RNS Number : 9451B
Japanese Accelerated Perf Fund Ltd
22 August 2008
Japanese Accelerated Performance Fund Limited
Half-yearly financial report
for the period ended
30 June 2008 (Unaudited)
ABOUT THE COMPANYJapanese Accelerated Performance Fund Limited is a Guernsey incorporated, closed-ended investment company. With the
exception of two Management Shares issued for administrative reasons, the Company's issued share capital comprises 30,000,000 Participating
Shares ("Shares") whose performance is designed to depend upon the performance of the Nikkei 225 Index. The Company has an unlimited life
but the Shares will be redeemed on or around 22 December 2009 (the "Redemption Date").
Investment Objective and Policy
The investment objective of the Company is to provide shareholders, on the Redemption Date, with five times the capital return of the
Nikkei 225 Index, up to a maximum amount (the "Final Capital Entitlement") of 200p per Share, comprising a capital growth amount of up to a
maximum of 100p per Share and a capital amount of 100p per Share. The Final Capital Entitlement per Share is designed to be determined by
the performance of the Nikkei 225 Index over the calculation period from 17 December 2003 to 17 December 2009.
The Shares are Sterling denominated and their value will not be affected by changes in the Yen / Sterling exchange rate.
In accordance with the Company's investment policy, the net proceeds derived from the issue of Shares have been invested in a portfolio
of debt securities and over-the-counter derivative instruments at prices based on the closing level of the Nikkei 225 Index on 17 December
2003 of 10,092.64. Therefore, if the Nikkei 225 Index rises 20% from its starting level of 10,092.64 on 17 December 2003, which equates to a
level of 12,111.17 in December 2009, the Shares are designed to return growth of 100%.
There is full capital protection if the Nikkei 225 Index has fallen at the end of the period (December 2009) unless the Nikkei 225 Index
has closed more than 50% down during the term to 5046.32. In this case, if the Nikkei 225 Index is still below 10,092.64 at the end of the
Calculation Period, the net asset value of the Company will fall by an equivalent percentage. If the level of the Nikkei 225 Index has
returned above its starting level of 10,092.64 in December 2009, then the Company will still provide five times the return of the Nikkei 225
Index to a maximum of 100%.
The Company has invested substantially all of its net assets in medium term loan notes ("Debt Securities") issued by financial institutions,
selected by the Manager, that, at the date of issue of the relevant Debt Security, had a rating of at least A- or A3, as determined by
Standard & Poor's and/or Moody's Investor Services Inc. respectively and was either (a) a credit institution as defined in Article 1 of the
Council Directive of 20 March 2000 relating to the taking up and pursuit of the business of credit institutions (No 2000/12/EC), other than
an institution referred to in Article 2(3) of that Directive, if authorised by the competent authority of an EU Member State in relation to
the credit institution concerned; (b) a bank authorised in a Member State of the European Economic Area; or (c) a bank authorised by a
signatory state (other than an EU Member State or a Member State of the European Economic Area) to the Basle Capital Convergence Agreement
of July 1988 (Switzerland, Canada, Japan and the US).
To avoid over-dependency on any single issuer, the Company has acquired seven Debt Securities. It is not anticipated that this portfolio
of Debt Securities will be varied prior to the maturity date of the Debt Securities other than in exceptional circumstances.
The Company has also sold a put option to BNP Paribas, the proceeds of which sale were used to finance the acquisition of the Debt
Securities. The performance of the put option is linked to the performance of the Nikkei 225 Index. At an Index value of 10,092.64 or
above at the close of business on 17 December 2009, or if the Index has never closed below 5,046.32 during the calculation period from 17
December 2003 to 17 December 2009, the put option will be worth �Nil at maturity. If the Index has closed below 5,046.32 over the
calculation period and the Index is still below 10,092.64 on 17 December 2009, the put option will be worth a percentage of the notional
value, being �30,000,000, equivalent to the percentage fall in the level of the Nikkei 225 Index over the calculation period, such payment
payable to BNP Paribas by the Company.
The Company has not invested and will not invest in other listed investment companies (included listed investment trusts).
The Company may borrow up to ten percent of its net asset value for temporary purposes. It is not, however, the current intention of the
Directors to engage in any borrowing. Without prejudice to the powers of the Company to invest in transferable securities, the Company may
not lend to, nor act as guarantor on behalf of, third parties.
MANAGERS REPORT
for the period ended 30 June 2008
Investment Performance
At launch the net proceeds derived from the issue of Shares of the Company were invested in a portfolio of debt securities and options
at a price based on the level of the Nikkei 225 Index at the close of business on 17 December 2003, namely 10,092.64. On 30 June 2008, the
Nikkei 225 Index closed at 13,481.38, a rise of 33.6% since launch and a fall of 11.9% over the reporting period. Over the same periods, the
total market value of the Company's shares rose by 59.25% and fall of 3.0% respectively.
As the Company's investment portfolio is based upon the Nikkei 225 Index, it is possible to show the potential capital entitlements
available to shareholders based on the level of the Nikkei 225 Index on the Company's end date of 17 December 2009. These figures are for
illustrative purposes only and do not represent forecasts or take into account any unforeseen circumstances.
As at 17 December 2009:
Final Nikkei 225 Index Level Net Asset Value if Net Asset Value if
Nikkei 225 Index Nikkei 225 Index has
never closes below closed below
5,046.32** 5,046.32**
8,000 100 79
8,500 100 84
9,000 100 89
9,500 100 94
10,000 100 99
10,500 120 120
11,000 144 144
11,500 169 169
12,000 194 194
12,500 200 200
13,000 and over 200 200
13,481.38* 200 200
* NIKKEI 225 Index level at the end of the reporting period
** On any day from 17 December 2003 to 17 December 2009
Market Review
The Nikkei 225 Index fell 11.9% over the period, as the credit crunch continued to weigh heavily on market sentiment.
The start of the period saw the end of the globally-coordinated central bank action designed to provide support and ensure liquidity,
amidst fears of a credit crunch-inspired systemic collapse. After the central banks' support ended, global equity markets fell, with the
Nikkei 225 Index falling by over 2700 points in the month of January, despite its constituents being relatively unexposed to the worst of
the sub-prime debt.
The Index recovered some of its losses in February as fears of a collapse eased and market participants judged the sell-off to be
overdone. In March, however, the Index plummeted as the near collapse and bail-out of US investment bank Bear Stearns led to fresh lows,
with the Index down over 3500 points since the start of the period.
From these lows, the Index rallied by up to 23% as the rescue of Bear Stearns was looked upon as a turning point in the credit crisis,
the US Federal Reserve having signalled it would ensure any large financial institutions under duress would be rescued. At the end of the
period the Index gave back some of these gains to finish the period at 13,481.36, as rising material costs dragged business confidence to
the lowest in four years.
The decline was broad-based across all sectors with 187 of the 225 constituents showing falls. The biggest drag on the Index came from
electronics components manufacturer TDK Corporation, which fell 24%, extending the heavy falls of the previous six months as falling prices
of hard-disk drives continued to hurt profitability. The biggest boost to the Index was provided by Fast Retailing, operator of Japan's
biggest clothing chain, which rose 26% as sales rose and it raised its forecast for full-year profits.
Market Outlook
The outlook for the Japanese economy rests partly on how the global economy fares as Japan has traditionally depended on exports for
much of its economic growth. As the credit crunch continues to bite and rising inflation concerns prevent western central banks from cutting
interest rates, exports are likely to come under pressure. Meanwhile, surging oil prices have led to the Governor of the Bank of Japan
keeping a close watch for signs of weakening growth which, thus far, has held up reasonably well, despite the Business Outlook Survey
indicating a deterioration in business sentiment.
Unlike much of the rest of the world, inflationary pressures in Japan have remained muted, suggesting the Bank of Japan is unlikely to
raise interest rates from the currently accommodative 0.5%. If commodity prices continue rising, company profits are likely to be squeezed,
but thus far, business investment has held up as firms expect sales to continue rising. The Nikkei 225 Index, however, may come under more
pressure as global economic growth is expected to slow and companies will struggle to maintain profit margins if producer prices continue
rising.
INTERIM MANAGEMENT REPORT
for the period 1 January to 30 June 2008
A description of important events that have occurred during the first six months of the financial year, their impact on the performance
of the Company as shown in the financial statements and a description of the principal risks and uncertainties for the remaining six months
of the financial year is given in the Manager's Report and is incorporated here by reference.
There were no material related party transactions which took place in the first six months of the financial year.
This half-yearly financial report has not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on
Review of Interim Financial Information.
Responsibility Statement
The Board of directors jointly and severally confirm that, to the best of their knowledge:
* The financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the Company; and
* This Interim Management Report includes or incorporates by reference:
* An indication of important events that have occurred during the first six months of the financial year, and their impact on the
financial statements;
* a description of the principal risks and uncertainties for the remaining six months of the financial year;
* confirmation that there were no related party transactions in the first six months of the current financial year that have
materially affected the financial position or the performance of the Company during that period; and
* confirmation that there have been no changes in the related parties transactions described in the last annual report that could
have a material effect on the financial position or performance of the Company in the first six months of the current financial year.
