Trinity Capital Regulatory News (TRC)

Trinity Capital PLC

Consolidated financial statements for the period ended 30 September 2012

Trinity Capital PLC (AIM: TRC), a fund created for investing in Indian real estate and infrastructure, announces its Interim Results for the period ended 30 September 2012.

Highlights

·; Net assets £56.1m (26.6p per share) compared with £58.2m (27.6p per share) at 31 March 2012

·; Subsequent sale of DB Realty holding for £12m (£2.8m greater than the value at 30th September 2012)

·; Further return of capital to shareholders in November of 5p per share

·; Continuing strategy to realise investments and return funds to shareholders

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Chairman's Statement

13 December 2012

Investor sentiment in the Indian property and equity markets continued to be weak during the first six months of the financial year. Sluggish demand for Indian real estate - especially for non-income producing development properties such as those held by Trinity Capital plc ("Trinity" or the "Company") - has had a direct impact on the pace of Trinity's realisations. The Company concluded no asset sales during the period under review apart from a small proportion of its holding of shares in DB Realty, which generated £0.2 million of proceeds. The market value of the remaining holding at 30 September, which has been applied in these financial statements, was £9.2 million. The Company sold its entire holding of these shares in October 2012 for £12.0 million. Most of the proceeds, amounting to 5p per share, were distributed to shareholders in November.

The Company's net assets declined by 1p per share during the six month period ended 30 September 2012 from 27.6p to 26.6p per share, mainly resulting from a 5% depreciation of the Indian rupee against Sterling and a consequent small reduction in the carrying values of the investment portfolio. The carrying values of the Company's investments and other net assets at 30 September 2012 are summarised as follows:

Four of the six remaining investments (following the sale of the DB Realty shares) continue to be held jointly with two German investment funds managed by SachsenFonds. These four investments are valued in aggregate at £39.9 million, with Trinity's interest in them standing at £32.0 million. None of these properties was sold during the period under review and SachsenFonds' strategy remains unclear. There have been no material developments in respect of the appeal lodged by the SachsenFonds-managed funds against the July 2011 dismissal on jurisdictional grounds by the Supreme Court of Mauritius in favour of our Mauritian subsidiary, our former investment manager and its principals.

The Company's share of the carrying values of the jointly-held investments in Lokhandwala and Luxor Cyber City at £10.7 million have remained broadly the same during the first six months of the year. Indicative offers for these properties remain under discussion, but there is no certainty that sales will complete or indeed that buyer interest will remain. There has been no progress with respect to the disposals of the other jointly held investments, Uppal IT, which now accounts for 26% of Trinity's investment portfolio, and DB (BKC) Realtors (formerly MK Malls).

With respect to the Company's holdings where SachsenFonds is not involved, the value of our investments in Jodhana and Horizon has been broadly maintained at £5.0 million and £6.6 million respectively. Absent a corporate transaction, realisation of the Jodhana investment will result from project development cash flows. We have an option to sell the shares in Horizon in late 2013, but this may be superceded by a reverse listing into a more substantial entity comprising the core businesses of the SKIL group.

The Board was disappointed to learn in September that Ramesh Jogani had parted ways with Indiareit. As shareholders may recall, Ramesh was a "key man" under the investment management agreement with Indiareit. We are in detailed discussions with Indiareit's senior management and its principal shareholder, the Piramal group, with regard to the management and realisation of Trinity's assets during the remaining life of the Company.

Arvind Pahwa resigned from the Board in December to take up a new post as Executive Director of Indiareit. We are very grateful to Arvind for his contributions as a Trinity director and wish him well in his new position.

There are some signs that domestic investor sentiment in Indian property is reviving and we are hopeful that we can report significant progress in realising assets in the coming months.

Martin M. Adams

Chairman

Investment Manager's Report

Indian Real Estate Overview

The Indian economy has witnessed a slowdown on the back of the global economic slowdown coupled with near stagnant industry growth due to high inflation and the Government`s interest rate regime. The GDP growth rate has declined to 5.3% in Q3-2012 as against 5.5% in the previous quarter and 6.5% for the year 2011-12. It is anticipated that the growth rate will remain range bound at 5.5-6% for 2012-13. Inflation continues to remain high at 7.45% for October 2012 as against the target of circa 5%. The current account deficit for Q3-2012 is expected to worsen further to nearly 5% of GDP which will be an all time high.

While the economic indicators continue to remain a cause for worry, the Government has implemented key policy reforms such as permitting foreign direct investment in multi-brand retail, aviation, insurance and broadcasting despite stiff political opposition on several of these measures. Industry and the markets have reacted positively to these reforms, in anticipation of more of such measures being adopted in the coming months, which would have a positive impact on the economic sentiment.

Residential real estate overview

The absorption rate (net absorption as a percentage of available stock) of residential units recorded a marginal increase to touch 14.4% on account of the Indian festive season. Total launches at a national level also saw an increase - nearly 46% q-o-q in Q3-2012. A total of 60,829 new residential units were launched, higher than the 41,668 units launched in the previous quarter. The National Capital Region ("NCR-Delhi") saw the highest number of units launched followed by Mumbai. The rate of appreciation in capital values slowed in 3Q12 compared to 2Q12, with the top seven cities seeing an average increase of 1.5% q-o-q. (Source: Real Estate Intelligence Service, JLL).

Overall, 2012 has been a reasonably good year for the residential market, except for limited price rise witnessed over the past few quarters. The fear of inventory stockpiles has not had an immediate and far-reaching consequence till date. This trend is expected to continue going forward as well.

Commercial real estate overview

The office absorption rate witnessed a decline from 7.7 million sqft in Q2-2012 to 6.8 million sqft in Q3-2012. About 26.3 million sq ft of office space is projected to be absorbed in the full year 2012. Supply, on the other hand, is expected to be 29.3 million sq ft in the same period. Vacancy rates for office space at a country level rose by 30 basis points q-o-q to 17.2% in Q3-2012. Office rents remained stable in most cities. (Source: Real Estate Intelligence Service, JLL)

Concerns over the global economic outlook are expected to continue to impact occupier sentiment in the short to medium term and overall mood is expected to remain cautious. Demand is expected to weaken in most markets and the majority of the leasing deals are likely to be for small and medium sized office space. Supply levels may exert pressure on rental movement and market recovery in most micro-markets. However, given high in- place rental yields, many occupiers are choosing to buy rather than lease with a view to breakeven in 6-8 years. The lack of clarity on existing incentives might dampen the attractiveness of SEZs even as the commerce ministry has suggested changes in the existing SEZ policy. It remains to be seen how that pans out.

Regulatory overview

In order to improve investor sentiment, the finance ministry has conducted a complete review of the controversial General Anti Avoidance Rules ('GAAR') provision. Several changes have been recommended by the panel appointed for this purpose, including postponing the implementation of the same for 3 years to enable readiness on part of both government and investors, specifying a threshold tax limit beyond which GAAR would not apply (recommended limit is circa $550,000), sufficiency of residency certificates issued by Mauritius to claim benefits under the Mauritius treaty and escape GAAR etc.. Although the changes are yet to be implemented, this is a step in the right direction and has served to comfort foreign investors.

The above macro economic conditions have had a bearing on Trinity Capital's projects as well, in particular low sales velocity in case of Lokhandwala and depressed demand for SEZs in Gurgaon and Greater Noida. We provide an overview of each project in the following pages:

Luxor Cyber City

Market update

Gurgaon has an existing Grade A office stock of 38.3 million sq ft, primarily dominated by IT office space. In the last quarter, 0.33 million sqft of IT office space was absorbed, while no fresh supply was introduced into the micro market. However, considering vacant stock from previous quarters, vacancy rates remained high at 22.7% and rentals remained stagnant. Going forward, the oversupply situation in 2013 is unlikely to change as expected demand in 2013 is circa 4.1 million sqft, while expected supply is circa 6.5 million sqft. (Source: Real Estate Intelligence Service, JLL).

Project Location overview

Luxor Cyber City's ('LCC') location is just off the major national highway (NH8). However, demand for an IT SEZ in the micro market where the project is located is not promising in the foreseeable future due to its distance from the main hub of existing office space in Gurgaon.

Partner / promoter overview

Mr. B.K. Uppal (promoter of Uppal Housing, a leading local developer) and Mr. D.K. Jain (promoter of Luxor Group, a large industrial house active in the NCR) are the other shareholders of LCC, with whom the project is to be developed.

Development update

The project is a "notified" (registered) SEZ. The underlying SEZ approval (which is granted on an annual basis) has expired and the application filed for renewal is pending with the authorities.

Since inception, no development work has been undertaken and status on ground has not changed during the past 6 months. The adverse market conditions currently and going forward do not justify development as an SEZ. Being part of a township development (best land use in today's context) is fraught with regulatory and development risks, especially for a foreign investor like TC14 right from aggregation of additional land required to comply under the township rules, obtaining a township license, market risk of being able to sell plots to realize proceeds and then remittance of the same outside India in a timely manner. 

Exit strategy / timelines

Valuation has remained almost constant to the one in March 2012 since micro and macro factors impacting the project have not witnessed any significant change.

Considering the complications in a township development, a strategic sale/ developer buyback is being explored as a realisation alternative. Any final decision of realisation of investment must be taken in consultation with Immobilien II / SachsenFonds.

Jodhana

Market overview

Jodhpur remains an attractive tourist destination and a manufacturing hub for handicrafts. Residential real estate in the city is dominated by single family gated compounds with a few apartment complexes. The prices continue to witness an uptrend with a mix of demand flowing from Jodhpur residents and Non-resident Jodhpuris 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

As before, the development plan is to undertake a high end villa development on the 19 acre land parcel and a combination of a plotted residential layout and apartments on the 9.7 acre land parcel.

The layout plan approval for the 19 acre master plan has been obtained and infrastructure works have commenced on site. The next step is to seek approval of the building plans for which the drawings have been finalised. However, some procedural issues have arisen, which are being reviewed with the government authorities and the partner. The construction activity will re-commence post resolution of these matters which we expect may take another 2-3 months.

Exit rationale / strategy

Valuation of the project has seen a significant increase on account of a rise in selling prices of both plots and villas. The plan remains to exit over 3 years through development and sale of residential units. It being a residential development, the project would be self-liquidating in nature.

Uppals IT Park "Tech Oasis"

\* TCML also provided £7.5 million of mezzanine debt to TC1 in October 2008 (included below)

Market overview

As mentioned in previous updates, farmers in the Greater Noida region had challenged legality of land acquisition by the Greater Noida / Noida authorities. While the acquisition was upheld by the state court, construction work was stopped till master plan of the entire area was re-approved by a government planning board. This approval has since been given. However, some farmers continue to pursue the matter with higher courts.

The region continues to be plagued with severe oversupply. In the year 2013, 1.35 million sqft of office space is expected to be completed, while the absorption is expected to be a mere 0.48 million sqft. Taking into account the vacant stock from the previous years, vacancy levels are expected to be around 65% in 2013 and further rise to around 66% in 2014. The vacancy rate for 2012 was 67%. (Source: Real Estate Intelligence Service, JLL)

Project location overview

The Yamuna Express way, 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) is now open for public use and has attracted significant interest in the area due to increased accessibility. 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. These initiatives will eventually boost the real estate demand in the region.

Partner / promoter overview

There is no Indian partner / promoter in the said 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.

The market conditions for development continue to remain unfavourable since inception - hence, no development work has been undertaken on site till date. Specifically with reference to the period from October, 2011 to August, 2012, 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 extended timelines (sought from the Greater Noida authority earlier) for achieving certain construction milestones had expired in July, 2012. On account of the farmer agitation in the region, the period from October, 2011 (the date when the state court judgment imposed stay on construction activities in the region) till August, 2012 (when the master plan was re-validated and the stay was lifted) is to be counted as a 'zero period' and will tantamount to an automatic extension of timelines. In addition to the same, Uppals IT has applied for further extension on account of delay by the authorities in granting approvals.

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 valuation has increased on account of an improvement in sale prices of the residential component of the site, which is largely due to the region coming into prominence owing to infrastructure initiatives mentioned above. 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

The future of the Indian logistics continues to look very promising, considering the current demand and unorganised nature of the industry. E-tailers have invested heavily into strategically located assets, and have been taking up quality warehousing space across India. The major footprint has been in NCR, Mumbai and Bangalore with smaller redistribution points in other metros. Furthermore, FMCG majors, White Goods and

Consumer Electronics firms are also on an expansion spree and are steadily increasing their footprint across the country.The introduction of reforms like the recently announced foreign direct investment in multi-brand retail will give a further fillip to the industry.

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, and ultimately capturing greater value at the time of listing.

Exit / realisation strategy

The agreement with the promoters for TC4's exit at a base price of Rs. 22 per share in 2013 continues to be in place. This price has been used as the basis for valuation as on September 30, 2012.

There also exists an upside if an initial public offering of Horizon materialises, or if Horizon is merged with another listed entity at a more attractive price prior to the option date in 2013. The Company has informed TC4 that a listing is being targeted in 2013 through a merger of the Company with another listed entity of the Group. The flagship company of the group, which is unlisted presently, is also expected to form part of the merger scheme - this will enable capture of greater value by the combined entity at the time of listing. The Investment Manager is currently evaluating the commercial and legal aspects of this proposal.

Lokhandwala

Market overview

Mahalaxmi is a highly sought after residential hub of South Mumbai. Several iconic projects have been launched and are under construction in the micro market by well known developers.

Project location overview

The micro market boasts of good social infrastructure including premium hotels such as Four Seasons and the 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.

Promoter/ partner overview

Lokhandwala Infrastructure, a large Mumbai based developer having a strong presence in the slum rehabilitation / redevelopment space, is the majority partner leading the project. 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 located at the site had already been cleared and re-located. The construction for both the free sale area and the slum rehabilitation area is now in progress after the project had been delayed by over 2 years. The project has been 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. There are regular sales albeit at a slow velocity in line with market conditions..

As mentioned in the previous update, the impact of the recently introduced Development Control Regulations ('DCR') is still not fully clear. For the purpose of this valuation exercise, 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

The valuation of the project has seen a minor drop since March, 2012 value. A strategic sale / developer buyback during the development phase of the project is the most likely realisation strategy given the likelihood of the project extending beyond the fund life.

Any exit decision would need to be taken in consultation with Immobilien II who are partners in TC5. Recent indications from Immobilien II are that they are receptive to an early realisation.

MK Malls

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. The promoters have not been very forthcoming in negotiating an exit, possibly on account of DB Realty (which manages MK Malls) having limited recourse to finance. TC10's 88% ownership by Immobilien I and Immobilien II poses further challenges in negotiating an exit.

INDEPENDENT REVIEW REPORT TO TRINITY CAPITAL PLC

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly report for the six months ended 30 September 2012 which comprises the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and the related explanatory notes. We have read the other information contained in the half-yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with the terms of our engagement. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this 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 for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The half-yearly report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly report in accordance with the AIM Rules.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs. The condensed set of financial statements included in this half-yearly report has been prepared in accordance with IAS 34 Interim Financial Reporting.

Our responsibility

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

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. 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 report for the six months ended 30 September 2012 is not prepared, in all material respects, in accordance with IAS 34 and the AIM Rules.

KPMG Audit LLC

Chartered Accountants Heritage Court

41 Athol Street

Douglas

Isle of Man

IM99 1HN

13 December 2012

Consolidated Statement of Comprehensive Incomefor the period ended 30 September 2012

Consolidated Statement of Financial Positionat 30 September 2012

These financial statements were approved by the Board on 13 December 2012 and signed on their behalf by

Stephen Coe Graham Smith

Director Director

Consolidated Statements of Changes in Equityfor the period ended 30 September 2012

Consolidated Statement of Cash Flowsfor the period ended 30 September 2012

Notes to the Financial Statementsfor the period ended 30 September 2012

The Company is a closed-end investment company incorporated on 7 March 2006 in the Isle of Man as a public limited company. 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.

The Group has no employees.

These interim consolidated financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the period ended 31 March 2012.

The consolidated financial statements of the Group as at and for the year ended 31 March 2012 are available upon request from the Company's registered office at IOMA House, Hope Street, Douglas, Isle of Man or at www.trinitycapitalplc.com.

These interim consolidated financial statements were approved by the Board of Directors on 12 December 2012.

The accounting policies applied by the Group in these interim consolidated financial statements are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 March 2012.

The preparation of condensed consolidated interim financial statements in conformity with IFRSs requires management to make judgements, estimates, and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results for which form the basis of making the judgements about carrying values of assets and liabilities that are not readily available from other sources. Actual results may differ from these estimates.

In preparing these condensed consolidated financial statements, the significant judgements made by management in applying the Group's accounting policies were the same as those that applied to the consolidated financial statements for the year ended 31 March 2012.

The principal risks and uncertainties are consistent with those disclosed in preparation of the Group's annual financial statements for the year ended 31 March 2012.

The authorised share capital at 30 September 2012 and 31 March 2012 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 new investment policy adopted by the Shareholders in March 2009, if the Company's ordinary shares are trading at a price below the NAV per Ordinary Share the Company shall immediately effect a return of capital through a cash distribution to Shareholders, (subject to the requirements of a prudent level of working capital). 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.

The basic loss per ordinary share is calculated by dividing the net loss attributable to the ordinary shareholders of the Company by the weighted average number of ordinary shares in issue during the period.

The Company has no dilutive potential ordinary shares; the diluted loss per share is the same as the basic loss per share.

On 18 June 2011, Trinity Capital Mauritius Limited ("TCML"), a wholly owned subsidiary of the Company, entered into an investment management agreement (to which the Company is also a party) appointing Indiareit Investment Management Company ("Indiareit") as investment manager to TCML. Indiareit is entitled to an investment management fee of USD 2.2 million in the first year of the contract, USD 1.89 million in the second year, and USD 1.69 million in the third and subsequent years. In addition Indiareit is entitled to a performance fee of 7.5 per cent of the realised net proceeds received by the Group for the disposal of its investments other than DB Realty, DB Hospitality, and Pipavav Shipyard. After the third anniversary of the contract, 50% of the investment management fees will be set-off against the performance fees.

A provision is made for the performance fees to which Indiareit would be entitled based on the fair value of all investments, apart from the exempted assets noted above. It amounted to £3,270,000 at 30 September 2012 (31 March 2012: £3,174,000).

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

The Group holds full or partial ownership interests in a number of unquoted Indian companies.

Some of these companies invest in development property projects ("the Project Companies"). For the Project 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 30 September 2012. 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. These are based on a discounted cash flow methodology applied to 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 rate applied varies from project to project to take account of the estimated risk and ranges between 21.41% and 26.41%. CBRE also carried out certain agreed upon procedures to test the Directors' valuations of the equity interest.

As exceptions to the above, the Directors valued DB (BKC) Realtors Private Limited (formerly "M K Malls Developers Pvt Ltd.") on the basis of the nominal value of the securities through which the Group holds its interest, discounted to reflect anticipated delays in realising a return.

The Directors also valued the Group's ownership interests in the unquoted companies not owning property development projects. At 30 September 2012, there was only one such holding, Horizon Countrywide Logistics Ltd. The valuation of this holding is based on the present value of the option to exit the investment. CBRE also carried out certain agreed upon procedures to test the Directors' valuations of this investment.

Listed equity securities are valued at the closing market price. At 30 September 2012, there was only one holding of listed equity securities, DB Realty Limited.

Table of Values

\* 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.

The Group disposed of a small proportion of its holding of shares in DB Realty during the period:

On 12 January 2011 the Company received a notification of claim from Immobilien. In addition to the Company, the notification was addressed to Trinity Capital Mauritius Ltd. ("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 dismissed those claims. On 26 July 2011, the Civil Court of appeal in Mauritius was served with a notice of appeal.

By way of background, in November 2007 and May 2008 Immobilien I and Immobilien II purchased from TCML interests in various Mauritian companies (the "Mauritian 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 are 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 made a provision of £2,000,000 for future legal costs in defending the actions in its Annual Report and Accounts to 31 March 2012. In the opinion of the Directors, it is appropriate to maintain the provision at this level at 30 September 2012.

Graham Smith is a Director of the Company and of the Administrator. The fees of the administrator for the period amounted to £54,000 (six months ended 30 September 2011: £75,000).

On 12 October 2012, the Company announced the sale of its entire shareholding in DB Realty Ltd. The consideration amounted to £12.0 million. This compares with the carrying value in the financial statements at 30 September 2012 of £9.2 million, resulting in a profit after the period end of £2.8 million.

On 9 November 2012, the Company paid a distribution to shareholders of 5p per share, giving a total return of capital of £10,534,000.