Final Results

REDEFINE INTERNATIONAL P.L.C.

("Redefine International" or the "Company" or the "Group")

 (Incorporated in the Isle of Man)

(Registered number 111198C)

LSE share code: RDI

JSE share code: RPL

ISIN: IM00B8BV8G91

AUDITED RESULTS FOR THE YEAR ENDED 31 AUGUST 2013

REDEFINE INTERNATIONAL REPOSITIONED TO DELIVER STRONG INCOME RETURNS UNDER REIT REGIME

Redefine International, the diversified income focused property company, which holds a primary listing on the London Stock Exchange ("LSE") and a secondary listing on the Johannesburg Stock Exchange ("JSE"), today announces its results for the year ended 31 August 2013.

Financial Highlights

‒ Earnings available for distribution of £30.1 million (31 August 2012: £25.5 million), an increase of 18.0%

‒ Basic earnings per share of 6.66 pence (Restated 31 August 2012: 24.16 pence loss), a return to profit

‒ Adjusted NAV per share of 38.66 pence (31 August 2012: 36.41 pence, re-stated), an increase of 6.2%

‒ Successful capital raisings totalling £144.3 million

‒ Second interim dividend of 1.635 pence per share (31 August 2012: 2.30 pence), a decrease of 28.9% reflecting an additional 388.5 million shares in issue at 31 August 2013

‒ Total declared dividends for the year of 3.11 pence per share (31 August 2012: 4.40 pence), a decrease of 29.3%

‒ Pro-forma Group LTV ratio reduced to 56.8% (31 August 2012: 81.7%)

‒ Total shareholder return for the year of 58.9%

Operational Highlights

‒ Portfolio quality enhanced through asset management, sales and new acquisitions

‒ Acquisition of three high quality German shopping centres with a combined market value of €189.0 million

‒ Exchange of contracts for the acquisition of Weston Favell Shopping Centre for a purchase price of £84.0 million post year end at an accretive 7.2% net initial yield

‒ Significant post year end restructuring of Aviva debt, secured against the UK Retail portfolio

‒ Portfolio occupancy improved to 97.3% (28 February 2013: 95.9%)

‒ Rationalisation of the shareholding structure approved post year end

‒ Successful secondary listing on the JSE post year end

‒ Proposed conversion to a UK-REIT and management internalisation well advanced

Greg Clarke, Chairman, commented:

"I am pleased to report another active and constructive period for the Company in which it achieved not only a strong set of results but also its long awaited goal of simplifying the shareholding structure to provide a single company with a dual listing on the LSE and JSE. The next key steps in terms of the Company's proposed conversion to a UK-REIT and internalisation of management are well advanced and further announcements to be made in due course.

"Further positive progress was made in restructuring the balance sheet post year end through an acquisition and debt restructuring with Aviva. The positive changes have reduced the leverage in the UK Retail portfolio and the long-term fixed-rate financing is expected to be beneficial. The reduction in servicing the Group's indebtedness has meant that the Company has increased its earnings available for distribution from its rationalised and higher quality investment portfolio.

"The economic outlook for the year ahead is increasingly positive and we firmly believe that, with an internalised management and industry benchmarked REIT structure, the Company is well positioned to deliver strong returns to shareholders."

Meeting, webcast and conference call

A meeting for analysts and institutional investors will take place today at 09.00 (UK local time) at FTI Consulting, Holborn Gate, 26 Southampton Buildings, London, WC2A 1PB. The meeting can also be accessed via a conference call dial in facility and webcast link, starting at 09.00, using the details below. The presentation will be made available on the Company's website http://www.redefineinternational.com/investor-relations/financial-reports. 

Conference call

Dial in numbers: United Kingdom Local +44(0)20 3427 1907 and South Africa Local +27(0)11 019 7076

Confirmation Code: 5271098

Webcast link: http://www.brrmedia.co.uk/event/117252/?popup=true

For further information, please contact:

Chairman's Statement

The 2013 financial year has seen a significant improvement in the performance of the Company from both an operational and shareholder return perspective.

The successful strengthening of the Group's financial position has allowed a shift in focus from its legacy portfolio and financing issues to enhancing the property portfolio and growing the business. This resulted in two major transactions, namely the acquisition of a portfolio of three prime German shopping centres with a combined market value of €189 million and the exchange of contracts for the acquisition of the Weston Favell Shopping Centre for a purchase price of £84 million post year end. 

Following successful share placements to raise £16.8 million of new capital to support the recent acquisition in Germany and a further placement to fund the settlement of the Aviva convertible instrument, the Company's market capitalisation reached £500 million for the first time.

Corporate Restructuring

It is very pleasing to report that the much anticipated rationalisation of the shareholding structure, which involved the unbundling by RIN of its sole asset, being a 61.8% shareholding in the Company (the "Unbundling"), has been approved. Following the Unbundling, previous shareholders in RIN will become direct shareholders in the Company, simplifying the corporate structure and enhancing liquidity. The Company also completed a secondary listing on the JSE on 28 October 2013.

The benefits of a larger free float and improved liquidity should allow the Company to be admitted to the relevant FTSE and EPRA indices in future.

The final step in the restructuring is the proposed conversion to a UK-REIT and internalisation of management, which are subject to various shareholder and regulatory approvals, is expected to be implemented in December 2013. Further announcements will be made in due course.

Financial Results

The Company produced a profit after tax attributable to equity holders of £61.5 million for the year which showed an encouraging, albeit gradual, improvement in the UK and European property markets. However, uncertainty around commodity markets impacted the Australian Dollar which declined 17.2% against Pound Sterling for the six months to 31 August 2013 which affected the return on the Cromwell investment.

Earnings available for distribution for the year were 3.11 pence per share which is a strong result given the increased number of shares following the capital raising activity and the impact of holding cash while the acquisition of new investments were completed. The impact of the weaker Australian Dollar reduced earnings by approximately 0.05 pence.

The Adjusted NAV per share as at 31 August 2013 was 38.66 pence, up 6.2% from 31 August 2012. This is after accounting for the issue of 490,384,616 new shares (441,346,154 as adjusted for the share consolidation which occurred in October 2012) at 26.0 pence in October 2012. The Adjusted NAV per share declined 4.0% in the second half of the financial year, largely as a result of the weaker Australian Dollar.

Operations

The performance of the Group's property portfolio was solid, underpinned by signs of improving investor and occupier sentiment. The overall occupancy of the property portfolio increased from 95.9% as at 28 February 2013 to 97.3% as at 31 August 2013 and valuations generally stabilised or rose in the second half of the year reflecting a stronger economic outlook and more positive investment market conditions. Where valuation declines were experienced they related primarily to declining lease lengths.

The UK Retail portfolio performed in line with national trends and encouragingly good lettings have been achieved at the revamped St George's Centre in Harrow ("St George's") and the Birchwood Centre in Warrington ("Birchwood"). In particular the lettings to Nando's and Frankie & Benny's in St George's have been very well received.

The holding of Government-let offices has successfully been reduced to 11.6% by market value of the directly owned property portfolio (excluding non-core assets) by market value. The remaining portfolio now provides a combination of high yielding assets let to tenants with strong covenants and opportunities to recycle capital from redevelopment assets into income producing investments.

The European portfolio provided a resilient income contribution backed by strong covenants and inflation-linked leases. The acquisition of three high quality German shopping centres with a number of asset enhancement opportunities is expected to provide a stronger asset base from which to drive rental growth.

The Hotel portfolio performed well during a period that was expected to be weak after last year's Olympic Games. Room rates and occupancies held up well considering the outperformance in 2012. The newly acquired Holiday Inn Express in Earls Court performed above expectations after taking into account the recent 50 bedroom extension.

Cromwell produced a record operating profit of AUD 102.4 million (7.6 cps) and increased its distribution by 3.67% to 7.25 cps. This was unfortunately offset by a weaker Australian dollar against Pound Sterling. Cromwell was also admitted to the ASX 200 Index during the period which should further enhance its profile and liquidity.

Dividend

The Board declared a second interim dividend of 1.635 pence per share on 28 October 2013, resulting in a total dividend of 3.11 pence per share for the year ended 31 August 2013, and reflecting a pay-out ratio of 100% of earnings available for distribution. Further details on the timing of the second interim dividend are set out in the Financial Review below.

Prospects

The 2013 financial year was another transformative year for the Group. It is now on a substantially firmer footing which has already enabled the Company to make the recently announced accretive investments. The Company's business model will continue to be focused around a diversified portfolio allowing capital to be recycled into growth areas. 

The economic outlook for the year ahead appears positive and, with internalised management operating within an industry benchmarked by the UK-REIT structure, the Company is well poised to deliver strong returns to shareholders.

Greg Clarke

Chairman

Our Business

Investment Strategy

The Group's strategy is focused on delivering sustainable and growing income returns through investment in high income yielding assets let to high quality occupiers on long leases. Development exposure is generally limited to asset management and the ancillary development of existing assets in order to enhance and protect capital values. The Group aims to distribute the majority of its earnings available for distribution on a semi-annual basis, providing investors with attractive income returns and exposure to capital growth opportunities.

Investment Markets

The Group is focused on real estate investment in large, well developed economies with established and transparent real estate markets. The investment portfolio is geographically diversified across the UK, Europe and Australia and provides exposure to the office, retail, industrial and hotel sectors.

Business Segments

Property portfolio by business segment at 31 August 2013

Notes:

1. Figures reflect the Group's share of jointly controlled entities.

2. The table excludes the Group's interest in Cromwell.

3. Non-core assets comprise the Delta portfolio and the Justice Centre in the Hague.

Top 10 properties by value

Note:

1. Figures reflect 100% of the asset values; ownership percentages are provided above.

UK Stable Income

Market

Improving economic conditions and confidence have started filtering through to the occupational market. Property consultants, GVA reported take-up across regional centres in the third quarter of 2013 at 10% above the five-year quarterly average, a significant turnaround from recent periods.

A stronger investment market generally and an increase in investment activity outside London and the South East provided improved liquidity and valuation support to regional assets. The pace of valuation decline has slowed significantly and, in many cases, reversed for better quality secondary assets in major regional centres. 

Performance

Valuations were supported by the improvements to the investment market as well as the on-going process of rationalising the portfolio to those assets with better long term growth potential. The portfolio value declined marginally by 1.0% in the six month period ended 31 August 2013. The Government-let portfolio declined by approximately 1.9%, largely as a result of declining lease lengths reflecting the current environment in which negotiations around lease extensions are typically left until the end of the lease period, and are then subject to an often protracted approval process. Despite this, the Company is confident that the majority of leases will be extended or re-let in due course. Positive revaluations elsewhere in the portfolio, most notably offices owned in London's Southbank area, offset some of the decline in values of regional offices.

Occupancy (excluding the Delta portfolio) improved to 98.0% by area (28 February 2013: 93.2%) following the sale of Sapphire House, Telford and the letting of 9,000 sq ft of vacant space. A further 65,000 sq ft was under offer at year end, which will support a continued reduction in operating costs.

Investment and asset management

The Company has agreed terms to sell Lyon and Equitable House. The transaction is subject to contract and further details will be announced in due course.

The lease with the Secretary of State (UK Passport Service) at Rochdale was regeared by removing the 2016 break and extending the term certain to November 2021. Leasing activity was otherwise limited to a number of small lettings with few lease events being triggered in the period.

Delta portfolio

The Delta portfolio remains held for sale. Three assets were sold post year end for a total disposal price of £4.1 million in order to achieve the necessary sales targets under the restructured facility agreement. The remainder of the portfolio is anticipated to be sold before April 2015. The Company has no economic exposure to the valuation movements on the Delta portfolio but continues to receive 65% of net rental income after debt service costs. Further details of the Delta finance facility are set out in the Finance Review.

Strategy and Outlook

The restructuring of the ex-Wichford Government-let regional office portfolio is largely complete resulting in a portfolio with reduced letting risk and a stronger income profile. Government-let offices now represent 11.6% of the directly held property portfolio (excluding non-core assets) by value.

