Final Results

FOR IMMEDIATE RELEASE 30 April 2010 LONDON & ASSOCIATED PROPERTIES PLC: RESULTS FOR 12 MONTHS TO 31 DECEMBER 2009 London & Associated Properties Plc is a fully listed UK shopping centre and Central London retail property specialist that owns and manages Â£239m of retail investments. HIGHLIGHTS * Wholly owned property portfolio valued at Â£213.6m - a like-for-like rise of 4.6% compared to an IPD index of retail property values decline of 4.3% * NAV increased 46.6% to Â£59.1m from Â£40.3m * EPRA adjusted NNNAV increased 41% to 74.2p a share from 52.7p * Rental income over period advanced to Â£17.1m from Â£16.8m * Final dividend of 0.4p a share plus a share issue of 0.8p per share proposed making a total for year of 1.95p a share equivalent - the same as 2008 * Â£21.9m of properties sold during year showing aggregate Â£0.9m surplus over book values - total sales over last four years amount to Â£159.8m * 95% of rents collected within two weeks of December 2009 quarter day * Vacant units only account for 2.2% by rental value of total portfolio " Our performance in 2009 has been positive. I am satisfied that our policy of upgrading and investing in the quality of our portfolio has insulated us from the worst of the economic downturn. I remain reasonably optimistic that we are well placed to cope with what is likely to be another challenging year for property companies," Michael Heller, Chairman. Contacts: London & Associated Properties PLC Tel: 020 7415 5000 John Heller, Chief Executive or Robert Corry, Finance Director Baron Phillips Associates Tel: 020 7920 3161 Baron Phillips CHAIRMAN'S STATEMENT I am pleased to report on a year of satisfactory progress. Once again the quality of our property portfolio, coupled with successful strategic management of our properties during the year, have contributed to this creditable performance. The harsh economic conditions of 2008 continued into the first half of 2009; however the second half of the year saw some improvement in values with the final quarter witnessing strong demand for quality properties with stable income streams. A significant proportion of our portfolio meets these criteria, and our year end valuation reflects this improvement. Our property portfolio was valued at Â£213.6 million at 31st December 2009. This represents an increase of 4.6% on a like-for-like basis which compares favourably with the Investment Property Databank (IPD), the property industry's valuation index, which showed retail property capital values had fallen by 4.3% over the same period. Over the year we also grew our rental income from Â£16.8 million per annum to Â£ 17.1 million. This has been achieved during a difficult period across the property market, which has witnessed substantial rental declines and a rise in vacant properties. Our estimated rental value now stands at Â£17.4 million per annum. A number of key factors have been responsible for this performance: First of all, we have suffered relatively low levels of tenant default. From September 2008, when the property recession commenced in earnest, to date, we have lost Â£ 681,000 of rental income due to tenant failure. This figure is somewhat distorted by the failure of Zavvi, the music retailer, who occupied a prime unit at Orchard Square, Sheffield, and who were paying Â£368,000 per annum. This unit has since been re-let to Republic at a base rent of Â£400,000 per annum. Republic is a fashion retailer with a more dynamic retail offer and a wider customer audience. To date we have completed lettings with an aggregate rental income of 108% of the previously passing rent in the vacated units mentioned above. This has been achieved notwithstanding the fact that three of these units are still to be re-let. Secondly, we obtained planning and listed building consents to redevelop our properties at King's Road, Chelsea and at Upper Street, Islington. We successfully carried out developments at both of these properties during the year and this work has added significantly to their respective values. Both of these developments had been pre-let. Thirdly, we pre-let three units at King Edward Court, Windsor at rents in excess of Â£115 zone A. This represents a higher rate per square foot than had been previously achieved in this part of the centre and underscores the resilience of this shopping centre during the current recession. In fact, both our larger shopping centres at Windsor and Sheffield, which together account for rental income approaching Â£11 million per annum, have continued to demonstrate rental growth and are fully let, with the exception of one small unit at Sheffield which forms part of a future redevelopment site. Finally, we took advantage of the market for prime property and sold, or exchanged contracts to sell, three properties during the year for a combined value of Â£21.9 million. These disposals show an aggregate surplus over book value of Â£0.9 million. Total disposals over the last 4 years have now reached some Â£159.8 million. Under the International Financial Reporting Standards (IFRS), the net assets of the company grew in 2009 by some 47% from Â£40.3 million to Â£59.1 million. These figures are distorted by the requirement to mark to market the interest rate derivatives that we have in place to hedge our interest payments. Over the year the gap between the prevailing swap rate and the level at which we started these contracts has closed substantially. This has led to a write back of Â£13.3 million to the net assets. During the year under the more appropriate and generally accepted standards of the European Real Estate Association (EPRA), our EPRA adjusted net assets per share grew by 11.5% to 91.5p. When looked at on an EPRA Triple NAV basis, our NNNAV per share has risen by some 41% over the period to 74.2p from 52.7p, taking account of the requirement to mark to market the value of our interest rate derivatives. On a management adjusted basis, as detailed in the Finance Director's report, and without capitalising interest we made a loss before tax of Â£2.5 million. This was mainly due to the expected reduction in income from our development sites, at Kings Road, Islington and Windsor during construction. This year we expect to move back into profit following the successful completion of our development programme. The last few years have seen intensive management of our property portfolio as we have reconfigured and improved our Centres to increase rental values and drive forward cash flows. These capital intensive projects have now drawn to a successful conclusion. Over the last 4 years we have invested Â£49.3 million into our portfolio. This includes a gross investment of Â£30.7 million into King Edward Court Windsor, which at the time was held in a joint venture with the Bank of Scotland. The remaining Â£18.6 million of investment has been funded from our existing cash resources. LAP still has some Â£5 million in unencumbered cash available to exploit opportunities as they arise. While property values have shown considerable improvements over the last two quarters and our experience on tenant failure has been below average, the Board remains cautious about the strength and durability of the current recovery. In view of this the Board feels that the Group should continue to conserve cash in the business. Therefore, the Board has taken the decision to maintain the dividend at the same level as last year. This will be a final cash dividend of 0.4p per share and a capitalisation issue of new shares worth 0.8p per share. The total assets of the Group, including those of Bisichi Mining PLC, our associate company, and Dragon Retail Properties, our joint venture with Bisichi, now stand at Â£306.4 million. Bisichi had another successful year and generated a profit before tax of Â£5.0 million. Given the backdrop of a testing occupational market, our performance in 2009 has been positive. I am satisfied that our policy of upgrading and investing in the quality of our portfolio has insulated us from the worst of the economic downturn. Although it is too early to say with certainty that we are through the worst of this recession, I remain reasonably optimistic that we are well placed to cope with what is likely to be another challenging year for property companies. Michael Heller, Chairman 16 April 2010 CHIEF EXECUTIVE'S REPORT 2009 was again a challenging year for the property sector. The difficult times experienced in 2008 when the credit markets effectively collapsed, continued into the first half of 2009. Retail property values, as measured by IPD, fell from peak to trough by some 45%, and no property portfolio seemed immune from this general markdown. The investment market, however, started to stabilise over the summer and a return of good demand from cash rich buyers meant there was a surge in value for properties that fulfilled certain criteria towards the end of the year. Buyers that have been most active in the investment market recently are generally looking for stable bond-like income from property during this period of historically low interest returns. Therefore, those properties which attracted the interest of the investment market have needed strong cash flows from quality covenants. LAP's property investment portfolio was valued at Â£213.6 million at 31 December 2009. Our top three properties accounted for 73% of this figure. All of these properties are fully let, with the exception of one small unit within a future development site at our centre in Sheffield. They also have long single leases to strong covenants or are multi-let but with rental income that has increased over the last 12 months. Gross rental income from our property portfolio has increased to Â£17.1 million during 2009 from Â£16.8 million the previous year. This is a significant achievement in the current environment and demonstrates the strength of our properties and of our rent roll. Our top 50 tenants plus the income from the car park at King Edward Court, Windsor account for 80% of our gross income. Almost all of these tenants are household names and some 74% by value of our leases have more than 5 years to run. We collected 95% of cash owed to us within 2 weeks of the December 2009 quarter day. Within our portfolio, vacant units account for just 2.2% by rental value, 0.7% of units are let to tenants on a temporary basis, while 3.4% of our rental income has moved from being received on a quarterly basis to being received on a monthly basis. In 2009 ten tenants went into some form of insolvency accounting for Â£681,000 per annum. Of these, 7 leases with a rental value of Â£ 739,000 per annum have been re-let. In 2010, to date, we have lost one further tenant accounting for Â£26,000. During the year we invested Â£3.5 million into developing and improving our property portfolio. These developments were all carried out with pre-lets in place, and have led to an incremental income of Â£858,000, which represents an annual return on investment of some 25%. We sold or exchanged contracts to sell three properties during the year, of which two completed in the financial year. In all three cases, we felt that the assets in question would demonstrate minimal rental or capital growth over the medium term. The first property to be sold was a block of shops in Solihull for which we received Â£11.5 million. We had carried out two recent lettings there that had enhanced the rental value of the block, and we felt the property would be unlikely to show further rental growth for some time. The other two properties sold were both in Islington. They had been acquired as part of the London Portfolio in 2006. The Mall, which is the larger property, was sold for Â£6.6 million. During the year we had successfully appealed an earlier refusal for consent to convert the Mall from an antiques arcade to a single shop. The application was made after pre-letting the entire building to Jack Wills, the fashion retailer, at Â£367,500 per annum. The cost of the amalgamation works and associated fees was Â£0.8 million and the property was handed over to the tenant on time and on budget in October 2009. The property was disposed of in December to show a profit over book value of Â£1.6 million. The third property was a single shop adjacent to The Mall which was let to Foxtons, the estate agency. We achieved Â£3.8 million for the freehold of the building which equated to a net initial yield of 5.75%. This showed a profit over book value of Â£0.6 million. This sale was completed in January 2010. Following these disposals our estimated rental income still stands at Â£17.4 million per annum. Windsor At King Edward Court in Windsor, the Centre returned to full occupancy having lost two retailers to some form of insolvency in December 2008. The two units that became vacant were on either side of Robert Gatward, a chain of upmarket jewellers who had recently taken over an existing jewellery business within the Centre. This presented an opportunity to extend and amalgamate all three units to create better configured space with more visible frontage. We obtained planning consent for the works during the year and pre-let the larger of the shops to Robert Gatward, who have significantly increased their retail space. Another unit has been let to Fat Face, the fashion chain, while the remaining space has been taken by Mystique Lingerie. The combined rent of the three units is Â£295,000 per annum, a 42% increase over the previous passing rent. In addition we have managed to increase Zone A rents to over Â£115 for the shops fronting onto the principal mall, a record for this part of the Centre. The total cost of the deal, including all tenant incentives, has been approximately Â£0.5 million. The total income for King Edward Court now stands at a record Â£7.8 million per annum, an increase over the year of 6.8%. Sheffield Orchard Square continues to trade well following the significant developments that we have carried out at this centre over the last few years. The shops remain fully let with the exception of one small unit that forms part of a future development site. The income from this centre reached Â£3.0 million per annum in 2009 compared to Â£2.8 million the previous year, and 78% of the leases have more than 5 years to run. We have previously reported to shareholders that during 2009 we let a prime shop fronting Fargate to Republic, the fashion retailer, at a record rent per square foot for the city. The London Portfolio We successfully completed the transformation of the Antiquarius building from an antiques arcade to a large single unit with approximately 16,000 square feet of retail space. The entire building has been let to Anthropologie, the US fashion chain, at a rent of Â£1.1 million per annum. The apartment to the rear of the building which we refurbished in 2007 has also been let at a further Â£ 50,000 per annum. The development required listed building and freeholder consents, which were obtained in April. The total cost of the development has been Â£1.96 million, and the net incremental rent is Â£592,000. Anthropologie took possession of the building in October 2009 and has recently commenced trading following an extensive period of fitting-out. At our markets in Brixton, South London, we have focused over the last year on improving occupancy and increasing the footfall across both of the markets that we own there. This has been particularly the case with those units in Brixton Village, one of the two markets, that have historically been hard to let away from the main pedestrian flows. We have enjoyed some success through the introduction of flexible leases for an initial 3 month trial period. These have only been available for retailers who we believe will add substantially to the quality of the tenant mix. The result of this initiative is that Market Row, the more successful of the markets, remains effectively fully let while Brixton Village now has 90% occupancy for the first time. Of the 17 tenants that commenced trading on flexible leases, 10 have now converted to full leases at a market rent. As a result the rental income for these two properties has increased by 9.4% over the last 12 months. Remainder of our portfolio The remainder of our portfolio continues to trade well in the current difficult economic environment. In addition to those properties mentioned above, our portfolio has been deliberately concentrated into locations where value retailing and day-to-day shopping is prevalent. We are confident that these locations will continue to trade at an acceptable level regardless of wider economic difficulties as they are less dependent on discretionary spending. Outlook The UK economic recovery continues to be fragile with a large rise in consumer savings and a low level of confidence. In addition there is less credit available for consumers, small businesses and property companies. We do not expect bank lending to return to the levels of 18 months ago in the near future. Consequently, we expect the polarisation already apparent between prime and secondary properties to continue to widen. Given the nature of our portfolio, of which 73% is in three high quality properties that can all demonstrate strong cash flows, we remain cautiously optimistic going forward. John Heller, Chief Executive 16 April 2010 FINANCE DIRECTOR'S REPORT In the challenging economic circumstances we faced in the year, we prioritised the management of our cash flow and our cash resources. We have now completed the capital expenditure relating to our development programme and those properties are all income producing. LAP has remained fully covenant compliant throughout this period. In the challenging economic circumstances we faced in the year, we prioritised the management of our cash flow and our cash resources. We have now completed the capital expenditure relating to our development programme and those properties are all income producing. LAP has remained fully covenant compliant throughout this period. Cash Flow The Group remains in a satisfactory cash flow positive position. During the year we sold Solihull and The Mall, Islington for a combined Â£18.1 million. We also exchanged contracts to sell the Foxtons unit in Islington, North London for Â£3.8 million, and completed the disposal in January 2010. The proceeds from these sales therefore were Â£21.9 million of which Â£15.1 million was used to pay down our Revolving Credit Facility with the Royal Bank of Scotland. The total amount drawn as at March 2010 stands at Â£54.4 million. Income Statement The Group's profit before tax as reported under IFRS was Â£21.4 million (2008: Â£ 57.3 million loss). This figure includes Â£9.4 million of movement in our property revaluation reserve and Â£13.3 million of movement on the marking to market of our interest derivatives, as well as certain other non-cash items. These adjustments can lead to considerable volatility in the reporting of our results. The table below does, though, show the underlying performance of the Group on a management adjusted basis. The average cost of debt has reduced to 5.97% for the year (2008: 6.10%). We closely monitor all interest rate hedging and regularly explore options for reducing the total interest payable in the future. The interest rate hedges in place were taken out as a management tool for the business to ensure stability and security of our cash flows in the medium to long term. It is important to us that the costs of funds are at a known level. This strategy means that should interest rates increase in the future we will be protected. We do not trade in the swaps. We have again valued the interest rate swaps on the basis of the net present value of the additional cost of the interest payable over the terms of the hedging arrangements against the prevailing rates of interest as at 31 December 2009. The Directors consider this to be the most appropriate method of valuation of these products. This valuation is based on the assumption (as required by IFRS) that we had to "unwind" these contracts at the balance sheet date. This is, of course, an unrealistic assumption since the hedges are designed to provide certainty for our interest costs and are not a traded item. The tax charge for the year is Â£2.4 million. This figure includes a corporation tax credit of Â£1.2 million and an increase in the deferred tax provision of Â£ 3.6 million. This deferred tax provision has arisen because of the increase in the value of the property portfolio. Cash Non-cash 2009 Cash Non-cash 2008 items items Per items items Per income income statement statement Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Net rental income 9,517 - 9,517 8,958 - 8,958 Income and gains on 148 - 148 298 - 298 investments held for trading Profit on sale of 14 - 14 897- - 897 investment properties Net change on revaluation - 9,422 9,422 - (33,125) (33,125) of investment properties Net increase/(decrease) - 178 178 - (1,530) (1,530) in value of investments held for trading Operating profit/(loss) 9,679 9,600 19,279 10,153 (34,655) (24,502) Share of joint ventures 131 1,078 1,209 131 (547) (416) and associates Interest rate derivative - 13,269 13,269 - (21,063) (21,063) Net interest (12,350) - (12,350) (11,285) - (11,285) (Loss)/profit before (2,540) 23,947 21,407 (1,001) (56,265) (57,266) taxation Balance Sheet The value of the overall property portfolio was Â£238.6 million. This includes the properties owned by Bisichi Mining PLC, Dragon Retail Properties and Analytical Ventures. On a like-for-like basis this shows an increase of 4.0%. The underlying net assets of the Group on a similar management adjusted basis are shown in the table below. The net assets of the Group under IFRS have increased to Â£59.1 million in the year, a rise of 46.6% and an increase of 21.5 pence per share. The more meaningful EPRA figure shows the net assets to be Â£72.8 million equivalent to 91.5 