Circ re. change of manager

RNS Number:7730D
Guangdong Development Fund Ld
30 May 2006


Guangdong Development Fund Limited

30 May 2006

          GUANGDONG DEVELOPMENT FUND LIMITED ('GDF' or 'the Company')

 Proposed disposal of interests in GD Decorative, Guangdong MDF, Honour Million
                              & Guangzhou Malting
        Proposed change of Manager and appointment of Investment Manager
                Proposed change of publication of quarterly NAV
                            Circular to shareholders
                                      and
                    Notice of Extraordinary General Meeting

1. INTRODUCTION

On 15 May 2006 the Company announced it had conditionally agreed to dispose of
its interests in GD Decorative, Guangdong MDF, Honour Million and Guangzhou
Malting. As stated in the previous announcement, the Assets Disposal constitutes
both a related party and a Class 1 transaction and therefore requires, and is
conditional upon, the prior approval of Shareholders.

Additionally, the Company announces today that it has conditionally agreed to
appoint GDF Management (Cayman) Limited (a wholly owned subsidiary of ASM) as
manager of the Company and Springridge Company Limited as investment manager of
the Company, conditional upon Shareholders' approval. Mr. Chan Kin, Mr. Chung
Kuohsien David and Ms. Li Yick Yee Angie are all connected with ASM and are
therefore not deemed to be independent as regards this proposed transaction. In
addition, ASM is the fund manager for ASM Asia Recovery (Master) Fund which
holds 10,670,000 Ordinary Shares, representing 11.01 per cent. of the issued
share capital of GDF. Consequently, the entering into the Management Agreement
also represents a related party transaction under the Listing Rules and
requires, and is conditional upon, the prior approval of Shareholders.

The Company is also proposing that, subject to Shareholders' approval, the
publication of its quarterly NAV be changed from the five newspapers in which it
is currently published, to the Regulatory News Service of the London Stock
Exchange plc.

Accordingly, the Company announces that a circular (the "Circular") setting out
full details of all the above proposals and a notice of an Extraordinary General
Meeting is being despatched to Shareholders today.

2. REASONS FOR THE CHANGE OF MANAGER AND APPOINTMENT OF INVESTMENT MANAGER

The current investment manager of GDF is Guangdong Investment Management Limited
("GIM"). GIM was appointed as the initial manager of the Company on the basis
that it would be able to identify suitable investment opportunities for GDF.
Following the passing of the 2001 Special Resolution, however, the focus of the
Company is now on realising its long term investments rather than making any
further investments. Consequently, the Board believes that it is more
appropriate for the Company to appoint a manager who is more specialised in the
realisation of assets.

In addition, the basis on which GIM is remunerated is calculated by reference to
the value of GDF's investments, with management fees to GIM of approximately
US$810,000 in 2004 and US$520,000 in 2005. The Independent Directors believe
that the proposed remuneration of GDFM is more aligned to rewarding successful
realisations of GDF's assets.

The Directors will discuss with GIM the termination of its contract, which
contains a six months notice clause, to ensure an orderly transition to GDFM if
the appointment of GDFM is approved by Shareholders.

Because Mr. Chan Kin, Mr. Chung Kuohsien David and Ms. Li Yick Yee Angie are all
connected with ASM, they have not participated in the Board's consideration of
the terms of the proposed Management Agreement.

Additionally, as three of the directors of GDF are connected with ASM and GDFM,
the board of directors will be re-constituted prior to the appointment of GDFM
as Manager becoming unconditional so that the board structure complies with the
requirements of the Listing Rules in relation to the independence of the board
from GDFM. Immediately following shareholder approval of the appointment of GDFM
as Manager at the EGM, Mr. Chan Kin will stand down as Chairman, Mr. Chung
Kuohsien David and Ms. Li Yick Yee Angie will resign as directors of GDF and
another director independent of ASM will be appointed to the board, who will
take on the role of Chairman. The independent directors (Mr. Ronald William
Green and Mr. Martyn Alan Scriven) and the connected director, Mr. Chan Kin,
will continue to sit on the board of GDF. The independent directors, together
with the new chairman, will provide an independent viewpoint to oversee GDFM and
Springridge.

Springridge is a specialised project management adviser on disposal of
distressed assets in China and has physical office locations within China in
order to effect transactions on which it advises. As GDFM does not have a
physical location in Guangdong Province nor does it have the equivalent local
knowledge of Springridge, Springridge is being proposed as Investment Manager to
manage the investments and to negotiate with potential buyers to dispose of the
investments.

The Directors believe the proposed remuneration of Springridge is in line with
rewarding successful realisations of GDF's assets.

In relation to this transaction the Independent Directors have been advised by
RSM Robson Rhodes Corporate Finance.

3. INFORMATION ON THE PROPOSED MANAGER AND INVESTMENT MANAGER

The Company is proposing to appoint GDFM (a wholly owned subsidiary of ASM) as
Manager of the Company on the terms and conditions as set out in the Management
Agreement, further details of which are set out below and in the Circular. ASM
was established in December 2001 and specialises in investments in assets in
Asia. In April 2002, ASM launched the ASM Asia Recovery (Master) Fund (which
owns 10,670,000 Ordinary Shares) and currently has approximately US$460 million
of assets under management. Mr. Chan Kin, Mr. Chung Kuohsien David and Ms. Li
Yick Yee Angie are directors of ASM.

The role of the Manager is to undertake all the investment and management duties
of the Company, although no transactions of amounts exceeding US$5 million can
be entered into without the prior approval of the Investment Committee of GDF.
The Company and GDFM are proposing to appoint Springridge as the Investment
Manager of the Company on the terms and conditions as set out in the Investment
Management Agreement, further details of which are set out below and in the
Circular.

Springridge is a wholly owned subsidiary of Springridge Investment (China)
Limited and the Springridge group was founded in 2001 by Mr. Dian Kang. It
provides advisory services to owners or acquirers of distressed asset portfolios
in mainland China, focusing on the management of those portfolios and advising
on bankruptcy/liquidation proceedings, financial restructuring and corporate
mergers and acquisitions.

The principal role of Springridge will be to monitor the Company's investments
and assist the Manager in the orderly disposal of GDF's investments.

4. DETAILS OF THE MANAGEMENT AGREEMENT AND INVESTMENT MANAGEMENT AGREEMENT

Under the terms of the Management Agreement, GDFM will undertake all investment
and management duties relating to GDF and will also be responsible for executing
divestment decisions, monitoring and supervising the investments of the Company
and making decisions on realisations in accordance with the 2001 Special
Resolution and the direction of the Investment Committee. In addition GDFM will
supervise the administration of the Company.

GDFM will be paid an annual management fee of US$150,000, payable in advance, in
two equal instalments each year. In addition, GDFM will also be entitled to a
one-off performance fee equal to 7.5 per cent. of aggregate proceeds,
distributed and available for distribution to the Shareholders, in excess of
US$20,000,000 from the date of the appointment of GDFM to the date of
termination of the Management Agreement.

The appointment of the Manager is for an initial fixed term of three years and
is thereafter terminable by either party giving not less than six months' prior
written notice. If, however, after eighteen months from the engagement date, the
NAV of the Company falls below US$1,000,000 then the Company may terminate the
agreement with six months' prior written notice or renegotiate the Management
Agreement.

Under the terms of the Investment Management Agreement, Springridge has agreed
to undertake all investment and management duties arising pursuant to the
existing investments held by GDF.

Springridge will be paid an annual fee of US$150,000, payable in advance, in two
equal instalments each year. In addition, Springridge will also be entitled to a
one-off performance fee equal to 7.5 per cent of aggregate proceeds, distributed
and available for distribution to the Shareholders, in excess of US$20,000,000
from the date of the appointment of Springridge to the date of termination of
the Investment Management Agreement.

The appointment of the Investment Manager is for an initial fixed term of three
years and is thereafter terminable by either party giving not less than three
months' prior written notice. If, however, after eighteen months from the
engagement date, the NAV of the Company falls below US$1,000,000 then GDFM may
terminate the agreement with three months' prior written notice or renegotiate
the Investment Management Agreement.

The independent directors, Mr. Ronald William Green and Mr. Martyn Alan Scriven,
consider the terms of the Management Agreement and the Investment Management
Agreement to be appropriate with regard to the fact that GDF is divesting the
ownership of its investments.

5. PROPOSED CHANGE OF PUBLICATION OF QUARTERLY NAV

Currently, GDF publishes its quarterly NAV in five newspapers and the aggregate
cost of the publication of the four quarterly NAV for the year ended 31 December
2005 was approximately HK$471,000 (approximately US$60,000). The Directors
believe that this cost is disproportionate to the size of the Company and that
it would be more appropriate for the quarterly NAV to be announced only through
the Regulatory News Service of the London Stock Exchange plc.

6. EXTRAORDINARY GENERAL MEETING

The resolutions are to be put before shareholders for approval at an
Extraordinary General Meeting to be held at 20th Floor Alexandra House, 16-20
Chater Road, Central, Hong Kong at 4:00p.m. (Hong Kong time) on 15 June 2006.

As required by the Listing Rules, Guangdong Capital Holdings Limited will
abstain, and has undertaken to take all reasonable steps to ensure that its
associates will abstain, from voting on the resolution at the EGM to approve the
Assets Disposal.

Similarly, ASM will abstain, and has undertaken to take all reasonable steps to
ensure that its associates will abstain, from voting on the resolution to be
proposed at the EGM to appoint the Manager.

***

A copy of the Circular has been submitted to the UK Listing Authority, 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
Telephone Number: 020 7676 1000

***

Enquiries:

RSM Robson Rhodes Corporate Finance
Neil Crawford        +44 (0)113 225 4100
Samantha Harrison    +44 (0)20 7865 2238

***

                                  DEFINITIONS

The following definitions apply throughout this announcement unless the context
otherwise requires:

"ASM"             Argyle Street Management Limited

"the Assets       disposal of all of the interests (being shareholdings and
 Disposal"        shareholder loans) of the Company in GD Decorative Material
                  (Zhongshan) Co., Ltd., Guangdong (Zhanjiang) Medium Density
                  Fibre Board Co. Ltd., Guangzhou Malting Company Ltd. and 
                  Honour Million Industries Limited

"Board"           the current board of directors of GDF

"China"           The Peoples' Republic of China

"Circular"        the circular to be posted to shareholders shortly

"Directors"       the directors of the Company whose names are set out in the
                  Circular

"EGM" or the      the extraordinary general meeting of GDF, notice of which is
"Extraordinary    set out at the end of the Circular, or any adjournment
 General          thereof
 Meeting"

"GDF" and "the    Guangdong Development Fund Limited
 Company"

"GDH"             GDH Limited

"GIM"             Guangdong Investment Management Limited, a company in which
                  Guangdong Capital Holdings Limited has a 55% stake

"GDFM"            GDF Management (Cayman) Limited, a wholly owned subsidiary of
                  ASM

"GD Decorative"   GD Decorative Material (Zhongshan) Co., Ltd
 and "GDD"

"Group"           GDF prior to the Assets Disposal

"Guangdong        Guangdong (Zhanjiang) Medium Density Fibre Board Co. Ltd.
 MDF"

"Guangzhou        Guangzhou Malting Company Ltd.
 Malting" and
 "Guangmai"

"HK$"             Hong Kong Dollars, the lawful currency of Hong Kong

"Honour           Honour Million Industries Limited
 Million"

"Investment       a committee appointed by the Directors pursuant to Article 123
 Committee"       of the Company's Articles of Association, where such committee
                  shall exercise such authority and undertake such acts as
                  provided for under the Articles of Association

"the Investment   the investment management agreement between GDF, GDFM and
 Management       Springridge Company Limited for GDFM to provide certain
 Agreement"       investment management and administrative services to GDF dated
                  29 May 2006

"Listing          the listing rules prepared by the Financial Services Authority
 Rules"           in its capacity as the competent authority under Part VI of
                  the Financial Services and Markets Act 2000

"the Management   the management agreement between GDF and GDFM in relation to
 Agreement"       investment management and administrative services dated 29 May
                  2006

"the Manager"     GDFM

"NAV"             Net Asset Value

"RMB"             Renminbi, the lawful currency of the People's Republic of
                  China

"Shareholder" or  a holder of Shares
 "shareholders"

"Shares" or       ordinary shares of US$0.01 nominal value each in the share
 "Ordinary        capital of GDF
 Shares"

"Springridge" or  Springridge Company Limited, a wholly owned subsidiary of
 "the Investment  Springridge Investment (China) Limited
 Manager"

"US$"             United States Dollars, the lawful currency of the United 
                  States of America





                      This information is provided by RNS
            The company news service from the London Stock Exchange

END
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