Rental levels on good quality secondary stock are expected to stabilise, particularly in the South East, where a sustained level of demand is being experienced. Asset management will remain focused on income security and repositioning assets with higher value alternative uses.

Outlook

Despite the recent focus on restructuring the portfolio, a stronger economy and improving occupier sentiment are creating opportunities to acquire relatively high yielding assets in areas with improving property fundamentals. The immediate focus will be on recycling capital from redevelopment sites into new investments.

UK Retail

Market

Consumer-related economic indicators have improved throughout 2013 which, if sustained, should start to support demand for retail space. However, despite a number of leading indicators, including retail sales volumes, showing signs of improvement, real rental growth may still take some time to come through. Administrations across all retail sectors reduced significantly in the first half of 2013 providing further evidence that the market is stabilising. 

The investment market for good quality secondary shopping centres has seen a sharp increase in activity with a number of investors attracted to shopping centres that offer relatively high but sustainable yields.

Performance

The portfolio value increased by 2.9% in the six months to 31 August 2013 reflecting the impact of a successful leasing and asset management strategy as well as evidence from a stronger investment market.

Occupancy declined marginally to 95.0% by area (28 February 2013: 95.9%). 1,096 m2 or 19.0% of the void space relates to the remaining newly developed units at Birchwood and St George's which are in the process of being marketed. ERVs increased 2.4% in the six month period from 28 February 2013. Early signs of stability appear to be returning to the occupational market outside of London which, together with recent investment, leasing and asset management initiatives, are expected to provide support to future rental levels.

Footfall declined 3.8% against a comparative Experian benchmark decline of 4.0%, reflecting a relatively common recent trend of fewer individual visits, but higher expenditure per visit.

UK Retail at a glance

1 Figures reflect the Group's share of jointly controlled entities

2 31 August 2012 figures have been restated to reflect the Group's share of jointly controlled entities (previously reported at 100%)

3 Excludes Delamere Place Shopping Centre, Crewe

Investment and asset management

Recent asset management initiatives, particularly those at St George's, are expected to show strong returns on investment with capital having been invested early in the cycle ahead of anticipated improvements in the retail environment.

St George's, Harrow

A number of key lettings, lease extensions and refurbishments were completed during the period as part of the asset management plan to establish St George's as the leisure and shopping destination of choice in the wider catchment area. 

· Unit 10/11: Nando's has taken a 3,491 sq ft unit plus an additional 220 sq ft seating area at a rental of £82,000 p.a on a new 20 year lease.

· Unit 12/13: Frankie & Benny's has taken a 4,270 sq ft unit at a rental of £102,480 p.a on a new 25 year lease with a tenant only break at year 15.

· Unit 1/2: H&M has regeared its lease and taken a reconfigured 7,786 sq ft unit at a rental of £175,000 p.a on a 10 year lease with a tenant only break at year seven.

· Unit 28: Pizza Express has regeared its lease and taken a 2,859 sq ft unit at a rental of £79,300 p.a on a new 25 year lease with a tenant only break at year 15.

· The units occupied by Vue, Prezzo, McDonalds and TK Maxx were comprehensively refurbished.

Birchwood, Warrington

· NU13: 99p Stores have taken a 10,000 sq ft unit at a gross rental of £100,000 p.a. on a new 10 year lease.

Weston Favell Shopping Centre, Northampton ("Weston Favell")

Contracts were exchanged post year end for the acquisition of Weston Favell for a purchase price of £84.0 million reflecting a net initial yield of 7.2%. The property, situated on the edge of Northampton, comprises approximately 307,763 sq ft of retail accommodation arranged over two floors with 1,150 free parking spaces. Anchored by one of the largest Tesco Extra supermarkets in the UK (156,987 sq ft, with a 14.3 year unexpired lease term), the centre has a total of 56 retail units and seven kiosks let to a variety of national and local retailers. 

The key investment attractions include the centre's dominance in the wider catchment area, the lack of supermarket competition in the north east of Northampton and the strength of the Tesco covenant which accounts for 53% of the net passing rent. The current void rate is 3.4% by ERV and 2.2% by area.

Digital strategy

The installation of Wi-Fi has been completed at Grand Arcade Shopping Centre, Wigan ("Grand Arcade"), West Orchards Shopping Centre, Coventry ("West Orchards") and Birchwood with the installation at Byron Place Shopping Centre, Seaham ("Byron Place") in progress. A mobile and tablet enabled website and consumer app is being trialled at West Orchards and will be used to inform a strategy across the UK Retail portfolio.

Commercialisation

The Company recently appointed consultants to drive additional income through use of good quality operational management, market contacts and 'portfolio leverage'. It is anticipated that an additional £150,000 p.a of new income will be generated in 2014.

Strategy and Outlook

The UK retail market strengthened in 2013 with signs of improving consumer and occupier demand. The retail recovery remains fragile, which combined with on-going structural changes in retailing and consumer behaviour, provides some uncertainty. However, market sentiment suggests the value, convenience and leisure subsectors are more resilient in terms of consumer demand, and showing greater resistance to the effects of the internet. 

The Company's retail strategy has therefore focused on two key areas of growth, namely convenience and discount shopping and leisure, food and beverage. Efficient capital expenditure and strategic leasing have encouraged a number of retailers to invest in modernising their stores. The results, particularly at St George's, where retailers have reported clear improvements in footfall and profitability, provide strong evidence that appropriately directed investment can provide sustainable retail assets and investment returns. 

The year ahead will focus on letting the remaining 8,600 sq ft of new retail space under development at Birchwood and continued capital expenditure programmes at St George's and West Orchards.

Hotel properties

Market

Following a slow start to the 2013 calendar year, there was a marked improvement in operating performance from June onwards. PriceWaterhouseCoopers (UK hotels forecast 2014) expects occupancy across all London hotels to reach approximately 82% in 2014 despite new supply, particularly in East London. As expected, the wider London hotel market has seen room rates significantly reduced from the peak at the time of the 2012 Olympic Games. However, improved economic prospects and tangible improvements in operating metrics suggest room rates are likely to rise again in 2014.

Performance

Underlying operating metrics have improved markedly in recent months which is encouraging going into the new financial year. Average occupancies for the financial year were 33.1% across the portfolio. Continued high occupancies should support increased rates and RevPar in 2014. RevPar averaged £72.60 across the portfolio for the financial year.

The portfolio value of £150.3 million remained broadly unchanged from 28 February 2013 (£150.2 million).

Investment and asset management

An effective 42.6% share of the Holiday Inn Express, Earl's Court was acquired in November 2012. The effective purchase price of £27.0 million (including £0.4 million of transaction costs) reflected a net initial yield of 7.5%. The addition of 50 rooms in 2012 has been easily absorbed by the market with occupancies and RevPar remaining stable; a strong indication of the underlying demand locally and in London generally. 

The construction of the Southwark redevelopment to add 48 bedrooms is well advanced, with completion anticipated in the first half of 2014. A planning application for an additional 10 bedrooms to be located alongside the entrance façade has been submitted for planning.

Strategy

Opportunities to make further acquisitions are expected to be limited in the current market, partly as a result of the limited number of suitable investment opportunities coming to the market and partly as a result of current pricing expectations. The immediate focus will therefore remain on adding additional rooms where possible and on revenue growth.

During the period, the Redefine Hotel Management Group, the lessee of the Company's hotel portfolio, announced a merger with the BDL Hotel Group to form Redefine BDL Hotel Group Limited. This group is now one of the largest independent hotel management companies in the UK and manages 60 hotels representing 6,700 rooms for major hotel brands such as Intercontinental Hotels Group, Wyndham Worldwide, Starwood Hotels & Resorts, Hilton Hotels and Resorts and Best Western. The Company's focus remains on London based limited service hotels and the establishment of a leading management company within the wider Group will provide improved access to market opportunities.

Outlook

Following a year of adjustment post the Olympics, the London hotel market is set to revert back to more normal trends. Occupancy has strengthened recently, and, despite continued new supply, opportunities for higher rates and RevPars are expected in 2014. In nominal terms, rates and RevPars are expected to return to peak levels.

Given the historic close relationship between RevPar and GDP, the existing portfolio is well positioned, particularly following the Group's recent capital investment program, to benefit from any sustained improvement in the UK economy.

Europe

Market

Although investment volumes in Europe declined overall, volumes in Germany continued to rise supporting Germany's status as a relative safe haven in Europe. Investment in Germany remains concentrated on prime assets where values continued to rise increasing the pricing differential between prime and secondary assets. Increasing risk appetite may however see investment demand for secondary assets improving in the near future.

Performance

Voids in the like-for-like portfolio remained nominal with occupancy of the total portfolio reducing only marginally to 98.6% following the acquisition of City Arkaden Shopping Centre, Ingolstadt, which was 87.1% occupied at 31 August 2013 and is subject to obtaining vacant possession on a number of units as part of the management strategy for the asset.

Valuations were up 2.2% in local currency terms from 28 February 2013 reflecting the active asset management within the portfolio in negotiating lease renewals or extensions. However, a weaker Euro against the Pound Sterling resulted in valuations increasing 1.3% in Sterling terms. 

Investment and asset management

The acquisition of three prime shopping centres in Berlin, Hamburg and Ingolstadt (the "CMC transaction") was a significant transaction for the Group and a notable step in improving the overall quality of the European portfolio. 

The three German shopping centres were acquired for a headline value of €189.0 million reflecting a net initial yield of 5.5% before taking into account effective adjustments as a result of the consideration being part paid in ordinary shares of the Company and part paid in cash at a discount of approximately 4.0% to the equity value. The three German shopping centres were acquired together with stapled debt of €140.8 million at an average all-in cost of 3.14% p.a. providing an initial income return on equity in excess of 12%.

The Delmonhorst property (part of the Lidl Portfolio) was sold for €250,000. The sale removes 2,500 sq ft of vacant space and is in line with the Company's strategy of selling smaller non-core assets. The proceeds of the sale have been used to part repay the loan on the remaining portfolio.

Leasing activity was limited with few lease events in the period. 

Strategy and Outlook

A number of asset management initiatives were identified as part of the recent CMC transaction. Opportunities to add additional retail space supported by the introduction of additional or new anchor tenants are at various stages of development. Certain of these initiatives have been progressed and are anticipated to result in yield enhancements over a two year period. 

Further sales of smaller non-core assets are anticipated during the next financial year with the intention of reducing the number of assets in the portfolio and concentrating on opportunities to drive income and value.

Cromwell

Cromwell's business

Cromwell is an internally managed Australian Real Estate Investment Trust (A-REIT) with a property investment portfolio in excess of AUD 2.5 billion (£1.5 billion) together with a fund management business that promotes and manages unlisted property investments. Cromwell's strategy is to provide defensive, superior risk-adjusted returns from Australian commercial property

Cromwell trades on the Australian Stock Exchange as a stapled security comprising Cromwell Corporation Limited (which manages the funds management brand and the property operations) and Cromwell Diversified Property Trust (which owns the AUD 2.5 billion property portfolio).

Financial and operating results

Cromwell produced a strong set of operating and financial results for their financial year ended 30 June 2013. Highlights included:

Financial

‒ Record operating profit of AUD 102.4 million (7.6 AUD cents per security)

‒ Operating profit derived 94.9% from property portfolio

‒ Increase in like-for-like property income of 2.89%

‒ Distribution per security increased by 3.57% to 7.25 AUD cents per security

‒ Net tangible assets excluding interest rate swaps increased to AUD 0.72

‒ Net gearing reduced to 46% loan to value.

Operating

‒ Property portfolio continued to support earnings growth despite a more difficult climate

‒ Government and listed companies provided 46% and 37% of property income respectively

‒ Occupancy maintained at 96% with minimal lease expiries over the next two years

‒ Property exposure remains focused on commercial assets with a balanced allocation to Brisbane, Sydney, Melbourne and Canberra

For further information please visit www.cromwell.com.au

Our investment

Following a period of strong share price appreciation supported by a strong Australian dollar relative to Sterling, the Company took the opportunity to sell 86,000,000 securities for a total disposal consideration of £52.8 million and thereby crystallising a profit of £10.5 million. As a result of the disposal and a further Cromwell placement in June 2013 in which the Company did not take part, Redefine International's shareholding in Cromwell reduced from 23.08% to 13.70% currently.

