Final Results

RNS Number : 8317Y

Capital & Regional plc

07 March 2012

7 March 2012

Capital & Regional plc

2011 Annual Results

Capital & Regional plc, the specialist property company today announces its audited annual results for the year to 30 December 2011.

Key performance indicators

	2011	2010

Investment returns
Net assets per share	£0.56	£0.50
EPRA net assets per share	£0.63	£0.57
Return on equity	11.9%	33.9%

Financing
Group net debt	£47.2m	£49.8m
Net debt to equity ratio	24%	29%
See-through net debt to property value	64%	66%

Profitability
Recurring pre-tax profit	£16.4m	£14.9m
Profit before tax	£23.4m	£46.4m
Basic earnings per share	£0.06	£0.13

Property under management	£2.5bn	£2.8bn

Highlights

Continued strengthening of financial position

· Growth in net assets per share to £0.56, up 12% from the 2010 year end, and EPRA net assets per share to £0.63, up 11% from 2010 year end

· Robust recurring pre-tax profit of £16.4 million, up 10% from 2010

· Group share of cash distributions from funds and joint ventures of £15.7 million

· Group net debt to equity ratio falling to 24% compared to 29% at 2010 year end

· Sale of six properties in The Mall and The Junction for £370.0 million, at or above valuation

· Acquisitions of The Waterside Shopping Centre in Lincoln and Schwäbisch Hall in Germany and the recycling of cash distributions to increase the Group's investment in The Mall Fund to 20.15% shortly after the year end

Impressive operational performance in challenging market conditions

· Strong asset management delivering 101 new lettings and 57 lease renewals at, or above ERV across the UK funds

· Strengthening UK fund occupancy of 96.8%, up 0.6% from the 2010 year end and

· Uplift in The Mall footfall of 3.2% and outperformance of the national index by 3.7%

· Continuing improvement in reducing our environmental impact with a 9% reduction in The Mall energy consumption and 7% reduction in carbon output across the Group

· Positive momentum in delivering the asset management and development pipeline

Commenting on the results John Clare, Chairman said

"I am delighted to report an increase in net asset value of 12% to 56 pence per share and an increase of 10% in recurring pre-tax profits to £16.4 million. These results are all the more encouraging as they reflect the impact of asset management initiatives which have boosted income not only in the UK funds but also in the joint ventures."

Chairman's statement

Overview

I am delighted to report an increase in net asset value of 12% to 56 pence per share and an increase of 10% in recurring pre-tax profits to £16.4 million. These results are all the more encouraging as they reflect the impact of asset management initiatives which have boosted income not only in the UK funds but also in the joint ventures.

Management's focus has shifted decisively from restructuring to ensuring the business is well placed to respond to the twin challenges of a weak economy and structural change in consumer behaviour, in particular the continuing rise in on-line retailing. Both developments are impacting the demand for retail space.

During the year, further disposals of property assets and recycling distributions into our core UK retail focus have formed part of our strategy to ensure we own or manage assets where we believe demand will remain strong. Our focus is on offering space which is both attractive and affordable. The Mall now owns nine assets, the majority of which are dominant within their community. We continue to ensure that these schemes, as well as other assets in the portfolio, are relevant to the communities in which they are located.

Dividend

The board is not recommending the payment of a final dividend meaning that no dividend will be payable for the full year. The board is committed to resuming dividends when it is prudent to do so. The current dividend policy links future payments to the Group's cash generating ability and will normally be restricted to not more than 50% of operating cash flow less interest and tax to comply with the undertakings given for the Group's banking arrangements. The board intends to review this policy during the course of the year by which time progress in creating liquidity within the Group's investments in the funds and joint ventures should be further advanced.

Responsible business

We attach great importance to the Group maintaining its commitment to responsible business in the currently very challenging operating environment. The manner in which the results have therefore been delivered is pleasing. The Group has once again gained its Investors in People award. The operating team have delivered a reduction in energy consumption and carbon footprint across the shopping centres which have helped limit increases in service charges. This in part explains the award from the PMA for Best Service Charge Provider for 2011. The shopping centres have raised significant sums for their local charities reinforcing their position at the heart of the local community and the Group is an active partner of the LandAid initiative.

Our people

I would like to thank all staff for their continued hard work in delivering this year's encouraging set of results. They have worked tirelessly to offer attractive space for our retailers and leisure operators and to provide a safe operating environment for their customers.

The board

I would like to thank Paul Stobart, who has stepped down from the board after nine years, for his contribution to the board's deliberations over a very challenging period for the Group and thank Philip Newton for taking on the role of the Senior Independent Director. I would also like to welcome Tony Hales who joined the board in August 2011. Tony brings a wealth of both board and commercial experience which will be of great value to the Group.

John Clare

Chairman

Chief Executive's statement

Operations

The UK business has delivered an impressive operational performance in challenging market conditions for our retailers, driven by a focus on new lettings, lease renewals and rent reviews. Passing rent has grown by 1% and occupancy levels across the three UK funds are up 0.6%, to 96.8% as at 30 December 2011.

The German business has been successful in securing key lease extensions for several properties which has secured the long term income at a marginally lower rent. Passing rent has grown by 1% within the portfolio and occupancy remains high at 95.1% as at 30 December 2011.

This operating performance and a 3.2% growth in footfall for our Mall shopping centres continues to reflect the overall affordability and well positioned nature of our property portfolio both in the UK and Germany.

Asset management and development pipeline

There is an attractive and exciting pipeline with near term plans for three Junction properties, Waterside Lincoln, Hemel Hempstead, Great Northern and The Mall Walthamstow. This reflects a belief that attractive returns can be generated from extending or reshaping schemes we know well. We have a track record of success in this area, highlighted by the British Council of Shopping Centres' award to The Mall Blackburn for best refurbishment in 2011. During the year, we have made positive momentum in laying the foundations for delivering this pipeline and realising value from our existing portfolio with the highlights being:

· Key planning permissions at Thurrock and Paisley and a planning variation at Oldbury have been granted for the Junction properties to enable these developments to progress in 2012. Construction at Lakeside Extra is expected to commence in the second quarter of 2012 on the back of a strong level of pre-lets;

· A planning application for a comprehensive redevelopment of our Hemel Hempstead property has been submitted. We anticipate commencing work on this during the second half of 2012 if the planning application is successful;

· Key lettings have been achieved at Waterside Lincoln and Great Northern to enhance the existing schemes whilst development and reconfiguration discussions have continued to advance; and

· Heads of terms have been finalised for a development agreement with the local authority on The Mall at Walthamstow.

In addition to the near term opportunities, there are significant medium to long term opportunities for The Malls at Luton, Camberley, Uxbridge and Maidstone, in The Junction at Thurrock and in Germany at Tönisvorst.

Financial position

The Group's balance sheet has continued to strengthen in 2011 with net assets of £196.0 million, up from £174.5 million at the end of last year.

Gearing at Group level has fallen to 24% as at 30 December 2011 compared to 29% at the end of last year. This reflects a £3.3 million repayment of Group debt during 2011 combined with a 12% growth in shareholders' equity.

At the fund level, the Mall Fund completed the disposal of three assets for total proceeds of £158.3 million during the year. Following these disposals, the headline loan to value ('LTV') for the Mall is now 69%, and allowing for cash in the Fund is 56%, both of which are comfortably below the 83% LTV covenant at year end.

The Junction disposed of three assets for total proceeds of £211.7 million during the year and the LTV at year end is 60%. Following these disposals the Fund made distributions to the Group of £9.9 million during the year.

Within our German joint venture we successfully refinanced debt of €162.3 million for three years in July 2011, subject to certain covenants, which was an important step in securing the funding for one of the portfolios,

At the start of the year the Group acquired The Waterside Shopping Centre in Lincoln and formed a joint venture with Karoo, and at the end of the year the German joint venture acquired Schwäbisch Hall. These acquisitions demonstrate our commitment to investing into new properties when the right opportunities and returns present themselves.

We are in negotiations to extend our core revolving credit facility and the Great Northern debt facility. Although there are no immediate refinancing issues, we aim to reach agreement well in advance of the maturity of these facilities.

Strategy

Capital & Regional's ambition is to be a leading specialist retail property company. Our unique management platform gives us the ability not only to invest in, but operate and asset manage large and complex properties.

Our objective is to grow our portfolio of UK shopping centres which are held both through our investment in The Mall and in joint ventures. Our recent investment in The Mall is part of a broader strategy to accelerate the restart of distributions and to position the fund so it can access capital to fund the exciting development opportunities that exist in a number of the core schemes.

Capital & Regional will continue to leverage its management platform by investing with other joint venture partners in shopping centres which share similar characteristics to the schemes in the Mall (dominant community schemes). Successful asset management initiatives at Waterside Lincoln encourage us that we have the skills and resources to apply to other opportunities.

The Junction continues to provide opportunities both to recycle capital from those retail parks where we believe asset management initiatives are largely complete and to invest in some exciting development initiatives in particular at Thurrock and Oldbury. Retail parks remain a core focus and we will continue to look at selective acquisitions in joint ventures with our partners.

Having had the opportunity to more aggressively and efficiently asset manage our German joint venture under the management of our new asset management platform Garigal, we intend over the next 12 to 18 months to focus on realising value from more mature properties.

Outlook

The operating environment is likely to remain challenging for the foreseeable future. This reflects the tough market conditions experienced by our retailers and leisure operators. We have seen a number of administrations in the first two months of 2012. The majority of units affected are expected to continue trading.

Despite this challenging backdrop we continue to see demand for affordable and attractive space in dominant trading destinations. As a consequence we therefore expect to see income resilience in the core schemes and opportunities to deliver valuation uplift from completed asset management initiatives in joint ventures and wholly-owned assets. We expect values for the South East and London based schemes, which account for the majority of the shopping centre portfolio, to remain resilient.

We have seen another year of significant disposals (at or above valuation). Further sales will be geared to recycling capital from the funds, accelerating distributions and the realisation of value from the joint ventures and wholly-owned assets on completion of the development initiatives.

We expect to make further significant progress this year in focusing Capital & Regional as a retail property investment company. We will achieve this through the recycling of capital from our non-core businesses into our core retail activities. The recent purchases of units in the Mall not only reflect the underlying value in the portfolio but also our wish together with our partners to play a significant part in the future development of the fund.

Hugh Scott-Barrett

Chief Executive

Financial information

The financial information set out in this preliminary statement does not constitute the Group and Company's statutory financial statements for the years to 30 December 2010 or 2011, but is derived from those financial statements. Statutory financial statements for 2010 have been delivered to the Registrar of Companies and those for 2011 will be delivered following the Company's annual general meeting.

The auditors have reported on the 2010 and 2011 financial statements and in both cases their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

Forward looking statements

This document contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking in nature and are subject to risks and uncertainties. Actual future results may differ materially from those expressed in or implied by these statements. Many of these risks and uncertainties relate to factors that are beyond the Group's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of government regulators and other risk factors such as the Group's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Group operates or in economic or technological trends or conditions, including inflation and consumer confidence, on a global, regional or national basis. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this document. The Group does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this document. Information contained in this document relating to the Group should not be relied upon as a guide to future performance.

Operating review

During the year the team have continued to deliver an impressive operational performance in challenging market conditions for our tenants. This performance continues to benefit from the overall affordability and well positioned nature of our property portfolio both in the UK and Germany.

New lettings, renewals and rent reviews

Asset management has driven strong performances on new lettings, lease renewals and rent reviews across the three UK funds during the year at rents at or above estimated rental values ('ERV'). Turnover rent is excluded from our comparison to ERV, but if included would have a positive effect. ERV has remained stable compared to the prior year. We are continuing to advance negotiations with a number of retailers for new space against the challenging headwinds in the retail sector with new lettings generally taking longer to complete in the current environment.

	The Mall	The Junction	X-Leisure	Total UK
Number of new lettings	75	7	19	101
Rent from new lettings (£m)	6.1	1.4	1.3	8.8
Comparison to ERV (%)	0.0	7.2	7.2	2.2
Renewals settled	53	1	3	57
Revised rent (£m)	1.4	0.3	0.1	1.8
Comparison to ERV (%)	0.9	(3.6)	0.8	0.2
Number of rent reviews settled	95	11	50	156
Revised passing rent (£m)	11.7	2.3	6.5	20.5
Uplift to previous rent (%)	2.8	3.0	8.7	4.7
Comparison to ERV (%)	8.6	(6.0)	6.0	6.1

During the first three quarters of 2011, The Mall new lettings were 4.5% above ERV. During the fourth quarter of 2011, The Mall new lettings were 5.4% below ERV, however we did two strategic new lettings at below ERV which, if excluded, would have resulted in fourth quarter new lettings in The Mall being 5.1% above ERV.

Since 30 December 2011, there have been a further six new lettings in The Mall for contracted rent of £0.4 million. The Junction has exchanged contracts on two new lettings with contracted rent of £0.3 million and X-Leisure has completed two new lettings with contracted rent of £0.2 million. In 2012, new lettings and renewals for the three UK funds have been at 1.4% below ERV, with The Mall new lettings and renewals being at 2.0% below ERV.

In Germany there were 10 new lettings with an initial passing rent of €1.0 million. A further 13 lease extensions were completed to secure the long term income of the portfolio. The lease extensions had the impact of increasing the average unexpired lease term of the portfolio by 1.5 years, but at a lower rent of €5.2 million compared to a current rent of €5.9 million.

In X-Leisure 29% of leases contain minimum or fixed uplifts which continue to drive income levels.

Significant highlights during the year include:

The Mall
Luton	New lettings to Costa, Toby Inns and Jimmy Spices to successfully complete the food element of the redevelopment. Lettings elsewhere in the scheme to Jessops and Tiger and lease renewals with Arcadia, WHSmiths and C & J Clark
Wood Green	Primark took an additional two units totalling 4,700 sq ft, at rents in excess of ERV, extending their store to approximately 80,000 sq ft. New lettings to Select, Phones 4U, Card Factory and Moss Bros
Blackburn	New lettings to Specsavers, JD Sports, Bank, Harvey, Thompson and Select
Maidstone	New lettings to Sports Direct, Costa, Select, Vision Express and Internacionale
Norwich	New lease to Family Bargains on a previously vacant 18,000 sq ft unit and a new letting to the British Heart Foundation and lease renewals with F Hinds and the Post Office
Sutton Coldfield	New lettings to H&M Hennes and Sports Direct who took 14,000 sq ft of formerly unused first floor space for a new upsized store, whilst Jones The Bootmaker have taken a new 4,000 sq ft store and there was a new letting to Barclays
Camberley	New lettings to 3G and Rush Hair and lease renewals with Monsoon, Jessops and Game
Walthamstow	New lettings to Choice Discount Stores and West Coast
Uxbridge	New lettings to Metrobank and Blue Inc and a significant lease renewal with Iceland
The Junction
Bristol	New lettings to The Range and Subway
Telford	New letting to Petstop
Thurrock	New lettings to Boots and Go Outdoors and a regear with Furniture Village
X-Leisure
Parrswood	New letting to Grosvenor Casino
Ashford	New lettings to Nando's and Chiquito
Cardigan Fields	Surrender taken from Scottish & Newcastle for a premium and space re-let to Bella Italia and a new letting to Mitchells and Butler
Cambridge	New letting to Sainsbury's
Poole	New letting to Pizza Express and a unit expansion by Empire Cinemas
Germany
Ingelheim	Lease extension for 15 years with Real
Koln Gremberg	Significant lease extension until 2024 with Real
Lauchammer	New 10 year letting to Toom and 5 year extension to Edeka
Balingen	10 year lease extension with Toom
Other properties
Waterside Lincoln	New letting to Apple franchise
Xscape Braehead	New 25 year lease to Sno Factor

Occupancy levels

Occupancy levels across the three UK funds of 96.8% at 30 December 2011 has improved by 0.6% compared to the prior year demonstrating the overall success of our asset management teams in letting space and maintaining occupancy in the challenging retail market.

	2011	2010
Occupancy (like for like)	%	%
The Mall	97.2	96.5
The Junction	96.4	96.9
X-Leisure	96.1	95.3
UK funds	96.8	96.2
Germany	95.1	96.9

The Mall occupancy of 97.2% at 30 December 2011 has improved by 0.7% compared to the prior year despite a number of administrations demonstrating the affordability and resilience of our shopping centres. The occupancy at 30 December 2011 includes the normal seasonal increase in Christmas temporary lettings. Included within the 97.2% occupancy for The Mall is 2.8% related to units that were in administration.

The Junction occupancy of 96.4% at 30 December 2011 declined by 0.5% reflecting the lease termination of Marks Wholesale and the administration of World of Sofas at Thurrock.

The X-Leisure occupancy of 96.1% at 30 December 2011 has improved by 0.8% due to strong new lettings during the year more than offsetting the administrations.

Germany occupancy of 95.1% at 30 December 2011 declined by 1.8% reflecting two lease expiries in Hamburg. Terms have been agreed for a new letting of one of these at an increased rent to commence in 2012 following refurbishment and management are currently assessing various options to re-let the other property.

Administrations

Whilst the number of administrations have increased compared to the prior year we have so far been able to re-let most of those units that cease trading, which has supported the strong occupancy levels reported above.

	The Mall	The Junction	X-Leisure	Total UK
Administrations (units)	62	3	8	73
Passing rent (£m)	3.3	0.2	0.6	4.1
Still trading (units)	21	-	1	22
Passing rent still trading (£m)	0.9	-	0.3	1.2

There were 73 administrations in the three UK funds during the year with a passing rent of £4.1 million (3.0% of the UK funds passing rent) of which 33 units have been re-let for rent of £1.3 million and a further £0.6 million is still being received from tenants in administration. The more notable administrations during the year related to T J Hughes, Hawkins Bazaar, Jane Norman, Officers Club, Barratts Shoes and World of Sofas.

In January 2012 the Best Buy unit at Thurrock in The Junction was closed, however the lease has been assigned at the same rent to Kiddicare, a part of Morrisons. This lease assignment provides an even stronger covenant and ensures that this large unit remains open and trading, maintaining the vibrancy of this part of the scheme.

Since the year end 2.0% of the three UK funds' passing rent has gone into administration involving 20 units. The most significant administration related to Peacocks in January 2012 whose business was sold to Edinburgh Woollen Mill in February 2012. This involved eight units in The Mall and The Junction with passing rent of £1.6 million. Of the units affected alternative demand has been identified for two units and six units are expected to remain open and trading. Eight of the other 12 units that have gone into administration since year end have remained open and trading, with the four units that have closed resulting in a loss of passing rent of £0.2 million.

There were four administrations in the German portfolio in the year with passing rent of €0.1 million.

Cash collection

Rent collection rates in the UK funds (adjusted for tenants in administration) have continued to be strong throughout the year, with 97.9% of rent being paid within 30 days of the due date for December 2011, the same as for September 2011 and similar to the 97.8% for December 2010.

Income security

Credit risk is managed through the assessment of the covenant strength of all incoming tenants and by monitoring credit ratings of key existing tenants. The 10 largest occupiers by rental income in each of the UK funds at 30 December 2011 are given below.

The Mall		The Junction		X-Leisure
	%		%		%
Alliance Boots Limited	4.9	B&Q plc	15.0	Cine UK Limited	18.8
Debenhams Properties Limited	2.6	Tesco Stores Limited	6.9	The Restaurant Group	4.6
BHS Limited	2.4	Dave Whelan Sports Limited	5.5	Snozone	3.8
Primark Stores Limited	2.3	NBC Apparel (T/A TK Maxx)	4.5	Odeon	3.6
Peacocks Stores Limited	2.2	DSG Retail Limited	4.4	Spirit	3.5
Argos Limited	2.1	Comet Group Plc	4.0	Vue	3.1
Superdrug Stores Plc	2.1	Boots the Chemists Limited	4.0	Virgin Active	3.1
Arcadia	2.1	The Carphone Warehouse Limited	3.6	Pizza Hut	2.7
Clinton Cards (Essex) Limited	2.1	DFS Furniture Company Limited	3.2	Mitchells and Butler	2.6
New Look Retailers Limited	2.0	Decathlon UK Limited	3.2	Tenpin	2.4

The high exposure to Cine UK in X-Leisure is a function of the size of cinemas relative to the rest of a leisure scheme and this risk is closely monitored and direct contact maintained with this operator. In Germany, 79% of the income is derived from seven tenants who are all strongly rated covenants such as Metro, Rewe and Edeka. As mentioned above, Peacocks went into administration in January 2012 and was sold to Edinburgh Woollen Mill in February 2012.

Footfall

The Mall's footfall has outperformed the national footfall index, with an increase of 3.2% in shopper numbers over the year compared to a decline of 0.5% in the national index, demonstrating the well positioned nature of the portfolio and which supports our view that the pressure on disposable incomes and high fuel costs are encouraging people to shop locally. In the first two months of 2012 The Mall's footfall increased by 0.4% compared to a decline of 3.2% in the national index.

The Junction's car counts at the retail parks increased by 3.4% compared to the prior year due to strong performances at Telford and Thurrock and X-Leisure's footfall has increased by 1.4% compared to the prior year.

Temporary lettings

At 30 December 2011 there were 127 (2010: 159) temporary lettings of one year or less of which 118 (2010: 155) for a net rent of £3.3 million compared to an ERV of £6.3 million were within The Mall. Temporary lettings are important because they maintain occupancy and energise the trading environment whilst contributing income and minimising the costs relating to vacant units.

Rental income

Passing rent

Passing rent across the UK funds and the German portfolio increased over the year which is a strong performance in light of the increased level of administrations and challenging economic environment.

	December 2011	June 2011	December 2010
Passing rent (like for like)	£m	£m	£m
The Mall	78.0	76.6	77.1
The Junction	17.4	17.0	17.1
X-Leisure	40.8	40.9	40.7
UK funds	136.2	134.5	134.9
	€m	€m	€m
Germany	46.2	46.0	45.7

The Mall's passing rent increased by £0.9m during the year principally due to additional income derived from new lettings and the expiry of rent free periods more than offsetting the impact of insolvencies. The Junction and X-Leisure have maintained broadly stable passing rents during the year with new lettings offsetting the rent free periods granted for lease re-gears and lease surrenders.

The German portfolio's passing rent increased by €0.5 million during the year due to rent indexation offsetting the two lease expiries in Hamburg and the lease extensions at slightly lower rents. The acquisition of Schwäbisch Hall on 30 December 2011 had the impact of increasing passing rent by €2.1 million. The German portfolio continued to generate a strong operating cash return for the year.

Contracted rent

The three UK funds had a further £6.0 million of contracted rent at 30 December 2011 which is not included in the passing rent figures above (The Mall £3.9 million, The Junction £1.2 million and X-Leisure £0.9 million).

Since the year end new lettings in the three UK funds were made for contracted rent of £0.9 million.

Investment portfolio performance

We are pleased with the strong property level total returns as set our below:

	Property valuation	Capital return	Total return	Initial yield	Equivalent yield
30 December 2011	£m	%	%	%	%

The Mall	971	(0.8)	6.2	7.0	7.7
The Junction	288	5.0	10.7	5.7	6.9
X-Leisure	565	6.8	14.1	6.6	7.4
UK weighted average¹	1,824	2.4	9.3	6.7	7.5
Germany	496	(0.9)	6.6	6.6	n/a

¹Weighted average by property valuation

There was outward yield shift of 19 basis points in The Mall with the property valuation being underpinned by a 2.3% increase in net valued income. Inward yield shift of 20 basis points in The Junction and 43 basis points in X-Leisure together with increases in net valued income have generated good total returns from these funds. The German valuation was stable with an inward yield shift of 8 basis points.

The property level returns coupled with the financial gearing within the funds and the German joint venture have resulted in a positive geared return for the Group from these investments during the year.

	2011	2010
Geared returns	%	%

The Mall	5.7	76.7
The Junction	13.4	14.8
X-Leisure	22.3	46.7
UK fund weighted average¹	11.5	55.7
Germany	18.0	14.7

¹ based on Group interest in the three funds at the year end

IPD index performance

All three UK funds outperformed their IPD index on a rolling 12 month basis driven by income growth, effective asset management and the strength of the underlying assets in the funds.

	2011	2010
	%	%
The Mall
Property level returns¹	6.3	20.0
IPD shopping centre index	5.0	16.9
The Junction
Property level returns¹	10.0	13.1
IPD retail parks index	8.1	16.3
X-Leisure
Property level returns¹	14.2	22.1
IPD leisure index	11.3	18.4

¹ as ratified by IPD

Asset management and development pipeline

C&R is highly selective in terms of acquisitions and will only pursue opportunities which deliver attractive risk adjusted returns without stretching the balance sheet. Capital for new asset management initiatives will be recycled from within existing businesses into projects which will deliver value using our in-depth knowledge of retailer requirements in specific locations. There is an attractive and exciting pipeline with near term plans for three Junction properties, Waterside Lincoln, Hemel Hempstead, Great Northern and The Mall Walthamstow which are summarised below:

The Junction
Thurrock	Planning permission has been granted at Lakeside Extra for the redevelopment of the former cinema to create 30,000 sq ft of Open A1 retail. An unconditional contract has been exchanged on 15,000 sq ft and a conditional contract on 7,500 sq ft and heads of terms on the final 7,500 sq ft have been agreed. We expect to commence work during the second quarter of 2012 and construction costs will be approximately £3.5 million. Additionally, further progress has been made on separate development opportunities at Thurrock with a planning application targeted for submission by the end of 2012.
Paisley	Planning permission has been granted for a new 54,000 sq ft terrace extension to our current scheme. We are in discussions with a number of retailers and expect to have contracted 65% of the space by the end of 2012. Additionally a planning application for 16,000 sq ft has been submitted for food retail on the former Menzies unit.
Oldbury	A variation to the original planning consent was approved for a 205,000 sq ft development with Open A1, bulky goods, leisure and A3 consent on a brownfield site. The variation included greater Open A1 and mezzanines. We are working up tenant interest and are looking to commence development during 2012.
Other properties
The Waterside Shopping Centre	During the year we have made solid progress towards our strategic aim of repositioning the scheme and upgrading the tenant mix and income profile in the centre. A permanent long term letting to an Apple franchise, supported by a full refit of the Top Shop store has lifted the front half of the scheme. We now have flexibility over the Barratts store at the scheme entrance where we have agreed terms with a national fashion footwear operator, which should complete during the first half of 2012. We are in advanced negotiations to upsize an existing fashion retailer by 6,000 sq ft, which will incorporate a number of units that have historically been vacant. The reconfiguration plans for the rear of the scheme to create large format retail space that would better anchor the scheme continue to progress well. However, with the success of the lettings currently being achieved at the front of the scheme, our strategy has been finessed to focus on completing the strengthening of this part of the centre, which will help strengthen the overall retailer perception of the scheme positioning, and in so doing improve the letting potential for the reconfiguration at the rear. The reconfiguration is not expected to commence until late in 2013.
Hemel Hempstead	A planning application is due to be determined shortly by the local authority. Following positive pre-application discussions it has been recommended by the planning officer for approval. This application is for a comprehensive redevelopment and re-branding of the 160,000 sq ft scheme replacing the swimming complex and nightclubs with family dining, children's' play area and gym, with the cinema, ice rink and ten pin bowling retained. Heads of terms have been agreed with a number of restaurant operators and we are in advanced negotiations with a new bowling operator. Construction costs will be approximately £4.4 million.
Great Northern	A new letting to the bowling operator, All Star Lanes, in March 2012 to take the ground floor for a ten pin bowling alley will improve the vitality of the property. This new letting is conditional on two items which are expected to be received shortly. A restaurant offer has been received for a unit on the ground floor and negotiations are continuing with regard to the first floor with a number of other potential leisure tenants. Various other reconfiguration opportunities are being explored, involving re-gearing leases to release and re-let up to 75,000 sq ft of existing space, improving the longer term investment performance of this property and capitalising on it's situation adjacent to the G-Max conference centre
The Mall
Walthamstow	Progress has been made for a proposed 65,000 sq ft extension and we have agreed heads of terms for a development agreement with the local authority. Negotiations are continuing with them and potential tenants to devise a scheme that meets all of their requirements.

Other significant medium to long term asset management and development opportunities exist in The Malls at Luton, Camberley, Uxbridge and Maidstone and in Germany at Tönisvorst.

Financial review

Key performance indicators

The key performance indicators we use to measure our performance against our strategy and objectives are:

	2011	2010

Investment returns
Net assets per share	£0.56	£0.50
EPRA net assets per share	£0.63	£0.57
Return on equity	11.9%	33.9%
Total shareholder return	(3.8)%	(2.2)%

Financing
Group net debt	£47.2m	£49.8m¹
Net debt to equity ratio	24%	29%¹
See-through debt to property value³	73%	76%
See-through net debt to property value^2,3	64%	66%¹

Profitability
Recurring pre-tax profit	£16.4m	£14.9m
Profit before tax	£23.4m	£46.4m
Basic earnings per share	£0.06	£0.13

Property under management	£2.5 billion	£2.8 billion

¹ Adjusted for the £5.0 million tax payment made on 31 December 2010 as disclosed in note 24a

² Adjusted for the Group's share of the €18.0 million German junior debt acquired during 2010

³ See-through debt and adjusted see-though net debt divided by IFRS property value as disclosed in note 24a

Investment returns

Net assets per share continued to increase in the year to £0.56, up £0.06, or 12% since 30 December 2010, and EPRA net assets per share increased to £0.63, up £0.06, or 11% since 30 December 2010. The growth in net assets resulted in an 11.9% return on equity for the year. The 3.8% fall in total shareholder return was driven by a slight fall in share price during a turbulent year for UK equity markets.

To provide a greater understanding of the composition of the business, the Group presents its balance sheet in two separate ways, with the "statutory" balance sheet following the accounting and statutory rules, and the "see-through" balance sheet showing the Group's proportionate economic exposure to the different property portfolios. These were:

	See-through			Statutory	See-through			Statutory
	Property	Debt	Other	30 December	Property	Debt	Other	30 December
				2011				2010
	£m	£m	£m	£m	£m	£m	£m	£m
The Mall	184.8	(120.3)	0.4	64.9	198.8	(138.4)	(2.8)	57.6
Germany	247.8	(197.5)	4.4	54.7	247.9	(201.2)	1.7	48.4
X-Leisure	66.5	(35.4)	(0.6)	30.5	62.1	(35.6)	(0.5)	26.0
The Junction	36.7	(21.8)	2.2	17.1	61.0	(38.4)	1.2	23.8
Great Northern	71.5	(61.9)	(1.7)	7.9	70.8	(63.6)	(2.3)	4.9
Waterside Lincoln	13.0	(6.8)	0.4	6.6	-	-	-	-
Xscape Braehead	24.1	(22.8)	2.9	4.2	22.6	(22.8)	2.4	2.2
Hemel Hempstead	8.3	(5.3)	0.0	3.0	9.8	(6.9)	0.2	3.1
FIX	26.1	(25.2)	0.1	1.0	26.9	(25.3)	(0.6)	1.0
Other net assets	0.2	-	5.9	6.1	0.2	-	7.3	7.5
Net assets	679.0	(497.0)	14.0	196.0	700.1	(532.2)	6.6	174.5

Financing

The group net debt to equity ratio fell from 29% to 24% over the course of the year, primarily due to the increase in shareholders' equity of £21.5 million and loan repayments of £3.3 million. A summary of the movements in Group and off balance sheet debt during the year is set out below:

		Off balance	See-through
	Group debt	sheet debt	debt
	£m	£m	£m
At 30 December 2010	70.5	461.7	532.2
Property acquisition	13.6	7.7	21.3
Disposal into a joint venture¹	(13.6)	6.8	(6.8)
Other repayments	(3.3)	(49.9)	(53.2)
Increased investment in The Mall	-	9.5	9.5
Foreign exchange	-	(6.0)	(6.0)
At 30 December 2011	67.2	429.8	497.0

¹Transfer from Group debt to off balance sheet debt following the sale of 50% of the Group's interest in The Waterside Shopping Centre in Lincoln

Group debt

Group debt fell by £3.3 million to £67.2 million at 30 December 2011 (2010: £70.5 million). This fall was due to £2.3 million of surplus cash generated by the Great Northern and Hemel Hempstead properties being used to pay down the relevant loans via a cash sweep and £1.0 million amortisation payments on the Hemel Hempstead loan. The breakdown of Group debt and net debt at 30 December 2011 was as follows:

		Loan to	Net debt	Average		Duration to
	Debt¹	value³	to value³	interest rate²	Fixed	loan expiry
30 December 2011	£m	%	%	%	%	Years
Core revolving credit facility	-	-	-	-	-	1.7
Great Northern	61.9	86	82	6.30	96	1.8
Hemel Hempstead	5.3	64	59	3.49	-	0.8
Group debt	67.2			6.08	89	1.7
Cash and cash equivalents	(20.0)
Group net debt	47.2

¹Excluding unamortised issue costs

² In the case of variable rate loans, based on LIBOR at 30 December 2011 plus the appropriate margin

³ Debt and net debt divided by investment property at fair value and trading property at the lower of cost and net realisable value

The core revolving credit facility remained undrawn during the year (2010: £nil) and at 30 December 2011 the forecast covenant tests indicate that there is sufficient headroom for the full £58.0 million facility to be available for draw down.

Off balance sheet debt

Off balance sheet debt fell by £31.9 million to £429.8 million at 30 December 2011 (2010: £461.7 million). This fall was due to £49.9 million debt repayments, principally from the proceeds of asset sales in The Mall and The Junction, and a £6.0 million foreign exchange translation gain on Germany, offset by a £14.5 million share of loan draw downs related to the acquisitions of Waterside Lincoln in the UK and Schwäbisch Hall in Germany and a £9.5 million higher share of The Mall debt due to the Group's increased holding in The Mall fund. The breakdown of the Group's share of off balance sheet debt and net debt at 30 December 2011 was as follows:

								Weighted
				Loan to	Net debt	Average		average duration
Group share	Debt¹	Cash	Net debt	value⁴	to value⁴	interest rate	Fixed	to loan expiry
30 December 2011	£m	£m	£m	%	%	%	%	Years
The Mall	120.3	(21.2)	99.1	69	56	5.32	100	3.3
Germany	197.5	(6.1)	191.4	80	77	3.62	59	2.8
X-Leisure	35.4	(2.6)	32.8	53	49	6.34	99	2.1
The Junction	21.8	(2.6)	19.2	60	50	6.76	99	2.3
Waterside Lincoln	6.8	(0.6)	6.2	52	47	4.70	100	3.1
Xscape Braehead	22.8	(1.8)	21.0	85	78	4.87	75	2.7
FIX	25.2	(0.5)	24.7	95	93	6.67	80	1.2
Other²	n/a	(1.4)	(1.4)	-	-	-	-	-
Off balance sheet	429.8	(36.8)	393.0			4.77	79	2.8
German debt adjustment³	(7.5)	-	(7.5)
Adjusted off balance sheet	422.3	(36.8)	385.5

¹Excluding unamortised issue costs

² Off balance sheet cash held in other associates and joint ventures

³Adjusted for the Group's share of the €18.0 million German junior debt acquired during 2010

⁴ Debt and net debt divided by investment property at fair value

Total Mall debt fell by £165.4 million to £662.3 million at 30 December 2011 (2010: £827.7 million). This fall was due to debt repayments principally from the sale proceeds of Bristol, Middlesbrough and Barnsley. The initial amortisation target required by the borrowing arrangements is £800 million by December 2012, which has already been achieved well in advance of the required date. A further target of £600 million by December 2014 could be met by one further property sale.

Total German debt increased by €5.4 million to €476.8 million at 30 December 2011 (2010: €471.4 million). At the applicable exchange rates this was equivalent to £398.2 million (2010: £405.7 million). The increase is due to the German joint venture drawing down €18.5 million to fund the Schwäbisch Hall acquisition, offset by €13.1 million of amortisation payments. On 15 July 2011 agreement was successfully reached to extend the maturity of €162.3 million debt in one of the portfolios by three years. The key terms of the extension include no change in the margin, but an extension fee of 10 basis points in year one, 25 basis points in year two and 100 basis points in year three and fixed LTV and ICR targets that commence in July 2012.

Total Junction debt fell by £125.5 million to £163.7 million at 30 December 2011 (2010: £289.2 million). This fall was due to debt repayments from the sale proceeds of Portsmouth, Swansea and Maidstone.

Total Waterside Lincoln debt is £13.6 million at 30 December 2011 (2010: £nil). During the year the Group drew down £13.6 million on a new four year facility from Deutsche PostBank to part fund the acquisition of Waterside Lincoln and capitalised related loan arrangement fees of £0.3 million. On 8 April 2011 a joint venture was formed by selling 50% of the Group's interest in Waterside with the debt being transferred into the joint venture.

Maturity analysis

The chart below shows the maturity profile of the see-through debt and undrawn core credit facility at 30 December 2011:

	2012	2013	2014	2015	2016	2017	Total
	£m	£m	£m	£m	£m	£m	£m
Sterling debt drawn	5.3	96.6	70.5	127.1	-	-	299.5
Euro debt drawn	12.5	42.3	86.1	29.6	11.8	15.2	197.5
Undrawn core credit facility	-	58.0	-	-	-	-	58.0
	17.8	196.9	156.6	156.7	11.8	15.2	555.0

Covenants

The Group and its associates and joint ventures were compliant with their banking and debt covenants at 30 December 2011, except as disclosed below.

On 12 January 2012, the Group obtained a bank waiver for the Hemel Hempstead loan in relation to an anticipated covenant breach which would have triggered on 30 January 2012 following the administration of the anchor tenant (Luminar). It was agreed with the bank to make a cash deposit of £0.9 million. The waiver is valid until 29 April 2012, at which time the position will be reassessed in light of the submitted planning application for the redevelopment of the Hemel Hempstead property.

On 5 March 2012, the German joint venture obtained a one year bank waiver for two loans in the same portfolio which had marginally breached their LTV covenants at year end. As part of the waiver the LTV covenant was extended for the next test date in December 2012.

Further details on the various debt covenants are disclosed in the 'other information' section in covenant information.

Interest rate hedging

The majority of current borrowing, both at Group level and in the funds and joint ventures, continues to be covered by interest rate swaps or caps. At 30 December 2011, the see-through valuation of the Group's swaps and caps was a liability of £18.8 million (2010: £22.9 million) which will not be crystallised unless the underlying contracts are closed out before their expiry date. During the year, The Mall, The Junction and Germany terminated swaps at a total cash cost of £13.2 million, of which the Group's share was £2.0 million.

Cash distributions

The Group received total cash distributions of £15.7 million during the year comprising: £9.9 million from The Junction fund; £3.7 million from the German portfolio; £1.3 million from the X-Leisure fund; £0.5 million from X-Leisure Limited and £0.3 million from The Auchinlea Partnership.

Profitability

Recurring pre-tax profit

The Group's recurring pre-tax profit increased by £1.5 million to £16.4 million for the year ended 30 December 2011 (2010: £14.9 million). The recurring pre-tax profit is derived from two principal segments being Asset businesses and Earnings and the breakdown of recurring pre-tax profit by segment is as follows:

	Year to	Year to
	30 December	30 December
	2011	2010
	£m	£m
Asset businesses
UK property investment	8.0	7.7
German property investment	7.9	5.6
Earnings businesses
Property management	4.5	5.8
SNO!zone	0.7	0.7
Non-segment item
Central costs	(4.7)	(4.9)
Recurring pre-tax profit	16.4	14.9

Property investment: The increase in recurring pre-tax profit of £0.3 million from the UK properties largely reflects reduced interest costs offsetting the property disposals that have taken place during the year. The recurring pre-tax profit from Germany in sterling terms has increased by £2.3 million due to reduced interest and property costs and stable rental income with rent indexation offsetting a lease break being exercised at the start of the year.

Property management: The recurring pre-tax profit has fallen by £1.3 million due to management fees falling by £0.6 million reflecting property disposals by The Mall and The Junction and the sharing of the German portfolio fees in the Garigal Asset Management GmbH associate from August 2010, combined with higher management expenses of £0.7 million due to cost inflation.

Performance fees: No performance fees have been recognised in 2011 (2010: £nil). The basis for calculating performance fees and the current status is disclosed in notes 1 and 37 of the financial statements.

Profit before tax

The profit before tax was £23.4 million for the year ended 30 December 2011 (2010: £46.4 million) and is analysed below:

	Year to	Year to
	30 December	30 December
	2011	2010
	£m	£m
Recurring pre-tax profit	16.4	14.9
Property revaluation	1.7	29.6
Profit on disposal	0.7	4.5
Financial instruments revaluation	2.6	0.6
Investment income	4.0	-
Gain on investment in The Mall	1.1	-
Other items	(3.1)	(3.2)
Profit before tax	23.4	46.4

As well as the recurring pre-tax profit discussed above, the other main factors behind the profit in the year were:

Property revaluation of £1.7 million driven primarily by gains in X-Leisure, The Junction and Xscape Braehead, offset by a fall in Germany, Hemel Hempstead and The Mall. This is discussed in more detail in the operating review.

Profit on disposal of £0.7 million due to asset sales primarily in The Junction offset by a small loss on disposal in The Mall.

Financial instrument revaluationof £2.6 million due to gains on the interest rate swaps hedging Great Northern, FIX, Xscape Braehead and X-Leisure and the gain on the unhedged and ineffective portion of the forward foreign exchange contract hedging the German portfolio.

Investment income of £4.0 million relates to the Group's share of the fair value uplift on the €18.0 million of junior debt that was acquired by the Group and the German joint venture partner shortly before the 2010 year end. The loan receivable was fair valued to €12.9 million as at the date of the successful debt extension in the relevant German joint venture portfolio in July 2011.

Gain on investment in The Mallrelated to the Group purchase of 13.6 million units in The Mall Fund at an average of £0.30 per unit for a total consideration of £4.0 million resulting in a gain on investment of £1.1 million.

Other items relate primarily to tax suffered in the German joint venture and various management incentive schemes which are disclosed in more detail in note 2a to the financial statements.

Tax

The tax charge for the year was £2.3 million compared to £2.0 million in the prior year. The current tax charge of £2.1 million (2010: credit of £0.5 million) was primarily due to the restricted availability of brought forward tax losses which could be utilised during the year. The deferred tax charge of £0.2 million (2010: £2.5 million) is due to the reversal of certain deferred tax assets carried against the liability for interest rate swaps.

The current tax liability was £3.0 million at year end (2010: £5.8 million). The non-current liability of £5.0 million (2010: £10.0 million) largely reflects the outstanding amount on the settlement concluded with the tax authorities during 2009 in relation to the tax structuring of certain property disposals by the Group in 2004 and 2005. The final payment for this settlement is due by 31 December 2012.

Property under management

During the year, property under management fell due to property disposals, which was partially offset by two property acquisitions and an overall increase in property valuations. The overall impact on property under management is set out below.

	Valuation				Valuation
	30 December 2010¹	Disposals / additions	Other movements²	Revaluation	30 December 2011¹
100%	£m	£m	£m	£m	£m
The Mall	1,128	(159)	8	(6)	971
The Junction	476	(198)	2	8	288
X-Leisure	528	-	1	36	565
German joint venture	496	19	(14)	(5)	496
Other properties	204	26	(71)	2	161
Property under management	2,832	(312)	(74)	35	2,481

¹Valuation excludes adjustments to property valuations for tenant incentives and head leases treated as finance leases and trading properties are included at the lower of cost and net realisable value

² Primarily expiry of the Ilford shopping centre short term management contract and foreign exchange movements in Germany

The split of property under management by sector is similar to the prior year and at 30 December 2011 is as follows:

	2011	2010
	%	%
Shopping centres	40.2	42.4
Leisure	28.2	23.3
Germany	20.0	17.5
Retail parks	11.6	16.8
	100.0	100.0

Property acquisitions

On 22 February 2011, the Group completed the purchase of The Waterside Shopping Centre in Lincoln for £24.8 million at a 7.68% net initial yield. On 8 April 2011, the Group formed a joint venture with Karoo Investment Fund II S.C.A SICAV-SIF ("Karoo") by selling 50% of the Group's interest in The Waterside Shopping Centre.

On 30 December 2011, the German joint venture completed the purchase of a retail park in Schwäbisch Hall, Baden Württemberg, for €22.6 million at a 7.75% net initial yield.

Property disposals

Properties disposed of during the year are set out below:

	Date	Sales proceeds	Net initial yield
		£m	%
The Mall
Bristol	January	50.2	7.0
Barnsley	September	26.1	8.6¹
Middlesbrough	September	82.0	8.6¹
		158.3
The Junction
Portsmouth	March	60.9	5.8
Swansea	June	80.2	5.8
Maidstone	September	70.6	5.9
		211.7
Total		370.0

¹Blended yield across two properties

During the year the German joint venture sold the Langburkersdorf property for €0.1 million at a small discount to the prior year valuation.

SNO!zone Braehead disposal

On 16 December 2011 the Group disposed of 100% of its interest in Snozone (Braehead) Limited for cash consideration of £0.1 million and a profit on disposal of £0.1 million was recognised.

Mall unit purchases

During the year, the Group purchased 13.6 million units in The Mall Fund at an average of £0.30 per unit for a total consideration of £4.0 million. This purchase was at a discount to the net asset value of The Mall and resulted in a gain on investment of £1.1 million. These purchases increased the holding in The Mall Fund by 1.44% to 18.16% at the end of the year.

On 8 February 2012, the Group purchased 18.7 million units in The Mall Fund at £0.30 per unit for a total consideration of £5.6 million and this further increased the holding in The Mall Fund from 18.16% to 20.15%.

Foreign currency exposure management

The Group uses a forward foreign exchange contract as a hedge of its net investment in the German joint ventures. At 30 December 2011, this was achieved through a contract for €47.0 million (2010: €47.0 million) at a fixed exchange rate of 1.1797 (2010: 1.143) which hedges 81% (2010: 85%) of the Group's German investment. During the year, the Group crystallised a gain of £1.5 million in April 2011 and closed out the forward contract which matured on 27 June 2012 and entered into a new forward contract which extended the hedging arrangement until 28 March 2013. At 30 December 2011 the value of the contract was an asset of £0.6 million (2010: asset of £0.6 million).

To the extent the hedge is effective under accounting rules, valuation movements on the forward contract is shown in reserves, where they partially offset the gain or loss in the value of the net investment in the Group's German joint ventures.

Financing strategy

Our financing structure needs to be flexible and cost effective and this is achieved through having cash of £20.0 million and an undrawn central revolving credit facility of £58.0 million at 30 December 2011. This gives the Group the scope to fund future property investments as opportunities arise.

At an associate and joint venture level, debt has been raised from a variety of sources, with a spread of maturities to mitigate refinancing risk as set out in the debt maturity analysis chart. Debt held in associates and joint ventures is non-recourse to the Group.

Going concern

As stated in note 1 to the consolidated financial statements, the directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the consolidated financial statements.

Charles Staveley

Group Finance Director

Principal risks and uncertainties

There are a number of risks and uncertainties which could have a material impact on the Group's future performance and could cause actual results to differ materially from expected and historical results. References to "the Group" include the funds and joint ventures in which Capital & Regional has an interest. The Group carries out a regular review of the major risks it faces and monitors the controls that have been put in place to mitigate them. Property risks are also monitored at various levels within divisional management.

Risk	Impact	Mitigation
Property risks
Property investment market risks
· Weak economic conditions and poor sentiment in commercial real estate markets leading to low investor demand and market pricing correction	· Small changes in property market yields have a significant effect on the value of the properties owned by the Group · Impact of leverage could magnify the effect on the Group's net assets	· Geographical and sector diversification of investments · Monitoring of indicators of market direction and pursuit of opportunistic asset sales in those schemes and locations most likely to suffer adverse impact · Review of debt levels and consideration of strategies to reduce if relevant
Impact of the economic environment (tenant risks)
· Tenant insolvency or distress · Prolonged downturn in tenant demand and pressure on rent levels	· Tenant failures and reduced tenant demand could adversely affect rental income revenues, lease incentive costs, void costs, available cash and the value of properties owned by the Group	· Large, diversified tenant base · Review of tenant covenants before new leases signed · Long term leases and active credit control process · Good relationships with, and active management of, tenants · Void management though temporary lettings and other mitigation strategies
Threat from the internet
· The trend towards online shopping may adversely impact consumer footfall In shopping centres	· A change in consumer shopping habits towards online purchasing and delivery may reduce footfall and therefore potentially reduce tenant demand for space and the levels of rents which can be achieved	· Strong location and dominance of shopping centres (predominantly South East England) · Strength of the community shopping experience · Increasingly retailers within our shopping centres use stores as collection points for purchases made by consumers online · Monitoring of footfall for evidence of falling visitors to shopping centres (increased footfall recorded in 2011) · Monitoring of retail trends and shopping behaviour · Mobile smart phone marketing initiatives
Valuation risks
· In the absence of relevant transactional evidence, valuations can be inherently subjective leading to a degree of uncertainty	· Stated property valuations may not reflect the price received on sale	· Use of experienced, external valuers · Rotation of valuers · Valuations reviewed by internal valuation experts

Property management income risks
· Fee income, although largely fixed, may still fall based on value of property under management · Contracts allow for termination under certain circumstances, which are largely outside management's control	· Changes in property values, sales of properties or other events not wholly under management's control could result in a reduction in or the loss of property management income	· Monitoring of compliance with terms of contracts · Close dialogue with other investors and stakeholders · Diversification of source of management income · Contracts have now been largely renegotiated to fix income · Reduction of cost base as fee income falls to mitigate loss
Nature of investments and relationships with key business partners
· The market for the Group's investments can be relatively illiquid · Restrictions on ability to exercise full control over underlying investments in joint ventures or fund structures	· Inability to sell investments or fully control exit/asset sale strategies could result in investments in associates and joint ventures not being realisable at reported values	· Close dialogue with other investors and stakeholders to align strategies and increase influence over the direction of investments · Exercise of significant influence over associates and joint ventures through representation on management boards
Funding and treasury risks
Liquidity and funding
· Inability to fund the business or to refinance existing debt on economic terms when needed	· Inability to meet financial obligations (interest, loan repayments, expenses, dividends) when due · Limitation on financial and operational flexibility · Cost of financing could be prohibitive	· Capital raising, debt refinancing and asset sales at both Group and fund levels have improved liquidity position, reduced the potential impact of falls in property values and positioned the Group to respond quickly to the turning point in the cycle · Ensuring that there are significant undrawn facilities · Option of further asset sales if necessary · Efficient treasury management and regular proactive reporting of current and projected position to the board to ensure debt maturities are dealt with in good time
Covenant compliance risks
· Breach of any of loan covenants causing default on debt and possible accelerated maturity	· Unremedied breaches can trigger demand for immediate repayment of loan	· Regular monitoring and projections of liquidity, gearing and covenant compliance · Review of future cash flows and predicted valuations to ensure sufficient headroom

Foreign exchange exposure risks
· Fluctuations in the exchange rate between sterling and the euro in respect of the Group's German joint venture · Uncertainty over the Eurozone and the future of the Euro currency	· Adverse impact on sterling valuation of investments and income flows, and losses as a result of the Group having not, or not effectively, hedged its risk	· Exposure minimised by funding the German investment through euro denominated borrowings and hedging a large proportion of the remaining investment through derivatives · Regular monitoring of the effectiveness of hedging and performance of derivative contracts
Interest rate exposure risks
· Exposure to rising or falling interest rates	· If interest rates rise and are unhedged, the cost of debt facilities can rise and ICR covenants could be broken · Hedging transactions used by the Group to minimise interest rate risk may limit gains, result in losses or have other adverse consequences	· Regular monitoring of the performance of derivative contracts and corrective action taken where necessary · Use of alternative hedges such as caps
Other risks
Tax and regulation risks
· Exposure to changes in tax legislation or the interpretation of tax legislation and property related regulations · Potential exposure to tax liabilities in respect of previous transactions undertaken where the tax authorities disagree with the tax treatment adopted	· Tax related liabilities and other losses could arise	· Expert advice taken on tax positions and other regulations · Maintenance of a regular dialogue with the tax authorities
Loss of key management
· Dependence of the Group's business on the skills of a small number of key individuals	· Loss of key individuals or an inability to attract new employees with the appropriate expertise could reduce the effectiveness with which the Group conducts its business	· Key management are paid market salaries and offered competitive incentive packages to ensure their retention · Succession planning for key positions is undertaken · Performance evaluation, training and development programmes are in place to maintain and enhance the quality of staff

The risks noted above do not comprise all those potentially faced by the Group and are not intended to be presented in any order of priority. Additional risks and uncertainties currently unknown to the Group, or which the Group currently deems immaterial, may also have an adverse effect on the financial condition or business of the Group in the future. These issues are kept under constant review to allow the Group to react in an appropriate and timely manner to help mitigate the impact of such risks.

Significant contracts or arrangements

The Company is required to disclose any contractual or other arrangements which it considers are essential to its business.

· The asset and property management agreements in relation to The Mall and The Junction are considered to be essential for the Company, because of the fee income they generate for the Company's subsidiary CRPM and the significant influence they allow the Group to assert over the investments. The asset and property management agreements for X-Leisure and the German portfolio are also considered to be essential for the Company because of the fee income they generate for the Company's X-Leisure Limited joint venture and Garigal associate, and the significant influence they allow the Group to assert over the investments.

· The Bank of Scotland £58.0 million central credit facility which is currently undrawn but provides the Group with liquidity.

· The Company also acts as a guarantor of the Great Northern and Hemel Hempstead loans and the Group's central credit facility.

Certain of these agreements can be terminated in the event of a change of control of the Company as disclosed in the Directors' report.

Consolidated income statement

For the year to 30 December 2011

		2011	2010
	Note	£m	£m
Revenue	3	28.9	30.7
Cost of sales	4	(11.7)	(10.4)
Gross profit		17.2	20.3
Administrative costs		(11.2)	(11.8)
Share of profit in associates and joint ventures	18a	22.3	45.2
Loss on revaluation of investment properties	12a	(1.5)	(0.2)
Other gains and losses	5	-	(0.9)
Profit on ordinary activities before financing		26.8	52.6
Finance income	6	2.3	1.2
Finance costs	7	(5.7)	(7.4)
Profit before tax	8	23.4	46.4
Tax	10a	(2.3)	(2.0)
Profit for the year		21.1	44.4

Basic earnings per share	11a	6p	13p
Diluted earnings per share	11a	5p	13p

All results derive from continuing operations and the profit for the current and preceding year is fully attributable to equity shareholders.

Consolidated statement of comprehensive income

For the year to 30 December 2011

	2011	2010
	£m	£m
Profit for the year	21.1	44.4
Exchange differences on translation of foreign operations	(1.3)	(2.6)
Gain on a hedge of a net investment taken to equity	0.9	2.2
Other comprehensive income	(0.4)	(0.4)
Total comprehensive income for the year	20.7	44.0

The total comprehensive income for the current year and preceding year is fully attributable to equity shareholders

Consolidated balance sheet

At 30 December 2011

		2011	2010
	Note	£m	£m
Non-current assets
Investment properties	12a	8.5	10.0
Goodwill	13	1.8	1.9
Plant and equipment	14	0.7	0.9
Available for sale investments	15	0.3	0.3
Receivables	16	33.3	25.9
Investment in associates	18b	120.2	110.8
Investment in joint ventures	18c	27.2	25.7
Total non-current assets		192.0	175.5

Current assets
Trading properties	12a	71.5	70.8
Receivables	19	5.0	7.1
Cash and cash equivalents	20	20.0	25.7
Total current assets		96.5	103.6

Total assets	2b	288.5	279.1

Current liabilities
Bank loans	23a	(5.0)	(0.6)
Trade and other payables	21	(10.0)	(10.9)
Current tax liabilities		(3.0)	(5.8)
		(18.0)	(17.3)

Non-current liabilities
Bank loans	23a	(61.6)	(68.8)
Other payables	22	(4.0)	(4.8)
Deferred tax liabilities	10c	(3.9)	(3.7)
Non-current tax liabilities	10e	(5.0)	(10.0)
Total non-current liabilities		(74.5)	(87.3)

Total liabilities	2b	(92.5)	(104.6)

Net assets		196.0	174.5

Equity
Share capital	25	9.9	9.9
Other reserves	28	72.8	153.2
Capital redemption reserve		4.4	4.4
Own shares held	27	(6.8)	(9.7)
Retained earnings		115.7	16.7
Equity shareholders' funds		196.0	174.5

Basic net assets per share	30	£0.56	£0.50
EPRA triple net assets per share	30	£0.56	£0.50
EPRA net assets per share	30	£0.63	£0.57

These financial statements were approved by the Board of directors, authorised for issue and signed on their behalf on 6 March 2012 by:

Charles Staveley

Group Finance Director

Consolidated statement of changes in equity

For the year to 30 December 2011

		Other reserves
						Net
					Foreign	investment	Capital	Own
	Share	Special	Merger	Acquisition	currency	hedging	redemption	shares	Retained	Total
	capital	reserve	reserve	reserve	reserve	reserve	reserve	held	earnings	equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance at 30 December 2009	9.9	79.5	60.3	9.5	10.0	(5.7)	4.4	(9.7)	(28.4)	129.8

Profit for the year	-	-	-	-	-	-	-	-	44.4	44.4
Other comprehensive income for the year	-	-	-	-	(2.6)	2.2	-	-	-	(0.4)
										-
Total comprehensive income for the year	-	-	-	-	(2.6)	2.2	-	-	44.4	44.0
										-
Credit to equity for equity-settled share-based payments	-	-	-	-	-	-	-	-	0.7	0.7
										-
Balance at 30 December 2010	9.9	79.5	60.3	9.5	7.4	(3.5)	4.4	(9.7)	16.7	174.5

Profit for the year	-	-	-	-	-	-	-	-	21.1	21.1
Other comprehensive income for the year	-	-	-	-	(1.3)	0.9	-	-	-	(0.4)
										-
Total comprehensive income for the year	-	-	-	-	(1.3)	0.9	-	-	21.1	20.7
										-
Credit to equity for equity-settled share-based payments	-	-	-	-	-	-	-	-	0.8	0.8
Transfer between reserves	-	(79.5)	-	-	-	-	-	-	79.5	-
Other movements	-	-	-	-	(0.5)	-	-	2.9	(2.4)	-
										-
Balance at 30 December 2011	9.9	-	60.3	9.5	5.6	(2.6)	4.4	(6.8)	115.7	196.0

Consolidated cash flow statement

For the year to 30 December 2011

		2011	2010
	Note	£m	£m
Operating activities
Net cash from operations	29	8.2	2.9
Distributions received from associates	18b	11.2	6.3
Distributions received from joint ventures	18c	4.5	3.4
Interest paid		(5.3)	(5.7)
Interest received		0.1	0.2
Income taxes paid		(9.9)	(4.3)
Cash flows from operating activities		8.8	2.8

Investing activities
Purchase of investment property	12a	(26.1)	-
Sale of equity interest in subsidiary to joint venture partner	32a	6.4	-
Disposal of SNO!zone Braehead subsidiary	32b	(0.1)	-
Purchase of plant and equipment	14	(0.3)	(0.4)
Investment in associates	18b	(4.0)	(2.7)
Investment in joint ventures	18c	(1.2)	-
Loans to joint ventures		(1.3)	(0.9)
Loans repaid by joint ventures		1.2	0.5
Sale of investment properties		-	12.5
Sale of MEN Arena joint venture		-	5.7
Share buybacks from joint ventures		-	0.6
Cash flows from investing activities		(25.4)	15.3

Financing activities
Bank loans drawn down	23a	13.6	-
Bank loans repaid		(3.2)	(9.9)
Loan arrangement costs	23a	(0.3)	-
Settlement of forward foreign exchange contract		1.5	-
Premium cost of interest rate swaption	24b	(0.7)	-
Cash flows from financing activities		10.9	(9.9)

Net (decrease)/increase in cash and cash equivalents		(5.7)	8.2

Cash and cash equivalents at the beginning of the year		25.7	17.5
Cash and cash equivalents at the end of the year	20	20.0	25.7

Notes to the financial statements

For the year to 30 December 2011

1 Significant Accounting Policies

General information

Capital & Regional plc is a company domiciled and incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is 52 Grosvenor Gardens, London, SW1W 0AU. The nature of the Group's operations and its principal activities are disclosed in note 2a and in the operating and financial reviews.

Basis of accounting

The financial statements comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement and notes 1 to 37. They are prepared on the historical cost basis except for the revaluation of certain properties and financial instruments. Other than as noted in the 'Accounting developments and changes' section below, the accounting policies have been applied consistently to the results, other gains and losses, assets, liabilities, income and expenses.

The financial statements are presented in pounds sterling because that is the currency of the primary economic environment in which the Group operates. Foreign operations are included in accordance with the accounting policies set out below.

Statement of compliance

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and therefore the Group financial statements comply with Article 4 of the EU IAS Regulation.

Accounting developments and changes

Developments - during 2011

During 2011 the new standards and amendments that have been issued and adopted by EU and the Group have not resulted in a material change to the consolidated financial statements.

Other changes

The accounting policy for Investment properties has been updated following the purchase of an investment property during the year.

Developments - not yet adopted

At the date of authorisation of these financial statements, the following standards and interpretations which have not been applied in these financial statements, were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

· IFRS 1 (amended) Severe hyperinflation and removal of fixed dates for first time adoptors

· IFRS 7 (amended) Disclosures - Transfers of financial assets

· IFRS 9 Financial Instruments

· IFRS 10 Consolidated financial statements

· IFRS 11 Joint arrangements

· IFRS 12 Disclosure of interests in other entities

· IFRS 13 Fair value measurement

· IAS 1 (amended) Presentation of items of other comprehensive income

· IAS 12 (amended) Deferred tax: Recovery of underlying assets

· IAS 19 (revised) Employee benefits

· IAS 27 (revised) Separate financial statements

· IAS 28 (revised) Investments in associates and joint ventures

The directors are assessing the impact that the adoption of these standards may have on the financial statements of the Group in future periods. The directors do not expect that the adoption of the standards listed above will have a material impact on the financial statements, however it is not practicable to provide a reasonable estimate of the effect of these standards until a detailed review has been completed.

Going concern

The Group prepares cash flow and covenant compliance forecasts to demonstrate that it has adequate resources available to continue in operation for the foreseeable future, being at least 12 months from the date of this report. In these forecasts the directors specifically consider anticipated future market conditions and the Group's principal risks and uncertainties. The directors believe that the Group and the Company have adequate resources to continue in operational existence for the foreseeable future and accordingly continue to adopt the going concern basis in preparing the annual report and financial statements.

Critical accounting judgements

The preparation of financial statements requires the directors to make judgements, estimates and assumptions that may affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses.

The following are the critical judgements, apart from those involving estimation uncertainty which are dealt with separately, that the directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements. The critical accounting judgements are:

Operating segments

An assessment of whether certain operating segments have characteristics that are sufficiently similar to allow them to be aggregated into a single segment for reporting in note 2a.

Property valuation

Reliance upon the work undertaken at 30 December 2011 by independent professional qualified valuers, as disclosed in note 12b, in assessing the fair value of certain of the Group's investment and trading properties.

An assessment of the directors' valuations of the investment properties owned by FIX UK as disclosed in note 12b.

Associates

An assessment of whether the Group exercises significant influence over its investments in The Mall, The Junction and X-Leisure, as discussed in note 18b.

Derivative financial instruments

Reliance upon the work undertaken at 30 December 2011 by independent third party experts in assessing the fair values of the Group's derivative financial instruments, which are disclosed in notes 16, 19, 22 and 24f.

Lease classification

Consideration of the potential transfer of risks and rewards of ownership in accordance with IAS 17 Leases for all properties leased to tenants. The directors have determined that all such leases are operating leases.

Performance fees

The likelihood that CRPM, X-Leisure Limited and Garigal will receive performance fee revenue under their respective asset and property management contracts. The directors have concluded that it is not yet probable that any amounts will be received but the performance criteria are disclosed in note 37.

Key sources of estimation uncertainly

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a risk of causing material adjustment to the carrying amount of assets and liabilities within the next financial year are:

Taxation

An assessment of the likelihood that potential historic tax liabilities will arise as well as the impact of changes in recent legislation, case law and accounting standards, along with future projections for the Group, in determining the current and deferred tax assets, liabilities and charge to the income statement, as disclosed in note 10.

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating unit to which goodwill has been allocated. The value in use calculation requires estimates of the expected life of the X-Leisure fund, the future cash flows expected to arise from the management contract and an appropriate discount rate applied for the calculation of present value. The assumptions used to determine whether the goodwill is impaired are disclosed in note 13

Impairment of loan receivable in Euro B-Note Holding Limited

Determining whether the subordinated loan receivable held indirectly by Euro B-Note Holding Limited is impaired requires an estimation of the credit risk of the relevant German joint venture portfolio. An independent valuation was obtained as at 30 June 2011 for the loan receivable fair value at the time of the debt refinancing. This fair value was based on the future cash flows expected to arise from the loan receivable and an appropriate discount rate of 15.35% applied for the calculation of the present value. This discount rate assumes that the loan principal is discounted by 12.0% per annum to reflect credit risk. The discount rate was based on a risk adjusted yield curve. Subsequent to the refinancing the loan receivable is held at amortised cost and tested for impairment at each reporting date. At 30 December 2011 management performed an impairment review over the relevant German joint venture portfolio which included an assessment of the actual and forecast loan to value, liquidity, net rental income and contribution. This impairment assessment resulted in the loan receivable being carried at €13.5 million compared to a nominal value of €18.0 million as disclosed in 18b.

The directors believe that the estimates and associated assumptions used in the preparation of the financial statements are reasonable, but actual outcomes may differ from those anticipated and so the judgements, estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

Principal accounting policies

The principal accounting policies adopted are set out below.

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company at 30 December and entities controlled by the Company (its subsidiaries) made up to 31 December each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal. The reporting period for subsidiaries ends on 31 December and their financial statements are consolidated from this date. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Business combinations

Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the aggregate at the date of exchange of the fair values of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in the income statement as incurred. Where a business combination is achieved in stages, the Group's previously-held interests in the acquired entity are remeasured to fair value at the acquisition date (i.e. the date the Group attains control) and the resulting gain or loss, if any, is recognised in the income statement.

If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the remeasurement period or additional assets or liabilities are recognised to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date. The measurement period is the period from the date of acquisition to the date the Group obtains complete information and is subject to a maximum of one year.

Investments in associates and joint ventures

A joint venture is an entity over which the Group has joint control, which is the contractually agreed sharing of control over an economic activity which exists when the strategic financial and operating decisions relating to the activity require the unanimous consent of the parties sharing control. An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

In accordance with IAS 28 Investments in Associates and IAS 31 Interests in Joint Ventures, associates and joint ventures are accounted for under the equity method, whereby the consolidated balance sheet and income statement incorporate the Group's share of net assets and profits or losses after tax. The profits or losses include revaluation movements on investment properties. Losses of an associate or joint venture in excess of the Group's interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group's net investment in the associate or joint venture) are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture.

Any excess of the cost of acquisition over the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the associate and is assessed for impairment as part of that investment. Any excess of the Group's share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate over the cost of acquisition, after reassessment, is recognised immediately in the income statement.

The reporting period for associates and joint ventures ends on 31 December and their financial statements are equity accounted to this date. In accordance with IAS 39 Financial Instruments: Recognition and Measurement, associates and joint ventures are reviewed at the end of the reporting period to determine whether any impairment loss should be recognised.

Goodwill

Goodwill arising in a business combination is recognised as an asset at the date that control is acquired and is measured as the excess of the sum of consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of any equity interest in the entity already held by the acquirer over the net of the acquisition date amounts of identifiable assets acquired and liabilities assumed.

Goodwill is not amortised but is reviewed for impairment at least annually. The impairment is calculated on the value in use of the goodwill and is recognised immediately in the income statement and not subsequently reversed. Where the Group's interest in the fair value of the acquiree's identifiable net assets exceeds the sum of consideration transferred, the amount of any non-controlling interest in the acquiree and the fair value of any equity interest in the entity already held by the acquirer, the excess is recognised immediately in the income statement as a bargain purchase gain.

Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated into sterling at exchange rates approximating to the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to sterling at the exchange rate ruling at that date and, unless they relate to the hedging of the net investment in foreign operations, differences arising on translation are recognised in the income statement.

Financial statements of foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated into sterling at the exchange rates ruling at the balance sheet date. The operating income and expenses of foreign operations are translated into sterling at the average exchange rates for the period. Significant transactions, such as property sales, are translated at the foreign exchange rate ruling at the date of each transaction. The principal exchange rate used to translate foreign currency denominated amounts in the balance sheet is the rate at the end of the year: £1 = €1.1972 (2010: £1 = €1.1618). The principal exchange rate used for the income statement is the average rate for the year: £1 = €1.1522 (2010: £1 = €1.1657).

Net investment in foreign operations

Exchange differences arising from the translation of the net investment in foreign operations are taken to the foreign currency reserve and the effective portions of related foreign currency hedges are taken to the net investment hedging reserve. The net investment in foreign operations includes the equity of the underlying entities and the portion of shareholder loans to those entities that is treated as equity where there is no intention of repayment in the foreseeable future. All exchange differences previously accumulated in equity are transferred to the income statement upon disposal or, where control is lost, part-disposal of the foreign operation.

Plant and equipment

Plant and equipment is stated at the lower of cost or valuation, net of depreciation and any provision for impairment. Depreciation is provided on all tangible fixed assets, other than investment properties and land, on a straight line basis over their expected useful lives:

· Leasehold improvements - over the term of the lease

· Fixtures and fittings - over three to five years

· Motor vehicles - over four years

Property portfolio

Investment properties

Investment properties are properties owned or leased under finance leases which are held either for long-term rental income or for capital appreciation or both. Investment property is initially recognised at cost (including directly related transaction costs) and is revalued at the balance sheet date to fair value, being the market value determined by professionally qualified external or director valuers, with changes in fair value being included in the income statement. Valuations are generally carried out twice a year. In accordance with IAS 40 Investment Property, no depreciation is provided in respect of investment properties.

Leasehold properties

Leasehold properties that are leased to tenants under operating leases are classified as investment properties or development properties, as appropriate, and included in the balance sheet at fair value.

Refurbishment expenditure

Refurbishment expenditure in respect of major works is capitalised. Renovation and refurbishment expenditure of a revenue nature is expensed as incurred.

Property transactions

Acquisitions and disposals are accounted for at the date of legal completion. Investment properties are reclassified as held for sale once contracts have been exchanged and are transferred between categories at the estimated market value on the transfer date. Properties held for sale are shown at fair value less costs of disposal.

Trading properties

Properties held with the intention of disposal are valued at the lower of cost and net realisable value. Any impairment in the value of trading properties is shown within the cost of sales line in the income statement.

Head leases

Where an investment property is held under a head lease, the head lease is initially recognised as an asset at the present value of the minimum ground rent payable under the lease. The corresponding rent liability to the leaseholder is included in the balance sheet as a finance lease obligation.

Tenant leases and incentives

Incentives and costs associated with entering into tenant leases are amortised over a straight line basis over the term of the lease.

Operating leases

Annual rentals under operating leases are charged to the income statement on a straight line basis over the term of the lease.

Financial instruments

Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes party to the contractual provisions of the instrument.

Financial assets

Financial assets are classified into the following specified categories: financial assets 'at fair value through profit or loss' (FVTPL), 'held to maturity' investments, 'available for sale' financial assets and 'loans and receivables'. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition.

Effective interest rate method

The effective interest rate method is a method of calculating the amortised cost of a debt instrument and of allocating the interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount in initial recognition.

Available for sale financial assets

The Group has investments in unlisted shares and unit trusts that are not traded in an active market but whose fair value the directors consider can be reliably measured. Gains and losses arising from changes in fair value are recognised in other comprehensive income, with the exception of impairment losses which are recognised in the income statement. Dividends are recognised in the income statement when the Group's right to receive the dividends is established.

Loans and receivables

Loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short term receivables when the recognition of interest would be immaterial.

Trade receivables

Trade receivables are carried at the original invoice amount less allowances made for doubtful accounts. An allowance for doubtful accounts is recorded for the difference between the carrying value and the recoverable amount where there is objective evidence that the Group will not be able to collect all amounts due. Discounts and similar allowances are recorded on an accrual basis consistent with the recognition of the related sales, using estimates based on existing contractual obligations, historical trends and the Group's experience. Long-term accounts receivable are discounted to take into account the time value of money, where material.

Cash and cash equivalents

Cash and cash equivalents include cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

Financial liabilities

Financial liabilities are classified as either financial liabilities 'at FVTPL' or 'other financial liabilities'.

Borrowings

Borrowings are initially measured at fair value, net of transaction costs. Borrowings are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. In accordance with IAS 39 Financial Instruments: Recognition and Measurement, a substantial modification of the terms of an existing borrowing is accounted for as an extinguishment of the original liability and the recognition of a new liability. Where the terms of the modification are not substantially different, any costs paid in connection with the modification are treated as an adjustment to the carrying amount of the liability and are amortised over the remaining life of the modified liability.

Derivative financial instruments

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. The fair value of forward foreign exchange contracts is calculated by reference to spot and forward exchange rates at the balance sheet date. The fair value of interest rate swaps is calculated by reference to appropriate forecasts of yield curves between the balance sheet date and the maturity of the instrument. Changes in fair value are included as finance income or finance costs in the income statement, except for gains or losses on the portion of an instrument that is an effective hedge of the net investment in a foreign operation, which are recognised in the net investment hedging reserve. Derivative financial instruments are classified as non-current when they have a maturity of more than twelve months and are not intended to be settled within one year.

Trade payables

Trade payables are carried at fair value, with any gains or losses arising on remeasurement recognised in the income statement.

Taxation

Tax is included in the income statement except to the extent that it relates to items recognised directly in equity, in which case the related tax is recognised in equity.

Current tax is based on the taxable profit for the year and is calculated using tax rates that have been enacted or substantively enacted. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are never taxable or tax deductible (permanent differences) or will be taxable at a later date (temporary differences). Temporary differences principally arise when using balance sheet values for assets and liabilities that are different to their respective tax base values.

Deferred tax is provided using the balance sheet liability method on these temporary differences with the exception of goodwill not deductible for tax purposes; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates applicable at the balance sheet date. A deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying temporary differences can be deducted. Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so.

Employee benefits

Pension costs

Pension liabilities, all of which relate to defined contribution schemes, are charged to the income statement as incurred.

Share-based payments

The Group has applied the arrangements of IFRS 2 Share-based Payment. Equity settled share-based payments are measured at fair value at the date of grant. The fair values of the 2008 LTIP, the COIP, the Matching Share Agreement and the SAYE scheme are calculated using Monte Carlo simulations or the Black-Scholes model as appropriate. The fair values are dependent on factors including the exercise price, expected volatility, period to exercise and risk free interest rate. Market related performance conditions are reflected in the fair values at the date of grant and are expensed on a straight line basis over the vesting period. Non-market related performance conditions are not reflected in the fair values at the date of grant. At each reporting date, the Group estimates the number of shares likely to vest under non-market related performance conditions so that the cumulative expense will ultimately reflect the number of shares that do vest. Where awards are cancelled, including when an employee ceases to pay contributions into the SAYE scheme, the remaining fair value is expensed immediately.

Own shares

Own shares held by the Group are shown as a deduction from shareholders' funds and included in other reserves. The cost of own shares is transferred to retained earnings when shares in the underlying incentive schemes vest. The shares are held in an Employee Share Ownership Trust.

Revenue

Management fees

Management fees are recognised, in line with the property management contracts, in the period to which they relate. They include income in relation to services provided by CRPM to associates and joint ventures for asset and property management, project co-ordination, procurement, and management of service charges and directly recoverable expenses. Income earned by X-Leisure Limited and Garigal for similar services is recognised in the share of profit / (loss) in associates and joint ventures.

Performance fees

Performance fees are recognised as revenue by the Group or the relevant associate or joint venture when both the amount of performance fee and the stage of completion of the relevant performance conditions can be measured reliably, and when it is probable that the performance fee will be received. Performance fees may be earned as follows:

· The Mall: by CRPM on property level outperformance relative to the IPD Shopping Centre Index (taking the 30 June 2010 valuation as the start point) of more than 50 basis points provided that the fund level return is greater than zero, payable at the end of the life of the fund or on an exit event, which is defined as a listing, sale of all the interests in the fund or the making of a cash offer which is accepted by a majority of the investors in the fund. For i) between 50 basis points and 150 basis points, CRPM receives 10% of the outperformance proceeds; ii) for between 150 basis points and 300 basis points of outperformance, CRPM receives 15% of the outperformance proceeds; and iii) for over 300 basis points of outperformance, CRPM receives no additional fee to ensure excessive risks are not taken. The provisions in the management agreements relating to removal for underperformance, which currently apply with effect from 31 December 2012, have been amended such that the GP board will only have the right to remove CRPM as the asset and property manager in the event of underperformance of at least 100 basis points below the IPD Shopping Centre Index over the period ending 31 December 2014. The above changes will be effective from 21 July 2010 when the Mall Bond Security Trustee has issued final confirmation of the fee arrangements.

· The Junction: by CRPM on any realised geared returns in excess of an internal rate of return of 15% over the period from May 2009 to the disposal of the entire portfolio or the expiry of the fund.

· X-Leisure: by X-Leisure Limited on any realised geared return in excess of an internal rate of return of 15% over the period from August 2009 to the disposal of the entire portfolio on the expiry of the fund or its conversion into a listed structure. An interim performance fee may be earned on the same basis if the X-Leisure portfolio is reduced to nine properties or fewer.

· German portfolio: by Garigal on any realised geared returns in excess of an internal rate of return of 12% over the period from June 2010 to the disposal of the entire portfolio or its conversion into a listed structure, subject to a maximum of €15 million.

Provisions for performance fees payable by the underlying associate or joint venture are made when there is a present obligation to settle the performance fee, its amount can be measured reliably and it is probable that it will be paid. Further disclosure on performance fees is included in note 37.

Net rental income

Net rental income is gross rental income adjusted for tenant incentives, recognised on a straight line basis over the term of the underlying lease, less expenses directly related to letting and holding the properties.

Dividend and interest income

Dividend income from investments is recognised when the shareholders' right to receive payment has been established. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

Finance costs

All borrowing costs are recognised under Finance costs in the income statement in the period in which they are incurred. Finance costs also include the amortisation of loan issue costs, any loss in the value of the Group's wholly owned interest rate swaps and any loss in the ineffective portion of the Group's hedge of its net investment in a foreign operation.

Operating segments

The Group's reportable segments under IFRS 8 are The Mall, The Junction, X-Leisure, the German joint venture, CRPM and SNO!zone. Other segments not individually reportable in the asset businesses are the Group's remaining associates and joint ventures, comprising FIX UK, Xscape Braehead, The Waterside Lincoln Limited Partnership, The Auchinlea Partnership, PPCR Group (put into liquidation in 2011), Sauchiehall Centre (put into liquidation in 2011) and MEN Arena (sold in 2010), and its wholly owned properties, comprising Great Northern Warehouse, Hemel Hempstead and 10 Lower Grosvenor Place/Beeston Place (sold in 2010). These have been combined into the "Other" segment as they meet the aggregation criteria under IFRS 8. Other segments not individually reportable in the earnings businesses are X-Leisure Limited and Garigal Asset Management GmbH, which are included with CRPM in the "Property management" segment as they also meet the aggregation criteria under IFRS 8. Non-segment items include Group overheads incurred by Capital & Regional plc and other subsidiaries, and the interest expense on the Group's central borrowing facility.

The Group's asset business segments (The Mall, The Junction, X-Leisure, the German joint venture and Other segments) derive their revenue from the rental of investment and trading properties. The Group's earnings business segments (the Property management and SNO!zone segments) derive their revenue from the management of property funds and joint ventures and the operation of indoor ski slopes. The split of revenue between these classifications satisfies the requirement of IFRS 8 to report revenues from different products and services. Depreciation and the variable overhead represent the only significant non-cash expenses.

The Group's interests in the assets, liabilities and profit or loss of its associates and joint ventures are proportionately consolidated and shown on a see-through basis as this is how they are reported to the Board of directors. There are no differences between the measurements of the segments' assets, liabilities and profit or loss as they are reported to the Board of directors and their presentation under the Group's accounting policies.

Inter-segment revenue and expenses represent items eliminated on consolidation and are accounted for on an arm's length basis. Management fees and other revenue items in the property management segment are earned from the asset business segments, where they are included under property and void costs. Since these asset business segments are proportionately consolidated, the costs would not eliminate against the income and have therefore not been split out separately as inter-segment expenses.

2a Operating segments

		Asset businesses					Earnings businesses		Group
									Total	Non-
							Property		reportable	segment
		The Mall	The Junction	X-Leisure	Germany	Other	management	SNO!zone	segments	items	Total
Year to 30 December 2011	Note	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Rental income from external sources	2b	16.0	3.0	5.1	19.3	12.4	-	-	55.8	-	55.8
Property and void costs		(4.0)	(0.6)	(1.0)	(2.6)	(1.8)	-	-	(10.0)	-	(10.0)
Net rental income		12.0	2.4	4.1	16.7	10.6	-	-	45.8	-	45.8
Interest income		-	-	-	0.8	-	-	-	0.8	-	0.8
Interest expense		(8.1)	(2.1)	(2.7)	(9.6)	(8.1)	-	-	(30.6)	-	(30.6)
Contribution		3.9	0.3	1.4	7.9	2.5	-	-	16.0	-	16.0
Management fees	2b	-	-	-	-	-	12.7	-	12.7	-	12.7
Management expenses		-	-	-	-	-	(8.1)	-	(8.1)	(3.9)	(12.0)
SNO!zone income	2b	-	-	-	-	-	-	12.4	12.4	-	12.4
SNO!zone expenses		-	-	-	-	-	-	(11.5)	(11.5)	-	(11.5)
Depreciation		-	-	-	-	-	(0.2)	(0.2)	(0.4)	-	(0.4)
Inter-segment revenue	2b	-	-	-	-	-	0.1	-	0.1	-	0.1
Inter-segment expenses		-	-	-	-	(0.1)	-	-	(0.1)	-	(0.1)
Interest income on central cash		-	-	-	-	-	-	-	-	0.1	0.1
Interest expense on central facility		-	-	-	-	-	-	-	-	(0.9)	(0.9)
Recurring pre-tax profit		3.9	0.3	1.4	7.9	2.4	4.5	0.7	21.1	(4.7)	16.4
Variable overhead		-	-	-	-	-	(0.6)	-	(0.6)	(1.1)	(1.7)
Revaluation of investment properties		(1.1)	1.2	4.2	(2.4)	(0.9)	-	-	1.0	-	1.0
Profit/(loss) on disposals		(0.7)	1.5	-	(0.1)	-	-	-	0.7	-	0.7
Impairment reversal of trading properties	4	-	-	-	-	0.7	-	-	0.7	-	0.7
Impairment of goodwill	5	-	-	-	-	-	(0.1)	-	(0.1)	-	(0.1)
Gain on financial instruments		0.1	0.1	0.3	0.7	1.4	-	-	2.6	-	2.6
Investment income		-	-	-	4.0	-	-	-	4.0	-	4.0
Other items		1.1	-	-	(1.1)	-	(0.1)	0.1	-	(0.2)	(0.2)
Profit/(loss) before tax		3.3	3.1	5.9	9.0	3.6	3.7	0.8	29.4	(6.0)	23.4
Tax charge	10a										(2.3)
Profit after tax											21.1

Total assets	2b	212.9	41.3	71.0	277.3	171.6	7.4	2.1	783.6	17.0	800.6
Total liabilities	2b	(148.0)	(24.2)	(40.5)	(222.6)	(148.8)	(4.5)	(2.0)	(590.6)	(14.0)	(604.6)
Net assets		64.9	17.1	30.5	54.7	22.8	2.9	0.1	193.0	3.0	196.0

2a Operating segments (continued)

		Asset businesses					Earnings businesses		Group
									Total	Non-
							Property		reportable	segment
		The Mall	The Junction	X-Leisure	Germany	Other	management	SNO!zone	segments	items	Total
Year to 30 December 2010	Note	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Rental income from external sources	2b	19.5	4.0	5.1	19.0	12.2	-	-	59.8	-	59.8
Property and void costs		(5.1)	(0.5)	(1.2)	(3.4)	(1.4)	-	-	(11.6)	-	(11.6)
Net rental income		14.4	3.5	3.9	15.6	10.8	-	-	48.2	-	48.2
Interest income		0.1	-	-	0.5	-	-	-	0.6	-	0.6
Interest expense		(10.1)	(3.4)	(2.7)	(10.5)	(8.8)	-	-	(35.5)	-	(35.5)
Contribution		4.4	0.1	1.2	5.6	2.0	-	-	13.3	-	13.3
Management fees	2b	-	-	-	-	-	13.3	-	13.3	-	13.3
Management expenses		-	-	-	-	-	(7.3)	-	(7.3)	(4.0)	(11.3)
SNO!zone income	2b	-	-	-	-	-	-	12.5	12.5	-	12.5
SNO!zone expenses		-	-	-	-	-	-	(11.5)	(11.5)	-	(11.5)
Depreciation		-	-	-	-	-	(0.2)	(0.3)	(0.5)	-	(0.5)
Inter-segment revenue	2b	-	-	-	-	0.1	0.1	-	0.2	-	0.2
Inter-segment expenses		-	-	-	-	(0.1)	(0.1)	-	(0.2)	-	(0.2)
Interest income on central cash		-	-	-	-	-	-	-	-	0.1	0.1
Interest expense on central facility		-	-	-	-	-	-	-	-	(1.0)	(1.0)
Recurring pre-tax profit		4.4	0.1	1.2	5.6	2.0	5.8	0.7	19.8	(4.9)	14.9
Variable overhead		-	-	-	-	-	(0.7)	-	(0.7)	(0.6)	(1.3)
Revaluation of investment properties		17.6	3.1	8.1	0.2	0.6	-	-	29.6	-	29.6
Profit/(loss) on disposal		3.0	1.8	0.2	(0.6)	0.1	-	-	4.5	-	4.5
Impairment reversal of trading properties	4	-	-	-	-	0.1	-	-	0.1	-	0.1
Impairment of goodwill	5	-	-	-	-	-	(0.7)	-	(0.7)	-	(0.7)
(Loss)/gain on financial instruments		(0.2)	(1.4)	(1.0)	2.6	0.6	-	-	0.6	-	0.6
Other items		-	-	-	(1.9)	(1.3)	0.5	1.9	(0.8)	(0.5)	(1.3)
Profit/(loss) before tax		24.8	3.6	8.5	5.9	2.1	4.9	2.6	52.4	(6.0)	46.4
Tax charge	10a										(2.0)
Profit after tax											44.4

Total assets	2b	225.6	67.5	67.0	275.0	152.2	8.8	2.5	798.6	24.0	822.6
Total liabilities	2b	(168.0)	(43.7)	(41.0)	(226.6)	(143.1)	(4.5)	(2.3)	(629.2)	(18.9)	(648.1)
Net assets		57.6	23.8	26.0	48.4	9.1	4.3	0.2	169.4	5.1	174.5

2b Reconciliations of reportable revenue, assets and liabilities

		Year to	Year to
		30 December	30 December
		2011	2010
Revenue	Note	£m	£m
Rental income from external sources	2a	55.8	59.8
Inter-segment revenue	2a	0.1	0.2
Management fees	2a	12.7	13.3
SNO!zone income	2a	12.4	12.5
Revenue for reportable segments		81.0	85.8
Elimination of inter-segment revenue		(0.1)	(0.2)
Rental income earned by associates and joint ventures	18d, 18e	(48.4)	(52.2)
Management fees earned by associates and joint ventures	18d, 18e	(3.6)	(2.7)
Revenue per consolidated income statement	3	28.9	30.7

Revenue for reportable segments by country
UK		60.4	66.5
Germany		20.6	19.3
Revenue for reportable segments		81.0	85.8

Revenue is attributed to countries on the basis of the location of the underlying properties. Revenue from the Group's major customer is management fee income from The Mall LP, included in the property management segment, which represented £7.1 million (2010: £8.9 million) of the Group's total revenue of £28.9 million (2010: £30.7 million). Further information on related party transactions is disclosed in note 37 to the financial statements.

		2011	2010
Assets	Note	£m	£m
Total assets of reportable segments	2a	783.6	798.6
Adjustment for associates and joint ventures		(512.1)	(543.5)
Non-segment assets	2a	17.0	24.0
Group assets		288.5	279.1

Liabilities
Total liabilities of reportable segments	2a	(590.6)	(629.2)
Adjustment for associates and joint ventures		512.1	543.5
Non-segment liabilities	2a	(14.0)	(18.9)
Group liabilities		(92.5)	(104.6)

Net assets by country
UK		140.1	123.6
Germany		55.9	50.9
Group net assets		196.0	174.5

3 Revenue

		Year to	Year to
		30 December	30 December
		2011	2010
		Total	Total
Statutory	Note	£m	£m
Asset businesses
Gross rent from wholly owned investment properties		1.0	0.9
Gross rent from wholly owned trading properties		6.4	6.7
Gross rent from wholly owned properties		7.4	7.6
Earnings businesses
Management fees		9.1	10.6
SNO!zone income	2a	12.4	12.5
Revenue per consolidated income statement	2b	28.9	30.7
Finance income	6	2.3	1.2
Total revenue		31.2	31.9

Management fees represent revenue earned by the Group's wholly-owned CRPM subsidiary.

With effect from 21 July 2010, the fee basis earned by CRPM for asset and property management on The Mall changed from a percentage of property under management to a fixed fee of £4.5 million per annum. 25% of this fee is subject to reduction on a sliding scale from 100% to 75% if the valuation of the properties in the fund falls to between £850 million and £600 million. The above fee basis will be effective from 21 July 2010 when the Mall Bond Security Trustee has issued final confirmation of the fee arrangements..

4 Cost of sales

		Year to	Year to
		30 December	30 December
		2011	2010
	Note	£m	£m
Property costs of wholly owned properties		0.3	0.2
Void costs of wholly owned properties		0.4	0.4
SNO!zone expenses		11.7	9.9
Impairment reversal of trading properties	12a	(0.7)	(0.1)
Total cost of sales		11.7	10.4

5 Other gains and losses

		Year to	Year to
		30 December	30 December
		2011	2010
	Note	£m	£m
Profit on sale of SNO!zone Braehead subsidiary	32b	0.1	-
Loss on sale of MEN Arena joint venture		-	(0.2)
Impairment of goodwill	13	(0.1)	(0.7)
Total other gains and losses		-	(0.9)

6 Finance income

		Year to	Year to
		30 December	30 December
		2011	2010
	Note	£m	£m
Interest receivable		1.3	1.2
Gain in fair value of financial instruments:
- Interest rate swaps		0.5	-
- Ineffective portion of forward foreign exchange contracts		0.2	-
- Unhedged element of forward foreign exchange contracts		0.3	-
Total finance income	3	2.3	1.2

7 Finance costs

	Year to	Year to
	30 December	30 December
	2011	2010
	£m	£m
Interest payable on bank loans and overdrafts	4.8	4.8
Interest receivable on swaps	(0.5)	(0.4)
Interest payable	4.3	4.4
Amortisation of loan issue costs	0.4	0.5
Other interest payable	1.0	1.3
Loss in fair value of financial instruments:
- Interest rate swaps	-	1.1
- Ineffective portion of forward foreign exchange contracts	-	0.1
- Unhedged element of forward foreign exchange contracts	-	-
Total finance costs	5.7	7.4

8 Profit before tax

The profit before tax has been arrived at after charging the following items:

		Year to	Year to
		30 December	30 December
		2011	2010
	Note	£m	£m
Depreciation of plant and equipment	14	0.4	0.5
Property revaluation	12a	1.5	0.2
Impairment of goodwill	13	0.1	0.7
Impairment of trade receivables	19	-	0.1
Staff costs	9	13.5	13.5
Auditors' remuneration		0.2	0.2

Auditors' remuneration

The analysis of the auditors' remuneration is as follows:

	Year to	Year to
	30 December	30 December
	2011	2010
	£m	£m
Fees payable to the Company's auditor and its associates for the audit of the Company's annual financial statements	0.1	0.1
Fees payable to the Company's auditor and their associates for other services to the Group - the audit of the Company's subsidiaries	0.1	0.1
Total audit fees for the Company and its subsidiaries	0.2	0.2
Fees payable to the Company's auditor and its associates for other services to the Group - the audit of the Company's affiliates	0.1	0.1
Total audit fees	0.3	0.3

Tax compliance services	0.1	-
Other non-audit services	0.1	0.1
Total non-audit fees	0.2	0.1

Total fees paid to auditor and their associates	0.5	0.4

Included in other non-audit services is an amount for audit related assurance services of £41,500 (2010: £40,000) which related to the review of the Group's interim report.

The fees in relation to the audit of the Company's affiliates have been disclosed gross and have not been pro-rated to reflect the Company's equity investment percentage.

Of the tax compliance services payable to the Company's auditors, £15,000 (2010: £nil) was payable by the Company, with the balance of the fee relating to amounts incurred by affiliates.

No services were provided pursuant to contingent fee arrangements.

9 Staff costs

All remuneration, including directors, is paid by either CRPM or the SNO!zone companies.

		Year to	Year to
		30 December	30 December
		2011	2010
	Note	£m	£m
Salaries		10.5	10.9
Ex-gratia payments		-	0.3
Discretionary bonuses		1.0	0.3
Share-based payments	26	0.8	0.7
		12.3	12.2
Social security		1.1	1.2
Other pension costs		0.1	0.1
		13.5	13.5

Except for the directors, the Company has no employees. The costs of the directors shown in the directors' remuneration report are borne by CRPM and appropriate amounts recharged to the Company.

Staff numbers

The monthly average number of persons, including directors, employed by the Group during the year was as follows:

	Year to	Year to
	30 December	30 December
	2011	2010
	Number	Number
CRPM	84	91
SNO!zone	251	253
Total staff numbers	335	344

10 Tax

10a Tax charge

		Year to	Year to
		30 December	30 December
		2011	2010
	Note	£m	£m
Current tax charge / (credit)
UK corporation tax		2.2	-
Adjustments in respect of prior years		(0.2)	(0.6)
Foreign tax		0.1	0.1
Total current tax charge / (credit)		2.1	(0.5)

Deferred tax charge
Origination and reversal of temporary timing differences		0.2	2.5
Total deferred tax charge	10c	0.2	2.5

Total tax charge	10b	2.3	2.0

£nil (2010: £nil) of the tax charge relates to items included in other comprehensive income.

10b Tax charge reconciliation

		Year to	Year to
		30 December	30 December
		2011	2010
	Note	£m	£m
Profit before tax		23.4	46.4
Profit multiplied by the UK corporation tax rate of 26.5% (2010: 28%)		6.2	13.0
Non-allowable expenses and non-taxable items		(2.5)	(1.0)
Utilisation of tax losses		(1.1)	(0.7)
Tax on realised gains / (losses)		(0.2)	(1.5)
Unrealised (gains) / losses on investment properties not taxable		0.1	(8.2)
Temporary timing and controlled foreign companies income		0.1	1.0
Adjustments in respect of prior years		(0.3)	(0.6)
Total tax charge	10a	2.3	2.0

10c Deferred tax

The following are the major deferred tax assets and liabilities recognised by the Group and movements during the current and preceding year.

				Total
		Capital	Other timing	deferred tax
		allowances	differences	liability
	Note	£m	£m	£m
At 30 December 2009		(4.9)	3.7	(1.2)
Deferred tax charge		-	(2.5)	(2.5)
At 30 December 2010		(4.9)	1.2	(3.7)
Deferred tax charge	10a	(0.3)	0.1	(0.2)
At 30 December 2011		(5.2)	1.3	(3.9)

The reduction in the UK corporation tax rate at 1 April 2012 from 26% to 25% was substantively enacted on 5 July 2011. Consequently, the UK corporation tax rate at which deferred tax is booked in the financial statements is 25% (2010: 27%).

There are no temporary differences relating to the unremitted earnings of subsidiaries as the Group's overseas subsidiaries are controlled foreign companies under UK tax legislation and their profits are treated as taxable in the UK in the year they arise. No deferred tax asset has been recognised in respect of temporary differences arising from investments in associates and interests in joint ventures of £2.2 million (2010: £3.0 million) as it is not certain that a deduction will be available when the asset crystallises.

10d Unused tax losses

The Group has £55.8 million (2010: £111.4 million) of unused revenue tax losses, all of which are in the UK. Unused revenue tax losses have reduced over the period in mitigation of historic tax matters following further negotiations with the tax authorities. A deferred tax asset of £0.5 million (2010: £0.6 million) has been recognised in respect of £2.1 million (2010: £2.2 million) of these losses, based on future profit forecasts. No deferred tax asset has been recognised in respect of the remainder owing to the unpredictability of future profit streams and other reasons which may restrict the utilisation of the losses. The Group has unused capital losses of £21.4 million (2010: £21.5 million) that are available for offset against future gains but no deferred tax has been recognised in respect of these losses owing to the unpredictability of future capital gains and other reasons which may restrict the utilisation of the losses. The losses do not have an expiry date.

10e Factors affecting tax

The calculation of the Group's tax charge necessarily involves a degree of estimation and judgement in respect of certain items whose tax treatment cannot be finally determined until a formal resolution has been reached with the relevant tax authorities. The Group has undertaken a number of other significant transactions in prior years which still need to be agreed with the tax authorities. The Group has assessed the potential exposure in respect of these transactions and maintains a limited provision on the expectation that no material liability will arise. The Group continues to monitor the position together with its advisers and is seeking to agree these outstanding matters with the tax authorities.

The Budget on 23 March 2011 revised the previously announced phased reduction in the UK statutory corporation tax rate. The rate is now proposed to reduce to 23% (previously 24%) by 1 April 2014. The reduction in the UK corporation tax rate at 1 April 2012 from 26% to 25% was substantively enacted on 5 July 2011. This change will not have a significant impact on the Group.

In 2009 agreement was reached with the tax authorities related to tax structuring of previous property disposals by the Group in 2004 and 2005 which resulted in a liability of £19.5 million including interest. During the period £10.0 million was paid and as at 30 December 2011 the non-current corporate tax liability related to this was £5.0 million.

11 Earnings per share

The European Public Real Estate Association ("EPRA") has issued recommendations for the calculation of earnings per share information as shown in the following tables:

11a Earnings per share calculation

Year to 30 December 2011		Year to 30 December 2011			Year to 30 December 2010
	Note	Basic	Diluted	EPRA diluted	Basic	Diluted	EPRA diluted
Profits (£m)
Profit for the year		21.1	21.1	21.1	44.4	44.4	44.4
Revaluation of investment properties	11b	-	-	(1.0)	-	-	(29.6)
Profit on disposal of investment properties (net of tax)	11b	-	-	(0.5)	-	-	(3.2)
Movement in fair value of financial instruments (net of tax)	11b	-	-	(2.0)	-	-	0.1
Impairment of goodwill	13	-	-	0.1	-	-	0.7
Deferred tax charge on capital allowances	10c	-	-	0.3	-	-	-
		21.1	21.1	18.0	44.4	44.4	12.4
Weighted average number of shares (m)
Ordinary shares in issue	25	350.6	350.6	350.6	350.6	350.6	350.6
Own shares held		(1.8)	(1.8)	(1.8)	(2.2)	(2.2)	(2.2)
Dilutive contingently issuable shares and share options		-	0.2	0.2	-	0.5	0.5
		348.8	349.0	349.0	348.4	348.9	348.9
Earnings per share (pence)		6p	6p	5p	13p	13p	4p

At the end of the year, the Group had 15,569,672 (2010: 14,671,893) share options and contingently issuable shares granted under share-based payment schemes that could potentially have diluted basic earnings per share in the future but which have not been included in the calculation because they are not dilutive or the conditions for vesting have not been met.

11b Reconciliation of earnings figures included in earnings per share calculations

		Year to 30 December 2011			Year to 30 December 2010
				Movement			Movement
				in fair value			in fair value
		Revaluation	Profit / (loss)	of financial	Revaluation	Profit / (loss)	of financial
		movements	on disposal	instruments	movements	on disposal	instruments
	Note	£m	£m	£m	£m	£m	£m
Associates	18d	3.5	0.8	1.2	28.4	5.0	(1.4)
Joint ventures	18e	(1.0)	(0.1)	0.4	1.4	(0.3)	3.2
Wholly owned		(1.5)	-	1.0	(0.2)	(0.2)	(1.2)
Tax effect		-	(0.2)	(0.6)	-	(1.3)	(0.7)
Total	11a	1.0	0.5	2.0	29.6	3.2	(0.1)

12 Property assets

12a Wholly-owned properties



		Freehold	Leasehold	Sub-total	Freehold	Total
		investment	investment	investment	trading	property
		properties	properties	properties	properties	assets
	Note	£m	£m	£m	£m	£m
Cost or valuation
At 30 December 2009		0.2	10.0	10.2	70.7	80.9
Impairment reversal of trading properties		-	-	-	0.1	0.1
Revaluation movement		-	(0.2)	(0.2)	-	(0.2)
At 30 December 2010		0.2	9.8	10.0	70.8	80.8
Acquisition	18c	26.1	-	26.1	-	26.1
Disposal into a joint venture	18c	(26.1)	-	(26.1)	-	(26.1)
Impairment reversal of trading properties		-	-	-	0.7	0.7
Revaluation movement		-	(1.5)	(1.5)	-	(1.5)
At 30 December 2011		0.2	8.3	8.5	71.5	80.0

The Group did not have any wholly owned development property in either the current year or the preceding year. The Group has pledged land and buildings with a carrying amount of £79.8 million (2010: £80.6 million) to secure banking facilities granted to the Group, including amounts relating to trading properties of £71.5 million (2010: £70.8 million). Those banking facilities restrict the remittance of income from the properties to elsewhere in the Group.

12b Property assets summary

		30 December	30 December
		2011	2010
		Valuation	Valuation
	Note	£m	£m
Wholly owned
Investment properties at fair value		8.5	10.0
Trading properties at the lower of cost and net realisable value		72.0	72.0
Unamortised tenant incentives on trading properties		(0.5)	(1.2)
		80.0	80.8
Joint ventures (100%)
Investment properties at fair value		575.9	546.7
Unamortised tenant incentives on investment properties		(6.0)	(5.8)
	18e	569.9	540.9
Associates (100%)
Investment properties at fair value		1,871.7	2,217.5
Head leases treated as finance leases on investment properties		70.2	84.8
Unamortised tenant incentives on investment properties		(44.8)	(49.3)
Held for sale properties at fair value		84.2	50.0
	18d	1,981.3	2,303.0

Valuations

In addition to the wholly-owned properties shown above, the Group's property assets include its share in the investment properties held by its associates and joint ventures. External valuations at 30 December 2011 were carried out on £2,479.7 million (2010: £2,760.5 million) of the property assets held by the Group and its associates and joint ventures, of which the Group's share was £650.2 million (2010: £670.0 million).

The valuations were carried out by independent qualified professional valuers from CB Richard Ellis Limited, Cushman & Wakefield LLP, DTZ Debenham Tie Leung Limited and Jones Lang LaSalle Limited. These valuers are not connected with the Group and their fees are charged on a fixed basis that is not dependent on the outcome of the valuations. The valuations, which conform to International Valuation Standards, were arrived at by reference to market evidence of transaction prices for similar properties.

Directors' valuations at 30 December 2011 were carried out on £132.6 million (2010: £135.7 million) of the property assets of the Group's associates and joint ventures, of which the Group's share was £26.7 million (2010: £27.3 million). The valuations were carried out by Kenneth Ford BSc FRICS and were arrived at by reference to market evidence of transaction prices for similar properties.

13 Goodwill

	30 December	30 December
	2011	2010
	£m	£m
At the start of the year	1.9	2.6
Impairment losses for the year	(0.1)	(0.7)
At the end of the year	1.8	1.9

The goodwill carried in the Group balance sheet relates to the management contracts for the X-Leisure fund held by the Group's X-Leisure Limited joint venture. The management contracts are co-terminus with the life of the X-Leisure fund. The goodwill is tested annually for impairment or more frequently if there are indications that it might be impaired. An impairment review was carried out at 30 December 2011 to calculate the recoverable amount of the goodwill based on its value in use, derived from the forecast cash flows generated by the management contracts.

The following key assumptions were applied to the forecast cash flows: (i) the pre-tax rate used to discount the expected cash flows is 9.5% (2010: 11.2%); (ii) management fees receivable are in line with the asset management contract, including both a fixed element and a variable amount dependent on the growth in net operating income of the X-Leisure fund; (iii) Fixed and variable administration costs, are assumed to grow by 2.4% per annum beyond the three-year period modelled in the Group's forecasts; (iv) a performance fee is received on the expiry of the fund based on current forecasts of performance; and (v) the expiry date of the X-Leisure fund is 31 December 2014, with a 50% chance that the life of the fund will be extended to 31 December 2021. If the termination date of the fund were to be the initial expiry date of 31 December 2014, there would be an additional impairment of £0.2 million in the year.

14 Plant and equipment

	30 December	30 December
	2011	2010
	£m	£m
Cost or valuation
At the start of the year	2.7	4.4
Additions	0.3	0.5
Disposals	(0.7)	(2.2)
At the end of the year	2.3	2.7
Accumulated depreciation
At the start of the year	(1.8)	(3.4)
Charge for the year	(0.4)	(0.5)
Eliminated on disposal	0.6	2.1
At the end of the year	(1.6)	(1.8)
Carrying amount
At the end of the year	0.7	0.9

15 Available for sale investments

	30 December	30 December
	2011	2010
	£m	£m
Fair value
At the start of the year	0.3	0.3
Revaluation movement	-	-
At the end of the year	0.3	0.3

Available for sale investments comprises of £303,682 (2010: £290,175) representing a 0.3% interest in units of the Paddington Central II and III Unit Trusts, and £10,000 (2010: £10,000) representing a 49.99% interest in Bestpark Investments Limited, which is treated as an investment as the Group does not exercise significant influence or control over the entity. On 12 January 2012 the Group disposed of its 0.3% interest in the units of the Paddington Central III Unit Trust for £0.3 million.

16 Non-current receivables

	30 December	30 December
	2011	2010
	£m	£m
Financial assets
Loans to joint ventures	32.1	24.7
Non-derivative financial assets	32.1	24.7
Financial assets carried at fair value through the profit or loss:
- Foreign exchange forward contracts	0.6	-
- Interest rate swaption	0.2	-
	32.9	24.7
Non-financial assets
Prepayments - tenant incentives	0.4	1.2
	33.3	25.9

Interest is payable on loans to joint ventures at normal commercial rates. The Group has pledged loans to joint ventures with a carrying amount of £15.0 million (2010: £14.6 million) to secure banking facilities granted to the Group.

17 Subsidiaries

A list of the significant investments in subsidiaries, including the name, country of incorporation, and proportion of ownership interest is given in note G to the Company financial statements.

The terms of the Group's central borrowing facility may restrict the ability of Capital & Regional Holdings Limited and its subsidiaries to make cash distributions or repay loans and advances to the Company or elsewhere in the Group if they would thereby cause a default on the facility.

The terms of the borrowing facilities for the Great Northern and Hemel Hempstead properties include cash sweeps that restrict the ability of Morrison Merlin Limited and Capital & Regional Hemel Hempstead (Jersey) Limited to make cash distributions or repay loans and advances to the Company or elsewhere in the Group as disclosed in note 20.

18 Investment in associates and joint ventures

18a Share of results

		Year to	Year to
		30 December	30 December
		2011	2010
	Note	£m	£m
Share of results of associates	18b	16.7	38.4
Share of results of joint ventures	18c	5.6	6.8
		22.3	45.2

18b Investment in associates

		30 December	30 December
		2011	2010
	Note	£m	£m
At the start of the year		110.8	76.4
Investment in associates		4.0	2.7
Share of results of associates	18a, 18d	16.7	38.4
Dividends and capital distributions received	37	(11.2)	(6.3)
Foreign exchange differences		(0.1)	-
Impairments		-	(0.4)
At the end of the year	18d	120.2	110.8

The Group's associates are:

	Group interest
	At the start of the year	Average during the year	At the end of the year
	%	%	%
The Mall Limited Partnership	16.72	16.94	18.16
The Junction Limited Partnership	13.29	13.29	13.29
X-Leisure Limited Partnership	11.93	11.93	11.93
The FIX UK Limited Partnership	20.00	20.00	20.00
Garigal Asset Management GmbH ("Garigal")	30.06	30.06	30.06
Euro B-Note Holding Limited	49.90	49.90	49.90

Whilst the Group holds less than 20% in The Mall Limited Partnership, The Junction Limited Partnership and X-Leisure Limited Partnership, they are accounted for as associates as the Group has significant influence arising from its representation on the General Partner boards. The Group holds 20% of The FIX UK Limited Partnership and exercises significant influence through its representation on the General Partner board and holds 30.06% of Garigal and exercises significant influence through its representation on the advisory board. The Group holds an effective 49.90% of Euro B-Note Holding Limited and exercises significant influence through its ownership interest.

The Mall Limited Partnership

During the second half of 2011, the Group purchased 13.6 million units in The Mall Fund at an average of £0.30 per unit for a total consideration of £4.0 million resulting in a gain on investment of £1.1 million as disclosed in note 18d. These purchases increased the holding in The Mall Fund by 1.44% to 18.16% at the end of the year.

On 8 February 2012, the Group purchased 18.7 million units in The Mall Fund at £0.30 per unit for a total consideration of £5.6 million and this increased the holding in The Mall Fund from 18.16% to 20.15%.

The Junction Limited Partnership

Under the terms of The Junction Limited Partnership fund's open offer in 2009 the Group's share fell to 13.44% and adjustments could be made to the price at which new units were issued to reflect the recoverability of debtors and the expected costs of certain remedial works. At 30 December 2011, the expected impact of these adjustments would mean the Group's share in the fund would be reduced to 13.29% (2010: 13.29%).

X-Leisure Limited Partnership

On 18 March 2011, Hermes sold their investments in X-Leisure and X-Leisure Limited to AREA which resulted in amendments to management contracts but has no material impact on the Group.

Euro B-Note Holding Limited

As disclosed in note 18d, during the year investment income of £4.0 million was recognised which relates to the Group's share of the fair value uplift on the €18.0 million of junior debt that was acquired by the Group and the German joint venture partner shortly before the 2010 year end. The loan receivable was fair valued to €12.9 million as at the date of the successful debt extension in the relevant German joint venture portfolio in July 2011 and is being carried at amortised cost of €13.5 million (Group share of £5.6 million) as at 30 December 2011.

Cash distributions

The borrowing arrangements of The Mall, The Junction, X-Leisure and FIX UK include certain terms including cash sweeps that may restrict their ability to make cash distributions to the Group as follows:

· The Mall is unable to make distributions as long as its LTV is above 60% and its debt above £600 million.

· The Junction is able to make distributions and made a distribution to the Group of £9.9 million during the year.

· X-Leisure is able to make distributions and made a distribution to the Group of £1.3 million during the year.

· FIX UK is unable to make distributions until the expiry of its loans in February 2013.

18c Investment in joint ventures

		30 December	30 December
		2011	2010
	Note	£m	£m
At the start of the year		25.7	30.3
Investment in joint ventures		1.2	-
Share of results of joint ventures	18a, 18e	5.6	6.8
Dividends and capital distributions received	37	(4.5)	(3.4)
Foreign exchange differences		(0.8)	(1.5)
Share buy backs from joint ventures		-	(0.6)
Net assets of MEN Arena joint venture disposed of		-	(5.9)
At the end of the year	18e	27.2	25.7

The Group's significant joint ventures are:

	Group interest
	At the start of the year	Average during the year	At the end of the year
	%	%	%
German portfolio	50.00	50.00	50.00
X-Leisure Limited	50.00	50.00	50.00
Xscape Braehead Partnership	50.00	50.00	50.00
The Auchinlea Partnership	50.00	50.00	50.00
Waterside Lincoln Limited Partnership	-	50.00	50.00

The Group's investments in joint ventures include its share of the German portfolio is (49.6%), and its investments in X-Leisure Limited (50%), Xscape Braehead Partnership (50%), The Waterside Lincoln Limited Partnership (50%) and The Auchinlea Partnership (50%). The Group's share in the German portfolio is accounted for at 50% as the minority interests are included as a liability on the joint venture balance sheet.

German portfolio

The €162.3 million debt in one of the German portfolios matured in July 2011. As anticipated, as part of the refinancing process a covenant breach was triggered in April 2011 and a standstill agreement was agreed for a period until 14 July 2011. On 15 July 2011 agreement was successfully reached to extend the maturity of the €162.3 million debt by three years. The key terms of the debt extension include no change in the margin, but an extension fee of 10 basis points in year one, 25 basis points in year two and 100 basis points in year three and fixed LTV and ICR targets that commence in July 2012.

The Group invested €1.4 million (£1.2 million) into the German portfolio during the year to fund the purchase of Schwäbisch Hall on 30 December 2011 and various debt refinancing costs.

During the year the German portfolio made distributions to the Group of €4.3 million (£3.7 million).

X-Leisure Limited

On 18 March 2011, Hermes sold their investments in X-Leisure and X-Leisure Limited to AREA which resulted in amendments to management contracts but has no material impact on the Group.

During the year X-Leisure Limited made distributions to the Group of £0.5 million.

The Auchinlea Partnership

During the year The Auchinlea Partnership made distributions to the Group of £0.3 million.

Waterside Lincoln Limited Partnership

On 22 February 2011, the Group completed the purchase of The Waterside Shopping Centre ("Waterside") in Lincoln for total cash consideration of £26.1 million, being a property cost of £24.8 million and directly related transaction costs of £1.3 million. The acquisition was completed utilising a new four year £13.6 million facility from Deutsche PostBank, together with existing cash resources.

On 8 March 2011, the Group conditionally exchanged contracts with Karoo Investment Fund II S.C.A SICAV-SIF ("Karoo") to form a joint venture by selling 50% of the Group's interest in Waterside ("the Disposal"). As the Group and Karoo have common significant shareholders the formation of the joint venture was conditional upon shareholder approval which was granted on 1 April 2011.

On 8 April 2011 the Group completed the Disposal. The Group initially acquired the Waterside through an English Limited Partnership consisting of a General Partner and two equal Limited Partners. In order to form the joint venture, the Group sold the entire share capital of one of the Limited Partners and 50% of the share capital of the General Partner to Karoo. Under the terms of the Disposal it was agreed that Karoo would fund half of the total costs and related expenses incurred by the Group in acquiring Waterside. Accordingly, the total amount paid by Karoo was £6.4 million comprising a purchase price for the shares being sold of £58k and £6.37 million of financing that had been provided by the Group to complete the purchase of Waterside. Following the Disposal the Group's remaining 50% interest in Waterside is classified as a loan to joint venture amounting to £6.4 million at 30 December 2011. The profit during the period from the date of purchase on 22 February 2011 to the date of disposal on 8 April 2011 was £0.1 million.

18d Analysis of investment in associates

						Year to 30 December	Year to 30 December
						2011	2010
		The Mall	The Junction	X-Leisure	Others	Total	Total
	Note	£m	£m	£m	£m	£m	£m
Income statement (100%)
Revenue - gross rent		94.5	22.3	42.4	10.9	170.1	197.8
Property and management expenses		(18.4)	(2.8)	(7.6)	(1.1)	(29.9)	(34.0)
Void costs		(5.3)	(0.5)	(1.6)	(0.3)	(7.7)	(10.3)
Net rent		70.8	19.0	33.2	9.5	132.5	153.5
Net interest payable		(47.7)	(15.8)	(22.4)	(9.2)	(95.1)	(119.0)
Contribution		23.1	3.2	10.8	0.3	37.4	34.5
Revenue - management fees		-	-	-	4.3	4.3	0.9
Management expenses		-	-	-	(2.9)	(2.9)	(0.8)
Revaluation of investment properties		(5.9)	8.1	35.5	(3.8)	33.9	194.4
Profit/(loss) on sale of investment properties		(4.4)	11.2	-	-	6.8	33.5
Fair value of interest rate swaps		0.2	0.4	2.8	3.7	7.1	(13.7)
Investment income	18b	-	-	-	8.1	8.1	-
Profit before tax		13.0	22.9	49.1	9.7	94.7	248.8
Tax		-	-	-	(0.4)	(0.4)	-
Profit after tax		13.0	22.9	49.1	9.3	94.3	248.8

Balance sheet (100%)
Investment properties	12b	933.2	275.9	557.3	130.7	1,897.1	2,253.0
Investment properties held for sale	12b	84.2	-	-	-	84.2	50.0
Other assets		154.8	34.6	38.0	22.6	250.0	264.3
Current liabilities		(50.2)	(6.3)	(22.7)	(7.0)	(86.2)	(203.4)
Non-current liabilities		(764.7)	(175.7)	(317.1)	(126.1)	(1,383.6)	(1,611.2)
Net assets (100%)		357.3	128.5	255.5	20.2	761.5	752.7

Income statement (Group share)
Revenue - gross rent		16.0	3.0	5.1	2.2	26.3	30.6
Property and management expenses		(3.1)	(0.5)	(0.8)	(0.1)	(4.5)	(5.4)
Void costs		(0.9)	(0.1)	(0.2)	(0.1)	(1.3)	(1.6)
Net rent		12.0	2.4	4.1	2.0	20.5	23.6
Net interest payable		(8.1)	(2.1)	(2.7)	(1.8)	(14.7)	(18.1)
Contribution		3.9	0.3	1.4	0.2	5.8	5.5
Revenue - management fees		-	-	-	1.3	1.3	0.3
Management expenses		-	-	-	(0.9)	(0.9)	(0.3)
Revaluation of investment properties	11b	(1.1)	1.2	4.2	(0.8)	3.5	28.4
Profit/(loss) on sale of investment properties	11b	(0.7)	1.5	-	-	0.8	5.0
Fair value of interest rate swaps	11b	0.1	0.1	0.3	0.7	1.2	(1.4)
Investment income	18b	-	-	-	4.0	4.0	-
Gain recognised on investment in Mall	18b	1.1	-	-	-	1.1	-
Gain recognised on investment in Garigal		-	-	-	-	-	0.9
Profit before tax		3.3	3.1	5.9	4.5	16.8	38.4
Tax		-	-	-	(0.1)	(0.1)	-
Profit after tax	18b	3.3	3.1	5.9	4.4	16.7	38.4

Balance sheet (Group share)
Investment properties		169.5	36.7	66.5	26.1	298.8	340.4
Investment properties held for sale		15.3	-	-	-	15.3	8.4
Other assets		28.1	4.6	4.5	8.4	45.6	42.4
Current liabilities		(9.1)	(0.8)	(2.7)	(1.6)	(14.2)	(31.0)
Non-current liabilities		(138.9)	(23.4)	(37.8)	(25.2)	(225.3)	(249.4)
Net assets (Group share)	18b	64.9	17.1	30.5	7.7	120.2	110.8

18e Analysis of investment in joint ventures

				Year to	Year to
				30 December	30 December
		German		2011	2010
		portfolio	Others	Total	Total
	Note	£m	£m	£m	£m
Income statement (100%)
Revenue - gross rent		38.6	5.6	44.2	44.2
Property and management expenses		(5.1)	(0.9)	(6.0)	(8.0)
Void costs		(0.2)	(0.6)	(0.8)	(0.2)
Net rent		33.3	4.1	37.4	36.0
Net interest payable		(19.3)	(4.1)	(23.4)	(26.1)
Contribution		14.0	-	14.0	9.9
Revenue - management fees		-	4.7	4.7	4.7
Management expenses		-	(3.9)	(3.9)	(3.5)
Revaluation of investment properties		(4.8)	2.9	(1.9)	3.8
Loss on sale of investment properties		(0.1)	-	(0.1)	(0.6)
Fair value of interest rate swaps		0.4	0.3	0.7	6.7
Write-off of SNO!zone tenant incentives		-	-	-	(2.1)
Profit before tax		9.5	4.0	13.5	18.9
Tax		(2.1)	(0.2)	(2.3)	(4.1)
Profit after tax		7.4	3.8	11.2	14.8

Balance sheet (100%)
Investment properties	12b	495.6	74.3	569.9	540.9
Other assets		15.9	13.8	29.7	36.6
Current liabilities		(38.6)	(6.6)	(45.2)	(173.7)
Non-current liabilities		(406.6)	(93.4)	(500.0)	(352.7)
Net assets (100%)		66.3	(11.9)	54.4	51.1

Income statement (Group share)
Revenue - gross rent		19.3	2.8	22.1	21.6
Property and management expenses		(2.5)	(0.5)	(3.0)	(3.7)
Void costs		(0.1)	(0.3)	(0.4)	(0.1)
Net rent		16.7	2.0	18.7	17.8
Net interest payable		(9.6)	(2.0)	(11.6)	(12.8)
Contribution		7.1	-	7.1	5.0
Revenue - management fees		-	2.3	2.3	2.4
Management expenses		-	(1.9)	(1.9)	(1.8)
Revaluation of investment properties	11b	(2.4)	1.4	(1.0)	1.4
Loss on sale of investment properties	11b	(0.1)	-	(0.1)	(0.3)
Fair value of interest rate swaps	11b	0.2	0.2	0.4	3.2
Write-off of SNO!zone tenant incentives		-	-	-	(1.0)
Profit before tax		4.8	2.0	6.8	8.9
Tax		(1.1)	(0.1)	(1.2)	(2.1)
Profit after tax	18c	3.7	1.9	5.6	6.8

Balance sheet (Group share)
Investment properties		247.8	37.1	284.9	270.5
Other assets		8.0	6.9	14.9	18.3
Current liabilities		(19.3)	(3.3)	(22.6)	(86.8)
Non-current liabilities		(203.3)	(46.7)	(250.0)	(176.3)
Net assets (Group share)	18c	33.2	(6.0)	27.2	25.7

19 Current receivables

	30 December	30 December
	2011	2010
	£m	£m
Financial assets
Trade receivables	0.7	1.7
Amounts owed by associates	1.4	1.4
Amounts owed by joint ventures	0.2	0.2
Other receivables	0.9	0.9
Accrued income	0.5	0.6
Non-derivative financial assets	3.7	4.8
Financial assets carried at fair value through the profit or loss:
- Foreign exchange forward contracts	-	0.6
	3.7	5.4
Non-financial assets
Prepayments	1.3	1.7
	5.0	7.1

Trade receivables largely comprise amounts owed by tenants of the Group's wholly owned properties. Before accepting a new tenant, a review of its creditworthiness is carried out using an external credit scoring system and other publicly available financial information. Included in the non-derivative financial assets balance are receivables with a carrying amount of £1.1 million (2010: £2.3 million) which are past due at the reporting date for which the Group has not provided, as there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group holds collateral of £0.1 million (2010: £0.2 million) over trade receivables as security deposits held in rent accounts. The average age of trade receivables is 35 days (2010: 31 days).

	30 December	30 December
	2011	2010
	£m	£m
Analysis of non-derivative current financial assets
Not past due	2.6	2.5
Past due but not individually impaired:
Less than 1 month	0.4	1.2
1 to 3 months	0.1	0.3
3 to 6 months	-	-
Over 6 months	0.6	0.8
	3.7	4.8

	30 December	30 December
	2011	2010
	£m	£m
Allowances for doubtful receivables
At the start of the year	0.8	0.8
Additional allowances created	-	0.1
Utilised during the year	(0.6)	(0.1)
At the end of the year	0.2	0.8

20 Cash and cash equivalents

	30 December	30 December
	2011	2010
	£m	£m
Cash at bank	16.2	23.0
Security deposits held in rent accounts	0.1	0.2
Other restricted balances	3.7	2.5
	20.0	25.7

Other restricted balances include amounts subject to a charge against various borrowings and may therefore not be available for general use by the Group.

The analysis of cash and cash equivalents by currency is as follows:

	30 December	30 December
	2011	2010
	£m	£m
Sterling	19.7	25.2
Euro	0.3	0.5
	20.0	25.7

21 Current payables

	30 December	30 December
	2011	2010
	£m	£m
Financial liabilities
Trade payables	0.4	0.2
Accruals	4.1	2.0
Payable to associates	0.7	0.7
Other payables	1.7	3.4
Non-derivative financial liabilities	6.9	6.3

Non-financial liabilities
Deferred income	1.9	3.4
Other taxation and social security	1.2	1.2
	10.0	10.9

The average age of trade payables is 20 days (2010: 30 days) and no amounts incur interest (2010: £nil).

22 Non-current payables

	30 December	30 December
	2011	2010
	£m	£m
Financial liabilities
Accruals	0.2	0.3
Other payables	0.3	-
Non-derivative financial liabilities	0.5	0.3
Financial liabilities carried at fair value through profit or loss:
- Interest rate swaps	3.5	4.5
	4.0	4.8

23 Borrowings

23a Summary of borrowings

The Group generally borrows on a secured basis and borrowings are arranged to ensure an appropriate maturity profile and to maintain short term liquidity. Short, medium and long term funding is raised principally through revolving credit facilities from a range of banks and financial institutions. There were no defaults or other breaches of financial covenants that were not waived under any of the Group's borrowings during the current year or the preceding year.

		30 December	30 December
		2011	2010
Borrowings at amortised cost	Note	£m	£m
Secured
Fixed and swapped bank loans	23d	59.6	60.8
Variable rate bank loans	23d	7.6	9.7
Total borrowings before costs	23b	67.2	70.5
Unamortised issue costs		(0.6)	(1.1)
Total borrowings after costs		66.6	69.4

Analysis of total borrowings after costs
Current		5.0	0.6
Non-current		61.6	68.8
Total borrowings after costs		66.6	69.4

Borrowings financing certain wholly owned properties are secured by charges on those properties, which are carried at £79.8 million (2010: £80.6 million) as disclosed in note 12a. The Group's central borrowing facility is secured by charges over the units the Group holds in The Mall, The Junction and X-Leisure funds carried at £112.5 million (£2010: £107.4 million) as disclosed in note 18d, charges over certain holdings in and loans to the German joint venture carried at £34.9 million (2010: £35.6 million), and guarantees by the Company.

As disclosed in note 18c, during the year the Group drew down £13.6 million on a new four year facility from Deutsche PostBank to part fund the acquisition of Waterside and capitalised related loan arrangement fees of £0.3 million. On 8 April 2011 a joint venture was formed by selling 50% of the Group's interest in Waterside. At 30 December 2011 the Deutsche PostBank debt is disclosed in see-through debt as part of the Group share of joint venture borrowings. The movement during the year on the Group balance sheet related to the Deutsche PostBank borrowing was:

	30 December
	2011
Statutory balance sheet - Deutsche PostBank	£m
At the start of year	-
Bank loan drawn down	13.6
Loan arrangement costs	(0.3)
Borrowing after costs	13.3
Disposal into a joint venture	(13.3)
At the end of the year	-

23b Maturity of borrowings

		30 December	30 December
		2011	2010
	Note	£m	£m
From two to five years		-	63.6
From one to two years		61.9	5.9
Due after more than one year		61.9	69.5
Current		5.3	1.0
	23a	67.2	70.5

23c Undrawn committed facilities

	30 December	30 December
	2011	2010
	£m	£m
Expiring between one and two years	58.0	-
Expiring between two and five years	-	58.0

The undrawn amount represents the balance on the Group's central revolving credit facility. Under the terms of the loan covenants, as disclosed in note 24e, £58.0 million (2010: £58.0 million) was actually available for drawdown at year end. The Articles of the Company also restrict borrowing but this did not limit the amount available for drawdown on the facility during the current year or the preceding year.

23d Interest rate and currency profile of borrowings

		30 December	30 December
		2011	2010
	Note	£m	£m
Fixed and swapped rate borrowings
6% to 7%		59.6	60.8
	23a	59.6	60.8
Floating rate borrowings	23a	7.6	9.7
		67.2	70.5

All loans are sterling denominated with the weighted average length of fix being 1.8 years (2010: 2.8 years). Floating rate borrowings bear interest based on three month LIBOR.

24 Financial instruments and risk management

24a Overview

Capital risk management

The Group manages its capital to ensure that all entities in the Group will be able to continue as going concerns while maximising the returns to shareholders through the optimisation of the debt and equity balance. The overall strategy of reducing the Group's levels of balance sheet and see-through debt remained unchanged from 2010.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 23a; cash and cash equivalents as disclosed in note 20; and equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings as disclosed in the Statement of changes in equity. For the purpose of calculating gearing ratios, debt is defined as long and short term borrowings (excluding derivatives) excluding unamortised issue costs. Equity includes all capital and reserves of the Group attributable to equity holders of the Company.

The Group is not subject to externally imposed capital requirements. The Board reviews the capital structure and cost of capital on an annual basis but does not set specific targets for gearing ratios. The risks associated with each class of capital are also considered as part of the risk reviews presented to the Audit Committee and the Board. The Group has met its objectives for managing capital during 2011, with a reduction in its net debt to equity ratios largely as a result of property disposals.

Gearing ratios

		30 December	30 December
		2011	2010
Statutory	Note	£m	£m
Debt before unamortised issue costs	23a	67.2	70.5
Cash and cash equivalents	20	(20.0)	(25.7)
Group net debt		47.2	44.8
Cash adjustment¹		-	5.0
Adjusted group net debt		47.2	49.8

Equity		196.0	174.5
Debt to equity ratio		34%	40%
Net debt to equity ratio		24%	26%
Adjusted net debt to equity ratio		24%	29%

		30 December	30 December
		2011	2010
See-through	Note	£m	£m
Debt before unamortised issue costs	24f	497.0	532.2
Cash and cash equivalents		(56.8)	(64.7)
See-through net debt		440.2	467.5
Cash adjustment¹		-	5.0
German debt adjustment²		(7.5)	(7.8)
Adjusted see-through net debt		432.7	464.7

Equity		196.0	174.5
Debt to equity ratio		254%	305%
Net debt to equity ratio		225%	268%
Adjusted net debt to equity ratio		221%	266%

Property assets - wholly owned	12a	80.0	80.8
Investment properties - associates	18d	314.1	348.8
Investment properties - joint ventures	18e	284.9	270.5
Property value		679.0	700.1
Debt to property value ratio		73%	76%
Net debt to property value ratio		65%	67%
Adjusted net debt to property value ratio		64%	66%

¹ Adjusted for the £5.0 million tax payment made on 31 December 2010 related to current tax liabilities recorded at 30 December 2010

² Adjusted for the Group's share of the €18.0 million German junior debt acquired during 2010

Categories of financial assets / (liabilities)

		2011			2010
		Carrying value	Gain/(loss) to income	(Loss)/gain to equity	Carrying value	Gain/(loss) to income	(Loss)/gain to equity
	Note	£m	£m	£m	£m	£m	£m
Financial assets
Investments	15	0.3	-	-	0.3	-	-
Available for sale		0.3	-	-	0.3	-	-

Loans to joint ventures	16	32.1	1.2	(0.4)	24.7	1.1	(1.1)
Current receivables	19	3.7	-	-	4.8	(0.1)	-
Cash and cash equivalents	20	20.0	0.1	-	25.7	0.1	-
Loans and receivables		55.8	1.3	(0.4)	55.2	1.1	(1.1)

Foreign exchange forward contracts	16,19	0.6	0.5	0.9	0.6	(0.1)	2.2
Derivatives in effective hedges		0.6	0.5	0.9	0.6	(0.1)	2.2

Interest rate swaption	16	0.2	(0.5)	-	-	-	-
Assets at fair value held for trading		0.2	(0.5)	-	-	-	-

Financial liabilities
Current payables	21	(6.9)	0.5	-	(6.3)	(0.3)	-
Non-current payables	22	(0.5)	-	-	(0.3)	-	-
Current borrowings	23a	(5.0)	-	-	(0.6)	-	-
Non-current borrowings	23a	(61.6)	(4.7)	-	(68.8)	(5.9)	-
Liabilities at amortised cost		(74.0)	(4.2)	-	(76.0)	(6.2)	-

Interest rate swaps	22	(3.5)	1.0	-	(4.5)	(1.1)	-
Liabilities at fair value held for trading		(3.5)	1.0	-	(4.5)	(1.1)	-

Total financial (liabilities) / assets		(20.6)	(1.9)	0.5	(24.4)	(6.3)	1.1

Significant accounting policies

Details of the significant accounting policies adopted in respect of each class of financial asset, financial liability and equity instrument, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, are disclosed in the accounting policies in note 1.

Financial risk management objectives

Exposure to credit, interest rate and currency risks arise in the normal course of the Group's business. The Group seeks to minimise the effect of these risks by using derivative financial instruments to manage exposure to fluctuations in interest rates and foreign currency exchange rates. Such instruments are not employed for speculative purposes. The use of any derivatives is approved by the Board, which provides guidelines on the acceptable levels of interest rate risk, credit risk, foreign exchange risk and liquidity risk, and the ranges of hedging required against these risks.

24b Interest rate risk

The Group normally raises bank debt on a floating rate basis and fixes a substantial portion of the interest payments by entering into interest rate swaps. The Group's objective in managing its interest rate risk is to ensure that it always maintains sufficient headroom to cover interest payments from anticipated cash flows and the directors regularly review the ratio of fixed to floating rate debt to assist this process. The Group is exposed to fair value risk from its fixed rate debt and interest rate risk from its floating rate debt, loans to joint ventures and cash. The Group does not hedge account its interest rate swaps and states them at fair value with changes in fair value included in the income statement.

The following table shows a summary of the Group's interest rate swap contracts and their maturity dates:

				Fair value		Fair value
		Notional	Contract	30 December	Gain / (loss)	30 December
		principal	Fixed rate	2011	To income	2010
	Maturity date	£m	%	£m	£m	£m
Interest rate swap	10 October 2013	59.6¹	4.42	(3.5)	1.0	(4.5)
Interest rate swaption²	2 September 2017	50.0	2.75	0.2	(0.5)	-

¹ The notional principal at 30 December 2010 was £60.8m

² The premium paid during the year was £0.7m and the exercise date of the interest rate swaption is 2 September 2013

Sensitivity analysis

The following table shows the Group's sensitivity to a 1% increase or decrease in Sterling and Euro interest rates. To calculate the impact on the income statement for the year the interest rates on all external floating rate interest bearing loans and borrowings and interest earning cash, including loans and cash within associates and joint ventures, have been increased or decreased by 1%. The income statement impact includes the effect of a 1% decrease or increase in interest rates on the market values of interest rate derivatives.

	1% increase in interest rates		1% decrease in interest rates
	Year to	Year to	Year to	Year to
	30 December	30 December	30 December	30 December
	2011	2010	2011	2010
	£m	£m	£m	£m
Floating rate loans and cash - gain / (loss)	(0.4)	0.5	0.4	(0.5)
Interest rate derivatives - gain / (loss)	8.0	11.2	(8.0)	(11.2)
Impact on the income statement - gain / (loss)	7.6	11.7	(7.6)	(11.7)
Impact on equity - gain / (loss)	7.6	11.7	(7.6)	(11.7)

24c Credit risk

The Group's principal financial assets are loans to joint ventures, bank and cash balances, short term deposits, trade and other receivables and investments. Credit risk, being the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group, is primarily attributable to loans to joint ventures, and trade and other receivables, which are principally amounts due from associates and joint ventures and from tenants. As a result there is a concentration of credit risk arising from the Group's exposure to these associates and joint ventures but the Group does not consider this risk to be material as it is mitigated by the significant influence that it is able to exercise through its holdings and management responsibilities in relation to those associates and joint ventures. Credit risk arising from tenants is mitigated as the Group monitors credit ratings for significant tenants and there is an allowance for doubtful receivables that represents the estimate of potential losses in respect of trade receivables.

The credit risk on short term deposits and derivative financial instruments is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies. The Group is not exposed to significant credit risk on its other financial assets.

24d Currency risk

The Group publishes its consolidated financial statements in Sterling but has investments and loans to its German joint venture portfolio which have the Euro as their functional currency. Therefore the Group is subject to currency risk due to exchange rate movements which affect the translation of results and underlying net assets of the German joint venture portfolio.

Net investment hedge

The Group uses a forward foreign exchange contract as a hedge of its net investment in the German joint ventures. At 30 December 2011, this was achieved through a contract for €47.0 million (2010: €47.0 million) at a fixed exchange rate of 1.1797 (2010: 1.143) which hedges 81% (2010: 85%) of the Group's German investment. During the year the Group closed out the previous forward contract which matured on 27 June 2012 and entered into a new forward contract which extended the hedging arrangement until 28 March 2013.

Only the spot element of the forward foreign exchange contracts is designated as the hedging instrument, determined as the undiscounted difference between the spot rate on the trade date and the spot rate on the revaluation date applied to the notional. The unhedged forward element of the fair value is determined as the total fair value less the spot element. Changes in the forward element of the fair value are reported through the income statement as finance income or finance costs as appropriate. During the year, this change in the unhedged element of the fair value was a gain of £0.3 million (2010: £nil) as disclosed in note 6. During the year, the ineffective portion of the hedge resulted in a gain of £0.2 million (2010: charge of £0.1 million) to the income statement as disclosed in note 6.

Sensitivity analysis

The following table shows the Group's sensitivity to a 10% strengthening or weakening in Sterling against the Euro. To calculate the impact on the income statement for the year the average exchange rate has been decreased or increased by 10%. The translational effect on equity is limited due to the Euro hedging in place. The effect on equity is calculated by decreasing or increasing the closing exchange rate with an adjustment for the movement in the currency hedge. It is assumed that the net investment hedge will be 100% effective.

	10% strengthening in sterling		10% weakening in sterling
	Year to	Year to	Year to	Year to
	30 December	30 December	30 December	30 December
	2011	2010	2011	2010
	£m	£m	£m	£m
Impact on the income statement - gain / (loss)	(0.8)	(0.6)	0.9	0.7
Impact on equity - gain / (loss)	(1.2)	(0.4)	2.1	1.5

24e Liquidity risk

Liquidity risk reflects the risk that the Group will have insufficient resources to meet its financial liabilities as they fall due. The day-to-day operations of the Group are largely funded through the items included in the breakdown of recurring profit included in note 2a. The majority of income within recurring profit is received quarterly, since the inflows and outflows from net rental income and net interest payable generally coincide with English quarter days, and property management fees are billed to the funds quarterly. As a result, the Group normally has sufficient funds to cover recurring administrative expenses which occur throughout the year. Liquidity risk therefore arises principally from the need to make payments for non-recurring items, such as tax payments and the close out of derivative financial instruments. Payments may also be necessary against bank debt facilities to prevent covenant breaches on loans related to the Group's wholly owned properties or to cover losses in the Group's joint ventures, or to repay loans when they fall due.

The Group's objective in managing liquidity risk is to ensure that it has sufficient funds to meet all its potential liabilities as they fall due, both in normal market conditions and when considering negative projections against expected outcomes, so as to avoid the risk of incurring contractual penalties or damaging the Group's reputation. The Group's treasury department maintains a rolling eighteen month forecast of anticipated recurring and non-recurring cash flows under different scenarios. This is compared to expected cash balances and amounts available for drawdown on the Group's core revolving credit facility to ensure that any potential shortfalls in funding are identified and managed. The Group's primary means of managing liquidity risk is the £58.0 million (2010: £58.0 million) core revolving credit facility, expiring in September 2013, which was undrawn and fully available for draw down at the end of the year as disclosed in note 23c.

The following table shows the maturity analysis of non-derivative financial assets / (liabilities) at the balance sheet date and, where applicable, their effective interest rates.

		Effective	Less than			More than
		interest rate	1 year	1-2 years	2-5 years	5 years	Total
2011	Note	%	£m	£m	£m	£m	£m
Financial assets
Available for sale investments	15		0.3	-	-	-	0.3
Non-current receivables	16	4.2	-	10.6	21.5	-	32.1
Current receivables	19		3.7	-	-	-	3.7
Cash and cash equivalents	20	0.5	20.0	-	-	-	20.0
			24.0	10.6	21.5	-	56.1
Financial liabilities
Borrowings - fixed and swapped bank loans¹	23a	6.30	-	(59.6)	-	-	(59.6)
Borrowings - variable rate bank loans	23a	3.49	(5.3)	(2.3)	-	-	(7.6)
Current payables	21		(6.9)	-	-	-	(6.9)
Non-current payables	22		-	(0.5)	-	-	(0.5)
			(12.2)	(62.4)	-	-	(74.6)

		Effective	Less than			More than
		interest rate	1 year	1-2 years	2-5 years	5 years	Total
2010	Note	%	£m	£m	£m	£m	£m
Financial assets
Available for sale investments	15		0.3	-	-	-	0.3
Non-current receivables	16	4.97	-	3.7	21.0	-	24.7
Current receivables	19		4.8	-	-	-	4.8
Cash and cash equivalents	20	0.75	25.7	-	-	-	25.7
			30.8	3.7	21.0	-	55.5
Financial liabilities
Borrowings - fixed and swapped bank loans	23a	6.26	-	-	(60.8)	-	(60.8)
Borrowings - variable rate bank loans	23a	3.24	(1.0)	(5.9)	(2.8)	-	(9.7)
Current payables	21		(6.3)	-	-	-	(6.3)
Non-current payables	22		-	-	(0.3)	-	(0.3)
			(7.3)	(5.9)	(63.9)	-	(77.1)

¹ The maturity is the same as the contractual repricing of the Group's fixed and swapped bank loans

The following tables detail the Group's remaining contractual maturity for its non-derivative financial liabilities. The tables have been drawn up based on the undiscounted cash inflows / (outflows) of financial liabilities based on the earliest date on which the Group can be required to pay, including both interest and principal cash flows.

	Less than					More than
	1 year	1-2 years	2-3 years	3-4 years	4-5 years	5 years	Total
2011	£m	£m	£m	£m	£m	£m	£m
Non-interest bearing	(6.9)	(0.5)	-	-	-	-	(7.4)
Variable interest rate instruments	(7.5)	(63.4)	-	-	-	-	(70.9)
	(14.4)	(63.9)	-	-	-	-	(78.3)

	Less than					More than
	1 year	1-2 years	2-3 years	3-4 years	4-5 years	5 years	Total
2010	£m	£m	£m	£m	£m	£m	£m
Non-interest bearing	(6.3)	-	(0.3)	-	-	-	(6.6)
Variable interest rate instruments	(3.1)	(8.5)	(65.8)	-	-	-	(77.4)
	(9.4)	(8.5)	(66.1)	-	-	-	(84.0)

The following tables detail the Group's remaining contractual maturity for its derivative financial assets / (liabilities), all of which are net settled, based on the undiscounted net cash inflows / (outflows). When the amount payable or receivable is not fixed, it has been determined by reference to the projected interest and foreign currency rates as illustrated by the yield curves existing at the reporting date.

	Less than										More than
		1 year	1-2 years		2-3 years		3-4 years		4-5 years		5 years	Total
2011	£m			£m		£m		£m		£m	£m	£m
Net settled
Interest rate swaps	(2.0)			(1.5)		-		-		-	-	(3.5)
Interest rate swaption	-			-		0.1		0.1		-	-	0.2
Foreign exchange forward contract	-			0.6		-		-		-	-	0.6
	(2.0)			(0.9)		0.1		0.1		-	-	(2.7)

	Less than										More than
		1 year	1-2 years		2-3 years		3-4 years		4-5 years		5 years	Total
2010	£m			£m		£m		£m		£m	£m	£m
Net settled
Interest rate swaps	(2.1)			(1.6)		(0.8)		-		-	-	(4.5)
Foreign exchange forward contract	0.6			-		-		-		-	-	0.6
	(1.5)			(1.6)		(0.8)		-		-	-	(3.9)

24f Fair values of financial instruments

The fair values of financial instruments together with their carrying amounts in the balance sheet are as follows:

		Notional	2011	2011	2010	2010
		principal	Book value	Fair value	Book value	Fair value
	Note	£m	£m	£m	£m	£m
Financial liabilities not at fair value through income statement
Sterling denominated loans	23a		(67.2)	(67.2)	(70.5)	(70.5)
Total on balance sheet borrowings			(67.2)	(67.2)	(70.5)	(70.5)
Group share of associate borrowings			(202.7)	(202.7)	(237.7)	(237.7)
Group share of joint venture borrowings			(227.1)	(228.2)	(224.0)	(225.3)
Total see-through borrowings	24a		(497.0)	(498.1)	(532.2)	(533.5)

Derivative assets/(liabilities) at fair value through income statement
Sterling interest rate swaps	22	59.6	(3.5)	(3.5)	(4.5)	(4.5)
Sterling interest rate swaption	16	50.0	0.2	0.2	-	-
Foreign exchange forward contracts	16,19	39.3	0.6	0.6	0.6	0.6
Total on balance sheet derivatives			(2.7)	(2.7)	(3.9)	(3.9)
Group share of Sterling interest rate swaps in associates and joint ventures		321.8	(13.1)	(13.1)	(15.5)	(15.5)
Group share of Euro interest rate swaps in joint ventures		167.6	(2.4)	(2.4)	(2.9)	(2.9)
Total see through derivatives			(18.2)	(18.2)	(22.3)	(22.3)
Less foreign exchange forward contracts			(0.6)	(0.6)	(0.6)	(0.6)
Total see through interest rate derivatives	30		(18.8)	(18.8)	(22.9)	(22.9)

The fair value of borrowings has been estimated on the basis of quoted market prices. The fair value of the interest rate swaps and interest rate swaption have been estimated by calculating the present value of future cash flows, using market discount rates. The fair value of the forward foreign exchange contract has been estimated by applying the quoted forward foreign exchange rate to the undiscounted cash flows at maturity.

Details of the Group's cash and deposits are disclosed in note 20 and their fair values and those of all other financial assets and liabilities are equal to their book values.

Fair value measurements recognised in the consolidated balance sheet

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable:

· Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities.

· Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

· Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

		2011
		Level 2	Level 3	Total
	Note	£m	£m	£m
Financial assets
Available for sale investments	15	-	0.3	0.3
Interest rate swaption	16	0.2	-	0.2
Foreign exchange forward contracts	16,19	0.6	-	0.6
		0.8	0.3	1.1
Financial liabilities
Interest rate swaps	22	(3.5)	-	(3.5)
		(3.5)	-	(3.5)

There were no transfers between Level 1 and Level 2 in the year. Since the only Level 3 fair value measurements in the year related to available for sale investments, the reconciliation of the movement in these measurements is disclosed in note 15.

24g Breach of loan agreements

On 12 January 2012, the Group obtained a bank waiver for the Hemel Hempstead loan in relation to an anticipated covenant breach which would have triggered on 30 January 2012 following the administration of the anchor tenant. It was agreed with the bank to make a cash deposit of £0.9 million. The waiver is valid until 29 April 2012, at which time the position will be reassessed in light of the submitted planning application for the redevelopment of the Hemel Hempstead property.

25 Share capital

	Number of authorised		Number of shares		Nominal value of shares
	shares		issued and fully paid		issued and fully paid
	2011	2010	2011	2010	2011	2010
	Number	Number	Number	Number	£m	£m
Ordinary shares of 1p each
At the start and end of the year	857,589,603	857,589,603	350,612,754	350,612,754	3.5	3.5
Deferred shares of 9p each
At the start and end of the year	71,348,933	71,348,933	71,348,933	71,348,933	6.4	6.4
Total called-up share capital			421,961,687	421,961,687	9.9	9.9

The Company has one class of Ordinary shares which carry voting rights but no right to fixed income. Deferred shares carry neither voting nor dividend rights.

26 Share-based payments

The Group's share-based payments comprise the SAYE scheme, the 2008 LTIP, the Matching Share Agreement and the COIP. In accordance with IFRS 2, the fair value of equity-settled share-based payments to employees is determined at the date of grant, calculated using either a Black-Scholes option pricing model or a Monte Carlo simulation.

Analysis of income statement charge

	Year to	Year to
	30 December	30 December
	2011	2010
	£m	£m
2008 LTIP	0.8	0.4
Matching Share Agreement	-	0.3
Equity-settled share-based payments	0.8	0.7

Cash-settled share-based payments - Employers' National Insurance	-	0.1

Movements during the year

	SAYE scheme			Matching share
	Invitation I	Invitation II	2008 LTIP	agreement	COIP
Outstanding at 30 December 2009	795,369	-	13,500,000	302,055	1,202,080
Granted during the year	-	-	-	-	-
Exercised during the year	(23,695)	-	-	-	-
Forfeited / lapsed / expired during the year	(80,348)	-	(500,000)	-	-
Outstanding at 30 December 2010	691,326	-	13,000,000	302,055	1,202,080
Granted during the year	-	499,567	500,000	-	-
Exercised during the year	(22,984)	-	-	(302,055)	-
Forfeited / lapsed / expired during the year	(66,437)	(12,261)	-	-	-
Outstanding at 30 December 2011	601,905	487,306	13,500,000	-	1,202,080
Exercisable at the end of the year	-	-	-	-	-
Fair value of award at grant date	£0.15	£0.05	£0.20	£4.76	£0.14
Weighted average exercise price	22.8p	36.7p	0.0p	0.0p	0.0p
Weighted average remaining contractual life	0.59 years	3.33 years	n/a	n/a	n/a

On 1 November 2011 a new invitation ('invitation II') to participate in the SAYE scheme was made to employees.

The 2008 LTIP awards are subject to a performance condition based on growth of total shareholder return (TSR) as disclosed in the Directors' remuneration report.

On 31 December 2011 all of the COIP lapsed as the performance criteria were not met.

On 1 February 2012, the first SAYE scheme invitation ('invitation I') matured and participants are eligible to exercise their options for up to six months from this date.

Assumptions

The key assumptions and inputs used in the fair value models were:

	SAYE scheme			Matching share
	Invitation I	Invitation II	2008 LTIP	agreement	COIP
Share price at grant date	45.5p	34.0p	31.9p	553.0p	44.75p
Exercise price	46.0p	36.7p	0.0p	0.0p	0.0p
Expected volatility	84%	56%	83%	37%	84%
Expected life (years)	3.12	3.00	3.00	2.99	3.04
Risk free rate	2.28%	3.51%	1.58%	3.78%	2.58%
Expected dividend yield	11.0%	14.7%	0%	4.9%	11.2%
Lapse rate	40%	2%	0%	0%	0%
Correlation	n/a	n/a	n/a	30%	29%

Expected volatility is based on the historic volatility of the Group's share price over the three years to the date of grant. The risk free rate is the yield at the date of grant on a gilt-edged stock with a redemption date equivalent to the expected life of the option or the performance period of the relevant scheme. Options are assumed to be exercised at the earliest possible date.

27 Own shares

		Own shares
		£m
At the start of the year		9.7
Disposed of on exercise of options		(2.9)
At the end of the year		6.8

The own shares reserve represents the cost of shares in the Company purchased in the market. At 30 December 2011, the Capital & Regional plc 2002 Employee Share Trust (the "ESOT") held 1,841,102 (2010: 2,166,141) shares to assist the Group in meeting the outstanding share awards under the schemes described above. The right to receive dividends on these shares has been waived. The market value of these shares at 30 December 2011 was £0.6 million (2010: £0.7million).

28 Reserves

The special reserve arose on the cancellation of the Company's share premium account in 2009 when £141.0 million of the share premium account was credited to retained earnings and the balance of £79.5 million remained in the special reserve pending consent from all of the Company's creditors. During the year the special reserve of £79.5 million was transferred to retained earnings following the resolution of the outstanding required consent from the Company's creditors.

The merger reserve of £60.3 million arose on the Group's capital raising in 2009 which was structured so as to allow the Company to claim merger relief under section 612 of the Companies Act 2006 on the issue of Ordinary shares. The merger reserve is available for distribution to shareholders.

The acquisition reserve of £9.5 million relates to the purchase of the entire ordinary share capital of Morrison Merlin Limited in 2005, prior to which it had been a joint venture in which the Group had a 50% interest. The balance on the reserve arose from the difference at the date of acquisition between the carrying value of the Group's existing interest and its fair value. The reserve will remain on the balance sheet until Morrison Merlin Limited is sold.

The foreign currency reserve of £5.6 million and the net investment hedging reserve deficit of £2.6 million respectively show foreign exchange translation differences from the Group's investment in its German joint venture and any hedges of that investment.

29 Reconciliation of net cash from operations

		Year to	Year to
		30 December	30 December
		2011	2010
	Note	£m	£m
Profit on ordinary activities before financing		26.8	52.6
Adjusted for:
Share of profit in associates and joint ventures	18a	(22.3)	(45.2)
Loss on revaluation of investment properties	12a	1.5	0.2
Loss on sale of MEN Arena joint venture		-	0.2
Impairment of goodwill	13	0.1	0.7
Impairment reversal of trading properties	12a	(0.7)	(0.1)
Depreciation of other fixed assets	14	0.4	0.5
Decrease in receivables		2.3	0.4
Decrease in payables		(0.7)	(7.1)
Non-cash movement relating to share-based payments	26	0.8	0.7
Net cash from operations		8.2	2.9

30 Net assets per share

EPRA has issued recommended bases for the calculation of certain net assets per share information as shown in the following table:

		30 December			30 December
		2011			2010
		Net assets	Number of	Net assets	Net assets
	Note	£m	shares (m)	per share (£)	per share (£)
Basic net assets		196.0	350.6	0.56	0.50
Own shares held	27	-	(1.8)
Dilutive contingently issuable shares and share options		-	0.2
Fair value of fixed rate loans (net of tax)		(0.8)
EPRA triple net assets		195.2	349.0	0.56	0.50
Exclude fair value of fixed rate loans (net of tax)		0.8
Exclude fair value of see-through interest rate derivatives	24f	18.8
Exclude deferred tax on unrealised gains and capital allowances		3.5
EPRA net assets		218.3	349.0	0.63	0.57

31 Return on equity

	30 December	30 December
	2011	2010
	£m	£m
Total comprehensive income attributable to equity shareholders	20.7	44.0
Opening equity shareholders' funds	174.5	129.8
Return on equity	11.9%	33.9%

32 Disposal of subsidiaries

32a Waterside Lincoln Limited Partnership

As disclosed in note 18c, on 8 April 2011 the Group disposed of 50% of its interest in the Waterside Lincoln Limited Partnership. The net assets of Waterside Lincoln Limited Partnership at the date of disposal were:

	8 April 2011
	£m
Investment property	26.1
Non-current liabilities	(13.3)
Net assets disposed of	12.8
Gain on disposal	-
Total consideration	12.8
Satisfied by:
Cash and cash equivalents	6.4
Fair value of equity interest and shareholder loan to joint venture	6.4
	12.8
Net cash inflow arising from disposal:
Consideration received in cash and cash equivalents	6.4

32b Snozone Braehead

On 16 December 2011 the Group disposed of 100% of its interest in Snozone (Braehead) Limited for cash consideration of £0.1 million. The net assets of Snozone (Braehead) Limited at the date of disposal were £nil and a profit on disposal of £0.1 million was recognised.

	16 December 2011
	£m
Net cash outflow arising from disposal:
Consideration received in cash and cash equivalents	0.1
Less: cash and cash equivalents disposed of	(0.2)
	(0.1)

The results of the Snozone Braehead subsidiary which have been included in the consolidated income statement were as follows:

	Period to	Year to
	16 December 2011	30 December 2010
	£m	£m
SNO!zone income	2.7	2.7
SNO!zone expenses	(2.8)	(3.0)
Recurring pre-tax loss	(0.1)	(0.3)
Other non-recurring items	-	1.9
(Loss) / profit after tax	(0.1)	1.6

33 Lease arrangements

The Group as lessee - operating leases

At the balance sheet date, the Group's future minimum lease payments and sublease receipts under non-cancellable operating leases related to land and buildings were as follows:

	2011	2010
	£m	£m
Lease payments
Within one year	(2.2)	(2.0)
Between one and five years	(7.4)	(7.6)
After five years	(21.7)	(25.7)
	(31.3)	(35.3)
Sublease receipts
Between one and five years	0.1	0.1
	0.1	0.1

Operating lease payments are denominated in sterling and have an average remaining lease length of 15 years (2010: 17 years) and rentals are fixed for an average of 3 years (2010: 9 years). During the year there were no contingent rents (2010: £nil) and the Group incurred lease payments recognised as an expense of £2.2 million (2010: £2.3 million).

The Group as lessor

The Group leases out all of its investment properties under operating leases for average lease terms of 10 years (2010: 12 years) to expiry. The most significant leasing arrangements are summarised in the fund portfolio information. The future aggregate minimum rentals receivable under non-cancellable operating leases are as follows:

	Unexpired							30	30
	average	Less					More	December	December
	lease	than 1	2 - 5	6 - 10	11 - 15	16 - 20	than 20	2011	2010
	term	year	years	years	years	years	years	Total	Total
100% figures	Years	£m	£m	£m	£m	£m	£m	£m	£m
The Mall	8.4	79.2	245.2	157.8	57.2	29.8	132.2	701.4	833.8
The Junction	11.2	17.4	69.4	78.2	41.9	19.0	-	225.9	374.1
X-Leisure	13.6	40.1	155.6	177.3	102.6	36.6	18.5	530.7	564.2
FIX UK	6.9	10.2	33.4	19.9	7.6	2.1	0.1	73.3	63.8
Total associates		146.9	503.6	433.2	209.3	87.5	150.8	1,531.3	1,835.9
German portfolio	7.0	37.5	110.8	67.1	24.4	4.0	-	243.8	243.5
Other joint ventures	11.6	6.3	22.6	21.0	12.7	8.9	-	71.5	62.9
Total joint ventures		43.8	133.4	88.1	37.1	12.9	-	315.3	306.4
Wholly owned	10.5	6.7	25.9	29.9	10.4	3.8	-	76.7	97.2
Total		197.4	662.9	551.2	256.8	104.2	150.8	1,923.3	2,239.5

There was no contingent rent (2010: £nil) recognised in income from wholly owned properties during the year.

34 Capital commitments

At 30 December 2011 the Group's share of the capital commitments of its associates, joint ventures and wholly owned properties was £0.5 million (2010: £2.5 million). This comprised £0.4 million (2010: £1.3 million) relating to The Mall, £nil million (2010: £0.5 million) relating to The Junction and £0.1 million (2010: £0.7 million) relating to other assets.

35 Contingent liabilities

Other than the tax-related contingent liabilities disclosed in note 10e, there were no other contingent liabilities at the end of either the current year or the preceding year.

36 Events after the balance sheet date

Paddington Central III Unit Trust disposal

On 12 January 2012, the Group disposed of its 0.3% interest in the units of the Paddington Central III Unit Trust for £0.3 million.

Breach of loan agreements

On 12 January 2012, the Group obtained a bank waiver for the Hemel Hempstead loan in relation to an anticipated covenant breach which would have triggered on 30 January 2012 following the administration of the anchor tenant. It was agreed with the bank to make a cash deposit of £0.9 million. The waiver is valid until 29 April 2012, at which time the position will be reassessed in light of the submitted planning application for the redevelopment of the Hemel Hempstead property.

Mall unit purchase

37 Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its associates and joint ventures, all of which occurred at normal market rates, are disclosed below.

	Interest received		Distributions received
	Year to	Year to	Year to	Year to
	30 December	30 December	30 December	30 December
	2011	2010	2011	2010
	£m	£m	£m	£m
Associates
The Junction Limited Partnership	-	-	9.9	5.6
X-Leisure Limited Partnership	-	-	1.3	0.7
	-	-	11.2	6.3
Joint ventures
Xscape Braehead Partnership	0.6	0.5	-	-
The Auchinlea Partnership	-		0.3	-
X-Leisure Limited	-	-	0.5	0.3
German joint venture companies	0.7	0.6	3.7	3.1
	1.3	1.1	4.5	3.4

	Fee income and rent		Net amounts
	income / (expense)		Receivable from
	Year to	Year to	As at	As at
	30 December	30 December	30 December	30 December
	2011	2010	2011	2010
	£m	£m	£m	£m
Associates
The Mall Limited Partnership	7.1	8.9	0.7	0.7
The Junction Limited Partnership	1.1	1.3	0.1	-
X-Leisure Limited Partnership	(1.6)	(1.3)	-	-
The FIX UK Limited Partnership	0.1	0.1	-	-
	6.7	9.0	0.8	0.7
Joint ventures
Xscape Braehead Partnership	0.1	(0.1)	10.7	10.2
X-Leisure Limited	0.1	(0.2)	0.1	0.1
German joint venture companies	-	0.2	15.0	14.6
Waterside Lincoln Limited Partnership	0.1	-	6.4	-
	0.3	(0.1)	32.2	24.9

Amounts receivable from associates are unsecured and do not incur interest and they are payable on demand and settled in cash.

Amounts receivable from the Xscape Braehead Partnership and the German joint venture incur interest at commercial rates which is payable on demand. Principal amounts owed by the Xscape Braehead Partnership are repayable in 2012 and 2013, and principal amounts owed by the German joint venture companies are repayable in 2013. The balances are unsecured and settled in cash. Amounts receivable from the Waterside Lincoln Limited Partnership are interest free and repayable on demand.

Management fees are received by Capital & Regional Property Management Limited and are payable on demand, unsecured, do not incur interest and are settled in cash.

All rents payable by SNO!zone companies are due to the relevant Xscape Partnerships. SNO!zone Limited (operator of the ski slopes at Milton Keynes and Castleford) paid rent of £1.6 million (2010: £1.4 million) to the X-Leisure Limited Partnership. SNO!zone (Braehead) Limited was sold on 16 December 2011 but paid rent of £0.1 million (2010: £0.3 million) to the Xscape Braehead Partnership.

Waterside Lincoln Limited Partnership

During the year the Group formed a joint venture with Karoo Investment Fund II S.C.A SICAV-SIF ("Karoo") by selling 50% of the Group's interest in The Waterside Shopping Centre in Lincoln. As the Group and Karoo have common significant shareholders the formation of the joint venture was conditional upon shareholder approval which was granted on 1 April 2011. Included within loans to joint ventures is an amount of £6.4 million related to the Waterside Lincoln Limited Partnership. The details of this transaction are disclosed in note 18c.

Performance fees

Certain entities in the Group may receive performance fees when investors realise their interests in the underlying funds or joint ventures, either at the end of the life of the fund, on the sale of some or all of the underlying properties, or through another realisation mechanism such as a listing. No performance fees were received from or paid to related parties in either the current year or the preceding year.

The Mall Fund

CRPM will earn a performance fee if the property level return is positive and is more than 50 basis points above the index when measured from July 2010 to the realisation of the fund, which is due to expire in April 2017. Part of any performance fee earned may be payable to certain key CRPM management and staff as part of their incentive plans. The Mall performance fees were effective from 21 July 2010 but are subject to final confirmation by the Mall Bond Security Trustee as disclosed in note 3. The Group will also bear 20.15% of the cost of this performance fee as an investor in The Mall fund following the purchase of additional Mall units on 8 February 2012.

The Junction Fund

CRPM will earn a performance fee if the internal rate of return is over 15% when measured from May 2009 to the realisation of the fund, which is due to expire in July 2013. Part of any performance fee earned may be payable to certain key CRPM management and staff as part of their incentive plans. The Group will also bear 13.29% of the cost of this performance fee as an investor in The Junction fund.

X-Leisure Fund

X-Leisure Limited will earn a performance fee if the internal rate of return is over 15% when measured from August 2009 to the realisation of the fund, which is due to expire in December 2014. Up to 50% of any performance fee earned may be payable to certain key X-Leisure Limited management and staff as part of their incentive plans. The Group will also bear 11.93% of the cost of this performance fee as an investor in the X-Leisure fund.

German joint venture

Garigal will earn a performance fee if the internal rate of return is over 12% when measured from August 2010 to the realisation of the joint venture, whose current business plan runs to June 2013. Up to 80% of any performance fee earned may be payable to certain key Garigal management and staff as part of their incentive plans. The Group will also bear 49.60% of the cost of this performance fee as an investor in the German joint venture.

Transactions with key personnel

In accordance with IAS 24, key personnel are considered to be the executive and non-executive directors as they have the authority and responsibility for planning, directing and controlling the activities of the Group. Their remuneration in the income statement is as follows:

	Year to	Year to
	30 December	30 December
	2011	2010
	£m	£m
Short term employment benefits	2.0	1.3
Post employment benefits	0.1	0.1
Share-based payments*	0.6	0.5
	2.7	1.9

* share-based payments relate to amounts awarded under the 2008 LTIP, the COIP and the Matching Share Agreement.

Covenant information

At 30 December 2011

	See through borrowings	Covenant	30 December	Future changes
	£m		2011
Core revolving credit facility
Asset cover	-	Greater than 200%	n/a
Gearing	-	Less than 200%	3%
ICR	-	Greater than 150%	1,349%

The Great Northern facility
LTV	61.9	100%	86%	From 31 December 2012 reducing in stages to 80% by 30 June 2013
ICR	-	Greater than 135%	161%

The Hemel Hempstead facility
LTV	5.3	75%	64%	Waiver until 29 April 2012
ICR	-	Greater than 150%	n/a	Waiver until 29 April 2012

The Mall
LTV	120.3	83%	69%	Reducing in stages to 65% by December 2014
ICR	-	Greater than 130%	158%

The Junction
LTV	21.8	70%	60%	Reducing in stages to 65% by 1 October 2012
ICR	-	Greater than 130%	158%	Until 1 July 2012 and then 135%

Germany
LTV
Portfolio 1	16.5	75%	72%
Portfolio 2	28.5	87%	74%
Portfolio 3	43.6	n/a	n/a
Portfolio 4*	66.2	93%	n/a	LTV holiday until 15 July 2012
Portfolio 5	19.8	81%	80%
Portfolio 6	22.9	n/a	n/a
ICR
Portfolio 1	-	Greater than 150%	256%
Portfolio 2	-	Greater than 150%	173%
Portfolio 3	-	Greater than 160%	226%
Portfolio 4*	-	Greater than 160%	n/a	ICR holiday until 15 July 2012
Portfolio 5	-	Greater than 120%	170%
Portfolio 6	-	Greater than 140%	172%

X-Leisure
LTV (central facility)	35.4	60%	53%
ICR	-	Greater than 130%	193%	Until March 2012 and then tiered increases to 150% at 1 April 2013

FIX UK
No covenant	2.4
LTV
Senior A	-	80%	73%	Reducing to 75% from July 2012
Senior A and B	22.8	90%	86%	Reducing to 85% from July 2012
ICR
Senior A	-	Greater than 120%	167%	Until 22 January 2012 and then 130%
Senior A and B	-	Greater than 100%	141%	Until 22 January 2012 and then 110%

Xscape Braehead
LTV	22.8	90%	85%	LTV holiday until 1 April 2012 then 90% and reducing to 80% from 1 April 2013
ICR	-	Greater than 120%	140%

Waterside Lincoln
LTV	6.8	60%	52%
ICR	-	Greater than 175%	218%
	497.0

* Portfolio 4 includes debt of £7.5 million, representing the Group's share of the €18.0 million German junior debt acquired during 2010.

Fund portfolio information (100% figures)

At 30 December 2011

	The Mall	The Junction	X-Leisure	German Portfolio

Physical data
Number of properties	9	6	16	48
Number of lettable units	1,083	79	313	268
Lettable space (sq feet - '000s)	4,663	1,391	3,070	5,202

Valuation data
Properties at independent valuation (£m)	971	288	565	496
Adjustments for head leases and tenant incentives (£m)	47	(12)	(7)	(1)
Properties as shown in the financial statements (£m)	1,018	276	558	495
Revaluation in the year (£m)	(6)	8	36	(5)
Initial yield	7.02%	5.68%	6.59%	6.61%
Equivalent yield	7.65%	6.92%	7.44%	n/a
Property level return	6.2%	10.7%	14.1%	6.6%
IPD benchmark return	6.3%	10.0%	14.2%	n/a
Reversionary	18.1%	12.6%	7.4%	n/a
Loan to value ratio	69%	60%	53%	80%
Net debt to value ratio	56%	50%	49%	77%

Lease length (years)
Weighted average lease length to break	8.4	11.2	13.6	7.0
Weighted average lease length to expiry	9.0	11.9	14.9	7.0

Passing rent (£m) of leases expiring in:
2012	5.2	0.2	0.7	1.5
2013	7.1	0.3	0.4	7.0
2014-2016	19.8	0.6	1.1	13.1

ERV (£m) of leases expiring in:
2012	6.8	0.4	0.7	n/a
2013	7.0	0.3	0.5	n/a
2014-2016	20.4	0.6	1.5	n/a

Passing rent (£m) subject to review in:
2012	7.6	2.1	6.3	n/a
2013	5.9	3.7	3.6	n/a
2014-2016	18.7	11.7	10.7	n/a

ERV (£m) of passing rent subject to review in:
2012	7.5	2.1	6.1	n/a
2013	5.8	3.8	3.6	n/a
2014-2016	22.7	11.4	11.1	n/a

Rental Data
Contracted rent at year end (£m)	81.9	18.6	41.7	n/a
Passing rent at year end (£m)	78.0	17.4	40.8	38.6
ERV at year end (£m per annum)	92.1	19.6	43.8	n/a
ERV movement (%)	(0.1)	(2.5)	0.8	n/a
Vacancy rate (%)	2.8%	3.6%	3.9%	4.9%

Like for like net rental income under UK GAAP (100%)
Current year net rental income (£m)
Properties owned throughout 2010/2011	60.7	14.9	36.6	33.3
Disposals	7.1	5.8	0.1	-
Net rental income	67.8	20.7	36.7	33.3
Prior year net rental income (£m)
Properties owned throughout 2010/2011	60.9	15.9	35.4	31.1
Disposals	22.7	15.1	2.5	0.2
Net rental income	83.6	31.0	37.9	31.3

Other Data
Unit Price (£1.00 at inception)	£0.42	£0.20	£0.35	n/a
Group share	18.16%	13.29%	11.93%	49.60%

Glossary of terms

CRPM is Capital & Regional Property Management Limited, a subsidiary of Capital & Regional plc, which earns management and performance fees from The Mall, The Junction and certain other associates and joint ventures of the Group. It also owns the Group's 50% share in X-Leisure Limited, which earns management and performance fees from the X-Leisure fund.

Contracted rent is passing rent and the first rent reserved under a lease or unconditional agreement for lease but which is not yet payable by a tenant.

Contribution is net rent less net interest, including unhedged foreign exchange movements.

Capital return is the change in value during the period for properties held at the balance sheet date, after taking account of capital expenditure and exchange translation movements, calculated on a time weighted basis

Debt is borrowings, excluding unamortised issue costs.

EPRA earnings per share (EPS)is the profit / (loss) after tax excluding gains on asset disposals and revaluations, movements in the fair value of financial instruments, intangible asset movements and the capital allowance effects of IAS 12 "Income Taxes" where applicable, less tax arising on these items, divided by the weighted average number of shares in issue during the year excluding own shares held.

EPRA net assets per shareinclude the dilutive effect of share-based payments but ignore the fair value of derivatives, any deferred tax provisions on unrealised gains and capital allowances, any adjustment to the fair value of borrowings net of tax and any surplus on the fair value of trading properties.

EPRA triple net assets per shareinclude the dilutive effect of share-based payments and adjust all items to market value, including trading properties and fixed rate debt.

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

ERV growth is the total growth in ERV on properties owned throughout the year including growth due to development.

Garigal is Garigal Asset Management GmbH, an associate of the Group, which earns management and performance fees from the German joint venture.

Gearing is the Group's debt as a percentage of net assets. See through gearing includes the Group's share of non-recourse debt in associates and joint ventures.

Interest rate cover (ICR)is the ratio of either (i) recurring profit (before interest, tax, depreciation and amortisation); or (ii) net rental income to the interest charge.

IPD is Independent Property Databank Limited, a company that produces an independent benchmark of property returns.

Like for like figures exclude the impact of property purchases and sales on year to year comparatives.

Loan to value (LTV) is the ratio of debt excluding fair value adjustments for debt and derivatives, to the fair value of properties.(excluding adjustments for tenant incentives and head leases)

Market value is an opinion of the best price at which the sale of an interest in a property would complete unconditionally for cash consideration on the date of valuation as determined by the Group's external or internal valuers. In accordance with usual practice, the valuers report valuations net, after the deduction of the prospective purchaser's costs, including stamp duty, agent and legal fees.

Net assets per share (NAV)are shareholders' funds divided by the number of shares held by shareholders at the period end, excluding own shares held.

Net initial yield (NIY)is the annualised net rent generated by the portfolio expressed as a percentage of the portfolio valuation, excluding development properties, which is in line with EPRA's best practice recommendations.

Net debt to property valueis debt less cash and cash equivalents divided by the property value (including adjustments tenant incentives and head leases)

Net interestis the Group's share, on a see through basis, of the interest payable less interest receivable of the Group and its associates and joint ventures.

Net rentis the Group's share, on a see through basis, of the rental income, less property and management costs (excluding performance fees) of the Group and its associates and joint ventures.

Nominal equivalent yieldis a weighted average of the net initial yield and reversionary yield and represents the return a property will produce based upon the timing of the income received, assuming rent is received annually in arrears on gross values including the prospective purchaser's costs.

Passing rentis gross rent currently payable by tenants including car park profit but excluding income from non-trading administrations and any assumed uplift from outstanding rent reviews.

Property under management (PUM)is the valuation of properties for which CRPM, X-Leisure Limited or Garigal is the asset manager.

Recurring pre-tax profitis the total of Contribution, the Group's share of management fees less fixed management expenses earned by CRPM, X-Leisure Limited and Garigal, the profit from SNO!zone and any central costs and interest.

Return on equityis the total return, including revaluation gains and losses, divided by opening equity plus time weighted additions to and reductions in share capital, excluding share options exercised.

Reversionary percentageis the percentage by which the ERV exceeds the passing rent.

Reversionary yieldis the anticipated yield to which the net initial yield will rise once the rent reaches the ERV.

See-through balance sheetis the pro forma proportionately consolidated balance sheet of the Group and its associates and joint ventures.

See-through income statementis the pro forma proportionately consolidated income statement of the Group and its associates and joint ventures.

Temporary lettingsare those lettings for one year or less.

Topped-up net initial yieldis the net initial yield adjusted for the expiration of rent-free periods or other unexpired lease incentives.

Total returnis the Group's total recognised income or expense for the year as set out in the consolidated statement of comprehensive income expressed as a percentage of opening equity shareholders' funds.

Total shareholder return (TSR) is a performance measure of the Group's share price over time. It is calculated as the share price movement from the beginning of the period to the end of the period plus dividends paid, divided by share price at the beginning of the period

Vacancy rateis the ERV of vacant properties expressed as a percentage of the total ERV of the portfolio, excluding development properties, in line with EPRA's best practice recommendations.

Variable overhead includes discretionary bonuses and the costs of awards to directors and employees made under the 2008 LTIP, Matching Share Agreement, COIP and SAYE Scheme, which are spread over the performance period.

For further information:

Capital & Regional:
Hugh Scott-Barrett, Chief Executive	Tel: 020 7932 8000
Charles Staveley, Group Finance Director	Tel: 020 7932 8000

Maitland:
Martin Leeburn	Tel: 020 7379 5151
Emma Burdett	Tel: 020 7379 5151

Notes to editors:

About Capital & Regional plc

Capital & Regional is a specialist property company with a track record of developing asset management opportunities in town centre shopping centres and out of town retail parks.

Capital & Regional founded The Mall and The Junction funds in conjunction with Aviva Investors. Capital & Regional acts as Property and Asset Manager for the Mall and Junction funds and holds 20.1% and 13.4% respectively of these funds.

Capital & Regional & AREA Property Partners each hold a 50% interest in a German retail property portfolio which is managed by Garigal Asset Management GmbH, in which Capital & Regional holds a 30% interest.

Capital & Regional also has an 11.9% stake in the X-Leisure fund, which is managed by X-Leisure Limited in which Capital & Regional holds a 50% interest.

Capital & Regional has a number of other joint ventures and wholly-owned properties.

For further information see www.capreg.com

This information is provided by RNS

The company news service from the London Stock Exchange

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Capital & Regional (CAL)

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