TIDMEHPR TIDMEBMC TIDMEIF TIDMUKE
RNS Number : 9391H
Harewood Structured Investment PCC
26 June 2013
Harewood Structured Investment PCC Limited
Half-yearly Financial Report for the
period ended 30 April 2013 (Unaudited)
Harewood Structured Investment PCC Limited
CONTENTS
About the Company 1-8
Investment Objective and Policy 9-14
Net Asset Values 15
Interim Management Report 16-17
Investment Manager's Report 18-25
Statement of Comprehensive Income 26
Statement of Financial Position 27
Statement of Changes in Net Assets Attributable
to Holders of Preference Shares 28
Statement of Cash Flows 29
Notes to the Financial Statements 30-50
Schedule of Investments 51-52
Directors and Service Providers 53
Shareholder Information 54
Harewood Structured Investment PCC Limited
ABOUT THE COMPANY
Harewood Structured Investment PCC Limited (the "Company"), is a
Guernsey incorporated, closed-ended protected cell investment
company. Upon incorporation, two Ordinary Shares (also referred to
as "Management Shares") were issued for administrative purposes.
The Company commenced business on 18 March 2005 when preference
shares in its first cell were allotted and issued.
On 7 December 2005, 46,613,549 BNP Paribas UK High Income
Preference Shares ("UKHI Shares") of the BNP Paribas UK High Income
cell (the "UKHI Cell") were allotted and issued at a price of
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 UKHI shares was made on 28
September 2006 at a price of 104.00 pence each. On 4 June 2007, a
further 15,000,000 UKHI Shares were allotted and issued at a price
of 109.60 pence each. The UKHI Shares had a defined investment life
to 8 December 2011, whereupon they were compulsorily redeemed.
On 22 March 2006, 27,506,140 BNP Paribas Energy - Base Metals
(2) Preference Shares ("EBM2 Shares") of the BNP Paribas Energy -
Base Metals (2) cell (the "EBM2 Cell") were allotted and issued at
a price of 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.
Harewood Structured Investment PCC Limited
ABOUT THE COMPANY (continued)
On 25 October 2006, 77,469,987 Class A Sterling Hedged US High
Income Preference Shares ("Class A USHI Shares") of the US High
Income cell (the "USHI Cell") were allotted and issued at a price
of 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 had a defined
investment life to 26 November 2012, whereupon they were
compulsorily redeemed.
On 21 June 2007, 37,225,896 BNP Paribas Agrinvest Preference
Shares ("Agrinvest Shares") of the BNP Paribas Agrinvest cell (the
"Agrinvest Cell") were allotted and issued at a price of 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 have a defined investment life to 29 June 2013, whereupon
they will be subject to compulsory redemption.
On 12 March 2008, 30,125,000 Enhanced Property Recovery
Preference Shares (the "EPR Shares") of the Enhanced Property
Recovery cell (the "EPR Cell") were allotted and issued at a price
of GBP1.00 each. The EPR Shares have a defined investment life to
20 March 2014, whereupon they will be subject to compulsory
redemption.
On 4 June 2008, 34,587,600 Energy - Base Metals (3) Preference
Shares ("EBM3 Shares") of the Energy - Base Metals (3) cell (the
"EBM3 Cell") were allotted and issued at a price of 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 have a
defined investment life to 12 June 2014, whereupon they will be
subject to compulsory redemption.
On 18 March 2009, 24,999,346 Class A Sterling Hedged Enhanced
Income Preference Shares ("Class A EIF Shares") of the Enhanced
Income cell (the "EI Cell") were allotted and issued at a price of
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.
Harewood Structured Investment PCC Limited
ABOUT THE COMPANY (continued)
The Class A EIF Shares have a defined investment life to 19
March 2108, whereupon they will be subject to compulsory redemption
on or around 10 May 2108*.
*In accordance with the Summary and Securities Note of the EI
Cell, the redemption date of the Class A EIF Shares will be the
twenty-fourth business day following the relevant record date. As
the maturity date is set so far in advance, and business days for
the year 2108 cannot yet be accurately determined, an approximate
redemption date only is disclosed within this Report.
On 29 May 2009, 25,526,009 Class A Sterling Hedged COMAC
Preference Shares ("COMAC Shares") of the BNP Paribas COMAC cell
(the "COMAC Cell") were allotted and issued at a price of 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
have a defined investment life to 16 July 2029 whereupon they will
be subject to compulsory redemption on or around 1 September
2029**.
**In accordance with the Summary and Securities Note of the USEI
Cell, the redemption date of the Class A USEI Shares and Class B
USEI Shares will be the twenty-fourth business day following the
relevant record date. As the maturity dates are set so far in
advance, and business days for the year 2029 cannot yet be
accurately determined, an approximate redemption date only is
disclosed within this Report.
On 15 July 2009, 48,500,080 Class A Sterling Hedged US Enhanced
Income Preference Shares ("Class A USEI Shares") of the US Enhanced
Income cell (the "USEI Cell") were allotted and issued at a price
of GBP1.00 each. The Class A USEI Shares have a defined
Harewood Structured Investment PCC Limited
ABOUT THE COMPANY (continued)
investment life to 16 July 2029, whereupon they will be subject
to compulsory redemption on or around 1 September 2029**.
On 23 September 2009, 49,015,722 UK Enhanced Income Preference
Shares ("UKEI Shares") of the UK Enhanced Income cell (the "UKEI
Cell") were allotted and issued at an issue price of GBP1.00 each.
The UKEI Shares have a defined investment life to 24 September 2029
whereupon they will be subject to compulsory redemption on or
around 8 November 2029***.
***In accordance with the Summary and Securities Note of the
UKEI Cell, the redemption date of the UKEI Shares will be the
twenty-fourth business day after the final record date. As the
maturity date is set so far in advance, and business days for the
year 2029 cannot yet be accurately determined, an approximate
redemption date only is disclosed within this Report.
The Company has an unlimited life but the shares of each cell
have a defined investment term as set out above. Holders of the
Ordinary Shares have the right to receive notice of and to vote at
all meetings of shareholders.
All shares in issue are listed on the Channel Islands Stock
Exchange (the "CISX") with the exception of the two Ordinary Shares
in issue which are not listed.
The Company is managed by its Board of directors who have
appointed THEAM of Paris, France as the Company's external
Investment Manager of all existing cells. Administrative and
Secretarial support is provided by Anson Fund Managers Limited in
Guernsey. BNP Paribas SA acts as Distributor and Investment
Counterparty of the Company's cells.
Directors and Principal Advisors
John Le Prevost - Director
John Le Prevost is British and resides in Guernsey. He is a
director and controlling shareholder of Anson Group Limited, the
holding company of Anson Fund Managers Limited, the Company's
Administrator and Secretary, and of Anson Registrars Limited, the
Company's Registrar, Transfer Agent, Paying Agent and Receiving
Agent. Mr Le Prevost
Harewood Structured Investment PCC Limited
ABOUT THE COMPANY (continued)
has over thirty years experience in the investment and offshore
trust industry, during which time he was Managing Director of
County NatWest Investment Management (Channel Islands), Royal Bank
of Canada's mutual fund company in Guernsey and Republic National
Bank of New York's international trust company. He is a trustee of
the Guernsey Sailing Trust, a director of a number of companies
associated with Anson Group Limited's business and, in addition,
serves as a non-executive director on the boards of many listed
investment companies.
Francois-Xavier Foucault - Director
Francois-Xavier Foucault is French and resides in France. As
well as being a director of the Company, he is currently Head of
Transforming Projects, Quality Control and Regulatory affairs for
BNP Paribas Arbitrage SNC, a 100% affiliate of BNP Paribas SA. He
has also held roles in finance, derivatives and funds at Gen Re
Securities, Guaranty City, AXA Investment Managers and BFT (Credit
Agricole).
Youri Siegel - Director
Youri Siegel is French and resides in the United Kingdom. As
well as being a director of the Company, he is currently the Head
of Solutions Structuring within the Global Equities and Commodities
Derivatives Department of BNP Paribas Arbitrage SNC, a 100%
affiliate of BNP Paribas SA. Mr Siegel has also held similar roles
at Société Generale and JPMorgan.
Trevor Hunt - Director
Trevor Hunt is British and resides in Jersey. He has extensive
experience in the offshore financial services sector. Mr Hunt
worked for HSBC for over 30 years in various senior management
positions within the open-ended and closed-ended offshore funds
industry. Mr Hunt retired from HSBC in 2003 and spent six years as
a director of Capita Financial Administrators (Jersey) Limited and
of other Capita entities before leaving in 2009 to join BNP Paribas
Securities Services in a senior management role. On 30 September
2011 Mr Hunt left BNP Paribas in order to focus on providing
non-executive directorship services to a number of Channel Island
funds and fund management companies. Mr Hunt is regulated by the
Jersey Financial Services Commission and Guernsey Financial
Services Commission for the provision of services as a
non-executive director and is a member of the Jersey
Harewood Structured Investment PCC Limited
ABOUT THE COMPANY (continued)
Association of Directors and Officers and serves on the
Association of Investment Companies ("AIC") Offshore Funds
Committee.
BNP Paribas SA - Investment Counterparty and Distributor
The Investment Counterparty and Distributor, in respect of all
the cells of the Company, is BNP Paribas SA. The duty of the
Investment Counterparty, in respect of each individual cell, is
that of the issuer of debt securities or other financial
instruments or the provider of a derivative contract or other
financial instrument. The duties of the Distributor include, inter
alia, the preparation of literature to promote the Company and
relevant cell within the United Kingdom ("UK") and to ensure it
complies with the applicable UK requirements and other applicable
laws and regulatory requirements, promoting within the UK
investment in the shares of the Company and researching, evaluating
and identifying marketing opportunities for promoting investments
in the shares of the Company.
BNP Paribas SA is a company in the BNP Paribas Group (the
"Group"). As of 15 May 2013 the Group had an equity market
capitalisation of EUR55.9 billion (source: Reuters). The Group is a
leading European provider of corporate and investment banking
products and services and a leading provider of private banking and
asset management products and services throughout the world. It
provides retail banking and financial services to over 20 million
individual customers throughout the world, in particular in Europe
and the western United States of America.
The Group has offices in more than 85 countries. At 31 December
2012, the Group had audited consolidated assets of EUR1,907.29
billion and audited shareholders' equity (Group share including
income for the 2012 fiscal year) of EUR85.89 billion. Audited net
income, before taxes, non-recurring items and amortization of
goodwill, for the year ended 31 December 2012 was EUR10.37 billion.
Audited net income, Group share, for the year ended 31 December
2012 was EUR6.55 billion.
Harewood Structured Investment PCC Limited
ABOUT THE COMPANY (continued)
THEAM - Investment Manager
The Investment Manager in respect of all cells of the Company is
THEAM, a member of the BNP Paribas Group. As a result of a joint
project between BNP Paribas CIB and BNP Paribas Investment
Partners, combining the Sigma Teams from BNP Asset Management with
Harewood Asset Management SAS, Harewood Asset Management SAS was
renamed THEAM on 31 March 2011. The role of the Investment Manager
includes, inter alia, the making of investment decisions on behalf
of the Company in respect of the assets of the relevant cell and
monitoring the investments which are attributable to that cell. The
Investment Manager is organised as a French Société Actions
Simplifiée, which is a form of limited liability company with
simplified legal obligations. The purpose of the Investment Manager
is the creation and management of investment funds on behalf of
their investors. The Investment Manager may also provide investment
advisory services. The Investment Manager is a wholly owned
subsidiary of BNP Paribas Investment Partners. The Investment
Manager is regulated by the Autorité des marchés financiers under
French law. As of 31 March 2013, THEAM was responsible for (or
mandated for) the investment of EUR41.3 billion over 814 funds.
