Final Results

FOR IMMEDIATE RELEASE 28 April 2011 LONDON & ASSOCIATED PROPERTIES PLC: RESULTS FOR THE 12 MONTHS TO 31 DECEMBER 2010 HIGHLIGHTS London & Associated Properties PLC is a well- established specialist shopping centre and retail investor and asset manager. * Rental income increased 2.4% on like-for-like basis to Â£16.5m * Property portfolio value grew 1% on like-for-like basis to Â£195mUnder EPRA net assets stood at Â£72.0m EPRA net asset value per share now 87.5p * Management adjusted Operating profit up 14.1% to Â£11.1m * Maintaining cash element of dividend - final dividend of 0.4p per share recommended making total of 1.15p per share * Void levels very low at only 1.5% of portfolio by rental value * Antiquarius on King's Road sold for Â£17.8m * Asset management key feature of business: * + Rental values at Orchard Square grew by 5% + Redevelopment of units in King Edward Court achieved record rents + Re-branding of Brixton markets has led to 8% rental growth + Brixton Village fully let for the first time in 20 years + Since year end agreed terms to let Brixton markets in their entirety to In Shops Ltd "I remain confident that the quality of our assets and our ability to drive rental income through intensive management means we are well placed to make further progress through 2011," Michael Heller, Chairman. "We have disposed of almost half our portfolio over the last five years and now retain a core group of quality assets in which we have invested significantly. Our top five centres account for almost our entire portfolio by value and these are mostly let on long leases. I therefore remain cautiously optimistic going forward," John Heller, Chief Executive. Contact: London & Associated Properties 020 7415 5000 John Heller, Chief Executive Robert Corry, Finance Director Baron Phillips Associates 020 7920 3161 Baron Phillips Chairman's statement I am pleased to report on another period of satisfactory progress for LAP against a difficult economic backdrop. The quality of our portfolio of shopping centres reflects the high level of investment and strategic management which we apply to all of our assets. This has protected us from the worst of the property recession. As at 31 December 2010, our directly owned portfolio of shopping centres and other retail property was independently valued at Â£195 million compared to Â£214 million the previous year. This follows a number of disposals of properties and on a like for like basis the valuation of our portfolio grew by 1%. Rental income in 2010 was Â£16.5 million compared to Â£17.1 million in the previous year. However, again on a like for like basis, rental income grew by 2.4%. We have achieved this increase in sustainable income in spite of selling properties which had a combined annualised rental income of Â£1.3 million per annum. This is a commendable achievement considering that tenant demand is widely regarded as being weak and IPD reports that rental levels across the retail sector have dropped significantly. Void levels remain low at just 1.5% of our portfolio by rental value. This has enabled us to drive our rental values forward, which in turn has supported our valuations. We have also been decisive in disposing of those properties from which we could see no further opportunities for growth. During 2010, we sold Antiquarius in King's Road, Chelsea for Â£17.8 million. We acquired this property as part of the London Portfolio in 2006 and, in 2009, we were successful in achieving a listed building consent in the face of considerable opposition to our plans. We pre-let the retail space to Anthropologie, the American fashion retailer, and carried out a significant refurbishment of the property. We believe that we had achieved maximum value of this asset, and consequently saw little point in holding it at a time when prime London retail property was commanding premium values. Asset management continues to be a key feature of our business. At King Edward Court, Windsor, which now accounts for almost half the value of our portfolio, we undertook a redevelopment of three poorly configured units to provide three modern shops. These had been pre-let to Fat Face, Robert Gatward Jewellers and Mystique Lingerie. The new units achieved record rents per square foot reinforcing the rental levels at the centre and demonstrating the continuing strong demand from retailers for shops at King Edward Court. Orchard Square, Sheffield, has remained fully let during the year and we have been able to achieve growth at rent review. This led to rental values growing by 5% at this centre on an annualised basis. This centre plus King Edward Court at Windsor account for rental income approaching Â£11 million per annum and the combined annualised rents grew by 3% over the last year. Our two markets in Brixton have been strong performers in terms of rental growth. These assets were also acquired as part of the London Portfolio. Since 2009, we have spent considerable time and effort in re-branding the markets as more exciting places to shop, with a particular emphasis on quality food and restaurants as well as cutting edge fashion. The net result of this input is that rents have grown by some 8% and Brixton Village, one of the markets, is fully let for the first time in some 20 years. As detailed in the Chief Executive's report, we have plans to work with a leading market operator to ensure the next phase of this asset's growth. Under International Financial Reporting Standards (IFRS), the net assets of the Group were Â£55.8 million. This compares to Â£59.1 million the previous year. However, this figure reflects the carrying cost of our interest rate swaps which has been marked to market as a negative Â£13.6 million, a liability some Â£ 7.3 million greater than at the end of 2009. Had the swaps been valued at today's date, the Â£7.3 million additional charge would be Â£ 1.7 million. We have stated previously that these swaps were contracted to ensure that we had certainty over our interest payments which are our most significant item of expense. We do not trade these swaps. It is important to note that under the standards of the European Real Estate Association (EPRA), as used by most property companies, our net assets stood at Â£72.1 million in December 2010 compared to Â£72.8 million as at December 2009. Under EPRA net asset per share is now 87.5p compared to 91.5p a year ago. This largely reflects the issue of additional shares as part of last year's dividend. Operating profit, on a management adjusted basis, grew to Â£11.1 million compared with Â£9.7 million in 2009, as shown in the table in the Finance Director's report on page 17. This excludes marking to market the carrying values of our properties and financial instruments. The growth in operating profit is partly a result of lower property expenses and other overheads incurred during the year. Our loss before tax over the same period has increased to Â£4.2 million from Â£2.5 million although this is after deducting a Â£3.5 million expense incurred in breaking swaps with a nominal value of Â£19.6 million. The annual cash saving from breaking these swaps is Â£0.8 million. We remain over-hedged by a nominal Â£10.4 million. This has an annualised negative effect on cash flow of Â£0.5 million. The cost of breaking the over-hedge has fluctuated significantly over the year. We continue to monitor this situation closely and will break the hedge when it is most appropriate to do so. It has been widely reported that bank lending remains subdued for real estate transactions. Against this backdrop, we have explored alternative sources of finance from property funds looking for joint venture partners. While it is too early to report any specific deals, we are currently examining a potential acquisition with one such partner and I hope to be able to report that this transaction has successfully concluded in the near future. We are looking to co-invest with suitable partners and we continue to hold an unencumbered cash reserve of some Â£5 million to take advantage of opportunities as they arise. During the year we were appointed by Grant Thornton, a firm of chartered accountants, to take on the asset management of a portfolio of shopping centres where they had been appointed as Administrators. Following the disposal of the properties this project has now been completed. We understand that the bank client of Grant Thornton regards the result as a great success. LAP received a fee for advising on the management of the centres and overseeing the disposal in 2011. Total Group assets, including those of Bisichi Mining PLC, our associate company, and Dragon Retail Properties, our joint venture with Bisichi, now stand at Â£289 million compared to Â£306 million the previous year. Bisichi Mining PLC, our associate company, had a difficult year and our share of their loss after taxation was Â£0.5 million. This was as a result of lower coal prices combined with a strong South African Rand against the US dollar and a shortage of railway trucks to transport the coal. Measures have been taken to address these issues and it is expected that they will return to acceptable profitability in the second half of 2011. We believe that LAP has performed well against a testing economy, although we remain mindful of the reduced bank lending currently available, and the negative forces facing consumers following last year's budget. As a result, the Board has taken the decision this year to maintain the cash element of the dividend at the level paid in 2010. There will be a final dividend of 0.4p payable on 1 July 2011 to shareholders on the register as at 10 June 2011, making a total dividend for the year of 1.15p. However, the Board has decided against the capitalisation issue of new shares as in previous years as this is felt to be too dilutive at the current price. Michael Stevens will be retiring this year after 25 years as a director and Company Secretary of LAP. I would like to take this opportunity to thank him for all of his hard work over this time, and wish him well in his retirement. We have promoted Heather Curtis, who joined the company in 2002,to Group Company Secretary. The economy in 2011 shows little sign of being an improvement over 2010. I remain confident that the quality of our assets and our ability to drive rental income through intensive management means that we are well placed to make further progress through 2011. Finally I would like to thank all of the directors, staff and advisors who have contributed to our progress this year. Michael Heller Chairman 15 April 2011 Chief Executive's Report 2010 was another difficult year for the UK economy with bank lending remaining subdued. This lack of funding has contributed to a polarisation in investor demand with cash buyers being predominant. These investors look for well-let property where tenant demand remains high and rental growth is still achievable. Our portfolio of retail property comes into this category. We have significantly re-profiled our portfolio in the last 5 years and disposed of Â£ 178 million of mature property where we felt we would be unable to deliver further growth. Initially we disposed of secondary shopping centres at a time when net initial yields were lower than deposit rates, yet investor demand for this type of asset remained high. More recently, we have been selling assets with long leases and excellent covenants, again to meet investor demand. Over this period we have also been investing heavily into our asset base. King Edward Court, Windsor and Orchard Square, Sheffield account for 72% of our property portfolio, and we have spent a combined Â£46 million on them over the last 5 years. This capital expenditure has produced better configured units to meet modern retailer demand. These units were pre-let to quality tenants on long leases. During 2010, we spent Â£0.5 million on developing and improving our properties. This produced an incremental annualised income of Â£0.16 million. We currently have no substantial development work underway, although we are constantly looking to improve our assets and grow rents. Our property portfolio is now valued at Â£194.9 million, and our top five properties by value account for over 90% of this total. All of these properties are well-let and all of them have either delivered rental income growth over the last year or confirmed their growth potential. Across the portfolio, our average weighted unexpired lease term is 7.2 years. Over 63% of our leases by rental value run for more than 5 years and 31% for more than 10 years. We have voids of just 1.5%. All of this combines to provide resilience during this property recession. Group rental income on a like for like annualised basis grew by 2.4% to Â£15.6 million compared with Â£15.2 million in 2009. This has been achieved against a widely reported reduction in rental levels across most parts of the country. Our top 50 tenants account for 74% of our gross rents. 93% of all rents were collected within two weeks of the December quarter day. We disposed of Antiquarius in King's Road Chelsea during the year for Â£17.82 million compared to a book value of Â£17.0 million as at year end 2009. This followed the completion of the lease in 2009 to Anthropologie at Â£1.15 million per annum and represented a net initial yield of 5.74%. We paid down our revolving credit facility by Â£12.75 million from the cash proceeds. During 2010, we were appointed by Grant Thornton as asset manager on a portfolio of three shopping centres in Burnley, Cardiff and Harlow. The fund that owned these shopping centres had been placed into administration and the centres had suffered from under investment and lack of direction as a result. LAP conducted a strategic review and identified a number of areas where the centres could be improved. We carried out a number of strategic lettings, including redeveloping shops where necessary, and applied our rigorous management controls to reduce irrecoverable costs. At the time of our appointment, the centres were independently valued at Â£120 million. We marketed the centres through leading investment agents and since the year end the disposal completed at Â£145 million. LAP received fees from Grant Thornton for the work undertaken and we are in discussion to take on further similar appointments. Following the financial crisis there is still much stress in the UK banking system and lack of credit at acceptable terms. As a result, we have entered into talks with a number of property funds with a view to establishing joint ventures. One of these is at an advanced stage of making an acquisition although contracts have not yet been exchanged. I am, however, confident that the transaction will conclude in the near future and we will make an appropriate announcement to shareholders in due course. I will now report on some of our major centres. King Edward Court, Windsor King Edward Court remained fully let throughout 2010 with the exception of a small office suite. Since the year end we have been able to negotiate the surrender of leases on two shops where we had less vibrant retailers. The first of these was originally let to a musical instrument retailer at Â£72,000 per annum. This unit has now been re-let to PrÃªt Ã Manger for a new cafÃ© concept at Â£85,000 per annum. This not only brings a more exciting retailer to the centre, but also a rental level equating to a Zone A level of Â£116 per sq.ft., a record for this part of the centre. The second unit had previously been let to a discount book retailer. The unit is now under offer to an established, upmarket gift retailer at an increased rent. The new lease should complete soon. In September 2010, Boots the Chemist vacated its 14,000 sq. ft. Shop, having taken a lease on the much larger, former Woolworths store outside our ownership. The lease on our shop continued until 2015. We have, since the year end, accepted a surrender of this lease in exchange for a payment of Â£1.025 million, equivalent to over two and a half year's rent. We intend to divide this unit into three smaller units and incorporate the vacant first floor offices. We have seen a high level of retailer interest in these units and already have offers on all of them from exciting retailers. I look forward to announcing the lettings in due course. We have made a planning application to change the shop fronts on these units and, subject to obtaining this consent, anticipate that the development will be let and completed during 2011. Sheffield Orchard Square has remained fully let throughout 2010. As a result, we have been able to grow the rents by some 5% over the previous year as the rental levels established by our successful lettings in previous years filter through to other shops in the centre. Orchard Square is anchored by reputedly one of the most successful TK Maxx stores in the country, and most of the shops are let at rents of between Â£80 and Â£90 Zone A. We believe this to be an undemanding level for a major city centre. Brixton Since late 2009, we have invested considerable time and effort in establishing our two Brixton markets as cutting edge retail and leisure locations. Initially we worked with a specialist marketing company to offer pop-up shops to entice new retailers into a location that had suffered over the years from high vacancies and low investment. The vast majority of these early retailers converted into full leases at market rents at the end of their trial periods. Once we had established a critical mass of new exciting retailers, word of mouth and positive press articles created sufficient interest to ensure that these markets are now fully let for the first time in approximately 20 years. While this project has been a success throughout 2010, we do not feel LAP has the resources to develop the Brixton Markets further. Consequently, since the year end we have agreed terms to let the two markets to In Shops Ltd, a subsidiary of Groupe Geraud, Europe's largest private market operator. The leases are at a base rent of Â£817,500 per annum with a profit share on the net rent above that amount. This increases to a 50:50 profit share on any net rent above Â£1,017,500. There will be a saving of direct staff costs and other central overheads and therefore we expect this deal to be cash neutral at the outset. We are confident that In Shops shares our belief that Brixton will become one of the most successful market areas in London. In Shops has the resources, energy and experience to enable this to take place, and we expect to benefit from its success through the profit share in the medium term. King's Square, West Bromwich We invested heavily during 2010 in re-gearing the leases of our anchor tenants at this shopping centre. These accounted for 29% of the centre's gross rental income. The centre's age meant that a number of the original leases there had less than 12 months until expiry. As a result of the re-gearing, the centre's future is much more stable and we will be able to concentrate on driving rents forward in the future. Other Properties As shareholders will be aware, we have deliberately sought to position the rest of our portfolio at the value end of retailing. We believe that this offers us significant defensive qualities in the current economic environment as our tenants are less dependent on discretionary spending. Last year, tenant failures across the whole portfolio were limited to an aggregate rental income of Â£127,000 per annum. These units have now been re-let at broadly the same rent. Outlook We remain concerned that the outlook for UK consumers will continue to impact upon retail property in general. However, we believe that the property market will experience differing levels of success dependent on location, affordability of rents and attractiveness of the individual centres. We have sold almost half our portfolio over the last five years and now retain a core of quality assets in which we have invested significantly. Our top five centres account for almost our entire portfolio by value and these are mostly fully let on long leases. I therefore remain cautiously optimistic going forward. John Heller Chief Executive 15 April 2011 FINANCE DIRECTOR'S REPORT In 2010, we again concentrated our efforts on managing cash flow. We have also reviewed our unutilised banking facilities and reduced them wherever possible. As a result we have achieved a net annualised cash saving of Â£0.3 million. As a result of the continuing crisis in the UK banking sector and, as mentioned in the Chief Executive's review, we have commenced negotiations with a number of property funds to provide alternative sources of finance. Cash flow Net cash increased over the year from Â£1.44 million to Â£4.72 million. This was after the repayment of Â£11.58 million of debt. Term debt reduced from Â£148.38 million to Â£136.80 million. This compares favourably with a peak level of Â£ 163.70 million at the end of 2007. Antiquarius, our property in Chelsea, London, was sold in August for Â£17.8 million and the sale of the Foxtons unit in Islington completed in January 2010. The utilisation of the cash over the year is shown in the graph below: Our Revolving Credit Facility with the Royal Bank of Scotland was extended during the year and will now expire in September 2012. We also reduced the total facility to Â£60 million from Â£90 million. This facility has been reduced further to Â£47 million since the year end because we considered it unlikely that we would borrow further against the facility before expiry. Income statement The Group's loss before tax as reported under IFRS was Â£10.69 million compared to a profit of Â£21.4 million in 2009. This volatility in our results reflects a number of changes in value which are taken directly to our Income Statement. Firstly, there have been considerable swings in the interest rates which have affected the fair value of our derivatives and this has led to a loss of Â£7.28 million (2009: Â£13.27 million profit). Secondly, the revaluation of our property portfolio has shown an increase of Â£1.57 million (2009: Â£9.42 million). The table below shows the underlying performance of the Group on a management adjusted basis. 2010 2009 Cash Non-cash Per income Cash Non-cash Per items items statement items items income statement Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Net rental income 10,366 10,366 9,517 9,517 Income and gains on 43 43 148 148 investments held for trading Profit on sale of 637 637 14 14 investment properties Net change on 1,569 1,569 9,422 9,422 revaluation of investment properties Net change in value 89 89 178 178 of investments held for trading Operating profit 11,046 1,658 12,704 9,679 9,600 19,279 Share of joint 174 (912) (738) 131 1,078 1,209 ventures and associates Interest rate - (7,280) (7,280) - 13,269 13,269 derivative Net interest (11,858) (11,858) (12,350) (12,350) (Loss) / profit (638) (6,534) (7,172) (2,540) 23,947 21,407 before taxation and exceptional items Exceptional item -- (3,515) (3,515) - - - interest derivative break cost (Loss) / profit (4,153) (6,534) (10,687) (2,540) 23,947 21,407 before taxation The interest charge, excluding the change in fair value of derivatives and one-off costs incurred on the termination of interest rate swaps, was cut in the year to Â£11.9 million (2009: Â£12.4 million). This is due to the reduction in the level of debt and the reduced swap contracts. During the year we reduced our long term hedging to be more in line with the total debt outstanding. The total value of our swaps was Â£125.4 million against a long term debt of Â£115.1 million. This was reduced in the year from Â£145.0 million and the Â£3.5 million cost of breaking the swaps has been shown as an expense in the income statement. This strategy of hedging our interest payments means that we are protected against future interest fluctuations. We do not trade our swaps and we try to align them to the debt levels we have in the Group at any given time. Rental income during the year reduced to Â£16.5 million (2009: Â£17.1 million). On a like for like basis the group's rental income, excluding joint ventures, increased by 2.4% to Â£15.6 million (2009: Â£15.2 million), as shown in the table below. 2010 2009 Â£'000 Â£'000 Annual rental income from properties still 15,550 15,187 held Income from properties sold 435 1,361 Revenue as per income statement 15,985 16,548 Overheads were down 22.4% to Â£3.8 million (2009: Â£4.9 million). This partly reflects increased fees received from managing third party assets, as well as lower direct costs. Operating profit, excluding property and other investment revaluations, increased to Â£11.0 million (2009: Â£9.7 million), a rise of 14.1%. Excluding exceptional items we improved the net result by Â£1.9 million in the year. The tax charge in the year shows a credit of Â£7.2 million. This is made up of a current tax credit in relation to prior years of Â£0.9 million and deferred tax credit of Â£6.3 million. This deferred tax charge has arisen due to a Â£2.0 million movement in the derivatives, valuation of the properties, including the indexation, of Â£2.8 million, and other timing differences of Â£1.5 million. Balance sheet The underlying net assets of the Group on a management adjusted basis are shown in the table below. Per IFRS Deferred Mark-to-market Head EPRA balance tax of interest leases Adjusted sheet net assets 2010 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Investment properties 223,610 (28,664) 194,946 Other fixed assets 2,558 2,558 Investments in 8,646 8,646 associate and joint ventures Other assets 4,809 4,809 Other liabilities (52,377) 2,671 13,627 28,664 (7,415) Net debt (131,485) (131,485) Net assets 55,761 2,671 13,627 72,059 Adjusted NAV per share 87.5p 2009 Investment properties 243,109 (29,485) 213,624 Other fixed assets 2,621 2,621 Investments in 9,440 9,440 associate and joint ventures Other assets 4,678 4,678 Other liabilities (54,395) 7,393 6,347 29,485 (11,170) Net debt (146,349) (146,349) Net assets 59,104 7,393 6,347 72,844 Adjusted NAV per share 91.5p Group net assets under IFRS were Â£55.8 million at the year end. The more meaningful EPRA figure shows net assets of Â£72.1 million, equivalent to 87.5p per share. The EPRA NNNAV reduced to 66.7p per share, predominately due to the increase in the number of shares in issue as a result of paying a proportion of last year's final dividend in shares. Accounting Judgements and going concern The most significant judgements made in preparing these accounts relate to the carrying value of the properties, investments and hedges 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 compared to current market rates. The Directors exercise their commercial judgements when reviewing the cash flow forecasts of 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 in this Report. In addition the directors considered note 17 to 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 a quality portfolio comprising a majority of long leases and suitable financial arrangements, the directors believe the company is well placed to manage its business risks successfully despite the continuing uncertain economic climate. 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 company is proposing a final dividend of 0.4p, payable on 1 July 2011 to shareholders on the register as at 10 June 2011. This makes a total dividend for the year of 1.15p.The directors have decided against the capitalisation issue of new shares as in the previous two years, as this is felt to be too dilutive on the net asset per share of the company. Our associated company Bisichi Mining PLC, in which we hold a 41.7% stake, had a difficult year and suffered losses after taxation of Â£1.3 million. This figure is after a revaluation surplus under IFRS of Â£0.1 million. I feel confident that the continued policy of prudently managing the Group's cash resources will benefit us as we go through this period of uncertainty. Robert Corry, Finance Director 15 April 2011 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, ASL Technology Holdings Limited and BG Consulting Group Limited as well as being a director of F&C US Smaller Companies plc. He is Deputy President of the Institute of Chartered Accountants in England and Wales and will become President in June 2011. 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 Heather A Curtis ACIS 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 Shareholder Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU 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 2010. 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 19 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 flow. 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 49 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 40. 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 37 and as discussed in the Finance Director's Report. Cash flow is shown on page 39. Dividend Policy An interim dividend for 2011 of 0.75p was paid on 22 January 2011 (2009: Interim dividend 0.75p paid on 22 January 2010). The directors recommend payment of a final cash dividend for 2010 of 0.4p per ordinary share of 10 pence each (the Final Dividend) and Ordinary Share respectively. It is not proposed to make a capitalisation issue with the final dividend in 2011 (2010: equivalent to 0.80p per Ordinary Share). 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. Subject to shareholder approval, the total dividend per Ordinary Share for 2010 will be 1.15p (2009: 1.15p). The Final Dividend of 0.4p per Ordinary Share will be payable on 1 July 2011 to shareholders registered at the close of business on 10 June 2011. The company's ordinary shares held in treasury During 2010 the company issued 2,335,517 of its own shares from Treasury for an average price of 41.68p which increased the "issued share capital" by the same number of shares (see table below for details). At 31 December 2010 1,957,534 (2009: 4,293,051) shares were held in Treasury with a market value of Â£822,164 (2009:Â£1,856,745). At the Annual General Meeting (AGM) in June 2010 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 2011. Movements in Treasury Transaction Number of shares during the year: price shares Treasury shares held at 1 January 2010 4,293,051 27 January 2010 - Issue of Treasury shares 42.00p (2,157,545) in lieu of directors and staff bonuses 1 October 2010 - Purchase by the Trustee of 37.00p (23,702) the SIP in connection with the HMRC approved share incentive plan 1 October 2010 - Shares issued for a 37.00p (19,097) non-executive directors' bonus 16 December 2010 - Issue of Treasury shares in 38.00p (135,173) connection with the HMRC approved share incentive plan Treasury shares held at 31 December 2010 1,957,534 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 2010 by external professional firms of chartered surveyors - Allsop LLP, London (49.6 per cent of the portfolio), King Sturge International LLP (48.2 per cent), and BNP Paribas, Leeds (2.2 per cent). The valuations, which are reflected in the financial statements, amount to Â£194.9 million (2009: Â£213.6 million). Taking account of prevailing market conditions, the valuation of Group properties at 31 December 2010 resulted in an increase of Â£1.6 million (2009: increase of Â£9.4 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 an increase of Â£1.4 million (2009: reduction of Â£0.2 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 2010. H D Goldring, is retiring by rotation at the Annual General Meeting in 2011 and offers himself for re-election. Brief details of the director offering himself for re-election are as follows: 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. Michael Stevens retires from his executive duties on 30 April 2011 after over 25 years service with the group. He is not offering himself for re-election at the Annual General Meeting. 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 10 1 Jan 10 31 Dec 10 1 Jan 10 M A Heller 6,016,577 5,450,109 19,277,931 18,902,994 R J Corry 962,527 661,879 - - H D Goldring 19,819 11,309 - - J A Heller 1,923,320 1,310,652 â€ 14,073,485 â€ 13,779,769 C A Parritt 36,166 24,867 - - M C Stevens 922,326 756,747 +1,163,088 +988,140 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 20 to the financial statements and the remuneration report). Between 1 January 2011 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 6,495,618 19,277,931 R J Corry 996,014 - M C Stevens 962,853 1,239,487 No other changes in the directors' holdings took place between 1 January 2011 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 2010 M A Heller and his family had an interest in 47.4 million shares of the company, representing 56.7 per cent of the issued share capital net of treasury shares (2009: 44.8 million shares representing 56.2 per cent). Cavendish Asset Management Limited has an interest in 5,186,065 shares representing 6.2 per cent of the issued share capital of the company (2009: 4,810,873 shares representing 6.04 per cent). Between 1 January 2011 and the date of this report the following changes occurred: The interest of M A Heller and his family increased to 47.88 million shares in the company, representing 56.82 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 2011 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 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 (Resolution 9). 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 2010 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 reasonable 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) published by the Quoted Companies Alliance. The Alliance provides guidance to SQC and their guidance covers the implementation of The UK Corporate Governance Code for SQC. The paragraphs below set out how the company has applied this guidance during the year. The company has complied with the Quoted Companies Alliance 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 risk management and accountability 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. The directors' responsibility statement in respect of the accounts is set out on page 34. 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 when 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 a maximum of 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 29 to 31. 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 32. Board and board committee meetings held in 2010 The number of regular meetings during the year and attendance was as follows: Meetings Meetings held attended R J Corry Board 10 10 Audit committee 2 2 H D Goldring Board 10 10 Audit committee 2 2 Nomination committee 1 1 Remuneration committee 2 2 M A Heller Board 10 10 Nomination committee 1 1 Remuneration committee 2 2 J A Heller Board 10 10 Audit committee 2 2 C A Parritt Board 10 10 Audit committee 2 2 Nomination committee 1 1 Remuneration committee 2 2 M C Stevens Board 10 9 Audit committee 2 2 Nomination committee 1 1 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 paying 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 and 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 misstatementor 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 2010 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. Risk assessment The audit committee has assessed the key risks to the group as follows: Description of Risk Description of Impact Mitigation Asset Management Tenant failure Financial loss Initial and subsequent assessment of tenant covenant strength combined with an active credit control function. Leases not renewed Financial loss Lease expiries regularly reviewed. Experienced in house teams with strong tenant and market knowledge who manage appropriate tenant mix. Asset illiquidity (size Assets may be illiquid and Regular reporting of and affect current and geographical location) flexing of balance sheet projected position to the Board with efficient treasury management. People: Retention and Unable to retain and Nomination Committee and recruitment of attract the senior staff best people for the key staff review skills gaps roles. and Loss of knowledge and key succession planning. skills. Training and development offered. Retention and Unable to retain and Nomination Committee and recruitment of attract the senior staff best people for the key staff review skills gaps roles. and Loss of knowledge and key succession planning. skills. Training and development offered. Reputation: Business interruption Loss in revenue. Documented Recovery Plan in Impact on footfall. place. Adverse publicity. General and terrorism Potential for criminal/ insurance civil policies in place and risks proceedings. monitored by trained security staff. Health and Safety policies in place. CCTV in centres. Financing: Fluctuation in property Impact on covenants and Secure income flows. values other loan Regular monitoring of LTV and other loan agreement and IC obligations. covenants and other obligations. Focus on quality assets. Reduced availability of Insufficient funds to meet Efficient treasury borrowing facilities existing management. debts/interest payments Loan facilities extended and where operational payments. possible. Regular reporting of current and projected position to the Board. Loss of cash and Financial loss Only use a spread of banks deposits and financial institutions which have a strong credit rating. Fluctuation of interest Uncertainty of interest Manage derivative contracts rates rate costs to achieve a balance between hedging interest rate exposure and minimising potential cash calls. Communication with shareholders Prompt communication with shareholders is given high priority. Extensive information about the Group and its activities is provided in the Annual Report. In addition, a half-year report and two interim reports are produced for each financial year and published on the company's website. The company's website www.lap.co.uk is promptly updated with announcements and Annual Reports upon publication. Copies from previous years are also available on the website. The company's share price is published daily in the Financial Times. The share price history and market information can be found at http:// www.londonstockexchange.com/prices-and-markets/markets/prices.htm. Our code is LAS. 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 both 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 5.4 days annual trade purchases (2009: 17.8 days). Donations No political donations were made during the year (2009: Â£Nil). Donations for charitable purposes amounted to Â£250 (2009: Â£1,525). 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 and 3 and the Chief Executive's Report on pages 6 to 15. The Finance Director's Report on pages 17 to 19 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 6 June 2011 at 10.30 a.m. Items 1 to 7 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 8 to 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 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 7- Directors' authority to allot securities Paragraph 7.1.1 of Resolution 7 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£2,805,864. This represents approximately 33.3 per cent of the ordinary share capital of the company in issue (excluding treasury shares) at 14 April 2011 (being the last practicable date prior to the publication of this Directors' Report). In line with guidance issued by the Association of British Insurers ('ABI') paragraph 7.1.2 of Resolution 7 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£ 2,805,864, 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 14 April 2011 (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. Special Resolutions The following special resolutions will be proposed at the Annual General Meeting: 1. Resolution 8- 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 2012, 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£421,300 representing in accordance with institutional investor guidelines, approximately 5 per cent of the total ordinary share capital in issue as at 14 April 2011 (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. Resolution 9- purchase of own Ordinary Shares The effect of Resolution 9 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 8,554,271 ordinary shares (representing approximately 10 per cent of the company's issued share capital as at 14 April 2011 (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 9 will expire at the conclusion of the company's next Annual General Meeting to be held in 2012 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 14 April 2011 (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 2010 was 70,000 shares representing 0.08% of the company's issued share capital as at 31 December 2010. 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 9. 3 Resolution 10 - New Articles of Association We are also asking shareholders to approve a number of amendments to our Articles of Association primarily to reflect the implementation of the remaining provisions of the Companies Act 2006 in October 2009. An explanation of the main changes between the proposed and existing Articles of Association is set out on page 70 of this document. Other matters Baker Tilly UK Audit LLP has expressed its willingness to continue in office as auditor. A proposal will be made at the Annual General Meeting for reappointment. By order of the board Heather Curtis Secretary 15 April 2011 Carlton House 22 St James's Square London SW1Y 4JH Remuneration Report The remuneration committee is pleased to present its report for the year ended 31 December 2010. 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. The remuneration committee receives updates on pay and employment conditions applying to other group employees. These are taken into consideration when setting executive directors' remuneration consistent with the group's general aim of seeking to reward all employees fairly according to the nature of their role, their performance and market forces." 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 2010 2010 total 2009 total before before Salary Bonus Bonus pension Pension pension Pension And in in Other contrib- contrib- Total contrib- contrib- Total fees cash shares benefits utions utions 2010 utions utions 2009 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 - 200 44 251 - 251 357 - 357 J A Heller 300 200 3 44 547 30 577 952 30 982 R J Corry 197 12 28 23 260 33 293 261 146 407 M C Stevens 90 - 6 20 116 23 139 115 65 180 594 212 237 131 1,174 86 1,260 1,685 241 1,926 Non-executive directors H D Goldring* 42 - 5 4 51 - 51 44 - 44 C A Parritt * 32 - 5 - 37 - 37 30 - 30 74 - 10 4 88 - 88 74 - 74 Total remuneration for directors' service during year 668 212 247 135 1,262 86 1,348 1,759 241 2,000 * 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 (2009: three) directors have benefits under money purchase pension schemes. Contributions in 2010 were Â£86,000 (2009: Â£241,000) 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 2010 (2009: four) and two non-executive directors (2009: nil). 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 (2009: 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. C A Parritt provides consultancy services to the group. This is dealt with in Note 20 to the financial statements. Share option scheme The company has an 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. 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 share option scheme known as the "Non-approved Executive Share Option Scheme" (Unapproved Scheme) which does not have HMRC approval was set up during 2000. At 31 December 2010 there were no options to subscribe for ordinary shares outstanding. 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. No options under the Unapproved scheme were exercised, granted or lapsed during the year to 31 December 2010. Further details of this scheme is set out in Note 19 "Share Capital" to the financial statements. The bid market price of London & Associated Properties PLC ordinary shares at 31 December 2010 was 42.0p (2009: 43.3p). During the year the share mid-market price ranged between 36.5p and 47.5p. 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: No free shares were awarded in 2010 (2009: 93,723 shares awarded at 43.00p per share) Free shares awarded: Number of members Number of shares Value of shares 2010 2009 2010 2009 2010 2009 Â£ Â£ Directors: R J Corry 0 1 0 6,977 0 3,000 J A Heller 0 1 0 6,977 0 3,000 M C Stevens 0 1 0 6,977 0 3,000 Staff 0 17 0 72,792 0 31,300 Total at 31 December 0 20 0 93,723 0 40,300 2. Partnership shares: On 17 November 2009 directors and staff were invited to complete partnership share agreements and commence saving for partnership shares over the period November 2009 to October 2010. Partnership shares issued: Number of members Number of shares Value of shares 2010 2009 2010 2009 2010 2009 Â£ Â£ Directors: R J Corry 1 1 3,947 3,488 1,500 1,500 J A Heller 1 1 3,947 3,488 1,500 1,500 M C Stevens 1 1 3,947 3,488 1,500 1,500 Staff 9 7 35,523 24,416 13,500 10,500 Total at 31 December 12 10 47,364 34,880 18,000 15,000 3. Matching shares: The partnership share agreements for the year to 31 October 2010 provide for two matching shares to be awarded free of charge for each partnership share acquired in December 2010. On 16 December 2010 87,809 matching shares were allocated (2009: 69,770). 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 2010 2009 2010 2009 2010 2009 Â£ Â£ Directors: R J Corry 1 1 7,894 6,977 3,000 3,000 J A Heller 1 1 7,894 6,977 3,000 3,000 M C Stevens 1 1 7,894 6,977 3,000 3,000 Staff 9 7 64,127 48,839 27,000 21,000 Total at 31 December 12 10 87,809 69,770 36,000 30,000 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 2010 amounted to Â£6,088 (2009: Â£6,547). Dividend shares issued: Number of members Number of shares Value of shares 2010 2009 2010 2009 2010 2009 Â£ Â£ Directors: R J Corry 1 1 1,783 1,573 660 464 J A Heller 1 1 1,783 1,573 660 464 M C Stevens 1 1 1,783 1,573 660 464 Staff 17 17 18,353 17,061 6,790 5,033 Total at 31 December 20 20 23,702 21,780 8,770 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 15 April 2011 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 of whom are 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€¢ to review the risk assessments made by management, consider key risks with action taken to mitigate these and to act as a forum for discussion of risk issues and contribute to the board's review of the effectiveness of the Group's risk management control and processes â€¢ consider once a year the need for an internal audit function; â€¢ advise the board on the appointment of the external auditor, 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 auditor's independence each year, which includes: i) a review of non-audit services provided to the Group and related fees; ii) discussion with the auditor 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 auditor's 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 auditor 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 auditor and approved their fees for both audit and non-audit services as set out in note 2 to the financial statements. â€¢ in accordance with the rules for rotation of audit partners, reviewed and approved the proposals from the external auditor to introduce a new senior audit partner to lead the audit. â€¢ the chairman of the audit committee has also 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 15 April 2011 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 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. for the group financial statements, state whether they have been prepared in accordance with IFRSs adopted by the EU and for the company financial statements state 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 Reportcomply 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 loss 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. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the London & Associated Properties PLC website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 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 2010 by the company as detailed in our Valuation Report dated 12 January 2011. Having regard to the foregoing, we are of the opinion that the open market value as at 31 December 2010 of these interests was: Â£'000 Freehold 73,727 Leasehold 23,023 96,750 27 Soho Square, London W1D 3AY Allsop LLP 12 January 2011 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 leasehold property interests held as at 31 December 2010 by the company as detailed in our Valuation Report as at 31 December 2010. Having regard to the foregoing, we are of the opinion that the open market value as at 31 December 2010 of these interests was: Â£'000 Freehold 5,050 Leasehold 88,950 94,000 30 Warwick Street King Sturge LLP London W1B 5NH 31 December 2010 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 2010 by the company as detailed in our Valuation Report dated 26 January 2011. Having regard to the foregoing, we are of the opinion that the open market value as at 31 December 2010 of these interests was: Â£'000 4,196 Freehold Capitol House, Russell Street, BNP Paribas Real Estate Leeds LS1 5SP Advisory and Property Management UK Limited 26 January 2011 Regulated by Royal Institution of Chartered Surveyors INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF London & Associated PropertiesPLC We have audited the Group and parent company financial statements ("the financial statements") on pages36 to 65. 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 auditor As more fully explained in the Directors' Responsibilities Statement set out on page 34, 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 and express an opinion on 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/private.cfm Opinion on financial statements In our opinion * the financial statements give a true and fair view of the state of the G roup's and of the parent company's affairs as at 31 December 2010 and ofthe Group's loss 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; * 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 27, in relation to going concern; * 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; and * certain elements of the report to shareholders by the Board on directors' remuneration. Euan Banks (Senior Statutory Auditor) For and on behalf of BAKER TILLY UK AUDIT LLP, Statutory Auditor Chartered Accountants 25 Farringdon Street, London, EC4A 4AB 18 April 2011 Consolidated income statement for the year ended 31 December 2010 2010 2009 Notes Â£'000 Â£'000 Gross rental income Group and share of joint ventures 16,503 17,067 Less: joint ventures - share of rental (518) (519) income Revenue 1 15,985 16,548 Direct property expenses (1,839) (2,166) Overheads (3,780) (4,865) Property overheads 1 (5,619) (7,031) Net rental income 1 10,366 9,517 Listed investments held for trading 3 43 148 Profit on sale of investment properties 637 14 Net increase on revaluation of 1,569 9,422 investment properties Net increase in value of investments 89 178 held for trading Operating profit 1 12,704 19,279 Share of loss of joint ventures after 10 (233) (276) tax Share of (loss)/profit of associate 11 (505) 1,485 after tax Profit before interest and taxation 11,966 20,488 Interest rate derivatives 17 (7,280) 13,269 Interest rate derivatives break costs 17 (3,515) - Finance income 5 64 90 Finance expenses 5 (11,922) (12,440) (Loss)/profit before taxation (10,687) 21,407 Income tax 6 7,192 (2,355) (Loss)/profitfor the yearattributable to (3,495) 19,052 the owners of the parent Basic (loss)/profit per share 8 (4.24)p 24.32p Diluted (loss)/profit per share 8 (4.24)p 24.32p The revenue and operating result for the year is derived from continuing operations in the United Kingdom. consolidated balance sheet at 31 December 2010 2010 2009 Notes Â£'000 Â£'000 Non-current assets Market value of properties attributable to 194,946 213,624 Group Present value of head leases 28,664 29,485 Property 9 223,610 243,109 Plant and equipment 9 612 816 Investments in joint ventures 10 1,163 1,396 Investments in associated company 11 7,483 8,044 Held to maturity investments 12 1,946 1,805 234,814 255,170 Current assets Trade and other receivables 13 4,092 3,976 Financial assets-investments held for 14 717 702 trading Cash and cash equivalents 8,584 8,655 13,393 13,333 Total assets 248,207 268,503 Current liabilities Trade and other payables 15 (10,022) (11,427) Financial liabilities - borrowings 16 (3,863) (7,216) Current tax liabilities - (741) (13,885) (19,384) Non-current liabilities Financial liabilities-borrowings 16 (136,206) (147,788) Interest rate derivatives 17 (13,627) (6,347) Present value of head leases on properties (28,664) (29,485) Deferred tax 18 (64) (6,395) (178,561) (190,015) Total liabilities (192,446) (209,399) Net assets 55,761 59,104 Equity attributable to the owners of the parent Share capital 19 8,554 8,392 Share premium account 4,866 5,042 Translation reserve in associate 30 (284) Capital redemption reserve 47 47 Retained earnings (excluding treasury 44,342 50,465 shares) Treasury shares 19 (2,078) (4,558) Retained earnings 42,264 45,907 Total shareholders' equity 55,761 59,104 Net assets per share 8 66.71p 74.22p Diluted net assets per share 8 66.69p 74.19p These financial statements were approved by the board of directors and authorised for issue on 15 April 2011 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 2010 Retained Earnings Translation Capital Treasury Retained Total Share Share reserves in redemption shares Earnings equity capital premium associate reserves shares excluding treasury shares Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Balance at 1 January 8,232 5,236 (504) 47 (6,237) 33,532 40,306 2009 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 Transactions with owners: Equity share options - - - - - (76) (76) in associate Issue of own shares 160 (194) - - - - (34) and expenses Disposal of own - - - - 521 - 521 shares 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 8,392 5,042 (284) 47 (4,558) 50,465 59,104 December 2009 Loss for year - - - - - (3,495) (3,495) Other comprehensive income: Currency translation - - 314 - - - 314 in associate Total other - - 314 - - - 314 comprehensive income Total comprehensive - - 314 - - (3,495) (3,181) income Transaction with owners: Equity share options - - - - - 2 2 in associate Minority interest on - - - - - (199) (199) share disposal in associate Issue of own shares 162 (176) - - - - (14) and expenses Disposal of own - - - - 973 - 973 shares Loss on transfer of - - - - 1,507 (1,507) - own shares Dividends paid - - - - - (924) (924) Transactions with 162 (176) - - 2,480 (2,628) (162) owners Balance at 31 8,554 4,866 30 47 (2,078) 44,342 55,761 December 2010 All the above are attributable to the owners of the parent. Consolidated statement of comprehensive income for the year ended 31 December 2010 2010 2009 Â£'000 Â£'000 (Loss)/profitfor the year (3,495) 19,052 Other comprehensive income: Currency translation in associate 314 220 Other comprehensive income for the year net of tax 314 220 Total comprehensive income for the period (3,181) 19,272 attributable to owners of the parent Consolidated cash flow statement for the year ended 31 December 2010 2010 2009 Â£'000 Â£'000 Operating activities Profit before interest and taxation 11,966 20,488 Depreciation 197 210 Profit on disposal of non-current assets (3) (3) Profit on sale of investment properties (637) (14) Net increase on revaluation of investment properties (1,569) (9,422) Share of loss/(profit) of joint ventures and associate 738 (1,209) after tax Net increase in value of investments held for trading (89) (178) (Increase)/decrease in net current assets (1,019) 2,303 Cash generated from operations 9,584 12,175 Income tax repaid/(paid) 111 (444) Cash inflows from operating activities 9,695 11,731 Investing activities Investment in loan stock in joint ventures (141) - Property acquisitions and improvements (754) (3,763) Sale of properties 21,302 17,805 Purchase of office equipment and motor vehicles (78) (133) Sale of office equipment and motor vehicles 86 27 Interest received 64 90 Dividends received from associate and joint ventures 173 273 Cash inflows from investing activities 20,652 14,299 Financing activities Issue expenses (14) (34) Sale of treasury shares 973 521 Equity dividends paid (924) (885) Interest paid (15,525) (12,132) Repayment of short term loan from joint ventures - (225) Repayment of medium term bank loan (11,575) (12,750) Cash outflows from financing activities (27,065) (25,505) Net increase in cash and cash equivalents 3,282 525 Cash and cash equivalents at beginning of year 1,439 914 Cash and cash equivalents at end of year 4,721 1,439 Cash and cash equivalents For the purpose of the cash flow statement, cash and cash equivalents comprise the following balance sheet amounts: 2010 2009 Â£'000 Â£'000 Cash and cash equivalents (before bank overdrafts) 8,584 8,655 Bank overdrafts (3,863) (7,216) Cash and cash equivalents at end of year 4,721 1,439 Â£0.6million of cash deposits at 31 December 2009 was charged as security to Axa Annuity Company. This was released in 2010. Group accounting policies The following are the principal group accounting policies: Basis of accounting The group financial statements for the year ended 31 December 2010 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 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; 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: IFRS 2 (amended) Group Cash Settled Share-based payment transactions Improvements to IFRS: 2007-2009 annual improvements Other than additional disclosure, there is no material impact on reported income or net assets. The following standards and interpretations have been issued and adopted by the EU but are not effective for the year ended 31 December 2010 and have not been adopted early: IAS 24 (revised) Related Party Disclosures IAS 32 (amended) Financial Instruments: Presentation IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments The adoption of the standards and interpretations in issue but not yet effective is not expected to have a 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. 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. Group accounting policies continued 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 is 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 originalmaturities of three months or less. Ordinary Shares Shares are classified as equity when there is no obligation to transfer cash or other assets. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. 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 2010 1.Segmental analysis 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 2010 2009 Property Listed Total Property Listed investments investments Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Rental income 15,985 - 15,985 16,548 - 16,548 Property overheads (5,619) - (5,619) (7,031) - (7,031) Net rental income 10,366 - 10,366 9,517 - 9,517 Listed investment income - 43 43 - 148 148 Profit on sale of 637 - 637 14 - 14 investment properties Net increase/(decrease) 1,569 - 1,569 9,422 - 9,942 on revaluation of investment properties Net increase/(decrease) - 89 89 - 178 178 on revaluation of investments held for trading Operating profit/(loss)* 12,572 132 12,704 18,953 326 19,279 Total assets (excluding 237,023 717 237,740 256,556 702 257,258 investments in associate and joint ventures) Total liabilities (52,377) - (52,377) (53,654) - (53,654) (excluding borrowings and current tax) Borrowings (140,194) - (140,194) (155,004) - (155,004) Net assets 44,452 717 45,169 47,898 702 48,600 Current tax liabilities: - (741) non segmental Investments in joint 3,104 3,196 ventures: non segmental (notes 10 and 12) Investments in 7,483 8,044 associate: non segmental (note 11) Investments in unlisted 5 5 companies Net assets as per 55,761 59,104 balance sheet Other segment items: Finance income 64 - 64 90 - 90 Finance expenses 11,992 - 11,992 12,440 - 12,440 Depreciation 197 - 197 210 - 210 Capital expenditure 567 - 567 3,594 - 3,594 Rental income Joint Ventures Group Analytical Dragon Group excl.joint Ventures Retail Share ventures Properties Total 2010 2009 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Rental income 15,985 830 206 17,021 16,503 17,067 Direct property expenses (1,839) (58) (12) (1,909) (1,874) (2,201) Overheads (3,780) (226) (135) (4,141) (3,960) (5,011) 10,366 546 59 10,971 10,669 9,855 Less: attributable to joint (303) (338) ventures Net rental income 10,366 9,517 *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 (2009: none). notes to the financial statements for the year ended 31 December 2010 2. (Loss)/profit before taxation 2010 2009 Â£'000 Â£'000 (Loss)/profit before taxation is arrived at after charging/ (crediting): Staff costs (note 21) 2,631 3,361 Depreciation on tangible fixed assets - owned assets 197 210 Operating lease rentals - land and buildings 375 385 Profit on disposal of motor vehicles and office equipment (3) (3) Amounts payable to the auditor in respect of both audit and non-audit services Audit services: Statutory - company and consolidation 84 81 - subsidiaries 41 54 Further assurance services 6 10 Other services 9 8 140 153 Staff costs and depreciation of tangible fixed assets are included in overheads. 3. Listed investments held for trading 2010 2009 Â£'000 Â£'000 Investment sales 119 1,948 Dividends receivable 15 60 134 2,008 Cost of sales (86) (1,835) 48 173 Attributable overheads (5) (25) Net income from listed investments 43 148 4. Directors' emoluments 2010 2009 Â£'000 Â£'000 Emoluments 1,262 1,759 Defined contribution pension scheme contributions 86 241 1,348 2,000 Details of directors' emoluments and share options are set out in the remuneration report. 5. Finance income and expenses 2010 2009 Â£'000 Â£'000 Finance income 64 90 Finance expenses Interest on bank loans and overdrafts (2,164) (3,013) Other loans (2,134) (2,108) Interest on derivatives adjustment (5,575) (5,338) Interest on obligations under finance leases (2,049) (1,981) Total finance expenses (11,922) (12,440) (11,858) (12,350) notes to the financial statements for the year ended 31 December 2010 6. Income tax 2010 2009 Â£'000 Â£'000 Current tax Corporation tax on (loss)/profit of the period - - Adjustments in respect of previous periods (861) (1,232) Total current tax (861) (1,232) Deferred tax Origination and reversal of timing differences (1,578) (1,052) Revaluation of investment properties (2,781) 658 Accelerated capital allowances 97 270 Fair value of interest derivatives (2,038) 3,715 Adjustments in respect of previous periods (31) (4) Total deferred tax (note 18) (6,331) 3,587 Tax on (loss)/profit on ordinary activities (7,192) 2,355 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 (2009: 28 per cent). The differences are explained below: (Loss)/profit on ordinary activities before taxation (10,687) 21,407 Taxation on ordinary activities at 28 per cent (2009: (2,992) 5,994 28%) Effects of: Expenses not deductible for tax purposes - 4 Other differences (3,265) (2,059) Joint ventures and associate (43) (348) Deferred tax rate adjustment - - Adjustment in respect of prior years (892) (1,236) Tax (credit)/charge for the period (7,192) 2,355 The main component of other differences in the reconciliation relates to potential indexation for capital gains of Â£3.2 million (2009: indexation allowance Â£1.9 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 2010 2009 Per Â£'000 Per Â£'000 share share Dividends paid during the year relating to the 1.15p 924 1.15p 885 prior period Dividends to be paid: Interim dividend for 2010 paid on 21 January 0.75p 627 0.75p 597 2011 Proposed final dividend for 2010 0.40p 337 0.40p 327 1.15p 964 1.15p 924 The proposed final dividend will be payable on 1 July 2011 to shareholders registered at the close of business on 10 June 2011 subject to approval at Annual General Meeting. notes to the financial statements for the year ended 31 December 2010 8. (Loss)/profit per share and net assets per share (Loss)/profit per share have been calculated as follows: 2010 2009 (Loss)/profitfor the year for the purposes of basic and diluted (3,495) 19,052 (loss)/profitper share (Â£'000) Weighted average number of ordinary shares in issue for the 82,389 78,345 purpose of basic (loss)/profitper share ('000) Basic (loss)/profit per share (4.24)p 24.32p Weighted average number of ordinary shares in issue for the 82,389 78,345 purpose of diluted (loss)/profitper share ('000) Fully diluted (loss)/profit per share (4.24)p 24.32p Weighted average number of shares in issue is calculated after excluding treasury shares of 1,957,534 (2009:4,293,051). 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 2010 2009 2010 2009 2010 2009 Â£'000 Â£'000 `000 `000 Pence Pence Basic At 31 December 55,761 59,104 83,585 79,629 66.71 74.22 Dilution adjustments for shares subject to option agreements: Issue of outstanding share 28 28 70 70 options Diluted 55,789 59,132 83,655 79,699 66.69 74.19 9. Property and plant and equipment Investment Properties Freehold Leasehold Leasehold Office Total over under equipment 50 years 50 years and motor vehicles Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Cost or valuation at 1 January 243,109 83,598 159,511 - 1,734 2010 Reclassification - - (576) 576 - Additions 489 - 489 - 78 Disposals (20,736) (3,736) (17,000) - (226) Decrease in present value of (821) - (821) - - head leases Increase/(decrease) on 1,569 3,111 (1,472) (70) - revaluation Cost or valuation at 31 223,610 82,973 140,131 506 1,586 December 2010 Representing assets stated at: Valuation 194,946 82,973 111,473 500 - Present value of head leases 28,664 - 28,658 6 - Cost - - - - 1,586 223,610 82,973 140,131 506 1,586 Depreciation at 1 January 2010 - - - - 918 Charge for the year - - - - 197 Disposals - - - - (141) Depreciation at 31 December - - - - 974 2010 Net book value at 1 January 243,109 83,598 159,511 - 816 2010 Net book value at 31 December 223,610 82,973 140,131 506 612 2010 notes to the financial statements for the year ended 31 December 2010 9. Property and plant and equipment continued Investment Properties Freehold Leasehold Leasehold Office Total over under equipment 50 years 50 years and motor vehicles Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Cost or valuation at 1 January 245,770 95,272 150,498 - 1,682 2009 Additions 3,461 1,450 2,011 - 133 Disposals (17,791) (17,791) - - (81) Increase in present value of 2,247 - 2,247 - - head leases Increase on revaluation 9,422 4,667 4,755 - - Cost or valuation at 31 243,109 83,598 159,511 - 1,734 December 2009 Representing assets stated at: Valuation: 213,624 83,598 130,026 - - Present value of head leases 29,485 - 29,485 - - Cost - - - - 1,734 243,109 83,598 159,511 - 1,734 Depreciation at 1 January 2009 - - - - 765 Charge for the year - - - - 210 Disposals - - - - (57) Depreciation at 31 December - - - - 918 2009 Net book value at 1 January 245,770 95,272 150,498 - 917 2009 Net book value at 31 December 243,109 83,598 159,511 - 816 2009 The leasehold and freehold properties, excluding the present value of head leases, were valued as at 31 December 2010 by external professional firms of chartered surveyors. The valuations were made at open market value. 2010 2009 Â£'000 Â£'000 Allsop LLP 96,750 205,865 BNP Paribas Real Estate 4,196 4,023 King Sturge LLP 94,000 - Directors' valuation - 3,736 194,946 213,624 Add: Present value of headleases 28,664 29,485 223,610 243,109 Upper Street, Islington, which was held at Directors' valuation at 31 December 2009, 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 (2009: Â£6,051,000) was as follows: 2010 2009 Freehold Leasehold Short Freehold Leasehold Short over 50 Leasehold over 50 Leasehold years years Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Cost at 1 January 80,608 133,462 - 96,308 131,451 - Reclassification - (785) 785 - - - Additions - 489 - 1,450 2,011 - Disposals (4,300) (11,700) - (17,150) - - Cost at 31 December 76,308 121,466 785 80,608 133,462 - notes to the financial statements for the year ended 31 December 2010 10. Investment in joint ventures 2010 2009 Â£'000 Â£'000 Group share of: Turnover 518 519 Loss before tax (226) (242) Taxation (7) (34) Loss after tax (233) (276) Non-current assets 6,333 6,565 Current assets 1,500 1,582 Current liabilities (3,712) (3,871) Non-current liabilities (2,958) (2,880) Net assets 1,163 1,396 Analytical Ventures Limited (Analytical Ventures) - unlisted property investment company. The company owns 50 per cent of the issued share capital and Â£1,940,860 of loan stock of Analytical Ventures. The remaining 50 per cent of the issued share capital and Â£1,800,000 of loan stock is owned by Uberior Ventures Limited. Analytical Ventures is incorporated and operates in England and Wales and has issued share capital of 7,558,000 ordinary shares (2009: 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 (2009:500,000 ordinary shares of Â£1 each). Dragon is managed by a board of directors with neither party having overall control. Shares in joint ventures: 2010 2009 Â£'000 Â£'000 At 1 January 1,396 1,793 Share of loss after tax (233) (276) Dividend received - (121) (233) (397) At 31 December 1,163 1,396 11. Investments in associated company 2010 2009 Â£'000 Â£'000 Bisichi Mining PLC - listed mining and property investment company Group share of: Turnover 13,681 12,094 (Loss)/profit before tax (725) 2,039 Taxation 220 (554) (Loss)/profit after tax (505) 1,485 Non-current assets 10,718 9,971 Current assets 4,811 4,308 Current liabilities (4,162) (4,345) Non-current liabilities (3,720) (1,890) Minority interest (164) - Net assets 7,483 8,044 notes to the financial statements for the year ended 31 December 2010 continued 11. Investments in associated company continued 2010 2009 Â£'000 Â£'000 Share in associate: At 1 January 8,044 6,567 Share of (loss)/profit after tax (505) 1,485 Equity share options 2 (76) Currency translation 314 220 Dividend received (173) (152) Minority interest (199) - (561) 1,477 At 31 December 7,483 8,044 The company owns 42 per cent (2009: 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 because 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 2010 was Â£8,700,000 (2009: Â£7,611,000). 12. Held to maturity investments 2010 Unlisted Loan 2009 Unlisted Loan Total Shares stock Total Shares Stock in joint ventures Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Cost At 1 January 1,805 5 1,800 1,805 5 1,800 Loan stock issue 180 - 180 - - - Repayments (39) - (39) - - - At 31 December 1,946 5 1,941 1,805 5 1,800 13. Trade and other receivables 2010 2009 Â£'000 Â£'000 Trade receivables 1,089 736 Amounts due from associate and joint ventures 328 196 Other receivables 206 437 Prepayments and accrued income 2,469 2,607 4,092 3,976 The directors consider that the carrying amount of trade and other receivables approximates to their fair value. 14. Investments held for trading 2010 2009 Â£'000 Â£'000 Market bid value of the listed investment 717 702 portfolio Unrealised deficit of market value over cost (395) (467) Listed investment portfolio at cost 1,112 1,169 All investments are listed on the London Stock Exchange. 15. Trade and other payables 2010 2009 Â£'000 Â£'000 Trade payables 256 691 Amounts owed to joint ventures 1,133 1,165 Other taxation and social security costs 981 825 Other payables 801 789 Accruals and deferred income 6,851 7,957 10,022 11,427 The directors consider that the carrying amount of trade and other payables approximates to their fair value. notes to the financial statements for the year ended 31 December 2010 continued 16. Borrowings Current borrowings - amounts falling due within one year 2010 2009 Â£'000 Â£'000 Bank overdrafts (unsecured) 3,863 7,216 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 9,804 9,787 per cent* 21,504 21,487 Term bank loans: Â£60 million revolving credit facility repayable in 2012*+ 44,855 56,494 Â£70 million term bank loan repayable in 2014* 69,847 69,807 114,702 126,301 136,206 147,788 *The Â£10 million debenture and bank loans are shown after deduction of outstanding amortised issue costs. +The Â£60 million facility was reduced from Â£90 million and the term extended by a year to September 2012. 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£60 million bank revolving credit facility repayable in September 2012 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£192.1 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. notes to the financial statements for the year ended 31 December 2010 continued 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 2-5 Over 5 2010 than years years Total 1 year Â£'000 Â£'000 Â£'000 Â£'000 Bank overdrafts (floating) 3,863 - - 3,863 Debentures (fixed) - 5,000 16,700 21,700 Bank loans (floating)* - 115,104 - 115,104 Trade and other payables 10,022 - - 10,022 (non-interest) 13,885 120,104 16,700 150,689 Less 2-5 Over 5 2009 than 1 years years Total year 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 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 2010 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£16,033,000 (2009: Â£35,105,000) as follows: 2010 2009 Â£'000 Â£'000 Overdrafts 1,137 1,784 Term facilities expiring in two to five years 14,896 33,321 16,033 35,105 Hedge profile a) There is a hedge to cover part of the Â£60 million revolving credit facility, which currently covers the full Â£45 million drawn. It consists of a 20 year swap for Â£15.4 million (2009: 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£9,811,000 deficit (2009: Â£4,570,000 deficit) being the estimated financial effect of the fair value to the business of these hedging instruments less the deferred tax thereon. During the year the Company broke Â£19.6 million of the 4.76 per cent swap at a cost of Â£3.515 million. 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 17 year interest rate, which was 3.85 per cent at 31 December 2010 against the rate payable under the specific hedge. This has given a liability at 31 December 2010 of Â£13,627,000 (2009: Â£ 6,347,000) as shown in the balance sheet and this value changes by approximately Â£1,600,000 for each 0.1% change in interest rate. The banks own initial quotation at 31 December 2010 to close each of the hedges was Â£ 16,236,000 (2009: Â£9,918,000). 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. The cost to the Group to exit the instruments before November 2014 and January 2015 has been attributed a cost by the bank of Â£5,679,000 (2009:Â£8,466,000). It is not the intention of the Directors to exit the instruments and this cost has not been recognised. During the year the company broke Â£19.6 million of the 4.76 per cent swap at a cost of Â£3.515 million. notes to the financial statements for the year ended 31 December 2010 continued 17. Financial instruments continued 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). 2010 Level 1 Level 2 Level 3 Total Gain/ (loss) to income statement Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Financial assets Other financial assets held for trading Quoted equities 717 - - 717 15 Financial liabilities Derivative financial instruments Interest rate swaps - - 13,627 13,627 (7,280) 2009 Level 1 Level 2 Level 3 Total Gain/ (loss) to income statement Â£'000 Â£'000 Â£'000 Â£'000 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 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 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 2010 this decreased to 189.8 per cent (2009: 223.6 per cent) which was calculated as follows: 2010 2009 Â£'000 Â£'000 Total debt 140,069 155,004 Less cash and cash equivalents (8,584) (8,655) Net debt 131,485 146,349 Total equity 69,388 65,451 189.5% 223.6% The gearing reduced primarily due to the reduction in the debt 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. notes to the financial statements for the year ended 31 December 2010 continued 17. Financial instruments continued Financial assets maturity Cash and cash equivalents all have a maturity of less than three months. 2010 2009 Â£'000 Â£'000 Cash at bank and in hand 8,584 8,655 These funds are primarily invested in short term bank deposits maturing within one year bearing interest at the bank's variable rates. Â£Nil (2009: Â£0.6 million) of the cash is secured against the 2022 First Mortgage Debenture. Financial liabilities maturity Repayment of borrowings 2010 2009 Â£'000 Â£'000 Bank loans and overdrafts: Repayable on demand or within one year 3,863 7,216 Repayable between two and five years 114,702 126,301 118,565 133,517 Debentures: Repayable between two and five years 5,000 5,000 Repayable in more than five years 16,504 16,487 140,069 155,004 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 1,137 1,784 which expire in two to five years 14,896 33,321 16,033 35,105 Interest rate risk and hedge profile 2010 2009 Â£'000 Â£'000 Fixed rate borrowings 21,700 21,700 Floating rate borrowings - Subject to interest rate swap 125,400 145,000 - Excess hedge (10,296) (11,105) 136,804 155,595 Average fixed interest rate 9.69% 9.69% Weighted average swapped interest rate 5.57% 5.58% Weighted average cost of debt on overdrafts, bank loans 6.12% 5.97% and debentures Average period for which borrowing rate is fixed 8.5 years 9.5 years Average period for which borrowing rate is swapped 16.9 years 17.9 years The swapped interest rate have calls by the bank 3.9 years 4.9 years The Group's floating rate debt bears interest based on LIBOR for the term bank loans and Bank base rate for the overdrafts. notes to the financial statements for the year ended 31 December 2010 continued 17. Financial instruments continued Total financial assets and liabilities The Group's financial assets and liabilities and their fair values are as follows: 2010 2009 Fair Carrying Fair Carrying value value value value Â£'000 Â£'000 Â£'000 Â£'000 Cash and cash equivalents 8,584 8,584 8,655 8,655 Financial assets - 717 717 702 702 investments held for trading Other assets 4,092 4,092 3,976 3,976 Derivative liabilities (13,627) (13,627) (6,347) (6,347) Bank overdrafts (3,863) (3,863) (7,216) (7,216) Bank loans (115,104) (114,702) (126,679) (126,301) Present value of head leases (28,664) (28,664) (29,485) (29,485) on properties Other liabilities (10,022) (10,022) (12,168) (12,168) Before debentures (157,887) (157,485) (168,562) (168,184) Fair value of debenture stocks Fair value of the Group's debenture Book Fair 2010 2009 liabilities: value value Fair value Fair Value adjustment adjustment Â£'000 Â£'000 Â£'000 Â£'000 Debenture stocks 21,700 26,589 (4,889) (7,483) Tax at 28 per cent (2009: 28 1,369 2,095 per cent) Post tax fair value (3,520) (5,388) adjustment Post tax fair value (4.21)p (9.40)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 2010 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. notes to the financial statements for the year ended 31 December 2010 continued 18. Deferred tax 2010 2009 Â£'000 Â£'000 Balance at 1 January 6,395 2,808 Transfer to profit and loss account (6,331) 3,587 Balance at 31 December 64 6,395 The deferred tax balance comprises the following: Revaluation of investment properties 2,953 5,733 Accelerated capital allowances 2,213 2,116 Fair value of interest derivatives (3,815) (1,777) Short-term timing differences 1,320 1,321 2,671 7,393 Loss relief (2,607) (998) Provision at end of period 64 6,395 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 2010 2009 ordinary ordinary 10p shares 10p shares 2010 2009 Â£'000 Â£'000 Authorised: Ordinary shares of 110,000,000 110,000,000 11,000 11,000 10p each Allotted, issued and fully paid 83,922,029 82,316,972 8,392 8,232 Ordinary shares of 10p - issued 1,620,682 1,605,057 162 160 during the year Share capital 85,542,711 83,922,029 8,554 8,392 Less: held in Treasury (see (1,957,534) (4,293,051) (196) (429) below) "Issued share capital" for 83,585,177 79,628,978 8,358 7,963 reporting purposes The company has one class of ordinary shares which carry no right to fixed income. The company issued a further 1,620,682 new ordinary shares of 10p each on 2 July 2010, from the amount standing to the credit of the Company's share premium account and less costs incurred of Â£14,000. The existing shareholders as at 4 June 2010 were entitled to the new Capitalisation Issue ordinary shares as authorised at the Annual General Meeting on 7 June 2010. Treasury shares Number of ordinary 10p shares Cost/issue value 2010 2009 2010 2009 Date Price Â£'000 Â£'000 excl. costs Shares held in Treasury at 1 4,293,051 5,873,865 4,558 6,237 January Issued to meet directors Jan-10 106.18p (2,069,524) (1,214,400) (2,198) (1,290) bonuses(Feb 09 -106.18p) Issued to meet share options - - (50,000) - (53) exercised(Feb 09 -106.18p) Issued for new share - - (21,780) - (23) incentive plan (Mar 09 -106.18p) Issued to meet staff bonuses Jan-10 106.18p (88,021) (96,261) (93) (102) (May 09 -106.18p) Issued to meet directors' Oct-10 106.18p (19,097) - (20) - bonuses Issued for new share Oct-10 106.18p (23,702) - (25) - incentive plan Issued for new share Dec-10 106.18p (135,173) (198,373) (144) (211) incentive plan (Dec 09 -106.18p) Shares held in Treasury at 31 1,957,534 4,293,051 2,078 4,558 December notes to the financial statements for the year ended 31 December 2009 continued 19. Share capital continued Share Option Schemes Employees' share option scheme (Approved scheme) At 31 December 2010 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 Option Price Normal Exercise Date 70,000 14 October 2003 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 2010 is as follows: Changes during the year At 1 Options Options Options At January lapsed 2010 Exercised granted 31 December 2010 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 2010 there were no options to subscribe for ordinary shares outstanding. 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 2010 is as follows: Changes during year Changes during the year At 1 Options Options Options At January lapsed 2010 Exercised granted 31 December 2010 Shares issued to date 450,000 - - - 450,000 Options granted which have not been - - - - - exercised Shares allocated over which options 550,000 - - - 550,000 have not yet been granted Total shares allocated for issue to 1,000,000 - - - 1,000,000 employees under the scheme notes to the financial statements for the year ended 31 December 2010 continued 20. Related party transactions Cost Amounts Owed Cash advanced recharged to (to) by to (by) (by) related related party related party party Â£'000 Â£'000 Â£'000 Related party: Analytical Ventures Limited Current Account 42 4 - Dragon Retail Properties Limited Current account 72 72 - Loan account - (1,205) - Bisichi Mining PLC Current account 359 (i) 326 - Directors and key management M A Heller and J A Heller 10 (ii) - - H D Goldring (Delmore Asset (25) (iii) - - Management Limited) C A Parritt (25) (iv) - - Totals at 31 December 2010 433 (803) - Totals at 31 December 2009 406 (1,021) 225 Nature of costs recharged - (i) Management fees (ii) Property management fees (iii) Portfolio management fees (iv) Consultancy fees. 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 (2009: 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 (2009: 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 (2009: 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 were Â£ 1,504,000 (2009: Â£2,192,000). 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 36 (2009: 37). 2010 2009 Â£'000 Â£'000 Staff costs during the year were as follows: Salaries and other costs 1,873 2,575 Social security costs 386 325 Pension costs 372 461 2,631 3,361 notes to the financial statements for the year ended 31 December 2010 continued 22. Capital Commitments 2010 2009 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 (2009: Â£Nil). 23. Commitments under operating and finance leases Operating leases on land and buildings At 31 December 2010 the Group has total future minimum commitments under non-cancellable operating leases on land and buildings as follows: 2010 2009 Â£'000 Â£'000 Within one year 399 390 In the second to fifth years inclusive 1,197 1,495 After five years - - 1,596 1,885 Operating lease payments represent rentals payable by the Group for its office premises. The leases are for an average term of 5 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 2010 2009 2010 2009 Â£'000 Â£'000 Â£'000 Â£'000 Amounts payable under finance leases: Within one year 1,821 1,874 1,821 1,874 In the second to fifth years 7,285 7,497 6,970 6,967 inclusive After five years 229,114 234,145 20,073 20,644 238,220 243,516 28,864 29,485 Future finance charges on (209,556) (214,031) - - finance leases Present value of finance 28,664 29,485 28,864 29,485 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: 2010 2009 Â£'000 Â£'000 Within one year 11,811 13,156 In the second to fifth years inclusive 40,537 48,079 After five years 41,273 67,808 93,621 129,043 24. Contingent Liabilities There were no contingent liabilities at 31 December 2010 (2009: Â£Nil), except as disclosed in Note 17. notes to the financial statements for the year ended 31 December 2010 continued 25. Company financial statements Company balance sheet at 31 December 2010 Notes 2010 2009 Â£'000 Â£'000 Fixed assets Tangible assets 25.3 86,758 87,333 Other investments: Associated company 25.4 358 358 Subsidiaries and others 25.4 46,431 46,290 25.4 46,789 46,648 133,547 133,981 Current assets Debtors 25.5 22,553 19,638 Investments 25.6 717 702 Bank balances 5,966 6,653 29,236 26,993 Creditors Amounts falling due within one year 25.7 (42,416) (25,171) Net current (liabilities)/assets (13,180) 1,822 Total assets less current liabilities 120,367 135,803 Creditors Amounts falling due after more than 25.8 (72,146) (81,063) one year Net assets 48,221 54,740 Capital and reserves Share capital 25.10 8,554 8,392 Share premium account 25.11 4,866 5,042 Capital redemption reserve 25.11 47 47 Revaluation reserve 25.11 13,407 13,779 Treasury shares 25.10 (2,078) (4,558) Retained earnings 25.11 23,425 32,038 Shareholders' funds 48,221 54,740 These financial statements were approved by the board of directors and authorised for issue on 15 April 2011 and signed on its behalf by: M A Heller R J Corry DirectorDirector Company Registration No. 341829 notes to the financial statements for the year ended 31 December 2010 continued 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 2010 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 vehicles - 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. notes to the financial statements for the year ended 31 December 2010 continued 25.2. (Loss)/profit for the financial year The company's loss for the year was Â£6,182,000 (profit 2009: Â£1,613,000). 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 Total Freehold Long Short Office leasehold leasehold Equipment and motor vehicles Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Cost or valuation at 1 88,294 62,678 23,840 - 1,776 January 2010 Reclassification - - (570) 570 - Additions 78 - - - 78 Disposals (222) - - - (222) Increase/(decrease) on (372) 445 (747) (70) - revaluation Cost or valuation at 31 87,778 63,123 22,523 500 1,632 December 2010 Representing assets stated at: Valuation 86,146 63,123 22,523 500 - Cost 1,632 - - - 1,632 87,778 63,123 22,523 500 1,632 Depreciation at 1 961 - - - 961 January 2010 Charge for the year 196 - - - 196 Disposals (137) - - - (137) Depreciation at 31 1,020 - - - 1,020 December 2010 Net book value at 1 87,333 62,678 23,840 - 815 January 2010 Net book value at 31 86,758 63,123 22,523 500 612 December 2010 The freehold and leasehold properties were valued as at 31 December 2010 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. 2010 2009 Â£'000 Â£'000 Allsop LLP 81,950 82,495 BNP Paribas Real Estate 4,196 4,023 86,146 86,518 The historical cost of investment properties, including total capitalised interest of Â£1,222,000 (2009: Â£1,222,000) was as follows: Freehold Long Short Leasehold Leasehold Â£'000 Â£'000 Â£'000 Cost at 1 January 2010 54,620 18,078 - Reclassification - (785) 785 Additions - - - Disposals - - - Cost at 31 December 2010 54,620 17,293 785 Long leasehold properties are held on leases with an unexpired term of more than fifty years at the balance sheet date. notes to the financial statements for the year ended 31 December 2010 continued 25.4. Other investments Shares in Loan stock Shares Loan Shares in Unlisted Total in in stock subsidiary subsidiary in joint associate shares joint companies companies ventures ventures Cost Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 At 1 January 2010 46,648 40,663 3,658 164 1,800 358 5 Loan stock issued 180 - - - 180 - - Repayments (39) - - - (39) - - At 31 December 46,789 40,663 3,658 164 1,941 358 5 2010 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 London & Associated Property Management 100 100 Management Services Limited Services 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 2010 2009 Â£'000 Â£'000 Trade debtors 639 382 Amounts due from subsidiary companies 17,525 17,601 Amounts due from associate and joint ventures 328 196 Deferred tax asset (note 25.9) 2,657 267 Other debtors 41 25 Prepayments and accrued income 1,363 1,167 22,553 19,638 25.6. Investments 2010 2009 Â£'000 Â£'000 Market value of the listed investment 717 702 portfolio Unrealised deficit of market value over cost (395) (467) Listed investment portfolio at cost 1,112 1,169 All investments are listed on the London Stock Exchange. notes to the financial statements for the year ended 31 December 2010 continued 25.7. Creditors: Amounts falling due within one year 2010 2009 Â£'000 Â£'000 Bank overdrafts (unsecured) 3,863 7,191 Amounts owed to subsidiary companies 31,659 9,729 Amounts owed to joint ventures 1,133 1,165 Corporation tax - 741 Other taxation and social security costs 649 576 Other creditors 328 360 Accruals and deferred income 4,784 5,409 42,416 25,171 25.8. Creditors: Amounts falling due after more than one year 2010 2009 Â£'000 Â£'000 Interest rate derivatives 5,787 3,082 Term Debenture stocks: Â£5 million First Mortgage Debenture Stock 2013 5,000 5,000 at 11.3 per cent Â£1.7 million First Mortgage Debenture Stock 1,700 1,700 2016 at 8.67 per cent Â£5 million First Mortgage Debenture Stock 2018 5,000 5,000 at 11.6 per cent Â£10 million First Mortgage Debenture Stock 9,804 9,787 2022 at 8.109 per cent* 21,504 21,487 Term bank loans: Repayable after more than two years*+ 44,855 56,494 72,146 81,063 *The Â£10 million debenture and bank loans are shown after deduction of un-amortised issue costs. +The Â£60 million facility was reduced from Â£90 million and the term extended by a year to September 2012. 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 3,863 7,191 Repayable between two and three years 44,855 56,494 48,718 63,685 Debentures: Repayable between three and five years 5,000 5,000 Repayable in more than five years 16,504 16,487 70,222 85,172 Hedge profile There is a hedge to cover part of the Â£60 million revolving credit facility, which currently covers the full Â£45 million drawn. It consists of a 20 year swap for Â£15.4 million (2009: 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£4,166,000 deficit (2009: Â£2,219,000 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 17 year interest rate, which was 3.85 per cent at 31 December 2010 against the rate payable under the specific hedge. This has given a liability at 31 December 2010 of Â£5,787,000 (2009: Â£ 3,082,000) as shown in the balance sheet. The banks own initial quotation at 31 December 2010 to close each of the hedges was Â£7,180,000 (2009: Â£5,047,000). The hedges arenot deemed to be eligible for hedge accounting, as the banks have an option to cancel the hedge in January 2015, to which they separately attribute a cost of Â£2,511,000 (2009: Â£4,518,000), 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. The cost to the company to exit the instruments before January 2015 has been attributed a cost by the bank of Â£2,511,000 (2009:Â£4,518,000). It is not the intention of the Directors to exit the instruments and this cost has not been recognised. During the year the company broke Â£19.6 million of the 4.76 per cent swap at a cost of Â£3.515 million. notes to the financial statements for the year ended 31 December 2010 continued 25.8. Creditors: Amounts falling due after more than one year continued 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). 2010 Level 1 Level 2 Level 3 Total Gain/ (loss) to Â£'000 Â£'000 Â£'000 Â£'000 income statement Â£'000 Financial assets Other financial assets held for trading Quoted equities 717 - - 717 15 Financial liabilities Derivative financial instruments Interest rate swaps - - 5,787 5,787 (2,705) 2009 Level 1 Level 2 Level 3 Total Gain/ (loss) to Â£'000 Â£'000 Â£'000 Â£'000 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 notes to the financial statements for the year ended 31 December 2010 continued 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 Over2010 1 year2-5 years 5 years Total Â£'000 Â£'000 Â£'000 Â£'000 Bank overdrafts (floating) 3,863 - - 3,863 Debentures (fixed) - 5,000 16,700 21,700 Bank loans (floating)* - 45,104 - 45,104 Trade and other payables 38,553 - - 38,553 (non-interest) 42,416 50,104 16,700 109,220 Less 2-5 Over 5 2009 than 1 years years year 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 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 2010 Fair 2009 value Carrying value Carrying value value Â£'000 Â£'000 Â£'000 Â£'000 Cash and cash equivalents 5,966 5,966 6,653 6,653 Investments 717 717 702 702 Other assets 22,553 22,553 19,638 19,638 Bank overdrafts (3,863) (3,863) (7,191) (7,191) Bank loans (45,104) (44,855) (56,679) (56,494) Derivative liabilities (5,787) (5,787) (3,082) (3,082) Other liabilities (38,553) (38,553) (17,980) (17,980) Before debentures (64,071) (63,822) (57,939) (57,754) Additional details of borrowings and financial instruments are set out in notes 16 and 17. notes to the financial statements for the year ended 31 December 2009 continued 25.9. Provisions for liabilities and charges 2010 2009 Â£'000 Â£'000 Deferred Taxation Balance at 1 January (267) (1,350) Transfer to profit and loss account (2,390) 1,083 Balance at 31 December (2,657) (267) No provision has been made for the approximate taxation liability at 28 per cent (2009: 28 per cent) of Â£992,000 (2009: 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 1,243 1,189 Fair value of interest derivatives (1,620) (863) Short-term timing differences 153 233 Losses (2,433) (826) Provision at end of period (2,657) (267) 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 Retained Total Premium redemption reserve Account reserve Earnings Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Balance at 1 January 2010 5,042 47 13,779 32,038 50,906 Decrease on valuation of - - (372) - (372) investment properties Retained loss for year - - - (6,182) (6,182) Dividends paid in year - - - (924) (924) Loss on disposal of Treasury - - - (1,507) (1,507) Shares Capitalisation issue of new (176) - - - (176) ordinary shares and expenses Balance at 31 December 2010 4,866 47 13,407 23,425 41,745 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 2010 2009 Â£'000 Â£'000 Commitments to capital expenditure contracted for at the - - year end 25.14. Commitments under operating leases At 31 December 2010 the company had annual commitments under non-cancellable operating leases on land and buildings as follows: 2010 2009 Â£'000 Â£'000 Expiring in more than one year but less than 390 - five years Expiring in more than five years - 390 In addition, the company has an annual commitment to pay ground rents on its leasehold investment properties which amount to Â£344,000 (2009: Â£323,000). 25.15. Contingent liabilities There were no contingent liabilities at 31 December 2010 (2009: Â£Nil), except as disclosed in Note 25.8. Five year financial summary 2010 2009 2008 2007 2006 Â£m Â£m Â£m Â£m Â£m Portfolio size Investment properties-Group^ 195 214 219 248 193 Investment properties-joint 13 13 13 3 91 ventures Investment 12 12 12 15 17 properties-associate 220 239 244 266 301 Portfolio activity Â£m Â£m Â£m Â£m Â£m Acquisitions - - 9.18 112.71 50.70 Disposals at book value (20.74) (17.79) (15.33) (41.37) (1.62) Capital Expenditure 0.49 3.46 9.73 9.15 5.13 (20.25) (14.33) 3.58 80.49 54.21 Consolidated income statement Â£m Â£m Â£m Â£m Â£m Rental income - Group and 16.50 17.07 16.77 14.26 11.84 share of joint ventures Less: attributable to joint (0.52) (0.52) (0.27) (1.23) (3.95) venture partners Group rental income 15.98 16.55 16.50 13.03 7.89 Profit/(loss) before interest 11.97 20.49 (24.91) (16.59) 21.76 and tax (Loss)/profit before tax (10.69) 21.41 (57.27) (23.89) 18.32 Taxation (7.19) 2.36 (9.81) (11.38) 3.11 (Loss)/profit attributable to (3.49) 19.05 (47.45) (12.50) 15.22 shareholders (Loss)/earnings per share - (4.24)p 24.32p (62.30)p (16.40)p 20.00p basic (Loss)/earnings per share - (4.24)p 24.32p (62.30)p (16.40)p 19.97p fully diluted Dividend per share 1.15p 1.15p 1.15p 1.95p 1.85p Consolidated balance sheet Â£m Â£m Â£m Â£m Â£m Shareholders' funds 55.96 59.10 40.30 88.99 101.86 Net borrowings 130.77 145.65 157.17 147.54 86.12 Net gearing 238.68% 246.44% 390.01% 165.79% 84.55% Net assets per share - basic 66.95p 74.22p 52.73p 116.86p 133.62p - fully diluted 66.92p 74.19p 52.70p 116.73p 133.47p Consolidated cash flow Â£m Â£m Â£m Â£m Â£m statement Net cash inflow from 9.58 12.18 12.02 3.97 3.44 operating activities Capital investment and 20.42 13.94 (6.09) 9.84 (26.86) financial investment Note: ^Excluding the present value of head leases

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