Half Yearly Report

SHAFTESBURY ANNOUNCES 2012 HALF YEAR RESULTS

GROWTH IN UNDERLYING PROFITS AND DIVIDENDS, CONTINUED STRONG TENANT DEMAND, LOW VACANCY, AND IMPORTANT NEW PROJECTS.

Shaftesbury PLC ("Shaftesbury") today announces its results for the 6 months ended 31 March 2012. Shaftesbury owns 12½ acres in London's West End comprising over 500 properties in and around Carnaby, Covent Garden, Chinatown, Soho and Charlotte Street.

Results and dividends

Net asset value and portfolio performance 

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

Portfolio activity

·; West End remains busy; good tenant demand across all uses.

·; Continued low levels of vacancy.

·; Acquisitions totalling £29.4 million in the period, of which over 90% was in Soho, and the remainder in Covent Garden.

·; £8.5 million capital expenditure on portfolio.

·; Planning consent obtained for two major schemes in Carnaby which will start shortly.

Finance

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

·; Committed unutilised bank facilities £157.5 million at 31 March 2012 (30.9.2011: £140.7 million).

Board changes

·; John Manser, non-executive director since 1997 and Chairman since 2004 to retire at 2013 Annual Meeting; Board has resolved that Jonathan Lane, currently executive Deputy Chairman, will succeed him as non-executive Chairman.

·; Two additional non-executive directors to be appointed later this year.

Brian Bickell, Chief Executive, commented:

"London's West End continues to be busy and prosperous. Throughout the first six months of the financial year our portfolio has been virtually fully let as demand for uses across our West End locations remains healthy.

London's reputation as a destination of world renown continues to grow, and this summer's major events - the Queen's Diamond Jubilee and the Olympics - will put the city firmly in the world's spotlight. These events are a unique opportunity for London to promote its many attractions to a global audience.

Our portfolio, underwritten by the West End's special features and attractions, continues to flourish and we remain confident that it will continue over time to deliver rising income and rental values. This in turn should bring long term growth in capital values which, coupled with low obsolescence in our assets, should allow us to maintain our record of out-performing the wider property market."

23 May 2012

For further information:

There will be a presentation to equity analysts at 11 am on Wednesday 23 May 2012, at The London Stock Exchange, 10 Paternoster Square, London EC4M 7LS.

There is a dial-in facility for the presentation. Analysts and investors are welcome to participate. The facility can be accessed by calling +44 (0)20 3140 0668. The PIN code is 634321#. The presentation document is available on the Group's website www.shaftesbury.co.uk. A recording of the conference call will be available on the Company's website www.shaftesbury.co.uk following the meeting.

Financial highlights

* Adjusted in accordance with the European Public Real Estate Association ("EPRA") Best Practice Recommendations.

Performance summary

*Source: Investment Property Databank Ltd © 2012.

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

Business review

London's West End continues to prosper, underpinned by robust visitor numbers and trading. This is in contrast to the UK economy generally, where business and consumer confidence is subdued and the timing of any sustained recovery is uncertain.

Throughout the first six months of the financial year our portfolio has been virtually fully let as demand for uses across our West End locations remains healthy. Like-for-like rental income has grown by 3.5% compared with the first half of last year as we have continued to meet or exceed estimated rental values ("ERVs") on lettings, lease renewals and rent reviews. Since 30 September 2011 we have seen a significant increase of £2.9 million in the reversionary potential of our portfolio, which now stands at £17.6 million.

We have acquired investments totalling £29.4 million during the period, principally in Soho. Expenditure on schemes amounted to £8.5 million. We have now secured planning consent for two important schemes in Carnaby, the first of which will start in June 2012.

In December 2011 we added £60 million to our financial resources through a fifteen year loan, at a fixed rate of 4.43%, raised in the Longmartin joint venture.

Results

EPRA adjusted profit before tax for the six months ended 31 March 2012 amounted to £16.1 million, compared with £14.0 million for the same period last year, an increase of £2.1 million or 15%.

Rents receivable across the Group rose by £3.7 million to £40.3 million (31.3.2011: £36.6 million) reflecting income from acquisitions together with continuing good demand and low levels of vacant space across our wholly owned portfolio and within the Longmartin joint venture. Net property income rose to £35.5 million (31.3.2011: £32.1 million), an increase of £3.4 million.

Provision for current tax on the EPRA adjusted profit for the period, which amounted to £0.3 million (31.3.2011: £0.1 million), arose in the Longmartin joint venture, which is outside our REIT group. Within the wholly owned Group, no taxation liabilities have arisen as its activities are largely tax-exempt under REIT legislation.

EPRA adjusted profit after tax for the period amounted to £15.8 million (31.3.2011: £13.9 million), an increase of 13.7%.

