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(from DFID webpage)

CDC INVESTMENT POLICY

CDC’s Mission Statement

"To implement policies designed to maximise the creation and long term growth of viable businesses in developing countries, especially poorer countries, to achieve attractive returns to its shareholders and to implement social, environmental and ethical best practice in the conduct of its and its subsidiary undertakings’ business."

CDC seeks to apply the principles reflecting the CDC Mission Statement when making investments on its own account. For these purposes CDC has adopted the investment strategy described below.

No changes will be made to the strategy without the prior approval of an ordinary resolution of the CDC shareholders and, while CDC has a special shareholder, the approval of the special shareholder.

Investment Strategy

1. All Investments made by CDC will be in companies and projects which are in the opinion of the Directors, for the immediate or prospective economic benefit of a country in the CDC Universe. For the purposes of this strategy "CDC" means any of CDC Group plc and/or those of its subsidiary undertakings whose principal business activities include the investing of its funds in the making of loans or in securities with a view to achieving returns whilst spreading investment risk and the "CDC Universe" is the geographic area covered by the countries in the First Schedule. The geographic area covered by any country that is, at any time after the date of the adoption of this strategy by CDC, classified by the World Bank, on the basis of GNP per caput, as "low income", "lower middle income" or " upper middle income" may be added to the CDC Universe with the prior approval of an ordinary resolution of the CDC shareholders and, while CDC has a special shareholder, the approval of the special shareholder. For the purposes of this strategy, "Investment" has the meaning given to it in the Third Schedule.

2. At least 70% of the aggregate cost of Investments by CDC or Approved Investment Vehicles over any five consecutive financial periods will be, in the opinion of the Directors, for the immediate or prospective economic benefit of poorer countries. The first five year period relevant for this target will be the five year period that ends on the last day of the financial period during which this strategy is adopted. For these purposes an "Approved Investment Vehicle" is a collective investment vehicle that (i) appears on the list in the Second Schedule or (ii) is managed by CDC and which the Board of Directors of CDC has approved (which approval shall be irrevocable) for this purpose; and a "poorer" country is the geographic area of any country specified as such in the First Schedule or whose GNP per caput, as recorded by the World Bank for any year or other period after 1996, is less than the weighted mean of GNP per caput, for that year or period, of countries classified by the World Bank as "lower middle income" for such year or period. Any country which is at the time of, or at any time after, the adoption of this strategy a "poorer" country, will be a "poorer" country for all financial periods during or before the beginning of which the country first qualified as a "poorer" country.
   
3. CDC will aim to ensure that at least 50% of the aggregate cost of Investments by CDC and Approved Investment Vehicles in any financial period will, in the opinion of the Directors, be for the immediate or prospective economic benefit of one or more countries with territory within the geographical area covered by the sub-Saharan Africa or South Asia countries denoted "A" or "SA" respectively in the First Schedule.
   
4. Neither CDC nor an Approved Investment Vehicle will invest in a company or project that manufactures nuclear or other equipment designed, or primarily used, for military purposes.
   
5. Neither CDC nor an Approved Investment Vehicle will invest in a company or project the primary activities of which include (a) the establishment or operation of casinos or any form of gambling; (b) pornography or the provision of products or services of a substantially similar nature; (c) the production, processing or distribution of illegal drugs. For these purposes a "primary activity" of a company or project is an activity from which the company or project derives, or from which CDC expects the company or project to derive, over time, the substantial portion of any of its turnover, gross income or profit.

For the purposes of the targets in paragraphs 2 and 3 : (i) the cost of an Investment other than a contract of guarantee or indemnity shall be the cost as calculated for the purposes of the preparation of the audited accounts of CDC or on the same basis as is used in the preparation of such accounts and the cost of a contract of guarantee or indemnity that is an Investment shall be the maximum contingent liability of CDC under such contract and (ii) any Investment made before the date of the adoption of this strategy shall be deemed to have been made for the immediate or prospective economic benefit of a country in the CDC Universe.

CDC has not adopted any specific investment restrictions beyond those implicit from the investment strategy described above. CDC may acquire the full range of securities and other investments, both listed and unlisted and including futures, options and other derivative instruments. CDC may give investment advice and provide investment services to companies and projects in which CDC or its clients have an interest, as well as to third parties. As used in this policy, the word Investments has the specific meaning set out in the Third Schedule. In addition to making this type of Investments in accordance with this policy, CDC has power to make other investments, of a more general nature, provided such investments are made in the ordinary course of business.

CDC may make an investment or Investment regardless of whether or not the investment or Investment is of investment grade, the issuer has a credit rating or the securities or other assets to be acquired are listed or dealt in on a recognised or other stock exchange. CDC has not imposed any limit on its exposure as a result of the use of derivatives and financial futures and may use such instruments for the purposes of hedging and enhancing the value of CDC’s portfolio. CDC may invest through one or more investment vehicles (which may be established or domiciled in a country outside the CDC Universe) if the Directors consider it appropriate to do so for fiscal, regulatory or other reasons. CDC is not restricted as to the portion of its assets which may be invested in cash or money market instruments in circumstances where the Directors (i) consider this to be (a) in the best interests of CDC and its shareholders as a whole (b) consistent with CDC’s mission statement and (ii) expect the level of such investments to be of a temporary nature.

Each annual report of CDC will contain a review of all Investments made by CDC during the period covered by the report and a review of the implementation of the CDC investment strategy described above.

First Schedule

The CDC Universe at 8 December 1999

1. Countries classified "low income" by the World Bank, 1998

Angola A*

Armenia

Azerbaijan

Bangladesh SA*

Benin A*

Bhutan

Burkina Faso A*

Burundi A*

Cambodia

Cameroon A*

Central African Rep A*

Chad A*

China, People’s Republic (excluding Hong Kong SAR and Macao SAR)

Comoros Islands A*

Congo, Democratic Republic A*

Congo, Republic A*

Cote d’Ivoire A*

Equatorial Guinea A*

Eritrea A*

1. Countries classified "lower middle income" by the World Bank, 1998 and below the weighted mean of GNP per caput for lower middle income countries

1. Other countries classified "lower middle income" by the World Bank, 1998

1. Countries classified "upper middle income" by the World Bank, 1998

1. Other countries within the CDC Universe for which the World Bank does not currently collect GNP data

Notes:

1. * after regional classification indicates "poorer country"

Second Schedule

Approved Investment Vehicles

Third Schedule

Investment definition

For the purposes of this policy document, an "Investment" means:

1. any asset, right or interest falling within any paragraph in Part 1 of Schedule 1 to the Financial Services Act 1986 (as amended or re-enacted from time to time); or
2. any right to be repaid a sum borrowed by a third party (other than to the extent that liability of the third party has been incurred in the ordinary course of a business of deposit taking) or to receive interest in respect of a sum so borrowed; or
3. any liability of CDC under a contract of guarantee or indemnity where the contract was entered into in connection with a transaction by a third party where the risks to CDC under the guarantee or indemnity are in the opinion of CDC’s directors comparable to those CDC accepts in the ordinary course of its lending business,

but it shall not include:

(iv) any asset, right or interest representing indebtedness of a government, government agency or instrumentality of a Member State of the European Union or OECD or any supranational authority of which one or more Member States of the European

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