TIDMCEAF
RNS Number : 5768H
Close European Accelerated Fund Ltd
23 February 2010
for the period ended 31 December 2009 (Unaudited)
Close European Accelerated Fund Limited (the "Company")
ABOUT THE COMPANY
Close European Accelerated Fund Limited (the "Company") is a Guernsey
incorporated, closed-ended investment company. With the exception of two
Management Shares issued for administrative reasons, the Company's issued share
capital comprises 39,550,000 Participating Shares (the "Shares") the performance
of which is designed to provide investors with a geared capped exposure to the
performance of the Dow Jones EuroStoxx 50 Index (the "Index").
Pursuant to the initial placing and offer for subscription, 36,000,000 Shares
were issued at a price of 100p each (the "Issue Price") on 27 July 2005. Your
Board, in conjunction with the Company's Manager, was since the initial placing
and offer for subscription of Shares, successful in raising further capital for
the Company by the subsequent issue of an additional 3,550,000 new Shares on 21
September 2006 at a price of 107.5p each. All 39,550,000 Shares in issue rank
pari passu, have been admitted to the Official List of the United Kingdom
Listing Authority and admitted to trading on the London Stock Exchange. The
Company has an unlimited life but the Shares will be redeemed on or around 29
July 2011 (the "Redemption Date").
Investment Objective and Policy
The investment objective of the Company is to provide shareholders on the
Redemption Date with a payment per Share which will comprise a capital amount of
100 pence per Share and a growth amount per Share equal to five times any
percentage increase in the value of the Index (the "End Value") as at 26 July
2011 (the "End Date") relative to its value (the "Start Value") as at 26 July
2005 (the "Start Date"), such amount being expressed in pence and rounded down
to the next half pence, subject to a maximum increase of 67.5 per cent. of the
Issue Price, subject to counterparty default.
If the End Value is lower than the Start Value, the Shares are designed to repay
the full initial subscription amount of 100p per Share on the Redemption Date
provided that the value of the Index has not fallen below 50 per cent. of the
Start Value at close of business on any Index business day between the Start
Date and the End Date (both dates inclusive) (an "Index Barrier Breach").
Close European Accelerated Fund Limited (the "Company")
ABOUT THE COMPANY (Continued)
If shareholders hold their Shares until the Redemption Date, and an Index
Barrier Breach has occurred and the End Value is not at least equal to the Start
Value, the Shares are designed to repay the Issue Price as reduced by the same
percentage by which the End Value is less than the Start Value.
In accordance with the Company's investment policy, the net proceeds derived by
the Company from the issue of Shares and the sale of a Put Option have been
invested in a portfolio of debt securities (the "Debt Securities") containing
embedded derivatives related to the Index at prices relative to the value of the
Index on 26 July 2005 of 3,302.98. Therefore, if the Dow Jones EuroStoxx 50
Index rises 13.5% or more from its Start Value of 3,302.98 on the Start Date,
which equates to a level of 3,748.88 or higher as at the End Date, the Shares
are designed to return growth of 67.5% on the Redemption Date.
As published in each of the annual and half-yearly financial reports of the
Company and as announced on 8 October 2008, the Company currently holds seven
Debt Securities, including one issued by Glitnir Banki HF ("Glitnir") and one
issued by Kaupthing Bunadarbanki ("Kaupthing"). These two debt securities have
a nominal value of GBP6,000,000 each and in aggregate account for approximately
30 per cent of the total nominal value of the Company's debt securities.
The Winding-Up Boards of Glitnir and Kaupthing asked all parties claiming debts
of any sort or other rights to submit claims by 26 November 2009 and 30 December
2009 respectively. Consequently, the Company submitted claim forms to each of
Glitnir and Kaupthing, claiming GBP10,050,000 in respect of each one of these
Debt Securities, such amounts being equal to the maximum amount due under the
relevant Debt Securities of GBP1.675 per GBP1 nominal.
The amount claimed should not be considered a forecast of the amount which will
be due from Glitnir and Kaupthing on the maturity of the relevant Debt
Securities, which may not be the amount currently claimed, nor is it a
reflection of the net asset value per Share.
Close European Accelerated Fund Limited (the "Company")
ABOUT THE COMPANY (Continued)
Shareholders should be aware that it is likely that Glitnir and Kaupthing may
not pay the Company the full amounts claimed. Whilst recovery rates from
issuers that default vary, and in this case are currently unknown, the worst
case scenario would see the Company receive nothing from either institution at
the maturity of the relevant Debt Security. In these circumstances, the
Company's assets will be reduced by 30 per cent and so accelerate asset erosion
under the Put option or reduce the redemption proceeds due to shareholders on
the redemption of their Shares accordingly.
In the event of both Glitnir and Kaupthing defaulting and having a zero recovery
rate and there being no insolvency of any other issuer of debt securities held
by the Company or any other event of default or any unforeseen circumstances, if
the Index were to fall to a level of approximately 1,002 at close of business on
the End Date, the redemption proceeds of the Shares would be zero. The
redemption proceeds per Share per the Company's investment objective will not be
known until after the end of the life of the Shares when the closing value of
the Dow Jones EuroStoxx 50 Index on the End Date is known.
Any claims which are paid may be paid before or after the end of the life of the
Shares and in the case of early payment it may not be possible to reinvest the
proceeds in Debt securities which replicate the investment characteristics of
the original Debt Securities. Any claims which are paid may be paid in
currencies other than Sterling and/or in forms other than cash. Any payments
received by the Company may therefore be subject to currency fluctuations and/or
other market movements.
Your attention is drawn to the Schedule of Investments on pages 32 of this
half-yearly financial report, which shows the assets held by the Company, and
note 12(b) to the financial statements, which refers to the credit risk of the
issuers of these assets as at the end of the reporting period and as at the date
of this report.
Close European Accelerated Fund Limited (the "Company")
ABOUT THE COMPANY (Continued)
In the event of a default by an issuer of a Debt Security purchased by the
Company, the Company would rank as an unsecured creditor in respect of sums due
from the issuer of such debt security. In such event, the Company may (in
respect of that debt security) receive a lesser amount (if any) and at a
different time than the proceeds anticipated at the maturity of the relevant
debt security. Any losses would be borne by the Company and returns to
Shareholders would be significantly adversely affected.
Close European Accelerated Fund Limited (the "Company")
MANAGER'S REPORT FOR THE PERIOD ENDED 31 DECEMBER 2009
Investment Performance
In order to fulfil its investment objective, the Company purchased seven Debt
Securities, including one issued by Glitnir and one issued by Kaupthing. These
latter two Debt Securities have a nominal value of GBP6,000,000 each and in
aggregate account for approximately 30 per cent. of the total nominal value of
the Company's Debt Securities. In the event of a default by an issuer of a Debt
Security purchased by the Company, the Company will rank as an unsecured
creditor in respect of sums due from the issuer of such Debt Security. In such
event, the Company may (in respect of that Debt Security) receive a lesser
amount of money than the amount due pursuant to the terms of the Debt Security,
may actually receive the money at a different time than would otherwise have
been the case and the amount received may be zero. Any losses would be borne by
the Company and returns to shareholders would be significantly adversely
affected.
The Winding-Up Boards for Glitnir and Kaupthing asked all parties claiming debts
of any sort or other rights to submit claims by 26 November 2009 and 30 December
2009 respectively. Consequently the Company submitted claim forms to each of
Glitnir and Kaupthing, claiming GBP10,050,000 in respect of each one of these
Debt Securities, such amounts being equal to the maximum redemption proceeds of
GBP1.675 per GBP1 nominal.
The amount claimed should not be considered a forecast of the amount which will
be due from Glitnir and Kaupthing on the maturity of the relevant Debt
Securities, which may not be the amount currently claimed, nor is it a
reflection of the net asset value per Share. The redemption proceeds per Share
per the Company's investment objective will not be known until after the end of
the life of the Company when the closing value of the Dow Jones EuroStoxx 50
Index on the End Date is known and may not be the amount currently claimed.
Shareholders should be aware that it is likely that Glitnir and Kaupthing may
not pay the Company the full amounts claimed. Whilst recovery rates from issuers
that default vary, and in this case are currently unknown, the worst case
scenario would see the Company receive nothing from either institution at the
maturity of the relevant Debt Securities. Any claims which are paid may be paid
before or after the end of the life of the Company and in the case of early
payment it may not be possible to reinvest the proceeds in forms other than
cash. Any payments received by the Company may therefore be subject to currency
fluctuations and/or other market movements.
Close European Accelerated Fund Limited (the "Company")
MANAGER'S REPORT FOR THE PERIOD ENDED 31 DECEMBER 2009 (Continued)
If the Dow Jones EuroStoxx 50 Index (the "Index") has closed down more than 50
per cent. from its Start Value (i.e. below 1,651.49) on any Index business day
between the Start Date and the End Date then an Index Barrier Breach will have
occurred. In these circumstances, the amount which the Company will be required
to pay J.P. Morgan Securities Limited (the "Put Option Counterparty") following
the Index Barrier Breach will reduce its assets by an amount which reflects the
decline, if any, in the Index between the Start Date and the End Date
The official closing level of the Dow Jones EuroStoxx 50 Index as at 31 December
2009 was 2,964.96. If the Index closed at this level on the End Date and an
Index Barrier Breach has not occurred, the redemption proceeds would be 100
pence subject to there being no counterparty default or any unforeseen
circumstances, and in the event of both Glitnir and Kaupthing defaulting and
having a zero recovery rate and there being no insolvency of any other issuer of
Debt Securities held by the Company or any other event of default or any
unforeseen circumstances, the redemption proceeds would be approximately 69.5
pence, and if the Index were to fall by approximately a further 66 per cent. to
a level of approximately 1,002 as at the End Date, the redemption proceeds of
the Shares would be zero.
The table below illustrates how the redemption proceeds of the Shares might vary
for different ending levels of the Dow Jones EuroStoxx 50 Index (1) subject to
there being no counterparty default or any unforeseen circumstances, and (2) on
the assumption of zero recovery in the event of default of the Debt Securities
issued by Glitnir and Kaupthing and there being no insolvency of any other
issuer of Debt Securities held by the Company or any other event of default or
any unforeseen circumstances.
