TIDMCED
RNS Number : 2206U
Close Enhanced Commodities Fund Ld
19 June 2009
?
Close Enhanced Commodities Fund Limited (the "Company")
PRELIMINARY ANNOUNCEMENT OF ANNUAL RESULTS
The directors announce the statement of results for the year ended 28 February
2009 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 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.
As published in each of the annual and half-yearly financial reports of the
Company and as announced on 8 October 2008, the Company currently holds six debt
securities, including one issued by Glitnir Banki HF. This debt security
accounts for approximately 19 per cent of the total nominal value of the
Company's debt securities. Following the Icelandic authorities' decision to
place Glitnir Banki HF into receivership, the Board of the Company considers it
likely that it 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.
Given the recent collapse of various financial institutions around the world,
including Glitnir Banki HF, and the intervention of various governments, it is
worth commenting on the assets held by the Company. Your attention is drawn to
the Schedule of Investments, which shows the assets held by the Company, and
note 12 (b) to the financial statements, which refers to the credit risk of the
issuers of these assets as at the end of the reporting period and as at the date
of this announcement.
In the event of a default by an issuer of a debt security purchased by the
Company, the Company would rank as an unsecured creditor in respect of sums due
from the issuer of such debt security. In such event, the Company may (in
respect of that debt security) receive a lesser amount (if any) and at a
different time than the proceeds anticipated at the maturity of the relevant
debt security. Any losses would be borne by the Company and returns to
Shareholders would be significantly adversely affected.
CHAIRMAN'S STATEMENT FOR THE YEAR ENDED 28 FEBRUARY 2009
In order to fulfil its investment objective the Company purchased six Debt
Securities, including one issued by Glitnir Banki HF. This Debt Security
accounts for approximately 19 per cent of the total nominal value of the
Company's Debt Securities. In the event of a default by an issuer of a Debt
Security purchased by the Company, the Company will rank as an unsecured
creditor in respect of sums due from the issuer of such Debt Security. In such
event, the Company may (in respect of that Debt Security) receive a lesser
amount of money than the amount due pursuant to the terms of the Debt Security,
may actually receive the money at a different time than would otherwise have
been the case and the amount received may be zero. Any losses will be borne by
the Company and returns to Shareholders would be significantly adversely
affected.
As a result of Glitnir Banki HF's reported failure to make payouts due on other
outstanding debt obligations, the Manager and the Board of the Company consider
it likely that it may not pay in full on its obligation. Whilst recovery rates
from issuers that default vary, and in this case are currently unknown, the
worst case scenario would see the Company receive nothing from Glitnir Banki HF
at the maturity of the Debt Security.
Potential capital entitlements available to shareholders are 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 Calculation Period ending on 22 February 2010.
Based on the average daily value of the Commodity Portfolio over the Calculation
Period to 27 February 2009, and assuming the End Value of the Commodity
Portfolio is the same, the Final Capital Entitlement per Share on the Redemption
Date would be approximately 157 pence subject to there being no counterparty
default or any unforeseen circumstances, and in the event of Glitnir Banki HF
defaulting and having a zero recovery rate and there being no insolvency of any
other issuer of Debt Securities held by the Company or any other event of
default or any unforeseen circumstances, the Final Capital Entitlement per Share
on the Redemption Date would be approximately 127 pence.
Based on the value of the Commodity Portfolio as at 27 February 2009, and
assuming the End Value of the Commodity Portfolio is the same, the Final Capital
Entitlement per Share on the Redemption Date would be approximately 159 pence
subject to there being no counterparty default or any unforeseen circumstances,
and in the event of Glitnir Banki HF defaulting and having a zero recovery rate
and there being no insolvency of any other issuer of Debt Securities held by the
Company or any other event of default or any unforeseen circumstances, the Final
Capital Entitlement per Share on the Redemption Date would be approximately 128
pence.
This is not a forecast nor is it a reflection of the net asset value per Share
and takes no account of any unforeseen circumstances and is provided for
informational purposes only and should not be relied upon for investment
decisions.
+-------------------+---------------+-------------------+-------------------+
| Commodity | Start Value | Average daily | As at |
| | | values over the | 27 February 2009: |
| | | Calculation | |
| | | Period to | |
| | | 27 February 2009: | |
+-------------------+---------------+-------------------+-------------------+
| Oil | $51.15 | $42.18 | $44.76 |
+-------------------+---------------+-------------------+-------------------+
| Gold | $432.85 | $ 967.40 | $ 952.00 |
+-------------------+---------------+-------------------+-------------------+
| Aluminium | $1972.00 | $ 1282.00 | $ 1290.00 |
+-------------------+---------------+-------------------+-------------------+
| Copper | $3367.00 | $ 3315.90 | $ 3390.00 |
+-------------------+---------------+-------------------+-------------------+
| Zinc | $1383.00 | $ 1090.40 | $ 1075.50 |
+-------------------+---------------+-------------------+-------------------+
| Commodity | 100.00% | 128.9% | 129.6% |
| Portfolio | | | |
+-------------------+---------------+-------------------+-------------------+
The tables below illustrate how the Final Capital Entitlement of the Shares
might vary for different End Values of the Commodity Portfolio relative to its
Start Value (1) subject to there being no counterparty default or any unforeseen
circumstances, and (2) on the assumption of zero recovery in the event of
default of the Debt Security issued by Glitnir Banki HF and there being no
insolvency of any other issuer of Debt Securities held by the Company or any
other event of default or any unforeseen circumstances.
