RNS Number:4550E
Guangdong Development Fund Ld
25 September 2007
Press Release
GUANGDONG DEVELOPMENT FUND LIMITED
ANNOUNCES 2007 INTERIM RESULTS
Hong Kong, 25 September 2007 - The Board of Directors (the "Board") of Guangdong
Development Fund Limited presents the unaudited interim financial statements of
the Company and its subsidiaries (collectively the "Fund") for the six months
ended 30 June 2007. The unaudited return attributable to shareholders for the
current period was US$2.35 million, compared to US$2.14 million for the
corresponding period in 2006. As at 30 June 2007, total net asset value was
US$18.03 million, or US$0.19 per share.
After due consideration of the subsequent receipt of the investment/dividend
income from and sale consideration of the investment projects of an aggregate
amount of US$7.58 million as detailed below and the forecast of the future
operating cash flow, the Board recommends the payment of an interim dividend of
US$0.07 per ordinary share, amounting to US$6,783,000, out of the Fund's special
distributable reserve, payable on 2 November 2007 to shareholders. The record
date and ex-dividend date will be on 19 October 2007 and 17 October 2007,
respectively. After payment of the interim dividend, the net asset value per
share will be decreased by US$0.07 per share.
ECONOMIC ENVIRONMENT OF MAINLAND CHINA
China's economy expanded 11.5 percent in the first half of this year, up 0.5
percentage points from last year. The economic growth of the second quarter of
2007 was 0.8 percentage points higher than the blistering 11.1 percent of the
three months to March. China's gross domestic product totalled 10,678.8 billion
yuan (US$1,405 billion) in the first six months of this year. The boom was
primarily driven by rising levels of foreign investment and import and export
industry, and also by increasing domestic consumption. In the first half of
2007, the China government adopted a series of macro-control policies aimed at
the outstanding problems existing in economic performance, resulting in a steady
and fast economic growth.
The continuous favourable economic environment of China and strengthening of
Renminbi virtually increased the value of the Fund's investments in US dollars.
Updated progresses of the various investment projects since January 2007 are set
out as follows:
INFRASTRUCTURE PROJECTS
As for the Pak Kong Transco Limited (the "Qingyuan Bridges Project"), as
reported in the Annual Report 2006, the Fund had signed a sale and purchase
agreement with the Chinese party to dispose of the Fund's entire interests in
the Qingyuan Bridges Project for a consideration of RMB34.27 million
(approximately US$4.50 million). The necessary approvals in respect of the sale
had been granted by the relevant government authorities in April 2006. On 16
August 2007, the Fund received the sale consideration of US$4.20 million, net of
tax. The Chinese party is now liaising with the State Administration of Foreign
Exchange to arrange for the remittance to the Fund of the compensation of
RMB5.84 million (approximately US$0.77 million), which is calculated on daily
basis from 1 October 2004 to 15 August 2007.
Regarding Guangdong Heyuan Tong Hua Investment Limited (the "Heyuan Project"),
on 17 May 2007, the Fund entered into a sale and purchase agreement with the
Chinese party to dispose of the Fund's entire interests in the Heyuan Project
for a consideration of RMB4 million (approximately US$0.53 million) which was
duly received by the Fund in May 2007, subject to the approval of the relevant
regulatory authorities in China. With reference to the sale consideration, a
fair value gain of US$0.27 million was made in respect of the investment of this
project for the current period.
For Yuehui Highways and Bridges Development Company Limited (the "Huizhang
Highway Project"), the issue over the amendment of the old joint venture
contract was settled, and thus a new joint venture contract was signed between
the existing shareholders during the current period. In July 2007, the Fund
received from the Huizhang Highway Project the dividends for year 2002, 2003,
2004, 2005 and 2006 of RMB22.80 million (approximately US$2.99 million), which
was totally accounted for as investment income in this interim period. The
Huizhang Highway Project resolved to distribute an interim dividend for the year
2007 amounting to RMB2 million (approximately US$0.26 million) to the Fund,
which is yet to be received. With reference to the independent valuation report
of Vigers Appraisal & Consulting Limited ("Vigers"), a fair value loss of
US$0.17 million was recorded in respect of this project for the current period.
