Proposed Move to Main Market

RNS Number : 7985M

Macau Property Opportunities Fund

01 June 2010

 



1 June 2010

Macau Property Opportunities Fund Limited

("MPO" or the "Company")

Proposed Move to Main Market

Proposed Migration of Ordinary Shares from AIM to the Official List

Proposed amendments to the Investment Policy

Proposed Development Management Services Agreement

Renewal of Share Buyback Authority

Disapplication of new pre-emption rights

Adjusted NAV as at 31 March 2010

Introduction

Further to the Company's announcement on 4 March 2010 that it intends to seek a Premium Listing of its ordinary shares (the "Ordinary Shares") on the Official List of the UK Listing Authority and admission to trading on the London Stock Exchange plc's Main Market for listed securities, the Company's board (the "Board") today announces further details of the migration of the Ordinary Shares from AIM to the Official List (the "Migration"), which will also involve the adoption of new articles of association of the Company (the "New Articles"). The Migration is conditional on the passing of a resolution to be proposed at an Extraordinary General Meeting of the Company (the "EGM"), as well as the admission of the Ordinary Shares to the Official List and to trading on the Main Market of the London Stock Exchange.

The Company will shortly issue a prospectus (the "Prospectus") setting out the terms of the Migration in full and giving notice to the Company's shareholders (the "Shareholders") of the EGM.

As part of the Migration, the Company has taken the opportunity to review its investment policy, the revised terms of which are subject to approval by Shareholders at the EGM.

The EGM will also consider the approval of a development management services agreement, which is a new agreement between the Company and a development management company to be known as Headland Developments Limited to provide development management services to the Company (the "Development Management Services Agreement").

Finally, the EGM will also consider the renewal of the Company's share buy-back authority, which currently contains specific references to prices derived from AIM, and the disapplication of the pre-emption rights contained in the New Articles to allow the Company to allot up to 10,500,000 Ordinary Shares (10 per cent. of the current issued share capital) without such rights applying.

The Migration and its potential benefits

Since its launch in June 2006, the Company's Ordinary Shares have been admitted to trading on AIM. At this stage of the Company's development, however, the company's directors (the "Directors") consider that a move to the Main Market will provide a number of potential advantages, including:

-              improving the liquidity in the Ordinary Shares;

-              enhancing the Company's profile amongst the financial and investment community;

-              widening the pool of potential investors in the Company;

-              providing a more appropriate platform on which the Company can trade given its market capitalisation and state of development; and

-              in the longer term, and subject to further conditions, eligibility for inclusion in the FTSE All-Share Index.

The Company is therefore proposing the Migration, under which the listing of the Ordinary Shares on AIM will be cancelled and Admission to the Official List and to trading on the Main Market will be sought.

As a result of the FSA's review of the listing regime, the final rules relating to which were published on 26 February 2010, all overseas companies that apply for a Premium Listing must incorporate pre-emption rights equivalent to those imposed by the Companies Act 2006 in their constitutional documents unless such rights are contained in the law of the applicant's jurisdiction of incorporation. As a Guernsey company, the Company is not currently subject to pre-emption rights and must therefore adopt the New Articles, which include such rights. This requires a special resolution of the Shareholders and the Migration is therefore conditional on the passing of such resolution at the EGM. The New Articles will also contain a number of miscellaneous changes that bring them up to date with best practice, the Companies (Guernsey) Law, 2008, and the requirements of the UK Listing Authority.

Assuming the resolution proposing the adoption of the New Articles is passed, and that the necessary approvals are received from the UK Listing Authority and the London Stock Exchange, it is expected that Admission will become effective and that dealings on the Main Market will commence on or about 30 June 2010, with cancellation of the AIM listing taking place at 7.00 a.m. on the same date.

Changes to the Investment Policy

As a result of the proposed Migration, the Company has had to consider whether its investment policy meets the requirements of Chapter 15 of the Listing Rules. These rules require the investment policy to have hard limits in place as to what the Company can and cannot do without having to seek the approval of Shareholders in general meeting. The rules regarding the investment policies of AIM-listed companies are not as strict. As a result of this review, the Company is proposing to make two specific changes to its investment policy, as described below.

The first proposed change is the removal of the guideline stating that it was not intended that any single investment would constitute more than 30 per cent. of the Company's net asset value plus an amount equal to long term borrowings ("Gross Asset Value") at the time of investment. It is proposed that this is replaced with a hard limit that prevents the Company from making an investment where it would constitute more than 40 per cent. of the Company's Gross Asset Value at the time of investment.

