TRIO Finance Limited

PRELIMINARY ANNOUNCEMENT OF THE AUDITED RESULTS For The YEAR ENDED 30 SEPTEMBER

2007 TRIO Finance Limited (`TRIO') 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. Lions Hill Limited (`Lions Hill'), TREAL PLC (`TREAL'), Longlands Finance No 2 Limited (`Longlands') and Pheasantry Limited are four of the subsidiaries of TRIO. TRIO is managed by Wharton Asset Management Bermuda Limited.

Highlights

* A final dividend proposed on 20 November 2007 of US$0.44 per share for the

second half of the year on 8 million shares in issue. Since the IPO TRIO

will have returned US$24.6m to Shareholders.

* The worldwide credit crunch that started in the US has had a significant

impact on the Group's business. In this liquidity crisis financial

institutions have been far more cautious in making credit available as well

as making a market for assets on which they provide broker marks at which

the assets are valued. * A number of assets owned by Lions Hill, an SPV controlled by TRIO, were downgraded in the third quarter of the Company's financial year by the rating agencies. Of the total impairment charge of US$42.8m during the year, US$27.5m relates to assets within Lions Hill. All such impairment charges are in respect of US assets. The remaining US$15.3m impairment charges have been against residual income positions held by TRIO. * Consolidated Net loss for the year of US$28.4m principally as result of impairment charges of US$42.8m.

* Consolidated reported NAV per share as at 30 September 2007 under IFRS of

US$(1.79) compared to US$6.74 at 30 June 2007, US$9.00 at 31 March 2007 and

US$10.01 at 30 September 2006.

* Company NAV* of US$5.99 compared to US$7.20 at 30 June 2007, US$9.00 at 31

March 2007 and US$10.01 at 30 September 2006.

* Excluding Lions Hill, exposure to US assets is only 0.28% at 30 September

2007 and including Lions Hill exposure to US assets has been reduced

significantly from 61% at 30 September 2006 to 13.5% at 30 September 2007.

* During the year the Group sold its Somerfield PIK at a premium resulting in

a net cashflow of US$28.5m after the repayment of associated loans.

* Both borrowing facilities, within Lions Hill and TREAL have termed out to

10 year facilities.

* Following the EGM held on 10 September 2007 and immediately on payment of

the special dividend, the company undertook a share consolidation - for

every 5 existing shares 4 new shares were issued.

* Company NAV represents the NAV of the TRIO Finance Limited and excludes any mark to market changes in excess of TRIO's interest in Lions Hill as explained below. Key Performance Indicators

* US$21m returned to Shareholders during the financial year:

* An interim dividend declared and paid in June 2007 of US$0.65 per share for

the first half of the year on 10 million shares in issue.

* A special dividend declared and paid in September 2007 of US$1.10 per Share

on 10 million shares in issue.

* A final dividend proposed on 20 November 2007 of US$0.44 per share for the

second half of the year on 8 million shares in issue. Since the IPO TRIO

will have returned US$24.6m to Shareholders. * Basic and Fully Diluted Earnings per share of US$1.45 pre impairment charges and US$(2.87) post impairment charges. The EPS for the previous period was US$0.74. * Investable funds fully committed at the end of the year. * The portfolio had a weighted average life of 4.89 (2006: 5.4) years and

there were funding facilities in place with a weighted average life of 9.21

(2006:10.2) years. Outlook

* Continue to generate cash returns primarily from the high yielding European

Commercial real estate. * Availability of new financing expected to remain difficult in current credit market. * Focus remains on distributing cash to Shareholders.

Chairman's statement

TRIO had a strong first half but the worldwide credit crunch that started in the US began to affect the Group's business from April 2007 onwards. The Group's strategy of diversifying away from US assets to build a strong portfolio of quality cash-generating European assets has nonetheless enabled us to hit most of our key goals for our first full year of operations. The first of these has been the payment of a dividend yield of at least 10 per cent on the initial investment. The Company paid a first half dividend of US$0.65 per share on 10 million shares and proposes a second half dividend of US$0.44 per share on 8 million shares in issue. In addition the Company paid a special dividend of US$1.10 per share on 10 million shares in issue which was accompanied by a proportionate consolidation of the number of shares in issue. Since IPO in June 2006, the total distribution will be US$24.6m. During the first 8 months of the year, the Group took advantage of attractive markets and strong opportunities in Europe by acquiring assets with good yields, and successfully trading out of positions in the US. This took our US exposure from 58% at the start of the year to 14% at the end of the second quarter on a gross basis. Since March 2007 the markets have been turbulent and the ability to make further sales in the US has been curtailed.

TRIO remains committed to high quality and transparent disclosure of its results and strategy.

The good earnings from our cash generative European assets have been impacted by the impairment charges that we have taken on our US portfolio. TRIO reports a net consolidated loss for the year of US$28.4m post impairment charges of US$42.8m and a net profit of US$14.4m before these impairments. This is equivalent to Earnings per share of US$1.45 per share pre impairment charges and US$(2.87) per share post impairment charges. All impairment charges have been in respect of US assets and none are for the Group's portfolio of European assets. The majority of the impairment charge - US$27.5m - is in respect of the Lions Hill investments. An additional US$15.3m has been booked in respect of the 3 residual income positions held directly by TRIO. As at 30 September 2007, TRIO had fully written down its US$21m interest in Lions Hill and continues to assume that no further income will be derived from these assets. This reflects the rapid deterioration of the US sub prime residential mortgage market which has resulted in the original credit ratings of certain Lions Hill assets being downgraded and therefore a breach of its funding covenants. Lions Hill is prevented from making any distributions to TRIO or redeeming TRIO's participation notes. Given that there is no further exposure to TRIO, the Board and Investment Manager believe that it is appropriate also to follow the performance of TRIO and its portfolio composition excluding any mark to market changes in the Lions Hill portfolio in excess of the US$21m written off, which is effectively the Company's NAV. This was US$5.99 as at 30 September 2007 compared to US$9.00 as at 31 March 2007 and US$10.01 as at 30 September 2006. Without Lions Hill - as at 30 September 2007, the portfolio comprises 99.7% European assets, which are all B loans and the balance of 0.3% represents the fair value of the residual income positions. The weighted average yield of the portfolio was 7.46% and weighted average life was 4.35 years. With Lions Hill - as at 30 September 2007, the portfolio is 86% European assets and 14% US assets. The weighted average yield of the portfolio was 7.37% and weighted average life of 4.89 years. The European portfolio which is 36% in the UK and 64% spread across Sweden, Finland, Germany and France continues to perform in line with expectations. The Group's two long term funding facilities have both termed out to 10 years and have a weighted average life of 9.2 years. The funding provides secure finance for the existing assets. In the current market position, the Group assumes that no further financing will be available for the foreseeable future. This limits the Group's ability to add to or turn over its portfolio. In this uncertain environment, with the constraints that it imposes, the Company's objective for the coming year is to provide income returns to shareholders in the form of semi-annual dividends. The European portfolio is currently performing strongly and therefore provides the best possible basis to deliver additional cash returns, although the current environment makes firm prediction very difficult.

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 Company continued with its strategy of diversifying away from the US assets and build a strong portfolio of European assets. However, the worldwide credit crunch that started in the US had a significant impact on the Group's business. The rapid deterioration of the US sub prime residential mortgage market has resulted in the original credit ratings of twelve US RMBS assets within Lions Hill being downgraded. In addition one UK CMBS was also downgraded. As announced in August 2007, Lions Hill is now prevented by the covenants of its bank facilities from making distributions of income to TRIO or redemption of the TRIO Participation Notes and also requires permission to buy and sell any assets within the Lions Hill portfolio. As at 30 September 2007, TRIO has fully written down its interest in Lions Hill and it is assumed that no future income will be derived from these assets. Nonetheless, under International Financial Reporting Standards ("IFRS"), TRIO is deemed to have control of Lions Hill and its assets and liabilities are consolidated, giving a reported consolidated NAV under IFRS of US$(1.79) per share. Given that TRIO has taken the maximum loss in this entity and that there is no further exposure for TRIO, the Board and Manager believe that it is appropriate to follow the performance of TRIO excluding any mark to market changes in the Lions Hill portfolio, as represented by the NAV. The Company NAV as at 30 September 2007 is US$5.99 per share and effectively represents the NAV of the Group after limiting TRIO's loss in Lions Hill to US$21m i.e. writing down the fair value of TRIO's investment in Lions Hill to US$nil.

Portfolio Composition and Diversification

Under IFRS, the Group has increased its investments to an aggregate market value of US$569m, a net increase of US$59m from the end of the previous year end. The average size per asset rose from US$5.4m to US$7m. During the year, TRIO has diversified its portfolio by divesting out of US RMBS assets and investing in European commercial real estate related assets.

About 68% of the portfolio is invested in European B loans compared to 27% at the end of previous period end. All the B loans are secured on principally commercial property in Europe.

During the year the following acquisitions were made:

* twelve European Commercial real estate loans with an aggregate value of

US$327m located in the UK, Germany, Sweden, France, Denmark and Finland;

* six Commercial Mortgage related securities purchased located in the UK and

Germany with a combined value of US$41m

* a rated tranche of a CDO with a value of US$2m.

During the year the following disposals took place and the proceeds were:

* Somerfield PIK £32m

* 27 US RMBS assets US$118.7m

Also during the year two European real estate loans with a value of SEK82.5m and £3.95m were fully paid down.

The portfolio is analysed below both with and without Lions Hill assets. As Lions Hill is operating under a standstill agreement and TRIO has fully written down its investment in Lions Hill, it is more meaningful to consider the company position excluding assets owned by Lions Hill.

Portfolio Analysis including Lions Hill assets

As at 30 September 2007 there were 81 securities and loans with a weighted average life of 4.89 years. The portfolio was fully comprised of floating-rate assets and the weighted average yield of the portfolio was 7.37%.

The amount invested in RMBS represented US$84.6m (2006:US$285.6m), corresponding to 15% (2006:56%) of the total portfolio, while 68% (US$389m) were real estate B Loans. The rest of the portfolio was composed by RIPs, ABS and CMBS. The portfolio was geographically diversified with direct exposures of 14% in the US, 41% in the UK, 43% in Continental Europe and 2% in Eastern Europe compared to 58%, 21%, 16% and 2% respectively as at 30 September 2006.

27% (2006:62%) of the portfolio had a weighted average rating between A2 and Baa3, with only 4% (2006:3%) representing sub-investment grade assets. The remaining 69% (2006:35%) of the portfolio was unrated, being the commercial property loans and residual income positions.

At IPO, approximately 21% of the portfolio consisted of non-US investments. In line with its strategy to increase its European real estate exposure, TRIO has increased its non-US exposure to 86% compared to 42% a year ago. TRIO's European investments have performed in-line with expectations.

Portfolio analysis excluding Lions Hill assets

As at 30 September 2007 there were 15 securities and loans with a weighted average life of 4.35 years. The portfolio was fully comprised of floating-rate assets and the weighted average yield of the portfolio was 7.46%.

As at 30 September 2007 99.72% was invested in 12 B loans, all unrated. The rest of the portfolio was composed of 3 residual income positions. The portfolio geographical exposure comprises 36% in the UK and 64% in Continental Europe. All these European investments have performed in-line with expectations.

The following tables show the asset composition as at 30 September 2007 for both (a) Group excluding the assets owned by Lions Hill as well as (b) Group with Lions Hill assets consolidated with comparisons for 30 September 2006.

Collateral type Credit ratings of assets held (Moody's) 30 Sept 30 Sept 30 30 Sept 30 Sept 30 Sept 07 Inc 07 Exc Sept 07 Inc 07 Exc 06 Lions Lions 06 Lions Lions Hill Hill Hill Hill A2 5% 0% 2% A3 0% 0% 6% REAL ESTATE LOANS 69% 100% 27% B2 0% 0% 0% EUROPE RMBS US 12% 0% 52% Baa1 1% 0% 12% CMBS EUROPE 11% 0% 4% Baa2 14% 0% 31% ABS EUROPE 4% 0% 7% Baa3 7% 0% 11% RIP US 0% 0% 4% Ba1 0% 0% 0% RMBS EUROPE 3% 0% 4% Ba2 4% 0% 3% CDO US 1% 0% 2% Unrated 69% 100% 35% Total 100% 100% 100% Total 100% 100% 100% Geographic location Currency 30 Sept 30 Sept 30 30 Sept 30 Sept 30 Sept 07 Inc 07 Exc Sept 07 Inc 07 Exc 06 Lions Lions 06 Lions Lions Hill Hill Hill Hill UK 41% 36% 21% GBP 42% 36% 21% US 14% 0% 58% USD 14% 0% 62% Finland and Sweden 16% 25% 7% EURO 38% 54% 15% Germany 13% 19% 7% SEK 6% 10% 2% Europe 14% 20% 2% Total 100% 100% 100% Eastern Europe 2% 0% 2% Global 0% 0% 3% Total 100% 100% 100% Top Ten Investments

A summary of the Group's ten largest investments excluding Lions Hill representing 91.93% and including Lions Hill representing 57.84% of the gross asset value of the portfolio is set out below.

Security description Asset Type Country Currency % % portfolio portfolio including excluding Lions Lions Hill Hill CENTREPARCS LOAN UK GBP 10.73% 17.05% VIOLET PROPCO LOAN UK GBP 7.20% 11.45% SUNRISE DECO B LOAN LOAN GERMANY EUR 6.85% 10.89% AURORA LOAN SWEDEN SEK 6.34% 10.08% KAMPPI B LOAN LOAN FINLAND EUR 5.13% 8.15% ROYAL MINT COURT LOAN UK GBP 4.75% 7.54% MIROMESNIL LOAN FRANCE EUR 4.64% 7.38% AURORA LOAN SWEDEN EUR 4.44% 7.06% PROJECT MAY LOAN GERMANY EUR 4.39% 6.97% SIGNAC LOAN FRANCE EUR 3.37% 5.36%

Out of the top ten investments, eight are European loans acquired since last year in accordance with TRIO's strategy of investing further in European assets.

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 stores across 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 B Loan

This is a B Loan secured on a portfolio of commercial properties located in West 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 this deal.

Aurora SEK and EUR

These are B loans secured by commercial properties across Sweden, Finland, Denmark and Lithuania. The portfolio includes office, industrial, warehouses and hotel properties. Northern European is the equity sponsor.

Kamppi B Loan

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.

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.

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 contractors guarantee and is fully let.

Financing TREAL During the year, TREAL drew on its existing facility to acquire more European commercial real estate related assets. As at 30 September 2007 TRIO has ?30m subordinated notes in TREAL and has drawn ?224m, just short of the ?230m available. In August 2007, TREAL requested an extension of the revolving facility as required under the facility agreement. The lender did not respond and consequently the extension was deemed to have been refused. Under the agreement, the repayment date of the loan extended to 31 August 2016, ten years from the date the facility was originally granted.

LONGLANDS

In December 2006, with the launch of Longlands, a further funding for the Somerfield PIK, was secured at LIBOR +4% until October 2007 and LIBOR +5% from thereon. The facility was available until the earlier of maturity of the PIK or July 2014 with the key condition that the Loan to Value should not exceed 50%. The initial funding of the PIK was 50% by TRIO and 50% from the lender. In July 2007, Somerfield PIK was sold and the proceeds were used to repay the loan

plus a prepayment fee. LIONS HILL On the first anniversary of the term loan, the lender did not renew the facility for another year. Consequently in March 2007, Lions Hill elected to exercise the Term Out Option under the loan facility agreement for a term of 10 years. Following the credit rating agency downgrades of some of the Lions Hill assets, Lions Hill was in breach of the loan covenants in the facility agreement. On 1 August 2007, Lions Hill entered into a standstill agreement with the lender for a period to 19 January 2008. During this period, Lions Hill cannot make any distributions to TRIO, no withdrawals can be made nor can any subordinated notes be redeemed. In addition assets cannot be bought or sold without the lender's permission.

Outlook

With the current credit crisis in the worldwide markets the real estate market is unlikely to have new financing available in the short term. TRIO has written down its investment in Lions Hill and it is assumed no further income will be derived from this. However, should markets improve, there will be an upside and potential income from this. TREAL has a term facility of 10 years and should continue to generate good returns from its European real estate portfolio.

The financial information set out in this announcement does not constitute the Company's statutory accounts for the year ended 30 September 2007.

The financial information for the year ended 30 September 2007 is derived from the financial statements to be delivered to the UK Listing Authority. The Auditors reported on those accounts, their report was unqualified and did not contain a statement under section 65(3) of The Companies (Guernsey) Law, 1994. However it includes an added emphasis paragraph regarding uncertainty over the fair value of investments as described further in notes 2 and 3 to the financial statements.

This preliminary announcement was approved by the directors of the Company on 21 November 2007.

Consolidated Income Statement

Note Year ended Period from 30 September 11 May 2006 2007 to 30 September 2006 US$ US$ Operating income Interest income from cash and cash 531,531 116,553 equivalents Interest income from investments 47,602,167

12,070,358

Net realised gains on investments 7,316,315

3,667,128

(including gains on initial portfolio)

Net foreign exchange losses (4,711,716) (3,185) Impairment charges 7 (42,762,196) - Total operating income 7,976,101 15,850,854 Operating expenses Other operating expenses 4 (4,341,778) (1,414,879) Finance costs 5 (32,054,094) (7,023,956) Total operating expenses (36,395,872) (8,438,835) Net (loss)/profit (28,419,771) 7,412,019 Earnings per Ordinary Share 8 Basic US$(2.87) US$0.74 Diluted US$(2.87) US$0.74

Weighted average Ordinary Shares 8 Number Number

outstanding Basic 9,895,890 10,000,000 Diluted 9,895,890 10,033,349

All items in the above statement are derived from continuing operations.

The accompanying notes form an integral part of the financial statements.

Company Income Statement

Note Year ended Period from 30 September 11 May 2006 2007 to 30 September 2006 US$ US$ Operating income Interest income from cash and cash 78,687 58,815 equivalents Interest income from investments 18,550,960

1,478,419

Net realised gains on investments 30,800

-

Net realised foreign exchange losses (2,178,281)

(2,524)

Net unrealised foreign exchange (losses)/ (409,191) 135,677 gains Impairment charges 7 (42,836,947) - Total operating (loss)/income (26,763,972) 1,670,387 Operating expenses Other operating expenses 4 (3,578,234) (1,337,312) Total operating expenses (3,578,234) (1,337,312) Net (loss)/profit (30,342,206) 333,075 Earnings per Ordinary Share 8 Basic US$(3.07) US$0.03 Diluted US$(3.07) US$0.03

Weighted average Ordinary Shares 8 Number Number

outstanding Basic 9,895,890 10,000,000 Diluted 9,895,890 10,033,349

All items in the above statement are derived from continuing operations.

The accompanying notes form an integral part of the financial statements.

Consolidated Statement of Changes in Shareholders Equity

Share Share Other Capital Net Accumulated Total premium reserve reserve unrealised capital gain/(loss) profits/ on available for sale (losses) investments Note US$ US$ US$ US$ US$ US$ US$ Balance at incorporation - - - - - - - Net profit for the period - - - -

- 7,412,019 7,412,019

Net unrealised gain on 10 - - - - 131,173 - 131,173 available for sale securities Total recognised income and - - - - 131,173 7,412,019 7,543,192 expense for the period Issuance of Ordinary Shares 15,16 - 100,000,000 - -

- - 100,000,000 Warrants granted 16,18 - (350,872) - 350,872 - - -

Costs related to issuance of 16 - (7,397,458) - - - - (7,397,458) Ordinary Shares and Warrants Cancellation of share 16 - (92,251,670) 92,251,670 - - - - premium Balance at 30 September 2006 - - 92,251,670 350,872

131,173 7,412,019 100,145,734

Net loss for the year - - - -

- (28,419,771) (28,419,771)

Net unrealised loss on 10 - - - - (64,962,738) - (64,962,738) available for sale securities Total Recognised income and - - - - (64,962,738) (28,419,771) (93,382,509) expense for the year Distribution to Ordinary 6 - - - - - (10,100,000) (10,100,000) Shareholders of the Company Special distribution to 6 - - (11,000,000) - - - (11,000,000) Ordinary Shareholders Transfer to accumulated 16 - - (43,629,131) - - 43,629,131 - profit Balance at 30 September 2007 - - 37,622,539 350,872

(64,831,565) 12,521,379 (14,336,775)

The accompanying notes form an integral part of the financial statements.

Company Statement of Changes in Shareholders' Equity

Note Share Share Other Capital Net Accumulated Total Capital premium reserve reserve unrealised gain/(loss) profits/ on available for sale (losses) investments and investments in subsidiaries US$ US$ US$ US$ US$ US$ US$ Balance at incorporation - - - - - - - Net profit for the period - - - - - 333,075 333,075 Net unrealised gain on - - - - 7,210,117 - 7,210,117 available for sale securities

Total recognised income and - - - -

7,210,117 333,075 7,543,192 expense for the period

Issuance of Ordinary Shares 15,16 - 100,000,000 - -

- - 100,000,000 Warrants granted 16,18 - (350,872) - 350,872 - - -

Costs related to issuance 16 - (7,397,458) - - - - (7,397,458) of Ordinary Shares and Warrants Cancellation of share 16 - (92,251,670) 92,251,670 - - - - premium Balance at 30 September - - 92,251,670 350,872 7,210,117 333,075 100,145,734 2006 Net loss for the year - - - - - (30,342,206) (30,342,206) Net unrealised loss on - - - - (781,901) - (781,901) available for sale securities Total Recognised income and - - - - (781,901) (30,342,206) (31,124,107) expense for the year Distribution to Ordinary 6 - - - - - (10,100,000) (10,100,000) Shareholders of the Company Special distribution to 6 - - (11,000,000) - - - (11,000,000) Ordinary Shareholders Transfer to accumulated 16 - - (43,629,131) - - 43,629,131 - profit Balance at 30 September - - 37,622,539 350,872 6,428,216 3,520,000 47,921,627 2007 Consolidated Balance Sheet Note 30 September 30 September 2007 2006 US$ US$ Non-current assets Available for sale investments 10 568,629,899 509,920,365 Current assets Cash and cash equivalents 15,107,862 37,696,939 Other assets 11 8,354,726 3,479,777 23,462,588 41,176,716 Total assets 592,092,487 551,097,081 Equity and liabilities Equity Share capital 15 - - Share premium account 16 - - Other reserve 16 37,622,539 92,251,670 Capital reserve 18 350,872 350,872 Net unrealised (loss)/gain on available for 10 (64,831,565) 131,173 sale investments Accumulated profits 12,521,379 7,412,019 (14,336,775) 100,145,734 Current liabilities Interest on loans 12 7,321,454 1,544,814

Interest on subordinated notes 157,684

- Loans 12 - 420,506,195 Amounts payable on investments purchased - 27,665,820 Other liabilities 14 965,418 1,234,518 8,444,556 450,951,347 Non-current liabilities Loans 12 597,984,706 - Total liabilities 606,429,262 450,951,347 Total equity and liabilities 592,092,487 551,097,081

The accompanying notes form an integral part of the financial statements.

These financial statements were approved and authorised for issue by the Board of Directors on 21 November 2007.

Company Balance Sheet Note 30 September 30 September 2007 2006 US$ US$ Non-current assets Investments in subsidiaries 9 40,525,339 60,691,454 Available for sale investments 10 1,012,659 20,000,000 41,537,998 80,691,454 Current assets Cash and cash equivalents 6,343,272 19,921,870 Other assets 11 791,295 689,405 7,134,567 20,611,275 Total assets 48,672,565 101,302,729 Equity and liabilities Equity Share capital 15 - - Share premium account 16 - - Other reserve 16 37,622,539 92,251,670 Capital reserve 18 350,872 350,872 Net unrealised gain on investments 9,10 6,428,216 7,210,117 Accumulated profits 3,520,000 333,075 47,921,627 100,145,734 Current liabilities Other liabilities 14 750,938 1,156,995 Total liabilities 750,938 1,156,995 Total equity and liabilities 48,672,565 101,302,729

The accompanying notes form an integral part of the financial statements.

These financial statements were approved and authorised for issue by the Board of Directors on 21 November 2007.

Consolidated Cash Flow Statement

Note Year ended 30 Period from September 2007 11 May 2006 to 30 September 2006 US$ US$ Net cash outflow from operating activities 17 (152,847,818) (469,932,656) Financing activities Proceeds from issuance of Ordinary Shares 15,16 -

100,000,000

Costs related to issuance of Ordinary 16 - (7,397,458) Shares

Dividends paid to Shareholders 6 (10,100,000)

-

Payment of special dividend to Shareholders 6 (11,000,000)

-

Net borrowings under loan facilities 177,478,511 420,506,195 Interest paid on loans (26,119,770) (5,479,142) Cash flows from financing activities 130,258,741

507,629,595

Net (decrease)/increase in cash (22,589,077)

37,696,939

Reconciliation of net cash flow to movement

in net cash Net (decrease)/increase in cash and cash (22,589,077) 37,696,939 equivalents

Cash and cash equivalents at 30 September 37,696,939

- 2006 Cash and cash equivalents at 30 September 15,107,862

37,696,939

2007

The accompanying notes form an integral part of the financial statements.

Company Cash Flow Statement Note Year ended Period from 30 September 2007 11 May 2006 to 30 September 2006 US$ US$ Net cash inflow/(outflow) from operating 17 7,521,402 (72,680,672) activities Financing activities Proceeds from issuance of Ordinary Shares 15,16 -

100,000,000

Costs related to issuance of Ordinary Shares 16 -

(7,397,458)

Dividends paid to Shareholders 6 (10,100,000)

-

Payment of special dividend to Shareholders 6 (11,000,000)

-

Cash flows from financing activities (21,100,000)

92,602,542

Net (decrease)/increase in cash (13,578,598)

19,921,870

Reconciliation of net cash flow to movement

in net cash Net (decrease)/increase in cash and cash (13,578,598) 19,921,870 equivalents

Cash and cash equivalents at 30 September 19,921,870

- 2006 Cash and cash equivalents at 30 September 6,343,272

19,921,870

2007

Notes to the Financial Statements

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 year end.

On 27 February 2007, the Company reclassified its listing from it 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 investment grade asset-backed securities (with a primary focus on real estate mortgage-backed securities) and real estate related financial assets including B-loans. 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 also makes direct acquisitions of such securities. Target assets may be in cash or synthetic form. The Group also invests 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 UK Limited, an investment management company 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 financial statements, the following Standards, which have not been applied in these financial statements, were in issue but not yet effective:

IFRS 7 Financial Instruments: Disclosures; and the related amendment to IAS 1 on capital disclosures

The Directors anticipate that the adoption of the above Standard in future periods will not have a material impact on the financial statements of the Company and Group except for additional disclosures on capital and financial instruments when the Standard comes into force for periods commencing on or after 1 January 2007.

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 Directors believe that other pronouncements which are in issue but not yet operative or adopted by the Company will not have a material impact on the financial statements of the Company.

The comparative figures disclosed relate to the period from 11 May 2006 (incorporation) to 30 September 2006.

2. Significant accounting policies

Statement of compliance

The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ("IFRS"), which comprise standards and interpretations approved by the International Accounting Standards Board ("the IASB"), and International Accounting Standards and Standing Interpretations Committee interpretations approved by the International Accounting Standards Committee ("IASC") that remain in effect, together with applicable legal and regulatory requirements of Guernsey Law and the Listing Rules of the UK Listing Authority.

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 Notes 3 and 13. 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. 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 income statement. When these investments are derecognised, the cumulative gain or loss previously recognised directly in equity is recognised in the income statement. Where these investments are interest-bearing, interest calculated using the effective interest method is recognised in the 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.

Cash and cash equivalents Cash and cash equivalents includes amounts held in interest bearing accounts, including any cash collateral held for forward foreign exchange contracts. The maximum amount to be held as collateral is 2% of the notional value of the forward foreign exchange contracts plus mark to market value of the contracts.

Derivative financial instruments

Derivative financial instruments used by the Group to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities that do not qualify for hedge accounting are accounted for as trading instruments. The Group may also enter into credit default or total return swap arrangements where the underlying asset or assets would otherwise be within the Group 's investment policy in order to obtain substantially the same economic exposure to the returns and risks associated with holding such underlying asset or assets. Derivative financial instruments (including embedded derivatives) are recognised initially at fair value. Subsequent to initial recognition, derivative financial instruments are stated at fair value. The gain or loss on remeasurement to fair value is recognised immediately in the income statement. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged.

Forward exchange contracts

Fair value of forward exchange contracts is their quoted market price at the balance sheet date, being the present value of the quoted forward price.

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. Dealer marks (where available) and any other available indicators are assessed to determine the fair value of the investment.

Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported within assets and liabilities when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

Interest-bearing loans and borrowings

Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.

Financing costs associated with the issuance of financings are deferred and amortised over the term of the financings using the effective interest rate method.

Foreign currency transactions

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to US Dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement.

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 income statement even though the financial asset has not been derecognised. The amount of the cumulative loss that is recognised in the 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 income statement.

Reversals of impairment

An impairment loss in respect of an investment in an equity instrument classified as available for sale is not reversed through the income statement. 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 is reversed, with the amount of the reversal recognised in the 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.

Transaction expenses

The preliminary expenses of the Group directly attributable to its initial public offering and any costs associated with the establishment of the Group are charged to the share premium account.

Share warrants have been granted to an affiliate of the Investment Manager have been treated as a transaction expense on the basis that they were granted by the Group as a fee for the affiliate's role as promoter and indemnification of certain costs, liabilities and losses in connection with raising capital for the Group. The fair value of such warrants is charged to the share premium account. The share premium account is credited with the fair value of such warrants at the time that such warrants are vested.

Interest income

Interest income is accrued based on the outstanding principal amount of the Group's financial assets and their contractual terms. Premiums and discounts associated with the purchase of financial assets are amortised or accreted into interest income over the projected lives of the investments using the effective interest method as defined under International Accounting Standard 39. The Group's policy for estimating prepayment speeds for calculating the effective yield is to evaluate historical performance, market consensus indicators and current market conditions. Where the Group adjusts its effective yield calculation to take account of any change in underlying assumptions, such adjustments are recognised in the income statement.

Other receivables

Other receivables do not carry any interest and are short-term in nature and are accordingly stated at their nominal value as reduced by appropriate allowances for estimated irrecoverable amounts.

Financial liabilities and equity

Financial liabilities and equity are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Financial liabilities and equity are recorded at the proceeds received, net of issue costs.

Other accruals and payables

Other accruals and payables are not interest-bearing and are stated at their nominal value. Expenses are accrued for in the period in which they were incurred.

Segmental reporting

The Directors are of the opinion that the Company and its Group are 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. 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 vast 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 quoted marks from brokers may not necessarily represent the realisation value of such assets as of the balance sheet date. As described in Note 13 to the financial statements, the market for subordinated asset-backed securities and the Group's ability to deal in investments may be limited. There is no active secondary market in residual income positions and, further, there is no industry standard agreed methodology to value residual income positions. Prices for the residual income positions are obtained from the lead trustee bank. As an additional indication of fair value, the Group performs discounted cashflow 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 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 income statement and the amortised cost is reduced.

A comparison is made of this reduced amortised cost with the fair value derived from broker marks and the lower of the two is taken as fair value.

In addition, these cash flow 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 10 and a further description of the risks associated with the Group's investments is provided in Note 13. 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" and Note 13. 4. Other operating expenses Group Group Period from Year ended 30 September 11 May 2006 to 2007 30 September 2006 US$ US$

Investment management, custodian and

administration fees Investment management and incentive fee (Note 2,470,847 1,038,301 18) Administration fee (Note 18) 353,681 108,738 Custodian fee (Note 18) 32,783 9,740 2,857,311 1,156,779 Other operating expenses Audit fees 109,434 75,000 Interim review fees 23,834 - Tax fees 12,000 - Directors' fees payable to the directors of 190,000 76,376 TRIO Finance Limited

Directors' fees payable to the directors of the 61,907

- Subsidiaries Legal fees 203,063 20,000

Special purpose vehicles set up costs 228,471

6614

Professional fees - secondary offer 500,000

- Other expenses 155,758 80,110 1,484,467 258,100 Total other operating expenses 4,341,778 1,414,879 The Group has no employees. Company Company Period from 11 May 2006 Year ended to 30 September 2007 30 September 2006 US$ US$

Investment management, custodian and

administration fees Investment management and incentive fee (Note 2,470,847 1,038,301 18) Administration fee (Note 18) 146,338 47,795 Custodian fee (Note 18) 15,205 3,294 2,632,390 1,089,390 Other operating expenses Audit fees 79,984 75,000 Interim review fees 23,834 - Tax fees 3,000 - Directors' fees payable to the directors of 190,000 76,376 TRIO Finance Limited Legal fees 67,200 20,000 Special purpose vehicles set up costs 33,386

6,614

Professional fees - secondary offer 500,000

- Other expenses 48,440 69,932 945,844 247,922 Total other operating expenses 3,578,234

1,337,312

Amounts paid to Deloitte & Touche in respect of acting as reporting accountants were US$nil (2006: US$138,255) (in respect of work relating to the Company's Initial Public Offering). This amount reduced the share premium account along with other listing costs in accordance with the accounting policies of the Group. In 2007 US$81,024 (2006: US$nil) was paid to Deloitte & Touche LLP in respect of work relating to the secondary offer. 5. Finance costs Group Group Year ended 30 Period from September 2007 11 May 2006 to 30 September 2006 US$ US$ Finance costs arises from: Loans 30,526,908 7,023,956 Subordinated note 1,527,186 - Total finance costs 32,054,094 7,023,956

There were no finance costs for the Company.

6. Dividends

Dividends of US$0.36 per share on 10 million shares (US$3,600,000 in total) and US$0.65 per share on 10 million shares (US$6,500,000 in total) were proposed by directors and paid during the year. A dividend was proposed of US$0.44 per share on 8 million shares by directors on 20 November 2007 and has not been included as a liability in these financial statements. A special dividend of US$1.10 per share on 10 million shares (US$11,000,000) was proposed by the directors on 9 August 2007 and paid on 26 September 2007 out of other reserves. 7. Impairment charges

Group impairment charges comprise US$27,466,951 in relation to investments held by Lions Hill and US$15,295,245 in relation to investments held by TRIO Finance Limited, the holding company. There were no impairment charges in the period ended 30 September 2006. Impairment charges are 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.

Company impairment charges comprise US$15,295,245 in relation to investments held by TRIO Finance Limited and US$27,541,702 in relation to TRIO Finance Limited's investment in its subsidiary Lions Hill.

8. Earnings per ordinary share

Group Group Year ended 30 Period from September 2007 11 May 2006 to 30 September 2006 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 (28,419,771) 7,412,019 diluted earnings per share being net profit

attributable to equity holders

Weighted average number of Ordinary Shares 9,895,890 10,000,000 for the purposes of basic and diluted

earnings per share

Effect of dilutive potential Ordinary

Shares Warrants - 33,349

Weighted average number of Ordinary Shares 9,895,890 10,033,349 for the purpose of diluted earnings per

share Company Company Year ended 30 Period from September 2007 11 May 2006 to 30 September 2006 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 (30,342,206)

333,075

diluted earnings per share being net profit attributable to equity holders

Weighted average number of Ordinary Shares 9,895,890 10,000,000 for the purposes of basic and diluted

earnings per share

Effect of dilutive potential Ordinary

Shares Warrants - 33,349

Weighted average number of Ordinary Shares 9,895,890 10,033,349 for the purpose of diluted earnings per

share A payment of a special dividend of US$11,000,000 on 16 August 2007, was followed by a share consolidation whereby 4 new shares were issued for 5 old shares on 11 September 2007, resulting in reduction of shares from 10,000,000 to 8,000,000.

There is no share dilution in 2007, as the market price of the shares is below the exercise price of the warrants.

9. Investments in 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 is subject to a standstill agreement with its lenders until 19 January 2008. Under this the lender has imposed certain conditions as explained in Note 12. 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 all 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 5 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. A single real estate loan was acquired and disposed of during the year. Longlands does not hold any securities at 30 September 2007. 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. The single investment held by Pheasantry was in Y2K Finance Inc. and disposed of during the year (note 18). Pheasantry does not hold any securities at 30 September 2007. Lions Hill TREAL Longlands Pheasantry Total US$ US$ US$ US$ US$ Balance at - - - - - incorporation Purchases 34,800,000 12,780,000 - 16,000,000 63,580,000 Sales (10,000,000) - - - (10,000,000) Unrealised gain/ 6,541,702 (17,768) - 587,520 7,111,454 (loss) Fair value as at 30 31,341,702 12,762,232 - 16,587,520 60,691,454 September 2006 Purchases 200,000 37,253,740 22,885,421 - 60,339,161 Sales (4,000,000) (10,224,000) (22,885,421) (16,000,000) (53,109,421) Realised and - 711,162 22,205 (587,520) 145,847 unrealised gain/ (loss) Impairment charge (27,541,702) - - - (27,541,702) Fair value as at 30 - 40,503,134 22,205 - 40,525,339 September 2007

The investments in subsidiaries are stated at the fair value of the Company's investment. Lions Hill has been written down to US$nil.

10. Available for sale investments

The following is a summary of the Group's investments at 30 September 2007:

Group Group 30 September 30 September 2007 2006 US$ US$

Cost as at start of year/period 511,157,493

- Purchases 369,698,251 536,487,327 Sales proceeds (243,913,675) (25,157,888) Realised gains 7,316,315 (171,946)

Amortisation of premium/discount (1,293,669)

- Impairment charge (42,762,196) - Cost as at end of year/period 600,202,519 511,157,493

Unrealised gains/(losses) on foreign exchange 33,258,945 (1,368,301)

Unrealised (losses)/gains on market values (64,831,565) 131,173

Fair value as end of year/period 568,629,899

509,920,365

The following is a summary of the Company's investments at 30 September 2007: Company Company 30 September 30 September 2007 2006 US$ US$

Cost as at start of year/period 19,901,337

- Purchases - 19,750,000 Amortisation of premium/discount (2,764,348) 151,337 Impairment charge (15,295,245) - Cost as at end of year/period 1,841,744 19,901,337 Unrealised (losses)/gains on market values (829,085)

98,663

Fair value as end of year/period 1,012,659 20,000,000 11. Other assets Group Group 30 September 30 September 2007 2006 US$ US$ Interest receivable 8,313,529 3,327,420 Derivative financial assets - unrealised gain on -

151,880

forward foreign exchange contracts

Other assets 41,197 477 8,354,726 3,479,777 Company Company 30 September 30 September 2007 2006 US$ US$ Interest receivable 785,036 553,251 Derivative financial assets - unrealised gain on -

135,677

forward foreign exchange contracts

Other assets 6,259 477 791,295 689,405

The following forward foreign exchange contracts in the Group and Company were unsettled at 30 September 2007:

Maturity Date Amount Bought Amount Sold Unrealised Loss US$ 26 October 2007 US$ 42,417,000 EUR (273,514) 30,000,000 (273,514) The following forward foreign exchange contracts in the Group were unsettled at 30 September 2006: Maturity Date Amount Bought Amount Sold Unrealised Gain US$ 5 December 2006 US$ 12,847,100 EUR 135,677 10,000,000 19 October 2006 US$ 819,591 GBP 430,000 16,203 151,880 The following forward foreign exchange contracts in the Company were unsettled at 30 September 2006: Maturity Date Amount Bought Amount Sold Unrealised Gain US$ 5 December 2006 US$ 12,847,100 EUR 10,000,000 135,677

The Directors consider that the carrying amount of other receivables approximates their fair value.

12. Loans

As at 30 September 2007, the Group had the following floating rate loan facilities in Lions Hill and TREAL:

Lions Hill

On 13 March 2007, Lions Hill elected to exercise the Term Out Option under the loan facility agreement for a term of 10 years from the last day of the interest period which ended immediately following the date of exercise of the Term out Option. The assets of Lions Hill (US$211,281,896) are provided as security against these loans. The outstanding facilities as at 30 September 2007 were as follows: Loan Principal Loan Interest Total Maturity Weighted Principal payable outstanding date average interest rate USD equivalent USD 137,617,058 2,159,594 139,776,652 23 March 6.010000 137,617,058 2017 EURO 25,492,039 235,251 25,727,290 25 April 4.885630 17,925,000 2017 GBP 56,320,735 114,745,049 1,433,809 116,178,858 25 April 6.707200 2017 GBP 500,000 1,018,675 12,729 1,031,404 2 May 2017 6.707200 278,872,821 3,841,383 282,714,204 In July 2007, some of the Lions Hill assets were downgraded by the rating agencies resulting in a breach of the loan covenants in the facility agreement with the lender. Subsequently, on 1 August 2007, Lions Hill entered into a standstill agreement with its lender for a period to 19 January 2008. The main undertakings entered into by Lions Hill were for it not to:

- dispose of any assets without the lender's consent;

- withdraw any funds without the lender's consent;

- make any distributions including dividends;

- redeem any subordinated loan notes; and

- make any other payments other than certain operational and legal costs.

The assets of Lions Hill are pledged as collateral and could be called.

As at 30 September 2006, Lions Hill drew down US$251,850,000, EUR10,982,291 and GBP43,917,500. The terms of these loans ranged from 38 to 100 days and the interest rates ranged from 3.82% to 6.03% depending on the currency that was drawn down. TREAL In August 2007, TREAL requested an extension of the revolving facility as required under the facility agreement. The lender did not respond and consequently the extension was deemed to have been refused. Under the agreement, the repayment date of the loan extended to 31 August 2016, ten years from the date the facility was originally granted. The assets of TREAL (US$357,474,951) are provided as security against these loans. The outstanding facilities as at 30 September 2007 were as follows:

As at 30 September 2006, TREAL drew down SEK82,500,000, EUR27,655,305 and GBP14,143,303. The terms of these loans ranged from 42 to 53 days and the interest rates ranged from 3.36% to 5.61% depending on the currency that was drawn down.

Loan Principal Loan Interest Total Maturity Weighted Principal payable outstanding date average interest rate USD equivalent EURO 39,032,266 337,434 39,369,700 31 August 4.94000 27,445,956 2016 EURO 746,688 1,061,902 9,627 1,071,529 31 August 4.94500 2016 EURO 85,304,219 812,477 86,116,696 31 August 4.93000 59,982,574 2016 EURO 15,074,790 128,772 15,203,562 31 August 4.96000 10,600,000 2016 EURO 8,000,000 11,377,200 43,549 11,420,749 31 August 5.30000 2016 GBP 14,010,375 28,544,038 368,961 28,912,999 31 August 6.74000 2016 GBP 20,347,764 41,455,517 617,313 42,072,830 31 August 6.71013 2016 GBP 30,000,000 61,120,500 847,105 61,967,605 31 August 6.74500 2016 SEK 36,141,453 314,833 36,456,286 31 August 4.48000 233,800,877 2016 319,111,885 3,480,071 322,591,956 Amounts due Amounts due Total after more than within one year one year 30 September 2007 Lions Hill 278,872,821 3,841,383 282,714,204 TREAL 319,111,885 3,480,071 322,591,956 597,984,706 7,321,454 605,306,160 Amounts due Amounts due Total after more than within one year one year 30 September 2006 Lions Hill - 349,138,131 349,138,131 TREAL - 72,912,878 72,912,878 - 422,051,009 422,051,009*

*Includes interest payable of US$1,544,814.

The fair value of loans may be greater than the book cost given that lenders are unwilling to provide financing at these interest rates for these assets at the present time. However it is not practical or possible to measure the fair value of such loans. 13. Financial instruments The principal risks to which the Group and Company will be exposed are market risk, interest rate risk, currency risk, credit risk and certain counterparty risks. In certain instances as described more fully below, the Group and Company will enter into derivative transactions in order to mitigate particular types of risk. Market risk The Group's and Company's exposure to market risk is comprised mainly of movements in the value of its investments and, to the extent that the Group and Company incur indebtedness in the future, changes in interest rates that either increase its cost of borrowing or, in the event the Group and Company make any fixed interest investments in the future, may decrease its interest income. Most of the Group's and Company's investments are floating rate or backed by floating rate assets and, as such, will be valued based on a market credit spread over a benchmark (such as LIBOR or EURIBOR). Increases in the credit spreads above such benchmarks may affect the Group's net equity or net income directly through their impact on unrealised gains or losses on investments within the portfolio, and therefore the Group's and Company's ability to make gains on such investments, or indirectly through their impact on the Group's and Company's ability to borrow and access capital.

Interest rate risk

To the extent that the Group and Company incurs indebtedness in the future, changes in interest rates can affect the Group's net interest income, which is the difference between the interest income earned on interest-earning investments and the interest expense incurred on interest-bearing liabilities. Changes in the level of interest rates also can affect, among other things, the Group's and Company's ability to acquire loans and investments, the value of its investments and the Group's and Company's ability to realise gains from the settlement of such assets. The Group and Company may enter into hedging transactions for the purposes of efficient portfolio management, where appropriate, to protect its borrowings from interest rate fluctuations. These instruments will be used to hedge as much of the interest rate risk as the Investment Manager determines is in the best interests of the Group, given the cost of such hedges. The Group and Company may bear a level of interest rate risk that could otherwise be hedged when the Investment Manager believes, based on all relevant facts, that bearing such risks is advisable.

As at 30 September 2007 and 30 September 2006 there were no interest rate hedges.

Interest rate profile Group - 30 September 2007

US$ US$ US$ Fixed Floating Non-interest Weighted bearing Average Rate Available for sale - 568,629,899 - 7.37% investments Cash equivalents - 15,107,862 - 5.20%

Loans and interest on loans - (605,306,160) -

5.90%

Interest rate profile Group - 30 September 2006

US$ US$ US$ Fixed Floating Non-interest Weighted bearing Average Rate Available for sale - 509,920,365 - 7.22% investments Cash equivalents - 37,696,939 - 5.00%

Loans and interest on loans - (422,051,009) -

5.59%

Interest rate profile Company - 30 September 2007

US$ US$ US$ Fixed Floating Non-interest Weighted bearing Average Rate Investments in subsidiaries - 40,525,339 - 17.03% Available for sale - 1,012,659 - 23.64% investments Cash equivalents - 6,343,272 - 4.57%

Interest rate profile Company - 30 September 2006

US$ US$ US$ Fixed Floating Non-interest Weighted bearing Average Rate Investments in subsidiaries - 60,691,454 - 37.12% Available for sale - 20,000,000 - 15.20% investments Cash equivalents - 19,921,870 - 5.10% Interest rate risk Although investments in residual income positions have been treated as floating rate investments in the above table, income on these investments is based on the effective interest method after taking into account historical performance, market indicators and current market conditions (see Note 2 - Interest income). These effective yield calculations are adjusted periodically to take account of any changes in underlying assumptions. Given the subordinated nature of residual income positions and the fact that many of them do not carry a fixed or stated coupon, the Group and Company calculate the weighted average rate of the portfolio on the basis of: (i) for investments that are unrated and which do not have a stated coupon, the gross asset value of the investment multiplied by the interest rate derived from using the effective interest method (see Note 2 - Interest income); and (ii) for investments that carry a fixed coupon, the net asset value of the investment after leverage multiplied by the stated coupon.

Currency risk

The Group's and Company's accounts are denominated in US Dollar while investments are made and realised in both US Dollar and other currencies. Changes in rates of exchange may have an adverse effect on the value, price or income of the investments. A change in foreign currency exchange rates may adversely impact returns on the Group's and Company's non-US Dollar-denominated investments. The Group's and Company's principal non-US Dollar currency exposures are to euros, pounds sterling and Swedish kroner but this may change from time to time. The Group's and Company's policy is to finance assets in the same underlying currency as the asset itself and to hedge any currency risk on a case by case basis and also, where the Investment Manager considers appropriate, on an overall portfolio basis. The Group may bear a level of currency risk that could otherwise be hedged where it considers that bearing such risks is advisable.

Group currency profile - 30 September 2007

Total US$ GBP EUR SEK (in US$) (in US$) (in US$) (in US$) (in US$) Available for sale 568,629,899 80,803,166 235,173,554 216,511,724 36,141,455 investments Cash equivalents 15,107,862 11,537,758 3,080,313 489,791 - Other assets 8,354,726 1,099,712 3,680,948 3,006,203 567,863 Foreign exchange (273,514) 42,417,000 - (42,690,514) - contracts Loans and interest (605,306,160) (139,776,652) (250,163,696) (178,909,526) (36,456,286) on loans Other liabilities (849,588) (849,588) - - - (14,336,775) (4,768,604) (8,228,881) (1,592,322) 253,032

Group currency profile - 30 September 2006

Total US$ GBP EUR SEK (in US$) (in US$) (in US$) (in US$) (in US$) Available for sale 509,920,365 314,148,998 108,266,093 76,248,126 11,257,148 investments Cash equivalents 37,696,939 24,315,782 670,249 12,710,908 - Other assets 3,327,897 1,546,650 1,236,198 507,602 37,447 Foreign exchange 151,880 13,666,690 (803,387) (12,711,423) - contracts Loans and interest (422,051,009) (252,862,934) (108,848,390) (49,062,379) (11,277,306) on loans Other liabilities (28,900,338) (1,234,518) - (27,665,820) - 100,145,734 99,580,668 520,763 27,014 17,289

Company currency profile - 30 September 2007

Total US$ GBP EUR SEK (in US$) (in US$) (in US$) (in US$) (in US$) Investment in 40,525,339 - 22,205 40,503,134 - subsidiaries* Available for sale 1,012,659 1,012,659 - - - investments Cash and cash 6,343,272 5,881,065 274,995 187,212 - equivalents Other assets 791,295 785,036 - 6,259 - Other liabilities (750,938) (750,938) - - - 47,921,627 6,927,822 297,200 40,696,605 -

Company currency profile - 30 September 2006

Total US$ GBP EUR SEK (in US$) (in US$) (in US$) (in US$) (in US$) Investment in 60,691,454 47,929,222 - 12,762,232 - subsidiaries* Available for sale 20,000,000 20,000,000 - - - investments Cash and cash 19,921,870 19,921,194 676 - - equivalents Other assets 689,405 689,405 - - - Other liabilities (1,156,995) (1,156,995) - - - 100,145,734 87,382,826 676 12,762,232 -

* The investment in subsidiaries is subject to underlying currency risk based on its investments and loan facility (as described in note 12).

The Group hedges its exposure to foreign exchange movements with the use of forward foreign exchange contracts. Unsettled contracts at 30 September 2007 and 2006 are disclosed in note 11.

Credit risk

The Group and Company are subject to credit risk with respect to its investments. The Group and Company seek to mitigate credit risk by actively monitoring its portfolio of investments and the underlying credit quality of its holdings. The Group and Company seek to minimise credit risk further by ensuring its investment portfolio is diversified by asset type, geography, industry and issuer or borrower. The Group and Company do not generally intend to undertake any credit hedging activities other than from time to time entering into transactions to hedge their credit exposure in relation to individual investments. The Group's and Company's hedging transactions using derivative instruments and any credit default or total return swap arrangements entered into by the Group or Company or any of its funding vehicles may involve certain additional risks, including counterparty credit risk. The Group and Company enters into derivative arrangements with counterparties that are major financial institutions with investment grade credit ratings and with which the Investment Manager is familiar. As a result, the Group and Company do not anticipate that any such counterparties will fail to meet their obligations.

Residual interest risk

Some of the Group's and Company's investments consist of interests in and/or economic exposures to limited recourse securities that are subordinated in right of payment and ranked junior to other securities that are secured by or represent ownership in the same pool of assets. In the event of default by an issuer in relation to such investments, holders of the issuer's more senior securities are entitled to payments in priority to the Group and Company. Some of the Group's and Company's investments also have structural features that divert payments of interest and/or principal to more senior classes of securities secured by or representing ownership in the same pool of assets when the delinquency or loss experience of the pool exceeds certain levels. This may lead to interruptions in the income stream that the Group and Company anticipate receiving from their investment portfolio, which may lead to the Group and Company having less income to distribute to Shareholders.

Residual interest risk (continued)

Although holders of asset-backed securities generally have the benefit of first ranking security (or other priority rights) over any collateral, control of the timing and manner of the disposal of such collateral upon a default typically will devolve to the holders of the senior class of securities outstanding. There can be no assurance that the proceeds of any such sale of collateral will be adequate to repay in full the Group's and Company's investments.

Liquidity risk

The market for subordinated asset-backed securities, including real estate loans and residual income positions, is illiquid. Accordingly, many of the Group's investments are illiquid. In addition, investments that the Group and Company purchase in privately negotiated (also called "over the counter" or "OTC") transactions may not be registered under relevant securities laws or otherwise may not be freely tradable, resulting in restrictions on their transfer, sale, pledge or other disposition except in a transaction that is exempt from the registration requirements of, or is otherwise in accordance with, those laws. As a result of this illiquidity, the Group's and Company's ability to vary its portfolio in a timely fashion and to receive a fair price in response to changes in economic and other conditions may be limited.

Furthermore, where the Group acquires investments for which there is not a readily available market, the Group's ability to deal in any such investment or obtain reliable information about the value of such investment or risks to which such investment is exposed may be limited.

Maturity profile Group - 30 September 2007

Within one Within one One to One to five Over five year year five years years years Total Fixed Floating Fixed Floating Floating US$ US$ US$ US$ US$ US$ Available for 568,629,899 - 3,735,736 - 358,685,596 206,208,567 sale investments Cash 15,107,862 - 15,107,862 - - - equivalents Loans and (605,306,160) (7,321,454) - - - (597,984,706) interest Other assets 7,231,624 - 7,231,624 - - - and other liabilities (14,336,775) (7,321,454) 26,075,222 - 358,685,596 (391,776,139)

Maturity profile Group - 30 September 2006

Within Within one One to One to five Over five one year year five years years years Total Fixed Floating Fixed Floating Floating US$ US$ US$ US$ US$ US$ Available for 509,920,365 - - - 272,979,421 236,940,944 sale investments Cash 37,696,939 - 37,696,939 - - - equivalents Loans and (422,051,009) - (422,051,009) - - - interest Other assets (25,420,561) - (25,420,561) - - - and other liabilities 100,145,734 - (409,774,631) - 272,979,421 236,940,944

Maturity profile Company - 30 September 2007

Within Within one One to One to Over five one year year five five years years years Total Fixed Floating Fixed Floating Floating US$ US$ US$ US$ US$ US$ Investment in 40,525,339 - 40,525,339 - - - subsidiaries Available for 1,012,659 - 212,659 - 800,000 - sale investments Cash 6,343,272 - 6,343,272 - - - equivalents Other assets 40,357 - 40,357 - - - and other liabilities 47,921,627 - 47,121,627 - 800,000 -

Maturity profile Company - 30 September 2006

Within Within one One to One to Over five one year year five five years years years Total Fixed Floating Fixed Floating Floating US$ US$ US$ US$ US$ US$ Investment in 60,691,454 - 60,691,454 - - - subsidiaries Available for 20,000,000 - - - 20,000,000 - sale investments Cash 19,921,870 - 19,921,870 - - - equivalents Other assets (467,590) - (467,590) - - - and other liabilities 100,145,734 - 80,145,734 - 20,000,000 - As described in note 12, following credit agency downgrades of certain of Lions Hill's assets, Lions Hill was in breach of the loan covenants in its facility agreement. It has entered a standstill arrangement with its lender and as part of that arrangement is currently unable to make distributions to TRIO and no assets can be bought or sold without the lender's authority. This arrangement will remain in place until 19 January 2008. At the present time the liabilities of Lions Hill are in excess of its assets. However as the losses of Lions Hill attributable to the Company are limited to the value of the Company's participation notes in Lions Hill, the Directors are of the opinion that the Group and Company has adequate liquidity to continue in operational existence for the foreseeable future. 14. Other liabilities Group Group 30 September 30 September 2007 2006 US$ US$

Derivative financial assets - unrealised loss on 273,514

-

forward foreign exchange contracts - Note 11

Investment management and incentive fee payable 127,484 621,976

Administration fee payable 77,200 109,148 Custodian fee payable 7,951 9,740 Audit fees payable 100,000 75,000 Directors fee payable 70,320 76,016 Legal fees payable 129,017 20,000 Tax fees 12,000 - Accrued expenses 167,932 322,638 965,418 1,234,518 Company Company 30 September 30 September 2007 2006 US$ US$

Derivative financial assets - unrealised loss on 273,514

-

forward foreign exchange contracts Investment management and incentive fee payable 127,484 621,976 Audit fees payable 80,000 75,000 Administration fee payable 40,000 52,032 Directors fee payable 47,500 64,265 Legal fees payable 9,018 20,000 Custodian fee payable 4,000 3,294 Tax fees 3,000 - Accrued expenses 166,422 320,428 750,938 1,156,995 15. Share capital Authorised share capital Number of 30 September Number of 30 September Ordinary 2007 Ordinary 2006 Shares Shares US$ US$ Ordinary shares of no par Unlimited - Unlimited - value each Issued and fully paid 30 September 30 September 30 September 30 September 2007 2007 2006 2006 Number of US$ Number of US$ Ordinary Ordinary Shares Shares

Balance at 1 October 2006 10,000,000 - 2

-

Share consolidation during (2,000,000) - 9,999,998

- the year Balance at 30 September 8,000,000 - 10,000,000 - 2007

On 16 August 2007, the directors proposed the payment of a special interim dividend of US$11,000,000 (equivalent to 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.

16. Share premium account and other reserve

Share premium account Group and Group and Company Company 30 September 30 September 2007 2006 US$ US$

Balance at date of incorporation -

-

Premium arising from issue of Ordinary Shares -

100,000,000

Expenses of issue of Ordinary Shares -

(7,397,458)

Warrants granted on issue of Ordinary Shares -

(350,872)

Cancellation of share premium transferred to - (92,251,670) other reserve

Balance at 30 September 2007 - -

Other reserve account Group and Group and Company Company 30 September 30 September 2007 2006 US$ US$

Balance at date of beginning of year/ 92,251,670

- incorporation Cancellation of share premium - 92,251,670

Special distribution to ordinary shareholders (11,000,000)

-

Transfer to accumulated profits/(losses) (43,629,131)

- Balance at 30 September 2007 37,622,539 92,251,670

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 (Notes 15 and 18). The Company 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.

The transfer to the accumulated profit reserve has been made by the Directors to satisfy the requirements of The Companies (Guernsey) Law, 1994, that the Company has sufficient profits available for the payment of its dividends.

17. Notes to cash flow statement

The following is the Group's notes to cash flow statement

Group Group Year ended 30 Period from September 2007 11 May 2006 to 30 September 2006 US$ US$ Net (loss)/profit (28,419,771) 7,412,019 Adjustments for: Realised (gain)/loss on investments (7,316,315)

171,946

Amortisation of (premium)/discount (note 10) 1,293,669

- Impairment charges (note 10) 42,762,196 - Unrealised foreign exchange (gains)/losses on (34,627,246) 1,368,301 investments Interest expense on loans 32,054,094 7,023,956 Unrealised losses/(gains) on derivatives (Note 425,394 (151,880) 11) 6,172,021 15,824,342 Purchases of investments (note 10) (397,364,071)

(508,821,507)

Sale of investments (note 10) 243,913,675 25,157,888 (153,450,396) (483,663,619) Increase in receivables (5,026,829) (3,327,897) (Decrease)/increase in payables (542,614) 1,234,518 (5,569,443) (2,093,379)

Net cash outflow from operating activities (152,847,818) (469,932,656)

The following is the Company's notes to cash flow statement

Company Company Year ended Period from 30 September 2007 11 May 2006 to 30 September 2006 US$ US$ Net (loss)/profit (30,342,206) 333,075 Adjustments for: Impairment charges (note 10) 42,836,947 -

Amortisation of (premium)/discount (note 10) 2,764,348 (151,337)

Unrealised losses/(gains) on derivatives (note 409,191 (135,677) 11) 15,668,280 46,061

Purchases of investments (note 9 & 10) (60,339,161) (83,330,000)

Sale of investments (note 9 & 10) 53,109,421 10,000,000 (7,229,740) (73,330,000) Increase in receivables (237,567) (553,728) (Decrease)/increase in payables (679,571) 1,156,995 (917,138) 603,267 Net cash inflow/(outflow) from operating 7,521,402

(72,680,672)

activities

Purchases and sales of investments are considered to be operating activities of the Group, given its purpose, rather than investing activities.

18. Material agreements and related parties

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.

The Group pays the Investment Manager a Management Fee and Incentive Fee (see Notes 4 and 14).

Management Fee The Investment Manager will be entitled to receive from the Group an annual management fee of 1.75 per cent. 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 year was US$1,724,915 (2006: US$561,442), of which US$127,484 (2006: US$145,117) was outstanding at the year end.

Investments in other entities managed by the Investment Manager

As at 30 September 2007, the Company held investments with a total value of US$998,450 (2006: US$15,000,000) in the following entities, which are managed by the Investment Manager: G Square Finance 2006-1 Limited and G Square Finance Limited.

During the year, Pheasantry's investment in Y2K Finance Inc., an entity managed by the Investment Manager was disposed of for US$16,000,000 (cost: US$16,000,000).

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 shall be the period from Admission to 30 September 2006.

The Incentive Fee for each incentive period will be an amount equivalent to 25 per cent. 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 per cent. 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 year was US$745,932 (2006: US$476,859), of which US$nil (2006: US$476,859) was outstanding at the year end. The incentive fee for the quarter to 30 September 2007 is US$nil as Lions Hill income has been excluded from the Group's consolidated net income for the purposes of calculating incentive fees by concession of the Investment Manager.

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 per cent. 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. The Administration Fee for the year was US$353,681 (2006: US$108,738), of which US$77,200 (2006: US$109,148) was outstanding at the year end. 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 per cent. per annum of DTCC deliverable gross assets and 0.015 per cent. 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 6 September 2007, the whole EUR10,000,000 participating term notes were redeemed for a cash consideration of EUR10,000,000.