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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Trio Fin | LSE:TRIO | London | Ordinary Share | GG00B1RB3W57 | ORD NPV |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 4.50 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TRIO FINANCE LIMITED REPORT FOR THE SIX MONTHS ENDED 31 MARCH 2008 TRIO Finance Limited ("TRIO" or the "Company") is a closed-ended real estate investment company that invests primarily in a diversified portfolio of real estate debt, including commercial and residential mortgage backed securities and commercial real estate loans. The Company also invests in the residual income pieces of securitisation transactions. TRIO is managed by Wharton Asset Management Bermuda Limited. Highlights * A satisfactory half year of operating performance, with underlying operating earnings from investments of US$4.2m compared to US$6.9m last year. At 31 March 2008 over 99.9% of assets owned are European B loans, which continue to perform well compared to 99.7% (excluding Lions Hill) as at 30 September 2007. * Cash resources changed from US$15.1m at 30 September 2007 to US$18.5m at 31 March 2008. TRIO has a forward Euro hedge of Euro30m against US Dollars and in the prevailing volatile markets, the Company will be prudent in assessing cash needs to fund its US Dollar cash and margin call requirements. * Accordingly, the Board proposes no dividend for this half year. * The worldwide credit crunch continues to have an impact on the Group's business growth. Financial institutions have virtually stopped making new credit available and have been conservative in providing broker marks at which the assets are valued. * Consolidated reported NAV per share as at 31 March 2008 of US$3.86 compared to US$(1.79) at 30 September 2007 and US$9.00 at 31 March 2007. This reflects on the one hand additional impairment charges over the six months of US$11.9m and on the other the deconsolidation of Lions Hill Limited ("Lions Hill"), an SPV formerly controlled by TRIO. As previously reported in August 2007 Lions Hill breached its funding covenants and on 21 January 2008 its lenders appointed administrators and receivers. The continued deterioration in the US asset backed securities market and likelihood of future defaults on some of the assets held by Lions Hill will not enable it to repay its obligations in the foreseeable future. Consequently TRIO is unlikely to be able to regain control of Lions Hill and the assets and liabilities in Lions Hill have been deconsolidated. As at 21 January 2008, TRIO had recognised the full losses of Lions Hill in the consolidated accounts although the extent of the loss was limited to US$21m in the parent company. On deconsolidation, the losses exceeding US$21m have been written back as realised gains of US$13.2m. * The net carrying value of the 3 residual income positions is US$0.4m, after impairment charges to date of US$19.6m. These are the only US assets remaining in the portfolio. * The TREAL facility has termed out to 10 years, with a remaining term of 8.4 years at 31 March 2008. * The aggregate market value of TRIO's portfolio as at 31 March 2008 was US$309m compared to US$569m at 30 September 2007 primarily due to deconsolidation of Lions Hill and early repayment of some B Loans. Key Performance Indicators * Net profit after tax of US$4.2m for the 6 months to 31 March 2008, resulting in earnings per share of US$0.52 compared to US$(2.87) for the year ended 30 September 2007 and US$0.69 in the 6 months to 31 March 2007. The profit in the 6 months to 31 March 2008 includes impairment charges of US$11.9m, and a realised gain on deconsolidation of Lions Hill of US$13.2m. * Excluding gain on deconsolidation and impairments, the profit before tax for the six months to 31 March 2008 was US$2.9m. * Operating expenses have declined from US$2.2m for the six months to 31 March 2007 to US$1.5m for the six months to 31 March 2008. * Investable funds fully committed. * The portfolio had a weighted average life of 3.6 (30 September 2007: 4.9) years and there were funding facilities in place with a weighted average life of 8.4 (30 September 2007: 9.2) years. Outlook * Asset portfolio expected to generate good cash returns from the European Commercial real estate loans. * Availability of new financing and ability to reinvest expected to remain difficult in current credit market. * Continue to focus on maximising shareholder returns. Chairman's Statement For the six months ending 31 March 2008, TRIO generated profit after tax of US$4.2m (31 March 2007: US$6.9m). The Group reported earnings per share of US$0.52 (31 March 2007: US$0.69). This included a realised gain on Lions Hill deconsolidation of US$13.2m and impairment charges of $11.95m (of which US$11.06m related to Lions Hill). TRIO Finance Limited, the holding company, has hedged its Euro30m investment in its subsidiary, TREAL plc ("TREAL"), back to US Dollars. Due to the recent strong appreciation of the Euro and continued volatility and uncertainty in foreign exchange markets, the Company believes it prudent to retain additional cash for hedging and margin calls and the Board proposes no dividend this half-year. The worldwide credit crisis and the turbulence in the financial sector has impacted TRIO. The Group's portfolio now principally consists of quality cash generating European Commercial real estate assets. In January 2008 a subsidiary of TRIO, Lions Hill, was put into receivership by its lenders following the breach of its funding covenants but this had no significant impact on TRIO's (the holding company) NAV as a full provision for the amount invested in Lions Hill had already been made in the financial statements for the year ended 30 September 2007. The continued deterioration in the US asset backed securities market and likelihood of further defaults on some of the assets held by Lions Hill will not enable it to repay its obligations in the foreseeable future. Consequently TRIO is unlikely to be able to regain control of Lions Hill. The assets and liabilities of Lions Hill have been deconsolidated from TRIO and hence the aggregate market value of the portfolio has reduced from US$569m as at 30 September 2007 to US$309m as at 31 March 2008 and the loans have also been reduced from US$598m as at 30 September 2007 to US$299m as at 31 March 2008. Principally due to this, 99.9% of TRIO's portfolio (by market value) comprises European B loans. These continue to perform well, generating good yields and have sound underlying assets. The credit crisis has made financial institutions more risk averse and the current lender, whilst supportive within the existing term out facility, has not permitted re-investment of the proceeds from two large repayments of assets in the six-month period. In the current market position, the Group does not expect the situation to change in the foreseeable future. The Group's current termed out facility has a remaining life of 8.4 years, providing secure long-term finance. The remaining 0.1% of the portfolio consists of 3 residual income positions, which have been written down to US$0.4m. This is the only US exposure. The weighted average yield of the portfolio was 7.50% and the weighted average life was 3.6 years. The European portfolio is 38% in the UK and 62% spread across Sweden, Denmark, Lithuania, Germany and France. Further detail in relation to the Company's performance, investment portfolio, financing and outlook is contained in the Investment Manager's Report. Julian Waldron, Chairman Investment Manager's Report Investment Performance The worldwide credit crunch and the lack of liquidity and financing has continued to impact the Company's business. As reported in the last audited report and financial statements as at 30 September 2007, Lions Hill was prevented by the covenants of its banking facilities from making distributions of income to TRIO or redemption of the TRIO Participation Notes. As at 30 September 2007, TRIO had fully written down its US$21m interest in Lions Hill but had to consolidate its assets and liabilities under International Financial Reporting Standards ("IFRS"). On 21 January 2008, the lenders to Lions Hill appointed administrators and receivers, consequently TRIO has lost control of Lions Hill and its assets and liabilities from that date have been deconsolidated. The continued deterioration in the US asset backed securities market and likelihood of further defaults on some of the assets held by Lions Hill will not enable it to repay its obligations in the foreseeable future. Consequently TRIO is unlikely to be able to regain control of Lions Hill. A gain of US$13.2m was realised in the condensed consolidated income statement principally comprising reversals of impairments of US$38.6m recognised in Lions Hill to date less US$21m, which are not attributable to the Group following the deconsolidation of Lions Hill. The remaining portfolio by market value is almost entirely in European Commercial Real Estate related assets and continues to perform in line with expectations. In line with its strategy of minimising currency exposure, all assets are funded in the same underlying currency, including hedging the Euro30m Euro funding provided by TRIO in TREAL. Portfolio Composition and Diversification The aggregate market value of the investments has declined from US$569m as at 30 September 2007 to US$309m as at 31 March 2008. There were no assets acquired in the six months to 31 March 2008. The primary reasons for the reduction were: * Deconsolidation of the Lions Hill Portfolio - US$210m * Full repayment of the Aurora Euro B Loan - US$27m (Euro17.8m) * Partial repayment of the Aurora SEK B Loan - US$21m (SEK133.3m) Given the deconsolidation of Lions Hill all comparatives of the portfolio as at 30 September 2007 referred to within this Investment Manager's report below are excluding the Lions Hill portfolio. As at 31 March 2008 there were 14 securities and loans (30 September 2007: 15) with a weighted average life of 3.6 years (30 September 2007: 4.4 years). The portfolio was fully comprised of floating rate assets and the weighted average yield of the portfolio was 7.50% (30 September 2007: 7.46%). As at 31 March 2008 99.9% (30 September 2007: 99.7%) was invested in 11 B loans (30 September 2007: 12), all unrated. The rest of the portfolio was composed of 3 residual income positions. The portfolio geographical exposure comprises 38% (30 September 2007: 36%) in the UK and 62% (30 September 2007: 64%) in Continental Europe. The Aurora B Loan, which has been fully repaid, was funded with Euro10m cash from TRIO and has not been re-invested. A B Loan is a junior participation in a first lien mortgage on a commercial real estate property. Geographic location 31 March 2008 30 September 2007 excluding Lions Hill UK 38% 36% USA 0% 0% Finland and Sweden 16% 25% Germany 18% 19% Europe 28% 20% Total 100% 100% The mix of assets by currencies excluding assets owned by Lions Hill was as follows: Currency 31 March 2008 30 September 2007 excluding Lions Hill GBP 39% 36% USD 0% 0% Euro 56% 54% SEK 5% 10% Total 100% 100% On 21 April 2008, another asset, the KAMPPI B Loan with a nominal value of US$32m (Euro20.2m) was fully repaid. This loan was principally funded with Euro20m cash from TRIO. The proceeds have not been reinvested. Net Asset Value The Group's Net Asset Value (all pre-dividend) was US$3.86 compared to US$ (1.79) at 30 September 2007 and US$9.00 at 31 March 2007. The European portfolio has continued to perform well, in line with expectations with some of the loans being repaid early due to the sale of the underlying properties. This demonstrates that high quality commercial real estate is still sought after in Europe albeit in an environment where valuations are under pressure. There have been no defaults or credit impairments. However, due to the curtailed liquidity in the market, the marks supplied by brokers at which the portfolio has been valued has resulted in unrealised fair value losses. The weighted average price of the portfolio was 93.7 as at 31 March 2008 (30 September 2007: 98.9). The total European portfolio as at 31 March 2008 is generating a weighted average yield of LIBOR / EURIBOR / STIBOR plus 2.49 (30 September 2007: 2.60) Top Ten Investments A summary of the Company's ten largest investments representing 96.7% (30 September 2007: 91.9% (excluding Lions Hill)) of the gross asset value of the portfolio is set out below. Security description Asset Country Currency Proportion of type portfolio 1 CENTREPARCS Loan UK GBP 20.66% 2 VIOLET S PROPCO Loan UK GBP 12.61% 3 SUNRISE DECO SUB SPV Loan Germany EURO 11.86% 4 ROYAL MINT COURT Loan UK GBP 9.00% 5 MIROMESNIL Loan France EURO 8.59% 6 KAMPPI Loan Finland EURO 8.57% 7 PROJECT MAY Loan Germany EURO 8.47% 8 SIGNAC Loan France EURO 6.13% 9 WOOLWORTH Loan Germany EURO 5.86% 10 AURORA Loan Sweden and SEK 5.07% Finland Centreparcs This is a B loan secured on a portfolio of 4 long-leasehold self-contained holiday parks in England. The company has been in operation for over 20 years and has considerable experience in management of such assets. In addition there is very limited competition in this market. Violet Propco This is a B loan secured by a portfolio of over 50 Somerfield stores across the UK, Apax, R20 and Barclays are strong equity sponsors and it also has a large equity participation from the experienced management team in place. Sunrise Deco This is a B loan secured on a portfolio of commercial properties located in Germany and is very granular (61 properties, 468 tenants) both in terms of the number of tenants and geographically. The portfolio can broadly be broken into 4 sectors: High Street, Mixed Commercial, Shopping Centre and Retail Warehouse. Dawnay, Day Treveria is a strong equity sponsor and a hands-on experienced management team is behind the deal. Royal Mint Court A B loan, which is secured by 4 office properties in London. These are occupied by high quality tenants. Miromesnil This is a B loan secured by 4 office properties in and around Paris. Lehman is the sole equity sponsor. Kamppi This is a B loan secured on the Kamppi Shopping Centre, a newly developed shopping centre in a prime location directly in the heart of Helsinki's retail and business district with excellent connection to public transport and easy accessibility. It has a great diversity of tenants, 151, and only 6.4% of the rent is contributed by the largest tenant. The initial equity sponsors were Boultbee and RBS. Project May This is a B loan secured by a wide variety of properties across Germany with an equally diversified list of quality tenants. The properties are managed by a focussed property manager with local knowledge. Signac A B loan, which is secured by a newly constructed office building just outside Paris. The property is still under the contractor's guarantee and is fully let. Woolworth This is a B loan secured by The Boenen Centre, modern high bay packing and distribution facility centre in Boenan Germany. The property is let to Deutsche Woolworth and is the company's core distribution centre for Germany and Austria. Aurora This is a B loan secured by commercial properties across Sweden, Denmark and Lithuania. The portfolio includes office, industrial, warehouses and hotel properties. Northern European is the equity sponsor. Financing The Group has a Euro230m (US$364m) multicurrency loan term out facility through TREAL plc providing term funding for commercial real estate and real estate loans. This facility expires on 31 August 2016. Related party transactions Related party transactions are disclosed in note 15 to the condensed set of financial statements. There have been no material changes in the related party transactions described in the last annual report. Potential risks and uncertainties There are a number of potential risks and uncertainties, which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. All the floating rate assets are financed by a term loan, which matures in August 2016. As such the financing is secure for the life of each of the assets. Changes in fair value of the assets, which are based on broker marks will reduce the net asset value by an amount equivalent to the revaluation. There are no impairments on these floating rate assets as at 31 March 2008. As at 31 March 2008, the market value of residual income positions was US$387,500. To the extent that no further distributions are made, this is the maximum future loss to the Group in income and net asset value from further impairments on these assets. The Group has hedged its credit exposure to each of the loans drawn against the individual investments within the floating rate asset portfolio by a credit default swap and the cost of this is included in the financing cost. The hedge is provided against loans to the value of US$299m. If the TRIO funding vehicle defaults on interest or principal repayment of a loan, any cash including any subordination amounts within the vehicle are first used to repay the loan and the balance can be satisfied by the credit default swap. Accordingly the maximum loss that is borne by the Group is its Euro30m subordination in TREAL. As explained above, 99.9% of the portfolio is floating rate assets. These are quarterly interest paying assets and the applicable LIBOR is re-set at each such pay date. All these assets (excluding the KAMPPI asset which fully repaid on 21 April 2008) are 100% financed by floating rate loans whose interest rates are re-set at dates matching the asset it is financing. Therefore the portfolio has no interest rate risk on net income. The Euro30m Subordinated Note in TREAL is held in Euro denominated assets, including cash. The Group has hedged its exposure to currency risk in respect of this by forward foreign exchange. Whilst there is no net currency exposure, it does reduce USD cash balances to finance the hedge and meet any collateral margin requirements. Within TREAL, following the early repayment of Aurora B Loan, Euro10m funded from cash was released and was available at 31 March 2008. On 21 April 2008 a further Euro20m also funded from cash was released from KAMPPI B Loan repayment. These are currently uninvested and this is to be held in Euros to match the original investment by TRIO. The cash is placed on overnight or term deposits and the interest income is exposed to interest rate risk. The Group's need to trade in the short term is mitigated by the long term funding in place, with a remaining life of 8.4 years as at 31 March 2008, whilst the average asset life is 3.6 years. Accordingly the Group would expect to be able to finance its existing investments through their lives. Outlook TRIO's existing investments in Europe are expected to continue to perform in line with expectations and generate good yields. The volatility experienced in the financial markets and the credit crisis has curtailed the growth of TRIO and likely to do so in the short term. However, should market conditions improve, there will be opportunities and potential to make further investments. Condensed Consolidated Income Statement Period from Period from 1 October 1 October 2006 2007 to 31 March to 31 March 2007 2008 Note US$ US$ Operating income Interest income from cash and cash 173,733 268,575 equivalents Interest income from investments 20,335,506 22,922,386 Net realised gains/(losses) on investments 634,149 (883,418) Realised gain on deconsolidation of Lions 7,8 13,168,767 - Hill Impairment charges 5 (11,952,203) - Net foreign exchange (losses)/gains (2,553,516) 843,177 Total operating income 19,806,436 23,150,720 Operating expenses Other operating expenses (1,491,964) (2,197,369) Finance costs (14,142,492) (14,073,233) Total operating expenses (15,634,456) (16,270,602) Net profit 4,171,980 6,880,118 Earnings per Ordinary Share Basic US$0.52 US$0.69 Diluted US$0.52 US$0.69 Weighted average Ordinary Shares Number Number outstanding Basic 8,000,000 10,000,000 Diluted 8,000,000 10,000,000 All items in the above statement are derived from continuing operations. The accompanying notes form an integral part of the half yearly accounts. Condensed Consolidated Statement of Changes in Shareholders' Equity For the period from I October 2007 to 31 March 2008 Share Share Other Capital Net Accumulated Total premium reserve reserve unrealised capital (loss)/gain profits on available for sale investments Note US$ US$ US$ US$ US$ US$ US$ Balance at 1 - - 37,622,539 350,872 (64,831,565) 12,521,379 (14,336,775) October 2007 Net profit for the - - - - - 4,171,980 4,171,980 period Net unrealised - - - - (15,034,002) - (15,034,002) loss on available-for-sale securities Reversal of 7,9 - - - - 59,639,975 - 59,639,975 unrealised losses on available for sale securities on deconsolidation of Lions Hill Distribution to 4 - - - - - (3,520,000) (3,520,000) the Ordinary Shareholders of the Company Balance at 31 - - 37,622,539 350,872 (20,225,692) 13,173,359 30,921,078 March 2008 For the period from 1 October 2006 to 31 March 2007 Share Share Other Capital Net Accumulated Total premium reserve reserve unrealised capital (loss)/gain profits on available for sale investments Note US$ US$ US$ US$ US$ US$ US$ Balance at 1 - - 92,251,670 350,872 131,173 7,412,019 100,145,734 October 2006 Net profit for the - - - - - 6,880,118 6,880,118 period Net unrealised - - - - (13,423,122) - (13,423,122) loss on available-for-sale securities Distribution to 4 - - - - - (3,600,000) (3,600,000) the Ordinary Shareholders of the Company Balance at 31 - - 92,251,670 350,872 (13,291,949) 10,692,137 90,002,730 March 2007 The accompanying notes form an integral part of the half yearly accounts. Condensed Consolidated Balance Sheet As at 31 March 2008 31 March 30 September 2008 2007 Note US$ US$ Non-current assets Available for sale investments 9 309,459,404 568,629,899 Current assets Cash and cash equivalents 20,166,276 15,107,862 Other assets 5,770,558 8,354,726 25,936,834 23,462,588 Total assets 335,396,238 592,092,487 Equity and liabilities Equity Share capital 12 - - Share premium account 13 - - Other reserve 13 37,622,539 37,622,539 Capital reserve 350,872 350,872 Net unrealised loss on available for sale 9 (20,225,692) (64,831,565) investments Accumulated profits 13,173,359 12,521,379 Total equity attributable to equity 30,921,078 (14,336,775) holders of the parent Current liabilities Interest on loans 3,330,287 7,321,454 Interest on subordinated notes - 157,684 Other liabilities 11 2,258,818 965,418 5,589,105 8,444,556 Non-current liabilities Loans 10 298,886,055 597,984,706 Total Liabilities 304,475,160 606,429,262 Total equity and liabilities 335,396,238 592,092,487 The accompanying notes form an integral part of the half yearly accounts. Condensed Consolidated Cash Flow Statement For the period from 1 October 2007 to 31 March 2008 Period from Period from 1 October 1 October 2006 2007 to 31 March to 31 March 2007 2008 Note US$ US$ Net cash inflow/(outflow) from operating 14 50,034,254 (142,068,606) activities Financing activities Dividends paid to Shareholders 4 (3,520,000) (3,600,000) Proceeds from Subordinated note issue - 12,942,000 Net borrowings under loan facilities 7 (39,582,095) 103,643,061 Deconsolidation of Lions Hill (3,555,237) - Cash flows from financing activities (46,657,332) 112,985,061 Net increase/(decrease) in cash and cash 3,376,922 (29,083,545) equivalents Reconciliation of net cash flow to movement in net cash Net increase/(decrease) in cash and cash 3,376,922 (29,083,545) equivalents Cash and cash equivalents at start of the 15,107,862 37,696,939 period Cash and cash equivalents at end of the 14 18,484,784 8,613,394 period The accompanying notes form an integral part of the half yearly accounts. 1. General information TRIO Finance Limited (the "Company") was registered on 11 May 2006 with registered number 44776 and is domiciled in Guernsey, Channel Islands, and commenced its operations on 5 June 2006. The Company is a closed-ended investment company incorporated in Guernsey with limited liability under The Companies (Guernsey) Law 1994 and its Ordinary Shares are listed on the London Stock Exchange. The registered office of the Company is Dorey Court, Admiral Park, St. Peter Port, Guernsey, GY1 3BG, Channel Islands. "Group" is defined as the Company and its subsidiaries: Lions Hill Limited ("Lions Hill"), TREAL Public Limited Company ("TREAL") and Longlands Finance No. 2 Limited ("Longlands"). Another subsidiary, Pheasantry Limited, is dormant at the period end. On 21 January 2008, Lions Hill was served a notice of default on the US$400m facility by its Lender. Following such notice, the Lender has appointed Margaret Mills and Alan Hudson of Ernst & Young, London and David Hughes of Ernst & Young, Dublin as joint administrators and receivers of Lions Hill. As a result of this, TRIO has lost control of Lions Hill and from this date, Lions Hill was deconsolidated from the Group. The continued deterioration in the US asset backed securities market and likelihood of further defaults on some of the assets held by Lions Hill will not enable it to repay its obligations in the foreseeable future. Consequently TRIO is unlikely to be able to regain control of Lions Hill. The amounts of deconsolidating Lions Hill are disclosed in Note 7 to these half yearly consolidated accounts. On 27 February 2007, the Company reclassified its listing from its previous listing under Chapter 15 of the Listing Rules to that of an overseas company listed under Chapter 14 of the Listing Rules. The Group's investment objective is to provide stable income returns to shareholders in the form of semi-annual dividends and the potential for capital growth. The Group invests predominantly in asset-backed securities (with a primary focus on real estate mortgage-backed securities) and real estate related financial assets. It seeks to achieve this by investing both in residual income positions of CDOs or fund structures (in particular targeting CDOs or funds managed by the Investment Manager or its affiliates) and investing in one or more special purpose vehicles or CDOs established by the Group. The Group may also make direct acquisitions of such securities. Target assets may be in cash or synthetic form. The Group may also invest directly in synthetic instruments, subject to the restrictions on exposure set out in the Prospectus at the IPO. The Group's investment management activities are managed by its Investment Manager, Wharton Asset Management Bermuda Limited (the "Investment Manager"), a private limited company incorporated in Bermuda. The Group has entered into an Investment Management Agreement (the "Investment Management Agreement") under which the Investment Manager manages its day-to-day investment operations, subject to the supervision of the Company's Board of Directors. The Investment Manager has appointed Wharton Asset Management GB Limited until 29 February 2008 and Wharton Asset Management UK LLP, thereafter both investment management companies incorporated in the United Kingdom and authorised and regulated by the Financial Services Authority, to perform certain sub-management functions. The Group has no direct employees. For its services, the Investment Manager receives a monthly management fee (which includes a reimbursement of expenses) and a quarterly performance-related fee. The Group has no ownership interest in the Investment Manager. The Group is administered by Kleinwort Benson (Channel Islands) Fund Services Limited (the "Administrator"). Investors Fund Services (Ireland) Limited are the sub-administrator. At the date of authorisation of these accounts, the following Standard, which has not been applied in these financial statements, was in issue but not yet effective: IFRS 8 Operating Segments The Directors anticipate that the adoption of the above Standard in future years will not have a material impact on the financial statements of the Company when the Standard comes into force for the period commencing 1 January 2009. The information for the year ended 30 September 2007 does not constitute statutory accounts as defined in the Companies (Guernsey) Law, 1994. A copy of the statutory accounts for that year has been delivered to the London Stock Exchange. The auditors' report on those accounts was not qualified but attention was drawn to the uncertainty in fair value estimates of the investments and did not contain statements under section 65(3) of The Companies (Guernsey) Law, 1994. 2. Significant accounting policies Statement of compliance The financial statements of the TRIO Finance Limited are prepared in accordance with International Financial Reporting Standards ("IFRS"). The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 `Interim Financial Reporting'. The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Group's latest annual audited financial statements. Standards effective in the current period In the current financial year, the Group has adopted International Financial Reporting Standard 7 `Financial Instruments: Disclosures' for the first time. As IFRS 7 is a disclosure standard, there is no impact on the half yearly report. Full details of the change will be disclosed in the annual report for the year ended 30 September 2008. Basis of preparation The financial statements of the Group are prepared under IFRS on the historical cost or amortised cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments, financial instruments held for trading and financial instruments classified as available for sale. The preparation of financial statements in conformity with IFRS requires the Group to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The details of these estimates and assumptions are described below and in Note 3. Actual results could differ from those estimates. These financial statements are presented in US Dollars and the functional currency of the Group is also considered to be US Dollars. Basis of consolidation Subsidiaries are entities controlled by the Company. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Control is the power to govern financial and operating policies of an entity so as to obtain benefits from its activities. In accordance with the Standing Interpretations Committee Interpretation 12 "Consolidation-Special Purpose Entities" ("SIC 12"), the Company consolidates only entities over which control is indicated by activities, decision-making, benefits and residual risks of ownership. Where the Company does consolidate a special purpose entity ("SPE"), the interest in the notes not held by the Company will be shown as a liability in the balance sheet. Any income or expenses attributable to these note holders will be shown as an expense in the income statement. In accordance with SIC 12 the Company does not consolidate an SPE in which it holds less than a substantial interest in the residual income position. Where it holds more than a substantial interest, it does not consolidate the SPE where the residual income position represents only a small part of the gross assets of the SPE and the Company was neither involved in the establishment of the SPE or the origination of the assets owned by the SPE, on the basis that the Company is not exposed to the majority of the risks and benefits of the assets owned by the SPE, provided control is not otherwise indicated by the Company's activities, decision making, benefits and residual risks or ownership. Investments Financial assets are classified as available for sale and are stated at fair value, with any resultant gain or loss being recognised directly in equity, except for impairment losses and, in the case of monetary items such as debt securities, foreign exchange gains and losses which are taken to the condensed consolidated income statement. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in the condensed consolidated income statement. Expenses incidental to the acquisition of available for sale investments are included within the cost of that investment. Further details of the factors and assumptions surrounding the estimation uncertainty in valuations is set out in Note 3. Financial assets are recognised/derecognised by the Group on the date it commits to purchase/sell the investments in regular way trades. Investments in subsidiaries are stated at fair value, including any interest in subordinated notes. Fair value All financial assets carried at fair value are initially recognised at fair value and subsequently re-measured at fair value based on quoted bid prices where such bids are available from a third party in a liquid market. Where quoted bids are not available, broker marks are sought, and where multiple marks are available the lowest such mark is taken. If quoted bid prices or broker marks are unavailable, the fair value of the financial asset is estimated using pricing models incorporating discounted cash flow techniques. These pricing models apply assumptions regarding asset-specific factors and economic conditions generally, including delinquency rates, prepayment rates, default rates, maturity profiles, interest rates and other factors that may be relevant to each financial asset. Where such pricing models are used, inputs are based on market related measures at the balance sheet date. Where actual performance data regarding defaults, delinquencies and prepayments received in respect of a given asset is markedly different from the default, delinquency and prepayment assumptions incorporated in the pricing model for the asset, the assumptions are revised to reflect this data and the pricing model is updated accordingly. In addition to the actual performance data observed in respect of a particular asset, market factors are also taken into account within the model. Broker marks (where available) and any other available indicators are assessed to determine the fair value of the investment. Impairment The carrying amounts of the Group's available-for-sale assets are reviewed at each balance sheet date to determine whether there is any indication of impairment. When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objective evidence that the asset is impaired, the cumulative loss that had been recognised directly in equity is recognised in the condensed consolidated income statement even though the financial asset has not been derecognised. The amount of the cumulative loss that is recognised in the condensed consolidated income statement is the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in the condensed consolidated income statement. Reversals of impairment If the fair value of a debt instrument classified as available-for-sale increased and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss shall be reversed, with the amount of the reversal recognised in the condensed consolidated income statement. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of amortisation, if no impairment loss had been recognised. Segmental reporting The Directors are of the opinion that the Group is engaged in a single segment of business of investing in debt securities and operates solely from Guernsey and therefore no segmental reporting is provided. 3. Critical accounting judgements and key sources of estimation uncertainty In the process of applying the Group's accounting policies (described in Note 2 above), the Group has determined that the following judgements and estimates have the most significant effect on the amounts recognised in the financial statements: Income recognition The Group's available for sale investments are stated at fair value and all the investments are floating rate assets except the residual income positions (US$387,500). As stated in Note 2, interest income on investments held (except residual interest positions) is accrued based on the outstanding principal amount and their contractual terms. Income is recognised for the residual interest positions on an effective interest rate ("EIR") method in accordance with paragraph 30 of IAS18 "Revenue". In addition, the amortisation of any premium or discount is based on the effective interest rate ("EIR"). The EIR is taken as the effective interest rate on the acquisition of the asset and remains unchanged throughout the holding period except where the LIBOR/EURIBOR rate has changed significantly. Valuation of investments In accordance with the Group's accounting policies, fair value of financial assets is primarily based on quoted bid prices where such bids are available from a third party. Where quoted bids are not available, broker marks are sought, and where multiple marks are available the lowest such mark is taken. The majority of the investments are real estate backed loans and real estate backed securities. The remainder are residual income positions. Given the illiquidity and widening of spreads due to recent and current market conditions, these marks from brokers may not necessarily represent the realisation value of such assets as of the balance sheet date. The market for subordinated asset-backed securities including B loans and the Group's ability to deal in investments may be limited. There is no active secondary market in B loans or residual income positions and, further, there is no industry standard agreed methodology to value B loans or residual income positions. Marks for the B loans and residual income positions are obtained from the lead trustee bank. As an additional indication of fair value, the Group performs discounted cash flow models for each of the assets. The cash flow data for these models is obtained from data providers such as Intex, trustee reports and in some cases information provided by the loan originator. Where actual performance data regarding defaults, delinquencies, recovery rates and prepayments received in respect of a given asset is markedly different from the default, delinquency and prepayment assumptions incorporated in the pricing model for the asset, the assumptions are revised to reflect this data and the pricing model is updated accordingly. The key assumptions within the model are voluntary and involuntary prepayment speeds, severity on liquidations, changes in pipeline of delinquencies, call option and changes in interest rates. In addition to the actual performance data observed in respect of a particular asset, market factors such as house price indices and refinancing opportunities are also taken into account within the model. If the discounted cash flows based on the assumed EIR is less than the book amortised cost (reduced by any impairment charges to date) then the difference results in an impairment charge to the condensed consolidated income statement and the amortised cost is reduced. A comparison is made of this reduced amortised cost with the broker marks and the lower of the two is taken as fair value. All B loans are valued at broker marks. In addition, these cash flows may lead to a changing pattern of future amortisation of premium/ discounts and therefore affect future interest income. The fair value of the Group's investments is set out in Note 9. Given the number of individual investments and the number of individual parameters that make up each pricing model, the Directors believe that it would be impractical to disclose the effects of changes to each assumption in respect of each individual investment and this would not provide meaningful additional disclosure. Further disclosures of key assumptions and key sources of estimation uncertainty are set out in Note 2 to the financial statements under the heading "Fair Value". 4. Dividends A dividend of US$0.44 per share on 8 million shares (US$3,520,000 in total) was proposed by directors on 20 November 2007 and paid during the period. During the six months ended 31 March 2007 a dividend of US$0.36 per share on 10 million shares (US$3,600,000 in total) was paid. No dividend is proposed in respect of the period to 31 March 2008. 5. Impairment charges Group impairment charges comprise US$11,060,173 in relation to investments held by Lions Hill in the period prior to deconsolidation and US$892,030 in relation to investments held by TRIO Finance Limited, the holding company. There were no impairment charges in the six months ended 31 March 2007. Impairment charges arise where there has been a permanent diminution in the value of the asset and the charge is the extent to which this is not recoverable. They represent the difference between amortised cost and expected cash flows of the financial asset discounted at its effective interest rate. 6. Earnings per ordinary share 31 March 2008 31 March 2007 US$ US$ The calculation of the basic and diluted earnings per share is based on the following data: Earnings for the purposes of basic and 4,171,980 6,880,118 diluted earnings per share being net profit attributable to equity holders Weighted average number of Ordinary 8,000,000 10,000,000 Shares for the purposes of basic and diluted earnings per share Effect of dilutive potential Ordinary - - Share: Warrants Weighted average number of Ordinary 8,000,000 10,000,000 Shares for the purposes of diluted earnings per share There is no share dilution, as the market price of the share is below the exercise price of the warrants. 7. Deconsolidation of Lions Hill As explained in note 8, on 21 January 2008 the Group lost control of its interest in Lions Hill. The continued deterioration in the US asset backed securities market and likelihood of further defaults on some of the assets held by Lions Hill will not enable it to repay its obligations in the foreseeable future. Consequently TRIO is unlikely to be able to regain control of Lions Hill and has been deconsolidated. The net liabilities of Lions Hill at the date of deconsolidation and the prior period balance sheet were as follows: 21 January 30 September 2007 2008 Assets US$ US$ Investments at fair value 184,240,206 210,142,288 Cash and cash equivalents 3,555,237 8,656,785 Interest receivable 2,335,559 1,843,568 Total assets 190,131,002 220,642,641 Non Current Liabilities Loans (259,516,556) (278,872,821) (259,516,556) (278,872,821) Current Liabilities Interest on loans (2,543,738) (3,841,383) Other liabilities (166,653) (180,574) (2,710,391) (4,021,957) Total Liabilities (262,226,947) (282,894,778) Total net liabilities pre deconsolidation (72,095,945) Unrealised losses reversed 59,639,875 Foreign exchange losses on (712,697) deconsolidation (13,168,767) Realised gain on deconsolidation of Lions 13,168,767 Hill Total consideration - Satisfied by: 21 January 2008 US$ Cash Deferred consideration - - Net cash outflow arising on disposal: Cash and cash equivalents (3,555,237) The condensed consolidated income statement of the Group include the following amounts relating to Lions Hill: Period from Period from 1 October 2007 1 October 2006 to 21 January to 31 March 2008 2007 US$ US$ Operating income Interest income from cash and cash 60,314 81,301 equivalents Interest income from investments 5,214,847 11,466,597 Net realised gains/(losses) on 603,432 (883,417) investments Impairment charges (11,060,173) - Net foreign exchange losses (8,550) (4,521,650) Total operating income (5,190,130) 6,142,831 Operating expenses Other operating expenses (224,239) (129,088) Finance costs (5,142,130) (8,871,998) Total operating expenses (5,366,369) (9,001,086) Net loss (10,556,499) (2,858,255) 8. Subsidiaries Lions Hill Limited ("Lions Hill") was incorporated in Ireland on 19 December 2005 and, pursuant to the Articles of Association of Lions Hill, the Company has the right to appoint a majority of the Board of Directors of Lions Hill. Two of the Directors of the Company have been appointed directors of Lions Hill. To ensure that the Company will be able to maintain a majority of the Board of Directors of Lions Hill in the future, the Company has been allocated three "B" ordinary shares in Lions Hill carrying the right to appoint a majority of the Board of Directors. Lions Hill was established for the sole purpose of acquiring and holding interests in certain assets, including assets comprised in the initial portfolio. However, Lions Hill was subject to a standstill agreement with its lenders until 19 January 2008. Under this the lender has imposed certain conditions. Following the expiry of the Standstill Agreement, on 21 January 2008, Lions Hill was served notice of default on the US$400m facility by its Lender. Following such notice, the Lender has appointed Margaret Mills and Alan Hudson of Ernst & Young, London and David Hughes of Ernst & Young, Dublin as joint administrators and receivers of Lions Hill. The continued deterioration in the US asset backed securities market and likelihood of further defaults on some of the assets held by Lions Hill will not enable it to repay its obligations in the foreseeable future. Consequently TRIO is unlikely to be able to regain control of Lions Hill but has no further obligation to support Lions Hill whose funding is non recourse to the Group. Under International Financial Reporting Standards ("IFRS"), TRIO is deemed to have relinquished control of Lions Hill and its assets and liabilities have been deconsolidated from this date giving rise to a reversal of unrealised losses relating to impairments of US$13,168,767 which was recognised in the condensed consolidated income statement. TREAL Public Limited Company ("TREAL") was incorporated in Ireland on 19 July 2006 and, pursuant to the Articles of Association of TREAL, the Company has the right to appoint a majority of the Board of Directors of TREAL. Two of the Directors of the Company have been appointed directors of TREAL. To ensure that the Company will be able to maintain a majority of the Board of Directors of TREAL in the future, the Company has been allocated three "B" ordinary shares in TREAL carrying the right to appoint a majority of the Board of Directors. TREAL was established for the sole purpose of acquiring and holding interests in certain assets, which to date have been all real estate loans. Longlands Finance No. 2 Limited ("Longlands") was incorporated in Ireland on 12 December 2006 and, pursuant to the Articles of Association of Longlands, the Company owns all of the voting shares in Longlands and has two Directors on the Board of Directors of Longlands. Longlands was established for the sole purpose of acquiring and holding interests in certain assets, which to date has been a single real estate loan, which has been disposed of. As the Company is dormant and is no longer required, the Board of Directors are arranging for it to be struck off. Pheasantry Limited ("Pheasantry") was incorporated in Cayman Islands on 28 April 2006 and, pursuant to the Articles of Association of Pheasantry, the Company owns all of the voting shares in Pheasantry. Pheasantry was established for the sole purpose of acquiring and holding interests in real estate related funds for a temporary period while opportunities arose for acquiring real estate related securities. Pheasantry has been dormant in the period. 9. Available for sale investments Investments are classified as available for sale. The following is a summary of the Group's investments at 31 March 2008 and 30 September 2007: Six months Year ended 30 ended 31 March September 2007 2008 US$ US$ Cost as at start of period 600,202,519 511,157,493 Purchases - 369,698,251 Pay downs and sales proceeds (54,868,605) (243,913,675) Deconsolidation of Lions Hill (249,171,743) - Realised gains 11,933,094 7,316,315 Amortisation of premium/discount (183,578) (1,293,669) Impairment charge (11,952,203) (42,762,196) Cost as at end of period 295,959,484 600,202,519 Unrealised gains on foreign exchange 33,725,612 33,258,945 Unrealised (losses) on fair values (20,225,692) (64,831,565) Fair value as at end of period 309,459,404 568,629,899 10. Loans As at 31 March 2008, TREAL had drawn down US$298,886,055 of its floating rate loan facility with a maturity date of 31 August 2016. As at 30 September 2007, the Group had floating rate loan facilities in TREAL of US$319,111,885 with a maturity date of 31 August 2016 and floating rate loan facilities in Lions Hill of US$278,872,821 with maturity dates ranging from 23 March 2017 to 2 May 2017. The interest rates on these facilities ranged from 4.51% to 5.8725% as at 31 March 2008 (30 September 2007: 4.48% to 6.745%). 11. Other liabilities Included in other liabilities, as at 31 March 2008 is a bank overdraft of US$1,681,492 (30 September 2007: US$Nil). The bank overdraft was one day funding provided by the Group's custodian bank to facilitate a collateral margin call on the forward hedge on 31 March 2008 in US dollars. This was subsequently cleared on 1 April 2008 by the reduction in the collateral margin call and repayment of the excess margin. 12. Share capital Authorised share capital 31 March 2008 30 September 2007 Number of Ordinary Shares US$ Number of US$ Ordinary Shares Ordinary shares of no par Unlimited - Unlimited - value each Issued and fully paid Number of US$ Number of US$ Ordinary Ordinary Shares Shares Balance at start of period 8,000,000 - 10,000,000 - Share consolidation during - - (2,000,000) - the period Balance at end of period 8,000,000 - 8,000,000 - On 16 August 2007, the directors proposed the payment of a special interim dividend of US$11,000,000 (equivalent of US$1.10 per existing ordinary share) out of the other reserve account. Following this, at an Extraordinary General Meeting of the Company held on 10 September 2007, a share consolidation was approved to reduce the number of existing Ordinary Shares by 20 per cent with the result that shareholders receive four new Ordinary Shares for every five existing Ordinary Shares held on 11 September 2007. The Company has authority to buy back up to 14.99% of the issued share capital until the next Annual General Meeting. The Company will propose a special resolution at the next annual general meeting to renew this authority. 13. Share premium account and other reserve Share premium account Period from 1 Year ended 30 October 2007 to September 2007 31 March 2008 US$ US$ Balance at start and end of period - - Other reserve account Period from 1 Year ended 30 October 2007 to September 2007 31 March 2008 US$ US$ Balance at date of beginning of period 37,622,539 92,251,670 Special distribution to ordinary shareholders - (11,000,000) Transfer to accumulated profits/(losses) - (43,629,131) Balance at end of period 37,622,539 37,622,539 The Ordinary Shares of the Company have no par value. As such, the proceeds of the Initial Public Offering represent the premium on the issue of the Ordinary Shares. In accordance with the accounting policies of the Company and as allowed by The Companies (Guernsey) Law, 1994, the costs of the Initial Public Offering have been written off against the share premium account. The issue costs associated with the Initial Public Offering amounted to US$7,397,458 and warrants with a value of US$350,872 (Note 15). The Company has passed a special resolution cancelling the amount standing to the credit of its share premium account immediately following admission to the London Stock Exchange. In accordance with The Companies (Guernsey) Law, 1994 (as amended) (the "Companies Law"), the Directors applied to the Royal Court in Guernsey for an order confirming such cancellation of the share premium account following admission. The other reserve created on cancellation is available as distributable profits to be used for all purposes permitted by the Companies Law, including the buy back of Ordinary Shares and the payment of dividends. 14. Notes to cash flow statement Period from Period from 1 October 2007 1 October 2006 to 31 March 2008 to 31 March 2007 US$ US$ Net profit 4,171,980 6,880,118 Adjustments for: Realised (gains)/losses on investments (634,149) 883,418 Realised (gains) on deconsolidation of Lions (13,168,767) - Hill Amortisation of premium discount account 183,578 - Impairment charges 11,952,203 - Unrealised foreign exchange gains/losses on (466,667) (14,105,940) investments (note 9) Realised foreign exchange gains on (5,294,586) - deconsolidation of Lions Hill. Unrealised (gains)/losses on derivatives (137,014) 546,174 (3,393,422) (5,796,230) Purchases of investments - (266,571,945) Paydowns and sales of investments 54,868,605 135,612,735 54,868,605 (130,959,210) Decrease/(increase) in receivables 248,609 (5,351,541) Increase in other payables (1,689,538) 38,375 (1,440,929) (5,313,166) Net cash inflow/(outflow) from operating 50,034,254 (142,068,606) activities Purchases and sales of investments are considered to be operating activities of the Group, given its purpose, rather than investing activities. 31 March 2008 30 September 2007 US$ US$ Cash and cash equivalents comprise: Cash at bank 20,166,276 15,107,862 Overdraft (note 11) (1,681,492) - 18,484,784 15,107,862 15. Material agreements and related party transactions Investment Manager The Group is party to an Investment Management Agreement with Wharton Asset Management Bermuda Limited, dated 31 May 2006, pursuant to which the Group has appointed the Investment Manager to manage the assets and liabilities and obligations of the Group in accordance with, inter alia, the investment objective and policy of the Group, subject to the overall supervision and direction of the Board of Directors of the Group. On Trio relinquishing control of Lions Hill on appointment of receivers on 21 January 2008, the Investment Manager has not been requested to continue managing the assets and liabilities of Lions Hill. The Group pays the Investment Manager a Management Fee and Incentive Fee. Management Fee The Investment Manager will be entitled to receive from the Group an annual management fee of 1.75 percent of the gross equity of the Group (the "Management Fee") calculated and payable monthly in arrears. For these purposes, gross equity means the aggregate gross proceeds to the Group of all issues of shares in the capital of the Group (less any capital distribution made by the Group). The Management Fee charge for the period was US$778,750 (6 months to 31 March 2007: US$872,744), of which US$131,592 (6 months to 31 March 2007: US$nil) was outstanding at the period end. Investments in other entities managed by the Investment Manager As at 31 March 2008, the Company held investments with a total value of US$387,500 (30 September 2007: US$998,450) in the following entities, which are managed by the Investment Manager: G Square Finance 2006-1 Limited and G Square Finance Limited. Incentive Fee The Investment Manager is also entitled to receive an incentive compensation fee (the "Incentive Fee") in respect of each incentive period that will be paid quarterly in arrears. An incentive period will comprise each successive quarter, except the first such period was the period from Admission to 30 September 2006. The Incentive Fee for each incentive period will be an amount equivalent to 25 percent of the amount by which A exceeds (B × C) where: A = the Group's consolidated net income excluding any realised and unrealised gains or losses (but only to the extent they have not been deducted in a prior incentive period) as shown in the Group's latest consolidated management accounts for the relevant quarter, before payment of any Incentive Fee; B = the time-weighed gross equity of the Group; and C = one percent plus one quarter of three month LIBOR (as at the beginning of the relevant incentive period). Where there is a difference between the Group's consolidated net income for the relevant incentive period as shown in the Group's quarterly management accounts compared to the Group's audited annual accounts, the consolidated net income for the relevant incentive period as reflected in the audited accounts shall prevail. Any excess Incentive Fee paid or any additional Incentive Fee due in respect of any incentive period attributable to any such difference will be repaid by or paid to the Investment Manager, as the case may be. The Incentive Fee charge for the period was US$nil (6 months to 31 March 2007: US$745,932), of which US$nil (6 months to 31 March 2007: US$nil) was outstanding at the period end. Administration Fee The Group is party to an Administration Agreement with Kleinwort Benson (Channel Islands) Fund Services Limited dated 31 May 2006, pursuant to which the Administrator has agreed to provide for the day-to-day administration of the Group, including maintenance of accounts and provision of a company secretary. For the provision of services under the Administration Agreement, the Administrator is entitled to receive fees, which will be agreed in writing from time to time between the Group and the Administrator. The initial fee has been agreed to be 0.125 per cent per annum of the Group's gross assets and 0.025 percent per annum of Lions Hill's gross assets (subject in each case to a minimum monthly fee of US$10,000), plus certain additional charges for ancillary services. Custodian Fee The Group is party to a Custody Agreement with Investors Trust & Custodial Services (Ireland) Limited dated 31 May 2006, pursuant to which the Custodian has agreed to be responsible for providing custodial services which include being global custodian of all the investments and property of the Company and its subsidiaries and SPVs, the safekeeping and registration of property for the Group and the settlement of all transactions relating to the property. For the provision of services under the Custody Agreement, the Custodian is entitled to receive a fee, which will be agreed in writing from time to time between the Group and the Custodian. The initial fee will be 0.005 percent per annum of DTCC deliverable gross assets and 0.015 percent per annum of Euroclear deliverable gross assets plus certain transaction fees. On 2 July 2007, State Street Corporation completed the acquisition of Investors Financial Services Corporation, the parent company of the Sub-Administrator and Custodian. Investment Manager Warrants In recognition of the promoter role and indemnification of certain costs, liabilities and losses incurred by the affiliate of the Investment Manager, Trident Capital Limited, in raising capital for the Company, the Company granted on 31 May 2006 warrants to that affiliate. The warrants represent the right to acquire 1,000,000 Shares, being 10 per cent of the number of Offer Shares, at an exercise price equal to the Offer Price. The warrants are fully vested and immediately exercisable on the date of admission to the London Stock Exchange and will remain exercisable until the 10th anniversary of that date. The Company may grant further warrants in connection with any future offering of Shares. Such warrants, if any will represent the right to acquire Shares equal to no more than 10 per cent of the number of Shares being offered in respect of that future offering and will have an exercise price equal to the offer price for that offering. As at the date of admission, the aggregate fair value of the warrants granted at the time of the Initial Public Offering using a Black-Scholes valuation model was US$350, 872 (reflecting a valuation of US$0.35 per warrant). This amount has been treated as a cost of the Initial Public Offering. Subordinated Note Carmen General Partner Limited, a limited liability company incorporated under the laws of England and Wales acting in its capacity as general partner of the Carmen Limited Partnership (collectively, "Carmen"), entered into a note purchase agreement dated 2 February 2007 with TREAL. Pursuant to the note purchase agreement, Carmen acquired EUR10,000,000 in principal amount of participating term notes issued by TREAL for a cash consideration of EUR10,000,000. On 13 August 2007, EUR2,000,000 participation notes were redeemed for a cash consideration of EUR2,000,000 and on 5 September 2007, the remaining EUR8,000,000 participation notes were assigned to TRIO Finance Limited for a cash consideration of EUR8,000,000. TRIO Finance Limited subsequently redeemed these participation notes on 6 September 2007. 16. Exchange rates The following exchange rates (against the US$) were used to convert the investments and other assets and liabilities denominated in currencies other than US$: 31 March 2008 30 September 2007 Euro 1.58455 1.42215 Pound sterling 1.98750 2.03735 Swedish krone 5.92997 6.46905 17 Post Balance Sheet events On 21 April 2008 the KAMPII B loan was fully repaid at par, equivalent to EUR20,017,812. END
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