GLIF.L Regulatory News (GLIF)

27 Sep 2006 07:02

T2 Income Fund Limited27 September 2006 T2 Income Fund LimitedInterim statement for the six month period ended 30 June 2006 CHAIRMAN'S STATEMENT Attached please find the Accounts of T2 Income Fund Limited (the "Fund") for thesix-month period ending 30 June 2006. As you are aware, the Fund was launched inAugust 2005 when it raised net proceeds of £36.7 million of equity. As of 30June 2006, the Fund had invested approximately £14.5 million of the netproceeds, and I am pleased to report that as of 20 September 2006, the Fund hastotal investments of approximately £33.2 million which means that the Fund isalmost fully invested. As of 30 June 2006, the investments in the portfolio, ona weighted average basis, bear an interest rate of 11.3%, which represents anaverage spread of more than 600 basis points over the relevant LIBOR base. Theweighted average maturity of the investment portfolio as of 30 June 2006 was 54months. Although the Fund's raised capital was deployed more slowly than originallyexpected, T2 Advisers, LLC (the Fund's investment manager, the "Advisor") hasseen an acceleration in the investment opportunities available to it, andbelieves that the current environment for providing investment capital tosmaller and medium-sized companies affords it a positive outlook going forward.Over the past several months the volume and pace of investment activity hasimproved. Primarily in recognition of the initial slowness in deploying theFund's capital, the Advisor has decided to voluntarily rebate £500,000 to theFund, which will increase the Fund's equity capital base going forward. The Fund's mandate is to invest primarily in smaller and medium-sized companiesacross a range of geographies, and adverse movements in the foreign currencymarkets, in particular the strengthening of sterling, have generated someunrealised currency losses. The plan from inception has been to hedge much ofthe risk associated with non-sterling denominated investments as the Fund becamefully invested. Accordingly, on 1 September 2006, with the Fund nearing itsinvestment target, we instituted a hedging program in conjunction withButterfield Bank. The Advisor has entered into discussions with several commercial banks toprovide the Fund with debt capital to leverage its investments and its returns.We have a clear incentive to borrow capital at the most favorable terms possiblein order to capture the greatest differential between the cost of our capitaland the return we generate on our investments. In July 2006, the Fund paid a dividend of 1p per share for the period ending 30June 2006, and the Directors of the Fund have recently increased the dividend to1.5p per share for the third quarter ending 30 September 2006, which will bepaid in October. We continue to see compelling opportunities to invest capital in soundcompanies. We believe that there are relatively few dedicated investors who areactively seeking the sort of investments we focus on. Moreover, we see aninverse relationship between the state of the equity capital (IPO) markets andthe quality of the opportunities available to us - profitable companies arechoosing to remain private longer and are looking to alternative sources inorder to finance their growth and to optimize their capital structures. The Directors are pleased with the recent progress that the Advisor has made onbehalf of the Fund and share the Advisor's enthusiasm with regard to the Fund'sprospects. With the Fund now almost fully invested and generating a strong yieldon its portfolio, we are looking forward to achieving greater operating scaleand a more efficiently levered capital structure. William Harley TozierChairman INCOME STATEMENT Unaudited Audited Period to Period to 30 June 2006 31 December 2005 Notes GBP GBP RevenueInterest income 2 1,146,407 648,866Other income - 46,978Investment IncomeNet (loss)/gain on financial assets and liabilities at fair value through profit or loss 5 (590,102) 33,384Other exchange gains on foreign currency 7,602 - ------------ ------------Total Income 563,907 729,228 ------------ ------------ExpensesManagement fees 4 372,750 300,967Administration and secretarial fees 4 19,835 16,329Custodian fees 4 7,437 6,123Legal and professional fees 9,477 9,167Directors' remuneration 4 32,500 36,418Directors' and