Aseana Prop. Regulatory News (ASPL)

02 July 2012

Aseana Properties Limited

("Aseana" or the "Company")

Proposed Return of Capital and Reorganisation

Aseana Properties Limited (LSE: ASPL), a property developer in Malaysia and Vietnam listed on the Main Market of the London Stock Exchange, is pleased to announce proposals regarding the return of capital to its shareholders ("Shareholders") and the reorganisation of the Company and its management arrangements.

1. Introduction

On 25 April 2012, the Company's board of directors (the "Board") announced that it was looking at ways to return capital to Shareholders and was considering the management arrangements and future direction of the Company. Shortly thereafter, the Board instructed its advisers to consult with Shareholders to seek their views on the Company's future direction and management arrangements.

Of the Shareholders who participated in the consultation process, holding in aggregate c. 80% of the Company's shares, there were a number of differing and competing views, ranging from a desire for the Company to continue its operations beyond 2015 to an early return of capital and winding up of the Company.

Given there was no clear consensus among Shareholders, in putting forward the proposals the Board has sought to draw an appropriate balance of Shareholder views by providing an accelerated return of capital while also providing for the Company to continue beyond 2015.

In the event that the proposals do not receive sufficient Shareholder support, it is the Board's intention that the Company will continue in its current form until the annual general meeting in 2015 (the "2015 AGM") at which Shareholders will vote on the Company's continuation as presently constituted, in accordance with the Company's articles of association (the "Articles"). Should Shareholders approve proposals for the winding up of the Company at the 2015 AGM and subsequent extraordinary general meeting, it is the Board's intention to seek to maximise Shareholder value through an orderly disposal of the Company's assets. Subject to market conditions at such time, this may involve a bulk sale of some or all of the Company's portfolio, and/or the completion and subsequent sale of all remaining development projects.

The proposals comprise:

1. a return of capital amounting in aggregate to US$100 million by 2015. Initially, the Company will return US$20 million through a tender offer ("Tender Offer") which is anticipated to take place in December 2012, subject to the timing of realisations;

2. a change in the Company's strategy to allow the Company to invest in new projects in South East Asia, primarily concentrating on Malaysia and Vietnam;

3. a change in the management structure with the termination of the existing management agreement between the Company and Ireka Development Management Sdn Bhd ("IDM" or the "Manager") and Lai Voon Hon being appointed as Chief Executive Officer, Monica Lai being appointed as Chief Financial Officer and Chan Chee Kian as Chief Investment Officer. If the proposals are approved, then Lai Voon Hon and Monica Lai would join the Board. In addition, it is proposed that the Company will enter into a contract with IDM under which IDM will provide the Company with project management, accounting, human resource services and other support services; and

4. the removal of Article 46 of the Articles, which requires that the Board shall procure, at the annual general meeting of the Company in 2015, an ordinary resolution to the effect that the Company shall cease to continue as presently constituted and if, at such meeting, such resolution is not passed the Board shall procure that a similar resolution is proposed at every third annual general meeting thereafter.

Full details of the proposals will be published at the time the Tender Offer is announced.

2. Background

Aseana was listed on the Main Market of the London Stock Exchange on 5 April 2007.

Since its launch in 2007, Aseana has operated in some of the toughest business conditions since the Asian financial crisis in the late 1990s. Whilst the local economy in Malaysia has remained robust, the uncertainty and weakness in the global economy has dampened foreign investment in the real estate sector. In Vietnam, high inflation, severe credit tightening and the high interest rate environment have weighed down on the real estate sector for the past few years.

During this period, the Company has completed the construction of five development projects (i-Zen@Kiara 1, 1 Mont Kiara, Tiffani by i-ZEN and Seni Mont' Kiara and Sandakan Harbour Square) and successfully realised two projects (i-ZEN@Kiara 1 and 1 Mont Kiara). Aseana is also on track to complete construction of two more projects by the end of 2012 (Sandakan Harbour Square, KL Sentral Office & Hotel project and City International Hospital) and continue the sale of apartments at Seni Mont Kiara and Tiffani by i-ZEN.

Although the economic problems mean that the returns on projects initially acquired by the Company at the time of its launch will not achieve the returns initially expected, the prudent management of the Board and the Manager has enabled the Company to take advantage of the weak economic cycle by acquiring a number of real estate assets, particularly in Vietnam at attractive prices. Furthermore, the ability of the Company to raise financing for all its projects, both in Malaysia and Vietnam, demonstrates the quality of the Company's assets and the reputation and track record of the management of the Company. Notwithstanding the tough credit condition over the last 12 months, the Company has successfully secured a 10-year Guaranteed Medium Term Notes Programme of up to US$162 million and an eight-year syndicated loan of US$43.3 million to finance its hotels, retail mall and hospital projects in Malaysia and Vietnam.

