Final Results

Wichford P.L.C.

("Wichford" or the "Company")

Final Results

Wichford P.L.C., the property investment company, is pleased to announce its annual results for the year ended 30 September 2010.

Highlights

Trading Operations Profit after tax £9.6m (2009: £9.1m)

Total profit after tax £17.0m (2009: (£75.4m) loss)

Trading Operations earnings per share 0.90p (2009: 0.86p **)

Total earnings per share 1.60p (2009: (7.10)p loss**)

Recommended final dividend per share 0.33p (2009: 0.31p)

Total recommended dividend for the year 0.65p (2009: 0.61p)

Total Portfolio at Market Values £573.5m (2009: £526.9m)

Net Assets £59.0m (2009: £47.4m)

Net asset value per share 5.56p (2009: 4.49p ***)

EPRA net assets per share 8.67p (2009: 7.66p ****)

Comparative notes have been adjusted to reflect the rights issue of shares in September 2009.

 ** See Note 9 for details of the calculation of earnings per share

 *** See note 10 for details of the calculation of net asset value per share

**** See note 23 for the calculation of EPRA net asset value per share

Other Highlights

All three UK debt facilities totalling £360.3m extended during the period

VBG1 debt restructuring successfully concluded

Weighted Average Unexpired Lease Term 9.1 years (2009: 8.4 years)

Indexation 63% (2009: 61%)

Occupancy rate 96% (2009: 99%)

Philippe de Nicolay, Chairman of Wichford, commented today:

"I am pleased with the real and significant progress your Company has made. We set ourselves a number of targets at the time of the Rights Issue last year, all of which have been achieved or in some cases bettered. With the Government's austerity programme we now have a new set of challenges which we are focussed upon. Shareholders will be aware of the approach that the Board has received from the Company's largest shareholder reported in our recent announcement. We continue to examine this proposal alongside the strategic review of your business that has already been initiated."

For further details, please contact, 

Notes to editors

Wichford P.L.C. (UK Listed: WICH) is a property investment company, with a portfolio focused on investment property occupied principally by Central and State Government bodies. Over three quarters of the portfolio comprises public sector rented properties in the UK with the remainder in Germany and the Netherlands.

Chairman's Statement

I am pleased to report that your Company has met the challenging targets set out at the time of the Rights Issue in September 2009. The extension of our principal UK debt facilities has been secured, the VBG1 facility has been extended, a covenant waiver has been agreed on VBG2 and overhead costs have been reduced. This has all been achieved in a relatively short space of time and places the Company in a stronger position to meet the challenges facing the property market and public sector.

The financial results reflect a pleasing return to profitability supported by strong earnings from Trading Operations and revaluation gains. Trading Operations earnings per share of 0.90p reflects a 4.7% increase on last year. On-going administration costs have been tightly controlled and interest expense has been reduced through the successful extension and restructuring of facilities at prevailing low interest rates. EPRA net asset value per share increased 13.2% to 8.67p. Headline net assets continue to reflect the significant negative fair value of interest rate swaps and the consolidation of the VBG negative net asset value position, further details of which are provided in the Financial Review.

At a property level, capital values in the UK Portfolio benefited from renewed investor demand for secure income yielding assets, particularly in the first half of the year. However, the investment market for Government occupied assets has become increasingly two-tiered with the dual impact of a lack of funding for short-term leases and more recently the UK Government's Comprehensive Spending Review ("CSR") impacting the market for properties subject to shorter lease terms.

The reduction in Government departmental budgets presents both challenges and opportunities for the property sector the impact of which will only be fully known in the medium term. We are responding to a changing market by revisiting our investment policy to provide for greater flexibility in the way we invest and manage existing assets. Further details are contained in the Business Review.

Strategic Review

As noted above, the Company has made substantial progress in 2010, securing its immediate funding position. The Board has commenced a review of Wichford's strategic options post the year end. This includes addressing the longer term financing position of the Company and, in particular, the October 2012 maturities of the Delta and Gamma facilities which represent a significant proportion of the Company's existing funding arrangements.

Rothschild have been appointed to assist in this review, which includes assessing interest expressed by Redefine International plc ("Redefine") in relation to a potential combination of Wichford and Redefine. As announced in November 2010, conversations are at an early stage and there can be no certainty that any transaction between Wichford and Redefine will be forthcoming. Redefine is Wichford's largest shareholder, holding 21.73% of its shares.

This expression of interest by Redefine has placed the Company in a takeover period, as defined by the Takeover Code. This year's report therefore contains additional reporting requirements of the Takeover Panel.

The Company will keep shareholders advised of progress with regard to the strategic review and in connection with the interest expressed by Redefine. The next scheduled reporting event will be the Company's AGM in January 2011.

Board & Management

Mark Sheardown joined the Board in January bringing with him over 30 years of experience in property development and investment. Mark has enhanced the Board's direct property expertise and has already made a significant contribution to the Company's investment strategy. Mark replaced Hugh Ward who resigned at the Company's AGM in January 2010 after giving years of valued service to Wichford.

Wolf Cesman announced his retirement from the Board in November. On behalf of the Board, I would like to take the opportunity of thanking Wolf for his significant contribution to the Company.

Dividend

The directors have resolved to recommend the payment of a final dividend of 0.33 pence per share. This reflects an increase of 3.1% on the interim dividend of 0.32 pence paid in June 2010. The total dividend proposed for the year of 0.65 pence per share reflects an increase of 6.6% on last year's figure and is covered 1.4 times by current earnings per share from Trading Operations.

Outlook

This year has seen a recovery in capital values as risk appetite and capital returned to the property sector. A large part of the recovery has however focussed on Central London where forecast supply and demand imbalances are expected to drive rental growth, particularly for prime property.

The regional city office market continues to see excess supply. However, the absence of new development and the potential for renewed take-up from the private sector should in time improve the strength of regionally dominant centres as the impact of a sustained economic recovery filters into regional cities.

We will continue to review the contribution of the Continental European Portfolio to the business, focussing on prospects for future returns from each of the assets and the likely capital requirements to meet future refinancing requirements.

In order to meet the challenges facing certain regional office markets, and in particular the public sector estate, we have set ourselves the following priorities for the coming year:

·; Secure a long term sustainable financing structure;

·; Protect occupancy and rental income;

·; Dispose of underperforming assets while investing for growth;

·; Reposition assets with better alternative uses; and

·; Seek opportunities to further rationalise the Group's holdings in Continental Europe

I look forward to reporting on progress against these priorities during the coming year.

Philippe de Nicolay

Chairman

Business Review

The Group's return to profitability reflected continued strong underlying earnings from Trading Operations and revaluation gains following an improved investment market, particularly for longer term secure income yielding assets.

Overall, net asset value per share (both on an EPRA and IFRS basis) and earnings per share (both in total and that from Trading Operations) were higher than 2009. The priorities surrounding near term facility maturities were successfully delivered which, together with investments completed during the year and overhead cost reduction initiatives contributed to a successful year.

An increase in the vacancy from less than 1.0% to 3.7% rate was anticipated and will result in additional holding costs while asset management initiatives for these properties are developed. A planning application for Lyon House, Harrow, which reflects 2.6% of the existing vacancy, will be submitted in the first half of 2011.

Strategic Priorities for 2009/2010

A number of targets were set out at the time of the Rights Issue and have been the priorities for the 2009/10 financial year. In all cases these targets have been met or exceeded, most notably the extension of four debt facilities totalling £418.0m.

Note: 1) See explanatory table in Financial Review

Our Market

Economic overview

Economic growth during 2010 has been stronger than expected, with the most recent GDP figures showing growth ahead of consensus. However, the possibility of a protracted weak economic recovery cannot be ruled out. A sustained period of fiscal tightening and a soft labour market are likely to result in below trend economic growth for an extended period.

The expectation of lower growth and lower inflation is reflected in historically low interest rates and bond yields which should provide some level of support to capital values. The timing and return of interest rates to more conventional levels needs to be monitored closely and will have a material effect on the market's investment decisions. The Company has employed the current low interest rate environment to good effect in the extension and restructuring of two debt facilities.

