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Wednesday 26 June, 2013

Harewood Struct Inv

Half Yearly Report

RNS Number : 9391H
Harewood Structured Investment PCC
26 June 2013
 



 

 

 

 

 

 

 

Harewood Structured Investment PCC Limited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Half-yearly Financial Report for the

period ended 30 April 2013 (Unaudited)

 


Harewood Structured Investment PCC Limited

 

CONTENTS

 


About the Company

 

1-8

Investment Objective and Policy

 

9-14

Net Asset Values

 

15

Interim Management Report

 

16-17

Investment Manager's Report

 

18-25

Statement of Comprehensive Income

 

26

Statement of Financial Position

 

27

Statement of Changes in Net Assets Attributable to Holders of Preference Shares

 

28

Statement of Cash Flows

 

29

Notes to the Financial Statements

 

30-50

Schedule of Investments

 

51-52

Directors and Service Providers

 

53

Shareholder Information

 

54

 


Harewood Structured Investment PCC Limited

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 UKHI 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.

 

 

Harewood Structured Investment PCC Limited

ABOUT THE COMPANY (continued)

 

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 had 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 have a defined investment life to 29 June 2013, whereupon they will be subject to compulsory redemption.

 

On 12 March 2008, 30,125,000 Enhanced Property Recovery Preference Shares (the "EPR Shares") of the Enhanced Property Recovery cell (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. 

Harewood Structured Investment PCC Limited

ABOUT THE COMPANY (continued)

 

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**.

 

**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 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

Harewood Structured Investment PCC Limited

ABOUT THE COMPANY (continued)

 

investment life to 16 July 2029, whereupon they will be subject to compulsory redemption on or around 1 September 2029**.

 

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 Stock Exchange (the "CISX") with the exception of the two Ordinary 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 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 - 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 Fund Managers Limited, the Company's Administrator and Secretary, and of Anson Registrars Limited, the Company's Registrar, Transfer Agent, Paying Agent and Receiving Agent.  Mr Le Prevost

Harewood Structured Investment PCC Limited

ABOUT THE COMPANY (continued)

 

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 - Director

Francois-Xavier Foucault is French and resides in France.  As well as being a director of the Company, he is currently Head of Transforming Projects, Quality Control and Regulatory affairs for BNP Paribas Arbitrage SNC, 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 - 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 - 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

Harewood Structured Investment PCC Limited

ABOUT THE COMPANY (continued)

 

 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 15 May 2013 the Group had an equity market capitalisation of €55.9 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.

 

 

 

 

Harewood Structured Investment PCC Limited

ABOUT THE COMPANY (continued)

 
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 March 2013, THEAM was responsible for (or mandated for) the investment of €41.3 billion over 814 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

Harewood Structured Investment PCC Limited 

ABOUT THE COMPANY (continued)

 

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.

 

 

 

Harewood Structured Investment PCC Limited

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, was 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, aimed 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, was 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 was 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

Harewood Structured Investment PCC Limited 

INVESTMENT OBJECTIVE AND POLICY (continued)

 

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.

 

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,



Harewood Structured Investment PCC Limited

INVESTMENT OBJECTIVE AND POLICY (continued)

 

 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.

 

 

Harewood Structured Investment PCC Limited

INVESTMENT OBJECTIVE AND POLICY (continued)

 

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

Harewood Structured Investment PCC Limited

INVESTMENT OBJECTIVE AND POLICY (continued)

 

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.

 

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.  Such investment objective being intended to be achieved by reference to an investment strategy linked to the total return performance of the Standard and Poor's 500®Index (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

Harewood Structured Investment PCC Limited

INVESTMENT OBJECTIVE AND POLICY (continued)

 

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.

 

Such investment objective being 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.



Harewood Structured Investment PCC Limited

NET ASSET VALUES

 

As at 30 April 2013, being the latest valuation date prior to the accounting reference date, the calculated net asset value of a share of each cell in existence at that date was as follows:-


As at

30 April 2013

 

As at

31 October 2012

 

BNP Paribas Agrinvest ("Agrinvest")

 

110.34 pence

123.31 pence

Enhanced Property Recovery ("EPR")

 

77.53 pence

73.56 pence

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

 

99.15 pence

100.75 pence

Enhanced Income - Class A ("EIF")

 

94.50 pence

91.78 pence

BNP Paribas COMAC ("COMAC")

 

68.68 pence

72.61 pence

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

 

113.98 pence

105.35 pence

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

 

114.18 US$ cents

105.61 US$ cents

UK Enhanced Income ("UKEI")

 

93.63 pence

 

88.46 pence

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

 

-

31.84 pence

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

-

38.43 US$ cents

 

 




Harewood Structured Investment PCC Limited

INTERIM MANAGEMENT REPORT

For the period from 1 November 2012 to 30 April 2013

 

A description of important events for each cell and the Company which have occurred during the reporting period and their impact on the performance of the Company as shown in the financial statements is given in the Investment Manager's Report on pages 18 to 25 and is incorporated here by reference. 

