Philexim eyes P1-B hybrid mutual, investment fund

The Philippine Export Import Credit Agency (Philexim) is forming a billion-peso mutual and investment fund by the end of the year, and it plans to go public towards the end of the first quarter next year.

The Exporter’s Capital Fund Unit Investment Trust (ECF-UIT) is a hybrid between a closed-end mutual fund and investment instrument. It is designed for the sole purpose of raising funds for the country’s export and import market.

Philexim is an attached agency of the Department of Finance (DOF) mandated to promote investments and trade through sovereign and financial guarantees as well as through direct credit, insurance and technical assistance.

The ECF-UIT is a specialized investment company under the Philexim fund management group that will assemble a portfolio of bonds, and other investment instruments and then sell fractional, undivided interests in that portfolio to the public. In return, investors receive dividend income on a regular basis.

Philexim vice chairman and president Joel C. Valdes explained that 30 percent (or roughly P300 million) of the fund will be placed in 10-year zero coupon Treasury Bonds to ensure non-erosion of the principal.

Upon maturity, it should have grown to another billion pesos.

"We have discussed this with Finance Secretary Jose Isidro Camacho and Bureau of Treasury head Sergio Edeza, and they have all agreed," Valdes said. Camacho is the chairman of Philexim.

The remaining 70 percent of the original P1 billion will be divided into various investment instruments including debt, quasi-debt, equity and quasi-equity.

It will likewise be invested as equity in export winners for a minimum period of seven years.

"We have a list of the country’s export winners, which have a track record of growth and a growth road map. That should assure investment returns ranging from 15- to 20-percent," he added.

Earnings or investments in exporter firms could be called or redeemed or sold, and proceeds will be reinvested into the ECF-UIT. Company officials said that unit holders can sell their units at any time when listed in the big board of the Philippine Stock Exchange (PSE) after an initial public offering (IPO) by the first quarter of the year. The ECF-UIT will mature in 10 years and dissolve with the proceeds to be paid back to unit holders.

Philexim explained that there exists a need to enhance the capabilities of the Philippine export sector since the country’s trading partners have started showing tell tale signs of a turnaround and with the emergence of the European Union and China as the country’s potential market.

"The Philippine exporters’ capital needs are unmet, and with the capital markets on the look-out for safe, liquid, and yield attractive investments due to excess liquidity, the capital markets could be tapped through an investment vehicle like the ECF-UIT to enhance the capabilities of the country’s export sector," Valdes stressed.

The DOF attached agency has an authorized capital stock of P10 billion and a paid-up capital of P4.4 billion as of end 2001. Its statutory limit for issuing guarantee obligations is 15 times its subscribed capital stock. "We should be an alternative for companies seeking sovereign guarantees other than the National Government, which is limited by the reviews of the International Monetary Fund (IMF). We have our own ceilings," he pointed out.

Philexim was originally known as the Philippine Export and Foreign Loan Guarantee Corp. (Philguarantee) formed in 1977 through Presidential Decree (PD) 1080. – Ted Torres