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Friday 25 February, 2011

Harewood Struct Inv

Annual Financial Report

RNS Number : 9213B
Harewood Structured Investment PCC
25 February 2011
 



Harewood Structured Investment PCC Limited (the "Company")

 

PRELIMINARY ANNOUNCEMENT OF ANNUAL RESULTS

The directors announce the statement of results for the year ended 31 October 2010 as follows:

 

ABOUT THE COMPANY

Harewood Structured Investment PCC Limited, a closed-ended protected cell investment company, was incorporated with limited liability in Guernsey with limited liability on 27 January 2005 when two Ordinary Shares were issued for administrative purposes.

 

The Company commenced business on 18 March 2005 when 8,500,255 Enhanced Global Asset Allocation Preference Shares ("EGAA Shares") of the Enhanced Global Asset Allocation cell were allotted and issued at an issue price of £1 each.

 

On 6 July 2006 a further 5,000,000 EGAA Shares were allotted and issued at an issue price of 127.13 pence each.  The EGAA Shares have a defined investment life to 24 March 2011 whereupon they will be subject to compulsory redemption.

 

On 28 June 2005, 12,501,195 BNP Paribas FTSE Summit Preference Shares ("FSM Shares") of the BNP Paribas FTSE Summit cell were allotted and issued at an issue price of £1 each.  On 6 July 2006 a further 8,000,000 FSM Shares were allotted and issued at an issue price of 121.84 pence each.  On 14 March 2007 a further 20,000,000 FSM Shares were allotted and issued at an issue price of 129.25 pence each.  The FSM Shares have a defined investment life to 4 July 2011 whereupon they will be subject to compulsory redemption.

 

On 28 June 2005, 7,001,999 BNP Paribas Energy - Base Metals Secure Growth Preference Shares ("EBM Shares") of the BNP Paribas Energy - Base Metals Secure Growth cell were allotted and issued at an issue price of £1 each.  On 25 November 2005 a further 700,000 EBM Shares were allotted and issued at an issue price of 106.54 pence each.  The EBM Shares had a defined investment life to 5 July 2010 whereupon they were compulsory redeemed.

 

On 7 December 2005, 46,613,549 BNP Paribas UK High Income Preference Shares ("UKHI Shares") of the BNP Paribas UK High Income Cell were allotted and issued at an issue price of £1 each.  On 26 May 2006 a further 30,000,000 UKHI Shares were allotted and issued at an issue price of 102.47 pence each and on 28 September 2006 a further 50,000,000 shares were allotted and issued at an issue price of 104.00 pence each and on 4 June 2007 a further 15,000,000 UKHI Shares were allotted and issued at an issue price of 109.60 pence each.  The UKHI Shares have a defined investment life to 8 December 2011 whereupon they will be subject to compulsory redemption.

 

On 22 March 2006, 27,506,140 BNP Paribas Energy - Base Metals (2) Preference Shares ("EBM2 Shares") of the BNP Paribas Energy - Base Metals (2) cell were allotted and issued at an issue price of £1 each.  On 6 July 2006 a further 5,000,000 EBM2 Shares were allotted and issued at an issue price of 110.44 pence each.  The EMB2 Shares have a defined investment life to 28 March 2012 whereupon they will be subject to compulsory redemption.

 

On 20 April 2006, 25,000,000 BNP Paribas European Shield Preference Shares ("ES Shares") of the BNP Paribas European Shield cell were allotted and issued at an issue price £1 each.  The ES Shares have a defined investment life to 3 May 2012 whereupon they will be subject to compulsory redemption.

 

On 19 July 2006, 61,748,923 BNP Paribas Absolute Progression Preference Shares ("BAP Shares") of the BNP Paribas Absolute Progression cell were allotted and issued at an issue price of £1 each.  On 23 January 2007 a further 15,000,000 BAP Shares were allotted and issued at an issue price of 108.484 pence each.  The BAP Shares have a defined investment life to 26 July 2012 whereupon they will be subject to compulsory redemption.

 

On 25 October 2006, 77,469,987 Class A Sterling Hedged US High Income Preference Shares ("Class A USHI Shares") of the US High Income cell were allotted and issued at an issue price of £1 each.  On 4 June 2007 a further 15,000,000 Class A USHI Shares were allotted and issued at an issue price of 105.65 pence each.  The Class A USHI Shares have a defined investment life to 26 November 2012 whereupon they will be subject to compulsory redemption

 

On 25 October 2006, 43,337,229 Class B Unhedged US High Income Preference Shares ("Class B USHI Shares") of the US High Income cell were allotted and issued at an issue price of $1 each.  On 4 June 2007 a further 15,000,000 Class B USHI Shares were allotted and issued at an issue price of 105.89 cents each.  The Class B USHI Shares have a defined investment life to 26 November 2012 whereupon they will be subject to compulsory redemption.

 

On 21 June 2007, 45,375,520 Class A Sterling Hedged Euro High Income Preference Shares ("Class A EUHI Shares") of the Euro High Income cell were allotted and issued at an issue price of £1 each.

 

On 21 June 2007, 10,261,000 Class B Unhedged Euro High Income Preference Shares ("Class B EUHI Shares") of the Euro High Income cell were allotted and issued at an issue price of €1 each.

 

Whilst at the time of issue the Class A EUHI Shares and the Class B EUHI Shares had a defined investment life to 1 July 2013 whereupon they would be compulsory redeemed, it was agreed by the Board of directors in May 2010 that it was no longer in the best interests of the Company, Euro High Income Cell (the "Cell") or the holders of Class A EUHI Shares and Class B EUHI Shares for the Company to continue to pursue its stated investment objective for the Cell.  At class meetings of each share class held on 25 June 2010 it was resolved to terminate the Cell and all such shares were compulsory redeemed on 29 June 2010.

 

On 21 June 2007, 37,225,896 BNP Paribas Agrinvest Preference Shares ("Agrinvest Shares") of the BNP Paribas Agrinvest cell were allotted and issued at an issue price of £1.00 each.  The Agrinvest Shares have a defined investment life to 29 June 2013 whereupon they will be subject to compulsory redemption.

 

On 12 March 2008, 30,125,000 Enhanced Property Recovery Preference Shares (the "EPR Shares") of the Enhanced Property Recovery cell were allotted and issued at an issue price of £1.00 each.  The EPR Shares have a defined investment life to 20 March 2014 whereupon they will be subject to compulsory redemption.

 

On 4 June 2008, 34,587,600 Energy - Base Metals (3) Preference Shares ("EBMC Shares") of the Energy - Base Metals (3) cell were allotted and issued at an issue price of £1.00 each.  On 5 September 2008 a further 15,000,000 EBMC Shares were allotted and issued at an issue price of 100.03 pence each.  The EBMC Shares have a defined investment life to 12 June 2014 whereupon they will be subject to compulsory redemption.

 

On 10 July 2008, 72,500 BNP Paribas Agribusiness Preference Shares ("AGRI Shares") of the BNP Paribas Agribusiness cell were allotted and issued at an issue price of HUF 10,000 each.  The AGRI Shares had a defined investment life to 11 February 2011 whereupon they were compulsory redeemed.

 

On 18 March 2009, 24,999,346 Class A Sterling Hedged Enhanced Income Preference Shares ("Class A EIF Shares") of the Enhanced Income cell were allotted and issued at an issue price of £1 each.  On 8 October 2009 a further 15,000,000 Class A EIF Shares were allotted and issued at an issue price of 117.86 pence each.  The Class A EIF Shares have a defined investment life to 19 March 2108 whereupon they will be subject to compulsory redemption on circa 10 May 2108.

 

*The maturity date of the Class A EIF Shares will be the twenty-fourth business day following the relevant record date. As the business days in 2108 cannot yet be accurately determined, an approximate date is disclosed.

 

On 29 May 2009, 25,526,009 Class A Sterling Hedged COMAC Preference Shares ("COM Shares") of the BNP Paribas COMAC cell were allotted and issued at an issue price of £1 each.  The COM Shares have a defined investment life to 01 June 2029 whereupon they will be subject to compulsory redemption on the fifth business day following 01 June 2029.

 

On 15 July 2009, 48,500,080 Class A Sterling Hedged US Enhanced Income Preference Shares ("Class A USEI Shares") of the US Enhanced Income cell were allotted and issued at an issue price of £1 each.  The Class A USEI Shares have a defined investment life to 16 July 2029 whereupon they will be subject to compulsory redemption on circa *1 September 2029.

 

On 14 July 2009, 25,079,125 Class B Unhedged US Enhanced Income Preference Shares ("Class B USEI Shares") of the US Enhanced Income cell were allotted and issued at an issue price of $1 each.  On 8 October 2009 a further 20,000,000 Class B USEI Shares were allotted and issued at an issue price of 109.64 cents each.  The Class B USEI Shares have a defined investment life to 16 July 2029 whereupon they will be subject to compulsory redemption on circa *1 September 2029.

 

*The maturity date of the Class A USEI Shares and Class B USEI Shares will be the twenty-fourth business day following the relevant record date. As the business days in 2029 cannot yet be accurately determined, an approximate date is disclosed.

 

On 23 September 2009, 49,015,722 UK Enhanced Income Preference Shares ("UKEI Shares") of the UK Enhanced Income cell were allotted and issued at an issue price of £1 each.  The UKEI Shares have a defined investment life to 24 September 2029 whereupon they will be subject to compulsorily redemption on circa 8 November 2029.

 

The Company has an unlimited life but the shares of each cell have a defined investment term as set out above.  Holders of the Ordinary Shares have the right to receive notice of and to vote at all meetings of shareholders.

 

Other than the two Ordinary Shares all shares in issue are listed on the Channel Islands Stock Exchange.  The AGRI Shares were until 10 January 2011 listed on the Budapest Stock Exchange and the two Ordinary Shares are not listed.

The Company is managed by its Board of directors who have appointed Harewood Asset Management SAS of Paris, France as the Company's external investment manager of all cells other than BNP Paribas Agribusiness.  Administrative and secretarial support is provided by Anson Fund Managers Limited in Guernsey.  BNP Paribas SA acts as Distributor and Investment Counterparty to all the cells.

 

Directors and Principal Advisors

 

John Le Prevost- Director

John Le Prevost is British and resident in Guernsey. He is a director and controlling shareholder of Anson Group Limited, the holding company of Anson Fund Managers Limited, the Company's Administrator and Secretary, and of Anson Registrars Limited, the Company's registrar, paying agent and receiving agent.  Mr Le Prevost has over thirty years experience in investment and offshore trusts during which time he was Managing Director of County NatWest Investment Management (Channel Islands), Royal Bank of Canada's mutual fund company in Guernsey and Republic National Bank of New York's international trust company.  He is a trustee of the Guernsey Sailing Trust, a director of a number of companies associated with Anson Group Limited's business as well as a non-executive director of many listed investment companies.

 

Francois-Xavier Foucault - Director

Francois-Xavier Foucault is French and resident in France. As well as being a director of the Company,he is currently head of Transforming Projects, Quality Control and Regulatory affairs for BNP Paribas SA. He has also held roles in finance, derivatives and funds at Gen Re Securities, Guaranty City, AXA Investment Managers and BFT (Credit Agricole).

 

Youri Siegel - Director

Mr Siegel is French and a resident of France. As well as being a director of the Company, he is currently the co-head of Regulatory Structuring within the Global Structuring Group of BNP Paribas.  He has also held similar roles at Société Generale and JPMorgan.

 

Peter Atkinson - Director

Peter Atkinson is British and resident in Guernsey.  He is an Advocate of the Royal Court of Guernsey and an English Solicitor. Admitted to the Guernsey Bar in 1980, he was the Senior Partner of Collas Day Advocates for 14 years. He specialised in corporate and fiduciary work and has been and continues to act as a non-executive director of companies within the financial services sector including companies listed on the London and Channel Islands Stock Exchanges. He is a former Chairman of the Guernsey Bar and is the chairman of Anson Group Limited.  

 
BNP Paribas SA - Investment Counterparty and Distributor

The Investment Counterparty and Distributor in respect of all the cells of the Company is BNP Paribas SA. The duty of the Investment Counterparty, in respect of each individual cell, is that of the issuer of debt securities or other financial instruments or the provide of a derivative contract or other financial instrument. The duties of the Distributor includes, inter alia, the preparation of literature to promote the Company and relevant Cell within the United Kingdom and to ensure it complies with the applicable UK requirements and other applicable laws and regulatory requirements, promoting within the United Kingdom investment in the shares of the Company and researching, evaluating and identifying marketing opportunities for promoting investments in the shares of the Company.

 

BNP Paribas SA is a company in the BNP Paribas Group (the "Group").  As of 29 October 2010 the Group had an equity market capitalisation of €62.97 billion (source: Reuters).  The Group is a leading European provider of corporate and investment banking products and services and a leading provider of private banking and asset management products and services throughout the world.  It provides retail banking and financial services to over 20 million individual customers throughout the world, in particular in Europe and the western United States of America.

 

The Group has offices in more than 85 countries.  At 31 December 2009 the Group had audited consolidated assets of €2,057.69 billion and audited shareholders' equity (Group share including income for the 2009 fiscal year) of €69.5 billion.  Audited net income, before taxes, non-recurring items and amortization of goodwill, for the year ended 31 December 2009 was €9 billion.  Audited net income, Group share, for the year ended 31 December 2009 was €5.83 billion.

 
Harewood Asset Management SAS - Investment Manager

The Investment Manager in respect of all cells of the Company, with the exception of Agribusiness, is Harewood Asset Management SAS. The role of the Investment Manager includes, inter alia, the making of investment decisions on behalf of the Company in respect of the assets of the relevant Cell and monitoring the investments attributable to that Cell. BNP Paribas Agribusiness has not appointed an Investment Manager.

 

The Investment Manager is organised as a French Société par Actions Simplifiée, which is a form of limited liability company with simplified legal obligations.  The purpose of the Investment Manager is the creation and management of investment funds on behalf of their investors as outlined in the activity program approved by the Autorité des Marchés Financiers on 11 August 2004.  The Investment Manager may also provide investment advisory services.  The Investment Manager is wholly-owned by BNP Paribas SA.  The Investment Manager is regulated by the Autorité des Marchés Financiers underthe Reglement Général de l'Autorité des Marchés Financiers.

 

Following the acquisition of Parcadia Asset Management, a company incorporated in Luxembourg, Harewood Asset Management now provides investment management services to numerous investment funds domiciled in France, Luxembourg, the Cayman Islands and Guernsey.  As of 31 December 2009, Harewood Asset Management was responsible for the investment management of €4 billion across 100 funds.

 
BNP Paribas Securities Services, Luxembourg Branch - Custodian

BNP Paribas Securities Services, Luxembourg Branch have been appointed by the Company as custodian of the assets of the Company. The Custodian will, amongst carrying out other duties, be responsible for holding assets for the Company and presenting the same for redemption and receiving the proceeds of such redemptions for and on behalf of the Company for the account of the relevant cell for onward payment to Shareholders upon applicable redemption. The Custodian also holds custody over the collateral accounts of each cell, as described on page 33.


 

The Custodian is the Luxembourg Branch of BNP Paribas Securities Services, a fully licensed bank incorporated under French law as a société anonyme (public limited company).  BNP Paribas Securities Services, Luxembourg Branch was created on 28 March 2002 and registered with the Luxembourg Trade and Companies' register under the number of B86.862.  As a branch of a French bank, BNP Paribas Securities Services, Luxembourg Branch is supervised by the Comité des Etablissements de Crédit et des Enterprises d'Investissement (which depends on the French Central Bank, the Banque de France).  It has also been authorised by the Commission de Surveillance du Secteur Financier, the Luxembourg Commission for the Supervision of the Financial Sector to act as a credit institution under the terms of article 30 of the Luxembourg law of 5 April 1993 on the Financial Sector, as amended from time to time.

 

INVESTMENT OBJECTIVE AND POLICY

The Enhanced Global Asset Allocation Cell (herein the "Cell")

The investment objective of the Company for the Cell in respect of the Enhanced Global Asset Allocation Preference Shares (herein the "Shares") is to provide shareholders with the opportunity to participate in the performance of global equity markets through four stock market Indices, being the FTSE 100, the Dow Jones EuroStoxx 50, the Standard & Poor's Composite 500 and the Nikkei 225, using an efficient asset allocation process. The investment return of the Shares is not subject to the risk of foreign exchange movements. 

 

In accordance with the Company's investment objective for the Cell in respect of the Shares, the gross proceeds at launch and at the subsequent issue of Shares were invested in an Index Derivative Contract (the "Contract") with BNP Paribas, the Investment Counterparty.  Under the terms of the Contract the Company contracted to receive, on behalf of the Cell, an amount equalling the funds available for payment of the investment return described in the preceding paragraph. 

 

Full details of the calculation of the investment return, the Contract and collateral arrangements in favour of the Company for the account of the Cell are disclosed in the Cell's Summary and Securities Note, a copy of which is available from the Administrator and from the Distributor.

 

The BNP Paribas FTSE Summit Cell (herein the "Cell")

The investment objective of the Company for the Cell in respect of the BNP Paribas FTSE Summit Preference Shares (herein the "Shares") is to provide shareholders with the opportunity to participate in the performance of the UK equity market through the FTSE 100 Index (the "Index") with the benefit of a minimum redemption amount equal to the principal amount (100 pence) per Share, and with the possibility of benefiting from the highest level of the Index over the six year investment period as determined at monthly intervals provided certain conditions are met. 

 

In accordance with the Company's investment objective for the Cell in respect of the Shares, the gross proceeds at launch and at the subsequent issue of Shares were invested in an Index Derivative Contract (the "Contract") with BNP Paribas, the Investment Counterparty.  Under the terms of the Contract the Company contracted to receive at redemption, on behalf of the Cell, an amount equalling the funds available for payment of the investment return described in the preceding paragraph. 

 

Full details of the calculation of the investment return, the Contract and collateral arrangements in favour of the Company for the account of the Cell are disclosed in the Cell's Summary and Securities Note, a copy of which is available from the Administrator and from the Distributor.

 

The BNP Paribas Energy - Base Metals Secure Growth Cell (herein the "Cell")

The investment objective of the Company for the Cell in respect of the BNP Paribas Energy - Base Metals Secure Growth Preference Shares (herein the "Shares") was to provide shareholders with a geared exposure to any increase in the prices of a notional portfolio of certain energy-related and base metal commodities (the "Commodity Portfolio") over a five year period.  The investment return of the Shares was not subject to the risk of foreign exchange movements save to the extent that the value of the commodities comprised in the Commodity Portfolio, which were priced in US Dollars, may have been affected by fluctuations in value of the US Dollar. 

 

In accordance with the Company's investment objective for the Cell in respect of the Shares, the gross proceeds at launch and at the subsequent issue of Shares were invested in an Index Derivative Contract (the "Contract") with BNP Paribas, the Investment Counterparty.  Under the terms of the Contract the Company contracted to receive at redemption, on behalf of the Cell, an amount equalling the funds available for payment of the investment return. 

 

In accordance with their defined investment life, all EBM Shares were compulsorily redeemed on 5 July 2010.

 

The BNP Paribas UK High Income Cell (herein the "Cell")

The investment objective of the Company for the Cell in respect of the BNP Paribas UK High Income Preference Shares (herein the "Shares"), is to provide shareholders with a stable stream of quarterly dividend distributions based on the dividend income of a notional portfolio of shares selected from the FTSE 100 Index, supplemented by premiums for notional call options written on those shares.  In addition, a purchase of portfolio insurance in the form of a put option linked to the FTSE 100 Index, with a term and maturity matching the term of the shares, aims to reduce the risk of capital loss. 

 

In accordance with the Company's investment objective for the Cell in respect of the Shares, the gross proceeds at launch and at each subsequent issue of Shares were invested in an Index Derivative Contract (the "Contract") with BNP Paribas, the Investment Counterparty.  Under the terms of the Contract the Company contracted to receive (a) on each dividend payment date an amount initially equal to 1.875 pence per Share, which will be applied by the Company in funding payments of dividends to shareholders and (b) at redemption an amount equal to the net asset value of the underlying portfolio.

 

Full details of the calculation of the investment return, the Contract and collateral arrangements in favour of the Company for the account of the Cell are disclosed in the Cell's Summary and Securities Note, a copy of which is available from the Administrator and from the Distributor.

 

The BNP Paribas Energy - Base Metals (2) Cell (herein the "Cell")

The investment objective of the Company for the Cell in respect of the BNP Paribas Energy - Base Metals (2) Preference Shares (herein the "Shares") is to provide shareholders with a geared exposure to any increase in the prices of a notional portfolio of certain energy-related and base metal commodities (the "Commodity Portfolio") over a six year period.  The investment return of the Shares is not subject to the risk of foreign exchange movements save to the extent that the value of the commodities comprised in the Commodity Portfolio, which are priced in US Dollars, may be affected by fluctuations in value of the US Dollar. 

 

In accordance with the Company's investment objective for the Cell in respect of the Shares, the net proceeds at launch were invested in an Index Derivative Contract (the "Contract") with BNP Paribas, the Investment Counterparty.  Under the terms of the Contract the Company contracted to receive at redemption, on behalf of the Cell, an amount equalling the funds available for payment of the investment return.

 

Full details of the calculation of the investment return, the Contract and collateral arrangements in favour of the Company for the account of the Cell are disclosed in the Cell's Summary and Securities Note, a copy of which is available from the Administrator and from the Distributor.

 

The BNP Paribas European Shield Cell (herein the "Cell")

The investment objective of the Company for the Cell in respect of the BNP Paribas European Shield Preference Shares (herein the "Shares") is to provide shareholders with the opportunity to participate in the performance of the leading 50 stocks traded on various European stock exchanges through the Dow Jones Euro STOXX50® Index (the "Index") with

the benefit of a geared return in respect of such performance (not exceeding 71.25 pence per Share), provided certain conditions are met, but subject to the risk, in other circumstances, of the aggregate amount payable being limited to the capital component of 100 pence per Share or a lesser amount linked to the performance of the Index.

 

In accordance with the Company's investment objective for the Cell in respect of the Shares, the net proceeds at launch were invested in an Index Derivative Contract (the "Contract") with BNP Paribas, the Investment Counterparty.  Under the terms of the Contract the Company contracted to receive at redemption, on behalf of the Cell, an amount equalling the funds available for payment of the investment return.

 

 Full details of the calculation of the investment return, the Contract and collateral arrangements in favour of the Company for the account of the Cell are disclosed in the Cell's Summary and Securities Note, a copy of which is available from the Administrator and from the Distributor.

 

The BNP Paribas Absolute Progression Cell (herein the "Cell")

The investment objective of the Company for the Cell in respect of the BNP Paribas Absolute Progression Preference Shares (herein the "Shares") is to provide shareholders with an investment offering a return based on the divergence between stock prices of very large global companies.  The Redemption Amount cannot be less than the capital amount of 100 pence per Share, and the return is linked to the performance, determined on an annual basis by reference to initial values determined on the Strike Date, being 20 July 2006, of a portfolio of shares selected annually from the 50 Shares comprising the Dow Jones Global Titans 50 Index (the "Index"), being shares which have outperformed the Index.  Each year, the excess (if any) of the average annualised performance of the Shares comprising such portfolio above a benchmark level of 5% accrues to holders' Shares and an amount per Share equal to 100 pence multiplied by such accrual is paid to holders of Shares on the Redemption Date, being 26 July 2012.  The objective of the Index is to represent multi-national companies whose stocks are traded on major exchanges of countries covered by the Dow Jones Global Indices benchmark family.

 

In accordance with the Company's investment objective for the Cell in respect of the Shares, the net proceeds at launch were invested in an Index Derivative Contract (the "Contract") with BNP Paribas, the Investment Counterparty.  Under the terms of the Contract the Company contracted to receive at redemption, on behalf of the Cell, an amount equalling the funds available for payment of the investment return.

 

Full details of the calculation of the investment return, the Contract and collateral arrangements in favour of the Company for the account of the Cell are disclosed in the Cell's

Summary and Securities Note, a copy of which is available from the Administrator and from the Distributor.

 

The US High Income Cell (herein the "Cell")

The investment objective of the Company for the Cell in respect of the US High Income Preference Shares (herein the "Shares"), is to provide shareholders with a stable stream of quarterly dividend distributions based on the dividend income of a notional portfolio of shares selected from the S&P 100 Index, supplemented by premiums for notional call options written on those shares.  In addition, a purchase of portfolio insurance in the form of a put option linked to the S&P 100 Index, with a term and maturity matching the term of the shares, aims to reduce the risk of capital loss. 

 

In accordance with the Company's investment objective for the Cell in respect of the Shares, the gross proceeds at launch and at the subsequent issue of Shares were invested in an Index Derivative Contract (the "Contract") with BNP Paribas, the Investment Counterparty. Under the terms of the Contract the Company contracted to receive on each dividend payment date an amount equal to 1.875 pence or cents per Share, which will be applied by the Company in funding the payment of dividends to shareholders, and at redemption an amount equal to the net asset value of the underlying portfolio. 

 

Full details of the calculation of the investment return, the Contract and collateral arrangements in favour of the Company for the account of the Cell are disclosed in the Cell's Summary and Securities Note, a copy of which is available from the Administrator and from the Distributor.

 

The Euro High Income Cell (herein the "Cell")

The investment objective of the Company for the Cell in respect of theEuro High Income Preference Shares (herein the "Shares") was to provide shareholders with a stable stream of quarterly dividend distributions based on the dividend income of a notional portfolio of shares in Eurozone companies selected from the Dow Jones Euro STOXX 50® Index, supplemented by premiums for notional call options written on those shares. In addition, a purchase of portfolio insurance in the form of a put option linked to the Dow Jones Euro STOXX 50® Index, with a term and maturity matching the term of the Shares, aimed to reduce the risk of capital loss.

 

In accordance with the Company's investment objective for the Cell in respect of the Shares, the net proceeds at launch were invested in an Index Derivative Contract (the "Contract") with BNP Paribas, the Investment Counterparty.  Under the terms of the Contract the Company contracted to receive on each dividend payment date an amount equal to 1.875 pence or cents per Share, which were applied by the Company in funding the payment of dividends to shareholders, and at redemption an amount equal to the net asset value of the underlying portfolio.

 

Whilst at the time of issue the Class A EUHI Shares and the Class B EUHI Shares had a defined investment life to 1 July 2013 whereupon they would be compulsory redeemed, it was agreed by the Board of directors in May 2010 that it was no longer in the best interests of the Company, Euro High Income Cell (the "Cell") or the holders of Class A EUHI Shares and Class B EUHI Shares for the Company to continue to pursue its stated investment objective for the Cell.  At class meetings of each share class held on 25 June 2010 it was resolved to terminate the Cell and all such shares were compulsory redeemed on 29 June 2010.

 

The BNP Paribas Agrinvest Preference Cell (herein the "Cell")

The investment objective of the Company for the Cell in respect of the BNP Paribas Agrinvest Shares (herein the "Shares") is to provide shareholders with the opportunity to participate in the performance of exchange-traded commodities futures comprised in the DCI® Agriculture BNP Paribas Enhanced Excess Return Index (the "Index"). The Index is designed to provide a broad yet liquid representation of large, mid and small commodity futures inside the Organisation for Economic Cooperation and Development (OECD). The Index consists of 23 components within the agriculture sector. The Index is also subject to a forward curve roll optimisation process through the addition of a quantitative enhancement algorithm.

 

In accordance with the Company's investment objective for the Cell in respect of the Shares, the net proceeds at launch were invested in an Index Derivative Contract (the "Contract") with BNP Paribas, the Investment Counterparty.  Under the terms of the Contract the Company contracted to receive at redemption, on behalf of the Cell, an amount equalling the funds available for payment of the investment return.

 

Full details of the calculation of the investment return, the Contract and collateral arrangements in favour of the Company for the account of the Cell are disclosed in the Cell's Summary and Securities Note, a copy of which is available from the Administrator and from the Distributor.

 

The Enhanced Property Recovery Cell (herein the "Cell")

The investment objective of the Company for the Cell in respect of the Enhanced Property Recovery Preference Shares (herein the "Shares") is to provide shareholders with the opportunity to participate in the performance of shares traded on various European stock exchanges through the FTSE EPRA Europe Real Estate Index (the "Index"). The Index is an index designed to track the performance of listed real estate companies in Europe. The Final Redemption Amount will be determined principally by reference to two values - the first (defined as the "Initial Index Level") being the level of the Index determined on 13 March 2008, the second (defined as the "Final Index Level") being the arithmetic average of thelevels of the Index on 13 monthly averaging dates from and including 13 March 2013 to and including the Maturity Date.

 

In accordance with the Company's investment objective for the Cell in respect of the Shares, the net proceeds at launch were invested in an Index Derivative Contract (the "Contract") with BNP Paribas, the Investment Counterparty.  Under the terms of the Contract the Company contracted to receive at redemption, on behalf of the Cell, an amount equalling the funds available for payment of the investment return.

 

Full details of the calculation of the investment return, the Contract and collateral arrangements in favour of the Company for the account of the Cell are disclosed in the Cell's Summary and Securities Note, a copy of which is available from the Administrator and from the Distributor.

 

The Energy - Base Metals (3) Cell (herein the "Cell")

The investment objective of the Company for the Cell in respect of the Energy - Base Metals (3) Preference Shares (herein the "Shares") is to provide shareholders with a geared exposure to any increase in the prices of a notional portfolio of certain energy related and base metal commodities (the "Commodity Portfolio") over a six-year period.  The Commodity Portfolio is a notional portfolio of commodities comprising 30% crude oil, 20% aluminium, 20% copper, 15% nickel and 15% zinc.  The investment return of the Shares is not subject to the risk of foreign exchange movements save to the extent that the value of the commoditiescomprised in the notional portfolio, which are priced in US dollars, may be affected by the fluctuations in value of the US dollar. 

 

In accordance with the Company's investment objective for the Cell in respect of the Shares, the net proceeds at launch were invested in an Index Derivative Contract (the "Contract") with BNP Paribas, the Investment Counterparty.  Under the terms of the Contract the Company contracted to receive at redemption, on behalf of the Cell, an amount equalling the funds available for payment of the investment return.

 

Full details of the calculation of the investment return, the Contract and collateral arrangements in favour of the Company for the account of the Cell are disclosed in the Cell's Summary and Securities Note, a copy of which is available from the Administrator and from the Distributor.

 

The BNP Paribas Agribusiness Cell (herein the "Cell")

The investment objective of the Company for the Cell in respect of the BNP Paribas Agribusiness Preference Shares (herein the "Shares") was to provide shareholders with the opportunity to participate, through a dividend payable on the Shares (the "Dividend Amount"), in the performance of shares of companies whose revenues are linked to the agribusiness industry through the BNP Paribas Global Agribusiness Excess Return Index (Reuters code: BNPIGAER Index) (the "Index").

 

In accordance with the Company's investment objective for the Cell in respect of the Shares, the net proceeds at launch were invested in an Index Derivative Contract (the "Contract")with BNP Paribas, the Investment Counterparty.  Under the terms of the Contract the Company contracted to receive in respect of the dividend payment date an amount equal to the dividend amount due to shareholders, which was applied by the Company in funding the payment of any dividend due to shareholders, and at redemption an amount equalling HUF 10,000 per share to finance the payment of the redemption proceeds due to shareholders.

 

All of these returns were received by holders of the Shares and they were, in accordance with their defined life, compulsory redeemed on 11 February 2011.

 

The Enhanced Income Cell (herein the "Cell")

The investment objective of the Company for the Cell in respect of the Enhanced Income Preference Shares (herein the "Shares") is to provide shareholders with a stable stream of quarterly dividend distributions (with a targeted dividend yield of approximately 8% per annum, subject to increase and decrease in certain circumstances) and return on capital, such investment objective being intended to be achieved by reference to an investment strategy linked to the total return performance of the Dow Jones Euro STOXX 50® Index (herein the "Index") and notional short-term call options written on the Index.

 

In accordance with the Company's investment objective for the Cell, the gross proceeds at launch were invested in an index derivative contract (the "Contract") with BNP Paribas, the

Counterparty. Under the terms of the Contract the Company contracted to receive on each dividend payment date an amount initially equal to 2 pence per Share, which will be applied by the Company in funding the payment of dividends to shareholders and at redemption an amount equal to the net asset value of the underlying portfolio.

 

Full details of the calculation of the investment return, the Contract and the collateral arrangements are disclosed in the Cell's Summary and Securities Note, a copy of which is available from the Administrator and from the Distributor.

 

The BNP Paribas COMAC Cell (herein the "Cell")

The investment objective of the Company for the Cell in respect of the Class A Sterling Hedged COMAC Preference Shares (herein the "Shares") is to provide shareholders with exposure to the performance of an actively managed long short arbitrage strategy (the "Strategy") based on a portfolio of 25 commodities through the BNP PARIBAS COMAC Long-Short Total Return Net of Fees Index (the "Index").  The Index is denominated in US

Dollars and is designed to track the performance of an actively managed portfolio of 25 commodities selected from the energy, metals and agricultural sectors, the respective weightings of which are determined in accordance with an investment strategy based on recommendations provided by the asset managers which, from time to time, provides the scores used in the determination of the weightings of the different commodities comprising the Index, and a rules-based proprietary methodology designed by BNP Paribas (the "Index Methodology").  The Strategy is also linked to notional currency hedging intended to provide a level of protection against changes in the Sterling / US Dollar exchange rate. 

 

In accordance with the Company's investment objective for the Cell, the net proceeds at launch were invested in an index derivative contract (the "Contract") with BNP Paribas, the Counterparty.  Under the terms of the Contract the Company contracted to receive at redemption, on behalf of the Cell, an amount equalling the funds available for payment of the investment return.

 

Full details of the calculation of the investment return, the Contract and the collateral arrangements in favour of the Company for the account of the Cell are disclosed in the Cell's Summary and Securities Note, a copy of which is available from the Administrator and from the Distributor.

 

The US Enhanced Income Cell (herein the "Cell")

The investment objective of the Company for the Cell in respect of the US Enhanced Income Preference Shares (herein the "Shares") is to provide shareholders with a stable stream of quarterly dividend distributions (with a targeted dividend yield of approximately 8% per annum, subject to increase and decrease in certain circumstances) and return on capital, such investment objective being intended to be achieved by reference to an investment strategy linked to the total return performance of the Standard and Poor's 500® Index and notional short-term call options written on such index.

 

In accordance with the Company's investment objective for the Cell, the net proceeds at launch and at the subsequent issue of Shares were invested in an index derivative contract (the "Contract") with BNP Paribas, the Counterparty.  Under the terms of the Contract the

Company contracted to receive on each dividend payment date an amount initially equal to 2 pence or cents per Share, which will be applied by the Company in funding the payment of dividends to shareholders, and at redemption an amount equal to the net asset value of the underlying portfolio.

 

Full details of the calculation of the investment return, the Contract and the collateral arrangements in favour of the Company for the account of the Cell are disclosed in the Cell's Summary and Securities Note, a copy of which is available from the Administrator and from the Distributor.

 

The UK Enhanced Income Cell (herein the "Cell")

The investment objective of the Company for the Cell in respect of the UK Enhanced Income Preference Shares (herein the "Shares") is to provide shareholders with a stable stream of quarterly dividend distributions (with a targeted dividend yield of approximately 8% per annum, subject to increase and decrease in certain circumstances) and return on capital, such investment objective being intended to be achieved by reference to an investment strategy linked to the total return performance of the FTSE 100 Index  and notional short-term call options written on such index.

 

In accordance with the Company's investment objective for the Cell, the net proceeds at launch were invested in an index derivative contract (the "Contract") with BNP Paribas, the Counterparty.  Under the terms of the Contract the Company contracted to receive on each dividend payment date an amount initially equal to 2 pence per Share, which will be applied by the Company in funding the payment of dividends to shareholders, and at redemption an amount equal to the net asset value of the underlying portfolio.

 

Full details of the calculation of the investment return, the Contract and the collateral arrangements in favour of the Company for the account of the Cell are disclosed in the Cell's Summary and Securities Note, a copy of which is available from the Administrator and from the Distributor.

 

NET ASSET VALUES

As at 29 October 2010, being the latest valuation date prior to the accounting reference date, the calculated net asset value of a share of each cell in existence at that date was as follows:-


As at

29 Oct 2010

 

As at

30 Oct 2009

 

Enhanced Global Asset Allocation ("EGAA")

 

137.56 pence

135.90 pence

BNP Paribas FTSE Summit ("FTSE S")

 

129.75 pence

128.66 pence

BNP Paribas Energy - Base Metals Secure Growth ("EBSMG")

 

-

272.70 pence

BNP Paribas UK High Income ("UK HI")

 

56.52 pence

68.98 pence

BNP Paribas Energy - Base Metals (2) ("EBM (2)")

 

176.14 pence

159.26 pence

BNP Paribas European Shield ("ES")

 

92.27 pence

87.93 pence

BNP Paribas Absolute Progression ("Abs Pro")

 

123.66 pence

118.01 pence

US High Income - Class A ("US HI A")

 

66.33 pence

74.01 pence

US High Income - Class B ("US HI B")

69.71 US$ cents

76.31 US$ cents

 

Euro High Income - Class A ("Euro HI A")

 

-

53.51 pence

Euro High Income - Class B ("Euro HI B")

 

-

53.15 Euro cents

BNP Paribas Agrinvest ("Agrinvest")

 

126.24 pence

102.39 pence

Enhanced Property Recovery ("EHPR")

 

79.37 pence

67.18 pence

Energy - Base Metals (3) ("EMB (3)")

 

110.85 pence

104.68 pence

BNP Paribas Agribusiness ("Agribusiness")

 

10,886 HUF

9,479 HUF

Enhanced Income - Class A ("EIF")

 

108.88 pence

113.85 pence

BNP Paribas COMAC ("COM")

 

84.75 pence

78.39 pence

US Enhanced Income - Class A ("US EI A")

 

105.57 pence

105.74 pence

US Enhanced Income - Class B ("US EI B")

 

105.83 US$ cents

105.73 US$ cents

UK Enhanced Income ("UKEI")

 

100.52 pence

101.69 pence

 

MANAGEMENT REPORT

A description of important events which 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 Investment Manager's Report on pages 35 to 56 and is incorporated here by reference.

 

Details of related party transactions are given in note 7 to the financial statements.  Details of material related party transactions are referred to on page 28.

 

Going Concern

 

The performance of the investments held by the Company for the account of each of its cells over the year and the outlook for the future are described in the Investment 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 are set out at note 6 to the financial statements.

 

As disclosed in note 6(d) to the financial statements, the only financial commitments of the Company are its ongoing operating expenses and obligations to shareholders on the redemption of their shares of a cell.  BNP Paribas has agreed to reimburse the Company for or, on behalf of the Company, pay in full all of its ongoing operating expenses.  On the redemption of shares of a cell the holders of such shares shall only be entitled to the net asset value of such shares, which will be calculated by reference to the proceeds received under the relevant contract entered into between the Company acting on behalf of the relevant cell and BNP Paribas on the maturity or early termination of that contract.

 

After making enquiries, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.

 

Responsibility Statement

The Board of directors jointly and severally confirm that, to the best of their knowledge:

(a)        the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and

(b)        This 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.

 

John R Le Prevost                              Peter Atkinson

Director                                               Director

25 February 2011

 

INVESTMENT MANAGER'S REPORT

 

On the invitation of the Directors of the Company, the following commentary is provided by Harewood Asset Management SAS, the Investment Manager.  Their commentary is provided as a source of useful information for shareholders of the Company but is not directly attributable to the Company.

 

Enhanced Global Asset Allocation

 

Listing: Channel Islands Stock Exchange

Launch date: 18 March 2005

Issue price at launch: 100 pence per share

NAV at launch: 96.50 pence per share (before Investment Counterparty fees of 3.5 pence per share)

Maturity date: 17 March 2011

ISIN: GB00B02FJD84

SEDOL: B02FJD8

Epic Code: EGA

 

Investment Objective

Enhanced Global Asset Allocation ("EGA") offers exposure over 6 years to the FTSE100, DJEuroStoxx50, S&P500 and Nikkei 225 (the "Indexes").  There are two principal features: the first is that growth becomes protected in each Index when it reaches 15%, 30% and 45% above its launch level (this is tested quarterly).  The second feature involves the allocation of 40% of the return to the best-performing index at maturity (or protected level if higher), 30% to the next best (or protected level if higher), 20% to the next (or protected level if higher) and 10% to the worst (or protected level if higher).

 

The levels of the Indexes recorded at launch and as of 29 October 2010, and the thresholds at which performance can become protected are set out in the table below.  The Indexes are observed on the following dates each year (or the next business day if applicable): 18 March, 18 June, 18 September and 18 December.

 

Index Name

Level at start

Value as at                       29-Oct-10

Change

Next observation date for lock-ins

15% lock-in level

30% lock-in level

45% lock-in level

Min return locked-in

Euro Stoxx 50

          3,053.54

          2,844.99

-6.8%

20-Dec-10

     3,511.57

     3,969.60

     4,427.63

45%

FTSE 100

          4,923.30

          5,675.16

15.3%

20-Dec-10

     5,661.80

     6,400.29

     7,138.79

30%

Nikkei 225

        11,879.81

        9,202.45

-22.5%

20-Dec-10

  13,661.78

  15,443.75

   17,225.72

45%

S&P 500

          1,189.65

          1,183.26

-0.5%

20-Dec-10

     1,368.10

     1,546.55

     1,724.99

15%

Source for Index Price Information: Bloomberg

 

Investment Performance

Between launch on 18 March 2005 and close on 29 October 2010 (the last business day prior to the balance sheet date) the NAV had risen by 42.5% (based on an initial NAV of 96.50 pence).  Over the same period, the MSCI World Total Return index (which we regard as an appropriate benchmark) had risen by 4.5%, the FTSE 100 had risen by 15.3%, the S&P 500 had fallen by 0.5%, the Euro Stoxx 50 had fallen by 6.8% and the Nikkei had also fallen by 22.5%. 

 

The highest NAV reached since launch represented a value per share of 144.09 pence and a highest performance since launch of 49.32% (based on an initial NAV of 96.50 pence).  This occurred as of closing on 10 December 2007.  The lowest NAV reached since launch represented a value per share of 94.26 pence and a performance since launch of -2.32% (based on an initial NAV of 96.50 pence).  This occurred on 29 April 2005.

 

Prior to the balance sheet date the indexes were observed on 18 March 2010 with respect to the thresholds at which lock-ins occur.  The Nikkei 225 and the DJ EuroStoxx have locked in a minimum return of 45%, the FTSE 100 index has locked in a minimum return of 30% and the S & P 500 Index has locked in a minimum of 15%.  As a result, if all the indices were to fall to zero on the maturity date, the minimum redemption value would now be 139.0 pence per share.

 

BNP Paribas FTSE Summit

 

Listing: Channel Islands Stock Exchange

Launch date: 30 June 2005

Issue price: 100 pence

NAV at launch: 100 pence

Maturity date: 29 June 2011

ISIN: GB00B0B8FC95

SEDOL: B0B8FC9

Epic Code: FSM

 

Investment Objective

BNP Paribas FTSE Summit ("FSM") is a six-year investment that pays the return of the highest observed performance of the FTSE 100 Index (the "Index") over that period, irrespective of the level of the index at maturity.  The closing price of the Index is observed on the 29 June 2011 (whichever is earlier, or the next business day if exchanges are closed).  If the index ever falls by 50% from its initial level at any time then 100 pence is returned at maturity.

 

Index name

Value at start

Value as of               29-Oct-10

Change

Next observation date

Highest FTSE closing level recorded

Minimum protected return

FTSE 100 Index

5,113.2

5,675.2

10.99%

29-Nov-10

6,706.0

131.15%

 

 

Source for Index Price Information: Bloomberg

 

Investment Performance

Between launch on 30 June 2005 and close on 29 October 2010 the NAV had risen by 29.8%, ahead of the 11.0% increase in the FTSE.

 

The highest NAV reached since launch represented a value per share of 143.81 pence and a performance since the launch NAV of 43.81%.  This occurred as of closing on 31 October 2007.  The lowest NAV was the launch NAV of 100 pence.

 

BNP Paribas Energy-Base Metals Secure Growth

 

Listing: Channel Islands Stock Exchange

Launch date: 30 June 2005

Issue price at launch: 100 pence

NAV at launch: 100 pence

Maturity date: June 29, 2010

ISIN: GB00B0B8H459

SEDOL: B0B8H45

Epic Code: EBM

 

This product matured with a NAV of 241.9%.

 

Investment Objective

BNP Paribas Energy-Base Metals Secure Growth ("EBM") is a five-year investment offering 340% of the upside of the spot prices of a portfolio of commodities.  The portfolio comprises West Texas Intermediate Oil (30%), Aluminium (20%), Copper (20%), Nickel (15%) and Zinc (15%).  If the portfolio performance is negative over six years, 100 pence is returned at maturity.

 

The name and weighting of each commodity, the spot prices of each commodity recorded at launch (the nearest futures price in the case of oil) and as of 29 June  2010 are set out in the table below.

 

Commodity name

Value at Start

Value as of            29-June-10

Change

Weight

Aluminium

1716.00

1962.50

14.4%

20.0%

Copper

3597.00

6585.00

83.1%

20.0%

Nickel

14700.00

19935.00

35.6%

15.0%

West Texas Intermediate

56.50

75.94

34.4%

30.0%

Zinc

1223.00

1759.50

43.9%

15.0%

 

Source for Commodity values Information: Bloomberg

 

Investment Performance

The fund matured in 29th June 2010.

 

Between launch on 30 June 2005 and redemption on 29 June 2010 the NAV had risen by 141.9%.  Over this period the DJ UBS Commodities Total Return Index had fallen by 18.7%.  The principle factors underlying EBM's performance are the NAV's sensitivity to the direction of commodity spot and forward prices and high sensitivity to changes in the volatility of forward commodity prices.

 

The highest NAV reached since launch represented a value per share of 415.90 pence and a performance since the launch NAV of 315.90%. This occurred on 11 July 2008. The lowest NAV reached since launch represented a value per share of 96.86 pence and a performance since the launch NAV of -3.1%.  This occurred on 18 July 2005.

 

BNP Paribas UK High Income

 

Listing: Channel Islands Stock Exchange

Launch date: 9 December 2005

Issue price at launch: 100 pence

NAV immediately following launch: 98.75 pence

Maturity date: 8 December 2011

ISIN: GB00B0N4CX50

SEDOL: B0N4CX50

Epic Code: UKH

 

Investment Objective

BNP Paribas UK High Income ("UKH") is a six-year investment aiming to provide shareholders with a stable stream of quarterly dividend distributions based on the dividend income of a notional portfolio of shares selected from the FTSE 100 Index, supplemented by premiums for notional call options written on those shares.  In addition, a purchase of portfolio insurance in the form of a put option linked to the FTSE 100 Index, with a term and maturity matching the term of the Shares, aims to reduce the risk of capital loss.

 

BNP Paribas UK High Income launched on 9 December 2005 with an initial NAV of 98.75 pence.  On this date (a) the portfolio of shares was selected and purchased (b) the corresponding 3-month call options were sold with an average strike price of 105.5% of the value of the shares (c) the portfolio insurance was acquired.  This takes the form of a six-year put option on the FTSE 100 with a strike level of 5,517.4.

 

The name and weighting of each selected share and its performance between 8 September 2010 (representing the most recent rebalancing of the portfolio) and 29 October 2010 are set out in the table below.

Stock

Strike price at 08-Sep-10

Current price at 29-Oct-10

Performance at  29-Oct-10

Option strike price

Share portfolio weighting at Strike Date

Weighting at 29-Oct-10

Anglo American

2499.00

2,908.00

16.37%

2,526

5.7%

6.33%

Astrazeneca

3333.50

3,129.50

-6.12%

3,353

5.6%

4.98%

Aviva

391.00

398.10

1.82%

395

4.2%

4.08%

BAE Systems

323.30

344.70

6.62%

326

4.2%

4.20%

BG Group

1076.00

1,215.50

12.96%

1,086

5.6%

6.00%

BHP Billiton

1890.00

2,213.50

17.12%

1,909

5.7%

6.30%

BP PLC

412.15

425.80

3.31%

416

7.0%

6.86%

BSKYB

710.50

706.50

-0.56%

713

2.8%

2.63%

British American Tobacco

2319.00

2,380.00

2.63%

2,332

5.6%

5.45%

Glaxosmithkline

1266.00

1,221.00

-3.55%

1,273

7.0%

6.38%

HSBC Holdings

654.80

649.10

-0.87%

660

7.0%

6.57%

National Grid

548.00

590.00

7.66%

551

4.2%

4.29%

Rio Tinto

3470.50

4,036.00

16.29%

3,510

7.1%

7.86%

Royal Dutch Shell

1764.00

1,998.50

13.29%

1,775

5.7%

6.08%

RSA Insurance Group

125.90

131.00

4.05%

127

1.4%

1.38%

J Sainsbury Ltd

376.00

389.30

3.54%

379

2.8%

2.77%

Scottish & Southern Energy

1178.00

1,153.00

-2.12%

1,184

4.2%

3.91%

Severn Trent PLC

1378.00

1,395.00

1.23%

1,384

1.4%

1.35%

Tesco

414.75

426.85

2.92%

417

5.6%

5.49%

Vodafone Group

159.80

169.85

6.29%

161

7.1%

7.10%

 Source for Share Price Information: Bloomberg

 

Investment Performance

Between launch on 9 December 2005 and close on 29 October 2010 the Total Return Performance had fallen by 9.0% (based on the initial NAV of 100 pence).  The directors declared interim dividends of 1.875 pence per share on 8 November 2007, 7 February 2008, 8 May 2008, 7 August 2008 6 November 2008, 5 February 2009, 7 May 2009, 6 August 2009, 5 November 2009, 7 February 2010, 11 May 2010, 11 August 2010 and 10 November 2010.

 

BNP Paribas Energy-Base Metals (2)

 

Listing: Channel Islands Stock Exchange

Launch date: 23 March 2006

Issue price at launch: 100 pence

NAV at launch: 100 pence

Maturity date: 22 March 2012

ISIN: GB00B0ZNS989

SEDOL: B0ZNS98

Epic Code: EBMB

 

Investment Objective

BNP Paribas Energy-Base Metals 2 ("EBMB") is a six-year investment offering 230% of the upside of the spot prices of a portfolio of commodities.  The portfolio comprises West Texas Intermediate Oil (30%), Aluminium (20%), Copper (20%), Nickel (15%) and Zinc (15%).  If the portfolio performance is negative over six years, 100 pence is returned at maturity.  The name and weighting of each commodity, the spot prices of each commodity recorded at launch (the nearest futures price in the case of oil) and as of 29 October, 2010 are set out in the table below.

 

Source for commodity values information:  Bloomberg

 

 

Investment Performance

Between launch on 23 March 2006 and 29 October 2010 the Total Return Performance had risen by 76.1%.  Over this period the DJ UBS Commodities Excess Return Index had fallen by 9.5%.

 

BNP Paribas European Shield

 

Listing: Channel Islands Stock Exchange

Launch date: 28 April 2006

Issue price at launch: 100 pence

NAV immediately following launch: 100.00 pence

Maturity date: 26 April 2012

ISIN: GB00B12GMC87

SEDOL: B12GMC8

 

Investment Objective

The BNP Paribas European Shield is a six-year fund returning 171.25p per share at maturity provided that, at maturity, the DJ Euro Stoxx 50 Index is at or above its initial level of 3,865.42.  This is equivalent to an annualised return of 8.5% on the application price of 105p.  The redemption value per share is reduced linearly from 171.25p to 100p per share as the index falls from 100% to 85% of its initial level.  The redemption value per share of 100p is protected unless the index falls by 50% from its initial level at any point over the six year life.  If downside is triggered and the index fails to recover to 85% of the initial level, investors will participate in index tracking plus 15p per share.

 

The level of the Index recorded at launch and as 29 October 2010, the level of the Index at maturity required to return a redemption value per share of 171.25 pence, the Index level which, if breached at any time, results in the potential loss of capital and the lowest observed level of the Index to date are set out in the table below.

 

Index name

Initial Level

Value as of            31-Oct-10

Change

85% Barrier Level

50% Barrier Level

Lowest observed Index Level

DJ Euro Stoxx 50

3865.4

2845.0

-26.4%

3285.6

1932.7

1810.0

 

Source for Index Price Information: Bloomberg

 

Investment Performance

Between launch on April 27 2006 and close on 29 October  2010 the NAV has fallen by 7.7% versus a 26.4.% decline in the Eurostoxx 50 Index.

 

BNP Paribas Absolute Progression

 

Listing: Channel Islands Stock Exchange

Launch date: 20 July 2006

Issue price at launch: 100 pence

NAV immediately following launch: 100.00 pence

Maturity date: 19 July 2012

ISIN: GB00B17WK500

SEDOL: B17WK500

 

Investment Objective

This 6-year maturity fund produces absolute returns based on the divergence, rather than the direction, of stock performance.  The fund focuses on the share components of the Dow Jones Global Titans Index, an index that includes the world's 50 largest multinational companies. On each anniversary of launch the fund's portfolio is, retrospectively, made up of the shares that have beaten the index over the previous year in equal weightings.  The fund's return for each year equals the amount by which this portfolio's annualised performance beats the index less a hurdle rate of 5%.

 

The level of the Index recorded at launch and as of 29 October 2010 is set out in the table below.

 

DJGT Components

Strike Price

Current Value at 30 Sep 10

% change

Out-performance

Abbot Labs

46.21

51.32

11.06%

26.64%

AT&T Inc

27.30

28.50

4.40%

19.98%

Chevron Texaco Corp

65.32

82.61

26.47%

42.06%

Cisco Systems

17.88

22.83

27.68%

43.27%

Coca Cola

43.84

61.32

39.87%

55.46%

CONOCOPHILIPPS

64.43

59.40

-7.81%

7.78%

Exxon Mobil Corp

64.25

66.47

3.46%

19.04%

Hewlett packard

31.80

42.06

32.26%

47.85%

IBM

75.48

143.60

90.25%

105.84%

Intel Corp

17.15

20.07

17.03%

32.61%

Johnson & Johnson

61.37

63.67

3.75%

19.33%

JP Morgan Chase

42.98

37.63

-12.45%

3.14%

Merck

37.30

36.28

-2.73%

12.85%

Microsoft

22.85

26.64

16.59%

32.17%

Nestle

39.15

53.90

37.68%

53.26%

Pepsi Cola

62.48

65.30

4.51%

20.10%

Phillip Morris

41.05

58.50

42.51%

58.10%

Procter & Gamble

56.61

63.57

12.29%

27.88%

Royal Dutch Shell

26.54

23.31

-12.19%

3.40%

Samsung Electronics

598,000.00

745,000.00

24.58%

40.17%

Siemens

64.43

82.08

27.39%

42.98%

Telefonica

13.04

19.40

48.77%

64.36%

Verizon

30.94

32.47

4.96%

20.54%

Vodafone

113.40

169.85

49.78%

65.37%

Wal-Mart Stores

44.29

54.17

23.31

37.89%






Portfolio Average




36.08%

Annualised Since Launch



7.46%

Source for Share Price Information: Bloomberg

 

As of 29 October 2010, the NAV had risen by 23.7% since.  Since launch, 27 stocks had outperformed the DJGT Index.  The average out-performance had been 36.08%.

 

Class A Sterling Hedged US High Income Preference Shares and Class B Unhedged US High Income Preference Shares

 

Listing: Channel Islands Stock Exchange

Launch date: 26 October 2006

Issue price at launch: 100 pence

NAV immediately following launch: 99 pence class A & $0.99 class B

Maturity date: 19 November 2012

Class A ISIN: GG00B1FP4W69

Class A SEDOL: B1FP4W6

Class B ISIN: GG00B1FP4X76

Class B SEDOL: B1FP4X7

 

Investment Objective

BNP Paribas US High Income ("USH" for Class A and "USHD" for Class B) is a six-year investment aiming to provide shareholders with a stable stream of quarterly dividend distributions based on the dividend income of a notional portfolio of shares selected from the S&P 100 Index, supplemented by premiums for notional call options written on those shares. This selection of shares is rebalanced on a quarterly basis. In addition, a purchase of portfolio insurance in the form of a put option linked to the S&P 100 Index, with a term and maturity matching the term of the Shares, aims to reduce the risk of capital loss.

 

BNP Paribas US High Income launched on 26 October 2006 with an initial NAV of 99 pence ($0.99 for class B).  On this date (a) a portfolio of shares was selected and purchased (b) the corresponding 3-month call options were sold with an average strike price of 104.3% of the value of the shares and (c) the portfolio insurance was acquired.  This takes the form of a six-year put option on the S&P 100 with a strike level of 645.42.

 

The name and weighting of each selected share and its performance as of 29 October 2010 are set out in the table below.

Stock

Strike Price at 23-Aug-2010

Current price at 29-Oct-10

Performance at 29-Oct-10

Option strike price

Weighting at Strike Date

Weighting at 29-Oct-10

Altria Group

22.73

25.4175

11.82%

23.42

2.70%

2.81%

AT&T

26.49

28.52

7.66%

27.39

5.41%

5.41%

Bank of America

12.87

11.449

-11.04%

13.73

5.41%

4.47%

Chevron Corp

75.05

82.6

10.06%

78.23

5.41%

5.53%

Ei di Pont de Nemours

40.37

47.28

17.12%

42.45

2.70%

2.94%

Exxon Mobil

59.5

66.49

11.75%

61.94

6.76%

7.02%

General Electric

14.89

16.02

7.59%

15.67

6.76%

6.76%

IBM

126.47

143.6

13.54%

131.32

5.41%

5.71%

Intel Corporation

18.7

20.05

7.22%

19.74

5.41%

5.39%

JP Morgan

36.88

37.63

2.03%

39.00

5.41%

5.13%

Johnson & Johnson

58.87

63.74

8.27%

60.67

6.76%

6.80%

McDonalds

73.34

77.77

6.04%

75.79

4.05%

4.00%

Microsoft

24.28

26.665

9.82%

25.44

6.76%

6.90%

Pfizer Inc.

16.1

17.415

8.17%

16.9

5.41%

5.44%

Phillip Morris International

51.73

58.51

13.11%

53.68

4.05%

4.26%

Procter&Gamble

60.03

63.57

5.90%

61.91

6.76%

6.65%

Southern Co.

35.88

37.87

5.55%

36.9

1.35%

1.33%

UPS

65.22

67.34

3.25%

68.12

4.05%

3.89%

Walt Disney Co

32.93

36.125

9.70%

34.61

4.05%

4.14%

Wells Fargo & Co

24.23

26.06

7.55%

25.83

5.41%

5.41%








S&P 100

413.54

533.08

28.91%




Weighted Basket Performance



7.53%




Source for Share Price Information: Bloomberg

 

Investment Performance

Between launch on 26 October 2006 and close on 29 October 2010 the Total Return Performance was 0.70% and 0.90% respectively for class A and class B (based on an initial NAV of 100 pence and 100 cents respectively for class A and class B) compared with the S&P TR Performance, which declined 5.6% over that period.  The directors declared interim dividends of 1.875 pence per Class A Sterling Hedged US High Income Preference Share and 1.875 cents per Class B Unhedged US High Income Preference Share on 17 January 2008, 17 April 2008, 17 July 2008, 23 October 2008, 22 January 2009, 23 April 2009, 23 July 2009, 22 October 2009, 21 January 2010, 17 April 2010 and 21 October 2010.

 

Class A Sterling Hedged Euro High Income Preference Shares and Class B Unhedged Euro High Income Preference Shares

 

Listing: Channel Islands Stock Exchange

Launch date: 22 June 2007

Issue price at launch: £1 class A & €1 class B

NAV immediately following launch: 99 pence Class A and 99 cents class B

Maturity date: 25 June 2010

Class A ISIN: GG00B1YKCQ26

Class A SEDOL:  B1YKCQ2

Class B ISIN:  GG00B1YKCV78

Class B SEDOL:  B1YKCV7

 

Investment Objective

Euro High Income Preference Shares ("EUHS" for Class A and "EUHE" for Class B") is a six-year investment aiming to provide shareholders with a stable stream of quarterly dividend distributions based on the dividend income of a notional portfolio of shares in Eurozone companies selected from the Dow Jones Euro STOXX 50® Index, supplemented by premiums for notional call options written on those shares.  In addition, a purchase of portfolio insurance in the form of a put option linked to the Dow Jones Euro STOXX 50® Index, with a term and maturity matching the term of the Shares, aims to reduce the risk of capital loss.

 

The name and weighting of each selected share and its performance between 23 September 2009 (the date of the most recent stock basket rebalance) and the maturity date (24 June 2010) are set out in the table below.

 

Stock

Strike Price at 22 March 2010

Maturity Price at 24-Jun-10

Performance at 24-Jun-10

Option Strike Price

Share portfolio weighting at Strike Date (Class A)

Weighting Class A at 24-Jun-10

AEGON

4.82

4.73

-1.87%

5.06

5.00%

5.76%

ALSTOM

47.69

38.52

-19.23%

50.07

5.00%

4.73%

AXA SA

15.77

13.25

-15.98%

16.55

5.00%

4.92%

ARCELORMITTAL

31.01

24.33

-21.54%

32.56

5.00%

4.59%

BANCO BILBAO

10.19

8.43

-17.27%

10.69

5.00%

4.84%

BANCO SANTANDER

9.86

8.72

-11.56%

10.35

5.00%

5.18%

BNP PARIBAS

57.14

45.88

-19.71%

60

5.01%

4.71%

CRH PLC

18.61

18.09

-2.79%

19.54

5.00%

5.69%

CREDIT AGRICOLE

12.44

8.812

-29.16%

13.06

5.00%

4.15%

DEUTSCHE BANK

54.08

43.89

-18.84%

56.6

5.02%

4.77%

DEUTSCHE BOERSE AG

52.97

51.84

-2.13%

55.35

5.02%

5.75%

DEUTSCHE TELEKOM

9.86

9.616

-2.47%

10.34

5.00%

5.71%

FRANCE TELECOM

17.65

14.79

-16.20%

18.53

5.00%

4.91%

ING GROEP

7.13

6.587

-7.62%

7.48

5.00%

5.41%

NOKIA AB OY A

11.2

6.785

-39.42%

11.76

5.00%

3.55%

SAINT GOBAIN

35.79

32.4

-9.47%

37.58

5.00%

5.30%

SOCIETE GENERALE

45.67

35.155

-23.02%

47.95

4.99%

4.50%

TELECOM ITALIA

1.08

0.938

-13.15%

1.13

5.00%

5.09%

UNICREDIT SPA

2.14

1.905

-10.98%

2.24

5.00%

5.22%

VIVENDI SA

19.29

17.175

-10.96%

20.25

5.00%

5.21%

 

 

Investment Performance

Between launch on 21 June 2007 and the funds early maturity on 25 June 2010, the Total Return Performance decreased by 45.9% and 46.3% respectively for class A and class B (based on an initial NAV of 100 pence and 100 cents respectively for class A and class B) compared with the DJ Eurostoxx TR performance of -8.70% over that period.  The directors declared interim dividends of 1.875 pence per Class A Sterling Hedged Euro High Income Preference Share and 1.875 Euro cents per Class B Unhedged Euro High Income Preference Share on 22 November 2007, 21 February 2008, 21 May 2008, 20 August 2008, 20 November 2008, 19 February 2009, 20 May 2009, 20 August 2009 26 November 2009, and 18 February 2010, 19 May 2010.

 

BNP Paribas Agrinvest

Listing: Channel Islands Stock Exchange

Launch date: 21 June 2007

Issue price at launch: 100 pence

NAV immediately following launch: 100.00 pence

Maturity date: 29 May 2013

ISIN: GB00B1YKCX92

SEDOL: B1YKCX9

 

Investment Objective

BNP Paribas Agrinvest Shares (herein the "Shares") is a six-year investment aiming to provide shareholders with the opportunity to participate in the performance of exchange-traded commodities futures comprised in the DCI® Agriculture BNP Paribas Enhanced Excess Return Index (the "Index").  The Index is designed to provide a broad yet liquid representation of large, mid and small commodity futures inside the Organisation for Economic Cooperation and Development (OECD).  The Index consists of 23 components within the agriculture sector. The Index is also subject to a forward curve roll optimisation process through the addition of a quantitative enhancement algorithm.

 

Investment Performance

Between launch on 22 June 2007 and close on 29 October 2010 the NAV had increased by 26.24%.  Over this period the S&P GSCI Agri&Livestock ER Index had fallen by 7.20% and DJ UBS Commodity ER had fallen by 15.20%.

 

Enhanced Property Recovery

Listing: Channel Islands Stock Exchange

Launch date: 13 March 2008

Issue price at launch: 100 pence

NAV immediately following launch: 100 pence

Maturity date: March 13, 2014

ISIN: GG00B2PWW869

SEDOL: B2PWW86

 

Investment Overview

The Enhanced Property Recovery Fund allows investors to benefit from a possible recovery in the listed property market with an enhanced market timing mechanism. At maturity, if the FTSE EPRA European Index (Bloomberg code: EPRA Index) (the "Index") finishes above its initial level, the fund will pay the greater of either 170% or the enhanced performance of the index. If the Index closes below the initial level, the Fund will track the Index.

Investment Performance

Between launch on 13 March 2008 and close on 29 October 2010 the NAV had fallen by 20.63%.  Over this period the EPRA Index had increased by 28.90%. The Fund performance is driven primarily by sensitivity of the NAV to movements in the underlying Index, which is nearly one for one. The Fund recorded its lowest observation in March 2009 at 760.83.  The enhanced market timing mechanism of this Fund means that if the Index was to recover to maturity, this figure would be used as the reference for which to calculate final performance.

 

BNP Paribas Energy-Base Metals (3)

 

Listing: Channel Islands Stock Exchange

Launch date: 5 June 2008

Issue price at launch: 100 pence

NAV at launch: 100 pence

Maturity date: 5 June 2014

ISIN: GG00B2R9LW24

SEDOL: B39TP47

Epic Code: EBMC

 

Investment Objective

BNP Paribas Energy-Base Metals 3 ("EBMC") is a six-year investment offering 175% of the upside of the spot prices of a portfolio of commodities.  The portfolio comprises West Texas Intermediate Oil (30%), Natural Gas (20%), Aluminium (12.5%), Copper (12.5%), Nickel (12.5%) and Zinc (12.5%).  If the portfolio performance is negative over six years, 100 pence is returned at maturity.

 

The name and weighting of each commodity, the spot prices of each commodity recorded at launch (the nearest futures price in the case of oil) and as of 29 October 2010 are set out in the table below.

 

Commodity name

Value at Start

Value as of            29-Oct-10

Change

Weight

Aluminium

2,858.5

2,302

-19.5%

12.5%

Copper

8,006

8,225

2.7%

12.5%

Nickel

22,000

22,700

3.2%

12.5%

West Texas Intermediate

122.3

81.43

-33.4%

30.0%

Zinc

1,948.5

2,392.5

22.8%

12.5%

Natural Gas

12.379

4.038

-67.4%

20.0%

Source for commodity values information:  Bloomberg

 

Investment Performance

Between launch on 5 June 2008 and close on 29 October 2010 the NAV had risen by 10.9%.  Over this period the DJ AIG Commodities Excess Return Index had fallen by 32.8%.

 

BNP Paribas Agribusiness

Listing: Budapest Stock Exchange

Launch date: 11 July 2008

Issue price at launch: HUF 10,000

NAV immediately following launch: HUF 10,000

Maturity date: 10 January 2011

ISIN:GG00B39FV703
SEDOL: B39FVH0

 

Investment Overview

The BNP Paribas Agribusiness Cell is a 2.5 year investment which aims to provide shareholders with the opportunity to participate, through a dividend payable on the Shares, in the performance of shares of companies whose revenues are linked to the agribusiness industry through the BNP Paribas Global Agribusiness Excess Return Index (Reuters Code: BNPIGAER).

 

Investment Performance

Between launch on 11 July 2008 and close on 29 October 2010 the NAV had risen by 8.86%. Over this period the BNP Paribas Global Agribusiness Excess Return Index had risen by 15.05%.

 

Class A Sterling Hedged Enhanced Income Preference Shares and Class B Unhedged Enhanced Income Preference Shares

 

Listing: Channel Islands Stock Exchange

Launch date: March 19 2009

Issue price at launch: 101 pence

NAV immediately following launch: 100 pence

Maturity date: March 2108

Class A ISIN: GG00B4W90V35

Class A SEDOL: B65H881

Class B ISIN: GG00B4W90W+42

Class B SEDOL: B4W90W4

 

Investment Overview

The investment objective of the Cell is to provide Shareholders with a stable stream of quarterly dividend distributions (with a targeted dividend yield of approximately 8% per annum, subject to increase and decrease in certain circumstances) and return on capital based on an investment strategy linked to the performance of the Dow Jones Euro STOXX 50® Index (the "Index") and notional call options written on the Index (the "Strategy"). Dividend distributions on the Enhanced Income Preference Shares will be denominated and paid in GBP in respect of the Class A Shares and in EUR in respect of the Class B Shares.  There are currently no Class B Shares in issue.

 

Investment Performance

Between launch on 19 March 2009 and close on 29 October 2010 the Total return Performance had risen by 21.9%.  Over this period the DJ EuroStoxx TR Index had increased by 48.30%.   The directors declared interim dividends of 2.00 pence per Class A Share on 24 June 2009, of 2.30 pence per Class A Share on 23 September 2009, 2.40 pence per Class A Share on 23 December 2009 and 2.30 pence per Class A Share on 24 March 2010.

 

Class A Sterling Hedged COMAC Preference Shares and Class B US Dollar Unhedged COMAC Preference Shares

 

Listing: Channel Islands Stock Exchange

Launch date: 1 June 2009

Issue price at launch: 101 pence

NAV immediately following launch: 100 pence

Maturity date: June 2029

Class A ISIN: GG00B3VGTS89

Class A SEDOL: B3VGTS8

Class B ISIN: GG00B3VM1S01

Class B SEDOL: B3VM1S)

 

Investment Overview

The investment objective of the Cell is to provide shareholders with exposure to the performance of an actively managed long short arbitrage strategy based on a portfolio of 25 commodities through the BNP PARIBAS COMAC Long-Short Total Return Net of Fees Index (the "Index").  The Index is denominated in USD and is designed to track the performance of an actively managed portfolio of 25 commodities selected from the energy, metals and agricultural sectors, the respective weightings of which are determined in accordance with an investment strategy based on recommendations provided by the COMAC Adviser and a rules-based proprietary methodology designed by BNP Paribas (the "Index Methodology").

 

Investment Performance

Between launch on 1 June 2009 and close on 29 October 2010 the NAV of Class A had fallen by 16.02%.  There are currently no Class B Shares in issue.

 

Class A Sterling Hedged US Enhanced Income Preference Shares and Class B Unhedged US Enhanced Income Preference Shares

 

Listing: Channel Islands Stock Exchange

Launch date: 16 July 2009

Issue price at launch: 101 pence

NAV immediately following launch: 100 pence class A & 100 cents class B

Maturity date: July 2029

Class A ISIN: GG00B4409G28

Class A SEDOL: B4409G2

Class B ISIN: GG00B4409P19

Class B SEDOL: B4409P1

 

Investment Overview

The Cell's investment objective is to provide Shareholders with a stable stream of quarterly dividends (with a targeted dividend yield of approximately 8% per annum, subject to increase and decrease in certain circumstances) and return on capital, such investment objective being intended to be achieved by reference to an investment strategy (the "Strategy") linked to the total return performance of the Standard and Poor's 500® Index (the "Index") and notional short-term call options written on such index.

 

Investment Performance

Between launch on 16 July 2009 and close on 29 October 2010 the NAV Total Return Performance was 16.30% and 16.60% respectively for class A and class B (based on an initial NAV of 100 pence and 100 cents respectively for class A and class B) compared with the S&P TR Performance, which increased 29.10% over that period.  The directors declared interim dividends of 2.00 pence per Class A Sterling Hedged US Enhanced Income Preference Share and 2.00 cents per Class B US Dollar Unhedged US Enhanced Income Preference Share on 21 July 2010 and 2.00 pence per Class A Sterling Hedged US

 

Enhanced Income Preference Share and 2.00 cents per Class B US Dollar Unhedged US Enhanced Income Preference Share on 20 October 2010.

 

UK Enhanced Income

 

Listing: Channel Islands Stock Exchange

Launch date: 24 September 2009

Issue price at launch: 101 pence

NAV immediately following launch: 100 pence

Maturity date: September 2029

ISIN: GG00B3YF5842

SEDOL: B3YF584

 

Investment Overview

The Cell's investment objective is to provide Shareholders with a stable stream of quarterly dividends (with a targeted dividend yield of approximately 8% per annum, subject to increase and decrease in certain circumstances) and return on capital, such investment objective being intended to be achieved by reference to an investment strategy (the "Strategy") linked to the total return performance of the FTSE 100™ Index (the "Index") and notional short-term call options written on such index.

 

Investment Performance

Between launch on 24 September 2009 and close on 29 October 2010 the Total Return Performance had increased by 8.50%.  Over this period the FTSE 100 Total Return Index had risen by 15.80%.  The directors declared an interim dividend of 2.00 pence per UK Enhanced Income Preference Share on 30 June 2010 and 2.00 pence per UK Enhanced Income Preference Share on 30 September 2010.

 

STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 October 2010

 



Year to


Year to



31 Oct 2010


31 Oct 2009



Total


Total


Notes

GBP


GBP






Net movement in unrealised gains / (losses) on





on investments


13,846,952


(4,776,187)






Realised losses on investments

3,8

(16,452,795)


(4,487,813)






Amortisation of debt issue costs


(49,585)


(49,585)






Income from financial assets at fair value through profit





or loss


37,526,039


29,671,803






Finance costs - distributions to holders of Preference





Shares


(37,526,039)


(29,671,803)






Decrease in net assets attributable to Preference





shareholders from operations


(2,655,428)


(9,313,585)






Other Comprehensive Income:

 

Exchange (losses) / gains on currency balances


(849,486)


874,585

 

Total Comprehensive Income


(3,504,914)


(8,439,000)








Pence


Pence

Loss per Share

1j

(0.31)


(1.25)

 

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.

 

 

STATEMENT OF FINANCIAL POSITION

as at 31 October 2010



Year to


Year to

 


31 Oct 2010


31 Oct 2009

 


Total


Total

 

Notes

GBP


GBP






ASSETS





NON CURRENT ASSETS





Financial assets at fair value through profit or loss

3

749,550,096


796,571,889






CURRENT ASSETS





Cash and cash equivalents


-


-

Investment income receivable


4,927,881


4,063,256

Prepaid debt issue costs


18,611


68,196



4,946,492


4,131,452






LIABILITIES





CURRENT LIABILITIES





Dividends payable


4,927,881


4,063,256



4,927,881


4,063,256






NET ASSETS ATTRIBUTABLE TO HOLDERS OF





PREFERENCE SHARES


749,568,707


796,640,085

 

STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF PREFERENCE SHARES

for the year ended 31 October 2010



Year to


Year to



31 Oct 2010


31 Oct 2009



Total


Total


Notes

GBP


GBP






Opening balance


796,640,085


627,265,230






Proceeds from issue of Preference Shares


-


194,555,055






Redemption of shares

3

(43,566,464)


(16,741,200)






Net loss for the year attributable to holders of





Preference Shares


(2,655,428)


(9,313,585)






Exchange (losses) / gains on currency balances

3

(849,486)


874,585






Balance as at 31 October


749,568,707


796,640,085

 

STATEMENT OF CASH FLOWS

for the year ended 31 October 2010


Year to


Year to


31 Oct 2010


31 Oct 2009


Total


Total


GBP


GBP

Operating activities




Net loss for the year attributable to holders of Preference




Shares

(2,655,428)


(9,313,585)

Distributions to holders of Preference Shares

36,661,414


25,608,547

Movement in realised and unrealised loss on investments

2,605,843


9,264,000

Movement in debtors and creditors during the year

49,585


49,585

Net cash inflow from operating activities

36,661,414


25,608,547





Investing activities




Redemption of financial assets

43,566,464


16,741,200

Purchase of financial assets

-


(194,555,055)

Net cash inflow / (outflow) from investing activities

43,566,464


(177,813,855)





Financing activities




Distribution to holders of Preference Shares redeemed

(43,566,464)


(16,741,200)

Proceeds from issue of Preference Shares

-


194,555,055

Distributions to holders of Preference Shares

(36,661,414)


(25,608,547)

Net cash (outflow) / inflow from financing activities

(80,227,878)


152,205,308





Increase / (decrease) in cash and cash equivalents

-


-









Cash and cash equivalents at beginning of year

-


-

Increase / (decrease) in cash and cash equivalents

-


-

Cash and cash equivalents at end of year

-


-

 

Notes to the Financial Statements

for the year ended 31 October 2010

 

1          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The principal accounting policies adopted by the Company and applied in the preparation of these financial statements are set out below.  These policies have been consistently applied to all periods presented, unless otherwise stated in the following text.

 

(a)        Basis of preparation

The financial statements have been prepared in conformity with International Financial Reporting Standards ("IFRS") which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), and International Accounting Standards and Standing Interpretations Committee approved by the International Accounting Standards Committee that remain in effect and applicable Guernsey law.  The financial statements have been prepared under the historical cost convention as modified for the measurement at fair value of financial instruments held at fair value through profit or loss.

 

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates.  It also requires the Board of directors to exercise judgement in the process of applying the Company's accounting policies.  The areas involving a high degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 2.

 

Changes in accounting policy and disclosures

The accounting policies adopted are consistent with those of the previous financial year except as follows:

-  IFRS 8 Operating Segments

-  IAS 1 (Revised 2007) Presentation of Financial Statements

-  Amendments to IFRS 7 Financial Instruments: Disclosures - Improving Disclosures about Financial Instruments.

 

The principal effect of these changes is as follows:

 

IFRS 8 Operating Segments

This standard is effective for accounting periods beginning on or after 1 January 2009, it requires disclosure of information about the Company's operating segments and replaced the requirement to determine primary (business) and secondary (geographical) reporting segments of the Company.  For management purposes, the Company is organised into one business unit.  The Company determined that this operating segment was the same as the business segment previously identified under IAS 14 Segment Reporting.

 

IAS 1 (Revised 2007) Presentation of Financial Statements

The standard replaces IAS 1 Presentation of Financial Statements (revised in 2003) as amended in 2005.  The revised IAS 1 Presentation of Financial Statements was issued in September 2007 and is effective for accounting periods beginning on or after 1 January 2009.

 

The standard introduces the Statement of Comprehensive Income; it presents all items of income and expense recognition in profit or loss, together with all other items of recognised income and expense, either in one single statement, or in two linked statements.  The Company chose to present one single Statement of Comprehensive Income.

 

Amendments to IFRS 7 Financial Instruments: Disclosures - Improving Disclosures about Financial Instruments.

Amendments to IFRS 7 were issued by the IASB in March 2009, effective for annual periods beginning on or after 1 January 2009.  The amendments to IFRS 7 require fair value to be disclosed by the source of inputs, using a three-level hierarchy:

 

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).

 

In addition, the amendments revise the specified minimum liquidity risk disclosures including: the contractual maturity of non-derivative and derivative financial liabilities, and a description of how this is managed.

In the first year of application, comparative information is not required.

 

The following Standards or Interpretations that are expected to affect the Company have been issued but not yet adopted by the Company as shown below.  Other Standards or Interpretations issued by the IASB and the International Financial Reporting Interpretations Committee ("IFRIC") are not expected to affect the Company.

 

IAS 24 (revised November 2009) Related Party Disclosures effective for annual periods beginning on or after 1 January 2011.

 

IAS 39 Financial Instruments - Recognition and Measurement effective for annual periods beginning on or after 1 January 2010.

 

IFRS 9 Financial Instruments - Classification and Measurement effective for annual periods beginning on or after 1 January 2013.

 

The directors have considered the above and are of the opinion that the above Standards and Interpretations are not expected to have an impact on the Company's financial statements except for the presentation of additional disclosures and changes to the presentation of components of the financial statements.  These items will be applied in the first financial period for which they are required.

 

(b)        Functional and presentation currency

Items included in the Company's financial statements are measured using the currency of the primary economic environment in which it operates (the "functional currency").  This is pounds sterling, which reflects the Company's primary activity of investing in sterling-denominated derivative transactions.  The Company has adopted pounds sterling as its presentation currency as the Company is listed on the Channel Islands Stock Exchange and the majority of its registered shareholders are domiciled in the United Kingdom.  Only one Cell is not listed on the Channel Islands Stock Exchange, that being BNP Paribas Agribusiness, which is listed on the Budapest Stock Exchange. Whilst shareholders of this cell are not exposed to movements in the HUF / Sterling Exchange rate, the reported value of this cell in the financial statements is exposed to such movements, as the aggregated financial statements are prepared in the functional currency.

 

(c)        Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.  Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Statement of Comprehensive Income.  Translation differences on non-monetary financial assets and liabilities such as equities at fair value through profit or loss are recognised in the Statement of Comprehensive Income within the fair value net gain or loss.

 

(d)        Taxation

The Company has been granted exemption from Guernsey Income Tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 and is charged an annual fee of £600.

 

(e)        Expenses

All expenses are accounted for on an accruals basis.  All expenses are borne by BNP Paribas SA pursuant to the terms of an Engagement Letter between the Company and BNP Paribas SA.  The ongoing expenses for the year under review are detailed in note 7 to the financial statements.

 

(f)         Debt issue costs

Pursuant to the placing and offer for subscription of Shares in the Enhanced Global Asset Allocation Cell (the "Cell") the Initial Cell Expenses incurred (as defined in Cell's Supplemental Memorandum) amounted to £297,509.  Because the Preference Shares in EGAA are redeemable on or around 17 March 2011, 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.

 

(g)        Cash and cash equivalents

At the reporting date cash or cash equivalents comprise cash at bank.  As detailed in note 7, all expenses of the Company are borne by BNP Paribas SA.  All income received is distributed to shareholders in the relevant cells as dividends and therefore the Company holds nil balances in its bank accounts as at the year end.

 

(h)        Income recognition

Dividend income is recognised in the Statement of Comprehensive Income when the relevant cell's right to receive the dividend has been established, normally being the ex-dividend date.  Dividend income is recognised on a gross basis, including withholding tax, if any.

 

(i)         Financial assets at fair value through profit or loss

All investments and derivative financial instruments are classified as "at fair value through profit or loss".  Investments are initially recognised at cost, being the fair value of the consideration given, including transaction costs associated with the investment.  After initial recognition, investments are measured at fair value, with unrealised gains and losses on investments being recognised in the Statement of Comprehensive Income.

 

The Company seeks to achieve the investment objective of each cell by entering into a contract with BNP Paribas (referred to herein as the "Counterparty").  Each contract is substantially in the form of an ISDA Master Agreement as supplemented by a transaction confirmation.

 



 

 

(i)         Financial assets at fair value through profit or loss (continued)

In respect of each contract, within BNP Paribas Group (the "Group"), the Market and Liquidity Risk department is responsible for the day-to-day risk monitoring and contributes to the control of the economic fair value of the Group's trading books.  This risk function department is separate and independent from the Trading and Sales departments.

 

The Market and Liquidity Risk department reviews the consistency of the non-observable market parameters by comparing and reconciling on a monthly basis several external data sources, including Bloomberg, Reuters, Markit/Totem and 10X.

 

This department is also responsible for the validation and control of any valuation models.

 

(j)         Loss per share

The loss per share is based on the decrease in net assets attributable to Preference shareholders from operations of the Company for the year of £2,655,428 (2009: £9,313,585 net loss) and on 857,671,534 (2009: 744,971,865) shares, being the weighted average number of shares in issue during the year.  There were no dilutive instruments in issue during the year.

 

(k)        Trade date accounting

All "regular way" purchase 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 of financial assets that require delivery of the asset within the time frame generally established by the regulation or convention in the market place.

 

(l)         Distributions payable to holders of redeemable shares

Proposed distributions to holders of redeemable shares are recognised in the Statement of Comprehensive Income when they are declared by the Board of directors.  The distribution on these redeemable shares is recognised in the Statement of Comprehensive Income as a finance cost.

 

(m)       Going concern

After making enquiries, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future.  The directors believe the Company is well placed to manage its business risks successfully despite the current economic climate.  Accordingly, the directors have adopted the going concern basis in preparing the financial information

 

(n)        Segment reporting

Operating segments are reported in a manner consistent with the internal reporting used by the Board of directors. In the opinion of the directors the Company is engaged in a single segment of business.

 

2          CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

 

Management make critical accounting estimates and judgements concerning the future.  The resulting accounting estimates will, by definition, seldom equal the related actual results.  The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the financial year are outlined below:

 



 

 

 

(a)        Fair value of derivative financial instruments

The Company holds derivatives which are tailored to meet the Company's respective needs for each cell.  As the investments are not traded in an active market, the fair value of such instruments is determined by using valuation techniques.  The fair value is calculated weekly and as at each month end by the Counterparty.  As at each reporting date, an independent check of the valuations of the investments is performed by Future Value Consultants Limited (the "Calculation Agent"), an independent third party.  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 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.  These techniques are periodically reviewed by experienced personnel at the Calculation Agent.

 

Models use observable data, to the extent practicable.  However, areas such as credit risk (both own and counterparty), volatilities, capital risk and correlations require management to make estimates.  Changes in assumptions about these factors could affect the reported fair value of financial instruments.

 

3          NET ASSETS ATTRIBUTABLE TO HOLDERS OF PREFERENCE SHARES

 



Year to


Year to



31 Oct 2010


31 Oct 2009



Total


Total



GBP


GBP






Opening portfolio cost


849,600,277


676,274,235

Opening unrealised losses on valuation


(60,159,548)


(55,333,776)

Opening exchange gains on currency balances


7,199,356


6,324,771






Opening valuation


796,640,085


627,265,230






Purchase at cost


-


194,555,055

Proceeds of sales of financial assets


(43,566,464)


(16,741,200)

Unrealised gains / (losses) for the year


13,797,367


(4,825,772)

Realised losses for the year


(16,452,795)


(4,487,813)

Exchange (losses) / gains on currency balances


(849,486)


874,585






Closing valuation


749,568,707


796,640,085






Closing portfolio cost


789,581,018


849,600,277

Closing unrealised losses


(46,362,181)


(60,159,548)

Closing exchange gains on currency balances


6,349,870


7,199,356






Closing valuation


749,568,707


796,640,085

 



 

 

IFRS 7 requires fair value measurements to be disclosed by the source of inputs, using the following three-level hierarchy:

 

·      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)

 

The financial assets held by the Company have been classified as Level 2.  This is in accordance with the fair value hierarchy.

 

There have been no transfers between Level 2 and Level 3 of the fair value hierarchy during the year under review.

 

4          SHARE CAPITAL

 

Authorised

SHARES

GBP

Preference shares of no par value each

Unlimited

-

Ordinary shares of no par value each

2

-

 

 

2

-

 

 

Allotted, called-up and fully paid Preference Shares

Shares issued as at

1 November 2009


 

Preference

Shares Redeemed


 

Preference Shares Issued


Shares issued as at 31 October 2010









Cell EGAA

13,500,255


-


-


13,500,255

Cell FTSE S

40,501,195


-


-


40,501,195

Cell EBMSG

7,701,999


(7,701,999)

*

-


-

Cell UK HI

141,613,549


-


-


141,613,549

Cell EBM (2)

32,506,140


-


-


32,506,140

Cell ES

25,000,000


-


-


25,000,000

Cell Abs Pro

76,748,923


-


-


76,748,923

Cell US HI A

92,469,987


-


-


92,469,987

Cell US HI B

58,337,229


-


-


58,337,229

Cell Agrinvest

47,225,896


-


-


47,225,896

Cell Euro HI A

45,375,520


(45,375,520)

*

-


-

Cell Euro HI B

10,261,000


(10,261,000)

*

-


-

Cell Hedge Elite

-


-


-


-

Cell EPR

30,125,000


-


-


30,125,000

Cell EBM (3)

49,587,600


-


-


49,587,600

Cell Agribus

72,500


-


-


72,500

Cell EI

39,999,346


-


-


39,999,346

Cell UK EI

49,015,722


-


-


49,015,722

Cell COMAC

25,526,009


-


-


25,526,009

Cell USEI A

48,500,080


-


-


48,500,080

Cell USEI B

45,079,125


-


-


45,079,125









Ordinary Shares

2


-


-


2









TOTAL

879,147,077


(63,338,519)


-


815,808,558

 

* See Note 8

 

Allotted, called-up and fully paid Preference Shares

Shares issued as at

1 November 2008


 

Preference

Shares Redeemed


 

Preference Shares Issued


Shares issued as at 31 October 2009









Cell EGAA

13,500,255


-


-


13,500,255

Cell FTSE S

40,501,195


-


-


40,501,195

Cell EBMSG

7,701,999


-


-


7,701,999

Cell UK HI

141,613,549


-


-


141,613,549

Cell EBM (2)

32,506,140


-


-


32,506,140

Cell ES

25,000,000


-


-


25,000,000

Cell Abs Pro

76,748,923


-


-


76,748,923

Cell US HI A

92,469,987


-


-


92,469,987

Cell US HI B

58,337,229


-


-


58,337,229

Cell Agrinvest

47,225,896


-


-


47,225,896

Cell Euro HI A

45,375,520


-


-


45,375,520

Cell Euro HI B

10,261,000


-


-


10,261,000

Cell Hedge Elite

21,229,013


(21,229,013)


-


-

Cell EPR

30,125,000


-


-


30,125,000

Cell EBM (3)

49,587,600


-


-


49,587,600

Cell Agribus

72,500


-


-


72,500

Cell EI

-


-


39,999,346


39,999,346

Cell UK EI

-


-


49,015,722


49,015,722

Cell COMAC

-


-


25,526,009


25,526,009

Cell USEI A

-


-


48,500,080


48,500,080

Cell USEI B

-


-


45,079,125


45,079,125









Ordinary Shares

2


-


-


2









TOTAL

692,255,808


(21,229,013)


208,120,282


879,147,077

 

 

Holders of Ordinary Shares shall not be entitled to receive and shall not participate in any dividends or other distributions out of the profits of the Company.  Holders of Ordinary Shares shall be entitled to receive notice of and to attend and vote at general meetings.  The Ordinary Shares are not redeemable and comprise the Company's non-cellular assets.

 

Holders of Enhanced Global Asset Allocation Preference Shares, BNP Paribas FTSE Summit Preference Shares, BNP Paribas Energy - Base Metals (2) Preference Shares, BNP Paribas European Shield Preference Shares, BNP Paribas Absolute Progression Preference Shares, BNP Paribas Agrinvest Preference Shares, Enhanced Property Recovery Preference Shares, Energy - Base Metals (3) Preference Shares and BNP Paribas COMAC Shares ("Cell Shares") shall not be entitled to receive and shall not participate in any dividends or other distributions of the Company.

 

Holders of BNP Paribas UK High Income Preference Shares, Class A Sterling Hedged US High Income Preference Shares, Class B Unhedged US High Income Preference  Shares, Class A Sterling Hedged Enhanced Income Preference Shares, Class A Sterling Hedged US Enhanced Income Preference Shares, Class B US Dollar Unhedged US Enhanced Income Preference Shares and UK Enhanced Income Preference Shares ("Cell Shares") shall be entitled to receive any dividends or other distributions out of the profits of their respective cells only, but not out of the non-cellular assets of the Company, other distributions out of the profits of their respective cells only, but not the Company.

 

On their respective redemption dates the holders of Cell Shares shall be entitled to receive per Cell Share held an amount equal to the net asset value per Cell Share.  As disclosed in the Supplemental Memorandum or Summary and Securities Note for each cell, the Cell Shares of each cell will be compulsorily redeemed by the Company on their respective redemption dates.

 

Holders of Cell Shares shall not be entitled to receive notice of or to attend or vote at any general meeting of the Company.

 

5          SHARE PREMIUM

 

Share Premium Preference Shares

Shares issued as at

1 November 2009


 

Preference

Shares Redeemed


 

Preference Shares Issued


Shares issued as at 31 October 2010


GBP


GBP


GBP


GBP









Cell EGAA

14,656,755


-


-


14,656,755

Cell FTSE S

47,058,395


-


-


47,058,395

Cell EBMSG

7,747,779


(7,747,779)

*

-


-

Cell UK HI

143,419,549


-


-


143,419,549

Cell EBM (2)

32,828,140


-


-


32,828,140

Cell ES

25,000,000


-


-


25,000,000

Cell Abs Pro

77,271,523


-


-


77,271,523

Cell US HI A

92,942,487


-


-


92,942,487

Cell US HI B

30,710,285


-


-


30,710,285

Cell Agrinvest

49,516,896


-


-


49,516,896

Cell Euro HI A

45,375,520


(45,375,520)

*

-


-

Cell Euro HI B

6,895,958


(6,895,958)

*

-


-

Cell Hedge Elite

-


-


-


-

Cell EPR

30,125,000


-


-


30,125,000

Cell EBM (3)

49,292,100


-


-


49,292,100

Cell Agribus

2,502,344


-


-


2,502,344

Cell EI

42,548,346


-


-


42,548,346

Cell UK EI

49,015,722


-


-


49,015,722

Cell COMAC

25,526,009


-


-


25,526,009

Cell USEI A

48,500,080


-


-


48,500,080

Cell USEI B

28,964,898


-


-


28,964,898









TOTAL

849,897,786


(60,019,257)


-


789,878,529

 

* See Note 8



 

 

Share Premium Preference Shares

Shares issued as at

1 November 2008


 

Preference

Shares Redeemed


 

Preference Shares Issued


Shares issued as at 31 October 2009


GBP


GBP


GBP


GBP









Cell EGAA

14,656,755


-


-


14,656,755

Cell FTSE S

47,058,395


-


-


47,058,395

Cell EBMSG

7,747,779


-


-


7,747,779

Cell UK HI

143,419,549


-


-


143,419,549

Cell EBM (2)

32,828,140


-


-


32,828,140

Cell ES

25,000,000


-


-


25,000,000

Cell Abs Pro

77,271,523


-


-


77,271,523

Cell US HI A

92,942,487


-


-


92,942,487

Cell US HI B

30,710,285


-


-


30,710,285

Cell Agrinvest

49,516,896


-


-


49,516,896

Cell Euro HI A

45,375,520


-


-


43,375,520

Cell Euro HI B

6,895,958


-


-


6,895,958

Cell Hedge Elite

21,229,013


(21,229,013)


-


-

Cell EPR

30,125,000


-


-


30,125,000

Cell EBM (3)

49,292,100


-


-


49,292,100

Cell Agribus

2,502,344


-


-


2,502,344

Cell EI

-


-


42,548,346


42,548,346

Cell UK EI

-


-


49,015,722


49,015,722

Cell COMAC

-


-


25,526,009


25,526,009

Cell USEI A

-


-


48,500,080


48,500,080

Cell USEI B

-


-


28,964,898


28,964,898









TOTAL

676,571,744


(21,229,013)


194,555,055


849,897,786

 

 

6          FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

 

The Company's activities expose it to a variety of financial risks: market risk (including interest rate risk and market price risk), credit risk, liquidity risk and foreign exchange risk.

 

The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance.  The Company uses derivative financial instruments to moderate certain risk exposures.

 

(a)        Interest Rate Risk

The Company is not directly exposed to cash flow interest rate risk.  Changes in interest rates may affect the performance of the swap contracts in which each cell is invested.  The Board and the Investment Manager monitor, but cannot control, interest rate risk.

 

(b)        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 Investment Manager actively monitors market prices and reports to the Board as to the appropriateness of the prices used for valuation purposes.  On a periodic basis independent valuations of the Company's investments are obtained from the Calculation Agent.  A list of investments held by the Company is shown in the Schedule of Investments on pages 87 to 90.

 

The Investment Manager also monitors on a monthly basis the market price risk of each Cell's underlying financial assets and liabilities using statistical measures, such as Delta.  Delta is the percentage change in price of a derivative in relation to a 1% change in the price of the underlying security, index or rate.  As there is no secondary market for the Company's investments, the Board cannot directly monitor nor control market price risk.

 

Price sensitivity

If market prices as at 31 October 2010 had been 10 per cent higher, and assuming these values were to remain unchanged through to the end of the life of the cells, with all other variables held constant, the increase in net assets attributable to holders of Cell Shares on the Redemption Date would have been as stated below, arising due to the increase in the fair value of the financial assets at fair value through profit or loss.

 

If market prices as at 31 October 2010 had been 10 per cent lower, and assuming these values were to remain unchanged through to the end of the life of the Cells, with all other variables held constant, the increase in net assets attributable to holders of Cell Shares on the Redemption Date would have been as stated below, arising due to the decrease in the fair value of the financial assets at fair value through profit or loss.

 


Increase in net assets attributable to holders of Preference Shares


Decrease in net assets attributable to holders of Preference Shares






Year ended 31 October 2010


Year ended 31 October 2009


Year ended 31 October 2010


Year ended 31 October 2009

Cell

GBP


GBP


GBP


GBP









Cell EGAA

1,857,095


1,834,698


(1,857,095)


(1,834,698)

Cell FTSE S

5,255,395


5,210,924


(5,255,395)


(5,210,924)

Cell EBMSG

-


2,100,404


-


(2,100,404)

Cell UK HI

8,005,272


9,769,352


(8,005,272)


(9,769,352)

Cell EBM (2)

5,725,729


5,176,993


(5,725,729)


(5,176,993)

Cell ES

2,306,775


2,198,450


(2,306,775)


(2,198,450)

Cell Abs Pro

9,490,772


9,057,831


(9,490,772)


(9,057,831)

Cell US HI A

6,134,089


6,843,704


(6,134,089)


(6,843,704)

Cell US HI B

2,535,798


2,707,336


(2,535,798)


(2,707,336)

Cell Agrinvest

5,962,080


4,835,790


(5,962,080)


(4,835,790)

Cell Euro HI A

-


2,428,135


-


(2,428,135)

Cell Euro HI B

-


487,801


-


(487,801)

Cell EPR

2,391,021


2,023,828


(2,391,021)


(2,023,828)

Cell EBM (3)

5,497,133


5,191,177


(5,497,133)


(5,191,177)

Cell Agribus

252,681


223,910


(252,681)


(223,910)

Cell COMAC

2,163,534


2,001,060


(2,163,534)


(2,001,060)

Cell US EI A

5,120,153


5,128,787


(5,120,153)


(5,128,787)

Cell US EI B

2,974,799


2,898,555


(2,974,799)


(2,898,555)

Cell UK EI

4,927,355


4,984,409


(4,927,355)


(4,984,409)

Cell EI

4,355,329


4,554,046


(4,355,329)


(4,554,046)










74,955,010


79,657,189


(74,955,010)


(79,657,189)

 

(c)        Credit Risk

Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Company.  At the date of this report the Counterparty was rated AA by Standard & Poor's for credit purposes.

 

Investors should be aware that repayment by the Company at the relevant redemption date of the redemption proceeds due to shareholders will only be performed if the Counterparty satisfies its obligations under the relevant contract to repay to the Company any amount due.  Under the terms of the Credit Support Deeds between the Company and the Counterparty, the Counterparty is required to deliver varying amounts of collateral to an escrow account held in favour of the Company.

 

Under the terms of credit support deeds entered into between the Counterparty and the Company acting for and on behalf of each cell, the Counterparty is required to post collateral in the form of AAA rated government bonds in favour of the Company acting for and on behalf of each cell, such collateral being valued on a weekly basis and, if the value of the collateral is less than the value calculated as specified below (the "Credit Support Amount"), The Counterparty will provide additional collateral to increase the aggregate value to at least the Credit Support Amount.  Where there is an event of default in respect of the Counterparty under the swap confirmation, the Company will be entitled to enforce against the Counterparty its security over the collateral.

 

Due to collateral being monitored on a weekly basis (as detailed above), there is a risk due to timing that the amount posted to collateral will be less than the Credit Support Amount.

 

In respect of all cells other than BNP Paribas Agribusiness, the Credit Support Amount is the lesser of (a) 100% of the net asset value of the relevant cell and (b) the total of the Applicable Percentage of such net asset value plus 10% of such net asset value (where the "Applicable Percentage" is calculated so as to reflect the percentage of shares in the relevant cell held at the relevant time by shareholders other than BNP Paribas Arbitrage SNC.  The Credit Support Amount in respect of BNP Paribas Agribusiness is 100% of the net asset value of BNP Paribas Agribusiness.

 

The most significant concentration of credit risk for the Company is that the Counterparty will be unable to satisfy its obligations under the relevant contract to repay to the Company any amount due.  The maximum credit risk exposure at the reporting date is therefore considered to be the valuation of the investments at this date, being £749,550,096.

 

The Investment Manager and Administrator monitor collateral posted on a weekly basis and report to the Board quarterly on the Counterparty's compliance with the relevant Credit Support Deeds.  The Investment Manager and Administrator have also undertaken to report to the Board immediately if there is a breach of compliance with the terms of the relevant Credit Support Deeds.

 

The Board monitors, but cannot control, credit risk.

 

(d)        Liquidity Risk

 

Liquidity risk is the risk that the Company will encounter difficulty in realising assets or otherwise raising funds to meet financial commitments and obligations to shareholders on redemption of their shares of a cell.  The only financial commitments of the Company are to meet ongoing expenses and these are met out of monies provided to the Company's Administrator by BNP Paribas SA.

 

There is a further liquidity risk in respect of the redemption of shares, the dates of which are set out in note 6(g) (ii).

 

As the investments are not traded in an active market, the Company may not be able to liquidate quickly its investments in these instruments at an amount close to their fair value to meet its liquidity requirements or to respond to specific events such as deterioration in the credit worthiness of the Counterparty.

 

The Board monitors, but cannot actively control, liquidity risk.

 

(e)        Capital Management

 

The Company has an unlimited life but the Protected Cell Shares for each cell have a fixed redemption date.

 

The Board of directors believes the current capital structure to be sufficient in meeting the capital requirements of the Company.

 

All expenses are borne by BNP Paribas SA and redemption proceeds are limited to the amounts received, if any, on the maturity or early termination of the relevant investment contract between the Company and the Counterparty.

 

Potential losses to shareholders are mitigated by the returns stipulated in the swap agreement with the counterparty as described in note 6 (h) and the collateral arrangements which are set out in note 6(i).

 

(f)         Foreign Exchange Risk

The carrying amounts of the Company's foreign currency denominated financial assets at the reporting date are as follows:

 


Year ended


Year ended


31 October 2010


31 October 2009


GBP


GBP





Euro

-


4,878,010

US Dollar

55,105,977


56,058,908

Hungarian Forint

2,526,805


2,239,095

 

As subscription, redemption and dividend payments in respect of all cells other than US High Income are made in the same functional currency, none of the cells other than US High Income are exposed to foreign exchange risk. Subscription and redemption payments in respect of Class B US High Income are made in US Dollars, but dividends are paid in the Sterling equivalent of a fixed US Dollar amount, unless the relevant shareholder elects to receive their dividends in US Dollars.  As the currency in which these dividends are paid is selected at the option of the shareholder and may be paid in the functional currency, the directors do not consider that the Company acting on behalf of US High Income is exposed to material foreign exchange risk.

 

(g)        Valuation

(i)  The notional amounts of the derivative instruments are as follows:

 

Enhanced Global Asset Allocation

GBP 13,500,255

BNP Paribas FTSE Summit

GBP 40,501,195

BNP Paribas UK High Income

GBP 141,613,549

BNP Paribas Energy - Base Metals (2)

GBP 32,506,140

BNP Paribas European Shield

GBP 25,000,000

BNP Paribas Absolute Progression

GBP 76,748,923

US High Income Cell - Class A

GBP 92,469,987

US High Income Cell - Class B

USD 58,337,229

BNP Paribas Agrinvest

GBP 47,225,896

Enhanced Property Recovery

GBP 30,125,000

Energy - Base Metals (3)

GBP 49,587,600

BNP Paribas Agribusiness

HUF 72,500

Enhanced Income

GBP 39,999,346

UK Enhanced Income

GBP 49,015,722

BNP Paribas COMAC

GBP 25,526,009

US Enhanced Income - Class A

GBP 48,500,080

US Enhanced Income - Class B

USD 45,079,125

 

 

 

(ii)  The maturity dates of the derivative instruments are as follows:

 

Enhanced Global Asset Allocation

17 March 2011

BNP Paribas FTSE Summit

29 June 2011

BNP Paribas UK High Income

8 December 2011

BNP Paribas Energy - Base Metals (2)

22 March 2012

BNP Paribas European Shield

26 April 2012

BNP Paribas Absolute Progression

26 July 2012

US High Income Cell - Class A

19 November 2012

US High Income Cell - Class B

19 November 2012

BNP Paribas Agrinvest

22 June 2013

Enhanced Property Recovery

13 March 2014

Energy - Base Metals (3)

5 June 2014

BNP Paribas Agribusiness

10 January 2011

Enhanced Income

*c. 30 April 2108

UK Enhanced Income

24 September 2029

BNP Paribas COMAC

8 June 2029

US Enhanced Income - Class A

16 July 2029

US Enhanced Income - Class B

16 July 2029

 

*The maturity date of the Enhanced Income cell will be the 26th business day after the final ex dividend date.  As the business days in April 2108 cannot yet be determined, an approximate date is disclosed.

 

(iii) Early Settlement Options relating to the derivative contracts

 

Each contract entered into between the Counterparty and the Company acting for and on behalf of each cell have been entered into upon terms which allow such contracts to be terminated, inter alia, in the following circumstances:

 

(a)        by the Company if the Counterparty fails to make a payment under the relevant contract (subject to a grace period of three local business days) or makes a representation which is incorrect or misleading in any material respect or fails to comply with its related obligations;

 

(b)        by the Counterparty if the Company fails to make a payment it is required to pay under the relevant contract (subject to the grace period mentioned above); and

 

 iii) Early Settlement Options relating to the derivative contracts (continued)

 

(c)        by either the Counterparty or the Company if the other party is dissolved, becomes insolvent or is unable to pay its debts as they become due or on the occurrence of an illegality or the imposition on payments under the Contract of a withholding which the Company or the Counterparty, as the case may be, is unable to gross-up.

 

It is anticipated that, on early termination of a Contract, a termination payment would become due to the Company equal to the aggregate net asset value of the relevant Contract at the date of such termination.  The Directors may reinvest such proceeds as they see fit in investments which in the opinion of the Directors replicate as nearly as practicable the investment characteristics of the contract so terminated and so that the proceeds are invested, as nearly as practicable, in accordance with the Company's stated investment objective for the relevant cell.

 

Even if recovered by the Company, any early redemption amount in respect of the shares of the relevant cell may result in a lower return than would have been the case if the contract had continued and been performed up to its maturity date.

 

In the event that the Directors determine that the investment characteristics of the Contract cannot be replicated then the Directors will notify Shareholders of the relevant cell of such circumstances, the relevant early redemption amount and the relevant early redemption date.

 

If the Counterparty fails to top up the collateral such that it is equal to at least the Specified Percentage (as set out in note 6(i) below) or other circumstances constituting an event of default with respect to the Counterparty occur, the Company will be entitled to enforce its security over the collateral as well as to pursue any other remedies it may have against the Counterparty.  In such circumstances, the Company will re-invest the proceeds of realisation of the collateral or distribute the same to Shareholders.

 

(h)        Periodic Returns on Principal and Timings of Payments

 

BNP Paribas UK High Income

Under the terms of the Swap Confirmation between the Counterparty and the Company acting for and on behalf of the BNP Paribas UK High Income cell, the Counterparty pays to the Company for the account of the BNP Paribas UK High Income cell quarterly a Sterling amount equal to 1.875% of the notional amount of the Swap Confirmation, equivalent to 1.875 pence per BNP Paribas UK High Income Preference Share, provided that if the underlying portfolio net asset value reaches 110% of the initial underlying portfolio net asset value (equivalent to a net asset value of 110 pence per share), future payments will increase to 2.0625% of the notional amount of the Swap Confirmation, equivalent to 2.0625 pence per BNP Paribas UK High Income Preference Share.  For each subsequent 5 per cent increase in the underlying portfolio net asset value, subsequent quarterly payments will increase by 0.09375%, equivalent to 0.09375 pence per BNP Paribas UK High Income Preference Share.

 

 

US High Income - Class A

Under the terms of the Swap Confirmation between the Counterparty and the Company acting for and on behalf of the US High Income cell in respect of Class A, the Counterparty pays to the Company for the account of the US High Income cell quarterly a Sterling amount equal to 1.875% of the notional amount of the Swap Confirmation, equivalent to 1.875 pence per Class A Sterling Hedged US High Income Preference Share, provided that if the underlying portfolio net asset value reaches 110% of the initial underlying portfolio net asset value (equivalent to a net asset value of 110 pence per share), future payments will increase to 2.0625% of the notional amount of the Swap Confirmation, equivalent to 2.0625 pence per Class A Sterling Hedged US High Income Preference Share.  For each subsequent 5 per cent increase in the underlying portfolio net asset value, subsequent quarterly payments will increase by 0.09375%, equivalent to 0.09375 pence per Class A Sterling Hedged US High Income Preference Share.

 

US High Income  - Class B

Under the terms of the Swap Confirmation between the Counterparty and the Company acting for and on behalf of the US High Income cell in respect of Class B, the Counterparty pays to the Company for the account of the US High Income cell quarterly the Sterling equivalent of an amount equal to 1.875% of the notional amount of the Swap Confirmation, equivalent to 1.875 cents per Class B Unhedged US High Income Preference Share, provided that if the underlying portfolio net asset value reaches 110% of the initial underlying portfolio net asset value (equivalent to a net asset value of 110 cents per share), future payments will increase to 2.0625% of the notional amount of the Swap Confirmation, equivalent to 2.0625 cents per Class B Unhedged US High Income Preference Share.  For each subsequent 5 per cent increase in the underlying portfolio net asset value, subsequent quarterly payments will increase by 0.09375%, equivalent to 0.09375 cents per Class B Unhedged US High Income Preference Share.  Where holders of Class B Unhedged US High Income Preference Shares have elected to receive their quarterly dividends in US Dollars, the Counterparty pays at the request of the Company in US Dollars such proportion of the quarterly payment as is required to enable the Company to finance the quarterly dividends payable in US Dollars and the balance in Sterling.

 

BNP Paribas Agribusiness Cell

Under the terms of the Swap Confirmation between the Counterparty and the Company acting for and on behalf of the BNP Paribas Agribusiness cell, the Counterparty will pay to the Company for the account of the BNP Paribas Agribusiness cell five business days before the dividend date, that being on or about 9 February 2011.  The dividend amount will be determined by reference to the closing level of the BNP Paribas Global Agribusiness Excess Return Index (the "Index") determined on or about 11 July 2008 (the "Initial Index Level") and the performance of the Index calculated as of each of seven consecutive monthly observation dates.  If the arithmetic average performance of the Index on the seven observation dates is equal to or less than zero, the dividend amount will be zero.  If the arithmetic average performance of the Index on the seven observation dates is greater than zero, the dividend amount will be an amount in Hungarian Forints equal to (a) HUF10,000 multiplied by (b) the product of (i)( the Participation Factor (being 100% and (ii) such arithmetic average performance of the Index.

 

 

Enhanced Income

Under the terms of the Swap Confirmation between the Counterparty and the Company acting for and on behalf of the Enhanced Income cell, the Counterparty will pay to the Company for the account of the Enhanced Income cell quarterly a Sterling amount equal to 2.00% of the notional amount of the Swap Confirmation, equivalent to 2.00 pence per Class A Sterling Hedged Enhanced Income Preference Share, provided that if the underlying portfolio net asset value reaches 110% of the initial underlying portfolio net asset value (equivalent to a net asset value of 110 pence per share), future payments will increase to 2.20% of the notional amount of the Swap Confirmation, equivalent to 2.20 pence per Class A Sterling Hedged Enhanced Income Preference Share.  For each subsequent 5 per cent increase in the underlying portfolio net asset value, subsequent quarterly payments will increase by 0.1%, equivalent to 0.1 pence per Class A Sterling Hedged Enhanced Income Preference Share.

 

Where the underlying portfolio net asset value subsequently decreases after having increased to 110% or more of the initial underlying portfolio net asset value, but has not decreased to less than 100% of the initial underlying portfolio net asset value, subsequent quarterly payments will reduce to 2.00 pence per Class A Sterling Hedged Enhanced Income Preference Share. If the underlying portfolio net asset value has fallen below 100 per cent. and below a lower percentage which is an integral multiple of 5 per cent. i.e. 95%, 90%, 85% (down to 5%) of the initial underlying portfolio net asset value, subsequent dividend payments will be adjusted to be the product of 2.00% and the relevant percentage threshold level and 100 pence per Class A Sterling Hedged Enhanced Income Preference Share.

 

UK Enhanced Income

Under the terms of the Swap Confirmation between the Counterparty and the Company acting for and on behalf of the UK Enhanced Income cell, the Counterparty will pay to the Company for the account of the UK Enhanced Income cell quarterly a Sterling amount equal to 2.00% of the notional amount of the Swap Confirmation, equivalent to 2.00 pence per UK Enhanced Income Preference Share, provided that if the underlying portfolio net asset value reaches 110% of the initial underlying portfolio net asset value (equivalent to a net asset value of 110 pence per share), future payments will increase to 2.20% of the notional amount of the Swap Confirmation, equivalent to 2.20 pence per UK Enhanced Income Preference Share.  For each subsequent 5 per cent increase in the underlying portfolio net asset value, subsequent quarterly payments will increase by 0.1%, equivalent to 0.1 pence per UK Enhanced Income Preference Share.

 

Where the underlying portfolio net asset value subsequently decreases after having increased to 110% or more of the initial underlying portfolio net asset value, but has not decreased to less than 100% of the initial underlying portfolio net asset value, subsequent quarterly payments will reduce to 2.00 pence per UK Enhanced Income Preference Share. If the underlying portfolio net asset value has fallen below 100 per cent. and below a lower percentage which is an integral multiple of 5 per cent. i.e. 95%, 90%, 85% (down to 5%) of the initial underlying portfolio net asset value, subsequent dividend payments will be adjusted to be the product of 2.00% and the relevant percentage threshold level and 100 pence per UK Enhanced Income Preference Share.

 

 

US Enhanced Income - Class A

Under the terms of the Swap Confirmation between the Counterparty and the Company acting for and on behalf of the US Enhanced Income cell in respect of Class A, the Counterparty will pay to the Company for the account of the US Enhanced Income cell quarterly a Sterling amount equal to 2.00% of the notional amount of the Swap Confirmation, equivalent to 2.00 pence per Class A Sterling Hedged US Enhanced Income Preference Share, provided that if the underlying portfolio net asset value reaches 110% of the initial underlying portfolio net asset value (equivalent to a net asset value of 110 pence per share), future payments will increase to 2.20% of the notional amount of the Swap Confirmation, equivalent to 2.20 pence per BNP Paribas US Enhanced Income Class A Preference Share.  For each subsequent 5 per cent increase in the underlying portfolio net asset value, subsequent quarterly payments will increase by 0.1%, equivalent to 0.1 pence per Class A Sterling Hedged US Enhanced Income Preference Share.

 

Where the underlying portfolio net asset value subsequently decreases after having increased to 110% or more of the initial underlying portfolio net asset value, but has not decreased to less than 100% of the initial underlying portfolio net asset value, subsequent quarterly payments will reduce to 2.00 pence per Class A Sterling Hedged US Enhanced Income Preference Share. If the underlying portfolio net asset value has fallen below 100 per cent. and below a lower percentage which is an integral multiple of 5 per cent. i.e. 95%, 90%, 85% (down to 5%) of the initial underlying portfolio net asset value, subsequent dividend payments will be adjusted to be the product of 2.00% and the relevant percentage threshold level and 100 pence per Class A Sterling Hedged US Enhanced Income Preference Share.

 

US Enhanced Income - Class B

Under the terms of the Swap Confirmation between the Counterparty and the Company acting for and on behalf of the US Enhanced Income cell in respect of Class B, the Counterparty will pay to the Company for the account of the US Enhanced Income cell quarterly a US Dollar amount equal to 2.00% of the notional amount of the Swap Confirmation, equivalent to 2.00 cents per Class B US Dollar Unhedged US Enhanced Income Preference Share, provided that if the underlying portfolio net asset value reaches 110% of the initial underlying portfolio net asset value (equivalent to a net asset value of 110 cents per share), future payments will increase to 2.20% of the notional amount of the Swap Confirmation, equivalent to 2.20 cents per BNP Paribas US Enhanced Income Class B Preference Share.  For each subsequent 5 per cent increase in the underlying portfolio net asset value, subsequent quarterly payments will increase by 0.1%, equivalent to 0.1 cents per Class A Sterling Hedged US Enhanced Income Preference Share.

 

Where the underlying portfolio net asset value subsequently decreases after having increased to 110% or more of the initial underlying portfolio net asset value, but has not decreased to less than 100% of the initial underlying portfolio net asset value, subsequent quarterly payments will reduce to 2.00 cents per Class B US Dollar Unhedged US Enhanced Income Preference Share. If the underlying portfolio net asset value has fallen below 100 per cent. and below a lower percentage which is an integral multiple of 5 per cent. i.e. 95%, 90%, 85% (down to 5%) of the initial underlying portfolio net asset value, subsequent dividend payments will be adjusted to be the product of 2.00% and the relevant percentage threshold level and 100 cents per Class B US Dollar Unhedged US Enhanced Income Preference Share.

 

 

(i)         Collateral Arrangements

Under the terms of credit support deeds entered into between the Counterparty and the Company acting for and on behalf of each cell, the Counterparty is required to post collateral in the form of AAA rated government bonds in favour of the Company acting for and on behalf of each cell, such collateral being valued on at a weekly basis and, if the value of the collateral is less than the Credit Support Amount (as set out in note 6(c) above), the Counterparty will provide additional collateral to increase the aggregate value to at least applicable Credit Support Amount.  Where there is an event of default in respect of the Counterparty under the swap confirmation, the Company will be entitled to enforce its security over the collateral.

 

The collateral held against all derivative instruments as at 31 October 2010 is detailed below:

 

Cell

Year ended


Year ended


31 October 2010


31 October 2009


GBP


GBP





EGAA

6,071,634


6,916,495

FTSE S

6,546,572


8,757,644

EBMSG

-


3,832,721

UK HI

9,644,704


26,410,783

EBM (2)

7,927,159


8,196,050

ES

5,279,994


7,178,798

Abs Pro

15,313,761


15,762,681

US HI

23,366,452


45,812,877

Agrinvest

16,016,399


21,268,699

Euro HI

-


4,954,795

EPR

12,993,972


13,404,525

EBM (3)

16,432,104


18,010,161

Agribus

2,289,575


3,085,963

COMAC

3,383,428


11,645,744

US EI

52,444,168


45,067,271

UK EI

24,026,325


1,374,050

EI

24,635,481


27,472,475

 

(j)         Finance Costs and Expenses

All payments by the Company are made in Sterling, except that the Investment Manager's fees in respect of Class B of US High Income and US Enhanced Income are paid in US Dollars and the Investment Manager's fees in respect of BNP Paribas Agribusiness are paid in Hungarian Forints.

 

All expenses are met out of monies provided by BNP Paribas.

 

Quarterly payments to the Company for the account of the US High Income cell in respect of Class B are made in Sterling, except that if the Company so elects by notice in writing to the Counterparty specifying the portion of the derivative contract in respect of which the Company wishes to receive payment in US Dollars, such payment is paid in part, in US Dollars in an amount equal to the product of (a) the number of Units so specified, (b) USD 1.00 and (c) the underlying dividend rate (as explained further at note 6(h) above) and (2) as to the balance in Sterling in an amount equal to the product of (x) the remaining number of Units, (y) the Sterling Amount which could be purchased with USD 1.00 at the applicable Forward Rate and (z) the underlying dividend rate) as explained further at note 6(h) above).  Such election will be made to satisfy elections from holders of Class B Unhedged US High Income Preference Shares to receive their dividends in US Dollars.

 

Dividends paid by the Company to holders of Class B Unhedged US High Income Preference Shares are paid in Sterling except that, where holders of such shares have elected to receive their dividends in US Dollars, such dividends will be paid in US Dollars in an amount equal to (a) the number of Class B Unhedged US High Income Preference Shares in respect of which such election is made, (b) USD 1.00 and (c) the underlying dividend rate (as explained further at note 6(h) above).

 

Payments to the Company for the account of the BNP Paribas Agribusiness cell are made in Hungarian Forints.

 

Dividends paid by the Company to holders of BNP Paribas Agribusiness Preference Shares are paid in Hungarian Forints.

 

Payments to the Company for the account of the US Enhanced Income cell in respect of Class B are made in US Dollars.

 

Dividends paid by the Company to holders of Class B US Dollar Unhedged US Enhanced Income Preference Shares are paid in US Dollars.

 

7          RELATED PARTY TRANSACTIONS

 

Anson Fund Managers Limited is the Administrator and Secretary of the Company and Anson Registrars Limited is the Registrar of the Company.  John R Le Prevost is a director of both these companies.  During the year under review, the Administrator charged fees of £276,416 (2009: £281,445) in respect of its administration of the Company of which £21,529 (2009: £27,327) was outstanding at the year end and the Registrar charged fees of £45,354 (2009: £56,064) in respect of registration services on behalf of the Company of which £1,777 (2009: £3,528) was outstanding at the year end.

 

Anson Group Limited is the ultimate controlling party of Anson Fund Managers Limited and Anson Registrars Limited. John R Le Prevost and Peter Atkinson are directors of Anson Group Limited.

 

Harewood Asset Management SAS, the Investment Manager, and BNP Paribas Arbitrage SNC, the Company's ultimate controlling party, are both members of the BNP Paribas Group.

 

During the year under review the Investment Manager charged fees of £847,865 (2009: £691,002), of which £Nil (2009: £Nil) was outstanding at the year end.

 

As described elsewhere in the financial statements, BNP Paribas, a member of the BNP Paribas Group, was appointed as Distributor of Preference Shares in all the cells and is also the counterparty to the Index Derivative Contracts entered into by the Company on behalf of all cells.  All these transactions and arrangements have been entered into on an arms length basis.  At the end of the year BNP Paribas Group and its subsidiaries held the following shares in issue:

 


As at




As at




31 Oct 2010




31 Oct 2009




Shares


% of total shares


Shares


% of total shares









Enhanced Global Asset Allocation

11,178,440


82.80%


9,834,455


72.85%

BNP Paribas FTSE Summit

39,392,983


97.26%


37,706,666


93.10%

BNP Paribas Energy - Base Metals

-


0.00%


7,132,473


92.61%

BNP Paribas UK High Income

125,179,108


88.39%


102,157,816


72.14%

BNP Paribas Energy - Base Metals (2)

31,377,701


96.53%


31,280,354


96.23%

BNP Paribas European Shield

22,594,225


90.38%


20,072,414


80.29%

BNP Paribas Absolute Progression

72,185,875


94.05%


71,184,880


92.75%

US High Income - Class A Sterling Hedged Preference Shares

 

77,183,830


 

83.47%


 

52,161,572


 

56.41%

US High Income - Class B Unhedged Preference Shares

 

49,415,612


 

84.71%


46,159,495


79.13%

BNP Paribas Agrinvest

38,701,110


81.95%


31,226,277


66.12%

Euro High Income - Class A Sterling Hedged Preference Shares

 

-


 

0.00%


43,643,993


96.21%

Euro High Income - Class B Unhedged Preference Shares

 

-


 

0.00%


9,095,212


88.64%

BNP Paribas Enhanced Property Recovery

 

16,734,691


 

55.55%


14,020,594


46.54%

BNP Paribas Energy - Base Metals (3)

39,698,184


80.06%


37,289,818


75.20%

BNP Paribas Agribusiness Cell

-


0.00%


-


0.00%

BNP Paribas Enhanced Income

20,867,863


52.17%


20,704,734


51.76%

BNP Paribas COMAC

24,163,327


94.66%


13,467,175


52.76%

US Enhanced Income - Class A

24,427,760


50.37%


30,468,910


62.82%

US Enhanced Income - Class B

16,441,138


36.47%


19.252,738


42.71%

UK Enhanced Income

29,835,981


60.87%


34,953,181


71.31%

 

On 29 June 2010 all Euro High Income Class A Sterling Hedged and all Euro High Income Class B Unhedged Preference Shares were compulsorily redeemed and Euro High Income Class A and B were subsequently dissolved.

 

On 21 July 2010 all BNP Paribas Energy - Base Metals Preference Shares were compulsorily redeemed and BNP Paribas Energy - Base Metals Preference was subsequently dissolved.

 

 

ONGOING EXPENSES

Year ended


Year ended


31 Oct 2010


31 Oct 2009


TOTAL


TOTAL


GBP


GBP





Administration fees

276,416


281,445

Directors' remuneration

19,200


25,600

Registration fees

45,354


56,064

Custody fees

172,687


519,066

Asset management fees

847,865


691,002

Tax fees

15,750


-

Audit fees

43,000


43,500

Annual fees

28,995


204,810

Other operating expenses

20,077


47,560






1,469,344


1,869,047

 

All expenses are accounted for on an accruals basis and are borne by BNP Paribas SA.

 

8          REDEMPTION OF SHARES

 

During the year it was agreed by the Board of directors that it was no longer in the best interests of the Company, Energy Base Metals Secure Growth, Euro High Income or holders of Energy Base Metals Secure Growth and Euro High Income Preference Shares for the Company to continue to pursue its stated investment objectives for Energy Base Metals Secure Growth and Euro High Income, so that it was resolved compulsorily to redeem all Energy Base Metals Secure Growth and Euro High Income Preference Shares in issue.

 

The redemption value per Energy Base Metals Secure Preference Share was 241.885 pence, resulting in redemption proceeds and distributions to the holders of Energy Base Metals Secure Preference Shares of £18,629,980.  The net realised gain on this redemption was £10,882,201.

 

The redemption value per Euro High Income Class A Preference Share was 45.748 pence, resulting in redemption proceeds and distributions to the holders of Euro High Income Class A Preference Shares of £20,758,392.  The net realised loss on this redemption was £24,617,127.

 

The redemption value per Euro High Income Class A Preference Share was 50.293 cents, resulting in redemption proceeds and distributions to the holders of Euro High Income Class A Preference Shares of €5,160,564.  The net realised loss on this redemption was £2,717,869.

 

9          ULTIMATE CONTROLLING PARTY

 

The ultimate controlling party is BNP Paribas Arbitrage SNC as holder of the two Ordinary Shares in issue.

 

10         SUBSEQUENT EVENTS

 

The 72,500 Agribusiness Preference Shares (the "AGRI Shares") which originally allotted on 10 July 2008, and had a defined investment life to 11 February 2011, were compulsorily redeemed in the period to the date of signing this report.

 

On 10 January 2011 the AGRI Shares was delisted from the Budapest Stock exchange, and on 9 February 2011 (the Dividend Payment Date) a Dividend of HUF 105,062,446 (HUF 1,449.37 per Share) was paid to holders of AGRI Shares.

 

On 11 February 2011 (the Redemption Date) a Redemption of HUF 725,000,000 (HUF 10,000 per Share) was paid to holders of AGRI Shares and the BNP Paribas Agribusiness Cell was terminated.

 


SCHEDULE OF INVESTMENTS

as at 31 October 2010

 


as at 31 October 2010


NOMINAL


VALUATION


TOTAL NET ASSETS




GBP


%







Enhanced Global Asset Allocation






BNP Paribas Index Derivative Contract

GBP 13,500,255


18,570,951


2.48%







BNP Paribas FTSE Summit






BNP Paribas Index Derivative Contract

GBP 40,501,195


52,553,946


7.01%







BNP Paribas Energy - Base Metals






Secure Growth






BNP Paribas Index Derivative Contract

-


-


0.00%







BNP Paribas UK High Income






BNP Paribas Index Derivative Contract

GBP 141,613,549


80,052,723


10.68%







BNP Paribas Energy - Base Metals (2)






BNP Paribas Index Derivative Contract

GBP 32,506,140


57,257,290


7.64%







BNP Paribas European Shield






BNP Paribas Index Derivative Contract

GBP 25,000,000


23,067,750


3.08%







BNP Paribas Absolute Progression






BNP Paribas Index Derivative Contract

GBP 76,748,923


94,907,718


12.66%







US High Income - Class A






BNP Paribas Index Derivative Contract

GBP 92,469,987


61,340,891


8.18%







US High Income - Class B






BNP Paribas Index Derivative Contract

USD 58,337,229


25,357,984


3.38%







BNP Paribas Agrinvest






BNP Paribas Index Derivative Contract

GBP 47,225,896


59,620,805


7.95%







Euro High Income - Class A






BNP Paribas Index Derivative Cell

-


-


0.00%







Euro High Income - Class B






BNP Paribas Index Derivative Contract

-


-


0.00%







Enhanced Property Recovery






BNP Paribas Index Derivative Contract

GBP 30,125,000


23,910,212


3.19%







Energy - Base Metals (3)






BNP Paribas Index Derivative Contract

GBP 49,587,600


54,971,326


7.33%







BNP Paribas Agribusiness






BNP Paribas Index Derivative Contract

HUF 72,500


2,526,805


0.34%







Enhanced Income






BNP Paribas Index Derivative Contract

GBP 39,999,346


43,553,288


5.81%

 

 

 

 


as at 31 October 2010


NOMINAL


VALUATION


TOTAL NET ASSETS




GBP


%







UK Enhanced Income Cell






BNP Paribas Index Derivative Contract

GBP 49,015,722


49,273,545


6.57%







BNP Paribas COMAC






BNP Paribas Index Derivative Contract

GBP 25,526,009


21,635,335


2.89%







US Enhanced Income - Class A






Sterling hedged






BNP Paribas Index Derivative Contract

GBP 48,500,080


51,201,534


6.83%







US Enhanced Income - Class B






US Dollar unhedged






BNP Paribas Index Derivative Contract

USD 45,079,125


29,747,993


3.97%







TOTAL



749,550,096


100.00%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SCHEDULE OF INVESTMENTS

as at 31 October 2009

 


as at 31 October 2009


NOMINAL


VALUATION


TOTAL NET ASSETS




GBP


%







Enhanced Global Asset Allocation






BNP Paribas Index Derivative Contract

GBP 13,500,255


18,346,981


2.30%







BNP Paribas FTSE Summit






BNP Paribas Index Derivative Contract

GBP 40,501,195


52,109,243


6.54%







BNP Paribas Energy - Base Metals






Secure Growth






BNP Paribas Index Derivative Contract

GBP 7,701,999


21,004,044


2.64%







BNP Paribas UK High Income






BNP Paribas Index Derivative Contract

GBP 141,613,549


97,693,523


12.26%







BNP Paribas Energy - Base Metals (2)






BNP Paribas Index Derivative Contract

GBP 32,506,140


51,769,929


6.50%







BNP Paribas European Shield






BNP Paribas Index Derivative Contract

GBP 25,000,000


21,984,500


2.76%







BNP Paribas Absolute Progression






BNP Paribas Index Derivative Contract

GBP 76,748,923


90,578,311


11.37%







US High Income - Class A






BNP Paribas Index Derivative Contract

GBP 92,469,987


68,437,037


8.59%







US High Income - Class B






BNP Paribas Index Derivative Contract

USD 58,337,229


27,073,356


3.40%







BNP Paribas Agrinvest






BNP Paribas Index Derivative Contract

GBP 47,225,896


48,357,901


6.07%







Euro High Income - Class A






BNP Paribas Index Derivative Cell

GBP 45,375,520


24,281,348


3.05%







Euro High Income - Class B






BNP Paribas Index Derivative Contract

EUR 10,261,000


4,878,010


0.61%







Enhanced Property Recovery






BNP Paribas Index Derivative Contract

GBP 30,125,000


20,238,276


2.54%







Energy - Base Metals (3)






BNP Paribas Index Derivative Contract

GBP 49,587,600


51,911,771


6.52%







BNP Paribas Agribusiness






BNP Paribas Index Derivative Contract

HUF 72,500


2,239,095


0.28%







Enhanced Income






BNP Paribas Index Derivative Contract

GBP 39,999,346


45,540,455


5.72%

 

 

 

 

 


as at 31 October 2009


NOMINAL


VALUATION


TOTAL NET ASSETS




GBP


%







BNP Paribas UK Enhanced Income Cell






BNP Paribas Index Derivative Contract

GBP 49,015,722


49,844,088


6.26%







BNP Paribas COMAC






BNP Paribas Index Derivative Contract

GBP 25,526,009


20,010,604


2.51%







US Enhanced Income - Class A






Sterling hedged






BNP Paribas Index Derivative Contract

GBP 48,500,080


51,287,865


6.44%







US Enhanced Income - Class B






US Dollar Unhedged






BNP Paribas Index Derivative Contract

USD 45,079,125


28,985,552


3.64%







TOTAL



796,571,889


100.00%

 

A pdf version of the annual financial report will shortly be posted on the Company's web-site at http://www.harewoodsolutions.co.uk/press.aspx and a further announcement will be made once the annual financial report is available to be downloaded.

 

For further information contact:

BNP Paribas

Tel: 0207 595 8056 or E-mail: [email protected]

 

Anson Fund Managers Limited

Secretary        

Tel: Guernsey 01481 722260

 

25 February 2011

 

END OF ANNOUNCEMENT

 

E&OE - in transmission

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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