Thg Regulatory News (THG)

12 June 2012

Terrace Hill Group plc

("Terrace Hill", "the Company" or "the group")

GOOD OPERATIONAL PROGRESS IN FIRST HALF

Half-yearly report for the six months ended 31 March 2012

Financial highlights:

(1) Profit before tax excluding results from joint venture and associated undertakings, valuation movements and one-off financing costs.

Operational highlights:

Commenting, Robert Adair, Chairman of Terrace Hill, said: "I am encouraged by the group's progress in meeting its key objectives: growing our foodstore development business, maximising the realisation value of our residential and other legacy assets and reduction of debt. Whilst our EPRA NAV has remained fairly static, this does mask the substantial progress made and I look forward to seeing further advances in the current and future periods."

For further information, please visit www.terracehill.co.uk, or contact:

 CHAIRMAN'S REPORT

I am pleased to report our unaudited results for the half-year ended 31 March 2012, during which period we have continued to make good progress on our foodstore development programme, progressed our planned withdrawal from the residential sector and substantially reduced the group's look through debt exposure.

While our IFRS net assets have fallen to £39.5 million at 31 March 2012 (18.6 pence per share), as a result of the loss referred to below, our EPRA Net Asset Value has remained largely unchanged at 27.7 pence per share (30 September 2011: 28.2 pence per share) and our EPRA Triple Net Asset Value (NAV) is also similarly largely unchanged at 26.2 pence per share (30 September 2011: 26.6 pence per share). The EPRA NAV includes adjustments to reflect the market value of the group's development properties where the value is above cost and the EPRA Triple NAV takes account of contingent tax on prospective gains and other fair value adjustments.

The group made a revenue profit (stated before valuation movements on investment and development properties and contribution from our joint venture and associated undertakings) of £0.2 million. This is compared with a revenue profit for the 12 months ended 30 September 2011 of £5.6 million. The group's IFRS loss before tax, which includes valuation movements and contributions from our joint venture and associated undertakings, for the six months ended 31 March 2012 was £8.4 million (12 months to 30 September 2011: loss £10.2 million). These results include our share of losses of £3.6 million within our residential associated undertaking, a £3.1 million provision for our investment in a joint venture and the benefit of the Whitchurch foodstore transaction.

We continue to make good progress with the repayment of debt and re-financing and renewal of existing facilities. The group's net debt, which is heavily affected by the timing of receipts from our development programme, has increased by £3.5 million in the period. If the cash received on the completion of the Whitchurch and Sunderland transactions had been received by 31 March, our net debt would have fallen by £5.5 million since the last year end. We are pleased to have concluded the refinancing of our wholly owned residential properties with new maturities of two and three years and extended the maturity of the Terrace Hill Residential PLC loan to June 2014. As a consequence of the small increase in our net debt, our gearing has increased to 93.1% (30 September 2011: 86.0%) and our loan to value ratio has slightly increased to 50.6% (30 September 2011: 48.5%). Our net debt including our share of joint venture and associated undertakings has fallen significantly by £44.0 million to £104.6 million with our total net gearing percentage falling to 177.4% from 248.6% at 30 September 2011.

We continue to keep our dividend policy under review and believe that, for the time being, the suspension of dividend payments remains prudent and should continue. However, as I have previously stated, we wish to resume a progressive dividend policy as soon as sensible and we plan to bring forward proposals shortly to shareholders to restructure our shareholders' funds to create distributable reserves which will allow the payment of dividends when conditions allow.

In the commercial development division we are still very focused on our foodstore development programme which is now delivering strong returns. The recent sale of our site at Whitchurch to Sainsbury's and the completion, post period end, of the forward funding of our pre-let foodstore at Sunderland have generated cash for the group, albeit the cash was received after 31 March 2012. Our EPRA NAV includes 7.0 pence per share, up from 3.3 pence per share at 30 September 2011, reflecting the completion of the Sunderland transaction, the confirmation of planning consent for our pre-let Asda development at Skelton near Middlesbrough and progress at other sites. We continue to make good progress with all our committed foodstore development sites (which total approximately 600,000 sq ft) and are advancing a number of new opportunities from which we expect to add material NAV enhancement. Whilst there has been some slowdown in the expansion of Tesco we are continuing to receive good interest in our sites from the other major operators.

In central London we have continued to focus on office and mixed use developments. At Howick Place in Victoria we are seeing good tenant interest well ahead of the building's completion in September 2012, and at Conduit Street we expect to make a start on site later this year. Both of these developments are well placed to benefit from the strong demand for prime London West End office occupiers. In addition we are making good progress with a number of our legacy assets including unit sales at Filton and Christchurch, the completion of the pre - sold Northern Design Centre at Baltic Business Quarter, Gateshead and in Southampton we have exchanged a conditional pre-letting contract with the University of Southampton on proposals for a student housing scheme for our city centre site.

Our planned exit from the residential property sector is on programme having sold £90.0 million from all portfolios since September 2011, including a £75.4 million portfolio sale of the London and South East properties of Terrace Hill Residential PLC. We have strategies in place for the disposal of the remaining properties and the recent extension of our bank facilities supporting these portfolios will help us to optimise value from them.

Outlook

Despite the large discount which our shares trade at relative to the group's EPRA NAV, it is our intention to retain our stock market listing. We believe that our AIM listing is useful operationally and that the aforementioned discount will narrow over time as we demonstrate an improving performance.

I am encouraged by the group's progress in meeting its key objectives: growing our foodstore development business, maximising the realisation value of our residential and other legacy assets and reduction of debt. Whilst our EPRA NAV has remained fairly static, this does mask the substantial progress made and I look forward to seeing further advances in the current and future periods.

Robert F M Adair

Chairman

12 June 2012

Business review - Operations

Since reporting our year end results in January 2012, performance has been good on all our operational fronts: making substantial progress with our foodstore development programme, accelerated plans for the development of a number of our non-retail sites and selling a large portfolio of residential investment properties.

Foodstores

There has been some commentary lately about the appetite of the food store operators for continued expansion in the UK, and it is fair to say that some have reduced their growth programmes and capital expenditure budgets for new stores. This has been most highly profiled by Tesco who have stated that they will reduce the number of large new store openings for the time being and to a lesser extent by M & S and Sainsbury's who have cut their capital expenditure budgets in this area. We have no current deal negotiations with Tesco or M & S, and we are finding that demand from the remaining operators remains solid in their most desired locations. As a result we are continuing to hold active negotiations with Sainsbury's, Asda and Morrisons on a number of new sites and opportunities. In terms of our portfolio of existing sites we have commitments from retailers on the majority and are close to agreeing terms on the balance as summarised below.

London Road, Whitchurch

This site has been sold to Sainsbury's with the benefit of a detailed planning consent for a 55,000 sq ft foodstore and petrol filling station. This followed the grant of planning permission in November last year and the expiry of the Judicial Review period without challenge.

Wessington Way, Sunderland

Following the grant of detailed planning permission last November and the expiry of the Judicial Review period, we have forward funded this 98,697 sq ft pre-let Sainsbury's development with Osprey Equity Partners at a capital value of £35 million, reflecting a net initial yield of 5.0%. Construction is now well under way with completion scheduled for early Spring 2013.

Skelton, East Cleveland

We were granted detailed planning permission for this 41,800 sq ft Asda development in October 2011, however the consent became subject to a challenge by the Co-op during the Judicial Review period which was subsequently dismissed by the hearing judge as being without foundation. Forward funding has been secured at £13.5 million and construction of this development will start in June 2012.

Sedgefield, Co. Durham

We were granted detailed planning consent for a 48,786 sq ft foodstore plus a petrol filling station on this 7.1 acre site in December last year and subsequently entered into a pre-letting agreement with Sainsbury's for a 25 year term with RPI linked rent reviews. Funding negotiations are now well advanced and we expect construction to start in the middle of the year with completion scheduled for Spring 2013.

Altira Park, Herne Bay, Kent

At this 6.84 acre site on the edge of Herne Bay we have entered into a pre-letting agreement with Sainsbury's for them to take a 95,239 sq ft store plus petrol filling station for a 25 year term with RPI linked rental uplifts. We intend to submit a planning application towards the end of this year and expect to complete the development in mid-2014.

Middlehaven, Teesside

Progress towards the submission of a planning application on this site has been slower than expected, but we are hopeful that our application for a large Sainsbury's foodstore will be made by the end of this year. We have also agreed terms for the sale of land to a pub operator and two fast food outlets on the balance of this 16 acre site.

Hyde, Greater Manchester

Terms have been agreed with a retailer for the sale of this site subject to us obtaining a detailed planning consent for their use. We expect to make a planning application in the second half of 2012 on this strategically located site adjacent to the M67 to the South East of Manchester.

Prestwich, Greater Manchester

We are working on a number of scenarios concerning the development of our interests in Prestwich and expect to be in a position to submit a planning application for a foodstore-led development by the end of this year.

St Austell, Cornwall

We have been selected by Cornwall Council to be their partner in the redevelopment of their site close to the centre of St Austell. Our proposal is for a large foodstore development and both Morrisons and Sainsbury's have requirements for the town. We anticipate making a detailed planning application this autumn.

London Offices

Occupational demand for prime West End offices remains robust and our involvement in two mixed use development schemes is well timed to capitalise on the strength of this market.

Howick Place, Victoria

This is a mixed use development being carried out in joint venture with Doughty Hanson, and will comprise 135,000 sq ft of offices and 25,300 sq ft of residential apartments when it completes in September this year. There is considerable interest in the office space at strong rents and undoubted demand for the private apartments, which will be let. The affordable residential has been forward sold. The office and retail market in Victoria is currently being transformed by a huge amount of investment by Land Securities and other substantial landlords and developers and Howick Place will benefit from this renaissance.

Savile Row/Conduit Street, W1

In January 2012 we obtained detailed planning consent for the redevelopment of the buildings on the corner of Savile Row and Conduit Street into 22,500 sq ft of offices and 9,000 sq ft of retail space. This will almost double the density of developed space on the site in a location where office and retail rents are continuing to rise. The group is acting as development manager on the scheme and will earn consultancy fees as well as the likelihood of a performance related bonus. The development is due to start on site towards the end of the year.

Other developments

We have made progress with a number of our other development sites. In Southampton, at our site at Mayflower Plaza, we have exchanged a conditional pre-letting agreement with the University of Southampton for a student housing scheme. At Baltic Business Quarter on Tyneside we completed the 60,000 sq ft Northern Design Centre which had been pre-sold to and forward funded by Gateshead Council. In Christchurch we completed the first phase of small industrial units and have now sold 10 out of 17 units and at Farnborough and Filton, which are schemes held within the Terrace Hill Development Partnership, three office units were sold or let.

Residential investment

In our last year end report, we stated our intention to implement an orderly disposal of our residential investment assets so that we could deploy our capital into areas showing greater returns over the medium term. As a result, during the period, our associate Terrace Hill Residential sold a portfolio of 574 properties to Swedish property investor Akelius for £75.4 million and we completed other sales amounting to £14.6 million. We have also re-financed two wholly owned portfolios which has given us time to optimise returns from the sale process. We intend to continue this disposal programme over the next 18 months to two years.

BUSINESS REVIEW - FINANCE

Financial results and net asset value

Net Asset Value

The group's IFRS NAV fell by 18.0% in the six month period ended 31 March 2012 to £39.5 million (18.6 pence per share) from £48.1 million (22.7 pence per share) at 30 September 2011 while our EPRA NAV remained largely unchanged at £59.0 million (27.7 pence per share) compared with £59.8 million (28.1 pence per share) at 30 September 2011.

The IFRS NAV reflects only those transactions that have either completed or have exchanged and where the conditions for completion are totally within our control. The IFRS NAV also includes our developments at the lower of cost and net realisable value, while the EPRA NAV recognises the market value of these trading assets. The EPRA NAV and its movements are a key performance indicator and therefore the EPRA NAV represents a better reflection of the true value of the group. At 31 March 2012, the EPRA NAV adjustments include further recognition of profit at Sunderland and Skelton where the projects are significantly advanced and a small element in respect of our student housing scheme at Southampton.

The directors have reflected on the treatment of the group's deferred tax asset in the determination of its EPRA NAV and now considers it more appropriate to include the deferred tax asset in its EPRA NAV as it reflects trading losses which it expects to utilise over the next few years in the ordinary course of business. This is a change from the determination of the EPRA NAV as at 30 September 2011 and the previous EPRA NAV amount of 25.4 pence per share has been restated to 28.1 pence per share to reflect the inclusion of the deferred tax asset in the calculation.

The group's EPRA Triple NAV, which takes into account any tax payable on profits arising if all the group's properties were sold at the values used for the EPRA NAV, the write off of goodwill and any other fair value adjustments, also remained largely unchanged at £55.7 million (26.2 pence per share) from £56.5 million (26.6 pence per share) at 30 September 2011.

Statement of comprehensive income

Revenue for the six month period ended 31 March 2012 includes £1.9 million of rental income, £0.7 million of fee income and £13.8 million of income from sales. This latter figure includes £9.8 million from site sales, £1.5 million from the sale of industrial units at Christchurch, £1.8 million of construction contract progress payments, £0.3 million release of retention on the Bishop Auckland Sainsbury's project and £0.4 million in respect of the sale of housing units in Scotland.

Administrative expenses of £3.0 million for the six months to 31 March 2012 continue to reflect tight control over administrative costs.

The group incurred a loss in the period of £0.5 million as a consequence of the sale of certain of its wholly owned residential investment properties which were disposed of in advance of a refinancing.

The group has fully provided for its investment in Achadonn Limited, a joint venture which owns land in Scotland, following the decision by the joint venture partners not to provide further funding to support a bank loan which partly finances the joint venture. The amount of £4.0 million provided in the period as an impairment charge against associated undertakings and joint ventures includes full provision against our Achadonn investment. We are discussing with the bank the future of this project but at present consider it prudent to make a full provision.

Finance income less finance costs amounted to £1.0 million. There were no abnormal items in the period.

The post-tax loss of £3.6 million from the share of joint venture and associated undertakings almost wholly reflects the results at Terrace Hill Residential PLC, in which the group has a 49% interest. Terrace Hill Residential PLC is in the process of an orderly disposal of its property portfolio and in the period realised £85.0 million from sales which reflected a 3% discount to book value. This resulted in a loss on sales after costs of £4.2 million. Terrace Hill Residential PLC also incurred a loss on revaluation of its remaining portfolio of £2.0 million.

The group had a tax charge in the period of £0.9 million reflecting the restatement of its deferred tax asset at the current lower rate of corporation tax and the utilisation of losses used to shelter the property sales noted above.

Balance sheet

The group's IFRS Net Assets were £39.5 million at 31 March 2012. Non-current assets reduced to £29.8 million at 31 March 2012 from £36.3 million at 30 September 2011, due principally to the disposal of £5.3 million of wholly owned residential investment assets. Current assets reduced as cash was used to repay debt and invest in our development projects.

The group's net gearing as a percentage of our EPRA Net Assets was 93.1% at 31 March 2012, compared with 86.0% at 30 September 2011. The group's look through net gearing, which includes its share of net debt in those joint ventures and associated undertakings to which it has on-going liabilities, fell to 177.4% from 248.6% at 30 September 2011, reflecting the reduction in net debt at those undertakings.

Financial resources and capital management

The group finances its operations with its fixed capital, cash and debt facilities. As the group has not raised share capital for some time, the group focuses its attention on the management of its cash and debt position. Our net debt at 31 March 2012 was £54.9 million, an increase of £3.5 million since 30 September 2011. Our trading in the period was cash neutral, but our net debt increased due to the payment of a VAT liability on a sale at the beginning of the period and the payment of £1.6 million in respect of an interest shortfall guarantee, which had been previously fully provided for. As mentioned in the Chairman's statement, if the cash generated from the Whitchurch and Sunderland transactions had been received before 31 March 2012, our net debt would have fallen by £5.5 million since the last year end.

The group has been successful in the period in refinancing its residential bank loans. Since 30 September 2011, the group's two residential loans have been refinanced with new maturities of March 2014 and March 2015. The group has a further £5.0 million of short term debt to refinance and has commenced negotiations with the lender. The group's remaining debt matures at the earliest in May 2013. Within Terrace Hill Residential PLC, the maturity of its bank loan has been extended until at least June 2014. The extended maturities of the residential loans allow the group to continue its planned withdrawal from the residential sector in an orderly fashion.

Summary of debt position

The net gearing and loan to value percentages shown above are in relation to our EPRA NAV. All joint venture and associated undertaking debt has limited recourse to the group.

At 31 March 2012, the group had no interest rate hedging in place. As a consequence, the group benefits from the low current interest rate environment whilst actively managing its interest rate exposure and monitoring movements in swap rates. We believe that the risks associated with this strategy are manageable. 40.5% of joint ventures and associated undertaking debt is hedged with an average interest rate of 3.0%.

The group monitors its cash resources and future cash flows closely through its comprehensive rolling 24 month cash forecasts. The group regularly reviews the underlying assumptions supporting the cash forecasts and believes it has sufficient resources to execute its strategy for the foreseeable future.

Philip Leech

Chief executive

Jon Austen

Group finance director

12 June 2012

Independent review report to Terrace Hill Group Plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2012 which comprises the unaudited consolidated statement of comprehensive income, the unaudited consolidated statement of changes in equity, the unaudited consolidated balance sheet, the unaudited consolidated cash flow statement and related explanatory notes.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The interim report, including the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on AIM which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on AIM and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 March 2012 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on AIM.

BDO LLP

Chartered Accountants and Registered Auditors

London

United Kingdom

12 June 2012

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

Unaudited consolidated statement of comprehensive income

for the six months ended 31 March 2012

Unaudited consolidated statement of changes in equity

for the six months ended 31 March 2012

Unaudited consolidated balance sheet

at 31 March 2012

Unaudited consolidated cash flow statement

for the six months ended 31 March 2012

Notes to the half-yearly financial statements

for the six months ended 31 March 2012

1 Accounting policies

Basis of preparation

The financial information in this half-yearly report does not constitute the full statutory annual accounts within the meaning of Section 434(3) of the Companies Act 2006 and is unaudited.

The statutory annual accounts of Terrace Hill Group PLC for the year ended 30 September 2011 have been reported on by the company's auditors and have been delivered to the Registrar of Companies. The independent auditors' report on the annual accounts for 2011 was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006. The audited annual accounts for the year ended 30 September 2011 have been restated for the items referred to below in 'Restatement of prior periods' in respect of the Cash flow statement and Investments.

The half-yearly report has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRSs) as endorsed by the European Union.

The same accounting policies, presentation and method of computation are followed in these financial statements as were applied in the group's latest annual audited financial statements and using accounting policies that are expected to be applied for the financial year ending 30 September 2012. Although there are a number of IFRS and IFRIC amendments or interpretations issued since the 2011 annual accounts were published, none are expected to have a material impact on the group's reporting.

Going concern

The directors are required to make an assessment of the group's ability to continue to trade as a going concern. The directors have given this matter due consideration and have concluded that it is appropriate to prepare the interim financial information on a going concern basis.

The group maintains a rolling 24 month cash forecast that takes account of all known inflows and outflows. The cash flow includes estimates of a number of key variables including the assumed dates and amounts relating to property disposals and amounts that may be required to reduce indebtedness as a consequence of falling property values and re-financing. The cash flow is regularly stress tested to ensure that the group can withstand reasonable changes in circumstances that could adversely affect its cash flow. The key potential changes that the group has considered include: (i) the possible falls in value of the portfolio which could result in margin calls; (ii) increased funding costs if future loan to value covenants were breached; (iii) reduced debt facility levels on renewed facilities; and (iv) possible delays in the timing and reductions in proceeds from sales. After considering the potential cash flow sensitivities the directors believe that the group has sufficient resources to continue trading for the foreseeable future.

Restatement of prior periods

Residential property

The group's investment properties are revalued to fair value, with changes in fair value being recognised in the consolidated statement of comprehensive income. The same accounting policy is applied to residential investment properties held by the group's associate, Terrace Hill Residential PLC, which is reflected in the group's share of the associate's profits or losses recognised in the consolidated statement of comprehensive income and reflected in the group's share of the associate's net assets in the consolidated balance sheet .

In prior years the fair value of residential investment properties owned by the group and its associate has been interpreted as the Market Value applying the special assumption of vacant possession in accordance with RICS Valuation Standards VS 3 Appendix 4.

As a consequence of prices achieved on sales of residential properties during the financial year ended 30 September 2011 and following the stated intention to place the residential portfolio owned by Terrace Hill Residential PLC on the market, the board reviewed the valuation basis to be adopted for the purposes of fair value for residential investment property.

The board concluded that fair value, as required by IAS 40 "Investment Property", should be determined by adopting an investment value basis of valuation, as defined by RICS Valuation Standards VS 4, as it better reflects the price at which the residential properties could be exchanged between knowledgeable, willing parties in arm's length transactions and is more appropriate for inclusion in financial statements than the previous valuation basis. Accordingly, the investment value basis was adopted for residential property held by the group and the associate for the year ended 30 September 2011 and was retrospectively applied to prior periods.

The impact of the restatement on 31 March 2011 is to:

Cash flow statement

The cash flow has been restated from that published in the 30 September 2011 accounts for the period then ended to correct mis-classifications in the 'cash flow from operating activities' segment of the cash flow statement. The impact on the 30 September 2011 cash flow has been to decrease the depreciation and impairment charge by £3,738,000, increase the decrease in property inventories by £4,226,000, reduce the decrease in trade and other receivables by £2,864,000, and to reduce the increase in trade and other payables by £2,376,000. There was no change to cash generated from operations as previously reported.

Investments

The balance sheets at 30 September 2011 and 31 March 2011 have been restated to correct the mis-classification of an amount of £4,273,000 previously disclosed as a receivable within current assets. It is considered more appropriate to include the amount as 'other investments' under the heading of non-current assets. The impact of the restatement is to increase other investments by £4,273,000 and reduce trade and other receivables by the same amount. The restatement has no impact on net assets for both balance sheet dates.

2 Earnings per ordinary share

The calculation of basic earnings per ordinary share is based on a loss of £9,232,000 (30 September 2011: loss of £10,423,000 and 31 March 2011: profit of £1,378,000) and on 210,951,299 ordinary shares, being the weighted average number of shares in issue during the period (30 September 2011 and 31 March 2011: 210,951,299).

For 31 March 2012 and 30 September 2011 the calculation of diluted earnings per ordinary share is the same as that for basic earnings per share because of the loss in both periods. The calculation of diluted earnings per share for 31 March 2011 is based on a profit of £1,378,000 and on 211,497,353 ordinary shares, being the weighted average number of shares in issue during the period adjusted to allow for the issue of ordinary shares in connection with a share award.

3 Analysis of divisions

The group operates in two principal divisions, being commercial property development and residential property investment. The group does not operate outside the UK.

4 Investment properties

The group's commercial and residential investment properties including the residential investment properties held in Terrace Hill Residential PLC were valued on the basis of Market Value by CBRE Limited ("CBRE"') and Allsop LLP ("Allsop") respectively, external valuers, as at 31 March 2012 in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors and have been primarily derived using comparable recent market transactions on arm's-length terms. The total fees, including the fees for these assignments, earned by CBRE and Allsop from the group is less than 5.0% of the total UK revenues of CBRE and Allsop. The principal signatories of the CBRE and Allsop valuation reports have continuously been the signatories of valuations for the same addressee and valuation purpose as this report since 2006 and 2010 respectively. CBRE and Allsop have continuously been carrying out valuation instructions for the group for the same period. CBRE and Allsop have carried out Valuation, Agency and Professional services on behalf of the group for in excess of six years.

5 Investments

Associates and joint ventures

Other investments

Included in other investments is a balance due from Howick Place JV S.a.r.l. totalling £4,273,000 (30 September 2011 and 31 March 2011: £4,273,000) that has a final maturity date of 31 December 2014.

6 Development properties

No amounts are held in development properties in respect of construction contracts and retentions on such contracts are £Nil.

7 Trade and other receivables

The movement in the allowance for impairment in respect of amounts due from associates and joint ventures during the period was as follows:

The allowance is based on the directors' assessment of recoverability of amounts due from associates and joint ventures.

8 Bank overdrafts and loans

9 Post balance sheet event

On 3 April 2012, the group completed the forward funding of a foodstore transaction at Sunderland. See the Business Review -Operations for more information.

Half-yearly report

The half-yearly report is available, free of charge, from the company secretary, Terrace Hill Group PLC, 1 Portland Place, London W1B 1PN.