IERE.L Regulatory News (IERE)

26 May 2011

INVISTA EUROPEAN REAL ESTATE TRUST SICAF

("IERET" or the "Company')

ANNOUNCEMENT OF HALF YEARLY RESULTS AND UNAUDITED NAV

Report for the six month period ENDed 31 March 2011

INVISTA EUROPEAN REAL ESTATE TRUST DELIVERS 7% NAV GROWTH

Invista European Real Estate Trust SICAF today announces its results for the six month period to 31 March 2011, including its unaudited Net Asset Value ("NAV") for the last quarter, calculated using International Financial Reporting Standards and adjusted to add back the change in fair value of the warrants and deferred tax.

Highlights

·; Unaudited NAV per share up 4.9% over the quarter and 7.1% over the six month period to €0.576 or 51.0p (30 September 2010: €0.54; 31 December 2010: €0.55) principally due to a reduction in the marked to market valuation of the interest rate swap and an increase in net cash income

·; Positive earnings on an EPRA basis of €2.6 million over the six month period

·; Property portfolio valued at €509.5 million on a like-for-like basis (30 September 2010: €515.7 million; 31 December: €512.5 million) comprising 43 properties. Valuation impacted by non-core, short lease properties but mitigated by positive valuation movements of core French and German assets, representing over 85% of the portfolio, following asset management enhancements

·; Successful asset management activity supporting a strong income return at the property level:

o Portfolio void rate reduced to 6.9% (30 September 2010: 8.4%; 31 December 2010: 6.3%) following the letting of 24,470 sqm of vacant space

o Portfolio gross annual income increased by 1.8% on a like-for-like basis to €42.9 million (30 September 2010: €42.1 million; 31 December 2010: €42.7 million)

o Net initial yield generated by the portfolio has risen to 7.80% (30 September 2010: 7.56%; 31 December 2010: 7.69%)

·; Accelerated sales programme progressing well with a view to reducing borrowings to below 65% LTV to reduce debt service costs:

o €44 million of assets in negotiations and classified in the accounts as assets held for sale

o A further €6.4 million was placed under offer post half year end

o Of the €50 million total under negotiation, contracts have been exchanged on €27 million

·;  Following termination of the investment management agreement with Invista Real Estate Investment Management Limited, the Board is working actively towards the appointment in the near future of a new investment manager, on a mandate with a strong emphasis on the delivery of shareholder value.

Tom Chandos, Chairman, commented:

"After the encouraging successes of the past six months in both lettings and disposals, the Board believes that the continuing programmes in these areas will give rise to further deleveraging of the Company and the enhancement of shareholder value."

For further information:

Tony Smedley / Chris Ludlam

Invista Real Estate Investment Management 020 7153 9345

Dido Laurimore / Olivia Goodall

Financial Dynamics 020 7831 3113

Company Summary

As at 31 March 2011, Invista European Real Estate Trust SICAF (the "Company") and its subsidiaries (together the "Group") held a diversified real estate portfolio comprising 43 commercial properties across seven Continental European countries. The combined aggregate value of these properties was €509.5 million1. The property will next be valued by an external valuer as at 30 June 2011 and the next quarterly NAV per share is expected to be published in August 2011.

The long term investment objective of the Company is to provide shareholder returns through investing in a diversified commercial real estate portfolio in Continental Europe with the potential for income and capital growth. The geographical focus of the Group is France and Germany due to the relative stability, transparency and liquidity of these markets.

Financial Summary

v Net Asset Value2 increased during the 6 month period from €139.9 million to €149.8 million

v Loss per share of €0.014293 (September 2010: €0.000163)

Sources: Invista Real Estate Investment Management; Datastream

1 Direct property valuation includes €44 million in respect of one asset in Poland and two assets in France which are classified as non-current assets held for sale as at 31 March 2011.

2 NAV is calculated using International Financial Reporting Standards and adjusted to add back the change in fair value of the warrants and deferred tax. IFRS NAV was €144.7m on 31 March 2011 and €135.0m on 30 September 2010.

3 Loss for the period divided by the weighted average number of ordinary shares in the year.

4 €:£ exchange rate used was €1.137 as at 31 March 2011, €1.161 as at 30 September 2010.

5 The NAV per preference share is equal to the nominal value plus accrued interest divided by the total number of preference shares.

6 Current liabilities exclude banking facilities.

7 EPRA (European Public Real Estate Association) earnings excludes capital gains / (losses) during the period.

8 EPRA NAV ignores fair value of financial instruments and deferred tax.

Chairman's Half Yearly Results Statement

NAV growth of 7.1% per share to €0.576 (51.0p) during the six month period principally reflected the reduction in the mark to market valuation of the interest rate swaps as Euro interest rates have begun to rise; the like for like valuation of the property portfolio decreased slightly during the period from €515.7 million to €509.5 million. At the same time, the Investment Manager's success in increasing rental income by 1.8% and reducing costs led to positive earnings (on an EPRA basis) and a consequential contribution to NAV growth. Leasing and asset management initiatives supported valuations and contributed towards the prospects of further progress in the disposal programme and deleveraging of the Company.

Property Portfolio

The Company owns a diversified portfolio of 43 commercial property investments located mainly in France and Germany. As at 31 March 2011, the Company's property portfolio was valued at €509.5 million. Current investment demand for real estate in Europe is mainly focussed on properties with long, secure income streams and whilst this benefited some of our assets it also created some negative valuation movements on our properties which have shorter leases and in non-core markets such as Spain. Although mitigated by the positive news arising from asset management initiatives in our core markets of France and Germany, when combined, these factors caused a small 1.1% decrease in the property portfolio valuation during the period.

During the period, the Investment Manager has been successful in implementing a number of asset business plans which have enabled the Company to generate a strong income return at the property level. These initiatives have reduced vacancy from 8.4% as at 30 September 2010 to 6.9% as at 31 March 2011 and increased the portfolio gross annual income by 1.8% over the six months period on a like for like basis. The net initial yield (NIY) generated by the portfolio has risen from 7.56% as at 30 September 2010 to 7.80% as at 31 March 2011. 

Results

The Company reports an increase in the unaudited NAV per share (adjusted to add back warrants and deferred taxation) to €0.576 (51.0p), equating to an uplift of 7.1% over the six month period to 31 March 2011. The increase in NAV has arisen principally from a reduction in the marked to market valuation of the interest rate swap and an increase in net cash income. The benefits of our strategy to reduce operating costs and grow property income are now being reflected in the Company's results. This is welcome progress to achieving a predictable and reliable cashflow upon which the Board could reconsider the resumption of ordinary dividends.

As at 31 March 2011, the Company had drawn down debt facilities of €347.5 million and a LTV of 68.2%. Should the Company complete the sales transactions currently under offer and apply all proceeds to reducing borrowings, the Company's drawn down debt would reduce significantly as would total interest costs. This is likely to result in an LTV of close to 65% at which point the lower debt margin cost of 225bp would be triggered resulting in an annualised saving on debt costs of around €0.7 million.

European Markets

The positive news that Europe's economic recovery has been sustained over the past six months and that property performance improved across the region in 2010 masked the wide divergence between Germany (GDP of +3.5%) which enjoyed above-trend growth, and the troubled economies on the periphery such as Greece (GDP of -4.5%) and Spain (GDP of -0.1%). Our core markets of France and Germany continue to act as the main driver of growth in the Eurozone with Germany's industrial production up 14.7% year-on-year to February and retail sales growth in France up 3.8% year-on-year to February, exceeding the Eurozone average. (Source of all economic data: Eurostat).

Recent economic forecasts suggest that GDP growth of c.1.7% pa will be maintained during 2011-12 in the Eurozone, though once again Germany is expected to lead the region ahead of France and Benelux which are in line with the regional average, and Italy and Spain where growth is expected to be modest. (Source of all economic forecasts: The Economist Poll of Forecasters).

Disposal Strategy

As announced in the Company's Interim Management Statement, published on 18 February 2011, the Board instituted an accelerated, proactive programme of disposals. Despite lacklustre investment markets for secondary assets, progress continues to be made in realising good value from the Company's properties. Property investors remain highly selective in their acquisitions and the Investment Manager continues to reposition assets for sale so as to ensure the widest possible market appeal. Despite these challenging markets the Company will intensify its efforts to reduce borrowings and debt service costs through effecting property disposals.

Investment Manager

On 18 March 2011, the Board announced that notice had been given to Invista Real Estate Investment Management Limited ('IREIM') to terminate its investment management agreement with effect from 18 September 2012 as a result of developments at IREIM's parent company. The Board is working actively towards the appointment in the near future of a new investment manager, on a mandate with a strong emphasis on the delivery of shareholder value. 

Outlook

In still fragile markets, asset management and leasing initiatives are vital in protecting the Company's income stream and enabling the disposal of properties at good valuations. All the properties currently under offer have been the subject of significant initiatives in the previous twelve months.After the encouraging successes of the past six months in both lettings and disposals, the Board believes that the continuing programmes in these areas will give rise to further deleveraging of the Company and the enhancement of shareholder value.

Tom Chandos

Chairman

Invista European Real Estate Trust SICAF

25 May 2011

INVESTMENT MANAGER'S REPORT

As at 31 March 2011, the Company's property portfolio was valued at €509.5 million and comprised 43 assets (€512.5 million: 31 December 2010). On a like for like basis, the value showed a slight fall of €3.0 million (or 0.6%) during the quarter to 31 March and €5.7 million (or 1.1%) in the six months to 31 March 2011. This largely reflects weakness in the Spanish occupational markets and those shorter leases in the portfolio which are currently being heavily discounted by investors.

The Company's portfolio generated a gross income of €42.9 million per annum as at 31 March 2011 from 149 individual leases and 138 tenants. The portfolio had a Gross Income Yield ("GIY") of 8.42% and a Net Initial Yield ("NIY") of 7.80%. This is an attractive level of income return and a premium of over 130bp over the cost of our senior debt of 6.53%.

During the six months to 31 March 2011, the portfolio void level reduced from 8.4% to 6.9% following the letting of 19,470 sqm of vacant space on a long term basis and an additional 5,000 sqm of vacant space let on a short term basis. This leasing activity reflects the high quality nature of the Company's property portfolio and its attractiveness to tenants. The portfolio's rents represent good value in the current market and its buildings remain competitive despite a fragile occupational market. It is pleasing to report that when combined, these factors caused the portfolio gross annual income to increase by 1.8% on a like for like basis over the six months to 31 March 2011.

As at 31 March 2011, the weighted average lease length to first break was 3.82 years and 5.92 years to lease expiry. The Company has an attractive line up of tenants with 66.8% of tenants by income classified as negligible or low risk by the Investment Property Databank's M-IRIS credit analysis system in April 2011. Our largest tenant Norbert Dentressangle is rated as negligible credit risk. The portfolio credit rating has improved slightly from 72 to 75 out of 100, which is classified as within a "low risk band".

As at 31 March 2011 the portfolio composition was as follows:

Sector Weightings

*Percentage of aggregate asset value as at 31 March 2011

Country Weightings

*Percentage of aggregate asset value as at 31 March 2011

Top 10 Properties

*Percentage of aggregate asset value plus cash as at 31 March 2011

Top 10 Tenants

* Percentage of aggregate gross rent as at 31 March 2011

Rent Expiry Profile

*Percentage of aggregate gross rent as at 31 March 2011

Expiry dates of lease contracts

Property Market Performance

The performance of the Company's property portfolio is independently calculated by IPD ('Investment Property Databank') and in 2010 the total return was 7.4% (2009: -4.6%) which compares well against an IPD Eurozone total return index of 6.0% for 2010. This outperformance reflects a combination of active asset management, a strong income return and stabilising valuations in the core markets of the Company's portfolio. The total returns generated by the Company's portfolio in its largest markets were Germany at 10.9%, Belgium at 9.2% and France at 7.7%.

From a portfolio perspective, the stronger property performance seen in 2010 also resulted from improved investor sentiment, particularly in the most liquid markets, which caused prime property yields to compress. However, as this driver of capital growth begins to abate in 2011-12, property performance will increasingly be determined by the level and stability of income, underlining the need to remain focused on asset management to support these factors.

From a markets perspective, total returns in the best performing countries were boosted by relatively strong capital value growth in 2010, in turn primarily driven by the renewed strength of property investment turnover which amounted to €68.8billion in 2010 (source: CBRE). Having recovered from a low in the 12 months to Q3 2009 of €42.5billion, investment turnover has since been dominated by Germany (28%), Scandinavia (22%), and France (16%).

Occupational markets in Continental Europe however generally remained challenging over the past six months, particularly in the weakest economies. Office vacancy rates have largely stabilised but they still remain at cyclically high levels and are likely to reduce slowly, particularly in markets that continue to demonstrate below-trend economic growth. By contrast, rental growth has become more widespread in the prime segment of the market, led by office, retail and latterly also the logistics sector which reportedly all experienced growth during Q1 2011 (source: CB Richard Ellis).

The Company remains focused on the core, transparent and mature markets of France and Germany which continue to demonstrate relatively strong investment performance.

Disposals

Investment demand for real estate remains highly risk averse but, where financing is available, premium prices are being paid for good properties let on long leases to strong tenants. By re-positioning some of its assets for sale, the Company has been the beneficiary of this strong demand which has generated competitive offers on selected assets, enabling it to pursue its objective of reducing borrowings and debt service costs. 

Realising profits from non-core investments or those that have met business plan objectives has been central to the investment management strategy since 2008. The intention is that all sales proceeds are used to reduce borrowings. Improved investor sentiment has enabled the Company to sell €100 million to date with a further €44 million in negotiations and classified in the accounts as assets held for sale. In addition, an asset of €6.4 million was placed under offer post half year end. Of this total of €50 million of assets under negotiation, contracts have been exchanged on €27 million at the date of this report. This accelerated, proactive programme of disposals is a key component in repositioning the Company for growth as the markets begin to recover and we continue to market selected assets.

Active Asset Management

The Company has achieved a number of successes in proactively managing portfolio income in the six months to 31 March 2011. During the period 19,470 sqm of vacant accommodation was let, generating an additional €1.3 million of annual rent and saving a further €312,000 pa on void costs. In addition, in order to exploit opportunities to benefit from short term revenue, the Company also let 5,000 sqm of warehouse space in Marseille, France on a short term basis generating €250,000 of one-off income.

As at the date of this report, we successfully re-negotiated eight existing leases representing 21.6% of portfolio income on the basis of an average new lease term to first break of 7.1 years. This included a 6 year lease with Deutsche Post Immobilien on a 53,895 sqm logistics building housing DHL in Lutterberg, Germany and a 12 year lease with anchor tenant real SB-Warenhaus at the retail park located in Riesa, Germany. These key leases represent a very important achievement for the Company in securing future rental revenue on two of our top 10 tenants whilst reducing void risk.

Tenants remain very sensitive to operational costs and we are, therefore, naturally cautious about the short term outlook for occupational markets in spite of positive evidence generated from our recent letting activities. It is very important for us to continue to progress our activities and negotiations on a number of key assets in the next 12-18 months where vacancies could occur should we be unable to agree terms.

Average rental levels across our property portfolio are however relatively low when compared to prime markets and this places the Company in a strong position for recovery, particularly as a more stable pattern of economic growth in Germany, France and Benelux emerges. This, together with the fact that some of our properties are valued at less than their build cost, leads us to believe we are at a low point in the valuation cycle of our portfolio.

Finance

As at 31 March 2011, the Company had drawn down a total of €347.5 million of senior debt in respect of its €359.3 million facility with the Bank of Scotland and its €12.0 million facility with Credit Foncier. In addition, the Company had cash balances of €37.7 million (excluding tenant deposits of €4.5 million and escrow items of €3.5 million) at that date, giving a net debt position of €309.8 million.

The Company's gross Loan To Value ("LTV") ratio as at 31 March 2011 was 68.2% and the net debt LTV was 60.8%. As a result of the valuation decline this quarter, the Company's gross LTV under the Finance Documents with the Bank of Scotland rose to 68.7% (30 September 2010: 67.9%) which still remains substantially below the LTV covenant of 82.5% in 2011.

All debt is fully hedged against changes in European interest rates until December 2013, giving a total interest cost of 6.53% per annum at current LTV levels.

The current senior debt facility expires in December 2013 and the Company is keeping its options open with respect to a refinancing. In order to be able to access the most cost effective financing, the Company will seek to refinance its portfolio as a whole or in part. There is sufficient time available to pursue such a strategy prior to expiry of the current facility and in the meantime the key strategic initiative is to access the lower margin available in the Bank of Scotland loan which is available at an LTV of below 65%.

Strategy

Completing the accelerated sales programme is our first priority as this has multiple benefits in reducing borrowings, associated debt service costs and generating surplus revenue once the lower margin debt is triggered. Net cash income levels are already showing the benefits of pursuing this strategy as evidenced by the EPRA earnings figure of €2.6 million for the last six months. Completing the €50 million of sales highlighted earlier would represent a highly successful outcome at this stage in the programme.

Our strong track record in actively managing the portfolio, reducing vacancy and growing revenue has benefited the portfolio to date but we remain cautious about a handful of lease breaks occurring in our portfolio during the next 12-18 months. In some cases, as a result of relatively weak occupational demand, we anticipate that void levels may rise however this is expected to be a short term situation. We continue to work very hard to mitigate any downside risk arising from these lease expiries and feel confident that our performance will continue to improve as the markets recover.

Tony Smedley

Head of European Funds

Invista Real Estate Investment Management Limited

25 May 2011

Responsibility Statement

We confirm that to the best of our knowledge:

(a) the condensed consolidated interim financial statements for the six months ended 31 March 2011 have been prepared in accordance with International Accounting Standard (IAS) 34 - "Interim Financial Reporting" and gives a true and fair view of the assets, liabilities, financial position and profit or loss of the Group;

(b) the interim Financial Information includes a fair review of:

i. important events having occurred during the six months ended 31 March 2011, together with their impact on the condensed consolidated interim financial statements;

ii. the principal risks and uncertainties for the remaining six months of the financial year; and

iii. the information relating to related parties' transactions and changes therein.

By order of the Board,

Tom Chandos Robert DeNormandie

Chairman Chairman of Audit Committee

25 May 2011 25 May 2011

CONDENSED CONSOLIDATED INTERIM INCOME STATEMENT

Unaudited for the six months ended 31 March 2011

The accompanying notes 1 to 15 form an integral part of these condensed consolidated interim financial statements

CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

Unaudited for the six months ended 31 March 2011

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

The accompanying notes 1 to 15 form an integral part of these condensed consolidated interim financial statements

CONDENSED CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

Unaudited as at 31 March 2011

The condensed consolidated interim financial statements were approved by the Board of Directors on 25 May 2011 and signed on its behalf by:

Tom Chandos Robert DeNormandie

Chairman Chairman of Audit Committee

The accompanying notes 1 to 15 form an integral part of these condensed consolidated interim financial statements

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

Unaudited for the six months ended 31 March 2011

The accompanying notes 1 to 15 form an integral part of these condensed consolidated interim financial statements

CONDENSED CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

Unaudited for the six months ended 31 March 2011

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

The accompanying notes 1 to 15 form an integral part of these condensed consolidated interim financial statements

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 31 MARCH 2011

1 Reporting entity

Invista European Real Estate Trust SICAF ("the Company") was incorporated as a "société anonyme" under the laws of Luxembourg on 6 June 2005. On 17 November 2006 the Company was converted into an investment company with fixed capital "société d'investissement à capital fixe" ("SICAF"). Through its subsidiaries (together "the Group") its main activity is to evaluate, make and actively manage direct and indirect investments in real estate in Continental European countries.

The Company is a public limited liability company incorporated for an unlimited term. The registered office of the Company is established at 25C, Boulevard Royal, L-2449 Luxembourg. Information pertaining to the Company is included to the extent required by the London Stock Exchange listing rules. This information should not deem to represent statutory annual accounts, which are separately prepared in accordance with International Financial Reporting Standard (IFRS) as adopted by the European Union.

2 Basis of preparation

2.1 Statement of compliance

These condensed consolidated interim financial statements for the six months ended 31 March 2011 have been approved for issue by the Board of Directors on 25 May 2011 and have been prepared in accordance with IAS 34 Interim Financial Reporting.

These condensed consolidated interim financial statements do not include all the information and disclosures required in the annual consolidated financial statements, and should be read in conjunction with the Company's annual consolidated statements for the year ended 30 September 2010.

Going concern

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements.

2.2 Basis of measurement

The condensed consolidated interim financial statements have been prepared on the historical cost basis except for the following material items:

- Investment in properties have been revalued as at 31 March 2011 (note 4),

- Derivative financial instruments are measured at fair value as at 31 March 2011 (note 12).

The significant accounting estimates and judgment applied in the preparation of the condensed consolidated interim financial statements are consistent with those applied in the preparation of the Company's annual consolidated statements for the year ended 30 September 2010.

2.3 Significant accounting policies

The accounting policies applied by the Group in these condensed consolidated interim financial statements are consistent with those followed in the preparation of the Group's annual consolidated statements for the year ended 30 September 2010.

3 Seasonality of operations

Rental income, other revenues and costs are received and incurred smoothly over the accounting period. No additional disclosures, therefore, need to be made in the condensed consolidated interim financial statements as a result of seasonality.

The net change in the value of the investment property also includes the valuation of assets sold:

5 Non-current assets classified as held for sale

As at 31 March 2011, two properties located in France and one property in Poland were held for sale.

Trade and others payables as at 31 March 2011 include tenant deposits of €0.1 million (31 March 2010: nil).

Issuance of ordinary shares

The Company has an issued share capital of €25,997,988 (30 September 2010: €25,997,694; 31 March 2010: €25,994,895) consisting of 259,979,880 shares (30 September 2010: 259,976,943 shares; 31 March 259,948,949 shares) without indication of nominal value all of which have been fully paid up.

The net asset value per ordinary share is based on net assets of €144.7 million as at 31 March 2011 (30 September 2010: €135 million) and 260.0 million ordinary shares outstanding at 31 March 2011 (30 September 2010: 260.0 million).

(1) €:£ exchange rate 1.137 as at 31 March 2011; € 1.161 as at 30 September 2010; € 1.1198 as at 31 March 2010.

(2) Exercise price of warrants of £0.29

The calculation of the basic earnings per share for the financial period ended 31 March 2011 is based on the loss attributable to ordinary shareholders of €3.715 million (30 September 2010: loss of €0.035 million), and the weighted average number of ordinary shares outstanding during the year ended 31 March 2011. The calculation of diluted earnings per share at 31 March 2011 is based on a diluted loss attributable to ordinary shareholders of €3.715 million (30 September 2010: loss of €0.035 million), and a weighted average number of ordinary shares outstanding during the period ended 31 March 2011 after the adjustment for the effect of all dilutive potential ordinary shares.

The conversion and assumed exercise of warrants to ordinary shares are ignored in the calculation of diluted loss per share since these are anti dilutive.

Furthermore, the warrant share price has been above the exercise price throughout the periods in the report, thus the assumption that warrants are unlikely to be converted to ordinary shares, and hence does not have a dilutive effect on profit/ loss.

9 Preference shares dividend

On 30 December 2009 the Company issued 29,137,134 redeemable preference shares with one warrant attached per preference share. The preference shares confer the right to a cumulative preference share dividend payable semi-annually.

The payment dates for the preference share dividend are 31 May and 30 November in each year from 2010 to 2016. On 23 November 2010, the Board decided to change the payment dates as agreed by CSSF and RNS to 24 June and 24 December.

Since 30 December 2009, two dividends of £0.09 per preference shares issued were paid on 28 May 2010 (€1.2 million) and on 24 December 2010 (€1.7 million).

The Group signed a forward exchange contract with Bank of Scotland's Treasury Group to protect the Euro payment of the next four sterling dividend payments until May 2012 (the spot rate of between one € for £0.8437 to one € for £0.8945 has been agreed).

10 Interest bearing loans and borrowings

This note provides information about the contractual terms of the Group's interest bearing loans and borrowings, which are measured at amortised cost.

As at 31 March 2011, the Group had €337.9 million of outstanding indebtedness with Bank of Scotland (30 September 2010: €333.2 million). The Company's loan to value ("LTV") (gross debt divided by market value of properties) under the Bank of Scotland loan documentation at that date was 68.7% (2010: 68.2% including Girona acquisition), against a covenant of 82.5% (30 September 2010: 85.0%).

In addition to the above financing, one of the French companies which has been classified as at 31 March 2011 as held for sale, SAS Trappes contracted a credit facility with Credit Foncier de France for €12 million in July 2009. As at 31 March 2011 the amount which has been drawn down is €9.6 million (30 September 2010: €10.4 million) with an interest rate margin of three month EURIBOR + 2.75%. The maturity date is 31 July 2014. No LTV and ICR covenants are applicable.

Terms and debt repayment schedule

The Company and the Group have related party transactions with its subsidiaries, shareholders and certain Directors.

There have been no material changes in the related party transactions described on page 72 of the annual report for the year ended 30 September 2010.

Directors' fees

The Directors of the Company and its subsidiaries were paid a total of €93,859 (2010 six months: €111,115) in Directors' fees during the period.

Invista Real Estate Investment Management Limited ("Invista REIM") acts as the Investment Manager of the Group. Invista REIM received an Investment Management fee of €1.7 million (2010 six months: €1.7 million). The conditions for payment of a performance fee to the Investment Manager were not met during the period so no charge for performance fees was made during the period in the condensed consolidated interim income statement.

The Group also operates an inter-group trading account facility with its subsidiaries whereby it may receive income on behalf of its subsidiaries or pay expenses on their behalf. These balances are non-interest bearing and are settled on demand.

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

i. Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;

ii. Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or the liability, either directly (e.g., as prices) or indirectly (i.e., derived from prices);

iii. Level 3: inputs for the asset or liability that are not based on observable market data.

Fair values of interest rate swap and currency rate swap contracts are determined by reference to market values. As of, and in accordance with IFRS, the Group has decided to classify them as Level 2 and no longer at Level 3 as disclosed in the annual consolidated statement for the year ended 30 September 2010.

Risk and Uncertainties

There are a number of potential risks and certainties which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially form expected and historical results. The directors do not consider that the principal risks and uncertainties have changed since the publication of the annual report for the year ended 30 September 2010. A detailed explanation of the risks summarised below, together with the Group's objectives, policies and processes for measuring and managing them, can be found on pages 56 - 57 of the annual report and cover the following areas:

·; market and operational risks;

·; currency risk;

·; credit risk;

·; liquidity risk; and

·; capital risk management.

The operating segments derive their revenue primarily from rental income from lessees. All of the Group's business activities and operating segments are reported within the segments below.

The segment information for the year ended 30 September 2010 is as follows:

Montowest litigation

In April 2010, the Court ruled in favour of Montowest, a subsidiary company in the Group, in respect of a litigation process in relation to roof damage that occurred in 2006. Total rental debtor as at 31 March 2011 was €6.3 million, representing an insurance receivable of €2 million and a tenant debt of €4.3 million. A provision of €1.1 million has been booked against the insurance receivable, leaving a net total exposure of €5.2 million (including VAT and deferred income). Rents paid by the tenant of €3.8 million are currently held in an escrow account, pending the completion of the litigation.

Investment Manager

On 18 March 2011, the Board announced that notice had been given to Invista Real Estate Investment Management Limited ('IREIM') to terminate its investment management agreement with effect from 18 September 2012 as a result of developments at IREIM's parent company. The Board is working actively towards the appointment in the near future of a new investment manager, on a mandate with a strong emphasis on the delivery of shareholder value.

Glossary

Adjusted gross assets is the aggregate value of all of the assets of the Group, including net distributable but undistributed income, less current liabilities of the Group (excluding from current liabilities any proportion of monies borrowed for investment whether or not treated under accounting rules as current liabilities), as shown in the consolidated accounts of the Group.

Earnings per share (EPS) is the profit after taxation divided by the weighted average number of shares in issue during the period.

Net equivalent yield is the time weighted average yield between the Net initial yield and the Reversionary yield.

Estimated rental value (ERV) is the Group's external valuers' reasonable opinion as to the open market rent which, on the date of valuation, could reasonably be expected to be obtained on a new letting or rent review of a property.

Gross rental income orgross rent is the annualised rental income receivable in the period, prior to payment of non-recoverable expenditure such as ground rents, local taxes, insurance and property outgoings.

Gross initial yield (GIY) is the Gross rent expressed as a percentage of the net valuation of property portfolio.

Net asset value (NAV) are shareholders' funds, plus the surplus of the open market value over the book value of both development and trading properties, adjusted to add back the change in fair value of the warrants and deferred tax.

Net initial yield (NIY) is the Net rental income expressed as a percentage of the gross valuation of the property portfolio.

Net rental income ornet rent is the annualised rental income receivable in the period after payment of non-recoverable expenditure items such as ground rents, local taxes, insurance and property outgoings.

Potential rent is the rent achievable if all the remaining vacant space is let at the estimated rental value and added to the current Gross rental income.

Reversionary yield is the anticipated yield, which the Net initial yield will rise to once the rent reaches the estimated rental value.

RNS, Regulatory News Services (UK stock market), which is the service used by the London Stock Exchange to publish company results, share issues, changes in the board of directors and other items which may affect the price of shares

CSSF, "Commission de Surveillance du Secteur Financier", which is responsible for the prudential supervision of credit institutions, other professionals of the financial sector, undertakings for collective investment, pension funds, SICARs, securitisation undertakings issuing securities to the public on a continuous basis, regulated markets and their operators, multilateral trading facilities and payment institutions. It also supervises the securities markets, including their operators.