Final Results

RNS Number : 4414D

Capital & Regional plc

23 March 2011

CAPITAL & REGIONAL PLC ANNUAL RESULTS 2010

Capital & Regional Plc, the specialist property company today announces its audited annual results for the year to 30 December 2010.

Financial Highlights

	2010	2009
Profitability
Profit / (loss) before tax	£46.4m	£(113.4)m
Recurring pre-tax profit	£14.9m	£17.5m

Investment returns
Net assets	£174.5m	£129.8m
Net assets per share	£0.50	£0.37
EPRA net assets per share	£0.57	£0.47

Financing
Adjusted group net debt	£49.8m	£62.9m
Adjusted see-through net debt	£464.7m	£583.9m
Net debt to equity ratio	29%	48%
See-through net debt to value	66%	76%

Property under management	£2.8bn	£3.1bn

Highlights

Strong recovery in pre-tax profits and net asset value

· Return to profitability with pre-tax profits of £46.4 million compared to a loss of £113.4 million in 2009

· Net assets per share of £0.50, up 35% from 2009, and EPRA net assets per share of £0.57, up 21% from 2009

· UK fund property valuations up £197.2 million (Group share £28.8 million) and total UK fund property return of 18.4%

Further de-gearing at fund and group level

· Adjusted group net debt to equity ratio of 29% compared to 48% in 2009

· Adjusted see-through net debt to property value of 66% compared to 76% in 2009 and see-through debt to property value of 76% compared to 86% in 2009

· Extension of The Mall bond funding for 3 years to 2015

Cash and asset recycling gathering momentum

· Group share of cash distributions from funds and joint ventures of £9.7 million

· Sale of 18 properties for £627.1 million across the Group, funds and joint ventures (Group share £117.8 million) generating a profit on disposal of £4.5 million

· Sale of The Mall Bristol in January 2011 and the Ocean Retail Park in Portsmouth in March 2011 both at a premium to their year end valuation

Asset management skills driving operational performance

· Opening of significant extensions at The Mall Blackburn and The Mall Luton

· Improving occupancy with total UK fund occupancy of 95.9%, up 1.5%

· Contracted rent in the UK funds is up by £4.2m, up 2.5%, passing rent up by £1.6 million, up 1.0%

Positioned for growth

· Acquisition of The Waterside Shopping Centre in Lincoln for £24.8 million in January 2011 is the first acquisition since 2007.

· Improved quality of the underlying assets, particularly for the Mall, following disposals in the year and Bristol in 2011. The Mall portfolio now has a majority of dominant secondary schemes which are located in areas which are expected to be less adversely affected by the economic downturn and government spending cuts

Commenting on the results John Clare, Chairman said

"Capital & Regional has made significant progress in 2010. A year which began with the continued degearing of Group and fund balance sheets ended with a renewed emphasis on growth. Last month we saw the purchase of the Waterside Shopping Centre in Lincoln, the first acquisition by the Company since 2007."

Chairman's statement

Overview

Capital & Regional has made significant progress in 2010. A year which began with the continued degearing of Group and fund balance sheets ended with a renewed emphasis on growth. Last month we saw the purchase of the Waterside Shopping Centre in Lincoln, the first acquisition by the Company since 2007.

Pre-tax profits of £46.4 million for the full-year reflect the positive impact of valuation movements across substantially all of the portfolio. It also reflects an uplift in income which flows from the impact of management's ability to engage with retailers more proactively now that restructuring is substantially completed.

Whilst retailers continue to experience challenging market conditions, the operating environment has proved more resilient than anticipated. The lack of any significant supply of new shopping centres, the shift in demand from the high street to out-of-town as well as the improved quality of the Group's underlying portfolios have all contributed to an increase in demand for space, a stabilisation in rental values and a boost in underlying income.

The purchase of the Waterside Shopping Centre in Lincoln and the proposed subsequent joint venture with Karoo typify the Group's strategy in action. The focus is on acquiring retail property assets where we can exercise meaningful influence and leverage our retail skills to generate asset management and performance fees by achieving superior returns in conjunction with our partners.

Dividend

We have carefully considered dividend policy in light of the Group's improved financial position. The Board, however, is not recommending the payment of a final dividend, meaning that no dividend will be payable for the full year. This reflects the fact that cash generated in many of the investments is currently being used either for capital expenditure or to pay down debt. The Board remains committed to resuming dividend payments when it considers it prudent to do so. As previously stated, future payments will be linked for the foreseeable future 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.

Responsible business

We attach particular importance to the Group maintaining its commitment to responsible business in the challenging operating environment we find ourselves in. We encourage each of the businesses and functions to develop an approach suitable to them, whilst providing strategic direction through a Responsible Business Committee. More details are set out in the statement on Responsible Business in the financial statements.

Our people

The transformation of the Group over the past two years has only been possible as a result of the continued hard work and commitment of our employees. I would like to take this opportunity to thank them for their efforts.

The Board

I would like to thank my predecessor, Tom Chandos, for his stewardship over 16 years as a Director of which nine years were as Chairman. Tom stepped down from the Board at the AGM in June. I have been fortunate to take on the role of Chairman as the restructuring of the Group has been substantially completed and I know that the current management team have greatly appreciated his leadership and support during what has been a very challenging time. I would also like to thank Alan Coppin who stepped down in September after six years as a Director. I wish him well in his many and varied interests.

John Clare

Chairman

Chief Executive's statement

I am pleased to report a return to profitability for the year. Capital & Regional's pre-tax profits of £46.4 million in 2010 compare with a pre-tax loss of £113.4 million in 2009. Higher property values, the benefits of the significant restructuring and a better operational performance have all contributed to this much improved result and the increase in net asset values. Basic net asset value at 50p per share is 35% above that seen at the end of last year whilst EPRA net asset value has risen 21% to 57p per share.

Recurring profitability has been adversely affected by the impact of both disposals on both investment and fee income and dilution following capital raising in the UK funds. As a consequence recurring pre-tax profits were £14.9 million compared with £17.5 million in 2009 but these have now begun to stabilise.

Property valuations in the UK funds have continued to recover during the year and are now 17% above the trough seen in the first half of 2009. Retail warehousing and leisure assets were particularly strong in the first half of the year whilst shopping centre valuations improved sharply in the third and fourth quarters - the Mall's valuation improved 13% at the property level and 39% at the unit price level compared to the end of 2009. Whilst strength in investment markets has driven yield compression, a strong operating performance has contributed to out-performance against the peer group in two of the three funds.

Values in Germany have stabilised following a slight fall in values in the first half of the year and ended the year flat after adjusting for the cash received on lease surrenders and other capital receipts.

Financial position

We have continued to prioritise the strengthening of the group's balance sheet in 2010. De-leveraging through disposals both at group and fund level and the restructuring of the Mall bonds have contributed to the further improvement in the financial position of the company during the year.

Net adjusted gearing at the Group level was 29% as at 30 December 2010 compared to 48% a year earlier. This reflects the impact of the sale of 10 Lower Grosvenor Place, Beeston Place and the MEN Arena for an aggregate £18.2 million in the first half of the year, the cash distributions totalling £9.7 million from the Junction Fund, German portfolio, X-Leisure Fund and X-Leisure Limited, as well as higher valuations across the funds and joint ventures.

At the fund level, the Mall Fund completed the disposal of seven assets for total proceeds of £340.8 million during the year and completed the sale of Bristol for £50.2 million shortly after the year-end. Following these disposals, the headline LTV for the Mall is now 72% which provides a property valuation headroom of 13% against the LTV covenant of 83% which will be tested for the first time in December 2011.

The Junction disposed of two assets for total proceeds of £142.3 million during 2010 and has subsequently completed the sale of Portsmouth for £60.9 million compared to the year end valuation of £55.4 million. The LTV at year end is 60%, excluding £27.0 million cash on the fund balance sheet, and this is after the distribution in the year, of which the Group received £5.6 million.

X-Leisure Fund's disposal of two assets for total proceeds of £59.5 million together with a growth in property values has contributed to lowering the Fund LTV to 56% compared to 68% at the end of 2009.

Whilst the refinancing of two portfolios earlier in the year within our German joint venture were important, the restructuring of the Mall bonds was the most significant step in the further strengthening of the Group's overall financial position. The three-year maturity extension (for which a package of financial covenants has been added) significantly increases financial flexibility whilst the reserve for capital expenditure has given additional impetus to the efforts of the management team to improve operating performance.

We will continue to adopt a prudent approach to balance sheet management by anticipating refinancing needs. In this context, we are well advanced in negotiations on the extension of a securitised loan relating to one of the portfolios within our German joint venture which matures later this year and we took steps to derisk this refinancing by the purchase of part of the joint venture portfolio debt at a discount.

Operations

One of the major objectives of the degearing has been to improve the quality of the underlying assets. This is particularly true in the case of the Mall where, following the disposals in the year and Bristol in 2011, the portfolio now has a majority of dominant secondary schemes which have higher levels of occupancy. These are located in areas which are expected to be less adversely affected by the economic downturn and government spending cuts.

The improved level of occupancy, the growth in like-for-like income across not only the Mall but also Junction and X-Leisure reflect this improved quality as well as the impact of a large number of asset management initiatives.

Highlights include:

· the opening of a 220,000 square feet extension at Blackburn anchored by Primark, Next, H&M, New Look, Peacocks, JD Sports & Bank;

· completion of a 76,500 square feet extension at Luton anchored by TK Maxx and Argos;

· portfolio-wide lease regears for B&Q of three units with 312,000 square feet and securing income to 2030.

· 2 lettings to Curry's for 54,000 square feet across the Junction and the opening of the first Best Buy store in the UK of 50,000 square feet at West Thurrock.

Contracted income across the businesses has grown steadily as retailers have looked to take additional space and as the funds have freed up resources for capital expenditure. The Mall and The Junction funds have spent £38.9 million on capital expenditure in 2010 and expect to spend up to £48.1 million in 2011.

Strategy

Capital & Regional is a specialist property company with a track record in exploiting asset management opportunities in retail and other related sectors. The progress that has been made in 2010 in repositioning the business enables us to approach this year with greater confidence.

The recently completed acquisition of the Waterside Shopping Centre in Lincoln illustrates the new strategy in action. Our focus is retail. We intend to take a meaningful stake in properties which we acquire, working in partnership with joint venture partners whilst still leveraging our management skills through asset management and performance fees. I am optimistic that we will be able to execute further such transactions during the course of the year.

We will continue to support the growth of both the Mall and Junction Funds based on the attractive returns which can be achieved in the medium-term. This may involve support for development initiatives and / or the purchase of additional units in each fund if these can be achieved at attractive prices. X-Leisure continues to perform very strongly on the back of the best in class X-Leisure Limited management team. We welcome the acquisition by AREA Property Partners of Hermes' stake in the X-Leisure Fund and X-Leisure Limited which will further enhance performance.

The acquisition of, in conjunction with our partners AREA, a majority stake in Garigal Asset Management gives us the opportunity to efficiently and aggressively asset manage our German joint venture. In the current market environment, Germany represents a very attractive segment to own and to develop.

Outlook

Investor appetite for retail assets continues to be strong and in the absence of any significant increase in supply within the first quarter, property valuations have been resilient.

There is no doubt that conditions for our retail clients are likely to remain very challenging. The steps that we have taken however in the last year to improve the quality of our portfolio mean that our centres and parks represent a more attractive mix of locations. The availability of capital expenditure for key asset management initiatives enables us to attract key retailers.

Disposals from within the funds and at group level will be determined by recycling of capital and / or asset management initiatives but not by the need to degear. The decision to retain Great Northern reflects a belief that we can deliver the asset management initiatives required for this property to be an attractive institutional asset which should not therefore be sold at a distressed price.

Capital & Regional's success in the past has been built on its skills both as a property investor as well as an asset manager. It is my firm belief that this combination offers the potential for attractive returns for our shareholders whilst still maintaining a policy of prudent balance sheet management.

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 2009 or 2010, but is derived from those financial statements. Statutory financial statements for 2009 have been delivered to the Registrar of Companies and those for 2010 will be delivered following the Company's annual general meeting.

The auditors have reported on the 2009 and 2010 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

The Group's operations are affected by the underlying performance of the tenants in its properties and the demand for space and by the wider property investment market which reflects the impact of supply and demand for property.

Investment portfolio

Overall values of the Group's portfolios have produced significant property level internal rates of return in 2010 as shown below:

	Property	Capital	Total	Initial	Equivalent
	Valuation	Return	Return	Yield	yield

2010	£m	%	%	%	%

Mall	1,128	10.55	18.88	6.98	7.81
Junction	476	6.53	12.97	5.77	6.82
X-Leisure	528	13.83	22.09	7.02	7.84
UK weighted average ¹	2,132	10.46	18.36	6.72	7.60
Germany	496	(1.57)	5.69	6.69	n/a

¹Weighted average by property valuation

In 2010 significant inward yield shift resulted in a good year for commercial property returns. There was increased investment activity with good demand for properties and valuations holding firm to date in 2011. The valuation gains seen in our UK retail property values in 2010 have been significantly driven by increases in rental income.

There was inward yield shift of 60 basis points in The Mall, 54 basis points in The Junction and 83 basis points in X-Leisure. Yield shift in Germany was lower at 11 basis points inwards.

The capital return in Germany was affected by two sales and the acceptance of a lease surrender at Kreuztal for a €6.3 million premium. The two properties were sold for portfolio optimisation, as they were non-core due to their small size. The Kreuztal surrender reflected defensive asset management to help maintain the value of the asset.

Properties disposed of during 2010 are set out below:

Property	Date	Sales proceeds	Net initial yield
		£m	%
The Mall
Aberdeen	February	47.4	7.9
Preston	March	87.0	7.6
Ilford	June	70.6	7.8
Falkirk	August	47.6	7.5¹
Gloucester	August	26.9	7.5¹
Southampton	August	21.3	7.5¹
Romford	August	40.0	7.5¹
		340.8
The Junction
Aylesbury	April	60.4	6.0
Hull	September	81.9	7.0
		142.3
X-Leisure
Croydon	March	32.5	7.6
Birmingham	October	27.0	9.0
		59.5

Other properties (7)	-	84.5

Total		627.1

¹Blended yield across four properties

The Mall Bristol was sold in January 2011 for £50.2 million (NIY 7.0%) compared to its year end valuation of £50.0 million. The premium over valuation on the seven disposals by The Mall during 2010 was 11.6%.

The Junction sold the Ocean Retail Park in Portsmouth on 15 March 2011 for £60.9 million (NIY 5.81%) compared to its year end valuation of £55.4 million. The premium over valuation on the two disposals by The Junction during 2010 was 2.3%.

The German joint venture sold two properties in February and May 2010 for £5.7 million. FIX UK sold two properties in Ipswich and Gloucester for £4.1 million and the MEN Arena joint venture was sold in June 2010 for £62.2 million (NIY 7.15%).

In March 2010, the Group sold its wholly owned Beeston Place property for £2.1 million and its wholly owned 10 Lower Grosvenor Place property for £10.4 million.

The property level returns coupled with the financial gearing within the funds and the German joint venture have resulted in notable increases in the geared returns earned by the Group from these investments in 2010 on an IFRS basis.

Geared returns earned by the Group
	2010	2009
	%	%

Mall	76.7	(54.1)

Junction	14.8	(55.6)

X-Leisure	46.7	(53.2)

UK fund weighted average ¹	55.7	(54.4)

German joint venture	14.7	(16.8)

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

The Group measures its total property returns against the relevant IPD index and aims to exceed the benchmark returns.

Performance versus IPD index
	2010	2009
Mall
Property level returns¹	20.0	(12.2)
IPD shopping centre index	16.9	(5.0)

Junction
Property level returns¹	13.1	(4.8)
IPD retail parks index	16.3	11.6

X-Leisure
Property level returns¹	22.1	(8.5)
IPD Leisure Index	18.4	3.7

¹ as ratified by IPD

The outperformance by The Mall, in part reflects the disposal of non-core assets by the fund ahead of their valuations, but also the strong growth in contracted rent from active asset management initiatives. Consequently, the Fund has seen out-performance in both the capital growth and income return component parts of the Total Return calculation. Completion of a high number of lettings has grown contracted rent and reduced void costs. Approximately 30% of the Mall's property valuation increase is attributable to net income growth, reflective of the strengthening of the portfolio following the sale of a number of the less dominant schemes.

The Junction's underperformance against its benchmark was a consequence of ongoing asset management initiatives. At Bristol, where the void rate has been reduced from 11% to 3% some lettings have been achieved below ERV. At Thurrock, the fund accepted surrenders of two leisure units for development purposes which have impacted on the returns this year but have positioned this property for future opportunities. The performance of the balance of the portfolio was ahead of the IPD benchmark.

The X-Leisure outperformance reflects net income growth of 2.7% arising from new lettings and rent review uplifts.

Passing rent (like for like)

	December 2009	June 2010	December 2010
	£m	£m	£m
The Mall	94.8	93.2	95.0
The Junction	28.2	28.5	28.8
X-Leisure	39.9	40.0	40.7
UK	162.9	161.7	164.5
	€m	€m	€m
Germany	43.9	43.9	43.6

The Mall had a further £5.2 million of contracted rent at the year end which is not included in the above figures. The Junction had an additional £2.0 million of contracted rent and X-Leisure £0.6 million of additional contracted rent. The growth in contracted rent was 2.5% on a like for like basis in the UK.

The Junction increase in rent has been achieved despite the two surrenders at Thurrock with rent of £0.4 million and a strategic decision to re-gear a number of leases with B&Q and TK Maxx. These re-gears reduced passing rent by £0.7 million as at the year end, but had an immediate uplift in valuation of £1.1 million and added 5.6 years income to these leases. During 2010 Best Buy opened their Thurrock store and commenced paying rent.

Occupancy levels (like for like)

	2010	2009
	%	%
The Mall	95.8	94.2
The Junction	97.3	94.5
X-Leisure	95.3	94.7
UK weighted average	95.9	94.4
Germany	96.7	98.1

Occupancy levels across all the UK funds rose over the year and this demonstrates the ability of our asset management teams to identify tenants for vacant space in a demanding market.

The Junction saw the biggest increase in occupancy as a result of letting 5 units at each of Imperial Park Bristol and Thurrock.

In X-Leisure there is an agreement for lease in place which is subject to planning and licensing being obtained. If this letting had been completed at the year end occupancy would have increased to 95.9%.

The reduction in occupancy in Germany arises from the surrender at Kreuztal.

New lettings, renewals and rent reviews

	The Mall	The Junction	X-Leisure	Total UK
Number of new lettings	145	14	23	182
Rent from new lettings (£m)	10.9	2.2	0.9	14.0
Comparison to ERV (%)	(9.5)	(16.0)	(4.5)	(10.2)

Renewals settled	31	-	7	38
Revised passing rent (£m)	1.8	-	0.3	2.1
Comparison to ERV (%)	(4.7)	-	(11.5)	(5.6)

Number of rent reviews settled	118	17	53	188
Revised passing rent (£m)	14.7	6.3	9.6	30.6
Uplift to previous rent (%)	4.4	5.0	16.3	8.3
Comparison to ERV (%)	6.5	(1.5)	8.3	5.4

There has been steady demand for quality space of the right size, particularly from the larger fashion retailers and the fast expanding discount stores.

The Mall saw a number of significant lettings during the year, particularly at the two developments at Blackburn and Luton. These include lettings to TK Maxx, Argos, Primark, Next, H&M Hennes, New Look and Peacocks.

Letting performance relative to ERV has been negatively influenced by the malls that were sold, including Bristol and the two developments. Excluding these malls there were 102 lettings in the portfolio delivering £7.4 million of rent at 5.6% below ERV. The trend improved in the second half of the year and in the final quarter new lettings were 2.6% behind ERV indicating that ERV's are stabilising.

The asset management team were effective in delivering additional income prior to the sale of assets. In Bristol, the fund secured a letting to Family Bargains, improving the net income position by £0.3 million and therefore value. At Romford, three lettings were completed including an amalgamation of three units which were let to Poundland improving the net income position by £0.3 million.

The scale of The Mall portfolio continues to be utilised in delivering advantageous group deals. A good example is the 12 unit transaction with the Regis Group (trading as Supercuts) where rents were secured at ERV for a combined additional term of 39 years.

In The Junction a number of notable lettings have been made to GAP, Peacocks and DSG. The shortfall in new letting income relative to ERV reflects downward pressure at Bristol where void levels were more than 10% at the beginning of the year. These lettings have significantly increased occupancy levels at this scheme. A further three lettings in the fund with total annual rent of £0.2 million were conditionally let at year end.

X-Leisure has completed lettings to Strada, Mitchells & Butlers and Prezzo.

In X-Leisure 41% of leases contain minimum or fixed uplifts which continue to drive income levels.

In Germany there were 7 lettings generating an initial passing rent of €0.2 million.

Income security and quality

The number of administrations is a key indicator of the strength and trading performance of tenants. It was pleasing to note in 2010 that there was a significant decline in administrations compared to the prior year.

	The Mall	The Junction	X-Leisure	Total UK
Number of administrations (units)	50	2	13	65
Passing rent administrations (£m)	2.2	0.1	0.8	3.1
Number of units re-let or still trading	30	2	-	32

On a like for like basis, administrations have fallen from 108 in 2009 with a passing rent of £9.1 million.

There were only two administrations in the German portfolio over the course of the year with a passing rent of €39,000.

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 tenants in each of the UK funds are given below.

Largest occupiers by rental income
The Mall		The Junction		X-Leisure
	%		%		%
Boots	5.1	B&Q Plc.	13.5	Cine UK	18.8
Arcadia	3.2	DSG Retail	10.8	The Restaurant Group	4.2
New Look	2.5	Home Retail Group	6.9	Odeon	3.9
Debenhams	2.2	TK Maxx	4.5	SNO!zone	3.6
BHS	2.2	Comet Group.	4.3	Vue Entertainment	3.1
WH Smith.	2.1	Tesco Stores.	4.1	Virgin Active	3.1
Peacocks Stores	2.0	Dave Whelan Sports	3.3	Spirit	2.7
Clinton Cards	1.9	Carpetright	3.3	Pizza Hut	2.6
Superdrug	1.8	Boots.	2.8	Tenpin	2.4
Argos.	1.7	Furniture Village.	2.6	Mitchells & Butler	2.3
	24.7		56.1		46.7

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. This risk is closely monitored and direct contact maintained with this operator.

At the year end there were 159 commercial temporary lettings (less than one year) of which 155 (2009: 134) were within The Mall. Of these, 19 (2009: 23) were at Bristol which has been sold since the year end. Temporary lettings are important because they maintain occupancy and energise the trading environment whilst contributing income and minimising the costs relating to vacant units (the share of service charges and business rates).

The importance of temporary lettings has shifted during 2010, broadly driven by individual schemes' occupancy levels. On a like for like basis and excluding Bristol, the temporary letting effective void is 5.5% compared to a pre-recession exposure at 30 December 2008 of 3.4%.

In Germany, 79% of the income is derived from 7 tenants who are all strongly rated covenants such as Metro, Rewe and Edeka. In sector terms, 65% of the top 15 tenants are food retailers, 16% are DIY operators and 9% are logistics businesses.

Footfall

Customer activity is a key management metric of the operational success of schemes and this is measured through footfall counts in shopping centres and leisure venues. Car counts are used to record customer activity in retail parks.

In The Mall, footfall rose 1.0% to 129.8m visits to the 12 malls owned at the year end. This compares positively with the National Retail Traffic Index which reported a 0.3% increase. Wood Green showed the biggest increase helped by the 2009 letting to Primark who are now looking to extend their store in this centre.

In X-Leisure, footfall has fallen 4.5% compared to 2009. Most of this was attributable to the poor weather at the end of the year.

Car counts at The Junction's retail parks were down 1.2% compared to 2009 having been affected adversely by a fire at Maidstone requiring the rebuilding of the Homebase unit and the bad weather in December.

Developments

The Mall successfully delivered two developments in 2010.

In Blackburn, the 200,000 sq ft extension was opened. The retail space created was well received by retailers, with units let to Primark, Next, H & M Hennes, New Look, Peacocks, Deichman Shoes, Carphone Warehouse, USC, Infinities, JD Sports/Bank. At the year end, the development was 92% let by floor area, with a further 3% in solicitors hands. The original part of the scheme was refurbished and several retailers took the opportunity to refit/re-gear their stores, most notably Arcadia and River Island. The development also incorporated a re-gear of the head lease with Blackburn Council, who in turn took a lease for a new 60,000 sq ft indoor market. The development has repositioned Blackburn as a retail destination and the scheme's dominance within the town should deliver continued strong performance.

In Luton, the 76,500 sq ft "St Georges Square" Extension was completed incorporating three retail units with a further six restaurant units. The development was 70% pre-let by floor area to TK Maxx and Argos and a further 27% is now in solicitors hands, which leaves one unit to let. This was a strategically important development that was undertaken in conjunction with Luton Borough Council, and fulfils the first element of our ongoing programme of extension and reconfiguration as we seek to create larger space retail units to satisfy the strong levels of demand for the town. There remain ongoing development opportunities within Luton that we are now actively pursuing.

The UK pipeline for new retail space is at its lowest for some years, but retailers are still seeking good quality space in the right locations to support their growth aspirations.

The Mall is therefore actively pursuing significant opportunities at Camberley, Walthamstow, and Luton. Good development potential also exists at Sutton Coldfield and Maidstone and these are currently being considered as part of a planned asset management/ development programme.

The Junction has successfully transferred planning consent from its Renfrew scheme to Abbotsinch where a strategic letting has been agreed with Pets at Home. Pre-letting has commenced on a new terrace and a good level of tenant interest has been shown resulting in terms being agreed with a number of tenants. There is further significant development potential at Oldbury where pre-lettings on 105,000 sq ft are in detailed negotiations and discussions with the local authority are being progressed to obtain a planning consent which can deliver to tenants' requirements.

At Thurrock, the strategic surrenders accepted from 2 leisure operators have delivered control over these units within the scheme. The fund is continuing to work with the Urban Development Corporation and local authority to deliver a framework from which a planning application can be made.

Financial review

Key performance indicators

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

Key performance indicators	2010	2009¹

Investment returns
Net assets per share	£0.50	£0.37
EPRA net assets per share	£0.57	£0.47
EPRA triple net assets per share	£0.50	£0.37
Total shareholder return⁵	(2.2)%	(24.7)%

Financing
Group net debt²	£49.8m	£62.9m
See-through net debt^2,3	£464.7m	£583.9m
Net debt to equity ratio²	29%	48%
See-through debt to property value⁴	76%	86%
See-through net debt to property value^2,3,4	66%	76%

Profitability
Recurring pre-tax profit	£14.9m	£17.5m
Profit / (loss) before tax	£46.4m	£(113.4)m
Basic earnings / (loss) per share	£0.13	£(0.59)

Property under management	£2.8 billion	£3.1 billion

¹ see-through debt and net debt have been restated to include FIX UK as the Group's investment is no longer impaired to £nil as it was in 2009

² adjusted for the £5.0 million tax payment made on 31 December 2010 as disclosed in note 22a

³ adjusted for the Group's share of the €18 million German junior debt acquired during the year as disclosed in note 22a

⁴ see-through debt and adjusted see-though net debt divided by property value as disclosed in note 22a

⁵ comparative restated using the closing market share price to be on a consistent basis with the current year

Investment returns

At 30 December 2010, equity shareholders' funds were £174.5 million, up by £44.7 million compared to £129.8 million at 30 December 2009. This is due to increased property values in the Group's underlying investments, the resilient recurring pre-tax profit and the net profit on property sales.

Net assets per share increased by £0.13, or 35%, to £0.50 per share and EPRA net assets per share increased by £0.10, or 21%, to £0.57 per share. Detailed calculations are disclosed in note 27.

To provide a better 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:

	Statutory			See-through
	30 December 2010		30 December 2009	30 December 2010	30 December 2009¹
		£m	£m	£m	£m
Fund properties
The Mall		58	33	199	233
The Junction		24	26	61	74
X-Leisure		26	18	62	61
FIX UK		1	-	27	28

Joint venture properties
Germany²		48	47	248	268
Other joint ventures		(8)	(2)	23	41

Wholly owned properties
Great Northern, Hemel Hempstead and others		81	94	81	94

Total properties		230	216	701	799

Other assets and liabilities		16	(6)	6	(9)
Debt		(71)	(80)	(532)	(660)

Net assets		175	130	175	130

¹ restated to include FIX UK as the Group's investment is no longer impaired to £nil as it was in 2009

² the statutory figures include the Group's shareholder loan to the German joint venture treated as equity

Financing

A summary of the movements in Group and off balance sheet debt during the year is as follows:

		Off balance	See-through
	Group debt	sheet debt	debt
	£m	£m	£m
At 30 December 2009 ¹	80.4	579.9	660.3
Property disposals	(7.4)	(97.4)	(104.8)
Other repayments	(2.5)	(11.2)	(13.7)
FIX UK equity contribution	-	(1.1)	(1.1)
Other movements ²	-	(8.5)	(8.5)
At 30 December 2010	70.5	461.7	532.2

¹ restated to include FIX UK as the Group's investment is no longer impaired to £nil as it was in 2009

² primarily foreign exchange movements in the Group's German joint venture

The undrawn core credit facility of £58.0 million which expires in September 2013, together with cash and cash equivalents of £20.7 million (after adjusting for the £5.0 million tax payment as disclosed in note 35), provided the Group with liquidity of £78.7 million at 30 December 2010.

Net debt to equity ratio

During the year the net debt to equity ratio fell from 48% to 29% at 30 December 2010, due to loan repayments of £9.9 million, a net cash inflow of £8.2 million, combined with an increase in shareholders' equity of £44.7 million. The ratio has been adjusted to reflect the cash tax payment of £5.0 million made by the Group on 31 December 2010 that is disclosed in notes 22a and 35.

Group debt

During the year, Group debt fell to £70.5 million compared to £80.4 million at 30 December 2009, primarily due to the repayment of the remaining £7.4 million loan on 10 Lower Grosvenor Place following the sale of the property in March 2010. The surplus cash generated by the Hemel Hempstead and Great Northern properties is being used to pay down the relevant loans each quarter via a cash sweep. The breakdown of Group debt and net debt at year end was as follows:

	Debt at	Average			Duration
	30 December	interest		Duration	to loan
	2010 ¹	rate ²	Fixed	of fixing	expiry
	£m	%	%	(years)	(years)
Core revolving credit facility	-	n/a	-	-	2.7
Great Northern	63.6	6.26	96%	2.8	2.8
Hemel Hempstead	6.9	3.24	-	-	1.8
Group debt	70.5	5.96	87%	2.8	2.7
Cash and cash equivalents	(25.7)
Group net debt	44.8
Cash adjustment³	5.0
Adjusted group net debt	49.8

¹excluding unamortised issue costs

² in the case of variable rate loans, based on LIBOR at 30 December 2010 plus the appropriate margin

³ cash adjustment for the £5.0 million tax payment made on 31 December 2010 related to the current tax liabilities recorded at 30 December 2010 as disclosed in notes 22a and 35

The core revolving credit facilityremained undrawn during the year (2009: £nil) and at year end the forecast covenant tests indicate that there is sufficient headroom for the full £58.0 million facility to be available for draw down.

The Great Northern facilityis now £63.6 million drawn (2009: £65.2 million) following the repayment of £1.6 million during the year via the loan's cash sweep mechanism.

The Hemel Hempstead facilityis now £6.9 million drawn (2009: £7.8 million) following repayment of £0.4 million during the year via the loan's cash sweep mechanism and a £0.5 million amortisation payment in July 2010. A further amortisation payment of £0.5 million occurred in January 2011 with a further £0.5 million due in July 2011. The loan is currently unhedged and bears interest at variable rates.

Cash of £25.7 million was held at 30 December 2010 (2009: £17.5 million), of which £2.5 million (2009: £1.9 million) is held in restricted accounts secured on debt facilities and £0.2 million (2009: £0.2 million) is held in segregated accounts.

Off balance sheet debt

The breakdown of the Group's share of off balance sheet debt and net debt at year end was as follows:

	Debt at	Net debt	Loan to			Weighted	Weighted
	30	at 30	value at 30	Average		average	average
	December	December	December²	interest		duration	duration
	2010¹	2010	2010	rate	Fixed	of fixing	to expiry
Group share	£m	£m	%	%	%	(years)	(years)
The Mall	138.4	119.5	73%	4.94%	100%	4.3	4.3
The Junction	38.4	34.8	60%	6.78%	99%	3.3	3.3
X-Leisure	35.6	32.8	56%	6.52%	99%	3.1	3.1
FIX UK	25.3	24.7	93%	7.43%	100%	1.0	2.2
German joint venture	201.2	190.6	82%	4.55%	102%	2.2	2.7
Braehead	22.8	21.6	89%	6.24%	88%	0.8	3.7
Other ³	n/a	(1.3)	-	-	-	-	-
Off balance sheet	461.7	422.7		5.25%	100%	2.8	3.3
German debt adjustment⁴	(7.8)	(7.8)
Adjusted off balance sheet	453.9	414.9

¹excluding unamortised issue costs

² borrowings (excluding unamortised issue costs) divided by investment property at fair value

³ off balance sheet cash held in other associates and joint ventures

⁴debt adjustment for the Group's share of the €18 million German junior debt acquired during the year as disclosed in note 16c and 22a

On 21 July 2010, The Mall completed a restructuring of its borrowing arrangements. Unitholders agreed to an extension of the life of the fund from June 2012 to June 2017, whilst bondholders agreed to an extension of the Intercompany Loan from the funding entity to The Mall Limited Partnership, which represents the effective maturity of the borrowing from the fund's perspective, from April 2012 to April 2015. The key elements of the restructuring were:

· an increase in the margin payable on the Notes from 0.18% to 0.68% with effect from April 2011. As a result of amendments to the fund's hedging instruments, the interest rate payable on the bonds over the period to 2015 will, for most of the period, be below 5%;

· mandatory amortisation of the Intercompany Loan to £800 million by December 2012 and £600 million by December 2014.Following the sale of Bristol in January 2011 for £50.2 million there will be a further bond repayment which, on a proforma basis, will result in the Mall debt falling to £777.5 million and the initial amortisation target being achieved well in advance of the required date;

· the introduction of an 83% LTV covenant from December 2011, reducing in stages to 65% in December 2014. Following the sale of Bristol in January 2011 the proforma LTV will be 72%;

· a suspension of the current release price mechanism until the LTV is below 60% and debt is less than £600 million, which will allow the sale of properties where the proceeds would be below the historically determined release price; and

· the restriction of distributions until the LTV is below 60% and debt less than £600 million.

A contribution of £155.0 million was also made from the fund's cash reserves, with £50.0 million used to repay existing debt, £85 million being set aside for leasing incentives, capital expenditure and working capital requirements, and £20.0 million covering the costs of the transaction, including swap breakage costs and consent solicitation fees.

The Mall debt is £827.7 million at year end, a fall of £418.5 million compared to £1,246.2 million at 30 December 2009. The debt fell as borrowings were repaid with the proceeds of the asset sales of Aberdeen, Preston, Ilford, Falkirk, Gloucester, Romford and Southampton, and a £50.0 million repayment from cash reserves as part of the refinancing in July 2010. The cash held in the fund was £113.2 million at year end (2009: £235.7 million).

The Junction debt is £289.2 million at year end, a fall of £85.0 million compared to £374.2 million at 30 December 2009. The debt fell as borrowings were repaid with the proceeds of the asset sales of Aylesbury and Hull. A further repayment of £31.7 million took place in March 2011 from the proceeds of the sale of Portsmouth. The cash held in the fund was £27.0 million at year end (2009: £28.3 million).

X-Leisure debt is £298.3 million at year end, a fall of £56.2 million compared to £354.5 million at 30 December 2009. The debt fell as borrowings were repaid with the proceeds of the asset sales of Croydon and Birmingham. The cash held in the fund was £23.8 million at year end (2009: £31.9 million).

FIX UK is now included in off balance sheet debt, having been excluded in 2009 while the Group's investment was impaired to £nil. The debt is £126.3 million at year end, a fall of £10.8 million compared to £137.1 million at 30 December 2009. The debt fell as borrowings were repaid following an equity raise in January 2010 and the proceeds of the sales of assets at Ipswich and Gloucester. The Group contributed £1.1 million as its share of new equity in connection with this refinancing. The cash held in the fund was £3.2 million at year end (2009: £5.3 million).

The German joint ventureis made up of six portfolios, each of which is financed by separate and non-recourse euro-denominated loan facilities. The debt is €471.4 million at year end, a fall of €10.7 million compared to €482.1 million at 30 December 2009. At the applicable exchange rates this was equivalent to £405.7 million (2009: £435.8 million). The cash held in the partnership was €24.6 million at year end (2009: €18.8 million).

During 2010, two loans were refinanced. The first was a €46.5 million facility with Bank of Scotland which has been extended to December 2013 at a lower principal amount of €40 million, as the proceeds of two disposals were used to pay off the remainder of the debt. The second was a €65 million facility with Eurohypo comprising two loans which were extended to December 2013. The main focus is now on the refinancing of a €164 million debt in one of the German portfolios which matures in July 2011. The debt is made up of €146 million of senior debt which is held in an Irish securitisation vehicle, and €18 million of junior debt which was acquired by the Group and the German joint venture partner shortly before year end at a discount reducing the refinancing risk. We are in advanced discussions with the loan servicer on extending the maturity of the debt and are confident of a successful resolution.

Braehead debt is £45.6 million at year end, a fall of £3.4 million compared to £49.0 million at 30 December 2009. The debt breached its LTV covenant in February 2010 and in April 2010, the Group and its joint venture partner agreed a refinancing of the loan by injecting funds which, together with cash already held in the partnership, reduced the debt to £45.6 million. The bank agreed to a stand still on the LTV breach prior to the refinancing being agreed. The terms of the loan were also renegotiated which increased the margin from 1% to 2% which will be rolled up for payment in March 2012. The cash held in the partnership was £2.4 million at year end (2009: £2.3 million).

The MEN Arena was sold in June 2010 and the associated bank loan of £47.8 million (our share of which was 30%) is therefore no longer included in off balance sheet debt.

Maturity analysis

The table below shows the maturity profile of the see-through debt and undrawn core credit facility at 30 December 2010:

	2011	2012	2013	2014	2015	2016	2017
	£m	£m	£m	£m	£m	£m	£m
Sterling debt drawn	1.0	5.9	98.6	87.1	138.4	-	-
Euro debt drawn	73.0	11.9	44.7	20.4	31.2	4.3	15.7
Undrawn core credit facility	-	-	58.0	-	-	-	-
	74.0	17.8	201.3	107.5	169.6	4.3	15.7

Covenants

The Group and its associates and joint ventures were compliant with their banking and debt covenants at 30 December 2010. Further details on the various debt covenants are disclosed in the section on covenant information at the end of the preliminary announcement.

All LTV and ICR covenants on the German debt portfolios were met at 30 December 2010. However, the LTV on the debt maturing in July 2011 is expected to be breached when a formal valuation is called as part of the refinancing arrangements but the expectation is that this will be simultaneously waived as part of the refinancing agreement.

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. During the year, The Mall and the German joint venture have also entered into forward-dated cap contracts which will hedge some interest rate risk once the current swaps expire.

At 30 December 2010, the see-through valuation of the Group's swaps and caps was a liability of £22.9 million (2009: £28.6 million) which will not be crystallised unless the underlying contracts are closed out before their expiry date. During the year, The Mall, The Junction, X-Leisure, FIX UK and the MEN Arena partnership terminated swaps at a total cost of £39.6 million, of which the Group's share was £6.3 million.

Cash distributions

During the year, the Group received total cash distributions of £9.7 million comprising £5.6 million from The Junction fund; £3.1 million from the German portfolio; £0.7 million from the X-Leisure fund and £0.3 million from X-Leisure Limited.

Profitability

Recurring pre-tax profit

The Group's recurring pre-tax profit for the year was £14.9 million, a fall of £2.6 million compared to £17.5 million in the prior year. The recurring pre-tax profit is derived from its two principal segments, which are:

· Asset businesses: comprising its share of net rental income less net interest expense arising from interests in associates, joint ventures and wholly owned entities, in both the UK and Germany; and

· Earnings businesses: comprising fees less fixed overheads earned by the wholly owned CRPM for asset / property management on behalf of The Mall, The Junction and certain joint ventures and wholly owned properties; by the X-Leisure Limited joint venture for non-regulated fund management and asset / property management on behalf of the X-Leisure fund; and with effect from August 2010 by Garigal Asset Management GmbH associate for asset / property management on behalf of the German portfolio. Earnings businesses also include the operating profit from SNO!zone.

As shown in note 2a to the financial statements, the breakdown of recurring pre-tax profit by segment is as follows:

	Year to 30	Year to 30
	December	December
	2010	2009
	£m	£m

Asset businesses
UK property investment	8.2	11.1
German property investment	5.1	6.1
Earnings businesses
Property management	5.8	5.3
SNO!zone	0.7	0.9
Non-segment item
Central costs	(4.9)	(5.9)
Recurring pre-tax profit	14.9	17.5

Property investment: The recurring pre-tax profit from the three UK funds and other UK properties has fallen by £2.9 million compared to the prior year. This largely reflects the property disposals that have taken place during the period. The recurring pre-tax profit from Germany in sterling terms has fallen by £1.0 million compared to the prior year. This primarily relates to lower rental income following a lease surrender at the Kreuztal property and asset sales at the beginning of the year.

Property management: The recurring pre-tax profit has increased by £0.5 million compared to the prior year. Management fees have fallen by £3.8 million reflecting property disposals by The Mall, the introduction of a fixed fee on The Junction in May 2009, the sharing of X-Leisure fees in the X-Leisure Limited joint venture, and the sharing of the German portfolio fees in the Garigal Asset Management GmbH associate from August 2010. This fall in income has been more than offset by falls in management expense arising from the Group's cost reduction programme.

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. 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 fee basis will be effective from 21 July 2010 and is subject to final confirmation from the Mall Bond Security Trustee which is expected shortly. The revised basis is consistent with the trend in the market to introduce fixed fees to cover the direct costs incurred by the managers. It is also expected to provide a greater alignment of interests between the fund and its managers. The Group will continue to earn service charge fees and other ancillary income on the existing basis.

In August 2010, the Group acquired a 30% share in Garigal Asset Management GmbH, a German asset and property manager which has taken over responsibility for the asset and property management of the Group's German joint venture. We believe that carrying out the asset and property management through a single German-based entity will provide more effective management of the portfolio, increasing the range of opportunities to monetise the Group's stake and provide a German platform for extending these services to third parties. Whilst the arrangements are expected to enhance recurring profit in the medium term, the Group does not expect to see any significant change until after the middle of 2011 owing to the costs of scaling up the business and the transitional arrangements with the current managers. Garigal Asset Management GmbH will earn a performance fee from the German joint venture on any amount realised on an exit event in excess of an internal rate of return of 12%, subject to a maximum of €15 million. The Garigal management team will earn the majority of this fee.

SNO!zone: the recurring pre-tax profit decreased by £0.2 million compared to the prior year. This was a result of a fall in turnover of £1.2 million due to the exceptional impact of the adverse UK weather on visitor numbers across the three sites at the beginning and end of the year during the key winter season, combined in part with the impact of the economic downturn and competition from other operators and venues. The fall in turnover was offset by cost management initiatives and reduced rent on the Braehead facility which reduced expenses by £1.0 million.

Central costs: the central costs have decreased by £1.0 million compared to the prior year principally due to a reduction in the interest expense incurred on the central facility.

Performance fees: No performance fees have been recognised in 2010 on any of the funds (2009: £nil). The basis for calculating performance fees and the current status is disclosed in notes 1 and 36 of the financial statements.

Profit / (loss) before tax

The profit before tax for the year was £46.4 million compared to a loss of £113.4 million in the prior year.

	Year to 30	Year to 30
	December	December
	2010	2009
	£m	£m
Recurring pre-tax profit	14.9	17.5
Revaluation and impairment of investment and trading properties	29.6	(110.5)
Profit / (loss) on disposal	4.5	(9.4)
Deemed disposal	-	(7.2)
Revaluation of financial instruments	0.6	0.3
Other non-recurring items	(3.2)	(4.1)
Profit / (loss) before tax	46.4	(113.4)

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

Property revaluation gainsof £29.6 million most notably reflecting the recovery in valuations in the three UK funds as detailed in the operating review.

Profit on disposal of £4.5 million due to assets sales, most notably in The Mall and The Junction offset by a small loss on disposal in the German portfolio.

Financial instrument revaluation gains of £0.6 million due to gains on the interest rate swaps hedging the German portfolio, partially offset by losses on the interest rate swaps and caps hedging the Group's UK property investments.

Other non-recurring itemsinclude impairments, one-off expenses and credits, tax suffered within the joint ventures and the costs of the Group's various management incentive schemes. These items are split out in more detail in note 2 to the financial statements.

Tax

The tax charge for the year was £2.0 million compared to £6.3 million in the prior year. The current tax credit of £0.5 million (2009: charge £3.7 million) is offset by the deferred tax charge of £2.5 million (2009: £2.6 million). The termination of certain interest rate swaps together with the utilisation of brought forward losses has resulted in a small loss overall for the Group in the year. The deferred tax charge is due to the reversal of certain deferred tax assets carried against the liability for interest rate swaps and the recognition of deferred tax liabilities against tenant incentives.

The current tax liability of £5.8 million at year end (2009: £8.1 million) and non-current liability of £10.0 million (2009: £10.0 million) largely reflect 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. This liability is subject to a deferred payment plan to 31 December 2012.

Property under management

During the year, property under management fell due to property disposals, which was partially offset by the recovery in property valuations. Details of the properties sold are set out in the operating review. The overall impact on property under management is set out below.

	Valuation				Valuation
	at 30				at 30
	December		Other		December
	2009¹	Disposals	Movements²	Revaluation	2010¹
100%	£m	£m	£m	£m	£m
The Mall	1,317	(323)	28	106	1,128
The Junction	572	(128)	9	23	476
X-Leisure	519	(58)	(1)	68	528
German joint venture	535	(7)	(32)	-	496
Other properties	197	(74)	78	3	204
Property under management	3,140	(590)	82	200	2,832

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 profit or loss on disposal, foreign exchange movements in the German joint venture and the Ilford shopping centre, which was sold by The Mall in June 2010 but which was still managed by CRPM on a short-term contract.

Foreign currency exposure management

The Group uses forward contracts to hedge against changes in exchange rates in relation to its investment in the German joint venture. At 30 December 2010, this was achieved through a contract for €47 million (2009: €47 million), hedging 85% of the Group's German investment (2009: 89%).

During the year, the Group took advantage of the weakening of the euro against sterling to close out its existing €47 million contract at a small profit and extended the €47 million hedge for a further year to 28 April 2011. The strengthening of sterling since then meant that the value of the contract at 30 December 2010 was an asset of £0.6 million (2009: liability of £1.4 million). On 13 January 2011, the Group closed the existing forward contract crystallising a gain of £1.5 million that will be received in April 2011, and entered into a new forward contract to sell €47.0 million on 27 June 2012 at a fixed exchange rate of 1.185, which had the effect of extending the hedging arrangements on its net investment in the German portfolio.

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

Financing strategy

Our financing structure needs to be flexible and cost effective and this is achieved through having cash of £20.7 million (after adjusting for the £5.0 million tax payment as disclosed in note 35) and an undrawn central revolving credit facility of £58 million at 30 December 2010. 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
Tenant risks
· Tenant insolvency or distress · Prolonged downturn in tenant demand	· 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
Valuation
· 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
· 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
· 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 prolonged 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
· 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
· Fluctuations in the exchange rate between sterling and the euro in respect of the Group's German joint venture	· 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
· 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
· 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 GAM associate, and the significant influence they allow the Group to assert over the investments.

· The Bank of Scotland £58 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, the Group's central credit facility, and the rent payable by SNO!zone Braehead.

Certain of these agreements can be terminated in the event of a change of control of the Company.

Consolidated income statement

For the year to 30 December 2010

		2010	2009
	Note	£m	£m
Revenue	3	30.7	37.8
Cost of sales	4	(10.4)	(16.0)
Gross profit		20.3	21.8
Administrative costs		(11.8)	(15.5)
Share of profit/(loss) in associates and joint ventures	16a	45.2	(106.8)
Loss on revaluation of investment properties	11a	(0.2)	(2.8)
Loss on sale of properties and investments	11d	(0.2)	(0.2)
Impairment of goodwill	12	(0.7)	(1.6)
Profit/(loss) on ordinary activities before financing		52.6	(105.1)
Finance income	5	1.2	2.7
Finance costs	6	(7.4)	(11.0)
Profit/(loss) before tax	7	46.4	(113.4)
Current tax	9a	0.5	(3.7)
Deferred tax	9a	(2.5)	(2.6)
Tax charge		(2.0)	(6.3)
Profit/(loss) for the year		44.4	(119.7)

Basic earnings/(loss) per share	10a	13p	(59)p
Diluted earnings/(loss) per share	10a	13p	(59)p

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

Consolidated statement of comprehensive income

For the year to 30 December 2010

		2010	2009
	Note	£m	£m
Profit / (loss) for the year		44.4	(119.7)

Exchange differences on translation of foreign operations		(2.6)	(3.9)
Gains on a hedge of a net investment taken to equity		2.2	3.9
Other comprehensive income		(0.4)	-
Total comprehensive income for the year	28	44.0	(119.7)

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

Consolidated balance sheet

At 30 December 2010

		2010	2009
	Note	£m	£m
Non-current assets
Investment properties	11a	10.0	10.2
Goodwill	12	1.9	2.6
Plant and equipment	13a	0.9	1.0
Available for sale investments	13b	0.3	0.3
Receivables	14	25.9	25.0
Investment in associates	16b	110.8	76.4
Investment in joint ventures	16c	25.7	30.3
Total non-current assets		175.5	145.8

Current assets
Trading properties	11a	70.8	70.7
Properties held for sale	11b	-	13.5
Receivables	17	7.1	6.9
Current tax recoverable		-	0.7
Cash and cash equivalents	18	25.7	17.5
Total current assets		103.6	109.3

Total assets	2b	279.1	255.1

Current liabilities
Bank loans	21a	(0.6)	(0.2)
Trade and other payables	19	(10.9)	(20.6)
Liabilities relating to assets held for sale		-	(1.0)
Current tax liabilities	9e	(5.8)	(8.1)
		(17.3)	(29.9)

Non-current liabilities
Bank loans	21a	(68.8)	(78.6)
Other payables	20	(4.8)	(5.6)
Deferred tax liabilities	9c	(3.7)	(1.2)
Non-current tax liabilities	9e	(10.0)	(10.0)
Total non-current liabilities		(87.3)	(95.4)

Total liabilities	2b	(104.6)	(125.3)

Net assets		174.5	129.8

Equity
Share capital	23	9.9	9.9
Other reserves	25	153.2	153.6
Capital redemption reserve		4.4	4.4
Own shares held		(9.7)	(9.7)
Retained earnings		16.7	(28.4)
Equity shareholders' funds		174.5	129.8

Basic net assets per share	27	£0.50	£0.37
EPRA triple net assets per share	27	£0.50	£0.37
EPRA net assets per share	27	£0.57	£0.47

These financial statements were approved by the Board of directors, authorised for issue and signed on their behalf on 22 March 2011 by:

Charles Staveley

Group Finance Director

Consolidated statement of changes in equity

For the year to 30 December 2010

			Other reserves
							Net
		Share				Foreign	investment	Capital	Own
	Share	premium	Special	Merger	Acquisition	currency	hedging	redemption	shares	Retained	Total
	capital	account	reserve	reserve	reserve	reserve	reserve	reserve	held	earnings	equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance at 30 December 2008	7.1	220.5	-	-	9.5	13.9	(9.6)	4.4	(9.7)	(50.0)	186.1

Loss for the year	-	-	-	-	-	-	-	-	-	(119.7)	(119.7)
Other comprehensive income for the year	-	-	-	-	-	(3.9)	3.9	-	-	-	-
											-
Total comprehensive income for the year	-	-	-	-	-	(3.9)	3.9	-	-	(119.7)	(119.7)
											-
Shares issued at a premium	2.8	-	-	60.3	-	-	-	-	-	-	63.1
Cancellation of share premium account	-	(220.5)	79.5	-	-	-	-	-	-	141.0	-
Credit to equity for equity-settled share-based payments	-	-	-	-	-	-	-	-	-	0.3	0.3
											-
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

Consolidated cash flow statement

For the year to 30 December 2010

		2010	2009
	Note	£m	£m
Operating activities
Net cash from operations	26	2.9	5.2
Distributions received from associates and joint ventures	16b, 16c	9.7	2.8
Interest paid	6	(5.7)	(9.4)
Interest received		0.2	-
Income taxes paid		(4.3)	(0.7)
Cash flows from operating activities		2.8	(2.1)

Investing activities
Sale of investment properties	11b	12.5	-
Purchase of fixed assets		(0.4)	(0.1)
Investment in associates	16b	(2.7)	(4.6)
Investment in joint ventures	16c	-	(2.1)
Disposals of joint ventures	31	5.7	1.2
Share buybacks from joint ventures	16c	0.6	-
Loans to joint ventures		(0.9)	(0.9)
Loans repaid by joint ventures		0.5	6.3
Cash flows from investing activities		15.3	(0.2)

Financing activities
Net proceeds from the issue of ordinary share capital		-	63.1
Bank loans drawn down		-	70.4
Bank loans repaid	21a	(9.9)	(102.5)
Loan arrangement costs		-	(3.7)
Settlement of forward foreign exchange contract		-	(8.7)
Termination of interest rate swaps		-	(2.9)
Cash flows from financing activities		(9.9)	15.7

Net increase in cash and cash equivalents		8.2	13.4

Cash and cash equivalents at the beginning of the year		17.5	4.1
Cash and cash equivalents at the end of the year	18	25.7	17.5

Notes to the financial statements

For the year to 30 December 2010

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.

Adoption of new and revised standards

The Group adopted two Interpretations issued by the International Financial Reporting Interpretations Committee in the current year:

· IFRIC 15 Agreements for the Construction of Real Estate

· IFRIC 17 Distributions of Non-cash Assets to Owners

The Group adopted fourteen amendments to Standards issued by the International Accounting Standards Board in the current year:

· IFRS 8 Operating Segments

· Amendments to IFRS 1 and IAS 27 (May 2008) Measuring Investments in Subsidiaries, Jointly Controlled Entities or Associates on First-time Adoption

· Revisions to IFRS 1 (December 2008) on First-time Adoption of IFRSs

· Amendments to IFRS 2 (January 2008) Vesting Conditions and Cancellations

· Amendments to IFRS 3 (January 2008) Business Combinations

· Amendments to IFRS 7 (March 2009) Enhancing Disclosures about Fair Value and Liquidity Risk

· Amendments to IAS 1 (September 2007) Presentation of Financial Statements

· Amendments to IAS 23 (March 2007) Borrowing Costs

· Amendments to IAS 27 (January 2008) Consolidated and Separate Financial Statements

· Amendments to IAS 32 and IAS 1 (February 2008) Puttable Financial Instruments and Obligations Arising on Liquidation

· Amendments to IAS 39 (July 2008) Eligible Hedged Items

· Amendments to IAS 39 (March 2009) Clarification regarding Assessment of Embedded Derivatives

· Improvements to IFRSs 2008 (May 2008)

· Improvements to IFRSs 2009 (April 2009)

The adoption of these Standards and Interpretations has not led to any material changes in the Group's accounting policies, reported results and financial position except as follows:

· In relation to IFRS 3 the following accounting policies have changed, though there has been no effect on the reported results and financial position as no acquisitions have been made during the year which fall under the scope of the new standard:

- acquisition costs which previously would have been included in the cost of a business combination are included as administrative expenses as they are incurred;

- any pre-existing equity interest in an entity acquired is remeasured to fair value at the date of obtaining control, with any resulting gain or loss recognised in the income statement;

- any changes in the Group's ownership interest subsequent to the date of obtaining control are recognised directly in equity, with no adjustment to goodwill; and

- any changes to the cost of an acquisition, including contingent consideration, resulting from events after the date of acquisition are recognised in the income statement where previously they resulted in an adjustment to goodwill

· IFRS 8 requires operating segments to be identified on the basis of internal reports about components of the Group that are reviewed by the Board of directors to allocate resources between the segments and to assess their performance, in contrast to IAS 14 "Segmental reporting" which required the Group to identify business and geographical segments using a risk and rewards approach. As a result, the segmental information required by IAS 34 included in notes 2a and 2b is presented in accordance with IFRS 8 and the comparatives have been restated accordingly. The separate note showing statutory segmental information included as note 3 of the Group's 2009 financial statements is no longer required.

· In relation to IAS 1, the primary statements have changed with the "Statement of total recognised income and expense" replaced by the "Statement of comprehensive income", and the "Reconciliation of movement in equity shareholders' funds" replaced by the "Consolidated statement of changes in equity". The latter shows changes in the components of equity for each period presented and it therefore incorporates the financial information included in notes 26 and 27 of the Group's 2009 financial statements, which are no longer required. If the Group applies an accounting policy retrospectively, makes a retrospective restatement of items in its financial statements or reclassifies items in its financial statements, it presents an additional balance sheet as at the beginning of the earliest comparative period. The financial liability of £3.4 million at 30 December 2009 related to the interest rate swap has been reclassified from current payables in note 19 to non-current payables in note 20 as it has a maturity of more than twelve months from the balance sheet date and it is not intended to be settled within one year. No other restatements or reclassifications have been made in the current period.

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):

Effective in the forthcoming year:

· Amendments to IFRS 1 (July 2009) Additional Exemptions for First-time Adopters

- Amendments to IFRS 2 (June 2009) Group Cash-settled Share-based Payment Transactions

- Amendments to IAS 32 (October 2009) Classification of Rights Issues

- IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

Effective in future years:

· IFRS 9 Financial Instruments

· IFRS 10 Consolidated financial statements

· IFRS 11 Joint arrangements

· IFRS 12 Disclosure of interests in other entities

· Amendments to IAS 24 (November 2009) Related Party Disclosures

· Amendments to IFRIC 14 (November 2009) Prepayments of a Minimum Funding Requirement

· Improvements to IFRSs 2010 (May 2010)

The directors are assessing the impact that the adoption of these Standards and Interpretations will have on the financial statements of the Group in future periods.

Statement of compliance

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

Basis of preparation

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 36. They are prepared on the historical cost basis except for the revaluation of certain properties and financial instruments. 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.

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 and key sources of estimation uncertainty

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 critical judgements and estimates that the directors have made in the process of applying the Group's accounting policies that have the most significant effect on the amounts recognised in the financial statements, or that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are as follows:

· 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.

· 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 9.

· reliance upon the work undertaken at 30 December 2010 by independent professional qualified valuers, as disclosed in note 11c, in assessing the fair value of certain of the Group's investment properties.

· an assessment of the directors' valuations of the investment properties owned by FIX UK as disclosed in note 11c.

· an estimate of the value in use of the cash-generating units to which goodwill has been allocated to determine whether the goodwill is impaired, as disclosed in note 12. 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 for the calculation of present value.

· an assessment of whether the Group exercises significant influence over its investments in The Mall, The Junction and X-Leisure, as discussed in note 16b.

· reliance upon the work undertaken at 30 December 2010 by independent third party experts in assessing the fair values of the Group's derivative financial instruments, which are disclosed in notes 17, 19 and 22f.

· an estimate of the future cash flows from the asset and property management contracts that are part of the total identifiable assets and liabilities in connection with the acquisition of Garigal, as disclosed in note 29.

· 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.

· 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 36.

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

As well as the financial statements of the Company, the consolidated financial statements incorporate the results of entities controlled by the Company (its subsidiaries), associates and joint ventures made up to 31 December each year.

Business combinations

Acquisitions of subsidiaries 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.

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 which is recognised as an asset 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.

Subsidiaries

Subsidiaries are those entities controlled by the Group. Control is assumed when the Group has the power to govern the financial and operating policies of an entity or business to benefit from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The reporting period for subsidiaries ends on 31 December and their financial statements are consolidated to this date.

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, which is the power to participate in the financial and operating policy decisions of the entity 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.

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 = €1.1618 (2009: £1 = €1.1062). The principal exchange rate used for the income statement is the average rate for the year: £1 = €1.1657 (2009: £1 = €1.1229).

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 stated at 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 assets and financial liabilities

Cash and cash equivalents

Cash and cash equivalents comprise 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.

Trade receivables and payables

Trade receivables and payables are stated at fair value, less any provision for impairment against trade receivables.

Borrowings

Borrowings are held at amortised cost. They are recognised initially at fair value, after taking into account any discount on issue and attributable transaction costs. Subsequently, such discounts and costs are charged to the income statement over the term of the borrowing at a constant return on the carrying amount of the liability. 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

Derivative financial instruments are designated as at fair value through profit or loss in accordance with IAS 39 "Financial Instruments: Recognition and Measurement". They are recognised initially at fair value, which equates to cost, and are subsequently remeasured at fair value. 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.

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.

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.

Tax

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.

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 but are subject to final confirmation from the Mall Bond Security Trustee which is expected shortly as disclosed in note 3.

· 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 36.

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.

Interest and dividend income

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. Dividend income from investments is recognised when the shareholders' right to receive payment has been established.

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

In prior years, segmental information was split between asset businesses, comprising the Group's property investment activities in the UK and Germany, and earnings businesses, comprising the Group's property management activities and SNO!zone. While these definitions continue to be valid, the information provided to the Board of directors (which is the Group's Chief Operating Decision Maker) for the purposes of resource allocation and assessment of segment performance is split further to show individual funds, joint ventures and other underlying entities of these businesses.

Under this basis and the quantitative thresholds of IFRS 8 "Operating Segments", the Group's reportable segments 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 Auchinlea Partnership, PPCR Group, Sauchiehall Centre, MEN Arena (sold in 2010) and Cardiff (sold in 2009), 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, 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 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	-	-	-	-	-	-	0.1	-	0.1
Interest expense		(10.1)	(3.4)	(2.7)	(10.5)	(8.3)	-	-	(35.0)	-	(35.0)
Contribution		4.4	0.1	1.2	5.1	2.5	-	-	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	5.1	2.5	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 disposals		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	12	-	-	-	-	-	(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 non-recurring 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	5.4	2.6	4.9	2.6	52.4	(6.0)	46.4
Tax charge	9a										(2.0)
Profit after tax											44.4

Total assets	2b	225.6	67.5	67.0	260.3	142.2	8.8	2.5	773.9	24.0	797.9
Total liabilities	2b	(168.0)	(43.7)	(41.0)	(211.9)	(133.1)	(4.5)	(2.3)	(604.5)	(18.9)	(623.4)
Net assets		57.6	23.8	26.0	48.4	9.1	4.3	0.2	169.4	5.1	174.5

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 2009	Note	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Rental income from external sources	2b	25.5	8.2	8.1	20.0	11.9	-	-	73.7	-	73.7
Property and void costs		(7.1)	(1.2)	(1.8)	(2.6)	(2.4)	-	-	(15.1)	-	(15.1)
Net rental income		18.4	7.0	6.3	17.4	9.5	-	-	58.6	-	58.6
Interest income		0.3	0.1	-	-	-	-	-	0.4	-	0.4
Interest expense		(11.8)	(6.5)	(4.6)	(11.3)	(8.3)	-	-	(42.5)	-	(42.5)
Contribution		6.9	0.6	1.7	6.1	1.2	-	-	16.5	-	16.5
Management fees	2b	-	-	-	-	-	17.1	-	17.1	-	17.1
Management expenses		-	-	-	-	-	(11.1)	-	(11.1)	(3.9)	(15.0)
SNO!zone income	2b	-	-	-	-	-	-	13.7	13.7	-	13.7
SNO!zone expenses		-	-	-	-	-	-	(12.4)	(12.4)	-	(12.4)
Depreciation		-	-	-	-	-	(0.1)	(0.3)	(0.4)	-	(0.4)
Inter-segment revenue	2b	-	-	-	-	0.9	0.3	-	1.2	-	1.2
Inter-segment expenses		-	-	-	-	(0.2)	(0.9)	(0.1)	(1.2)	-	(1.2)
Interest expense on central facility		-	-	-	-	-	-	-	-	(2.0)	(2.0)
Recurring pre-tax profit		6.9	0.6	1.7	6.1	1.9	5.3	0.9	23.4	(5.9)	17.5
Variable overhead		-	-	-	-	-	(0.3)	-	(0.3)	-	(0.3)
Revaluation of investment properties		(50.3)	(26.1)	(18.8)	(10.5)	(2.7)	-	-	(108.4)	-	(108.4)
Deemed disposals		-	(2.8)	(4.4)	-	-	-	-	(7.2)	-	(7.2)
(Loss) / profit on disposals		(3.7)	(2.1)	(3.4)	-	0.5	-	-	(8.7)	(0.7)	(9.4)
Impairment of trading properties	4	-	-	-	-	(2.1)	-	-	(2.1)	-	(2.1)
Impairment of goodwill	12	-	-	-	-	-	(1.6)	-	(1.6)	-	(1.6)
Gain / (loss) on financial instruments		0.7	(1.3)	0.4	(1.0)	0.8	-	-	(0.4)	0.7	0.3
Other non-recurring items		-	(0.6)	(0.2)	(0.1)	0.4	(0.5)	-	(1.0)	(1.2)	(2.2)
(Loss)/ profit before tax		(46.4)	(32.3)	(24.7)	(5.5)	(1.2)	2.9	0.9	(106.3)	(7.1)	(113.4)
Tax charge	9a										(6.3)
Loss after tax											(119.7)

Total assets	2b	281.7	81.2	67.2	292.6	157.2	7.2	3.5	890.6	28.4	919.0
Total liabilities	2b	(249.1)	(55.6)	(49.0)	(245.9)	(140.0)	(3.9)	(5.2)	(748.7)	(40.5)	(789.2)
Net assets		32.6	25.6	18.2	46.7	17.2	3.3	(1.7)	141.9	(12.1)	129.8

2b Reconciliations of reportable revenue, assets and liabilities

		Year to	Year to
		30 December	30 December
		2010	2009
Revenue	Note	£m	£m
Rental income from external sources	2a	59.8	73.7
Inter-segment revenue	2a	0.2	1.2
Management fees	2a	13.3	17.1
SNO!zone income	2a	12.5	13.7
Revenue for reportable segments		85.8	105.7
Elimination of inter-segment revenue		(0.2)	(1.2)
Rental income earned by associates and joint ventures	16d, 16e	(52.2)	(65.8)
Management fees earned by associates and joint ventures	16d, 16e	(2.7)	(0.9)
Revenue per consolidated income statement	3	30.7	37.8

Revenue for reportable segments by country
UK		66.5	85.7
Germany		19.3	20.0
Revenue for reportable segments		85.8	105.7

Revenue is attributed to countries on the basis of the location of the underlying properties. All Group revenue in the current year and preceding year arose in the UK. Revenue from the Group's major customer is management fee income from The Mall LP, included in the property management segment, which represented £8.9 million (2009: £9.5 million) of the Group's total revenue of £30.7 million (2009: £37.8 million). Further information on related party transactions is disclosed in note 36 to the financial statements.

		2010	2009
Assets	Note	£m	£m
Total assets of reportable segments	2a	773.9	890.6
Adjustment for associates and joint ventures		(543.0)	(675.9)
Non-segment assets		48.2	40.4
Group assets		279.1	255.1

Net assets by country
UK		123.6	83.1
Germany		50.9	46.7
		174.5	129.8

		2010	2009
Liabilities	Note	£m	£m
Total liabilities of reportable segments	2a	(604.5)	(748.7)
Adjustment for associates and joint ventures		521.3	654.3
Non-segment liabilities		(21.4)	(30.9)
Group liabilities		(104.6)	(125.3)

3 Revenue

		Year to	Year to
		30 December	30 December
		2010	2009
		Total	Total
Statutory	Note	£m	£m
Asset businesses
Gross rent from wholly owned investment properties		0.9	1.1
Gross rent from wholly owned trading properties		6.7	6.7
Gross rent from wholly owned properties		7.6	7.8
Other income		-	0.6
Earnings businesses
Management fees		10.6	15.7
SNO!zone income	2a	12.5	13.7
Revenue per consolidated income statement	2b	30.7	37.8
Finance income	5	1.2	2.7
Total revenue		31.9	40.5

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

The calculation of performance fees on The Mall has also changed so that they are no longer calculated on a rolling three-year basis but will instead be payable at the end of the life of the fund or an exit event such as the sale of all the interests in the fund. Payment will be based 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. CRPM will earn fees as follows:

· between 50 basis points and 150 basis points: 10% of the outperformance proceeds

· between 150 basis points and 300 basis points of outperformance: 15% of the outperformance proceeds

· over 300 basis points of outperformance: 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 also been amended such that the fund will only have the right to remove CRPM as managers 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 but are subject to final confirmation by the Mall Bond Security Trustee which is expected shortly. The GP Board agreed that the right of the fund to remove CRPM if there was a change of control of Capital & Regional Plc would be removed, as has the requirement for the Group to obtain the fund's approval prior to acquiring another shopping centre. These amendments become effective once the fee arrangements have been finalised.

4 Cost of sales

		Year to	Year to
		30 December	30 December
		2010	2009
	Note	£m	£m
Property costs of wholly owned properties		0.2	1.0
Void costs of wholly owned properties		0.4	0.2
SNO!zone expenses		9.9	12.7
(Impairment reversal) / impairment of trading properties	2a, 11a	(0.1)	2.1
Total cost of sales		10.4	16.0

5 Finance income

		Year to	Year to
		30 December	30 December
		2010	2009
		£m	£m
Interest receivable		1.2	1.3
Gain in fair value of financial instruments:
Interest rate swaps		-	1.2
Ineffective portion of forward foreign exchange contracts		-	0.2
Unhedged element of forward foreign exchange contracts		-	-
Total finance income	3	1.2	2.7

6 Finance costs

	Year to	Year to
	30 December	30 December
	2010	2009
	£m	£m
Interest payable on bank loans and overdrafts	5.8	11.0
Interest receivable on swaps	(0.4)	(2.2)
Interest payable	5.4	8.8
Amortisation of loan issue costs	0.5	2.5
Other interest payable	0.3	(0.4)
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	-	0.1
Total finance costs	7.4	11.0

7a Profit / (loss) before tax

The profit / (loss) before tax is arrived at after charging the following items:

		Year to	Year to
		30 December	30 December
		2010	2009
	Note	£m	£m
Depreciation of plant and equipment	13a	0.5	0.4
Property revaluation	11a	0.2	2.8
Impairment of goodwill	12	0.7	1.6
Impairment of trade receivables	17	0.1	0.6
Staff costs	8a	13.5	15.3
Auditors' remuneration	7b	0.2	0.6

7b Auditors' remuneration

The breakdown of auditors' remuneration was as follows:

		Year to	Year to
		30 December	30 December
		2010	2009
	Note	£m	£m
Fees payable to the Company's auditors for the audit of the Company's annual financial statements		0.1	0.1
Fees payable to the Company's auditors and their associates for other services to the Group - the audit of the Company's subsidiaries and joint ventures pursuant to legislation		0.1	0.1
Total audit fees		0.2	0.2
Non-audit fees (see below)		-	0.4
Total fees paid to auditors	7a	0.2	0.6

Included in non-audit fees are amounts for services supplied pursuant to legislation of £40,000 (2009: £64,000), which related to the review of the Group's interim report, and corporate finance services of £nil (2009: £330,000). Fees payable to Deloitte LLP and their associates for non-audit services to the Company are not required to be disclosed because the consolidated financial statements are required to disclose such fees on a consolidated basis.

8a Staff costs, including directors

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

		Year to	Year to
		30 December	30 December
		2010	2009
	Note	£m	£m
Salaries		10.9	13.2
Ex-gratia payments		0.3	0.4
Discretionary bonuses		0.3	-
Share-based payments	24	0.7	0.3
		12.2	13.9
Social security		1.2	1.3
Other pension costs		0.1	0.1
	7a	13.5	15.3

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.

8b 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
	2010	2009
	Number	Number
CRPM	91	128
SNO!zone	253	258
Total staff numbers	344	386

9 Tax

9a Tax charge

		Year to	Year to
		30 December	30 December
		2010	2009
	Note	£m	£m
Current tax (credit) / charge
UK corporation tax		-	-
Adjustments in respect of prior years		(0.6)	3.6
Foreign tax		0.1	0.1
Total current tax (credit) / charge		(0.5)	3.7

Deferred tax charge
Origination and reversal of temporary timing differences		2.5	2.6
Total deferred tax charge		2.5	2.6

Total tax charge	2a, 9b	2.0	6.3

£nil (2009: £nil) of the tax charge relates to items included in other comprehensive income.

9b Tax charge reconciliation

		Year to	Year to
		30 December	30 December
		2010	2009
	Note	£m	£m
Profit / (loss) before tax		46.4	(113.4)
Profit / (loss) multiplied by the UK corporation tax rate of 28% (2009: 28%)		13.0	(31.8)
Non-allowable expenses and non-taxable items (restated) *		(1.0)	(4.8)
(Utilisation of tax losses) / excess tax losses		(0.7)	4.0
Tax on realised gains/(losses) (restated) *		(1.5)	1.7
Unrealised (gains) / losses on investment properties not taxable		(8.2)	29.3
Temporary timing and controlled foreign companies income		1.0	4.4
Overseas tax rate differences		-	(0.1)
Adjustments in respect of prior years		(0.6)	3.6
Total tax charge	9a	2.0	6.3

* comparative amounts have been restated for consistency with the presentation in the current year with £163.7 million being eliminated from both 'non-allowable expenses and non-taxable items' and 'tax on realised gains/(losses)' in 2009 which had no impact on the total tax charge.

9c Deferred tax asset / (liabilities)

		Capital	Other timing	30 December	30 December
		allowances	differences	2010	2009
	Note	£m	£m	£m	£m
At the start of the year		(4.9)	3.7	(1.2)	1.4
Deferred tax credit/(charge)	9a,10a	-	(2.5)	(2.5)	(2.6)
At the end of the year		(4.9)	1.2	(3.7)	(1.2)

The UK corporation tax rate will be reduced by 1% to 27% from 1 April 2011 so the rate at which deferred tax is booked in the financial statements is 27% (2009: 28%).

There are no temporary differences relating to the unremitted earnings of subsidiaries as the Groups 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 £3.0 million (2009: £3.1 million) as it is not certain that a deduction will be available when the asset crystallises.

9d Unused tax losses

The Group has £111.4 million (2009: £108.1 million) of unused revenue tax losses, all of which are in the UK. A deferred tax asset of £0.6 million (2009: £0.7 million) has been recognised in respect of £2.2 million (2009: £2.5 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 £21.5 million (2009: £19.7 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 amount of losses available have yet to be agreed with the tax authorities and may therefore be reduced. The losses do not have an expiry date.

9e 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.

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. At 30 December 2010 the corporate tax liability related to this was £15.0 million, with £5.0 million classified as current and £10.0 million as non-current. As disclosed in note 35 the Group made a cash payment of £5.0 million on the due date of 31 December 2010 related to the current tax liability recorded at 30 December 2010 in accordance with the agreed payment plan.

10 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:

10a Earnings per share calculation

Year to 30 December 2010		Year to 30 December 2010			Year to 30 December 2009
	Note	Basic	Diluted	EPRA diluted	Basic	Diluted	EPRA diluted
Profits / (losses) (£m)
Profit / (loss) for the year		44.4	44.4	44.4	(119.7)	(119.7)	(119.7)
Revaluation of investment properties	10b	-	-	(29.6)	-	-	108.4
(Profit) / loss on disposal of investment properties (net of tax)	10b	-	-	(3.2)	-	-	9.4
Movement in fair value of financial instruments	10b	-	-	0.1	-	-	0.9
Impairment of goodwill	12	-	-	0.7	-	-	1.6
Deferred tax charge on capital allowances	9c	-	-	-	-	-	0.8
		44.4	44.4	12.4	(119.7)	(119.7)	1.4
Weighted average number of shares (m)
Ordinary shares in issue	23	350.6	350.6	350.6	206.6	206.6	206.6
Own shares held		(2.2)	(2.2)	(2.2)	(3.5)	(3.5)	(3.5)
Dilutive contingently issuable shares and share options		-	0.5	0.5	-	-	-
		348.4	348.9	348.9	203.1	203.1	203.1
Earnings / (loss) per share (pence)		13p	13p	4p	(59)p	(59)p	1p

At the end of the year, the Group had 14,671,893 (2009: 2,001,986) 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.

10b Reconciliation of earnings figures included in earnings per share calculations

		Year to 30 December 2010			Year to 30 December 2009
				Movement			Movement
				in fair value			in fair value
		Revaluation	Profit/(loss)	of financial	Revaluation	Loss on	of financial
		movements	on disposal	instruments	movements	disposal	instruments
	Note	£m	£m	£m	£m	£m	£m
Associates	16d	28.4	5.0	(1.4)	(95.2)	(9.2)	(0.2)
Joint ventures	16e	1.4	(0.3)	3.2	(10.4)	-	(0.8)
Wholly owned		(0.2)	(0.2)	(1.2)	(2.8)	(0.2)	1.3
Tax effect		-	(1.3)	(0.7)	-	-	(1.2)
Total	10a	29.6	3.2	(0.1)	(108.4)	(9.4)	(0.9)

11 Property assets

11a Wholly owned properties

					Long
					leasehold
		Freehold	Leasehold	Sub-total	owner	Freehold	Total
		investment	investment	investment	occupied	trading	property
		properties	properties	properties	property	properties	assets
	Note	£m	£m	£m	£m	£m	£m
Cost or valuation
At 30 December 2008		0.2	15.1	15.3	10.8	72.8	98.9
Impairment of trading properties	4, 26	-	-	-	-	(2.1)	(2.1)
Revaluation movement	7a, 26	-	(2.7)	(2.7)	(0.1)	-	(2.8)
Head leases treated as finance leases		-	-	-	0.4	-	0.4
Transfer to properties held for sale	11b	-	(2.4)	(2.4)	(11.1)	-	(13.5)
At 30 December 2009		0.2	10.0	10.2	-	70.7	80.9
Impairment reversal of trading properties	4, 26	-	-	-	-	0.1	0.1
Revaluation movement	7a, 26	-	(0.2)	(0.2)	-	-	(0.2)
At 30 December 2010		0.2	9.8	10.0	-	70.8	80.8

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 £80.6 million (2009: £91.8 million) to secure banking facilities granted to the Group, including amounts relating to trading properties of £70.8 million (2009: £70.7 million). Those banking facilities restrict the remittance of income from the properties elsewhere in the Group.

11b Properties held for sale

		Leasehold	Long leasehold	Total
		investment	owner-occupied	properties
		property	property	held for sale
	Note	£m	£m	£m
Cost or valuation
At 30 December 2008		-	-	-
Transfer from wholly owned properties	11a	2.4	11.1	13.5
At 30 December 2009	11c	2.4	11.1	13.5
Disposals		(2.4)	(11.1)	(13.5)
At 30 December 2010		-	-	-

On 2 March 2010 the sale of the Group's owner-occupied leasehold property completed for a sale price after transaction costs of £10.4 million. The proceeds were used to pay down the floating rate debt of £7.4 million secured on the property. The disposal included £0.8 million representing the value of the head lease. There was no profit or loss on disposal as the property was valued at its fair value at 30 December 2009.

On 10 March 2010 the sale of the Group's Beeston Place property completed for a sale price after transaction costs of £2.1 million. The disposal included £0.2 million representing the value of the head lease. There was no profit or loss on disposal as the property was valued at its fair value at 30 December 2009.

11c Property assets

		30 December	30 December
		2010	2009
		Valuation	Valuation
	Note	£m	£m
Wholly owned
Investment properties at fair value		10.0	10.2
Held for sale properties at fair value	11b	-	12.5
Head leases treated as finance leases on held for sale properties	11b	-	1.0
Trading properties at the lower of cost and net realisable value		72.0	72.0
Unamortised tenant incentives on trading properties		(1.2)	(1.3)
		80.8	94.4
Joint ventures
Investment properties at fair value		546.7	644.8
Head leases treated as finance leases on investment properties		-	3.5
Unamortised tenant incentives on investment properties		(5.8)	(8.1)
Held for sale properties at fair value		-	3.0
	16e	540.9	643.2
Associates
Investment properties at fair value		2,217.5	2,407.9
Head leases treated as finance leases on investment properties		84.8	100.7
Unamortised tenant incentives on investment properties		(49.3)	(53.7)
Held for sale properties at fair value		50.0	-
	16d	2,303.0	2,454.9

External valuations at 30 December 2010 were carried out on £2,760.5 million (2009: £3,133.4 million) of the property assets held by the Group and its associates and joint ventures, of which the Group's share was £670.0 million (2009: £750.5 million).

The valuations were carried out by independent qualified professional valuers from CB Richard Ellis Limited, Cushman & Wakefield LLP, DTZ Debenham Tie Leung Limited, Jones Lang LaSalle Limited and King Sturge LLP. 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 2010 were carried out on £135.7 million (2009: £12.7 million) of an associates property assets, of which the Group's share was £27.3 million (2009: £12.7 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.

11d Loss on sale of properties and investments

		Year to	Year to
		30 December	30 December
		2010	2009
	Note	£m	£m
Loss on sale of MEN Arena joint venture	26, 31	(0.2)	-
Profit on sale of Cardiff joint venture		-	0.5
Other write-downs, impairments and release of provisions		-	(0.7)
		(0.2)	(0.2)

12 Goodwill

		30 December	30 December
		2010	2009
	Note	£m	£m
At the start of the year		2.6	4.2
Provision for impairment	2a, 7a, 10a, 26	(0.7)	(1.6)
At the end of the year		1.9	2.6

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 2010 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 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 four-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 £0.3 million in the year.

13 Other non-current assets

13a Plant and equipment

		30 December	30 December
		2010	2009
	Note	£m	£m
Cost or valuation
At the start of the year		4.4	4.3
Additions		0.5	0.1
Disposals		(2.2)	-
At the end of the year		2.7	4.4
Depreciation
At the start of the year		(3.4)	(3.0)
Provided for the year	7a, 26	(0.5)	(0.4)
Released on disposal		2.1	-
At the end of the year		(1.8)	(3.4)
Carrying amount
At the end of the year		0.9	1.0

13b Available for sale investments

		30 December	30 December
		2010	2009
	Note	£m	£m
Fair value
At the start of the year		0.3	0.2
Increase in fair value		-	0.1
At the end of the year	22a, 22e	0.3	0.3

Available for sale investments comprises of £290,175 (2009: £256,000) representing a 0.3% interest in units of the Paddington Central II and III Unit Trusts, and £10,000 (2009: £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.

14 Non-current receivables

		30 December	30 December
		2010	2009
	Note	£m	£m
Financial assets
Loans to joint ventures	36	24.7	23.8
	22a, 22e	24.7	23.8
Non-financial assets
Prepayments		1.2	1.2
		25.9	25.0

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 £14.6 million (2009: £15.2 million) to secure banking facilities granted to the Group

15 Subsidiaries

A list of the significant investments in subsidiaries, including the name, country of incorporation, and proportion of ownership interest is given in note I 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 18.

16 Investment in associates and joint ventures

16a Share of results

		Year to	Year to
		30 December	30 December
		2010	2009
	Note	£m	£m
Share of results of associates		38.4	(96.2)
Dilution effect of The Junction open offer		-	(2.8)
Dilution effect of X-Leisure open offer		-	(4.4)
	16b	38.4	(103.4)
Share of results of joint ventures	16c	6.8	(3.4)
	26	45.2	(106.8)

16b Investment in associates

		30 December	30 December
		2010	2009
	Note	£m	£m
At the start of the year		76.4	182.3
Investment in associates		2.7	4.6
Share of results of associates	16a, 16d	38.4	(103.4)
Impairments		(0.4)	(0.4)
Dividends and capital distributions received	36	(6.3)	(6.7)
At the end of the year	16d	110.8	76.4

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	16.72	16.72
The Junction Limited Partnership	13.21	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
Euro B-Note Holding Limited	-	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

On 21 July 2010, The Mall completed a restructuring of its borrowing arrangements. Unitholders agreed to an extension of the life of the fund from June 2012 to June 2017, whilst bondholders agreed to an extension of the maturity of the Secured Floating Rate Notes from April 2014 to April 2017. The Intercompany Loan from the funding entity to The Mall Limited Partnership, which represents the effective maturity of the borrowing from the fund's perspective, was also extended from April 2012 to April 2015.

The key elements of the restructuring were:

· an increase in the margin payable on the Notes from 0.18% to 0.68% with effect from April 2011; As a result of amendments to the fund's hedging instruments, the interest rate payable on the bonds over the period to 2015 will, for most of the period be below 5%;

· mandatory amortisation of the Intercompany Loan to £800 million by December 2012 and £600 million by December 2014; Following the repayments during the year, the amount outstanding of £827.7 million at 30 December 2010 is already close to the initial target well in advance of the due date;

· the introduction of an 83% LTV covenant from December 2011, reducing in stages to 65% in December 2014;

· a suspension of the current release price mechanism until LTV is below 60% and debt less than £600 million, which will allow the sale of properties where the proceeds would be below the historically determined release price; and

· the restriction of distributions until LTV is below 60% and debt less than £600 million.

A contribution of £155.0 million was also made from the fund's cash reserves, with £50.0 million used to repay existing debt, £85 million set aside for leasing incentives, capital expenditure and working capital requirements, and £20.0 million covering the costs of the transaction, including swap breakage costs and consent solicitation fees.

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. An impairment of £0.4 million had been made at 30 December 2009 to reflect the expected impact of these adjustments, at which level the Group's share in the fund would have been reduced to 13.21%. At 30 December 2010, the expected impact of these adjustments would mean the Group's share in the fund would be reduced to 13.29%, resulting in a reversal of £0.2 million of the prior year impairment charge. The adjustment includes the effect of backdating the changed ownership percentage to May 2009.

X-Leisure Limited Partnership

The FIX UK Limited Partnership

The fund was at risk of breaching its LTV covenant early in the year but on 22 January 2010 agreed a refinancing package with its banks that included an LTV waiver until September 2011. The value of the Group's investment in FIX UK was £nil in 2009 but a further equity contribution of £1.1 million in 2010, that was part of the refinancing package, together with the profit generated by FIX UK in the year, mean it is now included at a value of £1.0 million. The unrecognised share of losses at the end of the year was £nil (2009: £0.6 million).

Garigal Asset Management GmbH

As disclosed in note 29, the 30.06% share in Garigal was purchased on 10 August 2010 and the Group's share of its results is included from that date, along with the goodwill arising from the investment in associate. Performance fees that could potentially be earned by Garigal in future are disclosed in note 35.

Euro B-Note Holding Limited

As disclosed in note 30, the effective 49.90% share in Euro B-Note Holding Limited was purchased on 22 December 2010 for €1.9 million (£1.6 million) and the Group's share of its results is included from that date.

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 £5.6 million during the year because its LTV is below 65%.

· X-Leisure is able to make distributions and made a distribution to the Group of £0.7 million during the year because its LTV is below 65%.

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

16c Investment in joint ventures

		30 December	30 December
		2010	2009
	Note	£m	£m
At the start of the year		30.3	34.4
Investment in joint ventures		-	2.1
Share buy backs from joint ventures		(0.6)	-
Net liabilities of Cardiff joint venture disposed of		-	0.5
Net assets of MEN Arena joint venture disposed of	31	(5.9)	-
Dividends and capital distributions receivable	36	(3.4)	(0.7)
Share of results of joint ventures	16a, 16e	6.8	(3.4)
Foreign exchange differences		(1.5)	(2.6)
At the end of the year	16e	25.7	30.3

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
Manchester Arena Complex Limited Partnership	30.00	30.00	-

The Group's share in the German portfolio is 49.6% (2009: 48.8%) but it is accounted for as 50% as the minority interests are included as a liability on the joint venture balance sheet. During the year the German portfolio bought out 1.6% of the minority interests for £1.0 million from existing cash reserves, with the impact on the Group being an increase in the share of the German portfolio of 0.8%.

German portfolio

The main focus is now on the refinancing of a €164 million debt in one of the German portfolios which matures in July 2011. The debt is made up of €146 million of senior debt which is held in an Irish securitisation vehicle, and €18 million of junior debt which was acquired by the Group and the German joint venture partner shortly before year end at a discount reducing the refinancing risk as disclosed in note 30.

All LTV and ICR covenants on the German debt portfolios were met at 30 December 2010, however the LTV on the debt maturing in July 2011 is expected to be breached when a formal valuation is called as part of the refinancing arrangements but the expectation is that this will be simultaneously waived as part of the refinancing agreement.

During the year the German portfolio made distributions to the Group of £3.1 million.

X-Leisure Limited

As disclosed in note 35, Hermes sold their investments in X-Leisure and X-Leisure Limited to AREA on 18 March 2011 which resulted in amendments to management contracts but has no material impact on the Group. Performance fees that could potentially be earned by X-Leisure Limited in future are disclosed in note 36.

During the year X-Leisure Limited made distributions to the Group of £0.3 million.

Xscape Braehead Partnership

The debt breached its LTV covenant in February 2010 and in April 2010, the Group and its joint venture partner agreed a refinancing of the loan by injecting funds which, together with cash already held in the partnership, reduced the debt to £45.6 million. The bank agreed to a stand still on the LTV breach prior to the refinancing being agreed. The terms of the loan were also renegotiated which increased the margin from 1% to 2% which will be rolled up for payment in March 2012.

The Auchinlea Partnership

The Auchinlea Partnership held the Group's interest in Glasgow Fort. Since the sale of this interest in 2004 the Group has received a total of £8.6 million further profit from its remaining interest in the joint venture. Further profits were potentially receivable, largely dependent on planning consent being obtained for future phases of the development and the letting of units at above target rents. The Group has also given certain rental guarantees for a five year period and has made provision for the amounts which are expected to be paid in respect of these. The Group's share of the fair value of the right to receive these future profits at 30 December 2010 is £nil (2009: £nil), as the necessary development did not take place in the timescale provided.

Manchester Arena Complex Limited Partnership

As disclosed in note 31, the 30% investment in Manchester Arena Complex Limited Partnership, which owned the MEN Arena investment property, was sold on 15 June 2010 and the Group's share of its results is included up to that date.

16d Analysis of investment in associates

						Year to 30 December	Year to 30 December
						2010	2009
		The Mall	The Junction	X-Leisure	Others	Total	Total
	Note	£m	£m	£m	£m	£m	£m
Income statement (100%)
Revenue - gross rent		114.6	30.3	42.3	10.6	197.8	247.7
Property and management expenses		(22.4)	(2.7)	(7.8)	(1.1)	(34.0)	(48.9)
Void costs		(7.5)	(1.1)	(1.7)	-	(10.3)	(11.1)
Net rent		84.7	26.5	32.8	9.5	153.5	187.7
Net interest payable		(60.0)	(25.7)	(23.0)	(10.3)	(119.0)	(133.0)
Contribution		24.7	0.8	9.8	(0.8)	34.5	54.7
Revenue - management fees		-	-	-	0.9	0.9	-
Management expenses		-	-	-	(0.8)	(0.8)	-
Revaluation of investment properties		105.5	23.4	68.3	(2.8)	194.4	(458.3)
Profit / (loss) on sale of investment properties		18.0	14.0	1.5	-	33.5	(54.3)
Loan renegotiation costs		-	-	-	-	-	(4.6)
Fair value of interest rate swaps		(1.2)	(10.6)	(8.5)	6.6	(13.7)	5.4
Profit / (loss) for the year		147.0	27.6	71.1	3.1	248.8	(457.1)

Balance sheet (100%)
Investment properties	11c	1,139.0	458.9	520.6	134.5	2,253.0	2,454.9
Investment properties held for sale	11c	50.0	-	-	-	50.0	-
Other assets		160.4	48.9	40.9	14.1	264.3	400.9
Current liabilities		(106.6)	(38.6)	(47.2)	(11.0)	(203.4)	(251.8)
Non-current liabilities		(898.6)	(290.2)	(296.4)	(126.0)	(1,611.2)	(2,060.7)
Net assets (100%)		344.2	179.0	217.9	11.6	752.7	543.3

Income statement (Group share)
Revenue - gross rent		19.5	4.0	5.1	2.0	30.6	41.8
Property and management expenses		(3.8)	(0.4)	(1.0)	(0.2)	(5.4)	(8.3)
Void costs		(1.3)	(0.1)	(0.2)	-	(1.6)	(1.8)
Net rent		14.4	3.5	3.9	1.8	23.6	31.7
Net interest payable	2a	(10.0)	(3.4)	(2.7)	(2.0)	(18.1)	(22.5)
Contribution	2a	4.4	0.1	1.2	(0.2)	5.5	9.2
Revenue - management fees		-	-	-	0.3	0.3	-
Management expenses		-	-	-	(0.3)	(0.3)	-
Deemed disposal	2a	-	-	-	-	-	(7.2)
Revaluation of investment properties	10b	17.6	3.1	8.1	(0.4)	28.4	(95.2)
Profit / (loss) on sale of investment properties	10b	3.0	1.8	0.2	-	5.0	(9.2)
Loan renegotiation costs		-	-	-	-	-	(0.8)
Fair value of interest rate swaps	10b	(0.2)	(1.4)	(1.0)	1.2	(1.4)	(0.2)
Gain recognised on investment in Garigal	29	-	-	-	0.9	0.9	-
Profit / (loss) for the year	16b	24.8	3.6	8.5	1.5	38.4	(103.4)

Balance sheet (Group share)
Investment properties		190.4	61.0	62.1	26.9	340.4	367.8
Investment properties held for sale		8.4	-	-	-	8.4	-
Other assets		26.8	6.5	4.9	4.2	42.4	62.7
Current liabilities		(17.8)	(5.1)	(5.6)	(2.5)	(31.0)	(38.0)
Non-current liabilities		(150.2)	(38.6)	(35.4)	(25.2)	(249.4)	(315.4)
		57.6	23.8	26.0	3.4	110.8	77.1
C&R accounting policy adjustment		-	-	-	-	-	(0.3)
Impairment		-	-	-	-	-	(0.4)
Net assets (Group share)	16b	57.6	23.8	26.0	3.4	110.8	76.4

16e Analysis of investment in joint ventures

				Year to	Year to
				30 December	30 December
		German		2010	2009
		portfolio	Others	Total	Total
	Note	£m	£m	£m	£m
Income statement (100%)
Revenue - gross rent		38.0	6.2	44.2	50.5
Property and management expenses		(6.6)	(1.4)	(8.0)	(7.2)
Void costs		(0.2)	-	(0.2)	(0.9)
Net rent		31.2	4.8	36.0	42.4
Net interest payable		(21.1)	(5.0)	(26.1)	(29.9)
Contribution		10.1	(0.2)	9.9	12.5
Revenue - management fees		-	4.7	4.7	1.7
Management expenses		-	(3.5)	(3.5)	(1.3)
Revaluation of investment properties		0.4	3.4	3.8	(18.5)
(Loss) / profit on sale of investment properties		(1.1)	0.5	(0.6)	(0.1)
Fair value movements of financial assets		-	-	-	(0.2)
Write-off of SNO!zone tenant incentives		-	(2.1)	(2.1)	-
Fair value of interest rate swaps		5.3	1.4	6.7	(1.3)
Profit / (loss) before tax		14.7	4.2	18.9	(7.2)
Tax		(3.7)	(0.4)	(4.1)	2.5
Profit / (loss) after tax		11.0	3.8	14.8	(4.7)

Balance sheet (100%)
Investment properties	11c	495.7	45.2	540.9	640.2
Investment properties held for sale	11c	-	-	-	3.0
Current assets		22.8	13.8	36.6	42.5
Current liabilities		(165.9)	(7.8)	(173.7)	(37.4)
Non-current liabilities		(287.2)	(65.5)	(352.7)	(581.4)
Net assets (100%)		65.4	(14.3)	51.1	66.9

Income statement (Group share)
Revenue - gross rent		19.0	2.6	21.6	24.1
Property and management expenses		(3.3)	(0.4)	(3.7)	(3.4)
Void costs		(0.1)	-	(0.1)	(0.4)
Net rent		15.6	2.2	17.8	20.3
Net interest payable	2a	(10.5)	(2.3)	(12.8)	(14.3)
Contribution	2a	5.1	(0.1)	5.0	6.0
Revenue - management fees		-	2.4	2.4	0.9
Management expenses		-	(1.8)	(1.8)	(0.7)
Revaluation of investment properties	10b	0.2	1.2	1.4	(10.4)
(Loss) / profit on sale of investment properties	10b	(0.6)	0.3	(0.3)	-
Fair value movements of financial assets		-	-	-	(0.1)
Write-off of SNO!zone tenant incentives		-	(1.0)	(1.0)	-
Fair value of interest rate swaps	10b	2.6	0.6	3.2	(0.8)
C&R accounting policy adjustment		-	-	-	0.5
Profit / (loss) before tax		7.3	1.6	8.9	(4.6)
Tax		(1.9)	(0.2)	(2.1)	1.2
Profit / (loss) after tax	16c	5.4	1.4	6.8	(3.4)

Balance sheet (Group share)
Investment properties		247.9	22.6	270.5	307.4
Investment properties held for sale		-	-	-	1.5
Current assets		11.4	6.9	18.3	19.4
Current liabilities		(82.9)	(3.9)	(86.8)	(17.2)
Non-current liabilities		(143.7)	(32.6)	(176.3)	(281.3)
		32.7	(7.0)	25.7	29.8
C&R accounting policy adjustment		-	-	-	0.5
Net assets (Group share)	16c	32.7	(7.0)	25.7	30.3

17 Current receivables

		30 December	30 December
		2010	2009
	Note	£m	£m
Financial assets
Trade receivables		1.7	1.5
Amounts owed by associates	36	1.4	0.7
Amounts owed by joint ventures	36	0.2	0.6
Other receivables		0.9	2.0
Accrued income		0.6	0.3
Non-derivative financial assets	22a, 22e	4.8	5.1
Financial assets carried at fair value through the profit or loss - Foreign exchange forward contracts	22a, 22e, 22f	0.6	-
		5.4	5.1
Non-financial assets
Prepayments		1.7	1.8
		7.1	6.9

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 trade receivables balance are debtors with a carrying amount of £2.3 million (2009: £4.8 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 £0.2 million (2009: £0.2 million) over trade receivables as security deposits held in rent accounts. The average age of trade receivables is 31 days (2009: 63 days).

	30 December	30 December
	2010	2009
	£m	£m
Analysis of non-derivative current financial assets
Not past due	2.5	0.3
Past due but not individually impaired:
Less than 1 month	1.2	2.7
1 to 3 months	0.3	0.2
3 to 6 months	-	1.0
Over 6 months	0.8	0.9
	4.8	5.1

	30 December	30 December
	2010	2009
	£m	£m
Allowances for doubtful receivables
At the start of the year	0.8	0.2
Additional allowances created	0.1	0.6
Utilised during the year	(0.1)	-
At the end of the year	0.8	0.8

18 Cash and cash equivalents

		30 December	30 December
		2010	2009
	Note	£m	£m
Cash at bank		23.0	15.4
Security deposits held in rent accounts		0.2	0.2
Other restricted balances		2.5	1.9
	22a, 22e	25.7	17.5

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
	2010	2009
	£m	£m
Sterling	25.2	16.6
Euro	0.5	0.9
	25.7	17.5

19 Current payables

		30 December	30 December
		2010	2009
			(restated)
	Note	£m	£m
Financial liabilities
Trade payables	22a, 22e	0.2	2.1
Accruals	22a, 22e	2.0	5.9
Payable to associates	22a, 22e, 36	0.7	2.7
Financial liabilities carried at fair value through profit or loss:
- Foreign exchange forward contracts	22a, 22f	-	1.4
Other payables	22a, 22e	3.4	3.9
		6.3	16.0
Non-financial liabilities
Deferred income		3.4	3.2
Other taxation and social security		1.2	1.4
		10.9	20.6

The average age of trade payables is 30 days (2009: 53 days) and no amounts incur interest (2009: £nil).

As disclosed in note 1 the financial liability of £3.4 million at 30 December 2009 related to the interest rate swap has been reclassified from current payables to non-current payables in note 20 as it has a maturity of more than twelve months from the balance sheet date and it is not intended to be settled within one year.

20 Non-current payables

		30 December	30 December
		2010	2009
			(restated)
	Note	£m	£m
Financial liabilities
Accruals	22a, 22e	0.3	-
Financial liabilities carried at fair value through profit or loss:
- Interest rate swaps	22a, 22f	4.5	3.4
		4.8	3.4
Non-financial liabilities
Other payables		-	2.2
		4.8	5.6

The liability of £1.9 million (2009 liability: £2.2 million) representing unamortised tenant incentives relating to the SNO!zone Braehead lease was written back during the year. The restatement of non-current payables at 30 December 2009 is explained in note 19.

21 Borrowings

21a 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
		2010	2009
Borrowings at amortised cost	Note	£m	£m
Secured
Fixed and swapped bank loans	21d	60.8	61.5
Variable rate bank loans	21d	9.7	18.9
Total borrowings before costs	21b, 22f	70.5	80.4
Unamortised issue costs		(1.1)	(1.6)
Total borrowings after costs		69.4	78.8

Analysis of total borrowings after costs
Current	22a	0.6	0.2
Non-current	22a	68.8	78.6
Total borrowings after costs		69.4	78.8

Borrowings financing certain wholly owned properties are secured by charges on those properties, which are carried at £80.6 million (2009: £91.8 million) as disclosed in note 11a. 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 £107.4 million (£2009: £76.4 million), charges over certain holdings in and loans to the German joint venture carried at £42.0 million (2009: £37.2 million), and guarantees by the Company.

21b Maturity of borrowings

		30 December	30 December
		2010	2009
	Note	£m	£m
From two to five years		63.6	72.5
From one to two years		5.9	7.2
Due after more than one year		69.5	79.7
Current		1.0	0.7
	21a	70.5	80.4

21c Undrawn committed facilities

	30 December	30 December
	2010	2009
	£m	£m
Expiring between two and five years	58.0	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 22e, £58.0 million (2009: £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.

21d Interest rate and currency profile of borrowings

		30 December	30 December
		2010	2009
	Note	£m	£m
Fixed and swapped rate borrowings
6% to 7%		60.8	61.5
	21a	60.8	61.5
Floating rate borrowings	21a	9.7	18.9
		70.5	80.4

All loans are sterling denominated with the weighted average length of fix being 2.8 years (2009: 3.8 years). Floating rate borrowings bear interest based on three month LIBOR.

22 Financial instruments

22a 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 2009.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 21a; cash and cash equivalents as disclosed in note 18; 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 2010, with a reduction in its net debt to equity ratios largely as a result of property disposals.

Gearing ratios

		30 December	30 December
		2010	2009
Statutory	Note	£m	£m
Debt before unamortised issue costs	21a	70.5	80.4
Cash and cash equivalents	18	(25.7)	(17.5)
Group net debt		44.8	62.9
Cash adjustment¹		5.0	-
Adjusted group net debt		49.8	62.9

Equity		174.5	129.8
Debt to equity ratio		40%	62%
Net debt to equity ratio		26%	48%
Adjusted net debt to equity ratio		29%	48%

		30 December	30 December
		2010	2009
			(restated)³
See-through	Note	£m	£m
Debt before unamortised issue costs	22f	532.2	660.3
Cash and cash equivalents		(64.7)	(76.4)
See-through net debt		467.5	583.9
Cash adjustment¹		5.0	-
German debt adjustment²		(7.8)	-
Adjusted see-through net debt		464.7	583.9

Equity		174.5	129.8
Debt to equity ratio		305%	509%
Net debt to equity ratio		268%	450%
Adjusted net debt to equity ratio		266%	450%

Property assets - wholly owned	11c	80.8	94.4
Investment properties - associates	16d	348.8	367.8
Investment properties - joint ventures	16e	270.5	308.9
Property value		700.1	771.1
Debt to property value ratio		76%	86%
Net debt to property value ratio		67%	76%
Adjusted net debt to property value ratio		66%	76%

¹ cash adjustment for the £5.0 million tax payment made on 31 December 2010 related to current tax liabilities recorded at 30 December 2010 as disclosed in note 35

² debt adjustment for the Group's share of the €18 million German junior debt acquired during the year as disclosed in note 16c

³see-through debt before unamortised issues costs has been restated to include FIX UK as the Group's investment is no longer impaired to £nil as it was in 2009. See-though cash and cash equivalents and the resulting ratios have been restated to be on a consistent basis with the current year.

Categories of financial assets / (liabilities)

		2010			2009
		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	13b	0.3	-	-	0.3	0.1	-
Available for sale		0.3	-	-	0.3	0.1	-

Loans to joint ventures	14,36	24.7	1.1	(1.1)	23.8	1.2	(1.7)
Current receivables	17	4.8	(0.1)	-	5.1	(0.6)	-
Cash and cash equivalents	18	25.7	0.1	-	17.5	0.1	-
Loans and receivables		55.2	1.1	(1.1)	46.4	0.7	(1.7)

Foreign exchange forward contracts	17	0.6	(0.1)	2.2	-	-	-
Derivatives in effective hedges		0.6	(0.1)	2.2	-	-	-

Financial liabilities
Trade payables	19	(0.2)	-	-	(2.1)	-	-
Accruals	19,20	(2.3)	-	-	(5.9)	0.4	-
Payable to associates	19	(0.7)	-	-	(2.7)	-	-
Other payables	19	(3.4)	(0.3)	-	(3.9)	(0.1)	-
Liabilities relating to properties held for sale		-	-	-	(1.0)	-	-
Current borrowings	21a	(0.6)	-	-	(0.2)	-	-
Non-current borrowings	21a	(68.8)	(5.9)	-	(78.6)	(6.8)	-
Liabilities at amortised cost		(76.0)	(6.2)	-	(94.4)	(6.5)	-

Foreign exchange forward contracts	19	-	-	-	(1.4)	0.1	3.9
Derivatives in effective hedges		-	-	-	(1.4)	0.1	3.9

Interest rate swaps	20	(4.5)	(1.1)	-	(3.4)	(3.4)	-
Liabilities at fair value held for trading		(4.5)	(1.1)	-	(3.4)	(3.4)	-

Total financial (liabilities) / assets		(24.4)	(6.3)	1.1	(52.5)	(9.0)	2.2

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.

22b 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 the remaining terms and other details of the Group's interest rate swap contracts:

	Average contract fixed rate		Notional principal amount		Fair value
	30 December	30 December	30 December	30 December	30 December	30 December
	2010	2009	2010	2009	2010	2009
	%	%	£m	£m	£m	£m
2 to 5 years	4.42	4.42	60.8	61.5	(4.5)	(3.4)
			60.8	61.5	(4.5)	(3.4)

Interest rate risk sensitivity analysis is determined by applying a change in interest rates to financial assets and financial liabilities at the balance sheet date. In order to be representative of the Group's exposure to interest rate risk, financial liabilities include interest rate swaps held in associates and joint ventures. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the balance sheet date was outstanding for the whole year. An increase / decrease of 1% in interest rates would have increased / decreased the Group's annual profit before tax by £11.8 million (2009: £15.2 million) with no impact on other equity reserves (2009: £nil).

The Group's sensitivity to interest rates has decreased during the current year as a result of the repayment of Group debt and debt held by joint ventures and associates. The termination of certain interest rate swaps in connection with these repayments of debt has also reduced the Group's sensitivity to interest rates, as it holds fewer derivative contracts whose values are based on forecasts of future interest rates.

22c 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. 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.

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.

22d Foreign exchange risk

The Group has investments in and loans to a number of joint ventures with property investments in Germany which have the Euro as their functional currency, and is therefore exposed to exchange rate fluctuations. The Group has designated one (2009: one) forward foreign exchange contract as a hedge of its net investment in these German joint ventures, selling €47.0 million (2009: €47.0 million) at a fixed exchange rate of 0.87489 (2009: 0.87505). In 2010 the ineffective portion of the hedge resulted in a charge of £nil (2009: charge of £0.2 million) to the income statement. As disclosed in note 35, this hedge was extended in January 2011 until June 2012.

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 loss of £0.1 million (2009: loss of £0.1 million) as disclosed in note 6.

Foreign currency risk sensitivity analysis is determined by applying a change in foreign currency rates to outstanding foreign currency denominated items at the reporting date. The following table details the Group's sensitivity to a 10% change in foreign currency rates, where a positive number indicates a decrease in loss before tax or increase in other equity reserves. The Group's sensitivity to foreign currency movements has increased during the current year following the changes to the hedge mentioned above.

	Year to	Year to
	30 December	30 December
	2010	2009
	£m	£m
10% strengthening in Sterling against the Euro
Increase in profit before tax (2009: decrease in loss before tax)	(0.2)	0.1
Increase in other equity reserves	2.7	2.5
10% strengthening in the Euro against Sterling
Decrease in profit before tax (2009: increase in loss before tax)	0.3	-
Decrease in other equity reserves	(3.3)	(2.6)

22e 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 management incentive schemes, 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 (2009: £58.0 million) core revolving credit facility, expiring in September 2013, of which £58.0 million (2009: £58.0 million) was undrawn at the end of the year as disclosed in note 21c. At the balance sheet date, £58.0 million (2009: £58.0 million) of this undrawn amount was available for drawdown under the covenants on the facility.

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
2010	Note	%	£m	£m	£m	£m	£m
Financial assets
Available for sale investments	13b		0.3	-	-	-	0.3
Non-current receivables	14	4.97	-	3.7	21.0	-	24.7
Current receivables	17		4.8	-	-	-	4.8
Cash and cash equivalents	18	0.75	25.7	-	-	-	25.7
			30.8	3.7	21.0	-	55.5
Financial liabilities
Borrowings - fixed and swapped bank loans	21a	6.26	-	-	(60.8)	-	(60.8)
Borrowings - variable rate bank loans	21a	3.24	(1.0)	(5.9)	(2.8)	-	(9.7)
Current payables	19		(6.3)	-	-	-	(6.3)
Non-current payables	20		-	-	(0.3)	-	(0.3)
			(7.3)	(5.9)	(63.9)	-	(77.1)

		Effective	Less than			More than
		interest rate	1 year	1-2 years	2-5 years	5 years	Total
2009	Note	%	£m	£m	£m	£m	£m
Financial assets
Available for sale investments	13b		0.3	-	-	-	0.3
Non-current receivables	14	4.86	-	-	23.8	-	23.8
Current receivables	17		5.1	-	-	-	5.1
Cash and cash equivalents	18	0.75	17.5	-	-	-	17.5
			22.9	-	23.8	-	46.7
Financial liabilities
Borrowings - fixed and swapped bank loans	21a	6.21	-	-	(61.5)	-	(61.5)
Borrowings - variable rate bank loans	21a	3.47	(0.7)	(7.2)	(11.0)	-	(18.9)
Current payables	19		(14.6)	-	-	-	(14.6)
Non-current payables			-	-	-	(1.0)	(1.0)
			(15.3)	(7.2)	(72.5)	(1.0)	(96.0)

The following table indicates the dates of contractual repricing of the Group's fixed and swapped bank loans:

	Less than			More than
	1 year	1-2 years	2-5 years	5 years	Total
Fixed and swapped bank loans	£m	£m	£m	£m	£m
2010	-	-	60.8	-	60.8
2009	-	-	61.5	-	61.5

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
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)

	Less than					More than
	1 year	1-2 years	2-3 years	3-4 years	4-5 years	5 years	Total
2009	£m	£m	£m	£m	£m	£m	£m
Non-interest bearing	(14.6)	-	-	-	-	-	(14.6)
Finance lease liability	-	-	-	-	-	(1.0)	(1.0)
Variable interest rate instruments	(3.2)	(11.7)	(10.5)	(68.4)	-	-	(93.8)
	(17.8)	(11.7)	(10.5)	(68.4)	-	(1.0)	(109.4)

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
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)

	Less than										More than
		1 year	1-2 years		2-3 years		3-4 years		4-5 years		5 years	Total
2009	£m			£m		£m		£m		£m	£m	£m
Net settled
Interest rate swaps	(2.1)			(1.0)		(0.3)		-		-	-	(3.4)
Foreign exchange forward contract	(1.4)			-		-		-		-	-	(1.4)
	(3.5)			(1.0)		(0.3)		-		-	-	(4.8)

22f Fair values of financial instruments

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

		Notional	2010	2010	2009	2009
		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	21a		(70.5)	(70.5)	(80.4)	(80.4)
Total on balance sheet borrowings			(70.5)	(70.5)	(80.4)	(80.4)
Group share of associate borrowings *			(237.7)	(237.7)	(301.0)	(301.0)
Group share of joint venture borrowings			(224.0)	(225.3)	(251.4)	(253.6)
Total see-through borrowings	22a		(532.2)	(533.5)	(632.8)	(635.0)

Derivative assets/(liabilities) at fair value through income statement
Sterling interest rate swaps	20	60.8	(4.5)	(4.5)	(3.4)	(3.4)
Foreign exchange forward contracts	17,19	40.5	0.6	0.6	(1.4)	(1.4)
Total on balance sheet derivatives			(3.9)	(3.9)	(4.8)	(4.8)
Group share of Sterling interest rate swaps in associates and joint ventures *		389.6	(15.5)	(15.5)	(19.5)	(19.5)
Group share of Euro interest rate swaps in joint ventures		181.7	(2.9)	(2.9)	(5.7)	(5.7)
Total see through derivatives	27		(22.3)	(22.3)	(30.0)	(30.0)

* prior year comparatives exclude FIX UK, as the Group's investment was impaired to £nil at that date

The fair value of borrowings has been estimated on the basis of quoted market prices. The fair value of the interest rate swaps has 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 18 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).

		2010
		Level 2	Level 3	Total
	Note	£m	£m	£m
Financial assets
Available for sale investments	13b	-	0.3	0.3
Foreign exchange forward contracts	19	0.6	-	0.6
		0.6	0.3	0.9
Financial liabilities
Interest rate swaps	20	(4.5)	-	(4.5)
		(4.5)	-	(4.5)

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 13b.

22g Breach of loan agreements

On 4 February 2010, there was a breach of the loan agreement in the Braehead joint venture when the 2009 year end valuation was provided to the bank showing that the value of the property had fallen below the level required for the LTV covenant. The lender extended the remedy period and on 30 April 2010 the Group and its joint venture partner agreed a refinancing of the loan by injecting funds which, together with cash already held in the partnership, allowed the repayment of £3.4 million of the loan. The terms of the loan were also renegotiated to introduce an LTV holiday until 31 March 2012 and an increase in the margin from 1% to 2%, with the additional margin rolled up for payment in March 2012.

23 Share capital

	Number of shares			Nominal value of shares
	issued and fully paid			issued and fully paid
	2010	2009		2010		2009
	Number	Number		£m		£m
Ordinary shares of 10p each
At the start of the year	-	71,348,933		-		7.1
Reclassification into Ordinary shares of 1p each and Deferred shares of 9p each	-	(71,348,933)		-		(7.1)
At the end of the year	-	-		-		-

Ordinary shares of 1p each
At the start of the year	350,612,754	-		3.5		-
Reclassification from Ordinary shares of 10p each	-	71,348,933		-		0.7
Issued new share capital	-	279,263,821		-		2.8
At the end of the year	350,612,754	350,612,754		3.5		3.5

Deferred shares of 9p each
At the start of the year	71,348,933	-		6.4		-
Reclassification from Ordinary shares of 10p each	-	71,348,933		-		6.4
At the end of the year	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

			Number of shares authorised
			2010		2009
			Number		Number
Ordinary shares of 1p each			857,589,603		857,589,603
Deferred shares of 9p each			71,348,933		71,348,933

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.

24 Share-based payments

The Group's share-based payments comprise the SAYE scheme, the 2008 LTIP, the COIP and the Matching Share Agreement. The 1998 share option schemes and the 2002 LTIP were also in operation during the year. 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. Any Employers' National Insurance payable on these awards is treated as a cash-settled share-based payment, for which the Group held a liability of £0.1 million (2009: £nil) at the end of the year. The total expense recognised under these share-based payment transactions in the year was as follows:

		Year to	Year to
		30 December	30 December
		2010	2009
	Note	£m	£m
Equity-settled share-based payments	8a, 26	0.7	0.3
Cash-settled share-based payments		0.1	-

Share options - SAYE scheme

Details of the share options outstanding under the scheme are as follows:

	Year to 30 December 2010		Year to 30 December 2009
		Weighted		Weighted
		average		average
	Number of	exercise	Number of	exercise
	share options	price	share options	price
Outstanding at the start of the year	795,369	22.8p	497,257	46.0p
Forfeited/lapsed before the capital raising	-	n/a	(81,305)	46.0p
Increase resulting from the capital raising	-	n/a	415,937	n/a
Forfeited/lapsed	(80,348)	22.8p	(36,520)	22.8p
Exercised	(23,695)	22.8p	-	n/a
Outstanding at the end of the year	691,326	22.8p	795,369	22.8p

Exercisable at the end of the year	-	22.8p	22,524	22.8p

The options outstanding at 30 December 2010 had a weighted average remaining contractual life of 1.52 years (2009: 2.59 years). Options are normally forfeited if an employee leaves the Group before they vest and the charge to the income statement assumes this lapse rate is 40% (2009: 45%), based on the level of staff turnover since the inception of the scheme and future expectations.

Share options - 1998 scheme

Details of the share options outstanding under the scheme are as follows:

	Year to 30 December 2010		Year to 30 December 2009
		Weighted		Weighted
	Number of	average	Number of	average
	share	exercise	share	exercise
	options	price	options	price
Outstanding at the start of the year	100,000	211.5p	140,000	205.8p
Expired during the year	(100,000)	211.5p	(40,000)	191.5p
Outstanding at the end of the year	-	n/a	100,000	211.5p

Exercisable at the end of the year	-	n/a	100,000	211.5p

Other share based payment schemes

The Group's other share based payment schemes are the 2002 LTIP, the 2008 LTIP, the COIP and the Matching Share Agreement. Details of the shares outstanding under these schemes are as follows:

			Matching
			Share
	2002 LTIP	2008 LTIP	Agreement	COIP	Total
Outstanding at the start of the year	192,081	-	302,055	1,202,080	1,696,216
Granted during the year	-	13,500,000	-	-	13,500,000
Forfeited during the year	-	(500,000)	-	-	(500,000)
Lapsed during the year	(192,081)	-	-	-	(192,081)
Outstanding at the end of the year	-	13,000,000	302,055	1,202,080	14,504,135

Fair value of award at grant date	£15.61	£0.20	£4.76	£0.14

The performance conditions for the 2002 LTIP award were not met so the shares lapsed during the year. The performance conditions for the COIP have also not been met for the performance period to date.

No awards were made under the 2008 LTIP before 8 June 2010, when the scheme was changed following shareholder approval of certain amendments which enabled the grant of one-off awards of up to 360% of salary to directors and certain other key executives to cover the three-year period from 2010 to 2012. These awards are subject to a performance condition based on growth in total shareholder return ("TSR") over the vesting period as follows:

Growth in TSR over period	Percentage of award vesting
Under 12% per annum	Nil
12% per annum	20%
Between 12% and 40% per annum	Pro-rata between 20% and 100%
40% per annum or above	100%

Costs of share based payment schemes

Fair values of the schemes above were calculated using the following inputs into the Black-Scholes option pricing model:

				Matching
		SAYE		Share
	2008 LTIP	scheme	COIP	Agreement
Share price at grant date	31.9p	45.5p	44.75p	553.0p
Exercise price	0.0p	46.0p	0.0p	0.0p
Expected volatility	83%	84%	84%	37%
Expected life (years)	3.00	3.12	3.04	2.99
Risk free rate	1.58%	2.28%	2.58%	3.78%
Expected dividend yield	0%	11.0%	11.2%	4.9%
Correlation	n/a	n/a	29%	30%

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.

ESOT shareholding

At 30 December 2010, the Capital & Regional plc 2004 Employee Share Trust (the "ESOT") held 2,166,141 (2009: 2,189,836) 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 2010 was £0.7 million (2009: £0.8 million).

	Number of	Number of
	shares	shares
	2010	2009
At the start of the year	2,189,836	1,991,760
Purchased in the year	-	198,076
Exercised / vested in the year	(23,695)	-
At the end of the year	2,166,141	2,189,836

25 Reserves

The special reserve arose on the cancellation of the Company's share premium account in 2009. £141.0 million of the share premium account was credited to retained earnings and the balance of £79.5 million remains in the special reserve pending consent from all of the Company's creditors at that date to transfer it to retained earnings. The special reserve is not available for distribution to shareholders but may be used to offset any deficit arising on the Company's retained earnings.

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 £7.4 million and the net investment hedging reserve deficit of £3.5 million respectively show foreign exchange translation differences from the Group's investment in its German joint venture and any hedges of that investment.

26 Reconciliation of net cash from operations

		Year to	Year to
		30 December	30 December
		2010	2009
	Note	£m	£m
Profit / (loss) on ordinary activities before financing		52.6	(105.1)
Adjusted for:
Share of (profit) / loss in associates and joint ventures	16a	(45.2)	106.8
Loss on revaluation of investment properties	11a	0.2	2.8
Loss / (profit) on sale of properties and investments	11d	0.2	(0.1)
Impairment of goodwill	12	0.7	1.6
(Impairment reversal) / impairment of trading properties	4, 11a	(0.1)	2.1
Depreciation of other fixed assets	7, 13a	0.5	0.4
Decrease in receivables		0.4	6.7
Decrease in payables		(7.1)	(10.3)
Non-cash movement relating to share-based payments	24	0.7	0.3
Net cash from operations		2.9	5.2

27 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
		2010			2009
		Net	Number	Net assets	Net assets
		assets	of shares	per share	per share
	Note	£m	(m)	(£)	(£)
Basic net assets		174.5	350.6	0.50	0.37
Own shares held		-	(2.2)
Dilutive contingently issuable shares and share options		-	0.5
Fair value of fixed rate loans (net of tax)		(0.9)
EPRA triple net assets		173.6	348.9	0.50	0.37
Exclude fair value of fixed rate loans (net of tax)		0.9
Exclude fair value of derivatives	22f	22.3
Exclude deferred tax on unrealised gains and capital allowances		2.6
EPRA net assets		199.4	348.9	0.57	0.47

28 Return on equity

	30 December	30 December
	2010	2009
	£m	£m
Total comprehensive income attributable to equity shareholders	44.0	(119.7)
Opening equity shareholders' funds	129.8	186.1
Return on equity	33.9%	(64.3)%

29 Investment in Garigal Asset Management GmbH

On 10 August 2010, the Group purchased 30.06% of the issued share capital of Garigal Asset Management GmbH ("Garigal"), a German asset and property manager, for cash consideration of €1. The Group's German joint venture partner purchased a further 20.04% of Garigal in the same transaction. The investment is expected to result in more effective management of the German portfolio by the transfer of responsibility to a single German-based entity, to increase the range of opportunities for the Group to monetise its stake in the German joint venture, and to provide a platform for extending asset and property management services to third parties in Germany.

As part of the investment, the asset and property management contract for the real estate portfolio held by the German joint venture was transferred to Garigal, which will have sole responsibility for the portfolio once a transitional period to 30 June 2011 has expired. An asset of £0.6 million, which represented the Group's share of the fair value of the estimated future cash flows from this contract, was therefore included in the consideration given for the investment. The recognised amounts of the identifiable assets acquired and liabilities assumed included a liability of £0.1 million, which represented the Group's share of the fair value of the estimated future cash flows from the existing management contract held by Garigal. Goodwill of £0.9 million arose from the excess of the consideration given over the identifiable assets and liabilities acquired.

		10 August
		2010
	Note	£m
Financial and other assets		0.1
Financial and other liabilities		(0.1)
Fair value of asset and property management contract held by Garigal		(0.1)
Total identifiable assets and liabilities acquired		(0.1)
Goodwill	16d	0.9
Total consideration		0.8

Represented by:
Cash consideration		-
Acquisition costs capitalised		0.2
Fair value of asset and property management contract transferred to Garigal		0.6
		0.8

The net cash outflow on investment in Garigal and the fair value of receivables acquired were immaterial, and no contingent liabilities were recognised in the transaction. At investment date it was assumed that all contractual cash flows will be collected. None of the goodwill arising within the associate is expected to be deductible for tax purposes.

Garigal did not contribute to the profit of the Group between the date of acquisition and the balance sheet date due to the initial transition costs incurred. If the acquisition had been completed on the first day of the financial year, Garigal would have contributed £0.1 million of profit to the Group. Since Garigal's results are included under the share of profit in associates and joint ventures in the consolidated income statement, the investment had no effect on reported Group revenue for the year.

30 Investment in Euro B-Note Holding limited

On 22 December 2010 the Group purchased an effective 49.9% of the issued share capital ofEuro B-Note Holding Limited. The Group's German joint venture partner purchased 50.1% of Euro B-Note Holding Limited in the same transaction. On 24 December 2010 Euro B-Note Holding Limited purchased one of the German joint venture portfolio's subordinated loans with a face value of €18.1 million.

31 Disposal - Manchester Arena Complex Limited Partnership

On 15 June 2010 the Group sold its wholly owned subsidiary, Capital & Regional Manchester Arena (Jersey) Limited, which held the 30% joint venture interest in the Manchester Arena Complex Limited Partnership, the owner of the MEN Arena investment property. The Group's share of net assets at the date of disposal and at 30 December 2009 was as follows:

		15 June	30 December
		2010	2009
	Note	£m	£m
Investment property		19.7	19.0
Current assets		1.0	0.7
Cash and cash equivalents		1.1	1.6
Current liabilities		(0.6)	(2.2)
Non-current liabilities		(15.3)	(14.3)
	16c	5.9	4.8
Loss on disposal	11d	(0.2)
Total cash consideration		5.7

Net inflow arising on disposal:
Cash consideration		5.7
Cash and cash equivalents disposed of		(1.1)
		4.6

32 Lease arrangements

The Group as lessee - finance leases

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments on land and buildings under finance leases as follows:

	Future minimum lease payments
	2010	2009
	£m	£m
Within one year	-	0.1
Between one and five years	-	0.2
After five years	-	4.8
	-	5.1
Less future finance charges	-	(4.1)
	-	1.0

	Present value of future
	minimum lease payments
	2010	2009
	£m	£m
After five years	-	1.0
	-	1.0

The finance leases represented the head leases on the Group's leasehold investment and owner-occupied properties, all of which were denominated in sterling. The properties were sold during the year. During the year there were no contingent rents (2009: £nil) and the Group made sublease payments of £nil (2009: £0.1 million).

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 were as follows:

	Land and buildings		Land and buildings		Other operating
	CRPM		SNO!zone		leases		Total
	2010	2009	2010	2009	2010	2009	2010	2009
	£m	£m	£m	£m	£m	£m	£m	£m
Lease payments
Within one year	(0.3)	(0.1)	(1.7)	(2.1)	-	(0.1)	(2.0)	(2.3)
Between one and five years	(0.5)	(0.6)	(7.1)	(9.5)	-	-	(7.6)	(10.1)
After five years	-	-	(25.7)	(41.8)	-	-	(25.7)	(41.8)
	(0.8)	(0.7)	(34.5)	(53.4)	-	(0.1)	(35.3)	(54.2)
Sublease receipts
Between one and five years	0.1	0.2	-	-	-	-	0.1	0.2
	0.1	0.2	-	-	-	-	0.1	0.2

Operating lease payments are denominated in sterling and have an average remaining lease length of 17 years (2009: 18 years) and rentals are fixed for an average of 9 years (2009: 10 years). During the year there were no contingent rents (2009: £nil) and the Group incurred lease payments recognised as an expense of £2.3 million (2009: £2.3 million). The Group negotiated a rent concession for SNO!zone Braehead which will reduce the amount payable under the lease in future years. The changes in the terms of the lease represent a significant modification so have been treated as generating a new lease, and as a result a liability of £1.9 million (2009: £2.2 million) representing the unamortised tenant incentives under the old lease was written back during the year.

The Group as lessor

The Group leases out all of its investment properties under operating leases for average lease terms of 12 years (2009: 11 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	2010	2009
	term	year	years	years	years	years	years	Total	Total
100% figures	Years	£m	£m	£m	£m	£m	£m	£m	£m
The Mall	9.3	87.5	269.1	171.0	69.5	42.7	194.0	833.8	1,107.6
The Junction	11.7	29.8	115.5	126.9	65.9	35.8	0.2	374.1	472.8
X-Leisure	14.6	39.8	155.0	181.1	122.9	42.2	23.2	564.2	669.5
FIX UK *	6.8	0.5	3.3	4.8	0.9	0.9	0.2	10.6	11.0
Total associates		157.6	542.9	483.8	259.2	121.6	217.6	1,782.7	2,260.9
German portfolio	6.6	37.0	112.4	64.5	24.7	4.2	0.7	243.5	276.1
Other joint ventures	15.3	3.9	15.2	17.9	12.6	11.0	2.3	62.9	122.1
Total joint ventures		40.9	127.6	82.4	37.3	15.2	3.0	306.4	398.2
Wholly owned	11.6	7.7	29.9	35.7	18.7	4.6	0.6	97.2	100.5
Total		206.2	700.4	601.9	315.2	141.4	221.2	2,186.3	2,759.6

* comparative figures restated to include FIX UK.

There was no contingent rent (2009: £nil) recognised in income from wholly owned properties during the year.

33 Capital commitments

At 30 December 2010 the Group's share of the capital commitments of its associates, joint ventures and wholly owned properties was £2.5 million (2009: £6.5 million). This comprised £1.3 million (2009: £5.9 million) relating to The Mall, £0.5 million (2009: £0.6 million) relating to The Junction and £0.7 million (2009: £0.5 million) relating to other assets.

34 Contingent liabilities

The Group no longer has any guarantee in respect of the MEN Arena joint venture following its sale during the year (2009: £0.1 million). Other than the tax-related contingent liabilities disclosed in note 9e, there were no other contingent liabilities at the end of either the current year or the preceding year.

35 Events after the balance sheet date

Tax payment

On 31 December 2010 the Group made a cash payment on the due date under the agreed payment plan with HMRC of £5.0 million related to the current tax liability recorded at 30 December 2010.

Hedge extension

On 13 January 2011, the Group entered a forward contract to sell €47.0 million on 27 June 2012 at a fixed exchange rate of 1.185, which had the effect of extending the hedging arrangements on its net investment in the German portfolio.

Group debt

On 30 January 2011, the Group repaid £0.5 million of the floating rate loan secured on its Hemel Hempstead property in line with the amortisation schedule of the facility.

Property disposals

On 14 January 2011, The Mall completed on the sale of its Bristol shopping centre for £50.2 million at a net initial yield of 7.0%, compared to its year end valuation of £50.0 million.

On 15 March 2011, The Junction completed on the sale of its Ocean Retail Park in Portsmouth for £60.9 million at a net initial yield of 5.81%, compared to its year end valuation of £55.4 million. The proceeds from the disposal were used to repay £31.7 million of the fund's loans.

Property acquisition

On 22 February 2011, the Group completed the purchase of The Waterside Shopping Centre ("Waterside") in Lincoln for cash consideration of £24.8 million, at a 7.68% net initial yield. The acquisition was completed utilising a new four year £13.65 million project 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 50:50 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 is conditional upon shareholder approval. A shareholder circular was posted on 8 March 2011 convening a General Meeting to be held on 1 April 2011. The Group 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 has agreed to sell 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 has been agreed that Karoo will fund approximately half of the total costs and related expenses incurred by the Group in acquiring Waterside. Accordingly, the total amount payable by Karoo will be approximately £6.4 million comprising a purchase price for the shares being sold of approximately £57,500 (assuming completion of the Disposal occurs on 8 April 2011) and, in addition, Karoo will repay £6.35 million of financing provided by the Group to complete the purchase of the Waterside.

X-Leisure

On 28 February 2011, the property valuation of the X-Leisure fund (excluding adjustments for tenant incentives and head leases) was £535.4 million. This gave a unit price of 31.8p, meaning the value of the Group's units excluding interest swap and mark-to-market valuations was £29.3 million compared to £28.4 million at 31 December 2010.

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.

36 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 receivable from		Distributions received from
	related parties		related parties
	Year to	Year to	Year to	Year to
	30 December	30 December	30 December	30 December
Capital & Regional plc and subsidiaries	2010	2009	2010	2009
	£m	£m	£m	£m
Associates
The Mall Limited Partnership	-	-	-	6.7
The Junction Limited Partnership	-	-	5.6	-
X-Leisure Limited Partnership	-	-	0.7	-
	-	-	6.3	6.7
Joint ventures
Xscape Braehead Partnership	0.5	0.6	-	-
The Auchinlea Partnership	-	-	-	0.1
X-Leisure Limited	-	-	0.3	-
German joint venture companies:
Capital & Regional (Europe LP) Limited	0.1	0.1	1.2	0.2
Capital & Regional (Europe LP 2) Limited	0.1	0.1	0.1	-
Capital & Regional (Europe LP 3) Limited	0.3	0.3	1.5	0.4
Capital & Regional (Europe LP 5) Limited	-	-	0.3	-
Capital & Regional (Europe LP 6) Limited	0.1	0.1	-	-
	1.1	1.2	3.4	0.7

			Amounts (payable to)/
			receivable from related parties
			30 December	30 December
Capital & Regional plc and subsidiaries			2010	2009
		Note	£m	£m
Associates
The Mall Limited Partnership			(0.7)	(2.4)
The Junction Limited Partnership			-	(0.1)
X-Leisure Limited Partnership			-	(0.2)
		19	(0.7)	(2.7)
Shareholder loans to Joint ventures
Xscape Braehead Partnership			10.1	8.6
German joint venture companies:
Capital & Regional (Europe LP) Limited*			3.0	3.1
Capital & Regional (Europe LP 2) Limited*			1.6	1.7
Capital & Regional (Europe LP 3) Limited*			7.5	7.9
Capital & Regional (Europe LP 5) Limited			0.7	0.7
Capital & Regional (Europe LP 6) Limited*			1.8	1.8
		14	24.7	23.8

* All amounts are transactions with subsidiaries of the Company, with the exception of transactions with the German joint venture companies where the Company holds 5.1% (2009: 5.1%) of the Group's interest.

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

Amounts receivable from joint ventures 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.

	Management fee income / (expense) from		Amounts owed by
	related parties		related parties
	Year to	Year to
	30 December	30 December	30 December	30 December
CRPM	2010	2009	2010	2009
	£m	£m	£m	£m
Associates
The Mall Limited Partnership	8.9	9.5	1.4	0.7
The Junction Limited Partnership	1.3	2.1	-	-
X-Leisure Limited Partnership	0.1	2.8	-	-
The FIX UK Limited Partnership	0.1	0.2	-	-
	10.4	14.6	1.4	0.7
Joint ventures
German joint venture companies	0.2	0.4	-	-
X-Leisure Limited	(0.2)	-	0.1	0.3
Manchester Arena Complex Limited Partnership	-	-	-	0.3
Xscape Braehead Partnership	0.2	0.1	0.1	-
	0.2	0.5	0.2	0.6

Management fees are payable on demand and the balances are unsecured, do not incur interest and are settled in cash. No performance fees were receivable from or payable to related parties in either the current year or the preceding year.

	Rent payable to		Amounts owed to
	related parties		related parties
	Year to	Year to
Snozone Limited and	30 December	30 December	30 December	30 December
Snozone Braehead Limited	2010	2009	2010	2009
	£m	£m	£m	£m
Associates
Xscape Milton Keynes Partnership	0.7	0.7	-	-
Xscape Castleford Partnership	0.7	0.7	-	-
	1.4	1.4	-	-
Joint ventures
Xscape Braehead Partnership	0.3	0.7	-	(2.1)
	0.3	0.7	-	(2.1)

All rents payable by SNO!zone companies are due to the relevant Xscape Partnerships, which in the case of Snozone Limited (operator of the ski slopes at Milton Keynes and Castleford) are wholly owned by X-Leisure Limited Partnership.

During 2010 the Group purchased IT equipment and services from Sage plc on normal commercial terms. Paul Stobart is a director of Sage plc.

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.

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 will be effective from 21 July 2010 but are subject to final confirmation by the Mall Bond Security Trustee which is expected shortly as disclosed in note 3. The Group will also bear 16.72% of the cost of this performance fee as an investor in The Mall 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 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.

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
	2010	2009
	£m	£m
Short term employment benefits (restated) ⁺	1.3	1.7
Post employment benefits	0.1	0.2
Share-based payments *	0.5	0.3
	1.9	2.2

⁺ the prior year figure has been restated to include amounts paid to the non-executive directors to be consistent with the current year presentation

* share-based payments relate to amounts awarded under the 2010 LTIP, the COIP and the Matching Share Agreement.

Covenant information

At 30 December 2010

	See through borrowings	Covenant	30 December	Future changes
	£m		2010
Core revolving credit facility
Asset cover	-	Greater than 200%	n/a
Gearing	-	Less than 200%	4%
ICR	-	Greater than 150%	876%

The Great Northern facility
LTV	63.6	100%	88%	From 31 December 2012 reducing in stages to 80% by 30 June 2013
ICR	-	Greater than 135%	157%

The Hemel Hempstead facility
LTV	6.9	75%	n/a	LTV holiday until February 2011
ICR	-	Greater than 150%	439%

The Mall
LTV	138.4	83%	n/a	Effective from December 2011 and then reducing in stages to 65% by December 2014
ICR	-	Greater than 130%	161%

The Junction
LTV	38.4	80%	60%	From 1 October 2011 reducing in stages to 65% by 1 October 2012
ICR	-	Greater than 130%	156%	Until 1 July 2012 and then 135%

Germany
LTV
Portfolio 1	17.2	80%	63% - 74%	From 1 January 2011 reducing to 75%
Portfolio 2	30.2	87% - 93%	78%
Portfolio 3	47.9	n/a	n/a
Portfolio 4	69.9	85%	81%
Portfolio 5	20.4	81%	80%
Portfolio 6	15.6	n/a	n/a

ICR
Portfolio 1	-	Greater than 150%	180% - 359%
Portfolio 2	-	Greater than 150%	170%
Portfolio 3	-	Greater than 160%	220%
Portfolio 4	-	Greater than 125%	146%
Portfolio 5	-	Greater than 120%	177%
Portfolio 6	-	Greater than 140%	151% - 181%

X-Leisure
LTV (central facility)	35.6	90%	56%	From 1 January 2011, reduced to 85% and then tiered decreases to 65% from 1 July 2013
ICR	-	Greater than 130%	177%	Until March 2012 and then tiered increases to 150% at 1 April 2013

FIX UK
No covenant	2.2
LTV
Senior A	19.9	80%	n/a	LTV holiday until September 2011 and then 80% reducing to 75% from July 2012
Senior B	3.2	90%	n/a	LTV holiday until September 2011 and then 90% reducing to 85% from July 2012
ICR
Senior A	-	Greater than 120%	144%	Until 22 January 2012 and then 130%
Senior B	-	Greater than 100%	123%	Until 22 January 2012 and then 110%

Braehead
LTV	22.8	90%	n/a	LTV holiday until 31 March 2012 then 90% and reducing to 80% from 31 March 2013
ICR	-	Greater than 120%	189%
	532.2

Fund portfolio information (100% figures)

At 30 December 2010

	The Mall	The Junction	X-Leisure	German Portfolio

Physical data
Number of properties	12	9	16	48
Number of lettable units	1,540	118	311	207
Lettable space (sq feet - '000s)	5,580	2,122	3,071	5,008

Valuation data
Properties at independent valuation (£m)	1,128	476	528	496
Adjustments for head leases and tenant incentives (£m)	61	(17)	(7)	-
Properties as shown in the financial statements (£m)	1,189	459	521	496

Revaluation in the year (£m)	106	23	68	-
Initial yield	6.98%	5.77%	7.02%	6.69%
Equivalent yield	7.81%	6.82%	7.84%	n/a
Geared return	43.20%	14.81%	45.98%	13.70%
Property level return	18.88%	12.97%	22.09%	5.69%
IPD benchmark return	16.90%	16.30%	18.40%	n/a
Reversionary	17.0%	15.1%	6.6%	n/a
Loan to value ratio	73.4%	60.2%	56.5%	81.8%
Net debt to value ratio	60.1%	57.1%	52.7%	76.9%

Lease length (years)
Weighted average lease length to break	9.33	11.68	14.55	6.55
Weighted average lease length to expiry	9.54	12.04	15.82	6.55

Passing rent (£m) of leases expiring in:
2011	7.80	0.05	0.63	0.70
2012	5.28	0.04	0.41	2.40
2013-2015	23.25	3.18	1.23	15.4

ERV (£m) of leases expiring in:
2011	10.88	0.89	0.82	n/a
2012	5.70	0.41	0.45	n/a
2013-2015	24.58	3.30	1.43	n/a

Passing rent (£m) subject to review in:
2011	18.99	2.94	19.52	n/a
2012	8.22	2.68	4.44	n/a
2013-2015	19.49	21.90	15.01	n/a

ERV (£m) of passing rent subject to review in:
2011	17.18	2.94	20.88	n/a
2012	7.53	2.67	4.49	n/a
2013-2015	20.32	21.92	15.43	n/a

Rental Data
Contracted rent at year end (£m)	100.18	30.78	41.28	n/a
Passing rent at year end (£m)	94.99	28.82	40.69	37.36
ERV at year end (£m per annum)	111.15	33.16	43.38	n/a
Rental increase (ERV) %	(4.97)%	(5.18)%	0.02%	n/a
Vacancy rate (%)	4.25%	2.72%	4.67%	3.30%

Like for like net rental income under UK GAAP (100%)
Current year net rental income (£m)
Properties owned throughout 2009/2010	79.5	27.1	35.5	31.1
Disposals	9.8	4.0	2.4	0.2
Net rental income	89.3	31.1	37.9	31.3

Prior year net rental income (£m)
Properties owned throughout 2009/2010	75.3	26.5	34.0	32.8
Disposals	33.3	14.2	6.6	0.7
Net rental income	108.6	40.7	40.6	33.5

Other Data
Unit Price (£1.00 at inception)	£0.4100	£0.3053	£0.3087	n/a
Group share	16.72%	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 share include 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 interest is 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 rent is 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 yield is 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 received annually in arrears on gross values including the prospective purchaser's costs.

Passing rent is 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 profit is 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 equity is 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 percentage is the percentage by which the ERV exceeds the passing rent.

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

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

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

Temporary lettings are those lettings for less than one year.

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

Total return is 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 rate is 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 8121
Kenneth Ford, Executive Director	Tel: 020 7932 8050
Charles Staveley, Finance Director	Tel: 020 7932 8000

Maitland:
Martin Leeburn	Tel: 020 7379 5151
Richard Farnsworth	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 Fund Management. Capital & Regional acts as Property and Asset Manager for the Mall and Junction funds and holds 16.7% 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

END

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