TIDMEIF TIDMUSE TIDMUSEB TIDMUKE
RNS Number : 2865Q
Harewood Structured Investment PCC
29 August 2014
Harewood Structured Investment PCC Limited
Half-yearly Financial Report for the
period ended 30 April 2014 (Unaudited)
Early Redemption 3
About the Company 4 - 10
Investment Objective and Policy 11 - 14
Net Asset Values 15
Interim Management Report 16 - 17
Investment Manager's Report 18 - 22
Statement of Comprehensive Income 23
Statement of Financial Position 24
Statement of Changes in Net Assets Attributable
to Holders of Shares 25
Statement of Cash Flows 26
Notes to the Financial Statements 27 - 48
Schedule of Investments 49 - 50
Directors and Service Providers 51
Shareholder Information 52
The Board received a request from a majority shareholder to
propose the early redemption of the preference shares in all the
existing cells as at the date of signing, being Enhanced Income
Cell, UK Enhanced Income Cell, US Enhanced Income Cell - Class A
and US Enhanced Income Cell - Class B.
On 9 July 2014, the Board considered the proposal and resolved
to contact shareholders setting out the proposal for early
redemption. On 6 August 2014 letters had been sent out to all
shareholders detailing the proposal and seeking their written
consent. The shareholders have been advised in the letter that the
majority shareholder who holds more than 75% of the shares in each
cell intends to approve the proposed early redemption and as such
is sufficient to approve the proposal.
On 15 August 2014 the Company received the written consent of
the majority shareholder in each of the existing cells. On 22
August 2014 a Written Special Resolution was passed by the sole
member of the Company to effect the termination of all the existing
cells. The redemption dates of all cells have therefore been
brought forward to 15 September 2014.
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
GBP1.00 each. On 26 May 2006, a further 30,000,000 UKHI Shares were
allotted and issued at a price of 102.47 pence each and a further
allotment and issue of 50,000,000 shares was made on 28 September
2006 at a price of 104.00 pence each. On 4 June 2007, a further
15,000,000 UKHI Shares were allotted and issued at a price of
109.60 pence each. The UKHI Shares had a defined investment life to
8 December 2011, whereupon they were compulsorily redeemed.
On 22 March 2006, 27,506,140 BNP Paribas Energy - Base Metals
(2) Preference Shares ("EBM2 Shares") of the BNP Paribas Energy -
Base Metals (2) cell (the "EBM2 Cell") were allotted and issued at
a price of GBP1.00 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 GBP1.00
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 GBP1.00 each. On 23 January 2007, a further 15,000,000 AP
Shares were allotted and issued at a price of 108.484 pence each.
The AP Shares had a defined investment life to 26 July 2012,
whereupon they were compulsorily redeemed.
On 25 October 2006, 77,469,987 Class A Sterling Hedged US High
Income Preference Shares ("Class A USHI Shares") of the US High
Income cell (the "USHI Cell") were allotted and issued at a price
of GBP1.00 each. On 4 June 2007, a further 15,000,000 Class A
USHI
Shares were allotted and issued at an issue price of 105.65
pence each. The Class A USHI Shares had a defined investment life
to 26 November 2012, whereupon they were compulsorily redeemed.
On 25 October 2006, 43,337,229 Class B Unhedged US High Income
Preference Shares ("Class B USHI Shares") of the USHI Cell were
allotted and issued at a price of $1.00 each. On 4 June 2007, a
further 15,000,000 Class B USHI Shares were allotted and issued at
a price of 105.89 cents each. The Class B USHI Shares have a
defined investment life to 26 November 2012 whereupon they were
compulsorily redeemed.
On 21 June 2007, 37,225,896 BNP Paribas Agrinvest Preference
Shares ("Agrinvest shares") of the BNP Paribas Agrinvest cell (the
"Agrinvest Cell") were allotted and issued at a price of GBP1.00
each. On 15 February 2008, a further 10,000,000 Agrinvest Shares
were allotted and issued at a price of 127.41 pence. The Agrinvest
Shares had a defined investment life to 29 June 2013, whereupon
they were compulsorily redeemed.
On 12 March 2008, 30,125,000 Enhanced Property Recovery
Preference Shares (the "EPR Shares") of the Enhanced Property
Recovery cell (the "EPR Cell") were allotted and issued at a price
of GBP1.00 each. The EPR Shares had a defined investment life to 20
March 2014, whereupon they were compulsory redeemed.
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 GBP1.00 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 had a
defined investment life to 12 June 2014, whereupon they were
compulsory redeemed.
On 18 March 2009, 24,999,346 Class A Sterling Hedged Enhanced
Income Preference Shares ("Class A EIF Shares") of the Enhanced
Income cell (the "EI Cell") were allotted and issued at a price of
GBP1.00 each. On 8 October 2009, a further 15,000,000 Class A EIF
Shares were allotted and issued at a price of 117.86 pence
each.
The Class A EIF Shares had a defined investment life to 19 March
2108, whereupon they would have been subject to compulsory
redemption on or around 10 May 2108.However on 15 August 2014 the
requisite majority of shareholders of the EI Cell approved a change
to the maturity date, bringing it forward to 15 September 2014. On
22 August 2014 a Written Special Resolution was passed by the sole
member of the Company to effect the termination of the EI Cell and
to redeem all Class A EIF Shares on 15 September 2014.
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 GBP1.00
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 had
a defined investment life to 16 July 2029 whereupon they would have
been subject to compulsory redemption on or around 1 September
2029. However on 15 August 2014 the requisite majority of
shareholders of the USEI Cell approved a change to the maturity
date, bringing it forward to 15 September 2014. On 22 August 2014 a
Written Special Resolution was passed by the sole member of the
Company to effect the termination of the USEI Cell and to redeem
all Class B USEI Shares on 15 September 2014.
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 GBP1.00 each. The Class A USEI Shares had a defined investment
life to 16 July 2029, whereupon they would have been subject to
compulsory redemption on or around 1 September 2029*. However on 15
August 2014 the requisite majority of shareholders of the USEI Cell
approved a change to the maturity date, bringing it forward to 15
September 2014. On 22 August 2014 a Written Special Resolution was
passed by the sole member of the Company to effect the termination
of the USEI Cell and to redeem all Class A USEI Shares on 15
September 2014.
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 GBP1.00 each.
The UKEI Shares had a defined investment life to 24 September 2029
whereupon they would have been subject to compulsory redemption on
or around 8 November 2029. However on 15 August 2014 the requisite
majority of shareholders of the UKEI Cell approved a change to the
maturity date, bringing it forward to 15 September 2014. On 22
August 2014 a Written Special Resolution was passed by the sole
member of the Company to effect the termination of the UKEI Cell
and to redeem all UKEI Shares on 15 September 2014.
The Company has an unlimited life but the shares of each cell
have a defined investment term as set out above. Holders of the
Ordinary Shares have the right to receive notice of and to vote at
all meetings of shareholders.
All shares in issue are listed on the Channel Islands Securities
Exchange Authority Limited (the "CISE") with the exception of the
two Management Shares in issue which are not listed.
The Company is managed by its Board of directors who have
appointed THEAM of Paris, France as the Company's external
Investment Manager of all existing cells. Administrative and
Secretarial support is provided by JTC (Guernsey) Limited (formerly
JTC Fund Managers (Guernsey) Limited and prior to that Anson Fund
Managers Limited) in Guernsey. BNP Paribas SA acts as Distributor
and Investment Counterparty of the Company's cells.
Directors and Principal Advisors
John Le Prevost - Non executive Director
John Le Prevost is British and resides in Guernsey. He is a
director and controlling shareholder of Anson Group Limited, the
holding company of Anson Registrars Limited, the Company's
Registrar, Transfer Agent, Paying Agent and Receiving Agent. Mr Le
Prevost has over thirty years experience in the investment and
offshore trust industry, during which time he was Managing Director
of County NatWest Investment Management (Channel Islands), Royal
Bank of Canada's mutual fund company in Guernsey and Republic
National Bank of New York's international trust company. He is a
trustee of the Guernsey Sailing Trust, a director of a number of
companies associated with Anson Group Limited's business and, in
addition, serves as a non-executive director on the boards of many
listed investment companies.
