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Thursday 13 February, 2014

Harewood Struct Inv

Annual Financial Report

RNS Number : 0626A
Harewood Structured Investment PCC
13 February 2014
 



 

 

 

 

Harewood Structured Investment PCC Limited

 

Annual Financial Report for the year ended 31 October 2013

 

ABOUT THE COMPANY

Harewood Structured Investment PCC Limited (the "Company"), is a Guernsey incorporated, closed-ended protected cell investment company.  Upon incorporation, two Ordinary Shares (also referred to as "Management Shares") were issued for administrative purposes.  The Company commenced business on 18 March 2005 when preference shares in its first cell were allotted and issued.

 

On 7 December 2005, 46,613,549 BNP Paribas UK High Income Preference Shares ("UKHI Shares") of the BNP Paribas UK High Income cell (the "UKHI Cell") were allotted and issued at a price of £1.00 each.  On 26 May 2006, a further 30,000,000 UKHI Shares were allotted and issued at a price of 102.47 pence each and a further allotment and issue of 50,000,000 shares was made on 28 September 2006 at a price of 104.00 pence each.  On 4 June 2007, a further 15,000,000 UKHI Shares were allotted and issued at a price of 109.60 pence each.  The UKHI Shares had a defined investment life to 8 December 2011, whereupon they were compulsorily redeemed.

 

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 (the "EBM2 Cell") were allotted and issued at a price of £1.00 each.  On 6 July 2006, a further 5,000,000 EBM2 Shares were allotted and issued at a price of 110.44 pence each.  The EBM2 Shares had a defined investment life to 28 March 2012, whereupon they were compulsorily redeemed.

 

On 20 April 2006, 25,000,000 BNP Paribas European Shield Preference Shares ("ES Shares") of the BNP Paribas European Shield cell (the "ES Cell") were allotted and issued at a price of £1.00 each.  The ES Shares had a defined investment life to 3 May 2012, whereupon they were compulsorily redeemed.

 

On 19 July 2006, 61,748,923 BNP Paribas Absolute Progression Preference Shares ("AP Shares") of the BNP Paribas Absolute Progression cell (the "AP Cell") were allotted and issued at a price of £1.00 each.  On 23 January 2007, a further 15,000,000 AP Shares were allotted and issued at a price of 108.484 pence each.  The AP Shares had a defined investment life to 26 July 2012, whereupon they were compulsorily redeemed.

 

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 (the "USHI Cell") were allotted and issued at a price of £1.00 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 had a defined investment life to 26 November 2012, whereupon they were compulsorily redeemed.

 

On 25 October 2006, 43,337,229 Class B Unhedged US High Income Preference Shares ("Class B USHI Shares") of the USHI Cell were allotted and issued at a price of $1.00 each.  On 4 June 2007, a further 15,000,000 Class B USHI Shares were allotted and issued at a price of 105.89 cents each.  The Class B USHI Shares have a defined investment life to 26 November 2012 whereupon they were compulsorily redeemed.

 

On 21 June 2007, 37,225,896 BNP Paribas Agrinvest Preference Shares ("Agrinvest shares") of the BNP Paribas Agrinvest cell (the "Agrinvest Cell") were allotted and issued at a price of £1.00 each.  On 15 February 2008, a further 10,000,000 Agrinvest Shares were allotted and issued at a price of 127.41 pence. The Agrinvest Shares had a defined investment life to 29 June 2013, whereupon they were compulsorily redeemed.

 

On 12 March 2008, 30,125,000 Enhanced Property Recovery Preference Shares (the "EPR Shares") of the Enhanced Property Recovery cell (the "EPR Cell") were allotted and issued at a 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 ("EBM3 Shares") of the Energy - Base Metals (3) cell (the "EBM3 Cell") were allotted and issued at a price of £1.00 each.  On 5 September 2008, a further 15,000,000 EBM3 Shares were allotted and issued at a price of 100.03 pence each.  The EBM3 Shares have a defined investment life to 12 June 2014, whereupon they will be subject to compulsory redemption.

 

On 18 March 2009, 24,999,346 Class A Sterling Hedged Enhanced Income Preference Shares ("Class A EIF Shares") of the Enhanced Income cell (the "EI Cell") were allotted and issued at a price of £1.00 each.  On 8 October 2009, a further 15,000,000 Class A EIF Shares were allotted and issued at a 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 or around 10 May 2108*.

 

*In accordance with the Summary and Securities Note of the EI Cell, the redemption date of the Class A EIF Shares will be the twenty-fourth business day following the relevant record date.  As the maturity date is set so far in advance, and business days for the year 2108 cannot yet be accurately determined, an approximate redemption date only is disclosed within this Report.

 

On 29 May 2009, 25,526,009 Class A Sterling Hedged COMAC Preference Shares ("COMAC Shares") of the BNP Paribas COMAC cell (the "COMAC Cell") were allotted and issued at a price of £1.00 each.  Whilst at the time of issue the COMAC Shares had a defined investment life to 1 June 2029, it was agreed by the Board of directors on 14 May 2013 that it was no longer in the best interests of the Company or the holders of COMAC Shares to continue to pursue the stated investment objective for the COMAC Cell.  On 11 June 2013 a Written Special Resolution was passed by the sole member of the Company to effect the termination of the COMAC Cell and to redeem all COMAC Shares on 2 July 2013.

 

On 14 July 2009, 25,079,125 Class B Unhedged US Enhanced Income Preference Shares ("Class B USEI Shares") of the USEI 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 or around 1 September 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 (the "USEI Cell") were allotted and issued at a price of £1.00 each.  The Class A USEI Shares have a defined investment life to 16 July 2029, whereupon they will be subject to compulsory redemption on or around 1 September 2029**.

 

**In accordance with the Summary and Securities Note of the USEI Cell, the redemption 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 maturity dates are set so far in advance, and business days for the year 2029 cannot yet be accurately determined, an approximate redemption date only is disclosed within this Report.

 

On 23 September 2009, 49,015,722 UK Enhanced Income Preference Shares ("UKEI Shares") of the UK Enhanced Income cell (the "UKEI Cell") were allotted and issued at an issue price of £1.00 each.  The UKEI Shares have a defined investment life to 24 September 2029 whereupon they will be subject to compulsory redemption on or around 8 November 2029***.

 

***In accordance with the Summary and Securities Note of the UKEI Cell, the redemption date of the UKEI Shares will be the twenty-fourth business day after the final record date.  As the maturity date is set so far in advance, and business days for the year 2029 cannot yet be accurately determined, an approximate redemption date only is disclosed within this Report.

 

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.

 

All shares in issue are listed on the Channel Islands Securities Exchange Authority (the "CISE") with the exception of the two Management Shares in issue which are not listed.

 

The Company is managed by its Board of directors who have appointed THEAM of Paris, France as the Company's external Investment Manager of all existing cells.  Administrative and Secretarial support is provided by JTC Fund Managers (Guernsey) Limited (formerly Anson Fund Managers Limited) in Guernsey.  BNP Paribas SA acts as Distributor and Investment Counterparty of the Company's cells.

 

Directors and Principal Advisors

 

John Le Prevost - Non executive Director

John Le Prevost is British and resides in Guernsey. He is a director and controlling shareholder of Anson Group Limited, the holding company of Anson Registrars Limited, the Company's Registrar, Transfer Agent, Paying Agent and Receiving Agent.  Mr Le Prevost has over thirty years experience in the investment and offshore trust industry, 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 and, in addition, serves as a non-executive director on the boards of many listed investment companies.

 

Francois-Xavier Foucault - Non executive Director

Francois-Xavier Foucault is French and resides in France.  As well as being a director of the Company, he is currently Head of Commodity and flow for Strategy & Risk, Risk & Resources and Regulatory Affairs for BNP Paribas GECD, a 100% affiliate of 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 - Non executive Director

Youri Siegel is French and resides in the United Kingdom.  As well as being a director of the Company, he is currently the Head of Solutions Structuring within the Global Equities and Commodities Derivatives Department of BNP Paribas Arbitrage SNC, a 100% affiliate of BNP Paribas SA.  Mr Siegel has also held similar roles at Société Generale and JPMorgan.

 

Trevor Hunt - Non executive Director

Trevor Hunt is British and resides in Jersey. He has extensive experience in the offshore financial services sector.  Mr Hunt worked for HSBC for over 30 years in various senior management positions within the open-ended and closed-ended offshore funds industry.  Mr Hunt retired from HSBC in 2003 and spent six years as a director of Capita Financial Administrators (Jersey) Limited and of other Capita entities before leaving in 2009 to join BNP Paribas Securities Services in a senior management role.  On 30 September 2011 Mr Hunt left BNP Paribas in order to focus on providing non-executive directorship services to a number of Channel Island funds and fund management companies.  Mr Hunt is regulated by the Jersey Financial Services Commission and Guernsey Financial Services Commission for the provision of services as a non-executive director and is a member of the Jersey Association of Directors and Officers and serves on the Association of Investment Companies ("AIC") Offshore Funds Committee.