 

A description of the principal risks and uncertainties facing the Company is given in note 6 to the financial statements and is incorporated here by reference. The principal risks and uncertainties facing the Company to the end of its financial year are considered to be the same as those which applied in the first six months of the financial year.

 

There were no material related party transactions which took place in the first six months of the financial year.

 

This half-yearly financial report has not been audited nor reviewed by auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.

 

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:

1)   An indication of important events that have occurred during the first six months of the financial year and their impact on the financial statements;

2)   A description of the principal risks and uncertainties for the remaining six months of the financial year;

3)   Confirmation that there were no material related party transactions in the first six months of the current financial year that have materially affected the financial position or the performance of the Company during that period; and



Harewood Structured Investment PCC Limited

INTERIM MANAGEMENT REPORT (continued)

For the period from 1 November 2012 to 30 April 2013

 

4)   Changes in the related parties transactions described in the Company's last annual financial report that could have a material effect on the financial position or performance of the Company in the first six months of the current financial year.

 

 

 

 

John Le Prevost                                  Trevor Hunt

Director                                               Director

 

25 June 2013

Harewood Structured Investment PCC Limited

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.

 

BNP Paribas Agrinvest

Listing: Channel Islands Stock Exchange

Launch date: 22 June 2007

Issue price at launch: 100 pence

NAV immediately following launch: 100 pence

Maturity date: 29 June 2013

ISIN: GB00B1YKCX92

SEDOL: B1YKCX9

 

Investment Objective

The Agrinvest Shares are a six-year investment aiming to provide shareholders with the opportunity to participate in the performance of exchange-traded commodities futures comprised in the EER Index.  The EER Index is designed to provide a broad yet liquid representation of large, mid and small commodity futures inside the 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 through the addition of a quantitative enhancement algorithm.

 

Investment Performance

Between launch on 22 June 2007 and close on 30 April 2013 the NAV had increased by 10.4%.  Over this period the S&P GSCI Agri & Livestock ER Index had fallen by -12.8% and DJ UBS Commodity ER had fallen by -23.0%.

 

 

 

 

 

 

 

Harewood Structured Investment PCC Limited

INVESTMENT MANAGER'S REPORT (continued) 

 

Enhanced Property Recovery

 

Listing: Channel Islands Stock Exchange

Launch date: 13 March 2008

Issue price at launch: 100 pence

NAV immediately following launch: 100 pence

Maturity date: 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 launch on 13 March 2008 and close on 30 April 2013 the NAV had fallen by 22.46%.  Over this period the EPRA Index had decreased by 20.60%. The fund performance is driven primarily by sensitivity of the NAV to movements in the underlying EPRA Index, which is nearly one for one. The fund recorded itslowest observation in March 2009 at 760.83.  The enhanced market timing mechanism of this fund means that if the EPRA Index were to recover to maturity, this figure would be used as the reference for which to calculate final performance.

 

 

 

 

 

 

Harewood Structured Investment PCC Limited

INVESTMENT MANAGER'S REPORT (continued)

 

BNP Paribas Energy-Base Metals (3)

 

Listing: Channel Islands Stock Exchange

Launch date: 5 June 2008

Issue price at launch: 100 pence

NAV at launch: 100 pence

Maturity date: 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 30 April 2013 are set out in the table below.

 

Commodity name

Value at Start

Value as of 

30-Apr-13

Change

Weight

Aluminium

2858.5

1846.5

-35.4%

12.5%

Copper

8006

7073.5

-11.60%

12.5%

Nickel

22000

15200

-30.90%

12.5%

West Texas Intermediate

122.3

93.46

-23.60%

30.0%

Zinc

1948.5

1854

-4.80%

12.5%

Natural Gas

12.379

4.343

-64.90%

20.0%

 

Source for commodity values information:  Bloomberg

 

 

 

 

Harewood Structured Investment PCC Limited

INVESTMENT MANAGER'S REPORT (continued)

 

Investment Performance

Between launch on 5 June 2008 and close on 30 April 2013 the NAV has dropped by 0.84%.  Over this period the DJ AIG Commodities Excess Return Index had fallen by 38.57%.

 

Enhanced Income

 

Listing: Channel Islands Stock Exchange

Launch date: March 19 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 launch on 19 March 2009 and close on 30 April 2013 the Total Return Performance had risen to 29.4%.  Over this period the DJES50 Index had increased to 54.0%.   The directors declared interim dividends as follows:

 

 

 

 

 

Harewood Structured Investment PCC Limited

INVESTMENT MANAGER'S REPORT (continued)

 

Announcement

Ex-Dividend

Pay Date

Dividend

24-Jun-09

01-Jul-09

31-Jul-09

2.00%

23-Sep-09

30-Sep-09

30-Oct-09

2.30%

22-Dec-09

30-Dec-09

01-Feb-10

2.40%

24-Mar-10

31-Mar-10

30-Apr-10

2.30%

23-Jun-10

30-Jun-10

30-Jul-10

2.00%

22-Sep-10

29-Sep-10

29-Oct-10

2.00%

22-Dec-10

29-Dec-10

28-Jan-11

2.00%

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

03-May-13

2.00%

 

 

 

 

 

 

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

 

Listing: Channel Islands Stock Exchange

Launch date: 1 June 2009

Issue price at launch: 101 pence

NAV immediately following launch: 100 pence

Maturity date: 1 June 2029

Class A ISIN: GG00B3VGTS89

Class A SEDOL: B3VGTS8

Class B ISIN: GG00B3VM1S01

Class B SEDOL: B3VM1S

 

Investment Objective

The investment objective of the COMAC Cell is to provide shareholders with exposure to the performance of an actively managed long short arbitrage strategy based on a portfolio of 25 commodities through the COMAC Index.  The COMAC Index is denominated in USD and is designed to track the performance of an actively managed portfolio of 25 commodities selected from the energy, metals and agricultural sectors, the respective weightings of which

Harewood Structured Investment PCC Limited

INVESTMENT MANAGER'S REPORT (continued)

 

are determined in accordance with an investment strategy based on recommendations provided by the COMAC Adviser and a rules-based proprietary methodology designed by BNP Paribas (the "Index Methodology").

 

Investment Performance

Between launch on 1 June 2009 and close on 30 April 2013 the NAV of Class A had fallen by 31.32%.  There are currently no Class B Shares in issue.

 

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

 

Listing: Channel Islands Stock Exchange

Launch date: 16 July 2009

Issue price at launch: 101 pence

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

Maturity date: 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 30 April 2013 the Total Return Performance was 52.3% and 49.8% 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 84.0% over that period.  The directors declared interim

Harewood Structured Investment PCC Limited

INVESTMENT MANAGER'S REPORT (continued)

 

dividends for both Share classes according to the following schedule: 

Announcement

Ex-Dividend

Pay Date

Dividend

23-Oct-09

28-Oct-09

27-Nov-09

2.20%

20-Jan-10

27-Jan-10

26-Feb-10

2.30%

21-Apr-10

28-Apr-10

28-May-10

2.30%

21-Jul-10

28-Jul-10

27-Aug-10

2.00%

20-Oct-10

27-Oct-10

26-Nov-10

2.00%

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%

 

 

 

 

 

 

 

 

 

UK Enhanced Income

 

Listing: Channel Islands Stock Exchange

Launch date: 24 September 2009

Issue price at launch: 101 pence

NAV immediately following launch: 100 pence

Maturity date: 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.



Harewood Structured Investment PCC Limited

INVESTMENT MANAGER'S REPORT (continued)

 

Investment Performance

Between launch on 24 September 2009 and close on 30 April 2013 the Total Return Performance had increased to 23.8%.  Over this period the FTSE 100 Total Return Index had risen to 43.6%.  The directors declared interim dividends according to the following schedule:

 

Announcement

Ex-Dividend

Pay Date

Dividend

30-Dec-09

06-Jan-10

05-Feb-10

2.00%

31-Mar-10

14-Apr-10

07-May-10

2.00%

24-Jun-10

07-Jul-10

06-Aug-10

2.00%

24-Sep-10

06-Oct-10

05-Nov-10

2.00%

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%

27-Mar-13

03-Apr-13

03-May-13

1.90%

 

 



Harewood Structured Investment PCC Limited

 

STATEMENT OF COMPREHENSIVE INCOME

for the period ended 30 April 2013

 



Period to


Period to



30 Apr 2013


30 Apr 2012



Total


Total


Notes

GBP


GBP






Net movement in unrealised gains on investments

3

89,648,482


51,460,702






Income from financial assets at fair value through profit





or loss


5,031,582


14,022,790






Finance costs - distributions to holders of Preference





Shares

1l

(5,031,582)


(14,022,790)






Realised loss on investments


(80,532,352)


(66,294,290)






Realised exchange (losses) / gains on currency





balances


-


(4,632)






Increase / (decrease) in net assets attributable to Preference shareholders from operations


9,116,130


(14,838,220)






Income received from Counterparty in relation to





operating expenses

1b

639,940


964,592






Operating expenses

1b, 7

(384,681)


(531,275)






Increase / (decrease) in net assets from operations


9,371,389


(14,404,903)






Other Comprehensive Income:










Unrealised foreign exchange losses


(5,101,946)


(967,114)






Total Comprehensive Income


4,269,443


(15,372,017)













Pence


Pence

Gain / (loss) per Share

1j

2.54


(2.22)

 

 

 

 

 

 

 

The notes on pages 30 to 50 form an integral part of these financial statements.


Harewood Structured Investment PCC Limited

STATEMENT OF FINANCIAL POSITION

as at 30 April 2013

 



Period to


Year to

 


30 Apr 2013


31 Oct 2012

 


Total


Total

 

Notes

GBP


GBP






ASSETS





NON CURRENT ASSETS





Financial assets at fair value through profit or loss

3

313,832,401


352,938,637






CURRENT ASSETS





Cash and cash equivalents

1b

2,507,004


2,171,973

Investment income receivable


-


4,096,234



2,507,004


6,268,207






LIABILITIES





CURRENT LIABILITIES





Accrued expenses


37,836


146,372

Dividends payable

1l

1,731,286


5,787,515








1,769,122


5,933,887






TOTAL NET ASSETS


314,570,283


353,272,957






NET ASSETS ATTRIBUTABLE TO HOLDERS OF





PREFERENCE SHARES

3

313,832,401


352,938,637






NET ASSETS ATTRIBUTABLE TO HOLDERS OF





MANAGEMENT SHARES

1b

737,882


334,320

 

 

The financial statements were approved and authorised for issue by the Board of directors on 25 June 2013 and are signed on its behalf by:

 

 

 

John Le Prevost                         Trevor Hunt

Director                                                 Director


 

 

  

 

The notes on pages 30 to 50 form an integral part of these financial statements.




Harewood Structured Investment PCC Limited

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

for the period ended 30 April 2013

 



Period to


Period to



30 Apr 2013


30 Apr 2012



Total


Total


Notes

GBP


GBP






Opening balance


352,938,637


606,861,780

Redemption of shares


(43,120,420)


(134,953,399)

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





Preference Shares


9,116,130


(14,833,588)

Unrealised foreign exchange losses


(5,101,946)


(967,114)






Balance attributable to preference shares as at 30 April 2013


313,832,401


456,107,679






Opening balance


334,320


2,583

Net gain for the period attributable to holders of Management Shares


403,562


428,685






Balance attributable to Management Shares as at 30 April 2013


737,882


431,268

 

Total balance attributable to shares as at 30 April 2013


314,570,283


456,538,947

 

 

 

 

 

 

 

 

 

 

 

 

The notes on pages 30 to 50 form an integral part of these financial statements.

 

Harewood Structured Investment PCC Limited

STATEMENT OF CASH FLOWS

for the period ended 30 April 2013

 


Period to


Period to


30 Apr 2013


30 Apr 2012


Total


Total


GBP


GBP

Operating activities




Net operating gain / (loss) for the period

9,371,389


(14,404,903)

Distributions to holders of Preference Shares

9,087,811


13,191,920

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

(9,116,130)


14,833,588

Movement in debtors and creditors during the period

68,531


82,045

Redemption of financial assets

43,120,420


116,181,164

Net cash flow from operating activities

52,532,021


129,883,814





Financing activities




Distributions to holders of Preference Shares redeemed

(43,120,420)


(116,181,164)

Distributions to holders of Preference Shares

(9,087,811)


(13,191,920)

Net cash flow from financing activities

(52,208,231)


(129,373,084)





Increase in cash and cash equivalents

323,790


510,730





Cash and cash equivalents at beginning of period

2,171,973


2,583

Increase in cash and cash equivalents

323,790


510,730

Exchange rate adjustment

11,241


-





Cash and cash equivalents at end of period

2,507,004


513,313

 

 

 

 

 

 

 

 

The notes on pages 30 to 50 form an integral part of these financial statements.

Harewood Structured Investment PCC Limited

Notes to the Financial Statements

for the period ended 30 April 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 applicable Guernsey Law.  The Financial Statements have been prepared under the historical cost convention as modified for the measurement at fair value of financial instruments held at fair value through profit or loss.

 

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

 

Changes in accounting policy and disclosures:

 

No new Standards or Interpretations have been adopted in the current period.

 

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

 

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

 

IFRS 9 Financial Instruments: Classification and Measurement - effective for annual periods beginning on or after 1 January 2015.

 

IFRS 13 Fair value measurement - Original issue effective for annual periods beginning on or after 1 January 2013.

 

IAS 1 Presentation of Financial Statements - amendments from Annual Improvement 2009-2011 Cycle (comparative information) effective for periods 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 34 Interim Financial Reporting - amendments from Annual Improvements 2009-2011 Cycle (interim reporting of segment assets) effective for periods on or after 1 January 2013.

 

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

 



Harewood Structured Investment PCC Limited

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

1          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(b)        Recognition of expenses and related income

The expenses borne by BNP Paribas SA ("BNP") on behalf of the Company and income received in order to pay Company expenses have been included in the Statement of Comprehensive Income.  Additionally the cash at bank relating to the excess of income received from BNP Paribas SA over expenses paid out has been included in the Statement of Financial Position.

 

The directors are of the opinion that the expenses, income and cash reserve detailed above should be included in the Financial Statements of the Company, as this more accurately represents the position of the Company.  The expenses and income have been detailed in the Statement of Comprehensive Income and the cash reserve built up by the excess of income over expenses has been allocated to the holders of Management Shares in the Statement of Financial position.

 

Pursuant to the terms of an Engagement Letter between the Company and BNP Paribas SA, all expenses are borne by BNP Paribas SA, therefore any cash at bank relating to the excess of income over expenses is due to BNP Paribas SA as holder of the Management Shares of the Company and is not due to the holders of Preference Shares.

 

(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 investment transactions.  The Company has adopted pounds sterling as its presentation currency as the Company is listed on the Channel Islands Stock Exchange and the majority of its registered shareholders are domiciled in the United Kingdom.

 

(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 within net movement in unrealised gains / (losses) on investments.

 

(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.

 

(f)         Expenses

All expenses are accounted for on an accruals basis and accounted for 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.  The ongoing expenses for the period under review are detailed in Note 7 to the Financial Statements.



Harewood Structured Investment PCC Limited

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

1          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(g)        Cash and cash equivalents

At the reporting date, cash and 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.

 

(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 to cover expenses of the Company is accounted for 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, including transaction costs associated with the investment.  After initial recognition, investments are measured at fair value, with unrealised gains and losses on investments being recognised in the Statement of Comprehensive Income.

 

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

 

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

 

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

 

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

 

(j)         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 period of £-9,116,130 (Apr 2012: -£15,372,017 loss) and on 358,827,307 (Apr 2012: 648,829,338) shares, being the weighted average number of shares in issue during the period.  There were no dilutive instruments in issue during the period.

 

(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 of financial assets that require delivery of the asset within the time frame generally established by the regulation or convention in the market place.



Harewood Structured Investment PCC Limited

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

1          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

(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 finance cost.

 

(m)       Going concern

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

 

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 period are outlined below:

 

(a)        Fair value of financial instruments

The Company holds derivatives which are tailored to meet the Company's respective needs for each cell.  As the investments are not traded in an active market, the fair value of such instruments is determined by using valuation techniques.  The fair value is calculated weekly and as at each month end by the Counterparty.  As at the reporting date, an independent check of the valuations of the investments is performed by Future Value Consultants Limited (the "Calculation Agent"), an independent third party.  The Calculation Agent uses a variety of methods and makes assumptions that are based on market conditions existing at the reporting date.  Valuation techniques used include the use of comparable recent arm's length transactions (where available), discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants.  These techniques are periodically reviewed by experienced personnel at the Calculation Agent.

 

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

 



Harewood Structured Investment PCC Limited

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

3          NET ASSETS ATTRIBUTABLE TO HOLDERS OF PREFERENCE SHARES

 



Period to


Year to



30 Apr 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 of sales of financial assets


(43,120,420)


(232,797,531)

Unrealised gain for the period / year


89,648,482


24,866,447

Realised loss on investments


(80,532,352)


(45,721,681)

Unrealised foreign exchange losses on currency balances


(5,101,946)


(270,378)

Realised exchange gain on currency balances


-


(2,583)






Closing valuation


313,832,401


352,938,637






Closing portfolio cost


323,489,049


447,141,821

Closing unrealised loss


(10,854,186)


(100,502,668)

Closing exchange gains on currency balances


1,197,538


6,299,484






Closing valuation


313,832,401


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 period under review.



Harewood Structured Investment PCC Limited

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

4          SHARE CAPITAL

 

Authorised

SHARES

GBP

Preference shares of no par value each

Unlimited

-

Ordinary shares of no par value each

2

-


2

-

 

Allotted, called-up and fully paid Preference Shares

Shares issued as at

1 November 2012


 

Shares Redeemed


 

Shares Issued


Shares issued as at 30 April 2013









UKHI Cell

-


-


-


-

EBM2 Cell

-


-


-


-

ES Cell

-


-


-


-

AP Cell

-


-


-


-

USHI A Cell

92,469,987


(92,469,987)

*

-


-

USHI 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

UKEI 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


(150,807,216)


-


335,058,780

 

*See Note 8

 

 

 

 

 



Harewood Structured Investment PCC Limited

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

4          SHARE CAPITAL (continued)

 

Allotted, called-up and fully paid Preference Shares

Shares issued as at

1 November 2011


 

Preference

Shares Redeemed


 

Preference Shares Issued


Shares issued as at 31 October 2012









UKHI Cell

141,613,549


(141,613,549)

*

-


-

EBM2 Cell

32,506,140


(32,506,140)

*

-


-

ES Cell

25,000,000


(25,000,000)

*

-


-

AP Cell

76,748,923


(76,748,923)

*

-


-

USHI A Cell

92,469,987


-


-


92,469,987

USHI 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

UKEI 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

 

*See Note 8

 

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.

