PSD Dec 10 Interims - Web

LISTED
PREMIUM
PSource Structured Debt Limited

Interim Report and Unaudited Consolidated Financial Statements For the Period from 1 July 2010 to 31 December 2010
Contents
Company Information Directors Financial Calendar Investment Objective and Policy Summary Information Monthly total return performance, NAV and dividends declared since inception Chairmans Statement Responsibility Statement Consolidated Statement of Financial Position (unaudited) Consolidated Statement of Comprehensive Income (unaudited) Consolidated Statement of Changes in Equity (unaudited) Consolidated Statement of Cash Flows (unaudited) Notes to the Financial Statements (unaudited) Analysis of Significant Investments (unaudited) Portfolio Analysis (unaudited) 1 2-3 3 3 3 4 5-6 7 8 9 10 11 12-46 47 48-49
Company Information
Company Number 47075 (Registered in Guernsey) Financial adviser and stockbroker to the Company: Numis Securities Limited The London Stock Exchange Building 10 Paternoster Square London EC4M 7LT Auditors to the Company: KPMG Channel Islands Limited 20 New Street St Peter Port Guernsey, GY1 4AN Solicitors to the Company: Eversheds LLP 1 Wood Street London EC2V 7WS
Directors: William Scott, Chairman Soondra Appavoo Peter Niven Tim Jenkinson Keith Dorrian Company Secretary and Administrator: Praxis Fund Services Limited Sarnia House Le Truchot St Peter Port Guernsey, GY1 4NA Registered office of the Company: Sarnia House Le Truchot St Peter Port Guernsey, GY1 4NA Manager: PSource Capital Guernsey Limited Sarnia House Le Truchot St Peter Port Guernsey, GY1 4NA Investment Manager: Laurus Capital Management, LLC 875 Third Avenue, 3rd Floor New York, NY 10022 USA Investment Consultant and Promoter: PSource Capital Limited 126 Jermyn Street London SW1Y 4UJ Independent Valuation Consultant: Clayton IPS Corporation 1700 Lincoln Street Suite 1600 Denver, Colorado 80263 USA Financial Public Relations: Weber Shandwick Financial Fox Court 14 Grays Inn Road London WC1X 8WS
Guernsey lawyers to the Company: Mourant Ozannes PO Box 186 1 Le Marchant Street St Peter Port Guernsey, GY1 4HP U.S. Counsel: Alston & Bird LLP 90 Park Avenue New York, NY 10016-1387 USA Bankers: Bank of Scotland plc (part of the Lloyds Banking Group) PO Box No 39900 155 Bishopsgate Exchange London EC2M 3YB Custodian: Wells Fargo Bank 45 Broadway,14th Floor New York, NY 10006 USA Equity Custodian & Broker: Fidelity Prime Services 200 Seaport Boulevard, Z2H Boston, MA 02210 USA (until 25 October 2010) Albert Fried & Company, LLC 45 Broadway, 24th Floor New York, NY 10006 USA (from 25 October 2010)
Registrar: Capita Registrars (Guernsey) Limited Longue Hougue House St Sampson Guernsey, GY2 4JN
Company Information continued

Directors
The Directors are responsible for the determination of PSource Structured Debt Limiteds (the Groups or Companys) investment policy and have overall responsibility for the Groups activities. The Directors have put in place procedures to ensure that the Group meets current corporate governance requirements. The Directors of the Company, all of whom are nonexecutive and who, apart from Mr Appavoo, are entirely independent of the Manager, the Investment Manager and the Investment Consultant, are: William Scott, Chairman William Scott was from 2003 to 2004 Senior Vice President with the Financial Risk Management Group, a leading specialist manager of funds of hedge funds. From 1989 to 2002 he worked at Rea Brothers (subsequently part of Close Brothers) as an investment manager specialising in fixed income portfolios and latterly in private banking where he was a director of Close Bank Guernsey Limited. Prior to this he was an equity sector manager with a large public sector pension fund. He holds a number of non-executive directorships of listed companies including AcenciA Debt Strategies Limited and a number of funds managed by the Financial Risk Management group where he is Chairman of the Audit, Risk Management and Control Committee. He is also a director of several other investment management and property companies. He is a chartered accountant with over 25 years experience in the funds sector, he acts as consultant to offshore investment management organisations. He is a resident of Guernsey. Soondra Appavoo Soondra Appavoo is managing director of PSource Capital Limited and director of PSource Capital Guernsey Limited. He has 17 years experience in the investment industry, including 4 years as director and managing director of PSolve Alternative Investments, the fund of hedge fund business of Punter Southall Group. He was formerly a director at UBS Warburg investment banking and is a chartered accountant. Mr Appavoo holds an MA in Natural Sciences and MBA with Distinction, both from the University of Oxford. He is the sole representative of the Manager on the Board.
Peter Niven Peter Niven has worked in the financial services industry in the UK and offshore for over 30 years, most recently as Chief Executive of the Lloyds TSB Groups offshore banking operations, until his retirement from the Bank in June 2004. A Fellow of the Institute of Bankers and a Chartered Director, he has served as a director of many Lloyds TSB group companies and is currently a director of a number of Guernsey based investment funds and captive insurance companies, including London listed Dexion Trading Limited and F&C Commercial Property Trust Limited. He is also Chief Executive of Guernsey Finance LBG. Mr Niven is a resident of Guernsey. Tim Jenkinson Tim Jenkinson is Professor of Finance at the Oxford Sad Business School. He is an expert on corporate finance, in particular initial public offerings, private equity and the cost of capital. He has written widely on finance and economics and his work has been published in books and leading international journals. He is a Research Fellow of the Centre for Economic Policy Research, a Research Associate of the European Corporate Governance Institute, is Managing Editor of the Oxford Review of Economic Policy, and is a Professorial Fellow of Keble College, Oxford. Professor Jenkinson is a director of the economic consulting firm Oxford Economic Research Associates (Oxera), and has consulted for a large number of companies and regulators. He is also a non-executive director of Oxford Sad Business School Limited. Professor Jenkinson joined the Sad Business School in 2000. He was previously in the economics department at Oxford University, which he joined in 1987. He initially studied economics as an undergraduate at Cambridge University, before going as a Thouron Fellow to the University of Pennsylvania, where he obtained a Masters in Economics. He then returned to the UK and obtained a DPhil in Economics from Oxford. Keith Dorrian Keith Dorrian has over 30 years experience in the offshore finance industry. Joining Manufacturers Hanover in 1973 he moved to First National Bank of Chicago in 1984. In 1989 he joined ANZ Bank (Guernsey) where as a director of the bank and fund management company he was closely involved in the banking and fund management services of
the group. He took up the position of Manager Corporate Clients in Bank of Bermuda Guernsey in 1999 and was appointed Head of Global Fund Services and Managing Director of the banks Guernsey fund administration company in 2001 retiring on 31 December 2003. He is currently a director of a number of funds and fund management companies and holds the Institute of Directors Diploma in Company Direction. He is a resident of Guernsey.
Subsidiary no longer had any holdings, SPV1 was voluntarily liquidated. It is the intention of the Group to remain substantially fully invested at all times, although the Group may use its discretion to hold cash or short-term money market instruments (including gilts) from time to time for the purposes of paying margin calls on hedging, paying dividends, meeting other expenses of the Group, funding buybacks and pending full investment. Cash will be held in accounts with institutions which are rated A1 (or above) by Standard & Poors or an equivalent rating by another reputable agency (or wholly owned subsidiary of such institutions). The Group will be a passive investor and will not control, seek to control, or be actively involved in the management of, any companies or businesses in which it invests. The Group will not be a dealer in investments. The Group will not enter into long term borrowing. Under its Articles of Association, the Company has the ability to borrow up to 30% of net assets in order to facilitate its intention of remaining fully invested, to implement any hedging and buyback strategies and to meet ongoing expenses (please refer to note 10 of the consolidated financial statements for details on the Groups loan and overdraft facilities).
Financial Calendar
Interim Report and Accounts sent to shareholders by 28 February 2011. Annual Report and Accounts sent to shareholders by 28 September 2011. Annual General Meeting to be held during October 2011.
Investment Objective and Policy

The Groups investment objective is to seek to provide a total return to shareholders of 10-15% per annum over a rolling 3-year period with annual standard deviation of less than 5%. The Groups investment policy is to invest in a diversified portfolio of asset backed loans and debt made predominantly to, and equity warrants and similar instruments issued predominately by, publicly traded small and micro-cap companies in the US. The exact number of assets and strategies in which the Group invests may vary over time but the Directors expect that the Group will be invested at all times in a minimum of 30 underlying companies. The Company has one Subsidiary, PSD SPV 2, Inc (SPV2), which has been established to hold certain US assets. For reasons of tax efficiency, the Group proposes to make newly originated direct investments and enter into co-investments through this Subsidiary. In prior periods the Company also used another Subsidiary, being PSource Structured Debt SPV1 Limited (SPV1), to make newly originated direct investments and enter into co-investments. On 29 December 2010, when this
Summary Information
There are 59,564,681 (30 June 2010: 59,564,681) Ordinary Shares in issue and the NAV per Ordinary Share at 31 December 2010 was US$1.7947 (30 June 2010: US$1.8922). The Company listed on 3 August 2007 with an initial NAV per Ordinary Share after launch costs of 97.75p. No interim dividends have been declared in respect of the 6 months ended 31 December 2010 (6 months ended 31 December 2009: zero pence per Ordinary Share). As at 31 December 2010 the portfolio which comprised 36 companies (30 June 2010: 47), represented 108.01% of Net Asset Value (30 June 2010: 111.35%). The maximum position in any company was 76.22% of the portfolio (30 June 2010: 64.92%).
Company Information continued

Monthly total return performance, NAV and dividends declared since inception is set out below:
5 June 2007 To 30 June 2008 NAV (p) Returns (%) Dividend (p) 1 July 2008 To 30 June 2009 NAV (p) NAV ()* Returns (%) Dividend (p) 1 July 2009 To 30 June 2010 NAV () Returns (%) Dividend () 1 July 2010 To 30 June 2011 NAV () Returns (%) Dividend () Jul 187.02 -1.16 Aug 179.00 -4.29 Sep 1.8093 1.08 Oct 1.8223 0.72 Nov 181.83 -0.22 Dec 179.47 -1.30 Jan 177.73 -0.97 Feb Mar Apr May Jun Jul 110.48 1.41 1.25 Aug 113.17 2.43 Sep 113.20 0.03 Oct 110.78 -2.14 Nov 105.49 -4.78 Dec 105.88 0.37 Jan* 162.22 4.99 Feb 153.71 -5.25 Mar 158.24 2.95 Apr 160.08 1.16 May 166.10 3.76 Jun 168.85 1.66 -
Financial Jul Aug 97.37 -0.38 Sep 98.53 1.19 Oct 100.17 2.49 0.8 Nov 102.13 1.95 Dec 103.81 1.64 Jan 103.13 0.55 1.25 Feb 105.06 1.87 Mar 107.21 2.05 Apr 107.54 1.49 1.25 May 109.40 1.73 Jun 110.19 0.72 -
YTD
16.37 3.30
Financial YTD 6.20 1.25
Jul 171.16 1.37 -
Aug 170.94 -0.13 -
Sep 170.09 -0.50 -
Oct 172.59 1.47 -
Nov 179.84 4.20 -
Dec 188.30 4.70 -
Jan 199.31 5.85 -
Feb 199.10 -0.11 -
Mar 202.62 1.77 -
Apr 198.52 -2.02 -
May 193.41 -2.57 -
Jun 189.22 -2.17 -
Financial YTD 12.06 -
Financial YTD -6.07 -
* On 30 January 2009, a special resolution was passed to convert the issued Sterling Shares into US Dollar Shares in accordance with article 3.12 of the Companys articles of association at an exchange rate of US$1.4593/. With effect from this date the performance of the Company is measured in US Dollars. Total net return since inception as at 31 December 2010 in reporting currency 31.36% Total net return since inception as at 31 December 2010 in reporting currency (annualised) 8.31% Annualised standard deviation (volatility) 8.54%
Chairmans Statement
Period ended 31 December 2010
It is my pleasure to present the semi-annual report for PSource Structured Debt Limited (the Company or PSD) for the half-year ended 31 December 2010. The past 6-months have continued to be challenging for the Company seeing a return of -5.15% to 31 December 2010. However, there have been steady improvements in key areas including the bank debt, cash realisations from the non-PetroAlgae portfolio, and the progress of PetroAlgae. I would like to discuss each in turn.
PetroAlgae, Inc.
The Companys largest holding is its holding in PetroAlgae (US$81.5 million). PetroAlgae, Inc., a leading Florida-based renewable energy company, licenses a commercial lemna based micro-crop technology system that enables the production of green diesel and a high-value protein food source in an environmentally friendly manner. PSDs holding in PetroAlgae is being held at a valuation of US$11.56 per share as of 31 January 2010. This compares to average trading on the OTC in the year at US$12.16 per share, albeit on thin trading. In early 2010 a process was set in motion to list PetroAlgae on a broader exchange. This move will create the opportunity for PSD to realise the full value of its investment in PetroAlgae although shareholders should understand that it is likely that there can only be a partial realisation at the time of the new listing with the remainder only possible after the expiry of any customary IPO lock-ups required of existing shareholders. I am pleased to note that PetroAlgae filed its draft prospectus (Form S-1) in August. Goldman Sachs, UBS, and Citi are managing this process. Since that time PetroAlgae has announced the signing of one umbrella contract with the Chinese state renewable energy company (CECEP) to build a trial facility in Hainan Province. CECEP has committed to build ten further full size units, each 5,000 hectares, contingent on the success of the trial facility. It is the commercial progress of PetroAlgae, such as the signing of further contracts, which underpins any realisation. We look forward to updating the market as PetroAlgae converts further advanced leads to commercial contracts.
Bank Debt
The terms of the banking facilities have necessarily prioritised paying off the Companys debt and significant progress has been made in this respect. During the 6-month period the Company has reduced its net borrowings from US$8.5 million to US$5.1 million (U$S4.6 million after taking into account brokerage account cash) as at 31 December 2010. At 31 January 2011 the bank debt has been further reduced to US$4.2 million. On 30 November 2010, PSD secured a new 6-month US$8 million US Dollar denominated credit facility with its existing lender, Bank of Scotland, to replace the expiring credit facilities. The reduction in the bank facility and strong nature of the cash flows this calendar year, US$10.4 million in cash receipts in 2010, have enabled the Company to obtain this refinancing on relatively attractive terms.
Cash Realisation Process

