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Fund Profile:
Sichuan SME Investment Fund LLC (SSIF)
Main Offices: West China Investment Consultants
88 Babau Street, Guoxin Plaza, Office 16A Chengdu, Peoples Republic of China 610031
Website: http://www.seaf.com/sichuanfund.htm
Email: jonathancarr@wcic-chengdu.com
Fund Manager: Small Enterprise Assistance Funds (SEAF)
Key Personnel: Johnathan Carr, Director General
Established: 2000
Total Committed Capital: US $22.5 million
Amount Invested: US $2.1 million (9.3%)
Shareholders:
International Financial Corporation (IFC)
New York Life International, Inc.
Deutsche Investitions - und Entwicklungsgesellschaft mbH (DEG), Germany
Norwegian Investment Fund for Developing Countries (Norfund), Norway
Swedfund International AB, Sweden
SEAF Management Sichuan LLC
Geographic Focus: primarily in the Sichuan Province or neighboring provinces in China.
Background
The SEAF Sichuan SME Investment Fund LLC (SSIF or the Sichuan Fund), which will invest in small and medium-sized enterprises (SMEs) in China's Sichuan Province and neighboring provinces, is SEAF's newest fund to be established, and is one of the first investment funds in China. The concept for the Sichuan Fund developed from its commercial investors' need to more fully understand this new and dynamic market, and will actively pursue the development of entrepreneurship in China. SEAF will leverage the experience gained through the Sichuan Fund to explore new regional initiatives in Asia. Investments will be made in combination with a management training and technical assistance component in order to enhance the business performance of the Fund's investments and to help meet its developmental objectives. The Fund actively assists its portfolio companies in implementing appropriate improvements in management techniques and practices, especially relating to financial control, cost accounting, quality control, and marketing. In addition, the Fund Manager's investment officers are actively engaged in implementing business strategy and in following-up with advice rendered by outside experts. Business support programs are sponsored not only by the Fund, but also by other international and local agencies.
Social Mission
To promote continued growth of the SME sector in Sichuan province of the Peoples' Republic of China as a means of increasing prosperity and employment, and indirectly, the financial sector of Sichuan, both by motivating increased bank loans to local SMEs through the use of credit guarantees and by establishing a commercially competitive new financial intermediary as a model. Private enterprises in China are generating employment growth of almost 25% per year, compared to declining employment in the state-owned and collective sectors in China, yet they face a shortage of capital for future growth. By fueling the growth of China's most dynamic players, the Fund will be contributing strongly to China's fundamental economic development. Like other funds managed by SEAF, the Fund-by providing affordable financing to private sector SMEs in underserved markets-seeks to build the capacity of SMEs to expand production, access new technology, improve competitiveness, reach wider markets, increase profits, and achieve long-term commercial sustainability. By supplementing investments with technical assistance, SEAF aims to help develop business and management skills, improve corporate governance and transparency, and formalize legal structures, business structures, and tax reporting. The development of a vibrant and sustainable SME sector will help to generate new employment, export revenues, and government tax revenues; stimulate economic growth; promote free markets; improve social welfare; and contribute to political stability in developing countries. The Fund also seeks to provide examples of successful private enterprises to entrepreneurs and investors, help SMEs establish new customer and banking relationships with the formal banking sector, create a culture of equity investment, institutionalize investment methods and structures, and help to develop the country's overall financial sector.
Investment Information
All portfolio companies must be based in and operate primarily in the Sichuan Province or neighboring provinces in China. The Fund will invest in enterprises engaged in a broad diversity of sectors, with a special emphasis on companies that are export-oriented and those with strong growth prospects. In particularly, the fund will target high-growth sectors, such as the following: high-quality electronic components and products (especially telecommunications); media; pharmaceutical products and distribution; specialty packaging; leading local branded products; logistics and distribution; internet service provides and portals; and, software and subcontract computer programming. The Fund will not invest in enterprises engaged in the following activities: banking, insurance, and financial services; speculative investment activities such as real estate, commodities, commodities contracts and forward currency contracts, except for currency contracts entered into in connection with investments in portfolio companies or the purchase of real estate to be used for the implementation of an investment project; production or sale of tobacco products or hard alcohol; arms manufacturing or other military-related activities; operation of casinos or other gambling-related activities; operation of abortion clinics; and activities harmful to the environment. The Fund also complies with IFC environmental, health, safety, and social policies, such as the following: The Fund will not make investments in entities engaged in forced labor, harmful child labor, trade in certain regulated wildlife products, production of ozone depleting substances or products containing PCBs, drift net fishing, projects affecting indigenous peoples or containing large resettlement components, and projects that pose serious health risks. The Fund adheres to applicable environmental, indigenous people, involuntary resettlement, cultural property protection, occupational health and safety requirements, and child labor and forced labor laws and regulations of the country in which investments are made. The Fund appoints an Environmental Manager, implements an Environmental Management System, and furnishes an Environmental Performance Report. Initial equity or quasi-equity investments will be in the US $100,000 to US $1,000,000 range, with follow-on potential up to US $2,000,000. Loan guaranties will range from US $100,000 to US $1,000,000. The combined (equity or quasi- equity investment and loan guaranty) exposure to one investment will not exceed US $3,000,000 or 10% of the total capital committed. The average combined exposure is expected to be US $750,000 - US $1,000,000. It will take an active, minority position of not less that 25% and not more than 49%. The Fund has no stage or co-investment preferences.
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