TIDMCROP
RNS Number : 7408K
Ceres Agriculture Fund Limited
26 April 2010
CERES AGRICULTURE FUND LIMITED
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2009
26 April 2010
For immediate release
Ceres Agriculture Fund Limited ("Ceres" or the "Company"), a Guernsey domiciled,
close-ended investment company established to invest in an actively managed
portfolio of exchange-traded agricultural commodity contracts and derivatives
managed by FourWinds Capital Management ("FWCM"), today issues its audited
results for the year ended 31 December 2009.
HIGHLIGHTS
· Net asset value ("NAV") per ordinary share ("Ordinary Share") of the
Company as at 31 December 2009 was US$ 0.98 (US$1.04 as at 31 December 2008).
· On 6 March 2009, the Board announced, as part of its discount management
policy, a tender offer for 7.5 percent of the Company's Ordinary Shares,
resulting in the buyback of 10,298,335 Ordinary Shares for holding in treasury.
· On 21 September 2009, the Company announced that it was undertaking a
strategic review aimed at reducing the discount to NAV at which the Company's
Ordinary Shares were trading ("Strategic Review"). The outcome of the Strategic
Review was announced on 6 November 2009, being the implementation of a share
buyback programme, with the aim of stabilising the discount to NAV and
maintaining that discount within a narrower range.
Kimberly Tara, Chief Executive Officer of FWCM, commented on the results: "In
2009, the collapse in volatility across many agriculture markets created a
challenging environment for trading strategies. We feel strongly that the
portfolio is well positioned to capture returns as volatility during 2010 is
normalised."
In accordance with DTR 6.3.5, the Company's annual financial report for the year
ended 31 December 2009 (the "Report") will shortly be available from the
Company's website www.ceresagriculture.com and will shortly be available for
inspection at the UK Listing Authority's Document Viewing Facility, which is
located at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS
The Report also contains details of the special business to be considered at the
Company's 2010 annual general meeting, which will be held on 16 June 2010.
Notice of the annual general meeting will be sent to shareholders shortly.
Enquiries
FourWinds Capital Management, Investment Manager
info@fourwindscm.com
Kimberly Tara
+44 (0)20 7518 7977
Cenkos Securities plc, Corporate Broker
Will Rogers
+44 (0)20 7397 1920
Citigate Dewe Rogerson, PR Advisor
Kevin Smith /Lindsay Noton
+44 (0) 207 638 9571
Notes to Editors
The Company is a Guernsey domiciled Authorised Closed-ended investment scheme.
Pursuant to section 8 of the Protection of Investors (Bailiwick of Guernsey) Law
1987, as amended and rule 6.02 of the Authorised Closed-ended Investment Schemes
Rules 2008.
The Ordinary Shares have not been and will not be registered under the US
Securities Act of 1933, as amended ("Securities Act") or the US Investment
Company Act of 1940, or with any securities regulatory body or any state or
other jurisdiction in the United States and, subject to certain exceptions, may
not be offered or sold in the United States or to or for the account or benefit
of US persons (as such term is defined in Regulation S under the Securities Act)
absent registration under the Securities Act or an applicable exemption from
such registration. No public offering of any shares in the Company is being, or
has been, made in the United States.
FUTURES AND OPTIONS TRADING HAS LARGE POTENTIAL REWARDS, BUT ALSO LARGE
POTENTIAL RISKS. YOU MUST BE AWARE OF THE RISKS AND BE WILLING TO ACCEPT THEM IN
ORDER TO INVEST IN THE FUTURES AND OPTIONS MARKETS AND IN ORDER TO INVEST IN THE
COMPANY. DO NOT TRADE OR INVEST WITH MONEY YOU CAN'T AFFORD TO LOSE. THIS
ANNOUNCEMENT AND ITS CONTENTS ARE NEITHER A SOLICITATION NOR AN OFFER TO BUY OR
SELL FUTURES, STOCKS OR OPTIONS ON THE FUTURES OR OPTIONS MARKETS. NO
REPRESENTATION IS BEING MADE THAT ANY ACCOUNT OR INVESTMENT WILL OR IS LIKELY TO
ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE DISCUSSED IN THIS ANNOUNCEMENT (IF
ANY). THE PAST PERFORMANCE OF ANY TRADING SYSTEM OR METHODOLOGY IS NOT
NECESSARILY INDICATIVE OF FUTURE RESULTS.
PURSUANT TO AN EXEMPTION FROM THE COMMODITY FUTURES TRADING COMMISSION IN
CONNECTION WITH POOLS WHOSE PARTICIPANTS ARE LIMITED TO QUALIFIED ELIGIBLE
PERSONS, AN OFFERING MEMORANDUM FOR THE COMPANY IS NOT REQUIRED TO BE, AND HAS
NOT BEEN FILED WITH THE COMMISSION. THE COMMODITY FUTURES TRADING COMMISSION
DOES NOT PASS UPON THE MERITS OF PARTICIPATING IN A POOL OR UPON THE ADEQUACY OR
ACCURACY OF AN OFFERING MEMORANDUM. CONSEQUENTLY, THE COMMODITY FUTURES TRADING
COMMISSION HAS NOT REVIEWED OR APPROVED ANY OFFERING BY THE COMPANY OR ANY
OFFERING MEMORANDUM FOR THE COMPANY.
CHAIRMAN'S STATEMENT
For the year ended 31 December 2009
Ceres Agriculture Fund Limited ("Ceres" or the "Company") is a Guernsey
domiciled, closed-ended investment company established to invest in an actively
managed portfolio of primarily exchange-traded agricultural commodity contracts
and derivatives. The Company's portfolio is managed by FourWinds Capital
Management (the "Manager").
Highlights
Ø Net asset value ("NAV") per ordinary share ("Ordinary Share") of the Company
as at 31 December 2009 was US$ 0.98 (US$1.04 as at 31 December 2008).
Ø On 6 March 2009, the Board announced, as part of its discount management
policy, a tender offer for 7.5 percent of the Company's Ordinary Shares,
resulting in the buyback of 10,298,335 Ordinary Shares for holding in treasury.
Ø On 21 September 2009, the Company announced that it was undertaking a
strategic review aimed at reducing the discount to NAV at which the Company's
Ordinary Shares were trading ("Strategic Review"). The outcome of the Strategic
Review was announced on 6 November 2009, being the implementation of a share
buyback programme, with the aim of stabilising the discount to NAV and
maintaining that discount within a narrower range.
Introduction
Dear Shareholders,
We herewith report the results of the Company for the year ended 31 December
2009.
A majority of agriculture commodity markets entered the year on the defensive,
as the deflationary environment created by the heights of the global recession
brought on continued liquidation of commodities such as corn and live cattle.
As a result, traders entered the year cautiously and scaled back their risk,
taking a wait-and-see approach. This was the general behaviour by most market
participants and led to significantly reduced volatility across agriculture
commodities during the first quarter of 2009.
A number of agriculture commodity markets came back to life during the second
quarter of 2009, as participants began trading more aggressively. This helped
push total open interest across agriculture commodities higher. However, the
return of capital flows during this period did not benefit pre-positioned
fundamental traders, as conditions were irrational. Prices were frequently
driven by macro market fundamentals such as the US Dollar index and global
monetary policies.
The lack of sustained price behaviour in relation to agricultural commodity
specific fundamental factors was the primary reason for the decrease in the NAV
of the Company in 2009.
Implementation of Discount Management Policy
Throughout 2009, the Board has made continued efforts to address the discount to
NAV at which the Company's Ordinary Shares have been trading.
As part of its discount management policy, on 6 March 2009 the Company announced
a tender offer for 7.5% of its Ordinary Shares. The tender offer was implemented
in April 2009 and resulted in the repurchase of 10,298,335 Ordinary Shares for
holding in treasury, for an aggregate consideration of US$10,076,920.56. The
discount to NAV at which the Ordinary Shares were trading prior to the
announcement of the tender offer on 6 March 2009 was approximately 31.4%. The
discount tightened to approximately 11.4% immediately following the announcement
of the tender offer.
The Strategic Review announced on 21 September 2009 resulted in the Company
implementing a share buyback programme with the aim of stabilising the discount
to NAV at which the Company's Ordinary Shares trade and maintaining that
discount within a narrower range. Pursuant to the share buyback programme, on 24
November 2009 and 14 December 2009 the Company repurchased to hold in treasury
135,000 Ordinary Shares at US$0.78 per share and 300,000 Ordinary Shares at
US$0.81 per share respectively. As at 31 December 2009 the discount to NAV was
approximately 8.2%, a slight improvement since the Company's announcement of its
Strategic Review.
The Company has continued to implement the share buyback programme and has
announced a further tender offer in 2010 (see 'Board's Intentions' below). The
Board believes that the share buyback programme and further tender offer have
created, and will continue to create, the momentum necessary to reduce the gap
between the traded share price and the NAV.
3
CHAIRMAN'S STATEMENT (CONTINUED)
For the year ended 31 December 2009
Net Asset Value
As at 31 December 2009, the Company's NAV per Ordinary Share was US$0.98. The
compounded annualised NAV return was -0.97% as at 31 December 2009.
Board's Intentions
The Board has continued to implement its share buyback programme into 2010 and
has made the following repurchases since 31 December 2009:
· 11 January 2010 - 750,000 Ordinary Shares at US$0.8725 per share
· 3 March 2010 - 588,000 Ordinary Shares at US$0.85 per share
· 18 March 2010 - 1,700,000 Ordinary Shares at US$0.88 per share
· 24 March 2010 - 1,700,000 Ordinary Shares at US$0.88 per share
Following these purchases, there remain 121,840,083 issued Ordinary Shares
admitted to trading, 13,537,787 Ordinary Shares held in treasury and 3,268,548
Ordinary Shares have been cancelled.
In addition, on 29 March 2010, the Board announced a further tender offer for
24.99 per cent of the Ordinary Shares then in issue at a tender price equal to
95.5 per cent of the latest published estimated unaudited net asset value per
Ordinary Share as at the close of business on the closing date of the tender. A
circular in respect of the tender offer was posted to shareholders on 9 April
2010 and the closing date of the tender offer is 30 April 2010.
Outlook
The Board believes that Ceres is currently well positioned to increase its
return profile with the aim of generating positive returns. The Manager has
taken steps to consolidate the portfolio by, amongst other things, reducing the
number of underlying managers throughout the year, and the Board believes that,
as a result, the more concentrated portfolio should be better positioned to take
advantage of inefficiencies in the market going forward. Despite increased
correlations across asset classes, Ceres continues to add diversification to
traditional equity and bond portfolios.
Hans-Willem van Tuyll
Chairman
23 April 2010
4
DIRECTORS' REPORT
For the year ended 31 December 2009
The Directors present their annual report and the audited financial statements
for the year ended 31 December 2009.
Ceres Agriculture Fund Limited was registered on 17 October 2007 with Registered
Number 47896 and is domiciled and incorporated in Guernsey, Channel Islands. The
Company is a closed-ended investment company with limited liability formed under
The Companies (Guernsey) Law, 1994 and its Ordinary Shares are admitted to the
Official List of the UK Listing Authority and are traded on the Main Market of
the London Stock Exchange (ticker: CROP).
Principal activity and business review
The principal activity of the Company during the year was that of an investment
company. The Company is expecting to continue its activities in the coming year.
A review of the year is provided in the Manager's Report.
Results and dividends
The results for the year are shown on the Statement of Comprehensive Income on
page 19 and the Company's financial position at the end of the year is shown on
the Statement of Financial Position on page 20.
The Directors expect returns to be reinvested and do not anticipate paying a
dividend. Where any dividend or other distribution is to be paid, it is expected
to be paid in US$ and in accordance with the Companies (Guernsey) Law, 2008 (the
"Companies Law"), any other applicable laws, the Listing Rules of the UK Listing
Authority ("Listing Rules") and the rules and regulations of the London Stock
Exchange. Since the date of incorporation of the Company, there has been no
dividend or distribution of any kind declared, paid or made by the Company.
Directors
The Directors of the Company who served during the year were:
Baron Hans-Willem Reinier van Tuyll van Serooskerken (Chairman)
Martyn Henley-Roussel
Howard Myles (Chairman of the Audit Committee)
Kimberly Tara
The Directors' interests in the share capital of the Company at 31 December 2009
were unchanged from 31 December 2008 (and have not changed since the end of the
year) and were as follows:
+--------+----------+--------+--------+--------+--------+--------+--------+---------------------------+
| | | | | | | | Number of |
| | | | | | | | Ordinary Shares |
+--------+----------+--------+--------+--------+--------+--------+------------------------------------+
| | Kimberly | | | | | | | 500,000 |
| | Tara* | | | | | | | |
+--------+----------+--------+--------+--------+--------+--------+--------+---------------------------+
| | Howard | | | | | | | 20,000 |
| | Myles | | | | | | | |
+--------+----------+--------+--------+--------+--------+--------+--------+---------------------------+
* K. Tara's interest is in respect of Ordinary Shares owned by FourWinds Capital
Management (the Manager) of which she is a director and shareholder
None of the Directors has, or has had, an interest in any transaction which is
or was unusual in its nature or conditions or significant to the business of the
Company or which has been effected by the Company during the year, except for
the interest of Kimberly Tara in the Manager (as stated above) and, therefore,
in the Management Agreement (further details of which are set out in note 16).
The Directors receive the following in the form of fees per annum:
+--------------------------------------------------------------+------------+
| Director | Fees |
+--------------------------------------------------------------+------------+
| Baron Hans-Willem Reinier van Tuyll van Serooskerken | GBP25,000 |
| (Chairman) | |
+--------------------------------------------------------------+------------+
| Martyn Henley-Roussel | GBP20,000 |
+--------------------------------------------------------------+------------+
| Howard Vivian Peter Myles (Chairman of the Audit and | GBP20,000 |
| Management Engagement Committee) | |
+--------------------------------------------------------------+------------+
The Chairman of the Audit and Management Engagement Committee receives an
additional GBP5,000 for his services in this role. All of the Directors are also
entitled to be paid all reasonable expenses properly incurred by them in
attending general meetings, Board or committee meetings or otherwise in
connection with the performance of their duties. The Board may determine that
additional remuneration may be paid, from time to time, to any one or more
Directors in the event such Director or Directors are requested by the Board to
perform extra or special services on behalf of the Company.
5
DIRECTORS' REPORT (CONTINUED)
For the year ended 31 December 2009
Substantial interests in share capital
As at 31 December 2009, the following holdings representing more than 3 percent
of the Company's issued share capital had been reported.
+--------+--------+--------+--------+--------+--------+--------+------------+------------+
| | | | | | | | Number | Percentage |
| | | | | | | | of | held |
| | | | | | | | Ordinary | |
| | | | | | | | Shares | |
+--------+--------+--------+--------+--------+--------+--------+------------+------------+
| | HSBC Global Custody Nominee (UK) Limited* | 22,374,800 | 17.68% |
+--------+-----------------------------------------------------+------------+------------+
| | Securities Services Nominees Limited* | 21,675,639 | 17.12% |
+--------+-----------------------------------------------------+------------+------------+
| | Chase Nominees Limited* | 20,000,000 | 15.80% |
+--------+-----------------------------------------------------+------------+------------+
| | Euroclear Nominees Limited* | 16,639,469 | 13.15% |
+--------+-----------------------------------------------------+------------+------------+
| | The Bank of New York (Nominees) Limited* | 10,541,442 | 8.33% |
+--------+-----------------------------------------------------+------------+------------+
| | KAS Nominees Limited* | 9,163,000 | 7.24% |
+--------+-----------------------------------------------------+------------+------------+
| | Nortrust Nominees Limited* | 5,307,872 | 4.19% |
+--------+-----------------------------------------------------+------------+------------+
| | Vidacos Nominees Limited* | 4,637,765 | 3.66% |
+--------+--------+--------+--------+--------+--------+--------+------------+------------+
* Nominee accounts holdings on behalf of individual shareholders. These holdings
are therefore aggregated holdings.
The Manager
FourWinds Capital Management was appointed as the Manager of the Company on 22
November 2007. The Directors have reviewed the performance of the Manager and
are currently satisfied that the continued appointment of the Manager on the
terms agreed is in the best interests of the shareholders and the Company. A
detailed review of the performance of the Company for the year ended 31 December
2009 is included in the Manager's Report on pages 11 and 12. Details of the
terms of the Management Agreement are disclosed in note 9.
Auditors
Ernst & Young LLP have been appointed as auditors of the Company and have
expressed their willingness to continue in office.
Administrator
On 3 August 2009 the Company announced that there was a change in the entity to
which its administrator, HSBC Securities Services (Guernsey) Limited (the
"Administrator"), delegates the provision of administration services to the
Company.
Earlier in 2009, HSBC Securities Services (Isle of Man) Limited, to whom the
Administrator had previously delegated the provision of administration services
to the Company, informed the Company that it intended substantially to transfer
its operations. In consequence, with effect from 31 July 2009, the Administrator
has delegated the provision to the Company of all administrative functions,
except those of a corporate secretarial nature, to HSBC Securities Services
(Ireland) Limited, which is also an affiliate of the Administrator.
Authorised and Issued Share Capital
The Company has the ability to issue an unlimited number of Ordinary Shares. The
Directors also have shareholder authority to purchase in the market up to 14.99
percent of the issued Ordinary Shares and to make tender offers for up to 25
percent of the issued Ordinary Shares. Both of these shareholder authorities
will expire on the date of the 2010 annual general meeting, and the Directors
intend to seek shareholder approval at the 2010 annual general meeting for their
renewal. During the year, the Company did not issue any Ordinary Shares and
repurchased a total of 10,733,335 Ordinary Shares (inclusive of Ordinary Shares
repurchased pursuant to the tender offer and share buyback programme referred to
below) for holding in treasury.
