Final Results

 

TIDMGDF 
 
RNS Number : 3789R 
Guangdong Development Fund Ld 
29 April 2009 
 
Press Release 
 
GUANGDONG DEVELOPMENT FUND LIMITED 
ANNOUNCES 2008 ANNUAL RESULTS 
 
 
Hong Kong, 29 April 2009 - The board of directors (the "Board") of Guangdong 
Development Fund Limited (the "Fund"  or the "Company") announced that the 
audited loss attributable to shareholders for the year ended 31 December 2008 
was US$4.61 million (2007: profit of US$3.20 million). 
 
 
The Fund's consolidated net asset value was US$5.95 million (2007: US$12.02 
million), a decrease of 50% compared with that of 2007. The decrease was 
primarily attributable to the significant decrease in investment income by 
US$2.54 million, the fair value loss of US$3.72 million on financial assets at 
fair value through profit or loss, the impairment loss of US$0.78 million on 
other receivable, and the payment of interim dividend of US$1.45 million during 
the year. 
 
 
The Board does not recommend the payment of any final dividend in respect of the 
current year. 
 
 
EXTRAORDINARY GENERAL MEETING 
Despite the prevailing unfavourable market climate and the falling valuations of 
the Fund's investment portfolio, the Fund identified a potential buyer to 
acquire the Fund's entire portfolio and a trust beneficial interest of 
approximately RMB25 million. 
 
 
As announced on 6 March 2009, the Fund entered into a conditional sale and 
purchase agreement (the "Disposal Agreement") to dispose of its entire equity 
interests in all of its subsidiaries and to assign all of its loans advanced to 
these subsidiaries and the trust beneficial interest (collectively the "Assets") 
to an independent third party for an aggregate consideration of US$4,400,000 
payable in cash (the "Disposal"). In addition, following, and conditional upon, 
completion of the Disposal Agreement, the Board proposes placing the Fund into a 
summary winding up process (the "Summary Winding Up"), in which event the 
listing of the Fund's 96,900,000 ordinary shares on the official list (the 
"Official List") maintained by the Financial Services Authority will be 
cancelled (the "Delisting") (collectively the "Transaction"). 
 
 
The Disposal is conditional, amongst other things, on obtaining the approval of 
shareholders of the Fund at the extraordinary general meeting to be held on 22 
May 2009 (the "EGM"). Due to its size, the Disposal is classified as a Class 1 
transaction and therefore requires the Fund's shareholder approval under the 
Listing Rules. The De-listing and the Summary Winding Up will also require the 
approval of shareholders of the Fund which will be sought at the EGM as well. 
Accordingly, a circular in relation to the Disposal, the De-listing and the 
Summary Winding Up (the "Circular") and the notice to convene the EGM (together 
with the proxy form) has been prepared and despatched to shareholders on 
27 April 2009. 
 
 
At the EGM, the following eight resolutions (the "Resolutions") will be proposed 
to be approved by shareholders of the Fund, and the Board strongly recommends 
that the shareholders of the Fund vote in favour of the Resolutions to be 
proposed at the EGM. If the Proposals are not approved at the EGM, the Board is 
of the opinion that the Fund will have missed a valuable opportunity to realise 
the value of the Assets. The Board believes that it remains uncertain whether 
the value of the Assets will further deteriorate in future given the prevailing 
market conditions. 
 
 
1. Ordinary Resolution: the approval of Disposal Agreement 
THAT, the Disposal by the Fund subject to the terms and conditions of the 
Disposal Agreement be and is hereby approved and that the Directors be and are 
hereby authorised to do or procure to be done all such acts and things on behalf 
of the Fund and any of its subsidiaries that are, in the opinion of the 
Directors, necessary or desirable to give effect to and to complete the Disposal 
Agreement and the transactions contemplated therein with such non-material 
modifications, amendments, revisions, variations or waivers to the terms of the 
disposal, the Disposal Agreement or any other documents relating thereto as they 
(or any such committee) consider to be necessary or desirable. 
 
 
2. Extraordinary Resolution: the cancellation of the listing of Fund's ordinary 
shares 
THAT, on the date of the completion of the Disposal Agreement, an application be 
made by the Fund to cancel the listing of its 96,900,000 ordinary shares of 
US$0.01 each on the Official List. 
 
 
3. Special Resolution: the liquidation of the Fund 
THAT, on the date of the completion of the Disposal Agreement, the Fund be wound 
up summarily in accordance with the provisions of Part 21 of the Companies 
(Jersey) Law 1991, as amended. This resolution shall be void and of no effect 
unless: (1) the resolution numbered 1 is duly passed by the requisite majority 
at the EGM; and (2) all conditions to closing under the Disposal Agreement 
(other than any condition relating to the approval by the members of the Fund of 
this resolution and the other resolutions proposed at the meeting of the members 
of the Fund at which this resolution is proposed) have been duly satisfied or 
waived in accordance with the terms of the Disposal Agreement, and the Disposal 
Agreement has not been terminated, prior to the commencement of the EGM. 
 
 
4. Special Resolution: the appointment of Liquidators 
THAT, subject to and with effect from the resolution numbered 3 being duly 
passed by the requisite majority at the meeting of the Fund's shareholders at 
which this resolution is proposed and coming into effect in accordance with its 
terms, on the date of the completion of the Disposal Agreement, David Robert 
Pirouet and Mark William James of PricewaterhouseCoopers CI LLP be and are 
hereby appointed as joint liquidators for the purposes of the summary winding-up 
of the Fund, and the exercise of any power conferred on them by law or by this 
resolution. 
 
 
5. Special Resolution: the amendment of the Articles of Association 
That, the Fund's Articles of Association be and are hereby amended by deleting 
Article 68 in its entirety and replacing the same with the following new 
Article: 
 
 
"68.    At least fourteen days' notice shall be given of every annual general 
meeting and of all other general meetings. Every notice shall be in writing and 
shall specify the place, the day and the time of the meeting and in the case of 
special business, the general nature of such business and, in the case of an 
annual general meeting, shall specify the meeting as such." 
 
 
6. Extraordinary Resolution: the authorisation of the Liquidators to make 
distribution 
THAT, subject to and with effect from the resolutions numbered 3 and 4 being 
duly passed by the requisite majority at the meeting of the Fund's shareholders 
at which this resolution is proposed and coming into effect in accordance with 
their terms, on the date of completion of the Disposal Agreement, the Joint 
Liquidators be and are hereby authorised to divide in specie the whole or any 
part of the assets of the Fund and to determine the value of such assets and the 
manner in which such division shall be carried out between the members. 
 
 
7. Special Resolution: the completion of the Disposal Agreement 
THAT, subject to and with effect from the resolutions numbered 3 and 4 being 
duly passed by the requisite majority at the EGM at which this resolution is 
proposed and coming into effect in accordance with their terms, notwithstanding 
the effect of the resolution numbered 3 being duly passed by the requisite 
majority, the Directors be authorised to take or to procure, following the 
coming into effect of this resolution, any and all actions required to be taken 
by the Fund, or which the Directors deem to be necessary or desirable, to give 
effect to and to complete the Disposal Agreement and the transactions 
contemplated thereby. 
 
 
8. Ordinary Resolution: the fixing of remuneration of the Liquidators 
THAT, subject to and with effect from the resolutions numbered 3, 4 and 7 being 
duly passed by the requisite majority at the meeting of the Fund's shareholders 
at which this resolution is proposed and coming into effect in accordance with 
their terms, on the date of completion of the Disposal Agreement, the 
remuneration of the joint liquidators (as appointed by the resolution numbered 
4) be fixed, in accordance with the terms of their engagement letter with the 
Fund dated 22 April 2009 and that they be and are hereby authorised to draw sums 
on account of their remuneration at such intervals as they reasonably determine 
and to pay any expenses and disbursements properly incurred by them in respect 
of the winding up. 
 
 
For further details of the proposed resolutions, shareholders are advised to 
read the whole content of the Circular. 
 
 
ECONOMIC ENVIRONMENT 
China's economy cooled to its slowest pace in seven years in 2008, expanding 9 
percent year-on-year as the widening global financial crisis continued to affect 
the world's fastest-growing economy. Gross domestic product (GDP) reached 30.067 
trillion yuan (4.4216 trillion U.S. dollars) in 2008. The 9-percent rate was the 
lowest since 2001, when an annual rate of 8.3 percent was recorded, and it was 
the first time China's GDP growth fell into the single-digit range since 2003. 
 