The reason for this change is that Chapter 15 of the Listing Rules requires all investment companies to have firm exposure limits (as opposed to statements of intent). The Board will continue to closely monitor the position concentration limit in the Company's portfolio and, in the ordinary course of events, it is not expected that any single investment in a development will represent more than 30 per cent. of the Gross Asset Value of the Company at the time of investment. It should however be noted that the Macau property market has increased in value since the Company's launch in 2006 when the 30 per cent. limit was established. The Board believes that a 40 per cent. limit is a more realistic upper limit based on current property values and the potential acquisition opportunities that Sniper Capital Limited (the "Manager") has seen in the market, and would give the Company more flexibility to invest in the event that it is offered an opportunity to acquire a larger property.

The second proposed change is to remove the prohibition on the Company investing in third party managed collective investment companies. This restriction was included in the admission document published on the launch of the Company in 2006 but the Directors now consider that it should be removed in order to align the investment restrictions applicable to the Company with those contained in the Listing Rules, as well as to provide flexibility to invest in such companies in the future. The Company will instead be required to comply with the restriction contained in the Listing Rules, which will prevent the Company from investing more than 10 per cent. in aggregate of the value of its total assets in other listed closed-ended investment funds (except where such listed closed-ended funds have published investment policies to invest no more than 15 per cent. of their total assets in other closed-ended listed investment funds).

Both of these changes constitute material amendments to the Company's existing investment policy and therefore require shareholder approval under the AIM Rules. Provided that pre-approval from the UK Listing Authority for the proposed amendments is granted, the Company is therefore proposing a resolution at the EGM to approve the amendments.

Development Management Services Agreement

The property portfolio of the Company and its subsidiaries (the "Property Portfolio") currently includes certain properties whose potential value would be enhanced by development. The Company has therefore conditionally entered into the Development Management Services Agreement with a development management company to be known as Headland Developments Limited ("Headland"). This agreement provides that Headland will provide development management services to the Company that are outside the scope of the Manager's obligations to the Company under the Management Agreement. Headland is part owned by Thomas Ashworth and Martin Tacon and therefore constitutes a related party of the Company. The Directors have therefore determined that the Development Management Services Agreement should be subject to Shareholder approval.

The Directors (excluding for this purpose Thomas Ashworth) are recommending that Shareholders approve the Development Management Services Agreement, which in their view affords the Company a number of benefits. The scope of development management services to be provided by Headland primarily involves taking responsibility for the complete, timely and cost effective delivery of each development project.

The Directors believe that the benefits to the Company from entering this agreement include a higher quality of service than could otherwise be obtained, with a high degree of commitment and dedication to development projects, greater control over the management and monitoring of construction costs and an enhanced communication of the Company's brand from inception to project completion. The objective will be to deliver development projects to a high standard and to position such projects to maximise the promotion and marketing and consequently sales, leasing and exit values.

Share repurchase authority

As the Shares will no longer be traded on AIM following Admission, the Company is seeking to obtain a replacement authority to repurchase its Shares. An ordinary resolution, which is conditional on Admission, will be put to Shareholders at the EGM to grant the Company authority to repurchase up to 14.99 per cent. of its issued share capital, subject to the requirements of the Listing Rules, until the end of the Company's next annual general meeting.

Disapplication of pre-emption rights

Following the adoption of the New Articles, the Company will not be able to allot Shares for cash without offering them to existing Shareholders first in proportion to their shareholdings. An extraordinary resolution, which is conditional on the passing of the resolution proposing the adoption of the New Articles, will therefore be put to Shareholders at the EGM to grant the Company authority to disapply these pre-emption rights in respect of up to 10,500,000 Shares, which is equal to 10 per cent. of the Company's issued share capital. This will allow the Company flexibility to issue further Shares for cash without conducting a rights issue or other pre-emptive offer.

The Portfolio

There are five major property investments held within the Company's portfolio together with a small number of other property assets and some cash.

Details of the portfolio, which was valued by Savills (Macau) Limited at an aggregate US$312,804,023 as at 31 March 2010, are as follows:

One Central is a premier mixed-use property development, of which the Company has acquired Tower Six and a number of other individual units. The Company's strategy for these properties is to seek to enhance their value through leasing and asset management. Tower 6 comprises 59 apartments and is being marketed as an exclusive high end residential enclave called The Waterside. The Company's investment in One Central was valued at US$186,885,725 as at 31 March 2010.

Rua da Penha is a niche market low-rise residential development which is intended to provide attractive accommodation for middle/upper-income locals in a popular and well established neighbourhood. Redevelopment of this property commenced in March 2010 and the intended exit is through pre-sales and sales of completed residential units. The Company's investment in Rua da Penha was valued at US$22,924,443 as at 31 March 2010.

