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Market Cap
£12.90m
Change Today
0.000p ()
Share Price
30.00p
Annual Report and Accounts
T2 Income Fund Limited
16 April 2008
T2 Income Fund Limited
Final Results for the year ended 31 December 2007
T2 Income Fund Limited (the "Company"), a closed-ended Guernsey exempt
investment company, announces its results for the year ended 31 December 2007.
Highlights of the year include:
• The Company is fully invested and has leveraged its assets to make new
investments. As at 31 December 2007 the Company had invested assets of
approximately £140.3 million (2006: £54.0 million).
• Net Asset Value per Share for the year ended 31 December 2007 is £0.92
(2006: £0.96)
• Profit for the period of approximately £1.6 million (2006: £0.5 million)
• Successful completion of second equity round of £5.1 million in June 2007
• Total dividends paid from inception in August 2005 through March 2008 were
14.5p per share
William Harley Tozier, Chairman of the Company, commented:
'Although the coming months are expected to be volatile in the global credit
markets, the Company believes that it has developed a portfolio that is
fundamentally sound and has been leveraged responsibly.'
For further information please contact:
Patrick Conroy
T2 Income Fund Limited
+1 203 983-5282
Philip Secrett
Nominated Adviser
Grant Thornton Corporate Finance
+44 (0) 207 383 5100
Angus Gordon Lennox
Broker
JPMorgan Cazenove
+44 (0) 207 588 2828
CHAIRMAN'S STATEMENT
Attached please find the Accounts of the Company for the one year period ended
31 December 2007.
I am pleased to report that, as of 31 December 2007, the Company had invested
assets of approximately £140.3 million. The investments in the portfolio, on a
weighted average basis, bear an interest rate of 8.4% (on an unlevered basis
from the Company's perspective), which is approximately 368 basis points over
LIBOR. The Company's Net Asset Value per Share for the year ended 31 December
2007 is £0.92. For the year ended 31 December 2007 the Company recorded a profit
for the period of approximately £1.6 million. Basic earnings per share for the
year ended 31 December 2007 was approximately £0.04.
The Company is fully invested and has leveraged its assets to make new
investments. In 2006 the Company, through its subsidiary T2 Income Fund CLO I
Ltd., established a credit facility with Merrill Lynch Capital Corporation. As
of 19 July 2007, the credit facility was replaced with long-term notes in the
amount of approximately £121.5 million (US$249.2 million). The Notes have a
twelve year term and a weighted average interest rate of LIBOR plus 75 basis
points. In connection with issuing these Notes, the full amount of the finance
costs, £3.1 million, a non-recurring item, was expensed in 2007. On a per share
basis, these costs were equal to approximately £0.07 per share. The net proceeds
of the Notes (after repayment of the Merrill Lynch credit facility) have been
used to make new investments.
Following the very severe declines across global credit markets during the
latter half of the year, the Company was able to identify attractive
risk-adjusted investment opportunities. T2 Advisers, LLC (the "Adviser")
believes that the current credit environment will be reflected in more volatile
market values. The Adviser notes that the global credit crisis has not, thus
far, resulted in a significant diminishment in credit quality across those
markets in which we invest although market prices continue to fluctuate. The
Company's portfolio investments and the notes issued by the Company are both
subject to a wide range of market price fluctuation.
On 15 June 2007 approval was received from the Royal Court of Guernsey to reduce
the issued share premium of the Company by an amount of £0.95 per share, and
that the aggregate of such reduction be credited as a distributable reserve. On
25 June 2007, 5,000,000 Ordinary Shares of no par value were issued at £1.0175
per Share resulting in gross proceeds of approximately £5.1 million. Net
proceeds of this placing were used to make new investments.
The total dividends paid from inception in August 2005 through March 2008 were
14.5p per share. The Company's dividend history is:
Dividend
Month paid Per share For period ended
July 2006 1.0p 30 June 2006
October 2006 1.5p 30 September 2006
February 2007 2.0p 31 December 2006
May 2007 2.5p 31 March 2007
September 2007 2.5p 30 June 2007
December 2007 2.5p 30 September 2007
March 2008 2.5p 31 December 2007
Total 14.5p
Although the coming months are expected to be volatile in the global credit
markets, the Company believes that it has developed a portfolio that is
fundamentally sound and has been leveraged responsibly. We look forward to
reporting on our progress in the future.
William Harley Tozier
Chairman
April 2008
CONSOLIDATED AND COMPANY INCOME STATEMENTS
Group Group Company Company
Year to Year to Year to Year to
31 December 31 December 31 December 31 December
2007 2006 2007 2006
Notes GBP GBP GBP GBP
Revenue
Interest income 2 10,821,834 2,950,030 1,389,774 2,676,375
Other income 2 43,716 36,814 43,716 36,814
Dividend income - - 711,182 -
Investment Income
Gain/(loss) on financial assets and 6
liabilities at fair value through
profit or loss
- Realised 1,768,561 (248,633) (547,568) (248,633)
- Unrealised 122,030 (1,835,169) 3,198,134 (1,630,983)
Gain/(loss) on foreign currency
transactions
- Realised 475,301 295,151 267,496 295,151
- Unrealised 78,248 129,740 (248,392) 129,740
Total Income 13,309,690 1,327,933 4,814,342 1,258,464
Expenses
Management fees 4 2,420,301 298,751 2,420,301 298,751
Administration and secretarial fees 4 40,000 40,000 40,000 40,000
Custodian fees 4 15,043 15,000 15,043 15,000
Legal and professional fees 43,806 25,455 43,806 25,455
Directors' remuneration 4 64,919 65,000 64,919 65,000
Directors' and officers' insurance 44,415 43,485 44,415 43,485
Audit fees 40,478 39,001 40,478 39,001
Loan note expenses 4 3,054,047 - - -
Finance costs 4 5,207,811 104,215 - -
Other expenses 773,287 200,502 436,224 199,827
Total Expenses 11,704,107 831,409 3,105,186 726,519
Profit for the year 1,605,583 496,524 1,709,156 531,945
Basic earnings per share 5 0.0396 0.0131 0.0421 0.0140
Diluted earnings per share 5 0.0356 0.0118 0.0379 0.0126
The accompanying notes form an integral part of these financial statements.
CONSOLIDATED BALANCE SHEET
31 December 2007 31 December 2006
Notes GBP GBP
ASSETS
Non-current assets
Financial assets at fair value through the profit
or loss account 6 140,315,881 53,978,368
Note receivable 8 500,000 500,000
140,815,881 54,478,368
Current assets
Trade and other receivables 8 1,119,113 610,946
Cash and cash equivalents 9 16,078,863 4,929,513
17,197,976 5,540,459
Total assets 158,013,857 60,018,827
EQUITY
Capital and reserves attributable to the Company's
equity holders
Share premium 11 5,619,040 36,694,149
Other reserve 36,200,000 14,167
Foreign exchange reserve 138,994 35,421
Retained earnings (2,505,937) (251,520)
Total equity 39,452,097 36,492,217
LIABILITIES
Non-current liabilities
Warehouse facility 10 - 22,374,308
Loan notes 10 114,590,180 -
Current liabilities
Trade and other payables 10 3,971,580 1,152,302
Total liabilities 118,561,760 23,526,610
Total equity and liabilities 158,013,857 60,018,827
Net Asset Value per Share £0.92 £0.96
The accompanying notes form an integral part of these financial statements.
COMPANY BALANCE SHEET
31 December 2007 31 December 2006
Notes GBP GBP
ASSETS
Non-current assets
Financial assets at fair value through the profit
or loss account 6 4,227,734 26,401,578
Investment in subsidiary 7 31,365,126 6,322,726
Note receivable 8 500,000 500,000
36,092,860 33,224,304
Current assets
Trade and other receivables 8 196,498 478,540
Cash and cash equivalents 9 3,380,265 3,854,472
3,576,763 4,333,012
Total assets 39,669,623 37,557,316
EQUITY
Capital and reserves attributable to the Company's
equity holders
Share premium 11 5,619,040 36,694,149
Other reserve 36,200,000 14,167
Retained earnings (2,366,943) (216,099)
Total equity 39,452,097 36,492,217
LIABILITIES
Current liabilities
Trade and other payables 10 217,526 1,065,099
Total liabilities 217,526 1,065,099
Total equity and liabilities 39,669,623 37,557,316
Net Asset Value per Share £0.92 £0.96
The accompanying notes form an integral part of these financial statements.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Group Share Share Other Foreign Retained Total
Capital Premium Reserve** Exchange Earnings** Equity
Reserve
GBP GBP GBP GBP GBP GBP
Balance at 31 December 2005 - 36,694,149 4,167 - 201,956 36,900,272
Profit for the year - - - - 496,524 496,524
Foreign exchange on - - - 35,421 - 35,421
consolidation
Total income & expense for the year - - - 35,421 496,524 531,945
Amortisation of fair value of
options - - 10,000 - 10,000
Dividends paid - - - - (950,000) (950,000)
Balance at 31 December 2006 - 36,694,149 14,167 35,421 (251,520) 36,492,217
Net proceeds from share issue - 5,024,891 - - - 5,024,891
Transfer to distributable
reserve - (36,100,000) 36,100,000 - - -
Profit for the year - - - - 1,605,583 1,605,583
Foreign exchange on
consolidation - - - 103,573 - 103,573
Total income & expense for the year - - - 103,573 1,605,583 1,709,156
Amortisation of fair value of
options - - 85,833 - - 85,833
Dividends paid* - - - - (3,860,000) (3,860,000)
Balance at 31 December 2007 - 5,619,040 36,200,000 138,994 (2,505,937) 39,452,097
Company Share Share Other Foreign Retained Total
Capital Premium Reserve** Exchange Earnings** Equity
Reserve
GBP GBP GBP GBP GBP GBP
Balance at 31 December 2005 - 36,694,149 4,167 - 201,956 36,900,272
Profit for the year - - - - 531,945 531,945
Total income & expense for the year - - - - 531,945 531,945
Amortisation of fair value of
options - - 10,000 - - 10,000
Dividends paid - - - - (950,000) (950,000)
Balance at 31 December 2006 - 36,694,149 14,167 - (216,099) 36,492,217
Net proceeds from share issue - 5,024,891 - - - 5,024,891
Transfer to distributable
reserve - (36,100,000) 36,100,000 - - -
Profit for the year - - - - 1,709,156 1,709,156
Total income & expense for the year - - - - 1,709,156 1,709,156
Amortisation of fair value of
options - - 85,833 - - 85,833
Dividends paid* - - - - (3,860,000) (3,860,000)
Balance at 31 December 2007 - 5,619,040 36,200,000 - (2,366,943) 39,452,097
*During the year the Company made four dividend payments. In February 2007 the
Company paid a dividend of 2p per ordinary share (£760,000), for the period to
31 December 2006. In May 2007 the Company paid a dividend of 2.5p per ordinary
share (£950,000), for the period to 31 March 2007. In September 2007 the
Company paid a dividend of 2.5p per ordinary share (£1,075,000). for the period
to 30 June 2007. In December 2007 the Company paid a dividend of 2.5p per
ordinary share (£1,075,000), for the period to 30 September 2007.
** Distributable reserves.
The accompanying notes form an integral part of these financial statements.
STATEMENT OF CASHFLOWS
Group Group Company Company
Year to Year to Year to Year to
31 December 31 December 31 December 31 December
2007 2006 2007 2006
Notes GBP GBP GBP GBP
Cash flows from operating activities
Cash generated from operations 13 2,215,509 (2,014,562) (1,421,108) (2,173,545)
Net cash inflow/(outflow) from
operating activities 2,215,509 (2,014,562) (1,421,108) (2,173,545)
Cashflows from investing activities
Purchase of investments 6 (137,310,167) (59,465,371) (10,226,998) (41,570,229)
Sale of investments 6 40,750,789 8,307,610 18,877,404 8,307,610
Payment to subsidiary 6,7 - - (17,819,912) (3,081,460)
Receipt from subsidiary 6, 7 - - 8,951,516 6,921,988
Principal received 6 1,670,903 983,235 - 705,815
Net cash outflow from investing
activities (94,888,475) (50,174,526) (217,990) (28,716,276)
Cashflows from financing activities
Net proceeds from issue of shares 11 5,024,891 - 5,024,891 -
Warehouse facility (18,874,945) 22,374,308 - -
Loan notes 121,532,370 - - -
Dividends paid (3,860,000) (950,000) (3,860,000) (950,000)
Net cash inflow/(outflow) from
financing activities 103,822,316 21,424,308 1,164,891 (950,000)
Net increase/(decrease) in cash and
cash equivalents 11,149,350 (30,764,780) (474,207) (31,839,821)
Cash and cash equivalents at
beginning of year 4,929,513 35,694,293 3,854,472 35,694,293
Cash and cash equivalents at end of year 16,078,863 4,929,513 3,380,265 3,854,472
The accompanying notes form an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2007
1. GENERAL INFORMATION
T2 Income Fund Limited (the "Company") was incorporated and domiciled in
Guernsey, Channel Islands, as a company limited by shares on 9 June 2005. The
address of the registered office is Regency Court, Glategny Esplanade, St Peter
Port, Guernsey, Channel Islands, GY1 3NQ.
A new Cayman Islands registered subsidiary company, T2 Income Fund CLO I Ltd.,
was created on 11 October 2006. Through its ownership of 100% of the preferred
shares of T2 Income Fund CLO I Ltd. the Directors consider the CLO to be a
wholly owned subsidiary and the operating results are consolidated in these
financial statements. The Group is comprised of the "Company" and the "CLO".
2. ACCOUNTING POLICIES
(a) Basis of preparation
The consolidated financial statements of the Group have been prepared in
accordance with International Financial Reporting Standards ("IFRS") and all
applicable requirements of Guernsey Company Law. The financial statements have
been prepared under the historical cost convention, apart from the inclusion of
non-current asset investments, foreign currency derivatives and non-current
liabilities at fair value through profit or loss. The principal accounting
policies of the Group and Company have remained unchanged from the previous
year, except for the adoption of IFRS "Financial Instruments:Disclosures", and
are set out below.
(b) Basis of consolidation
The consolidated financial statements comprise the financial statements of T2
Income Fund Limited and its subsidiary T2 Income Fund CLO I Ltd. Intercompany
transactions, balances and unrealised gains on transactions between group
companies are eliminated.
(c) Foreign currency translation
(i) Functional and presentation currency
The Financial Statements of the Company are presented in the currency of the
primary economic environment in which the entity operates (its functional
currency). The Directors have considered the primary economic currency of the
Company and considered the currency in which the original finance was raised,
distributions made, and ultimately what currency would be returned on a break up
basis. The Directors have also considered the currency to which the underlying
investments are exposed. On balance, the Directors believe Sterling best
represents the functional currency of the Company and Dollars the functional
currency of the subsidiary. Therefore the books and records are maintained in
Sterling and Dollars respectively and for the purpose of the financial
statements the results and financial position of the Group are presented in
Sterling, which is the presentation currency of the Group.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the
translation at period-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the Income Statement.
Translation differences on non-monetary items are reported as part of the fair
value gain or loss reported in the Income Statement.
(iii) Subsidiary company
The results and financial position of the subsidiary entity that has a
functional currency different to the presentation currency is translated into
the presentation currency as follows:
1. assets and liabilities of the Balance Sheet presented are translated
at the closing rate at the date of the balance sheet;
2. income and expenses for the Income Statement are translated at
average exchange rates for the period (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the dates
of the transactions); and
3. all resulting exchange differences are recognised as a separate
component of shareholders' equity.
(d) Revenue recognition
Revenue is recognised as follows:
Interest income - recognised on an accruals basis as this relates to bank
interest income and coupon interest.
Other income - relates to note receivable interest (2006: closing fees) which
are recognised when they fall due.
Dividend income - dividend income is recognised when the right to receive
payment is established.
(e) Expenditure
All expenses are accounted for on an accruals basis. The management fees,
administration fees, finance costs and all other expenses (excluding set up
expenses which were offset against share premium) are charged through the Income
Statement.
(f) Taxation
The Company is exempt from Guernsey taxation under the Income Tax (Exempt
Bodies) (Guernsey) Ordinance, 1989. A fixed annual fee of £600 is payable to the
States of Guernsey in respect of this exemption.
(g) Share issue expenses
Share issue expenses of an equity transaction are accounted for as a deduction
from equity (net of any income tax benefit) to the extent they are incremental
costs directly attributable to the equity transaction that otherwise would have
been avoided.
(h) Dividends
Dividend distributions to the Group's shareholders are recognised in the Group's
financial statements in the period in which the dividends are paid.
(i) Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held at call with
banks, other short term highly liquid investments and bank overdrafts.
(j) Trade and other receivables
Receivables are recognised initially at fair value plus transaction costs that
are directly attributable to their acquisition or origination. They are
subsequently measured at amortised cost.
(k) Trade and other payables
Payables are recognised initially at fair value and subsequently stated at
amortised cost.
(l) Investments and loan notes
Financial assets and liabilities at fair value through profit or loss
Purchases and sales of all investments are recognised on trade date - the date
on which the Group acquires or disposes of the economic benefits of the asset.
All investments are initially recognised at fair value, and transaction costs
for all financial assets and financial liabilities carried at fair value through
profit or loss are expensed as incurred. Investments are derecognised when the
rights to receive cash flows from the investments have expired or the Group has
transferred substantially all risks and rewards of ownership.
The fair value of financial instruments traded in active markets is based on
quoted market prices at the balance sheet date. The quoted market price used
for financial assets held by the Group is the current bid price. The fair value
of financial instruments that are not traded in an active market is determined
by using valuation techniques. Valuation techniques used include the use of
comparable recent arm's length transactions.
For broadly syndicated loans T2 receives market quotes from agent banks on a
quarterly basis. This information is reviewed by T2 management and used to
price the portfolio companies.
For bi-lateral loans, an independent third party performs portfolio company
evaluations. As part of this independent third party's due diligence they
review the following:
(i) Financial assets and liabilities at fair value through profit or loss
(continued)
- Audited and/or unaudited historical financial information including the most
recent fiscal year.
- Financial information for the most current period available.
- Financial forecast prepared by the Portfolio Company.
- Most current capitalisation table.
- T2 Investment Committee Memorandum prepared prior to the date of investment.
- Documents relating to business operations, financial performance and corporate
planning.
- Public filings by the Portfolio Companies
In assessing the fair value of each investment, a third party valuation firm
reviews the following:.
- Recent financial performance including cash flow and profitability on an
actual basis compared to plan.
- Funding history of the company, the implied valuation from the most recent
funding and anticipated future funding transactions.
- Company's capital structure.
- Recent business events disclosed by the Company.
- Potential requirement for additional funding.
The fair value of loan notes is determined primarily by reference to indicative
mid-market prices provided by a third party in good faith. Due to the limited
trading activity, or the absence of trading activity, in these securities, the
Directors do not believe that these prices represent a "market value" but
consider other factors in their fair value determination including trends in
credit spreads, interest rates and yields on similar securities. The Directors
believe that the mid-market convention is an accurate reflection of the fair
value of these securities, and is consistent with the other factors which have
been taken into consideration.
Gains and losses arising from changes in the fair value of the financial assets
and liabilities at fair value through profit or loss are included in the Income
Statement in the period in which they arise.
(ii) Derivative Financial Instruments
Derivatives are categorised as financial assets or liabilities held for trading
and valued at fair value through profit or loss.
(iii) Subsidiary
Investment in subsidiary is initially recorded at cost. After initial
recognition, the investment in subsidiary is measured at fair value, with
movements in the unrealised gains and losses recognised in the Company Income
Statement. Through its ownership of 100% of the preferred shares of T2 Income
Fund CLO I Ltd the Directors consider the CLO to be a wholly owned subsidiary
and the operating results are consolidated in these financial statements.
(m) Critical accounting estimates and judgements in applying accounting policies
The Group makes estimates and assumptions that affect the reported amounts of
assets and liabilities within the next financial year. Estimates are
continually evaluated and based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under
the circumstances. The Group also makes assumptions on the classification of
financial assets.
Unlisted Debt Securities
The Group can invest in financial instruments which are not quoted in active
markets. Fair values are determined by using valuation techniques. Where
valuation techniques, such as the Market Capitalization Approach, are used to
determine fair values they are carried out by an independent valuation firm
specifically engaged by the Group to carry out the valuations. Changes in
assumptions could affect the reported fair value of financial instruments. See
note 5 for carrying amount at year end.
(n) New standards
New standards and interpretations have been published that are mandatory for the
Group's accounting periods beginning on or after 1 January 2008 or later periods
and which the Group has not early adopted:
The Group has not early adopted the new standard IFRS 8 (Operating Segments),
therefore no additional disclosures have been made.
(o) Share based payments
Share options are valued in accordance with IFRS2 on an estimate of the fair
value of the services received.
3. FINANCIAL RISK MANAGEMENT
(1) Financial risk factors
The Group is exposed to a variety of financial risks: market risk (including
currency risk, fair value interest rate risk, cash flow interest rate risk and
price risk), credit risk and liquidity risk. The risk management policies
employed by the Group to manage these risks are discussed below. The primary
objectives of the financial risk management function are to establish risk
limits, and then ensure that exposure to risks stays within these limits. The
operational and legal risk management functions are intended to ensure proper
functioning of internal policies and procedures to minimise operational and
legal risks.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including
the criteria for recognition, the basis of measurement and the basis on which
income and expenses are recognised in respect of each class of financial asset,
financial liability and equity instrument are disclosed in note 2 to the
Financial Statements.
Capital Risk Management
The Group will seek to achieve a high level of current income by investing in
debt securities, consisting primarily of senior debt across multiple industries.
The Group intends to invest primarily in companies located in the United States,
Europe and the United Kingdom. The Group will target companies with attractive
fundamental characteristics including experienced management, a significant
financial or strategic sponsor or partner, a strong competitive position and
positive cash flow.
The capital structure of the Group consists of cash and cash equivalents and
equity attributable to equity holders, comprising share premium, distributable
reserves and retained earnings. The Group does not have any externally imposed
capital requirements. At 31 December 2007 the Group had total equity of
GBP39,452,097 (2006:GBP36,492,217).
The Group manages its capital to ensure that its objective is met. It does this
by investing available cash whilst maintaining sufficient liquidity to meet
on-going expenses and dividend payments.
The Investment Manager ensures that not more than 15% of the Group's gross
assets are invested in any one investment. The Group's leverage is capped at
500% of the Group's net asset value.
(a) Market risk
The Group's exposure to market risk is comprised mainly of movements in the
Group's investments. The investment portfolio is managed within parameters
disclosed in the Group's offering memorandum. All investments present a risk of
loss of capital.
At 31 December 2007, the Group's market risk is affected by three main
components: changes in actual market prices, interest rate and foreign currency
movements. Interest rates and foreign currency movements are covered at (b) and
(c) below.
The following details the Group's sensitivity to a 5% increase and decrease in
the market prices, with 5% being the sensitivity rate used when reporting price
risk to key management and represents management's assessment of the possible
change in market price.
If market prices had increased by 5% with all other variables held constant,
this would have increased net assets attributable to holders of equity shares by
approximately GBP1,286,285 (2006:GBP2,698,918), due to the increase in the fair
value of financial assets at fair value through profit or loss by GBP7,015,794
(2006:GBP2,698,918) offset by the increase in the fair value of the financial
liabilities at fair value through profit or loss by GBP5,729,509 (2006:GBPnil).
Conversely, if market prices had decreased by 5%, this would have decreased net
assets attributable to holders of equity shares by approximately GBP1,286,285
(2006:GBP2,698,918), due to the decrease in the fair value of financial assets
at fair value through profit or loss by GBP7,015,794 (2006:GBP2,698,918) offset
by the decrease in the fair value of the financial liabilities at fair value
through profit or loss by GBP5,729,509 (2006:nil).
(b) Interest rate risk
Interest rate risk is the risk that the value of financial instruments will
fluctuate due to changes in market interest rates. The Group has exposure to
interest rate risk because it has borrowed to fund investments. The exposure
arises on the difference between the rate of interest the Group is required to
pay on borrowed funds and the rate of interest which it receives on the debt
securities in which it invests.
The Group is exposed to risks associated with the effects of fluctuations in the
prevailing levels of market interest rates on its financial position and cash
flows. The Group's cash balances, debt instruments and loan notes are open to
interest rate risk.
The Group may, but is not required to, hedge against interest rate fluctuations
by using standard hedging instruments such as futures, options and forward
contracts.
The table below summarises the Group's exposure to interest rate risk.
Non- interest
Floating rate Fixed rate Bearing
Financial Financial Financial
Assets Assets Assets Total
At 31 December 2007 GBP GBP GBP GBP
Assets
Financial assets at fair value through
profit or loss 140,315,881 - - 140,315,881
Note receivable - 500,000 - 500,000
Trade and other receivables - - 1,119,113 1,119,113
Cash and cash equivalents 16,078,863 - - 16,078,863
Total assets 156,394,744 500,000 1,119,113 158,013,857
Liabilities
Loan notes 114,590,180 - - 114,590,180
Trade and other payables - - 3,971,580 3,971,580
Capital and reserves attributable to the
Company's equity holders - - 39,452,097 39,452,097
Total liabilities 114,590,180 - 43,423,677 158,013,857
Total interest sensitivity gap 41,804,564 500,000 (42,304,564) -
Non- interest
Floating rate Fixed rate Bearing
Financial Financial Financial
Assets Assets Assets Total
At 31 December 2006 GBP GBP GBP GBP
Assets
Financial assets at fair value through
profit or loss 53,978,368 - - 53,978,368
Note receivable - 500,000 - 500,000
Trade and other receivables - - 610,946 610,946
Cash and cash equivalents 4,929,513 - - 4,929,513
Total assets 58,907,881 500,000 610,946 60,018,827
Liabilities
Warehouse facility 22,374,308 - - 22,374,308
Trade and other payables - - 1,152,302 1,152,302
Capital and reserves attributable to the
Company's equity holders - - 36,492,217 36,492,217
Total liabilities 22,374,308 - 37,644,519 60,018,827
Total interest sensitivity gap 36,533,573 500,000 (37,033,573) -
A 25 basis point increase or decrease is used when reporting interest rate risk
internally to key management and represents management's assessment of the
possible change in interest rates.
3. FINANCIAL RISK MANAGEMENT (continued)
At 31 December 2007, should interest rates have lowered by 25 basis points with
all other variables remaining constant, the reduction in net assets attributable
to holders of equity for the year would amount to approximately GBP103,498
(2006:GBP64,389). If interest rates had risen by 25 basis points, the increase
in net assets attributable to holders of equity would amount to approximately
GBP103,498 (2006:64,389).
(c) Currency risk
Currency risk is the risk that the value of financial instruments will fluctuate
due to changes in foreign exchange rates. The Group may make investments in
currencies other than Sterling. To the extent that it does, the Group will be
exposed to a potentially adverse currency risk. Changes in the rate of exchange
may affect the value of the Group's investments, and the level of income that it
receives from those investments. The Group has entered into currency hedging
transactions to minimise this risk (see note 16).
Foreign currency denominated financial assets and liabilities, translated into
GBP at the closing rate, are as follows:
31 December 2007
Assets USD EUR GBP Total
Financial assets at fair value through profit
or loss account 137,374,272 2,941,609 - 140,315,881
Cash and cash equivalents 15,907,649 100,259 70,955 16,078,863
Trade and other receivables 1,049,316 - 569,797 1,619,113
Total assets 154,331,237 3,041,868 640,752 158,013,857
Liabilities
Trade and other payables 118,474,858 - 86,902 118,561,760
Total currency sensitivity gap 35,856,379 3,041,868 553,850 39,452,097
31 December 2006
Assets USD EUR GBP Total
Financial assets at fair value through profit or
loss account 49,060,856 4,917,512 - 53,978,368
Cash and cash equivalents 2,826,963 130,412 1,972,138 4,929,513
Trade and other receivables 574,186 35,675 501,085 1,110,946
Total assets 52,462,005 5,083,599 2,473,223 60,018,827
Liabilities
Trade and other payables 23,270,769 - 255,841 23,526,610
Total currency sensitivity gap 29,191,236 5,083,599 2,217,382 36,492,217
At 31 December 2007, had the exchange rate between the US dollar, EUR and GBP
increased or decreased by 5%, with all other variables held constant, the
increase or decrease respectively in net assets attributable to holders of
equity shares would amount to approximately GBP36,454 (2006: GBP52,411).
In accordance with the Group's policy, the Investment Manager monitors the
Group's currency position on a regular basis, and the Board of Directors reviews
it on a quarterly basis.
(d) Credit risk
Credit risk arises when a failure by counterparties to discharge their
obligations could reduce the amount of future cash inflows from financial assets
on hand at the balance sheet date. The Group invests primarily in senior debt,
senior subordinated debt and junior subordinated debt. The maximum investment
size, at the time of the investment, will generally be limited to 15% of the
Group's Gross Assets. However, the Group may make larger investments and it may
seek to syndicate or sell down a portion of any such investment, after it has
been acquired.
The Group has established a credit rating system. The purpose of the rating
system is to monitor the credit quality of T2's investment portfolio on both an
individual and portfolio basis and the future on-going monitoring required.
3. FINANCIAL RISK MANAGEMENT (continued)
(d) Credit risk (continued)
Portfolio by rating category 2007 2006
1 2% 0%
2 77% 100%
3 21% 0%
4 0% 0%
5 0% 0%
Total 100% 100%
Credit Ratings Level Ratings Criteria Methodology (1)
(General Parameters)
1 Company is ahead of expectations and this trend is expected to continue.
2 Full repayment of principal and interest is expected.
3 Closer monitoring is required. Full repayment of principal and interest is expected.
4 A reduction of interest income has occurred or is expected to occur. No loss of
principal is expected.
5 A loss of some portion of principal is expected. (2)
(1) These are guidelines and when determining a Credit Ratings Level and other
facts and circumstances may be considered.
(2) An estimate of the potential amount of principal loss will be determined on
a quarterly basis.
None of the Group's financial assets are secured by collateral or other credit
enhancements.
In respect of trade and other receivables, the Group is not exposed to any
significant credit risk exposure to any single counterparty or any group of
counterparties having similar characteristics.
The credit risk for liquid funds and other short-term financial assets is
considered negligible, since the counterparties are reputable banks with high
quality external credit ratings.
(e) Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets and
liabilities does not match. As the Group's investments will not generally be in
publicly traded securities, they are likely to be subject to legal and other
restrictions on resale or otherwise be less liquid than publicly traded
securities. The illiquidity of the Group's investments may make it difficult for
them to be sold quickly if the need arises. Since the Group intends to invest in
debt securities with a term of up to seven years, and hold investments in debt
securities and related equity securities until maturity of the debt, the Group
does not expect realisation events to occur in the near term.
The table below analyses the Group's financial liabilities into relevant
maturity groupings based on the remaining period at the balance sheet date to
the contractual maturity date. The amounts in the table are the contractual
undiscounted cash flow. Balances due within 12 months equal their carrying
balances, as the impact of discounting is not significant.
Current Non-Current
within 6 to 12 1 to 5 later No stated
6 months months years than 5 years maturity
At December 2007
Loan notes - - - 114,590,180 -
Trade and other payables 3,971,580 - - - -
Total financial liabilities 3,971,580 - - 114,590,180 -
At 31 December 2006
Warehouse facility - - 22,374,308 - -
Trade and other payables 1,152,302 - - - -
Total financial liabilities 1,152,302 - 22,374,308 - -
(2) Fair value estimation
The fair values of the Group's short-term trade receivables and payables
approximate their carrying amounts at the balance sheet date.
4. FUND EXPENSES
Management fee
The Investment Manager, T2 Advisers, LLC, is entitled to receive an annual fee
payable quarterly in advance. The management fee is calculated based on 2% of
the average value of the Company's gross assets at the most recently completed
calendar quarter and the projected gross assets as of the end of the current
calendar quarter.
Total fees charged for the year ended 31 December 2007 amounted to GBP2,420,301
(2006:GBP298,751). The total amount due and payable at the year end amounted to
GBP12,725 (2006:GBP57,207).
Administration and secretarial fees
The Administrator and Secretary, Butterfield Fund Services (Guernsey) Limited,
is entitled to an annual fee for its services, as administrator and secretary,
of 0.075% of the Net Asset Value of the Group, calculated on the last business
day of each quarter and payable quarterly in arrears. The fee is subject to a
minimum of GBP40,000 per annum. They are also due a fixed accounting fee of
GBP10,000 per annum plus a fixed fee of GBP5,000 for their registrar services.
Total Administration and secretarial fees (excluding accounting and registrar
fees) charged for the year ended 31 December 2007 amounted to GBP40,000 (2006:
GBP40,000). The total amount due and payable at the year end amounted to
GBP10,000 (2006:GBP20,000).
Custodian fees
The Custodian, Butterfield Bank (Guernsey) Limited is entitled to custody fees
of 0.02% of the Net Asset Value of the Group subject to a minimum of GBP15,000
per annum. The fee is payable quarterly in arrears.
Total fees charged for the year ended 31 December 2007 amounted to GBP15,043
(2006:GBP15,000). The total amount due and payable at the year end amounted to
GBP3,750 (2006:GBP3,780).
Directors fees
The current level of fees for the Chairman of the Board of Directors of the
Group is GBP25,000 per annum, and GBP20,000 each for non-executive directors.
Total fees charged to the Group for the year ended 31 December 2007 amounted to
GBP64,919 (2006:GBP65,000). The total amount due and payable at the year end
amounted to GBP16,321 (2006:GBP16,250).
Patrick Conroy received fees, as Chief Financial Officer to the Group, for the
year ended 31 December 2007 of GBP99,495 (2006:GBP50,000) . Fees outstanding at
the year end amounted to GBP54,165 (2006:4,167).
Loan note expenses
Total loan note expenses for 2007 was GBP3,054,047 (2006:GBP nil). These costs
are the transaction costs that were incurred as a direct result of the raising
and issuing of the loan notes raised and issued during the year.
Finance costs
Total finance costs for 2007 was GBP5,207,811 (2006:GBP104,215). These finance
costs are for interest paid to Merrill Lynch for the Warehouse facility
(GBP1,686,232) and interest due to the loan note holders (GBP3,521,579). The
liability for the Warehouse facility was repaid on 19 July 2007 (2006:
GBP22,374,308) and replaced with long-term notes. Long-term notes outstanding
at 31 December 2007 were GBP114,590,180.
5. EARNINGS PER SHARE
Earnings per share has been calculated by dividing the profit attributable to
ordinary share holders GBP1,605,583 Group, GBP1,709,156 Company (2006:GBP496,524
Group, GBP531,945 Company) by the weighted average number of ordinary shares
outstanding during the year 40,589,041 (2006:38,000,000). Fully diluted profit
per share has been calculated by dividing the profit attributable to ordinary
share holders of GBP1,605,583 Group, GBP1,709,156 Company (2006: GBP496,524
Group, GBP531,945 Company), by the weighted average number of ordinary shares
outstanding during the year adjusted for the effects of all dilutive potential
ordinary shares 45,098,934 (2006:42,222,222).
Date No. of shares No. of days Weighted average no. of shares
01/01/07 38,000,000 176 18,323,288
25/06/07 43,000,000 189 22,265,753
365 40,589,041
Date Fully diluted no. of No. of days Weighted average no. of shares
shares
01/01/07 42,222,222 176 20,359,208
25/06/07 47,777,777 189 24,739,726
365 45,098,934
6. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS
Group Group Company Company
2007 2006 2007 2006
GBP GBP GBP GBP
Listed debt securities 30,063,114 8,127,281 - 6,085,423
Unlisted debt securities 110,252,767 45,851,087 4,227,734 20,316,155
140,315,881 53,978,368 4,227,734 26,401,578
(Loss)/Gains recognised in relation to
financial assets at fair value through profit
or loss
- realised (1) (1,730,802) (248,633) (547,568) (248,633)
- unrealised (2) (6,820,160) (1,835,169) 3,198,134 (1,630,983)
(8,550,962) (2,083,802) 2,650,566 (1,879,616)
Group Group Company Company
2007 2006 2007 2006
GBP GBP GBP GBP
Opening value of financial assets 55,780,153 5,854,260 27,387,224 5,854,260
Purchases 137,310,167 59,465,371 10,226,998 41,570,229
Sales (40,750,789) (8,307,610) (18,877,404) (8,307,610)
Realised loss on sale of investments (1,730,802) (248,633) (547,568) (248,633)
Transfer to subsidiary - - (14,125,152) (10,775,207)
Capital repayments (1,670,903) - (705,815)
Cost of investments at year end 148,937,826 55,780,153 4,064,098 27,387,224
Unrealised (loss)/gain at year end (8,621,945) (1,801,785) 163,636 (985,646)
Closing value at year end 140,315,881 53,978,368 4,227,734 26,401,578
(1) For the year ended 31 December 2007 the Group had a realised gain on
financial assets and liabilities at fair value through the profit and loss
account of GBP1,768,561. This is comprised of a realised loss on financial
assets of GBP1,730,802 and a realised gain on liabilities of GBP3,499,363.
6. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS (continued)
(2) For the year ended 31 December 2007 the Group had an unrealised gain on
financial assets and liabilities at fair value through the profit and gain of
GBP122,030. This is comprised of an unrealised loss on financial assets of
GBP6,820,160 and an unrealised gain on liabilities of GBP6,942,190.
7. INVESTMENT IN SUBSIDIARY
Company Company
2007 2006
GBP GBP
Opening value of Investment in subsidiary 6,934,680 -
Additions at cost 22,993,548 6,934,680
Cost of Investment in subsidiary at year end 29,928,228 6,934,680
Unrealised gain/(loss) on net assets transferred to subsidiary 1,436,898 (611,954)
Closing fair value of Investment in subsidiary 31,365,126 6,322,726
The cost of the investment is represented by the net assets transferred to the
subsidiary.
The Company from time to time makes asset transfers between the Company, T2
Income Fund Limited, and the subsidiary, T2 Income Fund CLO I Ltd.
8. TRADE AND OTHER RECEIVABLES
Group Group Company Company
2007 2006 2007 2006
GBP GBP GBP GBP
Accrued bank interest 32,312 6,138 - 6,138
Loan interest receivable 1,060,213 444,417 169,909 312,011
Prepaid expenses 26,588 28,106 26,589 28,106
Unrealised gain on forward exchange contracts - 132,285 - 132,285
1,119,113 610,946 196,498 478,540
Non current assets
Note receivable 500,000 500,000 500,000 500,000
The GBP500,000 note receivable relates to a promissory note due for payment in
2009 from T2 Advisers, LLC, the Company's Investment Manager. This note, which
is subject to certain conditions, was signed on 5 December 2006 and is subject
to interest of 8% per annum, compounded annually. The promissory note is
recognised in the financial statements as the Directors, having reviewed the
conditions pertaining to the promissory note, deem that receipt of payment is
virtually certain.
9. CASH AND CASH EQUIVALENTS
Group Group Company Company
2007 2006 2007 2006
GBP GBP GBP GBP
Call account 16,078,863 4,929,513 3,380,265 3,854,472
For the purposes of the Cash Flow Statement, the above items represent the year
end cash and cash equivalents.
Included within call account balances is an amount held as Collateral by RBC
Capital Markets for GBPnil (2006:GBP1,413,332 (US$2,768,717)) in relation to the
forward exchange contracts.
10. TRADE AND OTHER PAYABLES
Group Group Company Company
2007 2006 2007 2006
Current liabilities GBP GBP GBP GBP
Due to RBC - 896, 461 - 896,461
Due to Subsidiary - - 56,440 -
Management fees 12,725 57,207 12,725 57,207
Administrator's fees 10,000 20,000 10,000 20,000
Custodian's fees 3,750 3,780 3,750 3,780
Audit fees 35,204 28,500 35,204 28,500
Directors' fees 16,321 16,250 16,321 16,250
Finance cost (1) 3,556,392 86,788 - -
Unrealised loss on forward exchange contracts 5,266 - 5,266 -
Other accruals 331,922 43,316 77,820 42,901
3,971,580 1,152,302 217,526 1,065,099
Non current liabilities
Warehouse facility - 22,374,308 - -
Loan notes 114,590,180 - - -
On 21 November 2006 T2 Income Fund CLO I Ltd. entered into a credit and
warehouse agreement (the "Agreement") by and among Merrill Lynch Capital Corp.,
T2 Income Fund CLO I Ltd. (as the Issuer), T2 Advisers, LLC (as the Collateral
Manager) and T2 Income Fund Limited. The facility amount was US$200,000,000.
Interest due to Merrill Lynch was calculated daily on the total amount at 1
month LIBOR plus 50 basis points. Merrill Lynch provided funding of 80% of the
par value of loans assigned to T2 Income Fund CLO I Ltd.
On 19 July 2007 the Warehouse facility was repaid and loan-notes were issued in
the amount of US$309,050,000 with a twelve year term. The "Indenture" dated 19
July 2007 is among T2 Income Fund CLO I Ltd as the "Issuer", T2 Income Fund CLO
I LLC as the "Co-Issuer" and The Bank of New York Mellon as the "Trustee".
(1) Interest on the loan-notes is calculated on a weighted average interest rate
of LIBOR plus 75 basis points.
11. SHARE CAPITAL
The Company has the power to issue an unlimited number of ordinary shares of no
par value.
On incorporation two Ordinary Shares were issued at 100p each to the subscribers
to the Memorandum of Association of the Company. On Admission to the AIM on 5
August 2005 the Company repurchased these Ordinary Shares.
On Admission to the AIM on 5 August 2005 the Company allotted 38,000,000 fully
paid Ordinary Shares.
During the year 5,000,000 Ordinary Shares of no par value were issued at 101.75p
per Share.
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares are shown in equity as a deduction from
the proceeds, net of tax.
On 15 June 2007 Court approval was received to reduce the issued share premium
of the Company by an amount of £0.95 per share and that the aggregate of such
reduction be credited as a distributable reserve.
The distributable reserve may be applied in any manner in which the Company's
profits available for distribution are able to be applied, including the
purchase of the Company's own shares and the payment of dividend.
11. SHARE CAPITAL (continued)
The Investment manager, T2 Advisers LLC, has been granted options to purchase
4,222,222 Ordinary Shares at the Placing Price, as reduced by dividends paid per
share, subject to the Company achieving certain performance criteria as follows:
The Investment manager options vested and became exercisable in respect of 50
per cent immediately on conclusion of the first three month period during which
the Company paid dividends on the Shares in an aggregate amount during that
three month period equal to or exceeding 8 per cent of the Initial Offer Price
on an annualised basis (the hurdle rate). The remaining 50 per cent vest and
become exercisable immediately on conclusion of the twelve month period
following the date specified above.
On 23 February 2007 the hurdle rate was met. Accordingly on 31 March 2007 the
options on 2,111,111 of these Ordinary shares became vested. The remaining
options for 2,111,111 Ordinary shares vested on 31 March 2008.
The Investment Manager has been granted options to purchase 555,555 Ordinary
Shares at 101.75p per Share, based upon the 5,000,000 Ordinary Shares issued in
June 2007, in accordance with the terms of the Investment Manager Agreement.
In accordance with IFRS2, the value of the options was based upon an estimate of
the fair value of the services received. The Company believes that the fair
value can be determined by a comparison to a performance-based incentive fee
program, which arrangements are common practice in the industry, because the
option program was similarly intended to compensate the Investment manager for
achieving superior returns. The fair value estimate was based, in good faith,
upon the present value of a hypothetical performance-based incentive fee,
assuming a fee of 20% of the excess return above an 8% hurdle rate over a
ten-year period; the fair value of the options was determined to be £100,000.
For the year ending 31 December 2007 the Company charged £85,833 (2006: £10,000)
to expenses representing the amortisation of the fair value of the options.
The calculation of fair value is sensitive to a number of assumptions, including
the average interest rate on investments, the pace of investment activity, the
amount and cost of leverage, if any, and expenses. It should be noted that the
actual value of the options may ultimately be substantially greater or less than
the fair value calculated. If actual financial performance is significantly
better than the assumptions used in the calculation of fair value, the options
could be worth several million pounds; to the extent that the performance
criteria is not achieved, the options would expire worthless.
Share Capital
Ordinary shares - nil par value Shares in issue Shares in issue
Balance at start year 38,000,000 38,000,000
Issued during the year 5,000,000
-
Balance at end year 43,000,000 38,000,000
31 December 31 December 2006
2007
Share Premium GBP GBP
Balance at start year 36,694,149 36,694,149
Issued during year 5,087,500 -
Issue costs (62,609) -
Transfer to distributable reserves (36,100,000) -
Balance at end year 5,619,040 36,694,149
12. NET ASSET VALUE PER SHARE
The net asset value per Ordinary Share is calculated by dividing the net assets
at the year end of GBP39,452,097 (2006:GBP36,492,217) by the Ordinary Shares in
issue at the end of the year being 43,000,000 (2006:38,000,000).
13. CASH GENERATED FROM OPERATIONS
Group Group Company Company
2007 2006 2007 2006
GBP GBP GBP GBP
Profit for the year 1,605,583 496,524 1,709,156 531,945
Adjustments for:
Realised (gain)/loss arising on adjustment
to financial assets and liabilities (1,768,561) 248,633 547,568 248,633
Unrealised (gain)/loss arising on adjustment
to financial assets and liabilities (122,030) 1,835,169 (3,198,134) 1,630,983
Amortisation of fair value of options 85,833 10,000 85,833 10,000
Foreign exchange on consolidation 103,573 35,421 - -
Changes in working capital:
Trade and other receivables (508,167) (1,070,506) 282,042 (938,100)
Trade and other payables 2,819,278 (3,569,803) (847,573) (3,657,006)
Cash inflow/(outflow) from operations 2,215,509 (2,014,562) (1,421,108) (2,173,545)
14. CONSOLIDATED SUBSIDIARY UNDERTAKING
Through its 100% ownership of preferred shares in T2 Income Fund CLO I Ltd., the
Directors consider the following entity as a wholly owned subsidiary of the
Company and its results and financial position are included within the
consolidated results of the Company.
Date of Country of incorporation Nature of % holding
incorporation holding
T2 Income Fund CLO I Ltd. 11 October 2006 Cayman Islands Direct 100%
15. RELATED PARTY TRANSACTIONS
Saul Rosenthal is a member of BDC Partners which owns T2 Advisers, LLC., the
Investment Manager.
Saul Rosenthal and Patrick Conroy are officers of T2 Advisers, LLC., the
Investment Manager.
Patrick Firth is a director of the Administrator, Butterfield Fund Services
(Guernsey) Limited.
The following transactions were carried out with related parties in addition to
the related party transactions disclosed in note 4:
Group Group Company Company
2007 2006 2007 2006
GBP GBP GBP GBP
Amounts incurred during the year to
related parties
Fees due to P Conroy as Chief Financial
Officer to the Company 99,495 50,000 99,495 50,000
Fees due to the Investment Manager, T2
Advisers, LLC 2,420,301 798,751 2,420,301 798,751
Note receivable from the Investment
Manager, T2 Advisers, LLC - (500,000) - (500,000)
Reimbursement due to BDC Partners, LLC 193,974 28,912 193,974 28,912
Amounts due to related parties at the year end
Fees due to P Conroy as Chief Financial
Officer to the Company 54,165 4,167 54,165 4,167
Due to subsidiary in relation to Wall
Street Office system - - 56,440 -
Fees due to the Investment Manager, T2
Advisers, LLC 12,725 57,207 12,725 57,207
Amounts due from related parties at the year end
Note receivable from the Investment
Manager, T2 Advisers, LLC 500,000 500,000 500,000 500,000
15. RELATED PARTY TRANSACTIONS (continued)
The Investment Manager has been granted options giving it the right to acquire a
total of 4,777,777 Ordinary Shares, refer note 11.
Directors shareholdings in Company
Saul Rosenthal has a beneficial interest in 1,319,445 ordinary shares (2006:
1,055,556) in the Company as at 31 December 2007. Through his ownership
interest in T2 Advisers, LLC, the Investment Manager, Mr Rosenthal has an
interest of 1,194,445 shares related to the share option plan (re note 11), and
125,000 shares relate to a purchase of shares during the year for his own
account. This is equal to a beneficial interest of 2.8% based on the Share
Capital as at that date when diluted by the number of Ordinary Shares subject to
the option.
16. COMMITMENTS
At the balance sheet date the following commitment in respect of forward foreign
exchange contracts existed:
Unrealised
Contract amount - GBP Buy Sell loss
GBP1,563,524 (USD3,100,000) USD GBP (5,266)
17. POST BALANCE SHEET EVENTS
Since the year end the Group has made a number of new investment purchases,
these are detailed below:
Date Par Amount Purchase Price
4 January 2008 US$4,000,000 Houghton International 99.50
12 March 2008 US$3,000,000 Paetec 90.75
14 March 2008 US$5,000,000 HCA,Inc. 91.75
Portfolio Statement of the Group
For the year ended 31 December 2007
Fair Value % of net assets
GBP
Atlantic Inertial 2,421,382 6.14%
4437667 Canada Inc. (Mold Master) 2,958,239 7.50%
Attachmate 4,370,064 11.08%
Cavalier Telephone 5,206,354 13.20%
Conner Steel 2,425,402 6.15%
Corel 5,540,960 14.04%
CPM Holdings 1,887,664 4.78%
DTN 2,433,928 6.17%
Emdeon Business Services LLC 3,028,153 7.68%
Express Energy 4,393,944 11.14%
First Data Corp B1 Term Loan 4,292,087 10.88%
Ford 4,155,987 10.53%
Georgia Pacific LLC 2,389,834 6.06%
Hudson Products Holdings Inc. 1,164,120 2.95%
Inverness Medical 2,393,154 6.07%
InfoNXX 3,368,532 8.54%
Infor Global 2,868,815 7.27%
Investools 4,403,087 11.16%
Koosharem Corp 1st Lien Credit 1,286,125 3.26%
Koosharem (Select Remedy) 2nd 2,723,559 6.90%
Krispy Kreme 2,547,041 6.46%
Merrill Corp 471,579 1.20%
Metrologic 1st lien 1,411,636 3.58%
Metrologic 2nd lien 1,392,041 3.53%
MR Default 1,590,331 4.03%
NameMedia, Inc. 2,995,915 7.59%
Nova 10.75% 2,941,609 7.46%
NPC 1st lien 1,855,169 4.70%
NPC 2nd lien 1,896,404 4.81%
Navisite 1,927,072 4.88%
Nuvox 3,394,327 8. 60%
Oshkosh Trucks 2,875,723 7.29%
PAETEC Holding Corp. 1,297,069 3.29%
Peacock Engineering 1,497,957 3.80%
Pegasus 5,055,375 12.81%
Prodigy Health 1st lien 2,696,326 6.83%
Prodigy Health 2nd lien 887,678 2.25%
Proquest 4,165,229 10.56%
QA Direct Holdings, LLC 2,777,104 7.04%
Realogy 5,291,913 13.41%
Sirsi Dynix 865,002 2.19%
SkillSoft 2,935,769 7.43%
Stratus Technologies 2,977,083 7.55%
Sunquest Holdings(Misys) 1,982,146 5.02%
Topps Co. Inc. 2,874,868 7.29%
TravelCLICK Acquisition Co 2,007,364 5.09%
Tribune 2,135,960 5.40%
TVC 1,932,088 4.90%
VS Holdings (CBA Group) 3,285,520 8.33%
Wimar Landco (Tropicana) 2,950,522 7.48%
Workflow 1,703,420 4.32%
X-rite 1st Lien 1,987,251 5.04%
Total financial assets at fair value through profit or loss 140,315,881 355. 66%
Cash balances 16,078,863 40.76%
Other net liabilities (116,942,647) -296.42%
Net Assets 39,452,097 100.00%
This information is provided by RNS
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