RNS Number : 1303X
Close Enhanced Commodities Fund Ld
19 June 2008
CLOSE ENHANCED COMMODITIES FUND LIMITED
PRELIMINARY ANNOUNCEMENT OF ANNUAL RESULTS
The directors announce the statement of results for the year ended 29 February 2008 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").
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 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).
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 End Value of the Commodity Portfolio will be calculated by aggregating the average value of each constituent of
the Commodity Portfolio over the one year Calculation Period 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 are not 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 FOR THE YEAR ENDED 29 FEBRUARY 2008
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 29 February 2008, the Commodity Portfolio had risen 108.6%
since launch and 40.2% over the reporting period. Over the same periods, the total market value of the Company's shares rose by 143.5% and
58.1% respectively.
As part of its investment portfolio, the Company holds a debt security issued by Glitnir Banki HF ("Glitnir") with a nominal value of
�6,740,000 and a market value, as at the reporting date, of �19,417,777. This represents 18.91 per cent of the value of the Company's net
assets as at the reporting date.
On 21 April 2008, Standard & Poor's Ratings Services lowered its long-term counterparty credit rating on Glitnir one notch from A- to
BBB+, with a negative outlook. Moody's rating has remained unchanged since 28 February 2008, at A2, with a stable outlook. As a result of
the downgrade, the Board considered both the sale and the retention of the Glitnir debt security, acting in the best interests of the
Company and Shareholders.
The Board reviewed Glitnir's financial results for the first quarter of 2008, including its liquidity and capital adequacy position, as
well as recent research updates from the ratings agencies. Whilst Glitnir's profitability has been, and is likely to remain, volatile due to
difficult conditions in capital markets and investment banking and the Icelandic economy, the ratings agencies noted Glitnir's strong and
sound levels of liquidity, and its ability to meet commitments falling due over the short-to-medium term, even under comprehensive stress
test conditions. They also considered that, should systemic support ever be required from the Icelandic authorities, it would likely be
forthcoming. The ratings agencies are not, therefore, suggesting that Glitnir will likely default on its liabilities. In fact, to the
contrary, a BBB+ rating is defined by Standard & Poor's as investment grade, with an "adequate" capacity to meet its financial commitments.
The Board also considered how the Final Capital Entitlement of the Shares might be affected by any sale of the Glitnir debt security and
noted that there could be a significant cost involved, resulting in an irreversible reduction in the terms stated in the Company's
investment objective and expected by Shareholders.
On the basis of the prevailing facts, the Board therefore concluded that it would not be in the best interests of the Company and
Shareholders to sell the Glitnir debt security, but will continue to monitor the situation.
Subsequent to the end of the financial year, the Commodity Portfolio has continued to rise. As at 30 May 2008 the Commodity Portfolio
had risen 0.7% since the financial year end. The very strong performance of the price of oil, which rose 25.0% over these few months, offset
falls in the other commodity prices, in particular zinc, which fell 27.3%. The price of gold fell 8.8% after having risen to over $1,000 per
ounce in March 2008, its highest level so far since the launch of the Company.
Your Company's shares continued to perform well, rising by 3.7% since the financial year end.
Nicholas Falla
Chairman
19 June 2008
MANAGEMENT REPORT FOR THE YEAR ENDED 29 FEBRUARY 2008
A description of important events that have occurred during 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 facing the Company is given in the Manager's Report
and is incorporated here by reference.
There were no material related party transactions which took place in the financial year.
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 Management Report includes or incorporates by reference a fair review of the development and performance of the business and
the position of the Company, together with a description of the principal risks and uncertainties that it faces.
Nicholas Falla John Le Prevost
Director Director
MANAGER'S REPORT FOR THE YEAR ENDED 29 FEBRUARY 2008
MARKET REVIEW
Over the reporting period the value of the notional Commodity Portfolio rose 40.2% due to rises across most of the commodities,
particularly oil and gold.
