Segro Regulatory News (SGRO)

21 february 2012

RESULTS FOR THE year ended 31 december 2011

SEGRO, Europe's leading owner-manager and developer of industrial property, reports strong operational performance and EPRA earnings growth. Good early progress is being made on the recently announced strategy to reshape the Group's property portfolio.

Strong operating results due to portfolio quality and operational focus

l Strong income generation, with £38.4m of new rental income contracted during the year (2010: £42.7m); lettings completed 1.7% above December 2010 ERVs

l Increased retention rate to 74% (2010: 63%), with takebacks reduced to £21.0m (2010: £29.3m)

l Group vacancy rate reduced further to 9.1% at 31 December 2011, down from 11.4% at 30 June 2011 and 12.0% at 31 December 2010. Former Brixton portfolio vacancy reduced to 13.4% (2010: 18.6%) - acquisition target of sub-15% achieved one year early

l Total cost ratio reduced to 24.3% (2010: 28.1%), with improved vacancy rates and tight management of operating expenses

l EPRA profit before tax up 8.8% to £138.5m (2010: £127.3m)

l 3.5% increase in full-year dividend to 14.8p (2010: 14.3p)

Reduction in Net Asset Value (NAV) impacted by write down of non-core assets

l Year-on-year like for like core completed portfolio valuation decline of 0.4%

l H2 2011 non-core portfolio valuation decline of £187.0m

l 2011 EPRA NAV per share down 9.6% to 340p (2010: 376p)

Good progress with strategic portfolio reshaping

l £110.9m of disposals in 2011 and post year-end disposal of five non-core UK industrial estates to Ignis Asset Management for £80.2m; further disposals expected over balance of year

l 14 developments completed during the year, generating £9.0m of annualised rental income

l A further 20 developments under way or contracted, producing annualised rental income of approximately £18.9m, and an average expected development yield of 9.5%

l Planned expansion of the logistics portfolio commenced with the £314.7m acquisition of the UK Logistics Fund in January 2012 in a 50/50 JV with Moorfield

Solid balance sheet

l Funding position further strengthened by significant debt financings arranged in 2011, including €440m (£367m) of new five-year bank facilities and a £400m refinancing of the Airport Property Partnership (APP) JV

l 78% of net borrowings in long-term bonds; weighted average maturity of gross borrowings of 8.8 years. No significant debt maturities before 2014

Commenting on the results and outlook, David Sleath, Chief Executive said:

"We delivered strong income-generation and earnings growth, driven by an excellent operational performance which included further reducing our vacancy rate, significantly increasing customer retention and building a strong pipeline of future income from pre-let developments. We expect the macro environment to remain unsettled for some time to come, both in the UK and Continental Europe. However, we have started the new year with good momentum in our letting activity and our 20 mainly pre-let development projects underpin future rental income. We have a strong balance sheet and a clear focus to build on our strengths by investing in the strongest locations in resilient sectors, both in the UK and Continental Europe, and to recycle those assets which do not fit our strategic criteria. Given the strengths of our operational teams and core assets, we are well-positioned to continue to capitalise on demand for newly-developed and well-located industrial space from a diverse range of customers and industries."

"As part of the revised strategy for the Group outlined on 8 November 2011, we have made a promising start to reshaping our portfolio with the completion since the year end of the acquisition of prime logistics assets with a joint venture partner and the disposal of a portfolio of non-core holdings in the UK."

webcast/CONFERENCE CALL FOR INVESTORS AND ANALYSTS

A live webcast of the results presentation will be available from 09.30 (GMT) at SEGRO's website at: http://www.segro.com/segro/Investors/Investors-Home.htm

A conference call facility will also be available at 09:30 (GMT) on the following numbers:

From midday the conference call will be available on a replay basis on the following numbers:

A video interview with David Sleath discussing the results is now available to view on www.segro.com

CONTACT DETAILS FOR INVESTOR / ANALYST AND MEDIA ENQUIRIES RESPECTIVELY:

The timetable for the 2011 final dividend will be as follows:

This announcement, the 2011 Property Analysis Booklet and other information about SEGRO are available at www.segro.com.

Neither the content of SEGRO's website nor any other website accessible by hyperlinks from SEGRO's website are incorporated in, or form part of, this announcement.

Forward-looking statements: This announcement contains certain forward-looking statements with respect to SEGRO's expectations and plans, strategy, management objectives, future developments and performance, costs, revenues and other trend information. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may occur in the future. There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Certain statements have been made with reference to forecast price changes, economic conditions and the current regulatory environment. Any forward-looking statements made by or on behalf of SEGRO speak only as of the date they are made. SEGRO does not undertake to update forward-looking statements to reflect any changes in SEGRO's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. Nothing in this announcement should be construed as a profit forecast. Past share performance cannot be relied on as a guide to future performance.

CHief executive's review

introduction

SEGRO is Europe's leading owner-manager and developer of industrial property, with a high-quality portfolio and leading market positions in some of the most attractive markets, including London and the South East of England and major conurbations in Germany, France and Poland. We operate in an asset class which, due to the higher-yielding nature of the underlying property, has outperformed the retail and office sectors in the UK over the past 25 years on a total return basis. In the UK we have £3.5 billion of assets, the vast majority of which are in prime locations in and around London, including estates at Park Royal and Heathrow, and in the Thames Valley - which includes the Slough Trading Estate, Europe's largest industrial park in single ownership. In Continental Europe, we have a good platform, with £1.6 billion of assets in several strong industrial and logistics markets including Frankfurt and the Rhine-Rühr region of Germany, the Ile de France region around Paris, and four areas in Poland. Our strengths in developing and managing industrial property estates are underpinned by a diversified income stream from our high-quality customer base across many different industries.

GOOD PROGRESS ON STRATEGIC PRIORITIES

In November 2011 we announced a new strategy for SEGRO. Our ambition is to be the best owner-manager and developer of industrial property in Europe, delivering high-quality, sustainable dividend and net asset value (NAV) growth for shareholders. Our strategy focuses on two key areas:

l Disciplined Capital Allocation, which consists of picking the right geographic markets and asset types, creating the right portfolio shape, actively managing the portfolio ('Buy Smart, Add Value and Sell Well') and deploying the right capital structure (including partnering with third-party investors); and

l Operational Excellence, which consists of optimising performance from the portfolio through customer focus, expert asset management, development and operational efficiency.

Although implementation of the strategy is at an early stage, we are making good progress on a number of our key initiatives. The acquisition of 14 prime logistics warehouses in the UK Logistics Fund for £314.7 million in a joint venture with Moorfield Real Estate Fund, and the disposal of a portfolio of five non-core industrial estates to Ignis Asset Management for £80.2 million, both of which, have been completed since the end of our financial year, represent the first positive steps. Within the business, we have introduced a new organisational model based around the two key disciplines of Disciplined Capital Allocation and Operational Excellence. We are confident that we are well-positioned to make further progress on our strategic objectives during 2012.