STATEMENT OF OPERATIONS
for the period from 1 January to 30 June 2008
Notes 1 January to30 June 1 January to30 June
2008GBP 2007GBP
Net movement in unrealised 5 (1,623,100) 1,488,370
(depreciation) / appreciation
on investments
Unrealised (appreciation) / 8 (246,000) 42,000
depreciation on value of put
option
Operating expenses 2 (140,402) (132,423)
(Loss) / gain on ordinary (2,009,502) 1,397,947
activities before taxation
Taxation on ordinary - -
activities
Net (loss) / gain for the (2,009,502) 1,397,947
period attributable to
shareholders
Pence Pence
Earnings per Share for the 4 (6.70) 4.66
period * Basic and Diluted
In arriving at the results for the financial period, all amounts above relate to continuing operations.
There are no recognised gains or losses for the period other than those disclosed above.
Reconciliation of earnings per Share for investment purposes to earnings per Share per the financial statements:
Pence Pence
Earnings per Share for investment purposes (6.23) 5.10
Adjustment to include expenses on an accruals basis (0.47) (0.44)
Earnings per Share per the financial statements (6.70) 4.66
In accordance with International Financial Reporting Standards, expenses should be attributed to the period to which they relate.
The earnings per Share for investment purposes represents the earnings per Share attributable to shareholders in accordance with the
Prospectus, which recognises all expenses of the Company up to and including the date that the Final Capital Entitlement becomes payable.
NET ASSET STATEMENT
as at 30 June 2008
Notes 30 June 2008 31 Dec 2007 30 June 2007
GBP GBP GBP
FIXED ASSETS
Unquoted financial assets 5
designated as fair value 47,584,680 49,207,780 49,196,890
through profit or loss
CURRENT ASSETS
Receivables 6 172,674 226,281 289,533
Cash at bank 431,074 520,400 580,176
603,748 746,681 869,709
CURRENT LIABILITIES
Payables - due within one year 7 21,810 24,341 9,911
NET CURRENT ASSETS 581,938 722,340 859,798
TOTAL ASSETS LESS CURRENT 48,166,618 49,930,120 50,056,688
LIABILITIES
Non-current liabilities
excluding net assets 8 426,000 180,000 18,000
attributable to shareholders
NET ASSETS ATTRIBUTABLE TO
SHAREHOLDERS 47,740,618 49,750,120 50,038,688
SHARES IN ISSUE 30,000,000 30,000,000 30,000,000
Pence Pence Pence
NAV PER SHARE 159.14 165.83 166.80
NAV PER MANAGEMENT SHARE 100.00 100.00 100.00
Reconciliation of NAV per Share for investment purposes to NAV per Share per the financial statements:
Pence Pence Pence
NAV per Share for investment purposes
157.19 163.42 163.92
Adjustment for debt issue costs 0.18 0.73 0.18
Adjustment to include expenses on an accruals
basis 1.77 1.68 2.70
NAV per Share per the financial statements
159.14 165.83 166.60
In accordance with International Financial Reporting Standards, expenses should be attributed to the period to which they relate.
The NAV per Share for investment purposes represents the NAV per share attributable to shareholders in accordance with the Prospectus,
which recognises all expenses of the company up to and including the date that the Final Capital Entitlement becomes payable.
STATEMENT OF CASH FLOWS
for the period ended 30 June 2008
1 Jan 2008 to 30 1 Jan 2007 to 30
June 2008 June 2007
GBP GBP
Operating activities
Net (loss) / gain for the
period attributable to (2,009,502) 1,397,947
shareholders
Less: Unrealised depreciation
/ (appreciation) on 1,623,100 (1,488,370)
investments
Less: Unrealised appreciation
/ (depreciation) on value of 246,000 (42,000)
Put option
Add: Amortisation of debt 56,353 56,199
issue costs
Less: Interest received (12,558) (16,091)
Less: (Decrease) in accrued (2,531) (5,016)
expenses
Less: (Increase) in
prepayments and accrued income (2,746) (10,725)
excluding debt issue costs
Net cash outflow from
operating activities (101,884) (108,056)
Investing activities
Interest received 12,558 16,091
Net cash inflow from investing
activities 12,558 16,091
Cash at beginning of period
520,400 672,141
(Decrease) in cash and cash (89,326) (91,965)
equivalents
Cash at end of period
431,074 580,176
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS
for the period ended 30 June 2008
30 June 2008 31 Dec 2007 30 June 2007
GBP GBP GBP
Opening balance 49,750,120 48,640,741 48,640,741
Net (loss) / gain for the period
attributable to shareholders (2,009,502) 1,109,379 1,397,947
Closing balance 47,740,618 49,750,120 50,038,688
NOTES TO THE FINANCIAL STATEMENTS
as at 30 June 2008
1 ACCOUNTING POLICIES
(a) Basis of Preparation
The financial statements have been prepared in conformity with International Financial Reporting Standards which comprise standards and
interpretations approved by the International Accounting Standards Board and International Financial Reporting Interpretations Committee and
applicable Guernsey law. The financial statements have been prepared on a historical cost basis except for the measurement at fair value of
financial instruments.
(b) Taxation
The Company has been granted exemption under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 from Guernsey Income Tax, and is
currently charged an annual fee of �600.
(c) Expenses
All expenses are accounted for on an accruals basis.
(d) Debt Issue Costs
The debt issue costs incurred amounted to �675,000. Because the Company's participating shares are redeemable on or around 22 December
2009, they are required to be classified as debt instruments under IAS32. Consequently, issue costs are amortised over the life of the
instrument.
(e) Interest Income
Interest income is accounted for on an accruals basis.
(f) Cash and Cash equivalents
Cash in bank and short term deposits which are held to maturity are carried at cost. Cash and cash equivalents are defined as call
deposits, short term deposits and highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk
of changes in value. For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and deposits at bank.
(g) Investments
All investments have been designated as financial assets at "fair value through profit and loss". Investments are initially recognised
on the date of purchase at cost, being the fair value of the consideration given. After initial recognition, investments are measured at
fair value, with unrealised gains and losses on investments and impairment of investments recognised in the Statement of Operations.
Investments are derecognised on the date of sale. Gains and losses on the sale of investments will be taken to the Statement of Operations.
(h) Put Option
The put option was initially recognised at the fair value of the consideration received on the date of sale, and included within
payables falling due after more than one year. After initial recognition, the put option is measured at fair value with unrealised gains and
losses being recognised in the Statement of Operations. The put option will be removed from the balance sheet at maturity on 17 December
2009.
(i) Trade Date Accounting
All "regular way" purchases and sales of financial assets are recognised on the "trade date", i.e. the date that the entity commits to
purchase or sell the asset. Regular way purchases or sales are purchase or sales of financial assets that require delivery of the asset
within the timeframe generally established by regulation or convention in the market place.
(j) Segmental Reporting
The directors are of the opinion that the Company is engaged in a single segment of business, being investment business.
2 OPERATING EXPENSES
1 Jan 2008 to 30 1 Jan 2007 to 30 June 2007
June 2008 GBP
GBP
Amortisation of debt issue 56,353 56,199
costs
Investment management fees (1) 52,213 52,069
Administration fees 9,945 9,918
Directors' remuneration 7,500 7,500
Registration fees 4,624 4,592
Directors' and Officers' 4,500 4,790
Insurance
Audit fees 5,300 3,538
Other operating expenses 12,525 9,908
152,960
148,514
Less: Interest earned on (12,558) (16,091)
expense provision bank account
140,402 132,423
(1) The Manager is entitled to receive a fee from the Company at an annual rate of 0.35% of the Initial Gross Proceeds.
3 DIRECTORS' REMUNERATION
The Prospectus provides that each director will be paid a fee of �5,000 per annum by the Company. The remuneration will remain fixed
over the life of the Company. John R Le Prevost, a director of the Company, is also a director of Anson Fund Managers Limited, the Company's
Secretary and of Anson Registrars Limited the Company's Registrar, Transfer Agent and Paying Agent.
4 EARNINGS PER SHARE
The earnings per Share is based on the net earnings attributable to shareholders for the period of -�2,009,502 (2007: �1,397,947) and on
30,000,000 (2007: 30,000,000) Shares, being the weighted average number of Shares in issue during the period. The earnings per Management
Share is based on the net gain for the period of �0 (2007: �0) and on 2 (2007: 2) Management Shares, being the weighted average number of
Management Shares in issue during the period.
5 INVESTMENTS
30 June 2008 31 Dec 2007 30 June 2007
GBP GBP GBP
UNQUOTED FINANCIAL ASSETS
DESIGNATED AS FAIR VALUE THROUGH
PROFIT OR LOSS
Portfolio cost 30,192,200 30,192,200 30,192,000
Unrealised appreciation on
valuation brought forward 19,015,580 17,516,320 17,516,320
Unrealised (depreciation) /
appreciation on valuation for (1,623,100) 1,499,260 1,488,370
the period
Unrealised appreciation on
valuation carried forward 17,392,480 19,015,580 19,004,690
Valuation 47,584,680 49,207,780 49,196,890
Valuations of investments are based on valuations provided by BNP Paribas (the "Calculation Agent"), which are subject to a check by the
Manager. The future performance of the financial assets will be based on the closing level of the Nikkei 225 Index ("the Index") on 17
December 2009.
If on that date, the Index closes above 10,092.64 the instruments are designed to give a return of five times the performance of the
Index up to a maximum return of 100% of the capital.
The provided valuations are derived from proprietary models based upon well-recognised financial principles and reasonable estimates
about relevant future market conditions.
Valuation data provided by the Calculation Agent to the Manager in connection with the Company is provided for informational purposes
only.
The Calculation Agent makes no representation or warranty (express or implied) relating to any valuation data, including as to the
accuracy, completeness, adequacy or reliability of any such data for any purpose, and shall have no duties or liabilities to third parties
arising from the provision or use of such data to the fullest extent permitted by law.
6 RECEIVABLES
30 June 2008 31 Dec 2007 30 June 2007
GBP GBP GBP
Accrued income 611 1,225 962
Prepaid debt issue costs 164,439 220,792 276,990
Prepayments 7,624 4,264 11,581
172,674 226,281 289,533
7 PAYABLES
(amounts falling due within 30 June 2008 31 Dec 2007 30 June 2007
one year) GBP GBP GBP
Accrued administration fees 1,639 1,699 1,644
Accrued registration fees 1,264 762 617
Accrued investment management 8,607 8,630
fees -
Accrued audit fees 2,750 7,000 3,500
Other accrued expenses 7,550 6,250 4,150
Expenses provision 204,331 191,720 192,976
Less: Prepaid expense provision
(see note 8) (204,331) (191,720) (192,976)
21,810 24,341 9,911
8 PAYABLES
(amounts falling due after 30 June 2008 31 Dec 2007 30 June 2007
one year) GBP GBP GBP
Expenses provision
213,168 349,880 389,832
Less: Prepaid expenses
provision (213,168) (349,880) (389,832)
- - -
FINANCIAL LIABILITIES 30 June 2008 31 Dec 2007 30 June 2007
GBP GBP GBP
Fair value of the put option 426,000 180,000 18,000
426,000 180,000 18,000
The prepaid expense provision represents monies set aside to meet the on-going, annual and redemption expenses of the Company, as set
out in the Prospectus.
If, at the Redemption Date, there is any surplus remaining from the expenses provision (together with accrued interest thereon), this
surplus will revert to the Manager. In the event of redemption or repurchase of all the shares, or upon a winding-up of the Company, in each
case prior to the Redemption Date, any balance of the expense provision (together with accrued interest thereon) other than the investment
management fee will also revert to the Manager.
The performance of the put option is linked to the performance of the Nikkei 225 Index. At an Index value of 10,092.64 or above at
the close of business on 17 December 2009, or if the Index has never closed below 5,046.32 during the calculation period from 17 December
2003 to 17 December 2009, the put option will be worth �Nil at maturity, if the Index has closed below 5,046.32 over the calculation period
and the Index is still below 10,092.64 at 17 December 2009, the put option will be worth a percentage of the notional value, being
�30,000,000, equivalent to the percentage fall in the level of the Index over the calculation period.
The put option is not exercisable until the maturity date of 17 December 2009.
The fair value of the put option is based on the valuation provided by BNP Paribas. There is no active market regarding the put option.
BNP Paribas in its capacity as the put option counterparty, has security over the financial assets held by the Company for payment of
any monies owed upon maturity or termination of the put option contract.
The original proceeds from the sale of the put option were �2,565,000.
9 SHARE CAPITAL
Authorised SHARES GBP
Unclassified shares of 0.01p each 200,000, 20,000
000
Management shares of �1.00 each 100 100
20,100
Issued SHARES
Participating shares - fully paid 30,000,000
Management shares - fully paid 2
Number of Shares in issue at 30 June 2007,
31 December 2007 and 30 June 2008 30,000,002
GBP
Issued capital as at 30 June 2007,
31 December 2007 and 30 June 2008 3,002
Participating Shares are redeemable on or around 22 December 2009. The Company is close-ended and therefore shareholders have no right
to request the Company to repurchase their Shares or to redeem them prior to the redemption date. If the Company is wound up prior to the
redemption date, shareholders will be entitled to the net asset value of the Shares on the winding up date. No dividends will be paid on the
Shares.
Management shares are not redeemable, do not carry any right to dividends and in a winding up rank only for a return of the amount of
paid up capital after return of capital on Shares and nominal shares. Given the immateriality of the Management shares to the net assets of
the Company, they have been included in the net assets attributable to holders of Shares.
10 SHARE PREMIUM
Total
Share premium as at 30 June 2007,
31 December 2007 and 30 June 2008 29,997,000
11 FINANCIAL INSTRUMENTS
The Company's main financial instruments comprise:
(a) Cash and cash equivalents that arise directly from the Company's operations; and
(b) Debt securities whose performance is based on the performance of the Nikkei 225 Index. Details of the investments referred to
above are shown in the schedule of investments.
(c) The Company has also sold a put option, whose performance is based on the Nikkei 225 Index. Details of the option contract are
shown in Note 8.
12 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The main risks arising from the Company's financial instruments are market price risk, credit risk, liquidity risk and interest rate
risk. The Board regularly reviews and agrees policies for managing each of these risks and these are summarised below:
(a) Market Price Risk
Market price risk arises mainly from uncertainty about future prices of financial instruments 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 prices used for valuation purposes. A list of investments held by the Company is shown
in the schedule of investments.
Price sensitivity
The following details the Company's sensitivity to a 10% increase or decrease in the final market prices of its constituent financial
assets and liabilities.
The final redemption value of the Shares is determined by reference to the level of the Nikkei 225 Index on 17 December 2009 and at that
date, if the Index stands at 12,111.17 (the "Index Cap Level"), the maximum redemption entitlement of 200 pence per Share will have been
reached; any further increase in the level of the Index will cause no further increase in that redemption entitlement.
On 30 June 2008 the Index stood at 13,481.38, whereas, as explained above, the Index Cap Level is 11.3% lower at 12,111.17. Accordingly,
as at 30 June 2008 the Company had no material sensitivity to either a 10% increase or decrease in the level of the Index.
(b) Credit Risk
Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with
the Company. At the date of this report all issuers carried an investment grade credit rating. The Board monitors credit risk and will
consider further action if the credit rating of an issuer falls below A- or A3 as ranked by S&P and Moody's respectively. Credit risks are
mitigated in the Company because the MTN's have been purchased from several different issuers.
The following table details the aggregate investment grade of the debt instruments in the portfolio, as rated by well known rating
agencies:
Ratin 30 June 31 Dec 30 June
g 2008 2007 2007
Aaa 0.00% 14.37% 0.00%
Aa 56.22% 27.51% 42.01%
A 43.78% 58.12% 57.99%
The credit risk on cash transactions and transactions involving derivative financial instruments is mitigated by transacting with
counterparties that are regulated entities subject to prudential supervision, or with high credit-ratings assigned by international
credit-rating agencies.
(c) Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulty in realising assets or otherwise raising funds to meet financial
commitments. The Company's main financial commitments are its ongoing operating expenses and any cash settlement due to BNP Paribas (the
"Put Option Counterparty") on the maturity of the put option (the "Put Option") sold to the Put Option Counterparty, scheduled to occur on
17 December 2009.
Upon the issue of the Shares in December 2005 the Company created a cash reserve (the "Expense Provision") for the amount of 3.75% of
the amount raised by the issue of the Shares (the "Initial Gross Proceeds"), such amount being estimated in the opinion of the directors
upon the advice of the Manager to be sufficient to meet the operating expenses reasonably expected to be incurred over the life of the
Shares.
If at any time during the life of the Company the Expense Provisions exhausted then, subject to the relevant excess expenses having been
agreed by the Manager, the Manager will make good such shortfall from its own resources, subject to a maximum in each of the first five
annual financial periods of 0.25% of the Initial Gross Proceeds and in the last financial period preceding the Redemption Date, of a maximum
amount of �100,000. Should these expenses exceed this cap the return to Shareholders will be adversely impacted. The directors do not
anticipate that the expenses will exceed the Expense Provision.
The Debt Securities purchased by the Company mature on 21 December 2009 (the "Maturity Date") and are due to be redeemed at their
notional face value plus five times the performance increase between 17 December 2003 and 17 December 2009 in the Nikkei 225 Index, capped
at an amount equal to 100% of the notional face value, so that the aggregate maturity proceeds are expected to be between �30,000,000 if the
Nikkei 225 Index closes on 17 December 2009 at or below its starting value on 17 December 2003 of 10,092.64 and a maximum of �60,000,000 if
the Nikkei 225 Index closes at or above 12,111.17 on 17 December 2009, all subject to counterparty default.
Provided that none of issuers of the Debt Securities defaults on its obligation to pay the maturity proceeds on the Maturity Date, the
minimum maturity proceeds of �30,000,000 due are intended to satisfy the maximum payment due to be made by the Company to the Put Option
Counterparty on the maturity of the Put Option of �30,000,000.
The directors and the Manager monitor the credit ratings of all issuers of the Debt Securities. In the event of any downgrading in the
long-term credit rating of any issuer below A- or A3, as determined by Standard & Poor's and/or Moody's Investor Services Inc. respectively,
the Company may in its absolute discretion seek to sell the relevant Debt Securities to third party purchasers and to reinvest the proceeds
in the purchase of Debt Securities of another issuer such that the new Debt Securities will replicate as closely as possible the terms and
conditions of the original Debt Securities. If the purchase of such Debt Securities is not possible, the Directors may reinvest such
proceeds as they see fit in investments which, in the opinion of the Directors, as nearly as is practicable, replicate the investment
characteristics of the Debt Securities sold and so that the proceeds are invested, as nearly as is practicable, in accordance with the
Company's stated investment objective. As at the accounting reference date and the date of this report, all issuers of the Debt Securities carried an investment grade credit rating.
(d) Interest Rate Risk
Interest rate risk is the risk that fluctuations in market interest rates will result in a reduction in deposit interest earned on cash
deposits held by the Company. The Company holds cash on fixed deposit, the return on which is subject to fluctuations. All fixed deposits
mature within three months.
The weighted average effective interest rate for cash and bank balances as at 30 June 2008 was 5.74% (2007: 4.94%).
None of the other assets or liabilities of the Company attract or incur interest.
Interest rate sensitivity
If interest rates had been 100 basis points higher and all other variables were held constant, the Company's increase in net assets
attributable for the period ended 30 June 2008 would have been �4,311 higher (2007: �5,802) due to an increase in the amount of interest
receivable on the bank balances.
If interest rates had been 100 basis points lower and all other variables were held constant, the Company's increase in net assets
attributable for the period ended 30 June 2008 would have been �4,311 lower (2007: �5,802) due to a decrease in the amount of interest
receivable on the bank balances.
The Company's sensitivity to interest rates is lower in 2008 than in 2007 because of a decrease in the value of cash balances held.
(e) Currency Risk
As both the Shares and the Debt Securities are Sterling-denominated, Shareholders investing for Sterling returns will not be exposed to
direct currency risk. However the value of the underlying securities comprising the Nikkei 225 may be affected by changes in the economic,
political or social environment in Japan, as well as globally, including changes in exchange rates.
(f) Capital Management
The investment objective of the Company is to provide shareholders, on the Redemption Date, with five times the capital return of the
Nikkei 225 Index, up to a maximum amount (the "Final Capital Entitlement") of 200p per Share, comprising a capital growth amount of up to a
maximum of 100p per Share and a capital amount of 100p per Share. The Final Capital Entitlement per Share is designated to be determined by
the performance of the Nikkei 225 Index over the calculation period from 17 December 2003 to 17 December 2009.
The Company has an unlimited life but the Shares will be redeemed on or around 22 December 2009. Until then, the Company has a fixed
capital.
(g) Collateral
Under the terms of a Credit Support Deed dated 19 December 2003 entered into between the Company and BNP Paribas, the Company as
security for the Put Option has agreed to mortgage, charge and pledge with full title guarantee, in favour of Put Option Counterparty by way
of first fixed legal mortgage all posted collateral and has assigned with full title guarantee, the assigned rights to the Put Option
Counterparty absolutely. The collateral is held by the Custodian in a segregated account. Where there is an event of default in respect of
the company under the Put Option, Put Option Counterparty will be entitled to enforce its security over the collateral.
SCHEDULE OF INVESTMENTS
as at 30 June 2008
DEBT SECURITIES PORTFOLIO 30 June 2008 30 June 2008 30 June 2008
NOMINAL HOLDINGS VALUATION TOTAL NET ASSETS
GBP
Brittania Building Society plc
0% Euro-Medium Term Note
21 December 2009
4,500,000 7,113,150 14.90%
Caisse Centrale du Credit
Immobillier de France
0% Euro-Medium Term Note
21 December 2009
4,300,000 6,852,910 14.35%
Caixa General de Depositas
0% Euro-Medium Term Note
21 December 2009
4,000,000 6,359,200 13.32%
Egg Banking plc
0% Euro-Medium Term Note
21 December 2009
4,300,000 6,769,920 14.18%
Irish Permanent
0% Euro-Medium Term Note
21 December 2009
4,300,000 6,783,680 14.21%
Royal Bank of Scotland plc
0% Euro-Medium Term Note
21 December 2009
4,300,000 6,838,720 14.32%
Yorkshire Building Society
0% Euro-Medium Term Note
21 December 2009
4,300,000 6,867,100 14.38%
47,584,680 99.67%
The Company has also sold a put option, details of which are shown below.
NOTIONAL HOLDING VALUATION
GBP
BNP Paribas Equity Index Option expiring 17
December 2009 (30,000,000) (426,000)
SCHEDULE OF INVESTMENTS
as at 31 December 2007
DEBT SECURITIES PORTFOLIO 31 Dec 2007 31 Dec 2007 31 Dec 2007
NOMINAL VALUATION TOTAL NET
HOLDINGS GBP ASSETS
Brittania Building Society plc
0% Euro-Medium Term Note
21 December 2009
4,500,000 7,397,550 14.87%
Caisse Centrale du Credit
Immobillier de France
0% Euro-Medium Term Note
21 December 2009
4,300,000 7,068,770 14.21%
Caixa General de Depositas
0% Euro-Medium Term Note
21 December 2009
4,000,000 6,575,600 13.22%
Egg Banking plc
0% Euro-Medium Term Note
21 December 2009
4,300,000 7,068,770 14.21%
Irish Permanent
0% Euro-Medium Term Note
21 December 2009
4,300,000 6,959,550 13.99%
Royal Bank of Scotland plc
0% Euro-Medium Term Note
21 December 2009
4,300,000 7,068,770 14.21%
Yorkshire Building Society
0% Euro-Medium Term Note
21 December 2009
4,300,000 7,068,770 14.21%
49,207,780 98.92%
The Company has also sold a put option, details of which are shown below.
NOTIONAL HOLDING VALUATION
GBP
BNP Paribas Equity Index Option expiring 17
December 2009 (30,000,000) (180,000)
SCHEDULE OF INVESTMENTS
as at 30 June 2007
DEBT SECURITIES PORTFOLIO 30 Jun 2007 30 Jun 2007 30 Jun 2007
NOMINAL VALUATION TOTAL NET
HOLDINGS GBP ASSETS
Brittania Building Society plc
0% Euro-Medium Term Note
21 December 2009
4,500,000 7,378,650 14.75%
Caisse Centrale du Credit
Immobillier de France
0% Euro-Medium Term Note
21 December 2009
4,300,000 7,050,710 14.09%
Caixa General de Depositas
0% Euro-Medium Term Note
21 December 2009
4,000,000 6,554,800 13.10%
Egg Banking plc
0% Euro-Medium Term Note
21 December 2009
4,300,000 7,046,410 14.08%
Irish Permanent
0% Euro-Medium Term Note
21 December 2009
4,300,000 7,055,440 14.10%
Royal Bank of Scotland plc
0% Euro-Medium Term Note
21 December 2009
4,300,000 7,055,440 14.10%
Yorkshire Building Society
0% Euro-Medium Term Note
21 December 2009
4,300,000 7,055,440 14.10%
49,196,890 98.32%
The Company has also sold a put option, details of which are shown below.
NOTIONAL HOLDING VALUATION
GBP
BNP Paribas Equity Index Option expiring 17
December 2009 (30,000,000) (18,000)
SHAREHOLDER INFORMATION
The Company's Participating Shares are listed on the London Stock Exchange. Company announcements and daily market closing prices of
Shares are available on the Reuters, Bloomberg and on-line on the web. The ISIN of the Shares is GB0033788018 and the London Stock Exchange
mnemonic is JAP.
Monthly factsheets are issued by the Manager and can be down-loaded from the Manager's web-site www.closeinvestments.com.
The Annual Financial Report for the year ended 31 December 2008 is intended to be made public in April 2009.
SHARE DEALING
Shares may be dealt in directly through a stockbroker or professional adviser acting on an investor's behalf. The buying and selling of
shares may be settled through CREST.
SHAREHOLDER ENQUIRIES
The Company's Registrar is Anson Registrars Limited in Guernsey and they can be contacted on 01481 711301.
DIRECTORS AND SERVICE PROVIDERS
Japanese Accelerated Performance Fund Limited (the "Company")
Registered in Guernsey No. 41311
Directors Charles P G Tracy (Chairman)
Christopher Jones
John R Le Prevost
Manager Close Investments Limited
(Authorised and Regulated by (Authorised and Regulated by the FInancial Services
Financial Services Authority) Authority)
Exchange Square
Primrose Street
London
England EC2A 2BY
Administrator and Secretary Anson Fund Managers Limited
PO Box 405
Anson Place
Mill Court
La Charroterie
St Peter Port
Guernsey GY1 3GF
Principal Bankers Royal Bank of Scotland International Limited
Royal Bank Place
1 Glategny Esplanade
St Peter Port
Guernsey GY1 4NW
Auditor Ernst & Young LLP
14 New Street
St Peter Port
Guernsey GY1 4AF
Registrar, Transfer Agent Anson Registrars Limited
and Paying Agent PO Box 426
Anson Place
Mill Court
La Charroterie
St Peter Port
Guernsey GY1 3WX
UK Transfer Agent Anson Administration (UK) Limited
3500 Parkway, Solent Business Park
Whiteley
Fareham
Hampshire
England PO15 7AL
Registered Office of the Anson Place
Company Mill Court
La Charroterie
St Peter Port
Guernsey GY1 1EJ
Anson Fund Managers Limited
Secretary
22 August 2008
E&OE - in transmission
END OF ANNOUNCEMENT
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR QLLFLVVBXBBZ
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