In Malaysia, the Company continues to be well regarded and is well positioned to re-enter the property market.

In Vietnam, the Company has consolidated its position and is seen as one of the more successful foreign companies having maintained a sound financial footing and a strong commitment to its projects throughout the difficult economic conditions. This has resulted in the Company winning the respect from and building relationships with its local partners, business networks and government authorities in Vietnam.

3. Portfolio Update

The Company's property portfolio comprises 13 projects at varying stages of development, of which eight projects are located in Malaysia and five in Vietnam. The following is an overview of the Company's portfolio since the publication of its quarterly investor update on 19 May 2012.

Highlights

Malaysia:

The Company's sale of ongoing development units is progressing well. As at end of May 2012, sales of SENI Mont' Kiara had advanced to 81%, compared to 79% in April 2012 with sales and purchase agreements signed.

Harbour Mall Sandakan (Phase 3) was completed with its Partial Occupational Certificate received on 12 March 2012. Tenants fit-outs are currently underway with the opening of the mall expected in mid-July 2012. Notable tenants include Parkwell, McDonalds, Levi's, The Body Shop, GNC and Tomei Gold and Jewellery. Meanwhile, the Four Points by Sheraton Sandakan Hotel received its Partial Occupational Certificate on 18 May 2012 and was opened for business on 30 May 2012.

Vietnam:

The Phuoc Long B project commenced construction of its villa show units, with a soft launch targeted by Q3 2012.

Sales Update as at 31 May 2012

* Based on sales and purchase agreements signed.

Construction Update as at 31 May 2012

Sandakan Harbour Square, Sandakan, Sabah, Malaysia

Construction works for the Harbour Mall Sandakan were completed with its Partial Occupational Certificate received in March 2012

Four Points by Sheraton, Sandakan hotel received its Partial Occupational Certificate in May 2012, with remaining works expected to complete by July 2012.

Kuala Lumpur Sentral Office Towers & Hotel, Kuala Lumpur, Malaysia

Slab works completed for the office towers and reinforced structural works in progress at Level 34 for the hotel.

Architectural and M&E works in progress at various levels for both the office towers and hotel, with expected completion in Q4 2012.

Phase 1: City International Hospital, International Hi-Tech Healthcare Park, Ho Chi Minh City, Vietnam

Structural works completed. Architectural and M&E works are in progress at various levels with completion expected in Q4 2012.

A detailed overview of the Company's portfolio is published in its latest Corporate Presentation, which is available on the Company's website at http://www.aseanaproperties.com/corporatepresentation.htm.

4. Return of Capital

The Company's initial development portfolio continues to mature and a number of these assets are either for sale or will be made available for sale once construction has been completed and, in respect of the hotel and retail mall developments, once an appropriate amount of time has elapsed in order to establish a suitable trading record. The Board is proposing that a significant amount of the proceeds derived from these sales should be returned to Shareholders.

The Board's target is to return US$100 million by 2015. The amount of capital that will be returned each year will depend on the timing of the realisation of assets and the amounts received.

Initially, the Board intends to return US$20 million through a Tender Offer. The pricing of the Tender Offer will be determined by the Board shortly before the announcement of the Tender Offer and in reaching their decision, the Board will consider the Company's share price and net asset value. However, if the Tender Price were being set at the time of this announcement then taking into account the current share price of US$0.41, and the net asset value, as at 31 December 2011, of US$0.96, the Tender Price would be at a significant premium to the current share price.

5. Strategy

The Company's assets are currently, by value, located approximately 70% in Malaysia, 28% in Vietnam and 2% in cash and at this time the Company cannot undertake new developments without the consent of Shareholders, although it is authorised to complete the development of existing projects. However, as construction of the assets in Malaysia completes and these assets are sold, the Company's assets will become increasingly exposed to Vietnam.

While the Board remains committed to investing in Vietnam, where the Company continues to develop and enhance its reputation, it is also of the view that Shareholders will benefit from the Company making further investments in Malaysia. This will enable the Company to benefit from the management team's many years of experience of developing in the Malaysian market and also balance the risk of the portfolio by having assets invested in Malaysia, which has a significantly more developed and stable economy compared to Vietnam.

If the proposals are accepted then it is proposed that the Company will:

1. complete and dispose of its existing developments in Malaysia;

2. source new developments in Malaysia, either on its own or with other partners;

3. continue with its existing projects in Vietnam;

4. develop its strategy as Master Developer of the land at The International Hi-Tech Healthcare Park in Ho Chi Minh City, which is expected to include developing some of the 20 plots available and disposing of the rest to other developers;

5. selectively develop other projects in Vietnam with its local partners; and

6. consider the acquisition and development of projects in other South East Asian economies.

