9 Oct 2014 14:55
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9 October 2014
For Immediate Release
Vietnam Infrastructure Limited
Preliminary announcement of proposals to restructure
Introduction
The Board of Vietnam Infrastructure Limited (the "Company" or "VNI") announces that, in light of the requirement to hold a continuation vote during 2017 and following consultations with a number of shareholders, it intends to bring forward proposals to restructure the Company (the "Proposals"). The Proposals (which are subject to regulatory and shareholder approval) would allow long-term investors to retain an investment in Vietnam, whilst providing those shareholders in the Company who wish to realise their investment an opportunity for a phased exit.
Summary of the Proposals
It is proposed that VNI separates the listed and the private equity components of its portfolio into two distinct pools represented by two share classes. This would be achieved by the issue of a new class of ordinary shares representing the Company's listed portfolio (the "Listed Portfolio Shares"). The new Listed Portfolio Shares would be issued to VNI shareholders on the basis of one Listed Portfolio Share for each existing ordinary share held on the record date, and the Company intends, subject to the consent of the London Stock Exchange, to seek their admission to trading on AIM.
Shareholders would continue to hold the existing VNI ordinary shares which would then represent the Company's private equity assets and be re-designated the "Private Equity Shares". The Company intends to seek, subject to the consent of the London Stock Exchange, the continued admission of the Private Equity Shares to trading on AIM.
The Proposals are subject to regulatory approval and to the approval of VNI shareholders at an extraordinary general meeting. The Board has also suspended its share buyback programme and the future operation of the programme will be reviewed as part of the implementation of the Proposals.
The Listed Portfolio
Under the Proposals, listed shares and bonds held by the Company will be contributed to a new open-ended fund provisionally to be called the VCG Partners Vietnam Fund ("VVF"), with a broad Vietnam investment strategy focused on listed equities. The Listed Portfolio Shares will be 100% invested in the underlying open-ended fund, VVF. Subject to regulatory approval, VVF will be incorporated as a Luxembourg UCITS. Initially, the Company will be the only investor in VVF.
Holders of the Listed Portfolio Shares will have the right to exchange a portion of their Listed Portfolio Shares for units in VVF on three distribution dates in the 12 months following the splitting of VNI's share capital into two classes. The exchange of Listed Portfolio Shares for units in VVF at the first and second distribution dates will be at a discount to the prevailing net asset value of the Listed Portfolio Shares as set out in the table below. This discount will accrue to the benefit of holders of the Listed Portfolio Shares who do not exchange their Listed Portfolio Shares for units in VVF. Excess applications will be permitted and accepted to the extent that other holders of Listed Portfolio Shares do not elect to exchange their shares.
Distribution | Date | UCITS Class shares distributed | Exit Discount
|
First Distribution Date | 21 days after admission to AIM | 33.3% | 4% |
Second Distribution Date | Six months after the First Distribution Date | 50% of remaining shares | 2% |
Final Distribution Date | Twelve months after the First Distribution Date | 100% of remaining shares | 0% |
VVF units are expected to be redeemable twice a month at net asset value without any redemption fee being applied to units issued to VNI or distributed to VNI shareholders.
At the time of the final distribution date, all remaining VVF units held by the Company will be automatically exchanged by holders of Listed Portfolio Shares pro rata and the Listed Portfolio Share class will be cancelled from trading on AIM.
The Company's listed portfolio was valued at approximately US$117 million as of 30 September 2014.
The Private Equity Portfolio
VNI's current investing policy in respect of its private equity assets will be amended to a realisation focus with a target exit by date of June 2017, to coincide with the Company's scheduled continuation vote.
The exit proceeds from the sale of private equity assets and surplus net cash-flows will, at their election, be distributed to holders of Private Equity Shares either in cash or through VVF units in specie. It is anticipated that holders of Private Equity Shares who do not make an election will receive a distribution of VVF units and not cash.
Overview of the Private Equity Shares
The Private Equity Shares will represent the Company's non-listed assets and VinaCapital Investment Management Ltd ("VinaCapital" or the "Investment Manager") will seek to realise the assets in a controlled and orderly manner so as to ensure that maximum value is obtained. VinaCapital believes that, in light of current market conditions, the realisation of the private equity portfolio should be completed by June 2017.
The Company's private equity portfolio was valued at approximately US$107.9 million as of 30 June 2014.
Management and Incentive Fees
No management fee will be charged by VinaCapital to VNI on either the Listed Portfolio Shares or the Private Equity Shares.
Instead, VinaCapital will receive an annual fee of 1.5% of net asset value in respect of VVF. The Board believes this to be in-line with comparable UCITS frontier markets investment funds. There will be no performance fee payable to VinaCapital in respect of VVF.
In relation to the private equity portfolio, instead of a management fee, VinaCapital will receive an incentive fee based on sales proceeds:
1) Upon realisation of the Company's private equity assets, the Investment Manager shall receive a fee of 3% of the total sale proceeds of each asset realised once the sale proceeds are received by VNI and distributed to holders of Private Equity Shares.
2) In order to align the Investment Manager with the Company's shareholders, the Investment Manager shall also receive an incentive fee of 10% of the aggregate of all sales proceeds over the aggregate of 75% of book value as at 30 June 2014. For the purposes of calculating this fee, the book value of the private equity assets will be that as of 30 June 2014 (US$107.9 million), as contained in the monthly update posted on the Company's website on 17 July 2014. This incentive fee will be paid only when all the private equity assets have been realised and the sale proceeds received by VNI and distributed to holders of Private Equity Shares.
This fee structure is designed to incentivise VinaCapital to maximise the sale proceeds and to minimise the time taken to realise the private equity assets at attractive valuations.
Entering into the revised arrangements with VinaCapital will constitute an AIM Rule 13 related party transaction.
The existing management fee and incentive fee arrangements for VNI will be replaced by the above. Further, shareholders should note that no performance fee is due under the existing management agreement which will be terminated and replaced by a new agreement.
The revised arrangements with VinaCapital are conditional upon the completion of the proposed restructuring of the Company.
Board
The VNI Board also announces that Paul Garnett has been invited to join the VNI Board as a Non-executive Director. Mr Garnett began his career in 1992 and has over 20 years' experience in closed-ended funds. In 2010 he helped found London-based Ironsides Partners UK LLP, an affiliate of Ironsides Partners LLC ("Ironsides"), where he is currently a portfolio manager. Funds managed by Ironsides have an aggregate economic interest in approximately 24% of the Company's issued share capital. By virtue of his relationship with Ironsides Mr Garnett is not regarded to be an independent director. Mr Garnett's appointment will be confirmed and formally announced in the coming days and it is expected that he will stand for re-election at the Company's first annual general meeting which is due to be held on 24 November 2014.
Overview of VCG Partners Vietnam Fund
The Board believes that VVF will, by virtue of the performance track record of VNI's listed portfolio and its overall size, represent an attractive product for investors seeking to invest in Vietnamese listed securities.
The VNI listed portfolio has performed strongly in recent years, as illustrated in the following table:
2014 - Year to 31 August | 2013 | 2012 | |
VNI listed portfolio performance | 50.6% | 37.1% | 31.5% |
Vietnam Stock Index (VN Index) | 26.2% | 22.0% | 17.7% |
Timetable
Preliminary steps have been taken in Luxembourg to commence the incorporation of VVF and establishment is expected to be concluded during January 2015 following receipt of the necessary regulatory approvals. VNI intends to convene an extraordinary general meeting of shareholders, which is expected to be held on 24 November 2014, to approve the Proposals, but the Proposals will not become effective until receipt of the necessary regulatory approval for the launch of VVF and, subject to the consent of the London Stock Exchange, admission to trading on AIM of the Listed Portfolio Shares and the Private Equity Shares.
It is currently envisaged that the regulatory approvals will be forthcoming in January 2015 and that the Proposals will also be implemented in January 2015.
Enquiries
For further information, please contact:
Vietnam Infrastructure Limited Rupert Carington Tel: +44 (0)20 7845 5950
VinaCapital Group
Tony Hsun Tel: +84 8 3821 9930
Louie Doan Tel: +84 8 3821 9930
Edmond de Rothschild Securities (UK) Limited, Financial AdviserWilliam Marle Tel: +44 (0)20 7845 5950
John Armstrong-Denby Tel: +44 (0)20 7845 5950
Hiroshi Funaki Tel: +44 (0)20 7845 5960funds@lcfr.co.uk
Grant Thornton UK LLP, Nominated Adviser Philip Secrett Tel: +44 (0)20 7383 5100
philip.j.secrett@uk.gt.com
Shareholders should note that the Proposals outlined above are subject to various regulatory approvals, shareholder approval, updating, amendment and change, and as such, there can be no assurance that a restructuring of the Company will proceed in the manner described above or at all.
This announcement does not constitute a listing document, prospectus, offering memorandum, or offer or solicitation to any person in the United States or any other jurisdiction to purchase or sell any investment. No information set out in or referred to in connection with this announcement is intended to form the basis of any contract of sale, investment decision or any decision to purchase any securities, nor should such information be construed as providing financial, investment or other professional advice. This announcement should not be considered by the recipient as a recommendation relating to the acquisition or disposal of investments. It is recommended that recipients of this announcement seek their own independent legal, tax, financial and other advice. This announcement does not contain sufficient information to support an investment decision and investors should ensure that they obtain all available relevant information before making any investment.
This announcement may include statements that are, or may be deemed to be, "forward-looking statements". In some cases, such forward-looking statements can be identified by the use of forward-looking terminology, including the terms "targets", "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology. Any forward-looking statements are only made as at the date of this announcement, and the Company neither intends nor assumes any obligation to update forward-looking statements set forth in this announcement whether as a result of new information, By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. The Company's actual performance, results of operations, financial condition, liquidity and distributions to shareholders may differ materially from the impression created by any forward-looking statements contained in this announcement.
The opinions expressed are those held by the Company at the date of this announcement and are subject to change. Neither the Company nor any of its affiliates accept any liability or responsibility whatsoever for the accuracy or completeness of, nor make any representation or warranty (express or implied) with respect to, the information contained in these materials or any publicly available information.