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					         retail properties plc
Annual Report 2011




Identify, acquire and improve
For For more information visit www.lxbretailproperties.com
ii more information visit www.lxbretailproperties.com




LXB Retail Properties Plc is a Jersey
incorporated closed-ended real estate
investment company, whose strategy
is to invest in out of town and
edge of town retail assets.




  London Road, Biggleswade
   (lxb) retail properties plc Annual Report 2011    1




Contents


Business Review
Highlights                                           2
Chairman’s Statement                                 3
Report of the Investment Manager,
LXB Manager LLP                                      7




Governance
Corporate Governance Report                         11
Board of Directors                                  14
Directors’ Report                                   15
Independent Auditors’ Report                        17




Financial Statements
Group Income Statement                              18
Group Statement of Comprehensive Income 19
Group Statement of Changes in Equity                20
Group Balance Sheet                                 21
Group Cash Flow Statement                           22
Notes to the Group Financial Statements             23
Company Income Statement                            42
Company Statement of Changes in Equity 43
Company Balance Sheet                               44
Company Cash Flow Statement                         45
Notes to the Parent Company
Financial Statements                                46




General Information
Glossary                                            48
Company information                                 49
2     For more information visit www.lxbretailproperties.com




    Highlights                                                               August 2011: exchanged contracts to acquire the 12 acre
                                                                             Prodrive Motorsport site in Banbury for £17m. On the same
                                                                             date acquired the former Hella factory in Banbury as a relocation
                                                                             site for Prodrive for £8.7m (including direct costs).

                                                                             September 2011: acquired 118 acres at Corton, South East Ayr
    Headlines:                                                               for £10.1m (including direct costs).

       Continued to make further strategic acquisitions in Greenwich         Cash deposits and liquid investments at 30 September 2011:
       and Biggleswade during the year.                                      £112.7m (2010: £52.5m).

       December 2010: acquired Stone Lake Retail Park in Greenwich,          NAV per share at 30 September 2011: 107.97p (2010: 94.19p).
       for £27.84m (including direct costs).
                                                                             EPRA* NAV per share at 30 September 2011: 108.19p (2010:
       January 2011: exchanged contracts on a subject to planning basis      95.19p).
       to acquire a Wm Morrison Supermarkets plc led development
       site on the Isle of Sheppey.                                          Earnings per share: 10.31p (2010: loss per share 1.39p).

       February 2011: entered into a £25.95m investment facility
       arrangement with Deutsche Hypothekenbank.                          Post year end:

       April 2011: acquired 31 developable acres in Rushden,                 on a notional amount of £100m interest rate swap facility with
       Northamptonshire for £4.7m (including direct costs).                  the Royal Bank of Scotland Plc effective from 25 March 2013
                                                                             until 25 September 2015.
       May 2011: exchanged an agreement for lease on a subject to
       planning basis with J Sainsbury Plc at Bugsby’s Way, Greenwich        November 2011: acquired Andrews Sykes unit in Greenwich for
       for a new store of 145,000 sq ft (gross external).

       June 2011: raised £110m net of costs through a share placing.         November 2011: signed pre-lets with Marks & Spencer plc
                                                                             on 28 November 2011, on a subject to planning basis for four
       July 2011: acquired two adjoining sites on the edge of Stafford       new stores at Banbury, Biggleswade, Greenwich, and Stafford
       town centre for £10.1m (including direct costs).                      covering, in total, over 300,000 sq ft.




    London Road, Biggleswade
                                                                                         (lxb) retail properties plc Annual Report 2011   3




Chairman’s Statement

                    Dear Shareholder,




                                                                                                                                              Business Review
                    I am pleased to present the Group’s second Annual Report
                    and Financial Statements, covering the year ended 30 September 2011.


We have made excellent progress in the last 12 months.               The Group does not develop speculatively so, in addition
                                                                     to securing the planning position, we have been negotiating
net of costs, acquisitions of new sites, designing scheme layouts,   lease terms with key occupiers for our new investments. Thus
preparing large scale planning applications, and signing lease       far, we have signed Agreements for Lease with a number of
terms with key tenants who will occupy our investments. We           major retailers including Wm Morrison Supermarkets plc
launched the business just two years ago with the intention          (“Morrisons”) and J Sainsbury Plc (“Sainsbury’s”). I am delighted
of creating a portfolio of prime out of town and edge of             that we have also signed four major pre-lets with Marks &
town retail investments offering space which meets the needs         Spencer plc (“M&S”). Including these M&S pre-lets, the total
of today’s trading formats, in the right locations, and at rents     space covered by these Agreements for Lease amounts to
which are sustainable.
                                                                     Moreover, I can also report that the Group is in advanced

number of locations including Sheppey, Rushden, Gloucester,
                                                                     anchor tenants across a number of sites.
Stafford, Banbury and Ayr, and added to our interests at
Greenwich and Biggleswade. New planning permissions (or
resolutions to grant planning permission) have been secured
at Greenwich, Biggleswade and Sheppey, planning applications         The Group works closely with local
have been submitted in respect of Biggleswade (adding to
                                                                     authorities and other stakeholders
the existing consent), Gloucester and Stafford and we expect
to submit applications for our Banbury and Rushden sites
                                                                     to ensure that our projects will
in the near future. Assuming that we achieve the planning            make a positive contribution to local
consents covered by these applications, the Group will have          communities and economies.
secured consent for some 1.63m sq ft of new retail space and


                                                                     We have been fortunate to work with local authorities who


                                                                     can bring. Additionally, we attach great importance to
                                                                     understanding the views of local residents; public consultations
                                                                     have been held in Sheppey, Biggleswade, Greenwich, Banbury,
                                                                     Stafford and most recently, Rushden to ensure we understand
                                                                     what will add greatest value to the areas in which we invest.
                                                                     These have been well attended and the feedback has been


                                                                     pleasing that the new jobs which our investments will create


Banbury Gateway
4    For more information visit www.lxbretailproperties.com




Chairman’s Statement (continued)

                                                                  a number of banks to ensure they are apprised of the quality


                                                                  economic backdrop, we continue to experience a real appetite
                                                                  from lenders.

                                                                  Sensible levels of gearing are a key element of the Group’s
                                                                  business plan and we have tracked the movements in swap rates
                                                                  which have seen record lows in recent times. In anticipation




                                                                  from 31 March 2013 to 30 September 2015.
Rushden Lakes

Construction work has started on the new Wickes store at
Greenwich and we expect to start on site at Sheppey and
                                                                  “If our major planning applications
Gloucester early in 2012 with stores open for trading in the
                                                                  which are currently under consideration
                                                                  are successful, we can look forward to
                                                                  further contributions to NAV in the
The growth in Net Asset Value (“NAV”) per share over the          near future.”
in part, the issue in June of 99.2m shares at 114p per share,
but is substantially due to the £19.1m increase in the value
                                                                  Outlook
of our investment properties during the year. If our major
                                                                  When we launched our business back in October 2009 market
planning applications which are currently under consideration
                                                                  conditions were very challenging. However, we believed there
are successful, we can look forward to further contributions to
                                                                  was a substantial opportunity to assemble a portfolio of prime
NAV in the near future.

The issue of new shares which was very well supported
by shareholders in June 2011 raised £110m (net of costs),
bringing the total funds raised to £257.5m (net of costs). Your
Board is extremely grateful for the continued support shown
by shareholders in more than doubling our equity within two
years of the IPO in October 2009.




We anticipate securing further bank borrowings to support
our substantial construction projects in due course, and our
Investment Manager maintains regular and close dialogue with      Neats Court, Isle of Sheppey
                                                                                       (lxb) retail properties plc Annual Report 2011   5




Outlook (continued)                                                value for shareholders. For example, our investment in the




                                                                                                                                            Business Review
out of town and edge of town retail investments. We believed       retail opportunity at Ayr will unlock value in the adjacent land
that suitable sites could be acquired and all our research told    which is earmarked for residential uses; where appropriate we
us that there was real occupier demand, and that value could
be created by offering retailers the space they wanted at rents    our shareholders. Our plan continues to be the creation of a
they could afford. It takes considerable due diligence before      portfolio of prime institutional property investments with a
your Board will invest, and it takes time to really understand     high quality income stream founded on really strong covenants
what our key tenants want and can afford to pay in rent. It also   from some of the UK’s leading retailers. Taken together with
takes time to design high quality schemes which will make a        our four major pre-lets to M&S, all this activity shows we are
positive contribution to local communities and gain planning       achieving our objectives.
approval.
                                                                   These are exciting times for the Group and I look forward
Two years on, the revaluation surplus for the year of £19.1m       to another year with opportunities to report further positive
demonstrates that our strategy is delivering shareholder value.    news for shareholders.
There is real momentum in the portfolio; since the balance
sheet date we have already submitted planning applications
                                                                   Phil Wrigley
for our Biggleswade and Stafford investments and we will
submit applications for Banbury and Rushden shortly. We are        Chairman
also seeing that our retail investments can deliver incremental    29 November 2011
6       For more information visit www.lxbretailproperties.com




                                                                                                     Ayr




                                                                                    Site purchased: September 2011
                                                                                    Plot size: 118 acres




                                                                                                                     Rushden




                Stafford
                                                                                                         Site purchased: April 2011
                                                                                                         Plot size: 31 developable acres




    Site purchased: July 2011
    (and a second site in advanced
    negotiation)
    Plot size: 15 acres in total                                                                                                           Biggleswade



                Banbury

                                                                                                                                 Site purchased: May 2010
                                                                                                                                 Plot size:




    Hella site purchased: August 2011
    Prodrive site purchased: Contingent on
    planning
    Plot size: 37 acres in total

                                                                                                                              Sheppey
                                                                          Greenwich
                               Gloucester


                                                                                                                 Site purchased: Contingent on planning
                                                                                                                 Plot size: 20 acres
                                                                 Site purchased: numerous acquisitions
                     Site purchased: Contingent on planning      since February 2010
                     Plot size: 17 acres                         Plot size: numerous locations




    Our current projects
                                                                                           (lxb) retail properties plc Annual Report 2011   7




Report of the Investment Manager,
LXB Manager LLP
LXB Manager LLP advises LXB Retail Properties Plc and is pleased to report on the Group’s




                                                                                                                                                Business Review
Annual Report and Financial Statements for the year ended 30 September 2011.



Investment portfolio                                                  On 28 November 2011, M&S signed a pre-let for a 20 year lease
The Group’s strategy is to develop a portfolio of high quality
investments delivering substantial and secure rental income. The      the existing M&S store in Banbury town centre). Strong interest
                                                                      is also being shown by a wide variety of other retailers who are
                                                                      keen to secure representation at this very prominent shopping
                                                                      destination.
at several locations, achieved a number of planning permissions (or
resolutions to grant planning permission) and submitted planning
applications to local authorities for various of its other sites.

Property details
Ayr
In September 2011, the Group acquired 118 acres of development
land at Corton, which forms part of a wider masterplan for a


from a resolution to grant planning consent (subject to signing
a s75 legal agreement) for a district shopping centre including
a foodstore and complementary retail, a business and leisure          London Road, Biggleswade
park of up to 17 acres, and 874 private and affordable homes.
Negotiations to conclude the s75 agreement are continuing             Biggleswade
and we are in discussions on terms for a pre-let with a leading       This site sits alongside the A1 with direct roundabout access
foodstore operator.                                                   allowing retailers to appeal to a wide potential catchment. Seven
Banbury                                                               separate land interests have been assembled over the last two
In August 2011 the Group agreed to purchase the Prodrive              years creating the opportunity to develop a major fashion led
Motorsport site which sits prominently by junction 11 of the M40,
subject to securing planning for a shopping park. Prodrive, the       still to be acquired but terms have already been agreed and this is
world leading motorsport and automotive business, has outgrown        expected to complete shortly.
its current facilities and the Group purchased the former Hella
factory in August to enable Prodrive’s relocation within Banbury.     A1 non food consent. A planning application has been submitted
Prodrive will purchase the Hella factory from the Group provided
planning for retail use is achieved on their existing site.

A planning application will be submitted shortly, seeking consent
for a 290,000 sq ft shopping park. The proposed scheme includes



is anticipated in March 2012.
8     For more information visit www.lxbretailproperties.com




Report of the Investment Manager,
LXB Manager LLP (continued)
Biggleswade (continued)                                                Good progress has been made on the original acquisition with a
We expect the scheme to be built in phases to allow existing           pre-let of the development site to Wickes for a new 21,500 sq ft
tenants to continue trading; relocation terms need to be agreed        retail unit in May 2011. Construction commenced in late summer
with the tenants, most of whom trade well and wish to remain           and practical completion is due in April 2012.
on site. On 28 November 2011 a pre-let was agreed with M&S
                                                                       Planning permission has been obtained to develop a new
for a 25 year lease (with a tenant’s break option after 15 years)
                                                                       retail terrace of 50,000 sq ft of unrestricted retail space on the
                                                                       remainder of the original site and construction of that element is
Provided planning and relocation discussions are successfully
                                                                       due to commence in August 2012.
concluded, construction will commence in summer 2012 and the
shopping park will be completed two years later. Strong interest       The Group has also assembled a freehold site of about 12 acres
has also been shown by other retailers for representation here.        bounded by Bugsby’s Way, Gallions Road and Woolwich Road.
                                                                       A pre-let for a 25 year lease on a 145,000 sq ft foodstore to
Gloucester
                                                                       Sainsbury’s was agreed in May 2011 and M&S signed a pre-let for
Earlier this year an agreement was entered into to acquire this 17
                                                                       a 20 year lease on an 80,000 sq ft store on 28 November 2011.
acre site from Network Rail, conditional on obtaining a satisfactory
                                                                       Both lettings are conditional on achieving planning permission, the
planning consent for a mixed use development. Morrisons has
                                                                       application for which is expected to be submitted in late 2011.
agreed to take a 25 year lease (with a tenant’s break option after
20 years) conditional on planning for a 71,300 sq ft foodstore.The     Planning permission has been obtained for a mixed use retail
planning application requesting detailed consent for the foodstore,    and hotel scheme on land adjacent to the proposed Sainsbury’s


employment uses, 11,000 sq ft of car showrooms and 8,000 sq ft         unit with a 120 bed hotel above and 85 car parking spaces. The
of restaurants was submitted in August 2011. The application is        Group expects to sign a pre-let to Travelodge in early 2012 with
expected to go before the planning committee for determination         construction to commence in March 2012.
on 1 December 2011. If planning permission is granted we               The Stone Lake Retail Park on Woolwich Road was acquired in
anticipate work will start on phase one (the foodstore) in spring      December 2010 to facilitate relocation of tenants from the Group’s
2012. Interest has also been received for the restaurant and from      nearby sites so that the new investments can be progressed. In
                                                                       May 2011, Dreams agreed to relocate here from their existing unit
the scheme.                                                            on Bugsby’s Way and in September 2011, planning permission was
Greenwich                                                              obtained to sub-divide the existing 20,000 sq ft former MFI unit at
                                                                       Stone Lake to enable this. Dreams will occupy an 8,000 sq ft unit
investment and adjoining retail development site, in Greenwich,        and work on the subdivision will start in early 2012, completing
                                                                       shortly thereafter. The remaining 12,000 sq ft unit (which has
further holdings in the Bugsby’s Way area of the Greenwich
Peninsula.

                                                                       from an open A1 non food permission. Discussions are underway
                                                                       to utilise the consent and bring new retailers, selling an expanded
                                                                       range of goods, to the park.




Woolwich Road, Greenwich
                                                                                                (lxb) retail properties plc Annual Report 2011   9




Rushden




                                                                                                                                                     Business Review
This 244 acre site lies alongside the A45 between the A1 and the          autumn 2012. Active discussions are being held with a number of
M1 at Rushden in East Northamptonshire, opposite an existing              retailers in respect of the second phase (the retail warehousing
Waitrose Food and Home store, a Wickes and a Lidl. Most of                units) and the Group intends to submit an enhanced planning
                                                                          application for this part of the site in early 2012, seeking consent

A planning application is expected to be submitted shortly for a
                                                                          Stafford
430,000 sq ft retail scheme, anchored by a garden centre, together
                                                                          Long leasehold interests in two adjoining properties, together
with an additional 112 bed hotel and a leisure club. 1,300 car
                                                                          amounting to seven acres, were acquired in July 2011. The site
parking spaces are planned and it is estimated that the combined
                                                                          lies on the edge of Stafford town centre, and offers the prospect
leisure, tourism and retail offer will attract over 3m visitors per
year.

Substantial investment is proposed to integrate the SSSI with
the retail scheme. The plans for the combined retail and leisure
destination will include a visitors’ centre, a marina and boathouse,
footpaths and cycle routes through the SSSI, and access into
neighbouring tourist attractions such as Stanwick Lakes. We are
working closely with the Wildlife Trust who will take on long term
management of the remainder of the SSSI for future generations,
and with the RSPB. On completion, the Group’s £50m investment
should create approximately 1,500 new jobs.


of next year and assuming it does, construction is expected to
start in the third quarter of 2012.

M&S has agreed in principle to anchor one of the three proposed

                                                                          Riverside, Stafford
discussions on the terms and these are ongoing. However, a high
level of interest has been received from other retailers attracted        The Group has been working with Stafford Borough Council
by the opportunity to trade alongside M&S at Rushden. Offers              on plans for a comprehensive retail development including
have also been received from a number of retailers who typically
trade well alongside garden centre operators.                             1,200 car parking spaces and following a well received public
                                                                          consultation in October 2011, a planning application was submitted
Sheppey
                                                                          in November. A planning committee decision is expected in
The Group entered into an option agreement with The Crown
Estate to acquire 20 acres of development land at Neats Court
                                                                          development in mid 2012. On 28 November 2011 M&S signed a
on the Isle of Sheppey in December 2010.
                                                                          pre-let for a 25 year lease (with a tenant’s break option after 15
In September 2011, a resolution to grant planning permission was
obtained for a 55,000 sq ft foodstore which has been pre-let to           discussions are ongoing with other potential tenants.

                                                                          The Group is also in advanced negotiations to acquire a further
drive-thru restaurant unit, and 80,000 sq ft of light industrial space.
                                                                          edge of centre development site from Stafford Borough Council,
                                                                          Staffordshire County Council, and others. This eight acre site,
development which includes the Morrisons and the drive-thru in            which currently comprises surface car parking, will be used
10    For more information visit www.lxbretailproperties.com




Report of the Investment Manager,
LXB Manager LLP (continued)
Stafford (continued)                                                      General administrative expenses
for a foodstore led development. A planning application for               The Group’s running costs principally comprise the management
a 71,500 sq ft foodstore, 14,000 sq ft of associated retail and           fee payable to the Investment Manager, LXB Manager LLP, which

the application is due to go to the planning committee in early           components of the Group’s £4.0m (2010: £2.2m) corporate
2012. The Group is in negotiations with Morrisons, for a pre-             administrative costs in the year were costs necessarily incurred
                                                                          by virtue of the Company being a listed company, including Jersey
legal commitments have not yet been entered into. Discussions             administration costs and Directors’ fees.
are also ongoing with other retailers in respect of the other
units.

Revaluation surplus
                                                                          mainly as a result of the Group having added to its property
As described in note 9 to the Group Financial Statements,                 portfolio, thus increasing its net rental income. Projected
the majority of the investment properties held by the Group               annualised overheads are, as expected, forecast to exceed the
at 30 September 2011 were valued by independent property
valuers, Jones Lang LaSalle Limited, as at that date. In their opinion,   rental income will fall as the Group achieves vacant possession
the open market value of these investment properties at that              on units to facilitate the proposed developments outlined earlier
date was £182.8m, resulting in a revaluation surplus for the year         in this report.
of £19.1m (2010: £259,783).
                                                                          During the year, £74.3m (2010: £92.7m) of cash has been
Pipeline of opportunities                                                 deployed in the purchase of and capital expenditure on
We continue to see plenty of opportunities to work with local             investment properties.
authorities and the larger retailers to deliver destination retail
                                                                          Tax
schemes. The Group has made a number of small strategic
acquisitions and secured options to purchase other sites at
several locations. Discussions continue with various parties in           explained in note 7 to the Group Financial Statements, tax is
these locations which may result in further acquisitions and pre-
lets in due course.                                                       of interest and certain other allowable costs.

Since the balance sheet date, the Group has spent £1.08m
(including direct costs) on further acquisitions at Greenwich.            Tim Walton
The Group monitors its equity requirements very closely and               On behalf of LXB Manager LLP
after accounting for acquisitions since the balance sheet date,           29 November 2011
the equity projected to be required to fund all of its existing
investments through to practical completion equates to
approximately £82.0m. This projected expenditure is largely
discretionary (that is, very little of it is subject to legally binding
obligations) and at the balance sheet date the Group held
£112.7m of cash and cash equivalents.
                                                                                         (lxb) retail properties plc Annual Report 2011   11




Corporate Governance Report

Applicability of the Corporate Governance Code                      have required full Board attendance but all were quorate in
The UK Corporate Governance Code 2010 (“the Code”) is a set         accordance with the Company’s Articles of Association, therefore
of principles of good corporate governance with which companies     the Directors do not consider that publication of the attendance
that have a primary listing on the London Stock Exchange are        of individual Directors at those meetings would be particularly
required to comply. As the Company is quoted on AIM and CISX        meaningful.
it is not required to comply with the Code. In addition, there is   The Board is responsible for determining strategy and for
no formal corporate governance regime in Jersey with which the      monitoring the performance of the Group. Each Director
Company is required to comply. However, the Directors place         is encouraged to constructively challenge and help develop
a great deal of importance on ensuring that high standards of       proposals on strategy.
corporate governance are maintained and consider that they




                                                                                                                                               Governance
                                                                    The Board carries out annual performance evaluations and
voluntarily comply with the Code to the extent appropriate.
                                                                    considers, amongst other things: the competence and performance
The Group does not seek to comply with aspects of the Code
                                                                    of the Board as a whole and compliance with applicable laws,
which are considered to be more appropriate for a larger public
                                                                    regulations and listing rules. The performance of the Group’s
company.
                                                                    principal advisors and the Group’s Investment Manager is also
Independent Non-Executive Directors                                 kept under regular review by the Board. Review of the Investment
The Code recommends that, in the case of smaller public limited     Manager is performed at each quarterly meeting of the Board
companies below the FTSE 350, at least two non-executive            where the progress of each project is assessed against a timeline
members of the board of directors (excluding the chairman) of       of key dates.
the company should be independent in character and judgement        The Board considers that the Directors of the Company have
and free from relationships or circumstances which are likely to    the appropriate balance of skills, experience, independence and
affect, or could appear to affect, their judgement.                 knowledge to enable them to discharge their respective duties
Since listing, the Board has comprised four Independent Non-        and responsibilities effectively. Training and development needs of
Executive Directors and a Non-Executive Chairman, Phil              the Directors, in order for them to be able to continue to carry
Wrigley, who was considered to be independent at the time           out their duties and responsibilities effectively, are monitored by
of his appointment, but whose independence is not subject to        the Board on an informal basis.
subsequent testing for the purposes of considering whether the      The commitments of each Director outside of the Company are
Company complies with the provisions of the Code.
                                                                    is available to enable them to discharge their responsibilities
(including the Chairman), each of whom is independent from the      effectively. The levels of Non-Executive Directors’ fees are
Group’s Investment Manager, are able to exercise independent
judgement.                                                          commitment and responsibilities of each individual’s role.