 

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 provider of a derivative contract or other financial instrument. The duties of the Distributor include, inter alia, the preparation of literature to promote the Company and relevant cell within the United Kingdom ("UK") and to ensure it complies with the applicable UK requirements and other applicable laws and regulatory requirements, promoting within the UK 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 31 October 2013 the Group had an equity market capitalisation of €67.91 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 2012, the Group had audited consolidated assets of €1,907.29 billion and audited shareholders' equity (Group share including income for the 2012 fiscal year) of €85.89 billion.  Audited net income, before taxes, non-recurring items and amortization of goodwill, for the year ended 31 December 2012 was €10.37 billion.  Audited net income, Group share, for the year ended 31 December 2012 was €6.55 billion.

 

THEAM - Investment Manager

 

The Investment Manager in respect of all cells of the Company is THEAM, a member of the BNP Paribas Group. As a result of a joint project between BNP Paribas CIB and BNP Paribas Investment Partners, combining the Sigma Teams from BNP Asset Management with Harewood Asset Management SAS, Harewood Asset Management SAS was renamed THEAM on 31 March 2011. 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 which are attributable to that cell. The Investment Manager is organised as a French Société 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. The Investment Manager may also provide investment advisory services. The Investment Manager is a wholly owned subsidiary of BNP Paribas Investment Partners. The Investment Manager is regulated by the Autorité des marchés financiers under French law. As of 31 October 2013, THEAM was responsible for (or mandated for) the investment of €37.5 billion over 735 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. BNP Paribas Securities Services is a company in the BNP Paribas Group.  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.

 

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

 

US High Income Cell

The investment objective of the Company for the USHI Cell in respect of the Class A USHI Shares and the Class B USHI Shares, which were issued on 25 October 2006, 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 Class A USHI Shares and Class B USHI Shares, aims to reduce the risk of capital loss. 

 

In accordance with the Company's investment objective for the USHI Cell, the gross proceeds at launch, together with the proceeds raised in the subsequent issue of further Class A USHI Shares and Class B USHI Shares, were invested into an Index Derivative Contract (the "USHI Contract") with BNP Paribas, the Investment Counterparty. Under the terms of the USHI Contract, the Company, on behalf of the USHI Cell, is to receive on each dividend payment date an amount equal to 1.875 pence or cents per Class A USHI Share or Class B USHI Share respectively, 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. 

 

In accordance with their defined investment life, all Class A USHI Shares and Class B USHI Shares were compulsorily redeemed on 26 November 2012.

 

BNP Paribas Agrinvest Preference Cell

The investment objective of the Company for the Agrinvest Cell in respect of the Agrinvest 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 "EER Index"). The EER 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 EER Index consists of 23 components within the agriculture sector. The EER Index is also subject to a forward curve roll optimisation process.  The roll optimisation process is achieved via an algorithm which is designed to select the optimum contracts on which the EER Index will roll


every month.  Further details of the roll optimisation process and algorithm applied are contained within the Summary and Securities Note for the Agrinvest Cell.

 

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

 

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

 

In accordance with their defined investment life, all Agrinvest Shares were compulsorily redeemed on 29 June 2013.

 

Enhanced Property Recovery Cell

The investment objective of the Company for the EPR Cell in respect of the EPR 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 "EPRA Index"). The EPRA 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 EPRA Index determined on 13 March 2008, the second (defined as the "Final Index Level") being the arithmetic average of the levels of the EPRA Index on 13 monthly averaging dates from 13 March 2013 to the Maturity Date inclusive.

 

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

 

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

 

Energy - Base Metals (3) Cell

The investment objective of the Company for the EBM3 Cell in respect of the EBM3 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 EBM3 Shares is not subject to the risk of foreign exchange movements, save to the extent that the value of the commodities comprised in the notional 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 EBM3 Cell, the net proceeds at launch, together with the proceeds raised in the subsequent issue of further EBM3 Shares, were invested in an Index Derivative Contract (the "EBM3 Contract") with BNP Paribas, the Investment Counterparty.  Under the terms of the EBM3 Contract, the Company, on behalf of the EBM3 Cell, is to receive, at redemption, an amount equalling the funds available for payment of the investment return.

 

Full details of the calculation of the investment return, the EBM3 Contract and collateral arrangements in favour of the Company for the account of the EBM3 Cell are disclosed inthe EBM3 Cell's Summary and Securities Note, a copy of which is available from the Company's Administrator or Distributor upon request.

 

Enhanced Income Cell

The investment objective of the Company for the EI Cell in respect of the Class A EIF 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 DJES50 Index and notional short-term call options written on the DJES50 Index.

 

In accordance with the Company's investment objective for the EI Cell, the gross proceeds at launch, together with the proceeds raised in the subsequent issue of further Class A EIF Shares, were invested into an Index Derivative Contract (the "EI Contract") with BNP Paribas, the Investment Counterparty. 

 

Under the terms of the EI Contract, the Company, on behalf of the EI Cell, is to receive an amount initially equal to 2 pence per Class A EIF Share on each dividend payment date, 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 EI Contract and the collateral arrangements are disclosed in the EI Cell's Summary and Securities Note, a copy of which is available from the Company's Administrator or Distributor upon request.

 

BNP Paribas COMAC Cell

The investment objective of the Company for the COMAC Cell in respect of the COMAC 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 "COMAC Index"). 

 

The COMAC 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 based on an investment strategy of 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 COMAC 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 fluctuations in the Sterling / US Dollar exchange rate. 

 

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

 

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

 

In accordance with a Company shareholder written resolution, all COMAC Shares were redeemed on 2 July 2013.

 

US Enhanced Income Cell

The investment objective of the Company for the USEI Cell in respect of the Class A USEI Shares and Class B USEI 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.  The investment objective is intended to be achieved by reference to an investment strategy linked to the total return performance of the Standard and Poor's 500®Index (the "S&P500 Index") and notional short-term call options written on the S&P500 Index.

 

In accordance with the Company's investment objective for the USEI Cell, the net proceeds at launch together with the proceeds raised in the subsequent issue of further Class A USEI Shares and Class B USEI Shares, were invested into an Index Derivative Contract (the "USEI Contract") with BNP Paribas, the Investment Counterparty.  Under the terms of the USEI Contract, the Company, on behalf of the USEI Cell, is to receive an amount initially equal to 2 pence or cents per Class A USEI Share or Class B USEI Share respectively on each dividend payment date, 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 USEI Contract and the collateral arrangements in favour of the Company, for the account of the USEI Cell, are disclosed in the USEI Cell's Summary and Securities Note, a copy of which is available from the Company's Administrator or Distributor upon request.

 

UK Enhanced Income Cell

The investment objective of the Company for the UKEI Cell in respect of the UKEI 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.

 

The investment objective is intended to be achieved by reference to an investment strategy linked to the total return performance of the FTSE 100Index (the "FTSE100 Index") and notional short-term call options written on the FTSE100 Index.

 

In accordance with the Company's investment objective for the UKEI Cell, the net proceeds raised at launch were invested into an Index Derivative Contract (the "UKEI Contract") with BNP Paribas, the Investment Counterparty.  Under the terms of the UKEI Contract the Company, on behalf of the UKEI Cell, is to receive an amount initially equal to 2 pence per UKEI Share on each dividend payment date, 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 UKEI Contract and the collateral arrangements in favour of the Company, for the account of the UKEI Cell, are disclosed in the UKEI Cell's Summary and Securities Note, a copy of which is available from the Company's Administrator or Distributor upon request.


 

NET ASSET VALUES

 

As at 31 October 2013, the accounting reference date, the calculated net asset value per share in each existing cell at that date was as follows:-


As at 31 Oct 2013

As at 31 Oct 2012

 

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

 

-

31.84 pence

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

 

-

38.43 US$ cents

BNP Paribas Agrinvest ("Agrinvest")

 

-

123.31 pence

Enhanced Property Recovery ("EPR")

 

79.26 pence

73.56 pence

Energy - Base Metals (3) ("EBM3")

 

99.32 pence

100.75 pence

Enhanced Income - Class A ("EIF")

 

96.60 pence

91.78 pence

BNP Paribas COMAC ("COMAC")

 

-

72.61 pence

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

 

113.13 pence

105.35 pence

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

 

113.08 US$ cents

105.61 US$ cents

UK Enhanced Income ("UKEI")

 

91.38 pence

88.46 pence

 


 

MANAGEMENT REPORT

For the year ended 31 October 2013

 

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 contained within this report and is incorporated here by reference. 

 

Details of related party transactions are given in Note 7 to the Financial Statements and in the Report of the Directors as contained within this report.

 

Going Concern

 

The performance of the investments held by the Company, for the account of each of its cells, over the reporting period 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, details of its financial instruments and its exposures to market price risk, credit risk, liquidity risk, interest rate risk and foreign exchange risk are set out in Note 6 to the Financial Statements as contained within this report.