+----------------------------+--------------------+--------------------+
| Percentage change in End | Final Capital | Final Capital |
| Value of the Commodity | Entitlement (1) | Entitlement (2) |
| Portfolio relative to its | | |
| Start Value+ | | |
+----------------------------+--------------------+--------------------+
| -100% | 100 | 80 |
+----------------------------+--------------------+--------------------+
| -80% | 100 | 80 |
+----------------------------+--------------------+--------------------+
| -60% | 100 | 80 |
+----------------------------+--------------------+--------------------+
| -40% | 100 | 80 |
+----------------------------+--------------------+--------------------+
| -20% | 100 | 80 |
+----------------------------+--------------------+--------------------+
| 0% | 100 | 80 |
+----------------------------+--------------------+--------------------+
| 20% | 140 | 113 |
+----------------------------+--------------------+--------------------+
| 40% | 180 | 145 |
+----------------------------+--------------------+--------------------+
| 60% | 220 | 177 |
+----------------------------+--------------------+--------------------+
| 80% | 260 | 210 |
+----------------------------+--------------------+--------------------+
| 100% | 300 | 242 |
+----------------------------+--------------------+--------------------+
(1) Subject to there being no counterparty default or any unforeseen
circumstances
(2) The table contemplates default and zero recovery in respect of the Debt
Security issued by Glitnir Banki HF. The Final Capital Entitlement set out in
this table is an example only and not a forecast of actual payments and is
subject to there being no insolvency of any other issuer of Debt Securities held
by the Company or any other event of default or any unforeseen circumstances.
The attention of shareholders is drawn to the section headed "Risk Factors" in
the Prospectus.
+ The End Value will be the average daily value of the Commodity Portfolio over
the one year Calculation Period ending on 22 February 2010.
Since the end of the financial year, the average daily value of the Commodity
Portfolio has enjoyed a rise in value. As at close of business 5 June 2009 the
average daily value of the Commodity Portfolio was up by 7.0% since the
financial year end, to a value of 137.9%. The average daily value of the oil
price was very strong (climbing 25% over this period), as were industrial metals
copper (+27%) and zinc (+24%). The average daily value of the price of gold fell
by 5% but remains close to its all time high, having not suffered the large
declines in value of the other constituents over the last financial year.
I am pleased to say that your Company's shares have performed very well since
the financial year end, rising by 47.2%.
Nicholas Falla
Chairman
19 June 2009
MANAGEMENT REPORT FOR THE YEAR ENDED 28 FEBRUARY 2009
Detailed in the section entitled "Investment Objective and Policy", the
Chairman's Statement, the Manager's Report and the notes to the financial
statements are 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.
There were no material related party transactions which took place in the
financial year.
Going Concern
The performance of the investments held by the Company over the reporting period
and the outlook for the future are described in the Manager's Report. The
Company's financial position, its cash flows and liquidity position are set out
in the financial statements and the Company's financial risk management
objectives and policies, details of its financial instruments and its exposures
to market price risk, credit risk, liquidity risk and interest rate risk are set
out at note 12 to the financial statements.
As highlighted in the section entitled "Investment Objective and Policy", the
Manager's Report and notes 1(g), 5 and 12(b) to the financial statements, during
the year under review, the issuer of one of the debt securities held by the
Company, being Glitnir Banki HF ("Glitnir") suffered severe financial
difficulties. As such, the value of the debt security issued by Glitnir cannot
be ascertained with any degree of certainty. Although at the time of writing the
situation remains unclear, the Manager and Board of directors consider it likely
that Glitnir may not pay in full on its obligations and in the worst case
scenario may pay nothing at all. Any losses will be borne by the Company and
returns to Shareholders will be significantly adversely affected.
The Final Capital Entitlement due to shareholders will be 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 Calculation Period ending on 22 February 2010.
At the end of the financial year, the notional Commodity Portfolio had risen
29.58 per cent. since launch. Based on the average daily value of the Commodity
Portfolio over the Calculation Period to 27 February 2009, and assuming the End
Value of the Commodity Portfolio is the same, the Final Capital Entitlement per
Share on the Redemption Date would be approximately 157 pence, subject to there
being no counterparty default or any unforeseen circumstances, and in the event
of Glitnir Banki HF defaulting and having a zero recovery rate and there being
no insolvency of any other issuer of Debt Securities held by the Company or any
other event of default or any unforeseen circumstances, the Final Capital
Entitlement per Share on the Redemption Date would be approximately 127 pence.
As disclosed in note 12(c) to the financial statements, upon the issue of Shares
in the Company 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 such
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 that 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 GBP100,000, notwithstanding the fact that such amount
may exceed 0.25 per cent of the Initial Gross Proceeds.
After making enquiries, the directors have a reasonable expectation that the
Company has adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going concern basis
in preparing this annual financial report.
