RNS Number:8101P
Guangdong Development Fund Ld
16 September 2003
GUANGDONG DEVELOPMENT FUND LIMITED
INTERIM RESULTS
The Board of Directors of Guangdong Development Fund Limited (the "Fund" or the
"Company") announces the unaudited return attributable to equity shareholders
for the six months ended 30 June 2003 was US$1.16 million. As of 30 June 2003,
the Fund's total net asset value was US$42.80 million, or US$0.442 per share.
The Board of Directors does not recommend the payment of an interim dividend.
ECONOMIC ENVIRONMENT
For the first half of 2003, the overall economic performance of China was better
than expected. Despite the negative impact on the economy due to the outbreak of
severe acute respiratory syndrome ("SARS") virus in late March of this year, the
Gross Domestic Product ("GDP") grew to US$605 billion, up 8.2 per cent over the
corresponding period of last year - China still enjoyed one of the fastest first
half growth period in recent years.
The industries hardest hit by SARS were passenger transportation, hospitality
services and tourism. However, three major contributors (investment, consumption
and export) to China's economic growth remained robust.
Total foreign direct investment utilized in first half of 2003 was US$30.3
billion, up 34.3 per cent from last year. Total export and import grew 33.9 per
cent to US$190.3 billion and 44.5 per cent to US$185.8 billion respectively over
the first half of last year. Domestic retail sales in the first six months of
2003 grew a year on year 8 per cent to 2.16 trillion yuan, and the Consumer
Price Index ("CPI") increased 0.6 per cent.
INFRASTRUCTURE PROJECTS
The infrastructure projects remained the most stable source of income for the
Fund. Current portfolio of Qingyuan Beijiang Bridges and National Highway No.205
(Heyuan Section) continued to register stable traffic pattern and contribute a
stable, recurrent income for the Fund.
The investment manager has continued discussions with the Chinese partner of
Huizhang Highway (Huizhou Section) project to resolve the problem relating to
the income due to the Company in 2002 but not yet paid resulting from changes in
the guidelines issued by the Guangdong Provincial Government.
INDUSTRIAL PROJECTS
Turnover at Foshan Tongbao Company Limited ("Tongbao") for the first half of
2003 is comparable to last year's, but profits after taxation declined due to
increase in costs of sales. Operating results of Hualu Company Limited, of which
Foshan Tongbao Company Limited holds a 50% interest, has been stable and
remained a major contributor to Tongbao's income.
Management of Tongbao is continuing its negotiation with its major shareholder,
Foshan Industry Investment Management Ltd. ("FIIML"), to indemnify a judgement
for approximately RMB37 million (US$4.47 million) against Tongbao due to a
guarantee provided by Tongbao to one of FIIML's subsidiaries.
As at 30 June 2003, to the best of the Fund's knowledge, outstanding guarantees
provided by Tongbao amounted to approximately RMB310 million (US$37.44 million),
and the Fund has been advised that none of the remaining guarantees made by
Tongbao have been called to date.
Turnover and profit after taxation at Guangzhou Malting Co., Ltd. and Guangzhou
Yangcheng Malting Plant (jointly known as "Guangmai") decreased compared to the
corresponding period of last year, principally due to the outbreak of SARS.
Ningbo Malting Company Limited's interim result has likewise worsened due to the
outbreak of SARS.
For Guangdong (Zhanjiang) Medium Density Fiberboard Limited, both turnover and
profit margin was comparable to the corresponding period of last year. The
company continued to enjoy a VAT refund granted by the PRC Tax Authority to the
industry during the year.
For the first six months of 2003, both turnover and profit margin for GD
Decorative Material (Zhongshan) Company Limited remained stable, and profit
after taxation increased due to the success in continuing cost cutting policies.
Xinhui Xingwei Building Material Company Limited, Guangdong Zhanhai Instrument
and Meter Company Limited and Gaoyao Gaolu Cement Company Limited showed no
improvement in their performances compared to the corresponding period of last
year. All three projects still incurred losses in the first half of 2003.
REAL ESTATE PROJECT
Guangdong Nan Fang (Holdings) Company Limited 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 impact on the
performance of the project. The company still incurred a loss for the first half
of 2003.
IT PROJECT
The Fund had fully provided for EBSBridge International Limited in 2001 and the
company is being liquidated.
LISTED INVESTMENTS
As of June 2003, the Fund's listed investments amounted to US$2.72 million,
representing approximately 6.4 per cent of its net assets.
