Tatton Asset Management Regulatory News (TAM)

29 Feb 2008 08:53

Titanium Asset Management Corp29 February 2008 TITANIUM ASSET MANAGEMENT CORP FINAL RESULTS FOR THE PERIOD ENDED 31 DECEMEBR 2007 Chairman's Statement I am delighted to present this statement as Chairman of Titanium AssetManagement Corp. We successfully raised US$120mn and were admitted to trading AIM, a marketoperated by the London Stock Exchange, in June 2007. This was a reflection ofthe skills of our placing agent, Sunrise Securities Corp, and we are verygrateful for the support of our new shareholders. As a special purpose acquisition company our strategy has been to acquire anumber of specialist asset managers and we have, I believe, made an encouragingstart in implementing this strategy through the purchase of two high qualityasset management firms, Wood Asset Management, Inc and Sovereign Holdings, LLC,respectively a US equity and a US fixed income manager. We have had a number ofexploratory discussions with other firms and on January 8th 2008 announced thesigning of a non-binding Letter of Intent to acquire another asset managementbusiness. . I am pleased to report that the Company is today announcing theproposed acquisition of National Investment Services, Inc, an institutionalasset management firm with offices in Milwaukee and Chicago. Two events that we did not foresee were, first, the sudden illness and thendeath of Gary Wood shortly after we bought his firm. We were deeply saddened tolose Gary after such a short period working together but it is a tribute to theteam that he assembled at Wood Asset Management that the firm has continued togenerate good investment performance and service its clients, now under thedirect management of my colleague and the Company's Chief Executive, JohnSauickie. The second event has been the extreme dislocation in financial markets that hasoccurred since last August. In addition to impacting directly on asset prices,this has clearly increased risk aversion amongst investors and has in some casesmade it harder for us to implement business decisions with certaincounterparties. While we should expect this volatility to continue for some months, we believethat the recent actions of the US Federal Reserve will begin to restore a degreeof investor confidence as the year progresses. We do not expect recent marketevents to prevent us from continuing to implement our business strategy. We arelooking to acquire high quality firms; to the extent that recent volatility has'stress tested' asset managers it will, in our view, help us to identify trulyexcellent businesses. John KuzanChairman For further information: Titanium Asset Management Corp.John Sauickie, Chief Executive Officer +1 941 361 2191Nigel Wightman, Executive Director + 44 7789 277849 Seymour Pierce LtdJonathan Wright +44 20 7107 8000 Penrose Financial Gay Collins +44(0) 20 7786 4888Kay Larsentitanium@penrose.co.uk CONSOLIDATED STATEMENT OF INCOMEFor the period of February 2, 2007 (inception) to December 31, 2007(in thousands except per share amounts) Revenue $2,437Operating expenses 3,905 --------Operating loss (1,468)Interest income 2,191 --------Income before taxes 723Income tax expense 280 --------Net income $443 --------Basic earnings per share 0.03Diluted earnings per share 0.03 CONSOLIDATED BALANCE SHEET at December 31, 2007ASSETSCurrent assetsCash and cash equivalents $19,338Restricted cash 55,587Other current assets 500 ----------Total current assets 75,475 Other assetsGoodwill 21 ,987Intangible assets, net 15,340Property and equipment 3Deferred tax benefit 377 ---------- 37,707 ----------Total Assets $113,182 ----------LIABILITIES AND STOCKHOLDERS' EQUITYAccounts payable and accruals $1,258CommitmentsTemporary equity 55,587 Stockholders' equityCommon stock 2Additional paid in capital 55,892Retained earnings 443 -----------Total stockholders' equity 56,337 ----------Total Liabilities and Stockholders' equity $113,182 ----------- CONSOLIDATED CASH FLOW STATEMENTFor the period of February 2, 2007 (inception) to December 31,2007 Net income $443Adjustments to reconcile net income to net cash and 1,654cash equivalents provided by operating activities:Depreciation and amortization chargesChanges in assets and liabilities:Decrease (increase) in:Fees receivable (388)Deferred tax asset (377)Other receivables (22)Prepaid expenses and other assets (90)Increase (decrease) in:Accounts payable 149Income taxes payable 657Accrued expenses and other current liabilities 452 ---------Net cash provided by operating activities 2,478 ---------Cash flows from investing activitiesPurchases of property and equipment (19)Cash paid for acquisition of subsidiaries (33,965)Restricted cash investments (55,875) ----------Net cash used in investing activities (89,571)Cash flows from financing activitiesIssue of share capital 120,025Costs associated with share issue (9,652)Share capital redeemed (3,892) ----------Net cash from financing activities 106,481 ----------Net increase in cash and cash equivalents $19,388 Cash and cash equivalentsBeginning - ----------Ending $19,388 ---------- NOTES ON CONSOLIDATED FINANCIAL STATEMENTSFor