China Portuguese Speaking Countries Cooperation and Development Fund (CPDFund) was founded after the Chinese government announced to initiate six policy measures, the first of which is to establish the fund to give full play to the unique advantages of China and the Portuguese-speaking countries, and to bring their economic cooperation to a larger scale, wider range and higher level on the 3rd Ministerial Conference of the Forum for economic and Trade Cooperation between China and Portuguese-speaking Countries (the Forum) in October 2010.
It is an important measure of the Chinese government to encourage and deepen the economic and trade cooperation between China (including Macau Special Administrative Region) and the Portuguese-speaking countries, focusing on the financing needs of the companies and promoting business growth, globalization and economic improvement of the member states of the Forum using capital as a link.
Overview
Size: A total amount of 1 billion US dollars with an initial phase of 125 million US dollars
Duration: 10 years, including 5-year investment period and 5-year exit period, and can be prolonged twice each by one year on an as-needed basis
Structure & Related Parties
CPDFund is established by the China Development Bank Capital Corporation Limited (CDB Capital) and the Macau Industrial and Commercial Development Fund as its cornerstone investors for its first phase.
Sponsor
China Development Bank (Sponsor)
China’s second-largest bond issuer, with quasi-sovereign credit rating;
Rich customer base, including large and medium-sized state-owned enterprises, prestigious private enterprises and a number of small and medium-sized enterprises;
China’s largest overseas investment and financing cooperation bank with global strategic vision and planning.
Macau Industrial and Commercial Development Fund (Sponsor/ Limited partner)
A legal entity in public law whose mission is to use its resources to fund projects and activities which facilitate the economic development of the Macau SAR. It keeps close relationships with the industrial and commercial circles and the SMEs of Macau.
Macau, at the crossroads where the eastern and western information and culture meet, boasts well-developed infrastructure facilities, a fully-fledged financial services system and a free, open business environment, plus the reservoir of a large number of Portuguese-Chinese bilingual professionals, providing a full range of services for the CPDFund.
China Development Bank Capital Corporation Limited (Limited Partner)
The Only financial institution in the Chinese banking industry with an exclusive RMB investment license.
A management team of 30 professionals and 15-year experience in private equity investment, managing 22 different types of funds totaling more than 140 billion yuan with a steady investment return of around 20 percent.
China Portuguese Speaking Countries Corporation and Development Fund Management Company (General Partner/Manager)
The management Company is established by the China-Africa Development Fund (CADFund) through its Hong Kong subsidiary. With its professional investment management team, the CADFund shares project development, investment analysis, risk control, asset management and other expertise with the Management Company, and is entrusted with the administration of the CPDFund by developing, reviewing and evaluating projects for the CPDFund while leaving the final decision to it.
Decision-making Body: An investment Committee consisting of professional representatives from the CPDFund management team
Project Sources
1. Recommended by the Secretariat and the government departments of the member states of the Forum;
2. Developed by the CPDFund management team;
3. Application from companies or investment institutions, etc. in the member states;
4. Other sources
Investment Vehicles
Based on the individual characteristics and circumstances of the investment companies and projects, the CPDFund can flexibly adopt various models or portfolios through vehicles such as equity or quasi-equity.
1. Equity
Investing in companies or projects via common shares
2. Quasi-equity
Other vehicles, such as preferred stock, hybrid capital instruments and convertible bonds
Cooperation Models
1. The CPDFund and the companies of the member states set up a joint venture to invest in the businesses or projects of the member states.
2. The CPDFund directly invests in or purchases shares of the businesses or projects of the member states.
3. The CPDFund and the international financial institutions jointly invest in the businesses or projects of the member states.
Investment Criteria and Requirements
1. Investment Criteria
A Companies to be invested in or partnered with should meet the following criteria:
Legally registered and operate in the member states;
Advanced technology and rich experience;
Solid financial strength;
An experienced, honest and faithful management team;
Sound business performance and a good track record of credibility.
