CORK STREET CLO DESIGNATED ACTIVITY COMPANY

Transcription

1 CORK STREET CLO DESIGNATED ACTIVITY COMPANY DIRECTORS REPORT AND THE AUDITED FINANCIAL STATEMENTS FOR THE PERIOD FROM 18 MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015 COMPANY NUMBER:

2 CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015 TABLE OF CONTENTS PAGE COMPANY [NFORMATION 1-2 D1CTORS REPORT 3-6 STATEMENT OF DIRECTORS RESPONSIBILITIES 7 INDEPENDENT AUDITORS REPORT 8-9 STATEMENT OF COMPREHENSIVE INCOME 10 STATEMENT OF FINANCIAL POSITION 11 STATEMENT OF CHANGES IN EQUITY 12 STATEMENT OF CASH FLOWS 13 NOTES TO THE FINANCIAL STATEMENTS 14-32

3 CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015 COMPANY INFORMATION DIRECTORS Paula F-loran (appointed 18 May 2015, resigned 05 June 2015) Andrew Lambe (appointed 1$ May 2015, resigned 05 June 2015) Jarlath Canning (Ireland) (appointed 05 June 2015) Sean O Sullivan (Ireland) (appointed 05 June 2015) SECRETARY REGISTERED OFFICE LEGAL ADVISER COLLATERAL MANAGER COLLATERAL ADMINISTRATOR, PAYING AGENT, CUSTODIAN, AND CALCULATION AGENT TRUSTEE INDEPENDENT AUDITOR CORPORATE ADMINISTRATOR ACCOUNT BANK MFD Secretaries Limited 2 Floor, Beaux Lane House Mercer Street Lower Dublin 2 Ireland 2 Floor, Beaux Lane House Mercer Street Lower Dublin 2 Ireland Maples & Calder 75 St. Stephen s Green Dublin 2 Ireland Guggenheim Partners Europe Limited South Dock House Hanover Quay Dublin 2 Ireland Elavon Financial Services Limited Block E, Cherrywood Business Park Loughlinstown Dublin Ireland U.S. Bank Trustees Limited 125 Old Broad Street, Fifth floor London EC2N 1AR United Kingdom KPMG Chartered Accountants and Statutory Audit Firm I Harbourmaster Place International Financial Services Centre Dublin I Ireland Maples Fiduciary Services (Ireland) Limited 2m1 Floor, Beaux Lane House Mercer Street Lower Dublin 2 Ireland Elavon Financial Services Limited Level 5, 125 Old Broad Street London EC2N IAR United Kingdom

4 CORK STREET CLO DESIGNATED ACTIVITY COMPANY DIRECTORS REPORT AND AUDITED FII JANCIAL STATEMENTS FOR THE PERIOD FROM 18 MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015 COMPANY INFORMATION (CONTINUED) FINANCIAL REPORTING AGENT/ADMINISTRATOR SWAP COUNTERPARTY The Bank of New York Mellon Trust Company N.A. 601 Travis Street, 16th floor Houston TX 77095, United States J.P. Morgan Securities Plc 25 Bank Street London EI45JP United Kingdom 2

5 V CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015 DIRECTORS REPORT The Directors present their first report and the audited financial statements of Cork Street CLO Designated Activity Company (the Company or Issuer ) for the period from 18 May 2015 (date of incorporation) to 31 December PRINCIPAL ACTIVITY AND REVIEW Of THE BUSINESS The Company was incorporated under the laws of Ireland as a private company limited by shares on 18 May 2015 with the name of Cleocrest Limited and company registration number of The Company changed its name from Cleocrest Limited to Cork Street CLO Limited on 13 October 2015 and re-registered as a designated activity company under the Irish Companies Act 2014 on 29 October The Company, a special purpose vehicle, was established as a qualifying company under Section 110 of the Taxes Consolidation Act, 1997 (as amended) to issue Notes and to use the proceeds thereof to invest in leveraged loans. The object of the Company is to carry on the business of issuing securities and to raise or borrow money, to grant security over its assets for such purposes, to lend with or without security and to enter into derivative transactions. Cash flow derived from the Collateral securing the Notes will be the Issuer s only source of funds to fund payments in respect of such Notes. The Company issued Notes with a nominal value of million and proceeds at million on 30 November 2015 and the proceeds, after payment of issue costs, are to be used at the discretion of Guggenheim Partners Europe Limited (the Collateral Manager ) to purchase leveraged loans. The principal and interest repayments on the Notes are dependent on the income generated from these leveraged loans. The Company s Notes are listed on the Irish Stock Exchange. FUTURE DEVELOPMENTS The directors expect the current level of activities to continue in the foreseeable future. RESULTS AND DIVIDENDS The results for the period from 18 May 2015 (date of incorporation) to 31 December 2015 are shown on page 10. The Directors do not recommend a dividend distribution. CHANGES IN DIRECTORS, SECRETARY AND REGISTERED OFFICE Paula Horan and Andrew Lambe were appointed as Directors on 18 May 2015 (date of incorporation) and resigned on 05 June Jarlath Canning and Sean O Sullivan were appointed as Directors on 05 June Paula Horan was appointed as Company Secretary on 18 May 2015 (date of incorporation) and resigned on 05 June MFD Secretaries Limited was appointed as Company Secretary on 05 June During the period, Paula Horan and Andrew Lambe both subscribed to 50 ordinary shares of 1.00 each and transferred all of their shares to Maples FS Trustees (Ireland) Limited on 05 June DIRECTORS AND SECRETARY S INTERESTS IN SHARES The Directors and Company Secretary who held office on 31 December 2015 did not hold any shares in, or debentures or loan stock of, the Company on that date or during the period. There are no contracts of any significance in relation to the business of the Company in which the Directors had any interest, as defined in the Companies Act 2014, at any time during the period ended 31 December 2015, other than as set out in note 19. PRINCIPAL RISK AND UNCERTAINTIES The principal risks and uncertainties facing the Company relate to the fmancial instruments held by it and are set out in note 17 to the financial statements. POLITICAL DONATIONS The Electoral Act 1997 (as amended by the Electoral Amendment Political Funding Act, 2012) requires companies to disclose all political donations over 200 in aggregate made during a financial year. The Directors on enquiry have satisfied themselves that no such donations in excess of that amount have been made by the Company during the period ended 31 December SUBSEQUENT EVENTS Refer to note 19 to the financial statements for details of events after the reporting date. 3

