LXB.L Regulatory News (LXB)

For immediate release 11 December 2015

LXB Retail Properties Plc

RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2015

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 2015.

Highlights

· October 2014: completed forward funded sale of Banbury Gateway scheme

· November 2014: entered into a £23.35m development facility with Royal Bank of Scotland Plc for the Stafford Kingsmead site

· December 2014: entered into a £28.5m development facility with Royal Bank of Scotland Plc for the Stafford Riverside site

· December 2014: exchanged contracts with Linden Homes for the sale of the residential element of the scheme at Sutton

· January 2015: exchanged contracts with the Lime Property Fund to sell the foodstore element of the scheme at Sutton

· March 2015: obtained a resolution to grant planning consent for the scheme at Willow Green, Truro

· March 2015: entered into a £5m investment facility with Barclays Bank Plc

· April 2015: exchanged contracts with The Crown Estate for the sale of the Rushden Lakes Scheme

· April 2015: exchanged contracts with Aberdeen Property Trust for the sale of the Biggleswade Scheme

· April 2015: completed the sale of the scheme at Biggleswade

· May 2015: completed the sale of the foodstore element of the scheme at Sutton

· June 2015: returned surplus funds of £82.6m to Shareholders

· June 2015: completed the sale of the residential element of the scheme at Sutton

· September 2015: restructured investment property interests at Greenwich Peninsula with the sale of the former Sainsbury's site and acquisition of the adjacent B&Q unit, in transactions that together yielded a NAV uplift of £5.7m

Post year end:

· November 2015: obtained a resolution to grant planning permission for 155 homes and associated community facilities under the Group's Living Villages concept at Higher Newham in Truro

· December 2015: exchanged conditional contracts with The Charities Property Fund for the forward-funded sale of the investment property at Brocklebank, Greenwich which will generate initial cash proceeds of £22.8m when the conditions are satisfied

* excluding fair values of financial instruments and deferred tax.

For further information please contact:

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/Kristof Vashegyi

Buchanan Tel: 020 7466 5000

Charles Ryland/Vicky Watkins

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 2015.

In my last statement, I set out a timetable to provide Shareholders with real strategic options for the future of the Group. As part of that strategy, we presented Shareholders with a recommendation for a continuation vote for a further year until the next Annual General Meeting ('AGM'). I was very pleased to note that the continuation vote was supported by 100% of Shareholders who voted at the AGM held on 27 May 2015. 

In recommending the continuation your Board wanted time to: 

· enable further value to be realised for the benefit of Shareholders; 

· give a much clearer view on the value of the Group's investments; and 

· consider strategic options in light of the above for the benefit of Shareholders including, but not limited to, conversion to a UK resident retail focused Real Estate Investment Trust (REIT) or an orderly winding up.

Neither of these options are without difficulty and your Board and the Investment Manager have been working hard to resolve those attendant issues. The Board recognises that conversion to a REIT has technical difficulties which would mean that it could not be achieved before the end of 2016 and that even if it could be done it does not appear to be a popular choice for many Shareholders. 

We remain of the view that a winding up can only work if it can be done over a relatively short space of time such that the vast majority of the value of the Group's assets can be returned to Shareholders in cash. Also, a satisfactory solution will need to be found to address any outstanding commitments that the Group has entered into and at the same time ensure that the Plc and the Investment Manager retain the resources to get the job done. 

I am pleased to say that much progress has been made and, whilst there are uncertainties remaining, it is clear to the Board that the issues that need to be addressed to everyone's satisfaction with regard to a winding up look like they can be overcome. I believe that this approach is likely to meet with the overwhelming support of Shareholders. Accordingly it is the Board's intention, subject to resolving any remaining obstacles, to put forward a resolution at the AGM which will involve a proposal to realise the Group's investments in an orderly fashion with the intention that substantially the whole of Shareholder value will be returned by March 2017. At that point, it may be necessary to appoint a liquidator to complete the formalities of a solvent winding up. In the meantime, and for the avoidance of doubt, the Group is and remains a going concern and our financial statements are presented accordingly.

I am pleased to report that the Group's results to 30 September 2015 show an uplift in net asset value per share of 10.4% over the year, after taking into account the £82.6m return of cash to Shareholders in June. We remain well placed to deliver good growth in net asset value in the short term as the outstanding issues in relation to the crystallisation of value in the Group's investments are resolved.

