GWIK.L Regulatory News (GWIK)

27 September 2011

Treveria plc

("Treveria" or the "Company")

Half Year Results

Treveria plc (AIM: TRV), the German retail focused real estate investment company, today announces its half year results for the six months ended 30 June 2011*.

Financial Highlights:

§ Profit before tax of €11.8 million (30 June 2010: €3.1 million) and adjusted profit after tax** of €1.1 million (30 June 2010: €4.3 million)**

§ Basic and adjusted earnings per share of 1.91c and 0.18c***, respectively (30 June 2010: 0.42c and 0.71c, respectively)

§ Adjusted net asset value per share up 0.4% to 54.2c**** (31 December 2010: 54.0c)

§ The total cash balance held by Treveria plc and its subsidiaries was €73.7 million (31 December 2010: €79.4 million)

§ Gross rental income for the period of €48.4 million (30 June 2010: €50.5 million), reflecting refurbishments being undertaken on two assets which created additional portfolio voids

§ Total value of property portfolio of €1.37 billion (FY 2010: €1.39 billion).

Operational Highlights:

§ New lettings generated additional annual rents of €6.9 million, a 17% increase on what was achieved in the first half of 2010

§ Continued focus on addressing vacancy rate on the portfolio, which reduced from 14.7% at the end of 2010 to 13.9% at 30 June 2011

§ Two property sales notarised for a gross consideration of €12.4 million. One disposal completed during the period for a consideration of €10.75 million, with the other completing in July 2011. These sales generated free cash of €11.4 million for the Group

§ €2.3 million capital expenditure investment to improve quality of assets, as part of wider programme to spend between €15 million and €20 million on capital expenditure

§ Ongoing restructuring of debt facilities, with loan extension agreements secured for Silos D and E.

Commenting on the results, Rolf Elgeti, Non-Executive Chairman of Treveria PLC said: 

"Following the corporate restructuring that we undertook in 2010, this year we have focused on actively managing our property portfolio through refurbishments, new lettings and sales, as well as the restructuring of our debt facilities. We have made good progress across all these areas and our ongoing capex programme is reflected in the strong levels of new lettings achieved, reducing the vacancy across the portfolio.

"Most importantly, de-leveraging will continue to be the key to the success of Treveria. This will be mainly achieved through our active asset management programme and subsequent sales of refurbished assets."

*Silo C was derecognised as a subsidiary company on 16 August 2010 and therefore the figures shown in the highlights above and in the Chairman's statement below exclude the transactions relating to Silo C in order to make comparisons more meaningful.

**Adjusted profit after tax excludes profit from disposal of investment properties, revaluation surplus/deficit and change in fair value of derivative financial instruments, net of related tax.

***Adjusted EPS excludes profit from disposal of investment properties, revaluation surplus/deficit, RETT, change in fair value of derivative financial instruments and gain on derecognition of subsidiaries, net of related tax.

****Adjusted NAV per share excludes deferred tax arising on revaluation surpluses and derivative financial instruments.

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Chairman's statement

At the time of our full year results announcement in April 2011, I explained that following the corporate restructuring that took place within the Group during 2010, this year would be focused on actively managing our property portfolio through refurbishments, new lettings and sales, as well as the restructuring of our debt facilities. I am pleased to report good progress in all these areas.

Results for the six-month period ended 30 June 2011 (all comparatives from prior year have been adjusted to exclude Silo C)

Gross rental income for the period was €48.4 million compared to €50.5 million for the comparative period in 2010 and €50.0 million for the second half of 2010. The decrease of €2.1 million (vs H1 2010) is mainly as a result of two properties now vacant which are undergoing major refurbishment programmes and which are due to be completed in 2012. The impact of a property sale also contributed €0.6 million to this reduction.

Net rental income for the period was €37.2 million (H1 2010: €41.5 million). Irrecoverable service charge expenditure represented 7.1% of gross rents compared with 5.5% for the comparable period in 2010 and 8.7% for the second half year 2010.

Administrative expenses decreased to €5.5 million for the period (H1 2010: €7.0 million). Having achieved initial successes in reducing legal and professional fees by internalising various functions, we will continue to work to decrease further the administrative costs.

The operating profit for the period was €32.0 million (H1 2010: €35.9 million).

Net finance cost for the first half of 2011 increased slightly to €30.2 million (H1 2010: €29.8 million) due to the effect of the higher interest margin in Silo F/K. The movement in the fair value of derivative instruments was impacted by the effluxion of time and changes in market interest rates. In the first half of 2011 this produced a credit of €10.0 million compared with a cost of €3.1 million for the same period in 2010.

The profit before tax for the period was €11.8 million (H1 2010: profit of €3.1 million) and the adjusted profit after tax was €1.1 million (H1 2010: €4.3 million; H2 2010: €1.3 million). Adjusted profit after tax is defined in note 8 to the accounts.

Basic and adjusted EPS for the period were 1.91c and 0.18c, respectively (H1 2010: 0.42c and 0.71c, respectively). Adjusted EPS is defined in note 8 to the accounts.

The total cash balance held by Treveria plc and its subsidiaries was €73.7 million (H2 2010: €79.4 million). In the reporting period the Group invested €1.9 million in acquisitions and €2.3 million in other capital expenditure improvements.

Markets

German GDP in 2011 is still expected to grow by ca. 2% p.a. and German retail sales to grow by 1.5% p.a. While the investment market in Germany for commercial real estate increased overall by 28% to €11.1bn in H1 2011, the investment market for retail properties grew by 58% in that same period. Transaction volume in H1 2011 in retail properties was €6.24 billion, compared to €7.9 billion for the whole of 2010. The investors, mainly asset managers and open ended funds focused very much on core assets with long leases and larger-sized properties, which meant that over 70% of the properties changing hands were shopping centres or big box stores . There is still demand for high street assets and they comprised more than 25% of the value of the transactions. Whilst in H1 2010, 50% of transactions were portfolio deals, in H1 2011 there were more than 70% single asset transactions. In H1 2011 over 50% of the investors were international buyers.

(Source: CBRE MarketView Germany Retail Investment H1 2011)

Investment markets are expected to stay dynamic in H2 2011 with the focus being on high quality buildings and long leases and with yields decreasing. It is apparent that investors are now becoming more interested in both properties where value can be added, as well as those in secondary cities. The potential impact of the Euro and sovereign debt crisis is hard to assess and the real estate markets could be affected.

Refurbishments and new lettings

In the first six months of 2011 we continued with our refurbishment programme across a number of properties, including assets in Dortmund and Berlin, and commenced new refurbishments in Fürth, Saarbrücken, Uelzen and Kempten. We finished the first tranche of the programme for Marl and Dortmund and completed the programmes in Bayreuth and Remscheid. In total, during the reporting period we invested a total of €2.3 million in capital expenditure in improving our properties. This is part of the wider programme to spend between €15 million and €20 million on capital expenditure, as announced in last year's chairman's statement, although some of this will now be deferred to 2012.

For the first time since 2008 I am pleased to be able to report an increase in our annualised rent roll. Although this only amounted to €0.6 million or 0.6% per annum, it is a positive reversal of previous trends. New lettings were achieved generating annual rents of €6.9 million and this is a 17% increase on what was achieved in the first half of 2010. As a result of our efforts in these asset management activities, the vacancy ratio in our portfolio was reduced from 14.7% at the end of 2010 to 13.9% at 30 June 2011. As a consequence of having to defer the timing of part of our expenditure programme to 2012, we do not anticipate reaching our target of 11% vacancy ratio until after the end of the current financial year.

Sales

Two property sales were notarised during the reporting period with a gross consideration of €12.4 million. The first of these, which belonged to Silo J and therefore free of any mortgage or charge, completed during the period for a consideration of €10.75 million. The other, which was held in Silo E, completed in July 2011 with the bank agreeing to let the Group retain the proceeds. As a result, these sales generated free cash of €11.4 million for the Group.

The Group acquired the freehold interest in two properties for €1.9 million where it previously held only a leasehold interest. Apart from this, the Group did not acquire, or enter into any other new contract to purchase further properties in the reporting period.

Valuation and net asset value

For the purpose of each set of published financial statements in the past, the Board has engaged the services of an outside independent professional valuer to value the Group's property portfolio. This can be a costly exercise. Over the six-month period ended 30 June 2011, the Board of Directors is of the view that the values of retail property in Germany have not seen a significant fluctuation. In view of this, we decided that the expense of having an outside professional valuation was not warranted. Instead, a valuation of the Group's property portfolio was carried out by our staff under the direction of the Board. We will instruct an outside independent valuer to perform a full valuation of the Group's property portfolio as at 31 December 2011 (as in previous years) and this will be used for the purposes of the annual consolidated financial statements. The Directors of the Group valued the portfolio at €1.37 billion. This takes into account the additions and disposals and represents no change on a like-for-like basis from the 31 December 2010 valuation carried out by DTZ Debenham Tie Leung Limited at €1.39 billion. The adjusted net asset value per share of the Group was 54.2c compared with 54.0c as at 31 December 2010.

Restructuring of debt facilities

Work in this area is a continuing activity and much effort has been concentrated on dealing with the banks involved as all the facilities require renewal or repayment during this year or next. I am pleased to report that we have made advances in this area and our major achievements so far this year are the agreements achieved in Silos D and E. Further details concerning the loans are set out below:

Silo D (Deutsche Bank/Citigroup; loan €217 million; securitised):

The lenders on this loan, which was due to expire on 20 July 2011, have transferred it into two separate securitisations. The servicer of these securitisations (Deutsche Bank) granted a 12 month extension with unchanged interest margins of 85bps. The limitation of only a one year extension is a result of a restriction in the CMBS documentation which permits an extension of only 12 months at a time. Interest on the loan is now 100% floating linked to 3-months Euribor with a one year cap at 3% p.a. Although the silo remains cash trapped, the Group is allowed to use such cash to draw down asset management fees, other operational costs and to invest in property refurbishments.

Silo E (ABN Amro; loan €424 million; securitised):

This loan expired on 15 July 2011. We entered into an Amendment and Standstill Agreement expiring on 30 September 2011 with Hatfield Philips, the loan servicer. An agreement in principle has been reached to extend the loan and further details will be announced once the documents are signed. The silo is currently in cash trap although we are allowed to pay our asset management fees and capital expenditure.

Silo F/K (Eurohypo; loan €428 million; sole lender):

The final maturity of this loan is 25 July 2012. The waiver on the LTV covenant, which expired at the end of April 2011, has been extended to 30 September 2011. We continue to pursue various options with regard to this facility, including an early refinancing with third party debt and possible mezzanine structures. The silo remains cash trapped.

Silo G (JP Morgan; loan €40 million; syndicated loan):

This silo is not cash trapped and is performing in accordance with the loan agreement with the lender. The loan matures on 19 November 2012.

Silo J (properties free of any mortgage or charge):

Following the sale of the Gelsenkirchen property, the largest asset in this silo, during the period, there remain seven properties with a value of €4.3 million.

Operations

Critical to our success in de-leveraging the silos is our ability to sell selective assets. Therefore, in 2011 we increased the number of our internal staff in this department and instructed five separate agents who are specialists in their relevant regions. We expect the result of these steps to come to fruition in the second half of 2011.

The total number of staff at 30 June 2011 was 46. This compares to 45 at the end of 2010.

RETT

As described in the 2010 Annual Report, we submitted the RETT relief request to the German tax authorities in January 2011. The regional RETT tax offices transferred the responsibility for dealing with this to a central office in Berlin. Our advisers have held a number of constructive meetings with this office, however the resolution and timing of the relief request is still difficult to assess. Therefore, for the time being the provision of €1 million and the contingent liability of €32.0 million relating to this remain unchanged.

Strategy and outlook

We hope in future to continue to establish strategic business partnerships in different fields of our business activities. In addition to the existing arrangements with agents we are currently engaged in two joint venture projects responsible for refurbishing assets, two partnerships to undertake letting activities as well as one related to technical real estate services.

At the same time, we continue to look for efficiencies in our operational structure. We are in the process of disposing of or liquidating those legal entities no longer required, which will result in a reduction in our administrative costs. We are engaged in the task of streamlining the record keeping and accounting functions throughout the Group with more administrative functions becoming centralised in Germany.

De-leveraging will continue to be the key to the success of Treveria. This will be mainly achieved through active asset management including capital expenditure, contracting long leases and selling the "refurbished" assets. Any surplus cash arising from these steps will be wholly or partly re-invested into our other suitable property assets. With these actions we hope to reduce the loan-to-value ratio of the portfolio to around 65% in 2014.

Finally, I am pleased to report that we have invited Nicholas Cournoyer, a partner in Montpelier Investment Management, one of our largest shareholders, to rejoin the Board and he has accepted with immediate effect. Montpelier is a significant manager of funds and Nick, who knows the Group thoroughly, brings a wealth of experience in dealing with debt related issues. Together with my colleagues on the Board I look forward to working with Nick and taking the Group forward in its endeavours.

Rolf Elgeti

Non-Executive Chairman

26 September 2011

AIM rule 17 Disclosure:

Nicholas Cournoyer, aged 53, is a Partner of Montpelier Investment Management which currently holds 21.36% of the Group's issued share capital.

Nicholas Cournoyer is, or has been, a director of the following companies in the last five years:

* Adjusted earnings per share are shown in note 8.

All results arise from continuing operations.

Consolidated statement of financial position

as at 30 June 2011

Notes to the consolidated financial statements

for the six months ended 30 June 2011

1. General information

Treveria plc (the Company) is a company incorporated and domiciled in the Isle of Man whose shares are publicly traded on AIM.

The consolidated financial statements of Treveria plc comprise the Company and its subsidiaries (together referred to as the Group).

The principal activities of the Group are described in note 3.

The Company acts as the investment holding company of the Group.

2. Significant accounting policies

(a) Basis of preparation

These condensed consolidated interim financial statements are unaudited, have not been reviewed by the auditors, and do not constitute statutory accounts. The statutory accounts for 2010, which received an unqualified report from the auditors, are available on the Company's website, www.treveria.com.

The condensed financial statements have been prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting.

These financial statements have been prepared on a going concern basis as it is the view of the Directors that this is the most appropriate basis of preparation to adopt having considered the issues identified below.

The Group's property portfolios are partly funded by debt facilities. Under the terms of the debt agreements each debt obligation is "ring-fenced" within a sub-group of companies. Treveria plc, the ultimate parent company, itself is not a party to any of the finance documents (in any capacity including as borrower, guarantor or security provider). The finance providers would therefore not have any recourse to the ultimate parent under the finance documents. Further details of the loans and events after the date of the Consolidated statement of financial position are provided in notes 13 and 20.

Due to the falling property values in recent periods, there is a significant risk that the Group will be unable to comply with loan-to-value ratio covenants set out in the Group's debt facilities in the foreseeable future.

The 30 June 2011 portfolio valuation indicates that the loan-to-value ratios on certain loans could, in the case of certain facilities and if tested by the finance providers as set out in the facilities agreements (see note 13), be above the permitted ratio levels. In the event that the real estate market deteriorates and valuations fall, then certain other loan-to-value ratios could rise above permitted ratio levels.

On 8 July 2010, an agreement was reached with Deutsche Bank AG and Citigroup Global Markets Limited in relation to the facility relating to Silo D. Under this agreement the banks agreed to waive any loan-to-value and debt service cover ratio hard breaches until 28 February 2011. In addition, as the loan-to-value ratio as at 31 December 2010 did not exceed the level as at 30 June 2010, these waivers were extended until the loan maturity date of 20 July 2011.

Various events which have an impact on certain of the loans have occurred after the date of the Consolidated statement of financial position:

• on 19 July 2011, a new agreement was reached with Deutsche Bank AG and Citigroup Global Markets Limited in relation to Silo D (see note 13). Under this agreement the banks agreed to extend the repayment term of the facility agreement until 20 July 2012. If the loan-to-value of 75% is achieved prior to this date, the borrowers may request an extension of the repayment for a further period of up to 12 months. In addition the banks agreed to waive any loan-to-value and debt service cover ratio hard breaches until 20 July 2012;

• on 15 July 2011, an Amendment and Standstill Agreement with ABN Amro N.V. was reached in relation to Silo E (see note 13). For the duration of the standstill period, it was agreed to amend the final maturity date to 30 September 2011. ABN Amro N.V. also agreed to refrain from exercising rights and remedies in respect of the existing loan-to-value breach. Negotiations are continuing to extend this loan; and

• On 27 July 2011, Eurohypo AG - Silo F/K (see note 13) agreed to waive the existing loan-to-value default until 30 September 2011. In addition Eurohypo AG amended the cross-default provisions in its loan agreements such that the insolvency of Treveria C S.à r.l. and/or any of its subsidiaries will not result in a right of the bank to accelerate debt repayment. Negotiations are continuing with the bank.

The permitted loan-to-value ratios in the debt arrangements as at 30 June 2011 were between 75% and 85% with a weighted average of 82.7%. The "hard breach" loan-to-value ratio covenants were between 76% and 95% with a weighted average of 90.4%. Were the lenders to adopt the valuations carried out for the purpose of these financial statements as at 30 June 2011, the weighted average loan-to-value ratio in respect of all the property as security under those debt arrangements would have been 79.1% after adjusting for cash held in bank accounts that have been restricted by lenders (see note 11).

Where the potential loan-to-value ratio based on the 30 June 2011 valuation is above the covenant level, the amount that would be required to be repaid to cure a potential default has been reclassified as a current liability. Where that liability is in excess of the cash balance available, it has been necessary to reclassify the entire loan amount within current liabilities as there would be no unconditional right to defer settlement should a covenant be breached. The total amount reclassified as at 30 June 2011 was €419,776,000 (31 December 2010: €432,510,000). However, because of the "ring-fencing" of the debt facilities described above the Directors do not consider that the risk of breaching loan-to-value covenants will impact the ability of the Group to continue as a going concern.

Nevertheless, in the event that a breach of covenant occurs or a loan matures and no satisfactory waiver, refinancing or renegotiation of terms is obtained, in general a lender can enforce its security against the relevant sub-group (although in one instance, such action could trigger a cross-default acceleration of debt repayment in another sub-group), with a consequent loss of the assets in return for the extinguishment of the debt within that sub-group only. Whilst none of the above events would affect the ability of the Group to continue as a going concern, it could have a significant potential impact on the classification and valuation of the relevant property assets included in the Group balance sheet as at 30 June 2011 and hence on the reported result of the Group for the period then ended. The impact on the net assets of the Group of the enforcement of security on individual sub-groups by lenders would depend on the respective carrying values of the assets and the debt in the sub-groups concerned. Notwithstanding the events described in note 20, it is uncertain whether any of the lenders will choose to enforce their security in future and, therefore, no adjustments have been made in the financial statements to reflect the possible impact of such action.

In assessing the implications of potential covenant breaches, the Directors have also considered:

• the various cure rights that are available in relation to any breach. The principal cure rights are a potential repayment of part of the loan or the use of cash trapped within each ring-fenced sub-group of companies providing the security to that bank facility to amortise the loan balance; and

• that the lenders to each sub-group have the ability to waive any breaches of covenant in relation to their sub-group where the lenders consider it to be in their best interests. The current economic environment has given rise to substantial asset valuation reductions across most global real estate markets and many have seen declines in value much more substantial than those experienced in the German retail markets in which the Group operates. The sub-groups are each made up of numerous companies holding various properties requiring active management. In addition, they each retain interest cover, i.e. the ratio of net rental income to interest payable. Interest cover (or, where relevant, debt service cover) as reported to the banks in the June 2011 quarter is between 114% and 167% against breach covenants ranging from 110% to 120%.

Nothing has come to the attention of the Directors to indicate that satisfactory arrangements will not be made with the lenders in respect of the loans which will fall due in the foreseeable future.

(b) Significant accounting policies

The condensed financial statements have been prepared under the historical cost convention, except for investment properties and derivative financial instruments that have been measured at fair value. The condensed financial statements are presented in euro and all values are rounded to the nearest thousand (€000) except when otherwise indicated.

Except as described below, the accounting policies adopted by the Group in these condensed consolidated interim financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements as at and for the year ended 31 December 2010.

Amendments resulting from improvements to IFRSs and their interpretations did not have any impact on the accounting policies, financial position or performance of the Group.

The Group has not early adopted any other standard, interpretation or amendment which was issued and is not yet effective.

Accounting policies for new transactions

Share-based payment arrangements, in which the Group receives services as consideration for its own equity instruments, are accounted for as equity-settled share based payment transactions, regardless of how the equity instruments are obtained by the Group. The grant date fair value of such awards is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the award.

3. Segmental reporting

The Group's portfolio consists predominantly of retail investment properties in Germany. Discrete financial information is provided to the Board of Directors, which is the Chief Operating Decision Maker, on a silo-by-silo basis.

* Funds from operations is calculated by taking Profit/(loss) for the year and adjusting it for profit/loss from disposal of investment properties net of related tax, revaluation surplus/deficit, RETT, change in fair value of derivative financial instruments, gain on derecognition of subsidiaries and deferred tax.

4. Revenue and profit from disposal of investment properties

Profit from disposal of investment properties

5. Operating profit

The following items have been charged/(credited) in arriving at operating profit/(loss):

Direct costs

Administrative expenses

6. Finance revenue and expense

7. Income tax

Consolidated statement of comprehensive income

Deferred income tax liability

The Group has tax losses of €100 million (31 December 2010: €90 million) that are available indefinitely for offset against future taxable profits of the companies in which the losses arose. Deferred tax assets have not been recognised in respect of these losses as they may not be used to offset taxable profits elsewhere in the Group and they have arisen in subsidiaries that have been

loss-making for some time.

8. Earnings per share

The calculation of the basic, diluted and adjusted earnings per share is based on the following data:

* The share options in issue have not been included in the calculation of the dilutive earnings per share for the six months ended 30 June 2010 as they are anti-dilutive and would decrease the loss per share.

9. Net assets per share

10. Investment properties

A reconciliation of the valuation to the carrying values shown in the Consolidated statement of financial position is as follows:

The fair value of the Group's investment properties has been arrived at on the basis of a valuation carried out as at the following dates:

a) 30 June 2011 - Directors' valuation

b) 30 June 2010 and 31 December 2010 - DTZ Debenham Tie Leung Limited (DTZ), an independent external valuer.

The Directors are of the view that the value of retail property in Germany has not fluctuated significantly during the six months ended 30 June 2011. A valuation of the Group's property portfolio as at 30 June 2011 was therefore carried out internally and this represents no change, on a like-for-like basis, from the valuation carried out by DTZ as at 31 December 2010.

All properties have been valued on the basis of market value which was primarily derived using comparable recent market conditions and transactions on arm's length terms.

As a result of the level of judgement used arriving at the market valuations, the amounts which may ultimately be realised in respect of any given property, may differ from the valuations shown in the balance sheet.

The movement on the valuation of the investment properties at market value is as follows:

11. Cash and short-term deposits

As at 30 June 2011, €25,254,000 (31 December 2010: €23,596,000) is held in blocked accounts. This is where rents received, in the ordinary course of business, are deposited at banks pending the quarterly interest payment dates and, subject to the financial covenant tests, any net surplus is returned to the Group. Within this balance at 30 June 2011, €16,820,000 (31 December 2010: €15,494,000) is cash that has become cash trapped within property companies. This is where certain quarterly financial covenant tests, set out in the Group's bank loan agreements, have not been met. This does not represent an event of default under these agreements. This cash remains under the control of the banks to be used for the payment of interest and amounts due under these loan agreements, and cannot be used for the Group's purposes until the financial covenant tests are satisfied.

12. Provision for RETT

As at 31 December 2009, a provision for German RETT of €40,200,000 was made as a prior year adjustment. This was in respect of the acquisition of shares in Treveria Properties S.à r.l. by Treveria Holdings S.à r.l. The Group's legal advisers have previously confirmed that, in the event the RETT was deemed payable, the likelihood of the authorities having any actual recourse to the assets of Treveria plc was remote. The Group continues to challenge the assessment of the RETT on various legal grounds and, has initiated relief procedures with the relevant German tax authorities. The outcome of such legal action and relief procedures is typically hard to predict. In the consolidated financial statements for the year ended 31 December 2010, it was reported that in the Isle of Man, the RETT is not presently enforceable and the "European Council Directive 2008/55/EC on mutual assistance for the recovery of claims relating to certain levies, duties, taxes and other measures" (Recovery Directive) is not expected to be implemented in the Isle of Man.

During 2010, it was decided to continue (redomicile) both Treveria Holdings S.à r.l. and Treveria Properties S.à r.l. from Luxembourg to the Isle of Man, where Treveria plc is already domiciled. These became effective on 10 November 2010 and 17 November 2010 respectively and their names were changed to Treveria Holdings Limited and Treveria Properties Limited.

In the year ended 31 December 2010, the Group reassessed the probability that Treveria Holdings Limited might be subject to the RETT liability. Based on legal advice received, it concluded that, following the relocation to the Isle of Man, it is no longer more likely than not that Treveria Holdings Limited will be required to settle the RETT obligation. A balance of €1,000,000 (31 December 2010: €1,000,000) has been retained within this provision to settle amounts which may become payable in relation to the RETT relief procedures (as mentioned above) and therefore the balance of the provision of €39,200,000 was no longer required and was released to the Consolidated statement of comprehensive income for the year ended 31 December 2010, net of related expenses.

At the time the provision for RETT was computed for inclusion, as a prior year restatement, in the consolidated financial statements for the year ended 31 December 2009, conservative estimates were used to determine the relevant property values and tax bases. During the year ended 31 December 2010, a more detailed analysis was performed and a reasonable estimate of the possible liability was €32,000,000. However, it is not probable that an outflow of resources embodying economic benefits will be required to settle this liability but, due to the uncertainties relating to the outcome of the challenge to the assessments, the relief procedures and possible future legislation, this amount is shown as a contingent liability (31 December 2010: €32,000,000) - see note 19.

13. Interest-bearing loans and borrowings