RNS Number : 1862K
European Equity Tranche Income Ltd.
15 December 2008
European Equity Tranche Income Limited
Audited annual report and accounts
European Equity Tranche Income Limited (the "Company") has today published its annual report for the year ended 30 June 2008. This
document will be sent to shareholders shortly and will also be available to view and download from the Company's website pursuant to AIM
Rule 26: www.eeti.co.uk
ABOUT THE COMPANY
European Equity Tranche Income Limited ("the Company") was incorporated in Guernsey as a closed-ended investment company on 17 March
2006. On 26 April 2006 the Company raised via an institutional offering Eur100 million by the issue of 100,000,000 Ordinary shares of no
par value ("Shares") at an issue price of Eur1 per share. The Company purchased for cancellation 2,000,000 shares in the capital of the
Company on 26 July 2007. The total number of shares in issue is now 98,000,000. The Company does not have a fixed life. Shareholders will
have the opportunity to review the future of the Company after an initial period of seven years, being on or after 26 April 2013 and every
second year thereafter.
INVESTMENT OBJECTIVE AND POLICY
The Company's investment objective is to deliver stable returns to shareholders in the form of quarterly dividends and to preserve
capital.
The Company seeks to achieve this by investment in non-investment grade and equity tranche (or "first loss") positions of residential
mortgage-backed securities ("RMBS") and, to a limited extent, other asset-backed securities ("ABS") in Europe. The directors intend that no
less than 75 per cent of investments are made in RMBS with the remainder being in other ABS.
INVESTMENT PERFORMANCE
As at 30 June 2008, the net asset value per Share was Eur0.3098 (2007: Eur0.9734, 2006: Eur0.9805), based on the net assets of the Group
for the year of Eur30,368,171 (2007: Eur97.344,025, 2006: Eur98,051,553) and on 98,000,000 (2007: 100,000,000, 2006: 100,000,000) shares,
being the number of shares in issue at the balance sheet date.
DIRECTORS
The Company has six directors. They are responsible for the implementation of the Company's investment policy and ongoing management.
Robin Monro-Davies (Chairman) (British) - Mr Monro-Davies, aged 67, has worked in the City for over 25 years and is a director of HSBC
Bank plc and AXA UK plc. He was co-managing director of Fox-Pitt, Kelton Limited from 1976 to 1992 and chief executive of Fitch Ratings
Limited from 1992 to 2002. He is currently also a director of Assured Guaranty Limited (Bermuda), AXA Asia Pacific Holdings, Ukraine
Opportunity Trust plc, as well as North American Banks Fund Limited. Mr Monro-Davies is resident in England.
Leslie Goodman (British) - Mr Goodman, aged 62, has worked in the City for over 30 years. He is chairman of Chapelthorpe plc. and a
director of a number of other companies. He qualified as a solicitor and subsequently became a director of Hill Samuel and of BZW. He was
chief executive of ACE Global Markets Limited from 1994 to 1998 and Jardine Lloyds Advisers Limited from 1991 to 1994. Mr Goodman is
resident in England.
John Le Prevost (British) - Mr Le Prevost, aged 57, is the Chairman of Anson Fund Managers Limited, the Company's administrator, and of
Anson Registrars Limited, the Company's registrar and has over 35 years experience in investments during which time he was managing director
of County NatWest Investment Management in Guernsey and Royal Bank of Canada's mutual fund company in Guernsey. He is currently a director
of several investment companies including MW Tops Limited, Bluecrest AllBlue Fund Limited and The Close Man Hedge Fund Limited. Mr Le
Prevost is resident in Guernsey.
Fran?se Henry (French) - Franoise Henry, aged 67, is currently Chief Investment Officer of Alternative Leader S.A. Ms. Henry was
previously the Head of alternative investment strategy for Europe at Goldman Sachs Asset Management and Head of Proprietary trading at
Credit Agricole. Ms. Henry is resident in France.
Tanguy Boullet (French) - Tanguy Boullet, aged 46, was, during the year under review, a co-founder of the Investment Manager, Ocean
Capital Associates LLP. He was the Head of Debt products origination for French Corporates and Head of French Real Estate Investment Banking
at Lehman Brothers from 2000 to 2004, Head of Debt products origination, French Corporates at Merrill Lynch from 1996 to 2000 and Head of
French Derivative linked and structured assets marketing at Merrill Lynch from 1992 to 1996. Mr Boullet is resident in France. Mr Boullet
retired as a partner and left Ocean Capital in June 2008. He now works in France as a financial adviser.
Juan de Dios Sanchez-Roselly Moreno (Spanish) - Mr Sanchez-Roselly Moreno, aged 40, is currently Global Head of Property and Commodity
Derivatives at Banco Santander. Previously he was Global Chief Investment Officer at Santander Asset Management. He was previously at Ahorro
Corporaci?nd Deloitte. Mr Sanchez-Roselly Moreno is resident in Spain.
INVESTMENT MANAGER, ADMINISTRATOR AND SECRETARY
Investment Manager
The Company's Investment Manager is Ocean Capital Associates LLP, a London based investment management partnership authorised and
regulated by the Financial Services Authority of the United Kingdom. This authorisation includes the provision of discretionary investment
management and advisory services. The Investment Manager provides investment management services and structured finance advisory services,
mainly where it can assist in sourcing new investment opportunities. The type of assignment undertaken typically involves a high level of
expertise in the analysis of the cash flow generation chain of the originators.
The business of the Investment Manager is the investment in equity tranche of securitisation of European originators, financial
institutions and large corporates. The size of this niche market is modest compared to the whole ABS market and this allows the Investment
Manager to have a strong understanding and coverage of the European market.
The Investment Management Team comprises three partners in charge of investments, risk management and operations and is supported by a
team of four people, all based in central London.
Administrator and Secretary
Anson Fund Managers Limited ("Anson") is a Guernsey incorporated privately owned company and provides administration and secretarial
services to the Company pursuant to an Administration Agreement. In such capacity, the administrator is responsible for the general
secretarial functions required by The Companies (Guernsey) Law, 2008, and for ensuring that the Company complies with its continuing
obligations as a company having its shares listed on the Channel Islands Stock Exchange and admitted to trading on the AIM operated by the
London Stock Exchange. The administrator is also responsible for the Company's general administrative functions such as the calculation of
the net asset value of shares and the maintenance of its accounting records. Anson provides such services to a number of investment schemes
and companies.
REPORT OF THE DIRECTORS
The directors present their report and financial statements for the year ended 30 June 2008.
Principal Activity
European Equity Tranche Income Limited is a closed-ended investment company incorporated in Guernsey on 17 March 2006. On 26 April 2006
its Shares were admitted to trading on AIM and admitted to listing and trading on the Channel Islands Stock Exchange.
Pursuant to the Company's admission document the Company offered its Shares for issue by means of a placing and on 26 April 2006 raised
Eur100 million by the issue of 100,000,000 Shares of no par value each at a price of Eur1 each. The Company purchased for cancellation
2,000,000 Shares in the capital of the Company on 26 July 2007. The total number of Shares in issue is now 98,000,000.
Dividends and Dividend Policy
The Company's dividend policy is to pay quarterly dividends subject to having profits or distributable reserves available for that
purpose.
The Company made dividend payments for the year ended 30 June 2008 totalling Eur5,920,000.
Subsequent to the year end, the Board decided to eliminate the payment of the quarterly dividend.
Financing Strategy
The Company has a facility agreement with Citibank of up to Eur70 million with the objective of enhancing returns to shareholders
through the use of borrowing, subject to the discretion of the Board. Whilst the Company has an unlimited power to borrow, the directors
have limited borrowing to a maximum of Eur40 million. At 30 June 2008 total drawdowns amounted to Eur34.2 million.
Shareholder Information
The net asset value per Share is calculated by the administrator, based on information supplied to it by the Investment Manager, and
announced on a quarterly basis on a regulatory information service and simultaneously announced on the Channel Islands Stock Exchange.
Results
The results for the period are set out in the Income Statement. In the course of the year, economic conditions deteriorated markedly,
especially impacting the housing and banking sector. As a result total fair value losses during the year amounted to Eur66 million and the
losses for the year totalled Eur59.5 million
Directors
Directors' interests in shares as at 5 December 2008 are as follows:
Director Shares Percentage of issued shares
Robin Monro-Davies 1,000,000 1.020
Leslie Goodman 70,000 0.071
Tanguy Boullet 30,000 0.031
John R Le Prevost 30,000 0.031
Juan de Dios Sanchez-Roselly Moreno 3,000 0.003
Directors Remuneration
The directors are entitled to receive fees for their services as directors, such sums in aggregate not to exceed �200,000 per annum.
Currently the Chairman receives the sum of �25,000 p.a. and the remaining directors receive the sum of �15,000 p.a. with the exception of
Tanguy Boullet who waived his fee during the period under review.
Statement of Directors' Responsibilities
The directors are required to prepare financial statements for each financial period which give a true and fair view of the state of
affairs of the Company as at the end of the financial period and of the profit or loss for that period. In preparing those financial
statements, the directors are required to:
select suitable accounting policies and apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the
financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in
business.
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial
position of the Company and to enable them to ensure that the financial statements have been properly prepared in accordance with The
Companies (Guernsey) Law, 1994, as amended. They are also responsible for safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
Corporate Governance
As a closed-ended investment company incorporated in Guernsey listed on the Channel Islands Stock Exchange and admitted to trading on
AIM, the Company is not required to comply with the requirements of the Combined Code issued by the UK Listing Authority. The Board has put
in place a framework for corporate governance which it believes is suitable for an investment company of its kind, taking into consideration
the Channel Island Stock Exchange Listing Rules and the AIM Rules for Companies.
