Final Results

13 March 2013

Capital & Regional plc

2012 Annual Results

Capital & Regional plc today announces its audited annual results for the year to 30 December 2012.

Progress in execution of strategy

·; Sale of Group's stakes in The Junction Fund and Xscape Braehead and, in early 2013, its interest in the X-Leisure Fund and FIX

·; Purchase of Mall Fund units increased Group share from 18.16% to 20.33%

·; Acquisition of 20% interest in Kingfisher Centre Redditch, in joint venture with Oaktree Capital Partners

Financial

·; Robust recurring pre-tax profit up 3.7% to £17.0 million (2011 - £16.4 million).

·; Proforma see-through net debt1 to property value fell to 55% compared to 65% at 2011 year end

·; Fall in net assets and EPRA net assets per share to 51p and 55p, respectively (2011 - 56p and 63p) primarily as a result of value adjustments and impairment of the German portfolio 4 joint venture

Operational

·; Occupancy on a like for like basis in our UK Shopping Centres up to 96.7% from 96.1% notwithstanding significant administrations during the first half of the year

·; Attractive and affordable space supported by 88 new lettings for £5.1 million, 25 renewals for £1.7 million, both at above ERV

·; Significant step forward for asset management and development with key terms agreed to enable the reconfiguration of Waterside Lincoln; Hemel Hempstead redevelopment gaining planning permission and a number of pre-lets finalised; The Hub leisure concept at Redditch gaining momentum

Future priorities

·; Recycle cash from disposals of non-core assets to create shareholder value by strengthening our core UK Shopping Centre business as well as the buyback of shares

·; Resume dividend payments to shareholders to be covered by cash earnings once Mall is in a position to recommence distributions to unit holders

1 Adjusted for £30.6 million X-Leisure proceeds received in January 2013.

2 As defined in Note 1 to the financial statements.

Commenting on the results, John Clare, Chairman, said "I am pleased to report that the Group has this year both successfully responded to the challenges created by a tough operating environment and made significant progress in the execution of its strategy."

Hugh Scott-Barrett, Chief Executive, added "We have a unique management platform that supports our aim to be a leading investor and property and asset manager of dominant community schemes. Our focus is in shopping centres which have a dominant market share in the communities they serve and which provide attractive and affordable space for retailers."

Chairman's Statement

Strategy

The Group's strategy is to focus its financial resources and management skills on dominant community shopping centres in the UK. The Group intends to recycle capital from non-core assets to strengthen its position as a leading retail property investment company.

Performance Overview

I am pleased to report that the Group has this year not only successfully responded to the challenges created by a tough operating environment but has also made significant progress in the execution of its strategy.

The UK shopping centres have performed well during a difficult time for UK retailing. The Mall Fund, at the property level, continues to outperform its IPD benchmark and occupancy levels at the year-end are higher than 12 months ago, as the very high levels of retail failures in recent months have provided opportunities to reconfigure space. Success in re-letting this space reinforces earlier decisions to retain and acquire those assets, such as Redditch, with dominant market shares in the communities in which they operate, and to dispose of those which do not.

During the course of this year, the Group has either disposed of or taken significant steps to dispose of non-core assets. The Group has sold its interest in The Junction Fund, the X-Leisure Fund and X-Leisure Limited, our 50% interest in Xscape Braehead as well as the sale of our interest in FIX, completed shortly after the end of the year.

Relevance of our property assets

Our shopping centres demonstrate the key characteristics to remain relevant in the current environment. They are specifically founded on a strong community involvement, affordable rents and continued investment to enhance the shopping experience.

We continually adapt to meet changing retailer and consumer needs. Free Cloud Wi-Fi has been rolled out across the shopping centres; the Mall smart phone app has been launched and we are reconfiguring space to support the multi-channel strategies of our retailers.

Dividend

The dividend policy continues to link future payments to the Group's cash generating ability. Following the renegotiation of the Group's banking arrangements, the restrictions limiting the payments to 50% of operating cash flow less interest and tax have been removed. Following further de-gearing, the Mall is likely to be in a position to recommence distributions in the second half of the year. Distributions from The Mall should enable the Group to resume the payment of a dividend, to be covered by cash earnings, at the end of 2013. Until this happens the board is not recommending the payment of a dividend meaning that no dividend will be payable for the full year 2012.

Responsible business

The Group attaches great importance to maintaining its commitment to responsible business in the still challenging operating environment.

At the beginning of the year a number of key objectives across The Market Place, The Environment and The Workplace were identified, each with target key performance indicators. Good progress has been made in each of these areas. The Group was awarded ROSPA Gold Award status for a sixth consecutive year and has exceeded stretching targets for reduction in energy, water use and water recycling.

Further details are set out in the Responsible Business review in the financial statements.

Our people

The management platform is key to the future and the creation of value for our shareholders. I would like to thank all staff who have once again delivered a robust set of operating results in the face of challenging market conditions. The prompt re-letting of space vacated by retailers in administration earlier in the year reflects the unique asset management skills of our teams.

With the sale of The Junction and X-Leisure we have also said goodbye to a number of colleagues who have been, directly and indirectly, part of the C&R family for some years. We wish them every success in their future careers.

The success of the restructuring programme in recent years gives me confidence the management team can execute the next phase of the Group's strategy.

The Board

I would like to thank Manjit Wolstenholme for her contribution to the board's deliberations over the last six years. Tony Hales has succeeded Manjit as Chairman of the Audit Committee and Philip Newton will take on the role of Chairman of the Remuneration Committee. I believe the current non-executive directors bring a depth of experience of internet retailing and consumer markets to the board in addition to their significant contribution to property, financial and strategic matters.

John Clare

Chairman

Chief Executive's Statement

Operations

Occupancy levels across the UK shopping centres have further improved this year from 96.1% to 96.7%, having fallen to 94.9% at 30 June. This reflects the benefits of a pro-active approach on re-letting vacant space arising from retailers in administration even if, in the short-term, it results in a reduction of income. During the course of the year, 69 units representing £5.8 million or 7% of the year end passing rent (fell into administration. At December 2012 only 12% of the affected space was not income producing or part of an asset management initiative. This highlights the effectiveness of the asset management focus during the year which has supported valuations across the portfolio. We believe that in the medium and longer term, a vibrant well let scheme offers the best potential to boost income. Whilst passing rent has therefore fallen by 3% to £82.3 million it is some 1% higher than at the half-year. Against this background, it is pleasing that the Mall, which is at the core of the Group's shopping centre activities, has again out-performed its benchmark at the property level. An increase in pre-tax recurring profit from £16.4 million to £17.0 million (including results from discontinued operations) is also particularly encouraging in these circumstances.

In our core German portfolio valuations have been stable and occupancy has remained high at 97.9% at December 2012. Contracted rent has remained stable but, importantly, a number of lease re-gears and renewals have enabled us to maintain the weighted average lease length of the core portfolios at 7.8 years.

Asset Management

In spite of the challenging environment for our retailers, we have continued to see demand for good quality affordable space across our shopping centres and other assets.

Key themes include:-

·; Increasing demand from leisure operators (in particular value restaurants) within our shopping centres. The progress we are making in establishing The Hub leisure concept at Redditch highlights the increased importance of such operators to increased dwell time by the shoppers in our schemes

·; Demand for space from fashion and department stores such as H&M in Luton and Debenhams at Blackburn

·; Reconfiguration of space and introduction of new technologies to accommodate multi-channel strategies

·; Significant progress in asset management initiatives at Hemel Hempstead and Great Northern Warehouse where All Star Lanes has now opened

·; Negotiations with anchor retailers on the key expansion and development opportunities within our schemes notably at Lincoln, Walthamstow and Camberley

Encouragingly, many of the new lettings have agreed at or above ERV. Indeed, for the full-year, 88 new lettings representing £5.1 million of passing rent were agreed at 0.2% above ERV.

Financial Position

Significant steps have been taken not only to reduce gearing but also to de-risk the Group balance sheet during the course of the year.

Adjusted for the disposal proceeds from the sale of X-Leisure, gearing at the Group level has fallen from 24% to 13% at December 2012 whilst see through net debt to property value again adjusted for the sale of X-Leisure, has fallen from 65% to 55%.

The impact of disposals on debt levels has therefore more than offset the impact of the acquisition of Redditch. The reduction in statutory NAV from £196 million to £180 million or 56p to 51p has been primarily caused by the impairment and devaluation of the German portfolio 4 and the related Euro B-note of £15.1 million.

At the same time, the Group has repaid the Hemel bank facility and has extended its two remaining facilities at the Group level being:

·; A £25 million Revolving Credit Facility which now matures in July 2016

·; A £57.6 million facility for the Great Northern Warehouse which now matures in October 2014

Following the disposal of The Junction, X-Leisure and FIX, the Mall is the only Fund in which C&R is invested. Following the disposal of the Castle Shopping Centre in Norwich and utilising the cash generated from operations, the Fund's debt has fallen by £91.4 million to £570.9 million. This represents a reduction in gross LTV from 69% to 67%. This is expected to fall further in 2013 following bondholder approval to repay £13.4 million in April 2013 from blocked cash. Adjusted for the unrestricted cash in the Mall, net debt to property value stood at 55% as at December 2012.

The decrease in total German debt of €170.1 million primarily reflects the impact of the full impairment of the investment in Holding 4. Following amortisation of €10 million and with values of the rest of the portfolio broadly stable, gearing levels have fallen slightly from 76% to 74%.

Strategy

The Group has delivered on its commitment to make significant progress in 2012 in focusing Capital & Regional on its core UK Shopping Centre activities. We have achieved this through disposals of The Junction, X-Leisure and Braehead, whilst the acquisition of Kingfisher Centre, Redditch adds critical mass and reinforces our core shopping centre activities.

Our objective remains to grow our portfolio of UK shopping centres which are held both through our investment in the Mall and in joint ventures with our key partners. We have a unique management platform that supports our aim to be a leading investor and property and asset manager of dominant community schemes. Our focus is on shopping centres which have a dominant market share in the communities they serve and which provide attractive and affordable space for retailers.

The Mall remains at the centre of C&R's strategy and will continue to be a priority for the allocation of capital. Each of the underlying core properties offers attractive opportunities for asset management initiatives and development opportunities. Our aim is to help position the Mall to access the necessary capital to exploit these opportunities. We will seek to take advantage of opportunities to increase further our stake in order to support the execution of our strategy for the Mall. To date, these purchases have been very accretive for our shareholders.

