But Craig Jones says return of capital will rob shareholders of future earnings.
THE manager of AIM-listed property developer JSM Indochina said Wednesday it has recommended the return of US$103 million in uninvested capital to shareholders following a vote earlier this month.
Craig Jones, chief executive officer of JSM Indochina Capital, which manages the closed-end fund’s investment and development activities, said the board still needed to give the go-ahead to the return of capital, which amounts to $0.45 per share.
However, he warned that the immediate financial gain for shareholders would be offset by lost returns in the future.
“Two years from now that money will be doubled. But democracy prevails: the vote was made, they want the cash,” he said, referring to a extraordinary general meeting held on December 7 following a leadership challenge by minority shareholder Passport Capital LLC, which also called for the return of uninvested capital.
The recommendation to return the uninvested capital had not been notified to the London Stock Exchange, which controls the AIM board, by the time the Post went to press Wednesday.
Jones said some recent investment decisions would need to be reconsidered if the move was agreed.
“We will need to defer some projects, delay some projects and cancel some projects,” he said, without giving further details of which would go ahead and which would be affected.
He also declined to confirm explicitly that the company’s Embassy Centre retail development would still go ahead, but said he was close to finalising a contract with a construction company for the project. The project has received approval from the Council for the Development of Cambodia (CDC), but a construction permit had not yet been approved, he added.
The fund announced in late October that it had purchased two stalled residential towers in Ho Chi Minh City for $65 million from a construction company that had run into financial difficulties. In an announcement to the London Stock Exchange’s AIM Board, Jones said he expected the towers, which will each have 90 apartment units, to be available for occupancy from mid-2011.
However, the transaction was still subject to due diligence at the time, and JSM has yet to issue an announcement finalising the deal.
The vote to return capital was initiated by minority shareholder Passport Capital, a San Francisco-based hedge fund that controls about 13 percent of JSM’s capital.
It also called for the removal of Jones and JSM Indochina Capital Chief Financial Officer Rowell Tan from the board of JSM Indochina, as well as the removal of non-executive Chairman Michael Tanner, claiming “serious corporate governance failings and the lack of transparency on matters of concern to all shareholders”.
Passport said the manager had failed to invest available capital and was paid excessive fees. It also said Jones was distracted from his duties due to financial difficulties in the United States, where 11 companies under his directorship had been placed into receivership.
Jones and Tan resigned ahead of the vote, whereas Tanner was removed by shareholders. The three were replaced by Passport nominees Scott Verges, who is now chairman, Paul Kaju and John Duggan. Alain Dupuis resigned as non-executive director on December 18.
The fund also announced Monday that Tan has resigned as CFO of the manager, effective following an annual audit of the firm's financial records to be completed by accounting firm KPMG on or before March 31.
Commenting on the resignation, Verges said: “Mr Tan is extremely well-regarded by the directors and the manager, and we are very sorry that he has resigned. We thank him for his excellent service to the company' and we wish him all the best in his future endeavours.”
Jones said the resignation was a direct result of the leadership challenge. Tan is “a man of integrity, an extremely hard worker, and he’s going to be missed”, Jones said.
Trading in JSM shares has been suspended at $0.66 since December 7 under AIM rules following the resignation of Numis, the fund’s nominated adviser following the December 7 extraordinary general meeting. Numis did not respond to a request for comment on its resignation. The board has 30 days to find a replacement or the company will be delisted.