Close European Accelerated Fund Limited (the "Company")
MANAGER'S REPORT FOR THE PERIOD ENDED 31 DECEMBER 2009 (Continued)
+------------+-------------+------------+------------+------------+
| | If Dow Jones EuroStoxx | If Dow Jones EuroStoxx |
| | 50 | 50 |
+------------+--------------------------+-------------------------+
| |Index never closes below | Index closed below |
| | 1,651.49+ | 1,651.49+ |
+------------+--------------------------+-------------------------+
| Final |Redemption |Redemption |Redemption |Redemption |
| EuroStoxx | | | | |
+------------+-------------+------------+------------+------------+
| 50 Index* | Proceeds | Proceeds | Proceeds | Proceeds |
| | (1) | (2) | (1) | (2) |
+------------+-------------+------------+------------+------------+
| 0 | | | 0.0 | 0.0 |
+------------+-------------+------------+------------+------------+
| 100 | | | 3.0 | 0.0 |
+------------+-------------+------------+------------+------------+
| 200 | | | 6.0 | 0.0 |
+------------+-------------+------------+------------+------------+
| 300 | | | 9.0 | 0.0 |
+------------+-------------+------------+------------+------------+
| 400 | | | 12.0 | 0.0 |
+------------+-------------+------------+------------+------------+
| 500 | | | 15.0 | 0.0 |
+------------+-------------+------------+------------+------------+
| 600 | | | 18.0 | 0.0 |
+------------+-------------+------------+------------+------------+
| 700 | | | 21.0 | 0.0 |
+------------+-------------+------------+------------+------------+
| 800 | | | 24.0 | 0.0 |
+------------+-------------+------------+------------+------------+
| 900 | | | 27.0 | 0.0 |
+------------+-------------+------------+------------+------------+
| 1,000 | | | 30.0 | 0.0 |
+------------+-------------+------------+------------+------------+
| 1,100 | | | 33.0 | 2.5 |
+------------+-------------+------------+------------+------------+
| 1,200 | | | 36.0 | 5.5 |
+------------+-------------+------------+------------+------------+
| 1,300 | | | 39.0 | 9.0 |
+------------+-------------+------------+------------+------------+
| 1,400 | | | 42.0 | 12.0 |
+------------+-------------+------------+------------+------------+
| 1,500 | | | 45.0 | 15.0 |
+------------+-------------+------------+------------+------------+
| 1,600 | | | 48.0 | 18.0 |
+------------+-------------+------------+------------+------------+
| 1,700 | 100.0 | 69.5 | 51.0 | 21.0 |
+------------+-------------+------------+------------+------------+
| 1,800 | 100.0 | 69.5 | 54.0 | 24.0 |
+------------+-------------+------------+------------+------------+
| 1,900 | 100.0 | 69.5 | 57.5 | 27.0 |
+------------+-------------+------------+------------+------------+
| 2,000 | 100.0 | 69.5 | 60.5 | 30.0 |
+------------+-------------+------------+------------+------------+
| 2,100 | 100.0 | 69.5 | 63.5 | 33.0 |
+------------+-------------+------------+------------+------------+
| 2,200 | 100.0 | 69.5 | 66.5 | 36.0 |
+------------+-------------+------------+------------+------------+
| 2,300 | 100.0 | 69.5 | 69.5 | 39.0 |
+------------+-------------+------------+------------+------------+
| 2,400 | 100.0 | 69.5 | 72.5 | 42.0 |
+------------+-------------+------------+------------+------------+
| 2,500 | 100.0 | 69.5 | 75.5 | 45.0 |
+------------+-------------+------------+------------+------------+
| 2,600 | 100.0 | 69.5 | 78.5 | 48.0 |
+------------+-------------+------------+------------+------------+
| 2,700 | 100.0 | 69.5 | 81.5 | 51.0 |
+------------+-------------+------------+------------+------------+
| 2,800 | 100.0 | 69.5 | 84.5 | 54.0 |
+------------+-------------+------------+------------+------------+
| 2,900 | 100.0 | 69.5 | 87.5 | 57.0 |
+------------+-------------+------------+------------+------------+
| 3,000 | 100.0 | 69.5 | 90.5 | 60.0 |
+------------+-------------+------------+------------+------------+
| 3,100 | 100.0 | 69.5 | 93.5 | 63.5 |
+------------+-------------+------------+------------+------------+
| 3,200 | 100.0 | 69.5 | 96.5 | 66.5 |
+------------+-------------+------------+------------+------------+
| 3,300 | 100.0 | 69.5 | 99.5 | 69.5 |
+------------+-------------+------------+------------+------------+
| 3,400 | 114.5 | 79.5 | 114.5 | 79.5 |
+------------+-------------+------------+------------+------------+
| 3,500 | 129.5 | 90.0 | 129.5 | 90.0 |
+------------+-------------+------------+------------+------------+
| 3,600 | 144.5 | 100.5 | 144.5 | 100.5 |
+------------+-------------+------------+------------+------------+
| 3,700 | 160.0 | 111.5 | 160.0 | 111.5 |
+------------+-------------+------------+------------+------------+
| 3,800 | 167.5 | 116.5 | 167.5 | 116.5 |
+------------+-------------+------------+------------+------------+
| 3,900 | 167.5 | 116.5 | 167.5 | 116.5 |
+------------+-------------+------------+------------+------------+
Close European Accelerated Fund Limited (the "Company")
MANAGERS REPORT FOR THE PERIOD ENDED 31 DECEMBER 2009 (Continued)
* As at 26 July 2011
+ On any day from 26 July 2005 to 26 July 2011
(1) Subject to there being no counterparty default or any unforeseen
circumstances
(2) The table contemplates default and zero recovery in respect of the Debt
Securities issued by Glitnir and Kaupthing. The redemption proceeds set out in
this table is an example only and not a forecast of actual payments and is
subject to there being
no insolvency of any other issuer of Debt Securities held by the Company or any
other event of default or any unforeseen circumstances. The attention of
shareholders is drawn to the section headed "Risk Factors" in the Prospectus.
Market Review
Over the period under review, the Dow Jones EuroStoxx 50 Index rose by 23.5%,
continuing the rally in financial markets that started in March 2009, as central
banks around the world kept interest rates close to zero and a range of data
pointed towards a sustained economic recovery, with most European countries
emerging from recession.
Close European Accelerated Fund Limited (the "Company")
MANAGER'S REPORT FOR THE PERIOD ENDED 31 DECEMBER 2009 (Continued)
The start of the period saw the Index retreating on speculation the global
economic slowdown had not ended, falling to a low 2281.47 in July. From this
low the Index rose over 7% in the space of three days as a series of positive
company results and economic news contradicted this belief. The Index continued
to climb at an impressive pace, gaining up to another 14% to the end of August
despite having a slight wobble in the middle of the month, again over
uncertainty about the strength of the recovery.
The trend of steady growth, interspersed with temporary but rapid falls, an
unsurprising phenomenon when markets are recovering from recession, continued
over the next six weeks as the generally positive sentiment was occasionally
undermined by worse than expected economic news. The Index reached its high for
the period of 2950.82 in mid October from where it fell to as low as 2712.30 in
early November on concerns the rally had outpaced the economic recovery.
However, once again the bullish trend returned and the market rallied to finish
the period at 2849.17.
The rise in the Index over the last six months was broad-based with 47 of the 50
constituents rising. The biggest contributor to the rise in the Index was Banco
Santander which rose 35% as, along with the other banks in the Index, the easing
of credit conditions allowed it to improve its profit margins and balance sheet.
The biggest drag on the Index came from car manufacturer Volkswagen which fell
68% as it won a takeover battle, which had earlier pushed up its price, with
rival Porsche.
As the recession created extra slack in the economy, inflation fell into
negative territory, with the Consumer Price Index (CPI) falling to as low as
-0.7%, far below the European Central Bank's ("ECB") 2.0% target. In response
to this the ECB kept interest rates unchanged over the period at 1.0%, the
lowest level in its history, as well as providing liquidity support to the
banking system to help facilitate the provision of credit.
Close European Accelerated Fund Limited (the "Company")
MANAGER'S REPORT FOR THE PERIOD ENDED 31 DECEMBER 2009 (Continued)
Market Outlook
The ECB is currently projecting annual real GDP growth of between +0.1% and
+1.5% and annual CPI inflation of between 0.9% and 1.7% in 2010. The risks to
these forecasts are broadly balanced with an anaemic recovery expected as
balance sheets are repaired and temporary stimulus measures withdrawn. If
confidence improves more than expected and commodity prices continue to increase
these projections may be revised upwards.
The rapid recovery in asset prices since March 2009 has largely been driven by
the return to positive economic growth and the cut in interest rates to close to
zero. The outlook for Dow Jones EuroStoxx 50 Index may be affected if growth
stutters or interest rate expectations rise.
Close Investments Limited
23 February 2010
Close European Accelerated Fund Limited (the "Company")
INTERIM MANAGEMENT REPORT FOR THE PERIOD FROM 1 JULY TO 31
DECEMBER 2009
Detailed in the section entitled "Investment Objective and Policy", in the
Manager's Report and in the notes to the financial statements are a description
of important events that have occurred during the first six months of the
financial year, their impact on the performance of the Company as shown in the
financial statements and a description of the principal risks and uncertainties
for the remaining six months of the financial year.
There were no material related party transactions which took place in the first
six months of the financial year.
This half-yearly financial report has not been audited or reviewed by auditors
pursuant to the Auditing Practices Board guidance on Review of Interim Financial
Information.
Going Concern
The performance of the investments held by the Company over the reporting period
and the outlook for the future are described in the Manager's Report. The
Company's financial position, its cash flows and liquidity position are set out
in the financial statements and the Company's financial risk management
objectives and policies, details of its financial instruments and its exposures
to market price risk, credit risk, liquidity risk, portfolio construction risk
and interest rate risk are set out at note 12 to the financial statements.
As highlighted in the section entitled "Investment Objective and Policy", the
Manager's Report and notes 1(k), 5 and 12(d) to the financial statements, during
the previous accounting period, the issuers of two of the debt securities, being
Glitnir and Kaupthing suffered severe financial difficulties and were placed
into receivership. The Company has submitted claim forms to each of Glitnir and
Kaupthing, claiming GBP10,050,000 in respect of each one of these Debt
Securities, such amounts being equal to the maximum redemption proceeds of
GBP1.675 per GBP1 nominal. As such, the values of the debt instruments issued
by Glitnir and Kaupthing cannot be ascertained with any degree of certainty.
Although at the time of writing the situation remains unclear, the Manager and
Board of directors consider it likely that Glitnir and Kaupthing may not pay in
full on their obligations and in the worst case scenario may pay nothing at all.
Any claims which are paid may be paid before or after the end of the life of
the Company and in the case of early payment it may not be possible to reinvest
the proceeds in Debt Securities which replicate the investment characteristics
of the original Debt Securities.
Close European Accelerated Fund Limited (the "Company")
INTERIM MANAGEMENT REPORT FOR THE PERIOD FROM 1 JULY TO 31
DECEMBER 2009 (Continued).
Any claims which are paid may be paid in currencies other than Sterling and/or
in forms other than cash. Any payments received by the Company may therefore be
subject to currency fluctuations and/or other market movements.
As disclosed in the section entitled "Investment Objective and Policy", the
notes to the financial statements and the schedule of investments on pages 32
and 33, the Company has sold a Put Option to the Put Option Counterparty. The
performance of the Put Option is linked to the performance of the Dow Jones
EuroStoxx 50 Index (the "Index"). At an Index value of 3,302.98 or above at the
close of business on 26 July 2011, or if the Index has never closed below
1,651.49 during the calculation period from 26 July 2005 to 26 July 2011 (an
"Index Barrier Breach"), the Put Option will be worth GBPNil at maturity. If
the Index has closed below 1,651.49 over the calculation period and the Index is
still below 3,302.98 at 26 July 2011, the Put Option will be worth a percentage
of the notional value, being GBP39,550,000, equivalent to the percentage fall in
the level of the Index over the calculation period. As at the accounting
reference date and as at the date of this report no Index Barrier Breach had
occurred.
