LXB.L Regulatory News (LXB)

For immediate release 5 December 2017

LXB Retail Properties Plc

RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2017

LXB Retail Properties Plc, a Jersey resident closed-ended real estate investment company focused on edge of town and out of town retail assets, today announces results for the year ended 30 September 2017.

Highlights

· November 2016: returned surplus funds of £30.3m to Shareholders

· December 2016: further cash considerations released in relation to the forward funded investments at Banbury and Sutton, completed a further disposal of land at Gloucester for £0.4m, and completed the surrender of the agreement for lease with ASDA at Willow Green Farm, Truro realising total cash proceeds of £8.5m

· January 2017: completed the disposal of Neats Court Retail Park, Sheppey to Lightstone Neatscourt LLP generating cash proceeds of £11.3m

· February 2017: obtained planning consent (subject to referral to the Secretary of State for Communities and Local Government) for a revised and enhanced scheme at Rushden Lakes

· March 2017: completed the sale of substantially all of the Group's remaining land interests at Corton, Ayr to Manse LLP generating cash proceeds of £3.4m

· May 2017: completed two further lettings at London Road, Biggleswade generating a cash receipt of £3.2m under the terms of the sales agreement

· May 2017: completed a further disposal of land at Gloucester for net proceeds of £0.45m

· July 2017: a £6.4m development facility was agreed with Royal Bank of Scotland to fund construction of the cinema at Stafford

· July 2017: practical completion of Phase 1 of Rushden Lakes

· July 2017: practical completion of Phase 2C at Sheppey

· August 2017: practical completion of Brocklebank Retail Park, Charlton

Post year end:

· November 2017: following the satisfaction of the remaining criteria, £8.6m was received from the Crown Estate under the funding agreement in respect of phases 2 and 3 at Rushden Lakes

* excluding fair values of financial instruments and deferred tax.

LXB Adviser LLP Tel: 020 7432 7900

Tim Walton, CEO Brendan O'Grady, FD

J.P. Morgan Cazenove (NOMAD) Tel: 020 7742 4000

Bronson Albery/Paul Hewlett

Buchanan Tel: 020 7466 5000

Charles Ryland/Victoria Hayns/Patrick Hanrahan

Forward looking statements

This document includes forward looking statements which are subject to risks and uncertainties. You are cautioned that forward looking statements are not guarantees of future performance and that if risks and uncertainties materialise, or if assumptions underlying any of these statements prove incorrect, the actual results of operations and financial condition of the Group may materially differ from those made in, or suggested by, forward looking statements. Other than in accordance with its legal or regulatory obligations, the Company undertakes no obligation to review, update or confirm expectations or estimates or to release publicly any revisions to any forward looking statements to reflect events that occur or circumstances that arise after the date of this document.

Chairman's Statement

Dear Shareholder,

I am pleased to present the Annual Report and Financial Statements for the year to 30 September 2017.

In my last Chairman's Statement, dated 5 June 2017, issued with the Interim Report in respect of the six months ended 31 March 2017, I set out the Board's thinking, following a period of consultation, as to how we could deliver on our mandate from Shareholders. The mandate, simply put, is to return as much of the value remaining in the portfolio as possible to Shareholders in the form of cash, whilst dealing with the significant assets, liabilities and contractual commitments which would exist beyond the conclusion of the mandate, which at that time was 30 November 2017.

The inherent difficulty in delivering the mandate was recognised recently by nearly all Shareholders when the date for the Board to put final proposals to you was extended to 28 February 2018 at an extraordinary general meeting which took place on 9 October 2017.

The strategy set out in my Letter to Shareholders on 5 April 2017 recognised the need for a NewCo to deal with matters beyond the mandate period and noted the Board's belief that this NewCo should be AIM listed. The intention was that NewCo would seek to develop out the Group's remaining longer-term investments including further phases of Rushden Lakes in partnership with The Crown Estate as owner of the retail and leisure scheme, the cinema and leisure development at Stafford, and a new Living Village on the edge of Truro.

Since that 5 April 2017 letter and my subsequent Chairman's Statement in June 2017, we have had to deal with an increasingly challenging operating environment in terms of the retail and lettings market with a mandate that gave limited flexibility both in terms of time and of action. Needless to say a lot has happened over that period and the Investment Manager's report notes that solicitors are currently instructed on sales of Riverside Retail Park and the cinema and leisure investments at Stafford. However, whilst the Board and Investment Manager have largely delivered in terms of the investments that the Group has been involved in, we have not been able to deliver on our expectations of value creation and the return of cash to Shareholders.

In my role as Chairman I, together with the rest of the Board, am continuously assessing how we can best deliver on the mandate, and maintain a constant dialogue with Shareholders to that end. However, since my last Chairman's Statement many things have changed, particularly in the external environment, which have caused us to reassess the deliverability of and therefore the rationale for the NewCo model.

