London & Associated Properties Regulatory News (LAS)

LONDON & ASSOCIATED PROPERTIES PLC Final Results for the year ended 31 December 2013 London & Associated Properties plc ("LAP" or the "Company") is a fully listedUK shopping centre and Central London retail property specialist. HIGHLIGHTS * Sale of King Edward Court, Windsor for an aggregate of £108 million * Further strategic property disposals of £17 million * New venture formed with Oaktree Capital Management and £120 million shopping portfolio acquired. * Property income of £8.2 million (£8.1 million on a like-for-like basis) * Fully diluted NAV of 59 pence per share (55.29 pence per share) * Net assets of £49.7 million (£46.5 million) * Total property assets of £238 million including properties under management (£244 million) * Dividend reintroduced of 0.125 pence per share. Chairman, Sir Michael Heller, comments: "Following these disposals LAP is in a stronger financial position for thefuture. We believe that there will be a number of interesting opportunities foryour Company to invest directly and to co-invest with third parties across theentire retail sector. We are well placed to take advantage of thoseopportunities as they arise." Ends. Contact: London & Associated Properties plc Tel: 020 7415 5000 John Heller, Chief Executive Robert Corry, Finance Director Baron Philips Associates Tel: 020 7920 3161 Baron Philips London & Associated Properties PLC Report and Accounts 2013 financial highlights Fully diluted net assets per share 59p 2012: 55.29p IFRS net assets £49.7m 2012: £46.5m Diluted EPRA net asset value per share 64.8p 2012: 80.3p Portfolio valuation* £238m 2012: £244m *Including properties under management financial calendar First interim management statement Friday 16 May 2014 Annual General Meeting Tuesday 10 June 2014 Announcement of half year results to 30 June 2014 Late August 2014 Second interim management statement Monday 17 November 2014 Announcement of annual results for 2014 Late April 2015 LAP at a glance WHOLLY OWNED Key projects Orchard Square, Sheffield,Market Row, BrixtonKing Square, West Bromwich Highlight Sale of King Edward Court shopping centre for £108m (completed January 2014) JOINT VENTURES AND INVESTMENTS Key projects Kingsgate Centre, DunfermlineThe Rushes Shopping centre, LoughboroughThe Vancouver Quarter centre, Kings LynnLangney, Eastbourne Highlights Appointed by Oaktree Capital Management to co-invest in and manage three oftheir shopping centres Planning permission has been granted for the redevelopment of Langney shoppingcentre in Eastbourne Sold Halifax for £8m successfully concluding the joint venture with LloydsBanking Group MANAGEMENT Key projects Agora Portfolio on behalf of Lloyds Banking Group Ealing portfolio on behalf ofNAMA Highlights Agora - All assets now successfully disposed of at levels ahead of expectation Ealing - This final asset was sold significantly ahead of bank value chairman and chief executive's statement I am pleased to report on a year of progress at LAP. The most significant eventof 2013 was the successful disposal of King Edward Court in Windsor for £105million. This brought the total proceeds from this centre to £108 million,since an additional unit let to Superdry, was sold for £3.175 million in July2013. The disposal marks the end of our successful ownership of King Edward Court.Shareholders will recall that we acquired it in 2002 for £45 million as thefirst investment in our joint venture with Bank of Scotland (now Lloyds BankingGroup). Between 2005-07 we redeveloped some 250,000 sq. ft. of Grade A retailspace to meet retailer demand. This scheme cost c.£25 million and included anew Waitrose supermarket plus shops for Zara, H&M, Top Shop and New Look, aswell as a Travelodge hotel. The development established Windsor as asignificant comparison shopping town, and led to continuous rental growth evenduring the most difficult years of the recession. We felt that the time was right to make this disposal. Strong investor demandfor quality shopping centres reinforced our opinion, and we considered thatfurther growth would only be achievable through significant development of oneend of the scheme. The proceeds of the sale have been used to pay off the associated loan fromLloyds Bank of £70 million. In addition, we terminated the swap used to hedgethis loan at a further cost of £14.6 million. During 2013 we also received £8.1 million from the sale of the Halifax propertywe owned jointly with Lloyds Bank, as this joint venture had reached the end ofits life. During our ownership, we maintained full occupancy and re-geared theleases to both Tesco, the anchor retail tenant, and Calderdale Borough Council,the principal tenant of the upper parts. Cash proceeds were used to pay downthe loan secured against the property, and surplus funds of £0.6 million wereadded to our cash reserves. Following these disposals LAP is in a stronger financial position for thefuture. We believe that there will be a number of interesting opportunities foryour Company to invest directly and to co-invest with third parties across theentire retail sector. We are well placed to take advantage of thoseopportunities as they arise. Bank finance is improving from the low points ofthe last few years but it is still patchy. Consequently a strong balance sheetremains an important advantage going forward. These transactions have strengthened our balance sheet and have enabled us tonegotiate better terms with the Royal Bank of Scotland (RBS), but we shall onlyrenew this line of credit for a short period. Your Board is in detailednegotiations with different lenders to totally replace the RBS facilities. Wehave a number of offers of finance which we are considering. All the offersreceived are on significantly better terms than those previously on offer fromRBS. Profit before tax under IFRS was £1.1 million compared to £7.6 million in theprevious year. However, if the impact of the discontinued operations isexcluded, the result was a profit of £1.6 million as compared to a loss £5.9million last year. Currently our underlying performance remains strong and weare anticipating a reduction in future interest costs as the derivatives areterminated and revised facilities are put in place. Total assets under management are £277 million. Net assets are £54.6 millionunder EPRA. London & Associated Management Services Ltd (LAMS) We have always managed properties for joint ventures and associates and in 2010we took the opportunity to grow this aspect of our business. London & Associated Management Services Ltd (LAMS) was formed to provide assetmanagement services for institutional type investors. In that year Lloyds Bankappointed us to assist with the asset management of a portfolio of shoppingcentres. We improved net operating income through intensive asset managementover a relatively short period of time, and this enabled us to successfullydispose of the centres on improved terms on the Bank's behalf. LAMS has expanded its workload considerably on behalf of the Banks and otherfinancial institutions. In 2013 we successfully completed the disposal of twoportfolios of shopping centres and other retail property on behalf of LloydsBank and NAMA (National Asset Management Agency, the Republic of Ireland'sstate-controlled "bad bank"). Once again, we enhanced the net operating incomeand upgraded the future cash flow profiles of the Centres to ensure maximumproceeds for the lenders. LAMS received fees of £620k for these projects. Our reputation for providing a full asset and property management service isgaining traction in the retail property market. As well as bank work-outmandates, we have been chosen by Oaktree Capital Management as a joint venturepartner to provide asset and property management services. In December 2013 thejoint venture acquired a portfolio of three shopping centres: the VancouverQuarter centre in Kings Lynn, the Rushes in Loughborough and the Kingsgateshopping centre in Dunfermline, Scotland. LAP's investment in this jointventure is £2.2 million. All three centres have suffered from a lack of investment due to the cashconstraints of the previous owners, but fundamentally they are of good qualityand in strong retail locations. We gained management control of these centresin January of this year and we have already placed a number of vacant unitsunder offer. We are confident that we will add significant value to thesecentres during the life of the joint venture, and I look forward to updatingshareholders on progress in the future. We report on our major centres as follows. Orchard Square, Sheffield Trading at Orchard Square remains strong. Three leases expired during 2013 andall three tenants have served notice requesting new leases. Two of thesetenants, Waterstones and Clarks shoes, have now agreed new leases, and theyboth show that rental income levels have remained close to the peaks achievedduring the last 10 years. We are close to finalising the third lease renewal. We reported last year that Republic, our tenant in one of the front units onFargate, had gone into administration, but was acquired by Sports Direct andconverted into a USC. Sports Direct have met with varied success with thisbusiness and as a consequence, they have decided to close a significant numberof their larger stores, including this one. The marketing of this unit has met with exceptionally strong interest from awide variety of national retailers. Currently we are exploring our optionswhich include letting the unit as a whole or splitting it into various smallerunits. We have offers from retailers on much of the space, and we will make aseparate announcement once negotiations have been concluded. USC was paying arent of £200,000 per annum, and we are confident that we will exceed thisfigure. Brixton Market Our two indoor markets in Brixton continue to see strong demand for space whichfar exceeds supply. Currently there is a waiting list of 160 traders and thiscontinues to drive rental growth. The Mayor of London is very keen to promoteLondon Village sites and the success of Brixton has been used as a partialjustification for this policy. West Bromwich The opening of the new Sandwell College with 12,000 students at the rear ofKing's Square has increased footfall through the centre and it is trading well.Metro Plaza, the Local Authority's redevelopment of the pedestrian walkway fromthe Metro station and the college to the rear entrance of our centre, is welladvanced and upon completion should further boost footfall. A new Tesco storeand other units in a new development on the opposite side of the High Streetare now open and trading, and they have brought significantly more shoppersinto West Bromwich town centre. A very high proportion of shoppers in WestBromwich arrive by public transport and with the main bus station at the sideof our centre, and the Metro station at the rear, shoppers dependent uponpublic transport have to pass through our centre to get to all parts of thetown centre. Langney Following a difficult year, during which the centre was closed due to thecollapsing of the atrium roof in heavy rain, we are pleased to report that allrepairs have been carried out. The centre reopened in the summer andis tradingwell. The costs of the repairs are being covered by insurance. During the yearwe obtained planning consent to extend the centre. Occupier interest is strongand we expect to agree a number of pre-lets in the near future. We will reporton this further as matters progress. Other swaps Having terminated the £70 million swap used to hedge the loan on Windsor, thecompany had a further £50.4 million of outstanding swaps. The directors havetaken the decision to terminate these swaps as well, and at the time of writingthere is just £20 million of notional swap remaining. This, too, will beterminated in the near future. Consequently, the company will be able to takeadvantage of the current low interest rates going forward. Bisichi Mining PLC Bisichi Mining PLC ("Bisichi") had a strong first half of the year, althoughthey had a more challenging second half. They had an EBITDA of £3 million(2012: £4.6 million) and their property values remained resilient for the fullyear. Greater detail about the full year of Bisichi's trading can be found inthe accounts of the company at www.bisichi.co.uk. Dividends Following the successful re-gearing of our balance sheet and the stronger cashflows that we anticipate achieving in the coming years, the Board have resolvedto pay dividends in the future. For 2013 your directors are recommending amodest final dividend of 0.125p per share payable on 4 July 2014 toshareholders registered at the close of business on 6 June 2014. We hope andexpect that dividends will grow in the future as the business makes furthertangible progress. We would, as always, like to thank the directors, staff and advisors, but thisyear we would like to make special mention of Mike Dignan, our director ofproperty, who has announced he will be retiring in June this year. Mike joinedLAP (or London & Associated Investment Trust as we were then called) in 1984,and has worked closely with the Board over the last 30 years. His wise counselhas always been appreciated and we wish him well for a long and happyretirement. Sir Michael Heller, John Heller,Chairman Chief Executive 17 April 2014 finance director's review 2013 has been a year of significant change for the Group with the sale of theproperty in Windsor, which was completed in January 2014. To enableshareholders to gain a proper reflection of the business going forward, theimpact of this and related transactions have been shown separatelyas a discontinued operation. As a result of the sale our gearing has been reduced substantially and we nowhave a strong Balance Sheet going forward which augurs well for the future ofthe business. Cash flow With the sale of Windsor at the year end, gearing is now 94.1%, down from180.9% in 2012. As part of the future financing strategy the Board decided to unwind the longdated swaps and all have now been terminated, apart from a notional £20 millionat a rate of 4.685%. This means that the group is able to take advantage of thelow interest rates and for 2014, our interest charge (assuming rates remainunchanged) should show a reduction of more than £7 million. This will give thegroup a stronger cash flow going forward. Once we have terminated the longdated swaps and replaced the £44 million term loan from RBS with a betterpriced alternative we intend to put in place appropriate hedging to cover theposition on that specific loan to ensure that we are protected against futureinterest rate rises. During the year a debenture of £5 million matured, which was repaid. We alsotook the opportunity to repay a further debenture of £1.7 million, due tomature in 2016 and rescheduled the 2018 debenture so that it now has £1 millionmaturing in 2016, £1 million in 2017 and the balance of £3 million in 2018 atno extra cost to the company. The remaining £10 million 2022 debenture remainsunchanged. This will generate an annual saving of over £0.7 million per annum. In the second half of the year we invested £2.2 million into a venture withOaktree Capital Management, an American Fund management business. This venturepurchased three shopping centres. London & Associated Management ServicesLimited (LAMS) has been awarded the contract to manage these properties, andthis will make a sizeable contribution to Group management income in this areawhich we see developing substantially in the coming years. We are looking to make similar investments as we develop the broad base of thebusiness. Income statement This statement has been adjusted so that the discontinued operations are shownseparately from the ongoing business enabling shareholders to better understandthe current trading position. Group property income on a like for like basishas increased by £0.2 million. Our mix of income continues to change as the importance of our managementbusiness (working for joint ventures and third parties) increases in relationto income earned from our directly owned properties. This is a positive trendsince it helps to reduce the risk to capital and the volatility of net income. The result, including revaluations and other movements, showed a profit of £1.6million (2012: loss £5.9 million). Much of this variation was attributable tothe volatility of derivative valuations which along with the related interestcost will not recur in future years. We also continue to monitor our overheads and reduce them wherever we can. Theoffice relocation we made in 2012 will be showing its full effect on theresults in year 2014 and going forward. The tax credit for the year relates entirely to movement in the deferred tax. Balance sheet The underlying assets of the Group on a management adjusted basis are shown inthe table below: 2013 Per IFRS Deferred Mark-to-market Head EPRA balance tax of interest leases Adjusted sheet swaps £'000 £'000 net £'000 £'000 assets £'000 Investment properties 92,046 (4,597) 87,449 Other fixed assets 2,403 2,403 Investments in associate and 9,593 9,593joint ventures Other assets 9,030 (2,785) (1,914) 4,331 Assets held for sale 15,067 15,067 Other liabilities (24,421) 9,569 4,597 (10,255) Net debt (53,984) (53,984) Net assets 49,734 (2,785) 7,655 - 54,604 Adjusted NAV per share 64.8p 2012 Investment properties 234,069 (28,657) 205,412 Other fixed assets 2,173 2,173 Investments in associate and joint 8,608 8,608ventures Other assets 8,000 (2,664) (7,805) (2,469) Other liabilities (75,106) 33,935 28,657 (12,514) Net debt (131,287) (131,287) Net assets 46,457 (2,664) 26,130 - 69,923 Adjusted NAV per share 80.3p Group net assets under IFRS were £49.7 million (2012: £46.5 million), but themore meaningful EPRA figure shows net assets of £54.6 million (2012: £69.9million). The reduction is due to the board's decision to terminate the longterm swaps. However this will improve the income position in future years. Accounting judgements and going concern The most significant judgements made in preparing these accounts relate to thecarrying value of the properties, investments and interest rate hedges all ofwhich are stated at fair value. The basis of the valuationfor the interest rate derivatives has been revised in the year (see accountingpolicies) because the Board has decided to terminate them rather than hold themfor the long term. For that reason they are now valued at their terminationvalue as compared to the net present value of the estimated extra costs whichwould arise to maturity if current market interest rates stayed the same untilthen. The Group uses external professional valuers to determine the values ofour properties. The Directors exercise their commercial judgement when reviewing the Group'scash flow forecasts and the underlying assumptions on whichthe forecasts are based. The Group's business activities, together with thefactors likely to affect its future development, are set out in the Chairmanand Chief Executive's Report and in this Report. In addition the Directorsconsider that note 17 to the financial statements sets out the company'sobjectives, policies and processes for managing its capital; its financial riskmanagement objectives; details of its financial instruments and hedgingactivities; its exposure to credit risk and liquidity risk. Negotiations are continuing with RBS in relation to the short term renewal ofthe £44.2 million term bank facility. While these negotiations are on-going theexisting facility has been allowed to continue. The documentation is beingfinalised and should be signed shortly. Negotiations are also in progress for anew long term facility which will replace the RBS loan and give the group longterm security on better terms. With a quality property portfolio comprising a majority of long leasessupported by suitable financial arrangements, the Directors believe the companyis well placed to manage its business risks successfully, despite thecontinuing uncertain economic climate. The Directors therefore havea reasonable expectation that the company has adequate resources to continue inoperational existence for the foreseeable future. Thus they continue to adoptthe going concern basis of accounting in preparingthe annual financial statements. Dividends In view of the improving strength of the company, the Directors are proposing afinal dividend of 0.125 pence per share payable in July 2014. Our associated company Bisichi Mining PLC, in which we hold a 42% stake, had astrong year. Bisichi had an EBITDA of £3 million for 2013 (2012: £4.6 million).There was a revaluation deficit under IFRS of £53,000 (2012: £456,000). I am confident that the continued policy of managing the Group's cash resourcesprudently will benefit us as we continue to move forward. Robert Corry,Finance Director 17 April 2014 portfolio overview Brixton Village and Market Row • Critically acclaimed as a Top 10 value location for eating in UK - Guardian(Life and Style) January 2014 • Colourful and eclectic • Over 160 traders on waiting list • Brixton Village Market has become the destination for budget eating in SouthLondon Time Out principal activity, strategy & business model The Group's principal business model is the investment in and management oftown centre retail property through direct investment and joint ventures, wherewe manage the property ourselves and on behalf of our partners. The mainstrategic priorities are: • Maximising income • Creating quality property • Capital strength OUR KEY STRENGTHS ARE OUR STRATEGY IS Maximising income By achieving an appropriate tenant mix and shoppingexperience we can increase footfallthrough the centres, hence tenant demand for space and an enhanced income. Creating quality property We look to improve the consumer experience at all ourcentres by achieving an appropriatetenant mix and a vibrant trading environment through investment activity,enhancement, refurbishment and development. Capital strength We operate within a prudent and flexible financial structure.Our gearing, which has beensubstantially reduced, provides financial stability whilst giving capacity andflexibility to look for further investments. risk and uncertainties DESCRIPTION OF RISK DESCRIPTION OF IMPACT MITIGATION Asset management: Tenant failure Financial loss. Initial and subsequent assessment of tenant covenant strength combined with an active credit control function. Leases not renewed Financial loss. Lease expiries regularly reviewed. Experienced in house teams with strong tenant and market knowledge who manage appropriate tenant mix. Asset illiquidity Assets may be illiquid Regular reporting of current and(size and and affect flexing of projected position to the Boardgeographical balance sheet. with efficient treasury management.location) People: Retention and Unable to retain and Nomination Committee and seniorrecruitment of staff attract the best people staff review skills gaps and for the key roles. succession planning. Training and development offered. Reputation: Business Loss in revenue. Documented Recovery Plan in place.interruption Impact on footfall. General and terrorism insurance policies in place and risks Adverse publicity. monitored by trained security staff. Potential for criminal/ civil proceedings. Health and Safety policies in place. CCTV in centres. Financing: Fluctuation in Impact on covenants and Secure income flows.property values other loan agreement obligations. Regular monitoring of LTV and IC covenants and other obligations. Focus on quality assets. Reduced availability Insufficient funds to Efficient treasury management.of meet existing debts/borrowing facilities interest payments and Loan facilities extended where operational payments. possible. Regular reporting of current and projected position to the Board. Loss of cash and Financial loss. Only use a spread of banks anddeposits financial institutions which have a strong credit rating. Fluctuation of Uncertainty of interest Manage derivative contracts tointerest rates rate costs. achieve a balance between hedging interest rate exposure and minimising potential cash calls. key performance indicators The Group's Key Performance Indicators are selected to ensure clear alignmentbetween its strategy, and shareholder interests.The KPIs are calculated using data from management reporting systems. Strategic priority KPI Performance Maximising income - occupancy We aim to maximise the total income in The ERV of the Void levels haveour properties by achieving full empty units as a remained veryoccupancy. percentage of our low in a difficult total income. trading environment. Maximising income - like for like property income To increase the like-for-like income Like-for-like After a small fallfrom the property year on year. rental income as in 2011 the a percentage of like-for-like the prior year rental income has rental. continued to grow. Capital Strength - growth in net asset value per share The net assets per share is the Increase in the The net assets perprincipal measure used by the group for net assets per share grew by 3.71monitoring its performance and is an share. pence per share orindicator of the level of reserves 6.7%.available for distribution by way ofdividend. The Rushes Shopping Centre Loughborough • Open air centre consisting of 15 units • c 235,000 sq ft • Anchored by Tesco • Other tenants include Next, M&S Food, Sports Direct and Argos • Includes a 440 space car park currently let to NCP Vancouver Quarter Kings Lynn • Open air centre consisting of 60 units • c 385,000 sq ft • Anchored by Sainsbury's • Other tenants include Superdrug, Iceland, Poundland and Wilkinsons • Includes the towns principal car park providing 440 spaces, currently let toAPCOA Kingsgate Shopping Centre Dunfermline • Covered centre consisting of 77 units • c 310,000 sq ft • Anchored by Debenhams • Other tenants include River Island, Topshop, New Look and H&M • Includes the towns principal car park providing 711 spaces, currently let toAPCOA corporate responsibility Greenhouse gas reporting We have reported on all of the emission sources required under the CompaniesAct 2006 (Strategic Report and Directors' Reports) Regulations for thereporting period 1st January 2013 to 31st December 2013. We have employed the Financial Control definition to outline our carbonfootprint boundary. Included within that boundary are Scope 1 & 2 emissionsfrom the landlord & tenant controlled areas of shopping centres and facilitiesthat we own. These include King Edward Court, Orchard Square, Brewery Street,Brixton Market, Shipley, Bridgend and Kings Square. Excluded from our footprint boundary are properties that we manageon behalf of others or not wholly owned by LAP (including The Halifax ShoppingCentre which is a 50/50 Joint Venture with Lloyds); and emissions considerednon material by the business. We have reported on emissions from Scope 1 & 2 emissions sources only. We havenot measured and reported on our Scope 3 emissions sources. Emissions forlandlord controlled areas have been calculated based on actual consumptioninformation collected from each shopping centre. Emissions from tenantcontrolled areas is calculated based on floor area and energy consumptionbenchmarks for general retail services in the UK. We have used the GHG Protocol Corporate Accounting and Reporting Standard(revised edition) and guidance provided by UK's Departmentof Environment and Rural Affairs (DEFRA) on voluntary and mandatory carbonreporting. Emission factors were used from UK Government's GHG ConversionFactors for Company Reporting 2013. 2013 Table1. Emissions from landlord & tenant controlled areas Emissions Source Amount Unit CO2e (Tonnes) Scope 1 Natural gas 2,107,320 kwh 939 Refrigerants 5 kg 9 Scope 2 Electricity 12,209,160 kWh 5,117 Total tCO2e 6,065 Table 2. Emissions from tenant controlled areas Emissions Source Amount Unit CO2e (Tonnes) Scope 1 Natural gas 0 kwh 0 Refrigerants 0 kg 0 Scope 2 Electricity 10,976,252 kWh 4,890 Total tCO2e 4,890 Table 3. Emission from landlord controlled areas Emissions Source Amount Unit CO2e (Tonnes) Scope 1 Natural gas 2,107,320 kwh 939 Refrigerants 5 kg 9 Scope 2 Electricity 1,232,908 kWh 227 Total 1,175 Intensity 1 Tonnes of CO2e per £ revenue 2013 for 0.000074 landlord controlled areas only Environment The Group's principal UK activity is property investment, which involvesrenting premises to retail businesses. We seek to provide those tenants withgood quality premises from which they can operate in an efficient andenvironmentally friendly manner. Where possible, improvements, repairs andreplacements are made in an environmentally efficient manner and wastere-cycling arrangements are in place at all of the Company's locations. Employee, social, community and human rights The Group's principal UK activity is to attract staff and motivate employees byoffering competitive terms of employment. The Group provides equalopportunities to all employees and prospective employees including those whoare disabled. Director, employees and gender representation At the year end the company had 6 directors (6 male, 0 female),5 senior managers (4 male, 1 female) and 19 employees (8 male, 11 female). Approved on behalf of the board of directors Robert Corry,Finance Director 17 April 2014 directors & advisors EXECUTIVE DIRECTORS * Sir Michael Heller MA FCA(Chairman) John A Heller LLB MBA(Chief Executive) Robert J Corry BA FCA(Finance Director) NON-EXECUTIVE DIRECTORS † Howard D Goldring BSC (ECON) ACAHoward Goldring has been a member of the board since July 1992, he is a globalasset allocation specialist and has over 30 years experience in the real estatemarket. He is executive Chairman of Delmore Asset Management Limited whichspecialises in the management of investment portfolios for private clients,charities, family trusts and pension funds. He also acts as an advisorproviding high level asset allocation advice to family offices and pensionschemes, including among others, Tesco Pension Investment Ltd. From 1997-2003he was consultant director on global asset allocation to Liverpool VictoriaAsset Management Limited. #† Clive A Parritt FCA CF FIIAClive A Parritt joined the board on 1 January 2006. He is a charteredaccountant with over 30 years experience of providing strategic, financial andcommercial advice to businesses of all sizes. He is Chairman of Baronsmead VCT2 plc, DiGiCo Global Limited and BG Consulting Group Limited as well as being adirector of Jupiter US Smaller Companies plc. Clive was President of theInstitute of Chartered Accountants in England and Wales in 2011-12. He isChairman of the audit committee and as Senior Independent Director he chairsthe Nomination and Remuneration Committees. Robin PriestRobin Priest joined the board on 31 July 2013. He is a Managing Director ofAlvarez & Marsal Real Estate Advisory Services LLP (A&M) and has more than 30years of experience in real estate and structured finance. He advises privatesector and public sector clients on both operational and financial real estatematters. Prior to joining A&M, Robin Priest was lead partner for Real EstateCorporate Finance in London with Deloitte LLP. He is a member of the investmentcommittee of a European real estate fund. He is also a trustee of London's OvalHouse Theatre. * Member of the nomination committee # Senior independent director † Member of the audit, remuneration and nomination committees SECRETARY & REGISTERED OFFICE Heather A Curtis ACIS24 Bruton PlaceLondon W1J 6NE DIRECTOR OF PROPERTY Mike J Dignan FRICS AUDITOR Baker Tilly UK Audit LLP PRINCIPAL BANKERS HSBC Bank PLCLloyds Banking Group PLCNational Westminster Bank PLCRoyal Bank of Scotland PLC SOLICITORS Olswang LLPPinsent Masons LLP STOCKBROKER Westhouse Securities Limited REGISTRARS & TRANSFER OFFICE Capita Asset ServicesShareholder ServicesThe Registry34 Beckenham RoadBeckenhamKentBR3 4TU Telephone 0871 664 0300(Calls cost 10p per minute + network extras,lines are open Mon-Fri 9.00am to 5.30pm)or +44 208 639 3399 for overseas callers. Website: www.capitaregistrars.comEmail: shareholderenquiries@capita.co.uk Company registration number341829 (England and Wales) WEBSITE www.lap.co.uk E-MAIL admin@lap.co.uk directors' report The directors submit their report and the audited accounts, for the year ended31 December 2013. Strategic report A comprehensive review and assessment of the Group's activities during the yearas well as its position at the year end and prospects for the forthcoming yearare included in the Chairman and Chief Executive's Statement and the StrategicReport. These reports should be read in conjunction with this report. Activities The principal activities of the Group during the year were property investmentand development, as well as investment in joint ventures and an associatedcompany. The associated company is Bisichi Mining PLC (Bisichi) in which thecompany holds a 42 per cent interest. Bisichi is listed on the London StockExchange and operates in England and South Africa with subsidiaries which areinvolved in overseas mining and mining investment. Business review Review of the Group's development and performance A review of the Group's development and performance can be found below andshould be read in conjunction with the Strategic Report. Property activities The Group is a long-term investor in property. It acquires retail properties,actively manages those assets to improve rental income and thus enhance thevalue of its properties over time. In reviewing performance, the principalareas regularly monitored by the Group include: • Rental income - the aim of the Group is to maximise the maintainable incomefrom each property by careful tenant management supported by sympathetic andrevenue enhancing development. Whilst income may be adversely affected by theinability of tenants to pay their rent, rent collection and tenant quality aremonitored carefully. Risk is also minimised by a diversified tenant base, whichshould limit the impact of the failure of any individual tenant. • Cash flow - allowing for voids, acquisitions, development expenditure,disposals and the impact of operating costs and interest charges, the Groupaims to maintain a positive cash flow. • Financing costs - the exposure of the Group to interest rate movements ismanaged by the use of swap arrangements (see note 18 for full details of thecontracts in place). These swap arrangements are designed to ensure that ourinterest costs are fixed and always covered by anticipated rental income. Onceput in place we intend that such swaps are generally retained until maturity.Details of key estimates adopted are contained in the accounting policies note. • Property valuations - market sentiment and economic conditions have a directeffect on property valuations, which can vary significantly (upwards ordownwards) over time. Bearing in mind the long-term nature of the Group'sbusiness, valuation changes have little direct effect on the ongoing activitiesor the income and expenditure of the Group. Tenants generally have long-termleases, so rents are unaffected by short-term valuation changes. Borrowings aresecured against property values and if those values fall very significantly,this could limit the ability of the Group to develop the business usingexternal borrowings. The risk is minimised by trying to ensure that there isadequate cover to allow for fluctuations in value on a short-term basis. It continues to be the policy of the Group to realise property assets when thevaluation of those assets reaches a level at which the directors consider thatthe long-term rental yield has been reached. The Group also seeks to acquireadditional property investments on an opportunistic basis when the potentialrental yields offer scope for future growth. Investment activities The investments in joint ventures and the associate are for the long term. The Group is an investor in the associate and manages the UK property assets ofthe associate. However the principal activity of the associate is overseasmining investment (principally in South Africa). The investment is held togenerate income and capital growth over the longer term. The other listedinvestments are held as current assets to provide the liquidity needed tosupport the property activities while generating income and capital growth. Investments in property are made through joint ventures when the financing andspreading of risk make it desirable. Dividend policy The directors are recommending payment of a final dividend for 2013 of 0.125pper share (2012 nil). Subject to shareholder approval, the total dividend per ordinary share for 2013will be 0.125p per ordinary share. The final dividend will be payable on Friday 4 July 2014 to shareholdersregistered at the close of business on 6 June 2014. The company's ordinary shares held in treasury At 31 December 2013, 1,254,738 (2012: 1,538,398) ordinary shares were held inTreasury with a market value of £552,084 (2012: £338,447). At the AnnualGeneral Meeting (AGM) in June 2013 members renewed the authority for thecompany to purchase up to 10 per cent. of its issued ordinary shares. Thecompany will be asking members to renew this authority at the next AGM in June2014. Movements in Treasury shares during the year: Number of shares Treasury shares held at 1 January 2013 1,538,398 Issued re directors bonuses (130,852 shares at 22p) (130,852) Issued re staff bonuses (128,026 shares at 22p) (128,026) Issued re Share Incentive Plan (Directors 4,673 shares at 21.75p) (4,673) Issued re Share Inventive Plan (Staff 20,109 shares at 21.75p) (20,109) Treasury shares held at 31 December 2013 1,254,738 Treasury shares are not included in issued share capital for the purposes ofcalculating earnings per share and net assets per share, and they do notqualify for dividends payable. Following the year-end, 391,503 shares were transferred from Treasury inrespect of shares issued in connection with an approved HMRC Share IncentivePlan and Directors' and staff bonuses. The shares were issued at 58.25p on 27February 2014. Investment properties The freehold and long leasehold properties of the Company and its subsidiarieswere revalued as at 31 December 2013 by external professional firms ofchartered surveyors - Allsop LLP, London (44.13 per cent of the portfolio),Woolhouse Real Estate (0.78 per cent), and by the Directors (55.09 per cent).The valuations, which are reflected in the financial statements, amount to £190.1 million (2012: £205.4 million). This is split between continuingoperations (£87.4 million) and assets held for sale (£102.7 million). Taking account of prevailing market conditions, the valuation of Groupproperties at 31 December 2013 resulted in a decrease of £5.8 million (2012:increase of £10.7 million). This is split between continuing operations (£0.5million) and discontinued operations (£5.3 million). This has been reflected inthe income statement in accordance with the requirements of IFRS. The impact ofproperty revaluations on the Company's joint ventures (Analytical VenturesLimited, Dragon Retail Properties Limited and Langney Shopping Centre UnitTrust) and the associate company (Bisichi Mining PLC) was a reduction of £0.5million (2012: reduction of £2.5 million). The proportion of this revaluationattributable to the Group (net of taxation) is reflected in the incomestatement and the consolidated balance sheet. Financial instruments Note 18 to the financial statements sets out the risks in respect of financialinstruments. The board reviews and agrees overall treasury policies, delegatingappropriate authority for applying these policies to the Chief Executive andFinance Director. Financial instruments are used to manage the financial risksfacing the Group and speculative transactions are prohibited. Treasuryoperations are reported at each board meeting and are subject to weeklyinternal reporting. Hedging arrangements are in place for the Company, itssubsidiaries and joint ventures in order to limit the effect of higher interestrates upon the Group. Where appropriate hedging arrangements are covered in theChairman and Chief Executive's Statement and the Finance Director's Review. Directors Sir Michael Heller, J A Heller, R J Corry, H D Goldring, C A Parritt wereDirectors of the company for the whole of 2013. Robin Priest was appointed tothe board on 31 July 2013 and will offer himself for election at the AnnualGeneral Meeting in 2014. His details are as follows: Robin Priest is a ManagingDirector of Alvarez & Marsal Real Estate Advisory Services LLP (A&M) and hasmore than 30 years of experience in real estate and structured finance. Headvises private sector and public sector clients on both operational andfinancial real estate matters. Prior to joining A&M, Robin Priest was leadpartner for Real Estate Corporate Finance in London with Deloitte LLP. RobinPriest has a contract of service with the Company determinable upon threemonths notice. The board has considered the appointment of Robin Priest andrecommends his election as Director. His knowledge of structured finance andexperience of dealing with challenging and complex assets and portfolios is ofsignificant benefit to the business. Directors' interests The interests of the Directors in the ordinary shares of the Company, includingfamily and trustee holdings, where appropriate can be found in the AnnualRemuneration Report. Substantial shareholdings At 31 December 2013 Sir Michael Heller and his family had an interest in 47.6million shares of the Company, representing 56.5 per cent. of the issued sharecapital net of treasury shares (2012: 47.5 million shares representing 56.6 percent.). Cavendish Asset Management Limited had an interest in 7,717,314 sharesrepresenting 9.16 per cent. of the issued share capital of the Company (2012:6,985,120 shares representing 8.32 per cent.). James Hyslop had an interest in3,856,258 shares representing 4.58 per cent. of the issued share capital of theCompany (2012: 3,336,258 shares representing 3.97 per cent.). The Company donot consider that the Heller family have a controlling share interestirrespective of the number of shares held as no individual party holds amajority and there is no legal obligation for shareholders to act in concert.Therefore the directors deem no party to have control. The Company is not aware of any other holdings exceeding 3 per cent. of theissued share capital. Following the year-end and at the date of this report SirMichael Heller and his family's interest increased to 47.9 million shares ofthe Company representing 56.6 per cent. of the issued share capital net oftreasury shares. Takeover directive The Company has one class of share capital, namely ordinary shares. Eachordinary share carries one vote. All the ordinary shares rank pari passu. Thereare no securities issued in the company which carry special rights with regardto control of the company. The identity of all significant direct or indirect holders of securities in thecompany and the size and nature of their holdings is shown in "Substantialshareholdings" above. The rights of the ordinary shares to which the HMRC approved Share IncentivePlan relates, are exercisable by the trustees on behalf of the employees. There are no restrictions on voting rights or on the transfer of ordinaryshares in the Company, save in respect of Treasury Shares. The rules governingthe appointment and replacement of Directors, alteration of the articles ofassociation of the company and the powers of the company's Directors accordwith usual English company law provisions. Each Director is re-elected at leastevery three years. The Company has requested authority from shareholders to buyback its own ordinary shares and there will be a resolution to renew theauthority at this year's AGM (Resolution 10). The company is not party to any significant agreements that take effect, alteror terminate upon a change of control of the company following a takeover bid.The company is not aware of any agreements between holders of its ordinaryshares that may result in restrictions on the transfer of its ordinary sharesor on voting rights. There are no agreements between the company and its directors or employeesproviding for compensation for loss of office or employment that occurs becauseof a takeover bid. Statement as to disclosure of information to the auditor The Directors in office on 31 December 2013 have confirmed that, so far as theyare aware, there is no relevant audit information of which the auditor isunaware. Each of the Directors has confirmed that they have taken all the stepsthat they ought to have taken as a Director in order to make them aware of anyrelevant audit information and to establish that it has been communicated tothe auditor. Directors and officers liability insurance The Group maintains Directors and officers insurance, which is reviewedannually and is considered to be adequate by the company and its insuranceadvisers. Donations No political donations were made during the year (2012: £Nil). Donations forcharitable purposes amounted to £2,548 (2012: £3,200). Greenhouse Gas Reporting Details of the Company's Greenhouse Gas Reporting for the year ended 31December 2013 can be found in the Strategic Report Going concern The directors have reviewed the cash flow forecasts of the Group and theunderlying assumptions on which they are based. They have also consideredcarefully the position in relation to renewal of the Group banking facilities.The Group's business activities, together with the factors likely to affect itsfuture development, are set out in the Chairman's and Chief Executive'sStatement and Finance Director's Review. In addition note 18 to the financialstatements sets out the company's objectives, policies and processes formanaging its capital; its financial risk management objectives; details of itsfinancial instruments and hedging activities; its exposure to credit risk andliquidity risk. Negotiations are continuing in relation to the renewal of the £44.2 millionterm bank facility which expired originally in September 2012. While thesenegotiations have been ongoing the existing facility was extended firstly to 2July 2013 and subsequently it has been allowed to continue while thedocumentation for a new short term facility is finalised. The negotiations havebeen protracted because the Board felt that the terms offered initially couldbe improved, even allowing for the fact that the facility sought is only forthe short term. The Board is seeking longer term funding from a new lender, asthis will be in the best interests of the Group. Negotiations for a new longterm facility are well advanced and we have received outline offers on goodterms from over 10 financial institutions. Following the sale of Windsor for £105 million in January 2014, we have paidoff the £70 million loan related to that property and we have terminated therelated interest rate swap at a cost of £14.6 million. The balance of theseproceeds is available to the Group. As a result the gearing of the Group hasimproved substantially (details of this are given in Note 18) and furtherimproved our negotiating position for short and longer term facilities. Thiscash could, of course, be used to reduce borrowings but the directors prefer touse it to further develop the business. In the circumstances the directors are confident that the short term facilityand a longer term replacement will be in place shortly. Should new funding notbe available, there is more than adequate security to cover the outstandingloan, net of transaction costs. With sound financial resources and long term leases in place and taking accountof the outline funding offers received, the Directors do not believe thatcurrent negotiations represent material uncertainties and they are satisfiedthat the Group is well placed to manage its business risks despite the currentuncertain economic outlook. Accordingly the Group has adequate resources tocontinue in operational existence for the foreseeable future. Thus we continueto adopt the going concern basis of accounting in preparing the annualfinancial statements. Annual General Meeting The Annual General Meeting will be held at 24 Bruton Place, London W1J 6NE onTuesday 10 June 2014 at 10.30 a.m. Items 1 to 8 will be proposed as ordinaryresolutions. More than 50 per cent. of shareholders' votes must be in favourfor those resolutions to be passed. Items 9 to 11 will be proposed as specialresolutions. At least 75 per cent. of shareholders' votes must be in favour forthose resolutions to be passed. The Directors consider that all of theresolutions to be put to the meeting are in the best interests of the companyand its shareholders as a whole and accordingly the board unanimouslyrecommends that shareholders vote in favour of all of the resolutions, as theDirectors intend to do in respect of their own beneficial holdings of ordinaryshares. Please note that the following paragraphs are only summaries of certainof the resolutions to be proposed at the Annual General Meeting and not thefull text of the resolutions. You should therefore read this section inconjunction with the full text of the resolutions contained in the notice ofAnnual General Meeting. Ordinary resolutions Resolution 8 - Authority to allot securities Paragraph 8.1.1 of Resolution 8 would give the Directors the authority to allotshares in the company and grant rights to subscribe for or convert any securityinto shares in the company up to an aggregate nominal value of £2,822,649. Thisrepresents approximately 1/3 (one third) of the ordinary share capital of thecompany in issue (excluding treasury shares) as at 15 April 2014 (being thelast practicable date prior to the publication of this Directors' Report). In line with guidance issued by the Association of British Insurers (`ABI')paragraph 8.1.2 of Resolution 8 would give the directors the authority to allotshares in the company and grant rights to subscribe for or convert any securityinto shares in the company up to a further aggregate nominal value of £2,822,649, in connection with a rights issue. This amount representsapproximately 1/3 (one third) of the ordinary share capital of the company inissue (excluding treasury shares) as at 15 April 2014 (being the lastpracticable date prior to the publication of this Directors' Report). The directors' authority will expire on 31 August 2015 or if earlier the nextAGM. The Directors do not currently intend to make use of this authority.However, if they do exercise the authority, the Directors intend to follow bestpractice as recommended by the ABI regarding its use (including as regards theDirectors standing for re-election in certain cases). Special resolutions The following special resolutions will be proposed at the Annual GeneralMeeting: Resolution 9 - Disapplication of pre-emption rights Under company law, when new shares are allotted or treasury shares are sold forcash (otherwise than pursuant to an employee share scheme) they must first beoffered to existing shareholders in proportion to their existing shareholdings.This special resolution gives the Directors authority, for the period ending onthe date of the next annual general meeting to be held in 2015, to: (a) allotshares of the company and sell treasury shares for cash in connection with arights issue or other pre-emptive offer; and (b) otherwise allot shares of thecompany, or sell treasury shares, for cash up to an aggregate nominal value of£423,397 representing in accordance with institutional investor guidelines,approximately 5 per cent. of the total ordinary share capital in issue as at 15April 2014 (being the last practicable date prior to the publication of thisDirectors' Report) in each case as if the pre-emption rights in company law didnot apply. Save in respect of issues of shares in respect of employee share schemes andshare dividend alternatives, the directors do not currently intend to make useof these authorities. The board intends to adhere to the provisions in thePre-emption Group's Statement of Principles not to allot shares for cash on anon-pre-emptive basis in excess of an amount equal to 7.5 per cent. of theCompany's ordinary share capital within a rolling three-year period withoutprior consultation with shareholders. The directors' authority will expire onon 31 August 2015 or if earlier the next AGM. Resolution 10 - Purchase of own ordinary shares The effect of Resolution 10 would be to renew the Directors' current authorityto make limited market purchases of the Company's ordinary shares of 10 penceeach. The power is limited to a maximum aggregate number of 8,467,947 ordinaryshares (representing approximately 10 per cent. of the company's issued sharecapital as at 15 April 2014 (being the latest practicable date prior topublication of this Directors' Report)). The minimum price (exclusive ofexpenses) which the Company would be authorised to pay for each ordinary sharewould be 10 pence (the nominal value of each ordinary share). The maximum price(again exclusive of expenses) which the company would be authorised to pay foran ordinary share is an amount equal to 105 per cent. of the average marketprice for an ordinary share for the five business days preceding any suchpurchase. The authority conferred by Resolution 10 will expire at theconclusion of the company's next annual general meeting to be held in 2015 or15 months from the passing of the resolution, whichever is the earlier. Anypurchases of ordinary shares would be made by means of market purchase throughthe London Stock Exchange. If granted, the authority would only be exercised if, in the opinion of theDirectors, to do so would result in an increase in earnings per share or assetvalues per share and would be in the best interests of shareholders generally.In exercising the authority to purchase ordinary shares, the Directors maytreat the shares that have been bought back as either cancelled or held astreasury shares (shares held by the company itself). No dividends may be paidon shares which are held as treasury shares and no voting rights are attachedto them. Other matters Baker Tilly UK Audit LLP has expressed its willingness to continue in office asauditor. A proposal will be made at the Annual General Meeting forreappointment. By order of the board Heather CurtisSecretary 17 April 201424 Bruton PlaceLondonW1J 6NE corporate governance Corporate governance The company has adopted the Corporate Governance Code for Small and Mid-SizeQuoted Companies (the QCA Code) published by the Quoted Companies Alliance. TheQCA Code provides governance guidance to small and mid-size quoted companies.The paragraphs below set out how the company has applied this guidance duringthe year. The company has complied with the QCA Code throughout the year. Principles of corporate governance The board promotes good corporate governance in the areas of risk managementand accountability as a positive contribution to business prosperity. The boardendeavours to apply corporate governance principles in a sensible and pragmaticfashion having regard to the circumstances of the business. The key objectiveis to enhance and protect shareholder value. Board structure During the year the board comprised the Chairman, the Chief Executive, oneother executive Director and three non-executive Directors. Their detailsappear above. The board is responsible to shareholders for the propermanagement of the Group. The Directors' responsibility statement in respect of the accounts is set outon below. The non-executive Directors have a particular responsibility toensure that the strategies proposed by the executive Directors are fullyconsidered. To enable the board to discharge its duties, all Directors havefull and timely access to all relevant information and there is a procedure forall Directors, in furtherance of their duties, to take independent professionaladvice, if necessary, at the expense of the Group. The board has a formalschedule of matters reserved to it and normally has eleven regular meetingsscheduled each year. Additional meetings are held for special business whenrequired. The board is responsible for overall Group strategy, approval of major capitalexpenditure and consideration of significant financial and operational matters. The board committees, which have written terms of reference, deal with specificaspects of the Group's affairs: • The nomination committee is chaired by C A Parritt and comprises one othernon-executive Director and the executive Chairman. The committee is responsiblefor proposing candidates for appointment to the board, having regard to thebalance and structure of the board. In appropriate cases recruitmentconsultants are used to assist the process. All directors are subject tore-election at a maximum of every three years. • The remuneration committee is responsible for making recommendations to theboard on the company's framework of executive remuneration and its cost. Thecommittee determines the contract terms, remuneration and other benefits foreach of the executive directors, including performance related bonus schemes,pension rights and compensation payments. The board itself determines theremuneration of the non-executive directors. The committee comprises twonon-executive directors and it is chaired by C A Parritt. The executiveChairman of the board is normally invited to attend. The Annual RemunerationReport is set out below. The audit committee comprises two non-executive Directors and is chaired by C AParritt. The audit committee report is set out below. Board and board committee meetings held in 2013 The number of regular meetings during the year and attendance was as follows: Meetings Meetings held attended R J Corry Board 11 11 Audit committee 2 2 H D Goldring Board 11 11 Audit committee 2 2 Nomination committee 2 2 Remuneration committee 5 5 Sir Michael Heller Board 11 11 Nomination committee 2 2 Remuneration committee 5 5 J A Heller Board 11 11 Audit committee 2 2 C A Parritt Board 11 11 Audit committee 2 2 Nomination committee 2 2 Remuneration committee 5 5 R Priest* Board 4 3 *From date of appointment on 31 July 2013 Performance evaluation - board, board committees and directors The performance of the board as a whole and of its committees and thenon-executive Directors is assessed by the Chairman and the Chief Executive andis discussed with the senior independent Director. Their recommendations arediscussed at the nomination committee prior to proposals for re-election beingrecommended to the board. The performance of executive Directors is discussedand assessed by the remuneration committee. The senior independent Directormeets regularly with the Chairman, executive and non-executive Directorsindividually outside of formal meetings. The Directors will take outside advicein reviewing performance but have not found this to be necessary to date. Independent directors The senior independent non-executive Director is C A Parritt. The otherindependent non-executive Directors are H D Goldring and R Priest. DelmoreAsset Management Limited (Delmore) is a company in which H D Goldring is amajority shareholder and Director. Delmore provides consultancy services to thecompany on a fee paying basis. Alvarez and Marsal Real Estate Advisory Services(A&M) is a company in whichR Priest is a Managing Director. A&M provides consultancy and advisory servicesthe company on a fee paying basis. The board encourages all three non-executive directors to act independently anddoes not consider that length of service of any individual non-executivedirector, nor any connection with the above mentioned consultancy and advisorycompanies has resulted in the inability or failure to act independently. In theopinion of the board the three non-executive directors continue to fulfil theirroles as independent non-executive directors. The independent Directors exchange views regularly between board meetings andmeet when required to discuss corporate governance and other issues concerningthe Group. Internal control The Directors are responsible for the Group's system of internal control andfor reviewing its effectiveness at least annually, and for the preparation andreview of its financial statements. The board has designed the Group's systemof internal control in order to provide the Directors with reasonable assurancethat assets are safeguarded, that transactions are authorised and properlyrecorded and that material errors and irregularities are either prevented orwould be detected within a timely period. However, no system of internalcontrol can eliminate the risk of failure to achieve business objectives orprovide absolute assurance against material misstatement or loss. The keyelements of the control system in operation are: • The board meets regularly with a formal schedule of matters reserved for itsdecision and has put in place an organisational structure with clearly definedlines of responsibility and with appropriate delegation of authority; • There are established procedures for planning, approval and monitoring ofcapital expenditure and information systems for monitoring the Group'sfinancial performance against approved budgets and forecasts; • The departmental heads are required annually to undertake a full assessmentprocess to identify and quantify the risks that face their departments andfunctions, and assess the adequacy of the prevention, monitoring andmodification practices in place for those risks. In addition, regular reportsabout significant risks and associated control and monitoring procedures aremade to the executive directors. The process adopted by the Group accords withthe guidance contained in the document "Internal Control Guidance for Directorson the Combined Code" issued by the Institute of Chartered Accountants inEngland and Wales. The audit committee receives reports from external auditorsand from executive Directors of the group. During the period, the auditcommittee has reviewed the effectiveness of the system of internal control asdescribed above. The board receives periodic reports from all committees. • There are established procedures for the presentation and review of thefinancial statements and the Group has in place an organisational structurewith clearly defined lines of responsibility and with appropriate delegation ofauthority. There are no internal control issues to report in the annual report andfinancial statements for the year ended 31 December 2013. Up to the date ofapproval of this report and the financial statements, the board has not beenrequired to deal with any related material internal control issues. TheDirectors confirm that the board has reviewed the effectiveness of the systemof internal control as described during the period. Communication with shareholders Prompt communication with shareholders is given high priority. Extensiveinformation about the Group and its activities is provided in the AnnualReport. In addition, a half-year report and two interim management statementsare produced for each financial year and published on the company's website.The company's website www.lap.co.uk is promptly updated with announcements andAnnual Reports upon publication. Copies from previous years are also availableon the website. The company's share price is published daily in the Financial Times. The shareprice history and market information can be found at http://www.londonstockexchange.com/prices-and-markets/markets/prices.htm. Our code isLAS. There is a regular dialogue with the company's stockbrokers and institutionalinvestors. Enquiries from individuals on matters relating to theirshareholdings and the business of the group are dealt with promptly andinformatively. The company's website is under continuous development to enable bettercommunication with both existing and potential new shareholders. The Bribery Act 2010 The Bribery Act 2010 came into force on 1 July 2011. All directors and staffhave since completed an e-learning course and continue to do so on a bi-annualbasis. The company is committed to acting ethically, fairly and with integrityin all its endeavours and compliance with the code is closely monitored. statement by the chairman of remuneration committee The remuneration committee is pleased to present its report for the year ended31 December 2013, which this year is presented in two parts in accordance withthe new regulations. The first part, is the Annual Remuneration Report which details remunerationawarded to directors and non-executive directors during the year. Theshareholders will be asked to approve the Annual Remuneration Report as anordinary resolution (as in previous years) at the AGM in June 2014. The secondpart, is the Remuneration Policy Report which details the remuneration policyfor directors. This policy is subject to a binding vote by shareholders at theAGM in 2014, and if approved will apply for a 3 year period commencing 10 June2014. The policy is very much in line with the previous policy although thelevel of disclosure has increased in line with the new regulations. Thecommittee reviewed the existing policy and deemed no changes necessary to thecurrent arrangements. Both of the above reports have been prepared in accordance with The Large andMedium-sized Companies and Groups (Accounts and Reports) (Amendment)Regulations 2013. The Company's auditor, Baker Tilly LLP is required by law to audit certaindisclosures and where disclosures have been audited they are indicated as such. C A ParrittChairman, Remuneration Committee 17 April 2014 annual remuneration report Annual report on remuneration The following information has been audited Single total figure of remuneration for the year ended 31 December 2013 Salary Bonuses Benefits Pensions Total National Total and fees before value £'000 £'000 £'000 2013 £'000 Share of options vesting £ '000- £'000 Share options £'000 Executive directors Sir Michael Heller* 7 216 34 - 257 n/a 257 J A Heller 327 326 30 33 716 n/a 716 R J Corry 166 10 24 33 233 n/a 233 500 552 88 66 1,206 - 1,206 Non-executive directors H D Goldring*+ 43 - 5 - 48 n/a 48 C A Parritt *+ 32 - - - 32 n/a 32 R Priest *^ 37 - - - 37 n/a 37 112 - 5 - 117 - 117 Total 612 552 93 66 1,323 - 1,323 * Note 21 "Related party transactions". ^ R Priest was appointed to the board on 31 July 2013 + Members of the remuneration committee for year ended 31 December 2013 Other benefits include the provision of car, health and other insurance andsubscriptions. Single total figure of remuneration for the year ended 31 December 2012 Salary Bonuses Benefits Pensions Total National Total and fees before value £'000 £'000 £'000 2012 £'000 Share of options vesting £ '000- £'000 Share options £'000 Executive directors Sir Michael Heller* 7 14 40 - 61 n/a 61 J A Heller 300 45 42 30 417 n/a 417 R J Corry 166 9 23 33 231 n/a 231 473 68 105 63 709 - 709 Non-executive directors H D Goldring*+ 43 - 4 - 47 n/a 47 C A Parritt *+ 33 - - - 33 n/a 33 76 - 4 - 80 - 80 Total 549 68 109 63 789 - 789 * Note 21 "Related party transactions". + Members of the remuneration committee for year ended 31 December 2012 Other benefits include the provision of car, health and other insurance andsubscriptions. Although Sir Michael Heller receives reduced remuneration in respect of hisservices to the Group, the Group does supply office premises, propertymanagement, general management, accounting and administration services for anumber of companies in which Sir Michael Heller has an interest. The boardestimates that the value of these services, if supplied to a third party, wouldhave been £300,000 (2012: £275,000) for the year. Further details of theseservices are set out in Note 21 "Related party transactions" to the financialstatements. H D Goldring's company, Delmore Asset Management Limited provides consultancyservices to the Group. This is dealt with in Note 21 to the financialstatements. C A Parritt provides consultancy services to the Group. This is dealt with inNote 21 to the financial statements. R Priest is a managing director of Alvarez & Marsal Real Estate AdvisoryServices who provide consultancy services to the Group. This is dealt with inNote 21 to the financial statements. Summary of directors' terms Date of Unexpired term Notice period contract Executive directors Sir Michael Heller 1 January 1971 Continuous 6 months John Heller 1 May 2003 Continuous 12 months Robert Corry 1 September Continuous 6 months 1992 Non-executive directors H D Goldring 1 July 1992 Continuous 3 months C A Parritt 1 January 2006 Continuous 3 months R Priest 31 July 2013 Continuous 3 months Total pension entitlements Two directors have benefits under money purchase schemes. Under their contractsof employments they are entitled to a regular employer contribution (currently£33k a year). There are no final salary schemes in operation. No pension costsare incurred on behalf of non-executive directors. Share Incentive Plan (SIP) In 2006 the directors set up an HMRC approved share incentive plan (SIP). Thepurpose of the plan, which is open to all eligible LAP executive directors andhead office based staff, is to enable them to acquire shares in the Company andgive them a continuing stake in the group. The SIP comprises four types ofshare - (1) free shares under which the Company may award shares of up to thevalue of £3,000 each year, (2) partnership shares, under which members may saveup to £1,500 per annum to acquire shares, (3) matching shares, through whichthe Company may award up to two shares for each share acquired as a partnershipshare, and (4) dividend shares, acquired from dividends paid on shares withinthe SIP. 1. Free shares: No free shares were awarded in 2013 (2012: 90,480). However,35,518 shares were awarded in February 2014 relating to 2013 bonuses and theseare shown below. Free shares awarded: Number of Number of Value of members shares shares 2013 2012 2013 2012 2013 2012 £ £ Directors: 1 1 5,150 13,636 3,000 3,000 R J Corry J A Heller - 1 - 13,636 - 3,000 Staff 6 5 30,368 63,208 17,690 13,906 Total at 31 December 7 7 35,518 90,480 20,690 19,906 2. Partnership shares: No partnership shares were issued between November 2012and October 2013. 3. Matching shares: The partnership share agreements for the year to 31 October2013 provide for two matching shares to be awarded free of charge for eachpartnership share acquired. No partnership shares were acquired in 2013 (2012:nil). Matching shares will usually be forfeited if a member leaves employmentin the group within 5 years of their grant. 4. Dividend shares: Dividends on shares acquired under the SIP will be utilisedto acquire additional shares. Accumulated dividends received on shares in theSIP to 31 December 2013 amounted to nil (2012: nil). Dividend shares issued: Number of Number of Value of members shares shares 2013 2012 2013 2012 2013 2012 £ £ Directors: R J Corry - 1 - 2,462 - 535 J A Heller - 1 - 2,211 - 481 Staff - 12 - 20,109 - 4,373 Total at 31 December - 14 - 24,782 - 5,389 The SIP is set up as an employee benefit trust - The trustee is London &Associated Securities Limited, a wholly owned subsidiary of LAP, and all sharesand dividends acquired under the SIP will be held by the trustee untiltransferred to members in accordance with the rules of the SIP. Share Option Schemes The Company has an HMRC approved scheme (Approved Scheme). It was set up in1986 in accordance with HMRC rules to gain HMRC approved status which gave themembers certain tax advantages. There are no performance criteria for theexercise of options under the Approved Scheme, as this was set up before suchrequirements were considered to be necessary. No director has any optionsoutstanding under the Approved Scheme nor were any options granted under theApproved Scheme for the year ended 31 December 2013. A share option scheme known as the "Non-approved Executive Share Option Scheme"(Unapproved Scheme) which does not have HMRC approval was set up during 2000.At 31 December 2013 there were no options to subscribe for ordinary sharesoutstanding. The exercise of options under the Unapproved Scheme is subject tothe satisfaction of objective performance conditions specified by theremuneration committee which conforms to institutional shareholder guidelinesand best practice provisions. 70,000 options under the Unapproved Scheme lapsedduring the year to 31 December 2013. Further details of this scheme are set outin Note 20 "Share Capital" to the financial statements. Payments to past directors No payments were made to past directors in the year ended 31 December 2013. Payments for loss of office No payments for loss of office were made in the year ended 31 December 2013. Statement of directors' shareholding and share interest Directors' interests The interests of the Directors in the ordinary shares of the Company, includingfamily and trustee holdings, where appropriate, were as follows: Beneficial interests Non-beneficial interests 31 Dec 13 1 Jan 13 31 Dec13 1 Jan 13 Sir Michael Heller 6,335,252 6,304,002 19,277,931 19,277,931 R J Corry 1,028,448 998,355 - - H D Goldring 19,819 19,819 - - J A Heller 1,673,581 1,630,649 †14,073,485 †14,073,485 C A Parritt 36,166 36,166 - - †These non-beneficial holdings are duplicated with those of Sir Michael Heller. The beneficial holdings of Directors shown above include their interests in theShare Incentive Plan. Performance graph and table The graph (unaudited) illustrates the Company's performance as compared with abroad equity market index over a five year period. Performance is measured bytotal shareholder return. The directors have chosen the FTSE All Share - TotalReturn Index as a suitable index for this comparison as it gives an indicationof performance against a large spread of quoted companies. The bid market priceof London & Associated Properties PLC ordinary shares at 31 December 2013 was22.0p (2012: 22.0p). During the year the share mid-market price ranged between21.75 and 44.0p. Remuneration of the Chief Executive over the last five years Year CEO Chief Executive Single Annual bonus Long-term incentive total figure of payout vesting rates against against maximum remuneration opportunity* maximum opportunity* £'000 % % 2013 J A 716 n/a n/a Heller 2012 J A 417 n/a n/a Heller 2011 J A 671 n/a n/a Heller 2010 J A 577 n/a n/a Heller 2009 J A 982 n/a n/a Heller \* There were no formal criteria or conditions to apply in determining the amountof bonus payable or the number of shares to be issued. Percentage change in Chief Executive's Remuneration (audited) The table below shows the percentage change in Chief Executive remuneration forthe prior year compared to the average percentage change for all other HeadOffice based employees. To provide a meaningful comparison, the same group ofemployees (although not necessarily the same individuals) appear in the 2012and 2013 group. The remuneration committee chose Head Office based employees asthe comparator group as this group forms the closest comparator group. Chief Executive Head Office Employees £'000 £'000 2013 2012 % change 2013 2012 % change Base salary 327 300 9% 894 900 (0.6%) Taxable benefits 30 42 (28%) 117 134 (12%) Annual bonus 326 45 625% 209 61 242% Total 683 387 76% 1,220 1,095 11% Relative importance of spend on pay The total expenditure of the Group on remuneration to all employees (Note 22refers) is shown below: 2013 2012 £'000 £'000 Employee Remuneration 2,730 1,946 Distributions to shareholders - 630 Statement of implementation of remuneration policy in the following year If the policy is approved at the AGM in June 2014 it is intended that theremuneration policy take effect from 10 June 2014. The vote on the remunerationpolicy is binding in nature. The Company may not then make a remunerationpayment or payment for loss of office to a person who is, is to be, or has beena director of the Company unless that payment is consistent with the approvedremuneration policy, or has otherwise been approved by a resolution of members. Consideration by the directors of matters relating to directors' remuneration The Remuneration Committee considered the executive directors remuneration andthe board considered the non-executive directors remuneration in the year ended31 December 2013. No increases were awarded and no external advice was taken inreaching this decision. Shareholder voting At the Annual General Meeting on 4 June 2013, there was an advisory vote on theresolution to approve the Remuneration Report the result of which is detailedbelow: % of votes % of votes Number of for against votes withheld Resolution to approve the 99.16 0.61 54Remuneration Report remuneration policy Introduction Set out below is the Group policy on directors' remuneration. This will beproposed for a binding vote at the 2014 AGM. If approved the policy will takeeffect from 10 June 2014. In setting the policy, the Remuneration Committee has taken the following intoaccount: • The need to attract, retain and motivate individuals of a calibre who willensure successful leadership and management of the company • The Group's general aim of seeking to reward all employees fairly accordingto the nature of their role and their performance • Remuneration packages offered to similar companies within the same sector • The need to align the interests of shareholders as a whole with the long-termgrowth of the Group • The need to be flexible and adjust with operational changes throughout theterm of this policy The remuneration of non-executive directors is determined by the board, andtakes into account additional remuneration for services outside the scope ofthe ordinary duties of non-executive directors. Future policy table Element Purpose Policy Operation Opportunity and performance conditions Executivedirectors Base To recognise: Considered by Reviewed annually There is nosalary remuneration whenever there is prescribed maximum Skills committee on a change salary or maximum appointment of role or rate of increase Responsibility operational Set at a level responsibility No specific Accountability considered performance appropriate to Paid monthly in conditions are Experience attract, retain, cash attached to base motivate and salaries Value reward the right individuals Pension To provide Company The contribution Company competitive contribution payable by the contribution retirement offered at up to Company is offered at up to benefits 10% of base included in the 10% of base salary salary as part of director's as part of overall overall contract of remuneration remuneration employment package package Paid into money No specific purchase schemes performance conditions are attached to pension contributions Benefits To provide a Contractual The committee The costs competitive benefits include: retains the associated with benefits discretion to benefits offered package Car or car approve changes are closely allowance in contractual controlled and benefits in reviewed on an Group health exceptional annual basis cover circumstances or where factors No specific Death in service outside the performance cover control of the conditions are Group lead to attached to Permanent health increased costs contractual insurance (e.g. medical benefits inflation) The value of benefits for each director for the year ended 31 December 2013 is shown in the table above Annual To reward and In assessing the The remuneration The currentBonus incentivise performance of committee maximum bonus will the executive determines the not exceed 200% of team, and in level of bonus on base salary in any particular to an annual basis one year but the determine whether applying such remuneration bonuses are performance committee reserves merited the conditions and the power to award remuneration performance up to 300% in an committee takes measures as it exceptional year into account the considers overall appropriate Performance performance of conditions will be the business, as assessed on an well as annual basis individual contribution to The performance the business in measures applied the period may be financial, non-financial, Bonuses are corporate, generally offered divisional or in cash or shares individual and in such proportion as the remuneration committee consider appropriate Share To provide Granted under Offered at Entitlement toOptions executive existing schemes appropriate times share options directors with by the granted under the a long-term remuneration Approved Option interest in committee scheme are not the company subject to performance criteria. Share Options granted under the Unapproved Scheme are subject to the performance criteria specified in the Scheme rules Share options will be offered by the remuneration committee as appropriate There are no maximum levels for share options offered Share To offer a Offered to Maximum Of any bonusIncentive shorter term executive participation awarded, DirectorsPlan incentive in directors and levels are set by may opt to have(SIP) the company head office staff HMRC maximum of £3,000 and to give of per year paid directors a in `Free Shares' stake in the under the SIP group scheme rules Full detail of the SIP can be found above Future policy table continued Element Purpose Policy Operation Opportunity and performance conditions Non-executive directors Base To Considered by the Reviewed annually There is nosalary recognise: board on prescribed appointment maximum salary Skills or maximum rate Set at a level of increase Experience considered appropriate to No performance Value attract, retain conditions are and motivate the attached to individual base salaries Experience and time required for the role are considered on appointment Pension No pension offered Benefits No benefits The committee retains the The costs offered except to discretion to approve associated with one non-executive changes in contractual benefits director who is benefits in exceptional offered are eligible for circumstances or where closely health cover (see factors outside the controlled and annual control of the Group lead reviewed on an remuneration to increased costs (e.g. annual basis report above) medical inflation) No specific performance conditions are attached to contractual benefits Share Non-executiveOptions directors do not participate in the share option schemes Notes to the Future Policy Table The remuneration committee consider the performance measures outlined in thetable above to be appropriate measures of performance. For details ofremuneration of other Company employees please see below Remuneration scenarios An indication of the possible level of remuneration that would be received byeach Executive director in the year commencing 10 June 2014 in accordance withthe director's remuneration policy is shown below. Assumptions Minimum Consists of base salary, benefits and pension. Base salary, benefits andpension for 2014 are assumed at the levels included in the single total figureremuneration table for the year ended 31 December 2013 above. On target Based on the average percentage bonus awarded to the individual in the threeyears ending on 31 December 2013. As outlined in the policy table above, theremuneration committee has discretion to award bonuses of up to 200% of basesalary in any one year (up to 300% in an exceptional year). Base salary, benefits and pension for 2014 are assumed at the levels includedin the single total figure remuneration table for the year ended 31 December2013 above. Maximum Based on maximum remuneration receivable if 300% base salary awarded as bonusin an exceptional year Base salary, benefits and pension for 2014 are assumed at the levels includedin the single total figure remuneration table for the year ended 31 December2013 above. Approach to recruitment remuneration All appointments to the board are made on merit. The components of theremuneration package (for a new director who is recruited within the life ofthe approved remuneration policy) would comprise base salary, pension,benefits, annual bonus and an opportunity to be granted share options asoutlined above. The approach to such appointments are detailed within thefuture policy table above. The Company will pay such levels of remuneration tonew directors that will enable the Company to attract appropriately skilled andexperienced individuals but which are not, in the opinion of the remunerationcommittee, excessive. Service contracts All executive directors have full-time contracts of employment with theCompany. Non-executive directors have contracts of service. No director has acontract of employment or contract of service with the Company, its jointventure or associated companies with a fixed term which exceeds twelve months.Directors notice periods (see above for the annual remuneration report) are setin line with market practice and of a length considered sufficient to ensure aneffective handover of duties should a director leave the company. All directors' contracts as amended from time to time, have run from the dateof appointment. Service contracts are kept at the registered office. Policy on payment for loss of office There are no contractual provisions agreed prior to 27 June 2012 that couldimpact on a termination payment. Termination payments will be calculated inaccordance with the existing contract of employment or service contract. It isthe policy of the remuneration committee to issue employment contracts toexecutive directors with normal commercial terms and without extended terms ofnotice which could give rise to extraordinary termination payments. Consideration of employment conditions elsewhere in the company In setting this policy for directors' remuneration the remuneration committeehas been mindful of the Company's objective to reward all employees fairlyaccording to their role, performance and market forces. In setting the policyfor Directors' remuneration the committee has considered the pay and employmentconditions of the other employees within the group. No formal consultation hasbeen undertaken with employees in drawing up the policy. The committee has notused formal comparison measures. Consideration of shareholder views No shareholder views have been taken into account when formulating this policy.In accordance with the new regulations, an ordinary resolution for approval ofthis policy will be put to shareholders at the AGM in June 2014. audit committee report The committee's terms of reference have been approved by the board and followpublished guidelines, which are available on request from the companysecretary. At the year end the audit committee comprised the two non-executive directors -H D Goldring and C A Parritt, both of whom are Chartered Accountants. The audit committee's primary tasks are to: • review the scope of external audit, to receive regular reports from BakerTilly UK Audit LLP and to review the half-yearly and annual accounts beforethey are presented to the board, focusing in particular on accounting policiesand areas of management judgement and estimation; • monitor the controls which are in force to ensure the integrity of theinformation reported to the shareholders; • act as a forum for discussion of internal control issues and contribute tothe board's review of the effectiveness of the Group's internal control andrisk management systems and processes; • to review the risk assessments made by management, consider key risks withaction taken to mitigate these and to act as a forum for discussion of riskissues and contribute to the board's review of the effectiveness of the Group'srisk management control and processes; • consider once a year the need for an internal audit function; • advise the board on the appointment of the external auditors, the rotation ofthe audit partner every five years and on their remuneration for both audit andnon-audit work; discuss the nature and scope of their audit work and undertakea formal assessment of their independence each year, which includes: i) a review of non-audit services provided to the Group and related fees; ii) discussion with the auditors of their written report detailing allrelationships with the company and any other parties that could affectindependence or the perception of independence; iii) a review of the auditors own procedures for ensuring the independence ofthe audit firm and partners and staff involved in the audit, including theregular rotation of the audit partner; and iv) obtaining a written confirmation from the auditors that, in theirprofessional judgement, they are independent. Meetings The committee meets at least twice prior to the publication of the annualresults and discusses and considers the half year results prior to theirapproval by the board. The audit committee meetings are attended by theexternal audit partner, chief executive, finance director and companysecretary. During the year the members of the committee also meet on aninformal basis to discuss any relevant matters which may have arisen.Additional formal meetings may be held as necessary. During the past year the committee: • met with the external auditors, and discussed their reports to the auditcommittee. • approved the publication of annual and half year financial results. • considered and approved the annual review of internal controls. • decided that there was no current need for an internal audit function. • agreed the independence of the auditors and approved their fees for bothaudit and non-audit services as set out in note 2 to the financial statements. • the chairman of the audit committee has also had separate discussions withthe external audit partner. External Auditor Baker Tilly UK Audit LLP held office throughout the period under review. In theUnited Kingdom London & Associated Properties PLC provides extensiveadministration and accounting services to Bisichi Mining PLC, which has its ownaudit committee and employs BDO LLP, a separate and independent firm ofregistered auditor. C A ParrittChairman - Audit Committee 17 April 2014 directors' responsibility statement The directors are responsible for preparing the Strategic Report and theDirectors' Report, the Directors' Remuneration Report and the financialstatements in accordance with applicable law and regulations. Company law requires the directors to prepare group and company financialstatements for each financial year. The directors are required under theListing Rules of the Financial Conduct Authority to prepare group financialstatements in accordance with International Financial Reporting Standards("IFRS") as adopted by the European Union ("EU") and have elected under companylaw to prepare the company financial statements in accordance with UnitedKingdom Generally Accepted Accounting Practice (United Kingdom AccountingStandards and applicable law). The group financial statements are required by law and IFRS adopted by the EUto present fairly the financial position and performance of the group; theCompanies Act 2006 provides in relation to such financial statements thatreferences in the relevant part of that Act to financial statements giving atrue and fair view are references to their achieving a fair presentation. Under company law the directors must not approve the financial statementsunless they are satisfied that they give a true and fair view of the state ofaffairs of the group and the company and of the profit or loss of the group forthat period. In preparing each of the group and company financial statements, the directorsare required to: a. select suitable accounting policies and then apply them consistently; b. make judgements and accounting estimates that are reasonable and prudent; c. for the group financial statements, state whether they have been prepared inaccordance with IFRSs adopted by the EU and for the company financialstatements state whether applicable UK accounting standards have been followed,subject to any material departures disclosed and explained in the companyfinancial statements; d. prepare the financial statements on the going concern basis unless it isinappropriate to presume that the group and the company will continue inbusiness. The directors are responsible for keeping adequate accounting records that aresufficient to show and explain the group's and the company's transactions anddisclose with reasonable accuracy at any time the financial position of thegroup and the company and enable them to ensure that the financial statementsand the Directors' Remuneration Report comply with the Companies Act 2006 and,as regards the group financial statements, Article 4 of the IAS Regulation.They are also responsible for safeguarding the assets of the group and thecompany and hence for taking reasonable steps for the prevention and detectionof fraud and other irregularities. Directors' statement pursuant to the Disclosure and Transparency Rules Each of the directors, whose names and functions are listed above confirm that,to the best of each person's knowledge: a. the financial statements, prepared in accordance with the applicable set ofaccounting standards, give a true and fair view of the assets, liabilities,financial position and profit of the company and the undertakings included inthe consolidation taken as a whole; and b. the Strategic Report contained in the Annual Report includes a fair reviewof the development and performance of the business and the position of thecompany and the undertakings included in the consolidation taken as a whole,together with a description of the principal risks and uncertainties that theyface. The directors are responsible for the maintenance and integrity of thecorporate and financial information included on the London & AssociatedProperties PLC website. Legislation in the United Kingdom governing the preparation and disseminationof financial statements may differ from legislation in other jurisdictions. valuers' certificates To the Directors of London & Associated Properties PLC In accordance with your instructions we have carried out a valuation of thefreehold and leasehold property interests held as at31 December 2013 by the company as detailed in our Valuation Reports dated 31January 2014. Having regard to the foregoing, we are of the opinion that the fair value as at31 December 2013 of these interests was: £'000 Freehold 67,180 Leasehold 16,950 84,130 33 Wigmore Street, London W1U 1BZ Allsop LLP31 January 2014 Regulated by Royal Institute Chartered Surveyors To the Directors of London & Associated Properties PLC In accordance with your instructions we have carried out a valuation of thefreehold property interests held as at 31 December 2013 by the company asdetailed in our Valuation Report dated 14 February 2014. Having regard to the foregoing, we are of the opinion that the fair value as at31 December 2013 of these interests was: £'000 Freehold 1,494 Capitol House, Russell Street, Leeds LS1 5SP Woolhouse Real Estate14 February 2014 Regulated by Royal Institute Chartered Surveyors independent auditor's report to the members of london & associated properties plc We have audited the group and parent company financial statements ("thefinancial statements") which comprise the Consolidated income statement, theConsolidated balance sheet, the Consolidated statement of changes inshareholders' equity, the Consolidated statement of comprehensive income, theConsolidated cash flow statement, the Group accounting policies, the Notes tothe Financial Statements, the Company balance sheet, and the related notes.The financial reporting framework that has been applied in the preparation ofthe group financial statements is applicable law and International FinancialReporting Standards (IFRSs) as adopted by the European Union. The financialreporting framework that has been applied in the preparation of the parentcompany financial statements is applicable law and United Kingdom AccountingStandards (United Kingdom Generally Accepted Accounting Practice). This report is made solely to the company's members, as a body, in accordancewith Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has beenundertaken so that we might state to the company's members those matters we arerequired to state to them in an auditor's report and for no other purpose. Tothe fullest extent permitted by law, we do not accept or assume responsibilityto anyone other than the company and the company's members as a body, for ouraudit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor As more fully explained in the Directors' Responsibilities Statement set outabove the directors are responsible for the preparation of the financialstatements and for being satisfied that they give a true and fair view. Ourresponsibility is to audit and express an opinion on the financial statementsin accordance with applicable law and International Standards on Auditing (UKand Ireland). Those standards require us to comply with the Auditing PracticesBoard's (APB's) Ethical Standards for Auditors. Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided onthe Financial Reporting Council's website at http://www.frc.org.uk/Our-Work/Codes-Standards/Audit-and-assurance/Standards-and-guidance/Standards-and-guidance-for-auditors/Scope-of-audit/UK-Private-Sector-Entity-(issued-1-December-2010).aspx Opinion on financial statements In our opinion • the financial statements give a true and fair view of the state of thegroup's and of the parent company's affairs as at 31 December 2013 and of thegroup's profit for the year then ended; • the group financial statements have been properly prepared in accordance withIFRSs as adopted by the European Union; • the parent company financial statements have been properly prepared inaccordance with United Kingdom Generally Accepted Accounting Practice; and • the financial statements have been prepared in accordance with therequirements of the Companies Act 2006 and, as regards the group financialstatements, Article 4 of the IAS Regulation. Emphasis of matter - Going Concern In forming our opinion on the financial statements, which is not modified, wehave considered the adequacy of the disclosure made in the Group accountingpolicies of the financial statements concerning the group and company's abilityto continue as a going concern. As disclosed in the group accounting policiesof the financial statements, the group's £44,200,000 revolving credit facilitywas repayable in September 2012 and an agreement has not yet been reached withthe group's finance providers to extend or replace this facility. Theseconditions, along with the other matters explained in the Group accountingpolicies of the financial statements, indicate the existence of a materialuncertainty which may cast significant doubt about the group and company'sability to continue as a going concern. The financial statements do not includethe adjustments that would arise if the group and company were unable tocontinue as a going concern. Emphasis of Matter - Change in Estimation of Financial Instruments In forming our opinion on the financial statements, which is not modified, wehave also considered the adequacy of disclosures made in note 18, to thefinancial statements concerning the change in accounting estimate used to valuethe group and company's financial instruments. During the period the group andcompany's directors have concluded that it is not their intention to hold theinstruments for the period to maturity. The directors have therefore adoptedthe counterparty's or termination valuations within these financial statementsas at the year ended 31 December 2013. The resultant financial instrument liability at 31 December 2013 is £9,569,000for continuing operations and £14,599,000 for discontinued operations (2012: £33,935,000). If the directors had continued to adopt the previous valuationmethodology the liability in the balance sheet would have been £7,923,000 forcontinuing operations and £11,473,000 for discontinued operations. In relationto continuing operations this change in accounting estimation has reduced theprofit by £1,646,000 in the current year. Whilst we are satisfied that thedisclosures in the financial statements are appropriate we consider that in theauditor's judgement this matter is of such importance that it is fundamental toa users' understanding of the financial statements. Opinion on other matters prescribed by the Companies Act 2006 In our opinion: • the part of the Directors' Remuneration Report to be audited has beenproperly prepared in accordance with the Companies Act 2006; and • the information given in the Strategic Report and the Directors' Report forthe financial year for which the financial statements are prepared isconsistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where theCompanies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the parent company, orreturns adequate for our audit have not been received from branches not visitedby us; or • the parent company financial statements and the part of the Directors'Remuneration Report to be audited are not in agreement with the accountingrecords and returns; or • certain disclosures of directors' remuneration specified by law are not made;or • we have not received all the information and explanations we require for ouraudit. Euan Banks (Senior Statutory Auditor)For and on behalf ofBAKER TILLY UK AUDIT LLP,Statutory Auditor Chartered Accountants25 Farringdon StreetLondon EC4A 4AB 17 April 2014 consolidated income statement for the year ended 31 December 2013 Notes 2013 2012 £'000 £'000 Gross property income 8,229 8,069 Net revenue from property 1 2,979 3,755 Listed investments held for trading 3 2 97 Results before finance costs and valuation movements 2,981 3,852 Finance income 5 59 28 Finance expenses 5 (5,616) (5,043) Result before valuation movements (2,576) (1,163) Non-cash changes in valuation of assets and liabilities Net decrease on revaluation of investment properties (488) (3,902) Net increase in value of investments held for trading 3 4 Share of profit/(loss)of joint ventures, after tax 11 99 (43) Share of profit of associate, after tax 12 151 545 Adjustment to interest rate derivative 4,419 (1,328) Result including revaluation and other movements 1,608 (5,887) Attributable to discontinued operations* 7 (461) 13,510 Profit for the year before taxation 1,147 7,623 Income tax 6 2,326 (354) Profit for the year attributable to the owners of the 3,473 7,269parent Basic and diluted profit/(loss) per share - continuing 9 2.74p (8.95)poperations Basic and diluted profit per share - discontinued 9 1.38p 17.60poperations Total 9 4.12p 8.65p \* The results previously reported in the year ended 31 December 2012 have beenreclassified to reflect discontinued operations. consolidated balance sheet at 31 December 2013 Notes 2013 2012 £'000 £'000 Non-current assets Market value of properties attributable to Group 87,449 205,412 Present value of head leases 24 4,597 28,657 Property 10 92,046 234,069 Plant and equipment 10 203 260 Investments in joint ventures 11 2,607 1,337 Investments in associated company 12 6,986 7,271 Held to maturity investments 13 2,200 1,913 Deferred tax 19 5,651 3,324 109,693 248,174 Current assets Assets held for sale 7 126,590 - Trade and other receivables 14 3,356 4,656 Financial assets - investments held for trading 15 23 20 Cash and cash equivalents 6,990 8,303 136,959 12,979 Total assets 246,652 261,153 Current liabilities Liabilities associated with assets held for sale 7 (111,523) - Trade and other payables 16 (10,255) (12,514) Financial liabilities - borrowings 17 (45,918) (52,666) (167,696) (65,180) Non-current liabilities Financial liabilities - borrowings 17 (15,056) (86,924) Interest rate derivatives 18 (9,569) (33,935) Present value of head leases on properties 24 (4,597) (28,657) (29,222) (149,516) Total liabilities (196,918) (214,696) Net assets 49,734 46,457 Equity attributable to the owners of the parent Share capital 20 8,554 8,554 Share premium account 4,866 4,866 Translation reserve in associate (658) (338) Capital redemption reserve 47 47 Retained earnings (excluding treasury shares) 38,084 34,749 Treasury shares 20 (1,159) (1,421) Retained earnings 36,925 33,328 Total shareholders' equity 49,734 46,457 Net assets per share 9 59.00p 55.30p Diluted net assets per share 9 59.00p 55.29p These financial statements were approved by the board of directors andauthorised for issue on 17 April 2014 and signed on its behalf by: Sir Michael Heller R J Corry Company Registration No. 341829Director Director consolidated statement of changes in shareholders' equity for the year ended 31 December 2013 Retained earnings Share Share Translation Capital Treasury Retained Total capital premium reserves in redemption shares earnings equity £'000 £'000 associate reserve £'000 excluding £'000 £'000 £'000 treasury shares £'000 Balance at 1 January 8,554 4,866 (216) 47 (1,421) 28,099 39,9292012 Profit for year - - - - - 7,269 7,269 Other comprehensiveincome: Currency translation in - - (122) - - - (122)associate Total other - - (122) - - - (122)comprehensive income Total comprehensive - - (122) - - 7,269 7,147income Transactions withowners: Equity share options in - - - - - 11 11associate Dividends paid - - - - - (630) (630) Transactions with - - - - - (619) (619)owners Balance at 31 December 8,554 4,866 (338) 47 (1,421) 34,749 46,4572012 Profit for year - - - - - 3,473 3,473 Other comprehensiveincome: Currency translation in - - (320) - - - (320)associate Total other - - (320) - - - (320)comprehensive income Total comprehensive - - (320) - - 3,473 3,153income Transaction withowners: Equity share options in - - - - - 62 62associate Disposal of own shares - - - - 62 - 62 Loss on transfer of own - - - - 200 (200) -shares Transactions with - - - - 262 (138) 124owners Balance at 31 December 8,554 4,866 (658) 47 (1,159) 38,084 49,7342013 All the above are attributable to the owners of the parent. consolidated statement of comprehensive income for the year ended 31 December 2013 2013 2012 £'000 £'000 Profit for the year 3,473 7,269 Other comprehensive income: Currency translation in associate (320) (122) Other comprehensive income for the year net of tax (320) (122) Total comprehensive income for the period attributable to owners 3,153 7,147of the parent consolidated cash flow statement for the year ended 31 December 2013 2013 2012 £'000 £'000 Operating activities Net revenue from property - continuing operations 2,979 3,755 - discontinued operations 6,557 7,546 Listed investments held for trading 2 97 Depreciation 54 188 Profit on disposal of non-current assets (21) (121) Decrease/(increase) in receivables 792 (129) Decrease in payables 471 767 Decrease in investments held for trading - 619 Cash generated from operations 10,834 12,722 Income tax paid - - Cash inflows from operating activities 10,834 12,722 Investing activities Investment in shares and loan stock in joint ventures 409 85 Investment in shares held to maturity (2,200) - Property acquisitions and improvements (34) (1,115) Sale of properties - discontinued operations 9,310 - Purchase of office equipment and motor vehicles (33) (37) Sale of office equipment and motor vehicles 57 194 Interest received - continuing operations 41 28 - discontinued operations - 19 Dividends received from associate and joint ventures 177 242 Cash inflows/(outflows) from investing activities 7,727 (584) Financing activities Sale of treasury shares 62 - Equity dividends paid - (630) Interest paid - continuing operations (3,314) (3,213) - discontinued operations (5,990) (6,301) Interest on obligation under finance leases - continuing (269) (250)operations - discontinued operations (1,786) (1,227) Debenture stock break costs paid - discontinued operations (545) - Short term loan from joint ventures and related parties 700 2,000 Repayment of debenture stocks - discontinued operations (6,700) - Repayment of medium term bank loan (247) (236) Cash outflows from financing activities (18,089) (9,857) Net increase in cash and cash equivalents 472 2,281 Cash and cash equivalents at beginning of year 5,028 2,747 Cash and cash equivalents at end of year 5,500 5,028 The cash flows above relate to continuing and discontinued operations. See Note7 for information on discontinued operations. Cash and cash equivalents For the purpose of the cash flow statement, cash and cash equivalents comprisethe following balance sheet amounts: 2013 2012 £'000 £'000 Cash and cash equivalents (before bank overdrafts) 6,990 8,303 Bank overdrafts (1,490) (3,275) Cash and cash equivalents at end of year 5,500 5,028 £0.5 million of cash deposits at 31 December 2013 was charged as security to adebenture stock. group accounting policies The following are the principal group accounting policies: Basis of accounting The Group financial statements are prepared in accordance with InternationalFinancial Reporting Standards (IFRS), as adopted by the European Union and withthose parts of the Companies Act 2006 applicable to companies reporting underIFRS. The Company has elected to prepare the parent company's financial statements inaccordance with UK GAAP, as applied in accordance with the provisions of theCompanies Act 2006 and these are presented in Note 26. The financial statementsare prepared under the historical cost convention, except for the revaluationof freehold and leasehold properties and financial assets held for trading aswell as fair value of interest derivatives. The Group financial statements arepresented in Pounds Sterling and all values are rounded to the nearest thousandpounds (£'000) except when otherwise stated. London & Associated Properties PLC, the parent company is a listed publiccompany, incorporated and domiciled in England and quoted on the London StockExchange. The Company registration number is 341829. Going concern The directors have reviewed the cash flow forecasts of the Group and theunderlying assumptions on which they are based. They have also consideredcarefully the position in relation to renewal of the Group banking facilities.The Group's business activities, together with the factors likely to affect itsfuture development, are set out in the Chairman and Chief Executive's Statementand Finance Director's Review. In addition Note 18 to the financial statementssets out the company's objectives, policies and processes for managing itscapital; its financial risk management objectives; details of its financialinstruments and hedging activities; its exposure to credit risk and liquidityrisk. Negotiations are continuing in relation to the renewal of the £44.2 millionterm bank facility which expired originally in September 2012. While thesenegotiations have been ongoing the existing facility was extended firstly to 2July 2013 and subsequently it has been allowed to continue while thedocumentation for a new short term facility is finalised. The negotiations havebeen protracted because the Board felt that the terms offered initially couldbe improved, even allowing for the fact that the facility sought is only forthe short term. The Board is seeking longer term funding from a new lender, asthis will be in the best interests of the Group. Negotiations for a new longterm facility are well advanced and we have received outline offers on goodterms from over 10 financial institutions. Following the sale of Windsor for £105 million in January 2014, we have paidoff the £70 million loan related to that property and we have terminated therelated interest rate swap at a cost of £14.6 million. The balance of theseproceeds is available to the Group. As a result the gearing of the Group hasimproved substantially (details of this are given in Note 18) and furtherimproved our negotiating position for short and longer term facilities. Thiscash could, of course, be used to reduce borrowings but the directors prefer touse it to further develop the business. In the circumstances the directors are confident that the short term facilityand a longer term replacement will be in place shortly. Should new funding notbe available, there is more than adequate security to cover the outstandingloan, net of transaction costs. With sound financial resources and long term leases in place and taking accountof the outline funding offers received, the Directors do not believe thatcurrent negotiations represent material uncertainties and they are satisfied that the Group is well placed to manage its business risksdespite the current uncertain economic outlook. Accordingly the Group hasadequate resources to continue in operational existence for the foreseeablefuture. Thus we continue to adopt the going concern basis of accounting inpreparing the annual financial statements. Key judgements and estimates The preparation of the financial statements requires management to makeassumptions and estimates that may affect the reported amounts of assets andliabilities and the reported income and expenses, further details of which areset out below. Although management believes that the assumptions and estimatesused are reasonable, the actual results may differ from those estimates.Further details of the estimates are contained in the Directors' Report. The most significant judgements made in preparing these accounts relate to thecarrying value of the properties, investments and interest rate hedges. TheGroup uses external professional valuers to determine property values and, asall hedges are in the process of being terminated, these are valued atestimated exit values at the balance sheet date. International Accounting Standards (IAS/IFRS) The following standards and interpretations have been applied for the firsttime in these financial statements: IFRS 7 Financial Instruments (amendment) IFRS 13 Fair Value Measurement IAS 1 Presentation of Financial Statements (amendment) At the date of approval of these financial statements, the following standardsand interpretations have been issued and adopted by the EU but are noteffective for the year ended 31 December 2013 and have not been adopted early: IFRS 10 Consolidated Financial Statements IFRS 11 Joint Arrangements IFRS 12 Disclosure of Interests in Other Entities IAS 27 SeparateFinancial Statements (revised) IAS 28 Investments in Associates and Joint Ventures (revised) IAS 32 Financial Instruments: Presentation (amendment) With the exception of IFRS 10 and IFRS 12, the adoption of the standards andinterpretations in issue but not yet effective is not expected to have amaterial impact on the financial statements of the Group. The Directors havenot yet completed the evaluation of the effect of adoption of IFRS 10 and IFRS12. Basis of consolidation The Group accounts incorporate the accounts of London & Associated PropertiesPLC and all of its subsidiary undertakings, together with the Group's share ofthe results and net assets of its joint ventures and associate. Subsidiaries Subsidiaries are those entities controlled by the Group. Control is assumedwhen the Group has the power to govern the financial and operating policies ofan entity or business and to benefit economically from its activities.Subsidiaries acquired during the year are consolidated using the acquisitionmethod. Their results are incorporated from the date that control passes. All intra group transactions, balances, income and expenses are eliminated onconsolidation. Details of Group trading subsidiary companies are set out inNote 26.4. Joint ventures Investments in joint ventures, being those entities over whose activities theGroup has joint control, as established by contractual agreement, include theappropriate share of the results and net assets of those undertakings. Associates Undertakings in which the Group has a participating interest of not less than20% of the voting capital and over which it has the power to exert significantinfluence are defined as associated undertakings. The financial statementsinclude the appropriate share of the results and reserves of thoseundertakings. Goodwill Goodwill arising on acquisition is recognised as an intangible asset andinitially measured at cost, being the excess of the cost of the acquired entityover the Group's interest in the fair value of the assets and liabilitiesacquired. Goodwill is carried at cost less accumulated impairment losses.Goodwill arising from the difference in the calculation of deferred tax foraccounting purposes and fair value in negotiations is judged not to be an assetand is accordingly impaired on completion of the relevant acquisition. Revenue Rental income Rental income arises from operating leases granted to tenants. An operatinglease is a lease other than a finance lease. A finance lease is one wherebysubstantially all the risks and rewards of ownership are passed to the lessee.Rental income is recognised in the Group income statement on a straight-linebasis over the term of the lease. This includes the effect of lease incentivesto tenants, which are normally in the form of rent free periods. Contingentrents, being the difference between the rent currently receivable and theminimum lease payments, are recognised in property income in the periods inwhich they are receivable. Rent reviews are recognised when such reviews havebeen agreed with tenants. Reverse surrender premiums Payments received from tenants to surrender their lease obligations arerecognised immediately in the income statement. Dilapidations Dilapidations monies received from tenants in respect of their leaseobligations are recognised immediately in the income statement. Other revenue Revenue in respect of listed investments held for trading represents investmentdividends received and profit or loss recognised on realisation. Dividends arerecognised in the income statement when the dividend is received. Property operating expenses Property operating expenses are expensed as incurred and any property operatingexpenditure not recovered from tenants through service charges is charged tothe income statement. Employee benefits Share based remuneration The Company operates a long-term incentive plan and two share option schemes.The fair value of the conditional awards on shares granted under the long- termincentive plan and the options granted under the share option scheme isdetermined at the date of grant. This fair value is then expensed on astraight-line basis over the vesting period, based on an estimate of the numberof shares that will eventually vest. At each reporting date, the fair value ofthe non-market based performance criteria of the long-term incentive plan isrecalculated and the expense is revised. In respect of the share option scheme,the fair value of options granted is calculated using a binomial method. Pensions The Company operates a defined contribution pension scheme. The contributionspayable to the scheme are expensed in the period to which they relate. Financial instruments Investments Held to maturity investments are stated at amortised cost using the effectiveinterest rate method. Investments held for trading are included in current assets at fair value. Forlisted investments, fair value is the bid market listed value at the balancesheet date. Realised and unrealised gains or losses arising from changes infair value are included in the income statement of the period in which theyarise. Trade and other receivables Trade and other receivables are recognised initially at fair value. A provisionfor impairment of trade receivables is made when there is evidence that theGroup will not be able to collect all amounts due. Trade and other payables Trade and other payables are non interest bearing and are stated at theirnominal value. Bank loans and overdrafts Bank loans and overdrafts are included as financial liabilities on the Groupbalance sheet net of the unamortised discount and costs of issue. Interestpayable on those facilities is expensed as a finance cost in the period towhich it relates. Debenture loans The debenture loans are included as a financial liability on the balance sheetnet of the unamortised costs on issue. The cost of issue is recognised in thegroup income statement over the life of the debenture. Interest payable todebenture holders is expensed in the period to which it relates. Finance lease liabilities Finance lease liabilities arise for those investment properties held under aleasehold interest and accounted for as investment property. The liability iscalculated as the present value of the minimum lease payments, reducing insubsequent reporting periods by the apportionment of payments to the lessor.Lease payments are allocated between the liability and finance charges so as toachieve a constant financing rate. Contingent rents payable, such as rentreviews or those related to rental income, are charged as an expense in theperiod in which they are incurred. Interest rate derivatives At 31 December 2013 the Group had hedges totalling £50.4m to cover the £44.2million facility. These consisted of a 20 year swap for £10.4 million with a 7year call option in favour of the bank, taken out in November 2007, at 4.76 percent; and a 20 year swap for £40 million with a 7 year call option in favour ofthe bank, taken out in December 2007, at 4.685 per cent. Since the year endthese hedges have been reduced by £30.4 million (the £10.4 million hedge at4.76 per cent and £20.0 million of the £40.0 million hedge at 4.685 per centhave been cancelled) leaving only £20 million of the 4.685 per cent hedgeoutstanding. The Board has decided to terminate all the long dated derivatives rather thanhold them to maturity. This decision has necessitated a revision of theaccounting estimate so that the fair value of derivatives is now recognised onthe basis that they are short term liabilities, rather than being held for thelonger term. At 31 December 2013 the liability for the hedging instruments isbased on the bank termination value adjusted for interest already includedelsewhere in the accounts. This results in a liability at 31 December 2013 of £9,569,000 in relation tocontinuing operations and £14,599,000 in relation to discontinued operations(2012: £33,935,000). If, as was the case in 2012, the hedges had been valued atthe net present value of the fair value , as against the termination values,the liability in the balance sheet would have been £7,923,000 in relation tocontinuing operations and £11,473,000 in relation to discontinued operations.The value of the continuing hedging instrument changes by approximately £61,000for each 0.1% change in interest rate. The amount recognised in the income statement for continuing operations was again of £4,419,000. Had the hedges been valued at the net present value of thefair value to the business (as last year), the amount recognised in the incomestatement would have been a gain of £6,065,000. Thus, in relation to continuingoperations, the profit has been reduced by £1,646,000 in the current year.There is no impact on the income statement for discontinued operations becausethe sale of Windsor required the hedging instrument to be terminated, and sohad to be accounted for on a terminated basis. Under IFRS 13 the hedges are not deemed to be eligible for hedge accounting andany movement in the value of the hedges is therefore charged directly to theconsolidated income statement. The bank has an option to cancel the hedges inJanuary 2015. The cost to the Group to exit the instruments before January 2015has been attributed a cost by the bank of £174,000 (2012: £401,000). Ordinary Shares Shares are classified as equity when there is no obligation to transfer cash orother assets. Incremental costs directly attributable to the issue of newshares are shown in equity as a deduction, net of tax, from the proceeds. Treasury Shares When the Group's own equity instruments are repurchased, consideration paid isdeducted from equity as treasury shares until they are cancelled. When suchshares are subsequently sold or reissued, any consideration received isincluded in equity. Investment properties Valuation Investment properties are those that are held either to earn rental income orfor capital appreciation or both, including those that are undergoingredevelopment. They are reported on the Group balance sheet at fair value,being the amount for which an investment property could be exchanged betweenknowledgeable and willing parties in an arm's length transaction. The directorsproperty valuation is at fair value. The directors valuation of property assetsheld for sale is at post year end disposal value, as property contracts wereexchanged during the year. The valuation of all other properties is undertaken by independent valuers whohold recognised and relevant professional qualifications and have recentexperience in the locations and categories of properties being valued.Surpluses or deficits resulting from changes in the fair value of investmentproperty are reported in the Group income statement in the period in which theyarise. Capital expenditure Investment properties are measured initially at cost, including relatedtransaction costs. Additions to capital expenditure, being costs of a capitalnature, directly attributable to the redevelopment or refurbishment of aninvestment property, up to the point of it being completed for its intendeduse, are capitalised in the carrying value of that property. The redevelopmentof an existing investment property will remain an investment property measuredat fair value and is not reclassified. Capitalised interest is calculated withreference to the actual rate payable on borrowings for development purposes, orfor that part of the development costs financed out of borrowings thecapitalised interest is calculated on the basis of the average rate of interestpaid on the relevant debt outstanding. Disposal The disposal of investment properties is accounted for on completion ofcontract. On disposal, any gain or loss is calculated as the difference betweenthe net disposal proceeds and the valuation at the last year end plussubsequent capitalised expenditure in the period. Depreciation and amortisation In applying the fair value model to the measurement of investment properties,depreciation and amortisation are not provided in respect of investmentproperties. Plant and equipment Other non-current assets, comprising motor vehicles and office equipment, aredepreciated at a rate of between 10% and 33% per annum which is calculated towrite off the cost, less estimated residual value of the assets, on a straightline basis over their expected useful lives. Income taxes The charge for current taxation is based on the results for the year asadjusted for disallowed or non-assessable items. Tax payable upon realisationof revaluation gains recognised in prior periods is recorded as a current taxcharge with a release of the associated deferred tax. Deferred tax is the taxexpected to be payable or recoverable on differences between the carryingamounts of assets and liabilities in the financial statements and thecorresponding tax bases used in the tax computations, and is accounted forusing the balance sheet liability method. Deferred tax liabilities aregenerally recognised for all taxable temporary differences and deferred taxassets are recognised to the extent that it is probable that taxable profitswill be available against which deductible temporary differences can beutilised. In respect of the deferred tax on the revaluation surplus, this iscalculated on the basis of the chargeable gains that would crystallise on thesale of the investment portfolio as at the reporting date. The calculationtakes account of indexation on the historic cost of properties and anyavailable capital losses. Deferred tax is calculated at the tax rates that areexpected to apply in the period when the liability is settled or the asset isrealised. Deferred tax is charged or credited in the group income statement,except when it relates to items charged or credited directly to equity, inwhich case it is also dealt with in equity. Cash and cash equivalents Cash comprises cash in hand and on demand deposits, net of bank overdrafts.Cash equivalents comprise short-term, highly liquid investments that arereadily convertible to known amounts of cash and which are subject to aninsignificant risk of changes in value and original maturities of three monthsor less. Segmental reporting The Group undertakes one primary activity - the management of properties eitherfor its own account or for third parties (including associated companies andjoint venture partners). In addition it holds a number of investments(including a significant stake in its associated company - Bisichi Mining PLC).The property business is subject to risks and returns that are different fromthose attributable to investment activities and this is reflected in the waythe Group is managed and with the format of the Group's internal financialreporting. notes to the financial statements for the year ended 31 December 2013 1. Results for the year and segmental analysis Operating Segments are based on the internal reporting and operationalmanagement of the Group. The Group is focused primarily on property activities(which generate all trading income), but it also holds and manages investments. Business segments 2013 2012 Total Total £'000 £'000 Property income Group rental income including share of joint ventures 6,807 7,220 Less: joint ventures - share of rental income (267) (281) Rental income from group properties 6,540 6,939 Management income from third party properties 1,689 1,130 Property related income 8,229 8,069 Direct property expenses (851) (728) Overheads (4,399) (3,586) Property result before finance costs and valuation movements* 2,979 3,755 Total assets (excluding investments in associate and joint 108,246 250,632ventures and discontinued businesses) Total liabilities (excluding borrowings and current tax) (24,421) (75,106) Borrowings (60,974) (139,590) 22,851 35,936 Investments 23 20 Investments in joint ventures: non segmental (notes 11 and 2,607 3,24513) Investments in associate: non segmental (note 12) 6,986 7,271 Investments in unlisted companies 2,200 5 Discontinued operations 15,067 - Net assets as per balance sheet 49,734 46,457 Other segment items: Net (decrease)/increase on revaluation of investment (488) 3,902properties Net increase on revaluation of investments held for trading 3 4 Finance income 59 47 Finance expenses 5,616 5,403 Depreciation 54 188 Capital expenditure 47 1,009 * Property result before finance cost and valuation movements is defined asprofit before tax and excludes the share of profit & losses of joint venturesand associate, finance income and expenses, movement on revaluation ofinvestment properties and investments held for trading and the movement ofinterest rate derivatives. Net rental income Joint Ventures Group Dragon Langney Total Group 2012 exclude: Retail Shopping £'000 Share £'000 joint Properties ventures Centre 2013 £'000 £'000 Unit £'000 Trust £'000 Property income 8,229 205 1,313 9,747 8,496 8,350 Direct property expenses (851) (15) (184) (1,050) (882) (780) Overheads (4,399) (116) (409) (4,924) (4,508) (3,661) 2,979 74 720 3,773 3,106 3,909 Less: attributable to joint (127) (153)ventures Net rental income 2,979 3,755 Geographical segments At net rental income level, the Group operates only in the United Kingdom. Thedirectors consider it to be the only geographical segment of the business. Further information in respect of the property reportable segment is includedwithin the primary statements. No customer represents revenue in excess of 10per cent of total revenue (2012: none). 2. Profit before taxation 2013 2012 £'000 £'000 Profit before taxation is stated after charging/(crediting): Staff costs (note 22) 2,730 1,946 Depreciation on tangible fixed assets - owned assets 54 188 Operating lease rentals - land and buildings 645 550 Profit on disposal of motor vehicles and office equipment (21) (121) Amounts payable to the auditor in respect of both audit andnon-audit services Audit services: Statutory - company and consolidation 75 69 - subsidiaries 29 29 Further assurance services 19 2 Other services 5 8 128 108 Staff costs and depreciation of tangible fixed assets are included inoverheads. 3. Listed investments held for trading 2013 2012 £'000 £'000 Investment sales - 733 Dividends receivable 2 8 2 741 Cost of sales - (619) 2 122 Attributable overheads - (25) Net income from listed investments 2 97 4. Directors' emoluments 2013 2012 £'000 £'000 Emoluments 1,257 726 Defined contribution pension scheme contributions 66 63 1,323 789 Details of directors' emoluments and share options are set out in theremuneration report. 5. Finance income and expenses 2013 2012 £'000 £'000 Finance income 59 28 Finance expenses Interest on bank loans and overdrafts (1,659) (1,382) Other loans (1,559) (1,494) Interest on derivatives (2,111) (1,931) Interest on obligations under finance leases (287) (236) Total finance expenses (5,616) (5,043) (5,557) (5,015) 6. Income tax 2013 2012 £'000 £'000 Current tax Corporation tax on profit of the period - - Adjustments in respect of previous periods - - Total current tax - - Deferred tax Origination and reversal of timing differences (3,273) 46 Revaluation of investment properties (1,157) 1,770 Accelerated capital allowances (867) (1,370) Fair value of interest derivatives 2,971 (92) Total deferred tax (note 19) (2,326) 354 Tax on profit on ordinary activities (2,326) 354 Factors affecting tax charge for the year The corporation tax assessed for the year is different from that at theeffective rate of corporation tax in the United Kingdom of 23.25 per cent(2012: 24.5 per cent). The differences are explained below: 2013 2012 £'000 £'000 Profit for the year before taxation 1,147 7,623 Taxation at 23.25 per cent (2012: 24.5%) 267 1,868 Effects of: Other differences (3,491) (1,824) Joint ventures and associate - (33) Deferred tax rate adjustment 898 343 Tax (credit)/charge for the period (2,326) 354 The main component of other differences in the reconciliation relates tocapital gains of £2.4 million (2012: £0.8 million) and indexation allowances of£0.7 million (2012: £0.8 million). Factors that may affect future tax charges: Based on current capital expenditure plans, the Group expects to continue to beable to claim capital allowances in excess of depreciation in future years, butat a slightly lower level than in the current year. Deferred tax provision has been made for gains on revaluing investmentproperties. At present it is not envisaged that any tax will become payable inthe foreseeable future. 7. Discontinued operations and assets and liabilities classified as held forsale A. Disposals As part of the Group's strategy to focus on core assets, the Group disposed ofthe following properties during the year. The profits and losses arising fromthese disposals are classified as discontinued operations: PropertyKing Edward Court, WindsorChesterfieldHalifax Contracts for the sale of King Edward Court had been exchanged at the date ofthe accounts and completion took place in January 2014. The transaction has,though, been included as a discontinued operation in order to display a trueand fair view. B. Result for the year of discontinued operations 2013 2012 £'000 £'000 Gross property income 7,370 8,227 Direct property costs (720) (623) Net property income 6,650 7,604 Overheads (93) (58) Net revenue from property 6,557 7,546 Loss on sale of investment properties (165) - 6,392 7,546 Finance expenses (5,990) (6,282) Debenture break costs (545) - (143) 1,264 Net (decrease)/increase on revaluations of investment (5,351) 14,594properties Share of loss of joint venture after tax (315) (591) Interest rate derivative 5,348 (1,757) (Loss)/profit before tax attributable to shareholders (461) 13,510 Income tax 1,626 1,275 C. Cash flows from discontinued operations 2013 2012 £'000 £'000 Cash flows from operating activities 6,392 7,546 Cash flows from investing activities 9.310 19 Cash flows from financing activities (15,021) (7,528) Net cash inflow from discontinued operations 681 37 D.Summary of assets and liabilities associated with assets held for sale 2013 £'000 Investment properties 102,663 Present value of head leases 23,627 Property 126,290 Trade and other receivables 300 Assets held for sale 126,590 Net current borrowings (70,000) Trade and other payables (3,297) Interest rate derivatives (14,599) Present value of head leases (23,627) Liabilities associated with assets held for sale (111,523) Net assets associated with assets held for sale 15,067 8. Dividend 2013 £'000 2012 £'000 Per share Per share Dividends paid during the year relating to the - - 0.75p 630prior period Dividends to be paid: Proposed final dividend 0.125p 105 - - 9. Profit per share and net assets per share Profit per share has been calculated as follows: 2013 2012 Profit for the year for the purposes of basic and diluted profit 3,473 7,269per share (£'000) Weighted average number of ordinary shares in issue for the 84,266 84,004purpose of basic profit per share ('000) Basic profit per share 4.12p 8.65p Weighted average number of ordinary shares in issue for the 84,266 84,004purpose of diluted profit per share ('000) Fully diluted profit per share 4.12p 8.65p Weighted average number of shares in issue is calculated after excludingtreasury shares of 1,254,738 (2012: 1,538,398). The profit for continuing operations was £2,308,000 (2012: loss £7,516,000) anddiscontinued operations was £1,165,000 (2012: £14,785,000). There was no dilutive effect of the outstanding options in either year. Net assets per share have been calculated as follows: 2013 2012 Net assets (£'000) 49,734 46,457 Shares in issue ('000) 84,288 84,004 Basic net assets per share 59.00p 55.30p Net assets diluted (£'000) 49,734 46,485 Shares in issue ('000) 84,288 84,074 Diluted net assets per share 59.00p 55.29p 10. Property and plant and equipment Investment Properties Total Freehold Leasehold Leasehold Office £'000 £'000 over under equipment 50 years 50 years and motor £'000 £'000 vehicles £'000 Cost or valuation at 1 January 2013 234,069 77,257 156,506 306 1,136 Additions 14 - 14 - 33 Disposals (9,475) (7,585) (1,890) - (145) Discontinued operations (126,290) - (126,290) - - Decrease in present value of head (433) - (433) - -leases (Decrease)/increase on revaluation (5,839) 827 (6,641) (25) - Cost or valuation at 31 December 2013 92,046 70,499 21,266 281 1,024 Representing assets stated at: Valuation 87,449 70,499 16,675 275 - Present value of head leases 4,597 - 4,591 6 - Cost - - - - 1,024 92,046 70,499 21,266 281 1,024 Depreciation at 1 January 2013 - - - - 876 Charge for the year - - - - 54 Disposals - - - - (109) Depreciation at 31 December 2013 - - - - 821 Net book value at 1 January 2013 234,069 77,257 156,506 306 260 Net book value at 31 December 2013 92,046 70,499 21,266 281 203 Investment Properties Total Freehold Leasehold Leasehold Office £'000 £'000 over under equipment 50 years 50 years and motor £'000 £'000 vehicles £'000 Cost or valuation at 1 January 2012 222,409 79,678 142,275 456 1,344 Additions 972 626 346 - 37 Disposals - - - - (245) Decrease in present value of head (4) - (4) - -leases Increase/(decrease) on revaluation 10,692 (3,047) 13,889 (150) - Cost or valuation at 31 December 2012 234,069 77,257 156,506 306 1,136 Representing assets stated at: Valuation: 205,412 77,257 127,855 300 - Present value of head leases 28,657 - 28,651 6 - Cost - - - - 1,136 234,069 77,257 156,506 306 1,136 Depreciation at 1 January 2012 - - - - 860 Charge for the year - - - - 188 Disposals - - - - (172) Depreciation at 31 December 2012 - - - - 876 Net book value at 1 January 2012 222,409 79,678 142,275 456 484 Net book value at 31 December 2012 234,069 77,257 156,506 306 260 The leasehold and freehold properties, excluding the present value of headleases and directors valuations, were valued as at 31 December 2013 by externalprofessional firms of chartered surveyors. The valuations were made at fairvalue. The directors property valuations were made at fair value. 2013 2012 £'000 £'000 Allsop LLP 84,130 201,235 Woolhouse Real Estate 1,494 - BNP Paribas Real Estate - 4,177 Directors valuations 1,825 - 87,449 205,412 Add: Present value of headleases 4,597 28,657 92,046 234,069 The historical cost of investment properties, including total capitalisedinterest of £1,161,000 (2012: £6,051,000) was as follows: Freehold 2013 Short Freehold 2012 Short £'000 Leasehold Leasehold £'000 Leasehold Leasehold Over 50 £'000 Over 50 £'000 years years £'000 £'000 Cost at 1 January 76,759 122,235 785 76,133 121,889 785 Additions - 14 - 626 346 - Disposals (12,360) (2,322) - - - - Discontinued operations - (101,995) - - - - Cost at 31 December 64,399 17,932 785 76,759 122,235 785 Each year external valuers are appointed by the Executive Directors on behalfof the Board. The valuers are selected based upon their knowledge, independenceand reputation for valuing assets such as those held by the Group. Valuations are performed annually and are performed consistently across allproperties in the Group's portfolio. At each reporting date appropriatelyqualified employees of the Group verify all significant inputs and review thecomputational outputs. Valuers submit their report to the Board on the outcomeof each valuation. Valuations take into account tenure, lease terms and structural condition. Theinputs underlying the valuations include market rent or business profitability,likely incentives offered to tenants, forecast growth rates, yields, EBITDA,discount rates, construction costs including any specific site costs (forexample section 106), professional fees, developer's profit includingcontingencies, planning and construction timelines, lease regear costs,planning risk and sales prices based on known market transactions for similarproperties to those being valued. Valuations are based on what is determined to be the highest and best use. Whenconsidering the highest and best use valuer will consider, on a property byproperty basis, its actual and potential uses which are physically, legally andfinancially viable. Where the highest and best use differs from the existinguse, the valuer will consider the cost and likelihood of achieving andimplanting this change in arriving at its valuation. There are often restrictions on Freehold and Leasehold property which couldhave a material impact on the realisation of these assets. The most significantof these occur when planning permission or lease extension and renegotiation ofuse are required or when a credit facility is in place. These restrictions arefactored in the property's valuation by the external valuer. The methods of fair value measurement are classified into a hierarchy based onthe reliability of the information used to determine the valuation, as follows: Level 1: valuation based on inputs on quoted market prices in active markets. Level 2: valuation based on inputs other than quoted prices included withinlevel 1 that maximise the use of observable data directly or from market pricesor indirectly derived from market prices. Level 3: where one or more inputs to valuations are not based on observablemarket data. Class of property Carrying Valuation Key Range (weighted / technique unobservable average) 2013Level 3 inputs Fair value 2013 £'000 Freehold - external 68,674 Income Estimated £4 - £41valuation capitalisation Rental Value (£23) Per sq ft p.a 5.3% - 10.5% Equivalent Yield (6.9%) Leasehold over 50 years 21,266 Income Estimated £7 - £20- external valuation capitalisation Rental Value (£15) Per sq ft p.a 8.9% - 14.3% Equivalent Yield (9.6%) Leasehold under 50 281 Income Estimated £5years - external capitalisation Rental Valuevaluation (£5) Per sq ft p.a 23.7% Equivalent Yield (23.7%) Freehold - Directors 1,825 Income Estimated £5valuation capitalisation Rental Value (£5) Per sq ft p.a 8.3% Equivalent Yield (8.3%) At 31 December 2013 92,046 The table below illustrates the impact of changes in key unobservable inputs onthe carrying / fair value of the Group's properties. Estimated rental Equivalent value yield 10% increase or 25 basis point (decrease) contraction £'000 or (expansion) £'000 Freehold - external valuation 5,883/(5,333) 2,891/(2,673) Leasehold over 50 years - external valuation 1,404/(1,399) 476/(586) Leasehold under 50 years - external valuation 21/(31) 3/(3) Freehold - Directors valuation 153/(153) 56/(53) 11. Investment in joint ventures 2013 2012 £'000 £'000 Group share of: Turnover 420 638 Loss before tax (195) (683) Taxation (21) 49 Loss after tax (216) (634) Split: Profit/(loss) after tax - continuing operations 99 (43) - discontinued operations (315) (591) Non-current assets 3,608 7,522 Current assets 2,050 2,013 Current liabilities (644) (6,040) Non-current liabilities (2,407) (2,158) Net assets 2,607 1,337 Analytical Ventures Limited (Analytical Ventures) - unlisted propertyinvestment company. The Company owned 50 per cent of the issued share capitaland £1,907,479 of loan stock of Analytical Ventures. Analytical Ventures becamea 100% subsidiary of the Company in December 2013 and the Company acquired theremaining loan stock from Uberior. Dragon Retail Properties Limited (Dragon) - unlisted property trading andinvestment company. The Company owns 50 per cent of the issued share capital.The remaining 50 per cent is owned by Bisichi Mining PLC. Dragon isincorporated and operates in England and Wales and has issued share capital of500,000 ordinary shares of £1 each (2012: 500,000 ordinary shares of £1 each).Dragon is managed by a board of directors with neither party having overallcontrol. Langney Shopping Centre Unit Trust (Langney) - unlisted property investmentunit trust. The Company acquired 12.50 per cent of the total ordinary units inissue in June 2011. A further 12.50 per cent is owned by Bisichi Mining PLC.The remaining 75 per cent is owned by Columbus Capital Management LLP. Langneyis incorporated in Jersey and has 7,707 (2012: 7,101) ordinary units in issueof £1,000 each. The Company has a management contract to manage the propertyfor Langney and accordingly has a significant influence in Langney. It is asingle asset unit trust. During the year the unit holders made additionalcapital contributions in proportion to their original holdings and theCompany's share was £75,750. Shares in joint ventures: 2013 2012 £'000 £'000 At 1 January 1,337 2,039 Share of loss after tax (216) (634) Dividend received - (68) Investment in shares 76 - Transferred to subsidiary undertaking 1,410 - 1,270 (702) At 31 December 2,607 1,337 12. Investments in associated company Associate 2013 2012 £'000 £'000 Bisichi Mining PLC - listed mining and property investmentcompany Group share of: Turnover 14,741 15,100 Profit before tax 41 818 Taxation 110 (273) Profit after tax 151 545 Non-current assets 9,646 10,397 Current assets 5,450 4,624 Current liabilities (6,662) (6,005) Non-current liabilities (1,297) (1,560) Minority interest (151) (185) Net assets 6,986 7,271 2013 2012 £'000 £'000 Share in associate: At 1 January 7,271 7,011 Share of profit after tax 151 545 Equity share options 62 11 Currency translation (321) (122) Dividend received (177) (174) (285) 260 At 31 December 6,986 7,271 The company owns 42 per cent (2012: 42 per cent) of the issued share capital ofBisichi Mining PLC (Bisichi), a company registered in England and Wales.Bisichi has an issued share capital of 10,636,839 (2012: 10,556,839) ordinaryshares of 10p each, and its principal countries of operation are the UnitedKingdom (property investment) and South Africa (coal mining). Bisichi is anassociated undertaking because London & Associated Properties PLC has aparticipating interest. Bisichi has an independent board of directors whichcontrols its operating and financial policies. The market (bid) value of this investment at 31 December 2013 was £4,865,000(2012: £4,654,000). No impairment is necessary as the Directors consider themarket value deficit temporary, having conducted a detailed impairment review. 13. Held to maturity investments 2013 Unlisted Loan 2012 Unlisted Loan Stock Stock Total Shares Total Shares in joint in joint £'000 £'000 £'000 £'000 ventures ventures £'000 £'000 Cost At 1 January 1,913 5 1,908 1,998 5 1,993 Loan stock issued 26 - 26 - - - Repayments (511) - (511) (85) - (85) Reclassification (1,423) - (1,423) - - - Impairment (5) (5) - - - - Additions - HRGT 2,200 2,200 - - - - At 31 December 2,200 2,200 - 1,913 5 1,908 HRGT - The Company acquired a 6.95% interest in the equity of HRGT ShoppingCentres LP (HRGT), a limited partnership set up in England to acquire and own 3shopping centres in Dunfermline, Kings Lynn and Loughborough. 92.10% of theequity is owned by Oaktree Capital Management and 0.95% by Gooch Cunliffe WhaleLLP. London & Associated Management Services Limited has a management contractto manage the properties on behalf of HRGT. 14. Trade and other receivables 2013 2012 £'000 £'000 Trade receivables 1,009 1,261 Amounts due from associate and joint ventures 382 178 Other receivables 214 221 Prepayments and accrued income 1,751 2,996 3,356 4,656 The Directors consider that the carrying amount of trade and other receivablesapproximates to their fair value. 15. Investments held for trading 2013 2012 £'000 £'000 Market bid value of the listed investment portfolio 23 20 Unrealised deficit of market value over cost - (3) Listed investment portfolio at cost 23 23 All investments are listed on the London Stock Exchange. 16. Trade and other payables 2013 2012 £'000 £'000 Trade payables 149 1,409 Amounts owed to joint ventures 3,300 3,266 Other taxation and social security costs 744 1,216 Other payables 1,322 939 Accruals and deferred income 4,740 5,684 10,255 12,514 The Directors consider that the carrying amount of trade and other payablesapproximates to their fair value. 17. Borrowings Current borrowings - amounts falling due within one year 2013 2012 £'000 £'000 £5 million First Mortgage Debenture Stock 2013 at 11.3 per cent - 5,000 Bank overdrafts (secured) 1,490 3,275 £1 million term bank loan repayable by 2015 (unsecured) 258 247 £47 million revolving credit facility repayable in 2013* 44,170 44,144(secured) 45,918 52,666 Non-current borrowings - amounts falling due after more than one year 2013 2012 £'000 £'000 Term borrowings Debenture stocks: £1.7 million First Mortgage Debenture Stock 2016 at 8.67 per cent - 1,700 £5 million First Mortgage Debenture Stock 2018 at 11.6 per cent 5,000 5,000 £10 million First Mortgage Debenture Stock 2022 at 8.109 per cent 9,855 9,837* 14,855 16,537 Term bank loans: £1 million term bank loan repayable by 2015 201 460 £70 million term bank loan repayable in 2014* - 69,927 201 70,387 15,056 86,924 * The £10 million debenture and bank loans are shown after deduction ofoutstanding amortised issue costs. Interest payable on the term bank loans is variable being based upon the Londoninter-bank offered rate (LIBOR) plus margin. First Mortgage Debenture Stocks August 2018 and 2022 and the £44 million bankfacility repayable in July 2013 are secured on specific freehold and leaseholdproperties which are included in the financial statements at a value of £85.8million. The Directors are working with the bank and advisors on the renewal ofthe facility to June 2014 and its replacement with a longer term loan. An adjustment to the £5 million 2018 debenture stock agreement in the year,amended the terms to £1 million repayments in August 2016 and August 2017 and £3 million repayment in 2018. The bank loans and debentures are secured by way of a first charge over theinvestment properties in the UK. The Group's objectives when managing capital are: - To safeguard the Group's ability to continue as a going concern, so that itmay provide returns for shareholders and benefits for other stakeholders; and - To provide adequate returns to shareholders by ensuring returns arecommensurate with the risk. 18. Financial instruments Treasury policy The Group enters into derivative transactions such as interest rate swaps andforward exchange contracts in order to help manage the financial risks arisingfrom the Group's activities. The main risks arising from the Group's financingstructure are interest rate risk, liquidity risk and market price risk. Thepolicies for managing each of these risks and the principal effects of thesepolicies on the results are summarised below. Interest rate risk Treasury activities take place under procedures and policies approved andmonitored by the Board to minimise the financial risk faced by the Group. Thebank loans are secured by way of a first charge on certain fixed assets. Therates of interest vary based on LIBOR in the UK. Sensitivity analysis As all term debt has been covered by hedged derivatives it is not consideredthat there is any material sensitivity for the Group to changes in interestrates. Liquidity risk The Group's policy is to minimise refinancing risk by balancing its exposure tointerest risk and to refinancing risk. In effect the Group seeks to borrow foras long as possible at the lowest acceptable cost. Efficient treasurymanagement and strict credit control minimise the costs and risks associatedwith this policy which ensures that funds are available to meet commitments asthey fall due. Cash and cash equivalents earn interest at rates based on LIBORin the UK. These facilities are considered adequate to meet the Group'santicipated cash flow requirements for the foreseeable future. The table below analyses the Group's financial liabilities into maturityGroupings and also provides details of the liabilities that bear interest atfixed, floating and non-interest bearing rates. Less than 2-5 years Over 2013 1 year £'000 5 years Total £'000 £'000 £'000 Bank overdrafts (floating) 1,490 - - 1,490 Debentures (fixed) - 5,000 10,000 15,000 Bank loans (floating)* 44,452 201 - 44,653 Trade and other payables 10,255 - - 10,255(non-interest) 56,197 5,201 10,000 71,398 Less than 2-5 years Over 2012 1 year £'000 5 years Total £'000 £'000 £'000 Bank overdrafts (floating) 3,275 - - 3,275 Debentures (fixed) 5,000 1,700 15,000 21,700 Bank loans (floating)* 44,441 70,460 - 114,901 Trade and other payables (non-interest) 12,514 - - 12,514 65,230 72,160 15,000 152,390 The Group would normally expect that sufficient cash is generated in theoperating cycle to meet the contractual cash flows as disclosed above througheffective cash management. *All the bank loans are fully hedged with appropriate interest derivatives.Details of all hedges are shown below. Market price risk The Group is exposed to market price risk through interest rate and currencyfluctuations. Credit risk At the balance sheet date there were no significant concentrations of creditrisk. The maximum exposure to credit risk is represented by the carrying amountof each financial asset in the balance sheet. The Group only deposits surpluscash with well-established financial institutions of high quality creditstanding. Borrowing facilities At 31 December 2013 London & Associated Properties PLC was within its bankborrowing facilities and was not in breach of any of the covenants. Overdraftsare renewable annually. Term loan repayments are as set out below. Details ofother financial liabilities are shown in Notes 16 and 17. The Group has undrawn facilities of £2,510,000 (2012: £3,531,000) as follows: 2013 2012 £'000 £'000 Overdrafts 2,510 725 Term facilities expiring in one year - 2,806 2,510 3,531 Hedge profile At 31 December 2013 the Group had hedges totalling £50.4m to cover the £44.2million facility. These consisted of a 20 year swap for £10.4 million with a 7year call option in favour of the bank, taken out in November 2007, at 4.76 percent; and a 20 year swap for £40 million with a 7 year call option in favour ofthe bank, taken out in December 2007, at 4.685 per cent. Since the year endthese hedges have been reduced by £30.4 million (the £10.4 million hedge at4.76 per cent and £20.0 million of the £40.0 million hedge at 4.685 per centhave been cancelled) leaving only £20 million of the 4.685 per cent hedgeoutstanding. The Board has decided to terminate all the long dated derivatives rather thanhold them to maturity. This decision has necessitated a revision of theaccounting estimate so that the fair value of derivatives is now recognised onthe basis that they are short term liabilities, rather than being held for thelonger term. At 31 December 2013 the liability for the hedging instruments isbased on the bank termination value adjusted for interest already includedelsewhere in the accounts. This results in a liability at 31 December 2013 of £9,569,000 in relation tocontinuing operations and £14,599,000 in relation to discontinued operations(2012: £33,935,000). If, as was the case in 2012, the hedges had been valued atthe net present value of the fair value , as against the termination values,the liability in the balance sheet would have been £7,923,000 in relation tocontinuing operations and £11,473,000 in relation to discontinued operations.The value of the continuing hedging instrument changes by approximately £61,000for each 0.1% change in interest rate. The amount recognised in the income statement for continuing operations was again of £4,419,000. Had the hedges had been valued at the net present value ofthe fair value to the business (as last year), the amount recognised in theincome statement would have been a gain of £6,065,000. Thus, in relation tocontinuing operations, the profit has been reduced by £1,646,000 in the currentyear. There is no impact on the income statement for discontinued operationsbecause the sale of Windsor required the hedging instrument to be terminated,and so had to be accounted for on a terminated basis. Under IFRS 13 the hedges are not deemed to be eligible for hedge accounting andany movement in the value of the hedges is therefore charged directly to theconsolidated income statement. The bank has an option to cancel the hedges inJanuary 2015. The cost to the Group to exit the instruments before January 2015has been attributed a cost by the bank of £174,000 (2012: £401,000). Fair value of financial instruments Fair value estimation The Group has adopted the amendment to IFRS 7 for financial instruments thatare measured in the balance sheet at fair value. This requires the methods offair value measurement to be classified into a hierarchy based on thereliability of the information used to determine the valuation, as follows: - Quoted prices (unadjusted) in active markets for identical assets orliabilities (level 1). - Inputs other than quoted prices included within level 1 that are observablefor the asset or liability, either directly (that is, as prices) or indirectly(that is, derived from prices) (level 2). - Inputs for the asset or liability that are not based on observable marketdata (that is unobservable inputs) (level 3). Level Level Level Total 2013 1 2 3 £'000 Gain/ £'000 £'000 £'000 (loss) to income statement '000 Financial assets Other financial assets held for trading Quoted equities 23 - - 23 3 Financial liabilities Derivative financial instruments Interest rate swaps - 9,569 - 9,569 4,419 Discontinued Derivative financial instruments Interest rate swaps - 14,599 - 14,599 5,348 Level Level Level Total 2012 1 2 3 £'000 Gain/ £'000 £'000 £'000 (loss) to income statement '000 Financial assets Other financial assets held for trading Quoted equities 20 - - 20 4 Financial liabilities Derivative financial instruments Interest rate swaps - 33,935 - 33,935 (3,085) Capital structure The Group sets the amount of capital in proportion to risk. It ensures that thecapital structure is commensurate to the economic conditions and riskcharacteristics of the underlying assets. In order to maintain or adjust thecapital structure, the Group may vary the amount of dividends paid toshareholders, return capital to shareholders, issue new shares or sell assetsto reduce debt. The Group considers its capital to include share capital, share premium,capital redemption reserve, translation reserve and retained earnings, butexclude the interest rate derivatives. Consistent with others in the industry, the Group monitors its capital by itsdebt to equity ratio (gearing levels). This is calculated as the net debt(loans less cash and cash equivalents) as a percentage of the equity. During2013 this decreased to 94.1% per cent (2012: 180.9 per cent) which wascalculated as follows: 2013 2012 £'000 £'000 Total debt 60,974 139,590 Less cash and cash equivalents (6,990) (8,303) Net debt 53,984 131,287 Total equity 57,389 72,587 94.1% 180.9% All the debt, apart from the overdrafts, is at fixed rates of interest as shownin Notes 17 and 18. The Group does not have any externally imposed capitalrequirements. Financial assets Financial assets are disclosed in Notes 13, 14 and 15 and above. The Group's principal financial assets are bank balances and cash, trade andother receivables and investments. The Group has no significant concentrationof credit risk as exposure is spread over a large number of counterparties andcustomers. The credit risk in liquid funds and derivative financial instrumentsis limited because the counterparties are banks with high credit ratingsassigned by international credit-rating agencies. The Group's credit risk isprimarily attributable to its trade receivables. The amounts presented in thebalance sheet are net of allowances for doubtful receivables, estimated by theGroup's management based on prior experience and the current economicenvironment. Financial assets maturity Cash and cash equivalents all have a maturity of less than three months. 2013 2012 £'000 £'000 Cash at bank and in hand 6,990 8,303 These funds are primarily invested in short term bank deposits maturing withinone year bearing interest at the bank's variable rates. Financial liabilities maturity Repayment of borrowings Bank loans and overdrafts: Repayable on demand or within one year 45,918 47,666 Repayable between two and five years 201 70,387 46,119 118,053 Debentures: Repayable within one year - 5,000 Repayable between two and five years 5,000 1,700 Repayable in more than five years 9,855 14,837 60,974 139,590 Certain borrowing agreements contain financial and other conditions that ifcontravened by the Group, could alter the repayment profile. Group undrawn banking facilities Which expire within one year 2,510 3,531 Interest rate risk and hedge profile 2013 2012 £'000 £'000 Fixed rate borrowings 15,000 21,700 Floating rate borrowings - Subject to interest rate swap 50,400 120,400 - Excess hedge (4,281) (5,499) 61,119 136,601 Average fixed interest rate 9.27% 9.69% Weighted average swapped interest rate 7.19% 6.00% Weighted average cost of debt on overdrafts, bank loans and 7.58% 6.48%debentures Average period for which borrowing rate is fixed 7.7 6.5 years years Average period for which borrowing rate is swapped 13.9 14.9 years years The swapped interest rate have calls by the bank 0.9 1.9 years years The Group's floating rate debt bears interest based on LIBOR for the term bankloans and Bank base rate for the overdrafts. Total financial assets and liabilities The Group's financial assets and liabilities and their fair values are asfollows: Fair 2013 Fair 2012 value Carrying Value Carrying £'000 value £'000 value £'000 £'000 Cash and cash equivalents 6,990 6,990 8,303 8,303 Financial assets - investments held for 23 23 20 20trading Other assets 3,363 3,363 4,656 4,656 Derivative liabilities (9,569) (9,569) (33,935) (33,935) Bank overdrafts (1,490) (1,490) (3,275) (3,275) Bank loans (44,653) (44,629) (114,901) (114,778) Present value of head leases on (3,235) (3,235) (28,657) (28,657)properties Other liabilities (10,275) (10,275) (12,514) (12,514) Total financial liabilities before (58,846) (58,822) (180,303) (180,180)debentures Fair value of debenture stocks Fair value of the Group's debenture liabilities: Book Fair 2013 2012 value value Fair value Fair Value £'000 £'000 adjustment adjustment £'000 £'000 Debenture stocks (15,000) (19,365) (4,365) (6,911) Tax at 20 per cent (2012: 23 per cent) 873 1,590 Post tax fair value adjustment (3,492) (5,321) Post tax fair value adjustment - basic (3.7)p (8.23)ppence per share There is no material difference in respect of other financial liabilities orany financial assets. The fair values were calculated by the directors as at 31 December 2013 andreflect the replacement value of the financial instruments used to manage theGroup's exposure to adverse rate movements. The fair values of the debentures are based on the net present value at therelevant gilt interest rate of the future payments of interest on thedebentures. The bank loans and overdrafts are at variable rates and there is nomaterial difference between book values and fair values. 19. Deferred tax 2013 2012 £'000 £'000 Deferred tax asset balance at 1 January (3,324) (3,678) Transfer to consolidated income statement (2,327) 354Balance at 31 December (5,651) (3,324) The deferred tax balance comprises the following: Revaluation of investment properties 3,020 4,177 Accelerated capital allowances 1,029 1,896 Fair value of interest derivatives (4,833) (7,805) Short-term timing differences 143 1,069 (641) (663) Loss relief (5,010) (2,661) Deferred tax asset provision at end of period (5,651) (3,324) The directors consider the temporary differences arising in connection with theinterests in associate and joint ventures are insignificant. There is no timelimit in respect of the Group tax loss relief. 20. Share capital Number of Number of 2013 2012 ordinary ordinary £'000 £'000 10p 10p shares shares 2013 2012 Authorised: Ordinary shares of 10p each 110,000,000 110,000,000 11,000 11,000 Allotted, issued and fully paid share 85,542,711 85,542,711 8,554 8,554capital Less: held in Treasury (see below) (1,254,738) (1,538,398) (125) (154) "Issued share capital" for reporting 84,287,973 84,004,313 8,429 8,400purposes The company has one class of ordinary shares which carry no right to fixedincome. Treasury shares Number of ordinary Cost/issue 10p shares value 2013 2012 2013 2012 £'000 £'000 Shares held in Treasury at 1 January 1,538,398 1,538,398 1,421 1,421 Issued to meet directors bonuses (Jan 13 (103,580) - (96) --22p) Issued to meet staff bonuses (Jan 13 -22p) (64,818) - (60) - Issued for new directors share incentive plan (27,272) - (25) -(Jan 13 -22p) Issued for new staff share incentive plan (63,208) - (58) -(Jan 13 - 22p) Issued for new directors share incentive plan (4,673) - (4) -(Jan 13 -21.75p) Issued for new staff share incentive plan (20,109) - (19) -(Jan 13 -21.75p) Shares held in Treasury at 31 December 1,254,738 1,538,398 1,159 1,421 Share Option Schemes Employees' share option scheme (Approved scheme) At 31 December 2013 there were no options to subscribe for ordinary sharesoutstanding, issued under the terms of the Employees' Share Option Scheme. This share option scheme was approved by members in 1986, and has been approvedby Her Majesty's Revenue and Customs (HMRC). There are no performance criteria for the exercise of options under theApproved scheme, as this was set up before such requirements were considered tobe necessary. A summary of the shares allocated and options issued under the scheme up to 31December 2013 is as follows: Changes during the year At 1 Options Options Options At 31 January Exercised granted lapsed December 2013 2013 Shares issued to date 2,367,604 - - - 2,367,604 Options granted which have not been 70,000 - - (70,000) -exercised Shares allocated over which options 1,549,955 - - - 1,549,955have not been granted Total shares allocated for issue to 3,987,559 - - (70,000) 3,917,559employees under the scheme Non-approved Executive Share Option Scheme (Unapproved scheme) A share option scheme known as the "Non-approved Executive Share Option Scheme"which does not have HMRC approval was set up during 2000. At 31 December 2013there were no options to subscribe for ordinary shares outstanding. The exercise of options under the Unapproved scheme is subject to thesatisfaction of objective performance conditions specified by the remunerationcommittee which conforms to institutional shareholder guidelines and bestpractice provisions. A summary of the shares allocated and options issued under the scheme up to 31December 2013 is as follows: Changes during the year At 1 Options Options Options At 31 January Exercised granted lapsed December 2013 2013 Shares issued to date 450,000 - - - 450,000 Shares allocated over which options 550,000 - - - 550,000have not yet been granted Total shares allocated for issue to 1,000,000 - - - 1,000,000employees under the scheme 21. Related party transactions Cost Amounts Cash recharged Owed advanced to/(by) (to)/by to/(by) related related related party party party £'000 £'000 £'000 Related party: Dragon Retail Properties Limited Current account (95) (95) - Loan account - (3,205) - Langney Shopping Centre Unit Trust Current account 92 (ii) 40 - Loan account - 232 232 Bisichi Mining PLC Current account 138 (i) 138 - Simon Heller Charitable Trust Current account (30) (30) - Loan account - (700) (700) Directors and key management M A Heller and J A Heller 16 (ii) 8 - H D Goldring (Delmore Asset Management (25) (iii) - -Limited) C A Parritt (18) (iv) - - R Priest (Alvarez & Marsal Real Estate (17) (iv) - -Advisory Services LLP) Totals at 31 December 2013 61 (3,612) (468) Totals at 31 December 2012 247 (3,073) (2,019) Nature of costs recharged - (i) Management fees (ii) Property management fees(iii) Portfolio management fees (iv) Consultancy fees. The related partycompanies above are the associate and joint ventures and are treated as noncurrent asset investments - details are shown in Notes 11 and 12. Dragon Retail Properties Limited (joint venture) Dragon Retail Properties Limited (Dragon) is owned 50 per cent by the Company,and 50 per cent by Bisichi Mining PLC. Dragon had surplus cash which was deposited equally with London & AssociatedProperties PLC and Bisichi Mining PLC. The £1.2 million deposit is currentlyinterest free. Dragon loaned £2m to the Company at an interest rate of 6.875per cent. Langney Shopping Centre Unit Trust (joint venture) Langney Shopping centre Unit Trust (Langney) is owned 12.5 per cent by theCompany and 12.5 per cent by Bisichi Mining PLC. The remaining 75 per cent isowned by Columbus Capital Management LLP. During the year LAP loaned £232,000at an interest rate of 20 per cent. The Company provides office premises, property management, general management,accounting and administration services for Dragon and property managementservices to Langney. Bisichi Mining PLC (associate) The Company provides office premises, property management, general management,accounting and administration services for Bisichi Mining PLC and itssubsidiaries. Directors London & Associated Properties PLC provides office premises, propertymanagement, general management, accounting and administration services for anumber of private property companies in which Sir Michael Heller and J A Hellerhave an interest. Under an agreement with Sir Michael Heller no charge is madefor these services on the basis that he reduces by an equivalent amount thecharge for his services to London & Associated Properties PLC. The boardestimates that the value of these services, if supplied to a third party, wouldhave been £300,000 for the year (2012: £275,000). The companies for which services are provided are: Barmik Properties Limited,Cawgate Limited, Clerewell Limited, Cloathgate Limited, Ken-Crav InvestmentsLimited, London & South Yorkshire Securities Limited, Metroc Limited, PenrithRetail Limited, Shop.com Limited, South Yorkshire Property Trust Limited,Wasdon Investments Limited, Wasdon (Dover) Limited, and Wasdon (Leeds) Limited. In addition the Company received management fees of £10,000 (2012: £10,000) forwork done for two charitable foundations, the Michael & Morven HellerCharitable Foundation and the Simon Heller Charitable Trust. The Simon Heller Trust has placed on deposit with LAP £700,000 at an interestrate of 9% and refundable on demand. Delmore Asset Management Limited (Delmore) is a company in which H D Goldringis a majority shareholder and director. Delmore provides consultancy servicesto the company on an invoiced fee basis. Alvarez & Marsal Real Estate Advisory Services LLP (A&M) is a company in whichR Priest is a director. A&M provides consultancy services to the company on aninvoiced fee basis. Sir Michael Heller is a director of Bisichi Mining PLC, the associated companyand received a salary from that company of £75,000 (2012: £75,000) forservices. J A Heller received a loan of £20,000, which has been repaid in the year. The directors are considered to be the only key management personnel and theirremunerations including employers national insurance for the year were £1,485,000 (2012: £883,000). All other disclosures required including interestin share options in respect of those directors are included within theremuneration report. 22. Employees The average number of employees, including directors, of the Group during theyear involved in management and administration was 29 (2012: 28). 2013 2012 £'000 £'000 Staff costs during the year were as follows: Salaries and other costs 2,108 1,427 Social security costs 260 181 Pension costs 362 338 2,730 1,946 23. Capital Commitments 2013 2012 £'000 £'000 Commitments to capital expenditure contracted for at the year end - - The Group's share of capital commitments of joint ventures at the year endamounted to £Nil (2012: £Nil). 24. Operating and finance leases Operating leases on land and buildings At 31 December 2013 the Group had commitments under non-cancellable operatingleases on land and buildings as follows: 2013 2012 £'000 £'000 Within one year 324 600 In the second to fifth years inclusive - 324 324 924 Operating lease payments represent rentals payable by the Group for its officepremises. The leases are for an average term of 5 years and rentals are fixed for anaverage of one year. Present value of head leases on properties Minimum lease Present value of minimum payments lease payments 2013 2012 2013 2012 £'000 £'000 £'000 £'000 Amounts payable under finance leases: Within one year 294 1,821 294 1,821 In the second to fifth years inclusive 1,177 7,285 1,094 6,770 After five years 29,181 225,472 3,209 20,066 30,653 234,578 4597 28,657 Future finance charges on finance leases (26,056) (205,921) - - Present value of finance lease liabilities 4,597 28,657 4,597 28,657 Finance lease liabilities are in respect of leased investment property. Manyleases provide for contingent rent in addition to the rents above, usually aproportion of rental income. Finance lease liabilities are effectively secured as the rights to the leasedasset revert to the lessor in the event of default. Future aggregate minimum rentals receivable The Group leases out its investment properties to tenants under operatingleases. The future aggregate minimum rentals receivable under non-cancellableoperating leases are as follows: 2013 2012 £'000 £'000 Within one year 7,303 12,706 In the second to fifth years inclusive 18,058 46,628 After five years 29,788 66,579 55,149 125,913 25. Contingent liabilities and post balance sheet events There were no contingent liabilities at 31 December 2013 (2012: £Nil), exceptas disclosed in Note 18. Since the year end the Group has terminated a 20 year swap with a notionalvalue of £70,000,000 with a 7 year call in favour of the bank, taken out inNovember 2007, at 4.76%; a 20 year swap with a notional value of £10,400,000with a 7 year call in favour of the bank, taken out in November 2007, at 4.76%and £20,000,000 of a 20 year swap with a notional value of £40,000,000 with a 7year call in favour of the bank, taken out in December 2007, at 4.685%; leavinga notional £20,000,000 of swap at 4.685% outstanding. The exit cost incurred in2014 associated with closing these instruments are £20.9m. On 17 January 2014 the disposal of Windsor Shopping Centre was completed for £104.7m. Full details are included in Note 7. 26. Company financial statements Company balance sheet at 31 December 2013 Notes 2013 2012 £'000 £'000 Fixed assets Tangible assets 26.3 65,912 76,972 Other investments: Associated company 26.4 489 489 Subsidiaries and others 26.4 47,649 46,196 26.4 48,138 46,685 114,050 123,657 Current assets Debtors 26.5 15,436 24,287 Investments 26.6 23 20 Bank balances 4,969 6,022 20,428 30,329 Creditors Amounts falling due within one year 26.7 (78,711) (97,083) Net current liabilities (58,283) (66,754) Total assets less current liabilities 55,767 56,903 Creditors Amounts falling due after more than one year 26.8 (24,625) (30,985) Net assets 31,142 25,918 Capital and reserves Share capital 26.10 8,554 8,554 Share premium account 26.11 4,866 4,866 Capital redemption reserve 26.11 47 47 Revaluation reserve 26.11 2,151 6,853 Treasury shares 26.10 (1,159) (1,421) Retained earnings 26.11 16,683 7,019 Shareholders' funds 31,142 25,918 These financial statements were approved by the board of directors andauthorised for issue on 17 April 2014 and signed on its behalf by: Sir Michael Heller R J CorryDirector Director Company Registration No. 341829 26.1. Company Accounting policies The following are the main accounting policies of the Company: Basis of accounting The financial statements have been prepared under the historical costconvention as modified to include the revaluation of freehold and leaseholdproperties and fair value adjustments in respect of current asset investmentsand interest rate hedges and in accordance with applicable accountingstandards. All accounting policies applied are consistent with those of priorperiods. Investment properties are accounted for in accordance with SSAP 19, "Accountingfor Investment Properties", which provides that these should not be subject toperiodic depreciation charges, but should be shown at open market value. Thisis contrary to the Companies Act 2006 which states that, subject to anyprovision for depreciation or diminution in value, fixed assets are normally tobe stated at purchase price or production cost. Current cost accounting or therevaluation of specific assets to market value, as determined at the date oftheir last valuation, is also permitted. The treatment of investment properties under the Companies Act 2006 does notgive a true and fair view as these assets are not held for consumption in thebusiness but as investments, the disposal of which would not materially affectany manufacturing or trading activities of the enterprise. In such a case it isthe current value of these investments, and changes in that current value,which are of prime importance. Consequently, for the proper appreciation of thefinancial position, the accounting treatment required by SSAP 19 is consideredappropriate for investment properties. Details of the current value andhistorical cost information for investment properties are set out in Note 26.3.Depreciation or amortisation is only one of the many factors reflected in theannual revaluation and the amount that might otherwise have been shown cannotbe separately identified or quantified. The financial statements have been prepared on a going concern basis. Furtherdetails of which are contained in Group accounting policies, in the FinanceDirector's report and Directors' report. Revenue Revenue comprises rental income, listed investment sales, dividends and otherincome. The profit or loss on disposal of properties is recognised oncompletion of sale. Dividends receivable Dividends are credited to the profit and loss account when the dividend isreceived. Tangible fixed assets a Investment properties An external professional valuation of investment properties is carried outevery year. Properties professionally valued by Chartered Surveyors are on anexisting use open market value basis, in accordance with the PracticeStatements contained within the RICS valuation standards 2012 prepared by theRoyal Institution of Chartered Surveyors. Directors valuation of properties areat fair value. The cost of improvements includes attributable interest. b) Other tangible fixed assets Other tangible fixed assets are stated at historical cost. Depreciation isprovided on all other tangible fixed assets at rates calculated to write eachasset down to its estimated residual value evenly over its expected usefullife. The rates generally used are - office equipment - 10 to 33 per cent perannum, and motor vehicles - 20 per cent per annum, on a straight line basis. Investments Long term investments are described as participating interests and areclassified as fixed assets. Short term investments are classified as currentassets. a) Investments held as fixed assetsThese comprise investments in subsidiaries and investments in Dragon RetailProperties Limited and Langney Shopping Centre Unit Trust (unlisted jointventures), Bisichi Mining PLC (listed associate), and in unlisted companieswhich are all held for the long term. Provision is made for any impairment inthe value of fixed asset investments. b) Investments held as current assets Investments held for trading are included in current assets and are revalued tofair value. For listed investments, fair value is the bid market listed valueat the balance sheet date. Realised and unrealised gains or losses arising fromchanges in fair value are included in the income statement of the period inwhich they arise. Financial Instruments Bank loans and overdrafts Bank loans and overdrafts are included in creditors on the Company balancesheet at the amounts drawn on the particular facilities. Interest payable onthose facilities is expensed as a finance cost in the period to which itrelates. Interest rate derivatives The company uses derivative financial instruments to hedge the interest raterisk associated with the financing of the company's business. No trading insuch financial instruments is undertaken. At previous reporting dates, these interest rate derivatives were recognised attheir fair value, being the Net Present Value of the difference between thehedged rate of interest and the current market rate of interest assuming thatthis rate was applied for the remainder of the hedge. Because the Directorshave decided to terminate all interest rate derivatives they are now shown attheir estimated termination value. Where a derivative is designated as a hedge for the variability of a highlyprobable forecast transaction e.g. an interest payment, the element of the gainor loss on the derivative that is an effective hedge is recognised directly inequity. When the forecast transaction subsequently results in the recognitionof a financial asset or a financial liability, the associated gains or lossesthat were recognised directly in equity are reclassified into the incomestatement in the same period or periods during which the asset acquired orliability assumed affects the income statemente.g. when interest income or expense is recognised. The gain or loss arising from any adjustment to the fair value is recognised inthe income statement. Debtors Debtors do not carry any interest and are stated at their nominal value asreduced by appropriate allowances for estimated irrecoverable amounts. Creditors Creditors are not interest bearing and are stated at their nominal value. Joint ventures Investments in joint ventures, being those entities over whose activities theGroup has joint control as established by contractual agreement, are includedat cost. Deferred taxation Deferred tax is recognised in respect of all timing differences that haveoriginated but not reversed at the balance sheet date where transactions orevents that result in an obligation to pay more tax in the future or a right topay less tax in the future have occurred at the balance sheet date. Timingdifferences are differences between the company's taxable profits and itsresults as stated in the financial statements. Deferred tax is measured at theaverage tax rates which are expected to apply in the periods in which timingdifferences are expected to reverse, based on tax rates and laws that have beenenacted or substantially enacted by the balance sheet date. Deferred tax ismeasured on a non-discounted basis. Leased assets and obligations All leases are "Operating Leases" and the annual rentals are charged to theprofit and loss account on a straight line basis over the lease term. Rent freeperiods or other incentives received for entering into a lease are accountedfor over the period of the lease so as to spread the benefit received over thelease term. Retirement benefits For defined contribution schemes the amount charged to the profit and lossaccount in respect of pension costs and other post retirement benefits is thecontributions payable for the year. Differences between contributions payablein the year and contributions actually paid are shown as either prepayments oraccruals at the balance sheet date. 26.2. Profit for the financial year The Company's profit for the year was £9,864,000 (2012 loss: £6,791,000). Inaccordance with the exemption conferred by Section 408 of the Companies Act2006, the Company has not presented its own profit and loss account. 26.3. Tangible assets Investment Properties Office Total Freehold Long Short Equipment £'000 £'000 leasehold leasehold and motor £'000 £'000 vehicles £'000 Cost or valuation at 1 January 2013 77,894 56,557 19,855 300 1,182 Additions 33 - - - 33 Disposals (6,446) (4,411) (1,890) - (145) Decrease on revaluation (4,702) (3,387) (1,290) (25) - Cost or valuation at 31 December 2013 66,779 48,759 16,675 275 1,070 Representing assets stated at: Valuation 65,709 48,759 16,675 275 - Cost 1,070 - - - 1,070 66,779 48,759 16,675 275 1,070 Depreciation at 1 January 2013 922 - - - 922 Charge for the year 54 - - - 54 Disposals (109) - - - (109) Depreciation at 31 December 2013 867 - - - 867 Net book value at 1 January 2013 76,972 56,557 19,855 300 260 Net book value at 31 December 2013 65,912 48,759 16,675 275 203 The freehold and leasehold properties were valued as at 31 December 2013 byexternal professional firms of chartered surveyors. The valuations were made atfair value. The directors property valuations were made at fair value. 2013 2012 £'000 £'000 Allsop LLP 62,390 72,535 Woolhouse Real Estate 1,494 - BNP Paribas Real Estate - 4,177 Directors valuation 1,825 - 65,709 76,712 The historical cost of investment properties, including total capitalisedinterest of £1,161,000 (2012: £1,222,000) was as follows: Freehold Long Short £'000 Leasehold Leasehold £'000 £'000 Cost at 1 January 2013 54,620 17,293 785 Additions - - - Disposals (6,859) (2,321) - Cost at 31 December 2013 47,761 14,972 785 Long leasehold properties are held on leases with an unexpired term of morethan fifty years at the balance sheet date. 26.4. Other investments Cost Total Shares in Loan stock Shares Loan Shares in Unlisted in in stock £'000 subsidiary associate shares subsidiary joint in joint companies £'000 £'000 companies ventures ventures £'000 £'000 £'000 £'000 At 1 January 2013 46,685 40,663 3,658 1,052 818 489 5 Additions 2,302 - - 76 26 - 2,200 Repayments (511) - - - (511) - - Impairment (338) - - - (333) - (5) At 31 December 2013 48,138 40,663 3,658 1,128 - 489 2,200 In December 2013 the remaining 50% ordinary shares and remaining loan stocks inAnalytical Ventures Limited (joint venture) were acquired by the Company for anominal value and it is now a wholly owned subsidiary. Subsidiary companies The Company owns 100 per cent of the ordinary share capital of the followingcompanies that are trading, all of which are registered in England and Wales: Activity % Held by % Held by company Group LAP Ocean Holdings Limited Property Investment 100 100 Antiquarius Limited Property Investment - 100 Brixton Village Limited Property Investment - 100 Market Row Limited Property Investment - 100 Ski Investments Limited Property Investment - 100 Analytical Properties Holdings Property Investment 100 100Limited Analytical Properties Limited Property Investment - 100 Analytical Properties (St Helens) Property Investment - 100Limited London & Associated Management Property Management 100 100Services Limited Services Analytical Ventures Limited Property Investment 100 100 Analytical Ventures (Halifax) Property Management - 100Limited Services In the opinion of the Directors the value of the investment in subsidiaries isnot less than the amount shown in these financial statements. Details of the associate and joint ventures are set out in Notes 11 and 12. 26.5. Debtors 2013 2012 £'000 £'000 Trade debtors 893 903 Amounts due from subsidiary companies 8,949 17,008 Amounts due from associate and joint ventures 381 164 Deferred tax asset (note 26.9) 3,706 4,644 Other debtors 181 187 Prepayments and accrued income 1,326 1,381 15,436 24,287 26.6. Investments 2013 2012 £'000 £'000 Market value of the listed investment portfolio 23 20 Unrealised deficit of market value over cost - (3) Listed investment portfolio at cost 23 23 All investments are listed on the London Stock Exchange. 26.7. Creditors: amounts falling due within one year 2013 2012 £'000 £'000 Bank overdrafts (unsecured) 1,490 3,275 Bank loans (secured)* 44,170 44,144 Bank loans (unsecured) 258 247 £5 million First Mortgage Debenture Stock 2013 at 11.3 per cent - 5,000 Amounts owed to subsidiary companies 22,982 35,974 Amounts owed to joint ventures 3,300 3,266 Other taxation and social security costs 635 726 Other creditors 1,408 747 Accruals and deferred income 4,468 3,704 78,711 97,083 \* The bank loans are shown after deduction of un-amortised issue costs. 26.8. Creditors: amounts falling due after more than one year 2013 2012 £'000 £'000 Interest rate derivatives 9,569 13,988 Term Debenture stocks: £1.7 million First Mortgage Debenture Stock 2016 at 8.67 per cent - 1,700 £5 million First Mortgage Debenture Stock 2018 at 11.6 per cent 5,000 5,000 £10 million First Mortgage Debenture Stock 2022 at 8.109 per cent 9,855 9,837* 14,855 16,537 Bank loans: Repayable after more than one year 201 460 24,625 30,985 \* The £10 million debenture is shown after deduction of un-amortised issuecosts. Details of terms and security of overdrafts, loans and loan renewal anddebentures are set out in note 17. Repayment of borrowings: Bank loans and overdrafts: Repayable within one year 45,918 47,666 Repayable between two and three years 201 460 46,119 48,126 Debentures: Repayable within one year - 5,000 Repayable between two and five years 5,000 1,700 Repayable in more than five years 9,855 14,837 60,974 69,663 Hedge profile At 31 December 2013 the Company had hedges totalling £50.4m to cover the £44.2million facility. These consisted of a 20 year swap for £10.4 million with a 7year call option in favour of the bank, taken out in November 2007, at 4.76 percent; and a 20 year swap for £40 million with a 7 year call option in favour ofthe bank, taken out in December 2007, at 4.685 per cent. Since the year endthese hedges have been reduced by £30.4 million (the £10.4 million hedge at4.76 per cent and £20.0 million of the £40.0 million hedge at 4.685 per centhave been cancelled) leaving only £20 million of the 4.685 per cent hedgeoutstanding. The Board has decided to terminate all the long dated derivatives rather thanhold them to maturity. This decision has necessitated a revision of theaccounting estimate so that the fair value of derivatives is now recognised onthe basis that they are short term liabilities, rather than being held for thelonger term. At 31 December 2013 the liability for the hedging instruments isbased on the bank termination value adjusted for interest already includedelsewhere in the accounts. This results in a liability at 31 December 2013 of £9,569,000 (2012: £10,771,000). If, as was the case in 2012, the hedges had been valued at the netpresent value of the fair value, as against the termination values, theliability in the balance sheet would have been £7,923,000. The value of thehedging instrument changes by approximately £61,000 for each 0.1% change ininterest rate. The amount recognised in the profit and loss account was a gain of £4,419,000.Had the hedges had been valued at the net present value of the fair value tothe business (as last year), the amount recognised in the profit and lossaccount would have been a gain of £6,065,000. Thus the profit has been reducedby £1,646,000 in the current year. Under FRS 29 the hedges are not deemed to be eligible for hedge accounting andany movement in the value of the hedges is therefore charged directly to theprofit and loss account. The bank has an option to cancel the hedges in January2015. The cost to the Company to exit the instruments before January 2015 hasbeen attributed a cost by the bank of £174,000 (2012: £182,000). Fair value of financial instruments Fair value estimation The Group has adopted the amendment to FRS29 for financial instruments that aremeasured in the balance sheet at fair value. This requires the methods of fairvalue measurement to be classified into a hierarchy based on the reliability ofthe information used to determine the valuation, as follows: - Quoted prices (unadjusted) in active markets for identical assets orliabilities (level 1). - Inputs other than quoted prices included within level 1 that are observablefor the asset or liability, either directly (that is, as prices) or indirectly(that is, derived from prices) (level 2). - Inputs for the asset or liability that are not based on observable marketdata (that is unobservable inputs) (level 3). Level Level Level Total 2013 1 2 3 £'000 Gain/ £'000 £'000 £'000 (loss) to profit and loss account £'000 Financial assets Other financial assets held for trading Quoted equities 23 - - 23 3 Financial liabilities Derivative financial instruments Interest rate swaps - 9,569 - 9,569 4,419 Level Level Level Total 2012 1 2 3 £'000 Gain/ £'000 £'000 £'000 (loss) to profit and loss account £'000 Financial assets Other financial assets held for trading Quoted equities 20 - - 20 4 Financial liabilities Derivative financial instruments Interest rate swaps - 13,988 - 13,988 (1,328) Liquidity The table below analyses the Company's financial liabilities into maturityGroupings and also provides details of the liabilities that bear interest atFixed, floating and non-interest bearing rates. Less than 2-5 years Over 2013 1 year £'000 5 years Total £'000 £'000 £'000 Bank overdrafts (floating) 1,490 - - 1,490 Debentures (fixed) - 5,000 10,000 15,000 Bank loans (floating)* 44,451 201 - 44,652 Trade and other payables 32,793 - - 32,793(non-interest) 78,734 5,201 10,000 93,935 Less than 2-5 years Over 2012 1 year £'000 5 years Total £'000 £'000 £'000 Bank overdrafts (floating) 3,275 - - 3,275 Debentures (fixed) 5,000 1,700 15,000 21,700 Bank loans (floating)* 44,441 460 - 44,901 Trade and other payables (non-interest) 44,416 - - 44,416 97,132 2,160 15,000 114,292 The Company would normally expect that sufficient cash is generated in theoperating cycle to meet the contractual cash flows as disclosed above througheffective cash management. \* The bank loans are fully hedged with appropriate interest derivatives. Detailsof the hedges are shown above. Total financial assets and liabilities The Company's financial assets and liabilities and their fair values are asfollows: Fair 2013 Fair 2012 value Carrying value Carrying £'000 value £'000 value £'000 £'000 Cash and cash equivalents 4,969 4,969 6,022 6,022 Investments 23 23 20 20 Other assets 15,436 15,436 24,287 24,287 Bank overdrafts (1,490) (1,490) (3,275) (3,275) Bank loans (44,451) (44,428) (44,441) (44,395) Derivative liabilities (9,569) (9,569) (13,988) (13,988) Other liabilities (24,543) (24,543) (44,416) (44,416) Before debentures (59,625) (59,602) (75,791) (75,745) Additional details of borrowings and financial instruments are set out in Notes17 and 18. 26.9. Provisions for liabilities and charges 2013 2012 £'000 £'000 Deferred Taxation Balance at 1 January (4,644) (4,550) Transfer to profit and loss account 938 (94) Balance at 31 December (3,706) (4,644) No provision has been made for the approximate taxation liability at 20 percent (2012: 23 per cent) of £101,000 (liability 2012: £51,000) which wouldarise if the investment properties were sold at the stated valuation. The deferred tax balance comprises the following: Accelerated capital allowances 934 1,044 Fair value of interest derivatives (1,914) (3,217) Short-term timing differences 146 156 Losses (2,872) (2,627) Provision at end of period (3,706) (4,644) 26.10. Share capital Details of share capital, treasury shares and share options are set out in Note20. 26.11. Reserves Share Capital Revaluation Retained Total Premium redemption reserve Earnings £'000 Account reserve £'000 £'000 £'000 £'000 Balance at 1 January 2013 4,866 47 6,853 7,019 18,785 Decrease on valuation of - - (4,702) - (4,702)investment properties Retained profit for year - - - 9,864 9,864 Loss on disposal of Treasury - - - (200) (200)Shares Balance at 31 December 2013 4,866 47 2,151 16,683 23,747 26.12. Related party transactions Details of related party transactions are given in Note 21. As provided under Financial Reporting Standard 8: Related Party Disclosures,the Company has taken advantage of the exemption from disclosing transactionswith other Group companies. 26.13. Capital commitments 2013 2012 £'000 £'000 Commitments to capital expenditure contracted for at the year end - - 26.14. Commitments under operating leases At 31 December 2013 the Company had annual commitments under non-cancellableoperating leases on land and buildings as follows: 2013 2012 £'000 £'000 Expiring in less than one year 324 210 Expiring in more than one year but less than five years - 390 324 600 In addition, the Company has an annual commitment to pay ground rents on itsleasehold investment properties which amount to £327,000 (2012: £354,000). 26.15. Contingent liabilities and post balance sheet events There were no contingent liabilities at 31 December 2013 (2012: £Nil), exceptas disclosed in Note 26.8. Since the year end the Company has terminated a 20 year swap with a notionalvalue of £10,400,000 with a 7 year call in favour of the bank, taken out inNovember 2007, at 4.76% and £20,000,000 of a 20 year swap with a notional valueof £40,000,000 with a 7 year call in favour of the bank, taken out in December2007, at 4.685%; leaving a notional £20,000,000 of swap at 4.685% outstanding.The exit cost incurred in 2014 associated with closing these instruments are £6.4m. five year financial summary 2013 2012 2011 2010 2009 £m £m £m £m £m Portfolio size Investment properties-Group^ 87 205 194 195 214 Investment properties-joint ventures 19 27 29 13 13 Investment properties-associate 12 12 12 12 12 118 244 235 220 239 Portfolio activity £m £m £m £m £m Acquisitions - - - - - Disposals (9.47) - (0.60) (20.74) (17.79) Capital Expenditure - 0.97 0.42 0.49 3.46 (9.47) 0.97 (0.18) (20.25) (14.33) Consolidated income statement £m £m £m £m £m Rental income - Group and share of joint 14.18 15.80 16.99 16.50 17.07ventures (including discontinued) Less: attributable to joint venture (0.27) (0.63) (0.61) (0.52) (0.52)partners Group rental income 13.91 15.17 16.38 15.98 16.55 Profit/(loss) before interest and tax 6.71 18.93 10.89 11.97 20.49 Profit/(loss) before tax 1.15 7.62 (18.56) (10.69) 21.41 Taxation 2.33 (0.35) 3.74 7.19 (2.36) Profit/(loss) attributable to shareholders 3.48 7.27 (14.82) (3.50) 19.05 Earnings/(loss) per share - basic 4.12p 8.65p (17.63) (4.24)p 24.32p p Earnings/(loss) per share - fully diluted 4.12p 8.65p (17.63) (4.24)p 24.32p p Dividend per share 0.125p - 0.75p 1.15p 1.15p Consolidated balance sheet £m £m £m £m £m Shareholders' funds 49.73 46.46 39.93 55.76 59.10 Net borrowings 53.96 131.27 133.03 130.77 145.65 Net assets per share - basic 59.00p 55.30p 47.53p 66.71p 74.22p - fully diluted 59.00p 55.29p 47.53p 66.69p 74.19p Consolidated cash flow statement £m £m £m £m £m Cash generated from operations 10.83 12.72 10.89 9.58 12.18 Capital investment and financial 7.51 (0.87) (0.50) 20.42 13.94investment

Note: ^Excluding the present value of head leases