Final Results

RNS Number : 4432H

Hammerson PLC

22 February 2010

 



Embargoed until 7.00 a.m. - Monday 22 February 2010

Hammerson plc - Audited Results for the year ended 31 December 2009

Financial highlights

Year ended:	31 December  2009		31 December 2008 (1)	Change
Net rental income	£293.6m		£299.8m	-2.1%
Loss before tax	£(453.1)m		£(1,611.5)m
Adjusted profit before tax (2)	£130.0m		£113.7m	+14.3%
Basic loss per share (3)	(54.1)p		(368.9)p
Adjusted earnings per share (2) (3)	19.7p		25.8p	-23.6%
Total dividend per share (4)	15.45p		18.9p
As at:	31 December  2009	30 June     2009 (6)	31 December 2008 (1)
Equity shareholders' funds	£2,950m		£2,821m	+ 4.6%
Adjusted net asset value per share, EPRA basis (1) (2)	£4.21	£3.73	£5.16	-18.4%
Return on shareholders' equity (5)	(16.9)%		(32.5)%
Gearing	72%	81%	118%

Notes

(1)	Comparative figures have been restated following the rights issue referred to in notes 7 and 20 on pages 41 and 50.  EPRA net asset value per share for 31 December 2008 is pro forma following the rights issue.
(2)	Calculations for adjusted figures are shown on pages 20 and 24 and in note 7 on page 41.
(3)	The average number of shares in issue during 2009 was 637.2 million.
(4)	Pro forma 2008 dividend: 15.0 pence per share.
(5)	Excluding deferred tax.
(6)	Figures for 30 June 2009 are unaudited.

Key points

·             Increase in UK property values over second half of 2009. Hammerson's portfolio fell in value by 9% over the year, however it increased by 6% in the second half of 2009 (UK +11%, France -3%). Adjusted net asset value per share fell by 18% over the year, but increased by 13% since 30 June 2009.

·             Net rental income resilient. Although net rental income was down 2.1% on 2008, principally reflecting disposals in the period, there was like-for-like income growth of 1.1% in the investment portfolio over the year.

·             Total dividend for the year of 15.45 pence, covered 1.3 times by adjusted earnings. The Board has declared a second interim dividend of 8.5 pence, with a scrip alternative, payable on 1 April 2010. Pro forma dividend for 2008: 15.0 pence per share.

·             Year-end occupancy of 95% (31 December 2008: 95%). Following an increase in vacancy in the first half of 2009, good progress has been made on lettings, with occupancy increasing from 93% at the half year.

·             Two major acquisitions in December 2009, capitalising on opportunities presented by current markets. Hammerson invested £152 million in a 50% interest in Silverburn shopping centre in Glasgow and acquired the Terrasses du Port development scheme in Marseille. Both acquisitions offer good growth

·             Commencing developments in 2010. We are starting work on the redevelopment of 54-60 rue du Faubourg Saint-Honoré, Paris, which is now fully pre-let (total cost £30 million). We expect to start on site at Les Terrasses du Port, Marseille (total cost £400 million), later this year. Encouragingly, the scheme is already over 40% pre-let.

·             Net debt reduced by £1.2 billion principally as a result of the rights issue and £767 million at the year end. property disposals. Net debt at 31 December 2009 was £2.1 billion, and gearing was 72%. 97% of debt is unsecured. Hammerson has just £63 million of debt maturing before 2012, and cash and undrawn committed facilities of

John Nelson, Chairman of Hammerson, said:

"Recently there has been a recovery in property markets, supported by strong investor demand and the policy of central banks supporting financial markets. The economic outlook, however, remains uncertain, and against this background the Board intends to maintain a prudent approach to financing.

Our reinvigorated management team, under David Atkins, is focused on creating value by maximising the income from our assets and improving operational efficiency. We rigorously evaluate the projected performance of our properties against financial benchmarks and will progress selected developments. We will continue to capitalise on opportunities which are being presented by the markets. This is likely to lead to more active management and evolution of our portfolio."

Enquiries:

David Atkins, Chief Executive	Tel: [phone]
Simon Melliss, Chief Financial Officer	Tel: [phone]
Morgan Bone, Director of Corporate Communications	Tel: [phone] [e-mail]

Results presentation today:

Time	9.30 a.m.
Venue	City Presentation Centre  4 Chiswell Street Finsbury Square London EC1Y 4UP Tel: [phone]

Webcast:

A live webcast of Hammerson's results presentation will be broadcast today at 9.30 a.m. via the Company's website: www.hammerson.com.

Financial calendar:

Ex-dividend date	3 March 2010
Record date	5 March 2010
Election date for scrip (or revocation)	19 March 2010
Second interim dividend payable	1 April 2010

Contents:

	Page			Page
Chairman's Statement	3		Responsibility Statement	27
Property Markets and Outlook	5		Financial Statements	28
Principal Risks and Uncertainties	7		Notes to the Accounts	34
Business Review	9		Other Information	52
Financial Review	20		Glossary of Terms	53

The terms used in this announcement are defined in the glossary on pages 53 and 54.

CHAIRMAN'S STATEMENT

This was a year of intense activity for the Company in volatile conditions. In the first half of the year we addressed rising gearing through a combination of an equity rights issue and asset disposals. In the second half we took advantage of our strengthened position to acquire assets with good growth potential.

RESULTS

The first six months of 2009 saw continued falls in commercial property values, however in the second half of the year investment activity increased and there was a recovery in values, particularly for prime properties in the UK. Against this background, although the value of Hammerson's portfolio has increased by 6% since June, for the year as a whole it showed a decline of 9%. Adjusted net asset value per share was £4.21 at the year end, an 18% fall over the year, but a 13% increase since 30 June. At 31 December 2009 gearing was 72%, compared to 118% at the end of 2008.

The Group's adjusted profit before tax for 2009 increased by £16 million to £130 million. However, reflecting the increased number of shares in issue following the rights issue, adjusted earnings per share fell to 19.7 pence. The Board has declared a second interim dividend of 8.5 pence per share, with a scrip alternative, giving a total dividend for the year of 15.45 pence. This compares with a pro forma dividend for 2008 of 15.0 pence per share. The second interim dividend, in lieu of the final dividend, will be payable on 1 April 2010, so that it will be received in the current tax year. Full details are included in the circular which will be issued to shareholders today.

PORTFOLIO

I am pleased to report that we made good progress during the year in the four areas which we identified as key: managing the existing portfolio to ensure it is well positioned to benefit from the recovery in markets; focusing on letting remaining space in recently completed developments; ensuring that we can exploit the development pipeline when conditions permit; and taking advantage of opportunities presented by current market conditions.

In 2009 we signed 395 leases in respect of approximately 176,000m² across our portfolio. In our shopping centres we continued to refresh the tenant mix bringing major international retailers into our schemes. We opened Union Square, Aberdeen, in October. Despite letting in the midst of the recession, the centre is over three-quarters let or in solicitors' hands, and has an attractive retail and leisure line up. We completed three retail park extensions, all of which were fully let at the year end, and our recently completed London office developments at 60 Threadneedle Street and 125 Old Broad Street were both over 90% let or in solicitors' hands at 31 December. At the year end the Group's overall occupancy rate was 95%, compared to 93% in June.

Our prime, modern portfolio, much of which we have developed ourselves, is at the forefront of sustainability in terms of design, construction, and resource utilisation. We also engage actively with the communities in which we operate, not only creating jobs but running training and education programmes to support our retailers in their recruitment. I am delighted that we have been recognised as an industry leader in this area.

Hammerson's proven expertise in retail property puts us in a strong position to take advantage of opportunities presented by current markets. In December we bolstered the portfolio with two significant acquisitions. We invested £152 million in the Silverburn shopping centre in Glasgow, undertaken in joint venture with the Canada Pension Plan Investment Board. We also acquired the Terrasses du Port retail development scheme in Marseille. This three year project has an anticipated total cost of £400 million, and we expect work to start on site later this year. In January 2010, following the appointment of administrators to Thornfield Ventures Limited, we were appointed as the development and asset manager for a partially completed retail development scheme.

BOARD

We announced in August that John Richards would be retiring as Chief Executive. John had been with Hammerson for nearly 30 years, the last ten as Chief Executive. We owe him a huge debt of gratitude for all that he did for the Company.

I am delighted that the Board appointed David Atkins as John's successor as Chief Executive. David has been with the Company for 12 years, was previously Managing Director of the UK business, and is one of the outstanding property executives in the industry.

We welcomed Terry Duddy, Chief Executive of Home Retail Group, to the Board as a non-executive Director in December. John Clare, who served on the Board for 11 years and was, most recently, the Senior Independent Director, retired at the end of 2009. I thank him for his particularly valuable contribution to the Company over such a long period. Tony Watson has succeeded John as the Senior Independent Director. In November, Christophe Clamageran, Managing Director of Hammerson France, resigned to take up a position in the quoted French real estate sector.

FINANCING

Net debt at the year end was £2.1 billion, down by £1.2 billion from 31 December 2008. 97% of our debt is unsecured, and we have liquidity (cash and undrawn facilities) of £767 million, giving us good financial flexibility. We have just £63 million of debt maturing before the end of 2011, and nearly three quarters of our debt is drawn from the bond markets, reducing our reliance on the bank market.

OUTLOOK

On behalf of the Board, I would like to take this opportunity to thank our shareholders for their continued support throughout 2009. I believe the actions which we have taken put the Company in a strong position for the future.

Hammerson has a clear strategy of concentrating on high quality retail assets in the UK and France, whilst exploiting opportunities in the office sector.

Recently there has been a recovery in property markets, supported by strong investor demand and the policy of central banks supporting financial markets. The economic outlook, however, remains uncertain, and against this background the Board intends to maintain a prudent approach to financing.

Our reinvigorated management team, under David Atkins, is focused on creating value by maximising the income from our assets and improving operational efficiency. We rigorously evaluate the projected performance of our properties against financial benchmarks and will progress selected developments. We will continue to capitalise on opportunities which are being presented by the markets. This is likely to lead to more active management and evolution of our portfolio.

John Nelson

Chairman

22 February 2010 

PROPERTY MARKETS AND OUTLOOK

Investment market

The commercial property markets in the UK saw a notable improvement during the second half of 2009, whilst the French markets stabilised.  Following systemic failures within the international financial system, the global economy fell into the deepest post-war recession on record during early 2009.  The extent of the downturn prompted coordinated action by central banks and governments, providing extensive support for financial markets and economic activity.  This in turn led to an improvement in real estate investor sentiment during the second half of 2009 and saw demand for commercial property investment increase, supporting lower yields and higher property valuations.

In the UK, the volume of property transactions increased in 2009 by around 6%, compared with 2008, reflecting a rapid increase in sales activity during the second half of the year.  The quarterly IPD all-property equivalent yield moved out 80 basis points during the first half of the year, before falling back 100 basis points in the second half to 8.0%.  As a result, both retail properties and offices recorded total returns of more than 10% in the last six months of 2009.

In France, where the Group has 34% of its portfolio, sales volumes reached a ten year quarterly low during the first three months of 2009.  Transaction levels steadily improved throughout the year but the weakness of the first half meant that the volume of transactions was 40% below that seen in 2008. The latest market analysis shows shopping centre and office yields stabilising and moving in for the best assets.  Shopping centre values fell during 2009 by an estimated 8.0%.

Property yields are still above their long term average and greater than many other investment classes.  As such the investment market in 2010 should improve further, provided investor demand is sustained. The level of improvement will remain dependent upon the strength of economic recovery and sustained policy support. Outstanding bank loans to UK commercial property remain very high at around £250 billion and around £160 billion of this debt is due to be refinanced before the end of 2013. The need for banks to reduce their lending to commercial property and the refinancing requirement are likely to dampen the recovery in property values.

Retail property

In the UK, non-food retail sales values fell by around 2% in 2009, significantly less than forecast at the start of the year.  The higher than expected level of sales came in the face of rising unemployment and low consumer confidence and has been attributed in part to the impact of lower interest rates on mortgages.  Whilst sales were better than expected, trading conditions for retailers remained difficult throughout the year, reducing the demand for new stores.  Looking ahead, the recovery in retail is likely to be fragile as improved confidence is set to be tempered by rising taxation, the potential for rising interest rates and the level of unemployment.

Following a rise in new retail space in 2008, the level of development completions fell by around half in 2009, and is expected to fall again in 2010.  With demand for new space remaining low and some retailers closing stores, UK retail vacancy rates were higher in the year, weighing negatively upon rental levels. According to the IPD Quarterly Index, retail rents fell by 6.1% in 2009, the largest annual fall on record.

In Hammerson's experience, the rise in vacancies has been less severe in prime locations, with retailers in some cases deciding to use the opportunity to open new stores in the best retail centres.

PROPERTY MARKETS AND OUTLOOK

Continued

In France, consumer confidence remained low throughout 2009, resulting in falling retail sales.  However, with the French economy returning to growth in the second quarter, consumer confidence has shown a gradual improvement and retail sales grew throughout much of the second half of the year.  Unlike the UK, the downturn in sales did not result in a large number of retailers entering administration.

Although a difficult retail environment precluded an expansion of operations in France, fewer administrations and the payment of key money by retailers prevented a significant increase in the level of vacancies and supported rental values, particularly in the most prime shopping centres.  For existing leases, the rate of indexation under the ILC index fell to 0.84% at 1 January 2010, down from 3.85% in the previous year, following lower inflation and weaker retail sales.

Office property

The Central London office market closely mirrored the fall and recovery experienced across global financial markets.  Having fallen to its lowest level on record in the first quarter of the year, the take-up of office space in Central London progressively improved throughout the rest of 2009, ending the year strongly with 0.3 million m² of space leased in the fourth quarter. 

Despite the pick-up in leasing activity in the latter part of the year, take-up was down 23% on 2008, and coincided with the completion of an additional 0.6 million m² of new space.  The Central London vacancy rate increased from 5.3% at the start of the year to 7.2% by the end of 2009, with the highest rates in the City at 8.5%.  City rents fell by around 20% in the year to £43.50/ft², whilst incentive packages increased to the equivalent of a 30 month rent free period on a ten year lease.

City office vacancy rates, which fell in the second half of 2009, are expected to continue to decline in 2010 as sustained take-up and fewer developments erode availability, providing a firm base for rental stabilisation and subsequent growth.  Following delays and cancellations over the past two years, new completions are set to fall further throughout the early part of this decade, increasing the probability of a medium term recovery in net rents as demand returns.

PRINCIPAL RISKS AND UNCERTAINTIES

PROPERTY VALUATIONS

Our property portfolio is the largest component of the Group's net asset value. The value of the portfolio is affected by the conditions prevailing in the property investment market and the general economic environment. Accordingly, the Group's net asset value can change due to external factors beyond management's control. In light of the improved economic conditions and government support for the financial sector, investors have recently become more active in the real estate investment market with the result that property values have started to rise for the first time in two years.

Hammerson has a high quality portfolio which is geographically diversified and let to a large number of tenants. These factors should continue to mitigate any negative impact arising from changing conditions in the financial and property markets. The Property Markets and Outlook section of this report provides further discussion of these issues.

Our property portfolio is valued in compliance with international standards by external professionally qualified valuers. The primary source of evidence for valuations should be recent, comparable market transactions. As the economic environment has improved, the number of transactions for the types of property owned by Hammerson in the UK and France has increased, and this in turn has made property valuations more reliable.

LIQUIDITY RISK

Although conditions in the financial markets have improved significantly in 2009, companies with short-term refinancing requirements may continue to find it difficult to secure adequate funding at costs comparable with their existing facilities. Hammerson has just £63 million of debt maturing before 2012, and we have time to plan for an optimal debt maturity and cost profile, with the option of further property sales if considered necessary.

Following the completion of the rights issue in March 2009 and the receipt of the proceeds of our disposal programme, gearing has decreased from 118% at the end of 2008 to 72% at 31 December 2009. The risk that the Group could breach its borrowing covenants, the most stringent of which is that gearing should not exceed 150%, has therefore receded. We estimate that, on a proforma basis, the value of our portfolio would have to fall by 30% to endanger our most rigorous gearing covenant.

DEVELOPMENT AND LETTING

The recent recession has made many potential occupiers cautious about entering into commitments to lease space. Therefore it has taken longer than originally anticipated to agree new leases at our recently completed developments. However, the improvements seen in the economy in the last few months have resulted in greater interest in the vacant space at the developments we completed in 2008 and 2009, as discussed in the Business Review on pages 11 to 14. We currently have no significant developments underway.

TENANT DEFAULT

The trading environment has improved during 2009, and the rate at which retail companies in the UK are going into administration has fallen. However some tenants, principally in the UK retail sector, continue to face difficult operating conditions and there is a risk that they will be unable to pay their rents. The large number of tenants and their geographical spread mean the risk of individual tenant default to Hammerson is low. Furthermore, our occupational leases are long-term contracts, thus making the income relatively secure. The quality of the Group's income is discussed on pages 14 and 15 of the Business Review.

PRINCIPAL RISKS AND UNCERTAINTIES

Continued

INTEREST RATES

Interest charged on borrowings is a significant cost for Hammerson and we set guidelines for our exposure to fixed and floating interest rates and use interest rate and currency swaps to manage this risk. At 31 December 2009, 78% of the Group's gross debt was at fixed rates of interest. The short-term outlook for interest rates is uncertain, but our hedging programme would partly mitigate the impact of any rise.

EXCHANGE RISK

Exchange risk is managed by matching foreign currency assets with foreign currency debt, using derivatives where appropriate. As at 31 December 2009, 80% of the value of the French property portfolio was hedged. We estimate that a 1% strengthening of the euro relative to sterling would have the effect of increasing shareholders' funds by around £3 million and increasing net debt by approximately £13 million.

BUSINESS REVIEW

Real estate strategy

There are three elements to our real estate strategy, which aims to maximise the total returns from the portfolio:

·             the allocation of the majority of the portfolio to regionally dominant shopping centres and retail parks;

·             the management of our investment properties so that they continue to be attractive to occupiers, enabling us to increase the Group's rental income and other revenues over time; and

·             the generation of attractive income and capital returns through development, in both the retail and office sectors.

This Business Review provides more detail on our performance in these areas during 2009, together with information on the potential future growth in income and value in the portfolio.

All references in this Business Review to the property portfolio exclude the Group's 25% interest in Bishops Square, which is accounted for as an associate.

Property portfolio and allocation

We use external and internal research to analyse in detail the markets in which we operate and base our decisions on overall portfolio allocation using this analysis. As part of our annual business planning process, we review the current and projected performance of each of our properties and identify assets for disposal. The result of this active approach to managing the portfolio is the £2.1 billion raised from disposals in the last five years, whilst £2.2 billion has been invested in acquisitions and new developments over the same period.

At 31 December 2009, Hammerson's retail portfolio in the UK and France provided 1.6 million m² of space including 16 major shopping centres and 16 retail parks. Our office portfolio includes six prime buildings in central London, providing 169,000m² of accommodation.

Our property portfolio was valued at £5.1 billion at the end of 2009, with our investment portfolio valued at £5.0 billion and developments making up the balance. Joint ventures, including eight major shopping centres in the UK, accounted for 37% by value of the total portfolio.

During 2009, acquisitions, disposals, development completions and the effects of changes in exchange rates have combined to change the weighting of the portfolio. At the end of the year, the retail portfolio represented 88% of the total, whilst the UK accounted for 66%. The comparative figures for 31 December 2008 were 76% and 60% respectively.

During 2009, the value of the portfolio reduced by £1.3 billion and the movement is analysed in the table below.

Movement in portfolio value in 2009		£m
Portfolio value at 1 January		6,457
Valuation decrease		(444)
Capital expenditure
	Acquisitions	187
	Development programme	87
	Expenditure on existing portfolio	110
Capitalised interest		10
Disposals		(1,055)
Exchange		(210)
Portfolio value at 31 December		5,142

BUSINESS REVIEW

Continued

The 2009 capital return for the UK and French portfolios was -8.9% as shown in the table below.

Capital returns - UK and France For the year ended 31 December 2009
	Shopping centres		Retail parks		Offices		Total
		Capital		Capital		Capital		Capital
	Value	return	Value	return	Value	return	Value	return
	£m	%	£m	%	£m	%	£m	%
UK	1,978	-8.3	833	0.6	596	-7.8	3,407	-5.9
France	1,643	-10.2	92	-19.7	-	-36.7	1,735	-14.2
Total	3,621	-9.0	925	-2.0	596	-13.1	5,142	-8.9

In the UK and France, the underlying valuation decreases for 2009 were 5.9% and 14.2% respectively. For the year as a whole, more than half of the decline in values resulted from changes to investment yields with the remainder principally due to lower rental values. However, this masked contrasting performances in the first and second halves of the year. In the UK portfolio in the first six months, investment yields weakened and rental values fell. The second half saw investment yields recover and the rate of decline of rental values slow. Investment yields in the French portfolio increased in both halves of the year, although the rate of increase slowed significantly in the last six months. Rental values in France increased slightly in the first half, but were virtually unchanged in the second.

The components of the valuation change in 2009 for the UK and France are shown in the charts below

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BUSINESS REVIEW

Continued

Investment portfolio

Valuation data for investment property for the year ended 31 December 2009
							True
		Properties	Revaluation	Capital	Total	Initial	equivalent
		at valuation	in the year	return	return	yield	yield
		£m	£m	%	%	%	%
Notes						1	2
United Kingdom
Retail:	Shopping centres	1,966	(152)	(8.0)	(3.1)	5.6	7.1
	Retail parks	826	19	1.4	8.1	5.7	6.9
		2,792	(133)	(5.3)	0.2	5.6	7.0
Office:	City	345	(27)	0.5	6.6	4.7	6.5
	Other	189	(35)	(16.3)	(10.0)	6.6	7.5
		534	(62)	(5.4)	0.6	5.4	6.8
Total United Kingdom		3,326	(195)	(5.0)	0.6	5.6	7.0
Continental Europe
France: Retail		1,696	(209)	(10.9)	(6.2)	5.2	5.9
Group
Retail		4,488	(342)	(7.5)	(2.3)	5.5	6.6
Office		534	(62)	(5.4)	0.6	5.4	6.8
Total investment portfolio		5,022	(404)	(7.3)	(2.0)	5.5	6.6
French office and German retail properties sold in the year		-	-	(36.2)	(33.3)
Developments		120	(40)	(33.0)	(33.1)
Total Group		5,142	(444)	(9.2)	(4.1)

Notes
1	Annual cash rents receivable, net of head and equity rents and the cost of vacancy, as a percentage of gross property value, as provided by the Group's external valuers. Rents receivable following the expiry of rent-free periods are not included. Rent reviews are assumed to have been settled at the contractual review date at ERV.
2	The capitalisation rate applied to future cash flows to calculate the gross property value. The cash flows reflect the timing of future rents resulting from lettings, lease renewals and rent reviews based on current ERVs and assuming rents are received quarterly in advance. The property true equivalent yields are determined by the Group's external valuers.
3	Further analysis of development properties by segment is provided in note 3B on page 37.

In the table above, the initial yield calculation is based on passing rents excluding rent of £21.6 million per annum which will be received after the expiry of rent free periods.

On 29 October, Union Square, our 49,600m² major shopping and leisure development in Aberdeen, opened to the public. The scheme received its one millionth visitor just three weeks after opening and was 79% let or in solicitors' hands at the end of December. Anchored by Marks & Spencer, and featuring a 203-bed Jurys hotel and Cineworld, Aberdeen's largest cinema, Union Square was awarded a BREEAM Very Good environmental rating and created over one thousand retail and leisure jobs.

In 2009, we successfully completed a number of extensions in our retail parks portfolio. The extension of Westwood Retail Park, Thanet, was completed in June and was fully let on opening to Bhs Homestore, Brantano and Dunelm. The extension to Cleveland Retail Park, Middlesbrough, was finished in July and the scheme was fully let by the end of the year. At Fife Central Retail Park in Kirkcaldy, we completed in August an 11,000m² extension which is fully let to tenants including B&Q, Mothercare and Toys R Us. The total cost of these three projects was £59 million and the annual rent receivable is £4.8 million.

We pursued our disposal programme during the year, which commenced with the exchange of contracts for the sale of Forum Steglitz, our remaining German asset, in May. The net proceeds of £58 million for the 31,600m² shopping centre were received in July and the comparable book value of the property at the end of 2008 was £79 million. We expect the sale to reduce administration expenses by around £0.5 million per annum.

June saw three further disposals. Les Trois Quartiers, the 29,700m² retail and office building in Paris 1er was sold for net proceeds of £172 million and its comparable book value at

BUSINESS REVIEW

Continued

31 December 2008 was £238 million. Hammerson loaned the purchaser €30 million for a two year term, extendable at the option of the purchaser for a further two years.

We sold a 75% interest in Bishops Square, London E1 in June. The principal tenant of the 71,500m² building is international law firm Allen & Overy and the asset is now held in a 25:75 joint venture between Hammerson and the Oman Investment Fund, an investment arm of the Government of Oman. The consideration for the property was £445 million compared with its book value at the end of 2008 of £486 million. Hammerson's interest in the property, including the related secured debt, is accounted for as an associate and the balance sheet includes Hammerson's share of the associate's net asset value. We provide asset management services to the joint venture for which we receive a fee of £300,000 per annum.

In December, our office building at 148 rue de l'Université, Paris 7ème was sold for £74 million. The equivalent book value of the property at 31 December 2008 was £108 million and at the time of sale, the property was 38% vacant and passing rents were £3.6 million.

During the year we disposed of five retail parks: Victoria Retail Park, Nottingham; Les Rives de L'Aa, St Omer; Cap Malo Boutiques, Rennes; Seacourt Retail Park, Oxford; and Berkshire Retail Park, Theale for total proceeds of £114 million.

In January 2010, we started work on a £30 million extension and refurbishment of our building at 54-60 rue du Faubourg Saint-Honoré in the eighth arrondissement of Paris. The scheme will result in a 7,400m² mixed-use property comprising 4,100m² of retail space and 3,300m² of residential accommodation and is expected to be completed in January 2011. The estimated rental income from the refurbishment is £4.6 million per annum and all of the space has been pre-let.

We completed our first major acquisition since 2007 in December, with the purchase of a 50% interest in Silverburn, a 91,100m² shopping centre in Glasgow. The scheme, which opened in 2007, is a single-level covered mall anchored by Debenhams, Marks & Spencer, New Look, Next and Tesco Extra. It has 98 retail units let to high quality retailers and is 97% occupied with an average unexpired lease term of 12 years. The centre is held in a 50:50 joint venture with the Canada Pension Plan Investment Board and Hammerson's share of the acquisition cost of the property was £152 million. There are opportunities to increase the value of the scheme through active asset management and by extending the property. Hammerson is the asset manager for the joint venture.

Investment portfolio overview

Investment portfolio at 31 December 2009		Gross	Net book
	Income	value	value
	£m	£m	£m
Portfolio value (net of cost to complete)		5,299	5,299
Purchasers' costs			(277)
Net portfolio valuation as reported in the financial statements			5,022
Income and yields
Rent for valuers' initial yield	290.1	5.5%	5.8%
Void allowance (net of outstanding rent reviews)	6.7	0.1%	0.1%
Rent free periods	21.6	0.4%	0.4%
Passing rents	318.4	6.0%	6.3%
ERV of vacant space	15.7	0.3%	0.3%
Reversions	13.7	0.3%	0.3%
Total ERV/Reversionary yield	347.8	6.6%	6.9%
True equivalent yield		6.6%
Nominal equivalent yield		6.3%

BUSINESS REVIEW

Continued

The table above analyses the net and gross valuations, income and yields for the Group's investment portfolio, excluding developments. Purchasers' costs equate to 5.5% of the net portfolio value.

Rental income

Rental data for investment portfolio

for the year ended 31 December 2009

		Gross	Net		Average		Estimated	Reversion/
		rental	rental	Vacancy	rent	Rents	rental	(over-
		income	income	rate	passing	passing	value	rented)
		£m	£m	%	£/m²	£m	£m	%
Notes				1	2	3	4	5
United Kingdom
Retail:	Shopping centres	121.3	92.4	6.4	420	124.7	143.0	7.7
	Retail parks	56.4	50.1	3.6	185	52.0	57.2	6.1
		177.7	142.5	5.5	335	176.7	200.2	7.2
Office:	City	40.3	33.4	8.1	455	27.6	25.2	(20.6)
	Other	15.9	14.7	9.0	260	16.1	16.6	(6.8)
		56.2	48.1	8.4	365	43.7	41.8	(15.1)
Total United Kingdom		233.9	190.6	6.2	340	220.4	242.0	3.1
Continental Europe
France: Retail		101.0	91.2	1.5	360	98.0	105.8	6.4
Group
Retail		278.7	233.7	4.1	340	274.7	306.0	7.0
Office		56.2	48.1	8.4	365	43.7	41.8	(15.1)
Total investment portfolio		334.9	281.8	4.8	345	318.4	347.8	4.1
Income from French office and German retail properties sold in the year		15.9	12.2
Income from developments and other sources not analysed above		0.7	(0.4)
As disclosed in note 2 to the accounts		351.5	293.6
Selected data for the year ended 31 December 2008
Group
Retail		238.9	206.4	4.4	365	276.3	311.1	7.8
Office		98.6	90.6	5.8	445	91.8	89.7	(8.9)
Total investment portfolio		337.5	297.0	4.8	380	368.1	400.8	3.8

Notes
1	The ERV of the area in a property, or portfolio, excluding developments, which is currently available for letting, expressed as a percentage of the sum of the rents passing and the ERV of vacant space for that property or portfolio.
2	Average rent passing at 31 December 2009 before deducting head and equity rents and excluding rents passing from anchor units and car parks.
3	The annual rental income receivable from an investment property at 31 December 2009, after any rent-free periods and after deducting head and equity rents.
4	The estimated market rental value of the total lettable space in a property at 31 December 2009, after deducting head and equity rents, calculated by the Group's valuers.
5	The percentage by which the ERV exceeds, or falls short of, rents passing together with the estimated rental value of vacant space, all at 31 December 2009.

For the year ended 31 December 2009, net rental income was £294 million, whilst passing rents from the investment portfolio totalled £318 million at that date. Further details of net rental income, including a like-for-like analysis, are provided in the Financial Review on pages 21 and 22.

In the UK we agreed 77 rent reviews in 2009, for which the current rents receivable were £8.5 million, and secured additional income of £1.3 million per annum. Assuming that rent reviews outstanding at the end of the year are settled at ERV, annual rents could increase by a further £3.4 million.

Rents at shopping centres in France change annually according to either a composite index, partly based on retail prices, or a construction cost index. From 1 January 2010, indexation of 0.84% will be applied to around 60% by value of the retail leases in Hammerson's French portfolio. The corresponding index for 2009 was 3.85%. The balance of the leases is indexed according to construction costs, for which the index for 2010 is -4.1%.

BUSINESS REVIEW

Continued

Occupancy/ vacancy

EPRA has issued revised guidance for the calculation of vacancy. Previously, vacancy was reported as a percentage of the total ERV of a property or portfolio. The revised definition expresses vacancy as a percentage of rents passing plus the ERV of vacant space. We have adopted this new definition and restated our 2008 comparatives for vacancy and occupancy data.

By the end of 2009, occupancy in the investment portfolio returned to its December 2008 level of 95.2%. A strong letting performance at the developments completed in 2008 offset the effects of the inclusion of 60 Threadneedle Street and Union Square following their completion in 2009.

The retail schemes at Highcross, Leicester; Cabot Circus, Bristol; and, O'Parinor, to the north of Paris, were respectively 94%, 95% and 99% let at 31 December 2009, whilst, in the City of London, 125 Old Broad Street was 91% let and 60 Threadneedle Street was 73% let. At the latter property, leases for the remaining space are in solicitors' hands.

Income security and quality

The weighted average unexpired lease term in our investment portfolio was around nine years at the end of 2009, indicating both a secure income stream and the potential for rental growth.

In the UK at 31 December 2009, 45 retail units were let to tenants in administration, and of these, 23 were still trading. The equivalent figures for France were 19 and 13 units respectively. The number of tenants in administration is lower than at the beginning of 2009, and substantially lower than at 30 June 2009. For the Group as a whole, income from tenants in administration represents 1.6% of passing rent at 31 December 2009.

Hammerson's largest tenants by rental income are shown in the table below. The ten largest retail tenants account for £52 million or 16% of total passing rents at 31 December 2009. In the office portfolio, the five largest tenants represented £23 million or 7% of total passing rents.

Retail		Office
Tenant	% of total passing rent	Tenant	% of total passing rent
B&Q	3.0	Deutsche Bank	3.2
H&M Hennes Limited	2.5	Latham & Watkins LLP	1.5
Arcadia	1.7	HM Government	1.2
New Look	1.6	Barclays Bank	0.7
DSG Retail Limited	1.4	DTZ Debenham Tie Leung	0.6
Next Group	1.3
Inditex	1.2
Vivarte	1.2
Home Retail Group	1.2
Boots	1.1
Total	16.2		7.2

In addition to the above, our share of the rent passing from the lease to Allen & Overy at Bishops Square is £8.6 million. Hammerson's investment in Bishops Square is now accounted for as an associate and is excluded from the rental and other data presented for the investment portfolio.

BUSINESS REVIEW

Continued

All new leases are assessed for the covenant strength of prospective tenants. Our credit control team monitors the credit ratings of all key tenants, using a credit rating agency's risk indicator scale of one to five, with one being low risk and two lower-than-average risk. At 31 December 2009, all but two of the top ten retail tenants had a rating of one, whilst the remainder scored two. Tenants with a low or lower-than-average risk indicator comprised 78% by passing rent of the UK retail portfolio.

Our office tenants are generally of lower risk than retailers, although we also monitor their risk indicators. At 31 December 2009, four of the top five office tenants had a low or lower-than-average risk indicator and the rent of the fifth was guaranteed by its parent company. There have been no significant rent payment defaults in our office portfolio in 2009.

Retailer performance

In the UK, like-for-like turnover at Hammerson's core shopping centres rose by 0.4% during 2009 when compared with 2008, with a poor first half offset by a strong finish to the year.  The Bullring in Birmingham saw like-for-like growth of 3.8%, outperforming the Hammerson portfolio average.  At Highcross, Leicester, the extension, which opened in September 2008, diluted turnover at comparable retail stores. 

In the UK, like-for-like sales at medium-sized stores increased by an average of 4.0% in 2008 and by 0.4% in 2009, whilst sales at department stores have fallen by 4.5% over the same period.  Across merchandising ranges, fashion, non-fashion and leisure have performed reasonably well, but general merchandise has suffered.

Footfall trends have been mixed with growth at Highcross, Leicester, following the opening of the extension and at WestQuay, Southampton, as a consequence of the opening of an IKEA store next door which also attracted customers to the shopping centre.  Elsewhere footfall declined slightly, suggesting a general picture of fewer visits but higher spending per visit.

In France, retail spending was subdued in 2009, despite a good Christmas season.  Nationally, sales at regional shopping centres fell by 4.2%, with Hammerson centres showing a decline of 3.6%.  Italie 2 recorded the best performance with sales stable, thanks to the introduction of new concepts and the rebranding of the supermarket.  O'Parinor, Espace Saint Quentin and Cergy 3 Fontaines also performed better than the national average whilst Bercy 2 and Place des Halles suffered from competitor activity.

In the Hammerson France portfolio, turnover at unit shops was flat whilst larger stores saw sales decline by 2.8%; hypermarket sales decreased by 7.5%.

Footfall performances matched the national benchmark at -3.7% year-on-year.  Bercy 2 (+0.6%) and O'Parinor (-1.5%) outperformed within the portfolio.

Affordability of rents

In the UK, affordability levels, measured as rents as a percentage of sales turnover, at stronger locations such as Bullring, WestQuay and Oracle were marginally lower at the end of 2009, which should enable future rental growth as turnover levels recover.  Elsewhere, and particularly at the recently completed centres in Bristol and Leicester, rent to sales ratios are high.  As these centres mature and sales grow, affordability is expected to improve. 

BUSINESS REVIEW

Continued

In France, the level of rents in relation to turnover is generally lower than in the UK. However passing rents have risen due to increases in the rental indices in 2008 and 2009 and there is pressure on turnover due to the economic downturn.

Lease expiries and breaks

Lease expiries and breaks as at 31 December 2009
								Weighted
								average
		Rents passing that			ERV of leases that			unexpired
		expire/break in			expire/break in			lease term
								to	to
		2010	2011	2012	2010	2011	2012	break	expiry
		£m	£m	£m	£m	£m	£m	years	years
Notes		1	1	1	2	2	2
United Kingdom
Retail:	Shopping centres	8.4	5.7	2.4	12.2	6.4	2.9	9.4	10.4
	Retail parks	1.7	0.6	2.2	2.0	0.7	2.2	12.4	13.0
		10.1	6.3	4.6	14.2	7.1	5.1	10.4	11.3
Office:	City	0.7	8.9	-	0.4	5.9	-	7.8	9.3
	Other	1.1	3.7	1.7	1.0	3.4	1.4	5.1	6.7
		1.8	12.6	1.7	1.4	9.3	1.4	6.9	8.4
Total United Kingdom		11.9	18.9	6.3	15.6	16.4	6.5	9.6	10.6
Continental Europe
France: Retail		20.2	11.5	11.9	22.9	12.2	12.3	1.9	4.2
Group
Retail		30.3	17.8	16.5	37.1	19.3	17.4	7.3	8.7
Office		1.8	12.6	1.7	1.4	9.3	1.4	6.9	8.4
Total Group		32.1	30.4	18.2	38.5	28.6	18.8	7.2	8.6

Notes
1	The amount by which rental income, based on rents passing at 31 December 2009, could fall in the event that occupational leases due to expire are not renewed or replaced by new leases. For the UK it includes tenants' break options. For France, it is based on the earliest date of lease expiry.
2	The ERV at 31 December 2009 for leases that expire or break in each year and ignoring the impact of rental growth and any rent-free periods.

The table above shows that leases with current rents passing of £80.7 million will expire, or are subject to tenants' break clauses, during the period from 2010 to 2012. Assuming renewals take place at current rental values, we estimate that additional rents of £5.2 million per annum would be secured. Rental uplifts in the retail portfolio would be partly offset by over-renting in the UK office portfolio. This is not a forecast and takes no account of void periods, lease incentives or possible changes in rental values.

BUSINESS REVIEW

Continued

Rent reviews

Rent reviews
as at 31 December 2009
						Projected rent at current ERV of
		Rents passing subject to review in				leases subject to review in
		Outstanding	2010	2011	2012	Outstanding	2010	2011	2012
		£m	£m	£m	£m	£m	£m	£m	£m
Notes		1	1	1	1	2	2	2	2
United Kingdom
Retail:	Shopping centres	18.4	12.8	9.7	12.2	20.3	13.4	10.0	13.1
	Retail parks	12.0	13.9	8.7	8.3	13.4	15.1	9.1	8.4
		30.4	26.7	18.4	20.5	33.7	28.5	19.1	21.5
Office:	City	-	1.6	7.9	0.8	-	1.6	7.9	1.1
	Other	2.6	5.1	2.3	1.1	2.7	5.1	2.9	1.1
		2.6	6.7	10.2	1.9	2.7	6.7	10.8	2.2
Total United Kingdom		33.0	33.4	28.6	22.4	36.4	35.2	29.9	23.7

Notes
1	Rents passing at 31 December 2009, after deducting head and equity rents, which is subject to review in each year.
2	Projected rents for space that is subject to review in each year, based on the higher of the current rental income and the ERV as at 31 December 2009 and ignoring the impact of changes in rental values before the review date.

The investment portfolio as a whole was 4.1% reversionary at the end of 2009, compared with 3.8% at 31 December 2008. Although reversion in the UK portfolio has fallen, particularly at our office buildings where rental values have declined, the impact was more than offset by the sale of over-rented properties in France.

The table above shows that in the UK, leases with passing rents of £84.4 million are subject to review over the next three years. On review, we estimate that rents receivable in respect of these leases would increase by £4.4 million per annum by 2012, if reviewed at current rental values. Assuming that outstanding rent review negotiations are concluded at current rental values, an additional £3.4 million per annum would be secured. This is not a forecast and takes no account of potential changes in rental values before the relevant review dates.

In France, the majority of leases are subject to annual indexation.

Contracted income: Developments completed in 2008 and 2009

In 2010, our cash flow will increase substantially due to leases and contracts that have been signed at recently completed developments. The table below shows contracted income on both cash flow and accounting bases.

		2009	2010	2011	2012
		£m	£m	£m	£m
Offices - UK		2.2	3.7	6.2	8.4
Shopping centres - UK		14.7	25.8	31.1	31.9
Retail parks - UK		0.8	4.4	4.7	4.8
Retail - France		7.8	8.7	10.2	11.6
Total	- cash flow	25.5	42.6	52.2	56.7
	- accounting basis	37.9	55.3	58.2	59.6

Note

Figures include Hammerson's share of the income from joint ventures.

BUSINESS REVIEW

Continued

Developments

Our objectives from development are:

·      to create assets which generate an attractive initial yield with significant future growth in income;

·      to create assets valued at a surplus above our costs; and

·     to create prime assets of a type which are difficult to obtain in the open market.

Hammerson has built a reputation as one of the leading developers in the UK and France, managing complex urban regeneration schemes and forging strong links with local authorities and key occupiers. In April 2009, we were named Property Week's Developer of the Year. The completion of Union Square in October marked the end of our recent programme of major developments. The developments shown in note 8 to the accounts on page 42 principally represent the costs incurred to date on the development pipeline.

Hammerson has a substantial pipeline of potential future development opportunities. We have maintained close contact with the local authorities involved with these schemes and continued to progress planning, legal and design work so that we may benefit from them as market conditions improve.

In December, we acquired Les Terrasses du Port, Marseille, one of the largest shopping centre developments anticipated in France over the next few years. The initial capital commitment, including the acquisition cost, is expected to be approximately £45 million in the first six months. The 52,000m² centre will provide 150 stores, a 260m-wide restaurant terrace overlooking the sea and 2,850 car parking spaces.  There is strong retailer interest in the scheme, with leases in respect of 44% of the retail income pre-let or under offer. Net rental income is anticipated to be £29 million per annum and the total development cost will be around £400 million. We expect to start enabling work later in 2010.

We have also achieved the following milestones during 2009:

·             In April, Southampton City Council granted outline planning consent for Watermark WestQuay, a project set on a four hectare brownfield site adjacent to our existing WestQuay Shopping Centre. The consent was subject to confirming S106 provisions, which were agreed in February 2010, and a development agreement with the Council is now in place. The mixed-use scheme will include up to 24,000m² of retail space, a hotel, a residential building with up to 240 apartments and leisure facilities.

·             We have entered into an agreement with The City of London Corporation, which provides us with a development option for the St Alphage House, London EC2 site. We intend to follow a full consultation process and work up the scheme design over the next two years.

·             In November, The London Borough of Hackney approved Hammerson's Bishops Place Regeneration Project. The scheme will open up a 1.3 hectare site in the heart of London and almost half of the scheme's footprint will be allocated to the public realm. The 140,000m² project, designed by Foster + Partners, will include high quality offices, residential accommodation, a hotel, serviced apartments and retail space. The site will also accommodate 50 affordable housing units, comprising properties for both shared ownership and rental.

·             The London Borough of Barnet passed a resolution to grant planning consent in November for the £4.5 billion Brent Cross Cricklewood regeneration plan. The partners of the joint venture proposing the scheme are the owners of Brent Cross Shopping Centre, Hammerson and Standard Life, and a separate joint venture between Hammerson and Brookfield Europe. A new town centre will be created, incorporating the delivery of 7,500 new homes, 27,000 jobs, three schools, a new train station, six bridges, new open spaces and an extension to Brent Cross Shopping Centre.

·             Our proposed retail-led regeneration of Leeds city centre, Eastgate Quarter, has outline planning consent. We have a development agreement with Leeds City Council and agreements for lease with anchors John Lewis and Marks & Spencer.

·             In Sheffield, we have outline planning consent for the retail-led Sevenstone development and detailed planning consent for some of the buildings within that scheme. A development agreement is in place with Sheffield City Council and we have an agreement for lease with John Lewis to anchor the centre. Discussions continue with the city council to complete the land acquisition phase of the project.

Since the year end, Hammerson has been appointed as development and asset manager by the administrators of Thornfield Ventures Limited (TVL), a non-trading holding company within the Thornfield Capital Limited group. Hammerson has not committed any capital to TVL or its subsidiaries. The principal asset of TVL is The Rock in Bury, a 60,000m² shopping centre development which is scheduled for completion this summer. As well as managing the development and the letting process, we will manage and evaluate the other properties and potential developments of the group.

FINANCIAL REVIEW

The financial information contained in this review is extracted or calculated from the attached income statement, balance sheet, cash flow statement, other financial statements, notes and the glossary of terms.

Result before tax

There was a loss before tax of £453.1 million for the year ended 31 December 2009, compared with the loss of £1,611.5 million for 2008. The reduction in the deficit reflects the slowing decline and, in the second half of the year, partial recovery, in property values during 2009. Accordingly, for the first six months of the year, the Group reported a loss of £818.5 million, but a profit of £365.4 million in the second half. Development properties are now accounted for under IAS 40 'Investment Property' and revaluation changes for developments are recognised in the income statement alongside those for investment properties.

In note 2 to the accounts, we have reanalysed the income statement to separately identify recurring, or 'adjusted', income and expenditure from large one-off items and valuation changes, categorised as 'capital and other'. The table below reconciles the loss for the year to the adjusted profit before tax of £130.0 million.

Analysis of (loss)/profit before tax	2009	2008
	£m	£m
Adjusted profit before tax	130.0	113.7
Adjustments:
Loss on the sale of investment properties	(163.4)	(32.5)
Revaluation losses on investment properties	(403.9)	(1,473.4)
Revaluation losses on development properties	(40.2)	(176.5)
Revaluation changes in associate	(1.7)	-
Release of provision relating to formerly owned property	5.3	-
Asset impairment	-	(15.9)
Recycled exchange differences	9.8	-
Net negative goodwill	2.0	-
Distribution from other investments	13.1	-
Change in fair value of derivatives	(4.1)	(26.9)
Loss before tax	(453.1)	(1,611.5)

Adjusted profit before tax was £16.3 million, or 14%, higher than the previous year. Disposals and the cessation of capitalised interest at the recently completed developments reduced profit. However, these effects were more than offset by the interest saved by using the rights issue proceeds to repay debt, lower interest rates, the movement in exchange rates, rental indexation in France and rent reviews in the UK.

Adjusted earnings per share were 19.7 pence for 2009, a reduction of 6.1 pence compared with 25.8 pence for the year ended 31 December 2008. The comparative figure for 2008 has been restated to take account of the bonus share element of the rights issue in March 2009. Note 7A to the accounts on page 41 provides detailed calculations for earnings per share.

The following table summarises the calculation of adjusted earnings per share in 2008 and 2009:

	2009	2008	Change
Adjusted profit for the year (£m)	125.3	110.3	+13.6%
Average number of shares in issue (million)	637.2	426.9	+49.3%
Adjusted earnings per share (pence)	19.7	25.8	-23.6%

FINANCIAL REVIEW 

Continued

Net rental income

At £293.6 million, net rental income for 2009 was £6.2 million, or 2.1%, lower than in 2008. The income lost from disposals was greater than that gained from recently completed developments, the effects of exchange and indexation in France. The tables below compare net rental income for 2009 and 2008, analysing the portfolio between investment properties owned throughout both years and those properties which have been acquired, sold or been under development at any time during the two year period.

Included within net rental income in 2009 is net income from car parks of £8.6 million and rent related to tenants' turnover, which amounted to £3.5 million. The comparative figures for 2008 were £8.4 million and £3.0 million respectively.

There is a trend in advertising away from television and radio and towards other media.  This has worked to the advantage of retailing destinations such as shopping centres, so that Hammerson benefits from additional income through the sale of advertising and merchandising opportunities in its malls.  In total this income amounted to £5.4 million in 2009 (2008: £6.0 million).

Property outgoings were £52.5 million in 2009, up from £38.2 million in the previous year. The increase principally reflected higher costs of vacancy, including unrecovered service charges, together with lease incentives written off and bad debt expense.

Our investment portfolio generated an increase in net rental income of 1.1% on a like-for-like basis, as the impact of lettings, indexation and rent reviews more than offset the increased cost of vacancy in the UK retail portfolio.

Analysis of net rental income		2009	2008
		£m	£m
Net rental income as reported in the income statement		293.6	299.8
Items included in net rental income	Amortisation of lease incentives and other costs	5.3	3.1
	Rent allocated to rent free periods	(10.6)	(4.1)
Net income receivable		288.3	298.8

The table above reconciles net rental income disclosed in the income statement to the net income receivable, which is a proxy for the net cash inflow from tenant leases. The amortisation of lease incentives and rent allocated to rent free periods have both increased year on year reflecting a full year's adjustment for the developments completed in 2008 and 2009. The increase in tenant incentives written off is principally a result of tenants going into administration.

FINANCIAL REVIEW 

Continued

Like-for-like net rental income for the year ended 31 December 2009
		Increase/
		(Decrease)
	Properties	for properties				Total
	owned	owned				net
	throughout	throughout				rental
	2008/9	2008/9	Acquisitions	Disposals	Developments	income
	£m	%	£m	£m	£m	£m
United Kingdom
Retail	120.4	(3.1)	2.1	2.8	17.1	142.4
Office	30.7	2.7	-	14.1	2.9	47.7
Total United Kingdom	151.1	(2.0)	2.1	16.9	20.0	190.1
Continental Europe
France	82.9	7.4	(0.4)	12.4	7.5	102.4
Germany	-	-	-	1.1	-	1.1
Total Continental Europe	82.9	7.4	(0.4)	13.5	7.5	103.5
Group
Retail	203.3	0.9	1.7	5.2	24.6	234.8
Office	30.7	2.7	-	25.2	2.9	58.8
Total	234.0	1.1	1.7	30.4	27.5	293.6
Like-for-like net rental income for the year ended 31 December 2008
	Properties					Total
	owned					net
	throughout					rental
	2008/9	Exchange	Acquisitions	Disposals	Developments	income
	£m	£m	£m	£m	£m	£m
United Kingdom
Retail	124.3	-	1.7	5.3	4.2	135.5
Office	29.9	-	-	41.4	1.1	72.4
Total United Kingdom	154.2	-	1.7	46.7	5.3	207.9
Continental Europe
France	77.2	(10.7)	(1.8)	20.4	3.8	88.9
Germany	-	(0.4)	-	3.4	-	3.0
Total Continental Europe	77.2	(11.1)	(1.8)	23.8	3.8	91.9
Group
Retail	201.5	(2.2)	(0.1)	8.6	8.0	215.8
Office	29.9	(8.9)	-	61.9	1.1	84.0
Total portfolio	231.4	(11.1)	(0.1)	70.5	9.1	299.8

Administration expenses

Administration expenses were £41.0 million for the year ended 31 December 2009, compared with £42.3 million for 2008. Lower staff numbers following the reorganisation in 2008 and reduced performance related bonuses contributed £2.6 million to the reduction. A charge of £0.8 million is included in administration expenses in 2009 in respect of John Richards' retirement. Management fees receivable were £1.6 million lower than in 2008 due to the completion of several joint venture developments late in 2008 and the reduction of asset management fees linked to property values.

FINANCIAL REVIEW 

Continued

Net finance costs

Excluding the change in fair value of derivatives, capitalised interest and one-off investment income, net finance costs were £133.5 million in 2009, some £46.2 million or 26% lower than the equivalent 2008 figure of £179.7 million. The reduction reflected the use of the proceeds of the rights issue and disposals to reduce indebtedness, together with lower interest rates.

Interest capitalised in respect of developments was £10.0 million, virtually all of which related to Union Square, which completed in October. In 2008, interest capitalised totalled £35.9 million.

The Group's average cost of borrowing in 2009 was 5.1%, slightly lower than the average cost of 5.4% for 2008.

Share of results of associate

During 2009, we sold a 75% interest in Bishops Square. Our remaining 25% investment in the company which owns the property and its related debt is accounted for as an associate. The share of results of the associate includes £0.9 million in respect of Hammerson's share of net rental income and interest costs.

Tax

Due to its status as a UK REIT and French SIIC, the Group bears minimal current tax.

Until mid-2009, a deferred tax provision was made for the UK tax that could arise on dividends to be received by Hammerson plc from French subsidiaries under the SIIC rules. However in July 2009, a corporation tax exemption for foreign dividends, introduced by the UK Government, was enacted. The result of this is the release of virtually all of the opening deferred tax provision for 2009 of £108 million.

The tax case relating to capital gains incurred by Grantchester prior to its acquisition by Hammerson in 2002, for which the Group paid a total of £52.0 million in tax and interest in 2008, has been settled in favour of HM Revenue & Customs. No further tax costs were incurred in 2009.

Dividend

The Board has approved a second interim dividend, in lieu of a 2009 final dividend, of 8.5 pence per share. Together with the first interim dividend of 6.95 pence, this makes a total dividend of 15.45 pence per share for 2009. The total dividend for 2008 was 27.9 pence and this year's dividend reflects the increased number of shares in issue following the rights issue.

The second interim dividend, for which the record date is 5 March 2010, will be paid as a PID, net of withholding tax if appropriate. Following the success of 2009's first interim dividend scrip alternative, shareholders will be offered a similar arrangement for the second interim dividend and have until 19 March 2010 to elect for the scrip alternative. Further details of the scheme are provided in a letter which is being sent to shareholders today. Where shareholders elect for the scrip dividend alternative, this will not be treated as a PID and will not be subject to withholding tax.

Shareholders should note that, whilst the scrip dividend scheme enables the Directors to offer an alternative to the cash dividend, there is no guarantee that the Board will offer a scrip dividend alternative for any future dividends.

FINANCIAL REVIEW 

Continued

Cash flow

Cash generated from operations was £239 million in 2009 compared with £346 million in the previous year. The figure for 2008 was particularly high due to the effects of exchange, the timing of receipts from tenants for the December quarters of 2007 and 2008 and the timing of VAT receipts and other changes to working capital. The cash generated from operations in 2009 also reflected disposals in 2008 and 2009. The increase in the cash inflow from operating activities from £30 million in 2008 to £105 million in 2009 reflected lower interest payments as a result of the rights issue, property disposals, lower interest rates and large tax payments in 2008 in respect of the final instalment of the UK REIT entry charge, the settlement of prior year tax liabilities and overseas disposals.

Capital expenditure, including acquisitions, was £227 million in 2009, whilst £424 million was raised from disposals.

After taking account of the net cash outflow from financing activities of £204 million, including the £584 proceeds from the rights issue, there was a net increase in cash and deposits of £68 million in 2009.

Balance sheet

At 31 December 2009, equity shareholders' funds were slightly up on the year at £2.9 billion, as the decline in property values was offset by the proceeds from the rights issue and retained profit. After adjusting for deferred tax and other items, adjusted net asset value per share was £4.21. Detailed calculations for net asset value per share are provided in note 7B to the accounts and the table below shows a reconciliation of the movement in net asset value over the year.

Analysis of net asset value		2009		2008
	£m	£ per share	£m	£ per share*
Basic	2,949.7	4.20	2,820.6	6.58
Dilution on exercise of share options	4.5	n/a	4.8	n/a
Diluted	2,954.2	4.20	2,825.4	6.61
Adjustments:
Fair value of derivatives	(1.9)	-	73.0	0.17
Deferred tax	0.4	-	108.4	0.25
Adjustment for associate	7.6	0.1	-	-
EPRA	2,960.3	4.21	3,006.8	7.03
Basic shares in issue (million)	702.8		427.9
Diluted shares in issue (million)	702.9		427.1
* The 2008 figures have been restated following the rights issue.

	Equity
	shareholders'	EPRA
	funds*	NAV*
Movement in net asset value	£m	£ per share
31 December 2008 restated following the rights issue	3,007	7.03
Rights issue	584	(1.87)
31 December 2008 pro forma	3,591	5.16
Revaluation changes	(444)	(0.63)
Loss on disposals	(163)	(0.23)
Retained profit (excluding revaluation changes and loss on disposal)	164	0.23
Dividends	(68)	(0.10)
Exchange and other movements	(120)	(0.22)
31 December 2009	2,960	4.21

^{* Excluding deferred tax and the fair value of derivatives, calculated in accordance with EPRA best practice.}

FINANCIAL REVIEW 

Continued

Changes to IFRS mean that developments are now accounted for under IAS 40 Investment Properties. Properties on which development is ongoing have been separately identified within note 8 to the accounts. Income generating properties which were acquired with the intention of being developed have been reclassified as investment properties within the note. These properties will be categorised as developments in the event that a development commences.

Financing

Our policy is to optimise the Group's weighted average cost of capital by using an appropriate mix of debt and equity. The Group's financial structure is monitored with reference to guidelines approved by the Board which currently include a minimum interest cover of 2.0 times, gearing of no more than 85% for an extended period and a net debt to EBITDA ratio of less than ten times. For 2009, these ratios were 2.2 times, 72% and 8.3 times respectively.

We manage the Group's exposure to interest rate and currency fluctuations using appropriate hedging policies.

At 31 December 2009, borrowings were £2.3 billion and cash and deposits were £183 million so that net debt totalled £2.1 billion, compared with £3.3 billion at the beginning of the year. Property disposals and the rights issue reduced net debt by approximately £1.4 billion. Hammerson's share of the debt secured on Bishops Square is included in the balance sheet within 'investment in associate'.

At the year end, the Group's borrowings had a weighted average maturity of around eight years and 78% of gross debt was at fixed rates of interest. The chart below shows the maturity profile of our debt portfolio.

http://www.rns-pdf.londonstockexchange.com/rns/4432H_1-2010-2-19.pdf

Undrawn committed facilities were £584 million at the end of 2009, which, together with cash and short-term deposits, provided liquidity of £767 million. Just £97 million of the undrawn facilities mature by the end of 2011. Committed expenditure at the end of 2009 amounted to £60 million.

FINANCIAL REVIEW 

Continued

The Group's unsecured bank facilities contain financial covenants that the Group's gearing, broadly equivalent to the ratio of net debt to shareholders' equity, should not exceed 150% and that interest cover, defined as net rental income divided by net interest payable, should be not less than 1.25 times. Three of the Company's unsecured bonds contain a similar gearing covenant and two contain a covenant that gearing should not exceed 175%. The bonds do not contain an interest cover covenant.

Gearing at the end of 2009 was 72%. The substantial reduction from the figure of 118% at 31 December 2008 resulted from lower levels of net debt, partly offset by the reduction in shareholders' equity arising from the decline in the value of the property portfolio.

At 31 December 2009, the market value of the Group's debt was £5 million lower than its book value. The corresponding figure for 2008 was £614 million and the substantial reduction during the year is principally the result of narrower credit margins.

Responsibility statement OF THE DIRECTORS ON THE ANNUAL REPORT

The Responsibility Statement has been prepared in connection with the Company's full Annual Report for the year ended 31 December 2009. Certain parts of the Annual Report are not included within this announcement.

We confirm to the best of our knowledge:

·	the financial statements, prepared in accordance with the applicable set ofaccounting standards, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole; and
·	the Business Review, which is incorporated into the Directors' Report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face

Signed on behalf of the Board on 22 February 2010

David Atkins	Simon Melliss
Director	Director

Consolidated INCOME STATEMENT

For the year ended 31 December 2009
		2009		2008
	Notes	£m		£m
Gross rental income	2	351.5		344.2
Operating profit before other net losses and share of results of associate	2	252.6		257.5
Other net losses	2	(590.4)		(1,698.3)
Share of results of associate	2	(0.8)		-
Operating loss	2	(338.6)		(1,440.8)
Finance costs		(129.0)		(153.8)
Change in fair value of derivatives		(4.1)		(26.9)
Finance income		18.6		10.0
Net finance costs	4	(114.5)		(170.7)
Loss before tax		(453.1)		(1,611.5)
Current tax	5A	(0.9)		(0.6)
Deferred tax	5A	103.6		38.3
Tax credit		102.7		37.7
Loss for the year		(350.4)		(1,573.8)
Attributable to:
Equity shareholders		(344.5)		(1,572.6)
Equity minority interests		(5.9)		(1.2)
Loss for the year		(350.4)		(1,573.8)
Basic loss per share	7A	(54.1)p		(368.9)p
Diluted loss per share	7A	(54.1)p		(368.4)p
Comparative per share data has been restated following the rights issue in March 2009 (see note 7).  Adjusted earnings per share are shown in note 7A. All results derive from continuing operations.

Consolidated balance sheet

As at 31 December 2009
		2009		2008
	Notes	£m		£m
Non-current assets
Investment and development properties	8	5,141.5		6,456.8
Interests in leasehold properties		23.0		25.6
Plant, equipment and owner-occupied property	9	30.4		38.5
Investment in associate	10	10.4		-
Other investments	12	114.0		112.1
Receivables	13	61.5		19.7
		5,380.8		6,652.7
Current assets
Receivables	14	102.7		123.6
Cash and deposits	15	182.9		119.9
		285.6		243.5
Total assets		5,666.4		6,896.2
Current liabilities
Payables	16	228.4		296.5
Tax	5D	1.6		3.8
Provision	2	-		6.0
Borrowings	17A	62.9		32.5
		292.9		338.8
Non-current liabilities
Borrowings	17A	2,256.1		3,420.1
Deferred tax	5D	0.4		108.4
Tax	5D	1.3		0.4
Obligations under finance leases		22.8		25.5
Payables	19	69.8		93.1
		2,350.4		3,647.5
Total liabilities		2,643.3		3,986.3
Net assets		3,023.1		2,909.9
Equity
Share capital	20	175.7		72.7
Share premium		1,223.6		742.2
Translation reserve		477.7		707.6
Hedging reserve		(385.4)		(580.1)
Capital redemption reserve		7.2		7.2
Other reserves		10.3		11.5
Revaluation reserve		78.6		100.0
Retained earnings		1,372.4		1,775.6
Investment in own shares	21	(4.6)		(4.5)
Treasury shares	22	(5.8)		(11.6)
Equity shareholders' funds		2,949.7		2,820.6
Equity minority interests		73.4		89.3
Total equity		3,023.1		2,909.9
Diluted net asset value per share	7B	£4.20		£6.61
EPRA net asset value per share	7B	£4.21		£7.03
Comparative per share data has been restated following the rights issue in March 2009 (see note 7).

Consolidated statement of COMPREHENSIVE INCOMe and expense

For the year ended 31 December 2009
		2009		2008
	Note	£m		£m
Foreign exchange translation differences		(209.0)		644.5
Net gain/(loss) on hedge of net investment in foreign subsidiaries		176.3		(508.7)
Exchange gain previously recognised in the translation reserve, recycled on disposal of foreign operation		(28.2)		-
Exchange loss previously recognised in the hedging reserve, recycled on disposal of foreign operation		18.4		-
Revaluation losses on development properties		-		(24.8)
Revaluation losses on owner-occupied property		(6.4)		(5.9)
Revaluation gains on investments		3.9		29.9
Actuarial (losses)/gains on pension schemes		(14.3)		0.4
Deferred tax on items taken directly to equity	5C	4.4		(0.2)
Net (loss)/gain recognised directly in equity		(54.9)		135.2
Loss for the year		(350.4)		(1,573.8)
Total comprehensive loss for the year		(405.3)		(1,438.6)
Attributable to:
Equity shareholders		(392.1)		(1,460.3)
Equity minority interests		(13.2)		21.7
Total comprehensive loss for the year		(405.3)		(1,438.6)

CONSOLIDATED STATEMENT OF CHANGES IN EQUIty

For the year ended 31 December 2009

					Capital				Investment		Equity	Equity
	Share	Share	Translation	Hedging	redemption	Other	Revaluation	Retained	in own	Treasury	shareholders'	minority	Total
	capital	premium	reserve	reserve	reserve	reserves	reserve	earnings	shares	shares	funds	interests	equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2009	72.7	742.2	707.6	(580.1)	7.2	11.5	100.0	1,775.6	(4.5)	(11.6)	2,820.6	89.3	2,909.9
Rights issue	101.5	507.2	-	-	-	-	-	-	-	-	608.7	-	608.7
Expenses of rights issue	-	(24.4)	-	-	-	-	-	-	-	-	(24.4)	-	(24.4)
Issue of other shares	-	0.1	-	-	-	-	-	-	-	-	0.1	-	0.1
Share-based employee remuneration	-	-	-	-	-	5.1	-	-	-	-	5.1	-	5.1
Cost of shares awarded to employees	-	-	-	-	-	(5.7)	-	-	5.7	-	-	-	-
Transfer on award of own shares to employees	-	-	-	-	-	(0.6)	-	0.6	-	-	-	-	-
Transfer on sale of investments	-	-	-	-	-	-	(0.4)	0.4	-	-	-	-	-
Transfer on change in accounting policy relating to development properties	-	-	-	-	-	-	(18.5)	18.5	-	-	-	-	-
Proceeds on award of own shares to employees	-	-	-	-	-	-	-	0.1	-	-	0.1	-	0.1
Transfer from treasury shares	-	-	-	-	-	-	-	-	(5.8)	5.8	-	-	-
Dividends	-	-	-	-	-	-	-	(68.4)	-	-	(68.4)	(2.7)	(71.1)
Scrip dividends	1.5	(1.5)	-	-	-	-	-	-	-	-	-	-	-
Foreign exchange translation differences	-	-	(201.7)	-	-	-	-	-	-	-	(201.7)	(7.3)	(209.0)
Net gain on hedge of net investment in foreign subsidiaries	-	-	-	176.3	-	-	-	-	-	-	176.3	-	176.3
Exchange gain previously recognised in the translation reserve recycled on disposal of foreign operation	-	-	(28.2)	-	-	-	-	-	-	-	(28.2)	-	(28.2)
Exchange loss previously recognised in the hedging reserve recycled on disposal of foreign operation	-	-	-	18.4	-	-	-	-	-	-	18.4	-	18.4
Revaluation losses on owner-occupied property	-	-	-	-	-	-	(6.4)	-	-	-	(6.4)	-	(6.4)
Revaluation gains on investments	-	-	-	-	-	-	3.9	-	-	-	3.9	-	3.9
Actuarial losses on pension schemes	-	-	-	-	-	-	-	(14.3)	-	-	(14.3)	-	(14.3)
Deferred tax on items taken directly to equity	-	-	-	-	-	-	-	4.4	-	-	4.4	-	4.4
Loss for the year attributable to equity shareholders	-	-	-	-	-	-	-	(344.5)	-	-	(344.5)	(5.9)	(350.4)
Total comprehensive (loss)/gain for the year	-	-	(229.9)	194.7	-	-	(2.5)	(354.4)	-	-	(392.1)	(13.2)	(405.3)
Balance at 31 December 2009	175.7	1,223.6	477.7	(385.4)	7.2	10.3	78.6	1,372.4	(4.6)	(5.8)	2,949.7	73.4	3,023.1

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONTINUED

Year ended 31 December 2008

					Capital				Investment		Equity	Equity
	Share	Share	Translation	Hedging	redemption	Other	Revaluation	Retained	in own	Treasury	shareholders'	minority	Total
	capital	premium	reserve	reserve	reserve	reserves	reserve	earnings	shares	shares	funds	interests	equity
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2008	72.6	740.0	86.0	(71.4)	7.2	10.6	238.7	3,291.5	(3.8)	(16.8)	4,354.6	70.4	4,425.0
Issue of shares	0.1	2.2	-	-	-	-	-	-	-	-	2.3	-	2.3
Share-based employee remuneration	-	-	-	-	-	4.6	-	-	-	-	4.6	-	4.6
Cost of shares awarded to employees	-	-	-	-	-	(4.5)	-	-	4.5	-	-	-	-
Transfer of treasury shares	-	-	-	-	-	-	-	-	(5.2)	5.2	-	-	-
Transfer on award of own shares to employees	-	-	-	-	-	0.8	-	(0.8)	-	-	-	-	-
Transfer of revaluation on completion of development properties	-	-	-	-	-	-	(141.8)	141.8	-	-	-	-	-
Transfer of deferred tax on completed properties	-	-	-	-	-	-	3.9	(3.9)	-	-	-	-	-
Proceeds on award of own shares to employees	-	-	-	-	-	-	-	0.1	-	-	0.1	-	0.1
Dividends	-	-	-	-	-	-	-	(80.7)	-	-	(80.7)	(2.8)	(83.5)
Exchange adjustment	-	-	621.6	-	-	-	-	-	-	-	621.6	22.9	644.5
Net loss on hedge of net investment in foreign subsidiaries	-	-	-	(508.7)	-	-	-	-	-	-	(508.7)	-	(508.7)
Revaluation losses on development properties	-	-	-	-	-	-	(24.8)	-	-	-	(24.8)	-	(24.8)
Revaluation losses on owner-occupied property	-	-	-	-	-	-	(5.9)	-	-	-	(5.9)	-	(5.9)
Revaluation gains on investments	-	-	-	-	-	-	29.9	-	-	-	29.9	-	29.9
Actuarial gains on pension schemes	-	-	-	-	-	-	-	0.4	-	-	0.4	-	0.4
Deferred tax on items taken directly to equity	-	-	-	-	-	-	-	(0.2)	-	-	(0.2)	-	(0.2)
Loss for the year attributable to equity shareholders	-	-	-	-	-	-	-	(1,572.6)	-	-	(1,572.6)	(1.2)	(1,573.8)
Total comprehensive (loss)/gain for the year	-	-	621.6	(508.7)	-	-	(0.8)	(1,572.4)	-	-	(1,460.3)	21.7	(1,438.6)
Balance at 31 December 2008	72.7	742.2	707.6	(580.1)	7.2	11.5	100.0	1,775.6	(4.5)	(11.6)	2,820.6	89.3	2,909.9

Investment in own shares and treasury shares are stated at cost

Consolidated cash flow statement

For the year ended 31 December 2009
		2009		2008
	Notes	£m		£m
Operating activities
Operating profit before other net losses and share of results of associate	2	252.6		257.5
Decrease in receivables		31.7		19.5
(Decrease)/Increase in payables		(48.1)		50.8
Adjustment for non-cash items	23	2.3		18.5
Cash generated from operations		238.5		346.3
Interest paid		(149.0)		(209.7)
Interest received		3.9		9.4
Distribution received from other investments		13.1		-
Tax paid	5D	(1.2)		(116.2)
Cash flows from operating activities		105.3		29.8
Investing activities
Property and corporate acquisitions	25	(39.5)		(123.5)
Development and major refurbishments		(164.1)		(376.7)
Other capital expenditure		(23.7)		(13.9)
Sale of properties		394.9		245.3
Sale of subsidiary		3.0		-
Investment in associate		(5.0)		-
Sale of investments		1.3		-
Cash flows from investing activities		166.9		(268.8)
Financing activities
Rights issue		584.3		-
Issue of other shares		0.1		2.3
Proceeds from award of own shares		0.1		0.1
(Decrease)/Increase in non-current borrowings		(647.2)		1,050.0
Decrease in current borrowings		(74.3)		(635.1)
Dividends paid to minorities		(2.7)		(2.8)
Equity dividends paid	6	(64.5)		(86.7)
Cash flows from financing activities		(204.2)		327.8
Net increase in cash and deposits		68.0		88.8
Opening cash and deposits		119.9		28.6
Exchange translation movement		(5.0)		2.5
Closing cash and deposits	15	182.9		119.9

Analysis of movement in net debt

For the year ended 31 December 2009
				Current
				borrowings
		Short-term	Cash at	including	Non-current
		deposits	bank	currency swaps*	borrowings	Net debt
		£m	£m	£m	£m	£m
Balance at 1 January 2009		40.5	79.4	(32.5)	(3,420.1)	(3,332.7)
Acquisition (note 25)		-	3.4	(139.6)	-	(136.2)
Sale of subsidiary		-	(0.7)	-	388.0	387.3
Cash flow		73.1	(7.8)	74.3	647.2	786.8
Exchange		(1.7)	(3.3)	47.0	128.8	170.8
Balance at 31 December 2009		111.9	71.0	(50.8)	(2,256.1)	(2,124.0)
*	At 31 December 2009, the fair value of currency swaps was an asset of £12.1 million which is included in current receivables (see note 14).

Notes to the accounts

1.     FINANCIAL INFORMATION

The financial information contained in this announcement has been prepared on the basis of the accounting policies set out in the statutory accounts for the year ended 31 December 2009. Whilst the financial information included in this announcement has been computed in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRS. The financial information does not constitute the Company's statutory accounts for the years ended 31 December 2009 or 2008, but is derived from those accounts. Those accounts give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole. Statutory accounts for 2008 have been delivered to the Registrar of Companies and those for 2009 will be delivered following the Company's annual general meeting. The auditors' reports on both the 2008 and 2009 accounts were unqualified; did not draw attention to any matters by way of emphasis; and did not contain statements under s498(2) or (3) Companies Act 2006 or preceding legislation.

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 = € 1.126 (2008: £1 = €1.034). The principal exchange rate used for the income statement is the average rate, £1 = € 1.123 (2008: £1 = €1.258).

GOING CONCERN

The current economic conditions have created a number of uncertainties. The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Chairman's Statement, Property Markets and Outlook, Principal Risks and Uncertainties, the Business Review and the Financial Review. The financial position of the Group, its liquidity position and borrowing facilities are described in the Business Review and the Financial Review and in the notes to the accounts.

The Directors have reviewed the current and projected financial position of the Group, making reasonable assumptions about future trading performance. As part of the review, the Directors considered the Group's cash balances, its debt maturity profile, including undrawn facilities, and the long-term nature of tenant leases. After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report.

Notes to the accounts

Continued

2.     RESULT FOR THE YEAR

			Capital				Capital
			and	Total			and	Total
		Adjusted	other	2009		Adjusted	other	2008
	Notes	£m	£m	£m		£m	£m	£m
Gross rental income	3A	351.5	-	351.5		344.2	-	344.2
Ground and equity rents payable		(5.4)	-	(5.4)		(6.2)	-	(6.2)
Gross rental income, after rents payable		346.1	-	346.1		338.0	-	338.0
Service charge income		57.6	-	57.6		59.8	-	59.8
Service charge expenses		(69.3)	-	(69.3)		(65.8)	-	(65.8)
Net service charge expenses		(11.7)	-	(11.7)		(6.0)	-	(6.0)
Other property outgoings		(40.8)	-	(40.8)		(32.2)	-	(32.2)
Property outgoings		(52.5)	-	(52.5)		(38.2)	-	(38.2)
Net rental income	3A	293.6	-	293.6		299.8	-	299.8
Management fees receivable		2.9	-	2.9		4.5	-	4.5
Cost of property activities		(28.2)	-	(28.2)		(29.7)	-	(29.7)
Corporate expenses		(15.7)	-	(15.7)		(17.1)	-	(17.1)
Administration expenses		(41.0)	-	(41.0)		(42.3)	-	(42.3)
Operating profit before other net losses and share of results of associate		252.6	-	252.6		257.5	-	257.5
Loss on the sale of investment properties		-	(138.0)	(138.0)		-	(32.5)	(32.5)
Loss on the sale of subsidiary		-	(25.4)	(25.4)		-	-	-
Revaluation losses on investment properties		-	(403.9)	(403.9)		-	(1,473.4)	(1,473.4)
Revaluation losses on development properties		-	(40.2)	(40.2)		-	(176.5)	(176.5)
Goodwill impairment		-	(1.4)	(1.4)		-	-	-
Negative goodwill		-	3.4	3.4		-	-	-
Net exchange gain previously recognised in equity, recycled on disposal of foreign operation		-	9.8	9.8		-	-	-
		-	(595.7)	(595.7)		-	(1,682.4)	(1,682.4)
Release of provision relating to formerly owned property		-	5.3	5.3		-	-	-
Asset impairment		-	-	-		-	(15.9)	(15.9)
Other net losses		-	(590.4)	(590.4)		-	(1,698.3)	(1,698.3)
Share of results of associate	10A	0.9	(1.7)	(0.8)		-	-	-
Operating profit/(loss)		253.5	(592.1)	(338.6)		257.5	(1,698.3)	(1,440.8)
Net finance (costs)/income	4	(123.5)	9.0	(114.5)		(143.8)	(26.9)	(170.7)
Profit/(Loss) before tax		130.0	(583.1)	(453.1)		113.7	(1,725.2)	(1,611.5)
Current tax	5A	(0.9)	-	(0.9)		(0.6)	-	(0.6)
Deferred tax	5A	-	103.6	103.6		-	38.3	38.3
Profit/(Loss) for the year		129.1	(479.5)	(350.4)		113.1	(1,686.9)	(1,573.8)
Equity minority interest		(3.8)	9.7	5.9		(2.8)	4.0	1.2
Profit/(Loss) for the year attributable to equity shareholders	7A	125.3	(469.8)	(344.5)		110.3	(1,682.9)	(1,572.6)

Included in gross rental income is £3.5 million (2008: £3.0 million) calculated by reference to tenants' turnover.

The management fees receivable of £2.9 million (2008: £4.5 million) are fees paid to Hammerson in respect of joint ventures and an associate for investment and development management services. Loans to associate are disclosed in note 13. All other related party transactions, with the exception of Directors' remuneration, are eliminated on consolidation.

The net exchange gain previously recognised in equity, recycled on disposal of foreign operation includes a £28.2 million gain in respect of foreign currency translation.

Litigation in relation to the formerly owned property has been settled and the unutilised portion of the £6.0 million provision at 31 December 2008 has been released.

Notes to the accounts

Continued

3.     SEGMENTAL ANALYSIS

The factors used to determine the Group's reportable segments are the geographic locations (UK and Continental Europe) and sectors in which it operates, which are generally managed by separate teams and are the basis on which performance is assessed and resources allocated.  Gross rental income represents the Group's revenue from external customers, or tenants.  Net rental income is the principal profit measure used to determine the performance of each sector.  Total assets are not monitored by segment and resource allocation is based on the distribution of property assets between segments.

A.    REVENUE AND PROFIT BY SEGMENT

					2009				2008
				Non-cash items				Non-cash items
				Within				Within
		Gross	Net	net	Revaluation	Gross	Net	net	Revaluation
		rental	rental	rental	gains/(losses)	rental	rental	rental	losses on
		income	income	income	on properties	income	income	income	properties
		£m	£m	£m	£m	£m	£m	£m	£m
United Kingdom
Retail:	Shopping centres	121.3	92.4	2.8	(152.2)	99.8	81.7	1.9	(538.6)
	Retail parks	56.4	50.1	0.5	18.7	53.1	48.9	(0.4)	(360.3)
		177.7	142.5	3.3	(133.5)	152.9	130.6	1.5	(898.9)
Office:	City	40.3	33.4	2.7	(27.5)	63.7	57.9	0.1	(188.7)
	Other	15.9	14.7	-	(34.7)	15.2	14.4	(0.2)	(70.3)
		56.2	48.1	2.7	(62.2)	78.9	72.3	(0.1)	(259.0)
Total United Kingdom		233.9	190.6	6.0	(195.7)	231.8	202.9	1.4	(1,157.9)
Continental Europe
France
Retail		101.0	91.2	1.0	(208.2)	81.3	72.8	0.9	(148.1)
Office		13.2	11.1	(1.2)	-	19.7	18.3	(1.3)	(137.3)
Total France		114.2	102.3	(0.2)	(208.2)	101.0	91.1	(0.4)	(285.4)
Germany
Retail		2.7	1.1	(0.5)	-	4.7	3.0	-	(30.1)
Total Continental Europe		116.9	103.4	(0.7)	(208.2)	105.7	94.1	(0.4)	(315.5)
Group
Retail		281.4	234.8	3.8	(341.7)	238.9	206.4	2.4	(1,077.1)
Office		69.4	59.2	1.5	(62.2)	98.6	90.6	(1.4)	(396.3)
Total investment portfolio		350.8	294.0	5.3	(403.9)	337.5	297.0	1.0	(1,473.4)
Developments and other sources not analysed above		0.7	(0.4)	-	(40.2)	6.7	2.8	-	(201.3)
Total portfolio		351.5	293.6	5.3	(444.1)	344.2	299.8	1.0	(1,674.7)
As disclosed in note		2	2	23	8	2	2	23	8

The non-cash items included within net rental income reflect the amortisation of lease incentives and other costs and movements in accrued rents receivable.

Notes to the accounts

Continued

3.     SEGMENTAL ANALYSIScontinued

B.    PROPERTY ASSETS BY SEGMENT

						2009				2008
			Investment	Development		Capital	Investment	Development		Capital
			properties	properties	Total	expenditure	properties	properties	Total	expenditure
			£m	£m	£m	£m	£m	£m	£m	£m
United Kingdom
Retail:		Shopping centres	1,966	12	1,978	290	1,683	155	1,838	234
		Retail parks	826	7	833	23	845	46	891	50
			2,792	19	2,811	313	2,528	201	2,729	284
Office:	City		345	57	402	15	753	174	927	73
	Other		189	5	194	-	224	5	229	-
			534	62	596	15	977	179	1,156	73
Total United Kingdom			3,326	81	3,407	328	3,505	380	3,885	357
Continental Europe
France
Retail			1,696	39	1,735	57	2,051	48	2,099	64
Office			-	-	-	(1)	383	-	383	(1)
Total France			1,696	39	1,735	56	2,434	48	2,482	63
Germany
Retail			-	-	-	-	90	-	90	3
Total Continental Europe			1,696	39	1,735	56	2,524	48	2,572	66
Group
Retail			4,488	58	4,546	370	4,669	249	4,918	351
Office			534	62	596	14	1,360	179	1,539	72
Total			5,022	120	5,142	384	6,029	428	6,457	423

C.    ANALYSIS OF EQUITY SHAREHOLDERS' FUNDS

					Equity
	Assets employed		Net debt		shareholders' funds
	2009	2008	2009	2008	2009	2008
	£m	£m	£m	£m	£m	£m
United Kingdom	3,415.8	3,675.5	(797.9)	(1,250.0)	2,617.9	2,425.5
Continental Europe	1,657.9	2,477.8	(1,326.1)	(2,082.7)	331.8	395.1
	5,073.7	6,153.3	(2,124.0)	(3,332.7)	2,949.7	2,820.6

As part of the Group's foreign currency hedging programme, at 31 December 2009 the Group had currency swaps outstanding which are included in the analysis above.  Previously reported figures for 2008 have been reanalysed to reflect the sterling and euro elements of the currency swaps outstanding at 31 December 2008. 

4.     NET FINANCE COSTS

	2009		2008
	£m		£m
Interest on bank loans and overdrafts	31.7		73.6
Interest on other borrowings	102.9		110.7
Interest on obligations under finance leases	2.3		2.3
Other interest payable	2.1		3.1
Gross interest costs	139.0		189.7
Less: Interest capitalised	(10.0)		(35.9)
Finance costs	129.0		153.8
Change in fair value of interest rate swaps	(3.1)		33.3
Change in fair value of currency swaps outside hedge accounting designation	7.2		(6.4)
Change in fair value of derivatives	4.1		26.9
Distribution from other investments (note 12)	(13.1)		-
Other finance income	(5.5)		(10.0)
Finance income	(18.6)		(10.0)
Net finance costs	114.5		170.7

Notes to the accounts

Continued

5.     TAX

A.            TAX CREDIT

		2009	2008
		£m	£m
UK current tax
On net income before revaluations and disposals		0.1	0.1
Credit in respect of prior years		-	(0.4)
		0.1	(0.3)
Foreign current tax
On net income before revaluations and disposals		1.0	0.3
(Credit)/Charge in respect of prior years		(0.2)	0.6
		0.8	0.9
Total current tax charge		0.9	0.6
Deferred tax credit
Released on introduction of foreign profits tax exemption (note 5G)		(105.4)	-
On net income before revaluations and disposals		2.7	13.5
On revaluations and disposals		(0.9)	(41.1)
Credit in respect of prior years		-	(10.7)
		(103.6)	(38.3)
Tax credit		(102.7)	(37.7)

B.            TAX CREDIT RECONCILIATION

	2009	2008
	£m	£m
Loss before tax	(453.1)	(1,611.5)
Loss multiplied by the UK corporation tax rate of 28% (2008:28.5%)	(126.9)	(459.3)
Deferred tax released on introduction of foreign profits tax exemption	(105.4)	-
UK REIT tax exemption on net income before revaluations and disposals	(25.7)	(30.5)
UK REIT tax exemption on revaluations and disposals	72.6	388.1
SIIC tax exemption (net of 2008 deferred tax provision for SIIC dividends)	66.1	36.3
UK current year losses not recognised	7.6	15.3
German revaluation and disposal	5.4	8.6
Non-deductible and other items	3.8	14.3
Prior year adjustments	(0.2)	(10.5)
Tax credit	(102.7)	(37.7)

C.            DEFERRED TAX ON ITEMS TAKEN DIRECTLY TO EQUITY

	2009	2008
	£m	£m
Deferred tax credit on revaluations	(3.9)	-
Deferred tax charge on share-based employee remuneration	-	0.1
Deferred tax (credit)/charge on actuarial (losses)/gains on pension schemes	(0.5)	0.1
Deferred tax on items taken directly to equity	(4.4)	0.2

Notes to the accounts

Continued

5.     TAX continued

D.            CURRENT AND DEFERRED TAX MOVEMENTS

		1 January	Recognised	Recognised	Tax	Corporate	31 December
		2009	in income	in equity	paid	acquisition	2009
		£m	£m	£m	£m	£m	£m
Current tax
UK tax		-	0.1	-	-	-	0.1
Overseas tax		1.5	0.8	-	(1.2)	1.4	2.5
		1.5	0.9	-	(1.2)	1.4	2.6
Deferred tax
Dividends receivable from France (note 5G)		156.9	(153.0)	(3.9)	-	-	-
Revenue tax losses		(48.6)	47.6	-	-	-	(1.0)
Other timing differences		0.1	1.8	(0.5)	-	-	1.4
		108.4	(103.6)	(4.4)	-	-	0.4
		109.9	(102.7)	(4.4)	(1.2)	1.4	3.0
Analysed as:
Current assets:
	Corporation tax	(2.7)					(0.3)
Current liabilities: Tax		3.8					1.6
Non-current liabilities:
	Deferred tax	108.4					0.4
	Tax	0.4					1.3
		109.9					3.0

Current tax is reduced by the UK REIT and French SIIC tax exemptions.

The tax case relating to capital gains incurred by the Grantchester Group prior to its acquisition by Hammerson, for which the Group settled in full a total of £52.0m of tax and interest in 2008, has been concluded in favour of HM Revenue & Customs.

E.             UNRECOGNISED DEFERRED TAX

At 31 December 2009, the group had unrecognised deferred tax assets (as calculated at a tax rate of 28%) of £78 million (2008: £25.0 million) for surplus UK revenue tax losses carried forward and £43 million (2008:£0.6 million) for UK capital losses.  The increases in the year reflect the foreign dividends exemption explained in note 5G below and capital losses arising on disposals of UK subsidiaries.

Deferred tax is not provided on potential gains on investments in subsidiaries and joint ventures when the Group can control whether gains crystallise and it is probable that gains will not arise in the foreseeable future. At 31 December 2009 the total of such gains was £153 million and the potential tax effect before the offset of losses was £43 million (2008: £445 million, potential tax effect £125 million).

If a UK REIT sells a property within three years of completion of development, the REIT exemption will not apply. At 31 December 2009, the value of such completed properties was £746 million (2008: £495 million) and the potential tax charge that would arise if these properties were to be sold was £nil (2008: £nil).

F.             UK REIT STATUS

The Group elected to be treated as a UK REIT with effect from 1 January 2007. The UK REIT rules exempt the profits of the Group's UK property rental business from corporation tax. Gains on UK properties are also exempt from tax, provided they are not held for trading or sold in the three years after completion of development. The Group is otherwise subject to UK corporation tax.

As a REIT, Hammerson plc is required to pay Property Income Distributions equal to at least 90% of the Group's exempted net income. To remain a UK REIT there are a number of conditions to be met in respect of the principal company of the Group, the Group's qualifying activity and its balance of business.

Notes to the accounts

Continued

G.            FRENCH SIIC STATUS

Hammerson plc has been a French SIIC since 1 January 2004 and all the major French properties are covered by the SIIC tax-exempt regime. Income and gains are exempted from French tax but the French subsidiaries are required to distribute a proportion of their profits to Hammerson plc, which will then pay UK dividends to its shareholders. Dividend obligations will arise principally after property disposals but there will be a period of up to four years after a sale before dividends are required to be received in the UK and a further year before dividends must be paid to shareholders.

If all the properties were realised at the 31 December 2009 values, a total of £425 million of dividends would be payable (2008: £560 million).  Until 1 July 2009, Hammerson plc would have been taxed on dividends received from France, subject to available UK tax losses, and accordingly the Group had recognised a deferred tax liability of £156.9 million at 31 December 2008.  However, legislation has been enacted to exempt foreign dividends from UK tax provided certain conditions are met.  As a result the deferred tax provision has been released and substantially all the deferred tax asset for UK losses has ceased to be recognised.

If Hammerson plc ceases to qualify as a French SIIC before 1 January 2014, tax of approximately £190 million (2008: £260 million) would be payable.  To continue to qualify, at least 80% of assets must be employed in property investment and, with limited temporary exceptions, no shareholder may hold 60% or more of the shares.

6.     DIVIDENDS

The Board approved a 2009 second interim dividend of 8.5 pence per share on 22 February 2010, payable on 1 April 2010 to shareholders on the register at the close of business on 5 March 2010.  This will be paid entirely as a PID, net of withholding tax if applicable, except to the extent that shareholders elect to receive the scrip dividend alternative.  The Company is paying a second interim dividend in lieu of a 2009 final dividend.

The first interim dividend of 6.95 pence per share, paid on 2 October 2009, was paid entirely as a PID, except to the extent that shareholders elected to receive the scrip dividend alternative.

The total dividend for the year ended 31 December 2009 will be 15.45 pence per share (2008: 27.9 pence per share; 18.9 pence per share as restated following the rights issue).

The aggregate amount of the 2009 second interim dividend is £59.7 million.  This assumes that no shareholders elect to receive the scrip dividend alternative and has been calculated using the total number of eligible shares outstanding at 31 December 2009.

				Equity	Equity
	PID	Non-PID	Total	dividends	dividends
	pence	pence	pence	2009	2008
	per share	per share	per share	£m	£m
Current year1
2009 second interim dividend	8.5	-	8.5	-	-
2009 first interim dividend	6.95	-	6.95	24.1	-
	15.45	-	15.45
Prior years2
2008 final dividend	2.6	7.8	10.4	44.3	-
2008 interim dividend	8.5	-	8.5	-	36.5
	11.1	7.8	18.9
2007 final dividend				-	44.2
Dividends as reported in the consolidated statement of changes in equity				68.4	80.7
2009 withholding tax (paid 14 January 2010)				(3.9)	-
2007 withholding tax (paid 14 January 2008)				-	6.0
Dividends paid as reported in the consolidated cash flow statement				64.5	86.7

1	The Company offered shareholders a scrip dividend alternative for these dividends. A letter from the Chairman has been sent to all shareholders today summarising the key details of the Hammerson Scrip Dividend Scheme relating to the 2009 second interim dividend. Further details are set out in Other Information on page 52.
2	The comparative per share data has been restated following the rights issue in March 2009 (see note 7A).

Notes to the accounts

Continued

7.     EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE

The European Public Real Estate Association (EPRA) has issued recommended bases for the calculation of certain per share information and these are included in the following tables.

A.            EARNINGS PER SHARE

The calculations for earnings per share use the weighted average number of shares, which excludes those shares held in the Hammerson Employee Share Ownership Plan and the treasury shares, which are treated as cancelled.

				2009			2008
		Earnings	Shares	Pence	Earnings	Shares	Pence
		£m	million	per share	£m	million*	per share
Basic		(344.5)	637.2	(54.1)	(1,572.6)	426.3	(368.9)
Dilutive share options		-	-	-	-	0.6	0.5
Diluted		(344.5)	637.2	(54.1)	(1,572.6)	426.9	(368.4)
Adjustments:
Other net losses (note 2)		595.7		93.5	1,682.4		394.1
Adjustment for associate (note 10A)		1.7		0.3
Change in fair value of derivatives		4.1		0.6	26.9		6.3
Distribution from other investments		(13.1)		(2.0)	-		-
Deferred tax credit		(103.6)		(16.3)	(38.3)		(9.0)
Equity minority interests in respect of the above		(9.7)		(1.5)	(4.0)		(0.9)
EPRA		130.6		20.5	94.4		22.1
Release of provision relating to formerly owned property		(5.3)		(0.8)	-		-
Asset impairment		-		-	15.9		3.7
Adjusted		125.3		19.7	110.3		25.8
*	In March 2009 the Company issued 405,796,774 new shares through a rights issue. Further details are provided in note 20. To reflect the rights issue, the numbers of shares previously used to calculate the basic, diluted and adjusted per share data have been amended in the above earnings per share table and net asset value per share table in note 7B. An adjustment factor of 1.47 has been applied, based on the ratio of the Company's share price of 334 pence per share on 19 February 2009, the day before the Record Date for the rights issue, and the theoretical ex-rights price at that date of 227 pence per share. The number of treasury shares is not affected as they were not eligible to subscribe for new shares under the terms of the rights issue.

B.            NET ASSET VALUE PER SHARE

			2009			2008
	Equity		Net asset	Equity		Net asset
	shareholders'		value	shareholders'		value
	funds	Shares	per share	funds	Shares	per share
	£m	million	£	£m	million	£
Basic	2,949.7	702.8	4.20	2,820.6	427.9	6.58
Company's own shares held in Employee Share Ownership Plan	-	(0.4)	n/a	-	(0.4)	n/a
Treasury shares	-	(0.5)	n/a	-	(1.0)	n/a
Unexercised share options	4.5	1.0	n/a	4.8	0.6	n/a
Diluted	2,954.2	702.9	4.20	2,825.4	427.1	6.61
Fair value adjustment to borrowings (net of tax)	3.5		0.01	441.9		1.03
EPRA triple net	2,957.7		4.21	3,267.3		7.64
Fair value of derivatives	(1.9)		-	73.0		0.17
Fair value adjustment to borrowings (net of tax)	(3.5)		(0.01)	(441.9)		(1.03)
Deferred tax	0.4		-	108.4		0.25
Adjustment for associate (note 10B)	7.6		0.01	-		-
EPRA	2,960.3		4.21	3,006.8		7.03

Taking account of the rights issue, the pro forma net asset value per share at 31 December 2008 was £5.16.

Notes to the accounts

Continued

8.     INVESTMENT AND DEVELOPMENT PROPERTIES 

	Investment		Development
	properties		properties		Total
	Valuation	Cost	Valuation	Cost	Valuation	Cost
	£m	£m	£m	£m	£m	£m
Balance at
1 January 2009	6,028.6	4,835.6	428.2	626.8	6,456.8	5,462.4
Exchange adjustment	(206.3)	(125.9)	(3.9)	(4.5)	(210.2)	(130.4)
Additions:
- Capital expenditure	110.0	110.0	87.1	87.1	197.1	197.1
- Asset acquisitions	150.5	150.5	36.2	36.2	186.7	186.7
	260.5	260.5	123.3	123.3	383.8	383.8
Disposals	(1,054.2)	(1,049.3)	(0.6)	(0.8)	(1,054.8)	(1,050.1)
Transfers	397.2	594.1	(397.2)	(594.1)	-	-
Capitalised interest	0.5	0.5	9.5	9.5	10.0	10.0
Revaluation adjustment	(403.9)	-	(40.2)	-	(444.1)	-
Balance at
31 December 2009	5,022.4	4,515.5	119.1	160.2	5,141.5	4,675.7

	Investment		Development
	properties		properties		Total
	Valuation	Cost	Valuation	Cost	Valuation	Cost
	£m	£m	£m	£m	£m	£m
Balance at
1 January 2008	6,269.2	4,003.8	1,005.8	845.8	7,275.0	4,849.6
Exchange adjustment	639.5	329.3	41.1	39.1	680.6	368.4
Additions:
- Capital expenditure	71.4	71.4	332.3	332.3	403.7	403.7
- Asset acquisitions			19.5	19.5	19.5	19.5
	71.4	71.4	351.8	351.8	423.2	423.2
Disposals	(283.6)	(215.1)	-	-	(283.6)	(215.1)
Transfers	805.2	645.9	(805.2)	(645.9)	-	-
Capitalised interest	0.3	0.3	36.0	36.0	36.3	36.3
Revaluation adjustment	(1,473.4)	-	(201.3)	-	(1,674.7)	-
Balance at
31 December 2008	6,028.6	4,835.6	428.2	626.8	6,456.8	5,462.4

Properties are stated at market value as at 31 December 2009, valued by professionally qualified external valuers. In the United Kingdom, the Group's properties were valued by DTZ Debenham Tie Leung, Chartered Surveyors. In France, the Group's properties were valued by Cushman & Wakefield, Chartered Surveyors. The valuations have been prepared in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors and with IVA 1 of the International Valuation Standards.

Valuation fees are based on a fixed amount agreed between the Group and the valuers and are independent of the portfolio value. Summaries of the valuers' reports are available on the Company's website: www.hammerson.com.

At 31 December 2009 the total amount of interest included in development properties was £nil (2008:
£22.0 million).  Capitalised interest is calculated using the Group's average cost of borrowings, as appropriate to the currency profile of the development programme, which for 2009 was 6.1% (2008: 6.7%).

		2009	2008
		£m	£m
Capital commitments		60.2	159.5

At 31 December 2008, Hammerson's share of the capital commitments in respect of joint ventures, which is included in the table above, was £25.5 million (2008: £43.2 million).

Notes to the accounts

Continued

9.     PLANT, EQUIPMENT AND OWNER-OCCUPIED PROPERTY

	Owner-occupied	Plant and
	property	equipment	Total
	£m	£m	£m
Book value at 31 December 2009	22.6	7.8	30.4
Book value at 31 December 2008	29.0	9.5	38.5

10.  INVESTMENT IN ASSOCIATE

On 4 June 2009, the Group sold its interest in Bishops Square Investments Limited, formerly Hammerson (Bishops Square) Limited, to Bishops Square Holdings Limited, a company in which the Group holds a 25% interest and which is accounted for as an associate. Further information on this transaction is included in the Business Review and the Financial Review.

A.            SHARE OF RESULTS OF ASSOCIATE

	Year ended		Year ended
	31 December		31 December
	2009		2008
	£m		£m
Gross rental income	5.2		-
Other operating profits and finance costs	0.9		-
Revaluation losses on investment properties	(1.2)		-
Change in fair value of derivatives	(0.5)		-
	(1.7)		-
Loss for the year	(0.8)		-

B.            SHARE OF ASSETS AND LIABILITIES OF ASSOCIATE

	31 December		31 December
	2009		2008
	£m		£m
Investment properties	120.2		-
Other assets	4.4		-
Total assets	124.6		-
Borrowings	(88.6)		-
Fair value of derivatives	(7.6)		-
Other liabilities	(18.0)		-
Total liabilities	(114.2)		-
Net assets	10.4		-

Notes to the accounts

Continued

11.  JOINT VENTURES

As at 31 December 2009 certain property and corporate interests, being jointly controlled entities, have been proportionately consolidated, and the significant interests are set out in the following table:

	Group
	share
	%
Investments
Brent Cross Shopping Centre	41.2
Brent South Shopping Park	40.6
Bristol Alliance Limited Partnership	50
Cricklewood Regeneration Limited	50
Queensgate Limited Partnership	50
Retail Property Holdings Limited	50
The Bull Ring Limited Partnership	33.33
The Grosvenor Street Limited Partnership	50
The Martineau Galleries Limited Partnership	33.33
The Oracle Limited Partnership	50
The Highcross Limited Partnership	60
The West Quay Limited Partnership	50
125 OBS Limited Partnership	50
Developments
Bishopsgate Goodsyard Regeneration Limited	50
Paddington Triangle	50
Wensum Developments Limited	50

The following summarised income statements and balance sheets show the proportion of the Group's results, assets and liabilities which are derived from its joint ventures.

In December 2009, the Group acquired a 50% interest in Retail Property Holdings Limited, which owns Silverburn shopping centre, Glasgow.

Notes to the accounts

Continued

11.    JOINT VENTURES continued

INCOME STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2009

		Bristol						Retail
		Alliance	Bull Ring	Oracle	Queensgate	Highcross	West Quay	Property
	Brent	Limited	Limited	Limited	Limited	Limited	Limited	Holdings		Total
	Cross1	Partnership	Partnership	Partnership	Partnership	Partnership	Partnership	Limited	Other	2009
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Net rental income	16.7	13.6	13.9	11.2	7.1	11.3	12.1	0.2	6.0	92.1
Administration expenses	-	(0.2)	(0.1)	-	(0.1)	-	-	-	(0.2)	(0.6)
Operating profit before other net losses	16.7	13.4	13.8	11.2	7.0	11.3	12.1	0.2	5.8	91.5
Other net losses	(28.6)	(24.4)	4.1	(10.9)	(24.5)	(29.7)	(14.9)	-	(28.4)	(157.3)
Net finance costs	-	(0.4)	-	0.1	-	-	(0.2)	-	(2.4)	(2.9)
Loss before tax	(11.9)	(11.4)	17.9	0.4	(17.5)	(18.4)	(3.0)	0.2	(25.0)	(68.7)

BALANCE SHEETS AS AT 31 DECEMBER 2009

		Bristol						Retail
		Alliance	Bull Ring	Oracle	Queensgate	Highcross	West Quay	Property
	Brent	Limited	Limited	Limited	Limited	Limited	Limited	Holdings		Total
	Cross1	Partnership	Partnership	Partnership	Partnership	Partnership	Partnership	Limited	Other	2009
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Non-current assets
Investment and development properties at valuation	293.5	269.3	233.5	208.3	100.0	253.5	198.2	151.5	172.9	1,880.7
Interests in leasehold properties	-	7.3	-	-	-	-	2.1	-	0.5	9.9
	293.5	276.6	233.5	208.3	100.0	253.5	200.3	151.5	173.4	1,890.6
Current assets
Other current assets	6.4	3.2	1.6	0.5	1.1	1.7	0.3	0.3	4.3	19.4
Cash and deposits	2.6	4.4	5.1	3.6	4.7	2.8	4.7	3.5	5.5	36.9
	9.0	7.6	6.7	4.1	5.8	4.5	5.0	3.8	9.8	56.3
Current liabilities
Borrowings	-	-	-	-	-	-	-	-	(62.9)	(62.9)
Other liabilities	(11.4)	(10.3)	(4.9)	(3.2)	(1.1)	(6.2)	(4.2)	(4.3)	(6.3)	(51.9)
	(11.4)	(10.3)	(4.9)	(3.2)	(1.1)	(6.2)	(4.2)	(4.3)	(69.2)	(114.8)
Non-current liabilities
Other liabilities	-	(7.3)	-	-	-	-	(2.1)	-	(0.5)	(9.9)
	-	(7.3)	-	-	-	-	(2.1)	-	(0.5)	(9.9)
Net assets	291.1	266.6	235.3	209.2	104.7	251.8	199.0	151.0	113.5	1,822.2

Other than as shown above, the joint ventures are funded by the Company and the relevant partners. 'Other net losses' principally represent valuation changes on investment properties.

¹ Includes Brent Cross Shopping Centre and Brent South Shopping Park.

Notes to the accounts

Continued

11.    JOINT VENTURES continued

INCOME STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2008

		Bristol		Moor
		Alliance	Bull Ring	House	Oracle	Queensgate	Highcross	West Quay
	Brent	Limited	Limited	Limited	Limited	Limited	Limited	Limited		Total
	Cross1	Partnership	Partnership	Partnership2	Partnership	Partnership	Partnership	Partnership	Other	2008
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Net rental income	18.1	5.1	13.2	6.9	12.0	8.7	9.2	12.5	4.8	90.5
Administration expenses	-	(0.1)	(0.1)	(0.1)	-	(0.2)	-	-	(0.2)	(0.7)
Operating profit before other net losses	18.1	5.0	13.1	6.8	12.0	8.5	9.2	12.5	4.6	89.8
Other net losses	(115.6)	(61.7)	(82.5)	(34.4)	(55.3)	(45.6)	(106.7)	(69.4)	(52.5)	(623.7)
Net finance costs	0.1	-	0.1	(0.1)	0.1	0.2	0.1	(0.1)	(3.7)	(3.3)
(Loss)/Profit before tax	(97.4)	(56.7)	(69.3)	(27.7)	(43.2)	(36.9)	(97.4)	(57.0)	(51.6)	(537.2)

BALANCE SHEETS AS AT 31 DECEMBER 2008

		Bristol
		Alliance	Bull Ring	Oracle	Queensgate	Highcross	West Quay
	Brent	Limited	Limited	Limited	Limited	Limited	Limited		Total
	Cross1	Partnership	Partnership	Partnership	Partnership	Partnership	Partnership	Other	2008
	£m	£m	£m	£m	£m	£m	£m	£m	£m
Non-current assets
Investment and development properties at valuation	321.5	284.4	230.0	219.5	124.5	279.2	211.6	194.0	1,864.7
Interests in leasehold properties	-	7.3	-	-	-	-	2.1	0.5	9.9
	321.5	291.7	230.0	219.5	124.5	279.2	213.7	194.5	1,874.6
Current assets
Other current assets	6.6	2.5	1.3	1.0	3.3	2.1	1.4	3.5	21.7
Cash and deposits	1.6	3.8	3.8	2.8	2.9	2.4	3.4	10.5	31.2
	8.2	6.3	5.1	3.8	6.2	4.5	4.8	14.0	52.9
Current liabilities
Other liabilities	(12.5)	(7.9)	(4.0)	(3.4)	(2.7)	(4.1)	(3.9)	(6.3)	(44.8)
	(12.5)	(7.9)	(4.0)	(3.4)	(2.7)	(4.1)	(3.9)	(6.3)	(44.8)
Non-current liabilities
Borrowings	-	-	-	-	-	-	-	(57.2)	(57.2)
Other liabilities	-	(7.3)	-	-	-	-	(2.2)	(3.3)	(12.8)
	-	(7.3)	-	-	-	-	(2.2)	(60.5)	(70.0)
Net assets	317.2	282.8	231.1	219.9	128.0	279.6	212.4	141.7	1,812.7

Other than as shown above, the joint ventures are funded by the Company and the relevant partners. 'Other net losses' principally represent valuation changes on investment properties.

¹ Includes Brent Cross Shopping Centre and Brent South Shopping Park.

² Reflects the Group's disposal of its 66.67% interest in Moorhouse in September 2008.

Notes to the accounts

Continued

12.  OTHER INVESTMENTS

	2009	2008
Available for sale investments	£m	£m
Value Retail Investors Limited Partnerships	56.4	52.5
Investments in Value Retail plc and related companies	57.5	58.3
	113.9	110.8
Other investments	0.1	1.3
	114.0	112.1

During the year, the Company received a special distribution of £13.1 million (2008: £nil) from the Value Retail Investors Limited Partnerships, which is included in finance income (see note 4).

13.  RECEIVABLES: NON-CURRENT ASSETS

	2009	2008
	£m	£m
Loans receivable	27.6	15.5
Loans to associate	30.1	-
Other receivables	3.8	2.4
Fair value of interest rate swaps	-	1.8
	61.5	19.7

Loans receivable includes £26.6 million (2008: £nil) representing a loan of €30 million to SCI Quantum, the purchaser of a property in France.  The loan is secured by way of a second charge on the property, bears interest at 6.1% and is for a term of two years from June 2009, extendable at the option of the purchaser for a further two years.

The loans to associate of £30.1 million (2008: £nil) comprise £9.1 million loaned to Bishops Square Holdings Limited which is non-interest bearing and repayable at the earlier of the termination date of the shareholder agreement; the sale of the property at Bishops Square, London EC1; or as agreed between Hammerson and the company, and a mezzanine loan of £21.0 million to Bishops Square Investments Limited, formerly Hammerson (Bishops Square) Limited, which bears interest at 6.27%, matures in April 2013 and is secured by way of a second charge on the property.

14.  RECEIVABLES: CURRENT ASSETS

	2009	2008
	£m	£m
Trade receivables	35.1	48.1
Loans receivable	14.2	-
Other receivables	37.3	69.4
Corporation tax	0.3	2.7
Prepayments	3.7	3.4
Fair value of currency swaps	12.1	-
	102.7	123.6

Loans receivable comprised a loan of €16 million (£14.2 million) to Value Retail plc bearing interest based on EURIBOR and maturing on 22 August 2010. At 31 December 2008, this loan, translated at £15.5 million, was included within non-current receivables (see note 13).

15.  CASH AND DEPOSITS

	2009	2008
	£m	£m
Cash at bank	71.0	79.4
Short-term deposits	111.9	40.5
	182.9	119.9
Currency profile
Sterling	87.9	58.3
Euro	95.0	61.6
	182.9	119.9

Notes to the accounts

Continued

16.  PAYABLES: CURRENT LIABILITIES

	2009	2008
	£m	£m
Trade payables	59.4	92.3
Other payables	138.0	178.2
Accruals	29.1	26.0
Fair value of interest rate swaps	1.9	-
	228.4	296.5

17.  BORROWINGS

A.    MATURITY

	Bank loans	Other	2009	2008
	and overdrafts	borrowings	Total	Total
	£m	£m	£m	£m
After five years	-	1,659.3	1,659.3	1,714.0
From two to five years	596.8	-	596.8	1,634.3
From one to two years	-	-	-	71.8
Due after more than one year	596.8	1,659.3	2,256.1	3,420.1
Due within one year	62.9	-	62.9	32.5
	659.7	1,659.3	2,319.0	3,452.6

At 31 December 2008 and 2009 no borrowings due after five years were repayable by instalments.

At 31 December 2009, the fair value of currency swaps was an asset of £12.1 million which is excluded from the table above, and included in current receivables (see note 14).  At 31 December 2008, the fair value of currency swaps was a liability of £33.3 million which is included in the table above.

B.    ANALYSIS

	2009	2008
	£m	£m
Unsecured
£200 million 7.25% Sterling bonds due 2028	197.7	197.6
£300 million 6% Sterling bonds due 2026	296.7	296.7
£250 million 6.875% Sterling bonds due 2020	247.3	247.3
£300 million 5.25% Sterling bonds due 2016	297.6	297.5
€700 million 4.875% Euro bonds due 2015	620.0	674.9
Bank loans and overdrafts	596.8	1,255.5
	2,256.1	2,969.5
Fair value of currency swaps	(12.1)	33.3
	2,244.0	3,002.8
Secured
Sterling variable rate mortgage due 2013	-	392.6
Sterling variable rate mortgage due 2010	62.9	57.2
	62.9	449.8
	2,306.9	3,452.6

Security for secured borrowings as at 31 December 2009 is provided by a first legal charge on a property with a carrying value of £106.5 million.

C.    UNDRAWN COMMITTED FACILITIES

	2009	2008
	£m	£m
Expiring within one year	27.0	200.0
Expiring between one and two years	70.0	117.5
Expiring after more than two years	487.3	50.0
	584.3	367.5

Notes to the accounts

Continued

17.   BORROWINGS continued

D.    INTEREST RATE AND CURRENCY PROFILE

				Fair value of	Other variable	2009
		Fixed rate borrowings		currency swaps	rate borrowings	Total
	%	Years	£m	£m	£m	£m
Sterling	6.2	11	1,187.3	(485.6)	184.1	885.8
Euro	4.9	5	620.0	473.5	327.6	1,421.1
	5.7	9	1,807.3	(12.1)	511.7	2,306.9
				Fair value of	Other variable	2008
		Fixed rate borrowings		currency swaps	rate borrowings	Total
	%	Years	£m	£m	£m	£m
Sterling	5.8	10	1,583.3	(533.8)	258.8	1,308.3
Euro	4.9	6	674.9	567.1	902.3	2,144.3
	5.6	9	2,258.2	33.3	1,161.1	3,452.6

The analysis above reflects the effect of currency and interest rate swaps in place at 31 December 2008 and 2009. Previously reported figures for 2008 have been reanalysed in the table above, to reflect the sterling and euro elements of currency swaps.

18.  FAIR VALUES OF FINANCIAL INSTRUMENTS

The fair values of borrowings and currency swaps, together with their carrying amounts included in the balance sheet, are as follows:

		2009		2008
	Book value	Fair value	Book value	Fair value
	£m	£m	£m	£m
Borrowings, excluding currency swaps	2,319.0	2,314.2	3,419.3	2,805.5
Currency swaps	(12.1)	(12.1)	33.3	33.3
Total	2,306.9	2,302.1	3,452.6	2,838.8
Interest rate swaps	10.2	10.2	39.7	39.7

At 31 December 2009, the book value of financial liabilities exceeded their fair value by £4.8 million (2008: £613.8 million), equivalent to 1 pence per share (2008: 144 pence per share) on an adjusted net asset value per share basis. On a post-tax basis, the difference was equivalent to 1 pence per share (2008: 103 pence per share).  Comparative per share data has been restated following the rights issue.

Notes to the accounts

Continued

19.  PAYABLES: NON-CURRENT LIABILITIES

	2009	2008
	£m	£m
Net pension liability	20.9	9.6
Other payables	40.6	42.0
Fair value of interest rate swaps	8.3	41.5
	69.8	93.1

20.  SHARE CAPITAL

			Called up, allotted
		Authorised	and fully paid
	2009	2008	2009	2008
	£m	£m	£m	£m
Ordinary shares of 25p each	214.8	94.8	175.7	72.7

		Number
Movements in issued share capital
Number of shares in issue at 1 January 2009		290,854,839
Issued in respect of rights issue		405,796,774
Issued in respect of scrip		6,107,123
Share options exercised	- Share option schemes	50,615
	- Save As You Earn	575
Number of shares in issue at 31 December 2009		702,809,926

On 23 March 2009 the Company issued 405,796,774 new ordinary shares at an issue price of 150 pence per new ordinary share through a rights issue, on the basis of 7 new shares for every 5 existing share held. Proceeds of £584.3 million, net of expenses, were used to reduce the Company's indebtedness.

The number of shares in issue at the balance sheet date included 500,000 shares held in treasury (2008: 1,000,000).

21.  INVESTMENT IN OWN SHARES

	2009	2008
At cost	£m	£m
Balance at 1 January	4.5	3.8
Transfer from treasury shares	5.8	5.2
Cost of shares awarded to employees	(5.7)	(4.5)
Balance at 31 December	4.6	4.5

22.  TREASURY SHARES

	2009	2008
At cost	£m	£m
Balance at 1 January	11.6	16.8
Purchase of treasury shares	-	-
Transfer to investment in own shares	(5.8)	(5.2)
Balance at 31 December	5.8	11.6

Notes to the accounts

Continued

23.  ADJUSTMENT FOR NON-CASH ITEMS IN THE CASH FLOW STATEMENT

		2009	2008
	Note	£m	£m
Amortisation of lease incentives and other costs		5.3	3.1
Increase in accrued rents receivable		(10.6)	(4.1)
Non-cash items included within net rental income	3A	(5.3)	(1.0)
Depreciation		1.5	1.3
Share-based employee remuneration		5.1	4.6
Exchange and other items		1.0	13.6
		2.3	18.5

24.  CONTINGENT LIABILITIES

There are contingent liabilities of £19.0 million (2008: £4.1 million) relating to guarantees given by the Group and a further £40.3 million (2008: £27.8 million) relating to claims against the Group arising in the normal course of business. Hammerson's share of contingent liabilities arising within joint ventures, which is included in the figures shown above, is £10.9 million (2008: £16.9 million).

25.  ACQUISITIONS

Name of business	Foruminvest France	Retail Property
acquired	Marseille SAS	Holding Limited
Date of acquisition	21 December 2009	18 December 2009
Proportion of shares acquired	100%	50%

						Total
	Book	Fair	Book	Fair	Book	Fair
	value	value	value	value	value	value
	£m	£m	£m	£m	£m	£m
Development/Investment properties	24.2	33.5	149.1	151.5	173.3	185.0
Current receivables	1.3	1.3	1.3	1.8	2.6	3.1
Cash and deposits	-	-	3.4	3.4	3.4	3.4
Current payables	-	-	(6.3)	(4.3)	(6.3)	(4.3)
Current borrowings	-	-	(139.6)	(139.6)	(139.6)	(139.6)
Current tax payable	-	(1.5)	-	-	-	(1.5)
Net assets acquired	25.5	33.3	7.9	12.8	33.4	46.1
Positive/(Negative) goodwill on acquisition		1.4		(3.4)		(2.0)
Cost of acquisition		34.7		9.4		44.1
Satisfied by:
Cash paid		33.7		146.5		180.2
Debt assumed		-		(139.6)		(139.6)
Additional consideration accrued		-		1.2		1.2
Costs paid		1.0		1.3		2.3
		34.7		9.4		44.1
Less:
Cash and deposits acquired						(3.4)
Additional consideration accrued						(1.2)
Property and corporate acquisitions as reported in the consolidated cash flow statement						39.5

OTHER INFORMATION

DIRECTORS
John Nelson*	Chairman
David Atkins	Chief Executive
Peter Cole
Terry Duddy*
David Edmonds* CBE
Jacques Espinasse*
John Hirst*
Simon Melliss
Tony Watson* CBE	Senior Independent Director
*Non-Executive Director
SECRETARY
Stuart Haydon FCIS
PRINCIPAL GROUP ADDRESSES
United Kingdom
Hammerson plc, 10 Grosvenor Street, London W1K 4BJ
Tel [phone]	Fax [phone]
France
Hammerson SAS, Washington Plaza Immeuble Artois, 44 rue Washington, 75408 Paris CEDEX 08, France
Tel [phone]	Fax [phone]
Registered office
10 Grosvenor Street, London W1K 4BJ
Registered in England No. 360632

WEBSITE

The 2009 Annual Report and other information is available on the Company's website: www.hammerson.com on the "Investors" page. The Company operates a service whereby all registered users can choose to receive, via e-mail, notice of all Company announcements which can be viewed on the website.

UK REIT TAXATION

As a UK REIT, Hammerson plc is exempted from corporation tax on rental income and gains on UK investment properties but is required to pay Property Income Distributions (PIDs).  UK shareholders will be taxed on PIDs received at their full marginal tax rates.  A REIT may in addition pay normal dividends.

For most shareholders, PIDs will be paid after deducting withholding tax at the basic rate. However, certain categories of shareholder are entitled to receive PIDs without withholding tax, principally UK resident companies, UK public bodies, UK pension funds and managers of ISAs, PEPs and Child Trust Funds.  Hammerson's website includes a form to be used by shareholders to certify if they qualify to receive PIDs without withholding tax. Further information on UK REITs is available on the Company's website.

SCRIP DIVIDEND ALTERNATIVE

A letter from the Chairman has been sent to all shareholders today summarising the key details of the Hammerson Scrip Dividend Scheme relating to the 2009 second interim dividend. Under the Scheme, if a shareholder elects to receive the scrip, the dividend ceases to qualify as a PID. Shareholders who wish to receive the scrip dividend alternative, but who have previously not elected to do so, should complete a mandate form and return it to Capita by no later than 19 March 2010. As the Company is offering a scrip dividend alternative, the Company's Dividend Reinvestment Plan (DRIP) will be suspended. Further information can be found in the full Guide which is available on the Company's website: www.hammerson.com on the "Investors" page. Copies of both the full Guide and the letter to shareholders are available for inspection at the UKLA's Document Viewing Facility at The Financial Services Authority, 25 The North Colonnade, London E14 5HS. Shareholders should note that there is no guarantee that the Board will offer a scrip dividend alternative for any particular future interim or final dividend.

FINANCIAL CALENDAR
Full year results announced		22 February 2010
Recommended second interim dividend	- Ex-dividend date	3 March 2010
	- Record date	5 March 2010
	- Scrip reference share price announced	10 March 2010
	- Election date for scrip (or revocation)	19 March 2010
	- Payable on	1 April 2010
Annual General Meeting		29 April 2010
Anticipated 2010 interim dividend		October 2010

Glossary of Terms

Adjusted figures (per share)	Reported amounts adjusted to exclude certain items as set out in note 7 to the accounts.
Anchor store	A major store, usually a department, variety or DIY store or supermarket, occupying a large unit within a shopping centre or retail park, which serves as a draw to other retailers and consumers.
Average cost of borrowing	The cost of finance expressed as a percentage of the weighted average of borrowings during the period.
Capital return	The change in property value during the period after taking account of capital expenditure and exchange translation movements, calculated on a monthly time-weighted basis.
Dividend cover	Adjusted earnings per share divided by dividend per share.
Earnings per share (EPS)	Profit for the period attributable to equity shareholders divided by the average number of shares in issue during the period.
EBITDA	Earnings before interest, tax, depreciation and amortisation.
EPRA	European Public Real Estate Association. This organisation has issued recommended bases for the calculation of earnings per share and net asset value per share.
Equivalent yield (true and nominal)	The capitalisation rate applied to future cash flows to calculate the gross property value.  The cash flows reflect the timing of future rents resulting from lettings, lease renewals and rent reviews based on current ERVs.  The true equivalent yield assumes rents are received quarterly in advance.  The nominal equivalent yield assumes rents are received annually in arrears.  The property true and nominal equivalent yields are determined by the Group's external valuers.
ERV	The estimated market rental value of the total lettable space in a property, after deducting head and equity rents, calculated by the Group's valuers.
Gearing	Net debt expressed as a percentage of equity shareholders' funds.
Gross property value	Property value before deduction of purchaser's costs, as provided by the Group's valuers.
Gross rental income	Income from rents, car parks and commercial income.
IASB	International Accounting Standards Board.
IFRS	International Financial Reporting Standard.
Initial yield	Annual cash rents receivable, net of head and equity rents and the cost of vacancy, as a percentage of gross property value, as provided by the Group's external valuers. Rents receivable following the expiry of rent-free periods are not included. Rent reviews are assumed to have been settled at the contractual review date at ERV.
Interest cover	Net rental income divided by net cost of finance before capitalised interest, the change in fair value of derivatives and bond redemption costs.
Interest rate or currency swap (or derivative)	An agreement with another party to exchange an interest or currency rate obligation for a pre-determined period of time.
IPD	Investment Property Databank. An organisation supplying independent market indices and portfolio benchmarks to the property industry.
Like-for-like / underlying net rental income	The percentage change in net rental income for completed investment properties owned throughout both current and prior periods, after taking account of exchange translation movements.
Net asset value per share (NAV)	Equity shareholders' funds divided by the number of shares in issue at the balance sheet date.

Glossary of terms Continued
Net rental income	Income from rents, car parks and commercial income, after deducting head and equity rents payable, and other property related costs.
Occupancy rate	The ERV of the area in a property, or portfolio, excluding developments, which is let, expressed as a percentage of the sum of the rents passing and the ERV of vacant space in that property or portfolio.
Over-rented	The amount by which the ERV falls short of rents passing, together with the estimated rental value of vacant space.
Pre-let	A lease signed with a tenant prior to the completion of a development.
Property Income Distribution (PID)	A dividend, generally subject to withholding tax, that a UK REIT is required to pay from its tax-exempt property rental business and which is taxable for    UK-resident shareholders at their marginal tax rate.
REIT	Real Estate Investment Trust. A tax regime which in the UK exempts participants from corporation tax both on UK rental income and gains arising on UK investment property sales, subject to certain requirements.
Rents passing or passing rents	The annual rental income receivable from an investment property, after any rent-free periods and after deducting head and equity rents. This may be more or less than the ERV (see over-rented and reversionary or under-rented).
Return on shareholders' equity (ROE)	Capital growth and profit for the year expressed as a percentage of equity shareholders' funds at the beginning of the year, all excluding deferred tax and certain non-recurring items.
Reversionary or under-rented	The amount by which the ERV exceeds the rents passing, together with the estimated rental value of vacant space.
Reversionary yield	The income on reversion to ERV, irrespective of timing, expressed as a percentage of the gross property valuation, as provided by the Group's external valuers.
Scrip dividend	A dividend received in the form of shares.
SIIC	Sociétés d'Investissements Immobiliers Côtées. A French tax-exempt regime available to property companies listed in France.
Total development cost	All capital expenditure on a development project, including capitalised interest.
Total return	Net rental income and capital return expressed as a percentage of the opening book value of property adjusted for capital expenditure and exchange translation movements, calculated on a monthly time-weighted basis.
Total shareholder return	Dividends and capital growth in the share price, expressed as a percentage of the share price at the beginning of the year.
Turnover rent	Rental income which is related to an occupier's turnover.
Vacancy rate	The ERV of the area in a property, or portfolio, excluding developments, which is currently available for letting, expressed as a percentage of the sum of the rents passing and the ERV of vacant space for that property or portfolio.

DISCLAIMER

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 Hammerson's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of governmental regulators and other risk factors such as the Company's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Company 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 speak only as of the date of this document. Hammerson 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 Company should not be relied upon as a guide to future performance.

 

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