officers' insurance 20,952 17,054Audit fees 17,325 15,000Share issue expenses - 68,801Independent valuation fees 13,000 -Board meeting expenses 14,126 -Other expenses 71,723 57,413 ------------ ------------Total Expenses 579,125 527,272 ------------ ------------(Loss)/profit for the period (15,218) 201,956 ============ ============ Basic Earnings per share 12 (0.0004) 0.0053Diluted Earnings per share 12 (0.0004) 0.0048 BALANCE SHEET Unaudited Audited 30 June 31 December 2006 2005 Notes GBP GBPASSETSNon-current assets Financial assets at fair value through the profit or loss account 5 14,511,480 5,887,644 ------------ ------------ 14,511,480 5,887,644 ------------ ------------Current assetsTrade and other receivables 6 210,352 40,440Cash and cash equivalents 7 22,279,321 35,694,293 ------------ ------------ 22,489,673 35,734,733 ------------ ------------ ------------ ------------Total assets 37,001,153 41,622,377 ============ ============ EQUITYCapital and reserves attributable to theCompany's equity holders Share premium 9 36,694,149 36,694,149Other reserve 9,167 4,167Retained earnings 186,738 201,956 ------------ ------------Total equity 36,890,054 36,900,272 ------------ ------------ LIABILITIESCurrent liabilities Trade and other payables 8 111,099 4,722,105 ------------ ------------Total liabilities 111,099 4,722,105 ------------ ------------ ------------ ------------Total equity and liabilities 37,001,153 41,622,377 ============ ============Net Asset Value per Share £0.97 £0.97 ============ ============ STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Share Share Other Retained Total Capital Premium Reserves Earnings Equity Note GBP GBP GBP GBP GBP Proceeds from preferred ordinary shares issued 9 - 38,000,000 - - 38,000,000Set-up fees in relation to issue of shares - (1,305,851) - - (1,305,851)Amortisation of fair value - - 4,167 - 4,167of optionsProfit for the period - - 201,956 201,956 ------------ ------------ ------------ ------------ ------------Balance at 31 December 2005 - 36,694,149 4,167 201,956 36,900,272 Loss for the period - - - (15,218) (15,218)Amortisation of fair value of options - - 5,000 - 5,000 ------------ ------------ ------------ ------------ ------------Balance at 30 June 2006 - 36,694,149 9,167 186,738 36,890,054 ============ ============ ============ ============ ============ STATEMENT OF CASHFLOWS Unaudited Audited 30 June 2006 31 December 2005 Notes GBP GBPCash flows from operating activities Cash generated from operations 10 449,819 156,573 ------------ ------------Net cash inflow from operating activities 449,819 156,573 ------------ ------------Cashflows from investing activitiesPurchase of investments (16,098,318) (1,156,429)Sale of investments 2,233,527 - ------------ ------------Net cash outflow from investing activities (13,864,791) (1,156,429) ------------ ------------Cashflows from financing activitiesProceeds from issue of shares - 38,000,000Set-up fees paid - (1,305,851) ------------ ------------Net cash inflow from financing activities - 36,694,149 ------------ ------------Net (decrease)/increase in cash and cash equivalents (13,414,972) 35,694,293 Cash and cash equivalents at beginning of period 35,694,293 - ------------ ------------Cash and cash equivalents at end of period 22,279,321 35,694,293 ============ ============ NOTES TO THE FINANCIAL STATEMENTS 1. GENERAL INFORMATION T2 Income Fund Limited ("the Company") was incorporated and domiciled inGuernsey, Channel Islands, as a company limited by shares on 9 June 2005. Theaddress of the registered office is P.O. Box 211, Regency Court, GlategnyEsplanade, St Peter Port, Guernsey, Channel Islands, GY1 3NQ. 2. ACCOUNTING POLICIES (a) Basis of preparation This statement has been prepared using accounting policies and presentationconsistent with those applied in the preparation of the accounts of the Companyfor the year ended 31 December 2005. Copies of this interim report are being sent to all registered shareholders.Additional copies are available from Butterfield Fund Services (Guernsey) Ltd,PO Box 211, Regency Court, St Peter Port, Guernsey GY1 3NQ. These accounts do not constitute statutory accounts as defined by Section 59 ofThe Companies (Guernsey) Law, 1994 or Section 240 of the UK Companies Act 1985.The balance sheet at 31 December 2005 and the income statement, statement ofchanges in equity and the cash flow statement for the period then ended havebeen extracted from the Company's 2005 statutory financial statements upon whichthe auditors opinion was unmodified. The financial statements have been prepared under the historical cost conventionas modified by the revaluation of investments at fair value through the IncomeStatement. (b) Foreign currency translation (i) Functional and presentation currency The Financial Statements of the Company are presented in the currency of theprimary economic environment in which the entity operates (its functionalcurrency). The Directors have considered the primary economic currency of theCompany and considered the currency in which the original finance was raised,distributions made, and ultimately what currency would be returned on a break upbasis. The Directors have also considered the currency to which the underlyinginvestments are exposed. On balance, the Directors believe Sterling bestrepresents the functional currency. Therefore the books and records aremaintained in Sterling and for the purpose of the financial statements theresults and financial position of the Company are presented in Sterling, whichis also the presentation currency of the Company. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency usingthe exchange rates prevailing at the dates of the transactions. Foreign exchangegains and losses resulting from the settlement of such transactions and from thetranslation at period-end exchange rates of monetary assets and liabilitiesdenominated in foreign currencies are recognised in the income statement. Translation differences on non-monetary items are reported as part of the fairvalue gain or loss reported in the Income Statement. (c) Revenue recognition Revenue is recognised as follows: Interest income - recognised on an accruals basis as this relates to bankinterest income and coupon interest income. Other income - relates to closing fees and is recognised on an accruals basis. (d) Expenditure All expenses are accounted for on an accruals basis. The management fees,administration fees, finance costs and all other expenses (excluding set upexpenses which were offset against share premium) are charged through the incomestatement. (e) Taxation The Company is exempt from Guernsey taxation under the Income Tax (ExemptBodies) (Guernsey) Ordinance, 1989. A fixed annual fee of £600 is payable to theStates of Guernsey in respect of this exemption. (f) Share issue expenses Share issue expenses of an equity transaction are accounted for as a deductionfrom equity (net of any income tax benefit) to the extent they are incrementalcosts directly attributable to the equity transaction that otherwise would havebeen avoided. (g) Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held at call withbanks, other short term highly liquid investments and bank overdrafts. (h) Trade and other receivables Receivables are recognised initially at fair value plus transaction costs thatare directly attributable to their acquisition or origination. They aresubsequently measured at amortised cost. (i) Trade and other payables Payables are recognised initially at fair value and subsequently stated atamortised cost. (j) Financial assets and liabilities at fair value through profit or loss Purchases and sales of investments are recognised on trade date - the date onwhich the Company acquires or disposes of the economic benefits of the asset.Investments are initially recognised at fair value, and transaction costs forall financial assets and financial liabilities carried at fair value throughprofit or loss are expensed as incurred. Investments are derecognised when therights to receive cash flows from the investments have expired or the Companyhas transferred substantially all risks and rewards of ownership. The fair value of financial instruments traded in active markets is based onquoted market prices at the balance sheet date. The quoted market price usedfor financial assets held by the Company is the current bid price. The fairvalue of financial instruments that are not traded in an active market isdetermined by using valuation techniques. Valuation techniques used include theuse of comparable recent arm's length transactions. Gains and losses arising from changes in the fair value of the financial assetsat fair value through profit or loss are included in the income statement in theperiod in which they arise. (k) Critical accounting estimates and judgements in applying accountingpolicies The Company makes estimates and assumptions that affect the reported amounts ofassets and liabilities within the next financial year. Estimates arecontinually evaluated and based on historical experience and other factors,including expectations of future events that are believed to be reasonable underthe circumstances. Unlisted Debt Securities The Company can invest in financial instruments which are not quoted in activemarkets. Fair values are determined by using valuation techniques. Wherevaluation techniques, such as the Market Capitalization Approach, are used todetermine fair values they are carried out by an independent valuation firmspecifically engaged by the Company to carry out the valuations. Changes inassumptions could affect the reported fair value of financial instruments. 3. FINANCIAL RISK MANAGEMENT (1) Financial risk factors The Company is exposed to interest rate risk, credit risk, liquidity risk andcurrency risk arising from the financial instruments it holds. The riskmanagement policies employed by the Company to manage these risks are discussedbelow. The primary objectives of the financial risk management function are toestablish risk limits, and then ensure that exposure to risks stays within theselimits. The operational and legal risk management functions are intended toensure proper functioning of internal policies and procedures to minimiseoperational and legal risks. (a) Interest rate risk Interest rate risk is the risk that the value of financial instruments willfluctuate due to changes in market interest rates. The Company will haveexposure to interest rate risk if the Board determines that the Company shouldborrow to fund future investments. The exposure arises on the difference betweenthe rate of interest the Company is required to pay on borrowed funds and therate of interest which it receives on the debt securities in which it invests. The Company is exposed to risks associated with the effects of fluctuations inthe prevailing levels of market interest rates on its financial position andcash flows. The Company may, but is not required to, hedge against interest ratefluctuations by using standard hedging instruments such as futures, options andforward contracts. (b) Credit risk Credit risk arises when a failure by counterparties to discharge theirobligations could reduce the amount of future cash inflows from financial assetson hand at the balance sheet date. The Company invests primarily in seniordebt, senior subordinated debt and junior subordinated debt. The maximuminvestment size, at the time of the investment, will generally be limited to 15%of the Company's Gross Assets. However, the Company may make larger investmentsand it may seek to syndicate or sell down a portion of any such investment,after it has been acquired. The Company has established a credit rating system. The purpose of the ratingsystem is to monitor the credit quality of T2's investment portfolio on both anindividual and portfolio basis and the future on-going monitoring required. (c) Liquidity risk Liquidity risk is the risk that arises when the maturity of assets andliabilities does not match. As the Company's investments will not generally bein publicly traded securities, they are likely to be subject to legal and otherrestrictions on resale or otherwise be less liquid than publicly tradedsecurities. The illiquidity of the Company's investments may make it difficultfor them to be sold quickly if the need arises. Since the Company intends toinvest in debt securities with a term of up to seven years, and hold investmentsin debt securities and related equity securities until maturity of the debt, theCompany does not expect realisation events to occur in the near term. (d) Currency risk Currency risk is the risk that the value of financial instruments will fluctuatedue to changes in foreign exchange rates. The Company may make investments incurrencies other than Sterling. To the extent that it does, the Company will beexposed to a potentially adverse currency risk. Changes in the rate of exchangemay affect the value of the Company's investments, and the level of income thatit receives from those investments. The Company has not entered into anycurrency hedging transactions as at 30 June 2006. 30 June 2006 30 June 2006 30 June 2006 30 June 2006Assets USD EUR GBP TotalFinancial assets at fair value through p&l account 14,511,480 - - 14,511,480Cash and cash equivalents 123,269 692,185 21,463,867 22,279,321Trade and other receivables 198,193 - 12,159 210,352 ------------ ------------ ------------ ------------Total assets 14,832,942 692,185 21,476,026 37,001,153 ------------ ------------ ------------ ------------LiabilitiesTrade and other payables - - 111,099 111,099 ============ ============ ============ ============ 31 December 31 December 31 December 31 December 2005 2005 2005 2005Assets USD EUR GBP TotalFinancial assets at fair value through p&l account 5,887,644 - - 5,887,644Cash and cash equivalents - - 35,694,293 35,694,293Trade and other receivables 31,688 - 8,752 40,440 ------------ ------------ ------------ ------------Total assets 5,919,332 - 35,703,045 41,622,377 ------------ ------------ ------------ ------------LiabilitiesTrade and other payables 4,653,822 - 68,283 4,722,105 ============ ============ ============ ============ (e) Market risk The Group's exposure to market risk is comprised mainly of movements in theCompany's investments. The investment portfolio is managed within parametersdisclosed in the Company's offering memorandum. (2) Fair value estimation The fair values of the Company's short-term trade receivables and payablesapproximate to their carrying amounts at the balance sheet date. 4. FUND EXPENSES Management fee The Investment Manager, T2 Advisers, LLC, is entitled to receive an annual feepayable quarterly in advance. For the period from the Company's admission totrading on AIM until the quarter end next following six months from the date ofadmission, the management fee was calculated based on 2% of the initial value ofthe Company's gross assets upon admission. The management fee is now calculatedbased on 2% of the average value of the Company's gross assets at the end of thetwo most recently completed quarters. Total fees charged for the period ended 30 June 2006 amounted to GBP372,750 (31December 2005:GBP300,967). The total amount due and payable at the period endamounted to GBP6,829 (31 December 2005:GBP2,150). Administration and secretarial fees The Administrator and Secretary, Butterfield Fund Services (Guernsey) Limited,is entitled to an annual fee for its services as administrator and secretary, of0.075% of the Net Asset Value of the Company, calculated on the last businessday of each quarter and payable quarterly in arrears. The fee is subject to aminimum of GBP40,000 per annum. They are also due a fixed accounting fee ofGBP10,000 per annum plus a fixed fee of GBP5,000 for their registrar services. Total administration and secretarial fees (excluding accounting and registrarfees) charged for the period ended 30 June 2006 amounted to GBP19,835 (31December 2005:GBP16,329). The total amount due and payable at the period endamounted to GBP10,315 (31 December 2005 GBP10,082). Custodian fees The Custodian, Butterfield Bank (Guernsey) Limited is entitled to custody feesof 0.02% of the Net Asset Value of the Company subject to a minimum of GBP15,000per annum. The fee is payable quarterly in arrears. Total fees charged for the period ended 30 June 2006 amounted to GBP7,437 (31December 2005:GBP6,123). The total amount due and payable at the period endamounted to GBP7,437 (31 December 2005:GBP3,781). Directors fees The current level of fees for the Chairman of the Board of Directors of theCompany is GBP25,000 per annum, and GBP20,000 each for non-executive directors. Total fees charged to the Company for the period ended 30 June 2006 amounted toGBP32,500 (31 December 2005:GBP36,418). The total amount due and payable at theperiod end amounted to GBP16,250 (31 December 2005:GBP16,250). 5. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 30 June 2006 31 December 2005 GBP GBP Listed debt securities - 1,186,814Unlisted debt securities 14,457,335 4,700,830Unlisted warrants 54,145 - ------------ ------------ 14,511,480 5,887,644 ============ ============(Losses)/gains recognised in relation to financialassets at fair value through profit or loss- realised (99,505) -- unrealised (490,597) 33,384 ------------ ------------ (590,102) 33,384 ============ ============ 6. TRADE AND OTHER RECEIVABLES 30 June 2006 31 December 2005 GBP GBP Accrued bank interest 7,354 7,541Loan interest receivable 194,141 6,683Prepaid expenses 8,857 26,216 ------------ ------------ 210,352 40,440 ============ ============ 7. CASH AND CASH EQUIVALENTS 30 June 2006 31 December 2005 GBP GBP Call account 1,010,695 5,110,197Fixed deposit 20,453,172 30,584,096Foreign currency accounts 815,454 - ------------ ------------ 22,279,321 35,694,293 ============ ============ For the purposes of the Cash Flow Statement, the above items represent theperiod end cash and cash equivalents. 8. TRADE AND OTHER PAYABLES 30 June 2006 31 December 2005Current liabilities GBP GBPPayable for investments - 4,650,853Management fees 6,829 2,150Administrator's fees 10,315 10,082Custodian's fees 7,437 3,781Audit fees 19,825 15,000Directors' fees 16,250 16,250Independent valuation fees 13,000 -Other accruals 37,443 23,989 ------------ ------------ 111,099 4,722,105 ============ ============ 9. SHARE CAPITAL The Company has the power to issue an unlimited number of ordinary shares of nopar value. On incorporation two Ordinary Shares were issued at 100p each to the subscribersto the Memorandum of Association of the Company. On Admission to the AIM on 5August 2005 the Company repurchased these Ordinary Shares. On Admission to the AIM on 5 August 2005 the Company allotted 38,000,000 fullypaid Ordinary Shares. Ordinary shares are classified as equity. Incremental costs directlyattributable to the issue of new shares are shown in equity as a deduction fromthe proceeds, net of tax. The Investment manager, T2 Advisers LLC, has been granted options to purchase4,222,222 Ordinary Shares at the Placing Price, as reduced by dividends paid pershare, subject to the Company achieving certain performance criteria as follows: The Investment manager options will vest and become exercisable in respect of 50per cent immediately on conclusion of the first three month period during whichthe Company pays dividends on the Shares in an aggregate amount during thatthree month period equal to or exceeding 8 per cent of the Initial Offer Priceon an annualised basis (the hurdle rate). The remaining 50 per cent will vestand become exercisable immediately on conclusion of the twelve month periodfollowing the date specified above. In accordance with IFRS2, the value of the options was based upon an estimate ofthe fair value of the services received. The Company believes that the fairvalue can be determined by a comparison to a performance-based incentive feeprogram, which arrangements are common practice in the industry, because theoption program was similarly intended to compensate the Investment manager forachieving superior returns. The fair value estimate was based, in good faith,upon the present value of a hypothetical performance-based incentive fee,assuming a fee of 20% of the excess return above an 8% hurdle rate over aten-year period; the fair value of the options was determined to be £100,000.For the period ending 30 June 2006 the Company charged £5,000 to expenserepresenting the amortisation of the fair value of the options. The calculation of fair value is sensitive to a number of assumptions, includingthe average interest rate on investments, the pace of investment activity, theamount and cost of leverage, if any, and expenses. It should be noted that theactual value of the options may ultimately be substantially greater or less thanthe fair value calculated. If actual financial performance is significantlybetter than the assumptions used in the calculation of fair value, the optionscould be worth several million pounds; to the extent that the performancecriteria is not achieved, the options would expire worthless. Share Capital Shares in issue GBPOrdinary sharesShares issued during the period 38,000,000 - ------------ ------------Shares in issue as at 31 December 2005 38,000,000 - ============ ============ GBPShare PremiumShares issued during the period 38,000,000Set-up fees (1,305,851) ------------Total as at 30 June 2006 and 31 December 2005 36,694,149 ============Total value of shares in issue as at 30 June 2006 and 31 December 2005 36,694,149 ============ 10. CASH GENERATED FROM OPERATIONS 30 June 2006 31 December 2005 GBP GBP(Loss)/profit for the period (15,218) 201,956Adjustments for:Net loss/(gain) on financial assets and liabilitiesat fair value through profit or loss 590,102 (33,384)Amortisation of fair value of options 5,000 4,167Changes in working capital:Trade and other receivables (169,912) (87,418)Trade and other payables 39,847 71,252 ------------ ------------Cash inflow from operations 449,819 156,573 ============ ============ 11. RELATED PARTY TRANSACTIONS Saul Rosenthal is a member of BDC Partners which owns T2 Advisers LLC. Saul Rosenthal and Patrick Conroy are directors of T2 Advisers LLC. Patrick Firth is a director of the Administrator, Butterfield Fund Services(Guernsey) Limited. The following transactions were carried out with related parties: 30 June 2006 31 December 2005 GBP GBPAmounts due to related partiesFees due to P Conroy as Chief Financial Officer tothe Company 4,167 4,167 ============ ============Fees due to the Investment manager, T2 Advisers, LLC 6,829 2,150 ============ ============ The Investment manager has been granted options giving it the right to acquire4,222,222 Ordinary Shares at the Placing Price, subject to the Company achievingcertain performance criteria. As at 30 June 2006 the criteria had not been met,refer note 9. Directors shareholdings in Company Saul Rosenthal holds 1,055,556 ordinary shares in the Company as at 30 June 2006and 31 December 2005. This is equal to a beneficial interest of 2.5% based onthe Share Capital as at that date when diluted by the number of Ordinary Sharessubject to the option. 12. EARNINGS PER SHARE Earnings per share has been calculated by dividing the loss attributable toordinary share holders (£15,218) by the weighted average number of ordinaryshares outstanding during the period (38,000,000). Diluted earnings per sharehas been calculated by dividing the loss attributable to ordinary share holders(£15,218) by the weighted average, except for the period between incorporationand flotation, number of ordinary shares outstanding during the period adjustedfor the effects of all dilutive potential ordinary shares (42,222,222). 13. POST BALANCE SHEET EVENTS Since the period end the Company has made a number of new investment purchases,these are detailed below: Cost07/07/06 US$3,000,000 X-Rite Inc. (2nd Lien)18/07/07 US$1,010,000 X-Rite Inc. (2nd Lien)28/07/06 US$3,942,857 Infor Global Solutions (1st Lien)16/08/07 US$2,057,143 Infor Global Solutions (1st Lien)17/08/06 US$1,268,750 One Communications Corp. ( 2nd Lien)29/08/06 US$3,045,000 One Communications Corp. (2nd Lien)18/08/06 US$5,078,684 Cavalier Telephone, Inc. (1st Lien)25/08/06 EUR1,500,000 Nova Analytics (1st Lien)25/08/06 US$3,446,625 Workflow Management Inc. (1st Lien)25/08/06 US$2,335,625 Workflow Management Inc. (1st Lien)01/09/06 EUR3,980,000 Versatel Holdings (2nd Lien)06/09/06 EUR3,323,125 Audatex North America, Inc (2nd Lien)06/09/06 US$6,000,000 Travelport (1st Lien) These new investments bear a weighted average interest rate of 9.64%, and aweighted average maturity of 77 months. On 31 July 2006, Infor Global Solutions (2nd Lien), original cost US$5,000,000,was refinanced and rolled into a total of US$6,000,000 by two instalments asindicated above. On 1 September 2006 Workflow Management Inc repaid two amounts being $1,178,629and $11,786. Portfolio Statement Fair % of total Value equityInvestments (31 December 2005:15.96%)Corel Corporation Term Loan B 4,050,707 10.98% Peer 1 Network (USA) Inc. Loan 4,041,909 10.96% Infor Global Solutions (2nd Lien) 2,761,384 7.49% Stratus Technologies Inc. (2nd Lien) 3,657,480 9.91% ------------ ------------Total financial assets at fair value through profit or 14,511,480 39.34%loss Cash balances(31 December 2005:96.73%) 22,279,321 60.39% Other net assets(31 December 2005:(12.69%)) 99,253 0.27% ------------ ------------Total equity 36,890,054 100.00% ============ ============ Statement of significant investment purchases and sales Purchases(at cost) 2006 GBP FCI International S.A.S. 803,582Stratus Technologies Inc. (2nd Lien) 3,872,335Corel Corporation Term Loan B 4,037,685Infor Global Solutions (2nd Lien) 2,733,862 ------------ 11,447,464 ------------ Sales (proceeds) 2006 GBP Corel Corporation (2nd Lien) Term Loan 1,082,310FCI International S.A.S. 778,197Capital repayments Peer 1 Network (USA) Inc. Loan 373,020 ------------ 2,233,527 ------------ This information is provided by RNS The company news service from the London Stock Exchange