Replacement Annual Financial Report -23-
April 30 2010 - 11:47AM
UK Regulatory
+----------------+---------------------------+------------------------------+------------------------------+------------------------------+
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 December 2009
11. STATEMENT OF PORTFOLIO MOVEMENTS
An unaudited statement of changes in the schedule of investments is disclosed on
pages 81 and 82.
12. BUSINESS COMBINATIONS AND GOODWILL
The 'Busines Combinations and Goodwill' note is included for comparative
purposes. On 9 December 2008 the Company's wholly-owned subsidiary, Carador
Guernsey Limited, amalgamated with Abingdon Investment Limited ("Abingdon"), an
unlisted closed-ended investment company, following the approval of the
shareholders of Carador plc and Abingdon at separate EGMs held on 27 October
2008. As a result, Carador was considered to have obtained the power to govern
the financial and operating policies of Abingdon, and was therefore the
acquiring entity in this transaction. At the date of the amalgamation Abingdon
had a wholly owned subsidiary, Abingdon Finance Limited. The amalgamation was
effected by the transfer of the business, assets and liabilities of Abingdon
Investment Limited into Carador Guernsey Limited and subsequently into the
Company. The fair value and corresponding carrying amount of the identifiable
assets and liabilities of Abingdon and its subsidiary at the date of acquisition
and immediately before acquisition were:
+------------------------------------+--------------------+----------------------------+
| Balance Sheet | Fair | Carrying |
| | value | amount at |
| | | acquisition |
+------------------------------------+--------------------+----------------------------+
| Assets | EUR | EUR |
+------------------------------------+--------------------+----------------------------+
| Cash and cash equivalents | 15,862,109 | 16,666,084 |
+------------------------------------+--------------------+----------------------------+
| Receivables | 208,120 | 414,798 |
+------------------------------------+--------------------+----------------------------+
| Prepaid expenses | | 75,160 |
| | - | |
+------------------------------------+--------------------+----------------------------+
| Investments - available for sale | 17,525,168 | 23,157,484 |
| securities | | |
+------------------------------------+--------------------+----------------------------+
| Investment in subsidiary | 14,017,031 | 21,624,195 |
+------------------------------------+--------------------+----------------------------+
| | | |
+------------------------------------+--------------------+----------------------------+
| Total Assets | 47,612,428 | 61,937,722 |
+------------------------------------+--------------------+----------------------------+
| | | |
+------------------------------------+--------------------+----------------------------+
| Liabilities | | |
+------------------------------------+--------------------+----------------------------+
| Current Liabilities | 34,307 | 125,480 |
+------------------------------------+--------------------+----------------------------+
| Other Liabilities | 591,498 | |
| | | - |
+------------------------------------+--------------------+----------------------------+
| Total Liabilities | 625,805 | 125,480 |
+------------------------------------+--------------------+----------------------------+
| | | |
+------------------------------------+--------------------+----------------------------+
| Net Assets | 46,986,623 | 61,812,243 |
+------------------------------------+--------------------+----------------------------+
| Goodwill arising on acquisition | 406,160 | |
+------------------------------------+--------------------+----------------------------+
| Total consideration | 47,392,783 | |
+------------------------------------+--------------------+----------------------------+
| | | |
+------------------------------------+--------------------+----------------------------+
| Cost | EUR | |
+------------------------------------+--------------------+----------------------------+
| Shares issued, at fair value | 46,654,913 | |
+------------------------------------+--------------------+----------------------------+
| Costs associated with the | 737,870 | |
| acquisition | | |
+------------------------------------+--------------------+----------------------------+
| Total | 47,392,783 | |
+------------------------------------+--------------------+----------------------------+
| | | |
+------------------------------------+--------------------+----------------------------+
The total cost of the combination was EUR47,392,783 and comprised of the value of
the issue of 6,159,881 euro shares and 83,799,318 US dollar shares in Carador
plc to the previous shareholders of Abingdon and costs directly attributable to
the combination. An amalgamation ratio, based on a formula asset value (as
defined in the prospectus) at 31 October 2008, was used to calculate the number
of Carador shares that Abingdon shareholders were entitled to. The amalgamation
ratio was 7.4966. The fair value of these shares at the date of issue was
determined by reference to the published NAV of the Company at 30 November 2008.
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the period ended 31 December 2009
12. BUSINESS COMBINATIONS AND GOODWILL (continued)
+------------------------------------+-------------------+
| Cash outflow on acquisition | EUR |
+------------------------------------+-------------------+
| Net cash acquired with the | 15,862,109 |
| subsidiary | |
+------------------------------------+-------------------+
| Cash paid | (76,756) |
+------------------------------------+-------------------+
| Net cash inflow on acquisition | 15,785,353 |
+------------------------------------+-------------------+
| | |
+------------------------------------+-------------------+
| Cash inflow on consolidation of | 4,746,021 |
| Gale Force 4 | |
+------------------------------------+-------------------+
| Total cash inflow | 20,531,374 |
+------------------------------------+-------------------+
| | |
+------------------------------------+-------------------+
The goodwill acquired on amalgamation with Abingdon was allocated to one
cash-generating unit, being the investment in debt securities business segment,
for impairment testing. The recoverable amount of this cash-generating unit was
determined based on fair value calculations. Key assumptions were those as set
out in the accounting policies. The carrying amount of the unit exceeded the
recoverable amount by the value of the goodwill, and therefore the goodwill of
EUR406,160 was written-off.
Assets previously owned by Abingdon, but upon acquisition were owned by the
Company, contributed EUR50,353 in revenue in the prior period. It was
impracticable to disclose the revenue and profit or loss in the prior period as
though the acquisition had been at the beginning of the period for the following
reasons:
o the books and records of Abingdon and Abingdon Finance Limited for the
period prior to the amalgamation are held with another administrator;
o the accounting period differs from that of Carador plc; and
o the assets and liabilities on the books of the previous administrator were
not carried using accounting policies consistent with those applied by Carador
plc.
13. INVESTMENT IN SUBSIDIARIES
The Company's results are consolidated with those of its subsidiary, namely Gale
Force 4.
Gale Force 4
The Company owns 70.98% of the income notes of Gale Force 4. By virtue of the
provisions of SIC Interpretation 12 - 'Consolidation - Special Purpose Entities'
("SIC 12") the Company is deemed to control Gale Force 4 as it holds the
majority of the residual risk in Gale Force 4. At 31 December 2009 the
non-controlling interest in the net assets of Gale Force 4 on the consolidated
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