The Company's contingent liability to the Put Option Counterparty under the Put
Option sold to the Put Option Counterparty will not crystallise until the Put
Option's scheduled maturity date of 28 July 2011. Such contingent liability
under the Put Option will be calculated based on the level of the Index as at 26
July 2011. As the contingent liability under the Put Option cannot be
quantified and does not crystallise until 26 July 2011, the directors do not
consider that such contingent liability renders the Company insolvent at this
time. Only in the event that the value of the Put Option based on the level of
the Dow Jones EuroStoxx 50 Index as at 26 July 2011 exceeds the value of the
Company's assets on that date might the Company be rendered insolvent.
As disclosed in the section entitled "Investment Objective and Policy" and note
12(c) to the financial statements, upon the issue of Shares in July 2005 the
Company created a cash reserve (the "Expense Provision") in the amount of 2.10%
of the amount raised by the issue of such shares (the "Initial Gross Proceeds")
plus GBP440,000, such amount being estimated in
Close European Accelerated Fund Limited (the "Company")
INTERIM MANAGEMENT REPORT FOR THE PERIOD FROM 1 JULY TO 31 DECEMBER 2009
(Continued)
the opinion of the directors upon the advice of the Administrator to be
sufficient to meet the operating expenses reasonably expected to be incurred
over the life of the Company. Upon the issue of additional Shares in September
2006, an additional 2.10% of the proceeds of that issue of additional Shares was
set aside to cover the increase in the Manager's fee which resulted from that
issue of additional Shares, all other expenses being either fixed for the life
of the Shares or deemed unlikely to increase materially as a result of this
issue of additional Shares.
After making enquiries, the directors have a reasonable expectation that the
Company has adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going concern basis
in preparing this half-yearly financial report.
Responsibility Statement
The Board of directors jointly and severally confirm that, to the best of their
knowledge:
(a) The financial statements, prepared in accordance with International
Financial Reporting Standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company; and
(b) This Interim Management Report includes or incorporates by reference:
(i) an indication of important events that have occurred during the
first six months of the financial year and their impact on the financial
statements;
(ii) a description of the principal risks and uncertainties for the
remaining six months of the financial year;
(iii) confirmation that there were no related party transactions in the
first six months of the current financial year that have materially affected the
financial position or the performance of the Company during that period; and
(iv) changes in the related parties transactions described in the last
annual report that could have a material effect on the financial position or
performance of the Company in the first six months of the current financial
year.
Talmai Morgan Peter Niven
Director Director
23 February 2010
Close European Accelerated Fund Limited (the "Company")
UNAUDITED STATEMENT OF COMPREHENSIVE INCOME
for the period ended 31 December 2009
+-------------------------------------+-------+-----------+----------+--------------+
| |Notes | 1 Jul | | 1 Jul |
| | | 2009 | | 2008 |
| | | 31 Dec | | 31 Dec |
| | | 2008 | | 2008 |
| | | GBP | | GBP |
+-------------------------------------+-------+-----------+----------+--------------+
| | | | | |
+-------------------------------------+-------+-----------+----------+--------------+
| Net movement in unrealised | | | | |
| appreciation / | | | | |
+-------------------------------------+-------+-----------+----------+--------------+
| (depreciation) on investments | 5 | 4,258,506 | | (16,190,325) |
+-------------------------------------+-------+-----------+----------+--------------+
| | | | | |
+-------------------------------------+-------+-----------+----------+--------------+
| Unrealised (appreciation) / | | 4,989,535 | | (5,934,934) |
| depreciation on value of Put Option | | | | |
+-------------------------------------+-------+-----------+----------+--------------+
| | | | | |
+-------------------------------------+-------+-----------+----------+--------------+
| Operating expenses | 2 | (19,874) | | (166,958) |
+-------------------------------------+-------+-----------+----------+--------------+
| | | | | |
+-------------------------------------+-------+-----------+----------+--------------+
| Net gain / (loss) for the period | | | | |
| attributable to | | | | |
+-------------------------------------+-------+-----------+----------+--------------+
| shareholders | | 9,050,157 | | (22,292,217) |
+-------------------------------------+-------+-----------+----------+--------------+
| | | | | |
+-------------------------------------+-------+-----------+----------+--------------+
| | | | | |
+-------------------------------------+-------+-----------+----------+--------------+
| | | Pence | | Pence |
+-------------------------------------+-------+-----------+----------+--------------+
| Earnings / (loss) per Share for the | 4 | 22.88 | | (56.36) |
| period | | | | |
+-------------------------------------+-------+-----------+----------+--------------+
In arriving at the results for the financial period, all amounts above relate to
continuing operations.
There are no recognised gains or losses for the period other than those
disclosed above.
There is no other comprehensive income in the period
Reconciliation of earnings / loss per Share for investment purposes to earnings
/ loss per Share per the financial statements:
+-------------------------------------------+---------+----------+----------+
| | Pence | | Pence |
+-------------------------------------------+---------+----------+----------+
| Earnings / (loss) per Share for | 23.38 | | (55.94) |
| investment purposes | | | |
+-------------------------------------------+---------+----------+----------+
| Adjustment to include expenses on an | (0.50) | | (0.42) |
| accruals basis | | | |
+-------------------------------------------+---------+----------+----------+
| Earnings / (loss) per Share per the | 22.88 | | (56.36) |
| financial statements | | | |
+-------------------------------------------+---------+----------+----------+
In accordance with International Financial Reporting Standards, expenses should
be attributed to the period to which they relate. The adjustment to expenses to
reflect the application of this accruals basis reduces the earnings per Share of
the Company by 0.50 pence.
The earnings per share for investment purposes represents the earnings per Share
attributable to Shareholders in accordance with the Prospectus, which recognises
all expenses of the Company up to and including the date that the redemption
proceeds becomes payable.
Close European Accelerated Fund Limited (the "Company")
UNAUDITED STATEMENT OF FINANCIAL POSITION
as at 31 December 2009
+-------------------------------------+-------+------------+----------+------------+
| |Notes | 31 Dec | | 30 Jun |
| | | 2009 | | 2009 |
| | | GBP | | GBP |
+-------------------------------------+-------+------------+----------+------------+
| NON-CURRENT ASSETS | | | | |
+-------------------------------------+-------+------------+----------+------------+
| | | | | |
+-------------------------------------+-------+------------+----------+------------+
| Unquoted financial assets | | | | |
| designated as at fair value | | | | |
+-------------------------------------+-------+------------+----------+------------+
| through profit or loss | 5 | 31,297,059 | | 27,038,553 |
+-------------------------------------+-------+------------+----------+------------+
| | | | | |
+-------------------------------------+-------+------------+----------+------------+
| CURRENT ASSETS | | | | |
+-------------------------------------+-------+------------+----------+------------+
| | | | | |
+-------------------------------------+-------+------------+----------+------------+
| Receivables | 6 | 244,194 | | 318,001 |
+-------------------------------------+-------+------------+----------+------------+
| Cash at bank | | 498,711 | | 616,104 |
+-------------------------------------+-------+------------+----------+------------+
| | | | | |
+-------------------------------------+-------+------------+----------+------------+
| | | 742,905 | | 934,105 |
+-------------------------------------+-------+------------+----------+------------+
| | | | | |
+-------------------------------------+-------+------------+----------+------------+
| CURRENT LIABILITIES | | | | |
+-------------------------------------+-------+------------+----------+------------+
| | | | | |
+-------------------------------------+-------+------------+----------+------------+
| Payables - due within one year | 7 | 24,051 | | 17,377 |
+-------------------------------------+-------+------------+----------+------------+
| | | | | |
+-------------------------------------+-------+------------+----------+------------+
| NET CURRENT ASSETS | | 718,854 | | 916,728 |
+-------------------------------------+-------+------------+----------+------------+
| | | | | |
+-------------------------------------+-------+------------+----------+------------+
| TOTAL ASSETS LESS CURRENT | | 32,015,913 | | 27,955,281 |
| LIABILITIES | | | | |
+-------------------------------------+-------+------------+----------+------------+
| (excluding net assets attributable | | | | |
| to shareholders) | | | | |
+-------------------------------------+-------+------------+----------+------------+
| | | | | |
+-------------------------------------+-------+------------+----------+------------+
| Non-current liabilities excluding | 8 | 4,173,469 | | 9,163,004 |
| net assets attributable to | | | | |
| shareholders | | | | |
+-------------------------------------+-------+------------+----------+------------+
| | | | | |
+-------------------------------------+-------+------------+----------+------------+
| NET ASSETS ATTRIBUTABLE TO | | 27,842,444 | | 18,792,277 |
| SHAREHOLDERS | | | | |
+-------------------------------------+-------+------------+----------+------------+
| | | | | |
+-------------------------------------+-------+------------+----------+------------+
| SHARES IN ISSUE | | 39,550,000 | | 39,550,000 |
+-------------------------------------+-------+------------+----------+------------+
| | | | | |
+-------------------------------------+-------+------------+----------+------------+
| | | Pence | | Pence |
+-------------------------------------+-------+------------+----------+------------+
| NAV PER SHARE | | 70.40 | | 47.52 |
+-------------------------------------+-------+------------+----------+------------+
Reconciliation of NAV per Share for investment purposes to NAV per Share per the
financial statements:
+-------------------------------------------+---------+----------+----------+
| | Pence | | Pence |
+-------------------------------------------+---------+----------+----------+
| NAV per Share for investment purposes | 68.58 | | 45.19 |
+-------------------------------------------+---------+----------+----------+
| Adjustment to include expenses on an | 1.82 | | 2.33 |
| accruals basis | | | |
+-------------------------------------------+---------+----------+----------+
| NAV per share per the financial | 70.40 | | 47.52 |
| statements | | | |
+-------------------------------------------+---------+----------+----------+
In accordance with International Financial Reporting Standards, expenses should
be attributed to the period to which they relate. The adjustment to expenses to
reflect the application of this accruals basis increases the NAV per Share of
the Company by 1.82 pence.
The NAV per Share for investment purposes represents the NAV per Share
attributable to Shareholders in accordance with the Prospectus, which recognises
all expenses of the Company up to and including the date that the redemption
proceeds becomes payable.
The financial statements were approved by the Board of Directors on 23 February
2010 and are signed on its behalf by:
Talmai Morgan Peter Niven
Director
Director
Close European Accelerated Fund Limited (the "Company")
UNAUDITED STATEMENT OF CASH FLOWS
for the period ended 31 December 2009
+----------------------------------------+-------------+----------+--------------+
| | 1 Jul | | 1 Jul |
| | 2009 | | 2008 |
| | to 31 | | to 31 Dec |
| | Dec 2009 | | 2008 |
| | GBP | | GBP |
+----------------------------------------+-------------+----------+--------------+
| Operating activities | | | |
+----------------------------------------+-------------+----------+--------------+
| | | | |
+----------------------------------------+-------------+----------+--------------+
| Net gain / (loss) for the period | 9,050,167 | | (22,292,217) |
| attributable to shareholders | | | |
+----------------------------------------+-------------+----------+--------------+
| Less Unrealised (appreciation) / | (4,258,506) | | 16,190,325 |
| depreciation on investments | | | |
+----------------------------------------+-------------+----------+--------------+
| Less: Unrealised (depreciation) / | | | |
| appreciation on value of Put | | | |
+----------------------------------------+-------------+----------+--------------+
| Option | (4,989,535) | | 5,934,934 |
+----------------------------------------+-------------+----------+--------------+
| Less: Interest received | (193) | | (17,728) |
+----------------------------------------+-------------+----------+--------------+
| Add: Increase / (decrease) in accrued | 6,674 | | (19,065) |
| expenses | | | |
+----------------------------------------+-------------+----------+--------------+
| Add: Decrease in prepayments and | 73,807 | | 74,537 |
| accrued income | | | |
+----------------------------------------+-------------+----------+--------------+
| | | | |
+----------------------------------------+-------------+----------+--------------+
| Net cash outflow from operating | (117,586) | | (129,214) |
| activities | | | |
+----------------------------------------+-------------+----------+--------------+
| | | | |
+----------------------------------------+-------------+----------+--------------+
| Investing activities | | | |
+----------------------------------------+-------------+----------+--------------+
| | | | |
+----------------------------------------+-------------+----------+--------------+
| Interest received | 193 | | 17,728 |
+----------------------------------------+-------------+----------+--------------+
| | | | |
+----------------------------------------+-------------+----------+--------------+
| Net cash inflow from investing | 193 | | 17,728 |
| activities | | | |
+----------------------------------------+-------------+----------+--------------+
| | | | |
+----------------------------------------+-------------+----------+--------------+
| Cash and cash equivalents at beginning | 616,104 | | 836,501 |
| of period | | | |
+----------------------------------------+-------------+----------+--------------+
| | | | |
+----------------------------------------+-------------+----------+--------------+
| Decrease in cash and cash equivalents | (117,393) | | (111,486) |
+----------------------------------------+-------------+----------+--------------+
| | | | |
+----------------------------------------+-------------+----------+--------------+
| Cash and cash equivalents at end of | 498,711 | | 725,015 |
| period | | | |
+----------------------------------------+-------------+----------+--------------+
Close European Accelerated Fund Limited (the "Company")
UNAUDITED STATEMENT OF CHANGES IN EQUITY ATTRIBUTABLE TO SHAREHOLDERS
for the period ended 31 December 2009
+-------------------+-----------+----------+------------+----------+--------------+----------+------------+
| | Share | | Share | | Accumulated | | |
| | Capital | | Premium | | Losses | | Total |
| | GBP | | GBP | | GBP | | GBP |
+-------------------+-----------+----------+------------+----------+--------------+----------+------------+
| | | | | | | | |
+-------------------+-----------+----------+------------+----------+--------------+----------+------------+
| Balance as at 1 | 3,957 | | 39,812,295 | | (21,023,975) | | 18,792,277 |
| July 2009 | | | | | | | |
+-------------------+-----------+----------+------------+----------+--------------+----------+------------+
| | | | | | | | |
+-------------------+-----------+----------+------------+----------+--------------+----------+------------+
| Net gain for the | - | | | | | | 9,050,167 |
| period | | | - | | 9,050,167 | | |
| attributable to | | | | | | | |
| shareholders | | | | | | | |
+-------------------+-----------+----------+------------+----------+--------------+----------+------------+
| | | | | | | | |
+-------------------+-----------+----------+------------+----------+--------------+----------+------------+
| Balance as at 31 | 3,957 | | | | | | 27,842,444 |
| December 2009 | | | 39,812,295 | | (11,973,808) | | |
+-------------------+-----------+----------+------------+----------+--------------+----------+------------+
+-------------------+-----------+----------+------------+----------+--------------+----------+--------------+
| | Share | | Share | | Accumulated | | |
| | Capital | | Premium | | Losses | | Total |
| | GBP | | GBP | | GBP | | GBP |
+-------------------+-----------+----------+------------+----------+--------------+----------+--------------+
| | | | | | | | |
+-------------------+-----------+----------+------------+----------+--------------+----------+--------------+
| Balance as at 1 | 3,957 | | 39,812,295 | | (1,810,224) | | 41,626,476 |
| July 2008 | | | | | | | |
+-------------------+-----------+----------+------------+----------+--------------+----------+--------------+
| | | | | | | | |
+-------------------+-----------+----------+------------+----------+--------------+----------+--------------+
| Net gain for the | - | | | | | | (22,834,199) |
| year attributable | | | - | | (22,834,199) | | |
| to shareholders | | | | | | | |
+-------------------+-----------+----------+------------+----------+--------------+----------+--------------+
| | | | | | | | |
+-------------------+-----------+----------+------------+----------+--------------+----------+--------------+
| Balance as at 31 | 3,957 | | | | | | 18,792,277 |
| December 2009 | | | 39,812,295 | | (21,023,975) | | |
+-------------------+-----------+----------+------------+----------+--------------+----------+--------------+
Close European Accelerated Fund Limited (the "Company")
UNAUDITED NOTES TO THE FINANCIAL STATEMENTS
as at 31 December 2009
1 ACCOUNTING POLICIES
(a) Basis of Preparation
The financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") which comprise standards and
interpretations approved by the International Accounting Standards Board and
International Financial Reporting Interpretations Committee and applicable
Guernsey law. The financial statements have been prepared on an historical cost
basis except for the measurement at fair value of financial instruments.
Amendments to IFRS 7 were issued by the International Accounting Standards Board
in March 2009, effective for annual periods beginning on or after 1 January
2009. The amendment to IFRS 7 requires fair value to be disclosed by the source
of inputs, using a three-level hierarchy:
Quoted prices (unadjusted) in active markets for identical assets or liabilities
(Level 1);
Inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly (as prices) or indirectly (derived from
prices) (Level 2);
Inputs for the asset or liability that are not based on observable market data
(unobservable inputs) (Level 3).
The following Standards or Interpretations have been issued by the International
Accounting Standards Board but not yet adopted by the Company:
IFRS 2 (revised June 2009) Share-based Payment effective for annual periods
beginning on or after 1 January 2013
IFRS 9 (revised April 2009) Financial Instruments - Classification and
Measurement effective for annual periods beginning on or after 1 January 2013
IAS 24 (revised November 2009) Related Party Disclosures effective for annual
periods beginning on or after 1 January 2011
IAS 32 (revised 2009) Financial Instruments - Presentation effective for annual
periods beginning on or after 1 February 2010
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments effective
for annual periods beginning on or after 1 July 2010.
Some of these Standards and Interpretations may require additional disclosure in
future financial instruments.
(b) Taxation
The Company has been granted exemption under the Income Tax (Exempt Bodies)
(Guernsey) Ordinance, 1989 from Guernsey Income Tax, and is charged an annual
fee of GBP600. The Guernsey system of corporate taxation is currently under
review.
(c) Expenses
All expenses are accounted for on an accruals basis.
(d) Debt Issue Costs
The debt issue costs incurred amounted to GBP810,000 on the initial share issue
and a further GBP79,609 on the share issue on 21 September 2006. Because the
Company's participating shares are redeemable on or around 29 July 2011, they
are required to be classified as debt
Close European Accelerated Fund Limited (the "Company")
UNAUDITED NOTES TO THE FINANCIAL STATEMENTS
as at 31 December 2009
1 ACCOUNTING POLICIES (continued)
(d) Debt Issue Costs
instruments under IAS 32. Consequently, issue costs are required to be
amortised over the life of the instrument.
(e) Interest Income
Interest income is accounted for on an accruals basis.
(f) Cash and Cash Equivalents
Cash at bank and short term deposits which are held to maturity are carried at
cost. Cash and cash equivalents are defined as call deposits, short term
deposits and highly liquid investments readily convertible to known amounts of
cash and subject to insignificant risk of changes in value. For the purposes of
the Statement of Cash Flows, cash and cash equivalents consist of cash and
deposits at bank.
(g) Investments
All investments and derivative financial instruments are classified as "at fair
value through profit or loss". Investments are initially recognised at cost,
being the fair value of the consideration given, excluding transaction costs
associated with the investment. After initial recognition, investments are
measured at fair value, with unrealised gains and losses on investments and
impairment of investments being recognised in the Statement of Comprehensive
Income. Fair value is the amount for which the financial instruments could be
exchanged, or a liability settled, between knowledgeable willing parties in an
arms length transaction. Fair value also reflects the credit quality of the
issuers of the financial instruments.
Except for the debt securities issued by Glitnir and Kaupthing, valuations of
the Company's investments are based on valuations provided to the Company by
Future Value Consultants Limited (the "Valuer"). These valuations are intended
to be an indication of the fair value of those investments, including an
issuer's credit risk designed to reflect the best estimation of the price at
which they could be sold, even though there is no guarantee that a willing buyer
might be found if the Company chose to sell the relevant investment.
The indicative fair values of the investments are based on an approximation of
the market level of the investments. As the investments are not traded in an
active market, the indicative fair value was determined by using valuation
techniques. The Valuer used a variety of methods and made assumptions that were
based on market conditions existing at the statement of financial position date.
Valuation techniques used may include the use of comparable recent arm's length
transactions (where available), discounted cash flow analysis, option pricing
models and other valuation techniques commonly used by market participants.
Models use observable data, to the extent practicable. However, areas such as
credit risk, volatilities and correlations require the Valuer to make estimates.
Changes in assumptions about these factors could affect the reported fair value
of financial instruments.
Different assumptions regarding these factors, combined with different valuation
techniques and models used, could lead to different valuations of the financial
instruments produced by different parties.
The values of the debt instruments issued by Glitnir and Kaupthing cannot be
ascertained with any degree of certainty. Therefore the directors have exercised
their judgement in the best interests of both shareholders and creditors to
value these investments at GBPnil.
Close European Accelerated Fund Limited (the "Company")
UNAUDITED NOTES TO THE FINANCIAL STATEMENTS (continued)
as at 31 December 2009
1 ACCOUNTING POLICIES (continued)
(h) Put Option
The Put Option was initially recognised at the fair value of the consideration
received on the date of sale, and included within Creditors falling due after
more than one year. After initial recognition, the Put Option is measured at
fair value with unrealised gains and losses being recognised in the Statement of
Comprehensive Income. The Put Option will be derecognised on its maturity on 28
July 2011.
(i) Trade Date Accounting
All "regular way" purchases and sales of financial assets are recognised on the
"trade date", i.e. the date that the entity 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 timeframe generally
established by regulation or convention in the market place.
(j) Segmental Reporting
In the opinion of the directors the Company is engaged in a single
segment of business, being investment business in the United Kingdom.
(k) Critical accounting estimates and judgements
Management make critical accounting estimates and judgements concerning the
future. The resulting accounting estimates will, by definition, seldom equal
the related actual results. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the financial period are outlined below:
Fair value of derivative financial instruments
The Company has invested in a portfolio of debt securities containing embedded
derivatives related to the Dow Jones EuroStoxx 50 Index. As the investments are
not traded in an active market, the fair value, based on valuations provided by
the Valuer, was determined by using valuation techniques. The Valuer used a
variety of methods and made assumptions that were based on market conditions
existing at the statement of financial position date.
During the previous period, the issuers of two of the debt securities held by
the Company, being Glitnir and Kaupthing, suffered severe financial
difficulties.
