Final Results

SHAFTESBURY ANNOUNCES 2012 ANNUAL RESULTS

 STRONG DEMAND DRIVES INCOME, VALUES AND PROFIT

Shaftesbury PLC ("Shaftesbury") today announces its results for the year ended 30 September 2012. Shaftesbury owns 13 acres in London's West End comprising over 500 properties in and around Carnaby, Covent Garden, Chinatown, Soho and Charlotte Street.

RESULTS AND DIVIDENDS

NET ASSET VALUE AND PORTFOLIO PERFORMANCE

* Adjusted in accordance with the European Public Real Estate Association ("EPRA") Best Practice Guidelines as set out below.

PORTFOLIO PERFORMANCE

·; West End is flourishing after a successful year

·; Villages exceptionally busy; good tenant demand across all uses

·; Vacancy continues at low levels

·; Like-for-like ERV growth of 6% in 2012

·; Acquisitions totalling £44.0 million in the period, of which £29.5 million was in Soho, £8.9 million in Charlotte Street, £3.1 million in Chinatown and £2.5 million in Covent Garden

·; £14.9 million capital expenditure across portfolio

·; In Carnaby, major schemes in hand. Lasenby House scheme is on-site and the Foubert's Place/Kingly Street scheme set to commence in January 2013

FINANCE

·; £120 million 15-year secured term loan at a fixed rate of 4.43% raised in our Longmartin joint venture (Group's share £60 million)

·; Committed unutilised bank facilities £139.3 million at 30 September 2012 (2011: £140.7 million)

·; Loan-to-value ratio at 30 September 2012: 30.5% (2011: 29.5%)

John Manser, Chairman, commented:

"2012 has been a truly memorable year for London. Following the Diamond Jubilee celebrations, the Olympics and Paralympics put London firmly in the world's spotlight. The successful staging of these major events has greatly enhanced London's reputation and should attract more visitors and businesses, particularly to the West End, in the years ahead.

Demand for all uses across our portfolio has remained strong, resulting in continuing low levels of space available to let, and rising rental income and ERVs. Since the summer the West End has become even busier and we are seeing unusually high levels of interest from retailers, restaurant operators and other businesses seeking to come to our areas.

It is clear that the UK and other western economies will continue to face structural challenges for some considerable time. Uncertainty regarding the timing and pace of recovery is causing subdued business and consumer confidence. However, with its unique status as a leading global city, London attracts businesses, visitors and those who wish to live here from across the world, underwriting the long-term prospects for continuing prosperity in the West End. I am confident that, with our proven strategy and long experience of this exceptional location, our portfolio will continue to deliver attractive long-term returns for our shareholders."

29 November 2012

For further information:

There will be a presentation to equity analysts at 9.30 am on Thursday 29 November 2012, at The London Stock Exchange, 10 Paternoster Square, London EC4M 7LS.

There is a dial-in facility for the presentation. Analysts and investors are welcome to participate. The facility can be accessed by calling +44 (0)20 3140 0668. The PIN code is 491300#. The presentation document is available on the Group's web site www.shaftesbury.co.uk. A recording of the conference call will be available on the Company's website www.shaftesbury.co.uk following the meeting.

FINANCIAL HIGHLIGHTS

* Adjusted in accordance with the EPRA Best Practice Recommendations.

PERFORMANCE

*Source: Investment Property Databank Ltd © 2012.

Shaftesbury Group data (other than total shareholder return) derived from financial results.

CHAIRMAN'S STATEMENT

This time last year we looked ahead to a year of great opportunity for London. Now, in this, my last statement as Chairman, I am delighted to report that 2012 has been a truly memorable year for our city. Following the Diamond Jubilee celebrations, the Olympics and Paralympics put London firmly in the world's spotlight. The successful staging of these major events has greatly enhanced London's reputation and should attract more visitors and businesses, particularly to the West End, in the years ahead.

Our EPRA profit before tax for the year ended 30 September 2012 amounted to £31.2 million, an increase of £2.0 million or 6.8%. Demand for all uses across our portfolio has remained strong, resulting in continuing low levels of space available to let, and rising rental income and ERVs. As we expected, the major events in London did result in some short-term disruption, particularly to West End visitor numbers, but there has been no discernible effect on our business.

Your directors are pleased to recommend a final dividend of 6.05p per share, bringing the total payable in respect of the financial year to 12.0p per share. This compares with 11.25p last year and represents an increase of 6.7%. The total distribution will amount to £30.3 million (2011: £28.4 million).

Our portfolio, which has been valued at £1,828.2 million, delivered a capital value return of 5.5%, through a combination of rising current income, growth in ERVs and yield improvement of 14 basis points. This is in contrast to our benchmark, the IPD Monthly Index, which reported a fall in capital values of 3.1%.

EPRA diluted NAV per share stood at £4.98 at 30 September 2012, an increase of 35p or 7.6% over the year. The increase before distributions to shareholders amounted to 46.7p or 10.1%.

Our shares delivered a Total Shareholder Return over the year ended 30 September 2012 of 16.0%. This compares with a return of 19.5% reported by the FTSE 350 Super Sector Real Estate Index. We have out-performed our benchmark index for a number of years so that, with a general narrowing of share price discounts in the sector during the period, a year of relative under-performance in Total Shareholder Return is unsurprising.

Property acquisitions during the year totalled £44.0 million. Our acquisition strategy continues to be focused both geographically and in the type of buildings which interest us. Inevitably, in our prosperous locations owners remain reluctant to sell and there is always competition from others seeking to invest.

In December 2011 we added £60.0 million to our financial resources through a 15-year loan at a fixed rate of 4.43% in the Longmartin joint venture. At the year end we had committed undrawn facilities of £139.3 million. With conservative gearing, and secure and rising income, we are well placed to fund the continuing expansion of our portfolio.

The year has seen a number of important changes in the membership of the Board.

In October 2011 Brian Bickell, previously our Finance Director, became Chief Executive. He was succeeded as Finance Director by Christopher Ward, who joined the Board in January 2012.

John Emly, a non-executive director since 2000, retired in February 2012. In July 2012 we announced the appointment, effective from 1 October 2012, of Dermot Mathias and Sally Walden as non-executive directors. Both have valuable corporate and real estate experience which will usefully augment the Board's skills, knowledge and outlook.

Early in 2012 I advised the Board that I would retire following the annual general meeting in February 2013. After consultation with major shareholders, the Board resolved that Jonathan Lane, our Chief Executive until last year and currently executive Deputy Chairman, will succeed me as non-executive Chairman. Jonathan's knowledge and contribution to the progress of our business over 26 years means he is uniquely well-qualified to lead the Board in the years ahead.

I was appointed to the Board in 1997 and became Chairman in 2004, succeeding our founder Chairman, Peter Levy. My time at Shaftesbury has been great fun and I am glad to say that the Company and its shareholders have prospered. It has been a privilege to work with talented and delightful people and I know that the Company will continue to thrive in excellent hands.

It is clear that the UK and other western economies will continue to face structural challenges for some considerable time. Uncertainty regarding the timing and pace of recovery is causing subdued business and consumer confidence. However, with its unique status as a leading global city, London attracts businesses, visitors and those who wish to live here from across the world, underwriting the long-term prospects for continuing prosperity in the West End. I am confident that, with our proven strategy and long experience of this exceptional location, our portfolio will continue to deliver attractive long-term returns for our shareholders.

John ManserChairman

29 November 2012

CHIEF EXECUTIVE'S REPORT

This has been a year of solid progress for Shaftesbury, reflected in good growth in our income and profits, and a rise in the value of our portfolio.

Nationally there are signs of economic stability but no early prospects of a return of sustained economic growth. In contrast, London's West End continues to be busy and prosperous. Sustained good demand and occupancy for all our uses underpin our growing rental income, which this year has risen by £5.6 million to £81.0 million.

EPRA adjusted profit for the year increased by £2.0 million to £31.2 million. EPRA adjusted diluted net assets per share at the year end stood at £4.98, an increase of 7.6% over the year after payment of dividends.