The Company is dependent upon liquidity in the US small and micro cap public markets to exercise the warrants in its portfolio and to sell the resultant shares. I am pleased to report that opportunities continue to reveal themselves as the markets recover, and total activity in this area has resulted in significant cash receipts (US$1.9 million) by the Company in the second half of 2010. In particular this has come from the Companys disposal of the majority of its holdings in Mitek and Bioniche. In addition to warrant and share sales, the firm has visibility of cash realisations from a number of identified asset sales and liquidations over the next two quarters significantly in excess of our current indebtedness, although such asset sales have been and remain subject to delays. This is independent of both the PetroAlgae IPO process and any cash realisations from the holdings in Biovest.
Change in Custody Arrangements

Effective from 26 November 2010, the Company migrated its custody and clearing services for its short term trading assets from Fidelity Prime Services to Albert Fried & Company, LLC. In addition, effective 1 December 2010, the Company migrated its trading services from Fidelity to GP Nurmenkari Inc., a New York based trading firm. The purpose of both of the above changes in service providers was to reduce costs for the Company. The Companys main custodian remains Wells Fargo which held all of the
Chairmans Statement continued

Period ended 31 December 2010
Change in Custody Arrangements continued

Companys certificated assets at 31 December 2010, which includes the Companys loan, warrant and PetroAlgae investments. It is clear that the banks in the US continue to reduce lending to small companies. The opportunity set for the strategy remains, therefore, attractive. Prior to this years AGM the Board and Manager intend to liaise with shareholders to ascertain how best to realise value from the strategy. William Scott (Chairman) Date: 21 February 2011
Share Price
Until October 2008, the Companys shares traded at or above NAV. However, the shares have recently fallen to a low of 37p in January 2011. This share price fall was due to a number of factors; a fall in liquidity which affected the entire investment company sector, uncertainty over the Companys banking facilities, the continued suspension of our dividend, and the lack of certainty and timing of a liquidity event from PetroAlgae. The Board shares investor concern and frustration with the level of the share price and has taken such steps as our banking facilities permit to address this. Notably, we believe that progress on extinguishing the bank debt and realising as cash the position in PetroAlgae should remove two of the major factors holding back a restart of distributions and material share repurchases, also key to the share price.
Future prospects for PSource Structured Debt

While a full exit from PetroAlgae is likely to take some time, a successful IPO will unlock a significant initial cash payment which the Company could use for dividends or share buybacks. The Annual General Meeting for PSD occurred in October 2010 and included a continuation vote. The Board believes that the success of this vote has preserved fund value and will enable the shareholders to benefit fully from the planned PetroAlgae IPO. It is the intention of the Board to hold another continuation vote at the next AGM.
Responsibility Statement
We confirm that to the best of our knowledge and in accordance with DTR 4.2.10R of the Disclosure and Transparency Rules: a) The financial statements have been properly prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS34 as adopted by the EU, Interim Financial Reporting and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group as at and for the period ended 31 December 2010. The interim report, which includes information detailed in the Chairmans Statement and Notes to financial statements, provides a fair review of the development and performance of the Group during the period; and includes a description of the principal risks and uncertainties faced as at and for the period ended 31December 2010.
b)
Director: William Scott
Director: Peter Niven
Date: 21 February 2011 On behalf of the Board of Directors
Consolidated Statement of Financial Position (unaudited)

As at 31 December 2010
Notes Investments Fair value through profit and loss Held for trading Loans and receivables Total investments Current assets Cash and cash equivalents Unsettled investment sales Other receivables 7 8 6
31 December 2010 US$ 89,524,026 2,755,118 23,183,468 115,462,612 1,958,375 6,237 1,901,899 3,866,511
30 June 2010 (audited) US$ 92,635,523 2,834,377 30,031,017 125,500,917 194,315 6,839 1,619,955 1,821,109 1,136,519 5,993,380 7,484,003 14,613,902 (12,792,793) 112,708,124 47,512,742 42,793,973 22,401,409 112,708,124 US$1.8922
Current liabilities Bank overdraft Other payables Loan
7 & 10 9 10
1 5,927,999 6,500,000 12,428,000
Net current liabilities Total net assets Represented by Shareholders equity: Share Premium Distributable reserve Reserves Total Shareholders equity Net asset value per Ordinary Share 13 11 11 12
(8,561,489) 106,901,123 47,512,742 42,793,973 16,594,408 106,901,123 US$1.7947
The accompanying notes form an integral part of these consolidated financial statements.
Consolidated Statement of Comprehensive Income (unaudited)

For the period ended 31 December 2010
Notes Income Loan interest income Bank interest Subordination fees Bad debt provision Movement in net unrealised gains on investments Movement in net unrealised losses on restructuring of loans Net realised losses on disposal/restructuring of investments Impairment charge on loans and receivables Net foreign exchange losses Net investment (deficit)/income Expenses Management fee Performance fee Directors fees and expenses Administration fees Custodian fees Registrar fees Auditors remuneration Loan arrangement fees Legal and professional fees Independent valuation consultancy fee US Taxation Other expenses Operating expenses before finance costs Net (deficit)/return from operations before finance costs Finance costs Bank interest Loan interest (Deficit)/return after finance costs for the period Total comprehensive (deficit)/income for the period Basic & diluted earnings per Ordinary Share before dividends paid 12 5 10 10 3 3 4 3 3 3
1 July 2010 to 31 December 2010 US$ 827,536 152 (258,449) 1,632,003 (1,549,159) (2,134,510) (2,193,953) (6,787) (3,683,167) 1,093,474 93,114 117,076 21,790 10,691 55,169 113,595 357,833 59,861 (16,457) 38,936 1,945,082 (5,628,249) 26,218 152,534 (5,807,001) (5,807,001) US$(0.0975)
1 July 2009 to 31 December 2009 US$ 1,840,628 932 79,456 (638,819) 24,812,730 (50,932) (11,378,767) 2,879,156 (12,685) 17,531,699 1,066,814 3,448,768 93,396 127,394 2,199 8,238 85,154 156,970 516,247 70,248 134,254 28,709 5,738,391 11,793,308 4,498 203,672 11,585,138 11,585,138 US$0.1945
6 6 6 6
& & & &
14 14 14 14
The results for the current and prior periods are derived from continuing operations.
Consolidated Statement of Changes in Equity (unaudited)

10
Notes Balance brought forward Total comprehensive deficit for the period Balance carried forward
1 July 2010 to 31 December 2010 Share Distributable Premium Reserve Reserves US$ US$ US$ 47,512,742 47,512,742 42,793,973 42,793,973
Total US$
12
22,401,409 112,708,124 (5,807,001) (5,807,001) 16,594,408 106,901,123
Notes Balance brought forward Total comprehensive income for the period Balance carried forward
1 July 2009 to 31 December 2009 Share Distributable Premium Reserve Reserves US$ US$ US$ 47,512,742 47,512,742 42,793,973 42,793,973
Total US$
12
10,269,631 100,576,346 11,585,138 11,585,138 21,854,769 112,161,484
Consolidated Statement of Cash Flows (unaudited)

11
Notes Cash flows from/(used in) operating activities Loan interest received Operating expenses paid Amounts paid for purchase of investments Sale proceeds received from disposal of investments Amounts received on loan repayments Net cash from operating activities Cash flows (used in)/from financing activities Bank interest received Bank interest paid Loan interest paid Loan repayments Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents, start of period Effect of exchange rate changes during the period Cash and cash equivalents, end of period Cash and cash equivalents comprise the following amounts: Bank deposits Bank overdrafts 7
1 July 2010 to 31 December 2010 US$ 667,478 (2,398,836) (4,089,610) 4,900,634 4,982,458 4,062,124 152 (26,218) (144,690) (984,003) (1,154,759) 2,907,365 (942,204) (6,787) 1,958,374 1,958,375 (1) 1,958,374
1 July 2009 to 31 December 2009 US$ 1,597,524 (2,716,760) (3,165,701) 1,903,934 7,753,259 5,372,256 932 (4,498) (245,158) (9,687,546) (9,936,270) (4,564,014) 4,151,052 (12,685) (425,647) 489,855 (915,502) (425,647)
Notes to the Financial Statements

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1.
The Company:
The Company is a closed-ended investment company, incorporated and registered with limited liability in Guernsey on 5 June 2007. The Company commenced business on 3 August 2007 when the initial 30,000,000 Ordinary Shares of the Company were admitted to the Official List on the London Stock Exchange. The Company is a Guernsey Authorised Closed-ended Investment Scheme and is subject to the Authorised Closed-ended Investment Scheme Rules 2008. During the period ended 30 June 2008 a capital reorganisation took place and a Placing and Offer for Subscription dated 8 June 2008 for a second issue up to 100,000,000 shares in the Company was approved by and filed with the Financial Services Authority. The second issue was for a total of 24,154,681 Ordinary Shares of the Company and these Ordinary Shares were issued and admitted to the Official List on the London Stock Exchange on 20 June 2008. On 30 July 2008 the Company issued 5,410,000 Ordinary Shares of no par value, representing 9.9% of the Ordinary Shares in issue. These Ordinary Shares were issued and admitted to the Official List on the London Stock Exchange for trading on the same day. The Company has one wholly owned subsidiary, PSD SPV 2 Inc (SPV2), which has been established to hold certain US assets. For reasons of tax efficiency, the Company proposes to make newly originated direct investments through this Subsidiary. SPV 2 was incorporated in the State of Delaware on 2 April 2009. The Subsidiary commenced trading on 1 May 2009. On 29 December 2010, PSource Structured Debt SPV 1 Limited (SPV1), a wholly owned Subsidiary of the Company was voluntarily liquidated. SPV1 was incorporated in Guernsey on 27 September 2007. PSource Structured Debt Limited and SPV2 have been consolidated to produce the consolidated results of the Group. Any references to Company relate to PSource Structured Debt Limited whereas references to the Group relate to PSource Structured Debt Limited and SPV2.
2.
Principal Accounting Policies:

(a) Basis of Preparation: (i) General The interim financial statements of the Group have been prepared in accordance with IAS 34 (IFRS) as adopted by the EU Interim Financial Reporting, which comprise standards and interpretations approved by the International Accounting Standards Board (IASB), and International Accounting Standards and Standing Interpretations Committee interpretations approved by the International Accounting Standards Committee (IASC) that remain in effect. The financial statements of the Group have been prepared under the historical cost convention modified by the revaluation of investments and assets and liabilities at fair value through profit or loss, in accordance with IFRS, The Companies (Guernsey) Law, 2008 and the Listing Rules of the Financial Services Authority. (ii) Functional and Presentation Currency The Groups investors are mainly from the UK, however, the vast majority of underlying investment portfolio is denominated in US Dollars. For this reason the Directors consider the presentation and functional currency of the Group to be US Dollars. As at 31 December 2010 the performance of the Group is measured and reported to investors in US Dollar. The financial information is presented in US Dollars, which is the Groups functional and presentation currency.
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2.
Principal Accounting Policies continued:

(a) Basis of Preparation continued (ii) Functional and Presentation Currency continued Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Consolidated Statement of Comprehensive Income. Translation differences on the revaluation of non-functional currency financial instruments are included in net unrealised gains and losses on investments and are recognised in the Consolidated Statement of Comprehensive Income. (iii) Judgements and estimates The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results could differ from such estimates. The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate was revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The most critical judgements, apart from those involving estimates, that management has made in the process of applying the accounting policies and that have the most significant effect on the amounts recognised in the consolidated financial statements are the functional currency of the Group (see note 2(a)(ii)) and the fair value of investments designated to be at fair value through profit or loss (see note 2(d)(i)). The valuation methods/techniques used in valuing financial instruments involve critical judgements to be made and therefore the actual value of financial instruments could differ significantly from the value disclosed in these consolidated financial statements. (iv) Going concern These consolidated financial statements have been prepared on a going concern basis taking into account the renewal of banking facilities during the next financial year. The Directors anticipate that the Group will generate further net cash during the twelve months following the date of signing these consolidated financial statements to repay the Companys current bank loan. (v) IFRS New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are not yet effective for the current period, and have not been applied in preparing these financial statements. None of these will have an effect on the financial statements of the Company, with the exception of the following:
Notes to the Financial Statements continued

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2.