Responsibility Statement
The Board of directors jointly and severally confirm that, to the best of their
knowledge:
(a) The financial statements, prepared in accordance with International
Financial Reporting Standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company; and
(b) This 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
19 June 2009
MANAGER'S REPORT FOR THE YEAR ENDED 28 FEBRUARY 2009
Market Review
The notional Commodity Portfolio fell 38.2% over the financial period as, apart
from gold, all the constituents' values collapsed dramatically.
+--------------------+----------------+---------------+--------------+
| | As at | Average daily | Return over |
| | 29 February | values over | the period |
| | 2008 | the | |
| | | Calculation | |
| | | Period to | |
| | | 27 February | |
+--------------------+----------------+---------------+--------------+
| Oil | $101.84 | $42.18 | -58.6% |
+--------------------+----------------+---------------+--------------+
| Gold | $971.50 | $ 967.40 | -0.4% |
+--------------------+----------------+---------------+--------------+
| Aluminium | $3086.00 | $ 1282.00 | -58.5% |
+--------------------+----------------+---------------+--------------+
| Copper | $8541.00 | $ 3315.90 | -61.2% |
+--------------------+----------------+---------------+--------------+
| Zinc | $2721.00 | $ 1090.40 | -59.9% |
+--------------------+----------------+---------------+--------------+
| | | | |
+--------------------+----------------+---------------+--------------+
| Commodity | 208.6% | 128.9% | -38.2% |
| Portfolio | | | |
+--------------------+----------------+---------------+--------------+
The first four months of the period saw the oil price continuing the remarkable
increase seen over the previous financial year, climbing to a high of $145.29,
up 42.7% for the period, defying the increasing evidence that the global economy
was facing a sharp slowdown in growth. From this high, the price fell to a low
of $33.87 over the next six months as the credit crunch sparked the collapse of
various financial institutions and pushed the global economy into recession,
with these two factors causing speculators to rein back their positions. Prices
recovered by 32.1% in the final two months of the financial year to close at
$44.76 as, in an effort to stem the falling price, OPEC announced supply cuts
and some investors viewed the sell-off as overdone.
The industrial metals in the basket all fell heavily over the financial year.
The start of the period saw zinc, mainly used to galvanise steel, falling
heavily on speculation that slower global growth would curb demand whilst copper
and aluminium remained resilient, 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, copper and aluminium prices fell sharply,
recording similar falls for the year as zinc, as the rapidly deteriorating
economic outlook led to a sharp decline in industrial output and demand for all
industrial metals.
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 in March 2008
before falling by as much as 15.6% over the next three months on worries it was
overvalued. A temporary spike in the price in July marked the start of a period
of increased price volatility as demand for gold varied on inflationary
concerns, the US dollar exchange rate, and its status as a safe haven. From its
July high the price fell by as much 24.9% as the commodity boom appeared to
be turning to bust, before the collapse of Lehman Brothers in September caused a
sharp increase in risk aversion, pushing the price higher before it fell again
in October to a low for the financial year of $712.50 on US Dollar weakness. The
price rallied by 33.6% over the next four months to finish almost unchanged for
the financial year at $952.00, as investors sought the perceived extra security
of gold.
Market Outlook
Following the large falls in the oil price in the second half of 2008, it
subsequently traded for most of the remainder of the financial year in a range
between $35 and $45, reflecting the expectation that much reduced industrial
production will result in lower demand. There are several factors helping to
underpin the price in this range: OPEC has cut supply and may do so again;
whilst marginal capacity has recently improved, the lack of investment in
infrastructure and exploration in the past is still being addressed; oil
reserves continue to be predominately in politically unstable areas; and, the
low oil price itself makes alternative energy less viable prompting a switch
back to oil and therefore boosting demand.
The outlook for industrial metals will largely depend upon the length and depth
of the economic slowdown together with the investment decisions of industrial
firms who are generally been running down their inventories whilst they wait for
signs of recovery. When they exhaust their supplies it is possible demand will
improve as businesses are forced to restock.
The gold price could be well supported as investors turn to it as a safe haven,
and to preserve value in times of increased financial uncertainty. In the past
it has often been used as a hedge against inflation, which is rapidly declining,
suggesting demand for gold could fall. However, as interest rates have been cut
to virtually zero, the cost of carry associated with holding gold has fallen.
This may make it more attractive compared to bonds and equities which have
suffered declining yields and falls in value.
