10 Sep 2012 12:03
VINALAND LIMITED
UPDATE ON CORPORATE STRATEGY
The Board of Directors ("the Board") of VinaLand Limited ("the Company" or "VNL"), the AIM-quoted investment vehicle established to target strategic segments within Vietnam's emerging real estate market, announces its intention to put forward proposals for the future of the Company for approval by the Company's shareholders ("VNL shareholders").
Background
The Company's AIM Admission Document stated that "shareholders should have the opportunity to review the future of the Company at appropriate intervals. Accordingly, the Board intends to convene an extraordinary general meeting of the Company in 2013 where a special resolution will be proposed that the Company continue as presently constituted." It also states "Shortly before the seventh anniversary of Admission, the Board will convene a Shareholders meeting at which a
resolution will be proposed to continue the Company."
Following consultation with the Company's investment manager, corporate advisers and major shareholders, the Board intends to put forward proposals ahead of the above timetable in order to provide certainty as to the direction of the Company for the next three years.
Proposals
The Board intends to convene an extraordinary general meeting ("the EGM") prior to the seventh anniversary of Admission, being 23 March 2013, at which the continuation resolution would be proposed. The Board recognise that change to the status quo is desirable and therefore in the event that the continuation vote is not passed the Board intends to put forward proposals at the EGM to restructure the Company including changes to the Company's investment strategy, distribution policy, investment manager remuneration structure and corporate governance. The Board intends that the proposals will comprise the following elements:
1) Investment strategy - the Board intends to propose that for the period of three years following the EGM (the "Cash Return Period") the Company will make no new investments (save that it may invest in, or advance additional funds to, existing projects within the Company's property portfolio to maximise value and assist in their eventual realisation), and that the Company will adopt a new realisation strategy whereby the Company's existing property portfolio of assets will be developed (where necessary) and/or divested in a controlled, orderly and timely manner.
2) Distribution policy - the Board intends to propose that during the Cash Return Period the net proceeds of all portfolio realisations will be returned to VNL shareholders, at the Board's discretion having regard to requirements to invest further funds in existing projects within the Company's property portfolio to enhance or preserve exit values; the Company's working capital requirements; and the cost and tax efficiency of individual transactions and/or distributions.
3) Further continuation vote - a further resolution for the Company's continuation will be proposed at an extraordinary general meeting at the end of the Cash Return Period (the "Second Continuation Vote").
4) Management remuneration - the Board has negotiated an in principle agreement with the Company's investment manager for its remuneration to be aligned with the above changes and with VNL shareholders' interest by way of the following amendments:-
(i) The management fee is intended to be reduced from 2% of the Company's NAV calculated on a monthly basis to fixed annual amounts of $8.25 million (equal to 1.47% of the Company's NAV) in the first year, $7.5 million in the second year and $6.5 million in the third year. These amounts have been determined based on the estimated cost to run the fund over each of the years. This will reduce the management fee payable during the first year of the Cash Return Period by approximately $3.0 million;
(ii) the investment manager's entitlement to future performance fees under its agreement with the Company is intended to be cancelled and no new performance fee arrangement is intended to be introduced; and
(iii) the payment by the Company to the investment manager of the accrued performance fees, which total approximately $28.2 million, is intended to be made conditional on distributions by VNL to shareholders. Under the intended revised agreement the investment manager will be entitled to receive payments of the accrued but deferred performance fees (up to approximately $28.2 million total accrual), equalling in aggregate 20% of any amounts deemed to be available for distribution during the Cash Return Period or received by VNL within 12 months of the termination of the investment management agreement (at the Board's discretion and taking into account follow-on investments, working capital and cost/tax efficiency considerations as discussed above).
The arrangement in 4 (iii) above is intended to be subject to the following conditions:
a) The first $50 million deemed available is intended to be distributed to VNL shareholders without any deductions for payments to the investment manager;
b) the investment manager would then be entitled to 50% of all subsequent distributions until such point that the 80:20 split has been reached;
c) 50% of cash payments received by the investment manager from the deferred performance fee will be used by the investment manager to purchase VNL shares in the secondary market, such VNL shares shall be subject to lock-in arrangements, whereby after 12 months, one third of the shares acquired will be released from the lock-in each six months; and
d) a maximum cap of $5 million will be applied to the deferred performance fee outstanding at the end of the Cash Return Period should the investment manager not have recovered the full amount of such deferred performance fee during the Cash Return Period or subsequent 12 month period to enable cash to be returned from the SPV level to VNL and onto VNL shareholders. This residual amount due (if any) would be satisfied by way of VNL shares acquired in the market. Any amount in excess of the $5 million not recovered by the investment manager during the time period stated above would be forfeited by the investment manager.