PORTFOLIO PERFORMANCE

Our portfolio has been valued at 30 September 2012 at £1,828.2 million, producing a surplus on revaluation of £90.2 million. The ungeared capital value return was 5.5%, which contrasts with a decline of 3.1% recorded by the IPD Monthly Index over the same period. Our portfolio delivered a total return of 9.7% compared with 3.5% reported by the IPD Monthly Index.

The objective of our management strategy is to deliver sustained growth in rental income which is the fundamental driver of long-term growth in property values. We have reported steadily rising income over many years and this year is no exception. 

Portfolio reversionary potential

At 30 September 2012 our portfolio produced annualised current income of £80.9 million, an increase over the year of £3.4 million. Eliminating the impact of acquisitions, on a like-for-like basis rents receivable rose by 2.5% this year, which follows last year's exceptional increase of 7.5%. Our rents have risen through a combination of lettings, lease renewals, rent reviews and schemes but their effect has been offset by a planned increase in vacant space, particularly in Carnaby, as we prepare for major new schemes.

Importantly the ERV of our portfolio increased over the year by £7.7 million to £99.9 million, of which acquisitions contributed £2.2 million. The like-for-like increase in ERVs was 6.0%, including £2.0 million from the two large new Carnaby schemes.

The reversionary potential of our portfolio now stands at £19.0 million, of which £17.0 million is attributable to our wholly owned portfolio and £2.0 million arises in the Longmartin joint venture's holdings. Of the total reversion, £4.6 million will be added to current income on the expiry of contracted rent free periods and £6.8 million will be crystallised on the letting of space currently vacant which includes schemes now in hand. £7.6 million of the reversionary potential should be realised through the normal cycle of rent reviews and future lettings, bringing rents to market levels currently estimated by our valuers.

Shops, restaurants and leisure uses account for 69% of total ERV and 67% of the reversion which is not yet contracted. In the West End there is a long history of sustained and growing demand for these uses but their availability is restricted, partly as a result of local planning policies. Our experience is that in our locations demand and rental values for these uses are not cyclical, which gives us confidence we shall realise their reversionary potential. At the same time, we expect our management strategies will continue to deliver long-term growth in rental values.

The equivalent yield attributed by our valuers to our wholly owned portfolio at 30 September 2012 was 4.79%, compared with 4.93% at the last year end and 4.92% at 31 March 2012. The overall 13 basis points improvement in yields in the second half of the year reflects strong sustained investor demand for secure, well-let investments in our locations, particularly from those who are less reliant on debt to finance their purchases. There are no signs of this demand abating.

DTZ, the valuers of our wholly owned portfolio, have again commented in their report on the concentration of a high proportion of our properties in adjacent or adjoining locations within our principal villages and the dominance of retail and restaurant uses. They advise that, as a consequence of these unusual factors, some prospective purchasers may consider that parts of the wholly owned portfolio, when combined, may have a greater value than that currently reflected in the valuation that we have adopted in our results.

This year, Carnaby, which represents 33% by value of our portfolio, delivered a capital value return of 7.3%, driven by progress on two important new schemes and a growing reversion across all uses. Our wholly owned holdings in Covent Garden (28% of our portfolio) returned capital growth of 4.5%, benefiting from the completion and letting of a number of schemes, strong demand for restaurants and improved residential values. Chinatown (23% of our portfolio) grew in value by 5.3% largely as a result of uplifts in restaurant values, the dominant use in this location. As in previous years, an absence of transactional evidence in these fully let holdings tempered ERV growth.

Our holdings in Soho (now 6% of our portfolio) delivered a capital value return of 0.9%. This modest performance is unsurprising as our long-term plans to assemble ownerships and bring improvements to this busy but run down area are still in their early stages. In Charlotte Street (3% of our portfolio), values grew by 3.7% as rental tones for restaurants improved and residential values rose.

Longmartin's portfolio delivered a capital value return of 5.7%. The equivalent yield attributed by its valuers was 4.73%, an improvement of 7 basis points over the year (30 September 2011: 4.80%). Current income has improved as rent free periods have expired and we have seen ERV growth of 4.3% across its mixed use portfolio.

ACQUISITIONS

As we have noted previously, other owners in our prosperous areas are understandably reluctant to sell assets which they will find difficult to replace. When properties do come to the market there is always considerable interest from a variety of potential bidders, often financed with substantial equity rather than debt.

We continue to be very focused in the locations we invest in and the types of building we seek to acquire. We apply strict criteria when considering potential acquisitions to assess their particular potential as well as their impact on our existing holdings.

This year our acquisitions totalled £44.0 million, in line with the average level in the previous four years of £46.0 million. Of this year's purchases £29.5 million was in Soho, £8.9 million in Charlotte Street, £3.1 million in Chinatown and £2.5 million in Covent Garden. Our acquisitions included six restaurants and bars, fifteen shops, 3,500 sq. ft. of offices and eleven apartments.

CAPITAL EXPENDITURE

The capital expenditure we bear is generally modest in relation to the overall size and value of our portfolio. Low costs of obsolescence in the buildings we own is an important factor in the good long-term returns our portfolio delivers.

In the case of our dominant uses of retail, restaurant and leisure, we provide space in shell form and tenants are responsible for the costs of fitting out and obsolescence. We also find obsolescence costs are modest in our residential holdings, as we create apartments to a high standard at the outset.

This year capital expenditure totalled £14.9 million of which £13.0 million arose in the wholly owned portfolio and £1.9 million arose in the Longmartin joint venture. The total represents 0.8% of the portfolio's valuation. The range of schemes during the year included extending retail and restaurant space, creation of new apartments, refurbishing offices, and contributions to public realm improvements across our villages. At any one time we usually have over 30 schemes at various stages from initial ideas, seeking planning approval, awaiting vacant possession or under construction.

With our concentrated ownerships, individual schemes frequently have a beneficial impact on adjacent holdings, bringing cumulative and compound improvements to an area.

DEMAND AND OCCUPANCY

Demand for all uses, and across all of our locations, has been generally strong throughout the year. As we anticipated, there was a reduction in enquiries during July and August but interest is now back to an extremely good level. Occupancy levels across the portfolio have remained high throughout the year. New commercial lettings totalled £5.2 million, including £1.6 million from our scheme at 36/39 Carnaby Street which completed at the end of 2011.

The ERV of commercial space in the wholly owned portfolio held for or under refurbishment at the year end amounted to £2.6 million, equivalent to 3.2% of commercial ERV. Of this, £0.8 million related to the first of our schemes in Foubert's Place in Carnaby, which is now under way.

Following completion of the development of 36/39 Carnaby Street in 2011, the level of vacant space under refurbishment fell but has risen recently with the commencement of the first scheme in Foubert's Place. We expect the level to rise further as we start our second scheme here at the beginning of 2013.

Available commercial space in our wholly owned portfolio has averaged around 3% of commercial ERV over recent years and 2012 is no exception.

At the year end the rental value of available vacant commercial space in the wholly owned portfolio amounted to £2.6 million, representing 3.2% of commercial ERV, of which £0.5 million was under offer. Five large shops (rental value over £100,000 per annum) with a total ERV of £1.0 million were vacant, three of which are now under offer and we have interest in the remaining two.

Fourteen of our 424 wholly owned apartments were vacant and ready to let at year end, reflecting the good level of occupancy we have seen throughout the year. The total includes 38 apartments, with an ERV of £0.8 million, which were being refurbished or were under construction.

In the Longmartin joint venture, 13,000 sq. ft. of offices (ERV £0.8 million) were under offer at the year end and have now been let. One shop (ERV £0.1 million) was vacant. 

VACANT COMMERCIAL SPACE AT 30 SEPTEMBER 2012 (WHOLLY OWNED PORTFOLIO)

Looking ahead

We have always held the view that the greatest benefits to London of this year's major public events will be felt in the years ahead. The hosting of what are widely regarded to be the most successful Olympics and Paralympics in their history has greatly enhanced the profile and reputation of London and the West End across the world. The ability to stage successfully such complex events is an achievement in which we should all take pride.