STRONG 2011 OPERATIONAL PERFORMANCE

We achieved a strong operating performance for 2011, delivering £38.4 million of new rental income contracted during the year, increasing our retention rate to 74 per cent and further reducing our vacancy to 9.1 per cent. This is testament to both the strength of our property teams and the high quality of our portfolio in key markets. We saw resilient demand for space across a range of businesses, including third-party logistics providers, national food and fashion retailers and data centre operators and from a variety of business which viewed the current market as providing a good opportunity to take on space. The high quality and locational strength of most of the assets in our portfolio, combined with the limited supply in the wider market for good quality, modern assets, helped SEGRO to deliver a strong income-generating performance for the year.

Within the UK, which accounts for 69 per cent of the total portfolio, London and the Thames Valley (in aggregate accounting for around 88 per cent of our UK portfolio) were the most resilient areas for occupier demand. Conditions continued to be more challenging in the Midlands and the North, where a significant supply of second-hand space added to the pressure on occupancy, rents and incentive packages. In Continental Europe, representing 31 per cent of the total portfolio, concerns about the economy appear to have had some impact on general business sentiment, but the key markets in our portfolio in Germany and France continued to see good levels of demand and our businesses in the non-Eurozone markets of Poland and Czech Republic also performed well. Within this environment, SEGRO's priority remained operational delivery, focused on customer and asset management, leasing, pre-let development and tight cost control.

Progress in all of these key areas during the year helped to deliver EPRA profit before taxation of £138.5 million, an increase of 8.8 per cent on 2010, and to produce approximately £28.0 million of income for the business from current and completed developments. EPRA NAV per share decreased by 9.6 per cent to 340 pence, reflecting a 4.2 per cent decline in the value of the completed property portfolio, comprising a 13.0 per cent reduction in the value of assets which are non-core to our long-term portfolio strategy and a 0.4 per cent decline in the valuation of the core portfolio.

REVIEW OF OPERATIONs

Resilient lettings performance in a challenging environment

Through our leasing activities we generated £33.5 million of annualised new rental income (2010: £37.7 million). This excludes the value of agreements for pre-lets which will be delivered in future years. Excluding 2011 pre-let completions, which are reviewed below, we generated £24.4 million of new annualised rental income (2010: £32.5 million).

Our strong lettings activity has not come at the expense of overall rental levels, despite our flexible approach to leasing and asset management. In 2011, overall headline rents across the business on new lettings and lease renewals were 1.7 per cent higher than 31 December 2010 ERVs. Lease incentives stood at 11.0 per cent of the committed rents (2010: 10.0 per cent).

UK

In the UK, we completed over 200 lettings generating £21.9 million of new annualised rental income (2010: £26.3 million), driven by a strong performance in London and the South East. Pre-let development completions contributed £3.7 million to this figure, compared with £5.2 million in the prior year.

In our Greater London business unit, which represents 49 per cent of our UK portfolio and 43 per cent of lettable space, lettings at our two major clusters, Park Royal and Heathrow, remained resilient. At Park Royal, covering 408,500 sq m of lettable space, 30 lettings were completed across 28,800 sq m, a high proportion of which derived from demand from existing customers. The largest letting at Park Royal in the year was a 4,400 sq m unit to MedicAnimal.

At Heathrow, which has 411,500 sq m of lettable space, including our share of joint venture assets, momentum in the occupier market was driven by the restricted supply of assets located within close proximity to the airport. A total of 29 completed lettings across 37,700 sq m in the year included the expansion of Airworld Services to all four ground floor units at the X2 building, a 3,700 sq m let at the Heathrow Cargo Centre to Worldwide Flight Services and 5,200 sq m at Polar Park to AMI.

Demand for space within our Thames Valley and the Regions business unit, representing 51 per cent of our UK portfolio and 57 per cent of lettable space, continued to be driven by the Thames Valley's prime business location and excellent transport links. During the period over 120 new deals were completed for a total of 120,300 sq m of space.

At the Slough Trading Estate, which covers 619,700 sq m, new lettings included 5,600 sq m of speculative development to an existing data centre customer at the estate.

At IQ Winnersh, more than 11,000 sq m of office space was leased, including the recently-refurbished Building 230 and Building 1020, making it one of the Thames Valley region's best performing business parks. Key deals during 2011 included 2,200 sq m of office space to an existing data centre customer and 4,400 sq m to Atos.

At the Maylands Estate in Hemel Hempstead 7,900 sq m was let to the data centre operator Gyron Internet, reflecting the attractiveness of buildings in our portfolio for higher-value use. The largest letting in the UK during the year was completed at Meteor Park, Birmingham, for 10,700 sq m of warehousing space.

Continental Europe

In Continental Europe, we generated £11.6 million of new annualised rental income (2010: £11.4 million), reflecting robust demand for the assets in our key markets, which offset more difficult occupier market conditions in Benelux. In comparison to the prior year, when there were no pre-lets completed, 2011 completions contributed £5.4 million to income.

Driven by a resilient macro-economic environment, in Germany 22 new lettings were secured for a total 96,500 sq m. These included 23,400 sq m to Metro at Holzwickede, Dortmund and, in Frankfurt, a 10-year lease for 6,600 sq m to Universum Inkasso at the Neckerman site. Occupancy at the former Karstadt-Quelle site in Fürth increased to almost 90 per cent following a 20-year lease taken out by a manufacturing customer.

In France, the majority of our portfolio is located in the Ile de France and, in particular, the prime industrial area north from Paris city centre to Charles de Gaulle Airport, where demand for our industrial and logistics assets continues to provide high-quality income. We secured 12 new lettings across 64,500 sq m during the year, including a large letting of 21,300 sq m to Bovis Transport at Bondoufle and 6,700 sq m of logistics space to CMP at Marly la Ville.

Our logistics operations in Poland continued to benefit from a strong occupier market, driven by a relatively buoyant economy coupled with large-scale infrastructure projects and preparations for the 2012 UEFA European football tournament. A total of 20 lettings across 80,700 sq m were completed during the year. At Nadarzyn, Warsaw, our property team worked closely with an existing customer of 24,000 sq m to meet their changing space requirements, and successfully managed the phased handover of the majority of this space to three customers, including 6,500 sq m to PepsiCo.

In Benelux, we completed 8,600 sq m of lettings, the largest of which was for 3,300 sq m to Tommy Hilfiger in the Netherlands. Despite the strengths of the facilities at Pegasus Park, our office development close to Brussels airport, the local office market remained subdued as customers took longer to reach decisions on taking new space and vacancy levels in the area remained higher.

Takebacks reduced by 28% to £21.0 million

Our performance in reducing the impact of takebacks (the amount of rental income lost due to lease expiry, exercise of break option, surrender or insolvency) was robust, with takebacks falling to £21.0 million (2010: £29.3 million), of which £16.2 million related to the UK and £4.8 million to Continental Europe.

Working closely with our customers has increased retention rates to 74%

Our commitment to providing excellent customer service and working closely with our customers where their leases are due for renewal, or in situations where they may be experiencing difficulties, helped to increase the Group retention rate in the year to 74 per cent from 63 per cent. This included an increase to 69 per cent from 55 per cent in the UK, and to 87 per cent from 75 per cent in Continental Europe.

A Group-wide customer satisfaction survey was carried out during the year with over 200 SEGRO customers across eight countries, the results of which were very encouraging and underline our increasing commitment to working closely with and meeting the needs of our customers. Overall satisfaction as an occupier of our buildings was rated as good or excellent by 78 per cent of customers. Over 80 per cent of respondents believe that SEGRO provides a consistently strong property management service, and over 70 per cent expressed satisfaction with the quality of our estate services.

Our commitment to high operational standards was recognised during the period by prestigious industry awards for Best Property Company in Industrial and Distribution (Estates Gazette), Property Company of the Year and Deal of the Year in the under 50,000 sq ft category, for a development on behalf of GeoPost (both Industrial Agents Society).

Significant improvement in Group vacancy rate to 9.1%

Through a combination of strong lettings activity and an improvement in retention rates, overall Group vacancy was significantly reduced to 9.1 per cent as at 31 December 2011 (2010: 12.0 per cent). Short-term lettings benefitted the Group vacancy rate by 1.9 per cent (31 December 2010: 1.5 per cent).

In the UK, we began the year with a vacancy rate of 13.3 per cent, reflecting the higher level of vacancy in the Brixton portfolio acquired in 2009 as well as at our wholly-owned properties at Heathrow. Our local property teams worked hard to reduce these levels, and we ended the year with a vacancy rate for the UK of 10.2 per cent, including a reduction of the former Brixton vacancy to 13.4 per cent from 18.6 per cent at the start of the year. Reducing the void rate in the Brixton portfolio was a key value driver for our acquisition of the portfolio, and with this year's performance our originally stated target for a 15.0 per cent vacancy rate by the end of 2012 has been achieved well ahead of schedule. In our two UK business units, Greater London and Thames Valley and the Regions, vacancy stood at 11.3 per cent and 9.3 per cent respectively.

Within our Greater London portfolio, further strong progress was made during the year at two of our largest and best-performing estates at Park Royal, both of which were part of the former Brixton portfolio. At Greenford Park, vacancy was reduced to 6.0 per cent from 47.2 per cent at acquisition and at Premier Park our assets were fully-let, compared with a vacancy rate of 7.4 per cent at acquisition.

In Continental Europe, vacancy continued to decline year on year, to 6.4 per cent as at 31 December 2011 from 8.9 per cent. The relative strength of the occupier market in Germany, combined with our continued focus on re-letting returned space at the Karstadt-Quelle properties, helped to significantly reduce the vacancy rate in Germany to 4.1 per cent from 11.5 per cent.

In France, vacancy also declined significantly, to 2.9 per cent from 6.7 per cent at the start of 2011, driven by a strong lettings and retention performance, reflecting continuing demand for our industrial and logistics space located around the key Paris market.

The combined vacancy rate for Poland and the Czech Republic of 3.4 per cent, as at 31 December, included vacancy for our assets in Poland of 4.0 per cent, which compares favourably with the market average of 11.5 per cent, and reflects the strength of our logistics proposition in a growth market.

In Benelux and Other markets, overall vacancy is 16.0 per cent, largely reflecting the subdued lettings market in Brussels and higher vacancy in some of our smaller assets in Italy.

The reduction in overall vacancy this year partly reflects a proactive and commercial approach to maximising income returns from some of our buildings by undertaking shorter-term lets, which may be reflected in future levels of rent at risk from breaks and expiries.

Growing pipeline of pre-let developments with 20 projects under construction or contracted

Demand for pre-let developments has remained resilient throughout the year, driven by a lack of available grade A space across several of our markets. This has enabled us to focus on delivering returns from our land bank, which stood at 641 hectares as at 31 December 2011 (2010: 631 hectares). We undertook some speculative development during the year, although this was limited to those locations where we see a material imbalance between supply and demand for good quality product.

Completed developments

We completed a total of 14 developments across our portfolio during 2011, totalling 136,900 sq m. Of these completions, six were in the UK, totalling 23,500 sq m, all of which are fully let. In Continental Europe, we completed 113,300 sq m, of which 92 per cent was let as at 31 December 2011.

In the UK, completed developments included a 5,700 sq m unit at Heathrow for Heathrow Cargo Handling and two separate facilities at Southall and Enfield in London for GeoPost, totalling 6,900 sq m. The largest pre-let at the Slough Trading Estate was 7,000 sq m for Selig, an existing customer.

In Continental Europe, the largest completion for a single occupier during the period was a 28,000 sq m pre-let warehouse facility for Casino at Gonesse, Paris, which was completed ahead of schedule for occupancy in August. A 20,700 sq m logistics facility was completed for Takko in Hamburg, and at Gliwice in Poland pre-let developments across a total of 32,300 sq m were completed for several customers.

New developments

Across the Group, we have started construction on or have approval for a total of 20 developments. Our current overall development pipeline represents £116.9 million of capital expenditure to completion and £18.9 million of annualised rental income, of which 78 per cent is pre-let.

In the UK, as at 31 December 2011, we had a total of seven pre-let and two speculative developments totalling 42,200 sq m under construction or contracted, with the demand for new space focused on London and the South East. This represents £25.0 million of capital expenditure to completion and £6.9 million of annualised rental income, of which 89 per cent is pre-let.

At the APP Portal site, we signed the largest pre-let for five years in the Heathrow market with DB Schenker for a new 9,900 sq m UK HQ office and warehouse facility, development of which commences in early 2012. In the final quarter of 2011, a further pre-let at the Portal site was signed with Rolls-Royce for an 8,500 sq m facility. Both of these developments are expected to complete in the second half of 2012.

On the Slough Trading Estate, five pre-lets were secured in the year, including one with Infinity in November to build an 11,400 sq m data centre on a 25-year lease. This development will be fast-tracked under the estate's Simplified Planning Zone status and is expected to be completed in the fourth quarter of 2012. We are also developing 5,600 sq m of speculative space, which is now let to an existing data centre customer at the estate and is due to be completed early in 2012. Two further speculative developments totalling 5,900 sq m are in progress at the estate, which we expect to complete in the first half of 2012.