Our Business

Wichford's predominantly Central and State Government tenants provide the Company with a secure rental income stream and a historically low vacancy rate. Many of the Company's UK tenants provide "core" government functions with associated public interfaces such as Job Centres, Courts and HMRC functions, many of which have local occupation obligations. The Group's strategy to incorporate inflation related rental increases into leases has resulted in 63% of rental income being linked to either CPI, RPI or in a small number of cases fixed increases.

Key Performance Indicators ("KPIs")

In order to drive cash flow growth and protect income security Wichford uses the following KPIs to monitor performance:

·; Occupancy - 96% (2009: 99%)

·; WAULT - 9.1 years (2009: 8.4 years)

·; Indexation - 63% (2009: 61%)

Both the WAULT and indexation measures improved during the year following the acquisition of long-dated leases and the removal of three break clauses (see Asset Management). All three DSA Driving Centres acquired during the year are subject to UK RPI indexation. Occupancy reduced following lease expiries at Lyon House, Harrow and St Anne House, Croydon. Initiatives for these properties, including the potential for redevelopment of Lyon House are underway.

Occupational markets

Occupational demand in regional office markets remains subdued with the impact of the Government's CSR expected to negatively impact markets with an historic reliance on the public sector. Higher vacancy levels outside of Central London are expected to restrain future rental growth although performance across regional markets is anticipated to vary significantly. Dominant regional centres are expected to outperform and follow Central London's recovery as a result of a stronger more resilient private sector with a lower reliance on the public sector.

The lack of new space under construction in regional markets is one positive aspect that should serve to limit any rise in vacancy rates. Speculative development in regional locations is also expected to be restricted by current rental levels and the availability of funding.

The UK Government's Comprehensive Spending Review

The CSR announced in October 2010 is the biggest programme of spending reductions in the UK for decades as the Government aims to reduce the public deficit. On average, Government departments are expected to experience budget cuts of 19% over the next four years.

The announcement identified certain high level initiatives in respect of the Government's property estate which, together with the establishment of a Government Property Unit, aims to reduce the overall estate and drive efficiency savings. The proposed establishment of two trial property vehicles in London and Bristol will centralise the control of the Government estate in these areas, co-ordinating requirements between departments and ensuring a more strategic approach to the management of occupational requirements.

The Cabinet Office's Efficiency and Reform Group also announced the requirement for departments to obtain approval for all new leases and lease renewals and extensions. Business cases to support any new lease commitments are expected to be required until 2015.

While these measures will result in an overall reduction in demand from Government occupiers, Wichford's portfolio has a number of defensive characteristics and the potential to take advantage of changes in public sector property requirements.

·; The Group's UK Portfolio is predominately occupied by Central Government bodies, many of which are core services and/or public facing.

·; The UK Portfolio has limited exposure to quangos and none have been identified for closure.

·; A significant portion of the UK portfolio (47.7% by UK rent roll) falls under the Trillium PRIME and Mapeley contracts, neither of which are directly subject to the 'moratorium' on new or extended leases

·; No more than 3.3% of the Company's total rent roll has a break or expiry in any one year for the next three years.

The CSR does however require an increasingly critical review of the long term demand for certain assets. Improving the overall quality of the Company's portfolio will be targeted through selective acquisitions and sales and investment into well located stock.

Adapting to Change

As the Government looks to rationalise and achieve efficiency savings across its estate, the Company will continuously review its investment criteria and portfolio in response to these changes.

A revised Investment Policy will be proposed at the forthcoming AGM which will provide a greater scope for redevelopment and asset management of the existing portfolio. The overall focus on secure income yielding assets from predominantly Central and State Government occupiers or tenants will be unchanged but with greater flexibility to ensure profitable alternative uses or redevelopment can be pursued where the asset no longer meets the occupational requirement.

Future investment will also look to meet the targets and challenges facing the Government sector. Co-location of departments, shared services, sustainability and the efficient use of space and energy are all areas that will drive future public sector occupation and therefore Wichford's investment strategy.

Portfolio

The portfolio has seen changes to support the extension of the Company's debt facilities, take advantage of opportunities in the investment market and to reduce exposure to assets with limited growth potential. The number of properties in the portfolio increased to 81 (September 2009: 75) following 9 acquisitions and 3 sales.

Note: Initial yields and rents for the Continental European portfolio reflect gross rents before deductions for irrecoverable costs.

Valuation

The valuation of the Group's portfolio was £573.5m as at 30 September 2010 (September 2009: £526.9m). The UK Portfolio increased in value by £14.8m or 4.0% on a like-for-like basis, driven largely by improved values from longer leases on Core Properties. The Continental European Portfolio decreased 3.3% on a like-for-like basis in local currency terms; however the relative weakness of the Euro during the period resulted in a 9.1% decrease in Sterling terms.

Overall, properties held throughout the year increased £1.1m or 0.2%, although this was impacted by a 6.1% depreciation of the Euro against Sterling.

Valuation movements in the second half of the year were broadly unchanged in the UK. Core properties were supported by investor demand and transactional evidence and reflected a marginal 0.4% like-for-like uplift whereas Active Properties declined 0.8%; largely a reflection of the vacancies at Lyon House, Harrow and St Anne House, Croydon. Values of the Continental European Portfolio declined 2.6% in local currency terms; a result of decreasing unexpired lease terms coupled with subdued occupational and investment markets.

Investments made during the year increased in value over their purchase price (before capitalised acquisition costs) by £1.1m or 2.1%. Acquisitions were predominantly focussed on long-dated government leases which proved to be an exceptionally competitive sector of the investment market. Securing these specific properties, largely through off-market transactions, was critical to ensuring the extension of the Group's two key UK borrowing facilities.

Notes: 1) the like-for-like analysis re-classifies properties in prior periods as Core or Active dependent on their current classification 2) The movement in new acquisitions reflects an increase in value against the purchase price before transaction costs from their date of acquisition 3) Like-for-like movements exclude the movement on capitalised items on the consolidated statement of financial position.

Despite strong income returns, capital values for the UK regional office market have lagged as the recovery has been led by investment activity in Central London and the expectation of supply and demand imbalances driving rental growth in the Capital.

In addition, the investment market for Government occupied property has differentiated strongly between short and long-dated leases; initially due to a lack of bank funding for short-dated leases, and more recently due to concerns over reduced public sector demand for offices and the impact of the CSR. This is reflected in the valuations of the Core and Active properties at net initial yields of 6.93% and 8.30% respectively.

Measuring Performance

The Company joined the IPD Portfolio Analysis Service in 2010 to provide independent measurement of underlying property performance against selected benchmarks.

The UK and Continental European Portfolio's total return for all benchmarked assets as measured by IPD was 11.5% and (-0.5%) respectively. By comparison the IPD benchmark (UK monthly and quarterly valued offices) produced a total return of 22.1% over the same period to 30 September 2010.

The stronger benchmark performance was largely attributable to the Central London sector of the benchmark (to which Wichford has no exposure) which produced a total return of 28.9% for the same period. The other sector components of the benchmark, Rest of South East and Rest of UK, produced total returns of 14.5% and 14.9% respectively.

Asset Management

Lettings & Lease Extensions

A flexible leasing policy has resulted in a number of successful lettings and lease extensions in a challenging occupier market. Vacancy increased across the portfolio to 3.7% (September 2010: less than 1%), largely attributable to the anticipated non-renewal of leases at Lyon House, Harrow and St Anne House, Croydon. Vacancy excluding Lyon House stands at 1.0% - planning for the re-development of Lyon House is underway.

The following lettings and lease extensions were achieved during the period:

·; Bristol, Crescent Centre

- A direct lease was completed with a previous sub-tenant for 2,935 sqft of space.