In addition and where practicable for a company of its size and nature, the Board endeavours to comply with the principles of the
Combined Code.
The Board meets at least four times a year and between these formal meetings there is regular contact with the secretary and investment
manager. The directors are kept fully informed of investment and financial controls and other matters that are relevant to the business of
the Company and should be brought to their attention. The directors also have access, where necessary in the furtherance of their duties, to
professional advice at the expense of the Company.
The Board has a breadth of experience relevant to the Company, and the directors believe that any changes to the Board's composition can
be managed without undue disruption. With any new director appointment to the Board, consideration will be given as to whether an induction
process is appropriate.
Audit Committee
An audit committee exists consisting of Leslie Goodman, Fran?se Henry and Juan de Dios Sanchez-Roselly Moreno. The function of the audit
committee is to ensure that the Company maintains high standards of integrity, financial reporting and internal controls. The audit
committee examines the effectiveness of the Company's internal control systems, the annual and interim reports and financial statements, the
auditors' remuneration and engagement, as well as the auditors' independence and any non-audit services provided by them. The audit
committee receives information from the administrator and secretary and from the external auditors as to the objectivity of their audit and
their independence. The terms of reference of the audit committee are available upon request from the Secretary.
Management Committee
A management committee exists consisting of all members of the Board excluding Tanguy Boullet and John Le Prevost. The function of the
management committee is:
(a) to ensure that the Company's contracts of engagement with the investment manager, administrator, and other service providers are
operating satisfactorily so as to ensure the safe and accurate management and administration of the Company's affairs and business and are
competitive and reasonable for the shareholders and to make appropriate recommendations to the Board; and
(b) to ensure that the Company complies to the best of its ability with applicable laws and regulations and adheres to the tenet of
generally accepted codes of conduct.
In addition the chairmanship of the above two committees and each director's performance is reviewed annually by the chairman and the
performance of the chairman is assessed by the remaining directors.
Internal Controls
The Board is responsible for the Company's system of internal control and for reviewing its effectiveness. The Board confirms that there
is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. This process has been in place
for the period under review and up to the date of approval of this annual report and financial statements, and is reviewed by the Board.
The Board has reviewed the effectiveness of the system of internal control. In particular, it has reviewed and updated the process for
identifying and evaluating the significant risks affecting the Company and the policies by which these risks are managed.
The internal control systems are designed to meet the Company's particular needs and the risks to which it is exposed. Accordingly, the
internal control systems are designed to manage rather than eliminate the risk of failure to achieve business objectives and by their nature
can only provide reasonable and not absolute assurance against misstatement and loss.
The Company does not have an internal audit department. All the Company's management and administration functions are delegated to
independent third parties and it is therefore felt that there is no need for the Company to have an internal audit facility. However, this
matter is reviewed periodically.
Going Concern
At 30 June 2008 the Company had a Eur70 million loan facility with Citibank which was due to mature on 15 December 2008, with a "term
out option" to extend until December 2009. On 12 December, the Company announced proposals relating to a capital restructuring which
includes:
* the purchase by Scribona Nordic AB ("Scribona") from Citibank of all outstanding commitments, rights and obligations in relation
to the Eur30 million debt owed by the company to Citibank under its existing facility agreement (the "Facility Agreement");
* the conversion by Scribona of Eur5.6 million of debt to equity at Eur0.0111 per share;
* a non pre-emptive placing of new ordinary shares ("Shares") with certain existing shareholders at a price of Eur0.0111 per share
to raise up to Eur4.4 million, underwritten by Scribona, where such subscription monies will be applied by the Company in prepayment of debt
owed to Scribona; and
* the release by Scribona of the Company from its obligations under the Facility Agreement to repay approximately Eur14.3 million of
debt.
As a condition to the transfer of the existing debt from Citibank to Scribona, Scribona has agreed to the repayment date under the
Facility Agreement being 15 December 2009 and the interest payable under the terms of such agreement is EURIBOR +5% per annum.
In order to implement the proposed capital restructuring it will be necessary to obtain shareholder approval. While the purchase of the
Citibank debt by Scribona has already become effective, the other elements of the proposal are conditional, inter alia, upon the passing of
all relevant shareholder resolutions. As a consequence of the restructuring the directors consider that the Company can be considered to
continue to operate as a going concern.
Post balance sheet events
Since 30 June 2008, conditions in the credit markets and the major European economies have continued to deteriorate. This has had the
effect of increasing the default risk in the asset pools that act as security for the Group's investments. In particular there have been
increased arrears reported in Spain and Portugal and continuing increases in prepayment rates in Italy.
The recent increase in arrears in Spain could lead to an increase in the default rate in 2009.
These factors may lead to a further reduction in the fair value of the investments and the Group's net asset value since 30 June 2008.
By order of the Board
John R Le Prevost Juan de Dios Sanchez-Roselly Moreno
Director Director
CHAIRMAN'S STATEMENT
I am afraid my report this year holds little cheer for our shareholders. Whilst our first quarter was relatively uneventful, the start
of Northern Rock's troubles in September 2007, which led to it being taken into public ownership in early 2008, was the first sign of the
increasingly serious problems which were to beset the financial industry from then on. I do not need to rehearse the litany of issues which
have brought some of the strongest financial institutions to their knees. Regrettably many of these issues have had their knock on effect on
EETI. In particular these have been:
* Lack of liquidity. Our investments were never vigorously traded, but the crisis of confidence which has occurred during the year
means that our investments have become totally illiquid. This has caused particular problems in the valuation of these investments, even
though some of them are still generating cash in line with our original projections.
* The economic slow down, and especially the dramatic fall in house prices in Spain and Portugal, has resulted in an increase in the
rate of default of our investments in these countries.
* The abnormal spread between base rate and LIBOR has significantly reduced the margins we received on our Ludgate investment.
* Following the introduction of retrospective legislation in Italy, which significantly reduced prepayment penalties, prepayments on
our Italian investments have continued at a very high level requiring us to make further write downs.
* Most importantly our Eur30 million of debt outstanding at 30 June 2008, although reduced from a peak of Eur45 million, has meant
that we do not have sufficient cash flow to repay the balance in full by the time it matures.
Our most recent announcements referred to negotiations with Citibank and potential investors seeking to reduce our debt obligations, and
in the absence of a solution were likely to result in the Company no longer being viable. I am pleased to say that these negotiations have
now concluded and today we have announced an underwritten issue of new shares together with a revised debt financing agreement. These
arrangements are due to complete in January 2009 and will provide a more appropriate capital structure for the Company.
At the next Annual General Meeting Ms Francoise Henry and Juan de Dios Sanchez-Roselly Moreno will in accordance with the Company's
Articles retire by rotation as directors of the Company. Juan de Dios Sanchez-Roselly Moreno will be standing for re-election as a director
and a resolution to that effect is proposed. Ms Henry is taking this opportunity to leave the board and I wish to take this opportunity to
thank Ms Henry for her valued contributions to the board's discussions since March 2006
Finally, I draw your attention to the detailed report on the individual investments within our portfolio prepared by our investment
manager, Ocean Capital Associates LLP.
Robin Monro-Davies
Chairman
INVESTMENT MANAGER'S REPORT
The NAV as at 30 June 2008 reported in the financial statements is estimated at Eur30.3 million or Eur0.30 cents per share. On 16 July
2007 the Group purchased Provide Gems Class C notes with a nominal value of Eur5 million and on 2 August 2007 the Group purchased Pastor 5
Class D Notes with a nominal value of Eur3.5 million. On 16 July 2007 the Group sold it's investment in Fact 2006 Class C Notes. The cash
flow generation remained strong over the entire year with Eur13.3 million received by the Group. Since July 2008 all the cash has been used
to pay down the debt which stands at Eur29.7 million as at 1 December 2008. Since launch of the Company to 30 September 2008, the portfolio
has generated cash of over Eur 26 million.
Market Outlook
Since June 2007, banks, regulators, central banks and governments have been caught off guard by the credit market on several occasions.
Investors have lost confidence in the value of bank assets generally. As a result, private investors pulled out of financial assets and
sought temporary security in cash assets. The banks were left scrambling to save their business by launching expensive but hopefully quick
recapitalisations.
The deleveraging of the financial system is still in full flow, after 18 months, and we see no reasons to be optimistic for the
reopening of the credit markets. The current flow of business in the credit markets is revolving around banks / central banks / governments
/ supra-national bodies. The price discovery mechanisms on financial assets have been slowed and/or hampered, by the vast amount of
liquidity injected and other government sponsored programs. Investors will remain very cautious about structured finance assets until they
feel the legal and regulatory framework has stabilised and the prices reflect long-term sustainable yields. Many trading opportunities will
arise in the coming months but as long as "real fresh cash" does not enter the system we do not believe lending and asset trading can be
resumed on a normal basis.
Valuation of investments
Given the absence of normal market prices and mechanisms, the Group has had to operate in a very difficult environment. The portfolio is
now composed of 16 investments, 8 are structured as first loss (excess spread) and 8 are structured as bonds. In agreement with the Board we
have increased the discount rate from 10% to a discount rate of 20% for residuals and a discount rate of 15% for bonds. This compares to an
ECB rate of 3% at 30 June 2008. This discount rate adjustment contributed to an immediate reduction of the NAV of c. Eur20 million.
Transaction Country Asset New Discount rate Position
Sestante 2 Italy Prime RMBS 20% Residual (Repack.)
Sestante 3 Italy Prime RMBS 20% Residual (Repack.)
Sestante 4 Italy Prime RMBS 20% Residual
Lusitano 3 Portugal Prime RMBS 20% Residual
Lusitano 4 Portugal Prime RMBS 20% Residual (Repack.)
