Investment Funds
Fund Capitalization and Audiovisual Sector Governance - FUNCINE
INTRODUCTION:
Banco Nacional do Desenvolvimento Econômico e Social (BNDES), as developer of the Brazilian economy, has structured the fund “Fundo de Capitalização e Governança do Setor Audiovisual – Fundo de Financiamento da Indústria Cinematográfica Nacional – FUNCINE” (FCGSA FUNCINE) with the main objective of investing in Brazilian media companies to finance and develop the sector:
- Supports the development of the Brazilian economy and that’s why it creates a new Fund for the Media sector (FUNCINE)
- Commits $ 15 mm
- Participates in the board and Investment Committee of the Fund
- Fund Registries, Capital Markets distribution license issued in Feb/2012
- As Brazilian public organisms they will be in charge of controlling the Fund and its investments
- Has been appointed as Manager of the Fund
- K&C is formed by experienced professionals in Private Equity, Investment Banking and in the Media Sector
- Commits $ 0,75 mm
OBJETIVE:
To be the first consolidator of leading media content producers in Brazil resulting in a Major Media Company with premium products, which will accelerate the industry to an unprecedented growth rate and profitability.
INVESTMENT FOCUS:
Media Content:
- 10 leading TV & Cinema Producers + Distributor + Exhibitor
- à High quality, creative and commercial products
- “Ready to Go” structure
Five senior professionals with over 30 years of experience in PE and Media. The Team is totally committed to high standards of governance, meritocracy and transparency in actions/reporting
Assured Investment Strategy Continuity:
- Major Company´s IPO
- FUND’S STRATEGY
- CINEMA EXHIBITOR (Entertainment & Education - satellite distribution)
- PREMIUM TV & CINEMA
- ANIMATED FILMS
- ONE STOP SHOP for SERIES and TV FORMATS (LAW 12.485)
- CREATION OF A SCRIPT INDUSTRY
Value Adding:
- TECHNOLOGY
- KNOWLEDGE
- CONTENT & IDEAS ATTRACTION
- MARGIN INCREASE
- BRAND VALUE
- CONTENT & IDEAS
| DESCRIPTION | |
|---|---|
| Fund’s Name | FUNDO DE CAPITALIZAÇÃO E GOVERNANÇA DO SETOR AUDIOVISUAL "FUNCINE" |
| Manager | K&C Investimentos Ltda |
| Administrator | BRL Trust DTVM |
| Legal Structure | FUNCINE, Instruction CVM #398 – Approvals by CVM and ANCINE |
| Capital | BRL 80 million |
| Term | 9 year - closed end fund: |
| • Investment period: 4 years | |
| • 5 years to divest | |
| • a 2-year extension in the divestment period can be approved by Shareholders in a General Meeting | |
| Portfolio | 10 to 15 companies |
| Maximum stake | 49% of the shares issued by invested corporation |
| Independent Auditor | Ernst & Young Terco |
| Fund’s Strategy | • Shared control |
| • Independent Auditor review | |
| • High governance through Board Members | |
| • Pre-established vetoes | |
| • Power to nominate the CFO and or the Financial Manager/Controller | |
| • Mandatory drag-along to Holding | |
| Investment Focus | • High margin products |
| • Cinema/TV/Internet extended life span products (vault development) | |
| • Technology | |
| • Synergy and complementary features in the portfolio | |
| Diversification rules | • Investment of up to 40% of the Fund’s committed capital per economic group |
| • In the divestment period, the Fund will be allowed to concentrate up to 100% of its investments in a Holding with potential to make an IPO at BOVESPA. | |
| Governance | Investment Committee: a Board with 7 members; 2 non-voting members will be nominated by K&C and up to 5 voting members to be nominated by the investors. Committee's decision will need a 2/3 majority |
| Shareholders General Meeting (“AGQ”). To deliberate over conflicts of interests | |
| Management Fee | 3.5% per year over the Fund’s net worth |
| Performance Fee / Carried Interest | • 20% in excess of IGPM (inflation index) + 6% per year (the “Hurdle Rate”) |
| Full Clawback provision: Carried interest will only be paid to the Fund’s Manager after 100% of the Committed Capital plus Hurdle Rate is repaid to the investor | |
| Capital Commitments | • BRL 1.5 million by K&C’s partners (Aprox. USD 0,75 MM) |
| • BRL 48,5 million by other investors (Aprox. USD 25 MM) | |
| Capital Commitments by BNDES | BRL 30 million (Aprox. USD 15 MM) |