- Negotiations are on-going with an existing tenant to take 5,865 sqft in April 2011 - replacing the Probate Registry who are due to vacate at the end of their lease term. The terms being agreed are for a 10 year term with breaks at years 3 and 5 at a commencing rent of £11.50 per sqft.

- Negotiations for lease extensions on 11,551 sqft are underway in order to make various departmental lease term co-terminus in line with the asset management opportunities identified on acquisition.

·; Hartlepool, Ward Jackson House - lease extension until 2023 with a break in 2018.

·; Billingham, Theatre Buildings - lease extension until 2023 with a break in 2018.

·; Birmingham, Aqueous 2 - removal of break clause providing an unexpired term to 2015.

·; Plymouth, Centre Court - new lease completed to Plymouth Teaching Primary Care Trust for a six year term until February 2016 with a break option in 2013.

·; Plymouth, West Point - 2,269 sqft along with three car spaces have been assigned from Principle Leasehold Properties to the Secretary of State for Communities and Local Government.

·; London, Newington Causeway - heads of terms have been agreed with Trillium PRIME for a new lease on the ground, first and second floors until 2023 with a break option in 2018, at a commencing rent of £315,000 per annum.

Indexed-linked Rent Reviews

Inflation in the UK has consistently remained above the Bank of England's 2.0% target benefiting rent reviews subject to CPI or RPI. Ten rent reviews were agreed or settled during the year providing an annualised uplift of £718,544.

Expiry profile

Wichford's near term UK expiry profile reflects a relatively small exposure to lease break options and expiries over the next three years. No more than 3.3% of the Company's total rent roll has a break or expiry in any one year for the next three years. In addition, £0.4m of lease breaks or expiries in 2011 have either passed their notice period date or are in lawyer's hands for renewal.

Low average rental levels of £11.85 psf continue to provide value for money in an environment where budgetary considerations are at the forefront of decision making. Despite the challenges posed from the Government's current stance on lease renewals, 90,296 sqft equating to £1.3m of rent p.a. has been renewed or extended during the year.

Development opportunities

A planning application is underway for Lyon House, Harrow. A residential-led mixed use scheme in the order of 220,000 sqft is being proposed which includes the potential acquisition and consolidation of the neighbouring site. The redevelopment represents an exciting opportunity to enhance value from a well located site which lends itself to a higher alternative use value.

An amendment to the existing Investment Policy is being proposed at the Company's AGM in January 2011 to provide greater flexibility in the way the Wichford invests and manages existing assets. The ability to undertake significant redevelopment projects, utilising joint venture partners where appropriate, has become increasingly important to ensure Wichford maximises value from its existing portfolio.

Acquisitions

Nine acquisitions were made during the year totalling £58.2m. Investment activity focussed particularly on properties with long-dated leases; £29.7m was invested in six properties with unexpired terms in excess of 14 years. In terms of the amount of capital required to meet the debt extension hurdle on the key UK debt facilities, this proved to be a successful investment strategy freeing up cash for additional investment.

Summary of 2009/10 Acquisitions

Sales

The sale of St Cloud in September 2010 resulted in a successful exit from France, simplifying the portfolio and corporate structure. The sales price of €6.13m was 3.1% above the March 2010 valuation in local currency terms.

Washington and Redditch were sold in the second half of the year. In both cases, uncertain longer term occupational demand for the properties supported the recycling of capital into new acquisitions. Both Washington and Redditch were sold at or above their last valuation.

The loss on sale in profit or loss reflects other capitalised costs, currency translation costs and sales costs associated with these investments.

Summary of 2009/2010 Sales

Continental European Portfolio

Despite a negative net asset value position on the VBG1 and VBG2 portfolios (see Financial Review), these assets continue to produce positive earnings for the Group, particularly after the recent restructuring of the VBG1 facility. However, the Continental European Portfolio will continue to be reviewed in light of its current and potential future contribution to Group profits, opportunities to recycle capital back into the UK market (as evidenced by the recent St Cloud sale) and the potential capital requirements associated with refinancing the VBG and other European funding facilities. The non-recourse nature of the Group's Continental European investments provides the Company with a wide range of options at its disposal.

Risks & Opportunities

The Group is subject to a variety of risk factors arising from the overall economic environment, supply and demand within the real estate investment and capital markets, complex regulatory and legislative environments, financial risks as well as the Group's own properties, tenants and suppliers.

The principal risks to the Group are managed and controlled in the following way:

Further commentary on Financial Risk Management is contained in note 17.

Looking Forward - Strategic Priorities 2010/2011

Following a successful year in which the immediate funding requirements and debt maturities were resolved, the Company is now on a considerably stronger footing to address the issue of a long-term sustainable financing structure as well as the challenges posed by the UK budget deficit and its anticipated impact on the Government's occupational requirements.

Strategic Review

The success in extending all three of the Company's UK debt facilities has provided security over the immediate funding position however, given the Group's gross loan to value ratio of 90% (UK 82%), there is a clear requirement to address the longer term financial structure of the Company.

The Board has commenced a review of Wichford's strategic options including addressing the longer term financing position of the Company, in particular the October 2012 maturities of the Delta and Gamma facilities.

Financial Review

The Group's financial results benefited from a stronger investment market in the UK and strong underlying earnings from Trading Operations. Total profits and earnings per share from Trading Operations were up year on year.

Income Statement and earnings per share

Basic earnings per share from Trading Operations were 0.90 pence (2009: 0.86 pence), up £0.5m or 4.7% showing resilient underlying earnings strength.

A £10.1m revaluation gain (2009: loss of £80.7m) on investment properties was driven by a stronger investment market in the UK, particularly in the first half of the year. Revaluation gains supported a profit after tax of £17.0m (2009: loss of £75.4m). Basic earnings per share for the year were 1.60 pence compared to a loss of 7.10p in 2009.

Revenue

Revenue for the year was marginally lower at £44.3m (2009: £44.8m), a reflection of lower occupancy ratios. Lease expiries at Lyon House, Harrow and St Anne House, Croydon in the second half of the year largely offset income from new acquisitions.

Administrative expenses

A number of actions were taken throughout the year to reduce operating costs. These changes have benefited the period under review, however the full impact is expected in the next financial year.

All of the Company's major service contracts were re-negotiated or re-tendered. New or amended contracts have been agreed with the Company's administrator and valuers. In addition, and as announced during the year, KPMG have been engaged as the Independent Auditor following a competitive tender process.

Allied to this the Company has converted its Isle of Man subsidiaries to being registered under the Companies Act 2006 which will reduce the operating costs of each Isle of Man registered subsidiary going forward.

Administrative expenses included an accrual of £0.4m for performance fees to the Investment Adviser. This grant-date fair value of equity share-based payment awards granted to the Investment Adviser is recognised as an expense, with the corresponding increase in equity, over the period the Investment Adviser becomes entitled to the awards. This amount has not been paid to the Investment Adviser as any performance fee will be satisfied at the end of the three year assessment period by the issuing of new shares in the Company. Due to the potential number of shares that could be issued under the performance fee arrangements the Company also shows diluted earnings per share. The effect is to reduce the earnings per share from 1.60 pence to 1.58 pence.

Net finance costs

Finance costs under Trading Operations were down year on year by £1.0 million following the extension of the Zeta and VBG1 facilities at lower prevailing interest rates.

A new interest rate swap was taken out at the time of the Zeta facility extension to benefit from a lower interest rate over the extended maturity period. The new effective fixed rate (including margin) is 3.88% (previously 5.18%). See Financing and Capital for further details.

The closing out of the old Zeta interest rate swaps has led to them being discontinued prospectively. £0.7 million of the cumulative balance in the cash flow hedge reserve was reclassified from other comprehensive income to the profit or loss under Other Items. This is a non-cash charge.

The VBG1 facility has been restructured with interest costs now based on three month Euribor plus a margin of 1.1%. Total interest costs are capped at 3.60% through the purchase of interest rate caps with a strike rate of 2.50%. See Financing and Capital for further details.

The new VBG1 hedging instruments have not been designated as cash flow hedges and changes in fair values will be reflected in profit and loss rather than equity. The Company shows such changes in Other Items as a finance cost.

