RNS Number:0951D
Close Enhanced Commodities Fund Ld
16 May 2006
CLOSE ENHANCED COMMODITIES FUND LIMITED
PRELIMINARY ANNOUNCEMENT OF ANNUAL RESULTS
The directors announce the unaudited statement of results for the period from
incorporation on 3 February 2005 to 28 February 2006 as follows:-
ABOUT THE COMPANY
Close Enhanced Commodities Fund Limited 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 35,300,000
Participating Shares (the "Shares") the performance of which is designed to
provide a geared exposure to any increase in the prices of a notional portfolio
of certain industrial and precious metals and energy related commodities (the
"Commodity Portfolio").
Pursuant to the initial placing and offer for subscription, 33,700,000 Shares
were issued at a price of 100p each on 23 February 2005. Your Board in
conjunction with the Company's Manager were successful in raising further
capital for the Company by the subsequent issue of 1,600,000 Shares at a price
of 105.5 pence each on 19 May 2005. All 35,300,000 Shares in issue now rank pari
passu, have been admitted to the Official List of the United Kingdom Listing
Authority and are capable of being dealt in on the London Stock Exchange. The
Company has an unlimited life but the Shares will be redeemed on or around 24
February 2010 (the "Redemption Date").
Looking to the future your Board remains open to further opportunities which may
result in the issue of further Shares. As was the case with the 1,600,000
Shares issued in May of last year, any further issues of Shares will only be
made where the proceeds of the issue can be invested in accordance with the
Company's investment objective and policy and on terms which are non-dilutive
for existing shareholders.
INVESTMENT OBJECTIVE AND POLICY
The investment objective of the Company is to provide shareholders on the
Redemption Date with a capital payment which will comprise a capital amount of
100p per Share and a growth amount per Share equal to two times any percentage
increase in the End Value of the Commodity Portfolio relative to its Start
Value, such amount being expressed in pence and rounded down to the next whole
penny (the "Final Capital Entitlement"). If the End Value is lower than the
Start Value, the Shares are designed to repay the full capital amount of 100p
per Share on the Redemption Date. The final return is subject to there being no
counterparty default or any other unforeseen circumstances.
The Final Capital Entitlement per Share in Sterling is designed to be determined
by applying to the initial issue price of #1 per Share the performance of the
Commodity Portfolio as valued and measured using US Dollar values over the
calculation period from 22 February 2005 (the "Start Date") to 22 February 2010
(the "End Date"). The Commodity Portfolio is a notional portfolio of
commodities comprising by value on the Start Date one third oil, one third gold
and one third industrial metals (equally weighted between aluminium, copper and
zinc). See page 9 for the opening values.
The US Dollar prices used in order to calculate the value of the Commodity
Portfolio on any date are: in respect of oil, the official closing price of the
NYMEX Exchange crude oil future contract next to expire in US Dollars per
barrel; in respect of gold, the afternoon fixing price for gold as determined by
the London Gold Market Fixing in US Dollars per Troy Ounce; and in respect of
the industrial metals, the official London Metal Exchange Cash Price in US
Dollars per metric tonne.
As at the End Date, the final value of the Commodity Portfolio will be
calculated by reference to the US Dollar aggregate daily value of each
constituent of the Commodity Portfolio over a calculation period of one year
ending on the End Date.
In accordance with the Company's investment policy, the net proceeds derived by
the Company from the issue of Shares have been invested in a portfolio of debt
securities at prices relative to the value of the Commodity Portfolio on 22
February 2005.
As both the Shares and the debt securities are Sterling-denominated,
Shareholders will not be exposed to direct currency risk. However, each of the
commodities is priced in US Dollars. Accordingly, in the event that the US
Dollar strengthens in value, this may cause a reduction in the prices of the
commodities and could result in a reduction in the Final Capital Entitlement.
CHAIRMAN'S STATEMENT
At launch, and at the placing on 19 May 2005, the net proceeds derived from the
issue of Shares of the Company were invested in a portfolio of debt securities
based on a notional portfolio of commodities. On 28 February 2006, the
Commodity Portfolio had risen 30.7% since launch. Over the same period, the
total market value of the Company's shares rose by 28.0%.
