JUN.11
'87 10:51 IMF WASH DC RAPICOM6300 477-7491
P.012
participate then the total capital would be increased to approximately US$30 million.
2.08
Board of Directors and Advisory Council. CIC will have a Board of Directors of up to twelve persons, with each of the initial shareholders (including IFC) having the right to appoint one director. The Board is expected to meet quarterly to review the progress of the Company and consider any projects which are beyond the authority of the management company. (See Operating and Investment Policies in para. 2.12 below.) In addition, CIC expects to have an Investment Advisory Council, consisting of prominent Hong Kong and PRC individuals who could assist the Company, in an advisory capacity, in identifying and promoting projects in the PRC.
2.09
Management Company. CIC's operating management will be provided by JF China Management Company Ltd. (CMC), a company recently established in Hong Kong for this purpose. CMC will have a share capital of US$50,000, which will be entirely invested in the shares of CIC. (The amount of CMC's capital may be increased to US$75,000 if CIC's own capital is increased to a total of approximately US$30 million.) CMC's shares will be owned 75% by Jardine Fleming, 10% by IFC, 10% by Kuwait Investment Authority and 5% by the Managing Director, Mr. Andrew Taylor. day-to-day operations, including investment decisions on projects falling within the approved policy guidelines, will be delegated to the management company. All investments will be reported to the full Board of CIC and investments which exceed the established guidelines or which involve projects in which any shareholder or related company or director also has an interest will require the prior approval of the CIC Board.
2.10 The management of CMC will be appointed by the Board of CMC and, in the first instance, will be Mr. Andrew Taylor, a UK national with extensive management and investment experience in the Far East and China. CMC also intends to recruit a small staff (2-3 professionals) with expertise on business and investment conditions in the PRC.
2.11
Fee Structure. CIC will pay management fees to CMC on the following basis;
(a)
(b)
a front-end fee of 2% of the initial capital raised (approximately US$400,000 on the expected initial capital of US$20.2 million);
an annual fee (paid quarterly) to cover CMC's direct costs, with no element of profit, based on annual budgets approved by CIC's Board of Directors. (These are expected to run between 2% and 2.5% of portfolio.)
As noted in the section on the Financial Plan (Para 2.06 above), CMC will own 20% of CIC's share capital with no obligation to provide the zero interest loan stock. This is designed to give CMC a strong (but equitable) profit-based incentive, since CMC will earn 20% of cic's dividends, which will be paid only after the Subordinated Loan Stock is fully retired.