Taxation

The overall positive tax charge for the year includes a £0.4m release of prior year deferred tax provisions. The overall tax charge accrued for current tax for the year is £0.2 million.

The Company also notes the Exposure Draft ("ED") published by the international Accounting Standards Board on 12 September 2010 entitled "Deferred Tax: Recovery of Underlying Assets" (proposed amendments to IAS 12) as this proposes a change to the way deferred tax is looked at for investment properties. Its main proposal is to assume that the cost of an investment property is recovered by its sale unless this is rebutted by the owners of the property. The Directors estimate that, if this ED was implemented now, the deferred tax liability of the Group would fall from £1.1 million as shown in the consolidated statement of financial position to £0.2 million.

Dividend

The Directors are proposing to pay a final dividend of 0.33 pence per share and a resolution for this will be put to the AGM in January 2011. This will bring the total proposed dividend related to the profits of the year to 0.65 pence per share (2009: 0.61p) - an increase of 6.6%.The dividend cover ratio for the year based on earnings from Trading Operations is 1.4 times.

Statement of Financial Position & Net asset Value

At 30 September 2010, Group net assets were £59.0 million, up from £47.4 million at 30 September 2009. The key factors behind the 1.1 pence per share change were:

·; Revaluation gains on investment property of £10.1million;

·; Profit excluding revaluation gains of £6.9 million;

·; Dividend payments of £6.7 million; and

·; A loss on foreign currency movements of £0.6 million

Net asset value per share increased 23.8%, to 5.56 pence (2009: 4.49 pence). EPRA net asset value per share which excludes the fair value of derivatives and deferred tax was 8.67 pence (2009: 7.66 pence).

The current negative fair value of derivatives of (£32.1) million or (3.02) pence per share reflects the historically low interest rate environment and is the principal factor behind the substantial variance between IFRS and EPRA net asset value measures. The (£32.1) million currently incorporated in net assets will unwind as each facility and its associated interest rate swaps nears maturity. (£24.2) million relates to the Delta and Gamma interest rate swaps which mature together with the facilities in October 2012 - the fair value will reduce to zero from now to maturity.

As noted in the Business Review, current Group net assets consolidates the negative net asset value of the VBG portfolio. As at 30 September 2010, the total of the investment property values, borrowings secured against these assets, derivative fair values and cash withheld for amortisation reflected negative £21.8m or 2.05 pence per share (excluding any trade receivables, trade payables or any other balances associated with these investments). Despite the negative contribution to net assets, the VBG portfolio continues to contribute positively to earnings from Trading Operations. The non-recourse nature of these investments provides the Company with a wide range options in assessing the future strategy for these assets.

Total borrowings of £514.9 million (2009: £528.9 million) are lower following amortisation of £3.8 million on the Hague, VBG1 and VBG2 facilities with the balance of the movement due to foreign exchange movements.

Cashflow

As at 30 September 2010 the Group had a total of £41.7 million (2009: £100.0 million) of cash and equivalents of which all but £0.8 million was available to the Group after the payment of interest on the borrowing facilities in October 2010.

The Groups' acquired nine new properties for a total cost of £58.2 million and disposed of three properties generating £8.2 million in receipts with the proceeds of the Washington sale not received until after the year end.

Within operating activities, cash generated from the profit of the Group was £12.1 million after the payment of finance costs. In addition to this, the Group paid £0.8 million in tax and reduced trade and other payables by £8.8 million. A major component of the reduction in trade and other payables was the change from quarterly to monthly rental payments on 26 properties.

Financing and Capital

The focus for the year has been on the extension of debt maturities. The successful extension of all three of the UK facilities, totalling £360.3m, as well as the positive restructuring of the VBG1 facility has exceeded the targets set out at the time of the Rights Issue in September 2009.

Both the Delta and Gamma facilities were extended to October 2012 following the successful acquisition and substitution of six long-dated leases into these facilities. An investment of £29.7m was made in connection with these acquisitions specifically targeted to meet the extension hurdle of 7.5 years from October 2012.

The early extension of the Zeta facility was successfully negotiated in July 2010. The facility has been extended for a further two year period until May 2013 with an unchanged margin of 1.15%. Interest rate hedging for the facility was extended to the new maturity date at a new effective fixed rate of 3.88% (previously 5.18%).

The VBG1 facility was successfully restructured extending the term to January 2012 with the loan to value covenant waived for the extended period. Interest rate payments are subject to three month Euribor, with the maximum effective interest rate capped at 3.60% (including margin) through the purchase of interest rate caps.

The VBG1 restructuring has resulted in a substantial reduction in interest payments in comparison to the previous effective fixed rate of 4.27%. The restructuring provides for releases to the Group of up to €219,000 per quarter. Amortisation remains unchanged at 1.25% with all surplus funds to be applied to additional amortisation at the Loan Servicer's discretion.

The Company continues to hold discussions over options to extend or restructure the VBG2 facility maturing in April 2011. In the interim a waiver of the LTV covenant has been granted.

The weighted average cost of debt (including VBG1 taken at the year end three month Euribor rate) is 5.00% (September 2009: 5.34%)

Notes: 1) ICR equivalent covenant waived following increased funding charges 2) Previous LTV covenant of 85% waived for extended maturity period 3) Previous LTV covenant of 86% waived.

Hedging

The Group uses interest rate swaps and interest rate caps to limit its exposure to interest rate movements.

For facilities to which interest rate swaps are attached the interest rates are fixed for the duration of the facility. This is the case for all of the Group's facilities except VBG1. For VBG1 the Group has interest rate caps which limit the exposure to upward movements of interest rates while allowing the Group to take advantage of falls in interest rates. These interest rate caps are not designated as cash flow hedges and any changes in their fair value will be taken to profit and loss rather than through equity.

During the year the Group cancelled the interest rate swaps associated with the Zeta facility and entered into a new one to take advantage of lower interest rates to the end of the extended maturity period. The cost of cancelling the existing interest rate swaps was incorporated in the new swap rate which will result in movements in fair value being attributed to profit and loss rather than equity as hedge accounting will not be applied prospectively.

Exchange rates

The average Euro to Sterling exchange rate for the year to 30 September was 1.15088 (2009: 1.14662).

The closing Euro to Sterling exchange rate as 30 September 2009 was 1.16170 (2009: 1.09120).

10 Largest Investments

Statement of Directors Responsibilities

The Directors are responsible for preparing the Directors' Report and the Financial Statements in accordance with applicable law and regulations.

Companies (Isle of Man) Acts 1931 to 2004 requires the Directors to prepare Group and parent Company financial statements for each financial year. Under the Listing Rules issued by the London Stock Exchange, the Directors are required to prepare the Group financial statements in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU and have elected to prepare the parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice and as applied in accordance with the Companies (Isle of Man) Acts 1931 to 2004.

The Group and parent Company financial statements are required by law, IFRS as adopted by the EU and United Kingdom Generally Accepted Accounting Practice to present fairly the financial position and performance of the Group and Company respectively. The Companies (Isle of Man) Acts 1931 to 2004 provide in relation to such financial statements that references in the relevant part of the law to financial statements giving a true and fair view are references to their achieving a fair presentation.

In preparing each of the Group and parent Company financial statements, the Directors are required to:

·; select suitable accounting policies and then apply them consistently;

·; make judgements and estimates that are reasonable and prudent;

·; state that the financial statements comply with, in the case of the Group, IFRSs as adopted by the EU and, in the case of the parent Company, with United Kingdom Generally Accepted Accounting Practice as applied in accordance with the Companies (Isle of Man) Acts 1931 to 2004; and

·; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent Company will continue in business.

Under applicable law and the requirements of the Listing Rules issued by the London Stock Exchange, the Directors are also responsible for preparing a Directors' Report and reports relating to Directors' remuneration and corporate governance that comply with that law and those Rules. In particular, in accordance with the Disclosure and Transparency Rules ("the DTR"), the Directors are required to include in their report a fair review of the business and a description of the principal risks and uncertainties facing the Group and the Company and a responsibility statement relating to these and other matters, included below.