The share price has seen a dramatic fall of nearly 50% to hover today at around 20p. The Trading Update issued on 19 October 2017 detailed the unforeseen losses on contracts at Rushden and at Stafford and the implications for ultimate value realisation arising from the difficulties in our core retail and leisure occupational markets which were feeding through into the investment market. The share price fall is partly a reflection of the Board's revised guidance as to the likely out-turn, but it also reflects the illiquidity of our shares with a market capitalisation of just over £30m. This is obviously very concerning for all Shareholders, including the Board, the Investment Manager, and former partners of the Investment Manager who have not sold any shares and together continue to be the largest shareholder in our company.

Continuing delays both in planning and construction at Stafford and Rushden mean that these large leisure projects are not due to reach practical completion until August 2018 and January 2019 respectively. If these contracts were to be carried forward into a new listed entity, the Board now considers that the inherent risks would place an unacceptable burden on the balance sheet and prospects of that vehicle.

Very significant progress has been made in simplifying the group and reducing the number and complexity of assets, liabilities and contractual commitments that would exist beyond the revised mandate period. To put that in context, at the start of this process the group consisted of 92 legal entities, that number has now been reduced to 41 entities. Now that the funding for phases 2 and 3 at Rushden Lakes is unconditional and assuming that the legal process to sell the retail at Stafford unconditionally and the leisure at practical completion is concluded, I anticipate a further significant reduction in the number of subsidiaries over the next few months as various contractual positions are closed out. We continue to work closely, in particular with The Crown Estate, to reduce the scale of those commitments given the limits that we are faced with, both in time and as regards the size of the Company's balance sheet.

It is clear from my ongoing dialogue with Shareholders, independent of the Investment Manager, that the overwhelming majority, including the Investment Manager, wish to see as much cash as possible returned to all shareholders in the short term, acknowledging the foregoing of profitable opportunities which that may entail. It is also clear from views expressed by Shareholders that, if a solution can be found to obviate the need for ongoing Shareholder involvement in a vehicle that could take significant time to realise value, then that is the preferred solution.

The Board met recently to consider how final proposals, to be put to Shareholders by 28 February 2018, could be framed in light of the current circumstances and in particular having regard to the aspirations of Shareholders and the mandate. The Board has come to the view that the most appropriate way forward is to proceed with a Scheme of Arrangement through the Jersey Courts which will ensure that:

· where possible all remaining assets and liabilities will be realised into cash and returned to shareholders or be extinguished by a long stop date of 31 March 2019;

· all remaining Group entities, again as far as possible, will be wound up or dissolved;

· a small number of entities which will have actual or contingent net liabilities that cannot be extinguished by 31 March 2019, and which are likely to have a net value of, in aggregate, less than 1p per share will be transferred to an entity owned and controlled by the Investment Manager at fair value and on arms' length terms; and

· after the long stop date of 31 March 2019, the Company, by that time having no value and with no liabilities or continuing commitments, will be dissolved.

A Scheme of Arrangement is currently being prepared by our legal advisers and it is anticipated that this will be presented to the Jersey Courts early in 2018. If it so determines, the Court will convene a meeting of Shareholders to vote on the Scheme of Arrangement. This meeting, together with an extraordinary general meeting convened by the Company in connection with the Scheme of Arrangement, is expected to be held by the end of February 2018 and will constitute proposals for the purposes of the Articles of Association of the Company.

It is necessary to commence the process shortly in order to comply with the mandate that the Board has been given, and adopting a structure that allows the scheme to complete with formal dissolution of the Company after the long stop date of 31 March 2019 ensures that the remaining exposure to construction and letting risk at both Rushden Lakes and Stafford remains with existing Shareholders, whilst providing the time to capture the potential value in Phase 4 at Rushden Lakes and turn that value into cash, again for the benefit of existing Shareholders. To that end a planning application for Phase 4 (the Garden Square) will be submitted next month.

I anticipate that, as part of these proposals, a return of cash, likely to be in excess of 10p per share, will be made in the first quarter of next year. Thereafter, your Board will look to return further amounts of cash as soon as it is realised, commensurate with our obligation to ensure that the Group's cash flow enables it to continue to fulfil its obligations. Any final distribution is proposed to be made prior to 31 March 2019 and the dissolution of the Company.

I appreciate that the final question, as always, goes to the ultimate value to be realised and considerable uncertainty remains as we continue to turn assets into cash and to remove liabilities. In particular, we retain a significant ongoing exposure to the occupational leisure market. The potential to capture the inherent value from the final phase at Rushden Lakes, the Garden Square, where we believe there is significant occupational demand, means that there is a reasonable prospect that we can meet our NAV guidance of between 30p and 35p in cash over the period to 31 March 2019.

We anticipate being able to post formal documentation concerning the proposed Scheme of Arrangement to Shareholders by early February so that the Shareholder meetings that will be required in connection with it and extraordinary general meeting convened by the Company can be held by the end of February 2018 in accordance with the requirements of the Articles of Association of the Company.

Finally a word of thanks to our advisers, the Investment Manager and my fellow Board members. They have worked very hard indeed in difficult circumstances. We have come a long way and are now in a position to deliver proposals which are, I believe, in line with the desired outcome of Shareholders. Whilst the final financial out-turn may not have met our expectations, we have already returned all of the money that was invested in the Plc, and we will have delivered real beneficial change to communities up and down the country.

Phil Wrigley

Chairman

5 December 2017

Report of the Investment Manager, LXB Adviser LLP

LXB Adviser LLP advises LXB Retail Properties Plc ("LXB" or "the Group") and is pleased to report on the operations of the Group during the year ended 30 September 2017 and up to the date of this report.

We continue to work towards realising the remaining value in the portfolio, with the sale of Neats Court Retail Park, Sheppey and all of the Group's remaining land interests at Corton, Ayr completed in the 12 months to 30 September 2017. During that period, the Group also disposed of two plots of land at Gloucester and concluded an agreement whereby ASDA surrendered its leasehold interest at Willow Green Farm, Truro. The Group is also close to concluding the sale of the final plot of land at Gloucester, has approved an offer for the sale of the Group's remaining interests at Stafford with solicitors instructed, and is in advanced discussions with a potential purchaser for the Group's remaining interests at Sutton.

We provide more information on the individual investments in the Property details section of this report. However, in order to protect Shareholders' interests, we do not comment on the status of discussions on potential sales of individual investments. The Group will, of course, report the outcome of those discussions, as and when transactions conclude.

Property details

The Group's most significant investments are discussed in greater detail below.

Biggleswade

Lettings to Cotswold Outdoor and Argos were secured in April 2017 and triggered a cash receipt of £3.2m. Discussions are ongoing regarding the remaining space, which is approximately 8,000 sq ft in total. Based on the proposed letting terms there is the potential for a further cash receipt if and when that space is let.

Gloucester

The Group's one remaining plot, comprising approximately 0.75 acres with planning consent for commercial, showroom or trade uses, is now under offer and the sale is expected to complete in the near future. The Group's NAV reflects the terms of the proposed sale.

Greenwich Brocklebank

Practical completion of the Group's Brocklebank investment, which was sold under an Institutional Funding Agreement to The Charities Property Fund in December 2015, took place in August 2017.

All the leases have completed, with Mothercare and Aldi already open for trade and Primark and Next scheduled to open before Christmas. Following the lease completions, the Group is in the process of agreeing the final cash receipt due under the Institutional Funding Agreement, and expects this to be finalised shortly.

Rushden Lakes

This investment was sold to The Crown Estate in May 2016. The sale terms provided that The Crown Estate would fund the development costs, with the Group retaining responsibility for a number of project related matters as well as for letting the remaining vacant space.

The Group has recently announced that it has secured an enhanced planning consent for a further 215,000 sq ft of retail and leisure space to be delivered over three additional phases of development and that the revised agreement providing for The Crown Estate to fund the next two phases at Rushden Lakes is now unconditional.

Rushden Lakes is now planned in four phases with Phase 1, anchored by M&S, Primark and House of Fraser, now open and 96% let. Additionally, a 4,649 sq ft unit has been let to Superdry and a 2,729 sq ft has been let to Magazine Heaven (both subject to planning) and a further lease with Robert Goddard for the final 2,352 sq ft at Phase 1 is in solicitors' hands. The contractor is already on site with Phases 2 and 3, with the anticipated practical completion dates being January 2019 and June 2018 respectively. Work on Phase 4 is expected to start in May 2018.

90% of the Phase 2 space is pre-let, with a further 2% in solicitors' hands. Phase 3 is 63% pre-let and another 20% is currently in solicitors' hands.

The Group remains in discussion with Highways England concerning potential cost over-runs in connection with the highways improvements at Rushden Lakes and will update further when it is appropriate to do so.

Sheppey

In January 2017, the Group completed the sale of the Neats Court Retail Park investment to Lightstone Neatscourt LLP for £11.34m.

Practical completion of the Group's remaining interest which comprises 10,000 sq ft of A3 restaurant space, was achieved in July 2017. Four units are already let and the tenants are in occupation which equates to 72% by floor area. Discussions are ongoing with various retailers to take the remaining space which is currently configured as two units.

The Board intends to wait until the scheme is fully let before bringing this investment to market.

Stafford

The Riverside retail investment is fully open and the Group has completed lettings on two further units in the period, leaving some 6,000 sq ft (approximately 6% of floor space) to let. The Board has approved an offer to purchase the investment and both parties have instructed solicitors.

The Group commenced construction of the cinema and adjacent restaurant unit during the period and practical completion is expected in August 2018. The RBS development facility to support the construction of the cinema and the adjacent restaurant was also signed in the period. The Board has approved an offer for this investment to be sold on a forward commitment basis whereby the buyer commits to acquire the completed investment at practical completion.