pence per share, a rise of 11.5%. The EPRA triple NAV increased by 41% over the period to 74.2p per share. Accounting judgments and going concern The most significant judgements made in preparing these accounts relate to the carrying value of the properties and investments which are stated at open market value. The Group uses external professional valuers to determine the values of our properties. Interest rate hedges (as explained above) are stated at net present value of the extra costs arising to maturity as compared with current market rates. The Directors exercised their commercial judgements when reviewing the cash flow forecasts of the Group and the underlying assumptions on which they are based. The Group's business activities, together with the factors likely to affect its future development, are set out in the Chairman's Statement, the Chief Executive's Report and this Report. In addition the directors considered note 17 to the financial statements which includes the company's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; as well as its exposure to credit risk and liquidity risk. Per IFRS Deferred Mark-to- Head EPRA tax market of leases Adjusted interest net swaps assets 2009 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Investment properties 243,109 (29,485) 213,624 Other fixed assets 2,621 2,621 Investments in associate 9,440 9,440 and joint ventures Other net assets 4,678 4,678 Other non-current (54,395) 7,393 6,347 29,485 (11,170) liabilities Net debt (146,349) (146,349) Net assets 59,104 7,393 6,347 - 72,844 Adjusted EPRA NAV per 91.5p share 2008 Investment properties 245,770 (27,238) 218,532 Other fixed assets 2,722 2,722 Investments in associate 8,360 8,360 and joint ventures Other net assets 810 810 Other non-current (49,662) 2,843 19,616 27,238 35 liabilities Net debt (167,694) (167,694) Net assets 40,306 2,843 19,616 62,765 Adjusted EPRA NAV per 82.1p share With sound financial resources and long term leases in place with the tenants, the directors believe that the company is well placed to manage its business risks despite the current uncertain economic outlook. The directors therefore have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. Dividends The Directors are again proposing the same final dividend as in 2008. The company is proposing to pay 1.2p, payable to shareholders on 2nd July 2010. This makes a total for the year of 1.95p - the same as in 2008. In current conditions this will be a final dividend of 0.4p per share and a capitalisation issue of new shares worth 0.8p per share. Our associated company Bisichi Mining PLC, in which we hold a 41.7% stake, had a strong year and produced profit before taxation of Â£5.0 million. This figure is after a revaluation surplus under IFRS of Â£0.1 million. I feel confident that the policy of prudently managing the Group's cash resources will benefit us as we continue to go through this period of uncertainty. Robert Corry, Finance Director 16 April 2010 Directors & Advisors DIRECTORS EXECUTIVE DIRECTORS *Michael A Heller MA FCA (Chairman) John A Heller LLB MBA (Chief executive) Robert J Corry BA FCA (Finance Director) Michael C Stevens FCA NON-EXECUTIVE DIRECTORS â€ Howard D Goldring BSC (ECON) ACA Howard Goldring has been a member of the board since July 1992 and is a global asset allocation specialist. He is chairman of Delmore Asset Management Limited which manages investment portfolios and provides global asset allocation advice to private clients, family offices and pension funds. From 1997-2003 he was consultant director on global asset allocation to Liverpool Victoria Asset Management Limited. #â€ Clive A Parritt FCA CF FIIA Clive A Parritt joined the board on 1 January 2006. He is a chartered accountant with over 30 years experience of providing strategic, financial and commercial advice to businesses. He is chairman of Barronsmead VCT 2 plc, DiGiCo Europe Limited and BG Consulting Group Limited as well as being a director of F&C US Smaller Companies plc. He is Vice President of the Institute of Chartered Accountants in England and Wales and is a non-executive member of its Board. He is chairman of the audit committee and as Senior Independent Director he chairs the Nomination and Remuneration Committees. * Member of the nomination committee # Senior independent director â€ Member of the audit, remuneration and nomination committees Secretary & registered office Michael C Stevens FCA Carlton House, 22a St James's Square London SW1Y 4JH Director of property Mike J Dignan FRICS Auditor Baker Tilly UK Audit LLP Principal bankers HSBC Bank PLC Lloyds Banking Group PLC National Westminster Bank PLC Royal Bank of Scotland PLC Solicitors Olswang LLP Pinsent Masons LLP Stockbroker Oriel Securities Limited Registrars & transfer office Capita Registrars, Northern House Woodsome Park Fenay Bridge Huddersfield W.Yorkshire HD8 0GA Telephone 0871 664 0300 (Calls cost 10p per minute + network extras, lines are open Mon-Fri 8.30am to 5.30pm) or +44 208 639 3399 for overseas callers. Website: www.capitaregistrars.com Email: ssd@capitaregistrars.com Company registration number 341829 (England and Wales) Website www.lap.co.uk E-mail admin@lap.co.uk Directors' Report The directors submit their report and the audited accounts, for the year ended 31 December 2009. Activities The principal activities of the group during the year were property investment and development, as well as investment in joint ventures and an associated company. The associated company is Bisichi Mining PLC in which the company holds a 42 per cent interest. Bisichi Mining PLC is listed on the London Stock Exchange and operates in England and South Africa with subsidiaries which are involved in overseas mining and mining investment. Business Review Review of the group's development and performance The Chairman's Statement, Chief Executive's Report and Finance Director's Report on the preceding pages 2 to 17 provide a comprehensive review and assessment of the group's activities during the year as well as its position at the year end and prospects for the forthcoming year. Property activities The group is a long-term investor in property. It acquires retail properties, actively manages those assets to improve rental income and thus enhance the value of its properties over time. In reviewing performance, the principal areas regularly monitored by the group include: â€¢ Rental income - the aim of the group is to maximise the maintainable income from each property by careful tenant management supported by sympathetic and revenue enhancing development. Income may be affected adversely by the inability of tenants to pay their rent. Rent collection and tenant quality are monitored carefully. This risk is minimised as a result of the diversified tenant base, which should limit the impact of the failure of any individual tenant. â€¢ Cash flow - allowing for voids, acquisitions, development expenditure, disposals and the impact of operating costs and interest charges, the group aims to maintain a positive cash. â€¢ Financing costs - the exposure of the group to interest rate movements is managed by the use of swap arrangements (see note 17 on page 47 for full details of the contracts in place). These swap arrangements are designed to ensure that our interest costs are fixed and always covered by anticipated rental income. Once put in place we intend that such swaps are generally retained until maturity. Details of key estimates adopted are contained in the accounting policies note on page 38. â€¢ Property valuations - market sentiment and economic conditions have a direct effect on property valuations, which therefore can vary significantly (upwards or downwards) over time. Bearing in mind the long-term nature of the group's business, valuation changes have little direct effect on the ongoing activities or the income and expenditure of the group. Tenants generally have long-term leases, so rents are unaffected by short-term valuation changes. Borrowings are secured against property values and if those values fall very significantly, this could limit the ability of the group to develop the business using external borrowings. The risk is minimised by trying to ensure that there is adequate cover to allow for fluctuations in value on a short-term basis. It continues to be the policy of the group to realise property assets when the valuation of those assets reaches a level at which the directors consider that the long-term rental yield has been reached. The group also seeks to acquire additional property investments on an opportunistic basis when the potential rental yields offer scope for future growth. Investment activities The investments in joint ventures and the associate are for the long term. The group is an investor in the associate and manages the UK property assets of the associate. However the principal activity of the associate is overseas mining investment (principally in South Africa). The investment is held to generate income and capital growth over the longer term. The other listed investments are held as current assets to provide the liquidity needed to support the property activities while generating income and capital growth. Investments in property are made through joint ventures when the financing and spreading of risk make it desirable. Corporate responsibility Environment The group's principal UK activity is property investment providing premises which are rented to retail businesses. We seek to provide those tenants with good quality premises from which they can operate in an efficient and environmentally friendly manner. Wherever possible, improvements, repairs and replacements are made in an environmentally efficient manner and waste re-cycling arrangements are in place at all the company's locations. Employment The group's policy is to attract staff and motivate employees by offering competitive terms of employment. The group provides equal opportunities to all employees and prospective employees including those who are disabled. Performance indicators Our success is principally measured in terms of net asset value per share and trading cash flow (where we aim over a period of time to deliver a positive cash return) and net asset value per share after adjusting for valuation volatility and excluding IFRS adjustments. The directors consider that the Key Performance Indicator of the Group is the Net Asset per Share value shown at the foot of the Balance Sheet on page 35 and as discussed in the Finance Director's Report. Cash flow is shown on page 37. Dividend Policy and Capitalisation Issue An interim dividend for 2009 of 0.75p was paid on 22 January 2010 (2008: Interim dividend 0.75p paid on 23 January 2009). The directors recommend payment of a final dividend for 2009 of 0.40p per ordinary share of 10 pence each (the Final Dividend and Ordinary Share respectively). In addition to the Final Dividend the directors propose to issue Ordinary Shares in lieu of the full final dividend that would otherwise have been paid, by issuing to existing shareholders new Ordinary Shares (the Capitalisation Issue) with an aggregate value equal to 0.80p (the Capitalisation Amount) for each Ordinary Share held by them. Subject to shareholder approval, the total dividend per Ordinary Share for 2009 will be 1.15p per Ordinary Share. When added to the Capitalisation Amount, this results in an equivalent nominal amount of 1.95p per Ordinary Share (2008:Equivilent nominal amount of 1.95p per Ordinary Share). The Final Dividend of 40p per Ordinary Share will be payable on 2 July 2010 to shareholders registered at the close of business on 4 June 2010. The Capitalisation Issue will take effect on 2 July 2010 to shareholders registered at the close of business on 4 June 2010. The Capitalisation Issue is conditional on, amongst other things, shareholders' approval at the AGM of the company to be held on 7June 2010 of the granting of authority to the directors to allot and issue Ordinary Shares in connection with the Capitalisation Issue (the Capitalisation Issue Shares). The Capitalisation Issue also requires shareholders to authorise the capitalisation of reserves to allow the Capitalisation Issue Shares to be issued. Further details concerning the Capitalisation Issue (including certain general taxation considerations in respect of the Capitalisation Issue) are set out below and a summary and explanation of the resolution to be proposed at the Annual General Meeting in respect of the Capitalisation Issue is set out on page 27 of this Directors' Report. The Capitalisation Issue Reason for Dividend Policy and Capitalisation Issue In the current economic climate, the board of directors feels that it is imperative that the group maximises its financial flexibility, including conserving cash wherever possible, and accordingly considers that it would be prudent to issue the Capitalisation Issue Shares in lieu of a cash dividend equal to 0.80p per Ordinary Share. Also, the Capitalisation Issue enables shareholders to build up their shareholding in the company without incurring dealing costs or stamp duty. The board of directors reserves the right not to complete the Capitalisation Issue if it considers such action would not be in the best interests of the company or its shareholders. Entitled Shareholders Holders of Ordinary Shares on the register as at 4 June 2010 will be entitled to receive Capitalisation Issue Shares. Accordingly, the last date transfers will be accepted for registration to participate in the Capitalisation Issue will be 4 June 2010 (the Capitalisation Issue Record Date). Entitlement to Capitalisation Issue Shares Each shareholder's entitlement to Capitalisation Issue Shares will be calculated by taking the Capitalisation Amount per Ordinary Share multiplied by the number of Ordinary Shares held by that shareholder at the Capitalisation Issue Record Date and dividing that amount by the Capitalisation Issue Price. The Capitalisation Issue Price will be the average of the middle market quotations for Ordinary Shares for the three dealing days starting on, and including, 2 June 2010, the day when the Ordinary Shares are first quoted ``ex-dividend'', as derived from the Official List of the UK Listing Authority. The Capitalisation Issue Price, once fixed, will also be notified on the company's website at www.lap.co.uk. Entitlements to Capitalisation Issue Shares will be rounded down to the nearest whole number of Ordinary Shares. No fraction of an Ordinary Share will be allotted. The Capitalisation Issue Shares The company will apply to the UK Listing Authority for the Capitalisation Issue Shares to be admitted to the Official List and to the London Stock Exchange for the Capitalisation Issue Shares to be admitted to trading on its market for listed securities on 2 July 2010. Subject to the applications being successful, the Capitalisation Issue Shares are expected to be allotted on and dealings in Capitalisation Issue Shares are expected to begin on or around 2 July 2010. The Capitalisation Issue Shares will be issued fully paid and will rank pari passu in all respects with the existing Ordinary Shares, including the right to receive all dividends or other distributions declared, made or paid after the date of their issue (but excluding for the avoidance of doubt the Final Dividend). Subject to the Capitalisation Issue becoming effective: (a) (a) In respect of Ordinary Shares held in certificated form on the Capitalisation Issue Record Date, share certificates will be issued in respect of Capitalisation Issue Shares and posted to shareholders as soon as reasonably practicable after the Capitalisation Issue becomes effective; and (b) (b) In respect of Ordinary Shares held in uncertificated form (i.e. CREST) on the Capitalisation Issue Record Date, prior to the commencement of dealings in the Capitalisation Issue Shares on the London Stock Exchange, the appropriate stock account in CREST of the relevant shareholder will be credited with such person's entitlement to Capitalisation Issue Shares. The Capitalisation Issue Shares are expected to be eligible to be traded through the CREST system with effect from the date of commencement of dealings on the London Stock Exchange. Dividends The timing of the payment of the company's cash dividends will not be affected by the Capitalisation Issue. All mandates and other instructions in force relating to dividend payments will, unless and until revoked, remain in force. Share Plans The company operates an HMRC approved share incentive plan. Executive director and staff participations may be adjusted to take account of the Capitalisation Issue in accordance with the rules of the scheme. Participants will be contacted separately and further information provided as to how their entitlements might be affected. UK tax treatment of the Capitalisation Issue The directors have sought advice as to the expected tax treatment of shareholders on receipt of Capitalisation Issue Shares. The following statements are intended only as a general guide to current UK tax law and practice of Her Majesty's Revenue & Customs (HMRC). They are intended to apply only to shareholders who are resident or ordinarily resident in the UK for UK tax purposes, who hold their Ordinary Shares as investments and who are the beneficial owners of their Ordinary Shares. The statements may not apply to certain classes of shareholders such as dealers in securities. Shareholders who are in any doubt as to their tax position regarding the acquisition, ownership and disposition of the Capitalisation Issue Shares or who are subject to tax in a jurisdiction other than the UK should consult their own tax advisers. The Capitalisation Issue should be treated as a reorganisation of the company's share capital for the purposes of taxation of chargeable gains. Accordingly, a shareholder should not be subject to a charge to tax on capital gains (CGT) upon receipt of Capitalisation Issue Shares. Instead, a shareholder's existing Ordinary Shares and the Capitalisation Issue Shares should, taken together, be treated for CGT purposes as the same asset, acquired at the time and for the same price that the shareholder acquired their existing Ordinary Shares. A subsequent sale or other disposal by a shareholder of some or all of the Capitalisation Issue Shares might give rise to a CGT liability for that shareholder. The receipt of Capitalisation Issue Shares should not give rise to a charge to tax on income for shareholders. The Capitalisation Issue should not be subject to stamp duty or stamp duty reserve tax. Overseas Shareholders It is the responsibility of overseas shareholders to ensure that all relevant laws and regulations in overseas jurisdictions applicable to them or their shareholdings (for example, exchange control laws or regulations) are complied with and that they obtain any permissions or consents required to be obtained, or make any filings required to be made by them. Shareholders should consult their professional advisers if they are not sure whether any formalities must be observed in order to receive Capitalisation Issue Shares. It is the responsibility of any person resident outside the UK wishing to receive Capitalisation Issue Shares to be satisfied as to full observance of the laws of the relevant territory, including obtaining any government or other consents which may be required and observing other formalities in such territories. The company's ordinary shares held in treasury During 2009 the company issued 1,580,814 of its own shares from Treasury for an average price of 33.5p which increased the "issued share capital"by the same number of shares. Details of the issue of these shares is shown in the table below. At 31 December 2009 4,293,051 (2008: 5,873,865) shares were held in treasury with a market value of Â£1,856,745 (2008:Â£1,468,466). At the Annual General Meeting (AGM) in June 2009 members renewed the authority for the company to purchase up to 10 per cent of its issued ordinary shares. The company will be asking members to renew this authority at the next AGM in June 2010. Movements in Treasury shares during the year: Transaction Number of price shares Treasury shares held at 1 January 2009 5,873,865 9 February 2009 - Issue of Treasury shares in lieu of 31.25p (1,214,400) directors bonuses 12 February 2009 - Issue of Treasury shares following 25.66p (50,000) the exercise of share options March 2009 - Purchase by the Trustee of the SIP for 29.50p (21,780) issue of Dividend Shares May 2009 - Issue of Treasury shares in lieu of senior 38.00p (96,261) staff bonuses December 2009 - Issue of Treasury shares in connection with the HMRC approved share incentive plan 43.00p (198,373) Treasury shares held at 31 December 2009 4,293,051 Treasury shares are not included in issued share capital for the purposes of calculating earnings per share and net assets per share, and they do not qualify for dividends payable. Investment properties The freehold and long leasehold properties of the company and its subsidiaries were revalued as at 31 December 2009 by external professional firms of chartered surveyors - Allsop LLP, London (98.1 per cent of the portfolio), and BNP Paribas, Leeds (1.9 per cent). The valuations, which are reflected in the financial statements, amount to Â£213.6 million (2008: Â£218.5 million). Taking account of prevailing market conditions, the valuation of group properties at 31 December 2009 resulted in a increase of Â£9.4 million (2008: reduction of Â£33.1 million). This has been reflected in the income statement in accordance with the requirements of IFRS. The impact of property revaluations on the company's joint ventures (Analytical Ventures Limited and Dragon Retail Properties Limited) and the associate company (Bisichi Mining PLC) was a reduction of Â£0.2 million (2008 reduction of Â£4.2 million). The proportion of this revaluation attributable to the Group (net of taxation) is reflected in the income statement and the consolidated balance sheet. Financial instruments Note 17 to the financial statements sets out the risks in respect of financial instruments. The board reviews and agrees overall treasury policies, delegating appropriate authority for applying these policies to the Chief Executive and Finance Director. Financial instruments are used to manage the financial risks facing the group - speculative transactions are prohibited. Treasury operations are reported at each board meeting and are subject to weekly internal reporting. Hedging arrangements have been put in place in the company, subsidiaries and joint ventures in order to limit the exposure to interest rate risk. Directors M A Heller, J A Heller, R J Corry, H D Goldring, C A Parritt and M C Stevens were directors of the company for the whole of 2009. M A Heller and H D Goldring, are retiring by rotation at the Annual General Meeting in 2010 and offer themselves for re-election. Brief details of the directors offering themselves for re-election are as follows: Michael Heller is executive chairman and has been a director since 1971. He has a contract of employment determinable at six months notice. Michael Heller is a chartered accountant and a member of the nomination committee. He is executive chairman of Bisichi Mining PLC, our associated company. Howard Goldring has been a director since 1992 and has a contract of service determinable at three months notice. He is a member of the audit, remuneration and nomination committees. Howard Goldring is a chartered accountant and global asset allocation specialist. He is executive chairman of Delmore Asset Management Limited which specialises in the management of investment portfolios and the provision of asset allocation advice for private clients, family offices and pension funds. The board has considered the re-appointment of Howard Goldring and recommends his re-election as a director. His specialised economic knowledge and broad business experience are of significant benefit to the business. Directors' interests The interests of the directors in the ordinary shares of the company, including family and trustee holdings, where appropriate, were as follows: Beneficial Non-beneficial interests interests 31 Dec 09 1 Jan 09 31 Dec 09 1 Jan 09 M A Heller 5,450,109 4,871,757 18,902,994 18,520,634 R J Corry 661,879 359,110 - - H D Goldring 11,309 11,080 - - J A Heller 1,310,652 1,153,971 â€ â€ 13,779,769 13,520,634 C A Parritt 24,867 24,364 - - M C Stevens 756,747 492,267 +988,140 +777,534 â€ These non-beneficial holdings are duplicated with those of M A Heller. +The non-beneficial interest of M C Stevens arises by reason of his being a director of London & Associated Securities Limited, a company which acts as a trustee. No director had any material interest in any contract or agreement with the group during the year other than as shown in this annual report. (Please see note 21 to the financial statements and the remuneration report). Between 1 January 2010 and the date of this report the interests of a number of directors in the ordinary shares of the company have increased to the following totals: Beneficial Non-beneficial M A Heller 5,878,681 18,902,994 R J Corry 930,450 - J A Heller 1,872,557 13,779,769 M C Stevens 891,032 988,140 No other changes in the directors' holdings took place between 1 January 2010 and the date of this report. However, the interests of M A Heller and his family company interests also increased in this period and are shown in the "Substantial shareholdings" paragraph below. The beneficial holdings of directors shown above include their interests in the Share Incentive Plan. Substantial shareholdings At 31 December 2009 M A Heller and his family had an interest in 44.8 million shares of the company, representing 56.23 per cent of the issued share capital net of treasury shares (2008: 43.09 million shares representing 56.4 per cent). Cavendish Asset Management Limited has an interest in 4,810,873 shares representing 6.04 per cent of the issued share capital of the company (2008: 3,470,351 shares representing 4.54 per cent). Between 1 January 2010 and the date of this report the following changes occurred: The interest of M A Heller and his family increased to 46.44 million shares in the company, representing 56.78 per cent of the issued share capital net of Treasury shares. The company is not aware of any other holdings exceeding 3 per cent of the issued share capital and no relevant changes have occurred between 1 January 2010 and the date of this report. Takeover Directive The company has one class of share capital, namely ordinary shares. Each ordinary share carries one vote. All the ordinary shares rank pari passu. There are no securities issued in the company which carry special rights with regard to control of the company. The identity of all significant direct or indirect holders of securities in the company and the size and nature of their holdings is shown in "Substantial shareholdings" above. The rights of the ordinary shares to which the HMRC approved Share Incentive Plan relate, are exercisable by the trustees on behalf of the employees. There are no restrictions on voting rights or on the transfer of ordinary shares in the company, save in respect of Treasury Shares. The rules governing the appointment and replacement of directors, alteration of the articles of association of the company and the powers of the company's directors accord with usual English company law provisions. Each director is re-elected at least every three years. The company has requested authority from shareholders to buy back its own ordinary shares and there will be a resolution to renew the authority at this year's AGM. The company is not party to any significant agreements that take effect, alter or terminate upon a change of control of the company following a takeover bid. The company is not aware of any agreements between holders of its ordinary shares that may result in restrictions on the transfer of its ordinary shares or on voting rights. There are no agreements between the company and its directors or employees providing for compensation for loss of office or employment that occurs because of a takeover bid. Statement as to disclosure of information to the auditor The directors in office on 31 December 2009 have confirmed that, as far as they are aware, there is no relevant audit information of which the auditor is unaware. All of the directors have confirmed that they have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that it has been communicated to the auditor. Corporate governance The company has adopted the Guidance for Smaller Quoted Companies (SQC's) published by the Quoted Companies Alliance (QCA). The QCA provides guidance to SQC's. The QCA's guidance covers the implementation of the Revised Combined Code on Corporate Governance for SQC's and the paragraphs below set out how the company has applied this guidance during the year. The company has complied with the QCA's guidance throughout the year, except insofar that non-executive directors are not appointed for fixed terms (section A.7.2). Principles of corporate governance The board promotes good corporate governance in the areas of accountability and risk management as a positive contribution to business prosperity. The board endeavours to apply corporate governance principles in a sensible and pragmatic fashion having regard to the circumstances of the business. The key objective is to enhance and protect shareholder value. Board structure During the year the board comprised four executive directors, being the chairman, chief executive, finance director and company secretary, and two non-executive directors. Their details appear on page 21. The board is responsible to shareholders for the proper management of the group. A directors' responsibility statement in respect of the accounts is set out on page 32. The non-executive directors have a particular responsibility to ensure that the strategies proposed by the executive directors are fully considered. To enable the board to discharge its duties, all directors have full and timely access to all relevant information and there is a procedure for all directors, in furtherance of their duties, to take independent professional advice, if necessary, at the expense of the group. The board has a formal schedule of matters reserved to it and normally has eleven regular meetings scheduled each year. Additional meetings are held for special business as required. The board is responsible for overall group strategy, approval of major capital expenditure and consideration of significant financial and operational matters. The board committees, which have written terms of reference, deal with specific aspects of the group's affairs: â€¢ The nomination committee is chaired by C A Parritt and comprises the non-executive directors and the executive chairman. The committee is responsible for proposing candidates for appointment to the board, having regard to the balance and structure of the board. In appropriate cases recruitment consultants are used to assist the process. All directors are subject to re-election at least every three years. â€¢ The remuneration committee is responsible for making recommendations to the board on the company's framework of executive remuneration and its cost. The committee determines the contract terms, remuneration and other benefits for each of the executive directors, including performance related bonus schemes, pension rights and compensation payments. The board itself determines the remuneration of the non-executive directors. The committee comprises the non-executive directors and it is chaired by C A Parritt. The executive chairman of the board is normally invited to attend. The directors' remuneration report is set out on pages 28 to 30. â€¢ The audit committee comprises the non-executive directors and is chaired by C A Parritt. The audit committee report is set out on page 31. Board and board committee meetings held in 2009 The number of regular meetings during the year and attendance was as follows: Meetings Meetings held attended R J Corry Board 11 11 Audit committee 3 3 H D Goldring Board 11 11 Audit committee 3 3 Nomination 1 1 committee 2 2 Remuneration committee M A Heller Board 11 11 Nomination 1 1 committee 2 2 Remuneration committee J A Heller Board 11 10 Audit committee 3 2 C A Parritt Board 11 11 Audit committee 3 3 Nomination 1 1 committee 2 2 Remuneration committee M C Stevens Board 11 11 Audit committee 3 2 Nomination 1 1 committee Performance evaluation - board, board committees and directors The performance of the board as a whole and of its committees and the non-executive directors is assessed by the chairman and the chief executive and is discussed with the senior independent director. Their recommendations are discussed at the nomination committee prior to proposals for re-election being recommended to the board. The performance of executive directors is discussed and assessed by the remuneration committee. The senior independent director meets regularly with the chairman, executive and non-executive directors individually outside of formal meetings. The directors will take outside advice in reviewing performance but have not found this to be necessary to date. Independent directors The senior independent non-executive director is C A Parritt. The other independent non-executive director is H D Goldring. Delmore Asset Management Limited (Delmore) is a company in which H D Goldring is a majority shareholder and director. Delmore provides consultancy services to the company on a fee basis. H D Goldring's association with Delmore and the length of his service on the board mean that the criteria for independence set out in the Combined Code of Corporate Governance are not met. However the board considers that the independence of H D Goldring is not impaired either because he has served on the board for more than nine years or because of his association with Delmore. The board therefore regards H D Goldring as being independent. The independent directors regularly meet prior to or after board meetings to discuss corporate governance and other issues concerning the group. Directors and officers liability insurance The group maintains directors and officers insurance, which is reviewed annually and is considered to be adequate by the company and its insurance advisers. Internal control The directors are responsible for the group's system of internal control and for reviewing its effectiveness at least annually, and for the preparation and review of its financial statements. The board has designed the group's system of internal control in order to provide the directors with reasonable assurance that assets are safeguarded, that transactions are authorised and properly recorded and that material errors and irregularities are either prevented or would be detected within a timely period. However, no system of internal control can eliminate the risk of failure to achieve business objectives or provide absolute assurance against material misstatement or loss. The key elements of the control system in operation are: â€¢ The board meets regularly with a formal schedule of matters reserved for its decision and has put in place an organisational structure with clearly defined lines of responsibility and with appropriate delegation of authority; â€¢ There are established procedures for planning, approval and monitoring of capital expenditure and information systems for monitoring the group's financial performance against approved budgets and forecasts; â€¢ The departmental heads are required annually to undertake a full assessment process to identify and quantify the risks that face their departments and functions, and assess the adequacy of the prevention, monitoring and modification practices in place for those risks. In addition, regular reports about significant risks and associated control and monitoring procedures are made to the executive directors. The process adopted by the group accords with the guidance contained in the document "Internal Control Guidance for Directors on the Combined Code" issued by the Institute of Chartered Accountants in England and Wales. The audit committee receives reports from external auditors and from executive directors of the group. During the period, the audit committee has reviewed the effectiveness of the system of internal control as described above. The board receives periodic reports from all committees; â€¢ There are established procedures for the presentation and review of the financial statements and the Group has in place an organisational structure with clearly defined lines of responsibility and with appropriate delegation of authority. There are no internal control issues to report in the annual report and financial statements for the year ended 31 December 2009 and up to the date of approval of this report and the financial statements the board has not been required to deal with any related material internal control issues. The directors confirm that the board has reviewed the effectiveness of the system of internal control as described during the period. Communication with shareholders Communications with shareholders are given high priority. Extensive information about the group and its activities is provided in the Annual Report and online. The company's website www.lap.co.uk is also updated with all announcements and reports promptly when they are issued. There is a regular dialogue with the company's stockbrokers and institutional investors. Enquiries from individuals on matters relating to their shareholdings and the business of the group are dealt with promptly and informatively . The company's website is under continuous development to enable better communication with existing and potential new shareholders. Payments to suppliers The company and the group agree the terms of contracts when orders are placed. It is group policy that payments to suppliers are made in accordance with those terms, provided that suppliers also comply with all relevant terms and conditions. Trade creditors outstanding at the year end represent 17.8 days annual trade purchases (2008: 17.3 days). Donations No political donations were made during the year (2008: Â£Nil). Donations for charitable purposes amounted to Â£1,525 (2008: Â£250). Going concern The group's business activities, together with the factors likely to affect its future development are set out in the Chairman's Statement on the preceding pages 2 to 5, Chief Executive's Report on pages 8 to 11. The Finance Director's Report on pages 15 to 17 sets out the financial position of the company, its cash flows, liquidity position and borrowing facilities. In addition Note 17 to the financial statements gives details of the group's financial instruments and interest rate risk, and maturity and hedging profile. The group has considerable financial resources together with long term leases with the majority of the tenants of its property portfolio. As a consequence, the directors believe that the company is well placed to manage its business risks successfully despite the current uncertain economic outlook. The directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. Annual General Meeting The Annual General Meeting will be held at the RAC Club, 89 Pall Mall, London SW1Y 5HS on Monday 7June 2010 at 10.30 a.m. Items 1 to 9 will be proposed as ordinary resolutions. More than 50 per cent of shareholders' votes must be in favour for these resolutions to be passed. Items 10 and 11 will be proposed as special resolutions. At least 75 per cent of shareholders' votes must be in favour for these resolutions to be passed. The directors consider that the Capitalisation Issue and all of the resolutions to be put to the meeting are in the best interests of the company and its shareholders as a whole and accordingly the board unanimously recommends that shareholders vote in favour of all of the resolutions, as the directors intend to do in respect of their own beneficial holdings of ordinary shares. Please note that the following paragraphs are only summaries of certain of the resolutions to be proposed at the Annual General Meeting and not the full text of the resolutions. You should therefore read this section in conjunction with the full text of the resolutions contained in the notice of Annual General Meeting. Ordinary Resolutions 1. Resolution 8 - Directors' authority to allot securities Paragraph 8.1.1 of Resolution 8 would give the directors the authority to allot shares in the company and grant rights to subscribe for or convert any security into shares in the company up to an aggregate nominal value of Â£2,726,200. This represents approximately 33.3 per cent. of the ordinary share capital of the company in issue (excluding treasury shares) at 16 April 2010 (being the last practicable date prior to the publication of this Directors' Report). In line with recent guidance issued by the Association of British Insurers ('ABI') paragraph 8.1.2 of Resolution 8 would give the directors the authority to allot shares in the company and grant rights to subscribe for or convert any security into shares in the company up to a further aggregate nominal value of Â£2,726,200 , in connection with a rights issue. This amount represents approximately 33.3 per cent. of the ordinary share capital of the company in issue (excluding treasury shares) at 16 April 2010 (being the last practicable date prior to the publication of this Directors' Report). The directors' authority will expire at the conclusion of the next Annual General Meeting. The directors have no present intention to make use of this authority. However, if they do exercise the authority, the directors intend to follow emerging best practice as regards its use (including as regards the directors standing for re-election in certain cases), as recommended by the ABI. 2. Resolution 9 - the Capitalisation Issue In order to enable the directors to effect the Capitalisation Issue the following ordinary resolution will be proposed at the Annual General Meeting: (a) To give the directors the authority to issue new Ordinary Shares in lieu of paying cash dividends of an amount equivalent to 0.8p per Ordinary Share Paragraph 9.1 of Resolution 9 will grant the directors authority to capitalise such amount of the company's share premium account as the directors may determine up to Â£672,000 and to apply such sum in paying up the Capitalisation Issue Shares. (b) To give the directors the authority to allot Ordinary Shares Paragraph 9.2 of Resolution 9 will grant the directors the authority to allot authorised but unissued Ordinary Shares in the share capital of the company. If Resolutions 8 and 9 are passed, the maximum aggregate amount the directors are authorised to allot represents 41.55 per cent. of the total issued ordinary share capital of the company (excluding treasury shares) as at 16 April 2010 (being the latest practicable date prior to the date of this Directors' Report). The authority given by paragraph 9.1 of Resolution 9 shall expire at the conclusion of the company's Annual General Meeting to be held in 2011. The directors at present intend to use the authority conferred by paragraph 9.2 of Resolution 9 to allot the Capitalisation Issue Shares. Further information relating to the proposed Capitalisation Issue is set out on pages 22 and 23 of this Directors' Report. Special Resolutions The following special resolutions will be proposed at the Annual General Meeting: 1. Resolution 10 - disapplication of pre-emption rights Under company law, when new shares are allotted or treasury shares are sold for cash (otherwise than pursuant to an employee share scheme) they must first be offered to existing shareholders in proportion to their existing shareholdings. This special resolution gives the directors authority, for the period ending on the date of the next Annual General Meeting to be held in 2011, to: (a) allot shares of the company and sell treasury shares for cash in connection with a rights issue or other pre-emptive offer; and (b) otherwise allot shares of the company, or sell treasury shares, for cash up to an aggregate nominal value of Â£419,610 representing in accordance with institutional investor guidelines, approximately 5 per cent. of the total ordinary share capital in issue as at 16 April 2010 (being the last practicable date prior to the publication of this Directors' Report in each case as if the pre-emption rights in company law did not apply. Save in respect of issues of shares in respect of employee share schemes and share dividend alternatives, the directors have no present intention to make use of these authorities. The board intends to adhere to the provisions in the Pre-emption Group's Statement of Principles not to allot shares for cash on a non-pre-emptive basis in excess of an amount equal to 7.5% of the company's ordinary share capital within a rolling three-year period without prior consultation with shareholders. 2. Resolution 11 - purchase of own Ordinary Shares The effect of Resolution 11 would be to renew the directors' current authority to make limited market purchases of the company's ordinary shares of 10 pence each. The power is limited to a maximum aggregate number of 8,392,203 ordinary shares (representing approximately 10 per cent of the company's issued share capital as at 16 April 2010 (being the latest practicable date prior to publication of this Directors' Report)). The minimum price (exclusive of expenses) which the company would be authorised to pay for each ordinary share would be 10 pence (the nominal value of each ordinary share). The maximum price (again exclusive of expenses) which the company would be authorised to pay for an ordinary share is an amount equal to the higher of (i) 105% of the average market price for an ordinary share for the five business days preceding any such purchase and (ii) the higher of the last independent trade for an ordinary share and the highest current independent bid for an ordinary share as derived from the trading venue where the purchase is carried out. The authority conferred by Resolution 11 will expire at the conclusion of the company's next Annual General Meeting to be held in 2011 or 15 months from the passing of the resolution, whichever is the earlier. Any purchases of ordinary shares would be made by means of market purchase through the London Stock Exchange. If granted, the authority would only be exercised if, in the opinion of the directors, to do so would result in an increase in earnings per share or asset values per share and would be in the best interests of shareholders generally. In exercising the authority to purchase ordinary shares, the directors may treat the shares that have been bought back as either cancelled or held as treasury shares (shares held by the company itself). No dividends may be paid on shares which are held as treasury shares and no voting rights are attached to them. As at 16 April 2010 (being the last practicable date prior to the publication of this Directors' Report) the total number of options to subscribe for new ordinary shares in the company as at 31 December 2009 was 70,000 shares representing 0.09% of the company's issued share capital as at 31 December 2009. Such number of options to subscribe for new ordinary shares would represent approximately 0.09% of the reduced issued share capital of the company assuming full use of the authority to make market purchases sought under Resolution 11. Other matters Baker Tilly UK Audit LLP have expressed their willingness to continue in office as auditor. A proposal will be made at the Annual General Meeting for their reappointment. By order of the board Michael Stevens, Secretary 16 April 2010 Carlton House 22a St James's Square London SW1Y 4JH Remuneration Report The remuneration committee is pleased to present its report for the year ended 31 December 2009. The remuneration committee is a formally constituted committee of the board and is comprised entirely of independent non-executive directors. The members of the committee are C A Parritt (chairman) and H D Goldring. Remuneration policy for executive directors and non-executive directors The principal function of the remuneration committee is to determine, on behalf of the board, the remuneration and other benefits of the executive directors and senior executives, including pensions, share options and service contracts. The company's policy is designed to attract, retain and motivate individuals of a calibre who will ensure the successful leadership and management of the company. Remuneration packages are designed to reward the executive directors and senior executives fairly for their contributions whilst remaining within the range of benefits offered by similar companies in the sector. The emoluments of each executive director comprise basic salary, a bonus at the discretion of the remuneration committee, provision of a car, premiums paid in respect of individual defined-contribution pension arrangements, health insurance premium and share options. The remuneration of non-executive directors is determined by the board, and takes into account additional remuneration for services outside the scope of the ordinary duties of non-executive directors. No pension costs are incurred on behalf of non-executive directors and they do not participate in the share option schemes. The board's policy is to grant share incentives to executive directors, managers and staff at appropriate times to provide them with an interest in the longer term development of the group. Service and employment contracts All executive directors have full-time contracts of employment with the company. Non-executive directors have contracts of service. No director has a contract of employment or contract of service with the company, its joint venture or associated companies with a fixed term which exceeds twelve months. All directors' contracts, as amended from time to time, have run from the date of appointment. Details of the directors standing for re-election are provided under `Directors' in the directors' report. It is the policy of the committee to issue employment contracts to executive directors with normal commercial terms and without extended terms of notice which could give rise to extraordinary termination payments. Summary of directors' terms Date of contract Unexpired term Notice period Executive directors M A Heller 01-Jan-71 Continuous 6 months J A Heller 01-May-03 Continuous 12 months R J Corry 01-Sep-92 Continuous 6 months M C Stevens 14-Oct-85 Continuous 6 months Non-executive directors H D Goldring 01-Jul-92 Continuous 3 months C A Parritt 01-Jan-06 Continuous 3 months The following information has been audited Directors' Remuneration for the year ended 31 December 2009 Salary Bonus Bonus Other Total Pension Total Total Pension Total And in in benefits before contrib 2009 before contrib 2008 fees cash shares Pension utions Pension utions contrib- contrib utions utions Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Executive directors M A Heller* 7 - 300 50 357 - 357 204 - 204 J A Heller 300 200 406 46 952 30 982 658 30 688 R J Corry 206 25 6 24 261 146 407 221 118 339 M C Stevens 90 - 6 19 115 65 180 136 67 203 603 225 718 139 1,685 241 1,926 1,219 215 1,434 Non-executive directors H D Goldring* 40 - - 4 44 - 44 38 - 38 C A Parritt 30 - - - 30 - 30 25 - 25 70 - - 4 74 - 74 63 - 63 Total 673 225 718 143 1,759 241 2,000 1,282 215 1,497 remuneration for directors' service during year * See "Directors" below and Note 20 "Related party transactions". Other benefits include the provision of car, health and other insurance and subscriptions. Pension schemes and incentives Three (2008: three) directors have benefits under money purchase pension schemes. Contributions in 2009 were Â£241,000 (2008: Â£215,000) as set out in the table above. Directors are not entitled to benefits under any bonus or incentive schemes apart from the share option and share incentive plan, details of which are set out below. Bonuses are awarded by the remuneration committee when merited. In assessing the performance of the executive team and, in particular to determine whether bonuses are merited the remuneration committee takes account of the overall performance of the business. Specific areas addressed include: enhancement of the asset base by effective development; changes in rental income generated; quality and risk profile of the tenant base; voids; timely acquisitions and disposals; security of funding arrangements; and overall teamwork. Bonuses were awarded by the remuneration committee to four executive directors during 2009 (2008: four). Directors Although M A Heller receives reduced remuneration in respect of his services to the group, the group does supply office premises, property management, general management accounting and administration services for a number of companies in which M A Heller has an interest. The board estimates that the value of these services, if supplied to a third party, would have been Â£275,000 (2008: Â£ 275,000) for the year. Further details of these services are set out in Note 20 "Related party transactions" to the financial statements. H D Goldring's company, Delmore Asset Management Limited provides consultancy services to the group. This is dealt with in Note 20 to the financial statements. Share option schemes The company has two share option schemes: 1. The HMRC approved scheme (Approved Scheme) was set up in 1986 in accordance with HMRC rules to gain HMRC approved status which gave the members certain tax advantages. No director has any options outstanding under the Approved Scheme. 2. The non HMRC approved scheme (Unapproved Scheme) was set up in 1998 and is not subject to HMRC rules for approval. One executive director had options in 2009 to subscribe for ordinary shares under the Unapproved Scheme as follows: Number of share options Option 1 31 from Exercised price January Exercised Granted December on 2009 2009 in 2009 2009 Unapproved Scheme: M C Stevens 25.66p 50,000 (50,000) - 8 Mar 02 7 Mar 09 M C Stevens exercised the 50,000 options on 12 February 2009 when the mid- market price was 31.25p There are no performance criteria for the exercise of options under the Approved Scheme, as this was set up before such requirements were considered to be necessary. The exercise of options under the Unapproved Scheme is subject to the satisfaction of objective performance conditions specified by the remuneration committee, which conform to institutional shareholder guidelines and best practice provisions. These performance conditions have been achieved. The bid market price of London & Associated Properties PLC ordinary shares at 31 December 2009 was 43.3p (2008: 25.0p). During the year the share mid-market price ranged between 52.50p and 26.00p. Share incentive plan Following a recommendation of the remuneration committee the directors set up an HMRC approved share incentive plan (SIP) in May 2006. The purpose of the plan, which is open to all eligible LAP head office based executive directors and staff is to enable them to acquire shares in the company to give them a continuing stake in the group. The SIP comprises four types of share - (1) free shares under which the company may award shares up to the value of Â£3,000 each year, (2) partnership shares, under which members may save up to Â£1,500 per annum to acquire shares, (3) matching shares through which the company may award up to two shares for each share acquired as a partnership share, and (4) dividend shares acquired from dividends paid on shares within the SIP. 1. Free shares On 22 December 2009 (2008: 17 November) free shares of up to the annual maximum of Â£3,000 per member were awarded at 43.00p (2008: 44.00p) per share as follows: Free shares awarded: Number of members Number of shares Value of shares 2009 2008 2009 2008 2009 2008 Â£ Â£ Directors: R J Corry 1 1 6,977 6,818 3,000 3,000 J A Heller 1 1 6,977 6,818 3,000 3,000 M C Stevens 1 1 6,977 6,818 3,000 3,000 Staff 17 19 72,792 80,682 31,300 35,500 Total at 31 December 20 22 93,723 101,136 40,300 44,500 2. Partnership shares On 17 November 2009 (2008: 17 November) directors and staff were invited to complete partnership share agreements and commence saving for partnership shares over the period November 2009 to October 2010. At 31 December 2009 three directors and seven staff had saved a total of Â£5,250 towards the cost of partnership shares to be acquired in November 2010. The shares will be acquired at the prevailing market price on the day of acquisition. Partnership shares issued: Number of members Number of shares Value of shares 2009 2008 2009 2008 2009 2008 Directors: Â£ Â£ R J Corry 1 1 3,488 3,409 1,500 1,500 J A Heller 1 1 3,488 3,409 1,500 1,500 M C Stevens 1 1 3,488 3,409 1,500 1,500 Staff 7 19 24,416 53,955 10,500 23,740 Total at 31 December 10 22 34,880 64,182 15,000 28,240 3. Matching shares The partnership share agreements for the year to 31 October 2009 provide for two matching shares to be awarded free of charge for each partnership share acquired in December 2009. On 22 December 2009 69,770 matching shares were allocated (2008: 128,364). Matching shares will usually be forfeited if a member leaves employment in the group within 5 years of their grant. Matching shares granted: Number of members Number of shares Value of shares 2009 2008 2009 2008 2009 2008 Â£ Â£ Directors: R J Corry 1 1 6,977 6,818 3,000 3,000 J A Heller 1 1 6,977 6,818 3,000 3,000 M C Stevens 1 1 6,977 6,818 3,000 3,000 Staff 7 19 48,839 107,910 21,000 47,480 Total at 31 December 10 22 69,770 128,364 30,000 56,480 4. Dividend shares Dividends on shares acquired under the SIP will be utilised to acquire additional shares. Accumulated dividends received on shares in the SIP to 31 December 2009 amounted to Â£6,547 (2008: Â£6,833). Dividend shares issued: Number of members Number of shares Value of shares 2009 2008 2009 2008 2009 2008 Â£ Â£ Directors: R J Corry 1 1 1,573 - 464 - J A Heller 1 1 1,573 - 464 - M C Stevens 1 1 1,573 - 464 - Staff 17 19 17,061 - 5,033 - Total at 31 December 20 22 21,780 - 6,425 - The SIP is set up as an employee benefit trust - The trustee is London & Associated Securities Limited, a wholly owned subsidiary of LAP, and all shares and dividends acquired under the SIP will be held by the trustee until transferred to members in accordance with the rules of the SIP. The following information is unaudited The graph illustrates the company's performance as compared with a broad equity market index over a five year period. Performance is measured by total shareholder return. The directors have chosen the FTSE All Share - Total Return Index as a suitable index for this comparison as it gives an indication of performance against a large spread of quoted companies. C A Parritt Chairman - Remuneration Committee 16 April 2010 Audit Committee Report The committee's terms of reference have been approved by the board and follow published guidelines, which are available on request from the company secretary. At the year end the audit committee comprised the two non-executive directors - H D Goldring and C A Parritt, both Chartered Accountants. The audit committee's prime tasks are to: â€¢ review the scope of external audit, to receive regular reports from Baker Tilly UK Audit LLP and to review the half-yearly and annual accounts before they are presented to the board, focusing in particular on accounting policies and areas of management judgement and estimation; â€¢ monitor the controls which are in force to ensure the integrity of the information reported to the shareholders; â€¢ act as a forum for discussion of internal control issues and contribute to the board's review of the effectiveness of the group's internal control and risk management systems and processes; â€¢ consider once a year the need for an internal audit function; â€¢ advise the board on the appointment of external auditors, the rotation of the audit partner every five years and on their remuneration for both audit and non-audit work; discuss the nature and scope of their audit work and undertake a formal assessment of the auditors' independence each year, which includes: i) a review of non-audit services provided to the group and related fees; ii) discussion with the auditors of their written report detailing all relationships with the company and any other parties that could affect independence or the perception of independence; iii) a review of the auditors' own procedures for ensuring the independence of the audit firm and partners and staff involved in the audit, including the regular rotation of the audit partner; and iv) obtaining a written confirmation from the auditors that, in their professional judgement, they are independent. Meetings The committee meets at least twice prior to the publication of the annual results and discusses and considers the half year results prior to their approval by the board. The audit committee meetings are attended by the external audit partner, chief executive, finance director and company secretary. Prior to monthly board meetings the members of the committee meet on an informal basis to discuss any relevant matters which may have arisen. Additional formal meetings may be held as necessary. During the past year the committee: â€¢ met with the external auditor, and discussed their reports to the audit committee. â€¢ approved the publication of annual and half year financial results. â€¢ considered and approved the annual review of internal controls. â€¢ decided that there was no current need for an internal audit function. â€¢ agreed the independence of the auditors and approved their fees for both audit and non-audit services as set out in note 2 to the financial statements. â€¢ the chairman of the audit committee has had separate meetings with the external audit partner. External Auditor Baker Tilly UK Audit LLP held office throughout the period under review. In the United Kingdom London & Associated Properties PLC provides extensive administration and accounting services to Bisichi Mining PLC, which has its own audit committee and employs PKF (UK) LLP, a separate and independent firm of registered auditors. C A Parritt Chairman - Audit Committee 16 April 2010 Directors' responsibility statement The directors are responsible for preparing the Directors' Report, the Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare group and company financial statements for each financial year. The directors are required under the Listing Rules of the Financial Services Authority to prepare group financial statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and have elected under company law to prepare the company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). The group financial statements are required by law and IFRS adopted by the EU to present fairly the financial position and performance of the group; the Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group and the company for that period. In preparing each of the group and company financial statements, the directors are required to: a. select suitable accounting policies and then apply them consistently; b. make judgements and accounting estimates that are reasonable and prudent; c. state for the group financial statements, whether they have been prepared in accordance with IFRSs adopted by the EU and for the company financial statements whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the company financial statements; d. prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group's and the company's transactions and disclose with reasonable accuracy at any time the financial position of the group and the company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulations. They are also responsible for safeguarding the assets of the group and the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Directors' statement pursuant to the Disclosure and Transparency Rules Each of the directors, whose names and functions are listed on Page 21 confirm that, to the best of each person's knowledge: a. the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the company and the undertakings included in the consolidation taken as a whole; and b. the management reportcontained in the Annual Report includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. Valuers' certificates To the Directors of London & Associated Properties PLC In accordance with your instructions we have carried out a valuation of the freehold and leasehold property interests held as at 31 December 2009 by the company as detailed in our Valuation Report dated 22 February 2010. Having regard to the foregoing, we are of the opinion that the open market value as at 31 December 2009 of these interests was: Â£'000 Freehold 78,209 Leasehold 127,656 205,865 27 Soho Square, London W1D 3AY Allsop LLP 22 February 2010 Property Consultants Regulated by Royal Institution of Chartered Surveyors To the Directors of London & Associated Properties PLC In accordance with your instructions we have carried out a valuation of the freehold property interests held as at 31 December 2009 by the company as detailed in our Valuation Report dated 24 February 2010. Having regard to the foregoing, we are of the opinion that the open market value as at 31 December 2009 of these interests was: Â£'000 Freehold 4,023 Capitol House, Russell Street, BNP Paribas Real Estate Advisory and Property Leeds LS1 5SP Management UK Limited 24 February 2010 Regulated by Royal Institution of Chartered Surveyors INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF LONDON & ASSOCIATED PROPERTIES PLC We have audited the group and parent company financial statements ("the financial statements") on pages 34 to 62. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As more fully explained in the Directors' Responsibilities Statement set out on page 32, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the APB's website at www.frc.org.uk/apb/scope/UKP. Opinion on the financial statements In our opinion * the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2009 and of the group's profit for the year then ended; * the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; * the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and * the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation. Opinion on other matters prescribed by the Companies Act 2006 In our opinion: * the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and * the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following: Under the Companies Act 2006 we are required to report to you if, in our opinion: * adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or * the parent company financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns; or * certain disclosures of directors' remuneration specified by law are not made; or * we have not received all the information and explanations we require for our audit. Under the Listing Rules we are required to review: * the directors' statement, set out on page 32, in relation to going concern; and * the part of the Corporate Governance Statement relating to the company's compliance with the nine provisions of the June 2008 Combined Code specified for our review. Nigel Tristem (Senior Statutory Auditor) For and on behalf of BAKER TILLY UK AUDIT LLP, Chartered Accountants 2 Bloomsbury Street London WC1B 3ST 19 April 2010 Consolidated income statement for the year ended 31 December 2009 2009 2008 Notes Â£'000 Â£'000 Gross rental income Group and share of joint ventures 17,067 16,775 Less: joint ventures - share of rental income (519) (272) Revenue 1 16,548 16,503 Direct property expenses (2,166) (3,137) Overheads (4,865) (4,408) Property overheads 1 (7,031) (7,545) Net rental income 1 9,517 8,958 Listed investments held for trading 3 148 298 Profit on sale of investment properties 14 897 Net increase/(decrease) on revaluation of 9,422 (33,125) investment properties Net increase/(decrease) in value of investments 178 (1,530) held for trading Operating profit/(loss) 1 19,279 (24,502) Share of loss of joint ventures after tax 10 (276) (588) Share of profit of associate after tax 11 1,485 172 Profit/(loss) before interest and taxation 20,488 (24,918) Interest rate derivatives 17 13,269 (21,063) Finance income 5 90 681 Finance expenses 5 (12,440) (11,966) Profit/(loss) before taxation 21,407 (57,266) Income tax 6 (2,355) 9,812 Profit/(loss) for the year attributable to the 19,052 (47,454) owners of the parent Basic profit/(loss) per share 8 24.32p (62.30)p Diluted profit/(loss) per share 8 24.32p (62.30)p The revenue and operating result for the year is derived from continuing operations in the United Kingdom. consolidated balance sheet at 31 December 2009 2009 2008 Notes Â£'000 Â£'000 Non-current assets Market value of properties attributable 213,624 218,532 to Group Present value of head leases 29,485 27,238 Property 9 243,109 245,770 Plant and equipment 9 816 917 Investments in joint ventures 10 1,396 1,793 Investments in associated company 11 8,044 6,567 Held to maturity investments 12 1,805 1,805 255,170 256,852 Current assets Trade and other receivables 13 3,976 3,974 Financial assets-investments held for 14 702 2,330 trading Cash and cash equivalents 8,655 8,191 13,333 14,495 Total assets 268,503 271,347 Current liabilities Trade and other payables 15 (11,427) (11,268) Financial liabilities - borrowings 16 (7,216) (7,277) Current tax liabilities (741) (2,417) (19,384) (20,962) Non-current liabilities Financial liabilities-borrowings 16 (147,788) (160,417) Interest rate derivatives 17 (6,347) (19,616) Present value of head leases on (29,485) (27,238) properties Deferred tax 18 (6,395) (2,808) (190,015) (210,079) Total liabilities (209,399) (231,041) Net assets 59,104 40,306 Equity attributable to the owners of the parent Share capital 19 8,392 8,232 Share premium account 5,042 5,236 Translation reserve in associate (284) (504) Capital redemption reserve 47 47 Retained earnings (excluding treasury 50,465 33,532 shares) Treasury shares 19 (4,558) (6,237) Retained earnings 45,907 27,295 Total shareholders' equity 59,104 40,306 Net assets per share 8 74.22p 52.73p Diluted net assets per share 8 74.19p 52.70p These financial statements were approved by the board of directors and authorised for issue on 16 April 2010 and signed on its behalf by: M A Heller R J Corry Director Director Company Registration No. 341829 Consolidated statement of changes in shareholders' equity for the year ended 31 December 2009 Retained earnings Translation Fair Capital Treasury Retained Total Share Share reserves value redemption Earnings equity capital premium reserve reserve shares excluding * treasury shares Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Balance at 1 January 8,232 5,236 (530) 1,001 47 (6,549) 81,554 88,991 2008 Loss for year - - - - - - (47,454) (47,454) Other comprehensive income: Reclassification of - - - (1,001) - - 1,001 - fair value of interest derivatives Currency translation - - 26 - - - - 26 in associate Total other - - 26 (1,001) - - 1,001 26 comprehensive income Total comprehensive - - 26 (1,001) - - (46,453) (47,428) income Transactions with owners: Equity share options - - - - - - 99 99 in associate Disposal of own shares - - - - - 129 - 129 Loss on transfer of - - - - - 183 (183) - own shares Dividends paid - - - - - - (1,485) (1,485) Transactions with - - - - - 312 (1,569) (1,257) owners Balance at 31 December 8,232 5,236 (504) - 47 (6,237) 33,532 40,306 2008 Profit for year - - - - - - 19,052 19,052 Other comprehensive income: Currency translation - - 220 - - - - 220 in associate Total other - - 220 - - - - 220 comprehensive income Total comprehensive - - 220 - - - 19,052 19,272 income Transaction with owners: Equity share options - - - - - - (76) (76) in associate Issue of own shares 160 (194) - - - - - (34) and expenses Disposal of own shares - - - - - 521 - 521 Loss on transfer of - - - - - 1,158 (1,158) - own shares Dividends paid - - - - - - (885) (885) Transactions with 160 (194) - - - 1,679 (2,119) (474) owners Balance at 31 December 8,392 5,042 (284) - 47 (4,558) 50,465 59,104 2009 * Interest rate derivatives All the above are attributable to the owners of the parent. Consolidated statement of comprehensive income for the year ended 31 December 2009 2009 2008 Â£'000 Â£'000 Profit/(loss) for the year 19,052 (47,454) Other Comprehensive income: Currency translation in associate 220 26 Other comprehensive income for the year 220 26 Total comprehensive income for the period 19,272 (47,428) attributable to owners of the parent Consolidated cash flow statement for the year ended 31 December 2009 2009 2008 Â£'000 Â£'000 Operating activities Profit/(Loss) before interest and taxation 20,488 (24,918) Depreciation 210 200 Profit on disposal of non-current assets (3) (2) Profit on sale of investment properties (14) (897) Net (increase)/decrease on revaluation of investment (9,422) 33,125 properties Share of (profit)/loss of joint ventures and associate (178) 416 after tax Net (increase)/decrease in value of investments held for (1,209) 1,530 trading Decrease in net current assets 2,303 2,566 Cash generated from operations 12,175 12,020 Income tax (paid)/repaid (444) 104 Cash inflows from operating activities 11,731 12,124 Investing activities Investment in shares and loan stock in joint ventures - (2,300) Property acquisitions and improvements (3,763) (19,788) Sale of properties 17,805 16,229 Purchase of office equipment and motor cars (133) (294) Sale of office equipment and motor cars 27 61 Interest received 90 681 Dividends received from associates and joint ventures 273 131 Cash inflows/(outflows) from investing activities 14,299 (5,280) Financing activities Issue expenses (34) - Sale of treasury shares 521 129 Equity dividends paid (885) (1,485) Interest paid (12,132) (12,210) Repayment of short term loan from joint ventures (225) (7) Repayment of medium term bank loan (12,750) (2,571) Cash outflows from financing activities (25,505) (16,144) Net increase/(decrease) in cash and cash equivalents 525 (9,300) Cash and cash equivalents at beginning of year 914 10,214 Cash and cash equivalents at end of year 1,439 914 Cash and cash equivalents For the purpose of the cash flow statement, cash and cash equivalents comprise the following balance sheet amounts: 2009 2008 Â£'000 Â£'000 Cash and cash equivalents (before bank overdrafts) 8,655 8,191 Bank overdrafts (7,216) (7,277) Cash and cash equivalents at end of year 1,439 914 Â£0.6m of cash deposits at 31 December 2009 was charged as security to Axa Annuity Company. Consolidated cash flow statement for the year ended 31 December 2009 2009 2008 Â£'000 Â£'000 Operating activities Profit/(Loss) before interest and taxation 20,488 (24,918) Depreciation 210 200 Profit on disposal of non-current assets (3) (2) Profit on sale of investment properties (14) (897) Net (increase)/decrease on revaluation of investment (9,422) 33,125 properties Share of (profit)/loss of joint ventures and associate (178) 416 after tax Net (increase)/decrease in value of investments held for (1,209) 1,530 trading Decrease in net current assets 2,303 2,566 Cash generated from operations 12,175 12,020 Income tax (paid)/repaid (444) 104 Cash inflows from operating activities 11,731 12,124 Investing activities Investment in shares and loan stock in joint ventures - (2,300) Property acquisitions and improvements (3,763) (19,788) Sale of properties 17,805 16,229 Purchase of office equipment and motor cars (133) (294) Sale of office equipment and motor cars 27 61 Interest received 90 681 Dividends received from associates and joint ventures 273 131 Cash inflows/(outflows) from investing activities 14,299 (5,280) Financing activities Issue expenses (34) - Sale of treasury shares 521 129 Equity dividends paid (885) (1,485) Interest paid (12,132) (12,210) Repayment of short term loan from joint ventures (225) (7) Repayment of medium term bank loan (12,750) (2,571) Cash outflows from financing activities (25,505) (16,144) Net increase/(decrease) in cash and cash equivalents 525 (9,300) Cash and cash equivalents at beginning of year 914 10,214 Cash and cash equivalents at end of year 1,439 914 Cash and cash equivalents For the purpose of the cash flow statement, cash and cash equivalents comprise the following balance sheet amounts: 2009 2008 Â£'000 Â£'000 Cash and cash equivalents (before bank overdrafts) 8,655 8,191 Bank overdrafts (7,216) (7,277) Cash and cash equivalents at end of year 1,439 914 Â£0.6m of cash deposits at 31 December 2009 was charged as security to Axa Annuity Company. Group accounting policies The following are the principal group accounting policies: Basis of accounting The group financial statements for the year ended 31 December 2009 are prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The company has elected to prepare the parent company's financial statements in accordance with UK GAAP, as applied in accordance with the provisions of the Companies Act 2006 and these are presented in note 25. The financial statements are prepared under the historical cost convention, except for the revaluation of freehold and leasehold properties and financial assets held for trading and fair value of interest derivatives. The group financial statements are presented in Pounds Sterling and all values are rounded to the nearest thousand pounds (Â£'000) except when otherwise stated. London & Associated Properties PLC is a public listed parent company, incorporated and domiciled in England and quoted on the London Stock Exchange. The Company registration number is 341829. Going concern The most significant judgements made in preparing these accounts relate to the carrying value of the properties, investments and interest rate hedges which are stated at open market value. The Group uses external professional valuers to determine the values of our properties. The Directors exercised their commercial judgements when reviewing the cash flow forecasts of the Group and the underlying assumptions on which they are based. The Group's business activities, together with the factors likely to affect its future development, are set out in the Chairman's Statement, the Chief Executive's Report and Finance Director's Report. In addition the Directors considered note 17 of the financial statements which include the company's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; its exposure to credit risk and liquidity risk. With sound financial resources and long term leases in place with the tenants, the Directors believe that the company is well placed to manage its business risks despite the current uncertain economic outlook. The Directors therefore have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. Key judgements and estimates The preparation of the financial statements requires management to make assumptions and estimates that may affect the reported amounts of assets and liabilities and the reported income and expenses, further details of which are set out below. Although management believes that the assumptions and estimates used are reasonable, the actual results may differ from those estimates. Further details of which are contained in the Directors' Report. International Accounting Standards (IAS/IFRS) At the date of approval of these financial statements, the following new Standards and interpretations which have been applied in these Financial statements, were in issue: IAS 1 (amended) Presentation of financial statements IAS 23 (amended) Borrowing costs. IAS 27 (revised) Consolidated and separate financial statements. IAS 39 (amended) Eligible hedged items. IFRS 1 (amended) Cost of investment in a subsidiary, jointly controlled entity or associate. IFRS 2 (amended) Share-based payments - vesting conditions and cancellations. IFRS 3 (revised) Business combinations. IFRS 7 (amended) Financial instruments. IFRS 8 Operating segments. IFRIC 9 (amended) Reassessment of Embedded Derivatives. IFRIC 15 Agreements for the construction of real estate. IFRIC 17 Distributions of non-cash assets to owners. Other than additional disclosure, there is no effect on reported income or net assets. The directors anticipate that the adoption of the standards and interpretations in issue but not yet effective in future periods will have no material impact on the financial statements of the Group. Basis of consolidation The Group accounts incorporate the accounts of London & Associated Properties PLC and all of its subsidiary undertakings, together with the Group's share of the results and net assets of its joint ventures and associate. Subsidiaries Subsidiaries are those entities controlled by the Group. Control is assumed when the Group has the power to govern the financial and operating policies of an entity or business and to economically benefit from its activities. Subsidiaries acquired during the year are consolidated using the acquisition method. Their results are incorporated from the date that control passes. All intra group transactions, balances, income and expenses are eliminated on consolidation. Details of Group trading subsidiary companies are set out in note 25.4. Joint ventures Investments in joint ventures, being those entities over whose activities the Group has joint control, as established by contractual agreement, include the appropriate share of the results and net assets of those undertakings. Associates Undertakings in which the Group has a participating interest of not less than 20% of the voting capital and over which it has the power to exert significant influence are defined as associated undertakings. The financial statements include the appropriate share of the results and reserves of those undertakings. Goodwill Goodwill arising on acquisition is recognised as an intangible asset and initially measured at cost, being the excess of the cost of the acquired entity over the Group's interest in the fair value of the assets and liabilities acquired. Goodwill is carried at cost less accumulated impairment losses. Goodwill arising from the difference in the calculation of deferred tax for accounting purposes and fair value in negotiations is judged not to be an asset and is accordingly impaired on completion of the relevant acquisition. Revenue Rental income Rental income arises from operating leases granted to tenants. An operating lease is a lease other than a finance lease. A finance lease is one whereby substantially all the risks and rewards of ownership are passed to the lessee. Rental income is recognised in the group income statement on a straight-line basis over the term of the lease. This includes the effect of lease incentives to tenants, which are normally in the form of rent free periods or capital contributions in lieu of rent free periods. For income from property leased out under a finance lease, a lease receivable asset is recognised in the balance sheet at an amount equal to the net investment in the lease, as defined in IAS 17. Minimum lease payments receivable, again as defined in IAS 17, are apportioned between finance income and the reduction of the outstanding lease receivable so as to produce a constant periodic rate of return on the remaining net investment in the lease. Contingent rents, being the difference between the rent currently receivable and the minimum lease payments, are recognised in property income in the periods in which they are receivable. Rent reviews are recognised when such reviews have been agreed with tenants. Reverse surrender premiums Payments received from tenants to surrender their lease obligations are recognised immediately in the income statement. Dilapidations Dilapidations monies received from tenants in respect of their lease obligations are recognised immediately in the income statement. Other revenue Revenue in respect of listed investments held for trading represents investment dividends received and profit or loss recognised on realisation. Dividends are recognised in the income statement when the dividend is received. Property operating expenses Property operating expenses are expensed as incurred and any property operating expenditure not recovered from tenants through service charges is charged to the income statement. Employee benefits Share based remuneration The company operates a long-term incentive plan and two share option schemes. The fair value of the conditional awards on shares granted under the long- term incentive plan and the options granted under the share option scheme are determined at the date of grant. This fair value is then expensed on a straight-line basis over the vesting period, based on an estimate of the number of shares that will eventually vest. At each reporting date, the fair value of the non-market based performance criteria of the long-term incentive plan is recalculated and the expense is revised. In respect of the share option scheme, the fair value of options granted is calculated using a binomial method. Pensions The company operates a defined contribution pension scheme. The contributions payable to the scheme are expensed in the period to which they relate. Financial instruments Investments Held to maturity investments are stated at amortised cost using the effective interest rate method. Investments held for trading are included in current assets at fair value. For listed investments, fair value is the bid market listed value at the balance sheet date. Realised and unrealised gains or losses arising from changes in fair value are included in the income statement of the period in which they arise. Trade and other receivables Trade and other receivables are recognised initially at fair value. A provision for impairment of trade receivables is made when there is evidence that the group will not be able to collect all amounts due. Trade and other payables Trade and other payables are non interest bearing and are stated at their nominal value. Bank loans and overdrafts Bank loans and overdrafts are included as financial liabilities on the group balance sheet net of the unamortised discount and costs of issue. Interest payable on those facilities is expensed as a finance cost in the period to which it relates. Debenture loans The debenture loans are included as a financial liability on the balance sheet net of the unamortised costs on issue. The cost of issue is recognised in the group income statement over the life of the debenture. Interest payable to debenture holders is expensed in the period to which it relates. Finance lease liabilities Finance lease liabilities arise for those investment properties held under a leasehold interest and accounted for as investment property. The liability is calculated as the present value of the minimum lease payments, reducing in subsequent reporting periods by the apportionment of payments to the lessor. Lease payments are allocated between the liability and finance charges so as to achieve a constant financing rate. Contingent rents payable, such as rent reviews or those related to rental income, are charged as an expense in the period in which they are incurred. Interest rate derivatives The group uses derivative financial instruments to hedge the interest rate risk associated with the financing of the group's business. No trading in such financial instruments is undertaken. At each reporting date, these interest rate derivatives are recognised at their fair value to the business, being the Net Present Value of the difference between the hedged rate of interest and the market rate of interest for the remaining period of the hedge. Where a derivative is designated as a hedge of the variability of a highly probable forecast transaction i.e. an interest payment, the element of the gain or loss on the derivative that is an effective hedge is recognised directly in equity. When the forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gains or losses that were recognised directly in equity are reclassified into the income statement in the same period or periods during which the asset acquired or liability assumed affects the income statement i.e. when interest income or expense is recognised. The gain or loss arising from any adjustment to the fair value to the business calculation is recognised immediately in the group income statement when the criteria set out in IAS 32 allowing the movements to be shown in equity have not been met. Treasury shares When the group's own equity instruments are repurchased, consideration paid is deducted from equity as treasury shares until they are cancelled. When such shares are subsequently sold or reissued, any consideration received is included in equity. Investment properties Valuation Investment properties are those that are held either to earn rental income or for capital appreciation or both, including those that are undergoing redevelopment. They are reported on the group balance sheet at fair value, being the amount for which an investment property could be exchanged between knowledgeable and willing parties in an arm's length transaction. The valuation is undertaken by independent valuers who hold recognised and relevant professional qualifications and have recent experience in the locations and categories of properties being valued. Surpluses or deficits resulting from changes in the fair value of investment property are reported in the group income statement in the period in which they arise. Capital expenditure Investment properties are measured initially at cost, including related transaction costs. Additions to capital expenditure, being costs of a capital nature, directly attributable to the redevelopment or refurbishment of an investment property, up to the point of it being completed for its intended use, are capitalised in the carrying value of that property. The redevelopment of an existing investment property will remain an investment property measured at fair value and is not reclassified. Capitalised interest is calculated with reference to the actual rate payable on borrowings for development purposes, or for that part of the development costs financed out of borrowings the capitalised interest is calculated on the basis of the average rate of interest paid on the relevant debt outstanding. Disposal The disposal of investment properties is accounted for on completion of contract. On disposal, any gain or loss is calculated as the difference between the net disposal proceeds and the valuation at the last year end plus subsequent capitalised expenditure in the period. Depreciation and amortisation In applying the fair value model to the measurement of investment properties, depreciation and amortisation are not provided in respect of investment properties. Plant and equipment Other non-current assets, comprising motor vehicles and office equipment, are depreciated at a rate of between 10% and 33% per annum which is calculated to write off the cost, less estimated residual value of the assets, on a straight line basis over their expected useful lives. Income taxes The charge for current taxation is based on the results for the year as adjusted for disallowed or non-assessable items. Tax payable upon realisation of revaluation gains recognised in prior periods is recorded as a current tax charge with a release of the associated deferred tax. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the tax computations, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. In respect of the deferred tax on the revaluation surplus, this is calculated on the basis of the chargeable gains that would crystallise on the sale of the investment portfolio as at the reporting date. The calculation takes account of indexation on the historic cost of properties and any available capital losses. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the group income statement, except when it relates to items charged or credited directly to equity, in which case it is also dealt with in equity. Cash and cash equivalents Cash comprises cash in hand and on demand deposits, net of bank overdrafts. Cash equivalents comprise short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value and original maturities of three months or less. Segmental Reporting For management reporting purposes, the Group is organised into business segments distinguishable by economic activity. The Group's only business segments are investment properties and other investments. These business segments are subject to risks and returns that are different from those of other business segments and are the primary basis on which the Group reports its segment information. This is consistent with the way the Group is managed and with the format of the Group's internal financial reporting. Notes to the financial statements for the year ended 31 December 2009 1. Segmental analysis Following the adoption of IFRS 8 during the year, Operating Segments are based on the internal reporting and operational management of the Group. The Group is organised into Property and other investments. Business segments 2009 2008 Property Listed Property Listed investments Total investments Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Rental income 16,548 - 16,548 16,503 - 16,503 Property overheads (7,031) - (7,031) (7,545) - (7,545) Net rental income 9,517 - 9,517 8,958 - 8,958 Listed investment - 148 148 - 298 298 income Profit on sale of 14 - 14 897 - 897 investment properties Net increase/ 9,422 - 9,422 (33,125) - (33,125) (decrease) on revaluation of investment properties Net increase/ - 178 178 - (1,530) (1,530) (decrease) on revaluation of investments held for trading Operating profit/ 18,953 326 19,279 (23,270) (1,232) (24,502) (loss)* Total assets 256,556 702 257,258 258,857 2,330 261,187 (excluding investments in associate and joint ventures) Total liabilities (53,654) - (53,654) (60,930) - (60,930) (excluding borrowings and current tax) Borrowings (155,004) - (155,004) (167,694) - (167,694) Net assets 47,898 702 48,600 30,233 2,330 32,563 Current tax (741) (2,417) liabilities: non segmental Investments in joint 3,196 3,588 ventures: non segmental (notes 10 and 12) Investments in 8,044 6,567 associate: non segmental (note 11) Investments in 5 5 unlisted companies Net assets as per 59,104 40,306 balance sheet Other segment items: Depreciation 210 - 210 200 - 200 Capital expenditure 3,594 - 3,594 19,208 - 19,208 Rental income Dragon Group Property Analytical Retail Share Ventures Properties 2009 Total Total 2008 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Rental income 16,548 818 220 17,586 17,067 16,775 Direct property expenses (2,166) (57) (13) (2,236) (2,201) (3,156) Overheads (4,865) (222) (70) (5,157) (5,011) (4,563) 9,517 539 137 10,193 9,855 9,056 Less: attributable to (338) (98) joint ventures Net rental income 9,517 8,958 *Operating profit is defined as profit before tax and excludes the share of profit & losses of joint ventures and associate, Finance income and expenses, and the movement of interest rate derivatives. Geographical segments At net rental income level, the Group operates in the United Kingdom only. The directors consider it to be the only geographical segment of the business. Further information in respect of the property reportable segment is included within the primary statements. No customer represents revenue in excess of 10 per cent of total revenue (2008:none). 2. Profit/(loss) before taxation 2009 2008 Â£'000 Â£'000 Profit/(loss) before taxation is arrived at after charging/ (crediting): Staff costs (note 21) 3,361 2,829 Depreciation on tangible fixed assets - owned assets 210 200 Operating lease rentals - land and buildings 385 373 Profit on disposal of motor vehicles and office equipment (3) (2) Amounts payable to the auditor in respect of both audit and non-audit services Audit services: Statutory - company and consolidation 81 82 - subsidiaries 54 65 Further assurance services 10 11 Other services 8 8 153 166 Staff costs and depreciation of tangible fixed assets are included in overheads. 3. Listed investments held for trading 2009 2008 Â£'000 Â£'000 Investment sales 1,948 1,603 Dividends receivable 60 141 2,008 1,744 Cost of sales (1,835) (1,421) 173 323 Attributable overheads (25) (25) 148 298 4. Directors' emoluments 2009 2008 Â£'000 Â£'000 Emoluments 1,759 1,282 Defined contribution pension scheme contributions 241 215 2,000 1,497 Details of directors' emoluments and share options are set out in the remuneration report. 5. Finance costs 2009 2008 Â£'000 Â£'000 Finance income 90 681 Finance expenses Interest on bank loans and overdrafts (3,013) (9,575) Interest on other loans (2,108) (2,178) Interest on derivatives adjustment (5,338) 1,614 Interest on obligations under finance leases (1,981) (1,989) Total borrowing costs (12,440) (12,128) Amounts included in the cost of qualifying assets - 162 (12,440) (11,966) (12,350) (11,285) No interest payable (2008: Â£162,000) has been transferred to the cost of investment properties (Note 9). The amounts capitalised represent the cost of funds forming part of the Group's borrowings which were used in financing major capital projects. 6. Income tax 2009 2008 Â£'000 Â£'000 Current tax: Corporation tax on profit/(loss) of the period - 299 Adjustments in respect of previous periods (1,232) 152 Total current tax (1,232) 451 Deferred tax Origination and reversal of timing differences (1,052) 2,269 Revaluation of investment properties 658 (7,726) Accelerated capital allowances 270 397 Fair value of interest derivatives 3,715 (5,898) Adjustments in respect of previous periods (4) 695 Total deferred tax (note 18) 3,587 (10,263) Tax on profit/(loss) on ordinary activities 2,355 (9,812) Factors affecting tax charge for the year The corporation tax assessed for the year is different from that at the standard rate of corporation tax in the United Kingdom of 28 per cent (2008: 28.5 per cent). The differences are explained below: Profit/(loss) on ordinary activities before taxation 21,407 (57,266) Taxation on ordinary activities at 28 per cent (2008: 28.5%) 5,994 (16,321) Effects of: Expenses not deductible for tax purposes 4 8 Other differences (2,059) 5,243 Joint ventures and associate (348) 119 Deferred tax rate adjustment - 292 Adjustment in respect of prior years (1,236) 847 Tax charge/(credit) for the period 2,355 (9,812) The main component of other differences in the reconciliation relates to potential capital gains of Â£1.9 million (2008: indexation allowance Â£4.8 million). Factors that may affect future tax charges: Based on current capital expenditure plans, the Group expects to continue to be able to claim capital allowances in excess of depreciation in future years, but at a slightly lower level than in the current year. Deferred tax provision has been made for gains on revaluing investment properties. At present it is not envisaged that any tax will become payable in the foreseeable future. 7. Dividend 2009 2008 Per Â£'000 Per Â£'000 share share Dividends paid during the year relating to the 1.15p 885 1.95p 1,485 prior period Equivalent final dividend in ordinary shares 0.80p - issued during the year relating to prior period 1.95p 1.95p Dividends to be paid: Interim dividend for 2009 paid on 22 January 0.75p 597 0.75p 571 2010 Proposed equivalent final dividend for 2009 1.20p 981 1.20p 933 (0.4p in cash and 0.8p in ordinary shares) 1.95p 1,578 1.95p 1,504 The proposed final dividend will be payable on 2 July 2010 to shareholders registered at the close of business on 4 June 2010. 8. Profit/(loss) per share and net assets per share Profit/(loss) per share have been calculated as follows: 2009 2008 Profit/(loss) for the year for the purposes of basic and 19,052 (47,454) diluted loss per share (Â£'000) Weighted average number of ordinary shares in issue for the 78,345 76,172 purpose of basic profit/(loss) per share ('000) Basic profit/(loss) per share 24.32p (62.30)p Weighted average number of ordinary shares in issue for the 78,345 76,172 purpose of diluted profit/(loss) per share ('000) Fully diluted profit/(loss) per share 24.32p (62.30)p Weighted average number of shares in issue is calculated after excluding treasury shares of 4,293,051 (2008: 5,873,865). There was no dilutive effect of the outstanding options in either year. Net assets per share have been calculated as follows: Net assets Shares in issue Net assets per share 2009 2008 2009 2008 2009 2008 Â£'000 Â£'000 `000 `000 Pence Pence Basic At 31 December 59,104 40,306 79,629 76,443 74.22 52.73 Dilution adjustments for shares subject to option agreements: Issue of outstanding share 28 40 70 120 options Diluted 59,132 40,346 79,699 76,563 74.19 52.70 9. Property and plant and equipment Investment Properties Office Leasehold equipment over and motor Freehold 50 years Total vehicles Â£'000 Â£'000 Â£'000 Â£'000 Cost or valuation at 1 95,272 150,498 245,770 1,682 January 2009 Additions 1,450 2,011 3,461 133 Disposals (17,791) - (17,791) (81) Increase in present value of - 2,247 2,247 - head leases Increase on revaluation 4,667 4,755 9,422 - Cost or valuation at 31 83,598 159,511 243,109 1,734 December 2009 Representing assets stated at: Valuation 83,598 130,026 213,624 - Present value of head leases - 29,485 29,485 - Cost - - - 1,734 83,598 159,511 243,109 1,734 Depreciation at 1 January - - - 765 2009 Charge for the year - - - 210 Disposals - - - (57) Depreciation at 31 December - - - 918 2009 Net book value at 1 January 95,272 150,498 245,770 917 2009 Net book value at 31 December 83,598 159,511 243,109 816 2009 9. Property and plant and equipment continued Investment Properties Office Leasehold equipment over and motor Freehold 50 years Total vehicles Â£'000 Â£'000 Â£'000 Â£'000 Cost or valuation at 1 116,206 163,541 279,747 1,554 January 2008 Additions 15,438 3,476 18,914 294 Disposals (15,333) - (15,333) (166) Decrease in present value of - (4,433) (4,433) - head leases Decrease on revaluation (21,039) (12,086) (33,125) - Cost or valuation at 31 95,272 150,498 245,770 1,682 December 2008 Representing assets stated at: Valuation: 95,272 123,260 218,532 - Present value of head leases - 27,238 27,238 - Cost - - - 1,682 95,272 150,498 245,770 1,682 Depreciation at 1 January - - - 673 2008 Charge for the year - - - 200 Disposals - - - (108) Depreciation at 31 December - - - 765 2008 Net book value at 1 January 116,206 163,541 279,747 881 2008 Net book value at 31 December 95,272 150,498 245,770 917 2008 The leasehold over fifty years and freehold properties, excluding the present value of head leases, were valued as at 31 December 2009 by external professional firms of chartered surveyors and Directors. The valuations were made at open market value. 2009 2008 Â£'000 Â£'000 Allsop LLP 205,865 214,855 BNP Paribas Real Estate 4,023 3,677 Directors' valuation 3,736 - 213,624 218,532 Add: Present value of headleases 29,485 27,238 243,109 245,770 Upper Street, Islington, which was held at Directors' valuation at the balance sheet date, was sold in January 2010 for Â£3.8 million. The historical cost of investment properties, including total capitalised interest of Â£6,051,000 (2008: Â£6,051,000) was as follows: 2009 2008 Leasehold Leasehold Freehold Over 50 Freehold Over 50 years years Â£'000 Â£'000 Â£'000 Â£'000 Cost at 1 January 96,308 131,451 94,957 127,975 Additions 1,450 2,011 15,438 3,476 Disposals (17,150) - (14,087) - Cost at 31 December 80,608 133,462 96,308 131,451 10. Investment in joint ventures 2009 2008 Â£'000 Â£'000 Group share of: Turnover 519 272 Loss before tax (242) (684) Taxation (34) 96 Loss after tax (276) (588) Non-current assets 6,565 6,712 Current assets 1,582 1,874 Current liabilities (3,871) (1,485) Non-current liabilities (2,880) (5,308) Net assets 1,396 1,793 Analytical Ventures Limited (Analytical Ventures) - unlisted property investment company. The company owns 50 per cent of the issued share capital and 50 per cent of the issued loan stock. The remaining 50 per cent is owned by the Bank of Scotland. Analytical Ventures is incorporated and operates in England and Wales and has issued share capital of 7,558,000 ordinary shares (2008:7,558,000 ordinary shares of Â£1 each). Analytical Ventures is managed by a board of directors with neither party having overall control. Dragon Retail Properties Limited (Dragon) - unlisted property trading and investment company. The company owns 50 per cent of the issued share capital. The remaining 50 per cent is owned by Bisichi Mining PLC. Dragon is incorporated and operates in England and Wales and has issued share capital of 500,000 ordinary shares of Â£1 each (2008:500,000 ordinary shares of Â£1 each). Dragon is managed by a board of directors with neither party having overall control. Shares in joint ventures: 2009 2008 Â£'000 Â£'000 At 1 January 1,793 1,881 Share of loss after tax (276) (588) Dividend received (121) - Investment valuation - 500 (397) (88) At 31 December 1,396 1,793 11. Investments in associated company 2009 2008 Â£'000 Â£'000 Bisichi Mining PLC - listed mining and property investment company Group share of: Turnover 12,094 10,828 Profit before tax 2,039 929 Taxation (554) (757) Profit after tax 1,485 172 Non-current assets 9,971 9,573 Current assets 4,308 4,574 Current liabilities (4,345) (5,929) Non-current liabilities (1,890) (1,651) Net assets 8,044 6,567 2009 2008 Â£'000 Â£'000 Share in associate: At 1 January 6,567 6,401 Share of profit after tax 1,485 172 Equity share options (76) 99 Currency translation 220 26 Dividend received (152) (131) 1,477 166 At 31 December 8,044 6,567 The company owns 42 per cent (2008: 42 per cent) of the issued share capital of Bisichi Mining PLC (Bisichi), a company registered in England and Wales. Bisichi has an issued share capital of 10,451,506 ordinary shares of 10p each, and its principal countries of operation are the United Kingdom (property investment) and South Africa (coal mining). Bisichi is an associated undertaking by virtue that London & Associated Properties PLC has a participating interest. Bisichi has an independent board of directors which controls its operating and financial policies. The market (bid) value of this investment at 31 December 2009 was Â£7,611,000 (2008: Â£6,087,000). 12. Held to maturity investments Loan Loan 2009 Unlisted Stock 2008 Unlisted Stock Total Shares in joint Total Shares in joint ventures ventures Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Cost At 1 January 1,805 5 1,800 5 5 - Loan stock issue - - - 1,800 - 1,800 At 31 December 1,805 5 1,800 1,805 5 1,800 13. Trade and other receivables 2009 2008 Â£'000 Â£'000 Trade receivables 736 966 Amounts due from associate and joint ventures 196 148 Other receivables 437 474 Prepayments and accrued income 2,607 2386 3,976 3,974 The directors consider that the carrying amount of trade and other receivables approximates to their fair value. 14. Investments held for trading 2009 2008 Â£'000 Â£'000 Market bid value of the listed investment 702 2,330 portfolio Unrealised deficit of market value over cost (467) (490) Listed investment portfolio at cost 1,169 2,820 All investments are listed on the London Stock Exchange. 15. Trade and other payables 2009 2008 Â£'000 Â£'000 Trade payables 691 1,070 Amounts owed to joint ventures 1,165 1,454 Other taxation and social security costs 825 553 Other payables 789 874 Accruals and deferred income 7,957 7,317 11,427 11,268 The directors consider that the carrying amount of trade and other payables approximates to their fair value. 16. Borrowings Current borrowings - amounts falling due within one year 2009 2008 Â£'000 Â£'000 Bank overdrafts (unsecured) 7,216 7,277 Non-current borrowings - amounts falling due after more than one year Term borrowings Debenture stocks: Â£5 million First Mortgage Debenture Stock 2013 at 11.3 per 5,000 5,000 cent Â£1.7 million First Mortgage Debenture Stock 2016 at 8.67 1,700 1,700 per cent Â£5 million First Mortgage Debenture Stock 2018 at 11.6 per 5,000 5,000 cent Â£10 million First Mortgage Debenture Stock 2022 at 8.109 9,787 9,770 per cent* 21,487 21,470 Term bank loans: Â£90 million revolving credit facility repayable in 2011* 56,494 69,184 Â£70 million term bank loan repayable in 2014* 69,807 69,763 126,301 138,947 147,788 160,417 *The Â£10 million debenture and bank loans are shown after deduction of outstanding amortised issue costs. Interest payable on the term bank loans is variable being based upon the London inter bank offered rate (LIBOR) plus margin. First Mortgage Debenture Stocks 2013, 2016, 2018 and 2022, the long term Â£90 million bank revolving credit facility repayable in September 2011 and the long term Â£70 million term bank loan repayable in November 2014 are secured on specific freehold and leasehold properties which are included in the financial statements at a value of Â£209.6 million. The bank loans and debentures are secured by way of a first charge over the investment properties in the UK. The Group's objectives when managing capital are: - To safeguard the Group's ability to continue as a going concern, so that it may provide returns for shareholders and benefits for other stakeholders; and - To provide adequate returns to shareholders by ensuring returns are commensurate with the risk. 17. Financial instruments Treasury policy The Group enters into derivative transactions such as interest rate swaps and forward exchange contracts in order to help manage the financial risks arising from the Group's activities. The main risks arising from the Group's financing structure are interest rate risk, liquidity risk and market price risk. The policies for managing each of these risks and the principal effects of these policies on the results are summarised below. Interest rate risk Treasury activities take place under procedures and policies approved and monitored by the Board to minimise the financial risk faced by the Group. The bank loans are secured by way of a first charge on certain fixed assets. The rates of interest vary based on LIBOR in the UK. Sensitivity analysis As all term debt has been covered by hedged derivatives it is not considered that there is any material sensitivity for the Group to changes in interest rates. Liquidity risk The Group's policy is to minimise refinancing risk by balancing its exposure to interest risk and to refinancing risk. In effect the Group seeks to borrow for as long as possible at the lowest acceptable cost. Efficient treasury management and strict credit control minimise the costs and risks associated with this policy which ensures that funds are available to meet commitments as they fall due. Cash and cash equivalents earn interest at rates based on LIBOR in the UK. These facilities are considered adequate to meet the Group's anticipated cash flow requirements for the foreseeable future. 17. Financial instruments continued The table below analyses the Group's financial liabilities into maturity Groupings and also provides details of the liabilities that bear interest at fixed, floating and non-interest bearing rates. Less than Over 5 2009 1 year 2-5 years Total years Â£'000 Â£'000 Â£'000 Â£'000 Bank overdrafts (floating) 7,216 - - 7,216 Debentures (fixed) - 5,000 16,700 21,700 Bank loans (floating)* - 126,679 - 126,679 Trade and other payables 11,427 - - 11,427 (non-interest) 18,643 131,679 16,700 167,022 Less 2-5 Over 5 2008 than years years Total 1 year Â£'000 Â£'000 Â£'000 Â£'000 Bank overdrafts (floating) 7,277 - - 7,277 Debentures (fixed) - 5,000 16,700 21,700 Bank loans (floating)* - 69,429 70,000 139,429 Trade and other payables 11,268 - - 11,268 (non-interest) 18,545 74,429 86,700 179,674 The Group would normally expect that sufficient cash is generated in the operating cycle to meet the contractual cash flows as disclosed above through effective cash management. *All the bank loans are fully hedged with appropriate interest derivatives. Details of all hedges are shown below. Market price risk The Group is exposed to market price risk through interest rate and currency fluctuations. Credit risk At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet. The Group only deposits surplus cash with well-established financial institutions of high quality credit standing. Borrowing facilities At 31 December 2009 London & Associated Properties PLC was within its bank borrowing facilities and was not in breach of any of the covenants. Overdrafts are renewable annually. Term loan repayments are as set out below. Details of other financial liabilities are shown in notes 15 and 16. The Group has undrawn facilities of Â£35,105,000 (2008: Â£22,544,000) as follows: 2009 2008 Â£'000 Â£'000 Overdrafts 1,784 1,973 Term facilities expiring in two to five years 33,321 20,571 35,105 22,544 Hedge profile a) There is a hedge to cover part of the Â£90 million revolving credit facility, which currently covers the full Â£57 million drawn. It consists of a 20 year swap for Â£35 million with a 7 year call option in favour of the bank, taken out in November 2007, at 4.76 per cent and a 20 year swap for Â£40 million with a 7 year call option in favour of the bank, taken out in December 2007, at 4.685 per cent. b) There is a hedge to cover the Â£70 million term bank loan drawn. It consists of a 20 year swap for Â£70 million with a 7 year call option in favour of the bank, taken out in November 2007, at 4.76 per cent. At the year end the amount recognised was Â£4,570,000 deficit (2008: Â£14,146,000 deficit) being the estimated financial effect of the fair value to the business of these hedging instruments less the deferred tax thereon. The Directors have estimated the financial effect of the fair value to the business of these hedging instruments. This has been calculated as the Net Present Value of the difference between the 18 year interest rate, which was 4.38 per cent at 31 December 2009 against the rate payable under the specific hedge. This has given a liability at 31 December 2009 of Â£6,347,000 (2008: Â£ 19,616,000) as shown in the balance sheet and this value changes by approximately Â£1,800,000 for each 0.1% change in interest rate. The banks own initial quotations at 31 December 2009 to close each of the hedges were Â£ 9,918,000 (2008: Â£24,893,000). It is not the company's intention to crystallise the derivatives. Under IAS 39 the hedges are not deemed to be eligible for hedge accounting and any movement in the value of the hedges is therefore charged directly to the consolidated income statement. The banks have an option to cancel the hedges in November 2014 and January 2015. Fair value of financial instruments Fair value estimation Effective 1 January 2009, the Group adopted amendment to IFRS 7 for financial instruments that are measured in the balance sheet at fair value, this requires disclosure of fair value measurements by level of the following fair value hierarchy: * Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). * Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). * Inputs for the asset or liability that are not based on observable market data (that is unobservable inputs) (level 3). 2009 Level 1 Level 2 Level 3 Total Gain/ Â£'000 Â£'000 Â£'000 Â£'000 (loss) to income statement Â£'000 Financial assets Other financial assets held for trading Quoted equities 702 - - 702 178 Financial liabilities Derivative financial instruments Interest rate swaps - - 6,347 6,347 13,269 2008 Level 1 Level 2 Level 3 Total Gain/ Â£'000 Â£'000 Â£'000 Â£'000 (loss) to income statement Â£'000 Financial assets Other financial assets held for trading Quoted equities 2,330 - - 2,330 (1,530) Financial liabilities Derivative financial instruments Interest rate swaps - - 19,616 19,616 (21,063) Capital structure The Group sets the amount of capital in proportion to risk. It ensures that the capital structure is commensurate to the economic conditions and risk characteristics to the underlying assets. In order to maintain or adjust the capital structure, the Group may adjust the capital structure, vary the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group considers its capital to include share capital, share premium, capital redemption reserve, translation reserve and retained earnings, but excluding the fair value reserve and the interest rate derivatives. Consistent with others in the industry, the Group monitors its capital by its debt to equity ratio (gearing levels). This is calculated as the net debt (loans less cash and cash equivalents) as a percentage of the equity. During 2009 this decreased to 221.6 per cent (2008: 266.2 per cent) which was calculated as follows: 2009 2008 Â£'000 Â£'000 Total debt 155,004 167,694 Less cash and cash equivalents (8,655) (8,191) Net debt 146,349 159,503 Total equity 65,451 59,922 223.6% 266.2% The gearing reduced primarily due to the rise in the asset values in the year. All the debt, apart from the overdrafts, is at fixed rates of interest as shown in notes 16 and 17. The Group does not have any externally imposed capital requirements. Financial assets Financial assets are disclosed in notes 12, 13 and 14 and above. The Group's principal financial assets are bank balances and cash, trade and other receivables and investments. The Group has no significant concentration of credit risk as exposure is spread over a large number of counterparties and customers. The credit risk in liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies. The Group's credit risk is primarily attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables, estimated by the Group's management based on prior experience and the current economic environment. Financial assets maturity Cash and cash equivalents all have a maturity of less than three months. 2009 2008 Â£'000 Â£'000 Cash at bank and in hand 8,655 8,191 These funds are primarily invested in short term bank deposits maturing within one year bearing interest at the bank's variable rates. Â£0.6 million (2008: Â£ nil) of the cash is secured against the 2022 First Mortgage Debenture. Financial liabilities maturity Repayment of borrowings 2009 2008 Â£'000 Â£'000 Bank loans and overdrafts: Repayable on demand or within one year 7,216 7,277 Repayable between two and five years 126,301 69,184 Repayable after more than five years - 69,763 133,517 146,224 Debentures: Repayable between two and five years 5,000 5,000 Repayable in more than five years 16,487 16,470 155,004 167,694 Certain borrowing agreements contain financial and other conditions that if contravened by the Group, could alter the repayment profile. Group undrawn banking facilities which expire within one year 1,784 1,973 which expire in two to five years 33,321 20,571 35,105 22,544 Interest rate risk and hedge profile 2009 2008 Â£'000 Â£'000 Fixed rate borrowings 21,700 21,700 Floating rate borrowings - Subject to interest rate swap 145,000 145,000 - (Excess hedge) / Not hedged (11,105) 1,706 155,595 168,406 Average fixed interest rate 9.69% 9.69% Weighted average swapped interest rate 5.58% 5.59% Weighted average cost of debt on overdrafts, bank loans 5.97% 6.10% and debentures Average period for which borrowing rate is fixed 9.5 years 10.5 years Average period for which borrowing rate is swapped 17.9 years 18.9 years The swapped interest rate have calls by the bank 4.9 years 5.9 years The Group's floating rate debt bears interest based on LIBOR for the term bank loans and Bank base rate for the overdrafts. Total financial assets and liabilities The Group's financial assets and liabilities and their fair values are as follows: 2009 2008 Fair Carrying Fair Carrying value value Value value Â£'000 Â£'000 Â£'000 Â£'000 Cash and cash equivalents 8,655 8,655 8,191 8,191 Financial assets - 702 702 2,330 2,330 investments held for trading Other assets 3,976 3,976 3,974 3,974 Derivative liabilities (6,347) (6,347) (19,616) (19,616) Bank overdrafts (7,216) (7,216) (7,277) (7,277) Bank loans (126,679) (126,301) (139,429) (138,947) Present value of head (29,485) (29,485) (27,238) (27,238) leases on properties Other liabilities (12,168) (12,168) (11,268) (11,268) Before debentures (168,562) (168,184) (190,333) (189,851) Fair value of debenture stocks Fair value of the Group's Fair 2009 2008 debenture liabilities: Book value Fair value Fair Value value adjustment adjustment Â£'000 Â£'000 Â£'000 Â£'000 Debenture stocks 21,700 29,183 (7,483) (7,579) Tax at 28 per cent (2008: 2,095 2,122 28 per cent) Post tax fair value (5,388) (5,457) adjustment Post tax fair value (9.40)p (9.91)p adjustment - basic pence per share There is no material difference in respect of other financial liabilities or any financial assets. The fair values were calculated by the directors as at 31 December 2009 and reflect the replacement value of the financial instruments used to manage the Group's exposure to adverse rate movements. The fair values of the debentures are based on the net present value at the relevant gilt interest rate of the future payments of interest on the debentures. The bank loans and overdrafts are at variable rates and there is no material difference between book values and fair values. 18. Deferred tax 2009 2008 Â£'000 Â£'000 Balance at 1 January 2,808 13,071 Transfer to profit and loss account 3,587 (10,263) Balance at 31 December 6,395 2,808 The deferred tax balance comprises the following: Revaluation of investment properties 5,733 5,075 Accelerated capital allowances 2,116 1,852 Fair value of interest derivatives (1,777) (5,493) Short-term timing differences 1,321 1,414 7,393 2,848 Loss relief (998) (40) Provision at end of period 6,395 2,808 The directors consider the temporary differences arising in connection with the interests in associate and joint ventures are insignificant. There is no time limit in respect of the Group tax loss relief. 19. Share capital Number of Number of ordinary ordinary 10p shares 10p shares 2009 2008 2009 2008 Â£'000 Â£'000 Authorised: Ordinary shares of 10p 110,000,000 110,000,000 11,000 11,000 each Allotted, issued and fully paid 82,316,972 82,316,972 8,232 8,232 Ordinary shares of 10p - issued 1,605,057 - 160 - during the year Less: held in Treasury (see below) (4,293,051) (5,873,865) (429) (588) "Issued share capital" for 79,628,978 76,443,107 7,963 7,644 reporting purposes The company has one class of ordinary shares which carry no right to fixed income. The company issued a further 1,605,057 new ordinary shares of 10p each on 3 July 2009, from the amount standing to the credit of the Company's share premium account. The existing shareholders as at 5 June 2009 were entitled to the new Capitalisation Issue ordinary shares as authorised at the Annual General Meeting on 10 June 2009. Treasury shares Number of ordinary 10p shares Cost/issue value Price. 2009 2008 2009 2008 excl. Date costs Â£'000 Â£'000 Shares held in Treasury at 5,873,865 6,167,545 6,237 6,549 1 January Issued to meet directors Feb-09 106.18p (1,214,400) - (1,290) - bonuses Issued to meet share Feb-09 106.18p (50,000) - (53) - options exercised Issued for new share Mar-09 106.18p (21,780) - (23) - incentive plan Issued to meet staff May-09 106.18p (96,261) - (102) - bonuses Issued to meet directors - (293,680) - (312) and staff bonuses (Nov 08 - 106.18p) Issued for new share Dec-09 106.18p (198,373) - (211) - incentive plan Shares held in Treasury at 4,293,051 5,873,865 4,558 6,237 31 December Share Option Schemes Employees' share option scheme (Approved scheme) At 31 December 2009 the following options to subscribe for ordinary shares were outstanding, issued under the terms of the Employees' Share Option Scheme: Number of shares Date of grant Normal Exercise Date Option Price 14 October 2003 70,000 39.5p 14 October 2006 to 13 October 2013 This share option scheme was approved by members in 1986, and has been approved by Her Majesty's Revenue and Customs (HMRC). There are no performance criteria for the exercise of options under the Approved scheme, as this was set up before such requirements were considered to be necessary. A summary of the shares allocated and options issued under the scheme up to 31 December 2009 is as follows: Changes during the year At Options Options Options At 1 January Exercised granted lapsed 31 2009 December 2009 Shares issued to date 2,367,604 - - - 2,367,604 Options granted which have not been 70,000 - - - 70,000 exercised Shares allocated over which options 1,549,955 - - - 1,549,955 have not been granted Total shares allocated for issue to 3,987,559 - - - 3,987,559 employees under the scheme Non-approved Executive Share Option Scheme (Unapproved scheme) A share option scheme known as the "Non-approved Executive Share Option Scheme" which does not have HMRC approval was set up during 2000. At 31 December 2009 there were no options to subscribe for ordinary shares outstanding. Number of shares Date of Grant Exercised Date Option Price 8 March 1999 50,000 25.66p 12 February 2009 The exercise of options under the Unapproved scheme is subject to the satisfaction of objective performance conditions specified by the remuneration committee which conforms to institutional shareholder guidelines and best practice provisions. A summary of the shares allocated and options issued under the scheme up to 31 December 2009 is as follows: Changes during year Changes during the year At Options Options Options At 1 January Exercised granted lapsed 31 2009 December 2009 Shares issued to date 400,000 50,000 - - 450,000 Options granted which have not 50,000 (50,000) - - - been exercised Shares allocated over which 550,000 - - - 550,000 options have not been granted Total shares allocated for issue 1,000,000 - - - 1,000,000 to employees under the scheme 20. Related party transactions Cost Amounts Owed Cash recharged to (to) by advanced to (by) related related party (by) related party party Â£'000 Â£'000 Â£'000 Related party: Analytical Ventures Limited Current Account 29 1 - Dragon Retail Properties Limited Current account 40 40 - Loan account - (1,205) 225 Bisichi Mining PLC Current account 348 (i) 143 - Directors and key management M A Heller and J A Heller 11 (ii) - - H D Goldring (Delmore Asset (22) (iii) - - Management Limited) Totals at 31 December 2009 406 (1,021) 225 Totals at 31 December 2008 302 (1,306) 7 Nature of costs recharged - (i) Management fees (ii) Property management fees (iii) Portfolio management fee. The related party companies above are the associate and joint ventures and are treated as non current asset investments - details are shown in Note 10 and 11. Analytical Ventures Limited (joint venture) Analytical Ventures Limited (Analytical Ventures) is owned 50 per cent by the company and 50 per cent by the Bank of Scotland. Dragon Retail Properties Limited (joint venture) Dragon Retail Properties Limited (Dragon) is owned 50 per cent by the company, and 50 per cent by Bisichi Mining PLC. Dragon had surplus cash which was deposited equally with London & Associated Properties PLC and Bisichi Mining PLC. The company provides office premises, property management, general management, accounting and administration services for both joint ventures. Bisichi Mining PLC (associate) The company provides office premises, property management, general management, accounting and administration services for Bisichi Mining PLC and its subsidiaries. Directors London & Associated Properties PLC provides office premises, property management, general management, accounting and administration services for a number of private property companies in which M A Heller and J A Heller have an interest. Under an agreement with M A Heller no charge is made for these services on the basis that he reduces by an equivalent amount the charge for his services to London & Associated Properties PLC. The board estimates that the value of these services, if supplied to a third party, would have been Â£ 275,000 for the year (2008: Â£275,000). The companies for which services are provided are: Barmik Properties Limited, Cawgate Limited, Clerewell Limited, Cloathgate Limited, Ken-Crav Investments Limited, London & South Yorkshire Securities Limited, Metroc Limited, Penrith Retail Limited, Shop.com Limited, South Yorkshire Property Trust Limited, Wasdon Investments Limited, Wasdon (Dover) Limited, and Wasdon (Leeds) Limited. In addition the company received management fees of Â£40,000 (2008: Â£40,000) for work done for two charitable foundations, the Michael & Morven Heller Charitable Foundation and the Simon Heller Charitable Trust. Delmore Asset Management Limited (Delmore) is a company in which H D Goldring is a majority shareholder and director. Delmore provides consultancy services to the company on an invoiced fee basis. M A Heller is a director of Bisichi Mining PLC, the associated company and received a salary of Â£75,000 (2008: Â£75,000) for services. The directors are considered to be the only key management personnel and their remunerations including employers national insurance for the year was Â£ 2,192,000 (2008: Â£1,656,000). All other disclosures required including interest in share options in respect of those directors are included within the remuneration report. 21. Employees The average number of employees, including directors, of the Group during the year involved in management and administration was 37 (2008: 43). 2009 2008 Â£'000 Â£'000 Staff costs during the year were as follows: Salaries and other costs 2,575 2,133 Social security costs 325 280 Pension costs 461 416 3,361 2,829 22. Capital Commitments 2009 2008 Â£'000 Â£'000 Commitments to capital expenditure contracted for at 500 - the year end The Group's share of capital commitments of joint ventures at the year end amounted to Â£Nil (2008: Â£Nil). 23. Commitments under operating and finance leases Operating leases on land and buildings At 31 December 2009 the Group has total of future minimum commitments under non-cancellable operating leases on land and buildings as follows: 2009 2008 Â£'000 Â£'000 Within one year 390 392 In the second to fifth years inclusive 1,495 1,566 After five years - 325 1,885 2,283 Operating lease payments represent rentals payable by the Group for its office premises. The leases are for an average term of 6 years and rentals are fixed for an average of one year. Present value of head leases on properties Minimum lease Present value of minimum payments lease payments 2009 2008 2009 2008 Â£'000 Â£'000 Â£'000 Â£'000 Accounts payable under finance leases: Within one year 1,874 1,874 1,874 1,874 In the second to fifth years 7,497 7,497 6,967 6,925 inclusive After five years 234,145 236,019 20,644 18,439 243,516 245,390 29,485 27,238 Future finance charges on (214,031) (218,152) - - finance leases Present value of finance 29,485 27,238 29,485 27,238 lease liabilities Finance lease liabilities are in respect of leased investment property. Many leases provide for contingent rent in addition to the rents above, usually a proportion of rental income. Finance lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default. Future aggregate minimum rentals receivable The Group leases out its investment properties to tenants under operating leases. The future aggregate minimum rentals receivable under non-cancellable operating leases are as follows: 2009 2008 Â£'000 Â£'000 Within one year 13,156 12,842 In the second to fifth years inclusive 48,079 46,793 After five years 67,808 65,613 129,043 125,248 24. Contingent Liabilities There were no contingent liabilities at 31 December 2009 (2008: Â£Nil). 25. Company financial statements Company balance sheet at 31 December 2009 Notes 2009 2008 Â£'000 Â£'000 Fixed assets Tangible assets 25.3 87,333 98,101 Other investments: Associated company 25.4 358 358 Subsidiaries and others 25.4 46,290 46,400 25.4 46,648 46,758 133,981 144,859 Current assets Debtors 25.5 19,638 38,970 Investments 25.6 702 2,330 Bank balances 6,653 5,849 26,993 47,149 Creditors Amounts falling due within one year 25.7 (25,171) (39,387) Net current assets 1,822 7,762 Total assets less current liabilities 135,803 152,621 Creditors Amounts falling due after more than 25.8 (81,063) (100,580) one year Net assets 54,740 52,041 Capital and reserves Share capital 25.10 8,392 8,232 Share premium account 25.11 5,042 5,236 Capital redemption reserve 25.11 47 47 Revaluation reserve 25.11 13,779 10,549 Treasury shares 25.10 (4,558) (6,237) Retained earnings 25.11 32,038 34,214 Shareholders' funds 54,740 52,041 These financial statements were approved by the board of directors and authorised for issue on 16 April 2010 and signed on its behalf by: M A Heller R J Corry DirectorDirector Company Registration No. 341829 25.1. Company accounting policies The following are the main accounting policies of the company: Basis of accounting The financial statements have been prepared under the historical cost convention as modified to include the revaluation of freehold and leasehold properties and fair value adjustments in respect of current asset investments and interest rate hedges and in accordance with applicable accounting standards. All accounting policies applied are consistent with those of prior periods. Investment properties are accounted for in accordance with SSAP 19, "Accounting for Investment Properties", which provides that these should not be subject to periodic depreciation charges, but should be shown at open market value. This is contrary to the Companies Act 2006 which states that, subject to any provision for depreciation or diminution in value, fixed assets are normally to be stated at purchase price or production cost. Current cost accounting or the revaluation of specific assets to market value, as determined at the date of their last valuation, is also permitted. The treatment of investment properties under the Companies Act 2006 does not give a true and fair view as these assets are not held for consumption in the business but as investments, the disposal of which would not materially affect any manufacturing or trading activities of the enterprise. In such a case it is the current value of these investments, and changes in that current value, which are of prime importance. Consequently, for the proper appreciation of the financial position, the accounting treatment required by SSAP 19 is considered appropriate for investment properties. Details of the current value and historical cost information for investment properties are set out in note 25 (3).Depreciation or amortisation is only one of the many factors reflected in the annual revaluation and the amount that might otherwise have been shown cannot be separately identified or quantified. The financial statements have been prepared on a going concern basis. Further details of which are contained in the Directors' report. Revenue Revenue comprises rental income, listed investment sales, dividends and other income. The profit or loss on disposal of properties is recognised on completion of sale. Dividends receivable Dividends are credited to the profit and loss account when the dividend is received. Tangible fixed assets a) Investment properties An external professional valuation of investment properties is carried out every year. Properties professionally valued by Chartered Surveyors are on an existing use open market value basis, in accordance with the Practice Statements contained within the RICS valuation standards 2008 prepared by the Royal Institution of Chartered Surveyors. The cost of improvements includes attributable interest. b) Other tangible fixed assets Other tangible fixed assets are stated at historical cost. Depreciation is provided on all other tangible fixed assets at rates calculated to write each asset down to its estimated residual value evenly over its expected useful life. The rates generally used are - office equipment - 10 to 33 per cent per annum, and motor cars - 20 per cent per annum, on a straight line basis. Investments Long term investments are described as participating interests and are classified as fixed assets. Short term investments are classified as current assets. a) Investments held as fixed assets: These comprise investments in subsidiaries and investments in Analytical Ventures Limited and Dragon Retail Properties Limited (unlisted joint ventures), Bisichi Mining PLC (listed associate), and in unlisted companies which are all held for the long term. Provision is made for any impairment in the value of fixed asset investments. b) Investments held as current assets: Investments held for trading are included in current assets and are revalued to fair value. For listed investments, fair value is the bid market listed value at the balance sheet date. Realised and unrealised gains or losses arising from changes in fair value are included in the income statement of the period in which they arise. Financial Instruments Bank loans and overdrafts Bank loans and overdrafts are included in creditors on the company balance sheet at the amounts drawn on the particular facilities. Interest payable on those facilities is expensed as a finance cost in the period to which it relates. Interest rate derivatives The company uses derivative financial instruments to hedge the interest rate risk associated with the financing of the company's business. No trading in such financial instruments is undertaken. At each reporting date, these interest rate derivatives are recognised at their fair value to the business, being the Net Present Values of the difference between the hedged rate of interest and the rate of interest for the remaining period of the hedge. Where a derivative is designated as a hedge of the variability of a highly probable forecast transaction i.e. an interest payment, the element of the gain or loss on the derivative that is an effective hedge is recognised directly in equity. When the forecast transaction subsequently results in the recognition of a financial asset or a financial liability, the associated gains or losses that were recognised directly in equity are reclassified into the income statement in the same period or periods during which the asset acquired or liability assumed affects the income statement i.e. when interest income or expense is recognised. The gain or loss arising from any adjustment to the fair value to the business is recognised in the income statement. Debtors Debtors do not carry any interest and are stated at their nominal value as reduced by appropriate allowances for estimated recoverable amounts. Creditors Creditors are not interest bearing and are stated at their nominal value. Joint ventures Investments in joint ventures, being those entities over whose activities the Group has joint control as established by contractual agreement, are included at cost. Deferred taxation Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the company's taxable profits and its results as stated in the financial statements. Deferred tax is measured at the average tax rates which are expected to apply in the periods in which timing differences are expected to reverse, based on tax rates and laws that have been enacted or substantially enacted by the balance sheet date. Deferred tax is measured on a non-discounted basis. Leased assets and obligations All leases are "Operating Leases" and the annual rentals are charged to the profit and loss account on a straight line basis over the lease term. Rent free periods or other incentives received for entering into a lease are accounted for over the period of the lease so as to spread the benefit received over the lease term. Retirement benefits For defined contribution schemes the amount charged to the profit and loss account in respect of pension costs and other post retirement benefits is the contributions payable for the year. Differences between contributions payable in the year and contributions actually paid are shown as either prepayments or accruals at the balance sheet date. 25.2. Profit/(loss) for the financial year The company's profit for the year was Â£1,613,000 (loss 2008: Â£11,212,000). In accordance with the exemption conferred by Section 408 of the Companies Act 2006, the company has not presented its own profit and loss account. 25.3. Tangible assets Investment Properties Office Long Total Freehold leasehold Equipment and motor vehicles Â£'000 Â£'000 Â£'000 Â£'000 Cost or valuation at 1 98,916 70,532 26,660 1,724 January 2009 Additions 725 592 - 133 Disposals (12,831) (12,750) - (81) Increase/(decrease) on 1,484 4,304 (2,820) - revaluation Cost or valuation at 31 88,294 62,678 23,840 1,776 December 2009 Representing assets stated at: Valuation 86,518 62,678 23,840 - Cost 1,776 - - 1,776 88,294 62,678 23,840 1,776 Depreciation at 1 January 815 - - 815 2009 Charge for the year 203 - - 203 Disposals (57) - - (57) Depreciation at 31 December 961 - - 961 2009 Net book value at 1 January 98,101 70,532 26,660 909 2009 Net book value at 31 87,333 62,678 23,840 815 December 2009 The freehold and long leasehold properties were valued as at 31 December 2009 by external professional firms of chartered surveyors. The valuations were made at open market value on the basis of existing use. The increase in book value was transferred to revaluation reserve. 2009 2008 Â£'000 Â£'000 Allsop LLP 82,495 93,515 BNP Paribas Real Estate 4,023 3,677 86,518 97,192 The historical cost of investment properties, including total capitalised interest of Â£1,222,000 (2008: Â£1,222,000) was as follows: Freehold Long Leasehold Â£'000 Â£'000 Cost at 1 January 2009 68,526 18,080 Additions 592 - Disposals (14,496) - Cost at 31 December 2009 54,622 18,080 Long leasehold properties are held on leases with an unexpired term of more than fifty years at the balance sheet date. 25.4. Other investments Shares in Loan stock Shares Loan subsidiary in in stock companies subsidiary joint in joint Shares in Unlisted Total companies ventures ventures associate shares Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 At 1 January 2009 46,758 40,663 3,658 274 1,800 358 5 Impairment (110) - - (110) - - - At 31 December 46,648 40,663 3,658 164 1,800 358 5 2009 Subsidiary companies The company owns 100 per cent of the ordinary share capital of the following companies that are trading, all of which are registered in England and Wales: Activity % Held by % Held by company Group LAP Ocean Holdings Limited Property investment 100 100 Antiquarius Limited Property investment - 100 Brixton Village Limited Property investment - 100 Market Row Limited Property investment - 100 Ski Investments Limited Property investment - 100 Analytical Properties Property investment 100 100 Holdings Limited Analytical Properties Limited Property investment - 100 Analytical Properties (St Property investment - 100 Helens) Limited In the opinion of the directors the value of the investment in subsidiaries is not less than the amount shown in these financial statements. Details of the associate and joint ventures are set out in notes 10 and 11. 25.5. Debtors 2009 2008 Â£'000 Â£'000 Trade debtors 382 760 Amounts due from subsidiary companies 17,601 35,640 Amounts due from associate and joint ventures 196 148 Deferred tax asset (note 25.9) 267 1,350 Other debtors 25 92 Prepayments and accrued income 1,167 980 19,638 38,970 25.6. Investments 2009 2008 Â£'000 Â£'000 Market value of the listed investment 702 2,330 portfolio Unrealised deficit of market value over cost (467) (490) Listed investment portfolio at cost 1,169 2,820 All investments are listed on the London Stock Exchange. 25.7. Creditors: Amounts falling due within one year 2009 2008 Â£'000 Â£'000 Bank overdrafts (unsecured) 7,191 7,277 Amounts owed to subsidiary companies 9,729 22,817 Amounts owed to joint ventures 1,165 1,454 Corporation tax 741 1,824 Other taxation and social security costs 576 282 Other creditors 360 756 Accruals and deferred income 5,409 4,977 25,171 39,387 25.8. Creditors: Amounts falling due after more than one year 2009 2008 Â£'000 Â£'000 Interest rate derivatives 3,082 9,926 Term Debenture stocks: Â£5 million First Mortgage Debenture Stock 2013 at 11.3 5,000 5,000 per cent Â£1.7 million First Mortgage Debenture Stock 2016 at 8.67 1,700 1,700 per cent Â£5 million First Mortgage Debenture Stock 2018 at 11.6 5,000 5,000 per cent Â£10 million First Mortgage Debenture Stock 2022 at 8.109 9,787 9,770 per cent* 21,487 21,470 Term bank loans: Repayable after more than two years* 56,494 69,184 81,063 100,580 *The Â£10 million debenture and bank loans are shown after deduction of un-amortised issue costs. Details of terms and security of overdrafts, loans and debentures are set out in note 16. Repayment of borrowings: Bank loans and overdrafts: Repayable within one year 7,191 7,277 Repayable between two and three years 56,494 69,184 63,685 76,461 Debentures: Repayable between three and five years 5,000 5,000 Repayable in more than five years 16,487 16,470 85,172 97,931 Hedge profile There is a hedge to cover part of the Â£90 million revolving credit facility, which currently covers the full Â£56 million drawn. It consists of a 20 year swap for Â£35 million with a 7 year call option in favour of the bank, taken out in November 2007, at 4.76 per cent and a 20 year swap for Â£40 million with a 7 year call option in favour of the bank, taken out in December 2007, at 4.685 per cent. At the year end the amount recognised was Â£2,219,000 deficit (2008: Â£7,147,000 deficit) being the estimated financial effect of the fair value to the business of these hedging instruments less the deferred tax thereon. The Directors have estimated the financial effect of the fair value to the business of these hedging instruments. This has been calculated as the Net Present Value of the difference between the 18 year interest rate, which was 4.38 per cent at 31 December 2009 against the rate payable under the specific hedge. This has given a liability at 31 December 2009 of Â£3,082,000 (2008: Â£ 9,926,000) as shown in the balance sheet. The banks own initial quotations at 31 December 2009 to close each of the hedges were Â£9,565,000 (2008: Â£ 14,182,000). The hedges arenot deemed to be eligible for hedge accounting, as the banks have an option to cancel the hedge in January 2015, even though this is after the expiry of the term loans and the level of the hedges closely equate to the amount of the loans outstanding. Any movement in the value of the hedges has therefore to be charged directly to the Income Statement. Fair value of financial instruments Fair value estimation Effective 1 January 2009, the Group adopted amendment to FRS29 for financial instruments that are measured in the balance sheet at fair value, this requires disclosure of fair value measurements by level of the following fair value hierarchy: * Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1). * Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2). * Inputs for the asset or liability that are not based on observable market data (that is unobservable inputs) (level 3). 2009 Level 1 Level 2 Level 3 Total Gain/(loss) Â£'000 Â£'000 Â£'000 Â£'000 to income statement Â£'000 Financial assets Other financial assets held for trading Quoted equities 702 - - 702 178 Financial liabilities Derivative financial instruments Interest rate swaps - - 3,082 3,082 6,844 2008 Level 1 Level 2 Level 3 Total Gain/(loss) Â£'000 Â£'000 Â£'000 Â£'000 to income statement Â£'000 Financial assets Other financial assets held for trading Quoted equities 2,330 - - 2,330 (1,530) Financial liabilities Derivative financial instruments Interest rate swaps - - 9,926 9,926 (10,882) 25.8. Creditors: Amounts falling due after more than one year continued Liquidity The table below analyses the company's financial liabilities into maturity Groupings and also provides details of the liabilities that bear interest at Fixed, floating and non-interest bearing rates. Less than 2-5 years Over 2009 1 year 5 years Total Â£'000 Â£'000 Â£'000 Â£'000 Bank overdrafts (floating) 7,191 - - 7,191 Debentures (fixed) - 5,000 16,700 21,700 Bank loans (floating)* - 56,679 - 56,679 Trade and other payables 17,980 - - 17,980 (non-interest) 25,171 61,679 16,700 103,550 Less than 1 2-5 years Over 5 2008 year years Total Â£'000 Â£'000 Â£'000 Â£'000 Bank overdrafts (floating) 7,277 - - 7,277 Debentures (fixed) - 5,000 16,700 21,700 Bank loans (floating)* - 69,429 - 69,429 Trade and other payables 32,110 - - 32,110 (non-interest) 39,387 74,429 16,700 130,516 The company would normally expect that sufficient cash is generated in the operating cycle to meet the contractual cash flows as disclosed above through effective cash management. *The bank loans are fully hedged with appropriate interest derivatives. Details of the hedges are shown above. Total financial assets and liabilities The company's financial assets and liabilities and their fair values are as follows: Fair 2009 2008 value Carrying Fair Carrying value value value Â£'000 Â£'000 Â£'000 Â£'000 Cash and cash equivalents 6,653 6,653 5,849 5,849 Investments 702 702 2,330 2,330 Other assets 19,638 19,638 38,970 38,970 Bank overdrafts (7,191) (7,191) (7,277) (7,277) Bank loans (56,679) (56,494) (69,429) (69,184) Derivative liabilities (3,082) (3,082) (9,926) (9,926) Other liabilities (17,980) (17,980) (32,110) (32,110) Before debentures (57,939) (57,754) (71,593) (71,348) Additional details of borrowings and financial instruments are set out in notes 16 and 17. 25.9. Provisions for liabilities and charges 2009 2008 Â£'000 Â£'000 Deferred Taxation Balance at 1 January (1,350) 1,337 Transfer to profit and loss account 1,083 (2,687) Balance at 31 December (267) (1,350) No provision has been made for the approximate taxation liability at 28 per cent (2008: 28 per cent) of Â£992,000 (2008: Â£649,000) which would arise if the investment properties were sold at the stated valuation. The deferred tax balance comprises the following: Accelerated capital allowances 1,189 1,184 Fair value of interest derivatives (863) (2,779) Short-term timing differences 233 285 Losses (826) (40) Provision at end of period (267) (1,350) 25.10. Share capital Details of share capital, treasury shares and share options are set out in note 19. 25.11. Reserves Share Capital Revaluation Total Premium redemption reserve Retained Account reserve Earnings Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Balance at 1 January 2009 5,236 47 10,549 34,214 50,046 Increase on valuation of - - 1,484 - 1,484 investment properties Retained profit for year - - - 1,613 1,613 Dividends paid in year - - - (885) (885) Loss on disposal of - - - (1,158) (1,158) Treasury Shares Capitalisation issue of (194) - - - (194) new ordinary shares and expenses Transfer of realised - - 1,746 (1,746) - revaluation loss Balance at 31 December 5,042 47 13,779 32,038 50,906 2009 25.12. Related party transactions Details of related party transactions are given in note 20. As provided under Financial Reporting Standard 8: Related Party Disclosures, the company has taken advantage of the exemption from disclosing transactions with other Group companies. 25.13. Capital commitments 2009 2008 Â£'000 Â£'000 Commitments to capital expenditure contracted for at the - - year end 25.14. Commitments under operating leases At 31 December 2009 the company had annual commitments under non-cancellable operating leases on land and buildings as follows: 2009 2008 Â£'000 Â£'000 Expiring in more than five years 390 392 In addition, the company has an annual commitment to pay ground rents on its leasehold investment properties which amount to Â£323,000 (2008: Â£326,000), the leases on which expire in more than fifty years. 25.15. Contingent liabilities There were no contingent liabilities at 31 December 2009 (2008: Â£Nil). Five year financial summary 2009 2008 2007 2006 2005 Â£m Â£m Â£m Â£m Â£m Portfolio size Investment properties-Group^ 214 219 248 193 117 Investment properties-joint 13 13 3 91 140 ventures Investment 12 12 15 17 15 properties-associate 239 244 266 301 272 Portfolio activity Â£m Â£m Â£m Â£m Â£m Acquisitions - 9.18 112.71 50.70 2.72 Disposals at book value (17.79) (15.33) (41.37) (1.62) (6.70) Capital Expenditure 3.46 9.73 9.15 5.13 3.34 (14.33) 3.58 80.49 54.21 (0.64) Consolidated income statement Â£m Â£m Â£m Â£m Â£m Rental income - Group and 17.07 16.77 14.26 11.84 12.39 share of joint ventures Less: attributable to joint (0.52) (0.27) (1.23) (3.95) (4.52) venture partners Group rental income 16.55 16.50 13.03 7.89 7.87 Profit/(loss) before interest 20.49 (24.91) (16.59) 21.76 21.48 and tax Profit/(loss) before tax 21.41 (57.27) (23.89) 18.32 17.89 Taxation 2.36 (9.81) (11.38) 3.11 3.04 Profit/(loss) attributable to 19.05 (47.45) (12.50) 15.22 14.85 shareholders Earnings/(loss) per share - 24.32p (62.30p) (16.40p) 20.00p 18.83p basic Earnings/(loss) per share - 24.32p (62.30p) (16.40p) 19.97p 18.79p fully diluted Dividend per share 1.95p* 1.95p* 1.95p 1.85p 1.725p Consolidated balance sheet Â£m Â£m Â£m Â£m Â£m Shareholders' funds 59.10 40.30 88.99 101.86 88.34 Net borrowings 145.65 157.17 147.54 86.12 44.14 Net gearing 246.44% 390.01% 165.79% 84.55% 49.97% Net assets per share - basic 74.22p 52.73p 116.86p 133.62p 116.04p - fully diluted 74.19p 52.70p 116.73p 133.47p 115.88p Consolidated cash flow Â£m Â£m Â£m Â£m Â£m statement Net cash inflow from 12.18 12.02 3.97 3.44 3.88 operating activities Capital investment and 13.94 (6.09) 9.84 (26.86) 0.69 financial investment Notes: ^Excluding the present value of head leases *Equivalent dividend includes new issue shares equal to 0.8p

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