As at As at Return over period
28 February 29 February
2007 2008
Oil $61.79 $101.84 +64.8%
Gold $664.20 $971.50 +46.3%
Aluminium $2,887.50 $3,086.00 +6.9%
Copper $5,980.00 $8,540.50 +42.8%
Zinc $3,470.00 $2,721.00 -21.6%
Commodity Portfolio 155.3% 208.6% +40.2%
The price of oil climbed to $66.03 at the end of March 2007 following Iran's seizure of 15 British naval personnel which heightened the
prospect of conflict involving OPEC's second biggest oil producer. Following the release of the sailors and marines, oil continued to trade
around this level until pushed up in July on supply concerns resulting from unrest in Nigeria's oil producing Niger Delta region.
In August oil prices fell back slightly as losses in the US subprime mortgage market and related money market problems signalled a
possible slowdown in US economic growth, which could reduce fuel demand. However, in September, signs of US rate cuts and a falling dollar,
which would bolster energy demand, meant prices rose above $80.
The price of oil continued to rise amidst fears of a Turkish military attack on Kurdish rebel bases in Iraq, which has the world's third
largest oil reserves. As the US dollar hit record lows against the Euro, this pushed up oil prices, which range traded between $90 and $100
to the end of the period, supported by geopolitical tensions such as those in Kenya following the December elections.
The industrial metals in the basket displayed significantly different returns over the financial year. Copper rose by 42.8%, aluminium
by 6.9%, whilst zinc fell 21.6%.
Copper prices surged in the first two months of the period as stockpiles shrank while demand from China, the world's biggest consumer of
the metal, continued through booming construction, which uses copper in wiring and pipes. Copper traded predominately between $7,000 and
$8,000 until October when, amid fears of a slowing US economy, it fell to a low of $6,272.5. From this low it surged higher as inventories
declined, ending the financial year at a high of $8,540.5.
Zinc and aluminium prices performed broadly similarly for the first eight months of the year, falling gradually as economic growth was
forecast to slow. From mid October, however, aluminium rose strongly as inventories fell whilst zinc prices continued to fall as stock
levels increased.
The first six months of the financial year saw the gold price trade mostly between $650 and $700, before accelerating sharply higher
over the rest of the period to close up 46.3% at a record high of $971.5. The catalysts for the move up came from a combination of the
unfolding credit crisis, US dollar weakness and the general thirst from investors for commodities.
MARKET OUTLOOK
The outlook for the price of oil continues to be influenced by geopolitical tensions in the world's largest oil producers. In Iran if
further economic sanctions, or even military action, were to be implemented this could result in signification disruption of oil supplies
from the Middle East. Meanwhile the Organization of Petroleum Exporting Counties (OPEC) is likely to maintain tight controls on their
production levels, which currently account for over 40% of the world's crude oil. Against this, continuing turmoil in credit markets could
lead to a significant decline in energy demand, and there are questions over whether China and Asia can manage to continue to expand
strongly even as the US economy slows.
The performance of industrial metals will also in large part depend upon the world economy, and in particular those countries such as
China and India, that have the greatest marginal demand. The current boom in prices has also been driven by large speculative flows seeking
alternative sources of return as equity markets continue to fall. If this hot money decides there are better returns available elsewhere
prices could fall to levels more in line with fundamentals.
Whilst gold has climbed close to $1,000 an ounce, much of this rise can be ascribed to US dollar weakness. Its increase in Euro terms
over the last year was a lower, but still impressive, 27.5%. As the US dollar continues to weaken, global inflation concerns increase, and
the credit crunch continues to hit sentiment, support for gold, with its reputation as a safe haven, can be anticipated to remain high.
Close Investments Limited
19 June 2008
STATEMENT OF OPERATIONS
for the year ended 29 February 2008
Year ended Year ended
Notes 29 Feb 2008 28 Feb 2007
GBP GBP
Net movement in unrealised appreciation on
investments 5 37,087,939 14,279,533
Operating expenses 2 (354,706) (340,321)
Net gain for the year attributable to 36,733,233 13,939,212
shareholders
Pence Pence
Earnings per share for the year - Basic and 4 104.06 39.49
Diluted
In arriving at the results for the financial year, all amounts above relate to continuing operations.
There are no recognised gains or losses for the year other than those disclosed above.
RECONCILIATION OF EARNINGS PER SHARE FOR INVESTMENT PURPOSES TO EARNINGS PER SHARE PER THE FINANCIAL STATEMENTS:
Pence Pence
Earnings per share for investment purposes 105.07 40.45
Adjustment to include expenses on an accruals basis (1.01) (0.96)
Earnings per share per the financial statements 104.06 39.49
In accordance with International Financial Reporting Standards, expenses should be attributed to the period to which they relate.
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 Final Capital Entitlement becomes payable.
NET ASSET STATEMENT
as at 29 February 2008
29 Feb 2008 28 Feb 2007
Notes GBP GBP
FIXED ASSETS
Unquoted financial assets designated at fair
value
through profit or loss 5 101,748,766 64,660,827
CURRENT ASSETS
Receivables 6 329,484 489,584
Cash and cash equivalents 638,114 812,318
967,598 1,301,902
CURRENT LIABILITIES
Payables - falling due within one year 7 34,513 14,111
NET CURRENT ASSETS 933,085 1,287,791
TOTAL ASSETS LESS CURRENT LIABILITIES 102,681,851 65,948,618
NON-CURRENT LIABILITIES EXCLUDING NET
ASSETS ATTRIBUTABLE TO SHAREHOLDERS
Payables - falling due after more than one 8 - -
year
NET ASSETS ATTRIBUTABLE TO
SHAREHOLDERS 102,681,851 65,948,618
SHARES IN ISSUE 35,300,000 35,300,000
Pence Pence
NAV PER SHARE 290.88 186.82
RECONCILIATION OF NAV PER SHARE FOR INVESTMENT PURPOSES TO NAV PER SHARE PER THE FINANCIAL STATEMENTS:
Pence Pence
NAV per share for investment purposes 288.24 183.17
Adjustment to include expenses on an accruals basis 2.64 3.65
NAV per share per the financial statements 290.88 186.82
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.
The financial statements were approved by the Board of directors on 19 June 2008 and are signed on its behalf by:
Nicholas Falla John Le Prevost
Director Director
STATEMENT OF CASH FLOWS
for the year ended 29 February 2008
Year ended Year ended
29 Feb 2008 28 Feb 2007
GBP GBP
Operating activities
Net gain for the year attributable to 36,733,233 13,939,212
shareholders
Less: Unrealised (appreciation) on investments (37,087,939) (14,279,533)
Less: Interest received (40,136) (41,663)
Add: Amortisation of debt issue costs 159,934 159,497
Add: Increase / (decrease) in accrued expenses 20,402 (7,579)
Add: Decrease / (increase) in prepayments and
accrued
income excluding debt issue costs 166 (330)
Net cash outflow from operating activities (214,340) (230,396)
Investing activities
Interest received 40,136 41,663
Net cash inflow from investing activities 40,136 41,663
Cash at beginning of year 812,318 1,001,051
(Decrease) in cash and cash equivalents (174,204) (188,733)
Cash at end of year 638,114 812,318
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS
for the year ended 29 February 2008
Year ended Year ended
29 Feb 2008 28 Feb 2007
GBP GBP
Opening balance 65,948,618 52,009,406
Net gain for the year attributable to shareholders 36,733,233 13,939,212
Closing balance 102,681,851 65,948,618
Under IAS 32, the Participating Shares are classified as debt and the Management Shares are classified as equity.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 29 February 2008
1 ACCOUNTING POLICIES
(a) Basis of Preparation
The financial statements have been prepared in conformity with International Financial Reporting Standards 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.
IFRS7 and the amended IAS1 have been adopted in the current year for the first time, from their effective date of 1 January 2007. The impact
that this has on the financial statements is purely in terms of additional disclosures.
(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 �600.
(c) Expenses
All expenses are accounted for on an accruals basis.
(d) Debt Issue Costs
The debt issue costs incurred amounted to �796,230. Because the Company*s participating shares are redeemable on or around 24 February 2010,
they are required to be classified as debt 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 have been designated as financial assets at *fair value through profit and loss*. Investments are initially recognised on
the date of purchase at cost, being the fair value of the consideration given. After initial recognition, investments are measured at fair
value, with unrealised gains and losses on investments and impairment of investments recognised in the Statement of Operations. The
indicative fair value of the investments is calculated at each month end by Barclays Capital and BNP Paribas (the *Calculation Agents*).
These indicative values are based on an approximation of the mid-market level of the investments. As at the balance sheet date, an
independent check of the valuations of the investments is performed by the Manager. As the investments are not traded in an active market,
the indicative fair value is determined by using valuation techniques. The Calculation Agents and Manager use a variety of methods and makes
assumptions that are based on market conditions existing at the balance sheet 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. The techniques used by the
Manager are periodically reviewed by experienced personnel at the Manager.
Models use observable data, to the extent practicable. However, areas such as volatilities and correlations require the Calculation Agents
and Manager to make estimates. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
(h) 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.
(i) Segmental Reporting
The directors are of the opinion that the Company is engaged in a single segment of business, being investment business.
2 OPERATING EXPENSES
Year ended Year ended
29 Feb 2008 28 Feb 2007
GBP GBP
Amortisation of debt issue costs 159,934 159,497
Management fees(1) 124,142 123,858
Auditor*s remuneration 7,500 7,000
Directors* and Officers* insurance 9,402 10,308
Registration fees 11,031 12,143
Administration fees 24,841 23,620
Custody fees 14,345 11,286
Directors* remuneration 15,000 15,000
Annual fees 12,880 12,088
Printing Accounts 12,353 426
Sundry costs and charges 3,414 6,758
394,842 381,984
Less: Interest earned on expense provision (40,136) (41,663)
354,706 340,321
(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 �5,000 per annum by the Company. The remuneration will remain fixed over
the life of the Company*s participating shares.
4 EARNINGS PER SHARE
Earnings per share is based on the net gain for the year attributable to shareholders of �36,733,233 (2007: �13,939,212) and on 35,300,000
(2007: 35,300,000) shares, being the weighted average number of shares in issue during the year. There are no dilutive instruments and
therefore basic and diluted gain per share are identical.
5 INVESTMENTS
29 Feb 2008 28 Feb 2007
GBP GBP
UNQUOTED FINANCIAL ASSETS DESIGNATED
AT FAIR VALUE THROUGH PROFIT OR LOSS
Opening portfolio cost 33,092,750 33,092,750
Unrealised appreciation on valuation brought 31,568,077 17,288,544
forward
Unrealised appreciation on valuation for the year 37,087,939 14,279,533
Unrealised appreciation on valuation carried 68,656,016 31,568,077
forward
Closing valuation 101,748,766 64,660,827
Valuations of investments are based on valuations provided by the Calculation Agents which are subject to a check by the Manager. The
provided valuations are derived from proprietary models based upon well-recognised financial principles and reasonable estimates about
relevant future market conditions.
The performance of the financial assets is based on the performance of a notional portfolio of commodities between 22 February 2005 and 22
February 2010. The instruments are designed to give a return of two times the performance of the notional portfolio of commodities.
6 RECEIVABLES
29 Feb 2008 28 Feb 2007
GBP GBP
Prepaid debt issue costs 317,246 477,180
Prepayments 11,237 11,636
Accrued bank interest 1,001 768
329,484 489,584
7 PAYABLES
(falling due within one year) 29 Feb 2008 28 Feb 2007
GBP GBP
Accrued administration fees 1,985 1,818
Accrued registration fees 839 850
Accrued management fees 9,814 -
Accrued directors* fees 2,500 2,500
Accrued audit fees 7,500 7,000
Accrued custody fees 6,475 1,943
Other accrued expenses 5,400 -
Expense provision 237,605 235,627
Less: Prepaid expense provision (see note 8) (237,605) (235,627)
34,513 14,111
8 PAYABLES
(falling due after more than one year) 29 Feb 2008 28 Feb 2007
GBP GBP
Expense provision 378,234 574,985
Less: Prepaid expense provision (378,234) (574,985)
- -
The prepaid expense provision represents monies set aside to meet the ongoing, 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 expenses provision (together with accrued interest thereon), this
surplus will revert to the Manager. In the event of redemption or repurchase of all 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.
9 SHARE CAPITAL
Authorised SHARES GBP
Unclassified shares of 0.01p each 200,000,000 20,000
Management shares of �1 each 100 100
20,100
Issued SHARES
Participating shares * fully paid 35,300,000
Management shares * fully paid 2
Number of shares in issue at 28 February 2007 and 29 February 35,300,002
2008
GBP
Issued capital as at 28 February 2007 and 29 February 2008 3,532
The issue of participating shares took Amount
place as follows: Number Price per received
of Shares Share Pence GBP
23 February 2005 33,700,000 100.00 33,700,000
13 May 2005 1,600,000 105.50 1,688,000
Participating Shares are redeemable on or around 24 February 2010. 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.
10 SHARE PREMIUM
GBP
Share premium as at 28 February 2007 and 29 February 2008 35,384,470
11 FINANCIAL INSTRUMENTS
The Company*s main financial instruments comprise:
(a) Cash and cash equivalents that arise directly from the Company*s operations; and
(b) Debt securities.
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 and interest rate risk.
The Board regularly review 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 page 36.
Details of the Company*s Investment Objective and Policy are given on pages 2 and 3.
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.
If market prices as at 29 February 2008 had been 10% higher, and assuming these values were to remain unchanged through to the end of the
Company*s life, with all other variables held constant, the increase in net assets attributable to shareholders on the Redemption Date would
have been �24,625,280 (Feb 2007: �19,125,540) arising due to the increase in the fair value of financial assets at fair value through profit
or loss of �24,625,280 (Feb 2007: �19,125,540).
If market prices as at 29 February 2008 had been 10% lower, and assuming these values were to remain unchanged through to the end of the
Company*s life, with all other variables held constant, the decrease in net assets attributable to shareholders on the Redemption Date would
have been �4,673,720 (Feb 2007: �2,760,460) arising due to the decrease in the fair value of financial assets at fair value through profit
or loss of �4,673,720 (Feb 2007: �2,760,460).
(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 all issuers carried an investment grade credit rating. 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. Credit risks are mitigated
in the Company because the Debt Securities have been purchased from several different issuers.
Investors should be aware that the prospective returns to Shareholders mirror the returns under the Debt Securities held or entered into by
the Company and that any default by an issuer or any such Debt Securities held or entered into by the Company would have a consequential
adverse effect on the ability of the Company to pay some or all of the Final Capital Entitlement to Shareholders. Such a default might, for
example, arise on the insolvency of an issuer of a Debt Security.
The following table details the aggregate investment grade of the debt instruments in the portfolio, as rated by Moody*s:
Rating 29 Feb 2008 28 Feb 2007
Aaa/AAA 0.00% 38.10%
Aa/AA 62.25% 23.60%
A/A 37.75% 38.30%
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 commitment is its ongoing operating expenses.
Upon the issue of Shares in February 2005, the Company created a cash reserve (the *Expense Provision*) in the amount of 3.25% of the amount
raised by the issue of the Shares (the *Initial Gross Proceeds*), such amount being estimated in the opinion of the directors upon the
advice of the Manager 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 May 2005 an additional 3.25% 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.
If in any full accounting period of the Company the balance remaining on the Expense Provision is insufficient to meet the expenses of the
Company during that accounting period, the Manager will firstly both rebate to the Company any fees paid to it by the Company in that
accounting period and waive its remaining fee entitlement for that accounting period and, secondly, if after fully discounting the fee
entitlement the Expenses Provision remains insufficient, cover the shortfall from its own resources. Such rebate is subject to a cap on
these expenses, excluding the management fee, of 0.25 per cent per annum of the Initial Gross Proceeds, provided that during the final
accounting period prior to the Redemption Date the Manager*s liability to make up any shortfall shall be subject to a maximum of �100,000,
notwithstanding the fact that such amount may exceed 0.25 per cent of the Initial Gross Proceeds.
The Euro Medium Term Notes (the *Debt Securities*) purchased by the Company mature on 24 February 2010, and are designed to pay on the
Maturity Date 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 pence. 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 24 February 2010, all subject to counterparty default. The End Value will be calculated by
aggregating the average value of each constituent of the Commodity Portfolio over the one year Calculation Period ending on the End Date of
22 February 2010. It is not anticipated that dividends will be paid in respect of the Shares.
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. 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 and the date of this report, all issuers of the Debt Securities carried an investment grade credit rating.
(d) Interest Rate Risk
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 Maturity
Date.
Interest rate risk is the risk that fluctuations in market interest rates will result in a reduction in deposit interest earned on cash
deposits by the Company. The Company holds cash on fixed deposit, the return on which is subject to fluctuations. All fixed deposits mature
within three months.
The weighted average effective interest rate for cash and bank balances as at 29 February 2008 was 5.71%.
None of the other assets or liabilities of the Company attract or incur interest.
Interest rate sensitivity
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 29 February 2008 would have been �6,381 greater 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 29 February 2008 would have been �6,381 lower due to a decrease in the amount of interest receivable on
the bank balances.
(e) Currency Risk
Whilst shareholders are not exposes to direct currency risk, since the Shares and the Debt Securities are all Sterling-denominated, 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.
(f) 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 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 other unforeseen circumstances.
The Shares have a fixed life and a fixed capital and this is not expected to change during the life of the Shares.
14 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. �35,872 (2007: �35,763) of costs were incurred by the
Company with these related parties in the year, of which �2,824 (2007: �2,668) was due to these related parties as at 29 February 2008.
SCHEDULE OF INVESTMENTS
as at 29 February 2008
DEBT SECURITIES PORTFOLIO NOMINAL TOTAL NET
HOLDINGS VALUATION ASSETS
GBP GBP %
Barclays Bank Plc EMTN 24 February 2010 6,740,000 19,438,834 18.93%
BNP Paribas EMTN 24 February 2010 1,600,000 4,588,000 4.47%
Glitnir Banki HF EMTN 24 February 2010 6,740,000 19,417,777 18.91%
Irish Life & Permanent Plc EMTN 24
February
2010 6,740,000 19,422,879 18.92%
KBC Bank NV EMTN 24 February 2010 6,740,000 19,441,767 18.93%
SNS Bank NV EMTN 24 February 2010 6,740,000 19,439,509 18.93%
35,300,000 101,748,766 99.09%
SCHEDULE OF INVESTMENTS
as at 28 February 2007
DEBT SECURITIES PORTFOLIO NOMINAL TOTAL NET
HOLDINGS VALUATION ASSETS
GBP GBP %
Barclays Bank Plc EMTN 24 February 2010 6,740,000 12,326,112 18.69%
BNP Paribas EMTN 24 February 2010 1,600,000 2,933,280 4.45%
Glitnir Banki HF EMTN 24 February 2010 6,740,000 12,301,160 18.65%
Irish Life & Permanent Plc EMTN 24
February
2010 6,740,000 12,308,554 18.66%
KBC Bank NV EMTN 24 February 2010 6,740,000 12,335,966 18.71%
SNS Bank NV EMTN 24 February 2010 6,740,000 12,455,755 18.89%
35,300,000 64,660,827 98.05%
A pdf version of the annual financial report will shortly be posted on the Managers web-site www.closeinvestments.com and a further
announcement will be made once the annual financial report is available to be downloaded.
For further information contact:
Anson Fund Managers Limited
Secretary
Tel: Guernsey 01481 722260
19 June 2008
END OF ANNOUNCEMENT
E&OE * in transmission
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR UKUVRWRRNAAR
Close Enhanced (LSE:CED)
Historical Stock Chart
From Jun 2024 to Jul 2024
Close Enhanced (LSE:CED)
Historical Stock Chart
From Jul 2023 to Jul 2024