It is no coincidence that since mid-September the West End has become even busier and we are seeing unusually high levels of interest from retailers, restaurateurs and other businesses seeking to come to our areas.

Against this background of strong demand, we are continuing to identify and advance numerous schemes to improve the accommodation we offer, particularly with important projects in Carnaby which are now in hand. In the short-term these projects will temper the growth in our income, particularly in the period to 2014, but they will bring important benefits in the medium-term.

Inevitably, in such prosperous locations as ours, opportunities to add to our holdings will continue to be limited. However, we maintain our focused and disciplined approach to acquisitions which have always been opportunistic and difficult to predict.

The West End continues to attract substantial investment through public projects such as Crossrail as well as private investment in major schemes to develop new buildings and improve areas around us. We welcome all such initiatives and commitments which bring more people - visitors, a growing working population and residents - to the West End. We are committed to further investment to improve the public realm in our locations.

In the period leading up to the 2007/2008 banking crisis we put in place debt facilities which have proved to be highly beneficial. Inevitably, as some of these facilities come closer to expiry in 2016, they will be replaced with arrangements which are more expensive than those we currently enjoy. With our very secure assets we are well placed to attract long-term finance, as we did in December 2011 with the £120 million 15-year facility we raised in the Longmartin joint venture. In order to take advantage of long-term rates, now at historically low levels, we are considering the early refinancing of some of our current arrangements. Although this will impact our profits in the short-term it will maintain our finances on a stable long-term footing.

Over the last 26 years we have assembled an exceptional portfolio in the prosperous heart of one of the world's most exciting cities. We have a small, highly committed team with a long experience of the West End, and we are supported by an equally experienced and enthusiastic team of advisors who share our philosophy and goals. Together we have an innovative approach to the management of our portfolio, and I am confident our business will continue to evolve and respond to the opportunities and challenges which lie ahead.

Brian BickellChief Executive

29 November 2012

BUSINESS REVIEW

What do we do?

We invest in real estate in London's West End, a location which has many unique features which bring prosperity, resilience and opportunity to the local economy. We focus on central locations close to a renowned concentration of world-class attractions which, together with unmatched shopping and leisure choices, attract huge numbers of domestic and overseas visitors.

Our strategy is to:

• Produce sustainable growth in our revenue through long-term investment in, and management of, our property holdings;

• Deliver this growing income stream to shareholders through dividends; and

• Increase the value of our portfolio and of shareholders' investment in our business through a combination of rising income and a concentration on uses which have low levels of obsolescence.

Why London's West End?

London is one of the world's principal global cities. Its long and exceptional history has created a major location for business as well as an unrivalled variety of heritage and cultural attractions. For generations these unique features have attracted commerce and visitors from all parts of the world, bringing prosperity to the city. Its international appeal means it has a broad economic base which is not reliant on the fortunes of the UK economy alone.

Shaftesbury's management team has a long history of working in the West End. Our experience has been that, as a result of the West End's particular features, real estate in our central locations has shown great resilience. Constrained supply of commercial space, tight planning regulations and demand from a wide variety of occupiers underpin the rental growth prospects and value of our portfolio. Historically, during downturns in the economy or the property market, tenant demand and rental levels, particularly for non-office uses, have been much less affected, and capital values have been much more stable than the wider market.

How is the West End evolving?

The West End's many unique features and attractions have evolved over many generations so that it is now a world-class international tourist destination as well as a mecca for Londoners and visitors from across the UK. It is also an important business centre, particularly for the fashion, media, creative and information technology sectors.

To maintain its wide appeal and continue its record of prosperity, the West End continues to evolve in response to an ever-changing world. It has to meet the rising expectations of those who choose to spend their leisure time here, as well as providing accommodation and the infrastructure required by businesses.

Westminster City Council has recently established a commission to consider the unique operational and strategic challenges faced by the West End. In 2013, it will make recommendations for a long-term framework of policies to ensure the West End continues to meet the needs and expectations of all stakeholders as a place to visit, work and live.

Areas in and around the West End continue to attract considerable investment both in buildings and infrastructure. There are important schemes under way to add to the availability of good-quality office accommodation to cater for the growing number of national and international businesses seeking a base in the West End. Those offices add to the very important local working population of often younger, affluent people who are potential customers for our shops, restaurants, cafes and bars.

Accessibility to the West End is a key priority, particularly in our locations. There are estimated to be some 200 million visits to the West End annually and Heathrow alone handles around 35 million passenger arrivals annually. An estimated 210 million passengers pass through the six underground stations closest to our villages every year. We welcome the considerable investment in the existing public transport network to improve capacity, reliability and passenger comfort.

The Crossrail project, which will be of great long-term benefit to the West End, is now under way. This major project will create a new east-west rail route through London, dramatically improving journey times from the provinces and London suburbs into the West End and relieving pressure on the existing transport network. Along with other stations on the route, both Tottenham Court Road and Bond Street stations are being rebuilt to provide significantly increased passenger capacity.

Whilst this much improved transport infrastructure will benefit the West End generally, the majority of our portfolio is within five minutes' walk of these two important interchanges. Our holdings in Seven Dials, Soho and Charlotte Street are close to Tottenham Court Road and its new entrance on Dean Street. Carnaby is close to the new entrance to Bond Street station on Hanover Square.

As well as delivering greater transport capacity, Crossrail is a catalyst for important regeneration around its stations and adjacent streets. Along the eastern end of Oxford Street there are already a number of major development schemes totalling around one million sq.ft. planned or under way.

What do we own?

Our wholly owned portfolio extends to 13 acres of freeholds and comprises 1,566,000 sq.ft. of commercial and residential accommodation.

The Longmartin joint venture, in which we have a 50% interest, owns a 1.9 acre island site in Covent Garden which includes 269,000 sq. ft. of mixed-use accommodation.

Our ownerships are clustered in villages in the heart of the West End. 35% of our portfolio by value is in Covent Garden in the districts of Seven Dials, Coliseum, the Opera Quarter and St Martin's Courtyard, 33% is in Carnaby and 23% is in Chinatown. In addition, we have growing holdings in Soho (6% of our portfolio) and in and around Charlotte Street (3%). The concentration of our ownerships in well-known locations, close to the West End's principal attractions reflects the importance of the visitor-based economy.

Our wholly owned portfolio comprises over 500 buildings, virtually all of which contain a mix of uses. Typically, lower floors contain our most valuable uses of retail, restaurants, bars and leisure which together provide 73% of current rental income. Upper floors are either offices, residential or a combination of both.

The areas in which we invest are long-established, with street patterns generally laid out between 1680 and 1720. They are mostly designated as conservation areas and over 20% of our buildings are listed as being of special architectural interest.

How do we add value?

Our management strategy is based on creating long-term prosperity by establishing and fostering areas in which our commercial tenants are able to flourish and which provide desirable places to live.

Using our detailed local knowledge, gained over many years of investing in the West End, we identify well-located areas which have the potential to attract greater footfall and tenant demand because, to date, they have suffered from fragmented ownerships, lack of investment and the absence of a cohesive strategy for uses and tenant mix. Our acquisition strategy is to establish clusters of ownerships which allows us to address these problems through a long-term management strategy across each area. It provides us with great flexibility to accommodate a variety of uses appealing to a broad range of occupiers as well as bringing cohesion and consistency to streets and entire areas.

Reflecting the importance of shopping and leisure in the West End, we choose areas and buildings which have, or have the potential for, a predominance of these uses. Traditionally, demand for these uses has exceeded availability, providing a firm foundation for rental growth. Also, as we generally provide space for these uses to tenants in shell form, our costs of obsolescence are minimal.

We acquire buildings which offer scope for improvement and have rental levels we consider to be modest. Through reconfiguration and refurbishment, we retain the particular characters of the historic buildings and the areas in which we invest whilst creating accommodation which meets the expectations of today's occupiers and provides an environment which attracts visitors, businesses and residents.

