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CQS Rig Finance Fund Ltd (RIG)

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Monday 29 June, 2009

CQS Rig Finance Fund Ltd

Unaudited Half Yearly Report





For release on Monday 29 June 2009



            CQS Rig Finance Fund Limited (the "Company")

                    Unaudited half yearly Report


The Company  announces  its unaudited  interim  results for  the  six
months ended 31 March 2009.

A full copy of the unaudited half year report will today be available
on  the  Company's  website:   www.cqsrigfinance.com  and  a  summary
thereof is set out below.



Enquiries:

Alastair Moreton
Arbuthnot Securities Limited
Telephone 020 7012 2000


Secretary
Kleinwort Benson (Channel Islands) Fund Services Limited
Telephone 01481 72711



Investment Objective


The Company invests primarily in  debt instruments issued to  finance
the construction, modification and/or refurbishment of rigs and other
infrastructure and/or equipment used for the offshore exploration and
production of oil and natural gas.

The Company's investment objective is to provide Shareholders with an
attractive total  return, primarily  through income,  with scope  for
capital  appreciation.  The  Company  targets,  in  the  absence   of
unforeseen circumstances, an annualised gross dividend yield of 8 per
cent. per annum of  the Net Asset Value  of the Company per  ordinary
share as at the beginning of the year.

The assets of the Company are managed by the Investment Manager,  CQS
Cayman Limited Partnership, a  limited partnership registered in  the
Cayman Islands. The Investment  Adviser up to  30 September 2008  was
CQS Investment Management Limited. A new Investment Adviser, CQS (UK)
LLP was appointed  from 01  October 2008. The  Investment Adviser  is
responsible for the management of, and/or providing investment advice
on, the Portfolio and  will also assist  the Investment Manager  with
related ancillary services.

CQS will seek to achieve the  investment objective of the Company  by
sourcing and trading  a portfolio of  secured debt instruments  using
fundamental credit and industry analysis to identify instruments with
an attractive risk-adjusted yield.
Investment Managers Report

The six months from 1  October 2008 to 31  March 2009 were marked  by
two phases.  From October  2008 to  January 2009,  there was  further
deterioration  in  financial  conditions  following  the  demise   of
Lehman.  The cost and availability of financing worsened resulting in
continued  dislocations  in  many   funding  markets  and   inventory
liquidation by banks and hedge funds. Equity and credit markets  fell
significantly  during  this  period.  From  January  2009,  stability
appeared to  return  first  to  credit  markets  during  January  and
subsequently to equity markets during March of 2009.

In addition to our commentary  contained in The Investment  Manager's
Report in the Company's Annual Report*, which was published on 15 May
2009,  and   the  Company's   announcements  since,   regarding   the
restoration of trading in its shares on AIM and CISX, on 18 May  2009
and 22 May 2009 respectively, WTI  Crude for July delivery rose  from
$52 to $66 per barrel or by 27% over the month of May. This move  was
seen as part of a wider rally in commodities as liquidity  conditions
improved and markets took the view that the recent sell off had  been
overdone. Strong gains were  recorded in drilling  stocks and in  the
E&P  (Exploration   and  Production)   sector.  Conversely,   certain
commentators and statistics point to the view that the rebound in oil
price may be sentiment  rather than demand led  and for prices to  be
sustained, further evidence of lower inventories and improved  demand
is required.

There was further evidence of  day-rates softening in the rig  market
although the Ultra  Deepwater segment  remains relatively  resilient.
Demand for  the  UDW units  was  recently  evidenced by  the  3  year
contract awarded to Odfjell by Petrobras. Credit markets,  especially
high yield, also rallied strongly in May and the Company's  portfolio
benefited from  this.  Gains  were  recorded  across  the  portfolio,
especially in those positions with low perceived construction  and/or
financing  risk.  The  defaulted  and  distressed  positions  in  the
portfolio displayed a lower correlation to the movements in the wider
markets reflecting greater issuer-specific risk.




























* As noted in the Company's Annual Report for the year ended 30
September 2008, the Company has suspended payments of further
dividends and it is unlikely that the Company will recommence
dividend payments in the 2009 financial year.
Income Statement (Unaudited)



                      For the six months ended     For the six months
                                   31 March 2009                ended
                                                        31 March 2008
                                             GBP                  GBP

Operating (loss)                    (79,539,285)          (3,873,839)

Operating expenses
Other operating                        (481,827)            (855,082)
expenses
Finance costs                      (1,002,561)            (2,263,830)
Total operating                      (1,484,388)          (3,118,912)
expenses

Net (loss)                          (81,023,673)          (6,992,751)

(Loss) per Ordinary
Share
Basic and Diluted                       (83.18)p             (10.46)p



All items in the above statement are derived from continuing
operations.

All income is attributable to the Ordinary Shareholders of the
Company.

The accompanying notes form an integral part of the interim financial
statements.



Statement of Changes in Shareholders' Equity (Unaudited)


For the six months ended 31 March 2009


                  Share   Share      Other   Accumulated        Total
                Capital Premium    Reserve        Losses
              Note  GBP    GBP)        GBP          GBP)         GBP)

Balance at 1                    90,982,384
October 2008          -       -             (19,800,264)  71,182,120)

Net loss for
the period            -       -          -  (81,023,673) (81,023,673)
Total
recognised
income and
expense plus
equity brought
forward               -       - 90,982,384 (100,823,937)  (9,841,553)

Dividends paid
to Shareholders       -       -          -             -            -

Balance   at    31              90,982,384
March 2009            -       -            (100,823,937)  (9,841,553)



For the six months ended 31 March 2008


               Share        Share       Other Accumulated       Total
             Capital      Premium     Reserve      Losses
           Notes GBP         GBP)         GBP        GBP)        GBP)

Balance at 1
October 2007       -            -  48,724,675    777,280) 49,501,955)

Net loss for
the period         -            -           - (6,992,751) (6,992,751)
Total recognised
income and
expense plus
equity brought
forward            -            -  48,724,675 (6,215,471)  42,509,751

Conversion
of C Shares            50,000,000
into
Ordinary
Shares         6   -                        -           -  50,000,000

Costs
related to
issuance of
Ordinary
Shares       6     -  (1,022,039)           -           - (1,022,039)

Transfer to          (48,977,961)  48,977,961
other
reserve       6    -                                    -           -

Dividends
paid to
Shareholders       -            -           - (2,903,718) (2,903,718)

Balance  at   31                   97,702,636
March 2008         -            -             (9,119,189)  88,583,447


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



Balance Sheet (Unaudited)
As at 31 March 2009


                                    31 March 2009   30 September 2008
                               Note           GBP                 GBP
Assets

Non-current assets
Investments at fair value
through
 profit or loss                 3      34,349,158         158,024,503

Current assets
Derivative financial assets:
Unrealised  gain  on   forward
exchange contracts                              -                   -
Receivable for securities sold          2,887,960           2,769,402
Cash and cash equivalents                       -              97,888
Other assets                                9,522                   -
                                        2,897,482           2,867,290

Total assets                           37,246,640         160,891,793

Equity and liabilities

Equity
Share capital                   5               -                   -
Share premium account           6               -                   -
Other reserve                   6      90,982,384          90,982,384
Accumulated (losses)/profits        (100,823,937)        (19,800,264)
                                      (9,841,553)          71,182,120
Current liabilities
Interest-bearing borrowings     4      42,284,240          77,164,899
Payable for loan                        4,185,996                   -
Payable for securities                          -
purchased                                                   1,288,008
Interest payable                          249,257                   -
Derivative financial
liabilities:
Unrealised loss on forward
exchange contracts                              -          10,722,889
Other liabilities and payables            368,700             533,877
Total liabilities                      47,088,193          89,709,673

Total equity and liabilities           37,246,640         160,891,793

Net Asset Value per Share                (10.10)p              73.07p


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










Cash Flow Statement (Unaudited)
For the six months ended 31 March 2009


                                          For the six   For the six
                                         months ended    months ended
                                        31 March 2009   31 March 2008
                                  Notes           GBP             GBP

Net cash outflow from operating
activities                          7      58,015,932    (86,550,698)

Financing activities
Proceeds from issuance of Shares    6               -      50,000,000
Costs related to issuance of
Shares                              6               -     (1,022,039)
Loan payable                                4,185,996               -
Interest expense paid                     (1,081,106)     (2,106,240)
(Decrease)/increase in
interest-bearing borrowings         4    (61,218,710)      42,582,695
Dividends paid to shareholders                      -     (2,903,718)
Cash inflows from financing
activities                               (58,113,819)      86,550,698

Net (decrease)/increase in cash              (97,888)               -

Reconciliation of net cash flow
to movement in net cash
Net (decrease)/increase in cash
and cash equivalents                                -               -
Cash and cash equivalents at
start of period                                97,888               -
Cash and cash equivalents at end
of period                                           -               -


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






















Notes to the Financial Statements (Unaudited)
for the 6 months ended 31 March 2009

1.    General Information

CQS Rig  Finance Fund  Limited (the  "Company") was  registered on  8
November 2006  with  registered number  45805  and is  domiciled  and
incorporated  in  Guernsey,  Channel   Islands.  The  Company  is   a
closed-ended investment  company  with limited  liability  under  The
Companies (Guernsey) Law, 2008 (the "Companies Law") and its Ordinary
Shares were traded on AIM and listed on CISX until 30 October  2008.
Trading in the Company's Ordinary Shares recommenced on AIM on 18 May
2009 and on CISX on 21 May 2009.

The Company's investment objective is to provide Shareholders with an
attractive total  return, primarily  through income,  with scope  for
capital appreciation.  The Company  will target,  in the  absence  of
unforeseen circumstances, an annualised gross dividend yield of 8 per
cent per annum of the Net Asset Value of the Company.

The Investment Adviser will seek to achieve the investment  objective
of the Company by  sourcing and trading a  portfolio of secured  debt
instruments  using  fundamental  credit  and  industry  analysis   to
identify instruments  with an  attractive risk-adjusted  yield.  Such
debt instruments are expected to  be primarily issued to finance  the
construction, modification  and/or refurbishment  of rigs  and  other
infrastructure and/or equipment used for  the exploration of oil  and
natural gas.

The Company  will  seek,  on  a  global  basis,  to  capture  on  its
investments attractive  risk-adjusted  yields and  potential  capital
appreciation arising from possible corporate activity, including  but
not limited to, refinancing  and industry consolidation. Returns  are
expected to be enhanced  through gearing the portfolio  by up to  100
per cent although gearing up to 150 per cent is permitted.

The Company has no direct employees. For its services, the Investment
Manager receives a monthly management fee and may also be entitled to
a performance-related fee. The Company  has no ownership interest  in
the Investment  Manager. The  Company  is administered  by  Kleinwort
Benson    (Channel    Islands)    Fund    Services    Limited    (the
"Administrator").

2.    Significant accounting policies

Statement of compliance

The Company adopted a condensed  set of financial statements for  the
Interim Reports. The Company  prepares these financial statements  in
accordance with International Financial  Reporting Standards IAS  34:
Interim Financial  Reporting ("IAS  34")  issued by  the IASB.  As  a
result these  financial  statements, which  are  a condensed  set  of
financial statements are  prepared in accordance  with sections 8  of
IAS 34, do  not include all  of the disclosures  as required for  the
Company's annual financial statements.






















2.  Significant accounting policies (continued)

Basis of preparation

The financial statements of the Company are prepared on a  historical
cost or amortised  cost basis  except that the  following assets  and
liabilities are  stated at  their  fair value:  derivative  financial
instruments, financial  instruments held  for trading  and  financial
instruments designated  as fair  value through  profit or  loss  upon
initial recognition.

The same accounting policies, presentation and methods of computation
are followed in these interim financial statements as were applied in
the preparation of  the Company's financial  statements for the  year
ended 30 September 2008.

The principal accounting policies are set out below. The  preparation
of financial statements in conformity with IFRS requires the  Company
to make estimates and assumptions that affect the reported amounts of
assets and liabilities at  the date of  the financial statements  and
the reported amounts  of revenues and  expenses during the  reporting
period. Actual  results  could  differ from  those  estimates.  These
financial statements are presented in GBP. The functional currency of
the Company is also considered to be GBP because that is the currency
of the primary economic environment  in which the Company has  raised
capital.

Standards, amendments  and  interpretations  in  issue  but  not  yet
effective

The IASB  have  issued  the following  standards  applicable  to  the
Company with  an effective  date after  the date  of these  financial
statements.

*          IAS 1 (revised) Presentation of Financial Statements
Comprehensive   revision   including   requiring   a   statement   of
comprehensive income - effective 1 January 2009

*          IAS 1 (revised) Presentation of Financial Statements & IAS
  32 (revised) Financial Instruments

*          Disclosure amendments relating to disclosure of puttable
  instruments and obligations arising on liquidation, comprehensive
  revision including requiring a statement of comprehensive income -
  effective 1 January 2009

*          IAS 23 Borrowing Costs
Comprehensive revision to prohibit immediate expensing - effective  1
January 2009

*          IFRS 8 Operating Segments
Additional disclosures on  operating segments -  effective 1  January
2009

*          IFRS 7 Financial Instruments: Disclosures - Improving
  Disclosures about Financial Instruments
Amendments to IFRS 7 were issued by the IASB in March 2009 and become
effective for annual  periods beginning  on or after  1 January  2009
with early application  permitted. The amendment  to IFRS 7  requires
fair value  measurements to  be disclosed  by the  source of  inputs,
using a three-level hierarchy:

*          Quoted prices (unadjusted) in active markets for identical
  assets or liabilities (Level 1)

*          Inputs other than quoted prices included in Level 1 that
  are observable for the asset or liability, either directly (as
  prices) or indirectly (derived from prices) (Level 2)



2.  Significant accounting policies (continued)

Standards, amendments  and  interpretations  in  issue  but  not  yet
effective (continued)

*          Inputs for the asset or liability that are not based on
  observable market data (unobservable inputs) (Level 3).

In addition  the amendment  revises the  specified minimum  liquidity
risk disclosures including amongst  others: the contractual  maturity
of  non  derivative  and  derivative  financial  liabilities,  and  a
description of  how  this is  managed.   This amendment  is  not  yet
effective and  is  not  expected  to  have  material  impact  on  the
financial position or performance of the Company.

The Directors have  not as yet  concluded to adopt  any of the  above
standards, however it  is anticipated  that these will  not have  any
impact on the financial position or the financial performance of  the
Company.

Going Concern

Given the  significant declines  in asset  values during  the  period
which moved the Company  to a position of  margin deficit, the  Board
entered into  negotiations with  the  Company's principal  lender  in
order to  provide sufficient  funding to  ensure the  ability of  the
Company to continue as a going concern for the foreseeable future.

While the above negotiations were  continuing, the Company secured  a
short term unsecured credit facility in October 2008 under which US$6
million (GBP3.4 million)  was made available  for short term  working
capital.  The facility  is due  to expire  on 22  October 2009.   The
facility was secured from a long-term investor in the Company seeking
to  protect  its  equity   investment.   The  unsecured  lender   has
subsequently confirmed that it has  no current intention to seek  its
contractual right  to repayment  until the  secured lender  has  been
repaid in full, see below.

On 22 April 2009, an 18  month secured facility which will expire  on
23 October 2010, was agreed for the following amounts:


NOK60,50,509  (GBP6,101,572)
US$45,195,277 (GBP31,010 894)
EUR1,817,787  (GBP1,614,147)
GBP39,512     (Credit)


The primary condition of the 18 month secured facility is one  where,
the cumulative  cash recovered  from assets,  that have  crystallised
through maturity, early  redemption, or from  the conclusion of  work
out scenarios, falls short of  the total expected recovered cash  for
the whole of the portfolio as  agreed with the secured lender at  the
date of execution of the facility, by an amount greater than or equal
to 20%  of that  total  expected recovered  cash, then  the  facility
becomes repayable on demand.