Though the global stock market remains bearish during the period, the total
market value of the Fund's listed investments as at 30 June 2003 was 32.5 per
cent higher than the original cost. The increase resulted from the improved
valuation of both B shares in China and H shares in Hong Kong.
PURCHASE, SALE OR REDEMPTION OF SHARES
During the six months ended 30 June 2003, neither the fund nor any of its
subsidiaries purchased, sold or redeemed any of the Fund's Listed shares.
AUDIT COMMITTEE
On 10 May 1999, the Fund established an Audit Committee comprising two
independent non-executive directors and one non-executive director. The role of
the Committee is to advise the Board of Directors of the Fund by providing
independent and objective reviews of the Fund's financial reporting procedure,
internal control and audit function. The 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 2003.
OUTLOOK
Despite the outbreak of SARS in China, the Chinese government has implemented an
effective containment programme and has successfully control the virus within a
short period of time. The effect on the economy has been kept to a minimum and
China's domestic economy remained robust. Looking ahead, the directors will
continue to seek opportunities to dispose of the Fund's investments at the best
prices reasonably obtainable, and return liquidity to shareholders.
VICTOR LAP-LIK CHU
Chairman
Enquiries
Guangdong Development Fund Limited
Victor Chu / Amy Cho
Tel: (852) 2956 1818
Fax: (852) 2956 1161
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 2003 which comprises Consolidated Statement of
Total Return, Consolidated Balance Sheet, Consolidated Cash Flow Statement, and
the related notes 1 to 10. 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' RESPONSIBILITES
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 group 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 United
Kingdom Auditing Standards and therefore provides a lower level of assurance
than an audit. Accordingly we do not express an audit opinion on the financial
information.
REVIEW CONCLUSION
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 2003.
Ernst & Young LLP
Jersey, Channel Islands
16 September 2003
UNAUDITED CONSOLIDATED STATEMENT OF TOTAL RETURN
For the period from 1 January 2003 to 30 June 2003
Six months ended 30 June 2003 Six months ended 30 June 2002
Notes Revenue Capital Total Revenue Capital Total
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Investment income:
Listed investments 31.1 - 31.1 29.6 - 29.6
Unlisted investments 2 1,279.5 - 1,279.5 1,800.6 - 1,800.6
Provision against
an amount due from
an investee entity - - - (204.7) - (204.7)
Amortisation of interests
in long term investments 3 (341.2) - (341.2) (341.2) - (341.2)
Net realised gain on
disposal of interests in
long term investments - - - - 94.3 94.3
Net realised gain on sale of
listed investments - 162.8 162.8 - - -
Unrealised appreciation of
listed investments - 630.0 630.0 - 136.2 136.2
Interest income from:
Bank deposits 26.1 - 26.1 18.4 - 18.4
Other sources - - - 15.8 - 15.8
Gross revenue 995.5 792.8 1,788.3 1,318.5 230.5 1,549.0
Investment management fee 4 (486.7) - (486.7) (530.9) - (530.9)
Other administrative (145.4) - (145.4) (107.0) - (107.0)
expenses
Return attributable to
equity shareholders 363.4 792.8 1,156.2 680.6 230.5 911.1
Reserves at the beginning
of period 9,334.2 (20,693.0) (11,358.8) 9,148.9 (21,004.2) (11,855.3)
Reserves at the end
of period 9,697.6 (19,900.2) (10,202.6) 9,829.5 (20,773.7) (10,944.2)
Return per ordinary
share (US cents) - Basic 5 0.375 0.818 1.193 0.702 0.238 0.940
All revenue and capital items in the above statement are derived from continuing
operations.
No operations were discontinued during the period.
UNAUDITED CONSOLIDATED BALANCE SHEET
As at 30 June 2003
Notes 30 June 2003 31 December 2002
US$'000 US$'000
INTERESTS IN LONG TERM INVESTMENTS 6 36,725.8 37,067.0
CURRENT ASSETS
Cash and bank balances 184.1 1,549.9
Time deposits 1,796.4 3,465.8
Listed investments 7 2,722.5 2,503.0
Prepayments, deposits and other receivables 13.3 8.5
Due from investee entities 1,748.8 778.0
Due from a related company 881.3 848.4
7,346.4 9,153.6
CURRENT LIABILITIES
Creditors and accrued liabilities 473.1 862.8
Due to an investee entity 568.1 568.1
Due to a related company 236.8 244.7
Proposed final dividend - 2,907.0
1,278.0 4,582.6
NET CURRENT ASSETS 6,068.4 4,571.0
TOTAL ASSETS LESS CURRENT LIABILITIES 42,794.2 41,638.0
EQUITY MINORITY INTEREST 3.4 3.4
42,797.6 41,641.4
CAPITAL AND RESERVES
Share capital 969.0 969.0
Share premium 4,977.2 4,977.2
Special distributable reserve 8 47,054.0 47,054.0
Capital reserve
- realised 10,899.1 10,736.4
- unrealised (30,799.3) (31,429.3)
Revenue reserve 9,697.6 9,334.1
TOTAL EQUITY SHAREHOLDERS' FUNDS 42,797.6 41,641.4
NET ASSET VALUE PER ORDINARY SHARE (US$) 0.442 .430
UNAUDITED CONSOLIDATED CASH FLOW STATEMENT
Period ended 30 June 2003
Six months ended Six months ended
Notes 30 June 2003 30 June 2002
US$'000 US$'000
NET CASH INFLOW/(OUTFLOW)
FROM OPERATING ACTIVITIES 9(a) (701.5) 1,171.0
ACQUISITIONS AND DISPOSALS
Proceeds from disposal of
interests in
long term investments - 206.9
Cash inflow from acquisitions and - 206.9
disposals
CAPITAL EXPENDITURE
AND FINANCIAL INVESTMENT
Repayment of shareholders' loans - 255.7
Cash inflow from capital
expenditure
and financial investment - 255.7
EQUITY DIVIDENDS PAID (2,907.0) (2,907.0)
NET CASH OUTFLOW BEFORE
USE OF LIQUID RESOURCES (3,608.5) (1,273.4)
MANAGEMENT OF LIQUID RESOURCES
Proceeds from sale of listed 9(b) 573.3 -
investments
Net decrease in time deposits 9(c) 1,669.4 991.0
Cash inflow from management of 2,242.7 991.0
liquid resources
DECREASE IN CASH (1,365.8) (282.4)
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
Six months ended Six months ended
Notes 30 June 2003 30 June 2002
US$'000 US$'000
DECREASE IN CASH (1,365.8) (282.4)
DECREASE IN LIQUID RESOURCES (2,242.7) (991.0)
CHANGE IN NET FUNDS RESULTING
FROM CASH FLOWS (3,608.5) (1,273.4)
NON-CASH CHANGE IN NET FUNDS 9(c) 792.8 136.2
(2,815.7) (1,137.2)
NET FUNDS AT BEGINNING OF YEAR 9(c) 7,518.7 5,651.4
NET FUNDS AT 30 JUNE 9(c) 4,703.0 4,514.2
Notes to the unaudited interim report 30 June 2003:
1. Basis of preparation and accounting policies
The unaudited interim 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 accounting policies and basis of presentation used in the preparation of
these interim financial statements are the same as those used in the Group's
audited financial statements for the year ended 31 December 2002.
2. Investment income - unlisted investments
For the six months ended 30 June 2003, no interim dividend was declared by the
investee companies. Investment income of US$1,279,500 shown is for the six
months received and receivable for the year 2003 from different projects
(Corresponding period 2002: US$1,800,600).
3. Amortisation of interests in long term investments
Amortisation of interests in long term investments is computed to write off the
cost of investments over the underlying contract terms of those investments
where the Fund is not entitled to the residual interests at the end of the
contract term.
4. Investment management fee
An investment management fee is payable to the Investment Manager on a quarterly
basis in arrears at an amount equal to the aggregate of 2.5 percent of the
Fund's assets invested in unlisted companies and 0.75 percent of the Fund's
remaining assets.
5. Return per ordinary share
The revenue return per ordinary share is based on the revenue return
attributable to equity shareholders of US$363,400 (Corresponding period 2002:
US$680,600) and on the 96,900,000 (Corresponding period 2002: 96,900,000)
ordinary shares in issue during the period.
The capital return per ordinary share is based on the net realised and
unrealised capital return of S$792,800 (Corresponding period 2002: gain of
US$230,500) and on the 96,900,000 (Corresponding period 2002: 96,900,000)
ordinary shares in issue during the period.
No figure for the diluted return per ordinary share has been shown as no
diluting events existed during the period.
6. Interests in long term investments
Effective Cost of
Holding Investment
% Funded
US$ million
XIN HUI XINGWEI BUILDING MATERIAL COMPANY LIMITED 30.0 4.73
Ceramic tiles manufacturer
FOSHAN TONGBAO COMPANY LIMITED 29.9 7.94
Thermostat manufacturer
PAK KONG TRANSCO LIMITED 14.0 4.70
Toll bridge operator in Qingyuan
GUANGDONG ZHANHAI INSTRUMENT
AND METER COMPANY LIMITED 36.0 3.74
Manufacturer of flow meters under license of Brooks Instrument
GAOYAO GAOLU CEMENT COMPANY LIMITED 30.6 7.18
Cement producer
GUANGDONG NAN FANG (HOLDINGS)
COMPANY LIMITED 43.7 10.61
Investment in 11,083 sq.m. shopping arcade in Guangzhou
GUANGDONG (ZHANJIANG) MEDIUM DENSITY
FIBERBOARD LIMITED 11.2 3.87
Production of medium density fiberboard
NINGBO MALTING COMPANY LIMITED 10.0 3.93
Operation of malting plant
GUANGDONG HEYUAN TONG HUA INVESTMENT LIMITED 24.2 4.82
Investment in National Highway No. 205
GUANGZHOU MALTING COMPANY LIMITED 29.5 7.29
Operation of malting plant
GUANGDONG YANGCHENG MALTING PLANT 29.5 6.24
Operation of malting plant
YUEHUI HIGHWAY AND BRIDGES DEVELOPMENT
COMPANY LIMITED 20.0 4.82
Investment in Huizhang Highway (Huizhou section)
GD DECORATIVE MATERIAL (ZHONGSHAN) CO. LIMITED 18.0 1.99
Production of decorative materials
EBSBRIDGE INTERNATIONAL LIMITED 10.0 1.00
Technology services
OTHER INVESTMENT PORTFOLIO 0.24
Unaudited long term investments at original cost 73.10
Add: Acquisition cost capitalised 0.38
Less: Amortisation of interests in long term investments (5.35)
Less: Provisions for impairment losses on long term investments (31.40)
Total unaudited long term investments as at 30 June 2003 36.73
7. Listed investments
30 June 2003 31 December 2002
US$'000 US$'000
Listed investments, at cost
PRC 293.6 582.4
Hong Kong 1,761.7 1,761.7
2,055.3 2,344.1
Unrealised appreciation 667.2 158.9
2,722.5 2,503.0
Listed investments at market value at period/year end 2,722.5 2,503.0
8. Special distributable reserve
30 June 2003 31 December 2002
US$'000 US$'000
At beginning of year and end of period 47,054.0 47,054.0
9. Notes to the unaudited consolidated cash flow statement
(a) Reconciliation of the Group's revenue return on ordinary activities to net
cash inflow/(outflow) from operating activities
Six months ended Six months
30 June 2003 ended
US$'000 30 June 2002
US$'000
Revenue return on ordinary activities for the period before taxation 363.4 680.6
Provision against an amount due from an investee entity - 204.7
Amortisation of interests in long term investments 341.2 341.2
Decrease/(increase) in prepayments, deposits and other receivables (4.8) 10.5
Decrease/(increase) in amounts due from investee entities (970.8) 1,918.8
Increase in an amount due from a related company (32.9) (481.3)
Decrease in creditors and accrued liabilities (389.7) (246.3)
Decrease in an amount due to an investee entity - (1,250.6)
Decrease in an amount due to a related company (7.9) (6.6)
Net cash inflow/(outflow) from operating activities (701.5) 1,171.0
(b) Analysis of sale of listed
investments
Six months ended Six months ended
30 June 2003 30 June 2002
US$'000 US$'000
Proceeds from sale of listed 573.3 -
investments
(c) Analysis of changes in net funds
At Net At
beginning of cash Non-cash 30 June
year flows change 2003
US$'000 US$'000 US$'000 US$'000
Cash 1,549.9 (1,365.8) - 184.1
Time deposits 3,465.8 (1,669.4) - 1,796.4
Listed investments 2,503.0 (573.3) 792.8 2,722.5
7,518.7 (3,608.5) 792.8 4,703.0
10. Segment information
Mainland
PRC Hong Kong Total
US$'000 US$'000 US$'000
Revenue:
Investment income 1,245.6 65.0 1,310.6
Interest income 3.5 22.6 26.1
1,249.1 87.6 1,336.7
Net realised gain on sale of listed investments 162.8 - 162.8
Unrealised appreciation of listed investments 173.9 456.1 630.0
1,585.8 543.7 2,129.5 Less:
Amortisation of interests in long term
investments (341.2) - (341.2)
1,244.6 543.7 1,788.3
Expenses:
Investment management fee (486.7)
Other administrative expenses (145.4)
Return attributable to equity shareholders 1,156.2
This information is provided by RNS
The company news service from the London Stock Exchange
END
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