Portfolio Summary

Portfolio overview by business segment

Business segments - market values

Notes:

1. Figures reflect the Group's share of jointly controlled entities.

2. The non-core portfolio includes the Delta portfolio and the Justice Centre in the Hague.

Business segments - gross rental income

Notes:

1. Figures reflect the Group's share of jointly controlled entities.

2. The non-core portfolio includes the Delta portfolio and the Justice Centre in the Hague.

Business segments - valuation movement since 28 February 2013

Notes:

1. Includes the effect of foreign exchange movement during the period. .

2. Figures reflect the Group's share of jointly controlled entities.

3. The non-core portfolio includes the Delta portfolio and the Justice Centre in the Hague.

Portfolio overview by sector

Property sectors at 31 August 2013

Notes:

1. Figures reflect the Group's share of jointly controlled entities.

Financial Review

Overview

The Group delivered a profit before tax of £67.2 million, compared to a loss of £124.9 million for the previous year. The disposal of 86 million Cromwell securities for a profit of £10.5 million and the subsequent change in accounting treatment to recognise the Cromwell investment at fair value, contributed significantly to the profit. The restructuring of the VBG portfolio resulted in a £16.4 million debt cancellation, also contributing to the profit figure. Earnings available for distribution were £30.1 million, up by £4.6 million from the year ended 31 August 2012. Basic earnings per share were 6.66 pence compared to a loss of 24.16 pence per share (restated) in the previous year.

Adjusting for the effects of the capital raise and 9:10 share consolidation in October 2012, the Adjusted NAV increased by 6.2% from 36.41 pence at 31 August 2012 to 38.66 pence at 31 August 2013. The 2.25 pence increase together with the 3.11 pence dividend payment for the 2013 financial year represents a 13.9% return on equity.

Earnings available for distribution and dividend

The Company's policy is to distribute the majority of its earnings available for distribution in the form of dividends to shareholders. The earnings available for distribution exclude any capital items and is the figure used by the Board as its measure of underlying performance. The earnings also exclude any earnings from Gamma and include only the Group's share of the net income from the Delta portfolio. Considering the earnings available for distribution at the year end, the Board declared a second interim dividend of 1.635 pence per share on 28 October 2013. No final dividend is proposed. Taken together with the first interim dividend of 1.475 pence per share, the full year dividend was 3.11 pence per share. The distribution reflects a yield of 8.0% on the Adjusted NAV per share at 31 August 2013.

The second interim dividend for the six months ended 31 August 2013 is payable to shareholders in accordance with the abbreviated timetable set out below:

There may be no dematerialisation or rematerialisation, nor any transfer of shares between sub-registers in the Isle of Man and South Africa between Monday, 18 November 2013 and Friday, 22 November 2013, both days inclusive.

Shareholders on the South African sub-register will receive dividends in South African Rand, based on the exchange rate to be obtained by the Company on or before 8 November 2013. A further announcement in this respect will be made on or before 8 November 2013.

The reconciliation of earnings available for distribution is as follows:

Net assets

The EPRA NAV per share has increased by 8.6%, from 27.63 pence at 31 August 2012 (pro-forma) to 30.00 pence per share at 31 August 2013. EPRA NAV is used as a reporting measure to better reflect underlying net asset value attributable to shareholders by removing the cumulative fair value movements of interest rate derivatives and deferred tax.

The EPRA NAV as at 31 August 2013 includes items which, in the opinion of the Board, should be adjusted in order to better reflect the underlying value of the Group. An "Adjusted NAV" per share has therefore been calculated as follows:

Notes:

1. Pro-forma position of 31 August 2012 NAV per share figure after adjusting for the effects of the capital raise and the 0.9:1 share consolidation in October 2012.

2. Notwithstanding the appointment of a receiver to the assets held in the Gamma portfolio, the residual non-recourse debt associated with the portfolio of £41.9 million and accrual interest of £0.9 million will remain on the Group's statement of financial position until such time as it can be legally extinguished or Redefine International loses control of Wichford Gamma Limited. Refer to Note 2.2.2 and Note 38 of the consolidated financial statements for further detail.

3. Following the successful completion of the Delta restructuring announced on 15 October 2012, the negative net asset value position of 2.36 pence per share is expected to reverse at the end of the loan term.

4. A provision of £12.1 million (1.19 pence per share) is currently held relating to the external loan facilities provided to certain of the UK shopping centres funded by Aviva. The facilities provided to the jointly controlled Grand Arcade Wigan and West Orchards Coventry centres, which have a nominal value of £199.88 million, are cross collateralised against properties held directly by the Group. These external loan liabilities are in excess of the value of the properties held by the jointly controlled entities. Following the announcement of the restructuring agreement entered into on 17 October 2013, this provision will no longer be necessary post the period end. In addition, as a result of the non-recourse nature of the debt relating to the Justice Centre in the Hague, Netherlands the negative net asset value position of 0.47 pence per share has been written back.

5. As Cromwell is accounted for as an investment at fair value in the statement of financial position as at 31 August 2013, the adjustment from equity accounting is no longer relevant. Cromwell was equity accounted at a net asset value of 69.8 AUD cents per security at 31 August 2012. The market price of Cromwell at 31 August 2012 was 75.0 AUD cents per security leading to an Adjusted NAV write-up of 0.77 pence per share.

6. The net VBG portfolio debt value as at 31 August 2012 was in excess of the current investment property value. Following the restructuring the negative net asset value position was reversed, leading to a positive effect on net asset value per share of 1.76 pence per share.

7. As a result of the proposed internalisation of the investment adviser, it is not expected that the 14,697,143 shares relating to the performance fee reserve will be issued. Notes 2, 3 and 4 above have been calculated excluding the dilutionary effect of these shares.

Financing and capital

The removal of the Gamma debt, completion of the VBG and Delta restructurings, as well as the £127.5 million capital raising in October 2012, have significantly improved the financial position of the Group and the LTV measures.

The Group's LTV ratio reduced to 60.4% (31 August 2012: 81.7%) following the various capital raising activities and debt restructurings during the period. The pro-forma position of 56.8% reflects the positive effect of the Aviva arrangements agreed post 31 August 2013, as well as the exclusion of the debt against the Delta portfolio, the Justice Centre in the Hague and the residual Gamma debt. The slightly higher than planned LTV is largely as a result of the take-on of €140.8 million of existing debt related to the acquisition of the three German shopping centres at an attractive all in rate of 3.14% p.a.

The weighted average maturity of debt (on a pro-forma basis) has increased substantially, to over nine years. Securing longer term facilities and rates in the current low interest rate environment will continue to be a priority in 2014. The nominal value of the Group's total debt facilities (excluding Gamma) at 31 August 2013 was £815.9 million (£635.1 million including its share of debt in subsidiaries and jointly controlled entities). 

Details of the repayment and restructuring of facilities which took place during the year are set out below:

VBG

The Company announced that it had completed the restructuring of all four VBG assets and the associated financing facilities on 8 October 2012. The restructuring and refinancing of the VBG portfolio and financing facilities has resulted in the Company owning a 49% interest in the VBG assets with Menora as its joint venture partner.

As part of the restructuring, the Company agreed to sell, for a nominal amount, 51% of its interest in the VBG holding company to Menora. This joint venture company, together with certain of its subsidiaries, reached agreement with the servicer of the VBG facilities to dispose of the VBG assets to new subsidiary companies within the joint venture vehicle. The proceeds from the disposal of approximately €80.0 million were used to settle the original VBG facilities in full. The facilities had an outstanding balance of €117.3 million.

The gross acquisition cost (inclusive of transaction costs) of approximately €84.9 million was partly funded by the joint venture company with a new five year €57.0 million debt facility secured from DG Hyp, with both joint venture partners injecting €14.0 million (£12.6 million) for their joint interests. The new debt facility has been secured at a margin of 1.72% p.a. which, together with a swap rate of 0.915% p.a., provides an all-in rate of 2.64% p.a., resulting in an initial yield on equity in excess of 19.0% on the Group's investment.

Delta

The Company announced on 15 October 2012 that the agreement to extend and restructure the £114.6 million Delta facility had been completed. The restructuring involved the repayment of £33.5 million of debt in consideration for the release from charge of a portfolio of seven assets, including the Lyon House, Harrow development site and six other assets let to predominantly UK central government occupiers. The repayment of debt associated with the six income producing assets reflects a net initial yield of 7.6% and a weighted average unexpired lease term in excess of 17 years.

The maturity date of the Delta facility has been extended to 15 April 2015 subject to the Company meeting certain limited annual disposal targets in respect of the remaining 16 Delta portfolio assets. The disposal proceeds, together with amortisation requirements, will be applied to reducing the remaining £81.1 million facility balance. The facility remains non-recourse to the Group.

Gamma

Notwithstanding the appointment of a receiver to the assets held in the Gamma portfolio and according to IFRS, the residual non-recourse debt associated with the portfolio of £41.9 million will remain on the balance sheet until such time as it can be legally extinguished or Redefine International loses control of Wichford Gamma Limited. Refer to Note 2.2.2 and Note 38 of the consolidated financial statements for further detail. It is expected that the release of this debt will occur by 2015 as the Gamma assets have, subsequent to the year end, been disposed of by the receivers. The facility is non-recourse to the Group.

Zeta

As announced on 29 May 2013, the Company completed the refinancing of the £46.0 million Zeta facility with Lloyds TSB Bank PLC.

A new £38.5 million facility, reflecting a 55% loan to value ratio, was agreed for a three year term with options to extend for two further one year periods. 75% of the loan amount was fixed for the initial three year term at an all-in rate of 4.06% with the balance of the loan bearing interest at a rate of 3.25% above three month Libor.

The £7.5 million reduction in the loan balance was funded with £5.5 million of cash already secured by the facility following a lease surrender and the subsequent sale of the Telford property. The remainder was funded utilising existing cash resources. The loan is secured against the Company's UK Government let offices (excluding the Delta portfolio assets).

Aviva Instrument

On 13 September 2013 the £13 million 6% convertible loan instrument issued to Aviva in September 2010, was settled in full and financed by the issue of 36,587,873 new ordinary shares of 8 pence each at an issue price of 41.925 pence per share.

Aviva Restructure

On 17 October 2013 the Company announced that it had agreed a debt restructuring with Aviva with respect to the Company's UK shopping centre portfolio. As part of the restructuring the Company exchanged contracts to purchase the Weston Favell Shopping Centre, Northampton for £84 million. Aviva will provide Redefine International with a finance facility of £50 million, with the balance of the purchase consideration being funded through internal cash resources. The interest rate on this Aviva facility will be fixed at circa 5.7% fixed per annum and the loan will be repayable in November 2038. Completion of the transaction is subject to certain conditions, which the Company expects to be fulfilled by 6 December 2013.

The transaction, once completed, will result in a restructuring of the Aviva debt secured against Grand Arcade and West Orchards. The debt against the West Orchards property will be legally settled at the current market value of the property (£37 million) and will result in the property becoming unencumbered. The debt against the Grand Arcade property will be reduced by approximately 50% to £73 million in consideration for a cash payment of £7 million. The Company will assume 100% ownership but Aviva will retain the right to participate in 50% of the income and capital growth generated by Grand Arcade (after all costs, expenses and interest) going forward. The Company will have the right to "buy-back" the profit share for a maximum cash payment of £18.5 million, in five instalments, upon the valuation of Grand Arcade increasing by certain agreed benchmarks.

Following completion of the transaction, the facilities currently provided by Aviva with respect to two of the Company's other shopping centres, at Birchwood (Warrington) and Byron Place (Seaham) as well as Grand Arcade, will be cross collateralised with the facility to be provided for Weston Favell.

Equity Raisings

The Company completed a £127.5 million (£122.5 million net of expenses) Firm Placing and Open Offer on 9 October 2012 through the issue of 490,384,616 new ordinary shares of 7.2 pence each at an issue price of 26.0 pence per new ordinary share. The new ordinary shares were consolidated on 11 October 2012 on a 9 for 10 basis, following which the Company's issued ordinary share capital comprised of 962,855,467 ordinary shares of 8.0 pence each.

A further 5,108,290 shares were issued on 4 July 2013 to acquire certain non-controlling interests in the period.

Pursuant to the acquisition of the three prime shopping centres in Germany which completed on 30 August 2013, the Company raised £16.8 million (before expenses) through a placing of 40,000,000 new ordinary shares of 8 pence each, at a price of 42.0 pence per share. The shares were admitted to trading on the LSE on 3 September 2013. The consideration in respect of the German retail assets comprised the issue of 12,606,061 new ordinary shares on 3 September 2013 and a further tranche of approximately 19,635,340 new ordinary shares will be issued on 6 December 2013 at an effective issue price of 40.0 pence per share.

In addition, 36,587,873 new ordinary shares were issued on 18 September 2013 to fund the settlement of the Aviva capital instrument.

Cashflow

The cash flow statement reflects net cash generated from operating activities of £36.9million (31 August 2012: £20.0 million), an 84.5% increase from 2012.

A net increase of £48.7 million in acquisitions over the prior year (excluding the Cromwell disposal) was directly related to the deployment of the £127.5 million raised in October 2012.

The net repayment of loans and borrowings include £35.4 million with respect to the Delta restructure and £7.6 million with respect to the Zeta refinancing.

Dividends paid during the period, being the final 31 August 2012 dividend and the February 2013 interim dividend, amounted to £27.5 million.

Hedging

The Group utilises derivative instruments, including interest rate swaps and interest rate caps to manage its interest-rate exposure. At 31 August 2013, the net fair value liability of the Group's derivative financial instruments was £4.7 million (31 August 2012: £9.4 million).

The Group has a hedging policy which requires at least 75% of all interest rate exposures exceeding one year to be on a fixed or capped rate basis. At 31 August 2013, Group debt (including its economic interest of subsidiaries and jointly controlled entities) was 99.9% fixed. For facilities with interest rate swaps or caps attached, the interest rates are fixed or capped for the duration of the facility. The Group has not applied hedge accounting during the current period and changes in the fair value of the Group's hedging instruments have been recognised in profit or loss.

Taxation

Election for UK-REIT status

Background

The Company has previously announced its intention to convert to a UK Real Estate Investment Trust ("UK-REIT") as the Board believes the advantages afforded by the recently enacted legislation, in particular the removal of the 2% gross asset conversion charge, provide an efficient method for the Group to convert to a transparent and tax efficient regime. The UK-REIT regime is the preferred structure for both UK and international real estate investors and will provide the Company with access to a broader range of investors.

The first significant changes since the introduction of the UK-REIT regime in 2007 were enacted in July 2012, when the Finance Bill 2012 received Royal Assent. By converting to UK-REIT status, the Group will no longer pay UK direct tax on profits and gains from its qualifying property rental business in the UK, provided it meets certain conditions. This removal of tax at the company level enables investors to be taxed broadly as though they held the property directly. The taxation of the Group's non-UK assets will remain unchanged, subject to changes in relevant jurisdictions, tax legislation or policy. Other profits and gains arising on UK assets of the Group will be subject to UK corporation tax.

The Company is not currently eligible for Group UK-REIT status because it is not resident for tax purposes solely in the UK. However, subject to obtaining shareholder and regulatory approvals, the Company intends altering its residency in order to become UK tax resident and satisfy the requirements of the UK-REIT legislation, including those related to the composition of the Board.

The Company will, following its proposed conversion to a UK-REIT, be required, annually to distribute 90% of the income profits of its UK property rental business each year to Shareholders. As the Company's focus is primarily on income-bearing assets, the Company's business model is well-suited to the UK-REIT regime. The Board believes that providing this level of distribution, which is consistent with the existing dividend policy, will be beneficial for Shareholders as a whole and will assist in attracting potential new investors.

AUDITED FINANCIAL STATEMENTS AND NOTES lFOR THE YEAR ENDED 31 AUGUST 2013

Directors' report

The Board present their report together with the audited consolidated financial statements for the period ended 31 August 2013.

Principal activity

Redefine International is focused on real estate investment in large, well developed economies with established and transparent real estate markets. The investment portfolio is geographically diversified across the UK, Europe and Australia providing exposure to the office, retail, industrial and hotel sectors.

Business review

A review of the activities and prospects of the Group is given in the Chairman's Statement and Business review.

Principal risks and uncertainties

The principal risks pertaining to the Group and the way in which it manages and controls have not changed significantly since the prior year. These risks will be outlined in the Annual report to shareholders.

Results and proposed dividends

The consolidated statement of comprehensive income is set out below and shows a profit attributable to equity holders of the parent of £61.5 million.

The Board has declared a second interim dividend of 1.635 pence per share, which will be paid on 29 November 2013 to those shareholders on the register as at 22 November 2013, and will result in a total dividend of 3.11 pence per share for the financial year. This reflects a pay-out ratio of 100% of earnings available for distribution.

Share capital

Details of the authorised and issued share capital, together with details of the movements in Redefine International's issued share capital during the period are shown in Note 23 to the consolidated financial statements. Redefine International has one class of share; all shares rank equally and are fully paid.

As at 31 August 2013 the Company's total issued share capital was 967,963,757 ordinary shares of 8.0 pence each and this is reflected in the financial statements.

On 3 September 2013, Redefine International issued 40,000,000 ordinary shares pursuant to a £16.8 million placing and a further 12,606,061 ordinary shares were issued as part consideration for the acquisition of three prime shopping centres in Berlin, Hamburg and Ingolstadt. Following which, the Company's issued ordinary share capital comprised 1,020,569,818 ordinary shares of 8.0 pence each in the capital of the Company.

On 13 September 2013 the Company repaid its £13 million 6% convertible loan instrument issued to Aviva Commercial Finance Limited ("Aviva") in September 2010 (the "Capital Instrument"). This repayment was financed by the issue of 36,587,873 new ordinary shares of 8 pence each in the Company to Redefine Properties Limited at an issue price of 41.925 pence per share. These shares were issued and admitted to trading on 18 September 2013, following which, the Company's issued share capital comprised of 1,057,157,691 ordinary shares of 8.0 pence each.

On 6 December 2013 a further circa 19,635,340 ordinary shares will be issued as consideration for the Berlin shopping centre (the precise number being determined pursuant to the Sterling: Euro exchange rate on 29 November 2013). These shares will be issued and admitted to trading after the final dividend for the year ended 31 August 2013 has been declared and paid, and as such will not rank for such dividend.

There are no specific restrictions on the size of a holding nor on the transfer of Ordinary Shares. The Directors are not aware of any agreements between holders of Redefine International's Ordinary Shares that may result in restrictions on the transfer of securities or on voting rights.

No shares were held in Treasury during the year.

Going concern

These consolidated financial statements have been prepared on a going concern basis as after considering the relevant factors, the Directors have a reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future. Completion of the restructuring on the Delta, Zeta and VBG facilities in the year, as well as the restructuring of the UK Shopping Centre portfolio debt financed by Aviva which was agreed post year end, has significantly improved the going concern expectation of the Group.

The Board has also had regard to the funds raised as part of the equity raisings which completed in October 2012 and September 2013 which saw the Company raise gross proceeds of £127.5 million and £16.8 million respectively. This additional capital has allowed the Group to further reduce its leverage.

The Board remains of the view that the Gamma facility and related portfolio of assets has negligible impact on the continued operations of the Group considering the non-recourse nature of the facility.

The Board has also considered a working capital forecast for the Group and believes that based on a detailed analysis of cashflow projections, the level of capital raised during the year and the progress made on loan refinancing that the Group has adequate resources to continue in operation for the foreseeable future.

Directors

The Directors of Redefine International, who served during the period, were as follows:

Details of the interests of the current Directors in the Ordinary Shares of Redefine International are set out in Note 33 "Related Party Transactions" to the consolidated financial statements.

Redefine International maintains insurance for the Directors in respect of liabilities arising from the performance of their duties.

Share options

There are no share options granted to Directors.

Charitable and Political donations

During the period Redefine International made no charitable or political donations.

Payment of suppliers

The policy of the Group is to settle supplier invoices within the terms of trade agreed with individual suppliers. Where no specific terms have been agreed, payment is usually made within one month of receipt of the goods or service.

Compliance with the Code

The Company has substantially complied with the provisions of the UK Corporate Governance Code, for which the Company is classified as a smaller company. A statement on corporate governance will be included in the Annual Report to shareholders, including areas of non-compliance.

Stakeholder pensions and employee share schemes

As there are no employees, no pension plan or employee share schemes are in place.

Auditors

KPMG have expressed their willingness to continue in office and a resolution to re-appoint them may be proposed at the Annual General Meeting.

Included in net operating income in the consolidated statement of comprehensive income are the following fees paid to KPMG during the year:

Statement of Directors responsibility

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

Isle of Man Companies Acts 1931-2004 (as amended) requires the Directors to prepare Group and parent Company financial statements (which will be included in the Annual Report to shareholders) for each financial year. Under the Listing Rules issued by the London Stock Exchange, the Directors are required to prepare the Group financial statements in accordance with the International Financial Reporting Standards ("IFRS") as issued by the IASB and have elected to prepare the parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice ("UK GAAP") and as applied in accordance with the Isle of Man Companies Acts 1931-2004 (as amended).

The Group and parent Company financial statements are required by law, IFRS as issued by the IASB and UK GAAP, to present fairly the financial position and performance of the Group and Company respectively. The Isle of Man Companies Acts 1931-2004 (as amended) provide in relation to such financial statements, that references in the relevant part of the law to financial statements giving a true and fair view, are references to their achieving a fair presentation.

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

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state that the financial statements comply in the case of the Group with IFRS as issued by the IASB and in the case of the parent Company with UK GAAP as applied in accordance with the Isle of Man Companies Acts 1931-2004 (as amended); and

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

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

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

Responsibility statement, in accordance with the transparency regulations

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

· the Group financial statements, prepared in accordance with IFRS as issued by the IASB, give a true and fair view of the assets, liabilities and financial position of the Group at 31 August 2013 and its profits for the year then ended;

· the parent Company financial statements, prepared in accordance with UK GAAP and as applied in accordance with the Isle of Man Companies Acts 1931-2004 (as amended), give a true and fair view of the assets, liabilities and financial position of the parent Company at 31 August 2013; and

· the Report of the Directors contained in the Annual Report together with the Business Review include a fair review of the development and performance of the business and the position of the Group and parent Company, together with a description of the principal risks and uncertainties that they face.

The Board of Directors

28 October 2013

Consolidated Income Statement

For the year ending 31 August 2013

Consolidated Statement of Comprehensive Income

For the year ended 31 August 2013

The accompanying notes form an integral part of these financial statements.

Consolidated Balance Sheet

As at 31 August 2013

The accompanying notes form an integral part of these financial statements.

The consolidated statements were approved by the Board of Directors on 28 October 2013.

Consolidated Statement of Changes In Equity

For the year ended 31 August 2013

The accompanying notes form an integral part of these financial statements.

Consolidated Cash Flow Statement

For the year ended 31 August 2013

The accompanying notes form an integral part of these financial statements

1. general information

Redefine International P.L.C was incorporated on 28 June 2004 under the laws of the Isle of Man and is listed on the Main Market of the London Stock Exchange.

The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ materially from these estimates. The significant judgements made by management in applying the Company's accounting policies and the key sources of estimation uncertainty are discussed further in Note 2.2 Basis of preparation.

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the IASB.

The accounting policies applied by the Group in these consolidated financial statements are the same as those applied by the Group in its audited financial statements as at and for the year ended 31 August 2012. 

The Group has however adopted the amendments to IAS 1 which are applicable to annual periods beginning on or after 1 July 2012. These amendments require the Company preparing financial statements in accordance with IFRSs to group together items within other comprehensive income that may be reclassified to the profit or loss section of the income statement. The amendments also reaffirm existing requirements that items in other comprehensive income and profit or loss should be presented as either a single statement or two consecutive statements. The adoption of these amendments had no impact on the balances recorded but impacted the disclosure in the consolidated statement of comprehensive income.

2.2 basis of preparation

The consolidated financial statements are presented in Great British Pounds, which is the functional currency of the Company and the presentational currency of the Group, rounded to the nearest thousand pounds. They are prepared using the historical cost basis except for investment property, derivative financial instruments and financial instruments designated at fair value through profit or loss.

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

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

2.2.1 Application of the going concern basis of accounting

These consolidated financial statements have been prepared on a going concern basis as, after considering the relevant factors, the Directors have a reasonable expectation that the Group has adequate resources to continue in operation for the foreseeable future. Completion of the restructuring on the Delta, Zeta and VBG Facilities in the year as well as the restructuring of the UK Shopping Centre portfolio debt, financed by Aviva, which was agreed post year end, has significantly improved the going concern expectation of the Group.

The Board has also had regard to the funds raised as part of the equity raisings which completed in October 2012 and September 2013 which saw the Company raise gross proceeds of £127.5 million and £16.8 million respectively. This additional capital has allowed the Group to further reduce its leverage.

The Board remains of the view that the Gamma facility and related portfolio of assets has negligible impact on the continued operations of the Group considering the non-recourse nature of the facility.

The Board has also considered a working capital forecast for the Group and believes that based on a detailed analysis of cashflow projections, the level of capital raised during the year and the progress made on loan refinancing that the Group has adequate resources to continue in operation for the foreseeable future.

2.2.2 Accounting for Gamma

Following the appointment of a Fixed Charge Receiver ("the Receiver") to the property subsidiaries which secure the Gamma facility, the Board considered whether the Group should continue to consolidate the underlying property companies.

Under IAS 27 the requirement for consolidation is based on control, which is the power to govern, either directly or indirectly, the financial and operating policies of an entity so as to obtain benefits from its activities.

As a result of the powers and the responsibilities of the Receiver as set out under UK law, the Directors believe that the Group has lost control of the underlying property companies. It no longer has the power to govern their operating activities or dispose of any of the underlying assets. It is also not in a position to exercise any power to obtain benefits from the underlying subsidiaries' activities. Redefine International has therefore ceased to consolidate the underlying property companies from the date control was lost i.e the date the Receiver was appointed.

Wichford Gamma Limited is the primary obligor for the debt although it is recourse only to the subsidiary companies on which it is secured. The Group is deemed to continue to control this company as a receiver has not been appointed to it and at 31 August 2013 Redefine International continues to have the ability to govern the activities of Wichford Gamma Limited. 

The Directors have considered the impact of the appointment of the Receiver to the underlying property subsidiaries on the carrying value of the loan facility in the books of Wichford Gamma Limited. 

IAS 39 does not provide specific guidance on whether or not the appointment by the lender of a receiver over the secured assets constitutes partial settlement of the debt. In the opinion of the Directors, the receiver is acting on behalf of the lender and consequently they consider that the transfer of the secured assets to the Receiver is in substance the transfer of those assets to the lender.

As a result the loan facility recorded in the books of Wichford Gamma Limited, and hence consolidated by Redefine International, has been reduced by the fair value of the net assets of the property subsidiaries at the date the Receiver was appointed to those companies. This is a key judgement.

The Group will continue to recognise the residual debt until such time as that element of the debt is legally extinguished or legally released by the Security Trustee or it can be evidenced that Redefine International no longer has the power to control Wichford Gamma Limited.

The Company will seek a legal extinguishment of the debt from the Security Trustee following the sale by the Receiver of all of the properties securing the Gamma facility.

2.2.3 Investment Property Valuation

The Group uses the valuations performed by its independent valuers as the fair value of its investment properties. The valuations are based upon assumptions including estimated rental values, future rental income, anticipated maintenance costs, future development costs and appropriate discount rates. The valuers also make reference to market evidence of transaction prices for similar properties. Further details are provided in note 3.3.5 and note 15.

2.2.4 Classification of Investment Property for hotels

The hotel properties are held for capital appreciation and to earn rental income. The properties have been let to Redefine Hotel Management Limited ("RHML") for a fixed rent which is subject to annual review. The annual review takes into account the forecast EBITDA for the hotel portfolio when setting the revised rental level. RHML operates the hotel business and is exposed to the fluctuations in the underlying trading performance of the hotels. It is responsible for the day to day upkeep of the properties and retains the key decision making responsibility for the business. Aside from the payment of rental income to Redefine International which resets annually, there are limited or no transactions between the two entities. As a result, Redefine International classifies the hotel properties as investment properties in line with IAS 40.

2.2.5 Classification of the Group's Investment in Cromwell at Fair Value through profit or loss

During the period, the Group's shareholding in Cromwell was diluted both through the sale of shares and due to the fact that the Group did not participate in certain share issues by Cromwell.

The Group sold 86 million shares of its Cromwell holding in April 2013 reducing its shareholding to 16.1%. This was further diluted as the Group did not participate in certain Cromwell share placements. At year end the Group had a 13.70% shareholding in Cromwell.

The Group ceased to account for Cromwell as an associate from the date its shareholding fell below 20% as it was no longer deemed to have significant influence over the operations of Cromwell. The investment was designated at Fair Value through Profit or Loss on that date as it is managed on a fair value basis.

While there is a presumption that significant influence does not exist if the holding is less than 20% this may be refuted if an ability, or lack of ability, to exercise significant influence is clearly demonstrated.

At the year end the Company has Cromwell board representation and as such this increases the judgement involved in determining whether significant influence over the operations of Cromwell exists.

The Board has considered whether significant influence continues to exist notwithstanding the fact that the shareholding is below 20%. Significant influence is usually evidenced by one or more of the following:

· representation on the board of directors or equivalent governing body of the investee;

· participation in the policy-making processes;

· material transactions between the investor and the investee;

· an interchange of managerial personnel; or

· provision of essential technical information.

A single factor in isolation does not necessarily indicate significant influence. Having considered all of the facts and circumstances the Directors do not believe that the Company has significant influence over the operations of Cromwell.

In making this determination the Board have considered the size of the Company's shareholding, the size of the Cromwell board, the nature of the directorship currently held on the Cromwell Board (independent non executive director), the fact that the Company does not have a right to appoint a director and the fact that in practice the Company is unable to significantly influence the decisions and business focus of the Cromwell group. The Directors believe that significant influence over Cromwell no longer exists and that the designation of the Company's residual investment at Fair Value through Profit or Loss is appropriate.

2.2.6 Taxation

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

2.2.7 Deferred Taxation

The Group considers that the value of the property portfolio is likely to be realised through sale. The Group bases its deferred taxation provision on the assumption that the residual value of the investment properties is not less than the present value as provided by its external valuers.

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

2.2.8 property acquisitions

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

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

Otherwise corporate acquisitions are accounted for as business combinations.

2.3 basis of consolidation

2.3.1 investment in subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiaries are included in the Group results from the effective dates of acquisition to the effective dates of disposal. Any difference between the purchase price of a subsidiary and the Group's share of the fair value of the identifiable net assets acquired is treated in accordance with the Group's accounting policy for intangible assets and goodwill.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company using consistent accounting policies.

The initial interest of non-controlling interests is stated at the non-controlling interest's proportion of the net asset value of the company or the fair value.

Transactions with non-controlling interests are accounted for as transactions with equity holders in their capacity as equity holders and therefore neither goodwill nor profit or loss is recognised as a result of such transactions.

2.3.2 transactions eliminated on consolidation

Intragroup balances, transactions and any unrealised gains and losses or income and expenses arising from intragroup transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

2.3.3 investment in associates and jointly controlled entities

Associates are entities over whose financial and operating policies the Group has the ability to exercise significant influence but not control and which are neither subsidiaries nor jointly controlled entities. Jointly controlled entities and joint ventures are those entities over which the Group exercises joint control under the terms of a contractual agreement.

Investments in associated undertakings and jointly controlled entities are initially recorded at cost and increased (or decreased) each year by the Group's share of the post-acquisition net income (or loss), and other movements reflected directly in the equity of the associated undertaking.

Where the Group acquires an additional shareholding or where it obtains significant influence such that an investment which was previously accounted for as a simple investment under IAS 39 is now deemed to be an associate undertaking, the Group's previously held interest is re-measured to fair value through profit or loss for the period. The cost of the associate is determined as the fair value of the original investment plus the fair value of any additional consideration given to achieve significant influence.

Goodwill arising on the acquisition of an associated undertaking or jointly controlled entity is included in the carrying amount of the investment. When the Group's share of losses in an associate or jointly controlled entity has reduced the carrying amount to zero, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations to make payments on behalf of the associate or jointly controlled entity.

The Group's share of the results of associated or jointly controlled entity undertakings after tax reflects the Group's proportionate interest in the relevant undertaking and is based on financial statements drawn up to a date not earlier than three months before the period end reporting date, adjusted to conform with the accounting policies of the Group.

Since goodwill that forms part of the carrying amount of the investment in an associate or jointly controlled entity is not recognised separately, it is therefore not tested for impairment separately. Instead, the entire amount of the investment in an associate or jointly controlled entity is tested for impairment as a single asset when there is objective evidence that the investment in an associate or jointly controlled entity may be impaired.

Reversals of impairments are recorded as an adjustment to the investment balance to the extent that the recoverable amount of the associate or jointly controlled entity increases.

Associates and jointly controlled entities are carried at cost less impairments in the company financial statements. Unrealised gains and losses arising from transactions with associates and jointly controlled entities are eliminated to the extent of the Group's interest in the entities.

When the Group ceases to have significant influence over an associate or joint control over a jointly controlled entity, it is accounted for as a disposal of the entire interest in that investee, with a resulting gain or loss being recognised in profit or loss. Any interest retained in that former investee at the date when significant influence or joint control is lost is recognised at fair value and this amount is regarded as the fair value on initial recognition of a financial asset or, when appropriate, the cost on initial recognition of an investment in an associate.

2.3.4 goodwill and intangible assets

Goodwill and intangible assets are carried at cost less accumulated impairment losses. In respect of equity accounted investments the carrying amount of goodwill is included in the carrying amount of the investment and an impairment loss on such an investment is not allocated to any asset, including goodwill that forms part of the carrying amount of the investee.

Amortisation of intangible assets is recognised in profit or loss on a straight-line basis over their estimated useful life, from the date that they are available for use.

2.4 currency translation reserve

2.4.1 foreign currency transactions

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to the functional currency at the foreign exchange rates ruling at the dates that the values are determined.

2.4.2 foreign operations

Exchange differences arising from the translation of the net investment in foreign operations are taken to the currency translation reserve (FCTR). They are released into the income statement upon disposal. On consolidation, the statements of financial position of foreign subsidiaries and associates are translated at the closing rate and the income statement and statement of comprehensive income are translated at the rates at the dates of the transaction or at an average rate for the period where this is a reasonable approximation.

2.5 investment property

Investment properties are those which are held either to earn rental income or for capital appreciation or for both. Investment properties are stated at fair value. External, independent valuation companies, having professionally qualified valuers and recent experience in the location and category of property being valued, value the portfolios on an annual basis. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably and without compulsion.

The valuations are prepared by considering comparable market transactions for sales and letting and having regard for the current leases in place. In the case of lettings this includes considering the aggregate of the net annual market rents receivable from the properties and where relevant, associated costs. A yield which reflects the risks inherent in the net cash flows is applied to the net annual rentals to arrive at the property valuation.

As the fair value model is applied, property under construction or redevelopment for future use as investment property is measured at fair value. However, where the fair value of investment property under redevelopment is not reliably measurable, the property is measured at cost.

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

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

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

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

The annual valuations of investment property are based upon estimates and subjective judgements that may vary from the actual values and sales prices that may be realised by the Group upon ultimate disposal. The critical assumptions made relating to valuations have been disclosed in Note 3 and Note 15 to the financial statements.

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

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

2.5.1 borrowing costs and cost of construction

All costs directly associated with the purchase and construction of a property are capitalised.

Borrowing costs are capitalised if they are directly attributable to the acquisition, construction or production of a qualifying asset. Capitalisation of borrowing costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Capitalisation of borrowing costs may continue until the assets are substantially ready for their intended use. If the resulting carrying amount of the asset exceeds its value, an impairment loss is recognised. The capitalisation rate is arrived at by reference to the actual rate payable on borrowings for development purposes or, with regard to that part of the development cost financed out of general funds, to the average rate.

2.6 financial instruments - recognition, classification and measurement

Non-derivative financial instruments

Non-derivative financial instruments comprise investments in equity securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments not designated at fair value through profit or loss, any directly attributable transaction costs, except as described below. Loan receivables and payables are subsequently measured at amortised cost using the effective interest rate method.

A financial instrument is recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group's contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial assets to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e. the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group's obligations specified in the contract expire.

Investments at fair value through profit or loss

An instrument is classified at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated as fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value. Upon initial recognition, attributable transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss comprise equity securities and are measured at fair value, and changes therein are recognised in the income statement. Fair values are determined by reference to their quoted bid price at the reporting date, where such a price is available. Investments in investment property funds are recorded at the net asset value per share reported by the managers of such funds, which is the best estimate of fair value.

Derivative financial instruments

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

Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for in profit or loss and disclosed in losses/gains from financial assets and liabilities.

2.7 financial leases

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

2.8 impairment

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers in the Group, economic conditions that correlate with defaults or the disappearance of an active market for a security.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against loans and receivables. Interest on the impaired asset continues to be recognised. When a subsequent event (e.g. repayment by a debtor) causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

2.9 cash and cash equivalents

Cash and cash equivalents comprise cash balances on hand, cash deposited with financial institutions and short-term call deposits. Cash and cash equivalents have a maturity of less than three months.

Restricted cash comprises cash deposits which are restricted until the fulfilment of certain conditions.

2.10 share capital

Ordinary share capital

Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares are shown as a deduction from equity, net of tax.

Treasury shares

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. The shares are available for reissue in the future.

2.11 leasehold property

Leasehold properties that are leased out to tenants under operating leases are classified as investment properties as appropriate, and included in the statement of financial position at fair value.

Land interests held under an operating lease are classified and accounted for as investment property on a property by property basis when they are held to earn rentals or for capital appreciation on both the land and the property elements. Any such property interest under an operating lease classified as investment property is carried at fair value.

2.12 loans and borrowings

Interest-bearing borrowings are recognised initially at fair value less directly attributable transaction costs. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis.

Finance costs

Finance costs recognised in the income statement comprises interest payable on borrowings calculated using the effective interest method, net of interest capitalised.

Restructured debt

A financial liability is derecognised when it is extinguished (i.e. it is discharged, cancelled or expires) which may happen when a payment is made to the lender, the borrower legally is released from primary responsibility for the financial liability or where there is an exchange of debt instruments with substantially different terms or a substantial modification of the terms of an existing debt instrument.

Any difference between the carrying amount of the original liability and the consideration paid is recognised in profit or loss. The consideration paid includes non-financial assets transferred and the assumption of liabilities, including the new modified financial liability. Any new financial liability recognised is measured initially at fair value. Any costs or fees incurred are recognised as part of the gain or loss on extinguishment and do not adjust the carrying amount of the new liability.

2.13 dividends

Dividends to shareholders are recognised when they become legally payable. In the case of interim dividends, this is when declared and paid by the directors. In the case of final dividends, this is when approved by the shareholders at a general meeting.

2.14 rental income

Rental income from investment property leased out under operating leases is recognised in the income statement on a straight-line basis over the term of the leases. Lease incentives granted are recognised as an integral part of the total rental income and amortised over the term of the leases.

Contingent rental income is recognised as it arises. Premiums to terminate leases are recognised in profit or loss as they arise.

2.15 service charges

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

2.16 investment income

Dividends from listed property investments are recognised on the date the Group's right to receive payment is established. Interest earned on cash invested with financial institutions is recognised on an accrual basis using the effective interest rate method.

2.17 income tax

Income tax on the profit or loss for the period comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in other comprehensive income or equity, in which case it is recognised in other comprehensive income or equity.

Deferred tax is provided using the statement of financial position liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: those arising from goodwill not deductible for tax purposes, those arising from the initial recognition of assets or liabilities that affect neither accounting or taxable profit, nor differences relating to investments in subsidiaries to the extent described below. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised and is reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax is not provided on temporary differences arising on investments in subsidiaries and jointly controlled entities where the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability settled. Deferred tax on the fair value adjustment on investment properties and listed securities has been provided at the capital gains taxation rate based on the manner in which each asset is expected to be realised. Deferred taxation is provided only to the extent that there are not sufficient tax losses to shield the charge.

2.18 earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding adjusted for the effects of all dilutive potential ordinary shares.

In calculating headline earnings per share headline earnings include fair value adjustments for financial liabilities and accounting adjustments required to account for lease income on a straight-line basis, as well as other non-cash accounting adjustments that do not affect distributable earnings.

2.19 segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and in respect of which it may incur expenses, including revenues and expenses that relate to the transactions with any of the Group's other components. An operating segment's operating results are reviewed regularly by the Chief Operating Decision Maker ("CODM") to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available. See Note 4 for further details.

2.20 capital instrument

A financial instrument or its component parts is classified on initial recognition as a financial liability, a financial asset or an equity instrument in accordance with the substance of the contractual arrangement.

An instrument is classified as equity where there is no contractual obligation to deliver cash or another financial asset to another party, or to exchange financial assets or financial liabilities with another party under potentially unfavourable conditions (for the issuer of the instrument) or where the instrument will or may be settled for a fixed number of the entity's own equity instruments.

Equity instruments are recognised initially at their fair value with any directly attributable costs allocated to the instrument. The equity instrument is not re-measured subsequent to initial recognition.

Payments in relation to the capital instrument are deemed to be share based payments and are recorded in the income statement due to the unavoidable nature of the obligation. See Note 24 for further details.

2.21 share based payments

For share based payment arrangements with the Investment Manager, which is classified as a non-employee, the Company measures the goods or services from the non-employee at each measurement date at their fair value with the share-based payment exchanged for the goods or services measured and recorded at an equal amount (subject to the non market EPRA EPS performance condition within the agreement being met).

This represents a change in accounting policy driven by consideration of whether the Investment Manager could be deemed to be an employee. Consistent with developments in the market place it has been determined that the Investment Manager is not an employee. This has no impact on the balances recorded in the prior period as the non market performance condition associated with the share based payment had not been met.

2.22 Disposal groups and non-current assets held for sale

A non-current asset or a disposal group comprising assets and liabilities is classified as held for sale if it is expected that its carrying amount will be recovered principally through sale rather than through continuing use, it is available for immediate sale and the sale is highly probable to occur within one year. For the sale to be highly probable, the appropriate level of management must be committed to a plan to sell the asset or disposal group.

Where the Group is committed to a sale plan involving the loss of control of a subsidiary it classifies all the assets and liabilities of that subsidiary as held for sale when the criteria set out above and detailed in IFRS 5 "Non-current Assets Held for Sale and Discontinued Operations" are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.

On initial classification as held for sale, generally, non-current assets and disposal groups are measured at the lower of the previous carrying amount and fair value less costs to sell, with any adjustments taken to the income statement. The same applies to gains and losses on subsequent re-measurement. However, certain items such as financial assets within the scope of IAS 39 and investment property in the scope of IAS 40 continue to be measured in accordance with those standards.

Impairment losses subsequent to classification of assets as held for sale are recognised in the income statement.

Increases in fair value less costs to sell of assets that have been classified as held for sale are recognised in the income statement to the extent that the increase is not in excess of any cumulative impairment loss previously recognised in respect of the asset. Assets classified as held for sale are not depreciated.

Gains and losses on re-measurement and impairment losses subsequent to classification as disposal groups and noncurrent assets held for sale are shown within continuing operations in the income statement, unless they qualify as discontinued operations.

Disposal groups and non-current assets held for sale are presented separately from other assets and liabilities on the statement of financial position. Prior periods are not reclassified.

2.23 Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote.

2.24 consideration

Consideration associated with the acquisition of assets and liabilities to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

2.25 Standards not yet effective

The following new accounting standards and amendments to existing standards approved by the IASB, but not early adopted by the Group, will impact the Group's financial reporting in future periods. The Group is currently considering the impacts of these amendments. The new accounting standards and amendments which are more relevant to the Group are detailed below.

The following will be applied in 2014 unless otherwise noted:

Consolidation Standards

IFRS 10 Consolidated Financial Statements

IFRS 10 replaces the consolidation guidance in IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation - Special Purpose Entities by introducing a single consolidation model for all entities based on control, irrespective of the nature of the investee.

IFRS 10 builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. This new standard will not change consolidation procedures for the Group, but will require management to assess whether an entity should be consolidated.

IFRS 11 Joint Arrangements

IFRS 11 introduces new accounting requirements for joint arrangements, replacing IAS 31 Interests in jointly controlled entities, by focusing on the rights and obligations of the arrangement, rather than its legal form. The option to apply the proportional consolidation method when accounting for jointly controlled entities is removed. The impact on the Group will be dependent on the formation of new joint arrangements by the Group.

IFRS 12 Disclosure of Interests in Other Entities

IFRS 12 sets out the required disclosures for entities reporting under the two new standards, IFRS 10 'Consolidated financial statements' and IFRS 11 'Joint arrangements'; it also replaces the disclosure requirements currently found in IAS 28 'Investments in Associates'.

The required disclosures aim to provide information to enable users to evaluate the nature of, and risks associated with, an entity's interests in other entities and the effects of those interests on the entity's financial position, financial performance and cash flows. This basic principle is further supported by more detailed disclosure objectives and requirements. This new standard will result in enhanced disclosures on the Group's subsidiaries and associates as well as unconsolidated structured entities.

IAS 27 Separate Financial Statements (revised 2011)

The requirements relating to separate financial statements are unchanged and are included in the amended IAS 27. The other sections of IAS 27 are replaced by IFRS 10. IAS 27 is renamed 'Separate financial statements' and is now a standard dealing solely with separate financial statements. The existing guidance and disclosure requirements for separate financial statements are unchanged.

IAS 28 Investments in Associates and Jointly Controlled Entities (revised 2011)

This standard prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. IAS 28 (revised 2011) does not include any disclosure requirements; these are now included in IFRS 12 Disclosure of Interests in Other Entities.

IFRS 13 Fair Value Measurement

This standard, which applies prospectively for annual periods beginning on or after 1 January 2013, establishes a single source of guidance for fair value measurements under IFRSs. IFRS 13 defines fair value, provides guidance on its determination and introduces consistent requirements for disclosures on fair value measurements. IFRS 13 requires entities to disclose information about the valuation techniques and inputs used to measure fair value, as well as information about the uncertainty inherent in fair value measurements. This information will be required for both financial and non-financial assets and liabilities. The impact of the standard is being assessed by the Group and may result in additional disclosures.

Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32, and Disclosures

Offsetting Financial Assets and Financial Liabilities - Amendments to IFRS 7

In December 2011, the IASB issued amendments to IAS 32 and IFRS 7 which clarify the accounting requirements for offsetting financial instruments and introduce new disclosure requirements that aim to improve the comparability of financial statements prepared in accordance with IFRS and US GAAP.

The amendments to IFRS 7 will require more extensive disclosures than are currently required. The disclosures focus on quantitative information about recognised financial instruments that are offset in the statement of financial position, as well as those recognised financial instruments that are subject to master netting or similar arrangements, irrespective of whether they are offset. The amended offsetting disclosures are to be retrospectively applied, with an effective date of annual periods beginning on or after 1 January 2013.

The amendments to IAS 32 clarify that the right of set-off must be currently available and legally enforceable for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The IAS 32 changes are effective for annual periods beginning on or after 1 January 2014 and apply retrospectively.

The following will be applied after 2014:

IFRS 9 Financial instruments

In 2009, the IASB commenced the implementation of its project plan for the replacement of IAS 39. This consists of three main phases:

Phase 1: Classification and measurement

In November 2009, the IASB issued IFRS 9 Financial Instruments, covering classification and measurement of financial assets, as the first part of its project to replace IAS 39 and simplify the accounting for financial instruments. The new standard endeavours to enhance the ability of investors and other users of financial information to understand the accounting for financial assets and to reduce complexity.

IFRS 9 uses a single approach to determine whether a financial asset is measured at amortised cost or fair value, replacing the many different rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments (its business model) and the contractual cash flow characteristics of the financial assets.

In October 2010, the IASB reissued IFRS 9 incorporating new requirements on accounting for financial liabilities, and carrying over from IAS 39 the requirements for derecognition of financial assets and financial liabilities. IFRS 9 does not change the basic accounting model for financial liabilities under IAS 39.Two measurement categories continue to exist: fair value through profit or loss ("FVTPL") and amortised cost. Financial liabilities held for trading are measured at FVTPL, and all other financial liabilities are measured at amortised cost unless the fair value option is applied. IFRS 9 requires gains and losses on financial liabilities designated as at fair value through profit or loss to be split into the amount of change in the fair value that is attributable to changes in the credit risk of the liability, which should be presented in other comprehensive income, and the remaining amount of change in the fair value of the liability which should be presented in profit or loss.

‒ The basic premise for the derecognition model in IFRS 9 (carried over from IAS 39) is to determine whether the asset under consideration for derecognition is:

‒ an asset in its entirety; or

‒ specifically identified cash flows from an asset (or a group of similar financial assets); or

‒ a fully proportionate (pro rata) share of the cash flows from an asset (or a group of similar financial assets); or

‒ a fully proportionate (pro rata) share of specifically identified cash flows from a financial asset (or a group of similar financial assets).

‒ A financial liability should be removed from the statement of financial position when, and only when, it is extinguished, that is, when the obligation specified in the contract is either discharged or cancelled or expires.

‒ All derivatives, including those linked to unquoted equity investments, are measured at fair value. Value changes are recognised in profit or loss unless the entity has elected to treat the derivative as a hedging instrument in accordance with IAS 39, in which case the requirements of IAS 39 apply.

Phase 2: Impairment methodology

An exposure draft issued by the IASB in November 2009 proposes an 'expected loss model' for impairment. Under this model, expected losses are recognised throughout the life of a loan or other financial asset measured at amortised cost, not just after a loss event has been identified. The expected loss model avoids what many see as a mismatch under the incurred loss model - front-loading of interest revenue (which includes an amount to cover the lender's expected loan loss) while the impairment loss is recognised only after a loss event occurs. The impairment phase of IFRS 9 is subject to on-going deliberations and has not yet been finalised.

Phase 3: Hedge accounting

In December 2010, the IASB issued an exposure draft on hedge accounting which will ultimately be incorporated into IFRS 9. The exposure draft proposes a model for hedge accounting that aims to align accounting with risk management activities. It is proposed that the financial statements will reflect the effect of an entity's risk management activities that use financial instruments to manage exposures arising from particular risks that could affect profit or loss. This aims to convey the context of hedge instruments to allow insight into their purpose and effect. This phase of IFRS 9 is not yet finalised.

The effective date for implementation of IFRS 9 has been deferred due to delays in completing phases 2 and 3 of the project as well as the delay in the insurance project. It is expected that the effective date will be announced soon.

Since significant aspects of the standard have yet to be finalised, it is impracticable for the Group to quantify the impact (if any) of IFRS 9 at this stage.

3. financial risk management

The Group has exposure to the following risks from its use of financial instruments:

‒ credit risk

‒ liquidity risk

‒ market risk.

This note presents information about the Group's exposure to each of the above risks, the Group's objectives, policies and processes for measuring and managing risk, and the Group's management of capital. Further quantitative disclosures are included throughout the consolidated financial statements.

The Group's Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framework. The Board is responsible for developing and monitoring the Group's risk management policies.

The Group's risk management policies require the identification and analysis of the risks faced by the Group, the setting of appropriate risk limits and controls, and the monitoring of risks and adherence to limits. Risk management policies and systems are reviewed regularly and adjusted to reflect changes in market conditions and the Group's activities.

The Group Audit Committee oversees management's monitoring of compliance with the Group's risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.

3.1 credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables from tenants and on investment securities.

3.1.1 Trade and other receivables

The Group is exposed to concentrations of sectored credit risk. Concentrations of tenant risk exist in each individual property portfolio. The Board of Directors monitors the concentration of credit risk with individual tenants and counterparties across the portfolio. The level of concentration is addressed both with regards to the sector of property, the industry in which the tenant operates and the credit history of the tenant/customer. An allowance is made where there is an identified loss event which is evidence of a reduction in the recoverability of the cash flows. See Note 29 for further details.

3.1.2 Cash and cash equivalents

The Group limits its exposure to credit risk by only investing in liquid securities and only with counterparties that have a credit rating of at least investment grade from Standard & Poor's or Moody's, except where specific exemptions are granted by the Board. Given the credit quality, management does not expect any counterparty to fail to meet its obligations. Cash transactions are limited to high-credit-quality financial institutions. The Board of Directors monitors the exposure of the Group to any one financial institution and ensures that this is limited by diversification of deposits and lending from each institution across the portfolio.

3.1.3 Loan counterparties

The Group limits its exposure to loan counterparty risk by firstly, diversifying its property related loans over a number of high credit rated financial institutions and secondly, only enters into single interest rate swap agreements with the respective financial institution providing the loan. Mezzanine counterparties are assessed for suitability prior to entering into loan agreements and are reviewed regularly in line with the Group's risk management policies.

3.1.4 Long-term receivables

The Group limits its exposure to credit risk by ensuring all loans are made to high-credit-quality financial institutions and counterparties, whose investments are secured over their underlying property assets. See Note 16 for further details.

3.2 Liquidity risk

The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.

The Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient rental income to service its financial obligations when they fall due. The monitoring of liquidity risk is assisted by the monthly review of financial covenants imposed by financial institutions, such as interest and loan to value covenant ratios. Renegotiation of loans takes place in advance of any potential covenant breaches in so far as the factors are within the control of the Board. In periods of increased market uncertainty the Board will ensure sufficient cash resources are available for potential loan repayments/cash deposits as may be required by financial institutions. Refer to Note 2.2 for further details on the going concern assumption adopted by the Board.

3.3 Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group's income or the value of its investments in financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

The Group enters into derivative financial instruments in the ordinary course of business, and incurs financial liabilities, in order to manage market risks. The Board of Directors receives reports on a quarterly basis with regards to currency exposures as well as interest rate spreads and takes the necessary steps to hedge/limit the risk the Group is exposed to. The Group does not apply hedge accounting. See Note 25, 26 and 30 for further details.

3.3.1 Currency risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the Euro ("EUR"), Australian Dollar ("AUD") and Swiss Franc ("CHF"). Foreign exchange risk arises from current exposures the Group has to foreign currencies, recognised monetary assets and liabilities and net investments in foreign operations.

The Group's investments in foreign subsidiaries and associates are not hedged as the currency positions are considered to be long-term in nature. See Note 31 for further details.

3.3.2 Interest rate risk

The Group's exposure to the risk of the changes in market interest rates relates primarily to the Group's long-term debt obligations with floating interest rates. The Group uses interest rate derivatives to mitigate its exposure to interest rate fluctuations. At the year end, as a result of the use of interest rate swaps and caps, the majority of the Group's borrowings were at fixed interest rates.

The Group's profit before tax has limited exposure to interest rate fluctuations until the repayment dates of the loans for which the interest rate swaps have been arranged. Refer Note 26 for further details on the Group's interest rate swap and cap agreements.

3.3.3 Equity price risk

Equity price risk arises from investment securities held by the Group. These investments are held at fair value. Their performance is actively monitored and managed on a fair value basis.

3.3.4 Commercial property price risk

The Directors draw attention to the risks associated with commercial property investments. Although over the long term property is considered a low risk asset, investors must be aware that significant short and medium term risk factors are inherent in the asset class.

Investments in property are relatively illiquid and usually more difficult to realise than listed equities or bonds and this restricts the Group's ability to realise value in cash in the short-term.

3.3.5 Estimates of fair value of investment properties

The best evidence of fair value is current prices in an active market for similar lease and other contracts. In the absence of such information, the Group determines the amount within a range of reasonable estimates. The Group considers a variety of information including:

‒ valuations from independent valuers;

‒ current prices in an active market for properties of a different nature, condition or location, adjusted for those differences;

‒ recent prices from similar properties in less active markets, with adjustments to reflect differences in economic conditions;

‒ discounted cash flow projections based on reliable estimates of future cash flows, derived from the terms of any existing lease and from external evidence such as current market rents for similar properties in the same location and condition, and using discount rates that reflect current market assessments.

3.4 Capital management

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors both the demographic spread of shareholders, as well as the return on capital, which the Group defines as total shareholders' equity, excluding non-controlling interests, and the dividends paid to ordinary shareholders.

The Company has the necessary shareholder authorisation to purchase its own shares on the market. The timing of these purchases will depend on market conditions and purchase and sale decisions will be made on a transaction by transaction basis by the Board of Directors. No share purchases took place in the period. The Group does not have a defined share buy-back plan.

Neither the Company nor any of its subsidiaries are subject to externally imposed regulatory capital requirements. The level of the Company's borrowings, in terms of its articles of association, shall not at any time, without the previous sanction of an ordinary resolution of the Company exceed ten times the aggregate of:

i. the amount paid up on the issued share capital of the Company

ii. the total of capital and revenue reserves

The Company's dividend policy is to distribute the majority of its earnings available for distribution to shareholders.

4. segmentAL reporting

The Group's identified reportable segments are set out below. These segments are generally managed by separate management teams. As required by IFRS 8, Operating Segments, the information provided to the Board of directors, who are the Chief Operating Makers, can be classified in the following segments:

Relevant revenue, assets and capital expenditure information is set out below:

i) Information about reportable segments

ii) Reconciliation of reportable segment profit or loss

Redefine Hotel Management Limited, which leases the Group's hotel properties, constitutes a major customer paying rent of £10.62 million (2012: £9.40 million).

5. gross rental income

6. investment income

7. other income

8. investment adviser and professional fees

Under the amended Investment Advisory Agreement dated 13 July 2011 (the "IAA"), the Company pays to Redefine International Property Management Limited ("RIPML") an asset management fee of 0.5 per cent on the aggregate gross value of the Group's assets (including cash) and a commission of 0.75 per cent in respect of sales and acquisitions, or 1 per cent where sub-agent costs are incurred. RIPML will also receive a fee of 3 per cent of the annual rents in respect of multi-let retail property and 1 per cent for any other properties.

In addition to the asset management fee, an incentive fee is payable by the Company to RIPML, and will be satisfied by the issue of ordinary shares in Redefine International at no cost to RIPML. The number of ordinary shares to be issued in terms of the award will be determined by reference to their average middle market price for the 20 working days prior to the final day of the relevant three year award period. The amount of any award is calculated as 20 per cent of the amount by which the total return on the Ordinary Shares in the Company exceeds 10 per cent.

The award is subject to EPRA Earnings Per Share in respect of the first period and second period being equal to or greater than 19.44 per cent of the EPRA Net Asset Value per Share as at the date immediately prior to the first day of the relevant 3 year period and 20 per cent for all subsequent 3 year periods. Further details of the incentive fee payable are provided in Note 41.

9. gains from financial assets and liabilities

The following table details the net gains and losses earned/(incurred) by the Group during the year:

During the year the Group sold 86 million of the securities it held in Cromwell for proceeds of AUD 77.49 million (£52.27 million net of fees) realising a gain on disposal of AUD$14.64 million (£9.97 million) (net of fees paid of £0.53 million).

This sale reduced the Group's percentage holding to 16%. The Group was no longer deemed to have significant influence over Cromwell and so ceased to equity account for its investment from that date. The investment in Cromwell was designated at Fair Value through Profit or Loss and thereafter held at fair value. The Group's shareholding in Cromwell was subsequently further diluted to 13.70% as it did not participate in certain Cromwell security issues.

The Group recognised a gain on loss of significant influence of £46.69 million being:

‒ the difference between the carrying value and the fair value of the remaining Cromwell securities on the date significant influence was lost, of £26.09 million;

‒ the gain realised on sale of the securities of £9.97 million (net of fees payable to the Investment Advisor of £0.53 million); and

‒ the recycle of the foreign currency translation reserve related to Cromwell of £10.63 million.

The fair value of the Group's investment in Cromwell at the year end was AUD $241.42 million (£138.91 million) resulting in a fair value movement from the date significant influence was lost of a negative £5.51 million (refer Note 17 for details).

10. redemption of loans and borrowINGs

In May 2012, agreement was reached with Aviva with respect to the loan facility for Delamere Place, Crewe. The outstanding loan balance of £17.5 million in Delamere Place Crewe was replaced by Mezzanine Capital Limited and subsequently settled with Aviva for a £11.0 million cash payment.

11. equity accounted PROFIT

12. interest income

13. interest expense

Interest expense on secured bank loans includes £1 million (31 August 2012: £25.93 million) in finance costs due to the amortisation of the fair value adjustment of the Hague, VBG, Gamma and Delta loan facilities arising due to reverse acquisition of Wichford in August 2011. Swap interest expense is included in the interest expense above.

14. taxation

a) Tax recognised in profit or loss

No tax was recognised on equity or other comprehensive income during the year (2012: nil)

b) Recognised deferred liability and movement during the period

The Group elected to early adopt IAS 12 in its 31 August 2012 annual consolidated financial statements with the resulting amendments applied retrospectively. The early adoption had the effect of reducing the 2011 deferred taxation balance with a corresponding increase in opening 2012 reserves of £0.91 million.

c) The tax for the period is higher (lower in 2012) than the 20% payable under the UK's NRL Scheme. The differences are explained below:

Net deferred tax assets not recognised amounted to £45.06 million (31 August 2012: £43.75 million).

From the reconciliation above, the effective tax rate of the Group was 9.2% (31 August 2012: 2.7%).

d) Unrecognised deferred tax assets and liabilities

Deferred tax assets have not been recognised in respect of the following items:

The net deferred tax asset of £14.02 million (2012: £43.75 million) has not been recognised because it is not probable that future taxable profits will be available against which the Group can utilise the benefits.

15. investment property

The cost of properties as at 31 August 2013 was £1.02 billion (31 August 2012: £1.07 billion). The carrying amount of investment property, is the fair value of the property as determined by a registered independent appraiser having an appropriate recognised professional qualification and recent experience in the location and category of the property being valued (together referred to as "valuers").

The fair value of each of the properties has been assessed by the valuers in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors ("Red Book"). In particular, the Market Value has been assessed in accordance with the Valuation Standard (VS) 3.2 of the Red Book. Under this provision, the term "Market Value" means "the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing wherein the parties have each acted knowledgeably, prudently and without compulsion".

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

The valuation does not include any adjustments to reflect any liability for taxation that may arise on disposal, nor for any costs associated with disposals incurred by the owner. No allowance has been made to reflect any liability to repay any government or other grants, or taxation allowance that may arise on disposals.

The valuers have used the following key assumptions:

The market value of investment properties has been primarily derived using comparable market transactions on arm's-length terms and an assessment of market sentiment. The aggregate of the net annual rents receivable from the properties and, where relevant, associated costs, have been valued based on yields ranging from 5% to 16% which reflect the risks inherent in the net cash flows. Valuations reflect, where appropriate, the type of tenants actually in occupation or likely to be in occupation after letting of vacant accommodation and the market's perception of their creditworthiness and the remaining useful life of the property.

In terms of IAS 40 Investment property: Paragraph 14, judgement is needed to determine whether a property qualifies as an investment property. The Group has developed criteria so that it can exercise its judgement consistently in recognising investment properties. These include inter alia; property held for long-term capital appreciation, property owned (or under finance leases) and leased out under one or more operating leases; and property that is being constructed or developed for future use as an investment property. The recognition and classification of property as investment property principally assures that the Group does not retain significant exposure to the variation in cash flows arising from the underlying operations of properties. Investment property comprises a number of commercial and retail properties that are leased to third parties. The hotel properties are held for capital appreciation and to earn rental income. The properties have been let to Redefine Hotel Management Limited ("RIHML") for a fixed rent which is subject to annual review. The annual rent review takes into account the forecast EBITDA for the hotel portfolio when setting the revised rental level.

RHML operates the hotel business and is exposed to the fluctuations in the underlying trading performance of the hotels. It is responsible for the day to day upkeep of the properties and retains the key decision making responsibility for the business. Aside from the payment of rental income to the Group there are limited or no transactions between the two entities. As a result, in line with IAS 40, Redefine International classifies the hotel properties as investment properties.

Property operating expenses in the consolidated income statement relate solely to income generating properties.

On 21 November 2012, the Company effectively acquired through its shareholding in Redefine Hotels Holdings Limited a 42.6% interest a 150 bedroom Holiday Inn express in Earls Court, London valued at £27 million on acquisition. This acquisition was financed by contributions from Redefine International, bank debt and a £6.55 million contribution from non-controlling interests. Redefine International were deemed to control the entity holding the property and so have consolidated its operations including the investment property and the related income and expenses.

The Inkstone properties located in Hamburg and Wedel were disposed for €4 million in October 2012. The proceeds of the sale were utilised to settle the outstanding Barclays facility within the Inkstone Grundstuckverwaltung & Co.KG.

Three petrol station properties in the Princes Street Investment portfolio were sold to Malthurst Limited (the tenant) on 7 September 2012. Sapphire House, Telford was also sold during the year for £530,000.

Disposals of properties have also been effected through the disposal of the corporate entity as was the case for Trito Petersfield Limited and as a result of the loss of control of the underlying property companies, as was the case for Gamma. Further details of the impact of the disposals are provided in Notes 37 and 38.

On 10 August 2013, the Company effectively completed the acquisition of three prime shopping centres in Germany. Further details of the acquisition are provided in Note 40.

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

16. long term receivables

The loans from jointly controlled entities are unsecured, bear interest at coupon rates between 0% and 7% and are repayable on demand, but the expectation is that the term will be greater than 12 months.

The loans from Mezzanine Capital Limited are secured, bear interest at rates between 10% and 12% and are repayable between one and three years.

Included in amounts due from Mezzanine Capital Limited is rolled up interest in respect of the period of Nil (2012: £7.6 million).

17. investments designated at fair value

The following table details Investments designated at fair value.

The movement in investments designated at fair value may be reconciled as follows:

The Company disposed of 86 million securities in Cromwell at prices ranging from AUD90 cents to AUD96.53 cents in April 2013 for a total consideration of AUD77.49 million (GBP52.27 million net of fees paid of £0.53 million).

Significant influence over the operations of Cromwell was deemed to have ceased from the date of this disposal and the Group ceased to use the equity accounting method of accounting for its investment. The fair value of the remaining shareholding in Cromwell on that date was AUD$211.98 million (£144.42 million). The investment was designated at fair value through profit or loss on that date.

As detailed in Note 9 the Group recognised a gain on loss of significant influence of £46.69 million (net of fees paid of £0.53 million).

The Company's interest in Cromwell at 31 August 2013 was 13.70%. The closing price of Cromwell on 31 August 2013 was 1.025 Australian cents per security and the total fair value of the securities held is AUD $241.42 million (£138.91 million), resulting in a negative fair value movement from the date significant influence was lost of £5.51 million.

18. assets AND LIABILITIES HELD FOR SALE

Discussions are on-going regarding the sale of a number of assets with disposals expected to be finalised within the next 12 months. As a result the assets have been reclassified to held for sale.

In addition at 31 August 2012 the Group had committed to a sale plan involving the loss of control of a number of subsidiaries and, as a result, all the assets and liabilities of those subsidiaries were classified as held for sale. Certain of these subsidiaries were subsequently sold in October 2012.

Assets held for sale

Assets held for sale at the year end include the following:

Disposals in the period were as follows

Liabilities held for sale

The Group finalised the restructuring of all four VBG assets and the associated financing facilities on 8 October 2012. The restructuring and refinancing of the VBG portfolio and financing facilities saw the Group sell 51% of its interest in the VBG holding company to a major pension fund and resulted in Redefine International owning a 49% interest in the VBG assets through VBG Holdings S.a.r.l . See Note 37 for further details.

The Company announced on 15 October 2012 the agreement to extend and restructure the £114.6 million Delta facility. The restructure involved repaying £33.5 million of debt in consideration for the release of a portfolio of seven assets. The maturity date of the Delta facility was extended to 15 April 2015 subject to the Company meeting annual disposal targets, in respect of the remaining 16 Delta portfolio assets. The Group has undertaken to sell these properties over a two year period with sales targets which are required to be met each year. The Group is unable to specifically identify in which financial year each of the Delta assets will be sold. As the Group is committed to the sale of the Delta property portfolio, all of the properties have been included in assets held for sale.

The Group has also commenced the sales process for West Tullos in Aberdeen and expects to complete the sale within the next 12 months.

19. investments in jointLY CONTROLLED ENTITIES

The Group's investments in jointly controlled entities currently consist of the following:

(i) 50% in Pearl House Swansea Limited, a jointly controlled entity with Sandgate Properties Limited, which owns a long leasehold retail interest in Swansea, Wales.

(ii) 50% in Swansea Estates Limited, a jointly controlled entity with Sandgate Properties Limited, which owns a long leasehold retail interest in Swansea, Wales.

(iii) 50% in Ciref NEPI Holdings Limited, a joint venture with New Europe Property Investments, which ultimately owns property in Germany, Western Europe.

(iv) 50% in 26 The Esplanade No 1 Limited, a joint venture with Rimstone Limited which ultimately owns an office building in St. Helier, Jersey.

(v) 50% in Ciref Crawley Limited, a joint venture with Graymont Limited which owns 3 blocks of offices in Crawley, Surrey.

(vi) 50% in Redefine Wigan Limited, a jointly controlled entity with Sandgate Properties Limited, which ultimately owns a shopping centre in Wigan, Greater Manchester.

(vii) 50% in CIREF Coventry Limited, a jointly controlled entity with Sandgate Properties Limited, which ultimately owns the West Orchards Shopping Centre in Coventry.

(viii) 50.5% interest in RI Menora German Holdings S.a.r.l, a joint venture with Menora Mivtachim which ultimately owns a property in Waldkraiburg, Germany.

(ix) 49% interest in VBG Holdings S.a.r.l., a joint venure with Menora Mitvachim which ultimately owns government let properties in Dresden, Berlin, Stuttgart and Cologne, Germany.

The increase in the investment over the period is comprised largely of the investment made in VBG Holdings S.a.r.l. of £12.6 million. Additional investments totalling £3.02 million were also made in RI Menora Germany Holdings S.a.r.l, to help fund, in conjunction with bank debt, the acquisition of properties in Hucklehoven and Kaiserslautern in Germany.

Summarised financial information

The summarised financial information derived from the gross balance sheets of the jointly controlled entities is set out below: