On 9 December 2004, the Company appointed FSP Equities Management Limited (FSP) as Investment Manager to manage the Company’s investment funds for an initial term of two years.

 

An initial amount of $6.0 million of the Company’s cash reserves was transferred to FSP’s custodian for investment by FSP in December 2004.  The Investment Management Agreement also allows for RFS to place further funds with FSP as and when additional cash reserves for investment become available to RFS.

 

In April 2005, the Company invested a further $7.64 million with FSP, being the cash proceeds from the sale of Avcol Stocbroking Pty Ltd.

   

The Board regards the appointment of FSP as an important step in re-positioning the Company as a credible LIC with a coherent and acceptable investment mandate.

  

FSP holds an Australian Financial Services Licence to manage its FSP Equity Leaders’ Fund (FSP Fund) – a wholesale fund not open to retail investors.  The investment management team of the FSP Fund is led by Mr Ronni Chalmers.

   

FSP is a 100% owned subsidiary of FSP Group Pty Ltd, which has as major shareholders global investment and advisory firm, Babcock & Brown Limited and financial services company, Tower Limited.

 

The appointment of FSP is a major step forward for RFS in restoring stability and direction to the Company’s investment portfolio and is consistent with the Board’s stated intention to place the Company’s investment funds under the management of an independent and professional funds manager.  This was an important part of the platform on which the current Directors were elected by an overwhelming majority in number of shareholders at the Extraordinary General Meeting held on 29 November 2004.

 

As Investment Manager, FSP will invest the Company’s funds directly in its FSP Fund.  As the objective of the Fund is to outperform the ASX 200 Accumulation Index over the medium term, FSP targets at least 75% of the investments of the Fund in securities from the ASX 200 Index.  The balance of the Fund’s investments will be in securities drawn from outside the ASX 200 Index.  The performance of the Company’s investment fund is benchmarked against the ASX 200 Accumulation Index.

 

Based upon the performance figures provided by FSP to the Company, FSP has consistently generated amongst the highest level of annual fund returns of any licensed Australian equities fund.

 

The management fees normally payable by participants in the FSP Fund is 1% per annum base management fee and a performance fee of 20% of the performance of the fund in excess of the ASX 200 Accumulation Index benchmark.  The Board has negotiated a variable fee structure that represents a favourable rebate to the normal fees charged by the FSP Fund, whilst still providing a material incentive to the Investment Manager for investment out performance of the benchmark.  Achieving this favourable fee structure has in part been possible due to the Company’s commitment to invest with the Investment Manager for a period of two years and the quantum of funds placed under management with FSP.

 

The Company notes that it has retained sufficient funds to cover administration and working capital requirements. 

 

 Further information regarding the FSP Group can be found at: www.fspgroup.com.au