Half Yearly Report

24th Dec 2009 07:01



TRIKONA TRINITY CAPITAL PLC

("the Company")

Interim Results for the six months ended 30 September 2009

Trikona Trinity Capital PLC (AIM: TRC), a fund created for investing in Indian real estate and infrastructure, announces its Interim Results for the six months ended 30 September 2009.

Further information, please contact: 

 

Evolution Securities 

Bobbie Hilliam, Corporate Finance

Chris Sim, Corporate Broking  +44 (0) 207 071 4300

 

Arden Partners plc

Chris Hardie, Corporate Finance  +44 (0) 207 614 5929

 

 

Chairman's Statement

Dear Shareholder

In March 2009, a new investment policy was adopted by shareholders which formally put the Company into effective realisation mode and committed Trikona Trinity Capital Plc ("TTC" or the "Company") to distributing cash raised from disposals, at least until the Company's share price reaches the net asset value ("NAV"). Inevitably, significant operational and strategic changes at the Company have resulted.

In the annual report for the year ended 31 March 2009, we reported on the initial plans and changes that were underway. After the Board of TTC was restructured in July 2009, we tried to engage constructively with Trikona Advisers Limited ("TAL") to review in detail the portfolio of investments, the potential to accelerate realisations, comprehend the multiple service relationships that were apparently being provided by TAL and its related companies and how the portfolio management agreement might be restructured to align their role as manager and fee arrangements with shareholders under the new investment policy. The discovery after the end of the financial half year of significant breaches of the portfolio management agreement led the Board to conclude that it was in the interests of both the Company and shareholders to bring the contract to an end. Notice of termination was given on 9 December 2009 and TAL's appointment as investment manager will cease on 16 March 2010. We are currently in the process of evaluating claims which the Company may have against TAL in respect of the contractual breaches and otherwise. TTC is also seeking, through its subsidiaries and investee companies, the termination of all contracts in India with companies related to TAL and its shareholders. It may be necessary to enter dispute-resolution proceedings with TAL and/or related entities in due course.

The change of investment manager of any specialist emerging market fund, especially one with an illiquid portfolio of assets, is a significant event and often represents a turning point. As such, this decision was not made lightly by the Board. Since notice of termination was given, the Board has sought to ensure that the assets continue to be properly protected. To this end, we have engaged advisers to assist in administering, monitoring and protecting the Company's investments in India in the short term. In order to ensure that, as far as possible, our relationships remain as stable as possible and that the minimum of disruption is caused, immediately after notice of termination was given, we also met with all of TTC's third party management and development partners to explain the situation. 

In terms of the management of the assets going forward, the Board intends to engage an adviser who will assist in inviting and screening proposals from other fund managers active in India with relevant experience and resources with a view to managing and realising the Company's investments in accordance with the investment policy after TAL's role has ceased. The intention is to have the new investment manager appointed as soon as the present portfolio management agreement terminates in March 2010.

The termination of the portfolio management agreement took place after the period to which these interim accounts relate and shortly before the writing of this statement. As stated above, a number of matters have come to our attention and the Board is assessing the impact of those matters on the Company and its investments. The Board considered it inappropriate in the circumstances to consult with TAL on investment valuations. Other than this, the Board has adopted the same methodology to valuing investments as in prior periods. If any material specific provisions for losses are required to be made based on new or more detailed information that comes to light, the Company will inform shareholders through the usual channel of RNS announcements. Although the financial statements to 30 September have not been audited, we have discussed the position with our auditors. 

During the six month period to 30 September 2009, the NAV increased by 8% from £1.13 to £1.21 per share. The value of the Company's portfolio of investments increased by 6% to £249.7 million. The increase in NAV was dampened by the negative effect of a 5% appreciation of UK sterling against the Indian rupee during the period between 1 April and 30 September 2009. 

There was a significant  development affecting one of the Company's investments during the period: Pipavav Shipyard, where the company's shares listed on the Bombay Stock Exchange and the National Stock Exchange on 9 October 2009. The IPO price set in late September 2009 was Rs 58 compared with TTC's acquisition price of Rs 25 and a carrying valuation at 31 March 2009 of Rs 47 per share. The Company's shareholding in Pipavav is subject to a one year lock up. TTC invested £14.3 million in shares of Pipavav in January 2007.

In November 2009, the Company placed its entire holding of 1,850,000 shares in Phoenix Mills Limited through the market at Rs170 per share, generating net disposal proceeds of approximately £3.9 million. The Company acquired the shares in June 2007 for £7.3 million and has therefore realised a loss of approximately £3.4 million. At 30 September 2009, the carrying value of the investment in Phoenix Mills was £4.3 million.

In October 2009, the Company also met its investment obligation to the first of the funds sponsored by SachsenFonds Asset Management GmbH ("SachsenFonds") and Lokhandwala Kataria Construction for the Lady Ratan Seasons project by investing the remaining outstanding commitment of Rs 471 million (£6.6 million). 

The Company remains in the position that it is not conducting a fire sale of its assets and is committed to maximising shareholder value by selling investments only when it is appropriate to do so. TTC's investments in IL&FS Transportation Networks Limited (ITNL) and DB Realty are progressing towards IPOs in India and realisation opportunities will arise in due course as a consequence. TTC's shares in ITNL will be placed through an offer for sale upon IPO. The holding in DB Realty will be subject to a one year lock-up before the shares can be freely sold.

The Company's development assets are at various stages of gestation. The projects at Lady Ratan Seasons, Rustomjee township and Virar township are making some progress but site development has still not commenced on either the Uppal IT Park - 'Tech Oasis' or Luxor Cyber City projects. A significant focus of the Company's new investment manager will be progressing or otherwise monetising these developments. 

During the first half of the financial year, the Company bought back and cancelled 21.4 million shares to the value of £12.0 million. Proceeds from the disposal of investments will be distributed periodically to shareholders after taking into consideration liabilities and projected operating costs. Further distributions will be effected by way of buyback, tender, capital distributions or dividends. 

The Board will have its work cut out for the remainder of the financial year. Besides the selection of an adviser and a new fund manager, the Board intends to engage further with SachsenFonds, which, through two India-focused closed end real estate funds it raised in Germany in 2007 and 2008, acquired certain of TTC's assets for an aggregate amount of £86.4 million. The issues faced by the Company in connection with the termination of the portfolio management agreement and in relation to the two SachsenFonds funds makes it unlikely that there will be any meaningful distributions to shareholders in the short term. However, as the position clarifies on both fronts, the Board intends to resume distributions to shareholders. 

Since the half year end, TTC's Board has been strengthened significantly through appointment of Arvind Pahwa in December 2009. Arvind brings extensive Indian real estate experience to the Board, having worked in the industry for over 25 years. His most recent role was as head of Indian Real Estate for JP Morgan Asset Management. Previously, he worked for leading Indian real estate players such as Indiareit and Reliance Land. 

In terms of the outlook for the Company, the investment environment in India continues to be positive. The prudent economic policies of the Government should have a positive effect on the Indian economy, real estate prices and the stock market. The business environment should therefore facilitate the implementation of the Company's investment policy. We will be busy over the next three months putting in place a new management structure and remain confident that, absent disruptions in the financial or real estate markets in India, the Company will be able to generate some £100 million of realisation proceeds in the foreseeable future.

Thank you for your continued support during this challenging period for TTC.

Martin M. Adams

Chairman

Consolidated Statement of Comprehensive IncomeFor the six months ended 30 September 2009

	Note	(unaudited) 6 months to 30 September  2009	(unaudited) 6 months to 30 September  2008	(audited)  12 months to 31 March  2009
		£'000	£'000	£'000
Interest received		168	1,880	4,102
Dividend income		64	98	98
Foreign exchange gain		149	114	86
Fair value gains/(losses) on investments	9
Reclassification of subsidiary		-	53,403	53,403
Other		14,929	(62,558)	(163,294)
Net realised gains on disposal of subsidiaries		-	31,844	31,795
Net investment income/(loss)		15,310	24,781	(73,810)
Investment Manager's management fees	8	(2,789)	(2,699)	(5,491)
Investment Manager's performance fees	8	(3,082)	(2,254)	20,459
Other administration fees and expenses		(1,961)	(669)	(2,602)
Total expenses		(7,832)	(5,622)	12,366
Profit/(loss) for the period before tax		7,478	19,159	(61,444)
Taxation		-	-	-
Profit for the period and total comprehensive income for the period		7,478	19,159	(61,444)
ATTRIBUTABLE TO:
Equity holders of the Company		5,670	4,196	(54,750)
Non-controlling interest		1,808	14,963	(6,694)
		7,478	19,159	(61,444)
Basic and diluted earnings/(loss) per share (pence)	7	2.6	1.8	(23.6)

 

Consolidated Balance SheetAs at 30 September 2009

	Note	(unaudited) 6 months  to 30 September 2009	(unaudited) 6 months  to 30 September 2008	(audited)  12 months  to 31 March 2009
		£'000	£'000	£'000
Non-current assets
Investments at fair value through the profit and loss	9	249,656	301,674	234,727
Total non-current assets		249,656	301,674	234,727
Current assets
Trade and other receivables		74	30	101
Cash and cash equivalents		44,318	95,707	60,038
Prepayments		52	192	142
Total current assets		44,444	95,929	60,281
Total assets		294,100	397,603	295,008
Liabilities
Non-current liabilities
Performance fee	8	(10,877)	(30,509)	(7,795)
Total non-current liabilities		(10,877)	(30,509)	(7,795)
Current liabilities
Trade and other payables		(6,575)	(5,348)	(6,006)
Total current liabilities		(6,575)	(5,348)	(6,006)
Total liabilities		(17,452)	(35,857)	(13,801)
Net assets		276,648	361,746	281,207
Represented by:
Ordinary shares	6	2,107	2,321	2,321
Distributable reserves		205,539	217,362	217,362
Retained reserves		47,428	100,704	41,758
Other reserves		(167)	(167)	(167)
Total equity attributable equity holders of the Company		254,907	320,220	261,274
Non-controlling interest		21,741	41,526	19,933
		276,648	361,746	281,207

 

Consolidated Statement of Changes in Equity For the six months to 30 September 2009

	Share Capital	Distributable reserves	Retained Earnings	Other Reserves	Shareholder funds	Minority interest	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Changes in equity for year to 31 March 2009 (audited)
Balance as at 1 April 2008	2,321	217,362	96,508	212	316,403	26,494	342,897
Loss for the year	-	-	(54,750)	-	(54,750)	(6,694)	(61,444)
Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Decrease in value of share options	-	-	-	(379)	(379)	-	(379)
Changes in ownership interest in subsidiaries that do not  result in a loss of control
Increase in minority interest shareholding	-	-	-	-	-	16,731	16, 731
Disposal of subsidiaries	-	-	-	-	-	(16,824)	(16,824)
Additional investment	-	-	-	-	-	226	226
Balance at 31 March 2009	2,321	217,362	41,758	(167)	261,274	19,933	281,207
Changes in equity for the period ended 30 September 2009 (unaudited)
Balance as at 1 April 2009	2,321	217,362	41,758	(167)	261,274	19,933	281,207
Net profit for the six months	-	-	5,670	-	5,670	1,808	7,478
Transactions with owners recorded directly in equity
Contributions by and distributions to owners
Share buy-backs	(214)	(11,823)	-	-	(12,037)	-	(12,037)
Balance at 30 September 2009	2,107	205,539	47,428	(167)	254,907	21,741	276,648

Consolidated Statement of Cash Flowsfor the six months ended 30 September 2009

		(unaudited) 6 months to 30 September 2009	(unaudited) 6 months to 30 September 2008	(audited)  12 months to 31 March 2009
	Note	£'000	£'000	£'000
Net cash used by operating activities	10	(3,917)	(10,331)	(14,449)
Cash flows from investing activities
Purchase of investments		-	(5,771)	(39,561)
Interest and dividend income received		234	1,978	4,201
Disposals of subsidiaries		-	54,754	54,754
Reclassification of subsidiary		-	(1,540)	(1,540)
Net cash inflow from investing activities		234	49,421	17,854
Cash flows from financing activities
Share buy-backs		(12,037)	-	-
Net cash (outflow) / inflow from financing activities		(12,037)	-	-
Net (decrease)/increase in cash and cash equivalents		(15,720)	39,090	3,405
Cash and cash equivalents at the start of the year / period		60,038	56,617	56,617
Foreign exchange		-	-	16
Cash and cash equivalents at the end of the year / period		44,318	95,707	60,038

Selected notes to the interim consolidated financial statementsFor the six months ended 30 September 2009

1. General information

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 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 of the London Stock Exchange.

The interim consolidated financial statements of the Company as at and for the six months ended 30 September 2009 comprise the Company and its subsidiaries (together referred to as the "Group"). The interim consolidated financial statements are unaudited.

The consolidated financial statements of the Group as at and for the year ended 31 March 2009 are available upon request from the Company's registered office at IOMA House, Hope Street, Douglas, Isle of Man, IM1 1AP or at http://www.trinitycapitalplc.com 

2. Statement of Compliance

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 2009. 

These interim consolidated financial statements were approved by the Board of Directors on 23 December 2009.

3. Significant accounting policies

Except as described below, 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 period ended 31 March 2009. 

Change in accounting policy

Presentation of financial statements 

The Group applies revised IAS 1 Presentation of Financial Statements (2007), which became effective as of 1 January 2009. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income. This presentation has been applied in these interim financial statements as of and for the six months period ended on 30 September 2009. Comparative information has been re-presented so that it also is in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.

4. Critical accounting estimates and assumptions

Estimates and judgements are continually evaluated and are based on historical experience as adjusted for current market conditions and other factors.

The Directors make estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below.

(a) Estimate of fair value of unquoted investments

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 of the development properties owned by each of these companies as at 30 September 2009. Based on CBRE's valuation of the development properties, the Directors valued the Group's interest in the equity interests held in each of the Project Companies. The Directors also valued the Group's ownership interests in the non-development property owning unquoted companies. Protiviti, an independent firm of advisors carried out certain agreed upon procedures to validate the computation of the fair value of Group's interest.

 For the Project Companies, the Directors' valuations are based on a discounted cash flow methodology. The methodology is principally 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 17.96% and 29.46%. For the non-development property company holdings, a combination of discounted cash flows and price earnings multiples is used. 

(b) Estimated performance fee (carried interest) on investments

As described in note 8, a provision has been established for performance fees. This is based on the fair value gains recognised and an estimate of the ultimate IRR of each investment.

5. Financial risk management policies

The Group's financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as at and for the period ended 31 March 2009.

6. Share capital

During the six months to September 2009, the Company purchased 21,367,702 of its own shares on the market for a total consideration of £12,037,000 and cancelled them.

	September 2009		March 2009 and September 2008
Issued share capital	No. of shares	£	No. of shares	£
Ordinary shares of £0.01 each	210,432,498	2,104,325	231,800,200	2,318,002
Deferred shares of £0.01 each	250,000	2,500	250,000	2,500
	210,682,498	2,106,825	232,050,200	2,320,502

7. Earnings/(loss) per share

The basic and diluted earnings per share is calculated by dividing the gains for the period attributable to ordinary shareholders by the weighted average number of shares outstanding during the period:

	6 months to 30 September 2009	6 months to 30 September 2008	12 months to 30 March 2009
Profit/(loss) attributable to  ordinary shareholders of the Company (£'000)	5,670	4,196	(54,750)
Weighted average number of  shares in issue ('000)	217,805	232,050	232,050
Basic earnings per share (pence)	2.6	1.8	(23.6)

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

8. Investment manager fees and performance fees

In consideration of the Manager providing management services, whether itself or through subcontractors, the Manager receives a management fee of 2 per cent. per annum of the amount subscribed on the issue of the Placing Shares plus returns from investment retained by the Group for further investment. This fee is payable quarterly in advance.

The Manager is entitled to a carried interest (performance fee), subject to meeting minimum returns. The hurdle is 10 per cent IRR on relevant investment ("Hurdle"). Following the sale of an investment, if the Hurdle has been met, the Manager will be entitled to receive a profit share of 20 per cent. of the gain generated by the Group in respect of that investment, provided that if the IRR exceeds 20 per cent., the Manager shall be entitled to 30 per cent. of the gain in respect of that investment. Upon entitlement, 80% of the fee becomes immediately payable and 20% of the fee is held in escrow. A provision of £10,877,000 (31 March 2009: £7,795,000) been made in respect of the relevant fair value investment gains recognised in the financial statements as at 30 September 2009. This provision has been calculated on the same basis as in previous periods and does not represent an amount which might become payable as a result of the termination of the portfolio management agreement after the period end (see note 14). In addition, the Company holds £2,583,000 in escrow, with an offsetting performance fee liability, being 20% of the performance fee arising on disposals made in 2007 and 2008.

9. Investments

Investments are recorded at fair value as follows: 

	At Cost  £'000	Fair value Adjustment  at 30 September 2009 £'000	Fair Value  At 30 September 2009 £'000	Fair Value  At 31 March 2009 £'000
Development property owning companies  (all unlisted equity securities):
Uppal IT Project Pvt Ltd.	36,194	6,444	42,638	39,088
Lokhandwala Kataria Constructions Pvt Ltd.	6,258	9,072	15,330	11,735
Kapstone Constructions Pvt Ltd.	10,593	3,467	14,060	12,352
DB Hospitality Pvt Ltd.	12,176	(1,572)	10,604	11,748
M K Malls Developers	12,283	3,465	15,749	16,511
Luxor Cyber City Pvt Ltd.	37,904	(13,685)	24,219	29,796
DB Realty Pvt Ltd.	26,381	29,597	55,978	46,170
Other companies (each less than £10m in value)	16,680	(3,183)	13,497	17,444
	158,469	33,606	192,075	184,844
Non-development property company holdings
Listed equity securities	20,898	(4,985)	15,913	9,145
Unlisted equity securities	29,498	12,168	41,666	40,738
	208,865	40,789	249,654	234,727

Unlisted equity securities including development property owning companies that amount to £233,741,000 (31 March  2009: £225,582,000) have been fair valued by the Directors as at 30 September 2009. Protiviti, an independent firm of business advisors, carried out certain agreed upon procedures to validate the computation of fair value. All the fund's unlisted equity securities comprising development projects are valued using discounted cash flow techniques, with the exception of the investment in Rustomjee Constructions Pvt Ltd. which is valued at the Group's share of the estimated underlying net asset value. The underlying cash flows for the development projects are based on data generated by CBRE (the Company's independent valuer) in conjunction with the Company's Investment Advisor, with the exception of DB Realty. DB Realty is valued on the basis of a mix of discounted cash flows and market comparables.  The unlisted equity securities comprising non-development property holdings are valued using a mixture of discounted cash flow and price earnings multiples, except for those holdings for which there is a recent transaction in which case that transaction price is used as the valuation basis if applicable.

The investment in MK Malls Developers comprises mezzanine debt stated at a fair value of £15,749,000 and cost of £12,283,000 (31 March 2009: £16,511,000 and £12,283,000 respectively).

10. Cash used by operations

	6 months to 30 September 2009	6 months to 30 September 2008	Year to31 March 2009
	£'000	£'000	£'000
Profit/(loss) for the period	7,478	19,159	(61,444)
Adjustments for:
Fair value gains on investment	(14,929)	9,155	109,891
Finance income	(232)	(1,978)	(4,201)
Profit on disposal of shares in subsidiaries	-	(31,843)	(31,795)
Share option expense	-	(379)	(379)
Changes in working capital
Increase in receivables	118	2	(20)
Increase/(decrease) in payables	3,648	(4,447)	(26,501)
Cash used by operations	(3,917)	(10,331)	(14,449)

11. Commitments

As at 30 September 2009 the Group had a capital commitment of £6,166,000 (31 March 2009 £10,582,000) in respect of capital expenditures contracted for at the balance sheet date but not yet incurred. This comprised a commitment by Trinity Capital (Five) Limited of in respect of Lokhandwala Kataria Constructions. Excluded from commitments is an amount of £10,500,000 which the Board approved for investment by Trinity Capital (Fourteen) Limited in Luxor Cybercity, but which is not subject to legal commitment.

12. Contingent Liabilities

The disposal of subsidiaries in the previous two financial years included legal provisions in the relevant documentation whereby the Group would be obliged to make good to the acquiror the economic loss which would arise upon the non fulfilment of certain conditions in the contractual arrangements. The Directors cannot yet state with full certainty that such obligations will not arise, but it is not possible to quantify the level of compensation which may become payable.

13. Net asset valuation (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 period by the number of shares in issue.

	30 September 2009	30 September 2008	31 March 2009
Net assets	£254,907,000	£320,220,000	£261,274,000
Number of shares in issue (note 11)	210,682,498	232,050,000	232,050,000
NAV per share	£1.21	£1.38	£1.13

14. Events after the balance sheet date

The commitment to make a further investment in Lokhandwala Kataria Constructions described in note 11 was paid on 22 October 2009. 

On 9 November 2009, the Company sold its entire holding of 1,850,000 shares in Phoenix Mills Limited into the market at INR170 per share, giving a total net consideration of approximately £3.9 million.

On 11 December 2009, the Company served notice of termination of the portfolio management agreement on Trikona Advisers Limited. In accordance with the terms of the portfolio management agreement the appointment of TAL will cease 60 business days from receipt of the notice of termination on 16 March 2010

  Review report by KPMG Audit LLC to Trikona 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 2009, which comprises the consolidated  statement of comprehensive income, the consolidated balance sheet, 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 are prepared in accordance with IFRS. The condensed set of financial statements included in this half yearly report have been prepared in accordance with IAS 34 Interim Financial Reporting.

The accounting policies that have been adopted in preparing the condensed set of financial statements are consistent with those that the Directors currently intend to use in the next annual financial statements.

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 2009 is not prepared, in all material respects, in accordance with IAS 34 and the AIM Rules. 

KPMG Audit LLC

Chartered Accountants

Douglas, Isle of Man

ENDIR GGMZZNFKGLZM

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