BNP Paribas Securities Services, Luxembourg Branch -
Custodian
BNP Paribas Securities Services, Luxembourg Branch have been
appointed by the Company as custodian of the assets of the Company.
BNP Paribas Securities Services is a company in the BNP Paribas
Group. The Custodian will, amongst carrying out other duties, be
responsible for holding assets for the Company and presenting the
same for redemption and receiving the proceeds of such redemptions
for and on behalf of the Company for the account of the relevant
cell for onward payment to shareholders upon applicable redemption.
The Custodian also holds custody over the collateral accounts of
each cell.
The Custodian is the Luxembourg Branch of BNP Paribas Securities
Services, a fully licensed bank incorporated under French law as a
société anonyme (public limited company). BNP Paribas Securities
Services, Luxembourg Branch was created on 28 March 2002 and
registered with the Luxembourg Trade and Companies' register under
the number
Harewood Structured Investment PCC Limited
ABOUT THE COMPANY (continued)
of B86.862. As a branch of a French bank, BNP Paribas Securities
Services, Luxembourg Branch is supervised by the Comité des
Etablissements de Crédit et des Enterprises d'Investissement (which
depends on the French Central Bank, the Banque de France). It has
also been authorised by the Commission de Surveillance du Secteur
Financier, the Luxembourg Commission for the Supervision of the
Financial Sector to act as a credit institution under the terms of
article 30 of the Luxembourg law of 5 April 1993 on the Financial
Sector, as amended from time to time.
Harewood Structured Investment PCC Limited
INVESTMENT OBJECTIVE AND POLICY
US High Income Cell
The investment objective of the Company for the USHI Cell in
respect of the Class A USHI Shares and the Class B USHI Shares,
which were issued on 25 October 2006, was to provide shareholders
with a stable stream of quarterly dividend distributions based on
the dividend income of a notional portfolio of shares selected from
the S&P 100 Index, supplemented by premiums for notional call
options written on those shares.
In addition, a purchase of portfolio insurance in the form of a
put option linked to the S&P 100 Index, with a term and
maturity matching the term of the Class A USHI Shares and Class B
USHI Shares, aimed to reduce the risk of capital loss.
In accordance with the Company's investment objective for the
USHI Cell, the gross proceeds at launch, together with the proceeds
raised in the subsequent issue of further Class A USHI Shares and
Class B USHI Shares, were invested into an Index Derivative
Contract (the "USHI Contract") with BNP Paribas, the Investment
Counterparty. Under the terms of the USHI Contract, the Company, on
behalf of the USHI Cell, was to receive on each dividend payment
date an amount equal to 1.875 pence or cents per Class A USHI Share
or Class B USHI Share respectively, which was applied by the
Company in funding the payment of dividends to shareholders, and,
at redemption, an amount equal to the net asset value of the
underlying portfolio.
In accordance with their defined investment life, all Class A
USHI Shares and Class B USHI Shares were compulsorily redeemed on
26 November 2012.
BNP Paribas Agrinvest Preference Cell
The investment objective of the Company for the Agrinvest Cell
in respect of the Agrinvest Shares is to provide shareholders with
the opportunity to participate in the performance of
exchange-traded commodities futures comprised in the DCI(R)
Agriculture BNP Paribas Enhanced Excess Return Index (the "EER
Index"). The EER Index is designed to provide a broad yet liquid
representation of large, mid and small commodity futures inside the
Organisation for Economic Cooperation and Development ("OECD"). The
EER Index consists of 23 components within the agriculture sector.
The EER Index is also subject to a
Harewood Structured Investment PCC Limited
INVESTMENT OBJECTIVE AND POLICY (continued)
forward curve roll optimisation process. The roll optimisation
process is achieved via an algorithm which is designed to select
the optimum contracts on which the EER Index will roll every month.
Further details of the roll optimisation process and algorithm
applied are contained within the Summary and Securities Note for
the Agrinvest Cell.
In accordance with the Company's investment objective for the
Agrinvest Cell, the net proceeds at launch were invested into an
Index Derivative Contract (the "Agrinvest Contract") with BNP
Paribas, the Investment Counterparty. Under the terms of the
Agrinvest Contract the Company, on behalf of the Agrinvest Cell, is
to receive, at redemption, an amount equalling the funds available
for payment of the investment return.
Full details of the calculation of the investment return, the
Agrinvest Contract and collateral arrangements in favour of the
Company for the account of the Agrinvest Cell are disclosed in the
Agrinvest Cell's Summary and Securities Note, a copy of which is
available from the Company's Administrator or Distributor upon
request.
Enhanced Property Recovery Cell
The investment objective of the Company for the EPR Cell in
respect of the EPR Shares is to provide shareholders with the
opportunity to participate in the performance of shares traded on
various European stock exchanges through the FTSE EPRA Europe Real
Estate Index (the "EPRA Index"). The EPRA Index is an index
designed to track the performance of listed real estate companies
in Europe. The Final Redemption Amount will be determined
principally by reference to two values - the first (defined as the
"Initial Index Level") being the level of the EPRA Index determined
on 13 March 2008, the second (defined as the "Final Index Level")
being the arithmetic average of the levels of the EPRA Index on 13
monthly averaging dates from 13 March 2013 to the Maturity Date
inclusive.
In accordance with the Company's investment objective for the
EPR Cell, the net proceeds at launch were invested into an Index
Derivative Contract (the "EPR Contract") with BNP Paribas, the
Investment Counterparty. Under the terms of the EPR Contract the
Company,
Harewood Structured Investment PCC Limited
INVESTMENT OBJECTIVE AND POLICY (continued)
on behalf of the EPR Cell, is to receive, at redemption an
amount equalling the funds available for payment of the investment
return.
Full details of the calculation of the investment return, the
EPR Contract and collateral arrangements in favour of the Company
for the account of the EPR Cell are disclosed inthe EPR Cell's
Summary and Securities Note, a copy of which is available from the
Company's Administrator or Distributor upon request.
Energy - Base Metals (3) Cell
The investment objective of the Company for the EBM3 Cell in
respect of the EBM3 Shares is to provide shareholders with a geared
exposure to any increase in the prices of a notional portfolio of
certain energy related and base metal commodities (the "Commodity
Portfolio") over a six-year period. The Commodity Portfolio is a
notional portfolio of commodities comprising 30% crude oil, 20%
aluminium, 20% copper, 15% nickel and 15% zinc.
The investment return of the EBM3 Shares is not subject to the
risk of foreign exchange movements, save to the extent that the
value of the commodities comprised in the notional portfolio, which
are priced in US dollars, may be affected by fluctuations in value
of the US dollar.
In accordance with the Company's investment objective for the
EBM3 Cell, the net proceeds at launch, together with the proceeds
raised in the subsequent issue of further EBM3 Shares, were
invested in an Index Derivative Contract (the "EBM3 Contract") with
BNP Paribas, the Investment Counterparty. Under the terms of the
EBM3 Contract, the Company, on behalf of the EBM3 Cell, is to
receive, at redemption, an amount equalling the funds available for
payment of the investment return.
Full details of the calculation of the investment return, the
EBM3 Contract and collateral arrangements in favour of the Company
for the account of the EBM3 Cell are disclosed inthe EBM3 Cell's
Summary and Securities Note, a copy of which is available from the
Company's Administrator or Distributor upon request.
Harewood Structured Investment PCC Limited
INVESTMENT OBJECTIVE AND POLICY (continued)
Enhanced Income Cell
The investment objective of the Company for the EI Cell in
respect of the Class A EIF Shares is to provide shareholders with a
stable stream of quarterly dividend distributions (with a targeted
dividend yield of approximately 8% per annum, subject to increase
and decrease in certain circumstances) and return on capital. Such
investment objective being intended to be achieved by reference to
an investment strategy linked to the total return performance of
the DJES50 Index and notional short-term call options written on
the DJES50 Index.
In accordance with the Company's investment objective for the EI
Cell, the gross proceeds at launch, together with the proceeds
raised in the subsequent issue of further Class A EIF Shares, were
invested into an Index Derivative Contract (the "EI Contract") with
BNP Paribas, the Investment Counterparty.
Under the terms of the EI Contract, the Company, on behalf of
the EI Cell, is to receive an amount initially equal to 2 pence per
Class A EIF Share on each dividend payment date, which will be
applied by the Company in funding the payment of dividends to
shareholders, and, at redemption, an amount equal to the net asset
value of the underlying portfolio.
Full details of the calculation of the investment return, the EI
Contract and the collateral arrangements are disclosed in the EI
Cell's Summary and Securities Note, a copy of which is available
from the Company's Administrator or Distributor upon request.
BNP Paribas COMAC Cell
The investment objective of the Company for the COMAC Cell in
respect of the COMAC Shares is to provide shareholders with
exposure to the performance of an actively managed long short
arbitrage strategy (the "Strategy") based on a portfolio of 25
commodities through the BNP PARIBAS COMAC Long-Short Total Return
Net of Fees Index (the "COMAC Index").
The COMAC Index is denominated in US Dollars and is designed to
track the performance of an actively managed portfolio of 25
commodities selected from the energy, metals and
Harewood Structured Investment PCC Limited
INVESTMENT OBJECTIVE AND POLICY (continued)
agricultural sectors, the respective weightings of which are
based on an investment strategy of recommendations provided by the
asset managers which, from time to time, provides the scores used
in the determination of the weightings of the different commodities
comprising the COMAC Index and a rules-based proprietary
methodology designed by BNP Paribas (the "Index Methodology"). The
Strategy is also linked to notional currency hedging intended to
provide a level of protection against fluctuations in the Sterling
/ US Dollar exchange rate.
In accordance with the Company's investment objective for the
COMAC Cell, the net proceeds at launch were invested into an Index
Derivative Contract (the "COMAC Contract") with BNP Paribas, the
Investment Counterparty. Under the terms of the COMAC Contract, the
Company, on behalf of the COMAC Cell, is to receive, at redemption,
an amount equalling the funds available for payment of the
investment return.
Full details of the calculation of the investment return, the
COMAC Contract and the collateral arrangements in favour of the
Company, for the account of the COMAC Cell, are disclosed in COMAC
Cell's Summary and Securities Note, a copy of which is available
from the Company's Administrator or Distributor upon request.
US Enhanced Income Cell
The investment objective of the Company for the USEI Cell in
respect of the Class A USEI Shares and Class B USEI Shares is to
provide shareholders with a stable stream of quarterly dividend
distributions (with a targeted dividend yield of approximately 8%
per annum, subject to increase and decrease in certain
circumstances) and return on capital. Such investment objective
being intended to be achieved by reference to an investment
strategy linked to the total return performance of the Standard and
Poor's 500(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
Harewood Structured Investment PCC Limited
INVESTMENT OBJECTIVE AND POLICY (continued)
equal to 2 pence or cents per Class A USEI Share or Class B USEI
Share respectively on each dividend payment date, which will be
applied by the Company in funding the payment of dividends to
shareholders, and, at redemption, an amount equal to the net asset
value of the underlying portfolio.
Full details of the calculation of the investment return, the
USEI Contract and the collateral arrangements in favour of the
Company, for the account of the USEI Cell, are disclosed in the
USEI Cell's Summary and Securities Note, a copy of which is
available from the Company's Administrator or Distributor upon
request.
UK Enhanced Income Cell
The investment objective of the Company for the UKEI Cell in
respect of the UKEI Shares is to provide shareholders with a stable
stream of quarterly dividend distributions (with a targeted
dividend yield of approximately 8% per annum, subject to increase
and decrease in certain circumstances) and return on capital.
Such investment objective being intended to be achieved by
reference to an investment strategy linked to the total return
performance of the FTSE 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.
Harewood Structured Investment PCC Limited
NET ASSET VALUES
As at 30 April 2013, being the latest valuation date prior to
the accounting reference date, the calculated net asset value of a
share of each cell in existence at that date was as follows:-
As at As at
30 April 2013 31 October
2012
BNP Paribas Agrinvest ("Agrinvest") 110.34 pence 123.31 pence
Enhanced Property Recovery ("EPR") 77.53 pence 73.56 pence
Energy - Base Metals (3) ("EBM3") 99.15 pence 100.75 pence
Enhanced Income - Class A ("EIF") 94.50 pence 91.78 pence
BNP Paribas COMAC ("COMAC") 68.68 pence 72.61 pence
US Enhanced Income - Class A ("USEI A") 113.98 pence 105.35 pence
US Enhanced Income - Class B ("USEI B") 114.18 US$ 105.61 US$
cents cents
UK Enhanced Income ("UKEI") 93.63 pence 88.46 pence
US High Income - Class A ("USHI A") - 31.84 pence
US High Income - Class B ("USHI B") - 38.43 US$ cents
Harewood Structured Investment PCC Limited
INTERIM MANAGEMENT REPORT
For the period from 1 November 2012 to 30 April 2013
A description of important events for each cell and the Company
which have occurred during the reporting period and their impact on
the performance of the Company as shown in the financial statements
is given in the Investment Manager's Report on pages 18 to 25 and
is incorporated here by reference.
A description of the principal risks and uncertainties facing
the Company is given in note 6 to the financial statements and is
incorporated here by reference. The principal risks and
uncertainties facing the Company to the end of its financial year
are considered to be the same as those which applied in the first
six months of the financial year.
There were no material related party transactions which took
place in the first six months of the financial year.
This half-yearly financial report has not been audited nor
reviewed by auditors pursuant to the Auditing Practices Board
guidance on Review of Interim Financial Information.
Responsibility Statement
The Board of directors jointly and severally confirm that, to
the best of their knowledge:
(a) the financial statements, prepared in accordance with
International Financial Reporting Standards, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company; and
(b) this Management Report includes or incorporates by reference:
1) An indication of important events that have occurred during
the first six months of the financial year and their impact on the
financial statements;
2) A description of the principal risks and uncertainties for
the remaining six months of the financial year;
3) Confirmation that there were no material related party
transactions in the first six months of the current financial year
that have materially affected the financial position or the
performance of the Company during that period; and
Harewood Structured Investment PCC Limited
INTERIM MANAGEMENT REPORT (continued)
For the period from 1 November 2012 to 30 April 2013
4) Changes in the related parties transactions described in the
Company's last annual financial report that could have a material
effect on the financial position or performance of the Company in
the first six months of the current financial year.
John Le Prevost Trevor Hunt
Director Director
25 June 2013
Harewood Structured Investment PCC Limited
INVESTMENT MANAGER'S REPORT
On the invitation of the directors of the Company, the following
commentary is provided by THEAM, the Investment Manager. Their
commentary is provided as a source of useful information for
shareholders of the Company but is not directly attributable to the
Company.
BNP Paribas Agrinvest
Listing: Channel Islands Stock Exchange
Launch date: 22 June 2007
Issue price at launch: 100 pence
NAV immediately following launch: 100 pence
Maturity date: 29 June 2013
ISIN: GB00B1YKCX92
SEDOL: B1YKCX9
Investment Objective
The Agrinvest Shares are a six-year investment aiming to provide
shareholders with the opportunity to participate in the performance
of exchange-traded commodities futures comprised in the EER Index.
The EER Index is designed to provide a broad yet liquid
representation of large, mid and small commodity futures inside the
OECD. The EER Index consists of 23 components within the
agriculture sector. The EER Index is also subject to a forward
curve roll optimisation process through the addition of a
quantitative enhancement algorithm.
Investment Performance
Between launch on 22 June 2007 and close on 30 April 2013 the
NAV had increased by 10.4%. Over this period the S&P GSCI Agri
& Livestock ER Index had fallen by -12.8% and DJ UBS Commodity
ER had fallen by -23.0%.
Harewood Structured Investment PCC Limited
INVESTMENT MANAGER'S REPORT (continued)
Enhanced Property Recovery
Listing: Channel Islands Stock Exchange
Launch date: 13 March 2008
Issue price at launch: 100 pence
NAV immediately following launch: 100 pence
Maturity date: 20 March 2014
ISIN: GG00B2PWW869
SEDOL: B2QBZY9
Investment Objective
The EPR Shares allow investors to benefit from a possible
recovery in the listed property market with an enhanced market
timing mechanism. At maturity, if the EPRA Index finishes above its
initial level, the fund will pay the greater of either 170% or the
enhanced performance of the EPRA Index. If the EPRA Index closes
below the initial level, the EPR Shares will track the EPRA
Index.
Investment Performance
Between launch on 13 March 2008 and close on 30 April 2013 the
NAV had fallen by 22.46%. Over this period the EPRA Index had
decreased by 20.60%. The fund performance is driven primarily by
sensitivity of the NAV to movements in the underlying EPRA Index,
which is nearly one for one. The fund recorded itslowest
observation in March 2009 at 760.83. The enhanced market timing
mechanism of this fund means that if the EPRA Index were to recover
to maturity, this figure would be used as the reference for which
to calculate final performance.
Harewood Structured Investment PCC Limited
INVESTMENT MANAGER'S REPORT (continued)
BNP Paribas Energy-Base Metals (3)
Listing: Channel Islands Stock Exchange
Launch date: 5 June 2008
Issue price at launch: 100 pence
NAV at launch: 100 pence
Maturity date: 12 June 2014
ISIN: GG00B2R9LW24
SEDOL: B39TP47
Epic Code: EBMC
Investment Objective
The EBM3 Shares are a six-year investment offering 175% of the
upside of the spot prices of a portfolio of commodities. The
portfolio comprises West Texas Intermediate Oil (30%), Natural Gas
(20%), Aluminium (12.5%), Copper (12.5%), Nickel (12.5%) and Zinc
(12.5%). If the portfolio performance is negative over six years,
100 pence is returned at maturity.
The name and weighting of each commodity, the spot prices of
each commodity recorded at launch (the nearest futures price in the
case of oil) and as of 30 April 2013 are set out in the table
below.
Value as
Value at of
Commodity name Start 30-Apr-13 Change Weight
------------------------- --------- ----------- -------- -------
Aluminium 2858.5 1846.5 -35.4% 12.5%
------------------------- --------- ----------- -------- -------
Copper 8006 7073.5 -11.60% 12.5%
------------------------- --------- ----------- -------- -------
Nickel 22000 15200 -30.90% 12.5%
------------------------- --------- ----------- -------- -------
West Texas Intermediate 122.3 93.46 -23.60% 30.0%
------------------------- --------- ----------- -------- -------
Zinc 1948.5 1854 -4.80% 12.5%
------------------------- --------- ----------- -------- -------
Natural Gas 12.379 4.343 -64.90% 20.0%
Source for commodity values information: Bloomberg
Harewood Structured Investment PCC Limited
INVESTMENT MANAGER'S REPORT (continued)
Investment Performance
Between launch on 5 June 2008 and close on 30 April 2013 the NAV
has dropped by 0.84%. Over this period the DJ AIG Commodities
Excess Return Index had fallen by 38.57%.
Enhanced Income
Listing: Channel Islands Stock Exchange
Launch date: March 19 2009
Issue price at launch: 101 pence
NAV immediately following launch: 100 pence
Maturity date: 19 March 2108
Class A ISIN: GG00B4W90V35
Class A SEDOL: B65H881
Class B ISIN: GG00B4W90W+42
Class B SEDOL: B4W90W4
Investment Objective
The investment objective of the EI Cell is to provide
shareholders with a stable stream of quarterly dividend
distributions (with a targeted dividend yield of approximately 8%
per annum, subject to increase and decrease in certain
circumstances) and return on capital based on an investment
strategy linked to the performance of the DJES50 Index and notional
call options written on the DJES50 Index. Dividend distributions on
the Class A EIF Shares will be denominated and paid in GBP and in
EUR in respect of the Class B shares. There are currently no Class
B shares in issue.
Investment Performance
Between launch on 19 March 2009 and close on 30 April 2013 the
Total Return Performance had risen to 29.4%. Over this period the
DJES50 Index had increased to 54.0%. The directors declared interim
dividends as follows:
Harewood Structured Investment PCC Limited
INVESTMENT MANAGER'S REPORT (continued)
Announcement Ex-Dividend Pay Date Dividend
24-Jun-09 01-Jul-09 31-Jul-09 2.00%
23-Sep-09 30-Sep-09 30-Oct-09 2.30%
22-Dec-09 30-Dec-09 01-Feb-10 2.40%
24-Mar-10 31-Mar-10 30-Apr-10 2.30%
23-Jun-10 30-Jun-10 30-Jul-10 2.00%
22-Sep-10 29-Sep-10 29-Oct-10 2.00%
22-Dec-10 29-Dec-10 28-Jan-11 2.00%
23-Mar-11 30-Mar-11 29-Apr-11 2.00%
23-Jun-11 29-Jun-11 01-Jul-11 2.00%
22-Sep-11 28-Sep-11 30-Sep-11 1.80%
20-Dec-11 28-Dec-11 30-Dec-11 1.90%
21-Mar-12 28-Mar-12 01-May-12 2.00%
27-Jun-12 04-Jul-12 03-Aug-12 1.90%
26-Sep-12 03-Oct-12 02-Nov-12 1.90%
24-Dec-12 02-Jan-13 01-Feb-13 2.00%
27-Mar-13 03-Apr-13 03-May-13 2.00%
Class A Sterling Hedged COMAC Preference Shares and Class B US
Dollar Unhedged COMAC Preference Shares
Listing: Channel Islands Stock Exchange
Launch date: 1 June 2009
Issue price at launch: 101 pence
NAV immediately following launch: 100 pence
Maturity date: 1 June 2029
Class A ISIN: GG00B3VGTS89
Class A SEDOL: B3VGTS8
Class B ISIN: GG00B3VM1S01
Class B SEDOL: B3VM1S
Investment Objective
The investment objective of the COMAC Cell is to provide
shareholders with exposure to the performance of an actively
managed long short arbitrage strategy based on a portfolio of 25
commodities through the COMAC Index. The COMAC Index is denominated
in USD and is designed to track the performance of an actively
managed portfolio of 25 commodities selected from the energy,
metals and agricultural sectors, the respective weightings of
which
Harewood Structured Investment PCC Limited
INVESTMENT MANAGER'S REPORT (continued)
are determined in accordance with an investment strategy based
on recommendations provided by the COMAC Adviser and a rules-based
proprietary methodology designed by BNP Paribas (the "Index
Methodology").
Investment Performance
Between launch on 1 June 2009 and close on 30 April 2013 the NAV
of Class A had fallen by 31.32%. There are currently no Class B
Shares in issue.
Class A Sterling Hedged US Enhanced Income Preference Shares and
Class B US Dollar Unhedged US Enhanced Income Preference Shares
Listing: Channel Islands Stock Exchange
Launch date: 16 July 2009
Issue price at launch: 101 pence
NAV immediately following launch: 100 pence class A & 100
cents class B
Maturity date: 16 July 2029
Class A ISIN: GG00B4409G28
Class A SEDOL: B3P3372 GB
Class B ISIN: GG00B4409P19
Class B SEDOL: B4409P1
Investment Objective
The USEI Cell's investment objective is to provide shareholders
with a stable stream of quarterly dividends (with a targeted
dividend yield of approximately 8% per annum, subject to increase
and decrease in certain circumstances) and return on capital, such
investment objective being intended to be achieved by reference to
an investment strategy (the "Strategy") linked to the total return
performance of the S&P500 Index and notional short-term call
options written on the S&P500 Index.
Investment Performance
Between launch on 16 July 2009 and close on 30 April 2013 the
Total Return Performance was 52.3% and 49.8% respectively for class
A and class B (based on an initial NAV of 100 pence and 100 cents
respectively for class A and class B) compared with the S&P TR
Performance, which increased 84.0% over that period. The directors
declared interim
Harewood Structured Investment PCC Limited
INVESTMENT MANAGER'S REPORT (continued)
dividends for both Share classes according to the following
schedule:
Announcement Ex-Dividend Pay Date Dividend
23-Oct-09 28-Oct-09 27-Nov-09 2.20%
20-Jan-10 27-Jan-10 26-Feb-10 2.30%
21-Apr-10 28-Apr-10 28-May-10 2.30%
21-Jul-10 28-Jul-10 27-Aug-10 2.00%
20-Oct-10 27-Oct-10 26-Nov-10 2.00%
20-Jan-11 26-Jan-11 25-Feb-11 2.20%
20-Apr-11 27-Apr-11 27-May-11 2.20%
20-Jul-11 27-Jul-11 26-Aug-11 2.20%
19-Oct-11 26-Oct-11 25-Nov-11 2.00%
18-Jan-12 25-Jan-12 24-Feb-12 2.00%
18-Apr-12 25-Apr-12 29-May-12 2.00%
18-Jul-12 25-Jul-12 24-Aug-12 2.00%
24-Oct-12 31-Oct-12 30-Nov-12 2.20%
23-Jan-13 30-Jan-13 01-Mar-13 2.00%
28-Mar-13 03-Apr-13 03-May-13 2.00%
UK Enhanced Income
Listing: Channel Islands Stock Exchange
Launch date: 24 September 2009
Issue price at launch: 101 pence
NAV immediately following launch: 100 pence
Maturity date: 24 September 2029
ISIN: GG00B3YF5842
SEDOL: B3YF584
Investment Objective
The UKEI Cell's investment objective is to provide shareholders
with a stable stream of quarterly dividends (with a targeted
dividend yield of approximately 8% per annum, subject to increase
and decrease in certain circumstances) and return on capital, such
investment objective being intended to be achieved by reference to
an investment strategy linked to the total return performance of
the FTSE100 Index and notional short-term call options written on
the FTSE100 Index.
Harewood Structured Investment PCC Limited
INVESTMENT MANAGER'S REPORT (continued)
Investment Performance
Between launch on 24 September 2009 and close on 30 April 2013
the Total Return Performance had increased to 23.8%. Over this
period the FTSE 100 Total Return Index had risen to 43.6%. The
directors declared interim dividends according to the following
schedule:
Announcement Ex-Dividend Pay Date Dividend
30-Dec-09 06-Jan-10 05-Feb-10 2.00%
31-Mar-10 14-Apr-10 07-May-10 2.00%
24-Jun-10 07-Jul-10 06-Aug-10 2.00%
24-Sep-10 06-Oct-10 05-Nov-10 2.00%
24-Dec-10 05-Jan-11 04-Feb-11 2.00%
24-Mar-11 06-Apr-11 06-May-11 2.00%
24-Jun-11 06-Jul-11 05-Aug-11 2.00%
24-Sep-11 05-Oct-11 04-Nov-11 1.90%
04-Jan-12 11-Jan-12 10-Feb-12 1.90%
28-Mar-12 04-Apr-12 10-May-12 2.00%
27-Jun-12 04-Jul-12 03-Aug-12 1.80%
26-Sep-12 03-Oct-12 02-Nov-12 1.90%
02-Jan-13 09-Jan-13 08-Feb-13 1.90%
27-Mar-13 03-Apr-13 03-May-13 1.90%
Harewood Structured Investment PCC Limited
STATEMENT OF COMPREHENSIVE INCOME
for the period ended 30 April 2013
Period
to Period to
30 Apr
2013 30 Apr 2012
Total Total
Notes GBP GBP
Net movement in unrealised gains
on investments 3 89,648,482 51,460,702
Income from financial assets at fair
value through profit
or loss 5,031,582 14,022,790
Finance costs - distributions to
holders of Preference
Shares 1l (5,031,582) (14,022,790)
Realised loss on investments (80,532,352) (66,294,290)
Realised exchange (losses) / gains
on currency
balances - (4,632)
------------- -------------
Increase / (decrease) in net assets
attributable to Preference shareholders
from operations 9,116,130 (14,838,220)
------------- -------------
Income received from Counterparty
in relation to
operating expenses 1b 639,940 964,592
Operating expenses 1b, 7 (384,681) (531,275)
------------- -------------
Increase / (decrease) in net assets
from operations 9,371,389 (14,404,903)
------------- -------------
Other Comprehensive Income:
Unrealised foreign exchange losses (5,101,946) (967,114)
-------------
Total Comprehensive Income 4,269,443 (15,372,017)
============= =============
Pence Pence
Gain / (loss) per Share 1j 2.54 (2.22)
The notes on pages 30 to 50 form an integral part of these
financial statements.
Harewood Structured Investment PCC Limited
STATEMENT OF FINANCIAL POSITION
as at 30 April 2013
Period to Year to
30 Apr 2013 31 Oct 2012
Total Total
Notes GBP GBP
ASSETS
NON CURRENT ASSETS
Financial assets at fair value through
profit or loss 3 313,832,401 352,938,637
CURRENT ASSETS
Cash and cash equivalents 1b 2,507,004 2,171,973
Investment income receivable - 4,096,234
------------
2,507,004 6,268,207
LIABILITIES
CURRENT LIABILITIES
Accrued expenses 37,836 146,372
Dividends payable 1l 1,731,286 5,787,515
------------ ------------
1,769,122 5,933,887
------------ ------------
TOTAL NET ASSETS 314,570,283 353,272,957
============ ============
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF
PREFERENCE SHARES 3 313,832,401 352,938,637
NET ASSETS ATTRIBUTABLE TO HOLDERS
OF
MANAGEMENT SHARES 1b 737,882 334,320
The financial statements were approved and authorised for issue
by the Board of directors on 25 June 2013 and are signed on its
behalf by:
John Le Prevost Trevor Hunt
Director Director
The notes on pages 30 to 50 form an integral part of these
financial statements.
Harewood Structured Investment PCC Limited
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF
PREFERENCE SHARES
for the period ended 30 April 2013
Period to Period to
30 Apr 2013 30 Apr 2012
Total Total
Notes GBP GBP
Opening balance 352,938,637 606,861,780
Redemption of shares (43,120,420) (134,953,399)
Net gain / (loss) for the period
attributable to holders of
Preference Shares 9,116,130 (14,833,588)
Unrealised foreign exchange losses (5,101,946) (967,114)
Balance attributable to preference
shares as at 30 April 2013 313,832,401 456,107,679
Opening balance 334,320 2,583
Net gain for the period attributable
to holders of Management Shares 403,562 428,685
Balance attributable to Management
Shares as at 30 April 2013 737,882 431,268
Total balance attributable to shares
as at 30 April 2013 314,570,283 456,538,947
============= ==============
The notes on pages 30 to 50 form an integral part of these
financial statements.
Harewood Structured Investment PCC Limited
STATEMENT OF CASH FLOWS
for the period ended 30 April 2013
Period to Period to
30 Apr 2013 30 Apr 2012
Total Total
GBP GBP
Operating activities
Net operating gain / (loss) for the
period 9,371,389 (14,404,903)
Distributions to holders of Preference
Shares 9,087,811 13,191,920
Movement in realised and unrealised
(gain) / loss on investments (9,116,130) 14,833,588
Movement in debtors and creditors during
the period 68,531 82,045
Redemption of financial assets 43,120,420 116,181,164
------------- --------------
Net cash flow from operating activities 52,532,021 129,883,814
Financing activities
Distributions to holders of Preference
Shares redeemed (43,120,420) (116,181,164)
Distributions to holders of Preference
Shares (9,087,811) (13,191,920)
------------- --------------
Net cash flow from financing activities (52,208,231) (129,373,084)
Increase in cash and cash equivalents 323,790 510,730
------------- --------------
Cash and cash equivalents at beginning
of period 2,171,973 2,583
Increase in cash and cash equivalents 323,790 510,730
Exchange rate adjustment 11,241 -
------------- --------------
Cash and cash equivalents at end of
period 2,507,004 513,313
------------- --------------
The notes on pages 30 to 50 form an integral part of these
financial statements.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements
for the period ended 30 April 2013
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted by the Company and
applied in the preparation of these Financial Statements are set
out below. These policies have been consistently applied to all
periods presented, unless otherwise stated in the following
text.
(a) Basis of preparation
The Financial Statements have been prepared in conformity with
International Financial Reporting Standards ("IFRS") and applicable
Guernsey Law. The Financial Statements have been prepared under the
historical cost convention as modified for the measurement at fair
value of financial instruments held at fair value through profit or
loss.
The preparation of Financial Statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires the Board of directors to exercise judgement in the
process of applying the Company's accounting policies. The areas
involving a high degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial
statements, are disclosed in Note 2.
Changes in accounting policy and disclosures:
No new Standards or Interpretations have been adopted in the
current period.
The following Standards have been issued by the International
Accounting Standards Board ("IASB") but not yet adopted by the
Company:
IFRS 7 Financial Instruments: Disclosures - amendments related
to the offsetting of assets and liabilities effective for annual
periods beginning on or after 1 January 2013 and interim periods
within those periods.
IFRS 9 Financial Instruments: Classification and Measurement -
effective for annual periods beginning on or after 1 January
2015.
IFRS 13 Fair value measurement - Original issue effective for
annual periods beginning on or after 1 January 2013.
IAS 1 Presentation of Financial Statements - amendments from
Annual Improvement 2009-2011 Cycle (comparative information)
effective for periods on or after 1 January 2013.
IAS 32 Financial Instruments: Presentation - amendments relating
to the offsetting of assets and liabilities effective for annual
periods beginning on or after 1 January 2014.
IAS 34 Interim Financial Reporting - amendments from Annual
Improvements 2009-2011 Cycle (interim reporting of segment assets)
effective for periods on or after 1 January 2013.
The directors have considered the above and are of the opinion
that the above Standards are not expected to have an impact on the
Company's financial statements except for the presentation of
additional disclosures and changes to the presentation of
components of the financial statements. These items will be applied
in the first financial period for which they are required.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Recognition of expenses and related income
The expenses borne by BNP Paribas SA ("BNP") on behalf of the
Company and income received in order to pay Company expenses have
been included in the Statement of Comprehensive Income.
Additionally the cash at bank relating to the excess of income
received from BNP Paribas SA over expenses paid out has been
included in the Statement of Financial Position.
The directors are of the opinion that the expenses, income and
cash reserve detailed above should be included in the Financial
Statements of the Company, as this more accurately represents the
position of the Company. The expenses and income have been detailed
in the Statement of Comprehensive Income and the cash reserve built
up by the excess of income over expenses has been allocated to the
holders of Management Shares in the Statement of Financial
position.
Pursuant to the terms of an Engagement Letter between the
Company and BNP Paribas SA, all expenses are borne by BNP Paribas
SA, therefore any cash at bank relating to the excess of income
over expenses is due to BNP Paribas SA as holder of the Management
Shares of the Company and is not due to the holders of Preference
Shares.
(c) Functional and presentation currency
Items included in the Company's Financial Statements are
measured using the currency of the primary economic environment in
which it operates (the "functional currency"). This is pounds
sterling, which reflects the Company's primary activity of
investing in sterling-denominated investment transactions. The
Company has adopted pounds sterling as its presentation currency as
the Company is listed on the Channel Islands Stock Exchange and the
majority of its registered shareholders are domiciled in the United
Kingdom.
(d) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
period-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the Statement
of Comprehensive Income. Translation differences on non-monetary
financial assets and liabilities such as equities at fair value
through profit or loss are recognised in the Statement of
Comprehensive Income within net movement in unrealised gains /
(losses) on investments.
(e) Taxation
The Company has been granted exemption from Guernsey Income Tax
under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989,
and is charged an annual fee of GBP600. Dividend income is
recognised on a gross basis, including withholding tax, if any.
(f) Expenses
All expenses are accounted for on an accruals basis and
accounted for in the Statement of Comprehensive Income. As
described in note 1(b) all expenses are borne by BNP pursuant to
the terms of an Engagement Letter between the Company and BNP. The
ongoing expenses for the period under review are detailed in Note 7
to the Financial Statements.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(g) Cash and cash equivalents
At the reporting date, cash and cash equivalents comprise cash
at bank. As detailed in note 1(b), all expenses of the Company are
borne by BNP, with income being received from BNP for the payment
of Company expenses. Any excess of income received from BNP for
payment of expenses is accounted for as cash and cash equivalents
attributable to the holders of Management Shares.
(h) Income recognition
Dividend income is recognised in the Statement of Comprehensive
Income when the relevant cell's right to receive the dividend has
been established, normally being the ex-dividend date. Dividend
income is recognised on a gross basis, including withholding tax,
if any.
Income received from BNP to cover expenses of the Company is
accounted for on an accruals basis.
(i) Financial assets at fair value through profit or loss
All investments and derivative financial instruments are
classified as "at fair value through profit or loss". Investments
are initially recognised at cost, being the fair value of the
consideration given, including transaction costs associated with
the investment. After initial recognition, investments are measured
at fair value, with unrealised gains and losses on investments
being recognised in the Statement of Comprehensive Income.
The Company seeks to achieve the investment objective of each
cell by entering into a contract with BNP Paribas (referred to
herein as the "Counterparty"). Each contract is substantially in
the form of an ISDA Master Agreement as supplemented by a
transaction confirmation.
In respect of each contract, within BNP Paribas Group (the
"Group"), the Market and Liquidity Risk department is responsible
for the day-to-day risk monitoring and contributes to the control
of the economic fair value of the Group's trading books. This risk
function department is separate and independent from the Trading
and Sales departments.
The Market and Liquidity Risk department reviews the consistency
of the non-observable market parameters by comparing and
reconciling on a monthly basis several external data sources,
including Bloomberg, Reuters, Markit/Totem and 10X.
This department is also responsible for the validation and
control of any valuation models.
(j) Gain / (loss) per share
The gain / (loss) per share is based on the increase /
(decrease) in net assets attributable to Preference shareholders
from operations of the Company for the period of GBP-9,116,130 (Apr
2012: -GBP15,372,017 loss) and on 358,827,307 (Apr 2012:
648,829,338) shares, being the weighted average number of shares in
issue during the period. There were no dilutive instruments in
issue during the period.
(k) Trade date accounting
All "regular way" purchases and sales of financial assets are
recognised on the "trade date" i.e. the date that the entity
commits to purchase or sell the asset. Regular way purchases or
sales of financial assets that require delivery of the asset within
the time frame generally established by the regulation or
convention in the market place.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(l) Distributions payable to holders of redeemable shares
Proposed distributions to holders of redeemable shares are
recognised in the Statement of Comprehensive Income when they are
declared by the Board of directors. The distribution on these
redeemable shares is recognised in the Statement of Comprehensive
Income as finance cost.
(m) Going concern
After making enquiries, the directors have a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future. The directors
believe the Company is well placed to manage its business risks
successfully despite the current economic climate. Accordingly, the
directors have adopted the going concern basis in preparing the
financial information.
2 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Management make critical accounting estimates and judgements
concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates
and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the financial period are outlined below:
(a) Fair value of financial instruments
The Company holds derivatives which are tailored to meet the
Company's respective needs for each cell. As the investments are
not traded in an active market, the fair value of such instruments
is determined by using valuation techniques. The fair value is
calculated weekly and as at each month end by the Counterparty. As
at the reporting date, an independent check of the valuations of
the investments is performed by Future Value Consultants Limited
(the "Calculation Agent"), an independent third party. The
Calculation Agent uses a variety of methods and makes assumptions
that are based on market conditions existing at the reporting date.
Valuation techniques used include the use of comparable recent
arm's length transactions (where available), discounted cash flow
analysis, option pricing models and other valuation techniques
commonly used by market participants. These techniques are
periodically reviewed by experienced personnel at the Calculation
Agent.
Models use observable data, to the extent practicable. However,
areas such as credit risk (both own and counterparty),
volatilities, capital risk and correlations require management to
make estimates. Changes in assumptions about these factors could
affect the reported fair value of financial instruments.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
3 NET ASSETS ATTRIBUTABLE TO HOLDERS OF PREFERENCE SHARES
Period to Year to
30 Apr 2013 31 Oct 2012
Total Total
GBP GBP
Opening portfolio cost 447,141,821 725,661,033
Opening unrealised loss on valuation (100,502,668) (125,369,115)
Opening exchange gains on currency
balances 6,299,484 6,572,445
Opening valuation 352,938,637 606,864,363
Proceeds of sales of financial assets (43,120,420) (232,797,531)
Unrealised gain for the period / year 89,648,482 24,866,447
Realised loss on investments (80,532,352) (45,721,681)
Unrealised foreign exchange losses
on currency balances (5,101,946) (270,378)
Realised exchange gain on currency
balances - (2,583)
Closing valuation 313,832,401 352,938,637
============== ==============
Closing portfolio cost 323,489,049 447,141,821
Closing unrealised loss (10,854,186) (100,502,668)
Closing exchange gains on currency
balances 1,197,538 6,299,484
Closing valuation 313,832,401 352,938,637
============== ==============
IFRS 7 requires fair value measurements to be disclosed by the
source of inputs, using the following three-level hierarchy:
* Quoted prices (unadjusted) in active markets for identical
assets or liabilities (Level 1)
* Inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly (as prices)
or indirectly (derived from prices) (Level 2).
* Inputs for the asset or liability that are not based on
observable market data (unobservable inputs) (Level 3).
The financial assets held by the Company have been classified as
Level 2. This is in accordance with the fair value hierarchy.
There have been no transfers between Level 2 and Level 3 of the
fair value hierarchy during the period under review.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
4 SHARE CAPITAL
Authorised SHARES GBP
Preference shares of no par value
each Unlimited -
Ordinary shares of no par value each 2 -
---------- ----
2 -
========== ====
Shares issued
Allotted, called-up as at Shares issued
and fully paid 1 November as at 30 April
Preference Shares 2012 Shares Redeemed Shares Issued 2013
UKHI Cell - - - -
EBM2 Cell - - - -
ES Cell - - - -
AP Cell - - - -
USHI A Cell 92,469,987 (92,469,987) * - -
USHI B Cell 58,337,229 (58,337,229) * - -
Agrinvest Cell 47,225,896 - - 47,225,896
EPR Cell 30,125,000 - - 30,125,000
EBM3 Cell 49,587,600 - - 49,587,600
EI Cell 39,999,346 - - 39,999,346
UKEI Cell 49,015,722 - - 49,015,722
COMAC Cell 25,526,009 - - 25,526,009
USEI A Cell 48,500,080 - - 48,500,080
USEI B Cell 45,079,125 - - 45,079,125
Management Shares 2 - - 2
-------------- ------------------ ---------------- ----------------
TOTAL 485,865,996 (150,807,216) - 335,058,780
============== ================== ================ ================
*See Note 8
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
4 SHARE CAPITAL (continued)
Shares issued
Allotted, called-up as at Shares issued
and fully paid 1 November Preference Preference as at 31 October
Preference Shares 2011 Shares Redeemed Shares Issued 2012
UKHI Cell 141,613,549 (141,613,549) * - -
EBM2 Cell 32,506,140 (32,506,140) * - -
ES Cell 25,000,000 (25,000,000) * - -
AP Cell 76,748,923 (76,748,923) * - -
USHI A Cell 92,469,987 - - 92,469,987
USHI B Cell 58,337,229 - - 58,337,229
Agrinvest Cell 47,225,896 - - 47,225,896
EPR Cell 30,125,000 - - 30,125,000
EBM3 Cell 49,587,600 - - 49,587,600
EI Cell 39,999,346 - - 39,999,346
UKEI Cell 49,015,722 - - 49,015,722
COMAC Cell 25,526,009 - - 25,526,009
USEI A Cell 48,500,080 - - 48,500,080
USEI B Cell 45,079,125 - - 45,079,125
Management Shares 2 - - 2
-------------- ------------------ ---------------- ------------------
TOTAL 761,734,608 (275,868,612) - 485,865,996
============== ================== ================ ==================
*See Note 8
Holders of Management Shares shall not be entitled to receive
and shall not participate in any dividends or other distributions
out of the profits of the Company. On winding up Management
shareholders are only entitled to an amount up to a maximum being
the Net Assets Attributable to Holders of Management Shares and
have no right to the Net Assets Attributable to the Holders of
Preference Shares. Holders of Management Shares shall be entitled
to receive notice of and to attend and vote at general meetings.
The Management Shares are not redeemable and comprise the Company's
non-cellular assets.
Holders of BNP Paribas Absolute Progression Preference Shares,
BNP Paribas Agrinvest Preference Shares, Enhanced Property Recovery
Preference Shares, Energy-Base Metals (3) Preference Shares and BNP
Paribas COMAC, ("Cell shares") shall not be entitled to receive and
shall not participate in any dividends or other distributions of
the Company.
Holders of Class A Sterling Hedged US High Income Preference
Shares, Class B Unhedged US High Income Preference Shares, Class A
Sterling Hedged US Enhanced Income Preference Shares, Class B US
Dollar Unhedged US Enhanced Income Preference Shares, Enhanced
Income Preference Shares and UK Enhanced Income Preference Shares
("Cell Shares") shall be entitled to receive any dividends or other
distributions out of the profits of their respective cells only,
but not out of the non-cellular assets of the Company.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
4 SHARE CAPITAL (continued)
On their respective redemption dates the holders of Cell Shares
shall be entitled to receive per Cell Share held an amount equal to
the net asset value per Cell Share. As disclosed in the
Supplemental Memorandum or Summary and Securities Note for each
cell, the Cell Shares of each cell will be compulsorily redeemed by
the Company on their respective redemption dates.
Holders of the Cell Shares shall not be entitled to receive
notice of or to attend or vote at any general meeting of the
Company.
5 SHARE PREMIUM
Share premium Share premium
Share Premium as at 1 November as at
Preference Shares 2012 Shares Redeemed Shares Issued 30 April 2013
GBP GBP GBP GBP
UKHI Cell - - - -
EBM2 Cell - - - -
ES Cell - - - -
AP Cell - - - -
USHI A Cell 92,942,487 (92,942,487) - -
USHI B Cell 30,710,285 (30,710,285) - -
Agrinvest Cell 49,516,896 - - 49,516,896
EPR Cell 30,125,000 - - 30,125,000
EBM3 Cell 49,292,100 - - 49,292,100
EI Cell 42,548,346 - - 42,548,346
UKEI Cell 49,015,722 - - 49,015,722
COMAC Cell 25,526,009 - - 25,526,009
USEI A Cell 48,500,080 - - 48,500,080
USEI B Cell 28,964,898 - - 28,964,898
TOTAL 447,141,823 (123,652,772) - 323,489,051
================== ================== ================ ===============
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
5 SHARE PREMIUM (continued)
Share premium
Share premium as at
Share Premium as at 1 November Preference Preference 31 October
Preference Shares 2011 Shares Redeemed Shares Issued 2012
GBP GBP GBP GBP
UKHI Cell 143,419,549 (143,419,549) - -
EBM2 Cell 32,828,140 (32,828,140) - -
ES Cell 25,000,000 (25,000,000) - -
AP Cell 77,271,523 (77,271,523) - -
USHI A Cell 92,942,487 - - 92,942,487
USHI B Cell 30,710,285 - - 30,710,285
Agrinvest Cell 49,516,896 - - 49,516,896
EPR Cell 30,125,000 - - 30,125,000
EBM3 Cell 49,292,100 - - 49,292,100
EI Cell 42,548,346 - - 42,548,346
UKEI Cell 49,015,722 - - 49,015,722
COMAC Cell 25,526,009 - - 25,526,009
USEI A Cell 48,500,080 - - 48,500,080
USEI B Cell 28,964,898 - - 28,964,898
TOTAL 725,661,035 (278,519,212) - 447,141,823
================== ================== ================ ==============
6 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company's activities expose it to a variety of financial
risks: market risk (including interest rate risk and market price
risk), credit risk, liquidity risk, capital risk and foreign
exchange risk.
The Company's overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise
potential adverse effects on the Company's financial
performance.
(a) Interest Rate Risk
The Company is not directly exposed to cash flow interest rate
risk. Changes in interest rates may affect the performance of the
swap contracts in which each cell is invested. The Board and the
Investment Manager monitor, but cannot control, interest rate
risk.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
6 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(b) Market Price Risk
Market price risk arises mainly from uncertainty about future
prices of financial instruments held. It represents the potential
loss the Company might suffer through holding market positions in
the face of price movements. The Investment Manager actively
monitors market prices and reports to the Board as to the
appropriateness of the prices used for valuation purposes. On a
periodic basis independent valuations of the Company's investments
are obtained from the Calculation Agent. A list of investments held
by the Company is shown in the Schedule of Investments on pages 51
to 52.
The Investment Manager also monitors on a monthly basis the
market price risk of each cell's underlying financial assets and
liabilities using statistical measures, such as Delta. Delta is the
percentage change in price of an investment in relation to a 1%
change in the price of the underlying security, index or rate. As
there is no secondary market for the Company's investments, the
Board cannot directly monitor nor control market price risk.
Price sensitivity
If market prices as at 30 April 2013 / 31 October 2012 had been
10 per cent higher / lower, and assuming these values were to
remain unchanged through to the end of the life of the cells, with
all other variables held constant, the increase in net assets
attributable to holders of Cell Shares on the Redemption Date would
have been as stated below, arising due to the increase / decrease
in the fair value of the financial assets at fair value through
profit or loss.
Increase in net assets 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 2013 31 October 30 April 31 October
2012 2013 2012
Cell GBP GBP GBP GBP
USHI A Cell - 2,944,892 - (2,944,892)
USHI B Cell - 1,390,195 - (1,390,195)
Agrinvest Cell 5,160,043 5,823,850 (5,160,043) (5,823,850)
EPR Cell 2,335,621 2,216,176 (2,335,621) (2,216,176)
EBM3 Cell 4,913,586 4,996,199 (4,913,586) (4,996,199)
EI Cell 1,744,907 1,853,444 (1,744,907) (1,853,444)
UKEI Cell 5,528,282 5,109,677 (5,528,282) (5,109,677)
COMAC Cell 3,314,327 2,951,840 (3,314,327) (2,951,840)
USEI A Cell 4,602,576 4,336,372 (4,602,576) (4,336,372)
USEI B Cell 3,783,898 3,671,220 (3,783,898) (3,671,220)
31,383,240 35,293,865 (31,383,240) (35,293,865)
=============== ============ ============= =============
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
6 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(c) Credit Risk
Credit risk is the risk that an issuer or counterparty will be
unable or unwilling to meet a commitment that it has entered into
with the Company. At the date of this report the Counterparty was
rated A+ by Standard & Poor's for credit purposes.
Investors should be aware that repayment by the Company at the
relevant redemption date of the redemption proceeds due to
shareholders will only be performed if the Counterparty satisfies
its obligations under the relevant contract to repay to the Company
any amount due. Under the terms of the Credit Support Deeds between
the Company and the Counterparty, the Counterparty is required to
deliver varying amounts of collateral to an escrow account held in
favour of the Company.
Under the terms of credit support deeds entered into between the
Counterparty and the Company acting for and on behalf of each cell,
the Counterparty is required to post collateral in the form of AAA
rated government bonds in favour of the Company acting for and on
behalf of each cell, such collateral being valued on a weekly basis
and, if the value of the collateral is less than the value
calculated as specified below (the "Credit Support Amount"), the
Counterparty will provide additional collateral to increase the
aggregate value to at least the Credit Support Amount. Where there
is an event of default in respect of the Counterparty under the
swap confirmation, the Company will be entitled to enforce its
security over the collateral.
Due to the collateral being monitored on a weekly basis (as
detailed above), there is a risk due to timing, that the amount
posted to collateral will be less than the Credit Support
Amount.
The Credit Support Amount is the lesser of (a) 100% of the net
asset value of the relevant cell and (b) the total of the
Applicable Percentage of such net asset value plus 10% of such net
asset value (where the "Applicable Percentage" is calculated so as
to reflect the percentage of shares in the relevant cell held at
the relevant time by shareholders other than BNP Paribas Arbitrage
SNC).
The most significant concentration of credit risk for the
Company is that the Counterparty will be unable to satisfy its
obligations under the relevant contract to repay to the Company any
amount due. The maximum credit risk exposure at the reporting date
is therefore considered to be the valuation of the investments at
this date, being GBP313,832,401.
The Investment Manager and Administrator monitor collateral
posted on a weekly basis and report to the Board weekly on the
Counterparty's compliance with the relevant Credit Support Deeds.
The Investment Manager and Administrator have also undertaken to
report to the Board immediately if there is a breach of compliance
with the terms of the relevant Credit Support Deeds.
The Board monitors, but cannot control, credit risk.
(d) Liquidity Risk
Liquidity risk is the risk that the Company will encounter
difficulty in realising assets or otherwise raising funds to meet
financial commitments and obligations to shareholders on redemption
of their shares of a cell. The only financial commitments of the
Company are to meet ongoing expenses and these are met out of
monies provided to the Company's Administrator by BNP Paribas
SA.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
6 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(d) Liquidity Risk (continued)
There is a further liquidity risk in respect of the redemption
of shares, the dates of which are set out in note 6 (g) (ii).
As the investments are not traded in an active market, the
Company may not be able to liquidate quickly its investments in
these instruments at an amount close to their fair value to meet
its liquidity requirements or to respond to specific events such as
deterioration in the credit worthiness of the Counterparty.
The table below details the residual contractual maturities of
the financial liabilities:
Over 1
1 - 3 months 3 - 12 months year Total
GBP GBP GBP GBP
As at 30 April 2013
Net assets attributable
to holders of Management
Shares 737,882 - - 737,882
Net assets attributable
to holders of Preference
Shares 69,049,500 72,492,071 172,290,830 313,832,401
------------- -------------- -------------- ------------
69,787,382 72,492,071 172,290,830 314,570,283
As at 31 October 2012
Net assets attributable
to holders of Management
Shares 334,320 - - 334,320
Net assets attributable
to holders of Preference
Shares 43,350,865 58,238,503 251,349,269 352,938,637
------------- -------------- -------------- ------------
43,685,185 58,238,503 251,349,269 353,272,957
The table below details the expected liquidity of assets
held:
Over 1
1 - 3 months 3 - 12 months year Total
GBP GBP GBP GBP
As at 30 April 2013
Net assets 69,787,382 72,492,071 172,290,830 314,570,283
As at 31 October 2012
Net assets 43,685,185 58,238,503 251,349,269 353,272,957
------------- -------------- -------------- ------------
The Board monitors, but cannot actively control, liquidity
risk.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
6 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(e) Capital Risk Management
The Company has an unlimited life but the Protected Cell Shares
for each cell have a fixed redemption date.
The Company's objective when managing capital is to safeguard
the Company's ability to continue as a going concern in order to
provide returns for shareholders.
The Board of directors believes the current capital structure to
be sufficient in meeting the capital requirements of the
Company.
All expenses are borne by BNP Paribas SA and redemption proceeds
are limited to the amounts received, if any, on the maturity or
early termination of the relevant investment contract between the
Company and the Counterparty.
Potential losses to shareholders are mitigated by the returns
stipulated in the swap agreement with the Counterparty as described
in note 6(h) and the collateral arrangements which are set out in
note 6(i).
(f) Foreign Exchange Risk
The carrying amounts of the Company's foreign currency
denominated financial assets at the reporting date are as
follows:
Period ended Year ended
30 April 2013 31 October
2012
GBP GBP
Assets
US Dollar 33,383,684 44,911,509
Euro 7,723 7,417
-------------- ------------
33,391,407 44,918,926
Liabilities
US Dollar (7,157) (1,331,560)
-------------- ------------
Net foreign currency assets 33,384,250 43,587,366
============== ============
As subscription, redemption and dividend payments in respect of
all cells other than US High Income are made in the same functional
currency, none of the cells other than US High Income are exposed
to foreign exchange risk. Subscription and redemption payments in
respect of Class B US High Income are made in US Dollars, but
dividends are paid in the Sterling equivalent of a fixed US Dollar
amount, unless the relevant shareholder elects to receive their
dividends in US Dollars. As the currency in which these dividends
are paid is selected at the option of the shareholder and may be
paid in the functional currency, the directors do not consider that
the Company acting on behalf of US High Income is exposed to
material foreign exchange risk.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
6 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(g) Valuation
(i) The notional amounts of the derivative instruments are as
follows:
BNP Paribas Agrinvest GBP 47,225,896
Enhanced Property Recovery GBP 30,125,000
Energy - Base Metals (3) GBP 49,587,600
Enhanced Income GBP 39,999,346
UK Enhanced Income GBP 49,015,722
BNP Paribas COMAC GBP 25,526,009
US Enhanced Income - Class A GBP 48,500,080
US Enhanced Income - Class B USD 45,079,125
(ii) The maturity dates of the derivative instruments are as
follows:
BNP Paribas Agrinvest 29 June 2013
Enhanced Property Recovery 20 March 2014
Energy - Base Metals (3) 12 June 2014
BNP Paribas COMAC 1 June 2029*
US Enhanced Income - Class A 16 July 2029
US Enhanced Income - Class B 16 July 2029
UK Enhanced Income 24 September
2029
Enhanced Income 19 March 2108
*It has been resolved to redeem this cell early on 2 July
2013.
(iii) Early Settlement Options relating to the derivative
contracts:
Each contract entered into between the Counterparty and the
Company acting for and on behalf of each cell has been entered into
upon terms which allow such contracts to be terminated, inter alia,
in the following circumstances:
(a) by the Company if the Counterparty fails to make a payment
under the relevant contract (subject to a grace period of three
local business days) or makes a representation which is incorrect
or misleading in any material respect or fails to comply with its
related obligations;
(b) by the Counterparty if the Company fails to make a payment
it is required to pay under the relevant contract (subject to the
grace period mentioned above); and
(c) by either the Counterparty or the Company if the other party
is dissolved, becomes insolvent or is unable to pay its debts as
they become due or on the occurrence of an illegality or the
imposition on payments under the Contract of a withholding which
the Company or the Counterparty, as the case may be, is unable to
gross-up.
It is anticipated that, on early termination of a Contract, a
termination payment would become due to the Company equal to the
aggregate net asset value of the Contract at the date of such
termination. The directors may reinvest such proceeds as they see
fit in investments which in the opinion of the directors replicate
as nearly as practicable the investment characteristics of the
contract so terminated and so that the proceeds are invested, as
nearly as practicable, in accordance with the Company's stated
investment objective for the relevant cell.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
6 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(g) Valuation (continued)
Even if recovered by the Company, any early redemption amount in
respect of the shares of the relevant cell may result in a lower
return than would have been the case if the contract had continued
and been performed up to its maturity date.
In the event that the directors determine that the investment
characteristics of the Contract cannot be replicated then the
directors will notify Shareholders of the relevant cell of such
circumstances, the relevant early redemption amount and the
relevant early redemption date.
If the Counterparty fails to top up the collateral such that it
is equal to at least the Specified Percentage (as set out in note
6(c)) or other circumstances constituting an event of default with
respect to the Counterparty occur, the Company will be entitled to
enforce its security over the collateral as well as to pursue any
other remedies it may have against the Counterparty. In such
circumstances, the Company will re-invest the proceeds of
realisation of the collateral or distribute the same to
Shareholders.
(h) Periodic Returns on Principal and Timings of Payments
Enhanced Income
Under the terms of the Swap Confirmation between the
Counterparty and the Company acting for and on behalf of the
Enhanced Income cell, the Counterparty will pay to the Company for
the account of the Enhanced Income cell quarterly a Sterling amount
equal to 2.00% of the notional amount of the Swap Confirmation,
equivalent to 2.00 pence per Class A Sterling Hedged Enhanced
Income Preference Share, provided that if the underlying portfolio
net asset value reaches 110% of the initial underlying portfolio
net asset value (equivalent to a net asset value of 110 pence per
share), future payments will increase to 2.20% of the notional
amount of the Swap Confirmation, equivalent to 2.20 pence per Class
A Sterling Hedged Enhanced Income Preference Share. For each
subsequent 5 per cent increase in the underlying portfolio net
asset value, subsequent quarterly payments will increase by 0.1%,
equivalent to 0.1 pence per Class A Sterling Hedged Enhanced Income
Preference Share.
Where the underlying portfolio net asset value subsequently
decreases after having increased to 110% or more of the initial
underlying portfolio net asset value, but has not decreased to less
than 100% of the initial underlying portfolio net asset value,
subsequent quarterly payments will reduce to 2.00 pence per Class A
Sterling Hedged Enhanced Income Preference Share. If the underlying
portfolio net asset value has fallen below 100 per cent and below a
lower percentage which is an integral multiple of 5 per cent i.e.
95%, 90%, 85% (down to 5%) of the initial underlying portfolio net
asset value, subsequent dividend payments will be adjusted to be
the product of 2.00% and the relevant percentage threshold level
and 100 pence per Class A Sterling Hedged Enhanced Income
Preference Share.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
6 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(h) Periodic Returns on Principal and Timings of Payments (continued)
UK Enhanced Income
Under the terms of the Swap Confirmation between the
Counterparty and the Company acting for and on behalf of the BNP
Paribas UK Enhanced Income cell, the Counterparty will pay to the
Company for the account of the UK Enhanced Income cell quarterly a
Sterling amount equal to 2.00% of the notional amount of the Swap
Confirmation, equivalent to 2.00 pence per UK Enhanced Income
Preference Share, provided that if the underlying portfolio net
asset value reaches 110% of the initial underlying portfolio net
asset value (equivalent to a net asset value of 110 pence per
share), future payments will increase to 2.20% of the notional
amount of the Swap Confirmation, equivalent to 2.20 pence per UK
Enhanced Income Preference Share. For each subsequent 5 per cent
increase in the underlying portfolio net asset value, subsequent
quarterly payments will increase by 0.1%, equivalent to 0.1 pence
per UK Enhanced Income Preference Share.
Where the underlying portfolio net asset value subsequently
decreases after having increased to 110% or more of the initial
underlying portfolio net asset value, but has not decreased to less
than 100% of the initial underlying portfolio net asset value,
subsequent quarterly payments will reduce to 2.00 pence per UK
Enhanced Income Preference Share. If the underlying portfolio net
asset value has fallen below 100 per cent and below a lower
percentage which is an integral multiple of 5 per cent i.e. 95%,
90%, 85% (down to 5%) of the initial underlying portfolio net asset
value, subsequent dividend payments will be adjusted to be the
product of 2.00% and the relevant percentage threshold level and
100 pence per UK Enhanced Income Preference Share.
US Enhanced Income - Class A
Under the terms of the Swap Confirmation between the
Counterparty and the Company acting for and on behalf of the US
Enhanced Income cell in respect of Class A, the Counterparty will
pay to the Company for the account of the US Enhanced Income cell
quarterly a Sterling amount equal to 2.00% of the notional amount
of the Swap Confirmation, equivalent to 2.00 pence per Class A
Sterling Hedged US Enhanced Income Preference Share, provided that
if the underlying portfolio net asset value reaches 110% of the
initial underlying portfolio net asset value (equivalent to a net
asset value of 110 pence per share), future payments will increase
to 2.20% of the notional amount of the Swap Confirmation,
equivalent to 2.20 pence per BNP Paribas US Enhanced Income Class A
Preference Share. For each subsequent 5 per cent increase in the
underlying portfolio net asset value, subsequent quarterly payments
will increase by 0.1%, equivalent to 0.1 pence per Class A Sterling
Hedged US Enhanced Income Preference Share.
Where the underlying portfolio net asset value subsequently
decreases after having increased to 110% or more of the initial
underlying portfolio net asset value, but has not decreased to less
than 100% of the initial underlying portfolio net asset value,
subsequent quarterly payments will reduce to 2.00 pence per Class A
Sterling Hedged US Enhanced Income Preference Share. If the
underlying portfolio net asset value has fallen below 100 per cent
and below a lower percentage which is an integral multiple of 5 per
cent i.e. 95%, 90%, 85% (down to 5%) of the initial underlying
portfolio net asset value, subsequent dividend payments will be
adjusted to be the product of 2.00% and the relevant percentage
threshold level and 100 pence per Class A Sterling Hedged US
Enhanced Income Preference Share.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
6 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(h) Periodic Returns on Principal and Timings of Payments (continued)
US Enhanced Income - Class B
Under the terms of the Swap Confirmation between the
Counterparty and the Company acting for and on behalf of the US
Enhanced Income cell in respect of Class B, the Counterparty will
pay to the Company for the account of the US Enhanced Income cell
quarterly a US Dollar amount equal to 2.00% of the notional amount
of the Swap Confirmation, equivalent to 2.00 cents per Class B US
Dollar Unhedged US Enhanced Income Preference Share, provided that
if the underlying portfolio net asset value reaches 110% of the
initial underlying portfolio net asset value (equivalent to a net
asset value of 110 pence per share), future payments will increase
to 2.20% of the notional amount of the Swap Confirmation,
equivalent to 2.20 cents per BNP Paribas US Enhanced Income Class B
Preference Share. For each subsequent 5 per cent increase in the
underlying portfolio net asset value, subsequent quarterly payments
will increase by 0.1%, equivalent to 0.1 cents per Class B US
Dollar Unhedged US Enhanced Income Preference Share.
Where the underlying portfolio net asset value subsequently
decreases after having increased to 110% or more of the initial
underlying portfolio net asset value, but has not decreased to less
than 100% of the initial underlying portfolio net asset value,
subsequent quarterly payments will reduce to 2.00 cents per Class B
US Dollar Unhedged US Enhanced Income Preference Share. If the
underlying portfolio net asset value has fallen below 100 per cent
and below a lower percentage which is an integral multiple of 5 per
cent i.e. 95%, 90%, 85% (down to 5%) of the initial underlying
portfolio net asset value, subsequent dividend payments will be
adjusted to be the product of 2.00% and the relevant percentage
threshold level and 100 cents per Class B US Dollar Unhedged US
Enhanced Income Preference Share.
(i) Collateral Arrangements
Under the terms of credit support deeds entered into between the
Counterparty and the Company acting for and on behalf of each cell,
the Counterparty is required to post collateral in the form of AAA
rated government bonds in favour of the Company acting for and on
behalf of each cell, such collateral being valued on a weekly basis
and, if the value of the collateral is less than the Credit Support
Amount (as set out in note 6(c) above), the Counterparty will
provide additional collateral to increase the aggregate value to at
least applicable Credit Support Amount. Where there is an event of
default in respect of the Counterparty under the swap confirmation,
the Company will be entitled to enforce its security over the
collateral. The collateral is delivered to an escrow account, held
by BNP Paribas Securities Services as custodian, in favour of the
Company.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
6 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
(i) Collateral Arrangements (continued)
The collateral held against all derivative instruments as at 30
April 2013 is detailed below:
Cell Period ended Year ended
30 April 2013 31 October
2012
GBP GBP
USHI - 10,580,862
Agrinvest 8,451,428 9,280,614
EPR 11,223,158 11,348,664
EBM (3) 11,403,692 13,066,686
COMAC 2,215,372 3,009,433
USEI 27,861,204 30,604,119
UKEI 10,203,504 11,050,438
EI 10,722,002 9,735,991
-------------- -----------
(j) Finance Costs and Expenses
All payments by the Company are made in Sterling, except that
the Investment Manager's fees in respect of US Enhanced Income are
paid in US Dollars.
As detailed in note 1(b), all expenses are borne by BNP Paribas
SA and recognised in the Statement of Comprehensive Income.
Payments to the Company for the account of the US Enhanced
Income cell in respect of Class B are made in US Dollars.
Dividends paid by the Company to holders of Class B US Dollar
Unhedged US Enhanced Income Preference Shares are paid in US
Dollars.
7 RELATED PARTY TRANSACTIONS
Anson Fund Managers Limited is the Administrator and Secretary
of the Company and Anson Registrars Limited is the Registrar of the
Company. John R Le Prevost is a director of both these companies.
During the period under review, the Administrator charged fees of
GBP76,792 (Apr 2012: GBP99,817) in respect of its administration of
the Company of which GBP10,457 (Oct 2012: GBP11,944) was
outstanding at the period end and the Registrar charged fees of
GBP12,302 (Apr 2012: GBP14,426) in respect of registration services
on behalf of the Company of which GBP1,068 (Oct 2012: GBP1,108) was
outstanding at the period end.
Anson Group Limited ("AGL") is the parent company of Anson Fund
Managers Limited and Anson Registrars Limited. John Le Prevost is a
director of AGL. John R Le Prevost is also the beneficial owner of
AGL.
THEAM (the Investment Manager) and BNP Paribas Arbitrage SNC,
the Company's ultimate controlling party, are both members of the
BNP Paribas Group.
During the period under review the Investment Manager charged
fees of GBP175,741 (Apr 2012: GBP274,947), of which GBP19,116 (Oct
2012: GBP66,156) was outstanding at the period end.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
7 RELATED PARTY TRANSACTIONS (continued)
As described elsewhere in the Financial Statements, BNP Paribas,
a member of the BNP Paribas Group, was appointed as Distributor of
Preference Shares in all the cells and is also the counterparty to
the Index Derivative Contracts entered into by the Company on
behalf of all cells. All these transactions and arrangements have
been entered into on an arms length basis. At the end of the period
BNP Paribas Group and its subsidiaries held the following shares in
issue:
As at As at
30 Apr 2013 % of total 31 Oct
2012 % of total
Shares shares Shares shares
US High Income Class A Sterling
Hedged Preference Shares - 0.00% 76,921,674 83.19%
US High Income Class B Unhedged
Preference Shares - 0.00% 5,580,086 9.57%
BNP Paribas Agrinvest 45,177,865 95.66% 44,912,900 95.10%
BNP Paribas Enhanced Property
Recovery 18,895,854 62.72% 18,895,854 62.72%
BNP Paribas Energy - Base
Metals (3) 43,837,732 88.40% 43,100,057 86.92%
BNP Paribas Enhanced Income 34,425,125 86.06% 34,015,772 85.04%
BNP Paribas COMAC 25,438,699 99.66% 24,438,699 95.74%
US Enhanced Income Class
A 41,537,523 85.64% 39,779,523 82.02%
US Enhanced Income Class
B 30,395,627 67.43% 28,360,527 62.91%
UK Enhanced Income 43,902,395 89.57% 42,196,395 86.09%
As detailed in Note 8, on 19 November 2012 all Class A Sterling
Hedged US High Income Cell and Class B Unhedged US High Income Cell
Shares were compulsorily redeemed and Class A Sterling Hedged US
High Income Cell and Class B Unhedged US High Income Cell were
subsequently dissolved.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
7 RELATED PARTY TRANSACTIONS (continued)
ONGOING EXPENSES Period ended Period ended
30 Apr 2013 30 Apr 2012
TOTAL TOTAL
GBP GBP
Administration fees 76,792 99,817
Directors' remuneration 15,000 13,469
Registration fees 12,302 14,426
Custody fees 31,451 55,129
Asset management fees 175,741 274,947
Tax fees 21,650 37,425
Audit fees 41,198 23,614
Annual fees 10,565 11,239
Foreign exchange differences (6,327) -
Other operating expenses 6,309 1,209
------------- -------------
384,681 531,275
============= =============
All expenses are accounted for on an accruals basis through the
Statement of Financial Position and are borne by BNP Paribas
SA.
8 REDEMPTION OF SHARES
During the period, Class A Sterling Hedged US High Income Cell
and Class B Unhedged US High Income Cell reached their redemption
dates. Therefore Class A Sterling Hedged US High Income Cell and
Class B Unhedged US High Income Cell Preference Shares in issue
were compulsorily redeemed.
The redemption value per BNP Paribas US High Income - Class A
Preference Share was 31.25 pence, resulting in redemption proceeds
and distributions to the holders of BNP Paribas US High Income -
Class A Preference Shares of GBP29,729,101. The net realised loss
on the redemption was GBP63,213,386.
The redemption value per BNP Paribas US High Income - Class B
Preference Share was 36.79 pence, resulting in redemption proceeds
and distributions to the holders of BNP Paribas US High Income -
Class B Preference Shares of GBP21,462,267. The net realised loss
on the redemption was GBP17,318,966.
Harewood Structured Investment PCC Limited
Notes to the Financial Statements (continued)
for the period ended 30 April 2013
9 ULTIMATE CONTROLLING PARTY
The ultimate controlling party is BNP Paribas Arbitrage SNC, as
holder of the two Management Shares in issue.
Harewood Structured Investment PCC Limited
SCHEDULE OF INVESTMENTS
as at 30 April 2013
As at 30 April 2013
NOMINAL VALUATION TOTAL NET ASSETS
GBP %
US High Income Cell - Class
A
BNP Paribas Index Derivative
Contract GBP 92,469,987 - 0.00%
US High Income Cell - Class
B
BNP Paribas Index Derivative
Contract USD 58,337,229 - 0.00%
BNP Paribas Agrinvest Cell
BNP Paribas Index Derivative
Contract GBP 47,225,896 51,600,431 16.44%
BNP Paribas Enhanced Property
Recovery Cell
BNP Paribas Index Derivative
Contract GBP 30,125,000 23,356,214 7.44%
BNP Paribas Energy - Base
Metals (3)
Cell
BNP Paribas Index Derivative
Contract GBP 49,587,600 49,135,857 15.66%
BNP Paribas Enhanced Income
Cell
BNP Paribas Index Derivative
Contract GBP 39,999,346 37,838,981 12.06%
BNP Paribas UK Enhanced
Income Cell
BNP Paribas Index Derivative
Contract GBP 49,015,722 46,025,763 14.67%
BNP Paribas COMAC Cell
BNP Paribas Index Derivative
Contract GBP 25,526,009 17,449,069 5.56%
US Enhanced Income Cell
- Class A
Sterling Hedged
BNP Paribas Index Derivative
Contract GBP 48,500,080 55,282,816 17.62%
US Enhanced Income Cell
- Class B
US Dollar Unhedged
BNP Paribas Index Derivative
Contract USD 45,079,125 33,143,270 10.55%
------------ -----------------
TOTAL 313,832,401 100.00%
============ =================
Harewood Structured Investment PCC Limited
SCHEDULE OF INVESTMENTS
as at 31 October 2012
As at 31 October 2012
NOMINAL VALUATION TOTAL NET ASSETS
GBP %
US High Income Cell - Class
A
BNP Paribas Index Derivative
Contract GBP 92,469,987 29,448,917 8.34%
US High Income Cell - Class
B
BNP Paribas Index Derivative
Contract USD 58,337,229 13,901,948 3.94%
BNP Paribas Agrinvest Cell
BNP Paribas Index Derivative
Contract GBP 47,225,896 58,238,503 16.50%
BNP Paribas Enhanced Property
Recovery Cell
BNP Paribas Index Derivative
Contract GBP 30,125,000 22,161,757 6.28%
BNP Paribas Energy - Base
Metals (3)
Cell
BNP Paribas Index Derivative
Contract GBP 49,587,600 49,961,986 14.16%
BNP Paribas Enhanced Income
Cell
BNP Paribas Index Derivative
Contract GBP 39,999,346 36,712,200 10.40%
BNP Paribas UK Enhanced
Income Cell
BNP Paribas Index Derivative
Contract GBP 49,015,722 43,363,719 12.29%
BNP Paribas COMAC Cell
BNP Paribas Index Derivative
Contract GBP 25,526,009 18,534,435 5.25%
US Enhanced Income Cell
- Class A
Sterling Hedged
BNP Paribas Index Derivative
Contract GBP 48,500,080 51,096,774 14.48%
US Enhanced Income Cell
- Class B
US Dollar Unhedged
BNP Paribas Index Derivative
Contract USD 45,079,125 29,518,398 8.36%
------------ -----------------
TOTAL 352,938,637 100.00%
============ =================
Harewood Structured Investment PCC Limited
DIRECTORS AND SERVICE PROVIDERS
Directors 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
Anson Fund Managers Limited Law)
PO Box 405 Clifford Chance LLP
Anson Place 10 Upper Bank Street
Mill Court London E14 5JJ
La Charroterie England
St. Peter Port
Guernsey GY1 3GF
---------------------------------- -----------------------------------
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 PO Box 426
Howald-Hesperange Anson Place
L-2085 Luxembourg Mill Court
La Charroterie
St Peter Port
Guernsey GY1 3WX
---------------------------------- -----------------------------------
Investment Counterparty Registered Office
BNP Paribas Anson Place
10 Harewood Avenue Mill Court
London NW1 6AA La Charroterie
England St Peter Port
Guernsey GY1 1EJ
---------------------------------- -----------------------------------
Harewood Structured Investment PCC Limited
SHAREHOLDER INFORMATION
Shares of all cells are listed on the Channel Island Stock
Exchange and may be dealt in directly through a stockbroker or
professional adviser acting on an investor's behalf. The buying and
selling of such shares may be settled through CREST. Announcements
to holders of such shares and daily market closing prices are
available on Bloomberg, Reuters and the Channel Islands Stock
Exchange's web-site.
Further information relating to such shares is available from
BNP Paribas, telephone 44 (0)207 595 8442 or e-mail
HAREWOOD_SOLUTIONS@bnpparibas.com, and from Anson Fund Managers
Limited, telephone 44 (0)1481 722 260 or e-mail:
reception@anson-group.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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