RNS Number : 5300H
Osprey Smaller Cos Income Fund Ltd
06 November 2008
OSPREY SMALLER COMPANIES INCOME FUND LIMITED
RESULTS FOR THE YEAR ENDED 31 AUGUST 2008
HIGHLIGHTS
* Net assets at 31 August 2008 of �19.2million (2007: �26.3 million), down
27.18% in the year;
* Net assets equal to 141.57pence (2007: 194.42 pence) per share, up 46.16%
since launch (Capital Return) and 85.6% since launch (Total Return);
* Outperformance of the FTSE Small Cap Index, the Company's closest benchmark
index;
* Profits of �7.3 million realised in the year from the sale of investments;
* Dividends paid in line with Prospectus expectations and previous years;
* Appointment of Rhys Davies as non-executive Director of the Company
following the retirement of Roger Alcock; and
* Appointment of Midas Investment Management Limited as Investment Adviser;
Post year-end
* Board exercise control over the discount of the share price to NAV by
purchasing 2,707,388 Ordinary Shares for cancellation; and
* Voluntary partial repayment of �3.0 million of the Bank of Scotland plc
Loan Facility.
For further information please
contact:
Midas Investment
Elysium Fund Management Management Limited
Limited 2nd Floor, Arthur
PO Box 650 House
No. 1 Le Truchot Chorlton Street
St Peter Port Manchester
Guernsey M1 3FH
GY1 3JX
elysium@elysiumfundman.com
Tel: 01481 810 100 info@midasim.co.uk
Fax: 01481 810 120 Tel: 0161 228 1709
Fax: 0161 228 2510
CHAIRMAN'S STATEMENT
I am pleased to present the results of the Company for the year ended 31
August 2008.
Change of Investment Adviser and Tender Offer
Following the acquisition of a 29.9% shareholding in the Company by
Manchester & Metropolitan Investment Management Limited ("M&M"), the Board
was approached by Midas Investment Management Limited ("Midas"), a company
related to M&M, with a proposal for them to be appointed as Investment
Adviser to the Company. The Board considered Midas' proposal, together with
one submitted by Unicorn Asset Management Limited ("Unicorn") and then
through its advisers consulted widely with the Company's shareholders. On 19
June 2008 Midas was appointed as Investment Adviser in replacement to
Unicorn.
Elysium Fund Management Limited ("Elysium") agreed to the termination of its
management agreement with the Company and on 19 June 2008 entered into an
administration agreement under which it will continue to provide
administration and secretarial services to the Company.
The Board recognised that some shareholders wanted to realise their
investment in the Company. Accordingly, the Company announced a tender offer
for up to 20% of its Ordinary Shares. At an Extraordinary General Meeting of
the Company held on 16 October 2008, a resolution authorising the Company to
repurchase 20% of the Ordinary Shares for cancellation was approved. On 21
October 2008 the Company announced that it would buy back 2,707,388 Ordinary
Shares for �2,563,960. Following the purchase, the Company cancelled these
shares together with the 500,000 Ordinary Shares already held as Treasury
Shares. Following the share cancellation, the issued share capital of the
Company comprised 10,829,612 Ordinary Shares.
Results
This year has been very difficult for global equity markets as a whole, and
this is reflected in the performance of the Company. Although the net asset
value per Ordinary Share of the Company fell by 27.18%[1] during the year
ended 31 August 2008 to 141.57p, it outperformed the FTSE Small Cap Index
(excluding investment trusts) Index ("FTSE Small Cap Index"), which fell by
32.47%. The Company had a negative total return for the year of 23.84%,
compared to a 32.39% fall in the FTSE Small Cap Total Return Index.
Investments
Since the change of Investment Adviser on 19 June 2008, Midas has
concentrated on repositioning the portfolio into more liquid stock to ensure
that the Company is better equipped to deal with and react effectively to the
uncertain market in the times ahead. A number of investments have also been
sold in order to be able to satisfy the cash requirements of the tender
offer.
Dividends
The Company continued to pay dividends in line with the original estimates,
as contained in the Prospectus. Two interim dividends were paid in respect of
the year ended 31 August 2008, the first interim dividend of 2.50p (2007:
2.50p) was declared on 19 March 2008 and paid on 9 April 2008 and the second
interim dividend of 4.00p (2007: 4.00p) was declared on 7 August 2008 and
paid on 29 August 2008. At 31 August 2008, the distributable reserves of the
Company stood at �3,489,559 (2007: �3,270,030).
R Prosser
5 November 2008
[1] Investments valued at bid prices.
INVESTMENT ADVISER'S REPORT
Our objectives upon our appointment as Investment Adviser on 19 June 2008
were to reposition the portfolio as follows:
* Reduce the gearing in the portfolio during the current market environment
of uncertainty. The gearing has now been reduced from a position of net
gearing as a percentage of the portfolio of 32.7%, as at 19 June 2008, to a
net cash position at 31 August 2008 of 33.8%.* Spread the sector weightings
in the portfolio so that the Company is not so overweight in its three
largest sectors. Upon appointment our three largest sectors (excluding
cash), being industrial engineering, electronic and electrical equipment, and
construction & materials, had an aggregate overweighting against the FTSE All
Share weightings of 60.9%. Currently, our three largest overweight sectors
(excluding cash) are electronic and electrical equipment, industrial
engineering, and support services with an aggregate overweighting of 21.5%.*
Increase the liquidity of the underlying holdings within the portfolio. The
weighted average market capitalisation of stocks in the portfolio has
increased from our appointment from �546 million to �1,180 million. Please
note that this has occurred whilst the FTSE Small Cap Index has fallen by
4.3%.Market conditions remain extremely testing. Every glimmer of hope leads
to market rallies amid press proclamations of a market turn but all are soon
extinguished by a raft of further worrying news. In this environment, we
have sought to reduce the Company's exposure to holdings that have a high
level of gearing and/or are cyclically sensitive. This has led to the sale
of a number of stocks such as Pendragon Plc and RPC Group Plc.
We estimate that approximately 20% by value of the portfolio was, and
remains, extremely illiquid. As it was our primary intention upon
appointment to reduce the gearing of the portfolio in a falling market and we
required further cash resources for the recently announced tender offer, we
have had to sell some of the more liquid stocks. We have also sold a number
of stocks which are considered by the market to be financially sound
companies with good long term prospects. However these stocks were in
sectors that were overweight in the portfolio and/or were trading at
valuation multiples above the market average, examples being Spirax Sarco
Engineering Plc, Rotork Plc and Renishaw Plc.
We have reinvested a proportion of the proceeds in stocks which have the
following characteristics:
* They have a market capitalisation greater than �250 million which should
provide some liquidity;* In aggregate, they provide a reasonable dividend
yield which should allow the Company to continue to pay a
reasonable dividend yield; and* Valuations multiples which are equal to or
at discounts to the market.The key acquisitions we have made which the
Company currently holds have been WSP Group Plc (acquired post year end),
iShares Plc - iShares FTSE 100, Aberdeen Asset Management Plc and BT Group
Plc.
BT Group Plc and iShares Plc - iShares FTSE 100 are not typical companies
that we would (under normal circumstances) look to buy but they have the
characteristics of market average to high yields and high liquidity which are
attractive in the current market environment.
Over the next six month period, our intention is to continue to sell the
illiquid holdings and reinvest in stocks with market capitalisations which
offer some liquidity, offer good long term growth prospects, trade on
attractive valuation multiples and have some predictability or sustainability
of earnings.
M Sheppard
Midas Investment Management Limited
5 November 2008
The financial information set out in this announcement does not constitute the Company's statutory financial statements for the year
ended 31 August 2008
INCOME STATEMENT
for the year ended 31 August 2008
Year ended 31 August Year ended 31 August
2008 2007
�'000 �'000
Investment gains and losses
Realised gain from sale of 7,305 3,481
investments at fair value
through profit or loss
Movement in unrealised gain on
revaluation of investments at (13,562) 1,167
fair value through profit or
loss
--------- ---------
Total investment gains and (6,257) 4,648
losses
Income
Dividends 1,115 1,628
Bank interest 261 77
--------- ---------
Total income 1,376 1,705
Expenses
Management fee (308) (383)
Administration fee (95) (84)
Performance fee - (726)
Custodian fee (29) (21)
Audit fee (13) (13)
Directors' fees (49) (50)
Interest payable and similar (749) (684)
charges
Other expenses (150) (131)
--------- ---------
Total expenses (1,393) (2,092)
--------- ---------
Net (loss)/profit for the year (6,274) 4,261
--------- ---------
(Loss)/earnings per Ordinary (46.34)p 30.89p
Share - basic and diluted
All items in the above statement are derived from continuing operations.
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 August 2008
Other
Share capital Share premium Distributable non-distributable
reserves reserves
Total
�'000 �'000 �'000 �'000 �'000
Balance at 1 September 2007 1,404 8,995 3,270 12,649 26,318
Net profit/(loss) for the year - - 1,099 (7,373) (6,274)
Dividends - - (879) - (879)
--------- --------- --------- --------- ---------
Balance at 31 August 2008 1,404 8,995 3,490 5,276 19,165
--------- --------- --------- --------- ---------
For the year ended 31 August 2007
Other
Share capital Share premium Distributable non-distributable
reserves reserves
Total
�'000 �'000 �'000 �'000 �'000
Balance at 1 September 2006 1,404 8,995 4,483 9,832 24,714
Net profit for the year - - 1,444 2,817 4,261
Dividends - - (1,750) - (1,750)
Purchase of own shares - - (907) - (907)
--------- --------- --------- --------- ---------
Balance at 31 August 2007 1,404 8,995 3,270 12,649 26,318
--------- --------- --------- --------- ---------
BALANCE SHEET
as at 31 August 2008
31 August 2008 31 August 2007
�'000 �'000
Non-current assets
Investments at fair value through profit or 12,959 36,890
loss
Current assets
Receivables and prepayments 151 99
Cash and cash equivalents 16,969 783
--------- ---------
17,120 882
--------- ---------
Total assets 30,079 37,772
--------- ---------
Current liabilities
Payables and accruals (428) (966)
Non-current liabilities
Bank loan (10,486) (10,488)
--------- ---------
Total liabilities (10,914) (11,454)
--------- ---------
Net assets 19,165 26,318
--------- ---------
Capital and reserves
Called-up share capital 1,404 1,404
Share premium 8,995 8,995
Distributable reserves 3,490 3,270
Other non-distributable reserves 5,276 12,649
--------- ---------
Total equity shareholders' funds 19,165 26,318
--------- ---------
Net asset value per Ordinary Share 141.57p 194.42p
STATEMENT OF CASH FLOW
for the year ended 31 August 2008
Year ended 31 August Year ended 31 August 2007
2008
�'000 �'000
Operating activities
Dividends received 1,190 1,624
Bank interest received 246 77
Management fee paid (474) (374)
Administration fee paid (84) (84)
Performance fee paid (726) (713)
Loan interest paid (740) (660)
Other expenses paid (218) (226)
--------- ---------
Net cash outflow from (806) (356)
operating activities
Investing activities
Purchase of investments at (3,413) (3,821)
fair value through profit or
loss
Sale of investments at fair 21,294 5,197
value through profit or loss
--------- ---------
Net cash inflow from investing 17,881 1,376
activities
Financing activities
Dividends paid on Ordinary (879) (1,224)
Shares
Bank loan arrangement fee (10) -
Purchase of own shares for - (907)
Treasury
--------- ---------
Net cash outflow from (889) (2,131)
financing activities
--------- ---------
Increase/(decrease) in cash 16,186 (1,111)
and cash equivalents
--------- ---------
Cash and cash equivalents at 783 1,894
beginning of year
Increase/(decrease) in cash 16,186 (1,111)
and cash equivalents
--------- ---------
Cash and cash equivalents at 16,969 783
year end
--------- ---------
This information is provided by RNS
The company news service from the London Stock Exchange
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