Lusitano 5 Portugal Prime RMBS 20% Residual
Ludgate UK Niche Prime RMBS 20% Residual & MERC
Minotaure France Assimilated to Prime 20% Residual
RMBS
Memphis 2006-1 Neth. Prime RMBS 15% B Rated (Bond)
Shield 1 Neth. Prime RMBS 15% B Rated (Bond)
Semper 2006-1 Germany Multi-family CMBS 15% Second Loss (Bond)
Pastor 2 Spain Prime RMBS 15% Second Loss (Bond)
Pastor 3 Spain Prime RMBS 15% Second Loss (Bond)
Pastor 4 Spain Prime RMBS 15% Second Loss (Bond)
Provide Gems Germany Second lien RMBS 15% BB- Rated (Bond)
Pastor 5 Spain Prime RMBS 15% Second Loss (Bond)
Portfolio Updates
Italy
The prepayment rates in Italy have remained exceptionally high and continue to increase. The three Sestante transactions held in our
portfolio had annualised constant prepayments rates ("CPR") as high as 25% during the year and this together with an increase in defaults
has contributed to a mark down of c. Eur24 million. We are closely monitoring the CPR as a sustained increase in the trend might lead to
further markdowns.
Annualised CPR Q4 07 Q1 08 Q2 08 Q3 08
Sestante 2 14.8% 17.5% 21.0% 25.1%
Sestante 3 14.9% 18.0% 24.8% 22.5%
Sestante 4 10.0% 11.0% 19.8% 24.9%
Portugal
Arrears in Portugal have increased between January 2008 and October 2008. The defaults on the three transactions are on average 1.7
times greater than originally anticipated and we have adjusted the value of the positions accordingly; this has contributed to a mark down
of c. Eur10 million.
Arrears as a % of current balance Q1 08 Q2 08 Q3 08
Lusitano 3 1.5% 2.1% 2.5%
Lusitano 4 1.8% 2.2% 2.6%
Lusitano 5 1.2% 2.8% 3.2%
United Kingdom
The sustained widening in the BBR - � Libor gap since September 2007 has destroyed all future value in the Ludgate residual note held by
the Company and contributed to a write off of c. Eur5 million.
Spain
The deteriorating trend of arrears in Spain has continued beyond the year end and could lead potentially to higher defaults in the early
part of 2009. For example in the Pastor 3, the amount of loans with arrears of 90 days and over as a percentage of the pool current balance
has increased from 0.8 % to 3.2 % at 3 December 2008. We are monitoring this closely.
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF EUROPEAN EQUITY TRANCHE INCOME LIMITED
We have audited the Group and Parent Company financial statements of European Equity Tranche Income Limited for the year ended 30 June
2008 which comprise the Group and Parent Company I and related notes. These financial statements have been prepared under the accounting
policies set out therein.
This report is made solely to the Company's members, as a body, in accordance with Section 64 of The Companies (Guernsey) Law, 1994. Our
audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an
auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed
Respective responsibilities of directors and auditors
As described in the Statement of Director' Responsibilities the Company's directors are responsible for the preparation of the financial
statements in accordance with applicable law and International Financial Reporting Standards (IFRS) as adopted for use in the European
Union.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International
Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements, which have been prepared in accordance with International Financial
Reporting Standards, give a true and fair view and are properly prepared in accordance with The Companies (Guernsey) Law 1994. We also
report to you if, in our opinion, the Report of the Directors is not consistent with the financial statements, if the Company has not kept
proper accounting records, if we have not received all the information and explanations we require for our audit, or if information
specified by law regarding directors' remuneration and transactions with the Company is not disclosed.
We read other information contained in the annual report, and consider whether it is consistent with the financial statements. This
other information comprises the Chairman's Statement and the Report of the Investment Manager.
We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the
financial statements. Our responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board.
An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also
includes an assessment of the significant estimates and judgements made by the directors in the preparation of the financial statements, and
of whether the accounting policies are appropriate to the Company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to
provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether
caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of
information in the financial statements.
Emphasis of matter - investment values
In forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the disclosure made in
note 1, 9 and 17 to the financial statements, which set out the policies adopted by the Directors for fair valuing the Group's investments.
In accordance with these policies and the requirements of International Accounting Standard 39 "Financial Instruments: Recognition and
Measurement", the Directors have estimated the fair value of the investments of the Group at Eur61,576,218 at 30 June 2008.
As described in notes 1, 9 and 17 of the financial statements, the Group's investments in asset*backed securities are highly illiquid.
As a result of this the assumptions used to compute the fair value estimates included in the financial statements are subject to
considerable uncertainty. Different assumptions would result in changes to the fair value assessment of the investments and hence the
carrying value of the investments in the consolidated and company balance sheet and the change in fair value of the investments reported in
the consolidated income statements. It is not possible to quantify the potential effects of the resolution of this uncertainty.
Emphasis of matter - going concern
In forming our opinion on the financial statements, which is not qualified, we have considered the adequacy of the disclosure made in
note 1 and 19 to the financial statements which sets out the basis on which the Directors consider that the going concern basis of
preparation of the financial statements is appropriate. The Group has recently entered into a placing and subscription agreement with a
third party that has at the same time purchased the existing rights and obligations attached to the Group's debt facilities. The Directors
have assumed the successful completion of the refinancing arrangements which are subject to shareholder and certain regulatory approvals.
If these assumptions are subsequently found to be inappropriate and in particular that the refinancing arrangements are not successfully
concluded then the Group may not be able to continue as a going concern and meet its liabilities as they fall due. The matters set out in
note 1 indicate the existence of a material uncertainty which casts doubt over the Group's ability to continue as a going concern. The financial statements do not include the adjustments that would
result if the Company and Group were unable to continue as a going concern.
Opinion
In our opinion:
the financial statements give a true and fair view, in accordance with IFRS as adopted for use in the European Union, of the state of
the Group's and Parent Company's affairs as at 30 June 2008 and of the Group's and the Company's loss for the year then ended;
the financial statements have been properly prepared in accordance with The Companies (Guernsey) Law, 1994; and
the information given in the Directors' Report is consistent with the financial statements.
Mazars LLP
Chartered Accountants
and Registered Auditors
Date: 15 December 2008
CONSOLIDATED INCOME STATEMENT for the year ended 30 June 2008
Year ended Year ended
30 June 2008 30 June 2007
Notes Eur Eur
Operating income 2 11,038,503 8,779,107
Gains and losses on fair value through
profit
and loss financial instruments 9 (66,033,128) (2,668,884)
Realised gain on disposal of financial
instruments 27,606 -
Operating expenses 3 (1,956,255) (1,754,493)
Loan interest payable (2,615,213) (353,258)
Net profit for the year (59,538,487) 4,002,472
Retained profit / (loss) transferred to /
(from)
reserves (59,538,487) 4,002,472
Basic and diluted (loss)/earnings per
share for
the year 7 (0.6075) 0.0400
Proforma basic and diluted (loss)/earnings
per
share for the year 7 (0.6075) 0.0400
In arriving at the results for the financial year, all amounts above relate to continuing operations.
CONSOLIDATED BALANCE SHEET as at 30 June 2008
30 Jun 2008 30 Jun 2008 30 Jun 2007 30 Jun 2007
Notes Eur Eur Eur Eur
ASSETS
Non-current assets
Investments designated at fair
value
through the income statement 9 61,576,218 129,069,538
Current assets
Trade and other receivables 11 1,120,501 3,375,740
Cash and cash equivalents 12 2,411,764 1,757,210
3,532,265 5,132,950
Total assets 65,108,483 134,202,488
EQUITY AND LIABILITIES
Equity
Issued share capital 13 - -
Share premium 50,000,000 50,000,000
Retained earnings (19,631,829) 47,344,025
30,368,171 97,344,025
Current liabilities
Bank loans and overdrafts 14 34,238,827 36,238,827
Trade and other payables 15 501,485 619,636
Total equity and liabilities 65,108,483 134,202,488
The financial statements were approved by the Board of directors on 15 December 2008 and are signed on its behalf by:
John R Le Prevost Juan de Dios Sanchez-Roselly Moreno
Director Director
INCOME STATEMENT
for the year ended 30 June 2008
Year ended Year ended
30 June 2008 30 June 2007
Notes Eur Eur
Operating income 2 7,255,599 8,779,107
Gains and losses on fair value through
profit
and loss financial instruments 9 (48,572,511) (2,668,884)
Impairment of subsidiary 10 (13,685,059) -
Realised gain on disposal of financial
Instruments 27,606 -
Operating expenses 3 (1,956,255) (1,754,493)
Loan interest payable (2,615,213) (353,258)
Net profit for the year (59,545,833) 4,002,472
Retained profit / (loss) transferred to /
(from)
reserves (59,545,833) 4,002,472
Basic and diluted (loss)/earnings per
share for
the year (0.6076) 0.0400
Proforma basic and diluted (loss)/earnings
per
share for the year (0.6076) 0.0400
In arriving at the results for the financial year, all amounts above relate to continuing operations.
BALANCE SHEET as at 30 June 2008
30 Jun 2008 30 Jun 2008 30 Jun 2007 30 Jun 2007
Notes Eur Eur Eur Eur
ASSETS
Non-current assets
Investments designated at fair
value
through the income statement 9 39,301,739 129,069,538
Investment in subsidiary 10 23,622,581 -
undertaking
Current assets
Trade and other receivables 11 540,572 3,375,740
Cash and cash equivalents 12 1,636,245 1,757,210
2,176,817 5,132,950
Total assets 65,101,137 134,202,488
EQUITY AND LIABILITIES
Equity
Issued share capital 13 - -
Share premium 50,000,000 50,000,000
Retained earnings (19,639,175) 47,344,025
30,360,825 97,344,025
Current liabilities
Bank loans and overdrafts 14 34,238,827 36,238,827
Trade and other payables 15 501,485 619,636
Total equity and liabilities 65,101,137 134,202,488
The financial statements were approved by the Board of directors on 15 December 2008 and are signed on its behalf by:
John R Le Prevost Juan de Dios Sanchez-Roselly Moreno
Director Director
CONSOLIDATED CASH FLOW STATEMENT for the year ended 30 June 2008
Year ended Year ended
30 Jun 2008 30 Jun 2007
Eur Eur
Cash flows from operating activities
Profit / (loss) for the year (59,538,487) 4,002,472
Losses on fair value through profit and loss
financial instruments 66,033,128 2,668,884
Realised gain on disposal of investment (27,606) -
Less: Interest received (134,270) (608,840)
Less: (Decrease) / increase in accrued expenses (118,151) 295,867
Add: Decrease / (increase) in prepayments and 2,255,239 (2,767,715)
accrued income
Less: Interest capitalised written back (3,803,796) -
Net cash inflow from operating activities 4,666,057 3,590,668
Cash flows from investing activities
Interest received 134,270 608,840
Purchase of non-current assets (7,354,793) (82,027,000)
Sale of non-current assets 8,100,001 -
Capital repayments received from investments 4,546,386 5,392,861
Net cash inflow / (outflow) from investing 5,425,864 (76,025,299)
activities
Cash flows from financing activities
Redemption of share capital (1,517,367) -
Dividends (5,920,000) (4,710,000)
Bank loan (repayments) / drawdowns (2,000,000) 36,238,827
Net cash (outflow) / inflow from financing (9,437,367) 31,528,827
activities
Cash and cash equivalents at the beginning of the 1,757,210 42,663,014
year
Net increase / (decrease) in cash and cash 654,554 (40,905,804)
equivalents
Cash and cash equivalents at the end of the year 2,411,764 1,757,210
CASH FLOW STATEMENT for the year ended 30 June 2008
Year ended Year ended
30 Jun 2008 30 Jun 2007
Eur Eur
Cash flows from operating activities
Profit / (loss) for the year (59,545,833) 4,002,472
Losses on fair value through profit and loss
financial instruments 48,572,511 2,668,884
Impairment of subsidiary 13,685,059 -
Cash flow received from pass through notes 2,672,061 -
Realised gain on disposal of investment (27,606) -
Less: Interest received (126,924) (608,840)
Less: (Decrease) / increase in accrued expenses (118,151) 295,867
Add: Decrease / (increase) in prepayments and 2,835,168 (2,767,715)
accrued income
Less: Interest capitalised written back (3,531,091) -
Net cash inflow from operating activities 4,415,194 3,590,668
Cash flows from investing activities
Interest received 126,924 608,840
Purchase of non-current assets (7,383,333) (82,027,000)
Sale of non-current assets 8,100,001 -
Capital repayments received from investments 4,057,616 5,392,861
Net cash inflow / (outflow) from investing 4,901,208 (76,025,299)
activities
Cash flows from financing activities
Redemption of share capital (1,517,367) -
Dividends (5,920,000) (4,710,000)
Bank loan (repayments) / drawdowns (2,000,000) 36,238,827
Net cash (outflow) / inflow from financing (9,437,367) 31,528,827
activities
Cash and cash equivalents at the beginning of 1,757,210 42,663,014
the year
Net decrease in cash and cash equivalents (120,965) (40,905,804)
Cash and cash equivalents at the end of the 1,636,245 1,757,210
year
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY for the year ended 30 June 2008
Share Share Accumulated Year ended
Group
Capital Premium Profits Total
Eur Eur Eur Eur
Balance at 1 July 2006 - 50,000,000 48,051,553 98,051,553
Net profit for the year - - 4,002,472 4,002,472
Distribution to ordinary - - (4,710,000) (4,710,000)
shareholders
Balance at 30 June 2007 - 50,000,000 47,344,025 97,344,025
Net Loss for the year - - (59,538,487) (59,538,487)
Redemption of share capital - - (1,517,367) (1,517,367)
Distribution to ordinary - - (5,920,000) (5,920,000)
shareholders
Balance at 30 June 2008 - 50,000,000 (19,631,829) 30,368,171
Company Share Share Accumulated Year ended
Capital Premium Profits Total
Eur Eur Eur Eur
Balance at 1 July 2006 - 50,000,000 48,051,553 98,051,553
Net profit for the year - - 4,002,472 4,002,472
Distribution to ordinary - - (4,710,000) (4,710,000)
shareholders
Balance at 30 June 2007 - 50,000,000 47,344,025 97,344,025
Net Loss for the year - - (59,545,833) (59,545,833)
Redemption of share capital - - (1,517,367) (1,517,367)
Distribution to ordinary - - (5,920,000) (5,920,000)
shareholders
Balance at 30 June 2008 - 50,000,000 (19,639,175) 30,360,825
NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2008
1 ACCOUNTING POLICIES
* Basis of Preparation
The consolidated financial statements of European Equity Tranche Income Limited, a closed-ended investment group in Guernsey, Channel
Islands have been prepared in conformity with International Financial Reporting Standards ("IFRS") issued by the International Accounting
Standards Board and the Interpretations of International Financial Reporting Standards issued by the International Financial Reporting
Interpretations Committee of the International Accounting Standards Board and applicable requirements of Guernsey Law.
The consolidated financial statements have been prepared on an historical cost basis except for the measurement at fair value of
investments designated at fair value through the Income Statement. The accounting policies have been applied consistently by the Group in
the accounting period which is for the year ended 30 June 2008. The consolidated financial statements have been prepared in its functional
currency, Euro, as this reflects the Group's primary activity of investing in Euro financial instruments. The Directors believe that IFRS's
and International Financial Reporting Interpretations Committee ("IFRIC") pronouncements which are in issue but not yet operative or adopted
by the Group will not have a material impact on the consolidated financial statements of the Group.
As set out in note 14, as at 30 June 2008 the Company had a Eur70 million loan facility with Citibank which was due to mature on 15
December 2008, with a "term out option" to extend until December 2009. On 12 December, the Company announced proposals relating to a
capital restructuring which includes:
* the purchase by Scribona Nordic AB ("Scribona") from Citibank of all outstanding commitments, rights and obligations in relation
to the Eur30 million debt owed by the company to Citibank under its existing facility agreement (the "Facility Agreement");
* the conversion by Scribona of Eur5.6 million of debt to equity at Eur0.0111 per share;
* a non pre-emptive placing of new ordinary shares ("Shares") with certain existing shareholders at a price of Eur0.0111 per share
to raise up to Eur4.4 million, underwritten by Scribona, where such subscription monies will be applied by the Company in prepayment of debt
owed to Scribona; and
* the release by Scribona of the Company from its obligations under the Facility Agreement to repay approximately Eur14.3 million of
debt.
As a condition to the transfer of the existing debt from Citibank to Scribona, Scribona has agreed to the repayment date under the
Facility Agreement being 15 December 2009 and the interest payable under the terms of such agreement is EURIBOR +5% per annum.
In order to implement the proposed capital restructuring it will be necessary to obtain shareholder approval. While the purchase of the
Citibank debt by Scribona has already become effective, the other elements of the proposal are conditional, inter alia, upon the passing of
all relevant shareholder resolutions. As a consequence of the restructuring the directors consider that the Company can be considered to
continue to operate as a going concern.
If shareholders do not vote in favour of the resolutions to approve the capital restructuring, the proposed waiver of debt, conversion
of debt to equity and issue of Shares will not take place and the Company will continue to owe approximately Eur30 million under the new
facility entered into with Scribona. Accordingly, the Company will be unlikely to be able to meet its obligations as they fall due, leading
to a likely immediate secured lender enforcement or insolvency.
The preparation of consolidated financial statements in conformity with IFRS requires the Group to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those estimates.
* Basis of consolidation
The consolidated financial statements made up to 30 June 2008 incorporate the financial statements of the Company and entities where the
Company is the majority economic beneficiary in such entity, even though the Company has no equity control over such an entity (the
"Subsidiary") (and together the "Group"). All inter-group balances, income and expenses are eliminated on consolidation.
In the separate financial statements of the Company, investments in subsidiaries are recorded at cost net of impairment losses.
* Foreign currencies
Transactions in foreign currencies are translated into Euros, which is deemed to be the functional currency, at the rates of exchange
ruling on the date on which the transactions occur. At the balance sheet date, foreign currency monetary items are translated into Euros at
the foreign exchange rate ruling at the balance sheet date. Foreign exchange differences arising on translation are recognised in the Income
Statement in the period in which they arise. At the balance sheet date, non-monetary items which are carried at fair value denominated in
foreign currency are reported using the exchange rates that existed at the date when the fair values were determined.
* Interest income
Interest income is accounted for on an accruals basis on cash and cash equivalents. Interest income is accrued based on the fair value
of the Group's investments and their contractual terms. Interest income is accrued over the projected lives of the investments using the
effective interest method as defined under International Accounting Standard 39 "Financial Instruments: Recognition and Measurement" ("IAS
39").
Where the Group adjusts expected cash flow projections to take account of any change in underlying assumptions, such adjustments are
recognised in the Income Statement by reflecting changes in a revised amortised cost value of the investment and applying the original
effective interest rate to this revised amortised cost value for the purposes of calculating future income. The Group's policy for
estimating prepayment speeds for calculating the effective yield is to evaluate historical performance, market consensus indicators and
current market conditions. Premiums and discounts associated with the purchase of investments/assets are amortised or accreted into interest
income over the projected term of the investment.