Senado Square is a mixed-use redevelopment project in the heart of the historic centre of Macau. The project is currently at the advanced planning stage and, on completion, should offer prime, multi-storey mixed-use retail space for a variety of tenants. The Company's holding in Senado Square was valued at US$37,220,022 as at 31 March 2010.

Rua do Laboratório is an entry-level residential high-rise project to be built close to the border with China. Situated in an old industrial area of Macau, this location has recently been emerging as a new residential district, led by government infrastructure initiatives, new road projects and proximity to the proposed Light Rapid Transit System. The Company's holding in the asset was valued at US$40,697,325 as at 31 March 2010.

Zhuhai Logistics Centre, which is currently at the leasing and planning stage, is a warehousing and logistics centre in Zhuhai, in close proximity to Macau, aimed at the needs of Macau's gaming, tourist and MICE industries. This site also benefits from its location adjacent to major infrastructure projects including the new Hong Kong-Zhuhai-Macau bridge, new road infrastructure and a new rail project to Guangzhou. The Company's likely exit strategy for this project will be through sale with long-term leases. The Company's holding was valued at US$14,166,791 as at 31 March 2010.

Other property assets include a number of smaller assets held for sale or for development which were valued, in aggregate, at US$10,909,717 as at 31 March 2010.

All valuations referred to above are derived from the valuation report prepared by Savills Valuation and Professional Services Limited for the purpose of inclusion in the Prospectus.

Cash

As at 21 May 2010, the Company had a cash balance equivalent to approximately US$31.5 million. The majority of the cash reserves are held in HK dollar fixed deposits and in savings and current accounts across a number of international banks located in Guernsey, Macau and Hong Kong.

Adjusted NAV as at 31 March 2010

The most recent Adjusted NAV per Ordinary Share was US$2.49, as at 31 March 2010. This figure is unaudited.

Accounting treatment of Tower Six, One Central Residences and Net Asset Value

As announced in the Company's unaudited interim results for the six months ended 31 December 2009, Tower Six of One Central was handed over from the developer to the Company during that period. As a result, and to reflect the intention to lease out and earn rentals from the units, the Company's Audit Committee determined that it would be most appropriate to reclassify Tower Six as an investment property, rather than inventory, for the purposes of the interim results. Under International Financial Reporting Standards, development properties classified as inventories are included in the financial statements at the lower of cost and net realisable value, whereas properties classified as investment properties are, after initial recognition, carried at fair value. The reclassification of Tower Six accordingly resulted in a fair value unrealised gain of US$47.1 million being recognised in the Group's income statement for that period, with a corresponding increase in the Company's Net Asset Value. It should be noted, however, that the reclassification had no impact on the Company's Adjusted Net Asset Value, as this figure is calculated by reference to property valuations rather than cost. It should also be noted that the reclassification had no impact on the amount of fees paid by the Company, as management and administration fees are calculated as a percentage of the Company's Adjusted Net Asset Value.

The Company's auditors have yet to determine whether they intend to adopt the same approach as the Audit Committee in classifying Tower Six as an investment property for the purposes of the Company's next audited accounts, being those in respect of the financial year ending 30 June 2010. If Tower Six of One Central were to be treated as inventory in the final audited results, rather than as an investment property, the Company would be required to reverse the fair value unrealised gain of US$47.1m that it recognised in the interim results as described above. The Company's Adjusted Net Asset Value will not in any event be affected by the approach adopted by the Company's auditors, as it is based on the most recent valuation of the Company's properties by Savills (Macau) Limited. The amount of fees paid by the Company will also not be affected by the approach adopted by the Company's auditors, as management and administration fees are calculated as a percentage of the Company's Adjusted Net Asset Value.

Net Asset Valuations

The Net Asset Value per Ordinary Share and the Adjusted NAV per Ordinary Share are currently calculated by the Administrator semi-annually based on the semi- annual valuation of the Property Portfolio and calculated on the basis of IFRS. This valuation or any suspension thereof will be announced to the London Stock Exchange through a Regulatory Information Service.

Following Admission, these valuations will be calculated on a quarterly basis, with the 31 March and 30 September valuations based on a desktop update of the latest Property Portfolio valuation. The Manager may also, at its discretion, arrange for additional valuations from time to time if market conditions warrant it.