I am pleased to report that subsequent to the end of the financial year, the
underlying commodities have risen substantially further. On 4 May 2006 the
Commodity Portfolio had risen 63.4% since launch, including a rise of 25.1%
since the financial year end. This rise was across all the commodities: oil and
gold rose 14.8% and 21.1% respectively over the same period since the financial
year end; and momentum for the price of industrial metals surged, including
copper which rose almost 50%.
The Company's shares have also performed well over this period, rising by 21.1%
since the financial year end.
Nicholas Falla
Chairman
MANAGER'S REPORT FOR THE PERIOD TO 28 FEBRUARY 2006
MARKET REVIEW
Since the launch of the Company, the value of the notional Commodity Portfolio
has risen by 30.7% due to rises across all the commodities, particularly zinc
and copper.
Start Value As at Return since launch
28 February 2006
Oil $51.15 $61.41 +20.1%
Gold $432.85 $556.00 +28.5%
Aluminium $1972 $2,371 +20.2%
Copper $3367 $4,839 +43.7%
Zinc $1383 $2,303 +66.5%
Commodity Portfolio 100.0% 130.7% +30.7%
For the first three months of the period under review, oil prices traded in a
narrow band, predominately between $50 and $55. Towards the end of May, when
the holiday driving season typically pushes US gasoline demand towards its peak,
several refineries in the US gulf coast encountered glitches driving the oil
price higher.
The oil price continued to climb, reaching a record $70 in August as OPEC
struggled to increase their supply to meet continuing strong demand, Iraqi
production fell, and hurricane Katrina struck the Gulf of Mexico, shutting down
95% of US refining capacity. Over the next few months the oil price fell back
slightly as production came back on-line and inventories improved, before
re-testing its previous highs as a dispute between the United Nations and Iran
over Iran's nuclear policy led to fears of a cut in Iranian oil supplies.
The last month of the period saw prices fall below $58 as the dispute was
discounted in favour of improving inventory data. Prices then spiked up after
attacks on Nigerian oil facilities caused further fears of supply shortages.
The oil price finished the period up 20.1% at $61.41, slightly above its average
for the period of $59.
The prices of industrial metals have traditionally been set by the interplay of
tight supply and changes in global demand, along with currency effects. The
price of copper has exemplified this interplay over the period since the
Company's launch. Growth in production was insufficient to meet global demand
which included growth in China's consumption from the Chinese construction and
telecommunication industries. As the market remained in deficit and
institutional investment increased, copper prices rose 44% since the Company's
launch. Similar factors also lead to the price of aluminium rising, up 20% over
the period.
The price of zinc rose 66% over the period, reaching all-time highs. Years of
underinvestment in production meant that although many producers attempted to
boost output, consumption growth still surpassed production growth, leading to
an increasingly tightened market. However the sustained price rise, which
picked up renewed momentum in the second half of 2005, was primarily bolstered
by support from institutional investors.
For the first three quarters of 2005 gold prices oscillated in a broad sideways
channel between $415/oz and just under $450/oz. In this period the value of
gold was affected, inter alia, by the strengthening of the US dollar and the
revaluing of the Yuan. In September gold finally broke through the $450/oz
psychological barrier, marking the beginning of a substantial rise to highs over
$520/oz in February 2006. This rise was spurred by substantial institutional
investment, as investors turned to gold amid economic, financial and political
uncertainties.
MARKET OUTLOOK
The factors that have led to the growth in oil prices are unlikely to dissipate
over the short to medium term. Demand continues to be strong as developing
countries such as China and India maintain rapid economic expansion and, whilst
the western world's productive use of oil has improved considerably, its
dependency has not. This, coupled with much of the world's oil supply coming
from politically unstable countries, has led to consistently high prices with
several sharp spikes whenever there is a fear of supply shortages. The current
high prices may eventually dampen economic activity, which could lead to a fall
in the oil price. However, the world is getting increasingly used to surging
oil prices and whilst demand remains strong and supply stretched, high oil
prices can be expected to remain.
Asia's hyper-growth, in particular China's demand for industrial metals, is
probably the most significant factor when considering their outlook. Over the
past few years this demand has outstripped all expectations and any fears of a
slowdown in this area are few given China's continuing economic growth. Further
to the supply tightness, institutional investors' interest in industrial metals
is also likely to lead to more investment-fuelled price surges so long as profit
taking does not emerge.
The outlook for gold in the long term remains positive. Although the recent
upsurge in gold prices had a negative impact on jewellery demand, longer term
this is expected to recover and resume growth once the price has stabilised.
High investment demand may also continue to drive prices higher.
STATEMENT OF OPERATIONS
for the period from incorporation on 3 February 2005 to 28 February 2006
GBP
Net movement in unrealised appreciation on investments 17,288,544
Operating expenses (667,140)
Net gain for the period 16,621,404
Pence
Gain per share for the period 47.58
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.
Reconciliation of gain per share for investment purposes to gain per share per
the financial statements:
Pence
Gain per share for investment purposes 49.48
Adjustment to include expenses on an accruals basis (1.90)
Gain per share per the financial statements 47.58
In accordance with International Financial Reporting Standards, expenses should
be attributed to the period to which they relate.
The gain per share for investment purposes represents the gain 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 Final Capital
Entitlement becomes payable.
NET ASSET STATEMENT
as at 28 February 2006
MANAGEMENT
FUND FUND TOTAL
GBP GBP GBP
FIXED ASSETS
Unquoted financial assets designated as
Fair value through profit and loss 50,381,294 - 50,381,294
CURRENT ASSETS
Debtors 648,751 2 648,753
Cash at Bank 1,001,051 - 1,001,051
1,649,802 2 1,649,804
CURRENT LIABILITIES
Creditors - due within one year 21,692 - 21,692
NET CURRENT ASSETS 1,628,110 2 1,628,112
Total Assets Less Current 52,009,404 2 52,009,406
Liabilities
Creditors - due after one year
excluding net assets attributable
attributable to shareholders - - -
NET ASSETS ATTRIBUTABLE TO
SHAREHOLDERS 52,009,404 2 52,009,406
SHARES IN ISSUE 35,300,000 2
Pence Pence
NAV PER SHARE 147.34 100.00
Reconciliation of NAV per share for investment purposes to NAV per share per the
financial statements:
Pence
NAV per share for investment purposes 142.72
Adjustment to include expenses on an accruals basis 4.62
NAV per share per the financial statements 147.34
In accordance with International Financial Reporting Standards, expenses should
be attributed to the period to which they relate.
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 Final Capital
Entitlement becomes payable.
STATEMENT OF CASH FLOWS
for the period from incorporation on 3 February 2005 to 28 February 2006
GBP
Operating activities
Gain on ordinary activities 16,621,404
Less: Unrealised (appreciation) on revaluation of investments (17,288,544)
Add: Amortisation of debt issue costs 159,553
Add: Increase in accrued expenses 21,692
Less: (Increase) in prepayments and accrued income excluding debt
issue costs (12,074)
Net cash outflow from operating activities (497,969)
Investing activities
Purchase of financial assets (33,092,750)
Net cash outflow from investing activities (33,092,750)
Financing activities
Proceeds of issue of shares 35,388,000
Costs of issue of shares (796,230)
Net cash inflow from financing activities 34,591,770
Cash at beginning of period -
Increase in cash and cash equivalents 1,001,051
Cash at end of period 1,001,051
Interest income in the period of #58,424 was received. Interest income has been
netted off against operating expenses.
STATEMENT OF CHANGES IN EQUITY
for the period from incorporation on 3 February 2005 to 28 February 2006
MANAGEMENT
FUND FUND TOTAL
GBP GBP GBP
Opening Balance - - -
Share capital Issued 353 2 355
Share premium at issue 35,387,647 - 35,387,647
Net gain for the period 16,621,404 - 16,621,404
Closing balance as at 28 February 52,009,404 2 52,009,406
2006
For further information contact:
Anson Fund Managers Limited
Company Secretary.
Tel: Guernsey 01481 722260
16 May 2006
END OF ANNOUNCEMENT
This information is provided by RNS
The company news service from the London Stock Exchange
END
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