As long-term investors we take a consistent approach to the management of our holdings. In our experience a holistic strategy which fosters and advances all aspects of the character of our villages enhances their appeal. We develop our holdings through a combination of:

• Implementing a comprehensive long-term tenant mix strategy for the dominant retail and leisure aspects of the area, creating distinctive destinations to bring greater footfall and prosperity;

• Encouraging new retail and leisure concepts so that our areas respond to ever-changing tastes and expectations;

• Restoring the fabric of often dilapidated buildings, respecting their traditional features, but extending their useful lives to meet the requirements of modern occupiers;

• Wherever possible, maximising retail and leisure uses within the lower floors of individual buildings to create more efficient and accessible trading space; 

• Introducing alternative uses for upper floors to replace smaller offices, which suffer from cyclical demand and obsolescence. In contrast, demand for residential accommodation in our lively, cosmopolitan central locations is growing, so we often convert upper floors to apartments, which we rent rather than sell; and

• Working with local authorities and community stakeholders to improve the public realm in and around our locations. We create safe and welcoming areas which meet the standards of a prosperous, high-profile urban location expected by tenants, their customers and employees, and local residents.

Our office is close to all our investments and we visit our villages every day. This allows us to have a regular dialogue with our tenants, whilst continually adding to our knowledge and understanding of the dynamics of our areas.

How do we approach sustainability?

Our policy is to extend the useful lives of existing buildings wherever possible. We do this by restoring and preserving their fabric, improving their efficiency and reconfiguring space to meet the expectations of modern-day commercial and residential occupiers.

We invest in historic areas where street patterns were laid out around 300 years ago. In recognition of their collective grouping, as well as their special architectural and historic features, most of our buildings are in designated conservation areas and many are listed. The average age of our buildings is over 150 years. In our locations, we find older buildings offer much greater flexibility than modern structures. We have considerable experience in bringing them up to modern standards of efficiency whilst retaining their character. We introduce a variety of contemporary and appropriate uses to ensure the economic viability of our buildings is improved and sustained.

We work closely with Westminster City Council and the London Borough of Camden, within whose jurisdictions all of our properties are located. We promote and contribute to the costs of up-grading streets in and around our villages, giving priority to pedestrians and improving street lighting, public safety and security. In our experience, investing in public streets and spaces is an important catalyst for regeneration through increasing footfall and accessibility. A better public environment encourages visitors to spend more time in our villages, bringing greater prosperity to our commercial tenants, as well as benefiting the residential community.

In the day-to-day management of our holdings we place great emphasis on minimising the environmental impact of our operations. We work with our advisors and suppliers to ensure environmental standards and targets for improvement are established across our portfolio.

How do we engage with stakeholders and the community?

We have regular contact with our tenants, community groups and other stakeholders in and around our areas. This provides us with the views of these diverse interest groups and important insights into the challenges faced by the West End, helping us to adapt our plans and co-ordinate with others.

We also work closely with the local authorities in our locations to help with the challenges of managing areas which attract huge numbers of visitors throughout the day and late into the night, every day of the week, whilst balancing the needs of local businesses and residents. Our leases are structured so that we can ensure that our tenants' operations do not detract from the reputation of the West End.

We work with stakeholders in the local community by supporting charities based in our areas and initiatives associated with social issues, community projects and the arts.

KEY PERFORMANCE INDICATORS (KPIs)

The tables above set out our performance against our chosen benchmarks: the IPD UK Monthly Indices and the FTSE 350 Super Sector Real Estate Index.

• Property performance

Our key financial objectives are sustainable out-performance and growth in rental and capital values. There is no property performance index which relates specifically to a portfolio of mixed-use buildings such as ours. Therefore, we use the IPD UK Monthly Capital Value and Total Return Indices, which track all main commercial property categories across the UK, as our benchmark.

We have continued to outperform the IPD monthly indices in 2012, as set out above. Since 2007 our values have risen 5%, which is in contrast to our benchmark index which has reported a decline in capital values of 35% over the same period.

The rental prospects of the portfolio are fundamental to long-term performance. The key non-financial performance indicators we use are the extent to which lettings exceed or meet the ERVs assessed by our valuers at the last valuation and letting space quickly to minimise vacancy. The Board is satisfied that, this year, growth in rents and ERVs has more than met its expectations and that lettings have been at or above valuers' estimates. The growth in rents and ERVs over the past five years is shown above. Like-for-like growth in rents receivable in the year was 2.5%, bringing the five-year average to 4.8% p.a. ERVs grew on a like-for-like basis by 6.0% in 2012.

Vacancy continues to remain at low levels, as shown above, which shows the level of EPRA vacancy over the past five years has been around 3%. Where space has become vacant, it has generally been let within acceptable periods.

• Total Shareholder Return

Our Total Shareholder Return for the year was 16.0%, delivering a return of 56.4% and 318.7% over five and ten years respectively.

By comparison, the FTSE 350 Super Sector Real Estate Index was up 19.5% for the year but was down 35.3% and up 66.8% over five and ten years respectively, as set out below:

Our outperformance over the longer-term reflects the resilience and qualities of our portfolio and our record of delivering consistent income and capital growth.

OUR PORTFOLIO

Virtually all our buildings contain a mix of uses. Lower floors comprise shops, restaurants, cafes and bars, which together provide 73% of our wholly owned current income. Upper floors contain offices, residential or a combination of both.

Shops

Our wholly owned portfolio includes 413,000 sq. ft. of retail accommodation across 330 shops, which provide 38% of current income. We have a wide range of unit sizes and rental tones which reflect the particular location of individual shops. We have 76 larger shops (rents in excess of £100,000 per annum) which provide 61% of current rental income. Our 254 smaller shops, which provide 39% of current income, complement our larger shops. They are an important element of the character and retail mix in our villages, providing shoppers with a wide variety of interesting formats.

Our large shops are generally let on leases of between five and ten years, whilst smaller shops are let for terms of three to five years. The weighted average unexpired lease length of our shops is five years.

We provide retail space in shell form for the tenant to fit out and refit as necessary over their period of tenure. We make no contribution to these costs but do grant appropriate rent-free periods to help tenants to establish their businesses.

Rents payable under the terms of the leases we grant are subject to review to current market levels during their term at a maximum of five-yearly intervals, or effectively on renewal if earlier.

The success of our retail destinations depends on maintaining their appeal to fashion-conscious shoppers. In today's world, new ideas and trends in fashion evolve at an ever-faster rate. We invest considerable time and effort in sourcing new retailers and concepts appropriate to each of our locations. Shorter and flexible leases enable us to respond quickly to shoppers' changing tastes and expectations.

Restaurants, cafes and bars

Within our wholly owned portfolio we have 232 restaurants, cafes and bars totalling 508,000 sq. ft. which provide 35% of our current income. Their weighted average unexpired lease term is twelve years.

As with our shops, these units are provided in shell form and we grant appropriate rent-free periods covering the fit out and initial trading period. Tenants' expenditure to fit out kitchens and trading space is substantial so leases are often granted for up to 25 years, and on terms which allow the tenant the right to renew on expiry of the term. This lease structure provides an incentive for tenants to invest for the long term. Rents are reviewed to market levels generally every five years during the lease term and at renewal.

In the locations we have chosen to invest in, planning policies have, for many years, restricted the creation of new restaurant space in order to preserve a balance with other commercial uses. In the West End's flourishing visitor economy, there is considerable demand for restaurant and leisure accommodation, such that leases for these uses provide a secure income for us as landlord. For the tenant they are a valuable asset so it is unusual for us to obtain vacant possession of our restaurants but, when we do, there is considerable demand from a wide range of potential occupiers. Often new operators will open in our locations by taking an assignment of a lease from an existing tenant, making a substantial initial investment by paying a premium to acquire the interest.

The extensive range of dining and leisure choices is a feature of the West End and is a draw for many visitors. As with our shops, we seek out and encourage new food and beverage concepts both from the UK and abroad to add to the appeal of our villages.

Offices

Offices in our wholly owned portfolio extend to 388,000 sq. ft. and provide 16% of current income with a weighted average unexpired lease term of three years.

Offices are an integral part of the mix of uses, bringing an important working population who contribute to the local economy in our villages. However, in many of our older buildings, office floor plates are relatively small, and occupancy and rents are cyclical. Offices generally give rise to unavoidable costs of obsolescence for the landlord, particularly where leases are short. For these reasons we often seek alternative uses to replace offices where it is not practical to up-grade them to provide better space and more secure income.

58% by floor area of our offices are in Carnaby and include some of our more modern space. At an average of 1,500 sq. ft., they are relatively large compared with our other areas. There is a long-established concentration of occupiers from the fashion and creative industries which, in this location, to some degree counteracts the cyclicality of demand.

23% by floor area of our offices are in Covent Garden. We have some of our oldest and smallest buildings in this area so, over time, we have returned many upper floors to their original residential use. Today, residential area and income in Covent Garden exceed that of offices.

In Chinatown, which accounts for 9% of our office space, units are small (average size 600 sq. ft.) but are essential for the Far Eastern business community which is concentrated here.

Residential

Our wholly owned portfolio includes 424 apartments, extending to 257,000 sq. ft., which provide 11% of our current income.

Many of our apartments have been created from the conversion of upper floors of our buildings, an important aspect of our strategy to extend the useful lives of existing buildings. A resident population in our villages is an important ingredient of the overall mix, bringing an additional strand of life and activity. We provide stylish, characterful apartments which appeal particularly to those who work or study close by and who appreciate the many benefits of living in our lively, central locations. In our experience, demand and occupancy is not cyclical and the costs of obsolescence are low.

Other than in exceptional situations, we do not sell our apartments as we believe to do so would inhibit the management flexibility necessary to realise the long-term potential of the valuable commercial uses in our buildings and villages. We find that letting not only provides a reliable and increasing source of income, but also adds to the vibrancy of the local residential community, making the area accessible to those who wish to live here but are unable or unwilling to buy.

Longmartin

The Longmartin joint venture owns a 1.9 acre island site in Covent Garden. A major refurbishment and reconfiguration scheme, completed in 2011, created at its centre St Martin's Courtyard, a new shopping and restaurant destination in this busy location close to Leicester Square. Longmartin's portfolio comprises 23 shops (69,000 sq. ft.), eight restaurants and bars (43,000 sq. ft.), 102,000 sq. ft. of office accommodation and 75 apartments (55,000 sq. ft.). These uses share the characteristics of our wholly owned portfolio.

PORTFOLIO SUMMARY

*Group's 50% share

CARNABY

Valuation £610.1m

Acquisitions during the year £nil

Capital expenditure during the year £5.7m

Capital value return 7.3%

Carnaby is our largest single village, which covers 4.1 acres across twelve streets. It has a number of high profile flagship stores as well as a wide variety of smaller, often independently owned shops. With a long-established focus on youth fashion, we are always seeking to introduce new retailers and concepts to refresh its appeal to occupiers and shoppers. We ensure the structure of our retail leases allows us to accelerate change, which is essential in a market where consumer tastes move quickly.

Carnaby has a world-renowned reputation for fashion retail, dating back to the early 1960s, when it became synonymous with "swinging London" and the emerging youth fashion and pop music culture. Shops currently provide 54% of current income, of which 73% comes from the 38 larger shops which front Carnaby Street itself. We continue to see considerable interest from retailers throughout Carnaby.

We have two important schemes in hand - one on site and one commencing in January 2013 - to add 12,500 sq. ft. of retail space on Foubert's Place, a busy pedestrian thoroughfare linking Regent Street and Carnaby Street.

On the north side of Foubert's Place, we are reconfiguring and extending existing shops to create three larger units totalling 10,800 sq. ft., of which 5,000 sq. ft. has been added from conversion of offices. The scheme will complete in early summer 2013, and we already have considerable interest in this much improved and extended space. We pre-let the remaining 15,000 sq. ft. of office space in Lasenby House to the adjacent Liberty department store for a term of 30 years. The estimated cost of the scheme is £4.25 million.

On the south side of Foubert's Place, we will commence work in January 2013 on an intricate development to demolish existing structures which link through to Kingly Street. An existing restaurant use will be relocated from Foubert's Place to a new 6,500 sq. ft. unit on Kingly Street, allowing us to introduce 7,500 sq. ft. of retail space to Foubert's Place itself. Upper floors of the scheme will include 7,000 sq. ft. of offices and twelve apartments. The scheme, which will complete in autumn 2014, is estimated to cost £13.5 million.

Restaurant and leisure uses are of growing importance, drawing footfall from busy areas in the vicinity. We have 44 restaurants, bars, and cafes across 83,000 sq. ft.

Kingly Street, which runs parallel to Regent Street to the west, and to Carnaby Street to the east, now has a much improved concentration of good quality restaurants following the pedestrianisation and repaving of the street in 2011. The northern end of the street will be further enhanced by the new large restaurant we will be creating in our Foubert's Place scheme. In Kingly Court we are now in the process of strengthening and adding to the food and beverage choices, introducing new, contemporary formats. In particular, we have secured consent to change 3,400 sq. ft. of retail space to restaurant use on the lower floors, which will be available for occupation in spring 2013.

Having completed the repaving of the western end of Ganton Street, from its junction with Kingly Street, in 2013 we will be carrying out an innovative new lighting scheme to further enhance the ambience of this busy leisure street.

Offices have always been an important aspect of the village, producing 26% of its current income. The area is popular with businesses from fashion retailing as well as those in the media, creative and IT sectors. Demand for space from these sectors remains strong. By the end of 2012 we will have 24,000 sq. ft. of office space with an ERV of £1.1 million under refurbishment, which will begin to become available in autumn 2013.

COVENT GARDEN

Valuation £637.7m*

Acquisitions during the year £2.5m

Capital expenditure during the year £5.1m*

Capital value return 4.7%*

* Includes the Group's 50% share of the Longmartin joint venture.

Covent Garden has a diverse and eclectic mix of commercial activities, cultural attractions and a flourishing residential community. Together with its historic street patterns and architecture, the area has a distinctive character and bohemian atmosphere which appeal to visitors. We foster and encourage the area's diversity and features, and welcome the efforts of neighbouring owners who share our approach.

Our wholly owned holdings in Covent Garden extend to 4.5 acres in the districts of Seven Dials, Coliseum and the Opera Quarter. Together with our 50% interest in the Longmartin joint venture, Covent Garden is our largest investment location.

Most of the shops in our wholly owned Covent Garden holdings are in and around Seven Dials, which is already benefiting from improved footfall from major new office schemes close by. Crossrail is fuelling a number of important developments in and around Tottenham Court Road which will raise further the profile of streets around Seven Dials as their importance as pedestrian routes grows. In anticipation, we are already refreshing the retail choice on Earlham Street and Monmouth Street. We are also liaising with the London Borough of Camden to bring forward traffic management and public realm improvements to create a more pedestrian-friendly environment.

Restaurants and leisure uses are an important aspect of Covent Garden's lively atmosphere, and are the dominant uses in our Coliseum and Opera Quarter districts. As in our other villages, we are keen to introduce new operators and concepts to improve the variety and quality of choices available. We are aware of considerable unsatisfied demand from independent operators and multiples from the UK and overseas who wish to open in these busy districts.

Our plans include reconfiguration and refurbishment of buildings to provide more efficient trading space for retailers and restaurant operators on lower floors, and often to convert upper floors to meet the continuing strong demand for apartments to rent.

Longmartin's St Martin's Courtyard, owned by our 50/50 joint venture with the Mercers' Company, is progressing well since its completion some 18 months ago. 71% of its retail income comes from the eight large shops which front Long Acre, part of an exceptionally busy and improved route between Regent Street, through Piccadilly Circus and Leicester Square to central Covent Garden. Footfall into the Courtyard is growing and, as visitor demographics evolve, we expect to instigate some changes to the initial retail mix. The five restaurants in the Courtyard and on St Martin's Lane are well established.

Longmartin's offices are fully let, having now completed the letting of 13,000 sq. ft. which was under offer at the year end. We are advancing a number of schemes to improve unmodernised buildings on the periphery of the site.

