FFWD.L Regulatory News (FFWD)

THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN, INTO OR FROM THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN OR ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A BREACH OF THE RELEVANT SECURITIES LAWS OF SUCH JURISDICTION.

4 May 2012

China Growth Opportunities Limited

("China Growth" or the "Company")

Proposed return of capital of 0.5p per Existing Ordinary Share, Bonus Issue of Warrants, subscription of 20,000,000 new Ordinary Shares, amendment to articles of incorporation, changes to the Board and change of investment policy

China Growth Opportunities Limited today announces that the Board is proposing to raise £200,000 (before expenses) by way of an issue of 20,000,000 new Ordinary Shares (the "Subscription Shares") to Scarborough Holding Company Limited (the "Investor"), with Warrants attached on a one for one basis, at a price of 1 pence per share, which represents a premium of 145 per cent. to the estimated unaudited net asset value per Existing Ordinary Share as at 31 May 2012 (being 0.41p, adjusted for the proposed return of capital).

The Directors intend that the net proceeds will be used to fund the working capital requirements of the Company and enable the Company to implement a proposed new investment policy. In connection with the Subscription, the Board is proposing that the investing policy be amended as set out below:

The Company's objective is to provide Shareholders with capital growth and income from investing in a portfolio of companies whose business operations are based in China. The Company will seek to invest as sole or lead investor in profitable, well-managed real estate and retail orientated businesses whose business operations are based in China.

The Investor intends to utilise its resources and contacts in Hong Kong and China in order to generate deal flow and actively manage investments. Although there are no limits on the proportion of the Company's net assets which may be invested in any particular investment, the Directors will seek to ensure that the Company has a spread of investments. Investments are expected to held for between approximately 3 to 5 years.

The Company will hold its investments through special purpose vehicles (SPVs). Borrowing may be undertaken at the SPV level and investments may initially be highly geared.

The Subscription is conditional, inter alia, on Admission and the Company obtaining approval from Shareholders at an Extraordinary General Meeting of the Company for a change to the existing investment policy and an amendment to the Articles. A circular containing a Notice of Extraordinary General Meeting of the Company (the "Circular"), to be convened for 10.30 a.m. on 28 May 2012, will be posted to Shareholders today.

Conditional on, inter alia, the Subscription and Admission, the Board is also proposing to (i) return capital of 0.5p per Existing Ordinary Share to Shareholders and (ii) implement a Bonus Issue of Warrants to existing Shareholders on the basis that existing Shareholders will receive 1 Bonus Issue Warrant for every 2 Existing Ordinary Shares held at the Record Date. Each Warrant will confer the right (but not the obligation) to subscribe for one Ordinary Share in cash at any time during the period commencing with the date of Admission and ending on the date which is the third anniversary of the date of Admission at a price of 5p per Ordinary Share.

The Directors believe the Bonus Issue of Warrants will have the following advantages:

·; Qualifying Shareholders will receive securities which they may convert into Ordinary Shares at a predetermined price in order to benefit from any future growth in the Company;

·; on any exercise of the Subscription Rights, the capital base of the Company will increase, allowing operating costs to be spread across a larger number of Ordinary Shares, which should cause the total expense ratio to fall; and

·; following the exercise of any Subscription Rights, the Company will have an increased number of Ordinary Shares in issue, which may in due course improve the liquidity in the market for its Ordinary Shares. 

On Subscription, Brett Miller and Weiming Zhang will resign as Directors. Rhys Davies will continue as Executive Chairman. Kevin McCabe will be appointed to the Board as an Executive Director. Kevin is the founding director of the Scarborough Group of companies ("Scarborough Group") and has been its chairman since inception.

The Directors consider the Proposals to be in the best interests of the Company and its Shareholders as a whole and accordingly recommend unanimously Shareholders to vote in favour of the Resolutions to be proposed at the Extraordinary General Meeting as they intend to do in respect of their beneficial holdings amounting, in aggregate, to 9,751,920 Ordinary Shares, representing approximately 19.5 per cent. of the existing issued ordinary share capital of the Company.

For further information please contact:

DISCLAIMER

Singer Capital Markets Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as nominated adviser and broker to the Company in connection with the matters described in this announcement. Persons receiving this announcement should note that Singer Capital Markets Limited will not be responsible to anyone other than the Company for providing the protections afforded to clients of Singer Capital Markets Limited or for advising any other person on the arrangements described in this announcement. Singer Capital Markets Limited has not authorised the contents of, or any part of, this announcement and no liability whatsoever is accepted by Singer Capital Markets Limited for the accuracy of any information or opinions contained in this announcement or for the omission of any information.

The Subscription Shares and Warrants will not be registered under the United States Securities Act of 1933 (as amended) or under the securities laws of any state of the United States or qualify for distribution under any of the relevant securities laws of Canada, Australia or Japan nor has any prospectus in relation to the Subscription Shares and Warrants been lodged with or registered by the Australian Securities and Investments Commission. Accordingly, subject to certain exceptions, the Subscription Shares and Warrants may not be, directly or indirectly, offered, sold, taken up, delivered or transferred in or into the United States, Canada, Australia or Japan. This announcement is directed and issued only to the shareholders of China Growth Opportunities Limited and their representatives and shall not be distributed to or used by any other person. Overseas shareholders and any person (including, without limitation, nominees and trustees) who have a contractual or other legal obligation to forward this announcement to a jurisdiction outside the United Kingdom should seek appropriate advice before taking any action.

