RNS Number:1524C
Guangdong Development Fund Ld
28 April 2006
GUANGDONG DEVELOPMENT FUND LIMITED
FINAL RESULTS
28 April 2006
The board of directors (the "Board") of Guangdong Development Fund Limited (the
"Fund" or the "Company") announced that the audited net loss attributable to
shareholders for the year ended 31 December 2005 was US$4.28 million (2004: net
loss of US$15.20 million).
The Fund's consolidated net asset value was US$22.15 million (2004: US$23.74
million), a drop of 7% compared with that of 2004. 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 firm of valuers.
The Board does not recommend the payment of any dividend in respect of the year.
QUALIFIED OPINION ON THE FINANCIAL STATEMENTS
Because of the scope limitation arising from the prior year's audit scope
limitation affecting opening balances, the Auditors have expressed a qualified
opinion on the financial statements of the Group for the year. The following is
extracted from the opinion paragraph of the Independent Auditors' Report:
"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 2005 and, except for any
adjustments that might have been found to be necessary had we been able to
obtain sufficient evidence concerning the fair value of the investment in
Tongbao as at 31 December 2004, of the result of the Group for the year then
ended and have bee properly prepared in accordance with the Companies (Jersey)
Law 1991. "
The nature and basis of qualification are explained in detail as follows: -
1. As detailed in the Independent Auditors Report dated 28 April 2005
on the Group's financial statements for the year ended 31 December 2004, the
directors were unable to obtain an independent professional valuation
commissioned by the Group 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, to assess whether
the carrying value of the investment was fairly stated at 31 December 2004.
2. During the current year ended 31 December 2005, an impairment loss
of US$3.9 million has been made by the Group against the carrying value of the
investment by reference to the valuation of the Group's interest in Tongbao as
at 31 December 2005 estimated by an independent international professionally
qualified firm of valuers.
3. The impairment loss has been fully charged to the current year's
Consolidated Statement of Total Return. However, since there were no
satisfactory audit procedures that we could adopt to obtain sufficient evidence
to determine the fair value of Tongbao as at 31 December 2004, the Auditors were
unable to determine the extent of such impairment loss which should have been
charged to the prior year's Consolidated Statement of Total Return.
4. Accordingly, any adjustments found to be necessary in respect
thereof would have a consequential effect on the net assets of the Group at 31
December 2004 and of its result for the current year and the prior year.
Change of the New Board of Directors
Following an extraordinary general meeting of the Company in March 2005, the
incumbent directors of the Fund were replaced by the current directors, namely
Mr. Kin Chan, Mr. David Kuohsien Chung, Ms. Angie Yick Yee Li, Mr. Martyn Alan
Scriven and Mr. Ronald William Green. The strategy of the current directors
remains to effect the timely and orderly disposal of all or alternatively,
substantially all, of the investment portfolio of the Fund.
ECONOMIC ENVIRONMENT
In 2005, the Chinese economy continued to strengthen with 9.9% gross domestic
product (GDP) growth by hitting Renminbi ("RMB")18.23 trillion (approximately
US$2.26 trillion). Growth has now been about 10% for three consecutive years
and the economy shows no signs of slowing despite government efforts to restrain
it.
Guangdong Province remains the most energetic and promising economy in China.
The province's GDP for 2005 reached RMB2.17 trillion (US$268.90 billion), an
increase of 12.5% from 2004, 2.6% higher than the national growth rate and
representing per capita GDP nearly US$3,000, also the nation's highest. The
continuous growth of the economy in China, especially in Guangdong Province,
will be beneficial to the investment projects of the Fund and may enhance the
possibility of their realization.
In August 2005, China raised the value of RMB by 2% to 8.11 per US$1 and
switched from a USD peg to referencing a basket of currencies hoping to reduce
the nation from exposure to single currency exchange rate volatility. It is
generally accepted that RMB 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 in USD.
OVERVIEW OF PERFORMANCE
Since the change of Board at an extraordinary general meeting held on 30 May
2005, significant efforts have been made to the realization of the investment
portfolio of the Company at the best price reasonably obtainable in order to
maximize the return to the shareholders of the Company.
As the Company is only a minority shareholder in all of its investment projects,
the Board believes that to establish a good relationship with other major
shareholders of the projects is essential for the sake of the shareholders of
the Company. The main reason is that the major shareholders of the investments
are the natural buyers of the Company's minority stakes in the projects.
Therefore, the Board and Investment Manager have been trying their best to
establish good relationship with and gain the trust from the other major
shareholders of the projects.
Our efforts show some achievements. The Company is currently negotiating with
the major shareholders of four investment projects to dispose of four unlisted
industrial investments of the Company, namely, GD Decorative Material
(Zhongshan) Co. Ltd., Guangdong (Zhanjiang) Medium Density Fibre Board Co. Ltd.,
Guangzhou Malting Company Ltd. and Honour Million Industries Limited (the
holding company of Ningbo Malting Company Limited). The details of the
negotiation will be announced in the near future.
