Trinity Capital Regulatory News (TRC)

Trinity Capital PLC

Consolidated financial statements for the year ended 31 March 2013 and cash distribution

Trinity Capital PLC (AIM: TRC), a fund created for investing in Indian real estate and infrastructure, announces its Preliminary Results for the year ended 31 March 2013.

The Company also announces a distribution to shareholders of 5.0 pence per share, equivalent to approximately £10,522,000 (the "Distribution"). The Distribution will be financed from the distributable reserve created by the cancellation of share premium account that took place shortly after the Company was admitted to AIM in 2006. The Distribution will be paid on 6 September 2013 to shareholders recorded on the register on 23 August 2013. The shares will be marked ex on 21 August 2013.

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Chairman's Report

Dear Shareholder

During the financial year to 31 March 2013, Trinity Capital plc ("Trinity" or the "Company") sold one investment, our holding in DB Realty, which generated proceeds of £12.0 million. This resulted in a distribution to Trinity's shareholders of 5p per share in November 2012. As previously announced the Company's investment in Luxor Cyber City was sold after year end for net proceeds of £9.2m. We have today announced a further distribution of 5p per share.

Weak economic conditions in India have reduced demand for property in the country's main cities, including for assets such as Trinity's. India's GDP growth during the quarter ended 31 March 2013 was 4.8% pa, which was the lowest rate in a decade and a sharp slowdown compared with the more than 9% growth rates experienced two years previously. A strong rebound in economic growth does not appear likely, with capital investment and private spending expected to remain sluggish. Foreign direct investment in the fiscal year to 31 March 2013 fell by 38% to US$22.4 billion. During the year to 31 March, the Bombay Stock Exchange's Realty Index was flat. Indian inflation, as measured by the wholesale price index, in the year to end-March was 6.0%, a 3 year low. With declining inflationary pressures, the Reserve Bank of India reduced its repo rate to 7.25% in May 2013, the third reduction since January. The central bank is cautious regarding further cuts and demand for property will not be stimulated as long as there is limited appetite from traditional lenders to provide mortgage finance. High interest rates of 18-20% pa normally demanded by non-bank lenders for loan maturities of 2 to 3 years make it difficult for developers to obtain cost effective financing. The prospect of national elections scheduled to take place in 2014 has added to the general business uncertainty prevailing in India.

Trinity's net asset value per share declined by 17% to £0.23 at 31 March 2013 from £0.28 a year previously, which was primarily due to the November distribution of £0.05 to shareholders. Net assets stood at £48.2 million at the financial year end. The Rupee declined by 1.0% against sterling during the year to 31 March 2013 and, by the end of July, had depreciated by a further 10.8%. The six remaining investments in India held by Trinity at 31 March 2013 were together valued at £41.1 million, equivalent to £0.20 per share, after allowing for the co-investors' interests. As in previous years, a description of each asset and its current status is provided in the Investment Manager's Report.

At 31 March 2013, the two funds managed by SachsenFonds were invested in four companies in which our wholly owned subsidiary, Trinity Capital Mauritius Limited ("TCML") is an investor. Shareholders may recall that SachsenFonds brought a case against Trinity in Mauritius which was dismissed on jurisdictional grounds in 2011. SachsenFonds has appealed the order of dismissal and that appeal is now scheduled to be heard towards the end of 2013.

Under the shareholder agreements governing the joint investments, a certain degree of cooperation with SachsenFonds is required. However, our co-investors have been uncooperative in furthering exits because they have said they do not want to "crystallize" losses without receiving additional compensation not reflected in the relevant contracts. Inevitably, this strategy of ignoring the realities of the Indian property market in the hope that declines in market value will not be reflected in eventual sales prices has delayed realisations. We struggle to understand how investors in the vehicles managed by SachsenFonds will benefit from this strategy because there is a substantial risk that values will continue to decline caused by the combination of rising construction costs, falling asking prices, limited demand for property in Mumbai and the National Capital Region and currency depreciation. We would very much like to make these points to the ultimate investors in the vehicles managed by SachsenFonds but, as they are not listed, it has not proven possible to do so.

The decision to sell TCML's investments where SachsenFonds is not involved has been more straightforward. Although development of the Jodhana site has been delayed due to licensing issues, local property prices in Jodhpur remain buoyant and Indiareit is in discussions to sell our interest to our joint venture partner. The forthcoming listing of Horizon through a reverse takeover and merger with other SKIL group companies will provide a potential liquidity event that causes the put option to fall away. Following listing and subject to liquidity in the shares, the investment in Horizon can be sold in the stock market.

The Board remains committed to controlling costs. Effective 1 February 2013, the Company and TCML agreed with Indiareit Investment Management Company ("Indiareit") to amend the terms of its appointment as investment manager. The fixed cost of managing the investment portfolio has been cut in favour of further incentives to accelerate the pace of realisations. The annual investment management fees payable to Indiareit have been reduced to US$198,000 from US$1.7 million. In return, the performance fees have been amended to incentivise early realisation of the remaining investments and the previous partial holdback of fees earned is no longer being applied. The money previously held in escrow and provision for payment of performance fees have been adjusted consistent with the terms of the new fee agreement and the Board's projections for the timing of realisations of the remaining investments. Further details of the previous and new investment management arrangements are provided in note 4 to the financial statements.

At 31 March 2013, Trinity held cash of £10.2 million. The Board carries out regular solvency and liquidity tests and intends to make further distributions to shareholders as investments are sold and liabilities are reduced. The Company recently announced the realisation of its investment in TC-14/ Luxor Cyber City, generating proceeds of £9.2 million . The Company has today announced a distribution of 5p per share to be made on 6 September 2013 to shareholders on the register on 23 August 2013.