The Group's NAV reflects the terms of both potential transactions. Further announcements will be made as and when they are contractually certain.

Sutton

The Group's remaining interest in Sutton is the long leasehold on the 27,000 sq ft ground floor retail units beneath the two residential towers. Four units are let and a further letting is in solicitors' hands which leaves one unit of 1,300 sq ft unit to let.

The Group is in advanced discussions with a potential purchaser which may lead to solicitors being instructed.

Living Villages - Truro, Higher Newham

The Group's land interests at Higher Newham Farm have consent for a Living Villages type scheme. As noted in the Chairman's Statement, the Board intends to explore all options to maximise the cash value of all remaining assets before 31 March 2019. Higher Newham Farm will be part of this review.

Revaluation deficit and loss on sale of investment properties

As described in note 12 to the Group Financial Statements, the investment properties held by the Group at 30 September 2017 were valued by the Group's external property valuers, JLL. In their opinion the fair value of these investment properties at that date was £54.7m, resulting in a revaluation deficit for the period of £13.3m. This deficit is largely down to a softening of yields on the Stafford and Sutton investments, cost increases at Stafford and reduced rent assumptions on vacant space at Sutton.

The Group recognised a loss on sale of investment properties of £0.8m in the year.

Accounting treatment of forward funded construction activities

Under the terms of the sale of a number of the Group's investments, the buyer funds the development with the Group overseeing the works. The Group recharges the costs associated with the relevant forward funding agreement plus a 1% fee on the main contractor's costs. As explained previously, following consultation with the Group's auditors, the appropriate accounting treatment for these arrangements is to include the amounts receivable from the buyer (in respect of each reporting period) in gross revenue and to include the costs incurred by the Group (in respect of each reporting period) in direct costs. The relevant amounts for the year are disclosed in note 4 to the Group Financial Statements.

Basis of preparation

Following Shareholder approval on 29 February 2016, the Directors are proceeding with the plans for an orderly realisation of the Group's remaining investments. As a result, the Directors have concluded that it continues to be appropriate not to adopt a going concern basis of preparation in these Group Financial Statements. Readers of the accounts should be aware that, as was the case at 30 September 2016 and 31 March 2017, the Group's investment properties are classified in the Group Balance Sheet as current assets "held for sale" rather than non-current assets. No other material adjustments arose as a result of ceasing to apply the going concern basis in either the current year or the prior periods.

Finance Act 2016

New rules introduced in Finance Act 2016 altered the UK tax position for non-UK entities with interests in UK land and specifically applied where land is acquired or developed with a main purpose of realising a profit on its disposal. The Group has historically been an investor in UK real estate but the position was altered by the shareholder vote on 29 February 2016, which in effect mandated the Board to realise all of the group's investments. The Finance Act 2016 provisions apply to any relevant disposals made on or after 5 July 2016 and appropriate provisions have been made in the accounts.

Group structure

As noted in the Chairman's Statement, significant progress has been made in simplifying the Group legal structure; this review is ongoing.

Cash position and expenditure

During the year to 30 September 2017, £10.5m of cash was deployed in the purchase of and capital expenditure on investment properties.

At the balance sheet date the Group had £8.0m of cash.

Tim Walton

On behalf of LXB Adviser LLP

5 December 2017

Group Income Statement

for the year ended 30 September 2017

As described in note 2, the Group is in the process of performing an orderly realisation of its investments.

There were no items of other comprehensive income or expense in the current or prior year and therefore the loss for the year also reflects the Group's total comprehensive loss for the year.

Group Statement of Changes in Equity

for the year ended 30 September 2017

Group Balance Sheet

at 30 September 2017

The Group Financial Statements were approved and authorised for issue by the Board of Directors on 5 December 2017 and were signed on its behalf by:

Group Cash Flow Statement

for the year ended 30 September 2017

Notes to the Preliminary Announcement

The financial information set out in this preliminary announcement, which has been approved by the Board, does not constitute the Group's statutory financial statements for the year ended 30 September 2017 ("the 2017 accounts") or for the year ended 30 September 2016 ("the 2016 accounts"), but is derived from those audited statutory financial statements.

The 2017 accounts, included within the Company's Annual Report for the year ended 30 September 2017, have been prepared in accordance with International Financial Reporting Standards adopted for use in the European Union. The auditors have reported on the 2017 accounts and although their report was unqualified it drew attention to the Directors' decision not to apply the going concern basis of preparation. The 2017 accounts will be available from the Company's website today.

The 2016 accounts, which also included an unqualified audit report, have been filed with the Registrar of Companies in Jersey.

1. General information about the Group

LXB Retail Properties Plc was listed on the AIM and CISE markets on 23 October 2009. It is a closed-ended real estate investment company that was incorporated in Jersey on 27 August 2009.

The financial information set out in this report covers the year to 30 September 2017 with comparative amounts relating to the year to 30 September 2016.

