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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Guangdong Dev. | LSE:GDF | London | Ordinary Share | GB0003933917 | US$0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.03 | 0.00 | 00:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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RNS Number:3790V
Guangdong Development Fund Ld
24 April 2007
Press Release
GUANGDONG DEVELOPMENT FUND LIMITED
ANNOUNCES 2006 ANNUAL RESULTS
Hong Kong, April 23 2007 - The board of directors (the "Board") of Guangdong
Development Fund Limited (the "Fund" or the "Company") announced that the
audited net profit attributable to shareholders for the year ended 31 December
2006 was US$2.50 million (2005: net loss of US$4.28 million).
The Fund's consolidated net asset value was US$21.42 million (2005: US$22.15
million), a decrease of 3% compared with that of 2005. The decrease was
primarily attributable to a revaluation of the Company's available-for-sale
investments based on an independent valuation exercise carried out by Vigers
Appraisal & Consulting Limited ("Vigers"), an independent international
professionally qualified firms of valuers.
The Board recommends the payment of a final dividend of US$0.06 per ordinary
share, amounting to US$5,814,000, out of the Fund's special distributable
reserve account in respect of year ended 31 December 2006, payable on 29 June
2007, to shareholders on the register of members on 15 June 2007.
EXTRAORDINARY GENERAL MEETING
At an extraordinary general meeting ("EGM") held on 15 June 2006, the following
three resolutions were approved by the shareholders:
(1) Disposal of GD Decorative Material (Zhongshan) Co., Ltd., Guangdong
(Zhanjiang) Medium Density Fibre Board Co. Ltd., Guangzhou Malting Company Ltd.
and Ningbo Malting Co Ltd (collectively the "Four Assets")
As announced on 15 May 2006, the Fund conditionally entered into sale and
purchase agreements to dispose of its interests in the Four Assets to
subsidiaries of GDH Limited, who is a major beneficial shareholder of the Fund,
for an aggregate consideration of approximately US$6.87 million, payable in cash
on completion subject to the approval of the Company's shareholders and relevant
approvals from regulatory authorities in China. Details of the transactions,
including terms and conditions, were set out in the circular dated 30 May 2006
issued by the Fund.
Subsequent to the EGM, the Fund obtained all necessary approvals from the
relevant regulatory authorities in China. The disposals were successfully
completed with all consideration received in U.S. dollars by the Fund in
November 2006.
(2) The change of manager and appointment of investment manager
The initial investment manager of the Fund was Guangdong Investment Management
Limited ("GIM"). Following the passing of the 2001 Special Resolution, the
focus of the Fund is on realising its long term investments rather than making
any further investments. Consequently, the Board believes that it is more
appropriate for the Fund to appoint a manager who is more specialised in the
realisation of assets and therefore GDF Management (Cayman) Limited ("GDFM") and
Springridge Company Limited ("Springridge") were proposed as the manager and
investment manager, respectively, of the Fund whose appointment is for an
initial fixed term of three years and is thereafter terminable by either party
giving not less than six months' prior written notice.
The handover between GIM, GDFM and Springridge was completed on 30 November
2006. Effective from 1 December 2006, GDFM and Springridge are the manager and
investment manager, respectively, of the Fund.
(3) The change of publication of quarterly net asset value ("NAV")
The announcement of the quarterly NAV of the Fund will only be done through
Regulatory News Service of the London Stock Exchange plc. in order to save cost.
As a result, advertising cost of approximately US$9,000 was incurred this
year, compared to that of approximately US$62,000 last year.
ECONOMIC ENVIRONMENT
In 2006, China's gross domestic product surged by 10.7 percent year-on-year to
reach 20.94 trillion yuan (2.7 trillion U.S. dollars). It was the fourth
straight annual double-digit growth rate for the world's fourth-largest economy,
driven by hefty investment and rocketing trade, both of which registered a 24
percent year-on-year growth last year.
China saw an 11.5 percent economic growth in the second quarter of last year
over the same period in 2005, the highest in a decade, prompting the government
to take rapid measures to curb growth. The central bank raised the interest
rate twice and hiked the reserve ratio requirement for commercial banks three
times last year to reduce credit. Stricter policies on land supply were also
implemented. Following the measures, the growth rate dropped to 10.6 percent in
the third quarter and 10.4 percent in the fourth quarter.
From 21 July 2005 onwards, China started to implement a managed floating
exchange rate system based on market supply and demand and adjusted by referring
to a basket of currencies. Since then, the renminbi has been appreciating and it
is generally accepted that it would be tending toward further appreciation in
the long run. We believe that this trend will be positive to the Fund's
investment projects since their value will increase when translated to U.S.
dollars.
OVERVIEW OF PERFORMANCE
After the change of Board of Directors last year, significant efforts have been
made to realisation of the Fund's investment portfolio at the best prices
reasonably obtainable in order to maximise the return to the shareholders of the
Fund.
As the Fund is only a minority shareholder in all of its investment projects,
the Board believes that maintaining good relationship with other major
shareholders of the Fund's investment projects is of paramount importance to the
realisation of these investments. The main reason is that the other major
shareholders of the investments are the natural buyers of the Fund's minority
stakes in the investments. Therefore, the Board together with the old and
current Investment Manager have been trying their best to establish good
relationship with and gain trust from the other major shareholders of the
investments.
In addition, the Board is committed to the Fund's investment strategy of
realising its long term investments and accordingly Springridge was appointed as
Investment Manager who is more specialised in the realisation of assets.
Our efforts show some achievements. As aforesaid, the Fund had successfully
disposed of the Four Assets to their majority shareholders at an aggregate
consideration of approximately US$6.87 million in November 2006.
As previously reported in the Interim Report 2006, the conditional sale
agreement of Pak Kong Transco Limited ("Pak Kong") signed in April 2006 between
the Fund and the Chinese party has been granted the necessary approvals from the
relevant government authorities on 28 April 2006. The consideration of sale is
RMB34.27 million. The Fund is now liaising with the State Administration of
Foreign Exchange to arrange for the remittance of the consideration. It is
expected that the proceeds could be received by the Fund in the third quarter of
2007.
Following the change of Board in 2005, the Fund has sold six unlisted investment
projects, including the Four Assets, Pak Kong and GH Water Supply (Holdings)
Limited, for a total consideration of US$11.31 million and received proceeds of
US$7.37 million. The proceeds, after making provision for future expenses and
contingencies, will be distributed to shareholders.
OUTLOOK
The sale of the above-mentioned investments marked a significant success of the
Fund's commitment to the shareholders, at an extraordinary general meeting held
on 23 February 2001, of timely and orderly disposal of all or substantially all
the investment portfolio of the Fund. For the shareholders' best interest, the
Directors, with the help of the new Investment Manger, will continuously seek
opportunities to dispose of the Fund's remaining investment portfolio at the
best prices possibly obtainable, and return realisation proceeds to
shareholders.
LI Wai Keung
Chairman
23 April 2007
* * *
For further information, please contact:
Guangdong Development Fund Limited
Tel: (852) 2106 0888
Fax: (852) 2868 3082
INVESTMENT MANAGER'S REPORT AND ANALYSIS
As at 31 December 2006, Guangdong Development Fund Limited (the "Fund" or the
"Company") had available-for-sale investments of US$5.92 million, representing
28% of its net asset value. These investments contributed a major part of the
Fund's income, amounted to US$1.83 million, or 95% of total income.
During the year, the Fund disposed of six available-for-sale investments with
book value of US$11.31 million, which resulted in a net realised gain on
disposal of US$4.32 million.
At the year end date, the Fund did not hold any listed investments. Total cash
and bank deposits amounted to US$8.35 million, equivalent to 39% of the net
asset value. During the year, the Fund recorded US$0.09 million interest income
from its bank deposits and other sources, representing 5% of the Fund's total
income.
Vigers Appraisal & Consulting Limited ("Vigers") was engaged to perform an
independent valuation and to appraise the fair value of most of the investment
projects of the Fund at the balance sheet date. After taking into account the
results of the valuation reports, fair values of the investment projects were
adjusted accordingly. The net asset value of the Fund as at 31 December 2006
was US$21.42 million (2005: US$22.15 million), a 3% decrease comparing with the
net asset value as at 31 December 2005.
INFRASTRUCTURE PROJECTS
Pak Kong Transco Limited ("Pak Kong")
- Operation of two Beijiang bridges in Qingyuan
As reported in the Interim Report 2006, on 13 April 2006, the Chinese party had
signed a conditional sale and purchase agreement with the Fund to purchase the
Fund's interests in Pak Kong for a consideration of RMB34.27 million, of which a
down payment of RMB24 million had been received by the Fund. The necessary
approvals in respect of the sale had been granted by the relevant government
authorities on 27 April 2006. The Fund is now liaising with the State
Administration of Foreign Exchange to arrange for the remittance of the
consideration. It is expected that the consideration could be remitted to the
Fund in third quarter of 2007.
The Chinese party has committed to pay a compensation to the Fund, which is
calculated on daily basis until completion of the transaction and the
compensation for 2006 amounted to US$0.18 million.
Guangdong Heyuan Tong Hua Investment Limited ("Tonghua")
- Operation of Heyuan section of National Highway No. 205
The Fund has a 24.2% stake in Tonghua, representing an investment with a
carrying value of US$0.26 million.
FY 2006 FY 2005 % Change
Investment income of the Fund US$0.95 million Nil N/A
Total toll revenue US$0.57 million US$3.60 million -84%
Average daily traffic flow 1,833 11,017 -83%
In 2006, the daily traffic flow of Tonghua had tumbled 83% and the toll revenue
decreased sharply from US$3.6 million to US$0.57 million, due to the opening of
a new Guangdong-Jiangxi Expressway and its related network in December 2005.
This resulted in a loss of US$2.30 million for the year.
In September 2006, the Fund received the dividend of RMB7.59 million
(approximately US$0.95 million) for the period from 1 July 2004 to 31 August
2006, which had been recognised as investment income for the current year. It
is expected that no more dividends could be received by the Fund, if the
prevailing situation shows no improvement.
In November 2006, the Chinese party offered to purchase the Fund's interests for
a consideration of RMB2 million. However, the Fund made a higher counter-offer.
The Chinese party agreed to consider, but had made no reply since then,
because of the change of cabinet of the Heyuan Provincial Government. In early
April 2007 when the change of cabinet was completed, the Fund had resumed the
negotiation with the Chinese party, but no agreement had been reached.
In consideration of the latest offer by the Chinese party of RMB2 million
(approximately US$0.26 million), a provision for impairment loss of US$0.86
million was made in respect of the investment in this project for the current
year.
Yuehui Highways and Bridges Development Company Limited ("Huizhang")
-Operation of Huizhou section of the Huizhang Highway
The Fund has a 20% stake in Huizhang, representing an investment of a carrying
value of US$3.71 million.
FY 2006 FY 2005 % Change
Investment income of the Fund Nil Nil N/A
Total toll revenue US$4.75million +8%
US$4.38million
Average daily traffic flow 12,477 12,400 +1%
The overall performance of Huizhang was satisfactory in 2006. The average daily
traffic flow for the year was 12,477, a increase of 1% over 2005, whereas the
total toll revenue recorded an increase of 8% to US$4.75 million over 2005.
But, the profit declined slightly by US$0.03 million to US$1.54 million, due to
the increase in operating costs.
Currently, the Chinese party proposed a package deal to resolve problems in
respect of dividend distributions for the year from 2002 to 2006 and the
amendment of the Joint Venture Agreement at the same time. Accordingly, the
Fund has engaged a lawyer to provide legal opinion on the foresaid deal.
With reference to Vigers' independent valuation report, a fair value gain of
US$0.15 million was made in respect of the investment of this project for the
current year.
INDUSTRIAL PROJECTS
Disposal of GD Decorative Material (Zhongshan) Co., Ltd., Guangdong (Zhangjiang)
Medium Density Fibre Board Co. Ltd., Honour Million Industries Limited and
Guangzhou Malting Company Ltd. (collectively the "Four Assets")
As announced on 1 December 2006, the Fund had received from the buyers in full
the consideration of total approximately US$6.87 million for the disposal of all
of its interests in the Four Assets as approved in the extraordinary general
meeting held on 15 June 2006.
Foshan Tongbao Co., Ltd. ("Tongbao")
- Production and sale of thermostats, other temperature control devices and
precision metal
The Fund has a 29.85% stake in Tongbao, representing an investment with a
carrying value of US$1.83 million.
FY 2006 FY 2005 % Change
Turnover US$78.31million US$61.20 million +28%
Profit after tax US$2.54million US$1.50 million +69%
Investment income of the Fund US$0.37 million US$0.36 million +3%
During the year, Tongbao's turnover and profit after tax increased by 28% and
69% respectively which was mainly due to the increase in export sales and the
realised gain of the disposal of its investee companies. Without taking into
account of the realised gain of US$1.96 million in respect of the disposal of
its investee companies (2005: Nil), Tongbao would post a profit after tax of
US$0.58 million for the current year, representing a drop of 61% compared with
that of US$1.50 million last year, which was mainly attributable to the fall in
profit margin as a result of surge in prices of raw materials.
As reported in previous Annual Reports, Tongbao had provided guarantees to the
related companies of its controlling shareholder without the knowledge of the
Fund. Legal proceedings were then instituted by the previous board of directors
of the Fund against Tongbao at the Foshan Intermediate People's Court (the
"Intermediate Court") in December 2003 in order to enforce its right to
investigate the corporate documents of Tongbao. The Fund made an appeal to
Guangdong Provincial Higher People's Court ("Higher Court") after an
unfavourable ruling against the Fund was received in September 2004. In April
2005, the Higher Court instructed the Intermediate Court to revoke the original
ruling previously made by the Intermediate Court and to retry the case.
During the second half of 2005, following the change of the board of directors
of the Company, Tongbao took a more cooperative approach towards the Fund and
hence, the Fund was able to commission Vigers to conduct the valuation of
Tongbao in February 2006. The Fund had since made tremendous efforts to
negotiate an out of court settlement which was acceptable to both parties. The
proposed settlement was to execute an agreement/memorandum of understanding to
be made between the Fund and Tongbao to stipulate certain measures monitoring
Tongbao's future corporate governance. However, this proposal was declined by
Tongbao and eventually the settlement fell through. The Fund had no other
alternatives but to restart the litigation and the retrial was held at the
Intermediate Court on 2 August 2006.
In August 2006, Tongbao denied Vigers access to carry out their independent
valuation procedures to perform a valuation. Without an independent valuation,
the fair value of the Fund's investment in Tongbao as at 30 June 2006 could not
be determined.
However, following the change of investment manager of the Fund in December
2006, Tongbao returned a more co-operative approach towards the Fund again. In
order to allow time to resolve the problems on Tongbao, the Fund and Tongbao
applied to the Intermediate Court to defer the retrial in January 2007. The
Fund would endeavour to reach an out of court settlement with Tongbao, which
would be acceptable to both parties.
As at 31 December 2006, Vigers had conducted a valuation of Tongbao, and the
auditors were given access to the financial information of Tongbao as part of
their audit procedures for the year then ended. With reference to Vigers'
independent valuation report, a provision for impairment loss of US$2.24 million
was made in respect of the investment in this project for the current year.
Guangdong Zhanhai Instrument & Meter Co. Ltd. ("Zhanhai")
-Production and sale of flow meters
The Fund has a 36% stake in Zhanhai, representing an investment with a carrying
value of US$0.11 million.
FY 2006 FY 2005 % Change
Turnover US$0.86 million US$0.78 million +10%
Loss for the year US$0.32 million US$0.31 million +3%
Zhanhai's turnover improved slightly, but continued to operate at a loss due to
the increase in interest payment and the appreciation of Renminbi.
The Fund is seeking exit for its interest in Zhanhai, and looking for potential
buyers. In order to obtain a higher realisation price, the Fund is currently in
the process of arranging an auction sale of its interests in Zhanhai.
With reference to Vigers' independent valuation report, a fair value gain of
US$0.02 million was made against the fair value as stated in the interim report
in respect of the investment in this project.
Gaoyao Gaolu Cement Company Limited ("Gaolu")
- Production and sale of cement
The fund has an effective stake of 30.6% in Gaolu and had made a full provision
in 1999. The stake is held through a 85% owned subsidiary, Guangxin Investment
Limited, which has invested US$8.49 million and holds a 36% interest in Gaolu.
Gaolu leased its assets for rental income of RMB6 million in 2006. But, it
continued to operate at a loss of RMB8.68 million.
Xin Hui Xing Wei Building Material Co. Ltd. ("Xingwei")
- Production and sale of ceramic tiles
The Fund has a 30% stake in Xingwei and had made a full provision in 1999.
Xingwei ceased production a number of years ago. The Chinese party is currently
winding up Xingwei voluntarily.
REAL ESTATE PROJECT
Guangdong Nan Fang (Holdings) Co. Ltd ("Nanfang")
- Investment holding and operation of a shopping mall at Guangzhou Exchange
Square
The Fund has a 43.7% stake in Nanfang and had made a full provision in 1999.
As of 31 December 2006, 72% of the shopping mall of Nanfang was leased. Rental
income derived from the property for the year was US$0.71 million, generating an
operating gain of US$0.54 million. After deduction of the heavy interest costs
in servicing its loan from Guangdong Investment Limited, Nanfang still recorded
a profit after tax of US$0.37 million for the year, which was mainly
attributable to the fair value gain of its shopping mail.
LISTED INVESTEMENTS
During the year, the Fund orderly disposed of 699,840 shares of China Merchants
China Direct Investments Limited over the market for a total cash consideration
of US$0.57 million, resulting in a gain of US$0.2 million. As of 31 December
2006, the Fund did not hold any listed investment.
REPORT OF THE DIRECTORS
The directors present their report and the audited financial statements of the
Company and its subsidiaries (collectively the "Group") for the year ended 31
December 2006.
PRINCIPAL ACTIVITY
The principal activity of the Group consisted of investment holding with the
objective of achieving long term capital appreciation through investing in
enterprises primarily in the Guangdong Province of the People's Republic of
China (the "PRC"), largely by taking significant minority interests in unlisted
equity and contractual joint ventures.
At the Extraordinary General Meeting of the Company held on 23 February 2001,
special resolutions were passed to widen the Company's powers of distribution
and to amend its investments policies. The Group thereafter intends not to make
any future investments of a long term nature.
NET ASSET VALUE
The net asset value per fully paid ordinary share at 31 December 2006 was
US$0.22.
ASSETS DENOMINATED IN RENMINBI
A number of the Group's financial assets are denominated in Renminbi ("RMB").
These assets amount to US$7.89 million and are either currently held or
initially due in RMB, which, until converted into U.S. dollars, are not
available for distribution to shareholders. It would also be difficult to
convert some of them into U.S. dollars. The Group is taking steps to resolve
the RMB issue; however this process is lengthy and uncertain. Details of these
amounts can be found in Notes 13, 14 and 15 to the Financial Statements.
RESULTS AND DIVIDEND
The Group's return for the year ended 31 December 2006 and the state of affairs
of the Company and the Group at that date are set out in the financial
statements as shown below.
The directors recommend the payment of a final dividend of US$0.06 per ordinary
share, amounting to US$5,814,000, out of the Company's special distributable
reserve account in respect of the year ended 31 December 2006, payable on 29
June 2007, to the shareholders on the register of members on 15 June 2007.
No interim dividend was declared and payable for the year (2005: Nil).
SUMMARY FINANCIAL INFORMATION
A summary of the revenue and return/(loss) and of the assets and liabilities of
the Group for the last five financial years as extracted from the audited
financial statements is set out below:
Assets and liabilities
Total liabilities
and equity Capital and Net asset value
As at 31 December Total assets minority interest reserves per share
US$ US$ US$ US cents
2002 46,220,654 4,579,208 41,641,446 43
2003 42,735,286 3,793,711 38,941,575 40
2004 25,376,716 1,635,868 23,740,848 25
2005 24,200,083 2,054,647 22,145,436 23
2006 22,299,609 881,170 21,418,439 22
Revenue and return/(loss)
Return/(loss)
attributable Return/(loss)
to equity per equity Dividend Dividend
Total shareholders share for the year per share
Year ended 31 revenue* US$ US cents US$ US cents
December US$
2002 3,105,308 496,552 0.5 2,907,000 3
2003 3,820,205 207,129 0.2 2,907,000 3
2004 2,087,047 (15,200,727) (15.7) 969,000 1
2005 1,411,362 (4,282,794) (4.4) - -
2006 1,924,458 2,503,057 2.6 - -
* Excluding amortisation for interests in long term investments, provisions or
impairment losses on long term investments, provisions against amounts due from
investee entities, provision for a bank guarantee given to an investee entity
and unrealised depreciation of listed investments, where applicable.
SUBSIDIARIES
Particulars of the Company's subsidiaries are set out in note 11 to the
financial statements.
AVAILABLE-FOR-SALE INVESTMENTS
At 31 December 2006, the Group's available-for-sale investments were valued at
US$5,915,765 (2005: US$19,312,618). Details of the available-for-sale
investments are included in note 12 to the financial statements.
SHARE CAPITAL
Details of the Company's share capital are set out in note 20 to the financial
statements.
RESERVES
Details of movements in the reserves of the Company and the Group during the
year are set out in note 21 to the financial statements and the Consolidated
Statement of Movements in Shareholders' Funds respectively.
DIRECTORS
The directors of the Company during the year were:
LI Wai Keung (appointed on 21 July 2006)
Kin CHAN
*Ronald William GREEN
*Martyn Alan SCRIVEN
David Kuohsien CHUNG (resigned on 15 June 2006)
Angie Yick Yee LI (resigned on 15 June 2006)
* Independent non-executive directors
Mr. Tse Tak Wah was appointed as an alternate director to Ms. Angie Yick Yee Li
to attend the Audit Committee meeting held on 20 April 2006 on Ms. Li's behalf.
Mr. Tse ceased to act in such capacity after the meeting.
Mr. Tse Tak Wah was appointed as an alternate director to Mr. David Kuohsien
Chung to attend the board meetings held on 27 April 2006 and 19 May 2006 on Mr.
Chung's behalf. Mr. Tse ceased to act in such capacity after the meetings.
Mr. Tse Tak Wah was appointed as an alternate director to Mr. Kin Chan to attend
the Audit Committee meeting held on 25 September 2006. Mr. Tse ceased to act in
such capacity after the meeting.
Ms. Tse Man Yu and Mr. Tse Tak Wah were appointed as alternate directors to Mr.
Li Wai Keung and Mr. Kin Chan, respectively, to attend the board meetings held
on 26 September 2006 and 21 December 2006. Both Ms. Tse and Mr. Tse ceased to
act in such capacity after the meetings.
In accordance with article 99 of the Company's articles of association, Mr. Li
Wai Keung will retire, and, being eligible, will offer himself for re-election
at the forthcoming annual general meeting. All the remaining directors continue
in office in accordance with the Company's articles of association.
DIRECTORS' SERVICE CONTRACTS
No director has a service contract with the Company.
DIRECTORS' REMUNERATION
All directors of the Company are non-executive directors. Their remunerations
are decided by the board under the authority delegated by the shareholders'
resolution at the Company's annual general meeting. Details of directors'
remuneration are set out in note 8 to the financial statements.
DIRECTORS' INTERESTS IN CONTRACTS
The following directors of the Company had beneficial interests in contracts to
which the Company or any of its subsidiaries was a party during the year:
Mr. Kin Chan and Ms. Angie Yick Yee Li hold an indirect equity interest in GDF
Management (Cayman) Limited ("GDFM"), which received management fee in
connection with administrative and accounting services provided to the Company
pursuant to a management agreement dated 29 May 2006 with effective from 1
December 2006.
Mr. Li Wai Keung is a director of Guangdong Investment Management Limited, which
received investment management fees in connection with investment,
administrative and accounting services provided to the Company pursuant to a
management agreement.
Mr. Li is also a director of GDH Limited, which through its subsidiaries had
acquired the Company's entire interests in GD Decorative Material (Zhongshan)
Co., Ltd., Guangdong (Zhangjiang) Medium Density Fibre Board Co. Ltd., Honour
Million Industries Limited and Guangzhou Malting Company Ltd.
Save as mentioned above, no director had a beneficial interest, either directly
or indirectly, in any material contract to which the Company or any of its
subsidiaries was a party during the year.
DIRECTORS' INTERESTS IN SHARES
As at 31 December 2006, ASM Asia Recovery (Master) Fund, of which Mr. Kin Chan
is director, held 10,670,000 ordinary shares in the Company, representing 11.01%
of the Company's issued share capital.
As at 31 December 2006, GDH Limited, of which Mr. Li Wai Keung is a director,
through its subsidiary, Guangdong Capital Holdings Limited, owned 10,000,000
ordinary shares in the Company, representing approximately 10.32% of the
Company's issued share capital.
Save as disclosed above, none of the directors or their associates had any
personal, family, corporate or other interests in the equity or debt securities
of the Company or any of its associated corporations.
At no time during the year has any right been granted to, or exercised by, any
director of the Company, nor has the Company or any of its subsidiaries been a
party to any arrangement to enable the Company's directors or their associates,
to acquire benefits by means of acquisition of shares in the Company or any
other body corporate.
MANAGEMENT AND ADMINISTRATION
On 18 February 1994, the Company entered into a management agreement with
Guangdong Investment Management Limited ("GIM"), which in turn has entered into
two administrative and accounting services agreements with GDF Management
Limited and Guangdong Fund (Hong Kong) Limited, respectively.
Effective from 1 December 2006, GIM ceased to act as the Investment Manager of
the Company, and GDFM and Springridge Company Limited were appointed as the
Manager and Investment Manager of the Company, respectively for a fixed term of
three years.
Pursuant to the management agreement dated 29 May 2006, GDFM acts as the Manager
of the Company and provides administrative and accounting services to the
Company. A management fee is paid semi-annually in advance, equal to the
aggregate of US$150,000 per annum. In addition, a performance fee shall be
payable to the Manager at the end of the engagement term, which is equal to the
higher of 7.5% of aggregate proceeds distributed and available for distribution
to the shareholders since the formal engagement less US$20,000,000 or zero. All
of the operating costs of the Manager incurred in providing these services to
the Company are borne by the Manager, except for the expenses reasonably
incurred in connection with the performance of its duty under the management
agreement.
Pursuant to the investment management agreement dated 29 May 2006, Springridge
Company Limited acts as the Investment Manager of the Company and executes the
investment policy as set out in the Listing Particulars issued by the Company in
1994. An investment management fee is paid semi-annually in advance, equal to
the aggregate of US$150,000 per annum. In addition, a performance fee shall be
payable to the Investment Manager at the end of the engagement term, which is
equal to the higher of 7.5% of aggregate proceeds distributed and available for
distribution to the shareholders since the formal engagement less US$20,000,000
or zero. All of the operating costs of the Investment Manager incurred in
providing these services to the Company are borne by the Investment Manager,
except for the legal and professional fee reasonably incurred in connection with
the performance of its duty under the investment management agreement.
At a board meeting held on 6 August 2002, the directors of the Company appointed
Dominion Fund Administrators Limited as the administrator of the Company to
replace Barclays Private Bank & Trust Limited. A novation agreement was
executed on 16 October 2002 among the Company, GIM, Barclays Private Bank &
Trust Limited and Dominion Fund Administrators Limited. Upon the appointment of
GDFM as the new Manager of the Company which took effect on 1 December 2006,
another novation agreement was executed on 25 January 2007 among the Company,
GDFM, and Dominion Fund Administrators Limited, which took effect on 1 December
2006 to replace the above novation agreement.
SUBSTANTIAL SHAREHOLDINGS
The directors of the Company are aware of the following parties (or their
clients) who, as at 20 April 2007, were interested, directly or indirectly, in
3% or more of the issued share capital of the Company:
Percentage of
Number of shares issued share
Name fully paid capital
QVT Fund L.P. 28,672,678 29.59%
ASM Asia Recovery (Master) Fund 17,430,000 17.99%
Roy Nominees Limited 12,700,000 13.11%
Guangdong Capital Holdings Limited 10,000,000 10.32%
United Gulf Bank (BSC) 8,000,000 8.26%
FE Select II Investments Limited 5,829,768 6.02%
Gartmore No.2 General Partner Scottish Limited Partnership 5,500,000 5.68%
PURCHASE, REDEMPTION OR SALE OF LISTED SECURITIES
Neither the Company, nor any of its subsidiaries purchased, redeemed or sold any
of the Company's listed securities during the year.
MAJOR CUSTOMERS AND SUPPLIERS
A substantial proportion of the Group's gross revenue is derived from its listed
and unlisted investments and the disclosure of information regarding customers
would not be meaningful. The Group has no major suppliers requiring disclosure.
PAYMENT POLICY
It is the Group's policy to finalise terms before business is agreed to ensure
that suppliers are aware of such terms and bills would be paid in accordance
therewith. As at 31 December 2006, the Group did not have any outstanding trade
creditors.
PRE-EMPTIVE RIGHTS
There are no provisions for pre-emptive rights under the articles of the Company
or the laws of Jersey which would oblige the Company to offer new shares on a
pro-rata basis to existing shareholders.
INTERNAL FINANCIAL CONTROLS
The board has entered into contracts delegating to external parties the
management of the investment portfolio, the custodial services which include the
safeguarding of the assets, and the day-to-day accounting and company
secretarial requirements. Each of these contracts was entered into only after
proper consideration by the board of the quality and cost of services offered.
The Investment Manager invests the Company's funds in accordance with the
investment policy and guidelines as set out in the Listing Particulars when the
Company's shares were first launched. The Investment Manager gives, from time
to time, reports on the Company's investment holdings and performance to the
Manager and the board at its meetings. The Investment Manager is required to
follow the instructions set by the shareholders at the Extraordinary General
Meeting held on 23 February 2001, not to make further investments of a long term
nature. The Manager also reports regularly to the board on the Company's
financial position and the custody of its assets.
On 10 May 1999, the Company, pursuant to the Combined Code of Principles of Good
Governance of the London Stock Exchange, established an Audit Committee (the "
Committee") comprising two independent non-executive directors and one
non-executive director. The role of the Committee is to advise the board by
providing independent and objective reviews on the Company's financial reporting
process, internal control and audit function; and the compliance and management
services of the Manager and Investment Manager under the management and
investment management agreement, respectively. The Committee will meet with the
Company's auditors, the Manager and/or Investment Manager and employees of the
Manager and/or Investment Manager and other third parties from time to time as
the Committee considers necessary to ensure an effective control system is in
place and to ensure that appropriate compliance procedures are being put in
place for the Company and, where needed, make recommendations to the board.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the financial statements in
accordance with applicable Jersey law and generally accepted accounting
principles.
Jersey Company law requires the directors to prepare financial statements for
each financial year which give a true and fair view of the state of affairs of
the company and of the profit or loss of the company for that period. In
preparing these financial statements, the directors should:
select suitable accounting policies and then apply them consistently;
make judgments and estimates that are reasonable and prudent;
prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
The directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
company and enable them to ensure that the financial statements comply with the
Law. They are also responsible for safeguarding the assets of the company and
hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
AUDITORS
Ernst & Young LLP retire and a resolution for their reappointment as auditors of
the Company will be proposed at the forthcoming annual general meeting.
On behalf of the Board
LI Wai Keung
Chairman
23 April 2007
The following is the full set of the audited financial statements of the Fund
for the year ended 31 December 2006:
INDEPENDENT AUDITORS' REPORT
TO THE MEMBERS OF
GUANGDONG DEVELOPMENT FUND LIMITED
We have audited the Group and parent company financial statements of Guangdong
Development Fund Limited for the year ended 31 December 2006 which comprise the
Consolidated Statement of Total Return, Consolidated Statement of Movements in
Shareholders' Funds, Consolidated Portfolio Statement, Consolidated Balance
Sheet, Consolidated Cash Flow Statement, Balance Sheet, Summary of Material
Portfolio Changes and the related notes 1 to 30. These financial statements
have been prepared on the basis of the accounting policies set out therein.
This report is made solely to the Company's members, as a body, in accordance
with Article 110 of the Companies (Jersey) Law 1991. Our audit work has been
undertaken so that we might state to the Company's members those matters that we
are required to state to them in an auditors' report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's members as a
body, for our audit work, for this report, or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described in the Report of the Directors, the Company's directors are
responsible for the preparation of the financial statements in accordance with
applicable Jersey law.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements, give a true
and fair view and are properly prepared in accordance with the Companies
(Jersey) Law 1991. We also report to you if, in our opinion, the Company has
not kept proper accounting records or if we have not received all the
information and explanations we require for our audit.
We read other information contained in the Annual Report, and consider whether
it is consistent with the audited financial statements. This other information
comprises only the Report of the Directors, Chairman's Statement, Investment
Manager's Report and analysis. We consider the implications for our report if
we become aware of any apparent misstatements or material inconsistencies with
the financial statements. Our responsibilities do not extend to any other
information.
BASIS OF AUDIT OPINION
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes an
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgements made by the directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the Company's and the Group's circumstances, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error.
In forming our opinion we also evaluated the overall adequacy of the
presentation of information in the financial statements.
Scope limitation arising from the prior year's audit
Our report, dated 28 April 2005, on the Group's financial statements for the
year ended 31 December 2004, details that the directors were unable to obtain an
independent professional valuation or other reliable financial information for a
long term investment, namely Foshan Tongbao Co., Ltd. ("Tongbao") with a
carrying value of approximately US$8 million as at 31 December 2004, in order to
assess whether the carrying value of the investment was fairly stated as at 31
December 2004.
During the year ended 31 December 2005, an impairment loss of US$3.9 was
recognised by the Group against the carrying value of the investment in Tongbao
as at 31 December 2005, based on an independent professional valuation. The
impairment loss was fully charged to the Consolidated Statement of Total Return
for the year ended 31 December 2005.
However, since there were no satisfactory audit procedures that we could have
adopted to obtain sufficient evidence to determine the fair value of Tongbao as
at 31 December 2004, we were unable to determine the allocation of such
impairment losses between the Consolidated Statements of Total Return for the
years ended 31 December 2005 and 31 December 2004. Accordingly any adjustments
found to be necessary in respect thereof would have had a consequential effect
on the results of the Group for the year ended 31 December 2005.
QUALIFIED OPINION ARISING FROM LIMITATION IN AUDIT SCOPE
In our opinion, the financial statements give a true and fair view, in
accordance with United Kingdom Accounting Standards, of the state of affairs of
the Company and of the Group as at 31 December 2006 and, except for any
adjustments to the corresponding results for the year ended 31 December 2005
that might have found to be necessary had we been able to obtain sufficient
audit evidence concerning the fair value of the investment in Tongbao as at 31
December 2004, of the results of the Group for the year then ended and have been
properly prepared in accordance with the Companies (Jersey) Law 1991.
In respect solely of the limitation on our work as set out in the basis of audit
opinion section of this report, we have not obtained all the information and
explanations that we considered necessary for the purpose of our audit.
Ernst & Young LLP
Jersey, Channel Islands
23 April 2007
GUANGDONG DEVELOPMENT FUND LIMITED
CONSOLIDATED STATEMENT OF TOTAL RETURN
Year ended 31 December 2006
2006 2005
Notes Revenue Capital Total Revenue Capital Total
US$ US$ US$ US$ US$ US$
Investment
income:
Listed
investments 896 - 896 4,899 - 4,899
Unlisted
investments 4 1,829,987 - 1,829,987 1,360,677 - 1,360,677
Impairment
loss of
available-for-
sale
investments 12 - (3,168,343) (3,168,343) - (4,426,886) (4,426,886)
Fair value
gain on equity
investments at
fair value
through profit
or loss - - - - 11,332 11,332
Net realised
gain on
disposal of
available-for-
sale
investments 12 - 4,315,507 4,315,507 - - -
Net realised
gain on
disposal of
equity
investments at
fair value
through profit
or loss - 204,979 204,979 - - -
Interest
income from:
Bank deposits 59,360 - 59,360 16,807 - 16,807
Other sources 34,215 - 34,215 17,647 - 17,647
_________ _________ _________ _________ _________ _________
Gross return/
(loss) 1,924,458 1,352,143 3,276,601 1,400,030 (4,415,554) (3,015,524)
continued/...
GUANGDONG DEVELOPMENT FUND LIMITED
CONSOLIDATED STATEMENT OF TOTAL RETURN (continued)
Year ended 31 December 2006
2006 2005
Notes Revenue Capital Total Revenue Capital Total
US$ US$ US$ US$ US$ US$
Management fees 6 (434,859) - (434,859) (519,234) - (519,234)
Other administrative expenses 7 (660,930) - (660,930) (708,641) - (708,641)
Exchange gain/(loss), net 322,245 - 322,245 (39,395) - (39,395)
_________ _________ _________ _________ _________ _________
Return/(loss) attributable to
equity shareholders 1,150,914 1,352,143 2,503,057 132,760 (4,415,554) (4,282,794)
_________ _________ _________ _________ _________ _________
_________ _________ _________ _________ _________ _________
Return/(loss) per ordinary share
(US cents) - Basic 10 1.19 1.40 2.58 0.14 (4.56) (4.42)
_________ _________ _________ _________ _________ _________
_________ _________ _________ _________ _________ _________
The total column of this statement is the income statement of the Group.
All revenue and capital items in the above statement are derived from continuing
operations.
No operations were acquired or discontinued during the year.
GUANGDONG DEVELOPMENT FUND LIMITED
CONSOLIDATED STATEMENT OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Year ended 31 December 2006
Special Investment Capital Capital
Share Share distributable revaluation reserve reserve Revenue
capital premium reserve reserve - realised - unrealised reserve Total
US$ US$ US$ US$ US$ US$ US$ US$
At 1 January
2005 969,000 4,977,239 44,147,000 761,089 12,348,198 (47,034,700) 8,334,111 24,501,937
Change in fair
value of
available-for-sale
investments - - - (1,531,593) - - - (1,531,593)
Impairment
loss of
available-for-
sale
investments - - - 4,426,886 - (4,426,886) - -
Change in fair
value of equity
investments
at fair value
through profit
or loss - - - - - 11,332 - 11,332
Return for the
year - - - - - - 132,760 132,760
Dividend paid - - ( 969,000) - - - - (969,000)
_______ _________ _________ _________ _________ _________ _________ _________
At 31 December
2005 and 1
January 2006 969,000 4,977,239 43,178,000 3,656,382 12,348,198 (51,450,254) 8,466,871 22,145,436
Change in fair
value of
available-for-sale
investments - - - (2,082,890) - - - (2,082,890)
Impairment
loss of
available-for-
sale
investments - - - 3,168,343 - (3,168,343) - -
Disposal of
interests in
available-for-
sale
investments - - - (4,315,507) 4,315,507 - - -
Disposal of equity
investments at
fair value through
profit or loss - - - - 204,979 - - 204,979
Capital
reserve
realised on
disposal of
investments - - - - (18,800,883) 18,800,883 - -
Return for the
year - - - - - - 1,150,914 1,150,914
_______ _________ _________ _________ _________ _________ _________ _________
At 31 December
2006 969,000 4,977,239 43,178,000 426,328 ( 1,932,199) (35,817,714) 9,617,785 21,418,439
_______ ________ _________ ________ _________ _________ _________ _________
_______ ________ _________ ________ _________ _________ _________ _________
GUANGDONG DEVELOPMENT FUND LIMITED
CONSOLIDATED PORTFOLIO STATEMENT
31 December 2006
Percentage
Effective Carrying of total
holding value net assets
% US$ %
Xin Hui Xing Wei Building Material Co. Ltd.
Dormant 30.0 - -
Foshan Tongbao Co., Ltd. 29.9 1,831,666 8.6
Production and sale of thermostats and
other temperature control devices
Guangdong Zhanhai Instrument & Meter Co. Ltd. 36.0 113,975 0.5
Production and sale of flow meters
Gaoyao Gaolu Cement Company Limited 30.6 - -
Production and sale of cement
Guangdong Nan Fang (Holdings) Co. Ltd 43.7 - -
Property holding
Guangdong Heyuan Tong Hua Investment Limited 24.2 256,124 1.2
Operation of a section of National Highway No. 205
Yuehui Highways and Bridges Development
Company Limited 20.0 3,714,000 17.3
Operation of a section of Provincial Highway No.1918, 1919
__________ _________
Portfolio of investments 5,915,765 27.6
Net current assets 15,501,662 72.4
Equity minority interest 1,012 -
__________ _________
Net assets 21,418,439 100.0
__________ _________
__________ _________
Except for the disposal of the Group's investment in Pak Kong Transco Limited,
Guangzhou Malting Company Ltd., Guangdong (Zhanjiang) Medium Density Fibre Board
Co. Ltd., Honour Million Industries Limited, GD Decorative Material (Zhongshan)
Co., Ltd. and certain unlisted and listed investments, there was neither
acquisition nor disposal of the Group's investment portfolio during the year.
GUANGDONG DEVELOPMENT FUND LIMITED
CONSOLIDATED BALANCE SHEET
31 December 2006
Notes 2006 2005
US$ US$
NON-CURRENT ASSETS
Available-for-sale investments 12 5,915,765 19,312,618
Other receivable 13 2,602,604 -
__________ __________
8,518,369 19,312,618
__________ __________
CURRENT ASSETS
Due from related companies 14 3,490,152 1,846,812
Due from investee entities 15 512,248 821,517
Prepayments, deposits and other receivables 13 1,428,659 40,589
Equity investments at fair value through profit or loss 16 - 369,411
Time deposits 1,025,235 -
Cash and bank balances 7,324,946 1,809,136
__________ __________
13,781,240 4,887,465
__________ __________
CURRENT LIABILITIES
Due to related companies 17 - 656,452
Due to an investee entity 18 - 434,742
Other payables and accrued liabilities 19 882,182 964,465
__________ __________
882,182 2,055,659
__________ __________
NET CURRENT ASSETS 12,899,058 2,831,806
__________ __________
TOTAL ASSETS LESS CURRENT LIABILITIES 21,417,427 22,144,424
EQUITY MINORITY INTEREST 1,012 1,012
__________ __________
21,418,439 22,145,436
__________ __________
__________ __________
CAPITAL AND RESERVES
Share capital 20 969,000 969,000
Share premium 4,977,239 4,977,239
Special distributable reserve 43,178,000 43,178,000
Investment revaluation reserve 426,328 3,656,382
Capital reserve
- realised ( 1,932,199) 12,348,198
- unrealised (35,817,714) (51,450,254)
Revenue reserve 9,617,785 8,466,871
__________ __________
TOTAL EQUITY SHAREHOLDERS' FUNDS 21,418,439 22,145,436
__________ __________
__________ __________
NET ASSET VALUE PER ORDINARY SHARE 23 0.22 0.23
__________ __________
__________ __________
Approved by the Board on 23 April 2007
LI Wai Keung CHAN Kin
Director Director
GUANGDONG DEVELOPMENT FUND LIMITED
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December 2006
Notes 2006 2005
US$ US$
NET CASH INFLOW/(OUTFLOW) FROM
OPERATING ACTIVITIES 24(a) (1,405,938) 544,038
ACQUISITIONS AND DISPOSALS
Proceeds from disposals of available-for-sale investments 7,372,593 -
_________ _________
Cash inflow from acquisitions and disposals 7,372,593 -
_________ _________
EQUITY DIVIDEND PAID - (969,000)
_________ _________
NET CASH INFLOW/(OUTFLOW) BEFORE USE OF
LIQUID RESOURCES 5,966,655 (424,962)
_________ _________
MANAGEMENT OF LIQUID RESOURCES
Net decrease/(increase) in time deposits 24(b) (1,025,235) 1,400,000
Proceeds from disposal of listed investments 574,390 -
_________ _________
Cash inflow/(outflow) from management of liquid resources (450,845) 1,400,000
_________ _________
INCREASE IN CASH 24(b) 5,515,810 975,038
_________ _________
_________ _________
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Notes 2006 2005
US$ US$
INCREASE IN CASH 24(b) 5,515,810 975,038
DECREASE/(INCREASE) IN LIQUID RESOURCES 450,845 (1,400,000)
_________ _________
CHANGE IN NET FUNDS RESULTING FROM
CASH INFLOWS/(OUTFLOWS) 5,966,655 (424,962)
NON-CASH CHANGE IN NET FUNDS 24(b) 204,979 11,332
_________ _________
CHANGE IN NET FUNDS 6,171,634 (413,630)
NET FUNDS AT BEGINNING OF YEAR 24(b) 2,178,547 2,592,177
_________ _________
NET FUNDS AT 31 DECEMBER 24(b) 8,350,181 2,178,547
_________ _________
_________ _________
GUANGDONG DEVELOPMENT FUND LIMITED
BALANCE SHEET
31 December 2006
Notes 2006 2005
US$ US$
NON-CURRENT ASSETS
Interests in subsidiaries 11 6,506,454 18,081,834
Other receivable 13 2,602,604 -
__________ __________
9,109,058 18,081,834
__________ __________
CURRENT ASSETS
Due from related companies 14 3,490,152 1,846,812
Prepayments, deposits and other receivables 13 124,625 40,589
Equity investments at fair value through profit or loss 16 - 369,411
Time deposits 1,025,235 -
Cash and bank balances 7,290,089 1,784,489
__________ __________
11,930,101 4,041,301
__________ __________
CURRENT LIABILITIES
Due to related companies 17 - 656,452
Other payables and accrued liabilities 19 498,841 576,379
__________ __________
498,841 1,232,831
__________ __________
NET CURRENT ASSETS 11,431,260 2,808,470
__________ __________
20,540,318 20,890,304
__________ __________
__________ __________
CAPITAL AND RESERVES
Share capital 20 969,000 969,000
Share premium 21 4,977,239 4,977,239
Special distributable reserve 21 43,178,000 43,178,000
Capital reserve
- realised 21 10,995,327 10,736,260
- unrealised 21 (49,278,283) (49,224,195)
Revenue reserve 21 9,699,035 10,254,000
__________ __________
TOTAL EQUITY SHAREHOLDERS' FUNDS 20,540,318 20,890,304
__________ __________
__________ __________
NET ASSET VALUE PER ORDINARY SHARE 23 0.21 0.22
__________ __________
__________ __________
Approved by the Board on 23 April 2007
LI Wai Keung CHAN Kin
Director Director
GUANGDONG DEVELOPMENT FUND LIMITED
SUMMARY OF MATERIAL PORTFOLIO CHANGES
31 December 2006
The following investments were disposed of during the year:
Net sale
proceeds
US$
Guangzhou Malting Company Ltd. 4,681,262
Production and sale of malt
Guangdong (Zhanjiang) Medium Density
Fibre Board Co. Ltd. 519,308
Production and sale of medium density fibreboard
HONOUR MILLION INDUSTRIES LIMITED 797,687
Investment holding
GD DECORATIVE MATERIAL (ZHONGSHAN) CO., LTD. 867,594
Production and sale of decorative materials
PAK KONG TRANSCO LIMITED 3,941,370
Operation of bridges in Qingyuan
GH WATER SUPPLY (HOLDINGS) LIMITED 506,742
CHINA MERCHANTS CHINA DIRECT INVESTMENTS LIMITED 574,390
__________
11,888,353
__________
__________
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
1. GENERAL
The Company was incorporated with limited liability in Jersey on 12
January 1994 under the Companies (Jersey) Law 1991. The Company's ordinary
share capital has been listed on the London Stock Exchange since 23 February
1994. The Company obtained a secondary listing of its ordinary share capital on
The Stock Exchange of Hong Kong Limited (the "Hong Kong Stock Exchange") on 23
July 1996.
On 6 March 2001, the Company's board of directors passed a resolution to
withdraw the Company's secondary listing of its ordinary share capital on the
Hong Kong Stock Exchange. The Company's application to withdraw the listing of
its ordinary share capital was confirmed by the listing committee of the Hong
Kong Stock Exchange on 18 April 2001 and the trading of the shares on the Hong
Kong Stock Exchange ceased with effect from the close of business on 2 May 2001.
2 SIGNIFICANT ACCOUNTING ESTIMATES
The Group makes estimates and assumptions concerning the future and
other key sources of estimation uncertainty at the balance sheet date that have
a significant risk of causing a material adjustment to the carrying value of
assets and liabilities within the next financial year, details of which are
discussed below.
Fair value of available-for-sale investments
The fair value of certain unlisted investments of the Group that are
not quoted in active markets is determined by using valuation techniques,
primarily discounted cash flow projections. The projections used to determine
fair values are based on reliable estimates of future cash flows, supported by
external evidences such as observable market data on interest rates and equity
returns. The discount rates used for valuing equity investments are determined
based on historic equity returns for other entities operating in the same
industry for which market returns are observable.
The total carrying amount of these investments which fair values are
determined by using valuation techniques at 31 December 2006 was US$5,659,641
(2005: US$15,243,566).
Impairment of available-for-sale investments
The Group's available-for-sale investments are either stated at fair
value or at cost less any impairment losses where the fair value cannot be
reliably measured. The Group determines whether available-for-sale investments
are impaired, at least, on an annual basis. This requires an estimation of the
recoverable amount of the investments which is based on reliable estimates
of the expected future cash flows and also a suitable discount rate to calculate
the present value of those cash flows or by reference to, inter alia, an
indicative disposal price offered by a counterparty.
The total carrying amount of available-for-sale investments at 31 December 2006
was US$5,915,765 (2005: US$19,312,618).
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
2 SIGNIFICANT ACCOUNTING ESTIMATES (continued)
Impairment allowances on receivables
The Group regularly reviews its receivables to assess impairment. In determining
whether a receivable or a group of receivables is impaired and impairment losses
are incurred, the Group considers, inter alia, whether there is any observable
data indicating that there is a measurable decrease in the estimated future cash
flows from its receivables. This requires the Company to make estimates about
expected future cash flows, and hence they are subject to uncertainty.
The total carrying value of receivables, including amounts due from
related companies and investee entities and other receivables, at 31 December
2006 was US$7,905,922 (2005: US$2,668,329).
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the principal accounting policies, all of which have
been applied consistently throughout the current and preceding years is set out
below.
Basis of preparation and accounting policies
The financial statements have been prepared in United States dollars
under the historical cost convention, as modified by the revaluation of
investments, and in accordance with accounting principles generally accepted in
the Island of Jersey, incorporating United Kingdom Accounting Standards.
The financial statements have been prepared in accordance with the
Statement of Recommended Practice "Financial Statements of Authorised Funds"
issued in December 2005 by the Investment Management Association in the United
Kingdom as far as is practicable for this entity.
Included in the available-for-sale investments as at 31 December
2006 is a carrying value of US$1,831,666 (2005: US$4,069,052) of the Group's
investment in Foshan Tongbao Co., Ltd. ("Tongbao"). As previously reported in
the 2005 audited financial statements, an impairment loss of US$3.9 million
against the carrying value of the Group's investment in Tongbao had been fully
charged to the consolidated statement of total return for the year ended 31
December 2005. However, as the directors were unable to obtain sufficient
evidence to determine the fair value of Tongbao as at 31 December 2004, it was
unable to determine the extent of such impairment loss which should have been
charged to the consolidated statement of total return for the year ended 31
December 2004 and hence, for the year ended 31 December 2005. Accordingly, the
comparative amounts of these financial statements may not be comparable.
Basis of consolidation
The consolidated financial statements include the financial
statements of the Company and its subsidiaries for the year ended 31 December
2006. All significant intra-group transactions and balances within the Group
are eliminated on consolidation.
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Subsidiaries
A subsidiary is a company in which the Company, directly or indirectly, controls
more than half of its voting power or issued share capital or controls the
composition of its board of directors.
Interests in subsidiaries are stated at cost unless, in the opinion of the
directors, there have been impairment losses, when they are written down to
values determined by the directors.
Associates
An associate is a company, not being a subsidiary or a jointly-controlled
entity, in which the Group has a long term interest of generally not less than
20% of the equity voting rights and over which it is in a position to exercise
significant influence.
In accordance with the exemption as set out in paragraph 49 of
Financial Reporting Standard No.9 "Associates and Joint Ventures", the Group
classified investments that are held as part of the Group's investment portfolio
as available-for-sale investments, even though the Group has significant
influence over the investees. The directors consider that, because these
investments are held with a view to the ultimate realisation of capital gains,
equity accounting would not give a true and fair view of the Group's interests
in these investments, which are better measured by dividends and interest.
Further details of accounting policies and the Group's investment portfolio are
included under the heading of "Investments and other financial assets" in notes
3 and 12, respectively, to the financial statements.
Investments and other financial assets
Financial assets in the scope of FRS 26 are classified as equity investments at
fair value through profit or loss, loans and receivables or available-for-sale
investments, as appropriate. When financial assets are recognised initially,
they are measured at fair value, plus, in the case of investments not at fair
value through profit or loss, directly attributable transaction costs. The
Group determines the classification of its financial assets after initial
recognition and, where allowed and appropriate, re-evaluates this designation at
each balance sheet date.
All regular way purchases and sales of financial assets are recognised on the
trade date, which is the date that the Group commits to purchase the asset.
Regular way purchases or sales are purchases or sales of financial assets that
require delivery of assets within the period generally established by regulation
or convention in the marketplace.
Equity investments at fair value through profit or loss
Financial assets classified as held for trading are included in the category
"Equity investments at fair value through profit or loss". Financial assets are
classified as held for trading if they are acquired for the purpose of selling
in the near term. Gains or losses on investments held for trading are
recognised in the statement of total return. Transaction costs are charged to
the statement of total return when they arise.
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Investments and other financial assets (continued)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. After initial
measurement, loans and receivables are subsequently carried at amortised cost
using the effective interest method less any allowance for impairment. Amortised
cost is calculated taking into account any discount or premium on acquisition
and includes fees that are an integral part of the effective interest rate and
transaction costs. Gains and losses are recognised in the statement of total
return when the loans and receivables are derecognised or impaired, as well as
through the amortisation process.
Available-for-sale investments
Available-for-sale investments are those non-derivative financial
assets in unlisted equity securities that are designated as available-for-sale
or are not classified in any of the other two preceding categories. After
initial recognition, available-for-sale investments are measured at fair value
with unrealised gains or losses being recognised directly in equity in the
investment revaluation reserve. When the investment is disposed of, the
cumulative gain or loss previously reported in equity is recognised in the
statement of total return. Interest earned on the investments is reported as
interest income using the effective interest rate. Dividends earned on the
investments are recognised in the statement of total return as investment income
when the right of payment has been established.
When the fair value of unlisted equity securities cannot be reliably
measured, such securities are stated at cost less any impairment losses.
Fair value
The fair value of investments that are actively traded in organised
financial markets is determined by reference to quoted market bid prices at the
close of business on the balance sheet date. For investments where there is no
active market, fair value is determined using valuation techniques. Such
techniques include using recent arm's length market transactions; reference to
the current market value of another instrument, which is substantially the same;
a discounted cash flow analysis or other valuation models.
Impairment of financial assets
The Group assesses at each balance sheet date whether a financial asset or group
of financial assets is impaired.
Assets carried at amortised cost
If there is objective evidence that an impairment loss on loans and
receivables carried at amortised cost has been incurred, the amount of the loss
is measured as the difference between the asset's carrying amount and the
present value of estimated future cash flows (excluding future credit losses
that have not been incurred) discounted at the financial asset's original
effective interest rate (i.e., the effective interest rate computed at initial
recognition). The carrying amount of the asset is reduced either directly or
through the use of an allowance account. The amount of the impairment loss is
recognised in return or loss.
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of financial assets (continued)
Assets carried at amortised cost (continued)
The Group first assesses whether objective evidence of impairment exists
individually for financial assets that are individually significant, and
individually or collectively for financial assets that are not individually
significant. If it is determined that no objective evidence of impairment
exists for an individually assessed financial asset, whether significant or not,
the asset is included in a group of financial assets with similar credit risk
characteristics and that group is collectively assessed for impairment. Assets
that are individually assessed for impairment and for which an impairment loss
is or continues to be recognised are not included in a collective assessment of
impairment.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event occurring
after the impairment was recognised, the previously recognised impairment loss
is reversed. Any subsequent reversal of an impairment loss is recognised in the
statement of total return, to the extent that the carrying value of the asset
does not exceed its amortised cost at the reversal date.
Assets carried at cost
If there is objective evidence that an impairment loss on an
unquoted equity instrument that is not carried at fair value because its fair
value cannot be reliably measured, the amount of the loss is measured as the
difference between the asset's carrying amount and the present value of
estimated future cash flows discounted at the current market rate of return for
a similar financial asset. Impairment losses on these assets are not reversed.
Available-for-sale financial assets
If an available-for-sale asset is impaired, an amount comprising the
difference between its cost (net of any principal payment and amortisation) and
its current fair value, less any impairment loss previously recognised in profit
or loss, is transferred from equity to the statement of total return.
Impairment losses on equity instruments classified as available-for-sale are not
reversed through return or loss.
Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset
or part of a group of similar financial assets) is derecognised where:
* the rights to receive cash flows from the asset have expired;
* the Group retains the rights to receive cash flows from the asset,
but has assumed an obligation to pay them in full without material delay to a
third party under a "pass-through" arrangement; or
* the Group has transferred its rights to receive cash flows from the
asset and either (a) has transferred substantially all the risks and rewards of
the asset, or (b) has neither transferred nor retained substantially all the
risks and rewards of the asset, but has transferred control of the asset.
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Derecognition of financial assets (continued)
Where the Group has transferred its rights to receive cash flows
from an asset and has neither transferred nor retained substantially all the
risks and rewards of the asset nor transferred control of the asset, the asset
is recognised to the extent of the Group's continuing involvement in the asset.
Continuing involvement that takes the form of a guarantee over the transferred
asset is measured at the lower of the original carrying amount of the asset and
the maximum amount of consideration that the Group could be required to repay.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the
liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from the
same lender on substantially different terms, or the terms of an existing
liability are substantially modified, such an exchange or modification is
treated as a derecognition of the original liability and the recognition of a
new liability, and the difference in the respective carrying amounts is
recognised in the statement of total return.
Dividends
Dividends declared are recognised in equity on their ex dividend
date.
Foreign currency translation
These financial statements are presented in United States dollars,
which is the Company's functional and presentation currency. Each entity in the
Group determines its own functional currency and items included in the financial
statements of each entity are measured using that functional currency. Foreign
currency transactions are initially recorded using the functional currency rates
ruling at the date of the transactions. Monetary assets and liabilities
denominated in foreign currencies are
retranslated at the functional currency rate of exchange ruling at
the balance sheet date. All differences are taken to the revenue reserve.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rates at the dates of the initial
transactions. Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair value was
determined.
For the purpose of the consolidated cash flow statement, the cash flows of
overseas subsidiaries are translated into United States dollars at the exchange
rates ruling at the dates of the cash flows. Frequently recurring cash flows of
overseas subsidiaries which arise throughout the year are translated into United
States dollars at the weighted average exchange rates for the year.
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Cash and cash equivalents
For the purpose of the consolidated cash flow statement, cash and
cash equivalents comprise cash at banks and term deposits, and short term highly
liquid investments which are readily convertible into known amounts of cash and
which are subject to an insignificant risk of changes in value, and have a short
maturity of generally within three months when acquired.
For the purpose of the balance sheets, cash and bank balances
comprise cash at banks, including term deposits, which are not restricted as to
use.
Revenue recognition
Interest income is recognised on an accrual basis using the
effective interest method by applying the rate that discounts estimated future
cash receipts through the expected life of the financial instrument to the net
carrying amount of the financial asset. Investment income is recognised when
the right to receive payment is established.
4. INVESTMENT INCOME - UNLISTED INVESTMENTS
Investment income from available-for-sale investments earned from
the Group's investment portfolio is as follows:
2006 2005
US$ US$
Foshan Tongbao Co., Ltd. 372,396 359,624
Guangdong Heyuan Tong Hua Investment Limited 951,332 -
Pak Kong Transco Limited ("Pak Kong")* 506,259 461,393
Guangzhou Malting Company Ltd. - 449,966
GD Decorative Material (Zhongshan) Co., Ltd. - 73,535
Other investment portfolio - 16,159
__________ __________
1,829,987 1,360,677
__________ __________
__________ __________
* Included in the balance is an amount of approximately US$0.2 million
receivable from the purchaser, also the Chinese joint venture partner, related
to the delay in completion of certain sale terms, including completion of
foreign exchange clearance procedures, in connection with the disposal of the
Group's entire interest therein. Pak Kong ceased to be the Group's investment
effective 27 April 2006. Further details of the transaction are set out in note
12 to these financial statements.
5. TAXATION
The Group is not subject to profits tax in any jurisdiction.
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
6. MANAGEMENT FEES
The management fees represent amounts paid or payable in connection
with investment, administrative and accounting services provided by the
investment manager and/or manager to the Company and is charged to the revenue
account in the statement of total return.
Prior to 1 December 2006, the management fee was charged by
Guangdong Investment Management Limited ("GIM"), the then investment manager,
for rendering the above services and was calculated quarterly based on an annual
rate of 2.5% of the Group's assets invested in unlisted companies and of 0.75%
of the Group's remaining assets.
With effect from 1 December 2006, GDF Management (Cayman) Limited
("GDFM") and Springridge Company Limited ("Springridge") were appointed by the
Group as the Group's manager and investment manager, respectively, to replace
GIM in providing the above services. The management fees were charged by each
of GDFM and Springridge at an annual fixed amount of US$150,000.
7. OTHER ADMINISTRATIVE EXPENSES
Group
2006 2005
US$ US$
Directors' remuneration 82,153 48,280
Auditors' remuneration
- audit services 84,231 132,820
- non-audit services 30,769 26,795
Legal and professional fees 366,478 406,888
General and administrative expenses 97,299 93,858
_________ _______
660,930 708,641
_________ _______
_________ _______
8. DIRECTORS' REMUNERATION
Details of remuneration payable by the Group to the directors of the
Company are as follows:
2006 2005
US$ US$
Fees:
Non-executive directors 26,998 16,800
Independent non-executive directors 55,155 31,480
_______ _______
82,153 48,280
_______ _______
_______ _______
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
8. DIRECTORS' REMUNERATION (continued)
There was no arrangement under which a director of the Company
waived or agreed to waive any remuneration during the year.
The Group did not employ any staff other than the directors noted
above during the year.
9. DIVIDEND
2006 2005
US$ US$
Proposed final - US6 cents (2005: Nil cent) per ordinary share 5,814,000 -
_________ _________
_________ _________
The proposed final dividend for the year is subject to the approval
of the Company's shareholders at the forthcoming annual general meeting.
10. RETURN/(LOSS) PER ORDINARY SHARE
The revenue return per ordinary share is based on the revenue return
attributable to equity shareholders of US$1,150,914 (2005: US$132,760) and on
the 96,900,000 (2005: 96,900,000) ordinary shares in issue during the year.
The capital return per ordinary share is based on the net realised
and unrealised capital return of US$1,352,143 (2005: Loss of US$4,415,554) and
on the 96,900,000 (2005: 96,900,000) ordinary shares in issue during the year.
The total return per ordinary share is based on the return
attributable to equity shareholders of US$2,503,057 (2005: Loss of US$4,282,794)
and on the 96,900,000 (2005: 96,900,000) ordinary shares in issue during the
year.
No diluted return per ordinary share has been shown as no diluting
events existed during the year (2005: Nil).
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
11. INTERESTS IN SUBSIDIARIES
Company
2006 2005
US$ US$
Unlisted shares, at cost 14 14
Due from subsidiaries 75,079,223 79,112,260
Due to subsidiaries (20,485,200) (11,942,857)
__________ __________
54,594,037 67,169,417
Less: Impairment of amounts due from subsidiaries (48,087,583) (49,087,583)
__________ __________
6,506,454 18,081,834
__________ __________
__________ __________
The balances with subsidiaries are unsecured, interest-free and have
no fixed terms of repayment.
The subsidiaries' sole activity is to hold the Group's investments
with any dividends received passed up to the Company.
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
11. INTERESTS IN SUBSIDIARIES (continued)
Particulars of the subsidiaries, which are incorporated in the
British Virgin Islands, are as follows:
Percentage
Nominal value of equity
of issued attributable to
Name share capital the Company Principal activities
GDF (Xinhui) Limited US$1 100% Investment holding
GDF (Tongbao) Limited US$1 100% Investment holding
GDF (International) Limited US$1 100% Investment holding
GDF (New Beijiang) Limited US$1 100% Investment holding
GDF (Zhanhai) Limited US$1 100% Investment holding
GDF (Gaoyao) Limited US$1 100% Investment holding
GDF (Zhongfang) Limited US$1 100% Investment holding
GDF (Ningbo) Limited US$1 100% Investment holding
GDF (Zhanxia) Limited US$1 100% Investment holding
Guangyong Development Limited US$1 100% Investment holding
GDF (Heyuan) Limited US$1 100% Investment holding
GDF (Mankelong) Limited * US$1 100% Investment holding
GDF (Guangmai) Limited US$1 100% Investment holding
GDF (Hui Zhang) Limited US$1 100% Investment holding
Guangxin Investment Limited ** US$100 85% Investment holding
* GDF (Mankelong) Limited ("GDF (Mankelong)") is a subsidiary of
Guangyong Development Limited.
** Guangxin Investment Limited ("Guangxin") is a subsidiary of
GDF (Gaoyao) Limited.
Except for GDF (Mankelong) and Guangxin, all of the above subsidiaries are
directly held by the Company.
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
12. AVAILABLE-FOR-SALE INVESTMENTS
Group
2006 2005
US$ US$
Available-for-sale investments, at fair value 5,915,765 19,312,618
__________ __________
__________ __________
Movements during the year:
Valuation at 1 January 19,312,618 20,844,211
Impairment loss (3,168,343) (4,426,886)
Net changes in fair value 1,085,453 2,895,293
Disposals (11,313,963) -
__________ __________
(13,396,853) (1,531,593)
__________ __________
Valuation at 31 December 5,915,765 19,312,618
__________ __________
__________ __________
The fair values of certain unlisted available-for-sale investments have been
estimated using valuation techniques, further details of which are set out in
note 2 to the financial statements. The directors believe that the estimated
fair values resulting from the valuation techniques, which are recorded in the
consolidated balance sheet, and the related changes in fair values, which are
recorded in the consolidated statement of movements in shareholders' funds, are
reasonable, and that they were the most appropriate values at the balance sheet
date.
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
12. AVAILABLE-FOR-SALE INVESTMENTS (continued)
The following available-for-sale investments were disposed of during the year:
Pak Kong Transco Limited ("Pak Kong")
The Group disposed of its entire interest in Pak Kong for a net consideration of
RMB31,964,513 (approximately US$3,941,000), resulting in a net gain of
approximately US$1.46 million after deduction of the related costs and release
of the attributable fair value gain from the investment revaluation reserve.
The carrying value of Pak Kong as at 31 December 2005 amounted to US$4,246,645.
GH Water Supply (Holdings) Limited ("GH Water")
The Group disposed of its entire interest in GH Water for a consideration of
approximately US$507,000, resulting in a net gain of approximately US$0.27
million after the release of the attributable fair value gain from the
investment revaluation reserve. The carrying value of GH Water as at 31
December 2005 amounted to US$506,711.
Guangzhou Malting Company Ltd. ("Guangzhou Malting")
The Group disposed of its entire interest in Guangzhou Malting for a
consideration of approximately US$4,681,000, resulting in a net gain of
approximately US$2 million after deduction of the related costs and release of
the attributable fair value gain from the investment revaluation reserve. The
carrying value of Guangzhou Malting as at 31 December 2005 amounted to
US$3,699,137.
Guangdong (Zhanjiang) Medium Density Fibre Board Co. Ltd.
("Zhanjiang")
The Group disposed of its entire interest in Zhanjiang for a consideration of
approximately US$519,000, resulting in a net gain of approximately US$0.08
million after deduction of the related costs and release of the attributable
fair value gain from the investment revaluation reserve. The carrying value of
Zhanjiang as at 31 December 2005 amounted to US$419,236.
GD Decorative Material (Zhongshan) Co., Ltd. ("GD Decorative")
The Group disposed of its entire interest in GD Decorative for a
consideration of approximately US$868,000, resulting in a net gain of
approximately US$0.15 million after deduction of the related costs and release
of the attributable fair value gain from the investment revaluation reserve. The
carrying value of GD Decorative as at 31 December 2005 amounted to US$621,455.
. Honour Million Industries Limited ("Honour Million")
The Group disposed of its entire interest in Honour Million for a
consideration of approximately US$798,000, resulting in a net gain of
approximately US$0.34 million after deduction of the related costs and release
of the attributable fair value gain from the investment revaluation reserve. The
carrying value of Honour Million as at 31 December 2005 amounted to US$578,406.
The purchasers of Guangzhou Malting, Zhanjiang, GD Decorative and Honour
Million were wholly owned subsidiaries of GDH Limited ("GDH") who is a
10.32% beneficial shareholder of the Company.
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
12. AVAILABLE-FOR-SALE INVESTMENTS (continued)
Details of the Group's available-for-sale investments, which are
holdings in unlisted associates, are as follows:
Place
of
incorp-
oration/ Carrying Attri-
regist- Per- Impair- value butable
ration centage Share Attri- ment/ as at earnings/ Princ-
and of capital butable Share- fair 31 (share Invest icipal
oper- equity and net Capital holders' value December Earnings/ of ment acti-
ations holding reserves assets invested loans changes 2006 (losses) losses) income vities
Company % US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Xin Hui Xing PRC 30.0 N/A N/A 3,530 1,240 (4,770) - N/A N/A - Dormant
Wei Building
Material Co.
Ltd. (f)
Foshan Tongbao
Co., Ltd.
("Tongbao")
(e),(f) PRC 29.9 30,609* 9,152 7,993 - (6,161) 1,832 2,537* 759 372 Production
and sale
of
thermostats
and other
temperature
control
devices
Guangdong
Zhanhai
Instrument PRC 36.0 2,443# 879 2,330 1,462 (3,678) 114 (315)# (113) - Production
& Meter Co.
Ltd. (f) and sale of
flow meters
Gaoyao Gaolu
Cement PRC 36.0 8,013# 2,885 7,439 1,045 (8,484) - (1,089)# (392) - Production
Company and sale
Limited (f) of
cement
Guangdong Nan
Fang British 43.7 (26,517)# (11,588) 29 10,603 (10,632) - 369# 161 - Property
(Holdings) Virgin holding
Co. Islands
Ltd /PRC
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
AVAILABLE-FOR-SALE INVESTMENTS (continued)
Details of the Group's available-for-sale investments, which are holdings
in unlisted associates, are as follows:
Place
of
incorp-
oration/ Carrying Attri-
regist- Per- Impair- value butable
ration centage Share Attri- ment/ as at earnings/ Princ-
and of capital butable Share- fair 31 (share Invest icipal
oper- equity and net Capital holders' value December Earnings/ of ment acti-
ations holding reserves assets invested loans changes 2006 (losses) losses) income vities
Company % US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Guangdong PRC 24.2 13,222# 3,200 2,331 - (2,075) 256 (2,300)# (557) 951 Operation
Heyuan Tong of a
Hua section
Investment
Limited
(d),(g) of
National
Highway
No. 205
Yuehui PRC 20.0 12,635* 2,527 1,328 1,977 409 3,714 1,544* 309 - Operation
Highways of a
and section
Bridges of
Development Provincial
("Huizhang") Highway
(d), (f) No.
1918,1919
______ ______ ______ ______ _____ ______ _____ ____ ____
Total 40,405 7,055 24,980 16,327 (35,391) 5,916 746 167 1,323
______ ______ ______ ______ _____ ______ _____ ____ ____
______ ______ ______ ______ _____ ______ _____ ____ ____
* Based on the PRC audited financial statements as at 31 December 2006
# Based on the unaudited management accounts as at 31 December 2006
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
12. AVAILABLE-FOR-SALE INVESTMENTS (continued)
Notes:
(a) All associates are held by the subsidiaries of the Company.
(b) The cost of investment includes loans to investee entities,
net of provision, amounting to US$4,608,000 (2005: US$4,608,000).
(c) Investment income includes dividend income and other related
investment income. All investment income is derived from the PRC.
(d) These are contractual joint ventures established by the various
subsidiaries of the Company and independent PRC third parties. Under the terms
of the joint venture contracts, the residual interests in the joint venture
projects are to be transferred to the various PRC joint venture partners at the
end of the contractual period in accordance with the terms of the contracts.
(e) As disclosed in previous financial statements, Tongbao had provided
guarantees to the related companies of its controlling shareholder without the
knowledge of the Group. Legal proceedings were then instituted by the previous
board of directors of the Group against Tongbao at the Foshan Intermediate
People's Court (the "Intermediate Court") in December 2003 in order to enforce
its right to investigate the corporate documents of Tongbao. The Group made an
appeal to Guangdong Provincial Higher People's Court ("Higher Court") after an
unfavorable ruling against the Group was received in September 2004. In April
2005, the Higher Court instructed the Intermediate Court to revoke the original
ruling previously made by the Intermediate Court and to retry the case.
During the second half of 2005, following the change of the board of directors
of the Company, Tongbao took a more cooperative approach towards the Group and
hence, the Group was able to commission an independent valuation of Tongbao in
February 2006. The Group had since made tremendous efforts to negotiate an out
of court settlement which was acceptable to both parties. The proposed
settlement was to execute an agreement/
memorandum of understanding to be made between the Group and Tongbao to
stipulate certain measures monitoring Tongbao's future corporate governance.
However, this proposal was declined by Tongbao and eventually the settlement
fell through. The Group had no other alternatives but to restart the litigation
and the retrial was held at the Intermediate Court on 2 August 2006.
In August 2006, Tongbao denied the Group's valuers access to carry out their
independent valuation procedures to perform a valuation. Without an independent
valuation, the fair value of the Group's investment in Tongbao as at 30 June
2006 could not be determined.
However, following the change of investment manager of the Group with effect
from 1 December 2006, Tongbao returned a more co-operative approach towards the
Group again. Vigers Appraisal and Consulting Limited ("Vigers"), an independent
firm of professionally qualified valuers, were able to conduct an independent
valuation of Tongbao as at the balance sheet date and, accordingly, the Group's
investment in Tongbao was stated at fair value of US$1,831,666 by reference to
the valuation of the Group's interest in Tongbao as at 31 December 2006. In
order to allow time to resolve the problems on Tongbao, the Group and Tongbao
applied to the Intermediate Court to defer the retrial in January 2007 until
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
12. AVAILABLE-FOR-SALE INVESTMENTS (continued)
Notes:
further notice.
The Group will endeavour to reach an out of court settlement with Tongbao, which
is acceptable to both parties.
(f) The fair value/impairment loss of these investments was recorded by
reference to the independent professional valuation as at 31 December 2006
carried out by Vigers.
(g) The impairment loss of this investment was determined by
reference to the indicative disposal price offered by a shareholder of
this investment.
13. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES
Group Company
Notes 2006 2005 2006 2005
US$ US$ US$ US$
Non-current assets:
Other receivable (a) 2,602,604 - 2,602,604 -
Current assets:
Prepayments and deposits 127,741 40,589 124,468 40,589
Other receivables (b) 1,300,918 - 157 -
_________ _______ _________ _______
1,428,659 40,589 124,625 40,589
_________ _______ _________ _______
Total 4,031,263 40,589 2,727,229 40,589
_________ _______ _________ _______
_________ _______ _________ _______
(a) This represents a receivable from an authorised financial
institution (the "Trustee") registered in the PRC who, in turn, deposited the
amount in a trust bank account jointly operated by the Trustee and the Group.
The amount maintained in this trust bank account is denominated in Renminbi,
which is not freely convertible into foreign currencies under the existing PRC
foreign exchange regulations. The Group is currently exploring ways to have
this amount remitted to the Group in United States dollars. In the opinion of
the directors, this amount may not be realised and distributed to the
shareholders in United States dollars within the next twelve months from the
balance sheet date and, accordingly, the receivable is classified as a
non-current asset.
(b) Included in short-term other receivables is an amount of
US$1,300,761 (2005: Nil) which represents outstanding sale consideration and
compensation income relating to the disposal of the Group's interest in Pak
Kong, a former investee entity. The Group is currently taking necessary
procedures to have this amount remitted to the Group in United States dollars.
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
14. DUE FROM RELATED COMPANIES
Group and Company
2006 2005
US$ US$
GDF Management Limited 11,359 1,846,812
Guangzhou Yagao Consultant Company
Limited ("Guangzhou Yagao") 3,478,793 -
_________ _________
3,490,152 1,846,812
__________ __________
__________ __________
Included in the amount due from Guangzhou Yagao is an amount of approximately
US$3 million, being the partial sale consideration of the Group's interest in
Pak Kong, a former investee entity, received by Guangzhou Yagao on the Group's
behalf. The Group is currently taking necessary procedures to have this amount
remitted to the Group in United States dollars.
The amounts due from related companies are unsecured, interest-free and have
no fixed terms of repayment.
15. DUE FROM INVESTEE ENTITIES
The amounts due from investee entities represent the investment income
receivables and are arrived at after charging impairment loss of US$777,632
(2005: US$777,632).
At the balance sheet date, the amount included an investment income receivable
from an investee entity, Huizhang, denominated in Renminbi, which is not freely
convertible into foreign currencies under the existing PRC foreign exchange
regulations. The Group is currently taking necessary procedures to have this
amount remitted to the Group in United States dollars. The amount due from
investee entities are unsecured, interest-free and have no fixed terms of
repayment.
16. EQUITY INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Group Company
2006 2005 2006 2005
US$ US$ US$ US$
Listed investments in Hong Kong, at cost - 315,323 - 315,323
Fair value gain - 54,088 - 54,088
_____ _______ _____ _______
Closing market valuation at 31 December - 369,411 - 369,411
_____ _______ _____ _______
_____ _______ _____ _______
The investments were fully disposed of during the year.
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
17. DUE TO RELATED COMPANIES
Group and Company
2006 2005
US$ US$
Guangdong Investment Management Limited - 652,461
Guangdong Fund (Hong Kong) Limited - 3,991
______ ________
- 656,452
______ ________
______ ________
The above balances were unsecured, interest-free and fully settled during the year.
18. DUE TO AN INVESTEE ENTITY
The amount due to an investee entity at the prior year end represented
investment income received in advance from the investee entity. The amount was
recognised as investment income upon the formal approval and declaration by the
board of directors of the investee entity for distribution to its shareholders
during the year.
19. OTHER PAYABLES AND ACCRUED LIABILITIES
Group Company
2006 2005 2006 2005
US$ US$ US$ US$
Accrued liabilities 233,349 311,317 207,161 280,385
Withholding tax payable 352,856 352,856 - -
Other payables 295,977 300,292 291,680 295,994
________ ________ ________ ________
882,182 964,465 498,841 576,379
________ ________ ________ ________
________ ________ ________ ________
The above payable balances are unsecured and non-interest-bearing.
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
20. SHARE CAPITAL
Company
2006 2005
US$ US$
Authorised:
150,000,000 ordinary shares of US$0.01 each 1,500,000 1,500,000
__________ __________
__________ __________
Issued and fully paid:
96,900,000 ordinary shares of US$0.01 each 969,000 969,000
__________ __________
__________ __________
21. RESERVES
Group
The movements in the Group's reserves for the current and prior years are
presented in the consolidated statement of movements in shareholders' funds
shown as above.
Company
Special Capital Capital
Share distributable reserve reserve Revenue
premium reserve - realised - unrealised reserve
US$ US$ US$ US$ US$
At 1 January 2005 4,977,239 44,147,000 10,736,260 (49,235,527) 11,410,977
Change in fair value of equity
investments
at fair value through profit or - - - 11,332 -
loss
Loss for the year - - - - (1,156,977)
Dividend paid - (969,000) - - -
________ ________ ________ ________ ________
At 31 December 2005 and 1 January 4,977,239 43,178,000 10,736,260 (49,224,195) 10,254,000
2006
Net realised gain on disposal of
equity investments at fair value
through profit or loss - - 204,979 - -
Captial reserve realised on disposal
of equity investments at fair value
through profit or loss - - 54,088 (54,088) -
Loss for the year - - - - 554,965)
________ ________ _______ ________ ________
At 31 December 2006 4,977,239 43,178,000 10,995,327 (49,278,283) 9,699,035
_______ ________ _______ ________ ________
_______ ________ _______ ________ ________
Note: Pursuant to a special resolution passed at the Extraordinary
General Meeting held on 23 February 2001, the Company's share premium account
was reduced by US$80 million to approximately US$5 million. The surplus arising
from such reduction was transferred to a distributable reserve account which is
available for distribution to the Company's shareholders. On 1 March 2001, the
Royal Court of Jersey confirmed such special resolution.
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
22. RECONCILIATION OF MOVEMENT IN EQUITY SHAREHOLDERS' FUNDS
Group
2006 2005
US$ US$
Return/(loss) attributable to equity shareholders 719,724 (1,387,501)
Equity shareholders' funds at beginning of year 22,145,436 24,501,937
Dividend paid - (969,000)
__________ __________
Equity shareholders' funds at end of year 22,865,160 22,145,436
__________ __________
__________ __________
3. NET ASSET VALUE PER ORDINARY SHARE
The Group's net asset value per fully paid ordinary share of US$0.22 (2005:
US$0.23) has been calculated in accordance with the articles of association.
The calculation is based on 96,900,000 shares (2005: 96,900,000 shares) in issue
at the year end and the net assets of the Group of US$21,418,439 (2005:
US$22,145,436) at the year end.
The Company's net asset value per fully paid ordinary share of US$0.21 (2005:
US$0.22) has been calculated in accordance with the articles of association.
The calculation is based on 96,900,000 shares (2005: 96,900,000 shares) in issue
at the year end and the net assets of the Company of US$20,540,318 (2005:
US$20,890,304) at the year end.
24. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
(a) Reconciliation of the Group's revenue return on ordinary
activities to net cash inflow/(outflow) from operating activities
2006 2005
US$ US$
Revenue return on ordinary activities for the year 1,150,914 132,760
Decrease in amounts due from related companies 1,359,060 354,634
Decrease/(increase) in amounts due from investee entities 309,269 (339,774)
Increase in prepayments, deposits and other receivables (3,051,704) (22,361)
Increase/(decrease) in amounts due to related companies (656,452) 519,940
Increase/(decrease) in an amount due to an investee entity (434,742) 65,236
Decrease in other payables and accrued liabilities (82,283) (166,397)
________ ________
Net cash inflow/(outflow) from operating activities (1,405,938) 544,038
_________ ________
_________ ________
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
24. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT (continued)
(b) Analysis of changes in net funds
At Net Other At
beginning cash non-cash 31 December
of year flows changes 2006
US$ US$ US$ US$
Cash 1,809,136 5,515,810 - 7,324,946
Time deposits - 1,025,235 - 1,025,235
Equity investments at fair value
through profit or loss 369,411 (574,390) 204,979 -
_______ _________ _______ _________
2,178,547 5,966,655 204,979 8,350,181
_________ _________ _______ _________
_________ _________ _______ _________
Major non-cash transaction
During the year, the Group disposed of its investment in Pak Kong for a net
consideration of RMB31,964,513 (approximately US$3.9 million), amongst which
RMB24,000,000 (approximately US$3 million) was received by a related company on
the Group's behalf and the remaining outstanding balance of RMB7,964,513
(approximately US$0.9 million) was recorded as an other receivable at the
balance sheet date.
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
25. SEGMENT INFORMATION
The principle activity of the Group is investment holding. An analysis of the
Group's revenue and loss and net assets by geographical area of operations for
the year ended 31 December 2006 is as follows:
Mainland PRC Hong Kong Total
2006 2005 2006 2005 2006 2005
US$ US$ US$ US$ US$ US$
Revenue:
Investment income 1,829,987 1,344,518 896 21,058 1,830,883 1,365,576
Interest income 34,215 17,647 59,360 16,807 93,575 34,454
________ ________ ________ ________ ________ ________
1,864,202 1,362,165 60,256 37,865 1,924,458 1,400,030
Fair value gain on equity
investments at fair value
through profit or loss, net - - - 11,332 - 11,332
Net realised gain on disposal
of interests in
available-for-sale
investments 4,098,183 - 217,324 - 4,315,507 -
Net realised gain on disposal
of equity investments at
fair value through profit
or loss - - 204,979 - 204,979 -
________ ________ ________ ________ ________ ________
5,962,385 1,362,165 482,559 49,197 6,444,944 1,411,362
Less:
Impairment of
available-for-sale
investments (3,168,343) (4,426,886) - - (3,168,343) (4,426,886)
________ ________ ________ ________ ________ ________
2,794,042 (3,064,721) 482,559 49,197 3,276,601 (3,015,524)
________ ________ ________ ________
________ ________ ________ ________
Expenses:
Management fees (434,859) (519,234)
Other administrative
expenses (660,930) (708,641)
Exchange gain/(loss) 322,245 (39,395)
________ ________
Return/(loss) attributable to
equity shareholders 2,503,057 (4,282,794)
________ ________
________ ________
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
25. SEGMENT INFORMATION (continued)
Mainland PRC Hong Kong Total
2006 2005 2006 2005 2006 2005
US$ US$ US$ US$ US$ US$
Available-for-sale investments 5,915,765 18,805,907 - 506,711 5,915,765 19,312,618
Other receivables 3,903,365 - 157 - 3,903,522 -
Due from related companies 3,490,152 1,846,812 - - 3,490,152 1,846,812
Due from investee entities 512,248 821,517 - - 512,248 821,517
Equity investments at fair
value through profit or loss - - - 369,411 - 369,411
Time deposits - - 1,025,235 - 1,025,235 -
Cash and bank balances - - 7,324,946 1,809,136 7,324,946 1,809,136
________ ________ ________ ________ ________ ________
13,821,530 21,474,236 8,350,338 2,685,258 22,171,868 24,159,494
________ ________ ________ ________
________ ________ ________ ________
Other net current liabilities
and minority interest (753,429) (2,014,058)
________ ________
Net assets 21,418,439 22,145,436
________ ________
________ ________
26. RELATED PARTY TRANSACTIONS
In addition to the balances and transactions disclosed elsewhere in these
financial statements, the Group had the following material transactions with
related parties during the year:
Name of payee Nature Notes 2006 2005
US$ US$
Guangdong Investment
Management Limited# Investment management fees (a) 409,859 519,234
GDF Management (Cayman)
Limited# Management fees (b) 12,500 -
Springridge Company
Limited* Investment management fee (b) 12,500 -
Victor Chu & Co.# Legal fees (c) - 25,311
Equity Secretarial
Services Limited# Secretarial fees (c) - 18,889
_______ _______
_______ _______
# Certain directors and/or beneficial shareholders of the above companies are
also directors and/or beneficial shareholders of the Company.
* Springridge has acted as the investment manager of the Group commencing from
1 December 2006.
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
26. RELATED PARTY TRANSACTIONS (continued)
In addition to the above transactions, the Group disposed of its entire
interests in Guangzhou Malting, Zhanjiang, GD Decorative and Honour Million to
certain wholly-owned subsidiaries of GDH, a 10.32% beneficial shareholder of the
Company, during the year, details of which are disclosed in note 12 to the
financial statements.
In the opinion of the directors of the Company, the above transactions were
entered into in the ordinary course of the business of the Group.
Notes:
(a) The investment management fees to GIM were calculated
quarterly based on an annual rate of 2.5% of the Group's assets invested in
unlisted companies and of 0.75% of the Group's remaining assets. GIM ceased to
act as the Group's investment manager with effect from 1 December 2006.
(b) The management fees were charged by each of GDFM and
Springridge at an annual fixed amount of US$150,000 commencing from 1 December
2006.
(c) The directors considered that the legal fees, secretarial
fees and printing charges were negotiated on an individual transaction basis.
27. VALUES OF FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS
(a) Values of financial instruments
Interests in available-for-sale investments and equity investments at fair value
through profit or loss are carried at the values calculated in accordance with
the accounting policies set out in note 3 to the financial statements. The
Group's other assets and liabilities include cash and bank balances, time
deposits, balances with investee entities and related companies, and other
receivables and payables which are realised or settled within a short period of
time. The carrying amounts of these other assets and liabilities approximate to
their fair values.
(b) Associated risks
The Group's investment activities expose it to the various types of risk which
are associated with the financial instruments and markets in which it invests.
The following summary, which is not intended to be a comprehensive summary of
all risks, illustrates the risks inherent in investing in the Group:
(i) Credit risk
Financial assets which potentially expose the Group to credit risk consist
principally of cash and bank balances, time deposits, amounts due from investee
entities and related companies, and other receivables. The maximum extent of the
Group's
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
27. VALUES OF FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS (continued)
(b) Associated risks (continued)
(i) Credit risk (continued)
exposure to credit risk in respect of these financial assets is equal to their
carrying amounts as recorded in the Group's balance sheet. The Group minimises
exposure to credit risk by only dealing with recognised and creditworthy
parties.
(ii) Market price risk
Market price risk arises mainly from uncertainty about the future prices of the
financial instruments held. It represents the potential loss the investments
might suffer through holding market positions in the face of price movements.
The Group's investment manager performs periodic evaluations of the investment
portfolio in order to minimise the risk associated with the investments whilst
continuing to follow the Group's investment objectives.
(iii) Foreign currency risk
A number of the Group's financial assets are denominated in currencies other
than their functional currency, with the effect that the balance sheet and total
return can be affected by currency movements. An analysis of the Group's
financial assets which may have significant foreign currency exposure is as
follows:
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
27. VALUES OF FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS (continued)
(iii) Foreign currency risk (continued)
2006 2005
US$ US$
Financial assets Foreign currencies
Available-for-sale investments Renminbi 5,915,765 18,805,907
Other receivables Renminbi 3,903,365 -
Due from related companies Renminbi 3,490,152 1,846,812
Due from investee entities Renminbi 512,248 821,517
__________ _________
13,821,530 21,474,236
__________ _________
Equity investments at fair Hong Kong
value through profit or loss dollars - 369,411
Hong Kong
Cash and bank balances dollars 32,128 59,411
__________ _________
32,128 428,822
__________ _________
Total 13,853,658 21,903,058
__________ __________
__________ __________
Under the existing foreign exchange regulations of the Mainland PRC, Renminbi is
not freely convertible into foreign currencies. The Group is currently taking
necessary steps/procedures to have these Renminbi financial assets be realised
and distributed to the shareholders in United States dollars. As further
detailed in note 13 to the financial statements, an other receivable of
RMB20,323,000 (US$2,602,604) may not be realised and distributed in United
States dollars within the next twelve months from the balance sheet date and,
accordingly, the receivable is classified as a non-current asset.
In addition, investment income from the Group's investment portfolio is
originally declared/distributed by the investee entities in foreign currencies.
The Group makes their best effort to negotiate with the investee entities to
remit the investment income in United States dollars to minimise foreign
currency exposure.
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
27. VALUES OF FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS (continued)
(iv) Interest rate risk
The majority of the Group's financial assets are equity shares and other
investments which neither pay interest nor have a maturity date. Financial
assets that expose the Group directly to interest rate risk consist of bank
balances and time deposits and therefore, the Group is not exposed to
significant risk arising from the fluctuations in the prevailing levels of
market interest rates.
Weighted
average
interest 2006 2005
rate US$ US$
Investments Non-interest-bearing - 5,915,765 19,682,029
Time deposits Fixed 2.72% 1,025,235 -
Cash and bank
balances Floating 1.91% 7,324,946 1,809,136
___________ ___________
___________ ___________
(v) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in raising
funds to meet commitments associated with financial instruments. Liquidity risk
may result from an inability to sell a financial asset quickly at close to its
fair value. The Group is exposed to liquidity risks on its unlisted investments
for which a liquid market does not exist. All of the financial liabilities of
the Group fall due within one year.
The Group's objective is to ensure that there are adequate funds to meet
commitments associated with its financial liabilities and cashflows are
closely monitored on an ongoing basis.
(vi) Fair value
There is no material difference between the value of the
financial assets and liabilities, as shown in the balance sheet, and their fair
values.
28. EXCHANGE RATES
The rates of exchange ruling at 31 December 2006 were as follows:
Hong Kong dollars 7.80 = US$1
Renminbi 7.81 = US$1
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
31 December 2006
29. CONTINGENT LIABILITIES
Pursuant to (i) the management agreement dated 29 May 2006 entered
into between the Company and GDFM; and (ii) the investment management agreement
dated 29 May 2006 entered into between the Company and Springridge, both GDFM
and Springridge are entitled to a one-off performance fee equal to 7.5% of
aggregate proceeds, distributed and available for distribution to the
shareholders in excess of US$20 million from the date of appointment to the date
of termination of the management agreement and the investment management
agreement, respectively.
A provision has not been recognised in respect of such possible payments
because, in the opinion of the directors, such possible payments cannot
be reliably measured and are not probable to result in a material future outflow
of resources from the Group in the foreseeable future.
30. APPROVAL OF THE FINANCIAL STATEMENTS
The financial statements were approved and authorised for issue by the board
of directors on 23 April 2007.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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