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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Close Enh Ii | LSE:CED2 | London | Ordinary Share | GG00B1WT2P00 | ORD NPV DESIGNATED AS PART SHS |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 141.25 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMCED2
RNS Number : 4386Y
Close Enhanced Commodities Fund II
21 February 2013
CLOSE ENHANCED COMMODITIES FUND II LIMITED (the "Company")
HALF-YEARLY FINANCIAL REPORT (UNAUDITED) FOR THE PERIOD ENDED 31 DECEMBER 2012
ABOUT THE COMPANY
The Company is a Guernsey incorporated, closed-ended investment company. With the exception of two Management Shares, issued for administrative reasons, the Company's issued share capital comprises 45,250,000 Participating Shares (the "Shares") the performance of which is designed to provide a geared exposure to any increase in the prices of a notional portfolio of certain industrial, precious metals and energy related commodities. The Commodity Portfolio is a notional portfolio of commodities comprising by value on 31 May 2007 (the "Start Date") one eighth oil, one eighth copper, one eighth aluminium, one eighth zinc, one eighth nickel, one eighth sugar, one eighth corn and one eighth wheat.
Pursuant to the initial placing and offer for subscription, 45,250,000 Shares were issued at a price of 100p each on 31 May 2007. All 45,250,000 Shares in issue rank pari passu, have been admitted to the Official List of the United Kingdom Listing Authority and are capable of being dealt in on the London Stock Exchange. The Company has an unlimited life but the Shares will be redeemed on or around 14 June 2013 (the "Redemption Date").
Investment Objective and Policy
The investment objective of the Company is to provide shareholders, on the Redemption Date, with a capital payment which will comprise a capital amount of 100p per Share and a growth amount per Share equal to two times any percentage increase in the Value of the Commodity Portfolio on 31 May 2013 (the "End Value") relative to the Value of the Commodity Portfolio on the Start Date (the "Start Value"), such amount being expressed in pence and rounded down to the next whole penny (the "Redemption Proceeds"). If the End Value is lower than the Start Value, the Shares are designed to repay the full capital amount of 100p per Share on the Redemption Date. The final return is subject to there being no counterparty default or any other unforeseen circumstances.
The Redemption Proceeds per Share in Sterling is designed to be determined by applying the performance of the Commodity Portfolio as valued and measured using US Dollar values over the calculation period from the Start Date to 31 May 2013 (the "End Date") to the initial issue price of GBP1 per Share.
The US Dollar prices used in order to calculate the value of the Commodity Portfolio on any date are: in respect of oil, the official closing price of the Inter Continental Exchange crude oil future contract next to expire in US Dollars per barrel; in respect of copper, aluminium, zinc and nickel, the Official London Metal Exchange Closing Cash Price in US Dollars per metric tonne; in respect of sugar, the official closing price of the New York Board of Trade Exchange Sugar Number 11 future contract next to expire in US cents per lbs; and in respect of corn and wheat, the official closing price of the Chicago Board of Trade Corn and Wheat future contracts next to expire in US cents per barrel.
As at the End Date, the final value of the Commodity Portfolio will be calculated by reference to the US Dollar aggregate daily value of each constituent of the Commodity Portfolio on the last business day of each month over a calculation period of one year ending on the End Date.
In accordance with the Company's investment policy, the net proceeds derived by the Company from the issue of Shares have been invested in a portfolio of debt securities at prices relative to the value of the Commodity Portfolio on the Start Date (the "Debt Securities").
As both the Shares and the Debt Securities are Sterling-denominated, shareholders will not be exposed to direct currency risk. However, each of the commodities is priced in US Dollars. Accordingly, in the event that the US Dollar strengthens in value, this may cause a reduction in the prices of the commodities and could result in a reduction in the Redemption Proceeds.
MANAGER'S REPORT FOR THE PERIOD ENDED 31 DECEMBER 2012
Investment Performance
At launch the net proceeds derived from the issue of Shares of the Company were invested in the Debt Securities based on the Commodity Portfolio. On 31 December 2012, the Commodity Portfolio had increased by 2.9 per cent. over the six month reporting period and had risen by 21.4 per cent. since launch. The total market value of the Shares grew by 29.7 per cent. over the six month reporting period ended 31 December 2012 and by 37.5 per cent. since inception.
As the Company's final capital entitlement is based upon the performance of the Commodity Portfolio, it is possible to show the potential capital entitlements available to Shareholders based on the percentage increase in the End Value of the Commodity Portfolio relative to its Start Value. The End Value will be the month end average value of the Commodity Portfolio over the one year period ending on 31 May 2013. The chart below is for illustrative purposes only and does not represent forecasts or take into account any unforeseen circumstances.
Market Review
Over the six month reporting period, the value of the Commodity Portfolio grew by 2.9 per cent.
As at 30(th) As at 31(st) December Return June 2012 (USD) 2012 (USD) over period Brent Crude Oil 97.8 111.11 13.6% Nickel 16,475.00 17,085.00 3.7% Aluminium 1,834.50 2,040.00 11.2% Copper 7,604.50 7,915.00 4.1% Zinc 1,843.00 2,034.50 10.4% Wheat 739.00 778.00 5.3% Corn 672.50 698.25 3.8% Sugar 21.81 19.51 -10.5% Commodity Portfolio 2.9%
Over the reporting period, Brent Crude Oil saw the largest price gains driven by concerns that political unrest in the middle-east would disrupt supply while emerging market demand would remain stable.
Industrial metals, namely aluminium, nickel and zinc also enjoyed price gains on the back of stable emerging market demand expectations and positive investor sentiment regarding a global economic recovery. Copper saw more muted gains over the reporting period as China, which represents 60 per cent. of global copper demand, indicated ample stockpiles and a slowdown in their copper inventory accumulation.
Agricultural commodities also saw more muted returns over the reporting period as prices consolidated after strong gains. Sugar was the only negative performer in the Commodity Portfolio as supply side disruptions, which had led to sharp price gains, dissipated and speculative buyers exited their positions.
Market Outlook
There continue to be a number of factors underpinning increased demand for commodities over the medium term. Growth of the middle class in emerging markets, economic recovery in developed markets, overdue industrial replacement as well as maintenance programs, changing consumption patterns and proposed national infrastructure projects are all supportive of higher commodity prices.
Nonetheless, idiosyncratic risks remain high with political uncertainty, weather events, potential for slower than expected economic recovery in developed countries and a slowdown in emerging markets growth creating potential for short-term volatility and weaker near-term commodity demand. It is also likely that continued speculative trading in real assets will accentuate volatility in commodities, especially metals, and could lead to sharp price moves in the short term. Geo-political news flow and monetary policy changes are also likely to lead to strong fluctuations in the US dollar which, in turn, would impact commodity prices, especially oil, and could lead to outsized price moves across the commodity complex.
Overall, the greatest medium term risk to commodity prices is from a slowdown in economic growth and the corresponding reduction in commodity demand. Improving economic data from the US, further sentiment improvement in Europe and continued strong growth in emerging markets would trigger further commodity price increases. Conversely, if the economic outlook were to deteriorate it is likely that commodities would see a fall in price.
Close Investments Limited
21 February 2012
INTERIM MANAGEMENT REPORT FOR THE PERIOD ENDED 31 DECEMBER 2012
Detailed in the Manager's Report and the Notes to the Financial Statements, is a description of the important events that have occurred during the financial period, 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 for the remaining six months of the financial year.
There were no material related party transactions which took place in the financial period.
This half-yearly financial report has not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.
The performance of the investments held by the Company over the reporting period and the outlook for the future are described in the Manager's Report. The Company's financial position, its cash flows and liquidity position are set out in the Financial Statements and the Company's financial risk management objectives and policies, details of its financial instruments and its exposures to market price risk, credit risk, liquidity risk, interest rate risk and currency risk are set out at Note 12 to the Financial Statements.
The Company currently holds five debt securities the issuers of which, as at the date of this report, have credit ratings from either Moody Investor Services ("Moodys") or from Standard & Poors Rating Agency ("S&P").
As part of its investment portfolio, the Company holds a debt security issued by Irish Life & Permanent ("IL&P") with a nominal value of GBP9,050,000. On 19 July 2012, as a result Irish Life & Permanent becoming two separate entities and the debt now belonging to Permanent TSB PLC ("PTSB"), S&P downgraded PTSB one notch from BB- to B+. For the same period, Moodys has kept its ratings at Ba2 with negative outlook.
The Company also holds a debt security issued by SNS Bank N.V with a nominal value of GBP9,050,000 and an S&P rating of A- with a negative outlook and a Moodys long-term senior debt rating of Baa1. The Board monitors credit risk and will consider further action if the credit rating of an issuer falls below A3 or A- as ranked by Moodys and S&P respectively.
The Company also holds a debt security issued by Caisse Centrale du Credit Immobilier de France SA ("CCCIF") with a nominal value of GBP9,050,000. On 28 August 2012 Moodys downgraded CCCIF's long-term senior debt rating to Baa1 with a negative outlook and on 25 of October 2012 the rating was downgraded further to Baa2 with a negative outlook.
As noted in the Annual Financial Report for the year ended 30 June 2012, as a result of earlier rating agencies actions, the Board considered both the sale and the retention of the above debt securities, acting in the best interests of the Company and its shareholders. On the basis of the prevailing facts, the Board concluded that it would not be in the best interests of the Company, or its shareholders, to sell one or all of the debt securities, but it would continue to monitor the situation.
The Company also holds a debt security issued by Erste Group Bank AG with a nominal value of GBP9,050,000. There were no rating changes over the reporting period.
The Company also holds a debt security issued by Mediobanca SpA with a nominal value of GBP9,050,000. There were no rating changes over the reporting period.
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.
As disclosed in Note 12(c) to the Financial Statements, upon the issue of Shares in May 2007, the Company created a cash reserve in the amount of 2.10 per cent. of the amount raised by the issue of such Shares, plus GBP600,000, such amount being estimated, in the opinion of the directors and upon the advice of the Administrator, to be sufficient (when taken in combination with the additional arrangements detailed in note 12(c)) to meet the operating expenses reasonably expected to be incurred over the life of the Fund.
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 Company's Shares are due to redeem 14 June 2013, being less than 12 months from the balance sheet date, in accordance with International Financial Reporting Standards, the Financial Statements cannot be prepared on a going concern basis. Accordingly, the Financial Statements have 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 profit or loss of the Company; and
(b) This Interim Management Report includes, or incorporates by reference,:
(i) an indication of important events that have occurred during the first six months of the financial year and their impact on the Financial Statements;
(ii) a description of the principal risks and uncertainties for the remaining six months of the financial year;
(iii) confirmation that there were no related party transactions in the first six months of the current financial year that have materially affected the financial position or the performance of the Company during that period; and
(iv) changes in the related parties transactions described in the last annual report that could have a material effect on the financial position or performance of the Company in the first six months of the current financial year.
John Stuart Graham Harrison Director Director
21 February 2013
Notes 1 Jul 2012 1 Jul 2011 to 31 Dec to 31 Dec 2012 2011 GBP GBP Net movement in unrealised appreciation / (depreciation) on investments 5 4,685,057 (10,099,185) Operating expenses 2 (220,628) (235,729) ----------- ------------- Net gain / (loss) for the period attributable to shareholders 4,464,429 (10,334,914) Other Comprehensive Income - - ----------- ------------- Total Comprehensive Income 4,464,429 (10,334,914) =========== ============= Pence Pence Earnings per Share for the period - Basic and Diluted 4 9.87 (22.84)
STATEMENT OF COMPREHENSIVE INCOME for the period ended 31 December 2012
In arriving at the results for the financial period, all amounts above relate to continuing operations.
There are no recognised gains or losses for the period other than those disclosed above.
Reconciliation of earnings / (loss) per Share for investment purposes to earnings / (loss) per Share per the financial statements:
1 Jul 2012 1 Jul 2011 to 31 Dec to 31 Dec 2012 2011 Pence Pence Earnings / (loss) per Share for investment purposes 10.35 (22.31) Adjustment to include expenses on an accruals basis (0.48) (0.53) Earnings / (loss) per Share per the financial statements 9.87 (22.84)
In accordance with International Financial Reporting Standards ("IFRS"), expenses should be attributed to the period to which they relate.
The earnings per Share for investment purposes represents the loss 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 redemption proceeds become payable.
The notes form an integral part of these financial statements.
STATEMENT OF FINANCIAL POSITION (UNAUDITED) as at 31 December 2012
31 Dec 2012 30 Jun 2012 GBP GBP Notes CURRENT ASSETS Unquoted financial assets designated as at fair value through profit or loss 5 64,914,329 60,229,272 Receivables 6 80,554 171,292 Cash and cash equivalents 201,419 336,159 ------------- ------------- 65,196,302 60,736,723 CURRENT LIABILITIES Payables - due within one year 7 39,751 44,601 ------------- ------------- NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS 65,156,551 60,692,122 ============= ============= SHARES IN ISSUE 45,250,000 45,250,000 Pence Pence NAV PER SHARE 143.99 134.13
Reconciliation of NAV per Share for investment purposes to NAV per Share per the financial statements:
31 Dec 30 Jun 2012 2012 Pence Pence NAV per Share for investment purposes 143.52 133.10 Adjustment to include expenses on an accruals basis 0.47 1.03 NAV per Share per the financial statements 143.99 134.13
In accordance with IFRS, expenses should be attributed to the period to which they relate.
The notes form an integral part of these financial statements.
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 redemption proceeds become payable.
The financial statements were approved by the Board of directors on 21 February 2013 and are signed on its behalf by:
John Stuart Graham Harrison Director Director
The notes form an integral part of these financial statements.
STATEMENT OF CASH FLOWS (UNAUDITED) for the period ended 31 December 2012
1 Jul 2012 1 Jul 2011 to 31 Dec to 31 Dec 2012 2011 GBP GBP Operating activities Net gain / (loss) for the period attributable to Shareholders 4,464,429 (10,334,914) Unrealised (appreciation) / depreciation on investments (4,685,057) 10,099,185 Interest received (824) (1,064) Amortisation of debt issue costs 84,959 84,959 (Decrease) / increase in accrued expenses (4,850) 6,178 Decrease in prepayments and accrued income excluding debt issue costs 5,779 6,205 ------------ ------------- Net cash outflow from operating activities (135,564) (139,451) ------------ ------------- Investing activities Interest received 824 1,064 ------------ ------------- Net cash inflow from investing activities 824 1,064 ------------ ------------- Cash and cash equivalent at beginning of period 336,159 621,612 Decrease in cash and cash equivalents (134,740) (138,387) ------------ ------------- Cash and cash equivalents at end of period 201,419 483,225 ============ =============
The notes form an integral part of these financial statements.
STATEMENT OF CHANGES IN EQUITY ATTRIBUTABLE TO SHAREHOLDERS (UNAUDITED) for the period ended 31 December 2012
Share Share Premium Accumulated Total Capital Gains GBP GBP Balance as at 1 July 2012 2 45,250,000 15,442,120 60,692,122 Net gain for the period attributable to shareholders - - 4,464,429 4,464,429 --------- -------------- ------------ ------------ Balance as at 31 December 2012 2 42,250,000 19,906,549 65,156,551 --------- -------------- ------------ ------------ Share Share Premium Accumulated Total Capital Gains GBP GBP Balance as at 1 July 2011 2 45,250,000 23,925,770 69,175,772 Net loss for the period attributable to shareholders - - (8,483,650) (8,483,650) --------- -------------- -------------- -------------- Balance as at 31 December 2011 2 42,250,000 15,442,120 60,692,122 --------- -------------- -------------- --------------
The notes form an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) for the period ended 31 December 2012
1 ACCOUNTING POLICIES (a) Basis of Preparation
The financial statements have been prepared in accordance 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 an historical cost basis except for the measurement at fair value of financial instruments, and give a true and fair view.
Break up basis of accounting
As the Company's Participating Shares (the "Shares") are due to be redeemed within twelve months, on or around 14 June 2013 the ("Redemption Date"), 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 December 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 December 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 Redemption Date of the Shares. However, the anticipated excess of redemption value over the fair value at 31 December 2012 of the Company's investments 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:
No new Standards or Interpretations affecting the Company have been applied in the period.
The following Standards or Interpretations that are expected to affect the Company have been issued but not yet adopted by the Company as shown below. Other standards or interpretations issued by the IASB and the IFRIC are not expected to affect the Company.
IFRS 7 Financial Instruments: Disclosures - Amendments relating to the offsetting of assets and liabilities effective for annual periods beginning on or after 1 January 2013 and interim periods within those periods.
IFRS 9 Financial Instruments- Deferral of mandatory effective date of IFRS 9 and amendments to transition disclosures effective for annual periods beginning on or after 1 January 2015.
IFRS 9 Financial Instruments- reissue to include requirements for the classification and measurement of financial liabilities and incorporate derecognition requirements effective for annual periods beginning on or after 1 January 2015.
IFRS 13 Fair value measurement- Original issue effective for annual periods beginning on or after 1 January 2013.
IAS 1 Presentation of Financial Statements- Amendments to revise the way other comprehensive income is presented effective for annual periods beginning on or after 1 July 2012.
IAS 1 Presentation of Financial Statements- Amendments resulting from Annual Improvements 2009-2011 Cycle (comparative information) for annual periods beginning on or after 1 January 2013.
IAS 32 Financial Instruments: Presentation - Amendments relating to the offsetting of assets and liabilities effective for annual periods beginning on or after 1 January 2014.
The directors have considered the above and are of the opinion that the above Standards and Interpretations are not expected to have an impact on the Company's Financial Statements except for the presentation of additional disclosures and changes to the presentation of components of the Financial Statements. These items will be applied in the first financial period for which they are required.
(b) Taxation
The Company has been granted exemption under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 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 GBP1,018,125. Because the Company's Shares are redeemable on or around 14 June 2013 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 in 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 consists of cash and deposits at bank.
(g) Investments
All investments and derivative financial instruments are classified as "at fair value through profit or loss". Investments are initially recognised at cost, being the fair value of the consideration given, excluding transaction costs associated with the investment. After initial recognition, investments are measured at fair value, with unrealised gains and losses on investments being 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 Company's 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 chose to sell the relevant investment.
The indicative fair values of the investments are based on an approximation of the market level of the investments. As the investments are not traded in an active market, the indicative fair value was determined by using valuation techniques. The Calculation Agent used a variety of methods and made assumptions that were 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 counterparty 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 significantly different valuations of the financial instruments produced by different parties. As at the reporting date, valuation data provided by JP Morgan Securities Limited was GBP32,901 (Jun 2012: GBP1,800,331) 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 14 June 2013 and accordingly, the investments have been reclassified as current assets as at 30 June 2012. Gains and losses on the sale of investments will be taken to the Statement of Comprehensive Income.
(h) Trade Date Accounting
All "regular way" purchases and sales of financial assets are recognised on the "trade date", i.e. the date that the entity commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of the asset within the timeframe generally established by regulation or convention in the market place.
(i) Segmental Reporting
The directors are of the opinion that the Company is engaged in a single segment of business, being investment business in the United Kingdom.
2 OPERATING EXPENSES 1 Jul 2012 1 Jul 2011 to 31 Dec to 31 Dec 2012 2011 GBP GBP Amortisation of debt issue costs 84,959 84,959 Management fees (1) 79,838 79,838 Auditor remuneration - 5,000 Directors' and Officers' insurance 3,087 3,497 Registration fees 4,864 4,595 Administration fees 17,847 19,408 Custody fees 9,479 9,828 Directors' remuneration 10,500 10,500 Annual fees 8,777 13,763 Printing costs 80 3,991 Sundry costs and charges 2,021 1,414 ----------- ----------- 221,452 236,793 Less: Interest earned on expense provision bank account (824) (1,064) ----------- ----------- 220,628 235,729 =========== ===========
(1) The Manager is entitled to receive a fee from the Company at an annual rate of 0.35% of the Initial Gross Proceeds.
3 DIRECTORS' REMUNERATION
The Prospectus provides that each director will be paid a fee of GBP7,000 per annum by the Company. The remuneration will remain fixed over the life of the Company.
4 EARNINGS / (LOSS) PER SHARE
The earnings / (loss) per Share is based on the net earnings / (loss) for the period attributable to Shareholders of GBP4,464,429 (2011: GBP10,334,914 loss) and on 45,250,000 (2011: 45,250,000) Shares, being the weighted average number of Shares in issue during the period. There are no dilutive instruments and therefore basic and diluted loss per Share are identical.
5 INVESTMENTS UNQUOTED FINANCIAL ASSETS DESIGNATED 31 Dec 2012 30 Jun 2012 AS AT FAIR VALUE THROUGH PROFIT OR LOSS GBP GBP Opening portfolio cost 38,424,943 38,424,943 Unrealised appreciation on valuation brought forward 21,804,329 29,813,229 Unrealised appreciation / (depreciation) on valuation for the period 4,685,057 (8,008,900) ------------ ------------ Unrealised appreciation on valuation carried forward 26,489,386 21,804,329 Closing valuation 64,914,329 60,229,272 ============ ============
Valuations of investments are based on valuations provided by the Calculation Agent. The provided valuations were derived from proprietary models based upon well-recognised financial principles and reasonable estimates about relevant future market conditions using suitable inputs from market data such as interest rates, credit default swap spreads, and notional Commodity Portfolio levels.
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 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 have been classified as Level 2 in accordance with fair value hierarchy. There have been no transfers between Level 1 and Level 2 of the fair value hierarchy during the period under review.
The performance of the financial assets is based on the performance of the Commodities Portfolio between 31 May 2007 and 31 May 2013. The instruments are designed to give a return of two times the performance of the Commodities Portfolio.
Valuation data provided by the Calculation Agent to the Company is provided for informational 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 31 Dec 2012 30 Jun 2012 GBP GBP Prepaid debt issue costs 76,186 161,145 Prepayments & accrued income 4,368 10,147 80,554 171,292 ============ ============ 7 PAYABLES
(amounts falling due within one year)
31 Dec 2012 30 Jun 2012 GBP GBP Accrued administration fees 3,063 3,287 Accrued registration fees 683 800 Accrued Investment Manager's fees 24,468 13,017 Accrued audit fees - 10,000 Accrued custody fees 4,979 5,131 Accrued printing costs 2,500 5,590 Other accrued expenses 2,058 6,776 Expense provision 229,251 332,739 Less: Prepaid expense provision (see below) (229,251) (332,739) ------------ ------------ 39,751 44,601 ============ ============
The prepaid expense provision represents monies set aside to meet the on-going, annual and redemption expenses of the Company, as set out in the Prospectus.
If, at the Redemption Date, there is any surplus remaining from the expense provision (together with accrued interest thereon), this surplus will revert to the Manager. In the event of redemption or repurchase of all the Shares, or upon a winding-up of the Company, in each case prior to the Redemption Date, any balance of the expense provision (together with accrued interest thereon) other than the investment management fee will also revert to the Manager.
8 SHARE CAPITAL Authorised SHARES GBP Participating Shares of no Unlimited - par value Management Shares of GBP1.00 each 2 2 ---------------- 2 ================ Issued SHARES Participating Shares - fully paid 45,250,000 Management Shares - fully paid 2 ---------------- Number of Shares in issue at 31 December 2012 and at 30 June 2012 45,250,002 ================ GBP Issued capital at 31 December 2012 and at 30 June 2012 2 ================ The issue of participating Shares took place as follows: Number of Price per Amount received Date of issue Shares Share pence GBP 31 May 2007 45,250,000 100.00 45,250,000
Shares are redeemable on the Redemption Date of 14 June 2013. The Company is closed-ended and therefore shareholders have no right to request the Company to repurchase their Shares or to redeem them prior to the redemption date. If the Company is wound up prior to the Redemption Date, Shareholders will be entitled to the net asset value of the Shares on the winding up date. No dividends will be paid on the Shares.
Management Shares are not redeemable, do not carry any right to dividends and in a winding up rank only for a return of the amount of paid up capital after return of capital on Shares.
Given the immateriality of the Management Shares to the net assets of the Company, they have been included in net assets attributable to Participating Shareholders.
9 SHARE PREMIUM GBP Share premium at 31 December 2012 and at 30 June 2012 45,250,000 ----------- 10 FINANCIAL INSTRUMENTS
The Company's main financial instruments comprise:
(a) Cash and cash equivalents that arise directly from the Company's operations; and (b) Debt Securities. 11 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The main risks arising from the Company's financial instruments are market price risk, credit risk, liquidity risk, interest rate risk and currency risk. The Board regularly review and agree policies for managing each of these risks and these are summarised below.
(a) Market Price Risk
Market price risk arises mainly from uncertainty about future prices of financial instruments held. It represents the potential loss the Company might suffer through holding market positions in the face of price movements. The Manager actively monitors market prices and reports to the Board as to the appropriateness of the prices used for valuation purposes. A list of investments held by the Company is shown in the Schedule of Investments.
Details of the Company's Investment Objective and Policy are contained 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 performance of the financial assets is based on the performance of the Commodities Portfolio of commodities between the Start Date and the End Date. The final redemption value of the Shares will comprise a capital amount of 100 pence per Share and a growth amount per Share equal to two times the percentage increase in the End Value of the Commodity Portfolio relative to its Start Value.
If the value of the commodities as at 31 December 2012 had been 10% higher, and assuming these values were to remain unchanged through to the end of the life of the Company, with all other variables held constant, the increase in the estimated Final Capital Entitlement (based on the commodity portfolio valuation) on the Redemption Date would have been 167 pence per Share arising due to an increase in the amount payable per Share on redemption of 25 pence per Share.
If the value of the commodities as at 31 December 2012 had been 10% lower, and assuming these values were to remain unchanged through to the end of the life of the Company, with all other variables held constant, the decrease in the estimated Final Capital Entitlement (based on the commodity portfolio valuation) on the Redemption Date would have been 118 pence per Share arising due to a decrease in the amount payable per Share on redemption of 24 pence per Share.
(b) Credit Risk
Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Company. At the date of this report four out of five issuers carried an investment grade credit rating. This is per Moody's ratings as no S&P rating was available for Caisse Centrale du Credit Immobilier ("CIF").
Investors should be aware that the prospective returns to Shareholders mirror the returns under the Debt Securities held or entered into by the Company and that any default by an issuer 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 proceeds 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 grades of the debt securities in the portfolio, based on the valuations of the investments as at 31 December 2012 (30 June 2012 for the comparative period) as rated by S&P.
Rating *21 February 31 Dec 2012 30 Jun 2012 2013 A 20.14% 20.14% 20.54% BBB 39.98% 39.98% 40.34% BB 0.00% 0.00% 18.64% B 19.90% 19.90% 0.00% NR 19.99% 19.99% 20.48%
*Based on the value of the Company's investments at 31 December 2012.
It should be noted that the S&P rating of CIF debt security is not rated as at 31 December 2012 and as at the date of signing. S&P withdrew the counterparty credit ratings and issue ratings of CIF on 23 November 2011 at the request of the French bank. CIF has been given an investment grade rating of Baa2 by Moodys as at 31 December 2012 and Baa2 at the date of signing.
Credit risk was mitigated at launch by the Company by purchasing the Debt Securities from five different issuers. At the time of purchase four of the issuers were rated by S&P at grade A, with the remaining issuer rated by S&P at grade AA.
The Company's financial assets exposed to credit risk are as follows:
31 Dec 2012 30 Jun 2012 GBP GBP Unquoted financial assets designated as at fair value through profit or loss 64,914,329 60,229,272 Receivables 80,554 171,292 Cash and cash equivalents 201,419 336,159 ------------- ------------- 65,196,302 60.736,723 ============= ============= (c) Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in realising assets or otherwise raising funds to meet financial commitments. The Company's main financial commitment is its on-going operating expenses.
Upon the issue of Shares in May 2007 the Company created a cash reserve (the "Expense Provision") in the amount of 2.10% of the Initial Gross Proceeds plus GBP600,000, such amount being estimated in the opinion of the directors upon the advice of the Manager to be sufficient to meet 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 of 0.25% of the Initial Gross Proceeds. 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 mature on 14 June 2013 (the "Maturity Date") and are designed to pay on the Maturity Date, a capital payment which will comprise a capital amount of 100p per Share, and a growth amount per Share equal to two times any percentage increase in the End Value of the Commodity Portfolio relative to its Start Value, such amount being expressed in pence and rounded down to the next whole pence. If the End Value is lower than the Start Value, the Shares are designed to repay the full initial subscription amount of 100p per Share on the 14 June 2013, all provided that no counterparty defaults on its obligations to the Company. The End Value is defined as the aggregate of the average official closing price of each constituent of the Commodity Portfolio on the last Business Day of each month in the Calculation Period. It is not anticipated that dividends will be paid in respect of the Shares.
The directors and the Manager monitor the credit ratings of all issuers of the Debt Securities. In the event of any downgrading in the long-term credit rating of any issuer below A- or A3, as determined by S&P and/or Moodys respectively, the Company may in its absolute discretion seek to sell the relevant Debt Securities to third party purchasers and to reinvest the proceeds in the purchase of Debt Securities of another issuer such that the new Debt Securities will replicate as closely as possible the terms and conditions of the original Debt Securities.
The directors would only seek to sell the relevant Debt Securities if they consider on the advice of the Manager that such would be in the best interests of the Company and its Shareholders. If the purchase of such Debt Securities is not possible, the directors may reinvest such proceeds as they see fit in investments which, in the opinion of the directors, as nearly as is practicable, replicate the investment characteristics of the Debt Securities sold and so that the proceeds are invested, as nearly as is practicable, in accordance with the Company's stated investment objective. As at the date of signing this report and the reporting date, four out of five issuers of the Debt Securities carried an investment grade credit rating as rated by Moodys.
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.
The table below details the residual contractual maturities of financial liabilities:
As at 31 December 1-3 months Over 1 year Total 2012 Accrued expenses 39,751 - 39,751 ----------- ------------ ------- Total 39,751 - 39,751 ----------- ------------ ------- As at 30 June 2012 1-3 months Over 1 year Total Accrued expenses 44,601 - 44,601 ----------- ------------ ------- Total 44,601 - 44,601 ----------- ------------ ------- (d) Interest Rate Risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair value of financial instruments. Except for cash set aside to meet expenses, the Company's assets and liabilities are expected to be held until the Maturity Date.
Interest rate risk is the risk that fluctuations in market interest rates will result in a reduction in deposit interest earned on cash deposits held by the Company. The Company holds cash on fixed deposit, the return on which is subject to fluctuations. All fixed deposits mature within three months.
The weighted average effective interest rate for cash and bank balances for the period ended 31 December 2012 was 0.28% (Jun 2012: 0.57%).
None of the other assets or liabilities of the Company attract or incur interest.
Interest rate sensitivity
If interest rates had been 25 basis points higher and all other variables were held constant, the Company's net assets attributable for the period ended 31 December 2012 would have been GBP252 (Jun 2012: GBP841) greater due to an increase in the amount of interest receivable on the bank balances.
If interest rates had been 25 basis points lower and all other variables were held constant, the Company's net assets attributable for the period ended 31 December 2012 would have been GBP252 (Jun 2011: GBP841) less due to a decrease in the amount of interest receivable on the bank balances.
The Company's sensitivity to interest rates is lower in the period ended 31 December 2012 than in the year ended 30 June 2012 because of a decrease in the amount of cash balances held.
(e) Currency Risk
Whilst shareholders are not exposed to direct currency risk, since the Shares and Debt Securities are all Sterling-denominated, in the event that the US Dollar strengthens in value this may cause a reduction in the prices of the Commodities and could result in a reduction in the redemption proceeds.
(f) Capital Management
The investment objective of the Company is to provide Shareholders on the Redemption Date with a capital payment which will comprise a capital amount of 100p per Share and a gross amount per Share equal to two times any percentage increase in the End Value of the Commodity Portfolio relative to its Start Value, such amount being expressed in pence and rounded down to the next whole penny. If the End Value is lower than the Start Value, the Shares are designed to repay the full capital amount of 100p per Share on the Redemption Date.
The Shares have a fixed life and a fixed capital and this is not expected to change during the life of the Shares. Until then the Company has a fixed capital.
12 RELATED PARTIES
There were no transactions with related parties during the period.
13 ULTIMATE CONTROLLING PARTY
In the directors' opinion the Company has no controlling party.
SCHEDULE OF INVESTMENTS (UNAUDITED) as at 31 December 2012
NOMINAL VALUATION TOTAL NET DEBT SECURITIES PORTFOLIO HOLDINGS GBP ASSETS Caisse Centrale du Credit Immobilier de France 0% EMTN 14 June 2013 9,050,000 12,973,196 19.91% Erste Bank 0% EMTN 14 June 2013 9,050,000 13,072,465 19.99% Irish Life & Permanent plc 0% EMTN 14 June 2013 9,050,000 12,915,881 19.82% Mediobanca SpA 0% EMTN 14 June 2013 9,050,000 13,023,526 19.99% SNS Bank NV 0% EMTN 14 June 2013 9,050,000 12,929,261 19.84% 45,250,000 64,914,329 99.55% =========== =========== ==========
SCHEDULE OF INVESTMENTS (UNAUDITED) as at 30 June 2012
NOMINAL VALUATION TOTAL NET DEBT SECURITIES PORTFOLIO HOLDINGS GBP ASSETS Caisse Centrale du Credit Immobilier de France 0% EMTN 14 June 2013 9,050,000 12,336,615 20.33% Erste Bank 0% EMTN 14 June 2013 9,050,000 12,369,443 20.38% Irish Life & Permanent plc 0% EMTN 14 June 2013 9,050,000 11,224,256 18.49% Mediobanca SpA 0% EMTN 14 June 2013 9,050,000 12,096,630 19.93% SNS Bank NV 0% EMTN 14 June 2013 9,050,000 12,202,328 20.11% 45,250,000 60,229,272 99.24% ----------- ----------- ----------
SHAREHOLDER INFORMATION
The Company's Shares are listed on the London Stock Exchange.
Company announcements and daily market closing prices of the Shares are available on Reuters, Bloomberg and on-line on the web. The ISIN of the Company's Participating Shares is GG00B1WT2P00, and the London Stock Exchange mnemonic is CED2.
SHARE DEALING
Shares may be dealt in directly through a stockbroker or professional adviser acting on an investor's behalf. The buying and selling of Shares may be settled through CREST.
SHAREHOLDER ENQUIRIES
The Company's registrar is Anson Registrars Limited in Guernsey and they can be contacted on 01481 711301.
Directors John William Stuart (Chairman) Graham Michael Harrison Trevor Charles Ash Custodian BNP Paribas Trust Company (Guernsey) Limited PO BOX 412 BNP Paribas House St Julians Avenue, St Peter Port Guernsey GY1 3WE Manager Close Investments Limited (Authorised and regulated by the Financial Services Authority) 10 Exchange Square Primrose Street London, England EC2A 2BY Administrator and Secretary Anson Fund Managers Limited PO Box 405, Anson Place Mill Court, La Charroterie St Peter Port Guernsey GY1 3GF Principal Bankers Royal Bank of Scotland International Limited Royal Bank Place 1 Glategny Esplanade St Peter Port Guernsey GY1 4BQ Auditors Saffery Champness La Tonnelle House Les Banques St Sampson Guernsey GY1 3HS Registrar, Transfer Agent Anson Registrars Limited and Paying Agent PO Box 426 Anson Place Mill Court, La Charroterie St Peter Port Guernsey GY1 3WX UK Transfer Agent Anson Administration (UK) Limited 3500 Parkway Whiteley, Fareham Hampshire England PO15 7AL Corporate Broker Panmure Gordon (UK) Limited One New Exchange, London England, EC4M 9AF (Appointed 12 November 2012).
This information is provided by RNS
The company news service from the London Stock Exchange
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