Close Investments Limited
19 June 2009
STATEMENT OF OPERATIONS for the year ended 28 February 2009
+------------------------------------------------------+---------+------------------+---+------------------+
| | | Year ended | | Year ended |
+------------------------------------------------------+---------+------------------+---+------------------+
| | Notes | 28 Feb 2009 | | 29 Feb 2008 |
+------------------------------------------------------+---------+------------------+---+------------------+
| | | GBP | | GBP |
+------------------------------------------------------+---------+------------------+---+------------------+
| | | | | |
+------------------------------------------------------+---------+------------------+---+------------------+
| Net movement in unrealised (depreciation) / | | | | |
| appreciation on investments | 5 | (57,849,677) | | 37,087,939 |
+------------------------------------------------------+---------+------------------+---+------------------+
| | | | | |
+------------------------------------------------------+---------+------------------+---+------------------+
| Operating expenses | 2 | (376,777) | | (354,706) |
+------------------------------------------------------+---------+------------------+---+------------------+
| | | | | |
+------------------------------------------------------+---------+------------------+---+------------------+
| Net (loss) / gain for the year attributable to | | | | |
| shareholders | | (58,226,454) | | 36,733,233 |
+------------------------------------------------------+---------+------------------+---+------------------+
| | | | | |
+------------------------------------------------------+---------+------------------+---+------------------+
| | | Pence | | Pence |
+------------------------------------------------------+---------+------------------+---+------------------+
| (Loss) / Earnings per share for the year - Basic and | | | | |
| Diluted | 4 | (164.94) | | 104.06 |
+------------------------------------------------------+---------+------------------+---+------------------+
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 |
+---------------------------------------------------------------+------------------+----+------------------+
| (Loss) / Earnings per share for investment purposes | (163.89) | | 105.07 |
+---------------------------------------------------------------+------------------+----+------------------+
| Adjustment to include expenses on an accruals basis | (1.05) | | (1.01) |
+---------------------------------------------------------------+------------------+----+------------------+
| (Loss) / Earnings per share per the financial statements | (164.94) | | 104.06 |
+---------------------------------------------------------------+------------------+----+------------------+
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 28 February 2009
+------------------------------------------------------+---------+------------------+---+------------------+
| | | 28 Feb 2009 | | 29 Feb 2008 |
| | | | | |
+------------------------------------------------------+---------+------------------+---+------------------+
| | Notes | GBP | | GBP |
+------------------------------------------------------+---------+------------------+---+------------------+
| FIXED ASSETS | | | | |
+------------------------------------------------------+---------+------------------+---+------------------+
| Unquoted financial assets designated at fair value | | | | |
| through profit or loss | 5 | 43,899,089 | | 101,748,766 |
+------------------------------------------------------+---------+------------------+---+------------------+
| | | | | |
+------------------------------------------------------+---------+------------------+---+------------------+
| CURRENT ASSETS | | | | |
+------------------------------------------------------+---------+------------------+---+------------------+
| Receivables | 6 | 169,445 | | 329,484 |
+------------------------------------------------------+---------+------------------+---+------------------+
| Cash and cash equivalents | | 415,238 | | 638,114 |
+------------------------------------------------------+---------+------------------+---+------------------+
| | | | | |
+------------------------------------------------------+---------+------------------+---+------------------+
| | | 584,683 | | 967,598 |
+------------------------------------------------------+---------+------------------+---+------------------+
| CURRENT LIABILITIES | | | | |
+------------------------------------------------------+---------+------------------+---+------------------+
| Payables - falling due within one year | 7 | 28,375 | | 34,513 |
+------------------------------------------------------+---------+------------------+---+------------------+
| | | | | |
+------------------------------------------------------+---------+------------------+---+------------------+
| NET CURRENT ASSETS | | 556,308 | | 933,085 |
+------------------------------------------------------+---------+------------------+---+------------------+
| | | | | |
+------------------------------------------------------+---------+------------------+---+------------------+
| TOTAL ASSETS LESS CURRENT LIABILITIES | | 44,455,397 | | 102,681,851 |
+------------------------------------------------------+---------+------------------+---+------------------+
| | | | | |
+------------------------------------------------------+---------+------------------+---+------------------+
| NON-CURRENT LIABILITIES EXCLUDING NET ASSETS | | | | |
| ATTRIBUTABLE TO SHAREHOLDERS | | | | |
+------------------------------------------------------+---------+------------------+---+------------------+
| Payables - falling due after more than one year | 8 | - | | - |
+------------------------------------------------------+---------+------------------+---+------------------+
| | | | | |
+------------------------------------------------------+---------+------------------+---+------------------+
| NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS | | | | |
| | | 44,455,397 | | 102,681,851 |
+------------------------------------------------------+---------+------------------+---+------------------+
| | | | | |
+------------------------------------------------------+---------+------------------+---+------------------+
| | | | | |
+------------------------------------------------------+---------+------------------+---+------------------+
| SHARES IN ISSUE | | 35,300,000 | | 35,300,000 |
+------------------------------------------------------+---------+------------------+---+------------------+
| | | | | |
+------------------------------------------------------+---------+------------------+---+------------------+
| | | Pence | | Pence |
+------------------------------------------------------+---------+------------------+---+------------------+
| NAV PER SHARE | | 125.94 | | 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 | 124.36 | | 288.24 |
+---------------------------------------------------------------+------------------+----+------------------+
| Adjustment to include expenses on an accruals basis | 1.58 | | 2.64 |
+---------------------------------------------------------------+------------------+----+------------------+
| NAV per share per the financial statements | 125.94 | | 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.