In Continental Europe, as at 31 December 2011, a total of eight pre-let and three speculative developments totalling 162,300 sq m were under construction or contracted. The development pipeline represents £91.9 million of capital expenditure to completion and £12.0 million of annualised rental income, of which 72 per cent is pre-let.

Key pre-let deals during the year included 11,300 sq m of development substantially let to WIR Packens in Düsseldorf, and a 31,300 sq m facility in Gliwice for a sports retailer. The development pipeline continued to progress at Energy Park at Vimercate, Milan; agreement was secured and construction commenced for two significant office facilities, the largest of which was for a 34,000 sq m campus for Alcatel Lucent, which has had its headquarters on the estate since 1962. The development, comprising five new buildings for Alcatel and a multi-storey car park, is expected to be complete for a phased handover to Alcatel at the end of 2013.

A full list of current and completed projects can be found in our 2011 Property Analysis Booklet, which is available at www.segro.com.

Cost ratio reduced to 24.3% by continuing to focus on operating efficiencies

We continued to tightly control our operating cost base, reducing our total cost ratio for the year to 24.3 per cent from 28.1 per cent. This performance was primarily driven by lower vacancy and a reduction in administrative expenses and represents good progress on our target to reduce our cost ratio over time to the low 20 per cent range.

Continuing to recycle assets with £110.9 million of disposals

During the year we completed a number of disposals across our portfolio with proceeds of £110.9 million at a profit of £10.4 million, of which £79.3 million related to UK assets. Proceeds from larger disposals during the period included: the GL6 portfolio of estates in London to Legal and General Property for £38.2 million; part of the DHL portfolio in France for £17.9 million; the Great Western estate in Southall for £10.3 million; IQ Cambridge for £10.2 million; three estates at Trafford in Manchester for £8.2 million; and Cressex Estate in High Wycombe for £8.0 million. Since the end of the year we have disposed of five non-core UK industrial estates to Ignis Asset Management for £80.2 million.

Valuation decline in non-core assets; core portfolio more resilient

The total value of the Group's property portfolio, comprising completed properties (including joint ventures at share), land and development, decreased from £5.3 billion to £5.1 billion over the 12 months to 31 December 2011. This movement includes a £255.0 million valuation decline, of which £242.0 million relates to the second half, including £187.0 million for the Group's non-core assets. Over the full year, the movement also reflects disposals of £103.0 million and a £38.0 million adverse impact from the weakening euro, offset by acquisitions and additions of £194.0 million.

Within the total portfolio, completed properties recorded a valuation decline of 4.2 per cent on a like for like basis, including a 0.4 per cent decline in the core portfolio and a 13.0 per cent fall in non-core assets.

Valuation movements during the year reflect the north-south divide within the UK, the importance of proximity to prime areas (such as Paris) within the Continental European portfolio, together with the quality of assets. Prime, well-let properties in the strongest locations have generally held their values, whereas further declines have been observed in the secondary market. Valuations of older and secondary properties have been under pressure in Continental Europe, in particular, as a result of relatively weak occupier demand which has allowed customers undergoing lease renewals or entering into new leases to negotiate more competitive terms.

The UK completed portfolio declined by 3.2 per cent, with the balance of losses weighted towards our non-core assets located outside of London and the South East. Within our Greater London business unit, positive valuation gains were recorded in Park Royal and in our joint venture portfolios, APP and Big Box, reflecting good letting progress and the limited availability and high investor demand for prime investment property. This was offset by value declines for the balance of our wholly-owned Heathrow assets, due to their comparatively higher level of vacancy, leading to the overall decline in value for the division of 1.1 per cent.

In Thames Valley and the Regions, capital values declined by 5.1 per cent. This business unit includes Slough Trading Estate and IQ Winnersh as well as the large non-strategic assets in Crawley and Farnborough and non-core assets in the Midlands and North of England. The division was, therefore, impacted by both the larger valuation declines attributed to assets identified for disposal and the focus of investor interest on London and the South East relative to the UK regions.

Within our completed Continental Europe portfolio, the strongest capital appreciations were in Poland and the Czech Republic, where values increased by 2.7 per cent, driven by robust demand for our prime logistics assets in the key transportation corridors of Gliwice and Poznan. Capital values for our assets in France were marginally positive, reflecting valuation gains for our prime assets in the Ile de France region around Paris, offset by weaker performing non-core assets elsewhere in the country. In Germany, a capital value decline of 10.9 per cent largely reflected the impact of negative movements for the two large non-strategic assets of Neckermann in Frankfurt and MPM in Munich.

A valuation decline of 15.4 per cent in Benelux and other markets was primarily impacted by the valuation falls at the two large non-strategic assets at Pegasus Park, Brussels and Energy Park, Milan.

Overall in Continental Europe, the capital appreciation made by our core assets was offset by the valuation declines of our non-strategic assets, to provide an aggregated completed portfolio decline of 6.6 per cent. To the extent that the current economic outlook for countries in Continental Europe changes as a result of the Eurozone crisis, valuations could fall further, particularly in relation to the Group's non-strategic or secondary assets.

Significantly strengthened our already secure financial position

Our funding position was further strengthened during the year with new or extended bank facilities totalling €440.0 million (£367.0 million), reflecting our strong relationships with our lending banks, and as a result the Group has no significant debt maturities before 2014. Our APP joint venture with Aviva Investors separately agreed a five-year refinancing package of £400.0 million and, since the end of the year, our joint venture with Moorfield has secured a facility of £186.6 million over five years secured on the assets of UKLF.

Net borrowings at the year end were £2,303.4 million (31 December 2010: £2,203.2 million) and the Group's gearing ratio was 89 per cent (2010: 80 per cent). Our loan to value ratio is now 50 per cent, up from 46 per cent at 31 December 2010. In the medium-term, our intention remains to reduce our loan to value ratio to 40 per cent.

Further details of the financial position, including sensitivities to interest rate and currency fluctuations, are provided in the Financial Review.

Dividend up by 3.5%

The Board is recommending a final dividend of 9.9 pence, giving a total dividend for the year of 14.8 pence per share, an increase of 3.5 per cent on the prior year. The final dividend payment will consist of a 7.0 pence PID and a 2.9 pence ordinary cash dividend. This payment will be made on 4 May 2012 to shareholders on the register at the close of business on 23 March 2012. A Dividend Reinvestment Plan (DRIP) will be introduced and will be applicable to the PID element only for the 2011 final dividend payment.

Outlook

In 2011 we delivered strong income-generation and earnings growth, driven by an excellent operational performance which included further reducing our vacancy rate, significantly increasing customer retention and building a strong pipeline of future income from pre-let developments.

As part of the revised strategy for the Group outlined on 8 November 2011, we have made a promising start to reshaping our portfolio with the completion since the year end of the acquisition of prime logistics assets with a joint venture partner and the disposal of a portfolio of non-core holdings in the UK.

We expect the macro environment to remain unsettled for some time to come, both in the UK and Continental Europe. However, we have 20 mainly pre-let development projects due to come on stream and have started the new year with good momentum in our letting activity. We have a strong balance sheet and a clear focus to build on our strengths of investing in the strongest locations in resilient sectors, both in the UK and key industrial markets of Continental Europe, and to recycle those assets which do not fit our strategic criteria. Given the strengths of our operational teams and core assets, we are well-positioned to continue to capitalise on demand for newly-developed and well-located industrial space from a diverse range of customers and industries.

An element of our strategy envisages increasing over time the proportion of our assets under management that are located the stronger markets in Continental Europe. We strongly believe that our selected target and product markets in this region provide attractive expansion and growth opportunities for SEGRO over the medium term. In setting our strategy and budgets we have not assumed a significant worsening in the current economic and political landscape of the countries in which we operate. We will however continue to monitor events in Europe to ensure that our assumptions remain valid, particularly as regards their impact on the strength of our diverse customer base and funding partners and on the appropriate timing for our asset recycling programme.

FINANCIAL REVIEW

HIGHLIGHTS

1 EPRA NAV, EPRA EPS and EPRA profit before tax are alternate metrics to their IFRS equivalents that are calculated in accordance with the Best Practices Recommendations of the European Public Real Estate Association (EPRA). SEGRO uses these alternative metrics as they highlight the underlying recurring performance of the property rental business, which is our core operational activity. The EPRA metrics also provide a consistent basis to enable a comparison between European property companies.

2 Includes the realised and unrealised property loss of £271.8 million for the wholly owned portfolio (see note 7 to the financial information) and the realised and unrealised property gain of £11.7 million from our share of joint ventures (see note 6 to the financial information)

TOTAL PROPERTY RETURN

Total property return is a measure of the ungeared combined income and capital return from the portfolio and is calculated as the total realised and unrealised property gain or loss plus net rental income, expressed as percentage of capital employed.

Total property return for the year was 0.8 per cent, a decline on the 6.8 per cent return for 2010. This reflects a consistent income return in comparison to the prior period, with the reduction attributable to theunrealised valuation deficit recognised in 2011 compared to a valuation surplus in 2010.

NAV AND EPRA NAV PER SHARE

A reconciliation of EPRA net assets to total net assets attributable to ordinary shareholders and the corresponding NAV and EPRA NAV per share calculations is provided in note 13 to the financial information.

EPRA NAV per share at 31 December 2011 was 340 pence, compared with 376 pence as at 31 December 2010. The decrease is largely as a result of the reduction in non-core property values, particularly in the second half of the year and dividends paid, offset by EPRA profit generated.

REALISED AND UNREALISED PROPERTY GAIN/(loss)

A total realised and unrealised loss on property for the wholly owned portfolio of £271.8 million (2010: £26.0 million gain) has been recognised in 2011, which includes an unrealised valuation deficit on investment properties of £272.3 million (2010: £32.4 million surplus). A gain of £5.2 million arose in 2011 on disposal of investment properties and a further gain of £5.2 million arose on disposal of trading properties (2010: £2.8 million loss and £0.1 million loss, respectively). Impairment provisions of £9.1 million (2010: £3.6 million) were recorded on certain trading properties as the fair value is deemed to be less than the original cost. The total realised and unrealised property loss for the wholly owned portfolio is further analysed in note 7 to the financial information.

Our share of realised and unrealised property gains generated from joint venture interests was £11.7 million (2010: £31.1 million) and are further analysed in note 6 to the financial information.

The Group's trading property portfolio (including share of joint ventures) has an unrealised valuation surplus of £11.4 million at 31 December 2011 (2010: £30.2 million surplus), which has not been recognised in the financial information it is recorded at the lower of cost or fair value.

EPS AND EPRA EPS

EPS is (4.1) pence for 2011, compared to 28.5 pence in 2010. The main driver behind this was the unrealised property loss in 2011 compared to a gain in 2010.

EPRA EPS of 18.4 pence per share is higher than the 2010 equivalent (17.1 pence per share) as a result of a £13.4 million increase in EPRA profit after tax, which is further analysed in the EPRA Profit and following sections.

EPRA PROFIT

EPRA profit is arrived at as follows:

1 Comprises net property rental income less administration expenses, net interest expenses and taxation

A reconciliation between EPRA profit before tax and IFRS loss before tax is provided in note 2 to the financial information.

EPRA profit before tax increased by £11.2 million compared to 2010, primarily due to an increase in SEGRO's share of joint ventures' EPRA profit and joint venture management fee income due to the full year impact of APP, a decrease in finance costs and a decrease in administration expenses, which offset the decrease in net rental income, all of which are described more fully below.

NET RENTAL INCOME

Like for like net rents have increased by £2.1 million, with an increase in both the UK (£0.7 million) and Continental Europe (£1.4 million), largely driven by cost savings in the UK and net lettings (lettings exceeding takebacks) in Continental Europe.

Net rental income in total has decreased by £10.9 million compared to 2010, largely due to the impact of disposals (£11.6 million decrease in the UK and £2.8 million decrease in Continental Europe), offset by the improved like for like rent noted above. Disposals in the UK include assets sold into the APP joint venture, in which the Group retains a 50 per cent interest (£5.1 million impact), along with disposals of Treforest, Cambridge and various portfolio sales (Westcore in 2010 and GL6 in 2011). Additionally, a lower level of lease surrenders (£4.3 million decrease, all in the UK) has occurred in 2011 with 2010 including the benefit of a large individual surrender. Development lettings have increased net rental income in 2011, with a £2.9 million increase in the UK (largely in Slough and Farnborough) and a £3.4 million increase in Continental Europe (largely Takko in Germany and Casino in France).

JOINT VENTURES

SEGRO's share of joint ventures' EPRA profit has increased by £5.8 million and joint venture management fee income has increased by £4.0 million as a result of a full year of APP income compared to six months in 2010. In addition to the full-year benefit, lower interest costs have been incurred in the APP joint venture following its debt facility refinancing in August 2011, along with the recognition of a performance fee achieved in 2011 (2010: £nil).

TOTAL COSTS

The Group is focused on carefully managing its cost base and regards the total cost ratio as a key measure of performance. The total cost ratio is calculated by expressing the sum of property operating expenses (net of service charge recoveries and third-party asset management fees) and administration expenses (excluding exceptional items) as a percentage of gross rental income and includes the Group's share of costs and revenue from joint ventures.

The total cost ratio for 2011 was 24.3 per cent compared to 28.1 per cent in 2010. The decrease compared to 2010 reflects a reduction in administrative expenses of £7.1 million partially due to a release of excess reserves in share schemes. Vacant property costs, which are one of the Group's largest costs, whereby property taxes, maintenance and other estate service expenses relating to unlet properties are borne by the Group, have decreased by £7.5 million to £15.2 million (2010: £22.7 million). The reduced vacant property costs are a result of a fall in vacancy, £3.9 million of prior period rates refunds in the UK, largely recognised in the first half of the year. Excluding vacant property costs, the cost ratio for 2011 was 20.1 per cent (2010: 21.9 per cent).

NET FINANCE COSTS

Excluding fair value gains and losses on interest rate swaps and other derivatives, net finance costs decreased by £5.2 million to £123.1 million. The decrease is mainly attributable to the impact of pay floating, receive fixed sterling interest rate swaps put in place at the end of 2010, combined with lower average net debt and reduced commitment fees following the cancellation of surplus undrawn bank facilities.

A net fair value gain on interest rate swaps and other derivatives of £67.1 million has been recognised within net finance costs in 2011 (2010: £21.5 million gain), mainly as a result of the impact of the significant decrease during 2011 in medium-term sterling interest rates on the fair value of the Group's pay floating, receive fixed sterling interest rate swap portfolio. This gain is not included in EPRA profit, in accordance with EPRA best practice recommendations.

TAX

A tax credit of £23.0 million has been recognised in 2011 (2010: £11.1 million), largely due to the release of deferred tax provisions following valuation movements. The underlying tax rate for the year ended 31 December 2011 on an EPRA profits basis was 1.5 per cent (2010: 3.4 per cent), consistent with a Group target tax rate of less than 5 per cent and reflecting a favourable geographical mix of profits. The Group's target tax range reflects its tax exempt status as a REIT in the UK and a SIIC in France.

CASH FLOW

A summary of cash flows for the year is set out in the table below:

Free cash flow generated from operations was £124.2 million in 2011, an increase of £17.6 million from 2010, primarily due to a reduction in cash paid for finance costs.

Capital expenditure on acquisitions and development of investment properties totalling £187.1 million has been incurred, which was funded through proceeds from investment property sales of £79.9 million, proceeds received from trading property sales of £31.0 million (included within cash flow from operations) and an increase in borrowings of £78.3 million. Dividends paid of £107.4 million are £24.6 million higher than that paid in 2010, due to the scrip dividend on offer for the 2009 final dividend, which was not offered for the 2010 final dividend. Overall this resulted in a net cash outflow of £28.2 million (2010: £66.9 million) during the year.

CAPITAL EXPENDITURE/DIVESTMENT

During 2011, the Group invested net capital of £90.8 million compared to a net divestment of £195.9 million in 2010. This is largely a result of pre-let led development expenditure, where we have seen a re-emergence of this market during 2011 following limited development in the last three years and a reduced level of disposals in 2011.

1. Values are stated on an accruals basis rather than a cash flow basis and exclude gains or losses on disposals and therefore can differ to the Cash Flow section above.

Contractual obligations in respect of future committed acquisitions and development expenditure on projects currently in progress or committed amount to approximately £100.7 million (2010: £70.2 million).

TREASURY POLICIES AND GOVERNANCE

Group Treasury operates within a formal treasury policy covering all aspects of treasury activity, including funding, counterparty exposure and management of interest rate, currency and liquidity risks. Group Treasury policies are reviewed by the Board at least once a year.

Treasury reports on compliance with these policies on a quarterly basis to the Treasury Committee, which includes the Chief Executive and is chaired by the Finance Director.

FINANCIAL POSITION AND FUNDING

At 31 December 2011, the Group's net borrowings were £2,303.4 million (2010: £2,203.2 million) comprising gross borrowings of £2,324.6 million (2010: £2,247.8 million) and cash balances of £21.2 million (2010: £44.6 million). These cash balances, together with the Group's interest rate and foreign exchange derivatives portfolio, are spread amongst a strong group of relationship banks all of whom currently have long term credit ratings of A- or better.

In November 2011 the Group agreed new bank facilities totalling €440 million (£367 million) with a group of nine relationship banks to refinance a £270 million bank facility maturing in 2013, which was prepaid and cancelled in full.

At 31 December 2011, 78 per cent of the net borrowings of the Group were long-term bonds with the remaining 22 per cent representing bank borrowings net of cash.

anaysis of net borrowings

At 31 December 2011, the weighted average maturity of the gross borrowings of the Group was 8.8 years (2010: 9.8 years). Secured borrowings at 31 December 2011 were £52 million, representing approximately 2 per cent of the Group's total gross borrowings.

The market value of the gross borrowings of the Group at 31 December 2011 was £2,507.5 million (2010: £2,323.3 million), £182.9 million (2010: £75.5 million) higher than the carrying value. The net market value of the Group's derivative portfolio of interest rate swaps and forward foreign exchange and currency swap contracts at 31 December 2011 was a net asset of £109.6 million (2010: £11.1 million).

GEARING AND FINANCIAL COVENANTS

The loan to value ratio of the Group at 31 December 2011 was 50 per cent (2010: 46 per cent). On a look-through basis, including the borrowings and property assets of the Group's share of joint ventures, loan to value at 31 December 2011 was 49 per cent (2010: 45 per cent).

The gearing ratio of the Group at 31 December 2011 was 89 per cent (2010: 80 per cent), significantly lower than the Group's tightest financial gearing covenant of 160 per cent. Property valuations would need to fall by around 23 per cent from their 31 December 2011 values to reach the gearing covenant threshold of 160 per cent.

The Group's other key financial covenant is interest cover, requiring that net interest before capitalisation be covered at least 1.25 times by net property rental income. At 31 December 2011, the Group comfortably met this ratio at 2.2 times (2010: 2.2 times).

LIQUIDITY POSITION

Funds availability at 31 December 2011 totalled £456.1 million, comprising £21.2 million of cash and £434.9 million of undrawn bank facilities provided by the Group's relationship banks, of which only £9.9 million were uncommitted. The Group has a favourable debt funding maturity profile with only £10.4 million of committed debt facilities maturing before 31 December 2012.

GOING CONCERN

Whilst wider economic conditions remain challenging, the Group has completed significant bank refinancing activity during 2011 and, as a result, has a strong liquidity position, a favourable debt maturity profile, substantial headroom against financial covenants and can reasonably expect to be able to continue to have good access to capital markets and other sources of funding.

Having made enquiries and having considered the principal risks and uncertainties facing the Group as summarised on page 19, the Directors have a reasonable expectation that the Company and the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going concern basis in preparing the Annual Report and Accounts.

INTEREST RATE RISK EXPOSURE

The Group's interest rate risk policy is that between 60 and 100 per cent of net borrowings should be at fixed or capped rates, both at a Group level and by major borrowing currency (currently euro and sterling), including the impact of derivative financial instruments.

At 31 December 2011, including the impact of derivative instruments, £1,703.3 million of borrowings were at fixed rates, representing 74 per cent of the net borrowings of the Group. By currency, 67 per cent of the euro denominated net borrowings of the Group of £1,273.1 million and 82 per cent of the remaining net borrowings (predominantly sterling) of £1,030.3 million were at fixed rates.

The weighted average maturity of fixed rate cover of £1,703.3 million at 31 December 2011 was 8.6 years at an average fixed interest rate of 5.3 per cent. Including the impact of derivative financial instruments, floating rate gross borrowings at 31 December 2011 were £621.3 million at an average interest rate (including margin) of 3.6 per cent, giving a weighted average interest rate for gross borrowings at that date, before commitment fees and amortised costs, of 4.8 per cent or 5.2 per cent after allowing for such items.

If short-term interest rates had been 1 per cent higher throughout the year to 31 December 2011, the adjusted net finance cost of the Group would have increased by approximately £4.9 million, representing under 4 per cent of EPRA profit after tax.

The Group has decided not to elect to hedge account its interest rate derivatives portfolio. Therefore, movements in the fair value are taken to the income statement but, in accordance with EPRA best practices recommendations, these gains and losses are eliminated from EPRA profit before tax and EPRA EPS.

FOREIGN CURRENCY TRANSLATION EXPOSURE

The Group has negligible transactional foreign currency exposure, but does have a potentially significant currency translation exposure arising on the conversion of its substantial foreign currency denominated net assets (mainly euro) into sterling in the Group consolidated accounts.

The Group policy is to hedge between 50 per cent and 90 per cent of foreign currency denominated assets with liabilities of the same currency to protect the Group's reported consolidated net asset value, earnings, cash flows and financial gearing covenant.

As at 31 December 2011, the Group had gross foreign currency assets amounting to £1,696.6 million, which were 84 per cent hedged by gross foreign currency denominated liabilities (including the impact of derivative financial instruments) of £1,430.7 million.

A 10 per cent weakening against sterling in the value of the currencies in which the Group operates at 31 December 2011 would have reduced net assets by approximately £24 million and reduced reported gearing by approximately 1 per cent. Including the impact of forward foreign exchange and currency swap contracts used to hedge foreign currency denominated net assets, the reduction in gearing would have been approximately 4 per cent.

The average exchange rate during 2011 was €1.15: £1. Based on the hedging position at 31 December 2011, and assuming that this position had applied throughout 2011, if the euro had been 10 per cent weaker than it was against sterling throughout the year (€1.27: £1), EPRA profit after tax for the year would have been approximately £2.7 million (2 per cent) lower than that reported.

extracts from 2011 PROPERTY ANALYSIS booklet

summary analysis as at 31 december 2011

1 The valuation movement percentage is based on the difference between the opening and closing valuations for completed properties, allowing for capital expenditure, acquisitions and disposals.

2 In relation to the completed properties only.

3 Comprises APP and Big Box joint ventures and includes 14% by value which is outside Heathrow.

supplementary data as at 31 December 2011

Weighted average lease length1

1 Weighted by topped up net rent.

Reconciliation between passing rent and ERV

Lease expiries & break options

development pipeline as at 31 december 2011

1 Includes land plus all costs incurred to date which are revalued during the development period.

2 Estimated costs to completion include estimated finance charges which are capitalised to the end of the construction period.

3 ERV based upon market rents as at 31 December 2011.

4 Indicative yield is the expected gross yield based on estimated rental value when fully let, divided by the current book value, plus estimated remaining costs to complete.

5 Comprises predominantly non-core land for disposal

Note that, as developments are revalued during the construction phase, yields will tend towards the yield for a completed investment property as each property nears completion.

The full 2011 Property Analysis Booklet is available from the SEGRO website www.segro.com.

STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES

The Board recognises that there are significant risks which can affect the performance of the Company and that it has overall responsibility for Group risk management. The Group's risk management process and specific risk management plans will be detailed in the 2011 Annual Report and Accounts. The Principal Risks and Uncertainties are summarised below.

1. Strategic Risks

l The Economic Environment. Changes in the macro economic environment in the UK and Continental Europe could have a significant impact on the Group's performance.

l Portfolio Performance. Management considers that the portfolio currently contains too many non-income producing or non-core assets and, if this is not addressed, the business could underperform relative to its peers.

l Implementing Strategic Changes. Performance could suffer if the Group was to fail to execute the medium-term strategic plans announced in November 2011.

2. Financial and Operational Risks

l Capital Structure. Failing to maintain an appropriate and cost-effective capital structure for any point in the market cycle could, if the Group holds too much debt when the market is falling, increase the risk of covenant breach (see Solvency and Covenant Breach risk below). If the Group holds too little debt when the market is rising, it could underperform relative to its peers.

l Availability and Cost of Borrowing. Deterioration in debt market conditions, a worsening of the Company's credit profile or a general rise in interest rates could impact the availability and cost of borrowing with a direct impact on both the solvency of the Group and the returns it generates.

l Solvency and Covenant Breach. A material fall in the Group's property asset values or rental income could lead to a breach of financial covenants within its debt funding arrangements. This could result in the cancellation of debt funding which would leave the Group without sufficient long-term resources to meet its commitments.

l Foreign Exchange Rates. Changes in the sterling to euro exchange rate could reduce the sterling value of Continental European assets and earnings. Significant exchange rate changes could also impact the Group's gearing ratio.

l Operations. The Group's ability to maintain its reputation, revenues and value could be damaged by operational failures.

3. Real Estate and Investment Risks

l Market Cycle. The property market is cyclical and there is an inherent risk that the Company could either misinterpret the market or fail to react appropriately to changing market conditions, resulting in capital being invested or disposals taking place at the wrong time in the cycle.

l Investment Plans. Investment decisions to buy, hold, sell or develop assets could be flawed due to inadequate analysis, inappropriate assumptions, poor due diligence or changes in the operating environment.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Statement of Directors' Responsibilities below has been prepared in connection with the Company's full Annual Report for the year ended 31 December 2011. Certain parts of the Annual Report have not been included in the announcement as set out in note 1 of the financial information.

We confirm that to the best of our knowledge:

l the financial statements have been prepared in accordance with IFRSs as adopted by the European Union and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

l the management report, which is incorporated into the Directors' Report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face;

The responsibility statement was approved by the Board of Directors on 20 February 2012 and is signed on its behalf by:

Group income statement

For the year ended 31 December 2011

Group statement of comprehensive income

For the year ended 31 December 2011

Group balance sheet

As at 31 December 2011

Group statement of changes in equity

For the year ended 31 December 2011

For the year ended 31 December 2010

1 AFS is the term used for 'Available-for-sale investments' and is shown net of deferred tax.

Group cash flow statement

For the year ended 31 December 2011

Notes to the condensed financial statements

1. financial information

The financial information set out in this announcement does not constitute the consolidated statutory accounts for the years ended 31 December 2011 and 2010, but is derived from those accounts. Statutory accounts for 2010 have been delivered to the Registrar of Companies and those for 2011 (approved by the Board on 20 February 2012) will be delivered following the Company's annual general meeting. The external auditor, Deloitte LLP, have reported on those accounts; their reports were unqualified, did not draw attention to any matters by way of emphasis without qualifying their report and did not contain statements under s498(2) or (3) of the Companies Act 2006.

Given due consideration to the nature of the Group's business and financial position, including the financial resources available to the Group, the Directors consider that the Group is a going concern and this financial information is prepared on that basis.

The financial information set out in this announcement is based on the consolidated financial statements which are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for the use by the European Union and complies with the disclosure requirements of the Listing Rules of the UK Financial Services Authority. The financial information is in accordance with the accounting policies set out in the 2010 financial statement except for the adoption of new accounting standards in 2011, none of which had a material impact on the current or prior year reported results.

The principal exchange rates used to translate foreign currency denominated amounts in 2011 are:

Balance sheet: £1 = €1.20 (31 December 2010: £1 = €1.17)Income statement: £1 = €1.15 (2010: £1 = €1.17)

2. Segmental analysis

The Group's reportable segments are the geographic locations of the United Kingdom and Continental Europe, which were managed and reported to the Board as separate distinct locations.

1 A detailed breakdown of the adjustments to the share of profit/(loss) from joint ventures is included in note 6.

Revenues from the most significant countries within Continental Europe were France £55.7 million (2010: £33.3 million) and Germany £47.1 million (2010: £55.4 million).

The adjustments outlined above arise from adopting the Best Practices Recommendations of European Public Real Estate Association (EPRA). The EPRA profit measures highlight the underlying recurring performance of the property rental business, which is our core operational activity and also provide a consistent basis to enable a comparison between European property companies.

3. Revenue

4. Property operating expenses

1 Property administration expenses predominantly relate to the employee staff costs of personnel directly involved in managing the property portfolio.

5. ADMINISTRATION EXPENSES

6. Investments in joint ventures and subsidiaries

6(i) - Share of profit from joint ventures after tax

The table below presents a summary income statement of the Group's largest joint ventures.

Trading properties held by joint ventures were externally valued resulting in an increase in the provision for impairment of £0.9 million (2010: £2.3 million). Based on the fair value at 31 December 2011, the Group's share of joint ventures' trading property portfolio has an unrecognised surplus of £4.0 million (2010: £5.1 million).

6(ii) - Summarised balance sheet information in respect of the Group's share of joint ventures

In June 2010, the Group acquired a 50 per cent interest in the APP for £109.7 million and made a further injection of £70.3 million, giving a total investment at 30 June 2010 of £180.0 million. In conjunction with the acquisition in 2010, the Group sold £237.1 million of property and joint venture investments to the APP joint venture.

6(iii) - Investments by the Group

The amount of loans advanced by the Group to joint ventures is £127.0 million (2010: £127.2 million). The Group's investment (50 per cent stake) in Colnbrook Industrial Limited Partnership was sold to APP in 2010 for net proceeds of £11.3 million, resulting in a loss on sale of £0.5 million.

7. REALISED AND UNREALISED Property (loss)/gain

8. Other investment income

9. AMOUNTS WRITTEN OFF ON Acquisitions

APP

Amounts written off on acquisition in the prior period relate to the APP acquisition (further details are included in note 6). The total cost of acquisition exceeded the fair value of net assets acquired by £13.8 million, primarily due to stamp duty costs. Given that the underlying assets are carried at fair value, this excess has been written off to the income statement. The Group acquired a management contract for £1.8 million as part of the APP acquisition, which is being treated as an intangible asset and amortised over 10 years, the length of the contract. The amortisation charge in the current year is £0.2 million (2010: £0.1million).

10. NET Finance costs

The interest capitalisation rates for 2011 were: UK 6.25 per cent (2010: 6.25 per cent) and in Continental Europe, rates ranging from 3.6 per cent to 4.2 per cent (2010: 1.7 per cent to 2.0 per cent). Interest is capitalised gross of tax relief.

11. Tax

11(i) - Tax on profit

11(ii) - Factors affecting tax charge for the year

The tax credit is lower than the standard rate of UK corporation tax. The differences are:

11iii) - Deferred tax provision

Movement in deferred tax was as follows:

The Group has recognised revenue tax losses of £21.9 million (2010: £20.0 million) available for offset against future profits. Further unrecognised tax losses of £369.6 million also exist at 31 December 2011 (2010: £496.0 million) of which £38.0 million (2010: £40.0 million) expires in 15 years.

11(iv) - Factors that may affect future tax charges

No deferred tax is recognised on the unremitted earnings of international subsidiaries and joint ventures. In the event of their remittance to the UK, no net UK tax is expected to be payable.

The standard rate of UK corporation tax is due to fall in stages to 23 per cent by 2014. This is unlikely to significantly impact the Group's tax charge.

12. Dividends

The Board recommends a final dividend for 2011 of 9.9 pence which will result in a distribution of £73.3 million. The total dividend paid and proposed per share in respect of the year ended 31 December 2011 is 14.8 pence (2010: 14.3 pence).

The final dividend for 2009 was partially satisfied by an issue of 7.1 million shares (£0.7 million ordinary share capital and £21.8 million share premium) under the scrip dividend scheme.

13. Earnings and net assets per share

The earnings per share calculations use the weighted average number of shares in issue during the year and the net assets per share calculations use the number of shares in issue at year end. Earnings per share calculations exclude 1.2 million (2010: 1.3 million) being the average number of shares held on trust for employee share schemes and net assets per share calculations exclude 1.1 million (2010: 1.3 million) being the actual number of shares held on trust for employee share schemes at year end.

13(i) - Earnings per ordinary share (EPS)

1 Details of adjustments are included in note 2.

13(ii) - Net assets per share (NAV)

Previously EPRA NAV was calculated by excluding foreign exchange and currency swaps as well as interest rate swaps. Following clarification of EPRA best practice recommendations, foreign exchange and currency swaps are no longer excluded as they act as economic hedges of euro denominated assets that are included in EPRA NAV. The comparative has been restated accordingly.

The tax effect of the fair value adjustment in respect of debt is no longer included as an adjustment to calculate EPRA triple net NAV as the Group does not believe that it will receive the economic benefit for that adjustment. The comparative has been restated accordingly.

14. Properties

14(i) - Investment properties