RNS Number:8973P
Defined Capital Return Fund Ltd
22 January 2007
The Defined Capital Return Fund Limited
Preliminary announcement of the audited results for the year ended
31 October 2006
Incorporation
The Company is a closed-ended investment company incorporated in Jersey on 17
August 2004. Admission to the official list of the UK Listing Authority and
dealing in shares commenced on 1 November 2004. The Company has a fixed life
expiring on or about 30 October 2009.
Investment objective and policy
The investment objective of the Company is to provide ordinary Shareholders with
a defined capital payment per share of 136.49 pence ("Defined Capital Return")
at the winding-up date. This return will be contingent on the level of the FTSE
100 at the end of the life of the Company. Provided that the FTSE 100 on the
winding-up date is not below 85% per cent of its level on the start date of
4,615.40 ("Start Value"), Shareholders will receive the Defined Capital Return
on or soon after 2 November 2009.
The Company has and will continue throughout its life to be invested in a
portfolio of at least 6 medium term floating rate notes ("Bonds") which pay
interest gross. The interest received from these Bonds is used to meet ongoing
costs and to fund payments due under the FTSE Transaction which it has entered
into with UBS AG ("FTSE Transaction Counterparty"). Under the FTSE Transaction,
the Company swaps periodic amounts based on the interest return received by it
in respect of the Bonds with the FTSE Transaction Counterparty. In addition,
under the FTSE Transaction, the FTSE Transaction Counterparty is (provided that
the final FTSE level is not below the break-even level) obliged to pay an amount
which, together with the principal amounts payable on redemption of the Bonds,
is intended to provide the final capital entitlement. If however, the final FTSE
level is below the break-even level, no payment is due from the FTSE Transaction
Counterparty under the FTSE Transaction and, instead the Company is obliged to
pay an amount to the FTSE Transaction Counterparty, which amount is intended to
be funded from the principal amounts payable on redemption of the Bonds.
The final capital entitlement is only payable at the winding-up date. If at the
winding-up date the final FTSE level is at least equal to 85% of the Start Value
then the final capital entitlement will be equal to the Defined Capital Return.
If the final FTSE level is below 85 per cent of the Start Value, the final
capital entitlement will be reduced on a straight line basis from the Defined
Capital Return down to zero when the final FTSE level is less than or equal to
25 per cent of the Start Value.
As at 31 October 2006, the FTSE stood at 6,129.20 and the index cover was
1.56234 times, this representing the extent to which the FTSE was higher than
the level required for Defined Capital Return to be paid.
If the winding-up date was 31 October 2006, the accrued entitlement as at that
date would have been 113.23 pence per share.
No dividends have been proposed as the shares carry no rights to dividends.
The Defined Capital Return Fund Limited
Balance Sheet
As at 31 October 2006
Restated
2006 2005
# #
Assets
Non-current assets
Securities (at fair value through the profit and loss 27,876,700 27,821,700
account)
Fair value of derivative financial instruments 3,786,580 1,789,294
Prepayments 323,986 486,186
Prepayment of Directors fees 18,260 27,390
32,005,526 30,124,570
Current assets
Cash and cash equivalents 76,123 29,082
Other receivables 1,350 1,103
Prepayments 179,964 176,886
Prepayment of Directors fees 9,130 9,130
266,567 216,201
Total assets 32,272,093 30,340,771
Liabilities
Current liabilities
Other creditors and accruals - 136
Non-current liabilities
Provisions 30,000 30,000
Liabilities (excluding net assets attributable to holders
of ordinary shares) 30,000 30,136
Net assets attributable to ordinary shareholders 32,242,093 30,310,635
Number of ordinary shares in issue 28,000,000 28,000,000
Net asset value per ordinary share 1.1515 1.0825
The Defined Capital Return Fund Limited
Income Statement
For the year ended 31 October 2006
(Comparatives are stated for the period 17 August 2004 to 31 October 2005)
2006 2005
# #
Revenue
Interest income 1,305,057 1,352,741
Gain on derivative financial instruments (at fair value through
the profit and loss account) 1,997,286 2,839,294
Gain on securities (at fair value through the profit and loss 55,000 -
account)
Total revenue 3,357,343 4,192,035
Expenditure
Loss on securities (at fair value through the profit and loss - 182,918
account)
Interest payable - 136
Management fee 112,000 112,307
Administration fees and expenses 31,960 32,048
Custodian fees 6,840 6,859
Directors fees 9,130 9,130
Audit fees 11,400 11,400
Formation costs - 225,899
Interest on total return swap 1,186,791 1,230,244
General expenses 67,764 70,459
Total expenditure 1,425,885 1,881,400
Increase in net assets attributable to ordinary shareholders 1,931,458 2,310,635
There are zero earnings attributable to the management shares.
The Defined Capital Return Fund Limited
Statement of Changes in Net Assets Attributable to Ordinary Shareholders
For the year ended 31 October 2006
2006 2006
# #
Balance at 1 November 2005 30,310,635
Increase in net assets attributable to ordinary shareholders 1,931,458
Net assets attributable to ordinary shareholders at 31 October 2006 32,242,093
For the period 17 August 2004 to 31 October 2005
2005 2005
# #
Movement due to creations and redemption of ordinary shares
Amounts received on creation of shares 28,000,000
Net increase from share transactions 28,000,000
Increase in net assets attributable to ordinary shareholders 2,310,635
Net assets attributable to ordinary shareholders at 31 October 2005 30,310,635
The Defined Capital Return Fund Limited
Cash Flow Statement
For the year ended 31 October 2006
(Comparatives are stated for the period 17 August 2004 to 31 October 2005)
2006 2005
# #
Cash flows from operating activities
Increase in net assets attributable to ordinary shareholders 1,931,458 2,310,635
Adjustments for:
Interest income (1,305,057) (1,352,741)
Interest payable - 136
Net realised loss on sale of investments - 4,618
Net change in unrealised (gain)/loss on the fair valuation of (55,000) 178,300
investments
Net change in unrealised gain on derivative financial instruments (1,997,286) (2,839,294)
Operating result before working capital changes (1,425,885) (1,698,346)
Decrease/(increase) in trade and other receivables 168,252 (699,592)
(Decrease)/increase in trade and other payables (136) 30,136
(1,257,769) (2,367,802)
Interest income 1,303,103 1,345,771
Deposit interest received 1,707 6,421
Net cash generated from operations 47,041 (1,015,610)
Cash flows from investing activities
Payment for purchases of investments - (28,000,000)
Proceeds from derivative financial instruments - 1,050,000
Proceeds from sale of investments - 2,312,726
Net cash used in investing activities - (24,637,274)
Cash flows from financing activities
Amounts received on creation of shares - 25,681,966
Net cash from financing activities - 25,681,966
Net increase in cash and cash equivalents 47,041 29,082
Cash and cash equivalents at beginning of period 29,082 -
Cash and cash equivalents at end of year 76,123 29,082
Cash and cash equivalents made up of:
Cash at bank 76,123 29,082
The annual report will be sent to all registered shareholders and copies may be
obtained from the Registered Office, Standard Bank House, 47-49 La Motte Street,
St Helier, Jersey. JE4 8XR
By order of the Board
Standard Bank Fund Administration Jersey Limited, Secretary
This information is provided by RNS
The company news service from the London Stock Exchange
END
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