Francois-Xavier Foucault - Non executive Director
Francois-Xavier Foucault is French and resides in France. As
well as being a director of the Company, he is in charge of
Commodity and Flow for the Strategy & Risk group within BNP
Paribas Global Equities and Commodity Derivatives. He is also
director of DECART RE a reinsurance company of the BNPP Paribas
group, and director of Theam Quant, an investment company of the
BNPP Paribas Group. Previously, he has also held roles in finance,
derivatives and funds at Gen Re Securities, AXA Investment Managers
and BFT (Credit Agricole).
Youri Siegel - Non executive Director
Youri Siegel is French and resides in the United Kingdom. As
well as being a director of the Company, he is currently the Head
of Solutions Structuring within the Global Equities and Commodities
Derivatives Department of BNP Paribas Arbitrage SNC, a 100%
affiliate of BNP Paribas SA. Mr Siegel has also held similar roles
at Société Generale and JPMorgan.
Trevor Hunt - Non executive Director
Trevor Hunt is British and resides in Jersey. He has extensive
experience in the offshore financial services sector. Mr Hunt
worked for HSBC for over 30 years in various senior management
positions within the open-ended and closed-ended offshore funds
industry. Mr Hunt retired from HSBC in 2003 and spent six years as
a director of Capita Financial Administrators (Jersey) Limited and
of other Capita entities before leaving in 2009 to join BNP Paribas
Securities Services in a senior management role. On 30 September
2011 Mr Hunt left BNP Paribas in order to focus on providing
non-executive directorship services to a number of Channel Island
funds and fund management companies. Mr Hunt is regulated by the
Jersey Financial Services Commission and Guernsey Financial
Services Commission for the provision of services as a
non-executive director and is a member of the Jersey Association of
Directors and Officers and serves on the Association of Investment
Companies ("AIC") Offshore Funds Committee.
BNP Paribas SA - Investment Counterparty and Distributor
The Investment Counterparty and Distributor, in respect of all
the cells of the Company, is BNP Paribas SA. The duty of the
Investment Counterparty, in respect of each individual cell, is
that of the issuer of debt securities or other financial
instruments or the provider of a derivative contract or other
financial instrument. The duties of the Distributor include, inter
alia, the preparation of literature to promote the Company and
relevant cell within the United Kingdom ("UK") and to ensure it
complies with the applicable UK requirements and other applicable
laws and regulatory requirements, promoting within the UK
investment in the shares of the Company and researching, evaluating
and identifying marketing opportunities for promoting investments
in the shares of the Company.
BNP Paribas SA is a company in the BNP Paribas Group (the
"Group"). As of 5 June 2014 the Group had an equity market
capitalisation of EUR64 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 2013, the Group had audited consolidated assets
of EUR1,800.13 billion and audited shareholders' equity (Group
share including income for the 2013 fiscal year) of EUR87.59
billion. Audited net income, before taxes, non-recurring items and
amortization of goodwill, for the year ended 31 December 2013 was
EUR8.18 billion. Audited net income, Group share, for the year
ended 31 December 2013 was EUR5.44 billion.
THEAM - Investment Manager
The Investment Manager in respect of all cells of the Company is
THEAM, a member of the BNP Paribas Group. As a result of a joint
project between BNP Paribas CIB and BNP Paribas Investment
Partners, combining the Sigma Teams from BNP Asset Management with
Harewood Asset Management SAS, Harewood Asset Management SAS was
renamed THEAM on 31 March 2011. The role of the Investment Manager
includes, inter alia, the making of investment decisions on behalf
of the Company in respect of the assets of the relevant cell and
monitoring the investments which are attributable to that cell. The
Investment Manager is organised as a French Société Actions
Simplifiée, which is a form of limited liability company with
simplified legal obligations. The purpose of the Investment Manager
is the creation and management of investment funds on behalf of
their investors. The Investment Manager may also provide investment
advisory services. The Investment Manager is a wholly owned
subsidiary of BNP Paribas Investment Partners. The Investment
Manager is regulated by the Autorité des marchés financiers under
French law. As of 30 April 2014, THEAM was responsible for (or
mandated for) the investment of EUR41.2 billion over more than 720
funds.
BNP Paribas Securities Services, Luxembourg Branch -
Custodian
BNP Paribas Securities Services, Luxembourg Branch have been
appointed by the Company as custodian of the assets of the Company.
BNP Paribas Securities Services is a company in the BNP Paribas
Group. The Custodian will, amongst carrying out other duties, be
responsible for holding assets for the Company and presenting the
same for redemption and receiving the proceeds of such redemptions
for and on behalf of the Company for the account of the relevant
cell for onward payment to Shareholders upon applicable redemption.
The Custodian also holds custody over the collateral accounts of
each cell.
The Custodian is the Luxembourg Branch of BNP Paribas Securities
Services, a fully licensed bank incorporated under French law as a
société anonyme (public limited company). BNP Paribas Securities
Services, Luxembourg Branch was created on 28 March 2002 and
registered with the Luxembourg Trade and Companies' register under
the number of B86.862. As a branch of a French bank, BNP Paribas
Securities Services, Luxembourg Branch is supervised by the Comité
des Etablissements de Crédit et des Enterprises d'Investissement
(which depends on the French Central Bank, the Banque de France).
It has also been authorised by the Commission de Surveillance du
Secteur Financier, the Luxembourg Commission for the Supervision of
the Financial Sector to act as a credit institution under the terms
of article 30 of the Luxembourg law of 5 April 1993 on the
Financial Sector, as amended from time to time.
Enhanced Property Recovery Cell
The investment objective of the Company for the EPR Cell in
respect of the EPR Shares is to provide shareholders with the
opportunity to participate in the performance of shares traded on
various European stock exchanges through the FTSE EPRA Europe Real
Estate Index (the "EPRA Index"). The EPRA Index is an index
designed to track the performance of listed real estate companies
in Europe. The Final Redemption Amount will be determined
principally by reference to two values - the first (defined as the
"Initial Index Level") being the level of the EPRA Index determined
on 13 March 2008, the second (defined as the "Final Index Level")
being the arithmetic average of the levels of the EPRA Index on 13
monthly averaging dates from 13 March 2013 to the Maturity Date
inclusive.
In accordance with the Company's investment objective for the
EPR Cell, the net proceeds at launch were invested into an Index
Derivative Contract (the "EPR Contract") with BNP Paribas, the
Investment Counterparty. Under the terms of the EPR Contract the
Company, on behalf of the EPR Cell, is to receive, at redemption an
amount equalling the funds available for payment of the investment
return.
Full details of the calculation of the investment return, the
EPR Contract and collateral arrangements in favour of the Company
for the account of the EPR Cell are disclosed inthe EPR Cell's
Summary and Securities Note, a copy of which is available from the
Company's Administrator or Distributor upon request.
In accordance with their defined investment life, all EPR Shares
were compulsorily redeemed on 20 March 2014.
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.
In accordance with their defined investment life, all EBM3
Shares were compulsorily redeemed on 12 June 2014.
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.
US Enhanced Income Cell
The investment objective of the Company for the USEI Cell in
respect of the Class A USEI Shares and Class B USEI Shares is to
provide shareholders with a stable stream of quarterly dividend
distributions (with a targeted dividend yield of approximately 8%
per annum, subject to increase and decrease in certain
circumstances) and return on capital. The investment objective is
intended to be achieved by reference to an investment strategy
linked to the total return performance of the Standard and Poor's
500(R)Index (the "S&P500 Index") and notional short-term call
options written on the S&P500 Index.
In accordance with the Company's investment objective for the
USEI Cell, the net proceeds at launch together with the proceeds
raised in the subsequent issue of further Class A USEI Shares and
Class B USEI Shares, were invested into an Index Derivative
Contract (the "USEI Contract") with BNP Paribas, the Investment
Counterparty. Under the terms of the USEI Contract, the Company, on
behalf of the USEI Cell, is to receive an amount initially equal to
2 pence or cents per Class A USEI Share or Class B USEI Share
respectively on each dividend payment date, which will be applied
by the Company in funding the payment of dividends to shareholders,
and, at redemption, an amount equal to the net asset value of the
underlying portfolio.
Full details of the calculation of the investment return, the
USEI Contract and the collateral arrangements in favour of the
Company, for the account of the USEI Cell, are disclosed in the
USEI Cell's Summary and Securities Note, a copy of which is
available from the Company's Administrator or Distributor upon
request.
UK Enhanced Income Cell
The investment objective of the Company for the UKEI Cell in
respect of the UKEI Shares is to provide shareholders with a stable
stream of quarterly dividend distributions (with a targeted
dividend yield of approximately 8% per annum, subject to increase
and decrease in certain circumstances) and return on capital.
The investment objective is intended to be achieved by reference
to an investment strategy linked to the total return performance of
the FTSE 100(TM)Index (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.
As at 30 April 2014, the accounting reference date, the
calculated net asset value per share in each existing cell at that
date was as follows:-
As at 30 April As at 31 Oct
2014 2013
Enhanced Property Recovery ("EPR") - 79.26 pence
Energy - Base Metals (3) ("EBM3") 99.69 pence 99.32 pence
Enhanced Income - Class A ("EIF") 95.92 pence 96.60 pence
US Enhanced Income - Class A 115.49 pence 113.13 pence
("USEI A")
US Enhanced Income - Class B 115.26 US$ cents 113.08 US$ cents
("USEI B")
UK Enhanced Income ("UKEI") 85.29 pence 91.38 pence
The Board of directors draws shareholders' attention to the
statement on page 3 wherein the early redemption of the existing
cells is detailed.
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 17 to 21 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
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
29 August 2014
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 Energy-Base Metals (3)
Listing: Channel Islands Securities Exchange Authority
Limited
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 2014 are set out in the table
below.
Source for commodity values information: Bloomberg
Investment Performance
Between the launch on 5 June 2008 and close on 30 April 2014 the
NAV has fallen by 0.33%. Over this period, the DJ-UBS Commodity
Excess Return Index has fallen by 36.66%
This represents a significant outperformance of 36.33% of the
fund from the benchmark index. The fund achieved an approximate 50%
reduction in the benchmark's volatility from 19.25% to 9.90%. The
EBM3 Shares were compulsorily redeemed on 12 June 2014.
Enhanced Income
Listing: Channel Islands Securities Exchange Authority
Limited
Launch date: 19 March 2009
Issue price at launch: 101 pence
NAV immediately following launch: 100 pence
Maturity date: 15 September 2014
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 Dow Jones Eurostoxx 50
Index and notional call options written on the SX5E Index. Dividend
distributions on the Class A EIF Shares will be denominated and
paid in GBP and in EUR in respect of the Class B shares. There are
currently no Class B shares in issue.
Investment Performance
Between the launch on 19 March 2009 and close on 30 April 2014
the Total Return Performance rose by 39.46%. Over the same period
the Dow Jones Eurostoxx Total Return Index (SX5T) increased by
86.53%. The directors declared interim dividends over the last
three years as follows:
Announcement Ex-Dividend Pay Date Dividend
23-Mar-11 30-Mar-11 29-Apr-11 2.00%
23-Jun-11 29-Jun-11 01-Jul-11 2.00%
22-Sep-11 28-Sep-11 30-Sep-11 1.80%
20-Dec-11 28-Dec-11 30-Dec-11 1.90%
21-Mar-12 28-Mar-12 01-May-12 2.00%
27-Jun-12 04-Jul-12 03-Aug-12 1.90%
26-Sep-12 03-Oct-12 02-Nov-12 1.90%
24-Dec-12 02-Jan-13 01-Feb-13 2.00%
27-Mar-13 03-Apr-13 05-Apr-13 2.00%
26-Jun-13 03-Jul-13 02-Aug-13 1.90%
25-Sep-13 02-Oct-13 04-Oct-13 1.90%
27-Dec-13 08-Jan-14 07-Feb-14 2.00%
26-Mar-14 02-Apr-14 07-May-14 1.90%
Class A Sterling Hedged US Enhanced Income Preference Shares and
Class B US Dollar Unhedged US Enhanced Income Preference Shares
Listing: Channel Islands Securities Exchange Authority
Limited
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: 15 September 2014
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 2014 the
NAV Total Return Performance increased 66.23% and 65.84%
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 121.48%
over that period. The directors declared interim dividends over the
last three years for both Share classes according to the following
schedule:
Announcement Ex-Dividend Pay Date Dividend
20-Jan-11 26-Jan-11 25-Feb-11 2.20%
20-Apr-11 27-Apr-11 27-May-11 2.20%
20-Jul-11 27-Jul-11 26-Aug-11 2.20%
19-Oct-11 26-Oct-11 25-Nov-11 2.00%
18-Jan-12 25-Jan-12 24-Feb-12 2.00%
18-Apr-12 25-Apr-12 29-May-12 2.00%
18-Jul-12 25-Jul-12 24-Aug-12 2.00%
24-Oct-12 31-Oct-12 30-Nov-12 2.20%
23-Jan-13 30-Jan-13 01-Mar-13 2.00%
28-Mar-13 03-Apr-13 03-May-13 2.00%
24-Jul-13 31-Jul-13 02-Sep-13 2.20%
23-Oct-13 30-Oct-13 29-Nov-13 2.20%
22-Jan-14 29-Jan-14 28-Feb-14 2.30%
23-Apr-14 30-Apr-14 02-Jun-14 2.30%
UK Enhanced Income
Listing: Channel Islands Securities Exchange Authority
Limited
Launch date: 24 September 2009
Issue price at launch: 101 pence
NAV immediately following launch: 100 pence
Maturity date: 15 September 2014
ISIN: GG00B3YF5842 .
SEDOL: B3YF584
Investment Objective
The UKEI Cell's investment objective is to provide Shareholders
with a stable stream of quarterly dividends (with a targeted
dividend yield of approximately 8% per annum, subject to increase
and decrease in certain circumstances) and return on capital, such
investment objective being intended to be achieved by reference to
an investment strategy linked to the total return performance of
the FTSE100 Index and notional short-term call options written on
the FTSE100 Index.
Investment Performance
Between launch on 24 September 2009 and close on 30 April 2014
the Total Return Performance had increased by 22.72%. Over this
period the FTSE 100 Total Return Index had risen by 57.04%. The
directors declared interim dividends over the last three years
according to the following schedule:
Announcement Ex-Dividend Pay Date Dividend
24-Dec-10 05-Jan-11 04-Feb-11 2.00%
24-Mar-11 06-Apr-11 06-May-11 2.00%
24-Jun-11 06-Jul-11 05-Aug-11 2.00%
24-Sep-11 05-Oct-11 04-Nov-11 1.90%
04-Jan-12 11-Jan-12 10-Feb-12 1.90%
28-Mar-12 04-Apr-12 10-May-12 2.00%
27-Jun-12 04-Jul-12 03-Aug-12 1.80%
26-Sep-12 03-Oct-12 02-Nov-12 1.90%
02-Jan-13 09-Jan-13 08-Feb-13 1.90%
28-Mar-13 03-Apr-13 05-Apr-13 1.90%
26-Jun-13 03-Jul-13 02-Aug-13 1.80%
02-Oct-13 09-Oct-13 08-Nov-13 1.90%
02-Jan-14 08-Jan-14 07-Feb-14 1.90%
26-Mar-14 02-Apr-14 07-May-14 1.70%
Period to Period to
30 April 30 April
2014 2013
Notes Total Total
GBP GBP
Net movement in unrealised gains
on investments 3 4,624,542 89,648,482
Unrealised foreign exchange losses 3 (1,443,748) (5,101,946)
Income from financial assets at fair
value through profit
or loss 6,776,820 5,031,582
Finance costs - distributions to
holders of Preference Shares 1l (6,776,820) (5,031,582)
Realised losses on investments 3 (6,083,698) (80,532,352)
(Decrease) / increase in net assets
attributable to
------------ -------------
Preference shareholders from operations (2,902,904) 4,014,184
------------ -------------
Income received from Counterparty
in relation to
Operating expenses 1b 261,818 639,940
Operating expenses 1b, 7 (290,129) (384,681)
(Decrease) / increase in net assets
from operations (2,931,215) 4,269,443
Other Comprehensive Income - -
Total Comprehensive Income (2,931,215) 4,269,443
============ =============
Pence Pence
(Loss) / gain per Share 1j (1.14) 1.12
The notes on pages 27 to 48 form an integral part of these
Financial Statements.
Period to Year to
30 April
2014 31 Oct 2013
Notes Total Total
GBP GBP
ASSETS
NON CURRENT ASSETS
Financial assets at fair value through
profit or loss 3 - 170,088,165
CURRENT ASSETS
Financial assets at fair value through
profit or loss 3 216,274,840 73,130,881
Cash and cash equivalents 1b 1,948,918 1,130,359
Investment income receivable 1,729,991 2,616,595
------------ ------------
219,953,749 76,877,835
LIABILITIES
CURRENT LIABILITIES
Accrued expenses 120,851 107,246
Dividends payable 1l 3,323,241 3,376,580
------------ ------------
3,444,092 3,483,826
------------
TOTAL NET ASSETS 216,509,657 243,482,174
============ ============
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF
PREFERENCE SHARES 3 216,274,840 243,219,046
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF
MANAGEMENT SHARES 1b 234,817 263,128
The Financial Statements were approved and authorised for issue
by the Board of directors on 29 August 2014 and are signed on its
behalf by:
John Le Prevost Trevor Hunt
Director Director
The notes on pages 27 to 48 form an integral part of these
Financial Statements.
Period to Period to
30 April 30 April
2014 2013
Total Total
GBP GBP
Net gain brought forward attributable to Preference
Shares 243,219,046 352,938,637
Redemption of shares (24,041,302) (43,120,420)
Net (loss) / gain for the period attributable
to holders of Preference Shares (2,902,904) 4,014,184
Balance attributable to Preference Shares as
at 30 April 216,274,840 313,832,401
Net gain brought forward attributable to Management
Shares 263,128 334,320
Net gain for the period attributable to holders
of Management Shares (19,311) 403,562
Balance attributable to Management Shares as
at 30 April 234,817 737,882
Total balance attributable to shares as at
30 April 216,509,657 314,570,283
=============== =============
The notes on pages 27 to 48 form an integral part of these
Financial Statements.
Period to Period to
30 Apr 2014 30 Apr 2013
Total Total
GBP GBP
Operating activities
Net operating (loss) / gain for the period (2,931,215) 4,269,443
Distributions to holders of Preference Shares 6,830,159 9,087,811
Movement in realised and unrealised loss
/ (gain) on investments 1,459,156 (9,116,130)
Movement in unrealised foreign exchange
losses 1,443,748 5,101,946
Movement in debtors and creditors during
the period 846,870 68,531
Redemption of financial assets 24,041,302 43,120,420
------------- -------------
Net cash flow from operating activities 31,690,020 52,532,021
Financing activities
Distributions to holders of Preference Shares
redeemed (24,041,302) (43,120,420)
Distributions to holders of Preference Shares (6,830,159) (9,087,811)
------------- -------------
Net cash flow from financing activities (30,871,461) (52,208,231)
Increase in cash and cash equivalents 818,559 323,790
------------- -------------
Cash and cash equivalent at beginning of
period 1,130,359 2,171,973
Increase in cash and cash equivalents 818,559 323,790
Exchange rate adjustment - 11,241
Cash and cash equivalents at end of period 1,948,918 2,507,004
------------- -------------
The notes on pages 27 to 48 form an integral part of these
Financial Statements.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements
for the period ended 30 April 2014
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 Laws and The Protection of Investors (Baliwick of
Guernsey) Law, 1987.
Non-going concern basis
The financial statements have been prepared in accordance with
the non-going concern basis following the approval by a majority
shareholder to bring forward the redemption date of all existing
cells to 15 September 2014. Adoption of the non-going concern basis
requires that the assets are reduced to their recoverable amounts
and that provisions are made for future losses. The directors have
considered whether there is any indication that the recoverable
amount of the Company's assets are lower than the amount recorded
as fair value at 30 April 2014. They have concluded that any post
balance sheet changes in value reflect fair value changes and do
not indicate a reduction in the recoverable amount at 30 April 2014
and, accordingly, that no adjustment is required to the carrying
amount of the Company's assets or increase in the Company's
liabilities at fair value through profit and loss. In addition the
directors have considered whether any provision is required for
future losses. The Company will continue to incur expenses up to
the date of liquidation. However, the anticipated income receivable
from the Counterparty, is expected to exceed the Company's
estimated future expenses and, accordingly, the directors do not
consider that a provision for future losses is required.
The Financial Statements have been prepared under the historical
cost convention as modified for the measurement at fair value of
financial instruments held at fair value through profit or
loss.
The preparation of Financial Statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires the Board of directors to exercise judgement in the
process of applying the Company's accounting policies. The areas
involving a high degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial
statements, are disclosed in Note 2.
Changes in accounting policy and disclosures:
The following Standards or Interpretation relevant to the entity
have been adopted in the current period. Their adoption has not had
any impact on the amounts reported in these Financial Statements
and is not expected to have any impact on future financial
periods.
IAS 1 Presentation of Financial Statements - Amendments to
revise the way other comprehensive income is presented for periods
beginning on or after 1 July 2012.
IAS 1 Presentation of Financial Statements - Amendments
resulting from Annual Improvements 2009 - 2011 cycle (comparative
information) for periods beginning on or after 1 January 2013.
IAS 32 Financial Instruments: Presentation - Amendments
resulting from Annual Improvements 2009 - 2011 cycle (comparative
information) for periods beginning on or after 1 January 2013.
IFRS 7 Financial Instruments: Disclosures - Amendments relating
to the offsetting of assets and liabilities effective for annual
periods beginning on or after 1 January 2013 and interim periods
within those periods.
IFRS 13 Fair value measurement - This standard aims to increase
consistency and comparability in fair value measurements and
related disclosure requirements for use across IFRSs. The
requirements do not extend to the use of fair value accounting but
provide guidance on how it should be applied. This standard is
effective for annual periods beginning on or after 1 January
2013.
The following Standards or Interpretations have been issued by
the International Accounting Standards Board (IASB) but not yet
adopted effective by the Company.
IFRS 7 Financial Instruments: Disclosures - Deferral of
mandatory effective date of IFRS 9 and amendments to transition
disclosures effective for annual periods beginning on or after 1
January 2018.
IFRS 7 Financial Instruments: Disclosures - Additional hedge
accounting disclosures (and consequential amendments) effective for
annual periods beginning on or after 1 January 2018.
IFRS 9 Financial Instruments - Classification and measurement of
financial assets, effective for annual periods beginning on or
after 1 January 2015.
IFRS 9 Financial Instruments - Accounting for financial
liabilities and derecognition, effective for annual periods
beginning on or after 1 January 2015.
IFRS 9 Financial Instruments - Reissue to incorporate a hedge
accounting chapter and permit the early application of the
requirements for presenting in other comprehensive income the 'own
credit' gains or losses on financial liabilities designated under
the fair value option without early applying the other requirements
of IFRS 9, effective for annual periods beginning on or after 1
January 2018.
IFRS 13 Fair value measurement - Amendments resulting from
Annual Improvements 2011 - 2013 cycle effective for annual periods
beginning on or after 1 July 2014.
IAS 32 Financial Instruments: Presentation - Amendments relating
to the offsetting of assets and liabilities effective for annual
periods beginning on or after 1 January 2014.
IAS 39 Financial Instruments: Recognition and Measurement -
Amendments for novations of derivatives for annual periods
beginning on or after 1 January 2014.
IAS 39 Financial Instruments: amendments to permit an entity to
elect to continue to apply the hedge accounting requirements in IAS
39 for a fair value hedge of the interest rate exposure of a
portion of a portfolio of financial assets or financial liabilities
when IFRS 9 is applied, and to extend the fair value option to
certain contracts that meet the 'own use' scope exception,
effective for annual periods beginning on or after 1 January
2018.
The directors have considered the above and are of the opinion
that the above Standards and Interpretations are not expected to
have a material impact on the Company's Financial Statements except
for the presentation of additional disclosures and changes to the
presentation of components of the Financial Statements. These items
will be applied in the first financial period for which they are
required.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements
for the period ended 30 April 2014
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Recognition of expenses and related income
Pursuant to the terms of an Engagement Letter dated 10 January
2006 between the Company and BNP Paribas SA ("BNP"), it is agreed
that BNP will pay a notional quarterly amount in advance to cover
the anticipated expenses of the Company. Any cash at bank relating
to the excess of income over expenses is due to BNP as holder of
the Management Shares of the Company and is not due to the holders
of Preference Shares.
Expenses borne by BNP on behalf of the Company and income
received in order to pay Company expenses are included in the
Statement of Comprehensive Income as the directors are of the
opinion that this more accurately reflects the position of the
Company. Additionally the cash at bank relating to the excess of
income received from BNP over expenses paid out has been allocated
to the holders of Management shares in the Statement of Financial
Position. The expenses are detailed in Note 7 Related Party
Transactions.
On 27 June 2013 the Company entered into an Expenses Agreement
with BNP. The Agreement states that there is a surplus of
GBP250,000 in the expense accounts into which BNP provide funding
for expenses borne by the company. This surplus was moved in to a
separate bank account and is included in cash and cash equivalents
on the Statement of Financial Position. Under the terms of the
Agreement this surplus is not to be returned to BNP but made
available to the Company to be used by the Board to satisfy any
liability incurred by the Board in acting on behalf of the Company
or any of its cells. For this purpose, BNP have requested that the
surplus be capitalised to the two ordinary shares of no par value
issued by the Company which are held by JTC (Guernsey) Limited for
the benefit of BNP Paribas Arbitrage SNC. The balance of the
expense accounts are to be monitored going forward and any
subsequent surplus balances are to be returned to BNP.
(c) Functional and presentation currency
Items included in the Company's Financial Statements are
measured using the currency of the primary economic environment in
which it operates (the "functional currency"). This is pounds
sterling, which reflects the Company's primary activity of
investing in sterling-denominated derivative transactions. The
Company has adopted pounds sterling as its presentation currency as
the Company is listed on the Channel Islands Securities Exchange
Authority Limited and the majority of its registered shareholders
are domiciled in the United Kingdom.
(d) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
period-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the Statement
of Comprehensive Income. Translation differences on non-monetary
financial assets and liabilities such as equities at fair value
through profit or loss are recognised in the Statement of
Comprehensive Income as unrealised foreign exchange gains /
(losses).
In previous periods the unrealised foreign exchange gains /
(losses) were presented as Other Comprehensive Income. However,
this is not in line with the requirements of the IAS1: Presentation
of Financial Statements. Therefore, in the current year unrealised
gains / (losses) on foreign exchange have been included in the
increase / (decrease) in net assets attributable to Preference
Share Holders from operations. The unrealised gains / (losses) on
foreign exchange in the period to 30 April 2012 have not been
reclassified as the value is immaterial to the Financial
Statements.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements
for the period ended 30 April 2014
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(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 GBP600. Dividend income is
recognised on a gross basis, including withholding tax, if any.
Withholding tax is recognised through the Statement of
Comprehensive Income.
(f) Expenses
All expenses are accounted for on an accruals basis 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.
(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. This includes a
balance of GBP250,000 which is held in trust for use by the Board
as set out in 1(b) above.
(h) Income recognition
Dividend income is recognised in the Statement of Comprehensive
Income when the relevant cell's right to receive the dividend has
been established, normally being the ex-dividend date. Dividend
income is recognised on a gross basis, including withholding tax,
if any.
Income received from BNP is recognised in the Statement of
Comprehensive on an accruals basis.
(i) Financial assets at fair value through profit or loss
All investments and derivative financial instruments are
classified as "at fair value through profit or loss". Investments
are initially recognised at cost, being the fair value of the
consideration given. After initial recognition, investments are
measured at fair value, with unrealised gains and losses on
investments and changes in fair value investments being recognised
in the Statement of Comprehensive Income.
The Company seeks to achieve the investment objective of each
cell by entering into a contract with BNP Paribas (referred to
herein as the "Counterparty").
Each contract is substantially in the form of an ISDA Master
Agreement as supplemented by a transaction confirmation. In respect
of each contract, within BNP Paribas Group (the "Group"), the Risk
department is responsible for the day-to-day risk monitoring and
contributes to the control of the economic fair value of the
Group's trading books. This risk function department is separate
and independent from the Trading and Sales departments.
This department is also responsible for the validation and
control of any valuation models.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements
for the period ended 30 April 2014 (continued)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(j) (Loss) / gain per share
The (loss) / gain per share is based on the (decrease) /
increase in net assets attributable to Preference shareholders from
operations of the Company for the period. A loss of GBP2,902,904
(Apr 2013: GBP4,014,184) and on 254,317,923 (Apr 2013: 358,827,307)
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 are
sales of financial assets that require delivery of the asset within
the time frame generally established by the regulation or
convention in the market place.
(l) Distributions payable to holders of redeemable shares
Proposed distributions to holders of redeemable shares are
recognised in the Statement of Comprehensive Income when they are
declared by the Board of directors. The distribution on these
redeemable shares is recognised in the Statement of Comprehensive
income as a finance cost.
(m) Going Concern
On 15 August 2014 the Company received the written consent of
the requisite majority of shareholders in each of the existing
cells to effect the early termination of all of the existing cells.
On 22 August 2014 a Written Special Resolution was passed by the
sole member of the Company to effect the termination of all the
existing cells. The redemption dates of all cells have therefore
been brought forward to 15 September 2014.
Accordingly, these financial statements have been prepared in
accordance with the non-going concern basis. Further details of
this have been provided in Note 1(a) above.
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:
Harewood Structured Investment PCC Limited
Notes to the Financial Statements
for the period ended 30 April 2014 (continued)
2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
(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. At
each interim and year end date, an independent check of the
valuations of the investments is performed by Future Value
Consultants Limited (the "Calculation Agent"), an independent third
party. The Calculation Agent uses a variety of methods and makes
assumptions that are based on market conditions existing at the
reporting date. Valuation techniques used include the use of
comparable recent arm's length transactions (where available),
discounted cash flow analysis, option pricing models and other
valuation techniques commonly used by market participants. These
techniques are periodically reviewed by experienced personnel at
the Calculation Agent.
Models use observable data, to the extent practicable. However,
areas such as credit risk (both own and counterparty),
volatilities, capital risk and correlations require management to
make estimates. Changes in assumptions about these factors could
materially affect the reported fair value of financial
instruments.
3 NET ASSETS ATTRIBUTABLE TO HOLDERS OF PREFERENCE SHARES
Period to Year to
30 Apr 2014 31 Oct 2013
Total Total
GBP GBP
Opening portfolio cost 248,446,144 447,141,821
Opening unrealised loss on valuation (5,376,231) (100,502,668)
Opening exchange gains on currency
balances 149,133 6,299,484
Opening valuation 243,219,046 352,938,637
Proceeds from sales of financial assets (24,041,302) (110,684,599)
Unrealised gain for the period / year 4,624,542 95,126,437
Realised loss on investments for the
period / year (6,083,698) (88,011,078)
Unrealised foreign exchange losses
on currency balances (1,443,748) (6,150,351)
Closing valuation 216,274,840 243,219,046
============= ==============
Closing portfolio cost 218,321,144 248,446,144
Closing unrealised loss (751,689) (5,376,231)
Closing exchange gains on currency
balances (1,294,615) 149,133
Closing valuation 216,274,840 243,219,046
============= ==============
Harewood Structured Investment PCC Limited
Notes to the Financial Statements
for the period ended 30 April 2014 (continued)
3 NET ASSETS ATTRIBUTABLE TO HOLDERS OF PREFERENCE SHARES (continued)
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.
Valuation techniques
The value of the Shares of the Company's Cells is calculated in
accordance with the provisions of each Summary and Securities Note
as approved by the Directors. The valuation methodology follows
certain criteria, amongst which:
-- the initial value of the Cell
-- the performance of the Index, the premium and exercise payoff
of the overwritten Call Options, and foreign exchange level (if
applicable) since inception
-- the volatility, expected yield and repo of the Index, and prevailing relevant interest rate
-- the remaining maturity and exercise prices of the overwritten Call Options
-- the dividends and interest receivables or paid by the Cell
The valuation of the Cells at the period end date may differ
significantly from the eventual proceeds realised upon maturity of
the Cells. The movement on unrealised gains/losses resulting from
valuing these investments is reflected in the Statement of
Comprehensive Income.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements
for the period ended 30 April 2014 (continued)
4 SHARE CAPITAL
Authorised SHARES GBP
Preference shares of no par value
each Unlimited -
Management shares of no par value
each 2 -
---------- ----
2 -
========== ====
Shares issued
Allotted, called-up as at Shares issued
and fully paid 1 November as at 30 April
Preference Shares 2013 Shares Redeemed Shares Issued 2014
US HI A Cell - - - -
US HI B Cell - - - -
Agrinvest Cell - - - -
EPR Cell 30,125,000 (30,125,000)* - -
EBM3 Cell 49,587,600 - - 49,587,600
EI Cell 39,999,346 - - 39,999,346
UK EI Cell 49,015,722 - - 49,015,722
COMAC Cell - - - -
USEI A Cell 48,500,080 - - 48,500,080
USEI B Cell 45,079,125 - - 45,079,125
Management Shares 2 - 2
-------------- ------------------ ---------------- ----------------
TOTAL 262,306,875 (30,125,000) - 232,181,875
============== ================== ================ ================
*See Note 8
Harewood Structured Investment PCC Limited
Notes to the Financial Statements
for the period ended 30 April 2014 (continued)
4 SHARE CAPITAL (continued)
Shares issued
Allotted, called-up as at Shares issued
and fully paid 1 November as at 31 October
Preference Shares 2012 Shares Redeemed Shares Issued 2013
US HI A Cell 92,469,987 (92,469,987) - -
US HI B Cell 58,337,229 (58,337,229) - -
Agrinvest Cell 47,225,896 (47,225,896) - -
EPR Cell 30,125,000 - - 30,125,000
EBM3 Cell 49,587,600 - - 49,587,600
EI Cell 39,999,346 - - 39,999,346
UK EI Cell 49,015,722 - - 49,015,722
COMAC Cell 25,526,009 (25,526,009) - -
USEI A Cell 48,500,080 - - 48,500,080
USEI B Cell 45,079,125 - - 45,079,125
Management Shares 2 - - 2
-------------- ------------------ ---------------- ------------------
TOTAL 485,865,996 (223,559,121) - 262,306,875
============== ================== ================ ==================
Holders of Management Shares shall not be entitled to receive
and shall not participate in any dividends or other distributions
out of the profits of the Company. On winding up Management
shareholders are only entitled to an amount up to a maximum being
the Net Assets Attributable to Holders of Management Shares and
have no right to the Net Assets Attributable to the Holders of
Preference Shares. Holders of Management Shares shall be entitled
to receive notice of and to attend and vote at general meetings.
The Management Shares are not redeemable and comprise the Company's
non-cellular assets. The Holders of Preference Shares are not
entitled to receive distributions based on non-cellular assets.
Holders of BNP Paribas Energy - base Metals (3) Preference
Shares ("Cell Shares") shall not be entitled to receive and shall
not participate in any dividends or other distributions of the
Company.
Holders of 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 shall be entitled to receive any dividends or
other distributions out of the profits of their respective cells
only, but not out of the non-cellular assets of the Company.
On their respective redemption dates the holders of Cell Shares
shall be entitled to receive per Cell Share held an amount equal to
the net asset value per Cell Share. As disclosed in the
Supplemental Memorandum or summary and Securities Note for each
cell, the Cell Shares of each cell will be compulsorily redeemed by
the Company on their respective redemption dates.
Holders of the Cell Shares shall not be entitled to receive
notice of or to attend or vote at any general meeting of the
Company.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements
for the period ended 30 April 2014 (continued)
5 SHARE PREMIUM
Share premium Share premium
Share Premium as at 1 November as at
Preference Shares 2013 Shares Redeemed Shares Issued 30 April 2014
GBP GBP GBP GBP
USHI A Cell - - - -
USHI B Cell - - - -
Agrinvest Cell - - - -
EPR Cell 30,125,000 (30,125,000)* - -
EBM3 Cell 49,292,100 - - 49,292,100
EI Cell 42,548,346 - - 42,548,346
UK EI Cell 49,015,722 - - 49,015,722
COMAC Cell - - - -
USEI A Cell 48,500,080 - - 48,500,080
USEI B Cell 28,964,898 - - 28,964,898
TOTAL 248,446,146 (30,125,000) - 218,321,146
================== ================== ================ ===============
*See Note 8
Share premium
Share premium as at
Share Premium as at 1 November 31 October
Preference Shares 2012 Shares Redeemed Shares Issued 2013
GBP GBP GBP GBP
US HI A Cell 92,942,487 (92,942,487) - -
US HI B Cell 30,710,285 (30,710,285) - -
Agrinvest Cell 49,516,896 (49,516,896) - -
EPR Cell 30,125,000 - - 30,125,000
EBM3 Cell 49,292,100 - - 49,292,100
EI Cell 42,548,346 - - 42,548,346
UK EI Cell 49,015,722 - - 49,015,722
COMAC Cell 25,526,009 (25,526,009) - -
USEI A Cell 48,500,080 - - 48,500,080
USEI B Cell 28,964,898 - - 28,964,898
TOTAL 447,141,823 (198,695,677) - 248,446,146
================== ================== ================ ==============
Harewood Structured Investment PCC Limited
Notes to the Financial Statements
for the period ended 30 April 2014 (continued)
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 holds cash in several bank accounts, the returns on
which are subject to fluctuations in market interest rates. The
exposure on cash balances held is not considered to have a material
impact, so no sensitivity analysis has been performed.
Changes in interest rates may affect the performance of the swap
contracts in which each cell is invested. The Board and the
Investment Manager monitor, but cannot control, interest rate
risk.
(b) Market Price Risk
Market price risk arises mainly from uncertainty about future
prices of financial instruments held. It represents the potential
loss the Company might suffer through holding market positions in
the face of price movements. The Investment Manager actively
monitors market prices and reports to the Board as to the
appropriateness of the prices used for valuation purposes. On a
periodic basis independent valuations of the Company's investments
are obtained from the Calculation Agent. A list of investments held
by the Company is shown in the Schedule of Investments on pages 48
to 49.
The Investment Manager also monitors on a monthly basis the
market price risk of each Cell's underlying financial assets and
liabilities using statistical measures, such as Delta. Delta is the
percentage change in price of a derivative in relation to a 1%
change in the price of the underlying security, index or rate. As
there is no secondary market for the Company's investments, the
Board cannot directly monitor nor control market price risk.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements
for the period ended 30 April 2014 (continued)
6 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(b) Market Price Risk (continued)
Price sensitivity
If market prices as at 30 April 2014 / 31 October 2013 had been
10 per cent higher / lower, and assuming these values were to
remain unchanged through to the end of the life of the cells, with
all other variables held constant, the increase / decrease in net
assets attributable to holders of Cell Shares on the Redemption
Date would have been as stated below, arising due to the increase /
decrease in the fair value of the financial assets at fair value
through profit or loss.
Increase in net assets Decrease in net assets
attributable to holders attributable to holders
of Preference Shares of Preference Shares
Period ended Year ended Period ended Year ended
30 April 2014 31 October 30 April 31 October
2013 2014 2013
Cell GBP GBP GBP GBP
EPR Cell - 2,387,949 - (2,387,949)
EMB3 Cell 4,942,892 4,925,140 (4,942,892) (4,925,140)
UK EI Cell 5,598,364 5,486,911 (5,598,364) (5,486,911)
COMAC Cell 3,078,173 3,178,574 (3,078,173) (3,178,574)
USEI A Cell 4,172,757 4,479,155 (4,172,757) (4,479,155)
USEI B Cell 3,835,297 3,864,177 (3,835,297) (3,864,177)
21,627,483 24,321,906 (21,627,483) (24,321,906)
=============== ============ ============= =============
(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 the Credit Support Deeds entered into between
the Counterparty and the Company acting for and on behalf of each
cell, the Counterparty is required to post collateral in the form
of AAA rated government bonds in favour of the Company acting for
and on behalf of each cell, such collateral being valued on a
weekly basis and, if the value of the collateral is less than the
value calculated as specified below (the "Credit Support Amount"),
the Counterparty will provide additional collateral to increase the
aggregate value to at least the Credit Support Amount. Where there
is an event of default in respect of the Counterparty under the
swap confirmation, the Company will be entitled to enforce against
the Counterparty its security over the collateral.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements
for the period ended 30 April 2014 (continued)
6 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(c) Credit Risk (continued)
Due to the collateral being monitored on a weekly basis (as
detailed above), there is a risk due to timing, that the amount
posted to collateral will be less than the Credit Support
Amount.
The Credit Support Amount is the lesser of (a) 100% of the net
asset value of the relevant cell and (b) the total of the
Applicable Percentage of such net asset value plus 10% of such net
asset value (where the "Applicable Percentage" is calculated so as
to reflect the percentage of shares in the relevant cell held at
the relevant time by shareholders other than BNP Paribas Arbitrage
SNC).
The most significant concentration of credit risk for the
Company is that the Counterparty will be unable to satisfy its
obligations under the relevant contract to repay to the Company any
amount due. The maximum credit risk exposure at the reporting date
is therefore considered to be the total valuation of the
investments at this date, being GBP216,274,840 (Oct 2013:
GBP243,219,046).
The Investment Manager and Administrator monitor collateral
posted on a weekly basis and report to the Board quarterly on the
Counterparty's compliance with the relevant Credit Support Deeds.
The Investment Manager and Administrator have also undertaken to
report to the Board immediately if there is a breach of compliance
with the terms of the relevant Credit Support Deeds.
The Board monitors, but cannot control, credit risk.
(d) Liquidity Risk
Liquidity risk is the risk that the Company will encounter
difficulty in realising assets or otherwise raising funds to meet
financial commitments and obligations to shareholders on redemption
of their shares of a cell. The only financial commitments of the
Company are to meet ongoing expenses and these are met out of
monies provided to the Company's Administrator by BNP.
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.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2014
6 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(d) Liquidity Risk (continued)
The table below details the residual contractual maturities of
the financial liabilities:
3 - 12 Over 1
1 - 3 months months year Total
GBP GBP GBP GBP
As at 30 April 2014
Net assets attributable
to holders of Management
Shares 234,817 - - 234,817
Net assets attributable
to holders of Preference
Shares 216,274,840 - - 216,274,840
-------------- ------------- -------------- ------------
49,663,737 - - 216,509,657
As at 31 October 2013
Net assets attributable
to holders of Management
Shares 263,128 - - 263,128
Net assets attributable
to holders of Preference
Shares - 73,130,881 170,088,165 243,219,046
-------------- ------------- -------------- ------------
263,128 73,130,881 170,088,165 243,482,174
The table below details the expected liquidity of assets
held:
3 - 12 Over 1
1 - 3 months months year Total
GBP GBP GBP GBP
As at 30 April 2014
Net assets 216,509,657 - - 216,509,657
As at 31 October 2013
Net assets 263,128 73,130,881 170,088,165 243,482,174
-------------- ------------- -------------- ------------
The Board monitors, but cannot actively control, liquidity
risk.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements
for the period ended 30 April 2014 (continued)
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 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 2014 31 October
2013
GBP GBP
Assets
US Dollar 31,449,987 32,474,343
Euro - 7,715
-------------- -----------
31,449,987 32,482,058
Liabilities
US Dollar (621,219) (619,447)
-------------- -----------
Net foreign currency assets 30,828,768 31,862,611
============== ===========
As subscription, redemption and dividend payments in respect of
all cells are made in the same functional currency, none of the
cells are exposed to foreign exchange risk.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements
for the period ended 30 April 2014 (continued)
6 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(g) Valuation
(i) The notional amounts of the derivative instruments are as
follows:
Energy - Base Metals (3) GBP 49,587,600
Enhanced Income GBP 39,999,346
UK Enhanced Income GBP 49,015,722
US Enhanced Income - Class A GBP 48,500,080
US Enhanced Income - Class B USD 45,079,125
(ii) The maturity dates of the derivative instruments are as
follows:
Energy - Base Metals (3) 12 June 2014
US Enhanced Income - Class A 16 July 2029*
US Enhanced Income - Class B 16 July 2029*
UK Enhanced Income 24 September
2029*
Enhanced Income 30 March 2108*
*The maturity date of the existing cells at the date of signing
has been brought forward to 15 September 2014 following the
approval by the requisite majority of shareholders of a proposal
for early redemption put forward by a majority shareholder of each
existing cell.
(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
for the period ended 30 April 2014 (continued)
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 Applicable Percentage (as set out in note
6(c)) or other circumstances constituting an event of default with
respect to the Counterparty occur, the Company will be entitled to
enforce its security over the collateral as well as to pursue any
other remedies it may have against the Counterparty. In such
circumstances, the Company will re-invest the proceeds of
realisation of the collateral or distribute the same to
Shareholders.
(h) Periodic Returns on Principal and Timings of Payments
Enhanced Income
Under the terms of the Swap Confirmation between the
Counterparty and the Company acting for and on behalf of the
Enhanced Income cell, the Counterparty will pay to the Company for
the account of the Enhanced Income cell quarterly a Sterling amount
equal to 2.00% of the notional amount of the Swap Confirmation,
equivalent to 2.00 pence per Class A Sterling Hedged Enhanced
Income Preference Share, provided that if the underlying portfolio
net asset value reaches 110% of the initial underlying portfolio
net asset value (equivalent to a net asset value of 110 pence per
share), future payments will increase to 2.20% of the notional
amount of the Swap Confirmation, equivalent to 2.20 pence per Class
A Sterling Hedged Enhanced Income Preference Share. For each
subsequent 5 per cent increase in the underlying portfolio net
asset value, subsequent quarterly payments will increase by 0.1%,
equivalent to 0.1 pence per Class A Sterling Hedged Enhanced Income
Preference Share.
Where the underlying portfolio net asset value subsequently
decreases after having increased to 110% or more of the initial
underlying portfolio net asset value, but has not decreased to less
than 100% of the initial underlying portfolio net asset value,
subsequent quarterly payments will reduce to 2.00 pence per Class A
Sterling Hedged Enhanced Income Preference Share. If the underlying
portfolio net asset value has fallen below 100 per cent and below a
lower percentage which is an integral multiple of 5 per cent i.e.
95%, 90%, 85% (down to 5%) of the initial underlying portfolio net
asset value, subsequent dividend payments will be adjusted to be
the product of 2.00% and the relevant percentage threshold level
and 100 pence per Class A Sterling Hedged Enhanced Income
Preference Share.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements
for the period ended 30 April 2014 (continued)
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
for the period ended 30 April 2014 (continued)
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
for the period ended 30 April 2014 (continued)
6 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(i) Collateral Arrangements (continued)
The collateral held against all derivative instruments as at 30
April 2014 is detailed below:
Cell Period ended Year ended
30 April 2014 31 October
2013
GBP GBP
EPR - 12,096,642
EBM (3) 11,645,796 11,511,139
US EI 21,989,390 22,821,910
UK EI 7,986,020 8,969,878
EI 9,662,156 9,353,130
-------------- -----------
(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 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 Registrars Limited is the Registrar of the Company. John R
Le Prevost is a director of Anson Registrars Limited. During the
period under review, the Registrar charged fees of GBP7,580 (Apr
2013: GBP12,302) in respect of registration services on behalf of
the Company of which GBP1,014 (Oct 2013: GBP872) was outstanding at
the period end.
Anson Group Limited ("AGL") is the parent company of 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 GBP169,346 (Apr 2013: GBP175,741), of which GBPnil (Oct
2013: GBP19,308) was outstanding at the period end.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements
for the period ended 30 April 2014 (continued)
7 RELATED PARTY TRANSACTIONS (continued)
As described elsewhere in the Financial Statements, BNP, 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
the Group and its subsidiaries held the following shares in
issue:
As at As at
30 Apr 2014 % of total 31 Oct
2013 % of total
Shares shares Shares shares
EPR Cell - 0.00% 18,895,854 62.72%
EBM3 Cell 44,015,668 88.76% 43,933,610 88.60%
EI Cell 35,039,125 87.60% 34,967,125 87.42%
USEI A Cell 42,685,523 88.01% 42,487,523 87.60%
USEI B Cell 40,031,227 88.80% 36,594,677 81.18%
UK EI Cell 45,585,395 93.00% 44,712,395 91.22%
As detailed in Note 8, on 20 March 2014 BNP Paribas Enhanced
Property Recovery Shares were compulsorily redeemed and BNP Paribas
Enhanced Property Recovery was subsequently dissolved.
ONGOING EXPENSES Period ended Period ended
30 Apr 2014 30 Apr 2013
TOTAL TOTAL
GBP GBP
Administration fees 51,327 76,792
Directors' remuneration 15,000 15,000
Registration fees 7,580 12,302
Custody fees 19,258 31,451
Asset management fees 169,346 175,741
Tax fees (8,200) 21,650
Audit fees 17,134 41,198
Annual fees 6,915 10,565
Foreign exchange differences 3,134 (6,327)
Other operating expenses 8,635 6,309
------------- -------------
290,129 384,681
============= =============
All expenses are accounted for on an accruals basis through the
Statement of Financial Position and are borne by BNP Paribas
SA.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements
for the period ended 30 April 2014 (continued)
8 REDEMPTION OF SHARES
During the period, Enhanced Property Recovery Cell reached its
redemption date. Therefore all Enhanced Property Recovery Cell
Preferences Shares in issue were compulsorily redeemed.
The redemption value per Enhanced Property Recovery Preference
Share was 79.81 pence, resulting in redemption proceeds and
distributions to the holders of Enhanced Property Recovery
Preference Shares GBP24,041,302. The net realised loss on the
redemption was GBP6,083,698.
9 ULTIMATE CONTROLLING PARTY
The ultimate controlling party is BNP Paribas Arbitrage SNC, as
holder of the two Ordinary Shares in issue.
10 SUBSEQUENT EVENTS
On 12 June 2014 all Energy - Base Metals (3) Cell Preference
Shares in issue were compulsorily redeemed.
The redemption value per Energy - Base Metals (3) Preference
Share was 100.00 pence, resulting in redemption proceeds and
distributions to the holders of Energy - Base Metals (3) Cell
Preference Shares of GBP49,577,600. The net realised gain on the
redemption was GBP295,500.
The Board received a request from a majority shareholder to
propose the early redemption of the preference shares in all the
existing cells as at the date of signing, being Enhanced Income
Cell, UK Enhanced Income Cell, US Enhanced Income Cell - Class A
and US Enhanced Income Cell - Class B.
On 9 July 2014, the Board considered the proposal and resolved
to contact shareholders setting out the proposal for early
redemption. On 6 August 2014 letters had been sent out to all
shareholders detailing the proposal and seeking their written
consent. The shareholders have been advised in the letter that the
majority shareholder who holds more than 75% of the shares in each
cell intends to approve the proposed early redemption and as such
is sufficient to approve the proposal.
On 15 August 2014 the Company received the written consent of
the requisite majority of shareholders in each of the existing
cells. On 22 August 2014 a Written Special Resolution was passed by
the sole member of the Company to effect the termination of all the
existing cells. The redemption dates of all cells have therefore
been brought forward to 15 September 2014.
Harewood Structured Investment PCC Limited
SCHEDULE OF INVESTMENTS
as at 30 April 2014
As at 30 April 2014
NOMINAL VALUATION TOTAL NET
ASSETS
GBP %
Enhanced Property Recovery
BNP Paribas Index Derivative
Contract GBP 30,125,000 - 0.00%
Energy - Base Metals (3)
BNP Paribas Index Derivative
Contract GBP 49,587,600 49,428,920 22.85%
Enhanced Income
BNP Paribas Index Derivative
Contract GBP 39,999,346 38,352,973 17.73%
UK Enhanced Income Cell
BNP Paribas Index Derivative
Contract GBP 49,015,722 41,727,574 19.29%
US Enhanced Income Cell -
Class A
Sterling Hedged
BNP Paribas Index Derivative
Contract GBP 48,500,080 55,983,642 25.89%
US Enhanced Income Cell -
Class B
US Dollar Unhedged
BNP Paribas Index Derivative
Contract USD 45,079,125 33,781,731 14.24%
------------- --------------
TOTAL 216,274,840 100.00%
============= ==============
Harewood Structured Investment PCC Limited
SCHEDULE OF INVESTMENTS
as at 31 October 2013
As at 31 October 2013
NOMINAL VALUATION TOTAL NET
ASSETS
GBP %
Enhanced Property Recovery
BNP Paribas Index Derivative
Contract GBP 30,125,000 23,879,485 9.82%
Energy - Base Metals (3)
BNP Paribas Index Derivative
Contract GBP 49,587,600 49,251,396 20.25%
Enhanced Income Cell
BNP Paribas Index Derivative
Contract GBP 39,999,346 38,641,748 15.89%
UK Enhanced Income Cell
BNP Paribas Index Derivative
Contract GBP 49,015,722 44,791,547 18.42%
US Enhanced Income Cell -
Class A Sterling Hedged
BNP Paribas Index Derivative
Contract GBP 48,500,080 54,869,111 22.55%
US Enhanced Income Cell -
Class B US Dollar Unhedged
BNP Paribas Index Derivative
Contract USD 45,079,125 31,785,739 13.07%
TOTAL 243,219,046 100.00%
============= ================
Harewood Structured Investment PCC Limited
DIRECTORS AND SERVICE PROVIDERS
Directors Investment Manager
Francois-Xavier Foucault THEAM
John Reginald Le Prevost 1 Boulevard Haussmann
Trevor Hunt 75009-Paris
Youri Siegel France
---------------------------------- -----------------------------------
Administrator and Secretary Solicitors to the Company (English
JTC (Guernsey) Limited Law)
PO Box 156 Clifford Chance LLP
Frances House, Sir William 10 Upper Bank Street
Place, London E14 5JJ
St. Peter Port England
Guernsey GY1 4EU
---------------------------------- -----------------------------------
Independent Auditors Advocates to the Company (Guernsey
PricewaterhouseCoopers CI LLP Law)
Royal Bank Place Mourant Ozannes
1 Glategny Esplanade 1 Le Marchant Street
St. Peter Port St. Peter Port
Guernsey GY1 4ND Guernsey GY1 4HP
---------------------------------- -----------------------------------
Custodian Registrar, Transfer Agent &
BNP Paribas Securities Services, Paying Agent
Luxembourg Branch Anson Registrars Limited
33, Rue de Gasperich Anson House
Howald-Hesperange Havilland Street
L-2085 Luxembourg St Peter Port
Guernsey GY1 2QE
---------------------------------- -----------------------------------
Investment Counterparty Registered Office
BNP Paribas PO Box 156
10 Harewood Avenue Frances House
London NW1 6AA Sir William Place
England St Peter Port
Guernsey GY1 4EU
---------------------------------- -----------------------------------
Shares of all cells are listed on the Channel Islands Securities
Exchange Authority Limited and may be dealt in directly through a
stockbroker or professional adviser acting on an investor's behalf.
The buying and selling of such shares may be settled through CREST.
Announcements to holders of such shares and daily market closing
prices are available on Bloomberg, Reuters and the Channel Islands
Securities Exchange Authority Limited's web-site.
Further information relating to such shares is available from
BNP Paribas, telephone 44 (0)207 595 8442 or e-mail
HAREWOOD_SOLUTIONS@bnpparibas.com, and from JTC (Guernsey) Limited,
telephone +44 (0)1481 702400 or e-mail:
fundservicesgsy@jtcgroup.com.
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
END
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