6. Reorganisation of the Management Arrangements

The Board has taken into account the comments of some Shareholders concerning the management structure of the Company and also noted that a number of other closed end property funds launched around the same time as the Company have changed their management arrangements and moved away from the structure of having an external manger manage their assets.

The Board has concluded that it would be beneficial for the Company if the existing management arrangements were terminated and new arrangements are put in place so that the Company undertakes the executive management of the its assets internally as opposed to that role being undertaken through an external manager. The Board believes that there are two principal advantages for Shareholders:

1. the interests of Shareholders and the management team will be more closely aligned with the senior management team's remuneration being more closely linked to the overall performance of the Company, including its share price, as opposed to the current arrangements where IDM's management fee is based on the performance of the net assets and is not affected by any significant discount at which the Company's shares may trade; and

2. there are a considerable number of investors who are either unable or unwilling to hold shares in property funds but who would be prepared to hold shares in an internally managed property company. The Board's view is that the Company's shares should appeal to as wide a range of potential investors as possible in order to increase liquidity and reduce the discount to net asset value at which the shares trade.

Subject to the other proposals being approved, the Board proposes that:

·; Lai Voon Hon be appointed as Chief Executive Officer;

·; Monica Lai be appointed as Chief Financial Officer; and

·; Chan Chee Kian be appointed as Chief Investment Officer.

Lai Voon Hon and Monica Lai would also join the Board.

Although the contracts for each individual will allow them to continue working for IDM, their principal responsibilities will be to the Company. Currently all three individuals devote substantially all of their time to the management of the Company's assets.

Under the existing management agreement, IDM provides project management, accounting, human resources and other support services. It is the Board's view that the Company would benefit from the continuity provided by continuing to receive these services from IDM and that it is better for the Company to have flexibility in the way in which it contracts for these services as opposed to recruiting its own team. If Shareholders approve these proposals, then the Board intends to enter into an outsourcing contract with IDM for the provision of these services. The contract will initially be for one year and will be reviewed by both parties towards the end of the year to ensure that the Company is receiving the appropriate level of service at a competitive price.

The Board and its advisers estimate that these new management arrangements should also result in a cost saving to the Company of approximately US$450,000 per annum.

7. Amendment to Articles

The Board's view is that the adoption of these proposals is inconsistent with Article 46 of the Articles that requires that the Board shall procure, at the annual general meeting of the Company in 2015, an ordinary resolution to the effect that the Company shall cease to continue as presently constituted and if, at such meeting, such resolution is not passed the Board shall procure that a similar resolution is proposed at every third annual general meeting thereafter.

The Board will accordingly be asking Shareholders to vote in favour of the removal of this requirement.

8. Irkea Corporation Berhad & Legacy Essence Limited

The Board has consulted with Ireka Corporation Berhad ("ICB") and Legacy Essence Ltd ("Legacy"), the Company's two largest Shareholders. They have advised the Board that they support the proposals and should the Company undertake a Tender Offer, they are unlikely to take up their full entitlement.

They have also advised the Board that should the proposals not be approved, then they would want the Company to continue in its current form until 2015 and would not support any early return of capital.

9. Timing

The Board intends to announce the Tender Offer and full details of its proposals as soon as practical. However, the exact timing of the Tender Offer will remain dependent upon the realisation of the Company's assets, particularly those at SENI Mont' Kiara, and the proceeds received from such sales. The Board will keep Shareholders updated on the Company's progress in relation to these matters.

These proposals will be subject to Shareholder approval at an extraordinary general meeting. A circular to Shareholders and a notice convening an extraordinary general meeting will be despatched to Shareholders at the time the Tender Offer is announced.

10. Conclusion

The Board considers that these Proposals:

1. provide Shareholders with a substantial return of capital aligned to the expected timescale for realising its investments;

2. look to address the wide discount to net asset value at which the Company's shares trade, through a regular return of capital and by restructuring the management arrangements in order to attract investors who would not invest in a fund; and

3. provide a clear future strategy for the Company.

Further information

Notes to Editors

London-listed Aseana Properties Limited (LSE: ASPL) ("Aseana") is a property developer investing in Malaysia and Vietnam.

Aseana typically invests in development projects at pre-construction stage. Investment is made in projects where it is believed there will be a minimum 30% annualised return on equity ("ROE") on investments in Vietnam and a minimum 20% ROE on investments in Malaysia.

Ireka Development Management Sdn Bhd ("IDM") is the exclusive Development Manager for Aseana. It is a wholly-owned subsidiary of Ireka Corporation Berhad, a company listed on the Bursa Malaysia since 1993, which has over 45 years of experience in construction and property development. IDM is responsible for the day-to-day management of Aseana's property portfolio and the introduction and facilitation of new investment opportunities.