(a) Basis of Preparation continued: (v) IFRS continued
IFRS 9 Financial Instruments, published on 12 November 2009 as part of phase I of the IASBs comprehensive project to replace IAS 39, deals with classification and measurement of financial assets. The requirements of this standard represent a significant change from the existing requirements in IAS 39 in respect of financial assets. The standard contains two primary measurement categories for financial assets: amortised cost and fair value. A financial asset would be measured at amortised cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows, and the assets contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal outstanding. All other financial assets would be measured at fair value. The standard eliminates the existing IAS 39 categories of held to maturity, available for sale and loans and receivables. For an investment in an equity instrument which is not held for trading, the standard permits an irrevocable election, on initial recognition, on an individual share-by-share basis, to present all fair value changes from the investment in other comprehensive income. No amount recognised in other comprehensive income would ever be reclassified to profit or loss at a later date. However, dividends on such investments are recognised in profit or loss, rather than other comprehensive income unless they clearly represent a partial recovery of the cost of the investment. Investments in equity instruments in respect of which an entity does not elect to present fair value changes in other comprehensive income would be measured at fair value with changes in fair value recognised in profit or loss. The standard requires that derivatives embedded in contracts with a host that is a financial asset within the scope of the standard are not separated; instead the hybrid financial instrument is assessed in its entirety as to whether it should be measured at amortised cost or fair value.
(b)
Basis of Consolidation: The consolidated financial statements of the Group incorporate the financial statements of the Company and its one wholly owned subsidiary made up to 31 December 2010. There are no minority interests in the income or assets of the subsidiary. Control is achieved where the Company has the power to govern the financial and operating policies of the subsidiary so as to benefit the Company.
(c)
Income: Bank interest, loan interest income and other income are included in these consolidated financial statements on an accruals basis, using the effective interest method. Where interest income falls past due it is assessed for impairment and where impairment is identified a 0-100% provision is made, on a case by case basis after the recoverability of each interest receipt has been assessed. Subordination fee income is included in these consolidated financial statements on an accruals basis and is recognised in the Consolidated Statement of Comprehensive Income.
15
2.

(d) Investments: The Groups investments comprise loans, fees receivables, royalties, equities, warrants (for listed equities) and options (for listed equities). (i) Classification Equity investments have been designated as fair value through profit or loss in accordance with IAS 39 (Revised) Financial Instruments: Recognition and Measurement. Warrants and penny warrants Investments meet the definition of Derivatives under IAS 39 and have been designated as held for trading in accordance with IAS 39 (Revised) Financial Instruments: Recognition and Measurement. They are accounted for as fair value through profit or loss. Investments in loans, royalties and fees receivable have been classified as loans and receivables in accordance with IAS 39 (Revised) Financial Instruments: Recognition and Measurement. (ii) Measurement Equities, warrants and penny warrants are initially recognised at fair value. Transaction costs are expensed in the Consolidated Statement of Comprehensive Income. Subsequent to initial recognition, equity, warrants and penny warrants are measured at fair value. Realised gains and losses on disposal of investments, where the disposal proceeds are higher/lower than the book cost of the investment are presented in the Consolidated Statement of Comprehensive Income in the period in which they arise. Unrealised gains and losses arising on the fair value of investments are presented in the Consolidated Statement of Comprehensive Income in the period in which they arise. Dividend income, if any, from equity investments is recognised in the Consolidated Statement of Comprehensive Income within dividend income when the Groups right to receive payments is established. Loans, royalties and fee receivables are initially recognised at fair value, which at the point of acquisition is equal to cost, less any directly attributable transaction cost. Subsequent to initial recognition, loans are measured at amortised cost using the effective interest rate method. Royalties are measured at the discounted value of future cash flows. Fee receivables are measured at fair value. (iii) Fair Value Estimation Quoted equity investments at fair value through profit or loss are valued at the bid price on the relevant stock exchange. Unquoted investments at fair value through profit and loss are valued in accordance with the International Private Equity and Venture Capital valuation guidelines or any other valuation model and techniques which can provide a reasonable estimate of fair value of the investment involved. Warrants and penny warrants are valued based on the listed price of the equity for which the warrants and penny warrants relates and then adjusted using the Black Scholes method. The Directors consider it prudent to apply certain discounts (7% against the value of penny warrants and 30% against the value of standard warrants) when valuing warrants and penny warrants for the purposes of calculating the Companys issued monthly NAV and for these consolidated financial statements due to their illiquid nature and the fact that there is no active market to trade these warrants and penny warrants.

16
2.

(d) Investments continued: (iii) Fair Value Estimation continued Royalty investments are valued using a discounted cash flows approach, based on the Companys contractually determined portion of projected revenue streams from specific products and/or businesses. When valuing the royalty investments, the Directors consider it prudent to apply a discount that reflects the full risks associated with each specific investment, including but not limited to the certainty of the projected cash flows and the liquidity of the investment. Fee receivables are valued at fair value with fair value being the value of the fee receivables less impairments to reflect the collectability of the fee receivable (see note 2(e)). Loans are valued at amortised cost and reviewed for impairment in accordance with IAS 39 (see note 2(e)). (iv) Recognition/derecognition All regular way purchases and sales of investments are recognised on trade date - the date on which the Company commits to purchase or sell the investment. Investments are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership. (e) Impairment of financial assets: Financial assets are assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the Consolidated Statement of Comprehensive Income. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. The reversal is recognised in the Consolidated Statement of Comprehensive Income. (f) Expenses: Expenses are accounted for on an accruals basis. (g) Cash and Cash Equivalents: Cash and cash equivalents are defined as cash in hand, demand deposits and highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value. For the purposes of the Consolidated Statement of Cash Flows cash and cash equivalents consist of cash in hand, deposits in bank and overdrafts.
17
2.

(h) Taxation: The Income Tax Authority of Guernsey has granted the Company exemption from Guernsey income tax under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 and the income of the Company may be distributed or accumulated without deduction of Guernsey income tax. Exemption under the above mentioned Ordinance entails payment by the Company of an annual fee of 600. It should be noted, however, that interest and dividend income accruing from the Companys investments may be subject to withholding tax in the country of origin. With effect from 1 January 2008 the standard rate of income tax for most companies in Guernsey is zero%. Tax Exempt status continues to exist and the Company has been granted this status for 2010. The Company has not suffered any withholding tax in the period. PSD SPV 2, Inc is a Delaware corporation and subject to US taxation. As such, PSD SPV 2, Inc will suffer taxes on realised capital gains and income generated by assets which it holds, to the extent that pre-tax earnings are not offset by expenses and realised losses. Moreover, as generated by a business wholly-owned by the Company, distributions of pre-tax earnings of PSD SPV 2, Inc to the Company (e.g. any interest payments on intercompany loans) will likely be subject to a withholding tax. To the extent permissible, the Company will seek to minimise the income tax and withholding tax suffered, although for accounting purposes, no benefits have been assumed. A 35% income tax liability is accrued against any income and capital gains accrued by PSD SPV 2, Inc, and a 30% withholding tax liability is accrued against any interest accruals related to intercompany loans between PSD SPV 2, Inc and the Company. An accrued asset of US$17,895 (30 June 2010: US$8,966 liability) associated with income tax rebates and withholding tax rebates related to PSD SPV 2, Inc has been made as at 31 December 2010. (i) Other Receivables and Other Payables: Other receivables are stated at amortised cost less any provision for doubtful debts. Other payables are stated at amortised cost.
3.
Material Agreements & Related Parties:

The Company is responsible for the continuing fees of the Manager, the Investment Manager, the Administrator, the Registrar, the Custodian and the Independent Valuation Consultant in accordance with the Management, Investment Management, Administration, Registrar, Custodian and Independent Valuation Consultants Agreements. Management Agreement Pursuant to the provisions of the Management Agreement, the Manager is entitled to receive a management fee during the year at 2.0% per annum of the net asset value of the Company. This fee is paid monthly in arrears. As at 31 December 2010, the management fee creditor was US$181,919 (30 June 2010: US$185,603).

18
3.
Material Agreements & Related Parties continued:

Management Agreement continued In addition the Manager is entitled to a Performance Fee in respect of any Performance Fee Period in which the Performance Trigger has been achieved. If the Performance Trigger is achieved, the Performance Fee shall equal 20% of the amount by which the Total Return NAV per Ordinary Share exceeds the NAV per Ordinary Share at the end of the previous Performance Fee Period, multiplied by the time-weighted average number of Ordinary Shares in issue during the relevant Performance Fee Period. If there has not been any previous Performance Fee Period the Performance Fee shall equal 20% of the amount if any by which the Total Return NAV per Ordinary Share exceeds the NAV per Ordinary Share (calculated net of all initial expenses payable by the Company) on the Effective Date (date of Admission of the Company), multiplied by the time-weighted average number of Ordinary Shares in issue during the relevant Performance Fee Period. As at 31 December 2010, the Performance Fee creditor was US$5,581,184 (30 June 2010: US$5,581,184). Administration Agreement Pursuant to the provisions of the Administration Agreement, Praxis Fund Services Limited is entitled to receive an administration fee at an annualised rate of 0.16% up to 150 million, 0.12% for the following 100 million and 0.10% thereafter, subject to a monthly minimum of 4,500. With regard to company secretarial services, the Administrator is compensated on a time cost basis. This is estimated to be in the range of 20,000 to 25,000 per annum. As at 31 December 2010, the administration fee creditor was US$19,077 (30 June 2010: US$15,668). Registrar Agreement Pursuant to the provisions of the Registrar Agreement, Capita Registrars (Guernsey) Limited is entitled to a maintenance fee of 2.00 per shareholder (subject to an annual minimum maintenance fee of 5,000) together with various per deal fees per shareholder transactions. As at 31 December 2010, the registrar fee creditor was US$4,230 (30 June 2010: US$3,121). Custodian Agreement Pursuant to the provisions of the Custodial Agreement that was in place during the period, Wells Fargo Bank will be entitled to receive a custodian fee as follows: Wells Fargo Bank

US$30,000 acceptance fee; plus US$30,000 annual administration fee; plus US$30 per asset annual custody fee; plus various activity fees.
Effective from 26 November 2010, the Company migrated its custody and clearing services for its short term trading assets from Fidelity Prime Services to Albert Fried & Company, LLC. Albert Fried & Company, LLC is entitled to receive various activity based fees for its services to the Company. During the period Albert Fried & Company, LLC were entitled to receive US$500 in respect of such services. Effective 1 December 2010, the Company migrated its trading services from Fidelity to GP Nurmenkari Inc.. GP Nurmenkari Inc. is entitled to receive various activity based fees for its services to the Company. During the period GP Nurmenkari Inc. were entitled to receive US$nil in respect of such services. In addition to the above agreements, during the period the Group paid US$6,064 to Fidelity Prime Services for custodial services provided in respect of the Groups short term trading assets.
19
3.

