RNS Number:3228I
Accelerated Return Fund Limited
22 November 2007
The Accelerated Return Fund Limited
Half-Yearly Financial Report
for the period ended 30 September 2007 (Unaudited)
THE ACCELERATED RETURN FUND LIMITED (the "Company")
ABOUT THE COMPANY
The Accelerated Return Fund Limited is a Guernsey incorporated, closed-ended
investment company. With the exception of two Management Shares issued for
administrative reasons, the Company's issued share capital comprises 27,700,000
Participating Shares ("Shares") whose performance is designed to depend upon the
performance of the FTSE 100 Index.
Pursuant to the initial placing and offer for subscription 21,200,000 Shares
were issued at a price of 100p per share on 8 April 2003, a further 2,100,000
Shares were issued at a price of 105.25p on 5 June 2003, a further 2,300,000
Shares were issued at a price of 108p on 22 July 2003 and a further 2,100,000
Shares were issued at a price of 112p on 15 October 2003. All 27,700,000 Shares
now in issue rank pari passu, have been admitted to the Official List and are
capable of being dealt in on the London Stock Exchange. The Company has an
unlimited life but the Shares will be redeemed on or around 10 October 2008.
Your Board in conjunction with the Company's Manager has, since the initial
placing and offer for subscription of Shares, been successful in raising further
capital for the Company by the subsequent issue of 6,500,000 new Shares.
Investment Objective and Policy
The investment objective of the Company is to provide shareholders with six
times the capital return of the FTSE 100 Index, up to a maximum of 66%, over 51/
2 years (the "Final Capital Entitlement"). The Final Capital Entitlement per
Share is designed to be determined by the performance of the FTSE 100 Index over
the calculation period from 7 April 2003 to 7 October 2008.
THE ACCELERATED RETURN FUND LIMITED (the "Company")
ABOUT THE COMPANY (continued)
In accordance with the Company's investment policy, the net proceeds derived by
the Company from the issue of Shares have been invested in a portfolio of debt
securities and over-the-counter derivative instruments at prices based on the
closing level of the FTSE 100 Index on 7 April 2003 of 3935.8. Therefore, if the
FTSE 100 Index rises 11% from its starting level of 3935.80 to a level of 4368.8
in October 2008, the Shares are designed to return growth of 66%.
There is full capital protection if the FTSE 100 Index has fallen at the end of
the period (October 2008) unless the FTSE 100 Index has closed more than 50%
down during the term to 1967.9. In this case, if the FTSE 100 Index is still
below 3935.8 at the end of the period, the net asset value of the Company will
fall by an equivalent percentage. If the level of the FTSE 100 Index has
returned above its starting level of 3935.8 in October 2008, then the Company
will still provide six times the return of the FTSE 100 Index to a maximum of
66%.
Structured Capital at Risk Products (SCARPs)
The Company has been advised that the Company is a SCARP as defined by
the Financial Services Authority (FSA). Financial Advisers should provide
customers with a copy of the FSA factsheet, which is available at
www.moneymadeclear.fsa.gov.uk/pdfs/capital_risk.pdf
The return of capital invested at the end of the investment period is not
guaranteed and therefore the investor may get back less than was originally
invested. Investors should not enter into the transaction unless they are
prepared to lose some or all of the money they have invested.
They should satisfy themselves that the Shares are suitable for them in the
light of their circumstances and financial position, and if in any doubt they
should seek professional advice. Investors may only achieve the rate of return
advertised over a set period and the return may depend on specific conditions
being met.
THE ACCELERATED RETURN FUND LIMITED
MANAGER'S REPORT FOR THE PERIOD ENDED 30 SEPTEMBER 2007
Investment Performance
At launch, and at each subsequent placing of Shares, the net proceeds derived
from the issue of Shares of the Company were invested in a portfolio of debt
securities and options at a price based on the level of the FTSE 100 Index at
the close of business on 7 April 2003, namely 3935.8. On 28 September 2007, the
FTSE 100 Index closed at 6466.8, a rise of 64.3% since launch and 2.5% over the
reporting period.
Over the same periods, the total market value of the Company rose by 51.3% and
1.2% respectively. As at the reporting date the Shares were trading at a 1.2%
discount to net asset value.