Proposed return of capital of 0.5p per Existing Ordinary Share, Bonus Issue of Warrants, subscription of 20,000,000 new Ordinary Shares, amendment to the articles of incorporation, changes to the Board and change of investment policy

1. Introduction and summary

The Board of China Growth is proposing to raise £200,000 (before expenses) by way of an issue of 20,000,000 new Ordinary Shares (the "Subscription Shares") to the Investor, with Warrants attached on a one for one basis, at a price of 1 pence per share. The Subscription proceeds will be used to fund the working capital requirements of the Company and enable the Company to implement a proposed new investment policy, further details of which are set out below.

The Subscription is conditional, inter alia, on Admission and the Company obtaining approval from Shareholders at an Extraordinary General Meeting to be convened for 10.30 a.m. on 28 May 2012 for a change to the existing investment policy and an amendment to the Articles. Further detail on the proposed change in investment policy and amendment to the Articles is set out in paragraphs 4 and 5 respectively below.

Conditional on the Subscription and Admission, the Board is also proposing to (i) return capital of 0.5p per Existing Ordinary Share to Shareholders and (ii) implement a Bonus Issue of Warrants to existing Shareholders on the basis that existing Shareholders will receive 1 Bonus Issue Warrant for every 2 Existing Ordinary Shares held at the Record Date. Further detail on the proposed return of capital and Bonus Issue is set in paragraphs 6 and 7 respectively below.

2. The Subscription

The Company proposes to raise £200,000 (before expenses) through the issue of the Subscription Shares to the Investor at the Issue Price, which represents a premium of 145 per cent. to the estimated unaudited net asset value per Existing Ordinary Share as at 31 May 2012 (being 0.41p, adjusted for the proposed return of capital). Application will be made to the London Stock Exchange for the Subscription Shares to be admitted to trading on AIM. The Subscription Shares will represent 28.57 per cent. of the Company's enlarged issued ordinary share capital immediately following Admission.

The Subscription will provide the funds required for working capital and for the Company to pursue a new investing policy (details of which are set out in paragraph 4 below).

Pursuant to the Subscription Agreement, the Company will also issue Subscription Warrants to the Investor on the basis of one Subscription Warrant for each Subscription Share. Accordingly, following Admission the Investor will hold 20,000,000 Ordinary Shares and 20,000,000 Subscription Warrants. Each Subscription Warrant will entitle the Investor to subscribe for one Ordinary Share in cash at any time during the period commencing with the date of Admission and ending on the date which is the third anniversary of the date of Admission at a price of 5p per Ordinary Share (subject to adjustment upon the occurrence of certain corporate events by or affecting the Company). The Investor may, on the occurrence of certain corporate events by or affecting the Company, elect to receive a cash amount in lieu of its entitlement to receive Ordinary Shares in the Company on exercise of the Subscription Warrants. The Subscription Warrants will not be admitted to listing or trading on any stock exchange.

The Subscription is conditional upon:

i. the passing of the Resolutions;

ii. the Company retaining cash reserves of at least £200,000 at the time of Admission;

iii. the appointment to the Board of Kevin McCabe (whose biography is set out in paragraph 3 below);

iv. the resignations of Brett Miller and Weiming Zhang as Directors;

v. notification being given to the Guernsey Financial Services Commission of the change to the Articles, the changes to the Board and the change to the Company's investment policy; and

vi. Admission occurring not later than 8.00 a.m. on 30 June 2012.

The Subscription Shares will rank pari passu with the Existing Ordinary Shares.

Application will be made to the London Stock Exchange for the Subscription Shares to be admitted to trading on AIM. It is expected that Admission will become effective on 29 May 2012.

3. Changes to the Board

On Subscription, Brett Miller and Weiming Zhang will resign as Directors. Rhys Davies will continue as Executive Chairman. Kevin McCabe will be appointed to the Board as an Executive Director. Kevin is the founding director of the Scarborough Group of companies ("Scarborough Group") and has been its chairman since inception. Kevin has over 40 years' experience in the commercial property sector. The Scarborough Group was founded in 1980 and is a group of independent businesses with real estate, investment and leisure interests in the UK, Central Europe, North America, Australia, India and China, including Hong Kong. The Scarborough Group's interests have diversified to include, inter alia, a global investment portfolio in excess of £1.0 billion.

Kevin is chairman of many of the Scarborough Group companies and is the Chairman of Sheffield United plc.