For the Qingyuan Bridges project, the Chinese partner agreed to buyout the
interests of the foreign parties, including the Fund's interest in the project
for a consideration of RMB34.27 million (approximately US$4.25 million). A
Letter of Intent was signed on 22 March 2006 between the Chinese party and the
Fund and a down-payment of RMB24 million (approximately US$2.97 million), being
70% of the consideration was then received by the Fund. Subsequently on 13
April 2006, the Chinese party and the Fund signed a conditional sales agreement
which is subject to approval from relevant regulatory and governmental
authorities of China and it is expected the transaction will be completed in the
first half of 2006.
Assuming successful completion of the above mentioned disposals, the Fund will
have realised a total of five unlisted investment projects, representing 43 % of
its net asset value as at 31 December 2005.
OUTLOOK
The sale of the above-mentioned investments will mark 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 will continuously seek opportunities to further dispose of the
Fund's investments at the best prices possibly obtainable, and return
realisation proceeds to shareholders.
Kin Chan
Chairman
27 April 2006
* * *
For further information, please contact:
Guangdong Development Fund Limited
Tel: (852) 2106 0888
Fax: (852) 2868 3082
INVESTMENT MANAGER'S REPORT & ANALYSIS
As at 31 December 2005, Guangdong Development Fund Limited (the "Fund" or the
"Company") had available-for-sale investments (formerly designated as "unlisted
long-term investments") of US$19.31 million, representing 87 % of its net asset
value. These investments contributed a major part of the Fund's income,
amounting to US$1.36 million, or 97 % of total income.
At the year end date, the Fund had US$ 0.37 million, or 2% of its net assets
invested in listed investments. Total cash and bank deposits amounted to
US$1.81 million, equivalent to 8% of the net asset value. During the year, the
Fund recorded US$0.03 million interest income from its bank deposits and other
sources, representing 2% 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 2005
was US$22.15 million (2004: US$23.74 million), a 7% decrease comparing with the
net asset value as at 31 December 2004.
INFRASTRUCTURE PROJECTS
Pak Kong Transco Limited ("Pak Kong")
- Operation of two Beijiang bridges in Qingyuan
The Fund has a 14% stake in Pak Kong, representing an investment with a carrying
value of US$4.25 million.
As previously reported in the 2004 Annual Report, the operation of toll stations
ceased on 1 October 2004. The Chinese party agreed to buyout the interests of
the foreign parties, including the Fund's interest in the project for a
consideration of RMB34.27 million (approximately US$4.25 million). A Letter of
Intent was signed on 22 March 2006 between the Chinese party and the Fund and a
down-payment of RMB24 million (approximately US$2.97 million), being 70% of the
sales consideration, was received by the Fund. Subsequently on 13 April 2006,
the Chinese party and the Fund signed a conditional sales agreement which is
subject to approval from relevant regulatory and governmental authorities of
China and it is expected the transaction will be completed in the first half of
2006. To compensate the delay in completion of the transaction, the Chinese
party paid US$0.46 million to the Fund in 2005.
With reference to the sales consideration, a fair value gain of US$1.0 million
was made in respect of the investment in this project for the current year.
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$1.12 million.
FY 2005 FY 2004 % Change
Investment income of the Fund Nil US$0.24 million -
Total toll revenue US$3.60 million US$2.93 million + 23%
Average daily traffic flow 11,017 9,290 + 19%
The overall performance of Tonghua in 2005 was satisfactory. However, the
traffic of the highway has experienced serious impact from the opening of a new
Guangdong!VJiangxi Expressway and its related network since 28 December 2005.
The toll income of Tonghua dropped 71% and 84% in January and February 2006
respectively compared with the same period of last year.
As disclosed in 2004 Annual Report, the Chinese party intended to purchase the
Fund's stake with consideration of RMB14.6 million (inclusive of the Fund's
entitlement of distributions in Tonghua since 1 July 2004). In November 2005,
the Chinese party informed the Fund that the offer to purchase the Fund's stake
in Tonghua had to be withdrawn due to its failure in securing financing. As a
result, the Fund is taking steps to recover the Fund's share of distributions
for the period since 1 July 2004 which approximately amounted to RMB7 million
(approximately US$0.87 million). In March 2006, the Chinese party offered to
buy back the Fund's stake in Tonghua at RMB9 million (approximately US$1.12
million), inclusive of the Fund's entitlement of distributions. The Fund is
following up the new offer with the Chinese party and way forward to resolve the
issues in Tonghua.
In consideration of the offer of the Chinese party, RMB9 million was regarded as
the carrying value of the investment in this project and accordingly a provision
for impairment loss of US$0.5 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$3.56 million.
FY 2005 FY 2004 % Change
Investment income of the Fund Nil US$0.48 million N/A
Total toll revenue US$4.38 million US$4.32 million +1%
Average daily traffic flow 10,687 10,870 -2%
The overall performance of Huizhang was satisfactory in 2005. The average daily
traffic flow for the year was 10,870, a slight decline of 2% over 2004, while
the total toll income recorded moderate increase of 1% to US$4.38 million over
2004.
Due to administrative procedures by Huizhang, the 2004 dividend of US$0.48
million has yet to be received. The Fund is currently working with Huizhang to
complete the administrative procedures.
The Fund is negotiating with the Chinese party in a package deal to resolve
problems in respect of dividend distributions for the year 2002 and 2003 and
amendment of the Joint Venture Agreement at the same time.
With reference to Vigers' independent valuation report, a fair value gain of
US$0.26 million was made in respect of the investment of this project for the
current year.
INDUSTRIAL PROJECTS
Guangzhou Malting Company Ltd. ("Guangmai")
- Production and sale of beer malt
The Fund has a 29.5% stake in Guangmai representing an investment with a
carrying value of US$3.7 million.
FY 2005 FY 2004 % Change
Turnover US$77.85 million US$61.50 million + 27%
Sales volume 213,545 tons 190,669 tons + 12%
Profit after tax US$4.11 million US$2.34 million + 76%
Investment income of the Fund US$0.45 million Nil -
The turnover and profit after tax of Guangmai surged 27% and 76% respectively,
which was mainly attributable to the growth of beer malt market in China and the
decrease in supply of beer malt by the small size plants which tend to produce
less when the price of malting barley (the raw materials for beer malt) was
ramping up during the year.
In 2005, Guangmai resolved to declare and distribute a final dividend of
RMB12.66 million for the year ended 31 December 2004. The dividend attributable
to the Fund of US$0.45 million was received in early January 2006.
In March 2006, Guangmai proposed to increase its capital by USD32.79 million for
expansion of production capacity. According to the shareholders' resolution in
the Extraordinary General Meeting held on 23 February 2001, which resolved that
the Fund shall not invest in any investment of long term nature, the Fund did
not intended to make any further investments in this project. As a result, the
interest of the Fund in this project will be diluted from 29.5% to 19.6% after
the completion of the capital increase.
With reference to Vigers' independent valuation report, a fair value gain of
US$1.04 million was recorded in respect of the investment in this project for
the current year.
Ningbo Malting Co Ltd ("Ningbo Malting")
- Production and sale of beer malt
The Fund has an effective stake of 10% in Ningbo Malting, representing an
investment with a carrying value of US$0.6 million. This stake is held through
Honour Million Industries Limited which holds 61% equity interest in Prospect
Top Developments Limited, a company which owns the entire equity interest in
Ningbo Malting.
FY 2005 FY 2004 % Change
Turnover US$67.42 million US$49.52 million + 36%
Sales volume 198,136 tons 157,025 tons + 26%
Profit after tax US$3.34 million US$0.54 million +519%
Due to similar reasons as Guangmai, the turnover and profit after tax of Ningbo
Malting soared 36% and 519% respectively.
With reference to Vigers' independent valuation report, a fair value gain of
US$0.12 million was recorded in respect of the investment in this project for
the current year.
Guangdong (Zhanjiang) Medium Density Fibre Board Co. Ltd. ("MDF")
- Production and sale of medium density fibreboard
The Fund has an 11.2% stake in MDF, representing an investment with a carrying
value of US$0.4 million.
FY 2005 FY 2004 % Change
Turnover US$16.68 million US$18.84 million - 11%
Sales volume 89,034 m(3) 98,835 m(3) - 10%
Profit /(loss) after tax (US$1.50 million) US$0.33 million - 555%
Owing to the over-supply of medium density fibreboard in the market, the
turnover of MDF decreased by 11% to US$16.68 million in 2005. During the year,
the surge in the cost of raw materials, especially the wood chips, and the keen
market competition seriously eroded the profit margin. Accordingly, MDF
recorded a net loss of US$1.50 million as compared with the net profit of
US$0.33 million last year.
With reference to Vigers' independent valuation report, a fair value loss of
US$0.02 million was recorded in respect of the investment in this project for
the current year.
GD Decorative Material (Zhongshan) Co., Ltd. ("Zhongshan Factory")
- Production and sale of decorative materials
The Fund has an 18% stake in Zhongshan Factory, representing an investment with
a carrying value of US$0.6 million.
FY 2005 FY 2004 % Change
Turnover US$11.87 million US$13.20 million - 10%
Sales volume (floor board) 2.18 million m(2) 2.50 million m(2) -13%
Profit after tax US$1.14 million US$1.02 million +12%
Investment income of the Fund US$0.07 million Nil -
The turnover of Zhongshan Factory decreased by 10% to US$11.87 million as a
result of keen market competition. Profit after tax in 2005 increased by 12% to
US$1.14 million. Taking out US$0.85 million provision made in 2004 against the
wooden wallboard manufacturing plant, the profit after tax of Zhongshan Factory
decreased even more by 38%.
In 2005, Zhongshan Factory resolved to declare and distribute final dividend of
RMB3.39 million (approximately US$0.41 million) for the year ended 31 December
2004. The dividend attributable to the Fund of US$0.07 million was received by
the Fund before the year-end of 2005.
With reference to Vigers' independent valuation report, a fair value loss of
US$0.10 million was recorded in respect of the investment in this project for
the current year.
Disposal of Guangmai, Ningbo Malting, MDF and Zhongshan Factory (collectively
the "Four Assets")
The Fund is currently negotiating with the major shareholders of the Four Assets
for the disposal of the Fund's interest in those assets. The details of the
negotiation will be announced in the near future.
Foshan Tongbao Co., Ltd. ("Tongbao")
- Production and sale of thermostats, other temperature control devices
and precision metal
The Fund has 29.85% stake in Tongbao, representing an investment with a carrying
value of US$4.07 million.
FY 2005 FY 2004 % Change
Turnover US$61.20 million US$76.46 million - 20 %
Profit after tax US$1.50 million US$3.60 million - 58%
Investment income of the Fund US$0.36 million Nil -
During the year, Tongbao's turnover and after tax profit decreased by 20% and
58% respectively which was mainly due to the disposal of its major revenue
contributor, Hualu Company Limited and the drastic surge of copper price in
2005.
As reported in the 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.
In mid 2005, after the change of the board of directors of the Fund, Tongbao
takes a more co-operative approach towards the Fund. To allow time for
resolving the problems in Tongbao, the Fund and Tongbao mutually agreed to apply
to the Intermediate Court to defer the retrial.
At the 2005 year end, the Fund's valuer, Vigers, conducted a valuation of
Tongbao. As at 31 December 2005, the auditors were given access to the
financial information of Tongbao as part of their audit procedures for the year
then ended. As at 31 December 2004, Tongbao refused access to the financial
information to enable the valuer to perform such a valuation and the auditors to
conduct the financial review of Tongbao. With reference to Vigers' independent
valuation report, a provision of US$3.92 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 flowmeters
The Fund has a 36% stake in Zhanhai, representing an investment with a carrying
value of US$0.5 million.
FY 2005 FY 2004 % Change
Turnover US$0.78 million US$0.85 million - 8%
Loss for the year US$0.31 million US$0.35 million - 11%
Zhanhai continued to operate at a loss, but improved slightly.
In October 2005, the Industrial and Commercial Bank of China, Zhanhai Branch
("ICBC") instituted legal proceedings against Zhanhai at the People's Court of
Zhangjiang Economic Technical Development Zone (the "Court") in order to recover
the outstanding bank loans of RMB12.75 million. As Zhanhai is not registered in
the Zhanjiang Economic Technical Development Zone, the Court has no jurisdiction
over the case. After discussion with the management, in consideration of the
intention that the management of Zhanhai and a potential buyer may buyout all
the foreign stakes in Zhanhai, ICBC agreed to withhold any further action at the
moment.
In January 2006, the Fund received a written offer from a potential buyer
together with the management of Zhanhai, to acquire all foreign parties'
interest in Zhanhai, including the Fund's 36% stake. Accordingly, the Fund
engaged Vigers to provide an independent valuation in Zhanhai. With reference
to Vigers' opinion, the Fund was currently negotiating with potential buyer to
dispose of the Fund's stake in the project.
With reference to Vigers' independent valuation report, a fair value gain of
US$0.32 million was recorded in respect of the investment in this project for
the current year.
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 its production for a number of years. The Chinese party is
currently winding up Xingwei voluntarily.
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.
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 2005, the shopping mall of Nanfang was fully leased. Rental
income derived from the property for the year was US$0.73 million, generating an
operating gain of US$0.52 million. However, Nanfang recorded a net loss for the
year due to the heavy interest costs in servicing its loan from Guangdong
Investment Limited.
LISTED INVESTMENTS
As of 31 December 2005, the only listed investment held by the Fund comprised
699,840 shares of China Merchants China Direct Investments Limited which
amounted to US$0.37 million, representing approximately 2% of the Fund's net
assets. The Investment Manager is orderly disposing of the listed shares over
the market.
GUANGDONG DEVELOPMENT FUND LIMITED
CONDENSED CONSOLIDATED STATEMENT OF TOTAL RETURN
Year ended 31 December 2005
2005 2004
Notes Revenue Capital Total Revenue Capital Total
US$ US$ US$ US$ US$ US$
Investment income:
Listed investments 4,899 - 4,899 5,444 - 5,444
Unlisted investments 2 1,360,677 - 1,360,677 753,052 - 753,052
Impairment loss of
available-for-sale
investments/long term - (4,426,886) (4,426,886) - (15,423,157) (15,423,157)
investments
Write-back of provision
for impairment loss of
long term
Investments - - - - 1,275,426 1,275,426
Amortisation of interests
in long term 1.1(b) - - - (580,287) - (580,287)
investments
Fair value gain on equity
investments
at fair value through - 11,332 11,332 - - -
profit or loss
Interest income from:
Bank deposits 16,807 - 16,807 26,094 - 26,094
Other sources 17,647 - 17,647 27,031 - 27,031
--------- ---------- ----------- ---------- ---------- -----------
Gross return/(loss) 1,400,030 (4,415,554) (3,015,524) 231,334 (14,147,731) (13,916,397)
Investment management fee (519,234) - (519,234) (808,457) - (808,457)
Other administrative 3 (748,036) - (748,036) (475,169) - (475,169)
expenses
--------- ---------- ----------- ---------- ---------- -----------
Return/(loss) on ordinary
activities
for the year 132,760 (4,415,554) (4,282,794) (1,052,292) (14,147,731) (15,200,023)
Equity minority interest - - - 199 (903) (704)
--------- ---------- ----------- ---------- ---------- -----------
Return/(loss)
attributable to equity
shareholders 132,760 (4,415,554) (4,282,794) (1,052,093) (14,148,634) (15,200,727)
========= ========== =========== ========== ========== ==========
Return/(loss) per
ordinary
share (US cents) - 4 0.14 (4.56) (4.42) (1.09) (14.6) (15.69)
Basic
========= ========== =========== ========== ========== ==========
The total column of this statement is the consolidated 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
CONDENSED CONSOLIDATED STATEMENT OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Year ended 31 December 2005
Special Investment Capital Capital
Share Share distributable revaluation reserve reserve Revenue
Notes capital premium reserve reserve - realised -unrealised reserve Total
US$ US$ US$ US$ US$ US$ US$ US$
At 1 January 2004,
as previously 969,000 4,977,239 44,147,000 - 12,348,198 (32,886,066) 9,386,204 38,941,575
stated
Prior year
adjustment:
-FRS 21 "Events
after the balance
sheet date" 1.1 - - 2,907,000 - - - - 2,907,000
(a)
-------- ---------- ------------ ----------- ------------ ----------- ---------- ----------
At 1 January 2004,
as restated 969,000 4,977,239 47,054,000 - 12,348,198 (32,886,066) 9,386,204 41,848,575
Impairment loss of
long term
investments - - - - - (15,423,157) - (15,423,157)
Write-back of
provision
for impairment
loss
of long term
investments - - - - - 1,274,523 - 1,274,523
Loss for the year - - - - - - (1,052,093) (1,052,093)
Dividend paid - - (2,907,000) - - - - (2,907,000)
-------- ---------- ------------ ----------- ------------ ----------- ---------- ----------
At 31 December 969,000 4,977,239 44,147,000 - 12,348,198 (47,034,700) 8,334,111 23,740,848
2004
======== ========== ============ =========== ============ =========== ========== ==========
At 1 January 2005,
as previously 969,000 4,977,239 43,178,000 - 12,348,198 (47,034,700) 8,334,111 22,771,848
stated
Prior year
adjustment:
-FRS 21 "Events
after the balance
sheet date" 1.1 - - 969,000 - - - - 969,000
(a)
Opening balance
adjustments:
- FRS 26
"Financial
instruments:
Measurement" 1.1 - - - 761,089 - - - 761,089
(b)
-------- ---------- ------------ ----------- ------------ ----------- ---------- ----------
At 1 January 2005,
as restated 969,000 4,977,239 44,147,000 761,089 12,348,198 (47,034,700) 8,334,111 24,501,937
Impairment loss of
available-for-sale
investments - - - - - (4,426,886) - (4,426,886)
Change in fair
value of
available-for-sale
investments - - - 2,895,293 - - - 2,895,293
Change in fair
value of
equity
investments
at fair value
through
profit or loss - - - - - 11,332 - 11,332
Return for the - - - - - - 132,760 132,760
year
Dividend paid - - (969,000) - - - - (969,000)
-------- ---------- ------------ ----------- ------------ ----------- ---------- ----------
At 31 December 969,000 4,977,239 43,178,000 3,656,382 12,348,198 (51,450,254) 8,466,871 22,145,436
2005
======== ========== ============ =========== ============ =========== ========== ==========
GUANGDONG DEVELOPMENT FUND LIMITED
CONSOLIDATED PORTFOLIO STATEMENT
31 December 2005
Percentage
Effective Carrying of total
holding value net assets
% US$ %
XIN HUI XING WEI BUILDING MATERIAL CO. LTD. 30.0 - -
Dormant
FOSHAN TONGBAO CO., LTD. 29.9 4,069,052 18.4
Production and sale of thermostats and other temperature control devices
GUANGDONG ZHANHAI INSTRUMENT & METER CO. LTD. 36.0 493,218 2.2
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 1,115,255 5.0
Operation of a section of National Highway No. 205
GUANGZHOU MALTING COMPANY LTD. 29.5 3,699,137 16.7
Production and sale of malt
YUEHUI HIGHWAYS AND BRIDGES DEVELOPMENT COMPANY LIMITED 20.0 3,563,503 16.1
Operation of a section of Provincial Highway No.1918, 1919
GUANGDONG (ZHANJIANG) MEDIUM DENSITY FIBRE BOARD CO. LTD. 11.2 419,236 1.9
Production and sale of medium density fibreboard
HONOUR MILLION INDUSTRIES LIMITED 16.4 578,406 2.6
Investment holding
GD DECORATIVE MATERIAL (ZHONGSHAN) CO., LTD. 18.0 621,455 2.8
Production and sale of decorative materials
PAK KONG TRANSCO LIMITED 14.0 4,246,645 19.2
Operation of bridges in Qingyuan
OTHER INVESTMENT PORTFOLIO (including equity investments 876,122 4.0
at fair value through profit or loss of US$369,411)
----------- ---------
Portfolio of investments 19,682,029 88.9
Net current assets (excluding equity investments at fair value through profit 2,462,395 11.1
or loss)
Equity minority interest 1,012 -
----------- ---------
Net assets 22,145,436 100.0
======== ======
There was neither acquisition nor disposal of the Group's investment portfolio
during the year.
GUANGDONG DEVELOPMENT FUND LIMITED
CONDENSED CONSOLIDATED BALANCE SHEET
31 December 2005
2005 2004
Note US$ US$
(Restated)
AVAILABLE-FOR-SALE INVESTMENTS/
LONG TERM INVESTMENTS 5 19,312,618 20,083,122
CURRENT ASSETS
Due from a related company 1,846,812 2,201,446
Due from investee entities 821,517 481,743
Prepayments, deposits and other receivables 40,589 18,228
Equity investments at fair value through profit or loss/
Listed investments 369,411 358,079
Time deposits - 1,400,000
Cash and bank balances 1,809,136 834,098
-------------- --------------
4,887,465 5,293,594
-------------- --------------
CURRENT LIABILITIES
Due to related companies 656,452 136,512
Due to an investee entity 434,742 369,506
Creditors and accrued liabilities 964,465 1,130,862
-------------- --------------
2,055,659 1,636,880
-------------- --------------
NET CURRENT ASSETS 2,831,806 3,656,714
-------------- --------------
TOTAL ASSETS LESS CURRENT LIABILITIES 22,144,424 23,739,836
EQUITY MINORITY INTEREST 1,012 1,012
-------------- --------------
22,145,436 23,740,848
========= =========
CAPITAL AND RESERVES
Share capital 969,000 969,000
Share premium 4,977,239 4,977,239
Special distributable reserve 43,178,000 44,147,000
Investment revaluation reserve 3,656,382 -
Capital reserve
- realised 12,348,198 12,348,198
- unrealised (51,450,254) (47,034,700)
Revenue reserve 8,466,871 8,334,111
-------------- --------------
TOTAL EQUITY SHAREHOLDERS' FUNDS 22,145,436 23,740,848
========= =========
NET ASSET VALUE PER ORDINARY SHARE 0.23 0.25
========= =========
GUANGDONG DEVELOPMENT FUND LIMITED
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December 2005
2005 2004
US$ US$
NET CASH INFLOW/(OUTFLOW) FROM
OPERATING ACTIVITIES 544,038 (221,963)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Repayment of shareholders' loans - 114,305
----------- -----------
Cash inflow from capital expenditure and financial investment - 114,305
----------- -----------
EQUITY DIVIDEND PAID (969,000) (2,907,000)
----------- -----------
NET CASH OUTFLOW BEFORE USE OF LIQUID
RESOURCES (424,962) (3,014,658)
----------- -----------
MANAGEMENT OF LIQUID RESOURCES
Net decrease in time deposits 1,400,000 3,004,843
---------- ----------
Cash inflow from management of liquid resources 1,400,000 3,004,843
---------- ----------
INCREASE/(DECREASE) IN CASH 975,038 (9,815)
======= ========
GUANGDONG DEVELOPMENT FUND LIMITED
RECONCILIATION OF NET CASH FLOW
TO MOVEMENT IN NET FUNDS
2005 2004
US$ US$
INCREASE/(DECREASE) IN CASH 975,038 (9,815)
DECREASE IN LIQUID RESOURCES (1,400,000) (3,004,843)
------------ ------------
CHANGE IN NET FUNDS RESULTING FROM
CASH OUTFLOWS (424,962) (3,014,658)
NON-CASH CHANGE IN NET FUNDS 11,332 -
------------ ------------
CHANGE IN NET FUNDS (413,630) (3,014,658)
NET FUNDS AT BEGINNING OF YEAR 2,592,177 5,606,835
------------ ------------
NET FUNDS AT 31 DECEMBER 2,178,547 2,592,177
========= =========
GUANGDONG DEVELOPMENT FUND LIMITED
NOTES TO FINANCIAL STATEMENTS
1.1 Impact of new and revised Financial Reporting Standards
The following new and revised Financial Reporting Standards
("FRSs") affect the Group and are adopted for the first time for the current
year's financial statements:
FRS 2 (Amended 2005): "Accounting for subsidiary undertakings"
FRS 20 (IFRS 2): "Share-based payment"
FRS 21 (IAS 10): "Events after the balance sheet date"
FRS 22 (IAS 33): "Earnings per share"
FRS 23 (IAS 21): "The effects of changes in foreign exchange rates"
FRS 24 (IAS 29): "Financial reporting in hyperinflationary economies"
FRS 25 (IAS 32): "Financial instruments: Disclosure and presentation"
FRS 26 (IAS 39): "Financial instruments: Measurement"
FRS 27: "Life assurance"
FRS 28: "Corresponding amounts"
The adoption of FRSs 2, 20, 22, 23, 24, 27 and 28 has had no
material impact on the accounting policies of the Group and the Company and the
methods of computation in the Group's and the Company's financial statements.
The impact of adopting FRSs 21, 25 and 26 is summarised as follows:
(a) FRS 21 !V Events after the balance sheet date
FRS 21 prescribes which type of events occurring
after the balance sheet date require adjustment to the financial statements, and
which require disclosure, but no adjustment. Its principal impact on these
financial statements is that the proposed final dividend which is not declared
and approved until after the balance sheet date, is no longer recognised as a
liability at the balance sheet date. To comply with this revised FRS, a prior
year adjustment has been made to reclassify the proposed final dividend for the
year ended 31 December 2004 of US$969,000, which was recognised as a current
liability at the prior year end, to the special distributable reserve account
within the capital and reserves section of the balance sheet. The result of
this has been to reduce both the Group's and the Company's current liabilities
and increase the reserves previously reported as at 31 December 2004, by
HK$969,000.
(b) FRS 25 !V Financial instruments: Disclosure and
presentation
FRS 26 !V Financial instruments: Measurement
Upon the adoption of FRSs 25 and 26, the Group's
investments in equity securities are designated as either equity investments at
fair value through profit or loss or available-for-sale investments.
Equity investments at fair value through profit
or loss
In prior years, the Group classified its listed
investments as short term and were stated at the mid-market price ruling on the
balance sheet date as taken from the relevant stock exchange. Capital gains and
losses on the investments, whether realised or unrealised, were dealt with in
the capital section of the statement of total return.
Upon the adoption of FRSs 25 and 26, the short
term listed investments are designated as equity investments at fair value
through profit or loss and are stated at the bid price ruling on the balance
sheet date as quoted on the relevant stock exchange. The adoption of these new
FRSs have not resulted in any material change in the measurement of these listed
investments.
Available-for-sale investments
In prior years, the Group classified its
interests in unlisted equity securities which were held for non-trading purposes
as long term investments and were stated initially at cost, as adjusted for
periodic revaluations of the directors. Such valuations also took into account
any adverse factors which indicated that an impairment loss (which was charged
to the consolidated statement of total return as a unrealised capital loss in
the period in which it arose) had taken place and provision should be made. For
unlisted investments operating in the form of joint ventures, whereby the
residual interests in the joint venture projects were to be transferred to the
various joint venture parties in the People's Republic of China (the "PRC") at
the end of the contractual periods in accordance with the terms of the
contracts, they were stated at cost less accumulated amortisation and any
impairment losses, computed to write off the cost less any residual value of the
joint ventures over the underlying joint venture contract terms.
Upon the adoption of FRSs 25 and 26, the long
term investments are designated as available-for-sale investments and are
measured at fair value with gains or losses being recognised as a separate
component of equity until the investment is sold, collected or otherwise
disposed of or until the investment is determined to be impaired at which time
the cumulative gain or loss previously reported in equity is included in the
statement of total return. When the fair value of unlisted equity investments
cannot be reliably measured, such investments are stated at cost less impairment
losses.
The principal impact of these FRSs on the
financial statements is as follows:
(i) certain long term investments which investment costs were
amortised over the joint venture period in previous years does no longer qualify
for amortisation under FRS 26; and
(ii) an opening adjustment has been made to recognise the
appreciation of the carrying value of a long term investment to its fair value.
This results in an increase in the carrying value of the long term investment
and investment revaluation reserve by the same amount as at 1 January 2005.
The Group has taken advantage of the
transitional provision under FRS 26, and therefore no retrospective adjustments
have been made for the adoption of FRS 26. The amounts shown for the year ended
31 December 2004 may not be comparable to the amounts shown for the current
year.
1.2 Summary of the impact of changes in accounting policies
A summary of the impact of changes in accounting policies in respect of FRSs 21,
25 and 26 is as follows:
(a) Effect on the balances of equity:
Effect of adopting
FRS 21 FRS 26
Special Investment Net increase/
distributable revaluation (decrease) on
reserve reserve equity
US$ US$ US$
At 1 January 2004, as previously
stated 44,147,000 -
Prior year adjustment:
- FRS 21 "Events after the
balance sheet date" 2,907,000 - 2,907,000
At 1 January 2004, as restated 47,054,000 -
Dividend paid (2,907,000) - (2,907,000)
At 31 December 2004 44,147,000 -
At 1 January 2005, as previously
stated 43,178,000 -
Prior year adjustment:
- FRS 21 "Events after the
balance sheet date" 969,000 - 969,000
Opening balance adjustment:
- FRS 26 "Financial
instrument: Measurement" - 761,089 761,089
At 1 January 2005, as restated 44,147,000 761,089
Change in fair value of
available-for-sale
investments - 2,895,293 2,895,293
Dividend paid (969,000) - (969,000)
At 31 December 2005 43,178,000 3,656,382 3,656,382
(b) Effect on the consolidated balance sheet
Effect of adopting
As at
1 January FRS 25 As at
2005 as FRS 26 Change in 1 January
previously Change in classification 2005
stated fair value of investments as restated
US$ US$ US$ US$
Long term investments 20,083,122 761,087 (20,844,209) -
Available-for-sale investments - - 20,844,209 20,844,209
Listed investments 358,079 - (358,079) -
Equity investments at fair value
through profit or loss - - 358,079 358,079
2. Investment income - unlisted investments
Investment income from available-for-sale investments earned from the Group's
investment portfolio is as follows:
2005 2004
US$ US$
Foshan Tongbao Co., Ltd. 359,624 -
Pak Kong Transco Limited 461,393 -
Guangzhou Malting Company Ltd. 449,966 -
GD Decorative Material (Zhongshan) Co., Ltd. 73,535 -
Guangdong Heyuan Tong Hua Investment Limited - 244,272
Yuehui Highways and Bridges Development Company Limited - 481,743
Other investment portfolio 16,159 27,037
------------ ----------
1,360,677 753,052
============ ==========
3. Other administrative expenses
Included in other administrative expenses for the year ended 31 December 2005 is
legal and professional fees of approximately of US$187,800 incurred in
connection with the Company's Extraordinary General Meeting on 30 May 2005.
4. Return / (Loss) per ordinary share
The revenue return per ordinary share is based on the revenue
return attributable to equity shareholders of US$132,760 (2004: Loss of
US$1,052,093) and on the 96,900,000 (2004: 96,900,000) ordinary shares in issue
during the year.
The capital loss per ordinary share is based on the net realised
and unrealised capital loss of US$4,415,554 (2004: Loss of US$14,148,634) and on
the 96,900,000 (2004: 96,900,000) ordinary shares in issue during the year.
The total loss per ordinary share is based on the loss
attributable to equity shareholders of US$4,282,794 (2004: Loss of
US$15,200,727) and on the 96,900,000 (2004: 96,900,000) ordinary shares in issue
during the year.
No diluted loss per ordinary share has been shown as no diluting
events existed during the year.
5. Available-for-sale investments/Long term investments
As disclosed in the financial statements for the year ended 31 December 2004,
there were certain factors related to the investment in Foshan Tongbao Co., Ltd.
("Tongbao") with the carrying amount of US$8 million which suggested that the
directors should perform an impairment review.
However, the directors had been unable to obtain an independent valuation
commissioned by the Group or other reliable financial information from Tongbao
to assess whether the investment had been impaired as at 31 December 2004. In
the absence of observable market and reliable financial information to assess
the fair value of Tongbao as at 31 December 2004, upon the adoption of FRS 26,
the investment was stated at cost less any impairment losses. During the
current year ended 31 December 2005, an impairment loss of US$3.9 million has
been made by the Group against the carrying value of the investment by reference
to the valuation of the Group's interest in Tongbao as at 31 December 2005
estimated by an independent international professionally qualified firm of
valuers. The impairment loss has been fully charged to the current year's
statement of total return.
6. Segment information
An analysis of the Group's revenue and loss and net assets by principal activity
and geographical area of operations for the year ended 31 December 2005 is as
follows:
Mainland PRC Hong Kong Total
2005 2004 2005 2004 2005 2004
US$ US$ US$ US$ US$ US$
Revenue:
Investment income 1,344,518 726,015 21,058 32,481 1,365,576 758,496
Interest income 17,647 27,031 16,807 26,094 34,454 53,125
------------- ------------- ------------- ------------- ------------- -------------
1,362,165 753,046 37,865 58,575 1,400,030 811,621
Write-back of provision for
impairment loss on long term
investments - 1,275,426 - - - 1,275,426
Fair value gain on equity
investments at fair value
through profit or loss, net - - 11,332 - 11,332 -
------------- ------------- ------------- ------------- ------------- -------------
1,362,165 2,028,472 49,197 58,575 1,411,362 2,087,047
Less:
Impairment loss of
available-for-sale
investments/long term (4,426,886) (15,423,157) - - (4,426,886) (15,423,157)
investments
Amortisation of interests in
long term
investments - (580,287) - - - (580,287)
------------- ------------- ------------- ------------- ------------- -------------
(3,046,721) (13,974,972) 49,197 58,575 (3,015,524) (13,916,397)
======== ========= ======== =======
Expenses:
Investment management fee (519,234) (808,457)
Other administrative expenses (748,036) (475,169)
------------- -------------
Loss on ordinary activities for (4,282,794) (15,200,023)
the year
Equity minority interest - (704)
------------- -------------
Loss attributable to equity
shareholders (4,282,794) (15,200,727)
======== ========
Mainland PRC Hong Kong Total
2005 2004 2005 2004 2005 2004
US$ US$ US$ US$ US$ US$
Available-for-sale
Investments/Long
term investments 18,805,907 19,847,704 506,711 235,418 19,312,618 20,083,122
Equity investments at
fair value through
profit or loss/
Listed
investments - - 369,411 358,079 369,411 358,079
Due from a related
Company 1,846,812 2,201,446 - - 1,846,812 2,201,446
Cash and bank balances - - 1,809,136 834,098 1,809,136 834,098
Time deposits - - - 1,400,000 - 1,400,000
------------- ------------- ------------- ------------- ------------- -------------
20,652,719 22,049,150 2,685,258 2,827,595 23,337,977 24,876,745
======== ======== ======== ========
Other net current
liabilities and
minority interest (1,192,541) (1,135,897)
-------------- --------------
Net assets 22,145,436 23,740,848
========= ========
Copies of the Annual Report and Audited Consolidated Accounts will shortly be
sent to the London Stock Exchange and are available to the public, free of
charge, at the following address: Bridgewell Securities Limited, Old Change
House, 128 Queen Victoria Street, London EC4V 4BJ, England and will shortly be
available for inspection at the UK Listing Authority's Document Viewing
Facility, which is situated at Financial Services Authority, 25 The North
Colonnade, Canary Wharf, London E14 5HS.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR AKOKNFBKDQQB
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