On 6 March 2009, the Directors announced that as part of their discount
management policy the Company would make a tender offer for 7.5 percent of the
Company's Ordinary Shares then in issue at a tender price equal to 95 percent of
the latest published estimated NAV per share as at the close of business on 1
April 2009. Accordingly the Company purchased for holding in treasury
10,298,335 Ordinary Shares at a price of US$0.9785 per Ordinary Share, being 95%
of the latest published NAV per share at the close of business on 1 April 2009
of US$1.02.
6
DIRECTORS' REPORT (CONTINUED)
For the year ended 31 December 2009
Authorised and Issued Share Capital (continued)
On 21 September 2009, the Board announced that a strategic review of the
discount management mechanisms available to the Company, and potentially its
corporate structure, was being undertaken. On 17 November 2009, the Board
announced the outcome of its strategic review, being the implementation of a
share buyback programme with the aim of stabilising the discount to NAV at which
the Company's Ordinary Shares were trading and maintaining that discount within
a narrower range. Pursuant to that share buyback programme, on 24 November 2009
and 14 December 2009 the Company repurchased 135,000 Ordinary Shares at US$0.78
per share and 300,000 Ordinary Shares at US$0.81 per share respectively. The
repurchased Ordinary Shares are held in treasury.
The Board expects the share buyback programme to continue until its stated
objective has been achieved. It will continue to monitor the effectiveness of
its discount control policy and to review the position with regard to the
discount and also the investment performance of the Company in order to consider
whether any further action is necessary.
A purported shareholders' requisition of an extraordinary general meeting was
received by the Company on 1 April 2010 and upon receiving legal advice the
Board concluded that the requisition was invalid. Details of the requisition and
its invalidity were published by the Company of 1 April 2010 via a regulatory
information service. No further requisition has been received since that date.
As at 31 December 2009, the Company had 126,578,083 Ordinary Shares in issue
(excluding treasury shares) and 12,068,335 Ordinary Shares held in treasury.
Going Concern
The Directors consider that the Company has adequate resources to continue in
operational existence for the foreseeable future and, after due consideration,
believe it is appropriate to adopt the going concern basis in preparing the
financial statements.
Corporate Governance
As a closed-ended investment company registered in Guernsey, the Company is
eligible for exemption from the requirements of the Combined Code (the "Code")
issued by the UK Listing Authority. The Board has, however, put in place a
framework for corporate governance which it believes is suitable for an
investment company. The Company complies with the corporate governance
obligations which apply to Guernsey registered companies. In addition, to the
extent the Directors consider appropriate, having regard to the Company's size
and resources and save as set out below, the Company has complied throughout the
year with the AIC Code of Corporate Governance produced by the Association of
Investment Companies (which is considered by the Financial Reporting Council to
meet the obligations of the Code).
Save for departing from the requirement to form a remuneration committee or a
nomination committee (since the Company does not have any executive directors),
the Company is not presently aware of any departures from the AIC Code of
Corporate Governance during the year.
The Board
All the Directors are non-executive and so there is no nomination or
remuneration committee.
The Articles of Association of the Company provide that unless otherwise
determined by the Board, the number of the Directors shall not be less than two
and the aggregate remuneration of all Directors in any twelve month period, or
pro rata for any lesser period, shall not exceed GBP150,000 or such sum as may
be approved by the Company in general meeting. Kimberly Tara is not entitled to
receive a director's fee. The Directors currently receive annualised aggregate
directors' fees of GBP70,000.
The Board generally meets at least four times a year at which time the Directors
review the management of the Company's assets and all other significant matters
so as to ensure that the Directors maintain overall control and supervision of
the Company's affairs. The Board is responsible for the appointment and
monitoring of all service providers to the Company. Between these quarterly
meetings there is regular contact with the Manager. The Directors are kept fully
informed of investment and financial controls and other matters that are
relevant to the business of the Company and should be brought to the attention
of the Directors. The Directors also have access to the Company Secretary
(through its appointed representatives who are responsible for ensuring that
Board procedures are followed and that applicable rules and regulations are
complied with) and, where necessary in the furtherance of their duties, to
independent professional advice at the expense of the Company.
7
DIRECTORS' REPORT (CONTINUED)
For the year ended 31 December 2009
The Board (continued)
In accordance with the Company's Articles of Association, at each annual general
meeting of the Company all the Directors who held office at the two preceding
annual general meetings and did not retire shall retire from office and shall be
available for re-election at the same meeting. Pursuant to the Listing Rules,
Kimberly Tara is required to retire from office at each annual general meeting
and is available for re-election at each such meeting. Kimberly Tara and Martyn
Henley-Roussel are required to retire by rotation at the 2010 annual general
meeting and will each put themselves up for re-election at that meeting. None of
the Directors has a service contract with the Company.
The Audit and Management Engagement Committee consisting of independent
non-executive Directors, whose function is to review the audited annual and
unaudited interim financial statements, receive and consider reports on internal
financial controls, appoint and liaise with external auditors, review the
corporate review procedures and consider the remuneration and appointment of the
Manager, meets formally at least twice a year.
In addition to the regular quarterly Board meetings, there were a small number
of ad hoc meetings of the Board to review and approve matters relating to the
tender offer in March 2009, the strategic review by the Company and repurchases
of Ordinary Shares by the Company and to review specific items arising between
the regular scheduled quarterly meetings. Attendance at the Board and Audit and
Management Engagement Committee meetings for the year ended 31 December 2009 was
as follows:
+--------+------------+----------+--------+--------+---------+--------+
| | | Number | Hans | H | M H |K Tara |
| | | of |Willem | Myles |Roussel | |
| | |meetings | Van | | | |
| | | held | Tuyll | | | |
+--------+------------+----------+--------+--------+---------+--------+
| | Board | 4 | 4 | 4 | 4 | 4 |
| | Meetings | | | | | |
+--------+------------+----------+--------+--------+---------+--------+
| | Audit | 3 | 3 | 3 | 3 | N/A |
| | and | | | | | |
| | Management | | | | | |
| | Engagement | | | | | |
| | Committee | | | | | |
+--------+------------+----------+--------+--------+---------+--------+
| | Ad hoc | 2 | 1 | 1 | 2 | 2 |
| | Board | | | | | |
| | Meetings | | | | | |
+--------+------------+----------+--------+--------+---------+--------+
The Board has a breadth of experience relevant to the Company and the Directors
believe that any foreseeable changes to the Board's composition can be managed
without undue disruption. With any new Director appointment to the Board,
consideration will be given as to whether an induction process is appropriate.
Internal Controls
The Board recognises the need for effective high level internal controls. High
level controls in operation at the Company include:
- segregation of duties between relevant functions and departments within
the Administrator and the Manager;
- consideration of compliance reports, administration reports, and
portfolio valuations provided by the Administrator; and
- consideration of the Manager's reports and analysis.
The Administrator has a number of internal control functions including a
dedicated Compliance Officer who is appointed as a statutory requirement and
whose role is determined by the Guernsey Financial Services Commission which
includes the maintenance of a log of errors and breaches which are reported to
the Board of both the Company and the Administrator at each quarterly board
meeting.
Relations with Shareholders
The Board believes that the maintenance of good relations with its shareholders
is important for the long term prospects of the Company. The Board receives
feedback on the views of shareholders from the Company's corporate broker and
the Manager.
All general meetings of the Company will be held in Guernsey. The Company will
hold an annual general meeting each year.
8
DIRECTORS' REPORT (CONTINUED)
For the year ended 31 December 2009
Annual General Meeting
The following information to be discussed at the forthcoming annual general
meeting of the Company is important and requires your immediate attention. If
you are in any doubt about the action you should take, you should seek advice
from your stockbroker, bank manager, solicitor, accountant or other financial
adviser, authorised under the UK Financial Services and Markets Act 2000 (as
amended). If you have sold or transferred all of your shares in the Company, you
should pass this document, together with all accompanying documents, to the
purchaser or transferee or to the person through whom the sale or transfer was
effected for transmission to the purchaser or transferee.
Resolutions relating to the following items of special business will be proposed
at the forthcoming annual general meeting of the Company. The Directors
recommend that shareholders vote in favour of the resolutions which are, in the
Directors' opinion, in the best interests of shareholders as a whole.
Resolution 7 - Authority to buy back shares
The resolution to be proposed will seek to renew the authority granted to
Directors enabling the Company to purchase its own shares. The Directors will
consider repurchasing shares in the market if they believe it to be in
shareholders' interests and as a means of addressing any imbalance between
supply of, and demand for, shares, to increase the net asset value per share and
to assist in maintaining a narrow discount to net asset value per share in
relation to the price at which the shares may be trading.
Purchases of Ordinary Shares will only be made through the market for cash at
prices below the prevailing net asset value per share. Under the Listing Rules
of the UK Listing Authority the maximum price which can be paid by the Company
for a share shall be the higher of (i) 5 percent above the average of the
mid-market values of the Ordinary Shares for the five business days immediately
preceding the date of purchase, and (ii) the higher of the last independent
trade and the highest current independent bid for the Ordinary Shares on the
trading venue where the purchase is carried out. The Directors are seeking
authority to purchase up to 14.99 percent of the issued share capital of the
Company at the date the resolution is passed. At the date of the publication of
these financial statements that represented 18,263,828 Ordinary Shares. However,
the number of issued Ordinary Shares of the Company may be reduced prior to the
annual general meeting in consequence of implementation of the share buyback
programme announced by the Directors on 6 November 2009 (the "Buyback
Programme") and the tender offer announced by the Directors on 29 March 2010
(the "Tender Offer"). The authority granted by the resolution may therefore
relate to a smaller number of shares, representing 14.99% of the issued Ordinary
Share capital following any further share repurchases made prior to the annual
general meeting in order to implement the Buyback Programme and the Tender
Offer. The authority granted by the resolution will expire at the conclusion of
the next annual general meeting of the Company or, if earlier, 14 months from
the date of passing of the resolution.
The timing of any purchases by the Company pursuant to the authority will be
decided by the Directors. Shares bought back may be held in treasury (up to a
maximum of 10 percent of the issued share capital) or be subsequently cancelled
by the Company. At the date of publication of these financial statements, the
Company holds 13,537,787 Ordinary Shares in treasury, being approximately 10
percent of its issued share capital.
Resolution 8 - Authority to make tender offers
The resolution to be proposed will seek to renew the authority granted to the
Directors enabling the Company to purchase its own shares pursuant to a tender
offer for up to 25 percent of the issued Ordinary Shares of the Company as
referred to and on such terms set out in the prospectus issued by the Company on
20 November 2008. The Directors will consider making such a tender offer from
time to time if they believe it to be in shareholders' interests and as a means
of addressing any imbalance between supply of, and demand for, shares, to
increase the net asset value per share and to assist in maintaining a narrow
discount to net asset value per share in relation to the price at which the
shares may be trading.
The Directors are seeking authority to make tender offers for a maximum number
of shares up to 25 percent of the issued share capital. Any such tender offer
will only be made at a price below the prevailing net asset value less
attributable costs and as otherwise determined by the Directors in their sole
discretion. The minimum price (exclusive of expenses) which may be paid for a
share pursuant to a tender offer under the authority is US$0.01. The authority
granted by the resolution will expire at the conclusion of the next annual
general meeting of the Company or, if earlier, 14 months from the date of
passing of the resolution.
The timing of any purchases by the Company pursuant to a tender offer made under
the authority will be decided by the Directors. Shares bought back may be held
in treasury (up to a maximum of 10 percent of the issued share capital) or be
subsequently cancelled by the Company. At the date of publication of these
financial statements, the Company holds 13,537,787 Ordinary Shares in treasury,
being approximately 10 percent of its issued share capital.
9
DIRECTORS' REPORT (CONTINUED)
For the year ended 31 December 2009
Annual General Meeting (continued)
Resolution 9 - Amendment of the Articles of Association of the Company
The resolution to be proposed will seek to amend the Articles of Association of
the Company in order to (i) provide that notices of general meeting may be sent
to shareholders electronically or published on a website and (ii) to provide
that accounts may be sent to shareholders electronically or made available to
shareholders by their publishing on a website.
The full terms of the proposed amendments to the Articles of Association will be
available for inspection from the date posting of the Notice of the forthcoming
annual general meeting of the Company until the close of the annual general
meeting at the offices of Cenkos Securities plc, 6, 7, 8 Tokenhouse Yard, London
EC2R 7AS and at the place of the annual general meeting for at least 15 minutes
before and during the meeting.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the financial statements in
accordance with applicable Companies Law and generally accepted accounting
principles.
Guernsey company law requires the Directors to prepare financial statements for
each financial year which give a true and fair view of the state of affairs of
the Company and of the profit or loss of the Company for that year. In preparing
such financial statements the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the financial
statements;
- prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business;
- disclose that there is no relevant audit information of which the
Company's Auditor is unaware;
- disclose that they have taken reasonable steps they ought to have taken
as directors to make themselves aware of any relevant audit information and to
establish that the Company's Auditor is aware of that information.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements comply with The
Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The Directors confirm to the best of their knowledge:
- the financial statements have been prepared in accordance with the
International Financial Reporting Standards;
- the financial statements have been prepared in accordance with the
applicable set of accounting standards, give a true and fair view of the assets,
liabilities and financial position and loss of the Company;
- the Chairman's Statement and Manager's Report include a fair review of
the development and performance of the business and position of the Company
together with the description of the principal risks and uncertainties that the
Company faces, as required by the Disclosure and Transparency Rules of the UK
Listing Authority (DTR 4.1.12); and
- so far as each of the Directors is aware, there is no relevant audit
information of which the Company's Auditors are unaware and each Director has
taken all reasonable steps he/she ought to have taken as a director to make
himself/herself aware of any relevant audit information and to establish that
the Company's Auditors are aware of that information.
Signed on behalf of the Board of Directors by:
Hans-Willem van Tuyll
Director
23 April 2010
10
MANAGER'S REPORT
For the year ended 31 December 2009
The Company's portfolio is managed by FourWinds Capital Management (the
"Manager").
Net Asset Value and Performance Overview
The NAV per Ordinary Share of the Company as at 31 December 2009 was US$0.98,
reflecting a decrease of 5.76% since 31 December 2008. While the Company lost
5.76% in 2009, the DJ UBS AG TR Index gained 13.72%.
From the commencement of trading activity on 7 December 2007 through 31 December
2008 the Company gained 4.02%. During this same period the DJ UBS AG TR Index
lost 22.54%. As a result, as at 31 December 2009, the life to date return of
the Company was -1.97% compared to the DJ UBS AG TR Index return of -11.92%.
Several factors contributed to the results in 2009:
1. For many agricultural commodities, volatility collapsed by nearly 40%.
This had a negative impact on the Company's long volatility strategies, and
resulted in less spreading opportunities for traders.
2. Grain commodity prices were fairly trendless throughout the year. This
hurt the Company's fundamental traders who were relying on there being momentum
within this sub-sector.
3. The low interest rate environment and the perception of a deflationary
environment at the beginning of the year to a pre-inflationary environment
during the summer led to a weaker U.S. dollar. This supported agriculture
commodity prices during the fourth quarter of 2009, regardless of strong bearish
fundamentals, primarily within the grains complex. The Company's grains traders
were positioned based on the bearish fundamentals and the macroeconomic impact
resulted in commodity prices moving against them.
4. During the second half of the year, money flow disrupted fundamentally
driven price activity. Therefore, traders who primarily relied on supply and
demand factors struggled, while traders who were better able to anticipate the
investment flows thrived. The Company's portfolio was weighed towards
fundamental traders and therefore suffered during this period.
5. The Company's underperformance, as compared to the DJ UBS AG TR Index,
was also impacted by the significant price increases in the soft and tropical
sub-sectors. The Company was exposed to the soft and tropical sub-sectors
through relative value trading strategies while the DJ UBS AG Index held a long
only directional position. The passive strategy of the Index generated
substantial positive returns while the relative value strategy employed by the
Company was flat.
6. In addition to the underperformance in the soft and tropical complex,
traders in the grains sub-sector underperformed the DJ UBS AG TR Index. The
grains sub-sector was a negative contributor to both the Index and the Company
during 2009, however, the Company's grains bucket suffered to a greater extent
given the difficulty of the trading environment for active traders.
Commentary
During 2009 agriculture commodity markets experienced a variety of trading
environments as capital flows, monetary policy and fundamentals were all
dominant and inconsistent influences on price activity.
The DJ UBS AG TR Index gained 13.72%, helped by higher trending prices in
commodities such as raw and white sugar as well as cotton. Those commodities
were boosted by fundamentally driven factors such as global supply deficits and
reduced production acres. Other commodity sub-sectors such as grains and
livestock witnessed a more typical year in terms of price activity. However, the
Company's fundamental traders in the grains sub-sector had an extremely
difficult year, as weather events created long term delays during both planting
and harvest. In addition, the rally in crude oil and the break in the U.S.
dollar index attracted money flows that disrupted fundamentally driven price
activity.
Shorter term traders in grains and meats, as well as those that had exposure
across the entire agriculture market, mostly did well during 2009. Those that
could profit from momentum-based technical opportunities did particularly well.
Additionally, as was the case in 2008, traders that had an eye on short term
pricing anomalies across the curve did well, as those opportunities provided
strong profits with reduced risk. These types of traders were able to generate
positive returns for the Company during the year.
The year did however produce some poor results for traders that experienced
counter-seasonal price moves in commodities such as lean hogs. Other fundamental
traders utilized less capital as they found it difficult to be aggressive in the
overall market conditions. Traders that were reliant on medium to longer term
fundamental price moves had an extremely tough year due to macro factors and
weather related price disruptions. The lack of sustained price behaviour in
relation to fundamental factors was the primary reason for the decrease in the
NAV of the Company in 2009.
11
MANAGER'S REPORT (CONTINUED)
For the year ended 31 December 2009
Commentary (continued)
As a result, the Manager has now added shorter term macro traders to the
portfolio in place of some of the longer term fundamental traders. The Company
now has a more balanced portfolio, between fundamental medium to long term
traders, spread traders, volatility traders and short term macro traders. These
changes aim to protect the Company from irrational market behaviour and
transform the short term price discrepancies into alpha.
Looking Ahead
The portfolio is now more concentrated around high conviction positions. The
Manager is confident that as fundamentals come back into play the Company's
traders will shift back to more directional trades and again take advantage of
the huge opportunities left by the global meltdown in the commodity markets.
More than ever the Manager is convinced that transparency, liquidity and common
sense are keys in managing institutional commodity-oriented portfolios.
Risk and Trading
The Manager believes that overall risk at the portfolio level was well managed
during the year. The daily Value-at-Risk (VaR) with 95% confidence averaged
-0.42% and never exceeded -1.33%, remaining below the internal limit of -1.50%.
Ten traders were removed from the portfolio and three traders were added over
the course of 2009. As a result, the portfolio included eleven traders at the
end of the year.
The Board is satisfied that the subsequent performance of the traders in
aggregate justified the decision taken to remove those traders from the
portfolio.
Outlook
During the latter part of the year, after discussion with the Board, the
investment committee of the Manager agreed to implement two changes to its
strategy and investment model, with the aim of increasing portfolio volatility,
and as an expected outcome, increased returns. These measures were, firstly, to
reduce the number of traders from over twenty to eleven, and secondly, within
the Company's investment guidelines, to allow two of its traders to implement
their agriculture trades with other agricultural commodity-related instruments
for hedging purposes.
The Manager has continued to enhance its risk management and operations
infrastructure through the development of proprietary applications dedicated to
such functions, thus allowing for more time to be spent managing the portfolio
and less time being spent processing data.
The Manager continues to look for seasoned traders that can excel in a variety
of different trading environments across a diversified set of agriculture
commodities. Recent market conditions have presented opportunities for the
Company to concentrate the number of traders. As a result, the Manager is
focused on further accessing more dynamic performance at the portfolio level by
allowing the most talented traders to employ their highest convictions across
the broad set of agriculture commodities, whilst continuing to monitor risk.
This should allow the Company to garner a larger piece of the performance
generated from each agriculture sub-sector.
FourWinds Capital Management
23 April 2010
12
INVESTMENT POLICY
The Company's investment objective is to provide capital appreciation through
diversified exposure to an actively managed portfolio of primarily
exchange-traded agricultural commodity contracts and derivatives and other
agricultural commodity-related investments.
Diversification
The Company's portfolio (the "Portfolio") is diversified by agricultural
complex: grains (such as corn, wheat, soy, rapeseed, oats, rice), tropicals
(such as cocoa, coffee, sugar, rubber, orange juice), fibers (such as cotton,
wool, silk) and livestock (such as live cattle and lean hogs); by trading
strategy; and by commodity trader, to provide sustainable returns and to control
volatility.
Asset allocation
The Company invests in at least three different agricultural complexes and
invests no more than a maximum of 50 percent of its Net Asset Value, at the time
of acquisition, in any one agricultural complex. There is no predetermined limit
on investment per commodity in any complex and there are no predetermined
geographical limits. The Company invests in developed agricultural markets in
politically stable countries.
The Company's assets comprise mainly agriculture commodity contracts and
derivatives and other agricultural commodity-related investments. These assets
are held mainly within proprietary managed accounts operated by specialised
commodity traders selected by the Manager so as to provide exposure across the
spectrum of trading strategies. Pending investment or reinvestment, the
Company's assets are held in cash or fixed income securities (including but not
limited to bank deposits, bonds or government issued treasury securities).
Generally no single commodity trader is allocated assets to trade which, at the
time of acquisition, exceed 10 percent of Net Asset Value of the Company.
However, the Board may authorise a higher allocation of assets on a case by case
basis. Income earned from the Company's investments will be reinvested in
accordance with this investment policy, subject to working capital requirements.
Borrowing and gearing
Whilst the Articles of Association of the Company permit maximum borrowings of
up to 25 percent of Net Asset Value, the Company's policy is to ensure that its
aggregate borrowings from time to time do not exceed a maximum of 10 percent of
Net Asset Value of the Company. Initially, the Directors do not intend to
borrow, save for short-term liquidity, working capital requirements and to fund
share buybacks. However, if the Directors deem it prudent, the Company may
borrow for longer term purposes.
The Company utilises both exchange-traded and over-the-counter derivatives,
including, but not limited to, futures, forwards, swaps, options and contracts
for differences. The low initial margin deposits normally required to establish
a position in such instruments permits a high degree of gearing. The Company
requires a margin to equity ratio not exceeding 25 percent for the Portfolio.
Generally, gross collateralised exposure does not exceed two times Net Asset
Value and net collateralised exposure does not exceed one times Net Asset Value.
However, the Board may authorise higher collateralised limits from time to time.
General
The Company will comply with certain investment restrictions, as set out in more
detail below, for so long as they remain requirements of the UK Listing
Authority. The Directors do not currently intend to propose any material changes
to the Company's investment policy, save in the case of exceptional or
unforeseen circumstances. As required by the UK Listing Rules, any material
change to the investment policy of the Company would be made only with the
approval of shareholders.
Investment restrictions
The Company carries on its business in accordance with its investment policy set
out above and will comply with the following investment restrictions for so long
as they remain requirements of the UK Listing Authority:
- the Company and any of its subsidiaries must not conduct a trading
activity which is significant in the context of its group as a whole. This rule
does not prevent the businesses forming part of the investment portfolio of a
close ended investment fund from conducting trading activities themselves;
- not more than 10 percent in aggregate of the value of the total
assets of the Company at the time of admission to the Official List of the UK
Listing Authority may be invested in other closed-ended investment funds except
that this restriction shall not apply to investments in closed-ended investment
funds which themselves have published investment policies to invest no more than
15 percent of their total assets in other closed-ended investment funds; and
13
INVESTMENT POLICY (CONTINUED)
- the Company will notify to a regulatory information service within
two business days of the end of each calendar month a list of all investments in
other listed closed-ended investment funds, as at the last business day of that
month, which themselves do not have stated investment policies to invest no more
than 15 percent of their total assets in other listed closed-ended investment
funds.
Although there is no restriction on a closed-ended investment fund taking a
controlling stake in an investee company, to ensure a spread of investment risk
the Company avoids:
(a) cross-financing between the businesses forming part of its Portfolio
including, for example, through the provision of undertakings or security for
borrowings by such businesses for the benefit of another; and
(b) the operation of common treasury functions as between the closed-ended
investment fund and investee companies.
The Company manages and invests its assets in accordance with the investment
policy set out above and is responsible for monitoring compliance with the above
investment restrictions.
14
BOARD OF DIRECTORS
The Directors are listed below. All of the Directors are non-executive and, save
for Kimberly Tara, are independent. Kimberly Tara does not receive a director's
fee from the Company.
Baron Hans-Willem van Tuyll (Chairman)
Mr Van Tuyll began his career with Cargill Group in 1969. He has over 30 years
of experience in agriculture and hedge funds and their development. In 1992 Mr
van Tuyll was elected to the board of the Cargill International Pension Board.
He retired from this position in 2003. From 1998 to 1999 he was Vice Chairman of
the board of the Alternative Investment Management Association (AIMA, London)
and from 1999 to 2001 he was Chairman. He chaired the conference committee of
AIMA from 1998 to 2003. Mr van Tuyll represented The Netherlands as the Honorary
Consul General for the French speaking part of Switzerland. Mr van Tuyll is
resident in Switzerland.
Martyn Henley-Roussel
Mr Henley-Roussel worked at Kleinwort Benson Guernsey from 1994 to 2000, as Head
of Portfolio Management. He became a director of Kleinwort Benson Asset
Management Limited in 2000, a position he occupied until 2002. From 2002 to 2006
he worked as an investment manager at Fortis Guernsey, where he was responsible
for managing a GBP35 million Belgian client base and was also a member of the
advisory committee for the Fortis family trust, valued at US$400 million. During
his period at Fortis, Mr Henley-Roussel had specific responsibility for
collective investment scheme investment analysis and helped design Fortis'
multi-manager funds model for the sterling area. He is currently a director of a
number of investment companies including another company trading on the London
Stock Exchange. Mr. Henley-Roussel is a member of The Securities Institute and
has a BA in Economics. Mr Henley-Roussel is resident in Guernsey.
Howard Myles
Mr Myles was a partner in Ernst & Young LLP in the Investment Management Group
until June 2007 and was responsible for the Investment Funds Corporate Advisory
team. He was previously with UBS Warburg from 1987 to 2001. Mr Myles began his
career in stockbroking in 1971 as an equity salesman and joined Touche Ross in
1975 where he qualified as a chartered accountant. In 1978 he joined W.
Greenwell & Co. in the corporate broking team and in 1987 moved to SG Warburg
Securities where he was involved in a wide range of commercial and industrial
transactions in addition to leading Warburg's corporate finance function for
investment funds. Mr Myles is resident in France.
Kimberly Tara
Ms Tara is the Chief Executive Officer of the Manager. She started her career in
1991 in Mergers & Acquisitions at Morgan Stanley. In 1995 she joined Value
Partners, a McKinsey spinoff that is today the largest private consulting firm
in Italy. In 1999, she began working as an alternative investment consultant,
providing financial and advisory services for clients in Europe and the US. She
also worked as CFO and Director of Business Development for a US-based biotech
company. In 2005 she cofounded the Manager. Ms Tara graduated magna cum laude
from Brown University with a degree in Business Economics and received her MBA
from INSEAD in France. Ms Tara is resident in France.
Under the terms of the Management Agreement, the Manager currently has the right
to appoint two representatives to the Board of the Company. The right to appoint
a second director is only exercisable by the Manager, if (i) following such
appointment the majority of the Board remains independent of the Manager and the
Board is able to demonstrate that it will act independently of the Manager; (ii)
the Manager's proposed appointee is not resident in the United Kingdom; and
(iii) the Manager's proposed appointee is approved by the Board, acting
reasonably.
15
PORTFOLIO STATEMENT
AT 31 DECEMBER 2009
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| Class | | Market value | Net | |
| of | | | Financial | |
| investments | | | Assets | |
| | | | and | |
| | | | Liabilities | |
+-------------+--------+------------------------------------------+ +--------+
| | | Financial | | | Financial | Net % |
| | | Asset | | | Liability | of net |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| | | (US$) | | (US$) | (US$) | assets |
| | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| Commodities | | | | | | |
| futures | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| Commodities | | 10,820,189 | | (8,756,104) | 2,064,085 | 1.67 |
| futures | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| Total | | 10,820,189 | | (8,756,104) | 2,064,085 | 1.67 |
| Futures | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| Commodities | | | | | | |
| options | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| Commodities | | 8,158,226 | | (6,243,304) | 1,914,922 | 1.55 |
| options | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| Total | | 8,158,226 | | (6,243,304) | 1,914,922 | 1.55 |
| Options | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| Fixed | | | | | | |
| Income | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| US | | 40,996,663 | | - | 40,996,663 | 33.12 |
| Treasury | | | | | | |
| Bill 0% | | | | | | |
| 03/18/2010 | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| US | | 44,995,901 | | - | 44,995,901 | 36.35 |
| Treasury | | | | | | |
| Bill 0% | | | | | | |
| 03/25/2010 | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| Total | | 85,992,564 | | - | 85,992,564 | 69.47 |
| Fixed | | | | | | |
| Income | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| Total | | 104,970,979 | | (14,999,408) | 89,971,571 | 72.69 |
| Futures, | | | | | | |
| Options | | | | | | |
| and | | | | | | |
| Fixed | | | | | | |
| Income | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+--------------+----------------------+--------+
16
PORTFOLIO STATEMENT
AT 31 DECEMBER 2008
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| Class | | Market value | Net | |
| of | | | Financial | |
| investments | | | Assets | |
| | | | and | |
| | | | Liabilities | |
+-------------+--------+-----------------------------------------+ +--------+
| | | Financial | | | Financial | Net % |
| | | Asset | | | Liabilities | of net |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| | | (US$) | | (US$) | (US$) | assets |
| | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| Commodities | | | | | | |
| futures | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| Commodities | | 4,442,820 | | (3,837,585) | 605,235 | 0.43 |
| futures | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| Total | | 4,442,820 | | (3,837,585) | 605,235 | 0.43 |
| Futures | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| Commodities | | | | | | |
| options | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| Commodities | | 3,751,990 | | (2,392,788) | 1,359,202 | 0.95 |
| options | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| Total | | 3,751,990 | | (2,392,788) | 1,359,202 | 0.95 |
| Options | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| Fixed | | | | | | |
| Income | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| US | | 70,081,990 | | - | 70,081,990 | 49.22 |
| Treasury | | | | | | |
| Bill 0% | | | | | | |
| 03/12/2009 | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| US | | 21,033,155 | | - | 21,033,155 | 14.77 |
| Treasury | | | | | | |
| Bill 0% | | | | | | |
| 03/26/2009 | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| Treasury | | 6,996,377 | | - | 6,996,377 | 4.91 |
| bills - | | | | | | |
| others | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| Total | | 98,111,522 | | - | 98,111,522 | 68.90 |
| Fixed | | | | | | |
| Income | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| Total | | 106,306,332 | | (6,230,373) | 100,075,959 | 70.28 |
| Futures, | | | | | | |
| Options | | | | | | |
| and | | | | | | |
| Fixed | | | | | | |
| Income | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
| | | | | | | |
+-------------+--------+-------------+-------------+-------------+-----------------------+--------+
17
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF CERES AGRICULTURE FUND LIMITED
We have audited the financial statements (the "financial statements") of Ceres
Agriculture Fund Limited for the year ended 31 December 2009 which comprise the
Statement of Comprehensive Income, the Statement of Financial Position, the
Statement of Changes in Equity, the Statement of Cash Flows and the related
notes 1 to 17. These financial statements have been prepared under the
accounting policies set out therein.
This report is made solely to the Company's members, as a body, in accordance
with Section 262 of the Companies (Guernsey) Law 2008. Our audit work has been
undertaken so that we might state to the Company's members those matters we are
required to state to them in an auditors' report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company's members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The Directors are responsible for the preparation of the financial statements in
accordance with applicable Guernsey law as set out in the Statement of
Directors' Responsibilities.
Our responsibility is to audit the financial statements in accordance with
relevant legal and regulatory requirements and International Standards on
Auditing (UK and Ireland).We report to you our opinion as to whether the
financial statements give a true and fair view and are properly prepared in
accordance with the Companies (Guernsey) Law 2008. We also report to you if, in
our opinion, the Company has not kept proper accounting records, if the
Company's financial statements are not in agreement with the accounting records
or if we have not received all the information and explanations we require for
our audit.
We read other information contained in the Annual Report and consider whether it
is consistent with the audited financial statements. The other information
comprises Management and Administration, Chairman's Statement, Directors'
Report, Manager's Report, Investment Policy, Board of Directors and Portfolio
Statement. We consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the Company's financial
statements. Our responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the Company's financial statements. It also includes an
assessment of the significant estimates and judgments made by the Directors in
the preparation of the financial statements, and of whether the accounting
policies are appropriate to the Company's circumstances, consistently applied
and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion the financial statements give a true and fair view, in accordance
with International Financial Reporting Standards as adopted in the European
Union, of the state of the Company's affairs as at 31 December 2009 and its
loss for the year then ended and have been properly prepared in accordance with
the Companies (Guernsey) Law 2008 and The Protection of Investors (Bailiwick of
Guernsey) Law, 1987.
