KLEINWORT Benson's China Investment and Development Fund will announce plans later this month for raising an additional US$60 million, doubling its size, to expand its investment in unlisted Chinese enterprises. The fund was formed in September 1992 as a closed-end investment company listed in London to invest in China and in companies having significant business with the mainland. The key objective of the fund is to earn a return on a long-term basis from a combination of capital appreciation and income, with investors recovering their money in four to five years. Kleinwort Benson China Management managing director Andrew Taylor said all existing capital would be invested later this year and further investments were under consideration. About $40 million of the first $60 million was invested in seven joint ventures in China, in which the company holds stakes ranging from 28 per cent to 38 per cent. The joint ventures range from the manufacture of batteries, ceramic tiles, uninterruptible power supplies, polyester yarn, beer, distilled spirits and telecommunications cabling. New projects under consideration include manufacture of consumer durables, construction materials, environmental friendly plastic bags and aluminium and glass products, with the next agreement being sealed in about one month's time. ''We still have $20 million from the first $60 million, but I expect that will be taken up in the next three investments, so with the additional money we can invest in less than 10 joint ventures,'' Mr Taylor said. The joint venture partners are normally established manufacturing companies which need to raise additional capital to expand business. ''We don't want heavy industries and infrastructure projects. We are looking at small-to medium-sized Chinese operations which are well positioned in their own areas,'' he said. The company has also invested about $1 million in listed shares. ''We have two Shanghai B shares, two Shenzhen B shares and two China shares in Hong Kong. But the purpose is to have exposure to each market,'' he said. ''We think the attraction of our fund is [its] not being a B share fund. Most B share funds made good returns last year, but this year I think it will be a lot more difficult for them,'' Mr Taylor said. The fund is advised by a subsidiary of the China International Trust and Investment Corporation (CITIC), which is directly under the Chinese State Council. Board members include Wei Mingui, chairman of CITIC and Jing Shuping, CITIC's executive director. ''Having CITIC as a partner in China is extremely helpful,'' said Mr Taylor. ''When you invest in B shares it doesn't really matter, but with direct investments it certainly helps to have a partner who is diligent, but most importantly is going to help you monitor what is going on. ''It is not that difficult to invest money in China, but it is extremely difficult to make sure you profit and get the dividend ultimately,'' he said. The company believes China will continue to achieve a high rate of economic growth and considers that it is an appropriate time to raise additional funds to capitalise on available investment opportunities. Mr Taylor said the company intended to list some of the joint ventures on stock exchanges once the earnings were solid and that the first one could be on the market in 12 months' time. It is anticipated that over time the emphasis of the portfolio may change to listed investments.