 

As disclosed in Note 6 to the Financial Statements, the only financial commitments of the Company are its on-going operating expenses and obligations to shareholders on the redemption of their preference shares held in a cell.  BNP Paribas has agreed to reimburse the Company for or, on behalf of the Company, pay in full all of its on-going 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.  Such net asset value 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 upon the maturity or early termination of that contract.

 

After making enquiries, and taking into consideration the long-term counterparty credit rating of BNP Paribas which, at the date of this report, was rated by Standard & Poor's Rating Agency ("S&P") as A+, 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                              Trevor Hunt

Director                                               Director

 

12 February 2014

 

REPORT OF THE DIRECTORS

The directors present their Report and Financial Statements for the year ended 31 October 2013.

Principal Activity

The principal activity of the Company is to carry on business as an investment company.  The Company is a Guernsey incorporated, authorised, closed-ended protected cell investment company and the shares of each cell are listed on the CISE.  The directors do not envisage any change in these activities for the foreseeable future.

 

Investment Objective and Investment Policy

The investment objective and policy of each of the Company's cells are summarised on in this report.  Full details of each cell's investment objective and policy are set out in the relevant Summary and Securities Note, copies of which are available for existing cells upon request from the Company's Administrator or Distributor.

 

Shareholder Information

The net asset value of a share in each of the Company's cells is announced to the CISE and to a regulatory information service on a daily basis. 

 

The shares of all of the Company's cells are listed on the CISE and could be dealt, indirectly, through a stockbroker or professional adviser acting on an investor's behalf.  The buying and selling of such shares could be settled through CREST.

 

The Company's registers of shareholders are maintained by Anson Registrars Limited in Guernsey who can be contacted on +44 (0) 1481 711301.

 

Results

The results for the year are set out in the Statement of Comprehensive Income as contained within this report.

 

Substantial Interests

Other than by BNP Arbitrage SNC, the Company has not been notified by any shareholder of a substantial interest in the shares of any of the Company's cells as at 31 October 2013.


BNP Paribas Arbitrage SNC is the beneficial owner of the two Ordinary Shares in issue, those being the only class of shares entitled to receive notice of general meetings of the Company and to attend and vote thereat.  The Ordinary Shares are registered in the name of JTC Fund Managers (Guernsey) Limited as nominee for BNP Paribas Arbitrage SNC.

 

BNP Paribas Arbitrage SNC also holds Preference Shares in each of the Company's cells and details of its shareholdings are shown in Note 7 to the Financial Statements.

 

Directors

The directors in office are shown within this report. Further details of the directors' responsibilities are given in this report.   As at 31 October 2013, none of the directors, nor any persons connected with them, had any beneficial interest in the Company.  The Company does not have a Chairman and, as all of the directors are non-executive, there is no chief executive. 

 

Related Party Transactions

Anson Registrars Limited is the Company's Registrar, Transfer Agent, Paying Agent and Receiving Agent.  John Le Prevost is a director and controlling shareholder of Anson Group Limited, the holding company of Anson Registrars Limited.   John Le Prevost is also a director of the subsidiary companies of Anson Group Limited.

 

BNP Paribas Arbitrage SNC, a wholly owned subsidiary of BNP Paribas SA, holds Preference Shares in each of the Company's cells and, as such, is entitled to receive dividend payments, where applicable, and redemption proceeds on the maturity of the cells.  Details of these shareholdings are disclosed in Note 7 to the Financial Statements.

 

Francois-Xavier Foucault and Youri Siegel are both employees of BNP Paribas SA, the Company's Investment Counterparty and Distributor.  The Company's Investment Manager, THEAM, is also a wholly owned subsidiary of BNP Paribas SA.

Statement of Directors' Responsibilities

The directors are responsible for keeping proper accounting records which disclose, with reasonable accuracy at any time, the financial position of the Company, for safeguarding the assets of the Company, for taking reasonable steps for the prevention and detection of fraud and other irregularities and for the preparation of a Directors' Report, which complies with the requirements of The Companies (Guernsey) Law, 2008, as amended (the "Law"). 

 

The directors are responsible for preparing the Financial Statements in accordance with applicable Guernsey law and have chosen to prepare Financial Statements for the Company in accordance with International Financial Reporting Standards ("IFRS").

 

IFRS requires that the Financial Statements present fairly, for each financial year, the Company's financial position, financial performance and cash flows.  This requires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses as set in the International Accounting Board's Framework for the preparation and presentation of Financial Statements.  In virtually all circumstances, a fair representation will be achieved by compliance with all applicable IFRS.  A fair presentation also requires the directors to:

 

·           select suitable accounting policies and apply them consistently;

·           make judgements and estimates that are reasonable and prudent;

·           state whether applicable accounting standards have been followed, subject to any material departures disclosed, and explained in the Financial Statements; and

·           prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

 

The directors confirm that they have complied with the above requirements in preparing the Financial Statements.

 

To the best of the directors' knowledge, there is no relevant audit information of which the Company's auditor is unaware and each director has taken all the steps that he ought to have taken as a director to make himself aware of any relevant audit information and to establish that the Company's auditor is aware of that information.

 

The Financial Statements give a true and fair view and have been prepared in accordance with the Law.

 

Corporate Governance Statement

The Company is regulated by the Guernsey Financial Services Commission (the "GFSC") as an authorised entity under the Authorised Closed Ended Investment Scheme Rules 2008 with the Preference Shares of its cells being listed on the CISE.  

 

On 30 September 2011, the GFSC issued the Finance Sector Code of Corporate Governance (the "Guernsey Code") which came into effect from 1 January 2012.  As the Company is regulated by the GFSC as an authorised collective investment scheme it is subject to the Guernsey Code. The Board of directors previously voluntarily complied with the UK Corporate Governance Code published by the Financial Reporting Council (the "Code"). Adherence to the Code ensured that the Company was deemed to comply with the requirement of the Guernsey Code. However, to avoid unnecessarily reporting under two regimes, the Board of directors has elected to only report under the Guernsey Code

 

The Board are satisfied that the Company's governance practices throughout the year ended 31 October 2013 were in accordance with all the principles of the Guernsey Code and continue to be in compliance as at the date of this report.

 

The Company's directors place a high degree of importance on ensuring that high standards of corporate governance are maintained and resolved that a Board Governance review be conducted annually. 

 

The Board is responsible for investment of the Company's assets, for and on behalf of each cell, and for monitoring the performance of the investments held by the Company for the account of each cell.  The Board is also responsible for declarations of dividends out of the assets of individual cells where applicable.  As all of the directors are non-executive, the day-to-day administration of the Company's affairs has been delegated to third-party service providers, including the Investment Manager, the Administrator and Secretary, the Registrar and the Custodian.  Their appointment and performance of their duties remains subject to the overall supervision of the Board.

 

The Board meets at least four times a year to consider the business and affairs of the Company for the previous quarter.  Between these quarterly meetings the Board meets to consider specific matters of a transactional nature and there is regular contact with the Secretary.  During the reporting period the Board or committees thereof, met 25 times.

 

The directors are kept fully informed of investment and financial controls and any other matters that are relevant to the business of the Company and should be brought to the attention of the directors.  The directors also have access to professional advice, where necessary in the furtherance of their duties, at the expense of the Company.

 

The Board has a breadth of experience relevant to the Company, and, whilst no separate nomination committee has been established, the directors believe that any changes to the Board's composition can be managed without undue disruption.  If any new directors are appointed to the Board a full and tailored induction will be provided on joining the Board.  The performance of the Board, and each director, is reviewed annually by the Board by way of a Performance Evaluation questionnaire.

 

Audit Committee

An Audit Committee has been established consisting of all four directors, of whom Mr Hunt and Mr Le Prevost are considered to be independent.  Notwithstanding that Mr Le Prevost is a director of Anson Registrars Limited he is considered to be independent as he does not perform any executive functions in respect of the Company on behalf of that service provider. Mr Hunt is considered independent as he is not connected to any of the Company's service providers.

 

In the performance of its duties, the Audit Committee has regard to the Guidance on Audit Committees published by the Financial Reporting Council in 2010, as amended in 2012.  The Audit Committee examines the effectiveness of the Company's internal control systems, the annual and half-yearly reports and Financial Statements, the auditors' remuneration and engagement, as well as the auditors' independence and any non-audit services provided by them.  The Audit Committee receives compliance updates from the Secretary's compliance department and the external auditors on an on-going basis. 

 

The Audit Committee meets at least twice annually, being before the Board meets to consider the Company's annual and half-yearly reports and financial statements.  The Audit Committee operates within clearly defined terms of reference and provides a forum through which the Company's external auditors report to the Board.  The terms of reference of the Audit Committee are available from the Secretary upon request.

 

There is no internal audit function.  As all of the directors are non-executive, and all of the Company's management and administration functions have been delegated to independent service providers, the Audit Committee does not deem it necessary for the Company to have an internal audit function but will review this requirement periodically. 

 

Dividend Committees

The Company has established Dividend Committees, consisting of any one director or their alternate, for the purpose of declaring dividends payable out of each of BNP Paribas Enhanced Income, US Enhanced Income and UK Enhanced Income cells.  All dividends declared and paid by these cells are in accordance with a fixed timetable, and calculated using a prescribed formula, as specified in the relevant Summary and Securities Note of each cell.  Therefore, the Board has no discretion with regard to the level or timing of such dividends.

