Since early May The China Heartland Fund Limited (the "Fund"), in conjunction with its legal advisers and Martin Currie Investment Management Limited ("Martin Currie"), has been actively seeking to try and resolve the additional commercial and regulatory issues referred to in the Fund's last announcement to shareholders dated 9 May 2002 (the "Announcement") which prevented the implementation of the reconstruction proposal approved by shareholders at the Adjourned Special General Meeting held on 6 May 2002 (the "Proposal"). Despite extensive negotiations with China Securities Corporation Limited ("CSC") it has not been possible to resolve these issues.
On 14 June 2002, an alternative route for realising the value comprised in the Investment Services and Returns Agreement dated 18 July 1997 as amended (the "Agreement") was presented to the Fund by CSC and a third party based in Hong Kong (the "Third Party"). Martin Currie and the directors of the Fund (the "Board") believed that pursuing such a route represented the most attractive option for preserving shareholder interests without triggering the need to obtain any further Chinese regulatory consents or approvals. The Fund has since been actively seeking to negotiate terms with the Third Party, upon which the Fund would exit from the Agreement.
Whilst negotiations are continuing with the Third Party, the Board now believes it is unlikely that the Proposal can be implemented by the Fund and will therefore proceed on the basis of the Alternative Proposal set out in the Circular dated 27 March 2002. The Fund will seek to return to shareholders as soon as possible an amount representing the proportion of the Fund invested in the liquid portfolio less an amount determined by the Board on the advice of the auditors which is sufficient to maintain the Fund's existence until such time as an exchange control commission is obtained for the payment of the outstanding amounts under the Agreement, or some alternative means of recovering monies in respect of such outstanding amounts is found. The Board have therefore instructed Martin Currie to realise all remaining liquid assets in the Fund and as soon as practicable thereafter to make an initial repayment of $20m to shareholders in the Fund.
The Board has agreed to meet again on 5 September 2002 to further consider the amount and timing of further repayments to shareholders in the Fund and the best options open to them to realise the value comprised in the notional profit under the Agreement, including progress on the sale of the Agreement to the Third Party.
Enquiries:
The China Heartland Fund Limited Julian Livingston
Phone :(+44) 131 479 4643
Fax :(+44) 131 222 2575
Email :jlivingston@martincurrie.com
Forum Securities Services Ltd. Edith G. Conyers
Phone: (+441) 296-1300
Fax (+441) 296-1301