EPRA adjusted net assets at 31 March 2012 amounted to £1,188.1 million, resulting in a diluted net asset value per share of £4.70. This represents an increase of 7p over the period, an uplift of 1.5%. The increase in the EPRA adjusted diluted net asset value per share before the payment of the 2011 final dividend of 5.75p per share was 12.75p, an uplift of 2.75%.

Interim dividend

Your directors are pleased to declare an interim dividend of 5.95p per share, an increase of 8.2% on last year's interim dividend of 5.50p. The interim dividend will be paid entirely as a Property Income Distribution.

The rate of growth of future distributions will reflect the underlying growth in the Group's net rental income and profits.

Portfolio valuation

Our portfolio has been valued at 31 March 2012 at £1,739.5 million, resulting in a revaluation surplus for the half year of £22.3 million. Adjusting for acquisitions and capital expenditure during the period, our portfolio has increased in value by 1.4%, compared with the IPD UK Monthly Index: Capital Growth which declined by 0.8% over the same period.

Growth in income continues to be the principal driver of the increase in the value of our portfolio. Generally equivalent yields attributed to secure, well let investments have been stable since mid-2010. In the case of our wholly owned portfolio, at 31 March 2012 our valuers attributed an equivalent yield of 4.92%, compared with 4.93% at 30 September 2011 and 5.10% at 30 September 2010. The valuation of the Longmartin joint venture's portfolio reflects an equivalent yield of 4.79% (30.9.2011: 4.80%).

Our portfolio has continued to generate increased contracted rents and higher ERVs from a combination of sustained tenant demand, high levels of occupancy, changes of use and new schemes. Our focus on retail, restaurant, leisure and residential uses, which for the landlord are less prone to long-term obsolescence, results in a low level of capital expenditure which enhances our capital value return.

Over the six months ended 31 March 2012 each of our principal villages grew in value by around 1.6%. Our Soho holdings, which represent 6% of our portfolio, fell in value by 2.7%, which is to be expected at this early stage of assembling ownerships and refurbishment activity. Our interest in the Longmartin joint venture's properties, which represents 7% of our portfolio, rose in value by 2.1% as a result of rising rental income following the expiry of rent free periods and an increase in total ERV.

Portfolio reversionary potential

* Excludes pre-lettings and contracted rent free periods

At 31 March 2012 the Group portfolio's current gross income amounted to £79.3 million, an increase of £1.8 million over the period. Acquisitions during the period added £1.2 million and the expiry of rent free periods in Longmartin added £0.9 million to current gross income. This additional income was partly offset by an increase in the amount of contracted income which was subject to rent free periods at the valuation date. The underlying growth in current gross income over the period was around 1.4%.

Our valuers have estimated the rental value of the Group's portfolio at 31 March 2012 at £96.9 million, compared with £92.2 million at 30 September 2011. Of the increase of £4.7 million, acquisitions contributed £1.4 million and the two large schemes in Carnaby we will be starting later this year added £2.0 million. Good demand for accommodation in our villages and the numerous other schemes we have in hand across the portfolio were the main drivers of the general increase in ERVs across the portfolio totalling £1.3 million.

The Group's reversionary potential at 31 March 2012 amounted to £17.6 million (30.9.2011: £14.7 million), an increase of £2.9 million over the period. Within the wholly owned portfolio, the reversionary potential is now estimated at £15.4 million (30.9.2011: £11.6 million), an increase of £3.8 million. The fall of £0.9 million in the reversion in the Longmartin portfolio resulted from the expiry of rent free periods. We expect its reversion will grow over time particularly as St Martin's Courtyard becomes established as a shopping and restaurant destination.

Shops and restaurants account for 71% of the estimated reversionary potential within the wholly owned portfolio. Demand for these uses in London's West End remains strong and tends not to be cyclical, giving us confidence that their current reversions will be realised over a five year review cycle. Through our management strategies, which foster environments where our tenants can prosper, we expect over time to deliver further growth in rental values and income.

Strategy

The objective of our strategy is to produce sustained growth in net rental income from our property portfolio which is delivered to shareholders through steadily rising distributions. Long term rental growth in turn underpins the growth in the value of our investments, which is a key element of shareholders' total return.

We achieve our objective through focussing our investments exclusively in London's West End, concentrating on central locations which attract visitors in numbers unmatched by any other city in the western world.

London and its economy benefit from many unique features, which have their origins in its long and exceptional history. Until the 1920s it was the world's largest city; even today it is Europe's largest city and fifth in the world measured by GDP.

London's importance and prosperity have created within the West End world class heritage and cultural attractions together with an unrivalled variety of shopping, eating and leisure choices, which attract millions of domestic and international visitors. With an extensive and improving transport network, visitors to the West End are also drawn from London's eight million residents, some 20 million people in the south of England who are easily able to visit for the day, and from across the UK.

Reflecting the importance of the visitor-based economy in our chosen locations, our strategy is to establish clusters of ownerships in areas which have, or have the potential for, retail and leisure uses. In the West End these uses have a long history of sustained demand.

We achieve our objective of delivering sustainable growth through:

·; Using our extensive local knowledge to identify well located areas which are often neglected and lack a cohesive strategy for uses and tenant mix, essential to attract footfall and bring prosperity;

·; Acquiring buildings which are often dilapidated, and as our clusters of ownership grow, we implement a long-term holistic management approach, restoring buildings, improving the public realm and creating and maintaining a mix of uses and tenants which attract visitors and spending. Establishing the conditions in which our commercial tenants - particularly those in retail, restaurants and leisure - are able to prosper is essential for long term sustainable rental growth;

·; Working closely with Westminster City Council and Camden Council, neighbouring owners and other stakeholders in the local community to promote the West End and its many attractions to the widest audience and to create the conditions for visitors to have an enjoyable experience which they will want to repeat.

Our portfolio

Extending to over 12½ acres, our wholly owned portfolio now comprises 1,315,000 sq. ft. of commercial space and around 267,000 sq. ft. of residential accommodation. We own over 500 individual buildings, clustered in villages, virtually all of which have a mix of uses. Typical of the locations we invest in, the lower floors of our buildings contain the most valuable uses of retail, restaurant and leisure. These uses now extend to 907,000 sq. ft. and provide 71% of our current gross income and represent 71% of ERV in the wholly owned portfolio. Upper floors of our buildings are mainly offices, residential or a combination of both.

Our wholly owned portfolio now includes 329 shops extending to 410,000 sq. ft. They provide 36% of current gross income and have a weighted average unexpired lease term of four years. 62% of our retail income is generated by 82 shops which have rents of over £100,000 per annum; 61 of those shops are in Carnaby. Our 247 smaller shops account for the remaining 38%.

Demand for retail space in our locations remains strong, particularly from overseas retailers seeking to establish a presence in London, which is widely regarded as being the world's best city for quality and choice of shopping. We seek out and encourage interesting new retailers and concepts to ensure our villages respond to ever changing tastes and spending patterns.

We now have 216 restaurants, cafes, bars and clubs totalling 497,000 sq. ft. They provide 35% of our current income and have a weighted unexpired lease term of twelve years. In the West End these leisure uses are in great demand, but supply is limited by restrictive local planning and licensing policies. As we only provide accommodation in shell form, tenants' investment is substantial and leases are often granted for terms of 25 years. As a result these leases are valuable assets for the tenant as well as the landlord in our locations and provide us with very secure income.

Our offices, which extend to 408,000 sq. ft., provide 18% of our current gross income. Our offices are generally small, typically of 1,500 sq. ft. or less, with an average current rent of £37 per sq. ft. and a weighted average unexpired lease term of three years. Many of our offices are occupied by businesses connected to their village location; fashion, media and creative firms in Carnaby and Covent Garden and businesses servicing the Far Eastern community in Chinatown. Whilst they are important in our villages, the small size of our units, cyclicality of office demand and costs of obsolescence borne by the landlord lead us to seek alternative uses for smaller offices.

We now have 399 apartments extending to 267,000 sq. ft., which provide 11% of current passing income. Many of these apartments have been created by conversion from office use. We usually let rather than sell our apartments which preserves flexibility in the management of our buildings and villages. There is continuing good demand and rental growth for our centrally located apartments.

The Longmartin joint venture's portfolio comprises a 1.9 acre island site at the junction of Long Acre and St Martin's Lane and is centred on St Martin's Courtyard, a mixed use scheme completed in 2011. It comprises 23 shops and eight restaurants across 112,000 sq. ft., which produce 62% of its current income, and 102,000 sq. ft. of offices which contribute 18%. In addition 75 apartments totalling 55,000 sq. ft., produce 20% of its current income.

Portfolio activity

Our acquisition strategy is very focussed both geographically and in the nature of the properties which interest us. Owners in our areas are always reluctant to sell assets which have shown long term resilience and are difficult to replace. Their reticence has increased in the current environment of historically low interest rates and general financial uncertainty.

In the six months ended 31 March 2012 we acquired properties totalling £29.4 million, of which £27.0 million are in Soho and £2.4 million in Covent Garden. These acquisitions comprised twelve shops and four restaurants extending to 25,000 sq. ft., 3,000 sq. ft. of offices and three apartments. We continue to seek new investments and are particularly keen to add to restaurant and leisure uses in our portfolio.

Capital expenditure across the portfolio over the period amounted to £8.5 million, of which £1.2 million arose in the Longmartin joint venture. Generally our capital expenditure is low in relation to the size of our portfolio as we only provide accommodation in shell form for our principal uses of retail, restaurants and leisure.

As our investments are in Conservation Areas and many of the buildings we own are listed, our schemes can be intricate. It can often take considerable time to secure the necessary consents and then vacant possession before works can start. Much of the expenditure we incur is to create or reconfigure retail and restaurant space, refurbish or convert smaller offices to other uses and invest in the public realm in and around our villages.

At 31 March 2012 we had over 40 schemes of varying size and complexity in hand across our villages. This is typical of our usual level of activity. The cumulative impact of our numerous projects makes an important contribution to our income and capital growth over time.

We have postponed a number of projects until the autumn as in practice new external construction work in our areas will be suspended in the period leading up to and during the Olympics.

Occupancy levels have remained high throughout the period. When space has become available, re-letting has generally been achieved with minimal void periods. New commercial lettings during the period totalled £3.2 million, of which £1.2 million arose from the retail and office lettings in the scheme at 36/39 Carnaby Street we completed in December 2011.

Vacant commercial space at 31 March 2012 (wholly owned portfolio only)

At 31 March 2012 the ERV of vacant commercial space in the wholly owned portfolio amounted to £3.1 million, equivalent to 3.9% of commercial ERV. Of this, £1.5 million, representing 1.9% of commercial ERV, was held for or under refurbishment and £1.6 million, equivalent to 2.0% of commercial ERV, was available to let.

Whilst the general level of vacant space continues to be low, the two major schemes in Carnaby which we will be starting later this year will inevitably result in a significant increase in the amount of space we have under refurbishment and loss of income throughout the period until summer 2014. Across the two schemes, 32,000 sq. ft. of existing commercial space currently producing a gross income of some £1.0 million per annum will be vacated.

At 31 March 2012 we had 369 completed apartments, of which eleven were vacant, together with 30 units under construction.

Within the Longmartin joint venture's portfolio, one retail unit was vacant (ERV £0.1 million) and the refurbishment of 10,000 sq. ft. of offices was nearing completion (ERV £0.6 million). Three apartments were undergoing refurbishment as part of a phased programme to improve unmodernised accommodation.

Carnaby

Carnaby is our largest single village, representing 33% by value of the Group's portfolio. 49% of the village's current gross income comes from its 126 shops. The 233,000 sq. ft. of offices, which provide 32% of its current income, account for nearly half of the offices in our wholly owned portfolio.

Carnaby has an international reputation for youth fashion, a market in which tastes change at an ever faster pace. We respond to this by actively managing the tenant mix and introducing new retailers and concepts, often with their origins outside the UK, to ensure the area continues to appeal to its fashion conscious visitors. At present we have no large shops to let but we anticipate opportunities will arise in the coming months to secure space for new retailers.

During the period we secured planning consent for two important new schemes which will provide space which meets the demand for larger shops.

We will start the first scheme, which is on the north side of Foubert's Place, in June 2012. It will include three new large shops and one reconfigured unit by combining existing small shops totalling 5,300 sq. ft. with space currently used as offices at the rear of Lasenby House. These shops, which on completion will extend to 10,800 sq. ft., will be available in summer 2013. In addition, we have pre-let the remaining 15,000 sq. ft. of unrefurbished offices on the upper floors of Lasenby House for a term of 30 years to the adjacent Liberty department store. The capital cost of the scheme is estimated to be £4.25 million.

The second scheme has frontages to the south side of Foubert's Place and Kingly Street. Existing structures will be demolished and replaced by 8,200 sq. ft. of retail on Foubert's Place and restaurant space will be relocated to a new 6,500 sq. ft. unit on Kingly Street. The upper floors will include 7,000 sq. ft. of offices and twelve apartments. We expect the scheme will commence by early 2013 and the first units will be available from autumn 2014. The capital cost is estimated to be £13.5 million.

During the period of construction these schemes will involve a loss of current income and an increase in non-recoverable costs, which we do not capitalise. However, once completed and let they are expected to produce additional income of some £2 million per annum. Importantly the much improved retail space in Foubert's Place should significantly improve the long term rental prospects of this busy pedestrianised street which connects Regent Street and Carnaby Street.

Following improvements to Kingly Street, which were completed last year, we have seen much improved footfall. The variety and quality of restaurants is improving, along with rental levels. The relocated restaurant space referred to above will further improve the northern end of the street and is already attracting interest from potential occupiers.

Apart from these two larger schemes, we have a number of other projects in hand across the village involving the reorganisation of uses and refurbishment of buildings. They include the refurbishment of 24,000 sq. ft. of more modern offices, currently producing an income of £1.1 million, which we expect to commence by the end of 2012.

Covent Garden

Our holdings in Covent Garden, including our share of the Longmartin joint venture, represent 35% by value of our portfolio. Our wholly owned holdings, concentrated in the districts of Seven Dials, Coliseum and the Opera Quarter, have a wide mix of uses, typical of this distinctive area. Retail provides 36% of our current gross income and restaurants 33%. Covent Garden has a growing residential community and apartments now provide 16% of our current income, exceeding the 15% we receive from offices.

During the period we acquired two properties which included two shops and three apartments, at a cost of £2.4 million.

As with our other villages, we are keen to introduce new retailers and concepts, particularly in Monmouth Street and Earlham Street. These streets are increasingly important pedestrian routes which are already benefitting from footfall, from the 400,000 sq. ft. new office development just north of Seven Dials which is now fully occupied. In the medium term, we expect significant pedestrian flows from the Crossrail and underground transport hub now under construction at Tottenham Court Road.

We have several conversion and refurbishment projects in progress. We have also identified a number of opportunities to introduce alternative and more profitable uses such as retail and residential in place of offices, and have obtained, or are in the process of seeking, the requisite planning consents.

In the joint venture, we are close to completing a 10,000 sq. ft. office refurbishment in a building that adjoins St Martin's Courtyard. We have also commenced a rolling programme of refurbishment of some of the older apartments in neighbouring blocks.

Improvements to the public realm remain an important element of our strategy and we have further projects in hand with both Westminster City Council and Camden Council. However, implementation of schemes which affect traffic flows is delayed until the autumn in order to avoid disruption in the period leading up to and during the Olympics.

Chinatown

Chinatown is the most central of our villages, at the heart of London's prime entertainment and leisure district, and our investments here represent 24% by value of our portfolio.

63% of the current gross income comes from our 68 restaurants, which thrive on the high visitor numbers and late hours of trading in this unique and vibrant central location. Chinatown continues to experience a generational change in its restaurant variety which is adding to the rich diversity in South East Asian cuisine.

Our capital expenditure in Chinatown is modest as a consequence of the high proportion of restaurants which tend to be let for longer lease terms, but we continue to identify and implement new projects within our existing holdings to enhance income and capital values.

Westminster City Council's £15 million refurbishment of Leicester Square is nearing completion. We know from our experience that improvements to the public realm such as this major scheme are important catalysts for long term regeneration. We are now discussing with the Council further potential improvements to streets linking Chinatown and Leicester Square.

Soho

Our holdings across Soho now total £99.5 million and represent 6% by value of the Group's portfolio. During the period our acquisitions totalled £27 million comprising ten shops (13,600 sq. ft.), four restaurants (11,500 sq. ft.) and 3,000 sq. ft. of offices.

Berwick Street is at the centre of our Soho holdings. It is a very busy north - south pedestrian route through Soho, but suffers from fragmented ownership, a dilapidated public environment, rundown buildings and a struggling street market. As a consequence rental values are low, but we see considerable scope for improvement as these issues are addressed.

We welcome and encourage investment by others in the area as a whole, which complement our own ideas and plans for long-term regeneration. A number of important schemes are under discussion or in hand in Berwick Street and nearby streets which, over time, should add to the area's appeal.

Charlotte Street

Our holdings in and around the southern end of Charlotte Street represent 2% by value of our portfolio. 60% of our current income comes from the thirteen restaurants, bars and cafes we own in the area. Since 31 March 2012 we have acquired a further restaurant and residential property at a cost of £5.0 million.

This lively and cosmopolitan area is home to a long established and interesting variety of restaurants and also has a flourishing residential community. In the coming years it will benefit from important new schemes at Fitzroy Place (formerly the site of the Middlesex Hospital), the redevelopment of the 2.3 acre Royal Mail site at Rathbone Place and the regeneration which is planned around the Tottenham Court Road transport interchange now under construction. These projects will bring a significant increase in the local working and residential population and footfall generally. We are aware that restaurateurs are keen to establish a presence in the area in anticipation of this increased activity.

Results in detail

EPRA adjusted profit before tax, which eliminates the effects of non-cash fair value movements in properties and financial instruments, was £16.1 million, up £2.1 million or 15% from the £14.0 million reported for the same period last year. Including the non-cash fair value movements, profit before tax was £38.1 million (31.3.2011: £101.0 million).

Tenant demand remains strong, occupancy levels have been stable and the incidence of tenant defaults has been low. Along with acquisitions, this has helped deliver growth in rents receivable of 10.1% to £40.3 million compared to the first half of last year (31.3.2011: £36.6 million). On a like-for-like basis, rents receivable in the wholly owned portfolio grew 3.5% compared to the first half of last year. Acquisitions added a further £1.1 million, and our Longmartin joint venture, which is now virtually fully let, delivered an extra £1.1 million in rents receivable compared with the six months to 31 March 2011.

After property charges of £4.8 million (31.3.2011: £4.5 million), net property income grew £3.4 million to £35.5 million (31.3.2011: £32.1 million).

Administration expenses were £4.7 million (31.3.2011: £4.1 million) and included £0.5 million (31.3.2011: £0.5 million) for employee annual bonuses and £0.9 million (31.3.2011: £0.8 million) in respect of equity settled remuneration.

Net finance costs (including settlements under the interest rate swap contracts) were £14.7 million (31.3.2011: £14.0 million) and were covered 2.1 times by operating profit before investment property revaluation movements (31.3.2011: 2.0 times), above the 1.5 times minimum required by our bank loan agreements. Our unhedged bank debt has continued to benefit from short term interest rates remaining at unprecedented low levels. Whilst short term rates have increased recently, at 31 March 2012 the marginal cost of additional borrowings under our revolving credit facilities remained under 2%.

With gilt and low risk bond yields continuing at historically low levels, the fair value deficit of our long-term interest rate swaps has risen by £0.3 million to £104.9 million since 30 September 2011. Whilst the movement over the last six months is relatively small, there has been considerable volatility in the deficit over the past eighteen months. In the six months to 31 March 2011 it decreased by £37.4 million to £43.1 million, but then rose by £61.5 million in the second half of the financial year. At the end of January 2012, it had risen a further £21.5 million, only to fall by £21.2 million by 31 March 2012. This non-cash accounting adjustment (which is excluded from our banking covenants) is kept under review by the Board and we continue to take the view that crystallising part or all of the fair value deficit would not benefit the Group at present.

As a REIT, the Group's activities are largely exempt from tax. However, our Longmartin joint venture is outside of the REIT group and the current tax charge for the period is £0.3 million (31.3.2011: £0.1 million).

EPRA adjusted diluted earnings per share were up 5% to 6.3p compared to the first six months of last year (31.3.2011: 6.0p). Taking into account the Group's continued strong financial position, we have declared an interim dividend of 5.95p per share, up 8.2% on last year's interim dividend of 5.50p. This is covered 1.06 times by EPRA adjusted earnings per share (31.3.2011: 1.09 times) and will be paid entirely as a PID.

Cash flows and finance

A combination of acquisitions, low vacancy and growing rents have increased cash generated from operating activities by £2.2 million to £31.5 million (31.3.2011: £29.3 million), comfortably covering finance costs of £14.2 million. The surplus after interest covered the February 2012 dividend payment of £14.5 million and tax payments of £0.3 million.

Borrowings have increased by £43.2 million to £538.5 million over the first half of the year, principally as a result of acquisitions and capital expenditure on properties, which totalled £39.5 million. Of the total debt, £121.0 million is fixed rate borrowing (30.9.2011: £61.0 million) and £417.5 million is floating rate (30.9.2011: £434.3 million), of which £360 million is hedged through interest rate swaps.

Gearing (based on nominal value of debt and measured against EPRA adjusted net assets) was 45%, up 2% from 43% at 30 September 2011 and comfortably within our maximum limit of 175% permitted in our bank loan agreements. In the wholly owned Group the ratio of debt to the fair value of property assets at 31 March 2012 was 31% (30.9.2011: 30%), well below the limit of 66.7% permitted in our loan agreements.

At 31 March 2012, we had £157.5 million undrawn committed loan facilities at our disposal (30.9.2011: £140.7 million). The Board monitors our overall committed facilities at all times to ensure that we have sufficient resources to meet our future cash commitments and comply with our loan covenants.

Our intention is to continue growing the portfolio through acquisition, redevelopment and active management. In a typical year, capital expenditure on our wholly owned portfolio is under 1% of its value, but this will increase over the coming two years as a result of the two large schemes in Carnaby.

Our financing policy is to ensure our funding reflects the long-term nature of our investment strategy. In December 2011, our Longmartin joint venture raised £120 million through a 15 year secured loan at a fixed rate of 4.43%. Our £60 million share of the proceeds was used to repay existing bank revolving credit facilities and, as such, was then available for re-drawing. This loan helped diversify our debt portfolio and increased our weighted average maturity of all debt to 7.1 years (30.9.2011: 6.9 years).

Our earliest bank debt maturities are in 2016. We maintain a dialogue with existing and potential lenders to ensure our debt structure evolves and continues to reflect the long term nature of our portfolio and investment strategy.

Taking into account the impact of interest rate hedging, interest on 89% of our borrowings was fixed at 31 March 2012 (30.9.2011: 85%). The weighted average all-in cost of debt was 5.42% at 31 March 2012 (30.9.2011: 5.39%).

The average margin over LIBOR on amounts drawn from the wholly owned Group's bank facilities at 31 March 2012 was 0.86% (30.9.2011: 0.85%), which would rise to 1.04% if we drew the facilities in full. These margins are considerably below the level that would currently be available so that, if current conditions in debt markets continue or deteriorate further, our finance costs will rise as we approach maturity of our current arrangements from 2016 onwards.

Performance and benchmarking

Our performance for the period, measured against our chosen benchmarks is set out in the table above.

With our valuation yields remaining largely unchanged, growth in contracted rents and ERVs resulted in a capital value return of 1.4% in the first half of the year, 2.2% higher than our benchmark, the IPD UK Monthly Index: Capital Growth, which reported a decline of 0.8%. Similarly, our total return of 3.4% exceeded our benchmark IPD UK Monthly Index: Total Return by 0.9%.

Our total shareholder return for the six months to 31 March 2012 was 6.9% compared to 10.7% shown by our benchmark index, the FTSE Super Sector Real Estate Index. Taking the twelve months to 31 March 2012, our total shareholder return was 6.4% compared with our benchmark index, which recorded a decline of 3.2%.

Principal risks and uncertainties

The principal risks facing the Group for the remaining six months of the financial year, which are consistent with those set out in the Annual Report for the year ended 30 September 2011, are summarised below:

·; Property valuations

Reduction in value of the Group's portfolio and the consequent effect on the Group's asset value would adversely impact its ability to continue to meet covenants in its loan agreements;

·; Location of property assets

The Group's properties are concentrated in London's West End. Events which discourage visitors to this high profile area, such as threats to public safety, security and health or of transport disruption could result in a reduction in visitor numbers. A material decline, if sustained for a long period, would adversely affect the local visitor-based economy and demand for the Group's shops and restaurants in particular.

All of the Group's properties are within the jurisdictions of Westminster City Council and the London Borough of Camden. Changes to their policies, particularly those relating to planning and licensing, could have a significant impact on the Group's ability to maximise the long term potential of its assets;

·; Tenant risk

As a result of adverse conditions in the wider economy, a restriction in the availability of credit for consumers and businesses could lead to lower levels of consumer spending, a higher level of business failures and difficulties for new ventures in raising start-up capital;

·; Environmental legislation

All of the Group's properties are in Conservation Areas and many are Listed. The future use of older buildings may be restricted if they become subject to environmental performance standards which they are unable to meet.

Board Changes

Christopher Ward joined the Board as Finance Director in January 2012. John Emly, a non-executive director since 2000, retired from the Board in February 2012.

John Manser, the Chairman of the Company, has advised the Board of his intention to retire at the conclusion of the 2013 Annual General Meeting expected to be held on 8 February 2013. The Board is pleased to announce that Jonathan Lane, presently the executive Deputy Chairman, will succeed him as non-executive Chairman. Further information regarding this change is provided in the following Stock Exchange announcement.

As part of its succession planning, the Board expects to announce later this year the appointment of two additional non-executive directors to augment the experience and balance of independence of the Board. A search process to identify suitable candidates is well advanced.

Prospects

There is a continuing climate of economic uncertainty in the UK and in Europe, which is now being exacerbated by the extensively reported problems within the Eurozone. These concerns are likely to add to the pressures on consumer confidence in the period ahead.

In contrast London's West End continues to be busy and prosperous. Its reputation as a destination of world renown continues to grow, and this summer's major events - the Queen's Diamond Jubilee and the Olympics - will put the city firmly in the world's spotlight. These events are a unique opportunity for London to promote its many attractions to a global audience. However, in the short term there will be some disruption to the normal patterns of life in this already busy city.

Our portfolio, underwritten by the West End's special features and attractions, continues to flourish. As a result of our long term management strategies, which create and sustain prosperous environments for our tenants, good demand continues for all uses in each of our villages. We will shortly commence important new schemes in Carnaby which will in the short term temper the growth in our income but will deliver long term improvements to our revenue.

We remain confident that our unique portfolio will continue over time to deliver rising income and rental values. This in turn should bring long term growth in capital values which, coupled with low obsolescence in our assets, should allow us to maintain our record of out-performing the wider property market.

Brian Bickell Chief Executive

Chris Ward Finance Director

23 May 2012

Portfolio analysis at 31 March 2012

* Shaftesbury Group's share

Basis of Valuation at 31 March 2012

Notes

1. The Fair Values at 31 March 2012 (the "valuation date") shown above in respect of the five villages are, in each case, the aggregate of the Fair Values of several different property interests located within close proximity which, for the purpose of this analysis are combined to create each village. The different interests within each village were not valued as a single lot.

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

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

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

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

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

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

8. The Initial Yield ignoring contractual rent free periods has been calculated as if the contracted rent is payable from the valuation date. For Longmartin this includes 100% of income from tenants who are, or will be paying, 50% as an initial rent.

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

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

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

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

Unaudited Group Statement of Comprehensive Income

For the six months ended 31 March 2012

The notes below form an integral part of the condensed consolidated half year financial statements.

Unaudited Group Balance Sheet

As at 31 March 2012

The notes below form an integral part of the condensed consolidated half year financial statements.

Unaudited Group Cash Flow Statement

For the six months ended 31 March 2012

The notes below form an integral part of the condensed consolidated half year financial statements.

Unaudited Group Statement of Changes in Shareholders' Equity

For the six months ended 31 March 2012

The notes below form an integral part of the condensed consolidated half year financial statements.

Notes to the Half Year Results

For the six months ended 31 March 2012

1. General information

The condensed consolidated half year financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 September 2011 were approved by the Board of Directors on 30 November 2011 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

The condensed half year financial statements have been reviewed, not audited.

Basis of preparation

These half year financial statements have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim Financial Reporting', as adopted by the European Union. They should be read in conjunction with the annual financial statements for the year ended 30 September 2011, which have been prepared in accordance with IFRSs as adopted by the European Union.

Going concern

The Directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial statements.

Significant judgements, assumptions and estimates

The preparation of financial statements requires management to make judgements, assumptions and estimates that affect the application of accounting policies and amounts reported in the Statement of Comprehensive Income and Balance Sheet. Such decisions are made at the time the financial statements are prepared and adopted based on the best information available. Actual outcomes may be different from initial estimates and are reflected in the financial statements as soon as they become apparent.

The measurement of fair value constitutes the principal area of judgement exercised by the Board in the preparation of these financial statements. The fair valuations of investment properties, derivative financial instruments and share options are carried out by external advisors whom the Board considers to be suitably qualified to carry out such valuations.

Certain statements in this Half Year Report are forward looking. Although the Group believes that the expectations reflected in these forward looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward looking statements.

The Group undertakes no obligation to update any forward looking statements whether as a result of new information, future events or otherwise.

2. Accounting policies

Changes in accounting policies

The accounting policies applied are consistent with those of the previous financial year.

New accounting standards and interpretations

New and amended standards and interpretations need to be adopted in the first half year financial statements issued after their effective date (or date of early adoption). There are no new IFRSs or IFRICs that are effective for the first time for this half year period that have a material impact on the Group.

The following new standard is relevant to the Group but not yet effective in the year ending 30 September 2012 and will have a significant impact on the Group's financial statements:

3. Revenue from properties and segmental information

Rents receivable include lease incentives recognised of £1.2 million (31.3.2011: £0.9 million; 30.9.2011: £1.9 million).

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

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

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

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

4. Property charges

5. Net property income

6. Charge in respect of equity settled remuneration

7. Finance costs

8. Taxation

The wholly owned Group is subject to taxation as a REIT; its property rental business (both income and capital gains) is exempt from taxation. The tax charge of £0.3 million is the Group's share of its joint venture's tax charge, which is not part of the REIT group.

9. Earnings per share

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

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

10. Dividends paid 

An interim dividend in respect of the six months ended 31 March 2012 of 5.95p per ordinary share amounting to approximately £14.9 million was declared by the Board on 23 May 2012. The interim dividend will be paid entirely as a PID on 6 July 2012 to shareholders on the register at 15 June 2012. The dividend will be accounted for as an appropriation of revenue reserves in the year ending 30 September 2012.

11. Investment properties

Investment properties were subject to external valuation as at 31 March 2012 by qualified professional valuers, being members of the Royal Institution of Chartered Surveyors, either working for DTZ Debenham Tie Leung Limited, Chartered Surveyors (in respect of the Group's wholly owned portfolio) or Knight Frank LLP, Chartered Surveyors (in respect of properties owned by Longmartin Properties Limited), both firms acting in the capacity of External Valuers. All such properties were valued on the basis of Fair Value in accordance with the RICS Valuation Standards.

Investment properties include freehold properties valued at £1,513.1 million, leasehold properties with an unexpired term of over 50 years valued at £130.5 million and a notional apportionment of value in respect of part freehold/part leasehold properties, where the apportionment in respect of the leasehold element with over 50 years unexpired is £95.9 million.

Capital commitments

12. Lease incentives

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

Prior to 30 September 2011, the unamortised balance of lease incentives was included within trade and other receivables. The amounts disclosed in the period to 31 March 2011 have been reclassified as described above. The reclassification has not affected the Group's previously reported net assets.

13. Trade and other receivables

At 31 March 2012, cash deposits totalling £10.4 million were held against tenants' rent payment obligations (31.3.2011: £10.1 million; 30.9.2011: £10.4 million).

14. Trade and other payables

15. Borrowings

The secured term loan is the Group's share of a £120 million loan, which the Longmartin joint venture entered into in December 2011.

Availability and maturity of borrowings 31 March 2012

The expected maturity and availability of the Group's borrowings, based on nominal values are as follows:

Movement in borrowings during the period

Interest rate profile of interest bearing borrowings

16. Fair value of financial derivatives

Changes in the fair value of the Group's financial derivatives, which are not held for speculative purposes, are reflected in the Group Statement of Comprehensive Income. They have been valued by J. C. Rathbone Associates Limited by reference to the mid-point of the yield curve at the balance sheet date.

Interest rate hedging in place at 31 March 2012

At 31 March 2012, the Group had in place fixed rate interest swaps on a notional principal of £360 million, at a weighted average rate of 4.87%, with a weighted average maturity of 20.8 years. The swaps are settled against three month LIBOR.

8.5% Mortgage Debenture Stock 2024

17. Ordinary shares

During the period, 586,020 ordinary 25p shares were issued in connection with the exercise of nil cost options granted under the 2006 Long Term Incentive Plan.

18. Net assets value per share

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