TIDMIRIS
RNS Number : 4145Y
DCG IRIS Limited
24 January 2014
DCG IRIS LIMITED
INTERIM REPORTS AND ACCOUNTS
The Company has today, in accordance with DTR 6.3.5, released
its Interim Financial Report for the period from 1 June 2013 to 30
November 2013. The Report will shortly be available from the
Company's website www.dexioncapital.com.
SUMMARY INFORMATION
Principal Activity
DCG IRIS Limited (the "Company") is a Guernsey authorised
closed-ended investment company admitted to the Official List and
to trading on the Main Market of the London Stock Exchange. Trading
in the Company's Shares commenced on 27 June 2012.
Investment Objective and Investment Policy
The Company's investment objective is to seek to achieve
positive returns through investing in insurance-linked contracts
and assets carrying exposure to risks related to insured event
risks.
The Company pursues its investment objective by principally
investing its assets (to the extent not retained in cash) in CS
IRIS Low Volatility Plus Fund Limited (the "Master Fund") which
invests in a broadly diversified portfolio of insurance-linked
contracts, securities and derivatives as well as various types of
investments related to insurance risks over the long-term.
The Company may not borrow or incur leverage for investment
purposes although as well as holding cash and investing in cash
equivalents it may borrow for cash management and short term
purposes. The borrowings of the Company are limited to ten per
cent. of the Company's gross assets at the time of drawdown.
Shareholder Information
The Net Asset Value (the "NAV") of the Company and the NAV per
Share for each class of Ordinary Shares are published monthly and
are calculated by the Administrator (or such other person as the
Directors may appoint for such purpose from time to time) as at the
NAV Calculation Date.
Weekly NAV estimates are also published by the Company and these
are based primarily upon information obtained by the Administrator
from the Master Fund Manager in relation to the portfolio
valuations of the Master Fund, in each case with adjustments to
account for the ongoing costs of the Company.
The NAV per Share for each class of Ordinary Shares in the
capital of the Company is published via a Regulated Information
Service ("RIS") on both a weekly and a monthly basis, approximately
19 Business Days (but not later than 20 Business Days) after the
end of each month in the case of the monthly NAV and approximately
3 Business Days (but not later than 5 Business Days) following the
end of the previous week in the case of a weekly NAV.
Financial Highlights
30 November 31 May 30 November
2013 2013 2012
-------------------------- ----------- -------- -----------
Total NAV GBP68.8m GBP60.2m GBP39.6m
NAV per share 99.46p 99.79p 98.56p
Mid-Market Share price 99.25p 100.63p 100.50p
(Discount)/premium to NAV (0.21%) 0.84% 1.97%
-------------------------- ----------- -------- -----------
As at 23 January 2014, the Company's share price stood at a
small discount of 0.19% to NAV. The estimated NAV per Share and
Mid-Market Share price stood at 98.69p and 98.5p respectively.
CHAIRMAN'S STATEMENT
I have pleasure in presenting this interim report for the period
1 June to 30 November 2013 on behalf of the Board of DCG IRIS
Limited (the 'Company').
During the period a further GBP8.9 million has been raised from
two equity issues and net assets are currently in excess of GBP68
million. The Company declared and paid dividends totalling 2.50
pence per Share to Shareholders.
The total return of the Company for the period was +2.20% and
the Shares traded at an average premium to their NAV of 0.64%.
The Company issued a number of event reports including in
relation to Superstorm Sandy, Winter Storm Christian and
Supertyphoon Haiyan; however, due to the investments of the Master
Fund at the time of each event, the Company's portfolio is not
expected to be materially impacted.
The Directors and Investment Manager continue to believe that
the Company offers a unique and attractive proposition for
investing in insurance-linked strategies. Since its launch in June
2012, the Company has delivered an annualised NAV total return to
29 November 2013 of 5.07% and dividends of 6.00 pence per
Share.
The Directors and Investment Manager are aware that the majority
of investors wish to see the Company continue to grow in size and
continue to keep the opportunity to raise further capital under
review.
On behalf of the Board, I would like to thank you for your
continued support and look forward to writing to Shareholders again
at the time of the Company's results for the year ending 31 May
2014.
Talmai Morgan
Chairman
23 January 2014
INVESTMENT MANAGER'S REPORT
Investment Review
We report that the NAV of the Company's Shares (in GBP terms)
increased by 7.25% net of fees and expenses over the period from 1
June 2012 to 30 November 2013. During this period, the Company has
declared and paid dividends totalling 6.00 pence per Share to
Shareholders. During the period from 1 June 2013 to 30 November
2013, the Company has declared and paid dividends totalling 2.50
pence per Share to Shareholders.
The following provides the review of the performance of the
Master Fund by the Master Fund Manager to 30 November 2013.
References to the allocated investments are, where the context
requires, to those of CS IRIS Low Volatility Plus Fund Limited (the
"Master Fund") of which the Company is a Feeder Fund.
30 November 2013 marks the end of another successful half-year
for the Master Fund which was launched in January 2012. The Master
Fund's steady Assets under Management ("AuM") growth has continued
with the fund ending the half-year with close to USD 740 million
under management. The past six months have been focused on
rebalancing the portfolio, with a strategic move away from
relatively under-priced Cat Bonds into private collateralised
reinsurance transactions. The fund return for the six-month period
was +2.67% (USD A class, net).