 

Internal Controls

The Board is responsible for the Company's system of internal control and for reviewing its effectiveness.  The Board confirms that there is an on-going process for identifying, evaluating and managing the significant risks faced by the Company.  This process has been in place for the reporting period under review, and up to the date of approval of this Annual Report and Financial Statements, and is regularly reviewed by the Board.

 

The internal control systems are designed to meet the Company's particular needs and the risks to which it is exposed.  Accordingly, the internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and, by their nature, can only provide reasonable, and not absolute, assurance against misstatement and loss.

 

Collateral Arrangements

In accordance with the investment objectives and policies of each of the Company's cells, and the contracts entered into between the Company, on behalf of each cell, and the Investment Counterparty, BNP Paribas is required to provide collateral to meet its obligations under each Contract in the form of AAA rated G7 government bonds to the designated collateral accounts held in favour of the Company, acting on behalf of each cell.  The collateral is valued on a weekly basis.

 

The amount of collateral which BNP Paribas is required to post in favour of each cell, for the tenure of the relevant Contract, is to the value of 100% of the indirect exposure to the credit risk of BNP Paribas of all preference share holders in the relevant cell (other than BNP Paribas Arbitrage SNC) plus an additional 10% of the relevant cell's total exposure to the credit risk of BNP Paribas (up to a maximum of 100% of such total exposure).  Should a default occur, the Company is able to uphold its rights under the restructuring deed between the Company, BNP Arbitrage SNC and BNP Paribas.

 

BNP Paribas Arbitrage SNC has waived its rights to pari passu payment with other preference share holders of all redemption amounts where there is a default by BNP Paribas under the relevant swap contract, thereby subordinating its rights in favour of all other preference shareholders (on default by BNP Paribas).

 

Dialogue with Shareholders

The directors are always available to enter into dialogue with shareholders and the Company believes such communications to be important.  BNP Paribas regularly meet with the Company's major shareholders and report to the Board of directors at least quarterly on those shareholders' views about the Company and any issues or concerns they might have.  BNP Paribas can also be contacted by shareholders, both by telephone and e-mail, their contact details are contained within these Financial Statements.

 

Going Concern

Given the nature of the Company and its investments, the directors are satisfied that it is appropriate to continue to adopt the going concern basis in preparing the Financial Statements, and, after due consideration, the directors consider that the Company is able to continue for the foreseeable future.

 

By order of the Board

 

John R Le Prevost                              Trevor P Hunt

Director                                               Director

 

12 February 2014


INVESTMENT MANAGER'S REPORT

On the invitation of the directors of the Company, the following commentary is provided by THEAM, 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 Property Recovery

 

Listing: Channel Islands Securities Exchange Authority

Launch date: 13 March 2008

Issue price at launch: 100 pence

NAV immediately following launch: 100 pence

Maturity date: 20 March 2014

ISIN: GG00B2PWW869

SEDOL: B2QBZY9

 

Investment Objective

The EPR Shares allow investors to benefit from a possible recovery in the listed property market with an enhanced market timing mechanism. At maturity, if the EPRA Index finishes above its initial level, the fund will pay the greater of either 170% or the enhanced performance of the EPRA Index. If the EPRA Index closes below the initial level, the EPR Shares will track the EPRA Index.

Investment Performance

Between the launch on 13 March 2008 and close on 31 October 2013 the NAV fell by 20.7%.  Over this period the EPRA Index also experienced a decrease of 18.2%.The Fund recorded its lowest observation of the EPRA index in March 2009 at 760.83, therefore if the Index were to recover to maturity, this figure would be used as the reference point to calculate final performance. The index has yet to recover to its initial level; however the market trend has been upwards since November 2011 to date. The UK property market was a major driving force in the performance of the underlying index. 7 of the top 10 holdings were from UK stocks, furthermore UK holdings comprised just under 40% of the index composition.


 

BNP Paribas Energy-Base Metals (3)

 

Listing: Channel Islands Securities Exchange Authority

Launch date: 5 June 2008

Issue price at launch: 100 pence

NAV at launch: 100 pence

Maturity date: 12 June 2014

ISIN: GG00B2R9LW24

SEDOL: B39TP47

Epic Code: EBMC

 

Investment Objective

The EBM3 Shares are 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 31 October 2013 are set out in the table below.

 

 

 
 
Value as of
 
 
Commodity name
Value at Start
31-Oct-13
Change
Weight
Aluminium
2858.5
1833
-35.9%
12.5%
Copper
8006
7234
-9.6%
12.5%
Nickel
22000
14515
-34.0%
12.5%
West Texas Intermediate
122.3
96.38
-21.2%
30.0%
Zinc
1948.5
1925.5
-1.2%
12.5%
Natural Gas
12.379
3.581
-71.1%
20.0%

 

 

Source for commodity values information:  Bloomberg

 

Investment Performance

Between the launch on 5 June 2008 and close on 31 October 2013 the NAV had fallen by 0.7%.  Over this period, the DJ AIG Commodities Excess Return Index had fallen by 42.4%


This represents a significant outperformance of 41.7% of the fund from the benchmark index. The fund achieved an over 50% reduction in the benchmark's volatility from 25.0% to 12.4%. The underlying commodities within the fund have yet to recover to their initial levels; however investors are reminded that the fund provides 100 pence per share capital protection.   

 

Enhanced Income

 

Listing: Channel Islands Securities Exchange Authority

Launch date: 19 March 2009

Issue price at launch: 101 pence

NAV immediately following launch: 100 pence

Maturity date: 19 March 2108

Class A ISIN: GG00B4W90V35

Class A SEDOL: B65H881

Class B ISIN: GG00B4W90W+42

Class B SEDOL: B4W90W4

 

Investment Objective

The investment objective of the EI 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 DJES50 Index and notional call options written on the DJES50 Index.  Dividend distributions on the Class A EIF Shares will be denominated and paid in GBP and in EUR in respect of the Class B shares.  There are currently no Class B shares in issue.

 

Investment Performance

Between the launch on 19 March 2009 and close on 31 October 2013 the Total Return Performance rose by 12.25%.  Over the same period the DJES50 Index increased by 63.21%. The directors declared interim dividends over the last three years as follows:   


 

Announcement

Ex-Dividend

Pay Date

Dividend

23-Mar-11

30-Mar-11

29-Apr-11

2.00%

23-Jun-11

29-Jun-11

01-Jul-11

2.00%

22-Sep-11

28-Sep-11

30-Sep-11

1.80%

20-Dec-11

28-Dec-11

30-Dec-11

1.90%

21-Mar-12

28-Mar-12

 01-May-12

2.00%

27-Jun-12

04-Jul-12

03-Aug-12

1.90%

26-Sep-12

03-Oct-12

02-Nov-12

1.90%

24-Dec-12

02-Jan-13

01-Feb-13

2.00%

27-Mar-13

03-Apr-13

05-Apr-13

2.00%

26-Jun-13

03-Jul-13

02-Aug-13

1.90%

25-Sep-13

02-Oct-13

04-Oct-13

1.90%

 

 

 

  

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

 

Listing: Channel Islands Securities Exchange Authority

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: 16 July 2029

Class A ISIN: GG00B4409G28

Class A SEDOL: B3P3372 GB

Class B ISIN: GG00B4409P19

Class B SEDOL: B4409P1

 

Investment Objective

The USEI 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 S&P500 Index and notional short-term call options written on the S&P500 Index.

 

Investment Performance

Between launch on 16 July 2009 and close on 31 October 2013 the NAV Total Return Performance increased 42.17% and 44.73% 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 86.72% over that period.  The directors declared interim dividends over the last three years for both Share classes according to the following schedule:  

Announcement

Pay Date

Dividend

20-Jan-11

26-Jan-11

25-Feb-11

2.20%

20-Apr-11

27-Apr-11

27-May-11

2.20%

20-Jul-11

27-Jul-11

26-Aug-11

2.20%

19-Oct-11

26-Oct-11

25-Nov-11

2.00%

18-Jan-12

25-Jan-12

24-Feb-12

2.00%

18-Apr-12

25-Apr-12

29-May-12

2.00%

18-Jul-12

25-Jul-12

24-Aug-12

2.00%

24-Oct-12

31-Oct-12

30-Nov-12

2.20%

23-Jan-13

30-Jan-13

01-Mar-13

2.00%

28-Mar-13

03-Apr-13

03-May-13

2.00%

24-Jul-13

31-Jul-13

02-Sep-13

2.20%

 

 

  

UK Enhanced Income

 

Listing: Channel Islands Securities Exchange Authority

Launch date: 24 September 2009

Issue price at launch: 101 pence

NAV immediately following launch: 100 pence

Maturity date: 24 September 2029

ISIN: GG00B3YF5842                                    .


SEDOL: B3YF584

 

Investment Objective

The UKEI 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 linked to the total return performance of the FTSE100 Index and notional short-term call options written on the FTSE100 Index.

 

Investment Performance

Between launch on 24 September 2009 and close on 31 October 2013 the Total Return Performance had increased by 25.92%.  Over this period the FTSE 100 Total Return Index had risen by 53.17%.  The directors declared interim dividends over the last three years according to the following schedule:

 

Announcement

Pay Date

Dividend

24-Dec-10

05-Jan-11

04-Feb-11

2.00%

24-Mar-11

06-Apr-11

06-May-11

2.00%

24-Jun-11

06-Jul-11

05-Aug-11

  2.00%

24-Sep-11

05-Oct-11

04-Nov-11

  1.90%

04-Jan-12

11-Jan-12

10-Feb-12

  1.90%

28-Mar-12

04-Apr-12

10-May-12

  2.00%

27-Jun-12

04-Jul-12

03-Aug-12

  1.80%

26-Sep-12

03-Oct-12

02-Nov-12

  1.90%

02-Jan-13

09-Jan-13

08-Feb-13

1.90%

28-Mar-13

03-Apr-13

05-Apr-13

1.90%

26-Jun-13

03-Jul-13

02-Aug-13

1.80%

02-Oct-13

09-Oct-13

08-Nov-13

1.90%

 


INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF HAREWOOD STRUCTURED INVESTMENT PCC LIMITED

 

Report on the Financial Statements

We have audited the accompanying Financial Statements of the Company which comprise the Statement of Financial Position as of 31 October 2013 and the Statement of Comprehensive Income, the Statement of Changes in Net Assets Attributable to Holders of Shares and the Statement of Cash Flows for the year then ended and a summary of significant accounting policies and other explanatory information.

 

Directors' Responsibility for the Financial Statements

The directors are responsible for the preparation of Financial Statements that give a true and fair view in accordance with International Financial Reporting Standards and with the requirements of Guernsey law.  The directors are also responsible for such internal control as they determine is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.

 

Auditors' Responsibility

Our responsibility is to express an opinion on these Financial Statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the Financial Statements are free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Financial Statements. The procedures selected depend on the auditors' judgement, including the assessment of the risks of material misstatement of the Financial Statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the Financial Statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the Financial Statements.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Opinion

In our opinion, the Financial Statements give a true and fair view of the financial position of the Company as of 31 October 2013, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and have been properly prepared in accordance with the requirements of The Companies (Guernsey) Law, 2008.

 

Report on other Legal and Regulatory Requirements

We read the other information contained in the Annual Financial Report and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the Financial Statements.  The other information comprises the following reports: About the Company, Investment Objective and Policy, Net Asset Values, Management Report, Report of the Directors, Investment Manager's Report, Schedule of Investments, Directors and Service Providers and Shareholder Information as detailed in the table of contents.

In our opinion the information given in the Report of the Directors is consistent with the Financial Statements.

 

This report, including the opinion, has been prepared for and only for the Company's members as a body in accordance with Section 262 of The Companies (Guernsey) Law, 2008 and for no other purpose.  We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

 

 

PricewaterhouseCoopers CI LLP

Chartered Accountants

Guernsey, Channel Islands

12 February 2014

 

STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 October 2013

 



Year to


Year to



31 Oct 2013


31 Oct 2012



Total


Total


Notes

GBP


GBP






Net movement in unrealised gains on investments

3

95,126,437


24,866,447






Unrealised foreign exchange losses

3

(6,150,351)


(270,378)






Income from financial assets at fair value through profit





or loss


13,466,195


25,462,886






Finance costs - distributions to holders of Preference





Shares

1l

(13,466,195)


(25,462,886)






Realised losses on investments

3

(88,011,078)


(45,721,681)






Realised exchange losses on currency balances


-


(2,583)






Increase / (decrease) in net assets attributable to





Preference shareholders from operations


965,008


(21,128,195)






Income received from Counterparty in relation to  





operating expenses

1b

944,852


1,448,911






Operating expenses

1b, 7

(1,016,044)


(1,114,591)











Increase / (decrease) in net assets from operations


893,816


(20,793,875)






Other Comprehensive Income


-


-

 

Total Comprehensive Income


893,816


(20,793,875)








Pence


Pence

Gain / (loss) per Share

1j

0.30


(3.63)

 

 

The notes as contained within this report form an integral part of these Financial Statements.

 

STATEMENT OF FINANCIAL POSITION

As at 31 October 2013



Year to


Year to

 


31 Oct 2013


31 Oct 2012

 


Total


Total

 

Notes

GBP


GBP






ASSETS





NON CURRENT ASSETS





Financial assets at fair value through profit or loss

3

170,088,165


251,349,269






CURRENT ASSETS





Financial assets at fair value through profit or loss

3

73,130,881


101,589,368

Cash and cash equivalents

1b

1,130,359


2,171,973

Investment income receivable


2,616,595


4,096,234



76,877,835


107,857,575






LIABILITIES





CURRENT LIABILITIES





Accrued expenses


107,246


146,372

Dividends payable

1l

3,376,580


5,787,515








3,483,826


5,933,887






TOTAL NET ASSETS


243,482,174


353,272,957






NET ASSETS ATTRIBUTABLE TO HOLDERS OF





PREFERENCE SHARES

3

243,219,046


352,938,637






NET ASSETS ATTRIBUTABLE TO HOLDERS OF





MANAGEMENT SHARES

1b

263,128


334,320

 

 

The Financial Statements were approved and authorised for issue by the Board of directors on 12 February 2014 and are signed on its behalf by:

 

 

Director                                                 Director

 

 

The notes as contained within this report form an integral part of these Financial Statements.

 

STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF SHARES

For the year ended 31 October 2013

 



Year to


Year to



31 Oct 2013


31 Oct 2012



Total


Total


Notes

GBP


GBP






Opening balance


352,938,637


606,864,363






Redemption of shares


(110,684,599)


(232,797,531)






Net gain / (loss) for the year attributable to holders of





Preference Shares


965,008


(21,128,195)











Balance attributable to Preference Shares as at 31





October


243,219,046


352,938,637






Net gain brought forward attributable to Management





Shares


334,320


-






Net (loss) / gain for the period attributable to holders of





Management Shares


(71,192)


334,320






Balance attributable to Management Shares as at





31 October


263,128


334,320






Total balance attributable to shares as at 31 October


243,482,174


353,272,957

 

The notes as contained within this report form an integral part of these Financial Statements.

 

STATEMENT OF CASH FLOWS

For the year ended 31 October 2013


Year to


Year to


31 Oct 2013


31 Oct 2012


Total


Total


GBP


GBP

Operating activities








Net profit/ (loss) for the year attributable to holders of Preference  and Management shares

893,816


(20,793,875)

Distributions to holders of Preference Shares

15,877,130


24,557,768

Movement in realised and unrealised (loss) / gain on investments

(7,115,359)


20,855,234

Movement in unrealised foreign exchange losses

6,150,351


270,378

Movement in debtors and creditors during the year

(970,422)


1,837,653

Redemption of financial assets

110,684,599


232,797,531

Net cash inflow from operating activities

125,520,115


259,524,689





Financing activities




Distributions to holders of Preference Shares redeemed

(110,684,599)


(232,797,531)

Distributions to holders of Preference Shares

(15,877,130)


(24,557,768)

Net cash outflow from financing activities

(126,561,729)


(257,355,299)





(Decrease) / increase in cash and cash equivalents

(1,041,614)


2,169,390









Cash and cash equivalents at beginning of year

2,171,973


2,583

(Decrease) / increase in cash and cash equivalents

(1,041,614)


2,169,390

Cash and cash equivalents at end of year

1,130,359


2,171,973

 

 

The notes as contained within this report form an integral part of these Financial Statements.


 

Notes to the Financial Statements

For the year ended 31 October 2013

 

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") and The Companies (Guernsey) Law, 2008 and The Protection of Investors (Bailiwick of Guernsey) Law, 1987.  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 following Standards or Interpretations relevant to the entity have been adopted in the current year.  Their adoption has not had any impact on the amounts reported in these Financial Statements and is not expected to have any impact on future financial periods:

 

IAS 1 Presentation of Financial Statements - Amendments to revise the way other comprehensive income is presented for periods beginning on or after 1 July 2012.

 

The following Standards or Interpretations have been issued by the International Accounting Standards Board ("IASB") but not yet been adopted effective by the Company.

 

IFRS 7 Financial Instruments: Disclosures - Amendments relating to the offsetting of assets and liabilities effective for annual periods beginning on or after 1 January 2013 and interim periods within those periods.

 

IFRS 7 Financial Instruments: Disclosures - Deferral of mandatory effective date of IFRS 9 and amendments to transition disclosures effective for annual periods beginning on or after 1 January 2015.

 

IFRS 9 Financial Instruments - Classification and measurement of financial assets, effective for annual periods beginning on or after 1 January 2015.

 

IFRS 9 Financial Instruments - Accounting for financial liabilities and derecognition, effective for annual periods beginning on or after 1 January 2015.

 

IFRS 13 Fair value measurement - This standard aims to increase consistency and comparability in fair value measurements and related disclosures requirements for use across IFRSs. The requirements do no extend to the use of fair value accounting but provide guidance on how it should be applied.  This standard is effective for annual periods beginning on or after 1 January 2013.

 

IAS 1 Presentation of Financial Statements - Amendments resulting from Annual Improvements 2009 - 2011 cycle (comparative information) for periods on or after 1 January 2013.


 

IAS 32 Financial Instruments: Presentation - Amendments resulting from Annual Improvements cycle effective for annual periods beginning on or after 1 January 2013.

 

IAS 32 Financial Instruments Presentation - Amendments relating to the offsetting of assets and liabilities effective for annual periods beginning on or after 1 January 2014.

 

IAS 39 Financial Instruments: Recognition and Measurement - Amendments for novations of derivatives effective for annual periods beginning on or after 1 January 2014.

 

The directors have considered the above and are of the opinion that the above Standards and Interpretations are not expected to have a material 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)        Recognition of expenses and related income

Pursuant to the terms of an Engagement Letter dated 10 January 2006 between the Company and BNP Paribas SA ("BNP"), it is agreed that BNP will pay a notional quarterly amount in advance to cover the anticipated expenses of the Company.  Any cash at bank relating to the excess of income over expenses is due to BNP as holder of the Management Shares of the Company and is not due to the holders of Preference Shares.

 

Expenses borne by BNP on behalf of the Company and income received in order to pay Company expenses are included in the Statement of Comprehensive Income as the directors are of the opinion that this more accurately reflects the position of the Company.  Additionally the cash at bank relating to the excess of income received from BNP over expenses paid out has been allocated to the holders of Management Shares in the Statement of Financial Position.  The expenses are detailed in Note 7 Related Party Transactions.

 

On 27 June 2013 the Company entered into an Expenses Agreement with BNP Paribas.  The Agreement states that there is a surplus of £250,000 in the expense accounts into which BNP Paribas provide funding for expenses borne by the Company.  This surplus was moved into a separate bank account and is included in cash and cash equivalents on the Statement of Financial Position. Under the terms of the Agreement this surplus is not to be returned to BNP but made available to the Company to be used by the Board to satisfy any liability incurred by the Board in acting on behalf of the Company or any of its cells.  For this purpose, BNP have requested that the surplus be capitalised to the two ordinary shares of no par value issued by the Company which are held by Anson Fund Managers Limited and Anson Custody Limited for the benefit of BNP Paribas Arbitrage SNC.  The balance of the expense accounts are to be monitored going forward and any subsequent surplus balances are to be returned to BNP Paribas.

 

(c)        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 Securities Exchange Authority and the majority of its registered shareholders are domiciled in the United Kingdom.

 

(d)        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 as unrealised foreign exchange gains / (losses).

 

In previous periods the unrealised foreign exchange gains / (loses) were presented as Other Comprehensive Income. However, this is not in line with the requirements of IAS1: Presentation of Financial Statements. Therefore, in the current year unrealised gains / (losses) on foreign exchange have been reclassified and included in the increase / (decrease) in net assets attributable to Preference Shareholders from operations. The unrealised gains / (losses) on foreign exchange in the year to 31 October 2011 have not been reclassified as the value is immaterial to the financial statements.

 

(e)        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.  Dividend income is recognised on a gross basis, including withholding tax, if any. Withholding tax is recognised through the Statement of Comprehensive Income.

 

(f)         Expenses

All expenses are accounted for on an accruals basis in the Statement of Comprehensive Income.  As described in Note 1(b) all expenses are borne by BNP pursuant to the terms of an Engagement Letter between the Company and BNP Paribas SA.  The on-going expenses for the year under review are detailed in Note 7 to the Financial Statements.

 

(g)        Cash and cash equivalents

At the reporting date cash and or cash equivalents comprise cash at bank.  As detailed in Note 1(b), all expenses of the Company are borne by BNP, with income being received from BNP for the payment of Company expenses.  Any excess of income received from BNP for payment of expenses is accounted for as cash and cash equivalents attributable to the holders of Management Shares. This includes a balance of £250,000 which is held in trust for use by the Board as set out in 1(b) above.

 

(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.

 

Income received from BNP is recognised in the Statement of Comprehensive Income on an accruals basis.

 

(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.  After initial recognition, investments are measured at fair value, with unrealised gains and losses on investments and changes in fair value of 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. In respect of each contract, within BNP Paribas Group (the "Group"), the 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.

 

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

 

(j)         Gain / (loss) per share

The gain / (loss) per share is based on the increase / (decrease) in net assets attributable to Preference shareholders from operations of the Company for the year of £965,008 (2012: £20,857,817 net loss) and on 320,347,665 (2012: 581,836,358) 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" purchases and sales of financial assets are recognised on the "trade date" i.e. the date that the entity commits to purchase or sell the asset.  Regular way purchases or sales are purchases or sales of financial assets that require delivery of the asset within the time frame generally established by 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

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 statements.

 

 

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.  At each interim and year end 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 materially affect the reported fair value of financial instruments.

 

3          NET ASSETS ATTRIBUTABLE TO HOLDERS OF PREFERENCE SHARES

 


Year to


Year to


31 Oct 2013


31 Oct 2012


Total


Total


GBP


GBP





Opening portfolio cost

447,141,821


725,661,033

Opening unrealised loss on valuation

(100,502,668)


(125,369,115)

Opening exchange gains on currency balances

6,299,484


6,572,445





Opening valuation

352,938,637


606,864,363





Proceeds from sales of financial assets

(110,684,599)


(232,797,531)

Unrealised gain for the year

95,126,437


24,866,447

Realised losses on investments for the year

(88,011,078)


(45,721,681)

Unrealised foreign exchange losses

(6,150,351)


(270,378)

Realised exchange loss on currency balances

-


(2,583)

Closing valuation

243,219,046


352,938,637





Closing portfolio cost

248,446,144


447,141,821

Closing unrealised loss

(5,376,231)


(100,502,668)

Closing exchange gains on currency balances

149,133


6,299,484





Closing valuation

243,219,046


352,938,637

 

 

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

-

Management Shares of no par value

2

-


2

-

 

 

 

Allotted, called-up and fully paid Preference Shares

Shares issued as at 1 November 2012


 

 

Shares Redeemed


 

 

Shares Issued


 

Shares issued as at 31 October 2013









UK HI Cell

-


-


-


-

EBM2 Cell

-


-


-


-

ES Cell

-


-


-


-

Abs Pro Cell

-


-


-


-

US HI A Cell

92,469,987


(92,469,987)

*

-


-

US HI B Cell

58,337,229


(58,337,229)

*

-


-

Agrinvest Cell

47,225,896


(47,225,896)

*

-


-

EPR Cell

30,125,000


-


-


30,125,000

EBM3 Cell

49,587,600


-


-


49,587,600

EI Cell

39,999,346


-


-


39,999,346

UK EI Cell

49,015,722


-


-


49,015,722

COMAC Cell

25,526,009


(25,526,009)

*

-


-

USEI A Cell

48,500,080


-


-


48,500,080

USEI B Cell

45,079,125


-


-


45,079,125









Management Shares

2


-


-


2









TOTAL

485,865,996


(223,559,121)


-


262,306,875

 

* See Note 8



 

Allotted, called-up and fully paid Preference Shares

Shares in issue as at

1 November 2011


 

 

Shares Redeemed


 

Shares Issued


Shares in issue as at 31 October 2012









UK HI Cell

141,613,549


(141,613,549)

*

-


-

EBM2 Cell

32,506,140


(32,506,140)

*

-


-

ES Cell

25,000,000


(25,000,000)

*

-


-

Abs Pro Cell

76,748,923


(76,748,923)

*

-


-

US HI A Cell

92,469,987


-


-


92,469,987

US HI B Cell

58,337,229


-


-


58,337,229

Agrinvest Cell

47,225,896


-


-


47,225,896

EPR Cell

30,125,000


-


-


30,125,000

EBM3 Cell

49,587,600


-


-


49,587,600

EI Cell

39,999,346


-


-


39,999,346

UK EI Cell

49,015,722


-


-


49,015,722

COMAC Cell

25,526,009


-


-


25,526,009

USEI A Cell

48,500,080


-


-


48,500,080

USEI B Cell

45,079,125


-


-


45,079,125









Management Shares

2


-


-


2









TOTAL

761,734,608


(275,868,612)


-


485,865,996

 

Holders of Management Shares shall not be entitled to receive and shall not participate in any dividends or other distributions out of the profits of the Company.  On winding up Management shareholders are only entitled to an amount up to a maximum being the Net Assets Attributable to Holders of Management Shares and have no right to the Net Assets Attributable to the Holders of Preference Shares.  Holders of Management Shares shall be entitled to receive notice of and to attend and vote at general meetings.  The Management Shares are not redeemable and comprise the Company's non-cellular assets. The Holders of Preference Shares are not entitled to receive distributions based on non-cellular assets.

 

Holders of BNP Paribas Enhanced Property Recovery Preference Shares and BNP Paribas Energy - Base Metals (3) Preference 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 Class A Sterling Hedged US Enhanced Income Preference Shares, Class B US Dollar Unhedged US Enhanced Income Preference Shares, Enhanced Income 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.

 

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

Share premium as at

1 November 2012


 

 

Shares Redeemed


Shares Issued


Share premium as at

31 October 2013


GBP


GBP


GBP


GBP









UK HI Cell

-


-


-


-

EBM2 Cell

-


-


-


-

ES Cell

-


-


-


-

Abs Pro Cell

-


-


-


-

US HI A Cell

92,942,487


(92,942,487)

*

-


-

US HI B Cell

30,710,285


(30,710,285)

*

-


-

Agrinvest Cell

49,516,896


(49,516,896)

*

-


-

EPR Cell

30,125,000


-


-


30,125,000

EBM3 Cell

49,292,100


-


-


49,292,100

EI Cell

42,548,346


-


-


42,548,346

UK EI Cell

49,015,722


-


-


49,015,722

COMAC Cell

25,526,009


(25,526,009)

*

-


-

USEI A Cell

48,500,080


-


-


48,500,080

USEI B Cell

28,964,898


-


-


28,964,898









TOTAL

447,141,823


(198,695,677)


-


248,446,146

 

* See Note 8

 

Share Premium - Preference Shares

Share premium as at

1 November 2011


 

 

Shares Redeemed


 

 Shares Issued


Share premium as at

 31 October 2012


GBP


GBP


GBP


GBP









UK HI Cell

143,419,549


(143,419,549)*


-


-

EBM2 Cell

32,828,140


(32,828,140)*


-


-

ES Cell

25,000,000


(25,000,000)*


-


-

Abs Pro Cell

77,271,523


(77,271,523)*


-


-

US HI A Cell

92,942,487


-


-


92,942,487

US HI B Cell

30,710,285


-


-


30,710,285

Agrinvest Cell

49,516,896


-


-


49,516,896

EPR Cell

30,125,000


-


-


30,125,000

EBM3 Cell

49,292,100


-


-


49,292,100

EI Cell

42,548,346


-


-


42,548,346

UK EI Cell

49,015,722


-


-


49,015,722

COMAC Cell

25,526,009


-


-


25,526,009

USEI A Cell

48,500,080


-


-


48,500,080

USEI B Cell

28,964,898


-


-


28,964,898









TOTAL

725,661,035


(278,519,212)


-


447,141,823

 



 

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, capital risk and foreign exchange risk.

 

The Company's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance.

 

(a)        Interest Rate Risk

The Company holds cash in several bank accounts, the returns on which are subject to fluctuations in market interest rates. The exposure on the cash balances held is not considered to have a material impact, so no sensitivity analysis has been performed.

 

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 as contained within this report.

 

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 2013 had been 10 per cent higher/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/decrease in net assets attributable to holders of Cell Shares on the Redemption Date would have been as stated below, arising due to the increase/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 2013


Year ended 31 October 2012


Year ended 31 October 2013


Year ended 31 October 2012

Cell

GBP


GBP


GBP


GBP









US HI A Cell

-


2,944,892


-


(2,944,892)

US HI B Cell

-


1,390,195


-


(1,390,195)

Agrinvest Cell

-


5,823,850


-


(5,823,850)

EPR Cell

2,387,949


2,216,176


(2,387,949)


(2,216,176)

EBM3 Cell

4,925,140


4,996,199


(4,925,140)


(4,996,199)

EI Cell

-


1,853,444


-


(1,853,444)

UK EI Cell

5,486,911


5,109,677


(5,486,911)


(5,109,677)

COMAC Cell

3,178,574


2,951,840


(3,178,574)


(2,951,840)

USEI A Cell

4,479,155


4,336,372


(4,479,155)


(4,336,372)

USEI B Cell

3,864,177


3,671,220


(3,864,177)


(3,671,220)










24,321,906


35,293,865


(24,321,906)


(35,293,865)

 

(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 issuer was rated A+ 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 the 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.

 

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 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 total valuation of the investments at this date, being £243,219,046 (Oct 2012: £352,938,637).

 

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 on-going 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 table below details the residual contractual maturities of the financial liabilities:

 

At 31 October 2013

1-3 months


3-12 months


Over 1 year


Total


GBP


GBP


GBP


GBP









Net assets attributable to holders of Management Shares

 

 

263,128


 

 

-


 

 

-


 

 

263,128

Net assets attributable to holders of Preference Shares

 

 

-


 

 

73,130,881


 

 

170,088,165


 

 

243,219,046










263,128


73,130,881


170,088,165


243,482,174

 

At 31 October 2012

1-3 months


3-12 months


Over 1 year


Total


GBP


GBP


GBP


GBP









Net assets attributable to holders of Management Shares

 

 

334,320


 

 

-


 

 

-


 

 

334,320

Net assets attributable to holders of Preference Shares

 

 

43,350,865


 

 

58,238,503


 

 

251,349,269


 

 

352,938,637










43,685,185


58,238,503


251,349,269


353,272,957

 

The table below details the expected liquidity of assets held:

 

At 31 October 2013

1-3 months


3-12 months


Over 1 year


Total


GBP


GBP


GBP


GBP









Net assets

263,128


73,130,881


170,088,165


243,482,174

 

At 31 October 2012

1-3 months


3-12 months


Over 1 year


Total


GBP


GBP


GBP


GBP









Net assets

43,685,185


58,238,503


251,349,269


353,272,957

 

The Board monitors, but cannot actively control liquidity risk.

 

(e)        Capital Risk Management

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

 

The Company's objective when managing capital is to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders.

 

The Board of directors believe 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 2013


31 October 2012


GBP


GBP

Assets




US Dollar

32,474,343


44,911,509

Euro

7,715


7,417


32,482,058


44,918,926





Liabilities




US Dollar

(619,447)


(1,331,560)





Net foreign currency asset

31,862,611


43,587,366

 

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 Property Recovery

GBP 30,125,000

Energy - Base Metals (3)

GBP 49,587,600

Enhanced Income

GBP 39,999,346

UK Enhanced Income

GBP 49,015,722

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 Property Recovery

20 March 2014

Energy - Base Metals (3)

12 June 2014

US Enhanced Income - Class A

16 July 2029

US Enhanced Income - Class B

16 July 2029

UK Enhanced Income

24 September 2029

Enhanced Income

c.30 April 2108*

 

 

* 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

 

(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 Applicable Percentage (as set out in note 6(c)) 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

 

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 BNP Paribas UK Enhanced Income cell, the Counterparty will pay to the Company for the account of the UK Enhanced Income Class A 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 Class A 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 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 B US Dollar Unhedged 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 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 the 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 is delivered to an escrow account, held by BNP Paribas Securities Services as custodian, in favour of the Company.

 

The collateral held against all derivative instruments as at 31 October 2013 is detailed below:

 

Cell

Year ended


Year ended


31 October 2013


31 October 2012


GBP


GBP





US HI

-


10,580,862

Agrinvest

-


9,280,614

EPR

12,096,642


11,348,664

EBM3

11,511,139


13,066,686

COMAC

-


3,009,433

US EI

22,821,910


30,604,119

UK EI

8,969,878


11,050,438

EI

9,353,130


9,735,991

 

 

(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.

 

As detailed in Note 1(b), all expenses are borne by BNP Paribas SA and recognised in the Statement of Comprehensive Income.

 

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 of these companies.  During the year under review, the Administrator charged fees of £140,201 (2012: £178,373) in respect of its administration of the Company of which £8,801 (2012: £11,944) was outstanding at the year end and the Registrar charged fees of £20,777 (2012: £28,453) in respect of registration services on behalf of the Company of which £872 (2012: £1,108) was outstanding at the year end.

 

Anson Group Limited ("AGL") is the parent company of Anson Fund Managers Limited and Anson Registrars Limited.  John R Le Prevost is a director of AGL.

 

THEAM 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 £272,543 (2012: £661,596), of which £19,308 (2012: £66,156) 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 2013


% of total


31 Oct 2012


% of total


Shares


shares


Shares


shares

US High Income Class A Sterling Hedged Preference Shares

 

-


 

0.00%


 

76,921,674


 

83.19%

US High Income Class B Unhedged Preference Shares

-


0.00%


55,800,836


95.65%

BNP Paribas Agrinvest

-


0.00%


44,912,900


95.10%

BNP Paribas Enhanced Property Recovery

18,895,854


62.72%


18,895,854


62.72%

BNP Paribas Energy - Base Metals (3)

43,933,610


88.60%


43,100,057


86.92%

BNP Paribas Enhanced Income

34,967,125


87.42%


34,015,772


85.04%

BNP COMAC

-


0.00%


24,438,699


95.74%

US Enhanced Income Class A

42,487,523


87.60%


39,779,523


82.02%

US Enhanced Income Class B

36,594,677


81.18%


28,360,527


62.82%

UK Enhanced Income

44,712,395


91.22%


42,196,395


86.09%

 

As detailed in Note 8 on 26 November 2012 all BNP Paribas Class A Sterling Hedged High Income Preference Shares and BNP Paribas US Class B Unhedged US High Income Preference Shares were compulsorily redeemed.  BNP Paribas Class A Sterling Hedged US High Income and BNP Paribas Class B Unhedged US High Income were subsequently dissolved.

 

On 24 June 2013 all BNP Paribas Energy Agrinvest Preference Shares were compulsorily redeemed and BNP Paribas Energy Agrinvest was subsequently dissolved.

 

On 26 June 2013 all BNP Paribas COMAC Preference Shares were compulsorily redeemed and BNP Paribas COMAC was subsequently dissolved.

 

 

ONGOING EXPENSES

Year ended


Year ended


31 Oct 2013


31 Oct 2012


TOTAL


TOTAL


GBP


GBP





Transfer of cash surplus to BNP Paribas

400,000


-

Administration fees

140,201


178,373

Directors' remuneration

30,000


28,469

Registration fees

20,777


28,453

Custody fees

61,483


93,631

Asset management fees

272,543


661,596

Tax fees

20,650


49,900

Audit fees

38,698


41,614

Annual fees

13,915


22,889

Foreign exchange differences

(9,123)


-

Other operating expenses

26,900


9,666






1,016,044


1,114,591

 

All expenses are accounted for on an accruals basis through the Statement of Financial Position and are borne by BNP Paribas SA.

 

8          REDEMPTION OF SHARES

 

During the year, BNP Paribas Class A Sterling Hedged High Income Preference Shares, BNP Paribas US Class B Unhedged US High Income Preference Shares and BNP Paribas Agrinvest Preference Shares reached their redemption dates.  Therefore all BNP Paribas Class A Sterling Hedged High Income Preference Shares, BNP Paribas US Class B Unhedged US High Income Shares and BNP Agrinvest Preference Shares in issue were compulsorily redeemed.

 

In addition, it was decided by the Board that BNP Paribas COMAC Preference Shares would be redeemed early.  Therefore, all BNP Paribas COMAC Preference Shares in issue were compulsorily redeemed.

 

The redemption value per BNP Paribas Class A Sterling Hedged US High Income Preference Share was 32.15 pence, resulting in redemption proceeds and distributions to holders of BNP Paribas Class A Sterling Hedged US High Income Preference Shares of £29,729,101.  The net realised loss on this redemption was £63,213,386.

 

The redemption value per BNP Paribas Class B Hedged US High Income Preference Share was 36.79 cents, resulting in redemption proceeds and distributions to holders of BNP Paribas Class B Sterling Hedged US High Income Preference Shares of $21,462,267.  The net realised loss on this redemption was £17,318,966.

 

The redemption value per BNP Paribas Agrinvest Preference Share was 106.776 pence, resulting in redemption proceeds and distributions to holders of BNP Paribas Agrinvest Preference Shares of £50,426,017.16.  The net realised gain on this redemption was £909,121.16.

 

The redemption value per BNP Paribas COMAC Preference Share was 67.14 pence, resulting in redemption proceeds and distributions to holders of BNP Paribas COMAC Preference Shares of £17,138,162.44.  The net gain on this redemption was £8,387,846.56.

 

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

 

On 29 November 2013 JTC Group acquired Anson Fund Managers Limited, the Administrator and Secretary of the Company. The Administrator and Secretary subsequently changed its name to JTC Fund Managers (Guernsey) Limited. John R Le Prevost is no longer a director of the Administrator and Secretary.

 

There were no other subsequent events which require disclosure in and adjustment to these financial statements.

 

SCHEDULE OF INVESTMENTS

as at 31 October 2013

 


As at 31 October 2013


NOMINAL


VALUATION


TOTAL NET ASSETS




GBP


%







US High Income - Class A






BNP Paribas Index Derivative Contract

GBP 92,469,987


-


0.00%







US High Income - Class B






BNP Paribas Index Derivative Contract

USD 58,337,229


-


0.00%







BNP Paribas Agrinvest






BNP Paribas Index Derivative Contract

GBP 47,225,896


-


0.00%







Enhanced Property Recovery






BNP Paribas Index Derivative Contract

GBP 30,125,000


23,879,485


9.82%







Energy - Base Metals (3)






BNP Paribas Index Derivative Contract

GBP 49,587,600


49,251,396


20.25%







Enhanced Income






BNP Paribas Index Derivative Contract

GBP 39,999,346


38,641,768


15.89%







UK Enhanced Income






BNP Paribas Index Derivative Contract

GBP 49,015,722


45,791,547


18.42%







BNP Paribas COMAC






BNP Paribas Index Derivative Contract

GBP 25,526,009


-


0.00%







US Enhanced Income - Class A Sterling Hedged






BNP Paribas Index Derivative Contract

GBP 48,500,080


54,869,111


22.55%







US Enhanced Income - Class B US Dollar Unhedged






BNP Paribas Index Derivative Contract

USD 45,079,125


31,785,739


13.07%







TOTAL



243,219,046


100.00%


SCHEDULE OF INVESTMENTS

as at 31 October 2012

 


As at 31 October 2012


NOMINAL


VALUATION


TOTAL NET ASSETS




GBP


%







US High Income - Class A






BNP Paribas Index Derivative Contract

GBP 92,469,987


29,448,917


8.34%







US High Income - Class B






BNP Paribas Index Derivative Contract

USD 58,337,229


13,901,948


3.94%







BNP Paribas Agrinvest






BNP Paribas Index Derivative Contract

GBP 47,225,896


58,238,503


16.50%







Enhanced Property Recovery






BNP Paribas Index Derivative Contract

GBP 30,125,000


22,161,757


6.28%







Energy - Base Metals (3)






BNP Paribas Index Derivative Contract

GBP 49,587,600


49,961,986


14.16%







Enhanced Income






BNP Paribas Index Derivative Contract

GBP 39,999,346


36,712,200


10.40%







UK Enhanced Income






BNP Paribas Index Derivative Contract

GBP 49,015,722


43,363,719


12.29%







BNP Paribas COMAC






BNP Paribas Index Derivative Contract

GBP 25,526,009


18,534,435


5.25%







US Enhanced Income - Class A Sterling Hedged






BNP Paribas Index Derivative Contract

GBP 48,500,080


51,096,774


14.48%







US Enhanced Income - Class B US Dollar Unhedged






BNP Paribas Index Derivative Contract

USD 45,079,125


29,518,398


8.36%







TOTAL



352,938,637


100.00%

 

DIRECTORS AND SERVICE PROVIDERS

 

Directors

Francois-Xavier Foucault

John Reginald Le Prevost

Trevor Hunt

Youri Siegel

 

Investment Manager

THEAM

1 Boulevard Haussmann

75009-Paris

France

Administrator and Secretary

JTC Fund Managers (Guernsey) Limited

PO Box 156

Frances House, Sir William Place,

St. Peter Port

Guernsey GY1 4EU

 

Solicitors to the Company (English Law)

Clifford Chance LLP

10 Upper Bank Street

London E14 5JJ

England

 

Independent Auditors

PricewaterhouseCoopers CI LLP

Royal Bank Place

1 Glategny Esplanade

St. Peter Port

Guernsey GY1 4ND

 

Advocates to the Company (Guernsey Law)

Mourant Ozannes

1 Le Marchant Street

St. Peter Port

Guernsey GY1 4HP

 

Custodian

BNP Paribas Securities Services, Luxembourg Branch

33, Rue de Gasperich

Howald-Hesperange

L-2085 Luxembourg

Registrar, Transfer Agent & Paying Agent

Anson Registrars Limited

PO Box 426

Anson Place

Mill Court

La Charroterie

St Peter Port

Guernsey GY1 3WX

 

Investment Counterparty

BNP Paribas

10 Harewood Avenue

London NW1 6AA

England

Registered Office

PO Box 156

Frances House

Sir William Place

St Peter Port

Guernsey GY1 4EU

 

 


SHAREHOLDER INFORMATION

Shares of all cells are listed on the Channel Islands Securities Exchange Authority and may be dealt in directly through a stockbroker or professional adviser acting on an investor's behalf.  The buying and selling of such shares may be settled through CREST.  Announcements to holders of such shares and daily market closing prices are available on Bloomberg, Reuters and the Channel Islands Securities Exchange Authority's web-site.

 

Further information relating to such shares is available from BNP Paribas, telephone 44 (0)207 595 8442 or e-mail [email protected], and from JTC Fund Managers (Guernsey) Limited, telephone 44 (0)1481 702 400 or e-mail: [email protected].

 

The Interim Financial Report for the period ending 30 April 2014 is intended to be made public in June 2014 and sent to shareholders as soon as possible thereafter.

 

REGISTRAR ENQUIRIES

 

The Company's registrar is Anson Registrars Limited in Guernsey and they can be contacted on telephone 44 (0)1481 711301.

 


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