 

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

 

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

 



Harewood Structured Investment PCC Limited

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

4          SHARE CAPITAL (continued)

 

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 the 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

30 April 2013


GBP


GBP


GBP


GBP









UKHI Cell

-


-


-


-

EBM2 Cell

-


-


-


-

ES Cell

-


-


-


-

AP Cell

-


-


-


-

USHI A Cell

92,942,487


(92,942,487)


-


-

USHI 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

UKEI 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


(123,652,772)


-


323,489,051



Harewood Structured Investment PCC Limited

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

5          SHARE PREMIUM (continued)

 

Share Premium Preference Shares

Share premium as at 1 November 2011


 

Preference Shares Redeemed


 

Preference Shares Issued


Share premium as at

31 October 2012


GBP


GBP


GBP


GBP









UKHI Cell

143,419,549


(143,419,549)


-


-

EBM2 Cell

32,828,140


(32,828,140)


-


-

ES Cell

25,000,000


(25,000,000)


-


-

AP Cell

77,271,523


(77,271,523)


-


-

USHI A Cell

92,942,487


-


-


92,942,487

USHI 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

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

 



Harewood Structured Investment PCC Limited

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

6          FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

 

(b)        Market Price Risk

Market price risk arises mainly from uncertainty about future prices of financial instruments held.  It represents the potential loss the Company might suffer through holding market positions in the face of price movements.  The Investment Manager actively monitors market prices and reports to the Board as to the appropriateness of the prices used for valuation purposes.  On a periodic basis independent valuations of the Company's investments are obtained from the Calculation Agent.  A list of investments held by the Company is shown in the Schedule of Investments on pages 51 to 52.

 

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 an investment 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 30 April 2013 / 31 October 2012 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 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










Period ended

30 April 2013


Year ended 31 October 2012


Period ended 30 April 2013


Year ended 31 October 2012

Cell

GBP


GBP


GBP


GBP









USHI A Cell

-


2,944,892


-


(2,944,892)

USHI B Cell

-


1,390,195


-


(1,390,195)

Agrinvest Cell

5,160,043


5,823,850


(5,160,043)


(5,823,850)

EPR Cell

2,335,621


2,216,176


(2,335,621)


(2,216,176)

EBM3 Cell

4,913,586


4,996,199


(4,913,586)


(4,996,199)

EI Cell

1,744,907


1,853,444


(1,744,907)


(1,853,444)

UKEI Cell

5,528,282


5,109,677


(5,528,282)


(5,109,677)

COMAC Cell

3,314,327


2,951,840


(3,314,327)


(2,951,840)

USEI A Cell

4,602,576


4,336,372


(4,602,576)


(4,336,372)

USEI B Cell

3,783,898


3,671,220


(3,783,898)


(3,671,220)










31,383,240


35,293,865


(31,383,240)


(35,293,865)

 



Harewood Structured Investment PCC Limited

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

6          FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

 

(c)        Credit Risk

Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Company.  At the date of this report the Counterparty was rated 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 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 valuation of the investments at this date, being £313,832,401.

 

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

 

The Board monitors, but cannot control, credit risk.

 

(d)        Liquidity Risk

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

 



Harewood Structured Investment PCC Limited

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

6          FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

 

(d)        Liquidity Risk (continued)

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:

 


1 - 3 months


3 - 12 months


Over 1 year


Total


GBP


GBP


GBP


GBP

As at 30 April 2013








Net assets attributable to holders of Management Shares

 

737,882


 

-


 

-


737,882

Net assets attributable to holders of Preference Shares

 

69,049,500


 

72,492,071


 

172,290,830


313,832,401


 

69,787,382


 

72,492,071


 

172,290,830


314,570,283









As at 31 October 2012








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:

 


1 - 3 months


3 - 12 months


Over 1 year


Total


GBP


GBP


GBP


GBP

As at 30 April 2013








Net assets

 

69,787,382


 

72,492,071


 

172,290,830


314,570,283









As at 31 October 2012








Net assets

 

43,685,185


 

58,238,503


 

251,349,269


353,272,957

 

 

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



Harewood Structured Investment PCC Limited

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

6          FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

 

(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 believes the current capital structure to be sufficient in meeting the capital requirements of the Company.

 

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

 

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

 

(f)         Foreign Exchange Risk

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

 


Period ended


Year ended


30 April 2013


31 October 2012


GBP


GBP

Assets




US Dollar

33,383,684


44,911,509

Euro

7,723


7,417


33,391,407


44,918,926

Liabilities




US Dollar

(7,157)


(1,331,560)





Net foreign currency assets

33,384,250


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.

 



Harewood Structured Investment PCC Limited

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

6          FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

 

(g)        Valuation

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

 

BNP Paribas Agrinvest

GBP 47,225,896

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

BNP Paribas COMAC

GBP 25,526,009

US Enhanced Income - Class A

GBP 48,500,080

US Enhanced Income - Class B

USD 45,079,125

 

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

 

BNP Paribas Agrinvest

29 June 2013

Enhanced Property Recovery

20 March 2014

Energy - Base Metals (3)

12 June 2014

BNP Paribas COMAC

1 June 2029*

US Enhanced Income - Class A

16 July 2029

US Enhanced Income - Class B

16 July 2029

UK Enhanced Income

24 September 2029

Enhanced Income

19 March 2108

 

*It has been resolved to redeem this cell early on 2 July 2013.

 

(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 has 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 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.

 



Harewood Structured Investment PCC Limited

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

6          FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

 

(g)        Valuation (continued)

 

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

 

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

 

If the Counterparty fails to top up the collateral such that it is equal to at least the Specified Percentage (as set out in note 6(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.

 



Harewood Structured Investment PCC Limited

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

6          FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

 

(h)        Periodic Returns on Principal and Timings of Payments (continued)

UK Enhanced Income

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

 

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

 

US Enhanced Income - Class A

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

 

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

 



Harewood Structured Investment PCC Limited

 

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

6          FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

 

(h)        Periodic Returns on Principal and Timings of Payments (continued)

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 pence 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 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.



Harewood Structured Investment PCC Limited

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

6          FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

 

(i)         Collateral Arrangements (continued)

The collateral held against all derivative instruments as at 30 April 2013 is detailed below:

 

Cell

Period ended


Year ended


30 April 2013


31 October 2012


GBP


GBP





USHI

-


10,580,862

Agrinvest

8,451,428


9,280,614

EPR

11,223,158


11,348,664

EBM (3)

11,403,692


13,066,686

COMAC

2,215,372


3,009,433

USEI

27,861,204


30,604,119

UKEI

10,203,504


11,050,438

EI

10,722,002


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 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 these companies.  During the period under review, the Administrator charged fees of £76,792 (Apr 2012: £99,817) in respect of its administration of the Company of which £10,457 (Oct 2012: £11,944) was outstanding at the period end and the Registrar charged fees of £12,302 (Apr 2012: £14,426) in respect of registration services on behalf of the Company of which £1,068 (Oct 2012: £1,108) was outstanding at the period end.

 

Anson Group Limited ("AGL") is the parent company of Anson Fund Managers Limited and Anson Registrars Limited.  John Le Prevost is a director of AGL.  John R Le Prevost is also the beneficial owner 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 period under review the Investment Manager charged fees of £175,741 (Apr 2012: £274,947), of which £19,116 (Oct 2012: £66,156) was outstanding at the period end.

 



Harewood Structured Investment PCC Limited

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

7          RELATED PARTY TRANSACTIONS (continued)

 

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 period BNP Paribas Group and its subsidiaries held the following shares in issue:

 


As at




As at




30 Apr 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%


5,580,086


9.57%

BNP Paribas Agrinvest

45,177,865


95.66%


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)

43,837,732


88.40%


43,100,057


86.92%

BNP Paribas Enhanced Income

34,425,125


86.06%


34,015,772


85.04%

BNP Paribas COMAC

25,438,699


99.66%


24,438,699


95.74%

US Enhanced Income Class A

41,537,523


85.64%


39,779,523


82.02%

US Enhanced Income Class B

30,395,627


67.43%


28,360,527


62.91%

UK Enhanced Income

43,902,395


89.57%


42,196,395


86.09%

 

As detailed in Note 8, on 19 November 2012 all Class A Sterling Hedged US High Income Cell and Class B Unhedged US High Income Cell Shares were compulsorily redeemed and Class A Sterling Hedged US High Income Cell and Class B Unhedged US High Income Cell were subsequently dissolved.



Harewood Structured Investment PCC Limited

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

7          RELATED PARTY TRANSACTIONS (continued)

 

ONGOING EXPENSES

Period ended


Period ended


30 Apr 2013


30 Apr 2012


TOTAL


TOTAL


GBP


GBP





Administration fees

76,792


99,817

Directors' remuneration

15,000


13,469

Registration fees

12,302


14,426

Custody fees

31,451


55,129

Asset management fees

175,741


274,947

Tax fees

21,650


37,425

Audit fees

41,198


23,614

Annual fees

10,565


11,239

Foreign exchange differences

(6,327)


-

Other operating expenses

6,309


1,209






384,681


531,275

 

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 period, Class A Sterling Hedged US High Income Cell and Class B Unhedged US High Income Cell reached their redemption dates.  Therefore Class A Sterling Hedged US High Income Cell and Class B Unhedged US High Income Cell Preference Shares in issue were compulsorily redeemed.

 

The redemption value per BNP Paribas US  High Income - Class A Preference Share was 31.25 pence, resulting in redemption proceeds and distributions to the holders of BNP Paribas US High Income - Class A Preference Shares of £29,729,101.  The net realised loss on the redemption was £63,213,386.

 

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

 



Harewood Structured Investment PCC Limited

Notes to the Financial Statements (continued)

for the period ended 30 April 2013

 

 

9          ULTIMATE CONTROLLING PARTY

 

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

 

 


Harewood Structured Investment PCC Limited

SCHEDULE OF INVESTMENTS

as at 30 April 2013

 


As at 30 April 2013

 


NOMINAL


VALUATION


TOTAL NET ASSETS




GBP


%

US High Income Cell - Class A






BNP Paribas Index Derivative Contract

GBP 92,469,987


-


0.00%







US High Income Cell - Class B






BNP Paribas Index Derivative Contract

USD 58,337,229


-


0.00%







BNP Paribas Agrinvest Cell






BNP Paribas Index Derivative Contract

GBP 47,225,896


51,600,431


16.44%







BNP Paribas Enhanced Property






Recovery Cell






BNP Paribas Index Derivative Contract

GBP 30,125,000


23,356,214


7.44%







BNP Paribas Energy - Base Metals (3)






Cell






BNP Paribas Index Derivative Contract

GBP 49,587,600


49,135,857


15.66%







BNP Paribas Enhanced Income Cell






BNP Paribas Index Derivative Contract

GBP 39,999,346


37,838,981


12.06%







BNP Paribas UK Enhanced Income Cell






BNP Paribas Index Derivative Contract

GBP 49,015,722


46,025,763


14.67%







BNP Paribas COMAC Cell






BNP Paribas Index Derivative Contract

GBP 25,526,009


17,449,069


5.56%







US Enhanced Income Cell - Class A






Sterling Hedged






BNP Paribas Index Derivative Contract

GBP 48,500,080


55,282,816


17.62%







US Enhanced Income Cell - Class B






US Dollar Unhedged






BNP Paribas Index Derivative Contract

USD 45,079,125


33,143,270


10.55%







TOTAL



313,832,401


100.00%

 

 



Harewood Structured Investment PCC Limited

SCHEDULE OF INVESTMENTS

as at 31 October 2012

 


As at 31 October 2012

 


NOMINAL


VALUATION


TOTAL NET ASSETS




GBP


%

US High Income Cell - Class A






BNP Paribas Index Derivative Contract

GBP 92,469,987


29,448,917


8.34%







US High Income Cell - Class B






BNP Paribas Index Derivative Contract

USD 58,337,229


13,901,948


3.94%







BNP Paribas Agrinvest Cell






BNP Paribas Index Derivative Contract

GBP 47,225,896


58,238,503


16.50%







BNP Paribas Enhanced Property






Recovery Cell






BNP Paribas Index Derivative Contract

GBP 30,125,000


22,161,757


6.28%







BNP Paribas Energy - Base Metals (3)






Cell






BNP Paribas Index Derivative Contract

GBP 49,587,600


49,961,986


14.16%







BNP Paribas Enhanced Income Cell






BNP Paribas Index Derivative Contract

GBP 39,999,346


36,712,200


10.40%







BNP Paribas UK Enhanced Income Cell






BNP Paribas Index Derivative Contract

GBP 49,015,722


43,363,719


12.29%







BNP Paribas COMAC Cell






BNP Paribas Index Derivative Contract

GBP 25,526,009


18,534,435


5.25%







US Enhanced Income Cell - Class A






Sterling Hedged






BNP Paribas Index Derivative Contract

GBP 48,500,080


51,096,774


14.48%







US Enhanced Income Cell - 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%

 

 


 

 



Harewood Structured Investment PCC Limited

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

Anson Fund Managers Limited

PO Box 405

Anson Place

Mill Court

La Charroterie

St. Peter Port

Guernsey GY1 3GF

 

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

Anson Place

Mill Court

La Charroterie

St Peter Port

Guernsey GY1 1EJ

 

 




Harewood Structured Investment PCC Limited

SHAREHOLDER INFORMATION

 

Shares of all cells are listed on the Channel Island Stock Exchange 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 Stock Exchange'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 Anson Fund Managers Limited, telephone 44 (0)1481 722 260 or e-mail: [email protected].

 

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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