the period of February 2, 2007 (inception) to December 31, 2007 1 Summary of business and significant accounting policies Nature of businessTitanium Asset Management, Corp. (the "Company") is a special purposeacquisition company which seeks to acquire privately owned asset managementbusinesses. To date the Company has acquired two asset management businesses andtheir results are consolidated with those of the company from October 1, 2007.The Company, through its wholly owned subsidiaries provides equity, fixed incomeand balanced investment management services to corporate and individual clientsthroughout the United States. The Company does not take title to, or custody of,client securities. Cash equivalents and concentration of credit riskFor the purposes of reporting cash flows, the Company considers all highlyliquid investments with an original maturity of three months or less to be cashequivalents. The Company periodically maintains cash balances with a financialinstitution, which at times throughout the year exceeds the federally insuredlimits. Management believes that the use of a credit quality financialinstitution minimizes the risk of loss associated with cash and cashequivalents. Use of EstimatesThe preparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period. Actual results could differ from those estimates. Basis of consolidationThe accompanying consolidated financial statements include the accounts of theCompany and its wholly owned subsidiaries. All inter-company transactions havebeen eliminated in consolidation. Revenue recognitionRevenue represents fees receivable for investment management and advisoryservices provided during the period. Management fees are recognised inaccordance with the contractual arrangement and as the services are provided. Property and equipmentProperty and equipment are stated at cost. Cost includes expenditures for majorimprovements and replacements with significant capital additions. Maintenance,repairs and minor renewals, which do not materially extend the life of assets,are charged to expense as incurred. Depreciation is computed using thestraight-line method over the estimated useful lives of the assets as follows:furniture and fixtures - 2 years Impairment of long-lived assetsThe Company complies with the provisions of Statement of Financial AccountingStandards ("SFAS") No. 144, Accounting for the Impairment or Disposal ofLong-Lived Assets. This statement requires that long-lived assets be reviewedfor impairment when events or circumstances indicate that their carrying amountmay not be recoverable. In management's opinion, no such events or changes incircumstances have occurred in the current year. Goodwill and intangiblesGoodwill is the excess of the amount paid to acquire a business over the fairvalue of the net assets acquired. Pursuant to SFAS No. 142, Goodwill and OtherIntangible Assets, the carrying amount of goodwill is reviewed for impairmentannually or whenever events or changes in circumstances indicate that thecarrying amount might not be recoverable. If the fair value of the operations towhich the goodwill relates is less than the carrying amount of the unamortizedgoodwill, the carrying amount will be reduced with a corresponding charge toexpense. We will test goodwill for impairment at least annually (first day of our fourthquarter), or more often if deemed necessary based on certain circumstances. Ourgoodwill impairment test will be a two-step process: Step 1 - test for potentialimpairment by comparing the fair value of each reporting unit with its carryingamount; if the fair value of the reporting unit is greater than its carryingamount (including recorded goodwill), then no impairment exists and Step 2 isnot performed; Step 2 - if the carrying amount of the reporting unit (includingrecorded goodwill) is greater than its fair value, then the amount of theimpairment, if any, is measured and recorded as needed. Intangible assets with definite lives are amortized over their estimated usefullife and reviewed for impairment in accordance with SFAS 144. Intangible assetswith definite lives are amortized using the straight-line method over theirestimated useful lives. The value of the non-compete agreement signed in connection to the Wood AssetManagement, Inc. acquisition (see note 14) has been charged to expense($829,000) in operating expenses, as of December 31, 2007, due to the untimelydeath of the previous owner with whom the agreement was with.LeasesRentals paid under operating leases are charged to the profit and loss accountin the period when they become payable. Earnings per shareEarnings per share is computed by dividing net income by the weighted averagenumber of shares of common stock and restricted stock outstanding during theperiod. Warrants have been treated as dilutive to the extent that they areexercisable below the average share price for the period. Temporary equityThe proceeds from the issue of common shares bearing the right to requirerepayment as explained in Note 13 have been classed as temporary equity toreflect the potential for stockholders to require repurchase of their shares. Option granted in relation to share issueThe fair value of the option granted to Sunrise Securities Corp. has beencredited to non-current liabilities. The cost of the option has been netted offagainst reserves along with the other costs of admission. Income TaxesThe Company accounts for income taxes in accordance with SFAS No. 109,"Accounting for Income Taxes." Deferred tax assets and liabilities arerecognized for the future tax consequences attributable to differences betweenfinancial statement carrying amounts of existing assets and liabilities andtheir respective tax bases and operating loss and other loss carryforwards.Deferred tax assets and liabilities are measured using enacted tax ratesexpected to apply to taxable income in the years in which those temporarydifferences are expected to be recovered or settled. 2 Cash and cash equivalents 2007Cash held by Group companies $19,388Cash held in trust for the Company 55,587 ---------- $74,975 ---------- The trust amount is held in a trust fund at a branch of J.P. Morgan Chase Bank,N.A. maintained by Continental Stock Transfer and Trust Company, as trustee,pursuant to an investment management agreement. The proceeds held in the trustfund will not be released except upon a number of events as set forth in thedocument published by the Company in connection with its admission to AIM.3 Stockholders' equity The company has authorized 54,000,000 shares of Common Stock, 720,000 shares ofRestricted stock and 1,000,000 shares of Preferred Stock, all with a par valueof $0.0001 per share. As of December 31, 2007 the Company had issued andoutstanding Common Stock shares and Restricted Stock shares of 22,993,731 and696,160 respectively. As of December 31, 2007, no Preferred Stock shares havebeen issued and accordinfgly the associated rights have not been established.During the period the Company executed various Private Placement offerings ofCommon Stock and Restricted Stock as follows: Date Class Number Price Proceeds Purpose (in $ thousands)02/02/07 Common stock 2,880,000 0.7c 20 Start up capital 02/02/07 Restricted 720,000 0.7c 5 Start up capital shares06/21/07 Units1 20,000,000 $6.00 120,000 Finance acquisitions10/01/07 Common stock 727,273 $5.50 - Wood acquisition 10/01/07 Common stock 181,818 $5.50 - Sovereign acquisition 1 Each unit comprised 1 common share and 1 warrrant to subscribe for commonshares at $4. The warrants expire on June 20, 2011. The holders of Common Stock arising from the issue of units on June 21, 2007 areentitled to require the Company to repurchase their shares if at the time theCompany seeks approval for a business combination and the stockholders voteagainst the proposal. The holders of Common Stock are also entitled to requirethe Company to repurchase their shares if the Company seeks approval to extendthe deadline for a qualifying business combination and the shareholders voteagainst the proposal. The repurchase price will be a per share price equal to apro-rata share of the trust fund, including interest earned and net of expensesand taxes thereon. As part of the AIM listing the Company granted an option to Sunrise SecuritiesCorp to acquire 2 million units at a price of $6.60. This option has been valuedat $2,091,000 and is recorded as a non-current liability on the balance sheet ofthe Company. 4 Acquisitions The financial statements include the results for Wood Asset Management Inc andSovereign Holdings LLC from October 1, 2007, the date of acquisition. As atDecember 31, 2007 Titanium Asset Management Corp held 100% of the issued sharecapital of Wood Asset Management Inc and a 100% economic interest in SovereignHoldings LLC. Wood Asset Management IncDetails Consideration Fair value Goodwill Cash $29,164 $-Shares issued 4,000 -Existing customers - 12,026Non-compete agreement - 829Brands - 444 --------- --------- --------- $33,164 $13,299 $19,865 --------- --------- ---------Sovereign Holdings LLCDetails Consideration Fair value Goodwill Cash $4,801 $-Shares issued 1,000 -Existing customers - 2,665Non-compete agreement - 833Brands - 181 -------- -------- -------- $5,801 $3,679 $2,122 -------- -------- -------- 5 Earnings per common share The calculation of basic earnings per ordinary share is based on the profit forthe year of $442,210 and on 14,312,262 common shares, being the weighted averagenumber of common shares in issue during the year. The diluted earnings per share is based on profit for the year beforeextraordinary items of $442,210 and on 17,489,985 common shares, calculated asfollows: 2007 Basic weighted average number of shares 14,312,262Dilutive effect of warrants 3,177,723 ------------- 6 Report and Accounts The report and accounts of the Company for the period from inception to 31December 2007 and being despatched to stockholders shortly. Copies of the reportand accounts will be available to the public free of charge from the offices ofSeymour Pierce, 20 Old Bailey, London EC4M 7EN for at least one month and willbe available to be downloaded from the Company's website at www.ti-am.com. This information is provided by RNS The company news service from the London Stock Exchange