4. Change of investing policy

At an extraordinary general meeting of the Company held on 23 January 2009, Shareholders resolved to amend the investment objective of the Company so that, going forward, it was to "manage the sale of the Company's investment portfolio and to maximise the return of invested capital to Shareholders during the period ending on 30 September 2010". At a subsequent meeting held on 6 July 2009, following a number of disposals, Shareholders approved the implementation of a capital return scheme by the Company (the "Capital Return Scheme"). At the annual general meeting of the Company held on 23 September 2011, the investing policy of the Company was amended to be: "The investing policy of the Company is to manage the sale of the Company's investment portfolio and to maximise the return of invested capital to Shareholders during the period ending on 30 September 2012".

In connection with the Subscription, it is proposed that the investing policy be amended as set out below:

Proposed new investment policy

The Company's objective is to provide Shareholders with capital growth and income from investing in a portfolio of companies whose business operations are based in China. The Company will seek to invest as sole or lead investor in profitable, well-managed real estate and retail orientated businesses whose business operations are based in China.

The Investor intends to utilise its resources and contacts in Hong Kong and China in order to generate deal flow and actively manage investments. Although there are no limits on the proportion of the Company's net assets which may be invested in any particular investment, the Directors will seek to ensure that the Company has a spread of investments. Investments are expected to held for between approximately 3 to 5 years.

The Company will hold its investments through special purpose vehicles (SPVs). Borrowing may be undertaken at the SPV level and investments may initially be highly geared.

A resolution to be proposed at the Extraordinary General Meeting will seek Shareholder approval for the change in investing policy. The Subscription is conditional, inter alia, on the passing of this resolution.

5. Amendment to Articles

The Company was incorporated on 23 February 2006. Article 36 of the Articles requires the Company to propose, at the annual general meeting to be held following the seventh anniversary of incorporation, an ordinary resolution that the Company cease to continue as presently constituted. If the resolution is not passed, a similar resolution is required to be proposed at every fifth annual general meeting thereafter. If the resolution is passed at any of those meetings, the Directors are required to formulate proposals to be put to Shareholders to reorganise, unitise, reconstruct or wind up the Company. It is proposed that Article 36 of the Articles be deleted.

A resolution to be proposed at the Extraordinary General Meeting will seek Shareholder approval for the amendment to the Articles. The Subscription is conditional, inter alia, on the passing of this resolution.

6. Return of capital

Since the implementation of the Capital Return Scheme, the Company has been making regular returns of capital to its Shareholders. The Company has returned capital of 27.50p per Ordinary Share in cash as well as a further £328,000 to Shareholders via a distribution in specie of 9,364,963 shares in China CDM Exchange Centre Limited. The Company held one investment as at 30 September 2011, which cost £4.0 million and had a fair value of nil at 30 September 2011. The Directors do not believe any value can be recovered from this investment. As at 3 May 2012, the Company held cash balances of £564,457.

Subject to the Board being satisfied on reasonable grounds that the Company will, immediately after payment of the return of capital, satisfy the solvency test prescribed by the Law and the Board approving a certificate, signed by at least one of the Directors to that effect, the Board has today resolved to return further capital of 0.5p per Existing Ordinary Share to Shareholders. The proposed return of capital is conditional on the Subscription and Admission. The expected timetable is as follows:

7. Bonus Issue

Conditional on the Subscription and Admission, the Board has resolved to issue Bonus Issue Warrants to Qualifying Shareholders on the basis of 1 Bonus Issue Warrant for every 2 Existing Ordinary Shares.

Each Warrant will confer the right (but not the obligation) to subscribe for one Ordinary Share in cash at any time during the period commencing with the date of Admission and ending on the date which is the third anniversary of the date of Admission at a price of 5p per Ordinary Share. The Subscription Price is subject to adjustment upon the occurrence of certain corporate events by or affecting the Company, including Subscription Price consolidations or sub-divisions of capital, takeover offers and the liquidation of the Company. Fractions of Warrants will not be allotted or issued and entitlements will be rounded down to the nearest whole number of Warrants. The Warrants, which will not be admitted to listing or trading on any stock exchange, will be issued in certificated form.

Warrants will rank equally with each other and will not carry the right to receive any dividends from the Company or the right to attend and vote at general meetings of the Company.

The Directors believe the Bonus Issue of Warrants will have the following advantages:

·; Qualifying Shareholders will receive securities which they may convert into Ordinary Shares at a predetermined price in order to benefit from any future growth in the Company;

·; on any exercise of the Subscription Rights, the capital base of the Company will increase, allowing operating costs to be spread across a larger number of Ordinary Shares, which should cause the total expense ratio to fall; and

·; following the exercise of any Subscription Rights, the Company will have an increased number of Ordinary Shares in issue, which may in due course improve the liquidity in the market for its Ordinary Shares. 

8. Recommendation

The Directors consider the Proposals to be in the best interests of the Company and its Shareholders as a whole and accordingly recommend unanimously Shareholders to vote in favour of the Resolutions to be proposed at the Extraordinary General Meeting as they intend to do in respect of their beneficial holdings amounting, in aggregate, to 9,751,920 Ordinary Shares, representing approximately 19.50 per cent. of the existing issued ordinary share capital of the Company.

SUBSCRIPTION STATISTICS

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

All times referred to in this document are, unless otherwise stated, references to London time.

DEFINITIONS

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