CORPORATE LIABILITY MANAGEMENT
Since 1988 ECU has managed hundreds of multi-currency loan facilities at over 20 banks, with terms of business that vary and that have evolved over time to meet our clients' and their lending banks' requirements.
This 1, 3, 5 & 10 Year Performance table for ECU Corporate Liability Management is pro-forma and has been created by taking certain actual foreign exchange transaction data which, subject to the notes below, is consistent with all foreign exchange transactions executed by ECU on all ECU-managed, sterling-based loans throughout the period.
The table demonstrates the net performance, in both capital and (non-cumulative) interest rate terms of a £10m multi-currency loan managed by ECU over the defined time periods.
Management Fees
Management fees are charged at 0.65% p.a. of the value of the original loan, which is based on the current ECU Management Fee scale applicable to a minimum corporate loan of £10m. Management Fees have been charged quarterly in arrears.
Interest Rate Savings
Interest is assumed as charged at 1% above the weekly closing 7 day inter-bank cost of funds applicable to the currencies borrowed. The benchmark used for calculating interest rate savings is the Sterling 7 day LIBOR rate plus 1%.
Performance Fees
Performance fees are charged on the basis of 20% of the combined capital reduction and non-cumulative interest saving charged quarterly in arrears.
Excluded Data
It is assumed that no bank switching fees have been charged by the lending banks for switching the underlying currency of an ECU managed corporate multi-currency loan.
Debt Reduction
'Debt Reduction' is the gross reduction in the size of a sterling loan assumed to start at the beginning of each year resulting from foreign exchange movements. A reduction in the size of a loan is positive performance. Any debt increase from adverse foreign exchange movements constitutes negative performance.
Interest Saving
The 'Interest Saving' is calculated as the difference between the interest which would have been paid on the starting balance of the loan in sterling at a rate of 1% above the weekly closing 7-day inter-bank sterling LIBOR rate, and the interest payable in the currency(ies) in which the loan has been denominated at a rate of 1% above the weekly closing 7-day inter-bank LIBOR rate applicable to those currencies. An Interest Saving is shown as positive performance. An Interest Loss is shown as negative performance.
Daily interest is calculated at a rate of 1% above the weekly closing 7-day inter-bank interest rates for borrowed money in the relevant currencies divided by 360 for all currencies except for sterling, which is divided by 365.
Total Performance (gross)
The total gross performance is the sum of the Debt Reduction (or Debt Increase) and the Interest Saving (or Interest Loss), for the period in question not including fees.
Total performance (net of fees)
Total net performance contains the following adjustments, which are intended to represent fairly the total net benefits to a client compared with a sterling interest-only loan paying a rate of 1% above the weekly closing 7-day inter-bank sterling LIBOR rate:
- Any Interest Saving achieved is put in a notional interest-bearing account.
- Management fees are charged at a rate of 0.65% p.a. of the value of the original loan, which is based on the current ECU Management Fee scale applicable to ECU's management of a £10m loan. Management Fees are charged monthly in advance, and, for the purposes of creating this performance table, they are deducted from the notional interest-bearing account.
- Performance fees are charged annually on the basis of 20% of the total gross performance (if positive), less any switch fees payable to the lender and less ECU's management fees during the period in question. For the purposes of creating this performance table, performance fees are taken from the notional interest-bearing account.
- The interest on any resulting positive balance of the notional sterling interest-bearing account is calculated at a rate of 0.625% below the weekly closing 7-day inter-bank LIBOR rate. If the balance is negative, interest is charged at a rate of 1% above the weekly closing 7-day inter-bank sterling LIBOR rate.
Underlying Transaction Data
Some of the historical ECU-managed, multi-currency loan facilities were provided by banks that no longer exist or have been sold or merged. As a result, independent verification of historical data is not always possible. ECU's trading instructions to all banks are identical save only three main respects: (a) the amounts vary from bank to bank; (b) although they are given at the same time, it may not have been possible to instruct or execute with all banks simultaneously; and (c) two of the lending banks that historically provided multi-currency loan facilities to ECU's clients were unable to place debt in more than one currency at a time.
The performance data is based on actual foreign exchange transactions executed for clients at Royal Trust Bank of Canada, who were then taken over by Kleinwort Benson Private Bank and subsequently by Kleinwort Benson (Channel Islands) Ltd. ECU believes this to be representative of the capital and interest rate savings of a £10m multi-currency loan managed by The ECU Group plc over these periods. The trading and performance data of ECU's multi-currency debt management programme is periodically reviewed by independent accountants.