The Group Financial Statements include the results and net assets of the Company and its subsidiaries, together referred to as the Group, on a consolidated basis.

Further general information about the Group can be found on its website: www.lxbretailproperties.com.

2. Accounting policies

Statement of compliance

The Group Financial Statements have been prepared in accordance with the International Financial Reporting Standards ('IFRS') adopted for use in the European Union and the requirements of the Companies (Jersey) Law 1991.

Basis of preparation

As described more fully in the Chairman's Statement and following the Shareholders' approval on 29 February 2016, the Directors are proceeding with the plans for an orderly realisation of the Group's remaining investments, with substantially the whole of the value to be returned to Shareholders in cash in the foreseeable future. As a result, the Directors have concluded that it is not appropriate to adopt a going concern basis of preparation in these financial statements. Other than the reclassification of investment properties from non-current assets to held for sale, no material adjustments arose as a result of ceasing to apply the going concern basis.

The financial statements have been prepared on the historical cost basis except that investment properties (defined below) and derivative financial instruments are stated at fair value.

The accounting policies have been applied consistently to the results, other gains and losses, assets, liabilities and cash flows of entities included in the consolidated financial statements.

Any revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period. If the revision affects both current and future periods, the change is recognised over these periods.

The preparation of financial statements often requires the Directors to make judgements, estimates and assumptions that may affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The most significant balances at the balance sheet date requiring the Directors to make such judgements and estimates are those concerning the receivables in relation to investment properties sold under forward-funded arrangements and held within property sales receivables (note 13). The ultimate value of these receivables is affected to varying degrees by a number of factors, including the details of the lease packages to be agreed with prospective tenants and the time taken for the relevant property to reach practical completion. Otherwise, there has been a limited requirement for the Directors to make such judgements or estimates in the period since the Company's listing to date. For example, the single most significant item on the balance sheet, "Investment Properties - held for sale" (comprising completed investment properties and development properties) have been supported by external valuations. Details of the overall approach to the valuation of these assets are set out in note 12. Details of the current status of the Group's carried interest arrangements are set out in note 21 and show that no judgements or estimates have been required to be made in this area to date.

The Group's accounting policies for these matters together with other policies material to the Group, are set out below.

Adoption of new standards, interpretations and amendments

There were no new standards or interpretations effective for the first time for periods beginning on or after 1 October 2016.

Standards and interpretations in issue not yet adopted

The IASB have issued or amended the following standards and interpretations that are mandatory for later accounting periods and which are or may be relevant to the Group and have not been adopted early. These are:

The potential impact on the Group's financial statements of the future adoption of these standards is still under review.

Basis of consolidation

Subsidiaries

Subsidiaries are those entities controlled by the Group. Control by the Group over an investee is assumed when all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect these variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Property portfolio

Investment properties

Investment properties are properties owned or held leasehold by the Group. Prior to the approval of the plans for an orderly realisation of the Group's assets in February 2016 these were held for capital appreciation, rental income or both, but are now classified as held for sale on the balance sheet. Investment properties include property that is being constructed, developed or redeveloped for future use as an investment property. Investment properties are initially recorded at cost, including related transaction costs. They are subsequently carried at each published balance sheet date at fair value as determined by professionally qualified independent external valuers.

Investment properties are reclassified to assets held for sale when they meet the relevant criteria set out in IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations' which requires that they are available for immediate sale and that the sale is expected to complete within one year of being reclassified. They continue to be measured at fair value.

The determination of the fair value of each property requires, to the extent applicable, the use of estimates and assumptions in relation to factors such as future rental income, current market rental yields, future development costs and the appropriate discount rate. In addition, to the extent possible, the valuers make reference to market evidence of transaction prices for similar properties.

Gains or losses arising from changes in the fair value of investment properties are recognised in the income statement in the period in which they arise.

In accordance with IAS 40 "Investment Property", no depreciation is provided in respect of investment properties.

Investment property is recognised as an asset when:

• it is probable that the future economic benefits that are associated with the investment property will flow to the Group;

• there are no material conditions precedent which could prevent completion; and

• the cost of the investment property can be measured reliably.

All costs directly associated with the purchase of an investment property are capitalised. Capital expenditure that is directly attributable to the redevelopment or refurbishment of investment property, up to the point of it being completed for its intended use, is capitalised in the carrying value of the property.

Acquisitions and disposals of investment properties are usually recognised when unconditional exchange of legally binding and irrevocable contracts occurs and where it is reasonable to assume at the balance sheet date that completion of the acquisition or disposal will occur.

Occupational leases

The Board considers the potential transfer of the risks and rewards of ownership in accordance with IAS 17 "Leases", for all investment properties that are leased to tenants by the Group and determines whether such leases are operating leases or finance leases. Where the Group substantially retains all the risks and rewards of ownership the lease is classified as an operating lease. In the event that substantially all of the risks and rewards of ownership are transferred to the lessee under the terms of a lease then such a lease would be classified as a finance lease. All tenant leases that have been entered into by the Group to date have met the criteria for classification as operating leases.

