TIDMRIG
For release on Thursday 19 June 2014
CQS Rig Finance Fund Limited
(the "Company")
Unaudited Half-Yearly Report and Condensed Financial Statements
The Company announces its unaudited half-yearly results for the six
months ended 31 March 2014. A full copy of the unaudited half-yearly
report will from today be available on the Company's website:
www.cqsrigfinance.com and is set out below.
Enquiries:
Secretary
Kleinwort Benson (Channel Islands) Fund Services Ltd
Tel: +44 (0)1481 710 607
Alastair Moreton/Hannah Young/Darren Vickers
NOMAD and Broker
Westhouse Securities Limited
Tel: +44 (0)20 7601 6118
CQS RIG FINANCE FUND LIMITED
HALF YEARLY REPORT AND CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
FOR THE SIX MONTHS ENDED 31 MARCH 2014
Registered Number: 45805
Page
Management and Administration 1
Chairman's Statement 2
Investing Policy 4
Investment Manager's Report 5
Financial Statements
Unaudited Condensed Statement of Comprehensive Income 8
Unaudited Condensed Statement of Financial Position 9
Unaudited Condensed Statement of Changes in Equity 10
Unaudited Condensed Statement of Cash Flows 11
Notes to the Unaudited Condensed Financial Statements 12
Directors Nominated Adviser and Broker
Michael Salter (Chairman) (UK resident) Westhouse Securities Limited
Bruce Appelbaum (US resident) Heron Tower
Trevor Ash (Guernsey resident) 110 Bishopsgate
Jonathan Gamble (Guernsey resident) London EC2N 4AY
Gavin Strachan (UK resident) England
Investment Manager Sub-Administrator
CQS Cayman Limited Partnership State Street Fund Services (Ireland) Limited
PO Box 242 78 Sir John Rogerson's Quay
45 Market Street Dublin 2
Gardenia Court Ireland
Camana Bay
Grand Cayman KY1-1104
Cayman Islands
Prime Broker and Custodian Registrar, Transfer Agent & Paying Agent
Credit Suisse Securities (Europe) Limited Capita Registrars (Guernsey) Limited
One Cabot Square Mont Crevelt House
London E14 4QJ Bulwer Avenue
England St Sampson
Guernsey GY2 4LH
Independent Auditor
Ernst & Young LLP
2(nd) Floor
Royal Chambers
St Julian's Avenue
St Peter Port
Guernsey GY1 4AF
Investment Adviser
CQS (UK) LLP
5th Floor
33 Grosvenor Place
London SW1X 7BL
England
Administrator and Secretary
Kleinwort Benson (Channel Islands) Fund Services Limited
Dorey Court
Admiral Park
St. Peter Port
Guernsey GY1 2HT
Registered Office
Dorey Court
Admiral Park
St. Peter Port
Guernsey GY1 2HT
Introduction
I present the Company's interim report for the six months from 1 October
2013 to 31 March 2014.
Investment Performance
The Company's performance for the period under review was positive,
despite a number of economic and geopolitical headwinds.
The Company's Net Asset Value ("NAV") increased from 35.65 pence per
ordinary share on 30 September 2013 to 35.75 pence per ordinary share on
31 March 2014. The total return to shareholders (appreciation in NAV
plus dividend income net of tax) over the interim period was 2.73%.
The price per ordinary share ended the period unchanged, with a closing
price of 34.25 pence on both 30 September 2013 and 31 March 2014. When
including the 0.87 pence interim dividend, this represents a return of
2.54%. During the period under review, the ordinary share's discount to
NAV rose from 3.9% at the beginning of the period to 4.2% at the end of
the period.
Cancellation of Channel Islands Securities Exchange Listing
On 16 January 2014, the Company announced that, as a consequence of the
notification by CQS (UK) LLP, CQS Asset Management Limited and CQS
Cayman Limited Partnership on 10 January 2014 that their shareholding in
the Company had increased to 65.54%, the Company did not satisfy the
requirements of the listing rules of the Channel Islands Securities
Exchange ("CISE") to have at least 25% of the Company's securities in
public hands. Accordingly, the Company's ordinary shares were suspended
from trading on the CISE at the request of the Company with effect from
8.00 a.m. on 17 January 2014.
The Company confirmed that its shares were cancelled from the Official
List of the CISE at 7.00 a.m. on Monday, 3 March 2014. The admission of
the Company's shares to trading on AIM was unaffected by the
cancellation of the CISE listing.
Outlook
The Company does not have a fixed life and, in accordance with the
Articles of Association, shareholders were provided with the opportunity
to vote on the continuation of the Company at the annual general meeting
of 5 March 2014. Specifically, an ordinary resolution in respect of the
Company's continuing for a further five year period ("continuation
vote") was voted on by shareholders at the annual general meeting of 5
March 2014. As a result of the outcome of the continuation vote, it was
resolved that the Company shall continue its investment activities for a
further five year period.
Since that date, the Company has been in discussion with its advisers in
connection with the strategic outlook for the Company. It has been
informed by the Company's largest shareholders, CQS (UK) LLP, CQS Asset
Management Limited and CQS Cayman LP, who together hold 65.54% of the
share capital of the Company, that they would support a shareholder
voluntary liquidation of the Company. An announcement to this effect was
made by the Company on 20 May 2014.
Accordingly the Board is making arrangements to convene an extraordinary
general meeting of shareholders to consider proposals to cancel its
admission to trading on the Alternative Investment Market ("AIM"), to
vote the Company into shareholders' voluntary liquidation and thereafter
to facilitate the return of available cash to shareholders.
A circular containing full details of the proposals and setting out the
anticipated timetable for the return of capital will be posted to
shareholders in due course.
Dividends
Further to the Company's policy to pay regular cash distributions in the
form of the semi-annual dividend payment and to target dividends
equivalent to an annual yield of 5% of NAV per ordinary share at the
start of each financial year, the Board proposed a final dividend of
0.87 pence per ordinary share in respect of the financial year ended 30
September 2013. The final dividend was approved at the annual general
meeting on 5 March 2014, and paid on 9 April 2014 to those shareholders
who were of record on 14 March 2014.
In light of the anticipated outcome of the extraordinary general meeting
of the shareholders as discussed above, an interim dividend has not been
declared.
I would like to thank shareholders for their support over the life of
the Company.
Michael Salter
Chairman
18 June 2014
The Company's investing policy in the period under review was as
follows:
The Company's investment objective is to provide shareholders with an
attractive total return, through a combination of capital appreciation
and dividends.
The Investment Adviser seeks to achieve the investment objective of the
Company by sourcing and trading a portfolio comprising predominantly
debt instruments. The Investment Adviser seeks to use fundamental credit
and industry analysis to identify instruments expected to provide
attractive risk-adjusted returns which meet the investment objective of
the Company. Such instruments are expected to be issued primarily to
finance companies involved in the construction, modification and
operation of offshore rigs and related infrastructure equipment, and
companies involved in the development and operation of assets used in
the offshore and/or onshore exploration, production and distribution of
oil, natural gas and other resources. Investments in adjacent sectors
such as shipping and transportation may be included at the discretion of
the Investment Adviser.
It is expected that the Company's portfolio will continue to be
passively managed, although the Investment Adviser may elect to become
actively involved in workout situations should they arise. It is
expected that some investments will be held through to maturity (or
earlier redemption/repayment by the issuer/borrower), while others may
be held for shorter terms to capture mispricing of risk. The Investment
Adviser may trade investments depending on the prevailing market
conditions at any time.
The Company seeks, on a global basis, to capture on its investments
attractive risk-adjusted yields and potential capital appreciation
arising from possible corporate activity, including but not limited to,
refinancing, industry consolidation and workouts, and from equity
appreciation for securities exhibiting equity characteristics. The
Company is permitted to borrow to enhance the returns of the portfolio.
The gearing of the portfolio is not expected to exceed 30% of Net Asset
Value, and from time to time the portfolio may be constructed with
little or no gearing. The Company may retain amounts in cash, or cash
equivalents, pending reinvestment if this is considered appropriate to
the achievement of its investment objective.
The Company may construct the portfolio using a range of securities,
derivatives and other agreements including but not limited to positions
in secured, unsecured and subordinated bonds, including convertible
bonds, that may be fixed or floating rate securities, payment-in-kind
bonds, senior, second lien and mezzanine loans, equities and equity
warrants. The Company may trade both rated and unrated debt instruments
although it expects, in most cases, that such instruments will not be
rated by a recognised rating agency. Exposure to securities may be taken
directly or synthetically through the use of repurchase agreements,
total return swaps and other derivatives referencing the securities
selected for the portfolio. Interest rate and foreign exchange
transactions may be effected using swaps, forwards, futures and options
and other derivatives. The Company may trade listed and unlisted
securities, and may execute derivative transactions on exchange or over
the counter.
Dividend Policy
Pursuant to the announcement on 14 February 2012 the Company's dividend
policy is to make regular cash distributions in the form of semi-annual
dividend payments and to target dividends equivalent to an annual yield
of 5% of the Net Asset Value per share at the start of each financial
year.
For the six months ended 31 March 2014
Oil Markets
The price of Brent Crude oil opened the period at close to $103 per
barrel and ended at approximately $108 per barrel, trading focusing
within this narrow range for the most part.
Barclays presents a balanced view in the notes of its Global Energy
outlook for March 2014. "Despite pockets of weakness in global business
confidence and mixed signals on growth from several of the world's major
oil-consuming nations, crude oil balances have been much tighter than
expected this year, providing robust support to prices. This may be as
good as it gets for oil. Cold weather, a burst of surprisingly strong
Chinese import demand and high investor interest levels have been some
of the key supports for prices so far this year. All those factors are
likely to fade in the second quarter of 2014 calendar year, and we see
the potential for significant price volatility in the short term. But
after the anticipated weakness in the second quarter, we see a robust
recovery for oil prices in the second half of 2014. Global oil demand
looks much healthier than it did a few months ago, with a stronger
picture in the Former Soviet Union, Middle East and Latin America.
Inventories are very low and geopolitical risk still high."(1)
It further states that overall industry spending continues to grow: "Our
E&P spending survey forecasts a 6% rise in 2014, with
higher-than-average growth in deep-water globally and onshore in the
US". However, it is noted that this is a deceleration in growth from
2013 calendar year and that capital discipline is a theme amongst the
oil majors. Another key theme is the diversion of capital expenditure
toward the onshore North American shale fields and away from oil sands
and the deepwater.(2) These factors, coupled with an oversupply of new
build rigs, have led analysts to sharply downgrade forecasts for
dayrates and rig utilisation levels.(3)
Financial Markets
Newsflow from the US dominated for much of the first half of the period,
as US lawmakers reached a budget deal and agreed to raise the borrowing
ceiling. The US Federal Reserve ("Fed") confirmed it would begin to
taper its asset purchase programme from January 2014 and upgraded its
assessment of the economy. In contrast, central banks in Europe and Asia
looked for ways to relax monetary policy. Interest rates in Europe were
cut to 0.25% in November, while China suffered its second cash crunch of
the year in December 2013, forcing an injection of liquidity from its
central bank. Softer-than-anticipated economic data from the US and
China at the start of 2014, coupled with the Fed's tapering of its asset
programme, exacerbated headwinds for Emerging Markets and catalysed a
sell-off in assets. However, these concerns began to dissipate by
February 2014, with equity markets rebounding and credit indices
tightening after a sluggish opening to 2014, despite the geopolitical
issues in Ukraine and further weaker data from the US. As the period
drew towards its close, markets began to refocus on new Fed Chair Janet
Yellen's suggestion that interest rate hikes may commence sooner than
market consensus. This sparked a sell-off which was short lived, as
markets instead began to focus on improving data which lent credence to
the theory that recent economic weaknesses were a result of poor weather
conditions. Emerging markets were boosted following speculation of the
introduction of stimulus measures to support the Chinese economy. The
MSCI World Index rose 8.4% net in US Dollars, while the S&P 500 posted
an 11.3% rise over the period and the Eurostoxx advanced 9.3%. Credit
markets were also strengthened, with European iTraxx Crossover (S20)
tightening to 227.8bps and iTraxx Main (S20) tightening to 67.2bps.
Financing Markets
European high yield issuance maintained its upwards trajectory over the
six month period to 31 March 2014, with a record EUR41.6bn issued across
all currencies. This represents an increase of 7.5% on the EUR38.7m of
issuance over the same period of last year, a slightly slower pace of
growth than has been seen in previous periods. However, it should be
borne in mind that 2013 was a record year overall for issuance of
European high yield, as loan-to-bond refinancing and corporate activity
remained elevated. With supportive government policies in Europe keeping
government bond yields low, the search for yield remained as strong as
ever, and lower-rated bonds outperformed as credit spreads continued to
squeeze tighter.
For the six months ended 31 March 2014 (continued)
The Portfolio
As at 31 March 2014, the portfolio was exposed to various sub-sectors of
the oil industry.
Performance over the period was boosted by both a general appreciation
in the value of a majority of the Company's investments and by carry.
The higher-coupon bonds issued by Golden Close, Chloe Marine and
Bluewater contributed most to the positive returns. A smaller position
in the Maire Tecnimont convertible bonds recorded healthy profits as the
bonds were marked up 28 points during the period. More modest losses
were posted by Ion Geophysical and Lukoil bonds, positions which were
exited during the period.
There were cash inflows over the period as bonds were redeemed at a
premium, particularly those issued by Afren Plc and Ocean Rig UDW Inc.,
which were redeemed at prices of 116.5 and 105.375 respectively.
Proceeds were reinvested into both new issuance and the secondary
market.
Analysed by face value, ultra-deepwater drilling rigs are the largest
category and account for 42% of assets, reduced from 51.4% from the end
of March 2013. Dayrates and utilisation have been falling during the
period as the effects of an oversupplied market were felt. Analysts
broadly anticipate a continuance of the trend in the medium term.
Research from Platou Markets stated that "following a general activity
slowdown in the offshore drilling space, we expect dayrates and
utilisation to continue to slide". That said, our bottom-up demand study
indicates a stronger market by 2016. Although we expect a challenging
2014 and 2015, companies with a modern asset base and strong contract
backlog are best suited to weather this market"(4) .
Service vessels made up 13.6% of the portfolio, up from 10.0% as at
March 2013, with the increase driven by new issuance and upsizing of the
position in Subsea 7 SA convertible bonds. Jack-up rigs made up 10.1% of
the portfolio following issuance by Oro Negro Drilling and Santa Maria
Offshore Ltd. to finance jack-up rigs on contract to Pemex in Mexico.
The remainder of the portfolio's assets was invested in related areas
such as exploration, accommodation vessels, transport vessels and
FPSO's.
Exposure by Collateral Type (% Long Market Value)
UDW Driller 42.01%
Service Vessel 13.61%
Jack-up 10.14%
E&P 9.89%
Transport 9.46%
Accommodation Vessel 5.84%
FPSO 4.21%
Seismic Vessel 3.14%
Well Intervention 1.70%
Total 100.00%
Seniority Analysis (% Long Market Value)
1st Lien 39.36%
2nd Lien 15.74%
Unsecured 27.09%
Equity 0.10%
Convertible 17.71%
Total 100.00%
For the six months ended 31 March 2014 (continued)
Financing
The Company continues to operate a Prime Brokerage Agreement with Credit
Suisse Securities (Europe) Limited that allows the Company to borrow in
one or more currencies against assets of the Company. The Company was in
a small negative cash position at the end of the period.
Outlook
The Company has been in discussion with its advisers in connection with
the strategic outlook for the Company. It has been informed by the
Company's largest shareholders, CQS (UK) LLP, CQS Asset Management
Limited and CQS Cayman LP, who together hold 65.54% of the share capital
of the Company, that they would support a shareholder voluntary
liquidation of the Company. An announcement to this effect was made by
the Company on 20 May 2014.
Accordingly the Board is making arrangements to convene an extraordinary
general meeting ("EGM") of shareholders to consider proposals to cancel
its admission to trading on AIM, to vote the Company into shareholders'
voluntary liquidation and thereafter to facilitate the return of
available cash to shareholders.
A circular containing full details of the proposals and setting out the
anticipated timetable for the return of capital will be posted to
shareholders in due course.
In anticipation of the outcome of the EGM the Investment Manager has
started to realise the portfolio with the objective of realising the
positions at their full market value. As announced on 16 June 2014 the
portfolio was 98.34% in cash and cash equivalents.
All market data sourced from Bloomberg and CQS Cayman Limited
Partnership.
(1) Source: Barclays, "Global Energy Outlook: Persevere, more
outperformance likely", March 2014 (Page 11)
(2) Source: Bernstein Research, "Why is US onshore so good and the
offshore so bad? Explaining the current dynamics in energy capex"
(3) Source: UBS Offshore Drillers: Off the Deep End; Cutting est Pt 2
(4) Source: Platou Markets AS (Page 3)
CQS Cayman Limited Partnership
June 2014
Six months ended Six months ended
31 March 2014 31 March 2013
GBP GBP
Notes Unaudited Unaudited
Operating income 4 1,592,098 2,410,296
Expenses
Operating expenses 5 (627,876) (568,280)
Finance costs (23,408) (4,955)
Total expenses (651,284) (573,235)
Net profit 940,814 1,837,061
Total comprehensive income for the period 914,814 1,837,061
Earnings per ordinary share
Basic and Diluted 6 0.97p 1.89p
For the period ending 31 March 2014, the Company has changed the basis
of presenting its financial statements from going concern to break up
basis (refer to note 2).
All income is attributable to the ordinary shareholders of the Company.
The accompanying notes form an integral part of the unaudited condensed
financial statements.
31 March 30 September 31 March
2014 2013 2013
Notes GBP GBP GBP
Assets Unaudited Audited Unaudited
Non-current assets
Financial instruments designated at fair value through
profit or loss 7 - 29,319,859 30,441,651
Current assets
Financial instruments designated at fair value through
profit or loss 7 37,641,237 4,539,521 4,358,078
Interest receivable 717,292 707,972 727,740
Receivable for securities sold 199,874 376,832 -
Derivative financial assets at fair value 125,423 778,348 141,182
Other assets 4,470 9,231 22,556
Cash and cash equivalents 9 63,327 2,186,170 2,163,882
38,751,623 8,598,074 7,413,438
Total assets 38,751,623 37,917,933 37,855,089
Equity and liabilities
Equity
Other reserve 85,848,877 86,696,344 87,543,811
Accumulated losses (51,025,134) (51,965,948) (52,561,255)
34,823,743 34,730,396 34,982,556
Current liabilities
Financial instruments designated at fair value through
profit or loss 7 2,868,218 1,398,918 1,583,748
Dividend payable 847,467 - 672,129
Other liabilities and payables 10 100,636 104,217 124,844
Liquidation expenses payable 2 75,000 - -
Derivative financial liabilities at fair value 36,559 44,620 56,229
Payable for securities purchased - 1,639,782 435,583
Total liabilities 3,927,880 3,187,537 2,872,533
Total equity and liabilities 38,751,623 37,917,933 37,855,089
Net Asset Value per Share 35.75p 35.65p 35.91p
For the period ending 31 March 2014, the Company has changed the basis
of presenting its financial statements from going concern to break up
basis (refer to note 2).
The accompanying notes form an integral part of the unaudited condensed
financial statements.
Other Accumulated
Reserve Losses Total
GBP GBP GBP
Unaudited Unaudited Unaudited
Balance at 1 October 2013 86,696,344 (51,965,948) 34,730,396
Total comprehensive income for the period - 940,814 940,814
Total recognised income and expense plus equity
brought forward 86,696,344 (51,025,134) 35,671,210
Dividends to shareholders (847,467) - (847,467)
Balance at 31 March 2014 85,848,877 (51,025,134) 34,823,743
For the six months ended 31 March 2013
Other Accumulated
Reserve Losses Total
GBP GBP GBP
Unaudited Unaudited Unaudited
Balance at 1 October 2012 88,215,940 (54,398,316) 33,817,624
Total comprehensive income for the period - 1,837,061 1,837,061
Total recognised income and expense plus equity
brought forward 88,215,940 (52,561,255) 35,654,685
Dividends to shareholders (672,129) - (672,129)
Balance at 31 March 2013 87,543,811 (52,561,255) 34,982,556
For the period ending 31 March 2014, the Company has changed the basis
of presenting its financial statements from going concern to break up
basis (refer to note 2).
The accompanying notes form an integral part of the unaudited condensed
financial statements.
Six
months
ended 31
Six months ended 31 March
March 2014 2013
GBP GBP
Unaudited Unaudited
Total comprehensive income for the period 940,814 1,837,061
Adjustments to reconcile total comprehensive income
for the period to net cash from operating activities:
Effect of exchange rate changes on cash and cash
equivalents (45,253) 4,518
Net change in operating assets and liabilities
Movement in other assets 4,761 (727,740)
Movement in interest receivable (9,320) 652,063
Movement in other payables (3,475) (19,687)
Movement in other liquidation expenses payables 75,000 -
Movement in interest expense payable (106) (1,167)
Movement in derivative financial assets 652,925 (135,237)
Movement in derivative financial liabilities (8,061) (125,932)
Movement in financial instruments designated at fair
value through profit or loss (3,775,381) (764,303)
Net cash flows from operating activities (2,168,096) 719,576
Net (decrease)/increase in cash and cash equivalents (2,168,096) 719,576
Effect of exchange rate changes on cash and cash
equivalents 45,253 (4,518)
Cash and cash equivalents at start of period 2,186,170 1,448,824
Cash and cash equivalents at end of period 63,327 2,163,882
Interest received 1,278,968 1,395,311
Interest paid (15,398) (6,122)
For the period ending 31 March 2014, the Company has changed the basis
of presenting its financial statements from going concern to break up
basis (refer to note 2).
The accompanying notes form an integral part of the unaudited condensed
financial statements.
1. General information
CQS Rig Finance Fund Limited (the "Company") was registered on 8
November 2006 with registered number 45805 and is domiciled and
incorporated in Guernsey, Channel Islands. The Company is a closed-ended
investment company with limited liability formed under The Companies
(Guernsey) Law, 2008, as amended and its ordinary shares were listed on
the Channel Island Securities Exchange ("CISE") and traded on the
Alternative Investment Market ("AIM"), a market operated by the London
Stock Exchange plc. On 3 March 2014, the Company delisted its ordinary
shares from the CISE.
The Company does not have a fixed life but, under the Articles of
Association, at the annual general meeting held on 5 March 2014
shareholders voted in favour of the continuation of the Company for a
further five years. Since that date, the Company has been in discussion
with its advisers in connection with the strategic outlook for the
Company. It has been informed by the Company's largest shareholders, CQS
(UK) LLP, CQS Asset Management Limited and CQS Cayman LP, who together
hold 65.54% of the share capital of the Company, that they would support
a shareholder voluntary liquidation of the Company. An announcement to
this effect was made by the Company on 20 May 2014.
The Company's investment objective was to provide shareholders with an
attractive total return through a combination of capital appreciation
and dividends.
2. Significant accounting policies
Statement of compliance
These condensed interim financial statements for the six months ended 31
March 2014 have been prepared in accordance with International
Accounting Standards (IAS) 34, "Interim Financial Reporting". The
condensed interim financial statements do not include all the
information and disclosure required in the annual financial statements
and should be read in conjunction with the audited financial statements
of the Company for the year ended 30 September 2013, which have been
prepared in accordance with International Financial Reporting Standards,
as adopted by the European Union ("IFRS").
The audited financial statements of the Company for the year ended 30
September 2013 are available upon request from the Company's registered
office at Dorey Court, Admiral Park, St Peter Port, Guernsey GY1 2HT and
are also available from the Company's website, www.cqsrigfinance.com.
Going Concern
As announced on 20 May 2014, the Company has been informed that the
largest shareholders; CQS (UK) LLP, CQS Asset Management Limited and CQS
Cayman LP would support a shareholder voluntary liquidation of the
Company. These shareholders collectively hold 65.54% of the share
capital of the Company. The Board will be making arrangements to convene
an extraordinary general meeting of the shareholders to consider
proposals to place the Company into shareholders' voluntary liquidation.
The Board therefore believe that the Company is unlikely to continue in
operation for the foreseeable future and so no longer constitutes a
going concern. The accounts have been prepared on a break up basis.
Basis of preparation
In accordance with IAS 1 "Presentation of financial statements" and IAS
10 "Events after the reporting period", the Company changed the basis of
preparing its financial statements from a going concern to liquidation
basis. As a result, the financial statements as at 31 March 2014 have
been prepared using a break up basis of accounting. Accordingly,
adjustments have been made to as to reduce their carrying value of
assets and liabilities to their estimated realisable amount, to provide
for any further liabilities which will arise, and to reclassify
non-current assets and long-term liabilities as current assets and
liabilities. All estimated liquidation expenses have been provided for.
This basis of presentation differs from the presentation adopted in the
financial reports of the Company issued for the year ended 30 September
2013 and the period ended 31 March 2013.
2. Significant accounting policies (continued)
Basis of preparation (continued)
The adoption of a break up basis of accounting did not result in a
significant change to net assets with the exception of the accrual for
estimated liquidation expenses. The Directors believe that the fair
value of the assets and liabilities equates to the net realisable value.
The functional currency of the Company is considered to be GBP because
that is the currency of the primary economic environment in which the
Company raised capital and in which dividends were paid to shareholders.
Standards and amendments to existing standards adopted during the period
IFRS 7 Disclosures - Offsetting Financial Assets and Financial
Liabilities- Amendments to IFRS 7, effective for annual periods
beginning on or after 1 January 2013, has been fully adopted. These
amendments require an entity to disclose information about rights to
set-off and related arrangements (e.g. collateral agreements). The
disclosures will provide users with information that is useful in
evaluating the effect of netting arrangements on an entity's financial
position. The new disclosures are required for all recognised financial
instruments that are set off in accordance with IAS 32 Financial
Instruments: Presentation. The disclosures also apply to recognised
financial instruments that are subject to an enforceable master netting
arrangement or similar agreement, irrespective of whether they are set
off in accordance with IAS 32. The application of these amendments has
not materially impacted the financial position or performance of the
Company.
IFRS 13, "Fair value measurement", effective for annual periods
beginning on or after 1 January 2013, has been fully adopted. The
standard improves consistency and reduces complexity by providing a
precise definition of fair value and a single source of fair value
measurement and disclosure requirements for use across IFRSs. The
requirements do not extend the use of fair value accounting but provide
guidance on how it should be applied where its use is already required
or permitted by other standards within IFRS. If an asset or a liability
measured at fair value has a bid price and an ask price, the standard
requires valuation to be based on a price within the bid ask spread that
is most representative of fair value and allows the use of mid-market
pricing or other pricing conventions that are used by market
participants as a practical expedient for fair value measurement within
a bid ask spread. The Company fair values its financial instruments
traded in active markets at the reporting date based on quoted bid
prices for assets and quoted offer prices for liabilities or third party
broker price quotations without any deduction for transaction costs. The
application of IFRS 13 has not materially impacted the fair value
measurements carried out by the Company and the application is disclosed
in note 8.
IAS 1, "Clarification of the requirement for comparative information
(Amendment)", the amendment to IAS 1 clarifies the difference between
voluntary additional comparative information and the minimum required
comparative information, is effective for annual periods beginning on or
after 1 January 2013. An entity must include comparative information in
the related notes to the financial statements when it voluntarily
provides comparative information beyond the minimum required comparative
period. The additional voluntarily comparative information does not need
to be presented in a complete set of financial statements. The
application of this amendment has not materially impacted the Company.
Standards, interpretations and amendments issued but not yet effective
or which have no impact on the Company
IAS 32 has been amended to clarify the requirements for offsetting
financial assets and financial liabilities in the Statement of Financial
Position. In connection therewith, amendments to IFRS 7 were also
issued. These new disclosures are intended to facilitate comparison
between IFRS and accounting principles generally accepted in the United
States of America ("U.S.GAAP"). The converged offsetting disclosures in
IFRS 7 are to be retrospectively applied, with an effective date of
annual periods beginning on or after 1 January 2013. The IAS 32 changes
are retrospectively applied, with an effective date of annual periods
beginning on or after 1 January 2014. Master netting agreements where
the legal right of offset is only enforceable on the occurrence of some
future event, such as default of the counterparty, continue not to meet
the offsetting requirements.
2. Significant accounting policies (continued)
Standards, interpretations and amendments issued but not yet effective
or which have no impact on the Company (continued)
The disclosures focus on quantitative information about recognised
financial instruments that are offset in the Statement of Financial
Position, as well as those recognised financial instruments that are
subject to master netting or similar arrangements irrespective of
whether they are offset. The Directors are considering the implications
of these new amendments and have not early adopted these amendments in
these financial statements.
IFRS 9 "Financial Instruments" issued in November 2009 (IFRS 9(2009))
will change the classification of financial assets. The standard is not
expected to have an impact on the measurement basis of the financial
assets since the majority of the Company's financial assets are measured
at fair value through profit or loss. The IASB has tentatively proposed
an effective implementation date of 1 January 2018 and the standard is
yet to be endorsed by the European Union.
In May 2011, the IASB issued IFRS 10, "Consolidated Financial
Statements" which is effective for annual periods beginning on or after
1 January 2013. The standard establishes principles for the presentation
and preparation of consolidated financial statements when an entity
controls one or more other entities. IFRS 10 replaces the consolidation
requirements in SIC-12 Consolidation - Special Purpose Entities and IAS
27 Consolidated and Separate Financial Statements. IFRS 10 (amendment)
as issued provides an exception to consolidation requirements for
entities that meet the definition of an investment entity. The exception
to consolidation requires investment entities to account for
subsidiaries at fair value through profit or loss in accordance with
IFRS 9 Financial Instruments. These amendments will not impact the
financial position or performance of the Company.
In May 2011, the IASB issued IFRS 11, "Joint Arrangements" which is
effective for annual periods beginning on or after 1 January 2013. The
standard establishes principles for financial reporting by parties to a
joint arrangement. The Company assessed the impact of this standard and
does not expect it to have any impact on the Company.
In May 2011, the IASB issued IFRS 12, "Disclosure of Interests in Other
Entities" which is effective for annual periods beginning on or after 1
January 2013. The standard requires entities to disclose the nature,
risk, and financial effects of its interests in other entities. The
Company assessed the impact of this standard and does not expect it to
have any impact on the Company.
IFRS 10 "Consolidated Financial Statements, IFRS 11, "Joint
Arrangements" and IFRS 12, "Disclosure of interests in other entities"
were endorsed by the European Union on 11 December 2012 and the European
Union effective date for each is 1 January 2014.
There are no other standards, interpretations or amendments to existing
standards that are effective that would be expected to have a
significant impact on the Company.
Significant accounting judgments and estimates
The preparation of the Company's financial statements in conformity with
IFRS as adopted by the European Union requires management to make
judgements, estimates and assumptions that affect the amounts recognised
in the financial statements. However, uncertainty about these
assumptions and estimates could result in outcomes that could require a
material adjustment to the carrying amount of the asset or liability
affected in the future.
2. Significant accounting policies (continued)
Fair value of financial instruments
Fair value is the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair values for financial
instruments traded in active markets at the reporting date are based on
their quoted bid-market price (31 March 2013: quoted bid price for
assets and quoted offer price for liabilities) or third party broker
price quotations without any deduction for transaction costs. Where
possible the Company receives at least three broker quotes for each
financial instrument held. The preferred broker quote is compared to the
other two broker quotes for consistency. If the broker quotes are not
consistent, the Company will adjust the valuation accordingly. In some
cases only a single broker quote is available. When this situation
arises, the Investment Manager reviews the prices independently received
as single broker quotes and ensures that they are in line with
expectations.
3. Segmental reporting
IFRS 8 'Operating Segments' requires a 'management approach', under
which segment information is presented on the same basis as that used
for internal reporting purposes. Operating segments are reported in a
manner consistent with the internal reporting used by the Chief
Operating Decision Maker ("CODM"). The CODM is responsible for
allocating resources and assessing the performance of the operating
segments.
The Board of Directors is charged with the overall governance of the
Company in accordance with the Company's Admission Document and the
Company's Memorandum and Articles of Association. The Board has
appointed CQS Cayman Limited Partnership as the Investment Manager. The
Board of Directors and CQS Cayman Limited Partnership are considered the
CODM for the purposes of IFRS 8.
The Investment Manager is responsible for decisions in relation to both
asset allocation, asset selection and any investment adviser delegation.
The Investment Manager has been given authority to act on behalf of the
Company, including the authority to purchase and sell securities and
other investments on behalf of the Company and to carry out other
actions as appropriate to give effect thereto. Any changes to the
investment strategy outside of the Company's Admission Document must be
approved by the Board and then the Company's shareholders in accordance
with the terms of the Admission Document, the Company's Articles and the
AIM Rules for Companies.
The Company sources and trades in a portfolio of secured debt
instruments which are expected to be primarily issued to finance the
construction, modification and/or refurbishment of rigs and other
infrastructure and/or equipment used for the exploration of oil and
natural gas. The Company operates a single operating segment under IFRS
8 with all investment cash and investment holdings being managed at a
Company level. The Investment Manager allocates decisions based on a
single integrated investment strategy and the Company's performance is
evaluated on an overall basis. Investment cash is allocated to the
Investment Manager who has discretionary authority to invest the
Company's assets and is responsible for all investment decisions made on
behalf of the Company, subject to the control and policies of the Board
of Directors of the Company. The Investment Manager has appointed an
investment adviser, CQS (UK) LLP. The Investment Adviser is responsible
for the management of and/or providing investment advice on the
portfolio and also assists the Investment Manager with related ancillary
services. The internal reporting provided to the Investment Manager for
the Company's assets and liabilities and performance is prepared on a
consistent basis with the measurement and recognition principles of
IFRS. There were no changes in the reportable segments during the period
ended 31 March 2014 or 31 March 2013.
4. Operating income
Six months ended Six months ended
31 March 2014 31 March 2013
GBP GBP
Unaudited Unaudited
Interest income from financial instruments designated
at fair value through profit or loss 1,359,912 1,457,823
Realised foreign exchange gain/(loss) 1,839,059 (2,226,635)
Realised loss on financial instruments designated
at fair value through
profit and loss (577,919) (641,473)
Realised gain on derivative financial assets and liabilities 5,457 49,338
Movement in unrealised (loss)/gain on financial instruments
designated at fair value through profit or loss (352,410) 3,488,187
Movement in unrealised (loss)/gain on forward contracts (652,925) 261,467
Movement in unrealised gain/(loss) on derivative financial
assets and liabilities 8,061 (298)
Movement in unrealised foreign exchange (loss)/gain (37,137) 21,887
Total operating income 1,592,098 2,410,296
5. Other operating expenses
Six months ended Six months ended
31 March 2014 31 March 2013
GBP GBP
Notes Unaudited Unaudited
Investment management and
administration fees
Investment management and
performance fee 12 (263,181) (259,219)
Administration fee 12 (74,795) (81,562)
Other operating expenses
Liquidation expenses 2 (75,000) -
Audit and other assurance fees (18,699) (18,390)
Directors' fees (43,631) (43,750)
Broker fees (24,932) (57,510)
Other expenses (127,638) (107,849)
Total other operating expenses (627,876) (568,280)
6. Earnings per share
31 March 31 March
2014 2013
GBP GBP
Unaudited Unaudited
The calculation of the basic and diluted earnings
per share is based on the following data:
Earnings for the purposes of basic and diluted earnings
per share being net profit attributable to equity
holders 940,814 1,837,061
Weighted average number of ordinary shares for the
purposes of basic and diluted earnings per share 97,410,000 97,410,000
7. Financial instruments designated at fair value through profit
or loss
31 March 2014 30 September 2013 31 March 2013
GBP GBP GBP
Unaudited Audited Unaudited
Cost of financial
instruments at start of
period/year 39,925,719 48,098,374 48,098,374
Purchase of financial
instruments 19,763,433 48,476,235 21,746,093
Sales proceeds on
disposal of financial
instruments (16,526,004) (49,271,876) (23,641,248)
Realised loss on sale of
financial instruments (572,462) (7,377,014) (641,473)
Cost of financial
instruments at end of
period/year 42,590,686 39,925,719 45,561,746
Unrealised loss on
financial instruments (7,817,667) (7,465,257) (12,345,765)
Financial instruments at
end of period/year 34,773,019 32,460,462 33,215,981
Split as follows:
Non-current assets - 29,319,859 30,441,651
Current assets 37,641,237 4,539,521 4,358,078
Current liabilities (2,868,218) (1,398,918) (1,583,748)
Financial instruments at end of
period/year 34,773,019 32,460,462 33,215,981
8. Measurement of financial instruments designated at fair value
through profit or loss
Fair value hierarchy
The amendment to IFRS 7, "Financial Instruments: Disclosures", requires
disclosures surrounding the level in the fair value hierarchy in which
fair value measurements are categorised for financial instruments
measured in the Statement of Financial Position. It requires the Company
to classify fair value measurements using a fair value hierarchy that
reflects the significance of the inputs used in making the measurements.
The financial instruments are analysed between those whose fair value is
based on:
-- Level 1 - Quoted (unadjusted) market prices in active markets for
identical assets or liabilities.
-- Level 2 - Valuation techniques (for which the lowest level input that
is significant to the fair value measurement is directly or indirectly
observable). This category includes instruments valued using: quoted
market prices in active markets for similar instruments; quoted prices
for similar instruments in markets that are considered less than active;
or other valuation techniques where all significant inputs are directly
or indirectly observable from market data.
-- Level 3 - Valuation techniques (for which the lowest level input that
is significant to the fair value measurement is unobservable). This
category includes all instruments where the valuation technique includes
inputs not based on observable data and the unobservable inputs could
have a significant impact on the instrument's valuation. This category
includes instruments that are valued based on quoted prices for similar
instruments where significant unobservable adjustments or assumptions are
required to reflect differences between the instruments.
The level in the fair value hierarchy within which the instrument is
categorised in its entirety is determined on the basis of the lowest
level input that is significant to the fair value measurement. For this
purpose, the significance of an input is assessed against the fair value
measurement in its entirety. If a fair value measurement uses observable
inputs that require significant adjustment based on unobservable inputs,
that measurement is a Level 3 measurement. Assessing the significance of
a particular input to the fair value measurement requires judgement,
considering factors specific to the asset or liability.
8. Measurement of financial instruments designated at fair value
through profit or loss (continued)
Fair value hierarchy (continued)
The determination of what constitutes 'observable' requires significant
judgement by the Company. The Company considers observable data to be
that market data that is readily available, regularly distributed or
updated, reliable and verifiable, not proprietary and provided by
independent sources that are actively involved in the relevant market.
Although the financial instruments with single broker quotes have inputs
into the price supplied by the brokers that are observable, for example,
rate yield, industry classification and credit rating, they are
classified as Level 3 holdings because the actual price may differ to
the broker estimates.
For each class of assets and liabilities not measured at fair value in
the Statement of Financial Position but for which fair value is
disclosed, IFRS 13 requires the Company to describe the technique and
inputs used in the valuation, as well as disclosure of the level in the
fair value hierarchy to which each class of assets and liabilities would
belong. As this is a new requirement of IFRS 13 no comparative
disclosure is required in the year of initial application.
Assets and liabilities not carried at fair value are carried at
amortised cost; their carrying values are a reasonable approximation of
fair value.
Cash and cash equivalents include deposits held with banks and other
short-term investments in an active market and they are categorised as
Level 1.
Receivable for investments sold and other receivables include the
contractual amounts for settlement of trades and other obligations due
to the Company. Payable for investments sold and other payables
represent the contractual amounts and obligations due by the Company for
settlement of trades and expenses. All receivable and payable balances
are categorised as Level 2.
The following table present the Company's fair value hierarchy for those
assets and liabilities measured at fair value on a recurring basis as of
31 March 2014.
Quoted prices in Significant
active markets other Significant
for identical observable unobservable
assets inputs inputs Total
(Level 1) (Level 2) (Level 3)
Assets GBP GBP GBP GBP
Financial instruments designated at fair value through
profit or loss 38,202 37,418,401 184,634 37,641,237
Derivative financial assets - 125,423 - 125,423
38,202 37,543,824 184,634 37,766,660
Liabilities
Financial instruments designated at fair value through
profit or loss (2,868,218) - - (2,868,218)
Derivative financial liabilities - (36,559) - (36,559)
(2,868,218) (36,559) - (2,904,777)
Level 2 investments in securities (assets) comprise corporate and
convertible bonds which have been valued using independently received
third party broker quotes. Typically multiple quotes for each position
are received and reviewed in order to assess the accuracy of the price
selected to value the asset. Level 2 derivative financial (assets)
comprise interest rate swaps which have been valued using observable
market yield curves and foreign exchange rates. The Level 2 derivative
financial (liabilities) comprise forward contracts which have been
valued using observable foreign exchange forward rates.
8. Measurement of financial instruments designated at fair value
through profit or loss (continued)
Fair value hierarchy (continued)
Level 3 investments in securities (assets) comprise corporate bonds
valued by means of one broker quote, and analysed using comparison to
market activity, similar issuers, and inputs such as credit spreads and
duration assumptions, implied and observed, to assess the accuracy of
the single bond quote. No unobservable inputs were used in the fair
value measurement of the Level 3 assets.
The following table shows the movement in Level 3 of the fair value
hierarchy for the period ended 31 March 2014.
Financial instruments designated at fair value through
profit or loss
GBP
Opening balance 190,069
Total losses recognised in the Statement of Comprehensive
Income (5,444)
Transfer into Level 3 from Level 2 9
Closing balance 184,634
There were no significant transfers between Level 1 and Level 2 of the
fair value hierarchy during the period ended 31 March 2014. The transfer
into Level 3 during the period ended 31 March 2014 consisted of Petrorig
III Pte Ltd which was due to the non-availability of multiple third
party broker quotes for this position.
The table below discloses how the gains or losses for Level 3
instruments were accounted for in the Statement of Comprehensive Income
for the period ended 31 March 2014.
Financial instruments designated at fair value through
profit or loss
GBP
Total unrealised losses recognised in the Statement
of Comprehensive Income for financial instruments
held at the end of the reporting period: (5,444)
- Included within movement in unrealised losses on
financial instruments designated at fair value through
profit or loss (5,444)
The following table presents the Company's fair value hierarchy for
those assets and liabilities measured at fair value on a recurring basis
as of 30 September 2013.
Quoted prices Significant
in active other Significant
markets for observable unobservable
identical assets inputs inputs Total
(Level 1) (Level 2) (Level 3)
Assets GBP GBP GBP GBP
Financial instruments designated at fair value through
profit or loss 133,720 33,535,591 190,069 33,859,380
Derivative financial assets - 778,348 - 778,348
133,720 34,313,939 190,069 34,637,728
Liabilities
Financial instruments designated at fair value through
profit or loss (1,398,918) - -(1,398,918)
Derivative financial liabilities - (44,620) - (44,620)
(1,398,918) (44,620) -(1,443,538)
8. Measurement of financial instruments designated at fair value
through profit or loss (continued)
Fair value hierarchy (continued)
Level 3 investments in securities (assets) comprise corporate bonds
valued by means of one broker quote, and analysed using comparison to
market activity, similar issuers, and inputs such as credit spreads and
duration assumptions, implied and observed, to assess the accuracy of
the single bond quote. No unobservable inputs were used in the fair
value measurement of the Level 3 assets.
The following table shows the movement in Level 3 of the fair value
hierarchy for the year ended 30 September 2013.
Financial instruments designated at fair value through
profit or loss
GBP
Opening balance 173,987
Total losses recognised in the Statement of Comprehensive
Income (2,665)
Transfer into Level 3 from Level 2 18,747
Closing balance 190,069
There were no significant transfers between Level 1 and Level 2 of the
fair value hierarchy during the year ended 30 September 2013. The
transfer into Level 3 during the year ended 30 September 2013 consisted
of Remedial Cayman Limited, Master Marine AS and NV Profit Share
Limited.
The table below discloses how the gains or losses for Level 3
instruments were accounted for in the Statement of Comprehensive Income
for the year ended 30 September 2013.
Financial instruments designated at fair value through
profit or loss
GBP
Total unrealised gains recognised in the Statement
of Comprehensive Income for financial instruments
held at the end of the reporting year: 16,082
- Included within movement in unrealised gains on
financial instruments designated at fair value through
profit or loss 16,082
The following table presents the Company's fair value hierarchy for
those assets and liabilities measured at fair value on a recurring basis
as of 31 March 2013.
Quoted prices Significant
in active other Significant
markets for observable unobservable
identical assets inputs inputs Total
(Level 1) (Level 2) (Level 3)
Assets GBP GBP GBP GBP
Financial instruments designated at fair value through
profit or loss 146,895 34,445,130 207,704 34,799,729
Derivative financial assets - 141,182 - 141,182
146,895 34,586,312 207,704 34,940,911
Liabilities
Financial instruments designated at fair value through
profit or loss (1,583,748) - - (1,583,748)
Derivative financial liabilities - (56,229) - (56,229)
(1,583,748) (56,229) - (1,639,977)
8. Measurement of financial instruments designated at fair value
through profit or loss (continued)
Fair value hierarchy (continued)
Level 3 investments in securities (assets) include corporate bonds
valued by means of one broker quote, and analysed using comparison to
market activity, similar issuers, and inputs such as credit spreads and
duration assumptions, implied and observed, to assess the veracity of
the single bond quote. No unobservable inputs were used in the fair
value measurement of the Level 3 assets.
The following table shows the movement in Level 3 of the fair value
hierarchy for the period ended 31 March 2013.
Financial instruments designated at fair value through
profit or loss
GBP
Opening balance 173,987
Total gains recognised in the Statement of Comprehensive
Income 8,726
Transfer into Level 3 from Level 2 24,991
Closing balance 207,704
There were no significant transfers between Level 1 and Level 2 of the
fair value hierarchy during the period ended 31 March 2013.
The table below discloses how the gains or losses for Level 3
instruments were accounted for in the Statement of Comprehensive Income
for the period ended 31 March 2013.
Financial instruments designated at fair value through
profit or loss
GBP
Total unrealised gains recognised in the Statement
of Comprehensive Income for financial instruments
held at the end of the reporting period: 8,726
- Included within movement in unrealised gains on
financial instruments designated at fair value through
profit or loss 8,726
9. Cash and cash equivalents
31 March 2014 30 September 2013 31 March 2013
GBP GBP GBP
Unaudited Audited Unaudited
Sterling cash 30,674 6,258,766 2,453,890
Euro cash (41,203) (682,500) 151,138
Norwegian Krone cash (116,390) (337,558) 24,092
Swedish Krone cash 8,008 8,322 8,768
US Dollar cash 182,238 (3,060,860) (474,006)
Cash and bank balances 63,327 2,186,170 2,163,882
The Company is in a net surplus cash position with its Prime Broker.
However, as detailed in the above table, the Company does borrow in
several currencies against assets of the Company and is entitled to
offset under a master netting agreement with the Prime Broker.
10. Other liabilities and payables
30
31 March September 31 March
2014 2013 2013
Notes GBP GBP GBP
Unaudited Audited Unaudited
Due to related parties
-- Investment management fees 12 44,276 43,324 44,278
Interest payable 3,515 3,621 644
Accrued expenses 52,845 57,272 79,922
Total payables 100,636 104,217 124,844
Other liabilities principally comprise amounts outstanding in respect of
ongoing costs. The Directors consider the carrying amount of other
liabilities to approximate their fair value.
Terms and conditions of the above other liabilities:
-- For terms and conditions relating to related parties, refer
to note 12.
-- Accrued expenses are non-interest bearing and have an average
term of less than 3 months.
11. Share capital
Authorised share 31 March 2014 30 September 2013 31 March 2013
capital
GBP GBP GBP
Unaudited Audited Unaudited
Number of Number of Number of
Ordinary Shares Ordinary Shares Ordinary Shares
Ordinary shares of no Unlimited Unlimited Unlimited
par value each
Issued and
fully paid 31 March 2014 30 September 2013 31 March 2013
GBP GBP GBP
Unaudited Audited Unaudited
Number of Number of Number of
Ordinary Shares Ordinary Shares Ordinary Shares
Balance at
the start
and end of
the
period/year 97,410,000 97,410,000 97,410,000
On incorporation, two ordinary shares were issued and fully paid to the
subscribers to the Memorandum of Association of the Company. Those
ordinary shares were made available under the initial placing.
Rights
The Company has the power to increase or reduce its share capital and to
attach to any shares in the initial or increased or reduced capital any
preferred deferred qualified or special rights, privileges and
conditions or to subject the same to any restrictions or limitations and
to consolidate or sub-divide all or any of its shares into shares of a
larger or smaller denomination.
The holders of the ordinary shares have the following rights:
Dividends: Holders of ordinary shares are entitled to receive, and
participate in, any dividends or other distributions out of the profits
or otherwise of the Company available for dividend and resolved to be
distributed in respect of any accounting period or other income or right
to participate therein.
Winding Up: Holders of ordinary shares are entitled to the surplus
assets remaining after payment of all creditors of the Company.
Voting: Holders of ordinary shares shall have the right to receive
notice of, and to attend and vote at general meetings of the Company and
each shareholder being present in person or by proxy or by a duly
authorised representative (if a corporation) at a meeting shall upon a
show of hands have one vote and upon a poll each such shareholder shall
have one vote in respect of each ordinary share held.
12. Material agreements and related parties
Investment Manager
The Company is a party to an Investment Management Agreement with the
Investment Manager, dated 8 November 2006, pursuant to which the Company
appointed the Investment Manager to manage its assets on a day-to-day
basis in accordance with its investment objectives and policies, subject
to the overall supervision and direction of the respective Boards of
Directors.
The Company pays the Investment Manager a management fee and performance
fee (see note 5).
Management fee
Under the terms of the Investment Management Agreement, the Investment
Manager is entitled to receive from the Company a monthly management fee
payable in arrears as at the last business day of each month that is
equal to 0.125% (equivalent to 1.5% per annum) of the Net Asset Value of
the Company as at the first business day of the month. Management fees
for the period were GBP263,181 (31 March 2013: GBP259,219) of which
GBP44,276 was outstanding at 31 March 2014 (30 September 2013:
GBP43,324, 31 March 2013: GBP44,278).
Performance fee
The performance fee in respect of each performance year is equal to 20%
of the amount, if any, by which the total return for such performance
year exceeds the performance hurdle. For the avoidance of doubt, the
performance fee arrangements are subject to a minimum of zero and will
not result in any repayment of performance fees in respect of previous
performance periods. There was no performance fee for the period ended
31 March 2014 or 31 March 2013.
For these purposes performance year means each year corresponding to
each accounting period of the Company.
Total return means in respect of each performance year the excess, if
any, of:
(i) the Company's Net Asset Value on the last day of such performance
year plus the aggregate of any capital
return and/or dividends payable in respect of such performance year,
over
(ii) the Company's Net Asset Value on the first day of such performance
year.
Administration fee
Under the terms of the Administration Agreement, the Administrator is
entitled to receive from the Company an administration fee of 0.095% of
the Net Asset Value of the Company with a minimum of USD14,200 per
month. In addition, the Administrator is entitled to an annual company
secretarial fee on a time charge basis with a minimum of USD50,400 per
annum. Administration fees for the period were GBP74,795 (31 March 2013:
GBP81,562) of which GBP4,816 was outstanding at 31 March 2014 (30
September 2013:GBP14,584, 31 March 2013: GBP8,600).
Prime broker and Custodian fee
The Prime Broker and Custodian are entitled to receive such fees as may
be agreed with the Company from time to time, reflecting normal
commercial rates which may be based upon a combination of transaction
charges and interest costs.
Investment by CQS Cayman Limited Partnership and all entities managed or
advised by, and employees of CQS(UK)LLP and CQS Asset Management Limited
("CQS Group Entities")
CQS Group Entities held 74,666,968 shares as at 31 March 2014 (30
September 2013: 66,924,185, 31 March 2013: 64,027,585). There were
purchases of 14,085,342 shares during the period from 1 October 2013 to
31 March 2014 (purchases of 52,325,158 shares during the year from 1
October 2012 to 30 September 2013, no purchases of shares during the
period from 1 October 2012 to 31 March 2013). There were sales of
6,342,559 shares during the period from 1 October 2013 to 31 March 2014,
(no sales of shares during the year from 1 October 2012 to 30 September
2013, no sales of shares during the period from 1 October 2012 to 31
March 2013).
12. Material agreements and related parties (continued)
Directors' interests
Mr. Gavin Strachan held 109,482 shares as at 31 March 2014 (30 September
2013: 109,482, 31 March 2013: 109,482). A person closely connected to
Mr. Michael Salter held 88,964 shares as at 31 March 2014 (30 September
2013: 88,964, 31 March 2013: 88,964). Mr. Bruce Appelbaum held 15,000
shares as at 31 March 2014 (30 September 2013: 15,000, 31 March 2013:
15,000).
Directors' remuneration
The Chairman receives an annual fee of GBP25,000 and Mr. Appelbaum, Mr.
Ash, Mr. Gamble and Mr. Strachan each receive an annual fee of
GBP15,000. Mr. Gamble as chairman of the audit committee also receives
an additional annual fee of GBP2,500.
13. Reconciliation of NAV
The NAV of the Company at period end as calculated
and published by the Administrator differs from that
presented in these condensed interim financial statements.
This is due to the provision of liquidation expenses,
as further explained in the significant accounting
policies in Note 2.
The note below shows the reconciliation between the
two NAV's.
31 March 2014
GBP
NAV per Share as published by the Administrator 35.83p
Liquidation expenses payable (0.08p)
NAV per Share as per the condensed interim financial
statements 35.75p
Total NAV as published by the Administrator 34,898,743
Liquidation expenses payable (75,000)
Total NAV as per the condensed interim financial
statements 34,823,743
14. Dividend policy and proposed dividends
The Company proposed, on 6 December 2013, a final dividend of 0.87 pence
per ordinary share in respect of the financial year ended 30 September
2013. The proposed dividend (approved by the shareholders at the annual
general meeting on 5 March 2014) was paid on 9 April 2014 to
shareholders of record at 14 March 2014.
The Company has not declared an interim dividend in respect of the
financial year ending 30 September 2014 as discussed in the Chairman's
statement.
15. Exchange rates
The following foreign exchange rates were used against GBP:
Currency 31 March 2014 30 September 2013 31 March 2013
Norwegian Krone 9.9813 9.7395 8.8564
Swedish Krone 10.8091 10.3716 9.8730
United States Dollar 1.6672 1.6194 1.5185
Euro 1.2096 1.1963 1.1825
16. Seasonal or cyclical changes
The Company is not subject to seasonal or cyclical changes.
17. Significant events during the period
On 3 March 2014, the Company's shares were delisted from the CISE.
The Company does not have a fixed life but, under the Articles of
Association, at the annual general meeting held on 5 March 2014
shareholders voted in favour of the continuation of the Company for a
further five years.
There were no other significant events affecting the Company during the
period that require disclosure within these condensed interim financial
statements.
18. Significant events after the period end
The Company announced on 20 May 2014 that the Board will be making
arrangements to convene an extraordinary general meeting of shareholders
to consider proposals to cancel its admission to trading on AIM, to vote
the Company into shareholders' voluntary liquidation and thereafter to
facilitate the return of available cash to shareholders. As announced on
16 June 2014 the estimated NAV per share was 36.22p and the portfolio
was 98.34% in cash and cash equivalents.
19. Approval of the condensed interim financial statements
The unaudited condensed interim financial statements were approved by
the Board of Directors on 18 June 2014.
This announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: CQS Rig Finance Fund Ltd via Globenewswire
HUG#1795587
http://www.cqsrigfinance.com/
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