As investors will be aware, the second half of the year is
dominated by the US wind season. This was the Master Fund's second
US wind season, and it proved to be an uneventful one from the
perspective of hurricanes making landfall. The period began with
the US renewal in June. In the run up to June, the Master Fund was
holding a larger Cat Bond portfolio compared to today. Both in the
lead up to the June renewal as well as over the course of the wind
season the primary Cat Bond market has seen high activity with
issuance in the year reaching close to record levels. This has been
primarily driven by investor demand which in turn has put pressure
on spreads in this space. Anticipating this pricing pressure, the
investment team actively sought to rebalance the portfolio over the
course of the season by strategically selling attractively priced
bonds that were trading at a premium. The proceeds from these sales
were reinvested in both private transactions as well as the
Industry Loss Warranty market, which saw some pricing improvements
in July. The US tornado season saw some activity with one of the
most devastating tornados of the year touching down in Moore County
in Oklahoma. Europe also saw some severe weather over the period
with some of the worst flooding in over a decade impacting parts of
Germany, Austria and Switzerland. However, these events were not
large enough to impact fund performance.
Property Claim Services ("PCS"), an independent company which
investigates reported disasters and determines the extent of
damage, issued its final loss report with respect to Superstorm
Sandy in late July and the final figure stands at USD 18.75
billion. As a result, and as investors have been informed, the
remaining side pockets established with respect to positions with
valuation uncertainty following Superstorm Sandy could be fully
moved back to the main portfolio. We are pleased to report that the
net impact on the Master Fund from Superstorm Sandy was
approximately - 0.24% as a percentage of the Fund NAV as of 31
October 2013.
Loss Events Impacting the Fund
There were no loss events that had an impact on fund performance
over the period.
General Market Overview
After a quiet US wind season, it has been a successful start to
the 2013/14 financial year for the Master Fund with the fund
continuing to grow. Notwithstanding the growth, the fund has a
well-balanced and mature portfolio. The lack of a market turning
event has continued to put pressure on premiums. Going into the new
year we expect to see some pricing pressure at the 1 January
renewals but are cautiously optimistic about the year ahead. We
continue to see large inflows of capital in the Cat Bond space
depressing pricing in the sector on a risk adjusted basis. From our
perspective, private transactions in the traditional market
continue to offer some of the best value for investors in the
Master Fund. The focus of the investment team going forward is on
the year end renewal season as well as the Japanese renewal in
April.
Analysis of Significant Investments
The Company's sole investment is in CS IRIS Low Volatility Plus
Fund Limited and equates to 99.9% (including subscriptions paid in
advance) of the Company's NAV. 67% of the net assets of CS IRIS Low
Volatility Plus Fund Limited comprises collateral held on insurance
products.
Whilst it is generally considered best practice to disclose the
full portfolio of an investment company, the composition of the
Master Fund's investment portfolio is the subject of
confidentiality provisions with the Master Fund.
Dexion Capital (Guernsey) Limited
23 January 2014
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
The Company's assets are mainly comprised of an investment in
the Master Fund, which invests in insurance linked contracts and
assets carrying exposure to risks related to insured event risks.
The Company's principal risks relate to the insured event risk
underlying the Master Fund's investments (for example seismic
activity and extreme weather events). The Company is also exposed
to market, capital, liquidity and credit risks. These risks and the
way in which they are managed, are described in more detail in the
Annual Report for the period ended 31 May 2013.
The Company's principal risks and uncertainties have not changed
materially since the date of that report and are not expected to
change materially for the remaining six months of the year.
RESPONSIBILITY STATEMENT
We confirm to the best of our knowledge that:
-- these Condensed Interim Unaudited Financial Statements have
been prepared in accordance with IAS 34 Interim Financial
Reporting; and
-- the interim management report (comprising of the Chairman's
Statement and Manager's Report) meet the requirements of an interim
management report and include a fair review of the information
required by:
(a) DTR 4.2.7.R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the six
months ended 30 November 2013 and their impact on the condensed set
of Interim Unaudited Financial Statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8.R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the Company
during that period; and any changes in the related party
transactions described in the last annual report for the period
ended 31 May 2013, that could do so.
Signed on behalf of the Board by:
Talmai Morgan Michael Poulding
Chairman Director
23 January 2014
INDEPENDENT REVIEW REPORT TO DCG IRIS LIMITED
We have been engaged by DCG IRIS Limited (the "Company") to
review the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 November 2013 which
comprises the Condensed Unaudited Statement of Financial Position,
the Condensed Unaudited Statement of Comprehensive Income, the
Condensed Unaudited Statement of Changes in Shareholders' Equity,
the Condensed Unaudited Statement of Cash Flows and the related
explanatory notes. We have read the other information contained in
the half-yearly financial report and considered whether it contains
any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
This report is made solely to the Company in accordance with the
terms of our engagement to assist the Company in meeting the
requirements of the Disclosure and Transparency Rules (the "DTRs")
of the UK's Financial Conduct Authority (the "UK FCA"). Our review
has been undertaken so that we might state to the Company those
matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company
for our review work, for this report, or for the conclusions we
have reached.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the DTRs of the UK FCA.
As disclosed in note 2, the annual financial statements of the
Company are prepared in accordance with International Financial
Reporting Standards. The condensed set of financial statements
included in this half-yearly financial report have been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
November 2013 is not prepared, in all material respects, in
accordance with IAS 34 and the DTRs of the UK FCA.
KPMG Channel Islands Limited
Chartered Accountants Guernsey
23 January 2014
CONDENSED UNAUDITED STATEMENT OF FINANCIAL POSITION
Note As at
As at 30 November 31 May
2013 2013
GBP000 GBP000
--------------------------- ----- ----------------- -------
Assets
Current Assets
Financial assets at
fair value through profit
or loss 3a 61,173 51,029
Cash and cash equivalents 73 167
Subscriptions paid in
advance 3a 7,550 9,025
Other receivables 11 14
--------------------------- ----- ----------------- -------
Total assets 68,807 60,235
--------------------------- ----- ----------------- -------
Liabilities
Current Liabilities
Accounts payable and
accrued expenses 6 53 59
--------------------------- ----- ----------------- -------
Total liabilities 53 59
--------------------------- ----- ----------------- -------
Net assets 68,754 60,176
--------------------------- ----- ----------------- -------
Represented by: 7
Shareholders' equity
and reserves
Share capital 68,294 59,546
Other reserves 460 630
--------------------------- ----- ----------------- -------
Total Shareholders'
equity 68,754 60,176
--------------------------- ----- ----------------- -------
Net assets per Share 8 99.46p 99.79p
--------------------------- ----- ----------------- -------
The condensed unaudited financial statements were approved by
the Board of Directors on 23 January 2014.
Talmai Morgan Michael Poulding
Chairman Director
CONDENSED UNAUDITED STATEMENT OF COMPREHENSIVE INCOME
For the period from
For the six 24 April 2012 (date
month period of incorporation)
ended 30 November to 30 November 2012
Note 2013 GBP000 GBP000
--------------------------------- ---- ------------------ --------------------
Income
Net changes in fair value
on financial assets at fair
value through profit or loss 3b 1,558 877
--------------------------------- ---- ------------------ --------------------
Net income 1,558 877
--------------------------------- ---- ------------------ --------------------
Expenses
Directors' remuneration and
expenses 9a (34) (39)
Administration fee 9f (37) (22)
Audit fee and interim review (15) (15)
Other professional fees (50) (23)
Other operating expenses (70) (36)
--------------------------------- ---- ------------------ --------------------
Total operating expenses (206) (135)
--------------------------------- ---- ------------------ --------------------
Total comprehensive income 1,352 742
--------------------------------- ---- ------------------ --------------------
Basic and diluted return
per Share 11 2.18p 1.85p
--------------------------------- ---- ------------------ --------------------
All items derive from continuing
activities.
CONDENSED UNAUDITED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY
FOR THE SIX MONTH PERIOD ENDED 30 NOVEMBER 2013
Share Other Total
Capital Reserves GBP000
GBP000 GBP000
--------------------------------------- ---------- --------- --------
Balance as at 31 May 2013 59,546 630 60,176
--------------------------------------- ---------- --------- --------
Total comprehensive income for
the period
Total comprehensive income for
the period - 1,352 1,352
--------------------------------------- ---------- --------- --------
Transactions with Shareholders, recorded
directly in equity
Shares issued 8,876 - 8,876
Share issue costs (128) - (128)
Distributions paid - (1,522) (1,522)
--------------------------------------- ---------- --------- --------
Balance as at 30 November 2013 68,294 460 68,754
FOR THE PERIOD FROM 24 APRIL 2012 (DATE OF INCORPORATION) TO
30 NOVEMBER 2012
Share Other
Capital Reserves Total
GBP000 GBP000 GBP000
--------------------------------------- ----------- -------- --------
Balance as at 24 April 2012 - - -
--------------------------------------- ----------- -------- --------
Total comprehensive income for
the period
Total comprehensive income for
the period - 742 742
--------------------------------------- ----------- -------- --------
Transactions with Shareholders, recorded directly
in equity
Shares issued 40,149 - 40,149
Share issue costs (602) - (602)
Distributions paid - (719) (719)
--------------------------------------- ----------- -------- --------
Balance as at 30 November 2012 39,547 23 39,570
--------------------------------------- ----------- -------- --------
CONDENSED UNAUDITED STATEMENT OF CASH FLOWS
For the period from
24 April 2012
For the six month (date of
period ended incorporation) to
30 November 2013 30 November 2012
GBP000 GBP000
Cash flows from operating activities
Total comprehensive income for the period 1,352 742
Adjustments for: (1,558) (877)
Net gains on financial assets held at fair value
through profit or loss Decrease/(increase) in debtors 3 (6)
(Decrease)/increase in creditors (6) 46
-------------------------------------------------------- -------- --------
Net cash used in operating activities (209) (95)
-------------------------------------------------------- -------- --------
Purchase of financial assets at fair value through
profit and loss (9,003) (39,410)
Proceeds from sale of investments 1,892 402
-------------------------------------------------------- -------- --------
Net cash outflows from investing activities (7,111) (39,008)
-------------------------------------------------------- -------- --------
Cash inflows from financing activities
Proceeds from issue of ordinary shares 8,876 40,149
Share issue costs (128) (602)
Distributions paid (1,522) (402)
-------------------------------------------------------- -------- --------
Net cash inflows used in financing activities 7,226 39,145
-------------------------------------------------------- -------- --------
Net (decrease)/increase in cash and cash equivalents (94) 42
-------------------------------------------------------- -------- --------
Cash and cash equivalents at the beginning of the
period 167 -
-------------------------------------------------------- -------- --------
Cash and cash equivalents at the end of the period 73 42
-------------------------------------------------------- -------- --------
Analysis of cash and cash equivalents at the end
of the period
Cash at bank 73 42
-------------------------------------------------------- -------- --------
CONDENSED NOTES TO THE UNAUDITED INTERIM FINANCIAL
STATEMENTS
1. General information
DCG IRIS Limited (the "Company") was incorporated with limited
liability in Guernsey, Channel Islands as a closed-ended investment
company on 24 April 2012. The Company's Shares were listed with a
Premium Listing on the Official List of the UK Listing Authority
and admitted to trading on the Main Market of the London Stock
Exchange on 27 June 2012.
The Company invests substantially all of its capital through a
"master-feeder" structure in CS IRIS Low Volatility Plus Fund
Limited (the "Master Fund") which is an open-ended investment
company incorporated under the laws of Guernsey on 28 October 2011
for an unlimited period and is a Qualifying Investor Fund
authorised under The Collective Investment Schemes (Qualifying
Professional Investor Funds) (Class Q) Rules 1998, issued by the
Guernsey Financial Services Commission pursuant to the 1997 Law
(Protection of Investors, Bailiwick of Guernsey). The Company
invests in the Class D Sterling Share Class and Class D Sterling S
Share Class of the Master Fund.
The Company's investment objective is to seek to achieve
positive returns through investing in insurance linked contracts
and assets carrying exposure to risks related to insured event
risks.
The Company pursues its investment objective by principally
investing its assets (to the extent not retained in cash) in the
Master Fund which invests in a broadly diversified portfolio of
insurance-linked contracts, securities and derivatives as well as
various types of investments related to insurance risks over the
long-term.
The Company may hold cash and invest in cash equivalents and may
also borrow for cash management and short-term purposes.
The Investment Manager of the Company is Dexion Capital
(Guernsey) Limited (the "Investment Manager"). The Investment
Manager of the Master Fund is Credit Suisse AG ("Credit
Suisse").
2. Significant accounting policies
a) Statement of Compliance
The condensed unaudited interim financial statements for the six
months ended 30 November 2013 have been prepared in accordance with
IAS 34 Interim Financial Statements and the Disclosure and
Transparency Rules ("DTRs") of the UK's Financial Conduct
Authority.
The condensed unaudited interim financial statements do not
include all of the information required for full annual financial
statements and should be read in conjunction with the Company's
Annual Report and Accounts for the period from 24 April 2012 (date
of incorporation) to 31 May 2013. The Annual Report and Accounts of
the Company for the period from 24 April 2012 to 31 May 2013 were
prepared in accordance with International Financial Reporting
Standards ("IFRS").
The information for the period ended 31 May 2013 is derived from
the Financial Statements delivered to the UK Listing Authority, and
does not constitute Statutory Accounts as defined by Guernsey Law.
A copy of the Statutory Accounts for that period has been delivered
to the Shareholders. The Auditor's Report on those Financial
Statements was not qualified.
The accounting policies, applied by the Company in these Interim
Financial Statements are consistent with those applied by the
Company in its Annual Financial Statements for the period from 24
April 2012 (date of incorporation) to 31 May 2013, except as
detailed below.
The Company has adopted the following new standard with a date
of initial application of 1 January 2013:
IFRS 13 Fair Value Measurement. IFRS 13 establishes a single
framework for measuring fair value and making disclosures about
fair value measurements, when such measurements are required or
permitted by other IFRSs. In particular, it unifies the definition
of fair value as the price at which an orderly transaction to sell
an asset or to transfer a liability would take place between market
participants at the measurement date. It also replaces and expands
the disclosure requirements about fair value measurements in other
IFRSs, including IFRS 7 Financial Instruments: Disclosures. Some of
these disclosures are specifically required in interim financial
statements for financial instruments; accordingly, the Company has
included additional disclosures in this regard (see Note 12).
In accordance with the transitional provisions of IFRS 13, the
Company has applied the new fair value measurement guidance
prospectively, and has not provided any comparative information for
new disclosures. Notwithstanding the above, the change had no
significant impact on the measurements of the Company's assets and
liabilities.
IFRS 10, 'Consolidated Financial Statements', replaces guidance
within IAS 27, 'Consolidated and Separate Financial Statements'.
The standard establishes principles for the presentation and
preparation of consolidated financial statements when an entity
controls one or more other entities. IFRS 10 requires entities to
consolidate entities it controls. Control requires exposure or
rights to variable returns and the ability to affect those returns
through power over an investee. IFRS 10 includes an exception from
consolidation for entities, which meet the definition of an
investment entity, and requires such entities to recognise all
investments at fair value through profit or loss. The Fund meets
the definition of an investment entity under IFRS 10. The Fund
invests directly in the Master Fund. The Investment is held at fair
value through profit or loss, and the Fund does not have control
over the Investments held in the Master Fund as defined under IFRS
10. The amendments did not have any impact on the Fund's financial
position or performance. The standard is applicable for periods
beginning on or after 1 January 2013.
The following new standards, new interpretations and amendments
to standards and interpretations have been issued but are not
effective for the period ended 30 November 2013 and have not been
early adopted:
-- Offsetting Financial Assets and Financial Liabilities
(Amendments to IAS 32) clarify the offsetting criteria in IAS 32
and address inconsistencies in their application. This includes
clarifying the meaning of 'currently has a legally enforceable
right of set-off' and that some gross settlement systems may be
considered equivalent to net settlement. The amendments did not
have any impact on the Fund's financial position or performance.
The standard is applicable for periods beginning on or after 1
January 2014.
-- IFRS 9, 'Financial instruments', was updated in October 2010.
The standard addresses the classification and measurement of
financial assets. IFRS 9 divides all financial assets that are
currently in the scope of IAS 39 into two classifications - those
measured at amortised cost and those measured at fair value. The
standard is applicable for periods beginning on or after 1 January
2017 but is available for early adoption. IFRS 9 requires that the
effects of changes in credit risk of liabilities designated as at
fair value through profit or loss are presented in other
comprehensive income unless such treatment would create or enlarge
an accounting mismatch in profit or loss, in which case all gains
or losses on that liability are presented in profit or loss. Other
requirements of IFRS 9 relating to classification and measurement
of financial liabilities are unchanged from IAS 39. Its adoption is
not expected to have a significant impact on the Company's
financial statements because the majority of the Company's
financial assets are designated as at fair value through profit or
loss and there are presently no financial liabilities designated as
at fair value through profit or loss.
The Directors believe that the adoption of the other standards
and interpretations effective in a future period will not have a
material impact on the financial statements of the Company.
b) Basis of preparation
The unaudited financial statements are prepared in pounds
sterling (GBP), which is the Company's functional and presentation
currency, rounded to the nearest thousand pounds. They are prepared
on a fair value basis for financial assets at fair value through
profit or loss. Other financial assets and financial liabilities
are stated at amortised cost.
On 18 July 2013, in accordance with the Company's articles of
incorporation and commitments given in the prospectus dated 12
November 2012, the Company proposed a Continuation Vote of the
Company and offered investors a Redemption Offer.
The Continuation Vote and the Redemption Offer were required
because the NAV of the Company as at 30 June 2013 was less than
GBP150 million. On the 9 August 2013, the Company sent a circular
to its Shareholders to convene the required EGM to approve, amongst
other things, the Continuation Vote and to set out full details of
the Redemption Offer. On 2 September 2013, the Company announced
that no acceptances of the Redemption Offer had been received. On 5
September 2013, the Company announced the results of the EGM were
that the Shareholders voted in favour of the continuation of the
Company.
The Company's Articles provide that the Directors are required
to propose an ordinary resolution for the continuation of the
Company if the average of the three month end NAVs of the Company
is less than GBP50million. On 5 September 2013, the Company
announced that Shareholders voted in favour of a proposed amendment
to the articles of incorporation such that the Directors will not
be required to propose another vote on this basis for a period of
one year from the end of the relevant consecutive three month
period. The proposed amendment was effective from 10 September
2013.
After making sufficient and appropriate enquiries of key service
providers and after taking into account the fact that there were no
tenders for redemption in connection with the Redemption Offer, the
Directors have a reasonable expectation that the Company has and
will maintain adequate resources to continue in operation for the
foreseeable future. Accordingly, the Directors have adopted the
going concern basis in the preparation of the financial
statements.
3. Financial Instruments As at 30 November As at 31 May 2013
a) Categories of financial instruments 2013 Carrying Carrying
amount % of amount % of
GBP000 net assets GBP000 net assets
-------------------------------------------- ------------------------- ---------------------------
Financial assets and liabilities at
fair value through profit or loss:
Classified as fair value through profit
or loss:
Investment in the Master Fund 61,173 88.98% 51,029 84.80%
Loans and Receivables: 7,634 11.10% 9,206 15.30%
Financial liabilities measured at amortised
cost: (53) (0.08%) (59) (0.10%)
-------------------------------------------- ----------- ------------ ------------ -------------
68,754 100.00% 60,176 100.00%
-------------------------------------------- ----------- ------------ ------------ -------------
Loans and Receivables presented above represent cash and cash
equivalents and other receivables including subscriptions paid in
advance, which represent subscriptions into the Master Fund, as
detailed in the Condensed Unaudited Statement of Financial
Position.
Financial liabilities measured at amortised cost presented above
represent distributions payable, accounts payable and accrued
expenses as detailed in the Condensed Unaudited Statement of
Financial Position.
b) Net changes in fair value on financial assets at fair value
through profit or loss
For the period from
24 April 2012
For the six month (date of incorporation)
period ended 30 to
November 2013 30 November 2012
GBP000 GBP000
-------------------------------- -------------------- --------------------------
Realised (losses)/gains on
investments (65) 37
Movement in unrealised gains
on investments 1,623 840
-------------------------------- -------------------- --------------------------
Net changes in fair value
on financial assets
at fair value through profit
or loss 1,558 877
-------------------------------- -------------------- --------------------------
4. Financial Risk Management
The Company's financial risk management objectives and policies
are consistent with those disclosed in the financial statements for
the period from 24 April 2012 (date of incorporation) to 31 May
2013. In the opinion of the Directors, there have been no changes
to the financial risk management objectives.
5. Operating segments
Information on realised gains and losses derived from sales of
investments are disclosed in Note 3(b) of the financial statements.
The Company is domiciled in Guernsey. Substantially all of the
Company's income is from its investment in the Master Fund, which
is incorporated in Guernsey.
The Company has no assets classified as non-current assets. The
investment in the Master Fund as at 30 November 2013 represents an
effective holding of 13.55% (31 May 2013: 12.51%) of the Master
Fund. The Company, indirectly, has a highly diversified portfolio
of investments via the Master Fund.
Segment information provided to management is measured on the
same basis as that which is used in the preparation of the
Company's Financial Statements. Therefore no reconciliation between
segmental information provided to management and the segmental
information disclosed in the Financial Statements is required.
The Company also has a diversified Shareholder base. As at 30
November 2013, registered shareholders with holdings greater than
10% in the Company were:
% of issued
Shareholder Shares share capital
Ericsson Pensionsstiftelse (A) 15,208,000 22.00%
Credit Suisse Asset Management Investment
Limited 10,000,000 14.47%
6. Accounts payable and accrued expenses
As at As at
30 November 31 May
2013 2013
GBP000 GBP000
-------------------------------------------- ----------- -------------
Audit fee 15 20
Directors' remuneration 11 11
Administration fee 14 8
Other professional fees 4 4
Other operating expenses 9 16
-------------------------------------------- ----------- -------------
53 59
-------------------------------------------- ----------- -------------
7. Share capital
As at As at
30 November 31 May
2013 2013
GBP000 GBP000
------------------------------------- ------------ -------
Authorised
Unlimited number of Shares at no par - -
value
Issued at no par value
69,127,278 (31 May 2013: 60,299,440) - -
Sterling Shares
------------------------------------- ------------ -------
Reconciliation of number of Shares
As at As at
30 November 31 May
2013 2013
No. of Shares No. of Shares
Shares at the beginning of the period 60,299,440 -
Issue of Shares 8,827,838 60,299,440
Total Shares in issue at the end of the period 69,127,278
60,299,440
Share capital account
As at As at
30 November 31 May
2013 2013
Share Capital Share Capital
GBP000 GBP000
Share Capital at the beginning of the period 59,546 -
Issued Share Capital 8,876 60,450
Share issue costs (128) (904)
Total Share Capital at the end of the period 68,294 59,546
The Share Capital of the Company consists of an unlimited number
of Shares with or without par value which, upon issue, the
Directors may designate as: (a) Shares; (b) B Shares; or (c) C
Shares, in each case of such classes and denominated in such
currencies as the Directors may determine.
As at 30 November 2013 one (31 May 2013: one) Sterling share
class has been issued, being the ordinary Shares of the Company. No
Shares have been issued in the B Class.
Pursuant to the placing programme, 1,170,000 Sterling Shares
were issued at a price of 100.5 pence per Sterling Share and listed
on the Official List and admitted to trading on the main market of
the London Stock Exchange on 19 July 2013. Pursuant to the placing
programme, a further 7,657,838 Sterling Shares were issued at a
price of 100.54 pence per Sterling Share and listed on the Official
List and admitted to trading on the main market of the London Stock
Exchange on 11 November 2013.
The rights attaching to the Shares are as follows:
a) the holders of Shares shall confer the right to all dividends
in accordance with the Articles of Incorporation of the
Company.
b) the Shareholders present in person or by proxy or (being a
corporation) present by a duly authorised representative at a
general meeting have, on a show of hands, one vote and, on a poll,
one vote for every Share held.
c) B Shares and, save in certain limited circumstances, C Shares
will not carry the right to attend and receive notice of any
general meetings of the Company, nor will they carry the right to
vote at such meetings.
d) the capital and surplus assets of the Company remaining after
payment of all creditors shall, on winding-up or on a return (other
than by way of purchase or redemption of own Shares) after
conversion, be divided amongst the Shareholders on the basis of the
capital attributable to the Shares at the date of winding up or
other return of capital.
8. Net asset value
The NAV of each Share of 99.46 pence (31 May 2013: 99.79 pence)
is determined by dividing the net assets of the Company attributed
to the Shares of GBP68,754,209 (31 May 2013: GBP60,175,183) by the
number of Shares in issue at 30 November 2013 of 69,127,278 (31 May
2013: 60,299,440).
9. Related parties and significant agreements
Related parties
a) Directors' Remuneration & Expenses
The Directors of the Company are remunerated for their services
at such a rate as the Directors determine provided that the
aggregate amount of such fees does not exceed GBP300,000 per
annum.
The annual Directors' fees comprise GBP37,500 payable to Mr
Morgan, the Chairman and GBP30,000 to Mr Poulding as Chairman of
the Audit Committee. Mr Fuller has waived his right to a fee. On 24
September 2013, Mrs Carol Kilby was appointed as an alternate
Director for Mr Fuller for the period 25 September 2013 to 11
November 2013. No fees were payable to Mrs Kilby for this service.
During the period ended 30 November 2013, Directors fees of
GBP33,704 (30 November 2012: GBP39,087) were charged to the
Company, of which GBP11,234 (31 May 2013: GBP11,281) remained
payable at the end of the period.
b) Investment Manager
No management or performance fees are payable by the Company to
the Investment Manager. The Master Fund pays a monthly management
fee equal to one-twelfth of 1.1% of the NAV of the Class D Sterling
Share Class and Class D Sterling S Class in respect of the Master
Fund Shares held by the Company. This is shared between the
Investment Manager and the Master Fund Manager.
During the period ended 30 November 2013, the Investment Manager
received a fee of GBP63,852 (30 November 2012: GBP31,355) as its
share of the monthly management fee paid by the Master Fund.
Robin Fuller, a director of the Company, is also an employee of
the Investment Manager.
c) Secretary
Dexion Capital (Guernsey) Limited ("the Secretary") performs
secretarial duties for which it was remunerated at an annual fee of
GBP25,000. During the period ended 30 November 2013, secretarial
fees of GBP20,364 (30 November 2012: GBP10,766) were charged to the
Company, of which GBP4,109 (31 May 2013: GBP4,425) remained payable
at the end of the period.
d) Placing Agent
For its services as the Company's placing agent (the "Placing
Agent") pursuant to a second placing agreement dated 12 November
2012 in connection with the Placing Programme, the Company paid
Dexion Capital plc a commission in respect of each placing based on
the gross issue proceeds of each placing, out of which the Placing
Agent has agreed to pay for all the costs of the Placing Programme.
As at 30 November 2013, commissions of GBP302,067 had been paid in
connection with the second placing agreement.
The commissions payable under the second placing agreement
constitute a smaller related party transaction for the purposes of
Listing Rule 11.1.10 of the UK Listing Authority ('UKLA') because
the Placing Agent is a member of
the Investment Manager's group and is therefore a related party
for the purposes of the Listing Rules of the UKLA.
On 20 May 2013 and 5 September 2013, independent Shareholders
approved related party transactions to permit Ericsson
Pensionsstiftelse (A) ("Ericsson") to participate in placings.
Independent Shareholder approval was required because Ericsson was
a substantial shareholder and therefore a related party for the
purposes of Listing Rules of the UKLA.
On 5 September 2013, independent Shareholders approved a related
party transaction to permit the Placing Agent to be able to acquire
Shares as principal under the Placing Programme on an ongoing basis
in its capacity as a market maker for the Company.
e) Shares held by related parties
As at 30 November 2013, Directors of the Company held the
following shares beneficially:
Number of % of issued
sterling shares share capital
Talmai Morgan 30,000 0.04%
Robin Fuller 49,838 0.07%
Michael Poulding 20,000 0.03%
----------------- ------ -----
As at 30 November 2013, Dexion Capital (Guernsey) Limited
beneficially held 4,000,000 shares (31 May 2013: 4,000,000), which
is 5.79% of issued share capital (31 May 2013: 6.63%). Dexion
Capital plc, held a market making position of 1,535,100 shares (31
May 2013: 1,535,100), which is 2.22% (31 May 2013: 2.55%) of the
total shares in issue. Ericsson held 15,208,000 shares (31 May
2013: 10,967,000), which is 22% (31 May 2013: 18.19%) of the total
shares in issue.
Significant agreements
f) Administrator
Northern Trust International Fund Administration Services
(Guernsey) Limited (the "Administrator") performs administrative
duties for which it was remunerated at a rate of 0.025% per annum
on the first GBP500 million of the net assets of the Company and
0.01% per annum thereafter, subject to a minimum of GBP75,000 per
annum. During the period ended 30 November 2013, administration
fees of GBP37,397 (30 November 2012: GBP21,507) were charged to the
Company, of which GBP12,329 (31 May 2013: GBP8,767) remained
payable at the end of the period.
10. Taxation
The Company has been granted tax exempt status in Guernsey where
it pays an annual fee of GBP600 under The Income Tax (Exempt
Bodies) (Guernsey) Ordinances 1989.
11. Earnings per Share
The calculation of the return per Share of 2.18 pence (30
November 2012: 1.85 pence) is based on the total return for the
period attributable to Ordinary Shareholders of GBP1,352,964 (30
November 2012: GBP742,045) and on the weighted average number of
Ordinary Shares in issue during the period ended 30 November 2013
of 62,076,776 (30 November 2012: 40,148,950).
12. Fair value measurement
All assets and liabilities are carried at fair value or at
carrying value which equates to fair value.
IFRS 13 requires the Company to classify the fair value
hierarchy that reflects the significance of the inputs used in
making the measurements. IFRS 13 establishes a fair value hierarchy
that prioritises the inputs to valuation techniques used to measure
fair value.
The hierarchy gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities (Level
1 measurements) and the lowest priority to unobservable inputs
(Level 3 measurements).
The three levels of the fair value hierarchy under IFRS 13 are
as follows:
Level Quoted prices (unadjusted) in active markets for identical
1 assets or liabilities;
Level Inputs other than quoted prices included within level
2 1 that are observable for the asset or liability,
either directly (that is, as prices) or indirectly (that
is, derived from prices including interest rates, yield
curves, volatilities, prepayment speeds, credit risks
and default rates) or other market corroborated inputs.
Level Inputs for the asset or liability that are not based on
3 observable market data (that is, unobservable inputs).
The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement in its entirety. For this purpose, the
significance of an input is assessed against the fair value
measurement in its entirety. If a fair value measurement uses
observable inputs that require significant adjustment based on
unobservable inputs, that measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgement, as well as/and
considering factors specific to the asset or liability.
The determination of what constitutes 'observable' requires
significant judgement by the Company. The Company considers
observable data to be that market data that is readily available,
regularly distributed or updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively
involved in the relevant market.
The following table presents the Company's financial assets and
liabilities by level within the valuation hierarchy as of 30
November 2013.
Assets and Liabilities at Fair Value
Level 1 Level 2 Level 3 Total
At 30 November 2013 GBP000 GBP000 GBP000 GBP000
Financial assets and liabilities at fair
value through profit or loss:
Investment in the Master Fund - 61,173 - 61,173
Total assets - 61,173 - 61,173
Level 2 is comprised of one investment in the Master Fund Class
D Shares which was fair valued using the NAV as supplied by the
administrator of the Master Fund.
The Board believes it could have redeemed the Company's
investment in the Class D Shares at this NAV per share on 30
November 2013 considering the redemption terms and that the Master
Fund NAV is established based on IFRS requirements.
In the opinion of the Directors, the NAV of the Master Fund is
representative of the fair value and no adjustments are
required.
The following table presents the Company's financial assets and
liabilities by level within the valuation hierarchy as of 31 May
2013.
Assets and Liabilities at Fair Value
Level 1 Level 2 Level 3 Total
At 31 May 2013 GBP000 GBP000 GBP000 GBP000
Financial assets and liabilities at fair value
through profit or loss:
Investment in the Master Fund - 50,646 383 51,029
Total assets - 50,646 383 51,029
Level 3 is comprised of one investment in the Master Fund's side
pocket, Class D S Shares. This investment was fair valued using the
NAV, as supplied by the administrator of the Master Fund, which
takes into account that the illiquid investments held in the side
pocket may be illiquid for a certain amount of time as the
collateral held there may not be released until there is more
certainty that Superstorm Sandy will have no further impact.
Investments in the Master Fund that are potentially impacted by
Superstorm Sandy were transferred from Level 2 to Level 3 as at 31
May 2013.
On 16 September 2013, the Company announced that the Directors
of the Master Fund released the remaining side pocketed investments
and moved all four remaining positions back into the Master Fund's
main portfolio effective as of the valuation point falling on 30
August 2013.
The following table presents the movements in level 3
Investments for the six months ended 30 November 2013 and for the
period from 24 April 2012 to 31 May 2013. Gains and losses are
included in the Statement of Comprehensive Income.
For the period
For six month from 24 April 2012
period ended (date of incorporation)
30 November 2013 to 31 May 2013
Investment in Investment in
Master Fund Master Fund
GBP000 GBP000
------------------------------------------ ------ ------
Opening balance 383 -
Net Transfers (322) 247
Realised (loss)/gain on investment (36) 111
Unrealised (loss)/gain on investment (25) 25
------------------------------------------ ------ ------
Closing balance - 383
------------------------------------------ ------ ------
Total losses for the period included in
the Statement of Comprehensive
Income relating to assets and liabilities
held at the period end (61) 136
------------------------------------------ ------ ------
13. Ultimate Controlling Party
In the opinion of the Directors on the basis of shareholdings
advised to them, the Company has no ultimate controlling party.
14. Short term borrowing
The Company may not borrow or incur leverage for investment
purposes although it may borrow for efficient cash management and
short term purposes. The borrowings of the Company shall be limited
to ten per cent. of the Company's gross assets at the time of
drawdown. The Company did not have any borrowing facilities in
place at 30 November 2013.
15. Distribution policy
Subject to market conditions and the Master Fund's performance,
the financial position of the Company and the financial outlook, it
is the Directors' intention to declare interim dividends to
Shareholders in October, January, April and July. There are
however, no assurances that these dividends will be paid or that
the Company will pay any dividends.
The Company declared the following dividends for the period from
1 June 2013 to 30 November 2013. Note 17 details the dividend
proposed and paid after the period end.
Dividend Net dividend Ex-dividend
rate
Period to per share payable Record date date Pay date
----------------- --------- ------------ ----------- ----------- ----------
30 June 2013 GBP0.0125 GBP753,743 12/07/2013 10/07/2013 12/08/2013
30 September 2013 GBP0.0125 GBP768,368 11/10/2013 09/10/2013 12/11/2013
Under Guernsey law, companies can pay dividends in excess of
accounting profit provided they satisfy the solvency test
prescribed under the Companies (Guernsey) Law, 2008. The solvency
test considers whether a company is able to pay its debts when they
fall due; and whether the value of a company's assets is greater
than its liabilities.
16. Ongoing Charges
The Ongoing Charges for the period ended 30 November 2013 have
been prepared in accordance with the AIC's recommended methodology
and was 0.50% (31 May 2013: 0.45%).
17. Subsequent Events
These financial statements were approved for issuance by the
Board on 23 January 2014. Subsequent events have been evaluated
until this date.
On 2 January 2014 the Company declared its third interim
dividend of 0.0125p per ordinary share in respect of the period
ending 31 December 2013, payable on 11 February 2014 to ordinary
Shareholders on the register on 10 January 2014. The ex-dividend
date was 8 January 2014.
As at 23 January 2014, the date of this Report, the Company had
69,127,278 Sterling Shares in issue.
CORPORATE INFORMATION
Directors
Talmai Morgan - Chairman
Robin Fuller
Michael Poulding
Investment Manager and Secretary of the Company
Dexion Capital (Guernsey) Limited
1 Le Truchot
St. Peter Port
Guernsey GY1 1WD
Manager of the Master Fund
Credit Suisse AG
AISE 2
Kalanderplatz 1
8070 Zurich
Switzerland
Administrator of the Company and the Master Fund
Northern Trust International Fund Administration Services
(Guernsey) Limited
P.O. Box 255
Trafalgar Court
Les Banques
St. Peter Port
Guernsey GY1 3QL
Corporate Broker
Dexion Capital plc
1 Tudor Street
London EC4Y 0AH
UK Legal Adviser to the Company
Dickson Minto W.S.
Broadgate Tower
20 Primrose Street
London EC2A 2EW
Guernsey Legal Adviser to the Company
Carey Olsen
PO Box 98
Carey House
Les Banques
St. Peter Port
Guernsey GY1 4BZ
Registrar, Paying Agent and Transfer Agent
Computershare Investor Services (Guernsey) Limited
3rd Floor
NatWest House
Le Truchot
St. Peter Port
Guernsey GY1 1WD
Receiving Agent
Computershare Investor Services PLC
Corporate Actions Projects
Bristol BS99 6AH
Auditors of the Company and the Master Fund
KPMG Channel Islands Limited
PO Box 20
20 New Street
St. Peter Port
Guernsey GY1 4AN
This information is provided by RNS
The company news service from the London Stock Exchange
END
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