Net rental income

Rental income from investment properties leased out under operating leases is recognised in the income statement on a straight-line basis over the lease term.

Contingent rents, such as turnover rents, rent reviews, and indexation, are recorded as income in the periods in which they are earned. Rent reviews are recognised when such reviews have been agreed with tenants.

Rent free periods, other lease incentives and any costs associated with entering into tenant leases are amortised evenly over the period from lease commencement to the first break option or, if the probability that the break option will be exercised is considered sufficiently low, over the full lease term.

Rental income from fixed and minimum guaranteed rent reviews is recognised on a straight-line basis over the shorter of the entire lease term or the period to the first tenant break option.

Where such income or costs are recognised ahead of the related cash flow, an adjustment is made to ensure the carrying value of the related investment property including the accrued rent does not exceed the external valuation.

Property operating expenses are expensed as incurred and any property operating expenditure not recovered from tenants through service charges is charged to the income statement.

Income derived from Institutional Funding Agreements

Where the Group remains responsible for overseeing the development of incomplete investment properties that have been sold to third parties who have contracted to fund the construction works, the income which arises from such arrangements is recognised in the income statement over the course of the development work through to the time of practical completion.

Revenue from these arrangements is recognised in the income statement so as to match to the proportion of the relevant development works performed up to the balance sheet date and associated costs incurred to that date.

Other property related transactions

Other property related transactions in the year comprise income related to the cancellation of certain contractual arrangements, and the impairment effect of such cancellations on the investment properties or other assets to which they relate. These transactions are recognised at the point that the cancellation becomes contractually binding.

Profits on sale of investment properties

Profits on sale of investment properties are calculated by reference to the carrying value at the previous published balance sheet date, adjusted for subsequent capital expenditure.

Financial instruments

Financial assets and liabilities are recognised in the balance sheet when a member of the Group becomes a party to the contractual terms of the relevant instrument. Unless otherwise indicated, the carrying values of the Group's financial assets and liabilities are a reasonable estimate of their fair values.

Business receivables and payables

Business receivables and payables are initially measured at fair value, subsequently measured at amortised cost and, where material, discounted to reflect the time value of money. If there is objective evidence that the recoverability of an asset is at risk, appropriate allowances for any estimated irrecoverable amounts are recognised in the income statement.

Cash and cash equivalents

Cash and cash equivalents comprise cash in hand, deposits held at call with banks and financial institutions and other highly liquid investments with original maturities of three months or less.

Equity instruments

Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

Finance income

Finance income includes interest receivable on funds invested.

Borrowings and finance charges

Borrowings are initially recognised at their fair value, net of any transaction costs directly attributable to their issue. Subsequently, loans are carried at their amortised value using the 'effective interest method', which spreads the interest expense over the period to maturity at a constant rate on the balance of the liability carried in the balance sheet for the relevant period.

Finance charges are accounted for on an accruals basis using the effective interest method and are added to or offset against the carrying amount of the loan instrument to the extent that they are not settled in the period in which they arise.

Distributions

Distributions on equity shares are recognised when they become legally payable.

Management fees and incentive arrangement payments

Management fees and incentive arrangement payments are recognised in the income statement in the period to which they relate. Any amounts relating to incentive arrangements that have been earned and are reasonably likely to become payable in the future will be provided for in the financial statements and balances will be discounted to reflect the deferred nature of the payment.

Tax

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

Current tax is the expected tax payable on taxable income for the reporting period, using tax rates enacted or substantively enacted at the balance sheet date, together with any adjustment in respect of previous periods.

Deferred tax is provided for using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. If applicable to any financial period, the tax effect of the following differences will not be provided for:

• the initial recognition of goodwill;

• the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and

• investments in subsidiaries, associates and jointly controlled entities where the Group is expected to be able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

3. Segmental information

During the current year and prior year, the Group operated in and was managed as one operating segment, being property investment, with all investment properties located in the United Kingdom.

The Board, which is considered to be the chief operating decision maker of the Group for IFRS 8 purposes, receives quarterly management accounts that are prepared on an IFRS (EU) basis and which aggregate the performance of all the Group's investment properties and focus on total returns on Shareholders' equity.

For the year ended 30 September 2017, one tenant provided 31%, a second tenant provided 18% and a third tenant provided 13% of the Group's gross rental income (year ended 30 September 2016: one tenant provided 62%, a second tenant provided 8% and a third tenant provided 6% of the Group's gross rental income).

