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| Kula Fund II |
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| Summary of Proposed Investment |
| This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only. |
| Project number | 27386 |
| Company name | Kula Fund II Limited |
| Country | East Asia and Pacific Region |
| Sector | Collective Investment Vehicles |
| Environmental category | FI |
| Department | Private Equity and Investment Funds |
| Status | Active |
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| Date SPI disclosed | September 26, 2008 |
| Projected board date | October 31, 2008 |
| Previous Events | Invested: March 23, 2009
Signed: February 20, 2009
Approved: December 16, 2008 |
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| Overview |
Sponsor/Cost/Location |
Development Impact |
Contacts |
Attachments |
| Project description |
| Kula Fund II Limited (‘Kula II’ or ‘the Fund’) is a 10-year private equity fund which will make equity and equity-related investments in small and medium-sized enterprises (‘SMEs’) located in the Pacific Islands region. Besides providing its investee companies with much needed equity capital for growth and expansion, the Fund will also provide on-going support to strengthen and professionalize its investees with the aim of improving operations and decision-making and attracting other sources of long-term capital. |
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| Project sponsor and major shareholders of project company |
| The Fund will be managed by Pacific Capital Partners (the ‘Manager’), a subsidiary of Aureos Capital (‘Aureos’). Aureos, established in 2001 as a joint venture between Commonwealth Development Corporation (‘CDC’) and the Norwegian Investment Fund for Developing Countries (‘Norfund’), is a private equity group which focuses on investing in SMEs in emerging markets. Aureos has raised and managed 20 SME private equity funds with committed capital exceeding $700 million through its existing network of 25 offices in Africa, Central America, South-East Asia, South Asia and the Pacific Islands, and 95 dedicated investment executives. Aureos’ 20 funds include 14 fully-invested SME country funds. |
| Total project cost and amount and nature of IFC's investment |
| The Fund has a target size of up to $22 million in equity commitments from investors. IFC will invest up to $4 million in equity for an interest of no more than 20% of total commitments to the Fund. |
| Location of project and description of site |
| The Fund is incorporated in Vanuatu and will focus on investments in SMEs located in the Pacific Islands region including Cook Islands, Fiji Islands, Kiribati, Republic of Marshall Islands, Federated States of Micronesia, Nauru, Papua New Guinea (‘PNG’), Samoa, Solomon Islands, Tonga, Tuvalu and Vanuatu (collectively, the ‘Target Countries’), though it is likely PNG and Fiji will account for the majority of investments given their relative size among the Target Countries. Up to 20% of the Fund’s commitments may be invested in IFC non-member countries of Cook Islands, Nauru, and Tuvalu. |
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| Anticipated development impact of the project |
The project’s key development impacts are:
Provision of long-term equity capital. The Fund will be an important source of otherwise scarce long-term growth capital in the small and underserved IDA economies of the Pacific Islands region.
Financial and managerial support for the development of SMEs in IDA economies in the Pacific Islands region. Besides providing much needed long-term equity capital for growth the Fund will also provide on-going support to strengthen and professionalize its investees with the aim of improving operations and decision-making and attracting other sources of long-term capital.
Enhancing corporate governance practices among SMEs. The Manager will adopt international best practices for transparency and corporate governance of its portfolio companies, thus fostering knowledge and skills transfer. |
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| IFC's expected development contribution |
IFC brings knowledge and assistance to the Fund:
Support of SMEs. IFC’s participation will enable Kula II to reach a reasonable size and IFC’s continued involvement will also send a positive signal to other investors considering investment in the Fund and the Region.
Co-investments with the fund. It is expected that investee companies will have other financing needs beyond the Fund’s investment. In such cases, IFC’s co-investment will be important to bridge the shortfall of capital need.
Environmental & social, corporate governance. IFC is able to offer support and advice on environmental and social issues and corporate governance both to the Fund and its portfolio companies. |
| Environmental and social issues - Category FI |
This project has been classified as a Category FI project according to IFC’s Environmental and Social Review Procedure.
Through Aureos and IFC’s investment in Kula I, the Fund Manager has been exposed to IFC’s environmental and social standards. Management training has been ongoing and the Fund Manager has developed a social and environmental management system which includes initial screening checklists and formal due diligence procedures. These were applied to the four investments already in the Kula II portfolio – and follow up actions identified.
IFC will require the Fund Manager to continue to screen potential investments and determine applicable requirements, including:
- the IFC FI Exclusion List;
- the applicable national social and environmental laws and regulations;
- the IFC performance standards
As part of its supervision support to the Fund, IFC will review the portfolio and assess the performance of the social & environmental management system, identifying supplemental actions to address gaps. In addition, if the Fund Manager identifies a potential investment which is likely to be a Category A in terms of environmental and social risk, it will inform IFC and request review before a final decision is reached. |
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| For inquiries about the project, contact: |
Andrew Crompton
Partner
Pacific Capital Partners (PNG) Ltd
Level 24, 10 Eagle Street
BRISBANE QLD 4000
Australia
Tel: +61 7 3303 0894
Fax: +61 7 3303 0895 |
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| For inquiries and comments about IFC, contact: |
General IFC Inquiries
IFC Corporate Relations
2121 Pennsylvania Avenue, NW
Washington DC 20433
Tel: +1 202 473 3800
Fax: +1 202 974 4384
E Mail: Webmaster |
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