RNS Number:5917R
Osprey Smaller Cos Income Fund Ltd
03 November 2003
OSPREY SMALLER COMPANIES INCOME FUND LIMITED
PRELIMINARY ANNOUNCEMENT OF RESULTS
FOR THE PERIOD ENDED 31 AUGUST 2003
CHAIRMAN'S STATEMENT
I am pleased to present Shareholders with the first set of results of Osprey
Smaller Companies Income Fund Limited for the period ended 31 August 2003.
The Company was launched on 30 August 2002 with listings on the London and
Channel Islands Stock Exchanges, after raising equity of #13.62m net of expenses
together with an associated bank term loan facility of #7.56m.
The Company's principal investment objective is to provide Shareholders with an
attractive level of income with potential for both income and capital growth.
The total dividend for the period ended 31 August 2003 had been estimated before
launch at 5.5p and I am pleased to report that this dividend forecast has been
met with a first interim dividend of 2p per share being declared on 13 March
2003 and a second interim dividend of 3.5p being declared on 28 August 2003.
The net gain from operating activities for the period was 33.85p per share.
During the period, the net asset value per Ordinary Share rose from 97p at
launch to 130.81p (on a mid-price basis) as at 31 August 2003, a rise of 34.86%,
significantly outperforming the Hoare Govett Smaller Companies Index (capital
only) which rose by 19.52% during the same period. Under International
Financial Reporting Standards, the portfolio is valued on a bid-price basis for
the purposes of these accounts resulting in a net asset value per Ordinary Share
of 128.36p. A reconciliation of the net asset value per Ordinary Share is
provided in note 13.
The share price stood at 102.5p as at 31 August 2003 compared to an issue price
of 100p. As reported in my interim statement, the Board have put in place
powers to enable the Company to repurchase Ordinary Shares should the discount
to net asset value be judged to be too large. To date your Board has not felt
it necessary or appropriate to make use of this power, which in any event
expired on 1 October 2003. In accordance with the prospectus issued on 23
August 2002, it is the Board's intention to seek the renewal of this authority
each year and accordingly a resolution to this effect will be placed before
shareholders at the first Annual General Meeting.
The Company is currently geared through a #7.56m floating rate facility with the
Bank of Scotland. The Board continue to monitor the movements in medium term
interest rate futures and if thought appropriate may seek to fix some or all of
the company's borrowings through the use of interest rate swap agreements.
The period under review has been a difficult one for stock markets with volatile
conditions throughout. Despite this unhelpful background the Company's
investment advisers, Unicorn Asset Management Limited, have produced an
excellent result for the Company. The Company's funds are now fully invested
and the Board remains confident that it will continue to meet its investment
objectives.
I look forward to welcoming Shareholders to our first Annual General Meeting to
be held at 12 pm on 17 December 2003 at the Company's registered office at TSB
House, Le Truchot, St Peter Port, Guernsey.
R E Alcock
3 November 2003
INVESTMENT ADVISER'S REPORT
The investment case for Osprey at the time of the Company's launch stated that
the prevailing market uncertainty had created an unusually large number of
investment opportunities and provided a timely moment for the Company to invest
the proceeds of the placing. Shortly after launch, the level of geopolitical
uncertainty increased dramatically with the build up to and ultimate war in Iraq
causing major stock market volatility. Despite the difficult beginning, we
believe that the performance of your Company has vindicated Shareholders'
support during our first year of operation. During the period to 31 August 2003
the Company's net asset value has risen from 97.00p to 130.81p, a rise of 34.86%
and significantly outperformed the Hoare Govett Small Companies Index (capital
only) which rose 19.52%.
We have been determined not to purchase yield for yield's sake and have sought
to avoid investments that lack the potential for capital growth. We have also
shown preference for companies serving the industrial and business services
areas of the market. We remain convinced that the profitability of many sectors
of the UK economy is vulnerable to the impact of a potential increase in base
rates, tax increases and a slowdown in consumer demand.
Stock market conditions remained difficult throughout the period under review.
There have been few signs of broad based recovery in the sectors in which we are
invested. However, the generally positive tenor of trading statements released
by our portfolio companies in recent months, has provided some comfort that the
worst trading conditions for many years are close to an end.
More recently, it is also encouraging to note that there has been a significant
improvement in investor sentiment towards smaller companies. During the latter
stages of the period under review, share price advances have been recorded by a
broad range of companies, indicating that investors are beginning to anticipate
an improvement in the fortunes of this sector of the market.
Whilst overall the economic background is not overly inspiring, we are confident
that the Company's emphasis on fundamentally attractive businesses with good
cash flow characteristics and longer term growth potential will deliver
relatively good performance over the coming year.
P Webb
Unicorn Asset Management Limited
3 November 2003
The financial information set out in this announcement does not constitute the
company's statutory accounts for the period ended 31 August 2003. The accounts
for the period ended 31 August 2003 are unaudited and will be finalised on the
basis of the financial information presented by the Directors in this
preliminary announcement and will be delivered to the UK Listing Authority
following approval.
STATEMENT OF OPERATIONS
for the period ended 31 August 2003
2 August
2002 to 31
Note August 2003
#'000
Income
Dividends 992
Bank interest 91
---------
Total income 1,083
Expenses
Management fee 2 (206)
Administration fee 2 (80)
Performance fee 2 (529)
Custodian fee (17)
Audit fee (10)
Directors' fees 3 (38)
Interest payable and similar charges 4 (325)
Formation expenses and listing fees 1f (420)
Other expenses (92)
---------
Total expenses (1,717)
---------
Net loss before investment result (634)
Investment gains and losses
Realised loss on available-for-sale investments 7 (1,066)
Unrealised gains on available-for-sale investments 7 6,452
---------
Net investment gains 5,386
---------
Net gain from operating activities 4,752
---------
Gain per Ordinary Share - basic 5 33.85 p
STATEMENT OF CHANGES IN EQUITY
for the period ended 31 August 2003
Other
non-distributable
Share Share Distributable reserves
capital premium reserves
Note Total
#'000 #'000 #'000 #'000 #'000
Net assets at 2 August 2002 - - - - -
Issue of Ordinary Shares 10 1,404 12,633 - - 14,037
Net gain from operating activities - - 846 3,906 4,752
Reclassification of share premium to 10 - (3,664) 3,664 - -
distributable reserves
Dividends 6 - - (772) - (772)
--------- --------- --------- --------- ---------
Net assets at 31 August 2003 1,404 8,969 3,738 3,906 18,017
--------- --------- --------- --------- ---------
STATEMENT OF NET ASSETS
as at 31 August 2003
Note 31 August 2003
#'000
Non-current assets
Available-for-sale investments 7 25,551
Current assets
Cash at bank 708
Debtors and Prepayments 497
---------
1,205
---------
Total assets 26,756
---------
Current liabilities
Other creditors and accruals 8 1,181
Non-current liabilities
Bank loan 9 7,558
---------
Total liabilities 8,739
---------
Net assets 18,017
---------
Capital and reserves
Called-up share capital 10 & 12 1,404
Share premium account 12 8,969
Distributable reserves 12 3,738
Other non-distributable reserves 12 3,906
---------
Total equity shareholders' funds 18,017
---------
Net asset value per Ordinary Share 13 128.36 p
STATEMENT OF CASH FLOW
for the period ended 31 August 2003
2 August 2002 to 31
August 2003
Note
#'000
Operating activities
Dividends received 884
Bank interest received 91
Management fee paid (143)
Administration fee paid (60)
Loan interest paid (280)
Other expenses paid (144)
---------
Net cash inflow from operating activities 14 348
Investing activities
Purchase of available-for-sale investments (24,957)
Sale of available-for-sale investments 4,423
---------
Net cash outflow from investing activities (20,534)
Financing activities
Proceeds from issue of Ordinary Shares 10 14,037
Formation expenses and listing fees paid 1f (420)
Draw down of bank loan 9 7,558
Dividends paid on Ordinary Shares (281)
---------
Net cash inflow from financing activities 20,894
---------
Increase in cash and cash equivalents 708
---------
Cash and cash equivalents at 2 August 2002 -
Increase in cash and cash equivalents 708
---------
Cash and cash equivalents at 31 August 2003 708
---------
NOTES TO THE PRELIMINARY ANNOUNCEMENT OF RESULTS
for the period ended 31 August 2003
1. Significant Accounting Policies
a) Statement of Compliance
These results have been prepared in accordance with International Financial Reporting Standards issued by
the International Accounting Standards Board, interpretations issued by the International Financial Reporting
Interpretations Committee and applicable legal and regulatory requirements of Guernsey Law and reflect the
following policies, which have been adopted and applied consistently.
b) Basis of preparation
The results have been prepared on a historical cost basis except for the measurement at fair value of
available-for-sale financial assets. The results are presented in Sterling, rounded to the nearest thousand.
As this is the first period of operation there are no comparative figures.
c) Segmental reporting
The Directors are of the opinion that the Company is engaged in a single economic segment of business being
investment business. All investments operate in one geographic segment, the United Kingdom, in the sense
that they are listed on the London Stock Exchange or traded on AIM.
d) Income recognition
Income derived from equity shares is taken into account on the ex-dividend date. Dividends received from
United Kingdom registered companies are accounted for net of imputed tax credits. Bank interest is accounted
for on an accruals basis.
e) Expenses
All expenses are accounted for on an accruals basis except for transaction costs incurred on the acquisition
of an investment, which are included within the cost of that investment. Transaction costs incurred on the
disposal of investments are deducted from the proceeds on sale. The Company's management and administration
fees, finance costs (including interest on the bank facility) and all other expenses are charged through the
Statement of Operations.
f) Formation expenses and listing fees
Formation expenses and listing fees incurred amounted to #420,210. The formation expenses and listing fees
have been written-off through the Statement of Operations in the period.
g) Taxation
The Company has been granted exemption from Guernsey taxation under The Income Tax (Exempt Bodies) (Guernsey)
Ordinance 1989 and is charged an annual exemption fee of #600. The Directors intend to conduct the Company's
affairs such that it continues to remain eligible for exemption from Guernsey tax.
h) Distributable and non-distributable reserve
The gross income less the ongoing costs and expenses of the Company, other than the management fees,
performance fees and bank loan interest, are allocated to the distributable reserve. Investment gains and
losses, formation expenses and listing fees, management fees, performance fees and bank loan interest are
allocated to the non-distributable reserve.
i) Cash and cash equivalents
Cash in hand and in banks and short-term deposits, which are held to maturity, are carried at cost. Cash and
cash equivalents are defined as cash in hand, demand deposits and short-term, highly liquid investments
readily convertible to known amounts of cash and subject to insignificant risk of changes in value.
For the purpose of the Statement of Cash Flow, cash and cash equivalents consist of cash in hand and deposits
at banks.
j) Investments
Classification
All investments are currently classified as "available-for-sale". Available-for-sale assets are financial
assets that are not held for trading purposes and which may be sold in response to needs for liquidity or
changes in interest rates, exchange rates or equity prices, but are not acquired for the purpose of short
term profit taking. Available-for-sale assets comprise investments in equity shares.
Recognition
The Company recognises financial assets held as available-for-sale assets on the date it commits to purchase
the instruments. From this date any gains and losses arising from the changes in fair value of the assets
are recognised.
Measurement
Available-for-sale assets are initially recognised at cost, being the fair value of the consideration given
including transaction costs associated with the investment. Subsequent to initial recognition, all
available-for-sale assets are measured at fair value with changes in value being recognised in the Statement
of Operations. For investments actively traded in organised financial markets, fair value is determined by
reference to Stock Exchange quoted market bid prices as at the close of business on the balance sheet date.
Derecognition
An available-for-sale asset is derecognised when the Company loses control over the contractual rights that
comprise that asset. This occurs when rights are realised, expire or are surrendered. Realised gains and
losses on available-for-sale assets sold are calculated as the difference between the sales proceeds and
cost. Available-for-sale assets that are sold are derecognised and corresponding receivables from the buyer
for the payment are recognised as of the date the Company commits to sell the assets. The Company uses the
weighted average method to determine realised gains and losses on derecognition.
k) Trade date accounting
All "regular way" purchases and sales of financial assets are recognised on the "trade date", i.e. the day
that the Company commits to purchase or sell the asset. Regular way purchases or sales are purchases or
sales of financial assets that require delivery of the asset within the time frame generally established by
regulation or convention in the market place.
l) Non-current liabilities
All loans and borrowings are initially recognised at cost, being the fair value of the consideration
received. After initial recognition, all interest-bearing loans and borrowings are subsequently measured at
amortised cost. Amortised cost is calculated by taking into account any discount or premium on settlement.
m) Derivative financial instruments
It is the Company's policy not to trade in derivative financial instruments.
n) Net asset value per share and earnings per share
The net asset value per share disclosed on the face of the Statement of Net Assets is calculated by
dividing the net assets by the number of Ordinary Shares in issue at the period end.
Earnings per share is calculated by dividing the net gain from operating activities for the period by the
weighted average number of Ordinary Shares in issue during the period.
2. Management, Administration and Performance Fees
Collins Stewart Fund Management Limited acts as Manager and is entitled to a fee from the Company at the
annual rate of 1.0% of the Total Assets of the Company. The fee is calculated on the last dealing day in
each calendar month and is payable quarterly in arrears. Where any investments comprised in the assets of
the Company are in funds managed or advised by the Manager or Investment Adviser or an affiliate of them the
value of such investments is deducted from the Total Assets for the purposes of calculating the management
fee.
In addition, the Manager is entitled to receive a performance fee payable at the end of each financial
period of the Company at a rate of 20% of any excess of Total Return over Benchmark Net Asset Value per
Ordinary Share, multiplied by the time weighted average number of Ordinary Shares in issue during the period
in question. Total Return is defined as net asset value per Ordinary Share as at the last dealing day of
the financial period, before the current year performance fee, but adding back to the net asset value per
Ordinary Share the aggregate amount of dividends per Ordinary Share declared in respect of the current
financial period and each previous financial period. In respect of the period ended 31 August 2003, the
Benchmark Net Asset Value per Ordinary Share was 107.5p. In subsequent financial periods, the Benchmark Net
Asset Value per Ordinary Share shall be 107.5p compounded at 7.5 per cent. per annum plus an amount (if any)
equal to the Performance Amount. The Performance Amount is defined as the aggregate amounts in respect of
each previous financial period by which the relevant Total Return exceeded the relevant Benchmark Net Asset
Value per Ordinary Share less, in each case, the amount of performance fee in pence per weighted Ordinary
Share payable in respect of each such prior period (subject to the application of the cap referred to
below). No performance fee is payable unless the total dividends declared in respect of that financial
period are not less than 5.5p per Ordinary Share and the mean average total dividends declared in respect of
that financial period and each of the previous financial periods is not less than 5.5p per Ordinary Share.
The maximum performance fee payable in respect of each financial period is capped at 2% of Total Assets as
at the end of the financial period.
A performance fee of #528,971 was payable to the Manager in respect of the period ended 31 August 2003
following the application of the cap. The Benchmark Net Asset Value per Ordinary Share applicable as at 31
August 2004 is 130.64p, which will be compared against the Total Return (as defined above) in calculating
any performance fee due.
In its capacity as Administrator, Collins Stewart Fund Management Limited is entitled to an annual fee of
#80,000 payable quarterly in arrears.
The fees payable to the Investment Adviser are borne by the Manager.
During the period a total of #814,902 was incurred in respect of Management, Administration and Performance
fees, split into #205,931, #80,000 and #528,971 respectively. A total of #612,004 was payable at the period
end in respect of Management, Administration and Performance fees, split in the amounts of #63,033, #20,000
and #528,971 respectively.
3. Directors' Fees
2 August 2002 to 31
August 2003
#'000
R Alcock 16
P Caldwell 11
D Harris 11
--------
38
--------
No bonuses or pension contributions were paid or payable on behalf of the Directors.