Andrew Offen, Partner
Ernst & Young LLP
Guernsey
23 April 2010
18
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2009
+----------------------------------------+--------+---------------+--------+------------+----------+--------+
| | Year ended | | For the period from 17 October |
| | 31 December | | 2007 to |
| | 2009 | | 31 December 2008 |
+-------------------------------------------------+---------------+--------+--------------------------------+
| | Notes | US$ | US$ |
+----------------------------------------+--------+---------------+-----------------------------------------+
| Income | | | |
+----------------------------------------+--------+---------------+-----------------------------------------+
| Interest income | | 24,574 | 1,797,368 |
+----------------------------------------+--------+---------------+-----------------------------------------+
| | | 24,574 | 1,797,368 |
+----------------------------------------+--------+---------------+-----------------------------------------+
| | | | |
+----------------------------------------+--------+---------------+-----------------------------------------+
| Expenses | | | |
+----------------------------------------+--------+---------------+-----------------------------------------+
| Commission & fee expenses | 7 | 7,465,202 | 12,385,356 |
+----------------------------------------+--------+---------------+-----------------------------------------+
| Other expenses | | 875,883 | 1,822,437 |
+----------------------------------------+--------+---------------+-----------------------------------------+
| Interest expense | | 5,069 | 185,338 |
+----------------------------------------+--------+---------------+-----------------------------------------+
| | | 8,346,154 | 14,393,131 |
+----------------------------------------+--------+---------------+-----------------------------------------+
| | | | |
+----------------------------------------+--------+---------------+-----------------------------------------+
| Net loss for the year before | | (8,321,580) | (12,595,763) |
| investment result | | | |
+----------------------------------------+--------+---------------+-----------------------------------------+
| | | | |
+----------------------------------------+--------+---------------+-----------------------------------------+
| Net realised and unrealised | | | |
| (loss)/gain on financial assets and | | | |
| liabilities at fair value through | | | |
| profit or loss and foreign currency | | | |
| translations | | | |
+----------------------------------------+--------+---------------+-----------------------------------------+
| Net realised gains on financial assets | 3 | 384,862 | 21,075,378 |
| and liabilities at fair value through | | | |
| profit or loss | | | |
+----------------------------------------+--------+---------------+-----------------------------------------+
| Net movement in unrealised | | (245,869) | 50,559 |
| (depreciation)/appreciation of | | | |
| financial assets and liabilities at | | | |
| fair value through profit or loss | | | |
+----------------------------------------+--------+---------------+-----------------------------------------+
| Net realised and unrealised foreign | | (12,241) | 14,120 |
| exchange (losses)/gains | | | |
+----------------------------------------+--------+---------------+-----------------------------------------+
| | | | |
+----------------------------------------+--------+---------------+-----------------------------------------+
| Net (loss)/profit for the year | | (8,194,828) | 8,544,294 |
+----------------------------------------+--------+---------------+-----------------------------------------+
| | | | |
+----------------------------------------+--------+---------------+-----------------------------------------+
| | | US$ | US$ |
+----------------------------------------+--------+---------------+-----------------------------------------+
| Earnings per Ordinary Share - basic | 4 | (0.06) | 0.06 |
| and diluted | | | |
+----------------------------------------+--------+---------------+-----------------------------------------+
| | | | |
+----------------------------------------+--------+---------------+-----------------------------------------+
| In the current year there were no gains or losses other than | |
| those recognised above. | |
+-----------------------------------------------------------------+-----------------------------------------+
| | |
+-----------------------------------------------------------------+-----------------------------------------+
| The Directors consider all results to derive from continuing | |
| activities. | |
+-----------------------------------------------------------------+-----------------------------------------+
| | |
+--------------------------------------------------------------------------------------------------+--------+
| | |
+--------------------------------------------------------------------------------------------------+--------+
| | | |
+---------------------------------------------------------------------------------------+----------+--------+
| | | | | | | |
+----------------------------------------+--------+---------------+--------+------------+----------+--------+
The notes on pages 23 to 40 form an integral part of these financial statements
19
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2009
+----------------------------------+--------+-+----------+----------+-+--------+--------+----------+--+---------------------+-----------+--------+
| | | 31 December | 31 December 2008 |
| | | 2009 | |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| | Notes | US$ | US$ |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| Assets | | | |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| Cash and cash equivalents | 12 | 25,546,118 | 41,844,531 |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| Margin accounts with brokers | | 9,055,754 | 2,540,466 |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| Financial assets held at fair value through profit or | 3 | | |
| loss | | | |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| Fixed income securities | | 85,992,564 | 98,111,522 |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| Commodities futures | | 10,820,189 | 4,442,820 |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| Commodities options | | 8,158,226 | 3,751,990 |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| Other receivables | 10 | 168,515 | 355,957 |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| TOTAL ASSETS | | 139,741,366 | 151,047,286 |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| | | | |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| | | | |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| Liabilities | | | |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| Financial liabilities held at fair value through profit | 3 | | |
| or loss | | | |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| Commodities futures | | 8,756,104 | 3,837,585 |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| Commodities options | | 6,243,304 | 2,392,788 |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| Other payables | 11 | 926,613 | 1,400,489 |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| Bank overdraft | 12 | 34,426 | 1,015,457 |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| TOTAL LIABILITIES | | 15,960,447 | 8,646,319 |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| | | | |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| | | | |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| Net assets | | 123,780,919 | 142,400,967 |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| | | | |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| Equity | | | |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| Share premium | 13 | 5,203,988 | 5,203,988 |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| Treasury shares | 13 | (11,417,720) | (992,500) |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| Retained earnings | | 129,994,651 | 138,189,479 |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| | | | |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| TOTAL EQUITY | | 123,780,919 | 142,400,967 |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| | | | |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| | | US$ | US$ |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| | | | | | | | | |
+-------------------------------------------+------------+------------+--------+--------+----------+------------------------+-----------+--------+
| | | | | | | | | | |
+----------------------------------+--------+------------+------------+--------+--------+----------+------------------------+-----------+--------+
| Net asset value per Ordinary Share | 4 | 0.98 | 1.04 |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| | | | |
+-------------------------------------------------------------------+---------------------------------+---------------------+--------------------+
| These financial statements on pages 19 to 40 were approved by the Board of Directors on 23 April 2010 and signed on its behalf |
| by |
+------------------------------------------------------------------------------------------------------------------------------------------------+
| | |
+---------------------------------------------+--------------------------------------------------------------------------------------------------+
| Hans-Willem Van Tuyll | Martyn Henley-Roussel |
+---------------------------------------------+--------------------------------------------------------------------------------------------------+
| Director | | | Director | | | | | | | | | |
+----------------------------------+--------+-+----------+----------+-+--------+--------+----------+--+---------------------+-----------+--------+
The notes on pages 23 to 40 form an integral part of these financial statements
20
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2009
+--------+--------+---------------+-------------+--------------+--------------+
| | | Share | Retained | Treasury | Total |
| | | premium | | | |
| | | | earnings | shares | |
| | | | | | |
+--------+--------+---------------+-------------+--------------+--------------+
| | | US$ | US$ | US$ | US$ |
+--------+--------+---------------+-------------+--------------+--------------+
| | | | | |
+-----------------+---------------+-------------+--------------+--------------+
| Balance at 17 | - | - | - | - |
| October 2007 | | | | |
+-----------------+---------------+-------------+--------------+--------------+
| Issue of shares | 139,203,988 | - | - | 139,203,988 |
+-----------------+---------------+-------------+--------------+--------------+
| Transaction | (4,354,815) | - | - | (4,354,815) |
| costs of issue | | | | |
| of shares | | | | |
+-----------------+---------------+-------------+--------------+--------------+
| Purchase of | - | - | (992,500) | (992,500) |
| treasury shares | | | | |
+-----------------+---------------+-------------+--------------+--------------+
| Transfer of | (129,645,185) | 129,645,185 | - | - |
| share premium | | | | |
| to retained | | | | |
| earnings | | | | |
+-----------------+---------------+-------------+--------------+--------------+
| Net profit for | - | 8,544,294 | - | 8,544,294 |
| the period | | | | |
+-----------------+---------------+-------------+--------------+--------------+
| | | | | | |
+--------+--------+---------------+-------------+--------------+--------------+
| Balance at 31 | 5,203,988 | 138,189,479 | (992,500) | 142,400,967 |
| December 2008 | | | | |
+-----------------+---------------+-------------+--------------+--------------+
| | | | | | |
+--------+--------+---------------+-------------+--------------+--------------+
| Purchase of | - | - | (10,425,220) | (10,425,220) |
| treasury shares | | | | |
+-----------------+---------------+-------------+--------------+--------------+
| Net loss for | - | (8,194,828) | - | (8,194,828) |
| the year | | | | |
+-----------------+---------------+-------------+--------------+--------------+
| | | | | |
+-----------------+---------------+-------------+--------------+--------------+
| Balance at 31 | 5,203,988 | 129,994,651 | (11,417,720) | 123,780,919 |
| December 2009 | | | | |
+-----------------+---------------+-------------+--------------+--------------+
| | | | | |
+-----------------+---------------+-------------+--------------+--------------+
| | | | | |
+--------+--------+---------------+-------------+--------------+
| | | | | | |
+--------+--------+---------------+-------------+--------------+--------------+
The notes on pages 23 to 40 form an integral part of these financial statements
21
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2009
+-----------------------------+--------+-------------------------------+--------+---------------+
| | | Year | | For |
| | | ended | | the |
| | | 31 | | period |
| | | December | | from |
| | | 2009 | | 17 |
| | | | | October |
| | | | | 2007 to |
| | | | | 31 |
| | | | | December |
| | | | | 2008 |
+-----------------------------+--------+-------------------------------+--------+---------------+
| | Notes | US$ | | US$ |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Cash | | | | |
| flows | | | | |
| from | | | | |
| operating | | | | |
| activities | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Net | | (8,194,828) | | 8,544,294 |
| (loss)/profit | | | | |
| for the year | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Adjustments | | | | |
| to | | | | |
| reconcile | | | | |
| (loss)/profit | | | | |
| for the year | | | | |
| to net cash | | | | |
| outflow from | | | | |
| operating | | | | |
| activities | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Less: | | (24,574) | | (1,797,368) |
| interest | | | | |
| income | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Add: | | 5,069 | | 185,338 |
| interest | | | | |
| expense | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Net | | (384,862) | | (21,075,378) |
| realised | | | | |
| gains on | | | | |
| financial | | | | |
| assets | | | | |
| and | | | | |
| liabilities | | | | |
| at fair | | | | |
| value | | | | |
| through | | | | |
| profit or | | | | |
| loss | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Net | | 245,869 | | (50,559) |
| movement | | | | |
| in | | | | |
| unrealised | | | | |
| depreciation/(appreciation) | | | | |
| of financial assets and | | | | |
| liabilities at fair value | | | | |
| through profit or loss | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Interest | | 24,586 | | 1,797,356 |
| received | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Interest | | (5,069) | | (185,338) |
| paid | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Net | | 187,430 | | (355,945) |
| decrease/(increase) | | | | |
| in other | | | | |
| receivables | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Net | | (473,876) | | 1,400,489 |
| (decrease)/increase | | | | |
| in other payables | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Net | | (8,620,255) | | (11,537,111) |
| cash | | | | |
| outflow | | | | |
| used in | | | | |
| operating | | | | |
| activities | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Cash | | | | |
| flows | | | | |
| from | | | | |
| investing | | | | |
| activities | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Purchase | | (439,602,900) | | (279,235,953) |
| of | | | | |
| financial | | | | |
| assets | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Proceeds | | 47,035,750 | | 66,982,003 |
| from | | | | |
| financial | | | | |
| liabilities | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Sale | | 432,019,461 | | 191,127,957 |
| of | | | | |
| financial | | | | |
| assets | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Disposal | | (29,208,930) | | (57,824,029) |
| of | | | | |
| financial | | | | |
| liabilities | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Margin | | (6,515,288) | | (2,540,466) |
| accounts | | | | |
| with | | | | |
| brokers | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Net | | 3,728,093 | | (81,490,488) |
| cash | | | | |
| inflow/(outflow) | | | | |
| from/(used in) | | | | |
| investing | | | | |
| activities | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Cash | | | | |
| flows | | | | |
| from | | | | |
| financing | | | | |
| activities | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Proceeds | 13 | - | | 139,203,988 |
| from | | | | |
| shares | | | | |
| issued | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Transaction | | - | | (4,354,815) |
| costs of | | | | |
| issue of | | | | |
| shares | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Purchase | | (10,425,220) | | (992,500) |
| of | | | | |
| treasury | | | | |
| shares | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Net | | (10,425,220) | | 133,856,673 |
| cash | | | | |
| (outflow)/inflow | | | | |
| (used in)/from | | | | |
| financing | | | | |
| activities | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Net | | (15,317,382) | | 40,829,074 |
| (decrease)/increase | | | | |
| in cash and cash | | | | |
| equivalents | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Cash | | 40,829,074 | | - |
| and | | | | |
| cash | | | | |
| equivalents | | | | |
| at the | | | | |
| beginning | | | | |
| of the | | | | |
| year/period | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Cash | 12 | 25,511,692 | | 40,829,074 |
| and | | | | |
| cash | | | | |
| equivalents | | | | |
| at the end | | | | |
| of the | | | | |
| year/period | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Represented | | | | |
| by: | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Cash | 12 | 25,546,118 | | 41,844,531 |
| and | | | | |
| cash | | | | |
| equivalents | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| Bank | 12 | (34,426) | | (1,015,457) |
| overdraft | | | | |
+-----------------------------+--------+-------------------------------+--------+---------------+
| | | 25,511,692 | | 40,829,074 |
+-----------------------------+--------+-------------------------------+--------+---------------+
The notes on pages 23 to 40 form an integral part of these financial statements
22
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2009
1. GENERAL INFORMATION
Ceres Agriculture Fund Limited (the "Company" or "Ceres") is a closed-ended
investment fund incorporated on 17 October 2007 in Guernsey. The Company is an
Authorised Closed-ended Investment Scheme as defined by the Authorised
Closed-ended Investment Schemes Rules (2008) (and, as such, is subject to
ongoing supervision by the Guernsey Financial Services Commission).
The Company invests in an actively managed portfolio of primarily
exchange-traded agricultural commodity contracts and derivatives. The Company is
managed by FourWinds Capital Management (the "Manager"). The Company aims to
provide capital appreciation through diversified exposure to an actively managed
portfolio of primarily exchange-traded agricultural commodity contracts and
derivatives and other agricultural commodity related investments.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Statement of compliance
These financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS"), as adopted by the European Union, issued
by the International Accounting Standard Board ("IASB") and interpretations
issued by the International Financial Reporting Interpretations Committee
("IFRIC") of the IASB.
b) Basis of preparation
The Company has adopted the US$ as its presentation currency, being the currency
in which its Ordinary Shares are issued. The presentation currency is the same
as the functional currency. The financial statements have been prepared on a
historic cost basis except for financial assets and financial liabilities at
fair value through profit or loss, which are designated at fair value through
profit or loss.
Significant accounting judgements and estimates
The preparation of the Company's financial statements requires Directors
managers to make judgements, estimates and assumptions that affect the amounts
recognised in the financial statements. However, uncertainty about these
assumptions and estimates could result in outcomes that could require a material
adjustment to the carrying amount of the asset or liability affected in the
future. Although management has made judgements in the process of applying the
Company's accounting policies, none is considered to have a significant effect
on the amounts recognised in the financial statements
Going Concern
The Company's management has made an assessment of its ability to continue as a
going concern and is satisfied that the Company has the resources to continue in
business for the foreseeable future. Furthermore, the management is not aware of
any material uncertainties that may cast significant doubt upon the Company's
ability to continue as a going concern. Therefore, the financial statements
continue to be prepared on the going concern basis.
c) Financial assets and liabilities at fair value through profit or loss
The Company designates its financial assets and liabilities at fair value
through profit or loss, at initial recognition.
Recognition and derecognition
Routine purchases and sales of investments are accounted for on the trade date.
Cost is not averaged out for futures and options. Each contract has its
respective cost, if any.
Financial assets and financial liabilities at fair value through profit or loss
are initially recognised at fair value. Transaction costs are expensed in the
Statement of Comprehensive Income. Subsequent to initial recognition, all
financial assets and financial liabilities at fair value through profit or loss
are measured at fair value. Gains and losses arising from changes in the fair
value of the 'financial assets or financial liabilities at fair value through
profit or loss' are recognised in the Statement of Comprehensive Income in the
year in which they arise.
23
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2009
2.SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
c) Financial assets and liabilities at fair value through profit or loss
(continued)
Recognition and derecognition (continued)
Realised gains/losses on disposal/settlement of financial instruments are
determined as the difference between the disposal/settlement proceeds and
carrying value of the financial instruments and are recognised in the year in
which they arise.
A financial asset is derecognised when the Company no longer has control over
the contractual rights that comprise that asset. This occurs when the rights are
realised, expired or are surrendered. A financial liability is derecognised when
it is extinguished or when the obligation specified in the contract is
discharged, cancelled or expired.
Fair value
Investments are exchange traded and prices are quoted. The fair value of
financial instruments traded in active markets is based on quoted market prices
at the Statement of Financial Position date. The quoted market price used for
financial assets held by the Company is the current bid price; the appropriate
quoted market price for financial liabilities is the current asking price.
d) Interest income and expense
Bank interest income and interest expense is recognised on an accrual basis
based on the effective interest method.
e) Cash and cash equivalents, margin accounts with brokers and cash
overdrawn
Cash and cash equivalents comprise cash balances held at banks. For cash flow
statement purposes, this includes bank overdrafts. The bank overdrafts are
repayable on demand and form an integral part of the Company's cash management.
Margin accounts with brokers comprise balances held as margin on futures with
various brokers and are used as collateral to trade on commodity exchanges.
f) Expenses
All expenses are recognised on an accrual basis.
g) Translation of foreign currencies
Foreign currency transactions during the year are translated into US$ at the
rates of exchange ruling at the dates of the transactions. Assets and
liabilities denominated in foreign currencies are translated into US$ at the
rates of exchange ruling at the Statement of Financial Position date. Exchange
differences are included in the Statement of Comprehensive Income.
h) Treasury shares
The Company's equity instruments which are reacquired and held in treasury are
recognised at cost and deducted from equity. No gain or loss is recognised in
the Statement of Comprehensive Income on the purchase, sale, issue or
cancellation of the Company's own equity instruments
i) New accounting pronouncements
IAS 1 (Revised 2007) Presentation of Financial Statements
The standard replaces IAS 1 Presentation of Financial Statements (revised in
2003) as amended in 2005. The revised IAS 1 Presentation of Financial Statements
was issued in September 2007 and is effective for annual periods beginning on or
after 1 January 2009 with early application permitted.
The revised standard prohibits the presentation of items of income and expenses
(that is, 'non-owner changes in equity') in the Statement of Changes in Equity,
requiring 'non-owner changes in equity' to be presented separately from owner
changes in equity. All non-owner changes in equity are required to be shown in a
performance statement, but entities can choose whether to present one
performance statement (the Statement of Comprehensive Income) or two statements
(an income statement and Statement of Comprehensive Income). Where entities
restate or reclassify comparative information, they are required to present a
restated Statement of Financial Position as at the beginning comparative period
in addition to the current requirement to present Statement of Financial
Positions at the end of the current period and comparative period.
The Company has presented one single Statement of Comprehensive Income.
Therefore the adoption of this revised standard has not resulted in any change
in the presentation of the Company's performance statement.
24
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2009
2.SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
i) New accounting pronouncements (continued)
IFRS 8 Operating Segments
IFRS 8 'Operating Segments' was issued by the IASB in November 2006 and is
effective for annual periods beginning on or after 1 January 2009, with early
application permitted. This standard requires disclosures on the financial
performance of the operating segments of the entity.
The Directors are of the opinion that the Company is engaged in a single segment
of business, being investing in agriculture commodities. Therefore the adoption
of this standard has not resulted in any changes in the Company's financial
statements.