Accordingly, the Company complies with the provisions of the        Details of how the Company aims to generate and preserve value
Code applicable to smaller companies in this regard.                over the longer term and its strategy for delivering the objectives
                                                                    of the Company are provided in the Chairman’s Statement.
The Board of Directors and Board Meetings
Board meetings are held at least four times a year and more
                                                                    the Company.
frequently as required in order to consider the business and
performance of the Group. During the period from the date           Board Committees
of publication of the previous Annual Report to the date of         The Board’s Audit Committee has formally delegated duties
publication of this Annual Report, four quarterly Board meetings    and responsibilities together with written terms of reference, as
have been held and all were attended by the entire Board with       further described below. From time to time, separate committees
the exception of one meeting where one Director was unable
to attend. Of the four additional meetings held, not all meetings   need arises.
12




Corporate Governance Report (continued)

Board Committees (continued)                                           believe that such committees would be appropriate or necessary
An Investment Committee, initially consisting of all of the            given the nature of the Group’s operations.
Directors, was also constituted at the time of the Company’s
                                                                       The assessment of the performance of the Chairman is determined
listing. The Investment Committee, which at the balance sheet
                                                                       by the other Directors.
date was a committee of the Company’s subsidiary undertaking,
LXB Retail Properties Fund LP (“the Fund”) through which all           The Board takes all reasonable steps to ensure compliance by the
                                                                       Directors with the provisions of the Code where appropriate.
and recommendations from the Investment Manager and has                The Board aims to ensure compliance by the Directors with the
                                                                       provisions of the AIM Rules and the CISX Listing Rules relating
business of the Fund, including:                                       to dealings in securities of the Company and has a share dealing
                                                                       code in place for this purpose. In addition, the Board has taken
     Fund proposes to invest £5m or more;                              steps to ensure that partners and employees of the group of
                                                                       which LXB Manager LLP, the Group’s Investment Manager, is a
                                                                       member, also comply with the terms of the share dealing code.
     Fund proposes to invest £10m or more;
                                                                       Audit Committee

     or more;                                                          The Audit Committee assists the Board in discharging its


                                                                       reporting, external audits and internal controls, including, amongst
     of an investment where the Fund proposes to invest or has
     invested £10m or more; and
                                                                       statements, reviewing and monitoring the extent of the non-audit
                                                                       services undertaken by the external auditors, advising on the
     terms which are unusual in the context of transactions of that    appointment of external auditors and reviewing the effectiveness
     type and/or are likely to have a material effect on the risk      of the Company’s internal controls and risk management systems.
                                                                       The ultimate responsibility for reviewing and approving the
                                                                       Company’s Annual and Interim Reports rests with the Board.
Under the terms of the Investment Advisory Agreement between
the Group and the Investment Manager, responsibilities have been       The Code recommends that, in the case of smaller public limited
delegated to the Investment Manager where a transaction falls          companies below the FTSE 350, the Audit Committee should
outside the full list of reserved matters set out in that agreement,   comprise at least two members who should both be independent
subject always to overall supervision and direction by the Board.      non-executive directors for the purposes of assessing compliance
                                                                       with the Code and that at least one member should have recent
The Investment Committee assists in the corporate governance
of the Fund and helps ensure that there are effective controls
and procedures in place to monitor the operations of the Fund.         The membership of the Company’s Audit Committee comprises
LXBRP CommCo Limited, another subsidiary undertaking of the            Danny Kitchen and George Baird. The Audit Committee is
Company, has absolute discretion as regards appointments and           chaired by Danny Kitchen, who is considered by the Directors
removal of members of the Investment Committee. Throughout
the year under review, the only members of the Investment              therefore consider that the Company complies with the Code’s
                                                                       recommendations regarding the composition of the Audit
Company. At least one senior representative of the Investment
Manager attends the Investment Committee’s meetings, but is not
                                                                       As noted above, the Audit Committee is responsible for ensuring
entitled to vote.

The Directors have not and do not intend to establish                  its management. This was reviewed prior to the listing and is kept
remuneration or nomination committees as the Directors do not          under constant review. In particular, where the auditors undertake
                                                                       non-audit work, the Audit Committee considers whether that
                                                                                             (lxb) retail properties plc Annual Report 2011    13




Audit Committee (continued)
work would be detrimental to the independence of the auditors.
The non-audit work conducted by the Company’s auditors in the          range of institutions, if required in connection with the borrowing
                                                                       arrangements relating to such investments.
2011, for which a fee of £25,000 was paid, a compliance review, for
                                                                       The Group ensures that surplus cash is managed with the following
which a fee of £10,000 was paid and accounting advice provided

                                                                       to deliver appropriate returns on all cash balances having regard to
note 4 to the Group Financial Statements for further information
on the fees paid to the auditors).The Audit Committee concluded,
in each case where the proposed scope of and fee for the




                                                                                                                                                    Governance
particular project deemed it appropriate, that neither the nature of   The Group has not appointed a custodian because: (i) the
                                                                       Company’s Jersey based Administrator holds any documents of
to independence.                                                       title and deeds of the Group relating to non-property assets; and,
                                                                       (ii) title deeds to the Group’s real estate assets are either held
The Audit Committee meets formally at least twice a year and
                                                                       by lawyers acting on behalf of the Group or by the lender or the
otherwise as required and meets with the Company’s external
auditors at least once a year.
                                                                       bank debt.
Operational Policies                                                   Internal control systems
Shareholder communication and reporting                                The Code states that the Board should maintain a sound system
Clear and regular reporting to shareholders is important to            of internal control to safeguard shareholders’ investments and the
the Directors. The Company’s Annual Report is prepared up to           assets of the Group. The Audit Committee reviews the Group’s
30 September each year and it is expected that copies will be          internal control framework half yearly and holds annual meetings
sent to shareholders and published on the Company’s website            with the Group’s auditors at which any issues in relation to internal
by no later than the end of January each year. Shareholders also       controls are discussed.
receive an unaudited interim report covering the six months to
                                                                       As with any risk management system, the Group’s internal control
31 March each year, which is expected to be sent to shareholders
                                                                       framework is designed to manage risk but cannot give absolute
and published on the Company’s website by no later than the
                                                                       assurance that there will never be any material misstatement or
end of July each year. The Company also, when appropriate, makes
                                                                       loss.
regulatory announcements to the London and Channel Islands
Stock Exchanges, which are available to shareholders on the            Having regard to the relatively simple nature of the Group’s
Company’s website.                                                     operations, the Board does not consider that the establishment of
                                                                       an internal audit function is appropriate or necessary.
All members of the Board are available to meet with shareholders
                                                                       Going Concern
Nominated Adviser and Joint Broker and Oriel Securities Limited, in    The Board routinely monitors the Group’s ability to continue as
their role as Joint Broker, assist the Company in its communications   a going concern. Included within the information presented at
with shareholders.                                                     quarterly Board meetings is a summary of the Group’s liquidity


                                                                       with the monitoring of forward looking information relating to the
the Board is monitoring the Group’s policy for holding cash on         Group’s performance and the likelihood of continuing compliance
deposit pending investment. The Group’s policy was to hold cash        with any debt covenants.


or better or that have substantial UK government backing. Such         able to continue in business for the foreseeable future and have
                                                                       adopted the going concern basis in the preparation of the Group
prevailing market conditions and the rating requirement may            and Parent Company Financial Statements.
14




Board of Directors

Phil Wrigley                                                         Danny Kitchen
Phil Wrigley is non-executive chairman of Majestic Wine Plc and      Danny Kitchen became chairman of Workspace Group PLC in
a non-executive director of Carluccios. He stepped down as           July 2011 and has extensive experience in both property and
executive chairman of Habitat in June 2011 after negotiating it’s
successful sale. In September 2009 he founded Madison Capital
                                                                     International from 2003 to 2008. Whilst at Green Property, Danny
opportunities to grow and create value. He stepped down              was involved in two rights issues, a successful hostile bid for a UK
as chairman of the New Look Group in January 2010, having            listed company, and saw the net assets of the company grow from
transformed it from a “small cap public company” into private        €100 million to €2 billion. Other roles have included over ten
ownership and to be the third largest womenswear retailer in the     years as a non-executive director of Kingspan Group Plc and an
UK with rapid global growth. Phil has led change programmes in       appointment as a non-executive director of Minerva Plc in May
a number of retail businesses embracing all aspects of retail. He    2010 until it’s takeover in June 2011. Danny is resident in Ireland.
has led merger and acquisition activities in the UK and overseas
                                                                     Alastair Irvine
whilst maintaining a particular focus on building strong and
successful management teams. In his retail career he has worked      Alastair Irvine is the former joint managing director of the A
as a director in the New Look Group, Bhs, Dorothy Perkins and        McLelland & Son Group which he joined in 1989. His responsibilities
Debenhams and held responsibility for all the primary roles in       included group strategy and commercial development, including
retail from buying and merchandising, logistics, retail operations   the launch and brand building of “Seriously Strong” cheddar into
                                                                     the UK’s second largest cheese brand. Alastair and his family sold
Exchange Education Committee, an honorary fellow of Harris           McLelland in 2004 to the French multinational Lactalis. Turnover
Manchester College, Oxford and participates in a number of
retail/property advisory boards.                                     six years, Alastair has had an active involvement in property
                                                                     investment with a particular focus on retail assets both in the
George Baird                                                         UK and in Europe. More recently, he has launched a solar energy
George Baird graduated with a law degree, after which he began       investment business in Portugal where he lives.
his career training as an accountant, and past roles have included
                                                                     Steve Webb

director of Mourant Group. George’s current directorships include    Steve Webb is currently investor relations director at Tesco. Steve
the non-executive chairmanship of Invesco Leveraged High Yield       joined Tesco in 2004 and was promoted to Tesco’s retail council
Fund Limited, Geiger Counter Limited and Saltus European Debt        in 2007. He spent 15 years at Safeway plc in a variety of strategy
Strategies Limited. George is also a non-executive director and      and planning roles, latterly as a member of it’s operations board.
chairman of the audit committee for Thread Green Industrial          Steve’s early career was in retail analysis at Verdict Research, where
Limited and held the same roles at Economic Lifestyle Property       he was a partner and major shareholder, and at Lehman Brothers
Investment Co Limited. George is resident in Jersey.                 where he was an equity analyst on food and general retail.
                                                                                            (lxb) retail properties plc Annual Report 2011   15




Directors’ Report

The Directors present their report together with the audited          the year. The interests of the Directors and their families in the
                                                                      ordinary shares of the Company are as follows:

Principal activities and business review                                                                      Interests in
                                                                                                            ordinary shares
The principal activity of the Group is property investment.
                                                                                               at 30 September at 30 September
Detailed reviews of the Group’s operations and future prospects                                                2011                 2010
are contained in the Chairman’s Statement and the Investment          Phil Wrigley                          447,748
Manager’s Report and they should be read in conjunction with          Steve Webb                            111,938
this report.                                                          Danny Kitchen                         467,927                380,208
                                                                      Alastair Irvine                      2,968,750
Results and dividends




                                                                                                                                                  Governance
                                                                      George Baird                                 –                     –

                                                                      All of the Directors are non-executive directors.
relate to the period from incorporation on 27 August 2009 to 30       The interests disclosed above include both direct and indirect
September 2010, with the commencement of operations on 23             interests in shares.
October 2009.

It is the Directors’ present intention that no dividends will be      shareholdings of the Directors between 30 September 2011 and
paid until a substantial proportion of the net proceeds of the        the date of this report.
equity fund raisings have been invested and that at an appropriate
time thereafter a progressive dividend policy will be put in place.   Fees payable to the Directors in respect of the year are disclosed
Accordingly, the Directors do not recommend the payment of a          in note 4 to the Group Financial Statements.
dividend for the year.                                                During the year, the Company had an insurance policy in place for
Details of post balance sheet events are set out in note 19 to the
Group Financial Statements.                                           effect at the date of this report.

                                                                      In accordance with the Company’s Articles of Association, all
Share capital changes
The Company is a closed-ended investment company.                     Meeting after their appointment and then at no more than three
On 14 June 2011, 99,192,359 shares were issued for cash, pursuant     yearly intervals thereafter. Currently, one Director is required to
to a placing on that date, at the placing price of 114p per share.    retire by rotation and therefore George Baird will offer himself for
Immediately following the placing there were 254,099,895 shares       re-election at the Company’s next Annual General Meeting.
in issue.
                                                                      Statement of Directors’ responsibilities
On the above mentioned date the relevant shares were admitted         The Directors are responsible for preparing the Annual Report
to trading on The Alternative Investment Market of the London
                                                                      (Jersey) Law 1991 and International Financial Reporting Standards
Stock Exchange.                                                       (IFRS).
Financial risk management objectives and policies
The management of risk is integral to the Board’s approach
                                                                      have elected to prepare the Group and Company Financial
management objectives and policies are described in more detail       Statements in accordance with IFRS as adopted by the European
in note 14 to the Group Financial Statements.                         Union. Under company law the Directors must not approve the

Directors
                                                                      and fair view of the state of affairs of the Group and Company and

this report are shown below. All the Directors served throughout
16




Directors’ Report (continued)

Statement of Directors’ responsibilities                               Substantial shareholdings
(continued)
                                                                       As at 11 November 2011, the following shareholders had an

in accordance with the rules of the London Stock Exchange
for companies trading securities on The Alternative Investment                                                            Number
                                                                                                                                 of          %
Market and with the rules of the Channel Islands Stock Exchange.
                                                                                                                           shares*     interest
                                                                       Invesco Asset Management
to:                                                                    BlackRock Investment Management Limited 35,787,528
                                                                       Jupiter Asset Management Limited
                                                                       Morgan Stanley Investment Management
      consistently;
                                                                       Scottish Widows Investment Partnership             21,518,424
                                                                       The members of LXB3 Partners LLP **                12,902,982
      reasonable and prudent;                                          Miton Asset Management Limited                     11,250,000
                                                                       Henderson Global Investors                         10,322,739
                                                                       Alpine Woods Capital Investors LLC                  9,220,351
      IFRS as adopted by the European Union, subject to any
                                                                       RREEF Alternative Investments
                                                                       Standard Life Investments Limited
      statements; and

                                                                       ** see note 18 to the Group Financial Statements
      unless it is inappropriate to presume that the Company and
                                                                       Suppliers
      Group will continue in business.
                                                                       The Group aims to settle supplier accounts in accordance with
The Directors are responsible for keeping adequate accounting
                                                                       their individual terms of business. The number of creditor days
                                                                       outstanding for the Group as at 30 September 2011 was 25 days
transactions and disclose with reasonable accuracy at any time

                                                                       Charitable and political donations
the Companies (Jersey) Law 1991. They are also responsible for         During the year and the prior period the Group made no
safeguarding the assets of the Company and hence for taking            charitable or political donations.
reasonable steps for the prevention and detection of fraud and
other irregularities.                                                  Disclosure of information to auditors
                                                                       All of the Directors have taken all the steps that they ought to
The Directors are responsible for ensuring the Annual Report,
                                                                       have taken to make themselves aware of any information needed
                                                                       by the auditors for the purposes of their audit and to establish
Financial statements are published on the Company’s website in
                                                                       that the auditors are aware of that information. The Directors are
accordance with legislation in Jersey governing the preparation
                                                                       not aware of any relevant audit information of which the auditors
                                                                       are unaware.
legislation in other jurisdictions. The maintenance and integrity of
the Company’s website is the responsibility of the Directors. The      Auditors
Directors’ responsibility also extends to the ongoing integrity of     A resolution to reappoint BDO LLP as auditors to the Company
                                                                       will be proposed at the 2012 Annual General Meeting.

                                                                       Signed on behalf of the Board on 29 November 2011.


                                                                       Phil Wrigley
                                                                       Chairman
                                                                                           (lxb) retail properties plc Annual Report 2011    17




Independent Auditors’ Report

Independent Auditors’ Report to the Members of
LXB Retail Properties Plc                                             In our opinion:
We have audited the Group and Parent Company Financial

                                                                          the state of the Group’s affairs as at 30 September 2011 and
Plc for the year ended 30 September 2011 which comprise
the Group and Parent Company Income Statements, the
Group Statement of Comprehensive Income, the Group
and Parent Company Statements of Changes in Equity, the                   view of the state of the Parent Company’s affairs as at 30
Group and Parent Company Balance Sheets, the Group and                    September 2011 and of the Parent Company’s loss for the
Parent Company Cash Flow Statements and the related notes.                year then ended;




                                                                                                                                                  Governance
their preparation is applicable law and International Financial           been properly prepared in accordance with IFRSs as adopted
Reporting Standards (IFRSs) as adopted by the European                    by the European Union; and
Union.

This report is made solely to the Company’s members, as a body,           been prepared in accordance with the requirements of the
in accordance with Article 113A of the Companies (Jersey) Law             Companies (Jersey) Law 1991.
1991. Our audit work has been undertaken so that we might
state to the Company’s members those matters we are required          Matters on which we are required to report by
to state to them in an auditors’ report and for no other purpose.     exception
To the fullest extent permitted by law, we do not accept or           We have nothing to report in respect of the following matters
assume responsibility to anyone other than the Company and the        where the Companies (Jersey) Law 1991 requires us to report to
Company’s members as a body, for our audit work, for this report,     you if, in our opinion:
or for the opinions we have formed.

Respective responsibilities of Directors and                              Company, or proper returns adequate for our audit have not
Auditors                                                                  been received from branches not visited by us; or

As explained more fully in the Statement of Directors’
Responsibilities, the Directors are responsible for the preparation       agreement with the accounting records and returns; or


a true and fair view. Our responsibility is to audit and express an       require for our audit.

law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing Practices      Russell Field
Board’s (APB’s) Ethical Standards for Auditors.                       For and on behalf of BDO LLP
                                                                      Chartered Accountants and Recognised Auditors
                                                                      London
                                                                      United Kingdom
is provided on the APB’s website at www.frc.org.uk/apb/scope/
                                                                      Date: 29 November 2011
private.cfm.
                                                                      BDO LLP is a limited liability partnership registered in England and
                                                                      Wales (with registered number OC305127).
Group Income Statement
                                                                                                          27 August
                                                                                      Year ended            2009 to
                                                                                    30 September      30 September
                                                                             Note           2011               2010
                                                                                                £                  £
Gross rental income                                                                    4,998,321          1,414,611
Property outgoings                                                                        (328,722)
Net rental income and gross profit                                                     4,669,599          1,334,148
Administrative expenses:
Corporate administrative expenses                                                       (4,048,809)        (2,205,373)
Cost of property activities                                                               (212,721)                –
Total administrative expenses                                                                              (2,205,373)
Investment property revaluation surplus                                                                      259,783
Other income                                                                                                       –
Operating profit/(loss)                                                         4     19,558,240           (611,442)
Finance income
Finance costs                                                                             (802,470)
Profit/(loss) before tax                                                              19,188,239         (1,647,080)
Taxation charge                                                                 7                            (34,343)
Profit/(loss) for the year/period                                                     19,031,998         (1,681,423)


                                                                                          Pence              Pence
                                                                                       per share          per share
Earnings/(loss) per share
Basic and diluted                                                               8          10.31               (1.39)
All amounts relate to continuing activities.
The notes on pages 23 to 41 form part of these Group Financial Statements.
                                                                                      (lxb) retail properties plc Annual Report 2011   19




Group Statement of Comprehensive Income
                                                                                                                    27 August
                                                                                           Year ended                 2009 to
                                                                                         30 September           30 September
                                                                                                 2011                    2010
                                                                                                           £                       £
Profit/(loss) for the year/period                                                                19,031,998
Market value adjustment of interest rate derivatives, recognised directly in equity                (572,853)                       –
Hedging reserve recycling adjustment                                                                                               –
Tax effect of interest rate derivative valuation adjustments                                        122,404                        –
Total comprehensive income for the year, net of tax                                           18,542,382              (1,681,423)
The notes on pages 23 to 41 form part of these Group Financial Statements.




                                                                                                                                            Financial Statements
Group Statement of Changes in Equity
                                                        Stated               Hedging       Retained
Year ended 30 September 2011                            capital              reserve       earnings           Total
                                                               £                    £              £               £
At 1 October 2010                                    147,583,939                     –
Profit for the year                                            –                     –     19,031,998      19,031,998
Issue of ordinary shares of no par value             113,079,289                     –             –      113,079,289
Share issue costs                                                                    –             –
Market value adjustment of interest rate
  derivatives, recognised directly in equity                   –              (572,853)            –         (572,853)
Hedging reserve recycling adjustment                           –                                   –
Tax effect of interest rate derivative valuation
adjustment                                                     –               122,404             –         122,404
At 30 September 2011                               257,501,358               (489,616)    17,350,575    274,362,317


                                                        Stated               Hedging       Retained
Period ended 30 September 2010                          capital              reserve            loss          Total
                                                               £                    £              £               £
At incorporation                                               –                     –             –                –
Loss for the period                                            –                     –
Issue of ordinary shares of no par value             153,279,835                     –             –      153,279,835
Share issue costs                                                                    –             –
At 30 September 2010                               147,583,939                       –    (1,681,423)   145,902,516
The notes on pages 23 to 41 form part of these Group Financial Statements.
                                                                                   (lxb) retail properties plc Annual Report 2011       21




Group Balance Sheet
                                                                                               As at                   As at
                                                                                       30 September            30 September
                                                                             Note              2011                    2010
                                                                                                         £                          £
Non-current assets
Investment properties                                                             9          194,790,032              93,000,000
Deferred tax asset                                                                7               139,500                           –
                                                                                          194,929,532              93,000,000

Current assets
Derivative financial assets                                                      14                      –
Business and other receivables                                                   10             5,074,307               2,152,150
Money Market Fund investments                                                    11
Cash and cash equivalents                                                        11                                   45,020,822
                                                                                          117,807,683              54,679,028
Total assets                                                                              312,737,215             147,679,028

Current liabilities
Business and other payables                                                      12           (11,935,204)
Income tax creditor                                                                              (199,389)                (34,343)




                                                                                                                                             Financial Statements
Derivative financial liabilities                                                 14                                                 –
Current liabilities                                                                        (12,383,558)             (1,776,512)

Non-current liabilities
Borrowings                                                                       13           (25,542,805)                          –
Derivative financial liabilities                                                 14              (448,535)                          –
Total liabilities                                                                          (38,374,898)             (1,776,512)
Net assets                                                                                274,362,317             145,902,516

Equity
Stated capital                                                                   15          257,501,358             147,583,939
Hedging reserve                                                                                                                     –
Retained earnings                                                                              17,350,575
Total equity                                                                              274,362,317             145,902,516

                                                                                                 Pence                  Pence
                                                                                              per share              per share
Net asset value per share
Basic and diluted                                                                17               107.97                   94.19
Adjusted (EPRA)                                                                  17               108.19                   95.19
The notes on pages 23 to 41 form part of these Group Financial Statements.
The Group Financial Statements were approved and authorised for issue by the Board of Directors on 29 November 2011 and were
signed on its behalf by:



Danny Kitchen                      George Baird
Director                           Director
22




Group Financial Statements

Group Cash Flow Statement
                                                                                                    27 August
                                                                               Year ended             2009 to
                                                                             30 September       30 September
                                                                                     2011                2010
                                                                                          £                  £
Cash flows from operating activities
Profit/(loss) before tax                                                         19,188,239
Adjustments for non-cash items:
Investment property revaluation surplus                                                                (259,783)
Net finance costs                                                                   370,001
Cash flows from operating activities before changes in working capital            468,378            (871,225)
Change in business and other receivables                                          (2,312,082)        (2,125,382)
Change in business and other payables                                                                 1,729,014
Taxation paid                                                                         (8,292)                 –
Cash flows from operating activities                                              (788,136)        (1,267,593)


Investing activities:
Interest received                                                                   414,237            484,158
Purchase of and capital expenditure on investment properties                     (74,327,871)
Money Market Fund investments made
Cash flows from investing activities                                           (85,573,409)       (99,747,524)


Financing activities:
Net proceeds from share issues                                                  109,917,419         147,583,939
New bank borrowings                                                              25,488,075                   –
Purchase of derivative instruments                                                         –         (1,548,000)
Finance costs paid                                                                 (495,790)                  –
Cash flows from financing activities                                          134,909,704         146,035,939


Net increase in cash and cash equivalents                                      48,548,159          45,020,822
Cash and cash equivalents at the beginning of the year/period                    45,020,822                   –
Cash and cash equivalents at the end of the year/period                        93,568,981          45,020,822
The notes on pages 23 to 41 form part of these Group Financial Statements.
                                                                                            (lxb) retail properties plc Annual Report 2011    23




Notes to the Group Financial Statements

1   General information about the Group
    LXB Retail Properties Plc was listed on the AIM and CISX markets on 23 October 2009. It is a closed-ended real estate investment
    company that was incorporated in Jersey on 27 August 2009.
    The financial information set out in this report covers the year to 30 September 2011 with comparative amounts relating to the
    period from incorporation to 30 September 2010, though the Company did not carry on business prior to the date of listing.
    The Group Financial Statements include the results and net assets of the Company and its subsidiaries, together referred to as the
    Group, on a consolidated basis.
    Further general information about the Company can be found on its website: www.lxbretailproperties.com.

2   Accounting policies
    Statement of compliance

    adopted for use in the European Union.

    Basis of preparation
    The financial statements have been prepared on a going concern basis and are presented in pounds sterling.
    The financial statements have been prepared on the historical cost basis except that investment properties (defined below),
    investments and derivative financial instruments are stated at fair value.
    The accounting policies have been applied consistently to the results, other gains and losses, assets, liabilities and cash flows of
    entities included in the consolidated financial statements.
    Any revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that




                                                                                                                                                   Financial Statements
    period. If the revision affects both current and future periods, the change is recognised over these periods.
    The preparation of financial statements often requires the Directors to make judgements, estimates and assumptions that may
    affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. However, the
    nature and scale of the Group’s business in the period since listing has meant that there has been a limited requirement for the
    Directors to make such judgements or estimates to date. For example, the single most significant line item in the financial statements,
    “Investment Properties” (comprising completed investment properties and development properties held for investment) have
    been supported by external valuations. Similarly, the value of derivative financial instruments have been independently assessed on
    the basis of market rates as at the balance sheet date. Details of the current status of the Group’s carried interest arrangements are
    set out in note 18 and show that no judgements or estimates have been required to be made in this area to date.
    The Group’s accounting policies for these matters together with other policies material to the Group, are set out below.

    Standards and interpretations effective in the current year
    No new standards or interpretations issued by the International Accounting Standards Board (IASB) or the IFRS Interpretations
    Committee (IFRIC) have led to any changes in the Group’s accounting policies during the year.
Notes to the Group Financial Statements

2   Accounting policies (continued)
    Standards and interpretations in issue not yet adopted
    The IASB have issued the following standards and interpretations that may be relevant to the Group and are mandatory for later
    accounting periods and which have not been adopted early. These are:
                                                                                                                    Effective date
                                                                                                            (periods commencing)
    –                              Improvements to IFRSs                                                                      Various
    IAS 24 (amended)               Related party disclosures                                                           1 January 2011
    IAS 1                          Presentation of items of other comprehensive income                                 1 January 2012
    IAS 12                         Deferred tax                                                                        1 January 2012
    IFRS 9                         Financial instruments                                                               1 January 2013
    IFRS 10                        Consolidated financial statements                                                   1 January 2013
    IFRS 13                        Fair value measurement                                                              1 January 2013

    The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group’s
    financial statements in the period of initial application, other than on presentation and disclosure.
    The IASB and IFRIC have also issued or revised IFRS 1, IFRS 7, IFRS 11, IFRS 12, IAS 19, IAS 27, IAS 28, IFRIC 14, IFRIC 19 and
    IFRIC 20 but the changes either have no relevance to the current operations of the Group or are not expected to have a material
    impact on the Group’s financial statements.

    Basis of consolidation
    Subsidiaries
    Subsidiaries are those entities controlled by the Group. Control is assumed when the Group has the power (directly or indirectly)
    to govern the financial and operating policies of an entity, or business, to benefit from its activities. The financial statements of
    subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control
    ceases. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

    Property portfolio
    Investment properties
    Investment properties are properties owned or held leasehold by the Group which are held for capital appreciation, rental
    income or both. Investment properties include property that is being constructed, developed or redeveloped for future use as an
    investment property. Investment properties are initially recorded at cost, including related transaction costs. They are subsequently
    carried at each published balance sheet date at fair value on an open market basis as determined by professionally qualified
    independent external valuers, adjusted for the carrying value of rents recognised in advance.
    The determination of the fair value of each property requires, to the extent applicable, the use of estimates and assumptions in
    relation to factors such as future rental income, current market rental yields, future development costs and the appropriate discount
    rate. In addition, to the extent possible, the valuers make reference to market evidence of transaction prices for similar properties.
    Gains or losses arising from changes in the fair value of investment properties are recognised in the income statement in the period
    in which they arise.
    In accordance with IAS 40 “Investment Property”, no depreciation is provided in respect of investment properties.
    Investment property is recognised as an asset when:
        it is probable that the future economic benefits that are associated with the investment property will flow to the Group;
        there are no material conditions precedent which could prevent completion; and
        the cost of the investment property can be measured reliably.
                                                                                              (lxb) retail properties plc Annual Report 2011    25




2   Accounting policies (continued)
    Investment properties (continued)
    All costs directly associated with the purchase of an investment property are capitalised. Capital expenditure that is directly
    attributable to the redevelopment or refurbishment of investment property, up to the point of it being completed for its intended
    use, is capitalised in the carrying value of the property.

    Occupational leases
    The Board considers the potential transfer of the risks and rewards of ownership in accordance with IAS 17 “Leases”, for all
    investment properties that are leased to tenants by the Group and determines whether such leases are operating leases or finance
    leases. Where the Group substantially retains all the risks and rewards of ownership the lease is classified as an operating lease. In
    the event that substantially all of the risks and rewards of ownership are transferred to the lessee under the terms of a lease then
    such a lease would be classified as a finance lease. All tenant leases that have been entered into by the Group to date have met
    the criteria for classification as operating leases.

    Net rental income
    Rental income from investment properties leased out under operating leases is recognised in the income statement on a straight-
    line basis over the lease term.
    Contingent rents, such as turnover rents, rent reviews, and indexation, are recorded as income in the periods in which they are
    earned. Rent reviews are recognised when such reviews have been agreed with tenants.
    Lease incentives and costs associated with entering into tenant leases are amortised over the period to the first break option or, if
    the probability that the break option will be exercised is considered low, over the lease term.
    Rental income from fixed and minimum guaranteed rent reviews is recognised on a straight-line basis over the shorter of the entire
    lease term or the period to the first break option. Where such rental income is recognised ahead of the related cash flow, an




                                                                                                                                                     Financial Statements
    adjustment is made to ensure the carrying value of the related property including the accrued rent does not exceed the external
    valuation.
    Property operating expenses are expensed as incurred and any property operating expenditure not recovered from tenants
    through service charges is charged to the income statement.

    Profits on sale of investment properties
    Profits on the sale of investment properties are calculated by reference to the carrying value at the previous published balance sheet
    date, adjusted for subsequent capital expenditure.

    Financial instruments
    Financial assets and liabilities are recognised in the balance sheet when a member of the Group becomes a party to the contractual
    terms of the relevant instrument. Unless otherwise indicated, the carrying values of the Group’s financial assets and liabilities are a
    reasonable estimate of their fair values.

    Business receivables and payables
    Business receivables and payables are initially measured at fair value, subsequently measured at amortised cost and, where material,
    discounted to reflect the time value of money. If there is objective evidence that the recoverability of an asset is at risk, appropriate
    allowances for any estimated irrecoverable amounts are recognised in the income statement.

    Cash and cash equivalents and Money Market Fund investments
    Cash and cash equivalents comprise cash in hand, deposits held at call with banks and financial institutions and other highly liquid
    investments with original maturities of ninety-five days or less. Money Market Fund investments are short-term equity investments
    held with mutual funds that invest in the “money markets”.

    Equity instruments
    Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
2   Accounting policies (continued)
    Finance income
    Finance income includes interest receivable on funds invested.

    Borrowings and finance charges
    Borrowings are initially recognised at their fair value, net of any transaction costs directly attributable to their issue. Subsequently,

    to maturity at a constant rate on the balance of the liability carried in the balance sheet for the relevant period.
    Finance charges are accounted for on an accruals basis using the effective interest method and are added to the carrying amount
    of the loan instrument to the extent that they are not settled in the period in which they arise.

    Derivative financial instruments
    Derivative financial instruments are used to minimise the exposure of the Group to cash flow risks arising from interest rate
    fluctuations. Derivatives are initially recognised at fair value on the date on which the derivative contract is entered into. Derivatives
    are re-measured to fair value at each published balance sheet date.
    Derivatives are classified either as derivatives in effective hedges or held for trading. It is anticipated that, generally, hedges will be

    assessed on an ongoing basis to ensure they remain effective.
    The gains or losses arising on the re-measurement to fair value of the portion of derivative financial instruments that qualify as
    effective hedges of cash flow interest rate risk are recognised directly in other comprehensive income. The gains or losses on the
    portion of derivative financial instruments deemed as ineffective are recognised in the income statement.

    Provisions
    A provision is recognised when a legal or constructive obligation exists as a result of an event that has occurred prior to the balance
    sheet date and where it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions
    are measured at the best estimate of the expenditure required to settle that obligation as at the balance sheet date, and will be
    discounted to present value if the effect is material.

    Distributions
    Distributions on equity shares will be recognised when they become legally payable.

    Management fees and incentive arrangement payments
    Management fees and incentive arrangement payments are recognised in the income statement in the period to which they relate.
    Amounts that are reasonably likely to become payable in the future will be provided for in the financial statements and balances
    will be discounted to reflect the deferred nature of the payment.

    Tax
    Tax is included in the income statement except to the extent that it relates to items recognised directly in equity, in which case
    the related tax is recognised in equity.
    Current tax is the expected tax payable on taxable income for the reporting period, using tax rates enacted or substantively
    enacted at the balance sheet date, together with any adjustment in respect of previous periods.
    Deferred tax is provided for using the balance sheet liability method, providing for temporary differences between the carrying
    amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. If applicable to any financial
    period, the tax effect of the following differences will not be provided for:
        the initial recognition of goodwill;
        goodwill for which amortisation is not tax deductible;
                                                                                               (lxb) retail properties plc Annual Report 2011       27




2   Accounting policies (continued)
    Tax (continued)
       the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the
       transaction affects neither accounting or taxable profit; and

        investments in subsidiaries, associates and jointly controlled entities where the Group is expected to be able to control the
        timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.
    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 that are expected to apply in the period in which the liability is to be settled or the asset is to
    be realised.
    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.

3   Segmental information
    During the current year and the prior period, the Group operated in and was managed as one business segment, being property
    investment, with all investment properties located in the United Kingdom.
    The Board, which is considered to be the chief operating decision maker of the Group, receives quarterly management accounts
    which are prepared on a basis that aggregates the performance of all properties and focuses on total returns on shareholders’
    equity.




                                                                                                                                                         Financial Statements
4   Operating profit/(loss)

                                                                                                                               27 August
                                                                                                      Year ended                 2009 to
                                                                                                    30 September           30 September
                                                                                                            2011                    2010
                                                                                                                      £                         £
    Operating profit/(loss) is stated after charging:
    Investment Manager’s fees                                                                                3,120,007              1,425,280
    Directors’ fees                                                                                            245,000                252,888
    Auditors’ remuneration:
    – audit of the Group and Company Financial Statements                                                       71,000
    – audit of a subsidiary undertaking                                                                          9,000                  8,000
    – review of the Company’s Interim Report                                                                    20,000                 17,500
    – fees for other non-audit services                                                                         20,350                 11,500

    Included in the auditors’ remuneration expensed in the income statement for other non-audit services was £10,000 (30 September
    2010: £nil) for a review of internal controls and processes. In addition, £25,000 (30 September 2010: £150,502) was paid to the
    auditors in relation to services provided in connection with fundraising. The equity fundraising costs have been treated as share
    issue costs and charged directly to the stated capital reserve.
    The Group has no employees.
4   Operating profit/(loss) (continued)
    Fees payable to the Directors in the year were as follows:
                                                                                                                      27 August
                                                                                              Year ended                2009 to
                                                                                            30 September          30 September
                                                                                                    2011                   2010
                                                                                                             £                    £
    Phil Wrigley                                                                                       75,000                77,414
    Steve Webb                                                                                         40,000                41,288
    Danny Kitchen                                                                                      50,000
    Alastair Irvine                                                                                    40,000                41,288
    George Baird                                                                                       40,000                41,288
    Total charged to the income statement                                                           245,000               252,888

5   Operating leases
    The Group enters into operating leases with tenants on its investment properties.
    Future minimum rents receivable under non-cancellable operating leases as at 30 September 2011 are set out in the table below.
    The rents receivable shown in the table are calculated on the assumption that any tenant with a break option chooses to exercise
    that option.
    Leases are generally for fixed terms of between 5 and 15 years and include periodic rent reviews and may include tenant and/or
    landlord break options.
                                                                                                    As at                 As at
                                                                                            30 September          30 September
                                                                                                    2011                  2010
                                                                                                             £                    £
    Minimum rents receivable:
    within one year                                                                                                       2,199,845
    in two to five years
    in more than five years                                                                                              12,578,137
                                                                                                 43,943,477           21,722,542
                                                                                          (lxb) retail properties plc Annual Report 2011       29




6   Finance income and costs
                                                                                                                          27 August
                                                                                                Year ended                  2009 to
                                                                                              30 September            30 September
    Recognised in the income statement:                                                               2011                     2010
                                                                                                                £                          £
    Finance income:
    Interest on cash deposits                                                                          432,469                 510,926
    Finance costs:
    Bank interest and charges                                                                                                              –
    Amortisation of capitalised finance costs                                                            (54,731)                          –
    Change in fair value of derivative financial instruments outside
       hedge accounting designation
    Hedging reserve recycling                                                                                                              –
    Total finance costs in income statement                                                           (802,470)            (1,546,564)
    Net finance costs recognised in income statement                                                  (370,001)            (1,035,638)

                                                                                                                          27 August
                                                                                                Year ended                  2009 to
                                                                                              30 September            30 September
    Recognised in other comprehensive income:                                                         2011                     2010
                                                                                                                £                          £




                                                                                                                                                    Financial Statements
    Losses recognised on the market value adjustment of the effective
      element of interest rate derivatives                                                              (572,853)                          –
    Hedging reserve recycling                                                                                                              –
    Net finance costs recognised in other comprehensive income                                        (612,020)                            –

    Net finance costs recognised in the income statement analysed by the categories of financial assets and liability shown in note 14c
    are as follows:
                                                                                                                          27 August
                                                                                                Year ended                  2009 to
                                                                                              30 September            30 September
                                                                                                      2011                     2010
                                                                                                                £                          £
    Cash and Money Market Fund investments
    Bank loans (secured)                                                                                                                   –
    Derivative financial instruments                                                                     (85,480)
                                                                                                      (370,001)            (1,035,638)
6   Finance income and costs (continued)
    Sensitivity to changes in interest rates:

                                                                                                                       27 August
                                                                                               Year ended                2009 to
                                                                                             30 September          30 September
                                                                                                     2011                   2010
                                                                                                              £                     £
    Effect on profit/(loss) before tax                                                                                            n/a
    Effect on other comprehensive income                                                                 18,382                   n/a
    Total effect on equity                                                                            379,560                    n/a
    The average interest rate incurred by the Group on its bank borrowings in the year, including the effects of hedging arrangements

    Further information about the derivative financial instruments, including details of their valuation at the balance sheet date, is
    included in note 14.

7   Taxation
                                                                                                                       27 August
                                                                                               Year ended                2009 to
                                                                                             30 September          30 September
                                                                                                     2011                   2010
                                                                                                              £                     £
    The tax charge for the year recognised in the income statement comprises:
    Current tax on results for the year                                                                 173,337                34,343
    Change in deferred tax in the year                                                                                              –
                                                                                                      156,241                34,343


                                                                                                                       27 August
                                                                                               Year ended                2009 to
                                                                                             30 September          30 September
                                                                                                     2011                   2010
                                                                                                              £                     £
    Profit/(loss) before tax                                                                      19,188,239            (1,647,080)


    Adjusted for the effects of:
    Expenses not deductible for tax                                                                     794,312
    Tax adjustment in respect of fair value adjustment to derivative financial instruments                                          –
    Investment property revaluation surplus not subject to tax                                       (3,852,474)              (51,957)
    Income not subject to tax                                                                                                (102,185)
    Deduction for allowable financing costs                                                                                  (191,278)
    Capital allowances claimed                                                                          (19,947)                    –
    Losses carried forward                                                                                                     23,335
    Tax charge for the year recognised in the income statement                                        156,241                34,343
                                                                                             (lxb) retail properties plc Annual Report 2011       31




7   Taxation (continued)

    applicable future revenue profits, for which no deferred tax asset is currently recognised.

    Tax status of the Company and its subsidiaries
    All group undertakings are either tax resident in Jersey or are tax transparent entities owned by Jersey resident entities. Jersey has a

    Company is not subject to UK Corporation tax on any dividend or interest income it receives.
    The Group’s investment properties are located in the United Kingdom and therefore the net rental income earned less deductible

                                                                                                                             27 August
                                                                                                    Year ended                 2009 to
                                                                                                  30 September           30 September
                                                                                                          2011                    2010
    Deferred tax asset                                                                                             £                          £
    At the start of the year                                                                                      –                           –
    Tax on interest rate derivative adjustment credited to other comprehensive income                       122,404                           –
    Tax on interest rate derivative adjustment credited to the income statement                                                               –
    At the end of the year                                                                                139,500                             –

8   Earnings/(loss) per share




                                                                                                                                                       Financial Statements
    year (2010: period from the Company’s listing on 23 October 2009 to 30 September 2010) and is based on earnings attributable

    There are no share options or other equity instruments in issue and therefore no adjustments need to be made for dilutive or
    potentially dilutive equity arrangements.
    The European Public Real Estate Association (“EPRA”) has issued guidelines aimed at providing a measure of earnings per share
    designed to present underlying earnings from core operating activities only. The adjusted EPRA earnings per share figure is
    calculated as follows:
                                                                    Year ended                                 27 August 2009 to
                                                                30 September 2011                             30 September 2010
                                                                                Pence per                                     Pence per
                                                                      £             share                          £              share
    Basic earnings/(loss) per the income
       statement                                           19,031,998                   10.31                                          (1.39)
    Adjustments:
    Investment property revaluation
       movements                                                                       (10.35)             (259,783)                   (0.22)
    Market value adjustment of interest rate
       derivatives, net of tax                                                           0.04                                           1.00
    EPRA earnings/(loss)                                      10,520                    0.00             (394,642)                    (0.61)
9   Investment properties
                                                                                                                                       £
    At 30 September 2010                                                                                                     93,000,000
    Additions                                                                                                                82,700,170
    Revaluation surplus
    Carrying value at 30 September 2011                                                                                  194,790,032
    Adjustment for rents recognised in advance                                                                                172,497
    Total Group property portfolio valuation at 30 September 2011                                                        194,962,529

    Movements in the prior period were as follows:
                                                                                                                                       £
    At incorporation                                                                                                                  –
    Additions                                                                                                                92,740,217
    Revaluation surplus                                                                                                         259,783
    Carrying value at 30 September 2010                                                                                   93,000,000

    At 30 September 2011, the majority of the Group’s investment properties were valued by Jones Lang LaSalle Limited,
    Chartered Surveyors, on a fixed fee basis, in their capacity as external valuers. The total external valuation of these properties at
    30 September 2011 is £182,800,000 (30 September 2010: £93,000,000). The carrying value of these properties includes a further

    the relevant properties in determining the external valuation. The external valuers’ valuation was undertaken in accordance with the
    Royal Institution of Chartered Surveyors’ Valuation Standards Seventh Edition on the basis of market value. Market value represents
    the estimated amount for which a property would be expected to exchange at 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, prudently
    and without compulsion.


    Properties that were acquired by the Group on 18 August 2011 at a cost of £882,185 and on 29 September 2011 at a cost of

    The historic cost of the Group’s investment properties as at 30 September 2011 was £175,440,387 (30 September 2010:
    £92,740,217).

10 Business and other receivables
                                                                                                        As at                 As at
                                                                                                30 September          30 September
                                                                                                        2011                  2010
                                                                                                                 £                     £
    Business receivables                                                                                  878,247
    Prepayments and accrued income                                                                      1,828,294
    Interest receivable                                                                                    45,000
    Other receivables
                                                                                                      5,074,307             2,152,150

    Substantially all receivables included in the above amounts are due within one year. No business receivables are past their due date
    or impaired.
                                                                                         (lxb) retail properties plc Annual Report 2011       33




11 Cash and cash equivalents and Money Market Fund investments
                                                                                                     As at                   As at
                                                                                             30 September            30 September
                                                                                                     2011                    2010
                                                                                                               £                          £
   Money Market Fund investments
   Cash and cash equivalents                                                                                                45,020,822
                                                                                                112,733,376              52,525,442
   The Money Market Fund investment is an investment in a liquidity fund with instant access and is therefore disclosed in the balance
   sheet as a current asset investment.
   Included within the Group’s cash and cash equivalents balance as at 30 September 2011 is £775,799 (30 September 2010: n/a) in
   bank accounts held as security by the provider of the secured bank debt.

12 Business and other payables
                                                                                                     As at                   As at
                                                                                             30 September            30 September
                                                                                                     2011                    2010
                                                                                                               £                          £
   Business payables                                                                                  1,335,789                 315,783
   Rents received in advance                                                                          1,045,047                 745,243
   Other creditors                                                                                      194,943                 518,207
   Accruals and other amounts payable                                                                 9,359,425




                                                                                                                                                   Financial Statements
                                                                                                  11,935,204               1,742,169

   properties in the year.
   All of the above amounts are due within one year and none incur interest.

13 Borrowings
                                                                                                     As at                   As at
                                                                                             30 September            30 September
                                                                                                     2011                    2010
                                                                                                               £                          £
   Bank loans (secured)                                                                           25,542,805                              –
   On 11 February 2011 a group entity entered into an agreement with Deutsche Hypothekenbank (Actien-Gesellschaft) for a five
   year debt facility. A loan amounting to £25,950,000 was drawn on 17 February 2011, secured against certain investment properties

   balance sheet date the secured properties have been externally valued at £51,000,000. The loan is due for repayment on 30 April

   There have been no defaults or other breaches of financial covenants under the terms of the loan agreement during the current
   year, or in the period since the balance sheet date.
   The Group has no undrawn, committed borrowing facilities at 30 September 2011 (2010: £nil).
   There was no difference between the book value and the fair value of the borrowings disclosed above.
14 Financial instruments and risk management
   a) Derivative financial liabilities
   On 22 February 2011, the Group entered into an interest rate swap and floor to provide protection against interest rate fluctuations
   in respect of the Group’s bank borrowings set out in note 13. The following table provides a summary of the instruments and their
   fair values at 30 September 2011.
                                                                                             Market value
                                 Notional       Protected                                   30 September        Market value
                                  amount             rate                  Expiry                    2011 30 September 2010
                                           £                %                                                 £                           £
   Non-amortising swap             £25.95m                          31 January 2015                                                      n/a
   Non-amortising floor            £25.95m                          31 January 2015                                                      n/a




   for hedge accounting purposes with movements thereon recognised in other comprehensive income.
   All interest rate derivative financial instruments have been fair valued by reference to interbank bid market rates as at the close of
   business on 30 September 2011 by J.C. Rathbone Associates Limited and include the full LIBOR basis spread.

   that are observable either directly or indirectly, rather than from quoted prices in active markets for identical assets and liabilities.
   Derivative financial instruments are categorised as follows:
                                                                                                                                     Total
                                                                                                                                           £
   Liabilities falling due:
   In less than one year
   In more than one year                                                                                                            448,535
                                                                                                                                  697,500
   The market values of hedging instruments change constantly with interest rate fluctuations, but the exposure of the Group to
   movements in interest rates is protected by way of the hedging products listed above. These valuations do not necessarily reflect
   the cost or gain to the Group of cancelling its interest rate protection, which is generally a marginally higher cost or smaller gain
   than a market valuation.
   Note 19 contains details of a forward interest rate swap entered into by the Group after the balance sheet date. This interest rate
   swap has been entered into in anticipation of the hedging needs for future investment, taking advantage of historically low current
   pricing for such instruments.

   b) Derivative financial assets
   On 8 January 2010, the Group entered into four purchaser swaptions in order to protect the Group against potential future
   interest rate rises. The following table provides a summary of the purchaser swaptions, all of which expired in the year.
                                               Option exercise date and                Swap end         Swap strike             Premium
   Notional amount                                      swap start date                    date             rate %                  paid
   £25m                                             1 October 2010 (expired)            1 July 2014                 3.38            421,000
   £25m                                              1 January 2011 (expired)           1 July 2014                 3.71            382,000
   £25m                                                 1 April 2011 (expired)          1 July 2014                 3.71            447,000

   statement in respect of these swaptions.
                                                                                           (lxb) retail properties plc Annual Report 2011       35




14 Financial instruments and risk management (continued)
   c) Categories of financial instruments
                                                                                                       As at                   As at
                                                                                               30 September            30 September
                                                                                                       2011                    2010
                                                                                                                 £                          £
   Financial assets
   Current assets:
   Money Market Fund investments
   Cash and cash equivalents                                                                                                  45,020,822
   Business receivables                                                                                   878,247
   Interest receivable                                                                                     45,000
   Derivative financial assets                                                                                  –
   Other receivables                                                                                    2,283,330
                                                                                                  115,939,953              54,215,118

                                                                                                       As at                   As at
                                                                                               30 September            30 September
                                                                                                       2011                    2010
                                                                                                                 £                          £
   Financial liabilities
   Current liabilities:
   Business payables                                                                                    1,335,789                 315,783




                                                                                                                                                     Financial Statements
   Other creditors                                                                                        171,457                 508,792
   Derivative financial instruments                                                                                                     –
   Accruals and other amounts payable                                                                   9,359,425
                                                                                                                                  987,511
   Non-current liabilities:
   Bank loans (secured)                                                                                25,542,805                           –
   Derivative financial instruments                                                                       448,535                           –
                                                                                                    37,106,976                  987,511
   All financial assets and liabilities are measured at amortised cost, except for derivative financial instruments and Money Market Fund
   investments, which are measured at fair value.

   d) Financial risk management
   Through the Group’s operations and use of debt financing it is exposed to a variety of risks. The Group’s financial risk management
   objectives are to minimise the effect of these risks by, for example, using derivative financial instruments to mitigate interest rate
   risk. Such instruments are not utilised for speculative purposes. The Board provides guidelines on the acceptable levels of interest
   rate risk, credit risk and liquidity risk and the use of any derivatives is pre-approved by the Board.
   The principal financial risks that are considered to be potentially material to the Group and the policies that it has in place to
   manage these risks are summarised below:

   i) Liquidity risk
   Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on its debt
   instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
   The Board utilises quarterly budgets and forecasts to make an assessment of the resources that are expected to be available to the
   Group to meet its liabilities when they fall due.
14 Financial instruments and risk management (continued)
   i) Liquidity risk (continued)
   The Group ensures that surplus cash is managed with the following objectives: (i) to ensure efficient cash and liquidity management;
   (ii) to deliver appropriate returns on all surplus funds having regard to the Group’s policy not to expose cash to significant risk; and
   (iii) to limit exposures through counterparty diversification.
   Generally returns on cash deposits reflect the notice period required to release the deposit back to the Group. With that in mind
   the Group holds cash with various institutions at varying dates of maturity.
   The following table shows the maturity analysis for financial liabilities and their effective interest rates, where applicable. The table
   has been drawn up based on undiscounted cash flows, including future interest payments, based on the earliest repayment date.
   Year ended 30 September 2011
                                                  Effective                      Less than             Between
   Financial liabilities                          interest rate                   one year         1 and 5 years                    Total
                                                                                            £                      £                      £
   Business payables                                                               1,335,789                       –             1,335,789
   Borrowings                                                                                                                   32,019,741
   Derivative financial instruments                                                                         448,535
   Accruals and other amounts payable                                              9,359,425                      –              9,359,425
                                                                               12,271,255             31,141,200             43,412,455

   Period ended 30 September 2010
                                                  Effective                     Less than             Between
   Financial liabilities                          interest rate                  one year         1 and 5 years                     Total
                                                                                            £                      £                      £
   Business payables                                                                 315,783                       –               315,783
   Borrowings                                     n/a                                      –                       –                     –
   Derivative financial instruments                                                        –                       –                     –
   Accruals and other amounts payable                                                                              –
                                                                                   478,719                         –             478,719

   ii) Credit risk
   Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to
   a financial loss. The Group is exposed to credit risk from its investment property leasing activities and from its financing activities,
   including deposits with banks and other financial institutions and derivatives.
   The credit risk on cash balances and short-term deposits is limited because the counterparties are typically banks with credit ratings
   of AA- or higher or that have substantial UK government backing. As at the year end deposits were spread across 7 (30 September
   2010: 8) different banks. The credit ratings of the banks are monitored by J.C. Rathbone Associates Limited and reported to the
   Board at least quarterly with changes made as necessary to manage risk. The Board does not consider that there is a significant
   concentration of counterparty risk.
   Rigorous credit control procedures are applied to facilitate recovery of business receivables. The majority of tenant leases are long-
   term contracts with rents payable quarterly in advance. Prospective tenants are assessed according to the Group’s credit criteria
   prior to entering into lease agreements. Penal interest is charged on outstanding rents in accordance with the applicable lease terms
   and legal action would be taken to recover any substantial arrears.
   The credit risk relating to counterparties transacting with the Group for property acquisitions and disposals is managed through
   appropriate contractual protection in the relevant agreements.
                                                                                              (lxb) retail properties plc Annual Report 2011     37




14 Financial instruments and risk management (continued)
   iii) Market risk-interest rate risk
   Market risk arises from the Group’s use of debt financing. It is the risk that the future cash flows of a financial instrument will
   fluctuate because of changes in interest rates.
   The Group is exposed to cash flow interest rate risk from its variable rate borrowings. As described above, the Group uses interest
   rate hedging products such as swaps and floors in order to mitigate this risk.
   The Group’s derivative financial instruments in use at the balance sheet date are described in section a) of this note and the Group’s


   iv) Capital risk management
   The Group’s total capital comprises net debt (which principally consists of the borrowings disclosed in note 13 less the cash
   and cash equivalents and Money Market Fund investments disclosed in note 11) and equity attributable to equity holders of the
   Company (stated capital, retained earnings and the hedging reserve). The Group monitors its capital with reference to committed
   expenditure with the primary objective of safeguarding its ability to continue to operate as a going concern whilst complying with
   its banking covenants. Borrowings are secured on specific properties and, as referred to in note 13, are non-recourse to the Group
   as a whole.
   The Group’s ongoing monitoring of its capital structure and in particular the specific financing required for each of its individual
   capital projects allows it to quickly identify funding needs and thereby facilitates in the securing of any necessary further debt finance.
   The Group is not subject to any external capital requirements.

15 Stated capital




                                                                                                                                                      Financial Statements
   Analysis of share capital:
   The Company has an unlimited authorised share capital of no par value.
   Issued and fully paid – ordinary shares of no par value                                                 Number                  Paid (£)
   At 1 October 2010                                                                                                            153,279,835
   Shares issued on 14 June 2011                                                                          99,192,359            113,079,289
   At 30 September 2011                                                                               254,099,895            266,359,124

   Issue costs
   At 1 October 2010
   Share issue costs in the year
   At 30 September 2011                                                                                                        (8,857,766)
   Stated capital per the balance sheet                                                                                      257,501,358
   On 14 June 2011, a further 99,192,359 shares were issued for cash, pursuant to a placing, at the placing price of 114p per share.
16 Reserves
   The Group Statement of Changes in Equity is shown as a primary financial statement.
   The nature and purpose of each reserve within equity is as follows:
   Stated capital: This represents the proceeds on the issue of shares, net of issue costs.
   Hedging reserve: This represents the change in the intrinsic value of interest rate derivative financial instruments, being the effective
   portion of such instruments, net of any deferred tax.
   Retained earnings/(loss): This represents the cumulative profits and losses recognised in the income statement.

17 Net asset value per share
   Net asset value per share is calculated as the net assets of the Group attributable to shareholders at each balance sheet date,
   divided by the number of shares in issue at that date (see note 15).
   There are no share options or other equity instruments in issue and therefore no adjustments need to be made for dilutive or
   potentially dilutive equity arrangements.
   The European Public Real Estate Association (“EPRA”) has issued guidelines aimed at providing a measure of net asset value
   (“NAV”) on the basis of long term fair values. The EPRA measure excludes items that it considers have no impact in the long term,
   such as the fair value of derivative financial instruments and deferred tax balances. The Group’s EPRA NAV is calculated as follows:
                                                      As at 30 September 2011                       As at 30 September 2010
                                                                                Pence per                                     Pence per
                                                                     £              share                          £              share
   Basic NAV                                                                          107.97                                          94.19
   Adjustments:
   Fair value of derivative financial instruments                                         0.27                                         1.00
   Deferred tax balances                                     (139,500)                   (0.05)                    –                      –
   EPRA NAV                                            274,920,317                   108.19         147,449,080                     95.19

18 Related party transactions and balances
   Interests in shares
   The interests of the Directors and their families in the share capital of the Company are as follows:

                                                                                                        Ordinary shares
                                                                                                          As at         As at
                                                                                                  30 September 30 September
                                                                                                          2011          2010
                                                                                                         Number                 Number
   Phil Wrigley                                                                                             447,748
   Steve Webb                                                                                               111,938
   Danny Kitchen                                                                                                                   380,208
   Alastair Irvine
   The interests disclosed above include both direct and indirect interests in shares.
                                                                                             (lxb) retail properties plc Annual Report 2011   39




18 Related party transactions and balances (continued)
   Interests in shares (continued)
   The group headed by LXB3 Partners LLP, which includes LXB Manager LLP and its wholly owned subsidiaries, LXBRP GP Limited
   and LXB DH Limited, is a related party of the Company. LXB Manager LLP is the Investment Manager to the Group. LXBRP
   GP Limited and LXB DH Limited act as the sole corporate general partners of LXB Retail Properties Fund LP and LXB DH LP
   respectively, which are significant, indirectly controlled, subsidiaries of the Company (see the paragraph headed “subsidiary entities”
   below). At 30 September 2011, LXB3 Partners LLP and its members held an aggregate total of 12,902,982 (30 September 2010:

   There have been no changes to any of the above shareholdings between 30 September 2011 and the date of this report.

   Fees
   Directors’ fees of £245,000 (30 September 2010: £252,888) were payable for the year ended 30 September 2011 (note 4). As at

   other amounts payable (note 12).
   Management fees of £3,120,007 (30 September 2010: £1,425,280) were payable to the group headed by LXB3 Partners LLP by
   the Group in respect of the year ended 30 September 2011, of which £nil was outstanding at the year end (2010: £475,293 net
   of VAT and included within business and other payables (note 12)).
   The Investment Manager, LXB Manager LLP, is under the terms of the Investment Advisory Agreement, permitted to recharge
   certain costs and expenses incurred in the discharge of its duties. During the year it has recharged costs totalling £43,151
   (30 September 2010: £nil).

   Subsidiary entities
   LXB Retail Properties Plc is the ultimate controlling party of its subsidiary entities.




                                                                                                                                                   Financial Statements
   All of the Group’s investment properties are held by entities that are either direct or indirect subsidiary undertakings of LXB Retail
   Properties Fund LP (“the Fund”).
18 Related party transactions and balances (continued)
   Subsidiary entities (continued)
   The consolidated financial statements include the financial statements of the Company and the following principal subsidiary
   entities, all of which are wholly-owned unless otherwise stated:
                                                                             Country of
   Entity                                                                 incorporation                                     Nature of business
   LXBRP CommCo Limited *                                                               Jersey     Appointment and removal of members of the
                                                                                                                         investment committee
   LXBRP LP Limited *                                                                  Jersey                                   Limited partner
   LXB Retail Properties Fund LP**                                                   Scotland                       Intermediate holding entity
   LXBRP TreasuryCo Limited                                                            Jersey                               Treasury operations
   LXB DH Borrower Limited                                                             Jersey            Treasury operations and group finance
   LXB DH LP***                                                                      Scotland                       Intermediate holding entity
   LXBRP (Acquisitions) Limited                                                        Jersey                              Property investment
   LXB RP (Ayr 1) Limited                                                              Jersey                              Property investment
   LXB RP (Ayr BP) Limited                                                             Jersey                              Property investment
   LXB RP (Ayr Holdings) Limited                                                       Jersey                       Intermediate holding entity
   LXB RP (Ayr Retail) Limited                                                         Jersey                              Property investment
   LXB RP (Banbury) Limited                                                            Jersey                              Property investment
   LXB RP (Biggleswade) Limited                                                        Jersey                              Property investment
   LXB RP (Biggleswade 2) Limited                                                      Jersey                              Property investment
   LXB RP (Denbigh) Limited                                                            Jersey                              Property investment
   Drewkai Properties Limited                                                          Jersey                              Property investment
   LXB RP (Gloucester) Limited                                                         Jersey                              Property investment
   LXB RP (Greenwich) Limited                                                          Jersey                              Property investment
   LXB RP (Greenwich 2) Limited                                                        Jersey                              Property investment
   LXB RP (Greenwich 3) Limited                                                        Jersey                              Property investment
   LXB RP (Greenwich 4) Limited                                                        Jersey                              Property investment
   LXB RP (Greenwich 5) Limited                                                        Jersey                              Property investment
                                                                                       Jersey                              Property investment
   LXB RP (Rushden) Limited                                                            Jersey                              Property investment
   LXB RP (Rushden 2) Limited                                                          Jersey                              Property investment
   LXB RP (Sheppey) Limited                                                            Jersey                              Property investment
   LXB RP (Stafford) Limited                                                           Jersey                              Property investment
   LXB RP (Sutton) Limited                                                             Jersey                              Property investment
   Threejack Properties Limited                                                        Jersey                              Property investment
   LXB RP (No. 11) Limited                                                             Jersey                              Property investment
   LXB RP (No. 19) Limited                                                             Jersey                            Property development
                                                                                       Jersey                              Property investment
   * LXBRP CommCo Limited and LXBRP LP Limited are directly owned by LXB Retail Properties Plc. All other entities are indirectly owned.
   ** LXB3 Partners LLP and LXBRP GP Limited (see the paragraph headed “Interests in shares” above) have partnership interests in LXB Retail
   Properties Fund LP (“the Fund”) with LXB3 Partners LLP being entitled to certain incentives that may become payable, as described below. The
   Group has the power, indirectly, to govern the financial and operating policies of the Fund so as to benefit from its activities as a result of having
   the authority to appoint and remove members of the Investment Committee. The Investment Committee, which has approval rights over all
   significant matters pertaining to the business of the Fund, was originally constituted as a committee of LXBRP GP Limited. On 11 January 2011,
   the Investment Committee was reconstituted as a committee of the Fund. The registered office of the Fund is 15 Atholl Crescent, Edinburgh,
   EH3 8HA. Advantage has been taken of the exemption conferred by regulation 7 of the Partnership (Accounts) Regulations 2008 in presenting
   information about the Fund.
   *** LXB DH Limited (see the paragraph headed “Interests in shares” above) has a partnership interest in LXB DH LP but is not entitled to any
   profit share.
                                                                                          (lxb) retail properties plc Annual Report 2011   41




18 Related party transactions and balances (continued)
   Incentives – carried interest arrangements with LXB3 Partners LLP
   At a future date, when the £257,501,358 of net funds raised from the share issues to date (being the stated capital of the Company,

   statement to date) have been returned in cash to shareholders (assuming no further share issues), cash returns over and above
                                                                              3



   to as “the cumulative hurdle amount” as at the relevant reporting date).
   As the net assets of the Group are less than the cumulative hurdle amount as at 30 September 2011, no provision for future
   incentive payments has been recognised in these financial statements.

   Other transactions
   Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.

19 Post balance sheet events

   notional amount of £100m interest rate swap facility with the Royal Bank of Scotland Plc effective from 25 March 2013 until
   25 September 2015. See note 14 for further information.
   On 17 November 2011, the Group acquired the Andrews Sykes unit in Gallions Road, Greenwich, completing the Group’s land
   assembly requirements for the delivery of the foodstore pre-let to Sainsbury’s earlier in the year. As part of the acquisition deal,
   the Group disposed of its site at 5 Peninsular Park Way, Greenwich to the Andrews Sykes Group. The Group’s net cash outflow
   from undertaking these transactions was £1.08m.




                                                                                                                                                Financial Statements
42




Parent Company Financial Statements

Company Income Statement
                                                                                                                  27 August
                                                                                           Year ended               2009 to
                                                                                         30 September         30 September
                                                                                Note             2011                  2010
                                                                                                         £                    £
General administrative expenses                                                                   (759,575)
Operating loss                                                                       2          (759,575)            (694,200)
Finance income                                                                                       1,448
Loss before and after tax and loss for the year/period                                          (758,127)            (691,132)
All amounts relate to continuing activities.
There were no items of other comprehensive income or expense in the current year and the prior period and therefore the loss for
the year also reflects the Company’s total comprehensive loss.
                                                       (lxb) retail properties plc Annual Report 2011       43




Company Statement of Changes in Equity
                                                Stated            Retained
Year ended 30 September 2011                    capital                loss                    Total
                                                      £                      £                          £
At 1 October 2010                            147,583,939
Loss for the year                                     –              (758,127)               (758,127)
Issue of ordinary shares of no par value     113,079,289                     –           113,079,289
Share issue costs                                                            –
At 30 September 2011                       257,501,358           (1,449,259)          256,052,099

                                                Stated            Retained
Period ended 30 September 2010                  capital                loss                    Total
                                                      £                      £                          £
At incorporation                                      –                      –                          –
Loss for the period                                   –
Issue of ordinary shares of no par value     153,279,835                     –           153,279,835
Share issue costs                                                            –
At 30 September 2010                       147,583,939             (691,132)          146,892,807




                                                                                                                 Financial Statements
Company Balance Sheet
                                                                                              As at               As at
                                                                                      30 September        30 September
                                                                            Note              2011                2010
                                                                                                     £                   £
Non-current assets
Loans to subsidiary undertakings                                                 4      256,022,413         146,658,723

Current assets
Business and other receivables                                                                       –
Cash and cash equivalents                                                                                          418,277
                                                                                             262,870             419,916
Total assets                                                                            256,285,283         147,078,639


Current liabilities
Business and other payables                                                      5            (233,184)           (185,832)
Total liabilities                                                                           (233,184)           (185,832)
Net assets                                                                              256,052,099         146,892,807


Equity
Stated capital                                                                             257,501,358         147,583,939
Retained loss                                                                               (1,449,259)
Total equity                                                                            256,052,099         146,892,807


The Parent Company Financial Statements were approved and authorised for issue by the Board of Directors on 29 November 2011
and were signed on its behalf by:



Danny Kitchen                      George Baird
Director                           Director
                                                                     (lxb) retail properties plc Annual Report 2011       45




Company Cash Flow Statement
                                                                                                     27 August
                                                                           Year ended                  2009 to
                                                                         30 September            30 September
                                                                                 2011                     2010
                                                                                           £                          £
Cash flows from operating activities
Loss before tax                                                                    (758,127)
Finance income                                                                        (1,448)
Cash flows from operating activities before changes in working capital           (759,575)               (694,200)
Change in business and other receivables
Change in business and other payables                                                47,352                 185,832
Cash flows from operating activities                                             (710,584)               (510,007)


Investing activities:
Interest received                                                                      1,448
Loans made to subsidiary undertakings
Cash flows from investing activities                                       (109,362,242)           (146,655,655)




                                                                                                                               Financial Statements
Financing activities:
Net proceeds from share issues                                                 109,917,419             147,583,939
Cash flows from financing activities                                        109,917,419             147,583,939


Net (decrease)/increase in cash and cash equivalents                             (155,407)                418,277
Cash and cash equivalents at the beginning of the year/period                       418,277                           -
Cash and cash equivalents at the end of the year/period                           262,870                 418,277
46



Notes to the Parent Company
Financial Statements

1    Basis of preparation
     The Parent Company Financial Statements have been prepared in accordance with applicable law and International Financial
     Reporting Standards (“IFRS”) adopted for use in the European Union. The accounting policies relevant to the Company are
     the same as those set out in the accounting policies for the Group in note 2 to the Group Financial Statements. Any additional
     significant policies are set out below.

     Investment in and loans to subsidiary undertakings
     Investments in subsidiary undertakings are carried at cost, less any provision for impairment.

2    Operating loss
     Operating loss is stated after charging auditors’ remuneration.
     Their remuneration in respect of the audit of the Company (including the consolidated financial statements) for the year was

     Financial Statements.

3    Investment in subsidiary undertakings
     The following companies were subsidiary undertakings as at 30 September 2011.
     Entity                                    Country of incorporation                                         Nature of business
     LXBRP CommCo Limited                                                  Jersey         Appointment and removal of members of the
                                                                                                              investment committee
     LXBRP LP Limited                                                      Jersey                                    Limited partner

     Both subsidiary companies are wholly owned and have only shares of no par value in issue. The principal subsidiary entities
     indirectly owned by the Company are disclosed in note 18 to the Group Financial Statements.

4    Loans to subsidiary undertakings
     The amounts due from subsidiary undertakings are unsecured, bear no interest and are repayable on demand.

5    Business and other payables
                                                                                                        As at               As at
                                                                                                30 September        30 September
                                                                                                        2011                2010
                                                                                                                £                 £
     Business payables                                                                                   20,310              22,897
     Other creditors and accruals                                                                       212,874
                                                                                                      233,184             185,832

6    Stated capital
     Details of the stated capital of the Company are disclosed in note 15 to the Group Financial Statements.
                                                                                     (lxb) retail properties plc Annual Report 2011   47




7   Related parties
    Directors’ fees
    Directors’ fees are disclosed in note 4 to the Group Financial Statements.

    Incentive arrangements
    The incentive arrangements described in note 18 to the Group Financial Statements are guaranteed by the Company.




                                                                                                                                           Financial Statements
48




       y
Glossary

AIM                   The Alternative Investment Market of the London Stock Exchange.

CISX                  The Daily Official List of the Channel Islands Stock Exchange.

EPRA                  European Public Real Estate Association.

EPRA EPS              An adjusted measure of earnings per share designed by EPRA to present underlying earnings from
                      core operating activities only.

EPRA NAV              An adjusted measure of net asset value designed by EPRA to present net asset value excluding the
                      effects of changes in value of financial instruments held for long term benefit, and the deferred tax
                      effects of those changes.

EPS                   Earnings per share, calculated as earnings after tax divided by the weighted average number of shares
                      in issue in the year.

Investment Advisory   The agreement between LXBRP GP Limited, the General Partner of LXB Retail Properties Fund LP,
Agreement             and LXB Manager LLP under which LXB Manager LLP provides investment advice to the Group.

Investment Manager    LXB Manager LLP.

LIBOR                 The London Interbank Offered Rate, being the interest rate charged by one bank to another for
                      lending money.

NAV                   Net asset value.
                                                                      (lxb) retail properties plc Annual Report 2011   49




Company Information

Registered Office                                Auditors
Ogier House                                      BDO LLP
The Esplanade                                    55 Baker Street
St Helier                                        London
Jersey                                           W1U 7EU
JE4 9WG
                                                 Derivatives Valuer
Directors                                        J.C. Rathbone Associates Limited
Philip Oliver Wrigley                            12 St. James’s Square
Stephen John Webb                                London
Daniel John Kitchen                              SW1Y 4LB
John Alastair Irvine
George Mackay Baird
                                                 Registrar
                                                 Capita Registrars (Jersey) Limited
Administrator and Company Secretary              12 Castle Street
Ogier Fund Administration (Jersey) Limited       St Helier
Ogier House                                      Jersey
The Esplanade                                    JE2 3RT
St Helier
Jersey
                                                 Property Valuer
JE4 9WG
                                                 Jones Lang LaSalle Limited
                                                 London West End
Investment Manager                               30 Warwick Street
LXB Manager LLP                                  London
Grafton House                                    W1B 5NH
2-3 Golden Square
London
                                                 Jersey Lawyers
W1F 9HR
                                                 Ogier
                                                 Ogier House
Nominated Adviser, Joint Financial Adviser and   The Esplanade
Joint Broker                                     St Helier
                                                 Jersey
125 London Wall                                  JE4 9WG
London
EC2Y 5AJ
                                                 UK Lawyers
                                                                                                                            Other Information

                                                 MacFarlanes LLP
Joint Financial Adviser and Joint Broker         20 Cursitor Street
Oriel Securities Limited                         London
150 Cheapside                                    EC4A 1LT
London
                                                 Website
                                                 www.lxbretailproperties.com
LXB Retail Properties Plc
Ogier House
The Esplanade
St Helier
Jersey JE4 9WG
www.lxbretailproperties.com

				
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