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CQS Rig Finance Fund Ltd (RIG)

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Monday 28 June, 2010

CQS Rig Finance Fund Ltd

CQS Rig Finance Fund Limited - Unaudited half y...






For release on Monday 28 June 2010


                          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 2010.
A  full copy of  the unaudited half  year report will  today be available on the
Company's website: www.cqsrigfinance.com and 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



                          CQS RIG FINANCE FUND LIMITED
               INTERIM REPORT AND CONDENSED FINANCIAL STATEMENTS
                                  (UNAUDITED)
                     FOR THE SIX MONTHS ENDED 31 MARCH 2010
                            Registered Number: 45805



CQS RIG FINANCE FUND LIMITED
Table of Contents
                                                                       Page


 Management and Administration                                          1


 Investing Policy                                                       2


 Investment Manager's Report                                            3


 Financial Statements


 - Unaudited Condensed Statement of Comprehensive Income                5


 - Unaudited Condensed Statement of Changes in Shareholders' Equity     6


 - Unaudited Condensed Statement of Financial Position                  7


 - Unaudited Condensed Statement of Cash Flows                          8


 - Notes to the Unaudited Condensed Financial Statements                9





CQS RIG FINANCE FUND LIMITED

Management and Administration

Directors
Michael Salter (Chairman) (UK                Nominated Adviser and Broker
resident)                                    Arbuthnot Securities Limited
Bruce Appelbaum (US resident)                Arbuthnot House
Trevor Ash (Guernsey resident)               20 Ropemaker Street
Jonathan Gamble (Guernsey                    London EC2Y 9AR
resident)                                    England
Gavin Strachan (UK resident)


Investment Manager                           Sub-Administrator
CQS Cayman Limited Partnership               State Street Fund Services
PO Box 309GT                                 (Ireland) Ltd
Ugland House                                 78 Sir John Rogerson's Quay
South Church Street                          Dublin 2
George Town                                  Ireland
Grand Cayman
Cayman Islands                               Registrar, Transfer Agent & Paying
                                             Agent
                                             Capital Registrars (Guernsey)
                                             Limited
                                             2(nd) Floor

Prime Broker and Custodian
Credit Suisse Securities                     No. 1 Le Truchot
(Europe) Limited                             St Peter Port
One Cabot Square                             Guernsey GY1 4AE
London E14 4QJ
England


Independent Auditor
Ernst & Young LLP
2(nd) Floor
Royal Chambers
St Julian's Avenue
St Peter Port
Guernsey GY1 4AF


Investment Adviser
CQS (UK) LLP
5th Floor
33 Grosvenor Place
London SW1X 7BL
England


Administrator and Company Secretary
Kleinwort Benson (Channel Islands) Fund
Services Limited
Dorey Court
Admiral Park
St Peter Port
Guernsey GY1 3BG


Registered Office
Dorey Court
Admiral Park
St Peter Port
Guernsey GY1 3BG




CQS RIG FINANCE FUND LIMITED

Investing Policy

The Company's investing policy 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 of the Net Asset Value per Share of the Company at
the start of each financial year.
The  Investment Adviser seeks to achieve the  investing policy 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 offshore exploration and production of
oil and natural gas.
The  Company seeks, 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 approximately 100 per cent. although gearing up to 150 per cent is permitted.
The  Company  seeks  to  construct  the  Portfolio  using a range of securities,
derivatives  and  other  agreements  including  but  not limited to positions in
bonds,  floating  rate  securities,  sovereign  bonds,  asset-backed securities,
loans,  repurchase  agreements,  interest  rate  and  credit  default  swaps and
swaptions,  total return swaps, interest rate  futures and options, bond futures
and options, currency swaps, foreign exchange contracts, futures and options and
other options and derivatives.
The   Portfolio  includes  exposure,  either  directly  or  synthetically  using
derivatives,  to  debt  instruments  that  are  secured. Such instruments may be
denominated  in any currency and the Company has the flexibility to trade in any
market  or  instrument  using  various  techniques  to achieve its stated return
objectives.  The  Company  may  trade  both  rated  and unrated debt instruments
although  it expected, in most cases, that such instruments will not be rated by
a  recognised  rating  agency.  The  Company  may also trade listed and unlisted
securities.
Derivatives  may be  used for  hedging or  investment purposes.  The Company may
execute  trades synthetically using  derivatives including, but  not limited to,
total  return swaps  referencing the  secured debt  instruments selected for the
Portfolio.  The Company  may also  retain amounts  in cash, or cash equivalents,
pending reinvestment if this is considered appropriate to the achievement of its
investment objective.
It  is expected  that investments  will often  be held  through to  maturity (or
earlier  redemption/repayment by  the issuer/borrower),  although the Investment
Adviser  may trade investments depending on  the prevailing market conditions at
any  time. The performance of such investment is therefore expected to be driven
primarily by the performance of the assets securing the investments.


CQS RIG FINANCE FUND LIMITED
Investment Manager's Report
For the six months ended 31 March 2010
Energy Markets
WTI crude oil prices traded mostly between USD70 and USD85 over the period under
review, rising from USD74 per barrel at the end of September 2009 to USD84 on
31 March 2010. The EIA¹ projects that world crude oil consumption will grow by
1.6 million barrels per day in 2010 and by a similar amount in 2011, based on
expectations of a somewhat more robust economic recovery. Non-OPEC supply is
projected to fall by 200,000 barrels per day in 2010, while OPEC supply is
expected to increase by 0.6 and 0.7 million barrels per day in both 2010 and
2011. WTI spot prices are projected to average USD84 per barrel during the
second half of 2010, rising to USD87 by the end of next year.
Financial Markets
Over  the first six months of the Company's financial year both major equity and
credit  market indices were volatile,  but generally higher at  the end of March
2010 than  they were at the beginning of October 2009. The FTSE 100 and S&P 500
both rose by approximately 11%, while credit markets, as measured by the Merrill
Lynch  European High Yield  Index rallied by  circa 13%. As the  New Year began,
markets  became more focused on Sovereign  debt issues, Chinese and Asian growth
rates,  and the  sustainability of  economic recovery  in the absence of further
government supported stimulus packages.
The Portfolio
The Company's NAV per Ordinary Share recovered from GBP10.81 pence at the end of
September  2009 to GBP19.66  pence as  at the  21 June 2010. This  reflected the
improving  trends  in  credit  markets,  the  stabilisation  of  oil  prices and
improvement  in  financing  conditions  in  the  offshore oil & gas sector. This
improvement  in  financing  availability  allowed  certain  companies within the
portfolio,  such as Marine Subsea AS,  to successfully restructure their balance
sheet  liabilities. The new  issues market re-opened  allowing companies such as
RDS  Ultra-Deepwater Ltd and Vantage Drilling Co. access to capital via the bond
markets.
As  at  the  end  of  March  2010, the  portfolio  was  divided into three broad
categories.  Analysed by  face value,  drilling rigs  were the  largest category
accounting  for  some  58% of  assets,  production-focused  equipment,  Floating
Production  Storage and Offloading  vessels (FPSOs) accounted  for 25% of assets
and  the remaining 17% of assets were  invested in oil service related equipment
such as well intervention vessels and barges.
The  FPSO sector returned  to life during  the period under  review. A number of
contracts  were awarded  after a  year long  absence including  a six year lease
given by Premier Oil Plc at the Chim Sao project in Vietnam.
In  the Drilling sector, the activity was characterised by falling day-rates for
the  older and lower specification rigs, especially jack-up rigs, and relatively
resilient   day-rates   in  the  ultra  deepwater  sector.  Day  rates  for  top
specification Ultra Deep Water rigs stabilised at around USD450,000 per day from
highs of around USD600,000 per day a year earlier.
Outlook
Following  the end  of the  period, in  addition to  the volatility in the wider
markets  experienced during  May, events  in the  Gulf of  Mexico contributed to
bonds  being  offered  for  sale  across-the-board  and  all  of  the  Company's
investments were marked down, albeit in most cases on thin trading volume.
Outlook (continued)
The  offshore oil & gas  sector has been adversely  impacted by the increasingly
poor news-flow and uncertainty created by the oil spill from the Macondo well in
the  Gulf of  Mexico. Although  the Company  does not  have any  material direct
investments  in assets operating in this region, negative sentiment is affecting
the entire sector.
The  US government  has announced  measures including  the suspension of current
deep-water  drilling  projects,  a  moratorium  on  new deepwater permits for an
initial  period of six months and the cancellation of the Western Gulf of Mexico
lease  sale.  Significant  uncertainties  remain  both  about  the length of the
drilling  ban and  potential regulatory  changes that  might be announced on the
back  of it.  We believe  this situation  is likely  to persist for some time to
come.
While markets appear to have subsequently regained some footing, we are cautious
on  the medium-term  outlook as  many countries  grapple with  what are arguably
unsustainable  fiscal deficits. We are, however,  encouraged by the stability of
oil prices and the general improvement in financing markets over the last year.
Over  the period under  review, the Company  reduced its net outstanding secured
cash  borrowing from the prime broker  from GBP35.7m at the 30 September 2009 to
GBP22.4m  at the period end. Following the period under review, the Company also
announced  on  9 April  2010, that  in  light  of  recent  improvements  in  the
collateral  liquidity of  the portfolio,  it had  negotiated improvements to the
terms  of both its secured and unsecured financing arrangements. The Company has
continued  to reduce  its secured  cash borrowing  since the  end of  the review
period.
¹ Source: US Energy Information Administration May 11 2010
All share price data sourced from Bloomberg
CQS Cayman Limited Partnership
Date: 25 June 2010
CQS RIG FINANCE FUND LIMITED

Unaudited Condensed Statement of Comprehensive Income
For the six months ended 31 March 2010



+-------------------------+----+-----------------------+-----------------------+
|                         |    |     For the six months|     For the six months|
|                         |    |                  ended|                  ended|
|                         |    |          31 March 2010|          31 March 2009|
+-------------------------+----+-----------------------+-----------------------+
|                         |    |                    GBP|                    GBP|
+-------------------------+----+-----------------------+-----------------------+
|                         |Note|              Unaudited|              Unaudited|
+-------------------------+----+-----------------------+-----------------------+
+-------------------------+----+-----------------------+-----------------------+
|Operating gain/(loss)    | 7  |             15,761,568|           (79,539,285)|
+-------------------------+----+-----------------------+-----------------------+
+-------------------------+----+-----------------------+-----------------------+
|Operating expenses       |    |                       |                       |
+-------------------------+----+-----------------------+-----------------------+
|Other operating expenses | 8  |              (379,963)|              (481,827)|
+-------------------------+----+-----------------------+-----------------------+
|Finance costs            |    |            (1,211,045)|            (1,002,561)|
+-------------------------+----+-----------------------+-----------------------+
|Total operating expenses |    |            (1,591,008)|            (1,484,388)|
+-------------------------+----+-----------------------+-----------------------+
+-------------------------+----+-----------------------+-----------------------+
|Net gain/(loss)          |    |             14,170,560|           (81,023,673)|
+-------------------------+----+-----------------------+-----------------------+
+-------------------------+----+-----------------------+-----------------------+
+-------------------------+----+-----------------------+-----------------------+
|Total comprehensive      |    |             14,170,560|           (81,023,673)|
|gain/loss for the period |    |                       |                       |
+-------------------------+----+-----------------------+-----------------------+
+-------------------------+----+-----------------------+-----------------------+
+-------------------------+----+-----------------------+-----------------------+
|Gain/(loss) per Ordinary |    |                       |                       |
|Share                    |    |                       |                       |
+-------------------------+----+-----------------------+-----------------------+
|Basic and Diluted        |    |                 14.55p|               (83.18p)|
+-------------------------+----+-----------------------+-----------------------+
+-------------------------+----+-----------------------+-----------------------+

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 unaudited condensed
financial statements.


+---------------------------------++-------------+------------------+----------+
|CQS RIG FINANCE FUND LIMITED     ||             |                  |          |
|Unaudited Condensed Statement of ||             |                  |          |
|Changes in Shareholders' Equity  ||             |                  |          |
|For the six months ended 31 March||             |                  |          |
|2010                             ||Other Reserve|Accumulated Losses|     Total|
+---------------------------------++-------------+------------------+----------+
|                                 ||          GBP|               GBP|       GBP|
+---------------------------------++-------------+------------------+----------+
+---------------------------------++-------------+------------------+----------+
|Balance at 1 October 2009        ||   90,982,384|      (80,448,048)|10,534,336|
+---------------------------------++-------------+------------------+----------+
+---------------------------------++-------------+------------------+----------+
|Total comprehensive gain for the ||             |                  |          |
|period                           ||            -|        14,170,560|14,170,560|
+---------------------------------++-------------+------------------+----------+
|Total recognised income and      ||             |                  |          |
|expense plus equity brought      ||             |                  |          |
|forward                          ||   90,982,384|      (66,277,488)|24,704,896|
+---------------------------------++-------------+------------------+----------+
+---------------------------------++-------------+------------------+----------+
|Balance at 31 March 2010         ||   90,982,384|      (66,277,488)|24,704,896|
+---------------------------------++-------------+------------------+----------+



For the six months ended 31 March 2009

+-------------------------------++-------------+------------------+------------+
|                               ||Other Reserve|Accumulated Losses|       Total|
+-------------------------------++-------------+------------------+------------+
|                               ||          GBP|               GBP|         GBP|
+-------------------------------++-------------+------------------+------------+
+-------------------------------++-------------+------------------+------------+
|Balance at 1 October 2008      ||   90,982,384|      (19,800,264)|  71,182,120|
+-------------------------------++-------------+------------------+------------+
+-------------------------------++-------------+------------------+------------+
|Total comprehensive 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)|
+-------------------------------++-------------+------------------+------------+
+-------------------------------++-------------+------------------+------------+
|Balance at 31 March 2009*      ||   90,982,384|     (100,823,937)| (9,841,553)|
+-------------------------------++-------------+------------------+------------+

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

*  In line with  IAS 34, the comparative  period for the  Condensed Statement of
Changes  in  Shareholders'  Equity  is  the  six months ended 31 March 2009. The
balance at that period end will not equate to the balance at 30 September 2009,
the date of the comparative Consolidated Statement of Financial Position on page
7.


CQS RIG FINANCE FUND LIMITED

Unaudited Condensed Statement of Financial Position
As at 31 March 2010
+---------------------------+----+-------------+-----------------+-------------+
|                           |    |31 March 2010|30 September 2009|31 March 2009|
+---------------------------+----+-------------+-----------------+-------------+
|                           |Note|          GBP|              GBP|          GBP|
+---------------------------+----+-------------+-----------------+-------------+
|Assets                     |    |    Unaudited|          Audited|    Unaudited|
+---------------------------+----+-------------+-----------------+-------------+
|                           |    |             |                 |             |
+---------------------------+----+-------------+-----------------+-------------+
|Non-current assets         |    |             |                 |             |
+---------------------------+----+-------------+-----------------+-------------+
|Investments at fair value  |    |             |                 |             |
|through profit or loss     | 4  |   53,151,654|       51,177,474|   34,349,158|
+---------------------------+----+-------------+-----------------+-------------+
+---------------------------+----+-------------+-----------------+-------------+
|Current assets             |    |             |                 |             |
+---------------------------+----+-------------+-----------------+-------------+
|Receivable for securities  |    |             |                 |             |
|sold                       |    |            -|                -|    2,887,960|
+---------------------------+----+-------------+-----------------+-------------+
|Cash and cash equivalents  | 9  |   10,128,603|          975,983|            -|
+---------------------------+----+-------------+-----------------+-------------+
|Interest receivable        |    |        2,676|                -|            -|
+---------------------------+----+-------------+-----------------+-------------+
|Other assets               |    |       40,053|           14,634|        9,522|
+---------------------------+----+-------------+-----------------+-------------+
|                           |    |   10,171,332|          990,617|    2,897,482|
+---------------------------+----+-------------+-----------------+-------------+
+---------------------------+----+-------------+-----------------+-------------+
|Total assets               |    |   63,322,986|       52,168,091|   37,246,640|
+---------------------------+----+-------------+-----------------+-------------+
+---------------------------+----+-------------+-----------------+-------------+
|Equity and liabilities     |    |             |                 |             |
+---------------------------+----+-------------+-----------------+-------------+
+---------------------------+----+-------------+-----------------+-------------+
|Equity                     |    |             |                 |             |
+---------------------------+----+-------------+-----------------+-------------+
|    Other reserve          |    |   90,982,384|       90,982,384|   90,982,384|
+---------------------------+----+-------------+-----------------+-------------+
|    Accumulated losses     |    | (66,277,488)|     (80,448,048)|(100,823,937)|
+---------------------------+----+-------------+-----------------+-------------+
|                           |    |   24,704,896|       10,534,336|  (9,841,553)|
+---------------------------+----+-------------+-----------------+-------------+
|Current liabilities        |    |             |                 |             |
+---------------------------+----+-------------+-----------------+-------------+
|Interest-bearing borrowings| 6  |   32,505,034|       36,601,096|   42,284,240|
+---------------------------+----+-------------+-----------------+-------------+
|Short term borrowings      | 6  |    3,955,434|        3,751,524|    4,185,996|
+---------------------------+----+-------------+-----------------+-------------+
|Other liabilities and      | 10 |    2,157,622|                 |      617,957|
|payables                   |    |             |        1,281,135|             |
+---------------------------+----+-------------+-----------------+-------------+
|Total liabilities          |    |   38,618,090|       41,633,755|   47,088,193|
+---------------------------+----+-------------+-----------------+-------------+
+---------------------------+----+-------------+-----------------+-------------+
|Total equity and           |    |   63,322,986|                 |   37,246,640|
|liabilities                |    |             |       52,168,091|             |
+---------------------------+----+-------------+-----------------+-------------+
+---------------------------+----+-------------+-----------------+-------------+
|Net Asset Value per Share  |    |       25.36p|           10.81p|     (10.10)p|
+---------------------------+----+-------------+-----------------+-------------+

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


CQS RIG FINANCE FUND LIMITED

Unaudited Condensed Statement of Cash Flows
For the six months ended 31 March 2010
+--------------------------------------------+-----+-------------+-------------+
|                                            |     |  For the six|For the six  |
|                                            |     | months ended|months ended |
|                                            |     |31 March 2010|31 March 2009|
+--------------------------------------------+-----+-------------+-------------+
|                                            |Notes|          GBP|          GBP|
+--------------------------------------------+-----+-------------+-------------+
|                                            |     |    Unaudited|    Unaudited|
+--------------------------------------------+-----+-------------+-------------+
+--------------------------------------------+-----+-------------+-------------+
|Net cash inflow from operating activities   | 12  |   15,826,311|   58,015,932|
+--------------------------------------------+-----+-------------+-------------+
+--------------------------------------------+-----+-------------+-------------+
|Financing activities:                       |     |             |             |
+--------------------------------------------+-----+-------------+-------------+
|Loan payable                                |     |            -|    4,185,996|
+--------------------------------------------+-----+-------------+-------------+
|Interest expense paid                       |     |  (1,115,068)|  (1,081,106)|
+--------------------------------------------+-----+-------------+-------------+
|Decrease in interest-bearing borrowings     |     |  (4,096,062)| (34,880,659)|
+--------------------------------------------+-----+-------------+-------------+
|Net loss on foreign exchange                |     |  (1,462,561)| (26,338,051)|
+--------------------------------------------+-----+-------------+-------------+
|Cash (outflow)/inflows from financing       |     |             |             |
|activities                                  |     |  (6,673,691)| (58,113,820)|
+--------------------------------------------+-----+-------------+-------------+
+--------------------------------------------+-----+-------------+-------------+
|Net increase/(decrease) in cash             |     |    9,152,620|     (97,888)|
+--------------------------------------------+-----+-------------+-------------+
+--------------------------------------------+-----+-------------+-------------+
|Reconciliation of net cash flow to movement in net cash:        |             |
+-------------------------------------------+------+-------------+-------------+
|Net increase/(decrease) in cash and cash   |      |             |             |
|equivalents                                |      |    9,152,620|     (97,888)|
+-------------------------------------------+------+-------------+-------------+
|Cash and cash equivalents at start of      |      |             |             |
|period                                     |      |      975,983|       97,888|
+-------------------------------------------+------+-------------+-------------+
|Cash and cash equivalents at end of period |      |   10,128,603|            -|
+-------------------------------------------+------+-------------+-------------+

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


CQS RIG FINANCE FUND LIMITED
Notes to the Unaudited Condensed Financial Statements
For the six months ended 31 March 2010

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 are traded on AIM and listed on CISX.
The  new Guernsey  Fund Rules  relating to  authorised and registered funds (the
Authorised   Closed-Ended  Investment  Schemes  Rules  2008 and  the  Registered
Collective  Investment  Scheme  Rules  2008, (together  the "new rules")) became
effective  from 15 December  2008. All funds  in existence  as at  that date are
automatically deemed to be authorised funds but had a transition period of up to
30 April  2009 to apply to the Guernsey Financial Services Commission to convert
to  a registered fund. The Company's Directors  have elected to keep the Company
as an authorised fund.
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  exceeded  this  gearing percentage and while this
situation will remain in the short to medium term, it is the Company's long term
objective to return the gearing to below the 150 per cent level.
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

These  condensed interim financial statements for  the six months ended 31 March
2010 have been prepared in accordance with IAS 34, "Interim Financial Reporting"
and   the   Companies  Law  (Guernsey)  2008. The  condensed  interim  financial
statements  do not  include all  the information  and disclosure required in the
annual  financial statements and should be  read in conjunction with the audited
financial  statements of the Company for the year ended 30 September 2009, which
have   been  prepared  in  accordance  with  International  Financial  Reporting
Standards (IFRS).
The  audited financial statements of the Company for the year ended 30 September
2009 are  available upon request  from the Company's  registered office at Dorey
Court, Admiral Park, St Peter Port, Guernsey GY1 3BG and are also available from
the Company's web site.
CQS RIG FINANCE FUND LIMITED

Notes to the Unaudited Condensed Financial Statements
For the six months ended 31 March 2010

2. Significant accounting policies (continued)

Basis of preparation

The  condensed interim  financial statements  of the  Company are  prepared on a
historical  cost or amortised cost basis, modified by the revaluation of certain
financial  instruments held for trading  and financial instruments designated as
fair value through profit or loss upon initial recognition.
Except  for the new standards adopted during the period, the accounting policies
applied by the Company in these condensed unaudited interim financial statements
are  consistent with those applied by the Company in its financial statements as
at and for the year ended 30 September 2009.
These   condensed  interim  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.
The accounting policies have been applied consistently by the Company.
New standards adopted

The  following new standards  and amendments to  standards are mandatory for the
first time for the reporting period:

  *         IFRS  8, 'Operating  segments'.  IFRS  8 replaces  IAS  14, 'Segment
    reporting'.  This standard puts an emphasis  on the "management approach" to
    reporting  on operating segments.  This standard has  resulted in additional
    disclosures  but does not have an impact on the Company's financial position
    or performance. Please see Note 3.