4. Gross revenue and direct costs

The Group's revenue and costs in connection with Forward Funding Agreements relate to:

· Sutton foodstore

· London Road Retail Park in Biggleswade

· the retail scheme at Brocklebank Road in Greenwich

· the Gateway Retail Park in Banbury

· the Sainsbury's/M&S development in Greenwich

· the Rushden Lakes Retail Park in Rushden, Northamptonshire

5. Other property related transactions

During the current and prior year, the Group accepted settlement payments in return for the cancellation of contractual arrangements relating to certain of its assets held for investment. The cancellation of these contractual arrangements had a direct and immediate detrimental effect on the value of the assets to which the contracts related, and as a result, an impairment charge has been applied to these assets. As these transactions are considered to be relevant to an understanding of the performance of the Group, and as the income and the resulting impairment does not necessarily relate to investment property assets, the income and the resulting impairment have been shown separately to other fair value movements of investment properties described in note 12.

6. Operating loss

The Group has no employees.

Fees payable to the Directors in the year were as follows:

7. Operating leases

The Group enters into operating leases with tenants on its investment properties.

Future minimum rents receivable under non-cancellable operating leases as at 30 September 2017 are set out in the table below. The rents receivable shown in the table are calculated on the assumption that any tenant with a break option chooses to exercise that option.

New leases are generally entered into for fixed terms of between 5 and 20 years and include periodic rent reviews and may include tenant and/or landlord break options.

There was no contingent rental income recognised in the year (2016: £nil).

8. Finance income and costs

Net finance costs recognised in the income statement, analysed by the categories of financial assets and liabilities shown in note 17a (where applicable), are as follows:

Sensitivity to changes in interest rates:

Movements in LIBOR impact the Group's cost of borrowings and the returns on its cash deposits. A 1% increase or decrease in LIBOR would have the following effects on the Group's results:

The average interest rate incurred by the Group on its bank borrowings for the year ended 30 September 2017, including the effects of the lender's margin but excluding amortisation of capitalised finance costs 2.70% (30 September 2016: 2.86%).

9. Taxation

The tax assessed for the year varies from the standard rate of income tax in the UK of 20%. The differences are explained below:

The Group has revenue related losses of £4,280,530 (30 September 2016: £4,240,888) available to carry forward to utilise against applicable future revenue profits, for which no deferred tax asset is currently recognised.

Tax status of the Company and its subsidiaries

All group undertakings are either tax resident in Jersey or are tax transparent entities owned by Jersey resident entities. Jersey has a corporate tax rate of zero, so the Company and its subsidiaries have no liability to taxation on their income or gains in Jersey. The Company is not subject to UK Corporation tax on any dividend or interest income it receives.

The Group's investment properties are located in the United Kingdom and therefore the net rental income earned less deductible items is subject to UK income tax, currently at a rate applicable to the relevant group undertakings of 20%.

10. Loss per share

Loss per share is calculated on 168,350,374 (30 September 2016: weighted average of 172,472,041) ordinary shares in issue for the year and is based on the loss attributable to Shareholders for the year of £15,458,199 (30 September 2016: earnings of £15,331,910). No losses or earnings were attributable to the "B" shares issued and redeemed in the current or prior year.

There are no share options or other equity instruments in issue and therefore no adjustments need to be made for dilutive or potentially dilutive equity arrangements.

The European Public Real Estate Association ("EPRA") issues guidelines aimed at providing a measure of earnings per share designed to present underlying earnings from core operating activities only. The adjusted EPRA earnings per share figure is calculated as follows:

11. Dividends

Current year:

An interim dividend of 18p per ordinary share was declared on 22 September 2016 and paid on 3 November 2016. The dividend was payable on each of the 57,988,322 shares in issue for which a corresponding "B" share was not issued (see note 18).

The holders of the remaining 110,362,052 ordinary shares in issue received 18p per share (a total of £19,865,169) on the redemption of these "B" shares in November 2016 (see note 18).

Prior year:

An interim dividend of 38p per ordinary share was declared on 31 May 2016 and paid on 9 June 2016. The dividend was payable on each of the 48,222,942 ordinary shares in issue for which a corresponding "B" share was not issued (see note 18).

The holders of the remaining 120,127,432 ordinary shares in issue received 38p per share (a total of £45,648,424) on the redemption of these "B" shares in June 2016 (see note 18).

12. Investment properties - held for sale

A reconciliation of the carrying value of investment properties to their fair values at the current and prior year balance sheet date is provided below:

At 30 September 2017, the Group's investment properties were valued by JLL, Chartered Surveyors, on a fixed fee basis, in their capacity as independent external valuers. The aggregate fair value of these properties at 30 September 2017 is £54,738,000 (30 September 2016: £71,403,000). The carrying value of these properties includes £292,110 (2016: £3,161,787) of accrued costs that were not treated as part of the historical cost of the relevant properties in determining the external valuation. The fair value includes £845,855 (2016: £1,394,601) of rents recognised in advance that are included in business and other receivables at the balance sheet date.

The external valuers' valuation was undertaken in accordance with the Royal Institution of Chartered Surveyors' Valuation Standards Professional Standards (January 2014) on the basis of fair value. Fair value is defined in IFRS 13 as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.

The Board determines the Group's valuation policies and procedures and is responsible for appointing the Group's independent external valuer. The Audit Committee considers the valuation process as part of its overall responsibilities.

The fair value of completed investment properties is determined using the 'investment method' whereby capitalisation yields derived from market transactions involving comparable investment properties are applied to the estimated net current and future cash flows expected to be generated by the investment property, which the valuer calculates using comparable market information, to obtain a market rent. The fair value of an investment property undergoing development is derived using the 'residual method' whereby the costs required to complete the development, including a notional cost of finance and an estimated risk factor or "profit on cost", are deducted from the net development value arrived at under the 'investment method'.

As part of each half-yearly valuation exercise, the valuations performed by the external valuers are reviewed by appropriately qualified members of the Investment Manager's team. This includes discussion of the assumptions used and judgements made by the external valuers as well as detailed consideration of the resulting valuations. Discussion of the valuation process and results then takes place at a meeting between the external valuers and the auditors at which the key assumptions and estimates are reviewed together with consideration of the valuers' reasons for significant valuation movements on individual properties.

The key unobservable inputs used in the valuation of the Group's investment properties at 30 September 2017 are as follows:

The key unobservable inputs used in the valuation of the Group's investment properties at 30 September 2016 are as follows:

*Comprises land assets that are held at their estimated open market value.

All other factors remaining constant, an increase in rental income would increase a valuation whilst increases in nominal equivalent yield and discount rate would result in a fall in value and vice versa. However, there are interrelationships between unobservable inputs as they are determined by market conditions. Corresponding movements in more than one unobservable input may have a complementary effect on a valuation whereas unobservable inputs moving in opposite directions may compensate each other. For example, where market rents and nominal equivalent yields increase simultaneously, the overall impact on a valuation may be minimal.

For investment properties undergoing development, a reduction in the cost and time to complete a scheme will have a positive impact on value, assuming all other factors remain constant. Conversely, if the anticipated cost or time to complete a scheme increased then this would negatively impact value, assuming all other factors remain constant.

All of the Group's investment properties are considered to be 'Level 3' in the fair value hierarchy described by IFRS 13. There have been no transfers of property between hierarchical levels in the year.

The historic cost of the Group's investment properties as at 30 September 2017 was £69,326,834 (30 September 2016: £89,525,931).

Property outgoings (note 4) were split as follows:

13. Business and other receivables

Property sales receivables comprise relevant amounts receivable in respect of investment property sales that had unconditionally exchanged prior to the balance sheet date.

Amounts receivable under Institutional Funding Agreements relate to the income referred to in note 4.

All of the above amounts are either receivable within one year or will be released to the income statement within one year except for £789,988 (2016: £1,226,188) of rents recognised in advance that are due to be released to the income statement in more than one year.

£2,708,105 included in prepayments and accrued income at 30 September 2016 was impaired in the year (see note 5). No other business receivables were overdue or impaired at the end of either of the above years.

14. Cash and cash equivalents

Included within the Group's cash and cash equivalents balance as at 30 September 2017 is £124,052 (30 September 2016: £554,934) in bank accounts held as security by the providers of the Group's secured bank debt facilities.

15. Business and other payables

All of the above amounts are due within one year and none incur interest.

Amounts payable under Institutional Funding Agreements relate to certain of the forward funding arrangements referred to in note 4.

16. Borrowings: amounts repayable within one year

Investment facility:

In March 2017, the development facility that was entered into in December 2014 (see below) expired. Construction of the investment property on which the facility was secured completed in the prior year. On 13 April 2017, the loan was converted into an investment facility and extended until 5 June 2018.

On 30 March 2015, a group entity entered into an agreement with Barclays Bank Plc for a one year £5,000,000 debt facility which was extended to 31 March 2017 during the prior year. The loan was secured against an investment property held within a ring-fenced sub-group, beyond which the loan is non-recourse. In January 2017, the investment property to which the loan was secured was sold and the loan was repaid on the same date.

Development facility:

In July 2017, a group entity entered into an agreement with the Royal Bank of Scotland Plc for a £6.4m development finance facility to fund construction of the cinema at Stafford, upon which the facility is secured. No amounts had been drawn at the balance sheet date.

Development facility in the prior year:

In December 2014, a group entity entered into an agreement with the Royal Bank of Scotland Plc for a development finance facility. The loan is shown above (net of unamortised loan issue costs) and was drawn in several tranches. The loan was secured against one of the Group's investment properties which is held within a ring-fenced sub-group beyond which the loan is non-recourse.

There have been no defaults or other breaches of financial covenants under the terms of any of the loan agreements described above during the current or prior periods, or in the period since the balance sheet date.

There was no difference between the book value and the fair value of the borrowings disclosed above at either balance sheet date.

17. Financial instruments and risk management

a) Categories of financial instruments