As the Company's investment portfolio is based upon the FTSE 100 Index, it is
possible to show the potential capital entitlements available to shareholders
based on the level of the FTSE 100 Index on the Company's winding-up date of 7
October 2008. These figures are for illustrative purposes only and do not
represent forecasts or take into account any unforeseen circumstances.
As at 7 October 2008:
Final FTSE 100 Net Asset Value if FTSE Net Asset Value if FTSE 100
Index Level 100 Index never closes Index has closed below
below 1967.9** 1967.9**
3500 100 88
3750 100 95
4000 109 109
4250 147 147
4500 166 166
4750 166 166
5000 166 166
5250 166 166
5500 166 166
5750 166 166
6000 166 166
6466.8* 166 166
* FTSE 100 Index level at the end of the reporting period
** On any day from 7 April 2003 to 7 October 2008
THE ACCELERATED RETURN FUND LIMITED
MANAGER'S REPORT FOR THE PERIOD ENDED 30 SEPTEMBER 2007 (continued)
As part of its investment portfolio, the Company holds a medium term note issued
by Northern Rock plc with a nominal value of #4,200,000 and a market value, as
at the reporting date, of #3,950,100. This represents 9.22 per cent of the value
of the Company's net assets.
On 14 September, following difficulty obtaining wholesale funding due to the
ongoing global credit crunch, Northern Rock requested emergency short-term
funding from the Bank of England, prompting a run on the bank's deposits as
customers panicked. The Chancellor of the Exchequer then pledged on 17 September
to guarantee all Northern Rock deposits, quelling the panic. On the same day
Moody's placed its Aa3 long term debt and deposit ratings on review direction
uncertain.
The reaction of other rating agencies was more negative. S&P downgraded Northern
Rock's long-term counterparty credit rating from A+ to A on 14 September and cut
it again to A- on 19 September, placing the ratings on creditwatch with
developing implications. Similarly, Fitch cut its long-term issuer default
rating one notch to A on 14 September and by another notch to A- on 17
September, but with a stable outlook. The rationale given by both was the
likelihood that Northern Rock's franchise had been damaged and it would need to
be sold or its operations otherwise wound down. Despite the downgrades, Northern
Rock's credit ratings remain investment grade.
The Treasury later clarified on 20 September that its guarantee would cover all
uncollateralised, unsubordinated wholesale borrowing. This means that the senior
unsecured medium term note held by the Company is now guaranteed by HM Treasury.
THE ACCELERATED RETURN FUND LIMITED
MANAGER'S REPORT FOR THE PERIOD ENDED 30 SEPTEMBER 2007 (continued)
Market Review
The FTSE 100 Index rose 2.5% over the reporting period despite a credit squeeze
prompting a sizeable correction over the summer months.
The start of the period under review saw the Index continuing its recovery from
the large falls seen at the end of February as markets shook off global fears
about the US housing sector and frothy Chinese equity markets, focusing instead
on strong corporate profits and M&A activity.
This optimism was not to last, however, as modern techniques of repackaging and
distributing risk, particularly US sub-prime mortgages, led to concerns over the
level of exposure and identity of various financial institutions to this risk.
This lack of visibility saw credit spreads rise appreciably as banks became
increasingly unwilling to lend to each other. The FTSE 100 Index reflected this
nervousness, falling by over 800 points before staging a
recovery as central banks around the world stepped in as lenders of last resort
to shore up the systemic risk.
Vodafone provided the biggest boost to the Index, climbing by 30.2% as the
outlook for sales growth from emerging markets exceeded expectations and the
dividend was raised. Mining and oil stocks also boosted the Index significantly
as many commodity prices continued to soar. Unsurprisingly, the banking sector
was the worst performing segment of the Index, with RBS being the biggest drag
on the Index, falling 20.6% as its predominately cash offer for ABN Amro
increasingly appeared overvalued to some analysts. Northern Rock was the biggest
faller, plummeting 84.4% as the credit squeeze made its aggressive mortgage
lending strategy untenable.
THE ACCELERATED RETURN FUND LIMITED
MANAGER'S REPORT FOR THE PERIOD ENDED 30 SEPTEMBER 2007 (continued)
Market Outlook
The credit crunch has prompted a fundamental shift in the UK economic outlook.
Over the summer months, the Bank of England ("BoE") was primarily concerned with
inflation exceeding its 2% target and market expectations were for at least one
0.25% hike in base rates. The subsequent market turmoil led to interbank
interest rates trading at considerable premiums to official rates. This
unofficial rate increase, combined with inflation unexpectedly falling below 2%,
led to the BoE keeping rates unchanged and the market now expects the next move
to be down.
The FTSE 100 has shown remarkable resilience, quickly recovering its poise once
central banks acted to underpin the credit markets. However, the strength of the
recovery has not been fully tested and if there are any more shocks waiting to
be discovered it could be short lived.
Close Investments Ltd
13 November 2007
THE ACCELERATED RETURN FUND LIMITED
INTERIM MANAGEMENT REPORT
FOR THE PERIOD FROM 1 APRIL TO 30 SEPTEMBER 2007
A description of important events that have occurred during the first six months
of the financial year, their impact on the performance of the Company as shown
in the financial statements and a description of the principal risks and
uncertainties for the remaining six months of the financial year is given in the
Manager's Report on pages 5 to 7 and is incorporated here by reference.
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 or 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 Interim Management Report includes or incorporates by
reference:
a. An indication of important events that have occurred during the first
six months of the financial year, and their impact on the financial
statements;
b. a description of the principal risks and uncertainties for the remaining
six months of the financial year;
c. confirmation that there were no 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
d. changes in the related parties transactions described in the last annual
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.
Trevor Ash Peter Le Cheminant
Director Director
THE ACCELERATED RETURN FUND LIMITED
STATEMENT OF OPERATIONS
for the period ended 30 September 2007
Notes 01 Apr 2007 01 Apr 2006
to 30 Sep 2007 to 30 Sep 2006
GBP GBP
Net movement in unrealised
appreciation on Investments 5 1,170,200 1,028.280
Operating
expenses 2 (120,143) (118,332)
---------- ----------
Gain on ordinary activities
before taxation 1,050,057 909,948
Taxation on ordinary activities - -
---------- ----------
Net gain for the period
attributable to shareholders 1,050,057 909,948
========== ==========
Pence Pence
Earnings per share for the
period - Basic and Diluted 4 3.79 3.29
In arriving at the results for the financial period, all amounts above relate to
continuing operations.
There are no recognised gains or losses for the period other than those
disclosed above.
Reconciliation of earnings per share for investment purposes to earnings per
share per the financial statements:
01Apr 2007 to 01 Apr 2006 to
30 Sep 2007 30 Sep 2006
Pence Pence
Earnings per share for investment purposes 4.22 3.71
Adjustment for amortisation of debt
issue costs (0.14) (0.13)
Adjustment to include expenses on
an accruals basis (0.29) (0.29)
Earnings per share per the financial
statements 3.79 3.29
In accordance with International Financial Reporting Standards, expenses should
be attributed to the period to which they relate. The adjustment to expenses to
reflect the application of this accruals basis decreases the earnings per share
of the Company by 0.43 pence.
The earnings per share for investment purposes represents the earnings per share
attributable to shareholders in accordance with the Prospectus, which recognises
all expenses of the Company up to and including the date that the Final Capital
Entitlement becomes payable.
THE ACCELERATED RETURN FUND LIMITED
NET ASSET STATEMENT
as at 30 September 2007
Notes 30 Sep 2007 31 Mar 2007 30 Sep 2006
GBP GBP GBP
FIXED ASSETS
Unquoted financial assets
designated as fair value through
profit or loss 5 42,393,590 41,223,390 39,885,040
---------- ---------- ----------
CURRENT ASSETS
Debtors 6 86,353 128,300 166,419
Cash at bank 373,267 454,693 533,533
--------- --------- ---------
459,620 582,993 699,952
CURRENT LIABILITIES
Creditors - due within one
year 7 11,823 15,053 10,119
--------- --------- ---------
NET CURRENT ASSETS 447,797 567,940 689,833
TOTAL ASSETS LESS CURRENT
LIABILITIES 42,841,387 41,791,330 40,574,873
Creditors - due after one year
excluding net assets
attributable
to shareholders 8 - - -
--------- --------- ---------
NET ASSETS ATTRIBUTABLE TO
SHAREHOLDERS 42,841,387 41,791,330 40,574,873
========= ========= =========
SHARES IN ISSUE 27,700,000 27,700,000 27,700,000
Pence Pence Pence
NAV PER SHARE 154.66 150.87 146.48
Reconciliation of NAV per share for investment purposes to NAV per share per the
financial statements:
30 Sep 2007 31 Mar 2007 30 Sep 2006
Pence Pence Pence
NAV per share for investment purposes 153.04 148.82 143.98
Adjustment for debt issue costs 0.28 0.42 0.57
Adjustment to include expenses on an 1.34 1.63 1.93
accruals basis
NAV per share per the financial
statements 154.66 150.87 146.48
THE ACCELERATED RETURN FUND LIMITED
NET ASSET STATEMENT (continued)
as at 30 September 2007
In accordance with International Financial Reporting Standards, expenses should
be attributed to the period to which they relate.
The NAV per Fund share for investment purposes represents the NAV per share
attributable to shareholders in accordance with the Prospectus, which recognises
all expenses of the Company up to and including the date that the Final Capital
Entitlement becomes payable.
The financial statements were approved by the Board of directors on 13 November
2007 and are signed on its behalf by:
Trevor Ash Peter Le Cheminant
Director Director
THE ACCELERATED RETURN FUND LIMITED
STATEMENT OF CASH FLOWS
for the period ended 30 September 2007
01 Apr 2007 01 Apr 2006
to 30 Sep 2007 to 30 Sep 2006
GBP GBP
Operating activities
Net gain for the period attributable
to shareholders 1,050,057 909,948
Less: Unrealised (appreciation) on
investments (1,170,200) (1,028,280)
Less: Interest received (11,450) (12,309)
Add: Amortisation of debt issue costs 38,336 35,122
Less: (Decrease) in accrued expenses (3,230) (8,491)
Add: Decrease in prepayments and accrued
income excluding debt issue costs 3,611 4,288
---------- ----------
Net cash outflow from operating activities (92,876) (99,722)
---------- ----------
Investing activities
Interest received 11,450 12,309
---------- ----------
Net cash outflow from investing activities 11,450 12,309
---------- ----------
Cash at beginning of period 454,693 620,946
(Decrease) in cash and cash equivalents (81,426) (87,413)
---------- ----------
Cash at end of period 373,267 533,533
========== ==========
THE ACCELERATED RETURN FUND LIMITED
STATEMENT OF CHANGES IN NET ASSETS
for the period ended 30 September 2007
30 Sep 2007 31 Mar 2007 30 Sep 2006
GBP GBP GBP
Opening balance 41,791,330 39,664,925 39,664,925
Net gain for the period attributable
to shareholders 1,050,057 2,126,405 909,948
---------- ---------- ----------
Closing balance 42,841,387 41,791,330 40,574,873
========== ========== ==========
THE ACCELERATED RETURN FUND LIMITED
Notes to the Financial Statements as at 30 September 2007
1 ACCOUNTING POLICIES
(a) Basis of Preparation
The financial statements have been prepared in conformity with International
Financial Reporting Standards and applicable Guernsey law. The financial
statements have been prepared on an historical cost basis except for the
measurement at fair value of financial instruments. Whilst the company has an
unlimited life, the Company's Participating Shares are due to be redeemed on 10
October 2008. The going concern basis remains appropriate.
(b) Taxation
The Company has been granted exemption under the Income Tax (Exempt Bodies)
(Guernsey) Ordinance, 1989 from Guernsey Income Tax, and is charged an annual
fee of #600.
(c) Expenses
All expenses are accounted for on an accrual basis.
(d) Debt Issue Costs
The debt issue costs incurred amounted to #419,368. Because the Company's
participating shares are redeemable on or around 10 October 2008, they are
required to be classified as debt instruments under IAS 32. Consequently, issue
costs are required to be amortised over the life of the instrument.
(e) Interest Income
Interest income is accounted for on an accruals basis.
(f) Cash and Cash Equivalents
Cash in bank and short term deposits which are held to maturity are carried at
cost. Cash and cash equivalents are defined as call deposits, short term
deposits and highly liquid investments readily convertible to known amounts of
cash and subject to insignificant risk of changes in value. For the purposes of
the Statement of Cash Flows, cash and cash equivalents consist of cash and
deposits at bank.
(g) Investments
All investments are designated "fair value through profit or loss". Investments
are initially recognised on the date of purchase 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 and impairment of investments
recognised in the Statement of Operations. Investments are derecognised on their
maturity date. Gains and losses on the sale of investments will be taken to the
Statement of Operations.
(h) Option
The option contract consists of a call spread and put option and was initially
recognised at the fair value of the consideration received on the date of sale.
After initial recognition, the option is measured at fair value with unrealised
gains and losses being recognised in the Statement of Operations. The option
will be derecognised at maturity on 7 October 2008.
THE ACCELERATED RETURN FUND LIMITED
Notes to the Financial Statements as at 30 September 2007 (continued)
1 ACCOUNTING POLICIES - CONTINUED
(i) Trade Date Accounting
All "regular way" purchases and sales of financial assets are recognised on the
"trade date", i.e. the date that the entity commits to purchase or sell the
asset. Regular way purchases or sales are purchases or sales of financial assets
that require delivery of the asset within the timeframe generally established by
regulation or convention in the market place.
(j) Segmental Reporting
The directors are of the opinion that the Company is engaged in a single segment
of business, being investment in Sterling-denominated medium term notes linked
to the performance of United Kingdom market indices the United Kingdom.
2 OPERATING EXPENSES
30 Sep 2007 30 Sep 2006
GBP GBP
Amortisation of debt issue costs 38,336 35,122
Investment management fees(1) 49,566 49,566
Administration fees 12,534 12,534
Directors' remuneration 7,500 7,500
Registration fees 4,416 4,342
Directors and Officers Insurance 4,500 5,067
Audit fees 3,847 3,700
Other operating expenses 10,894 12,810
--------- ---------
131,593 130,641
Less: Interest earned on expenses provision (11,450) (12,309)
--------- ---------
120,143 118,332
========= =========
(i) The Manager is entitled to receive a fee from the Company at an annual rate
of 0.35% of the initial Gross Proceeds.
3 DIRECTORS' REMUNERATION
The Prospectus provides that each director will be paid a fee of #5,000 per
annum by the Company. The remuneration will remain fixed over the life of the
Company's Preference Shares.
4 EARNINGS PER SHARE
Earnings per share is based on the net gain for the period attributable to
shareholders of #1,050,057 (2006: #909,948) and on 27,700,000 Shares, being the
weighted average number of Shares in issue during the period. The earnings per
Management Share is based on the net gain for the period of #0 (2006: #0) and on
2 (2006: 2) Management Shares, being the weighted average number of Management
Shares in issue during the period.
THE ACCELERATED RETURN FUND LIMITED
Notes to the Financial Statements as at 30 September 2007 (continued)
5 INVESTMENTS
UNQUOTED FINANCIAL ASSETS 30 Sep 2007 31 Mar 2007 30 Sep 2006
DESIGNATED AS FAIR VALUE GBP GBP GBP
THROUGH PROFIT OR LOSS
Opening portfolio cost 25,612,730 25,612,730 25,612,730
Unrealised appreciation on
valuation brought forward 15,610,660 13,244,030 13,244,030
Unrealised appreciation on
valuation for the period 1,170,200 2,366,630 1,028,280
--------- --------- ---------
Unrealised appreciation on
valuation carried forward 16,780,860 15,610,660 14,272,310
--------- --------- ---------
Closing valuation 42,393,590 41,223,390 39,885,040
========= ========= =========
Valuations of investments are based on valuations provided by BNP Paribas. The
Performance of the financial assets is based on the closing level of the FTSE
100 Index on 7 October 2008. If the FTSE 100 Index closes above 3,935.8 the
instruments are designed to give a return of six times the performance up to a
maximum return of 66% of the capital.
The medium term notes are zero dividend notes with a nominal value of
#27,700,000 and mature on 9 October 2008. The original cost of the medium term
notes was #21,764,250.
The option contract consists of a call spread and a put option. The performance
of the call spread is dependent on the FTSE 100 Index. The nominal value is
#27,700,000. If the FTSE 100 Index closes on 7 October 2008 above 3,935.8, the
call spread will give a return of six times the percentage increase in the
Index, up to a maximum return of sixty-six per cent of the nominal value.
The performance of the put option is linked to the performance of the FTSE 100
Index. At an Index value of 3,935.8 or above at the close of business on 7
October 2008 or if the Index has never closed below 1,967.9 during the
calculation period from 7 April 2003 to 7 October 2008 the put option will be
worth #nil at maturity. If the Index has closed below 1,967.9 over the
calculation period and the Index is still below 3,935.8 at 7 October 2008 the
put option will be worth a percentage of the notional value, being #27,700,000,
equivalent to the percentage fall in the level of the FTSE 100 Index over the
calculation period. The put option is not exercisable until the maturity date of
7 October 2008.
The original cost of the option contract was #3,848,480. The fair value of the
put option is based on the valuation provided by BNP Paribas. There is no active
market regarding the put option. An independent check on the valuation is
performed by the Manager.
THE ACCELERATED RETURN FUND LIMITED
Notes to the Financial Statements as at 30 September 2007 (continued)
6 DEBTORS
30 Sep 2007 31 Mar 2007 30 Sep 2006
GBP GBP GBP
Accrued income 815 606 647
Prepaid debt issue costs 78,558 116,894 158,634
Prepayments 6,980 10,800 7,138
--------- --------- ---------
86,353 128,300 166,419
========= ========= =========
7 CREDITORS
(amounts falling due within one year)
30 Sep 2007 31 Mar 2007 30 Sep 2006
GBP GBP GBP
Accrued administration fees 2,174 2,521 2,057
Accrued registration fees 699 697 627
Accrued audit fees 3,750 7,500 3,750
Other accrued expenses 5,200 4,335 3,685
Expenses provision 187,554 193,646 187,879
Less: Prepaid expense
provision (see Note 8) (187,554) (193,646) (187,879)
--------- --------- ---------
11,823 15,053 10,119
========= ========= =========
8 CREDITORS
(amounts falling due after one year)
30 Sep 2007 31 Mar 2007 30 Sep 2006
GBP GBP GBP
Expenses provision 181,685 257,400 343,320
Less: Prepaid expense (181,685) (257,400) (343,320)
provision --------- --------- ---------
- - -
========= ========= =========
The prepaid expense provision represents monies set aside to meet the ongoing,
annual and redemption expenses of the Company, as set out in the Prospectus.
If, at the Redemption Date, there is any surplus remaining from the expense
provision (together with accrued interest thereon), this surplus will revert to
the Manager. In the event of redemption or repurchase of all of the shares, or
upon a winding-up of the Company, in each case prior to the Redemption Date, any
balance of the expense provision (together with accrued interest thereon) other
than the investment management fee will also revert to the Manager.
THE ACCELERATED RETURN FUND LIMITED
Notes to the Financial Statements as at 30 September 2007 (continued)
9 SHARE CAPITAL
Authorised Shares GBP
Unclassified shares of 0.01p each 200,000,000 20,000
Management shares of #1.00 each 100 100
---------
20,100
=========
Issued 30 Sep 2007 31 Mar 2007 30 Sep 2006
GBP GBP GBP
Participating shares - fully paid 27,700,000 27,700,000 27,700,000
Management shares - fully paid 2 2 2
--------- --------- ---------
Number of shares in issue 27,700,002 27,700,002 27,700,002
========= ========= =========
Issued Share Capital 30 Sep 2007 31 Mar 2007 30 Sep 2006
GBP GBP GBP
Participating shares 2,770 2,770 2,770
Management shares 2 2 2
--------- --------- ---------
2,772 2,772 2,772
========= ========= =========
Participating Shares are redeemable on or around 10 October 2008. The Company is
closed-ended and therefore shareholders have no right to request the Company to
repurchase their Shares or to redeem them prior to the redemption date. If the
Company is wound up prior to the redemption date, shareholders will be entitled
to the net asset value of the Shares on the winding up date. No dividends will
be paid on the Shares.
Management Shares are not redeemable, do not carry any right to dividends and in
a winding up rank only for a return of the amount of paid-up capital after
return of capital on Shares and nominal shares. Given the immateriality of the
Management Shares to the net assets of the Company, they have been included in
the net assets attributable to holders of Shares.
10 SHARE PREMIUM
30 Sep 2007 31 Mar 2007 30 Sep 2006
GBP GBP GBP
Share premium 28,243,480 28,243,480 28,243,480
--------- --------- ---------
28,243,480 28,243,480 28,243,480
========= ========= =========
THE ACCELERATED RETURN FUND LIMITED
Notes to the Financial Statements as at 30 September 2007 (continued)
11 FINANCIAL INSTRUMENTS
The Company's main financial instruments comprise:
(a) Cash and cash equivalents that arise directly from the Company's operations;
and
(b) Debt securities; and
(c) An option contract whose performance is based on the performance of the FTSE
100 Index.
Details of the investments referred to above are shown in the Schedule of
Investments on pages 20 to 22.
12 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The main risks arising from the Company's financial instruments are market price
risk, credit risk, liquidity risk and interest rate risk. The Board regularly
review and agrees policies for managing each of these risks and these are
summarised below.
(a) Market Price Risk
Market price risk arises mainly from uncertainty about future prices of
financial instructments 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. A list of
investments held by the Company at the period end is shown in the Schedule of
Investments on page 20.
Details of the Company's Investment Objective and Policy are given on page 1.
(b) 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 all issuers carried an investment grade credit rating. The
Board monitors credit risk and will consider further action if the credit rating
of an issuer falls below A- or A3 as ranked by S&P and Moody's respectively.
(c) Liquidity Risk
Liquidity risk is the risk that Company will encounter difficulty in realising
assets or otherwise raising funds to meet financial commitments. The Board
regularly monitors the appropriateness of the expense provision over the
anticipated life of the Company.
(d) Interest Rate Risk
The Company holds cash on fixed deposit, the return on which is subject to
fluctuations in market interest rates. All fixed deposits mature within three
months.
(e) Option Counterparty Risk
The Company has entered into an arrangement with BNP Paribas ("BNP") as issuer
of the Equity Index Option whereby BNP posts collateral in a segregated account
under the control of the Company, where such collateral represents in value
terms the excess over 20% of the net asset value of the Company of the value of
the Equity Index Option in favour of the Company. Such collateral is adjusted on
at least a monthly basis between BNP and the Company.
THE ACCELERATED RETURN FUND LIMITED
Schedule of Investments as at 30 September 2007
DEBT SECURITIES PORTFOLIO 30 Sep 2007 30 Sep 2007 30 Sep 2007
NOMINAL VALUATION TOTAL NET
HOLDINGS GBP ASSETS
Alliance & Leicester Building
Society 2,100,000 1,976,730 4.62%
0% EMTN 9 October 2008
Bradford & Bingley plc 4,200,000 3,950,940 9.22%
0% EMTN 9 October 2008
Britannia Building Society plc 4,200,000 3,950,100 9.22%
0% EMTN 9 October 2008
Egg Banking plc 4,200,000 3,950,100 9.22%
0% EMTN 9 October 2008
Northern Rock plc 4,200,000 3,950,100 9.22%
0% EMTN 9 October 2008
Nationwide Building Society 4,400,000 4,139,960 9.66%
0% EMTN 9 October 2008
---------- ----------
Skipton Building Society 4,400,000 4,138,200 9.66%
0% EMTN 9 October 2008
---------- ----------
26,056,130 60.82%
========== ==========
NOTIONAL VALUATION TOTAL NET
HOLDING GBP ASSETS
---------- ----------
BNP Paribas Equity Index Option 27,700,000 16,337,460 38.13%
expiring 7 October 2008
---------- ----------
42,393,590 98.95%
========== ==========
The Accelerated Return Fund Limited (the "Company")
Schedule of Investment as at 31 March 2007
DEBT SECURITIES PORTFOLIO 31 Mar 2007 31 Mar 2007 31 Mar 2007
NOMINAL VALUATION TOTAL NET
HOLDINGS GBP ASSETS
Alliance & Leicester
Building Society 2,100,000 1,923,810 4.60%
0% EMTN 9 October 2008
Bradford & Bingley plc 4,200,000 3,843,840 9.20%
0% EMTN 9 October 2008
Britannia Building Society
plc 4,200,000 3,843,000 9.20%
0% EMTN 9 October 2008
Egg Banking plc 4,200,000 3,843,000 9.20%
