Investment Funds
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Investment Funds Overseas Private Investment Corporation Investment Funds Program The Overseas Private Investment Corporation (OPIC) Investment Funds Program is designed to support the creation and capitalization of long-term, private equity funds in emerging markets. The funds are structured as limited partnerships or limited lia- bility companies. They are managed by private sector fund managers and, like all OPIC programs, are self-sustaining. OPIC receives compensation for its support, calibrated to reflect the risk and reward represented by its investment. These OPIC-supported funds invest in the development, expansion, or privatization of businesses and meet the sizable unmet demand for risk capital. OPIC is one of the largest providers of emerging market private equity. Since the inception of the investment funds program in 1987, OPIC has committed over $2 billion to 35 private equity funds. These funds have invested in more than 350 new, expanding, or priva- tizing businesses -- approximately 90 percent of which are small- and medium-sized enterprises. For many of the investors in these funds, OPIC's unique role in using its guaranty authority to support capitalization was a key criterion in their investment decision. As a result, OPIC's participation has mobilized substantial capital and skills for investment in emerging markets. The Investment Funds Program helps to fulfill OPIC's mission to mobilize and facil- itate the participation of U.S. private capital and skills in the economic and social growth of less developed countries. Specifically, the funds program: ·Brings to the countries in which it invests modern business practices, improved cor- porate governance, improvements to the local regulatory and legal environments, and improved property and shareholder rights. ·Fosters the development of capital and financial markets in emerging markets. ·Helps achieve U.S. foreign policy objectives, such as promoting political and eco- nomic stability in emerging democracies through the development of the private sector and privatization of state-owned businesses, and promoting best practices in corporate governance, the environment, and worker rights. ·Encourages the development of new markets and opportunities for American com- panies, facilitating early access to new consumers and improving competitiveness Photos courtesy of : in the developing world. Carulla Vivero ·Strengthens economic growth at home through connections that may be estab- Celtel lished between U.S. companies and the businesses supported overseas, such as Euro Cement joint ventures, franchising, supply or distribution arrangements. Euronet Information Business Systems/North-West Telecom MTV Russia By supporting economic development, OPIC's investment funds program is also Russian American Glass Company enhancing the quality of life in host countries. Companies in which OPIC's funds Serbia Broadband have invested are providing significant employment and training opportunities. Thomas Debass OPIC Investment by OPIC's funds provides a catalyst for further economic growth and Kenneth Gray OPIC development in the local community and region. Funds projects are providing essen- Constance Shinn OPIC tial services such as the distribution of potable water, the processing of basic food supplies, or the accelerated introduction of new technology, which is helping to 1 Bridging the Digital Divide bridge the digital divide. The result is that OPIC's investment funds program is having a positive impact on the Serbia Broadband (SBB) is an investment of the Southeast Europe Equity Fund, lives of those living and working in developing market economies. Ltd. (SEEF), managed by SEEF Management, LLC. The investment in this start-up cable-TV and broadband company brought a new product with a superior infrastruc- OPIC-supported funds operate in a variety of markets, including sub-Sahara Africa, Russia, Emerging Europe, ture to the Serbian marketplace. The success of SBB, its fast growth from almost Latin America and Asia. Sector-specific funds operate worldwide and include investments in environmentally 2,000 subscribers to over 200,000 within two years, has created tremendous value friendly companies, small businesses, water related enterprises and maritime projects. for Serbian businesses and consumers, which until recently lacked developed telecommunications and media connections with the rest of the world. In order to provide funds with a substantial portion of their capital and enhance investor returns, OPIC can pro- vide a percentage of a fund's capital through a loan or loan guaranty with most of the interest capitalized until the SBB is helping the people of Serbia connect with cultures from around the world and fund's liquidation. OPIC can also provide investors with downside protection by offering a partial principal protec- become more globally informed by providing access to international cable channels tion product. such as CNN, BBC World, EuroNews, TV 5, MTV1 and the Discovery Channel. The beneficial impact OPIC has on the companies and countries in which its funds invest is significantly greater SBB is also helping community-based efforts by providing free Internet connections than the amount of capital that OPIC contributes directly. This occurs because private equity creates a "multiplier for public schools in Belgrade. While the project is still in the early stages of imple- effect" whereby new capital attracts additional investment and financing in companies. A recent study performed mentation, SBB intends to educate students on educational and creative uses of the by an OPIC-supported fund indicated that the $100 million invested by OPIC in the fund generated an additional Internet and provide students with personal email addresses that will allow them to $542 million in investments, at both the fund and portfolio company levels. communicate easily and economically with people around the globe. Because the funds program is a partnership between OPIC and the private sector, no element of the investment A final and very important element of SBB's activities has been the emphasis on cus- funds program is more important than working with fund managers of the highest caliber. To identify and retain tomer care--a relatively new concept in this former communist society. SBB has such managers, OPIC conducts a transparent and public search, which includes a call for proposals that is high- opened a modern call center in Belgrade, launched a new Info Channel, which pro- ly publicized. Additionally, a selection committee is established within OPIC to evaluate fund proposals and make vides servicing and programming information to its customers, and publishes a free recommendations to OPIC's Investment Committee. OPIC also relies on the resources and experience of highly monthly magazine for all of its subscribers. qualified private equity advisory consultancies to assist in fund manager evaluation and due diligence review. SBB appears to be on the right track to achieving its long-term goal: Serving as the With regard to its existing portfolio of funds, OPIC conducts ongoing reviews of each fund. OPIC also monitors number one cable television and data communications provider in Serbia. individual fund portfolio companies to ensure that they meet OPIC policies regarding U.S. economic and environ- mental impacts, host country development impact, as well as worker and human rights. Current Investments by Sector Tourism/Hotels Agribusiness 0.00% Construction Technology 12.99% 30.04% 0.00% Financial Services Services 8.40% 1.21% Infrastructure 18.40% Retail Current Investments by Region 1.39% Real Estate Manufacturing Russia Africa 15.17% 8.77% 15% 10% Mining NIS Asia 0.02% 8% 21% Printing/Publishing Oil/Gas 0.67% 0.00% Pharmaceuticals Middle East 3% 2.93% Latin America Central & Eastern Europe 23% Global 18% 2% 2 3 Improving Corporate Governance Fostering the Development of Capital Celtel international B.V. is a portfolio company of the ZM Africa Investment Fund Carulla Vivero is a leading retailer in Columbia invested in by Newbridge Andean (ZMAIF) managed by Zephyr Management, L.P., which draws upon its African expe- Partners, L.P., a fund managed by ACON Investments (an affiliate of Texas Pacific rience and extensive African and international networks to strengthen the position of Group). ZMAIF's portfolio companies while improving African economies. In 1998, Newbridge invested in Vivero, a chain of supercenters in northern Columbia "Celtel: Making life better for the people of Africa." Since 1998, Celtel has been that sells clothing and other consumer products to middle and upper-income con- building mobile phone operations in 13 African countries with the goal of being sumers. One year later, Newbridge invested in Carulla, a grocery store that caters Africa's market-leading network. Celtel is also serving as an example that a pan- to middle and upper-income shoppers and is the largest supermarket in Bogota. In African company can experience financial success, with revenues in 2003 of $446 February 2000, Newbridge proposed a merger of the two companies to form Carulla million and net profits of $74 million, and attract a good work force by instituting Vivero, S.A., making it the second largest retailer in Columbia. Samuel Azout, the transparency, corporate governance and managerial leadership. CEO of Vivero, took over as CEO, and with the help of Newbridge, recruited a new management team to energize and create value for the company through an aggres- With