Independent Valuation Consultant Pursuant to the provisions of the Independent Valuation Consultants Agreement between the Company and Clayton IPS Corporation (Clayton). Clayton has agreed to provide a monthly and quarterly valuation of the assets of the Company. For these services Clayton is entitled to a fee of US$10,000 for each monthly valuation. As at 31 December 2010, the independent valuation consultancy fee creditor was US$10,192 (30 June 2010: US$20,331). Master Agreement The Master Agreement dated 31 July 2007 (and as subsequently amended on 1 September 2007 and 29 October 2007) between the Company and Laurus Master Fund Ltd which governs the terms on which Laurus Master Fund Ltd may, from time to time, offer investments for sale to the Company and the Company may, if it wishes, accept such offers of investments (including the Initial Portfolio). The Company shall not be obliged to accept such an offer, but is entitled to accept the offer in respect of one or more of the investments offered. Investments will be offered on the basis of an agreed valuation methodology set out in the Agreement. The Laurus Master Fund Ltd makes a number of representations and warranties in the Master Agreement in respect of the investments that it offers to the Company. Under the Master Agreement ongoing investments made by the Company may include purchases from Laurus Master Fund Ltd and other affiliates of the Investment Adviser, subject to approval by the Board of Directors or a duly authorised committee of the Board. The Company entered into a similar Master Agreement with Valens Offshore SPV I Ltd (4 September 2007 and amended on 29 October 2007) and Valens US SPV 1, LLC (19 October 2007 and amended on 29 October 2007). Valens Offshore SPV I Ltd and Valens US SPV 1, LLC are managed by an affiliate of the Investment Manager, Valens Capital Management, LLC. Related Party Transactions During prior periods the Company has undertaken investment transactions with Laurus Master Fund Ltd, Calliope Capital Corporation, Erato Corp, Promethean Industries, Inc and Valens Offshore SPV I Ltd, being other affiliates of the Investment Manager, under the terms of the Master Agreements. There were no purchase transactions from related parties for the period 1 July 2010 to 31 December 2010 (period 1 July 2009 to 31 December 2009: none). Directors and Other Related Parties Interests As at 31 December 2010 the interests of the Directors and their families who held office during the year are set out below: 31 December 2010 Ordinary Shares 50,000 30,000 20,000 50,000 30 June 2010 Ordinary Shares 50,000 30,000 20,000 50,000 -
William Scott (Chairman) Peter Niven Soondra Appavoo Tim Jenkinson Keith Dorrian
There were no changes in the interests of the Directors prior to the date of this report.

20
3.

No Director, other than those listed above, and no connected person of any Director has any interest, the existence of which is known to, or could with reasonable diligence be ascertained by that Director, whether or not held through another party, in the share capital of the Company. As at 31 December 2010, the Investment Manager held 500,000 (30 June 2010: 500,000) Ordinary Shares in the Company.
4.
Directors Fees:
Each of the Directors has entered into an agreement with the Company providing for them to act as a non-executive director of the Company. Their annual fees, excluding all reasonable expenses incurred in the course of their duties which were reimbursed by the Company were as follows: 31 December 2010 Annual Fee 30,000 27,000 25,000 25,000 30 June 2010 Annual Fee 30,000 27,000 25,000 25,000
William Scott (Chairman) Soondra Appavoo Peter Niven Tim Jenkinson Keith Dorrian
Mr Appavoo has waived his Directors fees for the period. As at 31 December 2010 the Directors fees creditor was US$2,368 (30 June 2010: US$1,863). As chairman of the Audit Committee Mr Nivens fee includes a further 2,000 per annum.
5.
Basic & diluted earnings per Ordinary Share:

Basic earnings per Ordinary Share is based on the net deficit for the period of US$5,807,001 (period ended 31 December 2009: US$11,585,138 net return) and on a weighted average of 59,564,681 (period ended 31 December 2009: 59,564,681) Ordinary Shares in issue. Diluted earnings per Ordinary Share is based on the net deficit for the period of US$5,807,001 (period ended 31 December 2009: US$11,585,138 net return) and on a weighted average of 59,564,681 (period ended 31 December 2009: 59,564,681) Ordinary Shares in issue adjusted for the effects of all dilutive potential Ordinary Shares.
21
6.
Investments:
Fair Value Through Profit or Loss Investments: 1 July 2010 to 31 December 2010 US$ 4,402,416 85,121,610 89,524,026 Opening fair value Converted from loans Converted from fee receivables Converted from warrants Converted from penny warrants Purchases Sales proceeds Sales realised gains/(losses) on disposals Movement in net unrealised (loss)/gain Closing fair value Closing book cost Closing net unrealised gain Closing fair value Held for Trading Investments: 92,635,523 294,427 294,351 (4,552,002) 1,032,184 (180,457) 89,524,026 20,367,427 69,156,599 89,524,026 1 July 2010 to 31 December 2010 US$ 2,755,118 2,834,377 (294,427) (348,030) (1,249,262) 1,812,460 2,755,118 29,055,727 (26,300,609) 2,755,118 1 July 2009 1 July 2009 to to 30 June 2010 31 December 2009 US$ US$ 5,122,205 87,513,318 92,635,523 46,012,447 458,114 896,147 2,926,747 3,038,184 1,383,093 (1,722,123) (1,641,034) 41,283,948 92,635,523 23,298,467 69,337,056 92,635,523 1,060,346 79,583,619 80,643,965 46,012,447 89,724 2,737,354 (1,414,086) (1,538,393) 34,756,919 80,643,965 17,833,938 62,810,027 80,643,965
Investments listed on recognised investment exchanges Unlisted investments
1 July 2009 1 July 2009 to to 30 June 2010 31 December 2009 US$ US$ 2,834,377 19,000,009 (5,964,931) (443,508) (3,176,744) (6,580,449) 2,834,377 30,947,446 (28,113,069) 2,834,377 8,761,405 19,000,009 (143,508) (676,548) (9,418,548) 8,761,405 39,712,573 (30,951,168) 8,761,405
Unlisted investments Opening fair value Purchases Converted to equity Sales proceeds Sales realised losses on disposals Movement in net unrealised gain/(loss) Closing fair value Closing book cost Closing net unrealised loss Closing fair value

22
6.
Investments continued:
Loans and Receivables: 1 July 2010 to 31 December 2010 US$ 23,183,468 23,183,468 Opening carrying value Loans converted to equity Fee receivables converted to equity Purchases Sales proceeds Sales realised losses on disposals Repayments/restructuring of loans proceeds Repayments/restructuring of loans/fee receivables realised losses on repayments/restructuring Movement in unrealised gains on restructuring of loans Movement in impairment charge Movement in net unrealised loss on fee receivables and fee/proceeds receivable Closing carrying value Closing book cost Closing unrealised gains on restructuring of loans Impairment charge Closing carrying value 30,031,017 3,795,453 (4,982,458) 1 July 2009 1 July 2009 to to 30 June 2010 31 December 2009 US$ US$ 30,031,017 30,031,017 48,475,029 (458,114) (896,147) 577,880 (8,288,795) 34,189,904 896,147 35,086,051 48,475,029 (89,724) 1,315,248 (796,564) (7,753,259)
Loans Receivable *
(1,917,432) (1,549,159) (2,193,953) 23,183,468 30,354,166 1,952,200 (9,122,898) 23,183,468
(9,200,721) 994,159 (646,633) (525,641) 30,031,017 33,458,603 3,501,359 (6,928,945) 30,031,017
(8,367,262) (50,932) 2,879,156 (525,641) 35,086,051 36,032,939 2,456,268 (3,403,156) 35,086,051
* Receivable As part of a restructured loan, the Group was entitled to US$896,147. During the prior year this receivable was converted into an equity holding.
23
6.
Investments continued:
Total Investments: 1 July 2010 to 31 December 2010 US$ 4,402,416 87,876,728 23,183,468 115,462,612 Opening fair/carrying value Purchases Sales proceeds Sales realised losses on disposals Sales realised impairment on disposals Repayments/restructuring of loans proceeds Repayments/restructuring of loans/fee receivables realised losses on repayments/restructuring Movement in unrealised (losses)/gains on restructuring of loans Movement in impairment charge Movement in net unrealised gains Closing fair/carrying value Closing book cost Closing unrealised gains on restructuring of loans Impairment charge Closing net unrealised gain Closing fair/carrying value 125,500,917 4,089,804 (4,900,032) (217,078) (4,982,458) (1,917,432) (1,549,159) (2,193,953) 1,632,003 115,462,612 79,777,320 1,952,200 (9,122,898) 42,855,990 115,462,612 1 July 2009 1 July 2009 to to 30 June 2010 31 December 2009 US$ US$ 5,122,205 90,347,695 30,031,017 125,500,917 113,487,485 1,960,973 (2,165,631) (4,817,778) (8,288,795) (9,200,721) 994,159 (646,633) 34,177,858 125,500,917 87,704,516 3,501,359 (6,928,945) 41,223,987 125,500,917 1,060,346 88,345,024 34,189,904 896,147 124,491,421 113,487,485 4,052,602 (1,557,594) (2,214,941) (796,564) (7,753,259) (8,367,262) (50,932) 2,879,156 24,812,730 124,491,421 93,579,450 2,456,268 (3,403,156) 31,858,859 124,491,421
Investments listed on recognised investment exchanges Unlisted investments Loans Receivable
As at 31 December 2010 the Directors identified impairment charges on loans and receivables, in accordance with IAS 39, due to an underlying investment filing for chapter 11 bankruptcy. This resulted in the investments being written down by a further US$2,193,953 during the period (period ended 31 December 2009: US$2,879,156 write back). This impairment charge is reflected in the Consolidated Statement of Comprehensive Income. Due to several restructurings during the period ended 31 December 2009, a number of previously unrealised impairment charges were realised. This resulted in a transfer between unrealised and realised impairments during that period, with a net credit to the movement in unrealised impairment charge of U$2,879,156. Both realised and unrealised impairment charges are reflected in the Consolidated Statement of Comprehensive Income for the period ended 31 December 2009.

24
7.
Cash and Cash Equivalents:

31 December 2010 US$ Bank deposits Bank overdrafts (see note 10) 1,958,375 (1) 1,958,374 30 June 2010 US$ 194,315 (1,136,519) (942,204)
8.
Other Receivables:
31 December 2010 US$ Loan interest & fee receivables* Prepayments US Tax receivable 1,851,876 32,128 17,895 1,901,899 30 June 2010 US$ 1,600,591 19,364 1,619,955
* These are shown less a bad debt provision the bad debt provision is a 0%-100% provision against fee receivables of US$3,427 (30 June 2010: US$nil) (included in loan interest & receivables). The Directors consider that the carrying amount of other receivables approximates fair value.
9.
Other Payables:
31 December 2010 US$ Management fee payable Performance fee Administration fee Audit fee Loan interest payable US Tax payable Other payables 181,919 5,581,184 19,077 46,097 29,459 70,263 5,927,999 The Directors consider that the carrying amount of other payables approximates fair value. 30 June 2010 US$ 185,603 5,581,184 15,668 104,615 21,615 8,966 75,729 5,993,380
25
10. Loan and Overdraft:

As at 31 December 2010 the Company had credit facilities with Bank of Scotland plc (Bank of Scotland), in accordance with a facility agreement dated 30 November 2007 and a supplemental restatement facility agreement (utilisation date 1 December 2010). The facilities comprise a US$ 6.5million term note and a US$1.5 million committed overdraft. The key terms of these facilities are as follows: Facility available for 6 months from 1 December 2010; Interest is chargeable at a rate of the US 3 month LIBOR plus 5.0% per annum; Arrangement fee of US$75,000; No fixed amortisation; Cash sweep equal to 80% of monthly free cashflow; No net debt/gross asset covenants; Margin ratchet applicable based on repayment schedule set out in agreement; and Dividend payments by the Company may be permitted subject to approval by Bank of Scotland.
A further condition to the amendment and restatement of the facility agreement (utilisation date 1 December 2010), the Companys subsidiary, PSD SPV 2, Inc. (SPV2), would accede to the facility agreement as a guarantor and grant security over its assets in favour of the Bank. In turn, the Company was required to grant security over its shares in SPV2 in favour of the Bank. As at 31 December 2010 the Companys outstanding loan balance was US$6,500,000 (30 June 2010: US$7,484,003) and the overdraft balance was US$1 (30 June 2010: US$1,136,519). The above credit facility is secured against the Companys investment portfolio.
11. Share Capital:

31 December 2010 & 30 June 2010 US$ Authorised Share Capital Unlimited Ordinary and Qualifying C Shares of no par value 31 December 2010 US$ Allotted, issued and fully paid 59,564,681 (30 June 2010: 59,564,681) Ordinary Shares of no par value each 30 June 2010 US$ 1 July 2009 to 30 June 2010 No. 59,564,681 US$ 47,512,742 US$ 42,793,973
1 July 2010 to 31 December 2010 No. Brought forward & carried forward 59,564,681 US$ Share premium Brought forward & carried forward 47,512,742 US$ Distributable reserve Brought forward & carried forward 42,793,973

26
11. Share Capital continued:

The Ordinary Shareholders shall have the following rights: (i) Dividends During the period Shareholders (other than the Company itself where it holds its own Shares as treasury Shares) are entitled to receive, and participate in, any dividends or other distributions out of the profit of the Company available for dividend and resolved to be distributed in respect of any accounting period or other income or right to participate therein. (ii) Winding up On a winding up, Shareholders (other than the Company itself where it holds its own Shares as treasury Shares) shall be entitled to the surplus assets remaining after payment of all the creditors of the Company. (iii) Voting Shareholders (other than the Company itself where it holds its own Shares as treasury Shares) shall have the right to receive notice of and to attend and vote at general meetings of the Company and each Shareholder being present in person or by proxy or by a duly authorised representative (if a corporation) at a meeting shall upon a show of hands have one vote and upon a poll each such holder present in person or by proxy or by a duly authorised representative (if a corporation) shall have one vote in respect of every Ordinary Share held by him. On 27 July 2007, an ordinary resolution was passed at an extraordinary general meeting of the Shareholders approving the cancellation of the entire amount which will stand to the credit of the share premium account immediately after the Placing, conditionally upon the issue of the Shares and the payment in full thereof and with respect to any further issue of Shares. The cancellation was confirmed by the Royal Court on 25 January 2008 that the surplus thereby created formed a distributable reserve. By a resolution dated 2 November 2009, the holders of the Subscriber Shares in the Company granted the Company the authority to make market purchases of up to 14.99% of its own issued Ordinary Shares. A renewal of the authority to make purchases of Ordinary Shares is sought from Shareholders at each annual general meeting of the Company. Following closing of an Offer for Subscription on 18 June 2008, the Placing and the Offer raised 26.53 million (net of placing costs) and on 20 June 2008 24,154,681 additional Ordinary Shares in the Company were admitted to the Official List of the London Stock Exchange. On 30 July 2008 the Company issued 5,410,000 Ordinary Shares of no par value, representing 9.9% of the Ordinary Shares in issue. These Ordinary Shares were issued and admitted to the Official List on the London Stock Exchange for trading on the same day. Re-Designation of Sterling Shares into US Dollar Shares On 30 January 2009, a special resolution was passed by the shareholders so that the sterling currency of all of the issued Sterling Shares of the Sterling Class be re-designated into the U.S. Dollar currency in accordance with article 3.12 of the Companys Articles of Association at an exchange rate of US$1.4593/ calculated as at 31 December 2008. Capital Management Under its Articles of Association, the Company has the ability to borrow up to 30% of net assets in order to implement any hedging and buyback strategies and to meet ongoing expenses (please refer to note 10).
27
12. Reserves:
1 July 2010 to 1 July 2009 to 31 December 2010 31 December 2009 US$ US$ Brought forward Total comprehensive (deficit)/income for the period Carried forward 22,401,409 (5,807,001) 16,594,408 10,269,631 11,585,138 21,854,769
Reserves represent retained net realised and unrealised gains and losses of the Group. The reserve is used to facilitate payments of future dividends.
13. Net Asset Value per Ordinary Share:

The net asset value per Ordinary Share is based on the net assets attributable to Ordinary shareholders of US$106,901,123 (30 June 2010: US$112,708,124) and on the period/year end Shares in issue of 59,564,681 (30 June 2010: 59,564,681).

28
14. Financial Instruments:

(a) Significant accounting policies: Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of its financial assets and financial liabilities are disclosed in note 2 to these consolidated financial statements. (b) Categories of financial instruments: Financial instruments comprise loans, fees receivables, royalties, equity, warrants, penny warrants and cash and cash equivalents. Investments in loans have been classified as loans and receivables. The warrants and options are derivative instruments and have been classified as held for trading and are accounted for as fair value through profit or loss. All other financial instruments have been classified as fair value through profit or loss. 31 December 2010 Percentage of net assets attributable to Ordinary Fair Value Shareholders US$ % Assets Financial assets at fair value through profit or loss: Listed equity securities Unlisted equity securities Warrants Penny warrants Cash and cash equivalents Loans and receivables*: Loans Unsettled investment sales Other receivables Liabilities Cash and cash equivalents (bank overdrafts) Loans and receivables: Loan Other payables 30 June 2010 Percentage of net assets attributable to Ordinary Fair Value Shareholders US% %
4,402,416 85,121,610 2,180,722 574,396 92,279,144 1,958,375 23,183,468 6,237 1,901,899 119,329,123
4.12 79.62 2.04 0.54 86.32 1.83 21.69 0.01 1.78 111.63
5,122,205 87,513,318 1,852,177 982,200 95,469,900 194,315 30,031,017 6,839 1,619,955 127,322,026
4.54 77.65 1.64 0.87 84.70 0.17 26.65 0.01 1.44 112.97
(1) (6,500,000) (5,927,999) (12,428,000)
(6.08) (5.55) (11.63)
(1,136,519) (7,484,003) (5,993,380) (14,613,902)
(1.01) (6.64) (5.32) (12.97)
*The Directors deem that the carrying value of loans and receivables at amortised cost, written down where appropriate for known impairments, is not considered to be materially different from fair value.
29
14. Financial Instruments continued:

(c) Net gains and losses on financial instruments: Movement in net unrealised (losses)/gains and unrealised foreign exchange gains on translation US$ Period ended 31 December 2010 Financial assets at fair value through profit or loss: Listed equity securities Unlisted equity securities Warrants Penny warrants
Net realised gains/(losses) on disposals/loan repayments US$
Movement in Impairment charge US$
Movement in unrealised loss on restructuring of loans US$
(237,685) 57,228 2,220,264 (407,804) 1,632,003 1,632,003 Movement in net unrealised (losses)/gains and unrealised foreign exchange gains on translation US$
1,032,184 (1,249,262) (217,078) (1,917,432) (2,134,510)
(2,193,953) (2,193,953)
(1,549,159) (1,549,159)
Loans and receivables: Loans
Net realised gains/(losses) on disposals/loan repayments US$
Movement in unrealised gain on restructuring of loans US$
Year ended 30 June 2010 Financial assets at fair value through profit or loss: Listed equity securities Unlisted equity securities Warrants Penny warrants
42,335,279 (1,051,331) (4,929,891) (1,650,558) 34,703,499 (525,641) (525,641) 34,177,858
(252,998) (1,388,036) (3,176,744) (4,817,778) (8,404,157) (796,564) (9,200,721) (14,018,499)
(1,443,197) 796,564 (646,633) (646,633)
994,160 994,160 994,160
Loans and receivables: Loans Royalties Receivable

30

(c) Net gains and losses on financial instruments continued: Movement in net unrealised gains/(losses) and unrealised foreign exchange gains on translation US$ Period ended 31 December 2009 Financial assets at fair value through profit or loss: Listed equity securities Unlisted equity securities Warrants Penny warrants
Net realised (losses)/gains on disposals/loan repayments US$
Movement in unrealised loss on restructuring of loans US$
561,507 34,195,412 (7,199,943) (2,218,605) 25,338,371 (525,641) (525,641) 24,812,730
(150,357) (1,388,036) (676,548) (2,214,941) (8,367,262) (796,564) (9,163,826) (11,378,767)
2,082,592 796,564 2,879,156 2,879,156
(50,932) (50,932) (50,932)
Loans and receivables: Loans Fee receivables Royalties
(d)
Derivatives: The following tables detail the Groups aggregate investments in derivative contracts, by maturity, outstanding as at 31 December 2010. Penny Warrants Maturity 31 December 2010 Fair Value US$ 5,438 1,625 98,141 469,192 574,396 30 June 2010 Fair Value US$ 11,598 4,876 154,229 811,497 982,200
1-3 years 3-5 years 5-10 years >20 years Total
A penny warrant is a derivative financial instrument with similar economic characteristics to the underlying equity instrument which gives the right, but not the obligation to buy a specific amount of a given stock, at a specified price (strike price) during a specified period (American option) or on a specific date (European option). The fair value of the penny warrants are included in options classified as financial assets at fair value through profit or loss disclosed in note (b) above. All the penny warrants the Group owns have an exercise price of US$0.01 or less (quasi equities) and are valued at a 7% discount to net intrinsic value (see note 2(d) (iii)).
31

(d) Derivatives continued: Warrants Maturity 31 December 2010 Fair Value US$ 991,475 362,125 613,313 90,026 123,783 2,180,722 30 June 2010 Fair Value US$ 381,449 841,142 357,505 152,664 119,417 1,852,177
< 1 year 1-3 years 3-5 years 5-10 years 10-15 years Total
A warrant is a derivative financial instrument which gives the right, but not the obligation to buy a specific amount of a given stock, at a specified price (strike price) during a specified period (American option) or on a specific date (European option). The fair value of warrants are included in warrants classified as financial assets at fair value through profit or loss disclosed in note (b) above. The warrants are valued at a 30% discount to Black Scholes value (see note 2(d) (iii)). Forward foreign currency swaps As at 31 December 2010 and 30 June 2010, the Group had no outstanding forward foreign currency swaps. In accordance with the Groups scheme particulars the Group may invest in forward foreign exchange contracts for the purpose of efficient portfolio management.
15. Financial Risk Management:

Strategy in Using Financial Instruments: The Group's investment objective is to seek to provide a total return of 10-15% per annum over a rolling 3-year period with annual standard deviation of less than 5%, primarily through investing in a diversified portfolio of asset backed loans made predominantly to publicly traded small and micro-cap companies and equity warrants issued predominantly by publicly traded small and micro-cap companies. The Groups activities expose it to a variety of financial risks: market risk (including currency risk, fair value, interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Groups overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Groups financial performance. These policies include the use of certain financial derivative instruments. The risk management policies employed by the Group to manage these risks are discussed below. Market Price Risk: Market price risk results mainly from the uncertainty about future prices of financial instruments held. It represents the potential loss the Group may suffer through holding market positions in the face of price movements and changes in interest rates or foreign exchange rates, with the maximum risk resulting from financial instruments being determined by the fair value of the financial instruments. The Groups investment portfolio is monitored by the Investment Manager, Investment Consultant and the Directors in pursuance of the investment objectives.

32
15. Financial Risk Management continued:

Market Price Risk continued: All investments present a risk of loss of capital. The profitability of a significant portion of the Groups investment program depends to a great extent upon correctly assessing the future course of movements in interest rates, currencies and other investments. There can be no assurance that the Investment Manager will be able to predict accurately these price movements. The Investment Manager moderates this risk through a careful selection of securities and other financial instruments within specified limits. The maximum risk resulting from financial instruments is determined by the fair value of the financial instruments. The Groups portfolio and investment strategy is reviewed continuously by the Investment Manager, Investment Consultant and on a quarterly basis by the Board and the Manager. By their nature, the Groups equity investments at fair value through profit and loss, and, warrants and penny warrants investments held for trading are directly exposed to market price risk. The Groups investments in loans and receivables are not directly subject to market price risk in the same way as equities and derivatives. By their nature there is no upside in the value of loans and receivables. However market conditions may dictate that loan investments need to be impaired. The Groups exposure to this risk is dealt with under credit risk. The following details the Groups sensitivity to a 5% increase and decrease in market prices of equities, with 5% being the sensitivity rate used when reporting price risk internally to key management personnel and representing managements assessment of the possible changes in market prices. At 31 December 2010, the Groups market risk is affected by four main components: changes in actual market prices, credit risk, interest rate and foreign currency movements. Credit risk, interest rate and foreign currency movements are covered below. A 5% increase in the value of equity investments, with all other variables held constant, would bring about 4.19% or US$4,476,206 (30 June 2010: 4.11% or US$4,631,776) increase in net assets attributable to equity shareholders. If the value of equity investments had been 5% lower, with all other variables held constant, net assets attributable to equity shareholders would have fallen by a 4.19% or US$4,476,206 (30 June 2010: 4.11% or US$4,631,776). Warrants and penny warrants by their nature may be more sensitive to changes in the value of the underlying equity instrument dependent upon a number of factors including time to expiry and whether or not they are in the money. A 5% increase in the value of underlying equity prices for derivatives held, with all other variables held constant, would bring about a 0.19% or US$203,037 (30 June 2010: 0.17% or US$192,761) increase in net assets attributable to equity shareholders. A 5% decrease in the value of underlying equity prices for derivatives held, with all other variables held constant, would bring about a 0.19% or US$198,559 (30 June 2010: 0.16% or US$185,945) decrease in net assets attributable to equity shareholders. Credit Risk: Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Group, resulting in financial loss to the Group. To the extent the Group invests in derivative instruments, certain types of options or other customised financial instruments or non-UK securities, the Group takes the risk of non-performance by the other party to the contract. This risk may include credit risk of the counterparty and the risk of settlement default. This risk may differ materially from those entailed in UK exchange-traded transactions which generally are supported by guarantees of clearing organisations, daily marking-to-market and settlement, and segregation and minimum capital requirements applicable to intermediaries. Transactions entered directly between two counterparties generally do not benefit from such protections and expose the parties to the risk of counterparty default. In addition, there are risks involved in dealing with the custodians or brokers who settle trades particularly with respect to non-UK investments.
33

Credit Risk continued: At the reporting date financial assets exposed to credit risk include loan instruments, receivables and derivatives disclosed in note 14 to these financial statements. It is the opinion of the Board of Directors that the maximum exposure to credit risk that the Group faces is equal to the carrying value of these financial instruments held by the Group. The loan and receivable instruments are private loans and receivables with the underlying counterparties and as such do not have associated agency credit ratings. To mitigate the credit risk on these loan and receivable instruments the Directors consider impairment on an ongoing basis also taking into consideration the results of any reviews performed by Clayton. Clayton is employed to review a sample the of loan and receivable instruments on a monthly basis and report to the Board of Directors/Investment Manager any issues with regards to the valuation of the loan and receivable instruments in accordance with the Independent Valuation Consultants Agreement. Any impairment on the loan and receivable instruments is written off to the Consolidated Statement of Comprehensive Income. As at 31 December 2010, impairment charges totaling US$9,122,898 (30 June 2010: US$6,928,945) had been written off to the Consolidated Statement of Comprehensive Income since the Group commenced trading (see note 2(e)). The credit risk on cash transactions and transactions involving derivative financial instruments is mitigated by transacting with counterparties that are regulated entities subject to prudential supervision, or with high credit-ratings assigned by international credit-rating agencies. In accordance with the investment restrictions as described in its Placing Document, the Group may not invest more than 10% of its total assets in any one underlying company (calculated at the time of any relevant investment being made). As at 31 December 2010, the following amounts on debt instruments were past due: 31 December 2010 US$ Principal default Interest default 3,215,977 14,511 30 June 2010 US$ 2,150,820 140,187
The Group has entered into certain agreements with affiliates of the Investment Manager in which the Group and the affiliates have investments in the same loan instruments. The Group has agreed to alter the allocation of cash principal and interest repayments in the event of a restructuring or liquidation of the entity in which the Group and affiliate(s) are invested. The agreements provide for the Group to receive upfront consideration from the affiliate(s) in exchange for reallocating the cash liquidation proceeds received by the Investment Manager in respect of the loan securities first to the affiliate(s) and secondly to the Group. This reallocation applies only to regular principal and interest, and not to any contingent amounts including default interest and fees. The Group has mitigated the credit risk of these certain agreements by only entering into agreements related to loan instruments in which the collateral and/or operating strength of the invested companies was sufficiently in excess of the loan amounts outstanding such that doing so did not materially alter the credit risk of the loan instruments held by the Group. This determination of whether the loan instruments were sufficiently collateralised was made by Clayton IPS Corporation at the time of the agreements, and Clayton IPS Corporation continues to evaluate the loan instruments in the context of these agreements. As at 31 December 2010, of the total loans held by the Group of US$23,183,468 (30 June 2010: US$30,031,017), US$10,859,960 (30 June 2010: US$10,902,976) were subordinated.

34

Liquidity Risk: Liquidity risk is the risk that the Group will encounter in realising assets or otherwise raising funds to meet financial commitments. The Group invests in loan notes and warrants that are not liquid and there may not be any secondary market for these instruments. Even though the warrants are generally convertible into securities listed on the national securities exchanges, quoted on NASDAQ or traded in the over-the counter markets or other markets (eg pink sheets). The instruments themselves are not liquid. In addition, the Groups assets (including the loan notes) may, at any given time, include securities and other financial instruments or obligations which are very thinly traded or for which no market exists or which are restricted as to their transferability under applicable securities laws. The sale of any such investments may be possible only at substantial discounts. Further, such investments may be extremely difficult to value with any degree of certainty. The Group may also invest in private placements and other similar issues of securities (including investments in privately held companies). This may involve a high degree of business and financial risk that can result in substantial losses. In addition, there is no existing market for the purchase and sale of such investments and the Group may not be able to readily sell such investments. Such investments may be subject to greater economic, business and market risks than the marketable securities of more well-established companies. While the Investment Manager will attempt to spread the Groups assets among a number of investments in accordance with the investment policies adopted by the Group, at times the Group may hold a relatively small number of investments each representing a relatively large portion of the Groups net assets. Losses incurred in such investments could have a materially adverse effect on the Groups overall financial condition. Whilst the Groups portfolio is diversified in terms of the companies in which it invests, the investment portfolio of the Group may be subject to more rapid change in value than would be the case if the Group were required to maintain a wide diversification among types of securities, countries and industry groups. In particular the Group is exposed to its large holdings in Petrotech Holdings/PetroAlgae which constitutes 70.57% (30 June 2010: 64.92%) of the investment portfolio as at 31 December 2010. At any given time, the Group may have significant investment in smaller and medium sized companies of a less seasoned nature whose securities are traded in the over-the-counter market. These secondary securities often involve significantly greater risks than the securities of larger, better known companies. Such securities may not be liquid and there may be only a limited market for such securities. The Groups liquidity risk exposure is moderated by the careful selection of securities and other financial instruments by the investment Manager. The Groups portfolio and investment strategy is reviewed continuously by the Investment Manager and on a quarterly basis by the Board. In addition the Directors will seek to review capital requirements on an annual basis. The Groups principal financial commitment is its indebtedness to Bank of Scotland plc (the Bank) which facilities are due to expire on 31 May 2011. In the event that the Groups indebtedness to the Bank has not been extinguished and a replacement facility is not agreed with effect from that date, there is a risk that the Bank could enforce its security over the Groups portfolio which could result in losses for shareholders. Given the significant reduction in the size of the banking facility required by the Company during the current period and prior year, the Board currently anticipates that the facilities will not need to be renewed.
35

Liquidity Risk continued: The following table details the maturity profile of the Groups financial instruments: Maturity Analysis At 31 December 2010 less than 1 year US$ 1-3 years US$ 3-5 years US$ 5-10 years US$ > 10 years US$ No fixed maturity US$ Total US$
Assets Financial assets at fair value through profit or loss: Listed equity securities Unlisted equity securities Warrants 991,475 Penny warrants Cash and cash equivalents 1,958,375 2,949,850 Loans and receivables: Loans 8,078,359 Unsettled investment sales 6,237 Other receivables 1,901,899 12,936,345 Liabilities Financial assets at fair value through profit or loss: Cash and cash equivalents (Bank overdraft) Loans and receivables: Loans Other payables
362,125 5,438 367,563
613,313 1,625 614,938
90,026 98,141 188,167
123,783 469,192 592,975
4,402,416 85,121,610 89,524,026
4,402,416 85,121,610 2,180,722 574,396 1,958,375 94,237,519
5,424,357 5,791,920
331,290 946,228
188,167
592,975
9,349,462
23,183,468
6,237 1,901,899 98,873,488 119,329,123
(1)
(1)
(6,500,000) (5,927,999) (12,428,000)
- (6,500,000) - (5,927,999) - (12,428,000)

36

Liquidity Risk continued: Maturity Analysis, continued At 30 June 2010 Assets Financial assets at fair value through profit or loss: Listed equity securities Unlisted equity securities Warrants Penny warrants Cash and cash equivalents Loans and receivables: Loans Unsettled investment sales Other receivables less than 1 year US$ 1-3 years US$ 3-5 years US$ 5-10 years US$ > 10 years US$ No fixed maturity US$ Total US$
381,449 194,315 575,764
841,142 11,598 852,740
357,505 4,876 362,381
152,664 154,229 306,893
119,417 811,497 930,914
5,122,205 87,513,318 92,635,523
5,122,205 87,513,318 1,852,177 982,200 194,315 95,664,215
12,140,217 6,839 1,619,955 14,342,775
6,677,336 7,530,076
329,096 691,477
306,893
10,884,368
30,031,017
6,839 1,619,955 930,914 103,519,891 127,322,026
Liabilities Financial assets at fair value through profit or loss: Cash and cash equivalents (Bank overdraft) (1,136,519) Loans and receivables: Loans Other payables
(1,136,519)
(7,484,003) (5,993,380) (14,613,902)
- (7,484,003) - (5,993,380) - (14,613,902)
37

Interest Rate Risk: The Group is exposed to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial instruments and future cash flows. The Group is exposed to interest rate risk as it invests in loan instruments bearing interest at both fixed and floating interest rates. Other financial assets and liabilities exposed to interest rate risk include borrowings which are invested at long term interest rates and cash and cash equivalents which are invested at short term rates. The Investment Manager manages the Groups exposure to interest rate risk daily in accordance with the Groups investment objectives and policies, as disclosed on page 3. The Groups overall exposure to interest rate risk is monitored regularly by the Board of Directors. The table below summarises the Groups exposure to interest rate risk: 31 December 2010 Weighted average effective interest rate Total % US$ Assets Fixed rate equity (preference share holdings) Fixed interest rate unlisted loan instruments Floating interest rate unlisted loan instruments Floating interest rate cash and cash equivalents Non-interest bearing Total assets Liabilities Floating interest rate cash and cash equivalents Floating interest rate loan Non-interest bearing Total liabilities 30 June 2010 Weighted average effective interest rate %
Total US$
9.84 4.80 5.27 0.02 -
8,688,999 8,745,590 14,437,878 1,958,375 85,498,281 119,329,123
9.48 0.80 6.38 0.32 -
11,086,618 12,574,303 17,456,714 194,315 86,010,076 127,322,026
5.26 5.26 -
1 6,500,000 5,927,999 12,428,000
3.50 3.85 -
1,136,519 7,484,003 5,993,380 14,613,902
The analysis below has been determined based on the Groups exposure to interest rates for interest bearing assets and liabilities (included in the interest rate exposure table above) at the reporting date. The Groups interest bearing assets are comprised of fixed rate equity preference share instruments, fixed and floating rate loan instruments and floating rate cash and cash equivalents. The floating rate assets are generally indexed on US Prime. As of 31 December 2010, 63% (30 June 2010: 70%) of the floating rate loans have an interest rate floor, with an average floor of 7.46% (30 June 2010: 8.00%). In contrast, the interest rate of these loans in absence of the floor provisions would have been 2.25% (30 June 2010: 2.67%) lower. Therefore, the majority of the interest income generated by the Group is not sensitive to normal changes in interest rates. An immediate 200 basis point drop in US Prime would cause the yield on the interest bearing assets to fall by zero basis points or US$392 (30 June 2010: 0.1 basis points or US$622). Conversely, an immediate 200 basis point increase in US Prime would cause the yield on the interest bearing assets to increase by 3.7 basis points or US$39,168 (30 June 2010: 0.3 basis points or US$3,886).

38

Interest Rate Risk continued: The Groups interest bearing liabilities are comprised of floating rate cash and cash equivalents and floating rate loans. The floating rate loans are comprised of loans that are indexed on US LIBOR with a margin of 500 basis points, and reset either monthly or quarterly. The change in yield on these liabilities therefore changes directly with changes in US LIBOR. The 3 month US LIBOR as at 31 December 2010 was 0.26% (30 June 2010: 0.35%) an immediate drop to zero in the US LIBOR on the interest bearing liabilities would cause net assets attributable to equity holders to increase by US$17,104 or 0.02% (30 June 2010: US$30,248 or 0.03%) on an annualised basis due to the reduction in interest payable on floating rate interest bearing liabilities. Conversely, an immediate 200 basis point increase in US LIBOR would cause net assets attributable to equity holders to decrease by US$130,000 or 0.12% (30 June 2010: US$172,410 or 0.15%) on an annualised basis due to the increase in interest payable on floating rate interest bearing liabilities. As a result of low interest rates generally causing the floating rate loan asset yields to be based upon their floor rates, marginal increases of interest rates up to approximately 3% would only marginally increase net income on interest bearing assets less expenses on interest bearing liabilities, with a cumulative increase of approximately US$49,238 (30 June 2010: US$11,571 decrease) on an annualised basis if rates increased by 3%. Foreign Currency Risk: Foreign currency risk is the risk that the fair value of future cash flows of a foreign currency financial instrument will fluctuate because of changes in foreign exchange rates. As at 31 December 2010 the Groups assets are invested predominately in securities and other investments that are denominated in the same currency as the reporting currency. Accordingly the Group is at low risk to fluctuations in foreign exchange rate. However, should this change the Group has the ability to manage any significant exposure to foreign currencies through forward foreign exchange contracts to hedge its exposure back to US Dollar. As at 31 December 2010 there was no open currency hedging (30 June 2010: none). PSD was originally a Sterling denominated fund investing principally in US Dollar assets, with the foreign exchange risk hedged out using a rolling swap programme. During the second half of 2008 Sterling fell in value by 27% against the US Dollar. The result of this foreign exchange movement increased the Sterling value of the Groups US Dollar assets but also created a significant cash settlement liability on the foreign exchange contracts which exceeded the natural cash inflow from the Groups portfolio. PSD stopped hedging on 12 December 2008 and the reporting currency was changed from Sterling to US Dollars, as agreed by shareholders at an EGM at the end of January 2009. Following from these changes, the significant majority of the Groups assets and liabilities, and shareholder equity are dominated in US Dollars, significantly reducing the foreign currency risk of the Group. On 1 December 2010, PSD secured new US Dollar denominated credit facilities with its existing lender, Bank of Scotland plc, to replace its previous US$7.5 million reducing facility and a US$1.5 million committed overdraft. Bank of Scotland plc agreed to a US$6.5 million facility and a US$1.5 million committed overdraft. The cost of the debt is 500bps over 3 month US LIBOR (currently 0.263131%) with monthly repayments equal to 80% of monthly free cash flow.
39

Currency Exposure: As at 31 December 2010 the majority of the net assets of the Group are denominated in US Dollars. The carrying amounts of these assets and liabilities are as follows: Assets 31 December 2010 US$ British Pound Canadian Dollar Euro US Dollars 105,514 278,785 8 118,944,816 119,329,123 Assets 30 June 2010 US$ British Pound Canadian Dollar Euro US Dollars 38,253 196,729 8 127,087,036 127,322,026 Liabilities 31 December 2010 US$ (130,198) (1) (12,297,801) (12,428,000) Liabilities 30 June 2010 US$ (187,525) (1) (14,426,376) (14,613,902) Net 31 December 2010 US$ (24,684) 278,784 8 106,647,015 106,901,123 Net 30 June 2010 US$ (149,272) 196,728 8 112,660,660 112,708,124
The Group has no significant currency risk. The Group has the ability to implement a policy of currency hedging. The sensitivity analysis below has been determined based on the sensitivity of the Groups outstanding foreign currency denominated financial assets and liabilities to a 10% increase/decrease in the US Dollar to Sterling, Euro and Canadian Dollar, translated at the year end date. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents managements assessment of the possible change in foreign exchange rates. As at 31 December 2010 if US Dollar had weakened by 10% against Sterling, Euro and Canadian Dollar, with all other variables held constant, the increase in net assets attributable to Ordinary Shareholders would have been US$25,411 or 0.02% (30 June 2010: US$4,746 or 0.00%) higher. Conversely, if US Dollar had strengthened by 10% against the Sterling, Euro and Canadian Dollar with all other variables held constant, the increase in net assets attributable to equity shareholders would have been US$25,411 or 0.02% (30 June 2010: US$4,476 or 0.00%) lower. As at 31 December 2010, the Groups sensitivity to foreign currency risk is low due to the majority of the net assets of the Company are denominated in US Dollars.

40

Concentration Risk: While the Investment Manager will attempt to spread the Groups assets among a number of investments in accordance with the investment policies adopted by the Group, at times the Group may hold a relatively small number of investments each representing a relatively large portion of the Groups net assets. Losses incurred in such investments could have a materially adverse effect on the Groups overall financial condition. Whilst the Groups portfolio is diversified in terms of the companies in which it invests, the investment portfolio of the Group may be subject to more rapid change in value than would be the case if the Group were required to maintain a wide diversification among types of securities, countries and industry groups. Please refer to the Analysis of Significant Investments and Portfolio Analysis that follows the Notes to Financial Statements and the Liquidity Risk section of note 15. Classification of Fair Value Measurements: The Company adopted the amendment to IFRS 7, effective 1 January 2009. 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 fair value hierarchy has the following levels:

Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1); Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, the measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. The determination of what constitutes observable requires significant judgement by the Company. The Company considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The following table analyses within the fair value hierarchy the Companys financial assets (by class) measured at fair value at 31 December 2010: Fair Value as at 31 December 2010 Level 1 Level 2 Level 3 Total US$ US$ US$ US$ Financial assets at fair value through profit or loss: Equity securities Warrants Penny warrants
4,402,416 2,180,722 407,418 6,990,556
85,121,610 166,978 85,288,588
89,524,026 2,180,722 574,396 92,279,144
41

Classification of Fair Value Measurements continued: Level 1 US$ Financial assets at fair value through profit or loss: Equity securities Warrants Penny warrants Fair Value as at 30 June 2010 Level 2 Level 3 US$ US$ Total US$
5,114,520 1,852,177 815,222 7,781,919
87,521,003 166,978 87,687,981
92,635,523 1,852,177 982,200 95,469,900
Investments whose values are based on quoted market prices in active markets, and therefore classified within level 1, include active listed equities. No adjustments are made to the quoted price for these instruments. None of the Companys investments are categorised as level 1 financial assets. Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within level 2. As level 2 investments may include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information. Investments classified within level 3 have significant unobservable inputs, as they trade infrequently. Level 3 instruments include unquoted equity instruments which the Company values in accordance with the International Private Equity and Venture Capital valuation guidelines or any other valuation model and techniques which can provide a reasonable estimate of fair value of the investment involved. The Company considers liquidity, credit and other market risk factors. The table below provides a reconciliation from brought forward to carried forward balances of financial instruments categorised under level 3: 1 July 2010 to 31 December 2010 Equity securities Penny warrants Total US$ US$ US$ 87,521,003 (2,456,621) 57,228 85,121,610 166,978 166,978 87,687,981 (2,456,621) 57,228 85,288,588
Assets at Fair Value based on Level 3:
Fair value brought forward Sales Movement in net unrealised gains on fair value through profit or loss investments Fair value carried forward

42

Classification of Fair Value Measurements continued: Assets at Fair Value based on Level 3: 1 July 2009 to 30 June 2010 Equity securities Penny warrants US$ US$ 45,442,655 24 (210,168) 1,354,261 (1,388,036) 42,322,267 87,521,003 227,738 (60,760) 166,978 Total US$
Fair value brought forward Purchases Sales Loans converted to equity Net realised loss on fair value through profit or loss investments Movement in net unrealised gains/(losses) on fair value through profit or loss investments Fair value carried forward
45,670,393 24 (210,168) 1,354,261 (1,388,036) 42,261,507 87,687,981
16. Dividends:
At inception, it was the Groups intention to pay an annual dividend (paid gross quarterly) of not less than 5 pence per Ordinary Share (or its equivalent in US Dollars) in its first year growing by 0.5 pence per Ordinary Share (or its equivalent in US Dollars) per annum in its second and third years. Although this was achieved in respect of the first accounting period of the Group, a breach of the Group's banking facilities led to the suspension of dividends during the current period and prior year. It is the Boards intention to resume dividends at a sustainable level as soon as practicable. All dividends in prior periods were paid from the Groups reserves.
17. Significant Investment Holding:

PetroAlgae/PetroTech Holdings Inc. The Group has a significant holding in PetroTech Holdings Inc, a Delaware corporation. PetroTech Holdings Inc is a privately held holding company whose principal asset at 31 December 2010 was 100,000,000 shares (30 June 2010: 100,000,000 shares) of the common stock of PetroAlgae, Inc (PetroAlgae). PetroAlgae is a renewable energy company based in Florida which is registered with the SEC and quoted on the OTC Bulletin Board (PALG.OB), following a reverse merger into a quoted shell in December 2008. The OTC Bulletin Board is a regulated quotation service that displays real-time quotes, last-sale prices, and volume information in over-the-counter equity securities. Technology and Commercial progress PetroAlgae was founded in 2006 based on technology developed at the University of Arizona over the previous decade. PetroAlgae is an early stage company which has developed and is licensing new technologies to enable the global production of renewable energy. The Company is based in Melbourne Florida and has a 20 acre pilot facility. PetroAlgaes approach is to select the most suitable microorganism for each specific location (indigenous to the region), and then apply PetroAlgaes distinct proprietary processes to significantly increase output to 2 or 3 times that found naturally. Suitable microorganisms include macro-algae, micro-algae, diatoms, micro-angiosperms, cyanobacters and other small fuel and food-producing organisms of extremely rapid exponential growth.
43
17. Significant Investment Holding continued:

Technology and Commercial progress continued PetroAlgae is licensing a modular bioreactor system which can be built and operated cost-effectively on a very large commercial scale. The primary product derived from this system is feedstock for the production of fuel in existing oil refineries. However, a complimentary co-product produced in production of these feedstocks is high-quality proteins, which can be used for animal feed or human consumption. PetroAlgae is commercialising a licensing methodology which includes significant upfront payments without incurring costs related to capital expenditures. PetroAlgae intends for revenue to be realized through licensing fees and royalties. PetroAlgae has achieved a number of significant milestones. At the end of 2009 PetroAlgae entered into a Master License Agreement with Green Science Energy LLC for the use of its proprietary technology to produce biofuels in Egypt. This agreement generated US$4 million, the first commercial cash flow for PetroAlgae. PetroAlgae is in commercial discussions with over 300 active prospects spanning 40 countries around the globe, with numerous qualified business discussions having arisen from over 100 corporate visits to its pilot plant. While sales cycles for large licensing deals are long, the Company has recently signed a number of non-binding Memorandums of Understanding (MOUs) from among the many qualified business discussions. PetroAlgae and these potential licensees agree to negotiate a final license contract. Nonetheless, key contract terms that are generally set forth in the stated MOUs may change pending final negotiations; moreover the negotiations may not always result in a final contract. The following are certain groups that have reached the MOU stage: Memorandums of Understanding China (CECIC/CECEP): In March 2009, PetroAlgae entered into a Master Licensing Agreement with GTB Power Enterprise Ltd. to construct and operate at least ten separate 5,000 hectares license units for the production of microcrop biomass in China. In December 2009, PetroAlgae entered into a strategic MOU with the China Energy Conservation Investment Corporation (CECIC) whereby the parties contemplate that CECIC would acquire the Master License Agreement for China from GTB Power Enterprise Ltd. Its intent, in supporting the anticipated transfer to CECIC is to accelerate PetroAlgaes penetration of Chinas renewable energy market. CECIC, a State owned corporation with over 11,000 employees, was established in 1988 to invest in energy saving technologies and infrastructures. Thus far, CECIC has undertaken more than 3,000 major projects in the areas of energy-efficiency, environmental protection (treatment of waste gas, solid waste and waste gas), and renewable energy production (wind, solar, and biomass). In October 2010, PetroAlgae announced the agreement of a contract with CECEP (the new translation of CECIC) of China to build a pilot facility through the finalisation of a pilot facility agreement and a master framework agreement. Under the terms of the pilot facility agreement, CECEP will pay for the construction of a pilot facility. Following the successful running of the pilot facility and other conditions being met, CECEP is committed to construct a minimum of 10 units over a ten year period.

44

Technology and Commercial progress continued Memorandums of Understanding continued Indonesia: In December 2009, PetroAlgae signed an MOU to lead to the license of the Companys proprietary micro-crop technology to the largest conglomerate in Indonesia. This prospects various businesses cover a range of activities including palm oil, property development, leisure and agriculture. The MOU contemplates that this group would initially build a partial license unit to demonstrate the commercial viability of producing renewable fuels in Indonesia through the use of PetroAlgaes technology. Upon achieving success, the remaining portion of the full license unit 5,000 hectares or 12,355 acres) would be built for the large scale production of biofuels. Indian Oil: In November 2009 PetroAlgae entered into an agreement to license its proprietary micro-crop technology to Indian Oil Corporation Limited (IOCL) for its future large-scale production of renewable fuels. Under the terms of the MoU and the license agreement to be completed, IOCL will build a pilot facility to demonstrate the commercial viability of producing renewable fuels from micro-crops. Upon achieving success, the pilot facility is expected to lead to the completion of a licensed unit for large-scale production of renewable fuels by IOCL. Partnership with Foster Wheeler: In December 2009 PetroAlgae announced today that it signed an MOU with Foster Wheeler AGs (Nasdaq: FWLT) Global Engineering and Construction Group for engineering services to be performed in conjunction with PetroAlgaes micro-crop technology, which allows for the production of dry biomass at an unprecedented scale. PetroAlgae intends to work with Foster Wheeler to develop commercial solutions that will allow existing oil refineries to convert micro-crop biomass into fuels that are functionally compatible with petroleumbased fuels in the current market. For refineries, the solutions are expected to provide strong economics from the large-scale processing of PetroAlgaes micro-crop biomass into green fuels. The two firms will create end-to-end market solutions for the large-scale production of green gasoline, diesel, jet fuel and specialty chemicals. On 28 September 2010 Foster Wheeler AG announced that it had completed its initial testing of PetroAlgae's biomass, with encouraging results. The biomass, produced at PetroAlgae's micro-crop farm in the U.S., was being tested as a delayed coker feedstock supplement to provide renewable biofuels to the market. Testing was conducted at a state-of-the-art commercial coker testing facility operated by the College of Engineering and Natural Sciences at the University of Tulsa (Oklahoma). The combination of PetroAlgae's proprietary patent-pending biomass production system, and Foster Wheeler's SYDECSM delayed coking technology, is being designed with the intent to allow the delayed coker to incorporate biomass into the coker feedstock, with minimal configuration changes to an existing unit. Testing was conducted to demonstrate that the biomass is an effective add-in complement to vacuum residue coker feedstock, and does not significantly affect overall coker operations. The initial test results demonstrate that biomass, mixed with vacuum residue, yields additional valuable hydrocarbons as a result of biomass carbohydrate and lipid decomposition. Further testing and engineering development is underway to optimize process parameters and feedstock blend ratios. AIQ: In April 2010 PetroAlgae announced that it signed an MOU with Asesorias e Inversiones Quilicura (AIQ), a major shareholder in Subus Chile S.A., that is expected to enable the development in Chile of a micro-crop technology system for the large-scale production of green gasoline, diesel and jet fuel. Under the agreement, AIQ has acquired an option to purchase from PetroAlgae a standard license to build a full micro-crop technology system for commercially producing biofuels and high-value protein.
45

Technology and Commercial progress continued Memorandums of Understanding continued Eco-Frontier: In July 2010 PetroAlgae announced that it had signed a Non-Binding Commercial Offtake Agreement with Eco-Frontier, a leading cleantech management firm and Asian renewable energy developer based in Seoul, Korea. Eco-Frontier expressed its willingness to establish a market for biocrude products produced by the PetroAlgae system for use in co-firing energy applications in Korea and in other markets. Depending on the satisfaction of a number of different conditions, Eco-Frontier would be prepared to commit to purchase from PetroAlgaes licensees up to 850,000 metric tons of biocrude over a three year period beginning in 2012. Sky Airline: In October 2010, PetroAlgae announced that it had signed a non-binding offtake agreement with Sky Airline, a leading Chilean airline providing passenger, mail and cargo transport services. Subject to certain conditions, Sky Airlines and PetroAlgae have agreed to collaborate to enable Sky Airline to purchase fuel feedstock produced by licensees of PetroAlgae technology for conversion into renewable jet fuel. Valuation The Group owns 8.24% (30 June 2010: 8.24%) of the common stock and US$7.2 million (30 June 2010: US$7.2 million) in preferred stock in PetroTech Holdings Inc. The preferred stock is held at par plus accrued interest. The common stock is valued based on an assessment of the realisable value of PetroAlgae Inc. PetroTech Holdings Inc received PetroAlgae shares in a private placement that occurred in December 2008, and it is therefore subject to restrictions on the sale of the securities. There is limited liquidity in the market for shares of PetroAlgae. The shares have traded between US$3.25 per share and US$40 per share since trading commenced in December 2008. Since 1 September 2009, the shares have traded mainly in a range of US$10-25 per share. PSD initially valued the PetroAlgae (PALG) shares in PetroTech Holdings Corp at last trade and then at 1 month volume weighted average trading price (1mo VWAP), although the carrying value was therefore subject to high volatility that resulted from thin trading and illiquidity, and it was therefore deemed imprudent from a valuation standpoint. Multiple observable reference points are available to assist with determining a fair carrying value for the PALG shares, most notably the OTC trading data (bid, last trade, 1mo and 6mo VWAP) and the on-going private placement trades. From 31 October 2009 to 31 January 2010, following discussions with Clayton, the Group had based its valuation of PetroTech Holdings Inc common stock on a weighted average of i) the private placement-implied PetroAlgae share price of US$6.59 resulting from private subscriptions in excess of US$20 million, and ii) the 1mo VWAP of PetroAlgae shares in the OTC market. The weighting ascribed to each component had been determined by the following schedule. Private Placement Implied Price Weight 91.7% 83.3% 75.0% 66.7%
Date 31-Oct-09 30-Nov-09 31-Dec-09 31-Jan-10
VWAP Weight 8.3% 16.7% 25.0% 33.3%

46

Valuation continued The 1 mo VWAP for PetroAlgae in the period since July 2009 is set out below, along with the effective discounted value which PSource Structured Debt has used for PetroAlgae shares in its monthly valuation. Month Ended 31 31 30 31 30 31 31 28 31 30 31 30 31 31 30 31 30 31 31 Jul 2009 Aug 2009 Sept 2009 Oct 2009 Nov 2009 Dec 2009 Jan 2010 Feb 2010 Mar 2010 Apr 2010 May 2010 Jun 2010 Jul 2010 Aug 2010 Sept 2010 Oct 2010 Nov 2010 Dec 2010 Jan 2011 1mo VWAP US$10.40 US$17.59 US$17.76 US$19.72 US$21.06 US$20.42 US$21.50 US$20.96 US$22.38 US$25.04 US$23.00 US$11.36 US$22.26 US$10.42 US$12.72 US$11.08 US$11.57 US$12.16 US$10.77 PSD Price US$5.95 US$6.81 US$6.81 US$7.68 US$9.00 US$10.05 US$11.56 US$11.56 US$11.56 US$11.56 US$11.56 US$11.56 US$11.56 US$11.56 US$11.56 US$11.56 US$11.56 US$11.56 US$11.56 PSD Carrying Value* US$43,299,674 US$48,841,697 US$48,759,841 US$54,820,959 US$63,965,616 US$71,184,195 US$81,687,627 US$81,687,627 US$81,687,627 US$81,687,627 US$81,687,627 US$81,479,986 US$81,479,986 US$81,479,986 US$81,479,986 US$81,479,986 US$81,479,986 US$81,479,986 US$81,479,986
*Note: PSD Carrying Value does not include accrued dividends which accrue at 9% per annum on the PetroTech Preferred Stock. As of 31 December 2010, accrued dividends totaled US$1,607,599 (30 June 2010: US$1,276,468). Following statements made by PetroAlgae related to its stated intention to move to a broader stock exchange, the PSD Board believes it appropriate to hold the valuation of PetroAlgae shares in PSD constant from the 31 January 2010 NAV at US$11.56, until further material valuation information is made available on this process. Technology and Commercial Progress On 5 November 2010 the Aquaculture Research Institute at the University of Idaho announced that it had found that PetroAlgae protein concentrate (PPC) produced as a co-product along with the renewable fuel feedstock by the companys micro-crop technology system can replace menhaden fishmeal protein at levels up to 100% in feeds for tilapia. The study also found that PPC would be suitable as a fishmeal replacement for other farmed fish species. Prospects The Directors continue to monitor PetroAlgae with a view to its commercial progress and the liquidity in the stock. In particular, the Directors will look to any significant capital markets transactions that PetroAlgae may undertake in the future as an important indicator of value. Longer term, the Group continues to examine, together with its Investment Manager and Investment Consultant, the best options for realising its significant holding in PetroAlgae Inc. PSource Capital Guernsey Limited, the Manager of the Company, is acting as an advisor to PetroAlgae Inc in its proposed IPO.
18. Post Period End Events:

There are no significant post year end events that require disclosure in these consolidated financial statements.
Analysis of Significant Investments (unaudited)

47
The ten largest holdings of the Group, by underlying investment company as at 31 December 2010 are set out below: Book Cost US$ 7,198,509 8,781,715 5,322,845 9,663,717 3,186,755 1,068,613 2,972,441 845,031 1,496,058 3,162,344 36,079,292 79,777,320 Fair Value US$ 81,479,986 7,711,351 5,392,942 3,803,980 3,186,755 2,075,523 1,836,348 1,635,961 1,496,058 1,490,489 5,353,219 115,462,612 Percentage of NAV % 76.22 7.21 5.04 3.56 2.98 1.94 1.72 1.53 1.40 1.39 5.02 108.01
Name of investment Petrotech Holdings Corp Biovest International Sentinel Technologies Inc Creative Vistas Mascon Global Consulting Inc North Texas Steel JTM Acquisition Corp TNE Oleary Assets LLC GPSI Holdings LLC New Cetury Energy Corp 26 other underlying investment companies
In compliance with current UK Listing Authority requirements, the Company intends to disclose only its ten largest investments.
Portfolio Analysis (unaudited)

48
An analysis of the portfolio by industry at 31 December 2010 is set out below: Fair Value Through Profit & Loss Investments US$ 4,185,934 2,350 458 2,504,274 180,795 81,479,986 5,053 1,165,143 33 89,524,026
Industry Biotech Business Services Computers Consulting Energy Environmental Financial Services Industrial IT Renewable Energy Retail Security Software Technology Telecom Transport
Total US$ 9,767,482 141,058 962,999 3,186,755 3,267,256 244,405 7,724 2,081,574 939,499 81,479,987 14,417 3,803,980 10,196 7,395,670 312,697 1,846,913 115,462,612
Loans & Receivables US$ 4,586,857 837,500 3,186,755 655,538 244,367 2,064,000 3,700,768 6,071,335 1,836,348 23,183,468
Investments Held for Trading US$ 994,691 138,708 125,041 107,444 38 7,724 17,574 758,704 1 14,417 98,159 10,196 159,192 312,664 10,565 2,755,118
No. of companies No. 8 3 2 1 3 1 1 2 3 1 1 1 1 4 2 2 36
Portfolio Analysis (unaudited) continued

49
An analysis of the portfolio by geography at 31 December 2010 is set out below: Fair Value Through Profit & Loss Investments US$ 1,165,143 6 5,054 454 85,849,058 33 4 2,504,274 89,524,026
US State or Country Arizona California Canada Colorado Delaware Florida Illinois Indiana India Ireland Israel Massachusetts North Carolina New England New Hampshire New Jersey New York Ohio Other Texas Washington
Total US$ 1,506,624 1,358,334 4,082,765 837,954 215,784 90,435,916 5,399,053 862 3,186,755 96,880 39,223 16,124 598,946 27,387 89,080 125,041 258,817 7,518 608 5,342,397 1,836,544 115,462,612
Loans & Receivables US$ 331,290 417,200 3,700,768 837,500 4,586,857 5,322,845 3,186,755 244,367 2,719,538 1,836,348 23,183,468
Investments Held for Trading US$ 10,191 941,128 376,943 215,784 1 76,208 862 96,880 39,223 16,124 598,946 27,387 89,080 125,041 14,417 7,518 604 118,585 196 2,755,118
No. of companies No. 2 4 2 1 1 5 2 1 1 1 1 2 2 1 1 1 2 1 4 1 36
Perivan Financial Print
220728
LISTED
PREMIUM
Sarnia House Le Truchot, St Peter Port Guernsey, GY1 4NA www.psourcestructureddebt.com

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LISTED

PSource Structured Debt Limited

Company Information continued

Investment Objective and Policy

Company Information continued

Financial YTD 6.20 1.25

Jul 171.16 1.37 -

Aug 170.94 -0.13 -

Sep 170.09 -0.50 -

Oct 172.59 1.47 -

Nov 179.84 4.20 -

Dec 188.30 4.70 -

Jan 199.31 5.85 -

Feb 199.10 -0.11 -

Mar 202.62 1.77 -

Apr 198.52 -2.02 -

May 193.41 -2.57 -

Jun 189.22 -2.17 -

Financial YTD 12.06 -

Financial YTD -6.07 -

Cash Realisation Process

Change in Custody Arrangements

Chairmans Statement continued

Change in Custody Arrangements continued

Future prospects for PSource Structured Debt

Director: William Scott

Director: Peter Niven

Date: 21 February 2011 On behalf of the Board of Directors

Consolidated Statement of Financial Position (unaudited)

Current liabilities Bank overdraft Other payables Loan

1 5,927,999 6,500,000 12,428,000

(8,561,489) 106,901,123 47,512,742 42,793,973 16,594,408 106,901,123 US$1.7947

Consolidated Statement of Comprehensive Income (unaudited)

& & & &

Consolidated Statement of Changes in Equity (unaudited)

22,401,409 112,708,124 (5,807,001) (5,807,001) 16,594,408 106,901,123

10,269,631 100,576,346 11,585,138 11,585,138 21,854,769 112,161,484

Consolidated Statement of Cash Flows (unaudited)

Notes to the Financial Statements

Principal Accounting Policies:

Principal Accounting Policies continued:

Notes to the Financial Statements continued

Principal Accounting Policies continued:

Principal Accounting Policies continued:

Notes to the Financial Statements continued

Principal Accounting Policies continued:

Principal Accounting Policies continued:

Material Agreements & Related Parties:

Notes to the Financial Statements continued

Material Agreements & Related Parties continued:

Material Agreements & Related Parties continued:

Notes to the Financial Statements continued

Material Agreements & Related Parties continued:

Basic & diluted earnings per Ordinary Share:

Investments listed on recognised investment exchanges Unlisted investments

Notes to the Financial Statements continued

(1,917,432) (1,549,159) (2,193,953) 23,183,468 30,354,166 1,952,200 (9,122,898) 23,183,468

(9,200,721) 994,159 (646,633) (525,641) 30,031,017 33,458,603 3,501,359 (6,928,945) 30,031,017

(8,367,262) (50,932) 2,879,156 (525,641) 35,086,051 36,032,939 2,456,268 (3,403,156) 35,086,051

Investments listed on recognised investment exchanges Unlisted investments Loans Receivable

Notes to the Financial Statements continued

Cash and Cash Equivalents: