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PSource Struct Debt (PSD)

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Wednesday 27 February, 2013

PSource Struct Debt

Half Yearly Report

RNS Number : 7756Y
PSource Structured Debt Limited
27 February 2013
 



 

 

 

PSOURCE STRUCTURED DEBT LIMITED

 

 

INTERIM REPORT AND UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD FROM 1 JULY 2012 TO 31 DECEMBER 2012



PSOURCE STRUCTURED DEBT LIMITED

 

Contents

 

Company Information

1



Chairman's Statement

2-3



Responsibility Statement

4



Condensed Consolidated Statement of Financial Position (unaudited)

5



Condensed Consolidated Statement of Comprehensive Income (unaudited)

6



Condensed Consolidated Statement of Changes in Equity (unaudited)

7



Condensed Consolidated Statement of Cash Flows (unaudited)

8



Notes to the Condensed Consolidated Financial Statements (unaudited)

9-13



Analysis of Significant Investments (unaudited)

14

 

 

 

 

 


PSOURCE STRUCTURED DEBT LIMITED

Company Information

 

Company Number:

47075 (Registered in Guernsey)

Financial adviser and stockbroker to the Company:

Numis Securities Limited

The London Stock Exchange Building

10 Paternoster Square

London, EC4M 7LT

 

Directors:

William Scott, Independent Chairman

Soondra Appavoo

Peter Niven, Independent Director

Tim Jenkinson, Independent Director

Keith Dorrian, Independent Director

 

Auditors to the Company:

KPMG Channel Islands Limited

20 New Street

St Peter Port

Guernsey, GY1 4AN

Company Secretary and Administrator:

Praxis Fund Services Limited

Sarnia House

Le Truchot

St Peter Port

Guernsey, GY1 4NA

Solicitors to the Company:

Eversheds LLP

1 Wood Street

London, EC2V 7WS

Registered office of the Company:

Sarnia House

Le Truchot

St Peter Port

Guernsey, GY1 4NA

Guernsey Lawyers to the Company:

Mourant Ozannes

PO Box 186

1 Le Marchant Street

St Peter Port

Guernsey, GY1 4HP

 

Investment Manager:

Laurus Capital Management, LLC

875 Third Avenue, 3rd Floor

New York, NY 10022

USA

 

U.S. Counsel:

Alston & Bird LLP

90 Park Avenue

New York, NY 10016-1387

USA

Manager:

PSource Capital Guernsey Limited

Sarnia House

Le Truchot

St Peter Port

Guernsey, GY1 4NA

Until 31 July 2012

Bankers:

Investec Specialist Private Bank

Glategny Court,

Glategny Esplanade,

St Peter Port,

Guernsey, GY1 3LP

 

Investment Consultant Promoter & Manager:

PSource Capital Limited

126 Jermyn Street

London, SW1Y 4UJ

Manager - effective 31 July 2012

Custodian:

Wells Fargo Bank                 

45 Broadway,14th Floor        

New York, NY 10006             

USA                                       

Independent Valuation Consultant:

MountainView IPS (formerly Clayton IPS Corporation)

999 18th Street

Suite 1001

Denver, Colorado 80202

USA

Registrar:

Capita Registrars (Guernsey) Limited

Mont Crevelt House

Bulwer Avenue

St Sampson

Guernsey, GY2 4JN

Clearing Broker:

Albert Fried & Company, LLC

45 Broadway, 24th Floor   

New York, NY 10006

USA

 

 

Executing Broker:

GP Nurmenkari Inc.

6 East 39th Street

New York, NY 10016

USA

 

Financial Public Relations:

Weber Shandwick Financial

Fox Court

14 Gray's Inn Road

London, WC1X 8WS


 



PSOURCE STRUCTURED DEBT LIMITED

Chairman's Statement

Period end 31 December 2012

 

I set out below the interim report for the half year ended 31 December 2012. The most important development of the past half year has been significant investment made by an Abu Dhabi investment group in Parabel, the Company's largest investment.

 

PSD has been in wind-down for some time now. As mentioned in the 2012 Annual Accounts, the Board has been looking at liquidation options. Following the funding of Parabel, the Board believes that this is now an appropriate point to put PSD into liquidation. We set out further detail on this process below.

 

Review of the portfolio

Following the vote to put PSD into wind down in April 2012, the Company no longer prepares its accounts on a going concern basis. On the advice of the Independent Valuation Consultant, Mountainview, and reflecting the recent Parabel transaction, the Board has written the NAV down by US$33,693,279 (80.49%) to US$8,166,684.

 

The two largest components of this write down were:

 

·      US$27,155,566 write down in the Company's holding in Parabel to US$4,600,000

·      US$3,650,095 write down in the Company's holding in Biovest to US$1,617,573

 

The Parabel write down follows an investment by an Abu Dhabi Investment Group (Dhabi Cayman One Limited) into Parabel Limited (a newly formed subsidiary of Parabel, Inc.).  This is a complex transaction, and has resulted in a dilution of PSD's holding.  However, it is also an important step forward for Parabel to have secured this material investment (US$15 million) from a third party which Parabel management believes will assist in significantly accelerating Parabel's commercial development.  As PSD shareholders will recall, it has been the intention and hope of Parabel to achieve an IPO which, amongst other things would have provided funding to the operating business of Parabel for the purposes described above.  Circumstances have dictated that this has not been achieved in our holding period to date.  Accordingly, Parabel has sought and has obtained third party funding which has resulted in the Abu Dhabi transaction described above.   Shareholders will appreciate that there is a material difference to be expected in the valuation that an embryonic business such as Parabel (or indeed almost any business) will achieve in a private off-market transaction such as that with Abu Dhabi and that which could be achieved in a public market IPO.  The write down in the value of our holding reflects two elements: the relatively modest structural dilution from new money referred to above; and the larger from the re-pricing of our holding in line with the significant cash transaction with the new external investor.   Only the structural element of the value reduction is necessarily permanent; whether (and when) the remainder might reverse will of course be determined by the evolution of future events.

 

The Biovest write down follows an event of default declared by certain of Biovest's creditors (including PSD and other funds affiliated with the Investment Manager) in respect of indebtedness which fell due in November 2012 and which Biovest failed to repay or refinance and the further investment in that company by funds affiliated with the Investment Manager and the consequent assessment of the valuation of that company and the relevant elements of its capital structure by our Independent Valuation Consultant.

 

NAV Performance

The NAV has reduced by US$33.69 million or 80.49% during the period and was 0.1371 US cents per PSD share or 8.4p/share (US$8.17m in total) at 31 December 2012. Bearing in mind the illiquid nature of the Company's investments, the realisation of this NAV is highly dependent on market conditions.



PSOURCE STRUCTURED DEBT LIMITED

Chairman's Statement, continued

Period end 31 December 2012

 

Cash flows and bank position

There have been only limited disposals during the half year, the only significant sale being the disposal of the Company's holdings in BioDelivery Sciences for net proceeds of US$671,309.

 

The Company had a small cash balance of US$336,683 at 31 December 2012. As at 27 February, this cash balance had reduced to US$281,633.

 

The Company has no debt or overdraft facility with its bankers, Investec Specialist Private Bank.

 

Liquidation of the Company

Following the write down of the portfolio, the monthly expenses of the Company in its current form equate to approximately US$37,000. In the absence of any further cash inflows (none of which can be guaranteed), the Company does not have the cash resources to continue operation in its current form for an extended period.

 

The Board has considered a number of possible mechanisms for the Company during the realisation of the remaining holdings.  Although there are several potential ways of operating on a reduced-cost basis, the Board has concluded that the most appropriate and lowest-cost option is to appoint a liquidator.  Therefore, the Board intends before the end of March to put proposals for the delisting and the appointment by shareholders of a liquidator to represent their interests while ongoing efforts are made to realise PSD's residual assets.

 

Shareholders voted to put PSD into wind-down in April 2012. Following the Parabel funding transaction, the Board believes it is now an appropriate time to put PSD into liquidation.

 

 

 

 

William Scott (Chairman)

Date: 27 February 2013



PSOURCE STRUCTURED DEBT LIMITED

Responsibility Statement

 

We confirm that to the best of our knowledge and in accordance with DTR 4.2.10R of the Disclosure and Transparency Rules:

 

a)   The condensed consolidated financial statements (the "financial statements") have been properly prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with International Financial Reporting Standards ("IFRS") and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group as at and for the period ended 31 December 2012.

