ODEY EUROPEAN INC. Annual Report and Audited Financial Statements For the year ended 31 st December Management and Administration 3

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2 ODEY EUROPEAN INC. Annual Report and Audited Financial Statements For the year ended 31 st December 2014 Page Management and Administration 3 Statement of Directors Responsibilities 5 Investment Manager s Report 6 Independent Auditors Report 9 Statement of Financial Position 10 Statement of Comprehensive Income 11 Statement of Changes in Net Assets attributable to Holders of Redeemable Participating Shares 12 Statement of Cash Flows 13 Notes to the Financial Statements 14 Schedule of Investments 38 Unaudited additional information provided by the AIFM 49 2

9 Deloitte & Touche One Capital Place P.O. Box 1787 Grand Cayman KY CAYMAN ISLANDS Tel: Fax: INDEPENDENT AUDITORS REPORT TO THE SHAREHOLDERS OF ODEY EUROPEAN INC. We have audited the financial statements of Odey European Inc. (the Fund ) for the year ended 31 st December 2014 which comprise the Statement of Financial Position, the Statement of Comprehensive Income, the Statement of Changes in Net Assets attributable to Holders of Redeemable Participating Shares, the Statement of Cash Flows, the Schedule of Investments and the related notes 1 to 19. The financial reporting framework that has been applied in their preparation is International Financial Reporting Standards ( IFRS ). This report is made solely to the Fund s shareholders, as a body, in accordance with the Mutual Funds Law of the Cayman Islands. Our audit work has been undertaken so that we might state to the Fund s shareholders those matters we are required to state to them in an auditors report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Fund and the Fund s shareholders as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of Directors and Auditors As explained more fully in the Statement of Directors Responsibilities, the Directors are responsible for preparing the financial statements giving a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with the legal and regulatory requirements and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Fund s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report for the year ended 31 December 2014 to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion In our opinion the financial statements give a true and fair view in accordance with International Financial Reporting Standards of the state of the Fund s affairs as at 31 st December 2014 and of its profit for the year then ended. 29 th April

29 ODEY EUROPEAN INC. Notes to the Financial Statements 31 st December 2014 (Continued) 4. FINANCIAL RISK MANAGEMENT (continued) Credit/Counterparty Risk (continued) Offsetting Financial Assets and Financial Liabilities (continued) Liabilities Related amount not offset in the Statement As at 31 st December 2014 of Financial Position Counterparty Financial liabilities presented in the Statement of Financial Position Financial instruments Cash collateral Net amount EUR 000 EUR 000 EUR 000 EUR 000 Derivative Contracts Contracts for difference Morgan Stanley (3,708) (3,378) UBS AG (24,409) 24, Futures Contracts Morgan Stanley (2,214) (1,714) Forward Contracts Morgan Stanley (120,706) 120, Assets Related amount not offset in the Statement As at 31 st December 2013 of Financial Position Counterparty Financial assets presented in the Statement of Financial Position Financial instruments Cash collateral Net amount EUR 000 EUR 000 EUR 000 EUR 000 Derivative Contracts Contracts for difference Morgan Stanley 3,100 (1,179) - 1,921 UBS AG 34,681 (34,541) Futures Contracts Morgan Stanley 4,840 (1,010) - 3,830 UBS AG Forward Contracts Morgan Stanley 17,528 (15,105) - 2,423 Liabilities Related amount not offset in the Statement As at 31 st December 2013 of Financial Position Counterparty Financial liabilities presented in the Statement of Financial Position Financial instruments Cash collateral Net amount EUR 000 EUR 000 EUR 000 EUR 000 Derivative Contracts Contracts for difference Morgan Stanley (1,179) 1, UBS AG (34,541) 34, Futures Contracts Morgan Stanley (1,010) 1, Forward Contracts Morgan Stanley (15,105) 15,

49 ODEY EUROPEAN INC. UNAUDITED ADDITIONAL INFORMATION PROVIDED BY THE ALTERNATIVE INVESTMENT FUND MANAGER NOT FORMING PART OF THE AUDITED FINANCIAL STATEMENTS Purpose of this document The Alternative Investment Fund Managers Directive (AIFMD) is European Union (EU) legislation which requires Alternative Investment Fund Managers (AIFM s) to include various transparency disclosures in the Annual Reports of the Alternative Investment Fund that they manage and/or market in the EU. With effect from 22 July 2014, Odey Asset Management LLP has been authorised by the FCA as a full-scope UK registered AIFM. Odey Asset Management LLP is the AIFM of the Fund for the purposes of the AIFMD Rules and is authorised and regulated by the FCA in the conduct of investment business and will be authorised by the FCA to perform the regulated activity of managing an AIF (as defined in the AIFMD Rules) with effect from the Authorisation Date. Investment Review The investment review is contained with the Investment Manager s report on page 6 of the Annual Report and Audited Financial Statements. Remuneration The financial and non-financial criteria of the remuneration policies and practices for the Investment Manager s staff (partners and employees) are set out in the Investment Manager s Remuneration Policy (a summary of which is included below) and are intended to be consistent with, and to promote, sound and effective risk management. In particular, as regards (i) the potential influence of the Investment Manager s remuneration policies and practices on the risk profile of the relevant AIFs, and (ii) the measures adopted to avoid or manage conflicts of interest, the Remuneration Policy provides that: The structure of staff remuneration should be consistent with and promote effective risk management and not encourage any level of risk-taking that is inconsistent with the risk profiles of the AIFs it manages. The remuneration structure should avoid incentivising staff on a short-term basis, and should promote the Investment Manager s business strategy, objectives, values and long-term interests and those of the AIFs it manages and their investors.. In any given year, the total variable remuneration paid to the Investment Manager's staff should not limit its ability to maintain its required regulatory capital base. Variable remuneration will not be paid through vehicles or methods that facilitate the avoidance of the requirements of the AIFM Remuneration Code as set out in the Financial Conduct Authority s Handbook. The Investment Manager s risk management function is required to provide input on the Investment Manager s overall remuneration strategy, having regard to the effective promotion of risk management, and to have an active role in the design, ongoing oversight and review of the Remuneration Policy. Each member of staff s remuneration is determined by the Investment Manager s Remuneration Committee, a sub committee of the Executive Committee. Consequently it is not possible for any single individual to determine the remuneration for his/her own business area. Summary of Odey Asset Management s ( OAM s ) Remuneration Policy: Valuable focus is achieved through clear profit allocation or bonus targets. However, unduly narrow motivation to hit a specific target on a particular date can encourage excessively blinkered behaviour, which is negative for other business goals before/after the target date e.g. in relation to risk taking, broader business development, long term sustainability; franchise value. A 100% pay-out on a particular date is also directly bad for business continuity. The development of participants and their associated business tends to take place over a period of years; whereas a single profit allocation or bonus payment date can mean massive short term volatility in the retention incentive. 49

50 ODEY EUROPEAN INC. UNAUDITED ADDITIONAL INFORMATION PROVIDED BY THE ALTERNATIVE INVESTMENT FUND MANAGER NOT FORMING PART OF THE AUDITED FINANCIAL STATEMENTS (CONTINUED) Summary of Odey Asset Management s ( OAM s ) Remuneration Policy (continued): Profit allocation and bonus deferral is intended to help offset these disadvantages of particularly large single date profit allocation or bonus awards; without excessively de-motivating participants. There are currently two forms of deferral: Cash deferral Deferred cash awards are required to be invested in OAM Funds. This strengthens the alignment of interests between partners/staff and our clients/fund investors, especially for Odey participants responsible for performance. Requiring people to eat what you cook further encourages a responsible attitude to risk taking. Share deferral The award of Bonus Shares in Odey Holdings AG (the ultimate parent company of Odey Asset Management LLP), allows for increased ownership in the business by participants. In determining the award of shares, the Remuneration Committee takes into account a participant s contribution to the overall development of the business and creation of a long term franchise. To this end, whilst the initial vesting of bonus shares is over a three year period, the Company may require the shares to be surrendered (at cost), should the partner leave within the three year period. The Bonus Shares become Ordinary Shares with inalienable rights, after the third year, i.e. the partner keeps the shares should he leave. All forms of deferral help to manage key man risk as the retained element acts as a disincentive to leave at short notice and encourages behaviour focused on creating a sustainable business. Leverage Details of the AIF s current and historic gross and net exposures during the period are disclosed on the AIFM s website ( under the asset allocation graphic for the relevant AIF. Risk Management Details of the AIFM s approach to risk management is disclosed in note 4 Financial risk management of the Annual Report and Audited Financial Statements. Material Changes in the year Details of any material changes in the year are disclosed in note 17 Significant events during the year and note 18 Subsequent events of the Annual Report and Audited Financial Statements. Odey Asset Management LLP AIFM April

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