The financial statements were approved by the Board of directors on 19 June 2009
and are signed on its behalf by:
Nicholas Falla John Le Prevost
Director Director
STATEMENT OF CASH FLOWS for the year ended 28 February 2009
+-----------------------------------------------+--------------+--+--------------+
| | Year ended | | Year ended |
+-----------------------------------------------+--------------+--+--------------+
| | 28 Feb 2009 | | 29 Feb 2008 |
+-----------------------------------------------+--------------+--+--------------+
| | GBP | | GBP |
+-----------------------------------------------+--------------+--+--------------+
| Operating activities | | | |
+-----------------------------------------------+--------------+--+--------------+
| | | | |
+-----------------------------------------------+--------------+--+--------------+
| Net (loss) / gain for the year attributable | (58,226,454) | | 36,733,233 |
| to shareholders | | | |
+-----------------------------------------------+--------------+--+--------------+
| Add: Unrealised depreciation / (appreciation) | 57,849,677 | | (37,087,939) |
| on investments | | | |
+-----------------------------------------------+--------------+--+--------------+
| Less: Interest received | (23,190) | | (40,136) |
+-----------------------------------------------+--------------+--+--------------+
| Add: Amortisation of debt issue costs | 159,497 | | 159,934 |
+-----------------------------------------------+--------------+--+--------------+
| Add: (Decrease) / increase in accrued | (6,138) | | 20,402 |
| expenses | | | |
+-----------------------------------------------+--------------+--+--------------+
| Add: Decrease in prepayments and accrued | 542 | | 166 |
| income excluding debt issue costs | | | |
+-----------------------------------------------+--------------+--+--------------+
| | | | |
+-----------------------------------------------+--------------+--+--------------+
| Net cash outflow from operating activities | (246,066) | | (214,340) |
+-----------------------------------------------+--------------+--+--------------+
| | | | |
+-----------------------------------------------+--------------+--+--------------+
| Investing activities | | | |
+-----------------------------------------------+--------------+--+--------------+
| | | | |
+-----------------------------------------------+--------------+--+--------------+
| Interest received | 23,190 | | 40,136 |
+-----------------------------------------------+--------------+--+--------------+
| | | | |
+-----------------------------------------------+--------------+--+--------------+
| Net cash inflow from investing activities | 23,190 | | 40,136 |
+-----------------------------------------------+--------------+--+--------------+
| | | | |
+-----------------------------------------------+--------------+--+--------------+
| Cash and cash equivalents at beginning of | 638,114 | | 812,318 |
| year | | | |
+-----------------------------------------------+--------------+--+--------------+
| | | | |
+-----------------------------------------------+--------------+--+--------------+
| Decrease in cash and cash equivalents | (222,876) | | (174,204) |
+-----------------------------------------------+--------------+--+--------------+
| | | | |
+-----------------------------------------------+--------------+--+--------------+
| Cash and cash equivalents at end of year | 415,238 | | 638,114 |
+-----------------------------------------------+--------------+--+--------------+
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS for the year
ended 28 February 2009
+-----------------------------------------------+--------------+--+--------------+
| | Year ended | | Year ended |
+-----------------------------------------------+--------------+--+--------------+
| | 28 Feb 2009 | | 29 Feb 2008 |
+-----------------------------------------------+--------------+--+--------------+
| | GBP | | GBP |
+-----------------------------------------------+--------------+--+--------------+
| | | | |
+-----------------------------------------------+--------------+--+--------------+
| Opening balance | 102,681,851 | | 65,948,618 |
+-----------------------------------------------+--------------+--+--------------+
| Net (loss) / gain for the year attributable | (58,226,454) | | 36,733,233 |
| to shareholders | | | |
+-----------------------------------------------+--------------+--+--------------+
| | | | |
+-----------------------------------------------+--------------+--+--------------+
| Closing balance | 44,455,397 | | 102,681,851 |
+-----------------------------------------------+--------------+--+--------------+
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 28 February 2009
1 ACCOUNTING POLICIES
(a) Basis of Preparation
The financial statements have been prepared in conformity with International
Financial Reporting Standards and applicable Guernsey law. As the Company's
participating shares are due for redemption within twelve months, on or around
24 February 2010, the financial statements have been prepared on a realisable
value basis. The directors do not anticipate costs of liquidation to be
material. Such costs will be borne out of the Expense Provision described in
note 8 to the financial statements.
The following Standards or Interpretations that are expected to affect the
Company have been issued but not yet adopted by the Company as shown below.
Other Standards or Interpretations issued by the International Accounting
Standards Board and the International Financial Reporting Interpretations
Committee are not expected to affect 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
periods beginning on or after 1 January 2009.
IFRS 1 and IAS 27 Cost of an Investment in a Subsidiary, Jointly Controlled
Entity or Associate effective for annual periods beginning on or after 1 January
2009.
IAS 39 Eligible Hedged Items effective for annual periods beginning on or after
1 January 2009.
IAS 39 Financial Instruments: Recognition and Measurement and IFRS 7 Financial
Instruments Disclosures - Reclassification of Financial Assets (Amendments) and
Reclassification of Financial Assets: Effective Date and Transition effective
for annual periods beginning on or after 1 July 2008.
IFRS 7 Financial Instruments: Disclosures about Financial Instruments effective
for annual periods beginning on or after 1 January 2009.
The Directors have considered the above and are of the opinion that the above
Standards and Interpretations are not expected to have an impact on the
Company's financial statements except for the presentation of additional
disclosures and changes to the presentation of components of the financial
statements. These items will be applied in the first financial period for which
they are required.
(b) Taxation
The Company has been granted exemption under the Income Tax (Exempt Bodies)
(Guernsey) Ordinance, 1989, as amended, from Guernsey Income Tax, and is charged
an annual fee of GBP600.
(c)Expenses
All expenses are accounted for on an accruals basis.
(d) Debt Issue Costs
The debt issue costs incurred amounted to GBP796,230. 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 are classified as "at fair value through profit or loss".
Investments are initially recognised at cost, being the fair value of the
consideration given, excluding transaction costs associated with the investment.
After initial recognition, investments are measured at fair value, with
unrealised gains and losses on investments and impairment of investments being
recognised in the Statement of Operations.
Fair value is the amount for which the financial instruments could be exchanged,
or a liability settled, between knowledgeable willing parties in an arms length
transaction. Fair value also reflects the credit quality of the issuers of the
financial instruments.
Valuations of the Company's investments are based on valuations provided to the
Company by Future Value Consultants Limited ("FVC"). These valuations are
intended to be an indication of the fair value of those investments, including
an issuer's credit risk, designed to reflect the best estimation of the price at
which they could be sold, even though there is no guarantee that a willing buyer
might be found if the Company chose to sell the relevant investment.
The indicative fair values of the investments are based on an approximation of
the market level of the investments. As the investments are not traded in an
active market, the indicative fair value was determined by using valuation
techniques. FVC used a variety of methods and made assumptions that were 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 flows analysis, option pricing
models and other valuation techniques commonly used by market participants.
Models use observable data, to the extent practicable. However, areas such as
counterparty credit risk, volatilities and correlations require FVC to make
estimates. Changes in assumptions about these factors could affect the reported
fair value of financial instruments.
Different assumptions regarding these factors, combined with different valuation
techniques and models used, could lead to significantly different valuations of
the financial instruments produced by different parties. In previous accounting
periods, the valuation data was provided by Barclays Capital and BNP Paribas. As
at the balance sheet date, valuation data provided by Barclays Capital and BNP
Paribas was GBP4,715,446 higher than that provided by FVC.
Being cognisant of current market conditions, the Company believes that the
valuations provided by FVC comply with the definition of fair value as defined
by International Financial Reporting Standards and are more appropriate.
The investments will be derecognised on their maturity date, being 24 February
2010. However, in accordance with IFRS 5, the investments continue to be
classified as non current assets as at 28 February 2009, as they are not
considered to be available for immediate sale. Gains and losses on the sale or
maturity of investments will be taken to the Statement of Operations.
(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 |
+-----------------------------------------+--------------+--+--------------+
| | 28 Feb 2009 | | 29 Feb 2008 |
+-----------------------------------------+--------------+--+--------------+
| | GBP | | GBP |
+-----------------------------------------+--------------+--+--------------+
| Amortisation of debt issue costs | 159,497 | | 159,934 |
+-----------------------------------------+--------------+--+--------------+
| Management fees(1) | 123,574 | | 124,142 |
+-----------------------------------------+--------------+--+--------------+
| Auditor's remuneration | 7,750 | | 7,500 |
+-----------------------------------------+--------------+--+--------------+
| Directors' and Officers' insurance | 7,978 | | 9,402 |
+-----------------------------------------+--------------+--+--------------+
| Registration fees | 13,240 | | 11,031 |
+-----------------------------------------+--------------+--+--------------+
| Administration fees | 30,933 | | 24,841 |
+-----------------------------------------+--------------+--+--------------+
| Custody fees | 14,616 | | 14,345 |
+-----------------------------------------+--------------+--+--------------+
| Directors' remuneration | 15,000 | | 15,000 |
+-----------------------------------------+--------------+--+--------------+
| Annual fees | 14,279 | | 12,880 |
+-----------------------------------------+--------------+--+--------------+
| Printing accounts | 7,631 | | 12,353 |
+-----------------------------------------+--------------+--+--------------+
| Sundry costs and charges | 5,469 | | 3,414 |
+-----------------------------------------+--------------+--+--------------+
| | | | |
+-----------------------------------------+--------------+--+--------------+
| | 399,967 | | 394,842 |
+-----------------------------------------+--------------+--+--------------+
| | | | |
+-----------------------------------------+--------------+--+--------------+
| Less: Interest earned on expense | (23,190) | | (40,136) |
| provision | | | |
+-----------------------------------------+--------------+--+--------------+
| | | | |
+-----------------------------------------+--------------+--+--------------+
| | 376,777 | | 354,706 |
+-----------------------------------------+--------------+--+--------------+
3 DIRECTORS REMUNERATION
The Prospectus provides that each director will be paid a fee of GBP5,000 per
annum by the Company. The
remuneration will remain fixed over the life of
the Companys participating shares.
4 EARNINGS PER SHARE
Earnings per share is based on the net loss for the year attributable to
shareholders of GBP58,226,454 (2008:
gain of GBP36,733,233) and on
35,300,000 (2008: 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 result per
share are identical.