The Directors are responsible for keeping proper books of account that disclose with reasonable accuracy at any time the financial position of the Group and parent Company and enable them to ensure that the financial statements comply with the Companies (Isle of Man) Acts 1931 to 2004 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

RESPONSIBILITY STATEMENT, IN ACCORDANCE WITH THE TRANSPARENCY REGULATIONS

Each of the Directors confirms that to the best of each person's knowledge and belief;

·; the Group financial statements, prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities and financial position of the Group at 30 September 2010 and its profits of the year then ended; and

·; the parent Company financial statements, prepared in accordance with United Kingdom Generally Accepted Accounting Practice and as applied in accordance with the Companies (Isle of Man) Acts 1931 to 2004, give a true and fair view of the assets, liabilities and financial position of the parent Company at 30 September 2010; and

·; the Business Review includes a fair review of the development and performance of the business and the position of the Group and parent Company, together with a description of the principal risks and uncertainties that they face.

Consolidated Statement of Comprehensive Income

for the year ended 30 September 2010

All activities are continuing.

Consolidated Statement of Financial Position

As at 30 September 2010

Consolidated Statement of Changes In Equity

for the year ended 30 September 2010

The cumulative foreign exchange difference included in the Retained earnings reserve is a loss of £6.8 million (September 2009: a loss of £10.5 million). In the cash flow hedges reserve the cumulative foreign exchange difference is a loss of £0.2 million (September 2009: a loss of £0.5 million).

The amount of the Currency translation reserve taken to the profit or loss was £0.8 million (September 2009: nil).

Consolidated Cash Flow Statement

for the year ended 30 September 2010

Notes to the Financial Statements

1. Basis of Preparation

The financial information in this report is abridged and does not constitute the Group's full Financial Statements for the years ended 30 September 2010 and 30 September 2009, and has been prepared under International Financial Reporting Standards (IFRS).

Full Financial Statements for the year ended 30 September 2009, which were prepared under IFRS, received an unqualified auditors' report and did not contain a statement under Section 15 (4)(b) or (6) of the Isle of Man Companies Act 1982, have been filed in the Isle of Man Registrar of Companies.

Financial Statements for the year ended 30 September 2010 will be presented to the Members at the forthcoming Annual General Meeting.

Due to the Company being in an offer period as announced on 15 November 2010 the Company is required to make additional disclosures under Rule 29 of the Takeover Code. These disclosures primarily relate to investment properties and taxation and have been included in notes 11 and 8 respectively.

Basis of Measurement

The financial statements are prepared on the historical cost basis, except for investment property, derivative financial instruments and share based payment transactions that are measured at fair value.

Functional Currency

The Group's presentation currency is pounds Sterling which represents the functional currency of the Company and a number of key subsidiaries. All financial information is presented in millions of pounds sterling (£m), rounded to the nearest million unless otherwise indicated.

Going Concern

These financial statements have been prepared on a going concern basis as the Directors consider this the most appropriate basis. After considering the relevant factors, the Directors have a reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future.

The principal issues the Directors considered in their enquiries concerned the future maturity of the VBG2 facility in April 2011 together and the strategic review announced in November 2010. The strategic review will include as assessment of strategic options, including the addressing the longer term financing position of the Company.

The Directors are confident that the VBG2 facility will not be required to be repaid at maturity following on-going but non-concluded negotiations with the loan servicer. The Directors note that this facility is ring-fenced with no recourse to the other assets pledged to other Group facilities. They also note that the VBG1 facility has already been successfully extended after negotiations with the same loan servicer, although there can be no certainty that a similar or any agreement is reached on the extension of the VBG2 facility.

Changes in Accounting Policies

Except as described below, the accounting policies have been consistently applied to all periods presented.

(i) Presentation of financial statements

The Group applies revised IAS 1 Presentation of Financial Statements (2007), which became effective for the years beginning on or after 1 January 2009. As a result the Group presents a new primary statement called the consolidated statement of changes in equity for all owner changes in equity whereas all non-owner changes in equity are presented in the new consolidated statement of comprehensive income. This presentation has been applied in the consolidated financial statements as of and for the year ended 30 September 2010.

Comparative information has been re-presented so that it is in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.

(ii) Determination and presentation of operating segments

As at 1 October 2009 the Group determines and presents operating segments based on the information provided internally to the Board of Directors. This change in accounting policy is due to the adoption of IFRS 8 Operating Segments. Previously operating segments were determined and presented in accordance with IAS 14 Segment Reporting. The new accounting policy in respect of segment operating disclosures is presented as follows:

Comparative segment information has been re-presented in conformity with the transitional requirements of IFRS 8. Since the change in accounting policy only impacts presentation and disclosure aspects, there is no impact on earnings per share.

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to the transactions with any of the Group's other components. An operating segment's operating results are reviewed regularly by the Chief Operating Decision Maker (defined to be the Board of Directors) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

(iii) Improving disclosures about financial instruments

On 5 March 2009, the International Accounting Standards Board (IASB) issued IFRS 7 Improving Disclosures about Financial Instruments: Disclosures. The amended IFRS 7 requires that for financial instruments measured at fair value on the consolidated statement of financial position, fair value measurements are disclosed by the source of inputs, using a three level hierarchy. For detail on this requirement see note 17 "Financial risk management objectives and policies".

2. Significant Accounting Policies

A summary of the principal accounting policies is set out below.

Basis of Consolidation

The financial statements comprise the historical financial information of Wichford P.L.C. and its subsidiaries ("the Group") for the year ended 30 September 2010. Wichford P.L.C. is a public listed company in the London Stock Exchange ("LSE") and incorporated in the Isle of Man. Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred from the Group. Control comprises the power to govern the financial and operating policies of the investee so as to obtain benefit from its activities and is achieved through direct or indirect ownership of voting rights; currently exercisable or convertible potential voting rights; or by way of contractual agreement.

The financial statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies. Intragroup balances, and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Revenue

Revenue recognised through profit or loss in the consolidated statement of comprehensive income represents property rental income and interest income, net of VAT and other sales-related taxes, as follows:

Rental Income Receivable Under Operating Leases

Rental income receivable under operating leases is recognised on a straight-line basis over the term of the lease, except for any contingent rental income which is recognised when it arises.

Incentives for lessees to enter into lease agreements are spread evenly over the non-cancellable period of the lease, even if the payments are not made on such a basis.

Premiums received to terminate leases are recognised through profit or loss when they arise.

The lease term is the non-cancellable period of the lease together with any further term for which the tenant has the option to continue the lease, where, at the inception of the lease, the Directors are reasonably certain that the tenant will exercise that option.

Service Charges

Where the Group invoices service charges, these amounts are not recognised as income as the risks in relation to the provision of these goods and services are primarily borne by the Group's customers. Any servicing expenses suffered by the Group are included within administrative expenses.

Interest Income

Interest income is recognised as it accrues using the effective interest rate basis.

Insurance Premiums

Insurance premiums recharged to tenants are not reflected in either income or expense.

Property Acquisitions

Where properties are acquired through the acquisition of corporate interests the Directors have regard to the substance of the assets and activities of the acquired entity in determining whether the acquisition represents the acquisition of a business.

Where such acquisitions are not judged to be an acquisition of a business the transactions are accounted for as if the Group had acquired the underlying property directly. Accordingly, no goodwill arises, rather the cost of the corporate entity is allocated between the identifiable assets and liabilities of the entity based on their relative fair values at the acquisition date.

Otherwise corporate acquisitions are accounted for as business combinations.

Business Combinations and Goodwill

Business combinations, if any, are accounted for under IFRS 3 using the purchase method of accounting as there were no business combinations after the issuance of IFRS 3 "Business Combinations (2008)".

The cost of acquisition is the consideration given in exchange for the identifiable net assets. This consideration includes any cash paid plus the fair value at the date of exchange of assets given, liabilities incurred or assumed and equity instruments issued by the Group. The cost of acquisition also includes directly attributable costs.

The acquired net assets are initially recognised at fair value. Where the Group does not acquire 100 per cent ownership of the acquired company, a minority interest is recorded as the minority's proportion of the fair value of the acquired net assets. Any adjustment to the fair values is recognised within twelve months of the acquisition date.

Goodwill on acquisitions comprises the excess of the fair value of the consideration plus any associated costs for investments in subsidiaries over the fair value of the identifiable net assets acquired. Any goodwill and fair value adjustments are recorded as assets and liabilities of the acquired company for the purposes of consolidation and are recorded in the local currency of that company. The costs of integrating and reorganising acquired businesses are charged to the post-acquisition profit or loss.

Goodwill is carried at cost less accumulated impairment losses.

The Group's goodwill is reviewed at each reporting date, or more frequently if there is an indication that the goodwill is impaired, to determine whether events or changes in circumstances exist that indicate that their carrying amount may not be recoverable. If such an indication exists, the asset's recoverable amount is estimated. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. An impairment loss is recognised in the profit or loss for the amount by which the asset's carrying amount exceeds its recoverable amount.

Investment Property

Property held to earn rent or for capital appreciation, or both, is classified as investment property and recognised initially at cost, including directly attributable transaction costs.

Property held under leases for the same purpose is also classified as investment property, accounted for as held under a finance lease and initially recognised at the sum of any premium paid on acquisition and the present value of any further minimum lease payments. The corresponding liability to the superior leaseholder is included in the consolidated statement of financial position as a finance lease obligation.

Thereafter investment property is measured at fair value, which reflects market conditions at the reporting date. For the purposes of the historical financial information, the assessed fair value is:

·; reduced by the carrying amount of any accrued income and expense resulting from the spreading of lease incentives and/or minimum lease payments; and

·; increased by the carrying amount of any liability to the superior leaseholder included in the consolidated statement of financial position as a finance lease obligation.

The annual valuations of investment property are based upon estimates and subjective judgements that may vary from the actual values and sales prices that may be realised by the Group upon ultimate disposal. The critical assumptions made relating to valuations have been disclosed in note 11 to the financial statements.

Gains or losses arising from changes in the fair value of investment property are included in the profit or loss in the year in which they arise. Profits or losses on the disposal of investment property are recognised at contract completion for the disposal.

Disposals of investment properties are recognised on completion and the profit or loss on disposal is calculated as the difference between the sale proceeds and the latest carrying value of the property after adding attributable costs of the disposal.

Non-current Assets Held for Sale

Investment property is transferred to non-current assets held for sale when it is expected that the carrying amount will be recovered principally through sale rather than from continuing use. On re-classification, investment property continues to be measured at fair value.

Finance Leases

Finance leases, which are the ground rents payable to the superior landlord on leasehold properties, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and the reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged through profit or loss as they arise.

Cash and Short-term Deposits

Cash and short-term deposits in the consolidated statement of financial position comprise cash at bank, short-term deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less.

For the purpose of presenting the "Consolidated cash flow statement", cash and cash equivalents consist of cash and short-term deposits as defined above.

Trade and Other Receivables

Trade and other receivables are recognised at their fair value on initial recognition and subsequently at amortised cost. A provision for impairment of trade receivables is established where there is objective evidence that the Group will not be able to collect all amounts due according to original terms of the receivables concerned. Where such a provision for impairment has been made then the fair value on initial recognition less the provision is the amortised cost.

Trade and Other Payables

Trade and other payables are recognised at fair value and subsequently measured at amortised cost.

Loans and Borrowings

Loans and borrowings are initially recognised at fair value less directly attributable transaction costs.

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement.

Borrowing costs are recognised through profit or loss using the effective interest rate method.

Derecognition of Financial Liabilities

A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and recognition of new liability at fair value, and the difference in the respective carrying amounts is recognised through profit or loss.

Derivative Financial Instruments

The Group holds derivative financial instruments, such as interest rate swaps, to hedge its interest rate risk exposure. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through the profit or loss.

On initial designation of the derivative as the hedging instrument, the Group formally documents the relationship between the hedging instrument and hedged item, including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an on-going basis, of whether the hedging instruments are expected to be "highly effective" in offsetting the changes in the cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80 - 125 percent. For the cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported profit or loss.

Derivatives are recognised initially at fair value, attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

Cash Flow Hedges

When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately through profit or loss.

If the hedging instrument no longer meets the criteria for hedge accounting, expires or sold, terminated or exercised, or designation is revoked, then the hedge accounting is discontinued prospectively. If the forecast transaction is no longer to occur, then the balance in the hedging reserve is reclassified from other comprehensive income to profit or loss.

Other Derivatives

When a derivative financial instrument is not designated in a hedge relationship that qualifies for hedge accounting, all changes in its fair value are recognised immediately through profit or loss.

Fair Values of Financial Instruments

The fair value of actively traded instruments is determined by reference to bid prices at the close of business on the reporting date. Where there is no active market, fair value is determined using valuation techniques. These include using recent arms-length market transactions; reference to the current market value of another instrument which is substantially the same and, discounted cash flow analysis and pricing models.

Share-based Payments

The grant-date fair value of equity share-based payment awards granted to the Investment Adviser is recognised as an expense, with the corresponding increase in equity, over the period that the Investment Adviser become entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related non market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related non market condition performance conditions at the vesting date.

Current Taxation

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the reporting date.

Deferred Taxation

Deferred income tax is provided using the liability method on all temporary differences at the reporting period end date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes with the following exceptions:

·; where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss;

·; in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and

·; deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which deductible temporary differences, carried forward tax credits or tax losses can be utilised.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted, or substantively enacted, at the reporting 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. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

In determining the expected manner of realisation of an asset, the Directors consider that the Group will recover part of its value through use, as determined by the present value of the future rental stream to be received over the expected holding period, and the balance through sale, determined as the difference between the carrying amount and the amount to be recovered through sale.

Foreign Currency Translation

Transactions in foreign currencies are initially recorded in the functional currency by applying the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. All differences are recognised through profit and loss in the consolidated statement of comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

The assets and liabilities of foreign operations are translated from their foreign functional currency into pounds Sterling at the rate of exchange ruling at the reporting date. Income and expenses of foreign operations are translated at the weighted average exchange rates for the accounting period. The resulting exchange differences are taken directly to a separate component of equity and recognised through profit or loss on disposal of the foreign operation.

Exchange differences arising on a monetary item that forms part of a reporting entity's net investment in a foreign operation shall be recognised in profit or loss in the separate financial statements of the reporting entity or the individual financial statements as appropriate. In the financial statements that include the foreign operations and the reporting entity (the Group accounts), such exchange differences shall be recognised initially in a separate component of equity and recognised through profit or loss on disposal of the foreign operation.

Equity

Equity comprises the following:

·; "Share Capital" represents the nominal value of equity shares.

·; "Share Premium" represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of share issues.

·; "Retained earnings" represents retained profits and shareholder and court approved transfers from share capital and share premium.

·; "Cash flow hedges reserve" represents the effective portion of the cumulative net change in the fair value of cash flow hedging instrument related to hedged transactions that have not yet affected profit or loss.

·; "Currency translation reserve" represents all exchange differences arising from the translation of the financial statements of foreign operations as well as from the translation from the Company's net investment in foreign operations. This is disclosed by a way of narrative in the consolidated statement of changes in equity.

Segment Reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenue and expenses that relate to transactions with any of the Group's other components. All operating segments' operating results are reviewed regularly by the Board of Directors to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

New Standards and Interpretations not applied

The Directors have considered all IFRSs and interpretations that have been issued, but which are not yet effective and confirm that they do not believe that they will have a significant impact on how the results of operations and financial position of the Group are prepared and presented.

Critical Judgements and Estimates

The preparation of financial statements in conformity with IFRS requires the use of judgements and estimates that affect the reported amounts of assets and liabilities at the reporting date and the reported amounts of revenues and expenses during the year reported. Although these estimates are based on the Directors' best knowledge of the amount, event or actions, actual results may differ from those estimates.

The principal areas where such judgements and estimates have been made are:

Investment Property Valuation

The Group uses the valuation performed by its independent valuers as a fair value of its investment properties. The valuation is based upon assumptions including estimated rental values, future rental income, anticipated maintenance costs, future development costs and appropriate discount rates. The valuers also make reference to market evidence of transaction prices for similar properties.

Taxation

The Group is exposed to the risk of changes to tax legislation in the various countries in which the Group operates. It is also exposed to different interpretations of tax regulations between the tax authorities and the Group.

Deferred Taxation

The Group considers that the value of the property portfolio is likely to be realised by both the sale and the use over time.

The Group bases its deferred taxation provision on the assumption that the residual value of the investment properties is not less than the present value as provided by its external valuers.

The Group makes an initial estimate of the length of time that each property will be held in order to determine the initial recognised exemption for both the in use and on sale elements for each property. Periodically the Group will review the length of time for which each property will continue to be held and this can be significantly different from the residual of the time from the initial estimate.

The resulting provision, being subject to assumptions on the length of the time that each property will be held by the Group which can change over time, can lead to significantly different results for each property from one period to another.

The recoverability of any deferred tax asset is assessed and, where it is thought unlikely that a recovery will be made, is not included in the Group's provision.

Derivative Financial Instruments

The fair value of derivatives actively traded instruments is determined by reference to bid prices at the close of business on the reporting date. Where there is no active market, fair value is determined using valuation techniques. These include using recent arms-length market transactions, reference to the current market value of another instrument which is substantially the same and discounted cash flow analysis and pricing models.

Additionally, the Group tests the effectiveness of these instruments half-yearly and the estimated ineffective portion is recorded through profit or loss rather than taken to equity.

3. Operating Segments

The business activity of the Group is property investment in the UK and Continental Europe which the Board considers to be the only business segment as presented previously in the Annual Report. However, the Board manages the Group by looking at the Continental European operations separate from the rest of the Group and so there are two reportable segments.

The following summary describes the operations in each of the Group's reportable segments:

·; UK - Includes all UK properties together with all associated legal entities.

·; Continental Europe - Includes all non-UK properties together with all associated legal entities.

Reportable segment assets and profit/(loss) for operating segments are presented based on internal funding allocations. The differences to the consolidated statement of comprehensive income and the consolidated statement of financial position are due to corporate activities.

In both reportable segments the principal customers are Central and State Government departments.

4. Revenue

5. Administrative Expenses

The following items have been charged in arriving at operating profit:

In addition to the fees shown above as the Independent Auditors' remuneration, the Independent Auditors also charged £0.2 million in 2009 for the rights issuance advisory services. The total fees payable to the auditor in the year were £0.2 million (2009: £0.5 million). During the current financial year the Independent Auditors have changed from Grant Thornton to KPMG.

The performance fee is payable by Wichford P.L.C. to Wichford Property Management Limited ("WPML") and will be satisfied by the issuance of new shares at the prevailing market price at the time of payment, under which WPML will acquire Ordinary Shares in Wichford P.L.C. at no cost.

The amount of any award is calculated as 20 per cent of the amount by which the total return on the Ordinary Shares in Wichford P.L.C. exceeds 12 per cent for the first award under the contract and 10% for subsequent awards. A separate calculation of the amount of the annual award is made in relation to each separate tranche of Ordinary Shares in Wichford P.L.C. issued during the relevant three-year period.

The award of shares will only vest if the Company's return on property over each three-year period from the beginning of the relevant financial year to the end of the period two years later, is in the top 40 percentile of the IPD All Office Index. The Company has engaged IPD to make this comparison. The number of shares to be issued is only known at the end of each three year period as the cash equivalent earned under this scheme is divided by the average share price for the last 20 business days of the three year period.

The grant-date fair value of the award granted to the Investment Adviser was measured based on multiple scenarios. Expected volatility and dividends are estimated by considering historic average data.

Included in administrative expenses for the year ended 30 September 2010 are non-recoverable costs of service charges and maintenance on the Continental European properties amounting to £0.3 million. These are of a non-recurring nature and regarded as "one-off" expenses.

Included in the administrative expenses for the year ended 30 September 2009 are the costs of advice on the Windermere interest rate swaps and other matters of £0.6 million and the cost of restructuring investments in Germany of £1.0 million. These items are included in the Other Items column in the consolidated statement of comprehensive income.

A summary of the items included in Other Items for Administrative Expenses is shown below.

6. Directors' Emoluments

There were no employees other than the Directors of the parent company. Directors' emoluments paid in the year were £189,424 (2009: £178,046) and relate to fees and expenses; there being no other benefits or payments.

7. Finance Income and Costs

8. Income Tax Expense

(a) Tax on Profit from Ordinary Activities

During the year the Company reached agreement with HMRC over the previous tax periods and made payment of all resultant tax, no penalties, except for interest on late payment, was charged to the Group.

(b) Deferred Tax

Deferred tax included through profit or loss is as follows:

Deferred tax included through profit or loss is as follows:

The deferred tax provision reflects the likely tax charge in future periods based on the current expectation of how long each property will be owned. The calculation of this provision is based on separate calculations for recovering the initial investment through its use and on sale.

No deferred tax asset has been recognised due to the uncertainty of it being realised.

(c) Factors Affecting the Tax Charge in the Year

As the Group's properties are principally in the UK and owned by companies registered in the Isle of Man the Company regards the UK's income tax rate of 20% (2009: 20%), as payable under the UK's Non Resident Landlord Scheme, to be most relevant tax rate for the reconciliation of the theoretical tax charge on accounting profits to the tax charge for the year shown through the profit or loss.

This reconciliation is shown below.

(d) Potential Tax Liability on the Disposal of Assets

In accordance with Rule 29.3 of the Takeover Code, Shareholders should note that the valuation reports from Savills Commercial Limited and DTZ Eurexi have not taken into account any liability for tax which may arise on a disposal, whether actual or notional, of the Company's assets. If the properties which are the subject of the valuation reports were to be sold at the amounts of these valuation reports the Board estimates that the potential tax liability that would arise would be approximately £0.2 million.

9. Earnings Per Share

Basic earnings per share for the year ended 30 September 2010 is based on the profit attributable to equity shareholders of £17.0 million (2009: loss of £75.4 million) and a weighted average number of Ordinary Shares outstanding during the year ended 30 September 2010 of 1,062,095,584 (2009: 1,062,095,584).

The potential number of shares that may be issued under the performance fee arrangements with the Investment Adviser was 12,214,183 at 30 September 2010 as the estimated value of the incentive scheme was £1.1 million for the first three-year period.

The table below shows the figures on a comparable basis and shows the figures for 30 September 2009 on the same basis as that used for the figures for 30 September 2010.

The table below shows the figures reported at 30 September 2009 as the comparative to the current year figures (see note 19).

For EPRA basis total earnings per share figure refer to note 23.

10. Net Assets Per Share

Net assets per share is calculated by dividing the net assets at 30 September 2010 attributable to the equity holders of the parent of £59.0 million (2009: £47.4 million) by the number of Ordinary Shares as at 30 September 2010 of 1,062,095,584 (2009: 1,062,095,584).

The potential number of shares that may be issued under the performance fee arrangements with the Investment Adviser was 12,214,183 at 30 September 2010 as the value of the incentive scheme was £1.1 million for the first three-year period.

For EPRA basis net asset value figures refer to note 23.

11. Investment properties

At 30 September 2010 the Group owned 81 properties throughout the UK, Germany and the Netherlands.

The Group has made a provision for the potential purchase of the remaining shares in connection with its investments in Germany. This amounted to £1.8 million.

All the Group's investment properties were externally valued as at 30 September 2010 and 30 September 2009 on the basis of open market value by professionally qualified valuers in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors. The Group's valuers are Savills Commercial Limited in the UK and DTZ for Continental Europe, each of whom has given and not withdrawn its consent to the inclusion of its valuation report in Appendix 1.

The value of each of the properties has been assessed in accordance with the relevant parts of the Red Book. In particular, the Market Value has been assessed in accordance with PS 3.2. Under these provisions, the term "Market Value" means "the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing wherein the parties have each acted knowledgeably, prudently and without compulsion".

In undertaking the valuations on the basis of Market Value, the valuers have applied the interpretative commentary which has been settled by the International Valuation Standards Committee and which is included in PS 3.2. The RICS considers that the application of the Market Value definition provides the same result as Open Market Value, a basis of value supported by previous editions of the Red Book.

The valuation does not include any adjustments to reflect any liability to taxation that may arise on disposal, nor for any costs associated with disposals incurred by the owner. No allowance has been made to reflect any liability to repay any government or other grants, or taxation allowance that may arise on disposals. Deductions have been made to reflect purchasers' acquisition costs. These have been applied according to value on a sliding scale, representative of the typical costs that would be incurred in the market.

The valuers have used the following key assumptions:

·; The Market Value of investment properties has been primarily derived using comparable market transactions on arm's-length terms and an assessment of market sentiment. The aggregate of the net annual rents receivable from the properties and, where relevant, associated costs, have been valued at average yields ranging from 4.0% to 15.6%, which reflect the risks inherent in the net cash flows. Valuations reflect, where appropriate, the type of tenants actually in occupation or likely to be in occupation after letting of vacant accommodation and the market's perception of their creditworthiness and the remaining useful life of the property.

·; Given the significant fall in rents for some offices over the past year, an increased number of properties in the portfolio are considered to be over-rented. To account for this, the element of over-rent has been valued at a higher yield than the element of core income to take account of the fact that the tenants are paying in excess of market yields.

In accordance with Rule 29.3 of the Takeover Code, shareholders should note that the Valuation Reports from DTZ and Savills have not taken into account any liability for tax which may arise on a disposal, whether actual or notional, of the properties. If the properties which are the subject of the Valuation Reports set out in Appendix 1 were to be sold at the amount of the valuations stated in Appendix 1, the Board of Wichford estimates that the potential tax liability that would arise would be approximately £0.2 million. Further, and as required by the Takeover Code, the Board considers, following consultation with the valuers, that the valuation of the properties in total at the date of this statement is not materially different to that used in these financial statements.

A reconciliation of investment property valuations to the consolidated statement of financial position carrying value of investment property is shown below:

12. Trade and other receivables

As at 30 September 2010 nil trade receivables were impaired (2009: nil). As at 30 September 2010, £0.6 million trade receivables were over 120 days but not impaired (2009: nil).

13. Cash at bank

At 30 September 2010 there was £7.1 million (2009: £19.4 million) of the cash at bank to which the Group could not get instant access. The principal reason for this is that rents received are primarily held in locked bank accounts as interest and other related expenses are paid from these monies on the interest payment dates. Of the total amount £6.3 million (2009: £14.8 million) was released to pay interest and related expenses within the following 25 days with the surplus being released from Restricted Cash. £0.8 million (2009: £4.6 million) was retained in Restricted Cash.

Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods dependent on the immediate cash requirements of the Group.

14. Trade and other payables

15. Borrowings

a) Bank Loans

At 30 September 2010, the bank borrowings of £514.9 million (2009: £528.9 million) are secured by fixed and floating charges over the assets and income streams of the Group. It comprised of seven separate borrowing facilities each secured on a number of discrete assets with no common assets.

These facilities are summarised as below:

*Note: inclusive of swaps fixed rate (excluding VBG1).

The Gamma and Delta facilities are non-reducing and had repayment dates in October 2010. Both have been put into securitisation conduits by the lender. The Company has successfully completed an extension of these facilities which now have repayment dates in October 2012 with all other terms and conditions remaining the same.

The Hague facility, which was entered into by the Group in July 2008, was non-reducing and has a final repayment date in July 2014. Subsequent to the 30 September 2009 the Group agreed that for the period from November 2009 to October 2010 this facility will become a reducing loan whereby 0.25% of the initial outstanding balance will be repaid over that period in equal quarterly amounts. This was agreed together with a liquidity surcharge and increased margin imposed by the lender. These changes were reviewed in October 2010 and the revised conditions were extended until October 2011. As a result of the imposition of the liquidity surcharge and increased margin, the interest cover test would have failed and the lender granted a waiver of this test until October 2010 which, as part of the review in October 2010, has since been extended until October 2011.

This facility contains a cross-default provision that enables SNS Property Finance to demand repayment of the facility if there is an event of default under any other Group facility. SNS Property Finance's recourse is limited to the Hague property and its rental income. Notwithstanding the terms of this cross-default provision, in the event that such a default occurred under any of the other Group facilities, the Company has been advised that it would be difficult for SNS Property Finance to demand repayment of the Hague facility pursuant to this cross-default provision in the absence of either a payment default under the Hague facility or Den Haag's actual or threatened insolvency.

The Halle facility is non-reducing and has a repayment date in April 2014. The facility was already in place when the Group acquired the property on which it is secured in September 2007 and it was re-stated in October 2007 to increase the amount borrowed from €31.9 million to €37.1 million. This facility was originally entered into in February 2007.

The VBG facilities are reducing dependent upon expected rent rises with final repayment dates in January 2010 for VBG1 (extended during the year to 30 September 2010 to January 2012) and April 2011 for VBG2. However, on acquisition of the properties, part of the purchase price was paid into escrow accounts such that all expected reductions of these bank loans will be funded by the escrow accounts. These facilities have been put into securitisation conduits by the lender. The Group took on responsibility for these facilities on the acquisition of the properties on which they are secured, in June 2007.

Following the final repayment date for the VBG1 facility the Company has negotiated a two-year extension to this facility where the terms and conditions were mainly the same. However, the interest rate swaps associated with this facility matured on the repayment date in January 2010 and the Company has taken out interest rate caps which protect against future increases in interest rates and allow money to be released to the Group on each interest payment date. The on-going LTV covenant has also been waived.

The VBG2 facility matures in May 2011 and the loan servicer has called for a valuation of the two properties over which security was granted. The result of this was that the LTV covenant was not being met and the loan servicer has granted a waiver of this covenant while the longer term future of this facility is discussed. The Company is currently negotiating with the loan servicer over the future of this facility. It is the Company's view that a similar extension to that achieved on the VBG1 facility can be agreed although there can be no certainty that a similar or any agreement is reached on the extension of the VBG2 facility.

The Zeta facility, which was entered into by the Group in May 2008, is non-reducing and had a repayment date in May 2011. The Company has, during the year, been able to successfully negotiate terms for a two-year extension allowed under the original facility agreement. This facility now has a final repayment date in May 2013 on the same terms and conditions.

The opportunity was taken to replace the existing swaps on the Zeta facility with a composite one extending out to the final repayment date in May 2013.

The Delta, Gamma and Halle facilities provide for the payment of interest at a fixed rate. However, the respective borrowing subsidiaries have given indemnities to the lenders in respect of interest rate swaps entered into to create those fixed rates. As such these facilities have been treated as floating rate facilities with interest rate swaps. All of the facilities, except the VBG1 facility, are regarded as subject to the interest rate swaps of either ones with a Group entity as a counter-party or where the facility agreement requires such instruments to be in place and have been taken out by the lender as detailed in note 16. The derivatives for the Delta, Gamma and Halle facilities do not have a Group company as counter-party but the Company recognises that it benefits from them and so has decided to recognise them separately. On these facilities the Group is charged a fixed interest rate equal to the strike rate for these derivatives.

The exception to this interest rate swap regime is the VBG1 facility which now has interest rate caps associated with it. These derivatives are described in note 16.

b) Finance Leases

Obligations under finance leases at the reporting dates are analysed as follows: