Trinity Capital Regulatory News (TRC)

Trinity Capital PLC

Consolidated financial statements for the period ended 30 September 2013

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 2013.

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Chairman's Statement

Dear Shareholder

Trinity Capital plc ("Trinity" or the "Company") sold one investment, Luxor Cyber City, during the first half of the financial year. Proceeds generated in August 2013 amounted to £9.2 million. As a result, £0.05 per share, equivalent to an aggregate of £10.5 million, was distributed to shareholders in September. At 30 September 2013, Trinity continued to hold five investments in India, valued in total at £24.9 million, equivalent to £0.12 per share, after allowing for the co-investors' interests.

Trinity's net asset value per share declined by 39% to £0.14 at 30 September 2013 from £0.23 at the beginning of the financial year, of which £0.05 was due to the September distribution to shareholders and the remaining £0.04 was largely due to the 23% depreciation of the Rupee against Sterling during the period. Net assets stood at £30.2 million at 30 September 2013.

Economic conditions in India remain weak, including in the property sector, with little respite likely in the short term. With annualised GDP growth during the six month period to 30 September 2013 at 4.6%, India has now witnessed four consecutive quarters of annualised growth rates below 5%. After a 15% depreciation in the value of the Rupee against the US dollar during the six months to 30 September 2013, the currency has stabilised on the back of high interest rates, which are required to dampen persistent inflation. However, high interest rates also hurt consumer demand and make credit for businesses expensive, thereby adversely impacting growth prospects. During the six months to 30 September 2013, the Bombay Stock Exchange's Realty Index fell by 36% compared with a 2% rise in the benchmark SENSEX. The country is unlikely to witness a return of confidence to boost investment, lending, consumption and economic growth before a new Government is formed sometime after the mid-2014 national election.

The two Indian funds managed by SachsenFondsare invested in three companies in which Trinity's wholly owned subsidiary, Trinity Capital Mauritius Limited ("TCML") is an investor. Co-operation by SachsenFonds in maximising the value of the joint investments remains limited and their refusal to accept offers received for our investments has destroyed further value in 2013 as the Rupee depreciated, property prices fell and construction costs rose. It is little comfort that investors in the funds managed by SachsenFonds lost proportionately as much as TCML given the Rupee's depreciation of 22% against the Euro in the first six months of the financial year. We continue to examine all options to protect and realise our investments held with the funds managed by SachsenFonds. SachsenFonds' appeal against the case brought against Trinity in Mauritius, which had been dismissed on jurisdictional grounds in 2011, has been further delayed to 2014. The largest holding in terms of value, which is jointly held with the SachsenFonds' funds, remains the investment in Uppals IT.

Of the investments where the SachsenFonds funds are not involved, Trinity's manager, Indiareit Investment Management Company ("Indiareit"), remains in protracted sales negotiations in relation to the holding in Jodhana. The reverse takeover and merger of Horizon with other SKIL group companies was approved by India's high court and is proceeding. However, as the liquidity event contemplated in the investment agreements had not occurred by the September option exercise date, the contractual right to sell the investment to SKIL at a fixed price was exercised. SKIL has not yet honoured its obligation to acquire the shares in Horizon. Although we hope to reach an amicable agreement with SKIL, we are examining all further options including legal action. The implied mark-to-market value of TCML's investment if it were to receive shares in the merged entity is considerably less than the value under the put option.

The annual fixed cost of employing Indiareit to manage the investment portfolio has been reduced to US$0.2 million from US$1.7 million previously. Indiareit is incentivised to accelerate the pace of realisations through attractive performance fees payable when investments are sold. The terms of the investment management arrangements remain under review with Indiareit to ensure that interests are properly aligned.

It is perhaps inevitable that the investments remaining in any illiquid portfolio become progressively more difficult to sell. A combination of the poor economic climate in India and SachsenFonds' peculiar perception of its investors' interests complicate the implementation of Trinity's realisation strategy. Nevertheless, we are encouraged that we continue to receive expressions of interest at valuations that we believe to be appropriate to the market conditions in India.

At 30 September 2013, Trinity held cash of £8.4 million. The Board intends to make further distributions to shareholders as investments are sold and liabilities are reduced.

Yours faithfully

Martin M. Adams

Chairman

17 December 2013

Investment Manager Report

Indian Real Estate Overview

The overall macro-economic situation continues to remain weak. There is a further slowdown expected in the GDP growth rate to 4.8% in 2013-14, as per Reserve Bank of India's estimates. Inflation continues to remain a worry with the headline inflation (based on Wholesale Price Index) in October 2013 climbing to 7%, as against a target of 5%. The central bank, while focussing on inflation, is unable to lower key rates and this in turn is impacting growth. Though the currency has stabilized at about the GBP: INR 100 level, it is still approximately 20% down from 9 months ago. The high fiscal and current account deficits remain a cause for worry.

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. No major reforms/ actions are expected till then.

Residential real estate update

The Indian residential sector is facing a slowdown across most markets on account of the overall macro-economic scenario. Sales velocity is low thereby putting significant pressure on the capital values. As a result, developers have slowed down new launches as well. This trend is expected to continue for the next 6-9 months.

Mumbai has witnessed a sharp slowdown in sales velocity and also a 15-20% price correction, especially in the micro-market where the Lokhandwala project is located.

Commercial real estate update

On account of the circumspect macro-economic conditions, businesses are adopting a conservative approach towards expansion, thereby resulting in softening of overall demand for commercial real estate. In 3Q 2013, the six major cities - Mumbai, NCR, Bengaluru, Chennai, Kolkata and Pune recorded a 20% reduction in lease of commercial space compared to the last quarter. A large percentage of the demand for office space was generated due to companies relocating or consolidating their operations to a single cheaper location. In terms of outlook, corporate demand will continue to be slow at least until the national elections due next year (Source: Colliers). As regards Greater Noida, the region continues to be plagued with severe oversupply of office space with around two-thirds remaining vacant.

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

Summary of Investments

Jodhana

Market overview

Jodhpur is the second largest city in the Indian state of Rajasthan with a population of over 1.2 million. It was formerly the seat of a princely state of the same name, the capital of the kingdom known as Marwar. Jodhpur is a popular tourist destination, featuring many palaces, forts and temples, set in the stark landscape of the Thar desert.

With its economy thriving on handicrafts and tourism, the real estate market of the city has witnessed heightened real estate activity over the recent past. Residential real estate in the city is dominated by single family gated compounds with a few apartment complexes. The demand comes from wealthy businessmen residing within Jodhpur and Non Resident Indians who originally belong to Jodhpur.

Project Location overview

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

Partner/ promoter overview

The Maharaja of Jodhpur is a prominent ceremonial figure and commands significant respect and authority. 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.

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 March 2013 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 is in discussions for 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

The Greater Noida market continues to be plagued with severe oversupply. Nearly two thirds of office space remains vacant. Projections by several reputed international property consultants reveal that the situation is only expected to get worse over the next 3-4 years.

There is little progress on the farmer issue at the higher courts to which the farmers had appealed against the earlier judgement. Meanwhile, construction activity in the region has commenced.

Project location overview

The Yamuna Expressway is now fully operational. It is a 165 km long access controlled six-lane concrete pavement expressway connecting National Capital Region (NCR) with Agra (a major city in the northern Indian state of Uttar Pradesh). The project land has frontage on this expressway and is also located very close to the Formula 1 race track. While the expressway has been the fulcrum of real estate activity in the region, the supply of both residential and office space far exceeds the demand at present. As a result, even though several new projects have been launched many kilometres further down from our site towards Agra, they have seen limited absorption.

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.

Since the development has to be constructed 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 undeveloped land stage. Between October 2011 and 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, Uppals IT has followed up with the authorities and obtained approval for construction of a boundary wall. The design of the boundary wall has since been frozen, the necessary building material requirements drawn up and the contractor has recently been appointed. The construction of the boundary wall will commence shortly. This will further help in protecting land value and securing the site.

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

As regards the farmer issue with the higher courts, apart from the risk as to status of ownership, there is a possibility that landowners such as Uppals IT will be asked by the authority to share in enhanced compensation payments to the farmers. However, this outcome, though a risk, is remote.

Exit/ realization strategy

The Manager has been evaluating possible realization strategies, however nothing concrete has emerged as yet. A few preliminary expressions of interest to acquire the land have been received. Any exit decision would need to be taken in consultation with Immobilien I and II.

Horizon

Market overview

India's logistics sector is poised for significant growth in the coming years. Currently India's logistics sector is valued at around $110 billion and is expected to touch $200 billion by 2020. (Source: www.ciilogistics.in). Despite a weak economic scenario, the logistics and warehousing industry continued to witness growth during the first half of 2013. The demand for logistics and warehousing services is expected to increase further on the back of relaxation in the FDI regulation in the retail sector (Source: CBRE).

Project location overview

Horizon's projects include container freight stations, free trade warehousing zones, inland container depots and logistics and warehousing facilities located in different cities 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

Horizon is progressing its various projects with the objective of creation of greater substance. However the pace of progress has been slower than expected

Exit/ realisation strategy

TC4's right to exercise its put option and claim an exit at a base price of INR 22 per share came into effect when the proposed merger of Horizon and flagship company SKIL with another listed entity of the group did not take place by September 2013. TC4 accordingly exercised its option. However the promoters have been delaying the payment and have requested for more time. Meanwhile, after the above option date, the merger received all requisite approvals - procedural requirements are now being completed pursuant to which the shares of the merged entity will commence trading on the floor of the exchange.

TC4 has engaged lawyers for a full understanding of available options. While legal options are being kept open in light of SKIL's failure to meet its put option obligations, the Manager is pursuing a negotiated settlement for a certain and a timely exit.

Lokhandwala

Market overview

The luxury residential market in South Mumbai has probably been one of the worst hit in the recent real estate slow down owing to very high cost of apartments in this region. The Mahalaxmi micro-market has seen significant real estate activity, with several large iconic projects by well-known developers launched and under construction. This has led to a situation of significant supply of apartments aimed at the luxury segment, which coupled with the poor economic sentiment has led to a price correction - several new projects have been launched at prices 15-20% lower than those prevailing yet sales velocity remains a challenge.

Project location overview

The micro-market is a well-established residential hub with all facilities and infrastructure in place and operating successfully, including top premium hotels such as Four Seasons and the Palladium. The nearby high street development known as Phoenix Mills, complete with outlets of 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. The area is also a commercial hub with several well-known office 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 joint venture, 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 building is ongoing. Larsen and Toubro (one of India's foremost contractors) had been appointed for construction of the free-sale area, which is going on steadily after having been delayed due to several reasons by over 2 years. 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 continues to face several serious challenges. 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 sales velocity continues to be under severe pressure on account of oversupply in the micro market and general economic slowdown. The construction costs have increased significantly over those projected which has resulted in increase in prices of raw materials, labour and financing costs.

In addition, the impact of the Development Control Regulations ('DCR') introduced in 2012 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 I 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%.

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 Manager has re-initiated dialogue with the promoters after a long period of stalemate with the objective of providing an exit to TCML. We continue efforts to engage with the promoters to find an acceptable way forward.

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 2013 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 2013 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

17 December 2013

Consolidated Statement of Comprehensive Incomefor the period ended 30 September 2013

Consolidated Statement of Financial Positionat 30 September 2013

These financial statements were approved by the Board on 17 December 2013 and signed on their behalf by

Stephen Coe Graham Smith

Director Director

Consolidated Statements of Changes in Equityfor the period ended 30 September 2013

Consolidated Statement of Cash Flowsfor the period ended 30 September 2013

Notes to the Financial Statementsfor the period ended 30 September 2013

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 year-ended 31 March 2013.

The consolidated financial statements of the Group as at and for the year ended 31 March 2013 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 17 December 2013.

Except as described below, the accounting policies applied in these interim financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 31 March 2013. The following changes in accounting policies are also expected to be reflected in the Group's consolidated financial statements as at and for the year ending 31 March 2014.

Changes in accounting policies

The Group has adopted the following new standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 April 2013:

· IFRS 10 Consolidated Financial Statements (2011) including the amendments to IFRS 10, Investment Entities (see (a))

· IFRS 11 Joint Arrangements

· IFRS 13 Fair Value Measurement (see (b))

· Presentation of Items of Other Comprehensive Income (Amendments to IAS 1)

The nature and the effect of the significant changes are further explained below.

(a) Subsidiaries

As a result of IFRS 10 (2011), the Group has changed its accounting policy for determining whether it has control over and consequently whether it consolidates its investee companies. IFRS 10 (2011) introduces a new control model that is applicable to all investee companies, by focusing on whether the Group has power over an investee company, exposure or rights to variable returns from its involvement with the investee company and ability to use its power to affect those returns. In particular, IFRS 10 (2011) requires that the Group consolidate investee companies that it controls on the basis of de facto circumstances.

In accordance with the transitional provisions of IFRS 10 (2011), the Group reassessed the control conclusion for its investee companies at 1 April 2013. No changes resulted from this reassessment.

The amendments to IFRS 10, Investment Entities, are required for accounting periods commencing on or after 1 January 2014. These amendments require investment entities to state investments in controlled portfolio entities at fair value through profit or loss, instead of consolidating them. The Group is assessing the impact of these amendments on its financial statements. It is considered that any impact will be presentational, as the underlying investments held by the Group are currently stated at fair value in the consolidated subsidiaries.

(b) Fair value measurement

IFRS 13 establishes a single framework for measuring fair value and making disclosures about fair value measurements, when such measurements are required or permitted by other IFRSs. In particular, it unifies the definition of fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date. It also replaces and expands the disclosure requirements about fair value measurements in other IFRSs, including IFRS 7 Financial Instruments: Disclosures. Some of these disclosures are specifically required in interim financial statements for financial instruments; accordingly, the Group has included additional disclosures in this regard (see Note 10).

In accordance with the transitional provisions of IFRS 13, the Group has applied the new fair value measurement guidance prospectively. Notwithstanding the above, the change had no significant impact on the measurements of the Group's assets and liabilities.

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 2013.

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 2013.

The authorised share capital at 30 September 2013 and 31 March 2013 and the issued and fully paid share capital at the same dates were as follows:

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 potential dilutive ordinary shares; the diluted loss per share is the same as the basic loss per share.

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% to10% 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% of net realisation proceeds on the sale of investments.

As at 30 September 2013, a performance fee provision of £452,000 was accrued, based on the terms of the Amendment Agreement and the projected timing of disposals.

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

The trade and other payables balance of £832,000 includes a performance fee liability of £461,000 following the sale of TC14 as detailed in note 11.

The Group holds full or partial ownership interests in a number of unquoted Indian companies. For three investment properties, 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 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 22.1% and 27.1%.

For the remaining two properties, different methods of valuations were used. DB (BKC) Realtors Private Limited (MK Malls) 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 the investment in Uppals IT Project Pvt. Ltd has been prepared on the assumption 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 land value of this investment would be materially lower. The investment in Uppals IT Project Pvt. Ltd is now the Group's largest investment.

Investments are recorded at fair value are as follows:

The fair value movement on investments shown in the income statement of £15,317,000 is made up of the fair value adjustment of £6,843,000, less the £22,160,000 reversal of previous unrealised write-downs of the investment in Luxor Cyber City, and which form part of the realised loss of £24,130,000 as shown in note 11.

£6,364,000 of the fair value adjustment is due to the depreciation of the Indian Rupee against Sterling, with only £479,000 being due to a fair value movement in Rupee terms.

Fair value hierarchy of investments

The financial assets measured at fair value are valued using a fair value hierarchy that reflects the significance of the inputs used in making the fair value measurements, as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Those involving inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).

Level 3 - Those inputs for the asset or liability that are not based on observable market data (unobservable inputs).

All the Company's investments measured at fair value have been valued on the basis of Level 3 described above.

The Group disposed of its holdings in Luxor Cyber City (TC14) during the period:

In August 2013, TC14 realised its investment in Luxor Cyber City. The total proceeds were £13,775,000 compared with a carrying value in March 2013 of £15,745,000, the difference being due entirely to exchange rate movements. The Company's share of the proceeds was INR 870 million (£ 9,219,000) and the remainder of £4,556,000 was used to settle non-controlling interest in TC14. 

The total distribution to the Company's shareholders as a result of the disposal of TC 14 was £10,522,000 and was paid on 6 September 2013.

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 to defend the actions.

Graham Smith is a Director of the Company and of the Administrator. The fees paid to the administrator for the period amounted to £50,000 (six months ended 30 September 2012: £54,000). Mr Smith was not paid a director's fee during the period.

There are no significant subsequent events.