Capital & Regional will continue to leverage its management platform by investing with our key partners in shopping centres which share similar characteristics to the Mall. Our acquisition in partnership with Oaktree of the Kingfisher Centre, Redditch, confirms the belief that we are able to generate superior returns from investing in and managing such assets.

Outlook

The operating environment for our retailers remains challenging as the twin pressures of changing consumer behaviour and weak economic growth continue to impact sentiment. I am encouraged that our proven track record in prompt re-letting of space on retailer administrations is already having a positive impact in the early part of this year as asset management initiatives to re-let space from recent retailer failures are well advanced.

Disposals of non-core assets will continue to be a major focus. We expect to recycle capital from the remaining on-balance sheet assets of Hemel and Great Northern Warehouse as well as from the portfolio of German retail investments. Improved investment market sentiment gives us confidence that further progress will be possible this year.

We expect further deleveraging of the Mall. The objective is to reduce the quantum of debt below £400 million and the leverage to a level where we can both recommence distributions and look forward with confidence to the refinancing of the CMBS which matures in April 2015.

Our focus on shopping centres which are dominant in the communities they serve gives us confidence that we will continue to be able to respond to changing consumer behaviours. As in prior years the priority will be to ensure that occupancy levels remain high to maintain the vibrancy of the schemes in the belief that we will be able to rebuild and grow income levels over time. Plans will be progressed for each of our schemes ranging from refurbishment to extensions and major redevelopments which will enhance their relevance to the consumers and retailers they serve.

Hugh Scott-Barrett

Chief Executive

Financial information

The financial information set out in this preliminary statement does not constitute the Group and Company's statutory financial statements for the years to 30 December 2011 or 2012, but is derived from those financial statements. Statutory financial statements for 2011 have been delivered to the Registrar of Companies and those for 2012 will be delivered following the Company's annual general meeting.

The auditors have reported on the 2011 and 2012 financial statements and in both cases their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

Forward looking statements

This document contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking in nature and are subject to risks and uncertainties. Actual future results may differ materially from those expressed in or implied by these statements. Many of these risks and uncertainties relate to factors that are beyond the Group's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of government regulators and other risk factors such as the Group's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Group operates or in economic or technological trends or conditions, including inflation and consumer confidence, on a global, regional or national basis. Readers are cautioned not to place undue reliance on these forward-looking statements, which apply only as of the date of this document. The Group does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this document. Information contained in this document relating to the Group should not be relied upon as a guide to future performance.

Our business

UK Shopping Centres

The Group's Shopping Centre business comprises its investment in The Mall Fund, a specialist UK community shopping centre brand, owning eight properties with a total lettable space of over four million square feet which accommodates over 950 retail units. In addition the Group has interests in The Waterside Centre, Lincoln and The Kingfisher Centre, Redditch.

Our approach

The core strength of Capital & Regional is managing dominant UK community shopping centres. Embedded in our culture is a passion to deliver outstanding operational performance. This ethos has been built up over many years of shopping centre ownership during which we have created a unique in-house platform with demanding operating standards. The platform comprises specialists covering all the relevant disciplines of property and asset management.

Our teams think like retailers so they create and maintain environments that deliver sustained profits for our occupiers and an outstanding shopping experience for the communities we serve. Branding to us is not a name change or new sign, it's a culture that runs through every element of our shopping centre business and is why the Mall brand is recognised as being synonymous with best practice in managing shopping centres.

The elements which help to differentiate us include:

·; Our people - our teams hold strong common values and a clear vision as to what makes our business special.

·; Operational standards - we regularly measure each Mall against well defined and detailed brand standards, always striving for improvement. Amongst other aspects this ensures we provide clean and safe places to shop.

·; Retail relationships -we have built up excellent relationships with our retailers and they trust us to deliver on our promises and recognise the value in our operating culture. We understand their needs for space which allows us to plan to optimise the configuration of space as well as helping us to mitigate the exposure from tenant administrations.

·; Technology - shopping habits are changing with a continuing trend towards online shopping, 'click and collect', social media and mobile marketing. Successful retailers now operate through genuine multi-channel formats which enhance the physical shopping experience with the use of mobile technologies. We are absolutely committed to meeting both the challenges and the opportunities which can be derived from technological change.

Specific aspects include:

o The Mall website (www.themall.co.uk) which was launched in 2007 and was the first UK branded website covering a portfolio of shopping centres. We have received 25 million page views since then, 55% of which now arrive through our mobile enabled site.

o Enhancing our marketing and social media feedback through the development of mobile enabled websites, social networking and The Mall smart phone apps and loyalty based marketing and promotions.

o Introducing free cloud Wi-Fi across the shopping centre portfolio.

o We recently signed up fulfilment company "Bybox" to drive our click and collect service.

o We are working with our retail partners to help them fulfil their evolving omni channel requirements utilising our existing Mall digital media platforms.

o Retailer affiliate marketing hosted on: themall.co.uk.

·; Ancillary revenues - using the portfolio scale and leverage from the Mall brand, we have driven income from many sources - including advertising, promotional space, Retail Merchandising Units (RMU's), digital commerce, gift cards, and telecoms, amongst others. Our ancillary income was up 4.5% like for like in 2012.

·; Marketing - by regularly talking to our community of shoppers, we engage and encourage repeat visits and more spend.

·; Operational costs - leveraging the scale of our portfolio we drive down costs in all areas of expenditure. Service charges sit at an average £4.30 psf, 15.7% below the industry benchmark (source: Jones Lang LaSalle 2011 survey).

·; Environment - we are passionate about operating responsibly, and through our Enviromall operating system, now established for 10 years, we have an industry leading track record of year on year improvements with specific excellence in energy reduction and waste management.

Our Assets

Our operational excellence is complimented by the assets that we own and manage. We ensure that our property assets are aligned with the constantly evolving demands of our tenants and shoppers, developments in technology, and consumer behaviour.

The key features we look for in our assets are:

·; Town centre locations which are dominant in the local community with significant catchment

·; Affordable and sustainable rents

·; Attractive opportunities to generate future growth in value from asset management or development opportunities

·; Ownership of car parking and good local transport facilities

Our shoppers have demanding expectations of the level of service, convenience, range and quality of facilities, together with a real appreciation of value and local community. These community hubs provide our retailers with a cost effective location from which to serve their customers and sit as an essential element of the multichannel operation. We believe only those shopping centres which can consistently deliver these different elements will continue to be successful.

Our non-executive directors also bring a depth of experience of the internet, retailer and consumer markets to the board. This ensures our strategy is responsive to the changing retailer and consumer demands that impact on our property assets.

Germany

The commercial retail property portfolio in Germany is a joint venture with AREA Property Partners. The joint venture owns 26 properties with a total lettable space of over 3.3 million square feet.

Garigal Asset Management GmbH, a German asset and property manager, is responsible for the asset and property management of the German property portfolio and the Group holds a 30% stake in Garigal.

The key characteristics of the German portfolio are:

·; Established out-of-town retail locations, typically anchored by food retailers

·; Standalone hypermarkets and retail parks with sales areas of more than 3,500 square metres with car parking

·; Strong cash generation with generally shorter leases

Further details on all of the Group's Property interests including Great Northern Warehouse and Hemel Hempstead can be found in the Property Management and Property Information sections below.

Operating review

The principal focus of management during 2012 has been to implement its strategy of disposing of non-core assets in order to concentrate resources on its core UK Shopping Centre business.

During the year the Group realised £15.0 million in cash from the disposal of its interest in The Junction and its 50% share of Xscape Braehead. In addition £2.6 million of Performance Fee income was received in respect of The Junction. The Group also exchanged contracts for the sale of its interest in the X-Leisure Fund and X-Leisure Limited which completed after the year end raising a further £30.6 million after related transaction costs. During the last three years the Group has disposed of its interest in £1.9 billion of property at a discount to prevailing valuation of around 0.7%. As a result of these actions the Group's see through net debt has fallen to 55% from 75% since December 2009.

Since the year end the Group has completed the disposal of its interest in FIX and a parcel of land raising up to £1 million.

UK Shopping Centres

Occupancy levels

1 Occupancy at December 2012 and December 2011 includes a seasonal increase in temporary lettings.

The increase in occupancy has been achieved in difficult market conditions for our tenants and despite a significant number of administrations during the year. We continue to focus on maintaining high levels of occupancy which create shopping destinations which are appealing to shoppers and tenants and which acts as a springboard for growth in rental values.

New lettings, renewals and rent reviews

There has been good letting activity across the portfolio. Retailers are prepared to invest in new stores and in refurbishing their existing space as demonstrated by Debenhams, who have extended and refitted their store in Blackburn showing a willingness to invest in strong schemes.

1 Excluding the temporary letting of the TJ Hughes space in the Mall Maidstone to Beales on a flexible basis

2 For lettings which did not include a turnover rent

Lettings to new occupiers continued at an encouraging level during the year and it is particularly pleasing to see new fascias such as Apple and Pandora taking space in our schemes. Significant highlights during the year are set out below:

As part of our continued support of mobile commerce we concluded agreements with Cloud Networks, a Wi-Fi operator, across our portfolio on a six year deal. This importantly provides free Wi-Fi across our portfolio improving accessibility to our mobile apps whilst creating an additional income stream.

Since the year end new lettings in the UK Shopping Centres have been made for contracted rent of £0.9 million.

Administrations

Whilst the number of administrations in 2012 increased compared to the prior year we have re-let most of those units that ceased trading, which has supported the strong occupancy levels reported above.

During the year, the UK shopping centre business was adversely affected by a number of significant administrations. The most notable of these were Peacocks, Bon Marche, Julian Graves, Game Group, Clinton Cards and Birthdays. Throughout our primary objective was to maintain occupancy unless there was a preferable asset management opportunity such as the TK Maxx extension at Wood Green. This strategy has sustained income and mitigated void costs thus preserving the vibrancy of the centres.

Of the 69 units affected by administrations during the year 46 have been re-let while nine either continue to trade and are expected to be re-let or will be re-let as part of on-going asset management plans. There were 14 units affected by administration which closed and have not yet been re-let with pre-administration passing rent of £0.7 million.

By the end of February 2013 there had been 13 units that had entered administration with passing rent of £1.3 million representing 1.6% of the year end passing rent. 11 of these insolvencies relate to the widely reported HMV, Jessops and Republic administrations. At the end of February 2013 of the 13 units six remained trading, two had been re-let (including one to Morrisons Local with the lease being extended at an increased rent) and one forms part of the new TK Maxx store being created in Camberley, four units had been closed.