 

b)   The interim report, which includes information detailed in the Chairman's Statement and Notes to financial statements, includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months ended 31 December 2012 and description of principal risks and uncertainties for the remaining six months of the year); and

 

c)   The interim report, which includes information detailed in the Chairman's Statement and Notes to financial statements, includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

 

 

 

Director:                                                               William Scott

 

 

 

Director:                                                               Peter Niven

 

 

Date: 27 February 2013

On behalf of the Board of Directors

 

 



PSOURCE STRUCTURED DEBT LIMITED

Condensed Consolidated Statement of Financial Position (unaudited)

As at 31 December 2012

 


Notes

31 December 2012


30 June 2012

(audited)



US$


US$






Investments

6




Fair value through profit and loss


5,089,843


30,422,024

Held for trading


-


723,605

Loans and receivables


7,035,190


10,642,455

Total investments


12,125,033


41,788,084






Current assets





Cash and cash equivalents


336,683


293,808

Unsettled investment sales


59,330


-

Other receivables

7

24,511


4,275,920



420,524


4,569,728






Current liabilities





Other payables

8

(4,378,873)


(4,497,849)



(4,378,873)


(4,497,849)






Net current (liabilities)/assets


(3,958,349)


71,879






Total net assets


8,166,684


41,859,963






Represented by Shareholders' equity:





Share Premium


47,512,742


47,512,742

Distributable reserve


42,793,973


42,793,973

Reserves


(82,140,031)


(48,446,752)






Total Shareholders' equity


8,166,684


41,859,963






Net asset value per Ordinary Share

9

US$0.1371


US$0.7028

 

 

 

 

 

 

The accompanying notes form an integral part of these financial statements.



PSOURCE STRUCTURED DEBT LIMITED

Condensed Consolidated Statement of Comprehensive Income (unaudited)

For the period ended 31 December 2012

 


Notes

1 July 2012

to

31 December 2012


1 July 2011

to

31 December 2011



US$


US$

Revenue





Loan interest income


507,994


1,223,005

Bank interest


162


89

Fee income


-


5,400

Other income


18,043


12,868

Bad debt provision


(4,747,188)


(14,595)

Net losses on investments at fair value through profit or loss


 

(25,325,147)


 

(22,357,987)

Net losses on investments at amortised cost


(3,529,502)


(1,545,958)

Net foreign exchange gains


(6,554)


4,605






Net investment deficit


(33,082,192)


(22,672,573)






Expenses





Management fee


(306,461)


(935,738)

Directors' fees and expenses

4

(54,566)


(89,892)

Administration fees


(77,830)


(117,914)

Custodian fees


(13,245)


(14,000)

Registrar fees


(11,784)


(9,526)

Auditor's remuneration


(2,710)


(56,079)

Loan arrangement fees


-


(210,106)

Legal and professional fees


(91,335)


(153,561)

Independent valuation consultancy fee


(25,206)


(60,493)

US Taxation


(288)


(22,369)

Other expenses


(27,662)


(27,525)






Operating expenses before finance costs


(611,087)


(1,697,203)






Net deficit from operations before finance costs


(33,693,279)


(24,369,776)






Finance costs





Bank interest


-


(20,201)

Loan interest


-


(103,696)






Deficit after finance costs for the period


(33,693,279)


(24,493,673)











Total comprehensive deficit for the period


(33,693,279)


(24,493,673)






Basic & diluted deficit per Ordinary Share

5

US$(0.5657)


US$(0.4112)






 

 

 

 

 

The results for the current and prior periods are derived from continuing operations.

 

The accompanying notes form an integral part of these financial statements.


PSOURCE STRUCTURED DEBT LIMITED

Condensed Consolidated Statement of Changes in Equity (unaudited)

For the period ended 31 December 2012

 



1 July 2012 to 31 December 2012

 


 

 

Share

Premium

Distributable Reserve

Reserves

Total



US$

US$

US$

US$







Balance brought forward


47,512,742

42,793,973

(48,446,752)

41,859,963







Total comprehensive deficit for         the period

 

 

 

-

 

-

 

(33,693,279)

 

(33,693,279)













Balance carried forward


47,512,742

42,793,973

(82,140,031)

8,166,684









 

 



1 July 2011 to 31 December 2011

 



Share

Premium

Distributable Reserve

Reserves

Total



US$

US$

US$

US$







Balance brought forward


47,512,742

42,793,973

8,343,394

98,650,109







Total comprehensive deficit for         the period

 

 

 

-

 

-

 

(24,493,673)

 

(24,493,673)













Balance carried forward


47,512,742

42,793,973

(16,150,279)

74,156,436

 

 

 

The accompanying notes form an integral part of these financial statements.

 

 


PSOURCE STRUCTURED DEBT LIMITED

Condensed Consolidated Statement of Cash Flows (unaudited)

For the period ended 31 December 2012

 



1 July 2012

 to

31 December 2012


1 July 2011

 to

31 December 2011



US$


US$






Cash flows from operating activities





Loan interest received


-


239,744

Fee income received


-


5,400

Other income received


18,043


12,868

Operating expenses paid


(717,976)


(1,832,806)

Sale proceeds received from disposal of                  investments


 

671,309


 

682,832

Amounts received on loan repayments


77,763


6,457,225

 

Net cash from operating activities


 

49,139


 

5,565,263











Cash flows from/(used in) financing activities





Bank interest received


290


89

Bank interest paid


-


(20,201)

Loan interest paid


-


(103,696)

Loan liability repayments


-


(3,867,480)

 

Net cash from/(used in) financing activities


 

290


 

(3,991,288)






Net increase in cash and cash equivalents


49,429


1,573,975






Cash and cash equivalents, start of period


293,808


(510,243)






Effect of exchange rate changes during the period


(6,554)


4,605

 

Cash and cash equivalents, end of period


 

336,683


 

1,068,337

 

 

Cash and cash equivalents comprise the following amounts:





Bank deposits


336,683


1,068,337



336,683


1,068,337

 

 

The accompanying notes form an integral part of these financial statements.



 

PSOURCE STRUCTURED DEBT LIMITED

Notes to the Condensed Consolidated Financial Statements

For the period ended 31 December 2012









1.   The Company:

The Company is a closed-ended investment company, incorporated and registered with limited liability in Guernsey on 5 June 2007 and formed in accordance with The Control of Borrowing (Bailiwick of Guernsey) Ordinance, 1959 to 2003 as amended. The Company commenced business on 3 August 2007 when the initial 30,000,000 Ordinary Shares of the Company were admitted to the Official List of the London Stock Exchange. The Company is a Guernsey Authorised Closed-ended Investment Scheme and is subject to the Authorised Closed-ended Investment Scheme Rules 2008.

 

The Group also includes PSD SPV 2, Inc ("SPV2" or "Subsidiary") a wholly own subsidiary of the Company. SPV2 was incorporated in the State of Delaware on 2 April 2009 and commenced trading on 1 May 2009. SPV2 was established to hold certain US assets. For reasons of tax efficiency, newly originated direct investments and co-investments after that time were made through this Subsidiary.

 

The Group comprises PSource Structured Debt Limited and SPV2.

 

2.   Principal Accounting Policies:

The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Group's financial statements:

 

(a)  Basis of Preparation:

 

(i) General

The condensed interim financial statements (the "financial statements") have been prepared in accordance with International Accounting Standard ("IAS") 34 "Interim Financial Reporting", as adopted by the European Union and are in compliance with the Companies (Guernsey) Law, 2008.

 

The financial statements do not include all the information and disclosures required in annual financial statements and should be read in conjunction with the Group's annual financial statements for the year ended 30 June 2012. The same accounting policies, presentation and methods of computation are followed in these financial statements as those followed in the preparation of the Group's annual audited financial statements for the year ended 30 June 2012.

 

These financial statements have been prepared on a break up basis as the Company may go into voluntary liquidation during the next 12 months. The only impact of adopting the break-up basis compared to the going concern basis on the financial statements is the provision of liquidation costs, because in the Directors opinion the Company's investments are being carried at the best estimate of their realisable value as at the period end.

 

(ii) Judgements and estimates

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant.

 

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate was revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

 

In preparing these financial statements, the significant judgements made by management and the key sources of estimation uncertainty were the same as those applied to the financial statements for the year ended 30 June 2012.

 

3.   Material Agreements & Related Parties, continued:

 

Management Agreement

With effective from 16 May 2012, the Management Agreement was amended so that the annual management fee would be paid at the rate of 2 per cent per annum of NAV up to 31 March 2013 and will thereafter drop to a rate of 1.25 per cent per annum of NAV. The management fee will continue to be accrued daily and calculated and paid monthly.

 



PSOURCE STRUCTURED DEBT LIMITED

Notes to the Condensed Consolidated Financial Statements, continued

For the period ended 31 December 2012









3.   Material Agreements & Related Parties, continued:

 

Management Agreement, continued

As at 31 December 2012, the management fee creditor was US$27,408 (30 June 2012: US$70,877).

 

In addition, the Manager is entitled to a Performance Fee in respect of any Performance Fee Period in which the Performance Trigger has been achieved. As at 31 December 2012, the Performance Fee creditor was US$4,185,888 (30 June 2012: US$4,185,888). In January 2009, the Manager agreed to defer payment of the Performance Fee owed by the Group until such time as the Group has resumed dividend payments.

 

With effective from 16 May 2012, the Company waived the condition that any performance fee payments would be deferred until such date as the Company has resumed payment of dividends to Shareholders.

 

During the prior year, the Manager (and in turn the Investment Manager) also agreed to waive 25 per cent (being US$ 1,395,296) of its entitlement to the deferred Performance Fee. This amount was written back in the Consolidated Statement of Comprehensive Income during the prior year. The Manager (and in turn the Investment Manager) further agreed that it will only be entitled to receive the remaining 75 per cent (being US$ 4,185,888) of its entitlement to the deferred Performance Fee if following such waiver:

 

·      Parabel, Inc ("Parabel"), formerly Petro Algae Inc, is the subject of an IPO whereby its shares are listed on either NASDAQ or the NYSE or another stock exchange approved by the Company, and the proceeds of such IPO are distributed to the Company by PetroTech; or

·      more than 50 per cent of the shares of common stock in Parabel, attributable to the Company by virtue of its investment in PetroTech, are sold by private sale and the proceeds of such sale net of the proportion of expenses of PetroTech in respect of such sale attributable to the Company which were sold are distributed to the Company by PetroTech.

 

Upon termination of the Management and Investment Management Agreement, the Company may discharge its performance fee obligation in specie in Parabel, Inc stock or securities in PetroTech Holdings Inc (an intermediate holding company) based on a valuation of Parabel, Inc common stock of $8.70/share. Based on the Company's current valuation of its Parabel, Inc holding, such an in specie payment could discharge the Company's obligation at a substantially lower value than the current balance sheet liability ($4.185m). However, any such in specie payment is subject to a "True Up" revaluation if there is a subsequent exit event within six months of the date of transfer of shares in payment of the performance fee and based on this, the Board consider it appropriate to maintain the current full liability provision.

 

For details of changes to potential future performance fees please refer to the EGM Circular dated 16 May 2012.

 

Administration Agreement

As at 31 December 2012, the administration fee payable was US$20,322 (30 June 2012: US$12,166).

 

Registrar Agreement

As at 31 December 2012, theregistrar fee payable was US$4,991 (30 June 2012: US$5,942).

 

Custodian Agreement

As at 31 December 2012, the custodian fees payable was US$nil (30 June 2012: US$nil).

 

Independent Valuation Consultant

As at 31 December 2012, the independent valuation consultancy fee payable was US$12,706 (30 June 2012: US$12,500).

 

Related Party Transactions

There were no transactions with related parties during the current or immediately prior periods.

 

Directors' and Other Related Parties' Interests

As at 31 December 2012, the interests of the Directors and their families who held office during the period are set out below:


31 December 2012


30 June 2012


Ordinary Shares


Ordinary Shares

William Scott (Chairman)

50,000


50,000

Peter Niven

30,000


30,000

Soondra Appavoo

20,000


20,000

Tim Jenkinson

50,000


50,000

Keith Dorrian

-


-



PSOURCE STRUCTURED DEBT LIMITED

Notes to the Condensed Consolidated Financial Statements, continued

For the period ended 31 December 2012









3.   Material Agreements & Related Parties, continued:

 

Directors' and Other Related Parties' Interests

There were no changes in the interests of the Directors prior to the date of this report.

 

No Director, other than those listed above, and no connected person of any Director has any interest, the existence of which is known to, or could with reasonable diligence be ascertained by that Director, whether or not held through another party, in the share capital of the Company.

 

As at 31 December 2012, the Investment Manager held 500,000 (30 June 2012: 500,000) Ordinary Shares in the Company.

 

4.   Directors' Fees:

Each of the Directors has entered into an agreement with the Company providing for them to act as a non-executive director of the Company. Their annual fees, excluding all reasonable expenses incurred in the course of their duties which were reimbursed by the Company were as follows for the year:

 


31 December 2012


30 June 2012*


Annual Fee


Annual Fee


£


£

William Scott (Chairman)

20,000


27,500

Soondra Appavoo

-


-

Peter Niven (Audit Committee chairman)

17,000


24,500

Tim Jenkinson

15,000


22,500

Keith Dorrian

15,000


22,500

 

*All Directors annual fees were reduced by £10,000 per annum per Director with effect from 1 April 2012.

 

Mr Appavoo has waived his Director's fees for the year. As at 31 December 2012, the Directors' fees payable was US$27,227 (30 June 2012: US$nil).

 

5.   Basic & diluted deficit per Ordinary Share:

Basic deficit per Ordinary Share is based on the net deficit for the period of US$33,693,279 (period ended 30 June 2012: US$24,493,673) and on a weighted average of 59,564,681 (30 June 2012: 59,564,681) Ordinary Shares in issue.

 

Diluted deficit per Ordinary Share is the same as basic deficit per Ordinary Share since there are no dilutive potential Ordinary Shares arising from financial instruments.

 

6.   Investments:


31 December 2012

30 June 2012

31 December 2011

Fair Value Through Profit or Loss Investments:

US$

US$

US$

Investments listed on recognised investment exchanges

 

489,814

 

1,744,422

 

1,685,106

Unlisted investments

4,600,029

28,677,602

60,413,523


5,089,843

30,422,024

62,098,629

 


31 December 2012

30 June 2012

31 December 2011

Held for Trading Investments:

US$

US$

US$

Unlisted investments

-

723,605

251,485

 


31 December 2012

30 June 2012

31 December 2011

Loans and Receivables at amortised    cost:

US$

US$

US$

Loans

7,035,190

10,642,455

13,123,167

 

 



PSOURCE STRUCTURED DEBT LIMITED

Notes to the Condensed Consolidated Financial Statements, continued

For the period ended 31 December 2012









6.   Investments, continued:

 


31 December 2012

30 June 2012

31 December 2011

Total Investments:

US$

US$

US$

Investments listed on recognised investment exchanges

 

5,089,843

 

1,744,422

 

1,685,106

Unlisted investments

-

29,401,207

60,665,008

Loans

7,035,190

10,642,455

13,123,167


12,125,033

41,788,084

75,473,281

 

7.   Other Receivables:

31 December 2012

30 June 2012


US$

US$

Loan interest & fee receivables

-

4,239,484

Prepayments

24,511

36,436


24,511

4,275,920

 

The Directors consider that the carrying amount of other receivables approximates fair value.

 

8.   Other Payables:

31 December 2012

30 June 2012


US$

US$

Management fee payable

27,408

70,877

Performance fee payable

4,185,888

4,185,888

Administration fee payable

20,322

12,166

Audit fee payable

-

78,535

Legal & professional fees payable

100,000

100,000

US Tax payable

333

46

Other payables

44,922

50,337


4,378,873

4,497,849

 

      The Directors consider that the carrying amount of other payables approximates fair value.

 

9.   Net Asset Value per Ordinary Share:

The net asset value per Ordinary Share is based on the net assets attributable to Ordinary shareholders of US$8,166,664 (30 June 2012: US$41,859,963) and on the period end Ordinary Shares in issue of 59,564,681 (30 June 2012: 59,564,681).

 

10.  Financial Risk Management:

 

      Strategy in Using Financial Instruments:

The Group's activities expose it to a variety of financial risks: market risk (including currency risk, fair value, interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. These policies include the use of certain financial derivative instruments. The risk management policies employed by the Group to manage these risks are discussed below.

 

These financial statements do not include all financial risk management information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements for the year ended 30 June 2012. There have been no changes in risk management policies since the last year end.

 

11.  Significant Investment Holding:

 

Parabel, Inc./PetroTech Holdings Inc.

The Group has a significant holding in Parabel, Inc (formerly PetroAlgae), a food, feed and fuel development stage company based in Florida, through its holding in PetroTech Holdings Inc. The holding structure and some of the commercial progress of PetroAlgae is discussed below.


PSOURCE STRUCTURED DEBT LIMITED

Notes to the Condensed Consolidated Financial Statements, continued

For the period ended 31 December 2012







11.  Significant Investment Holding (continued):

 

Parabel, Inc./PetroTech Holdings Inc. (continued)

 

Holding structure

The Group has a significant holding in PetroTech Holdings Inc, a Delaware corporation. PetroTech Holdings Inc is a privately held holding company whose principal asset at 30 June 2012 was 100,000,000 shares (30 June 2011: 100,000,000 shares) of the common stock of Parabel, Inc ("Parabel") and US$101,000,000 of debt issued by Parabel, Inc. PetroTech Holdings Inc is owned jointly by the Group, Laurus Master Fund and Valens (which are funds managed by the Investment Manager).

 

Parabel is registered with the SEC and quoted on OTC Link (PABL.US), following a reverse merger into a quoted shell in December 2008. OTC Link is an electronic quotation system that displays quotes from broker dealers for many over-the-counter securities.

 

 

On 1 February 2012, Parabel, Inc announced an investment of US$15m by Dhabi Cayman One Ltd., a Cayman domiciled entity linked to an Abu Dhabi partner. Parabel Ltd. is a wholly owned subsidiary of PA LLC, which is a subsidiary of Parabel, Inc.

 

Valuation

The Group owns 8.24% (30 June 2011: 8.24%) of the common stock and US$7.2 million (30 June 2011: US$7.2 million) in preferred stock in PetroTech Holdings Inc.

 

The PSD Board has undertaken a review of the valuation of Parabel, Inc as at 31 December 2012. It has set the valuation at US$4,600,000 (including accrued income) (30 June 2011: US$31,755,566).This is based on a valuation of the Parabel, Inc debt held by Petrotech Holdings Inc of US$100m and no value being ascribed to the common stock of Parabel, Inc held by PetroTech Holdings Inc. This represents 64% of the par value of the preference shares PSD holds in PetroTech Holdings Inc (with accrued interest held at nil, 30 June 2012: US$3.1m).

 

In coming to this assessment of value, the Board, with advice from the Independent Valuation Consultant and the Investment Consultant, have taken the following factors into account:

 

·         Public trading of stocks on OTC Link

·         Model based valuations

·         The value implied of Parabel by the Dhabi Cayman One transaction

 

The shares of Parabel, Inc are traded on OTC Link. The trading is irregular and volumes traded are very limited. The Directors note the public trading but do not principally rely upon it for valuation purposes. The Volume Weighted Average Price of the shares traded in the period ended 31 December 2012 was as follows (source: Bloomberg):

 

·                 1 Month VWAP = US$1.02/share

·                 6 month VWAP = US$1.13/share

·                 12 month VWAP = US$1.60/share

 

The Directors have looked at model based discounted cash flow valuations. The models used have been based on the latest Parabel management forecasts.

 

Both a valuation based on the trading in Parabel, Inc stock and a discounted cashflow valuation would result in a significantly higher valuation than US$4,600,000 for PSD's holding in Parabel.

 

In assessing the appropriate valuation of PSD's Parabel holding, the Directors have placed greatest emphasis on the recent transaction with Dhabi Cayman One Ltd.

 

12.   Post Period End Events:

There are no other significant post period end events that require disclosure in these financial statements.

 



PSOURCE STRUCTURED DEBT LIMITED

Analysis of Significant Investments (unaudited)

As at 31 December 2012









The largest holdings of the Group, by underlying investment company as at 31 December 2012 are set out below:





 

 

Name of investment

 

Book

Cost

 

Fair

Value

Percentage

of

NAV

 

US$

US$

%

Petrotech Holdings Corp

7,198,509

4,600,000

56.33%

Creative Vistas

3,646,615

3,646,631

44.65%

Biovest International

8,105,768

1,617,573

19.81%

Mascon Global Consulting Inc

3,069,867

1,534,934

18.80%

Accentia Biopharmaceuticals

437,569

371,084

4.54%

North Texas Steel

592,350

186,907

2.29%

Presilient, LLC

837,529

167,529

2.05%

Prolink Holdings

-

375

0.00%





Other underlying investment companies

4,366,111

-

0.00%






28,254,318

12,125,033

148.47%

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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