CHINATOWN

Valuation £412.3m

Acquisitions during the year £3.1m

Capital expenditure during the year £1.0m

Capital value return 5.3%

Chinatown is at the heart of the West End's entertainment district, close to Piccadilly Circus and the important cluster of theatres and cinemas in and around Shaftesbury Avenue and Leicester Square. Although busy throughout the day, the area's long-established night-time leisure economy also attracts large numbers of visitors. These long hours of trading, particularly at weekends, underpin the prosperity of the local economy.

Our holdings in this location extend to around 2.75 acres and encompass around two-thirds of the district generally known as "Chinatown".

Unsurprisingly, catering is the dominant use in our Chinatown holdings, with 65 restaurants totalling 188,000 sq. ft. providing 62% of current income. They offer a wide variety of Far Eastern cuisine which has developed far beyond the tradition of Cantonese cooking which prevailed for many years. Choice today includes food from regions across China as well as Vietnamese, Japanese, Malaysian and Taiwanese cuisine. We encourage this variety, which improves choice and quality, bringing more custom to the area as a whole.

We are aware of a number of substantial restaurant groups based in the Far East which have expressed an interest in bringing their successful trading formats to Chinatown, and we are keen to facilitate their plans as part of the continuing evolution of our holdings.

London's long-established Far Eastern community brings considerable demand for our 62 shops, which extend to 62,000 sq. ft., and 34,000 sq. ft. of offices, which together provide 31% of our current income. Many of our 87 apartments, which provide 7% of current income, are let to people who work in local businesses, particularly those who are involved in the late-night economy and who value living close by.

The exceptionally busy and often congested streets in and around Chinatown present particular challenges in maintaining the good standard of public environment expected by today's visitors. We work closely with Westminster City Council and the local community to improve streets and their day-to-day servicing. We have been involved with numerous schemes in recent years and in 2013 we will be part-funding further pedestrianisation at the southern end of Wardour Street and the western part of Lisle Street as well as new public art installations.

Developments close to Chinatown are improving local amenities and add to the attraction of the area for visitors. The recently completed major refurbishment of Leicester Square has greatly improved this high-profile destination and the reopening of the Hippodrome as a new leisure and entertainment venue is attracting much interest. Recent and planned hotel developments close by are bringing considerable investment by others which will benefit this important area of the West End.

SOHO

Valuation £118.0m

Acquisitions during the year £29.5m

Capital expenditure during the year £1.9m

Capital value return 0.9%

Soho has a bustling local economy and is home to a wide variety of generally smaller shops, restaurants and bars, many small businesses in the media and creative industries and a long-established residential community.

Our investment in Soho, which was initially centred on Berwick Street alone, has now expanded to adjacent streets, such as Brewer Street, which have many features in common.

Despite Soho's popularity, fragmented ownerships have resulted in an absence of long-term strategy and a lack of investment. Better quality buildings and public realm are needed in order to improve the environment and amenities for visitors, businesses and local residents.

Our contribution to meeting the area's long-term challenges is through our investment and management strategies which have proved successful elsewhere in the West End. Inevitably, change will take a number of years to bring about.

We acquired properties to the value of £29.5 million in the year, comprising eleven shops, four restaurants, four apartments and 3,500 sq.ft. of offices. We expect to add further to our ownerships to help bring cohesion and improvement to the streets in which we are investing.

We welcome schemes and plans by others which, together with our initiatives, should bring significant investment and regeneration in the years ahead. These include:

• The numerous regeneration schemes along the eastern end of Oxford Street in anticipation of the footfall that will result from Crossrail and the redevelopment of Tottenham Court Road station and its new entrance on Dean Street;

• Planning consent for the demolition of Trenchard House on Broadwick Street, which has been derelict for many years, to be replaced by 78 new homes, new shops and a restaurant;

• After much delay, Westminster City Council has entered into an agreement which should lead to the refurbishment of the commercial elements of Kemp House, at the south end of Berwick Street and investment in surrounding public space;

• Westminster City Council is carrying out a consultation to identify strategies to revive the market in Berwick Street;

• Initial discussions are under way which should improve Walker's Court, which links Berwick Street to Brewer Street and Rupert Street to the south;

• The Crown Estate has recently completed a major mixed-use scheme at the western end of Brewer Street which is bringing more footfall from Regent Street, and now has plans to refurbish an adjoining block on Brewer Street; and

• A major hotel and retail scheme is under construction at Ham Yard, behind Piccadilly Circus, which will particularly benefit our ownerships in Denman Street.

All these projects give us confidence in the future prospects for our chosen locations in Soho. Meanwhile, we are pressing ahead with the improvement of the buildings we already own, providing a range of uses for which there continues to be considerable demand.

CHARLOTTE STREET

Valuation £50.1m

Acquisitions during the year £8.9m

Capital expenditure during the year £1.2m

Capital value return 3.7%

Charlotte Street is a geographically small neighbourhood, north of Oxford Street and close to Tottenham Court Road. It has an established reputation as a lively and popular restaurant district.

Our holdings in and around Charlotte Street, south of Goodge Street, now represent 3% by value of our portfolio and include fifteen restaurants, bars and cafes which provide 55% of current income. The residential community is growing and we have 39 apartments which produce 28% of current income.

The supply of properties in this close-knit area is always limited but, in the last year, we have added two properties totalling £8.9 million to our holdings. These comprised two restaurants and seven apartments.

We are aware that there is considerable interest from new restaurant operators who wish to locate in or close to Charlotte Street. This demand is driven by several important schemes in the vicinity which will bring more footfall and raise the area's profile.

As well as the impact of the new Tottenham Court Road transport interchange a few minutes' walk away, the development of the former Middlesex Hospital site now under way will create 310,000 sq. ft. of new offices as well as shops, restaurants and 237 apartments. The redevelopment of the Royal Mail site on Rathbone Place is expected to commence in late 2013 and will create a mixed-use scheme of over 400,000 sq. ft. Our holdings are well placed to benefit from these and other schemes nearby.

FINANCE REPORT

RESULTS

We have continued to grow rents and maintain low vacancy levels throughout the year. EPRA adjusted pre-tax profits increased by £2.0 million (6.8%) to £31.2 million (2011: £29.2 million) and EPRA adjusted diluted EPS grew 0.2p (1.7%) to 12.1p (2011: 11.9p). The lower percentage increase in EPRA adjusted diluted EPS is primarily a consequence of the additional shares in issue as a result of our Share Placing in 2011.

NET RENTAL INCOME

Rents receivable increased by £5.6 million (7.4%) to £81.0 million (2011: £75.4 million) including a contribution from acquisitions in 2012 of £0.9 million. The like-for-like increase in rents invoiced from our wholly owned portfolio was 2.5%. This is after the exceptional increase in 2011 of 7.5% and gives an average over the last two years of 5% p.a., broadly in line with our long-term average. The Longmartin joint venture is now virtually fully let and has delivered additional income of £1.3 million. 

The Group's property outgoings increased by £1.2 million to £10.0 million (2011: £8.8 million), representing 12.3% of rental income (2011: 11.7%). We continue to bear a greater proportion of service charge costs in respect of smaller offices and shops and also from our growing residential portfolio. In the current year there has been an unusual incidence of external renovation schemes, the cost of which is only partly recoverable through service charges.

ADMINISTRATIve COSTS

Total administrative costs for the year amounted to £10.0 million (2011: £9.6 million). Reflecting our growing business and activity within our portfolio, administrative costs, excluding the annual bonus provision and share option charge, increased this year by £1.2 million to £7.2 million. This was mainly as a result of an increase in the number of staff, rising employment costs and additional external advisory fees. We do not capitalise any of our administrative costs.

The provision for annual bonuses this year fell by £0.8 million to £1.2 million (2011: £2.0 million). The non-cash accounting charge for share options was £1.6 million, unchanged from last year.

PROPERTY VALUATION

The property revaluation gain was £90.2 million (2011: £110.6 million). This was driven by like-for-like ERV growth of 6.0% and yield compression of 14 basis points across the wholly owned portfolio and 7 basis points in the Longmartin joint venture. Realised gains, which totalled £1.6 million (2011: £nil), arose from the disposal of an apartment and premiums received on granting long leasehold extensions.

