TIDMCDO
RNS Number : 4894L
Carador PLC
06 May 2010
Carador PLC
30 April 2009
The following amendments have been made to the 'Annual Financial Report'
announcement released on 30/04/2010 at 16:47 under RNS No 1916L.
- On the Chairman's Report, under performance during the twelve months ended 31
December 2009 the loss per share was amended to EUR0.05 from EUR0.13
- Note references for Derivative financial instruments on the Company Statement
of Financial Position were amended to remove the reference to note 2
- The Distribution per share on the Consolidated Statement of Comprehensive
Income was amended to EUR0.049 from EUR0.10
- The cash inflow from dividends on the Consolidated Statement of Cashflows
amended to 997,618 from 89,056
- The Company and Consolidated tables on Note 3 splitting financial assets and
liabilities between Level 1,2 and 3 were replaced
- The page number references on Note 11 of 81 and 82 amended to 80 and 81
All other details remain unchanged.
The full amended text is shown below.
Annual Report for
the Year Ended 31 December 2009
Carador plc ("Carador" or the Company) has today released its Annual Report and
Consolidated Audited
Financial Statements for the period from 1 January 2009 to 31 December 2009.
The Annual Report and Consolidated Audited Financial Statements will shortly be
available from the
Company's website www.carador.co.uk and 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 financial information set out in this announcement is an extract from the
Annual
Report and Consolidated Audited Financial Statements of the Company for the
period from 1 January 2009 to 31 December 2009 and does not constitute the
Company's statutory accounts.
Enquiries:
Paul Noonan
Northern Trust Investor Services (Ireland) Limited +353 1 542 2000
CHAIRMAN'S REPORT
I herewith present the consolidated annual report and financial statements for
Carador PLC ('Carador' or the 'Company') for the year ended 31 December 2009.
The first half of 2009 saw an improvement in market sentiment despite the
significant increase in the leveraged loan default rate, highlighting the
influence of technical factors in the loan market sell off in 2008. The second
half of the year saw improving fundamentals support the leveraged loan and CLO
market further.
The Credit Suisse Leveraged Loan Index returned 44.9% in 2009 compared to -28.8%
in 2008. As a result, leveraged loans have been one of the best performing asset
classes in 2009 with similar returns to unsecured high yield bonds (54.22%(1))
and significantly outperforming equities (S&P500 2009 return 26.46%) and
investment grade corporate bonds (Credit Suisse Liquid US Corporate Bond Index
+19.61%).
Offsetting the recovery in trading levels, the long anticipated increase in
default rates began to materialise. The 12 month lagging default rate by
principal amount jumped to 10.81% in November from 3.75% at year-end 2008. The
increase in defaults, as historically has been the norm, resulted in lower
recovery rates. The average issuer weighted recovery rate for first lien loans
was 54.0% in 2009 versus an average recovery for the period 1982-2009 of
65.6%(2) but still significantly higher than the average recovery rate for
senior unsecured bonds which was 37.7% in 2009. Despite the significant increase
in defaults, the recovery rate for first lien loans was higher than in 1993
(53.4%) and in line with 1998 (56.7%).
Another concern for CLOs earlier in the year was the effect of downgrades in
their overcollateralisation test ("OC Tests") which are normally adjusted to
reflect not only defaults but also the proportion of CCC rated assets in the
portfolios. The higher share of CCC loans among rated issuers has been
compensated by the outperformance of this subset of the market. US leveraged
loans rated CCC/split CCC/Default generated a 60.9% total return in 2009,
outperforming the index by 16%. As a result, the CCC haircuts in the OC test
have, in some cases, fallen.
The stronger than expected economic rebound, the proactive approach taken by
companies to amend their covenants, the effect of distressed exchanges and
strong high yield bond issuance have contributed to marked reductions in default
expectations. Moody's default rate forecasting model shows a sharp fall in the
global speculative-grade default rate to 3.3% by December 2010. Moody's points
out that the forecasted sharp decline is consistent with previous credit
cycles(3).
Carador's equity portfolio was affected by the number of defaults and CCC
downgrades, and their effect in the OC Tests of several transactions, which have
diverted cash flows to repay senior debt in the first half of the year. It has
benefited from the underlying loan price improvements and selective purchases
and sales by the Manager taking advantage of the dislocation of the CLO market.
The performance of the senior notes in the portfolio has been positive but has
come mainly in the form of principal prepayments, which the Company cannot use
to fund dividend distributions.
Performance during the twelve months ended 31 December 2009
During the 12 month period ending 31 December 2009 the Company incurred a net
loss of EUR1,445,179 and losses per share of EUR0.05. The Board declared quarterly
interim dividends in respect of the year ended 31 December 2009 of EUR5,706,195,
in aggregate, equivalent to EUR0.0492 per share (US$0.0693 per US$ share).
The Company's net asset value decreased by 11% in the period to EUR58,103,058.
This was offset by the dividends distributed during the year which equated to
10.0% of the opening EUR class NAV and 11.1% of the opening US$ class NAV, giving
a total return for the year in the EUR Class of -0.2% and for the US$ Class of
+2.4%. As of 31 December 2009, the Company's portfolio had exposure to 30 CLO
tranches and 29 loan portfolios. 21% of the investment portfolio was invested in
cash or senior tranches (AAA/AA original rating) of CLOs, 7% in mezzanine
tranches (A/BBB/BB original rating) and 45% in subordinated tranches. The
Company held 27% of its assets in cash as at 31 December 2009. The portfolio is
broadly diversified across 16 managers.
(1)-Credit Suisse High Yield Index
(2)-Source: Moody's, "Special Comment: Corporate Default and Recovery Rates,
1920-2009", February 2010
(3)-Source: Moody's, "Special Comment: Corporate Default and Recovery Rates,
1920-2009", February 2010
CHAIRMAN'S REPORT (continued)
Outlook
The decision by Carador's investors to amend the investment guidelines to
include senior tranches of CLOs has proven to be prudent. The Board believes
that the realisations completed during 2009 and the cash held by the Company
means that Carador is well positioned to take advantage of potential
opportunities presented by the current market.
Material events
On 13 January 2010, the Board declared an interim dividend of EUR0.01 per share
in respect of the quarterly period ended 31 December 2009. This dividend was
payable on 29 January 2010 to shareholders on the register as at the close of
business on 22 January 2010. US$ class shareholders received US$0.0145 per
share, calculated at the prevailing exchange rate on 13 January 2010 of
EUR1:US$1.4508.
On 12 February 2010, the Company issued a circular to shareholders in order to
provide an update on GSO Capital Partners International LLP's implementation of
the Company's investment strategy and to notify them of the implementation of a
share repurchase programme by the Company. As at 28 April 2010, no shares had
been repurchased by the Company.
On 14 April 2010, the Board declared an interim dividend of EUR0.0091 per share
in respect of the quarterly period ended 31 March 2010. This dividend is payable
on 23 April 2010 to shareholders on the register as at the close of business on
21 April 2010. US$ class shareholders received US$0.0124 per share, calculated
at the prevailing exchange rate on 14 April 2010 of EUR1:US$1.3626.
On 15 April 2010, the Company released its net asset value as at 31 March 2010.
As at the close of business on 31 March 2010, the unaudited net asset value per
share was EUR0.4697 for the EURO class shares and US$0.6006 for the US$ class
shares. Including dividends paid during the period, the total return for the
EURO class shares and the US$ class shares in the year to date was 10.66% and
10.12% per share respectively.
In January 2010, the Company disposed of a portion of its holding in Gale Force
4. This disposal resulted in the reduction of its holding in the
equity/mezzanine tranche of Gale Force 4 to below 50% and as a result, in the
future Gale Force 4 will no longer be consolidated.
Werner Schwanberg
Chairman
28 April 2010
RESPONSIBILITY STATEMENT
Responsibility statement
The Directors are responsible for preparing the consolidated financial
statements in accordance with applicable Irish law and those International
Financial Reporting Standards ("IFRS") as adopted by the European Union.
Irish company law requires the Directors to prepare consolidated financial
statements for each financial period, which give a true and fair view of the
state of affairs of the Company and the Group and the profit or loss of the
Company and the Group for that period. In preparing those consolidated financial
statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company and Group will continue in business;
· present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
· provide additional disclosures when compliance with the specific
requirements in IFRS is insufficient to enable users to understand the impact of
particular transactions, other events and conditions on the entity's financial
position and financial performance; and
· state that the Company and Group has complied with IFRS as adopted by the
European Union, subject to any material departures disclosed and explained in
the financial statements.
The Directors confirm that they have complied with the above requirements in
preparing the consolidated financial statements. The Directors confirm that the
consolidated financial statements contain a fair review of the events during the
period and a description of the principle risks and uncertainties for the next
twelve months.
The Directors are responsible for keeping proper books of account which disclose
with reasonable accuracy at any time the financial position of the group and
Company and to enable them to ensure that the consolidated financial statements
are prepared in accordance with Companies Acts 1963 to 2009, the Listing Rules
of the UK Listing Authority and the Non-UCITS Series of Notices (the "Notices").
They are also responsible for safeguarding the assets of the group and Company
and hence for taking reasonable steps for the prevention and detection of fraud
and other irregularities.
In preparing these consolidated financial statements for the year to 31 December
2009 the Directors confirm that, to the best of their knowledge:
(a) the consolidated 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 group and
Company and the undertakings included in the consolidated financial statements
taken as a whole;
(b) the directors' report, chairman's report and investment manager's review
include a fair review of the development and performance of the business and the
position of the group and Company and the undertakings included in the
consolidated financial statements taken as a whole, together with a description
of the principal risks and uncertainties that they face.
INVESTMENT MANAGER'S REVIEW
For the year ended 31 December 2009
Overview
The fourth quarter saw a continuation of the improving trends witnessed in the
third quarter - loan prices continued to rally, defaults and CCC downgrades
moderated and as a result CLO collateral coverage tests (at least in the US)
improved. In concert with this improvement and the continued interest of
investors in higher risk assets, CLO security prices appreciated in value,
despite a minor sell off in late November, particularly in more junior tranches.
The sell off was met with high demand and bonds rallied to end the year through
the highs.
Carador entered the rally with a portfolio which during the second and third
quarter had expanded to include senior CLO tranches. We continued to invest in
senior tranches and also selectively invested in mezzanine tranches as the rally
improved their prospects. We took profits on some of the investments made in the
past year, where we viewed the potential future upside to be limited.
While we expect that the market will continue to see volatility, it is clear
from the current improved market technicals that it is unlikely we will re-test
the lows of the first quarter. CLOs have benefited from the improvement in
fundamentals during 2009. We expect this to continue as default rates fall,
asset prices rally and the economy improves through 2010. While the improvement
in European CLOs has lagged that in the US, we expect this to gradually change.
Market overview
Leveraged loans
The US and European leveraged loan market continued to outperform many asset
classes. The Credit Suisse Leveraged Loan Index posted a 44.9% return in 2009, a
complete turn around from 2008's -28.8% return. More than 60% of the loan market
now trades at a price of 90 cents or greater compared with only 5% in December
2008(1).
The key drivers to performance were an improvement in both fundamentals and
technical conditions. Technicals improved vastly over the course of 2009 as a
result of the ongoing inventory squeeze. New-issue volume fell to all-time lows
even as repayments continued at a rate of 1.25% per month, exceeding supply by
$46.5 billion over the year. Over the year, the institutional universe
contracted 10.9% from $596 billion at year-end 2008(2) and technical conditions
remain robust. In the fourth quarter alone, accounts built up large cash
positions on the strength of bond-for-loan take-out activity, which totalled $8
billion during the final three months of 2009. For the full year bond issuance
was a multiple of loan issuance for the first time since 2004(3).
The Credit Suisse Western European Leveraged Loan Index (hedged, in euro) was up
with a return of 47.2% in 2009. While the European loan market has slightly
lagged the US rally, the proportion of loans trading below 80 cents has shrunk
from 87% of the market in December 2008 to less than 30% at the end of 2009(4).
For CLOs the most notable feature of the leveraged loan market has been the
rally in CCC-rated loans - which have posted a full year return of 79% as
investor's risk appetite returned following a negative 51% performance in
2008(5). This feeds through to an improvement in many overcollateralisation
("OC") tests.
The continued laggard was middle market loans - to which Carador has minimal
exposure - as investors still seek perceived liquidity. The other
underperforming market has been Europe where, with a less robust high yield
market, restructurings relied on the loan providers for liquidity; however,
although bond issuance increased in the fourth quarter.
The US leveraged loan lagging 12-month default rate by principal amount eased to
9.61%, from an all-time high of 10.81% in November, although still almost double
the rate of 4.7% in December 2008(6).
(1)- Source: S&P LCD
(2)- Source: S&P LCD
(3)- Source: JP Morgan 4 January 2010
(4)-Source: S&P LCD
(5)- Source: Credit Suisse Returns analysis 14 January 2010
(6)-Source: S&P LCD
INVESTMENT MANAGER'S REVIEW (continued)
For the year ended 31 December 2009
If November 2009 does prove to be the peak in defaults, that is a significant
improvement on first quarter predictions of 12-15% default rates. The reasons
for this improvement are threefold. Firstly, it appears that the economy has
rebounded faster than expected. Secondly, aggressive efforts to amend loan terms
put off the day of reckoning for 15% of loan market issuers, with 4% executing
"amend-to-extends" and 11% covenant-relief. Finally, and most powerful, was the
bond market's embrace of distressed exchanges including top-10 Index names such
as TXU, Ford and Harrah's. The loans in question - which were unaffected even as
bondholders suffered principal haircuts - total a significant $41 billion. Had
they been included in the loan default rate, the rate would have peaked in
November at 17.89% by principal amount(1).
One concern relating to CLOs has been that recovery rates still significantly
lag historical average levels, however this is consistent with the stage of
economic recovery - recovery rates are always in inverse proportion to default
rates. Also of benefit to CLO's there has been a marked slowdown in CCC
downgrades, with fourth quarter downgrade numbers less than one third of those
seen in March and April(2).
Looking forward, the bond take-out trend shows no sign of ebbing and the loan
primary market appears to be at the highest level in 12 months. This and the
increasing approval of loan extensions (leading to higher spreads and fees),
bodes well for the growing loan maturity schedule which peaks at $279 billion in
US and EUR66 billion in Europe in 2014 - over three quarters of the US loan market
matures by that date, Europe peaks the following year.
Looking to the next few months, the default rate appears set to decline, with
$28 billion of first-quarter 2009 loan defaults coming out of the 12 month
default rolling average(3). Assuming that defaults continue at the second-half
pace of $2.6 billion a month, the default rate will fall to 6.53% by the end of
March 2010, putting the market on track to end 2010 in the mid-single digits, as
most participants now expect(4).
CLO Market
Since early May, with a hiccup in November, CLO spreads tightened dramatically
in 2009, despite considerable volumes of paper for sale.
While the primary market remains effectively shut, 2009 set a record in
secondary trading in CLO paper with close to $4 billion(5) in public BWICs (Bids
Wanted in Competition lists) trading in December, to bring the total amount of
public BWICs since May to over $12 billion(6), more than three quarters of which
was in the second half of the year. The overall volume of trading is probably
significantly higher given a large number of transactions are executed through
private lists, bypassing the BWIC market.
One notable change in the secondary market has been increased activity at the
lower mezzanine and equity section of the CLO capital structure, partly driven
by some CLO-squared liquidations and investors' returning risk appetite.
The technicals remain strong with anecdotal evidence suggesting there is money
on the sidelines waiting to be put to work, demonstrated by the recovery from
November's dip. The improving fundamental credit outlook and diminishing returns
in other asset classes is increasing that demand, particularly as, despite the
rally, Senior CLO tranches remain cheap relative to the underlying leveraged
loans and other asset classes(7).
On the supply side of the equation, too, banks holding these senior bonds may
have been tempted to sell as the rally has brought prices closer to the levels
at which the assets were moved into available-for-sale or hold-to-maturity books
(although the latter makes sales particularly difficult). However most market
participants conclude that banks are unlikely to sell in the near term,
particularly as it now appears the rating downgrades discussed below have a
negative, but not drastic impact on risk capital charges.
(1)-Source: S&P LCD
(2)-Source: JP Morgan
(3)-Source: S&P LCD
(4)-Source: S&P LCD
(5)-Source: Citibank "Global Structured Credit Strategy" December 2009
(6)-Source: Citibank "Global Structured Credit Strategy" December 2009
(7)-Source: Morgan Stanley "CDO Market Insights"
INVESTMENT MANAGER'S REVIEW (continued)
For the year ended 31 December 2009
Turning to the fundamentals, the US CLO market has continued to see a steady
improvement in market value tests such as OC tests due to loan price
appreciation and, as discussed, above a stabilisation in the deterioration of
hard credit fundamentals such as defaults and CCC downgrades. The European CLO
market, however, shows continued weakness in OC ratios
The difference between Europe and US is even more striking in the Senior OC
tests which have on average, in the US, improved by more than 1.5% points since
June 09, while in Europe they have deteriorated by 1.8% points over the same
period(1).
The rating outlook for CLO securities has stabilized. While S&P continue to
downgrade CLOs based on the methodology released in September 2009, Moody's has
now completed its global rating revision. In total $253bn of CLO paper in the
agency's CLO universe was downgraded. Europe slightly outperformed, with 84% of
the European deal count downgraded, versus close to 87% for US deals. In Europe,
AAA rating stability was better than that of the US (possibly a reflection of
higher initial credit enhancements), with approximately 47% of initially-rated
Aaa remaining so, while the comparable figure in the US was 35%. The average Aaa
downgrade was 2 notches. In light of receding credit deterioration in underlying
pools, negative rating migration trends should now decelerate significantly.
Fund performance(2)
During 2009 the Company's NAV per share declined by 10.2% (EUR class) and 8.7%
(US$ class). This was offset by the dividends distributed during the year which
equated to 10.0% of the opening EUR class NAV and 11.1% of the opening US$ class
NAV, giving a total return for the year in the EUR Class of -0.2% and for the US$
Class of +2.4%.
As highlighted in the strategy update in February 2010, in light of the rally in
CLO paper in the autumn of 2009, we decided to sell certain of the CLO equity
positions which we believed had limited future upside. Consequently, two BWICs
were undertaken at the end of November and early December, relating to, in
aggregate, 20 positions out of a total of 36 equity holdings in the portfolio.
Multiple bids were received on all positions and, in aggregate, 14 positions
were sold and the balance retained. The average bid received for the 20
positions as a percentage of the Company's latest valuation of each position for
the purpose of calculating net asset value was 102.3%, resulting in a small
realised gain on disposal.
We believe that this trading activity has underscored the accuracy of the
Company's net asset value calculation. In addition, in January 2010 the Company
sold just under one third of its largest position, Gale Force 4 CLO, at a price
10% above the 31 December 2009 NAV valuation of that position.
At the end of the year, 27% of the portfolio NAV was composed of cash. Senior
securities tranches, originally rated AA/AAA, of CLOs made up 21% of the
portfolio (16% in Sep 2009) and mezzanine 7% (up from zero at the end of the
third quarter) due to the purchase of 3 positions in December. By geography, 15%
of the portfolio is invested in European CLOs, down from 18% in September while
the balance is invested in US transactions.
GSO Capital Partners International LLP
28 April 2010
(1)-Source: Morgan Stanley
(2)- Past performance is not a guide to future performance
COMPANY STATEMENT OF FINANCIAL POSITION
As at 31 December 2009
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 31 December 2008 | | | | 31 December 2009 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| EUR | | | Notes | EUR |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| | | | | |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| | | Assets | | |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 162,243 | | Cash and cash equivalents | 5 | 8,293,739 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 909,377 | | Collateral held at bank | 14 | 909,377 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 1,079,064 | | Interest receivable | | 1,200,933 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| - | | Securities sold receivable | | 35,198 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 680,057 | | Derivative financial instruments | 10 | 399,699 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 53,036,009 | | Financial assets at fair value through profit or loss | 3 | 40,270,580 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 12,311,214 | | Investment in subsidiary designated as fair value through profit or loss | 3, 13 | 7,859,922 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 68,177,964 | | Total assets | | 58,969,448 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| | | | | |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| | | Liabilities | | |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 1,723,840 | | Operating expenses payable | 4 | 136,031 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 188,325 | | Audit fee payable | 4 | 187,550 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 94,059 | | Investment management fee payable | 4 | 116,923 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 19,660 | | Administration fee payable | 4 | 13,249 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 6,375 | | Custodian fee payable | 4 | 4,077 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 892,415 | | Derivative financial instruments | 10 | 408,560 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 2,924,674 | | Liabilities (excluding amounts attributable to redeemable participating shareholders) | | 866,390 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| | | | | |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 65,253,290 | | Net assets attributable to redeemable participating shareholders | | 58,103,058 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| | | | | |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 0.4661 | | Net asset value per redeemable participating EUR share | 17 | 0.4149 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 0.6480 | | Net asset value per redeemable participating $ share | 17 | 0.5953 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| | | | | |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| | | Represented by: | | |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 0.4919 | | Net asset value per redeemable participating EUR share for the shareholder dealing | | 0.4418 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| (0.0258) | | Adjustment to accruals | | (0.0269) |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 0.4661 | | Net asset value per redeemable participating EUR share per financial statements | | 0.4149 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| | | | | |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 0.6243 | | Net asset value per redeemable participating US$ share for the shareholder dealing | | 0.5699 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 0.0237 | | Adjustment to accruals | | 0.0254 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
| 0.6480 | | Net asset value per redeemable participating US$ share per financial statements | | 0.5953 |
+-------------------------------------+----------------+---------------------------------------------------------------------------------------+----------------+-------------------------------+
These financial statements were authorised and approved for issue by the
Directors on 28 April 2010 and signed on their behalf by:
Werner Schwanberg Adrian
Waters
Director
Director
The accompanying notes form an integral part of the financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2009
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 31 December 2008 | | | | 31 December 2009 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| EUR | | | Notes | EUR |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| | | | | |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| | | Assets | | |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 8,146,587 | | Cash and cash equivalents | 5 | 21,950,213 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 909,377 | | Collateral held at bank | 14 | 909,377 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 2,223,882 | | Interest receivable | | 2,846,921 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| | | Securities sold receivable | | 35,198 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 680,057 | | Derivative financial instruments | 10 | 399,699 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 252,811,063 | | Financial assets at fair value through profit or loss | 3 | 305,629,706 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 264,770,966 | | Total assets | | 331,771,114 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| | | | | |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| | | Liabilities | | |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 1,772,542 | | Operating expenses payable | | 181,054 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 188,325 | | Audit fee payable | 4 | 187,550 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 361,920 | | Investment management fee payable | 4 | 364,549 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 19,660 | | Administration fee payable | 4 | 13,249 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 23,422 | | Custodian fee payable | 4 | 19,800 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 1,049,054 | | Coupon note interest payable | | 341,340 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 892,415 | | Derivative financial instruments | 10 | 408,560 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 190,107,679 | | Financial liabilities at fair value through profit or loss | 3 | 268,933,084 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 194,415,017 | | Liabilities (excluding amounts attributable to participating shareholders) | | 270,449,186 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| | | | | |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 70,355,949 | | Net assets | | 61,321,928 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| | | | | |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 5,102,659 | | Non-controlling interest | | 3,218,870 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| | | | | |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 65,253,290 | | Net assets attributable to participating shareholders | | 58,103,058 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| | | | | |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 0.4661 | | Net asset value per participating EUR share | 17 | 0.4149 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 0.6480 | | Net asset value per participating $ share | 17 | 0.5953 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| | | | | |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| | | Represented by: | | |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 0.4919 | | Net asset value per redeemable participating EUR share for shareholder dealing | | 0.4418 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| (0.0258) | | Adjustment to accruals | | (0.0269) |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 0.4661 | | Net asset value per redeemable participating EUR share per financial statements | | 0.4149 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| | | | | |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 0.6243 | | Net asset value per redeemable participating US$ share for shareholder dealing | | 0.5699 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 0.0237 | | Adjustment to accruals | | 0.0254 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
| 0.6480 | | Net asset value per redeemable participating US$ share per financial statements | | 0.5953 |
+---------------------------------+----------------+---------------------------------------------------------------------------------+----------------+-------------------------------+
These financial statements were authorised and approved for issue by the
Directors on 28 April 2010 and signed on their behalf by:
Werner Schwanberg Adrian
Waters
Director
Director
The accompanying notes form an integral part of the financial statements.
COMPANY STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2009
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| Nine months ended | | | Year ended |
+--------------------------------------------------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| 31 December 2008 | | | | 31 December 2009 |
+-------------------------------------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| EUR | | | Notes | | EUR |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| | | | | | |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| | | Income | | | |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| 89,056 | | Dividend income | | | 997,618 |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| 4,936,805 | | Interest income | | | 7,477,245 |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| (267,895) | | Net unrealised gain/(loss) on derivative financial instruments | 10 | | 209,992 |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| (3,293,088) | | Net realised loss on derivative financial instruments | 10 | | (1,558,980) |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| (990,322) | | Net unrealised gain/(loss) on foreign currency | | | 1,169,467 |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| (11,523,370) | | Net unrealised gain/(loss) on financial assets designated at fair value through profit or loss | | | 2,096,966 |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| 119,580 | | Net realised gain/(loss) on financial assets designated at fair value through profit or loss | | | (10,159,277) |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| (10,929,234) | | Total operating income/loss | | | 233,031 |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| | | | | | |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| | | Expenses | | | |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| (291,425) | | Investment management fee | 4, 9 | | (681,792) |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| (546,552) | | Operating expenses | | | (512,892) |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| (164,949) | | Directors' fees | 4 | | (193,421) |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| (58,767) | | Administration fee | 4 | | (78,000) |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| (188,325) | | Audit fee | 4 | | (187,550) |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| (18,408) | | Custodian fee | 4 | | (24,555) |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| (406,160) | | Write-off of goodwill | | | - |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| (1,674,586) | | Total operating expenses | | | (1,678,210) |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| | | | | | |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| (12,603,820) | | Operating Loss | | | (1,445,179) |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| | | | | | |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| (2,751,375) | | Finance costs | 20 | | (5,706,195) |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| | | | | | |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| (15,355,195) | | Total comprehensive income for the year | | | (7,151,374) |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| | | | | | |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| | | | | | |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| (EUR0.27) | | Basic and diluted losses per share | 16 | | (EUR0.05) |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
| EUR0.055 | | Distribution per share | 20 | | EUR0.049 |
+-----------------------------+-------------+------------------------------------------------------------------------------------------------+-------------+-------------+----------------------------------+
These financial statements were authorised and approved for issue by the
Directors on 28 April 2010 and signed on their behalf by:
Werner Schwanberg Adrian
Waters
Director
Director
The accompanying notes form an integral part of the financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2009
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| Nine months ended | | | | Year ended |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| 31 December 2008 | | | | 31 December 2009 |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| EUR | | Notes | | EUR |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| | | | | |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| | Income | | | |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| 89,056 | Dividend income | | | 997,618 |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| 5,837,155 | Interest income | | | 17,530,707 |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (267,895) | Net unrealised gain/(loss) on derivative financial instruments | 10 | | 209,992 |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (3,293,088) | Net realised gain/(loss) on derivative financial instruments | 10 | | (1,558,980) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (990,322) | Net unrealised gain/(loss) on foreign currency | | | 1,169,467 |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (10,578,179) | Net unrealised gain/(loss) on financial assets and financial liabilities designated at fair value through profit or loss | | | 9,120,855 |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| 119,580 | Net realised gain/(loss) on financial assets and financial liabilities designated at fair value through profit or loss | | | (18,730,423) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (9,083,693) | Total operating (loss)/income | | | 8,739,236 |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| | | | | |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| | Expenses | | | |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (400,971) | Investment management fee | 4,9 | | (2,473,602) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (569,213) | Operating expenses | 4 | | (874,769) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (164,949) | Directors' fees | 4 | | (193,421) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (60,701) | Administration fee | 4 | | (134,301) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (188,325) | Audit fee | 4 | | (228,550) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (25,379) | Custodian fee | 4 | | (151,820) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (576,681) | Coupon note interest expense | | | (6,738,430) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (406,160) | Write-off of goodwill | | | - |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (2,392,379) | Total operating expenses | | | (10,794,893) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| | | | | |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (11,476,072) | Operating loss | | | (2,055,657) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| | | | | |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (2,751,375) | Finance costs | 20 | | (5,706,195) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| | | | | |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (14,358,518) | Loss for the year | | | (7,761,852) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| | | | | |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| | Other comprehensive income | | | |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (996,677) | Foreign exchange loss on translation | | | (1,273,311) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| | | | | |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (15,355,195) | Total comprehensive loss for the year | | | (9,035,163) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| | Loss for the year attributable to: | | | |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (14,227,447) | Redeemable participating shareholders | | | (6,148,427) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (131,071) | Non-controlling interest | | | (1,613,425) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| | | | | |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| | Total comprehensive loss for the year attributable to: | | | |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (15,224,124) | Redeemable participating shareholders | | | (7,151,374) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (131,071) | Non-controlling interest | | | (1,883,789) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| | | | | |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| (EUR0.25) | Basic and diluted losses per share | 16 | | (EUR0.04) |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
| EUR0.055 | Distribution per share | 20 | | EUR0.049 |
+--------------------------------+--------------------------------------------------------------------------------------------------------------------------+----------------+----------------+---------------------------------+
These financial statements were authorised and approved for issue by the
Directors on 28 April 2010 and signed on their behalf by:
Werner Schwanberg Adrian
Waters
Director
Director
The accompanying notes form an integral part of the financial statements.
COMPANY STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO PARTICIPATING
SHAREHOLDERS
For the year ended 31 December 2009
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| | | | Retained | |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| | | Participating Shares | Earnings | Total |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| | | EUR | EUR | EUR |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| Balance at 20 February 2006 | | - | - | - |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| Profit attributable to holders of participating shares | | - | 1,995,830 | 1,995,830 |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| Issue of participating shares | | 50,025,000 | - | 50,025,000 |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| Initial expenses | | - | (1,268,012) | (1,268,012) |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| | | | | |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| Balance at 31 March 2007 | | 50,025,000 | 727,818 | 50,752,818 |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| | | | | |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| Loss attributable to holders of participating shares | | - | (16,799,246) | (16,799,246) |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| | | | | |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| Balance at 31 March 2008 | | 50,025,000 | (16,071,428) | 33,953,572 |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| | | | | |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| Loss attributable to holders of participating shares | | - | (15,355,195) | (15,355,195) |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| Issue of participating shares | | 46,654,913 | - | 46,654,913 |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| | | | | |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| Balance at 31 December 2008 | | 96,679,913 | (31,426,623) | 65,253,290 |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| | | | | |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| Loss attributable to holders of participating shares | | - | (7,151,374) | (7,151,374) |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| Issue of participating shares | | 485,647 | - | 485,647 |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| Redemption of participating shares | | (484,505) | - | (484,505) |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| | | | | |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
| Balance at 31 December 2009 | | 96,681,055 | (38,577,997) | 58,103,058 |
+--------------------------------------------------------+----------------+-------------------------------------------+------------------------------------------+-----------------------------+
The accompanying notes form an integral part of the financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO PARTICIPATING
SHAREHOLDERS
For the year ended 31 December 2009
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| | | Participating | | Other | | Non-controlling | |
| | | | Retained | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| | | | | reserves | Subtotal | interest | Total |
| | | shares | earnings | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| | | EUR | EUR | EUR | EUR | EUR | EUR |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| Balance at 20 | | | | | | | |
| February 2006 | | - | - | - | - | - | - |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| Profit | | | 1,995,830 | | 1,995,830 | | 1,995,830 |
| attributable to | | - | | - | | - | |
| holders of | | | | | | | |
| participating | | | | | | | |
| shares | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| Issue of | | 50,025,000 | | | 50,025,000 | | 50,025,000 |
| participating | | | - | - | | - | |
| shares | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| Initial expenses | | | (1,268,012) | | (1,268,012) | | (1,268,012) |
| | | - | | - | | - | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| Balance at 31 | | 50,025,000 | 727,818 | | 50,752,818 | | 50,752,818 |
| March 2007 | | | | - | | - | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| Loss | | | (16,799,246) | | (16,799,246) | | (16,799,246) |
| attributable to | | - | | - | | - | |
| holders of | | | | | | | |
| participating | | | | | | | |
| shares | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| Balance at 31 | | 50,025,000 | (16,071,428) | | 33,953,572 | | 33,953,572 |
| March 2008 | | | | - | | - | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| Non-controlling | | | | | | 5,233,730 | 5,233,730 |
| interest on | | - | - | - | - | | |
| investment | | | | | | | |
| acquired | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| Loss | | | (14,358,518) | | (14,358,518) | | (14,358,518) |
| attributable to | | - | | - | | | |
| holders of | | | | | | | |
| participating | | | | | | | |
| shares | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| Loss | | | | | | (131,071) | (131,071) |
| attributable to | | - | | - | - | | |
| non-controlling | | | | | | | |
| interest | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| Unrealised | | | | (996,677) | (996,677) | | (996,677) |
| exchange loss on | | - | - | | | - | |
| foreign | | | | | | | |
| subsidiary | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| Issue of | | 46,654,913 | | | 46,654,913 | | 46,654,913 |
| participating | | | - | - | | - | |
| shares | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| Balance at 31 | | 96,679,913 | (30,429,946) | (996,677) | | 5,102,659 | 70,355,949 |
| December 2008 | | | | | 65,253,290 | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| Loss | | | (6,148,427) | | (6,148,427) | | (6,148,427) |
| attributable to | | - | | - | | - | |
| holders of | | | | | | | |
| participating | | | | | | | |
| shares | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| Loss | | | | | | (1,613,425) | (1,613,425) |
| attributable to | | - | - | - | - | | |
| non-controlling | | | | | | | |
| interest | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| Unrealised | | | | (1,002,947) | (1,002,947) | (270,364) | (1,273,311) |
| exchange loss on | | - | - | | | | |
| foreign | | | | | | | |
| subsidiary | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| Issue of | | 485,647 | | | 485,647 | | 485,647 |
| participating | | | | | | - | |
| shares | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| Redemption of | | (484,505) | | | (484,505) | | (484,505) |
| participating | | | - | - | | - | |
| shares | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| Balance at 31 | | 96,681,055 | (36,578,373) | (1,999,624) | 58,103,058 | 3,218,870 | 61,321,928 |
| December 2009 | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
| | | | | | | | |
+------------------+----------+-----------------------+--------------------+-------------------+--------------------+-----------------------+---------------------+
The accompanying notes form an integral part of the financial statements.
