TRIO Trio Fin

RNS Number:1131C
TRIO Finance Limited
15 August 2007

TRIO Finance Limited

Trading Statement

TRIO Finance Limited ("TRIO" or the "Company") today announces a trading update
for the third quarter to 30 June 2007.

Highlights

*  Immediate return of capital to shareholders in the form of a Special Dividend 
   of US$1.10 per share, accompanied by a proposed share consolidation
*  Adjustments to fair values and write-downs to US portfolio leads to Net loss 
   for the third quarter of US$9.5m, Adjusted* NAV to US$7.20 per share
*  European real estate securities portfolio continues to perform in line with 
   expectations
*  Current trading supports expectations of a second half dividend of around 
   US$0.35 per share, resulting in a full year dividend of US$1.00 per share
   as anticipated at IPO
*  After the special dividend and the expected second half dividend, TRIO will 
   have returned US$24.6m to shareholders or US$2.46 per share


* Adjusted NAV represents NAV of the TRIO Group excluding any mark to market
  changes in excess of TRIO's interest in Lions Hill


In light of current market turbulence, the Company proposes a swift return of
US$11m of capital to shareholders, by way of a special dividend equivalent to
US$1.10 per share.  The capital return is part of the Board's strategy to seek
to preserve shareholder value and return surplus cash to shareholders.

The special dividend will be accompanied by a proportionate consolidation of the
number of shares in issue.  A circular will be posted to shareholders to seek
approval of the share consolidation and to set out the details of the proposed
special dividend. It is currently anticipated that the special dividend will be
paid to shareholders before the end of September 2007.

The rapid deterioration of the US sub prime residential mortgage market has
resulted in the original credit ratings of seven US RMBS assets within Lions
Hill Limited ("Lions Hill") to be downgraded.  In addition, one UK CMBS asset
has been downgraded, also in Lions Hill. Lions Hill is now prevented by the
covenants of its bank facilities from making distributions of income or
redemption of the TRIO Participation Notes.  As at 30th June 2007, TRIO has
fully provided for its interest in Lions Hill and it is assumed that no future
income will be derived from these assets. Nonetheless, under 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$6.74 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 an *Adjusted NAV.

TRIO has taken a US$2.2m impairment charge on one of the US residual income
positions held directly by TRIO.  The Company continues to see volatility in its
US residual income positions given the uncertain environment being experienced
in the US residential mortgage market.

TRIO's European portfolio of real estate securities continues to perform in line
with expectations. In the third quarter to 30 June 2007, TRIO acquired two B
Loans in Germany for an aggregate of US$36.3m. Since 30 June 2007, the Company
has sold its Somerfield PIK at a premium resulting in a net cash flow of
US$28.5m after repayment of associated loans.  The Company has used part of the
proceeds, together with other funding facilities, for investments in Europe by
acquiring two further European B loans in the UK and France, for a total
consideration of US$86.6m.  Europe now represents 77% of the Company's
portfolio. The remaining cash will be returned to shareholders, as described
above.

TRIO reports a net loss for the third quarter of US$9.5m, or a net loss of
US$0.95 per share, principally as a result of fair value adjustments to
investments mainly in the US assets.  The cumulative net loss for the nine
months to 30 June 2007 is US$2.1m or a loss of US$0.21 per share.

Overall, the Company had good operating income excluding exceptional items and
impairments in the third quarter. The Company's investments generated net
operating income in the three months to 30 June 2007 of US$1.1m before
impairment losses of US$10.6m but after a US$1.6m provision for Lions Hill.  The
cumulative net operating income for the nine months to 30 June 2007 was US$8.5m.
The Company's NAV per share has declined to US$6.74 on an IFRS reported basis
or US$7.20 on an *Adjusted basis as at 30 June 2007 versus US$9.00 (pre
dividend) as at 31 March 2007.  During the third quarter, an interim dividend of
US$0.65 per share was paid to shareholders.

Notwithstanding the third quarter net loss and reduction in NAV, the Board
remains focused on the Company's principal investment objective of providing
stable income returns to shareholders in the form of semi-annual dividends.

Financial markets remain exceptionally turbulent. At the moment, however, the
Company remains on track to meet a final dividend payment of US$0.35 per share
(before the proposed share consolidation) resulting in a full year dividend of
US$1.00 per share, in line with the target set at IPO.  Going forward, the
continued strength of the European portfolio gives the Board confidence in its
ability to pay semi-annual dividends that represent an attractive yield for
shareholders, in line with the Company's objective set out at IPO.

Julian Waldron, Chairman of TRIO, said:

"The return of capital announced today reflects the Board's determination to
protect shareholder value in a time of exceptional turbulence in financial
markets, and the US credit market in particular. Although TRIO is not immune to
this turbulence, our focus on the stronger European markets, and on high-quality
cash-generating assets, has enabled us to pay cash of US$21.1m to shareholders
including the proposed special dividend. A further expected dividend for the
second half of US$3.5m will make a total distribution of US$24.6m or US$2.46 per
share. We will continue to selectively invest so as to provide stable income
returns, but also maintain our options to return additional capital to
shareholders. Overall, we believe our strategy will maximize shareholder value."

Enquiries:

Simon Parry                            020 7490 8062
Rostron Parry & Co.


                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

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