Final Results

RNS Number : 3420J

Local Shopping REIT (The) PLC

16 December 2015

The Local Shopping REIT plc

Results for the Year Ending

30 September 2015

The Local Shopping REIT plc ("the Company") today announces its audited results for the year ended 30 September 2015.

The information set out below is extracted from the Company's Annual Report and Accounts for the year ended 30 September 2015, which will be published today on the Company's website www.localshoppingreit.co.uk. A copy will also be submitted to the National Storage Mechanism and will be available for inspection at: http://www.Hemscott.com. Printed copies will shortly be dispatched to shareholders. Cross-references in the extracted information below refer to pages and sections in the Annual Report and Accounts for the year ended 30 September 2015.

Highlights

· Recurring profit* for the period of £0.23m or 0.3 pence per share ("pps") (2014: £0.68m or 0.8 pps).

· Profit for the financial period of £0.02m or 0.02 pps (2014: £1.21m or 1.5 pps).

· Portfolio valued at 30 September 2015 at £81.20M, reflecting an equivalent yield (excluding the residential element) of 9.30% (30 September 2014: £87.6m, equivalent yield 9.25%).

· Net Asset Value (NAV): £34.9m or 42 pps (30 September 2014: £34.8m or 42 pps).

· Adjusted NAV: £37.1m or 45 pps, excluding liabilities arising from derivative financial instruments (30 September 2014: £38.8m, 47 pps).

· Cash holdings at 30 September 2015 of £12.74m.

· Total net debt (taking account of cash reserves) of £42.95m, reflecting an LTV of 52.89% (2014: 56.12%).

· Sales completed on 37 properties for a combined consideration of £5.33m, at a gross premium of 9.1% of the aggregate valuations at the time the properties went under offer.

· 71 vacant commercial units let at an aggregate annual rental income of £533,170 per annum.

· 33 rent reviews with an aggregate rental uplift of £54,593 (9.83%) above passing rent.

· 47 lease renewals secured at an aggregate net rental decrease of £8,666 (1.76%) to previous passing rent, but 8.42% above Market Rent.

· HSBC debt facility restructured, removing 'payment in kind' interest accrual for debt repayment of £6.9m.

· Overall debt repayment for the year of £9.12m.

*Recurring profit is explained in the Finance section below.

Investment Policy

The Company's Directors, together with its investment manager INTERNOS Global Investors Limited, continue to execute the following investment policy, adopted by shareholders in July 2013.

The Company's investment objective is to maximise value for its shareholders from its existing portfolio of local real estate assets, comprising local shops in urban and suburban areas, as well as neighbourhood and convenience properties throughout the UK.

The Company seeks to achieve this through:

· realising its assets progressively in accordance with prevailing market conditions with a view to repaying the Company's existing debt facilities (where consistent with the protection of value) and ultimately returning value to shareholders;

· exploiting the potential of its remaining property portfolio through active asset management; and

· making further investments in properties only where such investment is deemed by the Board, in consultation with INTERNOS, to be significant to protect or enhance the realisable value of an existing property asset. In such circumstances the Company may seek to purchase assets intrinsically linked to existing assets in its core local retail portfolio (such as flats situated above local convenience stores in order to exploit marriage value).

Significant progress has been made towards these objectives over the two accounting periods following the change in investment strategy, as shown below:

	30 September 2013	30 September 2015
No. of Properties	640	353
Void Rate	11.97%	10.47%
Cash	£6.63m	£12.74m
LTV (loan facility level)	82.1% and 88.5%	71.7%
LTV (corporate level, including cash held)	75.2%	56.12%
No. of Properties sold in Portfolio sale	235
No. of Properties sold individually (owner occupier, private treaty, auction)	60
Aggregate gross premium / (discount) to valuation for all sales	2.3%

We continue to execute the investment strategy, actively pursuing all disposal opportunities including portfolio transactions, private treaty, owner-occupier sales and auctions. The improvement in the operational performance of the assets continues to assist the disposal programme.

For further information:

The Local Shopping REIT plc +44 20 7355 8800

Steve Faber, Director

Bill Heaney, Company Secretary

Or visit www.localshoppingreit.co.uk.

Performance Review

Market Context

Official statistics released throughout the year indicated that the UK economy continued its slow but steady emergence from the aftermath of the economic crisis of 2008, with the Office for National Statistics reporting that gross domestic product per head at 30 June 2015 had exceeded its pre-recession high. UK employment levels are also at an all-time high. However, GDP growth slowed during Q3 2015, with a fall in construction output restricting expansion during the quarter to 0.5%, down from 0.7% in Q2. Whilst services continued to perform well, manufacturing was also identified as a problem area, showing a drop in output of 0.9% during the first three quarters of 2015, as producers struggled with falling demand from overseas markets such as China and other emerging economies.

More positively for the retail sector, household disposable income has continued to rise and this appears to be feeding through into retail spending, with the Office for National Statistics reporting retail sales figures 6.5% ahead of September 2014. This was against a background of a fall in average store prices of 3.6% and an increase in on-line sales of 15.2% over the year.

Within this mixed environment, local and independent retailers continue to perform well, with the Association of Convenience Stores reporting 5% year-on-year sales growth amongst local shops. This research indicates that the most successful convenience traders are those that offer add-on services, such as mobile phone top-up, re-cycling services and internet shopping collection facilities. We seen this reflected amongst our own tenants, with good performance also amongst retailers offering health and beauty services and takeaway operators.

With a benign economic environment and apparent liquidity in the funding markets the succession of high profile collapses so evident in the downturn has continued to abate; albeit examples can still be found in fashion chain USC, streaming service Blinkbox; and Doncaster-based baker, Cooplands.

Despite the continuing improvement in consumer fundamentals, retail has lagged the other main property investment sectors, with rental and yield performance weaker than office and industrial markets. It appears that investors are still exercising a degree of caution towards a sector which has experienced a recent structural adjustment arising from the impact of internet shopping, which has led to a significant rebasing of rents to more affordable levels. Recent well publicised concerns regarding excess space capacity amongst supermarket operators may also have tainted investor attitudes.

Recently reported auction results (for example from Allsop LLP) indicate that for Grade B retail the trend of softening of yields which took hold in from 2006 has finally abated, with yields now stable. However, this is over a year later than stabilisation for Grade A retail and the approximate 250bp spread between Grade A and Grade B retail auction transactions compares with a 15 year historical average of nearer 150bp.

Operating Results & Portfolio Performance

Comparisons of operating results and portfolio performance during the year with the previous year should take account of the sale of two of the Company's property-holding subsidiaries, NOS 2 Limited and NOS 3 Limited in August 2014, shortly prior to the reporting period. This reduced the net rental income of the portfolio by circa 46% between the two years.

Profit before tax for the year was £0.02 million, or 0.02 pps, (2014: profit of £1.21 million, or 1.47 pps).

The recurring profit was £0.23 million, or 0.3 pps (2014: £0.68 million, or 0.8 pps). The recurring profit equated to 4.03% of net rental income (2014: 4.9%). Property operating expenses were £1.96 million, compared with £3.86 million in 2014. The principal reasons for these changes was the sale of properties in accordance with the investment policy (principally those held by NOS 2 Limited and NOS 3 Limited shortly before the beginning of the year). This had the effect of reducing rental income whilst removing the associated direct property expenses, but increasing the proportion of overheads to rental income.

Other factors included a reduction in bad debt charges, which was £0.25 million in the year compared (2014: £0.99 million) and non-recoverable service charges, which reduced to £35,000 compared with £287,000 in 2014. The profit before tax also incorporates a charge of £0.22 million representing an adjustment to the consideration for the disposal of NOS 2 Limited and NOS 3 Limited in relation to debtor balances.

Revaluation

The profit before tax reflected the movement in fair value of the property portfolio, which was valued at £81.2 million at 30 September 2015 (30 September 2014: £87.6m). The movement during the period reflected a combination of the reduction in portfolio value as a result of property disposals and value movements within the ongoing portfolio. On a like-for-like basis the portfolio reduced in value by 1.50%.

The investment property portfolio valuation as at 30 September 2015, reflected an equivalent yield (excluding the residential element) of 9.30% (30 September 2014, like-for-like: 9.25%).

As at 30 September 2015, the portfolio comprised 353 properties with an annual rental income, net of head rents payable, of £7.49 million (30 September 2014: 387 properties; annual rental income £7.92 million). The portfolio included 1,076 letting units (30 September 2014: 1,190 letting units).

Investment Property Portfolio as at 30 September 2015

Value	£81.20m
Initial Yield ("IY")	8.69%
Reversionary Yield ("RY")	9.68%
Equivalent Yield ("EY")	9.30%
Rent per annum*	£7.49m
Market Rent per annum*	£8.07m

*Net of head rents payable

Value Range	No. of Properties	Value £m	EY
£0 - £100k	141	9.57	10.68%
£101k - £200k	102	14.28	9.43%
£201k - £500k	81	25.21	9.39%
£501k - £1m	21	16.25	9.40%
£1m - £3m	7	12.44	9.36%
£3m +	1	3.45	6.62%
Total	353	81.20	9.30%

All yields quoted exclude the residential element which is valued at a discount to vacant possession value.

The table above illustrates the range of property values throughout the portfolio. The average property value is £230,017 and the median is £125,000. The residential element of the portfolio has been valued at £11.53 million, typically based on 85% of vacant possession value. The average value of the residential units in our portfolio is £51,463.

Portfolio - Like-for-like Comparison

	30 Sept 2015	30 Sept 2014	Change
Value	£81.20m	£82.43m	-1.50%
Initial Yield	8.69%	8.87%	-18 bps
Reversionary Yield	9.68%	9.50%	+18 bps
Equivalent Yield	9.30%	9.26%	+4 bps
Rent per annum*	£7.49m	£7.53m	-0.58%
Market Rent per annum*	£8.07m	£8.10m	-0.40%

All yields quoted exclude the residential element which is valued at a discount to vacant possession value.

*Net of head rents payable

Regional variations for market rents and yields across the portfolio are illustrated by the table below.

Region	30/09/2015 EY	30/09/2014 EY (like for like)	Change bbs
East Anglia	10.68%	9.82 %	+86
London	6.25%	6.46%	-21
South East	7.97%	8.36%	-39
South West	9.25%	9.24%	+1
West Midlands	9.74%	9.56%	+18
Wales	10.10%	10.01%	+9
Yorks & Humberside	10.40%	10.13%	+27
East Midlands	8.92%	8.95%	-3
North	10.77%	10.25%	+52
Scotland	9.93%	10.12%	-19
North West	10.05%	9.39%	+66

All yields quoted exclude the residential element which is valued at a discount to vacant possession value.

Property Sales

During the year sales were completed on a further 37 properties at a combined gross sale price of £5.33 million. This produced a premium of 9.1% on a gross proceeds basis to the aggregate valuations at the time the properties went under offer. Based on the carrying valuation at the time of sale the premium was 3.5%. The difference reflects revaluations during the sale process.

At the year end a further 21 properties were under offer at an aggregate price of £2.58 million, of which 5 properties have since been sold for a total of £649,000.

As at the date of this report, total property sales since the change in the Company's investment strategy in July 2013 have reached £90.21 million. A further 20 properties are currently under offer at an aggregate price of £3.16 million. Our target remains to complete the asset disposal and loan repayment process by the end of 2017 and return cash to shareholders as soon as possible thereafter.

Portfolio Performance and Asset Management

During the period we let 71 commercial units at a combined rent of £533,170 per annum against aggregate Market Rent of £578,990. Of these new lettings, eleven incorporated stepped rent increases whereby the aggregate initial rent will typically rise to exceed the current Market Rent over the first two years of the leases. Our average rent free period on lettings completed during the period was 94 days. At 30 September 2015 ten units were under offer for letting.

Rent reviews, which were completed on 33 units resulting in an increase in aggregate rental income of £54,593 per annum and a premium of 11.15% to Market Rent. Existing leases were renewed on 47 units, resulting in an aggregate net rental decrease of £8,666 (1.76%), but £37,510 (8.42%) ahead of Market Rent.

The portfolio rental income (after the deduction of head rent payments) at the year-end was £7.49 million, compared with a like-with-like net rental income of £7.53 million in 2014, a reduction of 0.54%. The like-for-like aggregate Market Rent declined by 0.40% over the period.

During the year consent was obtained for one change of use, for the replacement of a redundant pub unit with seven houses.

The overall void rate within the portfolio at 30 September 2015 was 10.47% of portfolio Market Rent, equivalent to Market Rent of £0.85 million (30 September 2014: 11.94% and £1.03 million). The Market Rent for void commercial properties was £0.74m million, with £0.11 million attributable to residential units (30 September 2014: £0.91m and £0.12m).

We continue our policy of taking early possession of units for re-letting where tenants are in financial difficulties, unless there is a good prospect of working with tenants to clear the arrears. The bad debt charge reduced significantly during the period compared with the previous year.

Our policy is to seek rent deposits for new lettings or assignments wherever appropriate. As at 30 September 2015, deposits held in respect of commercial tenants equated to 23.0% of our quarterly rent roll (30 September 2014: 27.76%), providing a measure of protection against tenant default. Further deposits, typically equating to one month's rent, are held by our managing agents and the Deposit Protection Service in respect of residential tenancies.

During the year the joint venture in which the Company participated entered members' voluntary liquidation, the properties held by the joint venture having been sold towards the end of the previous year. During the year the Company received distributions totalling £0.29 million arising from its equity stake. The Company now has no joint venture interests.

Finance Review

The financial statements contained in this report have been prepared in accordance

with International Reporting Standards ("IFRS"). No new accounting policies were adopted during the year.

Results

The Group has recorded an IFRS profit for the financial year of £0.02m (2014: £1.21m). The principal factors in the IFRS result were:

· the reduction of property activity levels following the disposal of NOS 2 Limited and NOS 3 Limited immediately prior to the year together with a further 37 properties during the year;

· the reduction in administrative expenses during the year, which moved from £2.2m to £1.7m; and

· the reduction in the fair value of the property portfolio by £1.6m over the year.

Key Performance Indicators

The following financial key performance indicators are monitored by the directors to review the performance of the business, in addition to the specific measures described in the Business Review which are used to monitor the performance of the property portfolio.

	30 September 2015	30 September 2014
Interest cover*	188%	183%
Loan to value (LTV) ratio	52.9%	56.1%
Adjusted NAV per share	45p§	47p§
Gearing (net of cash held)	123%	141%
Recurring profit per share	0.28p	0.83p

* Based on rental income compared to interest payable

† Net of cash held

‡ Based on 82,505,853 shares in issue at 30 September 2015 (2014: 82,505,853)

§ Adjusted to exclude the fair value of financial derivatives

Recurring Profit

The recurring profit for the year was £0.23m (2014: £0.69m), the calculation of which remains consistent with previous years. A reconciliation of the profit before tax to the recurring profit is set out in the table below:

	31 Sept 2015 £000	30 Sept 2014 £000
Profit/(loss) before tax (IFRS)	20	1,206
Movement in the fair value of the portfolio	1,638	496
Movement in the fair value of the interest rate swaps held	(1,728)	(2,267)
Loss (profit) on disposal of properties	7	(475)
Loss on sale of shares	-	1,312
Non-recurring expenditure & net resolution of aged balances	65	413
Adjustment to portfolio sale proceeds	225	-
Recurring profit on continuing operations	227	685

The calculation remains consistent with previous periods.

The recurring profit per share for the year was 0.3 pence (2014: 0.8 pence).

In accordance with the dividend distribution policy adopted by the Board in 2013, no dividend will be paid for the year (2014: nil).

Significant factors affecting recurring profit were:

Net Asset Value ("NAV")

During the period NAV rose to £34.85 million or £0.42 per share, based on 82.5 million shares in issue, excluding those held in Treasury (30 September 2014: £34.83 million, £0.42 per share).

The adjusted NAV of the Company as at 30 September 2015, excluding liabilities arising from derivative financial instruments, was £37.14 million or £0.45 per share (30 September 2014: £38.8 million, £0.47 per share).

As at 30 September 2015 the Group held £12.74 million of cash.

The Group's revaluation policy remains unchanged. At the half year and year end, 25% of the portfolio, plus all properties purchased in these two six-month periods (2014: none), are valued by Allsop LLP, a firm of Chartered Surveyors, acting as external valuers, who are experienced in property types held by the Group. The remainder of the portfolio is valued on the basis of Market Value by the directors who have relevant experience and professional qualifications with the benefit of outline advice provided by Allsop LLP

Financing

During the year, the Group operated using the loan facilities provided by HSBC Bank plc ("HSBC"). The facilities in place as at 30 September 2015 were as set out below.

Loan	Facility £m	Amount Outstanding £m	LTV Covenant	Amortisation	Termination Date
HSBC NOS 4 Loan	45.7	44.9	82.5%	0.45% pq for LTV 65%+ 0.25% pq for LTV 60-65% Nil below 60% LTV	30 April 2018
HSBC NOS 6 Loan	19.4	11.1	82.5%		30 April 2018
Total	£65.1	£56.0

At 30 September 2015 the debt outstanding was £56.0m (30 September 2014: £65.1m).

The two facilities provided by HSBC Bank plc ("HSBC") are subject to cross-collateralisation of the corresponding property portfolios, and on each quarterly interest payment date, the loan facilities are subject to actual and forecast interest cover tests. At each testing date during the period the loans were determined to be compliant. The ICR covenant required for the combined loan facility is listed below (each reporting period includes an actual and forecast ratio).

Loan

Actual & Forecast

ICR Covenant

Actual ICR

- Qtr ending

30/9/2015

Forecast ICR

- Qtr ending

30/9/2015

HSBC

130%

165.2%

158.5%

In April 2015 the facilities provided by HSBC were restructured, with the removal of the payment in kind (PIK) margin that had applied from January 2015. This considerably reduced the interest payable over the lifetime of the facility. In order to facilitate this change certain amendments were made to the loan to value ("LTV") and interest cover ratio ("ICR") covenants. Additionally a loan repayment of £6.9 million was made, immediately reducing the LTV ratio to 72.5% compared with the revised default LTV level of 82.5%.

Other changes to the facilities included the introduction of an LTV ratchet which unlocks lower interest margins and reduced amortisation requirements at lower levels of gearing. Amortisation instalments are paid on each interest payment date, currently calculated at 0.45% of the aggregate loan balance outstanding.

Additionally, the restructuring removed the obligation to hedge interest rate exposure, subject to continuing to satisfy the ICR covenant. In October 2015, this facilitated the termination of the interest rate swap which was due to expire in January 2017. Only cash trapped in accounts controlled by the lender, comprising sales proceeds of geared assets, was used for this purpose. This will reduce future interest payments, increase future ICR, and allow more cash to be released from the loan pool through higher operating cash flow.

The savings in interest payments (PIK and cash margins) from debt renegotiation and swap termination, are estimated at £2.3 million over the remainder of the loan period, compensating for the small reduction in covenant headroom, and the £1.0 million swap termination payment. The Group also holds a considerable amount of cash which could be deployed to repay debt in the unlikely event that a loan covenant is at risk of being breached. Furthermore, the revised debt terms and the optionality provided by the LTV ratchet improves the attractiveness of the portfolio to potential purchasers.

Immediately following the refinance and swap termination, the average cost of debt, including margin was 5.3%. Were the restructuring of the HSBC facilities not undertaken, the cost of debt would have risen to 7.2% immediately and higher thereafter as the PIK interest ratchet increased. The two remaining interest rate swaps expire in July 2016 following which all debt will attract interest of 3 month LIBOR plus a margin of between 1.75-2.0% dependent on the prevailing LTV. Current LIBOR forecasts suggest the cost of debt will fall below 3.0% at this time.

At 30 September 2015 the Group held property assets valued at £5.31 million with no debt secured against them together with cash of £12.7 million (30 September 2014: £15.7 million). The repayment date for both facilities is 30 April 2018.

Joint Ventures and Investments

Investments in joint ventures are equity accounted for during the period of the Group's ownership. During the year the Group continued to hold an interest in the small property joint venture with a financial institution. The joint venture entered members' voluntary liquidation during the year and at the year-end the Group had received distributions totalling £0.29 million in respect of its equity holding. Following the dissolution of the joint venture the Company no longer has any investment interests outside it wholly-owned subsidiaries.

Taxation

The Group continued to operate as a REIT throughout the year. Accordingly, any profits and gains from the property investment business should be exempt from Corporation Tax provided certain conditions continue to be met. Amounts estimated at £0.1m included in tax relief available for REIT status may become subject to Corporation Tax under s543 CTA 2010 if relief is not granted. In this event, the Company's future tax charge is likely to increase by up to £0.1m.

Dividend

In line with the Company's current dividend distribution policy no interim dividend will be paid. The Board will continue to review the dividend policy in line with progress with the investment strategy.

Outlook

Since shareholders approved the sale of the Group's property assets with a view to paying down debt and returning surplus cash we have sold £90.2m of property at prices reflecting a small premium to book value. As a result the Group is now relatively financially stable with debt gearing having dropped significantly, which has allowed us to restructure the remaining debt to good advantage. In addition the Group has a sensible cash balance and (if still relevant) will have reasonable cash flow at the expiry of the remaining interest rate swaps in 2016. However, the Board remains very mindful of the need to expedite the sale of the remaining property assets whilst preserving as much shareholder value as is reasonably possible. To that end, although there can be no guarantees, it would not be unreasonable to anticipate further portfolio sales in addition to our ongoing programme of individual property disposals, and shareholders will be updated at the appropriate moment.

S J East

Chairman

Financial Statements

Consolidated Income Statement

for the year ended 30 September 2015

	Note	2015	2014
	Note	£000	£000
Gross rental income		7,664	13,851
Property operating expenses		(1,960)	(3,865)
Net rental income		5,704	9,986
(Loss)/Profit on disposal of investment properties		(7)	475
Loss on disposal of subsidiaries		-	(1,312)
Loss from change in fair value of investment properties	7	(1,638)	(496)
Administrative expenses including non-recurring items	3	(1,699)	(2,152)
Net other income	4	-	5
Share of results from jointly controlled entities	8	-	(4)
Operating profit\(loss) before net financing costs		2,360	6,502
Financing income*	5	18	3
Financing expenses*	5	(4,086)	(7,566)
Movement in fair value of financial derivatives	5	1,728	2,267
Profit before tax		20	1,206
Taxation	6	-	-
Profit the year		20	1,206
			-
Profit for the financial year attributable to equity holders of the Company		20	1,206
Basic and diluted profit per share on loss for the year	16		1.5p
Basic and diluted profit per share on continuing operations for the year	16		1.5p

* Excluding movement in the fair value of financial derivatives.

Consolidated Statement of Comprehensive Income

for the year ended 30 September 2015

	2015	2014
	£000	£000
Profit\(Loss) for the financial year	20	1,206
Total comprehensive income for the year	20	1,206

Attributable to:
Equity holders of the parent Company	20	1,206

Consolidated Balance Sheet

as at 30 September 2015

	Note	2015	2014
	Note	£000	£000
Non-current assets
Investment properties	7	79,468	86,201
Investments in jointly controlled entities	8	-	292
		79,468	86,493
Current assets
Trade and other receivables	9	2,028	3,461
Investment properties held for sale	7	2,387	2,035
Cash	10	12,740	15,662
		17,155	21,158
Total assets		96,623	107,651

Non-current liabilities
Interest bearing loans and borrowings	11	(54,688)	(63,642)
Finance lease liabilities	13	(659)	(672)
Derivative financial instruments	17	-	(1,634)
		(55,347)	(65,948)
Current liabilities
Interest bearing loans and borrowings	11	(1,001)	(1,164)
Trade and other payables	12	(3,129)	(3,319)
Derivative financial instruments	17	(2,294)	(2,388)
		(6,424)	(6,871)
Total liabilities		(61,771)	(72,819)

Net assets		34,852	34,832

Equity
Issued capital	14	18,334	18,334
Reserves	14	3,773	3,773
Capital redemption reserve	14	1,764	1,764
Retained earnings		10,981	10,961
Total attributable to equity holders of the Company		34,852	34,832

Consolidated Statement of Cash Flows

for the year ended 30 September 2015

		2015	2014
	Note	£000	£000
Operating activities
Profit\(Loss) for the year		20	1,206
Adjustments for:
Loss from change in fair value of investment properties	7	1,638	496
Net financing costs	5	2,340	5,296
(Loss)/Profit on disposal of investment properties		7	(475)
Loss on disposal of subsidiaries	2		1,312
Share of results of jointly controlled entities	8		4
		4,005	7,839
Increase/(decrease) in trade and other receivables		1,419	1,220
(Decrease)/increase in trade and other payables		(147)	(1,108)
		5,277	7,951
Interest paid		(4,129)	(8,026)
Loan arrangement fees paid		(79)	(143)
Interest received		18	3
Corporation tax paid		-	-
Net cash from operating activities		1,087	(215)

Investing activities
Net proceeds from sale of investment properties		5,143	4,255
Cash transferred on disposal of subsidiaries		-	(1,350)
Proceeds from sale of subsidiaries		-	10,283
Acquisition and improvements to investment properties	7	(407)	(1,045)
Repayment of investment in jointly controlled entities	8	292	210
Cash flows from investing activities		5,028	12,353

Net cash flows from operating activities and investing activities		6,115	12,138

Financing activities
Repayment of borrowings		(9,037)	(3,102)
Dividends paid	15	-	-
Cash flows from financing activities		(9,037)	(3,102)

Net (decrease)/ increase in cash		(2,922)	9,036
Cash at beginning of year		15,662	6,626
Cash at end of year	10	12,740	15,662

Consolidated Statement of Changes in Equity

for the year ended 30 September 2015

			Capital
	Share capital		redemption	Retained
	-	Reserves	reserve	earnings	Total
	£000	£000	£000	£000	£000
Balance at 1 October 2013	18,334	3,773	1,764	9,755	33,626
Total comprehensive income for the year
Profit for the year	-	-	-	1,206	1,206
Transactions with owners, recorded directly
in equity
Dividends	-	-	-	-	-
Total contributions by and distributions to owners	-	-	-	-	-

Balance at 30 September 2014	18,334	3,773	1,764	10,961	34,832
Total comprehensive income for the year
Profit for the year	-	-	-	20	20
Transactions with owners, recorded directly
in equity
Dividends	-	-	-	-	-
Total contributions by and distributions to owners	-	-	-	-	-

Balance at 30 September 2015	18,334	3,773	1,764	10,981	34,852

Notes to the Financial Statements

for the year ended 30 September 2015

1. Accounting Policies

Basis of Preparation

The Local Shopping REIT plc ("the Company") is a company incorporated and domiciled in the UK. The Group's financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU (adopted "IFRS") and in accordance with the provisions of the Companies Act 2006.

The financial statements are prepared in pounds sterling, rounded to the nearest thousand. They have been prepared under the historical cost convention except for the following assets which are measured on the basis of fair value: investment properties, derivative financial instruments, other investments and investment properties held for sale.

The directors have considered whether it is appropriate to prepare the financial statements on a going concern basis. During the preceding year the Group disposed of a number of properties. During the current year 37 properties were sold individually. The directors are pursuing a number of approaches for selling down the property portfolio and note that this may take several years to achieve, depending on market conditions. The directors review progress with the investment strategy on a regular basis. The directors note that a number of alternative strategies remain available to the Company, such as selling the Company as a going concern or continuing t trade as a going concern. They will continue to evaluate these, and will make recommendations to shareholders on alternative strategies if appropriate.

The directors have prepared profit and cash flow forecasts for the period to 30 September 2018 which include assumptions relating to the sale of properties under the current investment strategy which the directors consider to be reasonable. These forecasts project that the Group's and Company's funding needs will be comfortably met by the existing banking facility agreements without any breach of related covenants over the remaining life of the facilities which expire in April 2018. The directors have a reasonable expectation that the banking facilities can be renewed on comparable terms sufficient to continue to trade as a going concern after April 2018, if necessary.

On the basis of these projections the directors consider that the Group will continue to be compliant with its banking covenants and sufficient resources will be available to enable it to continue as a going concern for at least the next 12 months. The financial statements do not include the adjustments that would result from the going concern basis of preparation being inappropriate.

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements.

Basis of Consolidation

The consolidated financial statements include the financial statements of the Company and all its subsidiary undertakings up to 30 September 2015. Subsidiaries are consolidated from the date on which the Group obtains control, being the power to govern the financial and operating policies of the entity so as to obtain benefit from its activities. They continue to be consolidated until the date that such control ceases. The financial statements of subsidiaries are prepared using consistent accounting policies. Inter-company transactions and balances are eliminated.

Investment Property

Investment properties are those properties owned by the Group that are held to earn rental income or for capital appreciation or both and are not occupied by the Company or any of its subsidiaries.

The fair value of investment properties is based on market values being an estimated amount for which a property could be exchanged on the date of valuation under an arm's length transaction between a willing buyer and seller after proper marketing wherein the parties had acted knowledgeably, prudently and without compulsion. Professional external valuers have valued a sample selected by themselves of 25% of the existing portfolio at the half year and year end and all new purchases since the previous valuation to the half year and to the year end. The remainder of the portfolio has been valued on the basis of market value at the year end by the directors who have appropriate recognised professional qualifications and recent experience of the location and category of the property being valued.

Investment properties are treated as acquired at the point the Group assumes the significant risks and returns of ownership. Subsequent expenditure is charged to the asset's carrying value only when it is probable that future economic benefits associated with the expenditure will flow to the Group and the cost of each item can be reliably measured. All other repairs and maintenance costs are charged to the Income Statement during the period in which they are incurred.

Disposals of investment properties are recognised on completion; profits and losses arising are recognised through the Income Statement, the profit is determined as the difference between the sales proceeds and the carrying amount of the asset at the last valuation date plus any additional expenditure incurred since that date.

Interest on loans associated with acquiring investment properties is expensed on an effective interest rate basis.

Rental income from investment properties is accounted for as described below.

Investment Properties Held for Sale

Investment properties held for sale are included in the Balance Sheet at their fair value. In determining whether assets no longer meet the investment criteria of the Group, consideration has been given to the conditions required under IFRS 5.

An investment property shall classify a non-current asset as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use.

The asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and its sale must be highly probable as at the year end.

Head Leases

Where a property is held under a head lease and is classified as an investment property, it is initially recognised as an asset based on the sum of the premium paid on acquisition and if the remaining life of the lease at the date of acquisition is considered to be material, the net present value of the minimum ground rent payments. The corresponding rent liability to the leaseholder is included in the Balance Sheet as a finance obligation in current and non-current liabilities.

The payment of head rent reduces the gross liability and the interest element of the finance lease is charged to the Income Statement. Head leases considered not to have a material life remaining at the date of acquisition are accounted for as operating leases with the head rent paid being expensed through the Income Statement.

Joint arrangements

The Group undertakes a business activity through a joint arrangement. Joint arrangements exist where two or more parties have joint control. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The Group's joint arrangement is a joint venture.

Joint Ventures

Joint ventures are joint arrangements in which the parties with joint control of the arrangement have rights to the net assets of the arrangement. A separate vehicle, not the parties, will have rights to the assets and obligations to the liabilities, relating to the arrangement.

Joint ventures are accounted for using the equity method. Under the equity method, the interests in the joint venture are carried in the Balance Sheet at cost plus post-acquisition changes in the Group's share of their net assets, less distributions received and less any impairment in value of the individual investment. The Income statement reflects the Group's share of the joint venture's results after interest and tax.

During the year, the joint venture commenced the process of members' voluntary liquidation.

Trade and Other Receivables

Trade and other receivables are initially recognised at fair value and subsequently held at amortised cost less impairment. Impairment is made where it is established that there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivable. The impairment is recorded in the Income Statement.

Cash and Cash Equivalents

Cash and cash equivalents comprise cash balances and deposits held on call. Cash equivalents are short-term, highly liquid investments with original maturities of three months or less.

Derivative Financial Instruments and Hedging

The Group uses derivative financial instruments such as interest rate swaps to economically hedge risks associated with interest rate fluctuations. The Group does not hold or issue derivatives for trading purposes.

Such instruments are initially measured at fair value on the date on which a contract is entered into and are subsequently re-measured at fair value. Financial derivatives are recognised as current and non-current based on the maturity profile of the associated cash flows.

The Group has determined that the derivative financial instruments held did not qualify as effective for hedge accounting under the criteria set out in IAS 39 and consequently any gains or losses arising from changes in their fair value are taken to the Income Statement. In the future and on an ongoing basis as new derivative financial instruments are entered into, the directors will review the derivative contracts to consider whether they qualify for hedge accounting.

Financial Assets

Financial assets are impaired when there is objective evidence that the cash flows from the financial asset are reduced.

Trade and Other Payables

Trade and other payables are initially recognised at fair value and subsequently held at amortised cost less impairment.

Ordinary Share Capital

External costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds.

Shares which have been repurchased are classified as treasury shares and shown in retained earnings. They are recognised at the trade date for the amount of consideration paid, together with directly attributable costs. This is presented as a deduction from total equity. Shares held by the Employee Benefit Trust are treated as being those of the Group until such time as they are distributed to employees, when they will be expensed in the profit and loss account.

The nominal value of shares cancelled has been taken to a capital redemption reserve.

Rental Income

Rental income from investment properties leased out under operating leases is recognised in the Income Statement on a straight-line basis over the term of the lease. When the Group provides lease incentives to its tenants the cost of incentives are recognised over the lease term, on a straight-line basis, as a reduction to income.

Other Income

Other income comprises administration fees charged on lease renewals.

Taxation

Corporation tax on the profit or loss for the year comprises current and deferred tax. Corporation tax is recognised in the Income Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

As a REIT, the Group will be exempt from corporation tax on the profits and gains from its property investment business, provided it continues to meet certain conditions. Non-qualifying profits and gains of the Group (the residual business) continue to be subject to corporation tax. Therefore, current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date and any adjustment to tax payable in respect of previous years. The REIT entry charge is expensed on the date of entry to the REIT regime. Deferred tax is provided using the balance sheet liability method. Provision is made for temporary differences between the carrying amounts of assets and liabilities in the financial statements for financial reporting purposes and the amounts used for taxation purposes. Deferred income tax is calculated after taking into account any indexation allowances and capital losses on an undiscounted basis. 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 enacted or substantially enacted at the balance sheet date. Deferred tax assets are recognised only to the extent that it is probable that future profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax assets and liabilities are only offset if there is a legally enforceable right of set-off.

Pensions

The Company has no pension arrangements in operation.

Share-based Payments

There were no share-based payment arrangements during the period.

Employee Benefit Trust

The Group operates an Employee Benefit Trust in order to hedge its obligations under the CSOP and LTIP schemes. The Group either purchases its own shares directly or it funds the trust to acquire shares in the Company. Transactions of the Employee Benefit Trust are treated as being those of the Company and are therefore reflected in the Group financial statements.

Use of Estimates and Judgements

To be able to prepare accounts according to generally accepted accounting principles, management must make estimates and assumptions that affect the asset and liability items and revenue and expense amounts recorded in the financial statements. These estimates are based on historical experience and various other assumptions that management and the Board of directors believe are reasonable under the circumstances. The results of these considerations form the basis for making judgements about the carrying value of assets and liabilities that are not readily available from other sources.

The areas requiring the use of estimates and judgements that may significantly impact the Group's earnings and financial position include the estimation of: the fair value of investment properties, derivative financial instruments and trade receivables.

The valuation of the Group's investment properties is the main area of judgement exercised by the Board in respect of the Group's results. The Board obtains an external valuation of the portfolio carried out by professionally qualified valuers in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors in respect of all properties purchased during each financial year and a further 25% of the portfolio at the half year and year end as selected by the valuers. The valuers were acting as independent valuers and have good information and experience of the current market prices for properties similar to those owned by the Group. Their opinion of Market Value was primarily derived using comparable recent market transactions on an arm's length basis. The tone of their valuation has been adopted by the directors to value the remainder of the portfolio. The assumptions underlying the valuation of the commercial properties within the portfolio include: future rental income, an appropriate discount rate, any planned capital expenditure and the strength of the local letting market in relation to the Market Rent of any letting voids. In addition to these assumptions, in respect of the residential element of the portfolio, a discount of 85% is typically applied to reflect vacant possession.

The valuation of derivative financial instruments and the fixed rate loan are also areas where judgement has been exercised by the Board. These assets and liabilities have been valued by the Group's bankers. These valuations have been relied upon by the Board.

The Group is required to assess whether there is sufficient objective evidence to require the impairment of individual trade receivables. It does this through a regular review of arrears with consideration given to any specific circumstances relating to the receivable.

Segmental reporting

IFRS 8 requires operating segments to be identified on the basis of internal reports that are regularly reported to the chief operating decision maker to allocate resources to the segments and to assess their performance.

Since the strategy review in July 2013 the Group has identified one operation and one reporting segment which is reported to the Board of directors on a quarterly basis. The Board of directors is considered to be the chief operating decision maker.

New Standards and Interpretations Not Yet Adopted As at September 2015, the following standards and interpretations or amendment there to, which have not been applied in these financial statements, were in issue but not yet effective. The effect of their adoption on the financial statements in future periods has not yet been ascertained.

Applicable for the year

commencing on or after:

Amendments to IFRS 11 (Accounting for Acquisitions of Interests in Joint Operations)	1 January 2016
Amendments to IAS 16 and IAS 38 (Clarification of Acceptable Methods of Depreciation and Amortisation	1 January 2016
Amendments to IAS 27 (Equity Method in Separate Financial Statements) -- not yet endorsed	1 January 2016
Amendments to IFRS 10 and IAS 28 (Sale or Contribution of Assets between an Investor and its Associate or Joint Venture ) - not yet endorsed	1 January 2016
Annual Improvements to IFRSs - 2012-2014 Cycle - not yet endorsed	1 January 2016
Amendments to IFRS 10, IFRS 12 and IAS 28 (Investment entities: Applying the Consolidation Exception ) - not yet endorsed	1 January 2016
Amendments to IAS 1 (Disclosure initiative) - not yet endorsed	1 January 2016
IFRS 9 Financial Instruments - not yet endorsed	1 January 2018
IFRS 15 Revenue from Contracts with Customers - not yet endorsed	1 January 2018

2. Disposal of subsidiary companies

During the preceding year the company disposed of two subsidiaries, NOS 2 Limited and NOS 3 Limited by the sale of their entire share capital.

The loss on sale was calculated as follows:

Sale proceeds			11,100
Deduct:
Assets of the subsidiaries
	Properties	78,199
	Debtors and prepayments	104
	Cash	1,350


		79,653

Liabilities of the subsidiaries
	Creditors and accruals	(1,319)
	Bank loans	(66,739)


		(68,058)


Net assets of subsidiaries		11,595
Fees and other costs		817


			12,412


Net loss			(1,312)

3. Administrative Expenses

a) The following fees have been paid to the Group's Auditors:

	2015	2014
	£000	£000

Auditors' remuneration for audit services:
Audit of parent Company	33	37
Audit related assurance services	16	19
Statutory audit of subsidiaries	37	43
Auditors' remuneration for non-audit services:
Tax services	27	27
Other services supplied	7	15

The other services supplied related to the disposal under project Minard of NOS 2 Limited and NOS 3 Limited in 2014 and in 2015 relate to professional advice received in connection with a transaction which did not proceed.

b) Included in administrative expenses is directors' remuneration as disclosed in the Remuneration Report. The company has no other paid employees.

Directors' emoluments are disclosed separately in the Remuneration Report.

c) Share Awards

There were no material share-based payment arrangements during the period.

d) Non-recurring items

IAS 1 (Revised) - "Presentation of financial statements" requires material items of income and expenditure to be disclosed separately. The amounts are items which, in management's opinion, need to be disclosed by virtue of their size or incidence in order for the user to obtain a proper understanding of the financial information. These amounts are considered to be £nil (2014: £nil).

4. Net Other Income

	2015	2014
	£000	£000


Other income	-	5
Other expenses	-	-


	-	5

5. Net Financing Costs

	2015	2014
	£000	£000
Interest receivable	18	3
Interest receivable excluding fair value movements	18	3
Fair value gains on derivative financial instruments (note 18)	1,728	2,267
Financing income	1,746	2,270

Bank loan interest	(3,937)	(7,366)
Amortisation of loan arrangement fees	(100)	(146)
Head rents treated as finance leases	(49)	(54)
Financing expenses excluding fair value movements	(4,086)	(7,566)
Fair value losses on derivative financial instruments (note 18)	-	-
Financing expenses	(4,086)	(7,566)

Net financing costs	(2,340)	(5,296)

6. Taxation

	2015	2014
	£000	£000
Profit\(loss) before tax	20	1,206

Corporation tax in the UK of 20.5% (2014: 22%)	4	265
Tax relief available from REIT status	(464)	(1,387)
Effects of:
Revaluation deficit and other non-deductible items	445	391
Deferred tax asset not recognised	14	731

Factors that may affect future current and total tax charges

Reductions in the UK corporation tax rate from 23% to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015) were substantively enacted on 2 July 2013. Further reductions to 19% (effective 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October 2015. This will reduce the company's future current tax charge accordingly and reduce the deferred tax asset at 30 September (which has been calculated based on the rate of 20% substantively enacted at the balance sheet date) by £0.23m. From 11 May 2007, the Group elected to join the UK REIT regime. As a result, the Group will be exempt from corporation tax on the profits and gains from its property investment business from this date, provided it continues to meet certain conditions. Non-qualifying profits and gains of the Group (the residual business) continue to be subject to corporation tax. The directors consider that all the rental income post-11 May 2007 originates from the Group's tax exempt business.

Due to the availability of losses no provision for corporation tax has been made in these accounts. The deferred tax asset not recognised relating to these losses can be carried forward indefinitely. It is not anticipated that sufficient profits from the residual business will be generated in the foreseeable future to utilise the losses carried forward as the current year losses will be adequate to cover foreseeable profits. The non-provided deferred tax asset at 30 September 2015 was £2.35 m (2014: £3.22m). Amounts estimated at £0.1m included in tax relief available for REIT status may become subject to Corporation Tax under s543 CTA 2010 if relief is not granted. In this event, the Company's future tax charge is likely to increase by up to £0.1m.

7. Investment Properties

	Freehold	Leasehold
	Investment	Investment
	Properties	Properties	Total
	£000	£000	£000
At 30 September 2013	134,789	31,318	166,107
Additions	51	994	1,045
Disposals	(68,217)	(13,878)	(82,095)
Fair value adjustments	653	(1,149)	(496)
Investment properties held for sale	1,487	153	1,640
At 30 September 2014	68,763	17,438	86,201
Additions	376	31	407
Disposals	(4,267)	(883)	(5,150)
Fair value adjustments	(819)	(819)	(1,638)
Investment properties held for sale	(428)	76	(352)
At 30 September 2015	63,625	15,843	79,468

The investment properties have all been revalued to their fair value at 30 September 2015.

At the half year and year end, all properties acquired in those six months, together with a sample selected by the valuers of 25% of the portfolio, at the half year and at the year end have been valued by Allsop LLP, a firm of independent Chartered Surveyors. The valuations were undertaken in accordance with the Royal Institution of Chartered Surveyors Appraisal and Valuation Standards on the basis of market value. Market value is defined as the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction, after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

The disposals balance at 30 September 2014 includes properties at carrying value of £78.2m that were disposed of as part of the NOS 2 and NOS 3 transaction.

The remainder of the portfolio has been valued on the basis of market value by the directors who have an appropriate recognised professional qualification and recent experience in the location and category of the property being valued.

All rental income recognised in the Income Statement is generated by the investment properties held and all direct operating expenses incurred resulted from investment properties that generated rental income.

A reconciliation of the portfolio valuation to the total value given in the Balance Sheet for investment properties is as follows:

	2015	2014
	£000	£000
Portfolio valuation	81,196	87,564
Investment properties held for sale	(2,387)	(2,035)
Head leases treated as investment properties held under finance leases per IAS 17	659	672
Total per Balance Sheet	79,468	86,201

8. Investment in Joint Venture

The Group has the following investment in a joint venture:

On 28 September 2011 an agreement was entered into with Gracechurch Commercial Investments Limited ("Gracechurch"), a newly incorporated entity. The initial investment made was £500,000. The principal activity of the entity was to manage properties for investment purposes. During the 2014 year the entire portfolio of Gracechurch was disposed of, and Gracechurch went into voluntary liquidation. During the current year this liquidation was finalised.

The summarised financial information in respect of the Group's share of the jointly controlled entities is shown below.

	Gracechurch
At 30 September 2013	507
Share of results, net of tax	(4)
Distributions received	(210)
At 30 September 2014	293
Distributions received	(293)
At 30 September 2015	Nil

Year ended 30 September 2014

	Gracechurch
	£000

Current assets	317
Current liabilities	(24)

	293

Represented by:
Capital	500
Brought forward share of results	(203)
Share of results, net of tax	(4)

Group's share of net assets	293

9 Trade and Other Receivables

	2015	2014
	£000	£000
Trade receivables	746	1,100
Other receivables	171	1,640
Prepayments	1,111	721
	2,028	3,461

10. Cash

	2015	2014
	£000	£000
Cash in the Statement of Cash Flows	12,740	15,662

Included in bank balances are amounts held pending the next interest payment due in October 2015. Until the interest payment has been deducted from these balances the cash is not available for use by the Group. At the year end the amount held on such account was £1,289,294(2014: £1,240,306) with accruals for interest due of £633,355 (2014: £676,647)

11. Interest Bearing Loans and Borrowings

	2015	2014
	£000	£000
Non-current liabilities
Secured bank loans	54,987	63,961
Loan arrangement fees	(299)	(319)
	54,688	63,642
Current liabilities
Current portion of secured bank loans	1,001	1,164

All bank borrowings are secured by fixed charges over certain of the Group's property assets and floating charges over the companies which own the assets charged.

For more information about the Group's exposure to interest rate risk, see note 18.

12. Trade and Other Payables

	2015	2014
	£000	£000
Trade payables	521	399
Other taxation and social security	225	5
Other payables	613	967
Accruals and deferred income	1,770	1,948
	3,129	3,319

Other payables include rent deposits held in respect of commercial tenants of £430,000 (2014: £469,000).

13. Leasing

Obligations Under Finance leases

Finance lease liabilities on head rents are payable as follows:

	Minimum Lease Payment	Interest	Principal
	£000	£000	£000
At 30 September 2013	6,809	(5,887)	922
(Payments)/charge	(54)	54	-
Disposals	(2,028)	1,778	(250)
At 30 September 2014	4,727	(4,055)	672
Disposals	(80)	67	(13)
(Payments)/charge	(48)	48	-
At 30 September 2015	4,599	(3,940)	659

In the above table, interest represents the difference between the carrying amount and the contractual liability/cash flow.

All leases expire in more than five years.

14. Capital and Reserves

Share Capital

		2015			2014
	Ordinary 20p Shares			Ordinary 20p Shares
	Number		Amount	Number		Amount
	000		£000	000		£000

Allotted, called up and fully paid	91,670		18,334	91,670		18,334

Investment in Own Shares

At the year end, 9,164,017 shares were held in treasury (2014: 9,164,017).

The number of shares held by the Company's Employee Benefit Trust, LSR Trustee Limited at the year end was 1,096,545 (2014: 1,096,545). During the year the EBT transferred no shares (2014: Nil) to employees on the vesting of awards under the Long Term Incentive Plan. During the year the EBT transferred no shares to employees on the exercise of awards under the Company's Share Option Scheme.

Reserves

The value of shares issued to purchase Gilfin Property Holdings Limited in excess of their nominal value has been shown as a separate reserve in accordance with the Companies Act 2006.

Capital Redemption Reserve

The capital redemption reserve arose in prior years on the cancellation of 8,822,920 Ordinary 20p Shares.

Calculation of Net Asset Value Per Share (NAV)

	2015	2014
	£000	£000
Net assets	34,852	34,832
Fair value of derivative financial instruments (see note 18)	2,294	4,022
Adjusted net assets	37,146	38,854


	2015	2014
	Number	Number

Allotted, called up and fully paid shares	91,670	91,670
Treasury shares	(9,164)	(9,164)
Number of shares	82,506	82,506

NAV per share	42p	42p
Adjusted NAV per share	45p	47p

15. Dividends

No dividends were paid during the current and previous year.

16. Earnings Per Share

Basic Earnings Per Share

The calculation of basic earnings per share was based on the loss attributable to Ordinary Shareholders and a weighted average number of Ordinary Shares outstanding, calculated as follows:

Profit/(Loss) Attributable to Ordinary Shares

	2015	2014
	£000	£000

Profit for the year	20	1,206

Profit for the year from discontinued operations	-	-

Profit\ on continuing operations for the year	20	1,206

Weighted Average Number of Ordinary Shares

	2015	2014
	Number	Number
	000's	000's
Issued Ordinary Shares at 1 October 2014	91,670	91,670
Shares held by EBT	(1,097)	(1,097)
Treasury shares	(9,164)	(9,164)
Weighted average number of Ordinary Shares at 30 September 2015	81,409	81,409

Diluted Earnings Per Share

There is no difference between basic and diluted earnings per share in the prior year and no difference in the current year.

17. Derivative Financial Instruments

Derivative financial instruments held by the Group are interest rate swaps used to manage the Group's interest rate exposure. These are shown in the Balance Sheet as follows:

		Movements		Movements
	Fair Value	in Income	Fair Value	in Income	Fair Value
	2013	Statement	2014	Statement	2015
	£000	£000	£000	£000	£000
Non-current liabilities	(3,872)	2,238	(1,634)	1634	-
Current liabilities	(2,417)	29	(2,388)	94	(2,294)
Fair value	(6,289)	2,267	(4,022)	1,728	(2,294)

At 30 September 2015 and 30 September 2014 these derivative financial instruments did not qualify as effective swaps for hedge accounting under the criteria set out in IAS 39.

A summary of the swaps and their maturity dates are as follows:

Notional value of swap	Effective date	Maturity date	Rate payable		Movements
			on fixed leg	Fair Value	in Income	Fair Value
£000			%	2014	Statement	2015
20,178	16/07/2007	31/01/2017	4.85	(1,658)	571	(1,087)
22,500	30/04/2013	20/07/2016	5.05	(1,612)	789	(823)
10,500	30/04/2013	29/07/2016	5.05	(752)	368	(384)
				(4,022)	1,728	(2,294)

The interest rate receivable on each swap is LIBOR. The notional value of the £20,178,000 swap amortises at a rate of £200,000 per quarter. Prior to the year end it was agreed that this swap would be terminated on 30^th October 2015, and accordingly has been treated as a current liability.

The derivative financial instruments included in the above tables are stated at their fair value based on quotations from the Group's bank.

More details of the Group's policy regarding the management of interest rate risk are given in note 18.

18. Financial Instruments and Risk Management

The Board of directors has overall responsibility for the establishment and oversight of the Group's risk management framework.

As described in the Corporate Governance report, this responsibility has been assigned to the executive directors with support and feedback from the Audit Committee. The Audit Committee oversees how management monitors compliance with the Group's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.

The Group has identified exposure to the following financial risks from its use of financial instruments: capital management risk, market risk, credit risk and liquidity risk.

Capital Management Risk

The Group's capital consists of long-term borrowings, cash and equity attributable to the shareholders. The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain the future development of the business. The Board regularly reviews the Group's capital structure, cost of capital, gearing levels and other specific measures. From time to time, the Company purchases its own shares when the Board considers that this course of action would enhance the value of the Group for shareholders. The Group has had a policy of paying 100% of recurring profits as a dividend each year. Following the restructuring in July 2013 dividend policy will be reviewed half-yearly by the Board. No dividend has been paid during the year. There were no other changes in the Group's approach to capital management during the year.

Market Risk

Market risk is the risk that changes in market conditions, such as interest rates, foreign exchange rates and equity prices, will affect the Group's profit or loss and cash flows. The Group's exposure to market risks is restricted to interest rate risk only. The Group borrows at floating rates of interest and uses financial instruments to fix the floating rates of interest in accordance with its policy.

The Group and its jointly controlled entities do not speculate in financial instruments. They are only used to limit their exposure to interest rate fluctuations. The Group's policy is to hedge between 60% and 100% of its interest rate exposure. At 30 September 2015, 95% (2014: 83%) of the Group's debt was fixed or protected, as shown below.

	At 30 September 2015			At 30 September 2014
	Interest	Notional	Loans not	Interest	Notional	Loans not
	bearing	value of	protected	bearing	value of	protected
	loans	swaps	by swaps	loans	swaps	by swaps
	£000	£000	£000	£000	£000	£000
Variable rate loan	55,988	53,178	2,810	65,125	53,979	11,146
	55,988	53,178	2,810	65,125	53,979	11,146

The variable rate loan is protected by interest rate swaps which are carried at fair value. These have been identified as Level 2 in the fair value hierarchy. Level 2 is defined as inputs other than quoted prices included within Level 1 that are observable for the liability either directly (i.e. as prices) or indirectly (as derived from prices).

Sensitivity Analysis

IFRS 7 requires an illustration of the impact on the Group's financial performance of changes in interest rates. The following sensitivity analysis has been prepared in accordance with the Group's existing accounting policies and considers the impact on the Income Statement and on equity of an increase of 100 basis points (1%) in interest rates. As interest rates were below 1% in the current and previous year, it has not been possible to consider the impact of a decrease of 100 basis points on interest income and expense as it would result in a negative rate of interest. Therefore, the impact of a fall in interest rates has been restricted to 0%. It has been possible to consider the impact of a 1% change in rates on the fair value of derivatives as the contracted rates are greater than 1%. All other variables remain the same and any consequential tax impact is excluded. The analysis assumes that changes in market interest rates affect the interest income and interest expense of derivative financial instruments. Changes in the fair value of derivative financial instruments have been estimated by discounting future cash flows at appropriate market rates prevailing at each year end.

Actual results in the future may differ materially from these assumptions and as such, these tables should not be considered as a projection of likely future gains and losses.

	2015				2014
	Impact on income		Impact on equity		Impact on income		Impact on equity
	Number	Amount	Number	Amount	Number	Amount	Number	Amount
	+	-	+	-	+	-	+	-
	£000	£000	£000	£000	£000	£000	£000	£000

Impact on Interest Income
and expense	169	13	169	131	63	111	63	111
Impact on fair value of
derivatives	627	363	627	363	1,075	608	1,075	608

Credit Risk

Credit risk is the risk of financial loss to the Group if a tenant, bank or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group's receivables from tenants, cash and cash equivalents held by the Group's banks and derivative financial instruments entered into with the Group's banks.

Trade and Other Receivables

The Group's exposure to credit risk is influenced mainly by the individual characteristics of each tenant. The Group has over 1,000 tenants in over 300 properties. There is no significant concentration of credit risk due to the large number of small balances owed by a wide range of tenants who operate across all retail sectors. Geographically there is no concentration of credit risk in any one area of the UK. An analysis of the business by region, user type and tenant grade is given on pages 2-3. The level of arrears is monitored monthly by the Group and more frequently on a tenant by tenant basis by the asset managers.

Cash, Cash Equivalents and Derivative Financial Instruments

Two major UK banks provide the majority of the banking services used by the Group. Financial derivatives are only entered into with these core banks

The Group's financial assets which are exposed to credit risk are classified as follows and are shown with their fair value:

30 September 2015

	At	Available	At Amortised	Total Carrying
	Fair Value	For Sale	Cost	Amount	Fair Value
	£000	£000	£000	£000	£000
Investments in joint ventures	--	--	-	-	-
Cash and cash equivalents	--	12,740	--	12,740	12,740
Trade receivables	--	--	746	746	746
Other receivables	--	--	171	171	171
	--	12,740	917	13,657	13,657

30 September 2014

	At	Available	At Amortised	Total Carrying
	Fair Value	For Sale	Cost	Amount	Fair Value
	£000	£000	£000	£000	£000
Investments in joint ventures	--	--	293	293	293
Cash and cash equivalents	--	15,662	--	15,662	15,662
Trade receivables	--	--	1,100	1,100	1,100
Other receivables	--	--	1,640	1,640	1,640
	--	15,662	3,033	18,695	18,695

For all classes of financial assets, the carrying amount is a reasonable approximation of fair value.

The ageing of trade receivables is as follows

	2015			2014
	Total	Impairment	After Impairment	Total	Impairment	After Impairment
	£000	£000	£000	£000	£000	£000
Not yet due	175	-	175	311	-	311
Past due by one to 30 days	327	(3)	324	368	(2)	366
Past due by 30-60 days	87	(6)	81	220	(5)	215
Past due by 60-90 days	27	(12)	15	32	(8)	24
Past due by 90 days	430	(279)	151	358	(174)	184
	1,046	(300)	746	1,289	(189)	1,100

Trade receivables that are not impaired are expected to be recovered.

Other receivables at 30 September 2015 and 30 September 2014 were not past due.

The movement in the trade receivables' impairment allowance during the year was as follows:

	2015	2014
	£000	£000
Balance at beginning of year	189	264
Impairment loss recognised	134	617
Trade receivables written off	(23)	(692)
Balance at end of year	300	189

The impairment loss recognised relates to the movement in the Group's assessment of the recoverability of outstanding trade receivables.

The movement in the trade receivables impairment allowance in relation to NOS 2 and NOS 3 (disposed of during the preceding year) is a net write off of £178k.

Liquidity Risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's approach to managing liquidity risk is to ensure, as far as possible, that it will always have adequate resources to meet its liabilities when they fall due for both the operational needs of the business and to meet planned future investments. This position is formally reviewed on a quarterly basis or more frequently should events require it.

The Group's financial liabilities are classified and are shown with their fair value as follows:

30 September 2015

	At	At Amortised	Total Carrying
	Fair Value	Cost	Amount	Fair Value
	£000	£000	£000	£000
Interest bearing loans and liabilities	-	55,689	55,689	55,689
Finance lease liabilities	-	659	659	659
Derivative financial instruments	2,294	-	2,294	2,294
Trade payables	-	521	521	521
Other payables	-	540	540	540
Accruals	-	918	918	918
	2.294	58,327	60,621	60,621

30 September 2014

	At	At	Total
	Fair Value	Amortised	Carrying	Fair Value
		Cost	Amount	-
	£000	£000	£000	£000
Interest bearing loans and liabilities	-	64,806	64,806	64,806
Finance lease liabilities	-	672	672	672
Derivative financial instruments	4,022	-	4,022	4,022
Trade payables	-	399	399	399
Other payables	-	830	830	830
Accruals	-	936	936	936
	4,022	67,643	71,665	71,665

For all classes of financial liabilities, other than the fixed rate loan, the carrying amount is a reasonable approximation of fair value.

The fair value of the fixed rate element of the interest bearing loan disclosed above has been valued by the Group's bankers.

The maturity profiles of the Group's financial liabilities are as follows:

30 September 2015

		Contractual	Within	One	Two	Three	Four	Over
	Carrying	Cash	One	to Two	to Three	to Four	to Five	Five
	Value	Flows	Year	Years	Years	Years	Years	Years
	£000	£000	£000	£000	£000	£000	£000	£000
Interest bearing loans and borrowings	55,689	59,444	2,429	2,542	54,473	-	-	-
Finance lease liabilities	659	4,727	48	48	48	48	48	4,487
Derivative financial instruments	2,294	2,718	2,321	397	-	-	-	-
Trade payables	521	521	521	-	-	-	-	-
Other payables	540	540	540	-	-	-	-	-
Accruals	918	918	918	-	-	-	-	-
	60,621	68,868	6,777	2,987	54,521	48	48	4,487

30 September 2014

		Contractual	Within	One	Two	Three	Four	Over
	Carrying	Cash	One	to Two	to Three	to Four	to Five	Five
	Value	Flows	Year	Years	Years	Years	Years	Years
	£000	£000	£000	£000	£000	£000	£000	£000
Interest bearing loans and borrowings	64,806	72,292	2,794	2,749	2,696	64,053	-	-
Finance lease liabilities	672	4,732	47	47	47	47	47	4,497
Derivative financial instruments	4,022	4,575	2,388	1,982	205	-	-	-
Trade payables	399	399	399	-	-	-	-	-
Other payables	830	830	830	-	-	-	-	-
Accruals	936	936	936	-	-	-	-	-
	71,665	83,764	7,394	4,778	2,948	64,100	47	4,497

Contractual cash flows include the undiscounted committed interest cash flows and, where the amount payable is not fixed, the amount disclosed is determined by reference to the conditions existing at the year end.

19. Operating Lease Arrangements

a) Leases as Lessee

The company has no leases where it is a lessee

b) Leases as Lessor

The investment properties are let under operating leases. Future minimum lease payments receivable by the Group under non-cancellable operating leases are receivable as follows:

	2015	2014
	£000	£000
Less than one year	1,907	2,169
Between one and five years	2,519	2,520
More than five years	3,126	3,226
	7,552	7,915

20. Capital Commitments

At 30 September 2015 the Group had contracted capital expenditure for which no provision has been made in these financial statements of £24,000 (2014: £78,000).

21. Related Parties

Transactions with Key Management Personnel

The only transactions with key management personnel relate to remuneration which is set out in the Remuneration Report.

The key management personnel of the Group for the purposes of related party disclosures under IAS 24 comprise all executive and non-executive directors.

See also Note 23: Significant Contracts.

22. Group Entities

	Country of	Ownership Interest*
	Incorporation	2015	2014

NOS Limited - in members' voluntary liquidation	United Kingdom	100%	100%
NOS 2 Limited - disposed of during year	United Kingdom	-	100%
NOS 3 Limited - disposed of during year	United Kingdom	-	100%
NOS 4 Limited	United Kingdom	100%	100%
NOS 5 Limited	United Kingdom	100%	100%
NOS 6 Limited	United Kingdom	100%	100%
Palladium Investments Limited	United Kingdom	100%	100%
NOS 8 Limited - in members' voluntary liquidation	United Kingdom	100%	100%
Gilfin Property Holdings Limited	United Kingdom	100%	100%
LSR Asset Management Limited - in members' voluntary liquidation	United Kingdom	100%	100%
NOS Residential Limited - in members' voluntary liquidation	United Kingdom	100%	100%

LSR Gresham Asset Advisers Limited - in members' voluntary liquidation	United Kingdom	100%	100%
LSR Gresham Investments Limited - in members' voluntary liquidation	United Kingdom	100%	100%

Joint Ventures
Gracechurch Commercial Investments Limited - Liquidated during the year	United Kingdom	50%	50%

On 7 August 2014 LSR plc disposed of its shareholdings in NOS 2 and NOS 3. Management have considered the criteria of IFRS 5 and have concluded that they are not applicable to this transaction.

23. Significant contracts

With effect from 22 July 2013 the Company entered into a management agreement with Internos Global Investors Limited ("Internos"). Under this agreement the Company pays to Internos:

• An annual management fee of 0.70% of the gross asset value of the portfolio, subject to a minimum fee of £1m in each of the first two years, £0.95m for the third year and £0.9m for the fourth year.

• An annual performance fee of 20% of the recurring operating profits above a pre-agreed target recurring profit.

• Fees for property sales as follows:

Up to £50m nil

£50m-£150m 0.5% of sales

Over £150m 1.5% of sales

• A terminal fee of 5.7% of cash returned to the Company's shareholders in excess of 36.1 pence per share from the Effective Date outside of dividend payments (the "Terminal Fee Hurdle"). The Terminal Fee Hurdle rises by 8% per annum after the first year but reduces on a pro-rata daily basis each time equity is returned to shareholders outside of dividend payments from recurring operating profits.

Under the terms of the agreement Internos received fees of £1,016,461 (2014:£1,318,539) during the year.

Company Balance Sheet

as at 30 September 2015

		2015		2014
	Note	£000	£000	£000	£000
Fixed assets
Investments	C5		29,754		70,418
			29,754		70,418
Current assets
Debtors	C6	149		2,460
Cash		7,475		10,108
		7,624		12,568
Creditors: Amounts falling due within one year	C7	(582)		(46,261)
Net current assets\(liabilities)			7,042		(33,693)
Total assets less current liabilities			36,796		36,725
Creditors: Amounts falling due after one year			-		-
Net assets			36,796		36,725


Capital and reserves
Share capital	C8		18,334		18,334
Reserves	C8		3,742		3,742
Capital redemption reserve	C8		1,764		1,764
Profit and loss account	C8		12,956		12,885
Shareholders' funds			36,796		36,725

These financial statements were approved by the Board of directors on xx December 2015 and were signed on its behalf by:

Steven Faber

Director

The registered number of the Company is 05304743.

Notes to the Financial Statements

C1. Accounting Policies

The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Company's financial statements.

Basis of Preparation

The financial statements have been prepared in accordance with applicable UK Accounting Standards and under the historical cost accounting rules.

Cash Flow Statement

Under FRS 1, the Company is exempt from the requirement to prepare a cash flow statement on the grounds that the Company is included in its own published consolidated financial statements.

Related Party Transactions

The Company has taken advantage of the exemption in FRS 8 - Related Party Transactions and has not disclosed transactions or balances with entities which form part of the Group as these consolidated financial statements include the results of these entities.

Financial Instruments

The Company has adopted the requirements of FRS 29 - Financial Instruments Disclosures and has taken the exemption under that standard from disclosure on the grounds that the Group financial statements contain disclosures in compliance with IFRS 7.

Investments

Investments in subsidiary undertakings are stated at historic cost less provisions for impairment.

Tangible Fixed Assets

Following the termination of the Company's office lease in 2013, all tangible assets were written off in that year.

Taxation

The charge for taxation is based on the result for the period and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Deferred tax is recognised, without discounting, in respect of all timing differences between the treatment of certain items for taxation and accounting purposes, which have arisen, but not reversed by the balance sheet date, except as otherwise required by FRS 19.

Pensions

The Company operates a defined contribution pension plan. Contributions payable by the Company in respect of defined contribution pension plans are charged to administrative expenses as incurred.

Share-Based Payments

There were no material share-based payment arrangements during the period.

Employee Benefit Trust

The Company operates an Employee Benefit Trust in order to hedge its obligations under the CSOP and LTIP schemes. The Company either purchases its own shares directly or it funds the trust to acquire shares in the Company. Transactions of the Employee Benefit Trust are treated as being those of the Company and are reflected in the Company's financial statements.

Ordinary Share Capital

External costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds.

Profit for the Financial Year

The Company has taken advantage of Section 408 of the Companies Act 2006 and has not included its own profit and loss account in these financial statements. The Company's profit for the year was £71,000 (2014: loss (£3,016,000))

C2. Remuneration of Directors

The detailed information concerning directors' emoluments, shareholdings and share options is shown in the Remuneration Report.

All directors of the Company are directors of the Group.

C3. Remuneration of Auditors

The detailed information concerning Auditors' remuneration is shown in note 3 to the Group financial statements.

C4. Staff Numbers, Costs and Share Option Schemes

The detailed information concerning staff numbers, costs and share option schemes is shown in note 3 to the Group financial statements.

C5. Fixed Asset Investments

	Shares in Group
	Undertakings	Total
	£000	£000
Cost
At 30 September 2014	108,605	108,605
Disposals	-	-
At 30 September 2015	108,605	108,605

Provisions
At 30 September 2014	38,187	38,187
Impairment charge for year	40,664	40,664
Disposals	-	-
At 30 September 2015	78,851	78,851

Net book value
At 30 September 2015	29,754	29,754
At 30 September 2014	70,418	70,418

An impairment review of the carrying value of the Company's investments in its subsidiary undertakings has been performed. In carrying out this review, the directors had due regard to the nature of the property investments held, which is commensurate with the funding arrangements in place. On the basis of this review which included a review of the underlying assets of the individual subsidiaries the directors have written down the value of investments in subsidiary undertakings to their estimated realisable value.

The companies in which the Company's interests at the year end were more than 20% are as follows:

	Nature of business	Ownership Interest*


NOS Limited - in Members' voluntary liquidation	Dormant	100%
NOS 4 Limited	Property Investment	100%
NOS 5 Limited	Property Investment	100%
NOS 6 Limited	Property Investment	100%
Palladium Investments Limited	Property Investment	100%
NOS 8 Limited - in Members' voluntary liquidation	Property Investment	100%
Gilfin Property Holdings Limited	Property Investment	100%
LSR Asset Management Limited - in Members' voluntary liquidation	Property Management	100%
NOS Residential Limited - in Members' voluntary liquidation	Property Investment	100%
LSR Gresham Asset Advisers Limited - in Members' voluntary liquidation	Property Management	100%
LSR Gresham Investments Limited - in Members' voluntary liquidation	Property Investment	100%

* All interests are in Ordinary Shares.

All of the above companies are incorporated in Great Britain

C6. Debtors

	2015	2014
	£000	£000
Amounts owed by Group undertakings	-	801
Other debtors	105	1,369
Other taxation and social security	2	274
Prepayments	42	16
	149	2,460

C7. Creditors

	2015	2014
	£000	£000
Trade creditors	305	227
Amounts owed to Group undertakings	-	45,663
Other taxation and social security	3	5
Other creditors	4	132
Accruals	270	234
	582	46,261

C8. Reconciliation of Shareholders' Funds

Share Capital

		2015			2014
	Ordinary 20p Shares			Ordinary 20p Shares
	Number		Amount	Number		Amount
	000		£000	000		£000

Allotted, called up and fully paid	91,670		18,334	91,670		18,334

Reserves

		Capital	Profit and
		Redemption	Loss Account
	Reserves	Reserve	-	Total
	£000	£000	£000	£000
At 1 October 2013	3,742	1,764	15,901	21,407
Loss for the financial year	-	-	(3,016)	(3,016)
At 30 September 2014	3,742	1,764	12,885	18,391
Profit for the financial year	-	-	71	71
At 30 September 2015	3,742	1,764	12,956	18,462

Investment in Own Shares

At 30 September 2015, 9,164,017 shares were held in treasury (2014: 9,164,017).

Reserves

The value of shares issued to purchase Gilfin Property Holdings Limited in excess of their nominal value has been shown as a separate reserve in accordance with the Companies Act 2006.

Capital Redemption Reserve

The capital redemption reserve arose in prior years on the cancellation of 8,822,920 Ordinary 20p Shares.

Dividends

No dividends were paid during the current and previous year:

C9. Disposal of shares in subsidiaries

During the preceding year the Company disposed of two subsidiaries, NOS 2 Limited and NOS 3 Limited by the sale of their entire share capital.

The profit on sale included in the profit and loss account was calculated as follows:

		£000's
Sale proceeds		11,100
Deduct:
Carrying cost of investments	11,584
Less:
Assets not disposed of	(1,369)


Fees and other costs	817

		11,032

Profit		68

The difference between the profit\(loss) on disposal in the Company accounts and the consolidated accounts is due to differences between the net assets of NOS 2 and NOS 3 at the date of disposal and the carrying costs of the investments in The Local Shopping REIT plc.

Glossary

Adjusted Net Asset Value ("Adjusted NAV") per share

Adjusted NAV is calculated as shareholders' funds, adjusted by the fair value of the derivative financial instruments held on the Balance Sheet, divided by the number of shares in issue at the year end, excluding treasury shares.

Earnings Per Share ("EPS")

EPS is calculated as profit attributable to shareholders divided by the weighted average number of shares in issue in the year.

Equivalent Yield

Equivalent yield is a weighted average of the initial yield and reversionary yield and represents the return a property will produce based upon the timing of the income received. In accordance with usual practice, the equivalent yields (as determined by the Group's external valuers) assume rent received annually in arrears and on gross values including prospective purchasers' costs (including stamp duty, and agents' and legal fees).

Funds From Operations ("FFO")

FFO is a term adopted by the National Association of Real Estate Investment Trusts. It is calculated as net income adjusted for depreciation of investment properties and gains/losses on sales of investment properties.

Head Lease

A head lease is a lease under which the Group holds an investment property.

Initial Yield

Initial yield is the annualised net rent generated by a property expressed as a percentage of the property valuation. In accordance with usual practice the property value is grossed up to include prospective purchasers' costs.

Interest Cover

Interest cover can be calculated in a number of ways. The Group interest cover given in the Finance Review is based on the percentage of times gross rental income covers financing

expenses.

Actual and Forecast Interest Cover Test (ICR)

The ICRs given in the Finance Review are calculated as defined in the loan facility agreements. Each bank loan has a charge on a specific pool of property and the ICRs are calculated based on the gross rental income, less an adjustment for unrecoverable costs compared to the interest charged on that loan for that particular pool of assets.

Interest Rate Swap

An interest rate swap is a financial instrument where two parties agree to exchange an interest rate obligation for a predetermined amount of time. These are used by the Group to convert floating rate debt to fixed rates.

Investment Property Databank Ltd ("IPD")

IPD produces an independent benchmark of property returns.

Initial Public Offering ("IPO")

An IPO is the first sale of shares by a privately owned company on a Stock Exchange. LSR issued its shares for sale on 2 May 2007.

London Interbank Offered Rate ("LIBOR")

LIBOR is the interest rate charged by one bank to another bank for lending money.

Loan-to-value ("LTV")

Loan-to-value is the ratio of debt, excluding any mark-to-market adjustments, to the value of investment properties.

Market Value

Market value is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and

without compulsion.

Market Rent

Market rent is the estimated amount for which a property should lease on the date of valuation between a willing lessor and a willing lessee on appropriate lease terms, in an arm's length transaction, after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

Net Asset Value ("NAV") per share

NAV per share is calculated as shareholders' funds divided by the number of shares in issue at the year end excluding treasury shares.

Real Estate Investment Trust ("REIT")

A REIT is a listed property company which qualifies for and has elected into a tax regime, which exempts qualifying UK property rental income and gains on investment property disposals from corporation tax. LSR converted to REIT status on 11 May 2007.

Recurring Profit

Recurring profit is calculated by adjusting the statutory IFRS reported result for: the movement in the fair value of the property portfolio; the movement in the fair value of financial derivatives held; any profit or loss realised on the sale of properties or other fixed assets; and other one-off, non-recurring income or costs incurred which are not considered to be sustainable or of a recurring nature.

Rent Roll

Rent roll is the total contractual annualised rent receivable from the portfolio net of any head rent payments.

Reversionary Yield

Reversionary yield is the annualised net rent that would be generated by a property if it were fully let at market rent expressed as a percentage of the property valuation. In accordance with usual practice the property value is grossed up to include prospective purchasers' costs.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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