Income security

Credit risk is managed through the assessment of the covenant strength of all incoming tenants and by monitoring credit ratings of key existing tenants. Where possible we look to pre-empt the consequences of administrations through contingency planning and actively seeking to reduce exposure to known risks. For example, in Walthamstow we had previously taken a surrender of the HMV lease and re-let the space at ERV. The 10 largest occupiers by rental income at 30 December 2012 are given below.

Rent collection rates in the UK shopping centres (adjusted for tenants in administration) have continued to be strong throughout the year, with 97.4% of rent being paid within 14 days of the due date for December 2012.

Footfall

The UK Shopping Centres' footfall has outperformed the national footfall index by 2.5% although there has been a fall in shopper numbers over the year of 1.8% compared of to a decline of 4.3% in the benchmark index, demonstrating the strength of the portfolio. In 2013 UK Shopping Centre footfall has continued to outperform the benchmark, in the 10 weeks to 4 March 2013 The Mall decline of 2.5% on the prior year was 1.1% better than the benchmark index.

Temporary lettings

At 30 December 2012 on a like for like basis there were 128 temporary lettings (2011: 113) for a net rent of £3.1 million (2011: £3.2 million) compared to an ERV of £6.4 million (2011: £5.8 million).

Passing rent

Passing rent across our UK shopping centres increased in the second half of the year following the fall in passing rent which occurred in the first half of the year.

The UK Shopping Centre passing rent decreased by £2.3m during the year principally due to income lost as a result of tenant failures in the first half of the year. This was offset by the income generated from new lettings as set out above. There was a further £3.6 million of contracted rent at 30 December 2012 which is not included in the passing rent figures above.

Investment portfolio performance

The property level total returns are set out below:

1 Weighted average by year end property valuation

Within UK shopping centres there has been a differential return performance with those schemes located in the south east and, particularly, in London being capitalised on tighter investment yields than those in the rest of the country.

The Mall Fund has outperformed its quarterly IPD index by 50 basis points during 2012.

Asset management and development

Capital for new asset management initiatives will be recycled from within existing businesses into projects which will deliver value using our in-depth knowledge of retailer requirements for each location. Across the portfolio there is an attractive and exciting pipeline with near term plans for a number of properties as set out below.

Other UK Operations

SNO!zone

The SNO!zone business has had an excellent year increasing its recurring pre-tax profit by 71% to £1.2 million. This has been the result of like for like income growth of 2% which was achieved despite disruption from the weather in January 2012. Significant cost reductions have been achieved following a detailed management review of the business's operations which included the disposal of the loss making site in Braehead, Glasgow last year. We expect further efficiency gains will be achieved in 2013 with the implementation of new online booking systems.

German portfolio

The Group's commercial retail property portfolio in Germany is in a joint venture with AREA Property Partners and is held in six individual and separate joint venture portfolios.

As reported more fully in Note 17c to the Financial Statements the Group impaired its investment in German portfolio 4 to £nil in June 2012 and as a consequence data on this is excluded from the review below. Portfolio 4 differs from the remaining portfolios in that it had the weakest assets in the joint venture with greater exposure to East Germany and non-food retailers. Portfolio 4 had gearing 28% higher at 102% and 30% shorter lease lengths at the date of its impairment.

The key portfolio property data at 30 December 2012 is as follows:

The movement in German portfolio properties is as follows:

In our German portfolio contracted rent has remained broadly stable at €32.5 million with 20 rent increases through indexation and ten new lettings increasing rent by €0.5 million. These were offset by seven expiries and three lease regears which had a downward impact on rent levels. The focus has been to extend the length of the income stream to increase or maintain valuation, improve marketability and to aid refinancing of the properties. Passing rent decreased marginally from €32.5 million to €31.8 million due to €0.7 million of rent free periods.

Occupancy remains strong at 97.9%, only marginally less than 98.7% at December 2011 due to two lease expiries. The weighted average lease length (WALL) has been maintained at 7.8 years.

The key initiatives undertaken in the year were:

·; An agreement has been signed to renew the lease with Real at Ingelheim which was due to expire in August 2014, with a new 15 year lease at the same rent. We have contributed €0.5 million to the refit of their store.

·; In Bruhl we have negotiated a further 5 year extension to 2024 with Real in consideration of which we have agreed to upgrade the car park and entrance.

·; At Herne we are working on improvements and an extension to the scheme, which on completion will result in Toom taking a new 15 year lease on their existing unit.

·; At Lauchhammer a new 10 year lease with Toom and a 7 year lease extension with Edeka improved the WALL by six years following refurbishment.

·; At Kreuztal a letting has been signed for 1,000 m2 to Rossman and terms agreed with Medimax for a further 1,250m2. Negotiations are advanced for a letting to a major food retailer which would generate combined additional rent of €0.5 million per annum.

·; At Hameln a planning application has been submitted for a proposed 550 m2 extension. A letting to Expert, an electronics retailer, has been agreed to take 2,200m2 with a target lease start date of June 2014 subject to planning. At the same time we are negotiating lease extensions with tenants in conjunction with a refurbishment of the scheme.

·; At Aachen we have agreed a 10 year lease to replace the current tenant, Praktiker, on expiry in July 2013. This is conditional on successful change of use planning application.

·; A sale of Taufkirchen has been agreed at the year end valuation of €6.4 million.

Financial review

Key performance indicators

The key performance indicators we use to measure our performance against our strategy and objectives are:

1 See-through debt and see-though net debt divided by IFRS property value as disclosed in note 23a

2 Adjusted for £30.6 million X-Leisure proceeds received in January 2013. See Note 23a for figures pre-adjustment.

Investment returns

Net assets per share decreased in the year to 51p, down 5p or 8.9% since 30 December 2011, and EPRA net assets per share decreased to 55p, down 8p, or 12.6% since 30 December 2011. The change in net assets resulted in an -8.5% return on equity for the year.

To provide a greater understanding of the composition of the business, the Group presents its balance sheet in two separate ways, with the "statutory" balance sheet following the accounting and statutory rules, and the "see-through" balance sheet showing the Group's proportionate economic exposure to the different property portfolios. These are shown below as at 30 December 2012:

1 For 2012 X-Leisure shown at net realisable value of £32.2 million less related costs of £1.6 million as per note 30.

Financing

The group net debt to equity ratio increased from 24% to 30% over the course of the year, primarily due to the acquisition of the Kingfisher Centre, Redditch combined with a decrease in shareholders' equity of £12.4 million. Following the receipt in January 2013 of the proceeds for the Group's interest in the X-Leisure Fund the proforma net debt to equity ratio at 30 December 2012 was 13%. A summary of the movements in Group and off balance sheet debt during the year is set out below:

Group debt

Group debt fell by £8.6 million to £58.6 million at 30 December 2012 (2011: £67.2 million). This fall was due to a £3.8 million loan repayment of the Great Northern Warehouse loan and the repayment of the £5.3 million loan on the Hemel Hempstead property which matured during the year. Both of these repayments were made using central funds. The breakdown of Group debt and net debt at 30 December 2012 are set out below with the proforma impact of the X-Leisure disposal:

1 Excluding unamortised issue costs

2 In the case of variable rate loans, based on LIBOR at 30 December 2012 plus the appropriate margin

3 Debt and net debt divided by investment property at fair value and trading property at the lower of cost and net realisable value

The core revolving credit facility was utilised during the year and the maximum amount drawn down was £14.8 million (2011: £nil). This was mainly as a result of the £5.3 million repayment of the Hemel Hempstead loan at maturity and the repayment of £3.6 million of the Great Northern Warehouse loan. At 30 December 2012 there was £1 million drawn down on the central facility. The forecast covenant tests indicate that there is sufficient headroom for the full £25 million facility available to be drawn down.

In August 2012 the Group signed a new revolving credit facility for £25 million with Bank of Scotland, a reduction from £58 million and with maturity extended to July 2016 from September 2013. This revised facility better reflects the Group's working capital requirements and reduces the cost of the undrawn facility. At the same time the Group extended the maturity of the loan on Great Northern Warehouse by one year to October 2014. The main covenant terms of the revolving facility are reproduced in the section "Covenant Information".

Off balance sheet debt

Off balance sheet debt, which is non-recourse to the Group, fell by £130.9 million to £298.9 million at 30 December 2012 (2011: £429.8 million) as a consequence of asset disposals and the exclusion of the German portfolio 4 and FIX following their impairment.

The proforma breakdown of the Group's share of off balance sheet debt and net debt at 30 December 2012 after adjustment of £35.6 million for the disposal of the X-Leisure Fund was as follows:

1 Excluding unamortised issue costs

2 Debt and net debt divided by investment property at fair value

3 Excluding cash beneficially owned by tenants

The Mall Fund's debt was reduced by £91.4 million to £570.9 million at 30 December 2012 (2011: £662.3 million). This decrease was due to debt repayments from the sale proceeds of Norwich and from cash generated from operations. The second amortisation target required by the Mall Fund's CMBS of £600 million by December 2014 has been achieved well in advance of the required date.

The Mall Fund will be permitted to recommence distributions when the LTV of the Fund, which is currently 67%, is less than 60% and we expect this to be achieved later in 2013. Approval has been received from the bond holders to utilise approximately £13.4 million of funds held in Camberley Unit Trust to repay debt which would result in a proforma LTV of 65%.

Total German debt decreased by €170.1 million to €306.7 million at 30 December 2012 (2011: €476.8 million). At the applicable exchange rates this was equivalent to £250.5 million (2011: £398.2 million). The decrease is due to the exclusion of €156.4 million of debt in the German portfolio 4 following the impairment and loss of joint control and amortisation payments of €13.7 million during the year.

Maturity analysis

The table below shows the maturity profile of the see-through debt and undrawn core credit facility at 30 December 2012 excluding debt relating to the X-Leisure Fund:

In relation to the Euro debt secured on the German properties discussions have already begun with a number of lenders to refinance these loans and we expect this debt to be refinanced by June 2013 well in advance of maturity.

Covenants

The Group and its associates and joint ventures were compliant with their banking and debt covenants at 30 December 2012, except as disclosed below:

·; The German joint venture has obtained a covenant waiver until maturity on 31 December 2013 for two loans in the same portfolio which had marginally breached their LTV covenants albeit that the overall portfolio covenant was met.

·; The German portfolio 4 formally defaulted on 16 July 2012 and was placed into special servicing.

Further details on the various debt covenants are disclosed in the 'other information' section in covenant information.

Interest rate hedging

The majority of current borrowing, both at Group level and in the funds and joint ventures, continues to be covered by interest rate swaps or caps. At 30 December 2012, the see-through valuation of the Group's swaps and caps was a liability of £14.4 million (2011: £18.8 million) which will not be crystallised unless the underlying contracts are closed out before their expiry date. During the year, The Mall and The Junction terminated swaps at a total cash cost of £13.3 million, of which the Group's share was £1.9 million.

Cash distributions

The Group received total cash distributions of £2.4 million during the year comprising a £0.9 million tax distribution from The Mall Fund; £1.1 million from the X-Leisure Fund; £0.2 million from Garigal Asset Management and £0.2 million from FIX UK.

Profitability

Recurring pre-tax profit

The Group's recurring pre-tax profit increased by £0.6 million to £17.0 million for the year ended 30 December 2012 (2011: £16.4 million). The breakdown of recurring pre-tax profit, as defined in Note 1, is as follows (and as set out further in Note 2a):

The recurring pre-tax profit of £5.6 million from UK Shopping Centres reflects the acquisition of The Kingfisher Centre, Redditch and additional Mall units during the period. The fall in recurring profitability in Germany principally reflects the loss of income from portfolio 4. Recurring profits within Property Management have decreased due to the net impact of the loss of fees in respect of The Junction and Mall disposals partially offset by fees arising from The Kingfisher Centre and the agreement of an asset management and development contract with Scottish Widows Investment Partners for the Broadwalk Centre Edgware. The improvement in SNO!zone recurring profit reflects cost savings delivered from the restructuring of the business during the year.

Loss for the year

The loss for the year ended 30 December 2012 was £16.0 million (2011: profit of £21.1 million) and is analysed below:

As well as the recurring pre-tax profit discussed above, the other main factors behind the loss in the year were:

·; Property devaluationof £20.8 million was mainly due to a fall in the value of Germany of £10.0 million, of which £8.6 million relates to the impairment of German portfolio 4 and a decline in the value of The Mall of £7.6 million attributable to the loss of income due to the level of administrations, most of which occurred in the first half of the year.

·; Impairments in respect of German portfolio 4 include £3.3 million related to the write down of the carrying value of the equity investment in German portfolio 4 to £nil to reflect the significant fall in property values during 2012 which resulted in the portfolio defaulting on its debt and being put into special servicing in July 2012. Since the year end an administrator has been appointed over the properties in portfolio 4. A further £3.2 million impairment was recognised on the Group's investment in the Euro B-note, reducing the carrying value to £2.3 million, reflecting the risk of recovering the loan due from German portfolio 4 given the continuing uncertainty.

·; Other impairments include £1.8 million of Goodwill previously held in respect of X-Leisure Limited and £1.3 million related to the write down of the carrying value of FIX UK to £nil to reflect the fall in value of the assets such that the net asset value was negative. Since 30 December 2012 the Group's has disposed of its interest in FIX realising up to £0.5 million.

·; Gain on investment in The Mall related to the Group's purchase of 18.7 million units in The Mall Fund as detailed below.

Tax

The tax credit for the year on continuing operations was £0.9 million compared to a charge of £2.0 million in the prior year consisting of £1.4 million credit of current tax and £0.5 million of deferred tax charge (2011: £1.8 million of current tax charge and £0.2 million of deferred tax charge). The reduction in current tax charge arises primarily due to a prior year tax credit to the income statement of £2.1 million.

The current tax liability was £1.3 million at year end (2011: £3.0 million). The final payment of £5.0 million was made in the year for the settlement concluded with the tax authorities during 2009 in relation to the tax structuring of certain property disposals by the Group in 2004 and 2005 and as such no further liabilities exist at 30 December 2012 in respect of this matter.

Property under management

During the year, property under management fell due to property and fund disposals, which was partially offset by the acquisition of Redditch. The overall impact on property under management is set out below and has been adjusted for the disposal of the X-Leisure Fund which completed after the year end.

1 Valuation excludes adjustments to property valuations for tenant incentives and head leases treated as finance leases and trading properties are included at the lower of cost and net realisable value

2 Primarily the exclusion of German portfolio 4 and foreign exchange movements in Germany

The split of property under management by sector has changed as a result of the sale of The Junction during the year and the reclassification of X-Leisure to an asset held for sale. The sector analysis at 30 December 2012 and prior year end is as follows:

Property acquisitions

On 1 May 2012, the Group acquired a 20% interest in The Kingfisher Shopping Centre in Redditch for a total consideration of £10.6 million in partnership with funds managed by Oaktree Capital Management Limited. The Kingfisher Centre was purchased for £130.0 million at an 8% initial yield. The Group acts as property and asset manager for the partnership.

Disposals

On 12 July The Mall sold The Castle Mall Shopping Centre, Norwich for £77.3 million at a net initial yield of 7.8%.

On 19 October the Group disposed of its 13.4% interest in The Junction fund for proceeds of £14.0 million including Performance Fee of £2.6 million.

On 24 December the Group sold its 50% interest in the Braehead Partnership for £4 million.

On 4 December 2012 the Group announced the conditional sale of its interest in the X-Leisure Fund and its 50% interest in X-Leisure Limited for gross proceeds of £32.2 million. This disposal subsequently completed on 16 January 2013.

Mall unit purchases

On 8 February 2012, the Group purchased 18.7 million units in The Mall Fund at £0.30 per unit for a total consideration of £5.6 million and this further increased the holding in The Mall Fund from 18.16% to 20.15%.

On 18 January 2013 the Group purchased 1.6 million units in The Mall Fund at £0.25 per unit for a total consideration of £0.4 million. As a consequence the Group's holding in The Mall Fund is now 20.33%.

Foreign currency exposure management

The Group uses a forward foreign exchange contract as a hedge of its net investment in the German joint ventures. At 30 December 2012, this was achieved through a contract for €47.0 million (2011: €47.0 million) at a fixed exchange rate of 1.1797 (2011: 1.1797) which hedges 97% (2011: 81%) of the Group's German investment. At 30 December 2012 the value of the contract was an asset of £1.4 million (2011: asset of £0.6 million). After the year end the Group closed out the forward contract of €47.0 million which matures on 28 March 2013 and entered into a new forward contract for €37.6 million until 31 December 2013 at a fixed exchange rate of 1.1617.

To the extent the hedge is effective under accounting rules, valuation movements on the forward contract is shown in reserves, where they partially offset the gain or loss in the value of the net investment in the Group's German joint ventures.

Financing strategy

Our financing structure needs to be flexible and cost effective and this was achieved through having cash of £5.3 million and a central revolving credit facility of £25 million at 30 December 2012 of which £1 million was drawn at that date. At end of February 2013 following receipt of the X-Leisure disposal proceeds the Group had cash of approximately £32 million. This gives the Group the scope to fund future property investments as opportunities arise.

At an associate and joint venture level, debt has been raised from a variety of sources, with a spread of maturities to mitigate refinancing risk as set out in the debt maturity analysis chart. Debt held in associates and joint ventures is non-recourse to the Group.

Going concern

As stated in note 1 to the consolidated financial statements, the directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the consolidated financial statements.

Charles Staveley

Group Finance Director

Principal risks and uncertainties

There are a number of risks and uncertainties which could have a material impact on the Group's future performance and could cause actual results to differ materially from expected and historical results. References to "the Group" include the funds and joint ventures in which Capital & Regional has an interest. The Group carries out a regular review of the major risks it faces and monitors the controls that have been put in place to mitigate them. Property risks are also monitored at various levels within divisional management.

The risks noted above do not comprise all those potentially faced by the Group and are not intended to be presented in any order of priority. Additional risks and uncertainties currently unknown to the Group, or which the Group currently deems immaterial, may also have an adverse effect on the financial condition or business of the Group in the future. These issues are kept under constant review to allow the Group to react in an appropriate and timely manner to help mitigate the impact of such risks.

Significant contracts or arrangements

The Company is required to disclose any contractual or other arrangements which it considers are essential to its business.

·; The asset and property management agreement in relation to The Mall is considered to be essential for the Company, because of the fee income it generates for the Company's subsidiary CRPM and the significant influence it allows the Group to assert over its investment. The asset and property management agreement for the German portfolio is also considered to be essential for the Company because of the fee income it generates for the Garigal associate, and the significant influence it allows the Group to assert over the investment.

·; The Bank of Scotland £25.0 million central credit facility which provides the Group with liquidity.

·; The Company also acts as a guarantor of the Great Northern loan and the Group's central credit facility.

Certain of these agreements can be terminated in the event of a change of control of the Company as disclosed in the Directors' report.

Consolidated income statement

For the year to 30 December 2012

1 2011 results have been restated to separate discontinued operations as explained in Note 30. 

The loss for the current year and the profit for the preceding year, including amounts from discontinued operations, are fully attributable to equity shareholders.

Consolidated statement of comprehensive income

For the year to 30 December 2012

The total comprehensive income for the current year and preceding year is fully attributable to equity shareholders.

Consolidated balance sheet

At 30 December 2012

These financial statements were approved by the Board of directors, authorised for issue and signed on their behalf on 12 March 2013 by:

Charles Staveley

Group Finance Director

Consolidated statement of changes in equity

For the year to 30 December 2012

The special reserve arose on the cancellation of the Company's share premium account in 2009 when £141.0 million of the share premium account was credited to retained earnings and the balance of £79.5 million remained in the special reserve pending consent from all of the Company's creditors. During 2011 the special reserve of £79.5 million was transferred to retained earnings following the resolution of the outstanding required consent from the Company's creditors.

The merger reserve of £60.3 million arose on the Group's capital raising in 2009 which was structured so as to allow the Company to claim merger relief under section 612 of the Companies Act 2006 on the issue of Ordinary shares. The merger reserve is available for distribution to shareholders.

The acquisition reserve of £9.5 million relates to the purchase of the entire ordinary share capital of Morrison Merlin Limited in 2005, prior to which it had been a joint venture in which the Group had a 50% interest. The balance on the reserve arose from the difference at the date of acquisition between the carrying value of the Group's existing interest and its fair value. The reserve will remain on the balance sheet until Morrison Merlin Limited is sold.

The foreign currency reserve of £3.6 million and the net investment hedging reserve deficit of £2.0 million respectively show foreign exchange translation differences from the Group's investment in its German joint venture and any hedges of that investment. £0.7 million has been reclassified from the foreign currency reserve to the income statement during the year related to the impairment of German portfolio 4 (see Note 17c).

Consolidated cash flow statement

For the year to 30 December 2012