Interim Results

ACM European Enhanced Inc.Fund PLC 06 September 2002 ACM European Enhance Inc. Fund PLC 5 September 2002 ACM EUROPEAN ENHANCED INCOME FUND PLC Interim Report and Financial Statements 30 June 2002 (unaudited) General Information ACM European Enhanced Income Fund Plc The following information is derived from and should be read in conjunction with the Prospectus dated 22 November 1999 (the 'Prospectus'). Capitalised terms used but not defined herein have the meanings set out in the Prospectus. ACM European Enhanced Income Fund Plc (the 'Company') was incorporated on 2 November 1999 under the laws of Ireland. Shares of the Company are listed on the London Stock Exchange. The Company is a closed-ended investment company with variable capital, authorised by the Central Bank of Ireland (the 'Bank'), pursuant to the provisions of Part XIII of the Companies Act, 1990 of Ireland. Shareholders will be given the opportunity to vote on the continuation of the life of the Company for a further five years at the annual general meeting after the year ending 31 December 2004. INVESTMENT OBJECTIVE The investment objective of the Company is to provide a high level of income from investment in European corporate and sovereign fixed income securities. As a secondary objective, the Company will seek to provide capital growth which is expected to arise principally through enhancement of the credit rating of specific securities bought by the Company and also a general re-rating of European high yield debt as the European high yield debt market matures. CORPORATE GOVERNANCE On 12 April 2002, the Board resolved to adopt voluntarily a corporate governance policy consistent with the provisions of the Combined Code (Principles of Good Governance and Code of Best Practice). The Combined Code was derived by the Committee on Corporate Goverance from the Committee's Final Report and from the Cadbury and Greenbury Reports. Details of the Company's compliance with the Combined Code during the financial year will be provided to Shareholders in the annual report and accounts of the Company, the first such report being for the year ending 31 December 2002. SHARE REPURCHASE AND REDEMPTIONS As the Company is closed-ended, Shareholders are not entitled to have their Shares redeemed or repurchased. MARKET PRICE The Company is closed-ended and there is no assurance that the market price of the Shares will reflect their underlying value. For the period from 1 January 2002 to 30 June 2002 the Company's market price per Share has been at a discount to its underlying Net Asset Value per Share ranging from a discount of 6.71% to 30.88%. As at 30 June 2002, the discount was 23.72% (Source: Bloomberg). VALUATION The Company has a Valuation Day on the last Business Day of each week and the first Business Day of each calendar quarter, or such other Business Day as the Board may deem appropriate for determining the Company's Net Asset Value per Share. A Business Day is any day on which banks in Dublin, New York and London are open for business. 2 Letter to Shareholders ACM European Enhanced Income Fund Plc 30 August 2002 Dear Shareholder: This report contains investment results and market activity for ACM European Enhanced Income Fund Plc (the 'Company') for the semi-annual reporting period ended 30 June 2002. INVESTMENT OBJECTIVES AND POLICIES The Company's investment objective is to provide a high level of income through investment in European corporate and sovereign fixed income securities. As a secondary objective, the Company seeks to provide capital growth, which is expected to arise principally through enhancement of the credit rating of specific securities bought by the Company but also through a general re-rating of European high yield debt as that market matures. The Company may borrow an amount of up to 25% of its net asset value at any time. As of 30 June 2002, the borrowing was 19.4%. INVESTMENT RESULTS The following table provides performance data for the Company for the six- and 12-month periods ended 30 June 2002. For comparison, we have included a custom benchmark consisting of 50% Merrill Lynch European Currency High Yield Index hedged into euros and 50% Lehman Brothers European Corporate Bond Index. This is then leveraged by 25% and converted into British pounds. This benchmark represents an unmanaged measure of the markets and instruments in which the Company is able to invest. The performance presented below is reported in British pounds. INVESTMENT RESULTS* Periods Ended 30 June 2002 Total Returns 6 Months 12 Months ACM European Enhanced Income Fund Plc 1.56% -1.00% Custom Benchmark** 0.51% 2.62% * The Company's investment results are total returns for the periods shown and are based on the net asset value (NAV) as of 30 June 2002. All fees and expenses related to the operation of the Company have been deducted. Past performance is no guarantee of future results. ** The custom benchmark is comprised of equal 50% weightings of two indices, which are leveraged by 25% and converted into British pounds. The unmanaged Merrill Lynch European Currency High Yield Index (hedged into euros) is comprised of corporate bonds with maturities greater than or equal to one year. The Lehman Brothers European Corporate Bond Index is a measure of fixed-rate securities with at least one year remaining until maturity. An investor cannot invest directly in an index, and its results are not indicative of the performance for any particular investment, including the Company. Following a change in investment strategy, the Company outperformed its custom benchmark for the six-month period ended 30 June 2002. Security selection was the primary contributor of outperformance. In particular, the Company benefited from avoiding many, although not all, high yield issuers that went into distress and, in some cases, default during the period. In large measure, the Company benefited from its lack of exposure to European cable and telecommunications issuers. We eliminated the Company's European cable holdings in the first quarter of 2002 after determining most of the sector would eventually be forced to restructure. This underweight position helped performance. Top performing holdings over the six-month period included HMV Media, which recently tendered at a premium for their bonds. Auto suppliers Dana and Dura, which benefited from the strong rebound in automobile sales, also helped performance. Performance of the Company was dampened by exposure to AES and Calpine, as both bonds fell when the market became concerned with overcapacity and energy trading in the utility sector. The Company reduced its quarterly dividend to 1.2 pence per Share effective April 2002. This level is consistent with the current earning power of the Company, reflecting a somewhat more conservative portfolio construction. INVESTMENT STRATEGY During the six-month period, with heightened volatility in the markets, we adopted a more defensive position in the portfolio, reducing our overweight positions in high yield and BBB-rated corporates and increasing a tactical position in government debt. We have shifted the portfolio to more defensive names within the high yield sector, reducing the Company's exposure to the volatile telecommunications and cable sectors and other distressed issuers. We have also reduced our telecommunications exposure within investment grade corporates, favoring higher quality sectors, particularly the bank sector. Finally, the portfolio remains predominantly exposed to the euro, with non-euro exposure being marginal. MARKET REVIEW Although signs of a global economic recovery began to appear at the beginning of the first quarter of 2002, evidenced by flatter yield curves among the G-7 countries (the group of seven industrialized nations, including Canada, France, Germany, Italy, Japan, the United Kingdom and the United States), rebounding commodity prices and the end of central bank easing, investors remained hesitant about the timing and strength of the recovery. Despite improving economic fundamentals, expectations for rapid global growth diminished in the second quarter as yields declined sharply in light of weakness in the equity markets and rising concerns about corporate integrity. The conflict in the Middle East, rising tensions between Pakistan and India and the ongoing war against terrorism also contributed to investor nervousness, resulting in a flight to quality that benefited the higher-quality sectors of the fixed-income markets. In Euroland, sentiment and production data indicate that European growth will recover in 2002. Inventory levels are now beginning to return to normal after last year's reductions. French industrial production increased more than expected during the first quarter of 2002, and the German index of business confidence rose above its pre-September 11th level. Inflation remained above the European Central Bank's 2.0% limit at 2.4% for much of the period, increasing expectations for tighter monetary policy, but the recent moderation of inflation and the significant rise of the euro has alleviated some of those concerns. Exports are currently driving the European economic turnaround while domestic demand remains weak due to high unemployment levels but also in part due to 3 ACM European Enhanced Income Fund Plc upward price adjustments brought on by the euro changeover at the beginning of the year. The European investment grade corporate bond market returned 2.21% for the six-month period ended 30 June 2002, as measured by the Lehman Brothers Euro Corporate Bond Index. The corporate bond markets suffered relative to government bond markets as accounting irregularities, apparent fraud, aggressive rating-agency actions and investors' increased risk aversion disrupted the markets. The European high yield market, as represented by the Merrill Lynch European Currency High Yield Index, returned -10.17% for the period. Performance of the index was hurt by weak equity performance, credit quality downgrades and poor earnings reports. Much of the negative impact came from the telecommunications sector, which returned -59.0% during the first half of the year. WorldCom announced it had substantially overstated its earnings for 2001 and the first quarter of 2002, sending shock waves throughout the global credit markets in the second quarter. However, many other sectors had positive returns as global economic conditions began to improve. In effect, the European high yield market has become a two-tiered market. Higher quality industrial issuers are trading at relatively high U.S. dollar prices, while many of the telecommunications, media and technology names trade at prices reflecting market expectations of high default rates and minimal recovery for bondholders. In the currency market, the U.S. dollar declined, sending sterling (GBP) to a 26-month high against the dollar. The euro reached parity with the U.S. dollar, rising to its highest value since February 2000. For the six-month period, sterling strengthened from 0.6083E/GBP in February to 0.6500E/GBP at the end of June. OUTLOOK We expect economic growth to continue to pick up through 2002, with Euroland ending the year near its long-term trend growth rate. The export sector should continue to lead the European economic recovery as industrial output rebounds in the months ahead due to stronger global demand. More stable labour markets should support private consumption in the second half of 2002. As domestic demand increases, industrial output should return to positive territory. We expect to see gross domestic product growth strengthening to an annualized increase of 3% for the second half of 2002, after an increase of only 1.4% in the first half of the year. The European Central Bank (ECB) has left rates unchanged at 3.25% year-to-date. Although inflationary pressures remain a concern, the recent strength of the euro has provided monetary policy makers with some leeway and rates are expected to remain unchanged through the rest of the year. The ECB is also likely to take into consideration the falling prices of financial assets. Even though the ECB does not target financial asset prices, it will be sensitive to the impact of market correction on confidence. We expect European yield curves to remain flatter than the U.S. yield curve, with European interest rates remaining relatively stable. As evidence of an economic recovery becomes more apparent, we will structure the portfolio with moderately lower interest rate exposure in anticipation of future Eurozone rate increases. For now we are maintaining a more neutral duration structure. In our view, recent market events have led to an asymmetric profile of expected returns, in which bonds already under pressure could continue to grossly underperform over the near term, while upside potential is limited. While we continue to believe that there are good investment opportunities in both investment grade and high yield credits, we recognise that in the current environment specific issuer selection will be key to outperformance. Performance in both asset classes should accelerate as economic conditions further improve. Within corporates, we favour the banking sector because of its high quality, liquidity, and general improvement in bank balance sheets. In our view, banks will continue to benefit from a steep yield curve, which provides attractive financing options. Within the high yield sector, we favour industrials and cyclicals. We believe that most of the European cable sector will ultimately restructure and are therefore avoiding the sector. Sincerely, Alliance Capital Management L.P. Investment Manager 4 Portfolio Of Investments 30 June 2002 (unaudited) ACM European Enhanced Income Fund Plc Principal £ % of Amount Value Net (000) Assets TRANSFERABLE SECURITIES QUOTED ON A STOCK EXCHANGE OR DEALT IN ON ANOTHER REGULATED MARKET EURO 12 REGION (EURO DENOMINATED) CORPORATE BONDS AUSTRIA Head Holding GmbH EUR £ 10.75%, 15/7/06 700 472,451 1.45% BELGIUM Fortis Bank Belgium 6.50%, 26/9/11 600 391,736 1.20 DENMARK Danske Bank As 5.88%, 01/3/15 1,200 784,346 2.41 (a) FINLAND Sonera Corp. 4.63%, 16/4/09 1,000 597,480 1.83 FRANCE Go Outdoor System 10.50%, 15/7/09 1,200 907,330 2.78 Lafarge 5.88%, 06/11/08 500 324,981 1.00 Remy Cointreau 10.00%, 30/7/05 1,650 1,127,911 3.46 2,360,222 7.24 GERMANY Grohe Holdings 11.50%, 15/11/10 825 610,465 1.87 Kronos International, Inc. 8.88%, 30/6/09 850 550,071 1.69 (b) Messer Greisham Holdings 10.38%, 01/6/11 1,150 807,138 2.48 ProsiebenSat.1 Media AG 5.88%, 28/3/06 1,500 860,746 2.64 2,828,420 8.68 IRELAND Clondalkin Industries Plc. 10.63%, 15/1/10 650 462,884 1.42 ITALY Banca Popolare Di Bergamo Veresino 8.36%, 15/2/11 1,500 1,031,651 3.16 LUXEMBOURG Banque Generale du Luxembourg 9.00%, 21/1/03 3,500 2,092,653 6.42 (b) Kloeckner Pentaplast SA 9.38%, 15/2/12 750 509,630 1.56 PTC International Finance II SA 10.88%, 01/5/08 750 499,158 1.53 11.25%, 01/12/09 675 462,562 1.42 Sanitec International SA 9.00%, 15/5/12 900 607,561 1.86 Tyco International Group 5.50%, 19/11/08 650 297,036 0.91 4,468,600 13.70 NETHERLANDS EUR £ AKZO Nobel NV 5.63%, 07/5/09 250 164,232 0.50% E.ON International Finance 5.75%, 29/5/09 500 329,257 1.01 Fixed Linked Finance BV 6.90%, 01/8/25 750 471,787 1.45 Jones Lang Lasalle Finance 9.00%, 15/6/07 500 340,835 1.04 Kappa Beheer BV 10.63%, 15/7/09 500 352,274 1.08 Netia Holdings 13.75%, 15/6/10 500 55,110 0.17 Pannon Finance BV 7.75%, 03/8/04 1,000 671,239 2.06 Royal KPN NV 3.50%, 24/11/05 750 416,378 1.28 Slovak Wireless Finance 11.25%, 30/3/07 500 351,333 1.08 3,152,445 9.67 Total Corporate Bonds (cost 16,550,235 50.76 £15,956,372) GOVERNMENT BONDS FRANCE France (Government of) 8.50%, 25/4/03 1,000 672,671 2.06 GERMANY Germany (Federal Republic of) 5.00%, 04/7/11 750 488,564 1.50 5.00%, 01/1/12 1,000 650,382 1.99 5.38%, 04/1/10 1,000 668,718 2.05 Treuhandanstalt 6.75%, 13/5/04 2,000 1,358,948 4.17 3,166,612 9.71 Total Government Bonds (cost £3,748,164) 3,839,283 11.77 MORTGAGE RELATED IRELAND Cygnus Finance Plc. 7.52%, 01/10/08 (a) (cost £631,270) 1,000 110,146 0.34 Total Euro 12 Region (Euro Denominated) (cost 20,499,664 62.87 £20,335,806) EURO 12 REGION (NON-EURO DENOMINATED) CORPORATE BONDS NETHERLANDS Impress Metal Packaging DEM Holdings BV 9.88%, 29/5/07 690 407,732 1.25 Total Euro 12 Region (Non-Euro denominated) (cost £349,624) 407,732 1.25 5 Portfolio Of Investments 30 June 2002 (unaudited) (continued) ACM European Enhanced Income Fund Plc Shares or £ % of Net Principal Assets Amount Value (000) NON-EURO 12 REGION EURO DENOMINATED) CORPORATE BONDS CHANNEL ISLANDS HSBC Capital Fund LP EUR £ % 8.03%, 30/6/12 600 433,338 1.33 NORWAY Enitel Warrants, expiring 05/4/2005 (b) 1 6 0.00 Findexa II AS 10.25%, 01/12/11 225 156,463 0.48 156,469 0.48 SWEDEN Alfa Laval Speciality Finance 12.13%, 15/11/10 150 112,896 0.35 CB Bus AB 11.00%, 15/2/10 500 331,285 1.02 Preem Holdings 10.63%, 31/3/11 800 431,326 1.32 875,507 2.69 UNITED KINGDOM Atlantic Telecom Group Warrants, expiring 1 4 0.00 15/1/10 (b) BCP Finance Bank 6.25%, 29/3/11 1,000 661,915 2.03 BPB Plc. 6.50%, 17/3/10 1,000 646,245 1.98 British Telecom Plc. 6.875%, 15/2/11 650 441,279 1.35 Equitable Life Finance 8.00%, 06/8/07 250 185,861 0.57 FKI Plc. 6.63%, 22/2/10 750 478,193 1.47 Imperial Tobacco Finance 6.25%, 06/6/07 500 327,394 1.00 Ineos Acrylics Finance 10.25%, 15/5/10 750 481,227 1.48 Ineos Group Holdings Plc. 10.50%, 01/8/10 350 242,794 0.74 Innogy Plc. 4.63%, 01/10/04 500 324,106 0.99 NGG Finance 6.13%, 23/8/11 850 557,536 1.71 Pearson Plc. 6.13%, 01/2/07 500 332,156 1.02 RBS Capital Trust A 6.47%, 29/6/12 1,500 971,946 2.98 5,650,656 17.32 UNITED STATES American Standard, Inc. 7.13%, 01/6/06 750 483,826 1.48 Clear Channel Communications, Inc. 6.50%, 07/7/05 750 469,078 1.44 Dana Corp. 9.00%, 15/8/11 475 305,269 0.94 Dura Operating Corp. EUR 9.00%, 01/5/09 250 £160,763 0.49 Euronet Worldwide, Inc. 12.38%, 01/7/06 920 581,389 1.78 Fort James Corp. 4.75%, 29/6/04 500 302,725 0.93 Huntsman ICI Chemicals LLC 10.13%, 01/7/09 1,250 673,783 2.07 Huntsman International LLC 10.13%, 01/7/09 250 132,824 0.41 (a) Johnson Diversey 9.63%, 15/5/12 1,000 677,076 2.08 Lear Corp. 8.13%, 01/4/08 375 243,505 0.75 Leica Geosystems Finance 9.88%, 15/12/08 390 273,383 0.84 Manitowoc Co. Inc. 10.38%, 15/5/11 500 345,017 1.06 Sola International, Inc. 11.00%, 15/3/08 250 172,671 0.53 Standard Chartered Cap Trust 8.16%, 23/3/10 (a) 1,500 1,005,993 3.09 Tower (R.J.) Corp. 9.25%, 01/8/10 300 197,848 0.61 Weightwatchers International, Inc. 13.00%, 01/10/09 500 380,653 1.17 6,405,803 19.67 Total Non-Euro 12 Region (Euro Denominated) (cost £12,827,928) 13,521,773 41.49 NON-EURO 12 REGION (NON-EURO DENOMINATED) CORPORATE BONDS UNITED KINGDOM Gala Group Holdings GBP 12.00%, 01/6/10 450 509,128 1.56 HCA The Healthcare Co. 8.75%, 01/11/10 250 269,551 0.83 United Biscuits Finance 10.75%, 15/4/11 500 562,349 1.72 Yell Finance BV 10.75%, 01/8/2011 875 964,687 2.96 2,305,715 7.07 UNITED STATES Aes Corp. GBP 8.38%, 01/3/11 250 162,916 0.50 Total Non-Euro 12 Region (Non-Euro Denominated) (cost £2,362,453) 2,468,631 7.57 TOTAL INVESTMENTS 113.18 Net current liabilities (13.18) NET ASSETS £ 100.00% (a) Coupon increases periodically based upon a predetermined schedule. Stated interest rate in effect at 30 June 2002. (b) Securities not admitted to an official stock exchange or dealt in on another Regulated Market. 6 Significant Portfolio Changes from 1 January 2002 to 30 June 2002 ACM European Enhanced Income Fund Plc COST PURCHASES £ Banque Generale du Luxembourg 9.00%, 21/1/03 2,360,020 Treuhandanstalt 6.75%, 13/5/04 1,339,095 Germany (Federal Republic of) 5.00%, 04/1/12 1,044,618 RBS Capital Trust A 6.47%, 29/6/12 957,732 Germany (Federal Republic of) 5.00%, 04/7/11 854,908 Danske Bank As 5.88%, 01/3/15 733,423 Pannon Finance BV 7.75%, 03/8/04 652,274 France (Government of) 8.50%, 25/4/03 650,034 Germany (Federal Republic of) 5.38%, 04/1/10 645,852 BCP Finance Bank 6.25%, 29/3/11 643,819 Germany (Federal Republic of) 5.25%, 04/1/08 635,387 Johnson Diversey 9.63%, 15/5/12 618,620 ENBW Finance Plc. 5.88%, 28/2/12 607,822 Hilton Group 6.50%, 17/7/09 574,089 Worldcom, Inc. 6.75%, 15/5/08 569,496 Germany (Federal Republic of) 4.50%, 04/7/09 558,122 Germany (Federal Republic of) 4.13%, 27/8/04 557,971 Sanitec International SA 9.00%, 15/5/12 556,483 Household Finance Corp 6.50%, 05/5/09 554,748 Kronos International, Inc. 8.88%, 30/6/09 545,116 Ford Motor Credit Co 6.00%, 14/2/05 473,980 Kloeckner Pentaplast SA 9.38%, 15/2/12 460,886 Ineos Acrylics Finance 10.25%, 15/5/10 439,512 British Telecom Plc. 6.875%,15/2/11 422,133 HSBC Capital Fund LP 8.03%, 30/6/12 410,030 Royal KPN NV 3.50%, 24/11/05 403,107 UPM-Kymmene Corp. 6.13%, 23/1/12 398,660 Enodis 10.38%, 15/4/12 375,000 BNP Paribas Capital Trust 6.34%, 24/1/12 368,465 Tyco International Group 5.50%, 19/11/08 345,787 Imperial Tobacco Finance 6.25%, 06/6/07 316,859 Germany (Federal Republic of) 5.00%, 17/2/06 315,133 E.ON International Finance 5.75%, 29/5/09 313,695 MMO2 6.38%, 25/1/07 306,875 Fort James Corp. 4.75%, 29/6/04 304,702 Calpine Canada Energy 8.88%, 15/10/11 276,000 Koninklijke KPN NV 4.75%, 05/11/08 273,339 PROCEEDS SALES £ HMV Media Group 10.88%, 15/5/08 829,572 Koninklijke KPN NV 4.75%, 05/11/08 824,227 Euronet Worldwide, Inc 12.38%, 01/7/06 644,771 J. Sainsbury Plc. 5.63%, 11/7/08 634,622 Royal Bank of Scotland 6.00%, 10/5/13 632,629 ENBW Finance Plc. 5.88%, 28/2/12 632,496 Bpb Plc. 6.50%, 17/3/10 628,566 Germany (Federal Republic of) 5.25%, 04/1/08 627,976 Koninklijke Ahold NV 5.88%, 09/5/08 624,277 Allied Domecq 5.50%, 18/4/06 620,403 Hilton Group 6.50%, 17/7/09 586,019 Household Finance Corp. 6.50%, 05/5/09 575,412 Germany (Federal Republic of) 4.50%, 04/7/09 571,925 Germany (Federal Republic of) 4.13%, 27/8/04 556,701 Ford Motor Credit Co. 6.00%, 14/2/05 481,386 Aviva 5.75%, 14/11/21 467,545 Fresenius Medical Care 7.38%, 15/6/11 462,871 Clear Channel Communications, Inc. 6.50%, 07/7/05 459,531 UPM-Kymmene Corp. 6.13%, 23/1/12 400,670 Regional Independent Media 12.88%, 01/7/08 399,243 MBNA Europe Funding 5.25%, 12/10/04 398,462 Germany (Federal Republic of) 5.00%, 04/1/12 394,945 Enodis 10.38%, 15/4/12 384,850 Fortis Bank Belgium 6.50%, 26/9/11 375,953 Germany (Federal Republic of) 5.00%, 04/7/11 375,392 BNP Paribas Capital Trust 6.34%, 24/1/12 366,953 Lehman Brothers Holdings Plc. 6.13%, 23/3/07 326,432 Antenna TV SA 9.75%, 01/7/08 322,989 Germany (Federal Republic of) 5.00%, 17/2/06 320,561 Pearson Plc. 6.13%, 01/2/07 311,453 MMO2 6.38%, 25/1/07 305,826 TPSA Eurofinance BV 6.63%, 01/3/06 295,960 KPNQwest 7.13%, 01/6/09 292,200 Xerox Capital Europe 5.25%, 03/12/04 241,681 Calpine Canada Energy 8.88%, 15/10/11 218,677 Luxfer Holdings 10.13%, 01/5/09 215,567 Colt Telecom Group 7.63%, 28/7/08 206,125 7 Statement Of Total Return From 1 January 2002 to 30 June 2002 (unaudited) ACM European Enhanced Income Fund Plc 2002 2001 Notes Revenue Capital Total Total £ £ £ £ Net loss on investments during the period 3 -0- (792,133) (792,133) (7,248,502) Net gain/(loss) on foreign exchange 4 -0- 63,313 63,313 (536,527) _________ _________ _________ _________ Net investment losses for the period -0- (728,820) (728,820) (7,785,029) Gross income 5 1,549,417 -0- 1,549,417 2,301,138 Expenses 6 (298,061) (99,241) (397,302) (492,142) _________ _________ _________ _________ Net income for the period 1,251,356 (99,241) 1,152,115 1,808,996 _________ _________ _________ _________ Return on ordinary activities 1,251,356 (828,061) 423,295 (5,976,033) Distributions from income earned previous 8 (956,458) -0- (956,458) (1,121,732) year Distributions from income earned current 8 (655,857) -0- (655,857) (2,459,463) period Income equalisation -0- -0- -0- 96,000 _________ _________ _________ _________ Net decrease in Shareholders' funds from investment activities (360,959) (828,061) (1,189,020) (9,461,228) _________ _________ _________ _________ _________ _________ _________ _________ Statement Of Movements In Shareholders' Funds From 1 January 2002 to 30 June 2002 (unaudited) 2002 2001 Notes £ £ Net assets at the start of the period 33,790,218 41,121,568 Amounts received on sale of Shares -0- 3,984,000 Less: Issue costs 1(h) -0- 32,411 Net proceeds on sale of Shares -0- 4,016,411 Net decrease in Shareholders' funds (1,189,020) (9,461,228) from investment activities Net assets at the end of the period 32,601,198 35,676,751 The accompanying notes form an integral part of the financial statements. 8 Balance Sheet as at 30 June 2002 (unaudited) ACM European Enhanced Income Fund Plc 2002 2001 Total Total Notes £ £ Portfolio of investments 1(e) 36,897,800 41,276,109 Net current assets Debtors 9 978,876 1,679,660 Cash and bank balances 10 1,216,043 566,136 2,194,919 2,245,796 Less Bank overdraft 10 (68,204) (42,978) Creditors 11 (106,095) (2,384,731) Loan 11 (6,317,222) (5,417,445) (6,491,521) (7,845,154) Net current liabilities (4,296,602) (5,599,358) Net assets 32,601,198 35,676,751 Shareholders' funds 32,601,198 35,676,751 Number of Shares in issue 54,654,743 54,654,743 Net Asset Value per Share £0.60 £0.65 The accompanying notes form an integral part of the financial statements. 9 Notes To Financial Statements as at 30 June 2002 (unaudited) ACM European Enhanced Income Fund Plc 1. Accounting policies a) Basis of accounting The financial statements are prepared under the historical cost convention as modified by the inclusion of securities at valuation. The financial statements are prepared in sterling (GBP). b) Income recognition Income on interest bearing securities is accounted for on an accruals basis and bank deposit interest is accounted for on a receipts basis. Income is shown gross of any withholding tax. The Company accretes discounts and amortises premiums as adjustments to interest income. c) Realised gains and losses on investments Realised gains and losses on sales of investments are calculated on the FIFO basis of the investment in local currency. The associated foreign exchange movement between the date of purchase and the date of sale on the sale of investments is included in other gains or losses in the Statement of Total Return. d) Unrealised gains and losses on investments Unrealised gains and losses on investments arising during the period are reflected as a component of net gains or losses on investments in the Statement of Total Return. e) Valuation of securities Assets listed or traded on a regulated market are valued at the official close of business prices at the period end. If for specific assets the official close of business prices do not, in the opinion of the Administrator, reflect their fair value or if prices are unavailable, the values are calculated with care and in good faith by the Administrator, approved for that purpose by the Custodian, in consultation with the Investment Manager, on the basis of the probable realisation values for such assets as at the close of business as at the period end. f) Foreign exchange Foreign currency assets and liabilities, including investments, are translated into sterling at the exchange rate prevailing at the period end. The foreign exchange gain or loss based on the translation of the original cost of the investments, together with the gain or loss arising on the translation of other assets and liabilities, is included in other gains or losses in the Statement of Total Return. Foreign currency forward exchange contracts are revalued to a forward rate as at their close of business price at the period end. The resulting unrealised gain or loss between this rate and the contract rate is included in other gains or losses in the Statement of Total Return and is shown as a debtor or creditor in the Balance Sheet. g) Distribution policy It is intended that substantially all of the net income of the Company be distributed as dividends. Dividends, if any, will be declared and paid quarterly in or about January, April, July and October of each year. h) Issue costs Issue costs incurred directly in connection with the issue of the Shares are deducted from the consideration received in the Statement of Movements in Shareholders' Funds. 2. Taxation Under current law and practice, the Company qualifies as an investment undertaking as defined in Section 739B (1) of the Taxes Consolidation Act, 1997, as amended. It is not chargeable to Irish tax on its income or capital gains. However, a tax can arise on the happening of a 'chargeable event' in the Company. A chargeable event includes any distribution payments to Shareholders or any encashment, redemption or transfer of Shares. Any tax arising on a chargeable event is a liability of the Shareholder, albeit that it is paid by the Company (although if the Company fails to deduct the tax or the correct amount of tax, it becomes ultimately a liability of the Company). No tax will arise on a chargeable event in respect of a Shareholder who is an Exempt Irish Investor (as defined in Section 739D of the Taxes Consolidation Act, 1997, as amended) or who is neither Irish resident nor ordinarily resident in Ireland at the time of the chargeable event provided that the necessary signed declaration is in place. 3. Net loss on investments The net loss on investments during the period comprises: 2002 2001 Notes £ £ Proceeds from sales of investments during the period 24,712,080 43,253,290 Original cost of investments sold during the period (30,783,231) (43,955,209) Net loss realised on investments sold during the period 1 (c) (6,071,151) (701,919) Net change in unrealised appreciation/(depreciation) at the 1(d) 5,279,018 (6,546,583) end of the period Net loss on investments during the period (792,133) (7,248,502) 10 4. Net gain/(loss) on foreign exchange 2002 2001 £ £ Net realised and unrealised foreign exchange gain/(loss) 63,313 (536,527) 5. Gross income 2002 2001 Notes £ £ Interest on securities 1(b) 1,538,095 2,281,451 Bank interest 1(b) 11,322 19,687 1,549,417 2,301,138 6. Expenses The Company charges 25% of the investment management fees, operational expenses and borrowing expenses in each year to capital (such expenses amounted to £99,241 for the six months ended 30 June 2002 and £130,657 for the six months ended 30 June 2001) and 75% of such fees and expenses to its income account. Thus, on realisation of Shares, Shareholders may not receive back the full amount invested. In addition, the formation and organisation expenses of the Company, other than those defined as issue costs, were written off as incurred. 2002 2002 2002 2001 £ £ £ £ Revenue Capital Total Total Payable to the Administrator Administration fee (20,025) (6,675) (26,700) (28,089) Payable to the Custodian Custody fee (10,652) (3,551) (14,203) (10,296) Payable to the Investment Manager Investment management fee (103,343) (34,448) (137,791) (175,836) Other expenses Audit fee (2,810) (937) (3,747) (7,008) Loan interest (114,008) (38,003) (152,011) (215,105) Legal fees (21,797) (7,266) (29,063) (22,500) Directors' remuneration (9,104) (3,035) (12,139) (14,000) Printing & postage (11,920) (3,973) (15,893) (11,553) Miscellaneous (4,402) (1,353) (5,755) (7,755) (164,041) (54,567) (218,608) (277,921) Total expenses (298,061) (99,241) (397,302) (492,142) 7. Related party transactions Investment Manager The Investment Manager (Alliance Capital Management L.P.) receives an annual investment management fee of 0.65% of the Company's average weekly Net Asset Value (having added back the amount borrowed at any time under the Company's borrowing facility with Deutsche Bank AG London). The Investment Manager, subject to approval of the Directors, also receives from the Company an amount not to exceed $45,000 annually exclusive of VAT, if any, thereon, to cover certain ancillary expenses incurred by the Investment Manager in connection with its provision of investment management services to the Company. Such compensation amounted to £15,944 (or $24,303) for the period ended 30 June 2002. In addition, the Investment Manager is reimbursed by the Company for its reasonable out-of-pocket expenses plus VAT, if any, thereon. The Investment Management Agreement may be terminated by the Investment Manager or the Company giving not less than 90 days' notice in writing. Alliance Capital Management L.P. has not entered into transactions in relation to a placing and/or a new issue in which a connected person with the Investment Manager has a material interest as a member of the underwriting syndicate. Administrator Deutsche International Fund Services (Ireland) Limited has been appointed to act as administrator pursuant to the Administration Agreement. For this service, the Company pays to the Administrator an annual fee, accrued daily based on the average weekly Net Asset Value and payable monthly in arrears at the following rates: Rate NAV 0.15% p.a. 0 to £30 million 0.10% p.a. £30 million+ to £60 million 0.075% p.a. £60 million+ 11 7. Related party transactions (continued) Administrator (continued) The Administrator receives a minimum fee of £4,500 per month. The Administrator is also entitled to an annual fee of £20 per Shareholder for registrar maintenance, £15 for each share registry entry, £10 for each dividend payment, £15 for each statement issued and £7 for each payment by telegraphic transfer. The Administrator is also reimbursed by the Company, as appropriate, for all reasonable costs, expenses and disbursements incurred by it in the performance of its duties for the Company. Custodian Deutsche International Custodial Services (Ireland) Limited has been appointed custodian to the Company pursuant to the Custodian Agreement. For this service, the Company pays to the Custodian a fee of 0.025% per annum of the average weekly Net Asset Value of the Company. The Custodian's fee is paid monthly in arrears and is accrued daily based on the average weekly Net Asset Value of the Company. In addition, the Custodian is entitled to a transaction charge of £20 per transaction. The Custodian is also reimbursed by the Company for all reasonable out-of-pocket expenses, including sub-custody fees and expenses which are charged at normal commercial rates. Directors' and Secretary's interests The Directors and Company Secretary who held office on 30 June 2002 had no interests in the Shares of the Company at that date or at any time during the financial period, except for Mr.Flight, who holds 50,000 shares in the Company.Mr. Hyde is a Senior Vice President at Alliance Capital Management Corporation, which is the general partner of the Investment Manager (Alliance Capital Management L.P.) Mr. O'Sullivan is a partner with Arthur Cox, legal advisor to the Company. 8. Distributions It is intended that substantially all of the net income of the Company is distributed as dividends. Distributions will, if declared, be declared and paid quarterly in January, April, July and October of each year. The Company reduced its quarterly dividend to 1.2 pence per Share effective April 2002, this level being consistent with the current earning power of the Company. The following dividends were paid during the period: Paid Amount £ Ex Date Date £ Per Share Distribution based on income from prior period 11-01-02 28-01-02 956,458 0.0175 Distribution based on income from current period 19-04-02 30-04-02 655,857 0.0120 9. Debtors 2002 2001 £ £ Accrued income 856,968 1,064,905 Sale of securities awaiting settlement 81,638 614,755 Unrealised gain on forward contracts 40,270 -0- 978,876 1,679,660 10. Analysis of cash on the Balance Sheet 2002 2001 £ £ Cash and bank balances 1,216,043 566,136 Bank overdraft (68,204) (42,978) 1,147,839 523,158 All cash and bank balances are held with Deutsche Bank AG London. 12 11. Creditors All settlements are scheduled for less than one year. At 30 June 2002, the Company had a loan outstanding with Deutsche Bank AG London of EUR9,750,000. The facility will be open for a period of five years renewable on such terms as may be mutually agreed between the Company and such banks and financial institutions as may be parties to the Facility Agreement at such time, although the Facility is repayable earlier under certain circumstances. 2002 2001 £ £ Purchase of securities awaiting settlement -0- (597,364) Accrued expenses (106,095) (168,724) Loan (6,317,222) (5,417,445) Unrealised loss on forward contracts -0- (149,610) Payable on Index Swap (notional value EUR5,000,000) -0- (239,301) Distribution payable -0- (1,229,732) (6,423,317) (7,802,176) 12. Exchange rate The following sterling exchange rates as at 30 June 2002 have been used in this report: EUR 1.5434 USD 1.5243 13. Soft commission arrangements There were no soft commission arrangements during the period under review. 14. Efficient Portfolio Management The Company enters into forward exchange currency contracts to hedge its exposure to changes in non-Euro currency exchange rates on its non-Euro portfolio holdings and to hedge certain firm purchase and sale commitments denominated in non-Euro currencies. A forward exchange currency contract is a commitment to purchase or sell a non-Euro currency at a future date at a negotiated forward rate. The gain or loss arising from the difference between the original contract and the closing of such contract is included in net gains or losses on investments. Fluctuations in the value of open forward exchange currency contracts are reflected for financial reporting purposes as a component of debtors or creditors. Risks may arise from the potential inability of a counterparty to meet the terms of a contract and from unanticipated movements in the value of a foreign currency relative to the Euro. At 30 June 2002, the Company had outstanding forward exchange currency contracts as follows: £ £ Value on £ Unrealised Contract Origination Current Appreciation Amount Date Value GBP Forward Exchange Currency Buy Contract Euro, settling 06/08/02 5,383,600 3,443,727 3,490,058 46,331 Sell Contract Euro, settling 06/08/02 1,269,026 816,618 822,679 (6,061) The Company utilises swap contracts for efficient portfolio management. A swap is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified amount of an underlying asset or otherwise determined notional amount. The payment flows are usually netted against each other, with the difference being paid by one party to the other. Risks may arise as a result of the failure of the counterparty to the swap agreement. The loss incurred by the failure of a counterparty is generally limited to the net interest payment to be received by the Company, and/or the termination value at the end of the agreement. Therefore, the Company considers the creditworthiness of each counterparty to a swap agreement in evaluating potential credit risk. Additionally, risks may arise from unanticipated movements in interest rates or in the value of the underlying assets. At 30 June 2002, the Company did not hold any swap contracts. 15. Approval of interim unaudited report The interim unaudited report was approved by the Board of Directors on 30 August 2002. 13 Other Information 30 June 2002 (unaudited) ACM European Enhanced Income Fund Plc Directors Mr. Howard Flight (Chairman) Mr. Michael K. Griffin Mr. Geoffrey L. Hyde Mr. Carl O'Sullivan Investment Manager Alliance Capital Management L.P. 1345 Avenue of the Americas New York New York 10105 United States of America Administrator and Registrar Deutsche International Fund Services (Ireland) Limited Guild House Guild Street International Financial Services Centre Dublin 1 Ireland Custodian Deutsche International Custodial Services (Ireland) Limited Guild House Guild Street International Financial Services Centre Dublin 1 Ireland Legal Advisors In Ireland Arthur Cox Earlsfort Centre Earlsfort Terrace Dublin 2 Ireland In England Linklaters One Silk Street London EC2Y 8HQ England Registered Office Guild House Guild Street International Financial Services Centre Dublin 1 Ireland Secretary Bradwell Limited Earlsfort Centre Earlsfort Terrace Dublin 2 Ireland Auditors Ernst & Young Registered Auditors Ernst & Young Building Harcourt Centre Harcourt Street Dublin 2 Ireland Corporate Broker HSBC Investment Bank Plc Vintners Place 68 Upper Thames Street London EC4V 3BJ England 15 EEIFSR0602 This information is provided by RNS The company news service from the London Stock Exchange

Companies

Abrdn Equity Income Trust (AEI)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today