RNS Number:5904K
Guangdong Development Fund Ld
30 April 2003
30 April 2003
GUANGDONG DEVELOPMENT FUND LIMITED
ANNOUNCES 2002 ANNUAL RESULTS
The Board of directors of Guangdong Development Fund Limited (the "Fund" or the "Company") announced that the audited
consolidated net return attributable to shareholders for the year ended 31 December 2002 was US$0.50 million. As of
31 December 2002, the Fund's consolidated net asset value was US$41.64 million, or US$0.43 per share.
The directors recommend the payment of a final dividend of US$0.03 per ordinary share, amounting to US$2,907,000, out
of the Company's special distributable reserve account in respect of the year ended 31 December 2002, payable on 26
June 2003, to shareholders on the register of members on 13 June 2003.
CHINA'S ECONOMY
In 2002, China's economy continued its robust growth and new records were achieved both in GDP growth and in total
retail sales of consumer goods. The GDP for the year reached RMB10.24 trillion (US$1.24 trillion), up 8% over the
previous year, whilst total retail sales of consumer goods reached RMB4.09 trillion (US$0.49 trillion), up 8.8% over
the previous year.
China's foreign trade also achieved rapid growth in 2002. The total value of import and export during the year
reached US$620.80 billion, up 21.8% over the previous year. Trade surplus for 2002 was US$30.40 billion.
Foreign direct investments scored another record in 2002 at US$52.70 billion, an increase of 12.5% over the previous
year.
At year end of 2002, the foreign exchange reserves of China reached US$286.40 billion, an increase of US$74.20
billion from the end of 2001. Exchange rate of RMB remained stable at RMB8.2773 to US$1.00. A number of commentators
are of the view that the RMB is under-valued at this level of exchange rates.
PROJECTS OVERVIEW
Our infrastructure projects contributed a major part of the Fund's recurrent income. The current portfolio of
Qingyuan Beijiang Bridges and National Highway No.205 (Heyuan Section) registered stable traffic flows and continued
to produce a quality, recurrent income for the Fund.
The Fund has yet to receive the 2002 payment of income guaranteed by the Chinese joint venture partner of the
Huizhang Highway (Huizhou Section) project due to changes in the guideline issued by the Guangdong Provincial
Government. The Investment Manager has been in discussion with the Chinese joint venture partner to resolve the
issue, and may take further actions if necessary.
Turnover at Foshan Tongbao Company Limited ("Tongbao") was comparable to 2001, although profit contribution from
Hualu Company Limited ("Hualu"), of which Tongbao holds a 50% interest, has slowed significantly. This was mainly due
to the decrease in the demand for Hualu's main product during the second half of the year. The new project invested
by Hualu in 2002 is still in trial production stage. When launched, it is expected that this new product will be a
major contribution to Hualu's operating results in 2003.
The Fund regrettably discovered that Tongbao had provided guarantees to subsidiaries of the major shareholder, Foshan
Industry Investment Management Ltd. ("FIIML"), beneficially owned by the Foshan Municipality Government, which were
not previously known to the Fund. One of the guarantees has been called and a judgement for approximately RMB37.00
million (US$4.47 million) has been awarded against Tongbao. The management of Tongbao has been exploring various
alternatives to mitigate the exposure, including the negotiation with FIIML to indemnify Tongbao for this amount. The
Investment Manager has commenced discussions with the management of Tongbao to speed up such negotiations while at
the same time, had initiated a process to assess the impact of this guarantee on the operation, cash flow and
profitability of Tongbao.
In addition to the RMB37.00 million (US$4.47 million) referred to above, to the best of the Fund's knowledge,
outstanding guarantees as at 31 December 2002 provided by Tongbao amounted to approximately RMB310 million (US$37.44
million). These guarantees were also not previously known to the Fund. The Fund's directors have been advised that
none of these guarantees have been called as at the date of approval of the financial statements. The Fund is in the
process of discussing these guarantees with Tongbao in order to minimize the exposure should the guarantees become
crystallized.
Turnover at Guangzhou Malting Co., Ltd. and Guangzhou Yangcheng Malting Plant (jointly known as "Guangmai") has been
stable and comparable to last year. After the completion of the debt restructuring in the second half of 2001, and
the write-back of several over-provisions during the year, the results of Guangmai have improved significantly.
Both sales volume and profits at Ningbo Malting Company Limited continued to improve during the year. However, no
write-back of the full provision made for this investment in 1999 is proposed at this stage.
For Guangdong (Zhanjiang) Medium Density Fiberboard Limited, both turnover and sales volume increased slightly.
However, as the tax exemption period expired last year, the company increased its provisions previously understated,
resulting in a negative impact on the company's performance in 2002.
Turnover at GD Decorative Material (Zhongshan) Company Limited declined due to tough competition in the industry.
However, with its strong sales network and PACO's prominent brand name, the company continued to be a leading player
in the market. During the year, the company has planned for the purchase of a new domestic production line, which can
double the production capacity and lower the overall production costs.
Xinhui Xingwei Building Material Company Limited, Gaoyao Gaolu Cement Limited and Guangdong Zhanhai Instrument and
Meter Company Limited still incurred losses in 2002.
The Fund's real estate project - Guangdong Nan Fang (Holdings) Company Limited ("Nanfang") - registered a stable
occupancy rate, and the rental income received has been stable. However, the burden of high interest costs and
payment for a settled lawsuit continues to affect the performance of the project. Nanfang incurred a loss in 2002.
The Fund had fully provided for EBS Bridge International Limited in 2001 and the company is being liquidated.
The total market value of the Fund's listed investments increased by US$0.06 million as of 31 December 2002 to
US$2.50 million.
OUTLOOK
While global economy continues to struggle, China's economic growth remains impressive. The recent outbreak of SARS
virus will inevitably impact on China's domestic economy in the short to medium term, although the extent of such
impact will depend on the effectiveness of Chinese Government's containment programme in the next few months. Looking
ahead, the Board will seek early opportunities to dispose of the Fund's investments at the best prices reasonably
obtainable, and return realisation proceeds to shareholders.
VICTOR LAP-LIK CHU
Chairman
30 April 2003
Enquiries
Guangdong Development Fund Limited
Victor Chu / Amy Cho +852 2956 1818
GUANGDONG DEVELOPMENT FUND LIMITED
CONSOLIDATED STATEMENT OF TOTAL RETURN
Year ended 31 December 2002
2002 2001
Notes Revenue Capital Total Revenue Capital Total
US$ US$ US$ US$ US$ US$
Investment income:
Listed investments 62,965 - 62,965 87,997 - 87,997
Unlisted investments 2,449,936 - 2,449,936 2,736,593 - 2,736,593
Provision for
impairment
loss on a long term
investment - - - - -538,332 -538,332
Write-back of
provision for
impairment loss on
a long term investment - - - - 2,416 2,416
Write-back of
provision/(provision)
against an amount due
from an investee -204,663 - -204,663 2,385 - 2,385
entity
Amortisation of
interests
in long term -682,526 - -682,526 -682,526 - -682,526
investments
Net realised gain on
disposal of interests
in
long term investments - 244,465 244,465 - 49,372 49,372
Net realised gain on
sale
of listed investments - - - - 1,390,893 1,390,893
Unrealised
appreciation
of listed investments - 66,820 66,820 - 971,213 971,213
Interest income from:
Bank deposits 29,533 - 29,533 521,045 - 521,045
Other sources 251,589 - 251,589 303,858 - 303,858
__________ _________ __________ __________ __________ __________
Gross revenue 1,906,834 311,285 2,218,119 2,969,352 1,875,562 4,844,914
Investment management -1,037,214 - -1,037,214 -1,124,912 - -1,124,912
fee
Other administrative -443,003 - -443,003 -667,647 - -667,647
expenses
__________ _________ __________ __________ __________ __________
Return on ordinary
activities
for the year before 426,617 311,285 737,902 1,176,793 1,875,562 3,052,355
taxation
Taxation -241,590 - -241,590 29,100 - 29,100
__________ _________ __________ __________ __________ __________
Return on ordinary
activities
for the year after 185,027 311,285 496,312 1,205,893 1,875,562 3,081,455
taxation
Equity minority 240 - 240 113 -363 -250
interest
________ _________ __________ __________ __________ __________
Return attributable to
equity shareholders 185,267 311,285 496,552 1,206,006 1,875,199 3,081,205
__________ ________ __________ __________ __________ __________
Dividends 2 - 2,907,000 2,907,000 - 30,039,000 30,039,000
__________ ________ __________ __________ __________ __________
Return per ordinary
share (US cents)
- Basic 3 0.19 0.32 0.51 1.24 1.94 3.18
_____ _____ _____ _____ _____ _____
All revenue and capital items in the above statement are derived from continuing operations.
No operations were discontinued during the year.
GUANGDONG DEVELOPMENT FUND LIMITED
CONSOLIDATED BALANCE SHEET
31 December 2002
2002 2001
Notes US$ US$
INTERESTS IN LONG TERM INVESTMENTS 37,067,021 41,228,465
CURRENT ASSETS
Cash and bank balances 1,549,950 835,851
Time deposits 3,465,780 2,379,350
Listed investments 2,502,971 2,436,151
Prepayments, deposits and other receivables 8,457 22,468
Due from investee entities 778,047 2,669,080
Due from a related company 848,428 101,104
__________ __________
9,153,633 8,444,004
__________ __________
CURRENT LIABILITIES
Creditors and accrued liabilities 862,840 630,514
Due to an investee entity 568,099 1,818,712
Due to a related company 244,669 267,509
Proposed final dividend 2 2,907,000 2,907,000
__________ __________
4,582,608 5,623,735
__________ __________
NET CURRENT ASSETS 4,571,025 2,820,269
__________ __________
TOTAL ASSETS LESS CURRENT LIABILITIES 41,638,046 44,048,734
EQUITY MINORITY INTEREST 3,400 3,160
__________ __________
41,641,446 44,051,894
__________ __________
CAPITAL AND RESERVES
Share capital 969,000 969,000
Share premium 4,977,239 4,977,239
Special distributable reserve 47,054,000 49,961,000
Capital reserve
- realised 10,736,390 10,491,925
- unrealised -31,429,347 -31,496,167
Revenue reserve 9,334,164 9,148,897
__________ __________
TOTAL SHAREHOLDERS' FUNDS 41,641,446 44,051,894
__________ __________
NET ASSET VALUE PER ORDINARY SHARE 4 0.43 0.45
__________ __________
GUANGDONG DEVELOPMENT FUND LIMITED
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 December 2002
Notes Notes 2002 2001
US$ US$
NET CASH INFLOW FROM OPERATING ACTIVITIES 5 (a) 984,146 5,644,011
ACQUISITIONS AND DISPOSALS
Proceeds from disposal of interests in long
term investments 3,285,177 375,579
__________ __________
Cash inflow from acquisitions and disposals 3,285,177 375,579
__________ __________
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Repayment of shareholders' loans 438,206 531,983
__________ __________
Cash inflow from capital expenditure and financial investment 438,206 531,983
__________ __________
EQUITY DIVIDENDS PAID -2,907,000 -27,132,000
__________ __________
NET CASH INFLOW/(OUTFLOW) BEFORE USE OF
LIQUID RESOURCES 1,800,529 -20,580,427
__________ __________
MANAGEMENT OF LIQUID RESOURCES
Proceeds from sale of listed investments 5 (b) - 2,691,215
Net decrease/(increase) in time deposits 5 (c) -1,086,430 17,856,390
__________ __________
Cash inflow/(outflow) from management of liquid resources -1,086,430 20,547,605
__________ __________
INCREASE/(DECREASE) IN CASH 714,099 -32,822
__________ __________
RECONCILIATION OF NET CASH FLOW
TO MOVEMENT IN NET FUNDS
2002 2001
US$ US$
INCREASE/(DECREASE) IN CASH 714,099 -32,822
INCREASE/(DECREASE) IN LIQUID RESOURCES 1,086,430 -20,547,605
__________ __________
CHANGE IN NET FUNDS RESULTING FROM
CASH FLOWS 1,800,529 -20,580,427
NON-CASH CHANGE IN NET FUNDS 5 (c) 66,820 2,362,106
__________ __________
CHANGE IN NET FUNDS 1,867,349 -18,218,321
NET FUNDS AT BEGINNING OF YEAR 5 (c) 5,651,352 23,869,673
__________ __________
NET FUNDS AT 31 DECEMBER 5 (c) 7,518,701 5,651,352
__________ __________
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the principal accounting policies, all of which have been applied consistently throughout the
current and preceding years, is set out below.
Basis of preparation and presentation
The financial statements have been prepared in US dollars under the historical cost convention, as modified by
the revaluation of investments, and in accordance with accounting principles generally accepted in the Island of
Jersey, incorporating United Kingdom accounting standards.
The presentation of the statement of total return and the balance sheet have been prepared in accordance with
the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" issued by the Association
of Investment Trust Companies in the United Kingdom.
Basis of consolidation
The consolidated financial statements include the financial statements of the Company and its subsidiaries for
the year ended 31 December 2002. All significant intra-group transactions and balances within the Group are
eliminated on consolidation.
Subsidiaries
A subsidiary is a company in which the Company, directly or indirectly, controls more than half of its voting
power or issued share capital or controls the composition of its board of directors.
Interests in subsidiaries are stated at cost unless, in the opinion of the directors, there have been impairment
losses, when they are written down to values determined by the directors.
Interests in long term investments
Interests in unlisted investments are classified as long term where, in the opinion of the directors, they are
made with the expectation that realisation will not be in the near future or where there are restrictions on their
immediate realisation.
All unlisted investments are initially recorded at cost. Thereafter they are recorded to reflect the periodic
revaluations of the directors. The directors' valuation takes into account the investee's historical or projected
earnings or asset value or the price at which transactions in the investee company's equity have taken place or an
offer has been made, as appropriate. Such valuations also take into account any adverse factors which indicate that
an impairment loss has taken place and a provision should be made. In the opinion of the directors, the carrying
value of the investments equates to the fair value.
Unlisted investments operating in the form of joint ventures, whereby the residual interests in the joint
venture projects are to be transferred to the various PRC joint venture parties at the end of the contractual periods
in accordance with the terms of the contract, are stated at cost less accumulated amortisation, computed to write off
the cost less any residual value of the joint ventures over the underlying joint venture contract terms. The
amortisation of interests in long term investments is dealt with in the revenue section of the statement of total
return.
Capital gains and losses on the investments, whether realised or unrealised, are dealt with in the capital
section of the statement of total return.
Associates
An associate is a company, not being a subsidiary or a jointly-controlled entity, in which the Group has a long
term interest of generally not less than 20% of the equity voting rights and over which it is in a position to
exercise significant influence.
In accordance with the provisions of Financial Reporting Standard No. 9 "Associates and Joint Ventures" relating
to investment funds, the Group includes all investments at cost less any provisions for impairment losses, where
appropriate, and accumulated amortisation, even where the Group has significant influence over the investees, because
these investments are held as part of the Group's investment portfolio. The directors consider that, because these
investments are held with a view to the ultimate realisation of capital gains, equity accounting would not give a
true and fair view of the Group's interests in these investments, which is better measured by dividends and interest.
Listed investments
Listed investments are classified as short term and are 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, are dealt with in the capital section of
the statement of total return.
Foreign currency transactions
Foreign currency transactions during the year are translated into United States dollars at the applicable
exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies at
the balance sheet date are translated into United States dollars at the applicable exchange rates ruling at that
date. Exchange differences are dealt with in the revenue section of the statement of total return.
Revenue recognition
Interest income is recognised on an accrual basis. Investment income is recognised when the right to receive
payment is established.
Investment management fee
The investment management fee represents amounts paid/payable to Guangdong Investment Management Limited
("Investment Manager") in connection with investment, administrative and accounting services provided to the Company
and is charged to the revenue return account. The investment management fee is charged by the Investment Manager for
those services and is calculated quarterly based on an annual rate of 2.5% of the Group's assets invested in unlisted
companies and of 0.75% of the Group's remaining assets.
Related parties
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other
party, or exercise significant influence over the other party in making financial and operating decisions. Parties
are also considered to be related if they are subject to common control or common significant influence. Related
parties may be individuals or corporate entities.
2. DIVIDENDS
2002 2001
US$ US$
First special dividend - Nil (2001: US18 cents)
per ordinary share - 17,442,000
Second special dividend - Nil (2001: US10 cents)
per ordinary share - 9,690,000
__________ __________
- 27,132,000
Proposed final dividend - US3 cents (2001: US3 cents)
per ordinary share 2,907,000 2,907,000
__________ __________
2,907,000 30,039,000
__________ __________
3. RETURN PER ORDINARY SHARE
The revenue return per ordinary share is based on the revenue return attributable to equity shareholders of
US$185,267 (2001: US$1,206,006) and on the 96,900,000 (2001: 96,900,000) ordinary shares in issue during the year.
The capital return per ordinary share is based on the net realised and unrealised capital return of US$311,285
(2001: US$1,875,199) and on the 96,900,000 (2001: 96,900,000) ordinary shares in issue during the year.
No diluted return per ordinary share has been shown as no diluting events existed during the year.
4. NET ASSET VALUE PER ORDINARY SHARE
The Group's net asset value per fully paid ordinary share of US$0.43 (2001: US$0.45) has been calculated in
accordance with the articles of association. The calculation is based on 96,900,000 shares (2001: 96,900,000 shares)
in issue at the year end and the net assets of the Group of US$41,641,446 (2001: US$44,051,894) at the year end.
5. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT
(a) Reconciliation of the Group's revenue return on ordinary activities to net cash inflow from operating
activities
2002 2001
US$ US$
Revenue return on ordinary activities for
the year
before taxation 426,617 1,176,793
Provision/(write-back of provision) against
an amount
due from an investee entity 204,663 -2,385
Amortisation of interests in long term 682,526 682,526
investments
Decrease in prepayments, deposits and other
receivables 14,011 3,272,014
Increase in an amount due from a related -747,324 -55,692
company
Decrease in amounts due from investee 1,686,370 1,958,866
entities
Decrease in creditors and accrued liabilities -9,264 -450,746
Decrease in an amount due to an investee -1,250,613 -
entity
Decrease in an amount due to a related -22,840 -937,365
company
______ ______
Net cash inflow from operating activities 984,146 5,644,011
(b) Analysis of sale of listed investments
2002 2001
US$ US$
Proceeds from sale of listed investments - 2,691,215
(c) Analysis of changes in net funds At Net cash flows Non-cash At 31 December 2002
Beginning change
of year
US$ US$ US$ US$
Cash 835,851 714,099 - 1,549,950
Time deposits 2,379,350 1,086,430 - 3,465,780
Listed investments 2,436,151 - 66,820 2,502,971
5,651,352 1,800,529 66,820 7,518,701
Copies of the Annual Report and Consolidated Audited 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.
END
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