COMPANY STATEMENT OF CASH FLOWS
For the year ended 31 December 2009
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| Nine months ended | | | | Year ended |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| 31 December 2008 | | | | 31 December 2009 |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| EUR | | | | EUR |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| | | | | |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| | | Cash flows from operating activities | | |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| (12,603,820) | | Loss for the financial period | | (1,445,179) |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| | | | | |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| | | Adjustments to reconcile profit for the financial period to net cash from operating activities | | |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| 1,837,022 | | (Decrease)/increase in creditors | | (1,574,429) |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| (670,253) | | Decrease/(increase) in debtors | | (157,067) |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| 406,160 | | Write-off of goodwill | | - |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| 11,791,265 | | Unrealised capital loss on investments | | (3,476,425) |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| - | | Realised loss on disposal of capital investments | | 9,270,435 |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| 760,374 | | Net cash inflow from operating activities | | 2,617,335 |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| | | | | |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| (24,381,464) | | Purchase of investments | | (26,468,395) |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| 1,760,931 | | Repayment of principle on investments | | 5,960,326 |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| 6,700,000 | | Disposal of investments | | 31,727,283 |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| 15,785,353 | | Acquisition net cash acquired | | - |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| (990,322) | | Exchange rate movement on cash acquired | | - |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| (1,125,502) | | Net cash inflow/(outflow) from investing activities | | 11,219,214 |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| | | | | |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| | | Cash flows from financing activities | | |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| (2,751,375) | | Distribution paid | | (5,706,195) |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| - | | Exchange gain on share transactions | | 1,142 |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| (2,751,375) | | Net cash outflow from financing activities | | (5,705,053) |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| | | | | |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| (3,116,503) | | Net increase/(decrease) in cash and cash equivalents | | 8,131,496 |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| 3,278,746 | | Cash and cash equivalents at the beginning of the period | | 162,243 |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| 162,243 | | Cash and cash equivalents at the end of the period | | 8,293,739 |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| | | | | |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| | | Supplementary information | | |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| 4,766,552 | | Cash inflow from interest | | 7,355,376 |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| 89,056 | | Cash inflow from dividends | | 997,618 |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
| 2,751,375 | | Cash outflow from dividends | | 5,706,195 |
+--------------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+---------------------------------------+
The accompanying notes form an integral part of the financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2009
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| Nine months ended | | | | Year ended |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| 31 December 2008 | | | | 31 December 2009 |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| EUR | | | | EUR |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| | | | | |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| | | Cash flows from operating activities | | |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| (11,476,072) | | Loss for the financial period | | (2,055,657) |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| | | | | |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| | | Adjustments to reconcile profit for the financial period to net cash from operating activities | | |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| 3,219,686 | | Increase in creditors | | (2,307,381) |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| (1,815,072) | | (Increase)/decrease in debtors | | 658,237 |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| 406,160 | | Write off of goodwill | | - |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| 11,664,017 | | Unrealised capital loss/(gain) on investments | | (10,500,314) |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| 788,905 | | Unrealised exchange loss on foreign subsidiary | | (1,273,311) |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| - | | Realised loss on disposal of capital investments | | 16,875,513 |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| 2,787,624 | | Net cash (outflow)/inflow from operating activities | | 1,397,087 |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| | | | | |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| (25,932,452) | | Purchase of investments | | (94,806,250) |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| 4,522,992 | | Repayment of principle on investments | | 46,838,849 |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| 6,700,000 | | Disposal of investments | | 66,956,904 |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| 20,531,374 | | Acquisition of subsidiary, net cash acquired | | - |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| (990,322) | | Exchange rate movement on net cash acquired | | - |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| 4,831,592 | | Net cash inflow from investing activities | | 18,989,503 |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| | | | | |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| | | Cash flows from financing activities | | |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| - | | Exchange gain on share transactions | | 1,142 |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| (2,751,375) | | Distribution paid | | (5,706,195) |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| (2,751,375) | | Net cash inflow/(outflow) from financing activities | | (5,705,053) |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| | | | | |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| 4,867,841 | | Net increase in cash and cash equivalents | | 14,681,537 |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| - | | Net foreign exchange difference | | (877,911) |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| 3,278,746 | | Cash and cash equivalents at the beginning of the period | | 8,146,587 |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| 8,146,587 | | Cash and cash equivalents at the end of the period | | 21,950,213 |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| | | | | |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| | | Supplementary information | | |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| 4,522,084 | | Cash inflow from interest | | 16,907,668 |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| 89,056 | | Cash inflow from dividends | | 977,618 |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| 576,681 | | Cash outflow from interest | | 6,738,430 |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
| 2,751,375 | | Cash outflow from dividends | | 5,706,195 |
+-----------------------------------------+----------------+------------------------------------------------------------------------------------------------+----------------+-----------------------------------------+
*Consolidated cash and cash equivalents includes Gale Force 4 cash and cash
equivalents. Cash and cash equivalents available for use by the Company is the
amount per the Company statement of financial position. Gale Force 4 was
consolidated as at 31 December 2009 because the Company owned 70.98% of the
income notes therefore the Company was deemed to hold the majority of the
residual risk in Gale Force 4 but did not ultimately exert control.
The accompanying notes form an integral part of the financial statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2009
1. GENERAL
Carador plc (the "Company") is a closed-ended limited liability investment
company domiciled and incorporated under the laws of Ireland with variable
capital pursuant to the Companies Acts, 1963 to 2009 of Ireland. It was
incorporated on 20 February 2006 under registration number 415764. The Company
was authorised by the Financial Regulator pursuant to Part XIII of the Companies
Act, 1990.
The Company's share capital consists entirely of shares of no par value. The
Company's initial share capital is denominated in euro. The Company issued a US$
denominated share class at the time of the amalgamation of its wholly-owned
subsidiary, Carador Guernsey Limited, with Abingdon Investment Limited on 9
December 2008. The Company may issue one or more additional classes of shares
on prior notice to and clearance by the Financial Regulator. The euro
denominated shares were admitted to the Official List and began trading on the
London Stock Exchange on 12 April 2006. The US$ denominated shares were
admitted to the Official List and began trading on the London Stock Exchange on
9 December 2008.
The Company's investment objective is to produce attractive and stable returns,
with low volatility compared to equity markets, by investing in a diversified
portfolio of senior notes of collateralised debt obligations collateralised by
senior secured bank loans and equity and mezzanine tranches of collateralised
debt obligations.
The previous reporting period was a nine month period from 1 April 2008 to 31
December 2008. The Company resolved to change its accounting year end on 16
October 2008 from 31 March to 31 December to coincide with the year end of its
subsidiary, Abingdon Finance Limited. This subsidiary has now been fully
liquidated. The comparative information presented is the audited results of the
Company for the nine month period ended 31 December 2008.
The Company has been established with a 15 year life.
2. SIGNIFICANT ACCOUNTING POLICIES
2a. Statement of compliance
The parent and consolidation financial statements are prepared in accordance
with International Financial Reporting Standards ("IFRS") as issued by the
International Accounting Standards Board ("IASB") and adopted by the European
Union.
2b. Basis of preparation
The consolidated financial statements have been prepared on a historical cost
basis, except for financial instruments classified at fair value through profit
or loss that have been measured at fair value. The consolidated financial
statements are presented in euro.
2c. Basis of consolidation
The consolidated financial statements of the group comprise the financial
statements of the Company and its subsidiaries (including special purpose
entities ("SPEs") that the Company consolidates) for the year ended 31 December
2009. The financial statements of the Company's subsidiaries are prepared for
the same reporting period as for the Company, using consistent accounting
policies.
All intra-group balances, transactions, income and expenses are eliminated in
full.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
2c. Basis of consolidation (continued)
Subsidiaries are fully consolidated from the date on which control is
transferred to the Company. Control is achieved where the Company has the power
to govern the financial and operating policies of an entity so as to obtain
benefits from its activities. The results of subsidiaries acquired during the
year are included in the consolidated statement of comprehensive income from the
date of acquisition The Company also consolidates SPEs where the substance of
its relationship with them indicates that it has control over them. The results
of SPEs are included in the consolidated statement of comprehensive income from
the date the Company is deemed to have assumed the majority of the residual risk
in the subsidiary. Investments in subsidiaries are accounted for at fair value
with fair value being determined as described in 2l (iii) below. Changes in fair
value are recorded within "Net unrealised loss on financial assets and financial
liabilities designated at fair value through profit or loss".
Non-controlling interests represent the portion of profit and loss and net
assets not owned, directly or indirectly, by the Company and are presented
separately in the consolidated statement of comprehensive income and in the
consolidated statement of financial position. Any losses applicable to the
non-controlling interest in excess of the non-controlling interest are allocated
against the interests of the parent. Acquisitions of non-controlling interests
are accounted for using the parent equity extension method, whereby, the
difference between the consideration and the fair value of the share of the net
assets acquired is recognised as goodwill.
2d. Business Combinations and goodwill
Business combinations are accounted for using the purchase method. Where the
Company obtains the power to govern the financial and operating policies of
another entity, the Company is deemed to be the acquirer in a business
combination. The cost of an acquisition is measured as the fair value of the
assets given, shares issued and liabilities incurred or assumed at the date of
exchange, plus costs directly attributable to the acquisition. Identifiable
assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at fair values at the date of acquisition,
irrespective of the extent of any non controlling interest.
Goodwill is initially measured at cost being the excess of the cost of the
business combination over the Group's share in the net fair value of the
acquiree's identifiable assets, liabilities and contingent liabilities. If the
cost of the acquisition is less than the fair value of the net assets of the
subsidiary acquired, the difference is recognised directly in the income
statement.
After initial recognition, goodwill is measured at cost less any accumulated
impairment losses. Goodwill is tested for impairment at the balance sheet date
and when circumstances indicate that the carrying value may be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of
each cash-generating unit to which goodwill relates. Where the recoverable
amount of the cash-generating unit is less than their carrying amount an
impairment loss is recognised.
2e. Changes in accounting policies and disclosures
The accounting policies adopted are consistent with those of the previous
financial year except as follows:
The Company has adopted the following new and amended IFRS as of 1 January 2009:
o IFRS 7 Financial Instruments: Disclosure - improving disclosures about
financial instruments effective 1 January 2009
o IFRS 8 Operating Segments effective 1 January 2009
o IAS 1 Presentation of Financial Statements effective 1 January 2009
o IAS 23 Borrowing Costs (Revised) effective 1 January 2009
o IAS 32 Financial Instruments: Presentation effective 1 January 2009
o Improvements to IFRSs (May 2008)
o Improvements to IFRSs (April 2009, early adopted)
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
2e. Changes in accounting policies and disclosures (continued)
When the adoption of the standard or interpretation is deemed to have an impact
on the financial statements or performance of the Company, its impact is
described below:
IFRS 7 Financial Instruments: Disclosure
The amended standard requires additional disclosures about fair value
measurement and liquidity risk. Fair value measurements related to items
recorded at fair value are to be disclosed by source of inputs using a three
level fair value hierarchy, by class, for all financial instruments recognised
at fair value:
o quoted prices (unadjusted) in active markets for identical assets or
liabilities (Level 1);
o inputs other that quoted prices included in Level 1 that are observable for
the asset or liability, either directly (as prices) or indirectly (derived from
prices) (Level 2);
o inputs for the asset or liability that are not based on observable market
data (unobservable inputs) (Level 3).
In addition, a reconciliation between the beginning and ending balance for Level
3 fair value measurements is required, as well as significant transfers between
levels in the fair value hierarchy. The amendments also clarify the requirements
for liquidity risk disclosures with respect to derivative transactions and
assets used for liquidity management. The fair value measurement disclosures are
presented in Note 3. The liquidity risk disclosures are not significantly
impacted by the amendments and are presented in Note 14.
IFRS 8 Operating Segments
IFRS 8 replaced IAS 14 Segment Reporting upon its effective date. The Company
concluded that the operating segments determined in accordance with IFRS 8 are
the same as the business segments previously identified under IAS 14. IFRS 8
disclosures are shown in Note 18, including the related revised comparative
information.
IAS 1 Presentation of Financial Statements
The revised standard introduces the statement of comprehensive income. It
presents all items of recognised income and expense, either in one single
statement, or in two linked statements. The Company has elected to present one
single statement.
IAS 23 Borrowing Costs
The revised IAS 23 requires capitalisation of borrowing costs that are directly
attributable to the acquisition, construction or production of a qualifying
asset. The main change from the previous version is the removal of the option to
immediately recognise as an expense borrowing costs that relate to assets that
take a substantial period of time to get ready for use or sale.
IAS 32 Financial Instruments: Presentation
The standard has been amended to allow a limited scope exception for puttable
financial instruments to be classified as equity if they fulfil a number of
specified criteria. The adoption of this amendment did not have any impact on
the financial position or the performance of the Company.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
2e. Changes in accounting policies and disclosures (continued)
Improvements to IFRSs
In May 2008 and April 2009 the IASB issued an omnibus of amendments to its
standards, primarily with a view to removing inconsistencies and clarifying
wording. These amendments are the result of conclusions the IASB reached on
proposals made in its annual improvements project. There are separate
transitional provisions for each standard. The adoption of the following
amendments resulted in changes to accounting policies but did not have any
impact on the financial position or performance of the Company.
o IFRS 8 Operating Segment Information: clarifies that segment assets and
liabilities need only be reported when those assets and liabilities are included
in measures that are used by the chief operating decision maker. As the chief
operating decision maker does not review segment assets and liabilities, the
Company has continued to disclose this information in Note 18.
o IAS 1 Presentation of Financial Instruments: assets and liabilities
classified as held for trading in accordance with IAS 39 Financial Instruments:
Recognition and Measurement are not automatically classified as current in the
statement of financial position. The Company analysed whether the expected
period of realisation of financial assets and liabilities differed from the
classification of the instrument. This did not result in any reclassification of
financial instruments between current and non-current in the statement of
financial position.
o IAS 7 Statement of Cash Flows: explicitly states that only expenditure that
results in recognising an asset can be classified as a cash flow from investing
activities.
o IAS 36 Impairment of Assets: when discounted cash flows are used to estimate
'fair value less cost to sell' additional disclosure is required about the
discount rate, consistent with disclosures required when the discounted cash
flows are used to estimate 'value in use'.
Standard and amendments to existing standards that are relevant to the Company
but not yet effective and have not been early adopted by the Company are as
follows;
o IAS 27 Consolidated and separate financial statements effective for periods
from 1 July 2009
o IFRS 3 Business Combinations effective for periods beginning on or after 1
July 2009
o IAS 39 Financial Instruments: Recognition and Measurement effective for
periods beginning on or after 1 July 2009
o IFRIC 17 Distribution of non-cash assets to owners effective for periods
beginning on or after 1 July 2009
The adoption of the above amendments in future periods will not have any impact
on the financial position or performance of the Company.
2f. Interest and dividend income and interest expense
Income receivable and payable from interest bearing financial instruments is
recognised in the statement of comprehensive income on an accruals basis to the
extent that it represents income and not a return of principal to the Company.
Dividend income is credited to the Statement of comprehensive income on an
ex-dividend basis. Dividend income is shown gross of any non-recoverable
withholding taxes, which is disclosed separately in the statement of
comprehensive income and net of any tax credits.
2g. Redeemable participating shares
Redeemable participating shares are redeemable on the winding up of the Company,
due to take place on or around 20 February 2021 and are classified as financial
liabilities in accordance with IAS 32. The liabilities arising from the
redeemable shares are carried at the redemption amount being the net asset value
calculated in accordance with IFRS.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
2h. Fees and charges
The Investment Manager's fee, Custodian's fee, Administrator's fee, Directors'
fees and other operating expenses are charged to the statement of comprehensive
income on an accruals basis.
2i. Cash and cash equivalents
Cash comprises current deposits with banks. Cash equivalents are short-term,
highly liquid investments that are readily convertible to known amounts of cash,
are subject to an insignificant risk of changes in value, and are held for the
purpose of meeting short-term cash commitments rather than for investments or
other purposes.
2j. Net realised gains or losses on investments
Realised gains or losses on investments pertain to gains or losses on disposal
of investments at fair value through profit or loss calculated on a weighted
average cost basis and gains or losses on settlement of derivative financial
instruments.
2k. Net unrealised gains or losses on investments
Net unrealised gains or losses on investments at fair value through the profit
or loss pertain to the fair value movement, which is calculated as described in
Note 2l (iii) and adjusted for any principal repayments. The returns received on
the Company's investments in CLOs carried at fair value through profit or loss
are allocated between income and principal based on the expected return on an
individual investment. Also included within this caption are the unrealised
gains or losses on derivative financial instruments, which are calculated as
described in Note 2l (i).
2l. Financial instruments
(i) Classification
The Company classifies its financial assets and financial liabilities into
categories in accordance with IAS 39 Financial Instruments: Recognition and
Measurement.
The category of financial assets and financial liabilities at
fair value through profit or loss comprises:
Financial assets and financial liabilities designated at fair value through
profit and loss
Financial assets, including investments in subsidiaries, and financial
liabilities classified in this category are designated by management on initial
recognition as part of a group of financial assets and liabilities which are
managed and their performance evaluated on a fair value basis, in accordance
with a documented investment strategy. The term "financial assets designated at
fair value through profit or loss" includes investments in collateralised loan
obligations, equities, collective investment schemes and term deposits. The
term "financial liabilities designated at fair value through profit or loss"
includes term notes issued by Gale Force 4.
Financial instruments held for trading
Derivatives are categorised as held for trading, as the Company does not
designate any derivatives as hedges for hedge accounting purposes as described
under IAS 39. Derivatives include forward currency contracts. Derivatives are
recorded at fair value. Changes in the fair value of derivatives are recorded in
'Net unrealised losses on derivative financial instruments'.
(ii) Initialmeasurement
Financial assets and financial liabilities are measured initially at fair value,
being the transaction price, on the trade date. Transaction costs on financial
assets are expensed immediately.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
2l. Financial instruments (continued)
(iii) Subsequent measurement
After initial measurement, the Company measures financial
instruments which are classified at fair value through profit or loss at their
fair values. Changes in fair value are recorded within 'Net unrealised
gain/(loss) on financial assets and financial liabilities designated at fair
value through profit or loss'. Fair value is the amount for which an asset
could be exchanged, or a liability settled, between knowledgeable, willing
parties in an arm's length transaction. The following sources have been used to
obtain fair value for the financial assets and liabilities of the Company:
1. where quoted market prices are available for the financial assets and
liabilities these are used to determine fair value of the respective financial
instrument;
2. where the market for a financial instrument is not an active market the fair
value on subsequent measurement is obtained through broker quotes or through the
use of pricing services;
3. where the fair value cannot be determined by reference to observable market
quotes or broker quotes the entity estimates fair value through the use of a
discounted cash flow model. There are a number of assumptions applied in
determining the fair values of the financial assets and liabilities whose fair
value is estimated through the use of the discounted cash flow model.
