Final Results

RNS Number : 7657I

Capital & Regional plc

18 March 2010

CAPITAL & REGIONAL PLC ANNUAL RESULTS 2009

Capital & Regional Plc, the co-investing property asset manager today announces its audited annual results for the year to 30 December 2009.

Financial Highlights

	December	June	December
	2008	2009	2009
		(unaudited)
Property under management	£4.0bn	£3.2bn	£3.1bn
Net Assets	£186m	£51m	£130m
EPRA NAV per share	£1.74 *		£0.47
Triple net diluted NAV per share	£1.33 *		£0.37
Net debt to equity ratio	58%	226%	48%
Dividend per share	5p	-	-
Recurring pre-tax profit	£27.6m	£10.3m	£17.5m
Loss before tax	£(516)m	£(131)m	£(113)m

* restated

Highlights

· £69 million capital raise with Parkdev as anchor investor

· Renegotiation of Group banking facilities

· £50 million capital raise in the X-Leisure fund, alongside refinancing of banking facilities and creation of X-Leisure Limited

· £64 million capital raise in The Junction fund with AREA as anchor investor, alongside refinancing of banking facilities

· Profit before tax of just over £17 million for the second half of 2009

· Key relettings of ex-Woolworths stores in The Mall and new letting to Best Buy in The Junction

· Further de-gearing of Group and fund balance sheets through £180 million of disposals between the Capital Raising and year end, resulting in a Group net debt to equity ratio of 48% as at 30 December 2009, and an additional £179 million of disposals in the UK so far in 2010

· Initial evidence of improving UK valuations in Q1 2010, supported by X-Leisure February valuation up 6% in the two months since year end and prices achieved for disposals in The Mall

· Discussions under way to create a separate German asset management platform

Commenting on the results Tom Chandos, Chairman said

"The Capital Raising completed in September and the agreed changes to the Group's banking arrangements have contributed materially to improving Capital & Regional's financial resilience. Whilst the Board is by no means complacent about the challenges ahead, these two events undoubtedly marked a turning point for the Group and its prospects."

Financial information

The financial information set out below does not constitute the Group and Company's statutory financial statements for the years to 30 December 2008 or 2009, but is derived from those financial statements. Statutory financial statements 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 have reported on the 2008 financial statements and their report was unqualified but modified to include an emphasis of matter paragraph on the uncertainty which may cast significant doubt on the Group and Company's ability to act as a going concern as described in note 1 to the financial statements. The 2008 audit report did not contain statements under section 237 (2) or (3) of the Companies Act 1985.

The auditors have reported on the 2009 financial statements. Their report was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under section 498 (2) or (3) of the Companies Act 2006.

Forward looking statements

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

Chairman's statement

Overview

The impact on valuations of improving property market sentiment has enabled Capital & Regional to return to profitability in the second half of 2009. The full year pre-tax loss of £113 million reflects the fact that, for much of the year, market conditions were challenging and that it was only in the fourth quarter that valuations in the UK funds began to recover some of the ground lost in the first half of the year.

The Capital Raising completed in September and the agreed changes to the Group's banking arrangements have contributed materially to improving Capital & Regional's financial resilience. Whilst the Board is by no means complacent about the challenges ahead, these two events undoubtedly marked a turning point for the Group and its prospects.

The positive momentum in investment markets has continued into the first quarter of 2010, although the pace of growth has slowed in most areas from the fourth quarter of last year. Given that these supportive market conditions are, in part, a consequence of stimulus measures implemented by governments around the world, there is a risk that these conditions will soften as liquidity measures are withdrawn.

Consequently, the Group has been taking steps to sell into strength where either capital can be recycled from assets offering lesser asset management potential or where refinancing needs can be anticipated. The Board believes these are prudent steps particularly as tenant markets are likely to remain challenging for the balance of 2010.

Dividend

The Board is not recommending the payment of a final dividend, meaning that no dividend will be payable for the full year. The Board is committed to resuming dividend payments when it considers it prudent to do so, but future payments will be linked for the foreseeable future to the Group's cash generating ability and will normally be restricted to not more than 50% of operating cash flow less interest and tax to comply with the undertakings given for the Group's banking arrangements.

The Board

I am delighted to welcome Louis Norval and Neno Haasbroek as non-executive directors. Their extensive knowledge of commercial property, and of the retail sector in particular, has enabled them already to make an important contribution to the Board's deliberations. PY Gerbeau resigned from the Board in July 2009 to concentrate on his new role as Chief Executive of X-Leisure Limited, while Hans Mautner retired from the Board in June 2009. I would like to thank both of them for their valuable contributions to the Group as directors.

Responsible Business

Capital & Regional has attached particular importance to maintaining its commitment to responsible business in the very challenging operating environment. We encourage each of the businesses and functions to develop an approach suitable to them, whilst providing increased strategic direction through a Responsible Business Committee. This approach has resulted in a number of notable achievements which are set out in the statement on Responsible Business.

Our partners

The Group's partnerships, to which has now been added the growing relationship with Parkdev following its investment as part of the Capital Raising, have continued to develop during the course of the year. The Board has actively sought to link partners' capital resources with the Group's own capital and its proven asset management capabilities in pursuing new opportunities for growth. These are expected to increase during the course of 2010.

The reshaping and strengthening of the Group over the past two years have only been possible as a result of the commitment and capability of all our employees, whether long standing or more recently arrived. It is because of them that the Group can now look forward to a secure and successful future.

Tom Chandos

Chairman

Chief Executive's statement

Results

Higher property values towards the end of the year have contributed to a much improved result for 2009. It is very encouraging to be able to report a pre-tax profit of £17 million for the six months to 30 December 2009 in a year in which the Group's prospects have improved significantly as a result of decisive actions taken by the management team. The full year pre-tax loss was £113 million compared to a pre-tax loss of £516 million in 2008.

We continue to generate recurring income from our role not only as a property investor but also as an asset manager and owner of operating businesses. Although we have delivered more than £3.5 million of cost savings, this positive effect has been outweighed by the impact of falling valuations and dilutions as a result of the part-sale of the German portfolio and capital raisings by the three UK funds since June 2008. As a consequence we have reported recurring pre-tax profits of over £17 million in 2009 compared to £28 million for 2008.

The three UK funds have experienced peak to trough falls in property valuations (reached in the second and third quarters of 2009) ranging from 39% for X-Leisure to 52% and 54% respectively for The Junction and The Mall. Recovery from these low levels has been most pronounced in retail warehousing, up by 12% from the trough in June 2009. Shopping centre valuations improved in the final quarter of the year while leisure valuations have lagged behind retail, though they have shown improvement in the first two months of 2010.

Whilst valuations in Germany fell a little further in the second half of the year, we believe that they are now stabilising. The German market has historically lagged behind and been less volatile than the UK which, combined with the resilience and strong operational performance of the portfolio, has limited the fall over the year to 4% in local currency. There has been a fall of 12% in local currency in the German portfolio from the peak in December 2007 to the end of 2009.

Reported net asset value per share has not only been affected by the impact of gearing on these property valuations but also by the impact of the new shares issued in the Capital Raising. Basic and EPRA net asset values per share as at 30 December 2009 were 37p and 47p compared to restated figures of £1.30 and £1.74 as at 30 December 2008.

Financial Position

The financial position of the Group has been significantly reinforced during the year as a result of the following actions:

· The Capital Raising of £69 million by way of a Firm Placing and Open Offer in which Parkdev Asset Managers subscribed £23.4 million for a 25% stake in the Company.

· The simultaneous renegotiation of the Group's core banking facility together with the facilities relating to assets held on the Group balance sheet, being the Great Northern Warehouse, Hemel Hempstead and 10 Lower Grosvenor Place.

· The Junction's £64 million capital raising in which AREA Property Partners subscribed £50 million, together with the renegotiation of the fund's banking arrangements.

· X-Leisure's £50 million capital raising, the establishment of X-Leisure Limited as a distinct management platform, together with the renegotiation of the fund's syndicated facility and facilities for Brighton Marina, Milton Keynes and Castleford.

Improving valuations in the second half of the year, new capital at both Group and fund level as well as the renegotiation of a significant number of banking arrangements have therefore contributed to this greater resilience.

Notwithstanding these actions, both the Group and UK funds continued to deleverage in the fourth quarter of the year and the start of 2010. The Group has completed the sale of 10 Lower Grosvenor Place and the adjoining Beeston Place property and is in negotiations to sell its stake in the MEN Arena in Manchester. The Mall completed the sale of Bexleyheath for £98 million at the end of 2009 and since year end has sold two further shopping centres in Aberdeen and Preston for consideration of £134 million. The Junction also completed the sale of its retail parks in Aberdeen and Slough for £82 million before the end of the year, while X-Leisure has recently sold its Croydon property for £33 million.

The disposals in The Mall have allowed the repayment of tranches of its CMBS financing in advance of the expiry date of the bonds in 2012 and those in The Junction have enabled the fund to reduce its LTV to a point where distributions to unit holders can recommence in 2010. Following the Croydon sale, we also expect X-Leisure to restart distributions this year.

Management remains focussed on anticipating refinancing needs well in advance of maturity and has secured credit committee approval for the refinancing on competitive terms of both facilities in Germany that mature in 2010. Discussions have also started on the 2011 refinancings. Since the year end, two small property disposals have also been made from the German portfolio for tactical reasons with the £6 million cash proceeds currently retained in the portfolio.

Operations

Capital & Regional's property asset management teams have had to deal with very challenging tenant conditions and have been fully focussed on income security as a number of retailers, particularly in The Mall, fell into administration at the beginning of 2009. Steady progress has been made in re-letting this space with overall occupancy of 94.6% at year end across the UK funds, compared to 94.2% at the end of 2008. It has been particularly pleasing to see that four of the six directly-held Woolworths stores have been let on good terms and that significant progress has been made on the letting of the other two units. It is also noteworthy that The Junction was one of the first property owners to secure a Best Buy letting, with a 50,000 square feet unit at its Thurrock Retail Park.

Strategy

Capital & Regional is now in a position where it has financial resources to invest in new opportunities and partners with whom it can co-invest and which can support the further development of the Group as a co-investing property asset manager. Our focus will be on:-

· Improving the value of the capital invested in the three UK funds and in Germany through property asset management initiatives, the recycling of capital within the portfolios and, where appropriate, further investment by the Group.

· Direct investment in retail and leisure where we can leverage available capital to generate fee income based on our specialist property asset management skills. We estimate that there is scope for an additional £1.5 billion property under management from existing resources alone. This could take the form of the establishment of additional funds with existing partners and/or third parties, where we can combine property investment with fund, asset and property management income.

· Expansion of the management platform, either organically or by way of acquisition.

Although we have submitted offers on a small number of opportunities, we feel there are likely to be more attractively priced investments as the year progresses. The key to creating value for our shareholders will be to retain maximum strategic flexibility to take advantage of opportunities as they arise.

Outlook

Continuing investor appetite for retail commercial property will be supportive of further improvements in UK valuations in the first half of 2010. Having lagged retail, the leisure sector is also expected to see recovery, which the February X-Leisure fund valuation indicates with a 6% increase from the year end figure as shown in note 35 to the financial statements. We also expect the German portfolio to continue to demonstrate resilience amidst increasing signs of stabilisation in the first quarter of 2010.

The Group and the funds where it acts as property asset manager will continue to look to sell assets during the current strength in the investment markets, as the risk exists that they may soften later in 2010. The Group will benefit from additional measures taken in 2009 to reduce costs. These are, however, likely to be offset by the impact of property sales on fee levels and reduced property investment income.

We anticipate tenant markets remaining challenging throughout this year and the bad weather at the start of 2010 has been an additional factor. Administrations are running at much lower levels than last year but there is still evidence that retailers are facing headwinds which means that the downward pressure on rental values is likely to continue for the foreseeable future. The skills that we have demonstrated as property asset managers in managing through such challenging conditions will serve us well in mitigating this risk, as our focus shifts from income protection to income recovery.

Hugh Scott-Barrett

Chief Executive

Operating review

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

Tenant markets

In the UK, the impact of the economic downturn hit tenants hard in the first quarter of 2009, which saw a number of high profile administrations and insolvencies. Although conditions for tenants remained challenging over the rest of the year, there was evidence of stabilisation in the second quarter and some improvements in the second half of 2009. Demand for vacant space has nevertheless been weak throughout the year, which has put downward pressure on ERVs. Our main objective has been income protection while seeking long-term solutions to voids caused by administrations.

Temporary lettings, which are less than one year in duration, have proved a useful means of maintaining occupancy and covering void costs while providing flexibility for longer term solutions to be found. Nevertheless, the Group has made a number of significant lettings during the year, including several vacant Woolworths stores in The Mall and one of the first UK Best Buy stores in The Junction. While the focus has been on income security, The Mall has nevertheless continued to make good progress with two developments within the existing Blackburn and Luton schemes.

The German portfolio has defensive characteristics, being predominantly anchored by food retailers with good financial covenants, and its tenants have continued to trade strongly during the year with very few tenant failures.

The Group monitors the performance of its tenant markets through the following key metrics; all figures quoted are like-for-like, to exclude the impact of property sales on year to year comparatives.

Occupancy levels

Over the course of the year, occupancy levels fell in the first two quarters but recovered in the second half of 2009 so that across the three funds at the year end, occupancy was 94.6% compared to 94.2% at the end of 2008. This once again demonstrates the ability of our teams to maintain occupancy levels and find tenants for vacant space in a challenging market.

The Mall saw the largest increase, from 94.0% to 95.0%, while X-Leisure saw a small decrease in the year, from 95.5% to 94.7% as a result of a number of insolvencies in the first quarter. The defensive qualities of the German portfolio are illustrated by its very strong occupancy rates: 98.1% at the end of 2009, having fallen only very slightly from 98.2% at the end of 2008.

Administrations

The level of administrations is one of the most important illustrations of the underlying condition of tenants. In the three UK funds, the challenges facing tenants were clearly demonstrated by the high numbers of insolvencies in the first quarter, when 83 units with passing rent of £6.9 million entered administration. The nine months in the rest of the year saw a much more resilient performance, with administrations in only 70 units with passing rent of £5.9 million. This meant that 5.1% of the total passing rent at the end of 2008 entered administration during 2009, broken down as follows:

	The Mall		The Junction		X-Leisure		Total
	Units	Rent roll	Units	Rent roll	Units	Rent roll	Units	Rent roll
		£m		£m		£m		£m
Q1 2009	73	5.0	5	1.5	5	0.4	83	6.9
Rest of year	56	3.7	5	1.2	9	1.0	70	5.9
Total 2009	129	8.7	10	2.7	14	1.4	153	12.8
	(5.8% of rent roll)		(5.7% of rent roll)		(2.6% of rent roll)		(5.1% of rent roll)

Q1 2010	31	2.0	-	-	3	0.1	-	-

The trading position of the 2009 administrations at the date of this report is as follows:

· The Mall: 22 of the units with passing rent of £1.1 million are still trading and 84 units have been re-let.

· The Junction: one of the units with passing rent of £0.2 million is still trading and three units have been re-let. Two further units were in the properties sold during the year.

· X-Leisure: two of the units with passing rent of £0.3 million are still trading and two units have been re-let.

There were administrations in only three units in the German portfolio over the course of the year, with passing rent of £0.1 million. This was 0.2% of the rent roll at the start of the year. There have been no further administrations since the year end.

Passing rent

		The
	The Mall	Junction	X-Leisure	UK	Germany
	£m	£m	£m	£m	€m
30 December 2008	138.2	39.5	45.2	222.9	44.9
30 June 2009	131.3	39.1	45.7	216.1	45.3
30 December 2009	128.9	39.0	45.3	213.2	45.3

The level of administrations and general state of the economy has affected rental growth, which is a key measure of demand for space and hence the underlying performance of a portfolio. Maintaining occupancy levels in the face of administrations and lease expiries has often required new lettings at lower rent levels than old, and as a result passing rent on the like-for-like basis shown above has fallen 4.4% over the year. As in 2008, the retail market was the main driver, with The Mall seeing a fall of 6.8% and The Junction a fall of 1.1%. The leisure market proved more robust, with passing rent in X-Leisure increasing 0.2% primarily because of a number of successful rent reviews and new lettings that offset the administrations in the year.

Rent collection rates across the three funds have been good, with 96.8% of the December rent roll (excluding administrations) collected within 30 days. The best performance came from The Junction, with over 98% collected.

Monthly rent payments

In Germany, monthly rent payments are standard but in the UK leases generally provide for quarterly payments. This makes additional demands on cash flow so requests to move from quarterly to monthly rent payments can be an indicator of potential tenant distress. The funds consider such requests on a case-by-case basis and at the year end 8.6% of passing rent was paid by concession this way, compared to 5.2% at the end of 2008. The Junction continues to have the highest proportion of monthly payers.

New lettings and rent reviews

There was a considerable amount of letting activity during the year which helped to offset the level of administrations, although the weakness of the market and competition for new tenants meant that lettings were generally below ERV.

Across the three funds, 159 new lettings (excluding temporary lettings) were made at passing rent of £8.2 million, at an average of 10% below ERV at the end of the previous quarter. The number of new lettings was down from 255 in 2008, though the fall reflects property disposals across the funds as well as conditions in the letting market.

· In The Mall new rents were only 5.4% below ERV and in some centres the successful reletting of Woolworths stores not only gave an uplift in income but proved to be a generator of additional footfall which should enhance rental values in future.

· In The Junction, a significant new letting above ERV was made for a large unit in Thurrock that will be occupied by Best Buy. Across the portfolio, however, the general weakness in the market meant that new lettings were on average 11.5% below ERV.

· In X-Leisure there were a number of turnover rents and fixed uplifts from low base figures which meant the average letting was 37.2% below ERV. The level of rent will, however, increase towards ERV in future years as the uplifts take effect.

There were 11 new lettings in the German portfolio at passing rent of £1.2 million.

In addition, 250 rent reviews were settled in the year at passing rent of £32.0 million, which was 3.3% above ERV. This was driven largely by The Mall, which contributed £18.1 million of the total at 5.1% above ERV.

Temporary lettings

There were temporary lettings in 202 units (2008: 120 units) at the end of the year, of which the majority were in The Mall. These lettings are an important part of the active management process, as much because they help maintain the vitality of the trading environment as well as meeting the costs of voids (the share of service charges as well as business rates) and generating additional income. These lettings enhanced occupancy and rental levels in the short term, covering the majority of those units that fell into administration in the last quarter of 2008 and first quarter of 2009.

The new valuers who took over responsibility for The Mall during the year make conservative assumptions about when these units are vacated and how long they might take to re-let, so the benefit of the temporary lettings is effectively disregarded in determining the valuations of the portfolio. Therefore, the extent to which these units may become permanently let provides scope for valuation uplift in the portfolio.

Property investment markets

2009 as a whole saw significant further adverse yield shift. Over the first nine months, UK yields continued to rise driven initially by weak demand for property, partly reflecting the shortage of bank finance but increasingly the result of fears over the security of income arising from the continued weakness of the tenant market. In the final quarter, changing sentiment in the market was reflected by greater demand for property and an increase in the number of transactions, albeit that this was mainly confined to the prime sector and the overall transactional level remained low. This improved sentiment led to inward yield shift for the first time since mid-2007 and a commensurate rise in the value of the Group's investments.

The German property market has historically lagged the UK market and has been much less volatile. The second half of 2009 saw a further small fall in values but there are signs that they have now stabilised.

Overall, like-for-like yields on the Group's portfolios moved outwards over the course of the year, though the recovery in the last quarter of the year for the UK portfolios can be seen in the following tables:

	December	Yield	September	Yield	December
	2008	shift	2009 ¹	shift	2009
		(bps)		(bps)
Initial yields
Mall	7.13%	113	8.26%	(47)	7.79%
Junction	6.06%	104	7.10%	(67)	6.43%
X-Leisure	6.71%	130	8.01%	(10)	7.91%
UK weighted average ²	6.71%	125	7.96%	(43)	7.53%
German joint venture	6.51%	22	6.73%	7	6.80%

Nominal equivalent yields ³
Mall	8.50%	136	9.86%	(72)	9.14%
Junction	7.03%	136	8.39%	(81)	7.58%
X-Leisure	7.75%	139	9.14%	(14)	9.00%
UK weighted average ²	7.88%	154	9.42%	(63)	8.79%

1 June 2009 for Germany as the portfolio is not valued in September

2 based on C&R share in the three funds

3 nominal equivalent yields in Germany are equal to initial yields

These rising yields, magnified by gearing at the fund and German joint venture level, have resulted in significant falls in the net asset value of these investments in 2009.

Fund and German joint venture performance
	2006	2007	2008	2009
Mall
Property level returns	17.6%	(3.3)%	(33.2)%	(12.5)%
Geared returns	26.3%	(13.2)%	(65.4)%	(51.4)%
IPD shopping centre index	12.7%	(4.3)%	(22.0)%	(7.1)%

Junction
Property level returns	15.0%	(16.8)%	(26.1)%	(5.3)%
Geared returns	18.3%	(34.0)%	(57.1)%	(32.2)%
IPD retail parks index	14.7%	(9.6)%	(25.6)%	11.1%

X-Leisure
Property level returns	19.7%	2.1%	(21.9)%	(19.0)%
Geared returns	30.4%	(3.0)%	(48.2)%	(41.7)%

UK weighted average ¹
Property level returns	16.9%	(6.1)%	(28.2)%	(12.2)%
Geared returns	23.9%	(17.3)%	(58.5)%	(45.6)%

German joint venture
Property level returns	15.2%	7.5%	(5.2)%	1.0%
Geared returns	34.2%	16.2%	(32.4)%	(9.8)%

¹ based on Group exposure to the three funds

The main reason that The Mall has underperformed its benchmark is that IPD has a significant weighting of prime centres, which saw less yield shift from the peak than the mainly secondary centres held within the fund and where the recovery to date has been more pronounced.

The Junction has also underperformed its benchmark, as it has a higher percentage of bulky goods parks than the index and the recovery of yields in this sector has been less marked.

X-Leisure saw poorer property level returns, since it did not see the same degree of recovery in values in the last quarter of 2009 as The Mall and The Junction. Nevertheless, the February 2010 X-Leisure fund valuation saw 45 basis points of inward yield shift from December. There are indications that there will also be further inward movement during the first quarter of 2010 for The Mall and The Junction, whose valuations are prepared quarterly.

The positive property level return on the German portfolio arose because the income return has offset the negative capital returns over the year.

Financial review

In the face of challenging conditions in the property market, the Group's priority during the year was stabilising both its financial position and that of its funds. At fund level, this was achieved through capital raisings and renegotiations of banking facilities in both The Junction and X-Leisure. At Group level, this was achieved through the Capital Raising in September 2009 and the renegotiation of Group banking facilities. This coincided with the low point of valuations in the three main UK funds and hence represented a fundamental turning point for the Group.

KPI summary

The key performance indicators used to monitor performance are summarised in the table below and are explained in more detail in the following paragraphs. The figures include the unaudited interim 2009 results to highlight the improved performance in the second half of the year.

	Year end	Year end	Half year	Year end
Key performance indicators	2007	2008	2009	2009
Scale of business
Property under management	£6.1bn	£4.0bn	£3.2bn	£3.1bn

Investment returns
Triple net diluted NAV per share ¹	£4.99	£1.33		£0.37
EPRA NAV per share ¹	£5.01	£1.74		£0.47
Total shareholder return	(73)%	(77)%	(28%)	(22%)

Profitability
Recurring pre-tax profit	£32.7m	£27.6m	£10.3m	£17.5m
Loss before tax	£(167)m	£(516)m	£(131)m	£(113)m

Net debt ²
Group net debt	£588m	£109m	£115m	£63m
Net debt to equity ratio ³	84%	58%	226%	48%
See-through net debt	£1,262m	£783m	£634m	£566m

Dividends
Dividend per share	27p	5p	-	-

1 Comparative figures have been restated to show the impact of the open offer element of the Capital Raising but exclude the impact of the firm placing element

2 Borrowings net of cash and cash equivalents

3 Group net debt divided by shareholders' equity

Key performance indicators - Property under management

In line with the Group's objective of reducing debt both at a central and fund level, there were no property acquisitions but a number of disposals during 2009, as well as reduced capital expenditure on the underlying assets. Together with valuation falls, this meant that property under management fell in the year as follows:

			X-	German
£m	Mall	Junction	Leisure	portfolio	Other	Total
2008	1,692	734	721	595	243	3,985
Disposals	(98)	(84)	(93)	-	(36)	(311)
Capital expenditure and other movements	46	2	1	1	-	50
Revaluation	(323)	(80)	(110)	(21)	(10)	(544)
Exchange difference	-	-	-	(40)	-	(40)
2009	1,317	572	519	535	197	3,140

· The Mall disposed of one property at Bexleyheath in December 2009 for £97.9 million at a deemed net initial yield of 7.55%, including a sum of £3.3 million conditional upon achieving rental uplifts on certain lease renewals. £63 million of the proceeds were used after the year end to redeem bonds and terminate the associated interest rate swaps. Since the year end, the fund has made further disposals at Aberdeen and Preston, as disclosed in note 35 to the financial statements, and continues to consider potential sales in line with the objective of maintaining a core portfolio of larger, dominant secondary centres in advance of the bond refinancing. The capital expenditure in The Mall relates primarily to significant developments in Luton and Blackburn, which have been covered by cash retained in the fund.

· The Junction made three disposals during the year, including the retail parks in Aberdeen and Slough, which were sold in December 2009 for £81.7 million at a net initial yield of 8.6%. The fund also sold a non-core industrial property at Victory Industrial Estate, Portsmouth in April 2009 for £1.6 million at a net initial yield of 9.3%. The proceeds of the sales were used to pay down bank debt.

· X-Leisure sold the O2 Centre, Finchley Road in April 2009 for £92.5 million at a net initial yield of 7.8%. The proceeds of the sale were used to pay down bank debt. Since the year end, it has also sold its Croydon property as disclosed in note 35 to the financial statements.

· There were no disposals from the German portfolio, though since the year end two non-core properties have been sold for £6.0 million as disclosed in note 35 to the financial statements. These sales were made for tactical reasons and are not expected to have any positive or negative impact on the valuation of the rest of the portfolio. The majority of the proceeds have been used to pay down bank debt.

· The Group sold its remaining interest in the Cardiff joint venture to its joint venture partner in May 2009 for £1.2 million at an estimated contracted net initial yield of 5.9%.

Since the year end, the Group has also sold its wholly-owned properties at Beeston Place and 10 Lower Grosvenor Place. The latter is not included in property under management as it is owner occupied.

Key performance indicators - Investment returns

Investment returns are driven primarily by the net asset value of the Group as shown in the balance sheet. To provide a greater understanding of the business, the Group presents its balance sheet in three ways:

· the enterprise balance sheet shows everything the Group manages;

· the "see-through" balance sheet shows the Group's economic exposure to the different property portfolios; and

· the statutory balance sheet follows the accounting and statutory rules

Three balance sheets as at 30 December 2009	Enterprise	See through	Statutory
	£m	£m	£m
Fund properties
Mall	1,391	233	33
Junction	552	74	26
X-Leisure	512	62	18

Joint venture properties
Germany	532	266	32
Other joint ventures *	108	41	(2)

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

Total property	3,189	770	201

Working capital etc	109	(7)	9
Debt	(2,588)	(633)	(80)

Net assets	710	130	130

C&R shareholders	130	130	130
Fund and other joint venture investors	580

Total equity	710	130	130

* the statutory figure reflects the impairment of the Group's loan to the Braehead joint venture

Basic NAV per share is £0.37 on a triple net basis, down from £1.33 (restated) at December 2008. As described further below under the commentary on Investment Returns, the major causes of this movement were:

· the adverse shift in valuation yields which led to losses on revaluation and on disposal of investment properties;

· the one-off impact of the open offers in The Junction and X-Leisure and the dilution following the Group's decision not to participate fully; and

· the impact of the firm placing element of the Capital Raising, which increased the number of shares in issue. Under accounting rules, we are required to restate the 2008 NAV per share, which was previously reported as £2.67, to reflect only the open offer element of the Capital Raising.

The Group contributed £0.6 million to The Junction's capital raise out of a possible £17.4 million and as a result its share in the fund fell from 27.3% to 13.4%, creating a deemed disposal loss of £2.8 million in May 2009. Under the terms of the open offer, adjustments can be made until May 2010 to the price at which new units were issued, to reflect the recoverability of debtors and the expected costs of certain remedial works. A further impairment of £0.4 million has been made to the value of the Group's investment in The Junction at the year end to reflect the expected impact of these adjustments, at which level the Group's share in the fund would be reduced to 13.2%.

The Group contributed £4.0 million to X-Leisure's capital raise out of a possible £9.7 million and as a result its share in the fund fell from 19.4% to 11.9%, creating a deemed disposal loss of £4.4 million in July 2009.

Foreign exchange hedging

The Group uses forward contracts to hedge against changes in exchange rates in relation to its investment in the German joint venture. Following the strengthening of sterling against the euro in January and February 2009, the cash settlement on the termination of the hedge was £8.7 million compared to its year end valuation as a liability of £14.2 million.

A new forward contract for €47 million was entered into at the same time and at year end it was valued as a liability of £1.4 million. Since the year end, the strengthening of sterling against the euro allowed the Group to extend the hedge at nil cost to April 2011. At this level, the Group's investment is 89% (2008: 94%) hedged.

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

Key performance indicators - Profitability

Recurring pre-tax profit

The Group's recurring pre-tax profit is derived from its two segments, being:

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

· Earnings businesses: comprising property management fees less fixed management expenses, including those generated by X-Leisure Limited, and the operating profit from the Group's SNO!zone business

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

	Year to 30	Year to 30	Six months to	Year to 30
	December	December	30 June	December
	2007	2008	2009	2009
	£m	£m	£m	£m

Property investment UK	10.2	6.1	3.4	4.5
Property investment Germany	9.6	11.1	3.1	5.8
Managing property funds	10.8	8.9	2.7	6.2
SNO!zone	2.1	1.5	1.1	1.0

Recurring pre-tax profit	32.7	27.6	10.3	17.5

· Property investment: the Group earns profits from its share of the net rental income less net interest payable in its investments. The cost of managing its wholly-owned investment and trading properties is allocated to the property investment business.

The fall in UK profit reflects the sale of properties from the funds and the dilution of the Group's interest in The Junction and X-Leisure during the year, which caused Property Investment UK Contribution to fall from £11.8 million to £10.4 million. During the year, the three main UK funds did not make distributions but retained cash to cover committed development costs and to maximise their financial flexibility in the light of falling valuations. With the recovery in values in the last quarter of 2009, The Junction and X-Leisure expect shortly to be in a position to resume distributions.

The fall in profit from the German portfolio reflects the sale of half of the business to AREA in October 2008. The prior year comparatives represent 100% of the portfolio for three quarters while the current year figures include only 50%.

· Managing property funds: a subsidiary of the Group, Capital & Regional Property Management Limited ("CRPM") earns fees from managing The Mall and Junction funds and certain joint ventures and wholly-owned properties.

CRPM also owns 50% of X-Leisure Limited, which was established as part of the X-Leisure fund's open offer as a joint venture with Hermes, integrating the asset, property and non-FSA regulated fund management activities carried out for the X-Leisure fund by the joint venture partners. Hermes continue to act as operator of the fund, responsible for FSA regulated fund management activities. X-Leisure Limited was appointed property and asset manager for the X-Leisure fund with effect from 18 August 2009 and the relevant CRPM staff transferred to the new entity on this date.

The property management business generated profits for the Group as follows:

	Year to 30	Year to 30	Six months to	Year to 30
	December	December	30 June	December
	2007	2008	2009	2009
	£m	£m	£m	£m

Asset management fees	18.6	14.9	5.5	8.9
Service charge fees	4.4	4.9	2.2	4.1
Other fees	3.0	3.0	1.2	4.1
Fixed management expenses *	(15.2)	(13.9)	(6.2)	(10.9)
CRPM recurring profit	10.8	8.9	2.7	6.2

Performance fees	(52.8)	(9.9)	-	-
Variable overheads	7.9	0.1	(0.1)	(0.3)
Impairment of goodwill	-	(8.0)	(1.0)	(1.6)
Other non-recurring items	-	(5.6)	(0.8)	(0.5)
(Loss)/profit before tax	(34.1)	(14.5)	0.8	3.8

* excluding overhead allocated to property investment business

Asset management fees were predominantly calculated on the value of property under management and hence declined over the year as they had in 2008 as a result of falling valuations and disposals in all three funds. The creation of X-Leisure Limited also led to a fall in income as asset and property management fees from the X-Leisure fund were split with the joint venture partner from this date, though this was partially offset by the benefit of the joint venture's share of fund management income.

These falls were partially offset by a cost reduction programme, saving over £3.5 million in 2009, and these initiatives together with further efficiencies such as the move to new offices will result in further cost reductions in 2010. The non-recurring items include the costs of redundancies under this programme. In addition, the costs of the X-Leisure division were shared with the joint venture partner in X-Leisure Limited from August 2009 onwards.

CRPM and X-Leisure Limited have management contracts with the three funds that determine how fees are calculated and over what period they can be earned. Certain of these arrangements were renegotiated in the year to secure them for the long term, and the main features are now as follows:

· The Mall fund's expiry date is 30 June 2012 if not extended to 30 June 2017 following a continuation vote of unit holders in June 2011. CRPM's management contract has the same termination date as the fund (including any extension) and cannot be terminated earlier than 31 December 2012 for performance returns falling short of a specified benchmark. To date, asset management fees have been calculated as a percentage of property under management but discussions are under way to change the basis of calculation, potentially to a fixed fee.

· The Junction fund has an effective termination date of 31 July 2013. CRPM's management contract has the same termination date as the fund and cannot be terminated early for performance returns falling short of a specified benchmark. Following the fund's open offer, asset management fees were fixed at £1.0 million per annum for the first two years of the term of the agreement and from May 2011, the greater of £0.85 million and 2.5% of net operating income from that date. The Group also receives service charge income which in 2009 was £0.3 million (2008: £0.3 million).

· The X-Leisure fund has a termination date of 31 December 2014 which may potentially be extended up to 31 December 2021 by a combination of fund manager recommendation and a continuation vote. The management contract has the same termination date as the fund (including any extension) and cannot be terminated earlier than 31 December 2013 for performance returns falling short of a specified benchmark. Asset management fees are now fixed at £3.4 million per annum, reducing by £100,000 each year for five years from 1 July 2010 until it reaches £2.9 million. This reduction will be offset (but cannot be reduced further) by an annual payment to X-Leisure Limited equal to 4% of the cumulative increase/decrease in the net income of the portfolio.

CRPM has historically earned significant performance fees from the UK funds, which were repayable in the event of underperformance in the following two years. All clawback of historic performance fees was fully recognised in 2008 and no performance fees have been recognised in 2009. Under the contractual agreements discussed above, future performance fees may be earned as follows:

· For The Mall, fees have historically been calculated annually on any outperformance over a three-year period compared to a defined IPD benchmark and an absolute 12% hurdle return. Fees can be positive or negative, but negative fees are capped at the amount received over the previous two years. Given the significant falls in property values it is unlikely that any fees would arise in the next few years. As part of the discussions for changing the basis of management fees it is likely that the basis for performance fees will change to provide greater incentive to create value and thereby align the interests of investors and the property and asset manager.

· For The Junction, fees are now calculated based on performance from completion of the fund's open offer in May 2009 to the disposal of the entire portfolio or on the expiry of the fund. CRPM's fee will be earned on any realised geared returns in excess of an internal rate of return of 15% per annum.

· For X-Leisure, fees are calculated on a cumulative basis over the period from completion of the fund's open offer in August 2009 to the earlier of disposal of the entire portfolio on the expiry of the fund or its conversion into a listed structure. X-Leisure Limited's fee will be calculated on any geared returns in excess of an internal rate of return of 15% per annum, less any interim performance fee. If the portfolio falls to nine properties or fewer, an interim performance fee will be calculated for the sold properties on the same basis.

· SNO!zone is the UK's premier real snow indoor ski slope operating business, based at three sites in properties owned by the X-Leisure fund at Milton Keynes and Castleford, and in a property owned by a 50:50 joint venture with Capital Shopping Centres at Braehead. SNO!zone's contribution to the Group's profits was as follows:

	Year to 30	Year to 30	Six months to	Year to 30
	December	December	30 June	December
	2007	2008	2009	2009
	£m	£m	£m	£m

Income	14.3	14.9	7.3	13.7
Cost of sales and operating expenses	(11.5)	(13.1)	(6.1)	(12.4)

Cash profit	2.8	1.8	1.2	1.3
Tenant incentives	(0.7)	(0.3)	(0.1)	(0.3)

Accounting profit	2.1	1.5	1.1	1.0

Turnover has fallen across the three sites in 2009, reflecting the state of the economy and increased competition from new operators and venues, so despite cost savings the level of profit has fallen from 2008.

Loss before tax

The pre-tax loss for the year was £113.4 million (2008: loss of £516.3 million). The losses arose primarily in the first half of the year with a small profit for the second half as follows:

	Year to 30 December 2007	Year to 30 December 2008	Six months to 30 June 2009 (unaudited)	Year to 30 December 2009


	£m	£m	£m	£m
Recurring pre-tax profit	32.7	27.6	10.3	17.5
Revaluation of investment and trading properties	(164.4)	(397.4)	(133.2)	(110.5)
Performance fees	(52.8)	(9.9)	-	-
Gain/(loss) on disposal	1.6	(42.3)	(2.8)	(9.4)
Deemed disposal	-	(28.8)	(2.9)	(7.2)
Revaluation of financial instruments	(7.0)	(47.8)	0.8	0.3
Other non-recurring items	22.9	(17.7)	(3.0)	(4.1)
Loss before tax	(167.0)	(516.3)	(130.8)	(113.4)
Tax	0.2	14.1	(3.9)	(6.3)
Loss for the year	(166.8)	(502.2)	(134.7)	(119.7)

The main factors behind this loss in the year were:

· further significant revaluation losses and losses on disposals across the Group's portfolio, reflecting valuation movements in the overall property investment market in both the UK and Germany. As described in the Operating Review, the key driver behind these movements was outward yield shift in the first three quarters of the year, which was partly reversed in the last quarter.

· deemed disposals that represented the dilution caused by the Group's decision not to participate fully in the open offers in The Junction and X-Leisure funds.

The other non-recurring items include impairments and one-off expenses. These items are described in more detail in note 2 to the financial statements.

Tax

The Group tries to ensure that its corporate structure remains as tax efficient as possible under current legislation. During 2009 there was a current tax charge of £3.7 million and a deferred tax charge of £2.6 million, reflecting additional liabilities in respect of prior years and the reversal of certain deferred tax assets carried against the liability for interest rate swaps.

In previous years, the Group has carried a significant provision for tax that crystallised during 2009 following the outcome of litigation between HMRC and another taxpayer as described in note 10 to the financial statements. Since the year end, the amount payable has been agreed with HMRC alongside a deferred payment plan.

The Group has significant tax losses which may be available for offset against future profits but the majority have not been recognised because of the unpredictability of future profit streams and other restrictions on the potential utilisation of the losses.

Key performance indicators - Net debt

The overriding priority for the Group during the year was to stabilise the financial position of both the Group itself and the funds and joint ventures in which it has investments. This was achieved primarily through the various capital raisings, both at the Group level which paid off the balance outstanding on the central facility and through open offers in The Junction and X-Leisure funds, which paid down debt.

At the same time as these capital raisings, the Group and fund level debt facilities were renegotiated with the proceeds of property disposals in the funds (and subsequent to the year end, from the Group's wholly-owned properties) and the cessation of distributions also used to pay down debt. A summary of the movements in Group and off balance sheet debt in the year is as follows:

		Off balance	See through
	Group debt	sheet debt	debt
	£m	£m	£m
As at 30 December 2008	112.6	723.6	836.2
Property disposals	-	(43.2)	(43.2)
Open offers in Junction and X-Leisure	4.6	(112.4)	(107.8)
Other net drawdowns	15.5	1.1	16.6
Capital Raising	(52.3)	-	(52.3)
Other movements *	-	(16.7)	(16.7)
As at 30 December 2009	80.4	552.4	632.8

* including foreign exchange movements

The Group and the three UK funds were compliant with their principal banking covenants at 30 December 2009. The Braehead joint venture debt facility was non-compliant with its LTV covenant based on its year end valuation and there was a minor issue with the Castleford facility in the X-Leisure fund, both of which are being resolved.

In the German joint venture, one of the facilities only satisfies its LTV covenant because it is measured (with the agreement of the lender) against its December 2008 valuation. The shortfall that would arise if the covenant was tested against the December 2009 can be met with the cash flows of the existing business without recourse to an equity contribution from the Group. The remaining German facilities were compliant with their banking covenants at the year end.

Further reductions in debt levels have taken place in 2010 to date, with the sale of the Group's wholly-owned 10 Lower Grosvenor Place and Beeston Place properties, while in the funds The Mall has used the proceeds of the Bexleyheath sale in December 2009 to repay £59 million of its bonds and is expected to pay down further debt from the £134 million proceeds of the Aberdeen and Preston sales. X-Leisure will also be able to pay down debt from the £33 million proceeds of the Croydon sale.

Group debt

During the year, Group debt fell from £113 million to £80 million, largely as a result of the repayment of the central facility following the Capital Raising. Off balance sheet debt also fell from £724 million to £552 million, the result of both the repayment of debt with the proceeds of property sales and the open offers in The Junction and X-Leisure, but also as part of the dilution of the Group's holding in these funds.

The breakdown of Group debt and net debt (which reflects the benefit of cash held in the Group's central and property-specific bank accounts) at the end of the year was as follows:

	Debt at	Average			Duration
	30 December 2009	interest rate *	Fixed	Duration of fixing	to loan expiry
	£m	%	%	(years)	(years)
Core revolving credit facility	-	4.11	-	-	3.7
Great Northern debt	65.2	6.21	94	3.8	3.8
Hemel Hempstead debt	7.8	3.34	-	-	2.8
10 LGP debt	7.4	3.61	-	-	1.3
Group debt	80.4	5.69	76	3.8	3.4
Cash and cash equivalents	(17.5)
Group net debt	62.9

* in the case of variable rate loans, based on LIBOR as at 30 December 2009 plus the appropriate margin

In August 2009, all of the Group debt facilities were refinanced alongside the Capital Raising. A waiver of the covenants on the core revolving credit facility had been agreed in June 2009 to allow time for these negotiations to complete.

· the core revolving credit facilitywas reduced from £125.5 million to £58.0 million and the term of the loan was extended from February 2011 to September 2013. The interest margin was also increased from 1.4% to 3.5%, reducing to 3.0% over time in line with the amount of headroom on the asset cover covenant, which now includes part of the Group's investment in the German joint venture as well as its units in The Mall, The Junction and X-Leisure funds.

The proceeds of the Capital Raising were used to pay down the entire balance of £48.6 million drawn on the facility. Loan arrangement costs of £2.0 million were paid in connection with this transaction with a further £0.2 million deferred until March 2010. Under accounting rules these costs were written off through the income statement as a non-recurring item in 2009.

The repayment of the principal meant the interest rate swaps connected with this facility were no longer required so they were cancelled during the year at a cost of £2.9 million. At year end the central facility remained undrawn and the Group held a further £13.4 million of cash in its central bank accounts.

Under the terms of the renegotiation, the limits on covenant tests remained unchanged. The results of the tests at the year end were as follows:

	Covenant	30 December 2009	30 December 2008
Asset cover	Greater than 200%	n/a	738%
Gearing	Less than 200%	12%	38%
Interest cover	Greater than 150%	896%	462%

· the Great Northern facility was reduced from £71.3 million to £65.5 million and the term of the loan was extended from October 2010 to October 2013. The interest margin was also increased from 1.0% to 2.0% and the LTV covenant was raised from 75% to 100% until December 2012, after which it will reduce to 90% until June 2013 and 80% thereafter.

Covenant

30 December 2009

30 December 2008

LTV

100%

91%

ICR

Greater than 135%

153%

148%

A £1.0 million repayment of principal and loan arrangement costs of £1.5 million were paid in connection with this transaction, and any excess cash in the borrowing company is now used to amortise the loan each quarter, with a 1% exit fee also due on final repayment. The costs have been capitalised and will amortise over the life of the loan. The swaps associated with the loan were also amended in line with the revised loan balance and amortisation schedule, but no fees were payable for these elements of the transaction.

· the Hemel Hempstead facility term was extended from September 2009 to September 2012. The interest margin was increased from 0.8% to 3.0% until November 2009, when it reduced to 2.75%, and will fall further to 2.5% in August 2010. The previous 75% covenant was replaced by an LTV holiday until February 2011, with a reduction in the LTV to 70% from February 2012. The ICR covenant was increased from 100% to 150%.

Covenant

30 December 2009

30 December 2008

LTV

n/a

79%

ICR

Greater than 150%

324%

138%

A £0.9 million repayment of principal and loan arrangement costs of £0.1 million were paid in connection with this transaction, and any excess cash in the borrowing company is now used to amortise the loan each quarter. The costs have been capitalised and will amortise over the life of the loan.

A second repayment of principal of £1.0 million took place in November 2009 and further payments of £0.5 million are required in August 2010, February 2011 and August 2011. The swap connected with this loan expired during the year and has not yet been replaced, so the loan bears interest at variable rates.

· the 10 Lower Grosvenor Place facility was reduced from £10 million to £7.4 million and the term of the loan was extended from October 2009 to March 2011. The interest margin was increased from 1.0% to 3.0%. The LTV covenant remained at 80% with no ICR. At the end of the year the LTV was 74% (2008: 79%).

A £0.6 million repayment of principal and loan arrangement costs of £0.1 million were paid in connection with this transaction. The loan remained at variable rates as in prior years. As described in note 35 to the financial statements, 10 Lower Grosvenor Place was sold and the loan repaid in full on 2 March 2010. The arrangement costs, which had been capitalised in 2009, will also be written off as a result of this disposal.

As shown in note 23a to the financial statements, the effect of these changes in net debt resulted in a fall in the net debt to equity ratio from 58% to 48% over the course of 2009.

Off balance sheet debt

The breakdown of off balance sheet debt at the end of the year was as follows:

	Debt at	Average
	30 December	interest		Duration	Duration to
	2009	rate	Fixed	of fixing	loan expiry
	£m	%	%	(years)	(years)
Mall (16.7% share)	208.4	5.01	100%	2.3	2.3
Junction (13.4% share)	50.3	7.56	100%	4.3	4.3
X-Leisure (11.9% share)	42.3	7.07	100%	4.2	4.2
German joint venture (48.8% share)	212.6	4.68	100%	1.7	2.9
Other JVs and associates (30%-50% share)*	38.8	5.70	91%	0.3	3.3
	552.4	5.32	99%	2.1	2.9

* excluding FIX UK where the Group has written down its investment to £nil.

· The Mall is funded entirely by bonds maturing in April 2012. The fund has been actively managing the challenge posed by this refinancing, reducing debt through opportunistic asset sales (totalling £232 million in the last quarter of 2009 and first quarter of 2010), retaining cash by suspending distributions and stopping non-essential and uncommitted capital expenditure. Discussions are under way with bondholders regarding the options for refinancing, with the objective of reaching agreement well in advance of the continuation vote in 2011.

At 30 December 2009 £1,246 million (2008: £1,246 million) was outstanding under the bonds but since the year end a further £59 million has been repaid with the proceeds of the Bexleyheath sale in December 2009, in line with the prescribed formula in the bond agreement. The balance will be further reduced with the proceeds of the Aberdeen and Preston sales.

In terms of covenants, the only LTV restriction is in the partnership deed which operates on an "incurrence basis". No remedy is required for a breach of the LTV limit although no additional borrowing can take place until the LTV falls back below 60%.

Covenant

30 December 2009

30 December 2008

LTV

n/a

78%

66%

ICR

Greater than 130%

167%

195%

· The Junctionused the proceeds of its property sales and £60 million from its open offer to pay down debt on its bank facility.

As part of a refinancing agreement connected to the open offer, the size of the facility was reduced from £625 million to £455 million and the life extended from April 2011 to April 2014. The LTV covenant was increased from 70% to 90% until September 2010, then reducing in tiers to 65% at September 2012 with the level of margin linked to the level of the LTV covenant. The interest cover covenant on the facility was increased under the refinancing from 127.5% to 130% until June 2012, when it will increase further to 135%.

Covenant

30 December 2009

30 December 2008

LTV

90%

65%

69%

ICR

Greater than 130%

143%

161%

The reduction of debt from property sales and the recovery in property valuations resulted in the year end LTV falling to a level at which the fund is expecting to restart distributions. This also removes the cash sweep and reduces the level of margin payable by 0.75% to 2.25% with immediate effect from the start of 2010.

· X-Leisure repaid debt on its central syndicated facility with £87 million of the proceeds from the sale of the O2 Centre and £37 million of the proceeds from its open offer.

As part of a refinancing agreement connected to the fund's open offer, the size of the central syndicated facility was reduced from £415 million to £300 million and the term extended from March 2012 to March 2014. The LTV covenant was increased from 70% to 90% until December 2010, then reducing in tiers to 65% at July 2013. A cash sweep also operates while the LTV is above 65%. The interest cover covenant on the facility remains at 130% until March 2012, when it will increase further in tiers to 150% at April 2013.

Covenant

30 December 2009

30 December 2008

LTV

90%

68%

70%

ICR

Greater than 130%

168%

177%

The central facility was subsequently extended to finance the fund's Brighton Marina asset and the separate facilities on the Milton Keynes and Castleford properties were also renegotiated during the year with increased LTV covenants and cash sweeps.

The Castleford facility was in breach of its ICR covenant at year end but this could be remedied with a £40,000 deposit of cash held elsewhere in the X-Leisure fund with the bank.

· The German portfolio is financed by Euro denominated facilities with six banks totalling €482.1 million (2008: €484.2 million). At the prevailing year end exchange rates this was equivalent to £435.8 million (2008: £468.1 million).

The Group's €5 million working capital facility to the German joint venture was undrawn at year end (2008: €nil).

Apart from the LTV issue noted above, all LTV and ICR covenants on the German debt were met at the year end. The LTV covenant on one other facility is close to its limit but it too could be remedied if it went into breach using cash that is either currently held or can be generated in future by the relevant joint venture company.

Credit committee approval has been granted for the refinancing of the two portfolios that mature in 2010. The Bank of Scotland €40 million (2008: €46.5 million) facility has been extended from June 2010 to December 2013 and the two Eurohypo facilities totalling €65 million (2008: €65 million) have been extended from June 2010 to December 2013.

· Other JVs and associates include the investments in Braehead, the MEN Arena and FIX UK, whose loans are non-recourse to the Group.

In the case of Braehead, the bank has agreed to an extended cure period for the LTV breach to 31 March 2010. Discussions with the bank are well progressed and an agreement is likely requiring an injection of equity from the Group and its joint venture partner into the joint venture as part of the renegotiation of the facility.

The bank has not called for a valuation of the MEN Arena given the current sale negotiations. If they were to call for a valuation and the loan were to breach, the partnership holds sufficient cash to repair the breach.

FIX UK was at risk of breaching its LTV covenant but has now agreed a refinancing package with its banks, including an 18 month LTV waiver. The Group agreed to contribute £1.1 million as its share of new equity in connection with this refinancing and this was injected after the year end as disclosed in note 35 to the financial statements.

Interest rate hedging

The majority of loans, both at Group level and in the funds and joint ventures, are covered by interest rate swaps. The effect of these swaps is to fix the amount of interest payable on the loans and low base rates meant the swaps continued to be valued as liabilities at the end of 2009. Over the course of the year, rising expectations of future sterling interest rates have reduced this loss, creating a gain in the income statement, but falling euro interest rates have partially offset this with a loss on the swaps in the German joint venture.

At the year end, the see-through valuation of the Group's swaps is a liability of £28.7 million (2008: £39.6 million). The recognition of this liability is required by accounting standards but it should be noted that it will not be crystallised unless the underlying swaps are required to be closed out. During the year, the repayment of debt in The Mall, The Junction and X-Leisure required the termination of swaps at a total cost to the funds of £11.8 million.

Key performance indicators - Dividends

During the year, the Company obtained Court approval to convert its share premium account into distributable reserves. As a consequence, £141.0 million of the reduced capital was used to offset the deficit on the profit and loss account but the balance of £79.5 million is currently still held in a non-distributable special reserve pending consent from all of the Company's creditors at the time of the reduction. We expect that it will be possible to convert the remaining balance into distributable reserves at some time in 2010. In the meantime, the Capital Raising was structured such that the premium on the issue of new shares could be held in a merger reserve and treated as distributable. As a result, the Company will have distributable reserves once its 2009 financial statements are filed.

The Board is committed to resuming dividend payments when it considers it prudent to do so, but future payments will normally be linked for the foreseeable future to the Group's cash generating ability and will be restricted to not more than 50% of operating cash flow less interest and tax. Dividends in excess of this amount would require the approval of the Group's principal bank to comply with the terms of its central facility. As mentioned in the Chairman's statement it has been decided that no dividend should be paid for 2009.

Charles Staveley

Group Finance Director

Principal risks and uncertainties

There are a number of principal risks and uncertainties which could have a material impact on the Group's future performance and could cause actual results to differ materially from expected and historical results. References to "the Group" include the funds and joint ventures in which Capital & Regional has an interest.

The Group carries out a regular review of the major risks it faces and monitors the controls that have been put in place to mitigate them. Property risks are monitored at various levels within divisional management.

Risk	Impact	Mitigation
Property Risks
Property investment market risks
· Weak economic conditions and poor sentiment in commercial real estate markets leading to low investor demand and market pricing correction	· Small changes in property market yields have a significant effect on the value of the properties owned by the Group · Impact of leverage could magnify the effect on the Group's net asset value	· Geographical and sector diversification of investments · Monitoring of indicators of market direction and pursuit of opportunistic asset sales in those schemes and locations most likely to suffer adverse impact · Review of debt levels and consideration of strategies to reduce if relevant
Tenant risks
· Tenant insolvency or distress · Prolonged downturn in tenant demand	· Tenant failures and reduced tenant demand could adversely affect rental income revenues, lease incentive costs, void costs, available cash and value of properties owned by the Group	· Large, diversified tenant base · Review of tenant covenants before new leases signed · Long term leases and active credit control process · Good relationships with and active management of tenants · Void management though temporary lettings and mitigation strategies
Valuation
· In the absence of relevant transactional evidence, valuations can be inherently subjective leading to a degree of uncertainty	· Stated property valuations may not reflect the price received on sale	· Use of experienced, external valuers · Rotation of valuers · Valuations reviewed by internal valuation experts
Property management income
· Fee income based on value of property under management · Contracts allow for termination under certain circumstances, which are largely outside management's control	· Changes in property values, sales of properties or other events not wholly under management's control could result in a reduction in or the loss of property management income	· Monitoring of compliance with terms of contracts · Close dialogue with other investors and stakeholders · Diversification of source of management income · Renegotiation of contracts to fix income or base it on measures other than value · Reduction of cost base as fee income falls to mitigate loss
Nature of investments
· The market for the Group's investments can be relatively illiquid · Restrictions on ability to exercise full control over underlying investments in joint ventures or fund structures	· Inability to sell investments or fully control exit/asset sale strategies could result in investments in associates and joint ventures not being realisable at reported values	· Close dialogue with other investors and stakeholders to align strategies and increase influence over the direction of investments · Exercise of significant influence over associates and joint ventures through representation on management boards
Funding and Treasury Risks
Liquidity and funding
· Inability to fund the business or to refinance existing debt on economic terms when needed	· Inability to meet financial obligations (interest, loan repayments, expenses, dividends) when due · Limitation on financial and operational flexibility · Cost of financing could be prohibitive	· Capital raising, debt refinancing and asset sales at both Group and fund levels have improved liquidity position, reduced the potential impact of prolonged falls in property values and positioned the Group to respond quickly to the turning point in the cycle · Ensuring that there are significant undrawn facilities · Option of further asset sales if necessary · Efficient treasury management and regular proactive reporting of current and projected position to the Board to ensure debt maturities are dealt with in good time
Covenant compliance
· Breach of any of loan covenants causing default on debt and possible accelerated maturity	· Unremedied breaches can trigger demand for immediate repayment of loan	· Regular monitoring and projections of liquidity, gearing and covenant compliance · Review of future cash flows and predicted valuations to ensure sufficient headroom
Foreign exchange exposure
· Fluctuations in the exchange rate between sterling and the euro in respect of the Group's German joint venture	· Adverse impact on sterling valuation of investments and income flows, and losses as a result of the Group having not, or not effectively, hedged its risk	· Exposure minimised by funding the German investment through euro denominated borrowings and hedging a large proportion of the remaining investment through derivatives · Regular monitoring of the effectiveness of hedging and performance of derivative contracts
Interest rate exposure
· Exposure to rising or falling interest rates	· If interest rates rise and are unhedged, the cost of debt facilities can rise and ICR covenants could be broken · Hedging transactions used by the Group to minimise interest rate risk may limit gains, result in losses or have other adverse consequences	· Regular monitoring of the performance of derivative contracts and corrective action taken where necessary · Use of alternative hedges such as caps
Other Risks
Tax and regulation
· Exposure to changes in tax legislation or the interpretation of tax legislation and property related regulations · Potential exposure to tax liabilities in respect of previous transactions undertaken where the tax authorities disagree with the tax treatment adopted	· Tax related liabilities and other losses could arise	· Expert advice taken on tax positions and other regulations · Maintenance of a regular dialogue with the tax authorities
Loss of key management
· Dependence of the Group's business on the skills of a small number of key individuals	· Loss of key individuals or an inability to attract new employees with the appropriate expertise could reduce the effectiveness with which the Group conducts its business	· Key management are paid market salaries and offered competitive incentive packages to ensure their retention · Succession planning for key positions is undertaken · Performance evaluation, training and development programmes are in place to maintain and enhance the quality of staff

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

Statement of Directors' Responsibilities

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have elected to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.

In preparing the parent company financial statements, the directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgments and accounting estimates that are reasonable and prudent;

· state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

In preparing the Group financial statements, International Accounting Standard 1 requires that directors:

· properly select and apply accounting policies;

· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

· make an assessment of the Group's ability to continue as a going concern.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Group's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions

Directors' responsibility statement

We confirm that to the best of our knowledge:

· the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

· the Operating Review and Financial Review, which are incorporated by reference 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 that they face.

On behalf of the Board

H Scott-Barrett

Chief Executive

C Staveley

Group Finance Director

17 March 2010

Consolidated income statement

For the year to 30 December 2009

		2009	2008
	Note	£m	£m
Rents, management fees and other revenue	4a	37.8	75.3
Performance fees	4a,4b	-	(9.9)
Revenue	4a	37.8	65.4
Cost of sales	5	(16.0)	(41.7)
Gross profit		21.8	23.7

Administrative costs		(15.5)	(23.1)
Share of loss in joint ventures and associates	18a	(106.8)	(432.9)
Loss on revaluation of investment properties	13a	(2.8)	(31.7)
Loss on sale of properties and investments	13c	(0.2)	(6.5)
Impairment of goodwill	14	(1.6)	(8.0)

Loss on ordinary activities before financing		(105.1)	(478.5)

Finance income	6	2.7	2.4
Finance costs	7	(11.0)	(40.2)

Loss before tax	8	(113.4)	(516.3)

Current tax	10a	(3.7)	1.1
Deferred tax	10a	(2.6)	13.0
Tax (charge)/credit		(6.3)	14.1

Loss for the year		(119.7)	(502.2)


Basic loss per share	12a	(59)p	(355)p
Diluted loss per share	12a	(59)p	(355)p

All results derive from continuing activities. The loss for the current year and the preceding year is fully attributable to equity shareholders.

Comparative loss per share figures have been restated to show the impact of the open offer element of the Capital Raising in September 2009 but exclude the impact of the firm placing element.

Consolidated balance sheet

As at 30 December 2009

		2009	2008
	Note	£m	£m
Non-current assets
Investment properties	13a	10.2	15.3
Long leasehold owner occupied property	13a	-	10.8
Goodwill	14	2.6	4.2
Plant and equipment	15a	1.0	1.3
Available for sale investments	15b	0.3	0.2
Receivables	16	25.0	30.2
Investment in associates	18b	76.4	182.3
Investment in joint ventures	18c	30.3	34.4
Deferred tax asset	10c	-	1.4
Total non-current assets		145.8	280.1

Current assets
Trading properties	13a	70.7	72.8
Properties held for sale	13a	13.5	-
Receivables	17	6.9	14.4
Current tax recoverable		0.7	1.6
Cash and cash equivalents	19	17.5	4.1
Total current assets		109.3	92.9

Total assets		255.1	373.0

Current liabilities
Bank loans	22a	(0.2)	(18.7)
Trade and other payables	20	(24.0)	(55.7)
Liabilities relating to properties held for sale		(1.0)	-
Current tax liabilities		(8.1)	(15.9)
		(33.3)	(90.3)

Non-current liabilities
Bank loans	22a	(78.6)	(93.8)
Other payables	21	(2.2)	(2.8)
Deferred tax liabilities	10c	(1.2)	-
Non-current tax liabilities		(10.0)	-
Total non-current liabilities		(92.0)	(96.6)

Total liabilities		(125.3)	(186.9)

Net assets		129.8	186.1

Equity
Share capital	24	9.9	7.1
Share premium account	26	-	220.5
Other reserves	26	153.6	13.8
Capital redemption reserve	26	4.4	4.4
Own shares held	26	(9.7)	(9.7)
Retained earnings	26	(28.4)	(50.0)
Equity shareholders' funds	23a	129.8	186.1

Basic net assets per share	29	£0.37	£1.30
Triple net, fully diluted net assets per share	29	£0.37	£1.33
EPRA diluted net assets per share	29	£0.47	£1.74

Comparative net asset per share figures have been restated to show the impact of the open offer element of the Capital Raising in September 2009 but exclude the impact of the firm placing element.

These financial statements were approved by the Board of directors, authorised for issue and signed on their behalf on 17 March 2010 by:

Charles Staveley

Group Finance Director

Consolidated statement of recognised income and expense

For the year to 30 December 2009

		2009	2008
	Note	£m	£m
Revaluation loss on owner occupied property	26	-	(2.4)
Foreign exchange translation differences		(3.9)	5.9
Net investment hedge		3.9	(4.0)
		-	(0.5)

Loss for the year		(119.7)	(502.2)

Total recognised income and expense		(119.7)	(502.7)

Attributable to:
Equity shareholders	30	(119.7)	(502.7)

Reconciliation of movement in equity shareholders' funds

For the year to 30 December 2009

		2009	2008
	Note	£m	£m
Opening equity shareholders' funds	30	186.1	703.0
Issue of shares net of costs		63.1	0.8
Purchase of own shares	26	-	(0.7)
Credit in respect of charge for share-based payments	26	0.3	1.2
Amortisation of IFRS 1 reserve	27	-	(0.1)
		249.5	704.2

Total recognised income and expense		(119.7)	(502.7)
		129.8	201.5

Dividends paid	11	-	(15.4)
Closing equity shareholders' funds		129.8	186.1

Consolidated cash flow statement

For the year to 30 December 2009

		2009	2008
	Note	£m	£m
Net cash from operations	28	5.2	(23.5)

Distributions received from joint ventures and associates		2.8	20.4
Interest paid		(9.4)	(25.6)
Interest received		-	1.5
Income taxes paid		(0.7)	(0.8)

Cash flows from operating activities		(2.1)	(28.0)

Investing activities
Capital expenditure on investment properties		-	(1.5)
Acquisitions and disposals of other fixed assets		(0.1)	(0.3)
Disposals of subsidiaries		1.2	56.0
Investment in associates	18b	(4.6)	-
Investment in joint ventures	18c	(2.1)	(6.7)
Loans to joint ventures		(0.9)	(5.4)
Loans repaid by joint ventures		6.3	9.5

Cash flows from investing activities		(0.2)	51.6

Financing activities
Net proceeds from the issue of ordinary share capital		63.1	0.8
Purchase of own shares		-	(0.7)
Bank loans drawn down		70.4	162.3
Bank loans repaid		(102.5)	(199.9)
Loan arrangement costs		(3.7)	(0.3)
Settlement of foreign exchange forward		(8.7)	(2.9)
Termination of interest rate swaps		(2.9)	-
Dividends paid to minority interests		-	(1.3)
Equity dividends paid	11	-	(15.4)

Cash flows from financing activities		15.7	(57.4)

Net increase in cash and cash equivalents		13.4	(33.8)

Cash and cash equivalents at the beginning of the year		4.1	37.1
Effect of foreign exchange rate changes		-	0.8

Cash and cash equivalents at the end of the year		17.5	4.1

Notes to the financial statements

For the year to 30 December 2009

1 Significant Accounting Policies

General information

Capital & Regional plc is a company domiciled and incorporated in the United Kingdom under the Companies Act 2006. The nature of the Group's operations and its principal activities are set out in note 2 and in the operating and financial reviews.

Adoption of new and revised standards

Five Interpretations issued by the International Financial Reporting Interpretations Committee were adopted by the Group in the current year:

· IFRIC 12 Service Concession Agreements

· IFRIC 13 Customer Loyalty Programmes

· IFRIC 14 IAS 19: The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

· IFRIC 16 Hedges of a Net Investment in a Foreign Operation

· IFRIC 18 Transfers of Assets from Customers

Three amendments to Standards issued by the International Accounting Standards Board were adopted by the Group in the current year:

· Amendments to IFRIC 9 and IAS 39 (March 2009) Embedded Derivatives

· Amendments to IAS 39 and IFRS 7 (October 2008) Reclassification of Financial Assets

· Amendments to IAS 39 and IFRS 7 (November 2008) Reclassification of Financial Assets - Effective Date and Transition

The adoption of these Interpretations and amendments has not led to any material changes in the Group's accounting policies.

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

Effective in the forthcoming year:

· IFRS 3 (revised January 2008) Business Combinations

· IFRS 8 Operating Segments

· IFRIC 15 Agreements for the Construction of Real Estate

· IFRIC 17 Distributions of Non-cash Assets to Owners

· Amendments to IFRS 1 and IAS 27 (May 2008) Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate

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

· Amendments to IFRS 7 (March 2009) Improving Disclosures about Financial Instruments

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

· Amendments to IAS 23 (March 2007) Borrowing Costs

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

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

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

· Improvements to IFRSs 2008 (May 2008)

· Improvements to IFRSs 2009 (April 2009)

Effective in future years:

· IFRS 9 Financial Instruments

· IAS 24 (revised November 2009) Related Party Disclosures

· IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

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

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

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

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

The directors are assessing the impact that the adoption of these Standards and Interpretations will have on the financial statements of the Group in future periods. The changes in IAS 1 will impact the layout of the primary statements in forthcoming years.

Basis of preparation

The financial statements are prepared on the historical cost basis except that investment and development properties, owner-occupied properties and derivative financial instruments are stated at fair value. The accounting policies have been applied consistently to the results, other gains and losses, assets, liabilities, income and expenses.

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

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS), this announcement does not itself contain sufficient information to comply with IFRS.

Going concern

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

Critical accounting judgements and key sources of estimation uncertainty

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

The critical judgements and estimations that the directors have made in the process of applying the Group's accounting policies that have the most significant effect on the amounts recognised in the financial statements, or that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The directors believe that the estimates and associated assumptions used in the preparation of the financial statements are reasonable. However, actual outcomes may differ from those anticipated.

· The directors have assessed changes in recent legislation, case law and accounting standards, along with future projections for the Group, in determining the current and deferred tax assets and liabilities and charge to the income statement, as disclosed in note 10.

· The directors have relied upon the work undertaken at 30 December 2009 by independent professional qualified valuers, as disclosed in note 13b, in assessing the fair value of certain of the Group's investment and owner occupied properties.

· Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which goodwill has been allocated. The value in use calculation requires estimates of the expected life of the X-Leisure fund, the future cash flows expected to arise from the management of it and an appropriate discount rate in order to calculate present value. The carrying amount of goodwill at the balance sheet date was £2.6 million (2008: £4.2 million) after an impairment of £1.6 million (2008: £8.0 million) during the year as disclosed in note 14.

· The directors have estimated the valuation of properties owned by FIX UK in determining whether to reverse the impairment of the Group's investment in the associate as disclosed in note 18b.

· The directors have relied upon the work undertaken at 30 December 2009 by independent third party experts in assessing the fair values of the Group's derivative financial instruments, which are disclosed in notes 20 and 23f.

The judgements, estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The principal accounting policies adopted are set out below.

Basis of consolidation

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

Subsidiaries

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

Joint ventures and associates

In accordance with IAS 28 "Investments in Associates" and IAS 31 "Interests in Joint Ventures", associates and joint ventures are accounted for under the equity method, whereby the consolidated balance sheet and income statement incorporate the Group's share of net assets and losses after tax. The losses include revaluation movements on investment properties. The reporting period for joint ventures and associates ends on 31 December and their financial statements are consolidated to this date. In accordance with IAS 39 "Financial Instruments: Recognition and Measurement", associates and joint ventures are reviewed to determine whether any impairment loss should be recognised at the end of the reporting period.

Goodwill

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the acquired entity over the Group's interest in the fair value of the assets, liabilities and contingent liabilities acquired. Goodwill which is recognised as an asset is reviewed for impairment at least annually. The impairment is calculated on the value in use of the goodwill. Any impairment is recognised immediately in the income statement and is not subsequently reversed. Where the fair value of the assets, liabilities and contingent liabilities acquired is greater than the cost, the excess, known as negative goodwill, is recognised immediately in the income statement.

Foreign currency

Foreign currency transactions

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

Financial statements of foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated into sterling at the exchange rates ruling at the balance sheet date. The operating income and expenses of foreign operations are translated into sterling at the average exchange rates for the period. Significant transactions, such as property sales, are translated at the foreign exchange rate ruling at the date of each transaction. The principal exchange rate used to translate foreign currency denominated amounts in the balance sheet is the rate at the end of the year: £1 = €1.1062 (2008: £1 = €1.0344). The principal exchange rate used for the income statement is the average rate for the year: £1 = €1.1229 (2008: £1 = €1.2558).

Net investment in foreign operations

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

Plant and equipment

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

· Leasehold improvements - over the term of the lease.

· Fixtures and fittings - over three to five years.

· Motor vehicles - over four years.

Property portfolio

Investment properties

Investment properties are stated at fair value, being the market value determined by professionally qualified external or director valuers, with changes in fair value being included in the income statement. In accordance with IAS 40 "Investment Property", no depreciation is provided in respect of investment properties.

Leasehold properties

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

Owner-occupied long leasehold properties

Owner-occupied long leasehold properties are included in the financial statements at fair value with changes in fair value recognised directly in equity except for falls below historic cost which are recognised in the income statement.

Properties under development

Attributable internal and external costs incurred during the period of development are capitalised. Interest is capitalised gross in the associates and joint ventures before deduction of related deferred tax relief. There is no interest capitalised in the Group. Interest is calculated on the development expenditure by reference to specific borrowings where relevant. A property ceases to be treated as being under development when substantially all activities that are necessary to make the property ready for use are complete.

Refurbishment expenditure

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

Property transactions

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

Trading property assets

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

Head leases

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

Tenant leases and incentives

Management has exercised judgement in considering the potential transfer of risks and rewards of ownership in accordance with IAS 17 "Leases" for all properties leased to tenants and has determined that all such leases are operating leases. Incentives and costs associated with entering into tenant leases are amortised over a straight-line basis over the term of the lease.

Operating leases

Annual rentals under operating leases are charged to the income statement as incurred.

Financial assets and financial liabilities

Cash and cash equivalents

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

Trade receivables and payables

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

Borrowings

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

Derivative financial instruments

Derivative financial instruments are designated as at fair value through profit or loss in accordance with IAS 39 "Financial Instruments: Recognition and Measurement". They are recognised initially at fair value, which equates to cost, and are subsequently remeasured at fair value. The fair value of forward foreign exchange contracts is calculated by reference to spot and forward exchange rates at the balance sheet date. The fair value of interest rate and basis swaps is calculated by reference to appropriate forecasts of yield curves between the balance sheet date and the maturity of the instrument. Changes in fair value are included as finance income or finance costs in the income statement, except for gains or losses on the portion of an instrument that is an effective hedge of the net investment in a foreign operation, which are recognised in the net investment hedging reserve.

Minority interest

The minority interest arising from the Group's German operations is classified as a liability and held at fair value in the balance sheet of the joint venture. Under the terms of the contract the minority has a put option to sell their share back to the joint venture typically after 5 years from acquisition. The minority interest's share of income and expenses while the German operations were wholly-owned was treated as a non-recurring finance charge in the income statement.

Tax

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

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

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

Employee benefits

Pension costs

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

Share-based payments

The Group has applied the arrangements of IFRS 2 "Share-based Payment". Equity settled share-based payments are measured at fair value at the date of grant. The fair values of the COIP, CEO share match scheme and SAYE scheme are calculated using Monte Carlo simulations or the Black-Scholes model as appropriate. The fair value of the 2007 LTIP is calculated using a normal distribution model, which the directors consider not to be materially different from a binominal model. The fair values are dependent on factors including the exercise price, expected volatility, period to exercise and risk free interest rate. Market related performance conditions are reflected in the fair values at the date of grant and are expensed on a straight-line basis over the vesting period. Where awards are cancelled, the remaining fair value is expensed immediately. Non-market related performance conditions are not reflected in the fair values at the date of grant. At each reporting date, the Group estimates the number of shares likely to vest under non-market related performance conditions so that the cumulative expense will ultimately reflect the number of shares that do vest.

Own shares

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

Revenue

Management fees

Management fees are recognised, in line with the property management contracts, in the period to which they relate. They include income in relation to services provided by CRPM to both joint ventures and associates for asset management, rent reviews, lettings, project co-ordination, procurement, service charges and directly recoverable expenditure.

Performance fees

Performance fees are recognised, in line with the property management contracts, at the end of the performance period to which they relate. CRPM earns performance fees for The Mall on the outperformance over a three-year period relative to the greater of 12% (2008: 12%) and an appropriate IPD index. Where performance falls short of this benchmark, fees are repayable, up to the amount received for the previous two years. Where there is a reasonable likelihood that part of a performance fee will be repaid the estimated repayment will not be recognised as income until the outcome can be reliably estimated. CRPM earns performance fees for The Junction on any realised geared returns in excess of an internal rate of return of 15%, with no provision for clawback, over the period from May 2009 to the disposal of the entire portfolio on the expiry of the fund. X-Leisure Limited earns performance fees for the X-Leisure fund on any realised geared return in excess of an internal rate of return of 15%, with no provision for clawback, over the period from August 2009 to the disposal of the entire portfolio on the expiry of the fund or its conversion into a listed structure. An interim performance fee may be earned on the same basis if the X-Leisure portfolio is reduced to nine properties or fewer.

Net rental income

Net rental income is equal to gross rental income, recognised in the period to which it relates and including tenant incentives, less expenses directly related to letting and holding the properties.

Interest and dividend income

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

Finance costs

All borrowing costs are recognised under Finance costs in the income statement in the period in which they are incurred. Finance costs also include the amortisation of loan issue costs; the unwinding of the discounting of liabilities relating to CAP awards; the minority interests' share of income and expenses while the German portfolio was wholly-owned; any loss in the value of the Group's wholly-owned interest rate swaps; and any loss in the ineffective portion of the Group's hedge of its net investment in a foreign operation.

Segmental reporting

Segments

The Group operates in two main business segments, an assets business and an earnings business. The assets business consists of property investment activities and the earnings business consists of property management activities and the ski slope business of SNO!zone. The businesses are the basis on which the Group reports its primary business segments.

Inter segment transactions

All transactions between segments are accounted for on an arm's length basis.

Earnings per share

Historical earnings per share and net asset value per share figures have been restated to show the impact of the open offer element of the Capital Raising in September 2009, but exclude the impact of the firm placing in accordance with IAS 33 Earnings per Share.

2 Segmental analysis: non statutory information - see through basis

2a Segmental analysis

		Assets		Earnings		Total
		Property	Property	Property
		investment	investment	management
		UK	Germany	UK	SNO!zone
Year to 30 December 2009	Note	£m	£m	£m	£m	£m
Net rents	2b	41.2	17.4	-	-	58.6
Net interest	2b	(30.8)	(11.3)	-	-	(42.1)

Contribution	2b	10.4	6.1	-	-	16.5
Management fees		-	-	17.1	-	17.1
SNO!zone income	4a	-	-	-	13.7	13.7
SNO!zone expenses	5	-	-	-	(12.7)	(12.7)
Management expenses		(3.9)	(0.3)	(10.9)	-	(15.1)
Net interest on central facility		(2.0)	-	-	-	(2.0)

Recurring pre-tax profit		4.5	5.8	6.2	1.0	17.5

Variable overhead		-	-	(0.3)	-	(0.3)
Revaluation of investment properties	12a	(97.9)	(10.5)	-	-	(108.4)
Deemed disposals from The Junction and X-Leisure open offers	18a	(7.2)	-	-	-	(7.2)
Loss on disposals		(9.4)	-	-	-	(9.4)
Impairment of trading properties	5,13a	(2.1)	-	-	-	(2.1)
Impairment of goodwill	14	-	-	(1.6)	-	(1.6)
Gain/(loss) on financial instruments		1.4	(1.1)	-	-	0.3
Other non-recurring items		(2.9)	1.2	(0.5)	-	(2.2)

(Loss)/profit before tax		(113.6)	(4.6)	3.8	1.0	(113.4)
Tax	10a					(6.3)

Loss after tax						(119.7)

Net assets/(liabilities)		95.5	32.4	3.6	(1.7)	129.8

Properties held for sale are included in the Property Investment UK segment.

2b Contribution

		Gross	Property	Void	Net	Net
		rent	costs	costs	rent	interest	Contribution
Year to 30 December 2009	Note	£m	£m	£m	£m	£m	£m

Mall (Group share: 16.7%) ¹	18d	25.5	(5.6)	(1.5)	18.4	(11.5)	6.9
Junction (Group share: 13.4%) ¹	18d	8.2	(1.1)	(0.1)	7.0	(6.4)	0.6
X-Leisure (Group share: 11.9%) ¹	18d	8.1	(1.6)	(0.2)	6.3	(4.6)	1.7

Total associates		41.8	(8.3)	(1.8)	31.7	(22.5)	9.2

German portfolio (Group share: 50%) ¹	18e	20.0	(2.5)	(0.1)	17.4	(11.3)	6.1
Other (Group share: 30-50%) ¹	18e	4.1	(0.9)	(0.3)	2.9	(3.0)	(0.1)

Total joint ventures		24.1	(3.4)	(0.4)	20.3	(14.3)	6.0

Statutory information
UK investment properties		1.1	(0.3)	-	0.8	(0.9)	(0.1)

Total rental income from investment property		1.1	(0.3)	-	0.8	(0.9)	(0.1)
Great Northern ²		6.7	(0.7)	(0.2)	5.8	(4.4)	1.4

Total rental income from wholly owned property	4a	7.8	(1.0)	(0.2)	6.6	(5.3)	1.3

Total on a see through basis	2a	73.7	(12.7)	(2.4)	58.6	(42.1)	16.5

With the exception of the German portfolio, all associates and joint ventures are held within the United Kingdom and Jersey.

1	The Group's average share during the year. As described in note 18b, following an open offer on 15 May 2009, the Group's share in The Junction fell from 27.32% to 13.44% and following an open offer on 31 July 2009, the Group's share in X-Leisure fell from 19.37% to 11.93%.
2	Great Northern is carried as a trading property in the balance sheet.

2a Segmental analysis

		Assets		Earnings		Total *
		Property	Property	Property
		investment	investment	management
		UK *	Germany	UK	SNO!zone
Year to 30 December 2008	Note	£m	£m	£m	£m	£m
Net rents	2b	56.7	29.4	-	-	86.1
Net interest	2b	(44.9)	(16.7)	-	-	(61.6)

Contribution	2b	11.8	12.7	-	-	24.5
Management fees		-	-	22.8	-	22.8
SNO!zone income	4a	-	-	-	14.9	14.9
SNO!zone expenses	5	-	-	-	(13.4)	(13.4)
Management expenses		(3.2)	(1.6)	(13.9)	-	(18.7)
Net interest on central facility		(2.5)	-	-	-	(2.5)
						-
Recurring pre-tax profit		6.1	11.1	8.9	1.5	27.6

Performance fees clawback	4a,4b	-	-	(9.9)	-	(9.9)
Benefit of performance fee clawback	18d	2.4	-	-	-	2.4
Variable overhead		-	-	0.1	-	0.1
Revaluation of investment properties		(339.9)	(34.0)	-	-	(373.9)
Deemed disposal from Mall rights issue and related costs	18a	(26.2)	-	(2.6)	-	(28.8)
Loss on disposals		(41.9)	(0.4)	-	-	(42.3)
Impairment of trading property	5, 13a	(23.5)	-	-	-	(23.5)
Impairment of goodwill	14	-	-	(8.0)	-	(8.0)
Impairment of associate	18b	(8.4)	-	-	-	(8.4)
Loss on financial instruments		(36.4)	(11.4)	-	-	(47.8)
Other non-recurring items		(2.8)	2.0	(3.0)	-	(3.8)

(Loss)/profit before tax		(470.6)	(32.7)	(14.5)	1.5	(516.3)
Tax	10a					14.1

Loss after tax						(502.2)

Net assets/(liabilities)		152.1	39.9	(3.5)	(2.4)	186.1

* restated to show net interest on central facility separately

2b Contribution

		Gross	Property	Void	Net	Net
		rent	costs	costs	rent	Interest	Contribution
Year to 30 December 2008	Note	£m	£m	£m	£m	£m	£m

Mall (Group share: 20.4%)¹	18d	35.4	(8.5)	(1.4)	25.5	(16.8)	8.7
Junction (Group share: 27.3%)¹	18d	13.8	(2.4)	(0.3)	11.1	(9.9)	1.2
X-Leisure (Group share: 19.4%)¹	18d	10.4	(2.3)	(0.3)	7.8	(5.7)	2.1
FIX UK (Group share: 20.0%)³		1.9	(0.1)	(0.1)	1.7	(1.9)	(0.2)

Total associates		61.5	(13.3)	(2.1)	46.1	(34.3)	11.8

Xscape Braehead (Group share: 50%)¹		1.6	(0.5)	(0.1)	1.0	(2.2)	(1.2)
German portfolio (Group share: 50%)²	18e	4.7	(0.6)	-	4.1	(1.7)	2.4
Manchester Arena (Group share: 30%)¹		1.8	(0.2)	(0.1)	1.5	(1.0)	0.5
Others (Group share: 30 -50%)¹		0.6	-	-	0.6	(0.6)	-

Total joint ventures		8.7	(1.3)	(0.2)	7.2	(5.5)	1.7

Statutory information
German portfolio²		27.9	(2.6)	-	25.3	(15.0)	10.3
FIX UK³		1.7	(0.3)	-	1.4	(1.4)	-
Other UK (restated)		1.4	(0.4)	-	1.0	(1.4)	(0.4)

Total rental income from investment property		31.0	(3.3)	-	27.7	(17.8)	9.9
Great Northern⁴		6.6	(0.9)	(0.6)	5.1	(4.0)	1.1

Total rental income from wholly owned property	4a	37.6	(4.2)	(0.6)	32.8	(21.8)	11.0

Total on a see through basis	2a	107.8	(18.8)	(2.9)	86.1	(61.6)	24.5

With the exception of the German portfolio, all associates and joint ventures are held within the United Kingdom and Jersey.

1	The Group's average share during the year. As described in note 18b, following the rights issue on 27 June 2008, the Group's share in The Mall fell from 24.24% to 16.72%.
2	With the exception of Capital & Regional (Europe Holding 4) Limited, the German portfolio was treated as wholly owned until 6 October 2008 after which the sale of 50% of the Group's share of the relevant entities meant they were treated as joint ventures as described in note 32b. Capital & Regional (Europe Holding 4) Limited was treated as wholly owned until 30 December 2008.
3	FIX UK was wholly owned until 6 March 2008, after which the Group's share was reduced to 20% and it was treated as an associate as described in note 32a.
4	Great Northern is carried as a trading property in the balance sheet.

3 Segmental analysis: statutory basis

3a Primary business segments

		Assets		Earnings
		Property	Property	Property
		investment	Investment	management
		UK	Germany	UK	SNO!zone	Total
Year to 30 December 2009	Note	£m	£m	£m	£m	£m
Revenue from external sources	3b,4a	8.4	-	15.7	13.7	37.8
Transactions with other segments		0.9	-	0.3	-	1.2

Total segment revenue		9.3	-	16.0	13.7	39.0
Cost of sales	5	(3.3)	-	-	(12.7)	(16.0)
Transactions with other segments		(0.2)	-	(0.9)	(0.1)	(1.2)
Administrative costs		(6.8)	(0.3)	(8.4)	-	(15.5)
Impairment of goodwill	14	-	-	(1.6)	-	(1.6)
Loss on sale of properties and investments		(0.2)	-	-	-	(0.2)
Loss on revaluation of investment properties	13a	(2.8)	-	-	-	(2.8)

Segment result		(4.0)	(0.3)	5.1	0.9	1.7
Share of loss in joint ventures and associates *		(102.6)	(4.2)	-	-	(106.8)
Net finance costs		(8.5)	0.2	-	-	(8.3)

(Loss)/profit before tax		(115.1)	(4.3)	5.1	0.9	(113.4)

Segment assets		139.0	1.3	3.9	3.5	147.7
Interest in joint ventures and associates						106.7
Tax assets - current tax						0.7
Tax assets - deferred tax						-

Consolidated total assets						255.1

Segment liabilities		(18.6)	(0.1)	(3.3)	(5.2)	(27.2)
Interest bearing liabilities						(78.8)
Tax liabilities						(19.3)

Consolidated total liabilities						(125.3)

Capital expenditure		-	-	-	0.1	0.1
Depreciation		-	-	0.1	0.3	0.4
Significant other non cash expenses		-	-	0.3	-	0.3

Aggregate investment in joint ventures and associates		74.2	32.4	0.1	-	106.7

* including deemed disposals of £7.2 million from The Junction and X-Leisure open offers

Properties held for sale are included in the Property Investment UK segment.

3b Secondary business segments

		United
		Kingdom	Germany	Total
	Note	£m	£m	£m
Revenue from external sources	4a	37.8	-	37.8
Segment gross assets		146.4	1.3	147.7
Capital expenditure		0.1	-	0.1

3a Primary business segments

		Assets		Earnings
		Property	Property	Property
		investment	investment	management
		UK	Germany	UK	SNO!zone	Total
Year to 30 December 2008	Note	£m	£m	£m	£m	£m
Revenue from external sources	3b,4a	9.7	27.9	12.9	14.9	65.4
Transactions with other segments		0.9	-	0.4	-	1.3

Total segment revenue		10.6	27.9	13.3	14.9	66.7
Cost of sales	5	(25.7)	(2.6)	-	(13.4)	(41.7)
Transactions with other segments		(0.3)	-	(0.9)	(0.1)	(1.3)
Administrative costs *		(3.2)	(1.6)	(18.3)	-	(23.1)
Impairment of goodwill	14	-	-	(8.0)	-	(8.0)
Loss on sale of properties and investments		(6.1)	(0.4)	-	-	(6.5)
Loss on revaluation of investment properties	13a	(7.0)	(24.7)	-	-	(31.7)

Segment result		(31.7)	(1.4)	(13.9)	1.4	(45.6)
Share of loss in joint ventures and associates *		(420.5)	(12.4)	-	-	(432.9)
Net finance costs		(20.5)	(16.6)	(0.7)	-	(37.8)

(Loss)/profit before tax		(472.7)	(30.4)	(14.6)	1.4	(516.3)

Segment assets		134.2	-	15.5	3.6	153.3
Interest in joint ventures and associates						216.7
Tax assets - current tax						1.6
Tax assets - deferred tax						1.4

Consolidated total assets						373.0

Segment liabilities		(31.9)	-	(20.5)	(6.1)	(58.5)
Interest bearing liabilities						(112.5)
Tax liabilities						(15.9)

Consolidated total liabilities						(186.9)

Capital expenditure		0.4	0.2	0.2	0.2	1.0
Depreciation		-	-	0.2	0.4	0.6
Significant other non cash expenses		-	-	1.1	-	1.1

Aggregate investment in joint ventures and associates		176.8	39.9	-	-	216.7

* including deemed disposal from The Mall open offer and related costs as appropriate

3b Secondary business segments

		United
		Kingdom	Germany	Total
	Note	£m	£m	£m
Revenue from external sources	4a	37.5	27.9	65.4
Segment gross assets		153.3	-	153.3
Capital expenditure		0.8	0.2	1.0

4a Revenue

		Year to	Year to
		30 December	30 December
		2009	2008
		Total	Total
	Note	£m	£m
Assets business
Property investment - gross rents from wholly owned investment property	2b	1.1	31.0
Property investment - gross rents from wholly owned trading property	2b	6.7	6.6

Property investment -gross rents from wholly owned property	2b	7.8	37.6
Other income		0.6	-

Earnings business
Property management - management fees		15.7	22.8
SNO!zone income	2a	13.7	14.9

Rents, management fees and other revenue		37.8	75.3
Property management - performance fee clawback	2a,4b	-	(9.9)

Revenue per consolidated income statement	3a,3b	37.8	65.4
Finance income	6	2.7	2.4

Total revenue		40.5	67.8

4b Performance fees

		Year to	Year to
		30 December	30 December
		2009	2008
		Total	Total
	Note	£m	£m
Property manager future repayment of performance fees		-	(9.9)
Fund manager future repayment of performance fees		-	(2.5)

Total performance fees included in associates adjusted financial statements	18d	-	(12.4)
Group share of future estimated repayments of performance fees
Property manager future repayment of performance fees		-	(9.9)

Total Group share of future repayment of performance fees	4a	-	(9.9)

5 Cost of sales

		Year to	Year to
		30 December	30 December
		2009	2008
	Note	£m	£m
Property and void costs	2b	1.2	4.8
SNO!zone expenses	2a	12.7	13.4
Impairment of trading properties	2a, 13a	2.1	23.5

Total cost of sales		16.0	41.7

6 Finance income

		Year to	Year to
		30 December	30 December
		2009	2008
	Note	£m	£m
Interest receivable		1.3	2.1
Foreign exchange gain on loans to German portfolio		-	0.2
Gain in fair value of financial instruments:
Interest rate swaps		1.2	-
Ineffective portion of forward contracts		0.2	-
Unhedged element of forward contracts		-	0.1

Total finance income	4a	2.7	2.4

7 Finance costs

	Year to	Year to
	30 December	30 December
	2009	2008
	£m	£m
Interest on bank loans and overdrafts	11.0	27.4
Interest receivable on swaps	(2.2)	(3.2)

Interest payable	8.8	24.2
Amortisation of loan issue costs	2.5	0.7
Unwinding of discounting of CAP awards	-	0.7
Share of income attributable to German minority interest classified as a liability	-	(0.3)
Other interest payable	(0.4)	1.7
Loss in fair value of financial instruments:
Interest rate swaps	-	12.7
Ineffective portion of forward contracts	-	0.5
Unhedged element of forward contracts	0.1	-

Total finance costs	11.0	40.2

8 Loss before tax

		Year to	Year to
		30 December	30 December
		2009	2008
	Note	£m	£m
This is arrived at after charging/(crediting):
Depreciation of owned assets		0.4	0.6
Net exchange gains		-	(0.2)
Loss on revaluation of properties	13a	2.8	31.7
Impairment of goodwill	14	1.6	8.0
Impairment of trade receivables		0.6	0.5
Staff costs	9	15.3	19.1
Auditors' remuneration (see below)		0.6	0.6

Auditors' remuneration

Fees payable to the Company's auditors for the audit of the Company annual financial statements	0.1	0.2
Fees payable to the Company's auditors and their associates for other services to the Group
- The audit of the Company's subsidiaries and joint ventures pursuant to legislation	0.1	0.1

Total audit fees	0.2	0.3
Non-audit fees (see below)	0.4	0.3

Total fees paid to auditors	0.6	0.6

Included in non-audit fees are amounts for services supplied pursuant to legislation of £64,000 (2008: £76,000) which related to the review of the Group's interim reports; services relating to tax of £nil (2008: £19,000); and other corporate finance services of £330,000 (2008: £200,000), which related to the Capital Raising (2008: the part-sale of the German portfolio). The Company considered that the auditors were best placed to complete the role of reporting accountants for the other corporate services in both the current year and the preceding year. Fees payable to Deloitte LLP and their associates for non-audit services to the Company are not required to be disclosed because the consolidated financial statements are required to disclose such fees on a consolidated basis.

9 Staff costs, including directors

All remuneration is paid by either Capital & Regional Property Management Limited (a subsidiary company of Capital and Regional plc) or the SNO!zone companies.

		Year to	Year to
		30 December	30 December
		2009	2008
	Note	£m	£m
Salaries		13.2	16.4
Ex-gratia payments		0.4	1.7
Discretionary bonuses		-	0.5
Capital Appreciation Plan		-	(2.5)
Share-based payments	25	0.3	1.2

		13.9	17.3

Social security		1.3	1.7
Other pension costs		0.1	0.1

	8	15.3	19.1

Except for the directors, the Company has no employees. The costs of the directors shown in the Directors' Remuneration Report are borne by CRPM and recharged to the Company.

Staff numbers

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

	2009	2008
	Number	Number
CRPM	128	170
SNO!zone	258	286

Total staff numbers	386	456

10 Tax

10a Tax credit

		Year to	Year to
		30 December	30 December
		2009	2008
	Note	£m	£m
Current tax charge/(credit)
Adjustments in respect of prior years		3.6	(1.8)
Foreign tax		0.1	0.7

Total current tax charge/(credit)		3.7	(1.1)

Deferred tax charge/(credit)
Origination and reversal of temporary timing differences		2.6	(13.0)

Total deferred tax charge/(credit)		2.6	(13.0)

Total tax charge/(credit)		6.3	(14.1)

10b Tax charge/(credit) reconciliation

	Year to	Year to
	30 December	30 December
	2009	2008
	£m	£m
Loss before tax	(113.4)	(516.3)

Loss multiplied by the UK corporation tax rate of 28% (2008: 28%)	(31.8)	(144.6)
Non-allowable expenses and non-taxable items	(168.5)	(161.4)
Utilisation of tax losses	4.0	14.7
Tax on revaluation gains	165.4	179.5
Unrealised gains on investment property not taxable	29.3	101.9
Temporary timing differences	4.4	(2.4)
Overseas tax rate differences	(0.1)	-
Prior year adjustments	3.6	(1.8)

Total tax charge/(credit)	6.3	(14.1)

10c Deferred tax assets/(liabilities)

		Other
	Capital	timing
	allowances	differences	Total
	£m	£m	£m
As at 30 December 2008	(4.1)	5.5	1.4
Deferred tax charge	(0.8)	(1.8)	(2.6)

As at 30 December 2009	(4.9)	3.7	(1.2)

10d Unused tax losses

	30 December	30 December
	2009	2008
	£m	£m
United Kingdom	108.1	94.7
Overseas	-	6.0

Total unused tax losses	108.1	100.7

A deferred tax asset of £0.7 million (2008: £1.4 million) has been recognised in respect of £2.5 million (2008: £5.0 million) of these losses, based on future profit forecasts. No deferred tax asset has been recognised in respect of the remainder owing to the unpredictability of future profit streams and other reasons which may restrict the utilisation of the losses. In particular, no deferred tax asset has been recognised in respect of £3.1 million (2008: £6.6 million) of deductible temporary timing differences as it is not certain that a deduction will be available when the asset crystallises. The losses do not have an expiry date.

The calculation of the Group's tax charge necessarily involves a degree of estimation and judgement in respect of certain items whose tax treatment cannot be finally determined until a formal resolution has been reached with the relevant tax authorities. One specific exposure related to the tax structuring of previous property disposals by the Group in 2004 and 2005. The liability in respect of this exposure has now been agreed with the tax authorities at £19.5 million including interest. A deferred payment plan has also been agreed over three years.

The Group has undertaken a number of other significant transactions in prior years which still need to be agreed with the tax authorities. The Group has assessed the potential exposure in respect of these transactions and maintains a limited provision on the expectation that no material liability will arise. We continue to monitor the position together with our advisers.

11 Dividends

	Year to	Year to
	30 December	30 December
	2009	2008
	£m	£m
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year to 30 December 2008 of nil p per share (2007: 17p per share)	-	11.9
Interim dividend for the year to 30 December 2008 of 5p per share	-	3.5

	-	15.4

12 Earnings per share

12a Earnings per share calculation

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

			Weighted average
		Earnings	number of shares	Pence
Year to 30 December 2009	Note	£m	(m)	per share
Weighted average number of shares			206.6
Own shares held			(3.5)

Basic and diluted		(119.7)	203.1	(59)p

Revaluation movements on investment properties, development properties and other investments	12b	108.4		53p
Loss on disposal of investment properties (net of tax)	12b	9.4		5p
Movement in fair value of financial instruments	12b	0.9		-
Impairment of goodwill		1.6		1p
Deferred tax charge		0.8		-

EPRA basic and diluted		1.4		1p

At the end of the year, the Group had 895,369 share options that could potentially dilute basic earnings per share in the future but were not included in the calculation of diluted earnings per share because they were antidilutive for the period presented.

The weighted average number of shares reflects the impact of the open offer element of the Capital Raising in September 2009.

			Weighted average	Pence
		Earnings	number of shares	per share
			(Restated)	(Restated)
Year to 30 December 2008	Note	£m	m
Weighted average number of shares			143.5
Own shares held			(2.0)

Basic and diluted		(502.2)	141.5	(355)p
			-
Revaluation movements on investment properties, development properties and other investments	12b	375.9		265p
Loss on disposal of investment properties (net of tax)	12b	30.5		22p
Movement in fair value of financial instruments	12b	47.8		33p
Impairment of goodwill		8.0		6p
Deferred tax credit		(14.1)		(10)p

EPRA basic and diluted		(54.1)		(39)p
Performance fee clawback (net of back charge and management incentives)		5.1		4p

Adjusted EPRA basic and diluted		(49.0)		(35)p

At the end of 2008, the Group had 637,257 share options that could have potentially diluted basic earnings per share in the future but were not included in the calculation of diluted earnings per share because they were antidilutive for the period presented.

The weighted average number of shares has been restated to reflect the impact of the open offer element of the Capital Raising in September 2009.

12b Reconciliation of earnings figures included in EPS calculation to the income statement

		Year to 30 December 2009			Year to 30 December 2008
				Movement			Movement
		Revaluation		in fair value			in fair value
		movements	Loss on	of financial	Revaluation	(Loss)/profit	of financial
		and provisions	disposal	instruments	movements	on disposal	instruments
	Note	£m	£m	£m	£m	£m	£m
Share of loss of associates	18d	(95.2)	(9.2)	(0.2)	(325.6)	(29.6)	(27.5)
Share of loss of joint ventures	18e	(10.4)	-	(0.8)	(18.6)	(6.2)	(7.2)
Wholly owned		(2.8)	(0.2)	1.3	(31.7)	(6.5)	(13.1)
Tax effect		-	-	(1.2)	-	11.8	-

Total per EPS calculation	12a	(108.4)	(9.4)	(0.9)	(375.9)	(30.5)	(47.8)

13 Property assets

13a Wholly-owned properties

					Long
					leasehold
		Freehold	Leasehold	Sub-total	owner	Freehold	Total
		investment	investment	investment	occupied	trading	property
		properties	properties	properties	property	properties	assets
	Note	£m	£m	£m	£m	£m	£m
Cost or valuation
As at 31 December 2007		661.8	16.7	678.5	15.6	95.9	790.0
Exchange adjustments		27.2	-	27.2	-	-	27.2
Additions		0.2	-	0.2	-	0.4	0.6
Disposals and transfers		(664.3)	2.4	(661.9)	-	-	(661.9)
Impairment of trading properties		-	-	-	-	(23.5)	(23.5)
Revaluation movement recognised in income		(24.7)	(4.2)	(28.9)	(2.8)	-	(31.7)
Revaluation movement recognised in equity		-	-	-	(2.4)	-	(2.4)
Head leases treated as finance leases		-	0.2	0.2	0.4	-	0.6

As at 30 December 2008		0.2	15.1	15.3	10.8	72.8	98.9
Impairment of trading properties	28	-	-	-	-	(2.1)	(2.1)
Revaluation movement recognised in income	3a, 28	-	(2.7)	(2.7)	(0.1)	-	(2.8)
Head leases treated as finance leases		-	-	-	0.4	-	0.4
Transfer to properties held for sale			(2.4)	(2.4)	(11.1)	-	(13.5)

As at 30 December 2009		0.2	10.0	10.2	-	70.7	80.9

Properties held for sale

	Leasehold	Long leasehold	Total
	investment	owner occupied	property
	property	property	held for sale
	£m	£m	£m
Cost or valuation
As at 31 December 2008	-	-	-
Transfer from wholly owned properties	2.4	11.1	13.5

As at 30 December 2009	2.4	11.1	13.5

The owner occupied property represents the Group's head office, held on a long leasehold with more than 50 years remaining, which was transferred to current assets on 19 October 2009 following the exchange of a contract of sale. As disclosed in note 35, the sale completed on 2 March 2010. The property was not independently valued at 30 December 2009 as fair value was taken to be the sale value less costs of disposal plus £0.8 million representing the value of the headlease. The carrying value is net of accumulated depreciation of £0.6 million (2008: £0.6 million) and the historical cost is £12.9 million (2008: £12.9 million). The leasehold investment property represents Beeston Place, which was transferred to current assets on 14 December 2009 following the exchange of a contract of sale. As disclosed in note 35, the sale completed on 10 March 2010. The property was not independently valued at 30 December 2009 as fair value was taken to be the sale value less costs of disposal plus £0.2 million representing the value of the headlease.

The Group has pledged land and buildings (including land and buildings held for sale) with a carrying amount of £91.8 million (2008: £98.7 million) to secure banking facilities granted to the Group. This includes amounts relating to trading properties of £70.7 million (2008: £72.8 million).

13b Property assets

		2009	2008
		Valuation	Valuation
	Note	£m	£m
Group properties at fair value		10.2	15.1
Plus: head leases treated as finance leases		-	0.2

Total investment properties held by the Group		10.2	15.3

Owner occupied property at fair value		-	10.4
Held for sale properties at fair value		12.5	-
Plus: head leases treated as finance leases		1.0	0.4
Trading properties at the lower of cost and net realisable value		70.7	72.8

Total wholly owned property assets		94.4	98.9

Properties held by joint ventures at fair value		644.8	749.5
Held for sale properties held by joint ventures at fair value		3.0	-
Plus: head leases treated as finance leases		3.5	3.4
Less: unamortised tenant incentives		(8.1)	(14.8)

Total investment properties held by joint ventures	18e	643.2	738.1

Properties held by associates at fair value		2,407.9	3,147.3
Plus: head leases treated as finance leases		100.7	138.2
Less: unamortised tenant incentives		(53.7)	(53.6)

Total investment properties held by associates	18d	2,454.9	3,231.9

External valuations at 30 December 2009 were carried out on £3,133.4 million (2008: £3,830.3 million) of the property assets held by the Group and its associates and joint ventures.

The valuations were carried out by independent qualified professional valuers working for DTZ Debenham Tie Leung Chartered Surveyors, CB Richard Ellis Limited Chartered Surveyors, Jones Lang LaSalle Chartered Surveyors, Cushman & Wakefield Chartered Surveyors and King Sturge Chartered Surveyors. These external valuers are not connected with the Group. The valuations, which conform to International Valuation Standards, were arrived at by reference to market evidence of transaction prices for similar properties.

Directors' valuations at 30 December 2009 were carried out on £12.7 million (2008: £166.0 million) of the Group's property assets. The properties were valued at the prices at which they were sold after the year end as described in note 13a. The properties held by FIX UK have not been valued as the Group's investment in FIX UK has been written down to £nil (2008: £nil).

13c Loss on sale of properties and investments

		Year to	Year to
		30 December	30 December
		2009	2008
	Note	£m	£m
Loss on part sale of FIX UK		-	(10.1)
Loss on part sale of German portfolio		-	(0.4)
Profit on sale of Cardiff joint venture	18c, 31	0.5	-
Other write-downs, impairments and release of provisions		(0.7)	4.0

		(0.2)	(6.5)

14 Goodwill

		30 December	30 December
		2009	2008
	Note	£m	£m
At the start of the year		4.2	12.2
Provision for impairment	2a, 3a, 8, 28	(1.6)	(8.0)

At the end of the year		2.6	4.2

The goodwill carried in the Group balance sheet relates to the acquisition of the MWB fund management business by CRPM in 2003, which included MWB's 13.29% interest in Leisure Fund 1, 5.72% interest in Leisure Fund IIa and 7.09% interest in Leisure Fund IIb. This goodwill is tested annually for impairment or more frequently if there are indications that it might be impaired. An impairment review has been carried out at 30 December 2009 to test the recoverable amount of the goodwill asset based on its value in use.

Impairment is tested by discounting the forecast cash flows generated by the X-Leisure asset management contract, which is coterminous with the life of the fund. The cash flows reflect the amendments to the contract resulting from the restructuring of the X-Leisure fund during the year, including the transfer of management responsibilities to X-Leisure Limited.

The forecast cash flows include the following assumptions:

· the initial expiry date of the X-Leisure fund is 31 December 2014, with a 50% chance that the life of the fund will be extended to 31 December 2021.

· management fees receivable are in line with the asset management contract, including both a fixed element and a variable amount dependent on the growth in net operating income in the X-Leisure fund.

· management fees receivable, as well as both fixed and variable administration costs, are assumed to grow by 2.4% per annum beyond the five-year period modelled in the Group's forecasts.

· the pre-tax rate used to discount the expected cash flows is 8.5% (2008: 8.3%).

If the termination date of the fund were to be the initial expiry date of 31 December 2014, there would be an additional impairment of £0.7m in the year.

The impairment in the year arose largely because of the renegotiation of certain terms in the X-Leisure Limited asset management contract, which was finalised after the previous impairment review had taken place (notably the fixed element of the management fee and the expiry date of the X-Leisure fund).

15 Other non-current assets

15a Plant and equipment

		30 December	30 December
		2009	2008
	Note	£m	£m
Cost or valuation
At the start of the year		4.3	3.9
Additions		0.1	0.4

At the end of the year		4.4	4.3

Depreciation
At the start of the year		3.0	2.4
Provided for the year	28	0.4	0.6

At the end of the year		3.4	3.0

Carrying amounts:
At the end of the year		1.0	1.3

15b Available for sale investments

		30 December	30 December
		2009	2008
	Note	£m	£m
Fair value
At the start of the year		0.2	0.3
Increase/(decrease) in fair value		0.1	(0.1)

At the end of the year	23a	0.3	0.2

Available for sale investments comprise the following:

· £256,000 (2008: £235,000) representing the net asset value of units in the Paddington Central III Unit Trust.

· £10,000 (2008: £10,000) representing a 49.99% interest in Bestpark Investments Limited, which is treated as an investment as the Group does not exercise any significant influence or control over the entity.

16 Non-current receivables

		30 December	30 December
		2009	2008
	Note	£m	£m
Financial assets
Loans to joint ventures	23a	23.8	29.1

		23.8	29.1
Non-financial assets
Prepayments		1.2	1.1

		25.0	30.2

Interest is payable on loans to joint ventures at normal commercial rates.

17 Current receivables

		30 December	30 December
		2009	2008
	Note	£m	£m
Financial assets
Trade receivables		1.5	0.7
Amounts owed by joint ventures		0.6	1.7
Amounts owed by associates		0.7	2.6
Other receivables		2.0	1.2
Accrued income		0.3	0.4

	23a	5.1	6.6
Non-financial assets
Tax and social security receivables		-	6.0
Prepayments		1.8	1.8

		6.9	14.4

The Group's trade receivables largely comprise amounts payable by tenants of the Group's wholly-owned properties. Before accepting a new tenant, a review of its creditworthiness is carried out using an external credit scoring system and other publicly-available financial information. Included in the Group's trade receivable balance are debtors with a carrying amount of £0.2 million (2008: £0.7 million) which are past due at the reporting date for which the Group has not provided, as there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group holds collateral of £0.2 million (2008: £0.1 million) over these balances as security deposits held in rent accounts. The average age of these receivables is 63 days (2008: 34 days).

	30 December	30 December
	2009	2008
	£m	£m
Analysis of current financial assets
Not past due	0.3	0.6
Past due but not individually impaired:
Less than 1 month	2.7	4.2
1-3 months	0.2	0.5
3-6 months	1.0	-
Over 6 months	0.9	1.3

	5.1	6.6

18 Investment in associates and joint ventures

18a Share of results

		Year to	Year to
		30 December	30 December
		2009	2008
	Note	£m	£m
Share of results of associates		(96.2)	(368.4)
Dilution effect of The Mall open offer	2a	-	(26.2)
Dilution effect of The Junction open offer	2a	(2.8)	-
Dilution effect of X-Leisure open offer	2a	(4.4)	-

		(103.4)	(394.6)
Impairment of FIX UK		-	(8.6)
Share of results of joint ventures	18c	(3.4)	(29.7)

	28	(106.8)	(432.9)

18b Investment in associates

		30 December	30 December
		2009	2008
	Note	£m	£m
At the start of the year		182.3	599.4
Investment in associates		4.6	-
Share of net assets in FIX UK transferred to associates		-	8.6
Share of results of FIX UK		-	(0.2)
Impairments		(0.4)	(8.4)
Share of results of other associates	18d	(103.4)	(394.6)
Dividends and capital distributions received		(6.7)	(22.5)

At the end of the year	18d	76.4	182.3

The Group's investments in associates include The Mall LP, The Junction LP, X-Leisure LP and The FIX UK LP. Despite the fact that the Group holds less than 20% in The Mall LP, The Junction LP and X-Leisure LP, they are accounted for as associates as the Group has significant influence arising from its membership of the General Partner boards. The Group holds 20% of The FIX UK LP and also exercises significant influence through its representation on the General Partner board.

The value of the Group's investment in FIX UK was written down to £nil in 2008. The unrecognised share of losses at the end of the year was £0.6 million (2008: £2.9 million), reflecting an unrecognised gain for the year of £2.3 million (2008: loss of £2.9 million). As disclosed in note 35, since the year end the Group has invested a further £1.1 million into FIX UK.

On 15 May 2009, The Junction fund completed a £63.6 million open offer. The Group took up £0.6 million of its rights, which was less than its pro-rata share and as a consequence its share in the fund fell from 27.32% to 13.44%. Under the terms of the open offer, adjustments can be made until May 2010 to the price at which new units were issued, to reflect the recoverability of debtors and the expected costs of certain remedial works. A further impairment of £0.4 million has been made to the value of the Group's investment in The Junction at the year end to reflect the expected impact of these adjustments, at which level the Group's share in the fund would be reduced to 13.2%.

On 31 July 2009, the X-Leisure fund completed a £50.0 million open offer. The Group took up £4.0 million of its rights, which was less than its pro-rata share and as a consequence its share in the fund fell from 19.37% to 11.93%.

C&R accounting policy adjustments were made in 2008 to correctly reflect the treatment of performance fees repayable by the Group to the funds. The results of The Mall LP were adjusted to reflect the Group's share of performance fees repayable at its percentage interest before the dilutive effects of an open offer and the results of The Mall LP, The Junction LP and X-Leisure LP were adjusted to ensure consistency of accounting in relation to the estimated repayments of performance fees.

18c Investment in joint ventures

		30 December	30 December
		2009	2008
	Note	£m	£m
At the start of the year		34.4	12.0
Share of net assets in German portfolio transferred to joint venture		-	44.9
Investment in joint ventures		2.1	8.5
Net liabilities of Cardiff joint venture at date of disposal	13c, 31	0.5	-
Dividends and capital distributions receivable		(0.7)	(2.3)
Share of results	18a, 18e	(3.4)	(29.7)
Foreign exchange differences		(2.6)	1.0

At the end of the year	18e	30.3	34.4

The Group's investments in joint ventures include its share in the German portfolio (48.8%) and X-Leisure Limited (50%), and its investments in Xscape Braehead Partnership (50%), Manchester Evening News Arena Complex Limited (30%) and The Auchinlea Partnership (50%).

The investment in Capital Retail Park Partnership (50%) was sold on 7 May 2009 as described in note 31 and its results are included until that date. X-Leisure Limited was established as a joint venture of CRPM on 18 August 2009 and its results are included from that date.

The Auchinlea Partnership held the Group's interest in Glasgow Fort. Since the sale of this interest in 2004 the Group has received a total of £8.3 million further profit from its remaining interest in the joint venture. Further profits were potentially receivable, largely dependent on planning consent being obtained for future phases of the development and the letting of units at above target rents. The Group has also given certain rental guarantees for a five year period and has made provision for the amounts which are expected to be paid in respect of these. The estimate of the Group's share of the fair value of the right to receive these future profits at 30 December 2009 is £nil (2008: £0.1 million), which reflects the likelihood that any future development will not take place in the necessary timescale.

A C&R accounting policy adjustment was made in 2009 to show the Group's share of the benefit to the Xscape Braehead Partnership of the provision made in Capital & Regional Plc for the amount payable under its rent guarantee for SNO!zone Braehead. The settlement of a claim by the Xscape Braehead Partnership, which was reimbursed for the costs of certain repair works to the cinema ceiling and other loss of income, is included in note 18e under the revaluation of investment properties under other joint ventures in both the current year and preceding year.

18d Analysis of investment in associates

					Year to	Year to
					30 December	30 December
		The Mall	The Junction	X-Leisure	2009	2008
		LP	LP	LP	Total	Total
	Note	£m	£m	£m	£m	£m
Income statement (100%)
Gross rents		152.7	45.2	49.8	247.7	274.8
Property expenses		(32.0)	(2.2)	(6.4)	(40.6)	(43.8)
Management expenses		(10.6)	(4.1)	(4.7)	(19.4)	(27.2)

Net rents		110.1	38.9	38.7	187.7	203.8
Net interest payable		(68.8)	(36.4)	(27.8)	(133.0)	(146.4)

Contribution		41.3	2.5	10.9	54.7	57.4
Performance fees	4b	-	-	-	-	12.4
Revaluation of investment properties		(301.2)	(64.1)	(93.0)	(458.3)	(1,520.5)
Loss on sale of investment properties		(22.1)	(15.4)	(16.8)	(54.3)	(141.2)
Provision for onerous contract		-	-	-	-	(10.3)
Loan renegotiation costs		-	(3.5)	(1.1)	(4.6)	-
Fair value of interest rate swaps		4.6	(1.0)	1.8	5.4	(155.1)

Loss before tax		(277.4)	(81.5)	(98.2)	(457.1)	(1,757.3)

Tax		-	-	-	-	(0.6)

Loss after tax		(277.4)	(81.5)	(98.2)	(457.1)	(1,757.9)

Balance sheet (100%)
Investment properties	13b	1,390.9	552.3	511.7	2,454.9	3,231.9
Other assets		293.9	55.3	51.7	400.9	347.0
Current liabilities		(152.6)	(42.1)	(57.1)	(251.8)	(291.2)
Non-current liabilities		(1,335.2)	(372.0)	(353.5)	(2,060.7)	(2,369.9)

Net assets (100%)		197.0	193.5	152.8	543.3	917.8

Group interest at the end of the year		16.72%	13.44%	11.93%
Group interest at the start of the year		16.72%	27.32%	19.37%
Group average interest during the year		16.72%	18.61%	16.23%

Income statement (Group share)
Gross rents	2b	25.5	8.2	8.1	41.8	59.6
Net rents	2b	18.4	7.0	6.3	31.7	44.4
Net interest payable	2b	(11.5)	(6.4)	(4.6)	(22.5)	(32.4)

Contribution	2b	6.9	0.6	1.7	9.2	12.0
Performance fees	2a	-	-	-	-	2.4
Deemed disposals	2a	-	(2.8)	(4.4)	(7.2)	(26.2)
Revaluation of investment properties	12b	(50.3)	(26.1)	(18.8)	(95.2)	(323.6)
Loss on sale of investment properties	12b	(3.7)	(2.1)	(3.4)	(9.2)	(29.6)
Provision for onerous contract	12b	-	-	-	-	(2.0)
Loan renegotiation costs		-	(0.6)	(0.2)	(0.8)	-
Fair value of interest rate swaps	12b	0.7	(1.3)	0.4	(0.2)	(27.5)

Loss before tax		(46.4)	(32.3)	(24.7)	(103.4)	(394.5)

Tax		-	-	-	-	(0.1)

Loss after tax	18b	(46.4)	(32.3)	(24.7)	(103.4)	(394.6)

Balance sheet (Group share)
Investment properties		232.6	74.2	61.0	367.8	634.9
Other assets		49.1	7.4	6.2	62.7	65.7
Current liabilities		(25.6)	(5.6)	(6.8)	(38.0)	(56.3)
Non-current liabilities		(223.2)	(50.0)	(42.2)	(315.4)	(463.2)

Associate net assets		32.9	26.0	18.2	77.1	181.1
C&R accounting policy adjustment		(0.3)	-	-	(0.3)	1.2
Impairment		-	(0.4)	-	(0.4)	-

Net assets (Group share)	18b	32.6	25.6	18.2	76.4	182.3

18e Analysis of investment in joint ventures

					Year to	Year to
					30 December	30 December
		German	X-Leisure		2009	2008
		portfolio	Limited	Others	Total	Total
	Note	£m	£m	£m	£m	£m
Income statement (100%)
Gross rents		40.0	-	10.5	50.5	19.7
Property expenses		(4.2)	-	(2.2)	(6.4)	(2.7)
Management expenses		(1.0)	-	(0.7)	(1.7)	(0.7)

Net rents		34.8	-	7.6	42.4	16.3
Net interest payable		(22.5)	-	(7.4)	(29.9)	(12.4)

Contribution		12.3	-	0.2	12.5	3.9
Management fees		-	1.7	-	1.7	-
Management expenses		-	(1.3)	-	(1.3)	-
Revaluation of investment properties		(21.1)	-	2.6	(18.5)	(41.4)
Loss on sale of investment properties and investments		-	-	(0.1)	(0.1)	(12.5)
Income and fair value movements of financial assets		-	-	(0.2)	(0.2)	(0.2)
Fair value of interest rate swaps		(2.3)	-	1.0	(1.3)	(15.3)

Loss before tax		(11.1)	0.4	3.5	(7.2)	(65.5)

Tax		2.6	(0.1)	-	2.5	1.6

Loss after tax		(8.5)	0.3	3.5	(4.7)	(63.9)

Balance sheet (100%)
Investment properties	13b	531.9	-	108.3	640.2	738.1
Investment properties held for sale	13b	3.0	-	-	3.0	-
Current assets		18.5	1.2	22.8	42.5	47.0
Other financial assets		-	-	-	-	0.2
Current liabilities		(20.7)	(0.9)	(15.8)	(37.4)	(62.2)
Non-current liabilities		(467.8)	-	(113.6)	(581.4)	(651.1)

Net assets (100%)		64.9	0.3	1.7	66.9	72.0

Group interest at the end of the year		50% *	50%	30-50%
Group interest at the start of the year		50% *	n/a	30-50%
Group average interest during the year		50% *	50%	30-50%

Income statement (Group share)
Gross rents	2b	20.0	-	4.1	24.1	8.7
Net rents	2b	17.4	-	2.9	20.3	7.2
Net interest payable	2b	(11.3)	-	(3.0)	(14.3)	(5.5)

Contribution	2b	6.1	-	(0.1)	6.0	1.7
Management fees		-	0.9	-	0.9	-
Management expenses		-	(0.7)	-	(0.7)	-
Revaluation of investment properties	12b	(10.5)	-	0.1	(10.4)	(18.6)
Loss on sale of investment properties	12b	-	-	-	-	(6.2)
Income and fair value movements of financial assets		-	-	(0.1)	(0.1)	(0.1)
Fair value of interest rate swaps	12b	(1.1)	-	0.3	(0.8)	(7.2)
C&R accounting policy adjustment		-	-	0.5	0.5	-

Loss before tax		(5.5)	0.2	0.7	(4.6)	(30.4)

Tax		1.3	(0.1)	-	1.2	0.7

Loss after tax		(4.2)	0.1	0.7	(3.4)	(29.7)

Balance sheet (Group share)
Investment properties		266.0	-	41.4	307.4	357.6
Investment properties held for sale		1.5	-	-	1.5	-
Current assets		9.3	0.6	9.5	19.4	22.3
Other financial assets		-	-	-	-	0.1
Current liabilities		(10.4)	(0.5)	(6.3)	(17.2)	(29.5)
Non-current liabilities		(234.0)	-	(47.3)	(281.3)	(316.0)
Joint venture net assets		32.4	0.1	(2.7)	29.8	34.4

C&R accounting policy adjustment		-	-	0.5	0.5	-

Net assets (Group share)	18c	32.4	0.1	(2.2)	30.3	34.4

* after minority interests included in liabilities

19 Cash and cash equivalents

		30 December	30 December
		2009	2008
	Note	£m	£m
Cash at bank		15.4	4.0
Security deposits held in rent accounts		0.2	0.1
Other restricted balances		1.9	-

	23a	17.5	4.1

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

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

	30 December	30 December
	2009	2008
	£m	£m
Sterling	16.6	3.7
Euro	0.9	0.4

	17.5	4.1

20 Current payables

	30 December	30 December
	2009	2008
	£m	£m
Financial liabilities
Trade payables	2.1	1.0
Accruals	5.9	7.4
Payable to associates	2.7	15.3
Financial liabilities carried at fair value through profit or loss - interest rate swaps	3.4	7.6
Financial liabilities carried at fair value through profit or loss - forward contracts	1.4	14.2
Other payables	3.9	5.9

	19.4	51.4
Non-financial liabilities
Deferred income	3.2	3.5
Other taxation and social security	1.4	0.8

	24.0	55.7

The average age of trade payables is 53 days (2008: 38 days).

No amounts incur interest (2008: £nil).

21 Non-current payables

	30 December	30 December
	2009	2008
	£m	£m
Financial liabilities
Finance leases	-	0.6

	-	0.6
Non-financial liabilities
Other payables	2.2	2.2

	2.2	2.8

The finance leases relate to the Group's wholly owned owner-occupied property at 10 Lower Grosvenor Place and wholly owned investment property at Beeston Place. As described in note 35, these properties exchanged for sale before the balance sheet date and have therefore been classified as held for sale.

22 Borrowings

22a Borrowings summary

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

		30 December	30 December
		2009	2008
	Note	£m	£m
Unsecured borrowing at amortised cost
Fixed and swapped bank loans		-	27.4

Secured borrowing at amortised cost
Fixed and swapped bank loans		65.2	77.0
Variable rate bank loans		15.2	8.2

Total borrowings before costs	23f	80.4	112.6
Less unamortised issue costs		(1.6)	(0.1)

Total borrowings after costs		78.8	112.5

Analysis of total borrowings after costs
Current	23a	0.2	18.7
Non-current	23a	78.6	93.8

Total borrowings after costs		78.8	112.5

Borrowings financing the Group's wholly owned properties are secured by charges on those properties, which are carried at £91.8 million (2008: £98.7 million) as described in note 13a. Following the renegotiation of the Group's central banking facility in September 2009, amounts borrowed under that facility are secured by charges over the units the Group holds in The Mall, The Junction and X-Leisure carried at £76.4 million, charges over certain holdings in and loans to the German joint venture carried at £37.2 million, and guarantees by the Company.

22b Maturity

	30 December	30 December
	2009	2008
	£m	£m
From two to five years	72.5	27.4
From one to two years	7.2	66.5

Due after more than one year	79.7	93.9
Current	0.7	18.7

	80.4	112.6

22c Undrawn committed facilities

	30 December	30 December
	2009	2008
	£m	£m
Expiring between two and three years	58.0	98.2

The undrawn amount represents the balance on the Group's central revolving credit facility. Under the terms of the loan covenants, as described in note 23e, £58.0 million (2008: £73.7 million) was actually available for drawdown at year end. The Articles of the Company also restrict borrowing but this did not limit the amount available for drawdown on the facility during the current year or the preceding year.

22d Interest rate and currency profile

		30 December	30 December
		2009	2008
	Note	£m	£m
Fixed and swapped rate borrowings
6% to 7%		65.2	104.4

	22a	65.2	104.4
Floating rate borrowings	22a	15.2	8.2

	22a	80.4	112.6

All loans are sterling denominated. The weighted average length of fix is 4 years (2008: 2 years). Floating rate borrowings bear interest based on three month LIBOR.

23 Financial instruments

23a Overview

Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the returns to shareholders through the optimisation of the debt and equity balance. The overall strategy of reducing the Group's levels of balance sheet debt remains unchanged from 2008.

The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 22a; cash and cash equivalents as disclosed in note 19; and equity attributable to equity holders of the parent, comprising issued share capital, reserves and retained earnings as disclosed in notes 24 and 26. The Capital Raising during the year had the effect on the capital structure of reducing debt and increasing cash and cash equivalents.

The Group is not subject to externally imposed capital requirements.

The Board reviews the capital structure and cost of capital on an annual basis but does not set specific targets for the Group's gearing ratios. The risks associated with each class of capital are also considered as part of the regular risk reviews presented to the Audit Committee and the Board. The Group has met its objectives for managing capital during 2009, with a reduction in net debt as a result of the Capital Raising.

Gearing ratio

The gearing ratios at the year end were as follows:

		30 December	30 December
		2009	2008
Statutory	Note	£m	£m
Debt before unamortised issue costs	22a	80.4	112.6
Cash and cash equivalents	19	(17.5)	(4.1)

Net debt		62.9	108.5
Equity		129.8	186.1
Debt to equity ratio		62%	60%
Net debt to equity ratio		48%	58%

		30 December	30 December
		2009	2008
See-through	Note	£m	£m
Debt before unamortised issue costs	23f	632.8	836.2
Cash and cash equivalents		(66.5)	(53.2)

Net debt		566.3	783.0
Equity		129.8	186.1
Debt to equity ratio		488%	449%
Net debt to equity ratio		436%	421%

Debt is defined as long and short term borrowings (excluding derivatives) excluding unamortised issue costs. Equity includes all capital and reserves of the Group attributable to equity holders of the Company.

Significant accounting policies

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

Categories of financial assets/(liabilities)

		2009			2008
		Carrying value	Gain/(loss) to income	(Loss)/gain to equity	Carrying value	Gain/(loss) to income	Gain/(loss) to equity
	Note	£m	£m	£m	£m	£m	£m
Financial assets
Investments	15b	0.3	0.1	-	0.2	-	-

Available for sale		0.3	0.1	-	0.2	-	-

Loans to joint ventures	16	23.8	1.2	(1.7)	29.1	1.7	1.3
Current receivables	17	5.1	-	-	6.6	-	-
Cash and cash equivalents	19	17.5	0.1	-	4.1	1.1	-

Loans and receivables		46.4	1.3	(1.7)	39.8	2.8	1.3

Financial liabilities
Trade payables	20	(2.1)	-	-	(1.0)	-	-
Accruals	20	(5.9)	0.4	-	(7.4)	(1.7)	-
Payable to associates	20	(2.7)	-	-	(15.3)	-	-
Other payables	20	(3.9)	(0.1)	-	(5.9)	(0.2)	-
Liabilities relating to properties held for sale *		(1.0)	-	-	-	-	-
Finance leases *	21	-	-	-	(0.6)	-	-
Current borrowings	22a	(0.2)	-	-	(18.7)	-	-
Non-current borrowings	22a	(78.6)	(6.8)	-	(93.8)	(28.1)	-

Liabilities at amortised cost		(94.4)	(6.5)	-	(142.7)	(30.0)	-

Forward contracts	20	(1.4)	0.1	3.9	(14.2)	(0.4)	(4.0)

Derivatives in effective hedges		(1.4)	0.1	3.9	(14.2)	(0.4)	(4.0)

Interest rate swaps	20	(3.4)	(3.4)	-	(7.6)	(10.2)	-

Liabilities at fair value held for trading		(3.4)	(3.4)	-	(7.6)	(10.2)	-

Total financial assets/(liabilities)		(52.5)	(8.4)	2.2	(124.5)	(37.8)	(2.7)

* Finance leases have been reclassified as liabilities relating to properties held for sale in the current year as described in note 21

Financial risk management objectives

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

23b Interest rate risk

The Group normally raises bank debt on a floating rate basis and fixes a substantial portion of the interest payments by entering into interest rate swaps. The Group's objective in managing its interest rate risk is to ensure that it always maintains sufficient headroom to cover interest payments from anticipated cash flows and management regularly reviews the ratio of fixed to floating rate debt to assist this process. The Group is exposed to fair value risk from its fixed rate debt and interest rate risk from its floating rate debt, loans to joint ventures, cash and the tax provision disclosed in note 10. The Group does not hedge account its interest rate swaps and states them at fair value with changes in fair value included in the income statement.

The following table shows the notional principals and remaining terms of the Group's interest rate swap contracts outstanding:

	Average contract fixed rate		Notional principal amount		Fair value
	30 December	30 December	30 December	30 December	30 December	30 December
	2009	2008	2009	2008	2009	2008
	%	%	£m	£m	£m	£m
Less than 1 year	-	6.27	-	10.5	-	(0.3)
1 to 2 years	6.42	6.51	-	109.0	-	(6.0)
2 to 5 years	-	6.28	61.5	25.0	(3.4)	(1.3)

			61.5	144.5	(3.4)	(7.6)

Interest rate risk sensitivity analysis is determined by applying a change in interest rates to financial assets and financial liabilities at the balance sheet date. In order to be representative of the Group's exposure to interest risk, financial liabilities include interest rate swaps held in associates and joint ventures. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the balance sheet date was outstanding for the whole year. An increase/decrease of 1% in LIBOR would have decreased/increased the Group's annual loss before tax by £15.2 million (2008: £20.1 million) with no impact on other equity reserves (2008: £nil).

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

23c Credit risk

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

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

No adjustment has been made for credit risk on derivative financial instruments in either the current year or the preceding year.

23d Foreign exchange risk

The Group has investments in and loans to a number of joint ventures with property investments in Germany which have the Euro as their functional currency, and is therefore exposed to exchange rate fluctuations. The Group has designated one forward contract (2008: two forward contracts) as a hedge of its net investment in these German joint ventures, selling €47.0 million (2008: €57.5 million) at a fixed exchange rate of 0.87505 (2008: 0.7259). In 2009 the ineffective portion of the hedge resulted in a charge of £0.2 million (2008: charge of £0.5 million) to the income statement. As disclosed in note 35, this hedge was extended for a further year in January 2010.

Only the spot element of the forward contracts is designated as the hedging instrument, determined as the undiscounted difference between the spot rate on the trade date and the spot rate on the revaluation date applied to the notional. The unhedged forward element of the fair value is determined as the total fair value less the spot element. Changes in the forward element of the fair value are reported through the income statement as finance income or finance costs as appropriate. During the year, this change in the unhedged element of the fair value was a loss of £0.1 million (2008: gain of £0.1 million) as disclosed in note 7 (2008: note 6).

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

	Year to	Year to
	30 December	30 December
	2009	2008
	£m	£m
10% strengthening in Sterling against the Euro
Decrease/(increase) in loss before tax	0.1	0.6
Increase/(decrease) in other equity reserves	2.5	3.3
10% strengthening in the Euro against Sterling
Increase/(decrease) in loss before tax	-	(0.7)
Decrease/(increase)in other equity reserves	(2.6)	(3.1)

23e Liquidity risk

Liquidity risk reflects the risk that the Group will have insufficient resources to meet its financial liabilities as they fall due. The day-to-day operations of the Group are largely funded through the items included in the breakdown of recurring profit included in note 2. The majority of income within recurring profit is received quarterly, since the inflows and outflows from net rental income and net interest payable generally coincide with English quarter days, and property management fees are billed to the funds quarterly. As a result, the Group normally has sufficient funds to cover recurring administrative expenses which occur throughout the year.

Liquidity risk therefore arises principally from the need to make payments for non-recurring items, such as management incentive schemes, tax payments and the close out of derivative financial instruments. Payments may also be necessary against bank debt facilities to prevent covenant breaches on loans related to the Group's wholly owned properties or to cover losses in the Group's joint ventures, or to repay loans when they fall due.

The Group's objective in managing liquidity risk is to ensure that it has sufficient funds to meet all its potential liabilities as they fall due, both in normal market conditions and when considering negative projections against expected outcomes, so as to avoid the risk of incurring contractual penalties or damaging the Group's reputation. The Group's treasury department maintains a rolling eighteen month forecast of anticipated recurring and non-recurring cash flows under different scenarios. This is compared to expected cash balances and amounts available for drawdown on the Group's core revolving credit facility to ensure that any potential shortfalls in funding are identified and managed.

The Group's primary means of managing liquidity risk is this £58.0 million (2008: £125.5 million) core revolving credit facility, expiring in September 2013 (2008: February 2011), of which £58.0 million (2008: £98.2 million) was undrawn at the end of the year as shown in note 22c. As at the balance sheet date, £58.0 million (2008: £73.7 million) of this undrawn amount was available for drawdown under the covenants on the facility.

During the year, a waiver of the asset cover and gearing covenants was agreed with the lending bank to allow time for the terms of the facility to be renegotiated. The life of the facility was subsequently extended from February 2011 to September 2013 and the margin was increased from 1.4% to 3.5%, reducing in future in line with the headroom on the asset cover test, which now includes the value of the Group's investment in the German joint venture as well as The Mall, The Junction and X-Leisure funds.

During the year, the Group also renegotiated its other balance sheet debt, extending the maturity dates of the facilities in return for an increase in margins payable. As described in note 19, as a result of these renegotiations certain cash balances are now treated as restricted cash as they are charged against borrowings and are not available for general use by the Group.

Following the sale of the Group's owner occupied leasehold property after the balance sheet date as described in note 35, one floating rate loan of £7.4 million expiring in 2011 has been repaid in full.

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

		Effective interest rate	Less than 1 year	1-2 years	2-5 years	More than 5 years	Total
2009	Note	%	£m	£m	£m	£m	£m
Financial assets
Available for sale investments	15b		(0.3)	-	-	-	(0.3)
Non-current receivables	16	4.86	-	-	(23.8)	-	(23.8)
Current receivables	17		(5.1)	-	-	-	(5.1)
Cash and cash equivalents	19		(17.5)	-	-	-	(17.5)

			(22.9)	-	(23.8)	-	(46.7)
Financial liabilities
Borrowings - fixed and swapped bank loans		6.21	(0.4)	-	64.2	-	63.8
Borrowings - variable rate bank loans		3.47	0.6	7.1	7.3	-	15.0
Current payables			14.6	-	-	-	14.6
Non-current payables *			-	-	-	(1.0)	(1.0)

			14.8	7.1	71.5	(1.0)	92.4

		Effective interest rate	Less than 1 year	1-2 years	2-5 years	More than 5 years	Total
2008	Note	%	£m	£m	£m	£m	£m
Financial assets
Available for sale investments	15b		(0.2)	-	-	-	(0.2)
Non-current receivables	16	5.84	-	-	(12.1)	(17.0)	(29.1)
Current receivables	17		(6.6)	-	-	-	(6.6)
Cash and cash equivalents	19		(4.1)	-	-	-	(4.1)

			(10.9)	-	(12.1)	(17.0)	(40.0)
Financial liabilities
Borrowings - fixed and swapped bank loans	22d	6.40	10.5	66.5	27.4	-	104.4
Borrowings - variable rate bank loans	22d	7.14	8.2	-	-	-	8.2
Current payables			29.6	-	-	-	29.6
Non-current payables	21		-	-	-	0.6	0.6

			48.3	66.5	27.4	0.6	142.8

* disclosed as liabilities relating to properties held for sale on the balance sheet

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

		Total	Less than 1 year	1-2 years	2-5 years	More than 5 years
Fixed and swapped bank loans	Note	£m	£m	£m	£m	£m
2009	23e	63.8	-	-	63.8	-
2008	23e	104.4	10.5	66.5	27.4	-

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

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

	(17.8)	(11.7)	(10.5)	(68.4)	-	(1.0)	(109.4)

	Less than 1 year	1-2 years	2-3 years	3-4 years	4-5 years	More than 5 years	Total
2008	£m	£m	£m	£m	£m	£m	£m
Non-interest bearing	(29.6)	-	-	-	-	-	(29.6)
Variable interest rate instruments	-	-	-	-	-	(0.6)	(0.6)
Fixed interest rate instruments	(22.5)	(69.5)	(27.6)	-	-	-	(119.6)

	(52.1)	(69.5)	(27.6)	-	-	(0.6)	(149.8)

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

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

	(3.5)	(1.0)	(0.3)	-	-	-	(4.8)

	Less than 1 year	1-2 years	2-3 years	3-4 years	4-5 years	More than 5 years	Total
2008	£m	£m	£m	£m	£m	£m	£m
Net settled
Interest rate swaps	(4.1)	(3.4)	(0.1)	-	-	-	(7.6)
Foreign exchange forward contracts	(14.2)	-	-	-	-	-	(14.2)

	(18.3)	(3.4)	(0.1)	-	-	-	(21.8)

23f Fair values of financial instruments

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

		Notional	2009	2009	2008	2008
		Principal	Book value	Fair value	Book value	Fair value
	Note	£m	£m	£m	£m	£m
Financial liabilities not at fair value through income statement
Sterling denominated loans	22a	80.4	80.4	80.4	112.6	112.6

Total on balance sheet borrowings			80.4	80.4	112.6	112.6
Group share of associate borrowings*			301.0	301.0	441.0	441.0
Group share of joint venture borrowings			251.4	253.6	282.6	284.1

Total see-through borrowings			632.8	635.0	836.2	837.7

Derivative assets/(liabilities) at fair value through income statement
Sterling interest rate swaps		61.5	(3.4)	(3.4)	(7.6)	(7.6)
Forward contracts		42.5	(1.4)	(1.4)	(14.2)	(14.2)

Total on balance sheet derivatives			(4.8)	(4.8)	(21.8)	(21.8)
Group share of Sterling interest rate swaps in associates and joint ventures*		361.4	(19.5)	(19.5)	(27.1)	(27.1)
Group share of Euro interest rate swaps in joint ventures		136.1	(5.7)	(5.7)	(5.0)	(5.0)
Group share of Sterling basis swaps in associates		-	-	-	0.1	0.1

Total see through derivatives			(30.0)	(30.0)	(53.8)	(53.8)

* excluding FIX UK where the Group has written down its investment to £nil.

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

Details of the Group's cash and deposits are set out in note 19. Their fair values and those of all other financial assets and liabilities equate to their book values.

23g Breach of loan agreements

At the year end, the Castleford facility in the X-Leisure fund was in breach of its ICR covenant but this could be remedied without further charge by depositing £40,000 of cash held by the fund with the bank.

After the year end, there was a breach of the loan agreement for the Group's Braehead joint venture as disclosed in note 35.

24 Share capital

	Number of shares			Nominal value of shares
	issued and fully paid			issued and fully paid
	2009	2008		2009		2008
	Number	Number		£m		£m
Ordinary shares of 10p each
At the start of the year	71,348,933	71,048,963		7.1		7.1
Issued on exercise of share options	-	299,970		-		-
Reclassification into Ordinary shares of 1p each and Deferred shares of 9p each	(71,348,933)	-		(7.1)		-

At the end of the year	-	71,348,933		-		7.1

Ordinary shares of 1p each
At the start of the year	-	-		-		-
Reclassification from Ordinary shares of 10p each	71,348,933	-		0.7		-
Issued in Capital Raising	279,263,821	-		2.8		-

At the end of the year	350,612,754	-		3.5		-

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

At the end of the year	71,348,933	-		6.4		-

Total called-up share capital	421,961,687	71,348,933		9.9		7.1

			Authorised
			2009		2008
			Number		Number
Ordinary shares of 10p each			-		150,000,000
Ordinary shares of 1p each			857,589,603		-
Deferred shares of 9p each			71,348,933		-

The Company has one class of Ordinary shares, which carry voting rights but no right to fixed income.

On 20 August 2009 the Company announced a firm placing and fully underwritten open offer (the "Capital Raising"). The firm placing and open offer were approved by the holders of the Company's Ordinary shares at a general meeting on 7 September 2009 and the transaction closed on 10 September 2009. As part of the Capital Raising, each Ordinary share of 10p was subdivided and reclassified into one Ordinary share of 1p and one Deferred share of 9p. Deferred shares carry neither voting nor dividend rights. The Company then issued Ordinary shares of 1p at a discount to the quoted market price as follows:

· 89,000,000 shares through a firm placing for consideration of £23.5 million

· 47,565,955 shares through a firm placing for consideration of £11.4 million

· 142,697,866 shares through an open offer for consideration of £34.3 million, with shareholders able to apply for two shares for every existing share held

Out of the total consideration of £69.2 million, £2.8 million (representing the nominal value of the shares) was credited to share capital. The balance of £60.3 million (after issue costs and expenses of £6.1 million) was credited to the merger reserve, which is available for distribution to shareholders, as the transaction utilised a cashbox structure and therefore qualified for merger relief under section 612 of the Companies Act 2006, which meant that the premium arising was not required to be credited to the Company's share premium account. Under the cashbox structure, Capital & Regional Equity (Jersey) Limited issued redeemable preference shares to the Company in consideration for the receipt of the net cash proceeds from the Capital Raising. The Company's Ordinary shares were issued as consideration for the transfer to it of the shares in Capital & Regional Equity (Jersey) Limited that it did not already own.

25 Share-based payments

The Group's share based payments comprise the SAYE scheme, the 1998 share option schemes, two LTIP schemes, the COIP and the Matching Share Agreement. In accordance with IFRS 2, the fair value of equity-settled share-based payments to employees is determined at the date of grant, calculated using either a Black-Scholes option pricing model or a Monte Carlo simulation, except for the 2007 LTIP which is calculated using a normal distribution model. Any Employers' National Insurance payable on these awards is treated as a cash-settled share-based payment. The total expense recognised under these share-based payment transactions in the year was as follows:

		Year to	Year to
		30 December	30 December
		2009	2008
	Note	£m	£m
Equity-settled share-based payments	9, 26, 28	0.3	1.2
National Insurance on share-based payments		-	(0.1)

Share options - SAYE scheme

All employees of CRPM are eligible for the SAYE scheme, which allows them to save between £5 and £250 per month over a period of either 3 or 5 years in order to purchase Company shares at a price set at the date of grant. The first payments by employees into the scheme were made in January 2009 subject to a cap of £67 per month. Options are normally forfeited if an employee leaves the Group before they vest and the charge to the Income Statement assumes this lapse rate is 45% (2008: 30%), based on the level of staff turnover during the year and future expectations. Details of the share options outstanding at the end of the year were follows:

	Year to 30 December 2009		Year to 30 December 2008
		Weighted		Weighted
		average		average
	Number of	exercise	Number of	exercise
	share options	price	share options	price
Outstanding at the start of the year	497,257	46.0p	-	-
Cancelled/lapsed before Capital Raising	(81,305)	46.0p	-	-
Increase resulting from Capital Raising	415,937	n/a	-	-
Cancelled/lapsed after Capital Raising	(36,520)	22.8p	-	-
Granted during the year	-	-	497,257	46.0p

Outstanding at the end of the year	795,369	22.8p	497,257	46.0p

Exercisable at the end of the year	22,524	22.8p	-	46.0p

As a result of the Capital Raising, the SAYE scheme was rebased in line with a methodology prescribed by HMRC so that the number of share options outstanding increased by 415,937 and the exercise price was reduced to 22.8p.

The options outstanding at 30 December 2009 had a weighted average remaining contractual life of 2.59 years (2008: 3.59 years).

Share options - 1998 schemes

Details of the share options outstanding at the end of the year are as follows:

	Year to 30 December 2009		Year to 30 December 2008
		Weighted		Weighted
	Number of	average	Number of	average
	share	exercise	share	exercise
	options	price	options	price
Outstanding at the start of the year	140,000	205.8p	439,970	256.2p
Expired during the year	(40,000)	191.5p	-	-
Exercised during the year	-	-	(299,970)	279.7p

Outstanding at the end of the year	100,000	211.5p	140,000	205.8p

Exercisable at the end of the year	100,000	211.5p	140,000	205.8p

The options outstanding at 30 December 2009 had a weighted average remaining contractual life of 0.70 years (2008: 1.26 years) and a fair value of £2.12 (2008: £2.06) each. The options were not rebased following the Capital Raising.

2006-2007 Long-Term Incentive Plans

Details of the shares outstanding at the end of the year under these schemes are as follows:

	Number of shares
	Opening	Lapsed	Closing
2006 awards	256,855	(256,855)	-
2007 awards	192,081	-	192,081

	448,936	(256,855)	192,081

The weighted average fair value of the outstanding LTIP awards at grant was £15.61 (2008: £13.06). The shares under grant were not rebased following the Capital Raising. The performance conditions for the 2007 award were not met so these shares have lapsed in 2010.

In calculating the charge for these LTIP awards in the Income Statement the following key assumptions were used:

· 50% Total return, none of which will vest based on expected performance

· 50% Total shareholder return which was derived by using the normal distribution of performance relative to the FTSE Real Estate Index. Calculation inputs are shown in the following table:

	Probability	Vesting	Value
	%	%	%
1st quartile	11	-	-
2nd quartile	39	-	-
3rd quartile	39	0 - 50	12.0
4th quartile	11	50	5.0

Total			17.0

2008 Long-Term Incentive Plan

In November 2008, shareholders approved the introduction of a new LTIP for senior employees. No awards were made under this scheme in 2009 and, as noted in the Directors' Remuneration Report, the Directors are proposing that it be replaced a new LTIP scheme subject to shareholder approval.

2008 Co-investment plan/Matching Share Agreement

In November 2008, shareholders approved the introduction of a new co-investment plan ('COIP') for senior employees. Participants may purchase shares using their annual bonus and receive matching shares subject to certain performance conditions. In addition, in March 2008 H Scott-Barrett was granted awards under a separate Matching Share Agreement.

No further shares were awarded, exercised, cancelled or lapsed under these agreements during the year, but as a result of the Capital Raising, the shares were rebased in line with a methodology prescribed by HMRC so that the number of shares outstanding at the end of the year was as follows:

	Number of shares
	Matching Share Agreement	COIP	Total
Outstanding at the start of the year	150,000	596,951	746,951
Increase resulting from Capital Raising	152,055	605,129	757,184

Outstanding at the end of the year	302,055	1,202,080	1,504,135

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

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

Expected volatility is based on the historic volatility of the Group's share price over the 3 years to the date of grant. The risk free rate is the yield at the date of grant on a gilt-edged stock with a redemption date equivalent to the expected life of the option or the performance period of the relevant scheme. Options are assumed to be exercised at the earliest possible date.

ESOT shareholding

At 30 December 2009, an Employee Share Ownership Trust ('ESOT') held 2,189,836 (2008: 1,991,760) shares, to enable the Group to meet the outstanding share awards under the schemes described above. The right to receive dividends on these shares has been waived. The market value of these shares at 30 December 2009 was £0.8 million (2008: £0.9 million).

	Number of	Number of
	shares	shares
	2009	2008
At the start of the year	1,991,760	904,905
Purchased in the year	198,076	1,226,660
Exercised/vested in year	-	(139,805)

At the end of the year	2,189,836	1,991,760

26 Reserves

		Share			Capital	Own
		premium	Revaluation	Other	redemption	shares	Retained
		account	reserve	reserves	reserve	held	earnings	Total
	Note	£m	£m	£m	£m	£m	£m	£m
As at 30 December 2007		219.7	2.4	10.9	4.4	(8.7)	467.2	695.9
Shares issued at premium		0.8	-	-	-	-	-	0.8
Revaluation of owner-occupied property	13a	-	(2.4)	-	-	-	-	(2.4)
Exchange differences		-	-	1.9	-	-	-	1.9
Amortisation of IFRS 1 reserve	27	-	-	(0.1)	-	-	-	(0.1)
Other transfers between reserves	27	-	-	1.1	-	-	(1.1)	-
Amortisation and vesting of own shares		-	-	-	-	(0.3)	0.3	-
Purchase of own shares		-	-	-	-	(0.7)	-	(0.7)
Credit in respect of share-based payments	25	-	-		-	-	1.2	1.2
Dividends paid	11	-	-	-	-	-	(15.4)	(15.4)
Loss for the year		-	-	-	-	-	(502.2)	(502.2)

As at 30 December 2008		220.5	-	13.8	4.4	(9.7)	(50.0)	179.0
Cancellation of share premium account	27	(220.5)	-	79.5	-	-	141.0	-
Shares issued at a premium	27	-	-	60.3	-	-	-	60.3
Credit in respect of share-based payments	25	-	-		-	-	0.3	0.3
Loss for the year		-	-	-	-	-	(119.7)	(119.7)

As at 30 December 2009		-	-	153.6	4.4	(9.7)	(28.4)	119.9

The balance on the Company's share premium account was cancelled by Court Order with effect from 28 August 2009 and transferred to the special reserve and retained earnings.

Transaction costs of £6.1 million relating to the Capital Raising have been deducted directly from equity through the merger reserve.

27 Other reserves

		Special reserve ¹	Merger reserve ²	Acquisition reserve ³	IFRS reserve ⁴	Foreign currency reserve	Net investment hedging reserve	Total
	Note		£m	£m	£m	£m	£m	£m
As at 30 December 2007		-	-	9.5	0.1	6.9	(5.6)	10.9
Exchange differences		-	-	-	-	19.6	(14.3)	5.3
Transfer to income statement on part-sale of German portfolio		-	-	-	-	(13.7)	9.8	(3.9)
Ineffective portion of hedge		-	-	-	-	-	0.5	0.5
Amortisation of IFRS reserve		-	-	-	(0.1)	-	-	(0.1)
Other transfers between reserves		-	-	-	-	1.1	-	1.1

As at 30 December 2008		-	-	9.5	-	13.9	(9.6)	13.8
Exchange differences		-	-	-	-	(3.9)	4.1	0.2
Ineffective portion of hedge		-	-	-	-		(0.2)	(0.2)
Cancellation of share premium	26	79.5	-	-	-	-	-	79.5
Shares issued at premium	26	-	60.3	-	-	-	-	60.3

As at 30 December 2009		79.5	60.3	9.5	-	10.0	(5.7)	153.6

1	The special reserve arose on the cancellation of the Company's share premium account on 28 August 2009. £141.0 million of the share premium account was credited to retained earnings and the balance of £79.5 million was moved to the special reserve pending consent from all of the Company's creditors at that date to transfer it to retained earnings.
2	The merger reserve arose on the Capital Raising, which was structured so as to allow the Company to claim merger relief on the issue of Ordinary shares as described in note 24.
3	The acquisition reserve relates to the acquisition of the remaining 50% of Morrison Merlin in 2005. Prior to this Morrison Merlin was a joint venture in which Capital & Regional had a 50% interest. The acquisition reserve arose from the difference between the fair value of the Company's existing 50% interest and the carrying value of that interest at the date of acquisition of the outstanding 50%. The reserve will remain in the balance sheet until Morrison Merlin is sold.
4	The IFRS reserve related to the requirements of IFRS 1. Where cash flow hedge accounting was being applied under a previous GAAP, IFRS 1 requires reserves are debited with the fair value of hedging derivatives at the date of transition for the Group to IFRS (31 December 2004). The entire gain or loss has been taken to equity and recycled to the income statement when the hedged transaction impacts profit or loss or as soon as the hedged transaction is no longer expected to occur.

28 Reconciliation of net cash from operations

		Year to	Year to
		30 December	30 December
		2009	2008
	Note	£m	£m
Loss on ordinary activities before financing		(105.1)	(478.5)
Adjusted for:
Share of loss in joint ventures and associates	18a	106.8	432.9
Loss on revaluation of investment properties	13a	2.8	31.7
Loss on sale of properties and investments		(0.1)	6.5
Impairment of goodwill	14	1.6	8.0
Impairment of trading property	13a	2.1	23.5
Depreciation of other fixed assets	15	0.4	0.6
Decrease in receivables		6.7	2.7
Decrease in payables		(10.3)	(52.1)
Non-cash movement relating to the LTIP	25	0.3	1.2

Net cash generated from operations		5.2	(23.5)

29 Net assets per share

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


	30 December 2009			30 December 2008
	Net assets	Number of	Net assets	Net assets
	£m	shares (m)	per share (£)	per share (£)
				(Restated)
Basic	129.8	350.6	0.37	1.30
Own shares held	-	(2.2)
Fair value of fixed rate loans (net of tax)	(1.6)

Triple net diluted net assets per share	128.2	348.4	0.37	1.33
Exclude fair value of fixed rate loans (net of tax)	1.6
Exclude fair value of derivatives	30.0
Exclude deferred tax	3.0

EPRA triple net diluted net assets per share	162.8	348.4	0.47	1.74

Comparative net asset per share figures have been restated to show the impact of the open offer to shareholders included in the Capital Raising in September 2009. Comparative EPRA triple net diluted net assets per share have also been restated to correctly reflect the treatment of deferred tax.

30 Return on equity

	30 December	30 December
	2009	2008
	£m	£m
Total recognised income and expense attributable to equity shareholders	(119.7)	(502.7)
Opening equity shareholders' funds	186.1	703.0
Return on equity	(64.3)%	(71.5)%

31 Disposal - Capital Retail Park Partnership

On 7 May 2009 the Group sold its wholly-owned subsidiary, Capital & Regional Cardiff (Jersey) Limited, which held the 50% interest in the Capital Retail Park Partnership. The net liabilities at the date of disposal and at 30 December 2008 were as follows:

		7 May	30 December
		2009	2008
	Note	£m	£m
Investment property		15.1	15.8
Current assets		4.3	5.0
Bank balance and cash		0.1	0.3
Current liabilities		(3.5)	(6.7)
Non-current liabilities		(16.5)	(15.4)

		(0.5)	(1.0)
Write-off of receivable from joint venture		1.2
Gain on disposal	13c, 18c	0.5

Total cash consideration		1.2

Net inflow arising on disposal:
Cash consideration		1.2
Cash and cash equivalents disposed of		(0.1)

		1.1

32 Operating lease arrangements

The Group as lessee - finance leases

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

	Minimum lease payments
	2009	2008
	£m	£m
Within one year	0.1	0.1
Between one and five years	0.2	0.2
After five years	4.8	4.8

	5.1	5.1

Less future finance charges	(4.1)	(4.5)

	1.0	0.6

	Present value of minimum lease payments
	2009	2008
	£m	£m
After five years	1.0	0.6

	1.0	0.6

The finance leases represent the headleases on the Group's leasehold investment and owner-occupied properties, all of which are denominated in sterling. The average remaining lease length is 109 years (2008: 110 years). As described in note 35, two of the Group's leasehold properties were sold after the balance sheet date and the relevant amounts payable under finance leases were therefore classified as held for sale.

During the year there were no contingent rents (2008: £nil) and the Group made sublease payments of £0.1 million (2008: £0.1 million).

The Group as lessee - operating leases

At the balance sheet date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases as follows:

	Land and buildings CRPM		Land and buildings SNO!zone		Other operating leases		Total
	2009	2008	2009	2008	2009	2008	2009	2008
	£m	£m	£m	£m	£m	£m	£m	£m
Within one year	0.1	0.1	2.1	2.1	0.1	0.3	2.3	2.5
Between one and five years	0.6	0.2	9.5	9.2	-	0.1	10.1	9.5
After five years	-	-	41.8	44.2	-	-	41.8	44.2

	0.7	0.3	53.4	55.5	0.1	0.4	54.2	56.2

Operating lease payments are denominated in sterling. The average remaining lease length is 18 years (2008: 19 years) and rentals are fixed for an average of 25 years (2008: 25 years).

During the year there were no contingent rents (2008: £nil) and the Group incurred lease payments recognised as an expense of £2.3 million (2008: £2.3 million).

The Group is currently negotiating a rent concession for SNO!zone Braehead which may reduce the amount payable under the lease in future years.

The Group as lessor

The Group leases out all of its investment properties under operating leases for average lease terms of 11 years (2008: 12 years) to expiry. The future aggregate minimum rentals receivable under non-cancellable operating leases are as follows:

	Unexpired							30	30
	average	Less					More	December	December
	lease	than 1	2 - 5	6 - 10	11 - 15	16 - 20	than 20	2009	2008
	term	year	years	years	years	years	years	Total	Total
100% figures	Years	£m	£m	£m	£m	£m	£m	£m	£m
Mall	9.7	112.9	361.5	234.5	87.7	51.9	259.1	1,107.6	1,459.6
Junction	12.7	36.5	149.6	161.7	91.1	32.0	1.9	472.8	611.5
X-Leisure	16.2	44.3	173.8	205.7	166.1	52.4	27.2	669.5	825.7

Total associates *		193.7	684.9	601.9	344.9	136.3	288.2	2,249.9	2,896.8

German portfolio	6.9	40.2	127.5	78.3	27.9	2.2	-	276.1	331.9
Other joint ventures	12.4	8.1	32.0	33.7	24.7	20.2	3.4	122.1	144.4

Total joint ventures		48.3	159.5	112.0	52.6	22.4	3.4	398.2	476.3

Wholly owned	8.5	6.6	29.6	38.3	20.2	5.0	0.8	100.5	91.7

Total		248.6	874.0	752.2	417.7	163.7	292.4	2,748.6	3,464.8

* excluding FIX UK where the Group has written down its investment to £nil.

There was no contingent rent (2008: £nil) recognised in income from wholly owned properties during the year.

33 Capital commitments

As at 30 December 2009 the Group's share of capital commitments of joint ventures and associates was £6.5 million (2008: £14.9 million). This comprised £5.9 million (2008: £10.2 million) relating to The Mall, £0.6 million (2008: £0.9 million) relating to The Junction and £nil (2008: £3.8 million) relating to the Cardiff joint venture.

34 Contingent liabilities

The Group has given certain guarantees relating to interest shortfalls and cost overruns in connection with the joint venture at Manchester Arena. The fair value of these guarantees is £0.1 million (2008: £0.2 million). The Group no longer has a guarantee in respect of its Cardiff joint venture which was sold during the year.

The Company has guaranteed the rent payable by SNO!zone Braehead Limited to the Xscape Braehead Partnership by SNO!zone Limited to the X-Leisure fund as described in note 36. During the year a provision of £1 million (2008: £nil) has been made against the Braehead guarantee in relation to the potential rent concession described in notes 18c and 35.

35 Events after the balance sheet date

Disposals - wholly-owned properties

As described in note 13, the sale of the Group's owner occupied leasehold property completed on 2 March 2010. The sale price after transaction costs was £10.3 million and the proceeds were used to pay down floating rate debt of £7.3 million secured on the property which was due to expire in March 2011. The disposal included £0.8 million of the finance lease balance shown in note 13. There was no profit or loss on disposal as the property was valued at its sale price at the year end.

As described in note 13, the sale of the Group's Beeston Place property completed on 10 March 2010. The sale price after transaction costs was £2.1 million and the disposal included £0.2 million of the finance lease balance shown in note 13. There was no profit or loss on disposal as the property was valued at its sale price at the year end.

The Mall

On 24 February 2010, The Mall fund completed on the sale of its Aberdeen property for £47.4 million at a net initial yield of 7.9%, compared to its year end valuation of £46.0 million, and on 8 March 2010 completed on the sale of its Preston property for £87.0 million at a net initial yield of 7.6%, compared to its year end valuation of £84.5 million.

Since the balance sheet date, £59.0 million from the proceeds of the December 2009 sale of The Mall's Bexleyheath property was used to redeem the same amount of the fund's bonds.

Braehead

On 4 February 2010, there was a breach of the loan agreement in the Braehead joint venture when the year end valuation was provided to the bank showing that the value of the property had fallen below the level required for the LTV covenant. The lender has agreed to extend the remedy period until 31 March 2010. The Group and its joint venture partner are currently in negotiations with the bank about the form of this remedy, which is likely to involve the injection of new equity into the Xscape Braehead Partnership in return for an LTV holiday. A rent concession is also being negotiated for SNO!zone Braehead which may have an adverse impact on the valuation of the Braehead property.

German joint venture

In January 2010, the German joint venture received credit committee approval for the extension of the Bank of Scotland €40 million (2008: €46.5 million) facility, with the new loan expiring in December 2013 (2008: June 2010). In March 2010, credit committee approval was also received for two Eurohypo facilities totalling €65 million (2008: €65 million), with the new loans expiring in December 2013 (2008: June 2010).

On 23 February 2010, the German joint venture completed on the sale of its Leipheim property and on 29 January 2010, the German joint venture exchanged on the sale of its Selm property. The sales were agreed for portfolio optimisation, as the properties were deemed to be non-core owing to their small size, so the proceeds of £6.0 million (at the year end exchange rate) are below the year end valuations of £7.5 million.

Other associates and joint ventures

On 20 January 2010, the Group paid a further £1.1 million to The FIX UK Limited Partnership as its proportional contribution of new equity to facilitate the refinancing of the debt on the portfolio.

As at 28 February 2010, the property valuation of the X-Leisure fund (excluding adjustments for tenant incentives and headleases) was £549.7 million. This gave a unit price of 26.0p, meaning the value of the Group's units excluding interest rate swap mark-to-market valuations was £23.9 million compared to £20.1 million at year end.

On 11 March 2010, the X-Leisure fund completed on the sale of its Croydon property for £32.5 million at a net initial yield of 7.6%. This compared to its year end valuation of £31.7 million.

Other

On 15 January 2010, HMRC formally agreed the amount of corporation tax payable for the liabilities described in note 10c. The first payment under the agreement of £3.3 million was made on 8 February 2010.

On 19 January 2010, the Group entered a forward contract to sell €47.0 million on 29 April 2011 at a fixed exchange rate of 1.143, which had the effect of extending its existing hedging arrangements on the German portfolio for another year.

36 Related party transactions

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

	Interest receivable from/ (payable to) related parties		Amounts owed by/(to) related parties
Capital & Regional plc	2009	2008	2009	2008
	£m	£m	£m	£m
Joint ventures
Xscape Braehead Partnership	0.6	0.6	8.6	12.1
German joint venture companies:
Capital & Regional (Europe LP) Limited	0.1	0.1	3.1	3.3
Capital & Regional (Europe LP 2) Limited	0.1	-	1.7	1.8
Capital & Regional (Europe LP 3) Limited	0.3	0.1	7.9	8.8
Capital & Regional (Europe LP 5) Limited *	-	-	0.7	1.1
Capital & Regional (Europe LP 6) Limited	0.1	-	1.8	1.9
Associates
The Mall Limited Partnership	-	-	(1.7)	(0.8)
The Junction Limited Partnership	-	-	(0.1)	(0.4)
X-Leisure Limited Partnership	-	-	(0.2)	(0.4)
* amounts owed to Capital & Regional Europe Holding 5 Limited, a subsidiary of Capital & Regional plc

Amounts payable by/(to) joint ventures incur interest at commercial rates. Interest is payable on demand, while principal amounts owed by the Xscape Braehead Partnership are repayable in 2012 and 2013, and principal amounts owed by the German joint venture companies are repayable in 2013. Balances are unsecured and settled in cash.

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

	Management and performance fees receivable from/(payable to) related parties		Amounts owed by/(to) related parties
CRPM	2009	2008	2009	2008
	£m	£m	£m	£m
Associates
The Mall Limited Partnership	9.5	11.6	0.6	(3.8)
The Junction Limited Partnership	2.1	4.2	-	0.4
X-Leisure Limited Partnership	2.8	(3.9)	-	(9.3)
The FIX UK Limited Partnership	0.2	0.1	-	0.5
Joint ventures
German portfolio	0.4	0.1	-	-
X-Leisure Limited	-	-	0.3	-
Manchester Arena Complex LP	-	-	0.2	-
Xscape Braehead Partnership	0.1	0.2	-	0.1

Management fees and performance fees are payable on demand. Balances are unsecured, do not incur interest and are settled for cash consideration.

	Rents payable to related parties		Amounts owed by/(to) related parties
Snozone Limited and Snozone Braehead Limited	2009	2008	2009	2008
	£m	£m	£m	£m
Associates
Xscape Milton Keynes Partnership	0.7	0.7	-	-
Xscape Castleford Partnership	0.7	0.7	-	-
Joint ventures
Xscape Braehead Partnership	0.7	0.7	(2.1)	(2.2)

Rent is payable quarterly for cash consideration, under the terms of the relevant lease and is secured by a guarantee from the Company of two years' rent and service charge payments in each case. The Group is currently in negotiations for a rent concession on SNO!zone Braehead which might require an equity injection into the Xscape Braehead Partnership in part settlement of this guarantee.

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

During 2009 the Group purchased IT and communication equipment from Redstone plc and Sage plc, on normal commercial terms. Alan Coppin was a director of Redstone plc until September 2009 and Paul Stobart is a director of Sage plc.

Transactions with key personnel

As per IAS 24 key personnel are considered to be the executive directors as they are the persons having the authority and responsibility for planning, directing and controlling the activities of the Group. Their remuneration in the income statement is detailed below.

	Year to	Year to
	30 December	30 December
	2009	2008
	£m	£m
Short term employment benefits	1.4	1.6
Post employment benefits	0.2	0.2
Other long term benefits *	-	(1.1)
Termination benefits	-	0.7
Share-based payments *	0.3	1.1

	1.9	2.5

* Other long term benefits relate to the Capital Appreciation Plan, which expired during the year, and Share-based payments relate to amounts awarded under the COIP and Matching Share Agreement.

This information is provided by RNS

The company news service from the London Stock Exchange

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