6 CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY2015 (DATE OF INCORPORATION) TO 3 I DECEMBER 2015 DIRECTORS REPORT (continued) GOING CONCERN The company will be in operation for a period greater than 12 months. be a going concern. The legal maturity dates of the notes are Therefore, we consider the comnany to KEY PERFORMANCE INDICATORS The principal key performance indicators used by the Directors to monitor performance are as follows: 2015 Net investment income 5,041,173 Total Assets 568,495,060 TAKEOVER DIRECTIVE The authorised share capital of the Company is 100,000 divided into 100,000 ordinary shares of 1 each (the Shares ), 100 of which are issued and fully paid and held on trust by MaplesfS Trustees Ireland Limited (the Share Trustee ) under the terms of a declaration of trust (the Declaration of Trust ) dated 10 June 2015, whereby the Share Trustee holds the Shares on trust for charitable purposes. The Share Trustee will have no beneficial interest in and will derive no benefit (other than its fees for acting as Share Trustee) from its holding of the Shares of the Issuer. The Share Trustee will apply any income derived from the Issuer solely for the above purposes. The takeover bids directive is not applicable as the Company does not have transferable securities carrying voting rights listed on a regulated market. ANNUAL CORPORATE GOVERNANCE STATEMENT Introduction The Company is subject to and complies with Irish Statute comprising the Companies Act 2014 and the Listing Rules of the Irish Stock Exchange. The Company does not apply additional requirements in addition to those required by the above. Each of the service providers engaged by the Company is subject to their own corporate governance requirements. financial reporting process The Board of Directors (the Board ) is responsible for establishing and maintaining adequate internal control and risk management systems of the Company in relation to the financial reporting process. Such systems are designed to manage rather than eliminate the risk of failure to achieve the Company s financial reporting objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The Board has established processes regarding internal control and risk management systems to ensure its effective oversight of the financial reporting process. These include appointing the Financial Reporting Agent/Administrator, The Bank of New York Mellon Trust Company N.A, (the Administrator ) to maintain the accounting records of the Company independently of the Collateral Manager and the Trustee. The Administrator is contractually obliged to maintain proper accounting records as required by the Financial Reporting Services Agreement. The Administrator is also contractually obliged to prepare for review and approval by the Board the interim and annual report including financial statements intended to give a true and fair view. The Directors exercise oversight of the Administrator through review of the periodic management accounts. The Board evaluates and discusses significant accounting and reporting issues as the need arises. From time to time, the Board also examines and evaluates the Administrator s financial accounting and reporting routines and monitors and evaluates the external auditors performance, qualifications and independence. The Administrator has operating responsibility for internal control in relation to the financial reporting process and the Administrator reports to the Board. 4

7 CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY 2015 (DATE Of INCORPORATION) TO 31 DECEMBER 2015 DIRECTORS REPORT (continued) ANNUAL CORPORATE GOVERNANCE STATEMENT (continued) Por fotio Administration Certain management functions with respect to the Portfolio (including, without limitation, the acquisition, management and disposal of the Collateral) will be performed by the Collateral Manager under the Collateral Management and Administration Agreement. The Collateral Manager will determine and will use reasonable endeavours, to cause to be acquired by the Issuer, a portfolio of Secured Senior Obligations, Unsecured Senior Obligations, Second Lien Loans, Mezzanine Obligations and High Yield Bonds during the Initial Investment Period, the Reinvestment Period and thereafter. Appointment and replacement ofdirectors and Amendments in the Articles ofassociation With regard to the appointment and replacement of Directors, the Company is governed by its Constitution and Irish Statute comprising the Companies Act The Constitution may be amended by special resolution of the shareholders. Control Activities The Administrator has implemented control structures to manage the risks arising in the processes surrounding the preparation of the financial statements for review by the Directors. These control structures include appropriate division of responsibilities and the employment of suitably qualified personnel. Monitoring The Board has an annual process to ensure that appropriate measures are taken to consider and address the shortcomings identified and measures recommended by the independent auditor. Given the contractual obligations on the Administrator, the Board has concluded that there is currently no need for the Company to have a separate internal audit function in order for the Board to perform effective monitoring and oversight of the internal control and risk management systems of the Company in relation to the financial reporting process. Risk Management The Board is responsible for assessing the risk of irregularities whether caused by fraud or error and ensuring processes are in place for the timely identification of internal and external matter with a potential effect on financial reporting. The Board has delegated certain functions, including the provision of financial reporting, to the Administrator. The Administrator has put in place processes to identify changes in accounting rules and recommendations and to ensure that these changes are accurately reflected in the Company s financial statements, including: a review procedure to ensure apparent errors and omissions in the financial statements are identified and corrected; and regular training on accounting rules and recommendations is provided to the accountants employed. Powers ofdirectors The Board is responsible for managing the business affairs of the Company in accordance with the Constitution. The Directors may delegate certain functions to Maples Fiduciary Services (Ireland) Limited (the Corporate Administrator ) and other parties, subject to the supervision and direction of the Directors. The Directors have delegated the day to day administration of the Company to the Corporate Administrator. Audit committee The sole business of the Company relates to the issuing of asset-backed securities. Under Regulation 115 (l0)(c) of the European Union (Statutory Audits) (Directive 2006/43/EC, as amended by Directive 20 14/56/EU, and Regulation (EU) NO 537/2014) Regulations 2016 (the Regulations ), such a Company may avail itself of an exemption from the requirement to establish an audit committee. Given the contractual obligations of the Administrator and the limited recourse nature of the securities issued by the Company, the Board has concluded that there is currently no need for the Company to have a separate audit committee in order for the Board to perform effective monitoring and oversight of the internal control and risk management systems of the Company in relation to the financial reporting process. Accordingly, the Company has availed itself of the exemption under the Regulations. 5

8 CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015 DIRECTORS REPORT (continued) ANNUAL CORPORATE GOVERNANCE STATEMENT (continued) Capital Structure The Company has issued a single class of ordinary share which carry full voting rights and entitlement to dividends. No person has a significant direct or indirect holding of securities in the Company. No person has any special rights of control over the Company s share capital. There are no restrictions on voting. ACCOUNTING RECORDS The measures taken by the Directors to secure compliance with the requirements of Sections 281 to 285 of the Companies Act 2014 with regards to the Company s obligation to keep adequate accounting records are the use of appropriate systems and procedures and employment of competent persons. The accounting records are maintained at 601 Travis Street, Houston, TX 77095, USA. INDEPENDENT AUDITOR During the period, KPMG, Chartered Accountants and Statutory Audit Firm, were appointed as independent auditor to the Company and will continue in office in accordance with Section 383(2) of the Companies Act On behalf of the Board Jarlath Canning Sean O Sullivan Director Date: 6

9 CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY 2015 (DATE Of INCORPORATION) TO 31 DECEMBER 2015 STATEMENT OF DIRECTORS RESPONSIBILITIES The Directors are responsible for preparing the Directors Report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare fmancial statements for each financial year. Under that law, they have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IfRS) as adopted by the EU and applicable law. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financial position of the Company and of its profit or loss for that period. In preparing the financial statements, the Directors are required to: select suitable accounting policies and then apply them consistently; make judgments and estimates that are reasonable and prudent; state whether they have been prepared in accordance with IfRS as adopted by the EU; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the assets, liabilities, financial position and profit or loss of the Company and enable them to ensure that its financial statements comply with the Companies Act They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. The Directors are also responsible for preparing a Directors Report that complies with the requirements of the Companies Act On behalf of the Board Jarlath Canning Sean Sullivan Director irector Date: 7

10 KPMG Audit 1 Harbourmaster Place IFSC Dublin 1 Ireland Independent Auditor s Report to the Members of Cork Street CLO Designated Activity Company We have audited the financial statements ( financial statements ) of Cork Street CLO Designated Activity Company ( the Company ) for the period from 18 May 2015 (date of incorporation) to 3 1 December 2015 which comprises the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Equity, the Statement of Cash Flows and the related notes. The financial reporting framework that has been applied in their preparation is Irish law and International Financial Reporting Standards (IFRS) as adopted by the European Union. Our audit was conducted in accordance with International Standards on Auditing (ISAs) (UK & Ireland). Opinions and conclusions arising from our audit 1 Our opinion on thefinancial statements is ttnmoctfied In our opinion, the financial statements: give a true and fair view of the assets, liabilities and financial position of the Cothpany as at 3 1st December 2015 and of its profit for the period then ended; have been properly prepared in accordance with IFRS as adopted by the European Union; and have been properly prepared in accordance with the requirements of the Companies Act Our conclutsions on other matters on which we are reqitired to report by the Companies Act 2014 are set out below We have obtained all the information and explanations which we consider necessary for the ptirposes of our audit. In our opinion, the accounting records of the Company were sufficient to permit the financial statements to be readily and properly audited and the financial statements are in agreement with the accounting records. In ocir opinion, the information given in the Directors Report is consistent with the financial statements. 3 We have nothing to report in respect of matters on which we are reqttirect to report by exception ISAs (UK & Ireland) require that we report to you if, based on the knowledge we acquired during ottr audit, we have identified information in the Directors Report that contains a material inconsistency with either that knowledge or the financial statements, a material misstatement of fact, or that is otherwise misleading. In addition, the Companies Act 2014 reqctires us to report to you if, in ottr opinion, the disclosures of Directors remuneration and transactions required by sections 305 to 3 12 of the Act are not made. KPMG, an Irish partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ( KPMG Internationall, a Swiss entity

11 (UK & Ireland). Those standards reqtlire us to comply with the Financial Reporting Council s Ethical Standards for Auditors. is to audit and express an opinion on the financial statements in accordance with Irish law and ISAs Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view and otherwise comply with the Companies Act Our responsibility As explained more fully in the Statement of Directors Responsibilities set out on page 7, the Date: 20 SeP fr1iizz Otb Dublin 1 IFSC 1 Harbourmaster Place Chartered Accountants, Statutory Audit Firm KPMG for and on behatf of Coim Clifford the most experienced members of the audit team, in particular the engagement partner responsible for the Companies Act Our audit work has been undertaken so that we might state to the report, or for the opinions we have formed. level the probability that the aggregate of uncorrected and undetected misstatements does not exceed or inconsistencies, we consider the implications for our report. In addition, we read all the financial and non-financial information in the Directors Report to identify us in the course of performing the audit. If we become aware of any apparent material misstatements 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 auditor plans the audit to determine the extent of testing needed to reduce to an appropriately low materiality for the financial statements as a whole. This testing requires us to conduct significant audit financial statements are free from material misstatement, whether caused by fraud or error. This statements. apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by assurance of identifying material misstatements or omissions, it is not guaranteed to do so. Rather, the other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to amounts and disclosures in the financial statements sufficient to give reasonable assurance that the includes an assessment of: whether the accounting policies are appropriate to the Company s material inconsistencies with the audited financial statements and to identify any information that is Whilst an audit conducted in accordance with ISAs (UK & Ireland) is designed to provide reasonable work on a broad range of assets, liabilities, income and expense as well as devoting significant time of Company s members those matters we are required to state to them in an auditor s report and for no anyone other than the Company and the Company s members as a body, for our attdit work, for this An audit undertaken in accordance with ISAs (UK & Ireland) involves obtaining evidence about the the audit, to subjective areas of the accounting and reporting. Our report is made solely to the Company s members, as a body, in accordance with section 391 of Designated Activity Company (continued) Independent Auditor s Report to the Members of Cork Street CLO

12 designated designated designated CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER2015 STATEMENT OF COMPREHENSIVE INCOME For the period from 18 May 2015 (date of incorporation) to 31 December 2015 NoTes Period from 18/05/2015 to fur Interest income on investments as at fair value through profit 4 or loss 892,128 Interest expense on Notes issued designated as at fair value through profitorloss 5 (688,288) Net expense from derivatives (95,797) Net interest income Net realised and unrealised losses on investments as at fair value through profit or loss Net gains on derivatives Net unrealised gains on Notes issued as at fair value through profit or loss Net foreign exchange gains Net investment income Other expenses 108,043 6 (2,843,838) 7 1,539, ,237,819 4,103 5,045,673 9 (5,044,673) Net income for the period before taxation Taxation Net income for the period after taxation 1, (250) 750 Other comprehensive income - Total comprehensive income for the period 750 All profits above are in respect of continuing operations. The accompanying notes form an integral part of the financial statements. 10

13 designated designated CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY 2015 (DATE OF INCORPORATION) STATEMENT OF FINANCIAL POSITION As at 31 December 2015 T031 DECEMBER2015 Non-Current Assets Investments as at fair value through profit or loss Derivatives i ulv Asal 302,979,099 87,014, ,993,427 Current Assets Cash and cash equivalents Interest receivable on investments Swap interest receivable Amounts receivable for investment disposals Share capital receivable Total Assets ,757,688 1,314, , , ,501, ,495,060 Non-Current Liabilities Notes issued as at fair value through profit or loss Derivatives Current Liabilities Interest payable on senior notes issued Swap interest payable Taxation payable Amounts payable for investment purchases Expense accrual ,896,981 85,474, ,371, , , ,393, ,872 $3,122,447 Total liabilities 568,494,210 Equity Share capital Retained earnings Shareholders funds - equity The accompanying notes form an integral part of the financial statements. On behalf of the board Jarlath Canning Sean O Sy,livan Director Director Date: 11

14 CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 1$ MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015 STATEMENT OF CHANGES IN EQUITY For the period from 18 May 2015 (date of incorporation) to 31 December 2015 Share Capital iecuiiieu Earnings Total Balance at 18 May 2015 Total comprehensive income Share capital issued Balance at 31 December The accompanying notes form an integral part of the financial statements. 12

15 CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015 STATEMENT OF CASH FLOWS For the period from 18 May 2015 (date of incorporation) to 31 December 2015 Period-from 18/05/2015 to Cash flows from operating activities Interest income on investments 886,720 Net swap receipts/payments - Fees on investments (2,500) Other closing expenses paid (4,412,801) Cash used in operating activities (3,528,581) Taxes paid - Net cash used in operating activities (3,528,581) Cash flows from investing activities Investment purchases (226,851,494) Investments paydowns and disposals 2,308,343 Purchased interest and fees (1,309,483) Net cash used in investing activities (225,852,634) Cash flows from financing activities Gross proceeds from note issuance ,134,800 Share capital received - Net cash from financing activities 406,134,800 Effects of exchange rate changes on cash and cash equivalents 4,103 Net increase in cash and cash equivalents 176,757,688 Cash and cash equivalents at beginning of the period - Cash and cash equivalents at end of the period ,757,688 3

16 designated at designated CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER2015 NOTES TO THE FINANCIAL STATEMENTS General information TFieCompany was incorporated May 2015 with the name of Cleocrest Limited and company registration number of The Company changed its name from Cleocrest Limited to Cork Street CLO Limited on 13 October 2015 and registered as a designated activity company under the Irish Companies Act 2014 on 29 October The Company, a special purpose vehicle, was established as a qualifying company under Section 110 of the Taxes Consolidation Act, 1997 (as amended) to issue Notes and to use the proceeds thereof to invest in leveraged loans. The Company s issued Notes are listed on the Irish Stock Exchange. 2. Basis of preparation re (a) (b) (c) Statement of comp]iance The financial statements have been prepared in accordance with International Financial Reporting Standards (collectively IfRSs ) as adopted by the European Union (EU) and in accordance with the Companies Act Basis of measurement The financial statements have been prepared on the historical cost basis except for the following: Investments as at fair value through profit or loss Notes issued as at fair value through profit or loss Derivatives fair value through profit or loss Use of estimates and judgements The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets, liabilities, income and expense. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and Liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The principal uses of judgement and sources of estimation of uncertainty arise with respect to the determination of the fair value of the financial instruments. These judgements and estimates include but are not limited to the selection of appropriate valuation models and the determination of the appropriate valuation inputs. Key judgements made during the period include: Designating some financial assets and liabilities at fair value through profit or loss; Selection of appropriate valuation techniques in determining fair values; and Fair values of financial assets equivalent to their cost. The methods and key assumptions used by the Company to estimate the fair values on certain types of financial instruments is described on note 16. The Directors believe that the chosen valuation techniques and assumptions used are appropriate in determining the fair value of financial instruments. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is 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. (d) Functional and presentation currency These financial statements are presented in which is the Company s functional currency. Functional currency is the currency of the primary economic environment in which the entity operates. The issued share capital of the Company is denominated in and all of the notes issued by the Company are denominated in. The Directors of the Company believe that most faithfully represents the economic effects of the underlying transactions, events and conditions. 14

17 designated at designated CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015 NOTES TO THE FINANCIAL STATEMENTS (continued) 2. Basis of preparation (continued) (e) Going Concern The Company s financial statements for the financial period ended 31 December 2015 have been prepared on a going concern basis. The Directors anticipate that the investments will continue to generate enough cash flows on an on-going basis to meet the Company s liabilities as they fall due. The Notes in issue as at 31 December 2015 will mature in For these reasons, the Directors believe that the going concern basis is appropriate. 3. Significant accounting policies (a) Financial instruments The financial instruments held by the Company include the following: Investments as at fair value through profit or loss Notes issued as at fair value through profit or loss Derivatives fair value through profit or loss Class(fication las 39 establishes specific categories into which all financial assets and financial liabilities must be classified. The classification of financial instruments determines how these financial assets or liabilities are subsequently measured in the financial statements. There are four categories of financial assets: financial assets at fair value through profit or loss; loans and receivables; held to maturity investments; and available for sale financial assets. There are two categories of financial liabilities: Financial liabilities at fair value through profit or loss and other financial liabilities. The Company has designated its portfolio assets and notes issued as at fair value through profit or loss on the basis that, in doing so, the Company eliminates a measurement inconsistency which would otherwise arise from recognising related financial assets and financial liabilities on a different basis. The Company has classified the derivatives, which it has entered into to minimise the currency risk on non-euro denominated leveraged loans held, as derivatives measured at fair value through profit or loss. The Company applies clean pricing to its derivatives with accrued interest being presented separately. Recognition The Company recognises all financial assets and financial liabilities on the trade date at which the Company becomes a party to the contractual provisions of the instrument. Realised gains and losses on disposals are calculated using FIFO and are reflected as net realised and unrealised gains/losses on investments in the Statement of Comprehensive Income. Measurement Financial instruments classified as at fair value through profit or loss are initially measured at fair value, with transaction costs for such instruments being recognised directly in the Statement of Comprehensive Income. Subsequent to initial recognition, all instruments classified as at fair value through profit or loss, are measured at fair value with changes in their fair value recognised in the Statement of Comprehensive Income. Loans and receivables are initially measured at fair value net of directly attributable transaction costs and are subsequently measured at amortised cost under the effective interest method. Other financial Liabilities are initially measured at fair value (which equates to the proceeds received) net of directly attributable issue or acquisition costs. Other financial liabilities are subsequently measured at amortised cost under the effective interest method. 15

18 CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015 NOTES TO THE FINANCIAL STATEMENTS (continued) 3. Significant accounting policies (continued) (a) Financial instruments (continued) Fair value measurement principles The Company records its securities and notes issued at fair value. The fair value of leveraged loans is determined by pricing the portfolio using bid prices compiled by a pricing vendor (Markit Partners). Securities that are not publicly traded or whose market prices are not readily available are valued at fair value as determined in good faith by the Collateral Manager. Such determination of fair value involves subjective judgments and estimates. With respect to unquoted assets and liabilities, each is valued considering, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies that are public and other factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Collateral Manager considers the pricing indicated by the external event to corroborate and/or assist in the valuation. The fair value of the Notes issued is determined by reference to the value of the Company s assets less the value of all other liabilities of the Company. The only assets held by the Company are assets acquired by it with the Note issuance proceeds and assets arising from amounts earned on those assets acquired with the Note issuance proceeds. Since the Company is entitled to retain a reserved profit of 1,000 per annum, all liabilities arising are payable from such assets. Since the Notes issued are of limited recourse, the amounts ultimately repayable to the note holders is restricted to the excess of the assets, excluding accumulated retained profits, over the other liabilities of the Company. As such, the fair value of the Notes issued is equal to the excess of the value of the assets of the Company, excluding accumulated retained profits, over the value of its liabilities. The fair value of the asset swaps is determined by pricing the long and short legs of the swaps at the prices for the related leveraged loans plus accrued interest as adjusted for the interest rate differential between the respective currencies with the short leg being translated to Euro at the closing rate of exchange. Dc-recognition The Company derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the right to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in a transferred financial asset that is created or retained by the Company is recognised as a separate asset or liability. The Company derecognises a fmancial liability when its cancelled or have expired. contractual obligations are discharged or Offsetting Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the Company has a legal right to set off the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted by the accounting standards. For the financial period ended 31 December 2015, there were no financial assets or liabilities subject to enforceable, master netting agreements or similar agreements which would require disclosure. Impairment If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset shall be reduced directly. The amount of the loss shall be recognised in the Statement of Comprehensive Income. 16

19 - that - whose - for CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015 NOTES TO THE FINANCIAL STATEMENTS (continued) 3. Significant accounting policies (continued) (b) (c) (d) Cash and cash equivalents Cash and cash equivalents are comprised of cash held with banks which are subject to insignificant risk of changes in their fair values and are used by the Company in the management of its short term commitments. Interest income and expense Interest income and expense is recognised in the Statement of Comprehensive Income on an effective interest basis on financial instruments carried at amortised cost and on an accruals basis on financial instruments carried at fair value. Operating Segments An operating segment is a component of an entity: engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same entity); operating results are reviewed regularly by the entity s chief operating decision maker to make decisions about resource allocated to the segment and assess its performance; and which discrete financial information is available. The Directors are the chief operating decision makers. There is only one operating segment. (e) Taxation Corporation tax is provided on taxable profits at current rates applicable to the Company s activities. Deferred taxation is accounted for, without discounting, in respect of all timing differences between the treatment of certain items for taxation and accounting purposes which have arisen but not reversed by the reporting date except as otherwise required by las 12 Income Tax. Provision is made at the tax rates which are expected to apply in the periods in which the timing differences reverse. Deferred tax assets are recognised only to the extent that it is considered more likely than not that they will be recovered. (1) Transactions in foreign currencies Transactions, including income and expenditure, in foreign currencies are translated at the foreign currency exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the foreign currency closing exchange rate ruling at the reporting date. Foreign currency exchange differences arising on translation and realised gains and losses on disposals or settlements of monetary assets and liabilities are recognised in the statement of comprehensive income. (g) New standards and interpretations A number of new standards, amendments to standards and interpretations came into effect during the financial period ended 31 December See below for standards and applicable dates. Standards and interpretations applied for the first time EU Effective date: for financial years beginning on or after Annual improvements to IfRSs Cycle (12 December 2013) 1 February 2015 The above new standard, amendment to standards or interpretation had no impact on the financial statements of the Company. 17

20 designated designated designated CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015 NOTES TO THE FINANCIAL STATEMENTS (continued) 3. Significant accounting policies (continued) (g) New standards and interpretations (continued) A number of new standards, amendments to standards and interpretations in issue are not yet effective for the period ended 31 December 2015, and have not been applied in preparing these fmancial statements. See below for standards and applicable dates. New requirements not yet effective and not yet applied EU Effective date: for financial years beginning on or after Amendments to las 1: Disclosure Initiative (18 December 2014) 1 January 2016 Annual Improvements to IFRSs Cycle (25 September 1 January ) IFRS 9 Financial Instruments: Classification and Measurement (and reissue to include requirements for the classification & measurement.... Not of financial liabilities & incorporate existmg derecognition requirements ; and deferral of mandatory effective date of If RS 9 & amendments to transition disclosures) endorsed, expected to be endorsed None of the above new standards, amendments or interpretations, with the exception of IfRS 9 below are expected to have, when adopted, a significant impact on the Company s reported financial position. To the extent applicable, the standards will require new or additional disclosures to be made. IfRS 9 Financial Instruments: Classification and Measurement (IASB effective date periods beginning 1 January2018) This is the first part of a new standard on classification and measurement of financial assets and financial liabilities that will replace las 39, Financial Instruments: Recognition and Measurement. IFRS 9 has two measurement categories: amortised cost and fair value. All equity instruments are measured at fair value. A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the las 39 requirements. These include amortised-cost accounting for most financial liabilities, with bifurcation of embedded derivatives. No impact is expected as a result of the adoption of this standard. Period from 4. Interest income on investments as at fair value 18/05/2015 to through profit or loss 3 1/12/2015 Interest income on leveraged loans 892, Interest expense on Notes issued as at fair Period from value through profit or loss 18/05/2015 to Interest expense on Notes issued (688,288) 6. Net losses on investments as at fair value Period from through profit or loss 18/05/2015 to Other investment expense (2,500) Net unrealised losses on investments (47,613) Net realised losses on investments (187,211) Net foreign exchange movement on investments (2,606,514) (2,843,838) 18

21 designated CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 1$ MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015 NOTES TO THE FINANCIAL STATEMENTS (continued) 7. Net gains on derivatives Period from 18/05/2015 Net swap receipts/payments - Fair value gains on derivatives 1,539,546 1,539, Net unrealised gains on Notes issued as at fair Period from value through profit or loss 18/05/20 15 to Unrealised gains on Notes issued 6,237, Other expenses Period from 18/05/2015 to FUR Auditors remuneration (22,500) Investment manager fees (72,267) Administration fees (2,640) Financial reporting fee (5,000) Other closing expenses (4,942,266) (5,044,673) Auditors remuneration (excluding VAT) Statutory audit services (18,000) Tax advisory services (4,500) Other non-audit services - (22,500) In accordance with section 322(1) of the Companies Act 2014, auditors remuneration includes out of pocket expenses. The auditors remuneration excludes VAT. Aggregate Directors emoluments in respect of qualifying services are NIL and all other amounts in relation to Companies Act 2014 sections 305 and 306 are NIL. The Company did not have any employees during the period. 19

22 designated CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015 NOTES TO THE FINANCIAL STATEMENTS (continued) 10. Taxation nf 2S% whirh ic tlw Idch Cnrnnritinn Tax rate applying to income other than trading income. The effective tax rate is 25%. Period from 18/05/2015 to Corporation tax 250 Factors affecting tax chargefor the period Corporation taxation has been calculated based on the results for the period and the resulting taxation charge is as follows: Profit on ordinary activities before tax 1,000 Current tax at 25% 250 The Company is a securitisation vehicle meeting the conditions of 5110 of the Taxes Consolidation Act, 1997 (as amended). The principal consequences are that the Company is treated as carrying on a trade, albeit that any profits chargeable to corporation tax are taxable at a rate of 25% and the return payable to shareholders should be deductible for corporation tax purposes. 11. Investments as at fair value through profit or loss As at 31/12/201 5 fur Investments designated as at fair value through profit or loss 302,979,099 Asat fur Movements on investments in leveraged loans Opening balance - Purchase of investments 308,244,640 Paydowns and disposals (2,424,203) Realised losses on disposals ( ) Unrealised losses on revaluation (47 613) Foreign exchange movements (2,606,514) Closing balance 302,979,099 The carrying value of the Company s assets represents their maximum exposure to credit risk. The currency risk is eventually transferred to the swap counterparty through the Perfect Asset Swap (PAS) i.e., cross currency swap (see Note 12). The investment funds are held as collateral for debt securities issued by the Company. None of the investment funds were rated by any rating agency, therefore no credit rating is disclosed in these financial statements. Refer to Note 17 (a) Credit risk for credit note disclosure relating to the investment funds. As at Maturity analysis Maturing within one 1 Financial Year - Maturing in Ito 2 financial Years 6,704,162 Maturing in 2 to 5 financial Years 47,745,038 Maturing after 5 financial Years 248,529, ,979,099 20

23 - Assets - Liabilities - Liabilities designated 3.60% 6.20% CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 1$ MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER2015 NOTES TO THE FINANCIAL STATEMENTS (continued) 12. Derivatives TheTompany eliminates currency risk 5Teiitering into an asset swap which covers botbihe prmcipatälilf interest aspects of a non-euro denominated investment. The asset swap operates by exchanging the foreign currency purchase price of the investment for a Euro notional amount at an agreed exchange rate. Under the terms of the swap agreements, these initial agreed exchange rates also apply to all future receipts of interest on that investment and to any receipts arising from paydowns of the investment or the disposal of the investment. In effect, the asset swap converts the foreign currency asset to a Euro asset thereby eliminating currency risk from the point of view of the Company. Asat Asat Currency Notional Amount Swap Valuation Perfect assets swaps $9,905,557 $7,014,328 GBP (12,000,000) (16,043,143) USD (77,089,900) (69,431,639) Total 815,657 1,539,546 All derivatives have maturity dates of more than 5 financial years. 13. Cash and cash equivalents As at Bank accounts held with US Bank 176,757, Notes issued as at fair value through profit or loss As at Debt securities issued Interest Basis Maturity Class A-lA Notes IBOR+ 1.45% ,300,000 Class A-lB Notes IBOR % ,700,000 Class A-2A Notes IBOR % ,650,000 Class A-2B Notes FIXED % ,350,000 Class B Notes FIXED ,000,000 Class C Notes FIXED 4.50% ,000,000 Class D Notes FIXED ,000,000 Subordinated Notes Profit participation ,500,000 Total contractual amount due (nominal amount) 406,500,000 Discount on issuance (365,200) Accumulated fair value adjustment (6,237,819) Carrying amount at fair value 399,896,981 As at fur Opening balance - Issuances 406,500,000 Discount on issuance of notes (365,200) Redemptions - Movement in fair value (6,237,8 19) Closing balance 399,896,981 21

24 designated CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015 NOTES TO THE FINANCIAL STATEMENTS (continued) 14. Notes issued as at fair value through profit or loss (continued) The Notes issued by the Company are limited recourse due to which each class of Noteholder has the right to receive funds generated from the collateral assets to the extent that funds are available and the right of each class of Noteholder to receive funds is governed by the priority order of payments. Accordingly, the Company s obligation to Noteholders is limited to the net proceeds upon realisation of the collateral. Should the net proceeds be insufficient to make all payments due in respect of the notes, the deficit is borne by the Noteholders according to the established priorities. The Collateral Manager holds 5% of each class of Notes issued by the Company. All classes of Notes issued are collectively linked to the performance of the entire investment portfolio. There is a priority of payments for the principal and interest in relation to Class A being the most senior and then followed by Classes B, C, D and the Subordinated Notes being the most junior tranche. The swap counterparty has priority of payment over the Noteholders. The ratings of the Notes are: 31 December 2015 Fitch Moody s Class A-lA Notes AAA Aaa Class A-YB Notes AAA Aaa Class A-2A Notes AA Aa2 Class A-2B Notes AA Aa2 Class B Notes A A2 Class C Notes BBB Baa2 ClassDNotes BB Ba2 Subordinated Notes NR NR As at Maturity analysis Amounts falling due within one I Financial Year - Amounts falling due in 1 to 2 Financial Years - Amounts falling due in 2 to 5 Financial Years - Amounts falling due after 5 financial Years 399,896, ,896,981 The above maturity analysis is based on the legal maturity of the notes. In the case of certain structured notes, the notes are required to be redeemed on the occurrence of certain events specified in their final terms which may cause such notes to be redeemed prior to their legal maturities. The notes issued by the Company are listed on the Irish Stock Exchange. 15. Share capital As at Authorised 100,000 ordinary shares at 1 each 100,000 Issued andfully paid up 100 ordinary shares at 1 each 100 The Company has issued one class of ordinary shares which carry full voting and dividend rights. The Company manages its share capital as capital which is the only form of capital held by the Company. The Company manages its Notes issued as debt. 22

25 Quoted Valuation Valuation CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 1 8 MAY (DATE Of INCORPORATION) TO 3 1 DECEMBER NOTES TO THE FINANCIAL STATEMENTS (continued) 16. Fair values Thecarryingamiiirntc nf 11 th Cnmpiny c finnrii1 ict nci fthinni1 Hthi1fti t th rpnrting 1te_ approximated their fair values. Determiningfair values The determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of valuation techniques as described in accounting policy 3(a) under the sub heading Fair value Measurement Principles. Valuation offinancial instruments The Company measures fair values using the following hierarchy of methods: Level 1 market price (unadjusted) in an active market for an identical instrument. Level 2 techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived by prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data. Level 3 techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs could have a significant effect on the instrument s valuation. This category includes instruments that are valued based on quoted prices for identical or similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments. IfRS establishes a hierarchical framework which prioritises and ranks the level of observable inputs used in measuring financial assets and financial liabilities and fair value. The extent to which inputs are observable is impacted by a number of factors, including the type of instrument and the characteristics specific to the instrument. Financial instruments for which quoted prices are readily available will generally require a lesser degree ofjudgement applied in determining fair value than those with unobservable inputs. The financial statements include financial instruments whose values have been estimated in the absence of readily ascertainable market values. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and it is reasonably possible that the difference could be material. The three-level hierarchy for fair value measurement is defined as follows: Level 1 Level 2 Level 3 Inputs to the valuation methodology are quoted prices available in active markets for identical instruments as of the reporting date. Instruments included in this category include unrestricted securities listed in active markets. The Company does not adjust the quoted price for these instruments, even in situations where the Company holds a large position. Inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. Instruments which are included in this category include restricted securities listed in active markets, securities traded in other than active markets and derivative instruments, including certain swaps. Inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgement or estimation. Instruments that are included in this category include non-listed instruments, including certain swaps. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an instrument s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Directors assessment of the significance of a particular input to the fair value measurement in its entirety requires judgement and considers factors specific to the financial instrument. Level 2 prices use widely recognised valuation models for determining the fair value of common and more simple financial instruments such as interest rate and currency swaps that use only observable market data and require little management judgement and estimation. 23

26 CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 1$ MAY 2015 (DATE Of INCORPORATION) TO 31 DECEMBER 2015 NOTES TO THE FINANCIAL STATEMENTS (continued) 16. Fair values (continued) CbservabIe_prirc pnt-i mndelinpiitsre iicuii]uwii1ih1e in th mrkt fnr lictpcl t1ht miii cpiity cprlirities, exchange traded derivatives and simple over the counter derivatives, e.g. asset swaps. Availability of observable market prices and model inputs reduces the need for management judgement and estimation and also reduces the uncertainty associated with the determination of fair values. Availability of observable market prices and inputs varies depending on the products and markets and is prone to changes based on specific events and general conditions in the financial markets. The fair value of leveraged loans is determined by pricing the portfolio using bid prices compiled by an independent pricing vendor or, in the case of leveraged loans where bid prices are not available from an independent pricing vendor, the fair value are determined in good faith by the Collateral Manager. Such determination of fair value involves subjective judgments and estimates. With respect to unquoted assets and liabilities, each is valued considering, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies that are public and other factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Collateral Manager considers the pricing indicated by the external event to corroborate andlor assist in the valuation. The Collateral Manager may perform an enterprise value analysis to assess the credit risk of the loan or debt security and to determine the fair value of the equity investment in private/portfolio companies. Enterprise value is the value of the entire company to a market participant, including the sum of the values of debt and equity securities used to capitalize the Company at the measurement date. Enterprise value is determined using various factors, including cash flow from operations of the portfolio company, multiples at which private companies are bought and sold, and other pertinent factors, such as recent offers to purchase a portfolio company, recent transactions involving the purchase or sale of the portfolio company s equity securities, liquidation events, or other events. The Collateral Manager allocates the enterprise value to the Company s debt and equity securities in order of the legal priority of the securities. For more complex Level 3 instruments, proprietary valuation models are used which usually are developed from recognised valuation models. Some or all of the significant inputs into these models may not be observable in the market, and are derived from market prices or rates or are estimated based on assumptions. Examples of instruments involving significant unobservable inputs include certain over the counter derivatives and certain securities for which there is no active market. Valuation models that employ significant unobservable inputs require a higher degree of management judgement and estimation in the determination of fair value. For leveraged loans, the Collateral Manager may perform a yield analysis assuming a hypothetical current sale of the investment. The yield analysis compares interest rates, credit rating and leverage levels of the loans to those of comparable loans as determined by the Collateral Manager that have quoted prices. The Collateral Manager determines the fair value of the loans based on the yield. A change in the assumptions that the Collateral Manager uses to estimate the fair value of its loans using the yield analysis could have a material impact on the determination of fair value. If there is deterioration in credit quality, or a loan or debt security is in workout, the Collateral Manager may consider other factors in determining the fair value of a loan, including the value attributable to the loan from the enterprise value of the borrower or the proceeds that would be received if the borrower liquidated. Due to the inherent uncertainty of determining the fair value of assets that do not have a readily available fair market value, the values of the Company s assets and liabilities may differ significantly from the values that would have been used had a readily available market value existed for such assets and liabilities, and such differences could be material. 24

27 designated designated 296,274,937 (85,474,782) - 297,814,483 CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 1$ MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015 NOTES TO THE FINANCIAL STATEMENTS (continued) 16. Fair values (continued) At the reporting date, the carrvin amounts of investments held by the (ompv derivatives ntred into by the Company and Notes issued by the Company, which fair values were determined directly, in full or in part, by reference to published price quotations and determined using valuation techniques are as follows: Level 1 Level 2 Level 3 Total Fair Values Investments at fair value through profit or loss - 6,704, ,979,099 Derivatives $7,014,328 - $7,014,328 Notes issued as at fair value through profit or loss - - (399,896,981) (399,896,981) Derivatives - (85,474,782) (393,192,819) (95,378,336) All fair value measurements above are recurring. There were no transfers between levels during the period. Where transfers between levels arise, they are deemed to occur at the date of the event or change in circumstances that caused the transfer. The below table shows the roll-forward movements for investments and Notes issued classified under valuation technique unobservable parameters (level 3): Investments Assets measured atfair value based on Level 3 As at Opening balance - Purchases 6,564,825 Paydowns and disposals - Realised gains on disposals - Unrealised gains on revaluation 139,337 Foreign exchange movements - Movement between level 2 and 3 - Closing balance 6,704,162 Notes issued measured atfair value based on Level 3 As at Notes issued at start of the period - Issuances of notes 406,500,000 Discount on issuance of notes (365,200) Redemptions during the period - Net unrealised gains (6,237,819) Notes issued at end of the period 399,896,981 Level 3 valuations are based on unobservable inputs. Management believes that these do not have a material impact on the Company due to profit or loss being ultimately borne by the note holders at no loss to the Company. Sensitivity Analysis If the prices used to determine level 3 investment prices had been 10% higher/lower, the valuation of these investments would be 670,416 higher or lower. 25

28 CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 1$ MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015 NOTES TO THE FINANCIAL STATEMENTS (continued) 16. Fair values (continued) For each class of assets and liabilities not measured at fair value in the statement of finncinl nosition hut for which fair value is disclosed, the Company is required to disclose the level within the fair value hierarchy which the fair value measurement would be categorised and a description of the valuation technique and inputs used in the technique. The following table analyses, within the fair value hierarchy, the Company s measured at fair value at the year-end but for which a fair value is disclosed: assets and liabilities not As at 31 December 2015 Cash and cash equivalents Interest receivable on investments Swap interest receivable Amounts receivable for investment disposals Share capital receivable Interest payable on senior notes issued Swap interest payable Taxation payable Amounts payable for investment purchases Expense accrual Level 1 fur 176,757, ,860 Level 2 fur 1,314, ,094 - Level 3 Total fur 176,757,688 1,314, ,094 1t5, ,757,788 1,743, ,501,633 - (688,288) - (408,891) - (250) - (631,872) - (688,288) (408,891) - (250) (81,393,146) - (81,393,146) (83,122,447) 176,757,788 (81,378,602) - (631,872) (83,122,447) 95,379,186 Carrying amount of non-financial assets and liabilities as determined by the accounting are considered a reasonable approximation of their fair value. policies in Note Financial risk management The Board of Directors has overall responsibility for the establishment and oversight of the Company s risk management framework. The Company has exposure to the following risks from its use of financial instruments: credit risk, liquidity risk, market risk including currency risk, interest rate risk and other price risk. The risk profile of the Company is such that credit, market, liquidity and other risks of the investment and derivatives are borne fully by the holders of the Notes issued. 26

29 designated CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY2015 (DATE OF INCORPORATION) TO 31 DECEMBER2015 NOTES TO THE FINANCIAL STATEMENTS (continued) 17. Financial risk management (continued) (a) Credit risk Credit risk is the risk of fmancial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the default risk on the leverage loan investments. The maximum gross exposure to credit risk at the reporting date was: As at Investments as at fair value through profit or loss 302,979,099 Derivatives 87,014,328 Cash and cash equivalents 176,757,688 Interest receivable on investments 1,314,891 Swap interest receivable 313,094 Amounts receivable for investment disposals 115,860 Share capital receivable ,495,060 The Company s exposure to credit risk is minimal as the Notes issued by it are limited recourse. Consequently, any loss suffered on the investments held will reduce the amount which the Company is required to pay to the note holders. The junior note holders have a higher exposure to credit risk in the event of a default, but also they have a greater interest rate and the benefit of a profit participation feature as a premium for this exposure. The Company has engaged the Collateral Manager, Guggenheim Partners Europe Limited, to monitor this risk. The table below shows the fair value of the Company s portfolio of assets by Moody s credit rating as at 31 December2015: Rating As at 31 December 2015 Fair value 31 81,654,406 B2 111,925, ,155,194 Bal 9,938,300 8a2 4,413,552 Ba3 16,558,434 NR 29,332,077 WR 9,001,260 Total 302,979,099 27

30 CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY 2015 (DATE Of INCORPORATION) TO 31 DECEMBER 2015 NOTE S TO THE FINANCIAL STATEMENTS (continued) 17. Financial risk management (continued) (a) Credit risk (continued) The tables below show the geographical diversification of the Company s portfolio based on the fair value of the portfolio of assets as at 31 December 2015: Amount Fair value Percentage of Country Portfolio Cayman Islands 18,939,560 6% Finland 6,704,162 2% France 16,853,835 6% Germany 14,294,061 5% Ireland 16,277,548 5% Jersey, Channel Islands 1,006,135 0% Luxembourg 27,230,275 9% Netherlands 33,242,436 11% Norway 12,515,840 4% Spain 13,442,558 4% United Kingdom 30,324,908 10% United States 112,147,781 38% Total 302,979, % The table below shows the diversification of the portfolio by industrial sector based on the fair value of the portfolio of assets as at 31 December 2015: 2015 Percentage Industry of Portfolio Automotive 3% Beverage and tobacco 9% Broker, dealers and investment houses 2% Building and development 2% Business equipment and services 5% Cable and satellite television 12% Chemical/plastics 2% Clothing/textiles 3% Cosmetic/toiletries 9% Ecological services and equipment 5% Electronic/electrical 11% food products/food services 2% Health care 2% Home furnishings 5% Industrial equipment 6% Insurance 2% Lodging and casino 2% Oil and gas 3% Retailers (other than food/drug) 1% Surface transport 9% Telecommunications 3% Utilities 2% 100% 28

31 designated CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 1$ MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015 NOTES TO THE FINANCIAL STATEMENTS (continued) 17. Financial risk management (continued) (a) Credit risk (continued) Cash and cash equivalents The Company s cash balances are held with Elavon Financial Services limited which is rated Aa2 by Moody s. Swap counterparty credit rating The long term Moody s rating for the swap counterparty (JP Morgan) is Aa2. (b) Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its fmancial obligations as they fall due. The Company s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company s reputation. This is achieved by issuing Notes with a longer legal maturity period than loan investments. the maturities of the leveraged At 31 December 2015 Notes issued as at fair value through profit or loss Derivatives Interest payable on Notes issued Taxation payable Amounts payable for investment purchases Swap interest payable Expense accruals Carrying amount Gross contractual cash flows Due within one Financial Year Due in more than one Financial Year fur (399,896,981) (509,921,764) (688,288) (509,233,476) ($5,474,782) (85,474,782) (85,474,782) - (688,288) (688,288) (688,288) - (250) (250) (250) - (81,393,146) (81,393,146) (81,393,146) - (408,891) (408,891) (408,891) - (63 1,872) (63 1,872) (63 1,872) - (568,494,210) (678,518,993) (169,285,517) (509,233,476) (c) Market risk Market risk is the risk that changes in market prices, such as currency risk and interest rates will affect the Company s income or the value of its holdings of investments and derivatives. The note holders are exposed to the market risk of the investment portfolio. Market risk presents the potential for both gains and losses and includes currency risk, interest rate risk, and price risk. (t) Currency risk The Company is potentially exposed to exchange rates between, its functional currency, and certain foreign currencies namely GBP and USD each time an investment denominated in a foreign currency is acquired. The Company minimises this currency risk by entering into an asset swap which covers both the principal and interest aspects of a non-euro denominated investment. The asset swap operates by exchanging the foreign currency purchase price of the investment for a Euro notional amount at an agreed exchange rate. Under the terms of the swap agreements, these initial agreed exchange rates also applies to all future receipts of interest on that investment and to any receipts arising from paydowns of the investment or the disposal of the investment. In effect, the asset swap converts the foreign currency asset to a Euro asset thereby eliminating currency risk from the point of view of the Company. 29

32 CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER2015 NOTE S TO THE FINANCIAL STATEMENTS (continued) 17. Financia] risk management (continued) (c) (t) Market risk (continued) Currency risk (continued) As at Currency profile GBP investments 16,251,869 USD investments 73,659,594 89,911,463 All Notes issued by the Company are denominated in FUR. The table above shows the equivalent of foreign currency investments at fair value. The closing exchange rates used are as follows: 2015 : GBP : USD Sensitivity analysis The Company s accounts are denominated in while some of the investments made by the Company are denominated in USD and GBP. Changes in rates of exchange may have an effect on the value of or the income from these investments. A 10% strengthening in GBP against the Euro would result in a 10% or 1,625,187 increase in the value of GBP denominated investments and a 1,625,187 decrease in the value of the GBP to asset swaps with no net impact of profits or net assets. A 10% weakening in GBP against the Euro would have the opposite effect. A 10% strengthening in USD against the Euro would result in a 10% or 7,365,959 increase in the value of USD denominated investments and a FUR 7,365,959 decrease in the value of the USD to asset swaps with no net impact of profits or net assets. A 10% weakening in USD against the Euro would have the opposite effect. (ii) Interest rate risk Interest rate risk is the risk borne by an interest-bearing asset due to variability of interest rates. The Company is exposed to changes in its cost of financing arising from movements in the Euribor rate which forms the basis for the interest payments on the Senior Notes issued and the basis of the interest receivable on the leveraged loan investments held and asset swaps entered into. The Company has also issued profit participating Subordinated Notes. An increase in the cost of ffinding the Senior Notes reduces the returns earned by the subordinated note holders with no loss to the Company. 30

33 - 302,979,099-87,014, ,757, ,896, ,314, , , ,872 CORK STREET CLO DESIGNATED ACTIVITY COMPANY FORTHE PERIOD FROM 18 MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER 2015 NOTES TO THE FINANCIAL STATEMENTS (continued) 17. Financial risk management (continued) (c) (ii) Market risk (continued) Interest rate risk At 31 December 2015 Investments at fair value at profit or loss Derivatives Cash and cash equivalents Interest receivable on investment Swap interest receivable Amounts receivable for investment disposal Share capital receivables Financial Assets Fixed Floating Non-interest bearing fur FUR ,751, ,860 Total FUR 302,979,099 87,014, ,757,688 1,314,89! 313, , ,743, ,495,060 Notes issued at fair value through profit or loss Derivatives Interest payable on notes issued Swap interest payable Taxation payable Amounts payable for investment purchases Expense accruals Financial Liabilities Fixed Floating Non-interest bearing Total FUR FUR FUR FUR - $5,474, ,371, ,288-81,393, ,896,981 85,474, , , ,393, ,872 83,122, ,494,210 (ut) Other price risk Price risk is the risk that the value of the investments will fluctuate as a result of changes in market prices, whether caused by factors specific to an individual investment, its issuer or all factors affecting all instruments traded in the market. The Company is exposed to changes in the market values of the portfolio of leveraged loans which it holds as investments. A 10% increase in market prices would result in an increase of 10% or 3,029,791 in the value of the Company s investments. A 10% decrease in market prices would have the opposite effect. Due to the limited recourse nature of the Notes issued, any market value losses on the investments is offset by equal and opposite movements in the fair value of the Notes issued with no loss to the Company. Similarly, any market value gains on the investments are offset by equal and opposite movements on the fair value of the investments with no gain to the Company. 31

34 CORK STREET CLO DESIGNATED ACTIVITY COMPANY FOR THE PERIOD FROM 18 MAY 2015 (DATE OF INCORPORATION) TO 31 DECEMBER2015 NOTES TO THE FINANCIAL STATEMENTS (continued) 17. Financial risk management (continued) Td)OeTdtlonitHk exposure Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Company s processes, personnel and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Company s operations. The Company was incorporated for the purpose of engaging in these activities outlined in the preceding paragraphs. The administration of the Company is outsourced to a corporate administrator, Maples Fiduciary Services (Ireland) Limited. 18. Related party transaction The Company has identified the following transactions and balances which are required to be disclosed in accordance with the criteria set out in International Accounting Standard 24 Related Party Disclosures ( las 24 ). Transactions with key management personnel Guggenheim Partners Europe Limited has been appointed as the Collateral Manager for the Company for the purpose of performing certain management functions with respect to the Portfolio. Investment management fees during the period amounted to 72,267. The Collateral Manager holds 5% of each class of Notes issued by the Company (see note 14). Jarlath Canning and Sean O Sullivan, the Directors of the Company, are also employees of Maples Fiduciary Services (Ireland) Limited. The Directors do not receive any fees in their capacities as Directors of the Company. The Directors did not hold any shares in the Company during the reporting period or at the reporting date. Other key contracts Maples Fiduciary Services (Ireland) Limited acts as the Company s Corporate Administrator and MFD Secretaries acts as Company Secretary to the Company. The Company paid 11,91! for these services during the period. The Bank of New York Mellon Trust Company N.A. acts as Financial Reporting Agent and fees due to them during the period amounted to 5,000. These services are provided under normal commercial terms. 19. Subsequent events There have been no material events since the reporting date. 20. Ownership of the Company During the period, Paula Horan and Andrew Lambe both subscribed to 50 ordinary shares of 1.00 each and transferred all of their shares to Maples FS Trustees (Ireland) Limited on 05 June All shares in the Company are held on trust for charity. The Trustee shareholder is as follows: Name % Holding MaplesFS Trustees Ireland Limited The Directors have considered the issue of control and have determined that the control of the Company rests with the board. 21. Approval of linaitcial statements The financial statements were approved by the board of directors on 20 September