0% EMTN 9 October 2008
Northern Rock plc 4,200,000 3,843,000 9.20%
0% EMTN 9 October 2008
Nationwide Building Society 4,400,000 4,028,640 9.64%
0% EMTN 9 October 2008
---------- ----------
Skipton Building Society 4,400,000 4,026,000 9.63%
0% EMTN 9 October 2008
---------- ----------
25,351,290 60.67%
========== ==========
NOTIONAL VALUATION TOTAL NET
HOLDING GBP ASSETS
BNP Paribas FTSE Equity
Index Option expiring 7
October 2008 27,700,000 15,872,100 37.98%
---------- ----------
41,223,390 98.65%
========== ==========
THE ACCELERATED RETURN FUND LIMITED
Schedule of Investments as at 30 September 2006
30 Sep 2006 30 Sep 2006 30 Sep 2006
DEBT SECURITIES PORTFOLIO NOMINAL VALUATION TOTAL NET
HOLDINGS GBP ASSETS
GBP %
Alliance & Leicester
Building Society 2,100,000 1,890,000 4.67%
0% EMTN 9 October 2008
Bradford & Bingley plc 4,200,000 3,775,800 9.31%
0% EMTN 9 October 2008
Britannia Building Society
plc 4,200,000 3,774,120 9.30%
0% EMTN 9 October 2008
Egg Banking plc 4,200,000 3,774,540 9.30%
0% EMTN 9 October 2008
Northern Rock plc 4,200,000 3,774,120 9.30%
0% EMTN 9 October 2008
Nationwide Building Society 4,400,000 3,957,360 9.75%
0% EMTN 9 October 2008
---------- ----------
Skipton Building Society 4,400,000 3,953,400 9.74%
0% EMTN 9 October 2008
---------- ----------
24,899,340 61.37%
========== ==========
NOTIONAL VALUATION TOTAL NET
HOLDING GBP ASSETS
BNP Paribas Equity Index
Option expiring 7 October 2008 27,700,000 14,985,700 36.93%
---------- ----------
39,885,040 98.30%
========== ==========
THE ACCELERATED RETURN FUND LIMITED
SHAREHOLDER INFORMATION
The Company's Participating Shares are listed on the London Stock Exchange.
Monthly factsheets are issued by the Manager and can be down-loaded from the
Manager's web-site http://www.closeinvestments.co.uk.
Company announcements and daily market closing prices of the Company's
Participating Shares are available on Reuters, Bloomberg and on-line on the web.
The ISIN of the Company's Participating Shares is GB0032715806 and the London
Stock Exchange mnemonic is ACF.
The Annual Financial Report for the year ended 31 March 2008 is intended to be
made public in June 2008 and sent to Shareholders in July 2008, together with a
Notice of Meeting convening the Annual General Meeting of shareholders.
SHARE DEALING
Shares may be dealt in directly through a stockbroker or professional adviser
acting on an investor's behalf. The buying and selling of shares may be settled
through CREST.
SHAREHOLDER ENQUIRIES
The Company's registrar is Anson Registrars Limited in Guernsey and they can be
contacted on 01481 711301.
THE ACCELERATED RETURN FUND LIMITED
Registered in Guernsey No. 39706
DIRECTORS AND SERVICE PROVIDERS
---------------------- ----------------------------
Directors Trevor Charles Ash (Chairman)
Jonathan Maximillian Gumpel
Peter John Le Cheminant
---------------------- ----------------------------
Manager Close Investments Limited
(Authorised and Regulated by the Financial Services
Authority)
10 Exchange Square
Primrose Street
London, England EC2A 4BY
---------------------- ----------------------------
Administrator and Anson Fund Managers Limited
Secretary
PO Box 405
Anson Place
Mill Court
La Charroterie
St Peter Port
Guernsey GY1 3GF
---------------------- ----------------------------
Principal Bankers Royal Bank of Scotland International Limited
PO Box 604
Royal Bank Place
1 Glategny Esplanade
St Peter Port
Guernsey GY1 4BQ
---------------------- ----------------------------
Auditor Ernst & Young LLP
PO Box 9
14 New Street
St Peter Port
Guernsey GY1 4AF
---------------------- ----------------------------
Registrar, Transfer Anson Registrars Limited
Agent
and Paying Agent PO Box 426
Anson Place
Mill Court
La Charroterie
St Peter Port
Guernsey GY1 3WX
---------------------- ----------------------------
UK Transfer Agent Anson Administration (UK) Limited
3500 Parkway
Whiteley
Fareham
Hampshire
England PO15 7AL
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR ELLFLDFBBFBX
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