Adoption  of this  revised standard  did not  have any  effect on  the financial
performance  or  position  of  the  Company  other  than  additional  disclosure
requirements.
New standards and interpretation not yet adopted

The  following new standards,  amendments to standards  and interpretations have
been  issued, but are not  effective for the reporting  period and have not been
early adopted:

  *        IFRS 9 'Financial instruments' (effective from 1 January 2013).
  *         IFRIC 14 'Prepayments  of a  minimum funding requirement' (effective
    from 1 January 2011).
  *        IFRIC 19 'Extinguishing financial liabilities and equity instruments'
    (effective 1 July 2010).
  *        IAS 24 'Related party disclosures' (effective from 1 January 2011).
  *        IAS 32 'Classification of rights issues' (effective 1 February 2010).



CQS RIG FINANCE FUND LIMITED

Notes to the Unaudited Condensed Financial Statements
For the six months ended 31 March 2010

2. Significant accounting policies (continued)

Significant accounting judgements 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  statement of financial position 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. The  non-performing assets,  as outlined on
Note   4, have  been  assigned  values  in  line  with  market  expectations  of
recoverability.
(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.


Going Concern
A fundamental principle of the preparation of financial statements in accordance
with  IAS 34 is the  assumption that an  entity will continue  in existence as a
going  concern, which contemplates  continuity of operations  and realisation of
assets  and  settlement  of  liabilities  occurring  in  the  ordinary course of
business. In accordance with this requirement the Company's policy is to prepare
the  condensed interim financial statements on  a going concern basis unless the
Directors intend to liquidate the Company.
On  22 April 2009, an 18 month secured facility  which will expire on 21 October
2010, was  agreed with Credit Suisse Securities  (Europe) Limited ("CS") for the
following amounts:

 NOK 60,505,509          GBP 6,520,060

 USD 45,195,277          GBP 28,257,645

 EUR 1,817,787           GBP 1,661,293

 GBP (39,512) (Credit)


 TOTAL                   GBP 36,399,486



CQS RIG FINANCE FUND LIMITED

Notes to the Unaudited Condensed Financial Statements
For the six months ended 31 March 2010


2. Significant accounting policies (continued)

Going Concern (continued)

The  primary condition of the 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 Company has  operated within the terms of this
new financing agreement during the six month period ending 31 March 2010.
The  Directors have  prepared detailed  cash projections  for the  period of the
facility  and beyond, and are confident that  they will be able to remain within
the  terms of the facility for its  entire duration. The Company has reduced the
secured  borrowings to GBP22.4m  as at 31 March 2010. The  Company believes that
over  the period April 2010 to October 2010, proceeds from restructurings, asset
maturities   and  selective  asset  sales  will  further  reduce  the  level  of
indebtedness materially.
The  Company also  agreed an  unsecured credit facility on 24 October 2008 under
which  USD6 million (GBP4.0  million) was made  available for short term working
capital.  The unsecured facility has been  provided by RBC Cees Trustees Limited
("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 unsecured lender has confirmed that it has
no  current  intention  to  seek  its  contractual  right to repayment until the
secured  lender  has  been  repaid  in  full.  The  unsecured facility which was
originally due to expire on 21 October 2009 was extended on 23 October 2009 with
the same terms and will now expire on 21 October 2010.
Additionally  as  detailed  in  note  6, on  9 April 2010 the Company negotiated
improvements to the terms of both its secured financing arrangements with CS and
its  unsecured facility  agreement with  RBC which  reduced the  cost of the two
facilities.
The  Company has as  yet not entered  into formal negotiations  with the secured
lender  with regards to extending the current facility. Prior to the maturity of
the  current  facility,  the  Company  plans  to  approach the secured lender to
renegotiate  the  debt  financing  arrangement.  The  Company continues to be in
communication  with the secured lender and is  not aware of any intention of the
secured  lender to  withdraw the  financing beyond  the maturity of the existing
facility.
In  view of  the above,  the Board  consider the  Company has adequate financial
resources  and believes that the  Company is well placed  to manage its business
risks  successfully  to  continue  in  operational existence for the foreseeable
future  and that  it is  appropriate to  prepare the condensed interim financial
statements on the going concern basis.

3. Segmental Reporting
IFRS  8 'Operating  Segments'  is  effective  from  1 January 2009. The standard
requires  a 'management approach', under  which segment information is presented
on  the  same  basis  as  that  used  for internal reporting purposes. Operating
segments are reported in a manner consistent with the internal reporting used by
the  chief  operating  decision  maker.  The  chief  operating decision maker is
responsible  for  allocating  resources  and  assessing  the  performance of the
operating segments.

CQS RIG FINANCE FUND LIMITED
Notes to the Unaudited Condensed Financial Statements
For the six months ended 31 March 2010

3. Segmental Reporting (continued)

The  Board of Directors is charged with the overall governance of the Company in
accordance  with the Company's Admission Document and the Company's Articles and
Memorandum.  The  Board  has  appointed  CQS  Cayman  Limited Partnership as the
Investment  Manager. The Board  of Directors and  CQS Cayman Limited Partnership
are  considered the  Chief Operating  Decision Maker  (CODM) for the purposes of
IFRS 8.
CQS Cayman Limited Partnership is responsible for decisions in relation to both
asset allocation, asset selection and any investment adviser delegation. CQS
Cayman Limited Partnership has been given authority to act on behalf of the
Company, including the authority to purchase and sell securities and other
investments on behalf of the Company and to carry out other actions as
appropriate to give effect thereto. Any changes to the investment strategy
outside of the Company's Admission Document must be approved by the Board and
then the Company's shareholders in accordance with the terms of the Admission
Document, the Company's Articles and the AIM rules for Companies.

The Company sources and trades in a portfolio of secured debt instruments which
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 operates a single operating
segment under IFRS 8 with all investment cash and investment holdings being
managed at a Company level. CQS Cayman Limited Partnership allocates decisions
based on a single integrated investment strategy and the Company's performance
is evaluated on an overall basis. Investment cash is allocated to CQS Cayman
Limited Partnership who has discretionary authority to invest the Company's
assets and is responsible for all investment decisions made on behalf of the
Company, subject to the control and policies of the Board of Directors of the
Company. CQS Cayman Limited Partnership has appointed an investment adviser, CQS
(UK) LLP. The investment adviser is responsible for the management of and/or
providing investment advice on the Portfolio and also assists the Investment
Manager with related ancillary services. The internal reporting provided to CQS
Cayman Limited Partnership for the Company's assets and liabilities and
performance is prepared on a consistent basis with the measurement and
recognition principles of IFRS. There were no changes in the reportable segments
during the period.
Geographical areas
The  Company is  incorporated in  Guernsey. The  Company invests in secured debt
instruments,  which are  classified as  non-current assets  on the  statement of
financial position and the assets that the debt instruments are secured over are
physically  located  either  "On  location"  or  in China, Dubai, Korea, Norway,
Indonesia, Singapore, Netherlands and USA.
+------------------+---------------+--------------------+------------------+
|31 March 2010     |Interest income|Realised gain/(loss)|Non-current assets|
+------------------+---------------+--------------------+------------------+
|                  |            GBP|                 GBP|               GBP|
+------------------+---------------+--------------------+------------------+
|On Location       |        217,009|           (723,623)|        14,833,464|
+------------------+---------------+--------------------+------------------+
|China             |        109,527|             163,222|        14,733,289|
+------------------+---------------+--------------------+------------------+
|Dubai             |              -|                   -|           134,485|
+------------------+---------------+--------------------+------------------+
|Korea             |              -|         (1,310,988)|                 -|
+------------------+---------------+--------------------+------------------+
|West Africa/Norway|        309,014|                   -|         5,623,509|
+------------------+---------------+--------------------+------------------+
|Norway/China      |        218,939|              55,734|                 -|
+------------------+---------------+--------------------+------------------+
|Norway            |              -|             389,841|                 -|
+------------------+---------------+--------------------+------------------+
|Indonesia         |              -|                   -|           169,742|
+------------------+---------------+--------------------+------------------+
|Singapore         |          4,804|           4,772,291|        16,652,622|
+------------------+---------------+--------------------+------------------+
|Netherlands       |              -|           (191,682)|                 -|
+------------------+---------------+--------------------+------------------+
|USA               |              -|                   -|         1,004,543|
+------------------+---------------+--------------------+------------------+
+------------------+---------------+--------------------+------------------+
|Total             |        859,293|           3,154,795|        53,151,654|
+------------------+---------------+--------------------+------------------+

CQS RIG FINANCE FUND LIMITED

Notes to the Unaudited Condensed Financial Statements
For the six months ended 31 March 2010

3. Segmental Reporting (continued)
Geographical areas (continued)
+----------------+-----------------+----------------------+--------------------+
| 31 March 2009  |   31 March 2009 |        31 March 2009 |  30 September 2009 |
|                | Interest income | Realised gain/(loss) | Non-current assets |
+----------------+-----------------+----------------------+--------------------+
|                |             GBP |                  GBP |                GBP |
+----------------+-----------------+----------------------+--------------------+
| On Location    |         963,081 |          (3,105,029) |         13,702,911 |
+----------------+-----------------+----------------------+--------------------+
| China          |         932,459 |          (1,219,517) |         13,009,575 |
+----------------+-----------------+----------------------+--------------------+
| Dubai          |       (269,144) |                    - |            127,552 |
+----------------+-----------------+----------------------+--------------------+
| Korea          |         484,275 |                    - |          2,886,798 |
+----------------+-----------------+----------------------+--------------------+
| Norway/China   |         606,338 |                    - |          3,248,979 |
+----------------+-----------------+----------------------+--------------------+
| Indonesia      |         139,871 |                    - |            822,540 |
+----------------+-----------------+----------------------+--------------------+
| Singapore      |       2,564,746 |          (6,367,609) |         16,421,276 |
+----------------+-----------------+----------------------+--------------------+
| Netherlands    |               - |              565,010 |                  - |
+----------------+-----------------+----------------------+--------------------+
| United Kingdom |               - |              343,000 |                  - |
+----------------+-----------------+----------------------+--------------------+
| USA            |        (25,715) |              130,797 |            957,843 |
+----------------+-----------------+----------------------+--------------------+
+----------------+-----------------+----------------------+--------------------+
| Total          |       5,395,911 |          (9,653,348) |         51,177,474 |
+----------------+-----------------+----------------------+--------------------+
Major customers
The Company regards its shareholders as customers, as it relies on their funding
for  continuing  operations  and  meeting  its  objectives.  The  Company  has a
diversified  shareholder population, however  as at 31 March  2010 there were 3
shareholders  that  held  more  than  10% of  the shares as at 31 March 2010 (30
September 2009: 3).
4. Investments at fair value through profit and loss
+--------------------------------+-------------+-----------------+-------------+
|                                |  For the six|          For the|  For the six|
|                                | months ended|       year ended| months ended|
|                                |31 March 2010|30 September 2009|31 March 2009|
|                                |          GBP|              GBP|          GBP|
|                                |    Unaudited|          Audited|    Unaudited|
+--------------------------------+-------------+-----------------+-------------+
+--------------------------------+-------------+-----------------+-------------+
|Cost of investments at start of |  104,930,681|      171,455,917|  171,455,915|
|period                          |             |                 |             |
+--------------------------------+-------------+-----------------+-------------+
|Purchase of investments         |   10,763,884|        3,297,552|   31,539,469|
+--------------------------------+-------------+-----------------+-------------+
|Sales proceeds on disposal of   | (25,372,055)|     (55,415,383)| (83,147,823)|
|investments                     |             |                 |             |
+--------------------------------+-------------+-----------------+-------------+
|Realised gain/(loss) on sale of |    3,154,795|     (14,407,405)|  (9,653,348)|
|investments                     |             |                 |             |
+--------------------------------+-------------+-----------------+-------------+
|Cost of investments at end of   |   93,477,305|      104,930,681|  110,194,213|
|period                          |             |                 |             |
+--------------------------------+-------------+-----------------+-------------+
|Unrealised loss on investments  | (40,325,651)|     (53,753,207)| (75,845,055)|
+--------------------------------+-------------+-----------------+-------------+
|Investments at fair value       |             |                 |             |
|through profit or loss at end of|   53,151,654|       51,177,474|   34,349,158|
|period                          |             |                 |             |
+--------------------------------+-------------+-----------------+-------------+
Significant fair value write downs
Outlined  below are  details of  a number  of significant  events which occurred
during the period which had an impact on investment positions:
In  early October 2009, Master Marine AS ("Master Marine") bondholders agreed on
a  restructuring plan with Nordic Capital. In December 2009 bondholders received
58% of  the bond  notional in  cash and  an allocation  of new  shares in Master
Marine.  The  Company  held  a  notional  position  of EUR2m (GBP1.8m) which was
exchanged  for EUR1.1m (GBP1.0m) cash plus  2.3m new shares in Master Marine. As
at 31 March 2010 the shares had a fair value of NOK1.53m (GBP0.17m).

CQS RIG FINANCE FUND LIMITED

Notes to the Unaudited Condensed Financial Statements
For the six months ended 31 March 2010

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

Significant fair value write downs (continued)
Nexus  Floating Production Limited ("Nexus")  signed an asset purchase agreement
for  FPSO Nexus #1 on  27 October 2009 with the purchaser  being an affiliate of
Brazil's  EBX Group.  The FPSO  Nexus #1  was sold  on an  "as is" basis and the
purchaser  has undertaken certain contracts and obligations related to the final
construction, development and delivery of the FPSO Nexus #1. A share of the sale
proceeds  was used to repay the 2nd Lien bondholders, equal to a 50% recovery of
the  outstanding face  amount. The  Company received  USD8.1m (GBP5.3m)  cash in
exchange  for 78% of the outstanding notional held. A residual notional position
of USD3.5m (GBP2.3m) remains in the Company but is priced at zero as there is no
further material recovery expected.
In  November 2009 the US bankruptcy court approved  the sale of the Petrorig III
Pte  Ltd ("Petrorig  III") rig,  Petrorig III.  The rig  was sold  at auction in
December  2009 for USD560m to  Grupo R. The  result is the  recovery levels have
increased  with a notional position of  NOK25m redeemed at 94% and the remaining
notional  position of NOK34m  had a fair  value of NOK31.3m  (GBP3.5m) as at 31
March 2010.
In December 2009, PetroProd Ltd ("PetroProd") distributed cash to the holders of
the  10.85% May 2013 bonds,  of which  the Company  holds a  USD16.0m (GBP10.0m)
notional  position, being the cash held in  escrow for the bondholders. The cash
proceeds  equated to a recovery  on the bonds of  10%. The Company still holds a
notional  position of  USD16.0m in  the event  of future  recovery but these are
marked  at zero as  no further material  distributions are expected. The Company
also  holds an  USD18.1m (GBP11.9m)  notional position  of a  floating rate Note
(FRN)  issued  by  PetroProd.  Bondholders  of  the  FRN  voted  on a deal which
effectively  buys the bondholders out of the FPSO and the construction contracts
for  an amount of  USD12.0m (GBP7.5m). This  added to the  USD15.0m (GBP9.4m) on
escrow  for  the  Petroprod  FRN  adds  up  to  a recovery of 21.5%. The Company
received the cash distribution of USD4.0m (GBP2.7m) on 29 January 2010.
Marine Subsea AS (formally Africa Offshore Services) ("Marine Subsea") completed
its  financial restructuring  in mid-December  2009. Marine Subsea  is now fully
financed  with a debt maturity  profile that matches the  longterm nature of its
contracts.  Under the terms of the restructuring, the two bonds issued by Marine
Subsea  were exchanged into a new bond  paying 9% coupon in the first two years,
stepping  up  to  12% thereafter.  The  Company therefore exchanged its USD10.7m
(GBP6.7m)  notional Africa  Offshore FRN  and USD4.4m  (GBP2.7m) notional Marine
Subsea  FRN into a single new  USD15.8m (GBP 9.9m) notional bond. The fair value
of the new bond was USD8.5m (GBP5.6m) as at 31 March 2010.

5. Measurement of investments at fair value through profit and loss

Fair value hierarchy

IFRS7  requires disclosures surrounding the level in the fair value hierarchy in
which fair value measurements are categorised for financial instruments measured
in  the statement of  financial position. This  requires the Company to classify
fair  value  measurements  using  a  fair  value  hierarchy  that  reflects  the
significance of the inputs used in making the measurements.
The IFRS 7 fair value hierarchy was not early adopted when preparing the audited
financial  statements as at  30 September 2009. However, the  Company did report
voluntary  disclosures showing how the portfolio was levelled as at 30 September
2009.

CQS RIG FINANCE FUND LIMITED

Notes to the Unaudited Condensed Financial Statements
For the six months ended 31 March 2010

5. Measurement of investments at fair value through profit and loss (continued)

Fair value hierarchy (continued)

Financial instruments recognised at fair value were analysed in the 30 September
2009 report between those whose fair value is based on:

  *        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 assets or liabilities, either directly (as prices) or
    indirectly (derived from prices) (Level 2); and


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


As  an  update  to  the  fair  value  hierarchy  disclosures given in the annual
financial   statements   of  30 September  2009, the  following  table  presents
significant  transfers  between  levels  of  the  fair  value  hierarchy  in the
measurement of the fair value of financial instruments at 31 March 2010.
                                      Transfers from Level 2 to Level 3

Security                       Fair value at 31 March Fair value at 30 September
                                                 2010                       2009


DP Producer AS, due                           134,485                    127,552
05/12/2011

Nexus 1 Pte Ltd, due                                -                  2,886,798
07/03/2012

Petroprod Ltd, due                                  -                  1,050,427
24/05/2013

Petroprod Ltd, due                                  -                  1,757,401
12/01/2012
6. Interest-bearing borrowings and short term borrowings
+-------------+------------+-----------+-------------+------------+------------+
|             |Effective   |           |31 March 2010|30 September|    31 March|
|             |rate        |   Maturity|             |       2009*|        2009|
+-------------+------------+-----------+-------------+------------+------------+
|             |            |           |          GBP|         GBP|         GBP|
+-------------+------------+-----------+-------------+------------+------------+
|             |            |           |    Unaudited|     Audited|   Unaudited|
+-------------+------------+-----------+-------------+------------+------------+
|Bank         |            |           |             |            |            |
|overdrafts   |LIBOR +     |           |             |            |            |
|EUR          |4.00%       |21 Oct 2010|           10|   1,164,525|   1,677,950|
+-------------+------------+-----------+-------------+------------+------------+
|Bank         |            |           |             |            |            |
|overdrafts   |LIBOR +     |           |             |            |            |
|GBP          |4.00%       |21 Oct 2010|            -|           -|    (61,803)|
+-------------+------------+-----------+-------------+------------+------------+
|Bank         |            |           |             |            |            |
|overdrafts   |LIBOR +     |           |             |            |            |
|USD          |4.00%       |21 Oct 2010|   25,863,241|  24,514,003|  31,577,467|
+-------------+------------+-----------+-------------+------------+------------+
|Bank         |            |           |             |            |            |
|overdrafts   |LIBOR +     |           |             |            |            |
|NOK          |4.00%       |21 Oct 2010|    6,641,783|  10,922,568|   9,090,626|
+-------------+------------+-----------+-------------+------------+------------+
|Total Bank overdrafts                 |   32,505,034|  36,601,096|  42,284,240|
+--------------------------------------+-------------+------------+------------+

* The effective rate as at 30 September 2009 and 31 March 2009 was LIBOR +4.00%.
Short term borrowings
+---------------+-------------+--------+-----------+-------------+-------------+
|               |Effective    |Maturity|   31 March| 30 September|31 March 2009|
|               |rate         |        |       2010|       2009**|             |
+---------------+-------------+--------++----------+-------------+-------------+
|               |             |         |       GBP|          GBP|          GBP|
+---------------+-------------+---------+----------+-------------+-------------+
|               |             |         | Unaudited|      Audited|    Unaudited|
+---------------+-------------+---------+----------+-------------+-------------+
+---------------+-------------+---------+----------+-------------+-------------+
|Short term     |LIBOR + 5.00%|21 Oct   | 3,955,434|    3,751,524|    4,185,996|
|borrowings     |             |2010     |          |             |             |
+---------------+-------------+---------+----------+-------------+-------------+

** The effective rate as at 30 September 2009 and 31 March 2009 was LIBOR
+5.00%.


CQS RIG FINANCE FUND LIMITED

Notes to the Unaudited Condensed Financial Statements
For the six months ended 31 March 2010

6. Interest-bearing borrowings and short term borrowings (continued)

Short term borrowings (continued)
On  22 April 2009, an 18 month secured facility  which will expire on 21 October
2010, was  agreed with Credit Suisse Securities  (Europe) Limited ("CS") for the
following amounts:
 NOK 60,505,509          GBP 6,520,060

 USD 45,195,277          GBP 28,257,645

 EUR 1,817,787           GBP 1,661,293

 GBP (39,512) (Credit)


 TOTAL                   GBP 36,399,486

The  primary condition of the 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 Company has  operated within the terms of this
new financing agreement during the six month period ending 31 March 2010.
The  Directors have  prepared detailed  cash projections  for the  period of the
facility  and beyond, and are confident that  they will be able to remain within
the  terms of the facility for its  entire duration. The Company has reduced the
secured  borrowings to GBP22.4m  as at 31 March 2010. The  Company believes that
over  the period April 2010 to October 2010, proceeds from restructurings, asset
maturities   and  selective  asset  sales  will  further  reduce  the  level  of
indebtedness materially.
The  Company also agreed  an unsecured  credit facility on 24 October 2008 under
which  USD6 million (GBP4.0  million) was made  available for short term working
capital.  The unsecured facility has been provided  by RBC Cees Trustees Limited
("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 unsecured lender has confirmed that it has
no  current  intention  to  seek  its  contractual  right to repayment until the
secured  lender  has  been  repaid  in  full.  The unsecured  facility which was
originally due to expire on 21 October 2009 was extended on 23 October 2009 with
the same terms and will now expire on 21 October 2010.

On  9 April 2010 the Company  negotiated improvements  to the  terms of both its
secured financing arrangements with CS and its unsecured facility agreement with
RBC as described below.

The  Company has  agreed with  CS that  advances made under the secured facility
entered  into on 22 April 2009 and that matures on 21 October 2010, will attract
interest  at a rate of the relevant  LIBOR rate for each Currency Amount (except
for  NOK which has  a NIBOR rate)  plus 2 per cent,  reduced from the 4 per cent
spread  previously applicable.  All other terms  remain the same including a fee
of   USD2,800,000   payable   by   the  Company  at  the  end  of  the  term  of
the secured facility  (including on early  repayment of the secured facility) or
on  its earlier termination. CS have agreed  to apply the reduced financing rate
from 1 April 2010.

The  Company has agreed with RBC that advances made under the unsecured facility
entered into on 24 October 2008 and subsequently extended on 23 October 2009 and
that  matures on  21 October 2010, will  attract interest  at the USD LIBOR rate
plus  3 per cent, reduced from the  5 per cent spread previously applicable. All
other  terms remain the  same.  RBC have  agreed to apply  the reduced financing
rate from 1 April 2010.


CQS RIG FINANCE FUND LIMITED

Notes to the Unaudited Condensed Financial Statements
For the six months ended 31 March 2010

7. Operating gain/(loss)
+------------------------------+-------------------+-------------+-------------+
|                              |                   |31 March 2010|31 March 2009|
+------------------------------+-------------------+-------------+-------------+
|                              |                   |          GBP|          GBP|
+------------------------------+-------------------+-------------+-------------+
|                              |                   |    Unaudited|    Unaudited|
+------------------------------+-------------------+-------------+-------------+
+------------------------------+-------------------+-------------+-------------+
|Interest income from investments at fair value    |             |             |
|through profit and loss                           |      859,293|    5,395,911|
+--------------------------------------------------+-------------+-------------+
|Net realised foreign exchange (losses)            |  (2,282,402)| (20,554,069)|
+--------------------------------------------------+-------------+-------------+
|Net realised gains on investments at fair value   |             |             |
|through profit and loss                           |    3,154,795|  (9,653,348)|
+--------------------------------------------------+-------------+-------------+
|Net unrealised gain/(loss) on investments at fair |             |             |
|value through profit and loss                     |   13,427,557| (59,208,903)|
+--------------------------------------------------+-------------+-------------+
|Net unrealised gain/loss on forward contracts     |            -|   10,722,889|
+--------------------------------------------------+-------------+-------------+
|Net unrealised foreign exchange gain/(loss)       |      602,325|  (5,783,982)|
+------------------------------+-------------------+-------------+-------------+
|Net  unrealised gain/(loss) on|                   |             |             |
|loan                          |                   |            -|    (457,783)|
+------------------------------+-------------------+-------------+-------------+
|Total operating gain/(loss)                       |   15,761,568| (79,539,285)|
+--------------------------------------------------+-------------+-------------+
8. Other operating expenses
+---------------------------------------------+----+-------------+-------------+
|                                             |    |31 March 2010|31 March 2009|
+---------------------------------------------+----+-------------+-------------+
|                                             |    |          GBP|          GBP|
+---------------------------------------------+----+-------------+-------------+
|                                             |Note|    Unaudited|    Unaudited|
+---------------------------------------------+----+-------------+-------------+
+---------------------------------------------+----+-------------+-------------+
|Investment   management   and  administration|    |             |             |
|fees:                                        |    |             |             |
+---------------------------------------------+----+-------------+-------------+
|- Investment management fees                 | 13 |    (127,769)|    (126,873)|
+---------------------------------------------+----+-------------+-------------+
|- Administration fees                        | 13 |     (60,515)|     (60,515)|
+---------------------------------------------+----+-------------+-------------+
+---------------------------------------------+----+-------------+-------------+
|Other Operating expenses:                    |    |             |             |
+---------------------------------------------+----+-------------+-------------+
|- Audit fees                                 |    |     (24,932)|     (44,741)|
+---------------------------------------------+----+-------------+-------------+
|- Directors' fees                            |    |     (46,760)|     (52,132)|
+---------------------------------------------+----+-------------+-------------+
|- Legal fees                                 |    |     (60,807)|     (89,189)|
+---------------------------------------------+----+-------------+-------------+
|- Other expenses                             |    |     (59,180)|    (108,377)|
+---------------------------------------------+----+-------------+-------------+
|Total other operating expenses                    |    (379,963)|    (481,827)|
+--------------------------------------------------+-------------+-------------+
9. Cash and cash equivalents
+------------------------+---------------+-------------------+---------------+
|                        | 31 March 2010 | 30 September 2009 | 31 March 2009 |
+------------------------+---------------+-------------------+---------------+
|                        |           GBP |               GBP |           GBP |
+------------------------+---------------+-------------------+---------------+
|                        |     Unaudited |           Audited |     Unaudited |
+------------------------+---------------+-------------------+---------------+
+------------------------+---------------+-------------------+---------------+
| Cash and bank balances |    10,128,603 |           975,983 |             - |
+------------------------+---------------+-------------------+---------------+
|                        |    10,128,603 |           975,983 |             - |
+------------------------+---------------+-------------------+---------------+
The cash balances were held at Credit Suisse Securities (Europe) Limited.
CQS RIG FINANCE FUND LIMITED

Notes to the Unaudited Condensed Financial Statements
For the six months ended 31 March 2010

10. Other payables and accrued expenses
+---------------------------+----+-------------+-----------------+-------------+
|                           |Note|31 March 2010|30 September 2009|31 March 2009|
+---------------------------+----+-------------+-----------------+-------------+
|                           |    |          GBP|              GBP|          GBP|
+---------------------------+----+-------------+-----------------+-------------+
|                           |    |    Unaudited|          Audited|    Unaudited|
+---------------------------+----+-------------+-----------------+-------------+
+---------------------------+----+-------------+-----------------+-------------+
|Interest payable           |    |      511,366|          401,784|      249,257|
+---------------------------+----+-------------+-----------------+-------------+
|Secured financing fees     |    |             |                 |             |
|payable                    |    |    1,120,706|          500,203|            -|
+---------------------------+----+-------------+-----------------+-------------+
|Due to related parties:    |    |             |                 |             |
+---------------------------+----+-------------+-----------------+-------------+
|- Investment management    | 13 |             |                 |             |
|fees                       |    |      386,372|          258,603|      241,475|
+---------------------------+----+-------------+-----------------+-------------+
+---------------------------+----+-------------+-----------------+-------------+
|Accrued expenses:          |    |             |                 |             |
+---------------------------+----+-------------+-----------------+-------------+
|- Administration fees      |    |            -|                -|       42,201|
+---------------------------+----+-------------+-----------------+-------------+
|- Audit fees               |    |       20,756|           20,823|       31,795|
+---------------------------+----+-------------+-----------------+-------------+
|- Directors' fees          |    |       20,506|           21,984|       21,864|
+---------------------------+----+-------------+-----------------+-------------+
|- Legal fees               |    |       25,000|           25,000|            -|
+---------------------------+----+-------------+-----------------+-------------+
|- Other payables           |    |       72,916|           52,738|       31,365|
+---------------------------+----+-------------+-----------------+-------------+
|Total payables             |    |    2,157,622|        1,281,135|      617,957|
+---------------------------+----+-------------+-----------------+-------------+
+---------------------------+----+-------------+-----------------+-------------+
11. Share capital and earnings per share
+-----------------------+--------------------+-------------------+-------------+
|Authorised        share|                    |                   |             |
|capital                |       31 March 2010|  30 September 2009|31 March 2009|
+-----------------------+--------------------+-------------------+-------------+
|                       |                 GBP|                GBP|          GBP|
+-----------------------+--------------------+-------------------+-------------+
|                       |                    |                   |    Number of|
|                       |  Number of Ordinary| Number of Ordinary|     Ordinary|
|                       |              Shares|             Shares|       Shares|
+-----------------------+--------------------+-------------------+-------------+
|                       |           Unaudited|          Unaudited|      Audited|
+-----------------------+--------------------+-------------------+-------------+
+-----------------------+--------------------+-------------------+-------------+
|Ordinary  shares  of no|                    |                   |             |
|par value each         |           Unlimited|          Unlimited|    Unlimited|
+-----------------------+--------------------+-------------------+-------------+
+-----------------------+--------------------+-------------------+-------------+
|Issued and fully paid  |       31 March 2010|  30 September 2009|31 March 2009|
+-----------------------+--------------------+-------------------+-------------+
|                       |                 GBP|                GBP|          GBP|
+-----------------------+--------------------+-------------------+-------------+
|                       |                    |                   |    Number of|
|                       |  Number of Ordinary| Number of Ordinary|     Ordinary|
|                       |              Shares|             Shares|       Shares|
+-----------------------+--------------------+-------------------+-------------+
|                       |           Unaudited|          Unaudited|      Audited|
+-----------------------+--------------------+-------------------+-------------+
+-----------------------+--------------------+-------------------+-------------+
+-----------------------+--------------------+-------------------+-------------+
|Balance at start of the|                    |                   |             |
|period                 |          97,410,000|         97,410,000|   97,410,000|
+-----------------------+--------------------+-------------------+-------------+
|Issuance of Ordinary   |                    |                   |             |
|Shares with no par     |                    |                   |             |
|value at date of       |                    |                   |             |
|incorporation          |                   -|                  -|            -|
+-----------------------+--------------------+-------------------+-------------+
|Issue  of  new Ordinary|                    |                   |             |
|Shares   with   no  par|                    |                   |             |
|value                  |                   -|                  -|            -|
+-----------------------+--------------------+-------------------+-------------+
|Balance  at the  end of|                    |                   |             |
|the period             |          97,410,000|         97,410,000|   97,410,000|
+-----------------------+--------------------+-------------------+-------------+


CQS RIG FINANCE FUND LIMITED

Notes to the Unaudited Condensed Financial Statements
For the six months ended 31 March 2010

11. Share capital and earnings per share (continued)

Earnings per Share
The  calculation of the  basic and diluted  earnings per share  are based on the
following data:-
                                                 31 March 2010 30 September 2009

                                                           GBP               GBP

                                                     Unaudited           Audited


Earnings  for  the  purpose  of  the  basic and
diluted    earnings    per   share   is   total
comprehensive gain/(loss)                           14,170,560      (81,023,673)


Weighted average number of shares for the basic
and diluted earnings per share                      97,410,000        97,410,000

Since  there have been no movements in  the number of ordinary shares issued for
the  year ended  30 September 2009 or  for the  period ended  31 March 2010, the
weighted  average number of shares is equal  to the opening balance at the start
of the year/period.
12. Notes to condensed statement of cash flows
                                                       For the six   For the six
                                                      months ended  months ended
                                                     31 March 2010 31 March 2009

                                                               GBP           GBP

                                                         Unaudited     Unaudited


Net profit/(loss)                                       14,170,560  (81,023,673)

Adjustments for:

- Realised (gain)/loss on sale of investments          (3,154,795)     9,653,348

- Unrealised gain on forward contracts                           -  (10,722,889)

- Unrealised (gain)/loss on investments               (13,427,557)    59,208,903

- Realised forward foreign exchange loss on
contracts                                                2,282,402    20,554,069

- Unrealised forward foreign exchange (gain)/loss on
currency                                                 (602,325)     5,783,982

- Interest income                                        (859,293)   (5,395,911)

- Interest expense                                       1,211,045     1,002,561

                                                         (379,963)     (939,610)


Purchases of investments                              (10,763,884)  (29,622,738)

Sales proceeds on disposal of investments               25,369,379    83,029,267

Interest received                                          859,293     5,395,911

                                                        15,464,788    58,802,440


(Decrease) in receivables                                 (25,419)       (9,522)

Increase in payables                                       766,905       162,624

                                                           741,486       153,102

Net cash inflow from operating activities               15,826,311    58,015,932

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


CQS RIG FINANCE FUND LIMITED

Notes to the Unaudited Condensed Financial Statements
For the six months ended 31 March 2010

13. Material agreements and related party transactions
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.
Please see below for details of the individual accrual and expense amounts.
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  GBP127,769  (31  March  2009: GBP126,873)  of which GBP386,372 was
outstanding  at  31 March  2010 (30  September 2009: GBP258,603, 31 March 2009:
GBP241,475).
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 2010 (31
March 2009: 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 USD14,200 per month. In addition,
the  Administrator is entitled  to an annual  company secretarial fee  on a time
charge  basis with a minimum of USD50,400 per annum. Administration fees for the
period   were  GBP60,515  (31  March  2009: GBP60,515)  of  which  GBP  Nil  was
outstanding   at  31 March  2010 (30  September  2009:GBP Nil,  31 March  2009:
GBP42,201).
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.


CQS RIG FINANCE FUND LIMITED

Notes to the Unaudited Condensed Financial Statements
For the six months ended 31 March 2010

14. Foreign exchange rates

The following foreign exchange rates were used:
 Currency                        As at               As at           As at
                         31 March 2010   30 September 2009   31 March 2009


 Norwegian Krone                9.0188              9.2799          9.6781

 United States Dollar           1.5175              1.5994          1.4333

 Euro                           1.1235              1.0942          0.9262

15. Significant events during the period
Please refer to Note 4 for an update to impaired assets.
There were no other significant events during the period that require adjustment
to  or disclosure in  the condensed interim  financial statements other than the
above.
16. Significant events after the period end
On  9 April 2010 the Company  negotiated improvements  to the  terms of both its
secured   financing   arrangements   ("Secured  Facility")  with  Credit  Suisse
Securities   (Europe)  Limited  ("CS")  and  its  unsecured  facility  agreement
("Subordinated  Facility") with RBC  Cees Trustees Limited  ("RBC") as described
below.

The  Company has agreed  with CS that  advances made under  the Secured Facility
entered  into on 22 April 2009 and that matures on 21 October 2010, will attract
interest  at a rate of the relevant  LIBOR rate for each Currency Amount (except
for  NOK which has  a NIBOR rate)  plus 2 per cent,  reduced from the 4 per cent
spread previously applicable. All other terms remain the same including a fee of
USD2,800,000  payable  by  the  Company  at  the  end of the term of the Secured
Facility  (including  on  early  repayment  of  the  Secured Facility) or on its
earlier  termination. CS have agreed to apply the reduced financing rate from 1
April 2010.

The  Company has agreed with RBC that advances made under the Unsecured Facility
entered into on 24 October 2008 and subsequently extended on 23 October 2009 and
that  matures on  21 October 2010, will  attract interest  at the USD LIBOR rate
plus  3 per cent, reduced from the  5 per cent spread previously applicable. All
other terms remain the same. RBC have agreed to apply the reduced financing rate
from 1 April 2010.

The  Unsecured 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.
17. Seasonal or cyclical changes
The Company is not subject to seasonal or cyclical changes.
18. Approval of the condensed interim financial statements
The condensed interim financial statements were approved by the Board of
Directors on 25 June 2010.



[HUG#1427841]








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