Compass's days as a property loan stock (PLS) in the Anglo stable ended in 2001, when its properties were sold to Apex Hi. Control then shifted to Foord Asset Management, which set about forming what portfolio manager Mark Hodges terms "a high income yield producing
investment vehicle".  That's one aspect. However, Compass also became an attractive proposition for the unnamed "consortium" holding now unlisted ordinary shares. These were previously part of Compass's linked unit structure as a PLS. This attraction took a quantum leap with January's debenture rights issue, which raised R108,5m.  Debenture holders are entitled to 90% of income in the form of taxable debenture interest. The balance is attributable to ordinary shareholders. With the rights issue, the latter's income became based on R180,6m of debenture capital compared with the pre-rights R74m.
 
In the six months to June, this produced attributable profit of R1,23m (after debenture interest) which went towards eliminating the ordinary share capital deficit. Once the deficit, now R2,2m, has been cleared, ordinary shareholders will become entitled to dividends, says Hodges. With the help of a zero tax rate, thanks to a R20,6m assessed loss, this should not take long.  Ordinary shareholders also have a 10% claim on net assets. As with income, they also stand to enjoy a big gearing benefit in asset value growth, compliments of the debenture capital.  So what's in it for debenture holders? Actually, nothing. However, the hope is that Foord Asset Management can pull off some spectacular investment moves in what's in essence a cross between an investment trust and a trading portfolio.  Hodges says that about 50% of Compass's investments will comprise long-term equity holdings, 25% will be held in listed property and the remaining 25% as trading assets and cash.  Trading investments include derivatives, bonds and some equity, says Hodges. How much of each - and particularly the role of derivatives - is undisclosed.  As for the fixed portfolio, believers in asset diversification will run a mile. At 30 June, the equity portion comprised a holding in Anglo American Platinum (Amplats) worth R18,9m and the property portion units in Apex Hi A worth R38,5m and Apex Hi B worth R9,3m.  So much for diversification. And it doesn't appear set for much improvement, with a promise of more Amplats buys "if market opportunities persist". Which appears likely, as the share's price buckles under pressure of a 58% slump in its interim earnings and dividend.  "Amplats is a good long-term story,

but it's not going that way right now because of the strong rand," says Hodges. Then why not sell? His reply: "We're good at fundamentals, not short-term timing."  Honest, but hardly encouraging given the importance of trading profits in Compass's income.  In its interim review, management holds out hope of a 70c total debenture distribution in 2003. But don't bank on it, it warns. Further rand strength or equity weakness could make nonsense of this target.