On 8 October 2008 the government of Iceland announced that "the Icelandic
Financial Services Authority, Fjármálaeftirlitið (FME) had decided to take over
the powers invested in Glitnir's shareholders meeting and Glitnir's Board of
Directors". The FME has appointed a receivership committee which has assumed the
role of the Board of Directors. By law, the action of appointing a receivership
committee does not have the effect of creating a default under any loan
documents.
On 9 October 2008, the Icelandic FME announced it had taken control of Kaupthing
under powers granted by the Icelandic Parliament and appointed a receivership
committee.
Close European Accelerated Fund Limited (the "Company")
UNAUDITED NOTES TO THE FINANCIAL STATEMENTS (continued)
as at 31 December 2009
1 ACCOUNTING POLICIES (continued)
The Debt Securities issued by Glitnir and Kaupthing held by the Company are
senior unsecured debt. This means that they fall behind the Icelandic
government, liquidators and any secured creditors in terms of repaying capital,
but before or pari passu with all other creditors. In the event of default,
Debt Security holders would likely get back some money at the "recovery rate"
but in a worst case scenario may receive nothing at all. In practice the
recovery rate is likely to be above zero, but it is not possible to assign a
recovery rate to the notes at this point in time. As the value of these debt
instruments cannot be ascertained with any degree of certainty, the directors
have exercised their judgement in the best interests of both shareholders and
creditors to value these investments at GBPnil, which valuations differ from the
valuations provided by the Valuer.
(l) Going Concern
The Company has adequate financial resources and as a consequence, the directors
believe the company is well placed to manage its business risks successfully
despite the current economic climate. After making enquiries, the directors
have a reasonable expectation that the Company has adequate resources to
continue in operational existence for the foreseeable future. Accordingly, the
directors have adopted the going concern basis in preparing the financial
information.
+----+-----------------------------------+----------+----------+-----------+
| 2 | OPERATING EXPENSES | | | |
| | | | | |
+----+-----------------------------------+----------+----------+-----------+
| | | 1 Jul | | 1 Jul |
| | | 2009 | | 2008 |
| | | to 31 | | to 31 Dec |
| | | Dec 2009 | | 2008 |
| | | GBP | | GBP |
+----+-----------------------------------+----------+----------+-----------+
| | | | | |
+----+-----------------------------------+----------+----------+-----------+
| | Amortisation of debt issue costs | 76,304 | | 76,304 |
+----+-----------------------------------+----------+----------+-----------+
| | Investment management fees (1) | 70,251 | | 70,059 |
+----+-----------------------------------+----------+----------+-----------+
| | Administration fees | 11,090 | | 11,060 |
+----+-----------------------------------+----------+----------+-----------+
| | Directors' remuneration | 7,500 | | 7,500 |
+----+-----------------------------------+----------+----------+-----------+
| | Registration fees | 3,914 | | 5,189 |
+----+-----------------------------------+----------+----------+-----------+
| | Directors' & Officers' Insurance | 3,960 | | 3,908 |
+----+-----------------------------------+----------+----------+-----------+
| | Audit fees | 4,000 | | 2,500 |
+----+-----------------------------------+----------+----------+-----------+
| | Annual fees | 12,200 | | 6,458 |
+----+-----------------------------------+----------+----------+-----------+
| | Other operating expenses | 8,848 | | 1,708 |
+----+-----------------------------------+----------+----------+-----------+
| | | | | |
+----+-----------------------------------+----------+----------+-----------+
| | | 198,067 | | 184,686 |
+----+-----------------------------------+----------+----------+-----------+
| | | | | |
+----+-----------------------------------+----------+----------+-----------+
| | Less: Interest earned on expense | (193) | | (17,728) |
| | provision bank account | | | |
+----+-----------------------------------+----------+----------+-----------+
| | | | | |
+----+-----------------------------------+----------+----------+-----------+
| | | 197,874 | | 166,958 |
+----+-----------------------------------+----------+----------+-----------+
(1) The Manager is entitled to receive a fee from the Company at an annual rate
of 0.35% of the Initial Gross Proceeds.
3 DIRECTORS' REMUNERATION
The Prospectus provides that each director will be paid a fee of GBP5,000 per
annum by the Company. This remuneration will remain fixed over the life of the
Company.
Close European Accelerated Fund Limited (the "Company")
UNAUDITED NOTES TO THE FINANCIAL STATEMENTS (continued)
as at 31 December 2009
4 EARNINGS PER SHARE
The earnings per Share is based on the gain for the period of GBP9,050,167
(2008: loss GBP22,292,217) and on 39,550,000 Shares (2008: 39,550,000 Shares),
being the weighted average number of Shares in issue during the period.
+----+------------------------------------+--------------+----------+--------------+
| 5 | INVESTMENTS |
+----+-----------------------------------------------------------------------------+
| | | | | |
+----+------------------------------------+--------------+----------+--------------+
| | | 31 Dec | | 30 Jun |
| | | 2009 | | 2009 |
| | | GBP | | GBP |
+----+------------------------------------+--------------+----------+--------------+
| | UNQUOTED FINANCIAL ASSETS | | | |
| | DESIGNATED AT FAIR VALUE THROUGH | | | |
| | PROFIT OR LOSS | | | |
+----+------------------------------------+--------------+----------+--------------+
| | | | | |
+----+------------------------------------+--------------+----------+--------------+
| | Portfolio cost | 39,889,380 | | 39,889,380 |
+----+------------------------------------+--------------+----------+--------------+
| | | | | |
+----+------------------------------------+--------------+----------+--------------+
| | Unrealised (depreciation) / | | | |
| | appreciation on valuation | | | |
+----+------------------------------------+--------------+----------+--------------+
| | brought forward | (12,850,827) | | 3,468,475 |
+----+------------------------------------+--------------+----------+--------------+
| | | | | |
+----+------------------------------------+--------------+----------+--------------+
| | Unrealised appreciation on | 4,258,506 | | 16,319,302 |
| | valuation for the period | | | |
+----+------------------------------------+--------------+----------+--------------+
| | | | | |
+----+------------------------------------+--------------+----------+--------------+
| | Unrealised depreciation on | (8,592,321) | | (12,850,827) |
| | valuation carried forward | | | |
+----+------------------------------------+--------------+----------+--------------+
| | | | | |
+----+------------------------------------+--------------+----------+--------------+
| | | | | |
+----+------------------------------------+--------------+----------+--------------+
| | Closing valuation | 31,297,059 | | 27,038,553 |
+----+------------------------------------+--------------+----------+--------------+
Except for the debt securities issued by Glitnir and Kaupthing, valuations of
investments are based on valuations provided by the Valuer. The provided
valuations were derived from proprietary models based upon well-recognised
financial principles and reasonable estimates about relevant future market
conditions using suitable inputs derived from market data such as interest
rates, credit default swap spreads, foreign exchange and forward foreign
exchange rates, Dow Jones EuroStoxx 50 Index levels and the implied volatilities
of EuroStoxx options.
To comply with the definition of fair value as defined by International
Financial Reporting Standards, the Valuer was engaged to provide valuations of
the investments, taking account of the current counterparty credit risk of the
issuers of the debt securities held by the Company.
As detailed in note 1(j) to the financial statements, the value of the debt
instruments issued by Glitnir and Kaupthing cannot be ascertained with any
degree of certainty. Therefore the directors have exercised their judgement in
the best interests of both shareholders and creditors to value these investments
at GBPnil which valuations differ from the valuations provided by the Valuer.
The performance of the financial assets is based on the closing level of the Dow
Jones EuroStoxx 50 Index on 29 July 2011. If the Dow Jones EuroStoxx 50 Index
closes above 3,302.98 the instruments are designed to give a return of five
times the performance up to a maximum return of 67.5% of the capital.
Valuation data provided by the Valuer to the Company is provided for
informational purposes only and does not represent an offer to buy or sell the
debt securities by the valuer or any other party.
Close European Accelerated Fund Limited (the "Company")
UNAUDITED NOTES TO THE FINANCIAL STATEMENTS (continued)
as at 31 December 2009
5 INVESTMENTS (continued)
The valuations provided are an indication of market levels and do not imply that
they can be sold at that valuation price. They are based on assumptions and
data the valuer considers in its judgement reasonable, but an alternative valuer
might arrive at different valuations for the same investments.
The Investments held by the Company have been classified as Level 2, except for
the two investments in notes issued by Glitnir and Kaupthing, which have been
classified as Level 3. This is in accordance with the fair value hierarchy.
Details of the value of each classification are listed in the table below.
Values are based on the market value of the investment as at the statement of
financial position date:
+----+------------------------------------+----------+----------+------------+
| | Investments | Market | | Market |
| | | Value | | Value |
| | | % | | GBP |
+----+------------------------------------+----------+----------+------------+
| | | | | |
+----+------------------------------------+----------+----------+------------+
| | Level 2 | 100% | | 31,297,059 |
+----+------------------------------------+----------+----------+------------+
| | Level 3 | 0% | | - |
+----+------------------------------------+----------+----------+------------+
| | | | | |
+----+------------------------------------+----------+----------+------------+
| | Total | 100% | | 31,297,059 |
+----+------------------------------------+----------+----------+------------+
There have been no transfers between Level 2 and Level 3 of the fair value
hierarchy during the period under review.
The following table shows a reconciliation of all the movements in the fair
value of financial instruments categorised within Level 3 between the beginning
and the end of the reporting period.
+----+------------------------------------+------------+----------+----------+
| | | Unquoted | | TOTAL |
| | | financial | | |
| | | assets | | |
| | | designated | | |
| | | as at fair | | |
| | | value | | |
| | | through | | |
| | | the profit | | |
| | | or loss | | |
| | | | | |
+----+------------------------------------+------------+----------+----------+
| | Level 3 | GBP | | GBP |
+----+------------------------------------+------------+----------+----------+
| | | | | |
+----+------------------------------------+------------+----------+----------+
| | Opening balance at 1 July 2009 | - | | - |
+----+------------------------------------+------------+----------+----------+
| | | | | |
+----+------------------------------------+------------+----------+----------+
| | Total gains and losses recognised | - | | - |
| | in - Profit and Loss | | | |
+----+------------------------------------+------------+----------+----------+
| | | | | |
+----+------------------------------------+------------+----------+----------+
| | Closing balance as 31 December | - | | - |
| | 2009 | | | |
+----+------------------------------------+------------+----------+----------+
Unrealised gains and losses on investments are recognised in the Statement of
Comprehensive Income. There have been no sales, purchases or realised gains on
the investments during the period under review.
Close European Accelerated Fund Limited (the "Company")
UNAUDITED NOTES TO THE FINANCIAL STATEMENTS (continued)
as at 31 December 2009
+----+-------------------------------------+----------+----------+----------+---------------+
| 6 | RECEIVABLES |
+----+--------------------------------------------------------------------------------------+
| | | | | |
+----+-------------------------------------+----------+---------------------+---------------+
| | | 31 Dec | | 30 Jun 2009 |
| | | 2009 | | GBP |
| | | GBP | | |
+----+-------------------------------------+----------+---------------------+---------------+
| | |
+----+--------------------------------------------------------------------------------------+
| | Prepayments | 244,194 | | 318,001 |
+----+-------------------------------------+----------+----------+--------------------------+
| | | | | |
+----+-------------------------------------+----------+----------+--------------------------+
| | | 244,194 | | 318,001 |
+----+-------------------------------------+----------+----------+--------------------------+
| | | | | | |
+----+-------------------------------------+----------+----------+----------+---------------+
+----+------------------------------------+-----------+----------+-----------+
| 7 | PAYABLES (amounts falling due within one year) |
+----+-----------------------------------------------------------------------+
| | | | | |
+----+------------------------------------+-----------+----------+-----------+
| | | 31 Dec | | 30 Jun |
| | | 2009 | | 2009 |
| | | GBP | | GBP |
+----+------------------------------------+-----------+----------+-----------+
| | |
+----+-----------------------------------------------------------------------+
| | Accrued administration fees | 1,868 | | 1,808 |
+----+------------------------------------+-----------+----------+-----------+
| | Accrued registration fees | 1,163 | | 458 |
+----+------------------------------------+-----------+----------+-----------+
| | Accrued audit fees | 4,000 | | 8,000 |
+----+------------------------------------+-----------+----------+-----------+
| | Accrued investment manager's fee | 11,836 | | - |
+----+------------------------------------+-----------+----------+-----------+
| | Other accrued expenses | 5,184 | | 7,111 |
+----+------------------------------------+-----------+----------+-----------+
| | Expense provision | 241,915 | | 242,377 |
+----+------------------------------------+-----------+----------+-----------+
| | Less: Prepaid expense provision | (241,915) | | (242,377) |
| | (see Note 8) | | | |
+----+------------------------------------+-----------+----------+-----------+
| | | | | |
+----+------------------------------------+-----------+----------+-----------+
| | | 24,051 | | 17,377 |
+----+------------------------------------+-----------+----------+-----------+
+----+-------------------------------------+-----------+----------+----------+---------------+
| 8 | PAYABLES (amounts falling due after one year) |
+----+---------------------------------------------------------------------------------------+
| | | | | |
+----+-------------------------------------+-----------+---------------------+---------------+
| | | 31 Dec | | 30 Jun 2009 |
| | | 2009 | | GBP |
| | | GBP | | |
+----+-------------------------------------+-----------+---------------------+---------------+
| | |
+----+---------------------------------------------------------------------------------------+
| | Expense provision | 232,745 | | 356,350 |
+----+-------------------------------------+-----------+----------+--------------------------+
| | Less: Prepaid expense provision | (232,745) | | (356,350) |
+----+-------------------------------------+-----------+----------+--------------------------+
| | | | | |
+----+-------------------------------------+-----------+----------+--------------------------+
| | | - | | - |
+----+-------------------------------------+-----------+----------+--------------------------+
| | | | | |
+----+-------------------------------------+-----------+----------+--------------------------+
| | FINANCIAL LIABILITIES | | | |
+----+-------------------------------------+-----------+----------+--------------------------+
| | | | | |
+----+-------------------------------------+-----------+----------+--------------------------+
| | | 31 Dec | | 30 Jun 2009 |
| | | 2009 | | GBP |
| | | GBP | | |
+----+-------------------------------------+-----------+----------+--------------------------+
| | | | | |
+----+-------------------------------------+-----------+----------+--------------------------+
| | Fair value of the Put Option | 4,173,469 | | 9,163,004 |
+----+-------------------------------------+-----------+----------+--------------------------+
| | | | | |
+----+-------------------------------------+-----------+----------+--------------------------+
| | | 4,173,469 | | 9,163,004 |
+----+-------------------------------------+-----------+----------+--------------------------+
| | | | | | |
+----+-------------------------------------+-----------+----------+----------+---------------+
The prepaid expense provision represents monies set aside to meet the on-going,
annual and redemption expenses of the Company, as set out in the Prospectus.
If, at the Redemption Date, there is any surplus remaining from the expense
provision (together with accrued interest thereon), this surplus will revert to
the Manager. In the event of redemption or repurchase of all of the Shares, or
upon a winding-up of the Company, in each case prior to the Redemption Date, any
balance of the expense provision (together with accrued interest thereon) other
than the investment management fee will also revert to the Manager.
Close European Accelerated Fund Limited (the "Company")
UNAUDITED NOTES TO THE FINANCIAL STATEMENTS (continued)
as at 31 December 2009
8 PAYABLES (amounts falling due after one year) (continued)
The performance of the Put Option is linked to the performance of the Dow Jones
EuroStoxx 50 Index. At an Index value of 3,302.98 or above at the close of
business on 26 July 2011, or if the Index has never closed below 1,651.49 during
the calculation period from 26 July 2005 to 26 July 2011, the Put Option will be
worth GBPNil at maturity. If the Index has closed below 1,651.49 over the
calculation period and the Index is still below 3,302.98 at 26 July 2011, the
Put Option will be worth a percentage of the notional value, being
GBP39,550,000, equivalent to the percentage fall in the level of the Dow Jones
EuroStoxx 50 Index over the calculation period.
The Put Option is not exercisable until the 26 July 2011.
The fair value of the Put Option is based on the valuation provided by the
Valuer. There is no active market regarding the Put Option.
J.P. Morgan Chase Bank N.A., in its capacity as the Put Option counterparty (the
"Put Option Counterparty"), has security over the financial assets held by the
Company for payment of any monies owed upon expiry or termination of the Put
Option contract.
The proceeds from the sale of the Put Option were GBP3,292,880.
The Put Option written by the Company has been classified as Level 2. This is in
accordance with the fair value hierarchy.
Details of the value of each classification are listed in the table below.
Values are based on the market value of the financial instruments as at the
statement of financial position date:
+----+------------------------------------+----------+----------+-------------+
| | | | | |
+----+------------------------------------+----------+----------+-------------+
| | Put Option | Market | | Market |
| | | Value | | Value |
| | | % | | GBP |
+----+------------------------------------+----------+----------+-------------+
| | | | | |
+----+------------------------------------+----------+----------+-------------+
| | Level 2 | 100 | | (4,173,469) |
+----+------------------------------------+----------+----------+-------------+
There have been no transfers between Level 2 and Level 3 of the fair value
hierarchy during the period under review.
+----+----------------------------------+-------------+----------+-----------+
| 9 | SHARE CAPITAL |
+----+-----------------------------------------------------------------------+
| | | | | |
+----+----------------------------------+-------------+----------+-----------+
| | Authorised | SHARES | | GBP |
+----+----------------------------------+-------------+----------+-----------+
| | | | | |
+----+----------------------------------+-------------+----------+-----------+
| | Unclassified shares of 0.01p | 100,000,000 | | 10,000 |
| | each | | | |
+----+----------------------------------+-------------+----------+-----------+
| | Management shares of GBP1.00 | 100 | | 100 |
| | each | | | |
+----+----------------------------------+-------------+----------+-----------+
| | | | | |
+----+----------------------------------+-------------+----------+-----------+
| | | | | 10,100 |
+----+----------------------------------+-------------+----------+-----------+
+----+----------------------------------+------------+----------+------------+
| | Issued | 31 Dec | | 30 Jun |
| | | 2009 | | 2009 |
+----+----------------------------------+------------+----------+------------+
| | | | | |
+----+----------------------------------+------------+----------+------------+
| | Participating shares - fully | 39,550,000 | | 39,550,000 |
| | paid | | | |
+----+----------------------------------+------------+----------+------------+
| | Management shares - fully paid | 2 | | 2 |
+----+----------------------------------+------------+----------+------------+
| | | | | |
+----+----------------------------------+------------+----------+------------+
| | Number of shares in issue | 39,550,002 | | 39,550,002 |
+----+----------------------------------+------------+----------+------------+
Close European Accelerated Fund Limited (the "Company")
UNAUDITED NOTES TO THE FINANCIAL STATEMENTS (continued)
as at 31 December 2009
9 SHARE CAPITAL (continued)
+----+----------------------------------+-----------+----------+-----------+
| | Issued Share Capital | 31 Dec | | 30 Jun |
| | | 2009 | | 2009 |
| | | GBP | | GBP |
+----+----------------------------------+-----------+----------+-----------+
| | | | | |
+----+----------------------------------+-----------+----------+-----------+
| | Participating shares - fully | 3,955 | | 3,955 |
| | paid | | | |
+----+----------------------------------+-----------+----------+-----------+
| | Management shares - fully paid | 2 | | 2 |
+----+----------------------------------+-----------+----------+-----------+
| | | | | |
+----+----------------------------------+-----------+----------+-----------+
| | | 3,957 | | 3,957 |
+----+----------------------------------+-----------+----------+-----------+
+----+--------------------+------------+----------+-----------+----------+------------+
| | The issues of Participating Shares took place as follows: |
+----+--------------------------------------------------------------------------------+
| | | | | |
+----+--------------------------------------------+-----------+----------+------------+
| | Date of issue | Number | | Price per | | Amount |
| | | of Shares | | Share | | Received |
| | | | | Pence | | GBP |
+----+--------------------+------------+----------+-----------+----------+------------+
| | | | | | | |
+----+--------------------+------------+----------+-----------+----------+------------+
| | 27 July 2005 | 36,000,000 | | 100.00 | | 36,000,000 |
+----+--------------------+------------+----------+-----------+----------+------------+
| | 21 September 2006 | 3,550,000 | | 107.50 | | 3,816,250 |
+----+--------------------+------------+----------+-----------+----------+------------+
The redemption proceeds for the Shares on a winding-up are detailed on pages 1
and 2.
Shares are redeemable on or around 29 July 2011. The Company is closed-ended
and therefore shareholders have no right to request the Company to repurchase
their Shares or to redeem them prior to the redemption date. If the Company is
wound up prior to the redemption date, shareholders will be entitled to the net
asset value of the Shares on the winding up date. No dividends will be paid on
the Shares.
Management shares are not redeemable, do not carry any right to dividends and in
a winding up rank only for a return of the amount of paid up capital after
return of capital on Shares and nominal shares. Given the immateriality of the
management shares to the net assets of the Company, they have been included in
net assets attributable to participating shareholders.
+----+----------------------------------+------------+----------+------------+
| 10 | SHARE PREMIUM |
+----+-----------------------------------------------------------------------+
| | | | | |
+----+----------------------------------+------------+----------+------------+
| | | 31 Dec | | 30 Jun |
| | | 2009 | | 2009 |
| | | GBP | | GBP |
+----+----------------------------------+------------+----------+------------+
| | | | | |
+----+----------------------------------+------------+----------+------------+
| | Opening and closing balance | 39,812,295 | | 39,812,295 |
+----+----------------------------------+------------+----------+------------+
11 FINANCIAL INSTRUMENTS
The Company's main financial instruments comprise:
(a) Cash and cash equivalents that arise directly from the Company's
operations;
(b) Debt securities whose performance is based on the performance of the
Dow Jones EuroStoxx 50 Index. Details of these investments are shown in the
schedule of investments on pages 32 and 33.
(c) The Company has also sold a Put Option, whose performance is based on
the Dow Jones EuroStoxx 50 Index. Details of the Put Option contract are shown
in Note 8.
Close European Accelerated Fund Limited (the "Company")
UNAUDITED NOTES TO THE FINANCIAL STATEMENTS (continued)
as at 31 December 2009
12 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The main risks arising from the Company's financial instruments are market price
risk, credit risk, liquidity risk, portfolio construction risk, interest rate
risk and currency risk. The Board regularly reviews and agrees policies for
managing each of these risks and these are summarised below:
(a) Market Price Risk
Market price risk arises mainly from uncertainty about future prices of
financial instruments held. It represents the potential loss the Company might
suffer through holding market positions in the face of price movements. The
Manager actively monitors market prices and reports to the Board as to the
appropriateness of the prices used for valuation purposes. A list of
investments held by the Company is shown in the schedule of investments on pages
32 and 33.
Details of the Company's Investment Objective and Policy are given
on pages 1 to 4.
Price sensitivity
The following details the Company's sensitivity to a 10% increase and decrease
in the final market prices of its constituent financial assets and liabilities.
The final redemption value of the Shares is determined by reference to the level
of the Dow Jones EuroStoxx 50 Index (the "Index") on 26 July 2011 and at that
date, if the Index stands at 3,748.89 (the "Index Cap Level"), the maximum
redemption entitlement of 167.5 pence per Share will have been reached; any
further increase in the level of the Index will cause no further increase in the
redemption entitlement.
On 31 December 2009 the Index stood at 2,964.96, a fall of 20.91% since the
Start Date.
During the period from the Start Date to 31 December 2009 the Index had not
closed below 1651.49, being 50% of the Start Value. As the Index would need to
decline by more than 44.30% from its level as at 31 December 2009 for the
redemption entitlement to be less than 100.00 pence per Share and further as the
Index would need to rise by more than 20.91% as at the End Date for the
redemption entitlement due to be more than 100.00 pence per Share, as at 31
December 2009 the Company had no material sensitivity to either a 10% increase
or decrease in the level of the Index, all provided that no counterparty
defaults on its obligations to the Counterparty.
(b) Credit Risk
Credit risk is the risk that an issuer or counterparty will be unable or
unwilling to meet a commitment that it has entered into with the Company.
At the date of this report and at the statement of financial position date, five
of the seven issuers carried an investment grade credit rating. The following
table details the aggregate investment grade of the debt instruments in the
portfolio based on the valuations of the investments at 31 December 2009 (30
June 2009 for the comparative period), as rated by Moody's Investor Services
Inc. ("Moody's").
+--------------------+-------------+-----------+-----------+
| Rating | 23 February | 31 Dec | 30 Jun |
| | 2010* | 2009 | 2009 |
+--------------------+-------------+-----------+-----------+
| | | | |
+--------------------+-------------+-----------+-----------+
| Aaa | 0.00% | 0.00% | 0.00% |
+--------------------+-------------+-----------+-----------+
| Aa | 100.00% | 100.00% | 69.71% |
+--------------------+-------------+-----------+-----------+
| A | 0.00% | 0.00% | 30.29% |
+--------------------+-------------+-----------+-----------+
* Based on the value of the Company's investments at 31 December 2009.
Close European Accelerated Fund Limited (the "Company")
UNAUDITED NOTES TO THE FINANCIAL STATEMENTS (continued)
as at 31 December 2009
12 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(b) Credit Risk (continued)
The Board monitors credit risk and will consider further action if the credit
rating of an issuer falls below A- or A3 as ranked by S&P and Moody's
respectively.
At the date of this report, the statement of financial position date and in the
previous period, two of the seven issuers, being Glitnir and Kaupthing, carried
a speculative grade credit rating as rated by Moody's. As the value of these
debt instruments cannot be ascertained, the directors have exercised their
judgement in the best interests of both shareholders and creditors to value
these investments at GBPnil.
Credit risk was mitigated at launch by the Company purchasing the Debt
Securities from six different issuers. At the time of purchase three of the
issuers were rated by Moody's at grade Aa and the remaining three were rated by
Moody's at grade A. Following the additional issue of shares in September 2006
the Company purchased a Debt Security that was rated by Moody's at grade Aa.
The credit risk on cash transactions and transactions involving derivative
financial instruments is mitigated by transacting with counterparties that are
regulated entities subject to prudential supervision, or with high credit
ratings assigned by international credit rating agencies.
(c) Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in
realising assets or otherwise raising funds to meet financial commitments. The
Company's main financial commitments are its ongoing operating expenses and any
cash settlement due to the Put Option Counterparty on the maturity of the Put
Option, scheduled to occur on 28 July 2011.
Upon the issue of the Shares in July 2005 the Company created a cash reserve
(the "Expense Provision") in the amount of 2.10% of the amount raised by the
issue of the Shares (the "Initial Gross Proceeds") plus GBP440,000, such amount
being estimated in the opinion of the directors upon the advice of the
Administrator to be sufficient to meet the operating expenses reasonably
expected to be incurred over the life of the Shares. Upon the issue of
additional Shares in September 2006 an additional 2.10% of the proceeds of that
issue of additional Shares was set aside to cover the increase in the Manager's
fee which resulted from that issue of additional Shares, all other expenses
being either fixed for the life of the Company or deemed unlikely to increase
materially as a result of this issue of additional Shares.
At each quarterly Board meeting and at the end of each financial period the
directors review the Expense Provision against the expected future expenses
(other than the Manager's fee) of the Company. To the extent that the directors
consider that the Expense Provision is less than 150 per cent of the expected
future expenses of the Company (other than the Manager's fee), the directors
may, having first consulted the Manager, at their discretion reduce the amount
of investment management fees payable to the Manager (subject to a maximum
reduction of 50 per cent) in order to re-establish the 150 per cent cover.
If at any time during the life of the Company, notwithstanding the arrangements
summarised above, the Expense Provision is exhausted then, subject to the
relevant excess expenses having been agreed by the Manager, the Manager will
make good such shortfall from its own
resources, subject to a maximum in each of the first five annual financial
periods of 0.25 per cent of the Initial Gross Proceeds and in the last financial
period preceding the Redemption Date, of a maximum amount of GBP100,000. Should
these expenses exceed this cap the return to Shareholders will be adversely
impacted. The directors do not anticipate that the expenses will exceed the
Expense Provision.
Close European Accelerated Fund Limited (the "Company")
UNAUDITED NOTES TO THE FINANCIAL STATEMENTS (continued)
as at 31 December 2009
12 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(c) Liquidity Risk (continued)
The Euro Medium Term Notes (the "Debt Securities") purchased by the Company
mature on 28 July 2011 (the "Maturity Date") and are due to be redeemed at their
notional face value plus five times the performance increase between 26 July
2005 and 26 July 2011 in the EuroStoxx 50 Index, capped at an amount equal to
67.50% of the notional face value, so that the aggregate maturity proceeds are
expected to be between GBP39,550,000 if the EuroStoxx 50 Index closes on 26 July
2011 at or below its starting value on 26 July 2005 of 3,302.98 and a maximum of
GBP66,246,250 if the EuroStoxx closes at or above 3,748.89 on 26 July 2011, all
provided that no counterparty defaults on its obligations to the Company.
Provided that none of issuers of the Debt Securities defaults on its obligation
to pay the maturity proceeds on the Maturity Date, the minimum maturity proceeds
of GBP39,550,000 due are intended to satisfy the maximum payment due to be made
by the Company to the Put Option Counterparty on the maturity of the Put Option
of GBP39,550,000.
The directors and the Manager monitor the credit ratings of all issuers of the
Debt Securities. In the event of any downgrading in the long-term credit rating
of any issuer below A- or A3, as determined by Standard & Poor's and/or Moody's
Investor Services Inc respectively, the Company may in its absolute discretion
seek to sell the relevant Debt Securities to third party purchasers and to
reinvest the proceeds in the purchase of Debt Securities of another issuer such
that the new Debt Securities will replicate as closely as possible the terms and
conditions of the original Debt Securities. The directors will only seek to
sell the relevant Debt Securities if they consider on the advice of the Manager
that such would be in the best interest of the Company and its shareholders. In
the event of such sales, if the purchase of such Debt Securities is not
possible, the Directors may reinvest such proceeds as they see fit in
investments which, in the opinion of the Directors, as nearly as is practicable,
replicate the investment characteristics of the Debt Securities sold and so that
the proceeds are invested, as nearly as is practicable, in accordance with the
Company's stated investment objective. As at the accounting reference date, at
the date of this report and in the previous period, five of the seven issuers of
the Debt Securities carried investment grade credit rating. Two of the seven
issuers of the Debt Securities carried a speculative grade credit rating.
The table below details the residual contractual maturities of financial
liabilities:
+----+--------------------+----------+----------+-----------+----------+-----------+
| | As at 31 December | 1-3 | | Over 1 | | Total |
| | 2009 | months | | year | | GBP |
| | | GBP | | GBP | | |
+----+--------------------+----------+----------+-----------+----------+-----------+
| | | | | | | |
+----+--------------------+----------+----------+-----------+----------+-----------+
| | Accrued expenses | 24,051 | | - | | 24,051 |
+----+--------------------+----------+----------+-----------+----------+-----------+
| | Derivative | - | | 4,173,469 | | 4,173,469 |
| | financial | | | | | |
| | instruments | | | | | |
+----+--------------------+----------+----------+-----------+----------+-----------+
| | | | | | | |
+----+--------------------+----------+----------+-----------+----------+-----------+
| | Total | 24,051 | | 4,173,469 | | 4,197,520 |
+----+--------------------+----------+----------+-----------+----------+-----------+
Close European Accelerated Fund Limited (the "Company")
UNAUDITED NOTES TO THE FINANCIAL STATEMENTS (continued)
as at 31 December 2009
12 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(d) Portfolio Construction Risk
Portfolio construction risk arises when the intended balance or
resultant effect of movements in value of assets and liabilities is disturbed
because of some unintended external event.
In the case of the Company's investment portfolio there is an
intended balance between the aggregate nominal value of the debt instruments
held and the nominal value of the Put Option and, if one or more of the debt
instrument issuers were to default, in part or in total, there will not be a
corresponding reduction in the value of the Put Option. Thus, if such an issuer
default did occur and there was an index barrier breach which caused the Put
Option to take effect, the default would cause an acceleration in the reduction
of the final redemption value of a share such that it will fall to zero well
before the index reaches nil.
As disclosed in note 1(j) above, in October 2008, the FME took
control of both Glitnir and Kaupthing and appointed a receivership committee of
each.
The Debt Securities issued by Glitnir and Kaupthing held by the
Company are senior unsecured debt. In the event of a default by either Glitnir
or Kaupthing, Debt Security holders would likely get back some money at the
"recovery rate" rather than zero. In practice the recovery rate is likely to be
above zero, but it is not possible to assign a recovery rate to the notes at
this point in time.
Although at the time of writing the situation remains unclear, the
Manager and Board of directors consider it likely that Glitnir and Kaupthing may
not pay in full on their obligations and in the worst case scenario may pay
nothing at all.
(e) Interest Rate Risk
The Company holds cash on fixed deposit, the return on which is
subject to fluctuations in market interest rates. All fixed deposits mature
within three months.
The weighted average effective interest rate for cash and bank balances as at 31
December 2009 was 0% (June 2009: 2.1%).
None of the other assets or liabilities of the Company attract or incur
interest.
Interest rate sensitivity
Interest rate risk arises from the possibility that changes in interest rates
will affect future cash flows or the fair value of financial instruments.
Except for cash set aside to meet expenses, the Company's assets and liabilities
are expected to be held until the Redemption Date.
If interest rates had been 100 basis points higher and all other variables were
held constant, the Company's increase in net assets attributable for the period
ended 31 December 2009 would have been GBP4,987 greater (2009: GBP6,161) due to
an increase in the amount of interest receivable on the bank balances.
If interest rates had been 100 basis points lower and all other variables were
held constant, the Company's increase in net assets attributable for the period
ended 31 December 2009 would have been GBP4,987 less (2009: GBP6,161) due to a
decrease in the amount of interest receivable on the bank balances.
The Company's sensitivity to interest rates is lower in 2009 than in June 2009
because of a decrease in the amount of cash balances held and the general level
of rates available in the market.
Close European Accelerated Fund Limited (the "Company")
UNAUDITED NOTES TO THE FINANCIAL STATEMENTS (continued)
as at 31 December 2009
12 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(f) Currency Risk
As both the Shares and the Debt Securities are Sterling-denominated,
shareholders investing for Sterling returns will not be exposed to direct
currency risk. The value of the underlying securities comprising the Index may
be affected by changes in the economic, political or social environment in
Europe, as well as globally, including changes in exchange rates.
(g)Capital Management
The investment objective of the Company is to provide shareholders, on the
Redemption Date, with a payment which will comprise a capital amount of 100p per
Share and a growth amount per Share equal to five times any percentage increase
in the value of the Index (the "End Value") as at 26 July 2011 (the "End Date")
relative to its value (the "Start Value") as at 26 July 2005 (the "Start Date"),
such amount being expressed in pence and rounded down to the next half pence,
subject to a maximum increase of 67.5 per cent of the issue price of 100 pence
per Share.
The Company has an unlimited life but the Shares will be redeemed on or around
29 July 2011.
(h) Collateral
Under the terms of a Pledge Agreement dated 2 August 2005 and the amendment
dated 18 September 2006 entered into between the Company and the Put Option
Counterparty, the Company has pledged the Debt Securities, and all rights, title
and interest therein, and any and all proceeds resulting from the sale or
repayment of the Debt Securities as security for the Company's contingent
liability under the Put Option sold to the Put Option Counterparty, further
details of which are shown at Note 8. The collateral is held by a custodian in
a segregated account in Euroclear. Where there is an event of default in
respect of the Company under the Put Option, the Put Option Counterparty will be
entitled to enforce its security over the Debt Securities.
13 RELATED PARTIES
Anson Fund Managers Limited is the Company's Administrator and Secretary, Anson
Registrars Limited is the Company's Registrar, Transfer Agent and Paying Agent
and Anson Administration (UK) Limited is the UK Transfer Agent. John R Le
Prevost is a director of Anson Fund Managers Limited, Anson Registrars Limited
and Anson Administration (UK) Limited. GBP15,004 (2008: GBP16,249) of costs
were incurred by the Company with these related parties in the period, of which
GBP3,031 (2009: GBP2,266) was due to these related parties as at 31 December
2009.
Close European Accelerated Fund Limited (the "Company")
UNAUDITED SCHEDULE OF INVESTMENTS
as at 31 December 2009
+--------------------------------+-----------+----------+------------+----------+---------+
| | NOMINAL | | VALUATION | | TOTAL |
| | | | | | NET |
+--------------------------------+-----------+----------+------------+----------+---------+
| DEBT SECURITIES PORTFOLIO | HOLDINGS | | GBP | | ASSETS |
| | | | | | % |
+--------------------------------+-----------+----------+------------+----------+---------+
| | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| BNP Paribas 0% EMTN 28 July | 6,000,000 | | 6,855,952 | | 24.62% |
| 2011 | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| Caixa Geral de Depositas 0% | 6,000,000 | | 6,836,653 | | 24.55% |
| EMTN 28 July 2011 | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| Erste Bank 0% EMTN 28 July | 6,000,000 | | 6,784,392 | | 24.37% |
| 2011 | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| Glitnir Banki HF 0% EMTN 28 | 6,000,000 | | - | | 0.00% |
| July 2011 | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| Kaupthing Bunadarbanki 0% EMTN | 6,000,000 | | - | | 0.00% |
| 28 July 2011 | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| KBC IFIMA 0% EMTN 28 July 2011 | 6,000,000 | | 6,797,153 | | 24.41% |
+--------------------------------+-----------+----------+------------+----------+---------+
| | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| RBS 0% EMTN 28 July 2011 | 3,550,000 | | 4,022,909 | | 14.45% |
+--------------------------------+-----------+----------+------------+----------+---------+
| | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| | | | 31,297,059 | | 112.40% |
+--------------------------------+-----------+----------+------------+----------+---------+
The Company has also sold a Put Option, details of which are shown below.
+-------------------------------+------------+----------+--------------+----------+---------+
| | NOTIONAL | | VALUATION | | |
+-------------------------------+------------+----------+--------------+----------+---------+
| | HOLDING | | GBP | | |
+-------------------------------+------------+----------+--------------+----------+---------+
| | | | | | |
+-------------------------------+------------+----------+--------------+----------+---------+
| JPM EuroStoxx 50 Put Option | 39,550,000 | | (4,173,469)) | | |
| maturing 28 July 2011 | | | | | |
+-------------------------------+------------+----------+--------------+----------+---------+
Close European Accelerated Fund Limited (the "Company")
UNAUDITED SCHEDULE OF INVESTMENTS
as at 30 June 2009
+--------------------------------+-----------+----------+------------+----------+---------+
| | NOMINAL | | VALUATION | | TOTAL |
| | | | | | NET |
+--------------------------------+-----------+----------+------------+----------+---------+
| DEBT SECURITIES PORTFOLIO | HOLDINGS | | GBP | | ASSETS |
| | | | | | % |
+--------------------------------+-----------+----------+------------+----------+---------+
| | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| BNP Paribas 0% EMTN 28 July | 6,000,000 | | 6,012,804 | | 32.01% |
| 2011 | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| Caixa Geral de Depositas 0% | 6,000,000 | | 5,983,009 | | 31.85% |
| EMTN 28 July 2011 | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| Erste Bank 0% EMTN 28 July | 6,000,000 | | 5,770,172 | | 30.72% |
| 2011 | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| Glitnir Banki HF 0% EMTN 28 | 6,000,000 | | - | | 0.00% |
| July 2011 | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| Kaupthing Bunadarbanki 0% EMTN | 6,000,000 | | - | | 0.00% |
| 28 July 2011 | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| KBC IFIMA 0% EMTN 28 July 2011 | 6,000,000 | | 5,789,313 | | 30.82% |
+--------------------------------+-----------+----------+------------+----------+---------+
| | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| RBS 0% EMTN 28 July 2011 | 3,550,000 | | 3,483,255 | | 18.55% |
+--------------------------------+-----------+----------+------------+----------+---------+
| | | | | | |
+--------------------------------+-----------+----------+------------+----------+---------+
| | | | 27,038,553 | | 143.89% |
+--------------------------------+-----------+----------+------------+----------+---------+
The Company has also sold a Put Option, details of which are shown below.
+-------------------------------+------------+----------+-------------+----------+---------+
| | NOTIONAL | | VALUATION | | |
+-------------------------------+------------+----------+-------------+----------+---------+
| | HOLDING | | GBP | | |
+-------------------------------+------------+----------+-------------+----------+---------+
| | | | | | |
+-------------------------------+------------+----------+-------------+----------+---------+
| JPM EuroStoxx 50 Put Option | 39,550,000 | | (9,163,004) | | |
| maturing 28 July 2011 | | | | | |
+-------------------------------+------------+----------+-------------+----------+---------+
Close European Accelerated Fund Limited (the "Company")
SHAREHOLDER INFORMATION
The Company's Participating Shares are listed on the London Stock Exchange.
Company announcements and daily market closing prices of Shares are available on
Reuters, Bloomberg and on-line on the web. The ISIN of the Shares is
GB00B0DB8N84 and the London Stock Exchange mnemonic is CEAF.
Monthly factsheets are issued by the Manager and can be down-loaded from the
Manager's web-site www.closeam.com.
The Annual Financial Report for the year ended 30 June 2010 is intended to be
made public in October 2010 together with a Notice of Meeting convening the
general meeting of shareholders to be held pursuant to section 199 of The
Companies (Guernsey) Law, 2008 (as amended).
Shares may be dealt in directly through a stockbroker or professional adviser
acting on an investor's behalf. The buying and selling of shares may be settled
through CREST.
The Company's registrar is Anson Registrars Limited in Guernsey and they can be
contacted on 01481 711301.
Close European Accelerated Fund Limited (the "Company")
Registered in Guernsey No 43314
DIRECTORS AND SERVICE PROVIDERS
+----------------------------+-------------------------------------+
| Directors | Talmai P Morgan (Chairman) |
| | Peter Niven |
| | John R Le Prevost |
| | |
+----------------------------+-------------------------------------+
| Manager | Close Investments Limited |
| | (Authorised and Regulated by the |
| | Financial Services Authority) |
| | 10 Exchange Square |
| | Primrose Street |
| | London |
| | England EC2A 2BY |
+----------------------------+-------------------------------------+
| Administrator and | Anson Fund Managers Limited |
| Secretary | PO Box 405 |
| | Anson Place, Mill Court |
| | La Charroterie |
| | St Peter Port |
| | Guernsey GY1 3GF |
+----------------------------+-------------------------------------+
| | |
+----------------------------+-------------------------------------+
| Principal Bankers | Royal Bank of Scotland |
| | International Limited |
| | Royal Bank Place |
| | 1 Glategny Esplanade |
| | St Peter Port |
| | Guernsey GY1 4BQ |
+----------------------------+-------------------------------------+
| | |
+----------------------------+-------------------------------------+
| Auditors | Saffery Champness |
| | La Tonnelle House |
| | Les Banques |
| | St Sampson |
| | Guernsey GY1 3HS |
+----------------------------+-------------------------------------+
| | |
+----------------------------+-------------------------------------+
| Registrar, Transfer Agent | Anson Registrars Limited |
| and Paying Agent | PO Box 426 |
| | Anson Place |
| | Mill Court, La Charroterie |
| | St Peter Port |
| | Guernsey GY1 3WX |
+----------------------------+-------------------------------------+
| UK Transfer Agent | Anson Administration (UK) Limited |
| | |
| | 3500 Parkway |
| | Solent Business Park |
| | Whiteley, Fareham |
| | Hampshire |
| | England PO15 7AL |
+----------------------------+-------------------------------------+
| Corporate Broker | Matrix Corporate Capital LLP |
| | One Vine Street, London |
| | England, W1J 1EJ |
+----------------------------+-------------------------------------+
| Registered Office of the | Anson Place |
| Company | Mill Court |
| | La Charroterie |
| | St Peter Port |
| | Guernsey GY1 1EJ |
+----------------------------+-------------------------------------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR PGUWCPUPUGMW
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