The Directors have no beneficial interest in the share capital of the Company.
4. Interest Payable and Similar Charges
2 August 2002 to 31
August 2003
#'000
Floating rate interest payable - bank loan (see note 9) 325
--------
5. Gain per Ordinary Share
The gain per Ordinary Share is based on a gain of #4,751,510 and on a weighted average number of 14,037,000
Ordinary Shares in issue throughout the period.
6. Dividends
2 August 2002 to 31
August 2003
#'000
First interim paid of 2.0p per Ordinary Share 281
Second interim paid of 3.5p per Ordinary Share 491
--------
772
--------
A second interim dividend for the period ended 31 August 2003 of #491,295 (3.5p per Ordinary Share) was declared on
28 August 2003 and was paid on 17 September 2003.
The Directors do not propose any further dividends for this period.
Under the terms of the Company's Prospectus, distributions can be made up to a total of accumulated gross income
received less the running costs (all of the ongoing costs and expenses of the Company, other than the management
fees, performance fees and bank loan interest). As at 31 August 2003, the amount available for distribution was
#3,738,000 (26.63p per Ordinary Share, based on a weighted average number of shares in issue throughout the period
of 14,037,000).
7. Available-For-Sale Investments
2 August 2002 to 31
August 2003
#'000
Opening valuation -
Purchases at cost 24,957
Sales - proceeds (4,792)
- realised (loss) (1,066)
Increase in unrealised gain on investments 6,452
--------
Closing valuation 25,551
--------
Closing book cost 19,099
Closing unrealised appreciation 6,452
--------
Closing valuation 25,551
--------
See note 1j regarding the classification, recognition, measurement and derecognition of financial assets.
8. Other Creditors and Accruals
2 August 2002 to 31
August 2003
#'000
Accrued interest payable 45
Management fee due to Collins Stewart Fund Management Limited 63
Performance fee due to Collins Stewart Fund Management Limited 529
Administration fee due to Collins Stewart Fund Management Limited 20
Second interim dividend 491
Other accruals 33
--------
1,181
--------
9. Bank Loan
Bank of Scotland ("the Bank") has made available a seven-year loan facility, expiring on 15 October 2009, of
up to the lower of #17.5 million and an amount equal to 7/13ths of the Placing proceeds (#7,558,380).
Interest is payable at the aggregate of three month LIBOR, certain regulatory costs charged by the Bank and
a margin of 1.05% per annum. Under the terms of the Bank of Scotland Facility Letter, the Bank of Scotland
Facility is secured by the Company granting to the Bank an English Law floating charge, a Guernsey law
security interest agreement and a Jersey law security interest agreement over substantially all of its
assets.
The Bank of Scotland Facility Letter contains financial and other covenants, including, inter alia, that:
i) the ratio of the aggregate mid-market value of all permitted investments held by the Company to the
aggregate amount outstanding under the Bank of Scotland Facility is required to be not less than 1.875:1
(tested monthly) ensuring that the aggregate value of the specified investments shall not be less than
1.0:1; and
ii) the ratio of the gross amount of all income receivable by the Company from permitted investments to the
aggregate of all interest, commissions and other financial expenses attributable to the total borrowings
of the Company, charged, accrued or capitalised for such period, is required to be at least 1.50:1
(tested semi-annually).
The Company has complied with its financial covenants throughout the period. The Manager continues to
monitor the loan covenants and reports to the Bank monthly. Subject to world equity markets stabilising at
current levels, the Directors have no reason to believe that any breaches of the financial covenants will be
made in the foreseeable future.
The fair value of the loan is the same as its carrying value.
10. Called up Share Capital
2 August 2002 to 31
August 2003
#'000
Authorised:
75,000,000 Ordinary Shares of 10p each 7,500
--------
Allotted, called-up and fully paid:
14,037,000 Ordinary Shares of 10p each 1,404
--------
On 30 August 2002, the Company issued 14,037,000 Ordinary Shares of 10p each with a premium of 90p each,
raising a total of #14,037,000.
As stated in the Prospectus it was the intention of the Company to reduce the share premium account by up to
30% to create a distributable reserve to be used to repurchase Ordinary Shares. On 21 March 2003 court
approval was received and the share premium account reduced accordingly. As detailed in the Prospectus, the
Company has the authority until 1 October 2003 to utilise this distributable reserve to buy back up to
14.99% of the Ordinary Shares issued at the original placing for cancellation. No shares were purchased for
cancellation during the period. The Company intends to seek to renew the necessary authorities to buy back
Ordinary Shares at the forthcoming Annual General Meeting.
11. Duration of the Company
At the Annual General Meeting of the Company to be held in 2009, a special resolution shall be proposed that
the Company ceases to continue as an investment company. If that resolution is passed, the Directors are
required to formulate proposals to put to Shareholders to reorganise, unitise or reconstruct the Company or
to wind up the Company. If the resolution to cease being an investment company is not passed, a similar
resolution will be proposed at every fifth Annual General Meeting thereafter.
12. Reserves
Called up Share Other
premium non-distributable
share Distributable reserves
capital account reserves
Total
#'000 #'000 #'000 #'000 #'000
Balance as at 2 August 2002 - - - - -
Issue of Ordinary Shares 1,404 12,633 - - 14,037
Net gain from operating activities - - 846 3,906 4,752
Reclassification of share premium to - (3,664) 3,664 - -
distributable reserves
Dividends - - (772) - (772)
-------- -------- -------- -------- --------
Balance as at 31 August 2003 1,404 8,969 3,738 3,906 18,017
-------- -------- -------- -------- --------
The gross income less the ongoing costs and expenses of the Company, other than the management fees,
performance fees and bank loan interest are allocated to the distributable reserve. Investment gains and
losses, formation expenses and listing fees, management fees, performance fees and bank loan interest are
allocated to the non-distributable reserve.
13. Net Asset Value per Ordinary Share
The net asset value per Ordinary Share is based on the net assets attributable to equity shareholders of
#18,017,000 and on 14,037,000 Ordinary Shares in issue at the end of the period.
The accounts have been prepared in accordance with the provisions of International Accounting Standard No.
39 ("IAS 39"), "Financial Instruments: Recognition and Measurement". The effect of this is to bring into
the Statement of Net Assets the concept of "fair value", with the Company's investment portfolio being
valued at market bid prices. This is in contrast to a United Kingdom domiciled investment trust that, under
the principles set out in the Statement of Recommended Practice ("SORP") for Financial Statements of
Investment Trust Companies ("ITC's"), values the investment portfolio at mid-market prices in its Statement
of Net Assets. The monetary effects of IAS 39 have resulted in a reduction in the net asset value per
Ordinary Share of 2.45p as at 31 August 2003.
Reconciliation of net asset value to published net asset value:
#'000 per share
Published net asset value 18,361 130.81 p
Valuation adjustment of investments at bid prices note (344) (2.45) p
-------- --------
Net asset value per IAS 39 18,017 128.36p
-------- --------
note In accordance with IAS 39, investments have been valued at Stock Exchange quoted market bid prices at
the close of business on the balance sheet date. However, in accordance with the SORP for ITC's, the
net asset value reported each month to the London Stock Exchange and The Channel Islands Stock
Exchange reflects these investments valued at Stock Exchange quoted market mid prices.
14. Reconciliation of Net Loss Before Investment Result to Net Cash inflow From Operating Activities
2 August 2002 to 31
August 2003
#'000
Net loss before investment result (634)
Formation expenses and listing fees included in financing activities 420
Movement in debtors and prepayments (128)
Movement in other creditors and accruals 690
--------
Net cash inflow from operating activities 348
--------
15. Related Parties
The relationship and transactions between the Company and Collins Stewart Fund Management Limited is
disclosed in note 2. The Company receives stockbroking services from Collins Stewart (CI) Limited, the
immediate parent of Collins Stewart Fund Management Limited, in respect of its Channel Islands Stock
Exchange responsibilities, for which a fee of #10,000 was paid. The Company also receives stockbroking
services from Collins Stewart Limited in respect of its London Stock Exchange listing, for which a fee of
#20,000 was paid. Collins Stewart (CI) Limited, Collins Stewart Fund Management Limited and Collins
Stewart Limited are all members at the Collins Stewart Tullet plc Group.
The Directors are not aware of any ultimate controlling party.
16. Maturity of Financial Liabilities
The maturity of the Company's financial liabilities at 31 August 2003 was as follows:
#'000
In one year or less -
In more than five years 7,558
---------
7,558
--------
17. Analysis of Financial Assets and Liabilities
Financial instruments risk profile
The principal investment objective of the Company is to provide an attractive level of income to
Shareholders with potential for both income and capital growth by investing primarily in companies traded on
the London Stock Exchange or AIM with market capitalisations of less than #1 billion at the point of initial
investment. Consistent with that objective, the Company's financial instruments include equity shares. In
addition, the Company holds cash and liquid resources as well as having creditors that arise directly from
its operations.
The main risks arising from the Company's financial instruments are market price risk, liquidity risk,
interest rate risk and credit risk.
The Board reviews and agrees policies for managing its risk exposure. These policies are summarised below
and have remained unchanged during the period under review.
Market price risk
The Company's exposure to market price risk comprises mainly of movements in the value of the Company's
investments.
In respect of some of the companies in which the Company may invest:
* they may be undergoing significant change. Such businesses are usually exposed to greater risks
than those not undergoing such change; and
* they may have less mature businesses, a more restricted depth of management and accordingly a
higher risk profile.
During the period under review, the Company has not hedged against movements in the value of its
investments. A 10% increase/decrease in the market value of investments from the values ruling as at 31
August 2003 would result in a 14.18% increase/decrease in the net asset value per Ordinary Share.
Liquidity risk
In respect of some of the companies in which the Company may invest there may not be a liquid market for
their shares. The fact that a share is traded on a market does not guarantee its liquidity. Accordingly,
such shares may be difficult to realise at quoted market prices.
Bank of Scotland ("the Bank") has made available a seven-year loan facility, expiring on 15 October 2009, of
up to the lower of #17.5 million and an amount equal to 7/13ths of the Placing proceeds (#7,558,380) was
drawn down. Further details of this are documented on Note 9. The terms of the Company's borrowings may
entitle the lender to require early repayment and in such circumstances the Company's ability to maintain
dividend levels and the net asset value attributable to the Ordinary Shares could be adversely affected as
the Company may need to sell assets at less than their quoted market values.
Interest rate risk
Interest is payable on the revolving loan facility with the Bank at the aggregate of three month LIBOR,
certain regulatory costs charged by the Bank and a margin of 1.05% per annum. The Directors and the Manager
believe that the cost of hedging against interest rate risk outweigh the cost of the interest rate risk
itself at the present time.
Interest rate risk profile of financial assets and liabilities
Financial assets
Total as per Financial assets Weighted
statement of on which no average period
net assets Floating interest is paid Weighted average until maturity
rate interest rate
#'000 #'000 #'000 % years
Cash at bank 708 708 - LIBOR based -
Debtors 497 - 497
-------- -------- --------
1,205 708 497
-------- -------- --------
Financial liabilities
Total as per Financial liabilities Weighted
statement of on which no interest average period
net assets Floating is paid Weighted average until maturity
rate interest rate
#'000 #'000 #'000 % years
Bank loan 7,558 7,558 - LIBOR based 6.12
Other creditors and 1,181 - 1,181
accruals
-------- -------- --------
8,739 7,558 1,181
-------- -------- --------
Credit risk
The risk that counterparties might default on their obligations is monitored on an ongoing basis.
Fair value of financial assets and liabilities
Financial assets and liabilities of the Company are included at fair value. The fair value of the bank loan
is the same as its carrying value.
18. Capital Commitments
All contracted capital commitments have been provided for.
If you have any queries please contact:
Andrew Duquemin
Collins Stewart Fund Management Limited
TSB House
Le Truchot
St Peter Port
Guernsey
GY1 4AE
Tel: 01481 731 987
Fax: 01481 720 018
This information is provided by RNS
The company news service from the London Stock Exchange
END
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