* Fair Value of Financial instruments
Under IAS 39, the Group's investments are measured initially at cost, which is the fair value of whatever was paid to acquire them.
Associated transaction costs are written off to the income statement. All purchases and sales of investments are recognised using trade date
accounting. After initial recognition the Group's investments are measured at fair value through the income statement. The Group's
investments are designated to this category at inception.
Investments, which principally comprise investments in residual income positions, are fair valued using financial pricing models that
reflect numerous factors including the investment manager's assessment of the nature of the investment and the collateral, security
position, risk profile, historical default rates and the originator and servicer. Each of these factors involves subjective judgements and
forward-looking determinations by the investment manager.
Where the fair value of the investment is written down due to changes in assumptions and expected cash flows, the change in the fair
value is taken to the income statement following the reassessment of the cash flow discounted at the current market rate estimated.
* Cash and Cash Equivalents
Cash and cash equivalents are carried at cost. Cash and cash equivalents are defined as cash and deposits at bank.
* Trade and other receivables and payables
Trade and other receivables and payables are initially recorded at fair value and subsequently measured at amortised cost using the
effective interest rate method, less a provision for impairment in respect of trade and other receivable balances (if appropriate).
A provision for impairment is established where there is objective evidence that the funds will not be receivable. Impairment losses are
recognised in the income statement.
* Bank loans and associated borrowing costs
Bank loans are raised to support funding of investments. They are recognised as current liabilities as they are due for repayment within
one year. Finance charges are charged to the Income Statement on an accruals basis using the effective interest method and are added to the
carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Interest payable on loans is
also recognised in the Income Statement on an accruals basis.
* Taxation
The Company has been granted exemption under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 from Guernsey Income Tax, and is
charged an annual fee of �600.
* Earnings per share
The Group calculates both basic and diluted earnings per share in accordance with International Accounting Standard 33 "Earnings per
Share" ("IAS 33"). Under IAS 33 basic earnings per share is computed using the weighted average number of shares outstanding during the
year. Diluted earnings per share is computed using the weighted average number of shares outstanding during the year plus the dilutive
effect of any instruments outstanding during the year.
* Segmental reporting
In the opinion of the directors the Group has only one business segment and one geographical segment being investment in European Asset
Backed Securities ("ABS"), in particular Residential Mortgage Backed Securities ("RMBS").
* Critical accounting judgements and key sources of estimation uncertainty
In the process of applying the Group's accounting policies, the Group has determined that the following judgements and estimates have
the most significant effect on the amounts recognised in the financial statements.
Income recognition
The Group invests primarily in a diversified portfolio of residual income positions, being the subordinated tranches of ABS, principally
RMBS. Residual income positions are typically unrated or rated below investment grade and are often referred to as the "equity" or "first
loss" position of securitisation structures. Unlike more conventional bonds and the more senior tranches of ABS (which generally hold the
rights to fixed levels of income), the cash flow profile of a residual income position does not include a contractually established schedule
of fixed payments divided between interest and principal. Instead the cash flows generally vary over time, and the periodic cash flows
associated with a residual income position may include principal repayment as well as income payments which fluctuate over time.
A given cash payment received in respect of a residual income position represents a combination of the return on the investment and the
repayment of some of the capital initially invested. As a result, the stream of expected cash flows associated with a particular residual
income position may have an uneven payout profile, in that the cash payment expected in one period (and the proportion of that payment that
represents principal repayment versus interest income) may vary significantly from the cash payments expected in other periods.
The Group follows a policy of accounting for such investments at fair value through profit or loss and has elected to recognise income
on an effective interest rate ("EIR") method in accordance with Paragraph 30 of International Accounting Standard 18 "Revenue".
Interest income is recorded based on the EIR, as set out in Note 1(d) above.
Further disclosures of key assumptions and key sources of estimation uncertainty are set out in Note 17 under the headings "Residual
Interest Risk" and "Liquidity Risk".
Valuation of investments
As described in Note 17 to the accounts, the market for RMBS, including residual income positions is illiquid and regular traded prices
are generally not available for such investments. There is no active secondary market in residual income positions and, further, there is no
industry standard agreed methodology to value residual income positions.
In accordance with the Group's accounting policies, fair value of financial assets is based on quoted bid prices where such bids are
available from a third party in a liquid market. Where quoted bid prices are unavailable, the fair value of the financial asset is estimated
by reference to a valuation model that incorporates discounted cash flow techniques as required by IAS 39.
The key assumptions upon which the valuation models are based are described in Note 1(e) to the accounts. Any change to assumptions
surrounding the pricing models may result in different fair values being attributed to the investments.
The fair value of the Group's investments is set out in Note 9 and a further description of the risks associated with the Group's
investments is provided in Note 17. The Group considers that it would be impractical to disclose the effects of changes to each assumption
in respect of each investment valuation model.
2 OPERATING INCOME
Company Group
30 Jun 2008 30 Jun 2007 30 Jun 2008 30 Jun 2007
Eur Eur Eur Eur
Interest on investments in
asset backed securities 7,128,675 8,170,267 10,904,233 8,170,267
Interest from cash and
cash equivalents 126,924 608,840 134,270 608,840
7,255,599 8,779,107 11,038,503 8,779,107
3 OPERATING EXPENSES
Company Group
30 Jun 2008 30 Jun 2007 30 Jun 2008 30 Jun 2007
Eur Eur Eur Eur
Investment managers fees 1,085,142 1,220,954 1,085,142 1,220,954
Directors' remuneration 112,506 125,449 112,506 125,449
Directors expenses 11,567 1,736 11,567 1,736
Directors & Officers insurance 25,592 31,773 25,592 31,773
Audit fees 103,163 96,224 103,163 96,224
Investment transaction costs - 152 - 152
Administration fees 82,669 56,014 82,669 56,014
Registration fees 19,039 17,905 19,039 17,905
Legal and professional fees 263,418 34,668 263,418 34,668
Other operating expenses 253,159 169,618 253,159 169,618
1,956,255 1,754,493 1,956,255 1,754,493
4 INVESTMENT MANAGERS FEES
Management Fee
Under the terms of the Investment Management Agreement, a management fee is payable to the Investment Manager at an annual rate of 1.25
per cent of the lower of (i) the Net Asset Value of the Group immediately following Admission and (ii) the Net Asset Value of the Group on
31 March, 30 June, 30 September and 31 December (before deduction of accruals in respect of the management fee for the current year and any
performance fee) (excluding current period income).
The management fee accrues daily and is payable quarterly in arrears.
Performance Fee
Under the terms of the Investment Management Agreement, the Investment Manager is entitled to receive a performance related fee in
respect of each performance period (being quarterly) which will be paid quarterly in arrears.
The performance fee for each performance period will be an amount equal to 20 per cent of the amount by which the Group's net income (as
calculated for these purposes) after tax for the relevant period, before payment of any performance fee, exceeds an amount equal to a simple
interest rate of two per cent per quarter (the "quarterly hurdle") multiplied by the weighted average number of Ordinary Shares outstanding
during the relevant period multiplied by the weighted average offer price of such Ordinary Shares, subject to the Net Asset Value of an
Ordinary Share at the end of the relevant performance period being no less than the Net Asset Value of an Ordinary Share immediately
following Admission.
The sum of quarterly performance fees based on the quarterly hurdle payable to the Investment Manager for any full financial period will
be capped at that amount which would be payable based on 20 per cent of the amount by which the Group's net income after tax for the
relevant period (before payment of any performance fees) exceeds an amount equal to an annualised simple interest rate of eight per cent
(the annual hurdle) multiplied by the weighted average number of Ordinary Shares outstanding during the relevant full financial period
multiplied by the weighted average offer price of such Ordinary Shares.
Where the sum of quarterly performance fees paid for any financial period based on the quarterly hurdle exceeds that amount which would
have been payable based on the annual hurdle, the Investment Manager shall repay to the Company any such excess.
The performance fee, if any, will be calculated on behalf of the Company by the Administrator.
Where there is a difference between the Group's net income for the relevant performance period as shown in the Group's quarterly
management accounts compared to the Group's audited annual accounts, the net income for the relevant performance period as reflected in the
audited accounts shall prevail. Any excess performance fee paid or any additional performance fee due in respect of any performance period
attributable to any such difference will be repaid by or paid to the Investment Manager, as the case may be.
5 STAFF COSTS
The Company has no employees other than the directors. During the year, Directors' expenses totalled Eur11,567 (2007: Eur1,736).
The Subsidiary has no employees and therefore has no staff costs.
6 DIRECTORS' REMUNERATION
Unless otherwise approved by the Company by ordinary resolution, the Company shall pay to the directors (but not alternate directors)
for their services as directors out of the funds of the Company by way of fees such sums as the Board determines (not exceeding �200,000 per
annum in aggregate or such larger amount as the Company may by ordinary resolution decide). The aggregate fees will be divided among the
directors in such proportions as the Board decides or, if no decision is made, equally. Directors' fees for the year totalled Eur112,506
(2007: Eur125,449).
The directors received no other benefits during the year under review.
7 EARNINGS PER SHARE
The earnings per share is based on the net loss of the Group for the year of Eur59,538,487 (2007: Eur4,002,472) and on 98,163,934 (2007:
100,000,000) shares, being the weighted average number of shares in issue during the year. There were no dilutive instruments in issue in
the year.
Proforma basic and diluted earnings per share is based on the same net profit and weighted average number of shares in issue i.e. the
number of shares is not adjusted for the prelisting period when the Company did not trade.
8 DIVIDENDS
During the year, the following dividend payments were made by the Company:
Date Amount per share Total dividend distribution
Eur Eur
10 August 2007 0.020 2,000,000
23 November 2007 0.020 1,960,000
29 February 2008 0.015 1,470,000
6 June 2008 0.005 490,000
5,920,000
During the previous year, dividend payments totalling Eur4,710,000 were made by the Company.
9 INVESTMENTS DESIGNATED AS FAIR VALUE THROUGH THE INCOME STATEMENT
Company Group
Unquoted investments in 30 Jun 2008 30 Jun 2007 30 Jun 2008 30 Jun 2007
RMBS and ABS Eur Eur Eur Eur
Valuation brought forward 129,069,538 55,104,283 129,069,538 55,104,283
Additions - cost 7,383,333 82,027,000 7,354,793 82,027,000
Disposals - cost (48,054,365) - (8,079,707) -
Capital repayments (4,055,347) (5,392,861) (4,539,074) (5,392,861)
Interest previously
capitalised
written back 3,531,091 - 3,803,796 -
Unrealised loss on revaluation
for
the year (48,572,511) (2,668,884) (66,033,128) (2,668,884)
39,301,739 129,069,538 61,576,218 129,069,538
On 16 July 2007 the Group purchased Provide Gems Class C notes with a nominal value of Eur5,000,000 and on 2 August 2007 the Group
purchased Pastor 5 Class D Notes with a nominal value of Eur3,500,000. On 16 July 2007 the Group sold it's investment in Fact 2006 Class C
Notes. A profit of Eur27,606 was realised on the disposal.
Income derived from the investments is based on their expected internal rate of return (IRR) over their estimated life. The IRR reflects
a number of collateral performance and other assumptions, which may be adjusted over time.
The weighted average expected floating interest rate of each investment is detailed in note 17(a) to the financial statements.
In order to hedge a foreign currency exposure in respect of an investment denominated in sterling, the Company entered into a total
return swap at the date of acquisition of the underlying investment. Accordingly there is no unrealised foreign exchange gain or loss at the
year end.
10 INVESTMENTS IN SUBSIDIARIES
On 4 July 2007, the Company purchased two Pass-Through Notes from EETI Finance Limited, ("EETIFL"), a special purpose vehicle
incorporated in Ireland, and transferred in exchange five investments at a book value of Eur39,979,703 to EETIFL under a Purchase Agreement
and a Support Deed. Under the Pass-Through Notes, the cash flow from the underlying five investments reverts to the Company.
The fair value of the two Pass-Through Notes as at 30 June 2008 was Eur23,622,581 (2007: EurNil).
As all risks and rewards of the ownership of the investments of EETIFL pass to the Company, in accordance with SIC12, EETIFL is
considered to be a subsidiary of the Company even though it is not legally owned by the Company.
Under the terms of the Support Deed the Company has agreed to settle on the Subsidiary's behalf and reimburse the Subsidiary against
certain liabilities, fees, costs, charges, disbursements and expenses paid or payable by the Subsidiary in relation to its business under
the terms and conditions of the Deed. The running costs to be incurred by EETIFL during its life, are estimated to be in the region of
Eur30,000 per annum. This includes audit fees for year of Eur9,000.
11 TRADE AND OTHER RECEIVABLES
Company Group
30 Jun 2008 30 Jun 2007 30 Jun 2008 30 Jun 2007
Eur Eur Eur Eur
Prepayments 36,849 116,429 36,849 116,429
Accrued interest - Investments 481,901 3,241,158 1,061,830 3,241,158
Accrued interest - Cash 8,476 4,807 8,476 4,807
Sundry debtors 13,346 13,346 13,346 13,346
540,572 3,375,740 1,120,501 3,375,740
12 CASH AT BANK
Company Group
30 Jun 2008 30 Jun 2007 30 Jun 2008 30 Jun 2007
Eur Eur Eur Eur
Bank balances 357,774 83,657 1,133,293 83,657
Call deposits 1,278,471 1,673,553 1,278,471 1,673,553
1,636,245 1,757,210 2,411,764 1,757,210
The weighted average floating interest rate on call deposits was 4.06%. Call deposits are due on demand.
13 SHARE CAPITAL
30 Jun 2008 30 Jun 2007
Eur Eur
Authorised
100,000,000 ordinary shares of no par value - -
30 Jun 2008 30 Jun 2007
Eur Eur
Issued
98,000,000 ordinary shares of no par value - -
The issue and redemption of Ordinary Shares took place as follows:
Number Price per Amount
Date of issue of shares share Eur received Eur
17 March 2006 2 1.000 2
26 April 2006 99,999,998 1.000 99,999,998
Share redemption 31 July 2007 (2,000,000) 0.759 (1,517,367)
98,000,000 98,482,633
As the Company has only one class of shares, the holders of its shares will under general law be entitled to participate in any surplus
assets in a winding-up in proportion to their shareholdings.
The Company has passed a special resolution reducing the amount standing to the credit of the share premium account to Eur50,000,000,
and that the surplus created form a distributable reserve. In accordance with The Companies (Guernsey) Law, 1994 (as amended) (the
"Companies Law"), the Directors applied to the Royal Court of Guernsey for an order confirming such reduction of the share premium account
following admission. The distributable reserve created on cancellation is available as distributable profits to be used for all purposes
permitted by the Companies Law, including the buy back of Ordinary Shares and the payment of dividends.
14 BANK LOANS AND OVERDRAFTS
In December 2006, Citibank was appointed to structure and arrange a senior financing facility for the Company to be secured on the
Group's investments. Prior to the closing of the senior term financing, a Warehouse financing facility was provided. The loan facility was
increased from Eur40 million to Eur70 million on 26 July 2007.
The loan facility is in the form of a secured loan agreement. As at 30 June 2008 total drawdowns under the loan facility were
Eur34,238,827 (2007: Eur36,238,827).
The loan is interest bearing, and the interest rate applied is a margin of 2.5% above EURIBOR taking into account any mandatory costs.
The interest periods are three months from the utilisation date and quarterly thereafter. The Company must pay accrued interest on the last
day of each interest period. The annual average rate applied during the year was 7.11% (2007: 6.37%).
The loan facility is due to mature on 15 December 2008. Details of the impact of the loan reaching maturity are set out in note 19 to
the financial statements.
15 TRADE AND OTHER PAYABLES
Company Group
30 Jun 2008 30 Jun 2007 30 Jun 2008 30 Jun 2007
Eur Eur Eur Eur
Accrued investment
managers fee 248,125 304,402 248,125 304,402
Accrued audit fees 101,378 59,990 101,378 59,990
Accrued administration fees 5,287 5,972 5,287 5,972
Accrued registration fees 796 1,572 796 1,572
Accrued loan interest 83,969 204,262 83,969 204,262
Other accrued expenses 61,930 43,438 61,930 43,438
501,485 619,636 501,485 619,636
16 FINANCIAL INSTRUMENTS
The Company's main financial instruments comprise:
(a) Cash and cash equivalents that arise directly from the Company's operations; and
(b) Non-investment grade and residual income positions of RMBS and ABS originated in Europe.
(c) Bank loans and overdrafts.
17 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The most important types of risk to which the Group is exposed are market price risk, discount rate risk, credit risk, prepayment risk,
default risk, liquidity risk, interest rate risk, residual interest risk and currency risk. Save where the Group purchases synthetic
securities to gain exposure to an underlying cash asset or assets, derivative transactions are only for the purposes of hedging risks or for
efficient portfolio management. The Company will not enter into derivative transactions for speculative purposes.
(a) Market Price Risk
The Group's exposure to market risk is comprised mainly of movements in the value of its investments and, to the extent that the Group
utilises leverage, changes in interest rates that either increase its cost of borrowing or decrease any interest income. Several of the
Group's investments are floating rate or backed by floating rate assets and, as such, are valued based on a market credit spread over a
benchmark (such as EURIBOR). Increases in the credit spreads above such benchmarks may affect the Group's net equity or net income directly
through their impact on unrealised gains or losses on investments within the portfolio, and therefore the Group's ability to make gains on
such investments, or indirectly through their impact on the Group's ability to borrow and access capital.
The following details the weighted average expected floating interest rate of each investment:
NAME OF INVESTMENT WEIGHTED AVERAGE EXPECTED FLOATING
INTEREST RATE
Lusitano Mortgages 3 plc Class 20%
E Notes
Lusitano Mortgages 4 plc Class 20%
E Notes
Lusitano Mortgages 5 plc Class 20%
E Notes
FCC Minotaure Compartiment 20%
2004-1-296 Residual R Bonds
and 1 Unit
Sestante 2 Class D Notes 20%
Sestante 3 Class D Notes 20%
Sestante 4 Class D Notes 20%
Shield I - Class F Bonds 15%
Memphis 2006-1 15%
Ludgate Funding Plc Series 20%
2006 FF1
Semper 2006 15%
IM Pastor 2 15%
IM Pastor 3 15%
IM Pastor 4 15%
IM Pastor 5 15%
Provide Gems 15%
The following details the Group's sensitivity to an increase and decrease in the yield of its constituent financial assets and
liabilities.
At 30 June 2008, if the estimated yield of the non-current asset investments had been 5% higher with all the other variables held
constant the loss transferred to reserves for the period would have been Eur10,838,820 higher, arising due to the decrease in the fair value
of financial assets at fair value through profit or loss.
At 30 June 2008, if the estimated yield of the non-current asset investments had been 5% lower with all the other variables held
constant the loss transferred to reserves for the period would have been Eur14,528,680 lower, arising due to the increase in the fair value
of financial assets at fair value through profit or loss.
At 30 June 2008, if the estimated yield of the non-current asset investments had been 10% higher with all the other variables held
constant the loss transferred to reserves for the period would have been c Eur19,096,560 higher, arising due to the decrease in the fair
value of financial assets at fair value through profit or loss.
(b) Credit Risk
The Group is subject to the risk that issuers of asset backed securities in which it invests may default on their obligations under such
instruments and that certain events may occur which have an immediate and significant adverse effect on the value of such instruments.
There can be no assurance that an issuer of an instrument in which the Group invests will not default or that an event which has an
immediate and significant adverse effect will not occur, and that the Group will not sustain a loss on the transaction as a result.
A further credit risk arises from the Company's use of a Special Purpose Vehicle ("SPV") to hold title to certain investments. There is
a risk that the SPV may not pass the cash flows generated by the underlying investment onwards to the Company. There is also a risk that the
SPV may fail to achieve the tax savings that it was designed for.
The Group seeks to mitigate credit risk by actively monitoring its portfolio of investments and the underlying credit quality of its
holdings. The Group seeks to minimise credit risk further by ensuring its investment portfolio is diversified by geography, originator,
servicer and issuer. The Group does not intend to undertake any credit hedging activities other than from time to time entering into
transactions to hedge its credit exposure in relation to individual investments.
(c) Prepayment Risk
Prepayment risk refers to the possibility that the individual borrowers will prepay the mortgage loans that collateralise the Group's
investments.
While the Group's valuations take into account expected prepayment rates of the loans that collateralise the Group's investments, the
Group's investments and the assets that collateralise them may prepay more quickly than expected and have an impact on the value of the
Group's portfolio. The Investment Manager reviews the prepayment assumptions each quarter and will update as required. These assumptions
are considered by review of the underlying loan performance information of the securitisations.
Prepayment rates are influenced by changes in interest rates and a variety of economic, geographic and other factor beyond the Group's
control and consequently cannot be predicted with certainty. The level and timings of prepayments made by borrowers in respect of the
mortgage loans that collateralise certain investments may have an adverse impact on the income earned by the Group from those investments.
(d) Default Risk
Default risk refers to each individual borrower's ability to make the required interest and principal payments on the scheduled due
dates.
While the Group's valuations take into account expected default rates and the expected loss given a default rate, the Group's
investments may be subject to higher losses through a combination of higher default rates. Default rate risk is managed by the Investment
Manager by regular review of the positions held. The Investment Manager reviews these assumptions each quarter and will update as required.
These assumptions are considered by review of the underlying loan performance information of the securitisations.
Default rates are influenced by changes in interest rates and a variety of economic, geographic and other factors beyond the Group's
control and consequently cannot be predicted with certainty. The level and timings of defaults made by borrowers in respect of the mortgage
loans that collateralise certain investments may have an adverse impact on the income earned by the Group from those investments.
(e) Liquidity Risk
Liquidity risk is the risk that the Group will encounter difficulty in realising assets or otherwise raising funds to meet financial
commitments. The market for subordinated asset-backed securities, including residual income positions, is illiquid. Accordingly, many of
the Group's investments are illiquid. In addition, investments that the Group purchases in privately negotiated (also called "over the
counter" or "OTC") transactions may not be registered under relevant securities laws or otherwise may not be freely tradable, resulting in
restrictions on their transfer, sale, pledge or other disposition except in a transaction that is exempt from the registration requirements
of, or is otherwise in accordance with, those laws. As a result of this illiquidity, the Group's ability to vary its portfolio in a timely
fashion and to receive a fair price in response to changes in economic and other conditions may be limited.
Furthermore, where the Group acquires investments for which there is not a readily available market, the Group's ability to deal in any
such investment or obtain reliable information about the value of such investment or risks to which such investment is exposed may be
limited.
The main financial commitments of the Group are the interest on the bank loan from Citibank and the meeting of ongoing operational
costs. These commitments are met by the cash flows received from the investments, which are monitored by the Investment Manager.
The following illustrates the maturity analysis of the Group's financial assets and liabilities as at the period end:
Due on Due within Due between Due between Due >5
Demand 3 months 3 and 12 months 1 and 5 years Years Total
Eur Eur Eur Eur Eur Eur
Assets
Investments designated at fair
value - - - 7,138,440 54,437,778 61,576,218
Trade and other
receivables - 1,070,306 50,195 - - 1,120,501
Cash and cash
equivalents 2,411,764 - - - - 2,411,764
Total assets 2,411,764 1,070,306 50,195 7,138,440 54,437,778 65,108,483
Liabilities
Bank loans and
overdrafts - - 34,238,827 - - 34,238,827
Trade and other
payables - - 501,485 - - 501,485
Total liabilities - - 34,740,312 - - 34,740,312
(f) Interest Rate Risk
Changes in interest rates, other than changes in spread between different interest rate benchmarks, do not affect the Group's ability to
acquire loans and investments, the value of its investments and the Group's ability to realise gains from the settlement of such assets.
The Company's weighted average effective interest rate for cash and bank balances as at 30 June 2008 was 4.06% (2007: 3.46%).
The Subsidiary's weighted average effective interest rate for cash and bank balances as at 30 June 2008 was 0.27% (2007: Nil).
If interest rates for cash and bank balances had been 100 basis points higher and all other variables were held constant, the Group's
net loss per the consolidated income statement for the period ended 30 June 2008 would have decreased by Eur54,848 (2007: Eur181,695) due to
an increase in the amount of interest receivable on the bank account.
If interest rates for cash and bank balances had been 100 basis points lower and all other variables were held constant, the Group's net
loss per the consolidated income statement for the period ended 30 June 2008 would have increased by Eur54,848 (2007: Eur181,695) due to a
decrease in the amount of interest receivable on the bank account.
The Group's sensitivity to interest rates on cash and bank balances is lower in 2008 than in 2007 because of a decrease in the average
cash balances held over the year.
The weighted average effective interest rate on the loan facility as at 30 June 2008 was 7.11% (2007: 6.37%).
If interest rates for the loan facility balance had been 100 basis points higher and all other variables were held constant, the Group's
net loss per the consolidated income statement for the period ended 30 June 2008 would have increased by Eur361,733 (2007: Eur53,752) due to
an increase in the amount of interest payable on the loan facility.
If interest rates for the loan facility balance had been 100 basis points lower and all other variables were held constant, the Group's
net loss per the consolidated income statement for the period ended 30 June 2008 would have decreased by Eur361,733 (2007: Eur53,752) due to
a decrease in the amount of interest payable on the loan facility.
The Group's sensitivity to interest rates on the loan facility is higher in 2008 than in 2007 because of an increase in the average loan
balance outstanding over the year.
(g) Residual Interest Risk
The majority of the Group's investments consist of interests in and/or economic exposures to limited recourse securities that are
subordinated in right of payment and ranked junior to other securities that are secured by or represent ownership in the same pool of
assets. In the event of default by an issuer in relation to such investments, holders of the issuer's more senior securities are entitled to
payments in priority to the Group. Some of the Group's investments also have structural features that divert payments of interest and/or
principal to more senior classes of securities secured by or representing ownership in the same pool of assets when the delinquency or loss
experience of the pool exceeds certain levels. This may lead to interruptions in the income stream that the Group anticipates receiving from
its investment portfolio, which may lead to the Company having less income to distribute to shareholders.
Although holders of asset-backed securities generally have the benefit of first ranking security (or other priority rights) over any
collateral, control of the timing and manner of the disposal of such collateral upon a default typically will devolve to the holders of the
senior class of securities outstanding. There can be no assurance that the proceeds of any such sale of collateral will be adequate to repay
in full the Group's investments.
(h) Currency Risk
The Group's accounts are denominated in Euros while investments may be made and realised in both Euros and Sterling. Changes in rates of
exchange may have an adverse effect on the value, price or income of the investments. A change in foreign currency exchange rates may
adversely impact returns on the Group's non-Euro denominated investments.
The Group seeks to reduce the currency risk by financing investments in the same currency as the relevant investment where commercially
practical or enter into hedging transactions for whole or part of the currency exposure. The Investment Manager may elect, however, to have
the Group bear a level of currency risk that could otherwise be hedged where it considers that bearing such risks is acceptable.
At the balance sheet date the Group has no material financial assets or liabilities not denominated in Euros, other than those covered
by the hedging agreement detailed below.
On 7 December 2006, the Company entered into a QUANTO FX deal with a counterparty which was structured as a Total Return Swap and which
will terminate on 31 December 2013. The purpose of the agreement is to hedge a foreign exchange transaction entered into by the Company
involving �5,525,000 worth of investments secured over Mortgage-only repayment certificates due 2060 and Residual certificates due 2060.
The counterparty will own the securities through a Total Swap Return Agreement which will be cash collateralised in full by the Company.
The effect of the transaction is that the Company has the right to receive all the flows from the certificates converted into Euros through
the QUANTO FX trade.
(i) Political Risk
Retrospective political law changes may have an adverse effect on the value of the Group's investments. It is difficult to assess
exactly how these changes will impact consumer behaviour, it is possible that prepayment rates will increase impacting the expected cash
flows from investments and the ability of the Company to maintain the same level of dividend payments.
(j) Collateral
Under the terms of the deed of assignment dated 15 February 2007 and the amendments dated 25 July 2007 and 17 December 2007 entered
into between the Company and Citibank N.A., the Company has assigned absolutely the unquoted investments in RMBS and ABS and all rights,
title and interest, present and future, without limitation, and its right to receive monies or securities to Citibank N.A. as security for
the loan facility. Where there is an event of default in respect of the Company under the loan facility, Citibank N.A. will be entitled to
enforce its security over the collateral. The details of a potential default event are set out in note 19 to the financial statements.
(k) Capital management
The Group monitors capital on the basis of the carrying amount of equity as presented on the face of the balance sheet. Capital for
the reporting periods under review is summarised as follows:
Company Group
30 Jun 2008 30 Jun 2007 30 Jun 2008 30 Jun 2007
Eur Eur Eur Eur
Share premium 50,000,000 50,000,000 50,000,000 50,000,000
Retained earnings (19,639,175) 47,344,025 (19,631,829) 47,344,025
30,360,825 97,344,025 30,368,171 97,344,025
18 RELATED PARTY TRANSACTIONS
Anson Fund Managers Limited is the Company's administrator and secretary and Anson Registrars Limited is the Company's registrar,
transfer agent and paying agent. John R Le Prevost is a director and controller of Anson Fund Managers Limited and of Anson Registrars
Limited. Eur101,708 (2007: Eur73,919) of fees were incurred by the Company with these related parties in the year, of which Eur6,083 (2007:
Eur7,544) was due to these related parties as at 30 June 2008.
During the year under review, Tanguy Boullet was a partner in the investment manager, Ocean Capital Associates LLP. Eur1,085,142 (2007:
Eur1,220,954) in fees was incurred by the Company with the investment manager in the year, of which Eur248,125 (2007: Eur304,402) was due to
the investment manager as at 30 June 2008.
19 POST BALANCE SHEET EVENTS
a) Going concern
As set out in note 14, at 30 June 2008 the Company had a Eur70 million loan facility with Citibank which was due to mature on 15
December 2008.
On 18 September 2008, the Company repaid Eur1.5 million of the outstanding balance of the loan facility and on 31 October 2008, the
Company repaid a further Eur3 million of the outstanding balance of the loan facility.
On 12 December, the Company announced proposals relating to a capital restructuring which includes:
* the purchase by Scribona Nordic AB ("Scribona") from Citibank of all outstanding commitments, rights and obligations in relation
to the Eur30 million debt owed by the company to Citibank under its existing facility agreement (the "Facility Agreement");
* the conversion by Scribona of Eur5.6 million of debt to equity at Eur0.0111 per share;
* a non pre-emptive placing of new ordinary shares ("Shares") with certain existing shareholders at a price of Eur0.0111 per share
to raise up to Eur4.4 million, underwritten by Scribona, where such subscription monies will be applied by the Company in prepayment of debt
owed to Scribona; and
* the release by Scribona of the Company from its obligations under the Facility Agreement to repay approximately Eur14.3 million of
debt.
As a condition to the transfer of the existing debt from Citibank to Scribona, Scribona has agreed to the repayment date under the
Facility Agreement being 15 December 2009 and the interest payable under the terms of such agreement is EURIBOR +5% per annum.
In order to implement the proposed capital restructuring it will be necessary to obtain shareholder approval. While the purchase of the
Citibank debt by Scribona has already become effective, the other elements of the proposal are conditional, inter alia, upon the passing of
all relevant shareholder resolutions. As a consequence of the restructuring the directors consider that the Company can be considered to
continue to operate as a going concern.
If the transaction set out above is not approved by the shareholders, such approval being the only outstanding condition to completion,
then further negotiation with Scribona would be required and this may have an impact on the carrying value of the investments as a forced
sale basis, would result in a significant reduction in the carrying value and corresponding reduction in the net asset value of the Group.
b) Other matters
Since 30 June 2008, conditions in the credit markets and the major European economies have continued to deteriorate. This has had the
effect of increasing the default risk in the asset pools that act as the security for the Group's investments. In particular there have been
increased arrears reported in Spain and Portugal and continuing increases in prepayment rates in Italy. The recent increase in arrears
witnessed in Spain could lead to an increase in the default rate in 2009.
20 ULTIMATE CONTROLLING PARTY
In the opinion of the directors, the Group has no ultimate controlling party.
SCHEDULE OF INVESTMENTS
Group 30 Jun 2008 30 Jun 2007
NAME OF INVESTMENT VALUATION TOTAL VALUATION TOTAL
ASSETS ASSETS
Eur % Eur %
Lusitano Mortgages 3 plc Class 3,363,731 5.17% 9,046,317 6.74%
E Notes
Lusitano Mortgages 4 plc Class 2,040,107 3.13% 6,333,133 4.72%
E Notes
Lusitano Mortgages 5 plc Class 5,379,117 8.26% 12,660,144 9.43%
E Notes
FCC Minotaure Compartiment
2004-1-296
Residual R Bonds and 1 Unit 2,798,522 4.30% 4,085,999 3.04%
Sestante 2 Class D Notes 2,954,627 4.54% 10,922,013 8.14%
Sestante 3 Class D Notes 2,487,269 3.82% 15,153,403 11.29%
Sestante 4 Class D Notes 3,469,998 5.33% 17,286,370 12.88%
Shield I - Class F Bonds 6,871,718 10.55% 8,231,779 6.13%
Memphis 2006-1 3,432,937 5.27% 4,215,722 3.14%
Fact 2006 Ltd Class C Notes - - 8,079,707 6.02%
Ludgate Funding Plc Series 266,722 0.41% 7,703,203 5.74%
2006 FF1
Semper 2006 5,356,989 8.23% 6,700,000 4.99%
IM Pastor 2 6,116,210 9.39% 7,300,000 5.44%
IM Pastor 3 7,294,995 11.20% 7,885,000 5.88%
IM Pastor 4 3,688,550 5.66% 4,475,000 3.33%
IM Pastor 5 2,236,668 3.43% - -
Provide Gems 4,478,401 6.88% - -
Less: Capitalised interest
included in
above figures (660,343) (1,008,252)
61,576,218 85.26% 129,069,538 96.91%
SCHEDULE OF INVESTMENTS
Company 30 Jun 2008 30 Jun 2007
NAME OF INVESTMENT VALUATION TOTAL VALUATION TOTAL
ASSETS ASSETS
Eur % Eur %
Lusitano Mortgages 3 plc Class 3,363,731 5.17% 9,046,317 6.74%
E Notes
Lusitano Mortgages 4 plc Class 2,040,107 3.13% 6,333,133 4.72%
E Notes
Lusitano Mortgages 5 plc Class 5,379,117 8.26% 12,660,144 9.43%
E Notes
FCC Minotaure Compartiment
2004-1-296
Residual R Bonds and 1 Unit 2,798,522 4.30% 4,085,999 3.04%
Sestante 2 Class D Notes 2,954,627 4.54% 10,922,013 8.14%
Sestante 3 Class D Notes 2,487,269 3.82% 15,153,403 11.29%
Sestante 4 Class D Notes - - 17,286,370 12.88%
Shield I - Class F Bonds 6,871,718 10.55% 8,231,779 6.13%
Memphis 2006-1 3,432,937 5.27% 4,215,722 3.14%
Fact 2006 Ltd Class C Notes - - 8,079,707 6.02%
Ludgate Funding Plc Series 266,722 0.41% 7,703,203 5.74%
2006 FF1
Semper 2006 5,356,989 8.23% 6,700,000 4.99%
IM Pastor 2 - - 7,300,000 5.44%
IM Pastor 3 - - 7,885,000 5.88%
IM Pastor 4 - - 4,475,000 3.33%
Provide Gems 4,478,401 6.88% - -
Less: Capitalised interest
included in
above figures (128,401) (1,008,252)
39,301,739 53.68% 129,069,538 96.91%
NAME OF SUBSIDIARY VALUATION TOTAL
ASSETS
Eur %
EETI Finance Limited 26,253,142 19.56%
SHAREHOLDER INFORMATION
The Company announces the estimated net asset value per share on a quarterly basis.
Shares are listed on the Channel Islands Stock Exchange and traded through AIM. Shares may be dealt directly through a stockbroker or
professional adviser acting on an investor's behalf. The buying and selling of shares may be settled through CREST.
The Company's register of shareholders is maintained by Anson Registrars Limited in Guernsey and they can be contacted on (44) 01481
711301.
DIRECTORS AND SERVICE PROVIDERS
Directors Anthony Robin Dominic Monro-Davies (Chairman)
Leslie David Goodman
John Reginald Le Prevost
Franoise Adeline Henry
Tanguy Patrice Marie Dominique Boullet
Juan de Dios Sanchez-Roselly Moreno
Registered Office of the Anson Place
Company Mill Court
La Charroterie
St Peter Port
Guernsey
GY1 1EJ
Administrator and Company Anson Fund Managers Limited
Secretary Anson Place
Mill Court
La Charroterie
St Peter Port
Guernsey
GY1 1EJ
Investment Manager Ocean Capital Associates LLP
47 Curzon Street
London
England
W1J 7UJ
Nominated Adviser and Broker Arbuthnot Securities Limited
Arbuthnot House
29 Ropemaker Street
London
England
EC2Y 9AR
Auditors Mazars LLP
Tower Bridge House
St Katherine's Way
London
EW1 1DD
Sponsor to CISX Listing Ogier Corporate Finance Limited
Whiteley Chambers
Don Street
St Helier
Jersey
JE4 9WG
Principal Bankers Royal Bank of Scotland International Limited
Guernsey Branch
PO Box 62
Royal Bank Place
1 Glategny Esplanade
St Peter Port
Guernsey
GY1 4BQ
Registrar, Transfer Agent, Anson Registrars Limited
Paying Agent and Receiving Anson Place
Agent Mill Court
La Charroterie
St Peter Port
Guernsey
GY1 3WX
UK Transfer Agent and Paying Anson Administration (UK) Limited
Agent 3500 Parkway
Whiteley
Fareham
Hampshire
England
PO15 7AL
Custodian BNP Paribas Trust Company (Guernsey) Limited
BNP Paribas House
St Julians Avenue
St Peter Port
Guernsey
GY1 1WA
15 December 2008
E&OE - in transmission
END OF ANNOUNCEMENT
This information is provided by RNS
The company news service from the London Stock Exchange
END
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