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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Close Ast.UK.Zd | LSE:CSUZ | London | Ordinary Share | GG00B1GJ9885 | ZERO DIV SHS CLOSE UK IDX GWTH FD 2012 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 148.125 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMCSUZ
RNS Number : 4026F
Close UK Index Growth Fund 2012
14 June 2012
CLOSE ASSETS FUNDS LIMITED (the "Company")
ANNOUNCEMENT OF ANNUAL RESULTS
The directors announce the statement of results for the year ended 31 March 2012 as follows:-
ABOUT THE COMPANY
Close Assets Funds Limited is a Guernsey incorporated, closed ended, umbrella investment company. Its issued share capital comprises two Management Shares issued for administrative reasons, 35,625,000 Zero Dividend Shares ("Shares") of the Close UK Index Growth Fund 2012 (the "Fund") and 39,375,000 Nominal Shares. The Company has an unlimited life but the Shares are expected to be redeemed in December 2012.
Investment Objective and Policy - Close UK Index Growth Fund 2012 (the "Fund")
The investment objective of the Fund is to provide Shareholders with a geared capped exposure to the performance of the FTSE 100 Index (the "Index").
If Shareholders hold their Shares to December 2012 (the "Redemption Date"), and the End Value of the Index is higher than the Start Value, the Shares are designed to pay to Shareholders, on the Redemption Date, the Final Capital Entitlement, which represents a return equal to four times the percentage increase in the Index capped at 64 per cent. of the Issue Price of GBP1.4864 per Share.
The Final Capital Entitlement will comprise:
(a) a Capital Amount of GBP1.4864 per Share; and
(b) a Growth Amount per Share equal to four times any increase in the End Value of the Index relative to its Start Value of 6,160.30, such percentage being applied to the Issue Price of GBP1.4864 per Share, subject to a maximum increase of 64 per cent. of the Issue Price.
If Shareholders hold their Shares until the Redemption Date and the End Value is lower than the Start Value, the Shares are designed to repay the Issue Price of GBP1.4864 per Share on the Redemption Date provided that the value of the Index had not fallen below 3,080.15, being 50 per cent. of the Start Value at close of business, on any Index Business Day between the Start Date of 22 November 2006 and the End Date of 22 November 2012 (both dates inclusive).
If Shareholders hold their Shares until the Redemption Date and if the value of the Index has fallen below 3,080.15, being 50 per cent. of the Start Value, at close of business on any Index Business Day between the Start Date and the End Date and the End Value is not at least equal to the Start Value, investors will be repaid on the Redemption Date the Issue Price as reduced by the same percentage by which the End Value is less than the Start Value. As at 31 March 2011 and as at the date of this report the level of the Index had not fallen below 3,080.15.
In accordance with the Company's investment policy for the Fund, the net proceeds derived by the issue of Shares and the sale of a put option to J.P. Morgan Chase Bank N.A. with a maturity date of 22 November 2012 (the "Put Option") have been invested in a portfolio of debt securities containing embedded derivatives related to the Index ("Debt Securities") at prices relative to the value of the Index on 22 November 2006 of 6,160.30.
The Debt Securities were issued by financial institutions, selected by the Manager, that, at the date of issue of the relevant debt security, had a rating of at least A- or A3, as determined by Standard & Poor's Ratings Group ("S&P") and/or Moody's Investor Services Inc. ("Moody's") respectively and was either (a) a credit institution as defined in Article 1 of the Council Directive of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions (No. 2000/12/EC), other than an institution referred to in Article 2(3) of that Directive, if authorised by the competent authority of an EU Member State in relation to the credit institution concerned; (b) a bank authorised in a Member State of the European Economic Area; or (c) a bank authorised by a signatory state (other than an EU Member State or a Member State of the European Economic Area) to the Basle Capital Convergence Agreement of July 1988 (Switzerland, Canada, Japan and the US); or (d) an insurance undertaking, insurance holding company or mixed-activity insurance holding company as defined in Article 1 of the Council Directive of 27 October 1998 relating to the supplementary supervision of insurance undertakings in an insurance group (No. 98/78/EC).
To avoid over-dependency on any single issuer, the Company, for the account of the Fund, acquired six debt securities. It is not anticipated that this portfolio of Debt Securities will be varied prior to the maturity date of the Debt Securities other than in exceptional circumstances.
Your attention is drawn to the Schedule of Investments within this annual financial report, which shows the assets held by the Company for the account of the Fund, and note 12(b) to the financial statements, which refers to the credit risk of the issuers of these assets as at the end of the reporting period and as at the date of this report.
In the event of a default by an issuer of a debt security the Company, for the account of the Fund, would rank as an unsecured creditor in respect of sums due from the issuer of such debt security. In such event, the Company, for the account of the Fund, may (in respect of that debt security) receive a lesser amount (if any) and at a different time than the proceeds anticipated at the maturity of the relevant debt security. Any losses would be borne by the Company, for the account of the Fund, and returns to Shareholders would be significantly adversely affected.
The Company has, for the account of the Fund, also sold a Put Option, the proceeds of which sale were used to increase the amount of money available to finance the acquisition of the Debt Securities. The performance of the Put Option is linked to the performance of the Index. At an Index value of 6,160.30 or above at the close of business on 22 November 2012, or if the Index has never closed below 3,080.15 during the calculation period from 22 November 2006 to 22 November 2012 (the "Calculation Period"), the Put Option will be worth GBPNil at maturity. If the Index has closed below 3,080.15 over the Calculation Period and the Index is still below 6,160.30 on 22 November 2012, the Put Option will be worth a percentage of the notional value, being GBP52,953,000, equivalent to the percentage fall in the level of the Index over the Calculation Period, such payment payable to J.P. Morgan Chase Bank N.A. by the Company on behalf of the Fund.
CHAIRMAN'S STATEMENT FOR THE YEAR ENDED 31 MARCH 2012
At launch, the net proceeds derived from the issue of shares of the Fund were invested in a portfolio of debt securities and options at a price based on the level of the Index at the close of business on the Start Date, namely 6,160.30.
On 31 March 2012, the Index closed at 5,768.45, a fall of 6.4 per cent. since launch and a fall of 2.4 per cent. over the reporting period. The total market value of the Fund fell by 3.5 per cent. since launch and rose 0.9 per cent. over the reporting period. As the Fund's investment portfolio is based upon the Index, it is possible to show the potential Final Capital Entitlements available to holders of Shares based on the closing level of the Index on the End Date. These figures are for illustrative purposes only, subject to there being no counterparty default, and do not represent forecasts or take into account any unforeseen circumstances.
Hot Features
Premium
Final FTSE 100 Index Final Capital Entitlement Final Capital Entitlement
Level ^ if FTSE 100 never closes if FTSE 100 closed below
below 3080.15** 3080.15**
--------------------- -------------------------- --------------------------
3000 N/A 72.39
3250 148.64 78.42
3500 148.64 84.45
3750 148.64 90.48
4000 148.64 96.51
4250 148.64 102.55
4500 148.64 108.58
4750 148.64 114.61
5000 148.64 120.64
5250 148.64 126.68
5500 148.64 132.71
5750 148.64 138.74
5768.45* 148.64 139.19
6000 148.64 144.77
6250 157.30 157.30
6500 181.43 181.43
6750 205.55 205.55
7000 229.68 229.68
7250 243.77 243.77
Over 7250 243.77 243.77
^ As at 22 November 2012
* FTSE 100 Index level at the end of the reporting period (31/03/2012)
** On any day from 22 November 2006 to 22 November 2012
Diagrammatically, the Final Capital Entitlement at various closing levels of the Index as at the End Date is displayed below. As of the end of the reporting period, and over the time period since inception, the Index had not closed below 3080.15 on any day.
Given the current economic uncertainty it is worth commenting on the assets held by the Company. Your attention is drawn to the unaudited Schedule of Investments within this annual financial report which shows the assets held by the Company and note 12(b) of this annual financial report which refer to the credit risk of the issuers of these assets as at the period end.
The Company currently holds six debt securities, the issuers of which, as at the date of this report, have two or more credit ratings from Moody's, S&P or Fitch Ratings ("Fitch"). Given the proximity to the End Date, the value of each of the underlying debt securities as at the end of the reporting period and credit rating of the respective issuer is detailed below.
The Company holds a debt security issued by Abbey National Treasury Services PLC with a nominal value of GBP8,800,000, and a fair value, as at the reporting date, of GBP9,299,518. This represented 16.98 per cent. of the value of the Company's net assets as at the reporting date. Abbey National Treasury Services PLC is a direct wholly-owned subsidiary of Santander UK plc, which has given a full and unconditional guarantee in respect of the liabilities of Abbey National Treasury Services PLC. Santander UK plc itself is an indirect wholly owned subsidiary of Banco Santander, S.A. At the end of the reporting period, Abbey National Treasury Services PLC was rated A1 by Moodys and A+ by Fitch with a stable outlook from both ratings agencies. At the end of the reporting period, Santander UK PLC was rated A1 by Moody's, A+ by Fitch and A by S&P each with a stable outlook.
The Company holds a debt security issued by Caisse Centrale du Credit Immobilier de France ("3CIF") with a nominal value of GBP8,800,000, and a fair value, as at the reporting date, of GBP9,338,423. This represented 17.05 per cent. of the value of the Company's net assets as at the reporting date. At the end of the reporting period, 3CIF was rated A1 by Moodys and A by Fitch with a negative outlook from both ratings agencies. On 23 November 2011, S&P withdrew the rating of 3CIF (at 3CIF's request) after affirming its A/A1 rating with negative outlook.
The Company holds a debt security issued by Britannia Building Society with a nominal value of GBP8,800,000, and a fair value, as at the reporting date, of GBP9,336,068. This represented 17.05 per cent. of the value of the Company's net assets as at the reporting date. Britannia Building Society and The Co-operative Bank PLC merged in August 2009 with the assets and liabilities of Britannia Building Society transferred to The Co-operative Bank PLC. At the end of the reporting period, Brittania Building Society (The Co-operative Bank PLC) was rated A3 by Moodys and A- by Fitch with a negative outlook from both ratings agencies.
The Company holds a debt security issued by Irish Life & Permanent ("IL&P") with a nominal value of GBP8,800,000, and a fair value, as at the reporting date, of GBP8,627,250. This represented 15.75 per cent. of the value of the Company's net assets as at the reporting date. At the end of the reporting period, IL&P was rated Ba2 by Moody's and BB- by S&P with a negative outlook from both ratings agencies.
The Company holds a debt security issued by The Royal Bank of Scotland PLC ("RBS") with a nominal value of GBP8,953,000, and a fair value, as at the reporting date, of GBP9,491,909. This represented 17.33 per cent. of the value of the Company's net assets as at the reporting date. At the end of the reporting period, RBS was rated A2 by Moodys, A by S&P and A by Fitch with a negative outlook from Moodys and a stable outlook from S&P as well as Fitch.
The Company holds a debt security issued by SNS Bank N.V., a wholly owned subsidiary of SNS Reaal N.V., with a nominal value of GBP 8,800,000, and a fair value, as at the reporting date, of GBP9,299,056. This represented 16.98 per cent. of the value of the Company's net assets as at the reporting date. At the end of the reporting period, SNS Bank N.V. was rated Baa1 by Moodys, BB+ by S&P and BBB+ by Fitch all with a stable outlook.
The Board monitors credit risk and will consider further action if and when the credit rating of an issuer falls below A or A3 as ranked by S&P and Moody's respectively. As was reported previously, as a result of the past rating agencies actions the Board considered both the sale and the retention of affected securities individually, acting in the best interests of the Company and its Shareholders. The Board reviewed research updates from the ratings agencies and also considered how the Final Capital Entitlement of the Shares might be affected by any sale of affected debt securities and noted that there could be a significant cost involved, resulting in an irreversible reduction in the possible returns to the Company's Shareholders. On the basis of the prevailing facts and the options available to the Board, the Board therefore concluded that it would not be in the best interests of the Company and Shareholders to sell the affected security at that time. The Board continues to closely monitor the credit health of debt security issuers with a view to taking immediate action, acting in the best interests of the Company and its Shareholders, if the credit health of debt security issuers deteriorates.
In the event of a default by an issuer of a debt security purchased by the Company, the Company would rank as an unsecured creditor in respect of sums due from the issuer of such debt security. In such event, the Company may (in respect of that debt security) receive a lesser amount (if any) and at a different time than the proceeds anticipated at the maturity of the debt security. Any losses would be borne by the Company and returns to Shareholders would be significantly adversely affected.
Over the reporting period, the Index has been relatively volatile while remaining between an approximate trading range of 5,000 and 6,000. From the end of the reporting period and to the time of this report going to print (12 June 2012) the Index had fallen 5.49 per cent. to 5,451.60. The European Sovereign debt crisis, recent data suggesting a slow down in economic growth and a reduction in consumer spending coupled with lower trading volumes going into the summer months have had a negative impact on investor sentiment leading to the current move down in the Index.
The Board believes the Shares continue to offer an attractive performance profile based on the level of the Index, although it is anticipated there will be a convergence of the market price to the net asset value as the Shares move towards their Redemption Date which is expected to be Friday 14 December 2012.
Richard de la Rue
Chairman
13 June 2012
MANAGEMENT REPORT FOR THE YEAR ENDED 31 MARCH 2012
A description of important events that have occurred during the financial year, their impact on the performance of the Company as shown in the financial statements and a description of the principal risks and uncertainties facing the Company is given in the Chairman's Statement, Manager's Report and the notes to the financial statements and is incorporated here by reference.
Going Concern
The Company for the account of the Fund currently holds six debt securities, the issuers of which, as at the date of this report, all have investment grade credit ratings ranging from Aa3 to Ba3 by Moody's and from A+ to BB+ by S&P. Of particular interest, IL&P's senior and dated subordinated debt is now guaranteed by the Irish Government for maturities before 29 September 2010. However the relevant debt security held by the Company for the account of the Fund matures after 29 September 2010. Therefore, the appropriate Moody's' and S&P ratings for this debt as at the date of this report are Ba3 and [BB+] respectively.
The Company also holds a debt security issued by SNS. On 5 April 2011 the long-term senior debt rating of SNS was downgraded by Moody's to Baa1. The Board monitors credit risk and may consider further action if the credit rating of an issuer falls below A3 or A- as ranked by Moody's and S&P respectively. As a result of the rating agencies actions and the recent downgrade of the debt securities issued by SNS and IL&P, the Board considered both the sale and the retention of these debt securities. After reviewing the research updates from the rating agencies and reviewing how the Final Capital Entitlement may be affected by the sale of the debt securities and the options available to it, the Board concluded that it would not be in the best interests of the Company and shareholders to sell these debt securities at this time. The Board resolves to continue to monitor the situation.
In the event of a default by an issuer of a debt security purchased by the Company for the account of the Fund, the Company for the account of the Fund would rank as an unsecured creditor in respect of sums due from the issuer of such debt security. In such event, the Company for the account of the Fund may (in respect of that debt security) receive a lesser amount (if any) and at a different time than the proceeds anticipated at the maturity of the debt security. Any losses would be borne by the Company for the account of the Fund and returns to Shareholders would be significantly adversely affected.
As disclosed in the section headed "Investment Objective and Policy" above, the Company has sold a Put Option to J.P. Morgan Chase Bank N.A. (the "Put Option Counterparty"). As the Company's contingent liability under the Put Option sold to the Put Option Counterparty will not crystallise until the Put Option's scheduled maturity date of 22 November 2012, and as such contingent liability would be based on the level of the Index on that date, the directors do not consider that such contingent liability would result now in the insolvency of the Company. In addition, unless the Index closes below 3,080.15 during the calculation period from 22 November 2006 to 22 November 2012, the Put Option will expire worthless.
As disclosed in Note 12(c) to the financial statements, upon the issue of Shares in November 2006 the Company created a cash reserve (the "Expense Provision") in the amount of 2.1 per cent. of the amount raised by the issue of such shares (the "Initial Gross Proceeds") plus GBP500,000, such amount being estimated in the opinion of the directors upon the advice of the Manager and the Administrator to be sufficient to meet the operating expenses reasonably expected to be incurred over the life of the Fund.
The performance of the investments held by the Company for the account of the Fund over the reporting period and the outlook for the future are described in the Chairman's Statement and the Manager's Report. The Company's financial position, its cash flows and liquidity position are set out in the financial statements and the Company's financial risk management objectives and policies, details of its financial instruments and its exposures to market price risk, credit risk, liquidity risk, interest rate risk and currency risk are set out in Note 12 to the financial statements.
After making enquiries, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence until the Redemption Date. As the Fund's Shares are due to redeem in December 2012, being less than 12 months from the date of this report, in accordance with International Financial Reporting Standards the financial statements cannot be prepared on a going concern basis. The financial statements have therefore been prepared on a break-up basis.
Responsibility Statement
The Board of directors jointly and severally confirm that, to the best of their knowledge:
(a) The financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and net loss of the Company; and
(b) This Management Report includes or incorporates by reference a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
Richard de la Rue Nicholas Falla Director Director
13 June 2012
MANAGER'S REPORT FOR THE YEAR ENDED 31 MARCH 2012
Market Review
The Index fell by 2.4 per cent. over the reporting period from 31 March 2011 to 31 March 2012. During the reporting period, the Index displayed high volatility while remaining within a range bound between 5,000 and 6,000.
The first month of the reporting period was affected mainly by the Japanese earthquake and nuclear disaster, which caused a sudden drop in the Index. Given that Japan industrial activity almost ground to a halt as a result of the tragedy, over the coming months, concerns over the global supply chain began affecting the global economy, especially other Asian economies. At the same time, concerns over Greece and other countries in the Eurozone periphery began rising due to a declining credit and money supply and slowing growth in the region. The economic growth in the UK and US also began to slow at the same time. This resulted in a slow and steady decline in the Index for the next two months.
In June and July rising European troubles led to intensifying fiscal pressures in almost all highly indebted developed regions including the US, which had already reached its ceiling for public debt borrowing. After a long acrimonious debate between Republicans and Democrats in the US, the debt ceiling was finally raised by the end of July but only after it became clear how dysfunctional the US Congress had become. As a result, global equity markets including the US index began to sell off. The credit rating downgrade of the US by S&P in early August served to further accelerate the selloff.
As US fiscal issues receded into the background the Eurozone sovereign debt crisis once again came to the fore, this time dominated by Italy and Spain. However, given the huge size of Italy and Spain debt markets, it was practically impossible to bail them out with the existing Eurozone bailout facilities. Either an enhanced bailout facility or quantitative easing were seen as possible solutions - but policymakers could not reach an agreement on either one. As Eurozone leaders lurched from providing one solution to another, market volatility intensified.
The Index marked its lowest point for the year in early October, although volatility continued until a final solution in the form of Long Term Refinancing Operations were proposed by the ECB at its meeting in early December. At the same time, US economic data also began showing impressive growth. The year ended on a strong note with a significant contraction in volatility.
Over the period, the biggest drag on the Index came from financial and mining related names which were directly impacted by fears of an economic slowdown, regulatory changes and the continuing financial crisis. Within the Index notable financial names; HSBC Holdings PLC (-13 per cent.), Lloyds Banking group PLC (-42 per cent.) and Barclays PLC (-15%) saw substantial share price falls. On the energy and mining side; Rio Tinto PLC (-21 per cent.), BHP Billiton PLC (-22 per cent.), Anglo American PLC (-27 per cent.) and Xstrata PLC (-27 per cent.) were the biggest drags on the Index.
On the positive side, the biggest boost to the Index came from more defensive names as investors moved towards investments less sensitive to economic growth. Consequently, British American Tobacco PLC (+26 per cent.), Imperial Tobacco Group PLC (+32%), Diageo PLC (+27%) and GlaxoSmithKline PLC (+17%) were the best performers over the reporting period providing a substantial boost to the Index.
Market Outlook
The UK Government is continuing on its course of fiscal consolidation and structural reforms aimed at reducing the sovereign debt burden, achieving stronger growth over time and rebalancing the economy. Austerity measures in the form of higher taxes and lower Government spending may negatively impact domestic economic growth in the short-term but should be beneficial in the medium to longer term. The Bank of England's expansionary monetary policy has somewhat mitigated the shorter term negative impacts with low interest rates and quantitative easing helping to support the economy. Domestic economic and company specific data continues to be mixed and remains susceptible to external shocks but the UK economy has shown a high level of resilience in the face of the current economic woes.
The biggest risks to Index performance are from a further slowdown in the global economic recovery, deterioration in the European sovereign debt crisis or a pull back in emerging market growth. If the situation were to deteriorate, due to the proactive stance of governments and central banks around the world it is likely that any resurgence in recessionary forces would be dealt with quickly leading to a relatively managed, rather than abrupt, move in markets. Conversely, an acceptable resolution to the European crisis and improvement in economic data is likely to be highly supportive leading to a strong near term upturn in the Index.
Close Investments Limited
13 June 2012
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2012
1 Apr 2011 1 Apr 2010
to to
Notes 31 Mar 2012 31 Mar 2011
GBP GBP
Net movement in unrealised (depreciation)
/
appreciation on investments 5 (2,337,561) 1,056,589
Net movement in unrealised depreciation
on Put
Option 2,424,263 3,256,962
Operating expenses 2 (317,785) (317,411)
------------ ------------
Net (loss) / gain for the year
attributable to shareholders (231,083) 3,996,140
------------ ------------
Other Comprehensive Income - -
------------ ------------
Total Comprehensive (Expense) /
Income (231,083) 3,996,140
------------ ------------
Pence Pence
(Loss) / earnings per Share for
the year - Basic and Diluted 4 (0.65) 11.22
In arriving at the results for the financial year, all amounts above relate to continuing operations.
There are no recognised gains or losses for the year other than those disclosed above.
Reconciliation of (loss) / earnings per Share for investment purposes to (loss) / earnings per Share per the financial statements:
1 Apr 2011 1 Apr 2010
to to
31 Mar 2012 31 Mar 2011
Pence Pence
(Loss) / earnings per Share for
investment purposes (0.51) 11.36
Adjustment for amortisation of debt
issue costs (0.14) (0.14)
(Loss) / earnings per Share per
the financial statements (0.65) 11.22
In accordance with International Financial Reporting Standards ("IFRS"), expenses should be attributable to the period to which they relate.
The (loss) / earnings per Share for investment purposes represents the (loss) / earnings per Share attributable to shareholders in accordance with the Prospectus, which recognises all expenses of the Company up to and including the date that the Final Capital Entitlement becomes payable.
STATEMENT OF FINANCIAL POSITION as at 31 March 2012
31 Mar 2012 31 Mar 2011
Notes GBP GBP
NON CURRENT ASSETS
Unquoted financial assets designated
as at fair value
through profit or loss 5 - 57,729,785
------------ ------------
CURRENT ASSETS
Unquoted financial assets designated
as
at fair value through profit or
loss 5 55,392,224 -
Receivables 6 48,579 98,785
Cash and cash equivalents 332,987 650,706
------------ ------------
55,773,790 749,491
CURRENT LIABILITIES
Financial liabilities 8 847,961 -
Payables - due within one year 7 166,408 216,548
------------ ------------
1,014,369 216,548
NET CURRENT ASSETS 54,759,421 532,943
TOTAL ASSETS LESS CURRENT LIABILITIES
(excluding net assets attributable
to
shareholders) 54,759,421 58,262,728
NON CURRENT LIABILITIES
Financial liabilities 8 - 3,272,224
NET ASSETS ATTRIBUTABLE TO
SHAREHOLDERS 54,759,421 54,990,504
------------ ------------
ZERO DIVIDEND SHARES IN ISSUE 35,625,000 35,625,000
Pence Pence
NAV PER ZERO DIVIDEND SHARE 153.71 154.36
STATEMENT OF FINANCIAL POSITION as at 31 March 2012
Reconciliation of NAV per Share for investment purposes to NAV per Share per the financial statements:
31 Mar 2012 31 Mar 2011
Pence Pence
NAV per Zero Dividend Share for investment
purposes 153.61 154.12
Adjustment for debt issue costs 0.10 0.24
NAV per Zero Dividend Share per the
financial statements 153.71 154.36
In accordance with IFRS, expenses should be attributed to the period to which they relate.
The NAV per Share for investment purposes represents the NAV per Share attributable to shareholders in accordance with the Prospectus, which recognises all expenses of the Company up to and including the date that the Final Capital Entitlement becomes payable.
The financial statements were approved by the Board of directors and authorised for issue on
June 2012 and are signed on its behalf by:
Richard de la Rue Nicholas Falla Director Director
STATEMENT OF CASH FLOWS for the year ended 31 March 2012
1 Apr 2011 1 Apr 2010
to to
31 Mar 2012 31 Mar 2011
GBP GBP
OPERATING ACTIVITIES
Net (loss) / gain for the year attributable
to shareholders (231,083) 3,996,140
Unrealised depreciation / (appreciation)
on investments 2,337,561 (1,056,589)
Unrealised depreciation on value of
Put Option (2,424,263) (3,256,962)
Interest receivable (2,249) (3,110)
Amortisation of debt issue costs 50,218 50,081
Decrease in accrued expenses (50,140) (6,881)
(Increase) / decrease in prepayments
and accrued
income excluding debt issue costs - 21
------------ ------------
NET CASH OUTFLOW FROM OPERATING ACTIVITIES (319,956) (277,300)
------------ ------------
INVESTING ACTIVITIES
Interest received 2,237 3,110
------------ ------------
NET CASH INFLOW FROM INVESTING ACTIVITIES 2,237 3,110
------------ ------------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 650,706 924,896
Decrease in cash and cash equivalents (317,719) (274,190)
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF
YEAR 332,987 650,706
------------ ------------
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS for the year ended 31 March 2012
TOTAL TOTAL
1 Apr 2011 1 Apr 2010
to to
31 Mar 2012 31 Mar 2011
GBP GBP
Opening balance 54,990,504 50,994,364
Net (loss) / gain for the year attributable
to Zero Dividend
Shareholders (231,083) 3,996,140
------------- -------------
Closing balance 54,759,421 54,990,504
------------- -------------
Changes in equity for the management fund are included within the balance for the Fund but are not considered material.
NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 March 2012
1. ACCOUNTING POLICIES
The significant accounting policies adopted by the Company are as follows:
(a) Basis of Preparation
The financial statements have been prepared in conformity with IFRS which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB") and International Financial Reporting Interpretations Committee ("IFRIC") and applicable Guernsey law. The financial statements have been prepared on a historical cost basis except for the measurement at fair value of financial instruments.
Break up basis of accounting
As the Company's Participating Shares are due to be redeemed within twelve months, on or around 6 December 2012, the financial statements have been prepared on a break up basis. The directors do not anticipate the costs of liquidation to be material. Such costs will be borne out of the Expenses Provision described in note 7 to the financial statements.
The preparation of financial statements in accordance with the break up basis requires that assets are reduced to their recoverable amounts and that provisions are made for future losses. The directors have considered whether there is any indication that the recoverable amount of the Company's assets is lower than the amount recorded as fair value at 31 March 2012. They have concluded that any post balance sheet changes in value reflect fair value changes and do not indicate a reduction in the recoverable amount at 31 March 2012 and, accordingly, that no adjustment is required to the carrying amount of the Company's assets or increase in the Company's liabilities at fair value through profit or loss. In addition the directors have considered whether any provision is required for future losses. The Company will continue to incur expenses up to the date of redemption of the Shares. However, the anticipated excess of redemption value over the fair value at 31 March 2012 of the Company's investments, other than those investments issued by Irish Life & Permanent Plc., is expected to exceed the Company's estimated future expenses and, accordingly, the directors do not consider that a provision for future losses is required.
Changes in accounting policy and disclosures
The following Standards or Interpretations have been adopted in the current year. Their adoption has not had any impact on the amounts reported in these financial statements and is not expected to have any impact on future financial periods.
IFRS 7 Financial Instruments: Disclosures - Amendments resulting from annual improvements effective for annual periods beginning on or after 1 January 2011.
IAS 1 Presentation of Financial Statements - Amendments resulting from annual improvements effective for annual periods beginning on or after 1 January 2011.
IAS 24 Related Party Disclosures - revised definition of related parties effective for annual periods beginning on or after 1 January 2011.
IAS 34 Interim Financial Reporting - Amendments resulting from annual improvements effective for annual periods beginning on or after 1 January 2011.
The following Standard has been issued by the IASB but not yet adopted by the Company:
IFRS 7 Financial Instruments: Disclosures - Amendments enhancing disclosures about transfers of financial assets effective for annual periods beginning on or after 1 July 2011.
(b) Taxation
The Company has been granted exemption under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 from Guernsey Income Tax, and is charged an annual fee of GBP600.
(c) Expenses
All expenses are accounted for on an accruals basis.
(d) Debt issue costs
The debt issue costs incurred amounted to GBP300,760. Because the Zero Dividend Shares of Fund 2012 are redeemable on or around 22 November 2012, and because the Management Shares are subordinate, they are required to be classified as debt instruments under IAS 32. Consequently, issue costs are required to be amortised over the life of the instrument.
(e) Interest Income
Interest income is accounted for on an accruals basis.
(f) Cash and Cash equivalents
Cash at bank and short term deposits which are held to maturity are carried at cost. Cash and cash equivalents are defined as call deposits, short term deposits and highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value. For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and deposits at bank.
(g) Investments
All investments are designated as financial assets at "fair value through profit and loss". Investments are initially recognised on the date of purchase at cost, being the fair value of the consideration given, excluding transaction costs associated with the investment. After initial recognition, investments are measured at fair value, with unrealised gains and losses on investments and impairment of investments recognised in the Statement of Comprehensive Income.
Fair value is the amount for which the financial instruments could be exchanged, or a liability settled, between knowledgeable willing parties in an arms length transaction. Fair value also reflects the credit quality of the issuers of the financial instruments.
Valuations of the investments are based on valuations provided to the Company by Future Value Consultants Limited (the "Calculation Agent"). These valuations are intended to be an indication of the fair value of the Company's investments, including an issuer's credit risk, designed to reflect the best estimation of the price at which they could be sold, even though there is no guarantee that a willing buyer might be found if the Company on behalf of the Fund chose to sell the relevant investment.
The indicative fair values of the investments are based on an approximation of the market level of the investments. As the investments are not traded in an active market, the indicative fair value is determined by using valuation techniques. The Calculation Agent uses a variety of methods and makes assumptions that are based on market conditions existing at the reporting date.
Valuation techniques used may include the use of comparable recent arm's length transactions (where available), discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants.
Models use observable data, to the extent practicable. However, areas such as credit risk, volatilities and correlations require the Calculation Agent to make estimates. Changes in assumptions about these factors could affect the reported fair value of financial instruments.
Different assumptions regarding these factors, combined with different valuation techniques and models used, could lead to different valuations of the financial instruments produced by different parties. As at the reporting date, valuation data for the Debt Securities, provided by J.P. Morgan Securities Limited was GBP590,705 (2011: GBP3,027,064) higher than that provided by the Calculation Agent.
Being cognisant of current market conditions, the Company believes that the valuations provided by the Calculation Agent comply with the definition of fair value as defined by IFRS and are more appropriate.
The investments will be derecognised on their redemption date, being 6 December 2012 and accordingly, the investments have been reclassified as current assets as at 31 March 2012. Gains and losses on the sale or maturity of investments will be taken to the Statement of Comprehensive Income.
(h) Put Option
The Put Option was initially recognised at the fair value of the consideration received on the date of sale, and included within Payables falling due after more than one year. After initial recognition, the Put Option is measured at fair value with unrealised gains and losses being recognised in the Statement of Comprehensive Income. The Put Option will be derecognised at maturity on 22 November 2012, and therefore in the year to 31 March 2012 has been included in current liabilities.
(i) Trade Date Accounting
All "regular way" purchases and sales of financial assets are recognised on the "trade date", i.e. the date that the entity commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of the asset within the time frame generally established by regulations or convention in the market place.
(j) Segmental Reporting
The directors are of the opinion that the Company is engaged in a single segment of business, being investment business in the United Kingdom.
2. OPERATING EXPENSES
TOTAL TOTAL
1 Apr 2011 1 Apr 2010
to to
31 Mar 2012 31 Mar 2011
GBP GBP
Amortisation of debt issue
costs 50,218 50,081
Investment management fees
(1) 185,843 185,335
Administration fees 24,550 24,500
Broker fees 12,263 12,232
Directors' remuneration 21,000 20,558
Registration fees 8,790 7,784
Annual fees 18,874 16,439
Directors' and Officers'
insurance 11,700 11,875
Audit fee 10,500 10,000
Printing and stationery 4,383 5,790
Sundry costs 2,217 2,280
Other operating expenses (30,304) (26,353)
------------ ------------
320,034 320,521
Less: Bank interest income (2,249) (3,110)
------------ ------------
317,785 317,411
------------ ------------
(1) The Manager is entitled to receive a fee from the Company at an annual rate of 0.35% of the Initial Gross Proceeds of Fund 2012.
3. DIRECTORS' REMUNERATION
The prospectus for Close UK Index Growth Fund 2012 provided that each director would be paid a basic fee of GBP5,000 per annum and an additional fee of GBP3,000 per annum for the Close US Index Growth Fund 2007. Following the maturity of Close US Index Growth Fund 2007 the Board resolved that each director be paid an annual fee of GBP7,000 per annum, such rate to be effective 1 April 2007. In order that there be no risk that the interests of shareholders in Fund 2012 might be impacted by this increase in directors' fees, the Manager undertook to increase the amount of its contingent rebate by GBP6,000 per annum and by GBP36,000 in the last financial period preceding the Redemption Date.
4. (LOSS) / EARNINGS PER SHARE
Loss per Share is based on the net loss for the year attributable to Shareholders of GBP231,083 (2011: gain GBP3,996,140) and on 35,625,000 (2011: 35,625,000) Shares, being the weighted average number of Shares in issue during the year. There are no dilutive instruments and therefore basic and diluted earnings per Share are identical.
5. INVESTMENTS
UNQUOTED FINANCIAL ASSETS TOTAL TOTAL
DESIGNATED AT FAIR VALUE 31 Mar 2012 31 Mar 2011
THROUGH PROFIT OR LOSS GBP GBP
Opening portfolio cost 52,953,000 52,953,000
Unrealised appreciation on
valuation brought forward 4,776,785 3,720,196
Unrealised (depreciation) /
appreciation on
valuation for the year (2,337,561) 1,056,589
Unrealised appreciation on
valuation carried
forward 2,439,224 4,776,785
Closing valuation 55,392,224 57,729,785
------------ ------------
Valuations of investments are based on valuations provided by the Calculation Agent. The provided valuations are derived from proprietary models based upon well-recognised financial principles and reasonable estimates about relevant future market conditions.
To comply with the definition of fair value as defined by IFRS, the Calculation Agent was engaged to provide valuations of the investments, taking account of the current counterparty credit risk of the issuers of the Debt Securities held by the Company for the account of the Fund. Details of the quantitative effect of using different valuation providers compared to the previous year are given in note 1(g).
IFRS 7 requires the fair value of investments to be disclosed by the source of inputs, using a three-level hierarchy as detailed below:
Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2);
Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
All Debt Securities held by the Company for the account of the Fund have been classified as Level 2 in accordance with the fair value hierarchy. There have been no transfers between Level 1 and Level 2 of the fair value hierarchy during the year.
The Debt Securities in the Fund's portfolio are Sterling-denominated non-coupon and non-interest bearing medium term notes linked to the FTSE 100 Index (the "Index"). They carry a maximum redemption amount of 164% of their principal amount which will be payable provided the FTSE 100 Index rises by 16% or more between 22 November 2006 and November 2012 (the "Calculation Period"). For each percentage point rise in the Index up to a maximum of 16% over the Calculation Period the maximum redemption amount will be increased by approximately 4%, subject to a maximum increase of 64%.
In the event that the Index falls over the Calculation Period, the Debt Securities are designed to return 100% of their principal amount.
Valuation data provided by the Calculation Agent to the Company is provided for information purposes only and does not represent an offer to buy or sell the Debt Securities by the Calculation Agent or any other party. The valuations provided are an indication of market levels and do not imply that they can be sold at that valuation price. They are based on assumptions and data the Calculation Agent considers in its judgement reasonable, but an alternative valuer might arrive at different valuations for the same investments.
6. RECEIVABLES
TOTAL TOTAL
31 Mar 2012 31 Mar 2011
GBP GBP
Prepaid expenditure 12,150 12,150
Prepaid debt issue costs 32,381 82,599
Accrued bank interest receivable 108 96
Sundry debtors 3,940 3,940
------------ ------------
48,579 98,785
------------ ------------
7. PAYABLES (amounts falling due within one year)
TOTAL TOTAL
31 Mar 2012 31 Mar 2011
GBP GBP
Accrued administration fees 2,075 2,081
Accrued registration fees 871 944
Accrued audit fee 10,500 10,000
Accrued management fees - 15,741
Other accrued expenses (1) 152,962 187,782
------------ ------------
166,408 216,548
------------ ------------
(1) Consisting of the currently estimated surplus cash remaining in the bank account established in respect of the ongoing, annual and redemption expenses of each Fund after payment of all such budgeted expenses to date, which will be payable to the Manager at the Redemption Date, as set out in the Prospectus of the Fund, together with other accrued expenses of an immaterial amount.
8. FINANCIAL LIABILITIES
TOTAL TOTAL
31 Mar 2012 31 Mar 2011
GBP GBP
Fair value of the Put Option 847,961 3,272,224
------------ ------------
847,961 3,272,224
------------ ------------
The performance of the Put Option is linked to the performance of the FTSE 100 Index. At an Index value of 6,160.30 or above at the close of business on the End Date, or if the Index has never closed below 3,080.15 during the Calculation Period, the Put Option will be worth GBPNil at maturity. If the Index has closed below 3,080.15 over the Calculation Period and the Index is still below 6,160.30 at the End Date, the Put Option will be worth a percentage of the notional value, being GBP52,953,000, equivalent to the percentage fall in the level of the FTSE 100 Index over the Calculation Period.
The Put Option is not exercisable until the maturity date of 22 November 2012.
The Put Option has been classified as Level 2 in accordance with the fair value hierarchy. There have been no transfers between Level 1 and Level 2 of the fair value hierarchy during the year.
The fair value of the Put Option is based on the valuation provided by the Calculation Agent. There is no active market regarding the Put Option.
J.P. Morgan Chase Bank N.A., in its capacity as the Put Option counterparty, has security over the financial assets held by the Company for payment of any monies owed upon maturity or termination of the Put Option contract.
The original proceeds from the sale of the Put Option were GBP4,209,763.50.
9. SHARE CAPITAL
Authorised SHARES GBP
Unclassified Shares of 0.01p each 200,000,000 20,000
Management shares of GBP1 each 100 100
-------
20,100
-------
Issued Management Nominal Zero Dividend
Shares Shares Shares TOTAL
Shares in issue
at
31 March 2011
and 31 March
2012 2 39,375,000 35,625,000 75,000,002
----------- ----------- -------------- -----------
Issued Management Nominal Zero Dividend
Shares Shares Shares TOTAL
GBP GBP GBP GBP
Issued share
capital
as at 31 March
2011
and 31 March
2012 2 3,937 3,563 7,502
----------- -------- -------------- ------
Zero Dividend Shares (the "Shares") are redeemable on or around 14 December 2012. The Company is closed-ended and therefore shareholders have no right to request the Company to repurchase their Shares or to redeem them prior to the Redemption Date. If the Company is wound up prior to the Redemption Date, shareholders will be entitled to the net asset value of the Shares on the winding up date. No dividends will be paid on the Shares.
Nominal shares are issued for administrative purposes and carry no rights as to dividends or voting.
Management shares are not redeemable, do not carry any right to dividends and in a winding up rank only for a return of the nominal amount paid up thereon after the return of capital on Zero Dividend Shares and Nominal Shares, together with any balance remaining in the Management Fund.
10. SHARE PREMIUM
TOTAL
GBP
Share premium as at 31 March 2011 and
31 March 2012 52,949,438
-----------
11. FINANCIAL INSTRUMENTS
The Company's main financial instruments comprise:
(a) Cash and cash equivalents that arise directly from the Company's operations; and
(b) Sterling-denominated Debt Securities whose performance is based on the performance of the Index; and
(c) The Company for the account of the Fund has also sold a Put Option, whose performance is based on the performance of the Index. Details of the Put Option contract are shown in Note 8.
12. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The main risks arising from the Company's financial instruments are market price risk, credit risk, liquidity risk, and interest rate risk. The Board regularly review and agrees policies for managing each of these risks and these are summarised below:
(a) Market Price Risk
Market price risk arises mainly from uncertainty about future prices of financial instruments held. It represents the potential loss the Company might suffer through holding market positions in the face of price movements. The Manager actively monitors market prices and reports to the Board as to the appropriateness of the prices used for valuation purposes. A list of investments held by the Company is shown in the unaudited Schedule of Investments.
Details of the Company's Investment Objective and Policy are shown within this report.
Price sensitivity
The following details the Company's sensitivity to a 10% increase and decrease in the final market prices of its constituent financial assets and liabilities.
The Final Capital Entitlement due on the redemption of the Shares is determined by reference to the performance of the Index over the Calculation Period from 23 of the Start Date to the End Date. If at the End Date the Index stands below 6,160.30 (the "Start Value") but has not closed below 3,080.15 during the Calculation Period, the Final Capital Entitlement will be equal to 148.64 pence per Share.
During the period from the Start Date to 31 March 2012 the Index had not closed below 3,080.15.
As at 31 March 2012, the Index closed at 5,768.45.
If market prices as at 31 March 2012 had been 10% higher (equating to an Index level of 6,345.30) and assuming this value was to remain unchanged until the End Date, the Final Capital Entitlement due would be 166.50 pence per Share.
As the Index would need to decline by more than 46.60% from its level at 31 March 2012 for the Final Capital Entitlement due to be less than 148.64 pence per Share, at 31 March 2012 the Company had no material sensitivity to a 10% decrease in the level of the Index.
(b) Credit Risk
Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Company. The Board monitors credit risk and will consider further action if the credit rating of an issuer falls below A- or A3 as ranked by Standard and Poor's ("S&P") and Moody's Investor Services Inc. ("Moody's") respectively. Credit risks are controlled in the Company because the EMTN's have been purchased from several different issuers.
Investors should be aware that the prospectus returns to shareholders mirror returns under the Debt Securities held or entered into by the Company and that any default by an issuer of any such Debt Securities held or entered into by the Company would have a consequential adverse effect on the ability of the Company to pay some or all of the redemption to shareholders. Such a default might for example, arise on the insolvency of an issuer of a debt security.
The following table details the aggregate investment grade of the debt instruments in the portfolio as a percentage of the value of the Company's investments at 31 March 2012 (31 March 2011 for the comparative period) as rated by Moody's:
Rating 13 Jun 2012* 31 Mar 2012 31 Mar 2011 Aaa 0.00% 0.00% 0.00% Aa 0.00% 0.00% 34.88% A 67.64% 67.64% 51.59% Baa 16.79% 16.79% 0.00% Ba 15.57% 15.57% 13.53%
* Based on the value of the Company's investments for the account of the Fund as at 31 March 2012.
The credit risk was mitigated at launch by the Company by purchasing the Debt Securities from six different issuers. At the time of the purchase four of the issuers were rated by Moody's at grade A, with the remaining two issuers rated by Moody's at grade Aa
The Company's financial assets exposed to credit risk are as follows:
31 Mar 31 Mar
2012 2011
GBP GBP
Unquoted financial assets designated
as at fair value through profit or
loss 55,392,224 57,729,785
Receivables 48,579 98,785
Cash and cash equivalents 332,987 650,706
----------- -----------
55,773,790 58,479,276
----------- -----------
(c) Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in realising assets or otherwise raising funds to meet financial commitments. The Company's main financial commitments are its ongoing operating expenses and any cash settlement due to the Put Option Counterparty on the maturity of the Put Option, scheduled to occur on 22 November 2012.
Upon the issue of the Shares in November 2006 the Company created a cash reserve (the "Expense Provision") in the amount of 2.1% of the amount raised by the issue of the Shares (the "Initial Gross Proceeds") plus GBP500,000, such amount being estimated in the opinion of the directors upon the advice of the Manager and the Administrator to be sufficient to meet the operating expenses reasonably expected to be incurred over the life of the Shares.
At each quarterly Board meeting and at the end of each financial period the directors review the Expense Provision against the expected future expenses (other than the Manager's fee) of the Company. To the extent that the directors consider that the Expense Provision is less than 150% of the expected future expenses of the Company (other than the Manager's fee), the directors may, having first consulted the Manager, at their discretion reduce the amount of investment management fees payable to the Manager (subject to a maximum reduction of 50%) in order to re-establish the 150% cover.
If at any time during the life of the Company, notwithstanding the arrangements summarised above, the Expense Provision is exhausted then, subject to the relevant excess expenses having been agreed by the Manager, the Manager will make good such shortfall from its own resources, subject to a maximum in each of the first five annual financial periods of 0.25% of the Initial Gross Proceeds plus GBP6,000 and in the last financial period preceding the Redemption Date, of a maximum amount of GBP136,000.
Should these expenses exceed this cap the return to Shareholders will be adversely impacted. The directors do not anticipate that the expenses will exceed the Expense Provision.
The Debt Securities purchased by the Company for the account of the Fund mature on 22 November 2012 (the "Maturity Date") and are due to be redeemed at their notional face value plus four times the performance increase between the Start Date and End Date in the Index, capped at an amount equal to 64% of the notional face value, so that the aggregate maturity proceeds are expected to be between GBP52,953,000 if the Index closes on the End Date at or below its starting value on the Start Date of 6,160.30 and a maximum of GBP86,842,920 if the Index closes at or above 6,160.30 on the End Date, all subject to counterparty default.
Provided that none of the issuers of the Debt Securities defaults on their obligation to pay the maturity proceeds on the Maturity Date, the minimum maturity proceeds of GBP52,953,000 due are intended to satisfy the maximum payment due to be made by the Company to the Put Option Counterparty on the maturity of the Put Option of GBP52,953,000.
The directors and the Manager monitor the credit ratings of all issuers of the Debt Securities. In the event of any downgrading in the long-term credit rating of any issuer below A- or A3, as determined by S&P and/or Moody's respectively, the Company on behalf of the Fund may in its absolute discretion seek to sell the relevant debt security to third party purchasers and to reinvest the proceeds in the purchase of debt securities of another issuer such that the new debt securities will replicate as closely as possible the terms and conditions of the original Debt Securities. If the purchase of such debt securities is not possible, the Directors may reinvest such proceeds as they see fit in investments which, in the opinion of the Directors, as nearly as is practicable, replicate the investment characteristics of the Debt Securities sold and so that the proceeds are invested, as nearly as is practicable in accordance with the Company's stated investment objective for the Fund.
No assurance can be given that the Company will be able to sell the Debt Securities, for the reasons described above or on a winding-up of the Company, at a favourable price or at all. Even if the Company is able to sell such Debt Securities, the sale of the Debt Securities may result in a lower return than would have been the case if the long-term credit rating of the issuer of the relevant Debt Securities had not been downgraded and the original Debt Securities had been retained and were redeemed on the Maturity Date.
(d) Interest Rate Risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair value of financial instruments. Except for cash set aside to meet expenses, the Company's assets and liabilities are expected to be held until the Maturity Date.
Interest rate risk is the risk that fluctuations in market interest rate will result in reduction in deposit interest earned on cash deposits held by the Company. The Company holds cash on fixed deposit, the return on which is subject to fluctuations in market interest rates. All fixed deposits mature within three months.
The average effective interest rate for cash and bank balances as at 31 March 2012 was 0.70% (2011: 0.53%).
None of the other assets or liabilities of the Company attract or incur interest.
Interest rate sensitivity
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair value of financial instruments. Except for cash set aside to meet expenses, the Company's assets and liabilities are expected to be held until the Redemption Date.
If interest rates had been 100 basis points higher and all other variables were held constant, the Company's net assets attributable to shareholders as at 31 March 2012 would have been GBP3,330 greater (2011: GBP6,507) due to an increase in the amount of interest receivable on the bank balances.
If interest rates had been 100 basis points lower and all other variables were held constant, the Company's net assets attributable to shareholders as at 31 March 2012 would have been GBP3,330 lower (2011: GBP6,507) due to a decrease in the amount of interest receivable on the bank balances.
The Company's sensitivity to interest rates is lower in 2012 than in 2011 because of a decrease in the amount of cash held.
(e) Currency Risk
As both the Shares and the Debt Securities are Sterling-denominated, shareholders investing for Sterling returns will not be exposed to direct currency risk. The value of the underlying securities comprising the Index may be affected by changes in the economic, political or social environment in Europe, as well as globally, including changes in exchange rates.
(f) Capital management
The investment objective of the Company for the Fund is to provide shareholders, on the Redemption Date, with a payment per Share which will comprise a capital amount of 148.64p per Share and a growth amount per Share equal to four times any percentage increase in the value of the Index as at the End Date relative to its value as at the Start Date, such amount being expressed in pence and rounded down to the next half pence, subject to a maximum increase of 64% of the issue price of 148.64 pence per Share.
The Company has an unlimited life but the Zero Dividend Shares will be redeemed on or around 14 December 2012. Until then the Company has a fixed capital.
(g) Collateral
Under the terms of a Pledge Agreement dated 7 December 2006 entered into between the Company on behalf of the Fund and the Put Option Counterparty, the Company on behalf of the Fund has pledged the Debt Securities and all rights, title and interest therein and any and all proceeds resulting from the sale or repayment of the Debt Securities as security for the Company's contingent liability under the Put Option sold to the Put Option Counterparty, further details of which are shown at Note 8. The collateral is held by a custodian in a segregated account in Euroclear. Where there is an event of default in respect of the Company under the Put Option, the Put Option Counterparty will be entitled to enforce its security over the Debt Securities.
13. RELATED PARTIES
Anson Fund Managers Limited is the Company's Administrator and Secretary. Anson Registrars Limited is the Company's Registrar, Transfer Agent and Paying Agent and Anson Administration (UK) Limited is the UK Transfer Agent. John R Le Prevost is a director and controller of Anson Fund Managers Limited, Anson Registrars Limited and Anson Administration (UK) Limited. GBP33,340 (2011: GBP32,284) of costs were incurred by the Company with these related parties in the period, of which GBP2,946 (2011: GBP3,025) was due to these related parties as at 31 March 2012.
14. ULTIMATE CONTROLLING PARTY
In the opinion of the directors the Company has no ultimate controlling party.
SCHEDULE OF INVESTMENTS as at 31 March 2012
CLOSE UK INDEX GROWTH FUND 2012 NOMINAL VALUATION TOTAL NET
DEBT SECURITIES PORTFOLIO HOLDINGS GBP ASSETS
Abbey National Treasury Services
Plc.
EMTN 6 December 2012 8,800,000 9,299,518 16.98%
Britannia Building Society
EMTN 6 December 2012 8,800,000 9,336,068 17.05%
Caisse Centrale du Credit Immobilier
de France
EMTN 6 December 2012 8,800,000 9,338,423 17.05%
Irish Life & Permanent Plc.
EMTN 6 December 2012 8,800,000 8,627,250 15.75%
Royal Bank of Scotland Plc.
EMTN 6 December 2012 8,953,000 9,491,909 17.33%
SNS Bank NV
EMTN 6 December 2012 8,800,000 9,299,056 16.98%
----------- ----------
55,392,224 101.16%
----------- ----------
The Company has also sold a Put Option, details of which are shown below:
NOMINAL VALUATION
HOLDING GBP
JP Morgan Chase Bank FTSE 100
Index
Option maturing 22 November
2012 52,953,000 (847,961)
----------
SCHEDULE OF INVESTMENTS as at 31 March 2011
CLOSE UK INDEX GROWTH FUND 2012 NOMINAL VALUATION TOTAL NET
DEBT SECURITIES PORTFOLIO HOLDINGS GBP ASSETS
Abbey National Treasury Services
Plc.
EMTN 6 December 2012 8,800,000 9,983,451 18.15%
Britannia Building Society
EMTN 6 December 2012 8,800,000 9,855,873 17.92%
Caisse Centrale du Credit Immobilier
de France
EMTN 6 December 2012 8,800,000 10,045,559 18.27%
Irish Life & Permanent Plc
EMTN 6 December 2012 8,800,000 7,811,558 14.21%
Royal Bank of Scotland Plc
EMTN 6 December 2012 8,953,000 10,148,393 18.45%
SNS Bank NV
EMTN 6 December 2012 8,800,000 9,884,951 17.98%
----------- ----------
57,729,785 104.98%
----------- ----------
The Company has also sold a Put Option, details of which are shown below:
NOMINAL VALUATION
HOLDING GBP
JP Morgan Chase Bank FTSE 100
Index
Option maturing 22 November
2012 52,953,000 (3,272,224)
------------
For further information contact:
Anson Fund Managers Limited
Secretary
Tel: Guernsey 01481 722260
14 June 2012
This information is provided by RNS
The company news service from the London Stock Exchange
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