Given the limited prospects of turnaround in Indian real estate and the continuing risk of Rupee depreciation, the Board remains of the view that early realisation of all of our investments is in the best interests of investors in both Trinity and the funds managed by SachsenFonds.

The Board is appreciative of your continued patience and support.

Yours faithfully

Martin M Adams

Chairman

13 August 2013

Investment Manager Report

Indian Real Estate Overview

The Indian economy has grown at the slowest pace in ten years in FY 2013 at 5.7%. The fiscal deficit at 5.2% estimated for FY 2013 also continues to strain the state's finances. The decline in currency has been a significant cause for worry (the Indian rupee has declined by nearly 12% over the past year and has touched all-time lows several times during the past month). Though the government and the central bank are directing efforts towards stabilising the rupee, the monetary policy adopted has been insufficient to achieve the desired effect so far and a sustained problem is expected to have a negative impact on growth over the medium-to-long term. Inflation, though, has moderated and the wholesale price index based inflation was at 4.86% in June 2013 down from 7.5% levels in April 2012.

The primary reason for the state of the economy is being attributed to policy paralysis on part of the government over the past couple of years and which is generally expected to continue until the General Elections are held in 2014. Although reform measures such as permitting foreign direct investment in multi-brand retail, aviation, insurance and broadcasting announced during second half of the current financial year does break the hiatus and are seen as politically motivated steps, its translation into a revival of investment and consumer demand will take time.

Budget update

The last Indian budget announced in February, 2013 has deferred the controversial General Anti Avoidance Rules ('GAAR') implementation to the Financial Year 2015-16, thus leading to less uncertainty for foreign investors to plan their transactions and structuring. Some onerous provisions were introduced in the budget such as applicability of withholding tax on buyback of shares by a company which may impact exits through such a route.

Residential real estate update

The absorption rate (net absorption as a percentage of available stock) of residential units remained largely stable during the first quarter of 2013 at 13.6%. On an overall basis, sales have been slow and a large amount of unsold inventory has led to developers reducing their launch pipeline. This trend is expected to continue in 2013 with fewer launches - however, developers are expected to hold up prices and aim to maintain a steady off take. (Source: Real Estate Intelligence Service, JLL).

Mumbai, though, has witnessed a sharp slowdown in sales velocity and also some price correction, due to the earlier price rally and a significant upcoming supply in certain sub-markets.

Commercial real estate update

The occupier focus continues to be on consolidation and more efficient use of their existing portfolio. As a result, leasing activity has been moderate - the absorption in calendar year 2012 was at 28m sq.ft, down 21% year on year. Correspondingly, supply also has been lower (24m sq.ft, 50% below initial estimates) with developers deferring construction schedules and holding off new project launches. Bangalore is the only market to witness stable demand; while absorption rates in other markets were down 15-40% over the year. Rentals have remained largely stable except for appreciation in few prime locations in Mumbai and Bangalore (Source: JP Morgan).

Concerns over the global economic outlook are expected to continue to weigh on occupier sentiment in the short to medium term and the overall mood in the leasing market is expected to remain cautious.

Trinity's investments are also impacted by the macro-economic as well as regulatory factors. We provide below a detailed update on each asset and likely exit strategy.

Summary of Investments

Luxor Cyber City

An exit was secured by Trinity from its investment in Luxor Cyber City in August, 2013. The investment was held through the Mauritian subsidiary company (TC-14), in which Trinity held 85%. The remaining shareholding was held by Immobilien II/ SachsenFonds and the decision to exit was taken in consultation with them. The exit involved purchase of shares held by TC-14 in Luxor Cyber City by the promoters.

The valuation of the asset had seen significant erosion over the past several valuation exercises given worsening market dynamics and adverse impact owing to changes in tax laws. The realization terms were attractive given that it provided an opportunity for immediate exit at a value which was at a significant premium to the 30 September 2012 carrying value, and also doing away with the market, execution, regulatory and currency risks.

The total consideration to Trinity Capital was INR 870 million (GBP 9.2 million).

Jodhana

Market overview

Jodhpur is a historic city located in the western Indian state of Rajasthan with a population of over 1.0 million and an economy thriving on handicrafts and tourism. The city has witnessed heightened activity in residential real estate segment in last couple of years owing to the development by local and regional developers. The demand comes primarily from wealthy businessmen residing within Jodhpur and Non-Resident Indians who originally belong to Jodhpur and are keen to maintain a link with the city. 

Project Location overview

The project site is located in the precincts of the Umaid Bhawan Palace (residence of the former Maharaja (King) of Jodhpur) - an iconic monument that attracts tourists and travelers from across the world and lends significant prestige to the area, allowing for new developments to be positioned as high-end products. A large part of the palace is managed as a luxury hotel by the Taj Group.

Partner/ promoter overview

The project is a joint venture with Marudhar Hotels Pvt. Ltd. (MHPL) (a company promoted by the Maharaja of Jodhpur), which is also the owner of the project land. The Indian investee company (SPV) has acquired development rights over the land from MHPL and the project is being developed by the SPV. The Maharaja is a prominent ceremonial figure and commands significant respect and authority.

Development overview

The development plan is to undertake a high-end villa development on the 19 acre land parcel. The plan for the 9.7 acre land parcel is to undertake plotted residential development.

The status on ground remains the same as mentioned in the September, 2012 report - layout plan approval for the 19 acre master plan has been obtained and infrastructure works had commenced on site. The procedural issues which had arisen are still being reviewed with the government authorities and the partner. These have taken longer than expected to resolve, and construction activity has been stopped until these are resolved.

Exit rationale/ strategy

The Manager has begun exploring the possibility of a strategic sale/ developer buy back at an appropriate value in order to provide a timely exit to TC-17.

Uppals IT Park "Tech Oasis"

\* TCML also provided £7.5 million of mezzanine debt to TC1 in October 2008.

Market overview

As mentioned in our previous update, the farmer issue continues with some farmers challenging the legality of the land acquisition by the Greater Noida/ Noida authorities in higher courts. However, not much progress has been made in those cases by the Courts. Meanwhile, construction activity in the region continues full swing after the master plan of the entire Greater Noida area was re-validated by a government planning board.

The region continues to be plagued with severe oversupply of office space with around two thirds remaining vacant.

Project location overview

The Yamuna Express way which was opened last year, has been the fulcrum of real estate activity in the region. Being a 165 km long access controlled six-lane concrete pavement expressway connecting NCR with the northern hinterlands, terminating at Agra (a major city in the northern Indian state of Uttar Pradesh), the expressway has led to increased accessibility of the region. The project land has frontage on this expressway. The Indian Grand Prix is held in October each year on the Formula 1 race track which is located very close to the project site. The region has seen heightened real estate activity even several kilometres further from our site towards Agra, however this has been limited to the residential sector only.

Partner/ promoter overview

There is no Indian partner/ promoter in the project.

Development overview

The project land is zoned for the IT/ITES industry and has received approval as a Special Economic Zone (SEZ) from the Indian government. The requisite lease premium has been paid to the local authority.

Since the development has to be done in line with the zoning and approval received, the product mix does not justify any development. This has been the case since inception - hence, the site is still at land stage. During Oct, 2011 to Aug, 2012, in any case no construction work was permitted by the authorities due to the requirement for re-validation of the area's master plan. Subsequent to such re-validation, the company has followed up with the authorities and obtained approval for construction of a boundary wall on site. The design of the boundary wall has since been frozen, the necessary BOQs drawn up and quotations obtained from the contractors. The company plans to proceed with construction of the boundary wall once the contractor has been finalized.

Uppals IT had applied for an extension of timelines for completion of phase I of the project and has now obtained further extension from GNIDA until May, 2014 for completion of the said milestones.

As regards the farmer issue with higher courts, apart from the risk as to status of ownership, there may also arise a situation whereby landowners such as Uppals IT are asked by the authority to share in the enhanced compensation to be paid to the farmers. However, this outcome, though a risk, is remote.

Exit/ realization strategy

The immediate focus remains protection of land value. The Investment Manager will be evaluating any possible realization strategies as they emerge. Any exit decision would need to be taken in consultation with Immobilien I and II.

Horizon

Market overview

India is emerging as one of the world's leading consumer markets with the rising middle income group. Estimated at $991 billion in 2010, total consumption expenditure is expected to grow to nearly $3.6 trillion in 2020. To service such a large market at shortest possible time with least cost, the logistics sector is expected to play a key role. Currently, India's logistics sector is valued at around $110 billion and is expected to touch $200 billion by 2020. Not only is there a scope for growth in this sector, what is needed are efficient players who can help reduce the cost of logistics as a whole. (Source: www.ciilogistics.in)

Project location overview

Horizon's projects include container freight stations, free trade warehousing zones, inland container depots and logistics and warehousing facilities and are located across the country.

Partner/ promoter overview

SKIL Group, the promoter shareholder of Horizon is a leading player in the Indian infrastructure industry and has executed large scale projects nationwide. It is the SKIL group's expertise which will enable execution of Horizon's projects and creation of value.

Development overview

The company continues to progress its various projects with the objective of creation of greater substance in the Company, and ultimately capturing greater value at the time of listing.

Exit/ realisation strategy

The company and the promoters have progressed the proposed merger of Horizon and flagship company SKIL with another listed entity of the group. The merger process is now in advanced stages. Since the flagship company of the group SKIL also forms part of the merger scheme, this should enable the capture of greater value by the combined entity at the time of listing.

Meanwhile, an agreement with the promoters for TC4's exit at a base price of Rs. 22 per share in 2013 continues to be in place. If, however, the listing happens before option exercise date in September, 2013, the agreement terminates.

There exists a possibility of an upside (or downside), if the merger happens and listed shares are traded at a higher (or lower) price than the base price of Rs. 22 per share. However, shares in the existing listed entity into which Horizon will merge have been depressed in recent months.

Lokhandwala

Market overview

Mahalaxmi has become a highly sought after residential hub of South Mumbai. The micro market is seeing a significant amount of supply with several iconic projects having been launched and under construction. In fact, the general market slowdown and the quantum of upcoming supply in the specific sub-market is putting pressure on prices - a few recent projects by well-known developers have been launched at prices 15-20% lower than those prevailing.

Project location overview

The micro market boasts a top quality social infrastructure including premium hotels such as Four Seasons and the recently opened Shangri-la. The nearby high street development known as Phoenix Mills, complete with outlets of all leading clothing brands (such as Zara, Giorgio Armani etc), a multiplex cinema, high end food and beverage outlets, entertainment zone etc is a well-known social destination. Besides, the area is a commercial hub as well with several well-known buildings such as Indiabulls Financial Centre, Peninsula Corporate Park, Peninsula Business Park, One Indiabulls Centre etc. in the vicinity.

Promoter/ partner overview

Lokhandwala Infrastructure, a large Mumbai based developer having a strong presence in the slum rehabilitation/ redevelopment space, is the majority partner in the company, and is leading the project development. The Lokhandwala Group has developed over 10 million sq. ft. of other projects in Mumbai including slum redevelopments.

Development overview

The nearly 2,100 slums that were at the site had already been cleared and re-located. The construction of the slum rehab area is now progressing well and is expected to be completed by the end of 2013. With one of India's best contractors (Larsen and Toubro) having been appointed for the construction of the free sale area, the pace of construction is steady after the commencement of construction had been delayed by over 2 yrs due to several reasons. The project was launched as "Minerva" and comprises two proposed towers of around 84 floors each, including stilt and podium parking and amenities in addition to the slum rehabilitation buildings - around 50% of the project has now been sold.

The project is however facing several serious challenges which has impacted its valuation as well. A few of the critical approvals such as 'Floor Area Ratio' construction density (which is presently approved at 25% below that projected) and the final height clearance of the Minerva tower are still pending. The construction costs have seen a significant increase over those projected largely on account of inflation and change in design resulting in increase in prices of raw materials, labour and financing costs. The sales velocity has been severely hit recently on account of a general slowdown in the market and excess supply.

Besides, the impact of the recently introduced Development Control Regulations ('DCR') still is not fully clear. For the purpose of this valuation exercise as well, CBRE has maintained its assumption that the new DCR will apply only to the additional floor space (which has not yet been approved).

Exit/ realisation strategy

Several realisation alternatives are being evaluated, including a strategic sale/ developer buyback during the development phase of the project.

Any exit decision would need to be taken in consultation with Immobilien II who are partners in TC5 and this may pose several challenges in realising a timely exit.

DB (BKC) Realtors

TC10's investment in DB (BKC) Realtors Private Limited ("MK Malls") consists of (a) equity; (b) redeemable optionally convertible cumulative preference shares ("ROCCPS"); and (c) compulsorily convertible preference shares ("CCPS"). In 2007 and 2008, the capital structure of TC10 was reorganised such that the shares acquired by Immobilien I and Immobilien II in TC10 provided the economic interest in the equity and ROCCPS. TCML was issued with shares in TC10 which provide the economic interest in the CCPS, with a return on equity capped at an IRR of 20%. The figures below refer only to the economic interest in the CCPS.

MK Malls is engaged in an attractively located commercial office development in the Bandra Kurla Complex business district of Mumbai.

The amount due to TC10 on exercise of the right to sell all CCPS (in which TCML has economic interest) after the expiry of three years from date of allotment has still not been paid by the promoters. However, after a long period of stalemate, dialogue has begun over the past couple of months between the Manager and the promoters towards providing an exit to Trinity.

Should the proceeds of sale be received by TC10, Immobilien I and Immobilien II, who together own 88% of TC10, can block the distribution of cash to TCML.

Directors' Report

The Directors have pleasure in presenting their report and financial statements of the Group for the year ended 31 March 2013.

Principal activity and incorporation

The Company is a closed-end investment company, incorporated on 7 March 2006 in the Isle of Man as a public limited company. Its shares were admitted to trade on the Alternative Investment Market of the London Stock Exchange on 21 April 2006.

The Group has invested in real estate and real estate related entities in India, primarily in commercial development in the office and business space, residential, retail, hospitality, and infrastructure sectors deriving returns from development, long-term capital appreciation and income.

In March 2009, shareholders voted to change the Company's investment policy by requiring the Company to gradually dispose of its assets over time and return capital to investors.

The Group has no employees.

The consolidated financial statements comprise the results of the Company and its subsidiaries (together referred to as the "Group").

Results and dividends

The Group's results for the financial year ended 31 March 2013 are set out in the Consolidated Statement of Comprehensive Income.

A review of the Group's activities is set out in the Chairman's Report and the Investment Manager's Report respectively.

During the year, the Company paid distributions of £10,519,000 (2012: £22,095,000).

Directors

The Directors of the Company during the year and to date of this report were as follows:

Martin Adams (Chairman)

John Chapman

Stephen Coe

Arvind Pahwa (resigned 12 December 2012)

Graham Smith

Pradeep Verma

None of the Directors had interests in the shares of the Company at 31 March 2013 (2012: none).

Details of the Directors' remuneration are provided in note 12.

Company Secretary

The secretary of the Company during the year and at the date of this report was Philip Scales.

Auditors

The auditors, KPMG Audit LLC, being eligible, have expressed their willingness to continue in office in accordance with Section 12(2) of the Isle of Man Companies Act 1982.

On behalf of the Board

Graham Smith

Director

13 August 2013

Statement of Directors' Responsibilities in Respect of the Annual Report and the Financial Statements

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 financial statements for each financial year, which meet the requirements of Isle of Man company law. In addition, the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards, as adopted by the EU.

The financial statements are required by law to give a true and fair view of the state of affairs of the Group and Parent Company and of the profit or loss of the Group for that period. 

In preparing these financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with International Financial Reporting Standards, as adopted by the EU; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and Parent Company will continue in business.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and to enable them to ensure that its financial statements comply with the Companies Acts 1931 to 2004. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation governing the preparation and dissemination of financial statements may differ from one jurisdiction to another.

Corporate Governance Statement

The UK Corporate Governance Code does not directly apply to companies incorporated within the Isle of Man but the Company's Board has developed its internal procedures to be in line with the recommendations of the UK Corporate Governance Code where appropriate and these are monitored on a regular basis. The Directors will continue to comply with the relevant requirements of the UK Corporate Governance Code to the extent that they consider it appropriate having regard to the Company's size and the nature of its operations. The Board is not aware of any reason that would cause it to reconsider its current approach.

Responsibilities of the Board

The Board of Directors is responsible for the implementation of the investment policy of the Company and for its overall supervision via the investment policy and objectives approved by shareholders. At each of the Company's regular Board meetings, the financial performance of the Company and its portfolio investments are reviewed.

The Board is also ultimately responsible for the Company's day-to-day operations, but in order to fulfil its obligations, the Board has delegated operations through arrangements with the Investment Manager and the Administrator. All Board members are non-executive.

Audit Committee

The Audit Committee is a sub-committee of the Board and makes recommendations to the Board which retains the right of final decision. The Audit Committee has primary responsibility for reviewing the financial statements and the accounting policies, principles and practice underlying them, liaising with the external auditors and reviewing the effectiveness of internal controls. The Audit Committee maintains a risk register to help it identify, evaluate, monitor and control risks. The Committee members are Stephen Coe (Chairman) and Pradeep Verma.

The terms of reference of the Audit Committee covers the following:

• duties in relation to external reporting, including reviews of financial statements, shareholder communications and other announcements;

• duties in relation to the external auditors, including appointment/ dismissal, approval of fee, discussion of the audit; and

• duties in relation to internal systems, procedures and controls.

Remuneration and Nomination Committee

The Remuneration and Nomination Committee is a sub-committee of the Board and makes recommendations to the Board which retains the right of final decision. The Committee members are Stephen Coe (Chairman) and Martin Adams.

The purpose of the Committee is to:

· set the remuneration of the Directors;

· demonstrate to the shareholders of the Company that the remuneration of the non-executive Directors of the Company and its subsidiaries (the "Group") is set by a committee of the Board whose members have no personal interest in the outcome of the decisions of such committee and who will have due regard to the interests of shareholders;

· to the extent that any executive or non-executive Director may be invited to join meetings of the Committee as appropriate he shall absent himself and take no part in any discussions concerning his own remuneration or other benefits or matters within the province of the Committee; and

· consider the appropriateness of the Board's composition, and assess the suitability of potential Board members.

The Committee is authorised by the Board to:

· when the fulfilment of its duties requires, obtain any outside legal or other professional advice including the advice of independent remuneration consultants, to secure the attendance of external advisers at its meetings, if it considers this necessary, and to obtain reliable, up-to-date information about remuneration in other companies, at the expense of the Company. The Committee has full authority to commission any reports or surveys which it deems necessary to help it fulfil its obligations; and

· when the fulfilment of its duties requires, to obtain any outside legal or other professional advice including the advice of independent recruitment consultants and to secure the attendance of external advisers at its meetings, if it considers this necessary, at the expense of the Company. The Committee has full authority to commission any reports or assistance which it deems necessary to help it fulfil its obligations.

Legal Committee

The Legal Committee is a sub-committee of the Board and makes recommendations to the Board which retains the right of final decision. The Legal Committee's primary responsibility is to oversee the disputes which the Group is currently involved in. The Committee members are John Chapman (Chairman), Martin Adams and Graham Smith.

Investment Committee

The Investment Committee is a sub-committee of the Board and makes recommendations to the Board which retains the right of final decision. The Investment Committee's primary responsibility is to oversee the realisation of the Company's portfolio in consultation with the Investment Manager in accordance with the Company's investment policy. The Committee members are Martin Adams (Chairman), John Chapman and Pradeep Verma.

Report of the Independent Auditors, KPMG Audit LLC, to the members of Trinity Capital PLC

We have audited the financial statements of Trinity Capital plc for the year ended 31 March 2013 which comprise the Group Statement of Comprehensive Income, the Group and Parent Company Statements of Financial Position, the Group and Parent Company Statements of Changes in Equity, the Group Statement of Cash Flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs), as adopted by the EU.

This report is made solely to the Company's members, as a body, in accordance with Section 15 of the Companies Act 1982. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and Auditor

As explained more fully in the Directors' Responsibilities Statement, the Directors are responsible for the preparation of financial statements that give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

 Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements.

Opinion on the financial statements

In our opinion the financial statements:

· give a true and fair view of the state of the Group's and Parent Company's affairs as at 31 March 2013 and of the Group's profit for the year then ended;

· have been properly prepared in accordance with IFRSs as adopted by the EU; and

· have been properly prepared in accordance with the provisions of Companies Acts 1931 to 2004.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Acts 1931 to 2004 require us to report to you if, in our opinion: 

· proper books of account have not been kept by the Parent Company and proper returns adequate for our audit have not been received from branches not visited by us; or 

· the Parent Company's statement of Financial Position and Statement of Comprehensive Income are not in agreement with the books of account and returns; or 

· certain disclosures of Directors' remuneration specified by law are not made; or

· we have not received all the information and explanations we require for our audit. 

KPMG Audit LLC

Chartered Accountants

Heritage Court

41 Athol Street

Douglas

Isle of Man IM99 1HN

Consolidated Statement of Comprehensive Incomefor the year ended 31 March 2013

Consolidated Statement of Financial Positionas at 31 March 2013

These financial statements were approved by the Board on 13 August 2013 and signed on their behalf by

Stephen Coe Graham Smith

Director Director

Consolidated Statement of Changes in Equityfor the year ended 31 March 2013

Company Statement of Changes in Equityfor the year ended 31 March 2013

Consolidated Statement of Cash Flowsfor the year ended 31 March 2013

Notes to the Financial Statementsfor the year ended 31 March 2013

1. General information

The Company is a closed-end investment company incorporated on 7 March 2006 in the Isle of Man as a public limited company. The address of its registered office is IOMA House, Hope Street, Douglas, Isle of Man.

The Company is listed on the Alternative Investment Market (AIM) of the London Stock Exchange. 

The Company and its subsidiaries (together the "Group") invest in real estate and real estate related entities in India, primarily in commercial development in the office and business space, residential, retail, hospitality and infrastructure sectors deriving returns from development, long-term capital appreciation and income.

In March 2009, shareholders voted to change Trinity's investment policy by requiring the company to gradually dispose of its assets over time and return capital to investors.

The Group has no employees.

2. Summary of significant accounting policies

(a) Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs), as adopted by the EU.

The consolidated financial statements were authorised for issue by the Board on 13 August 2013.

(b) Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for financial instruments at fair value through profit or loss are measured at fair value in the statement of financial position.

(c) Functional and presentation currency

These consolidated financial statements are presented in Sterling. The Company's functional currency is Indian Rupee (Rs). All financial information presented in Sterling has been rounded to the nearest thousand.

(d) Use of estimates and judgements

The preparation of the consolidated financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3.

(a) Consolidation

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries and subsidiary undertakings). Control is achieved where the Company has the power to govern the financial and operating policies of a portfolio company so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated Statement of Comprehensive Income from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by the Group. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

 (b) Business combinations

The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the portfolio company, plus any costs directly attributable to the business combination. The portfolio company's identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 are recognised at their fair value at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for resale in accordance with IFRS 5 Non-Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group's interest in the net fair value of the portfolio company's identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profit or loss.

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments.

The Directors are of the opinion that the Group is engaged in a single segment of business being property investment business in one geographical area being India.

Revenue includes interest receivable, dividend income and fair value gains and losses.

Interest receivable is accrued on a time basis by reference to the principal outstanding and the effective interest rate applicable.

Fair value gains and losses are recognised in the period of revaluation

Dividend income from investments is recognised when the Company's right to receive payment has been established, normally the ex-dividend date.

All expenses are accrued for on an accruals basis and are presented as revenue items except for expenses that are incidental to the disposal of an investment which are deducted from the disposal proceeds.

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Current tax payable also includes any tax liability arising from the declaration of dividends.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

· temporary differences on the initial recognition of assets or liabilities in a transaction that is

not a business combination and that affects neither accounting nor taxable profit or loss;

· temporary differences related to investments in subsidiaries and jointly controlled entities to

the extent that it is probable that they will not reverse in the foreseeable future; and

· taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

 Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

(a) Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured usingthe currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in Sterling, which is the Company's functional and presentation currency.

(b) Transactions and balances

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the retranslation of available-for-sale equity investments, a financial liability designated as a hedge of the net investment in a foreign operation that is effective, or qualifying cash flow hedges, which are recognised in other comprehensive income.

(c) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to Sterling at exchange rates at the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to Sterling at exchange rates at the dates of the transactions.

The income and expenses of foreign operations in hyperinflationary economies are translated to Sterling at the exchange rate at the reporting date. Prior to translating the financial statements of foreign operations in hyperinflationary economies, their financial statements for the current year are restated to account for changes in the general purchasing power of the local currency. The restatement is based on relevant price indices at the reporting date.

Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation reserve (translation reserve) in equity. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income, and presented in the translation reserve in equity.

Financial assets and financial liabilities are recognised when a Group entity becomes a party to the contractual provisions of a financial instrument. Financial assets and financial liabilities are offset if there is a legally enforceable right to set off the recognised amounts and interests and it is intended to settle on a net basis.

Investments of the Group where the Group does not have control are designated as at fair value through profit or loss on initial recognition. They are measured at fair value. Unrealised gains and losses arising from revaluation are recognised in profit or loss.

Investments in entities over which the Group has control are consolidated in accordance with IAS 27.

The fair value of unquoted securities is estimated by the Directors using the most appropriate valuation technique for each investment.

Securities quoted or traded on a recognised stock exchange or other regulated market are valued by reference to the last available bid price.

A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation, and the obligation can be reliably measured. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

At the date of authorisation of the financial statements, the following standards and interpretation were in issue, but not yet effective. The impact of these statements on the Group's financial statements in the period of initial application is not known at this stage. These statements, where applicable, will be applied in the year when they are effective.

Future changes in accounting policies

IASB (International Accounting Standards Board) and IFRIC (International Financial Reporting Interpretations Committee) have issued the following standards and interpretations as adopted by the EU with an effective date after the date of these financial statements:

The Directors do not expect the adoption of the standards and interpretations to have a material impact on the Group's financial statements in the period of initial application.

3. Critical accounting estimates and assumptions

These disclosures supplement the commentary on financial risk management (see note 19).

Key sources of estimation uncertainty

Determining fair values

The determination of fair values for financial assets for which there is no observable market prices requires the use of valuation techniques as described in accounting policy note 2.8. For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgement depending on liquidity, concentration, uncertainty of market factors, pricing assumptions and other risks affection the specific instrument. See also "Valuation of financial instruments" below.

Critical judgements in applying the Company's accounting policies

Critical judgements made in applying the Company's accounting policies include:

Valuation of financial instruments

The Company's accounting policy on fair value measurements is discussed in accounting policy note 2.8. The Company measures fair value using the following hierarchy that reflects the significant of inputs used in making the measurements:

· Level 1: Quoted market price (unadjusted) in an active market for and identical instrument.

· Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category included instruments valued using: quoted market prices in active markets for similar instruments: quoted market prices for identical or 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: Valuation 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 have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments the Company determines fair values using valuation techniques, as described in detail in note 10.

All the Company's investments measured at fair value have been valued on the basis of Level 3 described above. A reconciliation from the beginning balances to the ending balances for fair value measurements in level 3 of the fair value hierarchy is given in note 10.

Estimated performance fee (carried interest) on investments

As described in note 4, a provision has been made for performance fees. This is calculated by reference to the total fair value of those assets covered by the investment management agreement.

Estimated future legal fees

As described in note 18, the Company is engaged in litigation. A provision has been made for the associated legal costs, but this amount cannot be calculated with any certainty. The actual amount may differ significantly, and will depend on the duration and complexity of the litigation, and the success or otherwise in reaching settlement with the other parties.

4. Investment Management fees and performance fees

On 19 April 2013, Trinity Capital Mauritius Limited ("TCML"), a wholly owned subsidiary of the Company, entered into an amendment agreement (the "Amendment Agreement") with Indiareit Investment Management Company ("Indiareit") which amends the terms of the original investment management agreement entered into between these parties on 18 June 2010. The Amendment Agreement reduced the investment management fee from US$1.69 million p.a.to US$198,000 p.a. with effect from 1 February 2013. In addition, it incentivised acceleration in the pace of realisation of investments by changing the performance fees. The new performance fees payable range from 5% per cent to 10 per cent of net realisation proceeds and reduce on a sliding scale over time. Prior to the Amendment Agreement, Indiareit was entitled to receive (subject to certain escrow arrangements which no longer apply) 7.5 per cent. of net realisation proceeds on the sale of investments.

The performance fee liability of £1.225 million arising from these escrow arrangements and the provision for performance fees of £3.174 million have been reversed as a result of the Amendment Agreement. A new provision of £985,000 has been set, based on the terms of the Amendment Agreement and the likely timing of disposals.

The movements of the performance fee charge in the Statement of Comprehensive Income are made up as follows:

5. Other administration fees and expenses

6. Taxation

There is no liability for income tax in the Isle of Man.

The Group is subject to income tax in Mauritius at the rate of 15% on the chargeable income of Mauritian subsidiaries. The Mauritius subsidiaries are, however, entitled to a tax credit equivalent to the higher of the foreign tax paid and a deemed credit of 80% of the Mauritian tax on their foreign source income. No provision has been made in the financial statements due to the availability of tax losses.

7. Earnings per share

Basic earnings per share is calculated by dividing the net earnings attributable to equity shareholders of the parent by the weighted average number of ordinary shares outstanding during the year.

There is no difference between fully diluted earnings per share and basic earnings per share.

8. Distributions

The Company made the following distributions during the year and the previous year:

The distributions were paid out of reserves created upon the cancellation of the share premium reserve which arose at the time of the Company's admission to AIM.

9. Investments in subsidiaries

The Company has the following subsidiaries incorporated in Mauritius. They are recorded at cost in the financial statements of the Company.

As described in note 21, Trinity Capital (Fourteen) Limited sold its interest in Luxor Cyber City Private Limited after the reporting date. For consolidation purposes, the "non-controlling interest" amount has been calculated on the basis of the percentage share of sale proceeds agreed with the co-investor, Immobilien Development Indien II GmbH & Co. KG.

In addition to above, the Company has the following subsidiaries in India:

(a) Uppals IT Projects Private Limited: Trinity Capital (One) Limited held 100% of the total equity share capital at 31 March 2013.

(b) Jodhana Developers Private Limited: Trinity Capital (Seventeen) Limited held over 98% of the total equity share capital but only 48.48% of the voting rights and 49% of the economic interest at 31 March 2013.

(c) Nirmaan Buildwell Private Limited: Trinity Capital (Fourteen) Limited held 99.99% of the total equity share capital at 31 March 2013.

The financial statements of the subsidiaries in India are not consolidated in these financial statements, as they do not meet all the criteria for consolidation as required by IAS 27.

10. Investments - designated at fair value through profit or loss

The Group holds full or partial ownership interests in a number of unquoted Indian companies. CB Richard Ellis ("CBRE") conducted an independent valuation (acting as external valuers) of the development properties owned by each of these companies as at 31 March 2013. Based on CBRE's valuation of the development properties, which were carried out in accordance with the valuation guidelines of The Royal Institution of Chartered Surveyors, the Directors valued the Group's interest in the equity interests held in each of the Project Companies. CBRE also carried out certain Agreed Upon Procedures to test these computations of the fair value of Group's interest in Project Companies.

The Directors' valuations are based (where appropriate) on a discounted cash flow methodology. The methodology uses the cash-flow data generated by CBRE (which in turn is partially based on company-generated cash flows) and observable market data on interest rates and equity returns. The discount rates used for valuing equity securities are determined based on historic equity returns for other entities operating in the same industry for which market returns are observable. Management uses models to adjust the observed equity returns to reflect the actual debt/equity financing structure of the investment. The discount rate applied varies from project to project to take account of the estimated risk and ranges between 22.5% and 27.5%. The only exceptions to this are the valuation of DB (BKC) Realtors Private Limited, Horizon Countrywide Logistics Limited, and Luxor Cyber City. DB (BKC) Realtors Private Limited valuation is based on the discounted nominal value of the compulsorily convertible preference shares (excluding any interest). The valuation of Horizon Countrywide Logistics Limited which is based on a mark-to-market basis that assumes a reverse takeover and merger with other SKIL group companies will proceed. The valuation of Luxor Cyber City was based on the price offered by the potential purchaser, which ultimately led to a sale after the end of the reporting period, as detailed in note 21.

The valuation of the investment in Uppals IT Project Pvt. Ltd has been prepared on the basis that relevant lease extensions will be obtained from the local government development authority. The Board believes that such extensions will be forthcoming (and the valuation of the investment has been prepared on this basis) but there is no guarantee that this will take place. If such extensions were not obtained then the value of this investment would be materially lower.

Investments are recorded at fair value are as follows:

11. Share capital

The authorised share capital at 31 March 2012 and 31 March 2013 and the issued and fully paid share capital at the same dates were as follows:

The Deferred Shares rank pari passu with the Ordinary Shares save that the Deferred Shares have no right to dividends or voting rights or the right to receive notice of or attend any general meeting. On the return of capital in a winding-up of the Company or otherwise (other than re-purchases or redemptions of shares authorised by special resolution), the Deferred Shares have the right to return of par value paid up thereon in priority to the return of the par value paid up on the Ordinary Shares.

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor, and market confidence. In accordance with the investment policy adopted by the Shareholders in March 2010, the Company's ordinary shares are trading at a price below the NAV per Ordinary Share the Company shall effect a return of capital through a cash distribution to Shareholders. If the Company's Ordinary Shares are trading at a price above the NAV per ordinary share, the Board will selectively determine, on a periodic basis, whether or not to make new investments.

Group capital comprises share capital and reserves.

Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.

12. Directors' remuneration

Details of Directors' remuneration during the year are as follows:

The Directors' Incentive Plan was approved by Shareholders on 29 November 2011, and provides for payments to Martin Adams, Pradeep Verma and John Chapman amounting to 0.75%, 0.375% and 0.175% respectively of amounts distributed to shareholders.

The fixed fee paid to Stephen Coe includes £15,000 per annum for acting as Chairman of the Audit Committee and Remuneration Committee. The fixed fee to John Chapman includes £15,000 per annum for acting as Chairman of the Legal Committee

13. Disposals of investments

Realised loss on disposal of investments is as follows:

14. Net asset value (NAV)

The NAV per share is calculated by dividing the net assets attributable to the equity holders of the Company at the end of the year by the number of shares in issue as at 31 March 2013.

15. Cash and cash equivalents

16. Provision for future legal costs

The Company is engaged in a dispute, as described in note 18, with Immobilien Development Indien I GmbH & Co. KG ("Immobilien I") and Immobilien Development Indien II GmbH & Co. KG ("Immobilien II"), being limited partnerships incorporated in Germany, both sponsored by SachsenFonds Holding GmbH. A provision was established in March 2011 for the amount of the estimated legal costs yet to be incurred in the litigation. A provision of £2 million is retained for the estimate of future legal costs associated with the dispute.

The provision is as follows:

There can of course be no certainty as to the accuracy of these provisions. The actual amount may differ significantly, and will depend on the duration and complexity of the litigation, and the success or otherwise in reaching settlement with the other parties.

17. Commitments

There were no outstanding contractual commitments at the year end (2012: mil).

18. Contingent Liabilities

On 12 January 2011 the Company received a notification of claim from Immobilien I and Immobilien II. In addition to the Company, the notification was addressed to TCML, Trikona Advisers Ltd. ("TAL", the former investment adviser of the Company), private persons who together controlled TAL, and TSF Advisers Mauritius Limited (a joint venture between TAL and SachsenFonds Asset Management GmbH). On 13 July 2011, the Supreme Court in Mauritius set aside the claim lodged by Immobilien I and Immobilien II. Immobilien I and Immobilien II appealed against that decision on 26 July 2011.

By way of background, in November 2007 and May 2008 Immobilien I and Immobilien II purchased from TCML interests in various Mauritian companies (the "TC Companies") which in turn owned equity stakes in Indian investment vehicles (the "Indian Companies") which held certain of the Company's development projects in India (the "Transactions"). Accordingly, Immobilien I and/or Immobilien II were partners with TCML in various Mauritian companies in respect of five development projects in India. One Mauritian TC Company was sold in its entirety to Immobilien I and Immobilien II. In aggregate, Immobilien I and Immobilien II paid £86.4 million for investments in which the Company had invested £41.8 million. The contracts included legal provisions in the relevant documentation whereby the Group would be obliged to make good to the acquirer the economic loss which would arise upon the non-fulfilment of certain conditions in the contractual arrangements. 

The amount claimed by Immobilien I and Immobilien II in the original pleading was their original cost of the investments, being nearly €116 million, plus amounts to compensate for prejudice, trouble, annoyance, interest and costs.

The Board is fully committed to defending the claims made by Immobilien I and Immobilien II. The Directors do not consider it necessary to provide for the claims in the financial statements, but the Company maintains a provision of £2,000,000 for future legal costs, as explained in note 16, to defend the actions.

19. Financial risk management

The Group's activities expose it to a variety of financial risks: market risk (including currency risk, market price risk and interest rate risk), credit risk and liquidity risk.

Risk management is carried out by the Board, with assistance from the Investment Manager to the extent possible and as appropriate.

(i) Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Indian Rupee. Foreign exchange risk arises from future commercial transactions, recognised monetary assets and liabilities and net investments in foreign operations.

Net assets denominated in Indian Rupee at the year-end amounted to £50,817,000 (2012: £61,664,000).

At 31 March 2013, had the exchange rate between the Indian Rupee and Sterling increased or decreased by 5% with all other variables held constant, the increase or decrease respectively in net assets would amount to approximately £2,541,000 (2012: £3,083,000).

The Group does not hedge against foreign exchange movements, except from time to time for short term receivables or payables with a known settlement date.

(ii) Market price risk

The Group is exposed to market price risk arising from its investment in unlisted and listed equity investments. All these securities present a risk of capital loss. The Board and the Investment Manager are responsible for the selection of investments and monitoring exposure to market risk. All investments are in Indian companies.

If the value of the Group's investment portfolio had increased by 5%, the Group's net assets would have increased by £2,541,000 (2012: £3,083,000). A decrease of 5% would have resulted in equal and opposite decrease in net assets.

The Group is exposed to property price risk, property rentals risk and the normal risks of property development through its investment in Indian real estate companies.

(iii) Cash flow and fair value interest rate risk

The Group's cash and cash equivalents are invested at short term market interest rates.

The table below summarises the Group's exposure to interest rate risks. It includes the Groups' financial assets and liabilities at the earlier of contractual re-pricing or maturity date, measured by the carrying values of assets and liabilities.

Credit risk arises on investments, cash balances and debtor balances. The amount of credit risk is equal to the amounts stated in the statement of financial position for each of these assets. Cash balances are limited to high-credit-quality financial institutions. There are no impairment provisions as at 31 March 2013 (2012: nil).

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Company aims to maintain flexibility in funding.

Residual undiscounted contractual maturities of financial liabilities:

20. Related party transactions

Graham Smith is a Director of the Company, and a Director of the Administrator. He has received no Directors' fees from the Company during the year (2012: nil). The fees paid by the Company to the Administrator (excluding VAT) for the year amounted to £104,000 (2012: £131,000).

21. Subsequent events

In August 2013, TC14 realised its investment in Luxor Cyber City. The Company's share of the proceeds were INR 870 million (GBP 9.2 million at the prevailing exchange rate). This equals the carrying value of the Company's interest in the financial statements at 31 March 2013 in INR terms, but in GBP terms the carrying value was GBP 10.5 million (using 31 March 2013 exchange rates).