Issue of Equity
Ruffer Investment Company Limited
01 September 2005
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO THE UNITED STATES,
CANADA, AUSTRALIA OR JAPAN
RUFFER INVESTMENT COMPANY LIMITED
(a closed-ended investment company incorporated in Guernsey with registration
number 41996)
PLACING AND OFFER FOR SUBSCRIPTION OF UP £75 MILLION C SHARES
PRELIMINARY RESULTS FOR THE PERIOD ENDED 30 JUNE 2005
Introduction
On 14 July 2005, the Board announced proposals to raise up to £75 million by
means of a placing and offer for subscription of C Shares. The Board has today
published a Prospectus with details of the proposed C Share issue, a circular
calling an Extraordinary General Meeting in connection with the C Share issue,
and its annual report and accounts for the period ended 30 June 2005 (including
a notice of Annual General Meeting).
Background to and reasons for the Issue
The Company was launched in July 2004. The objective of the Company is to
achieve a positive total annual return, after all expenses, of at least twice
the Bank of England base rate (4.5 per cent. as at 8 July 2004) by investing in
internationally listed or quoted equities or equity related securities
(including convertibles) or bonds which are issued by corporate issuers,
supra-nationals or government organisations.
Based on the published Net Asset Value of 112.4p as at 8 July 2005, being the
first anniversary of the listing of the Company, the total annual return on the
portfolio (net of fees and expenses) was 15.2 per cent. (inclusive of income)
compared to the return objective of 9.46 per cent., being twice the time
weighted Bank of England base rate over the period. The NAV per Share has risen
from 98p immediately after launch to 113.90p per Share as at 26 August 2005.
Since launch, the Share price has traded at a consistent premium to the NAV per
Share. As at 26 August 2005, the NAV per Share was 113.90p compared to the
closing middle market price of 115.25p, a premium of 1.19 per cent. In addition
a dividend of 0.5p per Share was paid in respect of the period ended 31 December
2004 and a dividend of 0.5 per Share was declared on 1 September 2005 payable on
29 September 2005 to Shareholders as of the record date of 9 September 2005.
The Directors, following discussions with the investment manager, Ruffer LLP,
and in light of this excellent performance, have decided to increase the size of
the Company through a C Share issue of up to 75 million shares to be issued at
100p per share.
The proceeds of the Issue will be used to grow the Company and enhance long term
returns for shareholders.
The costs and expenses (including VAT where relevant) of, and incidental to, the
Issue payable by the Company have been fixed at 2 per cent. of the Initial Gross
Proceeds. Such expense will be met out of the proceeds of the Issue. In the
event that the Issue expenses exceed 2 per cent. of the Initial Gross Proceeds,
the excess will be paid by the Investment Manager and UBS (in the case of UBS
only in so far as its commission fees are reduced from 1.5 per cent. to 1.25 per
cent. of the Initial Gross Proceeds). In the event that the actual Issue
expenses are less than 2 per cent. of the Initial Gross Proceeds the Investment
Manager will at its discretion be entitled to be paid for its benefit the
difference (or part thereof). In the event that the Issue does not proceed all
costs and expenses (including VAT where relevant) of, and incidental to, the
Issue shall be payable by the Investment Manager.
In connection with the Issue, the Company is seeking the consent of existing
Shareholders in order to adopt the New Articles to accommodate the rights of the
C Shareholders, to increase the Company's authorised share capital, and to
cancel the share premium account arising from the Issue. The C Shares will be
offered to institutional investors by way of the Placing and to the public by
way of the Offer for Subscription.
Shareholders should be aware that implementation of the Issue is conditional
upon approval of resolution no 1 to be proposed at the Extraordinary General
Meeting. If the resolution is not approved, the Issue will not take place and
the existing share capital structure will remain in place.
Benefits of the Issue
The issue of further equity in the form of C Shares is designed to overcome the
potential disadvantages for both existing and new shareholders which would arise
out of a conventional fixed price issue of further shares for cash. In
particular:
• the assets from time to time representing the proceeds of the Issue will
be accounted for as a distinct pool of assets until the Calculation Time, by
which time it is expected they will have been at least 80 per cent. invested
in accordance with the Company's investment policy. As a result, holders of
existing Shares will not be exposed to a portfolio containing substantial
uninvested cash;
• the Net Asset Value of the existing Shares will not be diluted by the
expenses associated with the Issue which will be borne by the assets
attributable to the C Shares; and
• the basis upon which the C Shares issued under the Placing and Offer for
Subscription will convert into Shares is Net Asset Value to Net Asset Value.
That is to say, the number of New Shares to which holders of C Shares will
become entitled will reflect the value of the pool of additional capital
raised by the Issue as compared to the value of the remainder of the
Company's assets. As a result, neither the Net Asset Value attributable to
the existing Shares nor the Net Asset Value attributable to the C Shares
will be adversely affected by Conversion.
Shareholders should note that:
the primary rationale for the fundraising is to grow the Company and to improve
anticipated long term returns for Shareholders;
all the costs of the C Share issue, which have been fixed at 2 per cent. of the
proceeds of the Issue, will be borne by the C Shareholders;
enlarging the Company will mean the fixed costs of operating the Company are
spread across a greater number of assets; and
broadening the spread of shareholders within the Company should add further
diversification to the shareholder list and provide a larger free float.
C Shares
The Board is proposing to effect the capital raising exercise by way of an issue
of C Shares pursuant to the Placing and Offer for Subscription. On the
assumption that the Issue is fully subscribed, the net proceeds of the Issue
will be £73.5 million. Once the proceeds of the Issue have been at least 80 per
cent. invested, the C Shares issued under the Placing and Offer for Subscription
will convert into Shares on the basis of the Conversion Ratio, which will
reflect the proportion which the Company's net assets attributable to each C
Share bears to the net assets attributable to each existing Share at the
Calculation Time. The net assets of the C Shares issued under the Placing and
Offer for Subscription will be calculated having deducted the costs of the
Placing and Offer for Subscription.
The net proceeds of the Issue and the assets representing the net proceeds of
the Issue will be accounted for as a separate pool until they have been at least
80 per cent. invested in accordance with the Company's investment policy, at
which point the C Shares issued under the Placing and Offer for Subscription
will convert into Shares on the basis referred to above. The Directors expect
that Conversion of the C Shares will take place by the end of October 2005.
The C Shares will carry the same voting rights as the Shares. C Shareholders
will have the rights to dividends and be entitled to participate in a winding-up
of the Company or on a return of capital as specified in the Prospectus. The new
Shares issued on Conversion will rank pari passu with the existing Shares then
in issue. Fractions of Shares arising on Conversion will not be allocated to C
Shareholders but will be aggregated and sold for the benefit of the Company.
Further details in respect of the C Shares are set out in the Prospectus
including, in particular, the full terms and conditions of the C Shares.
Adoption of the New Articles of Association and increase in Authorised Share
Capital.
In order for the Company to effect the issue of C Shares (and any further issues
of C Shares), certain amendments must be made to the Existing Articles of
Association and the authorised share capital of the Company increased by the
creation of the C Shares. Consequently, the Board has called the Extraordinary
General Meeting at which the Resolutions to be proposed will, amongst other
things, increase the authorised share capital of the Company by the creation of
75,000,000 C Shares and adopt the new Articles of Association of the Company
which will include provisions reflecting the rights and restrictions attaching
to the C Shares (which may be issued in one or more tranches). These, together
with other minor consequential changes necessitated by the issue of C Shares and
to permit any future issues of C Shares, are the only changes from the Existing
Articles.
Capital Structure
Subject to the passing of the Resolutions, the Company's issued listed share
capital will consist of Shares and C Shares, pending Conversion of the C Shares
into new Shares.
Under the Existing Articles and the New Articles, the Directors have wide powers
to issue further shares on a non pre-emptive basis. The Directors will consider
issuing further shares at not less than the prevailing Net Asset Value per Share
where there is significant demand for further shares and as part of the process
of managing any premium which may arise in the market price of the Shares as
compared to the prevailing Net Asset Value per Share. In particular the Company
may issue further C Shares on a non pre-emptive basis.
Cancellation of Share Premium Account
Conditional on Admission, it is proposed, subject to Shareholder approval at the
Extraordinary General Meeting and confirmation by the Royal Court of Guernsey,
to cancel the entire amount of the share premium account arising on the issue of
C Shares pursuant to the Placing and Offer for Subscription in order to provide
the Company with increased flexibility to effect future purchases of its own
Shares.
The Company has no intention of using the special reserve arising on the
cancellation of the share premium account to make market purchases of its own C
Shares.
Extraordinary General Meeting
The Placing and Offer for Subscription and the commencement of dealings in C
Shares are conditional, inter alia, on the passing of Resolution no.1 in the
notice of Extraordinary General Meeting set out in the shareholder circular.
The Resolutions propose that:
• the New Articles be adopted in substitution for, and to the exclusion
of, the existing Articles; and the capital of the Company be increased by
the creation of 75,000,000 C Shares; and
• conditionally upon the issue of C Shares by the Company pursuant to the
Placing and Offer for Subscription, the payment in full thereof and with the
approval of the Royal Court of Guernsey, the amount standing to the credit
of the share premium account of the Company immediately following the issue
of the C Shares pursuant to the Placing and Offer for Subscription be
cancelled.
Recommendation
The Board, who have received financial advice from UBS, consider that the terms
of the Proposals are fair and reasonable. The Board further considers that the
terms of the Proposals are in the best interests of Shareholders as a whole.
Accordingly, the Board has unanimously recommended Shareholders to vote in
favour of the Resolutions to be proposed at the EGM. In providing its advice,
UBS relied upon the Directors' commercial assessment of the Proposals.
If Shareholders are in any doubt about the contents of the shareholder circular,
the Prospectus or what action they should take, they are recommended to seek
immediately their own personal financial advice from an appropriately qualified
independent adviser authorised pursuant to the Financial Services and Markets
Act 2000.
The Directors intend to vote in favour of the Resolutions to be proposed at the
Extraordinary General Meeting in respect of their entire shareholdings of 50,000
Shares representing 0.1 per cent. of the total number of issued Shares.
Preliminary results for the period ended 30 June 2005
Chairman's Review
Performance
The Company's investment portfolio earned a total return, after all expenses,
more than 5 per cent. above the objective of 'at least twice the average of the
Bank of England's Base Rate' in the period to 30 June 2005. Details are given in
the Investment Manager's Report.
Earnings and Dividend
Earnings for the period were 13.67p per share in total, of which 1.15p relates
to Revenue. An interim dividend of 0.5p per share was paid on 13 April 2005. A
second interim dividend is expected to be declared in September in respect of
the period ended 30 June 2005.
Share Price
Throughout the period the shares traded at a premium to their Net Asset Value
(NAV). At 30 June 2005 the premium was 1.6 per cent. over the Net Asset Value.
Share Buyback Authority
With its shares trading at a premium to NAV throughout the period, the Company
had no need to use its share buyback authority. However, renewal of the
authority will be sought at the Annual General Meeting with a view to enabling
the directors to minimise any discount to NAV at which the shares may trade in
the future.
'C' Share Issue
In light of the Company's performance and following discussions with our
Investment Manager, the Directors have decided to propose to shareholders that
the size of the Company be increased by the issue of up to 75 million shares at
NAV. The expenses of this issue will fall solely on the new shareholders.
Existing shareholders will benefit from the fixed costs of management being
spread over a broader base. The Directors think that all shareholders will
benefit from the greater liquidity in the shares which is likely to result, and
from a wider shareholder base. Shareholder approval will be sought at an
Extraordinary General Meeting immediately following the Company's first Annual
General Meeting.
Annual General Meeting
The Annual General Meeting of the Company will be held on 23 September 2005 at
the Company's registered office at Trafalgar Court, St Peter Port, Guernsey.
Acknowledgements
I would like to thank my colleagues on the Board for their hard work; Ruffer LLP
for an eminently satisfactory investment performance; Guernsey International
Fund Managers - our Company Secretary, Administrator and Registrar - for their
efficiency; and UBS - our brokers and financial advisors - for their skilful
advice. I particularly wish to thank our shareholders for their confidence.
John de Havilland
Chairman
18 July 2005
Investment Manager's Report
For the period ended 30 June 2005
Investment Objective
The principal objective of the Company is to achieve a positive total annual
return, after all expenses, of at least twice the Bank of England base rate
(4.75 per cent. as at 30 June 2005) by investing in internationally listed or
quoted equities or equity related securities (including convertibles) or bonds
which are issued by corporate issuers, supra-nationals or government
organisations.
Investment Review
From the launch date on 8 July 2004 to 30 June 2005 the NAV rose 15 per cent.
(net of fees and expenses and inclusive of a 0.5p dividend paid on 13 April
2005), compared to the objective return of 9.46 per cent., being twice the time
weighted Bank of England base rate over the period.
We come to the end of the first year of the life of the investment company
reasonably satisfied with the performance. Every aspect of the portfolio - short
/medium dated gilts, Swiss bonds, Japan and oil have each played a significant
part in producing the return, and their good work has not been undone by any
egregious mistakes in stock selection.
In the interim report as at December, we articulated the fear that the world
could be facing something of a financial crisis. We addressed the question of
timing by saying that this could be something that could either happen quite
quickly, or be long delayed. Six months on it still has not happened. We further
raised the possibility that the prediction of a financial crisis could be quite
wrong. What we have tried to do within the investment company is to create a
balance of assets designed to bring about a decent return under any of these
possible outcomes.
We have not changed the shape of the portfolio very much since then. The short/
medium gilts are down to about 30 per cent. of the portfolio, and the Swiss
Franc denominated bonds up to about the same percentage. The long dated Swiss
bonds have been crackers, but the performance has been almost entirely in the
underlying bond prices, and nothing at all to do with the Swiss Franc. We have
added to the Swiss Franc exposure by purchasing a Swiss Franc denominated short
dated Austrian bond because we think that the balance of reward should now come
in the currency rather than bond levels. On the bear side, we have an investment
in a US Bear Note (about 7 per cent. of the portfolio) which is a structured
product created for Ruffer LLP by Barclays Capital, which gives an assured
protection of the capital value on maturity (September 2009), and which is
designed to give a capital gain if the US equity market (S&P 500) were to fall
(it is quanto'd back into Sterling).
We have left the oil party somewhat too soon, letting Statoil go at considerably
lower levels than today, Sasol at somewhat lower levels, and Suncor Energy at
around current levels. We believe the oil story remains excellent, but is
increasingly understood. There has been a long but loose relationship between
the oil price and the gold price, and we have used the strength in oil to
reinforce slightly the investment in gold mining shares. Newcrest Mining is
doing well; Lihir Gold and Coeur D'Alene Mine are slightly above the purchase
price.
Individual European stocks have done well for us, with the exception of Swisscom
- the latter largely because of a poor timing on the currency. We are
particularly keen on Raisio.
Among the UK equities, BT Group stands out as being the biggest single equity
holding in the portfolio (it is 5 per cent. of the portfolio). We are
comfortable with this weighting. UK equities represent about 12 per cent. of the
portfolio and largely a mixture of specific stories with little, if any, common
underlying themes. We have the same percentage of the portfolio in Japan, but
there the stocks are much more representative of the themes which commend its
attraction to us: asset price reflation (hence the railway companies) and a
resurgence of rising prices as a result of currency compromise. These are
effectively the same play, with the former being the benign side of the
sixpence, and the latter the silver lining to what would be a fairly dark cloud.
Ruffer LLP
5 July 2005
Top Ten Holdings
As at 30 June 2005 Holding at Market % of
30.06.05 Value Total Net
£ Assets
Treasury 4% 07/03/2009 4,900,000 4,893,831 8.75
Treasury 5% 07/03/2008 4,600,000 4,712,792 8.43
Switzerland (Govt.) 4% 08/04/2028 8,240,000 4,557,244 8.15
Switzerland (Govt.) 3 1/2% 08/04/2033 8,800,000 4,543,135 8.12
Austria 3% 21/08/2009 9,750,000 4,538,932 8.11
Barclays Bank 0% 16/09/2009 Bear Note S&P 4,000,000 4,002,000 7.15
Switzerland (Govt.) 4% 06/01/2049 6,400,000 3,553,543 6.35
BT Group 1,200,000 2,757,000 4.93
Treasury 5 3/4% 07/12/2009 2,250,000 2,402,932 4.30
Japan Tobacco 320 2,384,436 4.26
Balance Sheet
As at 30 June 2005
30.06.05
£
ASSETS
Cash and cash equivalents 138,396
Receivables 699,050
Financial assets at fair value through profit or loss 55,562,965
----------
Total Assets 56,400,411
----------
EQUITY
Capital and reserves attributable to the
Company's shareholders
Management share capital 2
Net assets attributable to holders of redeemable
participating preference shares 55,935,077
----------
Total Equity 55,935,079
----------
LIABILITIES
Payables 465,332
----------
Total Liabilities 465,332
----------
----------
Total Equity and Liabilities 56,400,411
----------
Net assets attributable to holders of redeemable
participating preference shares (per share) 1.119
----------
Statement of Operations
For the period 1 June 2004 to 30 June 2005
01.06.04
to
30.06.05
Revenue Capital Total
£ £ £
Bank interest income 198,573 - 198,573
Fixed interest income 1,099,072 - 1,099,072
Dividend income 332,244 - 332,244
Net gains on financial assets
at fair value through profit or
loss - 6,305,405 6,305,405
Other gains/(losses) (22,303) 341,295 318,992
-------- -------- ---------
Total investment income 1,607,586 6,646,700 8,254,286
-------- -------- ---------
Management fees (128,934) (386,799) (515,733)
Expenses (759,793) (59) (759,852)
-------- -------- ---------
Total operating expenses (888,727) (386,858) (1,275,585)
-------- -------- ---------
-------- -------- ---------
Operating profit before taxation 718,859 6,259,842 6,978,701
-------- -------- ---------
Withholding tax (143,624) - (143,624)
Operating profit after taxation and
increase
in net assets attributable to holders
of -------- -------- ---------
redeemable particpating
preference shares 575,235 6,259,842 6,835,077
-------- -------- ---------
Earnings per share * 1.15p 12.52p 13.67p
* Earnings per share is based on the weighted average number of redeemable
participating preference shares. There being no change in the number of shares
in issue during the period, the weighted average number of shares for the period
is 50,000,000.
Statement of Changes in Equity
For the period from 1 June 2004 to 30 June 2005
01.06.04 to
30.06.05
Net assets attributable to holders of redeemable
participating preference shares at the start of the period -
----------
Movement due to issues and redemptions of shares
Proceeds from redeemable participating
preference shares issued 49,350,000
Redemption of redeemable participating
preference shares -
----------
Net increase from share transactions 49,350,000
----------
Increase in net assets attributable to holders of
redeemable participating preference shares from operations 6,835,077
Distributions to holders of redeemable
participating preference shares (250,000)
Increase in net assets attributable to holders of redeemable
----------
participating preference shares from operations (after
distributions) 6,585,077
----------
Net assets attributable to holders of redeemable
participating preference shares at the end of the period 55,935,077
----------
Cash Flow Statement
For the period from 1 June 2004 to 30 June 2005
01.06.04 to
30.06.05
£
Cash flows from operating activities
Purchase of financial assets and settlement of financial
liabilities (68,344,103)
Proceeds from sale of investments (including realised gains) 19,087,977
Amounts paid to brokers (134,210)
Bank interest received 198,573
Fixed interest income received 681,153
Dividends received 305,847
Withholding tax (151,204)
Operating expenses paid (833,291)
----------
Net cash utilised in operating activities (49,189,258)
----------
Cash flows from financing activities
Dividends paid (250,000)
Proceeds from issue of redeemable participating preference
shares 50,000,000
Issue expenses relating to issue of redeemable participating (650,000)
Preference shares
----------
Net cash flow from financing activities 49,100,000
----------
Net decrease in cash and cash equivalents (89,258)
Cash and cash equivalents at beginning of period -
Exchange gains on cash and cash equivalents 227,654
----------
Cash and cash equivalents at end of period 138,396
----------
Dividend Declaration
The Directors, have declared that a second interim dividend of 0.5p be payable
in respect of the period ended 30 June 2005.
Timetable
Declaration of dividend for the six months ended 30 June 2005 1 September 2005
Offer for Subscription opens 1 September 2005
Ex-dividend date 7 September 2005
Record date for dividend 9 September 2005
Latest time and date for receipt of Placing commitments 5pm on 22 September 2005
Latest time and date for receipt of Application forms
under the Offer for Subscription 5pm on 22 September 2005
Annual General Meeting 11am on 23 September 2005
Extraordinary General Meeting
to approve Issue 11.10am on 23 September 2005
Results of Placing and Offer for Subscription announced 26 September 2005
Dealings in C Shares commence 8am on 29 September 2005
Crediting of CREST accounts pursuant to the Issue 29 September 2005
Share certificate despatched week commencing 3 October 2005
C Shares expected to convert into Shares By end October 2005
A copy of the Prospectus, circular and annual report and accounts referred to in
this announcement has been submitted to the UK Listing Authority and will
shortly be available for inspection at the UK Listing Authority's Document
Viewing Facility, which is situated at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London, E14 5HS
Enquiries
Ruffer LLP
Jonathan Ruffer 020 7529 7900
Steve Russell 020 7529 7900
UBS Limited
Charlie Ricketts 020 7568 4781
Will Rogers 020 7568 2939
This announcement is not for distribution directly or indirectly in or into the
United States, Canada, Australia or Japan. This announcement does not constitute
an offer to sell or issue or the solicitation of an offer to buy or acquire C
Shares in the capital of Ruffer Investment Company Limited in the United States,
Canada, Australia or Japan or any jurisdiction in which such an offer or
solicitation is unlawful. The C Shares in Ruffer Investment Company Limited
referred to in this announcement have not been and will not be registered under
the Securities Act and may not be offered or sold within the United States
absent registration or an exemption from registration. No public offering of
securities will be made in the United States, Canada or Australia or Japan.
This announcement has been communicated by Ruffer Investment Company limited
which is authorised and regulated in the United Kingdom by the Financial
Services Authority and does not constitute an offer to sell or a solicitation of
an offer to purchase any securities. The price of shares and the income from
them may go down as well as up and investors may not get back the full amount
invested on disposal of the shares. There is no guarantee that the market price
of shares in Ruffer Investment Company Limited will fully reflect their
underlying NAV.
UBS Limited is acting exclusively for Ruffer Investment Company Limited and no
one else in connection with the Placing and Offer for Subscription and will not
be responsible to anyone other than Ruffer Investment Company Limited for
providing the protections afforded to clients of UBS Limited nor for providing
any advice in relation to the Placing and Offer for Subscription or any other
matters referred to in this press announcement.
This information is provided by RNS
The company news service from the London Stock Exchange