B Projects
Located in the member states: China (including Macau SAR), Angola, Brazil, Cape Verde, Guinea-Bissau, Mozambique, Portugal and East Timor;
Promising market projects with rapid and steady growth potential, and be able to generate good cash flow and profits;
With exits for the investments;
Can promote local economic development and improve people’s livelihood.
2. Investment Horizon
Based on various factors such as the industry, returns, risks, exit timing and manner, the CPDFund decides on their investment horizon. In principle, the holding period of a single project is from 4 to 6 years.
3. Investment Scale
A. Based on the requirements of risk management and control, the CPDFund will determine the investment limit for each business, project and industry, and adjust the investment scale in accordance with changes in the investment strategy.
B. In principle, as a financial investor, the CPDFund will not own controlling shares nor be the largest shareholder. It will monitor the business operation but not participate in the daily management.
C. The investment scale for a single project varies between 5 million US dollars and 20 million US dollars.
4. Investment Restrictions
The CPDFund will not invest in real estate, guarantee business or engage in any investment projects prohibited by the member states.
5. Investment Returns
The CPDFund operates in accordance with commercial principles, and expects investment returns not to be lower than the hurdle rate determined by the investment project revenues, risks, etc.
6. Asset Management
A. In principle, the CPDFund will not demand controlling interest in the investment projects, nor will it participate in the daily management. However, via methods such as dispatching directors, supervisors and financial management staff, it exerts influence on important issues, and exercises shareholders’ rights based on the Articles of Association of the invested company.
B. The CPDFund shall receive relevant financial and operation reports of the invested companies and projects on a regular basis, and effectively monitor and manage the use of fund and the investment performance.
C. The CPDFund can provide its partners with advisory services to increase corporate value.
Exits
The CPDFund will exit in a certain period primarily by the following ways:
1. Transfer Agreement. Shares owned by the CPDFund can be repurchased by the companies themselves or the majority shareholder, or transferred to other shareholders of the invested companies or third-party investors.
2. Exit via listing. The CPDFund can exit via listing its invested company on the domestic or overseas securities markets.
3. Other exits.
Investment Procedures
1. Project Development:
The potential investment projects are:
Recommended by the Secretariat of the Forum for Economic and Trade Cooperation between China and Portuguese-speaking Countries and government departments in the member states;
Developed by the CPDFund management team;
Applied by companies or investment institutions etc. in the member states;
From other sources.
2. Project Selection
Companies or their shareholders interested in applying for the CPDFund submit the Application Form for the China-Portuguese Speaking Countries Cooperation and Development Fund
According to the application forms submitted by the interested parties, the investment team will conduct preliminary investigation and screening, and form an initial opinion based on the information gathered
3. Set an intention
After the screening, a cooperation program will be negotiated with the partners to settle on a cooperation framework, and an investment team then will be formed for the due diligence.
4. Due Diligence
Due diligence includes marketing, finance and legal investigations, interviews with the company’s shareholders and the management, field survey of the partner and the projects, etc., and evaluations on the company’s facilities and operation.
When needed, the investment team can employ professional law firms, accounting firms and other institutions to conduct investigations and audits on the company’s related legal matters and financial situation.
5. Business Negotiation
Following due diligence, the investment team will negotiate with the companies to be invested regarding key points of the investment in order to reach an agreement based on the “conditions for investment”, which includes proposed investment amount, investment model, agreed exit, major terms and conditions for the dealings, and the governance and management structure of the partnering companies and joint ventures.
6. Investment Approval
The Investment team prepares investment proposals and submits tem to the Investment Approval Committee to review. Once a project is approved, its investment terms and conditions are to be nailed down, which will be submitted to the invested company. Upon agreement from both sides, investment documents will be prepared.
7. Signing Legal Documents
The CPDFund and its partners negotiate and draft relevant legal documents, which specify investment terms, and rights and obligations of both parties, and will be signed officially by the CPDFund and the invested company.
8. Disbursement
The CPDFund disburses capital to the invested company according to the agreement.
9. Project Management in Investment Period
The CPDFund and its partners manage the joint venture according to the Articles of Association and the signed investment agreement. In addition, it can provide value-added services to them as needed.
10. Exit
Exit according to the investment agreement.
A single purchase
