Preliminary Results

Prodesse Investment Limited 12 February 2008 Prodesse Investment Limited Results for the Quarter Ended 31 December 2007 Highlights for fourth quarter 2007: • Core net income1 per average share of US$0.21 • Dividend per share of US$0.21 from net interest income - equates to an annualised dividend yield of 11.11%2 (FTSE All Share annualised dividend yield of 3.05%3) • Net income per average share of US$0.24 • NAV per share of US$7.70 (30 September 2007: US$7.554) • Portfolio remains 100% implied 'AAA' mortgage-backed securities. Michael A.J. Farrell, Chairman and CEO of FIDAC, Investment Manager to Prodesse, commented: 'We are pleased that during the fourth quarter Prodesse was able to increase the dividend per share by over 30% despite the volatile and uncertain conditions in global financial markets. By the end of the year, the US Federal Funds target rate had been lowered to 4.25% as the Federal Reserve continued to utilize monetary policy tools to stimulate the economy and settle the markets. As a result of these actions our average cost of funds was lower during the quarter. We believe that the continued vigilance of the Federal Reserve will not only serve to calm the markets but it should also help to continue to reduce our cost of funds. In these conditions, Prodesse is poised to continue to perform.' Financial Highlights Q4 2007 Q3 2007 Q2 2007 Q1 2007 Q4 2006 $US Dividend per share 0.21 0.16 0.16 0.14 0.13 Core net income per average share 0.21 0.17 0.17 0.15 0.14 Net income per average share 0.24 0.20 0.18 0.16 0.19 Net income 6.7m 5.8m 5.0m 4.0m 4.9m Net asset value per share 7.70 7.554 7.77 8.22 8.08 GBP Sterling5 Dividend per share 11p 8p 8p 7p 7p Core net income per average share 11p 8p 8p 8p 7p Net income per average share 12p 10p 9p 8p 10p Net income £3.4m £2.8m £2.5m £2.0m £2.5m Net asset value per share 388.0p 370.0p4 387.1p 417.6p 412.9p 1 Core net income is defined as net income excluding realised and unrealised gains and losses on securities. 2 Based on annualisation of Q4 dividend, an exchange rate of 1.9827 US$ per Pound Sterling and a closing price of 381.5 on 31 December 2007. 3 Based on closing share prices of the constituents of the FTSE All Share index on 31 December 2007 (JCF Datastream). 4 After deducting dividends declared for the period. 5 Illustration is based upon an exchange rate of 1.9827, 2.0405, 2.0071, 1.9686, and 1.9569 US$ per Pound Sterling at 31 December 2007, 28 September 2007, 29 June 2007, 31 March 2007 and 31 December 2006, respectively. Translation to GBP Sterling is given for illustration purposes only as Prodesse invests only in US$ denominated assets which produce US$ income. Should shareholders choose to receive their dividends in GBP Sterling they may elect to do so. This release does not constitute the preliminary announcement of annual audited accounts in accordance with LSE listing rules. Enquiries Investor Relations Rob Bailhache / Nick Henderson, Financial Dynamics Tel: 020 7269 7200 / 020 7269 7114 Company Secretary and Administrator Sara Radford / Jean McMillan, BNP Paribas Fund Services (Guernsey) Limited Tel: 01481 743000 About Prodesse Prodesse Investment Limited is a limited liability Guernsey-incorporated closed-end investment company, the investments of which are managed by Fixed Income Discount Advisory Company. The Company's investment policy is to provide net income for distribution from the spread between the interest income earned from a portfolio of residential mortgage-backed securities and the cost of repurchase agreements entered into to finance the acquisition of such residential mortgage-backed securities. Conference Call There will be a conference call to discuss the results at 10.00am UK time on 12 February and a live audio webcast and presentation will be available via the Prodesse website, www.prodesse.co.uk. The dial-in number for the conference call is +44 (0) 1452 562716 and the passcode is 31786350. Company performance For the quarter ended 31 December 2007, Prodesse reported net income of US$6.7 million (quarter ended 30 September 2007: US$5.8 million) or US$0.24 per average share (quarter ended 30 September 2007: US$0. 20 per average share). Prodesse reported core net income, defined as net income excluding realised and unrealised gains and losses on securities, of US$6.0 million for the quarter ended 31 December 2007 (quarter ended 30 September 2007: US$4.9 million) or US$0.21 per average share (quarter ended 30 September 2007: US$0.17 per average share). During the quarter the Company sold US$53.1 million in securities, resulting in a realised gain of US$725,000. The Company delivered an annualised core return on average equity for the quarter ended 31 December 2007 of 11.16% (quarter ended 30 September 2007: 9.07%). For the quarter ended 31 December 2007, the annualised total return on average equity (RoAE) was 12.51% (quarter ended 30 September 2007: 10.70%). 01 October 2007 01 July 2007 to 01 April 2007 01 January 2007 01 October 2006 to 31 December 30 September to 30 June to 31 March to 31 December 2007 2007 2007 2007 2006 Core net income US$6.0 million US$4.9 million US$4.9 million US$4.0 million US$3.6 million Core net income per average US$0.21 US$0.17 US$0.17 US$0.15 US$0.14 share Annualised core RoAE 11.16% 9.07% 8.75% 7.25% 6.90% Reported net income US$6.7 million US$5.8 million US$5.0 million US$4.0 million US$4.9 million Net income per average share US$0.24 US$0.20 US$0.18 US$0.16 US$0.19 Annualised RoAE 12.51% 10.70% 8.82% 7.29% 9.39% Portfolio Performance For the quarter ended 31 December 2007, the annualised yield on average assets, which is calculated based on the annualised interest income for the period divided by the average value of interest earning assets for the period, was 5.83% (quarter ended 30 September 2007: 5.90%) and the annualised cost of funds on the average repurchase balance was 4.95% (quarter ended 30 September 2007: 5.18%) which equates to an interest rate spread of 0.88% (quarter ended 30 September 2007: 0.72%). At 31 December 2007, the annualised yield on assets was 5.79% and the annualised cost of funds with the effect of interest rate swaps on the repurchase balances was 4.83%, which equates to an interest rate spread of 0.96%. The Constant Prepayment Rate, or CPR, on the Company's mortgage-backed securities portfolio averaged 10% for the quarter ended 31 December 2007 (quarter ended 30 September 2007: 13%). Prepayment speeds on mortgage-backed securities, as reflected by the CPR, vary according to the type of investment, changes in interest rates, conditions in the financial markets, competition and other factors, none of which can be predicted with any certainty. 01 October 2007 01 July 2007 to 01 April 2007 01 January 2007 01 October 2006 to 31 December 30 September to 30 June to 31 March to 31 December 2007 2007 2007 2007 2006 Annualised yield on average 5.83% 5.90% 5.83% 5.81% 5.95% assets Annualised cost of funds on average repurchase balance 4.95% 5.18% 5.15% 5.15% 5.30% Interest rate spread 0.88% 0.72% 0.68% 0.66% 0.65% CPR 10% 13% 16% 15% 14% As at 31 December 2007, all of the assets in the Company's portfolio were Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securities, which carry an implied 'AAA' rating. 31 December 30 September 30 June 2007 31 March 2007 31 December 2006 2007 2007 Fixed-rate mortgage-backed 63% 66% 69% 69% 62% securities Adjustable-rate mortgage-backed 15% 12% 11% 8% 11% securities Floating-rate mortgage-backed 22% 22% 20% 23% 27% securities Borrowings The ratio of average daily repurchase agreements to equity resulted in average leverage of the Company of 9.6:1 during the quarter ended 31 December 2007 (quarter ended 30 September 2007: 9.4:1). The leverage at 31 December 2007 was 9.3:1 (30 September 2007: 9.0:1). 01 October 2007 01 July 2007 to 01 April 2007 to 01 January 2007 01 October 2006 to 31 December 30 September 2007 to 31 March 2007 to 31 December 2007 30 June 2007 2006 Average leverage for 9.6:1 9.4:1 9.3:1 9.3:1 9.3:1 period Leverage at period end 9.3:1 9.0:1 9.3:1 8.1:1 9.0:1 As of 31 December 2007, the Company had entered into interest rate swap agreements totalling US$778 million in notional amount in which the Company will pay an average rate of 5.15% and receive 1 month LIBOR on a monthly basis. As of 30 September 2007, the Company had entered into interest rate swap agreements totalling US$817 million in notional amount in which the Company would pay an average rate of 5.16% and receive 1 month LIBOR on a monthly basis. 31 December 2007 30 September 30 June 2007 31 March 2007 31 December 2006 2007 Notional amount US$778 million US$817 million US$821 million US$811 million US$597 million Average pay rate 5.15% 5.16% 5.16% 5.17% 5.22% Average receive rate 5.06% 5.57% 5.32% 5.32% 5.35% Capital At 31 December 2007, the Company had a net asset value per share of US$7.49 (30 September 2007: US$7.55) after deducting the current dividends declared for the quarter of US$5,914,766 (for the quarter 30 September 2007: US$4,506,488). 31 December 2007 30 September 2007 30 June 2007 31 March 2007 31 December 2006 NAV per share US$7.70 US$7.551 US$7.77 US$8.22 US$8.08 Dividends declared for the three month period US$5,914,766 US$4,506,488 US$4,506,488 US$3,943,177 US$3,331,321 NAV per share after deducting dividends US$7.61 declared US$7.49 US$7.55 US$8.08 US$7.95 1 After deducting dividends declared for the period. Dividends for the third quarter were declared 20 September 2007. Dividend The Company has declared a dividend for the quarter ended 31 December 2007 of US$0.21 per share that is payable on 7 March 2008 to holders on the register on 22 February 2008. Dividends are calculated and paid in US dollars. 01 October 2007 01 July 2007 to 01 April 2007 to 01 January 2007 to 31 01 October 2006 to 31 to 31 December 30 September 30 June 2007 March 2007 December 2006 2007 2007 Core net income per US$0.21 US$0.17 US$0.17 US$0.15 US$0.14 average share Net income per average US$0.24 US$0.20 US$0.18 US$0.16 US$0.19 share Dividends per share US$0.21 US$0.16 US$0.16 US$0.14 US$0.13 Outlook 'As we have discussed with investors for some time now, we believe that the softening US housing and mortgage markets and the weakening consumer financial condition, pose significant downside risks to the US economy,' said Wellington Denahan-Norris, Chief Investment Officer for Prodesse's Investment Manager, FIDAC. 'The Federal Reserve now has made it clear that it will act in a timely manner to minimize these risks. To that end, the Fed has since lowered the Fed Funds target rate to 3%, taking the extraordinary step of lowering the Federal Funds target rate by 75 basis points at an emergency meeting subsequent and by an additional 50 basis points at its regularly scheduled meeting on January 30. Moreover, the consensus view is that the Federal Reserve will likely need to continue to lower interest rates in 2008. All other things being equal, this should have the effect of further lowering Prodesse's cost of funds relative to the yield on its portfolio, which is comprised of floating-rate, adjustable-rate and fixed-rate US Government Agency securities.' Prodesse Investment Limited Balance Sheet 31-Dec-07 30-Sep-07 30-Jun-07 31-Mar-07 31-Dec-061 US$'000 US $'000 US $'000 US $'000 US $'000 Note (Unaudited) (Unaudited) (Unaudited) (Unaudited) US$ US$ US$ US$ ASSETS Current assets Available for sale investments 3 2,280,046 2,227,999 2,235,571 2,237,709 2,073,602 Accrued income receivable 10,541 10,131 10,236 9,302 8,774 Receivable for principal paydowns 2,839 2,977 6,613 5,409 3,210 Hedging instruments 4 - - 4,603 - - Cash and cash equivalents 48 205 11 30 35 Prepaid expenses 77 154 236 34 27 Total assets 2,293,551 2,241,466 2,257,270 2,252,484 2,085,648 EQUITY AND LIABILITIES Capital and reserves Share capital: 28,165,550 at 31 December 2007, 30 September 2007, 30 June 2007 and 31 March 2007, 25,625,550 at 31 December 2006 , at US$ 0.01 282 282 282 282 256 Capital redemption reserve 30 30 30 30 30 Share premium 71,680 71,680 71,680 71,759 50,000 Distributable reserve 141,513 141,513 141,513 198,681 198,681 Accumulated profits 7,220 1,229 5,347 4,361 3,720 Capital Reserve-Realised gain / (loss) and impairment on available for sale investments 1,600 875 - (57,206) (57,231) Revaluation reserve 16,411 5,578 (4,505) 18,198 14,082 Cash flow hedge reserve 4 (21,966) (8,486) 4,603 (4,557) (2,445) Total shareholders' equity 216,770 212,701 218,950 231,548 207,093 Current liabilities Securities purchased payable 31,882 92,122 - 136,626 15,407 Repurchase agreements 5 2,011,384 1,915,579 2,030,082 1,872,007 1,853,757 Accrued interest expense 9,823 6,475 6,706 6,068 5,563 Accrued expenses payable 1,726 1,597 1,532 1,678 1,383 Dividend payable 4 - 4,506 - - - Hedging instruments 21,966 8,486 - 4,557 2,445 Total liabilities 2,076,781 2,028,765 2,038,320 2,020,936 1,878,555 Total equity and liabilities 2,293,551 2,241,466 2,257,270 2,252,484 2,085,648 Net Assets 216,770 212,701 218,950 231,548 207,093 Net Asset Value per share 6 7.70 7.55 7.77 8.22 8.08 1 Derived from the audited financial statements at December 31, 2006. Prodesse Investment Limited (unaudited) Income Statement 01 October 2007 01 July 2007 01 April 2007 01 January 2007 01 October 2006 to 31 December to 30 September to 30 June to 31 March to 31 December 2007 2007 2007 2007 2006 US $'000 US $'000 US $'000 US $'000 US $'000 Income Interest income 33,048 32,604 33,602 30,895 31,076 Interest expense (25,381) (26,087) (26,898) (24,971) (25,733) Net interest income 7,667 6,517 6,704 5,924 5,343 Realised gain on sale of available for sale investments and interest rate swaps 725 875 38 25 1,289 Total income 8,392 7,392 6,742 5,949 6,632 Expenses Management, custodian and administration fees 1,362 1,301 1,453 1,297 1,278 Other operating expenses 314 322 323 654 502 Total expenses 1,676 1,623 1,776 1,951 1,780 Net income for the period 6,716 5,769 4,966 3,998 4,852 Net income per average share for the period 0.24 0.20 0.18 0.16 0.19 Dividend declared per share for the period 0.21 0.16 0.16 0.14 0.13 Average shares 28,165,550 28,165,550 28,165,550 25,766,661 25,625,550 outstanding Prodesse Investment Limited (unaudited) Cash Flow Statement 01 October 2007 01 July 2007 to 01 April 2007 to 01 January 01 October 2006 to 31 December 30 September 30 June 2007 to 31 to 31 December 2007 2007 2007 March 2007 2006 US $'000 US $'000 US $'000 US $'000 US $'000 Net cash (outflow)/inflow from operating activities (Note 1) (91,456) 119,203 (154,072) (36,709) (92,311) Financing Borrowings under reverse 4,993,525 5,772,535 6,197,781 5,771,019 5,947,866 repurchase agreements Repayments under reverse (4,897,720) (5,887,038) (6,039,706) (5,752,769) (5,853,198) repurchase agreements New shares issued - - - 21,863 - Issue costs - - (79) (78) - Dividends paid (4,506) (4,506) (3,943) (3,331) (3,072) Net cash inflow/(outflow) from 91,299 (119,009) 154,053 36,704 91,596 financing (Decrease)/increase in cash and (157) 194 (19) (5) (715) cash equivalents Cash and cash equivalents, at 205 11 30 35 750 beginning of period Cash and cash equivalents, at end 48 205 11 30 35 of period Note 1 Net income for the period 6,716 5,769 4,966 3,998 4,852 Net accretion/amortisation of premiums on available for sale (35) investments 180 139 (14) (215) Realised gain on sale of available for sale investments (725) (875) (38) (25) (2,508) Purchases of investments (215,290) (93,321) (328,449) (207,840) (432,026) Proceeds from sale of investments 53,110 108,812 33,493 34,168 228,070 Principal paydowns 61,409 98,658 136,635 132,739 109,422 Receivables (Increase)/decrease in accrued (410) 105 (934) (528) (834) income receivable Decrease / (increase) in prepaid 77 82 (202) (7) 147 expenses Liabilities Increase/(decrease) in accrued 3,348 (231) 638 505 754 interest expense Increase / (decrease) in accrued 129 65 (146) 295 27 expenses payable Net cash (outflow)/inflow from (91,456) 119,203 (154,072) (36,709) (92,311) operating activities Prodesse Investment Limited Statement of Changes in Shareholders' Equity (unaudited) 01 October 2007 to 31 December 2007 Share Capital Share Distributable Capital Reserve capital redemption premium reserve - realised gain reserve on sales and impairment of available for sale investments US $'000 US $'000 US $'000 US $'000 US $'000 Balance at 30 September 2007 282 30 71,680 141,513 875 Net income for the quarter - - - - - Hedge reserve revalued - - - - - Transfer of realised gain to capital - - - - 725 reserve Movement in unrealised gain on - - - - - revaluation taken to equity Total recognised income and expense - - - - 725 Balance at 31 December 2007 282 30 71,680 141,513 1,600 Prodesse Investment Limited Statement of Changes in Shareholders' Equity (unaudited) 01 October 2007 to 31 December 2007 Revaluation Accumulated Cash flow Total reserve profits hedge reserve US $'000 US $'000 US $'000 US $'000 Balance at 30 September 2007 5,578 1,229 (8,486) 212,701 Net income for the quarter - 6,716 - 6,716 Hedge reserve revalued - - (13,480) (13,480) Transfer of realised gain to capital - (725) - - reserve Movement in unrealised gain on revaluation 10,833 - 10,833 taken to equity - Total recognised income and expense 10,833 5,991 (13,480) 4,069 Balance at 31 December 2007 16,411 7,220 (21,966) 216,770 Notes to the financial statements 1. General Information Prodesse Investment Limited is a limited liability Guernsey-incorporated closed-end investment company, the investments of which are managed by Fixed Income Discount Advisory Company ('the Investment Manager'). The Company's share capital structure consists solely of Ordinary Shares. The Company has a listing on the London Stock Exchange and a listing on the Channel Islands Stock Exchange. The Company will have an indefinite life but Shareholders will have the opportunity to vote on its continuation at the Annual General Meeting to be held in 2010. The Company invests in a portfolio consisting primarily of implied 'AAA' rated mortgage-backed securities on a leveraged basis. The Company's investment strategy is to generate net income for distribution from the spread between the interest income from the portfolio and the cost of borrowing pursuant to reverse repurchase agreements used to finance the portfolio. The Investment Manager will seek to enhance returns through what it considers an appropriate amount of leverage. 2. Significant Accounting Policies Basis of Accounting This quarterly press release has been prepared using accounting policies consistent with International Financial Reporting Standards ('IFRS'). The same accounting policies, presentation and methods of computation are followed in the quarterly press release as applied in the Company's latest annual audited financial statements except for the change in reclassification of the net borrowings under repurchase agreements in the cashflow statement. The financial statements are presented in US Dollars because that is the currency of the primary economic environment in which the Company operates. The functional currency of the Company is also considered to be US Dollars. Changes in accounting policies In its financial statements for the year ended 31 December 2007, the Company will adopt International Financial Reporting Standard 7 'Financial Instruments and Disclosures' ('IFRS7') for the first time. As IFRS 7 is a disclosure standard, there is no impact of that change in accounting policy on the quarterly press release. Full details of the change will be disclosed in the Company's annual report for the year ended 31 December 2007. Investments The Company invests in securities issued by the United States Government Sponsored Enterprises such as the Federal Home Loan Mortgage Corporation (' Freddie Mac'), Federal National Mortgage Association ('Fannie Mae') and the Federal Home Loan Banks ('FHLB') as well as the Government National Mortgage Association ('Ginnie Mae'), a US Government Corporation. Freddie Mac, Fannie Mae, and FHLB, although chartered and sponsored by Congress, are not Companies funded by congressional appropriations and the debt and mortgage-backed securities issued by Freddie Mac, Fannie Mae and FHLB are neither guaranteed nor insured by the United States Government. The payment of principal and interest on the Freddie Mac and Fannie Mae mortgage-backed securities are backed by those respective agencies, the payment of principal and interest on the Ginnie Mae mortgage backed securities are backed by the full-faith-and-credit of the US Government. Although the Company generally intends to hold most of its securities until maturity, it may, from time to time, sell any of its mortgage-backed securities as part of its overall management strategy. Accordingly the Company classifies all its mortgage-backed securities as available for sale and these are reported at fair value. Expenses incidental to the acquisition of available for sale investments are included within the cost of that investment. Realised and Unrealised Gains and Losses on Investments Unrealised gains or losses arising on the revaluation of investments are included in equity. Unrealised losses on investment securities that are considered other than temporary, as measured by the amount of decline in fair value attributable to factors other than temporary, are recognised as an impairment loss in the income statement and the cost basis of the mortgage-backed securities is adjusted. The impairment loss is then transferred to a non-distributable capital reserve in accordance with the Memorandum and Articles of Association of the Company. Realised gains or losses arising on the sale of investments are recognised in the income statement but will be transferred to a non-distributable capital reserve in accordance with the Memorandum and Articles of Association of the Company. When-Issued/Delayed Securities The Company may purchase or sell securities on a when-issued or delayed delivery basis, including 'TBA' securities. TBA Securities are mortgage-backed securities for which details about the underlying mortgages have not yet been announced. Securities traded on a when-issued basis are traded for delivery beyond the normal settlement date at a stated price and yield, and no income accrues to the purchaser prior to delivery. Purchasing or selling securities on a when-issued or delayed delivery basis involves the risk that the market price at the time of delivery may be lower or higher than the agreed upon price, in which case an unrealised loss may be incurred. Security Transactions and Investment Income Recognition Security transactions are recorded on the trade date. Realised and unrealised gains and losses are calculated based on specific identified cost. Interest income is recorded as earned. Interest income and expense includes amortisation of market discount and premium as calculated using a hybrid methodology utilising the principles of the effective interest method. Other Receivables Other receivables do not carry any interest and are short-term in nature and are accordingly stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts. Cash and Cash Equivalents Cash includes amounts held in interest bearing overnight accounts. Financial Liabilities and Equity Financial liabilities and equity are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities. Financial liabilities and equity are recorded at the proceeds received, net of issue costs. Other Accruals and Payables Other accruals and payables are not interest-bearing and are stated at their nominal value. Reverse Repurchase Agreements The Company enters into reverse repurchase agreements with qualified third party financial institutions to finance its investment in mortgage-backed securities. The agreements are secured by the value of the Company's mortgage-backed securities. A repurchase agreement involves the sale by the Company of securities that it holds with an agreement by the Company to repurchase the same securities at an agreed price and date. Such an agreement involves the risk that the value of the securities sold by the Company may decline in value below the price of the securities. Interest on the principal value of reverse repurchase agreements issued and outstanding is based upon competitive market rates at the time of issuance. When the Company enters into a reverse repurchase agreement, it establishes and maintains a segregated account with the lender containing securities having a value not less than the repurchase price, including accrued interest, of the reverse repurchase agreement. Repurchase agreements are treated as collateralised financing transactions and are carried at their contractual amounts, including accrued interest, as specified in the repurchase agreements. Accrued interest is recorded as a separate line item. Securities sold subject to repurchase agreements are retained in the financial statements as available for sale securities and the counterparty liability is included in liabilities under repurchase agreements. Derivative Financial Instruments and Hedge Accounting The Company's activities expose it primarily to the financial risks associated with changes in interest rates. The Company uses interest rate swap contracts to hedge these exposures. The Company does not use derivative financial instruments for speculative purposes. The use of financial derivatives is governed by the Company's policies approved by the board of directors, which provide written principles on the use of financial derivatives. Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in equity and any ineffective portion is recognised immediately in the income statement. The amount in equity is released to income when the forecast transaction impacts profit or loss. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualified for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity for cash flow hedges is retained in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to net profit or loss in the period. Taxes The Company is exempt from Guernsey taxation under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 for which it pays an annual fee of £600. Set-up and Issue Costs The preliminary expenses of the Company directly attributable to the equity transaction and costs associated with the establishment of the Company that would otherwise have been avoided are taken to the share premium account. Costs directly attributable to the issue of Ordinary Shares are expensed against the share premium account as allowed by with The Companies (Guernsey) Law, 1994. 3. Available for Sale Investments Gross Unrealised Gross Estimated At 31 December 2007 Amortised Cost Gain Unrealised Loss Fair Value US $'000 US $'000 US $'000 US $'000 Adjustable rate 846,490 2,136 (5,047) 843,579 Fixed rate 1,417,145 19,616 (294) 1,436,467 Total 2,263,635 21,752 (5,341) 2,280,046 As at 31 December 2007, all of the assets in the Company's portfolio were Fannie Mae, Freddie Mac, or Ginnie Mae mortgage-backed securities, which carry a 'AAA' or implied 'AAA' rating. During the quarter ended 31 December 2007, the Company did not have any securities that it deemed to be other-than-temporarily impaired. Mortgage-backed securities are created when mortgages and their attendant streams of interest and principal payments are pooled to serve as collateral for the issuance of securities to investors. Interests in mortgage-backed securities differ from other forms of traditional debt securities, which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates. Instead, mortgage-backed securities typically provide irregular cash flows consisting of both interest and principal. An investment consideration of any mortgage-backed security is the structure of the payment of the cash flow streams from the underlying mortgages to the holders of the mortgage-backed securities. The cash flows can be simply passed from the mortgage holder to the investor or they can be structured in a number of different ways. The market values of the various structures will vary in different interest rate or prepayment environments, with the more derivative or complex structures (e.g., interest-only or principal-only securities) being more sensitive to movements in interest rates or rates of prepayment. Beyond the basic security of the mortgages and properties that underlie mortgage-backed securities, a critical attribute of mortgage-backed securities issued by the US Agencies is the credit enhancement that the US Agencies provide. The holder of mortgage-backed securities issued or guaranteed by the US Agencies is guaranteed the timely payment of principal and interest. Ginnie Mae is the principal governmental (i.e., backed by the full credit of the US Government) guarantor of mortgage-backed securities. Fannie Mae and Freddie Mac are the principal US Government-related (i.e. not backed by the full credit of the US Government) guarantors. Adjustable-rate and floating-rate mortgage-backed securities in which the Company may invest include pass-through mortgage-backed securities issued by the US Agencies backed by adjustable-rate mortgages and Floaters. The interest rates on adjustable-rate and floating rate mortgage-backed securities are reset at periodic intervals to an increment over some predetermined reference interest rate. There are two main categories of reference rates: (i) those based on US Treasury securities and (ii) those derived from a calculated measure such as a cost of funds index or a moving average of mortgage rates. Commonly utilised reference rates include the one-year Treasury Bill rate or one-month US dollar LIBOR. Some reference rates, such as the one-year Treasury Bill rate or LIBOR, closely mirror changes in market interest rate levels. Others tend to lag changes in market rate levels and tend to be somewhat less volatile. Adjustable-rate mortgages frequently have upper and lower limits on the interest rates to which a residential borrower may be subject (i) in any reset or adjustment interval and (ii) over the life of the loan. These upper and lower limits are commonly known as ''caps'' and ''floors'' respectively. 4. Hedging Instruments The Company uses interest rate swaps to manage its exposure to interest rate movements. When the Company enters into an interest rate swap, it agrees to pay a fixed rate of interest and to receive a variable interest rate, generally based on the London Interbank Offered Rate ('LIBOR'). The Company's swaps are designated as cash flow hedges against the benchmark interest rate risk associated with the Company's borrowings. At 31 December 2007, the Company had interest rate swap agreements of US$778 million notional amount in which the Company will pay a weighted average rate of 5.15% and have a weighted average receive rate of 5.06%. 5. Reverse Repurchase Agreements At 31 December 2007 the aggregate value of securities pledged by the Company under reverse repurchase agreements exceeds the liability under such agreements by approximately US$60.3 million (approximately 3% of such liability). The interest rates on the reverse repurchase agreements at 31 December 2007 range from 4.47% to 5.15% and have maturity dates ranging from 2 day to 1520 days. The Company has entered into repurchase agreements which provide the counterparty with the right to call the balance prior to maturity date. These repurchase agreements totalled US$300 million. 6. Net Asset Value The net asset value per Ordinary Share is based on net assets at 31 December 2007 and on 28,165,550 Ordinary Shares, being the number of Ordinary Shares in issue at the period end. At 31 December 2007, the reported net asset value per Ordinary Share (before excluding the dividend declared for the quarter ended 31 December 2007) is US$7.70 At 31 December 2007, the Company had a net asset value per Ordinary Share of US$7.49, after including the effect of the dividend declared for the quarter ended 31 December 2007 of US$5,914,766. This information is provided by RNS The company news service from the London Stock Exchange

Companies

Predator Oil & Gas Holdings NPV (PRD)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today