The retail property market remains difficult especially in the food sector where it is well documented that retailers are looking to challenge contractual commitments wherever possible. Securing planning either in principle, or in looking to make changes of detail, remains an arduous process. However, we now have all the planning changes that we need at Rushden Lakes to make a timely start on site next year. Furthermore, our success in achieving planning at Higher Newham in Truro with Living Villages shows that even a new settlement will be supported by local people in circumstances where it delivers value to the local community.

Notwithstanding the above, considerable progress has been made in providing clarity to Shareholders over the eventual value of our portfolio of investments. Further detail is provided in the Investment Manager's review and I would like to highlight a few key areas here: 

At Rushden Lakes we expect the Crown Estate deal to complete in the first quarter of 2016 coinciding with a start on site for the build phase. We have already been on site for six months preparing the ground and piling. We have already announced the commitment of the three anchor retailers; Marks and Spencer, House of Fraser and Primark and in total we are now exchanged or in solicitors' hands for a total of 142,000 sq ft ground floor space representing 59% of the Phase 1 space. 

We have achieved practical completion and the opening of both Greenwich Meridian (Sainsbury's/M&S scheme) and Banbury Gateway. Both schemes are 99% let and we have now received all material monies in respect of the respective sales.

Biggleswade Phase 1 achieved practical completion and has opened well with Phases 2 and 3 due to complete in spring 2016. In total, Biggleswade is now 92% let with only three units to go.

We have realised value from the restructuring of our Greenwich Peninsula interests with a sale of the development site to IKEA who will shortly start on site to build their new 330,000 sq ft store, and an acquisition adjacent to the proposed IKEA which is let to B&Q and which will provide secure income and interesting short and medium term value creation opportunities. 

We are on site building at Stafford Riverside (practical completion ('PC') date April 2016), Stafford Kingsmead (PC for the foodstore February 2016), Sutton (PC for the foodstore September 2016) and Biggleswade as noted above. In addition we expect to start on site imminently at Greenwich Brocklebank (PC in September 2016), Stafford leisure site (PC November 2016) and Rushden Lakes (Phase 1 PC October 2016). Activity levels across the portfolio remain very high! 

I expect to be able to put proposals to Shareholders early in the New Year, these proposals will include:

· the timing and quantum of likely cash returns; we expect to commence a share buyback programme in the next few weeks which will buy back up to £16m worth of the Group's shares and we will seek to renew the authority to continue with the buyback programme for relatively small amounts at the AGM. The Board remains committed to the principle that larger cash returns should be made under the return of capital mechanism used for the cash return in May 2015 but that smaller amounts should be returned as soon as practicable using its share buyback authority;

· the likely value of the Group's investments, including any material uncertainties, such as the foodstore related assets at Stafford and Ayr;

· plans for the completion of the Group's commitments which extend beyond the likely winding up date;

· the arrangements for Investment Manager fees and an incentive plan. The Board needs to ensure that the Investment Manager is committed to realising the value of the Company's investments and rewarded accordingly. Part of that arrangement needs to be that the Investment Manager is free to start making new arrangements for its own business beyond LXB Retail provided that there is no conflict with the delivery of its existing contractual commitments to the Group; and

· the arrangements for Rushden Phase 3, the entrance site, where there is a commitment to deliver for The Crown Estate but where that commitment, at least in terms of build, will fall outside of the winding up period. 

Conclusion

When I think back to the flotation of this business as a cash shell in the autumn of 2009, I am struck by two things; firstly, by just how tough the market in which the Group has operated has been and secondly, by just how much has been achieved. The Board is immensely proud of the fact that every single scheme that we have invested in has delivered a planning permission. In total we have secured over 2.78m sq ft of consents and are on track to deliver over 1.97m sq ft of lettings. Furthermore, in Rushden Lakes the Group will deliver a legacy that will set a new benchmark for what out of town retail and leisure can offer. 

We have had a remarkably stable investor base over that period and the Board and the Investment Manager remain major investors, with a common purpose. I look forward to continuing dialogue with Shareholders to deliver a successful outcome for all over the coming period. 

Phil Wrigley

Chairman

11 December 2015

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 2015 and up to the date of this report.

The Group completed the sale of the residential and foodstore elements of its Sutton investment in December 2014 and January 2015 respectively and the sale of its Biggleswade investment in April 2015. The Group also exchanged contracts on the sale of its Rushden Lakes investment in April 2015, completed the reorganisation of its interests at Greenwich Peninsula in September 2015 and recently announced the conditional sale of Brocklebank Retail Park to The Charities Property Fund under a forward funding contract. Completion of the sales of Rushden Lakes and Brocklebank Retail Park are subject to the satisfaction of a number of conditions but the Group is confident that these can be delivered, allowing both sales to complete in early 2016. Consequently, along with the Biggleswade and Sutton foodstore investments, the Rushden Lakes and Brocklebank Retail Park investments are excluded from the tables below.

Investment portfolio

Planning consents

The Group now has the "core" planning permission it sought at all of its key retail locations and although amendments to those permissions may be required to, amongst other things, meet the requirements of tenants, these are not expected to be controversial. Along with the retail permissions achieved, the Group secured its first Living Villages consent in October 2015 when the Planning Committee at Truro approved the application for 155 new homes and community facilities. Because of the residential nature of the Living Villages scheme, the planning permission is excluded from the tables below and instead is considered in more detail in the subsequent property details section.

Agreements for lease

The Group classifies the space on its schemes as let or pre-let, in solicitors' hands, under offer or to let. The agreements for lease on pre-let space always contain conditions which can include (but are not limited to) signing pre-lets to certain other occupiers or pre-letting a certain amount of space. Where the Group has no reason to believe that it cannot meet those conditions the space is considered pre-let. Where the Group has a credible offer from a prospective tenant and is actively engaged in detailed discussions but has not yet appointed solicitors that unit is regarded as "under offer". Of course, there is no certainty that all of those discussions will result in a pre-let.

The Group has made substantial progress on lettings since the release of its Interim Report on 12 May 2015 with a further £3.75m of annualised rent pre-let or in solicitors' hands across the retained and forward funded investments.

Many of the Group's developments include mezzanine space and, although this space is included in the planning consent, it is (for retail space) generally not rentalised; therefore any reference made to pre-let space in the table below is to rentalised space only.

Agreements for lease signed or leases completed up to the date of this report (excluding properties sold by or after the balance sheet date and properties where contracts were conditionally exchanged for sale at the balance sheet date) are shown below:

Following practical completion of the Group's investment properties, based on current lettings, pre-lets and those agreements in solicitors' hands, the prospective Weighted Average Lease Term ("WALT") by investment is shown below:

Property details

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

Ayr

The Group has submitted detailed applications for the initial infrastructure works and for the foodstore which is pre-let to Sainsbury's. All of these applications are to go before the Regulatory Panel (Planning Committee) on 16 December 2015 with a recommendation for approval.

Despite some last minute changes in the design and layout of the scheme to accommodate the tenant's requirements, the Group is confident that these planning consents will be satisfactory in terms of the Agreement for Lease and is looking forward to working with Sainsbury's to deliver their new supermarket in Ayr.

Banbury Gateway

The Group has now finalised all material matters associated with completion of the investment and the balancing payment from The Crown Estate has been received. This final receipt of £5.7m, which was received after the balance sheet date, resulted in a further £3.0m uplift to NAV since that reported in the Interim Report 2015 balance sheet. Only one 1,708 sq ft vacant unit remains unlet on this 285,000 sq ft new retail destination. An offer from a prospective tenant is being considered.

Biggleswade

Phase 1 of this investment completed in April 2015 and a number of the retailers which have opened are trading ahead of expectations. The scheme is already 92% pre-let and the Group is confident that current discussions will result in pre-lets being exchanged on the three remaining units before practical completion of the final phase in spring 2016. At that point the Group will receive further cash consideration which is currently anticipated to be approximately £11.8m. Total receipts from the sale of Biggleswade are expected to be approximately £80m, reflecting an underlying overall yield of 4.75% for the retail elements of the scheme.

Gloucester

The Group's principal investment property at this location was a Morrison's foodstore, which occupied the greater part of the "Railway Triangle" site and was sold in 2013. The Group was successful in securing planning permission for the remaining land, but it is largely consented for industrial use so it does not fit with the Group's retail led investment proposition. Consequently, during the period up to the date of this report, contracts were exchanged for the sale of three of the four remaining surplus parcels of land at this location. One of those transactions is unconditional and will complete by the end of December 2015, generating initial cash proceeds of approximately £0.75m, but the other two, which will generate combined proceeds of approximately £1m, are conditional on the purchasers obtaining satisfactory planning permissions, with those planning decisions being some six to nine months away. Once development has commenced on the adjacent land, there is expected to be good interest in the remaining plot which comprises approximately 0.75 acres and has consent for industrial uses.