(iv) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the
statement of financial position where there is a legally enforceable right to
offset the recognised amounts and there is an intention to settle on a net
basis, or realise the assets and settle the liability simultaneously.
(v) Derecognition
The Company derecognises a financial asset when the contractual rights to the
cash flows from the financial asset expire or it transfers the financial asset
and the transfer qualifies for derecognition in accordance with IAS 39. The
Company derecognises a financial liability when the obligation specified in the
contract is discharged, cancelled or expires.
2m. Foreign currency
The functional currency of the Company is euro as the Directors have determined
that this reflects the Company's primary economic environment. The presentation
currency of the Company is also euro. Transactions in foreign currencies are
translated at the foreign currency exchange rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies
are translated to euro at the foreign currency closing exchange rate ruling at
the statement of financial position date. Foreign currency exchange differences
relating to investments at fair value through profit or loss are included in the
realised net gain/loss on investments at fair value through profit or loss and
the movement in unrealised net gain/loss on investments at fair value through
profit or loss. All other foreign currency exchange differences relating to
monetary items, including cash, are presented in the statement of comprehensive
income.
Foreign exchange gains and losses on financial assets and financial liabilities
at fair value through profit or loss are recognised together with other changes
in the fair value.
The results and financial position of any subsidiary whose functional currency
is not the same functional currency of the Company are translated into the
Company's presentation currency using the following procedures:
(a) assets and liabilities are translated at the closing rate at the date of the
statement of financial position;
(b) income and expenses are translated at average exchange rates during the
period; and
(c) all resulting exchange differences are taken directly to a separate
component of net assets attributed to participating shareholders. On disposal of
the foreign subsidiary, the deferred cumulative amount is recognised in the
statement of comprehensive income.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
2n. Taxation
Under current law and Irish practice the Company qualifies as an investment
undertaking under Section 739B of the Taxes Consolidation Act 1997 and is not
therefore chargeable to Irish tax on its relevant income or relevant gains. No
stamp, transfer or registration tax is payable in Ireland on the issue,
redemption or transfer of shares in the Company. Distributions and interest on
securities issued in countries other than Ireland may be subject to taxes
including withholding taxes imposed by such countries. The Company may not be
able to benefit from a reduction in the rate of withholding tax by virtue of the
double taxation agreement in operation between Ireland and the other countries.
The Company may not therefore be able to reclaim withholding tax suffered by it
in particular countries.
To the extent that a chargeable event arises in respect of a shareholder, the
Company may be required to deduct tax in connection with that chargeable event
and pay the tax to the Irish Revenue Commissioners. A chargeable event can
include payments to shareholders, appropriation, cancellation, redemption,
repurchase or transfer of shares, or a deemed disposal of shares every 8 years
beginning from the date of acquisition of those shares. Certain exemptions can
apply. To the extent that Shareholders have appropriate tax declarations in
place with the Company there may be no requirement to deduct tax.
The Group's subsidiary, Gale Force 4 is a Cayman Island CLO. Under existing
Cayman Island law the payments of principal and distributions will not be
subject to taxation in the Cayman Islands and no withholding tax will be
required on such payments to any noteholder and gains derived from the sale of
notes will not be subject to Cayman Islands income or corporation tax. It is
exempt from all forms of taxation in the Cayman Islands, including income,
capital gains and withholding taxes.
2o. Distributions
Distributions to holders of redeemable participating shares are recorded in the
statement of comprehensive income when they are declared to the members.
Distributions are based on net income received during the period less expenses
and do not include realised and unrealised capital gains and losses on
investments. Distributions are recognised in the statement of comprehensive
income as finance costs.
2p. Loans and Receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. The Company
includes in this category amounts relating to cash collateral on securities
borrowed and other short-term receivables.
2q. Significant accounting judgments and estimates
(i) Fair value of financial instruments
The Company's CDO assets are not actively traded and given the illiquidity in
current market conditions, market quotations may not be available or may not
necessarily represent the realisation value of at the statement of financial
position date.
When the fair value of financial assets and financial liabilities recorded in
the statement of financial position cannot be derived from active market
quotations, they are determined using valuation techniques including the use of
discounted cash flow models. The inputs to these models are taken from
observable markets where possible but where this in not feasible, a degree of
judgment is required in establishing fair values. The judgments include
considerations of liquidity and model inputs such as credit risk, correlation
and volatility. Changes in assumptions relating to these factors could affect
the reported fair value of financial instruments. The models are calibrated
regularly and tested for validity using prices from any observable current
market transactions in the same instrument or based on observable market data.
The key assumptions applied are base discount rate 36.69% (31 December 2008:
36.69%), default rate (long term annual rate of 2% (31 December 2008: 2%) and
severity loss 30% (31 December 2008: 30%). The most significant of these is the
base discount rate which is adjusted to reflect the credit risk of the
respective financial instruments. Adjustments are made, among others, in respect
of the overcollaterisation cushion, the weighted average rating factor and
weighted average spread.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
3. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
As described in the accounting policies note, the Group and Company have
financial assets and financial liabilities designated at fair value through
profit or loss and derivative financial instruments held for trading. The
following table shows financial instruments recognised at fair value, analysed
between those whose fair value is based on:
o quoted prices (unadjusted) in active markets for identical assets or
liabilities (Level 1);
o inputs other that quoted prices included in Level 1 that are observable for
the asset or liability, either directly (as prices) or indirectly (derived from
prices) (Level 2);
o inputs for the asset or liability that are not based on observable market data
(unobservable inputs) (Level 3).
Company
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| | | 31 December 2009 |
+----------------------------+----------+--------------------------------------------------------------------+
| | | Level | Level | Level | Total |
| | | 1 | 2 | 3 | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| | | | | | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| Financial assets at fair | | | | | |
| value through profit or | | | | | |
| loss | | | | | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| Financial assets held for | | | | | |
| trading | | | | | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| | | | | | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| Derivative financial | | | | | |
| assets | | | | | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| Forward currency contracts | | - | 399,699 | | 399,699 |
| | | | | - | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| | | | | | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| Financial assets | | | | | |
| designated at fair value | | | | | |
| through profit or loss | | | | | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| | | | | | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| Collateralised debt | | | 9,253,585 | 31,155,053 | 40,408,638 |
| obligations | | - | | | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| Equities | | | | 271,140 | 271,140 |
| | | - | - | | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| Money market funds | | 7,450,724 | | | 7,450,724 |
| | | | - | - | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| | | 7,850,423 | 9,653,284 | 31,426,193 | |
| | | | | | 48,530,201 |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| | | | | | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| Financial liabilities at | | | | | |
| fair value through profit | | | | | |
| or loss | | | | | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| | | | | | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| Derivative financial | | | | | |
| assets | | | | | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| Forward currency contracts | | - | (408,560) | | (408,560) |
| | | | | - | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| | | - | (408,560) | | (408,560) |
| | | | | - | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
| | | | | | |
+----------------------------+----------+--------------+--------------+------------------+-------------------+
* Collateral debt obligations contains the investment in the subsidiary, Gale
Force IV, of EUR7,859,922
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
3. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
(continued)
Consolidated
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| | | 31 December 2009 |
+-----------------------+----------+----------------------------------------------------------------------------+
| | | Level | Level | Level 3 | Total |
| | | 1 | 2 | | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| | | | | | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| Financial assets at | | | | | |
| fair value | | | | | |
| through profit or | | | | | |
| loss | | | | | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| Financial assets held | | | | | |
| for trading | | | | | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| | | | | | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| Derivative financial | | | | | |
| assets | | | | | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| Forward currency | | | 399,699 | | 399,699 |
| contracts | | - | | - | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| | | | | | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| Financial assets designated at fair | | | |
| value through profit or los | | | |
+-------------------------------------------------+--------------------+-------------------+--------------------+
| | | | | | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| Collateralised debt | | | 9,253,585 | 31,876,559 | 41,130,144 |
| obligations | | - | | | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| Equities | | | | 271,140 | 271,140 |
| | | - | - | | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| Money market funds | | 7,450,724 | | | 7,450,724 |
| | | | - | - | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| Loans and receivables | | | 256,777,698 | | 256,777,698 |
| | | - | | - | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| | | 7,450,724 | 266,430,982 | 32,147,699 | 306,029,405 |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| | | | | | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| Financial liabilities | | | | | |
| at fair value through | | | | | |
| profit or loss | | | | | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| Term notes | | | (33,355,879) | (235,577,205) | (268,933,084) |
| | | - | | | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| | | | | | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| Derivative financial | | | | | |
| assets | | | | | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| Forward currency | | - | (408,560) | | (408,560) |
| contracts | | | | - | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| | | - | (33,764,439) | (235,577,205) | (269,341,644) |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
| | | | | | |
+-----------------------+----------+--------------+--------------------+-------------------+--------------------+
When fair values of listed equity and debt securities as well as publicly traded
derivatives at the reporting date are based on quoted market prices or binding
dealer price quotations (bid price for long positions and ask price for short
positions), without any deduction for transaction costs, the instruments are
included within Level 1 of the hierarchy. When the Company has assets and
liabilities with offsetting market risks, it uses mid-market prices as a basis
for establishing fair values for the off-setting risk positions and applies the
bid or ask price to the net open positions as appropriate.
For all other financial instruments, fair value is determined using valuation
techniques. Valuation techniques include the use of discounted cash flow models.
The Company uses widely recognised valuation models for determining fair values
of over-the-counter derivatives. For these financial instruments, inputs into
models are market observable and are therefore included within Level 2.
The fair values of currency exchange contracts are calculated by reference to
current exchange rates for contracts with similar maturity and risk profiles.
Instruments included in Level 3 include those for which there is currently no
active market. In valuing such instruments the Company uses a valuation model
which is accepted in the industry. Some of the inputs to that model may not be
market observable and are therefore estimated based on assumptions. The model is
calibrated to reflect performance of the investment in terms of
over-collateralisation tests, weighted average spread of the underlying
portfolio, weighted average rating factor of the underlying portfolio and
manager quality.
Transfers between Level 1 and 2
There were no transfers between level 1 and level 2 during the year.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
3. FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
(continued)
Level 3 reconciliation
The following table shows a reconciliation of all movements in the fair value of
financial instruments categorised within Level 3 between the beginning and the
end of reporting period.
Company
+--------------------+---------------+----------------+-----------+-------------+-----------------+
| | At 1 | Total | Purchases | Sales | At 31 |
| | January | gains/(losses) | | | December |
| | 2009 | recorded in | | | 2009 |
| | | profit or loss | | | |
+--------------------+---------------+----------------+-----------+-------------+-----------------+
| | EUR | EUR | EUR | EUR | EUR |
+--------------------+---------------+----------------+-----------+-------------+-----------------+
| Financial Assets | | | | | |
+--------------------+---------------+----------------+-----------+-------------+-----------------+
| Financial assets | | | | | |
| designated at fair | | | | | |
| value through | | | | | |
| profit or loss: | | | | | |
+--------------------+---------------+----------------+-----------+-------------+-----------------+
| Colateralised debt | 47,549,869 | (9,557,421) | | (6,837,393) | 31,155,055 |
| obligations | | | - | | |
+--------------------+---------------+----------------+-----------+-------------+-----------------+
| Equities | 394,624 | (123,484) | | | 271,140 |
| | | | - | - | |
+--------------------+---------------+----------------+-----------+-------------+-----------------+
| Total Level 3 | 47,944,493 | (9,680,905) | | (6,837,393) | 31,426,195 |
| financial assets | | | - | | |
+--------------------+---------------+----------------+-----------+-------------+-----------------+
| | | | | | |
+--------------------+---------------+----------------+-----------+-------------+-----------------+
Consolidated
+--------------------+----------------+-----------------+---------------+-------------+-----------------+
| | At 1 | Total | Purchases | Sales | At 31 |
| | January | gains/(losses) | | | December |
| | 2009 | recorded in | | | 2009 |
| | | profit or loss | | | |
+--------------------+----------------+-----------------+---------------+-------------+-----------------+
| | EUR | EUR | EUR | EUR | EUR |
+--------------------+----------------+-----------------+---------------+-------------+-----------------+
| Financial Assets | | | | | |
+--------------------+----------------+-----------------+---------------+-------------+-----------------+
| Financial assets | | | | | |
| designated at fair | | | | | |
| value through | | | | | |
| profit or loss: | | | | | |
+--------------------+----------------+-----------------+---------------+-------------+-----------------+
| Collateralised | 41,648,741 | (4,304,420) | 1,369,631 | (6,837,393) | 31,876,559 |
| debt obligations | | | | | |
+--------------------+----------------+-----------------+---------------+-------------+-----------------+
| Equities | 394,624 | (123,484) | | | 271,140 |
| | | | - | - | |
+--------------------+----------------+-----------------+---------------+-------------+-----------------+
| Total Level 3 | 42,043,365 | (4,427,904) | 1,369,631 | (6,837,393) | 32,147,699 |
| financial assets | | | | | |
+--------------------+----------------+-----------------+---------------+-------------+-----------------+
| | | | | | |
+--------------------+----------------+-----------------+---------------+-------------+-----------------+
| Financial | | | | | |
| liabilities | | | | | |
+--------------------+----------------+-----------------+---------------+-------------+-----------------+
| Financial | | | | | |
| liabilities | | | | | |
| designated at fair | | | | | |
| value through | | | | | |
| profit or loss: | | | | | |
+--------------------+----------------+-----------------+---------------+-------------+-----------------+
| Term notes | 190,107,679 | 78,825,405 | | | 268,933,084 |
| | | | - | - | |
+--------------------+----------------+-----------------+---------------+-------------+-----------------+
| Total Level 3 | 190,107,679 | 78,825,405 | | | 268,933,084 |
| financial | | | - | - | |
| liabilities | | | | | |
+--------------------+----------------+-----------------+---------------+-------------+-----------------+
| | | | | | |
+--------------------+----------------+-----------------+---------------+-------------+-----------------+
| Total net Level 3 | (148,064,314) | (83,253,309) | 1,369,631 | (6,837,393) | (236,785,385) |
| financial assets/ | | | | | |
| (liabilities) | | | | | |
+--------------------+----------------+-----------------+---------------+-------------+-----------------+
| | | | | | |
+--------------------+----------------+-----------------+---------------+-------------+-----------------+
In relation to the Company's Level 3 investments, if the base IRR input changed
by 1% then the fair value of the Level 3 investments would change by EUR530,159.
If the base IRR input changed by 3%, this would change the valuation of the
Level 3 financial liabilities by up to 10 basis points. This would equate to
+/(-)EUR755,331.
The above amount of total gains or losses for the period recorded in profit or
loss that are attributable to gains or losses relating to those assets and
liabilities held at the end of the reporting period is a loss of EUR314,126 for
the Company and a loss of EUR73,886,529 for the group.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
4. FEES
The Investment Manager was entitled to receive a management fee from the Company
of 1.5% per annum of the net asset value of the Company, calculated and payable
monthly in arrears. The base management fee will be reduced to take into
account any fees received by the Investment Manager or any of its associates or
affiliates as a result of managing any CDO that the Company invests in, if such
investment is or has been made in the primary market (i.e. the market in which
investors have the first opportunity to buy a new security).
In addition, the Investment Manager is entitled to a performance fee in respect
of each share class equivalent to 13% of the amount by which the value of the
financial year end net asset value per share of a class plus distributions per
share of that class paid in the period exceeds the value of the net asset value
per share of that class, as increased by 12 month Euribor plus 2%, as at the
following point in time:
(i) if a performance fee has previously been paid, the net asset
value per share of that class as at the end of the most recent previous
completed accounting period or, if greater, the net asset value per share of
that class as at the end of the previous completed accounting reference period
in respect of which a performance fee was paid; or
(ii) if no performance fee has been paid, the opening net asset value
per share of that class as at the effective date of the amalgamation of the
Company and Abingdon Investment Limited.
The Company also reimburses the Investment Manager for all out-of pocket
expenses reasonably incurred in the performance of its duties.
The Custodian is entitled to receive an annual fee from the Company of 0.04% of
the net asset value of the Company paid monthly in arrears, subject to an
aggregate minimum monthly fee payable by the Company to the Custodian (and the
Administrator) of EUR8,500.
The Administrator is entitled to receive an annual fee of 0.08% of the net asset
value of the Company on the first EUR75 million of the Company's net assets, 0.07%
of the net asset value on the next EUR75 million of the Company's net assets and
0.06% thereafter, accrued and paid monthly in arrears, subject to an aggregate
minimum monthly fee payable by the Company to the Administrator (and the
Custodian) of EUR8,500.
Company
During the year ended 31 December 2009 the Company paid Investment Manager,
Custodian and Administration fees of EUR681,792 (31 December 2008: EUR291,425),
EUR24,555 (31 December 2008: EUR18,408) and EUR78,000 (31 December 2008: EUR58,767)
respectively. Of these EUR116,923 (31 December 2008: EUR94,059), EUR4,077 (31
December 2008: EUR6,375) and EUR13,249 (31 December 2008: EUR19,660) was outstanding
at year end. There were no performance fees paid in the year (31 December 2008:
EURNil).
The Directors are entitled to a fee in remuneration for their services at a rate
to be determined from time to time by the Directors and disclosed in the
financial statements. Under the arrangements currently in force the maximum
aggregate of the remuneration to be paid to and the benefits in kind to be
granted to the Directors for the financial year shall not exceed EUR195,000. Upon
the date of each financial year end, the Company may increase the level of
Directors' remuneration in respect of the financial year by the amount not
exceeding 10% of the current level of Directors' remuneration on that date. Any
such increase shall be notified to shareholders immediately. During the year
ended 31 December 2009 the Company paid Directors fees of EUR193,421 (31 December
2008: EUR164,949), of which EURNil (31 December 2008: EURNil) was outstanding at the
year end.
During the year ended 31 December 2009 the auditors received a fee of EUR187,550
(31 December 2008: EUR188,325), of which EUR187,550 (31 December 2008: EUR188,325) was
outstanding at the year end.
During the year ended 31 December 2009 the Company incurred other operating
expenses of EUR512,892 (31 December 2008: EUR546,552) of which EUR136,031 (31 December
2008: EUR1,723,840) was outstanding at year end.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
4. FEES (continued)
Consolidated
Investment Management, Custodian and Administration fees of EUR2,473,602 (31
December 2008: EUR400,971), EUR151,820 (31 December 2008: EUR25,379) and EUR134,301 (31
December 2008: EUR60,701) respectively were paid by the group during the year. Of
these EUR364,549 (31 December 2008: EUR361,920), EUR19,800 (31 December 2008: EUR23,422)
and EUR13,249 (31 December 2008: EUR19,660) were payable at the year end.
Operating expenses of EUR874,769 (31 December 2008: EUR569,213) were incurred by the
group during the year. Of this EUR181,054 (31 December 2008: EUR1,772,542) was
payable at year end. The group incurred no further directors' and audit fees
other than those incurred by the Company.
5. CASH BALANCES
Company cash balances are held with the Northern Trust Company. Cash balances of
Gale Force 4 are held with State Street Corporation.
6. REDEEMABLE PARTICIPATING SHARES
The authorised share capital of the Company shall not be less than the currency
equivalent of EUR2 and the maximum issued share capital shall not be more than the
currency equivalent of EUR500 billion divided into a specified number of shares of
no par value. The issued share capital consists of 55,282,169 euro shares (31
December 2008: 56,184,881) and 84,764,307 US$ shares (31 December 2008:
83,799,318). The Company has allotted two subscriber shares, of EUR1 each. These
shares do not participate in the profits of the Company.
+----------------------------+-----+----------------+------------------+---------------------+
| | | EUR | USD | Total |
| | | shares | shares | |
+----------------------------+-----+----------------+------------------+---------------------+
| Issued share (no. of | | | | |
| shares) | | | | |
+----------------------------+-----+----------------+------------------+---------------------+
| Balance at 31 December | | 56,184,881 | 83,799,318 | 139,984,199 |
| 2008 | | | | |
+----------------------------+-----+----------------+------------------+---------------------+
| Net issue during the year | | (902,712) | 964,989 | 62,277 |
+----------------------------+-----+----------------+------------------+---------------------+
| Balance at 31 December | | 55,282,169 | 84,764,307 | 140,046,476 |
| 2009 | | | | |
+----------------------------+-----+----------------+------------------+---------------------+
| | | | | |
+----------------------------+-----+----------------+------------------+---------------------+
Capital management
The Company is closed ended. Subject to the approval of shareholders by way of
special resolution, the Company will redeem all shares on the expiry of its 15
year limited life.
The Company's objectives for managing capital are:
- to invest the capital in investments meeting the description, risk
exposure and expected return indicated in its prospectus;
- to achieve consistent returns while safeguarding capital by investing in
CLOs backed by corporate loans or holding cash;
- to maintain sufficient liquidity to meet the expenses of the Company and
to meet distribution commitments; and
- to maintain sufficient size to make the operation of the Company
cost-efficient.
Quantitative disclosures are contained in Note 14.
7. SOFT COMMISSIONS
There are no agreements for the provision of any services by means of soft
commission.
8. INITIAL EXPENSES
Initial expenses are fees and expenses relating to the establishment and initial
set-up of the Company, the issue of shares pursuant to the placing.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
9. RELATED PARTY TRANSACTIONS
Fees paid to GSO Capital Partners International LLP amounted to EUR681,792 (31
December 2008: EUR291,425) of which EUR116,923 (31 December 2008: EUR94,059) was
outstanding at the year end. No Director, nor the Company Secretary, had any
beneficial interest in the shares of the Company during the year ended 31
December 2009 or during the year ended 31 December 2008.
GSO Debt Funds Management LLC, an affiliate of the Investment Manager and a
subsidiary of The Blackstone Group LP was paid EUR1,791,810 (31 December 2008:
EUR109,546) in investment management fees relating to Gale Force 4 during the year
of which EUR247,626 (31 December 2008: EUR267,861) was outstanding at the year end.
10. FINANCIAL DERIVATIVE INSTRUMENTS
The Company invests in underlying assets which are predominantly US$ and euro
denominated. The base currency of the Company is euro. The Company therefore has
an exposure to changes in the exchange rate between euro and the US$ which, if
unhedged, has the potential to have a significant effect on returns. In
addition, the US$ class is denominated in US$. The Directors believe that it is
in the best interests of shareholders for the Company to engage consistently in
currency hedging solely to reduce the risk of currency fluctuations and the
volatility of returns which may result from such currency exposure. This
involves hedging, at the level of the Company, the US$ assets to euro, and, at a
class level, the euro exposure to the US$ class back to US$, through the use of
rolling forward foreign exchange transactions. The Company only uses hedging
techniques for the purposes of efficient portfolio management and has no
intention of using the currency hedging facility for the purposes of currency
speculation for its own account.
The Company utilised currency contracts for the purposes of efficient portfolio
management during the year ended 31 December 2009. Details of the contracts open
at year end are disclosed in Note 14. Unrealised gains/(losses) resulting from
these contracts are disclosed below. The fair value of forward foreign exchange
contracts is calculated using valuation techniques based on observable market
data.
+----------------+---------------------------+------------------------------+---------------------------+---------------------------+
| | Company | Consolidated | Company | Consolidated |
+----------------+---------------------------+------------------------------+---------------------------+---------------------------+
| | Year | Year | Nine | Nine |
| | ended | ended | months | months |
| | | | ended | ended |
+----------------+---------------------------+------------------------------+---------------------------+---------------------------+
| | 31 | 31 | 31 | 31 |
| | December | December | December | December |
| | 2009 | 2009 | 2008 | 2008 |
+----------------+---------------------------+------------------------------+---------------------------+---------------------------+
| | EUR | EUR | EUR | EUR |
+----------------+---------------------------+------------------------------+---------------------------+---------------------------+
| Financial | | | | |
| assets held | | | | |
| for trading | | | | |
+----------------+---------------------------+------------------------------+---------------------------+---------------------------+
| - | 399,699 | 399,699 | 680,057 | 680,057 |
| derivative | | | | |
| financial | | | | |
| instruments | | | | |
+----------------+---------------------------+------------------------------+---------------------------+---------------------------+
| Financial | | | | |
| liabilities | | | | |
| held for | | | | |
| trading | | | | |
+----------------+---------------------------+------------------------------+---------------------------+---------------------------+
| - | (408,560) | (408,560) | (892,415) | (892,415) |
| derivative | | | | |
| financial | | | | |
| instruments | | | | |
+----------------+---------------------------+------------------------------+---------------------------+---------------------------+
| Total | (8,861) | (8,861) | (212,358) | (212,358) |
| financial | | | | |
| assets at fair | | | | |
| value through | | | | |
| profit or loss | | | | |
+----------------+---------------------------+------------------------------+---------------------------+---------------------------+
| | | | | |
+----------------+---------------------------+------------------------------+---------------------------+---------------------------+
| Gains/(losses) | | | | |
| recognised on | | | | |
| derivative | | | | |
| financial | | | | |
| instruments | | | | |
+----------------+---------------------------+------------------------------+---------------------------+---------------------------+
| - | (1,558,980) | (1,558,980) | (3,293,088) | (3,293,088) |
| realised | | | | |
+----------------+---------------------------+------------------------------+---------------------------+---------------------------+
| - | 209,992 | 209,992 | (267,895) | (267,895) |
| unrealised | | | | |
+----------------+---------------------------+------------------------------+---------------------------+---------------------------+
| Total | (1,348,988) | (1,348,988) | (3,560,983) | (3,560,983) |
| gains/(losses) | | | | |
+----------------+---------------------------+------------------------------+---------------------------+---------------------------+
| | | | | |
+----------------+---------------------------+------------------------------+---------------------------+---------------------------+
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
11. STATEMENT OF PORTFOLIO MOVEMENTS
An unaudited statement of changes in the schedule of investments is disclosed on
pages 80 and 81.
12. BUSINESS COMBINATIONS AND GOODWILL
The 'Busines Combinations and Goodwill' note is included for comparative
purposes. On 9 December 2008 the Company's wholly-owned subsidiary, Carador
Guernsey Limited, amalgamated with Abingdon Investment Limited ("Abingdon"), an
unlisted closed-ended investment company, following the approval of the
shareholders of Carador plc and Abingdon at separate EGMs held on 27 October
2008. As a result, Carador was considered to have obtained the power to govern
the financial and operating policies of Abingdon, and was therefore the
acquiring entity in this transaction. At the date of the amalgamation Abingdon
had a wholly owned subsidiary, Abingdon Finance Limited. The amalgamation was
effected by the transfer of the business, assets and liabilities of Abingdon
Investment Limited into Carador Guernsey Limited and subsequently into the
Company. The fair value and corresponding carrying amount of the identifiable
assets and liabilities of Abingdon and its subsidiary at the date of acquisition
and immediately before acquisition were:
+------------------------------------+--------------------+----------------------------+
| Balance Sheet | Fair | Carrying |
| | value | amount at |
| | | acquisition |
+------------------------------------+--------------------+----------------------------+
| Assets | EUR | EUR |
+------------------------------------+--------------------+----------------------------+
| Cash and cash equivalents | 15,862,109 | 16,666,084 |
+------------------------------------+--------------------+----------------------------+
| Receivables | 208,120 | 414,798 |
+------------------------------------+--------------------+----------------------------+
| Prepaid expenses | | 75,160 |
| | - | |
+------------------------------------+--------------------+----------------------------+
| Investments - available for sale | 17,525,168 | 23,157,484 |
| securities | | |
+------------------------------------+--------------------+----------------------------+
| Investment in subsidiary | 14,017,031 | 21,624,195 |
+------------------------------------+--------------------+----------------------------+
| | | |
+------------------------------------+--------------------+----------------------------+
| Total Assets | 47,612,428 | 61,937,722 |
+------------------------------------+--------------------+----------------------------+
| | | |
+------------------------------------+--------------------+----------------------------+
| Liabilities | | |
+------------------------------------+--------------------+----------------------------+
| Current Liabilities | 34,307 | 125,480 |
+------------------------------------+--------------------+----------------------------+
| Other Liabilities | 591,498 | |
| | | - |
+------------------------------------+--------------------+----------------------------+
| Total Liabilities | 625,805 | 125,480 |
+------------------------------------+--------------------+----------------------------+
| | | |
+------------------------------------+--------------------+----------------------------+
| Net Assets | 46,986,623 | 61,812,243 |
+------------------------------------+--------------------+----------------------------+
| Goodwill arising on acquisition | 406,160 | |
+------------------------------------+--------------------+----------------------------+
| Total consideration | 47,392,783 | |
+------------------------------------+--------------------+----------------------------+
| | | |
+------------------------------------+--------------------+----------------------------+
| Cost | EUR | |
+------------------------------------+--------------------+----------------------------+
| Shares issued, at fair value | 46,654,913 | |
+------------------------------------+--------------------+----------------------------+
| Costs associated with the | 737,870 | |
| acquisition | | |
+------------------------------------+--------------------+----------------------------+
| Total | 47,392,783 | |
+------------------------------------+--------------------+----------------------------+
| | | |
+------------------------------------+--------------------+----------------------------+
The total cost of the combination was EUR47,392,783 and comprised of the value of
the issue of 6,159,881 euro shares and 83,799,318 US dollar shares in Carador
plc to the previous shareholders of Abingdon and costs directly attributable to
the combination. An amalgamation ratio, based on a formula asset value (as
defined in the prospectus) at 31 October 2008, was used to calculate the number
of Carador shares that Abingdon shareholders were entitled to. The amalgamation
ratio was 7.4966. The fair value of these shares at the date of issue was
determined by reference to the published NAV of the Company at 30 November 2008.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the period ended 31 December 2009
12. BUSINESS COMBINATIONS AND GOODWILL (continued)
+------------------------------------+-------------------+
| Cash outflow on acquisition | EUR |
+------------------------------------+-------------------+
| Net cash acquired with the | 15,862,109 |
| subsidiary | |
+------------------------------------+-------------------+
| Cash paid | (76,756) |
+------------------------------------+-------------------+
| Net cash inflow on acquisition | 15,785,353 |
+------------------------------------+-------------------+
| | |
+------------------------------------+-------------------+
| Cash inflow on consolidation of | 4,746,021 |
| Gale Force 4 | |
+------------------------------------+-------------------+
| Total cash inflow | 20,531,374 |
+------------------------------------+-------------------+
| | |
+------------------------------------+-------------------+
The goodwill acquired on amalgamation with Abingdon was allocated to one
cash-generating unit, being the investment in debt securities business segment,
for impairment testing. The recoverable amount of this cash-generating unit was
determined based on fair value calculations. Key assumptions were those as set
out in the accounting policies. The carrying amount of the unit exceeded the
recoverable amount by the value of the goodwill, and therefore the goodwill of
EUR406,160 was written-off.
Assets previously owned by Abingdon, but upon acquisition were owned by the
Company, contributed EUR50,353 in revenue in the prior period. It was
impracticable to disclose the revenue and profit or loss in the prior period as
though the acquisition had been at the beginning of the period for the following
reasons:
o the books and records of Abingdon and Abingdon Finance Limited for the
period prior to the amalgamation are held with another administrator;
o the accounting period differs from that of Carador plc; and
o the assets and liabilities on the books of the previous administrator were
not carried using accounting policies consistent with those applied by Carador
plc.
13. INVESTMENT IN SUBSIDIARIES
The Company's results are consolidated with those of its subsidiary, namely Gale
Force 4.
Gale Force 4
The Company owns 70.98% of the income notes of Gale Force 4. By virtue of the
provisions of SIC Interpretation 12 - 'Consolidation - Special Purpose Entities'
("SIC 12") the Company is deemed to control Gale Force 4 as it holds the
majority of the residual risk in Gale Force 4. At 31 December 2009 the
non-controlling interest in the net assets of Gale Force 4 on the consolidated
statement of financial position of Carador Plc is EUR3,218,870 (31 December 2008:
EUR5,102,659). The non-controlling interest in the consolidated statement of
comprehensive income of Gale Force 4 at 31 December 2009 is (EUR1,613,425) (31
December 2008: (EUR131,071)).
The consolidated statement of comprehensive income includes income and expense
relating to Gale Force 4 for the year to 31 December 2009. The statement of
financial position figures are as at 31 December 2009. The functional currency
of Gale Force 4 is US$; therefore the results of Gale Force 4 have been
translated in accordance with IAS 21 'The effects of changes in foreign exchange
rates'. This has resulted in an unrealised exchange loss on consolidation of
EUR1,273,311 (31 December 2008: (EUR996,677)), which is recorded within the
consolidated statement of changes in net assets attributable to participating
shareholders.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
13. INVESTMENT IN SUBSIDIARIES (continued)
Upon consolidation of Gale Force 4, a basis valuation difference arose between
the Company valuation of its investment in Gale Force 4 in the Company's
accounts and the valuation of the Gale Force 4 assets and liabilities in the
consolidated accounts. The Company's valuation, which is lower has been
determined using the valuation model described in Note 3. The Directors believe
it to be more prudent to carry the investment in Gale Force 4 at this value.
Subsequent to the year end, a portion of the Gale Force 4 investment was sold
and the sale price supports the valuation used by the Directors in the Company
accounts. The residual resulting from the basis difference was included in
financial liabilities in the consolidated statement of financial position.
Gale Force 4 has its offices at P.O. Box 1093GT, Boundary Hall, Cricket Square,
George Town, Grand Cayman, Cayman Islands.
14. RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS
Introduction
Risk is inherent in the Company and group's activities but it is managed through
a process of ongoing identification, measurement and monitoring, subject to
risks limits and other controls. The process of risk management is critical to
the Company and group's continuing profitability. The Company and group are
exposed to market risk (which includes currency risk, interest rate risk and
other price risk), and credit risk arising from the financial instruments it
holds. Given the Company and group's permanent capital structure as a
closed-ended fund, it is not exposed to redemption risk. However the
consolidated financial instruments include investments in collateralised debt
obligations and derivative contracts traded over-the-counter which are not
traded in an organised public market and which may be illiquid. As a result,
the Company and group may not be able to promptly liquidate some of its
investments in these instruments at an amount close to its fair value in order
to meet its liquidity requirements or to respond to specific events such as
deterioration in the credit worthiness of any particular issuer. It may be
impossible to assess the exposure to risk in such circumstances.
Risk management structure
The Board of Directors is ultimately responsible for identifying and controlling
risks. The Investment Manager also carries out ongoing monitoring of the risk.
As a result, there are separate bodies for managing and monitoring risks at the
Company.
Risk measurement and reporting system
The Company's risks are measured using a method which reflects both the expected
loss likely to arise in normal circumstances and unexpected losses, which are an
estimate of the ultimate actual loss based on models. The models makes use of
the probabilities derived from historical experience, adjusted to reflect the
economic environment.
Monitoring and controlling risks is primarily performed based on limits
established by the Board. These limits reflect the business strategy and market
environment of the Company as well as the level of risk that the Company is
willing to accept. In addition, the Company monitors and measures the overall
risk bearing capacity in relation to the aggregate risk exposure across risks
type and activities.
Risk mitigation
The Company has investment guidelines that set out its overall business
strategies, its tolerance for risk and its general risk management philosophy
and has established processes to monitor and control economic hedging
transactions in a timely and accurate manner. The Company uses derivatives and
other instruments only in connection with its risk management activities, but
not for trading purposes.
Excessive risk concentration
Concentration arises when a number of counterparties are engaged in similar
business activities, or activities in the same geographic region, or have
similar economic features that would cause their ability to meet contractual
obligations to be similarly affected by changes in economic, political or other
conditions. Concentration indicates the relative sensitivity of the Company's
performance to developments affecting a particular issuer, manager, asset class
or geographical location.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
14. RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS (continued)
Excessive risk concentration (continued)
In order to avoid excessive concentration of risk, the Company's policies and
procedures include specific guidelines to focus on maintaining a diversified
portfolio. Identified concentration of credit risks are controlled and managed
accordingly.
Carador's investment guidelines specify, among others, that the Company must
invest in a minimum of 20 separate CDO equity, mezzanine and/or senior tranche
transactions with a maximum exposure per CDO investment, at the time of
investment, of 20% of the net asset value. The Company also limits its exposure
to CDOs managed by the same CDO portfolio manager to 15% of the net asset value,
at the time of investment. However, if the CDO portfolio manager is an affiliate
of the Investment Manager, this limit is increased to 60% of the net asset
value, at the time of investment. The concentration risk at 31 December 2009
and 31 December 2008 is disclosed within credit risk note 14.2.
14.1. Market risk
Market risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in market prices and includes
interest rate risk, foreign currency risk and "other price risks", such as index
price risk. The Company uses derivative instruments to hedge the investment
portfolio against currency risk.
The Company's investments in collateralised debt obligations typically have no
significant assets other than the collateral. Accordingly, payments on the CDO
securities are payable solely from the cash flows from the collateral, net of
all management fees and other expenses. Payments to the Company as a holder of
equity notes and/or mezzanine notes are met only after payments due on the
senior notes (and, where appropriate, the mezzanine notes) have been made in
full.
The following table shows the securities held by the Company which are
susceptible to market risk arising from uncertainties about interest rates,
foreign currency fluctuation and future prices of the instruments.
+--------------+-------------------------------+-------------------------------+-------------------------------+------------------------------+
| | Company | Consolidated | Company | Consolidated |
+--------------+-------------------------------+-------------------------------+-------------------------------+------------------------------+
| | 31 | 31 | 31 | 31 |
| | December | December | December | December |
| | 2009 | 2009 | 2008 | 2008 |
+--------------+-------------------------------+-------------------------------+-------------------------------+------------------------------+
| | EUR | EUR | EUR | EUR |
+--------------+-------------------------------+-------------------------------+-------------------------------+------------------------------+
| Financial | 32,410,659 | 305,629,706 | 53,036,009 | 252,811,063 |
| assets at | | | | |
| fair value | | | | |
+--------------+-------------------------------+-------------------------------+-------------------------------+------------------------------+
| Investments | 7,859,922 | | 12,311,214 | |
| in | | - | | - |
| subsidiaries | | | | |
| at fair | | | | |
| value | | | | |
+--------------+-------------------------------+-------------------------------+-------------------------------+------------------------------+
| Derivative | 399,699 | 399,699 | 680,057 | 680,057 |
| financial | | | | |
| instruments | | | | |
+--------------+-------------------------------+-------------------------------+-------------------------------+------------------------------+
| Financial | | (268,933,084) | | (190,107,679) |
| liabilities | - | | - | |
| at fair | | | | |
| value | | | | |
+--------------+-------------------------------+-------------------------------+-------------------------------+------------------------------+
| Derivative | (408,560) | (408,560) | (892,415) | (892,415) |
| financial | | | | |
| instruments | | | | |
+--------------+-------------------------------+-------------------------------+-------------------------------+------------------------------+
Interest rate risk
The majority of the Company's financial assets are equity and mezzanine tranches
of cash flow CDOs. The Company's investments have some exposure to interest
rate risk but this is limited to floating Libor-based exposure for both the
CDO's assets and its liabilities.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
14. RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS (continued)
14.1. Market risk (continued)
The following table shows the Director's best estimate of the sensitivity of the
portfolio to stressed changes in interest rates, with all other variables held
constant. The table assumes parallel shifts in the respective forward yield
curves. The table also assumes 3 month US$ Libor ("$3m Libor") and 6 month EURO
Libor ("EUR6m Libor"), which are the standard indices for each type of CDO
transaction.
+--------------+------------+---------------------+----------------------+----------------------+-------------------------+
| Company | Possible | Effect | Effect | Effect | Effect |
| | reasonable | on | on net | on | on net |
| | change in | profit | assets | profit | assets |
| | rate | 31 | 31 | 31 | 31 |
| | | December | December | December | December |
| | | 2009 | 2009 | 2008 | 2008 |
+--------------+------------+---------------------+----------------------+----------------------+-------------------------+
| $ 3m | -1% | (489,505) | (489,505) | 70,767 | 70,767 |
| Libor | | | | | |
+--------------+------------+---------------------+----------------------+----------------------+-------------------------+
| | 1% | 661,323 | 661,323 | (42,022) | (42,022) |
+--------------+------------+---------------------+----------------------+----------------------+-------------------------+
| EUR 6m | -1% | (691,242) | (691,242) | 526,034 | 526,034 |
| Libor | | | | | |
+--------------+------------+---------------------+----------------------+----------------------+-------------------------+
| | 1% | 720,659 | 720,659 | (529,130) | (529,130) |
+--------------+------------+---------------------+----------------------+----------------------+-------------------------+
| | | | | | |
+--------------+------------+---------------------+----------------------+----------------------+-------------------------+
| Consolidated | Possible | Effect | Effect | Effect | Effect |
| | reasonable | on | on net | on | on net |
| | change in | profit | assets | profit | assets |
| | rate | 31 | 31 | 31 | 31 |
| | | December | December | December | December |
| | | 2009 | 2009 | 2008 | 2008 |
+--------------+------------+---------------------+----------------------+----------------------+-------------------------+
| $ 3m | -1% | (384,093) | (384,093) | 96,291 | 96,291 |
| Libor | | | | | |
+--------------+------------+---------------------+----------------------+----------------------+-------------------------+
| | 1% | 590,306 | 590,306 | (57,179) | (57,179) |
+--------------+------------+---------------------+----------------------+----------------------+-------------------------+
| EUR 6m | -1% | (691,242) | (691,242) | 478,129 | 478,129 |
| Libor | | | | | |
+--------------+------------+---------------------+----------------------+----------------------+-------------------------+
| | 1% | 720,659 | 720,659 | (480,943) | (480,943) |
+--------------+------------+---------------------+----------------------+----------------------+-------------------------+
Concentration of interest rate risk
+--------------+-----------+--------------+-----------+--------------+
| | Company | Consolidated | Company | Consolidated |
| | | | | |
+--------------+-----------+--------------+-----------+--------------+
| | 31 | 31 | 31 | 31 |
| | December | December | December | December |
| | 2009 | 2009 | 2008 | 2008 |
+--------------+-----------+--------------+-----------+--------------+
| | % | % | % | % |
+--------------+-----------+--------------+-----------+--------------+
| Investments | 100 | 100 | 100 | 100 |
| related to | | | | |
| floating | | | | |
| rate notes | | | | |
+--------------+-----------+--------------+-----------+--------------+
| | | | | |
+--------------+-----------+--------------+-----------+--------------+
| Investments | | | | |
| related to | - | - | - | - |
| fixed rate | | | | |
| notes | | | | |
+--------------+-----------+--------------+-----------+--------------+
| | | | | |
+--------------+-----------+--------------+-----------+--------------+
| Financial | 100 | 100 | 100 | 100 |
| liabilities | | | | |
+--------------+-----------+--------------+-----------+--------------+
Currency risk
The Company's investments are denominated in dollar and euro (the functional
currency of the Company). It is therefore exposed to currency risk, as the value
of the securities denominated in other currencies than the euro will fluctuate
due to changes in exchange rates. This exposure is mitigated by the use of
monthly rolling forward currency contracts as hedges.
The tables below indicate the currencies to which the Company had significant
exposure at 31 December 2009 on its trading monetary assets and liabilities. The
analysis discloses the Directors' best estimates of the effect of a reasonably
possible movement of the currency rate against the euro with all other variables
held constant on the profit and loss account. A negative amount in the table
reflects a potential net reduction in profit and loss or net assets, while a
positive amount reflects a net potential increase.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
14. RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS (continued)
14.1. Market risk (continued)
+----------+----------+------------------------+------------+----------------------+-----------+
| Currency | Possible | 31 | 31 | 31 | 31 |
| | change | December | December | December | December |
| | in | 2009 net | 2009 | 2008 net | 2008 |
| | exchange | exposure | effect on | exposure | effect on |
| | rate | | net assets | | net |
| | | | and profit | | assets |
| | | | | | and |
| | | | | | profit |
+----------+----------+------------------------+------------+----------------------+-----------+
| | % | EUR | EUR | EUR | EUR |
+----------+----------+------------------------+------------+----------------------+-----------+
| | | | | | |
+----------+----------+------------------------+------------+----------------------+-----------+
| Company | | | | | |
+----------+----------+------------------------+------------+----------------------+-----------+
| | | | | | |
+----------+----------+------------------------+------------+----------------------+-----------+
| US | (+/-) 5 | (24,857,172) | (+/-) | (466,686) | (+/-) |
| dollar | | | 1,243,853 | | 26,300 |
+----------+----------+------------------------+------------+----------------------+-----------+
| | | | | | |
+----------+----------+------------------------+------------+----------------------+-----------+
| Consolidated | | | | |
+---------------------+------------------------+------------+----------------------+-----------+
| | | | | | |
+----------+----------+------------------------+------------+----------------------+-----------+
| US | (+/-) 5 | (29,050,502) | (+/-) | 5,625,973 | (+/-) |
| dollar | | | 1,139,625 | | 286,825 |
+----------+----------+------------------------+------------+----------------------+-----------+
Concentration of foreign currency exposure
The Company's total net exposure in foreign currency exchange rates at the
statement of financial position date was as follows:
+--------------+-------------------------+------------------------+--------------------------+-------------------------+
| | Company | Consolidated | Company | Consolidated |
+--------------+-------------------------+------------------------+--------------------------+-------------------------+
| | 31 | 31 | 31 | 31 |
| | December | December | December | December |
| | 2009 | 2009 | 2008 | 2008 |
+--------------+-------------------------+------------------------+--------------------------+-------------------------+
| | EUR | EUR | EUR | EUR |
+--------------+-------------------------+------------------------+--------------------------+-------------------------+
| Financial | | | | |
| assets | | | | |
+--------------+-------------------------+------------------------+--------------------------+-------------------------+
| | | | | |
+--------------+-------------------------+------------------------+--------------------------+-------------------------+
| US dollar | 38,690,138 | 303,838,451 | 52,977,999 | 250,571,001 |
+--------------+-------------------------+------------------------+--------------------------+-------------------------+
| | | | | |
+--------------+-------------------------+------------------------+--------------------------+-------------------------+
| Total | 38,690,138 | 303,838,451 | 52,977,999 | 250,571,001 |
| financial | | | | |
| assets | | | | |
+--------------+-------------------------+------------------------+--------------------------+-------------------------+
| | | | | |
+--------------+-------------------------+------------------------+--------------------------+-------------------------+
| Financial | | | | |
| liabilities | | | | |
+--------------+-------------------------+------------------------+--------------------------+-------------------------+
| | | | | |
+--------------+-------------------------+------------------------+--------------------------+-------------------------+
| US dollar | (63,547,310) | (332,888,954) | (53,444,685) | (244,945,028) |
+--------------+-------------------------+------------------------+--------------------------+-------------------------+
| | | | | |
+--------------+-------------------------+------------------------+--------------------------+-------------------------+
| Total | (63,547,310) | (332,888,954) | (53,444,685) | (244,945,028) |
| financial | | | | |
| liabilities | | | | |
+--------------+-------------------------+------------------------+--------------------------+-------------------------+
| | | | | |
+--------------+-------------------------+------------------------+--------------------------+-------------------------+
| Net exposure | (24,857,172) | (29,050,502) | (466,686) | 5,625,973 |
+--------------+-------------------------+------------------------+--------------------------+-------------------------+
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
14. RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS (continued)
14.1. Market risk (continued)
The Company's policy is to enter to monthly currency hedging transactions to
mitigate currency risk.
At 31 December 2009 and 31 December 2008 the Company had open forward positions
in the following contracts:
+------------+---------+----------+-----+---------------+------------+-------------------+--------------------------+
| Contract | | Maturity | Ccy | | Ccy | | Unrealised |
| | | | | | | | |
+------------+---------+----------+-----+---------------+------------+-------------------+--------------------------+
| date | Strike | date | Buy | Amount | Sell | Amount | gain/(loss) EUR |
| | price | | | | | | |
+------------+---------+----------+-----+---------------+------------+-------------------+--------------------------+
| 31/12/2009 | 1.4347 | 29/01/10 | EUR | 32,253,740 | USD | 46,574,401 | (208,709) |
+------------+---------+----------+-----+---------------+------------+-------------------+--------------------------+
| 31/12/2009 | 1.4347 | 29/01/10 | EUR | 30,885,009 | USD | 44,597,953 | (199,852) |
+------------+---------+----------+-----+---------------+------------+-------------------+--------------------------+
| 31/12/2009 | 1.4347 | 29/01/10 | USD | 44,597,953 | EUR | 30,885,009 | 199,852 |
+------------+---------+----------+-----+---------------+------------+-------------------+--------------------------+
| 31/12/2009 | 1.4347 | 29/01/10 | USD | 44,597,953 | EUR | 30,885,009 | 199,848 |
+------------+---------+----------+-----+---------------+------------+-------------------+--------------------------+
| | | | | | | | |
+------------+---------+----------+-----+---------------+------------+-------------------+--------------------------+
| | | | | | | | |
+------------+---------+----------+-----+---------------+------------+-------------------+--------------------------+
| | | | | | | | |
+------------+---------+----------+-----+---------------+------------+-------------------+--------------------------+
| Contract | | Maturity | Ccy | | Ccy | | Unrealised |
| | | | | | | | |
+------------+---------+----------+-----+---------------+------------+-------------------+--------------------------+
| date | Strike | date | Buy | Amount | Sell | Amount | gain/(loss) EUR |
| | price | | | | | | |
+------------+---------+----------+-----+---------------+------------+-------------------+--------------------------+
| 31/12/2008 | 1.439 | 30/01/09 | USD | 74,203,805 | EUR | 52,552,270 | (892,415) |
+------------+---------+----------+-----+---------------+------------+-------------------+--------------------------+
| 31/12/2008 | 1.439 | 30/01/09 | EUR | 40,094,551 | USD | 56,613,506 | 680,057 |
+------------+---------+----------+-----+---------------+------------+-------------------+--------------------------+
The year end exchange rate was EUR:US$ 1.43475 (31 December 2008: 1.39005).
The primary purpose of the Company's foreign currency economic hedging
activities is to protect against the volatility associated with investments
denominated in foreign currencies. The Company primarily utilises forward
exchange contracts to hedge foreign currency denominated financial assets.
Increases or decreases in the Company's foreign currency denominated financial
assets are largely offset by gains and losses on the economic hedging
instruments. The Company does not use foreign currency forward exchange
contracts or purchased currency options for trading purposes.
Index price risk
Index price risk is the risk that the fair value of the portfolio changes as the
result of changes in the levels of fixed income and credit indices.
Specifically, it is the Company's portfolio of CDOs that is affected by index
price risk.
The Directors' best estimate of the effect on the Company's net assets and
profit and loss due to a reasonably possible change in standard fixed income
credit indices, with all other variable held constant is as follows.*
* In practice the actual trading results may differ from the below sensitivity
analysis and the difference could be material.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
14. RISKS ASSOCIATED WITH FINANCIAL INSTRUMENTS (continued)
14.1. Market risk (continued)
+---------+---------+----------+-----------+----------+------------+
| Market | Change | Change | Effect | Change | Effect on |
|indices | in | in | on net | in |net assets |
| | market | price | assets | price |and profit |
| | index | (%) | and | (%) | |
| | (%) | | profit | | |
+---------+---------+----------+-----------+----------+------------+
| | | 31 | 31 | 31 | 31 |
| | |December | December |December | December |
| | | 2009 | 2009 | 2008 | 2008 |
+---------+---------+----------+-----------+----------+------------+
| iTraxx | +10% | 0.66% | EUR | 4.32% | EUR |
| LEVX | | | 380,757 | | 2,975,871 |
+---------+---------+----------+-----------+----------+------------+
| CDX | +10% | 6.10% | EUR | 11.07% | EUR |
| LCDX | | |3,502,951 | | 7,619,469 |
+---------+---------+----------+-----------+----------+------------+
| iTraxx | +10% | 0.46% | EUR | 2.50% | EUR |
| Europe | | | 263,647 | | 1,721,472 |
+---------+---------+----------+-----------+----------+------------+
| CDX NA | +10% | 1.33% | EUR | 5.00% | EUR |
| IG | | | 763,716 | | 3,442,943 |
+---------+---------+----------+-----------+----------+------------+
| | | | | | |
+---------+---------+----------+-----------+----------+------------+
| iTraxx | Index consists of 35 equally weighted European |
| LEVX | reference entities, referencing 1st lien loans. |
| | Calculated by Markit. |
+---------+--------------------------------------------------------+
| CDX | Index consists of 100 reference entities, |
| LCDX | referencing 1st lien loans listed on the Markit |
| | Syndicated Secured List. |
+---------+--------------------------------------------------------+
| iTraxx | Index composed of one hundred twenty five (125) |
| Europe | investment grade entities domiciled in Europe. |
| | Calculated by Markit. |
+---------+--------------------------------------------------------+
| CDX NA | Index composed of one hundred twenty five (125) |
| IG | investment grade entities domiciled in North |
| | America. Calculated by Markit. |
+---------+---------+----------+-----------+----------+------------+
The table below contains the inputs that have been used for the Index price risk
analysis table.
The definition for each of the columns is the following:
- market indices: relevant market indices to stress;
- change in market index: stress applied;
- estimated sensitivity: the investment manager's view on the "beta"
between Carador's investments and the index;
- % of portfolio to apply: based on asset allocation of Carador and the
market indices.
In order to arrive at "Change in price" in the above table, the "Change in
market index" was multiplied by "Estimated sensitivity" and "Percentage of
portfolio to apply" in the below table.
+---------+--------+------------------------------+-----------+-----------------------------+-----------+
| Market | Change | Estimated | % of | Estimated | % of |
| indices | in | sensitivity | portfolio | sensitivity | portfolio |
| | market | | to apply | | to apply |
| | index | | | | |
| | (%) | | | | |
+---------+--------+------------------------------+-----------+-----------------------------+-----------+
| | | 31 | 31 | 31 | 31 |
| | | December | December | December | December |
| | | 2009 | 2009 | 2008 | 2008 |
+---------+--------+------------------------------+-----------+-----------------------------+-----------+
| | | | | | |
+---------+--------+------------------------------+-----------+-----------------------------+-----------+
| iTraxx | +10% | 1.50 | 4% | 1.50 | 29% |
| LEVX | | | | | |
+---------+--------+------------------------------+-----------+-----------------------------+-----------+
| CDX | +10% | 1.50 | 41% | 2.00 | 55% |
| LCDX | | | | | |
+---------+--------+------------------------------+-----------+-----------------------------+-----------+
| iTraxx | +10% | 0.50 | 10% | 0.25 | 100% |
| Europe | | | | | |
+---------+--------+------------------------------+-----------+-----------------------------+-----------+
| CDX NA | +10% | 0.50 | 27% | 0.50 | 100% |
| IG | | | | | |
+---------+--------+------------------------------+-----------+-----------------------------+-----------+
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
14. RISK ASSOCIATED WITH FINANCIAL INSTRUMENTS (continued)
14.1. Market risk (continued)
Concentration of index price risk
The table below analyses the Company's concentration of index price risk by
subsector in the secured loan asset class, including investment in subsidiary
(represented above by the iTraxx LEVX and CDX LCDX indices).
+-----------------------------------------+------------+------------+
| | Financial | Financial |
| | assets | assets |
+-----------------------------------------+------------+------------+
| | 31 | 31 |
| | December | December |
| | 2009 | 2008 |
+-----------------------------------------+------------+------------+
| By asset class: | EUR | EUR |
+-----------------------------------------+------------+------------+
| Broadly syndicated sub-investment grade | 10,684,421 | 10,674,117 |
| secured loans - Europe | | |
+-----------------------------------------+------------+------------+
| Broadly syndicated sub-investment grade | 29,538,296 | 34,941,182 |
| secured loans - North America | | |
+-----------------------------------------+------------+------------+
| Middle market secured loans - North | 457,061 | 2,329,195 |
| America | | |
+-----------------------------------------+------------+------------+
| Other | 7,450,724 | 1,875,584 |
+-----------------------------------------+------------+------------+
| Term deposits | | 15,527,145 |
| | - | |
+-----------------------------------------+------------+------------+
| | 48,130,502 | 65,347,223 |
+-----------------------------------------+------------+------------+
| | | |
+-----------------------------------------+------------+------------+
The table below analyses the Company's and group's concentration of market price
risk by geographical area.
+----------------+------------------------+------------------------+------------------------+-------------------------+
| | Company | Consolidated | Company | Consolidated |
+----------------+------------------------+------------------------+------------------------+-------------------------+
| | financial | financial | financial | financial |
| | assets at | assets at | assets at | assets at |
| | market | market | market | market |
| | value | value | value | value |
+----------------+------------------------+------------------------+------------------------+-------------------------+
| | 31 | 31 | 31 | 31 |
| | December | December | December | December |
| | 2009 | 2009 | 2008 | 2008 |
+----------------+------------------------+------------------------+------------------------+-------------------------+
| | EUR | EUR | EUR | EUR |
+----------------+------------------------+------------------------+------------------------+-------------------------+
| Europe | 15,310,415 | 18,601,876 | 12,549,701 | 18,529,351 |
+----------------+------------------------+------------------------+------------------------+-------------------------+
| North America | 32,820,087 | 287,027,830 | 52,797,522 | 7,646,606 |
+----------------+------------------------+------------------------+------------------------+-------------------------+
| | 48,130,502 | 305,629,706 | 65,347,223 | 26,175,957 |
+----------------+------------------------+------------------------+------------------------+-------------------------+
| | | | | |
+----------------+------------------------+------------------------+------------------------+-------------------------+
14.2. Credit risk
Credit risk is the risk that one party to a financial instrument will cause a
financial loss for the other party by failing to discharge an obligation. It is
the Company's policy to enter into financial instruments with a range of
reputable counterparties. Therefore, the Company does not expect to incur
material credit losses on its financial instruments.
The table below analyses the Company's maximum credit exposure to credit risk
for the components of the statement of financial position, including derivative
financial instruments.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
14. RISK ASSOCIATED WITH FINANCIAL INSTRUMENTS (continued)
14.2. Credit risk (continued)
+---------------+--------------------------------+--------------------------------+-------------------------------+-------------------------------+
| | Company | Consolidated | Company | Consolidated |
+---------------+--------------------------------+--------------------------------+-------------------------------+-------------------------------+
| | 31 | 31 | 31 | 31 |
| | December | December | December | December |
| | 2009 | 2009 | 2008 | 2008 |
+---------------+--------------------------------+--------------------------------+-------------------------------+-------------------------------+
| | EUR | EUR | EUR | EUR |
+---------------+--------------------------------+--------------------------------+-------------------------------+-------------------------------+
| Cash and cash | 8,293,739 | 21,950,213 | 162,243 | 8,146,587 |
| equivalents | | | | |
+---------------+--------------------------------+--------------------------------+-------------------------------+-------------------------------+
| Amounts due | 909,377 | 909,377 | 909,377 | 909,377 |
| from brokers | | | | |
+---------------+--------------------------------+--------------------------------+-------------------------------+-------------------------------+
| Investments | 40,270,580 | 305,629,706 | 52,641,385 | 252,416,439 |
| at fair value | | | | |
+---------------+--------------------------------+--------------------------------+-------------------------------+-------------------------------+
| Investments | 7,859,922 | | 12,311,214 | |
| in | | - | | - |
| subsidiaries | | | | |
+---------------+--------------------------------+--------------------------------+-------------------------------+-------------------------------+
| Derivative | 399,699 | 399,699 | 680,057 | 680,057 |
| financial | | | | |
| instruments | | | | |
+---------------+--------------------------------+--------------------------------+-------------------------------+-------------------------------+
| Interest | 1,200,933 | 2,846,921 | 1,079,064 | 2,223,882 |
| receivable | | | | |
+---------------+--------------------------------+--------------------------------+-------------------------------+-------------------------------+
| Securities | 35,198 | 35,198 | | |
| sold | | | - | - |
| receivable | | | | |
+---------------+--------------------------------+--------------------------------+-------------------------------+-------------------------------+
The change in fair value of the loans and receivables designated at fair value
through profit or loss attributable to changes in credit risk amounts to a loss
to the group of EUR19,993,442 (31 December 2008: EUR2,057,477). The estimate is
based on the change in the average bid of loans held in Gale Force 4 which
suffered credit rating changes by Moody's during the year, adjusted by the
change in the S&P LCD All Loans Index and the change in the average bid of the
CLO investments held which suffered credit rating changes by Moody's during the
year, adjusted for the average bid for similarly rated assets. There were 93
loans downgraded by S&P, 83 loans downgraded by Moody's, 62 loans upgraded by
S&P and 30 loans upgraded by Moody's. The average bid of the S&P LCD All Loans
Index increased by 41.48% during the year.
The change in fair value of the financial liabilities at fair value through
profit or loss, attributable to changes in credit risk amounts to a loss to the
Group of EUR72,149,881 (31 December 2008: EUR2,417,549).
There is no significant credit risk attached to cash and cash equivalents,
amounts due from brokers or derivative financial instruments.
The Company also quantifies the exposure to the credit risk of all financial
assets (excluding equities) by geographic region:
+----------------+-------------------------------------+------------------------------------+-------------------------------------+------------------------------+
| | Company | Consolidated | Company | Consolidated |
+----------------+-------------------------------------+------------------------------------+-------------------------------------+------------------------------+
| | 31 December 2009 | 31 December 2009 | 31 December 2008 | 31 December 2008 |
+----------------+-------------------------------------+------------------------------------+-------------------------------------+------------------------------+
| | EUR | EUR | EUR | EUR |
+----------------+-------------------------------------+------------------------------------+-------------------------------------+------------------------------+
| Cayman Islands | 26,773,769 | 19,972,262 | 35,742,592 | 24,310,051 |
+----------------+-------------------------------------+------------------------------------+-------------------------------------+------------------------------+
| United States | 6,317,458 | 260,878,039 | 16,660,306 | 208,113,832 |
+----------------+-------------------------------------+------------------------------------+-------------------------------------+------------------------------+
| Canada | - | 6,448,669 | - | 6,414,151 |
+----------------+-------------------------------------+------------------------------------+-------------------------------------+------------------------------+
| Ireland | 9,193,666 | 9,193,666 | 6,653,959 | 6,653,958 |
+----------------+-------------------------------------+------------------------------------+-------------------------------------+------------------------------+
| Luxembourg | - | - | 515,750 | 680,312 |
+----------------+-------------------------------------+------------------------------------+-------------------------------------+------------------------------+
| Netherlands | 5,845,609 | 7,872,100 | 5,379,992 | 5,379,992 |
+----------------+-------------------------------------+------------------------------------+-------------------------------------+------------------------------+
| Norway | - | 1,264,971 | - | 864,143 |
+----------------+-------------------------------------+------------------------------------+-------------------------------------+------------------------------+
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
14. RISK ASSOCIATED WITH FINANCIAL INSTRUMENTS (continued)
14.2. Credit risk (continued)
The table below summarises the Company's portfolio concentrations as of 31
December 2009 and 31 December 2008.
+--------------+--------+-----------+--------+------------------+
| | | Maximum | | |
| | |portfolio | | |
| | | holdings | | |
+--------------+--------+-----------+--------+------------------+
| | | of a | | Average |
| | | single | | portfolio |
| | | asset | | holdings |
+--------------+--------+-----------+--------+------------------+
| | | % of | | % of total |
| | | total | | portfolio |
| | |portfolio | | |
+--------------+--------+-----------+--------+------------------+
| | | | | |
+--------------+--------+-----------+--------+------------------+
| 31 December 2009 | 13.53% | | 2.07% |
| Company | | | |
+-----------------------+-----------+--------+------------------+
| 31 December 2009 | 12.83% | | 2.03% |
| Consolidated | | | |
+-----------------------+-----------+--------+------------------+
| 31 December 2008 | 18.86% | | 1.73% |
| Company | | | |
+-----------------------+-----------+--------+------------------+
| 31 December 2008 | 10.63% | | 1.39% |
| Consolidated | | | |
+--------------+--------+-----------+--------+------------------+
The Company's and group's portfolio is mostly invested in the equity tranches of
cash flow collateralised debt obligations that, by definition, are not rated
("NR") securities. The Company and group assesses the quality of NR assets
based on a fundamental analysis of the underlying loans in the respective
portfolios and the effect of the liabilities and terms and conditions determined
in the relevant CLO document in the expected cash flow allocation to the NR
tranche. The Company has invested in the following securities which are rated as
at 31 December 2009; Westbrook CLO which had a rating of A1 with Moodys and AA
with Standard and Poors; Apidos Quattro CDO which had a rating of A2 with Moodys
and AA- with Standard and Poors; Mountain View Funding CLO which had a rating of
A2 with Moodys and AA with Standard and Poors; Hyde Park CDO which had a rating
of Ba1 with Moodys and A- with Standard and Poors; Foxe Basin CLO which had a
rating of Ba2 with Moodys and A- with Standard and Poors; Leopard CLO which had
a rating of Baa1 with Moodys and AA with Standard and Poors; and Green Park CDO
which had a rating of Caa2 with Moodys and BB- with Standard and Poors. The
consolidated portfolio also contains Gale Force 4 loans.
The ratings of the consolidated portfolio are as follows:
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| | Company | Consolidated | Company | Consolidated |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| | 31 | 31 | 31 December 2008 | 31 December 2008 |
| | December | December | | |
| | 2009 | 2009 | | |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| Moody's | Market | Market | Market value EUR | Market value EUR |
| rating | value EUR | value EUR | | |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| A1 | 2,456,872 | 2,456,872 | - | - |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| A2 | 2,935,180 | 3,240,899 | - | - |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| Aa2 | | 1,256,198 | - | - |
| | - | | | |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| Aa3 | | 1,754,103 | - | - |
| | - | | | |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| A3 | | | - | 2,025,826 |
| | - | - | | |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| B1 | | 52,725,733 | - | 24,457,566 |
| | - | | | |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| B2 | | 81,338,969 | - | 55,123,054 |
| | - | | | |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| B3 | | 42,994,396 | - | 12,047,179 |
| | - | | | |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| Ba1 | 1,231,200 | 9,175,091 | - | 5,440,082 |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| Ba2 | 74,647 | 13,113,108 | 1,513,587 | 6,024,730 |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| Ba3 | | 33,426,176 | - | 8,086,910 |
| | - | | | |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| Baa1 | 3,475,000 | 3,475,000 | - | - |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| Baa2 | | 2,632,095 | - | 611,489 |
| | - | | | |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| Baa3 | | 3,314,284 | - | - |
| | - | | | |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| C | | 565,657 | - | - |
| | - | | | |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| Ca | | 4,040,644 | - | - |
| | - | | | |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| Caa1 | | 12,032,020 | - | 9,328,793 |
| | - | | | |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| Caa2 | 423,750 | 3,127,260 | - | 4,561,731 |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| Caa3 | | 2,110,664 | - | 2,395,549 |
| | - | | | |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| NR | 37,533,853 | 32,850,536 | 63,833,636 | 122,708,153 |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| Total | 48,130,502 | 305,629,706 | 65,347,223 | 252,811,063 |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
| | | | | |
+-------------+-----------------------------+-------------------------------+-------------------------------------+-------------------------------------+
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
14. RISK ASSOCIATED WITH FINANCIAL INSTRUMENTS (continued)
14.2. Credit risk (continued)
The Company may be adversely impacted by an increase in its credit exposure
related to investing, financing, and other activities. The Company is exposed to
the potential for credit related losses that can occur as a result of an
individual, counterparty or issuer being unable or unwilling to honour its
contractual obligations. These credit exposures exist within financing
relationships, commitments, derivatives and other transactions. These exposures
may arise, for example, from a decline in the financial condition of a
counterparty, from entering into swap or other derivative contracts under which
counterparties have obligations to make payments to us, from a decrease in the
value of securities of third parties that the Company holds as collateral, or
from extending credit through guarantees or other arrangements. As the Company's
credit exposure increases, it could have an adverse effect on the Company's
business and profitability if material unexpected credit losses occur.
The Company will typically be in a first loss or subordinated position with
respect to realised losses on the collateral of each investment. With the
exception of investments in senior CLO notes, the Company will typically be in a
first loss or subordinated position with respect to realised losses on the
collateral of each investment. The leveraged nature of the equity notes and the
mezzanine notes, in particular, magnifies the adverse impact of collateral
defaults. The leveraged nature of the equity notes and the mezzanine notes, in
particular, magnifies the adverse impact of collateral defaults.
14.3. 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 does not currently use leverage and as a result it has no financing
subject to margin calls which may force the Company to liquidate assets. The
Company's unleveraged capital structure reflects the long-term investment
strategy and matches the illiquidity of the underlying investments. As the
Company is a closed-ended investment company, it is not required to meet any
fund redemptions.
The Company has been established with a 15 year life. At the annual general
meeting in 2021, the Directors will be obliged to put a special resolution to
the shareholders for the winding-up of the Company. The Directors may be
relieved of this obligation by special resolution of shareholders. The Directors
expect that at the end of the 15 year life the Company's investments will have
been realised or will be capable of immediate realisation at their fair values.
There is no certainty that market events in the intervening period will not
cause legal maturities in the Company's underlying investments to have been
extended beyond the anticipated life of the Company thus causing the Directors
to seek relief from winding up the Company.
Given the Company's permanent capital structure as a closed-ended fund, it is
not exposed to redemption risk. However the Company's financial instruments
include investments in collateralised debt obligations and derivative contracts
traded over-the-counter which are not traded in an organised public market and
which may be illiquid. As a result, the Company may not be able to promptly
liquidate some of its investments in these instruments at an amount close to its
fair value in order to meet its liquidity requirements or to respond to specific
events such as deterioration in the credit worthiness of any particular issuer.
It may be impossible to assess the exposure to risk in such circumstances.
The table below analyses the Company's financial liabilities into relevant
maturity grouping based on remaining period at the statement of financial
position date to the contractual maturity date. There is a facility agreement in
place with JP Morgan to mitigate liquidity risk, which is undrawn at year end.
The amounts in the table are the contractual undiscounted cash flows. Balances
due within 12 months equal their statement of financial position carrying
balance, as the impact of discounting is not significant.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
14. RISK ASSOCIATED WITH FINANCIAL INSTRUMENTS (continued)
14.3. Liquidity risk (continued)
+----------------------------------------------+-------------+--------------------------+-----------------------+-------------------------------+--------+---------------------+
| | | Due on | Due | Due between 3 | Due | |
| | | | within | | after | |
| | | | 3 | | 12 | |
+----------------------------------------------+-------------+--------------------------+-----------------------+-------------------------------+--------+---------------------+
| | | demand | months | and 12 months | months | Total |
+----------------------------------------------+-------------+--------------------------+-----------------------+-------------------------------+--------+---------------------+
| Company | | EUR | EUR | EUR | EUR | EUR |
+----------------------------------------------+-------------+--------------------------+-----------------------+-------------------------------+--------+---------------------+
| | | | | | | |
+----------------------------------------------+-------------+--------------------------+-----------------------+-------------------------------+--------+---------------------+
| Financial liabilities as at 31 December 2009 | | | | | | |
+----------------------------------------------+-------------+--------------------------+-----------------------+-------------------------------+--------+---------------------+
| Derivative financial instruments | | - | (408,560) | - | | (408,560) |
| | | | | | - | |
+----------------------------------------------+-------------+--------------------------+-----------------------+-------------------------------+--------+---------------------+
| Other payables | | - | (270,280) | - | | (270,280) |
| | | | | | - | |
+----------------------------------------------+-------------+--------------------------+-----------------------+-------------------------------+--------+---------------------+
| Total financial liabilities | | - | (678,840) | - | | (678,840) |
| | | | | | - | |
+----------------------------------------------+-------------+--------------------------+-----------------------+-------------------------------+--------+---------------------+
| | | | | | | |
+----------------------------------------------+-------------+--------------------------+-----------------------+-------------------------------+--------+---------------------+
| | | Due on | Due | Due between 3 | Due | |
| | | | within | | after | |
| | | | 3 | | 12 | |
+----------------------------------------------+-------------+--------------------------+-----------------------+-------------------------------+--------+---------------------+
| | | demand | months | and 12 months | months | Total |
+----------------------------------------------+-------------+--------------------------+-----------------------+-------------------------------+--------+---------------------+
| Company | | EUR | EUR | EUR | EUR | EUR |
+----------------------------------------------+-------------+--------------------------+-----------------------+-------------------------------+--------+---------------------+
| | | | | | | |
+----------------------------------------------+-------------+--------------------------+-----------------------+-------------------------------+--------+---------------------+
| Financial liabilities as at 31 December 2008 | | | | | | |
+----------------------------------------------+-------------+--------------------------+-----------------------+-------------------------------+--------+---------------------+
| Derivative financial instruments | | - | (892,415) | - | - | (892,415) |
+----------------------------------------------+-------------+--------------------------+-----------------------+-------------------------------+--------+---------------------+
| Other payables | | - | (2,032,259) | - | | (2,032,259) |
| | | | | | - | |
+----------------------------------------------+-------------+--------------------------+-----------------------+-------------------------------+--------+---------------------+
| Total financial liabilities | | - | (2,924,674) | - | | (2,924,674) |
| | | | | | - | |
+----------------------------------------------+-------------+--------------------------+-----------------------+-------------------------------+--------+---------------------+
| | | | | | | |
+----------------------------------------------+-------------+--------------------------+-----------------------+-------------------------------+--------+---------------------+
The table below analyses the Group's financial liabilities into relevant
maturity grouping based on 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. Balances due within 12 months equal their
statement of financial position carrying balance, as the impact of discounting
is not significant. The carrying value of the financial liabilities due after 12
months is EUR268,933,084 (31 December 2008: EUR190,107,679), a difference of
EUR109,150,738 from the undiscounted contractual cash flow.
+------------------------------------------------------------+-----------+--------------------------+-----------------------+-------------------------------+-----------------------+---------------------+
| | | Due on | Due within 3 | Due between 3 | Due after 12 | |
+------------------------------------------------------------+-----------+--------------------------+-----------------------+-------------------------------+-----------------------+---------------------+
| | | demand | months | and 12 months | months | Total |
+------------------------------------------------------------+-----------+--------------------------+-----------------------+-------------------------------+-----------------------+---------------------+
| Consolidated | | EUR | EUR | EUR | EUR | EUR |
+------------------------------------------------------------+-----------+--------------------------+-----------------------+-------------------------------+-----------------------+---------------------+
| | | | | | | |
+------------------------------------------------------------+-----------+--------------------------+-----------------------+-------------------------------+-----------------------+---------------------+
| Financial liabilities as at 31 December 2009 | | | | | | |
+------------------------------------------------------------+-----------+--------------------------+-----------------------+-------------------------------+-----------------------+---------------------+
| Derivative financial instruments | | - | (408,560) | - | - | (408,560) |
+------------------------------------------------------------+-----------+--------------------------+-----------------------+-------------------------------+-----------------------+---------------------+
| Other payables | | - | (1,107,542) | - | - | (1,107,542) |
+------------------------------------------------------------+-----------+--------------------------+-----------------------+-------------------------------+-----------------------+---------------------+
| Financial liabilities at fair value through profit or loss | | | | | | |
| | | - | - | - | (378,083,822) | (378,083,822) |
+------------------------------------------------------------+-----------+--------------------------+-----------------------+-------------------------------+-----------------------+---------------------+
| Total financial liabilities | | - | (1,516,102) | - | (378,083,822) | (379,599,924) |
+------------------------------------------------------------+-----------+--------------------------+-----------------------+-------------------------------+-----------------------+---------------------+
| | | | | | | |
+------------------------------------------------------------+-----------+--------------------------+-----------------------+-------------------------------+-----------------------+---------------------+
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
14. RISK ASSOCIATED WITH FINANCIAL INSTRUMENTS (continued)
14.3. Liquidity risk (continued)
+------------------------------------------------------------+-----------+--------------------------+-----------------------------+-------------------------------+------------------------+---------------------+
| | | Due on | Due within 3 | Due between 3 | Due after 12 | |
+------------------------------------------------------------+-----------+--------------------------+-----------------------------+-------------------------------+------------------------+---------------------+
| | | demand | months | and 12 months | months | Total |
+------------------------------------------------------------+-----------+--------------------------+-----------------------------+-------------------------------+------------------------+---------------------+
| Consolidated | | EUR | EUR | EUR | EUR | EUR |
+------------------------------------------------------------+-----------+--------------------------+-----------------------------+-------------------------------+------------------------+---------------------+
| | | | | | | |
+------------------------------------------------------------+-----------+--------------------------+-----------------------------+-------------------------------+------------------------+---------------------+
| Financial liabilities as at 31 December 2008 | | | | | | |
+------------------------------------------------------------+-----------+--------------------------+-----------------------------+-------------------------------+------------------------+---------------------+
| Derivative financial instruments | | - | (892,415) | - | - | (892,415) |
+------------------------------------------------------------+-----------+--------------------------+-----------------------------+-------------------------------+------------------------+---------------------+
| Other payables | | - | (3,414,923) | - | - | (3,414,923) |
+------------------------------------------------------------+-----------+--------------------------+-----------------------------+-------------------------------+------------------------+---------------------+
| Financial liabilities at fair value through profit or loss | | | | | | |
| | | - | - | - | (390,242,215) | (390,242,215) |
+------------------------------------------------------------+-----------+--------------------------+-----------------------------+-------------------------------+------------------------+---------------------+
| Total financial liabilities | | - | (4,307,338) | - | (390,242,215) | (394,549,553) |
+------------------------------------------------------------+-----------+--------------------------+-----------------------------+-------------------------------+------------------------+---------------------+
| | | | | | | |
+------------------------------------------------------------+-----------+--------------------------+-----------------------------+-------------------------------+------------------------+---------------------+
The amounts included in the above tables represent undiscounted cash flows.
However, amounts included in the consolidated statement of financial position
represent discounted cash flows.
14.4. Collateral
The following table details the financial assets pledged as collateral for
liabilities or contingent liabilities:
+------------------------------------+----------------------------------+----------------------------------+
| | 31 December 2009 | 31 December 2008 |
+------------------------------------+----------------------------------+----------------------------------+
| | EUR | EUR |
+------------------------------------+----------------------------------+----------------------------------+
| | | |
+------------------------------------+----------------------------------+----------------------------------+
| Cash collateral for borrowed | 909,377 | 909,377 |
| securities | | |
+------------------------------------+----------------------------------+----------------------------------+
Cash collateral is held with JP Morgan. It is used to cover any mark to market
margin requirements. The interest on collateral is paid by JP Morgan
periodically. Cash collateral was requested by JP Morgan as of 11 January 2007.
The collateral agreement between the Company and JP Morgan is subject to certain
terms and conditions. JP Morgan expressly disclaims any responsibility for the
accuracy of the models or estimates used in deriving the valuations, any errors
or omissions in computing or disseminating the valuations and any uses to which
the valuations are put.
15. STOCKLENDING
The Company did not enter into any stocklending transactions during the year to
which these financial statements relate.
16. EARNINGS PER SHARE
Basic and diluted earnings per share is calculated by dividing net profit/(loss)
for the year attributable to redeemable participating shareholders of Carador
Plc by the weighted average number of shares outstanding during the year. The
weighted average number of shares for the year ended 31 December 2009 reflects
the issue of shares in the year. The net profit/(loss) used to calculate the
earnings per share for the year was pre-dividend profit/(loss).
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
16.EARNINGS PER SHARE (continued)
+---------------+--------------------------------+-----------------------------+----------------------------+------------------------------+
| | Company | Consolidated | Company | Consolidated |
| | | | | |
+---------------+--------------------------------+-----------------------------+----------------------------+------------------------------+
| | year | year | nine | nine |
| | ended | ended | months | months |
| | | | ended | ended |
+---------------+--------------------------------+-----------------------------+----------------------------+------------------------------+
| | 31 | 31 | 31 | 31 |
| | December | December | December | December |
| | 2009 | 2009 | 2008 | 2008 |
+---------------+--------------------------------+-----------------------------+----------------------------+------------------------------+
| | | | | |
+---------------+--------------------------------+-----------------------------+----------------------------+------------------------------+
| Net loss for | (7,151,374) | (6,148,427) | (15,355,195) | (14,358,518) |
| the period | | | | |
+---------------+--------------------------------+-----------------------------+----------------------------+------------------------------+
| | | | | |
+---------------+--------------------------------+-----------------------------+----------------------------+------------------------------+
| Number of | 140,021,054 | 140,021,054 | 57,248,001 | 57,248,001 |
| ordinary | | | | |
| shares for | | | | |
| basic and | | | | |
| diluted | | | | |
| earnings per | | | | |
| share | | | | |
+---------------+--------------------------------+-----------------------------+----------------------------+------------------------------+
| | | | | |
+---------------+--------------------------------+-----------------------------+----------------------------+------------------------------+
| Earnings per | (0.05) | (0.04) | (0.27) | (0.25) |
| share | | | | |
+---------------+--------------------------------+-----------------------------+----------------------------+------------------------------+
17. NET ASSET VALUE RECONCILIATION
The net asset value per share which was published by the Company differs from
that presented in these financial statements for year ended 31 December 2009.
The difference is due to adjustments to accruals and a difference in the basis
of calculation. The NAV per share for shareholder dealing was calculated in line
with the terms of the prospectus and the NAV per share per the financial
statements was calculated using a weighted average method.
The net asset value reconciliation as at 31 December 2009 is as follows:
+------------------------------------------+---+---------------------+----------------+
| | | EUR | US$ |
| | | Class | Class |
+------------------------------------------+---+---------------------+----------------+
| Net asset value per share for | | 0.44178 | 0.56986 |
| shareholder dealing per valuation | | | |
+------------------------------------------+---+---------------------+----------------+
| Adjustment to accruals | | (0.02690) | 0.02540 |
+------------------------------------------+---+---------------------+----------------+
| Net asset value per share per financial | | 0.41488 | 0.595255 |
| statements | | | |
+------------------------------------------+---+---------------------+----------------+
| | | | |
+------------------------------------------+---+---------------------+----------------+
The net asset value reconciliation as at 31 December 2008 was:
+------------------------------------------+---+---------------------+----------------+
| | | EUR | US$ |
| | | Class | Class |
+------------------------------------------+---+---------------------+----------------+
| Net Asset Value per share for | | 0.49190 | 0.62430 |
| shareholder dealing per valuation | | | |
+------------------------------------------+---+---------------------+----------------+
| Adjustment to accruals | | (0.02351) | 0.02679 |
+------------------------------------------+---+---------------------+----------------+
| Net Asset Value per share per financial | | 0.46839 | 0.65109 |
| statements | | | |
+------------------------------------------+---+---------------------+----------------+
| | | | |
+------------------------------------------+---+---------------------+----------------+
The Net Asset Value reconciliation as at 31 March 2008 was:
+------------------------------------------+---+---------------------+
| | | EUR |
| | | Class |
+------------------------------------------+---+---------------------+
| Net Asset Value per share for | | 0.67730 |
| shareholder dealing per valuation | | |
+------------------------------------------+---+---------------------+
| Adjustment to accruals | | 0.01090 |
+------------------------------------------+---+---------------------+
| Adjustment on value of investments | | (0.00950) |
+------------------------------------------+---+---------------------+
| Net Asset Value per share per financial | | 0.67870 |
| statements | | |
+------------------------------------------+---+---------------------+
| | | |
+------------------------------------------+---+---------------------+
18. SEGMENTAL REPORTING
Under IFRS 8, the primary segment has been identified as the business segment.
The Company has only one business segment, which is its investments in debt
securities. The table below discloses revenue earned from the country of
domicile and from material foreign countries.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
18. SEGMENTAL REPORTING (continued)
+---------------+----------------+--------------+----------------+----------------+-------------+-----------------+
| | Ireland | Cayman | USA | Netherlands | Other | Total |
| | (Country | Islands | | | foreign | |
| | of | | | | countries | |
| | domicile) | | | | | |
+---------------+----------------+--------------+----------------+----------------+-------------+-----------------+
| Consolidated | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 | EUR'000 |
+---------------+----------------+--------------+----------------+----------------+-------------+-----------------+
| 31December | | | | | | |
| 2009 | | | | | | |
+---------------+----------------+--------------+----------------+----------------+-------------+-----------------+
| | | | | | | |
+---------------+----------------+--------------+----------------+----------------+-------------+-----------------+
| Dividend | | 997,618 | | | | 997,618 |
| income | - | | - | - | - | |
+---------------+----------------+--------------+----------------+----------------+-------------+-----------------+
| Interest | 256,396 | 3,878,113 | 12,509,427 | 508,868 | 377,903 | 17,530,707 |
| income | | | | | | |
+---------------+----------------+--------------+----------------+----------------+-------------+-----------------+
| | | | | | | |
+---------------+----------------+--------------+----------------+----------------+-------------+-----------------+
| 31December | | | | | | |
| 2008 | | | | | | |
+---------------+----------------+--------------+----------------+----------------+-------------+-----------------+
| | | | | | | |
+---------------+----------------+--------------+----------------+----------------+-------------+-----------------+
| Dividend | | 89,056 | | | | 89,056 |
| income | - | | - | - | - | |
+---------------+----------------+--------------+----------------+----------------+-------------+-----------------+
| Interest | 54,771 | 2,788,804 | 1,296,473 | 1,434,616 | 262,491 | 5,837,155 |
| income | | | | | | |
+---------------+----------------+--------------+----------------+----------------+-------------+-----------------+
| | | | | | | |
+---------------+----------------+--------------+----------------+----------------+-------------+-----------------+
19. INVESTMENT BREACH
As at 30 January 2009, the Company held 21.5% of the value of the net asset
value of the Company in Gale Force 4. The Company is restricted to holding a
maximum of 20% of the value of the net asset value of the Company in the
securities of any one issuer. This breach was as a result of market
appreciation. The Company was back in compliance as at 28 February 2009, at
which point the Company held 19% of its net asset value in Gale Force 4.
20. DISTRIBUTIONS
The Board declared the following distributions during the year;
Period ended 30 September 2009
EUR0.0112 per Euro share
US$0.0167 per US$ share
This distribution was paid on 29 October 2009 to shareholders on the share
register as at the close of business on 23 October 2009.
Period ended 30 June 2009
EUR0.0149 per Euro share
US$0.0208 per US$ share
This distribution was paid on 31 July 2009 to shareholders on the share register
as at the close of business on 24 July 2009.
Period ended 31 March 2009
EUR0.0131 per Euro share
US$0.0173 per US$ share
This distribution was paid on 30 April 2009 to shareholders on the share
register as at the close of business on 24 April 2009.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
20. DISTRIBUTIONS (continued)
Period ended 31 December 2008
EUR0.0115 per Euro share
US$0.019 per US$ share
This distribution was paid on 30 January 2009 to shareholders on the share
register as at the close of business on 23 January 2009.
Total distributions for the period amounted to EUR2,267,153 on the Euro class and
$4,781,139 on the US$ class.
21. SUBSEQUENT EVENTS
On 13 January 2010, the Board declared an interim dividend of EUR0.01 per share
in respect of the quarterly period ended 31 December 2009. This dividend was
payable on 29 January 2010 to shareholders on the register as at the close of
business on 22 January 2010. US$ class shareholders received US$0.0145 per
share, calculated at the prevailing exchange rate on 13 January 2010 of
EUR1:US$1.4508.
On 12 February 2010, the Company issued a circular to shareholders in order to
provide an update on GSO Capital Partners International LLP's implementation of
the Company's investment strategy and to notify shareholders of the
implementation of a share repurchase programme by the Company.
On 14 April 2010, the Board declared an interim dividend of EUR0.0091 per share
in respect of the quarterly period ended 31 March 2010. This dividend is payable
on 23 April 2010 to shareholders on the register as at the close of business on
21 April 2010. US$ class shareholders received US$0.0124 per share, calculated
at the prevailing exchange rate on 14 April 2010 of EUR1:US$1.3626.
On 15 April 2010, the Company released its net asset value as at 31 March 2010.
As at the close of business on 31 March 2010, the unaudited net asset value per
share was EUR0.4697 for the EURO class shares and US$0.6006 for the US$ class
shares. Including dividends paid during the period, the total return for the
EURO class shares and the US$ class shares year to date was 10.66% and 10.12%
respectively.
In January 2010, the Company disposed of a portion of its holding in Gale Force
4. This disposal resulted in the reduction of its holding in the
equity/mezzanine tranche of Gale Force 4 to below 50% and as a result, in the
future Gale Force 4 will no longer be consolidated.
No other events have occurred in respect of the Company subsequent to the period
end that may be deemed relevant to the accuracy of these financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCBUGDUCBGBGGL
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