5) Corporate governance - the Board recognises the evolution of corporate governance standards since the Company's admission to AIM and in order to align its arrangements with best practice in this area, the Board intends to:
(i) Publish further details of its policies regarding Director's tenure on the Board and the appointment of any new Directors;
(ii) Convene an annual general meeting in 2013 and in each subsequent year;
(iii) Rationalise the Board by reducing its membership from seven Directors to five at the first AGM; and
(iv) Review its disclosure policies with a view to enhancing transparency for VNL shareholders.
Illustrative realisation and distribution profile
The investment manager has prepared, in connection with the consideration of the Company's future by the Board and VNL shareholders, an illustration of the Company's potential realisation and distribution profile over the period to the Second Continuation Vote.
The investment manager has estimated that over the three year period to the Second Continuation Vote the Company may be capable of realising gross cash proceeds of approximately $250 million. After deduction of estimated management fees, operating expenses, further commitments to current portfolio assets and accrued performance fee, this would equate to approximately $140 million being capable of being deemed available for distribution to VNL shareholders. The detail of this illustrative analysis, including the specific assumptions, is set out in the presentation to VNL shareholders now available for viewing on the Company's webpage (www.vinacapital.com/vnl). The presentation also contains further details on the status of current pipeline divestments where negotiations are well advanced. There are five potential transactions with either signed SPAs or MOUs with a total estimated divestment value over the next 12 months of approximately $40 million.
These figures, and those in the presentation, are illustrative estimates only. Due to various risks and uncertainties, actual events or results or the actual performance of the Company or any investment discussed in the presentation may differ materially from those reflected or contemplated in such illustrative estimates. Any projections, market outlooks or illustrative estimates are forward-looking statements and are based upon certain assumptions. Other events which were not taken into account may occur and may significantly affect the performance of the Company or any investment. Any outlooks and assumptions should not be construed to be indicative of the actual events which will occur.
Shareholder meetings
The Company will be conducting a series of shareholder meetings over the coming weeks and intends following this process to publish detailed proposals and to convene the EGM.
Forward-looking statements:
This announcement may contain statements that constitute forward-looking statements that include but are not limited to statements regarding the expected proceeds generated from the divestment of real estate assets owned by the Company or other funds managed by VinaCapital Group ("the Group"). Undue reliance should not be placed on forward-looking statements. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties, which could cause actual results to differ materially from those anticipated by the Group and described in the forward-looking statements. These risks and uncertainties include but are not limited to delays in receipt of payments, and unforeseen changes to general economic and business conditions. Forward-looking statements are based on the estimates and opinions of the Group's management at the time the statements are made. The Company and the Group assume no obligation to update forward-looking statements should circumstances or management's estimates or opinions change, except as required by law.
Notes to Editors:
VinaCapital is a leading asset management and real estate development firm in Vietnam, with a diversified portfolio of USD1.6 billion in assets under management. VinaCapital was founded in 2003 and boasts a team of investment professionals who bring extensive international finance and investment experience to the firm. Our mission is to produce superior returns for investors by using our experience and knowledge to identify the key trends and opportunities that emerge as Vietnam continues to develop its economy. To achieve this, VinaCapital has teams with broad experience covering equity markets, fixed income, private equity, venture capital, real estate and infrastructure.
VinaCapital manages three closed-end funds trading on the AIM Market of the London Stock Exchange. These funds are: VinaCapital Vietnam Opportunity Fund Limited (VOF), VinaLand Limited (VNL), and Vietnam Infrastructure Limited (VNI). VinaCapital also co-manages the DFJ VinaCapital L.P. technology venture capital fund with Draper Fisher Jurvetson.
VinaCapital has offices in Ho Chi Minh City, Hanoi, Danang, Nha Trang, Phnom Penh (Cambodia) and Singapore. More information about VinaCapital is available at www.vinacapital.com.
Enquiries:
David Dropsey
VinaCapital Investment Management Limited
Investor Relations/Communications
+84 8 821 9930
david.dropsey@vinacapital.com
Philip Secrett
Grant Thornton Corporate Finance, Nominated Adviser
+44 (0)20 7583 5100
philip.j.secrett@uk.gt.com
Hiroshi Funaki / William Marle
LCF Edmond de Rothschild Securities, Broker
+44 20 7845 5960
funds@lcfr.co.uk
Hugh Jonathan / David Benda
Numis Securities Limited, Broker
+44 (0)20 7260 1000
Mark Walters
FTI Consulting, Public Relations (Hong Kong)
+852 3716 9802
mark.walters@fticonsulting.com
Andrew Walton
FTI Consulting, Public Relations (London)
+44 (0)20 7269 7204
andrew.walton@fticonsulting.com