The carrying amounts of the Company's foreign currency
denominated financial assets at the reporting date are as
follows:
Year ended Year ended
31 October 31 October
2013 2012
GBP GBP
Assets
US Dollar 32,474,343 44,911,509
Euro 7,715 7,417
----------- ------------
32,482,058 44,918,926
Liabilities
US Dollar (619,447) (1,331,560)
Net foreign currency asset 31,862,611 43,587,366
=========== ============
As subscription, redemption and dividend payments in respect of
all cells other than US High Income are made in the same functional
currency, none of the cells other than US High Income are exposed
to foreign exchange risk. Subscription and redemption payments in
respect of Class B US High Income are made in US Dollars, but
dividends are paid in the Sterling equivalent of a fixed US Dollar
amount, unless the relevant shareholder elects to receive their
dividends in US Dollars. As the currency in which these dividends
are paid is selected at the option of the shareholder and may be
paid in the functional currency, the directors do not consider that
the Company acting on behalf of US High Income is exposed to
material foreign exchange risk.
(g) Valuation
(i) The notional amounts of the derivative instruments are as
follows:
Enhanced Property Recovery GBP 30,125,000
Energy - Base Metals (3) GBP 49,587,600
Enhanced Income GBP 39,999,346
UK Enhanced Income GBP 49,015,722
US Enhanced Income - Class A GBP 48,500,080
US Enhanced Income - Class B USD 45,079,125
(ii) The maturity dates of the derivative instruments are as
follows:
Enhanced Property Recovery 20 March 2014
Energy - Base Metals (3) 12 June 2014
US Enhanced Income - Class A 16 July 2029
US Enhanced Income - Class B 16 July 2029
UK Enhanced Income 24 September
2029
Enhanced Income c.30 April
2108*
* The maturity date of the Enhanced Income cell will be the
26(th) business day after the final ex dividend date. As the
business days in April 2108 cannot yet be determined, an
approximate date is disclosed.
(iii) Early Settlement Options relating to the derivative
contracts:
Each contract entered into between the Counterparty and the
Company acting for and on behalf of each cell have been entered
into upon terms which allow such contracts to be terminated, inter
alia, in the following circumstances:
(a) by the Company if the Counterparty fails to make a payment
under the relevant contract (subject to a grace period of three
local business days) or makes a representation which is incorrect
or misleading in any material respect or fails to comply with its
related obligations;
(b) by the Counterparty if the Company fails to make a payment
it is required to pay under the relevant contract (subject to the
grace period mentioned above); and
(c) by either the Counterparty or the Company if the other party
is dissolved, becomes insolvent or is unable to pay its debts as
they become due or on the occurrence of an illegality or the
imposition on payments under the Contract of a withholding which
the Company or the Counterparty, as the case may be, is unable to
gross-up.
It is anticipated that, on early termination of a Contract, a
termination payment would become due to the Company equal to the
aggregate net asset value of the relevant Contract at the date of
such termination. The directors may reinvest such proceeds as they
see fit in investments which in the opinion of the directors
replicate as nearly as practicable the investment characteristics
of the contract so terminated and so that the proceeds are
invested, as nearly as practicable, in accordance with the
Company's stated investment objective for the relevant cell.
Even if recovered by the Company, any early redemption amount in
respect of the shares of the relevant cell may result in a lower
return than would have been the case if the contract had continued
and been performed up to its maturity date.
In the event that the directors determine that the investment
characteristics of the Contract cannot be replicated then the
directors will notify Shareholders of the relevant cell of such
circumstances, the relevant early redemption amount and the
relevant early redemption date.
If the Counterparty fails to top up the collateral such that it
is equal to at least the Applicable Percentage (as set out in note
6(c)) or other circumstances constituting an event of default with
respect to the Counterparty occur, the Company will be entitled to
enforce its security over the collateral as well as to pursue any
other remedies it may have against the Counterparty. In such
circumstances, the Company will re-invest the proceeds of
realisation of the collateral or distribute the same to
Shareholders.
(h) Periodic Returns on Principal and Timings of Payments
Enhanced Income
Under the terms of the Swap Confirmation between the
Counterparty and the Company acting for and on behalf of the
Enhanced Income cell, the Counterparty will pay to the Company for
the account of the Enhanced Income cell quarterly a Sterling amount
equal to 2.00% of the notional amount of the Swap Confirmation,
equivalent to 2.00 pence per Class A Sterling Hedged Enhanced
Income Preference Share, provided that if the underlying portfolio
net asset value reaches 110% of the initial underlying portfolio
net asset value (equivalent to a net asset value of 110 pence per
share), future payments will increase to 2.20% of the notional
amount of the Swap Confirmation, equivalent to 2.20 pence per Class
A Sterling Hedged Enhanced Income Preference Share. For each
subsequent 5 per cent. increase in the underlying portfolio net
asset value, subsequent quarterly payments will increase by 0.1%,
equivalent to 0.1 pence per Class A Sterling Hedged Enhanced Income
Preference Share.
Where the underlying portfolio net asset value subsequently
decreases after having increased to 110% or more of the initial
underlying portfolio net asset value, but has not decreased to less
than 100% of the initial underlying portfolio net asset value,
subsequent quarterly payments will reduce to 2.00 pence per Class A
Sterling Hedged Enhanced Income Preference Share. If the underlying
portfolio net asset value has fallen below 100 per cent. and below
a lower percentage which is an integral multiple of 5 per cent.
i.e. 95%, 90%, 85% (down to 5%) of the initial underlying portfolio
net asset value, subsequent dividend payments will be adjusted to
be the product of 2.00% and the relevant percentage threshold level
and 100 pence per Class A Sterling Hedged Enhanced Income
Preference Share.
UK Enhanced Income
Under the terms of the Swap Confirmation between the
Counterparty and the Company acting for and on behalf of BNP
Paribas UK Enhanced Income cell, the Counterparty will pay to the
Company for the account of the UK Enhanced Income Class A cell
quarterly a Sterling amount equal to 2.00% of the notional amount
of the Swap Confirmation, equivalent to 2.00 pence per UK Enhanced
Income Preference Share, provided that if the underlying portfolio
net asset value reaches 110% of the initial underlying portfolio
net asset value (equivalent to a net asset value of 110 pence per
share), future payments will increase to 2.20% of the notional
amount of the Swap Confirmation, equivalent to 2.20 pence per UK
Enhanced Income Preference Share. For each subsequent 5 per cent.
increase in the underlying portfolio net asset value, subsequent
quarterly payments will increase by 0.1%, equivalent to 0.1 pence
per UK Enhanced Income Preference Share.
Where the underlying portfolio net asset value subsequently
decreases after having increased to 110% or more of the initial
underlying portfolio net asset value, but has not decreased to less
than 100% of the initial underlying portfolio net asset value,
subsequent quarterly payments will reduce to 2.00 pence per UK
Enhanced Income Preference Share. If the underlying portfolio net
asset value has fallen below 100 per cent. and below a lower
percentage which is an integral multiple of 5 per cent. i.e. 95%,
90%, 85% (down to 5%) of the initial underlying portfolio net asset
value, subsequent dividend payments will be adjusted to be the
product of 2.00% and the relevant percentage threshold level and
100 pence per UK Enhanced Income Preference Share.
US Enhanced Income - Class A
Under the terms of the Swap Confirmation between the
Counterparty and the Company acting for and on behalf of the US
Enhanced Income cell in respect of Class A, the Counterparty will
pay to the Company for the account of the US Enhanced Income cell
quarterly a Sterling amount equal to 2.00% of the notional amount
of the Swap Confirmation, equivalent to 2.00 pence per Class A
Sterling Hedged US Enhanced Income Class A Preference Share,
provided that if the underlying portfolio net asset value reaches
110% of the initial underlying portfolio net asset value
(equivalent to a net asset value of 110 pence per share), future
payments will increase to 2.20% of the notional amount of the Swap
Confirmation, equivalent to 2.20 pence per US Enhanced Income Class
A Preference Share. For each subsequent 5 per cent. increase in the
underlying portfolio net asset value, subsequent quarterly payments
will increase by 0.1%, equivalent to 0.1 pence per Class A Sterling
Hedged US Enhanced Income Preference Share.
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