P.017
companies doing business in China rather than in direct investment in Chinese joint ventures. CIC will be the only substantial investment company whose primary activities will be to identify, promote and invest in businesses in China.
3.12 As noted in paragraph 2.12 above, CIC's investment targets are US$8-10 million annually, including debt, equity and other forms of investment, in perhaps, 4 to 8 projects. Barring any unforeseen dramatic shifts in the Chinese investment climate, CIC should be able to find sufficient, attractive opportunities to enable it to meet its investment targets.
4.01
IV. THE IFC INVESTMENT
The main features of the proposed IFC investment are as follows:
(A) Equity in CIC:
(B) Equity in CMC:
(C) Loan to CIC:
Amount and Currency: Interest Rate
US$30,000 to acquire 30,000 shares, of US$1.00 par value each, to be subscribed at par.
Up to US$7,500 to acquire 10% of the ordinary share capital, at par.
US$3,000,000
0% p.a.
Repayment
Commitment Fee
Front-End Fee
Security
Subordination
No fixed repayment schedule.
To be repaid
out of profits.
N.A.
N.A.
N.A.
Subordinated to Senior Debt
In the case of the investments in CIC the absolute amounts would be fixed (US$30,000 for shares and US$3,000,000 for Loan Stock) but the percentage which those represent of the total would vary depending on the final size of the offering (i.e. between US$20 - $30 million). IFC's investment in CMC would be 10% of the share capital. In turn, CMC's share capital would be 20% of the share capital of CIC. Authority is sought to permit IFC to invest up to US$7,500 in CMC's shares, which would be 10% of CMC's share capital if CIC's financial plan is expanded to US$30 million of Subordinated Loan Stock and US$375,000 of share capital, including US$75,000 held by
Since the Subordinated Loan Stock is really regarded as equity, for all practical purpose, no commitment fees or front-end fees are to be provided.
4.02 IFC's proposed small investment in CMC permits IFC to have a more direct role in the management company, which will provide the management for CIC and control the day-to-day operations, and it enables IFC to participate in the "carried interest" which accrues to CMC because it will not subscribe for any of the zero interest Subordinated Loan Stock. (As previously noted, since no dividends will be paid by CIC until all of the Subordinated Loan Stock has been repaid, the benefit of the "carried interest" would only be realized at that stage.)
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