Disposal

 

TIDMGDF 
 
RNS Number : 4428O 
Guangdong Development Fund Ld 
06 March 2009 
 
For Immediate Release 
6 March 2009 
 
 
GUANGDONG DEVELOPMENT FUND LIMITED 
(the "Company") 
PROPOSED DISPOSAL OF ENTIRE INVESTMENT PORTFOLIO, DE-LISTING AND SUMMARY WINDING 
UP 
 
 
 
1.    INTRODUCTION 
 
 
The Board of Guangdong Development Fund Limited (LSE: GDF) is pleased to 
announce that the Company has conditionally agreed to dispose of its entire 
investment portfolio by agreeing to sell its Equity Investments and to assign 
its Shareholder Loans and Trust Beneficial Interest for an aggregate 
consideration of USD4,400,000.00 pursuant to an agreement entered into with 
Kingwin Investments Limited ("KIL") on 6 March 2009. Under the Listing Rules, 
the proposed Disposal constitutes a Class 1 transaction and therefore requires, 
and is conditional upon among other things, the prior approval of Shareholders. 
 
 
In addition, the Board proposes a Summary Winding Up of the Company following 
Completion of the Disposal Agreement, in which event the listing of the 
Company's Ordinary Shares on the Official List will be cancelled ("De-listing"). 
 
 
The appointment of the proposed joint liquidators of the Company ("Joint 
Liquidators") will become effective upon Completion assuming the approval of the 
resolutions relating to the Summary Winding Up to be proposed at the forthcoming 
EGM. Following the Joint Liquidators' appointment, the powers of the directors 
of the Company will cease and the Joint Liquidators will assume responsibility 
for the Summary Winding Up of the Company. 
 
 
Full details of the Disposal, the Summary Winding Up and the De-listing 
(together, the "Proposals"), and details of the time and venue of the 
forthcoming EGM, will be set out in a circular and a proxy statement, each of 
which will be posted to Shareholders as soon as possible. 
 
2.    BACKGROUND TO AND REASONS FOR THE DISPOSAL 
 
 
The principal activity of the Company consists of investment holdings with the 
object of achieving long term capital appreciation through investing in 
enterprises primarily located in Guangdong Province of the People's Republic of 
China, largely by taking significant minority interests in unlisted equity and 
contractual joint ventures. 
 
 
A special resolution was passed by Shareholders on 23 February 2001 authorising 
the Company and the Board to arrange for the timely and orderly disposal of all, 
or substantially all, of the investment portfolio of the Company and to 
distribute the net proceeds arising from these disposals to Shareholders. 
 
 
The Disposal will result in the sale of all the Company's Assets and reflects 
the Board putting into effect the wishes of Shareholders pursuant to the 
above-mentioned special resolution. Accordingly, the Board, having given careful 
consideration to the current market conditions and reviewed the business and 
financial condition and prospects of the Company, considers that the Proposals 
are in the best interests of the Company and the Shareholders as a whole. 
 
 
The Board is being advised by Seymour Pierce Limited ("Seymour Pierce"), as 
sponsor, in relation to the Disposal. 
 
3.    THE ASSETS SUBJECT TO THE DISPOSAL 
 
 
Equity Investments 
 
 
The Company owns the entire issued share capital of each of its Subsidiaries. 
The Subsidiaries hold the Company's underlying equity investments including the 
following principal investments: 
(a) 20 per cent. equity holding in Yuehui Highways and Bridges Development 
Company Limited, a joint venture which operates a toll road in Guangdong 
Province; 
(b) 30.6 per cent. equity holding in Gaoyao Gaolu Cement Company Limited, a loss 
making joint venture which was engaged in the sale and production of cement; 
(c) 36 per cent. equity holding in Guangdong Zhanhai Instrument & Meter Co. 
Ltd., a joint venture which produces and markets flow meters and related 
products; 
(d) 29.85 per cent. equity holding in Foshan Tongbao Co., Ltd., an enterprise 
whose core business is the manufacturing of thermostats, other temperature 
control devices and precision metal; 
(e) 43.66 per cent. equity holding in Guangdong Nan Fang (Holdings) Co. Ltd 
whose business is the investment holding and operation of a shopping mall at 
Guangzhou Exchange Square. 
 
In addition to the above principal investments, the Company has claims in 
respect of any residual value available to Shareholders resulting from the 
winding up of Hong Kong Property Co. and Guangdong Alliance Ltd. However, the 
Board does not expect to realise any value from these claims. 
 
 
Shareholder Loans 
 
 
The Company provided unsecured interest free loans ("Shareholder Loans") to a 
number of the Subsidiaries in order to fund the acquisition and operation of the 
underlying equity investments. The total aggregate amount currently outstanding 
pursuant to the Shareholder Loans is USD29,880,262.89. The Shareholder Loans 
have no fixed terms of repayment and can only be repaid by a Subsidiary from 
dividends received from or the proceeds of the disposal of any underlying equity 
investment(s) which it holds. Consequently, the Company will not receive any 
repayment in respect of the Shareholder Loans unless a Subsidiary receives a 
dividend from or the proceeds of disposal of any underlying equity investment 
prior to Completion. The Shareholder Loans have not been formally documented. 
 
 
Trust Beneficial Interest 
 
The Company is the beneficiary of monies held in a trust account pursuant to a 
trust contract between the Company and Guangdong Finance Trust Co., Ltd. dated 
14 December 2006 (as amended by a supplemental agreement dated 25 December 
2008). The amount currently standing to the credit of the trust account is 
approximately RMB25 million. 
 
 
Valuation of Assets 
 
 
The Company engaged Vigers Appraisal & Consulting Limited ("Vigers") to perform 
an independent valuation and to appraise the fair value of the Company's 
investments in Yuehui Highways and Bridges Development Company Limited, Gaoyao 
Gaolu Cement Company Limited, Guangdong Zhanhai Instrument & Meter Co. Ltd. and 
Foshan Tongbao Co., Ltd. (together the "Appraised Assets"). As at 31 October 
2008, the aggregate value attributed by Vigers to the Appraised Assets was 
USD1.39 million. 
 
 
For the year ended 31 December 2007, the Company generated investment income 
from the Assets of approximately USD3.34 million and a net profit of 
approximately USD2.55 million. As at 30 June 2008, the gross consolidated asset 
value of the Assets stated in the Company's 30 June 2008 Interim Report (the 
"Interim Report 2008") was USD8.66 million, comprising of Equity Investments and 
Shareholders Loans of USD5.06 million and Trust Beneficial Interest of USD3.6 
million. 
 
 
The consideration to be paid by KIL pursuant to the Disposal Agreement 
represents a discount of approximately 49 per cent. to the gross asset value 
shown in the Interim Report 2008. For the period from 1 January 2008 to 30 June 
2008, the Company generated investment income from the Assets of approximately 
USD0.43 million. 
 
4.    PRINCIPAL TERMS AND CONDITIONS OF THE DISPOSAL 
 
 
Pursuant to the Disposal Agreement entered into on 6 March 2009 with KIL, the 
Company has conditionally agreed to dispose of its entire investment portfolio 
by agreeing to sell its Equity Investments and to assign its Shareholder Loans 
and the Trust Beneficial Interest for an aggregate consideration of 
USD4,400,000.00. 
 
 
The Disposal Agreement is subject to a number of conditions, including the 
following: 
 
(a) the Disposal being approved by Shareholders at the forthcoming EGM; 
(b) the Disposal being approved by the Jersey Financial Services Commission; and 
(c) the Company complying with all applicable laws, regulations and rules in the 
United Kingdom or elsewhere, including but not limited to, the requirements of 
the UKLA. 
 
 
Subject to the above conditions and satisfaction of a number of customary 
closing conditions, Completion is expected to take place on or before 15 
May 2009. 
 
 
Under the terms of the Disposal Agreement, KIL will pay an initial deposit of 
USD660,000.00 (representing 15 per cent. of the total consideration) upon 
execution of the Disposal Agreement. The remaining balance of USD3,740,000.00 
(representing 85 per cent. of the total consideration) will be paid in cash on 
Completion. 
 
 
Any dividends received by the Company from the Equity Investments during the 
period between the date of the Disposal Agreement and the business day 
immediately prior to Completion shall upon Completion be applied together with 
any interest accrued thereon to satisfy (in whole or in part), and be set off 
against, payment of the total amount of consideration due from KIL to the 
Company pursuant to the Disposal Agreement. 
 
 
The liability of the Company under the terms of the Disposal Agreement is 
limited to the amount of the initial deposit paid by KIL. 
 
 
Following the Disposal, GDF will no longer receive any income from the Equity 
Investments and it will no longer have any assets (apart from the bank deposit 
and cash consideration to be received pursuant to the Disposal Agreement). 
 
5.    USE OF PROCEEDS 
 
 
The Board intends that the net cash proceeds of the Disposal will be used to 
discharge the remaining actual and contingent liabilities of the Company and the 
costs and expenses of the Summary Winding Up. The remaining cash balance will be 
returned to Shareholders through the Summary Winding Up process which would be 
initiated pursuant to resolutions to be put to Shareholders at the forthcoming 
EGM. 
 
6.    SUMMARY WINDING UP 
 
 
If Shareholders approve the Proposals, the Joint Liquidators, after paying or 
providing for all actual and contingent liabilities of the Company and the costs 
and expenses of the Summary Winding Up, will distribute the Company's remaining 
cash, including the available net proceeds of the Disposal, to Shareholders. The 
Joint Liquidators will then proceed to wind up the Company. 
 
 
Further details of these proposed arrangements will be provided to the 
Shareholders as soon as possible. 
 
7.    CANCELLATION OF LISTING 
 
 
It is expected that the listing of the Company's Ordinary Shares will be 
suspended on the day of the EGM. Subject to the approval of all relevant 
resolutions at the EGM and Completion, application will be made to cancel the 
listing of the Ordinary Shares on the Official List. 
 
8.    AMENDMENT TO ARTICLES OF ASSOCIATION 
 
 
Shareholder approval will be sought at the EGM for the adoption of a new Article 
68 to conform to new provisions in section 91 of the Companies (Jersey) Law 
1991, as amended. If such approval is granted, all general meetings of the 
Company (including annual general meetings) may be called on at least 14 clear 
days' notice. This amendment to the Articles is being proposed by the Board in 
order to ensure that any further Shareholder resolutions proposed by the Board 
may be proposed in a timely manner. 
 
 
Further details of this proposed amendment to the Articles will be provided to 
the Shareholders as soon as possible. 
 
9.    CONDITIONS 
 
 
The Disposal is conditional (among other things) upon Shareholder approval being 
obtained at the EGM. The resolution to approve the Disposal will be an Ordinary 
Resolution, which means that it will require the approval of a simple majority 
of the votes cast in person or by proxy at the EGM. 
 
 
The Disposal is also conditional on the conditions set out in section 4 above. 
 
 
The De-listing is conditional upon Shareholder approval, which will be sought at 
the EGM. The resolution to approve the De-listing will be an Extraordinary 
Resolution, which means that it will require approval by not less than 75 per 
cent. of the votes cast in person or by proxy at the EGM. 
 
 
The Summary Winding Up is conditional on Shareholder approval, which will be 
sought at the EGM. The resolution to approve the Summary Winding Up will be a 
Special Resolution, which means that it will require approval by not less than 
66.6 per cent. of the votes cast in person or by proxy at the EGM. In addition, 
the resolution to approve the Summary Winding Up will not have effect unless 
Shareholder approval of the Disposal is duly obtained and the other conditions 
to Completion are duly satisfied or waived. 
 
 
The resolution to approve the amendment to the Articles will be a Special 
Resolution. 
 
10.   TERMS USED IN THIS ANNOUNCEMENT 
 
 
+------------------+----------------------------------------------------+ 
| "Articles"       | the Company's articles of association, as amended  | 
|                  | from time to time                                  | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "Assets"         | the Equity Investments, the Shareholder Loans and  | 
|                  | the Trust Beneficial Interest                      | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "Board"          | the board of directors of the Company              | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "Company"        | Guangdong Development Fund Limited                 | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "Completion"     | completion of the Disposal in accordance with the  | 
|                  | terms of the Disposal Agreement                    | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "Disposal"       | the proposed disposal of the Company's entire      | 
|                  | investment portfolio pursuant to the Disposal      | 
|                  | Agreement and the assignment of the Shareholder    | 
|                  | Loans and Trust Beneficial Interest                | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "Disposal        | the conditional agreement between the Company and  | 
| Agreement"       | KIL dated 6 March 2009 relating to the Disposal    | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "Equity          | the entire issued share capital of each of the     | 
| Investments"     | Subsidiaries                                       | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "EGM"            | extraordinary general meeting of the Company       | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "Extraordinary   | a resolution by a majority of not less than        | 
| Resolution"      | three-fourths of Shareholders, who being entitled  | 
|                  | to do so, vote in person or by proxy at the EGM    | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "Listing Rules"  | the listing rules made by the Financial Services   | 
|                  | Authority in exercise of its functions as          | 
|                  | competent authority pursuant to Part VI of the     | 
|                  | Financial Services and Market Act 2000             | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "Official List"  | the official list maintained by the UKLA           | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "Ordinary        | the ordinary shares of USD0.01 each in the capital | 
| Shares"          | of the Company                                     | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "Ordinary        | a resolution by a simple majority of Shareholders  | 
| Resolution"      | who, being entitled to do so, vote in person or by | 
|                  | proxy at the EGM                                   | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "Shareholders"   | holders of Ordinary Shares                         | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "Shareholder     | the loans made by the Company to the Subsidiaries  | 
| Loans"           |                                                    | 
+------------------+----------------------------------------------------+ 
| "Special         | a resolution passed by a majority of not less than | 
| Resolution"      | two-thirds of Shareholders who, being entitled to  | 
|                  | do so, vote in person or by proxy at the EGM       | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "Subsidiaries"   | GDF (New Beijiang) Limited, GDF (Gaoyao) Limited,  | 
|                  | GDF (Heyuan) Limited, GDF (Hui Zhang) Limited, GDF | 
|                  | (Tongbao) Limited, GDF (Zhanhai) Limited, GDF      | 
|                  | (Zhongfang) Limited and Guangyong Development      | 
|                  | Limited                                            | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "Summary Winding | the proposed summary winding up of GDF in          | 
| Up"              | accordance with the provisions of Part 21 of the   | 
|                  | Companies (Jersey) Law 1991, as amended            | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "Trust           | the Company's beneficial interest in a trust       | 
| Beneficial       | account under a trust contract dated 14 December   | 
| Interest"        | 2006 between the Company and Guangdong Finance     | 
|                  | Trust Co., Ltd. (as amended by a supplemental      | 
|                  | agreement dated 25 December 2008)                  | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "UKLA"           | the Financial Services Authority acting in its     | 
|                  | capacity as competent authority for the purposes   | 
|                  | of Part VI of the Financial Services and Markets   | 
|                  | Act 2000                                           | 
|                  |                                                    | 
+------------------+----------------------------------------------------+ 
| "USD"            | United States dollars, the lawful currency of the  | 
|                  | United States of America                           | 
+------------------+----------------------------------------------------+ 
 
11.   ENQUIRIES 
 
 
Guangdong Development Fund Limited 
Steve Lee/ Ivan Wong 
Tel: [phone] 
 
 
Seymour Pierce Limited 
Sponsor 
John Depasquale 
Tel: + 44(0) 207 107 8010 
 
 
Seymour Pierce, which is authorised in the United Kingdom by the Financial 
Services Authority, is acting as sponsor to the Company and no one else in 
connection with the Proposals and will not be responsible to anyone other than 
the Company for providing the protections afforded to customers of Seymour 
Pierce, or for advising any other person in connection with the Proposals. 
 
 
This announcement is not intended to and does not constitute or form part of, 
any offer to sell or an invitation to purchase any securities or the 
solicitation of any vote or approval in any jurisdiction pursuant to the 
transactions referred to here or otherwise. Persons who are not resident in the 
United Kingdom should inform themselves about and observe any applicable legal 
and regulatory requirements. 
 
This information is provided by RNS 
            The company news service from the London Stock Exchange 
   END 
 
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