NET FINANCE COSTS

With higher debt levels resulting from acquisitions and capital expenditure projects during the year, net finance costs (excluding the change in fair value of derivative financial instruments) were up £2.0 million to £29.8 million (2011: £27.8 million). In addition, whilst the new 15-year loan raised by Longmartin increased our debt maturity profile, the proceeds were used to repay cheaper short-term existing bank revolving credit facilities, increasing the interest cost in the year.

Net finance costs were covered 2.05 times by operating profit before property valuation gains (2011: 2.05 times) which is comfortably above the minimum of 1.5 times which we are required to maintain by our bank loan agreements.

Reflecting the macro-economic environment, gilt and low-risk bond yields have fallen even further over the year and consequently the fair value deficit of our long-term interest rate swaps has increased by £28.2 million to £132.8 million (2011: £104.6 million). The position is sensitive to movements in long-term rates. The deficit increased by £21.5 million in the first quarter of the year, fell £21.2 million in the second quarter and grew by £27.9 million in the second half. This accounting charge is a non-cash item and is excluded from our banking covenants. The Board does not see the commercial benefit from crystallising this position at present but keeps it under review.

TAX CHARGE

As a REIT, the Group's activities are largely exempt from tax. The Longmartin joint venture is not part of the REIT group and so our share of its profits is subject to tax. Our share of its tax charge in the year was £1.8 million (2011: £1.9 million) of which £1.2 million (2011: £1.5 million) was in respect of deferred tax on the revaluation of the property and capital allowances.

DIVIDENDS

The Board has declared a final dividend of 6.05p per share, up 5.2% on the 2011 final dividend (5.75p). This brings the total dividend for the year to 12.0p per share, an increase of 6.7% on 2011 (11.25p). The dividends for the year are payable as PIDs.

We expect the rate of growth of future dividends to reflect the underlying long-term growth in the Group's net rental income and profits.

NET ASSET VALUE

EPRA adjusted net assets have increased by £95.1 million to £1,259.1 million (2011: £1,164.0 million), resulting in an increase in EPRA adjusted diluted NAV per share of 7.6% to £4.98 (2011: £4.63). The main factors in this increase were the property revaluation gains in the year and underlying profits less dividends paid. 

CASH FLOWS

Cash generated from operating activities after payment of interest and tax totalled £30.3 million (2011: £25.5 million) and covered dividend payments totalling £29.3 million (2011: £24.2 million).

Cash outflows in respect of acquisitions totalled £44.7 million during the year (2011: £64.0 million) and we spent £16.9 million (2011: £15.3 million) on capital expenditure across the portfolio.

In a typical year, capital expenditure is around 0.8% - 0.9% of the wholly owned portfolio value. However, we expect additional capital expenditure of around £9 million in 2013 and £6 million in 2014 as we carry out our two large development schemes in Carnaby.

Borrowings increased during the year by £61.4 million to £562.1 million (2011: £500.7 million), largely to fund acquisitions and capital expenditure. In December 2011, our Longmartin joint venture raised £120.0 million (our share: £60.0 million) through a 15-year secured loan at a fixed rate of 4.43%.

DEBT

Our strategy is to have medium to long-term flexible debt, a large proportion of which has interest rate protection, either through fixed-interest loans or hedging. This matches our funding with our long-term investment strategy, whilst reducing the uncertainty from interest rate movements. In practice we use secured debt which is typically cheaper than unsecured finance.

The Board regularly reviews debt levels and maturities, expected cash needs, interest rate and hedging exposures and the capital structure of the Balance Sheet.

At 30 September 2012, our secured debt, including our share of Longmartin's £120.0 million loan, totalled £556.7 million (2011: £495.3 million), of which £121.0 million was fixed rate borrowing (2011: £61.0 million) and £435.7 million was floating rate (2011: £434.3 million). £360.0 million of the floating rate debt was fixed through interest rate swaps in both years.

At year end we had available undrawn facilities totalling £139.3 million.

Our year end Group loan-to-value was 30.5% (2011: 29.5%) and would rise to a proforma 35.4% if we were to use our undrawn facilities to acquire properties or further invest in the portfolio. This is comfortably within the covenant limits in our loan agreements.

DEBT SUMMARY (INCLUDING OUR 50% SHARE OF LONGMARTIN DEBT)

*based on nominal value of debt†measured against EPRA adjusted net assets

Taking into account the impact of the interest rate hedging, the average cost of debt, including margin and non-utilisation costs for undrawn facilities, at 30 September 2012 was 5.43% (2011: 5.55%). The average margin payable on drawn bank debt was 0.88% at year end (2011: 0.85%) and this would rise to 1.04% if all facilities were fully drawn. Drawings under our bank facilities are all LIBOR-linked and their margins are significantly cheaper than would be available in the market today.

At 30 September 2012, 86.4% of our interest costs were fixed (2011: 85.0%). The current marginal cost of additional drawings under our revolving credit facilities is around 1.70% (2011: 1.75%).

The weighted average maturity of our debt is 6.8 years (2011: 6.9 years), and our earliest maturities are in 2016. We are maintaining a dialogue with our lenders and potential new lenders to ensure that our maturity risk is managed and our debt structure continues to meet the Group's long-term needs.

As we get closer to 2016 we will refinance some of our facilities and, assuming current conditions in the debt markets prevail, the new arrangements will be more expensive than those they replace.

SECURITY AND COVENANTS

Our bank loans and Debenture stock are secured by fixed charges over specific assets and a floating charge over all of the assets of Shaftesbury PLC and certain of its subsidiaries. The financial covenants in our banking agreements are structured on a Group-wide basis and are broadly similar for each facility. The Debenture covenants are based on the specific property assets charged under the Trust Deed.

The term loan in our Longmartin joint venture is secured by way of a fixed charge over its property and certain of its other assets and a floating charge over the remainder of its assets. There is no recourse to either of the joint venture shareholders.

Actual and forecast performance against loan covenants are reviewed by the Board at least quarterly and we continue to operate with significant headroom over the covenant limits set out in our loan agreements.

PORTFOLIO ANALYSIS

* Shaftesbury Group's share

BASIS OF VALUATION

Notes

1. The Fair Values at 30 September 2012 (the "valuation date") shown above in respect of the individual villages are, in each case, the aggregate of the Fair Values of several different property interests located within close proximity which, for the purpose of this analysis, are combined to create each village. The different interests within each village were not valued as a single lot.

2. Current gross income includes total actual and 'estimated income' reserved by leases. No rent is attributed to leases which were subject to rent free periods at the valuation date. Current gross income does not reflect any ground rents, head rents or rent charges and estimated irrecoverable outgoings at the valuation date. 'Estimated income' refers to gross estimated rental values in respect of rent reviews outstanding at the valuation date and, where appropriate, estimated rental values in respect of lease renewals outstanding at the valuation date where the Fair Value reflects terms for a renewed lease.

3. ERV is the respective valuers' opinion of the rental value of the properties, or parts thereof, reflecting the terms of the relevant leases or, if appropriate, reflecting the fact that certain of the properties, or parts thereof, have been valued on the basis of vacant possession and the assumed grant of a new lease. Where appropriate, ERV assumes completion of developments which are reflected in the valuations. ERV does not reflect any ground rents, head rents or rent charges and estimated irrecoverable outgoings.

4. The percentage of current gross income and the percentage of ERV in each of the use sectors are expressed as a percentage of total gross income and total ERV for each village.

5. Average unexpired lease length has been calculated by weighting the leases in terms of current rent reserved under the relevant leases and, where relevant, by reference to tenants' options to determine leases in advance of expiry through effluxion of time.

6. Where mixed uses occur within single leases, for the purpose of this analysis, the majority use by rental value has been adopted.

7. The Initial Yield is the net initial income at the valuation date expressed as a percentage of the gross valuation. Yields reflect net income after deduction of any ground rents, head rents and rent charges and estimated irrecoverable outgoings at the valuation date.