Greenwich Brocklebank

The Group recently announced the conditional sale of this investment property to The Charities Property Fund under a forward funding contract. The sale of the investment property will crystallise a further uplift to NAV of at least £3.7m (2.0p per share) of which £0.9m is recognised in the reported balance sheet, with the remainder expected to be recognised in the Interim Report 2016.

Under the terms of the forward funding contract the Group is responsible for procuring construction of the property and for letting the final unit.

Greenwich B&Q

During the period, the Group restructured its investment property interests on the Greenwich Peninsula with the sale of the Group's interest in the old Sainsbury's store to IKEA concluding in September 2015. In the same month, the Group acquired the B&Q which is adjacent to what will become IKEA's new 350,000 sq ft store. The B&Q offers potential for future capital growth following the development of the IKEA and as a consequence of the substantial amount of residential building activity on the Peninsula. It also presents interesting asset management possibilities and a good, steady stream of rental income for the Group.

Rushden Lakes

In April 2015, the Group exchanged contracts with The Crown Estate for the sale of this investment. Under the terms of the forward funding contract, The Crown Estate will purchase the whole Rushden Lakes investment when the pre-completion conditions are satisfied and will then fund all future development costs. The principal pre-completion conditions involve securing a highways agreement and achieving a number of further pre-lets.

The planning conditions are expected to be satisfied in early 2016 and the Group is making excellent progress on lettings. With pre-lets to Marks & Spencer, House of Fraser, Primark, H&M, Costa, Jigsaw, Phase Eight, L'Occitane and Cineworld already secured and 13 other lettings in solicitors' hands, it is likely that 59% of Phase 1 will be pre-let (by ground floor sq ft) by January 2016.

The Group plans to increase the leisure offer at Rushden Lakes and more than 750 people attended a recent public consultation to present the leisure proposals and the plans were extremely well received. The planning application for the leisure proposals will be submitted early in the New Year and determination is expected in spring 2016.

The Group remains confident that it will have satisfied all the conditionality to enable the completion of the sale of Rushden Lakes to The Crown Estate in early 2016.

Sheppey

Four of the units on Neats Court Retail Park are let and those tenants are trading. The Group has exchanged contracts for the letting of one 5,000 sq ft unit with The Original Factory Shop. The potential letting to a supermarket operator that was referred to in the Interim Report 2015 did not proceed. However, two further lettings with national retailers for a 10,000 sq ft unit and a 5,100 sq ft unit are in solicitors' hands. Once complete, this investment will be fully let.

The Group was successful in securing planning permission for the remaining land but, in a similar way to Gloucester, the consent does not fit with the Group's retail led investment proposition. Consequently, the Group completed on the sale of a serviced pub/restaurant plot to Marston's PLC in October 2015 for £550,000. The Group is considering its options on the remainder of Phase 3 and more news will be forthcoming on this shortly.

Stafford

Construction of the three elements that make up the Riverside and Kingsmead investments is progressing broadly to programme. The multi-storey car park adjacent to the Riverside investment has now been completed and the handover to the local authority is imminent.

The handover of the car park will allow the Group to close the existing surface parking facilities at Kingsmead which will enable work to start on the foodstore car park. Construction of the foodstore, which is pre-let to Morrisons, is due to complete shortly and it is expected that Morrisons will take access in spring 2016 when the car park is completed. The two adjacent retail units, which are pre-let to B&M and Just for Pets, are due for completion in summer 2016.

At the Riverside retail investment, which is due to complete in spring 2016, pre-lets for two units are in solicitors' hands and a further unit is under offer. If these result in signed agreements for lease only 5,900 sq ft of space will remain to let.

On the leisure scheme, the two pre-lets that are in solicitors' hands are expected to exchange soon, at which point all four of the restaurant units at the ground floor level of the multi-storey car park will be pre-let. There is good interest in the remaining units which total about 18,000 sq ft. The adjoining site has planning permission for a cinema and this pre-let is also in solicitors' hands.

Sutton

The sale of the Group's foodstore investment at Sutton to The Lime Property Fund completed in May 2015 and the sale of the residential element of the Group's investment at Sutton to Linden Homes completed in June 2015. Once construction of the residential towers is completed, Linden Homes will grant a 999 year lease on the 27,000 sq ft ground floor retail units back to the Group (at nil premium and a peppercorn rent).

There has been good occupier interest in this new space and pre-lets for four of the ten units, totalling almost 13,000 sq ft, are in solicitors' hands.

Truro Threemilestone

The Group has finalised the Section 106 agreement and outline planning consent is expected to be issued imminently for the scheme which comprises 435 houses (of which 40% will be affordable homes), a 78,000 sq ft foodstore pre-let to ASDA, a pub, community centre, primary school and care home. The Group is working up the detailed design for the first phase and road works with a view to starting on site later next year.

As with other investments this scheme has additional plots that are outside the Group's retail led proposition but there is good interest in these non-retail elements. The pub site is under offer and detailed terms are being negotiated for the sale of the first phase of housing. Good interest has been shown in the care home site too.

Living Villages - Truro Higher Newham

On 22 October 2015, the Strategic Planning Committee at Cornwall Council resolved to grant planning permission for the Group's Higher Newham Farm proposals which were brought forward by Living Villages in partnership with Cornwall Food Foundation and Duchy College. As is normal, the planning permission is conditional on entering into a Section 106 agreement and discussions on this are well advanced. The proposal, which includes 155 new homes, a community hub, a restaurant and cookery school to be operated by the Cornwall Food Foundation, and a community farm and educational facility which will be run by Duchy College, was supported 16:3 by the Strategic Planning Committee.

Revaluation surplus

As described in note 11 to the Group Financial Statements the investment properties held by the Group at 30 September 2015 were valued by external property valuers, Jones Lang LaSalle Limited. In their opinion the fair value of these investment properties at that date was £208.37m, resulting in a revaluation surplus for the year of £18.18m.

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 Institutional 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.

Cash position and future expenditure

During the year to 30 September 2015, £147.9m of cash has been deployed in the purchase of and capital expenditure on investment properties.

At the balance sheet date the Group had £5.0m of cash and this is all allocated to existing projects or pipeline opportunities.

The Group signed an investment facility for £5m with Barclays in respect of the Sheppey Phase 2 investment property in March 2015 and an investment facility for £23m with RBS in respect of the Greenwich B&Q investment property in September 2015.

Portfolio

The following table shows how the current portfolio is progressing and when the Group expects to complete on the development phase of its retained portfolio as well as details of the sites that are subject to forward funding contracts at 30 September 2015:

* Subject to conditionality at the date of this report

** Linden Homes will construct the ground floor retail units and will grant the Group a 999 year lease on practical completion

NAV uplift and timings

The Board's communication with Shareholders early in the New Year will provide a further briefing on the status of the Group's investments and the inherent value in the portfolio.

Tim Walton

On behalf of LXB Adviser LLP

11 December 2015

Group Income Statement

for the year ended 30 September 2015

All amounts relate to continuing activities.

Group Statement of Comprehensive Income

for the year ended 30 September 2015

There are no items in the current or prior year that will never be reclassified to profit or loss.

Group Statement of Changes in Equity

for the year ended 30 September 2015

Group Balance Sheet

at 30 September 2015

Group Cash Flow Statement

for the year ended 30 September 2015

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 2015 ("the 2015 accounts") or for the year ended 30 September 2014 ("the 2014 accounts"), but is derived from those audited statutory financial statements.

The 2015 accounts, included within the Company's Annual Report for the year ended 30 September 2015, have been prepared in accordance with International Financial Reporting Standards adopted for use in the European Union. The auditors have reported on the 2015 accounts and their report was unqualified and did not draw attention to any matters by way of emphasis. The 2015 accounts will be available from the Company's website today.

The 2014 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 2015 with comparative amounts relating to the year to 30 September 2014.

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.

Basis of preparation

Details are set out in the Chairman's Statement of certain strategic proposals intended to be put forward by the Board to Shareholders in early 2016 regarding the future operations of the Group. As the outcome of the consideration of these proposals cannot currently be foreseen the Board consider that the going concern basis of preparation of the financial statements remains appropriate. The financial statements are presented in pounds sterling.

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 12). 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 line item in the financial statements, "Investment Properties" (comprising completed investment properties and development properties held for investment) have been supported by external valuations. Details of the overall approach to the valuation of these assets are set out in note 11. Similarly, the values of derivative financial instruments have been independently assessed on the basis of market rates as at the balance sheet date. 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 and revised standards

During the year ended 30 September 2015, the following new or revised standards that had some relevance to the Group were adopted:

The adoption of these new and revised standards either had no impact on the financial statements or resulted in changes to presentation and disclosure only.

No other new standards or interpretations issued by the International Accounting Standards Board (IASB) or the IFRS Interpretations Committee (IFRIC) have led to any material changes in the Group's accounting policies or disclosures during the current or prior year.

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 which are held for capital appreciation, rental income or both. 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.

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.

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.

Derivative financial instruments

Derivative financial instruments are used to minimise the exposure of the Group to cash flow risks arising from interest rate fluctuations. Derivatives are initially recognised at fair value on the date on which the derivative contract is entered into. Derivatives are re-measured to fair value at each published balance sheet date.

Derivatives are classified either as derivatives in effective hedges or held for trading. When hedges are 'highly effective' within the meaning of IAS 39 and the other criteria necessary for applying hedge accounting are met, the Group may elect to apply hedge accounting. Such hedges are assessed on an ongoing basis to ensure they remain effective.

The gains or losses arising on the re-measurement to fair value of the portion of derivative financial instruments that qualify as effective hedges of cash flow interest rate risk are recognised directly in other comprehensive income and accumulated in a hedging reserve. If hedges are no longer expected to remain effective as a result of forecast transactions no longer being expected to occur, then hedge accounting in respect of the relevant designated hedging relationship is revoked. Any amounts previously accumulated in a hedging reserve in respect of the relevant financial instrument are reclassified immediately from other comprehensive income to the income statement.

The gains or losses on the re-measurement to fair value of all other derivative financial instruments are recognised in the income statement.

Provisions

A provision is recognised when a legal or constructive obligation exists as a result of an event that has occurred prior to the balance sheet date and where it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions will be measured at the Board's best estimate of the expenditure required to settle that obligation as at the balance sheet date, and will be discounted to present value if the effect is material.

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 2015, two tenants each provided 18% and one tenant provided 12% of the Group's gross rental income (year ended 30 September 2014: 23% from one tenant, 22% from a second tenant and 14% from a third tenant).

4. Gross revenue and direct costs

Revenue and costs in connection with Institutional Funding Agreements relate to:

· the Group's contractual obligations, which concluded in the current year, in respect of the construction of the Sainsbury's/M&S development in Greenwich which was disposed of during the prior year; and

· the ongoing contractual obligations in respect of the construction of the foodstore and residential scheme at Sutton, Banbury Gateway Retail Park and Biggleswade London Road Retail Park, all of which were disposed of during the current year.

5. Operating profit

The Group has no employees.

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

6. 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 2015 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 15 years and include periodic rent reviews and may include tenant and/or landlord break options.

There was no contingent rental income in the year (2014: £nil).

7. Finance income and costs

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

Sensitivity to changes in interest rates:

Movements in LIBOR impact the valuation of the Group's hedging instruments and the returns on its cash deposits. Increases in LIBOR impact positively on the valuation of effective hedging instruments in the statement of comprehensive income, and on the interest receivable and valuation of ineffective hedging instruments in the income statement. A 1% increase or decrease in LIBOR would have the following maximum effects on the Group's results:

The average interest rate incurred by the Group on its bank borrowings for the year ended 30 September 2015, including the effects of hedging instruments and the lender's margin but excluding amortisation of capitalised finance costs was 2.88% (30 September 2014: 3.5%).

Further information about the derivative financial instruments, including details of their valuations at each balance sheet date is included in note 17a.

8. 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 £3,653,084 (30 September 2014: £3,180,681) 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%.

9. Earnings per share

Earnings per share is calculated on 183,630,374 (30 September 2014: weighted average of 190,771,677) ordinary shares in issue for the year and is based on earnings attributable to Shareholders for the year of £25,811,277 (30 September 2014: earnings of £36,127,418). No earnings were attributable to the "B" shares issued and redeemed in the 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:

10. Dividends

An interim dividend of 45p per ordinary share was declared on 29 May 2015 and paid on 9 June 2015. The dividend was payable on each of the 69,913,263 ordinary shares in issue for which a corresponding "B" share was not issued (see note 18).

The holders of the remaining 113,717,111 ordinary shares in issue received 45p per share (a total of £51,172,700) on the redemption of these "B" shares in June 2015 (see note 18).

11. Investment properties

At 30 September 2015, the Group's investment properties were valued by Jones Lang LaSalle Limited, Chartered Surveyors, on a fixed fee basis, in their capacity as independent external valuers. The total external valuation of these properties at 30 September 2015 is £208,370,000 (30 September 2014: £245,515,000).

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 reasons for significant revaluation movements attributable to individual properties are explained in the auditor's report to the Audit Committee.

The key unobservable inputs used in the valuation of the Group's investment properties at 30 September 2015 are as follows:

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

The key unobservable inputs used in the valuation of the Group's investment properties at 30 September 2014 were as follows: