RNS Number : 4683G
Close Enhanced Commodities Fund Ld
22 October 2008
Close Enhanced Commodities Fund Limited
Half-Yearly Financial Report
for the period ended 31 August 2008 (Unaudited)
Close Enhanced Commodities Fund Limited (the *Company*)
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 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 pence (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).
Close Enhanced Commodities Fund Limited (the *Company*)
ABOUT THE COMPANY (continued)
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.
The readers* attention is drawn to the Interim Management Report on page 7 and to Note 14 to the financial statements on page 23, which
refer to significant post balance sheet events.
Close Enhanced Commodities Fund Limited (the *Company*)
MANAGER*S REPORTfor the period ended 31 August 2008
Investment Performance
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 August 2008, the Commodity Portfolio had risen 93.1% since
launch and fallen 7.4% over the reporting period. Over the same periods, the total market value of the Company*s shares rose by 113.0% and
fell by 12.5% respectively.
Commodity Weightings in the notional Commodity Portfolio as at 29 August 2008
http://www.rns-pdf.londonstockexchange.com/rns/4683G_1-2008-10-22.pdf
As the Company*s share price is based upon the performance of the Commodity Portfolio, it is possible to show the potential capital
entitlements available to shareholders based on the percentage increase in the End Value of the Commodity Portfolio relative to its Start
Value. The End Value will be the average daily value of the Commodity Portfolio over the one year period ending on 22 February 2010. The
chart below is for illustrative purposes only and does not represent forecasts or take into account any unforeseen circumstances.
Close Enhanced Commodities Fund Limited (the *Company*)
MANAGER*S REPORTfor the period ended 31 August 2008 (continued)
Final Capital Entitlement
http://www.rns-pdf.londonstockexchange.com/rns/4683G_2-2008-10-22.pdf
Market Review
The notional Commodity Portfolio fell 7.4% over the financial period as all the constituents apart from oil lost value.
As at29 February As at29 August 2008 Return over the period
2008
Oil $101.84 $115.46 +13.4%
Gold $971.50 $833 -14.3%
Aluminium $3086 $2682.50 -13.1%
Copper $8540.5 $7510 -12.1%
Zinc $2721 $1720.50 -36.8%
Commodity Portfolio 208.6% 193.1% -7.4%
The first four months of the period saw the oil price continuing the remarkable increase seen over the last financial year, climbing to a
high of $145.29, up 42.7% for the period. The increase came in the face of continued volatility in financial markets, still suffering from
the credit crunch, and increasing evidence that the global economy was facing a sharp slowdown in growth. In July, the changing economic
landscape saw the oil price level off
Close Enhanced Commodities Fund Limited (the *Company*)
MANAGER*S REPORTfor the period ended 31 August 2008 (continued)
and then begin to fall quickly as what many commentators saw as a speculative froth started to dissipate.
Performance of Commodity Portfolio over the reporting period
http://www.rns-pdf.londonstockexchange.com/rns/4683G_3-2008-10-22.pdf The industrial metals in the basket all fell, with zinc
particularly weak. The start of the period saw all three metals falling heavily on speculation that slower global growth would curb demand.
Prices then stabilised, range trading up until late May after which the price performance of zinc, mainly used to galvanise steel, diverged
from copper and aluminium due to weak demand and oversupply. Copper and aluminium rallied in June, both reaching all time highs in July as
investors seeking higher returns and diversification away from weak equity markets bid up prices. From these highs, however, they fell back
as China, the largest consumer of copper, cut back on imports and inventories of both metals rose at the London Metal Exchange (LME).
The gold price started the period continuing the sharp rise in prices seen in the second half of 2007, climbing to a record high of $1011.25
before falling as investors took profits. The price then remained fairly stable over the majority of the remaining period, trading mostly
between $850 and $950. In August, however, it fell sharply, partly dragged lower by the change in sentiment towards commodities but also due
to the US Dollar appreciating in value.
Close Enhanced Commodities Fund Limited (the *Company*)
MANAGER*S REPORTfor the period ended 31 August 2008 (continued)
Market Outlook
The outlook for the oil price is less positive than it has been as a range of factors have combined to weaken demand: forecast weaker
economic growth points to falling demand; previously high oil prices have begun to change consumer behaviour, as seen by drivers cutting
back on journeys, whilst increasing the viability of alternative energies; and the credit crunch has led to a reduction in speculative
positions as margin requirements have risen. Against this, there are several factors that will help to underpin the oil price: following the
recent sharp falls, OPEC has signalled its intention to cut supply; the lack of investment in infrastructure and exploration during the
1980s and 1990s when prices were much lower has led to little spare capacity and a skills shortage; oil reserves continue to be
predominately in politically unstable areas; and, despite weaker global growth, emerging countries such as China are expected to continue
growing strongly.
The outlook for industrial metals will depend upon the severity of the slowdown in global industrial production. As the credit crunch
continues to bite, the risks increase of it exacerbating the slowdown and spreading to those parts of the world thus far relatively
unaffected.
The gold price should be well supported as investors turn to it as a safe haven, and to preserve value in times of increased financial
uncertainty. It is also often used as a hedge against inflation, which has risen to levels not seen since the early 1990s. Against this, if
the recent strength in the US Dollar continues it may limit price gains.
The readers* attention is drawn to the Interim Management Report overleaf, which refers to significant events after the end of the reporting
period.
Close Investments Limited
6 October 2008
Close Enhanced Commodities Fund Limited (the *Company*)
INTERIM MANAGEMENT REPORTfor the period ended 31 August 2008
Detailed below and in the Manager*s Report are a description of important events which have occurred since the end of the reporting period
and the principal risks and uncertainties currently facing the Company.
Since the end of the reporting period the credit crunch which began in the summer of 2007 has worsened considerably leading to a global
financial crisis which has seen the very real threat of the financial system failing. The catalyst came from the collapse of US investment
bank Lehman Brothers, sparking banks to lose all confidence in lending for any longer than overnight as they feared any institution that
relied on the money markets for funding, regardless of how well capitalised or profitable it might be, would be unable to meet its
obligations. This led to the collapse of various financial institutions around the world and government bail-outs in an attempt to stave off
a systemic collapse.
Among the victims of the crisis was the Icelandic bank Glitnir Banki HF, which was unable to access the wholesale money markets and has been
placed into receivership by the Icelandic authorities. The Company currently holds six debt securities including one issued by Glitnir. This
accounts for approximately 19 per cent of the total nominal value of the Company*s debt securities. Although the situation at the time of
writing remains unclear, the Manager and the Board of the Company consider it likely that Glitnir may not pay in full on its obligations.
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 at the maturity of the relevant debt security.
At the end of the reporting period, the notional Commodity Portfolio value had risen 93.1 per cent since launch which, assuming this level
were to remain unchanged through to the end of the life of the Company, would imply the Final Capital Entitlement per Share to be 286 pence.
In the event of Glitnir defaulting and having a zero recovery rate, the Final Capital Entitlement would be reduced to 231 pence.
Close Enhanced Commodities Fund Limited (the *Company*)
INTERIM MANAGEMENT REPORTfor the period ended 31 August 2008 (continued)
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.
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:
a. An indication of important events that have occurred during the first six months of the financial year, and their impact on the
financial statements;
b. a description of the principal risks and uncertainties for the remaining six months of the financial year;
c. 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
d. 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.
Director Director
22 October 2008
Close Enhanced Commodities Fund Limited (the *Company*)
STATEMENT OF OPERATIONSfor the period ended 31 August 2008
1 Mar 2008 1 Mar 2007
to 31 Aug 2008 to 31 Aug 2007
Notes GBP GBP
Net movement in unrealised 5 (9,042,188) 3,194,074
(depreciation) / appreciation on
investments
Operating expenses 2 (187,461) (179,230)
Net (loss) / gain for the period
attributable to
shareholders (9,229,649) 3,014,844
Pence Pence
Earnings per share for the period *
Basic and
Diluted 4 (26.15) 8.54
In arriving at the results for the 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 earnings per share for investment purposes to earnings per share per the financial statements:
Pence Pence
Earnings per share for investment purposes (25.62) 9.04
Adjustment to include expenses on an accruals basis (0.53) (0.50)
Earnings per share per the financial statements (26.15) 8.54
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.
Close Enhanced Commodities Fund Limited (the *Company*)
NET ASSET STATEMENTas at 31 August 2008
31 Aug 2008 29 Feb 2008
Notes GBP GBP
NON-CURRENT ASSETS
Unquoted financial assets designated as at 5 92,706,578 101,748,766
fair value through profit or loss
CURRENT ASSETS
Receivables 6 248,699 329,484
Cash and cash equivalents 533,246 638,114
781,945 967,598
CURRENT LIABILITIES
Payables * falling due within one year 7 36,321 34,513
NET CURRENT ASSETS 745,624 933,085
TOTAL ASSETS LESS CURRENT LIABILITIES 93,452,202 102,681,851
Payables * falling due after one year
excluding net
assets attributable to shareholders 8 - -
NET ASSETS ATTRIBUTABLE TO
SHAREHOLDERS 93,452,202 102,681,851
SHARES IN ISSUE 35,300,000 35,300,000
Pence Pence
NAV PER SHARE 264.74 290.88
Reconciliation of NAV per share for investment purposes to NAV per share per the financial statements:
Pence Pence
NAV per share for investment purposes 262.62 288.24
Adjustment to include expenses on an accruals basis 2.12 2.64
NAV per share per the financial statements 264.74 290.88
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.
Close Enhanced Commodities Fund Limited (the *Company*)
STATEMENT OF CASH FLOWSfor the period ended 31 August 2008
1 Mar 2008 1 Mar 2007
to 31 Aug 2008 to 31 Aug 2007
GBP GBP
Operating activities
Net (loss) / gain for the period (9,229,649) 3,014,844
attributable to shareholders
Add: Unrealised depreciation /
(appreciation) on
investments 9,042,188 (3,194,074)
Less: Interest received (14,845) (20,742)
Add: Amortisation of debt issue costs 80,404 80,404
Add: Increase in accrued expenses 1,808 5,436
Add: Decrease in prepayments and accrued
income
excluding debt issue costs 381 600
Net cash outflow from operating activities (119,713) (113,532)
Investing activities
Interest received 14,845 20,742
Net cash inflow from investing activities 14,845 20,742
Cash and cash equivalents at beginning of 638,114 812,318
period
Decrease in cash and cash equivalents (104,868) (92,790)
Cash and cash equivalents at end of period 533,246 719,528
Close Enhanced Commodities Fund Limited (the *Company*)
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO SHAREHOLDERSfor the period
ended 31 August 2008
31 Aug 2008 31 Aug 2007
GBP GBP
Opening balance 102,681,851 65,948,618
Net (loss) / gain for the period attributable to (9,229,649) 3,014,844
shareholders
Closing balance 93,452,202 68,963,462
Under IAS 32, the Participating Shares are classified as debt and the Management Shares are classified as equity.
Close Enhanced Commodities Fund Limited (the *Company*)
NOTES TO THE FINANCIAL STATEMENTSfor the period ended 31 August 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.
The following Standards or Interpretations have been issued by the International Accounting Standards Board but not yet adopted by the
Company:
IFRS 2 (revised 2008) Share-based Payment effective for annual periods beginning on or after 1 January 2009
IFRS 3 (revised 2008) Business Combinations effective for annual periods beginning on or after 1 July 2009
IFRS 8 Operating Segments effective for annual periods beginning on or after 1 January 2009
IAS 1 (revised 2007) Presentation of financial statements effective for annual periods beginning on or after 1 January 2009
IAS 23 (revised 2008) Borrowing Costs effective for annual periods beginning on or after 1 January 2009
IAS 27 (revised 2008) Consolidated and Separate Financial Statements effective for annual periods beginning on or after 1 July 2009
Amendments to IAS 32 and IAS 1 Puttable Financial Instruments effective for annual periods beginning on or after 1 January 2009
Some of these Standards and Interpretations may require additional disclosure in future financial statements.
(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
Close Enhanced Commodities Fund Limited (the *Company*)
NOTES TO THE FINANCIAL STATEMENTS (continued)for the period ended 31 August
2008
1 ACCOUNTING POLICIES (continued)
(f) Cash and Cash Equivalents (continued)
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 are classified as *at fair value through profit or loss* so that all assets will be measured on consistent bases.
Investments are recognised at the fair value, excluding transaction costs associated with the investment. Changes in fair value are
recognised in the Statement of Operations as unrealised appreciation / (depreciation) on investments. Fair value is the amount for which the
financial instruments could be exchanged between knowledgeable willing parties in an arms length transaction. Fair value also reflects the
credit quality of the issuers of the financial instruments.
Valuations of the Company*s investments are based on valuations provided to the Company by Future Value Consultants Limited. These
valuations are intended to be an indication of the fair value of the Company*s 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 at the balance sheet
date, an independent reasonableness check of the valuations of the investments provided by Future Value Consultants Limited 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.
Future Value Consultants Limited and the Manager use a variety of methods and make 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 credit risk, volatilities and correlations require Future
Value Consultants Limited and the Manager to make estimates. Changes in assumptions about these factors could affect the reported fair value
of financial instruments.
In previous accounting periods, the valuation data was provided by Barclays Capital and BNP Paribas.
(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.
Close Enhanced Commodities Fund Limited (the *Company*)
NOTES TO THE FINANCIAL STATEMENTS (continued)for the period ended 31 August
2008
1 ACCOUNTING POLICIES (continued)
(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
1 Mar 2008 1 Mar 2007
to 31 Aug 2008 to 31 Aug 2007
GBP GBP
Amortisation of debt issue costs 80,404 80,404
Management fees(1) 62,267 62,438
Auditor*s remuneration 2,875 3,600
Directors* and Officers* insurance 2,081 4,810
Registration fees 7,874 5,178
Administration fees 15,619 12,637
Custody fees 8,107 6,719
Directors* remuneration 7,500 7,500
Annual fees 7,542 6,393
Printing Accounts 6,121 8,559
Sundry costs and charges 1,916 1,734
202,306 199,972
Less: Interest earned on expense provision (14,845) (20,742)
187,461 179,230
(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. Their remuneration will remain fixed over
the life of the Company.
Close Enhanced Commodities Fund Limited (the *Company*)
NOTES TO THE FINANCIAL STATEMENTS (continued)for the period ended 31 August
2008
4 EARNINGS PER SHARE
Earnings per share is based on the net loss for the period attributable to shareholders of �9,229,649 (2007: gain �3,014,844) and on
35,300,000 (2007: 35,300,000) shares, being the weighted average number of shares in issue during the period. There are no dilutive
instruments and therefore basic and diluted gain per share are identical.
5 UNQUOTED FINANCIAL ASSETS DESIGNATED AS AT
FAIR VALUE THROUGH PROFIT OR LOSS
31 Aug 2008 29 Feb 2008
UNQUOTED FINANCIAL ASSETS GBP GBP
Opening portfolio cost 33,092,750 33,092,750
Unrealised appreciation on valuation brought
forward 68,656,016 31,568,077
Unrealised (depreciation) / appreciation on (9,042,188) 37,087,939
valuation for the period
Unrealised appreciation on valuation carried 59,613,828 68,656,016
forward
Closing valuation 92,706,578 101,748,766
Valuations of investments are based on valuations provided by Future Value Consultants Limited which are subject to an independent
reasonableness 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.
To comply with the definition of fair value as defined by International Financial Reporting Standards, Future Value Consultants Limited was
engaged to provide valuations of the Company*s investments, taking account of the current counterparty credit risk of the issuers of the
debt securities held by the Company.
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.
Valuation data provided by Future Value Consultants Limited to the Company is provided for indicative informational purposes and does not
represent an offer to buy or sell the debt securities by Future Value Consulants Limited or any other party. 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 Future
Value Consultants Limited considers in its judgement reasonable, but an alternative valuer might arrive at a different valuation for the
same investments.
Close Enhanced Commodities Fund Limited (the *Company*)
NOTES TO THE FINANCIAL STATEMENTS (continued)for the period ended 31 August
2008
6 RECEIVABLES
31 Aug 2008 29 Feb 2008
GBP GBP
Prepaid debt issue costs 236,842 317,246
Prepayments 11,857 11,237
Accrued bank interest - 1,001
248,699 329,484
7 PAYABLES (amounts falling due within one year)
31 Aug 2008 29 Feb 2008
GBP GBP
Accrued administration fees 2,619 1,985
Accrued registration fees 1,549 839
Accrued management fees 10,491 9,814
Accrued directors* fees 2,500 2,500
Accrued audit fees 2,875 7,500
Accrued custody fees 6,667 6,475
Other accrued expenses 9,620 5,400
Expenses provision 271,367 237,605
Less: Prepaid expense provision (see note 8) (271,367) (237,605)
36,321 34,513
8 PAYABLES (amounts falling due after one year)
31 Aug 2008 29 Feb 2008
GBP GBP
Expense provision 237,415 378,234
Less: Prepaid expenses provision (237,415) (378,234)
- -
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.
Close Enhanced Commodities Fund Limited (the *Company*)
NOTES TO THE FINANCIAL STATEMENTS (continued)for the period ended 31 August
2008
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 29 February 2008 and 31 August 2008 35,300,002
GBP
Issued capital as at 29 February 2008 and 31 August 2008 3,532
The issue of participating shares took place as follows:
Number Price per Amount
of Shares share pence received 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 at 29 February 2008 and 31 August 2008 35,384,470
Close Enhanced Commodities Fund Limited (the *Company*)
NOTES TO THE FINANCIAL STATEMENTS (continued)for the period ended 31 August
2008
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 pages 23 and 24.
Details of the Company*s Investment Objective and Policy are given on pages 1 and 2.
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 31 August 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 �13,414,000 (2007: �11,296,000) arising due to the increase in the fair value of financial assets at fair value through profit or
loss of �13,414,000 (2007: �11,296,000).
If market prices as at 31 August 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 �13,767,000 (2007: �11,296,000) arising due to the decrease in the fair value of financial assets at fair value through profit or
loss of �13,767,000 (2007: �11,296,000).
(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. As at the accounting reference date all issuers of the Debt Securities carried an investment grade credit rating, but as at the
date of this report only five of the six 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.
Close Enhanced Commodities Fund Limited (the *Company*)
NOTES TO THE FINANCIAL STATEMENTS (continued)for the period ended 31 August
2008
12 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(b) Credit Risk (continued)
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 of 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 31 Aug 2008 29 Feb 2008
Aaa/AAA 0.00% 0.00%
Aa/AA 62.76% 62.25%
A/A 37.24% 37.75%
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.
Close Enhanced Commodities Fund Limited (the *Company*)
NOTES TO THE FINANCIAL STATEMENTS (continued)for the period ended 31 August
2008
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 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. 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 interests 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 all issuers of the Debt Securities carried an
investment grade credit rating, but as at the date of this report, only five of the six issuers 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 31 August 2008 was 5.54%.
None of the other assets or liabilities of the Company attract or incur interest.
Close Enhanced Commodities Fund Limited (the *Company*)
NOTES TO THE FINANCIAL STATEMENTS (continued)for the period ended 31 August
2008
12 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(d) Interest Rate Risk (continued)
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 31 August 2008 would have been �5,332 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 31 August 2008 would have been �5,332 lower due to a decrease in the amount of interest receivable on the
bank balances.
(e) Currency Risk
Whilst shareholders are not exposed 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.
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. �23,493 (2007: �17,815) of costs were incurred by the
Company with these related parties in the period, of which �4,168 (2007: �3,235) was due to these related parties as at 31 August 2008.
Close Enhanced Commodities Fund Limited (the *Company*)
NOTES TO THE FINANCIAL STATEMENTS (continued)for the period ended 31 August
2008
14 EVENTS AFTER THE BALANCE SHEET DATE
Since the balance sheet date, the issuer of one of the debt securities held by the Company, being Glitnir Banki HF (*Glitnir*), has suffered
severe financial difficulties. On 8 October 2008 the government of Iceland announced that *the Icelandic Financial Services Authority,
FjmaeftirlitiFME) has 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 with immediate effect. By law, the action of
appointing a receivership committee will not have the effect of creating a default under any loan documents.* This announcement annulled the
previous stated intention of the Icelandic government to buy a 75% stake in Glitnir.
The MTN issued by Glitnir held by the Company is 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, MTN holders would likely get back some money at the *recovery rate*, which may be above zero, but it is not possible to assign a
recovery rate to the notes at this point in time.
Although the situation at the time of writing remains unclear, the Manager and the Board of the Company consider it likely that they may not
pay in full on their obligation.
The Company will advise all shareholders by means of announcements to a regulatory information service if and when further relevant
information becomes available.
Close Enhanced Commodities Fund Limited (the *Company*)
SCHEDULE OF INVESTMENTSas at 31 August 2008
NOMINAL VALUATION TOTAL NET
DEBT SECURITIES PORTFOLIO HOLDINGS GBP ASSETS
Barclays Bank Plc EMTN 24 February 6,740,000 17,948,889 18.96%
2010
BNP Paribas EMTN 24 February 2010 1,600,000 4,297,694 4.48%
*Glitnir Banki HF EMTN 24 February 6,740,000 16,517,641 18.95%
2010
Irish Life & Permanent Plc EMTN 24
February
2010 6,740,000 17,833,401 18.95%
KBC Bank NV EMTN 24 February 2010 6,740,000 18,105,380 18.96%
SNS Bank NV EMTN 24 February 2010 6,740,000 18,003,573 18.94%
35,300,000 92,706,578 99.24%
* The reader*s attention is drawn to the Interim Management Report on page 7 and to Note 14 to the financial statements on page 23, which
refer to significant post balance sheet events.
Close Enhanced Commodities Fund Limited (the *Company*)
SCHEDULE OF INVESTMENTSas at 29 February 2008
NOMINAL VALUATION TOTAL NET
DEBT SECURITIES PORTFOLIO HOLDINGS GBP ASSETS
Barclays Bank Plc EMTN 24 February 6,740,000 19,438,834 18.93%
2010
BNP Paribas EMTN 24 February 2010 1,600,000 4,588,000 4.47%
Glitnir Banki HF EMTN 24 February 6,740,000 19,417,777 18.91%
2010
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%
Close Enhanced Commodities Fund Limited
SHAREHOLDER INFORMATION
The Company*s Participating Shares are listed on the London Stock Exchange. Monthly factsheets are issued by the Manager and can be
down-loaded from the Manager*s web-site www.closeinvestments.com
Company announcements and daily market closing prices of the Company*s Participating Shares are available on Reuters, Bloomberg and on-line
on the web. The ISIN of the Company*s Participating Shares is GB00B05QHC32, and the London Stock Exchange mnemonic is CED.
The Audited Annual Financial Report for the year ended 28 February 2009 is intended to be made public and sent to Shareholders in June 2009
together with a Notice of Meeting convening the Annual General Meeting of shareholders.
SHARE DEALING
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.
SHAREHOLDER ENQUIRIES
The Company*s registrar is Anson Registrars Limited in Guernsey and they can be contacted on 01481 711301.
Close Enhanced Commodities Fund LimitedRegistered in Guernsey No. 42782
DIRECTORS AND SERVICE PROVIDERS
Directors Nicholas John Falla (Chairman)Roger Edward CumingJohn Reginald
Le Prevost
Manager Close Investments Limited(Authorised and regulated by the
Financial Services Authority)10 Exchange SquarePrimrose
StreetLondon, England EC2A 2BY
Administrator and Secretary Anson Fund Managers LimitedPO Box 405Anson PlaceMill CourtLa
CharroterieSt Peter PortGuernsey GY1 3GF
Custodian BNP Paribas Trust Company (Guernsey) LimitedRoyal Bank Place1
Glategny EsplanadeSt Peter PortGuernsey GY1 4BQ
Principal Bankers Royal Bank of Scotland International LimitedPO Box 604Royal Bank
Place1 Glategny EsplanadeSt Peter PortGuernsey GY1 4NW
Auditor Saffery ChampnessLa Tonnelle HouseLes BanquesSt SampsonGuernsey
GY1 3HS
Registrar, Transfer Agentand Anson Registrars LimitedPO Box 426Anson PlaceMill CourtLa
Paying Agent CharroterieSt Peter PortGuernsey GY1 3WX
UK Transfer Agent Anson Administration (UK) Limited3500
ParkwayWhiteleyFarehamHampshireEngland PO15 7AL
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR FGMZGDZMGRZM
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
