China-Portuguese-Speaking Countries fund to finance projects worth between US$5 million and US$20 million

13 August 2013

The China-Portuguese-Speaking Countries Cooperation and Development Fund will finance business projects worth between US$5 million and US$20 million, according to a brochure to which Macauhub was given access Tuesday.

The brochure, which includes a form to fill out for companies or their shareholders interested in investing to apply for access to the US$1 billion Fund (with initial funding of US$125 million), outlines a number of potential investment areas.

“Based on the individual characteristics and circumstances of the investment companies and projects, the CDPFund can flexibly adopt various models or portfolios through vehicles like equity of quasi-equity,” the brochure said.

The former case includes direct investment in common shares of companies or projects, in the latter case other methods such as preferred stock, hybrid capital instruments and convertible bonds.

Criteria for investment include being, “legally registered and operating in the member states, (employing) advanced technology and rich experience, (demonstrating) solid financial strength, (providing) an experienced, honest and faithful management team and a good track record of credibility.”

Projects should be located in China, including the Macau Special Administrative Region (MSAR) and Portuguese-speaking countries, with the exception of Sao Tome and Principe, and have “promising market prospects with rapid and steady growth potential and be able to generate good cash flow and profits.”

The project must be recommended by the Secretariat of the Forum for Economic and Trade Cooperation between China and Portuguese-speaking Countries and government departments of the member states, must be developed by the CPDFund management team, and applications made by companies or investment institutions in the member states.

The projects should also provide exit channels for the investments ad promote local economic development and improve people’s quality of life.

The Fund is intended to promote business investment, particularly by supporting Chinese companies, including those from Macau, in cooperating with companies from Portuguese-speaking companies in terms of investment.

The decision to invest will be made by the Investment Commission, made up of professional representatives of the management team of the China-Africa Development Fund, based in Beijing.

The Fund, which was officially announced by the Chinese authorities in November 2010, is sponsored by the China Development Bank, the Macau Industrial and Commercial Development Fund (sponsor and limited partner), CDB Capital Co. (limited partner), and the Fund’s management Company, as general partner and manager, with permanent support from Forum Macau.

Investment for a single project will range from US$5 million and US$20 million and the holding period for each project will range from four to six years, based on industrial characteristics, expected returns, risk profile, time and method of conclusion for the project, amongst other factors.

The Fund, according to the brochure, will not, in principle, demand controlling interest in the investment projects by owning a certain number of shares and should not be the biggest shareholder: “nor will it participate in daily management.”

The limit for investment in single company, project or industry will be decided based on the project’s risk management and respective requirements, and the scale will be adjusted along with changed to the investment strategy.

Restrictions include real estate investment, offering business guarantees or any type of project that is prohibited in member states.

Return on investment should not be less than the lowest rate set by the Fund, based on the return and risk for the investment project, amongst other factors.

The brochure also provides a list of sector contacts, all based in Beijing, that can be approached for clarification. (macauhub)