1、Capital&Regional plc Annual report 2004Annual report 2004Contents1Capital&Regionalwhat we do2Financial highlights3Chairmans statement4Chief and Deputy Chief Executives review6Finance Directors review10Operating review shopping centres14Operating review retail parks18Operating review leisureManagemen
2、t,governance andcorporate social responsibility22Directors24Advisers and corporate information25Directors remuneration report29Directors report32Corporate governance report35Corporate social responsibility36Statement of directors responsibilities37Independent auditors reportFinancial statements38Con
3、solidated profit and loss account39Consolidated balance sheet40Statement of total recognised gains and lossesNote of historical cost profits and lossesReconciliation of movements in equity shareholders funds41Consolidated cash flow statement42Company balance sheet43Notes to the accountsAdditional in
4、formation67Property under managementFund portfolio information68Five-year reviewShareholders information69Glossary of termsCapital&Regional.what we doC&R is a co-investing property asset manager.This means that wemanage property assets for funds in which we hold a significant stakeThis enables our e
5、quity and management to be leveraged over a largeportfolio and enhances returns to shareholdersWe aim to build best-of-class specialist management teams for theretail and leisure sectors in which we operateCapital&Regional 1Financial highlights2 Capital&RegionalGroup exposure to property by sector(%
6、)19951996199719981999200020012002200320046005004003002000100Pence per share700800199519961997199819992000200120022003200415129630Pence per shareDividend growthGrowth in adjusted fully diluted net asset value(NAV)per share19951996199719981999200020012002200320042,0001,5001,0005004,5002,5000Property v
7、alue(million)4,0003,5003,000Property under managementWholly-ownedother 2%Fundshoppingcentres50%Wholly-ownedtrading property 1%Fundretail parks23%Wholly-ownedretail parks7%Fundleisure6%Partnershipleisure11%Chairmans statementCapital&Regional 3BoardThe Board was further strengthened during the yearthr
8、ough the appointment of Alan Coppin as an independentnon-executive director.He brings extensive experience inthe management of major visitor destinations and a stronginterest in management and governance best practice.EmployeesA company rich in physical assets is no less dependent on its human ones
9、than a so-called“people business”.As the property assets for which the Company is responsiblehave increased fourfold in the past three years,the Capital&Regional team,now comprising 128 employees centrallyand 497 at individual centres,has worked with hugecommitment and imagination.The exceptional re
10、sults that I have been able to report are directly attributable toour employees great efforts,for which,on behalf of theshareholders,I give them corresponding thanks.Tom Chandos ChairmanIntroduction2004 was another extremely successful year for theCompany,with strong returns,property acquisitions an
11、dnew institutional investment all contributing to the increasein property assets under management from 2.9 billion to4.0 billion.We generated a return on our equity of 39%,the secondconsecutive year at this sort of level;the adjusted fullydiluted net asset value per share was 710p at the year end.Ou
12、r three principal funds,investing in shopping centres,retail parks and urban entertainment complexes,are run by specialist teams who share an intense focus on attractingvisitors to their centres,with a view to enhancing thetrading of their tenants and,hence,increasing rental values.This proactive ap
13、proach,combined with the generallyfavourable conditions in our chosen sectors of the propertymarket,has demonstrably delivered excellent results.Our intensive operational approach,allied to ouracquisition,development and financing expertise,shouldenable the Group to show continued outperformanceagai
14、nst market benchmarks,leading to superior returns toour shareholders.DividendsIn the light of the substantial increase in recurringmanagement fee income achieved during 2004,as well as the good prospects for continuing performance feesbecoming payable in future years,the Board believes that it is no
15、w appropriate to rebase the level of the dividend,by recommending a final dividend of 9p(2003:5p),to make 14p for the full year(2003:9p),a 56%increaseover the previous year.Specialisation has allowed us to invest in management teams intended to be“best in class”for their own sectors.Their skills can
16、 be spread over bigger portfolios,and theycan exploit scale economies for the benefit of occupiers,fund investors and C&R.We believe we have some of the most experienced andeffective management teams in the industry.We are proud oftheir strength and depth.The interests of the managementteams,the fun
17、ds and C&R are well aligned by our businessmodel.We believe that this is at the root of our success.Business building 2004 was again a year of business building,with the Groupsmarket position strengthened in a number of significant ways:GProperty under management increased from 2.9 billion to 4.0 bi
18、llion.In particular we have increased thenumber of shopping centres we manage from 15 to 21,at 30 December 2004 and to 22 now.GThe X-Leisure Fund was established from the tail end of the three funds acquired from MWB.We now have a vibrant leisure division,with sufficient scale andsignificant opportu
19、nities for future expansion.GWe have restructured our principal investments via Jerseyin order to increase liquidity in the market for units.Convertible Unsecured Loan Stock(CULS)In 2004 we started to buy back our CULS.The conversionprice of 1.9448 is well below the current share price soFinancial r
20、esultsWe are pleased to be able to report another set of strongfinancial results for 2004,the second full year of operatingour new business model.Highlights include:GReturn on equity before exceptionals for the year 39.0%(2003:37.6%).GAdjusted fully diluted net asset value per share up to 710p(31 De
21、cember 2003:521p).GProfit before tax and exceptional items of 36.2 million(2003:26.3 million).G56%increase in the full-year dividend to 14p(2003:9p).Background to the financial resultsWe are now seeing the benefits of the decision taken tochange the strategic direction of the Group and specialise in
22、 specific sectors.The sectors we have chosen in town shopping centres,retail warehouses and leisure are deliberately chosen as ones which respond well to active management.They benefit from being run as businesses,in partnershipwith occupiers.The needs of the traders are at the heart of our business
23、,whether the sector is retail or leisure.Our centre managersmainly have a retail background rather than one inproperty,and are expected to understand the operatingdynamics of the occupiers.Happy tenants means they aretrading successfully which means the centre is thriving.Chief and Deputy Chief Exec
24、utives review4 Capital&RegionalFrom left:Martin Barber,Xavier Pullenwe have had to pay a premium to redeem them.It is worthnoting that the premium paid is written off through theCompanys profit and loss account and reduces its taxableprofit.We chose to reduce our capital by buying back CULSrather th
25、an shares because it simplifies our capital structure.We have continued the repurchase programme after the yearend,and have now bought approximately half the CULS issued.Market overviewCurrent market conditions remain good despite thereported slowdown in consumer demand.There continuesto be strong d
26、emand from investors looking for ways offinding suitable property exposure and we believe that there is room for further reductions in investment yields,particularly in the leisure sector.Future prospectsThe current year has started well.We have experienced andwell incentivised management teams and
27、the infrastructurein place for continued organic growth.This will allow us toproduce attractive returns for both fund investors and C&R.The longer-term outlook is more difficult to predict,but we remain confident that our business model will help usoutperform.Martin BarberXavier PullenChief Executiv
28、eDeputy Chief ExecutiveCapital&Regional 5Return on equityReturn on equity is still the key measure for our financialperformance.Calculated directly from the audited accountsthe 2004 figure is 37.0%.After adding back exceptionalitems it is 39.0%.Total return20042003mmProfit before tax and exceptional
29、s36.226.3Exceptional items(10.2)Gains taken to reserves122.085.9Pre-tax return148.0112.2Tax(12.0)(10.6)Total return for the year136.0101.6Return on equity37.0%37.6%Adjusted return on equity,before exceptionals39.0%37.6%Finance Directors review6 Capital&RegionalLeft:William Sunnucks,Group Finance Dir
30、ectorBelow:the CorporateteamLeft to right:Falguni DesaiAnton ManuelpillaiDoug McAndrewTracy RichardsonRichard SnooksCapital&Regional 7Drivers of return39%is clearly a high return and shareholders will want to understand the four main economic drivers behind it.Four main drivers are identified below:
31、1 Earnings businesses:the Group is now a hybrid,withtwo significant earnings businesses which should beanalysed differently from our property investments.Since they generate substantial profit from very little equity they significantly enhance our return on equity.Both businesses have been built up
32、from smallbeginnings three years ago.Our property managementbusiness is operated by Capital&Regional PropertyManagement Limited(CRPM),and our ski slopeoperating business by Snozone Limited.The corporatestructure can be simplified as follows2 Outperformance by the funds:all three funds are activelyma
33、naged and outperformed their benchmarks on both a geared and ungeared basis.Strong performance fromthe funds benefits the Group in two ways:first throughits co-investment,and secondly through the performancefees which entitle CRPM to an extra share of theoutperformance over and above the benchmarks.
34、Capital&Regional plcEarnings businessesProperty investments(Property management(wholly-owned properties,business and ski slope business)joint ventures and fundco-investment)3 Strong markets:investor demand for retail propertydrove up property values during the year,and investmentyields fell.We have
35、estimated that our total return can besplit up as follows:4 Non-fund property activity:our retail park and leisureteams still have significant non-fund activities,and thesehave made a major contribution to our return on equity:Key non-fund investment2004 returnon equity%Glasgow Fort 50%JV38.8Swansea
36、 Retail Park wholly owned92.8Xscape Milton Keynes 50%JV43.1Xscape Castleford 66.7%JV24.3Great Northern 50%JV9.4Effect of yield shift21.5%Active management and other factors17.5%Total return before exceptionals39.0%Fund performance in 2004GearedUngeared returnreturnIPD%Mall26.019.617.1Junction35.624.
37、023.5X-Leisure(nine months only)18.011.4Capital&Regionals offices in Victoria,London.Ski slope income and expense:Snozone produced higherthan expected profits in 2004.Castleford enjoyed its firstfull year of trading;cost controls were operating strongly at both Castleford and Milton Keynes;and some
38、costs couldbe shared between locations.The ski slope income comes mainly from ski slope ticketsales.Its expenses are staff costs and building occupationcosts including rent.Share of associates and joint ventures:a breakdown of incomefrom this source is shown in note 19 of the financialstatements.All
39、 three funds have enjoyed strong capitalgrowth,and paid significant performance fees to CRPM.These fees are currently charged against the operating profit of associates,although they are driven by capitalgrowth.The move to Jersey may allow the funds to offsetperformance fees against capital and in d
40、ue course we hopethat cash distributions will be increased.Amortisation of goodwill:goodwill arising on the acquisitionof the MWB leisure funds is amortised over 12.5 years.Thecost of the goodwill was reduced by 1.2 million due to acarried interest earned and credited to C&R as extra units inthe new
41、 leisure fund.Management expense:over the last three years our fixedmanagement expense has grown from 10.5 million to 13.7 million while the portfolio has grown from 900 million to 4 billion.We have tried to moderate the increase in our fixed cost base.The variable management expense includes all pa
42、ymentswhich vary with the performance letting fees paid tomembers of staff,bonuses,and the cost of the Long TermIncentive Plan(LTIP)and the Capital Appreciation Plan(CAP).The cost of the LTIP awards is spread over the three-year performance period.The cost of the CAP is borne in the year in which th
43、e performance fees are earned,although payouts are delayed for a further two years.Exceptional items:our accounts have borne the cost of writing off 8.2 million of premium paid for therepurchase of the Convertible Unsecured Loan Stock(CULS).This reduces profit and total return,but it alsoreduces the
44、 number of shares after conversion.So on a fully diluted basis NAV per share will be enhanced.Performance fees200420032002mmmMall22.811.12.8Junction7.32.2X-Leisure1.1Total31.213.32.8Finance Directors review8 Capital&RegionalProfit and loss detailThe table below breaks down our turnover and profit in
45、toits main components:Management fees:most of our management fee income isstable.The core fee income is paid by the funds,the servicecharge fees by the tenants.Only 8%of the total is related towork on property procurement which will fluctuate withthe level of activity within the funds.Performance fe
46、es:our property management company,CRPM,is entitled to performance fees,which are calculatedas a share of the excess return over pre-agreed benchmarks.There are significant lags in the formula to ensure that onlyconsistent performance is rewarded.GFees are calculated on a rolling three-year basis,so
47、 our2004 performance will contribute to the 2005 and 2006performance fees.GIf the calculation produces a negative figure in either2005 or 2006,the 2004 fee can be clawed back.Thus our strong performance in 2004 gives us a good starttowards earning performance fees in 2005 and 2006.Weonly include in
48、the 2004 profit and loss account the feesthat are legally attributable to the year,as shown in the tablebelow.Management fees20042003mmCore fee income11.610.7Service charge fees3.22.4Other regular income3.01.4Procurement fees1.51.2Total19.315.7Profit and loss account20042003mmManagement fees19.315.7
49、Performance fees31.213.3Ski slope income9.05.5Rental income2.94.9Group turnover62.439.4Property costs0.4(1.3)Income from associates and JVs30.635.9Net interest payable(34.5)(29.5)Ski slope expenses(7.5)(5.1)Amortisation of goodwill(1.2)(1.2)Fixed management expense(13.7)(11.8)Variable management exp
50、ense(13.0)(7.7)Profit on disposals/investments net12.87.6Profit before exceptional items36.226.3Exceptional item re Jersey restructuring(2.0)Exceptional item re CULS(8.2)Profit before tax26.026.3The profit and loss account also shows a 2.0 millionexceptional charge for the cost of transferring the G
51、roupsfund holdings into Jersey holding companies.Financing and corporate structureValue of property management business:we have been asked toprovide more information to help investors understand thevalue of our property management business.Note 2 to thefinancial statements therefore includes for the
52、 first time anallocation of management expenses between our propertymanagement and property investment businesses based onan allocation of staff costs.The cash flows from the assetmanagement business can be classified as follows:Dividend policy:our decision to increase the dividend isdriven by an an
53、alysis of our recurring income.Recurringincome includes rent,management fees,interest and fixedmanagement expense.It excludes performance fees andvariable overhead.It also excludes the share of the cost of performance fees which we bear as an investor in the funds.We calculate that our recurring pre
54、-tax profit for 2004 was 18.4 million.This translates into recurring post-taxearnings per share of 19.6p,which covers our 14pproposed total dividend for 2004 1.4 times.Bank debt:the Group has bank debt of 118 million against adjusted shareholders funds of 515 millionincluding CULS of 20.4 million.Th
55、is debt is secured onour wholly-owned properties,principally our investment in the Morfa site Swansea,and also on our units in The Malland The Junction Funds.The Group is also exposed to 531 million of bank debtthrough its interests in the three funds and its various jointventures.The Mall and Junct
56、ion portfolios are gearedroughly 50/50 debt to equity,the X-Leisure fund is slightlyhigher at 65/35.This 531 million includes our share of fund debt for whichthere is no recourse whatsoever to Group assets.In somecases there is recourse to the Group for debt incurred byjoint ventures.These figures a
57、re prepared on a see-throughbasis,in other words,if we hold 27.86%of the fund,weinclude 27.86%of the fund debt.Propertymanagementbusiness20042003(CRPM)mmAsset management fees19.315.8Fixed overhead(10.6)(9.1)Ongoing cash flow8.76.7Performance fees31.213.3Variable overhead(11.8)(6.5)Performance-relate
58、d cash flow19.46.8On this see-through basis we have debt of 649 millionagainst adjusted shareholders funds(including the CULS)of 515 million,representing gearing of 126%.Hedging:the floating rate interest on this bank debt must bepaid from a fixed flow of rental income,and it is thereforeprudent to
59、enter into interest rate swaps to hedge theinterest rate exposure.At the year end we had swaps on72%of the 649 million with an average duration of 29 months.Since the year end further swaps have increasedthis to 76%and an average duration of 53 months.Convertible Unsecured Loan Stock(CULS):at 30 Dec
60、emberour balance sheet included 20.4 million of CULS each of which can be converted into shares at an effectiveconversion price of 1.9448.This is significantly below the current share price and we therefore treat the CULS as equity for gearing purposes.We started to repurchase the CULS during 2004.T
61、he effectson our financial statements are as follows:GWe paid 12.4 million cash for the repurchase.G4.2 million of this reduces the book liability,the 8.2 million balance is taken as a loss through the profit and loss account as an exceptional item withininterest payable.GNet asset value is reduced
62、by 8.2 million.GFully diluted NAV per share is enhanced on a post-tax basis.We have continued to buy back CULS in 2005.Totalbuybacks to date can be summarised as follows:International Accounting StandardsWe will continue using UK GAAP for the year ended 30 December 2005.But we are preparing to adopt
63、 IFRS for2006,and we will be providing supplementary informationto shareholders later this year to ensure that they are fullyinformed.The extra year of UK GAAP is clearly in theeconomic interests of shareholders because there iscertainty under UK GAAP about the accounting and taxtreatment of the wri
64、te-off of the premium paid onrepurchase of the CULS.William Sunnucks Finance DirectorNominal value ExpenditurePremiummmm2004 buybacks4.212.48.22005 buybacks9.033.124.1Total buybacks to date13.245.532.3Capital&Regional 9The shopping centre market 2004 was a record year for investment transactions wit
65、hover 5 billion worth of centres traded.Average lot size also increased to circa 75 million with nominal equivalentyields hardening in Mall-type centres to 6.25%,on par withThe Malls portfolio yield of 6.3%.It is hard to see a softening of pricing in the short term.Indeed the weight of money for ret
66、ail investment inparticular suggests further yield compression during 2005albeit at a lesser rate than the last two years.As to rental growth,there is general concern in the marketabout the fundamentals of cooling consumer demand and general retail price deflation pressurising the retailerscapacity
67、to support increased occupational overheads.Investors appear to be prepared to take at least a medium-term view on this.Our view is that The Mall is well placed in such a market scenario,as outlined in Malls market position on pages 10 to 11.The Mall FundIn early 2002 Capital&Regional injected its p
68、ortfolio ofshopping centres into The Mall Fund,a Limited Partnershipset up with Morley Fund Management.Capital&RegionalProperty Management became the Property and AssetManager,with Morley Fund Management becoming theFund Manager.Since then the portfolio has grown from 11 centres to 21 a 22nd was acq
69、uired in early 2005 after the reference datefor this report.Total gross assets are now approximately2.25 billion,making The Mall one of the largest ownersand operators of covered retail space in the UK.The investor base has grown from the two foundinginvestors to 30.New investors have contributed pr
70、operty,new equity or a mixture of both.The gearing of the fundhas remained on average at 50%and the investment criteriacontinue to focus on:GIn-town covered shopping centres with integrated car parking and good public transport links;andGA minimum size of 150,000 sq ft in a shoppingcatchment of more
71、 than 100,000 people.During 2004 The Mall expanded by six new centres,investing650 million,circa 12%of total shopping centre standinginvestment transactions for the year.Five of these acquisitionswere made“off market”,testimony to The Malls marketcredibility.One centre,Bristol,was acquired for inves
72、tmentunits in the fund;all others were bought with cash.The Malls market positionThe Mall is seeing continuing strong tenant demand acrossall format sizes particularly so,however,in the 10,000 sq ftplus range.This is reflected in a low void rate of 2.8%which in itself includes strategic vacations fo
73、r refigurationand reletting.Operating review shopping centres10 Capital&RegionalLeft:Ken Ford,Chief Executive The MallBelow:The Mall ExecutiveteamLeft to right:Mark BourgeoisMatt ChambersGaynor GillespieIsobel Willamson-JonesJohn WoodThe Mall model is intended to be robust in a morechallenging consu
74、mer climate.It offers:GUK-wide geographical diversityGNo reliance on any single occupier:top 20 retailers liable for only 32%of rent rollGCompetitive costs of occupation:average unit rent,70,000 paGMass-market tenancy rosterGConvenient and accessible local locationsGEmerging Mall brand loyaltyPerfor
75、manceThe Mall Fund has significantly outperformed its IPDshopping centres benchmark on both a geared andungeared basis.We believe that this has been driven by thescale of the portfolio,the benefits of branding and most ofall by the strong teams which we have actively managingeach centre in partnersh
76、ip with retailers.The Mall Fund performance20042003Property level returns19.6%21.7%Fund level returns26.0%33.5%IPD benchmark17.1%15.2%Performance fee22.8m11.1mMall managementThe Mall is managed by C&Rs 48-strong dedicated teambased in London and Glasgow working with The Mall FundManager at Morley.We
77、 operate the Malls directly:no third-party managingagents are retained.In this way we enjoy direct relationshipswith both our retailers and shopping customers.The C&Rteam includes:GRetail Development Managers,who are responsible forretailer relations,retail mix and space creation strategies.They wor
78、k with our over 775 retail partners occupyingnearly 2,000 units.GThe Operations Team of retail professionals provide theday to day management link with the At Mall Teams.GRetail Surveyors supply tenancy,management andvaluation services to the business.GThe Mall Facilities Management Team is responsi
79、ble for statutory compliance and for ensuring that bestpractice and purchasing scale economies are appliedacross all Malls.GA Project Management Team co-ordinates theprocurement and delivery of construction services.GThe Marketing Team devises and co-ordinates delivery of marketing and promotional a
80、ctivities atThe Malls.In addition this team is responsible for developing the commercial revenue and brand partner sponsorshipprogrammes and The Mall brand.GThe Accounts Team collects and accounts for a rent roll of 132 million pa and a total service charge budgetcurrently of 31 million.This Mall Ce
81、ntral Team operates to support the delivery ofindividual Mall business plans by the At Mall Teams.A highdegree of local“M-powerment”is therefore necessary andthis structured programme is delivered by The Malls humanresources unit,also a Mall central function.Capital&Regional 11The Mall delivers shop
82、ping as it should be from great customer service at our“Ask Me”points,to Mall TV.Operating review shopping centres12 Capital&RegionalAt Mall teamsOn-site management is provided by 278 people based atThe Malls.These“At Mall Teams”are the front line of thebusiness and are closely aligned with The Mall
83、 brand valuesand operating culture.A typical“At Mall Team”includes:GA General Manager:a key individual,normally with aretail management background.The GM is responsiblefor the daily running of the individual Mall business andthe delivery of the business plan objectives.GAn Operations Manager:effecti
84、vely the GMs deputy,theOperations Manager is actively involved in business plandelivery and service charge management.In addition the OM is responsible for statutory compliance issues at their Mall.GA Marketing Manager:manages the marketing,promotional,advertising and PR activities at their Mall.GMa
85、ll Administrator:provides administrative services toMall management and monitors financial controls.The MallsWe now have a portfolio of 22 centres across the UK,oneof the largest in the sector:The retailersWe regard our retailers as business partners.We are awarethat our success depends on theirs an
86、d we will work withthem in every way we can to improve their businesses.The Mall retailer base is unashamedly mass market,appealing to the majority of shoppers focused on value,CentreSize(sq ft)The Mall,Aberdeen 200,000The Mall,Barnsley 170,000The Mall,Bexleyheath 400,000The Mall,Birmingham400,000Th
87、e Mall,Blackburn535,000The Mall,Bristol320,000The Mall,Camberley*360,000The Mall,Chester232,000The Mall,Edgware199,000The Mall,Epsom400,000The Mall,Falkirk190,000The Mall,Gloucester250,000The Mall,Ilford300,000The Mall,Maidstone542,000The Mall,Middlesbrough430,000The Mall,Norwich400,000The Mall,Pres
88、ton270,000The Mall,Romford320,000The Mall,Southampton200,000The Mall,Sutton Coldfield500,000The Mall,Walthamstow280,000The Mall,Wood Green570,000Total7,468,000*acquired in January 2005.convenience and choice.We also actively seek toaccommodate local“heritage”retailers who have anassociation with the
89、ir local communities.Our scale encourages UK-wide,multi-Mall relationships.Over 60%of our multiple retailers are represented in twoor more of our Malls.We also operate where possible a flexible leasing policywhich enables us to better manage the retail offer withinindividual Malls.Open,direct and ho
90、nest communication lies at the heart ofour retailer relationships.The Mall brandThe Mall has three brand values Caring:Dynamic:Easy.They describe a way of behaving whether interacting withbusiness partners or shoppers.Over the last three years we have put considerable effortinto building the consist
91、ent experience we believe The Mallrepresents.We have made this investment because it is goodbusiness.All our customers and suppliers are discerning.If we do not give them what they want they will“shop”elsewhere.We feel that our commitment to the brand valueswill help us deliver consistently for the
92、customer.We canthus encourage customer and supplier loyalty and create a sustainable,profitable business.A brand for community:to our shoppers we aim to make The Mall more than a collection of shops.The Mall is at theheart of the community.A place where shoppers enjoyspending time as well as money.T
93、he Mall environment isdesigned to be welcoming,secure and fun.Mall brandedfacilities like car parks,toilets and“Ask Me”points allcontribute to the distinctive Mall shopping experience.We try to reach beyond the centre through our relationshipswith local authorities,police and local community groups.
94、Through“The Mall Cares”we support locally-basedcharities.If we do all this and provide the right retail offer,shoppers will reward The Mall with frequent visit loyalty.A brand for partnership:to our retailers,The Mall aims to bean inclusive business partner,working together to create the virtuous cy
95、cle of shopping satisfaction and commercialThe top five Mall tenants are:%of rentalNumber incomeof unitsBoots the Chemist Limited2.7418Arcadia2.5828Woolworths Plc2.3514Clinton Cards2.0019Alexon International Ltd1.8525success.Our marketing and promotional campaigns aredesigned to increase the popular
96、ity of The Mall,drivingrelevant footfall and sales to our retailers.The Mall strives to understand the dynamics of eachretailers business and has a flexible approach to leasing andretail mix.We appreciate retailer sensitivity to non-rentalcosts of occupation and through our direct bulk-buying ofutil
97、ities and services,we create real cost savings.A brand for people:to our people,The Mall works hard to be the employer of choice in all of our areas ofoperation.The At Mall Teams include specialists in retail,property investment and management,finance,humanresources and marketing.We try to create a
98、vibrant internalculture that eliminates barriers and encourages collectiveresponsibility and creative thinking.Our M-powermentPeople Development Programme encourages all to be allthey can be within The Mall.Capital&Regional 13The Mall has a constant dialogue with its customers bringing them familiar
99、ity withsurprise “Whats on”boards,Mall TV and innovative“freshen up”toilet areas.Retail park activitiesThe C&R retail park teams main activity is the managementof The Junction Fund,but it is also involved in a number ofother projects as described in the table below.Junction FundIn early 2002 Capital
100、&Regional injected most of its retailparks into The Junction Fund,alongside a similar number ofretail parks injected by clients of Morley Fund Management.Capital&Regional Property Management became theProperty Manager,and Morley Fund Management becamethe Fund Manager.Since then the portfolio has gro
101、wn from322 million to 1 billion.New investors have participatedin the Fund,diluting Capital&Regionals interest from theoriginal 50%to 27%.The Junction will concentrate its activities on the primeopen A1 and prime bulky goods parks which are dominantand/or have the ability to become dominant in their
102、catchment area.Operating review retail parks14 Capital&RegionalRetail park marketOver the last 12 months the retail parks market has beenthe strongest performing sector within the UK propertyinvestment market.It is attractive to investors because there is strong tenant demand combined with tight pla
103、nningcontrols.There are good prospects for rental growth,andthis has been encouraging investors to drive down yields.Tenant demand from open A1 retailers remains strong as isrental growth for quality locations.Demand from bulkygoods retailers is becoming more focused on primedestination parks,where
104、we expect to see continued rentalgrowth albeit at a slower rate.Demand for secondary parksin poor locations seems unlikely to improve.We would expect to see some further favourable yield in theshort term,due to the weight of money the sector hasattracted.However,the yield differential between prime
105、andsecondary has narrowed to a level which we believe isunsustainable.Wonsectetuer adipiscing elit,sed diamnonummy nibh euismod tincidunt utlaoreet dolore magna ibh euisadipiscingelit,sed diam nommy nibh euismodtincidunt ut laoreet dolore magnaaliquam erat volutpaonsectetueradipiscing elit,sed diaLe
106、ft:Andrew Lewis-Pratt,Chief Executive TheJunctionBelow:The Junction teamLeft to right:John GatleyJo LordGraham InglisIan HarrisRetail park activitiesInvestmentDescriptionRecent activitySq ftJunction Fund17 core retail parksPortfolio management3,460,000Glasgow FortShopping park.Sold to Hercules Fund
107、in June 2004Now trading.C&R still entitled 350,000to certain overage payments(Phase 1)Morfa Retail Park,SwanseaWholly-owned retail park developmentDevelopment completed in October 2004260,000Leckwith Retail Park,CardiffPotential large retail park developmentPre-letting in progress400,000We have a sp
108、ecialised,energetic,and motivated team of 22people with varied backgrounds in retailing,development,investment and finance.We have developed and continuedto develop our skills in what is still a specialist market.The Junction retail parksSince inception we have assembled through a mixture of acquisi
109、tions,sales,development,extensions andrefurbishment a prime portfolio which would be extremely difficult to replicate.Strict investment criteriahave ensured that the fund concentrates its activities onlyon prime open A1 and bulky goods parks which aredominant and/or have the ability to become domina
110、nt in their catchment area.Junction tenantsWe enjoy close working relationships with our tenants,and are able to offer them more opportunities to satisfytheir ongoing requirements as our portfolio increases in size and quality.In 2004 we completed 25 lettings for over 450,000 sq ft of retail space a
111、nd have diversifiedour tenant base to include a number of open A1 retailers.Learning from the experiences of our colleagues at The Mall and X-Leisure,we have recruited an in-houseoperations team in order to provide our tenants with a much improved on-site service and to apply consistencyof standards
112、 across the portfolio.Capital&Regional 15Top five tenantsNumber%of rentalof unitsincomeB&Q619.02Comet126.92Carpetright135.30DSG Retail85.08Matalan44.91Junction retail parksSize(sq ft)Aberdeen140,000Aylesbury 1200,000Beckton 190,000Bristol 320,000Glasgow190,000Hull 1330,000Ipswich210,000Leeds 140,000
113、Leicester 170,000Maidstone170,000Oxford140,000Paisley 190,000Portsmouth160,000Renfrew240,000Junction Thurrock joint venture 2320,000Wembley260,000Worcester90,000Total3,460,0001 Park size following completion of development works,currently under construction.2The Junction owns 65%of The Junction Thur
114、rock joint venture.Below,left and right:The Junction,Hull.Operating review retail parks16 Capital&RegionalThe Junction Aylesbury phase 1 newly developed.Retail park shopping.Acquisitions and disposalsCompetition for retail park investments is extremely strong.Nevertheless over the year The Junction
115、has increased itsportfolio through the acquisition of 118.4 million ofproperty.The two major acquisitions were the purchase of Great Western Retail Park for 53 million,in January 2004,reflecting an equivalent yield of 6%and in December 2004the purchase of Kittybrewster Retail Park in Aberdeen for52.
116、6 million,showing an equivalent yield of 5.75%.The only park sold in 2004 was Warrington,for 43.25 million.PerformanceIn 2004 The Junction was the top performing fund in theHSBC/APUT All Pooled Funds Index.In both 2004 and 2003 The Junction outperformed its benchmark.As a resultCapital&Regional has
117、earned significant performance fees.The 24%property level return in 2004 can be attributed to:GIncome 5.3%.GAsset management and ERV growth 5.5%.GPlanning and development 2.7%.GYield shift 10.5%.20042003Property level returns24.0%17.70%Fund level return35.6%28.20%IPDbenchmark23.5%16.60%Performance f
118、ee7.3m2.2mCapital&Regional 17Planning permission and developmentCentral Government policies and planning legislation with regard to out-of-town retail developments has beenincreasingly restrictive and now borders on draconian.Despite this,The Junction has achieved considerable successin obtaining pl
119、anning consents for new developments,existing park refurbishments and extensions,and change ofuse totalling 880,000 sq ft.This will assist The Junction in delivering outperformance in future years,and has helped to create the developmentpipeline summarised below:Phase 1 of our 200,000 sq ft developm
120、ent at Aylesbury has been completed and trading commenced in November2004 with the balance scheduled for completion in August2005.The 130,000 sq ft extension to Hull started on site in September 2004 with completion scheduled for August2005.A further 100,000 sq ft was added at Bristol duringthe year
121、,and consent was achieved for 430,000 sq ft atOldbury following the planning inquiry in May 2004.Permission was also granted in October 2004 for thecomprehensive redevelopment of 200,000 sq ft at Wembley.Prior to commencement the developments will be substantially pre-let,with fixed-priced buildingc
122、ontracts signed in order to reduce the risk borne by the Fund.Glasgow FortPhase I of this project was completed and opened for trade in October 2004.Notable lettings during this year includeZara,New Look and an extended Boots store.The overallun-let space by area is now only 4%.The investment was so
123、ld during the year by the partnership in which C&R is a 50%partner for 195 million toHercules Unit Trust,with the partnership retaining a rightto receive further capital receipts in respect of the projectand subsequent phases.These are subject to certainconditions and no value is included in Capital
124、&Regionalsbalance sheet.Morfa Shopping Park,SwanseaIn October 2004 Capital&Regional completed the MorfaShopping Park in Swansea.This investment comprises105,000 sq ft of open A1 retail and 132,000 sq ft of bulkygoods retail,in addition to some A3 restaurant units.Existing tenants include B&Q,Next,TK
125、 Maxx,Boots andAsda George.Of the remaining 30,000 sq ft available to let,10,000 sq ft is under offer and strong demand in theremaining space is being shown at significantly higher rent levels.This investment has significantly exceeded our expectationsand we anticipate further capital growth in 2005
126、.Junction development pipelineFurther Existingdevelopment areaarea DevelopmentDescriptionStatus(sq ft)(sq ft)AylesburyDevelopment of old existing retail parkOn site30,000200,000Hull Phase IINew space extensionOn site240,000130,000Bristol Phase IVNew space extensionPhase V completed320,000156,000Wemb
127、leyRedevelopment and refurbishment of old existing retail parkCommence work April 2005260,000n/aOldburyNew developmentPlanning consent achievedn/a430,000ThurrockRedevelopment and refurbishmentOn site March 2005490,000n/aPaisleyNew space extensionPlanning permission awaited in June 2005190,00085,000L
128、eicesterNew space extensionPlanning consent achieved170,00017,5001,700,0001,018,500Operating review leisure18 Capital&RegionalAs the largest leisure landlord in the UK,the X-LeisureFund and Xscape destinations continue to deliver the leisuredestinations of the future,offering branded destinations,wh
129、ere our business partners want to be,where thecustomers prefer to go and as a result maximisingsustainable returns to our investors.Leisure market overview and trendsIncreasingly the leisure sector is attracting interest from a wider audience of investors.This is not surprising whenone looks at the
130、initial yield across leisure investmentscompared to other asset classes.The leisure sector is lookinggood value and the weight of money currently in themarket is beginning to harden these yields as investordemand seeks out value.There are also additional uniquebenefits that the leisure market offers
131、 to the investor thatthe market is now recognising when considering leisure as a property investment.Unexpired lease lengths in excessof 20 years,good covenants and guaranteed rental uplifts at future reviews guaranteeing future reversionary incomestream and the equivalent yields.The X-Leisure appro
132、achAt X-Leisure we have always passionately believed in the destination/experience business model achievingdifferentiation and a unique selling proposal.Thats whyas a team we concentrate on the consumer experience,as well as our tenants/partners success,and not just bricksand mortar.In 2004 we have
133、held 205 events across ourportfolio supported by 2.5 million marketing leaflets,Left:PY Gerbeau,Chief Executive X-LeisureBelow:The X-LeisureteamLeft to right:Alastair BellPolly FarrellPierre HardyArnaud PaluRobert Warnersignificant advertising spend,and provided customer servicetraining to tenants/p
134、artners.The last year has seen footfallincreases and positive rent review settlements;one canargue whether these positive results are down to marketinginitiatives,or increase in consumer spending and operatordemand.Either way it has benefited returns to ourinvestors.It is evident that todays consume
135、r has become moresophisticated;therefore,product differentiation isparamount.Differentiation comes from range,price andlocation but increasingly the total consumer experience is vital.Consumer experience and success comes fromdestination leisure,delivering unique,integratedexperiences.No longer can
136、owners within these sectors sit back andcollect rent and expect to outperform educated/specialistowners.C&R leisure divisions activitiesCapital&Regionals leisure team has four majorresponsibilities:X-Leisure FundThe X-Leisure Fund was formally launched on 15 March2004 with a gross asset value at inc
137、eption of 502 millionand nine investors with C&R holding 10.77%of the equity.At the year end the Funds gross asset value 597 millionwith one additional investor Royal Mail Pension Fund.The X-Leisure Fund is the largest leisure fund in the UK and thescale of ownership provides the opportunity to carr
138、y outcross-portfolio deals allowing expansion and restructuringwith our occupiers.Acquisitions/disposalsThe major acquisition in 2004 was the Brighton Marinaretail and leisure destination at 65 million.There are capitalgains to be made from both short-term asset managementinitiatives as well as long
139、er-term and more ambitiousdevelopment plans across the scheme.The scheme also offersbranding and destination marketing opportunities and willtherefore benefit from X-Leisures specialist marketingAssetDescriptionX-Leisure FundA portfolio of 17 urban entertainment complexesXscape partnershipsXscapes i
140、n Milton Keynes and Castleford(near Leeds)A third is being built in Braehead(near Glasgow)SnozoneSnow slope operating business.Successful cash flow business.Pays rent to Xscape partnershipsGreat Northern partnershipLarge retail and leisure property in central ManchesterCapital&Regional 19Top and abo
141、ve:the X-Leisure approach is about creating industry leading leisuredestinations with complementary lifestyle retail.Operating review leisure20 Capital&Regionalapproach and expertise.The asset is now a key holdingwithin the fund.The fund also acquired the 25%holding of the“O2”London long leasehold i
142、nterest from JV partner Burford.This resulted in a significant capital value gain from themerging of the two interests and the benefits from 100%ownership and initiatives.Other major activity:the combination of the three funds intoone and the extension of the fund life has freed the fund tostart a n
143、umber of significant projects.For example:GTower Park,Poole planning permission was receivedfor a 16,000 sq ft(four unit)extension.Work hascommenced with completion due in Summer 2005.GStar City,Birmingham the turnaround of this regionaldestination has commenced with the start on site of theconstruc
144、tion of a mini snow slope,skate park,air parkand climbing walls.GAt Great North,North Finchley,planning was grantedand pre-lets were agreed for the reconfiguration ofaccommodation.GSuccessful rent review settlements above estimated rentalvalues were achieved at the O2 Centre,London andLockmeadow in
145、Maidstone.Performance:over the nine months since inception,the fundlevel return was 18%.Annualised this is an equivalent of23.3%.The funds annual hurdle rate of return is 12%andwe are pleased to have earned a 1.1 million performance fee.Top and above:skiers and boarders enjoying snow all year round
146、at CastlefordCapital&Regional 21XscapeXscape Milton Keynes:the property is fully let althoughvarious asset management initiatives have moved the valueforward over the year increasing rental values and rentalincomes by sub-divisions/reconfigurations.Xscape MiltonKeynes remains the flagship entertainm
147、ent leisuredestination within the UK and welcomed 6.1 millionvisitors in 2004.Xscape Castleford,Leeds:2004 saw its first full year ofoperation.Over the year 550,000 of new rental incomewas exchanged.At the year end the property was 90%let by floor area.The scheme is now trading successfully andyear-
148、on-year growth being experienced.The surroundingarea has seen substantial development with the opening of a 100,000 sq ft B&Q,reconfiguration/expansioncommencing on the adjoining factory outlet and thecompletion of a 120-bedroom hotel.Xscape Braehead:Laing ORourkes started construction onsite in Jun
149、e 2004 and the 310,000 sq ft building iscurrently on target to open in Spring 2006.A tremendouslevel of tenant interest has been experienced with 70%byfloor area already pre-let.This Xscape is being developed in a joint venture with the owners of the very successfulBraehead Shopping Centre on the ad
150、joining site.It willoffer additional attractions ensuring that the Xscape brandcontinues to be innovative and exciting.Snozone Ltd Snozone operates the indoor snow slopes at the Xscapes and has grown at both Xscape Milton Keynes and XscapeCastleford,exceeding profit forecasts year on year with anexc
151、ellent expansion strategy.Year-on-year growth has beenseen in both destinations and,as awareness of the all yearround ability to ski within the destinations increases,theseasonal factor of the business,particularly in MiltonKeynes,is becoming less acute.Great Northern Warehouse,ManchesterThis refurb
152、ished former railway warehouse is 50%owned in a JV company,Morrison Merlin Ltd,with Anglia WaterGroup.In 2004 an agreement for lease was exchanged withLondon Clubs International for a 40,000 sq ft casino.Finallicensing and planning approvals are expected in the firsthalf of 2005 enabling the casino
153、to open in early 2006.More than 45 million people visited X-Leisure attractions in 2004,enjoying a wide range of facilities from bowling,cinema and casinos to waterparks and extreme sports.Directors22 Capital&RegionalThe Board,from left:Standing Paul Stobart,Kenneth Ford,Andrew Lewis-Pratt,Hans Maut
154、ner,Xavier Pullen,PY Gerbeau.Seated David Cherry,Martin Barber,Tom Chandos,William Sunnucks,Alan Coppin.Tom Chandos Chairman,52 Chairman of Nomination CommitteeTom is the Chairman of The TelevisionCorporation plc and a non-executivedirector of Global Natural Energy plcand of a number of private comp
155、anies.In addition to his board positions,he has worked in investment bankingand alternative investment areas such as venture capital and hedge funds.He is a Labour member of the Houseof Lords.He was appointed as adirector of the Company in 1993 andas Chairman in 2000.Martin Barber Chief Executive,60
156、Member of Nomination CommitteeMartin was a founder director of the Company in 1979 and has beeninvolved in commercial property as a developer and investor for over 30 years.Martin is also co-Chairman of CenterPoint Properties Trust,a realestate investment trust,listed on theNew York Stock Exchange a
157、nd formerlya subsidiary of Capital&Regional.William Sunnucks MA ACAFinance Director,48William was appointed Group FinanceDirector in October 2002.He has been Finance Director of a number oflarge companies,including SecurumInternational and English,Welsh andScottish Railways.He is a charteredaccounta
158、nt and has an MBA from theLondon Business School.William hasresponsibility for the Groups finances,including funding,reporting andfinancial control.Xavier PullenDeputy Chief Executive,53 Xavier was a founder director of theCompany in 1979 and has been activein the property industry for over 30 years
159、.Xavier focuses primarily onthe supervision of the Groups fundmanagement business together withthe co-ordination of all propertymatters and the development of new business initiatives.Kenneth Ford BSc FRICS Managing Director of Shopping Centres,51 Ken has been a director of Capital&Regional since 19
160、97 and,as ChiefExecutive of The Mall,is responsiblefor the funds shopping centreportfolio.Ken has been involved incommercial property for 30 years.He founded the Easter ManagementGroup Scotland in 1991 prior tojoining Capital&Regional.Andrew Lewis-Pratt BSc ARICS Managing Director of Retail Parks,47
161、Andrew has been a director of Capital&Regional since 1997 and,as Chief Executive of The Junction,is responsible for the funds retail parkportfolio.Andrew has over 20 yearsexperience within the retail and leisure sector.PY Gerbeau Managing Director of Leisure,39PY was appointed to the Board in2003,an
162、d as Chief Executive of X-Leisure.He has over 15 yearsexperience in the leisure industry.PYs career to date has included Vice President of Park Operations atDisneyland Paris and Chief Executive of the Dome.PY has an MBA from oneof Frances leading business schoolsand teaches on the MBA programme at t
163、he London Business School.David Cherry Non-executive,67 Member of Audit and Remuneration CommitteesDavid is the former Senior Partner of Donaldsons,a national firm ofcommercial chartered surveyors with asignificant reputation in retail property.He has wide experience in the UKproperty market and was
164、 head of theorganisation for eight years.He wasappointed as a director of the Companyin 1997.Hans Mautner Non-executive,67Chairman of Remuneration CommitteeHans is President of the InternationalDivision of Simon Property Group(SPG),the worlds largest publiclytraded retail real estate company.Inaddit
165、ion,Hans is Chairman of SimonGlobal Limited,SPGs London-basedentity.SPG currently carries out itsownership/development in Europethrough two separate entities in whichit has investments:Gallerie CommercialiItalia and European Retail Enterprises.Hans is Chairman of both theseorganisations.Hans was app
166、ointed as a director of the Company in 2003.Paul Stobart Non-executive,47 Chairman of Audit Committee and member of Remuneration and Nomination CommitteesAfter qualifying as a charteredaccountant with Price Waterhouse,Paul spent five years in corporatefinance with Hill Samuel beforejoining Interbran
167、d,an internationalmarketing services consultancy,in 1988.He joined The Sage Group in 1996 as Business DevelopmentDirector,becoming Managing Director,UK and Ireland,in 2003.In 2001 Paulwas appointed a non-executive directorof Planet Holdings plc.Paul wasappointed as a director of the Companyin 2003.A
168、lan Coppin Non-executive,54Member of Audit Committee Alan is currently Chairman of DanoptraLimited,the leading amusementmachine and leisure managementgroup backed by Electra.His previouspositions have included being ChiefExecutive of Wembley plc and HistoricRoyal Palaces.In the voluntary sector,his
169、current appointments include theChairmanship of the PrincesFoundation for the Built Environmentand membership of the AdvisoryForum of the Said Business School at Oxford University.Alan wasappointed as a director of the Companyduring the year.Capital&Regional 2324 Capital&RegionalPrincipal lending ba
170、nksBank of Scotland plcNew Uberior House11 Earl Grey Street Edinburgh EH3 9BNRoyal Bank of Scotland plc135 BishopsgateLondon EC2N 3URBarclays Bank plcProperty TeamBusiness Banking54 Lombard StreetLondon EC3V 9EXPrincipal valuersDTZ Debenham Tie LeungOne Curzon Street London W1A 5PZKing Sturge7 Strat
171、ford PlaceLondon W1C 1STJones Lang LaSalle22 Hanover SquareLondon W1A 2BNRegistered office10 Lower Grosvenor PlaceLondon SW1W OENTelephone:020 7932 8000Facsimile:020 7802 Registered number1399411Advisers and corporate informationAuditorsDeloitte&Touche LLPHill House1 Little New StreetLondon EC4A 3TR
172、Investment bankersCredit Suisse First Boston1 Cabot Square Canary WharfLondon E14 4QJUBS Warburg1 and 2 Finsbury AvenueLondon EC2M 2PPPrincipal legal advisersOlswang90 High HolbornLondon WC1V 6XXBerwin Leighton PaisnerAdelaide HouseLondon BridgeLondon EC4R 9HANabarro NathansonLacon House84Theobalds
173、RoadLondon WC1X 8RWMaclay Murray&Spens151 St Vincent StreetGlasgow G2 5NJCapital&Regional 25a market value not exceeding 100%of the participantsbasic salary.All the executive directors together with otherkey executives of the Company are participants in the LTIP.A total of 466,335 shares were condit
174、ionally awarded to the participants in 2004.All LTIP awards are subject tomeeting performance conditions in order to incentivise and retain key executives to increase the return on capitalby aligning their interests with those of the shareholders of the Company.Details of the awards made in 2004 and
175、 a summary of the performance conditions are set out underthe heading“Long Term Incentive Plan”below.All the present executive directors and other key executivesare participants in the CAP.The terms of the CAP permit theCommittee to make awards to the participants annually thatwill entitle them to r
176、eceive payments in aggregate of up to30%of the performance fees receivable by the Company fromthe Mall,Junction and X-Leisure Funds.Awards made underthe CAP are also subject to the achievement of performanceconditions.In 2004,a total of 7,792,000 has been awardedto the participants,which represents
177、24.96%of the performancefees earned by the Company during that period.The level ofCAP awards determined by the Committee took into account,inter alia,the level of cash bonuses paid to executives for the year.To the extent that the awards ultimately vest,theindividual entitlements for 2004 will be re
178、duced by 80%of the value of the shares awarded under the LTIP.Details of the awards made in respect of 2004,and a summary ofthe performance conditions for payment,are set out underthe heading“Capital Appreciation Plan”below.Pension arrangements The Company makes contributions,at proportional rates t
179、o basic salary,to defined contribution pension schemes of each executive directors choice,except in the cases of M Barber and X Pullen where 48,759 and 46,099salary,in lieu of pension contributions,were paid to themrespectively.Other benefits Benefits consist of private medical insurance cover,perma
180、nent health insurance cover,critical illness cover and additional salary in lieu of a company car.Service contracts Each of the present executive directors has a rolling serviceagreement which can be terminated on one years notice by either party,except in the case of W Sunnucks who canterminate his
181、 service agreement by giving six months notice.In the event of early termination of an executive directorsagreement,the Committee will determine the amount ofcompensation(if any)to be paid by reference to thecircumstances of the case at the time.It is the Committeespolicy not to reward poor performa
182、nce and to take accountof the executive directors duty to mitigate loss.Unaudited informationRemuneration Committee The Company has a Remuneration Committee appointed by the Board,consisting entirely of non-executive directors.During the period the members were H Mautner(Chairman),D Cherry and P Sto
183、bart.The Committee is responsible for setting the remunerationpolicy for the executive directors and senior employees.The Committee determines the terms of the serviceagreements,salaries and discretionary bonus payments,as well as deciding on the awards to be made to allparticipants in the Long Term
184、 Incentive Plan and CapitalAppreciation Plan.Advice from independent externaladvisers is obtained when required.Remuneration policy The Committee seeks to ensure that the total remunerationreceived by the executive directors under their contracts iscompetitive within the property industry and will m
185、otivatethem to perform at the highest level.In order to align the interests of executive directors withthe interests of shareholders,a significant proportion ofdirectors remuneration is performance-related through theuse of annual bonus and incentive schemes.Basic salaries The Committees policy is t
186、o set the basic salaries of each executive director at levels which reflect their roles,experience and the practices in the employment market.Annual bonus scheme For 2004 the Committee has awarded cash bonuses to the executive directors based on an assessment of theirindividual achievements during t
187、he period and on theCompanys financial performance.Incentive schemes The Company has four incentive schemes under whichawards currently subsist:GThe 1988 Share Option Schemes(the“Closed Schemes”)GThe 1998 Share Option Schemes(the“1998 Schemes”)GThe Long Term Incentive Plan(the“LTIP”)GThe Capital App
188、reciation Plan(the“CAP”).No options have been granted under the Closed Schemesfollowing the expiry of the shareholder approval for thatplan in May 1998.In addition,no further awards will bemade under the 1998 Schemes which have been supplantedby the LTIP and CAP plans.The terms of the LTIP permit th
189、e Committee to makeconditional awards of shares to participants annually with Directors remuneration reportThe dates of the executive directors service agreements are as follows:M Barber 28 October 1993X Pullen 28 October 1993K Ford 17 May 1996A Lewis-Pratt 20 January 1998W Sunnucks 15 October 2002P
190、Y Gerbeau14 April 2003The Company allows executive directors to take up externalpositions outside the Company,providing they do notinvolve a significant commitment and do not cause conflictwith their duties to the Company.Directors are allowed toretain all remuneration arising from any external posi
191、tion.Both the Chief Executive and the Finance Director areChairmen of companies external to the Group.M Barber is Chairman of CenterPoint Properties Trust,an Americancompany listed on the New York Stock Exchange.W Sunnucks is the Chairman of Land Management Limited,a family-run company.The Company d
192、oes not consider that either of these appointments involves significantcommitment nor that the roles cause conflict with theirduties to the Company.Any earnings received from theseappointments are kept by the individuals concerned andhave not been disclosed to the Company.Non-executive directors rem
193、uneration Each non-executive director currently receives fees of27,000 per annum.The Chairman receives additional feesof 63,000 per annum and the Chairman of each of theAudit and Remuneration Committees receives an additionalfee of 5,000 per annum.The non-executive directors are not entitled to bonu
194、ses,benefits,pension contributions or to participate in anyincentive schemes.None of the non-executive directors has a service agreement.They are all appointed for three-year fixed terms.Performance graph This graph below is prepared in accordance with The DirectorsRemuneration Report Regulations 20
195、02 and illustrates theCompanys performance compared to a broad equity marketindex.As the Company is a constituent of the FTSE RealEstate Index,this index is considered by the Board to be theappropriate comparator for this purpose.Performance ismeasured by total shareholder return(share price growthp
196、lus dividends paid).Total shareholder return(TSR)for the period 25 December 1999 to 30 December 2004Audited informationLong Term Incentive Plan Shares have been conditionally awarded to the directorsunder the Long Term Incentive Plan as set forth below:In addition to the above,during the period 174,
197、335 shareswere awarded to key executives at 500.0p;total conditionalawards held by key executives at 30 December 2004amounted to 340,629 shares.Awards in respect of 2003 and2004 in an amount of 85,250 shares have lapsed followingthe departure of certain executives.The qualifying(“vesting”)conditions
198、 for all awards underthe plan can be summarised as follows:The extent to which shares conditionally awarded in 2004will vest is determined by reference to the level of the Groupsaverage Post Tax Return on Equity(ROE)for the financialyears ended 30 December 2004,2005 and 2006.None of theSharesMarketA
199、s at conditionallyprice onEnd ofAs at31 Decemberawarded date of awardqualifying 30December2003in 2004(p)period2004M Barber84,138310.531/12/0484,13868,750394.531/12/0568,75055,000500.031/12/0655,000X Pullen79,459310.531/12/0479,45965,000394.531/12/0565,00052,000500.031/12/0652,000W Sunnucks30,596310.
200、531/12/0430,59650,000394.531/12/0550,00040,000500.031/12/0640,000K Ford76,490310.531/12/0476,49062,500394.531/12/0562,50050,000500.031/12/0650,000A Lewis-Pratt76,490310.531/12/0476,49062,500394.531/12/0562,50050,000500.031/12/0650,000PY Gerbeau58,132310.531/12/0458,13256,250394.531/12/0556,25045,000
201、500.031/12/0645,00025.12.9925.12.0025.12.0131.12.0231.12.0330.12.04050100150200250300350TSR Index at 25.12.99=100Financial year endCapital&RegionalFTSE All Share IndexFTSE Real Estate Index400Directors remuneration report26 Capital&RegionalCapital&Regional 27Directors remunerationThe remuneration of
202、 the directors who served in the period ended 30 December 2004 is analysed below:2004SalaryDiscretionaryPensionOther20042003and feesbonuscontributionsbenefitsTotalTotal000000000000000000M Barber27527549*27626599X Pullen26026046*20586561K Ford*25025038 21559534A Lewis-Pratt2502503820558533W Sunnucks2
203、002002521446424PY Gerbeau225225214713191,4601,4601961303,2462,970T Chandos 909090M Gruselle15D Cherry272727P Duffy121227H Mautner323211P Stobart323214A Coppin77200200184Total1,6601,4601961303,4463,154*48,759 was paid to M Barber as salary in lieu of pension contributions(2003:48,857).*46,099 was pai
204、d to X Pullen as salary in lieu of pension contributions(2003:46,192).*19,307 will be paid to K Ford in respect of the 2002 CAP award.shares will vest if the ROE is less than 10%;20%of the shareswill vest if the ROE is 10%;100%of the shares will vest if theROE is 18%or above.If the ROE falls between
205、 10%and 18%the percentage of shares will vest at an incremental rate.ROE is calculated by dividing the total of profit attributableto shareholders and all other gains and losses included in thestatement of total recognised gains and losses for the relevantyear by the amount of the equity shareholder
206、s funds on thefirst day of the relevant year,adding the results for the threeyears,dividing by three and multiplying the result by 100.Adjustments to the amount of equity shareholders funds willbe made to reflect changes in the amount of the issued sharecapital,share premium account or capital reser
207、ves occurringduring the relevant financial year.The Remuneration Committee has elected to adjust the totalreturn calculation to eliminate the effect of the CULS premiumwrite-off.Capital Appreciation PlanIn accordance with the terms of the plan,the directors havebeen awarded the following interests i
208、n the performance feesreceivable by the Group in respect of the financial year 2004.The interests awarded will only be paid in full if none of the shares conditionally awarded under the LTIP in 2004 vest in 2007.The value of the initial award will be reducedpro rata to the extent that any part of th
209、e performance feesreceived by the Group in respect of 2004 are clawed back as a result of under-performance of the funds in 2005 or2006.Consequently,no payments will be made in respect ofthe 2004 awards until 2007,when this clawback right lapses.Note 1The amount of the potential offset represents 80
210、%of the LTIP award made in 2004 plus theoffset carried forward from 2003;it will be reduced pro rata to the extent that the shares conditionallyawarded under the LTIP do not vest in full.Note 2 If the finally determined amount of the offset exceeds the value of the CAP award in any oneyear,the exces
211、s will be carried forward to be offset against future awards under the CAP.Whereparticipants have offset carried forward from previous years this is aggregated with the maximum offset.*The actual amount paid is subject to clawback and minor adjustments.In addition to the above,key executives who wer
212、e notdirectors were awarded 4.96%(2003:5.22%)interests with a value of 1,550,000(2003:695,130).Key executiveswho received 3.41%of those interests with a value of1,065,000 also received LTIP awards whose maximum grossaggregate offset amounted to 473,740(2003:547,855).MaximumValueMaximumoffset carried
213、Interestof initialamountforward fromawardedaward*of offsetprevious year2004%000Note 1Note 2M Barber3.791,183220X Pullen3.541,105208K Ford4.041,261200A Lewis-Pratt3.791,183200W Sunnucks2.74855160PY Gerbeau2.106551802003M Barber4.89650273X Pullen4.50600236K Ford6.00800197A Lewis-Pratt4.50600297W Sunnu
214、cks2.40320213PY Gerbeau2.49330233During the period the directors made total gains of1,462,638(2003:974,029)relating to share optionsexercised in the period.During the period,the share price ranged from a high of 695p to a low of 402.5p.The share price as at 30 December 2004 was 695p.No share options
215、 were granted during 2004 and no furtherawards will be made under these schemes to participants ofthe LTIP.Approval This report has been prepared in accordance with theDirectors Remuneration Report Regulations 2002 and was approved by the Board of Directors and signed on its behalf by:F DesaiCompany
216、 Secretary28 April 2005Other key executives who received 1.55%of the remaininginterests with a value of 485,000 received CAP awardsonly and no LTIP awards.Interests in shares The directors and,where relevant,their connected persons(within the meaning of Section 346 of the Companies Act1985)were bene
217、ficially interested in the ordinary sharecapital of the Company at the dates shown in the tableopposite.There have been no changes to the directors interests inshares since 30 December 2004 other than Hans Mautnerwho purchased 2,000 ordinary shares of 10p each in theCompany on 4 April 2005.Ordinary
218、shares of 10p each6.75%convertible subordinated unsecured loan stock 2006/1630December31 December 30December31 December 2004200320042003SharesSharesM Barber2,354,7152,290,24435,39435,394X Pullen1,089,991917,42123,69323,693W Sunnucks9,1859,185K Ford382,043382,001A Lewis-Pratt14,15314,153PY GerbeauT C
219、handos45,00045,0005,0005,000D Cherry5,5805,580P StobartH Mautner36,08325,906A Coppin3,350P DuffyDirectors remuneration report28 Capital&RegionalInterests in share optionsMarket price As at As at Exerciseat date of Earliest Latest Exercise 31 December30Decemberpriceexercise exercise exercisecondition
220、2003Exercised2004(p)(p)datedatemetM Barber 104,263104,263131.4542.028/10/97 22/10/04Yes50,58250,582226.4462.018/06/00 18/06/04Yes50,00050,000211.513/09/0313/09/10Yes204,845154,84550,000X Pullen104,263104,263131.4511.028/10/97 22/10/04 Yes50,58250,582226.4511.018/06/0018/06/04Yes100,000100,000279.518
221、/05/0118/05/08Yes50,00050,000211.513/09/0313/09/10Yes304,845154,845150,000K Ford175,000175,000279.518/05/0118/05/08Yes75,00075,000191.518/02/0218/02/07Yes50,00050,000211.513/09/0318/09/10Yes300,000300,000A Lewis-Pratt75,00075,000191.5500.018/02/02 18/02/07Yes50,00050,000211.5500.013/09/0318/09/10Yes
222、125,000125,000Directors reportCapital&Regional 29The directors present their report together with the audited financial statements for the period ended 30 December 2004.Results and proposed dividends The consolidated profit and loss account is set out on page38 and shows a profit on ordinary activit
223、ies after taxationof 20,189,000(2003:19,381,000).The directors recommend the payment of a final dividendof 9.0p per ordinary share on 20 June 2005 to members onthe register at the close of business on 22 April 2005,whichtogether with an interim dividend of 5.0p per ordinaryshare,paid in 2004,makes a
224、 total dividend of 14.0p pershare for the period.Principal activities,trading review and future developments The principal activity of the Group is that of a co-investingproperty manager.A review of the activities and prospectsof the Group is given in the Chairmans statement,the Chiefand Deputy Chie
225、f Executives review,the Finance Directorsreview and the operating reviews on pages 3 to 21.Directors The directors of the Company during the period were:M Barber,T Chandos,D Cherry,A Coppin,P Duffy,K Ford,PY Gerbeau,A Lewis-Pratt,H Mautner,X Pullen,P Stobartand W Sunnucks.All directors served throug
226、hout the period,with theexception of P Duffy who resigned on 11 June 2004 and A Coppin who was appointed on 24 September 2004.In accordance with the Articles of Association,A Coppin,having been appointed after the last Annual GeneralMeeting,will retire by rotation and,being eligible,offershimself fo
227、r re-appointment.X Pullen,A Lewis-Pratt and K Ford will retire from the Board by rotation and will alsooffer themselves for re-election.The Company maintains insurance for the directors inrespect of liabilities arising from the performance of theirduties.Directors interests The directors and,where r
228、elevant,their connected persons(within the meaning of Section 346 of the Companies Act1985)are interested in 3,940,100 issued shares representing6.15%of the issued ordinary share capital of the Company asdetailed in the directors remuneration report on page 28.There were no contracts of significance
229、 subsisting during orat the end of the period in which a director of the Companywas materially interested,other than as set out in note 35to the accounts.No director had a material interest in theshare capital of other Group companies during the period.Share options Details of outstanding share opti
230、ons granted to the directorsunder the 1988 and 1998 Share Option Schemes,aredisclosed in the directors remuneration report on page 28.The Capital&Regional plc Long Term Incentive Plan 2002(“LTIP”)and The Capital&Regional plc CapitalAppreciation Plan 2002(“CAP”)(together the“Plans”)The Company obtain
231、ed shareholder approval to establish the LTIP and CAP on 18 December 2002 for the benefit of the executive directors and key executives.Details of theplans and awards made under them,can be found in thedirectors remuneration report on pages 26 to 28.In accordance with the rules of the LTIP and CAP t
232、he Plansare due for renewal in 2005 and the Board are recommendingextension with minor changes as set out on page 30.Substantial shareholdings In addition to the interests of the directors,the Companyhas been notified pursuant to Sections 198 to 202 of the Companies Act 1985,as amended,of the follow
233、ingnotifiable interests in its issued share capital as at 8 April2005(the latest practicable date prior to the issue of this report):Charitable donations During the year the Group contributed 16,848(2003:3,700)to UK charities.Payment of suppliers The policy of the Company is to settle supplier invoi
234、ceswithin the terms of trade agreed with individual suppliers.Where no specific terms have been agreed,payment isusually made within one month of the receipt of the goodsor service.At the year end,the Company had an average of 29 days(2003:27 days)purchases outstanding.No.of shares%Neuberger&Berman
235、LLC5,533,1138.23F&C Asset Management4,226,0876.29Henderson Global Investors3,462,5755.15United Nations Pensions Fund3,301,5614.91ABPInvestments3,117,9384.64ING Investment Management2,764,3004.11Morley Fund Management2,752,8384.09UBS Global Asset Management2,578,7233.84Legal&General Investment Manage
236、ment2,357,0273.51Compliance with Combined Code A statement on corporate governance is set out on pages 32 to 35.Stakeholder pensions As a result of the Governments introduction of stakeholderpensions in April 2001,employers must provide theiremployees with access to a stakeholder pension scheme.The
237、Company appointed consultants,who put such ascheme in place,and also nominated a stakeholder pensionprovider at that time.Employees have had access to join thisscheme since May 2001.Dividend Reinvestment PlanIn 1999,the Company introduced a service wherebyshareholders can use their cash dividends to
238、 buy moreshares in the capital of the Company.The plan wasintroduced for those shareholders preferring capitalappreciation rather than income from their shareholding,and has been available to all shareholders from the 1999interim dividend onwards.The timetable for the 2004 final dividend is set out
239、on page 68.Details of the terms and conditions of theDividend Reinvestment Plan can be obtained by contactingthe Company Secretary at the registered office.Change of year end During the period the Groups year end was changed to 30 December.Post balance sheet events Post balance sheet events are set
240、out in note 37 to the accounts.Auditors Deloitte&Touche LLP have expressed their willingness tocontinue in office and a resolution to re-appoint them willbe proposed at the Annual General Meeting.Special business of the Annual General MeetingDirectors authority to allot securitiesAuthority to allot
241、securities,Section 80 of the CompaniesAct 1985,requires shareholders authority for the directorsto allot new shares or convertible securities,other thanshares which may be allotted under employee shareschemes.Under resolution 9,which is proposed as anordinary resolution,the directors seek authority
242、to allotshares having a nominal value of 2,134,653 representingone-third of the nominal value of the Companys currentlyissued share capital.The authority will expire at the conclusionof the Companys Annual General Meeting in 2006.Pre-emption rights Shares allotted for cash must normally first be off
243、ered toshareholders in proportion to their existing shareholdings.Under resolution 10,which is proposed as a specialresolution,the directors seek to renew their annualauthority to allot shares for cash as if the pre-emptionrights contained in Section 89(1)of the Companies Act1985 did not apply up to
244、 a maximum of 5%of theCompanys issued share capital.Authority to purchase own shares At the Annual General Meeting in 2004,the Company wasgranted authority to make purchases in the market of itsown shares,subject to specified limits.This authority,whichhas not as yet been exercised,expires at the co
245、nclusion ofthe Companys 2005 Annual General Meeting.Therefore byresolution 11,it is proposed as a special resolution that thisauthority in respect of the Company is renewed and alsothat the Company may cancel any bought-in sharesimmediately or hold them in treasury.The authority is sought until the
246、conclusion of the 2006Annual General Meeting,or for 15 months after the date on which the resolution is passed,whichever is the earlier.Details of the current issued share capital are set out in note28 to the accounts.The directors will only exercise thisauthority if they consider that it will resul
247、t in an increase in asset value per share for the remaining shareholders andthat it will be in the best interests of the Company to do so.LTIP and CAP summary of the PlansSave as proposed below,the principal features of the LTIPremain unaltered from those approved by shareholders in2002.The Remunera
248、tion Committee may grant awards toparticipants at its discretion of up to 100%of their basicsalaries in any financial year.Awards are in the form ofshares,which are held by trustees subject to the exercise of an award by a participant in accordance with the rules ofthe LTIP.Subject to the satisfacti
249、on of the eligibility criteriaand performance conditions in relation to that award,a participant is currently able to exercise from the thirdanniversary of the award date up until the day before thetenth anniversary of the award date.When a participantexercises an award the shares held by the truste
250、es aretransferred to the participant.No payment is required fromparticipants for an award.The principal features of the CAP also remain unaltered fromthose approved by shareholders in 2002.Under the CAP,the Remuneration Committee,at its discretion,makes awardsto participants,which entitle them to re
251、ceive payments inaggregate of up to 30%of the performance fees received by the property management subsidiary from the funds in respect of a financial year.While awards are madeannually,payments under the CAP are not made until theperformance fees to which they relate cease to be subject tothe risk
252、of clawback.80%of the cost of LTIP awards madeto a participant in respect of any financial year are offsetagainst the share of the performance fees awarded to suchparticipant in that year.If the share of the performance Directors report30 Capital&Regionalfees is less than the amount of the LTIP awar
253、d to be offsetagainst it,the shortfall is carried forward to be offsetagainst any subsequent award awarded to that participantunder the CAP.The Remuneration Committee may alsomake awards under the CAP in respect of any fees payableto the property management subsidiary or any other groupcompany follo
254、wing the formation of any new funds,onterms which are substantially the same as those in themanagement agreements.Extension of the PlansIn accordance with the rules of the LTIP and the CAP the Remuneration Committee instructed Towers Perrin,independent consultants,to review the Plans.Havingundertake
255、n this review the Board considers that it isappropriate that the Plans should be extended,with theminor amendments set out below.In 2008 the Board expectsto undertake a further review of the Plans and prior to thegrant of any awards in respect of that year,the Companyshall seek further approval by o
256、rdinary resolution of themembers of the Company for an extension to the Plans.Since establishing The Mall and The Junction Funds,theirperformance has exceeded expectation and CAP awards in respect of 2003 and 2004 have reflected this strongperformance.The Board believes that the retention andmotivat
257、ion of key executives has been assisted by theoperation of these schemes;and that,in turn,the excellentresults for the Company are,to a material extent,derived from the capability of the key executives.The Board thereforebelieves that it is in the interest of shareholders to extend the Plans on the
258、basis proposed below.This extension is setout under resolutions 12 and 13 which are proposed asordinary resolutions.Vesting of LTIP awardsThe Board proposes amendments to the rules in relation tothe vesting of the LTIP awards.At present vesting dependssolely upon the Companys Post Tax Return on Equi
259、ty,with a differential rate of vesting between 10%and 18%.Underthe proposed rules from 2005 onwards,the vesting of 50%of an award will depend upon the Companys Post TaxReturn on Equity(within the same range as before)and theother 50%will be linked to Total Shareholder Return(“TSR”)over the three yea
260、r performance period relative to the FTSEReal Estate Index whereby:i)If TSR is below the median,no shares in an award willvest;ii)If TSR is above the median,25%of the sharescomprised in an award will vest;iii)If TSR is in the upper quartile,100%of the sharescomprised in an award will vest;andiv)If T
261、SR is between median and upper quartile,the shareswill vest pro rata.Under all circumstances,vesting under the TSR portion of the scheme will be conditional on Post Tax Return onEquity for the Company averaging 5%per annum or higherover the relevant three year performance period.The Board considers
262、that by amending the vesting rules inthis way the participants will be subject to a more balancedmeasure of performance but one which is still sufficientlychallenging to satisfy.Under resolution 14,which is proposedas an ordinary resolution,the directors seek authority toamend the rules relating to
263、vesting of the LTIP award.By order of the BoardF Desai Company Secretary28 April 2005Capital&Regional 31The Board of Directors is accountable to the Companysshareholders for the management and control of theCompanys activities and is committed to high standards of corporate governance.This report an
264、d the directorsremuneration report set out on pages 25 to 28 describehow the Company complies with the provisions of the July 2003 Financial Reporting Council Combined Code on Corporate Governance(“the Combined Code”).Statement of complianceThe Company has complied throughout the period ended 30 Dec
265、ember 2004 with the provisions set out in Section1of the Combined Code issued by the Financial ReportingCouncil in July 2003.Application of the principlesThe Board of DirectorsDetails of the directors are set out on pages 22 and 23.The Company is controlled through the Board of Directorswhich compri
266、ses the Chairman,six executive and four non-executive directors,which provides an appropriatebalance of power and authority within the Company.All the Companys non-executive directors act independently of management.The terms and conditions of appointmentof non-executive directors are available for
267、inspection at theCompanys registered office.P Stobart was nominated as the senior independent directoras required by the Combined Code for the period ended 30 December 2004,following the retirement of P Duffy in 2004.There is a clear division of responsibility between theChairman and Chief Executive
268、.In the Companys view,thebreadth of experience and knowledge of the Chairman andthe non-executive directors detachment from the day-to-day issues within the Company provide a sufficiently strongand experienced balance with the executive members of theBoard.The breadth of experience attributed to the
269、 non-executive directors,allied to the management informationprovided by the Company,enables them to assess and advisethe full Board on the major risks faced by the Company.In accordance with the Combined Code the Companyconsiders all its non-executive directors are independent.The Board has adopted
270、 a schedule of matters reserved for itsdecision and a schedule of matters delegated to committees,both of which are reviewed at least annually.The Boardreserves approval for all significant or strategic decisionsincluding major acquisitions,disposals and financingtransactions.The directors are entit
271、led to take independentprofessional advice as and when necessary.The responsibilities,which the Board has delegated,aregiven to committees that operate within specified terms of reference and authority limits,which are reviewedannually or in response to a change in circumstances.An Executive Directo
272、rs Committee,comprising the sixexecutives,meets on a weekly basis and deals with all majordecisions of the Group not requiring full Board approval or authorisation by other Board committees.The ExecutiveDirectors Committee is quorate with four executivedirectors in attendance;if decisions are not un
273、animous the matter is referred to the Board for approval.Notes andaction points from the Executive Directors Committeemeetings are circulated to the Board.The Audit Committeeand Remuneration Committee,consist solely of non-executive directors and meet at least twice a year.The Board schedules quarte
274、rly meetings each year,as aminimum,and arranges further meetings as the businessrequires.For each quarterly Board meeting,each memberreceives up-to-date financial and commercial information in respect of the three divisions prior to each meeting,in particular,management accounts budgets and forecast
275、s,details of acquisitions and disposals and relevant appraisals(prior Board approval being required for large transactions)and cash flow forecasts and details of funding availability.All members of the Board are subject to the re-electionprovisions in the Articles which require them to offerthemselv
276、es for re-election at least once every three yearsand at the first Annual General Meeting(“AGM”)afterappointment,if appointed after the last AGM.Details ofthose directors offering themselves for re-appointment areset out in the directors report on page 29.A performance evaluation of the Board and th
277、e Committeeswas conducted for the period ended 30 December 2004.The Chairmans performance was evaluated by the seniornon-executive director and the Chairman evaluated theperformance of the remaining directors.Induction trainingis given to all new directors appointed in the Company and consists of an
278、 introduction to the Board,onsite visits to properties managed by the Group,introduction to thedivisional teams,an induction pack and access toindependent advisers.The ongoing training requirements of the directors are reviewed on a regular basis andundertaken individually,as necessary.The Company i
279、sfinalising a formal ongoing training programme,althoughit is recognised that all members of the Board experiencecontinuous professional development from workingtogether.This is achieved by virtue of the dynamic anddiverse mix of the Board members,their sharing ofknowledge and experiences gained fro
280、m a range ofcommercial backgrounds,and the complement of theirpersonal attributes to the Board.Corporate governance report32 Capital&RegionalNomination CommitteeThe committee comprises T Chandos(Chairman),P Stobartand M Barber.The Nomination Committee meets as requiredto select and recommend to the
281、Board suitable candidatesfor both executive and non-executive appointments to the Board;the Committee does not have the authority to appoint and agree terms and conditions with thecandidates.On an annual basis the Nomination Committeealso considers succession planning for the Board followingthe year
282、ly performance evaluation process.The Board isgiven an opportunity to meet the individual concernedprior to any formal decision.During the period,a non-executive director,A Coppin,was appointed to the Boardfollowing a consultation process involving externalconsultants,Spencer Stuart.The terms of ref
283、erence of theNomination Committee are available for inspection at theCompanys registered office.Board and committee meetingsThe number of meetings of the Board and of the Audit,Remuneration and Nomination Committees,and individualattendance by directors,is set out below:There were 13 full Board meet
284、ings during the period.There were five Audit Committee meetings during theperiod.A Coppin was appointed to the Audit Committeeafter the period end.Audit Committee meetingsAttendanceD Cherry5P Stobart5P Duffy(retired 11 June 2004)1Board meetingsAttendanceT Chandos13M Barber13D Cherry12X Pullen12W Sun
285、nucks12H Mautner11K Ford10PY Gerbeau10P Stobart8A Lewis-Pratt7P Duffy(retired 11 June 2004)5A Coppin(appointed 24 September 2004)1There were five Remuneration Committee meetings duringthe period.There were three Nomination Committee meetings duringthe period.Directors remuneration The Remuneration C
286、ommittee makes recommendations to the Board,within existing terms of reference,onremuneration policy and determines,on behalf of theBoard,specific remuneration packages for each executivedirector.The terms of reference of the RemunerationCommittee are available for inspection at the Companysregister
287、ed office.A proportion of all executive directors remunerationconsists of cash bonuses(linked to corporate and individualperformance achievements),the levels of which aredetermined by the Remuneration Committee.All theexecutive directors are eligible to participate in the LongTerm Incentive Plan(“LT
288、IP”)and Capital Appreciation Plan(“CAP”)which were both established on 18 December2002 following shareholder consultation and approval.The fees of the non-executive directors are reviewed by the Board at regular intervals.The statement ofremuneration policy and details of each directorsremuneration
289、are set out in the directors remunerationreport on pages 25 to 28.During the period the Remuneration Committeecommissioned Towers Perrin,external remunerationconsultants,to review and advise on the current executiveincentive schemes operated by the Company.Towers Perrinhad no other connection with t
290、he Company during the period.Nomination Committee meetingsAttendanceT Chandos3M Barber3P Duffy(retired 11 June 2004)0P Stobart3Remuneration Committee meetingsAttendanceP Stobart5D Cherry5H Mautner 5Capital&Regional 33Shareholder relationsThe Company has always encouraged regular dialogue withits ins
291、titutional shareholders and private investors at theAGM,and through corporate functions and property visits.In addition,following the announcement of preliminaryand interim results,and throughout the year,as requested,the Company holds update meetings with institutionalshareholders.All the directors
292、 are accessible to allshareholders,and queries received verbally or in writing are immediately addressed.The directors are introduced to shareholders at the AGM each year and the non-executivedirectors and committee chairmen are clearly identified.Announcements are made to the London Stock Exchangea
293、nd the business media concerning business developmentsto provide wider dissemination of information.Registeredshareholders are sent copies of both the annual report andaccounts and the interim report.Accountability and auditFinancial reportingThe Companys annual report and accounts includesdetailed
294、reviews of the activities of each division,togetherwith a detailed review of their financial results andfinancing position.In this way,and as required by theCombined Code,the Board seeks to present a balanced andunderstandable assessment of the Companys position andprospects.Internal controlThe Boar
295、d is responsible for maintaining a sound system of internal control to safeguard shareholders investmentand for reviewing its effectiveness.Such a system isdesigned to manage,but not eliminate,the risk of failure to achieve business objectives.There are inherent limitationsin any control system and,
296、accordingly,even the mosteffective system can provide only reasonable,and notabsolute,assurance against material misstatement or loss.In accordance with the guidance of the Turnbull Committeeon internal control,an ongoing process has beenestablished for identifying,evaluating and managing risksfaced
297、 by the Company.This process has been in place fromthe start of the 2004 financial year,to the date of approvalof these financial statements.Each year the Board conductsa review of the effectiveness of the current system ofinternal control and updates the documentation of controlsin place if needed.
298、The risks for each of the divisions in the Group(The Mall,Junction,Xscape/X-Leisure and Corporate)are classifiedinto financial,administrative and compliance risks,propertyrisks and operational risks.The key features of theCompanys system of internal control are as follows:GControl documents for each
299、 area of risk which identifythe key risks,the probability of those risks occurring,their impact if they do occur and the actions being takento manage those risks to the desired level.GClearly defined organisational responsibilities andauthority limits throughout the Group.The day-to-dayinvolvement o
300、f the executive directors in the running of the business ensures that these responsibilities andlimits are adhered to.GFinancial reporting to the Board including regularreports from the Fund Manager of The Mall and TheJunction Funds and for the Group as a whole,including the preparation of budgets a
301、nd forecasts,cash management,variance analysis,property,taxationand treasury reports and a report on financing.GAn Audit Committee which meets with the externalauditors and deals with any significant internal controlmatter.In the period under review the Committee met with the external auditors on fi
302、ve occasions and receiveda paper on the internal controls of the Company.Steps are being taken to embed internal control and riskmanagement further into the operations of the business and to deal with areas of improvement which come tomanagements and Boards attention.Due to the size of the Group it
303、does not have an internalaudit function and the Company believes that a need forsuch a function does not currently exist.This has beenreviewed in 2004 in light of the recommendations of theCombined Code,and it is still considered that the size ofthe Group does not currently warrant an internal audit
304、function.This will remain under periodic review in 2005.Audit CommitteeThe Audit Committee consists of three non-executivedirectors,P Stobart(Chairman),A Coppin and D Cherry,and the terms of reference of the Audit Committee are available for inspection at the Companys registeredoffice.The role of th
305、e Audit Committee is to maintain a relationship with the Groups external auditors and toreview,in depth,the Companys financial statements,internal financial control and risk management systems andcirculars to shareholders in order to monitor financialintegrity within the Group.The Audit Committee is
306、 alsoresponsible for reviewing the cost-effectiveness and the Corporate governance report34 Capital&Regionalvolume of non-audit services provided to the Group.TheCompany does not impose an automatic ban on the Groupsexternal auditors undertaking non-audit work,and detailsof fees paid to the Groups e
307、xternal auditors are detailed on page 47 in note 7 to the accounts.The Groups aim isalways to have any non-audit work involving accountancyfirms carried out in a manner that affords value for money.The Companys policy is that the accounting firm must notbe in a position of conflict in respect of the
308、 work inquestion and must have the skill,competence and integrityto carry out the work in the best interests of the Group.TheAudit Committee reviews and makes recommendations tothe Board for the re-appointment of the Groups externalauditors.This was considered during the period.Meetingsof the Audit
309、Committee are held prior to Board meetings to consider the interim and annual results and on an ad hocbasis at other times during the period.During 2004,theCommittee met five times.Going concern In compliance with the Listing Rules of the FinancialServices Authority the directors can report that,bas
310、ed onthe Groups budgets and financial projections,they havesatisfied themselves that the business is a going concern.The Board has a reasonable expectation that the Companyand Group have adequate resources and facilities tocontinue in operational existence for the foreseeable future and therefore th
311、e accounts are prepared on a going concern basis.F DesaiCompany Secretary28 April 2005IntroductionCapital&Regional plc recognises and acknowledges theconduct of its business has an impact on its employees,its partners,its tenants and suppliers and the communityand environment of the property portfol
312、io it manages.The Companys corporate governance report is set out on pages 32 to 35.The Companys relationship with its keystakeholders,its shareholders,is noted on page 34.Employees The Company values the contribution of all its staff and is committed to a policy of equal opportunities for all itsem
313、ployees,regardless of sex,race or disability.Employeesare encouraged to develop within the Company and,tofacilitate this,training is encouraged and each employee is regularly appraised with a view to maximising theirpotential and contribution.The Company places considerable value on involving andcon
314、sulting its employees,at all levels,in its affairs and has continued to keep them regularly and systematicallyinformed on matters of concern that may affect them asemployees,and on the financial and economic factorsaffecting the Companys performance.Consultations withemployees or employee representa
315、tives are conducted on a regular basis so that their views can be considered whendecisions are made which may affect their interests.Theconsultations are undertaken through regular meetingsbetween management and employees at all levels.Health and safety in the Group The Companys aim is to develop a
316、culture throughout itsorganisation that is committed to the prevention of injuriesto,and ill health of,its employees or others that may beaffected by its activities.Each division has a nationally co-ordinated health and safety initiative that is contractedout and monitored by the facilities manageme
317、nt team.Procedures are reviewed at monthly management meetingswith centre management by the National Operations Team.All properties are adequately insured to cover potential risksand annual risk assessments are carried out by the Group in consultation with the Group contractor and insurers.During 20
318、05,The Mall will be employing a nationalcompliance manager to match growth requirements and to reflect the importance placed on health and safety by theGroup.Within the X-Leisure division,a national facilitiesmanager and centre manager are responsible for theimplementation and monitoring of the heal
319、th and safetyprogramme on a daily basis and maintain a manual,madeavailable to all employees,which is reviewed and updatedregularly.In respect of the Junction division,responsibilityfor health and safety is undertaken by the occupiers andtenants.Corporate social responsibilityCapital&Regional 35The
320、Company is committed to providing relevantinformation and necessary ongoing training to employeesin respect of risks to health and safety appropriate to theiractivities in the workplace.All employees are offered privatemedical insurance as well as long-term disability cover.Environmental policy The
321、Company is committed to delivering the higheststandards of environmental policy implementation in themanagement of its retail and leisure property portfolio.TheCompany consults employees,shareholders,suppliers andcustomers alike to maintain high standards.The Companystrives to achieve compliance wit
322、h recognised best practicestandards,particularly in the areas of energy and itsefficient use and impact on the environment,recyclingpractices,water management and minimisation of use.During 2004,The Mall division participated in a nationalmall environmental benchmarking exercise with Upstream.The su
323、rvey analyses the environmental performance of over 80 shopping centres in the areas of carbon dioxideemission,water consumption,waste production andrecycling.The results of the survey revealed that,incomparison with other shopping mall operators,The Mallportfolio topped the benchmark.During 2005,Th
324、e Mallwill continue to minimise its impact on the environment asa shopping mall operator and will continue to benchmarkits relative industry performance.Across the X-Leisure spectrum we are committed to anenergy saving and recycling programme.The consumptionof electricity at the X-Leisure sites has
325、been reducedthrough a number of measures,namely the removal ofexcessive lamping from luminaries in the service corridors,examining the potential for replacing high wattage dichroichalogen lamps with lesser-wattage rated lamps andimproving the use and control of internal and externallighting through
326、the use of daylight sensors.The sites arealso looking into the replacement of convector heaters withinfrared radiant plaque heaters.X-Leisure is also endeavouring to increase the tonnage of recycled waste,this is done with support and interactionwith the tenants.For example,in 2004 Xscape MiltonKeyn
327、es recycled 76 tonnes of glass and 52 tonnes ofcardboard.It is hoped that these figures will be increased in 2005.The Company also endeavours to include environmentalconsiderations in the design and refurbishment ofproperties in the Group,applying and installing whereverpracticable current best prac
328、tice technology.The Company is committed to a process of continuousmonitoring and feedback in order to adopt a responsibleand positive approach to environmental issues.In respect of the preparation of financial statementsUnited Kingdom company law requires the directors toprepare financial statement
329、s for each financial year whichgive a true and fair view of the state of affairs of theCompany and Group as at the end of the financial periodand of the profit or loss of the Group for that period.In preparing those financial statements,the directors arerequired to:GSelect suitable accounting polici
330、es and then apply themconsistently;GMake judgements and estimates that are reasonable andprudent;andGState whether applicable accounting standards have beenfollowed.The directors are responsible for keeping proper accountingrecords which disclose with reasonable accuracy at any time the financial po
331、sition of the Company and enable them to ensure that the financial statements comply withthe Companies Act 1985.They are also responsible for thesystem of internal control,for safeguarding the assets of theCompany and hence for taking reasonable steps for theprevention and detection of fraud and oth
332、er irregularities.Corporate social responsibility36 Capital&RegionalStatement of directors responsibilitiesWe have audited the financial statements of Capital&Regional plc for the period ended 30 December 2004which comprise the consolidated profit and loss account,the consolidated balance sheet,the
333、statement of totalrecognised gains and losses,the note of historical costprofits and losses,the reconciliation of movements in equity shareholders funds,the consolidated cash flowstatement,the Company balance sheet and the related notes1 to 37.These financial statements have been preparedunder the accounting policies set out therein.We have also audited the information in the part of the directors
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