8. The Initial Yield, ignoring contractual rent free periods, has been calculated as if the contracted rent is payable from the valuation date.

9. Equivalent Yield is the internal rate of return, being the discount rate which needs to be applied to the expected flow of income so that the total amount of income so discounted at this rate equals the capital outlay at values current at the valuation date. The Equivalent Yield shown for each village has been calculated by merging together the cash flows and Fair Values of each of the different interests within each village and represents the average Equivalent Yield attributable to each village from this approach.

10. The tone of rental values and yields is the range of rental values or yields attributed to the majority of the properties.

11. All commercial floor areas are net lettable. All residential floor areas are gross internal. All floor areas are stated as existing at the valuation date.

12. For presentation purposes percentages have been rounded to the nearest integer.

13. The wholly owned residential portfolio has been re-measured. Changes in reported floor areas have not materially affected values advised by our valuers.

14.Properties in Denman Street have been reclassified from Chinatown to Soho during the year.

Group Statement of Comprehensive Income

For the year ended 30 September 2012

The notes form an integral part of this Group financial information.

Group Balance Sheet

As at 30 September 2012

The notes form an integral part of this Group financial information.

Group Cash Flow Statement

For the year ended 30 September 2012

The notes form an integral part of this Group financial information.

Group Statement of Changes in Shareholders' Equity For the year ended 30 September 2012

The notes form an integral part of this Group financial information.

Notes to the financial statements

For the year ended 30 September 2012

1. BASIS OF PREPARATION

The preliminary announcement does not constitute full financial statements.

The results for the year ended 30 September 2012 included in this preliminary announcement are extracted from the audited financial statements for the year ended 30 September 2012 which were approved by the directors on 29 November 2012. The auditors' report on those financial statements was unqualified and did not include a statement under Section 498(2) or 498(3) of the 2006 Companies Act.

The 2012 Annual Report is expected to be posted to shareholders on 17 December 2012 and will be considered at the Annual General Meeting to be held on 8 February 2013. The financial statements for the year ended 30 September 2012 have not yet been delivered to the Registrar of Companies.

The auditors' report on the financial statements for the year ended 30 September 2011 was unqualified and did not include a statement under Section 498(2) or 498(3) of the 2006 Companies Act. The financial statements for the year ended 30 September 2011 have been delivered to the Registrar of Companies.

2. SEGMENTAL INFORMATION

The chief operating decision maker has been identified as the Board, which is responsible for reviewing the Group's internal reporting in order to assess performance and the allocation of resources.

The Group's properties, which are all located in London's West End, are managed as a single portfolio. Its properties, which are of similar type, are combined into villages. All of the villages are geographically close to each other and have similar economic features and risks.

For the purposes of IFRS 8, each village is considered to be a separate operating segment. However, in view of the similar characteristics of each village, and the reporting of all investment, income and expenditure to the Board at an overall Group level, the aggregation criteria set out in IFRS 8 have been applied to give one reportable operating segment.

The Board assesses the performance of the reportable operating segment using measures of net property income and investment property valuation. All financial information provided to the Board is prepared on a basis consistent with these financial statements and, as the Group has only one reportable segment, the measures used in assessing the business are set out in the Group Statement of Comprehensive Income.

3. Revenue from properties

Rents receivable includes lease incentives recognised of £1.5 million (2011: £1.9 million).

4. PROPERTY CHARGES

5. Net property income

6. Charge in respect of equity settled remuneration

7. PROFIT ON DISPOSAL OF INVESTMENT PROPERTIES

The realised gains of £1.6 million arose from the disposal of an apartment and premiums received on granting long leasehold extensions.

8. Finance costS

9. Taxation

The Group's wholly owned business is subject to taxation as a REIT. Under the REIT regime, income from its rental business (calculated by reference to tax rather than accounting rules) and chargeable gains from the sale of its investment properties are exempt from corporation tax.

The Longmartin joint venture is outside the REIT group and is subject to corporation tax.

10. Earnings per share

The calculations below are in accordance with EPRA's Best Practice Recommendations.

The difference between the weighted average and diluted average number of ordinary shares arises from the potentially dilutive effect of outstanding options granted over ordinary shares.

11. Dividends paid

A final dividend of 6.05p per share was approved by the Board on 29 November 2012. Subject to approval by shareholders at the 2013 Annual General Meeting, the final dividend will be paid on 15 February 2013 to shareholders on the register at 25 January 2013. The dividend will be accounted for as an appropriation of revenue reserves in the year ending 30 September 2013.

12. INVESTMENT PROPERTIES

Investment properties were subject to external valuation as at 30 September 2012 by qualified professional valuers, being members of the Royal Institution of Chartered Surveyors (RICS), either working for DTZ Debenham Tie Leung Limited, Chartered Surveyors (in respect of the Group's wholly owned portfolio) or Knight Frank LLP, Chartered Surveyors (in respect of properties owned by Longmartin Properties Limited), both firms acting in the capacity of external valuers. All such properties were valued on the basis of Fair Value in accordance with the RICS Valuation - Professional Standards 2012.

Capital commitments

*Group's share.

13. Lease incentives

The unamortised amount of lease incentives is allocated between amounts to be charged against rental income within one year of the Balance Sheet date and amounts which will be charged against rental income in subsequent periods.

14. TRADE AND OTHER RECEIVABLES

15. Cash and cash equivalents

Cash balances at 30 September 2012 included amounts of £4.2 million (2011: £1.2 million), which are held in accounts or on deposit that have certain conditions restricting the use of these monies. Holding cash in restricted accounts does not prevent the Group from earning returns by placing these monies in interest bearing accounts or on deposit.

16. Trade and other payables

17. Borrowings

Reconciliation of net debt

The Group's head lease obligations represent its share of the net present value of amounts payable under leases with unexpired terms of 168 years held by Longmartin Properties Limited.

Availability and maturity of borrowings

Interest rate profile of interest bearing borrowings

The Group also incurs non-utilisation fees on undrawn facilities. At 30 September 2012, the weighted average charge on the undrawn facilities of £139.3 million (2011: £140.7 million) was 0.54% (2011: 0.44%).

The Group's current bank facilities, which expire between April 2016 and March 2021, are at credit margins which are fixed for the life of the facilities. At 30 September 2012, the weighted average credit margin on these facilities is:

The Group has in place interest rate swaps to hedge £360.0 million of floating rate bank debt, at fixed rates in the range 4.59% to 5.15%, with a weighted average rate at 30 September 2012 of 4.87%. The swaps, which are settled against three month LIBOR, expire between December 2027 and November 2038. The weighted average term is 20.4 years (2011: 21.4 years). If mutual break or early termination options were exercised the weighted average term is 5.2 years (2011: 6.2 years).

18. Financial instruments

Fair value of financial instruments

Interest rate swaps are the only financial instruments which are carried at fair value. They have been valued by J. C. Rathbone Associates Limited using a Level 2 methodology as defined in IFRS 7 by reference to observable market data.

The 8.5% Mortgage Debenture Stock 2024 and the Group's share of its joint venture's 4.43% secured term loan are held at amortised cost in the Balance Sheet. The fair value of liability in excess of book value which is not recognised in the reported results for the year is £18.5 million (2011: £11.4 million).

The fair values have been calculated using a level 3 methodology as adjusted by IFRS. The calculation is based on a discounted cash flow model using the relevant reference gilt and appropriate market spread.

The Group is not obliged to redeem the £61.0 million (nominal) of Debenture Stock in issue in advance of its redemption date of 31 March 2024, when repayment will be at par value. The Group also has no obligation to repay its share of the secured term loan in advance of its maturity on 21 December 2026.

Other financial instruments

The fair values of the Group's cash and cash equivalents, trade and other receivables, interest bearing borrowings (other than the 8.5% Mortgage Debenture Stock 2024 and its share of the secured term loan), head leases and trade and other payables are not materially different from the values at which they are carried in the financial statements.

19. Deferred tax liabilities

20. NET ASSET VALUE PER SHARE

The EPRA adjusted net asset value per share figures are calculated in accordance with EPRA's Best Practice Recommendations.