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.
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
END
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