Indicative timetable

Date	Action
Monday 28th June	Extraordinary General Meeting
Wednesday 30th June	Cancellation of AIM listing
Wednesday 30th June	Admission and commencement of unconditional dealings in the Ordinary Shares

Document viewing

Upon formal approval of the Prospectus by the UK Listing Authority, which is expected to be granted shortly, a copy of the Prospectus will be submitted to the UK Listing Authority, and will be available for inspection at the UK Listing Authority's Document Viewing Facility, which is situated at The Financial Services Authority, 25 The North Colonnade, Canary Wharf, London E14 5HS. The Prospectus will also then be available for viewing on the Company's website, www.mpofund.com.

For further information, please contact:

Nominated Adviser and Sponsor
Collins Stewart Europe Limited
David Yovichic	020 7523 8361
Dominic Waters	020 7523 8473
Manager
Sniper Capital Limited
Daisy Tang, Corporate & Investor Communications	[phone]
e-mail: [e-mail]
Company Secretary and Administrator
Heritage International Fund Managers Limited
Mark Huntley/Laurence McNairn	01481 716000

 

This announcement appears as a matter of record only and does not constitute an offer to sell or a solicitation of an offer to purchase any security.

This announcement constitutes an advertisement and is not a prospectus. It does not constitute an offer to sell or a solicitation of an offer to buy any securities described herein in the United States or in any other jurisdiction, nor shall it, by the fact of its distribution, form the basis if, or be relied upon, in connection with any contract therefor. The information contained in this announcement is for background purposes only and does not purport to be full or complete. No reliance may be placed for any purpose on the information contained in this announcement or its accuracy or completeness. No offer, invitation or inducement to acquire shares or other securities in the Company ("Shares") is being made by or in connection with this announcement.

The distribution of this announcement in certain jurisdictions may be restricted by law. Save for the publication of the Prospectus, no action has been taken by the Company or Collins Stewart Europe Limited that would permit an offering of the Shares or possession or distribution of this announcement or any other offering or publicity material relating to such shares in any jurisdiction where action for that purpose is required. Persons into whose possession this announcement comes are required by the Company and Collins Stewart Europe Limited to inform themselves about, and to observe, such restrictions.

The information presented herein is not an offer for sale within the United States of any equity shares or other securities of the Company. The Company has not been and will not be registered under the US Investment Company Act of 1940, as amended (the "Investment Company Act"). In addition, the Shares have not been and will not be registered under the US Securities Act of 1933, as amended (the "Securities Act") or any other applicable law of the United States. Consequently, the Shares may not be offered or sold or otherwise transferred within the United States, or to, or for the account or benefit of, US Persons (as defined in Regulation S under the Securities Act), except pursuant to an exemption from the registration requirements of the Securities Act and under circumstances which will not require the Company to register under the Investment Company Act. No public offering of the Shares has been made in the United States. This announcement should not be distributed, forwarded, transferred, reproduced, or otherwise transmitted, directly or indirectly, to any persons within the United States or to any US Persons unless it is lawful to do so.

This announcement is directed only at (i) persons outside the United Kingdom to whom it is lawful to communicate it, or (ii) persons having professional experience in matters relating to investments who fall within the definition of "investment professionals" in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended), or (iii) high net worth companies, unincorporated associations and partnerships and trustees of high value trusts as described in Article 49(2) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended), each a "Relevant Person", and persons who receive this announcement who do not fall within (i), (ii) or (iii) above should not rely on or act upon this announcement.

This announcement may include certain "forward-looking statements". These statements are based on the current expectations of the Company and are naturally subject to uncertainty and changes in certain circumstances. Forward-looking statements typically include statements containing words such as "intends", "expects", "anticipates", "targets", "plans", "estimates" and words of similar import. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are various factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These factors include, but are not limited to, changes in economic conditions, changes in the regulatory environment, fluctuations in value of interest and exchange rates, the outcome of litigation and government actions. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward-looking statements. The Company does not undertake any obligation to update publicly or revise forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.

All investments are subject to risk. Past performance is no guarantee of future returns. The value of investments may fluctuate. Results achieved in the past are no guarantee of future results. This announcement is not intended to constitute legal, tax or accounting advice or investment recommendations. Prospective investors are advised to seek expert legal, financial, tax and other professional advice before making any investment decision.

Collins Stewart Europe Limited, which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for the Company and no-one else in connection with the Migration and the contents of this announcement, and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Collins Stewart Europe Limited nor for providing advice in connection with the Migration or the contents of this announcement or any other matter referred to herein. Collins Stewart Europe Limited is not responsible for the contents of this announcement. This does not exclude or limit any responsibilities which Collins Stewart Europe Limited may have under the Financial Services and Markets Act 2000 or the regulatory regime established thereunder.

 

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