The Directors have prepared detailed cash projections for the  period
of the facility, and are confident  that they will be able to  remain
within the  terms  of  the  facility  for  its  entire  duration.  In
addition, the Directors are confident  that during the period of  the
facility, they will  have been  able to  organize sufficient  orderly
disposal of assets  that the  facility will  not need  to be  further
extended.  In view of the above,  the Board has concluded that it  is
appropriate to prepare the financial statements on the going  concern
basis.


2.  Significant accounting policies (continued)

Significant accounting judgments and estimates

The  preparation  of  the  Company's  financial  statements  requires
management to make judgments,  estimates and assumptions that  affect
the  amounts  recognised  in   the  financial  statements.   However,
uncertainty about  these assumptions  and estimates  could result  in
outcomes that could  require a  material adjustment  to the  carrying
amount of the asset or liability affected in the future.

(i) Fair value of financial instruments
When the fair  value of  financial assets  and financial  liabilities
recorded in the balance sheet cannot be derived from active  markets,
they are  determined using  a variety  of valuation  techniques  that
include  the  use  of   mathematical  pricing  models   incorporating
discounted  cash  flow   techniques.  These   pricing  models   apply
assumptions regarding asset-specific factors and economic  conditions
generally,  including  delinquency  rates,  default  rates,  maturity
profiles, interest rates and  other factors that  may be relevant  to
each financial asset. Where such pricing models are used, inputs  are
based on market related measures at the balance sheet date but  where
this is not feasible a degree of judgment is required in establishing
fair values. The  judgments include considerations  of liquidity  and
model inputs  such  as credit  risk  (both own  and  counterparty's),
correlation  and  volatility.  Changes  in  assumptions  about  these
factors  could   affect  the   reported  fair   value  of   financial
instruments. No  such models  were  used in  deriving fair  value  of
financial assets within these financial statements.

(ii) Functional currency
The primary objective of the Company  is to generate returns in  GBP,
its capital-raising currency. The liquidity of the Company is managed
on a  day-to-day  basis  in  GBP and  the  Company's  performance  is
evaluated in GBP. Therefore, the management considers the GBP as  the
currency that most faithfully represents the economic effects of  the
underlying transactions, events.

Financial instruments

(i) Classification
The Company classifies its financial assets and financial liabilities
as financial assets and liabilities  at fair value through profit  or
loss in categories in accordance with IAS 39.

Financial assets at fair value through profit or loss

The financial assets are designated  as at fair value through  profit
or loss upon initial recognition:  these are mainly debt  instruments
that are not held for trading. These financial assets are  designated
on the basis that they are part of a group of financial assets  which
are managed  and have  their performance  evaluated on  a fair  value
basis, in accordance with  risk management and investment  strategies
of the Company, as set out  in the Company's offering document.   The
financial  information  about  these  financial  assets  is  provided
internally on that basis to the  Investment Manager and to the  Board
of Directors.

(ii) Recognition
The Company recognises  a financial  asset or  a financial  liability
when, and only when, it becomes a party to the contractual provisions
of the  instrument.  Purchases  or sales  of  financial  assets  that
require  delivery  of   assets  within  the   time  frame   generally
established by  regulation  or  convention  in  the  marketplace  are
recognised on the trade date, i.e., the date that the Company commits
to purchase or sell the asset.


2.      Significant accounting policies (continued)

Financial instruments (continued)

(iii) Derecognition
A financial asset (or, where applicable  a part of a financial  asset
or part of a group of similar financial assets) is derecognised where
the rights to  receive cash flows  from the asset  have expired,  the
Company has transferred  its rights  to receive cash  flows from  the
asset and either  (a) the Company  has transferred substantially  all
the risks and rewards  of the asset, or  (b) the Company has  neither
transferred nor retained substantially all  the risks and rewards  of
the asset, but  has transferred  control of the  asset.  The  Company
derecognises a  financial liability  when  the obligation  under  the
liability is discharged, cancelled or expires.

(iv) Initial measurement
Financial assets  and financial  liabilities  at fair  value  through
profit or loss are recorded in  the Balance Sheet at fair value.  All
transaction costs  for such  instruments are  recognised directly  in
profit or loss.

Loans and  receivables and  financial  liabilities other  than  those
classified as  at fair  value  through profit  or loss  are  measured
initially  at  their  fair  value  plus  any  directly   attributable
incremental  costs  of  acquisition  or  issue.  There  are  no  such
financial assets within these financial statements.

(v) Subsequent measurement
After initial measurement, the Company measures financial instruments
which are classified as at fair value through profit or loss at  fair
value. Subsequent  changes  in  the fair  value  of  those  financial
instruments are recorded  in 'Unrealised  gain or  loss on  financial
assets at fair value through profit or loss. Interest earned elements
of such instruments are recorded separately in 'Interest income  from
investments at fair value through profit or loss.

(vi) Determination of fair value
Fair value is the amount for which an asset could be exchanged, or  a
liability settled, between knowledgeable, willing parties in an arm's
length transaction. The fair  value for financial instruments  traded
in active markets at the reporting date are based on their quoted bid
price or third  party broker price  quotations without any  deduction
for transaction costs. For all other financial instruments not traded
in  an  active  market,  the  fair  value  is  determined  by   using
appropriate valuation techniques that include the use of mathematical
pricing models incorporating discounted  cash flow techniques.  These
pricing models apply assumptions regarding asset-specific factors and
economic conditions generally,  including delinquency rates,  default
rates, maturity profiles, interest rates  and other factors that  may
be relevant to each financial asset. Where such Valuation  techniques
are used, inputs are based on market related measures at the  balance
sheet dates, such as using  recent arm's length market  transactions;
reference to the current market  value of another instrument that  is
substantially the same.

Cash and cash equivalents

Cash and  cash  equivalents comprise  balances  held with  the  Prime
Broker with original maturities of three months or less.

Derivative financial instruments

Derivative financial instruments  used by  the Company  to hedge  its
exposure to foreign  exchange and  interest rate  risks arising  from
operational, financing and investment activities that do not  qualify
for hedge accounting are accounted for as trading instruments.

Forward exchange contracts

Fair value of forward exchange contracts is their quoted market price
at the  balance sheet  date being  the present  value of  the  quoted
forward price. The change in value is recorded in net  gains/(losses)
in the income statement. Realised gains and losses are recognised  on
the maturity of a contract, or when a contract is closed out and they
are transferred to realised gains or losses, and are recorded in  the
income statement.

Functional and presentation currency

The Company's functional and presentation currency is the GBP,  which
is the  currency of  the  primary economic  environment in  which  it
operates. The Company's performance is evaluated and its liquidity is
managed in GBP. Therefore, the GBP is considered as the currency that
most faithfully  represents the  economic effects  of the  underlying
transactions, events and conditions.





Foreign currency transactions

Transactions in  foreign currencies  are  translated at  the  foreign
exchange rate  ruling  at  the  date  of  the  transaction  from  the
transaction currency to the functional currency. Monetary assets  and
liabilities denominated in  foreign currencies at  the balance  sheet
date are translated  to GBP at  the foreign exchange  rate ruling  at
that date. Foreign  exchange differences arising  on translation  are
recognised  in  the   income  statement.   Non-monetary  assets   and
liabilities that  are  measured in  terms  of historical  cost  in  a
foreign currency are translated using  the exchange rate at the  date
of transaction. Non-monetary  assets and  liabilities denominated  in
foreign currencies that are  stated at fair  value are translated  to
GBP at foreign exchange rates ruling at the dates the fair value  was
determined.

Transaction expenses

The expenses  of  the Company  directly  attributable to  its  public
offerings associated with the issue of the shares are charged against
the carrying amount of the shares.

Interest income

Interest income is accrued, based on the outstanding principal amount
of the  Company's  financial  assets  and  their  contractual  terms.
Premiums and  discounts associated  with  the purchase  of  financial
assets are  amortised  or  accreted into  interest  income  over  the
projected lives  of  the  investments using  the  effective  interest
method as defined under International Accounting Standard 39.

Taxation

With effect from 1 January 2008, the standard rate of income tax  for
companies in Guernsey has moved from  20% to 0% under the Income  Tax
(Zero Ten) (Guernsey) Law, 2007 passed  by the States of Guernsey  on
26 September  2007.   Close-ended  investment vehicles  such  as  the
Company can  continue to  apply for  exempt status  for Guernsey  tax
purposes.  Alternatively they may choose to automatically become  tax
resident, paying the nil rate.  The Company will continue to register
as tax exempt.

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.



Financial liabilities and equity

An equity  instrument  is  any contract  that  evidences  a  residual
interest in the  assets of  the Company  after deducting  all of  its
liabilities. At the  time of  issue, C  shares do  not represent  the
residue interest  in the  assets of  the Company  until the  date  of
conversion. C shares  are classified as  financial liabilities  until
the number of ordinary shares into which they will convert is fixed.
Financial  liabilities  and  equity  are  recorded  at  the  proceeds
received, net  of  issue  costs.  The change  in  the  value  of  the
ring-fenced assets attributed to C shares  from the date of issue  to
the date of conversion into ordinary shares, are charged or  credited
to the income statement and the carry value of the C shares.

Other accruals and payables

Other accruals and payables are  not interest-bearing and are  stated
at their fair value.

Business and geographical segments

The Directors are  of the opinion  that the Company  is engaged in  a
single segment of business of investing in debt securities  primarily
issued to finance the construction, modification and/or refurbishment
of rigs  and other  infrastructure equipment  used for  the  offshore
exploration and production of oil and natural gas. Whilst investments
are denominated in both  US$ and Norwegian  Krone, the similarity  of
economic and political conditions  relating to entities operating  in
the global energy  market lead  the directors to  determine that  the
Company operates in  a single geographical  segment and therefore  no
segmental information is provided.

Finance costs

Finance costs arise  from overdraft facilities  held by the  Company.
These costs are  recognised in  the income statement  on an  accruals
basis.

3.    Investments at fair value through profit and loss


                               For the six months             For the
                                            ended          year ended
                                    31 March 2009   30 September 2008
                                              GBP
Cost of investments at start
of period                             171,455,915        105,473,467)
Purchase of investments                31,539,469        137,081,782)
Sales proceeds on disposal of
investments                          (83,147,823)        (73,833,596)
Realised (loss)/gain on sale
of investments                        (9,653,348)          2,734,262)
Cost of investments at end of
period                                110,194,213        171,455,915)
Unrealised loss on investments       (75,845,055)        (13,431,412)
Investments at fair value
through profit or loss at end
of period                              34,349,158        158,024,503)


3.    Investments at fair value through profit and loss (continued)

Impairment

The following assets  held by  the company as  at 31  March 2009  are
impaired:

Viking Drilling announced on 26  February 2008 its intention to  file
for Chapter 11 bankruptcy protection in the US.  On 11 March 2008 the
Trustees were able to pay  out 96% of the par  value of the 2nd  lien
notes from funds that  had been held in  an escrow account which  had
not been  used by  Viking Drilling.  On 6  May 2008  Viking  Drilling
announced that it had  decided to proceed with  the sale of rigs  and
related equipment,  as  its  board of  directors  believed  that  the
likelihood of obtaining acceptable prices were favourable due to high
oil prices and high activity in the rig market.  As at 31 March  2009
the company held notional positions  of NOK21m and USD11.7m 1st  lien
and USD0.4m 2nd lien bonds issued by Viking Drilling.  As at 31 March
these positions were priced at 25% of par value for the 1st lien  and
0% of par value for the 2nd lien.

MPU announced on  30 June 2008  that it had  decided to petition  for
bankruptcy, resulting in a  significant drop in  the quoted price  of
the instruments.  In  November  2008,  MPU  distributed  3.65%  as  a
recovery payment and no further recoveries are expected. The  company
held a notional position of NOK52m issued by MPU which was priced  at
0% as at 31 March 2009.

FPS Ocean AS ("FPS") and its subsidiaries announced that it had filed
for bankruptcy  on  20  February  2009.   FPS  had  experienced  cost
overruns  in  its  construction  project  and  was  unable  to  raise
sufficient funds to continue.  The  Company held a notional  position
of USD16.4m of FPS debt which was priced at 1% as at 31 March 2009. A
bondholder  steering  committee  has  been  formally  appointed   and
discussions are ongoing  between the Bondholders,  the Shipyard,  the
Trustee and other interested parties in order to maximise  recoveries
from the vessel, which is largely complete.

4.    Interest-bearing borrowings

                          For the six             For the
                         months ended          year ended
                          31 Mar 2009   30 September 2008
                                  GBP                 GBP
Bank overdrafts - EUR       1,677,950           1,528,684
Bank overdrafts - GBP        (61,803)           8,325,622
Bank overdrafts - USD      31,577,467          35,208,686
Bank overdrafts - NOK       9,090,626          32,101,907
Bank overdrafts - Total    42,284,240          77,164,899


The Company borrows money from the secured lender by way of  interest
- bearing  borrowings.  The  secured  lender  guarantees  the  Credit
Facility on a rolling  364 day basis.  The Company's investments  are
held with the secured lender and  100% of these are used as  security
for these overdrafts. As at 31 March 2009, the drawn down amount  was
GBP42,284,240 (31 September 2008: GBP77,164,899), it is not  intended
that the Company will make any further drawn downs on this facility.

In October, following the significant NAV decline that occurred  over
the month  of  September  2008,  the Company  sought  to  relock  its
committed financing  with  the secured  lender,  but because  of  the
prevailing market conditions, found  the secured lender unwilling  to
do so. Nonetheless,  the secured  lender indicated  a willingness  to
continue to  support the  Company.  The  secured lender  was able  to
implement an  increase  of  100  basis points  to  the  cost  of  the
Company's financing  as it  sought to  cover its  own financing  cost
increases during this period.  As announced on  24 October 2008,  the
Company sought a more appropriate  capital structure and proposed  an
issue of new shares.   Unfortunately the further  decline in the  net
asset value of the Company combined with the inability to secure term
finance for the residual debt after the issuance of new shares,  made
that issuance unviable.

4.    Interest-bearing borrowings (continued)

On 24 October 2008 the Company  did however successfully secure a  $6
million (GBP3.4  million) unsecured  term loan.   The unsecured  term
loan carries an interest rate of LIBOR plus 5 per cent per annum  and
per the agreement is repayable at the earliest of 23 October 2009  or
a date  90 days  after receipt  of cancellation  by the  lender.  The
unsecured lender has  subsequently confirmed that  it has no  current
intention to  seek  its  contractual right  to  repayment  until  the
secured lender  has  been repaid  in  full.  The  facility  has  been
provided by RBC in its capacity as trustee of certain assets for  the
benefit of  Michael  Hintze, Chief  Executive  of CQS,  who  holds  a
majority  interest  in  CQS  Cayman  LP,  the  Company's   investment
manager.

The Company successfully  concluded renegotiations  of its  committed
financing terms with its secured lender  on 22 April 2009.   The  new
terms are committed for an 18 month term at a rate of one month Libor
plus 400  basis points  with  a US$2.8  million  fee payable  at  the
earlier of 18 months or full repayment of the secured lender.   There
are some conditions under  which the secured lender  may, but is  not
obliged to  withdraw, the  facility.  The  primary condition  is  one
where,  the  cumulative  cash   recovered  from  assets,  that   have
crystallised  through  maturity,  early   redemption,  or  from   the
conclusion of work out scenarios,  falls short of the total  expected
recovered cash for  the whole  of the  portfolio as  agreed with  the
secured lender at the date of execution of the facility, by an amount
greater than or equal to 20% of that total expected recovered cash.

The Directors believe it should be  able to operate within the  level
of these  new  financing  terms  based  on  its  cash  forecasts  and
projections.  The projected  income and capital  repayments over  the
next 18 months  are expected to  repay a material  proportion of  the
debt to the secured lender.  Leading up to the end of 18 months,  the
Company will review its options  to extend or replace its  financing,
or issue  new equity  to repay  some  or all  of the  residual  debt.
 Furthermore, it may be that by then asset values have recovered to a
point where  the sale  of  assets to  repay  the residual  debt  also
represents an attractive option.

5.    Share capital


Authorised share capital            31 March 2009   30 September 2008
                                              GBP                 GBP
                                        Number of           Number of
                                  Ordinary Shares     Ordinary Shares
Ordinary shares of  no par  value       Unlimited           Unlimited
each



Issued and fully paid               30 March 2009   30 September 2008
                                              GBP                 GBP
                                        Number of           Number of
                                  Ordinary Shares     Ordinary Shares
Balance  at  the  start  of  the       97,410,000          50,000,000
period
Issuance of Ordinary Shares with
no par value at date of
incorporation                                   -                   -
Issue  of  new  Ordinary  Shares                -
with no par value                                          47,410,000
Balance at end of period               97,410,000          97,410,000


6.    Share premium account

                                        31 March 2009   31 March 2008
                                                  GBP             GBP

Balance at start of the period                      -               -
Premium arising from issuance of
ordinary shares                                     -      50,000,000
Expenses  of  issuance  of   ordinary
shares                                              -     (1,022,039)
Transfer to other reserve                           -    (48,977,961)
Balance at the end of the period                    -               -


The  Company  passed  a  special  resolution  cancelling  the  amount
standing to  the  credit of  its  share premium  account  immediately
following its admission to AIM. In accordance with the Companies Law,
the Directors applied  to the Royal  Court in Guernsey  for an  order
confirming such cancellation of  the share premium account  following
admission. The other reserve created on cancellation is available  as
distributable profits to be  used for all  purposes permitted by  the
Companies Law,  including the  buy back  of Ordinary  Shares and  the
payment of dividends.

7.    Notes to cash flow statement

                                          For the six     For the six
                                         months ended    months ended
                                        31 March 2009   31 March 2008
                                                  GBP             GBP
Net (loss)/profit                        (81,023,673)     (6,992,751)
Adjustments for:
Realised loss/(gain) on sale of
investments                                 9,653,348       (476,281)
Unrealised (gain) on forward contracts   (10,722,889)       (945,492)
Unrealised loss on investments             59,208,903       2,890,760
Realised foreign exchange loss on
forward contracts                          20,554,069               -
Unrealised foreign exchange loss on
currency                                    5,783,982               -
Interest income                           (5,395,911)     (8,116,405)
Interest expense                            1,002,561       2,263,830
                                            (939,610)    (11,376,339)

Purchases of investments                 (29,622,738)   (110,882,932)
Sales   proceeds    on   disposal    of
investments                                83,029,267      28,719,512
Interest received                           5,395,911       8,116,405
                                           58,802,440    (74,047,015)

Increase in receivables                       (9,522)       (585,088)
(Decrease)/increase in payables               162,624       (542,256)
                                              153,102     (1,127,344)
Net    cash    inflow/(outflow)    from
operating activities                       58,015,932    (86,550,698)


Purchases and sales  of investments  are considered  to be  operating
activities of the Company, given  its purpose, rather than  investing
activities.

8.    Material agreements and related parties

Investment Manager
The Company is a party to an Investment Management Agreement with the
Investment Manager,  dated 8  November 2006,  pursuant to  which  the
Company  has  appointed  the  Investment  Manager  to  manage   their
respective assets  on a  day-to-day basis  in accordance  with  their
respective investment objectives and policies, subject to the overall
supervision and direction of  their respective Boards of  Directors.
The  Company  pays  the  Investment  Manager  a  Management  Fee  and
Performance Fee.

Management Fee
Under  the  terms  of   the  Investment  Management  Agreement,   the
Investment Manager is entitled to receive from the Company a  monthly
management fee payable in arrears as at the last business day of each
month that is equal  to 0.125 per cent.  (equivalent to 1.5 per  cent
per annum) of  the net asset  value of  the Company as  at the  first
business day  of  the month.  Management  fees for  the  period  were
GBP126,873 (31  March  2008:  GBP648,346)  of  which  GBP241,475  was
outstanding at 31 March 2009 (30 September 2008: GBP114,601).

Performance Fee
The performance fee in  respect of each performance  year will be  an
amount equal to 20 per cent of the amount, if any, by which the total
return for such performance year exceeds the performance hurdle.  For
the avoidance of doubt, the performance fee arrangements are  subject
to a  minimum  of  zero and  will  not  result in  any  repayment  of
performance fees in  respect of previous  performance periods.  There
was no performance fee for the  period ended 31 March 2009 (31  March
2008: GBP Nil).

For these purposes performance year means each year corresponding  to
each accounting period of the Company.

Total return means in respect of each performance year the excess, if
any, of:
(i)  the Company's net asset value on the last day of such
performance year plus the aggregate of any capital return and/or
dividends payable in respect of such performance year, over
(ii) the Company's net asset value on the first day of such
performance year.

Administration Fee
Under the terms of the Administration Agreement, the Administrator is
entitled to receive from the  Company an administration fee of  0.095
per cent of  the net asset  value of  the Company with  a minimum  of
US$14,200 per month. In addition, the Administrator is entitled to an
annual company secretarial fee on a time charge basis with a  minimum
of US$50,400 per annum.

Prime Broker and Custodian Fee
The prime  broker and  custodian will  receive such  fees as  may  be
agreed  with  the  Company  from  time  to  time,  reflecting  normal
commercial rates which may be based upon a combination of transaction
charges and interest costs.

9.    Post Balance Sheet Events

Petromena ASA announced on 6 April  2009 that it had received  notice
of default  for  three issues  of  its debt.   The  Bondholders  have
retained legal and financial advisors and a sales process is underway
for some of the underlying assets, the proceeds of which will  define
the recovery level.  The Company held notional positions of  USD10.5m
and NOK59m of  Petromena ASA debt  which were priced  at 20% and  26%
respectively as  at  31 March  2009.  The  quoted bid  price  of  the
USD10.5m position has decreased  to 22% and quoted  bid price of  the
NOK59m position has increased to 53% as at 22 June 2009.





9.    Post Balance Sheet Events (continued)

On 8  April 2009  the loan  trustee for  PetroProd Ltd  ("PetroProd")
announced that it  had filed  an application for  the appointment  of
liquidators to PetroProd.   On 9 April 2009, provisional  liquidators
were appointed  to  PetroProd  by  the  Grand  Court  of  the  Cayman
Islands.  The Company held notional positions of USD16m and  USD18.8m
of PetroProd debt which were priced at 13% and 18% respectively as at
31  March  2009.  Bondholders  have  appointed  legal  and  financial
advisors to work with the  joint provisional liquidators to  maximize
recoveries for the bondholders  and a sales  process is underway  for
certain of  the assets.  The  quoted bid  prices  of the  USD16m  and
USD18.8m positions have decreased to 5% and 15% respectively as at 22
June 2009.

Nexus Floating Production Limited the  parent company of Nexus 1  Pte
Limited ("Nexus") are currently working on a restructuring plan.  The
restructuring which could  potentially include a  conversion of  debt
into equity would  be subject  to approval by  the bondholders.   The
Company held notional positions of USD16.2m  of Nexus 1 Pte Ltd  debt
which was priced at 15% as at 31 March 2009. The quoted bid price  of
the USD16.2m position was still 15% as at 22 June 2009.

Skeie  Drilling   &  Production   ASA  ("Skeie")   is  currently   in
negotiations with a  group of  bondholders to  agree a  restructuring
plan. The restructuring which could potentially include a  conversion
of debt into equity would be subject to approval by the  bondholders.
The Company held notional positions of USD14.4m, USD7.5m and USD11.3m
which were priced at 17%, 18.5%  and 21% respectively as at 31  March
2009. The quoted  bid  prices have  increased  to 31%,  22%  and  26%
respectively as at 22 June 2009.

On 22 April 2009, the Company successfully renegotiated its committed
financing terms with its secured lender.

The key terms are:
The secured lender agrees to provide financing for 18 months.   There
can be no increase  in the net  USD value of  the secured debt.   The
financing cost is LIBOR + 400  basis points.  There is a USD2.8m  fee
for the facility payable at the earliest of the end of 18 months  and
the point at which the secured lender is repaid.

During the period of the facility;

*          all cash receipts, net of agreed operating expenses, are
  used to pay down the secured lender's debt (including fee) and, if
  achieved,
*          all cash receipts thereafter, net of agreed operating
  expenses, are used to pay down the unsecured lender's principal and
  interest and, if achieved,
*          all cash receipts thereafter, net of agreed operating
  expenses, and remaining portfolio assets are available for
  distribution to share holders.

There are some conditions under which the secured lender may, but  is
not obliged to, withdraw the  facility. The primary condition is  one
where  the  cumulative   cash  recovered  from   assets,  that   have
crystallised  through  maturity,  early   redemption,  or  from   the
conclusion  of  realisation  scenarios,  falls  short  of  the  total
expected aggregate level  of recoverable  cash for the  whole of  the
portfolio as agreed with the secured lender at the date of  execution
of the facility, by an  amount greater than or  equal to 20% of  that
total expected  recoverable cash.  Such expected  aggregate level  of
recoverable cash  agreed  with the  secured  lender at  the  date  of
execution of  the  facility is  substantially  higher then  the  long
market value of the securities as at that date.

The Company believes it should be able to operate within the terms of
this  new  financing  agreement  based  on  its  cash  forecasts  and
projections.  The projected  income and capital  repayments over  the
next 18 months  are expected to  repay a material  proportion of  the
debt to the secured lender.  Leading up to the end of 18 months,  the
Company will review its options  to extend or replace its  financing,
or issue  new equity  to repay  some or  all of  the residual  debt.
Furthermore, it may be that by then asset values have recovered to  a
point where  the sale  of  assets to  repay  the residual  debt  also
represents an attractive option.


9.    Post Balance Sheet Events (continued)

While in  the short  term, it  is the  intention of  the Company,  to
reduce its  gearing and  its debt  to its  lenders, the goal  of  the
Company remains  unchanged.  The  Board and  the  Investment  Manager
remain in close contact over the timing on how to best exploit  these
opportunities as they  arise.  Further  to this  on 18  May 2009  the
Company returned to trading  on AIM and restored  its listing on  the
CISX on 21 May 2009.

10.        Dividends

No dividends have  been declared or  paid in the  6 months ending  31
March 2009,  and it  is  unlikely that  the Company  will  recommence
dividend payments in the 2009 financial year.

11.        Foreign exchange rates

The following foreign exchange rates were used as at 31 March 2009:

                                As at             As at         As at
Currency                31 March 2009 30 September 2008 31 March 2008
British         Pound
Sterling                       1.0000            1.0000        1.0000
Norwegian Krone                9.6781           10.4447       10.1133
United States Dollar           1.4333            1.7778        1.9830
Euro                            .9262            1.2628             -


12.        Approval of the financial statements

The financial statements were approved by the Directors on 26 June
2009.

---END OF MESSAGE---




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solely responsible for the content of this announcement.