INDUSTRIAL PROJECTS
As reported in previous Annual Reports, Foshan Tongbao Co. Ltd. ("Tongbao") had
provided guarantees to the related companies of its former 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 unfavorable 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 until
further notice. In July 2007, the Fund reached an out of court settlement with
Tongbao and therefore entered into a settlement agreement on 30 July 2007 with
Tongbao, which allows the Fund to monitor Tongbao's future corporate governance
and commits Tongbao to assist the Fund to perform audit and valuation on
Tongbao. Following the signing of the settlement agreement, the Fund applied to
the Intermediate Court to withdraw the litigation against Tongbao which was
approved by the Court in August 2007.
In July 2007, the Fund received the dividend from Tongbao for year 2006 of
US$0.39 million.
Vigers had conducted a valuation of Tongbao as at 30 June 2007. With reference
to the independent valuation report of Vigers, a provision for impairment loss
of US$0.69 million was made in respect of the investment in this project for the
current period.
Guangdong Zhanhai Instrument & Meter Co. Ltd. ("Zhanhai") still sustained a net
loss in the first half of 2007, and showed little deterioration in its
performance. The Fund is seeking exit for its interest in Zhanhai. 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 the
independent valuation report of Vigers, an impairment loss of US$0.10 million
was recorded in the statement of total return, after the release of investment
revaluation reserve of US$0.02 million, in respect of this project for the
current period.
As Xin Hui Xingwei Building Material Co. Ltd. has not operated for years, the
Chinese partner intends to wind up the joint venture company. Gaoyao Gaolu
Cement Company Limited showed no improvement in their performance. These two
projects continued to incur loss in the first half of 2007.
REAL ESTATE PROJECT
For the period under review, the occupancy rate of shopping mall held by
Guangdong Nan Fang (Holdings) Co. Ltd ("Nanfang") is 72%, representing a drop by
27% when compared with last year, owing to less rental space being occupied by a
big tenant. Rental income of the shopping mall for the first half of 2007
amounted to US$0.33 million. However, after the loan interest expenses and tax,
Nanfang recorded a net loss of US$0.28 million for the interim period.
MANAGEMENT FEE
The Fund continued to pay management fee to GDF Management (Cayman) Limited
("GDFM") and Springridge Company Limited ("Springridge") in accordance with the
Management Agreement and Investment Management Agreement, both dated 29 May
2006, respectively. The management fee charged by each of GDFM and Springridge
amounted to US$75,000 for the six months ended 30 June 2007.
PURCHASE, SALE OR REDEMPTION OF SHARES
During the six months ended 30 June 2007, neither the Fund nor any of its
subsidiaries purchased, sold or redeemed any of the Fund's listed shares.
AUDIT COMMITTEE
The role of the Audit Committee is to advise the Board of the Fund by providing
independent and objective reviews of the Fund's financial reporting procedure,
internal control and audit function. The Audit Committee has reviewed this
report and presented a report thereon to the Board.
CORPORATE GOVERNANCE
None of the directors of the Fund is aware of any evidence that would reasonably
indicate that the Fund failed to comply with the Combined Code of Principles of
Good Governance of the London Stock Exchange at present or for any part of the
six months ended 30 June 2007.
OUTLOOK
The Board will continue to make the greatest effort to realise the Fund's
investments at the best prices reasonably obtained in order to maximise the
greatest possible return to the shareholders of the Fund.
Li Wai Keung
Chairman
25 September 2007
For further information, please contact:
Guangdong Development Fund Limited
Tel: (852) 2106 0888
Fax: (852) 2868 3082
The following is the full set of the unaudited interim financial statements of
the Fund for the period ended 30 June 2007:
INDEPENDENT REVIEW REPORT
TO GUANGDONG DEVELOPMENT FUND LIMITED
INTRODUCTION
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2007 which comprises the Condensed Consolidated
Statement of Total Return, Condensed Consolidated Statement of Movements in
Shareholders' Funds, Condensed Consolidated Portfolio Statement, Condensed
Consolidated Balance Sheet, Condensed Consolidated Cash Flow Statement and the
related notes 1 to 13. We have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
This report is made solely to the Company in accordance with guidance contained
in Bulletin 1999/4 "Review of interim financial information" issued by the
Auditing Practices Board. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company, for our work,
for this report, or for the conclusions we have formed.
DIRECTORS' RESPONSIBILITIES
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
REVIEW WORK PERFORMED
We conducted our review in accordance with guidance contained in Bulletin 1999/4
"Review of interim financial information" issued by the Auditing Practices Board
for use in the United Kingdom. A review consists principally of making enquiries
of management and applying analytical procedures to the financial information
and underlying financial data, and based thereon, assessing whether the
accounting policies and presentation have been consistently applied, unless
otherwise disclosed. A review excludes audit procedures such as tests of
controls and verification of assets, liabilities and transactions. It is
substantially less in scope than an audit performed in accordance with
International Standards on Auditing (UK and Ireland) and therefore provides a
lower level of assurance than an audit. Accordingly, we do not express an audit
opinion on the financial information.
Scope limitation arising from the prior year's review
Our report, dated 26 September 2006, on the Group's financial information for
the six months ended 30 June 2006, 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$4.1 million as at 30 June
2006, in order to assess the fair value of the investment as at 30 June 2006.
For the year ended 31 December 2006, an impairment loss of US$2.2 million was
recognised by the Group against the carrying value of the investment in Tongbao
as at 31 December 2006, 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 2006.
However, since there were no satisfactory review procedures that we could have
adopted to obtain sufficient evidence to determine the fair value of Tongbao as
at 30 June 2006, we were unable to determine the allocation of the US$2.2
million impairment loss between the Consolidated Statements of Total Return for
the year ended 31 December 2006 and the six months ended 30 June 2006.
Accordingly any adjustments found to be necessary in respect thereof would have
had a consequential effect on the results of the Group for the six months ended
30 June 2006.
MODIFIED REVIEW CONCLUSION ARISING FROM LIMITATION OF REVIEW SCOPE
On the basis of our review, we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007, except for any adjustments to the corresponding results for
the six months ended 30 June 2006 that might have determined to be necessary had
the above scope limitation not existed.
Ernst & Young LLP
Jersey, Channel Islands
25 September 2007
GUANGDONG DEVELOPMENT FUND LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF TOTAL RETURN
For the period from 1 January 2007 to 30 June 2007
Six months ended Six months ended
30 June 2007 30 June 2006
Notes Revenue Capital Total Revenue Capital Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Investment income:
Listed investments - - - 0.9 - 0.9
Unlisted investments 2 3,128.5 - 3,128.5 816.7 - 816.7
Impairment loss of
available-for-sale
investments - (791.6) (791.6) - (71.8) (71.8)
Net realised gain on
disposal of interests
in available-for-sale
investments - - - - 1,726.8 1,726.8
Net realised gain
on disposal of equity
investments at fair value
through profit or loss - - - - 205.0 205.0
Interest income from:
Bank deposits 187.4 - 187.4 36.1 - 36.1
---------- ---------- ---------- ---------- ---------- ----------
Gross return/(loss) 3,315.9 (791.6) 2,524.3 853.7 1,860.0 2,713.7
Investment management fee 3 (150.0) - (150.0) (231.4) - (231.4)
Other administrative expenses (230.0) - (230.0) (366.8) - (366.8)
Exchange gain 204.9 - 204.9 28.1 - 28.1
---------- ---------- ---------- ---------- ---------- ----------
Return / (loss) attributable
to equity shareholders 3,140.8 (791.6) 2,349.2 283.6 1,860.0 2,143.6
====== ======= ======= ======= ======= =======
Return / (loss) per ordinary
share (US cents) - Basic 4 3.24 (0.82) 2.42 0.29 1.92 2.21
======= ======= ======= ======= ======= =======
The total column of this statement is the income statement of the Group.
All revenue and capital items in the above statement are derived from continuing
operations.
No operations were acquired or discontinued during the period.
GUANGDONG DEVELOPMENT FUND LIMITED
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the period from 1 January 2007 to 30 June 2007
Special Investment Capital Capital
Share Share distributable revaluation reserve reserve Revenue
capital premium reserve reserve -realised -unrealised reserve Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
At 1 January 2006 969.0 4,977.2 43,178.0 3,656.4 12,348.2 (51,450.3) 8,466.9 22,145.4
Impairment loss of
an available-for-
sale investment - - - 71.8 - (71.8) - -
Net realised gain on
disposal of available-
for-sale investments - - - - 1,726.8 - - 1,726.8
Change in fair value
of available-for-sale
investments - - - 1,166.1 - - - 1,166.1
Net realised gain
on disposal of
equity investments
at fair value through
profit or loss - - - - 205.0 - - 205.0
Release of investment
revaluation reserve
upon disposal - - - (2,032.0) - - - (2,032.0)
Return for the period - - - - - - 283.6 283.6
-------- -------- ---------- -------- ---------- --------- --------- ----------
At 30 June 2006 969.0 4,977.2 43,178.0 2,862.3 14,280.0 (51,522.1) 8,750.5 23,494.9
======== ======== ========== ======== ========== ========= ========= ==========
At 1 January 2007 969.0 4,977.2 43,178.0 426.3 (1,932.2) (35,817.7) 9,617.8 21,418.4
Impairment loss of
available-for-sale
investments - - - 791.6 - (791.6) - -
Change in fair value
of available-for-sale
investments - - - (712.6) - - - (712.6)
Return for the period - - - - - - 3,140.8 3,140.8
Dividend paid - - (5,814.0) - - - - (5,814.0)
-------- -------- ---------- -------- ---------- --------- --------- ----------
At 30 June 2007 969.0 4,977.2 37,364.0 505.3 (1,932.2) (36,609.3) 12,758.6 18,032.6
======== ======== ========== ======== ========== ========= ========= ==========
GUANGDONG DEVELOPMENT FUND LIMITED
UNAUDITED CONDENSED CONSOLIDATED PORTFOLIO STATEMENT
As at 30 June 2007
Percentage
Effective Carrying of total
holding value net assets
% US$'000 %
XIN HUI XING WEI BUILDING MATERIAL CO. LTD. 30.0 - -
Dormant
FOSHAN TONGBAO CO., LTD. 29.9 1,137.5 6.3%
Production and sale of thermostats and other temperature control devices
GUANGDONG ZHANHAI INSTRUMENT & METER CO. LTD. 36.0 - -
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 24.2 525.2 2.9%
Operation of a section of National Highway No. 205
YUEHUI HIGHWAYS AND BRIDGES DEVELOPMENT
COMPANY LIMITED 20.0 3,540.5 19.6%
Operation of a section of Provincial Highway No.1918, 1919
------------- ----------
Portfolio of investments 5,203.2 28.8%
Long term other receivable 3,297.8 18.3%
Net current assets 9,530.6 52.9%
Equity minority interest 1.0 -
----------- ---------
Net assets 18,032.6 100.0
======== ======
There was neither acquisition nor disposal of the Group's investment portfolio
during the period.
GUANGDONG DEVELOPMENT FUND LIMITED
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
As at 30 June 2007
30 June 31 December
Notes 2007 2006
US$'000 US$'000
(Unaudited) (Audited)
NON-CURRENT ASSETS
Available-for-sale investments 5 5,203.2 5,915.8
Other receivable 8 3,297.8 2,602.6
------------ ------------
8,501.0 8,518.4
------------ ------------
CURRENT ASSETS
Due from related companies 6 3,574.7 3,490.2
Due from investee entities 7 3,585.9 512.2
Prepayments, deposits and other receivables 8 1,638.6 1,428.7
Time deposits 1,039.9 1,025.2
Cash and bank balances 1,027.6 7,324.9
------------ ------------
10,866.7 13,781.2
------------ ------------
CURRENT LIABILITIES
Due to an investee entity 9 525.2 -
Creditors and accrued liabilities 810.9 882.2
------------ ------------
1,336.1 882.2
------------ ------------
NET CURRENT ASSETS 9,530.6 12,899.0
------------ ------------
TOTAL ASSETS LESS CURRENT LIABILITIES 18,031.6 21,417.4
EQUITY MINORITY INTEREST 1.0 1.0
------------ ------------
18,032.6 21,418.4
============ ============
CAPITAL AND RESERVES
Share capital 969.0 969.0
Share premium 4,977.2 4,977.2
Special distributable reserve 37,364.0 43,178.0
Investment revaluation reserve 505.3 426.3
Capital reserve
- realised (1,932.2) (1,932.2)
- unrealised (36,609.3) (35,817.7)
Revenue reserve 12,758.6 9,617.8
------------ ------------
TOTAL EQUITY SHAREHOLDERS' FUNDS 18,032.6 21,418.4
============ ============
NET ASSET VALUE PER ORDINARY SHARE (US$) 10 0.19 0.22
============ ============
GUANGDONG DEVELOPMENT FUND LIMITED
UNAUDITED CONDENSED CONSOLIDATED CASH FLOW STATEMENT
For the period from 1 January 2007 to 30 June 2007
Six months Six months
ended ended
Notes 30 June 2007 30 June 2006
US$'000 US$'000
NET CASH OUTFLOW FROM OPERATING
ACTIVITIES 11 (a) (468.6) (3,312.2)
ACQUISITIONS AND DISPOSALS
Proceeds from disposal of interests in
available-for-sale investments - 3,509.2
---------- ----------
Cash inflow from acquisitions and disposals - 3,509.2
---------- ----------
EQUITY DIVIDEND PAID (5,814.0) -
---------- ----------
NET CASH INFLOW/(OUTFLOW) BEFORE USE OF LIQUID
RESOURCES (6,282.6) 197.0
---------- ----------
MANAGEMENT OF LIQUID RESOURCES
Net increase in time deposits 11 (b) (14.7) (1,011.1)
Proceeds from disposal of equity
investments at fair value through - 574.4
profit or loss
---------- ----------
Cash outflow from management of liquid
resources (14.7) (436.7)
---------- ----------
DECREASE IN CASH (6,297.3) (239.7)
======= =======
GUANGDONG DEVELOPMENT FUND LIMITED
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Six months Six months
ended ended
Notes 30 June 2007 30 June 2006
US$'000 US$'000
DECREASE IN CASH (6,297.3) (239.7)
INCREASE IN LIQUID RESOURCES 14.7 436.7
---------- ----------
CHANGE IN NET FUNDS RESULTING FROM
CASH INFLOW/(OUTFLOW) (6,282.6) 197.0
NON-CASH CHANGE IN NET FUNDS 11 (b) - 205.0
---------- ----------
CHANGE IN NET FUNDS (6,282.6) 402.0
NET FUNDS AT BEGINNING OF PERIOD 11 (b) 8,350.1 2,178.5
---------- ----------
NET FUNDS AT 30 JUNE 11 (b) 2,067.5 2,580.5
======= =======
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO THE UNAUDITED CONDENSED INTERIM REPORT 30 JUNE 2007:
1. Basis of preparation and accounting policies
The unaudited condensed consolidated interim financial statements of Guangdong
Development Fund Limited and its subsidiaries (collectively the "Group" or the
"Fund") have been prepared in United States dollars under the historical cost
convention, as modified by the revaluation of available-for-sale 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.
The accounting policies and basis of presentation used in the preparation of
these financial statements are the same as those used in the Group's audited
financial statements for the year ended 31 December 2006.
Included in the available-for-sale investments as at 30 June 2007 is a carrying
value of US$1.1 million of the Fund's investment in Foshan Tongbao Co., Ltd.
("Tongbao"). During the year ended 31 December 2006, an impairment loss of
US$2.2 million against the carrying value of the Fund's investment in Tongbao
had been fully charged to the consolidated statement of total return. However,
as the directors were unable to obtain sufficient evidence to determine the fair
value of Tongbao as at 30 June 2006, it was unable to determine the allocation
of such impairment loss which should have been charged to the consolidated
statement of total return for the year ended 31 December 2006 and the period
ended 30 June 2006. Accordingly, the comparative amounts of these financial
statements may not be comparable.
2. Investment income - unlisted investments
Investment income from available-for-sale investments earned from the Group's
investment portfolio for the period is as follows:
Six months Six months
ended ended
30 June 30 June
2007 2006
US$'000 US$'000
(Unaudited) (Unaudited)
Foshan Tongbao Co., Ltd. 393.4 372.4
Pak Kong Transco Limited ("Pak Kong")* 63.9 444.3
Yuehui Highways and Bridges Development Company
Limited 2,667.2 -
Other investment portfolio 4.0 -
---------- ---------
3,128.5 816.7
====== =====
* Included in the balance is an amount of approximately US$63,900 (2006:
US$115,300) 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 from 27 April 2006.
3. Investment management fee
The investment management fee is payable to GDF Management (Cayman) Limited and
Springridge Company Limited at an annual fixed amount of US$150,000 each.
4. Return / (loss) per ordinary share
The revenue return per ordinary share is based on the revenue return
attributable to equity shareholders of US$3,140,800 (Corresponding period 2006:
Revenue return of US$283,600) and on the 96,900,000 (Corresponding period 2006:
96,900,000) ordinary shares in issue during the period.
The capital loss per ordinary share is based on the net realised and unrealised
capital loss of US$791,600 (Corresponding period 2006: Capital gain of
US$1,860,000) and on the 96,900,000 (Corresponding period 2006: 96,900,000)
ordinary shares in issue during the period.
The total return per ordinary share is based on the return attributable to
equity shareholders of US$2,349,200 (Corresponding period 2006: US$2,143,600)
and on the 96,900,000 (Corresponding period 2006: 96,900,000) ordinary shares in
issue during the period.
No diluted return per ordinary share has been shown as no diluting events
existed during the period.
5. Available-for-sale investments
Included in the available-for-sale investments as at 30 June 2007 is a carrying
value of US$1.1 million relating to the Group's investment in Tongbao.
As reported in previous Annual Reports, Tongbao had provided guarantees to the
related companies of its former 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 (the "Higher Court") after an
unfavorable 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 an independent 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 the Fund's valuers 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 with effect from
1 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
until further notice. In July 2007, the Fund reached an out of court settlement
with Tongbao and therefore entered into a settlement agreement on 30 July 2007
with Tongbao, which allows the Fund to monitor Tongbao's future corporate
governance and commits Tongbao to assist the Fund to perform audit and valuation
on Tongbao. Following the signing of the settlement agreement, the Fund applied
to the Intermediate Court to withdraw the litigation against Tongbao which was
approved by the Court in August 2007.
Included in the available-for-sale investments as at 30 June 2007 is also a
carrying value of US$0.53 million relating to the Group's investment in
Guangdong Heyuan Tong Hua Investment Limited (the "Heyuan Project"). On 17 May
2007, the Fund entered into a sale and purchase agreement with the Chinese party
to dispose of the Fund's entire interests in the Heyuan Project for a
consideration of RMB4 million (approximately US$0.53 million) which was duly
received by the Fund in May 2007. The completion of the transaction is subject
to the approval of the relevant regulatory authorities in China.
6. Due from related companies
30 June 31 December
2007 2006
US$'000 US$'000
(Unaudited) (Audited)
GDF Management Limited 0.5 11.4
Guangzhou Yagao Consultant Company Limited
("Guangzhou Yagao") 3,574.2 3,478.8
---------- ----------
3,574.7 3,490.2
====== ======
Included in the amount due from Guangzhou Yagao is an amount of approximately
US$3.2 million being the partial sale consideration of the Fund's interest in
Pak Kong, a former investee entity, received by Guangzhou Yagao on the Group's
behalf. Subsequent to the balance sheet date, the Group duly received this
amount in United States dollars in August 2007.
The amounts due from related companies are unsecured, interest-free and have no
fixed terms of repayment.
7. Due from investee entities
It represents the investment income/dividend income receivables from the
following investee entities: -
30 June 30 December
2007 2006
US$'000 US$'000
(Unaudited) (Audited)
Tongbao 393.3 -
Yuehui Highways and Bridges Development Company
Limited ("Yuehui") 3,192.6 512.2
---------- ---------
3,585.9 512.2
====== =====
Subsequent to the balance sheet date, the Group duly received the investment
income/dividend income receivables of US$0.39 million from Tongbao and of
approximately US$2.99 million from Yuehui in United States dollars,
respectively, in July 2007.
8. Prepayments, deposits and other receivables
30 June 31 December
Notes 2007 2006
US$'000 US$'000
(Unaudited) (Audited)
Non- current assets:
Other receivable (a) 3,297.8 2,602.6
Current assets:
Prepayments and deposits 198.2 127.8
Other receivables (b) 1,440.4 1,300.9
---------- ----------
1,638.6 1,428.7
---------- ----------
4,936.4 4,031.3
====== ======
(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$1,399,318 (2006:
US$1,300,761) which represents outstanding sale consideration and compensation
income relating to the disposal of the Group's interest in Pak Kong, a former
investee entity. Subsequent to the balance sheet date, the Group received the
outstanding sale consideration of approximately US$1.04 million in United States
dollars on 16 August 2007.
9. Due to an investee entity
It mainly represents sales consideration received in advance by the Fund from
the Chinese party for the disposal of the Fund's entire interests in Guangdong
Heyuan Tong Hua Investment Limited.
10. Net asset value per ordinary share
The Group's net asset value per fully paid ordinary share of US$0.19 (2006:
US$0.22) has been calculated in accordance with the articles of association. The
calculation is based on 96,900,000 shares (2006: 96,900,000 shares) in issue at
the period end and the net assets of the Group of US$18,032,603 (2006:
US$21,418,439) at the period end.
11. Notes to the consolidated cash flow statement
(a) Reconciliation of the Group's revenue return on ordinary activities to net
cash outflow from operating activities
Six months Six months
ended ended
30 June 30 June
2007 2006
US$'000 US$'000
(Unaudited) (Unaudited)
Revenue return on ordinary activities for the
period 3,140.8 283.6
Increase in long term other receivable (695.2) -
Increase in an amount due from a related company (84.5) (3,132.3)
Increase in amounts due from investee entities (3,073.7) (320.6)
Increase in prepayments, deposits and other
receivables (209.9) (26.9)
Increase in amounts due to related companies - 231.5
Increase/(decrease) in an amount due to an
investee entity 525.2 (324.6)
Decrease in creditors and accrued liabilities (71.3) (22.9)
----------- -----------
Net cash outflow from operating activities (468.6) (3,312.2)
======= =======
(b) Analysis of changes in net funds
At At
beginning Other non-cash 30 June
of period Net cash flows change 2007
US$'000 US$'000 US$'000 US$'000
(Audited) (Unaudited) (Unaudited) (Unaudited)
Cash 7,324.9 (6,297.3) - 1,027.6
Time deposits 1,025.2 14.7 - 1,039.9
---------- ---------- ---------- ---------
8,350.1 (6,282.6) - 2,067.5
========== ========== ========== =========
12. Segment information
An analysis of the Group's revenue and loss and net assets by principal activity
and geographical area of operations for the six months ended 30 June 2007 is as
follows:
Mainland PRC Hong Kong Total
Six months Six months Six months Six months Six months Six months
ended ended ended ended ended ended
30 June 30 June 30 June 30 June 30 June 30 June
2007 2006 2007 2006 2007 2006
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Revenue:
Investment income 3,124.5 816.7 4.0 0.9 3,128.5 817.6
Interest income 55.6 13.2 131.8 22.9 187.4 36.1
------------- ------------- ------------- ------------- ------------- -------------
3,180.1 829.9 135.8 23.8 3,315.9 853.7
Impairment loss of an
available-for-
sale investment (791.6) (71.8) - - (791.6) (71.8)
Net realised gain
on disposal of
interests in
available-for-sale
investments - 1,455.5 - 271.3 - 1,726.8
Net realised gain
on disposal of equity
investments at fair
value through
profit or loss - - - 205.0 - 205.0
------------- ------------- ------------- ------------- ------------- -------------
2,388.5 2,213.6 135.8 500.1 2,524.3 2,713.7
Expenses:
Investment
management fee (150.0) (231.4)
Other administrative
expenses (230.0) (366.8)
Exchange gain 204.9 28.1
------------- -------------
Return attributable
to equity shareholders 2,349.2 2,143.6
======== ========
Mainland PRC Hong Kong Total
30 June 31 December 30 June 31 December 30 June 31 December
2007 2006 2007 2006 2007 2006
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
(Unaudited) (Audited) (Unaudited) (Audited) (Unaudited) (Audited)
Available-for-sale
investments 5,203.2 5,915.8 - - 5,203.2 5,915.8
Other receivables 4,738.2 3,903.3 - 0.2 4,738.2 3,903.5
Due from related companies 3,574.7 3,490.2 - - 3,574.7 3,490.2
Due from investee entities 3,585.9 512.2 - - 3,585.9 512.2
Time deposits - - 1,039.9 1,025.2 1,039.9 1,025.2
Cash and bank balances - - 1,027.6 7,324.9 1,027.6 7,324.9
------------ ------------ ----------- ----------- ------------ ------------
17,102.0 13,821.5 2,067.5 8,350.3 19,169.5 22,171.8
Other net current
liabilities and minority
interest (1,136.9) (753.4)
------------ ------------
Net assets 18,032.6 21,418.4
======= =======
13. Post balance sheet event
Subsequent to the balance sheet date, on 25 September 2007, the board of
directors recommends the payment of an interim dividend of US$0.07 per ordinary
share, amounting to US$6,783,000, out of the Fund's special distributable
reserve, payable on 2 November 2007 to shareholders.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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