 
The year-on-year growth rate for the fourth quarter slid to 6.8 percent from 9 
percent in the third quarter and 9.9 percent for the first three quarters. 
Economic growth showed "an obvious correction" last year, but the full-year 
performance was still better than other countries affected by the global 
financial crisis. 
 
 
The fourth-quarter weakness was primarily attributable to reduced industrial 
output as inventories piled up amid sharply lower foreign demand. Exports, which 
accounted for about one-third of GDP, fell 2.8 percent year-on-year to 111.16 
billion U.S. dollars in December 2008. Exports declined 2.2 percent in November 
2008 from a year earlier. Industrial output rose 12.9 percent year-on-year in 
2008, down 5.6 percentage points from the last year. 
 
 
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 in 2005, significant efforts have been 
made to realise 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 relationships 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 Investment 
Manager have been trying their best to establish good relationships with and 
gain trust from the other major shareholders of the investments. 
 
 
The Board has been committed to the Fund's investment strategy of realising its 
long term investments. Our efforts show some achievements. Following the change 
of Board of Directors in 2005, the Fund sold eight unlisted investment projects, 
including GD Decorative Material (Zhongshan) Co., Ltd., Guangdong (Zhanjiang) 
Medium Density Fibre Board Co. Ltd., Guangzhou Malting Company Ltd., Honour 
Million Industries Limited, GH Water Supply (Holdings) Limited, Pak Kong Transco 
Limited, Guangdong Heyuan Tong Hua Investment Limited, and Xin Hui Xing Wei 
Building Material Co. Ltd. which was disposed of at a consideration of 
approximately US$61,500 during the year. In addition, as mentioned above, the 
Fund entered into the Disposal Agreement to dispose of its Assets for an 
aggregate consideration of US$4,400,000, subject to the approval of shareholders 
at the EGM. 
 
 
During the year, the Fund declared and paid an interim dividend of US1.5 cents 
per ordinary share in total to shareholders, amounting to US$1.45 million. Since 
the change of Board of Directors in 2005, an aggregate distribution of US14.5 
cents per ordinary share, which amounts to US$14.05 million, has been made to 
the shareholders of the Fund. 
 
 
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. 
 
 
As explained in the Circular, following completion of the Disposal and the 
commencement of the Summary Winding Up, the Joint Liquidators shall distribute 
the maximum available amount of the proceeds of the Disposal, subject to the 
retentions, and any available cash, allowing for the Fund's ongoing expenses and 
the expenses of the Summary Winding Up, to the shareholders of the Fund through 
a distribution to be made under the Summary Winding Up. Subsequent to the 
Disposal, the Fund will mainly have cash at bank and the proceeds of the 
Disposal. 
 
 
For a minimum of three months following the appointment of the Joint 
Liquidators, the Joint Liquidators propose to retain, and not distribute to 
shareholders of the Fund, the sum of US$660,000 in order to satisfy any claims 
which may be made under the Disposal Agreement. A further additional amount in 
the sum of US$279,000 will be retained by the Joint Liquidators out of the 
proceeds of the Disposal in order to settle any claims not arising under or in 
connection with the Disposal Agreement following the appointment of the Joint 
Liquidators. No such claims are foreseen at this stage. Any amount retained by 
the Joint Liquidators and not utilised upon completion of the Summary Winding Up 
will be distributed to shareholders of the Fund. 
 
 
It is expected that, in aggregate, an amount of approximately US$4.74 million 
(excluding the retentions of US$660,000 and US$279,000 as mentioned above) 
should be available for distribution to shareholders of the Fund in the Summary 
Winding Up and this distribution will be made as soon as possible following 
appointment of the Joint Liquidators, subject to the level of claims received by 
the Joint Liquidators and the progress made in agreeing those claims. 
 
 
LI Wai Keung 
Chairman 
 
 
29 April 2009 
 
 
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Final Results document. 
 
 
http://www.rns-pdf.londonstockexchange.com/rns/3789R_1-2009-4-29.pdf 
 
 
 
 
 
 
 
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