5INVESTMENTS
+-----------------------------------------+--------------+--+--------------+
| | 28 Feb 2009 | | 29 Feb 2008 |
+-----------------------------------------+--------------+--+--------------+
| | 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 | 68,656,016 | | 31,568,077 |
| brought forward | | | |
+-----------------------------------------+--------------+--+--------------+
| | | | |
+-----------------------------------------+--------------+--+--------------+
| Unrealised (depreciation) / | (57,849,677) | | 37,087,939 |
| appreciation on valuation for the year | | | |
+-----------------------------------------+--------------+--+--------------+
| | | | |
+-----------------------------------------+--------------+--+--------------+
| Unrealised appreciation on valuation | 10,806,339 | | 68,656,016 |
| carried forward | | | |
+-----------------------------------------+--------------+--+--------------+
| | | | |
+-----------------------------------------+--------------+--+--------------+
| Closing valuation | 43,899,089 | | 101,748,766 |
+-----------------------------------------+--------------+--+--------------+
Valuations of investments are based on valuations provided by FVC Limited. The
provided valuations were 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, FVC was engaged to provide valuations of the
investments, taking account of the current counterparty credit risk of the
issuers of the debt securities held by the Company. Details of the quantitative
effect of using different valuation providers compared to the previous year is
given in note 1(g).
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 FVC to the Company is provided for informational
purposes only and does not represent an offer to buy or sell the debt securities
by FVC 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 FVC considers in its judgement reasonable, but an
alternative valuer might arrive at different valuations for the same
investments.
6 RECEIVABLES
+-----------------------------------------+--------------+--+--------------+
| | 28 Feb 2009 | | 29 Feb 2008 |
+-----------------------------------------+--------------+--+--------------+
| | GBP | | GBP |
+-----------------------------------------+--------------+--+--------------+
| Prepaid debt issue costs | 157,749 | | 317,246 |
+-----------------------------------------+--------------+--+--------------+
| Prepayments | 11,696 | | 11,237 |
+-----------------------------------------+--------------+--+--------------+
| Accrued bank interest | - | | 1,001 |
+-----------------------------------------+--------------+--+--------------+
| | | | |
+-----------------------------------------+--------------+--+--------------+
| | 169,445 | | 329,484 |
+-----------------------------------------+--------------+--+--------------+
7 PAYABLES
+-----------------------------------------+--------------+--+--------------+
| (amounts falling due within one year) | 28 Feb 2009 | | 29 Feb 2008 |
+-----------------------------------------+--------------+--+--------------+
| | GBP | | GBP |
+-----------------------------------------+--------------+--+--------------+
| Accrued administration fees | 2,347 | | 1,985 |
+-----------------------------------------+--------------+--+--------------+
| Accrued registration fees | 798 | | 839 |
+-----------------------------------------+--------------+--+--------------+
| Accrued management fees | - | | 9,814 |
+-----------------------------------------+--------------+--+--------------+
| Accrued directors' fees | 2,500 | | 2,500 |
+-----------------------------------------+--------------+--+--------------+
| Accrued audit fees | 7,750 | | 7,500 |
+-----------------------------------------+--------------+--+--------------+
| Accrued custody fees | 7,500 | | 6,475 |
+-----------------------------------------+--------------+--+--------------+
| Other accrued expenses | 7,480 | | 5,400 |
+-----------------------------------------+--------------+--+--------------+
| Expense provision | 398,559 | | 237,605 |
+-----------------------------------------+--------------+--+--------------+
| Less: Prepaid expense provision (see | (398,559) | | (237,605) |
| note 8) | | | |
+-----------------------------------------+--------------+--+--------------+
| | | | |
+-----------------------------------------+--------------+--+--------------+
| | 28,375 | | 34,513 |
+-----------------------------------------+--------------+--+--------------+
8 PAYABLES
+-----------------------------------------+--------------+--+--------------+
| (amounts falling due after one year) | 28 Feb 2009 | | 29 Feb 2008 |
+-----------------------------------------+--------------+--+--------------+
| | GBP | | GBP |
+-----------------------------------------+--------------+--+--------------+
| Expense provision | - | | 378,234 |
+-----------------------------------------+--------------+--+--------------+
| Less: Prepaid expense provision | - | | (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.
9SHARE CAPITAL
+-----------------------------------------+--------------+--+--------------+
| Authorised | SHARES | | GBP |
+-----------------------------------------+--------------+--+--------------+
| | | | |
+-----------------------------------------+--------------+--+--------------+
| Unclassified shares of 0.01p each | 200,000,000 | | 20,000 |
+-----------------------------------------+--------------+--+--------------+
| Management shares of GBP1 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 | 35,300,002 |
| 28 February 2009 | |
+---------------------------------------------------------+--------------+
| | |
+---------------------------------------------------------+--------------+
| | |
+---------------------------------------------------------+--------------+
| | GBP |
+---------------------------------------------------------+--------------+
| | |
+---------------------------------------------------------+--------------+
| Issued capital as at 29 February 2008 and 28 February | 3,532 |
| 2009 | |
+---------------------------------------------------------+--------------+
+----------------------------------+------------+--+------------+--+------------+
| The issue of participating | | | | | Amount |
| shares took | | | | | |
+----------------------------------+------------+--+------------+--+------------+
| place as follows: | Number | | Price per | | received |
+----------------------------------+------------+--+------------+--+------------+
| | of | | Share | | GBP |
| | Shares | | Pence | | |
+----------------------------------+------------+--+------------+--+------------+
| | | | | | |
+----------------------------------+------------+--+------------+--+------------+
| 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 29 February 2008 and 28 February 2009 | 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.
Price sensitivity
The following details the Company's sensitivity to a 10% increase and decrease
in the average daily values over the calculation period to 28 February 2009 of
its constituent financial assets and liabilities.
If average daily values over the calculation period to 28 February 2009 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 net
assets attributable to shareholders on the Redemption Date would have been
GBP9,178,000 higher (Feb 2008: GBP24,625,280) arising due to the increase in the
fair value through profit or loss of GBP9,178,000 (Feb 2008: GBP24,625,280).
If average daily values over the calculation period to 28 February 2009 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
GBP8,825,000 lower (Feb 2008: GBP4,673,720) arising due to the increase in the
fair value of financial assets at fair value through profit or loss of
GBP8,825,000 (Feb 2008: GBP4,673,720).
(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 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.
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, based on the valuations of the investments at 28
February 2009 (29 February 2008 for the comparative period), as rated by
Moody's:
+------------------------------------+---------------------+---------------+----------------------+
| Rating | 10 June 2009* | 28 Feb 2009 | 29 Feb 2008 |
+------------------------------------+---------------------+---------------+----------------------+
| | | | |
+------------------------------------+---------------------+---------------+----------------------+
| Aaa/AAA | 23.64% | 0.00% | 0.00% |
+------------------------------------+---------------------+---------------+----------------------+
| Aa/AA | 52.97% | 52.97% | 62.25% |
+------------------------------------+---------------------+---------------+----------------------+
| A/A | 23.39% | 47.03% | 37.75% |
+------------------------------------+---------------------+---------------+----------------------+
* Based on the value of the Company's investments at 28 February 2009
As at the financial reporting date and as at the date of this report, the credit
rating of Glitnir Banki HF non-investment grade, so that as at the financial
reporting date and as at the date of this report this issuer was not included in
the above table. As at 28 February 2008 Glitnir Banki HF was ascribed an
investment grade credit rating and therefore included in the above table as at
that date.
As the value of the debt instrument issued by Glitnir Banki HF cannot be
ascertained, the directors have exercised their judgement in the best interests
of both shareholders and creditors to value this investment at GBPnil.
Accordingly, the exclusion of Glitnir Banki HF from the above table as at the
financial reporting date and as at the date of this report has no effect on the
percentage values cited in the table.
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 GBP100,000, 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 for the
year ended 28 February 2009 was 4.27%.
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 28 February 2009 would have been GBP4,152 (2008: GBP6,381) 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 28 February 2009 would have been GBP4,152 (2008: GBP6,381) 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. GBP44,173 (2008: GBP35,872) of costs
were incurred by the Company with these related parties in the year, of which
GBP3,145 (2008: GBP2,824) was due to these related parties as at 28 February
2009.
14 ULTIMATE CONTROLLING PARTY
In the opinion of the Directors, the Company has no ultimate controlling party.
SCHEDULE OF INVESTMENTS as at 28 February 2009
+--------------------------------------+------------+--+------------+--+------------+
| DEBT SECURITIES PORTFOLIO | NOMINAL | | | | TOTAL NET |
+--------------------------------------+------------+--+------------+--+------------+
| | HOLDINGS | | VALUATION | | ASSETS |
+--------------------------------------+------------+--+------------+--+------------+
| | GBP | | GBP | | % |
+--------------------------------------+------------+--+------------+--+------------+
| Barclays Bank Plc EMTN 24 February | 6,740,000 | | 10,419,632 | | 23.44% |
| 2010 | | | | | |
+--------------------------------------+------------+--+------------+--+------------+
| | | | | | |
+--------------------------------------+------------+--+------------+--+------------+
| BNP Paribas EMTN 24 February 2010 | 1,600,000 | | 2,496,096 | | 5.61% |
+--------------------------------------+------------+--+------------+--+------------+
| | | | | | |
+--------------------------------------+------------+--+------------+--+------------+
| Glitnir Banki HF EMTN 24 February | 6,740,000 | | - | | 0.00% |
| 2010 | | | | | |
+--------------------------------------+------------+--+------------+--+------------+
| | | | | | |
+--------------------------------------+------------+--+------------+--+------------+
| Irish Life & Permanent Plc EMTN 24 | | | | | |
| February | | | | | |
+--------------------------------------+------------+--+------------+--+------------+
| 2010 | 6,740,000 | | 10,376,332 | | 23.34% |
+--------------------------------------+------------+--+------------+--+------------+
| | | | | | |
+--------------------------------------+------------+--+------------+--+------------+
| KBC Bank NV EMTN 24 February 2010 | 6,740,000 | | 10,335,504 | | 23.25% |
+--------------------------------------+------------+--+------------+--+------------+
| | | | | | |
+--------------------------------------+------------+--+------------+--+------------+
| SNS Bank NV EMTN 24 February 2010 | 6,740,000 | | 10,271,525 | | 23.11% |
+--------------------------------------+------------+--+------------+--+------------+
| | | | | | |
+--------------------------------------+------------+--+------------+--+------------+
| | 35,300,000 | | 43,899,089 | | 98.75% |
+--------------------------------------+------------+--+------------+--+------------+
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 | 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% |
+--------------------------------------+------------+--+-------------+--+------------+
A pdf version of the annual financial report will shortly be posted on the
Managers web-site www.closeam.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 2009
END OF ANNOUNCEMENT
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