Amendment to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation
of Financial Statements - Puttable Financial Instruments and Obligations Arising
on Liquidations
Amendments to IAS 32 and IAS 1 were issued by the IASB in February 2008 and
become effective for annual periods beginning on or after 1 January 2009, with
early application permitted. The amendment to IAS 32 requires certain puttable
financial instruments and obligations arising on liquidation to be classified as
equity if certain criteria are met. The amendments to IAS 1 require disclosure
of certain information related to puttable instruments classified as equity.
The Company did not have any puttable financial instruments in issue. Therefore
the adoption of these amendments has not resulted in any changes in the
Company's financial statements.
Amendments to IFRS 7 Financial Instruments: Disclosures - Improving Disclosures
about Financial Instruments
Amendments to IFRS 7 were issued by the IASB in March 2009 and become effective
for annual periods beginning on or after 1 January 2009. These amendments
require disclosures of financial instruments measured at fair value to be based
on a three-level fair value hierarchy that reflects the significance of the
inputs in such fair value measurements. The hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or
liabilities (level 1 measurements) and the lowest priority to unobservable
inputs (level 3 measurements). The three levels of the fair value hierarchy are
as follows:
+---------+-----------------------------------------------------------+
| Level 1 | Inputs that reflect unadjusted quoted prices in active |
| | markets for identical assets or liabilities that the |
| | Company has the ability to access at the measurement |
| | date; |
+---------+-----------------------------------------------------------+
| Level 2 | Inputs other than quoted prices that are observable for |
| | the asset or liability either directly or indirectly, |
| | including inputs in markets that are not considered to be |
| | active; |
+---------+-----------------------------------------------------------+
| Level 3 | Inputs that are unobservable. |
| | |
+---------+-----------------------------------------------------------+
Inputs are used in applying the various valuation techniques and broadly refer
to the assumptions that market participants use to make valuation decisions,
including assumptions about risk. Inputs may include price information,
volatility statistics, specific and broad credit data, liquidity statistics, and
other factors. A financial instrument's level within the fair value hierarchy is
based on the lowest level of any input that is significant to the fair value
measurement. However, the determination of what constitutes "observable"
requires significant judgment by the Directors. The Directors consider
observable data to be that market data which is readily available, regularly
distributed or updated, reliable and verifiable, not proprietary, and provided
by independent sources that are actively involved in the relevant market. The
categorisation of a financial instrument within the hierarchy is based upon the
pricing transparency of the instrument and does not necessarily correspond to
the Directors' perceived risk of that instrument. These amendments also require
additional qualitative and quantitative disclosures of liquidity risk. The
adoption of these amendments has resulted in enhanced disclosures in the notes
to the financial statements.
The following standards, amendments and interpretations were also effective for
2009 but had no impact on the financial position or performance of the Company:
IFRS 2 Share-based Payment: Vesting Conditions and
Cancellations effective 1 January 2009
IAS 23 Borrowing Costs (Revised) effective 1 January 2009
IFRIC 9 Remeasurement of Embedded Derivatives and IAS 39
Financial Instruments: Recognition and Measurement effective for periods ending
on or after 30 June 2009
IFRIC 13 Customer Loyalty Programmes effective 1 July 2008
IFRIC 16 Hedges of a Net Investment in a foreign Operation
effective 1 October 2008
25
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2009
2.SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
j) New accounting pronouncements not yet effective
The following standards, amendments and interpretations are not effective and
are not expected to have material impact on the financial position or
performance of the Company:
IFRS 3 (Revised 2008) Business Combinations and IAS 27 (Revised 2008)
Consolidated and Separate Financial Statements
The revised standards were issued in January 2008 and become effective for
financial years beginning on or after 1 July 2009. IFRS 3 (Revised 2008)
introduces a number of changes in the accounting for business combinations that
will impact the amount of goodwill recognised, the reported results in the year
that an acquisition occurs, and future reported results. IAS 27 (Revised 2008)
requires that a change in the ownership interest of a subsidiary is accounted
for as an equity transaction. Application of the revised standards will become
mandatory for the Company's 2010 financial statements.
Amendment to IAS 39 Financial Instruments: Recognition and Measurement -
Eligible Hedged Items
This amendment to IAS 39 Financial Instruments: Recognition and Measurement was
issued on 31 July 2008 and is applicable for annual periods beginning on or
after 1 July 2009 with early application permitted. The amendment clarifies how
the principles that determine whether a hedged risk or portion of cash flows is
eligible for designation should be applied in particular situations.
IFRIC Interpretation 17 Distributions of Non-Cash Assets to Owners
The IFRIC issued IFRIC Interpretation 17 in November 2008. IFRIC 17 provides
guidance on how to account for distributions of non-cash assets to its owners
and distributions that give owners a choice of receiving either non-cash assets
or a cash alternative. An entity shall apply this Interpretation prospectively
for annual periods beginning on or after 1 July 2009.
IFRIC Interpretation 18 Transfers of assets from customers
The IFRIC issued IFRIC Interpretation 18 in January 2009. IFRIC 18 provides
guidance on how to account for transfers of items of property, plant and
equipment by entities that receive such transfers from their customers. An
entity shall apply this Interpretation prospectively for annual periods
beginning on or after 1 July 2009.
IFRS 1 First Time Adoption of International Financial Reporting Standards -
Additional Exemptions for First-time Adopters
The revised standard was issued in July 2009 and becomes effective for financial
years beginning on or after 1 January 2010. The amendment provides relief from
the full retrospective application of IFRS in certain circumstances.
IFRS 2 Share-based Payments - Group cash-settled share-based payment
transactions
The revised standard was issued in July 2009 and is effective for annual periods
beginning on or after 1 January 2010. It provides guidance on that, to be within
the scope of IFRS 2, an award must be a 'share-based payment transaction,' and
part of a 'share-based payment arrangement'.
Amendment to IAS 32 Financial Instruments: Presentation - Classification of
Rights Issues
The amendment was issued in October 2009 and is effective for annual periods
beginning on or after 1 February 2010. The amendment sets out the classification
requirements for rights issues.
IFRS 9 Financial Instruments: Classification and Measurement
The IASB issued IFRS 9 Financial Instruments in November 2009 which is effective
for annual periods beginning on or after 1 January 2013 with early adoption
permitted starting in 2009. The issue of this standard represents the completion
of the first part of a three-part project to replace IAS 39 Financial
Instruments: Recognition and Measurement with a new standard-IFRS 9 Financial
Instruments.
IFRIC Interpretation 19 Extinguishing Financial Liabilities and Equity
Instruments
The IFRIC issued IFRIC Interpretation 19 in November 2009. IFRIC 19 provides
guidance on how to account for the extinguishment of a financial liability by
the issue of equity instruments. An entity shall apply this Interpretation for
annual periods beginning on or after 1 July 2010 with earlier application
permitted.
26
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2009
2.SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
j) New accounting pronouncements not yet effective (continued)
Amendment to IAS 24 Related Party Disclosures
The revised standard was issued in November 2009 and is effective for annual
periods beginning on or after 1 January 2011. The revised standard simplifies
the disclosure requirements for entities that are controlled, jointly controlled
or significantly influenced by a government (referred to as government related
entities) and clarifies the definition of a related party.
Amendments to IFRIC 14 - Prepayments of a Minimum Funding Requirement
The amendment was issued in November 2009 and is effective for annual periods
beginning on or after 1 January 2011 with earlier application permitted. The
amendments correct an unintended consequence of IFRIC 14 IAS 19 - The Limit on a
Defined Benefit Asset, Minimum Funding Requirements and their Interaction.
3. FINANCIAL ASSETS AND LIABILITIES HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
+-------------+-----------------------+-------------+------------+-------------+
| 31 | Commodities | Commodities | Fixed | Total |
| December | Futures | Options | Income | |
| 2009 | | | | |
+-------------+-----------------------+-------------+------------+-------------+
| | US$ | US$ | US$ | US$ |
+-------------+-----------------------+-------------+------------+-------------+
| Financial | | | | |
| assets at | | | | |
| fair | | | | |
| value | | | | |
| through | | | | |
| profit or | | | | |
| loss | | | | |
+-------------+-----------------------+-------------+------------+-------------+
| Cost | - | 8,590,822 | 85,988,191 | 94,579,013 |
| at 31 | | | | |
| December | | | | |
| 2009 | | | | |
+-------------+-----------------------+-------------+------------+-------------+
| Unrealised | 10,820,189 | (432,596) | 4,373 | 10,391,966 |
| gain/(loss) | | | | |
+-------------+-----------------------+-------------+------------+-------------+
| Market | 10,820,189 | 8,158,226 | 85,992,564 | 104,970,979 |
| value | | | | |
| at 31 | | | | |
| December | | | | |
| 2009 | | | | |
+-------------+-----------------------+-------------+------------+-------------+
| | | | | |
+-------------+-----------------------+-------------+------------+-------------+
| Financial | | | | |
| liabilities | | | | |
| at fair | | | | |
| value | | | | |
| through | | | | |
| profit or | | | | |
| loss | | | | |
+-------------+-----------------------+-------------+------------+-------------+
| Cost | | 4,412,131 | - | 4,412,131 |
| at 31 | - | | | |
| December | | | | |
| 2009 | | | | |
+-------------+-----------------------+-------------+------------+-------------+
| Unrealised | 8,756,104 | 1,831,173 | - | 10,587,277 |
| loss | | | | |
+-------------+-----------------------+-------------+------------+-------------+
| Market | 8,756,104 | 6,243,304 | - | 14,999,408 |
| value | | | | |
| at 31 | | | | |
| December | | | | |
| 2009 | | | | |
+-------------+-----------------------+-------------+------------+-------------+
| Net realised gains on financial | 384,862 |
| assets and | |
| financial liabilities at fair | |
| value through profit or loss | |
+-------------+-----------------------+-------------+------------+-------------+
+-------------+-------------+-------------+------------+-------------+
| | | | Fixed | Total |
| 31 | Commodities | Commodities | Income | |
| December | Futures | Options | | |
| 2008 | | | | |
+-------------+-------------+-------------+------------+-------------+
| | US$ | US$ | US$ | US$ |
+-------------+-------------+-------------+------------+-------------+
| Financial | | | | |
| assets at | | | | |
| fair | | | | |
| value | | | | |
| through | | | | |
| profit or | | | | |
| loss | | | | |
+-------------+-------------+-------------+------------+-------------+
| Cost | - | 4,707,253 | 97,366,653 | 102,073,906 |
| at 31 | | | | |
| December | | | | |
| 2008 | | | | |
+-------------+-------------+-------------+------------+-------------+
| Unrealised | 4,442,820 | (955,263) | 744,869 | 4,232,426 |
| gain/(loss) | | | | |
+-------------+-------------+-------------+------------+-------------+
| | | | | |
+-------------+-------------+-------------+------------+-------------+
| Market | 4,442,820 | 3,751,990 | 98,111,522 | 106,306,332 |
| value | | | | |
| at 31 | | | | |
| December | | | | |
| 2008 | | | | |
+-------------+-------------+-------------+------------+-------------+
| | | | | |
+-------------+-------------+-------------+------------+-------------+
| Financial | | | | |
| liabilities | | | | |
| at fair | | | | |
| value | | | | |
| through | | | | |
| profit or | | | | |
| loss | | | | |
+-------------+-------------+-------------+------------+-------------+
| Cost | - | 2,048,506 | - | 2,048,506 |
| at 31 | | | | |
| December | | | | |
| 2008 | | | | |
+-------------+-------------+-------------+------------+-------------+
| Unrealised | 3,837,585 | 344,282 | - | 4,181,867 |
| loss | | | | |
+-------------+-------------+-------------+------------+-------------+
| | | | | |
+-------------+-------------+-------------+------------+-------------+
| Market | 3,837,585 | 2,392,788 | - | 6,230,373 |
| value | | | | |
| at 31 | | | | |
| December | | | | |
| 2008 | | | | |
+-------------+-------------+-------------+------------+-------------+
| Net realised gains on financial | 21,075,378 |
| assets and | |
| financial liabilities at fair | |
| value through profit or loss | |
+-------------+-------------+-------------+------------+-------------+
27
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2009
3. FINANCIAL ASSETS AND LIABILITIES HELD AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
The following table presents the financial instruments carried on the Statement
of Financial Position by caption and by level within the fair valuation
hierarchy at 31 December 2009.
+------------------------+-------------+------------+------------+-------------+
| | Level 1 | Level 2 | Level 3 | Total |
+------------------------+-------------+------------+------------+-------------+
| | US$ | US$ | US$ | US$ |
+------------------------+-------------+------------+------------+-------------+
| Financial assets at | | | | |
| fair value through | | | | |
| profit or loss | | | | |
+------------------------+-------------+------------+------------+-------------+
| Commodities futures | 10,820,189 | - | - | 10,820,189 |
+------------------------+-------------+------------+------------+-------------+
| Commodities options | 8,158,226 | - | - | 8,158,226 |
+------------------------+-------------+------------+------------+-------------+
| Fixed income | 85,992,564 | - | | 85,992,564 |
+------------------------+-------------+------------+------------+-------------+
| | 104,970,979 | - | - | 104,970,979 |
+------------------------+-------------+------------+------------+-------------+
| Financial liabilities | | | | |
| at fair value through | | | | |
| profit or loss | | | | |
+------------------------+-------------+------------+------------+-------------+
| Commodities futures | 8,756,104 | - | - | 8,756,104 |
+------------------------+-------------+------------+------------+-------------+
| Commodities options | 6,243,304 | - | - | 6,243,304 |
+------------------------+-------------+------------+------------+-------------+
| | 14,999,408 | - | - | 14,999,408 |
+------------------------+-------------+------------+------------+-------------+
In determining an instrument's placement within the hierarchy, the Directors
separate the Company's investment portfolio into two categories: investments and
derivative instruments. Each of these categories can further be divided between
financial assets or financial liabilities.
Investments
Investments whose values are based on quoted market prices in active markets,
and are therefore classified within level 1, include active listed equities,
certain U.S. government and sovereign obligations, and certain money market
securities. The Directors do not adjust the quoted price for such instruments,
even in situations where the Company holds a large position and a sale could
reasonably impact the quoted price.
Investments that trade in markets that are not considered to be active, but are
valued based on quoted market prices, dealer quotations or alternative pricing
sources supported by observable inputs are classified within level 2. These
include certain less liquid listed equities. As level 2 investments include
positions that are not traded in active markets and/or are subject to transfer
restrictions, valuations may be adjusted to reflect illiquidity and/or
non-transferability, which are generally based on available market information.
The Company did not hold any such investments at 31 December 2009.
Investments classified within level 3 have significant unobservable inputs, as
they trade infrequently or not at all. The Company did not hold any such
investments during the year ended 31 December 2009.
Derivative Instruments
Derivative instruments can be exchange-traded or privately negotiated
over-the-counter ("OTC"). Exchange-traded derivatives, such as futures contracts
and exchange traded option contracts, are typically classified within level 1 or
level 2 of the fair value hierarchy depending on whether or not they are deemed
to be actively traded.
Futures
Futures contracts are contractual agreements to buy or sell a specified
financial instrument at a specific price and date in the future. Futures
contracts are transacted in standardised amounts on regulated exchanges and are
subject to daily cash margin requirements. The main differences in the risk
associated with futures contracts are credit risk and liquidity risk. The credit
risk related to future contracts is considered minimal because the exchange
ensures that these contracts are always honoured. Futures contracts result in
market risk exposure.
Options
Options are contractual agreements that convey the right, but not the
obligation, for the purchaser either to buy or sell a specific amount of a
financial instrument at a fixed price, either at a fixed future date or at any
time within a specified period.
28
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2009
3. FINANCIAL ASSETS AND LIABILITIES HELD AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
Options (continued)
The Company purchases and sells put and call options through regulated exchanges
and OTC markets. Options purchased by the Company provide the Company with the
opportunity to purchase (call options) or sell (put options) the underlying
asset at an agreed-upon value either on or before the expiration of the option.
The Company is exposed to credit risk on purchased options only to the extent of
their carrying amount, which is their fair value.
Options written by the Company provide the purchaser the opportunity to purchase
from or sell to the Company the underlying asset at an agreed-upon value either
on or before the expiration of the option.
Options are generally settled on a net basis.
4. EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE
Earnings per share is based on the net loss for the year attributable to
shareholders of the Company of US$ 8,194,828 (31 December 2008 gain of US$
8,544,294) and on 129,523,549 (31 December 2008: 136,940,285) Ordinary Shares,
being the weighted average number of shares in issue during the year. There are
no dilutive instruments and therefore basic and diluted earnings per share are
identical.
Net asset value per share is based on the total equity of US$ 123,780,919 (31
December 2008: US$ 142,400,967) and on 126,578,083 (31 December 2008:
137,311,418) Ordinary Shares, being the number of shares in issue at the year
end.
5. RISK MANAGEMENT POLICIES AND DISCLOSURES
The Company may utilise a variety of financial instruments in its investing
strategy. Several of these instruments contain varying degrees of off-Statement
of Financial Position risk whereby changes in market values of the securities
underlying the instrument may be in excess of the amounts recorded on the
Company's Statement of Financial Position. Investments expose the Company to
varying risks including market, liquidity, and credit/counterparty risks. A
description of the specific risks and the policies of managing these risks are
included below.
a) Market price risk
Market price risk is the risk that the market price of a financial instrument
will fluctuate owing to changes in foreign exchange rates, market interest rates
and factors specific to the underlying commodities or its issuer or factors
affecting all commodities traded in the market.
Market price risk arises mainly from uncertainty about future values of
investments held. It represents the potential loss the Company might suffer
through holding market positions in the face of price movements. The Manager
actively monitors market prices and reports to the Board as to the
appropriateness of the investments held. Market risk is managed for the
portfolio by investing in traditionally uncorrelated commodities, specifically;
fibers, tropicals, grains, livestock. Specific risk parameters addressing the
maximum percentage in each sector, as well as parameters specific to the
allowable margin to equity ratio of each trader, serve to protect against severe
exposure in any market. The Company also monitors a daily Value-at-Risk (VaR)
calculation to ensure it does not exceed maximum risk guidelines.
At 31 December 2009, the overall market risk exposures were as follows:
+-------------+-------------+------------------------------------+------------+--------------+---------+
| | Commodities | Commodities | Fixed | Total | % of |
| | Futures | Options | Income | | |
+-------------+-------------+------------------------------------+------------+--------------+---------+
| | US$ | US$ | US$ | US$ | net |
| | | | | | assets |
+-------------+-------------+------------------------------------+------------+--------------+---------+
| Financial | 10,820,189 | 8,158,226 | 85,992,564 | 104,970,979 | 84.81 |
| assets | | | | | |
| held at | | | | | |
| fair | | | | | |
| value | | | | | |
| through | | | | | |
| profit or | | | | | |
| loss | | | | | |
+-------------+-------------+------------------------------------+------------+--------------+---------+
| Financial | (8,756,104) | (6,243,304) | - | (14,999,408) | (12.12) |
| liabilities | | | | | |
| held at | | | | | |
| fair value | | | | | |
| through | | | | | |
| profit or | | | | | |
| loss | | | | | |
+-------------+-------------+------------------------------------+------------+--------------+---------+
| | 2,064,085 | 1,914,922 | 85,992,563 | 89,971,571 | 72.69 |
+-------------+-------------+------------------------------------+------------+--------------+---------+
29
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2009
5. RISK MANAGEMENT POLICIES AND DISCLOSURES
a) Market price risk (continued)
The notional market value of the commodities futures are US$160,613,523 held
under financial assets held at fair value through profit or loss and
US$89,901,597 held under financial liabilities held at fair value through profit
or loss.
At 31 December 2008, the overall market risk exposures were as follows:
+-------------+-------------+-------------+------------+-------------+--------+
| | Commodities | Commodities | Fixed | Total | % of |
| | Futures | Options | Income | | |
+-------------+-------------+-------------+------------+-------------+--------+
| | US$ | US$ | US$ | US$ | net |
| | | | | | assets |
+-------------+-------------+-------------+------------+-------------+--------+
| Financial | 4,442,820 | 3,751,990 | 98,111,522 | 106,306,332 | 74.66 |
| assets | | | | | |
| held at | | | | | |
| fair | | | | | |
| value | | | | | |
| through | | | | | |
| profit or | | | | | |
| loss | | | | | |
+-------------+-------------+-------------+------------+-------------+--------+
| Financial | (3,837,585) | (2,392,788) | - | (6,230,373) | (4.38) |
| liabilities | | | | | |
| held at | | | | | |
| fair value | | | | | |
| through | | | | | |
| profit or | | | | | |
| loss | | | | | |
+-------------+-------------+-------------+------------+-------------+--------+
| | 605,235 | 1,359,202 | 98,111,522 | 100,075,959 | 70.28 |
+-------------+-------------+-------------+------------+-------------+--------+
Market Risk Assessment
The investment committee of the Manager ("Investment Committee") has set limits
on the level of risk that may be accepted in the portfolio. The VaR methodology
is applied in order to assess the market risk of positions held within the
portfolio and to estimate the potential economic loss based on a number of
parameters and assumptions. VaR is a method used in measuring financial risk by
estimating the potential negative change in the market value of a portfolio at a
given confidence level and over a specified time horizon. SunGard's Kiodex Risk
Workbench ("Kiodex"), a commodities risk management solution, is used to
calculate VaR. Additional details on the methodology are provided below under
'VaR Assumptions and Methodology'.
The portfolio VaR as well as trader's individual VaR, including incremental VaR,
is calculated on a daily basis using Kiodex. Incremental VaR represents the
trader's contribution to the total portfolio VaR and provides an additional
layer of risk analysis. In addition, Kiodex provides the flexibility to drill
down and view risk at the position level.
In addition to VaR, the Investment Committee reviews other measures of
sensitivity and exposure known as the greeks (delta, gamma, vega). The
portfolio greeks as well as trader's individual greeks are calculated on a daily
basis using Kiodex. The Investment Committee utilizes the greeks in order to
evaluate exposure to various commodity markets (grains, livestock, fibres,
tropicals) as well as individual commodities and commodity contracts. The
measures are useful in managing concentration risk in the portfolio.
VaR Assumptions and Methodology
The VaR that the Investment Committee measures is an estimate, using a
confidence level of 95%, of the potential loss that is not expected to be
exceeded if the current market risk positions were to be held unchanged for one
day.
For example, assume the portfolio 1-day VaR is US$1.25 million. This implies
that under normal trading conditions the Investment Committee can be 95%
confident that a change in the value of the portfolio would not result in a
decrease of more than US$1.25 million during one day. If the Net Asset Value
(NAV) of the portfolio is US$150 million, this would mean that the 1-day, 95%
VaR is approximately 0.83% of the NAV (in percentage terms). As at 31 December
2009, VaR was 0.55% (31 December 2008: 0.09%) of the NAV of the Company.
Kiodex Monte Carlo VaR is generated using historic correlations and implied
early expiry volatilities as explained below.
The 1-day VaR is calculated assuming a 95% confidence level using a Monte Carlo
simulation. Correlations are generated from a predetermined time period of 90
days. Each commodity is correlated through a two-factor model, with the long and
short end of the curve each representing a factor. Both factors are correlated
to both ends of every other commodity. A curve is the relation between the
price of a commodity contract and time (month) at which the contract matures (or
expires). The short end of the curve refers to the 'spot' or 'front' month
contract which is the next futures contract due to expire for a particular
commodity. The long end of the curve refers to commodity contracts that expire
further out in the future. Both factors are also correlated to each other to
measure the level of curve twisting which may occur in a random scenario. It is
this two factor model which enables curves to move from contango to
backwardation in markets where this is applicable. For example, markets such as
gold which never go into backwardation would not show backwardation as a likely
scenario. Other curves, which easily flip to varying states of backwardation and
contango, will show twists in a number of scenarios.
30
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2009
5. RISK MANAGEMENT POLICIES AND DISCLOSURES (CONTINUED)
a) Market price risk (continued)
VaR Assumptions and Methodology (continued)
Once correlations are generated the magnitude of market data shifts are
simulated. The magnitude of the range of curve bumps throughout scenarios is
determined from the implied at the money early expiry volatilities of each
contract.
The implied volatility of a contract represents the term volatility. When a VaR
is run for a period shorter than the term of the contract, volatility for the
chosen horizon must be determined from both the term volatility and the
volatility distribution defined by the Kiodex model parameters.
Mark to markets are then run against a variety of scenarios. The results are
ordered from the most positive to the most negative mark to market change. A VaR
level is chosen to represent the path in percentage terms. If 1,000 paths are
used, a 95% VaR represents the 950th best path, or the 50th worst path.
Different paths are used to determine the VaR of a trade, book, and portfolio
within the same risk report. For example, a trader's VaR represents that
particular trader's 95% VaR level, while a position VaR represents the 95% VaR
level for that particular position.
Limitations of the VaR Methodology
The VaR that is utilized in the Company's risk analysis is a 'point-in-time'
calculation, reflecting positions recorded at that date, which does not
necessarily reflect the risk positions held at any other time. VaR is a
statistical estimation and therefore it is possible that there could be, in any
period, a greater number of days in which losses could exceed the calculated VaR
implied by the confidence level. Although losses are not expected to exceed the
calculated VaR on 95% of occasions, on the other 5% of occasions, losses are
expected to be greater and might be substantially greater than the calculated
VaR
b) Interest rate risk
Although the Company's interest-bearing financial assets and liabilities expose
it to risks associated with the effects of fluctuations in the prevailing levels
of market interest rates on its financial position and cash flows, it is not
subject to significant amounts of risk due to such fluctuations. Any excess cash
and cash equivalents are invested at short-term market interest rates which
mitigates interest rate risk and the extent to which the cash and cash
equivalent assets are positively correlated to interest rates.
The table below summarises the Company's exposure to interest rate risk. It
includes the Company's assets and liabilities at fair values, categorised by the
earlier of contractual re-pricing or maturity dates.
+--------+--------+----------+--+----------+--------+----------+----+----------+--+----------+----+----------+-------+----------+--------+------------+--------------+----------+-------------+
| | At 31 December 2009 | | | Up to | Non-interest | Total |
+--------+----------------------------------------------------------------------------------------+------------------+-------------------+------------+-------------------------+-------------+
| | | | | | | | | | 1 month | bearing | |
+--------+--------+-------------+-------------------+---------------+-------------+---------------+------------------+-------------------+------------+-------------------------+-------------+
| | Assets | | | | | | US$ | US$ | US$ |
+--------+------------------------------------------+---------------+-------------+---------------+------------------+-------------------+------------+-------------------------+-------------+
| | Cash and cash equivalents | | | | | 25,546,118 | - | 25,546,118 |
+--------+----------------------------------------------------------+-------------+---------------+------------------+-------------------+------------+-------------------------+-------------+
| | Margin accounts with brokers | 9,055,754 | - | 9,055,754 |
+--------+-------------------------------------------------------------------------------------------------------------------------------+------------+-------------------------+-------------+
| | Financial assets held at fair value through profit or loss | - | 104,970,979 | 104,970,979 |
+--------+-------------------------------------------------------------------------------------------------------------------------------+------------+-------------------------+-------------+
| | Other receivables | | | | | | - | 168,515 | 168,515 |
+--------+------------------------------------------+---------------+-------------+---------------+------------------+-------------------+------------+-------------------------+-------------+
| | Total Assets | | | | | | 34,601,872 | 105,139,494 | 139,741,366 |
+--------+------------------------------------------+---------------+-------------+---------------+------------------+-------------------+------------+-------------------------+-------------+
| | | | | | | | | | |
+--------+-----------------------------------------------------+---------------+-------------+---------------+------------------+--------+------------+-------------------------+-------------+
| | | | | | | | Up to | Non-interest | Total |
| | | | | | | | | | |
+--------+-----------------------------------------------------+---------------+-------------+---------------+------------------+--------+------------+--------------+------------------------+
| | | | | | | | 1 month | bearing | |
+--------+-----------------------------------------------------+---------------+-------------+---------------+------------------+--------+------------+--------------+------------------------+
| | Liabilities | | | | | | US$ | US$ | US$ |
+--------+-----------------------------------------------------+---------------+-------------+---------------+------------------+--------+------------+--------------+------------------------+
| | Financial liabilities held at fair value through profit or loss | - | 14,999,408 | 14,999,408 |
+--------+-------------------------------------------------------------------------------------------------------------------------------+------------+--------------+------------------------+
| | Bank overdraft | | | | | | 34,426 | - | 34,426 |
+--------+-----------------------------------------------------+---------------+-------------+---------------+------------------+--------+------------+--------------+------------------------+
| | Other payables | | | | - | 926,613 | 926,613 |
+--------+-----------------------------------------------------------------------------------+---------------+------------------+--------+------------+--------------+------------------------+
| | Total Liabilities | | | | | | 34,426 | 15,926,021 | 15,960,447 |
+--------+-----------------------------------------------------+---------------+-------------+---------------+------------------+--------+------------+--------------+------------------------+
| | | | | | | | | | | | |
+--------+-------------------+-------------+-------------------+---------------+-------------+---------------+------------------+--------+------------+--------------+------------------------+
| | Interest rate sensitivity gap | | 34,567,446 | | |
+--------+----------------------------------------------------------------------------------------------------------------------+--------+------------+--------------+------------------------+
| | | | | | | | | | | | | | | | | | | | |
+--------+--------+----------+--+----------+--------+----------+----+----------+--+----------+----+----------+-------+----------+--------+------------+--------------+----------+-------------+
31
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2009
5. RISK MANAGEMENT POLICIES AND DISCLOSURES (CONTINUED)
b) Interest rate risk (continued)
+--------+----------+--+----------+--+----------+--------+----------+----+----------+--+----------+----+----------+-------+----------+--------+------------+----------+--------------+----------+-------------+
| | At 31 December 2008 | | | Up to | Non-interest | Total |
+--------+---------------------------------------------------------------------------------------------+------------------+-------------------+------------+------------------------------------+-------------+
| | | | | | | | | | 1 month | bearing | |
+--------+-------------+-------------+-------------------+---------------+-------------+---------------+------------------+-------------------+------------+------------------------------------+-------------+
| | Assets | | | | | | US$ | US$ | US$ |
+--------+-----------------------------------------------+---------------+-------------+---------------+------------------+-------------------+------------+------------------------------------+-------------+
| | Cash and cash equivalents | | | | | 41,844,531 | - | 41,844,531 |
+--------+---------------------------------------------------------------+-------------+---------------+------------------+-------------------+------------+------------------------------------+-------------+
| | Margin accounts with brokers | 2,540,466 | - | 2,540,466 |
+--------+------------------------------------------------------------------------------------------------------------------------------------+------------+------------------------------------+-------------+
| | Financial assets held at fair value through profit or loss | - | 106,306,332 | 106,306,332 |
+--------+------------------------------------------------------------------------------------------------------------------------------------+------------+------------------------------------+-------------+
| | Other receivables | | | | | | - | 355,957 | 355,957 |
+--------+-----------------------------------------------+---------------+-------------+---------------+------------------+-------------------+------------+------------------------------------+-------------+
| | Total Assets | | | | | | 44,384,997 | 106,662,289 | 151,047,286 |
+--------+-----------------------------------------------+---------------+-------------+---------------+------------------+-------------------+------------+------------------------------------+-------------+
| | | | | | | | | | |
+-------------------+-----------------------------------------------+---------------+-------------+---------------+------------------+--------+-----------------------+-------------------------+-------------+
| | | | | | | | Up to | Non-interest | Total |
| | | | | | | | | | |
+-------------------+-----------------------------------------------+---------------+-------------+---------------+------------------+--------+-----------------------+--------------+------------------------+
| | | | | | | | 1 month | bearing | |
+-------------------+-----------------------------------------------+---------------+-------------+---------------+------------------+--------+-----------------------+--------------+------------------------+
| | Liabilities | | | | | | US$ | US$ | US$ |
+-------------------+-----------------------------------------------+---------------+-------------+---------------+------------------+--------+-----------------------+--------------+------------------------+
| | Financial liabilities held at fair value through profit or loss | - | 6,230,373 | 6,230,373 |
+-------------------+-------------------------------------------------------------------------------------------------------------------------+-----------------------+--------------+------------------------+
| | Bank overdraft | | | | | | 1,015,457 | - | 1,015,457 |
+-------------------+-----------------------------------------------+---------------+-------------+---------------+------------------+--------+-----------------------+--------------+------------------------+
| | Other payables | | | | - | 1,400,489 | 1,400,489 |
+-------------------+-----------------------------------------------------------------------------+---------------+------------------+--------+-----------------------+--------------+------------------------+
| | Total Liabilities | | | | | | 1,015,457 | 7,630,862 | 8,646,319 |
+-------------------+-----------------------------------------------+---------------+-------------+---------------+------------------+--------+-----------------------+--------------+------------------------+
| | | | | | | | | | | | |
+-------------------+-------------+-------------+-------------------+---------------+-------------+---------------+------------------+--------+-----------------------+--------------+------------------------+
| | Interest rate sensitivity gap | | 43,369,540 | | |
+-------------------+----------------------------------------------------------------------------------------------------------------+--------+-----------------------+--------------+------------------------+
| | | | | | | | | | | | | | | | | | | | | | |
+--------+----------+--+----------+--+----------+--------+----------+----+----------+--+----------+----+----------+-------+----------+--------+------------+----------+--------------+----------+-------------+
Interest rate sensitivity
At 31 December 2009, should interest rates have lowered between 10 and 25 basis
points with all other variables remaining constant, the decrease in net assets
attributable to holders of Ordinary Shares for the year would amount to
approximately US$ Nil (31 December 2008: Nil) and US$ Nil (31 December 2008:
Nil) respectively. If interest rates had risen by 10 and 25 basis points, the
increase in net assets attributable to holders of Ordinary Shares would amount
to approximately US$ 34,567 (31 December 2008: US$43,369) and US$ 86,419 (31
December 2008: US$108,424) respectively.
The income on Company's cash assets is positively correlated to interest rates.
Cash is held at the various brokers, and as interest rates rise, the interest
earned would follow (rise) thus increasing the value of the Company.
The carrying amount of financial assets and financial liabilities approximates
their respective fair value as at 31 December 2009.
c) Liquidity risk
Liquidity risk is defined as the risk that the Company may not be able to settle
or meet its obligations on time or at a reasonable price. The Company manages
the overall liquidity by investing through traders who trade in various US and
European markets. The derivatives in which they trade are exchange products,
with standardised contracts and large volume and open interest numbers. In
addition, the Company is fully funded.
Under its Articles of Association of the Company, the Company has the ability to
incur borrowings of up to 25 percent of its Net Asset Value but the Company's
policy is to restrict any borrowings to a maximum of 10 percent of Net Asset
Value. The Board intends to use this only for short term liquidity, working
capital requirements and to fund Company share buy backs. The use of such
borrowings may have an adverse effect on the Company's ability to achieve its
target returns. It should be noted that the Board's policy is to maintain a
strong capital base so as to maintain shareholder value and to sustain future
development of the Company (see note 5(g)).
The table below analyses the Company's financial assets and liabilities into
relevant maturity groupings based on the remaining period at the Statement of
Financial Position date to the contractual maturity date. The amounts in the
table are the contractual undiscounted cash flows.
32
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2009
5. RISK MANAGEMENT POLICIES AND DISCLOSURES (CONTINUED)
c) Liquidity risk (continued)
+--------+--------+--------+---------+--------+--------+--------+------------+----------+---------+----------+---------+----------+----------+-------------+
| | At 31 December 2009 | | | Less | | | More than | |
| | | | | than | | | | |
+--------+------------------------------------+--------+--------+------------+--------------------+--------------------+---------------------+-------------+
| | | | | | | | 1 | 1-3 months | 3-12 months | 12 months | Total |
| | | | | | | | month | | | | |
+--------+--------+--------+---------+--------+--------+--------+------------+--------------------+--------------------+---------------------+-------------+
| | Assets | | | | | US$ | US$ | US$ | US$ | US$ |
+--------+-----------------+---------+--------+--------+--------+------------+--------------------+--------------------+---------------------+-------------+
| | Cash and cash equivalents | 25,546,118 | - | - | - | 25,546,118 |
+--------+------------------------------------------------------+------------+--------------------+--------------------+---------------------+-------------+
| | Margin accounts with brokers | 9,055,754 | - | - | - | 9,055,754 |
+--------+------------------------------------------------------+------------+--------------------+--------------------+---------------------+-------------+
| | Financial assets held at fair value | 761,886 | 95,920,510 | 8,288,583 | - | 104,970,979 |
| | through profit or loss | | | | | |
+--------+------------------------------------------------------+------------+--------------------+--------------------+---------------------+-------------+
| | Other receivables | 168,515 | - | - | - | 168,515 |
+--------+------------------------------------------------------+------------+--------------------+--------------------+---------------------+-------------+
| | | | | | | | 35,532,273 | 95,920,510 | 8,288,583 | - | 139,741,366 |
+--------+--------+--------+---------+--------+--------+--------+------------+--------------------+--------------------+---------------------+-------------+
| | | | | | | | | | | | |
+--------+--------+--------+---------+--------+--------+--------+------------+--------------------+--------------------+---------------------+-------------+
| | | | | | Less than | | | More | |
| | | | | | | | | than | |
+--------+---------------------------+--------+--------+--------+-----------------------+--------------------+--------------------+----------+-------------+
| | | | | | 1 month | 1-3 months | 3-12 months | 12 | Total |
| | | | | | | | | months | |
+--------+---------------------------+--------+--------+--------+-----------------------+--------------------+--------------------+----------+-------------+
| | Liabilities | | | | US$ | US$ | US$ | US$ | US$ |
+--------+---------------------------+--------+--------+--------+-----------------------+--------------------+--------------------+----------+-------------+
| | Financial liabilities at fair value | 1,322,253 | 6,861,691 | 6,815,464 | - | 14,999,408 |
| | through profit or loss | | | | | |
+--------+------------------------------------------------------+-----------------------+--------------------+--------------------+----------+-------------+
| | Bank overdraft | | | | 34,426 | - | - | - | 34,426 |
+--------+---------------------------+--------+--------+--------+-----------------------+--------------------+--------------------+----------+-------------+
| | Other payables | 926,613 | - | - | - | 926,613 |
+--------+------------------------------------------------------+-----------------------+--------------------+--------------------+----------+-------------+
| | Total liabilities | | | | 2,283,292 | 6,861,691 | 6,815,464 | - | 15,960,447 |
+--------+---------------------------+--------+--------+--------+-----------------------+--------------------+--------------------+----------+-------------+
| | | | | | | | | | | | |
+--------+--------+--------+---------+--------+--------+--------+-----------------------+--------------------+--------------------+----------+-------------+
| | Net assets attributable to shareholders | | 123,780,919 |
+--------+------------------------------------------------------------------------------------------------------------------------+----------+-------------+
| | | | | | | | | | | | | | | |
+--------+--------+--------+---------+--------+--------+--------+------------+----------+---------+----------+---------+----------+----------+-------------+
+--------+--------+--------+---------+--------+--------+--------+------------+----------+---------+----------+---------+----------+----------+-------------+
| | At 31 December 2008 | | | Less | | | More than | |
| | | | | than | | | | |
+--------+------------------------------------+--------+--------+------------+--------------------+--------------------+---------------------+-------------+
| | | | | | | | 1 | 1-3 months | 3-12 months | 12 months | Total |
| | | | | | | | month | | | | |
+--------+--------+--------+---------+--------+--------+--------+------------+--------------------+--------------------+---------------------+-------------+
| | Assets | | | | | US$ | US$ | US$ | US$ | US$ |
+--------+-----------------+---------+--------+--------+--------+------------+--------------------+--------------------+---------------------+-------------+
| | Cash and cash equivalents | 41,844,531 | - | - | - | 41,844,531 |
+--------+------------------------------------------------------+------------+--------------------+--------------------+---------------------+-------------+
| | Margin accounts with brokers | 2,540,466 | - | - | - | 2,540,466 |
+--------+------------------------------------------------------+------------+--------------------+--------------------+---------------------+-------------+
| | Financial assets held at fair value | 770 | 96,182,655 | 10,122,907 | - | 106,306,332 |
| | through profit or loss | | | | | |
+--------+------------------------------------------------------+------------+--------------------+--------------------+---------------------+-------------+
| | Other receivables | 355,957 | - | - | - | 355,957 |
+--------+------------------------------------------------------+------------+--------------------+--------------------+---------------------+-------------+
| | | | | | | | 44,741,724 | 96,182,655 | 10,122,907 | - | 151,047,286 |
+--------+--------+--------+---------+--------+--------+--------+------------+--------------------+--------------------+---------------------+-------------+
| | | | | | | | | | | | |
+--------+--------+--------+---------+--------+--------+--------+------------+--------------------+--------------------+---------------------+-------------+
| | | | | | Less than | | | More | |
| | | | | | | | | than | |
+--------+---------------------------+--------+--------+--------+-----------------------+--------------------+--------------------+----------+-------------+
| | | | | | 1 month | 1-3 months | 3-12 months | 12 | Total |
| | | | | | | | | months | |
+--------+---------------------------+--------+--------+--------+-----------------------+--------------------+--------------------+----------+-------------+
| | Liabilities | | | | US$ | US$ | US$ | US$ | US$ |
+--------+---------------------------+--------+--------+--------+-----------------------+--------------------+--------------------+----------+-------------+
| | Financial liabilities at fair value | 142,288 | 1,408,669 | 4,543,516 | 135,900 | 6,230,373 |
| | through profit or loss | | | | | |
+--------+------------------------------------------------------+-----------------------+--------------------+--------------------+----------+-------------+
| | Bank overdraft | | | | 1,015,457 | - | - | - | 1,015,457 |
+--------+---------------------------+--------+--------+--------+-----------------------+--------------------+--------------------+----------+-------------+
| | Other payables | 1,400,489 | - | - | - | 1,400,489 |
+--------+------------------------------------------------------+-----------------------+--------------------+--------------------+----------+-------------+
| | Total liabilities | | | | 2,558,234 | 1,408,669 | 4,543,516 | 135,900 | 8,646,319 |
+--------+---------------------------+--------+--------+--------+-----------------------+--------------------+--------------------+----------+-------------+
| | | | | | | | | | | | |
+--------+--------+--------+---------+--------+--------+--------+-----------------------+--------------------+--------------------+----------+-------------+
| | Net assets attributable to shareholders | | 142,400,967 |
+--------+------------------------------------------------------------------------------------------------------------------------+----------+-------------+
| | | | | | | | | | | | | | | |
+--------+--------+--------+---------+--------+--------+--------+------------+----------+---------+----------+---------+----------+----------+-------------+
33
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2009
5. RISK MANAGEMENT POLICIES AND DISCLOSURES (CONTINUED)
d) Currency risk
The majority of the Company's financial assets and liabilities are in US$, the
functional currency. Currency risk is the risk that the value of non-US$
financial instruments will fluctuate due to changes in foreign exchange rates.
The tables below indicate the currencies and amounts the Company was exposed to,
at 31 December 2009 and 31 December 2008.
31 December 2009
+--------+--------+--------+--------+--------+--------+--------+--------+-------------+------------+-------------+--------+
| | Currency | | | | | Amount | Conversion | Value | % of |
| | | | | | | | rate | | net |
| | | | | | | | | | assets |
+--------+--------------------------+--------+--------+--------+--------+-------------+------------+-------------+--------+
| | | | | | | | | | (based | US$ | |
| | | | | | | | | | on | | |
| | | | | | | | | | US$) | | |
+--------+--------+--------+--------+--------+--------+--------+--------+-------------+------------+-------------+--------+
| | US$ | 123,657,129 | 1.0000 | 123,657,129 | 99.90 |
+--------+--------------------------------------------------------------+-------------+------------+-------------+--------+
| | GBP | | | | | | 26,712 | 0.6188 | 43,167 | 0.03 |
+--------+-----------------+--------+--------+--------+--------+--------+-------------+------------+-------------+--------+
| | EURO | | | | | | 6,479 | 0.6977 | 9,286 | 0.01 |
+--------+-----------------+--------+--------+--------+--------+--------+-------------+------------+-------------+--------+
| | CAD | | | | | | 74,733 | 1.0476 | 71,337 | 0.06 |
+--------+-----------------+--------+--------+--------+--------+--------+-------------+------------+-------------+--------+
| | | | | | | | | | | | 100.00 |
+--------+--------+--------+--------+--------+--------+--------+--------+-------------+------------+-------------+--------+
31 December 2008
+--------+--------+--------+--------+--------+--------+--------+--------+-------------+------------+-------------+--------+
| | Currency | | | | | Amount | Conversion | Value | % of |
| | | | | | | | rate | | net |
| | | | | | | | | | assets |
+--------+--------------------------+--------+--------+--------+--------+-------------+------------+-------------+--------+
| | | | | | | | | | (based | US$ | |
| | | | | | | | | | on | | |
| | | | | | | | | | US$) | | |
+--------+--------+--------+--------+--------+--------+--------+--------+-------------+------------+-------------+--------+
| | US$ | 142,254,206 | 1.0000 | 142,254,206 | 99.90 |
+--------+--------------------------------------------------------------+-------------+------------+-------------+--------+
| | GBP | | | | | | (3,082) | 0.6862 | (4,491) | - |
+--------+-----------------+--------+--------+--------+--------+--------+-------------+------------+-------------+--------+
| | EURO | | | | | | 108,258 | 0.7157 | 151,252 | 0.10 |
+--------+-----------------+--------+--------+--------+--------+--------+-------------+------------+-------------+--------+
| | | | | | | | | | | | 100.00 |
+--------+--------+--------+--------+--------+--------+--------+--------+-------------+------------+-------------+--------+
e) Credit risk
The Company has exposure to credit risk, which is the risk that a counterparty
will be unable to pay amounts in full when due. The Company is exposed to credit
risk in relation to its cash balances, investments and trade receivables as
stated in the Statement of Financial Position.
As at 31 December 2009 and 31 December 2008, the Company's cash and cash
equivalents, margin accounts with brokers, financial assets and liabilities at
fair value through profit or loss were held at two different Futures Commodity
Merchants* ("FCMs") (three different FCMs at 31 December 2008) and at HSBC Bank
plc with the following weights:
+--------+-------------+--------+--------+--------+--------+--------+----------+--------+------------+-------------+
| | | | Credit | 2009 | 2008 |
+--------+-------------------------------------------------+--------+-------------------+------------+-------------+
| | Broker / Bank | | Rating | % of net | % of net |
| | | | | assets | assets |
+--------+-------------------------------------------------+--------+-------------------+------------+-------------+
| | MF Global | | | | | | BBB | 51 | 71 |
+--------+-------------+--------+--------+--------+--------+--------+-------------------+------------+-------------+
| | Marex | | | | | | N/R | - | 11 |
+--------+-------------+--------+--------+--------+--------+--------+-------------------+------------+-------------+
| | NewEdge | | | | | | AA | 48 | 16 |
+--------+-------------+--------+--------+--------+--------+--------+-------------------+------------+-------------+
| | HSBC Bank plc | AA | 1 | 2 |
+--------+---------------------------------------------------------------------+--------+------------+-------------+
| | Total | | | | | | | 100 | 100 |
| | | | | | | | | | |
+--------+-------------+--------+--------+--------+--------+--------+-------------------+------------+-------------+
| | | | | | | | | | | |
+--------+-------------+--------+--------+--------+--------+--------+----------+--------+------------+-------------+
*The FCMs accounts are segregated by CFTC regulations so that they are
not commingled with the brokers' assets.
In an effort to mitigate credit risk, the Company holds the majority of excess
cash in segregated accounts with various FCMs. All investments, including
short-term United States Treasury Bills are held in segregated accounts with
various FCMs. As a result, the FCMs are prohibited from comingling cash and
investments with their assets.
34
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2009
5. RISK MANAGEMENT POLICIES AND DISCLOSURES (CONTINUED)
f) Off-Statement of Financial Position risk
Furthermore, the Company enters into investment transactions which attract
off-Statement of Financial Position market risks and off-Statement of Financial
Position credit risks. An off-Statement of Financial Position market risk exists
when the maximum potential loss on a particular investment is greater than the
value of such investment as reflected in the Statement of Financial Position.
Off-Statement of Financial Position credit risk exists, among other situations,
when the collateral received by the Company from the counterparty to an
agreement with the Company proves to be insufficient to cover the Company's
losses resulting from a default by the counterparty of its obligation to perform
under the terms of the agreement. Margin deposits with brokers are held as
collateral for futures. This risk is inherent in investing in futures. By
instituting all the items discussed in note 5, principally market risk
assessment in 5(a) and credit risk in 5(e), the Company is addressing and
mitigating this risk factor.
g) Capital management
The Board's policy is to maintain a strong capital base so as to maintain
shareholder value and to sustain future development of the Company. The Board
manages the Company's affairs to achieve shareholder returns through capital
growth rather than income, and monitors the achievement of this through growth
in Net Asset Value per share. Gearing may be employed by the Company with the
aim of enhancing shareholder returns and for short term liquidity and working
capital requirements. The Company is not subject to externally imposed capital
requirements except for the margin requirements imposed by the exchanges on
which the brokers trade.
During the year ended 31 December 2009 the Company repurchased Ordinary Shares
for holding in treasury as detailed in note 13.
6. TAXATION
The Company is a Guernsey Exempt Company and is therefore not subject to
taxation on its income under the Income Tax (Exempt Bodies) (Guernsey)
Ordinance, 1989. An annual exempt fee of GBP600 has been paid.
7. COMMISSION AND FEE EXPENSES
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+-----------+------------+
| | | | | Year | For |
| | | | | ended | the |
| | | | | 31 | period |
| | | | | December | from |
| | | | | 2009 | 17 |
| | | | | | October |
| | | | | | 2007 to |
| | | | | | 31 |
| | | | | | December |
| | | | | | 2008 |
+--------+--------------------------------------------------------------+--------+--------+-----------+------------+
| | | | | | | | | | | US$ | US$ |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+-----------+------------+
| | Trader performance fees | | | 1,474,730 | 6,410,695 |
+--------+--------------------------------------------------------------+--------+--------+-----------+------------+
| | Management fees | | | 2,032,234 | 2,363,378 |
+--------+--------------------------------------------------------------+--------+--------+-----------+------------+
| | Trader management fees | | | 1,543,393 | 1,393,863 |
+--------+--------------------------------------------------------------+--------+--------+-----------+------------+
| | Commission fees | | | 1,871,504 | 1,700,222 |
+--------+--------------------------------------------------------------+--------+--------+-----------+------------+
| | Directors' fees | | | 101,962 | 153,501 |
+--------+--------------------------------------------------------------+--------+--------+-----------+------------+
| | Directors' expenses | | | 33,796 | 20,597 |
+--------+--------------------------------------------------------------+--------+--------+-----------+------------+
| | Administration fees | | | | | | 148,488 | 174,802 |
+--------+-----------------------------------+--------+--------+--------+--------+--------+-----------+------------+
| | Audit fees* | | | | | | | 136,027 | 168,298 |
+--------+--------------------------+--------+--------+--------+--------+--------+--------+-----------+------------+
| | Advisor fee | | | | | | | 123,068 | - |
+--------+--------------------------+--------+--------+--------+--------+--------+--------+-----------+------------+
| | | | | | | | | | | 7,465,202 | 12,385,356 |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+-----------+------------+
*Audit fees for the period from 17 October 2007 to 31 December 2008 includes
fees paid to the Reporting Accountants for work carried out in relation to the
prospectuses of the Company published in November 2007 and November 2008 and
fees paid to the Auditors for the financial statements for the period from
inception to 28 February 2008 (carried out for purposes of inclusion in the
prospectus issued by the Company on 20 November 2008) and audit fees paid to
Auditors for the annual financial statements for the period from inception to 31
December 2008.
35
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2009
8. ADMINISTRATION FEES
The Administrator, HSBC Securities Services (Guernsey) Limited, is
paid fees for acting as administrator of the Company on a sliding scale, based
on the Net Asset Value of the Company, as follows:
+--------+--------+----------------+--------+--------+--------+--------+---------------------------------+
| | | US$0 to US$100,000,000 | | | | 0.12% per annum |
+--------+--------+-------------------------+--------+--------+--------+---------------------------------+
| | | US$100,000,000 to US$250,000,000 | 0.09% per annum |
+--------+--------+----------------------------------------------------+---------------------------------+
| | | US$250,000,000 to US$500,000,000 | 0.06% per annum |
+--------+--------+----------------------------------------------------+---------------------------------+
| | | Above | | | | | 0.03% per annum |
| | | US$500,000,000 | | | | | |
+--------+--------+----------------+--------+--------+--------+--------+---------------------------------+
| | | | | | | | |
+--------+--------+----------------+--------+--------+--------+--------+---------------------------------+
subject to a minimum monthly fee of US$10,000, or such other fees as may be
agreed on normal commercial terms between the Administrator and the Company from
time to time. The Administrator will also be paid a termination/re-structuring
fee of US$5,000 upon termination/liquidation of the Company, and any future
re-structure of the Company will incur a minimum fee of US$10,000.
The fee will accrue on a monthly basis and will be payable monthly in arrears.
The administration fees paid for the year ended 31 December 2009 were US$
148,488 (period ended 31 December 2008: US$ 174,802) of which US$ 63,107 was
payable at 31 December 2009 (31 December 2008: US$ 40,128).
9. MANAGER FEES
The Manager was appointed by the Company pursuant to a Management Agreement
dated 22 November 2007.
The Company pays to the Manager a 'base fee' which is equal to 0.375 % of the
Net Asset Value per calendar quarter.
In addition the Manager is entitled to a Performance Fee which is an amount
equal to 20% of the appreciation in the Net Asset Value over the high water mark
Net Asset Value (which is the net asset value per share at the end of the last
calculation period in respect of which a Performance Fee was paid or if no
Performance Fee has previously been paid, the Net Asset Value per Ordinary Share
immediately following admission to trading on the London Stock Exchange)
multiplied by (1+ (0.08 x (n/y))) where n = the number of calendar days in the
calculation period for which the particular share was in issue and y = 365, in a
leap year, 366.
The Manager has been appointed for an initial term of 4 years and thereafter the
Management Agreement is terminable on 12 months' notice by the Manager or on 12
months' notice by the Company, but only where the majority of Directors so
resolve and on the basis of the performance of the Manager. The Management
Agreement may also be terminated immediately in certain limited circumstances,
including liquidation of the Manager or the Company, material breach, or
pursuant to the requirements of a regulatory authority.
The Manager's base fees paid for the year ended 31 December 2009 were US$
2,032,234 (period ended 31 December 2008: US$ 2,363,378).
Trader management fees are charged between a range of 0.01% and 2.00%. Trader
performance fees are charged between a range 20% to 25%.
The Trader management fees paid for the year ended 31 December 2009 were US$
1,543,393 (period ended 31 December 2008: US$ 1,393,863) of which US$ 261,844
was payable at 31 December 2009 (31 December 2008: US$ 326,493).
Further details of the terms and conditions of the Manager's appointment are
detailed on pages 43 and 44 and pages 115-117 of the latest prospectus of the
Company published on 20 November 2008, which can be found on the Company's
website at www.ceresagriculture.com.
The Company also bears the management fees, incentive payments and expenses that
are payable to its traders. Due to the fees and expenses charged by traders,
the Company is subject to layering of administrative and other expenses as well
as management fees and incentive compensation.
36
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2009
10. OTHER RECEIVABLES
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+
| | | | | | | | | | | 31 | 31 |
| | | | | | | | | | | December | December |
| | | | | | | | | | | 2009 | 2008 |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+
| | | | | | | | | | | US$ | US$ |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+
| | Pre-payments | | | | | | | 168,515 | 355,945 |
+--------+--------------------------+--------+--------+--------+--------+--------+--------+----------+----------+
| | Interest receivable | | | | | | | - | 12 |
+--------+--------------------------+--------+--------+--------+--------+--------+--------+----------+----------+
| | | | | | | | | | | 168,515 | 355,957 |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+----------+
11. OTHER PAYABLES
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+-----------+
| | | | | | | | | | | 31 | 31 |
| | | | | | | | | | | December | December |
| | | | | | | | | | | 2009 | 2008 |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+-----------+
| | | | | | | | | | | US$ | US$ |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+-----------+
| | Commission & fees expense | | | 529,954 | 827,410 |
+--------+--------------------------------------------------------------+--------+--------+----------+-----------+
| | Due to broker | | 96,475 | 236,330 |
+--------+-----------------------------------------------------------------------+--------+----------+-----------+
| | Others | | 300,184 | 336,749 |
+--------+-----------------------------------------------------------------------+--------+----------+-----------+
| | | | | | | | | | | 926,613 | 1,400,489 |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+----------+-----------+
12. CASH AND CASH EQUIVALENTS
+--------+----------+-+--------+---------+--------+--------+--------+--------+--------+--------+--------------+-------------+
| | | | | | | | | | | 31 December | 31 December |
| | | | | | | | | | | 2009 | 2008 |
+--------+------------+--------+---------+--------+--------+--------+--------+--------+--------+--------------+-------------+
| | | | | | | | | | | US$ | US$ |
+--------+------------+--------+---------+--------+--------+--------+--------+--------+--------+--------------+-------------+
| | Cash and cash equivalents | | | 25,546,118 | 41,844,531 |
+--------+-------------------------------------------------------------------+--------+--------+--------------+-------------+
| | Bank overdraft | | (34,426) | (1,015,457) |
+--------+----------------------------------------------------------------------------+--------+--------------+-------------+
| | | | 25,511,692 | 40,829,074 |
+--------+----------------------------------------------------------------------------+--------+--------------+-------------+
| | | | | |
+--------+----------------------------------------------------------------------------+--------+--------------+-------------+
| | Represented by: | | | |
+--------+----------------------------------------------------------------------------+--------+--------------+-------------+
| | | | | |
+--------+----------+--------------------------------------------------------------------------+--------------+-------------+
| | | Cash and cash equivalents | | |
+--------+----------+--------------------------------------------------------------------------+--------------+-------------+
| | | HSBC Bank plc | 750,005 | 2,370,032 |
+--------+----------+--------------------------------------------------------------------------+--------------+-------------+
| | | MF Global | 20,062,487 | 24,785,421 |
+--------+----------+--------------------------------------------------------------------------+--------------+-------------+
| | | NewEdge USA LLC | 4,733,626 | 6,001,152 |
+--------+----------+--------------------------------------------------------------------------+--------------+-------------+
| | | Marex Financial | - | 8,687,926 |
+--------+----------+--------------------------------------------------------------------------+--------------+-------------+
| | | Cash at bank | 25,546,118 | 41,844,531 |
+--------+----------+--------------------------------------------------------------------------+--------------+-------------+
| | | | | |
+--------+----------------------------------------------------------------------------+--------+--------------+-------------+
| | | Bank overdraft* | | |
+--------+----------+--------------------------------------------------------------------------+--------------+-------------+
| | | NewEdge USA LLC | (34,426) | - |
+--------+----------+--------------------------------------------------------------------------+--------------+-------------+
| | | MF Global | - | (1,015,457) |
+--------+----------+--------------------------------------------------------------------------+--------------+-------------+
| | | Bank overdraft | (34,426) | (1,015,457) |
+--------+----------+--------------------------------------------------------------------------+--------------+-------------+
| | | | | | | | | | | | | |
+--------+----------+-+--------+---------+--------+--------+--------+--------+--------+--------+--------------+-------------+
* Bank overdrafts represent negative cash balances in non US$ brokerage
accounts.
37
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2009
13. SHARE CAPITAL
The authorised share capital of the Company on incorporation was represented by
an unlimited number of Ordinary Shares of no par value. At incorporation, 2
Ordinary Shares were subscribed for by the subscribers to the Memorandum of
Association. On 27 November 2007 (the date of admission of the Ordinary Shares
to the Official List of the UK Listing Authority and to trading on the Main
Market of the London Stock Exchange), a further 133,999,998 Ordinary Shares were
issued. Prior to admission, on 9 November 2007, the holders of the 2 issued
Ordinary Shares in the Company passed a written special resolution approving the
cancellation of the entire amount which would stand to the credit of the share
premium account immediately after admission, conditionally upon the issue of the
Ordinary Shares and the payment in full thereof. An application was made to the
Royal Court of Guernsey to confirm the reduction of the share premium account.
This cancellation, which was granted on 4 January 2008, enables the Company to
effect purchases of its own shares.
On 11 April 2008, the Company issued an additional 4,646,418 Ordinary Shares.
Under the Articles, the Directors have wide powers to issue further shares or
reissue shares held in treasury, on a pre-emptive and non pre-emptive basis. The
Directors will consider issuing further shares at a price per share that is not
less than the then prevailing Net Asset Value per share or, in relation to
shares held in treasury, at no more than a 5 percent discount to the then
prevailing Net Asset Value per share or, if less, the average discount at which
all the shares then held in treasury were repurchased by the Company.
On 21 November 2008 and 26 November 2008, the Company purchased 175,000 Ordinary
Shares at US$0.70 per share and 1,160,000 Ordinary Shares at US$0.75 per share
respectively for holding in treasury. The resulting discount on purchase of
treasury shares is included under retained earnings. On 6 March 2009, the
Directors announced that as part of their discount management policy the Company
would make a tender offer for 7.5 percent of the Ordinary Shares then in issue
at a tender price equal to 95 percent of the latest published estimated
unaudited NAV per share as at the close of business on 1 April 2009. Accordingly
the Company purchased for holding in treasury 10,298,335 Ordinary Shares at a
price of US$0.9785 per Ordinary Share, being 95% of the latest published NAV per
share at the close of business on 1 April 2009 of US$1.02. On 24 November 2009
and on 14 December 2009, the Company repurchased 135,000 Ordinary Shares at
US$0.78 per share and 300,000 Ordinary Shares at US$0.81 per share respectively.
These Ordinary Shares are also held in treasury.
The shareholders of the Company (except for the holders of treasury shares, who
shall have no such right) have the right to receive notice of, and to attend and
vote at, general meetings of the Company and each holder of Ordinary Shares
being present in person or by attorney at a meeting upon a show of hands has one
vote and upon a poll each such holder present in person or by proxy or by
attorney has one vote in respect of each Ordinary Share held by him.
Shareholders (except for the holders of treasury shares, who shall have no such
right) are entitled to receive, and participate in, any dividends or other
distributions out of the profits of the Company available for dividend and
resolved to be distributed in respect of any accounting period or other income
or right to participate therein.
The details of issued share capital of the Company are as follows:
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+-------------+-------------+
| | | | | | | | | | | 31 | 31 |
| | | | | | | | | | | December | December |
| | | | | | | | | | | 2009 | 2008 |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+-------------+-------------+
| | Issued share capital | | |
+--------+--------------------------------------------------------------------------------+-------------+-------------+
| | Ordinary Shares of no par value | 126,578,083 | 137,311,418 |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+-------------+-------------+
The issue of shares took place as follows:
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------------------------------+---------+----------------+
| | 31 December 2009 | | No. of | Share | Share |
| | | | Ordinary | Capital | Premium |
| | | | Shares | | |
+--------+--------------------------------------------------------------+--------+--------------------------------+---------+----------------+
| | | | | | | | | | | US$ | US$ |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------------------------------+---------+----------------+
| | At 1 January 2009 | 137,311,418 | | 5,203,988 |
| | | | - | |
+--------+-----------------------------------------------------------------------+--------------------------------+---------+----------------+
| | Purchase of treasury shares | (10,733,335) | - | - |
+--------+-----------------------------------------------------------------------+--------------------------------+---------+----------------+
| | At 31 December 2009 | | | | 126,578,083 | - | 5,230,988 |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------------------------------+---------+----------------+
38
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2009
13. SHARE CAPITAL (CONTINUED)
+--------+--------+--------+--------+--------+--------+--------+--------+--------+-------------------------+---------+---------------+
| | 31 December 2008 | | No. of | Share | Share |
| | | | Ordinary | Capital | Premium |
| | | | Shares | | |
+--------+--------------------------------------------------------------+--------+-------------------------+---------+---------------+
| | | | | | | | | | | US$ | US$ |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+-------------------------+---------+---------------+
| | At 17 October 2007 (date of incorporation) | 2 | | |
| | | | - | - |
+--------+-----------------------------------------------------------------------+-------------------------+---------+---------------+
| | Issued during the period | 138,646,416 | | 139,203,988 |
| | | | - | |
+--------+-----------------------------------------------------------------------+-------------------------+---------+---------------+
| | Less: Share issue costs | - | - | (4,354,815) |
+--------+-----------------------------------------------------------------------+-------------------------+---------+---------------+
| | Transfer to retained earnings | - | - | (129,645,185) |
+--------+-----------------------------------------------------------------------+-------------------------+---------+---------------+
| | Purchase of treasury shares | (1,335,000) | - | - |
+--------+-----------------------------------------------------------------------+-------------------------+---------+---------------+
| | At 31 December 2008 | | | | 137,311,418 | | 5,203,988 |
| | | | | | | - | |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+-------------------------+---------+---------------+
+--------+-----------+--------+--------+------------+------------+
| | Treasury | | | No. of | US$ |
| | shares | | | Shares | |
+--------+-----------+--------+--------+------------+------------+
| | At 1 | | | 1,335,000 | 992,500 |
| | January | | | | |
| | 2009 | | | | |
+--------+-----------+--------+--------+------------+------------+
| | Purchased | | | 10,733,335 | 10,425,220 |
| | during | | | | |
| | the year | | | | |
+--------+-----------+--------+--------+------------+------------+
| | At 31 | | | 12,068,335 | 11,417,720 |
| | December | | | | |
| | 2009 | | | | |
+--------+-----------+--------+--------+------------+------------+
+--------+----------------+--------+--------+-----------+---------+
| | Treasury | | | No. of | US$ |
| | shares | | | Shares | |
+--------+----------------+--------+--------+-----------+---------+
| | At 17 | | | - | - |
| | October | | | | |
| | 2007 | | | | |
| | (date | | | | |
| | of | | | | |
| | incorporation) | | | | |
+--------+----------------+--------+--------+-----------+---------+
| | Purchased | | | 1,335,000 | 992,500 |
| | during | | | | |
| | the | | | | |
| | period | | | | |
+--------+----------------+--------+--------+-----------+---------+
| | At 31 | | | 1,335,000 | 992,500 |
| | December | | | | |
| | 2008 | | | | |
+--------+----------------+--------+--------+-----------+---------+
14. EXCHANGE RATES
The exchange rates used in preparation of the financial statements are:
Closing rate at 31 December 2009 US$ 1 = GBP 0.6188 (31 December 2008: GBP
0.6862)
Closing rate at 31 December 2009 US$ 1 = EUR 0.6977 (31 December 2008: EUR
0.7157)
Closing rate at 31 December 2009 US$ 1 = CAD 1.0476
15. COMPARATIVE FIGURES
The comparative figures for the Statement of Financial Position are as at 31
December 2008. The comparatives figures for the Statement of Comprehensive
Income, Statement of Changes in Equity and Statement of Cash Flows are for the
period from 17 October 2007 (date of incorporation) to 31 December 2008, and
such figures are reclassified for comparative purposes without any impact on the
profit/loss or net asset value at that date.
16. RELATED PARTY TRANSACTIONS
Transactions with related parties are based on terms equivalent to those that
prevail in an arm's length transaction.
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+-----------+-----------+
| | | | | | | | | | | Year | For |
| | | | | | | | | | | ended | the |
| | | | | | | | | | | 31 | period |
| | | | | | | | | | | December | from |
| | | | | | | | | | | 2009 | 17 |
| | | | | | | | | | | | October |
| | | | | | | | | | | | 2007 to |
| | | | | | | | | | | | 31 |
| | | | | | | | | | | | December |
| | | | | | | | | | | | 2008 |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+-----------+-----------+
| | | | | | | | | | | US$ | US$ |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+-----------+-----------+
| | Remuneration of directors | | | 101,962 | 153,501 |
+--------+--------------------------------------------------------------+--------+--------+-----------+-----------+
| | Management fees | | | | | | | 2,032,234 | 2,363,378 |
+--------+--------------------------+--------+--------+--------+--------+--------+--------+-----------+-----------+
| | Placing fees | | | | | | | - | 1,477,292 |
+--------+--------------------------+--------+--------+--------+--------+--------+--------+-----------+-----------+
| | | | | | | | | | | 2,134,196 | 3,994,171 |
+--------+--------+--------+--------+--------+--------+--------+--------+--------+--------+-----------+-----------+
Placing fees relate to a placing fee paid to the Manager pursuant to the placing
agreement dated 22 November 2007 of 2.5 percent of gross placing proceeds in
respect of Ordinary Shares received from the placees procured by the Manager at
the time of admission of the Company to the Official List of the UK Listing
Authority, and a placing fee of 1 percent of such part of the placing proceeds
in respect of the further placing of Ordinary Shares received from placees
procured by the Manager pursuant to the placing agreement dated 11 April 2008.
39
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2009
16. RELATED PARTY TRANSACTIONS (CONTINUED)
Kimberly Tara, a director and shareholder of the Manager, is a Director of the
Company.
The Directors' interests in the share capital of the Company at 31 December 2009
were unchanged from 31 December 2008 (and have not changed since the end of the
period) and were as follows:
+--------+----------+--------+--------+--------+--------+--------+---------------------------+
| | | | | | | Number of |
| | | | | | | Ordinary Shares |
+--------+----------+--------+--------+--------+--------+------------------------------------+
| | Howard | | | | | | 20,000 |
| | Myles | | | | | | |
+--------+----------+--------+--------+--------+--------+--------+---------------------------+
| | Kimberly | | | | | | 500,000 |
| | Tara* | | | | | | |
+--------+----------+--------+--------+--------+--------+--------+---------------------------+
* K. Tara's interest is in respect of Ordinary Shares owned by FourWinds Capital
Management of which she is a director and shareholder.
17. SUBSEQUENT EVENTS
Since 31 December 2010:
· 11 January 2010 - 750,000 Ordinary Shares at US$0.8725 per share
· 3 March 2010 - 588,000 Ordinary Shares at US$0.85 per share
· 18 March 2010 - 1,700,000 Ordinary Shares at US$0.88 per share
· 24 March 2010 - 1,700,000 Ordinary Shares at US$0.88 per share
Following these purchases, there remain 121,840,083 issued Ordinary Shares
admitted to trading, 13,537,787 Ordinary Shares held in treasury and 3,268,548
Ordinary Shares have been cancelled.
In addition, on 29 March 2010, the Board announced a further tender offer for
24.99 per cent of the Ordinary Shares then in issue at a tender price equal to
95.5 per cent of the latest published estimated unaudited net asset value per
Ordinary Share as at the close of business on the closing date of the tender. A
circular in respect of the tender offer was posted to shareholders on 9 April
2010 and the closing date of the tender offer is 30 April 2010.
40
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR IJMFTMBITBLM
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