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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Newstar Rbc 1Xe | LSE:HXE | London | Ordinary Share | GG00B1FBH479 | RED PREF SHS NPV (1X EUR) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0.66 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMHXS TIDMHXU TIDMHXE
RNS Number : 7378N
New Star RBC Hedge250 IDX (1X GBP)
23 February 2009
HEDGE ETS
New Star RBC Hedge 250 Index Exchange Traded Securities
PCC Limited
(A closed-ended investment company incorporated in Guernsey with registered
number 45501 under the provisions of The Companies (Guernsey) Laws 1994 to 1996
and The Protected Cell Companies Ordinance 1997 to 1998, as amended)
Statement of Results
for the six months ended 31 December 2008
New Star Hedge 250 Index Exchange Traded Securities PCC Limited (the "Company"
or "Hedge ETS") today announces its results for the six months ended 31 December
2008.
20 February 2008
Investment objective and summary policy
The investment objective of the Company is to provide access to performance
representative of the hedge fund asset class. The investment policy of the
Company is to provide access to such performance through investment exposure to
the RBC Hedge 250 Index (the "Index").
The 1X Cell seeks to achieve its investment objective by entering into a swap
agreement with Royal Bank of Canada designed to provide unleveraged exposure to
the performance of the Index.
The 3X Cell seeks to achieve its investment objective by entering into a swap
agreement with Royal Bank of Canada designed to provide approximately three
times the exposure to the performance of the Index.
Financial Results Summary
For the period ended 31 December 2008
* NAV per share has tracked the RBC Hedge 250 Index down, reflecting the decline
in hedge fund industry returns over the period
* Shareholders' funds at 31 December 2008 were $86.8 million
+----------------------------+----------+----------+----------+----------+----------+----------+
| | 1X shares | 3X shares |
+----------------------------+--------------------------------+--------------------------------+
| | $ | EUR | GBP | $ | EUR | GBP |
+----------------------------+----------+----------+----------+----------+----------+----------+
| NAV per share at 31 | 0.7657 | 0.7520 | 0.7646 | 0.2919 | 0.2730 | 0.2751 |
| December 2008 | | | | | | |
+----------------------------+----------+----------+----------+----------+----------+----------+
| % increase/(decrease) | (25.09)% | (25.84)% | (25.97)% | (68.95)% | (70.64)% | (71.08)% |
| since June 2008 | | | | | | |
+----------------------------+----------+----------+----------+----------+----------+----------+
| % increase/(decrease) | (23.43)% | (24.80)% | (23.54)% | (70.81)% | (72.70)% | (72.49)% |
| since launch* | | | | | | |
+----------------------------+----------+----------+----------+----------+----------+----------+
| Share price at 31 December | 0.600 | 0.630 | 0.615 | 0.110 | 0.080 | 0.075 |
| 2008 | | | | | | |
+----------------------------+----------+----------+----------+----------+----------+----------+
| % increase/(decrease) | (40.20)% | (36.27)% | (38.94)% | (85.11)% | (89.36)% | (89.06)% |
| since June 2008 | | | | | | |
+----------------------------+----------+----------+----------+----------+----------+----------+
| % increase/(decrease) | (39.00)% | (35.00)% | (36.50)% | (86.00)% | (90.00)% | (89.50)% |
| since launch* | | | | | | |
+----------------------------+----------+----------+----------+----------+----------+----------+
* Hedge ETS launched on the 28 November 2006
Directors
+--------------------------------+---------------------------------------------------+
| Christopher Sherwell*+ | (aged 61) is a non-executive director of a number |
| (Chairman) | of investment related companies. He was Managing |
| | Director of Schroders (CI) Limited from 2000 |
| | until 2004 and served as a director of various |
| | Schroders group companies and investment funds. |
| | He continued as a non-executive director of |
| | Schroders (CI) Limited before stepping down on 31 |
| | December 2008. His other directorships include |
| | chairmanship of Goldman Sachs Dynamic |
| | Opportunities Limited, a London listed investment |
| | company, Hermes Absolute Return Fund (Guernsey) |
| | Limited, a fund of hedge funds, and Consulta |
| | (Channel Islands) Limited. Before joining |
| | Schroders in 1993 he worked as Far East regional |
| | strategist with Smith New Court Securities in |
| | London and then Hong Kong. He was previously a |
| | journalist, working for the Financial Times. He |
| | is a resident of Guernsey. |
| | |
+--------------------------------+---------------------------------------------------+
| John Duffield* | (aged 69) is chairman and a shareholder of New |
| | Star Asset Management Group PLC. He is also |
| | chairman of New Star Asset Management Limited, |
| | New Star Asset Management (Bermuda) Limited and |
| | New Star International Investment Products |
| | Limited. He is a resident of the United Kingdom. |
| | |
+--------------------------------+---------------------------------------------------+
| John Hallam*+ | (aged 59) is a Fellow of the Institute of |
| | Chartered Accountants in England and Wales and |
| | qualified as an accountant in 1971. He is a |
| | former partner of PricewaterhouseCoopers having |
| | retired in 1999 after 27 years with the firm both |
| | in Guernsey and in other countries. He is |
| | currently chairman of Cazenove Absolute Equity |
| | Ltd, EFG Private Bank (Channel Islands) Ltd, M&G |
| | Recovery Investment Co Ltd, Partners Group Global |
| | Opportunities Ltd and Prodesse Investment Ltd as |
| | well as being a director of a number of other |
| | financial services companies, some of which are |
| | listed on the London Stock Exchange. He served |
| | for many years as a member of the Guernsey |
| | Financial Services Commission from which he |
| | retired in 2006 having been its Chairman for the |
| | previous three years. He is a resident of |
| | Guernsey. |
| | |
+--------------------------------+---------------------------------------------------+
* denotes non-executive director
+ denotes independent director
Chairman's Report
Chairman's review
This document comprises the interim report and accounts of the New Star RBC
Hedge 250 Index Exchange Traded Securities PCC Limited for the six months to 31
December 2008. The company seeks to provide access to performance representative
of the hedge fund asset class through exposure to the RBC Hedge 250 Index.
Performance
During the six months to 31 December 2008, the net asset values (NAVs) of the 1X
dollar, euro and sterling class shares fell 25.1%, 25.8% and 26.0% respectively
Over the same period, the NAVs of the 3X dollar, euro and sterling class shares
fell 69.0%, 70.6% and 71.1% respectively. The prices of the US dollar shares
fell 39.7% for the 1X shares and 84.7% for the 3X shares over the period.
Share price rating
For most of the period under review, the shares were trading at a discount to
NAV. In response, the directors continued to undertake share buybacks during the
third quarter of 2008 when the shares could be repurchased at a discount to NAV.
Share buybacks were suspended on 16 September 2008 and no more purchases were
made for the remainder of the period to avoid increasing the exposure of the 1X
and 3X shares to the RBC Hedge 250 Index beyond agreed tolerances.
Closure of 3X Cell
At the extraordinary general meeting held on the 13 January 2009 the
recommendation for the compulsory redemption of the 3X Shares was approved. This
redemption process is now underway and the 3X cell will be closed using the 31
March 2009 net asset value. It should be noted that the Board have the power to
compulsorily redeem 1X shares although there is currently no intention to
utilize these powers.
Outlook
At the period end, the developed world was in recession as the reverberations of
the credit crisis spread wider. No asset class seemed to escape apart from
sovereign bonds, and many hedge fund strategies were found wanting. The
unprecedented official response to the crisis and to the recessionary conditions
may lead to some revival of economic momentum in 2009, but the sclerosis in
credit markets, weak consumer and business confidence and rising unemployment
may dampen economic confidence for a considerable time.
In such an environment, market volatility provides potentially profitable
opportunities for talented hedge fund managers, who are incentivised to produce
absolute returns by exploiting sentiment swings and pricing anomalies in equity,
fixed income and commodity markets. As such, the Company's exposure to the full
range of hedge fund strategies continues to offer the potential to generate
superior returns compared to more traditional investments.
Christopher Sherwell
20 February 2009
Investment Manager's Report
Global equities were exceptionally weak and volatile during the period under
review, with the MSCI World Total Return index falling 33.52% in dollar terms.
The worst markdowns came in the autumn as bad news from the financial sector
assailed investors and the developed world went into recession, dragging down
economic growth rates in emerging markets. The official response was radical as
governments injected capital into troubled banks and provided emergency funding
to revive inter-bank lending. Leading central banks, meanwhile, responded with
exceptional monetary easing. Over the six months, the Federal Reserve reduced
its fed funds target rate from 2% to 0.25%, the Bank of England cut base rate
from 5% to 2% and the European Central Bank, which had tightened its repo rate
to 4.25% in July, did a quick reversal and cut it to 2.5%.
Latin American emerging markets fared worst, falling 55.47% in dollar terms,
principally as a result of falling commodity prices. Over the half year, oil
prices fell 71.95% to $39.53 per barrel having peaked at $145.65 in early July,
while the Reuters Industrial Commodities Index fell 52.99%. A further reason for
regional weakness was investor flight from riskier securities towards perceived
safe haven asset classes.
Other relatively weak areas within global stockmarkets included the UK, down
43.02%, Asia excluding Japan, down 39.45%, and Europe excluding the UK, down
37.42%. By contrast, Japanese and US equities were relatively robust, with Tokyo
falling 25.01% and Wall Street falling 29.21%. Such relative strength was,
however, due to currency changes, with the dollar and the yen rising
significantly against the pound and the euro. The US currency benefited from its
safe haven status while the yen benefited from the unwinding of the "carry
trade", which had involved investors borrowing in low-yielding currencies such
as the yen and investing in higher yielding asset classes.
Investor flight towards safer securities in the face of deteriorating economic
conditions was apparent in sector returns and in the diverging fortunes of large
and small companies. Basic materials fell 58.17%, energy fell 48.37%, financial
stocks fell 39.20% and industrial stocks fell 37.97%. By contrast, healthcare
fell 12.95%, telecommunications fell 22.52% and consumer services fell 23.51%.
On a global basis, DJ Stoxx indices show larger companies fell 37.84% in dollar
terms while smaller stocks fell 45.03%.
With risk aversion increasing despite monetary easing in the US and the UK,
government bonds benefited from a "flight to quality", with US Treasury bonds
returning 11.41%. By contrast, lower-quality bonds underperformed, with
high-yielding US corporate bonds falling 20.22% and emerging market government
bonds falling 9.13% in dollar terms.
Strategy allocation and returns
The allocations in the nine sub-strategies within the RBC Hedge 250 Index are
rebalanced each month. For the six months to 31 December 2008, the rebalancing
resulted in increased allocations in the credit, managed futures, mergers and
special situations and multi-strategy sub-strategies at the expense of
convertible arbitrage, equity long/short, equity market neutral, fixed income
arbitrage and macro sub-strategies.
The strategy allocation at 31 December 2008 is shown below.
Returns for the sub-strategies comprising the RBC Hedge 250 Index for the period
to 31 December 2008 are
shown below:
+-----------------------------------------------+-------------------------------+-------------------------------+
| | Six months to | Strategy weightings at |
| | 31 December 2008 | 31 December 2008 |
| | % return | % |
+-----------------------------------------------+-------------------------------+-------------------------------+
| Convertible arbitrage | (43.1)% | 1.2% |
+-----------------------------------------------+-------------------------------+-------------------------------+
| Credit | (35.8)% | 12.2% |
+-----------------------------------------------+-------------------------------+-------------------------------+
| Equity long/short | (16.8)% | 38.1% |
+-----------------------------------------------+-------------------------------+-------------------------------+
| Equity market neutral | (5.3)% | 2.6% |
+-----------------------------------------------+-------------------------------+-------------------------------+
| Fixed income arbitrage | (21.2)% | 3.0% |
+-----------------------------------------------+-------------------------------+-------------------------------+
| Macro | (10.7)% | 8.9% |
+-----------------------------------------------+-------------------------------+-------------------------------+
| Managed futures | 5.5% | 7.5% |
+-----------------------------------------------+-------------------------------+-------------------------------+
| Mergers & special situations | (20.5)% | 9.9% |
+-----------------------------------------------+-------------------------------+-------------------------------+
| Multi-strategy | (32.9)% | 16.6% |
+-----------------------------------------------+-------------------------------+-------------------------------+
As can be seen from the table, only one of the nine strategies, managed futures,
produced positive returns. Managed futures managers benefited from currency
swings and positioning themselves correctly for increased risk aversion and
deteriorating economic data. By contrast, convertible arbitrage and credit
managers suffered from widening credit spreads and declining liquidity in the
corporate bond markets while mergers and special situations strategies were
affected by the decline in corporate activity.
New Star Asset Management (Bermuda) Limited
20 February 2009
Interim Directors' Report
Net Asset Values
At 31 December 2008 the net asset value of the respective share classes were as
follows:
+------------------------------------+-------+------------------+------------------+
| | | 31 December 2008 | 30 June 2008 |
+------------------------------------+-------+------------------+------------------+
| | | | |
+------------------------------------+-------+------------------+------------------+
| 1X | | | |
+------------------------------------+-------+------------------+------------------+
| US$ share class | | US$0.7657 | US$1.0221 |
+------------------------------------+-------+------------------+------------------+
| Euro share class | | EUR0.7520 | EUR1.0140 |
+------------------------------------+-------+------------------+------------------+
| Sterling share class | | GBP0.7646 | GBP1.0328 |
+------------------------------------+-------+------------------+------------------+
| | | | |
+------------------------------------+-------+------------------+------------------+
| 3X | | | |
+------------------------------------+-------+------------------+------------------+
| US$ share class | | US$0.2919 | US$0.9402 |
+------------------------------------+-------+------------------+------------------+
| Euro share class | | EUR0.2730 | EUR0.9297 |
+------------------------------------+-------+------------------+------------------+
| Sterling share class | | GBP0.2751 | GBP0.9511 |
+------------------------------------+-------+------------------+------------------+
A summary of the performance during the period may be found in the Chairman's
Statement and the Investment Manager's Review.
Issued share capital
Details of the changes to the issued share capital during the period may be
found in Note 10.
Risk management
Details of the risks faced by the Company may be found in Note 8.
Directors
The Directors of the Company may be found above. Each of the Directors served
throughout the period.
Related parties
Except for John Duffield who is chairman of the Investment Manager and New Star
Asset Management Limited (the "Investment Advisor"), which receives fees as per
Note 3, none of the directors was a party to any transaction which was unusual
in its nature or conditions or significant to the business of the Company or has
any actual or potential conflicts of interests between their duties to the
Company and their private interests or other duties.
As at 31 December 2008 none of the directors or their families held any shares
in the Company (30 June 2008: None).
Auditors
The half-yearly financial report has not been audited or reviewed by auditors
pursuant to the Auditing Practices Board guidance on the Review of Interim
Financial Information.
Responsibility Statement
We confirm that to the best of our knowledge:
* The condensed set of financial statements contained within the half yearly
report to 31 December 2008 has been prepared in accordance with IAS 34 "Interim
Financial Reporting";
* The interim directors' report includes a fair view of important events that have
occurred during the first six months of the financial year and their impact on
financial statements;
* The interim directors' report includes a description of the principal risks and
uncertainties forremaining six months of the year; and
* The interim directors' report includes a fair view of information concerned
related party transactions as required by DTR 4.2.8R of the FSA's Disclosure
and Transparency Rules.
Approved by the Board on 20 February 2009
Unaudited Balance Sheet
as at 31 December 2008
+---------------------------------------+-------+---------------+--------------+------------+
| |Notes | 1X Cell | 3X Cell | Total |
+---------------------------------------+-------+---------------+--------------+------------+
| | | US$ '000 | US$ '000 | US$ '000 |
+---------------------------------------+-------+---------------+--------------+------------+
| Assets | | | | |
+---------------------------------------+-------+---------------+--------------+------------+
| Financial assets at fair value | 2, 6 | 88,856 | 20,934 | 109,790 |
| through profit or loss | | | | |
+---------------------------------------+-------+---------------+--------------+------------+
| Cash and cash equivalents | 7 | 1,311 | 188 | 1,499 |
+---------------------------------------+-------+---------------+--------------+------------+
| Other receivables | | 21 | 9 | 30 |
+---------------------------------------+-------+---------------+--------------+------------+
| Total assets | | 90,188 | 21,131 | 111,319 |
+---------------------------------------+-------+---------------+--------------+------------+
| | | | | |
+---------------------------------------+-------+---------------+--------------+------------+
| Liabilities | | | | |
+---------------------------------------+-------+---------------+--------------+------------+
| Financial liabilities at fair value | 2, 6 | 11,447 | 9,951 | 21,398 |
| through profit or loss | | | | |
+---------------------------------------+-------+---------------+--------------+------------+
| Bank overdraft | | 2,291 | 263 | 2,554 |
+---------------------------------------+-------+---------------+--------------+------------+
| Redemption payable | | 51 | 27 | 78 |
+---------------------------------------+-------+---------------+--------------+------------+
| Investment management fees payable | | 108 | 19 | 127 |
+---------------------------------------+-------+---------------+--------------+------------+
| Administration fees payable | | 33 | 7 | 40 |
+---------------------------------------+-------+---------------+--------------+------------+
| Audit fees payable | | 72 | 18 | 90 |
+---------------------------------------+-------+---------------+--------------+------------+
| Share issuance costs payable | | - | 9 | 9 |
+---------------------------------------+-------+---------------+--------------+------------+
| Other payables | | 184 | 54 | 238 |
+---------------------------------------+-------+---------------+--------------+------------+
| Total liabilities | | 14,186 | 10,348 | 24,534 |
+---------------------------------------+-------+---------------+--------------+------------+
| | | | | |
+---------------------------------------+-------+---------------+--------------+------------+
| Equity | | | | |
+---------------------------------------+-------+---------------+--------------+------------+
| Share premium | | 95,702 | 45,000 | 140,702 |
+---------------------------------------+-------+---------------+--------------+------------+
| Retained earnings | | (19,700) | (34,217) | (53,917) |
+---------------------------------------+-------+---------------+--------------+------------+
| Total equity | | 76,002 | 10,783 | 86,785 |
+---------------------------------------+-------+---------------+--------------+------------+
| Total equity and liabilities | | 90,188 | 21,131 | 111,319 |
+---------------------------------------+-------+---------------+--------------+------------+
| | | | | |
+---------------------------------------+-------+---------------+--------------+------------+
| | | 1XCell | 3XCell | |
+---------------------------------------+-------+---------------+--------------+------------+
| Net Asset Value | | | | |
+---------------------------------------+-------+---------------+--------------+------------+
| US$ share class | | US$42,307,656 | US$6,001,271 | |
| | | | | |
+---------------------------------------+-------+---------------+--------------+------------+
| Euro share class | | EUR15,369,917 | EUR1,451,311 | |
| | | | | |
+---------------------------------------+-------+---------------+--------------+------------+
| Sterling share class | | GBP8,512,018 | GBP1,936,583 | |
| | | | | |
+---------------------------------------+-------+---------------+--------------+------------+
| | | | | |
+---------------------------------------+-------+---------------+--------------+------------+
| Shares in issue | | | | |
+---------------------------------------+-------+---------------+--------------+------------+
| US$ share class | 10 | 55,250,728 | 20,560,977 | |
+---------------------------------------+-------+---------------+--------------+------------+
| Euro share class | 10 | 20,439,627 | 5,316,390 | |
+---------------------------------------+-------+---------------+--------------+------------+
| Sterling share class | 10 | 11,133,007 | 7,040,732 | |
+---------------------------------------+-------+---------------+--------------+------------+
| | | | | |
+---------------------------------------+-------+---------------+--------------+------------+
| Net Asset Value per share | | | | |
+---------------------------------------+-------+---------------+--------------+------------+
| US$ share class | | US$0.7657 | US$0.2919 | |
+---------------------------------------+-------+---------------+--------------+------------+
| Euro share class | | EUR0.7520 | EUR0.2730 | |
+---------------------------------------+-------+---------------+--------------+------------+
| Sterling share class | | GBP0.7646 | GBP0.2751 | |
+---------------------------------------+-------+---------------+--------------+------------+
Approved by the Directors
20 February 2009
Balance Sheet
as at 30 June 2008
+----------+-----------------------------------------------+---------+------------------+---------------------+---------------+
| | Notes | 1X Cell | 3X Cell | Total |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| | | US$ '000 | US$ '000 | US$ '000 |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| Assets | | | | |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| Financial assets at fair value through profit or loss | 2, 6 | 177,304 | 47,387 | 224,691 |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| Cash and cash equivalents | 7 | 15,327 | 1,501 | 16,828 |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| Other receivables | | 48 | 32 | 80 |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| Total assets | | 192,679 | 48,920 | 241,599 |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| | | | | |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| Liabilities | | | | |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| Redemption payable | | 2,524 | - | 2,524 |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| Investment management fees payable | | 580 | 170 | 750 |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| Administration fees payable | | 63 | 15 | 78 |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| Audit fees payable | | 88 | 23 | 111 |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| Share issuance costs payable | | - | 9 | 9 |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| Other payables | | 195 | 60 | 255 |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| Total liabilities | | 3,450 | 277 | 3,727 |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| | | | | |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| Equity | | | | |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| Share premium | | 170,525 | 51,560 | 222,085 |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| Retained earnings | | 18,704 | (2,917) | 15,787 |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| Total equity | | 189,229 | 48,643 | 237,872 |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| Total equity and liabilities | | 192,679 | 48,920 | 241,599 |
+----------------------------------------------------------+---------+------------------+---------------------+---------------+
| | | | | | |
+----------+-----------------------------------------------+---------+------------------+---------------------+---------------+
| | | | 1XCell | 3XCell | |
+----------+-----------------------------------------------+---------+------------------+---------------------+---------------+
| | Net Asset Value | | | | |
+----------+-----------------------------------------------+---------+------------------+---------------------+---------------+
| | US$ share class | | US$106,287,0009 | US$21,819,000 | |
+----------+-----------------------------------------------+---------+------------------+---------------------+---------------+
| | Euro share class | | EUR37,289,000 | EUR8,120,000 | |
+----------+-----------------------------------------------+---------+------------------+---------------------+---------------+
| | Sterling share class | | GBP12,194,000 | GBP7,061,000 | |
+----------+-----------------------------------------------+---------+------------------+---------------------+---------------+
| | | | | | |
+----------+-----------------------------------------------+---------+------------------+---------------------+---------------+
| | Shares in issue | | | | |
+----------+-----------------------------------------------+---------+------------------+---------------------+---------------+
| | US$ share class | 10 | 103,992,823 | 23,205,687 | |
+----------+-----------------------------------------------+---------+------------------+---------------------+---------------+
| | Euro share class | 10 | 36,772,483 | 8,733,957 | |
+----------+-----------------------------------------------+---------+------------------+---------------------+---------------+
| | Sterling share class | 10 | 11,806,460 | 7,423,862 | |
+----------+-----------------------------------------------+---------+------------------+---------------------+---------------+
| | | | | | |
+----------+-----------------------------------------------+---------+------------------+---------------------+---------------+
| | Net Asset Value per share | | | | |
+----------+-----------------------------------------------+---------+------------------+---------------------+---------------+
| | US$ share class | | US$1.0221 | US$0.9402 | |
+----------+-----------------------------------------------+---------+------------------+---------------------+---------------+
| | Euro share class | | EUR1.0140 | EUR0.9297 | |
+----------+-----------------------------------------------+---------+------------------+---------------------+---------------+
| | Sterling share class | | GBP1.0328 | GBP0.9511 | |
+----------+-----------------------------------------------+---------+------------------+---------------------+---------------+
Unaudited Income Statement
for the six month period ended 31 December 2008
+-----------------------------------------+-------+-------------+-------------+------------+
| |Notes | 1X Cell | 3X Cell | Total |
+-----------------------------------------+-------+-------------+-------------+------------+
| | | US$ '000 | US$ '000 | US$ '000 |
+-----------------------------------------+-------+-------------+-------------+------------+
| Income | | | | |
+-----------------------------------------+-------+-------------+-------------+------------+
| Interest income | 2 | 235 | 46 | 281 |
+-----------------------------------------+-------+-------------+-------------+------------+
| Total investment income | | 235 | 46 | 281 |
+-----------------------------------------+-------+-------------+-------------+------------+
| | | | | |
+-----------------------------------------+-------+-------------+-------------+------------+
| Expenses | | | | |
+-----------------------------------------+-------+-------------+-------------+------------+
| Interest expense | | 35 | 25 | 60 |
+-----------------------------------------+-------+-------------+-------------+------------+
| Investment management fees | 3 | 397 | 113 | 510 |
+-----------------------------------------+-------+-------------+-------------+------------+
| Directors' fees | 3 | 55 | 13 | 68 |
+-----------------------------------------+-------+-------------+-------------+------------+
| Audit fees | 3 | 51 | 12 | 63 |
+-----------------------------------------+-------+-------------+-------------+------------+
| Administration fees | 3 | 105 | 49 | 154 |
+-----------------------------------------+-------+-------------+-------------+------------+
| Custodian fees | 3 | 49 | 17 | 66 |
+-----------------------------------------+-------+-------------+-------------+------------+
| Other expenses | | 230 | 66 | 296 |
+-----------------------------------------+-------+-------------+-------------+------------+
| Total operating expenses | | 922 | 295 | 1,217 |
+-----------------------------------------+-------+-------------+-------------+------------+
| | | | | |
+-----------------------------------------+-------+-------------+-------------+------------+
| Net investment expense | | (687) | (249) | (936) |
+-----------------------------------------+-------+-------------+-------------+------------+
| | | | | |
+-----------------------------------------+-------+-------------+-------------+------------+
| Net realised and unrealised losses on | | | | |
| financial assets and liabilities at | | | | |
| fair value through profit or loss and | | | | |
| foreign exchange | | | | |
+-----------------------------------------+-------+-------------+-------------+------------+
| Net realised loss on financial assets | | (24,400) | (20,206) | (44,606) |
| and liabilities at fair value through | | | | |
| profit or loss | | | | |
+-----------------------------------------+-------+-------------+-------------+------------+
| Net unrealised loss on financial assets | | (14,059) | (11,153) | (25,212) |
| and liabilities at fair value through | | | | |
| profit or loss | | | | |
+-----------------------------------------+-------+-------------+-------------+------------+
| Net realised gain on foreign exchange | | 742 | 308 | 1,050 |
+-----------------------------------------+-------+-------------+-------------+------------+
| Total net realised and unrealised | | (37,717) | (31,051) | (68,768) |
| losses on financial assets and | | | | |
| liabilities at fair value through | | | | |
| profit or loss and foreign exchange | | | | |
+-----------------------------------------+-------+-------------+-------------+------------+
| | | | | |
+-----------------------------------------+-------+-------------+-------------+------------+
| Loss for the period | | (38,404) | (31,300) | (69,704) |
+-----------------------------------------+-------+-------------+-------------+------------+
| | | |
+-----------------------------------------+-------+----------------------------------------+
| | | 1XCell | 3XCell | |
+-----------------------------------------+-------+-------------+-------------+------------+
| Loss per Share | | | | |
+-----------------------------------------+-------+-------------+-------------+------------+
| US$ share class | 14 | US$(0.3681) | US$(0.8239) | |
+-----------------------------------------+-------+-------------+-------------+------------+
| Euro share class | 14 | EUR(0.3586) | EUR(0.7488) | |
+-----------------------------------------+-------+-------------+-------------+------------+
| Sterling share class | 14 | GBP(0.3787) | GBP(0.7502) | |
+-----------------------------------------+-------+-------------+-------------+------------+
| | | | | |
+-----------------------------------------+-------+-------------+-------------+------------+
Unaudited Income Statement
for the six month period ended 31 December 2007
+------------------------------------------+-------+------------+--+-------------+----------+--+
| |Notes | 1X Cell | 3X Cell | Total |
+------------------------------------------+-------+------------+----------------+-------------+
| | | US$ '000 | US$ '000 | US$ '000 |
+------------------------------------------+-------+------------+----------------+-------------+
| Income | | | | |
+------------------------------------------+-------+------------+----------------+-------------+
| Interest income | 2 | 800 | 216 | 1,016 |
+------------------------------------------+-------+------------+----------------+-------------+
| Investment income | | 800 | 216 | 1,016 |
+------------------------------------------+-------+------------+----------------+-------------+
| | | | | |
+------------------------------------------+-------+------------+----------------+-------------+
| Expenses | | | | |
+------------------------------------------+-------+------------+----------------+-------------+
| Interest expense | | 45 | 36 | 81 |
+------------------------------------------+-------+------------+----------------+-------------+
| Investment management fees | 3 | 1,102 | 334 | 1,436 |
+------------------------------------------+-------+------------+----------------+-------------+
| Directors' fees | 3 | 58 | 15 | 73 |
+------------------------------------------+-------+------------+----------------+-------------+
| Audit fees | 3 | 82 | 20 | 102 |
+------------------------------------------+-------+------------+----------------+-------------+
| Administration fees | 3 | 74 | 23 | 97 |
+------------------------------------------+-------+------------+----------------+-------------+
| Custodian fees | 3 | 28 | 9 | 37 |
+------------------------------------------+-------+------------+----------------+-------------+
| Set up fees | | 171 | 46 | 217 |
| | | | | |
+------------------------------------------+-------+------------+----------------+-------------+
| Other expenses | | 286 | 101 | 387 |
+------------------------------------------+-------+------------+----------------+-------------+
| Total operating expenses | | 1,846 | 584 | 2,430 |
+------------------------------------------+-------+------------+----------------+-------------+
| | | | | |
+------------------------------------------+-------+------------+----------------+-------------+
| Net investment expense | | (1,046) | (368) | (1,414) |
+------------------------------------------+-------+------------+----------------+-------------+
| | | | | |
+------------------------------------------+-------+------------+----------------+-------------+
| Net realised and unrealised | | | | |
| gains/(losses) on financial assets and | | | | |
| liabilities at fair value through profit | | | | |
| or loss and foreign exchange | | | | |
+------------------------------------------+-------+------------+----------------+-------------+
| Net realised gain on financial assets | | 12,183 | 613 | 12,796 |
| and liabilities at fair value through | | | | |
| profit or loss | | | | |
+------------------------------------------+-------+------------+----------------+-------------+
| Net unrealised loss on financial assets | | (4,195) | (2,393) | (6,588) |
| and liabilities at fair value through | | | | |
| profit or loss | | | | |
+------------------------------------------+-------+------------+----------------+-------------+
| Net realised loss on foreign exchange | | (1,797) | (395) | (2,192) |
+------------------------------------------+-------+------------+----------------+-------------+
| Total net realised and unrealised | | 6,191 | (2,175) | 4,016 |
| gains/(losses) on financial assets and | | | | |
| liabilities at fair value through profit | | | | |
| or loss and foreign exchange | | | | |
+------------------------------------------+-------+------------+----------------+-------------+
| | | | | |
+------------------------------------------+-------+------------+----------------+-------------+
| Profit/(loss) for the period | | 5,145 | (2,543) | 2,602 |
+------------------------------------------+-------+------------+----------------+-------------+
| | | |
+------------------------------------------+-------+----------------------------------------+
| | | 1X Cell | 3X Cell | |
+------------------------------------------+-------+---------------+-------------+----------+
| Earnings/(loss) per Share | | | | |
+------------------------------------------+-------+---------------+-------------+----------+
| US$ share class | 14 | US$0.0230 | US$(0.0412) | |
+------------------------------------------+-------+---------------+-------------+----------+
| Euro share class | 14 | EUR0.0194 | EUR(0.0436) | |
+------------------------------------------+-------+---------------+-------------+----------+
| Sterling share class | 14 | GBP0.0176 | GBP(0.0438) | |
+------------------------------------------+-------+---------------+-------------+----------+
| | | | | |
+------------------------------------------+-------+------------+--+-------------+----------+--+
Unaudited Statement of Changes in Equity
for the six month period ended 31 December 2008
+--------------------------------------------+-------------+--------------+-------------+
| | 1X Cell | 3X Cell | Total |
+--------------------------------------------+-------------+--------------+-------------+
| | US$ '000 | US$ '000 | US$ '000 |
+--------------------------------------------+-------------+--------------+-------------+
| | | | |
+--------------------------------------------+-------------+--------------+-------------+
| Balance at 1 July 2008 | 189,229 | 48,643 | 237,872 |
+--------------------------------------------+-------------+--------------+-------------+
| | | | |
+--------------------------------------------+-------------+--------------+-------------+
| Loss for the period | (38,404) | (31,300) | (69,704) |
+--------------------------------------------+-------------+--------------+-------------+
| | | | |
+--------------------------------------------+-------------+--------------+-------------+
| Share premium | | | |
+--------------------------------------------+-------------+--------------+-------------+
| Subscriptions, net of transfer between | 1,102 | - | 1,102 |
| classes | | | |
+--------------------------------------------+-------------+--------------+-------------+
| Redemptions, net of transfer between | (75,884) | (6,550) | (82,434) |
| classes | | | |
+--------------------------------------------+-------------+--------------+-------------+
| Share issuance costs | (41) | (10) | (51) |
+--------------------------------------------+-------------+--------------+-------------+
| Total share premium | (74,823) | (6,560) | (81,383) |
+--------------------------------------------+-------------+--------------+-------------+
| | | | |
+--------------------------------------------+-------------+--------------+-------------+
| Balance at 31 December 2008 | 76,002 | 10,783 | 86,785 |
+--------------------------------------------+-------------+--------------+-------------+
Unaudited Statement of Changes in Equity
for the six month period ended 31 December 2007
+----------------------------------------------+-------------+-------------+------------+
| | 1X Cell | 3X Cell | Total |
+----------------------------------------------+-------------+-------------+------------+
| | US$ '000 | US$ '000 | US$ '000 |
+----------------------------------------------+-------------+-------------+------------+
| | | | |
+----------------------------------------------+-------------+-------------+------------+
| Balance at 30 June 2007 | 257,869 | 68,839 | 326,708 |
+----------------------------------------------+-------------+-------------+------------+
| | | | |
+----------------------------------------------+-------------+-------------+------------+
| Profit/(loss) for the period | 5,145 | (2,543) | 2,602 |
+----------------------------------------------+-------------+-------------+------------+
| | | | |
+----------------------------------------------+-------------+-------------+------------+
| Share premium | | | |
+----------------------------------------------+-------------+-------------+------------+
| Subscriptions, net of transfer between | 16,873 | 820 | 17,693 |
| classes | | | |
+----------------------------------------------+-------------+-------------+------------+
| Redemptions, net of transfer between classes | (35,279) | (4,477) | (39,756) |
+----------------------------------------------+-------------+-------------+------------+
| Share issuance costs | (124) | (25) | (149) |
+----------------------------------------------+-------------+-------------+------------+
| Total share premium | (18,530) | (3,682) | (22,212) |
+----------------------------------------------+-------------+-------------+------------+
| | | | |
+----------------------------------------------+-------------+-------------+------------+
| Balance at 31 December 2007 | 244,485 | 62,613 | 307,098 |
+----------------------------------------------+-------------+-------------+------------+
Unaudited Cash Flow Statement
for the six month period ended 31 December 2008
+--------------------------------------------+--------------+-------------+--------------+
| | 1X Cell | 3X Cell | Total |
+--------------------------------------------+--------------+-------------+--------------+
| | US$ '000 | US$ '000 | US$ '000 |
+--------------------------------------------+--------------+-------------+--------------+
| Cash flows from operating activities | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Loss for the period | (38,404) | (31,300) | (69,704) |
+--------------------------------------------+--------------+-------------+--------------+
| Adjustments to reconcile return for the | | | |
| period to net cash from operating | | | |
| activities: | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Purchase of investments | (211,698) | (63,268) | (274,966) |
+--------------------------------------------+--------------+-------------+--------------+
| Sale of investments | 297,898 | 88,771 | 386,669 |
+--------------------------------------------+--------------+-------------+--------------+
| Unrealised loss on investments and swap | 13,152 | 10,819 | 23,971 |
| agreements | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Decrease in unrealised gain on | 545 | 83 | 628 |
| open forward exchange contracts | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Decrease in investment management fees | (473) | (152) | (625) |
| payable | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Decrease in administration fees payable | (30) | (8) | (38) |
+--------------------------------------------+--------------+-------------+--------------+
| Decrease in audit fees payable | (16) | (5) | (21) |
+--------------------------------------------+--------------+-------------+--------------+
| Decrease in other receivables | 27 | 23 | 50 |
+--------------------------------------------+--------------+-------------+--------------+
| Decrease in other payables | (12) | (6) | (18) |
+--------------------------------------------+--------------+-------------+--------------+
| Net cash used in operating activities | 60,989 | 4,957 | 65,946 |
+--------------------------------------------+--------------+-------------+--------------+
| | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Cash flows from financing activities | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Subscriptions, net of transfer between | 1,102 | - | 1,102 |
| classes | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Redemptions, net of transfer between | (78,357) | (6,523) | (84,880) |
| classes | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Share issuance costs | (41) | (10) | (51) |
+--------------------------------------------+--------------+-------------+--------------+
| Net cash used in financing activities | (77,296) | (6,533) | (83,829) |
+--------------------------------------------+--------------+-------------+--------------+
| | | | |
+--------------------------------------------+--------------+-------------+--------------+
| | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Net decrease in cash and cash equivalents | (16,307) | (1,576) | (17,883) |
+--------------------------------------------+--------------+-------------+--------------+
| | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Opening cash and cash equivalents | 15,327 | 1,501 | 16,828 |
+--------------------------------------------+--------------+-------------+--------------+
| | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Ending cash and cash equivalents | (980) | (75) | (1,055) |
+--------------------------------------------+--------------+-------------+--------------+
| | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Supplementary cash flow information: | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Interest received | 218 | 38 | 256 |
+--------------------------------------------+--------------+-------------+--------------+
| Interest paid | (46) | (28) | (74) |
+--------------------------------------------+--------------+-------------+--------------+
Unaudited Cash Flow Statement
for the six month period ended 31 December 2007
+--------------------------------------------+--------------+-------------+--------------+
| | 1X Cell | 3X Cell | Total |
+--------------------------------------------+--------------+-------------+--------------+
| | US$ '000 | US$ '000 | US$ '000 |
+--------------------------------------------+--------------+-------------+--------------+
| Cash flows from operating activities | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Profit/ (loss) for the period | 5,145 | (2,543) | 2,602 |
+--------------------------------------------+--------------+-------------+--------------+
| Adjustments to reconcile return for the | | | |
| period to net cash from operating | | | |
| activities: | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Purchase of investments | (1,138,240) | (306,245) | (1,444,485) |
+--------------------------------------------+--------------+-------------+--------------+
| Sale of investments | 1,147,955 | 313,655 | 1,461,610 |
+--------------------------------------------+--------------+-------------+--------------+
| Unrealised gain on investments and swap | 4,115 | 3,250 | 7,365 |
| agreements | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Decrease in unrealised gain on | 654 | 210 | 864 |
| open forward exchange contracts | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Increase in due from broker | (520) | (353) | (873) |
+--------------------------------------------+--------------+-------------+--------------+
| Increase in investment management fees | 82 | 21 | 103 |
| payable | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Increase in administration fees payable | 24 | 8 | 32 |
+--------------------------------------------+--------------+-------------+--------------+
| Increase in audit fees payable | 25 | 5 | 30 |
+--------------------------------------------+--------------+-------------+--------------+
| Increase in other receivables | (178) | (62) | (240) |
+--------------------------------------------+--------------+-------------+--------------+
| Decrease in other payables | (102) | 39 | (63) |
+--------------------------------------------+--------------+-------------+--------------+
| Net cash provided by operating activities | 18,960 | 7,985 | 26,945 |
+--------------------------------------------+--------------+-------------+--------------+
| | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Cash flows from financing activities | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Subscriptions, net of transfer between | 16,873 | 820 | 17,693 |
| classes | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Redemptions, net of transfer between | (34,239) | (3,770) | (38,009) |
| classes | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Share issuance costs | (330) | (116) | (446) |
+--------------------------------------------+--------------+-------------+--------------+
| Net cash used in financing activities | (17,696) | (3,066) | (20,762) |
+--------------------------------------------+--------------+-------------+--------------+
| | | | |
+--------------------------------------------+--------------+-------------+--------------+
| | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Net increase in cash and cash equivalents | 1,264 | 4,919 | 6,183 |
+--------------------------------------------+--------------+-------------+--------------+
| | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Opening cash and cash equivalents | 1,741 | 554 | 2,295 |
+--------------------------------------------+--------------+-------------+--------------+
| | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Ending cash and cash equivalents | 3,005 | 5,473 | 8,478 |
+--------------------------------------------+--------------+-------------+--------------+
| | | | |
+--------------------------------------------+--------------+-------------+--------------+
| | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Supplementary cash flow information: | | | |
+--------------------------------------------+--------------+-------------+--------------+
| Interest received | 690 | 189 | 879 |
+--------------------------------------------+--------------+-------------+--------------+
| Interest paid | (7) | - | (7) |
+--------------------------------------------+--------------+-------------+--------------+
Notes to the Unaudited Financial Statements
for the six month period ended 31 December 2008
1. Organisation
New Star RBC Hedge 250 Index Exchange Traded Securities PCC Limited (the
"Company") is a closed ended protected cell company registered and incorporated
on 19 September 2006 in Guernsey under the provisions of the Companies
(Guernsey) Law, 1994 and the Protected Cell Companies Ordinance, 1997 to 1998
(as amended).
The investment objective of the Company is to provide access to performance
representative of the hedge fund asset class. The investment policy of the
Company is to provide access to such performance through investment exposure to
the RBC Hedge 250 Index (the "Index").
The Company has established two
Cells, designated as the 1X Cell and the 3X Cell, so that subject to compliance
with certain conditions under Guernsey law, the liability of the Company
attributable to one Cell can only be satisfied out of the assets of that Cell.
Each Cell is deemed a separate reporting segment, the objectives of each are
listed below:
* The 1X Cell aims to provide unleveraged exposure to the performance of the
Index. It achieves its investment objective by entering into a swap agreement
(the "Swap") with Royal Bank of Canada (the "Swap Counterparty").
* The 3X Cell aims to provide approximately three times the exposure to the
performance of the Index. It achieves its investment objective by entering into
a swap agreement with the Swap Counterparty.
The assets of each Cell are invested in cash or highly rated cash and near cash
instruments with the intention of generating returns so as to offset certain US
dollar LIBOR based funding charges under the Swap in respect of the relevant
Cell, although this cannot be guaranteed. Substantially all of these instruments
are posted under the terms of each Swap as collateral for the purposes of
securing each Cell's obligations to the Swap Counterparty.
The Index is a broad range of hedge funds constructed based on the RBC Hedge 250
Index Rules (the "Rules"). The Rules have been established to produce a
benchmark of the performance of the hedge fund asset class as represented by a
group of hedge funds selected pursuant to the Rules. The hedge funds that are
eligible for inclusion may be limited to the extent necessary to allow RBC to
hedge its exposure with respect to the Index.
The Index was launched on 1 July 2005 and at inception gave approximately equal
weightings to 250 funds representing nine strategies within four sectors. The
Index has continued to give exposure to these nine strategies.
On 28 November 2006 the 1X Euro shares, 1X Sterling shares, 1X US$ shares, 3X
Euro shares, 3X Sterling shares and 3X US$ shares were listed on the London
Stock Exchange.
Earnings per Share (EPS) have been calculated at share class level on a weighted
average basis for the 1X Cell and the 3X Cell in the base currency of each share
class.
The market price of the Shares, as well as being affected by the Net Asset Value
per Share of the relevant Class, also takes into account prevailing interest
rates, supply and demand for the Shares, market conditions and general investor
sentiment. The market value of a Share may vary considerably from the Net Asset
Value per Share. Due to the presence of such a discount or premium to the Net
Asset Value per Share, and the difference between the mid-market Share price and
the price at which Shares can be sold, the realisable value of a Share may not
fully reflect the relevant Net Asset Value per Share.
2. Significant Accounting Policies
(a) Statement of Compliance
The financial statements have been prepared in accordance with International
Financial Reporting Standards issued by the International Accounting Standards
Board (IASB), interpretations issued by the International Financial Reporting
Interpretations Committee of the IASB, and the Companies (Guernsey) Law, 2008 as
updated. Certain amounts in the prior period comparative figures have been
reclassified in order to be consistent with the presentation of the current
period's figures.
(b) Basis of Preparation
The financial statements are presented in United States dollars ("US$"). The
financial statements have been prepared on a historical cost basis, except for
financial instruments classified at fair value through profit or loss that have
been measured at fair value. The preparation of the financial statements in
accordance with International Financial Reporting Standards requires the
Directors to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial information and the reported amounts of revenues and
expenses during the year. Actual results could differ from such estimates.
Standards adopted by the Company
These financial statements are also subject to the new standard IFRS 7,
Financial Instruments: Disclosures, and the complementary Amendment to IAS 1,
Presentation of Financial Statements - Capital Disclosures. IFRS 7 introduces
new disclosures relating to financial instruments. This standard does not have
any impact on the classification and valuation of the Company's financial
instruments. In accordance with the requirements of the Amendment to IAS 1,
additional disclosures have been provided on the Company's objectives and
policies for its capital, which is represented by the net assets attributable to
the holders of redeemable shares. The impact of the adoption of IFRS 7 and the
changes to IAS 1 has been to expand the disclosures provided in these financial
statements regarding the Company's financial instruments and management of
capital.
Interpretations to existing standards that are not yet effective or early
adopted by the Company
The following interpretations are mandatory for the Company's accounting periods
beginning on or after 1 January 2009:
* IFRS 8, Operating Segments (effective 1 January 2009)
* Amendment to IAS 32 and IAS 1 - Financial Instruments Puttable at Fair Value and
Obligations Arising on Liquidation
The Company will consider applying these new standards and interpretations for
its accounting period commencing 1 July 2009.
(c) Financial Assets and Financial Liabilities at Fair Value through Profit
or Loss
Financial Instruments
(i) Classification
The Company has designated its investments into the financial assets at fair
value through profit or loss category. This category has two sub-categories:
financial assets and liabilities held for trading, and those designated by
management at fair value through profit or loss at inception.
(c) Financial Assets and Financial Liabilities at Fair Value through Profit
or Loss (continued)
The Company has categorised its investments in bonds, swap agreements and
forward foreign exchange contracts as held for trading. IAS 39 requires all
derivatives, including swap agreements and forward foreign exchange contracts to
be categorised as held for trading notwithstanding that the Company holds such
instruments for long term investment purposes. Derivatives are categorised as
held for trading, as the Company does not designate any derivatives as hedges
for hedge accounting purposes as described under IAS 39.
(ii) Recognition
Purchases and sales of investments are recognised on trade date - the date on
which the Company commits to purchase or sell the asset. Investments are
initially recognised at fair value and are derecognised when the rights to
receive cash flows from the investments have expired or the Company has
transferred substantially all risks and rewards of ownership.
(iii) Measurement
Financial instruments categorised at fair value through profit or loss are
measured at fair value, with transaction costs for such instruments being
recognised directly in the income statement. Gains and losses arising from
changes in the fair value of the 'financial assets at fair value through profit
and loss' category are included in the income statement in the year in which
they arise. Realised gains and losses on disposals of financial instruments are
calculated using "first-in-first-out" ("FIFO") method of valuation.
(iv)Fair value measurement principles
Fair value is the amount for which an asset could be exchanged, or a liability
settled, between knowledgeable, willing parties in an arm's length transaction.
The fair value of financial instruments is based on their quoted market prices
on a recognised exchange or sourced from a reputable broker/counterparty in the
case of non-exchange traded instruments, at the balance sheet date without any
deduction for estimated future selling costs. Financial assets are priced at
their current bid prices, while financial liabilities are priced at their
current offer prices.
If a quoted market price is not available on a recognised stock exchange or from
a broker/counterparty, the fair value of the financial instruments may be
estimated by the directors using valuation techniques, including use of recent
arm's length market transactions, reference to the current fair value of another
instrument that is substantially the same, discounted cash flow techniques,
option pricing models or any other valuation technique that provides a reliable
estimate of prices obtained in actual market transactions.
The fair value of derivative financial instruments at the reporting date
generally reflects the amount that the Company would receive or pay to terminate
the contract at the reporting date. Many derivative financial instruments are
exchange traded or are traded in the over the counter market where market values
are readily obtainable.
The Company normally determines the value of the swaps based on the information
provided by the Swap Counterparty and calculates and publishes figures for the
Net Asset Value of each Cell and the Net Asset Value per Share of each Class
before the final Index level for a month end is determined, on the basis of a
reasonably accurate estimate of the Index for that month end provided by RBC as
swap counterparty.
(c) Financial Assets and Financial Liabilities at Fair Value through Profit
or Loss (continued)
(v) Derecognition
A financial asset is derecognised when the Company no longer has control over
the contractual rights that comprise that asset. This occurs when the rights are
realised, expired or are surrendered. A financial liability is derecognised when
it is extinguished or when the obligation specified in the contract is
discharged, cancelled or expired.
Assets held for trading that are sold are derecognised and corresponding
receivables from the buyer for the payment are recognised as of the date the
Company commits to sell the assets. The Company uses the FIFO method to
determine the gain or loss on derecognition.
(vi) Offsetting
Financial assets and liabilities are offset and the net amount reported in the
balance sheet when there is a legally enforceable right to set-off the
recognised amounts and there is an ability and intention to settle on a net
basis, or realise the assets and settle the liability simultaneously.
(d)Cash and Cash Equivalents
Cash includes deposits with the Custodian. Cash equivalents are short-term
highly liquid investments that are readily convertible to known amounts of cash
and are subject to an insignificant risk of changes in value.
(e) Foreign Currency Translation
(i) Functional and presentation currency
Items included in the Company's financial statements are measured using the
currency of the primary economic environment in which it operates ('the
functional currency'). This is the United States dollar, which reflects the
Company's investment objectives.
(ii) Foreign currency transactions
Monetary assets and liabilities denominated in currencies other than the United
States dollar are translated into United States dollar at the closing rates of
exchange at each period end. Transactions during the year, including purchases
and sales of securities, income and expenses, are translated at the rate of
exchange prevailing on the date of the transaction. Foreign currency transaction
gains and losses are included in realised and unrealised gain and loss on
investments.
(f) Interest Income
Interest income is recognised on an accruals basis in line with contractual
terms. Interest is accrued on a daily basis.
(g) Expenses
All expenses, including investment management fees and non-swap interest
expense, are recognised in the Income Statement on an accruals basis, with the
exception of commissions payable to placing agents and the Investment Manager
which have been deducted from gross subscriptions received and all costs
associated with the issuance of shares which have been deducted from share
premium.
3. Fees and Expenses
Investment management fees
New Star Asset Management (Bermuda) Limited (the "Investment Manager") is paid
by the Company an investment management fee of 0.85% and 1% per annum of the Net
Asset Value for 1X Cell and 3X Cell, respectively (before deducting the amounts
of that month's investment management fees). The fee is calculated and paid
monthly in arrears. Management fees of US$397,000 (period ended
31 December 2007: US$1,102,000) and US$113,000 (period ended 31 December 2007:
US$334,000) respectively for 1X Cell and 3X Cell were incurred during the six
month period ended 31 December 2008, of which US$108,000 (30 June 2008:
US$580,000) and US$19,000 (30 June 2008: US$170,000) was outstanding at the
period end.
Administration fees
HSBC Securities Services (Guernsey) Limited, (the "Administrator" and "Company
Secretary"), a company incorporated in Guernsey, is paid an annual fee on a time
cost basis (with an annual minimum of US$5,800) by the Company for corporate
secretarial and administrative services and is also reimbursed all reasonable
out of pocket expenses owed to the Administrator. The Administrator is
responsible for payment of all of the Sub-Administrator's fees and expenses.
Each Cell pays fees to the Administrator on a sliding scale basis. The rates are
0.06% per annum on the first US$37.5 million Net Asset Value of each Cell, 0.05%
per annum on the next US$37.5 million of the Net Asset Value of each Cell and
0.04% per annum on the remaining Net Asset Value. These fees are accrued and
calculated monthly and paid monthly in arrears. During the six month
period ended 31 December 2008, administration fees of US$105,000 (period ended
31 December 2007: US$74,000) and US$49,000 (period ended 31 December 2007:
US$23,000) for the 1X Cell and 3X Cell, respectively, were incurred, of which
US$33,000 (30 June 2008: US$63,000) and US$7,000 (30 June 2008: US$15,000) was
outstanding at the period end.
Custodian fees
HSBC Institutional Trust Services (Ireland) Limited (the "Custodian") is paid a
fee by each Cell equal to 0.03% per annum on the first US$50 million Net Asset
Value of each Cell and 0.02% per annum of the Net Asset Value of each Cell above
US$50 million. The custody fee is accrued and calculated monthly and paid
monthly in arrears. During the six month period ended 31 December 2008,
custodian fees of US$49,000 (period ended 31 December 2007: US$28,000) and
US$17,000 (period ended 31 December 2007: US$9,000) were incurred by the 1X Cell
and 3X Cell, respectively, of which US$39,000 (30 June 2008: US$33,000) and
US$10,000 (30 June 2008: US$11,000) was outstanding at the period end.
Registrar fees
Capita Registrars (Guernsey) Limited, (the "Registrar"), is paid a fee
calculated on the basis of number of shareholders and the number of transfers
processed. During the six month period ended 31 December 2008, registrar fees of
US$46,000 (period ended 31 December 2007: US$8,000) and US$32,000 (period ended
31 December 2007: US$2,000) were incurred by the 1X Cell and 3X Cell,
respectively, of which US$: Nil (30 June 2008: US$23,000) and US$: Nil (30 June
2008: US$21,000) were paid in advance to the Registrar at the period end.
Directors' fees
Since December 2007 Christopher Sherwell has been entitled to receive GBP25,000
per annum directors' fees, payable quarterly in advance and John Duffield and
John Hallam are entitled to receive GBP20,000 each per annum as directors, fees
payable quarterly in advance. Directors' remuneration for the six month
period ended 31 December 2008 amounted to US$55,000 (period ended
31 December 2007: US$40,000) and US$13,000 (period ended 31 December 2007:
US$10,000) for 1X and 3X Cell respectively, of which US$: Nil (30 June 2008: US
Nil) and US$: Nil (30 June 2008: US$ Nil) was payable at the period end.
Auditors' remuneration
Auditors' remuneration for the period amounted to US$63,000 (period ended
31 December 2007: US$102,000).
4. Taxation
The Company is registered in Guernsey as an exempt company and therefore, is not
liable for Guernsey income tax.
Guernsey does not levy capital gains tax (with the exception of dwellings profit
tax) and therefore the Company will not suffer any tax in Guernsey on capital
gains. Payments made by the Company to non Guernsey resident shareholders
whether made during the life of the Company or by distribution on the
liquidation of the Company will not be subject to Guernsey tax. The Directors
intend to conduct the affairs of the Company so that it does not become resident
in the United Kingdom for taxation purposes. As a result, and provided the
Company does not trade in the United Kingdom through a fixed place of business
or agent situated therein that constitutes a "permanent establishment" for
United Kingdom taxation purposes and that all its trading transactions in the
United Kingdom are carried out through a broker or investment manager acting as
an agent of independent status in the ordinary course of its business, the
Company will not be subject to United Kingdom corporation tax or income tax on
its profits.
5. Dividend Policy
The Directors intend to seek certification of each Sterling Share class in the
Company as having distributor fund status with a view to ensuring that on a
disposal of Sterling Shares (by way of redemption, transfer or otherwise) UK
resident Shareholders are subject to capital gains tax rather than income tax.
It cannot be guaranteed, however, that the conditions necessary to obtain
distributor fund status will always be met.
It is not envisaged that any income or gains will be distributed on the US
Dollar and Euro shares by way of dividend.
6.Financial Assets and Liabilities at Fair Value through Profit or Loss
+----------------------------------------------------------+----------------+----------------+----------------+
| | Fair Value | Fair Value | Fair Value |
| As at 31 December 2008 | 1X Cell | 3X Cell | Total |
| | US$ '000 | US$ '000 | US$ '000 |
+----------------------------------------------------------+----------------+----------------+----------------+
| Held for trading | | | |
+----------------------------------------------------------+----------------+----------------+----------------+
| Bonds | 88,856 | 20,934 | 109,790 |
+----------------------------------------------------------+----------------+----------------+----------------+
| Total financial assets at fair value through profit or | 88,856 | 20,934 | 109,790 |
| loss | | | |
+----------------------------------------------------------+----------------+----------------+----------------+
+----------------------------------------------------------+----------------+----------------+----------------+
| | Fair Value | Fair Value | Fair Value |
| As at 31 December 2008 | 1X Cell | 3X Cell | Total |
| | US$ '000 | US$ '000 | US$ '000 |
+----------------------------------------------------------+----------------+----------------+----------------+
| Held for trading | | | |
+----------------------------------------------------------+----------------+----------------+----------------+
| Swap agreements | (10,937) | (9,887) | (20,824) |
+----------------------------------------------------------+----------------+----------------+----------------+
| Forward foreign currency contracts | (510) | (64) | (574) |
+----------------------------------------------------------+----------------+----------------+----------------+
| Total financial liabilities at fair value through profit | (11,447) | (9,951) | (21,398) |
| or loss | | | |
+----------------------------------------------------------+----------------+----------------+----------------+
+----------------------------------------------------------+----------------+----------------+----------------+
| | Fair Value | Fair Value | Fair Value |
| As at 30 June 2008 | 1X Cell | 3X Cell | Total |
| | US$ '000 | US$ '000 | US$ '000 |
+----------------------------------------------------------+----------------+----------------+----------------+
| Held for trading | | | |
+----------------------------------------------------------+----------------+----------------+----------------+
| Bonds | 175,440 | 46,550 | 221,990 |
+----------------------------------------------------------+----------------+----------------+----------------+
| Swap agreements | 1,829 | 818 | 2,647 |
+----------------------------------------------------------+----------------+----------------+----------------+
| Forward foreign currency contracts | 35 | 19 | 54 |
+----------------------------------------------------------+----------------+----------------+----------------+
| Total financial assets at fair value through profit or | 177,304 | 47,387 | 224,691 |
| loss | | | |
+----------------------------------------------------------+----------------+----------------+----------------+
The full amount of the bonds are pledged as collateral as explained in note 9.
7. Cash and Cash Equivalents
+-------------------------------------------+------------+------------+------------+
| As at 31 December 2008 | Fair Value | Fair Value | Fair Value |
| | 1X Cell | 3X Cell | Total |
| | US$ '000 | US$ '000 | US$ '000 |
+-------------------------------------------+------------+------------+------------+
| | | | |
+-------------------------------------------+------------+------------+------------+
| Current deposits with banks | 845 | 15 | 860 |
+-------------------------------------------+------------+------------+------------+
| Margin accounts | 466 | 173 | 639 |
+-------------------------------------------+------------+------------+------------+
| Total cash and cash equivalents | 1,311 | 188 | 1,499 |
+-------------------------------------------+------------+------------+------------+
| | | | |
+-------------------------------------------+------------+------------+------------+
| Bank overdraft | - | - | - |
+-------------------------------------------+------------+------------+------------+
| Margin accounts | 2,291 | 263 | 2,544 |
+-------------------------------------------+------------+------------+------------+
| Total bank overdraft | 2,291 | 263 | 2,544 |
+-------------------------------------------+------------+------------+------------+
+----------------------------------------------------------+----------------+----------------+----------------+
| | Fair Value | Fair Value | Fair Value |
| As at 30 June 2008 | 1X Cell | 3X Cell | Total |
| | US$ '000 | US$ '000 | US$ '000 |
+----------------------------------------------------------+----------------+----------------+----------------+
| | | | |
+----------------------------------------------------------+----------------+----------------+----------------+
| Current deposits with banks | 203 | 81 | 284 |
+----------------------------------------------------------+----------------+----------------+----------------+
| Margin accounts | 15,124 | 1,420 | 16,544 |
+----------------------------------------------------------+----------------+----------------+----------------+
| Total cash and cash equivalents | 15,327 | 1,501 | 16,828 |
+----------------------------------------------------------+----------------+----------------+----------------+
Margin accounts represent cash transferred as collateral against swap
agreements. To the extent not provided as collateral under the swap agreements,
the Company's Custodian holds each Cell's cash and cash equivalent balances.
8. Financial Instruments and Associated Risks
The Company's investing activities expose it to various types of risks, which
are associated with the financial instruments and markets in which it invests.
These include market risk (which includes currency risk, interest rate risk and
other price risk), credit risk and liquidity risk. As an investment fund, the
Company buys, sells or holds financial assets and liabilities in order to take
advantage of changes in market prices or rates.
Risk Management Structure
The Board of Directors' is ultimately responsible for identifying and
controlling risks. The Board of Directors has delegated these activities to the
Investment Manager.
Risk Measurement and Reporting System
Monitoring and controlling risks is primarily performed based on limits
established by the Investment Manager. These limits reflect the business
strategy and market environment of the Company as well as the level of risk that
the Company is willing to accept. In addition, the Company monitors and measures
the overall risk bearing capacity in relation to the aggregate risk exposure
across all risk types and activities.
Risk Mitigation
The Company has investment guidelines that set out its overall business
strategies, its tolerance for risk and its general risk management philosophy
and have established processes to monitor and control economic hedging
transactions in a timely and accurate manner. The Company uses derivatives and
other instruments for investment purposes and in connection with its risk
management activities. The Company's accounting policies in relation to
derivatives are set out in Note 2.
The risk management policies employed by the Company are discussed below.
(a) Market Risk
Market risk is the risk that changes in foreign exchange rates, interest rates
or other price factors will make an instrument less valuable or more onerous.
All investment portfolio financial instruments are measured at fair value, and
all changes in market conditions directly affect net income.
The Company's strategy on the management of market risk is driven by the
Company's investment objective. The Company's market risk is managed on a
monthly basis by the Investment Manager in accordance with policies and
procedures in place.
The investment objective of the Company is to provide access to performance
representative of the hedge fund asset class. The investment policy of the
Company is to provide access to such performance through investment exposure to
the RBC Hedge 250 Index (the "Index"). The Index is a broad range of hedge funds
constructed based on the RBC Hedge 250 Index Rules (the "Rules"). The Rules have
been established to produce a benchmark of the performance of the hedge fund
asset class as represented by a group of hedge funds selected pursuant to the
Rules. The hedge funds that are eligible for inclusion may be limited to the
extent necessary to allow RBC to hedge its exposure with respect to the Index.
The Company may not achieve its investment objective. Meeting that objective is
a target but the existence of such an objective should not be considered as an
assurance or guarantee that it can or will be met. The investment results of the
Company are reliant upon the performance of the Index. There is no assurance
about the performance of the Index over the life of the Company and as a result
Net Asset Value per Share may not increase over its issue price and may decrease
below its issue price.
Details of the Company's investment portfolio at the balance sheet date are
disclosed in the schedule of investments. Details of the nature and terms of
derivative financial instruments outstanding at the balance sheet date are set
out in Note 9.
(i) Currency risk
Currency risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in foreign exchange
rates. The Company invests in securities and other investments that are
denominated in currencies other than that of the Sterling and Euro Share
Classes. Accordingly, the value of these Share Classes may be affected
favourably or unfavourably by fluctuations in currency rates and therefore be
subject to foreign exchange risks.
The Company has entered into a number of forward contracts for hedging purposes
in an attempt to reduce the effects of foreign currency fluctuations associated
with the Sterling and Euro share classes. The gains/losses on forward contracts
related to hedging of Sterling and Euro share classes are only applicable to the
net asset value calculation of those classes.
The following table sets out the Company's direct exposure to foreign currency
at 31 December 2008 and 30 June 2008 at Sterling and Euro share class level.
This table also discloses management's best estimate of the effect on results
for the year of a 5% change in the US Dollar exchange rate against the Euro and
the Sterling with all other variables held constant. In practice, the actual
trading results may differ from the below Sensitivity Analysis and the
difference could be material.
+------------------------------+----------------+----------------+----------------+----------------+
| | Total | Hedged | Net | 5% change in |
| | | | | US$ |
| | | | | effect on |
| | | | | profit/equity |
+------------------------------+----------------+----------------+----------------+----------------+
| 1X Cell | 31 December | 31 December | 31 December | 31 December |
| | 2008 | 2008 | 2008 | 2008 |
+------------------------------+----------------+----------------+----------------+----------------+
| | '000 | '000 | '000 | '000 |
+------------------------------+----------------+----------------+----------------+----------------+
| Euro share class | | | | |
+------------------------------+----------------+----------------+----------------+----------------+
| Euro | 21,886 | (20,063) | 1,823 | 91 |
+------------------------------+----------------+----------------+----------------+----------------+
| Sterling share class | | | | |
+------------------------------+----------------+----------------+----------------+----------------+
| Sterling | 12,502 | (13,179) | (677) | (34) |
+------------------------------+----------------+----------------+----------------+----------------+
| | Total | Hedged | Net | 5% change in |
| | | | | US$ |
| | | | | effect on |
| | | | | profit/equity |
+------------------------------+----------------+----------------+----------------+----------------+
| 3X Cell | 2008 | 2008 | 2008 | 2008 |
+------------------------------+----------------+----------------+----------------+----------------+
| | '000 | '000 | '000 | '000 |
+------------------------------+----------------+----------------+----------------+----------------+
| Euro share class | | | | |
+------------------------------+----------------+----------------+----------------+----------------+
| Euro | 2,068 | (1,962) | 106 | 5 |
+------------------------------+----------------+----------------+----------------+----------------+
| Sterling share class | | | | |
+------------------------------+----------------+----------------+----------------+----------------+
| Sterling | 2,846 | (3,170) | (324) | (16) |
+------------------------------+----------------+----------------+----------------+----------------+
+------------------------------+----------------+----------------+----------------+----------------+
| | Total | Hedged | Net | 5% change in |
| | | | | US$ effect on |
| | | | | profit/equity |
+------------------------------+----------------+----------------+----------------+----------------+
| 1X Cell | 30 June 2008 | 30 June 2008 | 30 June 2008 | 30 June 2008 |
+------------------------------+----------------+----------------+----------------+----------------+
| | '000 | '000 | '000 | '000 |
+------------------------------+----------------+----------------+----------------+----------------+
| Euro share class | | | | |
+------------------------------+----------------+----------------+----------------+----------------+
| Euro | 37,288 | (38,306) | (1,018) | (51) |
+------------------------------+----------------+----------------+----------------+----------------+
| Sterling share class | | | | |
+------------------------------+----------------+----------------+----------------+----------------+
| Sterling | 12,178 | (12,333) | (155) | (8) |
+------------------------------+----------------+----------------+----------------+----------------+
| | Total | Hedged | Net | 5% change in |
| | | | | US$ effect on |
| | | | | profit/equity |
+------------------------------+----------------+----------------+----------------+----------------+
| 3X Cell | 2008 | 2008 | 2008 | 2008 |
+------------------------------+----------------+----------------+----------------+----------------+
| | '000 | '000 | '000 | '000 |
+------------------------------+----------------+----------------+----------------+----------------+
| Euro share class | | | | |
+------------------------------+----------------+----------------+----------------+----------------+
| Euro | 8,120 | (8,418) | (298) | (15) |
+------------------------------+----------------+----------------+----------------+----------------+
| Sterling share class | | | | |
+------------------------------+----------------+----------------+----------------+----------------+
| Sterling | 7,052 | (7,249) | (197) | (10) |
+------------------------------+----------------+----------------+----------------+----------------+
(ii) Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in market interest rates.
The majority of the Company's financial instruments are interest bearing and as
a result the Company is subject to significant amounts of risk due to
fluctuations in the prevailing market interest rate. In addition to other
interest rate-related risks, if US dollar interest rates rise, the market price
of the Shares may be adversely affected.
The Investment Manager monitors changes in interest rates applicable to the
Company on a monthly basis and adjusts investments accordingly to manage this
risk.
The following table details the Company's concentration to interest rate risks
by fixed and variable interest rates.
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| 1X Cell | | Less than | | 3 months | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| | | 1 month | 1-3 months | to 1 year | Total |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| 31 December 2008 | | US$ '000 | US$ '000 | US$ '000 | US$ '000 |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| | | | | | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Variable interest rate instruments | | | | | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Cash and cash equivalents | | 1,311 | - | - | 1,311 |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| | | | | | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Fixed interest rate instruments | | | | | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Bonds | | 19,994 | 68,862 | - | 88,856 |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Total | | 21,305 | 68,862 | - | 90,167 |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| 1X Cell | | Less than | | 3 months | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| | | 1 month | 1-3 months | to 1 year | Total |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| 30 June 2008 | | US$ '000 | US$ '000 | US$ '000 | US$ '000 |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| | | | | | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Variable interest rate instruments | | | | | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Swap agreements | | - | 1,829 | - | 1,829 |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Cash and cash equivalents | | 15,327 | - | - | 15,327 |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| | | | | | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Fixed interest rate instruments | | | | | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Bonds | | - | 175,440 | - | 175,440 |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Total | | 15,327 | 177,269 | - | 192,596 |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
At 31 December 2008, should interest rates have increased by 100 basis points
with all other variables remaining constant, the decrease in the return for the
year would amount to approximately US$248,000 (30 June 2008: US$252,000). A
decrease in interest rates of 100 basis points would have had an equal but
opposite effect. In practice, the actual trading results may differ from the
above Sensitivity Analysis and the difference could be material.
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| 3X Cell | | Less than | | 3 months | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| | | 1 month | 1-3 months | to 1 year | Total |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| 31 December 2008 | | US$ '000 | US$ '000 | US$ '000 | US$ '000 |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| | | | | | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Variable interest rate instruments | | | | | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Cash and cash equivalents | | 188 | - | - | 188 |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| | | | | | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Fixed interest rate instruments | | | | | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Bonds | | 7,555 | 13,379 | - | 20,934 |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Total | | 7,743 | 13,379 | - | 21,122 |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| 3X Cell | | Less than | | 3 months | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| | | 1 month | 1-3 months | to 1 year | Total |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| 30 June 2008 | | US$ '000 | US$ '000 | US$ '000 | US$ '000 |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| | | | | | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Variable interest rate instruments | | | | | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Swap agreements | | - | 818 | - | 818 |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Cash and cash equivalents | | 1,501 | - | - | 1,501 |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| | | | | | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Fixed interest rate instruments | | | | | |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Bonds | | - | 46,550 | - | 46,550 |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
| Total | | 1,501 | 47,368 | - | 48,869 |
+--------------------------------------------+--+---------------+---------------+--------------+---------------+
At 31 December 2008, should interest rates have increased by 100 basis points
with all other variables remaining constant, the decrease in the return for the
year would amount to approximately US$1,292,000 (30 June 2008: US$1,531,000). A
decrease in interest rates of 100 basis points would have had an equal but
opposite effect. In practice, the actual trading results may differ from the
above Sensitivity Analysis and the difference could be material.
(iii) Other price risk
Other price risk is the risk that the fair values or future cash flows of a
financial instrument will fluctuate because of changes in the market prices
(other than those arising from currency risk or interest rate risk), whether
caused by factors specific to an individual investment, its issuer or all
factors affecting all instruments traded in the market. As explained in note 10,
each Cell invests in swap agreements which are exposed to the performance of the
Index.
The swap entered into by the 3X Cell is highly leveraged, which increases
the potential for volatility in the performance of the 3X Cell Shares. The use
of leverage creates special risks and may significantly increase the 3X Cell's
investment risk. Leverage creates the opportunity for greater total return but,
at the same time, increases the 3X Cell's exposure to capital risk and interest
costs. Whilst the use of leverage may cause the Net Asset Value of the 3X Shares
to increase more rapidly than would otherwise be the case without leverage,
leverage may also cause the Net Asset Value of the 3X Shares to decrease more
rapidly than would otherwise be the case without leverage.
An increase in one month USD LIBOR rates causes an increase in the payments due
by the relevant Cell to the Swap Counterparty under the swap entered into by
each Cell, and such increase may cause the market price of the relevant Shares
to fall. Considering the leverage under the swap entered into by the 3X Cell,
any fall in the market price of the 3X Cell Shares may be greater than would
otherwise be the case without leverage. As a result of the leverage within the
3X Cell, the amount of interest generated on the collateral provided by the 3X
Cell will be less than the funding charges payable under the swap as they are
charged under the floating notional amount under the 3X Cell Swap (which,
assuming a leverage ratio of 3 times, is 3 times the collateral provided). Any
increase in one month USD LIBOR increases this shortfall and hence increases the
potential losses to which the 3X Cell is exposed.
A sudden or sharp decline in the value of the notional interests in the Index
and/or foreign exchange transactions under the swap entered into by the 3X Cell
may result in losses under the swap exceeding the value of the collateral posted
by the 3X Cell in respect of the swap (and any other assets of the 3X Cell), and
in such circumstances investors in 3X Shares would lose their entire investment.
Neither the Company nor any of the Cells borrow any monies directly. However,
each Cell is able to take advantage of leverage embedded within each relevant
swap, and the ability to make adjustments under each relevant swap, for
investment and liquidity purposes.
With respect to the 1X Cell, the Investment Manager and/or Investment Advisor do
not utilise leverage for investment purposes but may do so for liquidity
purposes. It is not anticipated that the leverage ratio will be more than 1.25
times exposure to the performance of the Index. The leverage ratio may go above
that temporarily due to market fluctuations.
With respect to the 3X Cell, the Investment Manager and/or Investment Advisor
may utilise leverage for investment and liquidity purposes. The Investment
Manager and/or Investment Advisor target a leverage ratio of approximately 3
times exposure to the performance of the Index and endeavour to maintain a
leverage ratio between 2.7 and 3.3 times. The leverage ratio may go outside this
range temporarily due to market fluctuations.
Management's best estimate of the effect on results for the year due to a
reasonably possible change in the Index, with all other variables held constant
is as follows. In practice the actual trading results may differ from the below
sensitivity analysis and the difference could be material.
+--------------------+--------+-------------+-------------+------------+------------+
| | Change | 1X Cell | 1X Cell | 3X Cell | 3X Cell |
+--------------------+--------+-------------+-------------+------------+------------+
| Market Index | in | 31 December | 30 June | 31 | 30 June |
| | Index | 2008 | 2008 | December | 2008 |
| | | | | 2008 | |
+--------------------+--------+-------------+-------------+------------+------------+
| | | US$ '000 | US$ '000 | US$ '000 | US$ '000 |
+--------------------+--------+-------------+-------------+------------+------------+
| | | | | | |
+--------------------+--------+-------------+-------------+------------+------------+
| RBC Hedge 250 | +5% | 9,210 | 12,622 | 7,586 | 9,962 |
| Index | | | | | |
+--------------------+--------+-------------+-------------+------------+------------+
(b) Credit Risk
Credit risk is the risk that the counterparty to a financial instrument will
fail to discharge an obligation or commitment that it has entered into. Credit
risk is generally higher when an OTC contract is involved because the
counterparty for an OTC contract is not backed by an exchange clearing house.
The Company has credit risk from OTC contracts when two conditions are present
(i) the OTC contracts have unrealised gains, net of any collateral and (ii) the
counterparty to the contract defaults. The credit risk related to
exchange-traded contracts is minimal because the exchange ensures that their
contracts are always honoured. The Company did not hold any open exchange-traded
contracts as at 31 December 2008 and 30 June 2008.
The counterparty for all derivative transactions entered into by the Company is
Royal Bank of Canada ("RBC"). Each Cell is subject to exposure to the
creditworthiness of RBC as the counterparty and the risk of the inability of the
counterparty to perform with respect to its obligations under each swap
agreement and forward foreign exchange contract, whether due to insolvency or
other causes. However, under the terms of each swap and the relevant collateral
agreements, collateral held by or on behalf of RBC is held in custody and, in
the event of the insolvency of RBC the portion of collateral held by or on
behalf of RBC (which is not needed to satisfy the Company's obligations upon
close-out of the swap agreements) is recoverable by the Company.
Substantially all of the cash held by the Company is held by RBC and HSBC.
Bankruptcy or insolvency by RBC or HSBC may cause the Company's rights with
respect to the cash held by RBC or HSBC to be delayed or limited. The Company
monitors its credit risk by monitoring the credit rating of RBC or HSBC on a
regular basis, as reported by Standard and Poor's, Moody's or Fitch. As at 31
December 2008 and 30 June 2008, RBC and HSBC had a credit rating of A+ and AA
respectively.
The Company's investments in fixed income securities including Commercial Paper
are also subject to credit risk. Commercial Paper is only purchased where the
issuer meets a minimum long term credit rating of AA and a short term credit
rating of A1/P1 at the time of purchase. In addition the Company also seeks to
geographically diversify the issuer exposure, where possible. The directors
monitor the positions of the Company on an ongoing basis in order to mitigate
the risks described above. This is formally undertaken and noted at the
Company's quarterly Board meetings, where the investment manager and the
sub-administrator report to the Board.
The Company's fixed income securities exposed to credit risk, analysed by
counterparty as a % of NAV are disclosed in the below table.
+---------------------------------------+---------+--------------+--------------+
| 31 December 2008 | | | |
+---------------------------------------+---------+--------------+--------------+
| | | 1X Cell | 3X Cell |
+---------------------------------------+---------+--------------+--------------+
| Issuer | Credit | % of NAV | % of NAV |
| | Rating | | |
+---------------------------------------+---------+--------------+--------------+
| Barclays | AA | 22.18 | 22.57 |
+---------------------------------------+---------+--------------+--------------+
| Citigroup Funding | AA | 22.23 | 35.05 |
+---------------------------------------+---------+--------------+--------------+
| ING Bank | AA | 8.41 | 31.51 |
+---------------------------------------+---------+--------------+--------------+
| National Australia | AA | 22.18 | - |
+---------------------------------------+---------+--------------+--------------+
| Royal Bank of Scotland | AA | 15.63 | 34.97 |
+---------------------------------------+---------+--------------+--------------+
| Societe Generale | AA | 4.07 | 35.01 |
+---------------------------------------+---------+--------------+--------------+
| UBS London | AA | 22.21 | 35.02 |
+---------------------------------------+---------+--------------+--------------+
+---------------------------------------+---------+--------------+--------------+
| 30 June 2008 | | | |
+---------------------------------------+---------+--------------+--------------+
| | | 1X Cell | 3X Cell |
+---------------------------------------+---------+--------------+--------------+
| Issuer | Credit | % of NAV | % of NAV |
| | Rating | | |
+---------------------------------------+---------+--------------+--------------+
| ANZ National Bank | AA | 10.54 | 6.15 |
+---------------------------------------+---------+--------------+--------------+
| Banque Et Caisse | AA+ | 5.80 | 8.81 |
+---------------------------------------+---------+--------------+--------------+
| Clydesdale Bank | AA- | 10.54 | 10.25 |
+---------------------------------------+---------+--------------+--------------+
| Commonwealth Bank of Australia | AA | 5.27 | - |
+---------------------------------------+---------+--------------+--------------+
| Den Danske Bank (S&P short term | A1+ | 5.79 | 4.10 |
| rating) | | | |
+---------------------------------------+---------+--------------+--------------+
| Deutsche Bank | AA- | 10.54 | 10.25 |
+---------------------------------------+---------+--------------+--------------+
| Dexia Financial Products | AA- | 5.79 | 8.81 |
+---------------------------------------+---------+--------------+--------------+
| National Australia | AA | 5.79 | 8.81 |
+---------------------------------------+---------+--------------+--------------+
| Nationwide Building Society | A+ | 5.79 | 9.21 |
+---------------------------------------+---------+--------------+--------------+
| SG Australia Ltd (Fitch long term | AA- | 10.54 | 10.24 |
| rating) | | | |
+---------------------------------------+---------+--------------+--------------+
| Ulster Bank Finance | AA- | 10.54 | 10.25 |
+---------------------------------------+---------+--------------+--------------+
| Westpac Banking | AA | 5.79 | 8.81 |
+---------------------------------------+---------+--------------+--------------+
The amount of credit exposure is represented by the carrying amounts of the
Company's assets as disclosed in notes 6 and 7.
(c) Liquidity Risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting
obligations associated with financial liabilities. The Company's financial
instruments also include swap agreements and forward foreign exchange contracts,
which are traded over the counter and which may be illiquid. As a result, the
Company may not be able to liquidate quickly some of these instruments at an
amount close to its fair value in order to meet liquidity requirements, or to
respond to specific events such as deterioration in the creditworthiness of any
particular issuer. Other than the swap agreements and forward foreign exchange
contracts, the Company invests in instruments which are readily realisable.
The Swap Counterparty may terminate the Swap in whole or in part in
accordance with the conditions set out in the terms of the Swap and without
consultation with, consideration of, or regard for the Company. Such termination
may result in realisation of losses for the Company. The Company may by 3
business days' prior notice terminate a Swap for any reason at any time, such
termination to become effective at the end of the next quarter.
The following table shows the contractual, undiscounted cash flows of the
Company's financial liabilities.
+---------------------------------+-----------+------------+-----------+-----------+
| 1X Cell | Less than | | 3 months | No stated |
+---------------------------------+-----------+------------+-----------+-----------+
| 31 December 2008 | 1 month | 1-3 months | to 1 year | maturity |
+---------------------------------+-----------+------------+-----------+-----------+
| | US$ '000 | US$ '000 | US$ '000 | US$ '000 |
+---------------------------------+-----------+------------+-----------+-----------+
| Financial liabilities | | | | |
+---------------------------------+-----------+------------+-----------+-----------+
| Bank overdraft | 2,291 | - | - | - |
+---------------------------------+-----------+------------+-----------+-----------+
| Financial liabilities at fair | 510 | 10,937 | - | - |
| value through profit or loss | | | | |
+---------------------------------+-----------+------------+-----------+-----------+
| Redemption payable | 51 | - | - | - |
+---------------------------------+-----------+------------+-----------+-----------+
| Investment management fees | 108 | - | - | - |
| payable | | | | |
+---------------------------------+-----------+------------+-----------+-----------+
| Administration fees payable | 33 | - | - | - |
+---------------------------------+-----------+------------+-----------+-----------+
| Audit fees payable | - | - | 72 | - |
+---------------------------------+-----------+------------+-----------+-----------+
| Other payables | - | - | 184 | - |
+---------------------------------+-----------+------------+-----------+-----------+
| Total liabilities | 2,993 | 10,937 | 256 | - |
+---------------------------------+-----------+------------+-----------+-----------+
+---------------------------------+-----------+------------+-----------+-----------+
| 1X Cell | Less than | | 3 months | No stated |
+---------------------------------+-----------+------------+-----------+-----------+
| 30 June 2008 | 1 month | 1-3 months | to 1 year | maturity |
+---------------------------------+-----------+------------+-----------+-----------+
| | US$ '000 | US$ '000 | US$ '000 | US$ '000 |
+---------------------------------+-----------+------------+-----------+-----------+
| Financial liabilities | | | | |
+---------------------------------+-----------+------------+-----------+-----------+
| Redemption payable | 2,524 | - | - | - |
+---------------------------------+-----------+------------+-----------+-----------+
| Investment management fees | 580 | - | - | - |
| payable | | | | |
+---------------------------------+-----------+------------+-----------+-----------+
| Administration fees payable | 63 | - | - | - |
+---------------------------------+-----------+------------+-----------+-----------+
| Audit fees payable | - | - | 88 | - |
+---------------------------------+-----------+------------+-----------+-----------+
| Share issuance costs payable | - | - | - | - |
+---------------------------------+-----------+------------+-----------+-----------+
| Other payables | - | - | 195 | - |
+---------------------------------+-----------+------------+-----------+-----------+
| Total liabilities | 3,167 | - | 283 | - |
+---------------------------------+-----------+------------+-----------+-----------+
+---------------------------------+-----------+------------+-----------+-----------+
| 3X Cell | Less than | | 3 months | No stated |
+---------------------------------+-----------+------------+-----------+-----------+
| 31 December 2008 | 1 month | 1-3 months | to 1 year | maturity |
+---------------------------------+-----------+------------+-----------+-----------+
| | US$ '000 | US$ '000 | US$ '000 | US$ '000 |
+---------------------------------+-----------+------------+-----------+-----------+
| Financial liabilities | | | | |
+---------------------------------+-----------+------------+-----------+-----------+
| Bank overdraft | 263 | - | - | - |
+---------------------------------+-----------+------------+-----------+-----------+
| Financial liabilities at fair | 64 | 9,887 | | |
| value through profit or loss | | | | |
+---------------------------------+-----------+------------+-----------+-----------+
| Redemption payable | 27 | - | - | - |
+---------------------------------+-----------+------------+-----------+-----------+
| Investment management fees | 19 | - | - | - |
| payable | | | | |
+---------------------------------+-----------+------------+-----------+-----------+
| Administration fees payable | 7 | - | - | - |
+---------------------------------+-----------+------------+-----------+-----------+
| Audit fees payable | - | - | 18 | - |
+---------------------------------+-----------+------------+-----------+-----------+
| Share issuance costs payable | 9 | - | - | - |
+---------------------------------+-----------+------------+-----------+-----------+
| Other payables | | - | 54 | - |
+---------------------------------+-----------+------------+-----------+-----------+
| Total liabilities | 389 | 9,887 | 72 | - |
+---------------------------------+-----------+------------+-----------+-----------+
+---------------------------------+-----------+------------+-----------+-----------+
| 3X Cell | Less than | | 3 months | No stated |
+---------------------------------+-----------+------------+-----------+-----------+
| 30 June 2008 | 1 month | 1-3 months | to 1 year | maturity |
+---------------------------------+-----------+------------+-----------+-----------+
| | US$ '000 | US$ '000 | US$ '000 | US$ '000 |
+---------------------------------+-----------+------------+-----------+-----------+
| Financial liabilities | | | | |
+---------------------------------+-----------+------------+-----------+-----------+
| Investment management fees | 170 | - | - | - |
| payable | | | | |
+---------------------------------+-----------+------------+-----------+-----------+
| Administration fees payable | 15 | - | - | - |
+---------------------------------+-----------+------------+-----------+-----------+
| Audit fees payable | - | - | 23 | - |
| | | | | |
+---------------------------------+-----------+------------+-----------+-----------+
| Share issuance costs payable | 9 | - | - | - |
+---------------------------------+-----------+------------+-----------+-----------+
| Other payables | - | - | 60 | - |
+---------------------------------+-----------+------------+-----------+-----------+
| Total liabilities | 194 | - | 83 | - |
+---------------------------------+-----------+------------+-----------+-----------+
| | | | | |
+---------------------------------+-----------+------------+-----------+-----------+
9. Derivative Contracts
Typically, derivative contracts serve as components of the Company's investment
strategy and are utilised primarily to structure and hedge investments to
enhance performance to the Company (the Company does not designate any
derivatives as hedges for hedge accounting purposes as described under IAS 39).
The derivative contracts that the Company holds are swap agreements and forward
foreign exchange contracts.
The Company records its derivative activities on a fair value basis. Fair values
are determined by performing calculations using quoted market prices. Fair value
of the swaps is determined based on the information provided by the Swap
Counterparty. For OTC contracts, the Company enters into master netting
agreements with its counterparties, therefore, assets represent the Company's
unrealised gains, less unrealised losses for OTC contracts in which the Company
has a master netting agreement. Similarly, liabilities represent net amounts
owned to counterparties on OTC contracts.
(a) Swap agreements
Swap agreements ("swaps") represent agreements that obligate two parties to
exchange a series of cash flows at specified intervals based upon or calculated
by reference to changes in specified prices or rates for a specified amount of
an underlying asset or otherwise determined notional amount. The payment flows
are usually netted against each other, with the difference being paid by one
party to the other. Therefore amounts required for the future satisfaction of
the swap may be greater or less than the amount recorded.
Each Swap is valued on the basis of the latest available valuation provided by
the Swap Counterparty. The valuation of each Swap is dependent, among other
things, on the Index Administrator determining the Index level in accordance
with the Index Rules. The Index level may reflect estimates of the net asset
value of all or some of the hedge funds provided by administrators or managers
of the relevant hedge funds. Further, the Index level may be estimated by the
index administrator, RBC Capital Markets Corporation ("Index Administrator").
The realised gain or loss depends upon the prices at which the underlying
financial instruments of the swap are valued at the swap's settlement date and
is included in the income statement. Unrealised gains or losses are fair valued
in accordance with the accounting policy stated in Note 2 and the resulting
movement in the unrealised gain or loss is recorded in the income statement.
As at 31 December 2008 and 30 June 2008, the following swap agreements were
included in the Company's balance sheet at fair value through profit or
loss:
+-----------------------------------------+---------------+----------------+---------------+-----------------+
| | Nominal | Unrealised | Nominal | Unrealised gain |
| | | loss | | |
+-----------------------------------------+---------------+----------------+---------------+-----------------+
| 1X Cell | 31 December | 31 December | 30 June | 30 June |
| | 2008 | 2008 | 2008 | 2008 |
+-----------------------------------------+---------------+----------------+---------------+-----------------+
| | US$ '000 | US$ '000 | US$ '000 | US$ '000 |
+-----------------------------------------+---------------+----------------+---------------+-----------------+
| RBC Hedge 250 Index | 250,250 | (10,937) | 250,250 | 1,829 |
| Exchange Traded Securities Index Swap | | | | |
+-----------------------------------------+---------------+----------------+---------------+-----------------+
| | | | | |
+-----------------------------------------+---------------+----------------+---------------+-----------------+
| 3X Cell | | | | |
+-----------------------------------------+---------------+----------------+---------------+-----------------+
| | | | | |
+-----------------------------------------+---------------+----------------+---------------+-----------------+
| RBC Hedge 250 Index | 202,160 | (9,887) | 202,160 | 818 |
| Exchange Traded Securities Index Swap | | | | |
+-----------------------------------------+---------------+----------------+---------------+-----------------+
Under the terms of the swap relating to 1X and 3X Cells both Cells are required
to post collateral to secure their obligations to the Swap Counterparty at the
outset of the swap equal to the full value of the initial notional amount under
the swap for the 1X Cell and approximately one third of the initial notional
amount under the swap for the 3X Cell. In addition, during the life of the swap,
the Company may be required to post further collateral to secure its obligations
to the Swap Counterparty under the swap in the event that the leverage ratio
under the swap reaches 1.5 times in relation to the 1X Cell and four times in
relation to the 3X Cell, in order to reduce the leverage ratio.
(b) Forward foreign exchange contracts
A forward foreign exchange contract involves an obligation to purchase or sell a
specific currency at a future date; at a price set at the time the contract is
made. Forward foreign exchange contracts are valued by reference to the forward
price at which a new forward contract of the same size and maturity could be
undertaken at the valuation date. The unrealised gain or loss on open forward
foreign exchange contracts is calculated as the difference between the forward
rate for the transaction specified in the contract and the forward rate on the
valuation date as reported in published sources, multiplied by the face amount
of the forward contract. Realised and unrealised gains and losses are recognised
in the income statement. Realised gains or losses include net gains or losses on
contracts which have settled or for which offsetting contracts have been entered
into.
As at 31 December 2008 and 30 June 2008, the following forward foreign exchange
contracts were included in the Company's balance sheet at fair value through
profit or loss:
+-----------------------------------------+----------------+----------------+---------------+-----------------+
| | Nominal | Unrealised | Nominal | Unrealised gain |
| | | loss | | |
+-----------------------------------------+----------------+----------------+---------------+-----------------+
| 1X Cell | 31 December | 31 December | 30 June | 30 June |
| | 2008 | 2008 | 2008 | 2008 |
+-----------------------------------------+----------------+----------------+---------------+-----------------+
| | US$ '000 | US$ '000 | US$ '000 | US$ '000 |
+-----------------------------------------+----------------+----------------+---------------+-----------------+
| EUR/US$ 30/01/2009 | 14,082 | (413) | - | - |
+-----------------------------------------+----------------+----------------+---------------+-----------------+
| GBP/US$ 30/01/2009 | 8,983 | (97) | - | - |
+-----------------------------------------+----------------+----------------+---------------+-----------------+
| US$/GBP 31/07/2008 | - | - | 153 | - |
+-----------------------------------------+----------------+----------------+---------------+-----------------+
| US$/EUR 31/07/2008 | - | - | 156 | - |
+-----------------------------------------+----------------+----------------+---------------+-----------------+
| GBP/US$ 31/07/2008 | - | - | 12,426 | 33 |
+-----------------------------------------+----------------+----------------+---------------+-----------------+
| EUR/US$ 31/07/2008 | - | - | 38,207 | 2 |
+-----------------------------------------+----------------+----------------+---------------+-----------------+
| Total | 23,065 | (510) | 50,942 | 35 |
+-----------------------------------------+----------------+----------------+---------------+-----------------+
+-----------------------------------------+----------------+----------------+---------------+-----------------+
| | Nominal | Unrealised | Nominal | Unrealised gain |
| | | loss | | |
+-----------------------------------------+----------------+----------------+---------------+-----------------+
| 3X Cell | 31 December | 31 December | 30 June | 30 June |
| | 2008 | 2008 | 2008 | 2008 |
+-----------------------------------------+----------------+----------------+---------------+-----------------+
| | US$ '000 | US$ '000 | US$ '000 | US$ '000 |
+-----------------------------------------+----------------+----------------+---------------+-----------------+
| EUR/US$ 30/01/2009 | 1,377 | (40) | - | - |
+-----------------------------------------+----------------+----------------+---------------+-----------------+
| GBP/US$ 30/01/2009 | 2,161 | (24) | - | - |
+-----------------------------------------+----------------+----------------+---------------+-----------------+
| GBP/US$ 31/07/2008 | - | - | 7,258 | 19 |
+-----------------------------------------+----------------+----------------+---------------+-----------------+
| EUR/US$ 31/07/2008 | - | - | 8,418 | - |
+-----------------------------------------+----------------+----------------+---------------+-----------------+
| Total | 3,538 | (64) | 15,676 | 19 |
+-----------------------------------------+----------------+----------------+---------------+-----------------+
10. Share Capital
Authorised:
The authorised share capital of the Company consists of two Management Shares of
no par value and an unlimited number of ordinary shares of no par value.
Issued:
The Company is a closed-ended protected cell investment company. Two management
shares have been allotted in respect of the non cellular assets of the Company
to the Investment Manager and to the nominee of the Administrator. There have
been no other transactions in the non cellular assets of the Company.
Ordinary shares are entitled to dividends payments out of distributable profits
attributable to the relevant ordinary share class in accordance with the
Bye-Laws. The management shares do not carry any right to dividends except on
non-cellular profits (if any).
A holder of ordinary shares in a class or cell and a holder of management shares
present in person or represented in accordance with the Articles at a general
meeting of the Company or a Cell or a Class meeting shall on a poll have one
vote in respect of each relevant ordinary share or management share registered
in the name of such person.
The Company's Articles of Association enable Shareholders to convert some or all
of their shares in one class into shares of any other class within the same cell
on the last business day of March, June , September and December in each year or
such other days as the Directors may determine. Shares are converted from one
class to another by reference to the ratio of the most recently published NAV
per share of the respective share classes.
The Company's Articles of Association enable Shareholders, at the Directors'
discretion, to redeem up to 100 per cent. of their shares for cash as at the
first business day in January or July in each year or up to 50 per cent. of
their shares for cash in January, April, July or October in each year.
The Company is closed-ended and shareholders have no right whatsoever under the
Articles to require the Company to repurchase or redeem their shares.
Transactions in ordinary shares during the period ended 31 December 2008 were as
follows:
+---------------------------+--------------------------+-------------------------+
| Class | 1X Cell | 3X Cell |
+---------------------------+--------------------------+-------------------------+
| US$ shares | shares | shares |
+---------------------------+--------------------------+-------------------------+
| Opening balance | 103,992,823 | 23,205,687 |
+---------------------------+--------------------------+-------------------------+
| Shares issued | 1,102,119 | - |
+---------------------------+--------------------------+-------------------------+
| Shares | (49,844,214) | (2,644,710) |
| redeemed/repurchased | | |
+---------------------------+--------------------------+-------------------------+
| Shares converted | - | - |
| within the cell | | |
+---------------------------+--------------------------+-------------------------+
| Closing balance | 55,250,728 | 20,560,977 |
+---------------------------+--------------------------+-------------------------+
+---------------------------+--------------------------+-------------------------+
| Class | 1X Cell | 3X Cell |
+---------------------------+--------------------------+-------------------------+
| Euro shares | shares | shares |
+---------------------------+--------------------------+-------------------------+
| Opening balance | 36,772,483 | 8,733,957 |
+---------------------------+--------------------------+-------------------------+
| Shares issued | - | - |
+---------------------------+--------------------------+-------------------------+
| Shares | (14,932,856) | (2,822,414) |
| redeemed/repurchased | | |
+---------------------------+--------------------------+-------------------------+
| Shares converted | (1,400,000) | (595,153) |
| within the cell | | |
+---------------------------+--------------------------+-------------------------+
| Closing balance | 20,439,627 | 5,316,390 |
+---------------------------+--------------------------+-------------------------+
+---------------------------+--------------------------+-------------------------+
| Class | 1X Cell | 3X Cell |
+---------------------------+--------------------------+-------------------------+
| Sterling shares | shares | shares |
+---------------------------+--------------------------+-------------------------+
| Opening balance | 11,806,460 | 7,423,862 |
+---------------------------+--------------------------+-------------------------+
| Shares issued | - | - |
+---------------------------+--------------------------+-------------------------+
| Shares | (1,754,540) | (841,040) |
| redeemed/repurchased | | |
+---------------------------+--------------------------+-------------------------+
| Shares converted | 1,081,087 | 457,910 |
| within the cell | | |
+---------------------------+--------------------------+-------------------------+
| Closing balance | 11,133,007 | 7,040,732 |
+---------------------------+--------------------------+-------------------------+
Transactions in ordinary shares during the year ended 30 June 2008 were as
follows:
+---------------------------+--------------------------+-------------------------+
| Class | 1X Cell | 3X Cell |
+---------------------------+--------------------------+-------------------------+
| US$ shares | shares | shares |
+---------------------------+--------------------------+-------------------------+
| Opening balance | 123,030,271 | 31,674,110 |
+---------------------------+--------------------------+-------------------------+
| Shares issued | - | - |
+---------------------------+--------------------------+-------------------------+
| Shares | (34,728,275) | (7,927,605) |
| redeemed/repurchased | | |
+---------------------------+--------------------------+-------------------------+
| Shares converted | 15,690,827 | (540,818) |
| within the cell | | |
+---------------------------+--------------------------+-------------------------+
| Closing balance | 103,992,823 | 23,205,687 |
+---------------------------+--------------------------+-------------------------+
+---------------------------+--------------------------+-------------------------+
| Class | 1X Cell | 3X Cell |
+---------------------------+--------------------------+-------------------------+
| Euro shares | shares | shares |
+---------------------------+--------------------------+-------------------------+
| Opening balance | 56,778,461 | 8,905,835 |
+---------------------------+--------------------------+-------------------------+
| Shares issued | - | - |
+---------------------------+--------------------------+-------------------------+
| Shares | (20,195,052) | (343,612) |
| redeemed/repurchased | | |
+---------------------------+--------------------------+-------------------------+
| Shares converted | 189,074 | 171,734 |
| within the cell | | |
+---------------------------+--------------------------+-------------------------+
| Closing balance | 36,772,483 | 8,733,957 |
+---------------------------+--------------------------+-------------------------+
+---------------------------+--------------------------+-------------------------+
| Class | 1X Cell | 3X Cell |
+---------------------------+--------------------------+-------------------------+
| Sterling shares | shares | shares |
+---------------------------+--------------------------+-------------------------+
| Opening balance | 22,628,678 | 8,161,347 |
+---------------------------+--------------------------+-------------------------+
| Shares issued | - | - |
+---------------------------+--------------------------+-------------------------+
| Shares | (3,010,932) | (875,451) |
| redeemed/repurchased | | |
+---------------------------+--------------------------+-------------------------+
| Shares converted | (7,811,286) | 137,966 |
| within the cell | | |
+---------------------------+--------------------------+-------------------------+
| Closing balance | 11,806,460 | 7,423,862 |
+---------------------------+--------------------------+-------------------------+
11. Exchange Rates
The following exchange rates were used to translate assets and liabilities into
the reporting currency (United States dollar) at 31 December 2008 and 30 June
2008:
+------+------------+---------------+---------------+---------------+---------------+
| | | 31 | 30 June |
| | | December | 2008 |
| | | 2008 | |
+------+------------+-------------------------------+-------------------------------+
| US$: | Euro | 1 : | 0.71574 | 1 : | 0.63540 |
+------+------------+---------------+---------------+---------------+---------------+
| US$: | Sterling | 1 : | 0.68622 | 1 : | 0.50274 |
+------+------------+---------------+---------------+---------------+---------------+
12.Other Related Parties
Except for John Duffield who is chairman of the Investment Manager and New Star
Asset Management Limited (the "Investment Advisor"), which receives fees as per
Note 3, none of the directors was a party to any transaction which was unusual
in its nature or conditions or significant to the business of the Company or has
any actual or potential conflicts of interests between their duties to the
Company and their private interests or other duties.
As at 31 December 2008 none of the directors or their families held any shares
in the Company (30 June 2008: None).
13. Cross Cell and Cross Class Liability
The Company has been constituted as a protected cell company under Guernsey law.
A protected cell company is a multi-cellular company whose principal feature is
that each cell has its own distinct assets which are not available to creditors
of other cells of that company or the company as a whole. Jurisdictions other
than Guernsey may not be prepared to accept that creditors of a particular Cell
are prevented from gaining access to the assets of other Cells or that creditors
of a multi-cellular company as a whole do not have access to those assets
specifically designated as cellular assets.
Where a Cell utilises a higher level of leverage than another Cell (such as the
3X Cell compared to the 1X Cell), there is a higher risk that the assets of the
higher leveraged Cell will be insufficient to satisfy the claims of any
creditors of that Cell.
The Company issued more than one Class of Share in each Cell. Although the
Articles of the Company
require the establishment of accounts for each Class of Shares and the attribut
on of assets and liabilities to the relevant Class, if the liabilities of a
Class exceed its assets, creditors of the Company may have recourse to the
assets attributable to the other Classes in that Cell. As at the date of this
document, the directors are not aware of any such existing or contingent
liability.
14. Earnings per Share
The Company may raise more capital or repurchase shares or permit redemptions
and this may affect future earnings per Share.
Earnings per Share (EPS) have been calculated at share Class level on a weighted
average basis for the 1X Cell and the 3X Cell in the base currency of each share
Class.
+----------------------+-----------------+-----------------+--------------+--+--------------+--+
| | 31 December 2008 | 31 December 2007 |
+----------------------+-----------------------------------+--------------------------------+
| | 1X Cell | 3X Cell | 1X Cell | 3X Cell |
+----------------------+-----------------+-----------------+-----------------+--------------+
| Earnings per | | | | |
| Share class | | | | |
+----------------------+-----------------+-----------------+--------------+--------------------+
| US$ share class | US$(21,378,000) | US$(17,420,000) | US$2,984,000 | US$ (1,260,000) |
| | | | | |
+----------------------+-----------------+-----------------+--------------+--------------------+
| Euro share class | EUR(7,735,000) | EUR(4,170,000) | EUR1,033,000 | EUR (391,000) |
+----------------------+-----------------+-----------------+--------------+--------------------+
| Sterling share | GBP(4,267,000) | GBP(5,528,000) | GBP 330,000 | GBP (360,000) |
| class | | | | |
+----------------------+-----------------+-----------------+--------------+--------------------+
| | | |
+----------------------------------------------------------+--------------+--------------------+
| Weighted average number of shares | | |
+----------------------------------------------------------+--------------+--------------------+
| US$ share class | 58,073,323 | 21,142,999 | 129,679,490 | 30,601,363 |
+----------------------+-----------------+-----------------+--------------+--------------------+
| Euro share class | 21,568,650 | 5,568,890 | 53,154,533 | 8,961,681 |
+----------------------+-----------------+-----------------+--------------+--------------------+
| Sterling share | 11,268,840 | 7,368,898 | 18,723,035 | 8,217,168 |
| class | | | | |
+----------------------+-----------------+-----------------+--------------+--------------------+
| | | | | |
+----------------------+-----------------+-----------------+--------------+--------------------+
| Earnings per | | | | |
| Share | | | | |
+----------------------+-----------------+-----------------+--------------+--------------------+
| US$ share class | US$(0.3681) | US$(0.8239) | US$0.0230 | US$ (0.0412) |
+----------------------+-----------------+-----------------+--------------+--------------------+
| Euro share class | EUR(0.3586) | EUR(0.7488) | EUR0.0194 | EUR(0.0436) |
+----------------------+-----------------+-----------------+--------------+--------------------+
| Sterling share | GBP(0.3787) | GBP(0.7502) | GBP0.0176 | GBP(0.0438) |
| class | | | | |
+----------------------+-----------------+-----------------+--------------+--+--------------+--+
15. Website
The Company's accounts for the six months ended 31st December 2008 may be found
at:
www.newstaram.com/alternative-investments/closed-end-funds
Unaudited Schedule of Investments
As at 31 December 2008
1X Cell
+--------------+----------------------------------------------+------------+------------+
| | | |
+-------------------------------------------------------------+------------+------------+
| Quantity/ | Financial Assets and Liabilities at Fair | Fair Value | % of Net |
| Nominal | Value | | Assets |
| | through Profit or Loss | US$ '000 | |
+--------------+----------------------------------------------+------------+------------+
| 16,900,000 | Barclays Bank 13/02/2009 | 16,857 | 22.18 |
+--------------+----------------------------------------------+------------+------------+
| 16,900,000 | Citigroup Funding Commercial Paper | 16,898 | 22.23 |
| | 16/01/2009 | | |
+--------------+----------------------------------------------+------------+------------+
| 6,400,000 | ING Bank, Certificate of Deposit 2.1% | 6,393 | 8.41 |
| | 13/02/2009 | | |
+--------------+----------------------------------------------+------------+------------+
| 16,900,000 | National Australia Bank 13/02/2009 | 16,859 | 22.18 |
+--------------+----------------------------------------------+------------+------------+
| 11,900,000 | Royal Bank of Scotland 13/02/2009 | 11,871 | 15.63 |
+--------------+----------------------------------------------+------------+------------+
| 3,100,000 | Societe Generale Commercial Paper 0% | 3,096 | 4.07 |
| | 20/01/2009 | | |
+--------------+----------------------------------------------+------------+------------+
| 16,900,000 | UBS London 13/02/2009 | 16,882 | 22.21 |
+--------------+----------------------------------------------+------------+------------+
| | Total fixed income | 88,856 | 116.91 |
+--------------+----------------------------------------------+------------+------------+
| | | | |
+--------------+----------------------------------------------+------------+------------+
| | Swap | | |
+--------------+----------------------------------------------+------------+------------+
| 250,250,000 | RBC Hedge 250 Index Swap | (10,937) | (14.39) |
+--------------+----------------------------------------------+------------+------------+
| | Total swap | (10,937) | (14.39) |
+--------------+----------------------------------------------+------------+------------+
| | | | |
+--------------+----------------------------------------------+------------+------------+
| | Forward foreign exchange contracts | | |
+--------------+----------------------------------------------+------------+------------+
| 14,082,002 | EUR/US$ 30/01/2009 | (413) | (0.54) |
+--------------+----------------------------------------------+------------+------------+
| 8,983,347 | GBP/US$ 30/01/2009 | (97) | (0.13) |
+--------------+----------------------------------------------+------------+------------+
| | Total forward foreign exchange contracts | (510) | (0.67) |
+--------------+----------------------------------------------+------------+------------+
| | | | |
+--------------+----------------------------------------------+------------+------------+
| | Financial assets and liabilities at fair | 77,409 | 101.85 |
| | value through profit or loss | | |
+--------------+----------------------------------------------+------------+------------+
| | Cash at bank | (980) | (1.29) |
+--------------+----------------------------------------------+------------+------------+
| | Other net liabilities | (427) | (0.56) |
+--------------+----------------------------------------------+------------+------------+
| | Net asset value | 76,002 | 100.00 |
+--------------+----------------------------------------------+------------+------------+
3X Cell
+--------------+----------------------------------------------+------------+------------+
| | | |
+-------------------------------------------------------------+------------+------------+
| | Financial Assets and Liabilities at Fair | Fair Value | % of Net |
| Quantity/ | Value | | Assets |
| Nominal | through Profit or Loss | US$ '000 | |
+--------------+----------------------------------------------+------------+------------+
| 2,440,000 | Barclays Bank 13/02/2009 | 2,434 | 22.57 |
+--------------+----------------------------------------------+------------+------------+
| 3,780,000 | Citigroup Funding Commercial Paper | 3,779 | 35.05 |
| | 16/01/2009 | | |
+--------------+----------------------------------------------+------------+------------+
| 3,400,000 | ING Bank, Certificate of Deposit 2.1% | 3,398 | 31.51 |
| | 13/02/2009 | | |
+--------------+----------------------------------------------+------------+------------+
| 3,780,000 | Royal Bank of Scotland 13/02/2009 | 3,771 | 34.97 |
+--------------+----------------------------------------------+------------+------------+
| 3,780,000 | Societe Generale Commercial Paper 20/01/2009 | 3,776 | 35.01 |
+--------------+----------------------------------------------+------------+------------+
| 3,780,000 | UBS London 13/02/2009 | 3,776 | 35.02 |
+--------------+----------------------------------------------+------------+------------+
| | Total fixed income | 20,934 | 194.13 |
+--------------+----------------------------------------------+------------+------------+
| | | | |
+--------------+----------------------------------------------+------------+------------+
| | Swap | | |
+--------------+----------------------------------------------+------------+------------+
| 202,160,000 | RBC Hedge 250 Index Swap | (9,887) | (91.69) |
+--------------+----------------------------------------------+------------+------------+
| | Total swap | (9,887) | (91.69) |
+--------------+----------------------------------------------+------------+------------+
| | | | |
+--------------+----------------------------------------------+------------+------------+
| | Forward foreign exchange contracts | | |
+--------------+----------------------------------------------+------------+------------+
| 1,377,266 | EUR/US$ 30/01/2009 | (40) | (0.37) |
+--------------+----------------------------------------------+------------+------------+
| 2,160,414 | GBP/US$ 30/01/2009 | (24) | (0.22) |
+--------------+----------------------------------------------+------------+------------+
| | Total forward foreign exchange contracts | (64) | (0.59) |
+--------------+----------------------------------------------+------------+------------+
| | | | |
+--------------+----------------------------------------------+------------+------------+
| | Financial assets and liabilities at fair | 10,983 | 101.85 |
| | value through profit or loss | | |
+--------------+----------------------------------------------+------------+------------+
| | Cash at bank | (75) | (0.69) |
+--------------+----------------------------------------------+------------+------------+
| | Other net liabilities | (125) | (1.16) |
+--------------+----------------------------------------------+------------+------------+
| | Net asset value | 10,783 | 100.00 |
+--------------+----------------------------------------------+------------+------------+
Unaudited Schedule of Investments
As at 31 December 200
1X Cell
+--------------+----------------------------------------------+------------+------------+
| | | |
+-------------------------------------------------------------+------------+------------+
| | Financial Assets at Fair Value | Fair | % of Net |
| Quantity/ | through Profit or Loss | Value | Assets |
| Nominal | | US$ '000 | |
+--------------+----------------------------------------------+------------+------------+
| | Fixed income | | |
+--------------+----------------------------------------------+------------+------------+
| 20,000,000 | ANZ National Bank Euro Commercial Paper | 19,938 | 10.54 |
| | 13/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 11,000,000 | Banque Et Caisse Euro Commercial Paper | 10,966 | 5.80 |
| | 15/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 20,000,000 | Clydesdale Bank Euro Commercial Paper | 19,939 | 10.54 |
| | 13/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 10,000,000 | Commonwealth Bank of Australia Euro | 9,969 | 5.27 |
| | Commercial Paper 13/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 11,000,000 | Den Danske Bank Euro Commercial Paper | 10,963 | 5.79 |
| | 15/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 20,000,000 | Deutsche Bank Euro Commercial Paper | 19,937 | 10.54 |
| | 13/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 11,000,000 | Dexia Financial Products Euro Commercial | 10,963 | 5.79 |
| | Paper 15/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 11,000,000 | National Australia Bank Euro Commercial | 10,963 | 5.79 |
| | Paper 15/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 11,000,000 | Nationwide Building Society Euro Commercial | 10,960 | 5.79 |
| | Paper 15/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 20,000,000 | SG Australia Ltd Euro Commercial Paper | 19,938 | 10.54 |
| | 13/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 20,000,000 | Ulster Bank Finance Euro Commercial Paper | 19,938 | 10.54 |
| | 13/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 11,000,000 | Westpac Banking Euro Commercial Paper | 10,966 | 5.79 |
| | 15/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| | Total fixed income | 175,440 | 92.72 |
+--------------+----------------------------------------------+------------+------------+
| | | | |
+--------------+----------------------------------------------+------------+------------+
| | Swap | | |
+--------------+----------------------------------------------+------------+------------+
| 250,250,000 | RBC Hedge 250 Index Swap | 1,829 | 0.96 |
+--------------+----------------------------------------------+------------+------------+
| | Total swap | 1,829 | 0.96 |
+--------------+----------------------------------------------+------------+------------+
| | | | |
+--------------+----------------------------------------------+------------+------------+
| | Forward foreign exchange contracts | | |
+--------------+----------------------------------------------+------------+------------+
| 12,426,453 | GBP/US$ 31/07/2008 | 33 | 0.02 |
+--------------+----------------------------------------------+------------+------------+
| 153,474 | US$/GBP 31/07/2008 | - | - |
+--------------+----------------------------------------------+------------+------------+
| 38,206,665 | EUR/USD 31/07/2008 | 2 | - |
+--------------+----------------------------------------------+------------+------------+
| 156,901 | USD/EUR 31/07/2008 | - | - |
+--------------+----------------------------------------------+------------+------------+
| | Total forward foreign exchange contracts | 35 | 0.02 |
+--------------+----------------------------------------------+------------+------------+
| | | | |
+--------------+----------------------------------------------+------------+------------+
| | Financial assets at fair value through | 177,304 | 93.70 |
| | profit or loss | | |
+--------------+----------------------------------------------+------------+------------+
| | Cash at bank | 15,327 | 8.10 |
+--------------+----------------------------------------------+------------+------------+
| | Other net liabilities | (3,402) | (1.80) |
+--------------+----------------------------------------------+------------+------------+
| | Net asset value | 189,229 | 100.00 |
+--------------+----------------------------------------------+------------+------------+
3X Cell
+--------------+----------------------------------------------+------------+------------+
| | | |
+-------------------------------------------------------------+------------+------------+
| | Financial Assets at Fair Value | Fair Value | % of Net |
| Quantity/ | through Profit or Loss | | Assets |
| Nominal | | US$ '000 | |
+--------------+----------------------------------------------+------------+------------+
| | Fixed income | | |
+--------------+----------------------------------------------+------------+------------+
| 3,000,000 | ANZ National Bank Euro Commercial Paper | 2,991 | 6.15 |
| | 13/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 4,300,000 | Banque Et Caisse Euro Commercial Paper | 4,287 | 8.81 |
| | 15/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 5,000,000 | Clydesdale Bank Euro Commercial Paper | 4,985 | 10.25 |
| | 13/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 2,000,000 | Den Danske Bank Euro Commercial Paper | 1,993 | 4.10 |
| | 15/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 5,000,000 | Deutsche Bank Euro Commercial Paper | 4,984 | 10.25 |
| | 13/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 4,300,000 | Dexia Financial Products Euro Commercial | 4,285 | 8.81 |
| | Paper 15/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 4,300,000 | National Australia Bank Euro Commercial | 4,285 | 8.81 |
| | Paper 15/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 4,500,000 | Nationwide Building Society Euro Commercial | 4,484 | 9.21 |
| | Paper 15/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 5,000,000 | SG Australia Ltd Euro Commercial Paper | 4,985 | 10.24 |
| | 13/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 5,000,000 | Ulster Bank Finance Euro Commercial Paper | 4,985 | 10.25 |
| | 13/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| 4,300,000 | Westpac Banking Euro Commercial Paper | 4,286 | 8.81 |
| | 15/08/2008 | | |
+--------------+----------------------------------------------+------------+------------+
| | Total fixed income | 46,550 | 95.69 |
+--------------+----------------------------------------------+------------+------------+
| | | | |
+--------------+----------------------------------------------+------------+------------+
| | Swap | | |
+--------------+----------------------------------------------+------------+------------+
| 202,160,000 | RBC Hedge 250 Index Swap | 818 | 1.70 |
+--------------+----------------------------------------------+------------+------------+
| | Total swap | 818 | 1.70 |
+--------------+----------------------------------------------+------------+------------+
| | | | |
+--------------+----------------------------------------------+------------+------------+
| | Forward foreign exchange contracts | | |
+--------------+----------------------------------------------+------------+------------+
| 7,258,310 | GBP/US$ 31/07/2008 | 19 | 0.04 |
+--------------+----------------------------------------------+------------+------------+
| 8,418,101 | EUR/US$ 31/07/2008 | - | - |
+--------------+----------------------------------------------+------------+------------+
| | Total forward foreign exchange contracts | 19 | 0.04 |
+--------------+----------------------------------------------+------------+------------+
| | Financial assets at fair value through | 47,387 | 97.43 |
| | profit or loss | | |
+--------------+----------------------------------------------+------------+------------+
| | Cash at bank | 1,501 | 3.09 |
+--------------+----------------------------------------------+------------+------------+
| | Other net liabilities | (245) | (0.52) |
+--------------+----------------------------------------------+------------+------------+
| | Net asset value | 48,643 | 100.00 |
+--------------+----------------------------------------------+------------+------------+
General Information
+-----------------------------------+-----------------------------------------------------+
| Directors | Christopher Sherwell (Chairman, Independent |
| | Non-Executive) |
+-----------------------------------+-----------------------------------------------------+
| | John Duffield (Non-Executive) |
+-----------------------------------+-----------------------------------------------------+
| | John Hallam (Independent Non-Executive) |
+-----------------------------------+-----------------------------------------------------+
| | |
+-----------------------------------+-----------------------------------------------------+
| Registered Office | New Star RBC Hedge 250 Index Exchange Traded |
+-----------------------------------+-----------------------------------------------------+
| | Securities PCC Limited |
+-----------------------------------+-----------------------------------------------------+
| | PO Box 208 |
+-----------------------------------+-----------------------------------------------------+
| | Arnold House |
+-----------------------------------+-----------------------------------------------------+
| | St. Julian's Avenue |
+-----------------------------------+-----------------------------------------------------+
| | St. Peter Port |
+-----------------------------------+-----------------------------------------------------+
| | Guernsey GY 1 3NF |
+-----------------------------------+-----------------------------------------------------+
| | Channel Islands |
+-----------------------------------+-----------------------------------------------------+
| | |
+-----------------------------------+-----------------------------------------------------+
| Investment Manager | New Star Asset Management (Bermuda) Limited |
+-----------------------------------+-----------------------------------------------------+
| | 31 Queen Street |
+-----------------------------------+-----------------------------------------------------+
| | PO Box HM 1871 |
+-----------------------------------+-----------------------------------------------------+
| | Hamilton HM HX |
+-----------------------------------+-----------------------------------------------------+
| | Bermuda |
+-----------------------------------+-----------------------------------------------------+
| | (Licensed to conduct investment business by the |
| | Bermuda |
+-----------------------------------+-----------------------------------------------------+
| | Monetary Authority) |
+-----------------------------------+-----------------------------------------------------+
| | |
+-----------------------------------+-----------------------------------------------------+
| Investment Advisor | New Star Asset Management Limited |
+-----------------------------------+-----------------------------------------------------+
| | 1 Knightsbridge Green |
+-----------------------------------+-----------------------------------------------------+
| | London SW1X 7NE |
+-----------------------------------+-----------------------------------------------------+
| | United Kingdom |
+-----------------------------------+-----------------------------------------------------+
| | (Authorised and regulated by the Financial Services |
| | Authority) |
+-----------------------------------+-----------------------------------------------------+
| | |
+-----------------------------------+-----------------------------------------------------+
| Company Secretary and | HSBC Securities Services (Guernsey) Limited |
| Administrator | |
+-----------------------------------+-----------------------------------------------------+
| | PO Box 208 |
+-----------------------------------+-----------------------------------------------------+
| | Arnold House |
+-----------------------------------+-----------------------------------------------------+
| | St. Julian's Avenue |
+-----------------------------------+-----------------------------------------------------+
| | St. Peter Port |
+-----------------------------------+-----------------------------------------------------+
| | Guernsey GY 1 3NF |
+-----------------------------------+-----------------------------------------------------+
| | Channel Islands |
+-----------------------------------+-----------------------------------------------------+
| | |
+-----------------------------------+-----------------------------------------------------+
| Sub-Administrator | HSBC Securities Services (Ireland) Limited |
+-----------------------------------+-----------------------------------------------------+
| | 1 Grand Canal Square |
+-----------------------------------+-----------------------------------------------------+
| | Grand Canal Harbour |
+-----------------------------------+-----------------------------------------------------+
| | Dublin 2 |
+-----------------------------------+-----------------------------------------------------+
| | Ireland |
+-----------------------------------+-----------------------------------------------------+
| | |
+-----------------------------------+-----------------------------------------------------+
| Custodian | HSBC Institutional Trust Services (Ireland) Limited |
+-----------------------------------+-----------------------------------------------------+
| | 1 Grand Canal Square |
+-----------------------------------+-----------------------------------------------------+
| | Grand Canal Harbour |
+-----------------------------------+-----------------------------------------------------+
| | Dublin 2 |
+-----------------------------------+-----------------------------------------------------+
| | Ireland |
+-----------------------------------+-----------------------------------------------------+
| | |
+-----------------------------------+-----------------------------------------------------+
+-----------------------------------+-----------------------------------------------------+
| Auditors | Ernst & Young LLP |
+-----------------------------------+-----------------------------------------------------+
| | 14 New Street |
+-----------------------------------+-----------------------------------------------------+
| | St. Peter Port |
+-----------------------------------+-----------------------------------------------------+
| | Guernsey GY1 4AF |
+-----------------------------------+-----------------------------------------------------+
| | Channel Islands |
+-----------------------------------+-----------------------------------------------------+
| | |
+-----------------------------------+-----------------------------------------------------+
| English Solicitors | Simmons and Simmons |
+-----------------------------------+-----------------------------------------------------+
| | CityPoint |
+-----------------------------------+-----------------------------------------------------+
| | One Ropemaker Street |
+-----------------------------------+-----------------------------------------------------+
| | London EC2Y 9SS |
+-----------------------------------+-----------------------------------------------------+
| | United Kingdom |
+-----------------------------------+-----------------------------------------------------+
| | |
+-----------------------------------+-----------------------------------------------------+
| Guernsey Lawyers | Ozannes |
+-----------------------------------+-----------------------------------------------------+
| | PO Box 186 |
+-----------------------------------+-----------------------------------------------------+
| | 1 Le Marchant Street |
+-----------------------------------+-----------------------------------------------------+
| | St. Peter Port |
+-----------------------------------+-----------------------------------------------------+
| | Guernsey GY1 4HP |
+-----------------------------------+-----------------------------------------------------+
| | Channel Islands |
+-----------------------------------+-----------------------------------------------------+
| | |
+-----------------------------------+-----------------------------------------------------+
| Registrar | Capita Registrars (Guernsey) Limited |
+-----------------------------------+-----------------------------------------------------+
| | 2nd Floor |
+-----------------------------------+-----------------------------------------------------+
| | No. 1 Le Truchot |
+-----------------------------------+-----------------------------------------------------+
| | St. Peter Port |
+-----------------------------------+-----------------------------------------------------+
| | Guernsey GY1 4 AE |
+-----------------------------------+-----------------------------------------------------+
| | Channel Islands |
+-----------------------------------+-----------------------------------------------------+
| | |
+-----------------------------------+-----------------------------------------------------+
| Receiving Agent, UK Paying Agent | Capita IRG Plc |
+-----------------------------------+-----------------------------------------------------+
| and Transfer Agent | The Registry |
+-----------------------------------+-----------------------------------------------------+
| | 34 Beckenham Road |
+-----------------------------------+-----------------------------------------------------+
| | Beckenham |
+-----------------------------------+-----------------------------------------------------+
| | Kent BR3 4TU |
+-----------------------------------+-----------------------------------------------------+
| | United Kingdom |
+-----------------------------------+-----------------------------------------------------+
Savings Directive
EU Council Directive 2003/48/EC of 3 June 2003 (the 'Savings Directive')
The following is based on the Company's understanding of certain aspects of the
law and practice currently in force in Guernsey and the UK applicable to the
Company and to persons who are resident or ordinarily resident and, where
relevant, domiciled in Guernsey or the UK for tax purposes and who hold the
Shares as an investment. This summary does not constitute legal advice and there
can be no guarantee that the tax position or proposed tax position at the date
of this document or at the time of investment will endure indefinitely.
Investors should consult their professional advisers on the possible tax and
other consequences of their subscribing for, purchasing, selling or redeeming
shares under the laws of their country of incorporation, establishment,
citizenship, residence or domicile. If you are in any doubt as to your tax
position, or if you may be subject to tax in a jurisdiction other than Guernsey
or the UK, you should consult your professional adviser.
The Savings Directive targets certain payments made in a member state of the
European Union (a "Member State") to individuals and certain other entities
("Beneficiaries") residing in another Member State. The payments within scope of
the Savings Directive are those payments that are considered "interest payments"
for the purposes of the Savings Directive ("Taxable income"). Under the Savings
Directive, Member States are required to provide the tax authorities of the
Beneficiary's Member State with details of payments of Taxable income made and
the identity of the respective Beneficiaries. This is achieved by Member States
requiring paying agents located in their jurisdiction to provide relevant
information to them, which they in turn pass on to the Member State in which the
Beneficiary is based.
Guernsey has introduced equivalent legislation to the regime set out in the EU
Savings Tax Directive, providing for the operation of a withholding tax system
or an exchange of information with the relevant tax authorities. Under the terms
of the relevant equivalent legislation and/or bilateral agreements entered into,
or proposed to be entered into, by Guernsey and guidance in respect thereof, the
Directive or relevant equivalent legislation will apply to a fund established in
Guernsey only if, unlike the Company, it is a collective investment fund and so
is equivalent to a UCITS.
Accordingly it appears that the United Kingdom does not regard the Directive as
applicable to the Company, so that a paying agent established in the United
Kingdom would not have any obligations under the Directive. It is unclear
whether other jurisdictions will adopt the same interpretation of the Directive.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR BUGDDDGDGGCX
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