Half Yearly Report

9th Dec 2008 07:00



9 December 2008

Trikona Trinity Capital PLC

("Trikona TC" or "the Company")

Interim Results for the six months to 30 September 2008

Trikona Trinity Capital PLC (AIM: TRC), a fund created for investing in Indian infrastructure and real estate, announces its Interim Results for the six months to 30 September 2008.

Highlights

Financial 

Assets up 65% over cost

Net Asset Value ("NAV") per share of 138p1 (31 March 2008: 151p), down 8.6% 

NAV on a constant currency basis against the previous period of 143p per share

Successfully completed second divestment of investment assets to SachsenFonds GmbH ("SachsenFonds") for £54.1 million, realising a 115% gain on invested capital

Co-invested a further £20.04 million with SachsenFonds. At 30 September, Trikona TC had investments in 11 high-profile projects

Realisation of Assets

In June, Trikona TC divested holdings in four projects to SachsenFonds for £54.10 million and co-invested £20.04 million in MIG Bandra (DP13), a new residential redevelopment project 49% investment made through a Mauritian SPV funded 45% by Trikona TC and 55% by SachsenFonds. On current exchange rates, 45% ownership equates to £8.7 million.

In September, the Company agreed a divestment of holdings in three further projects to SachsenFonds for an initial consideration of £32.05 million. As part of the transaction SachsenFonds agreed to invest £15.02 million in new projects.

In October, the Company invested £25.2 million in four new investments. SachsenFonds have been granted a 90 day extension from 17 October 2008 to complete their project funding of £15.02 million.

Operational

On 31 October, the Board of Trikona TC announced the appointment of two new non-executive  directors - Andrzej Sobczak and Pradeep Verma

Expanded and strengthened the Trikona team through the appointments of Michael McCook and Brijesh Kumar 

Michael Cassidy CBE, Chairman of Trikona Trinity Capital PLC said: 

"The current global financial downturn and adverse economic conditions have impacted significantly upon Trikona TC's share price and NAV. However, while our reported NAV in the period was down 8.6%, since inception the reported NAV is up 46.8%2 compared to the net asset value at inception net of issue costs. In addition, we successfully completed further disposals of assets during the period.

"The Company's resilience in the sector can be attributed to the experience, local knowledge and execution capabilities of our management team, and investor confidence in our continued ability to realise strong returns in increasingly challenging markets."

 

Conference Call Details

There will be an interim results conference call today at 15.30 (London, UK).

There will be a short presentation of the results by Rak Chugh, Managing Director, and Michael Cassidy CBE, Chairman of Trikona Trinity Capital, followed by Q&A.

 

Date:  Tuesday 09 December 2008

Time: 15.30

Dial in details: + 44 (0) 207 190 1596

Conference title:  Trikona Trinity Capital Interim Results

Conference Call 

(On connection, please quote the title of the conference call)

 

(Please note, you will be connected in a listen only mode and hear music until the conference begins)

If you are unable to dial in at 15.30 but would like to listen at a later date there is a replay facility that will be accessible for 30 days.

Dial in details: UK Local +44 207 154 2833

Enquiries:

 

Trikona Trinity Capital PLC managed by Trikona Capital Limited 

Aashish Kalra, Managing Director +91 11 4659 6000

Sally Lewis, Director of Investor Relations +44 207 148 5360

 

Bell Pottinger Corporate & Financial +44 207 861 3232

Mike Davies / Rosanne Perry / Laura Pope

 

Numis Securities +44 207 260 1000

NOMAD: Lee Aston

Corporate Broking: Charles Farquhar

 

Fairfax I.S. PLC +44 207 598 5368

James King, Head of Corporate Finance

  Chairman's Statement

I am pleased to report Trikona Trinity Capital's Interim Results for the six months to 30 September 2008. Despite the challenges faced by the Company during the period, Trikona TC has continued to make encouraging progress in its projects and confirmed its ability to realise value for shareholders. While net asset values fell by 8.6% during the period, this compares well with the overall performance of the real estate sector. At 30 September, the Company achieved a NAV per share of 138p1 compared with 151p at 31 March 2008.

Trikona Trinity Capital ("Trikona TC") continued to demonstrate the ongoing success of its business model and hands-on approach to investing in India, by completing its second realisation of portfolio assets, achieving a cash-on-cash return in excess of 115% on four of its initial investments. This included the sale of the balance of the Company's interest in Development Projects 3 and 5. 

Trikona TC has consistently delivered on its IPO promises and has realised significant cash returns on investments in the real-estate sector. At 30 September 2008, Trikona TC had investments in 11 high-profile projects.

On 13 September 2008, the Company committed to invest in Sankalp Buildwell Private Limited ("Sankalp") (DP14), Jodhana Developers Private Limited ("Jodhana") (DP15), Enigma Constructions Private Limited ("Virar") (DP16) and Horizon Countrywide Logistics Limited ("HCLL") (EH17). In October, Trikona TC provided previously committed funding of £25.2 million.

On 31 October 2008, the Board of Trikona TC announced the appointment of two new non-executive directors - Andrzej Sobczak and Pradeep Verma. The Board also stated it would extend its previously announced review and upon appointment of the two directors, the review would focus on the Company's ongoing investment policy and future distribution of capital. A requisition from Carrousel Fund Ltd and Carrousel Fund II Ltd Carrousel") to call an extraordinary general meeting ("EGM") of Trikona TC, was subsequently withdrawn.

IFRS financial statements

The financial statements, as prepared under IFRS, show a net profit for the period attributable to shareholders of £4.2 million (6 months to 30 September 2007: £42.9 million) and net assets at the period end of £320 million (31 March 2008: £316 million). The financial statements for the period include for the first time a fair value adjustment for Uppals IT following the change in treatment as described below.

During the period, as part of the second realisation of assets by way of sale to SachsenFonds, the Group's interest in Uppals IT was reduced to 67%. As part of this sale the Group also entered into a shareholder's agreement with SachsenFonds, which resulted in the Group's interest in Uppals IT being recategorised as a joint venture, whereas it had previously been treated as a subsidiary. In accordance with the Group's accounting policy, interests in joint ventures and associates are stated at fair value through profit or loss. The resulting value adjustment has been passed through the Income Statement and, helpfully, brings the financial statements into line with the figures used to produce the quoted NAV per share. The effect of this change on the total net assets is as follows:

	Net assets per  IFRS Balance Sheet	Net assets adjusted for reporting purposes
30 September 2008	£320.2 million	£320.2 million
31 March 2008	£316.4 million	£350.8 million

Realisation of assets

During the period, Trikona TC successfully completed its second divestment to leading German fund manager SachsenFonds GmbH ("SachsenFonds") with the sale of a further part of its portfolio for £54.1 million, realising a 115% gain. Trikona TC also co-invested £20.04 million in a new project with SachsenFonds. This project, MIG Bandra, is a residential redevelopment located within the MIG Bandra area in a 49:51 partnership with Rustomjee Constructions Pvt. Ltd. SachsenFonds owns 55% and Trikona TC owns 45% of the 49% stake.

On 13 September 2008, the Fund agreed to a conditional deal to divest additional assets to SachsenFonds in a third transaction. As part of this agreement, Trikona TC would invest in DP14, DP15, and DP16 and SachsenFonds would then take an interest in the Mauritian entities holding DP1, DP2, DP10, DP14, DP15 and DP16 for up to £70.61 million.

As a result of the uncertain conditions in global financial markets and the corporate activity announced on the 14 October 2008, the Company has granted SachsenFonds an extension period of up to 90 days from 17 October 2008 to complete first tranche funding of the divestment of £32.05 million and we remain confident the transaction will complete.

In respect of existing investments where commitments have been made, repatriation is governed under Indian Foreign Direct Investment rules and is subject to a three year hold period.

Subsequent events

As announced in our pre-close period update, the Board initiated a process to undertake a review of mechanisms designed to address the gap between the Company's share price and NAV. During this review process, which involved a consultation with key shareholders to review the various mechanisms available, the Company received a requisition from Carrousel Fund Ltd and Carrousel Fund II Ltd ("Carrousel") to call an extraordinary general meeting of Trikona TC.

The requisition allowed shareholders to vote on changes to the Board and on a change in the Company's stated investment policy. On 31 October 2008, the Board announced the appointment of Andrzej Sobczak and Pradeep Verma as non-executive directors and confirmed the requisition had been withdrawn. Both directors look forward to working with Trikona TC and its management team with a view to maximising shareholder value.

The Board also announced on the 31 October its commitment to extend its review to include a review of the ongoing investment policy and the strategy regarding distributions of capital. This is a fundamental review and the outcome will be announced in due course.

During the review period, the Company will refrain from making new investments in any new assets, conserve any cash resulting from disposals and also refrain from any capital distributions until such time as the strategic review has been concluded. 

Market Developments

Like most property markets around the world, the Indian real estate market has been affected by slowing economic growth and unsettled global capital markets, with the well publicized terrorist attacks in Mumbai at the end of November only adding to the uncertainties.

In areas where there is significant supply already in the pipeline, or which are currently witnessing lower demand, investment is starting to slow and, whilst Foreign Direct Investment ("FDI") and private equity investment is expected to continue, it is likely to be more measured.

However, whilst there has been a slowdown in residential sales in some areas, the residential market around the secondary business district of Bandra Kurla Complex still commands a premium due to limited supply. Trikona TC is seeking to capitalise on this opportunity through its investment in MIG Bandra, a development partnership with Keystone Realtors Pvt. Ltd. Once complete, this project will offer 598,133 sq. feet of residential space close to Bandra Kurla Complex, the secondary business district of Mumbai.

Infrastructure and logistics asset classes in India continue to provide investment opportunities with strong growth projections. With the need for basic consumer goods remaining strong, analysts expect the warehousing and logistics market to reach £80 billion and grow at between 8% - 12% per annum. Our investment into Horizon Countrywide Logistics Limited (EH17) represents our first investment in this space.

Outlook 

The current global financial downturn and adverse economic conditions have impacted significantly upon Trikona TC's share price and NAV. However, while our reported NAV in the period was down 8.6%, since inception the reported NAV is up 46.8% compared to the NAV at inception, net of issue costs. In addition, the Company successfully completed further disposals on its assets during the period.

The Company's resilience in the sector can be attributed to the experience, local knowledge and execution capabilities of our management team, and investor confidence in our continued ability to realise strong returns in increasingly challenging markets.

  

Trikona Capital Investment Manager's Report

Introduction

The half-year to 30 September 2008 was a challenging period for Trikona Trinity Capital ("Trikona TC"). The global financial and economic turmoil affected our business, adding complexity to the decision process for transactions as well as constraining some asset valuations. While the value of our assets showed a gain of 65% over cost, there was fall of 8.6% in our Net Asset Value ("NAV") from 151p in the previous period to 138p1.

Trikona TC has realized significant returns on its investments. The Company became fully invested within its first 12 months of operation and has subsequently realised cash-on-cash returns in excess of 115%, while equity markets have fallen significantly during the same period.

In accordance with the investment strategy stated at Admission, in June we invested £8.7 million in one project and disposed of £54.10 million in four projects. 

In September, we announced our commitment to undertake a further transaction and as part of this, we completed initial funding in October of £25.2 million in four projects: Sankalp Buildwell Private Limited ("Sankalp") (DP14), Jodhana Developers Private Limited ("Jodhana") (DP15), Enigma Constructions Private Limited ("Virar") (DP16) and Horizon Countrywide Logistics Limited ("HCLL") (EH17). The transaction also includes divestment of a further part of our portfolio to SachsenFonds GmbH ("SachsenFonds") for an initial consideration of £32.05 million.

Since the half year end, market conditions have deteriorated further, the Company's share price has weakened and the discount to NAV has widened, albeit on low volumes. Whilst we recognise the extent to which the discount has been influenced by sector and industry trends, we are working closely with the Board and its advisors to address this discount.

Investment highlights

Trikona TC has continued to create value for shareholders through the successful sale of parts of its investment portfolio to, SachsenFonds, a leading German fund manager.

In June, Trikona TC completed its second divestment to SachsenFonds with the sale of part of its portfolio for £54.10 million, realising a 115% gain. Under the terms of the agreement, Trikona TC created a Mauritian SPV jointly funded by Trikona TC and SachsenFonds in a 45:55 ratio to invest £20.04 million in MIG Bandra (DP13), a new residential redevelopment project. Under the terms of the arrangement, the 49% interest by the Mauritian SPV will have the first right of cash flow in the project returns, thereby protecting its interest in the project against market downturn.

Trikona TC has capitalized on the current downturn by investing in high volume middle income housing and as part of the MIG Bandra development project, Trikona TC is working in partnership with Keystone Group to redevelop a four acre site in North Mumbai. The site is in close proximity to the Secondary Business District (SBD) of Mumbai, known as the Bandra Kurla Complex (BKC), which is fast outgrowing the traditional Central Business District of Nariman Point. As increasing numbers of corporations move into the BKC, there is a growing demand for quality residential real estate space in the adjoining areas.

1 Volatility in the currency market has also contributed significantly to the NAV. While the 151p reported at 31 March 2008 was calculated at 79.53 INR to GBP, the 30 September 2008 results are calculated at 84.11 INR to GBP. The rate as of 1 December 2008 is 74.9 INR to GBP. On a constant currency basis, using the rate at 31st March 2008, the NAV would be 143p. Using the rate at 1 Dec 2008 the NAV would be 148p.

  Portfolio review

The portfolio is diversified across seven asset classes (infrastructure, urban rejuvenation, residential, commercial, retail, hospitality and logistics) which, combined with our local knowledge and execution capability, has enabled us to better withstand current market conditions. In addition, the portfolio has conservative gearing, with no debt carried at the Company or Mauritian SPV level and as at 30 September 2008 the Indian SPVs held aggregate debt amounting to less than 15% of their 30 September 2008 value3. 

Our partnerships with local developers continued to give Trikona TC a competitive advantage in the Indian market, and the strong reputation and expertise of the on-the-ground management team allowed us to identify and negotiate attractive investment opportunities.

Through its relationship with Keystone Group, and following Trikona TC's portfolio investment in Rustomjee's Township (DP2), the Company has gained exposure to the key city centre entry points and suburban centers in Mumbai that focus on the affluent middle class. More recently, we strengthened our partnership with Keystone Group and made investments in MIG Bandra (DP13), gaining access to Mumbai's lucrative business district, and in Enigma Constructions in Virar (DP16) to develop affordable housing in Mumbai's northern suburbs. Both investments are showing resilience to global conditions, with DP16 experiencing high demand for their homes valued from £18,000 - £40,000. 

Following Trikona TC's investment in Pipavav Shipyard Limited (EH8) with SKIL, we extended the Company's partnership with the developer through investments in two new projects. Sankalp Buildwell Private Limited (DP14) will develop an integrated township to cater for shipyard workers as well as the vast workforces employed at nearby cement, steel and power plants. Horizon Countrywide Logistics Limited (EH17) is a logistics company focusing on the supply chain required to support the demand for goods across India. 

Market Summary

Whilst the global credit crisis has had a large impact on the Indian markets, GDP growth of the Indian markets is expected to continue, albeit at a slower pace. The IMF's revised 2009 growth projections put Indian GDP growth at 6.3% as against the Government of India estimate of 7.6%. We believe that this expansion will primarily take place in core sectors and support demand for affordable housing and stimulate key infrastructure sectors such as energy and logistics. On the real estate front, some micro-markets have experienced a slow-down in residential and commercial demand, but affordable housing in the large cities remains supply constrained.

On the economic front, domestic savings continue to grow, foreign exchange reserves are healthy and there is a substantial backlog of demand for infrastructure projects. Inflationary pressures appear to be moderating and there has been fiscal relaxation designed to sustain demand, with further fiscal stimulus expected.

All our principal developments in the specific micro markets of Mumbai/Mumbai agglomeration and the NCR are entering a significant phase of development. The recent fall in commodity prices, which includes steel, cement and other building materials, has provided our developments with a cost buffer. Construction houses have also begun to accept lower construction margins.

With current shortages of debt and other structured finance instruments, Indian developers continue to face a difficult time in obtaining the cash needed to complete many of their projects and as a result we expect that supply constraints will occur three to five years in the future when many of Trikona TC's projects will be coming to market. 

We continue to expect strong demand for affordable housing in 2009 and a number of developers are redefining the product mix of developments to address demand from middle income groups. We expect execution and completion of existing residential developments to be the primary focus of developers who will need to restore their balance sheet before initiating new projects with consequent impact on supply.

3 Debt data for all the equity holdings are as at 31 March 08 and calculated against 30 September 2008 valuations.  Investment Management Team

We continue to recognise the importance of hands-on experience, and consequently the Manager has expanded its team through the appointments of Michael McCook and Brijesh Kumar.

Mr. McCook is a former Senior Investment Officer of Real Estate of the California Public Employees Retirement System (CalPERS) and has joined the Trikona Capital as a general advisor. Mr. Kumar, former Chairman and CEO of the Greater Noida Industrial Development Authority, Uttar Pradesh, has also been appointed as an advisor to Trikona Capital and as an independent director to Panthera Developers.

These two new advisors will broaden the experience of the existing team, as well as adding further strengthen to the advice resources it can offer to the Company.

Valuation of Property Portfolio 

We are pleased to report that CBRE, as an independent valuer, has appraised the properties in Trikona TC's investment portfolio as of 30 September 2008. Based on the work by CBRE on the underlying assets, the Directors' valuation of Trikona TC's total investments, including cash and entity level shareholdings, produces a NAV of £320.2 million or 138 pence per share compared with the a NAV of 151 pence per share at 31 March 2008. 

The assessment of value of our interests in the various assets was made by the Board of Directors and Protiviti performed certain agreed procedures to validate the computation of the value of Trikona TC's investments.

Outlook

Whilst we live in turbulent times, we remain confident in our investment thesis and in our ability to realise cash returns for shareholders. We remain committed to working closely with the Board and our advisors to conduct a strategic review to improve our share price performance and narrow the discount between our share price and NAV.

  Investment Portfolio Summary 

Exchange rate is INR 84.116 =£1, INR 46.965 =$1 at 30 September 2008

ID**	Investment Name	Location	Project Type	Investment Date	Capital Committed	NAV as of 30 September 2008 (on 100% basis)	Effective Trikona TC NAV as of 30 Sept 2008 (adjusted basis*)	Trikona TC Transaction Multiple (1)	Trikona TC IRR (%) from investment to 30 Sept 2008 (2)
DP1	Uppal IT Park "Tech Oasis"	Greater Noida, NCR of Delhi	IT/ITES SEZ with Residential, Commercial & IT	Oct-06	28.7	79.00	52.93	2.75	84%
DP2	Rustomjee's Township	Thane, Mumbai	Residential, Commercial & Retail	Oct-06	14.16	21.15	21.15	2.00	43%
DP3	MK Malls* Mezz	Bandra Kurla Complex, Mumbai	Commercial	Mar-07	12.3	13.47	13.47	1.10	9%
DP4	Lady Ratan Seasons	Worli, Southern Mumbai	Residential Space	Oct-06	12.3	22.73	13.41	1.85	63%
DP6	NeelKamal Marine Drive	Mumbai, Pune and Goa	Development company & Hospitality Platform	Dec-06	12.2	13.30	13.3	1.09	8%
DP10	Luxor Cyber City	Gurgaon, NCR of Delhi	IT/ITES SEZ	Jun-07	38.4	55.13	46.86	1.44	33%
DP11	DB Realty	Mumbai	Residential & Commercial	Apr-07	26.4	50.01	50.01	1.89	62%
DP13	MIG Group IV	Mumbai	Residential Space	May-08	8.7	10.89	10.89	1.25	n/a
EH7	Fortis Healthcare Limited	Pan India	Infrastructure	Jan-07	13.5	5.89	5.89	0.44	n/a
EH8	Pipavav Shipyard Limited	Pipavav Port, State of Gujarat	Infrastructure	Jan-07	13.5	36.69	36.69	2.71	82%
EH9	IL&FS Transportation & Networks Limited	Pan India	Infrastructure	Oct-06	5.1	6.47	6.47	1.26	13%
EH12	Phoenix Mills Limited	Pan India	Retail, Commercial & Hospitality	Jun-07	7.4	3.17	3.17	0.43	-49%
TOTAL					192.58	317.89	274.24	1.68	46%

(1) Multiples are on a gross basis, before deducting carried interest, management fees and disposal costs.

(2) Gross IRR reflects return before deducting carried interest, management fees, and disposal costs. 

* Adjusted by NAV attributable to minority holders of the Mauritian SPV post realisation 

**DP = Development Project; EH = Equity Holding

  Portfolio Valuation

	Development Project	Cost £ million	Valuation £ million	Valuation  gain %	Minority £m	NAV per share (£)	% of  TTC NAV
DP1	Uppal IT	28.7	79.0	175%	- 26.1	0.23	16.5%
DP2	Kapstone	14.2	21.2	49%	-	0.09	6.6%
DP3	MK Malls				-	0.00	0.0%
DP4	Lokhandwala	12.3	22.7	85%	- 9.3	0.06	4.2%
DP5	Manjeera				-	0.00	0.0%
DP6	DB Hospitality	12.2	13.3	9%	-	0.06	4.2%
DP10	Luxor	38.4	55.1	44%	- 8.3	0.20	14.6%
DP11	DB Realty	26.4	50.0	89%	-	0.22	15.6%
DP13	MIG Bandra	8.7	10.9	25%	-	0.05	3.4%
	Subtotal - Projects	140.8	252.2	79%	-43.7	0.90	65.1%
EH7	Fortis (listed)	13.5	5.9	-56%	-	0.03	1.8%
EH8	Pipavav	13.5	36.7	171%	-	0.16	11.5%
EH9	ITNL	5.1	6.5	26%	-	0.03	2.0%
EH12	Phoenix (listed)	7.4	3.2	-57%	-	0.01	1.0%
	Subtotal - Equity holdings	39.5	52.2	32%	-	0.23	16.3%
	MK Malls mezzanine	12.3	13.5	10%		0.06
	Total investments	192.6	317.9	65%	- 43.7	1.18	85.6%
	Cash		95.7			0.41	29.9%
	Committed cash		-16.2			-0.07	-5.1%
	Committed cash in respect of MI				2.3	0.01	0.7%
	Other assets & liabilities		-5.3			-0.02	-1.7%
	Total assets under management		392.1		- 41.4	1.51	109.5%
	Minority Interest		-41.4
	Performance fee		-30.5			-0.13	-9.5%
	Total net assets attributable to shareholders		320.2			1.38	100.0%

  Development Project Update

DP1

Name | Uppal IT Park- 'Tech Oasis'

Location | Greater Noida, NCR of Delhi

Asset Classes | Residential, Commercial, Hospitality 

Project Partner | Panthera Developers

Type | IT SEZ with Residential, Commercial & IT space

Saleable Area | 10.16m sq. ft. on 76 acres

Project Description

Located in the National Capital Region (NCR) of Delhi, Greater Noida represents one of the fastest growing emerging townships of Uttar Pradesh. Viewed by most as the next IT destination in North India to accommodate the increasing demand for townships and planned infrastructure, the township is spread over 36,000 hectares, and supports a population of over 500,000 that is expected to more than double by 2021. Greater Noida, recognised as an alternative to the saturated locale of Gurgaon, is also beginning to capture some of the commercial space demands of non-IT industries and multi-national corporations.

Trikona TC's property benefits by being located within the specially designated 650 acre Tech Zone within Greater Noida. The Tech Zone maintains excellent infrastructure, and affords optimum connectivity to Noida, Faridabad, Gurgaon and South Delhi with the Central Business District of Noida only 35km away and the current international airport only 45km away.

Highlights

In December 2007, SachsenFonds acquired an 8% share in the Mauritian SPV for £6.48 million resulting in a realised IRR of 161% and a multiple of 2.87 times return (SF-I).

In January 2008, the Board of Approvals in India granted the project "Special Economic Zone" status. The granting of this status is estimated to provide a substantial cost saving in income tax and construction costs over the next 10 years and will offer additional incentives for businesses to occupy the land upon completion. This approval was the result of the Investment Manager's continuous and rigorous dialogue with the government offices and its various departments.

In June 2008, SachsenFonds acquired an additional 25% share of the original Mauritian SPV for £20.24 million, resulting in a realised IRR of 101% and a multiple of 2.86 times return (SF-II).

A joint development agreement with a large pan India developer is at the final stage of negotiation. 

Detailed Profile

Area by Asset Class

Asset Class	Current Plans  (Saleable Area in millions of sq. ft.)
Asset Class	Current Plans  (Saleable Area in millions of sq. ft.)
IT/ITeS	4.66
Commercial	0.81
Residential	1.07
Hotel	0.21
Retail	0.93
Basement/Parking	2.48
Total	10.16

Investment

Date of Investment	18 October 2006
Total Capital Committed	£28.7m
Total Capital Invested	£28.7m

  Ownership and Divestment

The Mauritian SPV still owns 100% of DP1; however, Trikona TC has sold a portion of its ownership in the Mauritian SPV. The following table outlines the transactions:

Date	% of Mauritian SPV sold (%)	Trikona TC's Remaining % of Mauritian SPV (%)	Sale price	IRR at sale (%)	Multiple (x)	To whom
Date	% of Mauritian SPV sold (%)	Trikona TC's Remaining % of Mauritian SPV (%)	Sale price	IRR at sale (%)	Multiple (x)	To whom
27 December 2007	8	92	6.48	161	2.87	SF-I
17 June 2008	25	67	20.24	101	2.86	SF-II

Performance

Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
30 September 2008	79	84%	2.75

** On committed capital on a 100% basis

Current Rates (Manager's estimate based on 31st March 2008 exchange rates)

Asset Class	Construction Rates (INR)			Sales / Lease Rate (INR)
Asset Class	Construction Rates (INR)			Sales / Lease Rate (INR)
	INR	£	$	INR	£	$
IT/ITes rate/sq.ft.	1,750-1,900	21.66 - 23.51	43.75 - 47.50	38-42 /month	0.47 - 0.52	0.95 - 1.05
Residential rate/sq.ft.	1,300-1,400	16.09 - 17.32	32.50 - 35.00	2,800-3,300	34.65-40.84	70.00-82.50
Commercial rate/sq.ft.	1,750-1,900	21.66 - 23.51	43.75 - 47.50	38-42 /month	0.47 - 0.52	0.95 - 1.05
Retail rate/sq.ft.	2,050-2,200	25.37 - 27.23	51.25 - 55.00	63-78 /month	0.78 - 0.96	1.57 - 1.95
Hotel rate/sq.ft.	500,000/key	6189/key	12,500/key	6,500-7,000
FSI sale:	N.A.			N.A.
IT/ITes	N.A.			1,050	12.99	26.25
Commercial	N.A.			650	8.04	16.25

 

DP2 

Project Name | Rustomjee's Township 

Location | Thane, Maharashtra 

Asset Classes | Residential, Commercial, Retail, Hospitality

Partner | Kapstone Constructions Private Ltd

Type | Mixed Use

Saleable Area | 7.2m sq. ft. on 127 acres

Project Description

Spanning an area of about 147 sq. km., Thane houses over one million people and contains over 200km of roadway. Thane's large industrial area supports a mixture of large and small industries across the chemical, engineering, textile and electrical industries. Due to rapid de-industrialisation, Thane has also become a natural residence for white-collar workers.

Located only 40km from Mumbai's business centre, and adjacent to the major highway that connects Mumbai and Delhi, Trikona TC's project offers excellent access across Mumbai and its surrounding areas.

Trikona TC's investment in Rustomjee's Township, the integrated township to be built over 127 acres in four phases over a period of seven years, will feature over 7.2m sq. ft. with a mix of residential, commercial and retail space, with a development focus committed to creating a total lifestyle environment.

Highlights

Phase I is comprises of residential for-sale apartments with excavation work and piling completed.

Residential pre-sales for Development Plan-A of Phase I was launched in October 2006 at a base rate of INR 2,925 per sq. ft. The apartments are currently being sold at a base rate of INR 4,860 to INR 5,130 per sq. ft., representing an appreciation of 75% from the launch date.

98% of the saleable area in Phase I has been pre-sold. 

Average sales realisation for the total pre-sold area is over INR 4,100 per sq. ft. which is 21% higher than assumed in the underwritten business plan.

The effort to increase the approved area (FSI) beyond the business plan via a Town Centre approval from Thane District Development Commission (UD) or using the Infrastructure Township model in Maharashtra has been delayed by several months availing clearance from the Chief Minister of Maharashtra, who is also the Head of UD, but the project expects to deploy additional resources to make up for the lost time. On receipt of this approval, the saleable area would increase by about 30%.

Higher FSI, increased sale price and improved building specifications will offset the estimated increase in construction costs and the delay in obtaining clearances due to higher cement and steel prices.

In November 2007, Urban Land Ceiling & Regulation Act (ULCRA) was repealed in the state of Maharashtra leading to a potential for increased saleable area for the project. 

Development Plan-B of Phase I (700,000 sq. ft.) of 2 and 2.5 bedrooms, hall and kitchen (BHK) flats has been launched.

The Investment Manager is working closely with the partner's office to gain the prestigious Town Centre approval for this project. This approval will enhance the saleable area in this project by at least 30%, which will result in an FSI of 9.4 mm as against the underwritten FSI of 7.2 mm. The Investment Manager has been able to successfully prove to the authorities that Thane is an important node on the route between Mumbai and other key centres of economic and industrial growth and is hence eligible for this approval.

  Detailed Profile

Area by Asset Class

Asset Class	Current Plans  (Saleable Area in millions of sq. ft)
Asset Class	Current Plans  (Saleable Area in millions of sq. ft)
Commercial	2.3
Residential	4.3
Retail	0.6
Total Saleable Area	7.2

Investment

Date of Investment	23 October 2006
Total Capital Committed	£14.16
Total Capital Invested	£10.6m*

*Additional funding tranche is pending

Ownership

Trikona TC's ownership in the Mauritian SPV	100%
The Mauritian SPV's ownership in DP2	16%

Performance

Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
30 September 2008	21.15	43%	2

** On committed capital on a 100% basis

Sales Progress 

Date	Asset	Amount
Date	Asset	Amount
April 2008	345 residential units launched in phase I in October 2006	337 sold
November 2008	Additional 155 residential units launched as part of phase I in October 2008	4 sold

Sale Rate Evolution

Date	Sales Rate per sq. ft.			Asset Class
Date	Sales Rate per sq. ft.			Asset Class
	INR	£	$
October 2006	2925	36.20	73.12	Residential
March 2007	3750	46.41	93.75	Residential
October 2007	3960	49.01	99.00	Residential
May 2008	4770	59.04	119.25	Residential
September 2008	5130			Residential

 

  

DP4

Project Name | Lady Ratan Seasons

Location | Worli, South Mumbai 

Asset Classes | Residential

Partner | Lokhandwala Kataria Constructions Private Ltd

Type | Residential (under Rehabilitation Scheme)

Saleable Area* | 0.98m sq. ft. on 7 acres

*based on current plans

Project Description

Worli represents one of the most desirable residential locations in South Mumbai. Home to senior executives, boutique financial services firms, and the self-employed, this prime development area enjoys occupancy levels as high as 85% to 90%. Despite the strong appreciation in capital values most of the developers see 75% to 90% of their projects sold before completion.

Furthermore, with the direct sea-based road link to Bandra almost complete, the appeal of this location will increase, countering any supply increase and enabling prices to remain firm.

Lady Ratan Seasons is a luxury condominium development under which Trikona TC will redevelop seven acres into a total of 0.98m* sq. ft. of saleable space in lieu of developing 0.70m sq. ft. of new housing in eleven, eight storey blocks for the existing slum dwellers.

Total Area under development: 0.67m sq. ft. (Residential) + 0.70m sq. ft. (Rehabilitation) + 0.31m sq. ft. (Basement Parking).

Highlights

The only Four Seasons hotel in India opened for business in March 2008, located within the neighbourhood of the development.

In November 2007, SachsenFonds acquired a 41% interest in the Mauritian SPV for £9.71 million resulting in a realised IRR of 84% and a multiple of 2.04 times return (SF-I). 

Revised plans moved project launch from September 2007 to December 2008; however, due to the issuance of a stop work notice stating that no construction can be carried out within 182m from a prison wall, the project work slowed down and solutions are being discussed with the Head of Urban Development.  

The state government has also notified that going forward slum dwellers will be entitled to a larger size units (units with a carpet area of 269 sq. ft as against 225 sq. ft specified in earlier schemes). As a result the entire layout plan is being redrawn. This is likely to result in an increase in both the rehab and saleable from the current level of 673,000 sq. ft. to 850,000 sq.ft.

The revised project cost and timeline for the project have been agreed upon recently and will be executed between parties shortly.

Detailed Profile

Area by Asset Class

Asset Class	Current Plans  (Saleable Area in millions of sq. ft)
Asset Class	Current Plans  (Saleable Area in millions of sq. ft)
Residential	0.67
Basement	0.31
Total Saleable Area	0.98

*In the 30 Sept 2007 results we showed a total figure of 1.68m sq. ft., where we included 0.70m sq. ft. allocated for the rehabilitation buildings for tenants, this should not be included as a part of the saleable area. The residential area and basement area will be sold, at different rates.

  

Investment

Date of Investment	12 October 2006
Total Capital Committed	£12.3m
Total Capital Invested	£6.3m

Ownership and Divestment

The Mauritian SPV owns 49% of DP4; however, Trikona TC has sold a portion of its ownership in the Mauritian SPV. The following table outlines the transaction:

Date	% of Mauritian SPV sold (%)	Trikona TC's Remaining % of Mauritian SPV (%)	Sale price	IRR at sale (%)	Multiple (x)	To whom
Date	% of Mauritian SPV sold (%)	Trikona TC's Remaining % of Mauritian SPV (%)	Sale price	IRR at sale (%)	Multiple (x)	To whom
27 December 2007	41	59	4.76	84	2.04	SF-I

Performance

Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
30 September 2008	22.7	63%	1.85

** On committed capital on a 100% basis

 

DP6

Project Name | DB Hospitality

Location | Goa, Pune, Mumbai, operating Hotel in Mumbai 

Asset Classes | Hospitality

Partner | DB Group

Type | Hyatt and Le Meridien hotels

Saleable Area | 26.6 acres consolidated across the 4 projects

Project Description

India's robust economic performance and the growing size of its middle class is slowly shaping into a burgeoning market for its leisure industry. India received 0.91m foreign tourists in Q2 FY07, which is a year-on-year improvement of 9%. In the full year 2007, India had a total room inventory of 130,000 keys across all segments in the organised and unorganised sector.

Through its investment in DB Hospitality, Trikona TC has the opportunity to further develop other hospitality assets throughout the country, and is planning to expand its hospitality franchise to other strategic locations. The group currently owns an operational 5 Star Hotel, Le Meridien, in Mumbai and land under development for three luxury hotels over the next 2 to 3 years under the Hyatt Brand. The investments are in the cities of Mumbai, Pune and Goa - which offer higher occupancy rates and higher average room rates. 

Highlights

In January 2008 the Manager made a conditional offer to purchase the project at a price 10% above the 30 September 2007 NAV. The offer was under independent review by the Directors and the NOMAD, but has since lapsed.

Hyatt group will be managing and operating the development hotel properties.

Foster + Partners, designer of The Willis Building (London), Millau Viaduct (France) and 30 St Mary Axe 'The Gherkin' (London) have been appointed as the master planning architect for the iconic tower project near Marine Drive in Mumbai.

Construction on all three new hotels is in progress and the first new development hotel is expected to be ready for launch by the end of September 2009.

Construction on Park Hyatt property in South Mumbai has commenced in October 2008. Prior this, work on the retention wall has been completed. 

Detailed Profile

Area by Asset Class

Asset Class	Current Plans
Asset Class	Current Plans
Keys (Goa, Mumbai, Pune, Le Meridien Mumbai)	1,095
Service Apartments (Mumbai Hotel)	50
Residences (Mumbai Hotel)	50
Retail (Mumbai, Goa)	145,000 sq.ft

Investment

Total Capital Committed	£12.2m
Total Capital Invested	£12.13m

Break down of Capital Invested

Date of Investment	Amount (£m)
15 December 2006	5.73
31 January 2008	6.4*

*Due to exchange rate fluctuations the £ amount is different

  Ownership

Type of Ownership	Entity Level Investment
The Mauritian SPV's ownership in DP6	9.54%

Performance

Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
30 September 2008	13.3	8%	1.09

** On committed capital on a 100% basis

  DP10

Project Name | Luxor Cyber City -'SEZ' IT/ITES development

Location | Gurgaon, NCR of Delhi 

Asset Classes | IT/ITES

Partner | Uppal & Luxor Group

Type | IT and Commercial Space

Saleable Area | 4.89 m sq. ft. on 62.66 acres (based on current plans and adjusted for TTC shareholding only)

Project Description

The National Capital Region (NCR) encompasses a circular area with a 150km radius from the centre of Delhi. The commercial real estate market in the NCR region has primarily been driven by the growth in the IT/ITeS sector. The lack of land in Delhi is a major constraint on real estate development and high capital and rental values have led to several companies moving to suburban areas including Gurgaon and Noida.

The project site is situated in Gurgaon and is well connected; 32 kilometres from Delhi Central, 52km from Noida and 35km from Faridabad, with the International Airport located at a distance of 20km. It is also located on the National Highway 24, which offers the site excellent connectivity as this is the main highway extending from Delhi to Bombay. 

Once developed, the project will offer grade A IT/ITeS space. It is also among the first few Special Economic Zones declared in the National Capital Region, enabling it to take advantage of the fact that over 8,000 companies will lose their tax-free status at the end of March 2009 unless they move into an SEZ.

Highlights

Master Plan has been submitted for final approval and is expected by the end of January 2009.

The Uppal Group is developing a five star hotel adjoining the project which is expected to enhance marketability.

In June 2008, SachsenFonds acquired 15% interest in the Mauritian SPV for £9.42m, resulting in a realised IRR of 63% and a multiple 1.64 times return (SF-II).

To facilitate development, a three-way split of the respective land share has been finalised and approved by all the three partners and a formal agreement to this effect is expected to be executed post approval of the Master Plan.

Detailed Profile

Area by Asset Class

Asset Class	Current Plans  (Saleable Area in millions of sq. ft)
Asset Class	Current Plans  (Saleable Area in millions of sq. ft)
IT/ITeS*	3.37
Basement/Parking	1.52
Total Saleable Area	4.89

* Area under development has gone down since the project will now envisage building only IT/ITeS space on 31 acres as against the original plan of building commercial, residential, retail and IT/ITeS space on 62.66 acres. 

Investment

Date of Investment	12 June 2007
Total Capital Committed	£38.4m
Total Capital Invested	£38.4m

Ownership and Divestment

The Mauritian SPV owns 49.38% of DP10; however, Trikona TC has sold part of its ownership in the Mauritian SPV. The following table outlines the transactions:

Date	% of Mauritian SPV sold (%)	Trikona TC's Remaining % of Mauritian SPV (%)	Sale price	IRR at sale (%)	Multiple (x)	To whom
Date	% of Mauritian SPV sold (%)	Trikona TC's Remaining % of Mauritian SPV (%)	Sale price	IRR at sale (%)	Multiple (x)	To whom
17 June 2008	15	85	9.42	63	1.64	SF-II

  Performance

Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
30 September 2008	55.1	33%	1.44

** On committed capital on a 100% basis

  DP11

Project Name | Dynamix Balwas Realty ("DB Realty")

Location | Mumbai and Pune

Asset Classes | Residential, Commercial, Retail, Hospitality and Urban Rejuvenation

Partner | Dynamix Balwas Group

Type | Residential, Commercial and Urban Rejuvenation Projects

Saleable Area | 39.93m sq. ft.

Dynamix Balwas Realty (DB Realty), promoted by Dynamix Balwas Group, is a US$2 billion conglomerate with a 25 year track record in real estate development. Designed as a holding company with the specific purpose of undertaking development rights based or Joint Ventures/Special Purpose vehicles based projects in Mumbai, it is now well known for its strong residential portfolio and capabilities in developing different asset types.

DB Realty, a leader in the urban rejuvenation plans within Mumbai, successfully acquires tenanted land by working with the current settlers and local government. Through a programme to resettle or compensate existing tenants, DB Reality acquires premium land at a significant discount to prevailing market prices. 

The group's portfolio of projects is located in prime areas of Mumbai and will result in 39.93m sq. ft. of residential, commercial, retail and urban rejuvenation space. These groundbreaking projects will significantly redefine the landscape of central and suburban Mumbai and Pune.

The portfolio currently holds 20 properties across prime locations in Mumbai and Pune in various stages of development.

Highlights

Construction continues to progress on five of the 20 projects, with significant developments in terms of sales and leasing.

Through the sale of approximately 2.4 million sq. ft of TDR (Transferable Development Rights/Air Rights) generated from the Mahul project, the Company earned revenues of INR 5,880m / £ 69.90 million / US$ 125.12 million.

The Board of the Company has approved 4 additional projects taking the aggregate number of projects in the portfolio to 20.

The projects are delayed by more than a year compared to the original business plan due to delays in obtaining approvals and clearing of sites.

Detailed Profile

Area by Asset Class

Asset Class	Current Plans  (Saleable Area in millions of sq. ft.)
Asset Class	Current Plans  (Saleable Area in millions of sq. ft.)
IT/ITeS	1.29
Commercial	3.52
Residential	20.36
Retail	3.26
Urban Rejuvenation	11.50
Total Area under Development	39.93

Investment

Date of Investment	23 April 2007
Total Capital Committed	£26.4m
Total Capital Invested	£26.4m

  Ownership

Type of Ownership	Entity Level Investment
The Mauritian SPV's ownership in DP11	5.92%

Performance

Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
30 September 2008	50.01	62%	1.88

** On committed capital on a 100% basis 

  DP13

Project Name | MIG Group-IV, Bandra

Location | Bandra, Mumbai, India

Asset Classes | Predominantly Residential (Redevelopment)

Partner | Keystone Realtors Pvt. Ltd.

Type | Residential

Saleable Area | 267,370 sq. ft.

Project Description

This transaction enabled Trikona TC to enter into a partnership with the Keystone Group, in order to capitalize on a predominantly residential development in one of the prime locations in Mumbai. The SPV (Trinity Capital (Fifteen) Limited) owns 49% of the underlying asset while 51% is owned by Keystone Realtors Pvt. Ltd. This SPV is in turn owned in a ratio of 55:45 by Sachsen Fonds and Trikona TC.

The attractiveness of this project lies in its location. The site is in close proximity to the Secondary Business District (SBD) of Mumbai known as the Bandra Kurla Complex (BKC), which is fast outgrowing the traditional/preferred Central Business District of Nariman Point. As more corporate offices are moving into BKC, there is an increasing demand for quality residential real estate space in the adjoining areas.

The MIG colony in Bandra East is divided into six groups - Group I to VI. All the groups are at varying stages of negotiations for redevelopment. The proposed redevelopment project will see a complete renewal of the neighbourhood as the program will involve adding of new community facilities in addition to high-rise housing.

The project will encompass 598,133 sq ft of which 330,763 sq ft will be used for rehabilitating the existing society members and 267,370 sq ft will be available to the project SPV for sale at the market value.

Highlights

As per shareholder agreement terms, Trikona TC has already remitted its first tranche of investment of INR 300 million to Rustomjee Constructions Private Limited during the month of May 2008.

The approval process for fulfilment of Conditions Precedent II for payment of the second tranche is in process.

The launch date of pre-sales for residential space is expected in the Q1 2009 and for commercial space in December quarter 2009.

Investment

Date of Investment	22 May 2008
Total Capital Committed	£ 8.7m
Total Capital Invested	£ 1.7m *

\* The investment will be made in four tranches as envisaged in the business plan. The figures only represent Trikona TC's commitment and interest in DP13

Ownership

Trikona TC's ownership in the Mauritian SPV	45%
The Mauritian SPV's ownership in DP13	49%

Performance

Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
30 September 2008	10.89		1.25

** On committed capital on a 100% basis

  Equity Holding

EH7 

Project Name | Fortis Healthcare Limited ('FHL') 

Location | Pan India 

Asset Classes | Infrastructure 

Partner | Ranbaxy Group

Type | Healthcare facilities, hospitals

Project Description

Fortis Healthcare Limited was established in 1996 by the promoters of Ranbaxy Laboratories. Ranbaxy is among the world's top 10 generic pharmaceutical companies and India's largest pharmaceutical company. Fortis Healthcare has a network of 11 hospitals, primarily in North India, and 16 satellite and heart command centres.

The hospitals include multi-specialty and super-specialty centres, providing healthcare to patients in cardiac care, orthopaedics, neurosciences, oncology, renal care, gastroenterology and mother and child care.

Fortis has initiated the following projects:

A super-specialty hospital in West Delhi, with focus on cardiac care, neurosciences, renal sciences, mother and child care and gastroenterology (Phase 1: 250 beds).

A super-specialty hospital in Gurgaon, with a focus on trauma, oncology, mother and child care, orthopaedics, organ transplants and neurosciences (Phase 2: 350 beds).

Detailed Profile

Investment

Date of Investment	15 January 2007
Total Capital Committed	£13.5m
Total Capital Invested	£13.5m

Ownership

Type: Public

Exchange the shares are listed on: Bombay Stock Exchange

Ticker symbol: FORTIS

Percentage outstanding shares held: 3.5%

Number of shares held: 8,000,000

Performance

Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
30 September 2008	5.9	NA***	0.44

** On committed capital on a 100% basis

*** Investment made in two tranches and both investments demonstrate negative IRRs   

EH8 

Project Name | Pipavav Shipyard Limited 

Location | Pipavav, Gujarat

Asset Classes | Infrastructure 

Partner | Pipavav Shipyard Ltd

Type | Shipyard

Project Description

The International Maritime Organization's decision to either scrap all single hull structure oil tankers or convert them into double hull structures by 2010 has revived interest in the shipbuilding sector across the globe, reinvigorating a $250 billion market. This global revival has translated into renewed interest in the Indian shipbuilding market and has led to an increase in the order book from about INR 15 billion in 2002 to over INR 100 billion today. 

The Pipavav port started operations in 1996 primarily to cater to the refrigerated cargo market of Veraval but has over the years developed into a port handling cargo from various nearby and north/west India locations. It is the first private sector port in India controlled and operated by the A. P. Moller Group (Maersk) of Denmark-one of the largest maritime groups in the world. It has been commercially operational for the last six years and has state of the art handling equipment, road networks and railroad connectivity, thus offering the necessary logistical support to the shipyard. 

The Pipavav Shipyard is expected to be largest shipyard in India and amongst the largest in Asia, with the capacity to build and repair vessels of up to 400,000 DWT. The shipyard has an all-weather marine enclave and one of the shortest approach channels, allowing for easy ship movement and faster turnaround time.

The project is spread over 210 acres and is poised to become the world's fifth largest shipyard. Upon completion of construction, the shipyard will be capable of ship construction and repairs for a range of vessels of different sizes and types, as well as the fabrication and construction of products such as offshore platforms, oil and gas rigs, jackets and vessels. The shipyard is being constructed on the principle of concurrent shipbuilding, which means that production of vessels can commence simultaneously as the shipyard is built. 

Highlights

The order booking has commenced and PSL has already booked orders worth US$1.06billion.

Along with Trikona TC, other private equity funds including New York Life, Standard Chartered, Deutsche Bank, Citadel and Merrill Lynch have made significant investments in the Company.

In January 2008, the latest investment was made in PSL at a valuation of INR 80 per share against the TTC investment at INR 25 per share in January 2007.

The Company has entered into a strategic alliance with Punj Lloyd Limited (PLL), a leading engineering and EPC company with current market capitalisation of US$1.2 billion, and inducted them as co-promoters with a 23.11% stake. This alliance will enable the company to enter into the business of fabrication/construction of offshore platforms, SBMs and rigs with minimum lead time. As part of this alliance PLL will also transfer its existing fabrication business to the company.

Avgi Maritime confirmed their order for additional 4 optional Panamax bulk carriers. PSL's order book position in terms of Panamax class ships has now scaled to the number two position in the world after Oshima Shipbuilding, Japan. 

During January 2008, Government of India has notified land measuring 124 acres in Amreli District, Gujarat, close to the shipyard as Special Economic Zone (SEZ) for Engineering Goods. The land is owned by E Complex Pvt. Ltd (ECPL), a wholly owned subsidiary of PSL.

Pre-fabrication and block assembly of first four ships commenced in April of 2008. The first ship is expected to be delivered by March 2009

  Detailed Profile

Investment

Date of Investment	January 2007
Total Capital Committed	£13.5m
Total Capital Invested	£13.5m

Ownership

Type: Pre-IPO

Percentage outstanding shares held: 7.91%

Number of shares held: 45,900,000

Performance

Time	Price / share (INR)	Who entered
Time	Price / share (INR)	Who entered
January 2007	25	Trikona Trinity Capital Plc
January 2007	25	New York Life
Sept 2007	27	Punj Lloyd
Sept 2007	45	Citadel
November 2007	45	SembCorp Holdings
November 2007	80	The India Fund Inc.
December 2007	80	Merrill Lynch International
December 2007	80	The Asia Opportunities Offshore Market Fund Limited
January 2008	80	Deutsche Bank AG
January 2008	80	Manz Retail Pvt. Ltd
January 2008	80	Galleon Special Opportunities Master Fund, SPC Limited

Performance

Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
30 September 2008	36.69	82%	2.71

** On committed capital on a 100% basis   

EH9 

Project Name | IL&FS Transportation & Networks Limited

Location | Pan India

Asset Classes | Infrastructure

Partner | IL&FS Transportation Networks Ltd

Type | Surface Transport Infrastructure

IL&FS Transportation Networks (India) Limited (ITNL) was formed by Infrastructure Leasing and Financial Services Limited (IL&FS) to create a pan-India surface transport business. IL&FS has identified the Transport Sector as an area of focus and represents itself in this sector through ITNL. 

ITNL has established itself as a player with significant experience in the development, commissioning and management of road projects and is also developing capabilities in other sub-sectors such as railways, urban transportation systems and logistics.

ITNL offers integrated services for road infrastructure projects including project development, investment / project sponsorship, construction management, operation and management of toll roads and advisory services. The Company has also been involved in the development and implementation of important highways, flyovers, bridges and roads. These projects have been designed on international standards in terms of technology and facilities. ITNL currently holds ten road sub sector projects in its portfolio and all these roads are strategically important as they connect major industrial and social centres of the country.

Highlights

Following the investment by Trikona, Goldman Sachs and SCB Asian Infrastructure fund have both invested in ITNL.

The Noida Toll Bridge Company Ltd. project is completed and fully operational, with a registered growth rate of over 150% from previous year. Current revenues stand at £9.04 million.

The Gujarat Road Infrastructure Company Ltd. project is completed and now operational.

5 out of 7 Roads of Road Infrastructure Investment Company of Rajasthan have become operational and started generating revenue. The remaining two roads will also be completed during current calendar year. 

The Tamil Nadu, North Karnataka, West Gujarat and Thiruvananthapuram Road projects are also fully operational and generating toll and annuity income.

ITNL has made equity investment of USD 140 Million in Joint Venture with SOTRIG, a Mexican State Government SPV, to undertake design, construction, operation and maintenance of rapid transit system for a total length of 151.4 km with double track lanes and 17 stations. Moody's have assigned Investment Grade Rating (BAA3) to the project.

ITNL has also acquired 100% equity stake (instead of 25% as envisaged earlier) in Elsamex SA, a Spanish 50 year old Operations and Maintenance (O&M) company, to enter into Europe and Latin America. Elsamex currently has over 5000 Kms of roads under maintenance in its geographical spread across Europe, Americas and Asian region.

In March 2008, ITNL divested 3.6% out of its 49% stake in Kohinoor CTNL Infrastructure Co. Ltd for INR 540 Million to fund the future project investments. The acquisition cost for 49% stake was INR 18 Million. The transaction valued the Kohinoor CTNL at INR 15 Billion and remaining stake of ITNL at INR 6.8 Billion. This investment is now being offered for sale.

Asset Update 

Financial year 2007-08, ITNL has achieved significant increase of 91% in revenue to INR 3,206 Million and 105% increase in profits to INR 892 Million over previous year.

ITNL has also declared a second year dividend of 20% to all equity shareholders for the year 2007/08.

As on September 2008 a total of 12 road projects are operational spanning over 1000 kms of roads and about 3000 kms of roads are under construction.

One of the assets, RIDCOR (Road Infrastructure Investment Company of Rajasthan), is contemplating an Initial Public Offering to augment future funding requirements for RIDCOR. This expansion involves a minimum of 350 km of road and would simultaneously unlock ITNL's equity.

Investment

Date of Investment	5 October 2006
Total Capital committed	£5.1m
Total Capital invested	£5.1m

Ownership

Type: Pre-IPO

Time	Percentage of Outstanding Shares Held (%)	Number of shares held
Time	Percentage of Outstanding Shares Held (%)	Number of shares held
At Initial Investment	2.56	4,160,000
31 March 2008	2.50	4,175,844*

*anti dilution shares issued to existing shareholders

PerformanceTime	NAV (£m)	IRR at date (%)	Multiple at date(x)**
PerformanceTime	NAV (£m)	IRR at date (%)	Multiple at date(x)**
30 September 2008	6.47	13%	1.26

** On committed capital on a 100% basis

  

EH12

Project Name | Phoenix Mills

Location | Pan India 

Asset Classes | Retail, Hospitality, Commercial 

Partner | Phoenix Mills Ltd 

Type | Retail led Mix Development

Saleable Area | 21.4 million sq.ft.

Project Description

India is one of the ten largest retail markets in the world. With a total turnover of US$295 billion  -its outlay is equivalent to about 50% of the total private expenditure on consumption and around a third of the total Indian GDP. Organised retail has been growing at 38-39% a year.  Retailers have bought or will buy about 316 million sq. ft. Of retail space, several times the 68 million sq. ft. of space they took in 2006.

Phoenix Mills Limited is known for its expertise in planning and conceptualising large retail-led, entertainment, commercial and hospitality projects under one project plan and turning them into landmark destinations. 

With the objective of achieving a formidable cross-country footprint as the leading retail-led mixed format player over the next three years, Phoenix Mills Limited has entered into various partnerships with regional developers to develop about 21.4m sq. ft. of retail, commercial and entertainment area. It also plans to grow to 45 mn sq. ft over 27 locations in next 3 years through its subsidiaries and associates.

Highlights

PML has entered into a strategic alliance with Entertainment World Developers Pvt. Ltd. (EWDPL) by acquiring a 40% stake in the company. EWDPL is a Tier II city centric retail mall and mixed-use developer engaged in the construction and operation of mixed-use retail centres and townships.

During the quarter PML invested in Big Apple Real Estate Pvt. Ltd., the owners of the United Malls brand, and acquired 39% with an intention to acquire a up to 74% in the future through a share swap and an infusion of INR 800 million / US$20 million.

PML has raised Euro 200 Million from German Real Estate Fund MPC Synergy, (a JV between MPC Capital, AG of Germany and Geneva based Synergy Asset Management, AG). MPC Synergy has picked up equity stakes ranging from 10 to 49% in 21 PML projects and its 2 subsidiaries - Entertainment World Developers Pvt. Ltd (EWDPL) and Big Apple.

PML has tied up with Shangri-La to operate a 400 keys 5 star hotel in its Mumbai property and also with Standard brands for the other propositions under development.

Asset Update 

PML's flagship retail development is the High Street Phoenix, a prominent commercial and residential location in Mumbai. Phases 1 and 2 were completed in 2005 and have been completely leased out. Phases 3 and 4 are under construction and scheduled to be completed by 2010.

During the year PML raised INR 9.8 billion through a QIP (Qualified Institutional Placement) and INR 3.18 billion through  preferential allotments to FIIs (Foreign Institutional Investor)

PML has declared a dividend of 50% on equity shares for the year 2008-09.

Investment

Total Capital Committed	£7.4m
Total Capital Invested	£7.4m

  Ownership

Time	Percentage of Outstanding Shares Held (%)	Number of shares held
Type: Public
Exchange the shares are listed on: BSE, NSE
Ticker symbol: PHOENIXLTD
Time	Percentage of Outstanding Shares Held (%)	Number of shares held
At Initial Investment	1.93	370,000
31 March 2008	1.36	1,850,000*
30 June 2008	1.36	1,850,000*

*5 to 1 split

Performance

Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
Time	NAV (£m)	IRR at date (%)	Multiple at date(x)**
30 September 2008	3.17	-49%	0.43

** On committed capital on a 100% basis

Condensed consolidated interim income statement For the six months to 30 September 2008

	Notes	(unaudited) 6 months to 30 September 2008	(unaudited) 6 months to 30 September 2007	(audited)  12 months to 31 March 2008
		£'000	£'000	£'000
Interest received		1,880	3,475	5,038
Dividend income		98	-	-
Foreign exchange gain / (loss)		114	3	(41)
Fair value (losses) / gains on investments	7
Reclassification of subsidiary		53,403	-	-
Other		(62,558)	63,698	91,406
Net realised gains on disposal of interest in subsidiaries		31,844	-	3,218
Net investment income		24,781	67,176	99,621
Investment manager's management fees	6	(2,699)	(2,500)	(5,052)
Investment manager's performance fees	6	(2,254)	(20,771)	(27,663)
Other administration fees and expenses		(669)	(1,031)	(3,227)
Profit for the period before tax		19,159	42,874	63,679
Tax		-	-	-
Profit for the period after tax		19,159	42,874	63,679
ATTRIBUTABLE TO:
Equity holders of the Company		4,196	42,874	62,497
Minority interest		14,963	-	1,182
		19,159	42,874	63,679
Basic and diluted earnings per share (pence)	5	1.8	18.5	26.9

Condensed consolidated interim balance sheet At 30 September 2008

	Notes	(unaudited) 6 months to 30 September 2008	(unaudited) 6 months to 30 September 2007	(audited)  12 months to 31 March 2008
		£'000	£'000	£'000
Non-current assets
Investments	7	301,674	258,284	301,858
Property plant & equipment		-	53	-
Total non-current assets		301,674	258,337	301,858
Current assets
Trade and other receivables		30	189	558
Cash and cash equivalents		95,707	50,504	56,617
Inventory		-	23,299	25,641
Prepayments		192	175	131
Total current assets		95,929	74,167	82,947
Total assets		397,603	332,504	384,805
Liabilities
Non-current liabilities
Performance fee	6	(30,509)	(33,901)	(36,308)
Borrowings		-	(1,341)	(1,250)
Total non-current liabilities		(30,509)	(35,242)	(37,558)
Current liabilities
Trade and other payables		(5,348)	(889)	(4,350)
Total current liabilities		(5,348)	(889)	(4,350)
Total liabilities		(35,857)	(36,131)	(41,908)
Net assets		361,746	296,373	342,897
Represented by:
Ordinary shares	4	2,321	2,321	2,321
Distributable reserve		217,362	217,362	217,362
Retained reserves		100,704	76,885	96,508
Other reserves		(167)	(195)	212
Total equity attributable equity holders of the Company		320,220	296,373	316,403
Minority interest		41,526	-	26,494
		361,746	296,373	342,897

Condensed consolidated interim statement of changes in equity For the six months to 30 September 2008

	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 2008 (audited)
Balance as at 1 April 2007	2,321	217,362	34,011	(1)	253,693	-	253,693
Net profit for the year			62,497		62,497	1,182	63,679
Increase in value of share options				379	379		379
Partial disposal of subsidiaries						25,082	25,082
Additional investment						230	230
Foreign exchange on translation of subsidiaries				(166)	(166)		(166)
Balance at 31 March 2008	2,321	217,362	96,508	212	316,403	26,494	342,897
Changes in equity for the period ended 30 September 2008 (unaudited)
Net profit for the six months			4,196		4,196	14,963	19,159
Increase / (decrease) in value of share options				(379)	(379)		(379)
Disposal of interests in subsidiaries						(144)	(144)
Additional investment						213	213
Foreign exchange on translation of subsidiaries							-
Balance at 30 September 2008	2,321	217,362	100,704	(167)	320,220	41,526	361,746

Condensed consolidated interim cash flow statement For the six months to 30 September 2008

		(unaudited) 6 months to 30 September 2008	(unaudited) 6 months to 30 September 2007	(audited)  12 months to 31 March 2008
	Notes	£'000	£'000	£'000
Net cash used by operating activities	8	(10,331)	(4,208)	(15,854)
Cash flows from investing activities
Purchase of investments		(5,771)	(72,144)	(88,010)
Interest received		1,978	3,475	5,031
Purchase of property plant & equipment		-	(56)	-
Proceeds from disposals of investments		54,754	-	32,108
Cash disposed of on reclassification of subsidiary		(1,540)	-	-
Net cash inflow/(outflow) from investing activities		49,421	(68,725)	(50,871)
Cash flows from financing activities
Loan repayments		-	(333)	(461)
Net cash (outflow) / inflow from financing activities		-	(333)	(461)
Net increase / (decrease) in cash and cash equivalents		39,090	(73,266)	(67,186)
Cash and cash equivalents at the start of the year / period		56,617	123,705	123,705
Foreign exchange		-	65	98
Cash and cash equivalents at the end of the year / period		95,707	50,504	56,617

 

Selected notes to the condensed consolidated financial information For the six months to 30 September 2008

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 condensed consolidated financial information comprise the results of the Company and its subsidiaries (together referred to as the "Group") and are unaudited.

2. Accounting policies

Basis of preparation

This condensed interim financial information for the period ended 30 September 2008 has been prepared in accordance with IAS 34, Interim Financial Reporting and on a basis consistent with the accounting policies set out in the Company's audited annual report and accounts for the year ended 31 March 2008.

The financial information has been presented in Sterling.

2.1 Investments

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

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

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

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

2.2 Segment reporting

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

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

3. 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 2008. 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. The Directors used valuation models prepared by Protiviti, an independent firm of advisors. 

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 valued equity investment. 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

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.

4. Share capital

Issued share capital	No. of shares	£
30 September 2008 and 31 March 2008
Ordinary shares of £0.01 each	231,800,200	2,318,002
Deferred shares of £0.01 each	250,000	2,500
	232,050,200	2,320,502

5. Earnings per share

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

	6 months to  30 September 2008	6 months to  30 September 2007	12 months to  30 March 2008
Profit attributable to  ordinary shareholders of the Company (£'000)	4,196	42,874	62,497
Weighted average number of  shares in issue ('000)	232,050	232,050	232,050
Basic earnings per share (pence)	1.8	18.5	26.9

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

6. 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) which aligns its interest with those of the Shareholders 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. Under the terms of the agreement, 80% of the profit share is payable within 10 business days and 20% retained, pending calculation of the Final IRR. A provision of £30,509,000 (31 March 2008: £36,308,000) been made in respect of the relevant fair value investment gains recognised in the financial statements as at 30 September 2008. A fee of £8,054,000 became payable in the period in respect of profit share on realised gains, of which £6,443,000 was paid and £1,611,000 retained as a liability under the terms of the agreement.

7. Investments

Investments are recorded at fair value as follows: 

30 September 2008	At Cost  £'000	Fair value Adjustment £'000	At Fair Value  £'000
Development property owning companies (all unlisted equity securities):
Lokhandwala Kataria Constructions Pvt Ltd.	6,258	10,874	17,132
Kapstone Construction Pvt Ltd.	10,593	6,991	17,584
DB Hospitality	12,176	1,128	13,304
M K Malls Developers *	12,283	1,189	13,472
Luxor Cyber City	37,904	17,226	55,130
DB Realty	26,381	23,625	50,006
Uppals IT	28,694	50,310	79,004
MIG Bandra	1,630	2,200	3,830
	135,919	113,543	249,462
Non-development property company holdings
Listed equity securities	20,898	(11,843)	9,055
Unlisted equity securities	18,257	24,900	43,157
	175,074	126,600	301,674

31 March 2008	At Cost  £'000	Fair value Adjustment £'000	At Fair Value  £'000
Development property owning companies (all unlisted equity securities):
Lokhandwala Kataria Constructions Pvt Ltd.	6,258	12,251	18,509
Kapstone Construction Pvt Ltd.	10,593	9,010	19,603
DB Hospitality (formerly known as Neelkamal Marine Drive Developers Pvt Ltd.)	12,176	3,214	15,390
Manjeera Retail Holdings	9,605	6,640	16,245
M K Malls Developers (including mezzanine debt)	24,034	14,851	38,885
Luxor Cyber City	37,904	25,896	63,800
DB Realty	26,381	34,149	60,530
	126,951	106,011
Non-development property company holdings
Listed equity securities	20,898	(3,945)	16,953
Unlisted equity securities	18,257	33,686	51,943
	166,106	135,752	301,858

Unlisted equity securities that amount to £292,619,000 (31 March 2008: £284,905,000) have been fair valued by the Directors as at 31 March 2008 wherein the assessment of value of our interests in the various assets was made and Protiviti, an independent firm of business advisors, performed certain agreed upon procedures to validate the computation of value of such investments. All the unlisted equity securities classed as development projects, with the exception of DB Realty, are valued using discounted cash flow techniques. The unlisted equity securities comprising DB Realty and non-development property holdings are valued using a mixture of discounted cash flow and price earnings multiples. The underlying cash flows for the development projects are based on data generated by CBRE, the Company's independent property valuers.

The investment in MK Malls Developers comprises mezzanine debt stated at a fair value of £13,472,000 and cost of £12,283,000 (31 March 2008: £13,479,000 and £12,283,000 respectively).

In June 2008, the Group sold interests in four development property holdings to SachsenFonds Holdings GmbH ("SF") for a total price of £54.33m (via the sale of interests in the Mauritian subsidiary investment holding companies), as follows:

Subsidiary	Proportion sold	Underlying investment
Trikona Trinity Capital (One) Limited	25%	Uppals I.T. Projects Private Limited
Trikona Trinity Capital (Six) Limited	59%	Manjeera Retail Holdings
Trikona Trinity Capital (Ten) Limited	60%	M K Malls Developers
Trikona Trinity Capital (Fourteen) Limited	15%	Luxor Cyber City

The sale crystallised fair value gains of £16,537,000 which had previously been recognised through the profit and loss account and gave rise to additional gains of £13,709,000 not previously recognised. Selling costs of £1,630,000 have been deducted from the net realised gains in the Income Statement. 

For two of these investments, Manjeera Retail Holdings and MK Malls Developers (equity), the sale completed the disposal of 100% of the Group's interest in the related Mauritian subsidiary companies. (The mezzanine debt investment in MK Malls was retained). For Uppals IT, the disposal reduced the Group's effective interest to 67%. A shareholders agreement is also in place for this investment, such that this investment has been reclassified from a subsidiary to an investment at fair value through profit or loss. This reclassification gave rise to an immediate fair value gain of £53,403,000, which has been recognised in the income statement. The minority interest share of this gain, being £17,623,000 has also been recognised in the income statement. 

In June 2008 the Group also co-invested with SF in a new development property project - MIG Bandra, through a new Mauritian subsidiary, which is owned 45% by the Group and 55% by SF.

8. Cash used by operations

	6 months to 30 September 2008	6 months to 30 September 2007	Year to 31 March 2008
	£'000	£'000	£'000
Profit for the period	19,159	42,874	63,679
Adjustments for:
Fair value gains on investment	9,155	(63,698)	(91,406)
Finance income	(1,978)	(3,475)	(5,031)
Profit on disposal of shares in subsidiaries	(31,843)	-	(4,182)
Share option expense	(379)	-	379
Changes in working capital
Increase in inventories	-	(990)	(3,430)
(Decrease) / Increase in receivables	2	(240)	(620)
(Decrease) / Increase in payables	(4,447)	21,321	24,757
Cash used by operations	(10,331)	(4,208)	(15,854)

9. Commitments

As at 30 September 2008 the Group had capital commitments of £16,225,000 (31 March 2008: £12,252,000) in respect of capital expenditures contracted for at the balance sheet date but not yet incurred.

In addition, the Group had contingent capital commitments in relation to four further investments made after the period end - see note 11(a).

As at 30 September 2008 the Board had approved, but not yet contractually committed to, further investments of £18,000,000 in Uppals I.T. and Luxor Cyber City, of which £7.5 million has been subsequently paid (see note 11).

10. Related party transactions

Rakshitt Chugh, who is a director of the Company, has a beneficial interest in the Investment Manager. Fees charged by the Investment Manager, including performance fees, are described in note 6.

Panthera Developers Private Limited ("Panthera"), Enfield Property Management Services Private Limited ("Enfield"), and Broadgate Securities Limited ("Broadgate") are related parties to the Investment Manager. Panthera is the developer of Uppals I.T. Projects Private Limited and co-developer of Luxor Cyber City. Enfield is the property manager for the development property companies in which the Group is invested but receives fees from only two. Broadgate provides to the Company capital market advisory services. The aggregate amount of fees received by Panthera, Enfield and Broadgate for the services described above for the period ended 30 September 2008 was £2,252,000 (year ended 31 March 2008: £4,471,000).

Philip Scales is a director of the Company and of the Administrator. The fees of the Administrator for the 6 month period amounted to £25,000.

11. Events after the balance sheet date

Details of events that have occurred after the balance sheet date are as follows:

(a) Investments

In August and September 2008 the Group entered conditional agreements to invest in four new development projects: Sankalp Buildwell Private Limited ("Sankalp"), Jodhana Developers Private Limited ("Jodhana"), Enigma Constructions Private Limited ("Virar") and Horizon Countrywide Logistics Limited. The conditions were fulfilled in October, upon which the Group paid a total of £25.2 million. A further £9.6m may become payable in certain circumstances which the Board does not currently believe will arise.

In addition, the Group invested a further £7.5 million in Uppals I.T.

(b) Disposal of shareholdings in subsidiaries and related co-investment

In September 2008, the Group entered into a conditional agreement to sell additional assets to SachsenFonds Holdings GmbH ("SF") in a third transaction. As part of this agreement, the Group would invest in Sankalp, Jodhana and Virar, and SF would then take an interest in the Mauritian entities holding these three investments and in the Mauritian entities holding Uppals I.T., Luxor Cyber City and Kapstone Construction. The combined purchase consideration for the existing investments and subscription consideration for the new investments payable by SF amounts to £47.1 million.

The Company has granted SF an extension period of up to 90 days from 17 October 2008 to complete the transaction.

(c)  Cash position

The Group had cash balances of £95.7m as at 30 September 2008. Subsequent to the post period end investments noted above and payment of regular operating costs, and taking into account the capital commitments detailed in note 9, the uncommitted cash position as at 5 December 2008 is £31.1m.

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 2008, which comprises the consolidated income statement, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement 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 2008 is not prepared, in all material respects, in accordance with IAS 34 and the AIM Rules. 

KPMG Audit LLC

Chartered AccountantsDouglasIsle of Man

8 December 2008

ENDIR KGMGZMRGGRZZ

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