Hammerson plc Annual Report 2012

FY2012 Annual Report · Hammerson plc

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Hammerson plc
Annual Report 2012

Who we are

We create
high-quality

retail property

Our vision is to be the best owner-manager
and developer of retail property within Europe.

We focus on winning locations: prime regional
shopping centres, convenient retail parks and
premium designer outlet villages.

Hammerson retail locations (see pages 8 to 17 for more details)

ExpEriEncE

convEniEncE

Luxury

UK shopping centres
1 Brent Cross, London NW4
2 Centrale, Croydon
3 Queensgate, Peterborough
4 Bullring, Birmingham
5 Highcross, Leicester
6 Silverburn, Glasgow
7 Cabot Circus, Bristol
8 The Oracle, Reading
9 Union Square, Aberdeen
WestQuay, Southampton
Monument Mall, Newcastle
Victoria Quarter, Leeds

France shopping centres
Grand Maine, Angers
O’Parinor, Aulnay-sous-Bois
Bercy 2, Charenton-le-Pont
Italie 2, Avenue d’Italie, Paris 13ème
Place des Halles, Strasbourg
Espace Saint Quentin,
Saint Quentin-en-Yvelines
Les 3 Fontaines, Cergy Pontoise
SQY Ouest, Saint Quentin-en-Yvelines
Les Terrasses du Port, Marseille

Value Retail
1 Bicester Village, Oxford
2 La Vallée Village, Paris
3 Kildare Village, Dublin

Not shown
Maasmechelen Village, Brussels
Wertheim Village, Frankfurt
Ingolstadt Village, Munich
Fidenza Village, Milan
Las Rozas Village, Madrid
La Roca Village, Barcelona

UK retail parks
1 Abbey Retail Park, Belfast
2 Central Retail Park, Falkirk
3 Dallow Road, Luton
4 Battery Retail Park, Birmingham
5 Cleveland Retail Park, Middlesbrough
6 Drakehouse Retail Park, Sheffield
7 Brent South Shopping Park, London
8 Cyfarthfa Retail Park, Merthyr Tydfil
9 Elliott’s Field, Rugby

Fife Central Retail Park, Kirkcaldy
Parc Tawe Retail Park, Swansea
Westwood & Westwood Gateway, Thanet
Manor Walks, Cramlington
Ravenhead Retail Park, St Helens
Wrekin Retail Park, Telford
St Oswald’s Retail Park, Gloucester
The Orchard Centre, Didcot
Thurrock Shopping Park, Lakeside
Forge Shopping Park, Telford
Imperial Retail Park, Bristol
Abbotsinch Retail Park, Paisley

France retail parks
Villebon, Paris

Portfolio

£5.5bn

Hammerson owns a portfolio of retail property
assets in the UK and France. The portfolio, which is
valued at £5.5 billion, includes 20 prime shopping
centres, 22 convenient retail parks and investments
in nine premium designer outlets.

12
6

19 4

3
18

19
16 2
20
22

14
1518

1 1
2

11 7 20

Strategic review

Who we are
Portfolio

Overview
At a glance
Chairman’s statement
Chief Executive’s report
Market background
Business model

Our focus areas
Experience
Convenience
Luxury

Business and financial review
Our people
Business review
Key performance indicators
Financial and property returns
Risk management
Financial review
Property portfolio information

Governance

Chairman’s introduction
Our Board
Leadership
Effectiveness
Accountability
Relations with shareholders
Remuneration report
Additional disclosures

Financial statements

IFC
1

2
4
6
8
10

12
14
16

18
20
32
34
36
40
46

50
51
54
56
58
61
62
78

83
84

Directors’ responsibilities
80
Independent auditor’s report (Group) 81
Consolidated income statement
82
Consolidated statement
of comprehensive income
Consolidated balance sheet
Consolidated statement
of changes in equity
Consolidated cash flow statement
Notes to the accounts
Independent auditor’s report
(Parent Company)
Company balance sheet
Notes to the Company accounts
Ten-year financial summary

123
124
125
128

85
87
88

Other information

Connected reporting framework

129

Property portfolio
UK shopping centres
UK retail parks
France retail

Glossary of terms
Index
Shareholder information

132
134
137

138
140
141

HAMMERSON ANNUAL REPORT 2012

Overview

At a glance

Strategic review
Governance
Financial statements
Other information

At a glance

Our focus

Our strategy

Our performance

As a pure retail property business,
we focus on winning locations that
cater to consumer preference for:

Our strategy is to deliver industry
leading shareholder returns by
maximising income from our retail
properties and development pipeline.

2012 was a year in which our
financial and operational metrics
demonstrated the validity of
our strategy.

Experience

Creating high-quality property

Prime shopping centres which offer
exciting brands, full-line stores, high-quality
catering and leisure facilities in a safe,
mobile-enabled environment are continuing
to attract significant footfall.
See pages 12 to 13 for more details.

Convenience

Convenient, well-managed retail parks in
out-of-town locations are securing an
increasing number of fashion and catering
tenants, due to their accessibility.
See pages 14 to 15 for more details.

Luxury

Consumer preferences and increased
tourism have driven impressive sales growth
at premium designer outlets in major cities
throughout Europe.
See pages 16 to 17 for more details.

We develop or acquire to create
compelling retail properties in successful
locations which are tailored to the local
consumer demographic.

Maximising income

We aim to maximise occupancy and
footfall at our properties, which support
our retail customers and enable us to
maximise income growth.

Capital strength

We operate within a prudent and flexible
financial structure which provides
financial security whilst allowing us
to act swiftly and decisively.
See pages 4 to 5 for more details.

Operational and financial highlights
occupancy of
97.7%

ToTaL propErTy rETurn of

5.0%

nET rEnTaL incomE grEw by

2.1%
adjusTEd Earnings pEr sharE* of
20.9p, 8.3%

See pages 32 to 35 for more details.

* Profit before tax for the year ended 31 December 2012

was £142.2 million (2011: £346.3 million)

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Overview

At a glance

2012: a year of transformation

In 2012 we announced our decision to
become a pure retail property company

Our key investments

– Sold £627 million of office property

at 7% premium

– Reinvested £541 million in our

targeted areas

ExpEriEncE

convEniEncE

ExpEriEncE

Whitgift

£65m†

Junction Retail Parks

Victoria Quarter

£260m

£136m

Luxury

Value Retail

£80m

Resulting portfolio exclusively focused on winning retail locations

2013 priorities

– Prepare Les Terrasses du Port for opening Spring 2014

– Deliver extensions and refurbishments in our

existing portfolio

– Confirm plans for major developments in Leeds and London

– Continue to focus on operational efficiency

– Advance customers’ multi-channel strategies

– Identify successful future retail formats and brands

– Implement Positive Places sustainability programme

– Identify and execute selective acquisitions

† Exchanged not yet completed

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Chairman’s statement

Overview

Chairman’s statement

Setting the
strategy, governance
& values

of the business

Introduction

Overview

Results

Welcome to the Annual Report for
2012. This is my last Chairman’s
statement after nine years, as I will
be retiring at this year’s AGM. I am
pleased to say that the Company
ended 2012 in as strong a position
as it has been in many years.

This has been an excellent year for the Company,
in which we successfully executed our strategy of
focusing the business on high-quality retail assets
in winning locations. We executed transactions
worth over £1 billion, including the sale of our
office portfolio and the reinvestment into retail
assets that cater for structural consumer
preferences for experience, convenience,
and luxury.

We have additionally made good progress
with our developments, and the Company is in
a strong financial position which allows us the
flexibility to capture future opportunities. This
has been achieved against a difficult economic
backdrop, which is a tribute to the experience
and energy of the management team, and the
quality of our assets.

This is a strong base from which to grow
the business.

I am pleased to report that we have grown
income from the portfolio in 2012, which
combined with acquisitions and cost
management initiatives has enabled us to
grow adjusted earnings by 8.3% to
20.9 pence per share.

In conjunction with our visibility on future
earnings from our portfolio, this gives us the
confidence to increase the full-year dividend
by 6.6% to a total of 17.7 pence per share.

At the year end the portfolio was worth
£5.5 billion, equivalent to a net asset value
of £5.42 per share.

Maintaining capital strength

We had an active year managing the costs and
maturity profile of our debt, contributing to an
£11.6 million reduction in interest expenses in
2012. We repurchased €220 million of the

The Oracle,
Reading

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Overview

Chairman’s statement

4.875% Euro bonds, then in September issued
a seven-year €500 million 2.75% unsecured
bond due in 2019. In December we bought
back the £100 million floating rate reset
bonds from BNP Paribas, incurring a one-off
mark-to-market charge of £42 million, and
also signed a new £175 million revolving
credit facility.

Borrowings were £2.1 billion at 31 December
2012 and cash balances were £66 million, to
give net debt of £2.0 billion (2011: £2.0 billion).
Loan-to-value and gearing ratios at the year
end were 36% and 53% respectively. Liquidity,
comprising cash and undrawn facilities, was
£696 million at December 2012.

Board changes

After nine years at Hammerson, and having
taken up the Chairmanship of Lloyd’s of London,
I informed the Board during the course of
last year that I wished to retire at this year’s
AGM. I am delighted that David Tyler joined
the Board in January, and will succeed me as
Chairman immediately after the AGM.

He is the right man to succeed me, having
had a successful career, much of it in finance
and retailing. He is currently Chairman of
Sainsbury’s and a Director of Burberry.

Gwyn Burr joined the Board as a Non-
Executive Director in May this year. Gwyn has
over 25 years’ experience in the retail sector,
with a particular focus on the delivery of
industry-leading customer service and
marketing communications.

At the beginning of 2013 we also appointed
Jean-Philippe Mouton as an Executive
Director. Jean-Philippe is Managing Director
for France, a position he has held since 2009.
As well as his management role for France, he
will have additional responsibility for marketing
and digital engagement across the Group.

nET assET vaLuE:
£5.42 per share

£ 5 . 4 2
+ 2 . 3%

63%

communiTy:
63% of our community
investment is long term

Remuneration

Outlook

In a transformational year for our business we
have demonstrated that high-quality retail
assets combined with active management
can deliver good income growth even in a
challenging environment. Whilst we still remain
cautious about the overall economic outlook
in the UK and Europe, we have a portfolio of
modern, well-located retail properties which
offer consumers leisure, catering and
multi-channel capabilities. Whilst these assets
are not immune to retail failures, we anticipate
the impact to remain modest and we are
confident that these assets will continue to
attract both domestic and international
retailers. This gives us confidence in our ability
to grow underlying rental income through
active asset management, which will be
enhanced as we complete developments.
In conjunction with a continued focus on
operating and financial efficiency, we are
targeting strong growth in earnings and
dividends over the three year period to 2015.

We remain confident in our ability to identify
further attractive additional acquisitions
opportunities in our chosen sectors to
increase the scale, efficiency and overall
returns of our business.

This is my last Chairman’s statement. I am
proud of what the Company has achieved
and I wish its shareholders and staff well
for the future.

John Nelson
CHAIRMAN

The Board’s ambition is to improve
transparency and better demonstrate the link
between pay and performance. For 2012 the
Remuneration Committee determined that
there should be no increase to base salary for
Executive Directors. However, reflecting the
strong performance of the Company in 2012
the variable element of Executive Directors’
overall remuneration has increased. We
believe shareholders are supportive of this
approach which aligns their interest with those
of the management team.

Communities

Hammerson is an active participant in the
communities in which it operates. In both the
UK and France, job creation and growth are
key priorities for local authorities, and we work
with our communities to support local needs.
In the UK we engaged with communities in
Croydon, Leeds and Southampton regarding
employment opportunities associated with
our development plans. In France, through an
initiative which boosts local employment by
including an employment code of conduct into
new leases, we promoted retail sector jobs
through Pôle Emploi, the national job agency.

Sustainability

We have fully integrated sustainability initiatives
into our business plans, which we believe will
deliver long-term business benefits across all
our operational activities. These include
innovations in bringing sustainable design to new
developments, as well as improving the carbon
performance of our investment portfolio. In 2012
we launched our Positive Places sustainability
programme, focused on how we engage
with employees, communities, customers,
suppliers and investors. We have had a strong
performance in areas like waste recycling and
supplier engagement in 2012. Full details can
be found in our connected reporting framework
on pages 129 to 131, and in our online CR report
www.hammerson.com. However, reflecting
the fact that sustainability is fully integrated
into our daily operations, this year’s Annual
Report has no dedicated, separate CR section.

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Overview

Chief Executive’s report

Chief executive’s
report

It’s all about
retail

Introduction

StRAtegy

In early 2012, we set out a revised
strategy to become a pure retail-focused
business, in order to generate superior,
sustainable returns for shareholders.
We stated our intention to exit our
office investments, and redeploy capital
into the three winning areas of retail:
prime shopping centres offering
experience; retail parks offering
convenience; and premium designer
outlets offering luxury and value.
I am pleased to report that we have
met this objective.

Structural consumer trends including the growth
of e-commerce and mobile technologies are
reshaping the requirements of retailers for
physical space. Consumers increasingly show
a preference for experience, convenience or
luxury. Retailers are therefore seeking fewer,
but larger units in prime shopping centres;
innovative new formats which capitalise on
fashion demand and click & collect facilities at
retail parks; and representation in high-footfall,
high-spend premium designer outlets.

In early 2012, we set out a revised strategy to
become a pure retail-focused business, in order
to generate superior, sustainable returns for
shareholders. We announced the exit from our
office investments for £627 million, a 7% premium
to December 2011 values. We announced a total
of £541 million of investments into the three
winning locations of retail: prime shopping centres,
retail parks and premium designer outlets.

Across our three chosen areas of retail, our
strategic priorities are to: create high-quality
property, maximise income, and operate
within a prudent and flexible capital structure.
In conjunction with a continued focus on
operating and financial efficiency, we are
targeting strong growth in earnings and
dividends over the three year period to 2015.

invEsTmEnT:
£627m of
office sales

£541m of retail
acquisitions

£ 6 2 7m
£ 5 4 1m

CReAtINg HIgH-quAlIty
PRoPeRty

Experience – prime shopping centres

Prime shopping centres which offer exciting
brands, full-line stores, high-quality catering
and leisure facilities in a safe, mobile-enabled
environment are continuing to attract
successful retailers.

Our major retail and leisure development at
Les Terrasses du Port, Marseille, is now 83%
pre-let, which is a testament to the strength
of the catchment area and positioning of the
scheme. In addition to securing Printemps as
a major anchor, pre-letting agreements were
exchanged in the year with brands such as
Sandro, Michael Kors, Gant, Bose, and G-Star.
Construction is on schedule and on budget,
with the project expected to open in spring
2014. On opening, this venue will become an
iconic example of what consumers can expect
from retail destinations of the future.

During the year we enhanced our position in
Croydon by announcing the acquisition of a 25%
share of the leasehold interest in Whitgift,
Croydon for £65 million. In January 2013 we
provided clarity and certainty for both retailers
and residents by announcing the formation
of a 50:50 joint venture with Westfield. This
JV will complete the acquisition of the 25%
Whitgift stake and take responsibility for joint
delivery of our development plans for Croydon.

Focus areas (see pages 8 to 17 for more details)
ExpEriEncE

convEniEncE

Luxury

20
prime Shopping Centres
250m
annual visits
£4bn
of annual tenants’ sales

22
convenient Retail Parks
largest
direct owner of UK parks
500,000m2
of space

£490m
investment in Value Retail
9
premium outlet villages across Europe
17%
compound annual growth
in tenants’ sales

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Overview

Chief Executive’s report

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-10.6%

EnvironmEnT:
10.6% reduction in
carbon emissions
(target 20% by 2015)

The pre-letting of our proposed Le Jeu de
Paume retail development at Beauvais, north
of Paris, is progressing well. We have secured
H&M as the main fashion anchor at the
scheme, and with Carrefour and Le Furet du
Nord, 34% of the income is already exchanged
or in solicitors’ hands. Following the acquisition
of the land at the start of 2013, we are
now committed to this development and
construction will commence later this year.

We also acquired Victoria Quarter in Leeds for
£136 million during the year. Victoria Quarter,
anchored by Harvey Nichols, has successfully
established itself as a leading luxury retail
destination in the heart of Leeds’ retail core
and continues to experience strong demand
from designer retail brands. In conjunction
with our existing John Lewis anchored
development at Eastgate, we will now bring
forward a combined retail destination, creating
a direct route between the Victoria and
Eastgate Quarters. We expect to submit
a planning application for Eastgate Quarters
by June, and start on site next year.

Convenience – retail parks

Convenient, well-managed retail parks in
out-of-town locations are securing an
increasing number of fashion and catering
tenants, due to their accessibility and ability
to support retailers’ click & collect offer.

In October we purchased The Junction Fund
for £260 million, which has shown a 10%
uplift in value in the four months since our
acquisition. The fund consists of four retail
parks located in strong catchments, as well
as consented development opportunities
and additional development land. We have
already secured planning permission for the
redevelopment of Abbotsinch, Paisley, and
agreed the sale of excess land at Thurrock,
Lakeside. We have also completed the
redevelopment of the former UCI unit at
Thurrock, which will accommodate the first
retail park Nike store in the UK.

We are making good progress with extensions
and redevelopments across the retail parks
portfolio. We have exchanged contracts with
Debenhams for a 5,570m² store that will
anchor the redevelopment of Elliott’s Field,

Rugby, where we have submitted a planning
application. In Cramlington, the 5,900m²
leisure extension of Manor Walks, to be
anchored by Vue, will be ready for opening in
the summer. At Cyfarthfa, Merthyr Tydfil, we
have signed M&S to anchor the 14,500m²
retail extension, which will help bring other
high street brands to the park.

Luxury – premium designer outlets

Consumer preference for luxury brands
combined with increasing tourist demand has
driven impressive tenants’ sales growth, and
rental income, at premium designer outlets
such as Bicester Village. We anticipate this
trend continuing as global tourist numbers
increase over the coming years. In 2012 Value
Retail (‘VR’) remerchandised 25% of its selling
space, introducing new brands such as
Blumarine, Boggi, and Lagerfeld, as well as
completing an extension at La Vallée Village,
Paris. From a base of over 30 million annual
shoppers, retailers’ sales have consequently
increased 13%, rental income rose by 17% and
the valuation of VR’s Villages went up by 18%.

In line with our intention to increase capital
allocated to the high-growth sector of premium
designer outlets, we announced in July the
acquisition of further interests in VR holding
companies for a total of £80 million and
increased our shareholder loan to the company
from €28 million to €58 million. We now have
a 22% stake in VR holding companies and,
including our direct investments in outlet villages,
we have an effective 29% interest in VR’s
underlying operating profit in 2012. On an EPRA
basis, Hammerson’s net income from Value
Retail has increased by 54% to £12.6 million.

MAXIMISINg INCoMe
geNeRAtIoN

In 2012 we signed 376 leases in respect of over
120,000m², at levels above both the estimated
rental values (‘ERV’), and previous passing
rent. Despite the impact of high-profile retail
administrations we maintained high occupancy
of 97.7% at the year end. Year-end occupancy
has exceeded our 97% target for each of the
last three years. Like-for-like net rental income
for the year increased by 2.1% on 2011. We
continue to bring new retailers and new

formats to our portfolio, including Printemps at
Les Terrasses du Port, Marseille, Jeff Banks’
first standalone store in Brent Cross, London
and Pretty Green at Bullring, Birmingham.

Catering and leisure

Quality catering and leisure options add
vibrancy to our venues and continue to grow
in importance for consumers. At WestQuay,
Southampton, we launched a transformed
‘Dining at WestQuay’ with new restaurants
including Pizza Express, Wagamama and Café
Rouge Express alongside Tortilla and Ed’s Easy
Diner. This trend is also evident at our UK retail
parks, where we signed well-known brands
such as Costa and Frankie & Benny’s to the
portfolio in the year.

Multi-channel retailing

Following the upgrade to centre websites
and provision of wi-fi accessibility, we are
commencing a digital loyalty programme at
selected centres in the UK and France. The
programme will deliver targeted promotions to
consumers via their mobile devices, and respond
in real-time to their behaviour. The data will allow
us to understand better consumer shopping
patterns, which can in turn be used to tailor
future digital communications and promotions
to encourage additional visits and sales.

In summary it has been an active year, where
we made good progress. Against a challenging
backdrop I remain confident about the future
for the Company.

David Atkins
CHIeF eXeCutIVe

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Market background

Overview

Market background

Market
dynamics
& consumer
trends

Our marketplace

Experience – shopping centres

In the UK, Hammerson owns stakes in
12 shopping centres that accommodate
1,300 retail and catering occupiers. Our
centres attract over 180 million shoppers
each year that spend in excess of £2 billion
and generate annual rents of £141 million.
The portfolio comprises nine of the UK’s top
30 shopping centres.

Major tenants in the portfolio include: John
Lewis, House of Fraser, Marks & Spencer,
H&M and National Amusements.

In France, the Company owns eight shopping
centres concentrated in the greater Paris
region. The portfolio comprises approximately
300,000 sq m and its 900 occupiers

generate annual rents of £69 million per
annum. The portfolio is one of the largest in
France, attracting over 70 million shoppers
per annum, who spend a total of over
£1.5 billion per annum.

Key occupiers in the French portfolio include;
Carrefour, Monoprix, Inditex, H&M, Sephora
and Printemps.

One of the Company’s key objectives is to
increase its scale in French retail property. In
this direction it is developing a major shopping
centre, Terrasses du Port in Marseille, that is
due for completion in spring 2014, and is
shortly to commence development of a
shopping centre in Beauvais, to the north west
of Paris which is due to complete in 2015.

OWNERSHIP OF MAJOR UK SHOPPING CENTRES

INTU

Hammerson

Land
Securities

Henderson

PruPIM

Aviva

Westﬁeld

Standard
Life

British Land

GIC

CPPIB

Source: Hammerson analysis

Hammerson is a focused retail REIT
with operations in the UK and France
and concentrates on specific sub-sectors
of retail property in its chosen markets.

The operating environment for retailers, both
in the UK and France, remains tough. The
impact of austerity is squeezing household
budgets and the rise of e-commerce is
challenging the way that traditional retailers
engage with their customers. With a greater
number of channel options, consumers are only
selecting physical retail in locations that satisfy
their need for convenience or the wish for a
special experience.

We believe these market dynamics create an
opportunity for selected operators. Total UK
retail sales are predicted to grow rapidly over
the next decade by 26% to reach £377bn by
2022. However this growth will not be evenly
distributed across all consumer segments.

Consequently, retail venues are polarising.
Shopping centres and retail parks, such as
those owned by Hammerson, which provide
a compelling mix of retail brands and high-
quality leisure and catering, have shown high
occupancy and increasing market shares.
Expanding retailers, including international
brands, continue to compete for the best
space in these ‘winning’ locations. At the other
end of the retail spectrum, retailers continue
to exit underperforming stores.

Hammerson operates in the UK and France
where planning regimes impose restrictions
on new property developments. These
restrictions are particularly onerous in the case
of large retail schemes, limiting the supply of
new space and thereby benefiting owners of
existing retail properties.

The UK’s first House of Fraser.com
store opened in Union Square, Aberdeen,
allowing consumers to use interactive
screens to order goods which can then
be collected in store

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Overview

Market background

The Company takes an innovative approach
to the development and management of its
shopping centres, utilising in-house expertise
to adapt to changing market dynamics and
constantly evolving consumer preferences for
a wide range of shops, restaurants and leisure
facilities and the need for a unique and special
experience.

In 2012 we attracted 12 new fashion brands
to our centres and continued to improve the
leisure offer; over 10% of total rents now
derive from leisure and catering operators. We
are also engaging with consumers on a digital
level and increasing our use of social media
and loyalty programmes. All of our UK centres
have free wi-fi and our digital marketing
initiatives have resulted in a 190% increase in
the number of users of our mobile websites
and a 150% increase in online dwell times.

Given large individual lot sizes, Hammerson’s
preferred approach is to use single asset joint
ventures to control exposure to individual
assets. This approach enables Hammerson to
maximise its market position and increase its
footprint across its retail markets, so ensuring
multiple touchpoints with retail and catering
occupiers. Joint ventures also mitigate risk
by spreading capital more widely across
the sector.

Convenience – retail parks

The Company owns 21 of the UK’s leading retail
parks that accommodate 360 retail tenants.
Major occupiers include B&Q, Boots, Next and
Curry’s, as well as catering operators such as
Costa, Frankie and Benny’s and Pizza Hut.

TOP DIRECT OWNERS OF UK RETAIL PARKS (’000 SQ M)

500

450

400

350

300

250

200

150

100

471

327

312

276

239

227

Hammerson

Hercules
Unit Trust

British
Land

Land
Securities

Henderson UK Retail
Warehouse Fund

Prudential
Assurance
Company

Source: The Deﬁnitive Guide to Retail &
Leisure Parks 2013, Trevor Wood Associates

213

The
Crown
Estate

These retail locations succeed by meeting
consumers’ needs for convenience as well
as retailers’ needs for accessible locations to
support the fulfilment of multi-channel sales.
For some retailers up to 25% of all sales are
made online with an increasing proportion
either collected or returned in-store. This
is becoming an increasingly important driver
of store traffic and incremental retail sales.

Following November’s acquisition of The
Junction Fund, Hammerson became the
largest direct owner of retail warehouse
properties in the UK. We utilise this strong
market position to secure favourable terms
with occupiers and other counterparties.

Luxury – premium designer outlets

Hammerson is a major investor in Value Retail,
the only company in Europe that specialises
exclusively in the development and operation
of luxury outlet shopping Villages. Value Retail
owns and operates nine luxury designer
outlets across Europe, which provide guests
with an outlet shopping experience unrivalled
anywhere in the world.

The portfolio is home to a high concentration
of luxury and aspirational brands such as
Gucci, Prada, Mulberry, Burberry and Giorgio
Armani. The Villages have become must-visit
shopping destinations for domestic shoppers
and international tourists. They benefit from
increasing prosperity in emerging markets and
represent one of the fastest growing sectors
of the retail property market.

Since 2007, tenants’ sales at Value Retail
villages have grown at an annual rate of 17%
and the villages are among some of the most
successful retail locations in the world. Sales at
the most successful village, Bicester Village,
now exceed £20,000/ sq m. As rents in outlet
villages are directly related to store turnovers,
asset values over the period have increased at
a similar rate.

Cyfarthfa Retail Park, Merthyr Tydfil,
which fulfils shoppers’ needs for a local
convenient retail venue

HAMMERSON ANNUAL REPORT 2012

5.0

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

Strategic review
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Business model

Overview

Business model

our vision:
to Be the Best

owner-manager and developer

of retail property within europe.

1
ExpEriEncE
primE
shopping
cEnTrEs

prime Shopping Centres

250m

annual visits

£4bn

of annual tenants’ sales
See pages 12 to 13 for more details.

Focus areas

2
convEniEncE
rETaiL parKs

3
Luxury
prEmium
dEsignEr
ouTLETs

convenient Retail Parks

Largest

direct owner of UK parks

500,000m2

of space
See pages 14 to 15 for more details.

£490m

investment in Value Retail

premium outlet villages across Europe

17%

compound annual growth
in tenants’ sales
See pages 16 to 17 for more details.

HAMMERSON ANNUAL REPORT 2012

Competitive advantageOwnership and management of many of UK and France’s major shopping mallsModern, diverse tenant mixShoppers enjoy excellent experienceLeading direct owner of retail parks in UKFlexible planning status allows variety of retail formatsExcellent locations near major roads and rail hubsStrong independent management team with unparalleled subsector expertisePrestige tenants such as Prada, Gucci and ArmaniTop tier marketing resources and investmentClose, long-standing relationships with major retail groupsSpecialism in retail markets in EuropeTalented, motivated employees with deep sector knowledgeResearch-driven insight to consumer trends
Overview

Business model

Strategic review
Governance
Financial statements
Other information

Background

Hammerson was established in 1942 by Lewis Hammerson, originally
developing residential property then expanding into commercial property in
1948. Hammerson became a public company in 1954, and began a programme
of partnering with local authorities to redevelop UK cities’ retail offer. The
Company opened Brent Cross, the UK’s first covered mall, in 1976, and
expanded into French commercial property in 1985. As mentioned in the
Chief Executive’s report, Hammerson focuses on winning retail locations.

Strategic priorities

Measuring success (KPIs)

Maintain and grow
OUR HigH-qUALiTy
ASSET bASE
through
– refurbishment
– extensions
– development
– aquisitions

Consistently
gROw iNCOME
via
– high occupancy
– tenant engineering
– creative marketing to end consumers

Operate within a
PRUdENT ANd
fLExibLE
capital structure

Total Property Returns

5.0%

Occupancy

97.7%

Like-for-like
Net Rental Income

2.1%

Earnings per share

20.9p
8.3%

HAMMERSON ANNUAL REPORT 2012

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Our focus areas

Experience

experience – 20 prime shopping centres

357

restaurants and cafés
across our portfolio

ThE

EnTErTainmEnT

businEss

We attract consumers and differentiate
our offer by providing entertainment.
We create prime shopping centres
in the UK and France, which act as
retail and leisure destinations for
the surrounding area.

Creating the right environment

Enhancing the consumer experience

We develop or acquire to create the right retail
venue in successful areas – winning locations.
For example, Victoria Quarter, Leeds (‘The
Knightsbridge of the North’) and Les Terrasses
du Port, Marseille, our major groundbreaking
retail and leisure destination overlooking the
Mediterranean sea.

We combine a mix of the most current and
popular retail brands, in combination with
known and trusted department stores. We
travel the world seeking out expanding
international retailers to bring in retail firsts
such as Apple, Hollister and Forever 21.
Increasingly, as shopping centres become
leisure venues in their own right, this is
embellished by introducing high-quality
catering brands and leisure facilities.

Having created the venue, the consumer
experience is enhanced through a combination
of targeted events and promotional activity.
In 2012 we hosted a wide range of events in
our centres including fashion shows, farmers’
markets and student lock-ins.

We encourage visitors through the use of
social media marketing, to generate a buzz
and a loyalty that can only be created through
direct interaction with the consumer.

We optimise our centre websites and provide
free wi-fi, so that our visitors can begin their
experience online before they reach the
centre, and continue once they are with us.
Our flexible and innovative approach in the
multi-channel arena is helping our retail
customers find new ways to support and
grow their sales.

HAMMERSON ANNUAL REPORT 2012

Our focus areas

Experience

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Prime experience key facts

1.25 million m2

>£200m gross rents

2,215 units

90 promotional events 2012

PRIME EXPERIENCE
Bullring, Birmingham
With a footfall of almost 40 million a year,
Bullring is one of the UK’s most successful
retail destinations. The regeneration of
Spiceal Street has further strengthened the
catering offer, with the opening of several
new restaurants, including Browns
Bar and Brasserie, Chaophraya and
handmade burger Co.

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Our focus areas

Convenience

Convenience – 22 convenient retail parks

59%

of consumers reserve
online and pick up
in store

yourconvEniEncE

Hammerson is the UK’s largest
direct owner of retail parks. There
is continued strong consumer demand
for the ease and convenience of
retail parks, which is reflected in
the increasing requirements from a
range of fashion and catering retailers.

Responding to consumers’ preferences

Growing rents

From a low base, our retail parks have rents
with significant scope to grow as we introduce
fashion and catering formats. In 2012 we
invested £260 million in new retail parks,
which we believe will enhance the income
profile of the business.

To capitalise on the strength of consumer
demand and create the winning retail parks
of the future, we are also extending several
of our properties.

Retail parks have their origins in low-cost retail
space for DIY stores and bulky goods retailers
outside the town centre. However, the ease of
access and convenience of free parking have
proved popular with consumers. We are
capitalising on these inherent strengths by
bringing new fashion retailers, new caterers
and new formats to retail parks.

In 2012 we secured Nike’s first ever retail park
store at Thurrock Shopping Park, introduced
Costa coffee pods at several of our parks and
brought household names like Marks & Spencer
and Debenhams to the retail park portfolio.

In addition, as retailers look for ways to support
their multi-channel strategies, a ‘click and collect’
offer is increasingly important. The accessibility
of retail parks makes them an obvious choice in
fulfilling an integral part of this strategy.

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Our focus areas

Convenience

Convenience key facts

£184/m2 average rents

500,000 area in m2 of floorspace

2/3 space consented for
open A1 fashion

RETAIL PARKS

Brent South Shopping
Park, London
Owned by Hammerson and Standard Life
Investments, Brent South Shopping Park
was completed in November 2004. Located
directly opposite Brent Cross Shopping
Centre, the shopping park includes
principle occupiers Arcadia, Next and
TK Maxx, and also provides 350
parking spaces.

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Our focus areas

Luxury

Luxury – investment in
Value Retail’s nine premium
designer outlet villages

160,000m2
with 96%
occupancy

Brand
focus

new

We are an investor in Value Retail’s
highly successful premium outlet
villages which operate in major cities
throughout Europe.

The success of this strategy has been evident
in the impressive annual sales growth of
around 17% over the last five years.

In 2012, we increased our investment in Value
Retail, and are now working closely with the
team to ensure that we capitalise on our
relationships and respective skills.

Working with brands

Value Retail works directly with the major
fashion brands to create a bespoke, high-quality
environment for the sale of their original-line
goods. The villages often provide the only
outlet venue in the country for these retailers.

By creating successful luxury villages which
are marketed in a focused and targeted
manner, the team generates footfall of
domestic visitors and tourists who come
with the intention of spending money.

The management team then works actively
with the retailers on site to optimise the mix
of tenants and ensure that they are individually
promoting their business to the best of
their abilities.

HAMMERSON ANNUAL REPORT 2012

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Our focus areas

Luxury

Value Retail key facts

163m residents within
120-minute drive

289m cars pass Villages each year

958 individual boutiques

VALUE RETAIL
Investing in brands
Hammerson has an investment in the
highly successful Value Retail business
which owns premier outlet villages in nine
of Europe’s main cities. Having secured
an additional stake, we believe there will
be opportunities for further future
investment in this business.

HAMMERSON ANNUAL REPORT 2012

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our people

Business and financial review

Our people

our people
create value

for our shareholders

Hammerson’s people create value
for our shareholders through their
skills, knowledge, behaviour and
commitment in acquiring, managing,
developing, supporting and adding
value to our assets.

The way we manage, engage with
and develop our people makes the
best of their skills and in turn delivers
better business results.

Performance and talent management

Leadership and organisation

During 2012 we have developed talent from
within Hammerson, as well as injecting new
external perspectives from other organisations.
In particular, the exit from the London office
portfolio was managed professionally in a way
to ensure continuity, while also enabling some
talented individuals to be deployed where their
skills can be applied to other key areas of the
Hammerson business.

2012 saw the conclusion of the first phase
of Hammerson’s Leadership Development
Programme and the broadening of the Group
Executive Committee (GEC) to include greater
representation from UK Retail, France and
Human Resources. This diversity of perspectives
has contributed to clearer decision-making
and accountability for the delivery of the
retail-focused business strategy.

Building on previous appointments during
2011, we have also successfully recruited
talent with a retail property focus including
Iain Mitchell as our UK Commercial Director.
Graduate employment remains a key area of
focus to ensure fresh ideas and to build for
the future. To support our focus on effective
management of performance, Hammerson
has implemented reviews of performance
and potential reviews across the business to
identify talent and ensure that succession
and development are actively managed.

The Leadership Development Programme
was positively received leading to greater
personal ownership for driving improvements
in the business, and better cooperation across
functional and geographical lines.

Throughout 2012 we have also further
in-sourced UK Shopping Centre Management
in order to gain greater control over customer
experience together with restructuring our
marketing function to achieve greater
economies of scale and integration between
our shopping centres.

Partnership

We have seen continued efforts to share best
practices and integrate our approaches across
the Company. A pan-European Induction
event has been launched, resulting in excellent
feedback from delegates. This event ensures
that all new employees have an holistic view
of the Company’s vision, structure and
operations, as well as building relationships
with colleagues in other functions and
locations that can help share best practices
in the future. Team events are actively
encouraged to build morale and team spirit,
as well as supporting charities and local
communities. Hammerson was the leading
property fundraiser for the Movember
charity’s 2012 campaign.

“Hammerson provided
a great opportunity to
develop my career within
our Retail Parks team
following the sale of the
London offices – as one
door closes, another
opens”
James Rowbotham
DeVeloPMeNt MANAgeR

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Our people

71%

EmpLoyEEs:
71% of employees
and contractors have
completed CR training

aLL EmpLoyEEs

Male

Female

group ExEcuTivE commiTTEE

Male

Female

board mEmbErs*

Male

Female

* as at 31 December 2012

46%
54%

8
1

8
2

“The induction
programme painted
a clear picture
of how business
areas across the UK
and France work
together with a
clear vision”
Aurélie Siha
ASSet MANAgeR

Diversity and equality

Sustainability and Development

The appointment of Gwyn Burr to the Board
has contributed to increased gender diversity
at the Board level. We are committed to equal
opportunities and believe that having an
inclusive culture and diverse workforce is good
for our business. Our equal opportunities
policy reflects our commitment to objectively
assess, recruit and reward based on merit.

At a glance

– Hammerson currently employs 297 people

in the UK and 110 in France.

– As at 31st December 2012, 246

employees owned shares or participated in
the Group’s share plans.

– Hammerson is formally accredited as an

‘Investor in People’.

– Hammerson reports on a number of
performance indicators relating to
employees as part of the Global Reporting
Initiative.

– The remuneration of the Directors is set

out on the Directors’ Remuneration Report
on pages 62 to 77.

Educating our staff about the benefits
of sustainability remains a core part of
our CR strategy. In 2012, our accredited
environmental training course was completed
by 71% of employees and contractors
at our shopping centres, and in 2013, we
will be forging even closer links between
sustainability and individual performance
through the launch of a new skills-based
employee-volunteering scheme.

Leadership training was a key focus for 2012,
with our Chief Executive attending a Climate
Leadership course at Cambridge University,
The GEC in addition to Senior Management
completing our 12-month leadership-training
programme. We are also proposing to
introduce a broader management development
programme during 2013 to build upon
the success of the leadership programme.

Our objective of presenting new employees
with a comprehensive understanding of our
business and their role within this context has
led to a complete overhaul of our corporate
induction programme. The two-day course
now includes interactive sessions on our
policies regarding sustainability, anti-bribery
and corruption, code of conduct,
whistleblowing, health and safety and IT.

“The Leadership Development
Programme was a great opportunity
to build closer relationships across the
business and reinforce the idea that we
are ‘working as one’”
Sarah Booth
geNeRAl CouNSel AND
CoMPANy SeCRetARy

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Our focus is
exclusively

on retail

Overview of strategy

Creating high-quality properties

We announced in February 2012 our
intention to focus exclusively on the
retail property sector.

Concentrating on a single sector of the real
estate market will support our objective of
generating attractive property returns, both
absolute and relative to other real estate
sectors and peers, by enabling us to:

– leverage our operating platform through
increased scale, reduced costs and by
growing income streams

– deepen retailer relationships and lead the
industry by innovating multi-channel
opportunities

– position Hammerson more strongly to

exploit retail acquisition and development
opportunities

– attract additional joint venture investment

requiring specialist retail asset management
skills, allowing us to recycle capital into
higher-return assets.

High-quality real estate is fundamental to
delivering on our strategy. We develop or acquire
to create compelling retail venues in successful
locations with services and experiences tailored
to the local consumer demographic. The quality
of our asset base is enhanced through:

– development – creating vibrant, modern

retail destinations, often involving
urban regeneration

– refurbishment – refreshing or repositioning
existing assets to increase their appeal to
tenants and consumers

– extensions – meeting the increased

demand from tenants and consumers at
successful retail locations

– investment activity – recycling capital from
mature assets into properties offering the
potential to generate higher returns.

Development, refurbishment
and extensions

To execute our growth plans successfully we
have identified three key strategic priorities
which guide our capital deployment, operating
model and financial management:

– creating high-quality properties
– maximising income from the portfolio
– utilising the Group’s capital strength, whilst
maintaining a prudent capital structure.

Our experience in managing complex urban
regeneration schemes has earned Hammerson
a reputation as a leading real estate developer
in the UK and France. We have a substantial
pipeline of future developments with the
potential to provide shareholders with high
returns and we have forged strong relationships
with the local authorities and major retail
groups who have interests in these schemes.

We have the flexibility to commence projects
when we are satisfied that the relevant
markets are sufficiently robust, when we
have the right level of interest from occupiers
and on the basis that sound financial analysis
demonstrates good returns. We will also
continue to follow a prudent funding strategy
for developments, recycling established
assets and entering into joint ventures
where appropriate.

We made good progress in 2012, and have
continued to do so since the year end, on
advancing development projects and have
achieved several milestones, as shown in the
table below.

Projects for which we are on site will provide
78,300m² of lettable space at a cost to
complete of £194 million and generate an
estimated £29 million of income per annum.
The annual income from near-term projects
involving the development, refurbishment or
extension of 197,200m² is estimated at
£39 million and the cost would be £485 million.
The medium-term developments proposed
would create 453,250m² of new space, at a
total development cost of almost £1.8 billion
and we estimate that they would produce in
excess of £130 million of annual income when
fully let.

The developments for which we are on site,
or which we expect to start over the next few
years, are summarised in the table on page 21.

Overview of recent progress on developments

site assembly

Planning

letting

construction

• Acquired the site at Le Jeu de

• Achieved planning approval for:

• Signed lettings for:

• Completed Dining at WestQuay,

Paume, Beauvais

• Contracted to acquire a

25% leasehold interest in
Whitgift, Croydon

– Centrale, Croydon

– Les Terrasses du Port, Marseille

– Silverburn extension, Glasgow

– Manor Walks, Cramlington

• Submitted planning applications for:

– Monument Mall, Newcastle

– Cyfarthfa Retail Park,

Merthyr Tydfil

– Whitgift, Croydon

– Elliott’s Field, Rugby

Southampton

• Progressed construction at:

– Les Terrasses du Port, Marseille

– the extension of Manor Walks,

Cramlington

• Started on site at Monument Mall,

Newcastle

Note: Further information on these schemes is set out on pages 21 to 23.

HAMMERSON ANNUAL REPORT 2012

– Le Jeu de Paume, Beauvais

– Eastgate Quarters (Phase 1),

Leeds

– Halle en Ville, Mantes

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Developments

Scheme

On site

Lettable area
m²

Earliest
start

Potential
completion

Value at
31/12/12
£m

Estimated cost
to complete1
£m

Estimated annual
income2
£m

Les Terrasses du Port, Marseille

61,000

Commenced

Manor Walks, Cramlington

Monument Mall, Newcastle

5,900

Commenced

11,400

Commenced

Q2 2014

Q2 2013

Q3 2013

229

n/a

Near-term

Abbotsinch, Paisley

Cyfarthfa, Merthyr Tydfil

Elliott’s Field, Rugby

Le Jeu de Paume, Beauvais

Brent Cross Cinema, London NW4
(41% interest)

Eastgate Quarters (Phase 1), Leeds

Halle en Ville, Mantes

Silverburn extension, Glasgow4

SQY Ouest,
Saint Quentin-en-Yvelines4

Watermark WestQuay,
Southampton

Medium-term
Croydon town centre4

Italie 2, Paris 13ème

Orchard Centre, Didcot

Sevenstone, Sheffield

The Goodsyard, London E14, 5

Brent Cross extension, London
NW4 (41% interest)

Eastgate Quarters (Phase 2), Leeds

78,300

4,900

14,500

16,000

23,700

9,000

37,000

32,000

10,700

30,000

19,400

197,200

200,000

6,000

21,000

60,500

5,750

87,000

73,000

453,250

2013

2014

2015

2016

2014

2015

2016

2015

2016

2018

2017

2016

2017

Phased

2019

178

194

120

110

485

500

285

100

350

470

–

1,781

131

Notes
1 Incremental capital cost including capitalised interest.
2 Incremental income net of head rents and after expiry of

rent-free periods.

3 Let or in solicitors’ hands by income at 25 February 2013.
4 50% ownership interest.

5 Area reflects phase 1 of retail space only.
6 € converted at £1 = €1.233.
7 Data for proposed schemes is indicative.

Let3
%

–

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On-site developments

Near-term developments

The programme for Les Terrasses du Port,
Marseille, is on schedule to complete in spring
2014 and is on budget. The 61,000m² shopping
centre will feature 194 shops and 2,600 car
parking spaces. We have agreements in place
with Printemps to anchor the scheme with a
8,700m² department store and with the car
park operator, Vinci Park. Following the
exchange of pre-letting agreements with
brands such as Sandro, Michael Kors, Gant,
Bose and G-Star, the project is now 83%
pre-let or in solicitors’ hands, and we are
continuing discussions with a number of
well-known international retailers to lease the
remaining space. The development was valued
at £229 million, or £39 million above cost at
31 December 2012.

Construction work on the 5,900m² shopping
centre extension at Manor Walks, Cramlington
began in April and the scheme will be ready for
opening in summer 2013. A pre-let has been
signed with Vue Cinema and the first phase
of the scheme also includes family restaurants,
improvements to the South Mall and increased
car parking. Vue will create a new leisure anchor
for the shopping centre, occupying a 2,600m²,
nine-screen cinema.

The £18 million redevelopment of Monument
Mall in Newcastle is scheduled for completion
at the end of 2013 and leases representing
38% of the anticipated rental income have been
signed or are in solicitors’ hands. TK Maxx,
which currently occupies a 2,300m² store
on the lower level, is upsizing to a 3,300m²
flagship store over the first and second floors
with a glazed triple-height entrance onto
Northumberland Street. The scheme will
introduce new prime shopping to Blackett
Street, significantly strengthening the retail
link between prime Northumberland Street,
Eldon Square and Grainger Street. Three listed
façades are being restored and new double
height retail frontages created.

Our retail pipeline includes several potential
extensions, redevelopments and
developments which could commence in the
near-term and which are shown in the table on
page 21. The average yield on cost for these
projects is estimated to be more than 7.5%
and the following paragraphs provide further
information on selected schemes.

In May, Marks & Spencer agreed to anchor the
14,500m² retail extension of Cyfarthfa Retail
Park, Merthyr Tydfil. The 4,600m² full-line store
will offer clothing, homeware and a food hall.
Proposals to extend the retail park were
submitted in August and, subject to a successful
planning decision, the new Marks & Spencer
could be open in autumn 2014. The scheme
will also provide 8,900m² of additional retail
space, to which B&Q will be relocated and which
will accommodate up to seven new brands.

In November, we signed Debenhams to anchor
the redevelopment of Elliott’s Field Retail Park
in Rugby. The 5,570m² full-line store will offer
cosmetics, clothing, homeware and a café/
restaurant. The £35 million extension will create
space for 15 fashion and homeware brands as
well as refurbishing the retained units and
improving the external environment and parking
facilities. Since the year end we have submitted
a planning application for the scheme.

In January 2013 we acquired the land for our
proposed French retail development at Le Jeu
de Paume, Beauvais and pre-letting is well
advanced. We have agreed a pre-let with
Carrefour Market for a 3,000m² store to
anchor the centre, which will consist of 81
retail units and 37 residential apartments in a
23,700m² city centre scheme, 60 km to the
north of Paris. Leases signed or in solicitors’
hands now represent 34% of the expected
income and include H&M as the fashion anchor
and Furet du Nord as the culture and leisure
anchor. We are in discussions with retailers
interested in the remaining larger units and are
planning to start construction later this year.

We anticipate submitting a planning
application later this year for the cinema
extension at Brent Cross. Subject to planning
consent, we will start on site in 2014.

HAMMERSON ANNUAL REPORT 2012

The 9,000m² extension is expected to
generate £2 million of income per annum
at a cost of £20 million.

John Lewis signed revised heads of terms in
July to anchor Eastgate Quarters in Leeds with
a 24,000m² store. The store will form part of
the 37,000m² first phase of Eastgate Quarters,
which will introduce two new retail streets
drawing on Leeds’ thriving arcade heritage and
create a direct route between the Victoria and
Eastgate Quarters. In addition to the flagship
John Lewis store, this £130 million phase will
provide up to 30 additional retail units for
aspirational brands, six restaurants, new leisure
space and a 600 space multi-story car park.
The estimated annual income from the
scheme is £10 million, and we are working up
the design and will submit a detailed planning
application by June 2013. Subject to planning
approval, we expect work to commence in
spring 2014 with an autumn 2016 opening.

The proposed 32,000m² shopping centre at
Halle en Ville, Mantes, to the north west of
Paris, will include 116 retail units. Leases
representing 30% of the expected income
have been signed or are in solicitors’ hands.
The tenant line-up includes the food anchor
Leclerc and 24 other retailers. We are in
discussions with other potential anchor tenants.

During 2012, we also extended the
development agreement for Watermark,
WestQuay with Southampton City Council,
agreeing how it will be phased, and have
submitted a leisure-led planning application
for the expansion of Silverburn, Glasgow.

Medium-term developments

We have continued to progress excellent
opportunities for medium-term retail and
leisure developments in the UK and France.

Since the year end, Hammerson and Westfield
have formed a 50:50 joint venture which will
regenerate the retail centre of Croydon, South
London, and restore the town to its rightful
place as one of the UK’s leading shopping
destinations. Hammerson contributed its
Centrale shopping centre to the joint venture,
at a valuation of £115 million, and ownership is
now shared with Westfield. The joint venture
will also purchase a 25% interest in the
155-year headlease of the Whitgift Centre,

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following completion of Hammerson’s
conditional contract to acquire that interest
from Royal London for £65 million. Under the
agreement, the partners intend to redevelop
and combine the Whitgift Centre and Centrale
to deliver a transformational change to
Croydon. The mixed-use scheme of around
200,000m² will include retail, leisure and
residential space, with the potential for hotels
and offices, and will create over 5,000 new
jobs. Together with Westfield, we are
discussing our plans for Croydon with all
relevant stakeholders and will then create a
revised masterplan which will combine the
best elements of the proposed schemes. A
planning application was registered in February
2013 and we anticipate that planning consent
for the £1 billion scheme could be secured
later this year, with construction starting on
site in 2015. A joint management company
has been established which has responsibility
for development, leasing and asset management
of the completed scheme. Westfield will
undertake the design and construction of the
project and Hammerson will continue to
manage Centrale and any further acquisitions
prior to the redevelopment of the Whitgift
Centre. A Westfield executive will lead the
project development team and it is intended
that the asset management of the completed
centre will be led by a Hammerson executive.

Plans are in the work-up phase for the
mixed-use redevelopment of The Goodsyard,
London E1, in which we have a 50% interest,
and a major extension to Brent Cross shopping
centre, London NW4. The latter follows
agreement for a phased approach to Brent
Cross Cricklewood and we intend to finalise
the development strategy later this year and
apply early next year for a revision to the
existing consent.

ENHANCING QUALITY THROUGH
PORTFOLIO MANAGEMENT

During 2012 we swiftly implemented our
revised strategy of focusing the portfolio on
the retail sector through the sale or contract
for sale of our London office portfolio. We
were also successful in executing our policy of
recycling mature properties for reinvestment
in acquisitions and developments with
prospects for income and capital growth.

Disposals

In June contracts were exchanged for the sale
of approximately 75% of the office portfolio
to Brookfield Office Properties for aggregate
cash proceeds of £518 million. The impact of
the sale was broadly neutral to 2012 earnings.
Completion of the transaction was phased and
the assets contracted for sale were:

Sales completed in September 2012 – total
consideration £329 million

– 99 Bishopsgate, London EC2. A 31,500m²
freehold office tower of 26 floors. Acquired
by Hammerson in 1994 and redeveloped in
1995, part of the building was refurbished in
2012, with 11,000m² of space made available
to let. Rents passing at 31 December 2011
were £11 million, and averaged £600/m².

– Principal Place, London EC2. A mixed-use
leasehold development scheme which has
consent for a 57,500m² office building and
a separate 23,000m² residential tower
providing 243 private apartments. Legal
ownership of Principal Place remains vested
in Hammerson until transfer of its interest
in accordance with the arrangements with
the London Borough of Hackney.

– An interest in 1 Puddledock, London EC4

and a block of properties adjoining Principal
Place, on Shoreditch High Street.

– An interest in London Wall Place, London
EC2, held as an option from the City of
London, with consent for a 46,000m²
office development.

Sales which will complete in June 2013 – total
consideration £189 million

– 125 Old Broad Street, London EC2. A 50%
owned, 30,300m² freehold office building
over 26 floors, on the site of the former
London Stock Exchange. The site was
acquired in 2002 and the redeveloped
tower completed in 2008. Hammerson’s
share of rents passing at 31 December 2012
was £8 million, with an average of £515/m².
There is a non-recourse credit facility of
£129 million (£65 million Hammerson
share) secured on the property.

– 1 Leadenhall Court, London EC3. A

10,000m² leasehold office at the corner of
Gracechurch Street and Leadenhall Street.
The building was acquired by Hammerson
in 2010. Rents passing at 31 December
2012 were £7 million, averaging £760/m².
The building is let to Alliance Assurance
Company until March 2014.

The aggregate rents passing at 31 December
2011 of the assets included in the sale were
£27 million and their book value at that date
was £468 million. We spent a further
£18 million on capital expenditure during the
year. The total consideration represented a
premium over the implied combined book
value of 7% and an initial yield of 5.2%.

The remaining office assets were sold in
separate transactions, principally in the
second half of 2012. The sale of our interest
in Harbour Quay, London E14, in June for
£9.5 million realised a profit of £5 million over
its December 2011 book value. Our 30%
stake in 10 Gresham Street, London EC2,
held in a joint venture with CPPIB was sold
for £60 million in October, and we disposed
of Stockley House, London SW1, in November
for £41 million. The prices for these transactions
totalled £4 million above their December
2011 valuations. We are retaining our 50%
ownership of Hammerson’s London head
office at 10 Grosvenor Street, London W1.

The life cycle of 54-60 rue du Faubourg Saint-
Honoré, Paris 8ème, is a good example of how
we use our development and asset management
expertise to crystallise substantial profits. We
acquired the 8,000m² mixed-use buildings in
Paris’ luxury retail quarter in 2005 and
completed a redevelopment of the retail
element in 2011. Following the refurbishment,
the scheme comprises 3,900m² of retail
space that is occupied by designer brands
including Burberry, Moschino, Jenny Packham
and Bally. The property also includes 3,900m²
of residential accommodation and 200m² of
office space and the net passing rent was
€7 million taking account of stepped rents. In
May, the sale of the property was completed
for €165 million, slightly above its December
2011 book value and significantly above the
cumulative cost of €94 million.

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Business and financial review

Business review

Acquisitions

In light of the change in strategy to focus on retail, we have identified three themes which mirror the demands of consumers for: the all-round
experience provided by shopping centres; the convenience of well-located retail parks; and the value offered by premium designer outlets. We
have grouped our operations into these themes as shown below. The continuing portfolio comprises UK shopping centres, France retail, UK retail
parks and Other UK.

Theme
Experience

Convenience

Luxury

Other

• UK shopping centres

• France retail

• UK retail parks

• Premium designer outlets – Value Retail

• Other UK – including assets held for redevelopment and the element of Hammerson’s head office

building which is let to third parties

• Held for sale – comprising office assets sold or contracted for sale as part of our refreshed strategy

(see note 9 to the accounts on page 100)

The proceeds from disposals have been used to increase scale in our chosen retail themes.

Experience

Convenience

In October, we announced the acquisition of
The Junction Fund retail parks portfolio for
£260 million, representing a 7% yield on the
purchase price. The transaction consolidates
Hammerson’s position as the largest direct
owner of retail parks in the UK with 22 assets
valued at a total of £1.4 billion.

The 107,200m² Junction Fund portfolio
comprises four prominent retail parks in
strong catchment areas which are let to a
diverse mix of high-quality tenants. The
income stream is secure with an average
lease length of 11 years and 98% occupancy.
There are asset management opportunities
to grow income as current rents are low at an
average of c. £18 per square foot and a high
proportion (68%) of the space benefits from
open A1 planning consent. The current passing
rent of the portfolio is £19.1 million per
annum, but this is due to rise to £20.0 million
over five years through contracted rental
uplifts. The portfolio also provides 34,000m²
of consented development opportunities and
17 ha of additional development land, which
offers the prospect of further returns.

We consolidated our presence in Leeds in
October with the purchase of Victoria Quarter
for £136 million. The transaction also
reinforced our interest in the fast-growing
luxury retail sector and complements the
proposals for the first phase of the adjacent
Eastgate Quarters, enabling a coordinated
approach to our tenant and marketing
strategies in the city. Anchored by a Harvey
Nichols department store, the 19,100m²
centre is established as a leading luxury
shopping destination in the heart of Leeds’
retail core. With 70 stores and two cafés,
the listed arcades provide a unique retail
environment in two distinct streets: County
Arcade with 30 units is home to high-end
retailers such as Louis Vuitton, Mulberry,
Vivienne Westwood and Oliver Sweeney; and
Queen Victoria Street comprising 26 stores
and entrances to Harvey Nichols. Additional
retailers include Hobbs, Whistles, Kurt Geiger
and Kiehls. Victoria Quarter continues to
attract designer retail brands and is almost
fully let, with passing rent of £7.3 million. The
initial yield on the purchase, including costs,
was 5.3%. Leeds is the principal shopping
destination in Yorkshire with an affluent
population and we have the opportunity
to capture growing consumer demand
throughout the region by bringing exciting
new brands to the city.

HAMMERSON ANNUAL REPORT 2012

Principal assets acquired with
The Junction Fund

– Thurrock Shopping Park, Lakeside is situated
next to Junction 31 of the M25 and Lakeside
shopping centre. A catchment of 877,000
people live within a 20 minute drive of the
property and, together with the adjoining
Lakeside shopping centre and Lakeside Retail
Park, it forms one of the largest dedicated
shopping areas in Europe. Comprising
Lakeside Extra and Lakeside Tunnel, current
passing rent is £5.8 million, with average
rents of £18 per square foot. The 17,200m²
Lakeside Extra has Boots, TK Maxx, Gap and
ASDA Living in the tenant line-up. Lakeside
Tunnel includes Decathlon, Halfords and Pets
at Home in 8,600m² of accommodation.
Both locations have unrestricted open A1
non-food consent and there is an additional
10 ha development site which is allocated
for retail and residential use.

– Forge Shopping Park, Telford, to the west of
the town centre, has a catchment population
of 260,000 within a 20 minute drive. The
Forge is Telford’s primary shopping park and
comprises 29,100m² of open A1 retail space,
anchored by a 5,900m² Sainsbury’s, which
is one of the principal foodstores in Telford.
With 20 tenants including Next, Outfit, Boots,
Gap, Currys/PC World and TK Maxx, the park
has current passing rents of £5.1 million per
annum, an average of £20 per square foot.

Strategic review
Governance
Financial statements
Other information

Business and financial review

Business review

– Imperial Retail Park, Bristol, is located two
miles south of Bristol city centre. More
than 468,000 people live within a 20
minute drive of the park. The 32,300m²
scheme is anchored by a 9,800m²
B&Q, and also includes Next, Boots and
HomeSense stores. Current passing rents
are £5.2 million per annum, an average of
£16 per square foot. There is also a 5 ha
cleared development site for which a
mixed-use planning resolution is in place.

– Abbotsinch Retail Park, Paisley, is adjacent
to Junction 27 of the M8 motorway with a
catchment of 665,000 people within a 20
minute drive. The 15,900m² park is
anchored by a 9,500m² B&Q alongside
DFS, Pets at Home, Harveys and Frankie &
Benny’s. Average rents of £18 per square
foot generate passing rent of £3.1 million
per annum. A development site was also
acquired, which has planning consent for an
additional retail terrace and a standalone
food store.

– A 6 ha development site which is adjacent
to Oldbury town centre, approximately one
mile from Junction 2 of the M5 motorway.
Together with adjacent properties, the site
has planning consent which includes a retail
park with up to 27,000m² of accommodation.

Since the acquisition, we have been delighted
with the progress made in advancing some of
the value-creating initiatives which we had
identified in the portfolio and which have
contributed to an increase in the valuation
by 10%:

– we completed the redevelopment of the
former UCI unit, which will accommodate
the first retail park Nike store in the UK

– we have agreed the conditional sale of 3 ha
of the excess land at Thurrock for £19 million,
some £10 million above its book value

– planning permission has been secured for

the 4,900m² redevelopment of Abbotsinch,
Paisley, for which leases in respect of 60% of
the income are in solicitors’ hands

PREMIUM dEsIGNER OUTLETs –
vALUE RETAIL (‘vR’)

Since 1998 we have held an investment
in Value Retail PLC and some of its related
companies. As a developer and operator
of luxury retail outlet Villages in the UK and
mainland Europe, VR is one of the most
successful participants in its market. We
initially bought an interest in Bicester Village,
Oxfordshire, and subsequently invested in
Value Retail PLC and in some of its European
Villages. In the second half of 2012 we
acquired further interests in VR’s holding
companies for £80 million and increased
our shareholder loan from €28 million to
€58 million. Following these transactions we
now own 22% of the VR holding companies.
We are now in a position to influence VR’s
strategy and operations and have equity
accounted for the investment with effect
from August 2012.

The total asset value of VR’s nine European
Villages is €2.8 billion, up 18.3% since the end
of 2011, and together they generate brand
sales of €1.7 billion with sales growth over the
last five years of 17% per annum. The Villages
attracted more than 30 million shoppers in
2012 and VR’s business model is underpinned
by tourism in the cities near which the Villages
are located. Total brand sales increased by
13.3% in 2012, reflecting a 3.6% increase in
footfall and an increase in spend per visit of
9.4%. The effect of this sales increase on
rental income was augmented by a combination
of a rise in the fixed element of rental income
collected and an increase in the royalty
percentage paid on some new leases. As
a result, total rental income from tenants
increased by 16.5% to €226 million, which
represented 13.3% of total sales. VR’s
portfolio sales densities grew in line with total
sales. EBITDA increased from €79 million in
2011 to €95 million in 2012 whilst gross
profit margin, before administration costs,
grew from 61.8% to 62.4%. The EBITDA margin
in 2012 was 38%, up from 36% in 2011.

A key area of operating activity for VR during
2012 was to increase investment in marketing
with the aim of attracting high-spending,
long-haul tourists. This included increasingly
sophisticated B-2-C digital communications
following research to better understand the
needs of the target customer, and enhanced
hospitality services. The research led to
increased investment in remerchandising the
brand mix across the portfolio to drive future
sales growth. In 2012, an average of 25%
of the selling space was remerchandised,
of which approximately 15% related to the
introduction of new brands, with the balance
reflecting unit refitting or the relocation of
existing brands. New brands introduced to the
Villages in 2012 included Blumarine, Rituals,
Zwilling and Lagerfeld, whilst Belstaff,
Ermenegildo Zegna, Sandro, Hugo Boss and
Michael Kors were among the existing brands
which opened in new Villages. Seasonal
promotions such as the Denim campaign have
generated additional footfall and enhanced
brand cohesion.

An extension to La Vallée Village near Paris,
anchored by a new Burberry flagship store,
opened in late 2012 and added around
20% to the gross lettable area of the Village.
Following the grant of planning consent, works
will commence during 2013 on an extension
to La Roca Village near Barcelona, which will add
around 33% to the gross lettable area and which
is expected to open for trading in early 2014.

In 2012, VR refinanced senior and mezzanine
debt facilities in respect of its Villages at La
Roca and Ingolstadt, and agreed a new senior
debt facility at Fidenza Village. As a result
of these and other initiatives, total external
debt increased by 7.9% on 2011 levels, to
€1.2 billion or 42% of the December 2012
portfolio property value.

Further information on how our investment
in VR has impacted Hammerson’s financial
performance is provided in the Financial
review on page 42.

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Business and financial review

Business review

MAXIMIsING PORTFOLIO INCOME

Our approach to meeting the objective of
maximising income from the portfolio varies
according to the characteristics of the markets
in which we operate, but the common
themes are:

– fostering close, long-standing relationships

with existing and prospective retailers

– predicting, monitoring and responding to

local market trends

– offering attractive commercial solutions to

tenants’ occupational requirements

– tailoring marketing campaigns to maximise

footfall at each destination

– innovating new formats for our tenants to

facilitate multi-channel sales, and

– providing an enhanced customer
experience at our properties.

Market environment

The trading environments in the UK and
France remain challenging for retailers but this
has reinforced their preference for space in
high-quality, prime shopping centres and
conveniently located retail parks of the types
which Hammerson operates. This trend is
expected to continue. Our efforts to generate
income growth concentrate on maintaining
high occupancy rates, tenant engineering,
enhancing tenant mix, commercialisation
initiatives and by continuing to innovate with
multi-channel retailing.

Clicks, bricks and the shopping
experience

Partnership with retailers to capture
multi-channel sales

The retail sector is in a period of significant
change and in response we are repositioning
the products and services we offer to retailers
and consumers. Retailers are focusing on
locations in large, successful, vibrant shopping
centres and balancing physical representation
with their online operations. Consumers demand
convenience, flexibility and an entertaining
shopping experience. Hammerson is well
placed to take advantage of these key trends.

Experience

Our focus on leisure and entertainment has
led to the provision of greater variety in the
catering offer at WestQuay, Southampton,
through ‘Dining at WestQuay’. The £6 million
extension opened in the autumn and
introduced three new catering brands to the
centre: Wagamama, Pizza Express and Café
Rouge. The scheme has aligned the catering
experience more closely with the high-quality
fashion brands trading at the centre. At our UK
retail parks we signed well-known brands such
as Costa and Frankie & Benny’s during 2012.

Partnership with retailers to enhance
customer services

In an internet-enabled, competitive retail
environment, customer service is a key
differentiator when consumers decide where
to shop. At Hammerson we are committed to
excellence in this area. In a property industry
first we have introduced a national retail
awards scheme, ‘We Love Retail’, with
nominees and winners selected by our
ongoing ‘Mystery Shop’ programme. The ‘We
Love Retail’ event at The Royal Opera House in
February 2012 was attended by store
management and staff and many of our retail
partners, with the overall winner being
Wagamama’s at Union Square, Aberdeen.

We are committed to working with retailers
on their cross-channel products such as
House of Fraser.com and also ‘pureplay’
operators looking at innovative ways of
using their physical space, such as Boden
and Ocado.

Driving footfall and sales through
digital engagement

Our retailers and consumers are at the
forefront of multi-channel retailing, and
we are working with our customers to trial
different technologies and innovate new
formats, before employing best practice
across our portfolio in both the UK and France.
Consumers are now constantly connected,
often on a mobile device. Our social media
base, which has grown at 42% per annum, is
increasingly used to engage with customers
and support promotional activity.

During the year we upgraded all UK shopping
centre websites to become fully mobile-
enabled, and provided free wi-fi in all centres.
At The Oracle in Reading we have successfully
trialled a product-specific search tool from
Google, and this service will be extended to all
centres in the coming months. Following the
upgrade to centre websites and provision of
wi-fi accessibility, we are commencing a digital
loyalty programme at selected centres in the
UK and France. The programme will deliver
targeted promotions to consumers via their
mobile devices, and respond in real-time to
their behaviour. The data will allow us to better
understand consumer shopping patterns,
which can in turn be used to tailor future
digital communications to encourage
additional visits and sales.

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Business and financial review

Business review

Operational performance

Despite the weak economic backdrop, our retail assets have produced a strong operating performance during 2012 as shown in the table below.

Operational performance – continuing operations

Occupancy (%)

Net rental income growth – like-for-like (%)

Leasing activity – new rent from units leased (£m)

Area of new lettings (‘000m²)

Leasing v ERV (% above 31 December 2011/2010 ERV)

Retail sales like-for-like change (%)

UK shopping centres

France shopping centres

Footfall like-for-like change (%)

UK shopping centres

France shopping centres

Non-rental income (£m)

France

Occupancy

2012

97.7

2.1

18.7

123.3

0.4

(3.0)

(2.3)

(3.4)

18.6

1.6

2011

97.9

3.8

21.5

97.6

2.1

(1.1)

0.4

(2.8)

15.6

1.4

For the continuing portfolio, occupancy was 97.7% at the end of December 2012. This was above our target of 97.0% and the components of
portfolio occupancy are analysed in the table below.

Occupancy (%)

31 December 2012

31 December 2011

UK shopping centres

France retail

UK retail parks

Other UK

98.1

98.0

97.5

98.2

98.4

90.9

92.4

Total continuing
portfolio

97.7

97.9

High occupancy in the shopping centre portfolio has been maintained despite the pressures on retailers from the economic environment.
A slight decrease in France was principally the result of acquiring vacant possession of a number of units in SQY Ouest in advance of its proposed
redevelopment. UK retail parks occupancy at 31 December 2012 reflects vacancy in The Junction Fund portfolio which was acquired in October.

Like-for-like net rental income

On a like-for-like basis and excluding properties held for sale, net rental income for the continuing portfolio increased by 2.1% during 2012. At
our shopping centres, the figure was 2.8% comprising 3.6% in the UK, driven principally by lettings at The Oracle, Bullring and Union Square and
increased car park income at the latter, and 1.4% in France, primarily reflecting indexation. Income at UK retail parks grew by 0.5% despite the
impact of tenant administrations. The tables overleaf analyse net rental income for 2011 and 2012.

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Business and financial review

Business review

like-for-like net rental income for the year ended 31 december 2012

United Kingdom

Shopping centres

Retail parks

Other UK

Total United Kingdom

Continental Europe

France retail

Group

Retail

Other UK

Total continuing operations

Discontinued operations

Total

Properties owned
throughout
2011/12
£m

Increase/
(Decrease)
for properties
owned throughout
2011/12
%

Acquisitions
£m

Disposals
£m

Developments
£m

108.2

56.8

8.9

173.9

3.6

0.5

1.0

2.4

8.8

10.2

–

19.0

–

4.9

(0.1)

–

0.1

–

Total net
rental income
£m

116.9

67.0

13.9

197.8

58.3

1.4

1.0

2.1

(0.4)

61.0

223.3

8.9

232.2

14.1

246.3

2.2

1.0

2.1

4.5

2.3

20.0

–

20.0

–

20.0

2.1

4.9

7.0

10.0

17.0

(0.5)

0.1

(0.4)

–

(0.4)

244.9

13.9

258.8

24.1

282.9

like-for-like net rental income for the year ended 31 december 2011

Properties owned
throughout
2011/12
£m

104.4

56.5

8.8

169.7

Exchange
£m

Acquisitions
£m

Disposals
£m

Developments
£m

–

5.5

5.4

–

10.9

–

0.2

12.3

12.5

2.5

–

2.5

Total net
rental income
£m

112.4

62.1

21.1

195.6

57.5

4.5

1.3

7.4

(2.0)

68.7

218.4

8.8

227.2

13.5

240.7

4.5

–

4.5

–

4.5

12.2

–

12.2

–

12.2

7.6

12.3

19.9

18.3

38.2

0.5

–

0.5

–

0.5

243.2

21.1

264.3

31.8

296.1

United Kingdom

Shopping centres

Retail parks

Other UK

Total United Kingdom

Continental Europe

France retail

Group

Retail

Other UK

Total continuing operations

Discontinued operations

Total

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Business and financial review

Business review

At 31 December 2012, 74% of the portfolio
by value was located in the UK, with the
balance in France and developments
comprised just over 5% of the total. Joint
ventures accounted for 41% by value of the
portfolio and included eight major shopping
centres in the UK and two in France. The
average lot size of the portfolio was
£87 million and 49% of the portfolio value at
the end of 2012 was represented by our ten
most valuable properties.

Movement in portfolio value in 2012

Portfolio value at 1 January

Valuation decrease

Capital expenditure

Developments

Expenditure on existing portfolio

Expenditure on discontinued
operations

Acquisitions

Capitalised interest

Disposals

Reclassification to assets held for sale

Exchange

£m

5,720

(49)

397

(542)

(195)

(43)

Portfolio value at 31 December –
continuing operations*

5,458

* Includes developments

Leasing activity

In 2012 we signed 376 leases, representing
123,300m² of space with rental income of
£18.7 million per annum. Rents secured were
around 4% in excess of December 2011 ERVs
in both the UK and France. Rent reviews were
agreed for 103 leases with rents passing of
£15.2 million and these will result in a further
£0.9 million of annual rental income.

Over the 12 months ended 31 December
2012, average ERVs fell by less than 1% in the
UK but rose by approximately 3% in France.

Retailer sales and footfall

The challenging trading environment was
reflected in the sales and footfall data at our
shopping centres in the UK and France. The
other operational measures, however, support
the premise that retailer demand for prime
retail destinations remains strong.

Non-rental income

Net income from car parks and from the sale
of advertising and merchandising
opportunities at our centres, which are
included within ‘net rental income’, are
important sources of revenue for Hammerson.
Increased car park income, particularly at
Union Square, and a full year’s contribution
from Centrale contributed to total non-rental
income of £20.2 million in 2012 compared
with £17.0 million in the prior year.

We reduced the carbon emissions produced
by our UK shopping centre portfolio by 8%
in 2012 and by 20% for our assets in France.
These results are in line with our goal of a
20% reduction in emissions across the portfolio
between 2010 and 2015. We expect further
reductions in 2013 as we continue to roll
out energy efficient lighting to the portfolio
following successful implementation at
Highcross, The Oracle, Silverburn and Union
Square in the UK, and at Bercy 2, Espace Saint
Quentin and Grand Maine in France. Our next
carbon-reducing project in 2013 will focus on
converting mechanically ventilated shopping
centres to more natural methods, beginning
with mixed-mode (a combination of natural
and mechanical) ventilation at Bullring and
Brent Cross.

By centralising our UK waste management
contracts we outperformed our recycling
targets and achieved a 74% recycling rate,
almost hitting our target of 75% by 2013.
In France, we recycled 38% of waste,
significantly up on the figure for 2011 of 26%.

In 2012, we committed to reducing water
consumption and began implementing a
standard specification for shopping centre
washrooms as part of our refurbishment
programme. We will continue to roll this
out across our assets in the UK and France
during 2013. Further data on sustainability
performance is provided in the Connected
Reporting Framework on pages 129 to 131.

Sustainability

MAINTAINING CAPITAL sTRENGTH

Energy, water and waste efficiency has a
direct correlation with cost efficiency and can
play an important part in making our assets
attractive to retailers and in maximising the
net income from our portfolio. We have made
good progress in implementing our
sustainability initiatives during 2012.

Portfolio overview

In this overview, ‘the portfolio’ refers to the
continuing portfolio and excludes the office
properties sold or held for sale. At 31
December 2012, the retail portfolio provided
1.7 million m² of space, included 20 prime
shopping centres in the UK and France and 22
conveniently located retail parks and was
valued at a total of £5.5 billion.

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Business and financial review

Business review

Analysed in the table below are net and gross valuations, income and yields for the investment portfolio. The prime locations and high quality of the
portfolio are reflected in yields which are low relative to other property classes.

For the continuing portfolio at the end of 2012, the net initial yield, based on the gross portfolio value, was 5.3%, unchanged since 31 December
2011. The components of the portfolio valuation are analysed in more detail in ‘Capital returns’ opposite.

continuing investment Portfolio at 31 december 2012

Portfolio value (net of cost to complete)
Purchasers’ costs1

Net portfolio valuation as reported in the financial statements

Income and yields

Rent for valuers’ initial yield (equivalent to EPRA Net Initial Yield)

Rent-free periods (including pre-lets)

Rent for ‘topped-up’ initial yield2

Non-recoverable costs (net of outstanding rent reviews)

Passing rents

ERV of vacant space

Reversions

Total ERV/Reversionary yield

True equivalent yield

Nominal equivalent yield

Notes
1 Purchasers’ costs equate to 5.5% of the net portfolio value.
2 The yield of 5.5% based on passing rents and the gross portfolio value is equivalent to EPRA ‘topped-up’ Net Initial Yield.

Income
£m

292.2

9.9

302.1

9.4

311.5

7.2

6.4

325.1

Net book
value
£m

5,469

(286)

5,183

5.6%

0.2%

5.8%

0.2%

6.0%

0.2%

0.1%

6.3%

Gross
value
£m

5,469

5.3%

0.2%

5.5%

0.2%

5.7%

0.1%

5.9%

6.0%

5.8%

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Business and financial review

Business review

Capital returns

For the calendar year 2012, the total return of the property portfolio as a whole was 5.0%, comprising a capital return of 0.1% and an income
return of 5.0%. For the continuing portfolio, the figures were 4.5%, -0.5% and 5.0% respectively. Total and capital returns are analysed by
segment in the valuation data table on page 48 and the chart below analyses the components of the changes in valuation for the continuing
portfolio for 2012. The capital return of 5.3% for the discontinued portfolio reflected the sales agreed in the year.

Investment yields for the UK shopping centres increased slightly in the year, and the change contributed about one-third to the decline in values,
whilst just less than half of the fall resulted from lower income. In France, the positive impacts of increased rental income, principally as a result of
indexation, and development surpluses at Les Terrasses du Port were partly offset by a modest increase in investment yields. The valuation of
the UK retail parks portfolio was largely influenced by increased yields and the impact of reduced income, although these negative impacts were
partly offset by the increase in value following the acquisition of The Junction Fund.

COMPONENTS OF VALUATION CHANGE 2012 – CONTINUING PORTFOLIO (£M)

(20)

(40)

(60)

(80)

37.9

20.8

8.8

15.3

15.2

6.3

-7.1 -9.2

-4.9

-21.2

-25.9

-15.6

-30.4

-30.7

-6.6

-6.7

-4.0

-17.3

UK shopping centres

France retail

UK retail parks

UK other

Total continuing portfolio

-48.5

-70.0

Yield

Income

Development

Total

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
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Other information

Key performance
indicators

Overview

We use four principal measures to monitor
the performance of our business against
appropriate benchmarks: portfolio total
returns; occupancy; growth in like-for-like
net rental income; and growth in adjusted
earnings per share. These ‘Key Performance
Indicators’, or ‘KPIs’, illustrate how successful
the implementation of our strategic priorities
has been. The sources of the information used
to calculate KPIs are management reporting
systems and IPD.

Following the change in our strategy to focus
purely on the retail real estate sector, we have
reviewed our KPIs and replaced ‘return on
equity’ with the measures net rental income
and earnings per share, both of which have a
closer link to the retail property market and to
executive remuneration than return on equity.

The Company’s Annual Incentive Plan (‘AIP’)
and Long Term Incentive Plan (‘LTIP’) for
Executive Directors contain performance
measures, set out on pages 70 to 73, that
align closely with our KPIs. Total property
return relative to IPD is a specific measure
in both the AIP and the LTIP and occupancy
levels, income growth, growth in net rental
income and high occupancy drive higher
earnings per share, total shareholder return
and net asset value which form performance
measures in either the AIP or the LTIP.

1 In the chart, the total property returns are for the total
portfolio. IPD returns are weighted indices for the UK
and France for 2011 and prior. As the 2012 IPD index for
France was not available at the time of publication, the
2012 IPD return used is the UK quarterly index.

2 Full definitions are provided in the glossary on page 138.

HAMMERSON ANNUAL REPORT 2012

Business and financial review

Key performance indicators

strategic Priority

kPi and benchmark

Performance

Creating high-quality property
We invest in high-quality real estate which is
attractive to tenants and consumers and provides
a platform from which to grow income and value,
generating returns in excess of other asset classes.

Portfolio total return relative to IPD
We compare the total return achieved from the
portfolio against the relevant IPD index.

Benchmark:
IPD

Maximising income
We aim to maximise the occupancy of our
properties as income lost through vacancy has
a direct impact on profitability. However, we believe
that a low level of structural vacancy is appropriate
in our retail portfolio as it allows us to flex tenant
mix and location within a property, which should
in turn increase rental income and provide
capital growth.

Occupancy2
The ERV of the space in the portfolio
which is currently let, as a percentage
of the total portfolio.

Benchmark:
97%

Maximising income
Net rental income (NRI) from the property portfolio
is the primary source of the Group’s operating
cashflow and the main contributor to earnings. We
aim to grow NRI organically through leasing vacant
space, capturing rent reviews, tenant engineering
and other ‘value adding’ initiatives.

Growth in like-for-like NRI2
The percentage change in net rental income
for completed investment properties owned
throughout both current and prior periods, after
taking account of exchange rate movements.

Benchmark:
>2%

Capital strength
Adjusted earnings per share (EPS) is the Group’s
principal profit measure and is an indicator of the
level of recurring profit available for distribution
to shareholders in the form of dividends. Steady
growth in adjusted EPS reflects the sound capital
structure of the Group and will support a
progressive dividend policy and increased
shareholder returns.

Growth in adjusted EPS2
The increase in adjusted EPS expressed as
a percentage of the prior year figure.

Benchmark:
RPI

5.0% (IPD Universe 2.8%) (2011: 8.9% (IPD Universe 8.2%))

At 5.0% the returns for 2012 materially outperformed the benchmark of 2.8%. The income return for the total

portfolio at 5.0% underperformed the IPD income return of 5.8% reflecting the prime nature of the Hammerson

portfolio. However the IPD capital return was -2.8% whereas our portfolio showed slight capital growth of 0.1%,

which included the profit crystallised on disposal of the office portfolio. Excluding the offices sold, our portfolio

capital return was -0.5%, again outperforming IPD and demonstrating the relative quality of Hammerson’s

assets. Our objective is to outperform IPD by 100 basis points.

Focus on 2013

We believe that, particularly in the current economic environment, prime shopping centres and well located retail

parks of the type which Hammerson owns and operates will outperform other classes of real estate and should

result in superior total returns.

Further commentary

Financial and property returns, page 34.

97.7% (2011: 97.9%)

At the end of 2012 the continuing portfolio was 97.7% occupied, compared with 97.9% for the prior year.

Occupancy in the shopping centre portfolio has been maintained above our target of 97.0% despite the

pressures on retailers from the economic environment.

Focus on 2013

Retailers continue to face a challenging operating environment which is likely to result in further administrations

and which may increase vacancy. However our prime portfolio has proved resilient throughout the downturn

and recovery and we expect it to remain attractive to potential occupiers.

Further commentary

Business review, page 27.

2.1% (2011: 3.8%)

For the continuing portfolio, growth in net rental income was 2.1% for the year ended 31 December 2012

compared with 3.8% in 2011 and our target level of more than 2%. Income from shopping centres grew by

2.8%, with 3.6% growth in the UK and 1.4% in France. UK retail park income increased by 0.5% on a like-for-like

basis. The 2011 figures were 4.6% and 0.6% for the UK and French shopping centre portfolios respectively,

whilst retail park income grew by 4.5%.

Focus on 2013

Further commentary

Business review, page 27.

Sustaining strong like-for-like NRI growth in the present environment is challenging. However we have

opportunities in both the UK and France to increase rental income through expiries, breaks and reviews.

8.3% (2011: -3.0%)

In 2012, adjusted EPS increased by 1.6 pence, or 8.3%, to 20.9 pence principally reflecting lower interest costs

following refinancing transactions and asset disposals, additional income from our investment in Value Retail

and lower administration costs. We benchmark this KPI against the Retail Prices Index (RPI) and our target is

to grow adjusted EPS by a rate which exceeds RPI plus 3%. In 2012 this hurdle was 6.1%, so the Group beat

Our programme of extensions, refurbishments and developments, together with like-for-like NRI growth

should deliver a further uplift in adjusted EPS in 2013.

the target.

Focus on 2013

Further commentary

Financial review, page 40.

Strategic review
Governance
Financial statements
Other information

Business and financial review

Key performance indicators

strategic Priority

kPi and benchmark

Performance

+2.1%

MaxIMIsIng IncoMe:
Growth in like-for-like NRI

+8.3%

caPItal stRength:
Growth in Adjusted EPS

Creating high-quality property

We invest in high-quality real estate which is

Portfolio total return relative to IPD

We compare the total return achieved from the

attractive to tenants and consumers and provides

portfolio against the relevant IPD index.

a platform from which to grow income and value,

generating returns in excess of other asset classes.

Benchmark:

IPD

Maximising income

Occupancy2

We aim to maximise the occupancy of our

properties as income lost through vacancy has

The ERV of the space in the portfolio

which is currently let, as a percentage

a direct impact on profitability. However, we believe

of the total portfolio.

that a low level of structural vacancy is appropriate

in our retail portfolio as it allows us to flex tenant

mix and location within a property, which should

in turn increase rental income and provide

Benchmark:

97%

capital growth.

Maximising income

Growth in like-for-like NRI2

Net rental income (NRI) from the property portfolio

The percentage change in net rental income

is the primary source of the Group’s operating

for completed investment properties owned

cashflow and the main contributor to earnings. We

throughout both current and prior periods, after

aim to grow NRI organically through leasing vacant

taking account of exchange rate movements.

space, capturing rent reviews, tenant engineering

and other ‘value adding’ initiatives.

Benchmark:

>2%

Capital strength

Growth in adjusted EPS2

Adjusted earnings per share (EPS) is the Group’s

The increase in adjusted EPS expressed as

principal profit measure and is an indicator of the

a percentage of the prior year figure.

level of recurring profit available for distribution

to shareholders in the form of dividends. Steady

growth in adjusted EPS reflects the sound capital

structure of the Group and will support a

progressive dividend policy and increased

shareholder returns.

Benchmark:

RPI

5.0% (IPD Universe 2.8%) (2011: 8.9% (IPD Universe 8.2%))
At 5.0% the returns for 2012 materially outperformed the benchmark of 2.8%. The income return for the total
portfolio at 5.0% underperformed the IPD income return of 5.8% reflecting the prime nature of the Hammerson
portfolio. However the IPD capital return was -2.8% whereas our portfolio showed slight capital growth of 0.1%,
which included the profit crystallised on disposal of the office portfolio. Excluding the offices sold, our portfolio
capital return was -0.5%, again outperforming IPD and demonstrating the relative quality of Hammerson’s
assets. Our objective is to outperform IPD by 100 basis points.

Focus on 2013
We believe that, particularly in the current economic environment, prime shopping centres and well located retail
parks of the type which Hammerson owns and operates will outperform other classes of real estate and should
result in superior total returns.

Further commentary
Financial and property returns, page 34.

97.7% (2011: 97.9%)
At the end of 2012 the continuing portfolio was 97.7% occupied, compared with 97.9% for the prior year.
Occupancy in the shopping centre portfolio has been maintained above our target of 97.0% despite the
pressures on retailers from the economic environment.

Focus on 2013
Retailers continue to face a challenging operating environment which is likely to result in further administrations
and which may increase vacancy. However our prime portfolio has proved resilient throughout the downturn
and recovery and we expect it to remain attractive to potential occupiers.

Further commentary
Business review, page 27.

2.1% (2011: 3.8%)
For the continuing portfolio, growth in net rental income was 2.1% for the year ended 31 December 2012
compared with 3.8% in 2011 and our target level of more than 2%. Income from shopping centres grew by
2.8%, with 3.6% growth in the UK and 1.4% in France. UK retail park income increased by 0.5% on a like-for-like
basis. The 2011 figures were 4.6% and 0.6% for the UK and French shopping centre portfolios respectively,
whilst retail park income grew by 4.5%.

Focus on 2013
Sustaining strong like-for-like NRI growth in the present environment is challenging. However we have
opportunities in both the UK and France to increase rental income through expiries, breaks and reviews.

Further commentary
Business review, page 27.

8.3% (2011: -3.0%)
In 2012, adjusted EPS increased by 1.6 pence, or 8.3%, to 20.9 pence principally reflecting lower interest costs
following refinancing transactions and asset disposals, additional income from our investment in Value Retail
and lower administration costs. We benchmark this KPI against the Retail Prices Index (RPI) and our target is
to grow adjusted EPS by a rate which exceeds RPI plus 3%. In 2012 this hurdle was 6.1%, so the Group beat
the target.

Focus on 2013
Our programme of extensions, refurbishments and developments, together with like-for-like NRI growth
should deliver a further uplift in adjusted EPS in 2013.

Further commentary
Financial review, page 40.

PORTFOLIO TOTAL RETURNS
AND IPD UNIVERSE (%)1
20

-5

-10

-15

-20

13.7 15.0

1.3

-4.1

8.9

8.2

5.0

2.8

-13.6

-17.6

2008

2009

2010

2011

2012

IPD Universe

Portfolio total return

OCCUPANCY (%)

97.9

97.7

97.3

95.2

95.4

2008

2009

2010

2011

2012

Occupancy

Target

GROWTH IN LIKE-FOR-LIKE
NRI (%)
4.0

3.8

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

3.5

2.2

2.1

0.9

2008

2009

2010

2011

2012

Growth in like-for-like NRI (Target)

Target

GROWTH IN ADJUSTED EPS (%)

-5

-10

-15

-20

-25

-30

8.3

0.9

2.4

4.8

1.0

-5.5

3.1

-3.0

-23.6

2008

2009

2010

2011

2012

RPI

Growth in adjusted EPS

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Financial and
property returns

Overview

Our objective is to achieve a return
on equity which is greater than our
cost of equity. To achieve this, we
set hurdle rates for investment, based
on a minimum five-year internal rate
of return and adjusted according to
the risk associated with each project.
When appropriate, the returns that
would be generated by buying in the
Company’s own shares are evaluated
against the potential returns from
property investment and development.

Business and financial review

Financial and property returns

Hammerson’s total shareholder return for
2012 outperformed the FTSE EPRA/NAREIT
UK index by 11.1 percentage points. Over the
last five years, Hammerson’s average annual
total shareholder return has been -2.9%
compared with -4.9% for the EPRA/NAREIT
UK index.

EPRA financial reporting best practice
recommendations

EPRA (European Public Real Estate
Association) has established best practice
recommendations for the calculation and
presentation of certain performance measures
for the listed property sector in Europe.
Definitions and references to where the
measures can be found in this annual report
are shown in the table opposite.

EPRA best practice recommendations
(‘BPR’) on sustainability reporting

Absolute measures for energy and water usage,
greenhouse gas emissions and waste, together
with intensity measures for energy and water
usage and greenhouse gas emissions, as
defined by EPRA, are set out in the full Global
Reporting Initiative (‘GRI’) and EPRA BPR
compliance pack which can be found online at
www.hammerson.com

The table opposite sets out the financial returns
achieved in 2012 and compares them with
benchmark indices.

The IPD benchmarks shown for the UK
portfolio are based on the quarterly index.
There is no benchmark for total portfolio
returns which is comparable with
Hammerson’s geographical portfolio
allocation. IPD data relating to the returns of
the French property sector in 2012 will be
available only after this Annual Report has
been published.

An analysis of capital and total returns by
business segment is provided in the Property
portfolio information on page 48.

The IPD Universe includes retail, office and
industrial returns for all grades of property in
the UK, although Hammerson does not invest
in the industrial sector and, latterly, has little
invested in offices. The outperformance of the
IPD Universe capital return index arose
principally because of the prime nature of
Hammerson’s shopping centre portfolio. Prime
shopping centres provide low initial yields
reflecting their high quality. Consequently, the
income returns for our portfolio are lower
than the index.

Hammerson’s return on shareholders’ equity
for the year ended 31 December 2012 was
5.3%. The income element of the return on
shareholders’ equity will tend to be relatively
low given the quality of the property portfolio,
as described above. In 2012 the capital
element of the return on equity reflected the
slight fall in the value of our strategic land
holdings and retail parks during the year.

HAMMERSON ANNUAL REPORT 2012

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Other information

Business and financial review

Financial and property returns

Returns data for 2012

return*

UK portfolio capital return

UK portfolio income return

UK portfolio total return

Total portfolio capital return

Total portfolio income return

Total portfolio total return

Return on shareholders’ equity

Total shareholder return over one year

Total shareholder return over three years p.a.

Total shareholder return over five years p.a.

* Portfolio returns include developments, continuing and discontinued operations.

benchmark

-0.8

UK IPD Universe – capital

5.2

4.3

0.1

5.0

5.3

41.0

8.9

-2.9

UK IPD Universe – income

UK IPD Universe – total

n/a

Estimated cost of equity

FTSE EPRA/NAREIT UK index over one year

FTSE EPRA/NAREIT UK index over three years p.a.

FTSE EPRA/NAREIT UK index over five years p.a.

-2.8

5.8

2.8

7.9

29.9

7.9

-4.9

EPRA performance measures

Performance measure

definition

Page

PurPose

EPRA Earnings

Recurring earnings from core operational activities

102

A key measure of a company’s underlying operating
results from its property rental business and an
indication of the extent to which current dividend
payments are supported by earnings

EPRA NAV

EPRA NNNAV (triple net)

EPRA Net Initial Yield (NIY)

EPRA ‘topped-up’ NIY

Vacancy

Net Asset Value (NAV) adjusted to include
properties and other investment interests at fair
value and to exclude certain items not expected
to crystallise in a long-term investment property
business model

EPRA NAV adjusted to include the fair values of
financial instruments, debt and deferred taxes

Annualised rental income based on cash rents
passing at the balance sheet date, less non-
recoverable property operating expenses, divided
by the market value of the property, including
estimated purchasers’ costs

EPRA NIY adjusted for the expiry of rent-free
periods

Estimated market rental value (ERV) of vacant
space (occupancy is the inverse of vacancy)
divided by the ERV of the whole portfolio

102

Adjusts IFRS NAV to provide stakeholders with
relevant information on the fair value of the assets
and liabilities of a real estate investment company
with a long-term investment strategy

102

Adjusts EPRA NAV to provide stakeholders with
relevant information on the current fair value of the
assets and liabilities of a real estate company

Comparable measure for portfolio valuations

A measure of investment property space that is
vacant, based on ERV

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Risk management

Business and financial review

Risk management

Responding to
changing

market environments

Charenton-le-Pont’s
Bercy 2 is one of
the most important
shopping destinations
in the eastern suburbs
of Paris

Our risk management process

Responsibility for risk
management rests ultimately
with the Board. However,
the foundations are built on
the mindset of our people,
their integrity and the culture
we foster at Hammerson.
Short reporting lines and
a flat management structure
mean that the senior team
is included in all key decision
making and involved in risk
identification and mitigation.

Risk management and principal
uncertainties

The management of risk is an integral
component of our operating, financial and
governance activities. The policies for risk
management are designed to reduce the
chances of financial loss, protect our
reputation and optimise performance when
opportunities arise. We identify, control and
communicate risk management throughout
the organisation using a risk management
framework which is regularly reviewed by our
Senior Management team.

The five principal areas of risk in that
framework, together with the related principal
uncertainties currently facing the Group, are
shown in the table opposite. Economics
continues to be the dominant feature of the
risk landscape. Also noted in the table are
more specific risks featured in the framework
and the steps we take to mitigate them.
Finally, we have included references to the
pages in this Annual Report where the risks,
or the elements of the business affected by
them, are discussed further.

HAMMERSON ANNUAL REPORT 2012

BUSINESS RISKSBEHAVIOUR AND CULTURERISK AND CONTROLS COMMITTEEPOLICIES AND PROCEDURES INTERNAL AUDITUK RETAIL EXECUTIVEHAMMERSON FRANCE MANAGEMENT BOARDAUDIT COMMITTEE REM COMMITTEE GROUP EXECUTIVE COMMITTEENOM COMMITTEEBOARD OVERSIGHT
Strategic review
Governance
Financial statements
Other information

risk area
(and executive
resPonsibility)
Business strategy
(GEC)

Property and
corporate investment
(GEC)

Business and financial review

Risk management

PrinciPal
uncertainties
Property and financial markets
Although financial markets are
relatively stable at present,
uncertainty in the eurozone
and the austerity measures
being implemented by western
governments continue to make
lenders cautious, and are likely to
constrain economic growth. The
risk of a full or partial break-up
of the euro-community seems to
have receded, but remains a risk
and if realised would be likely to
lead to a prolonged global recession.
We are exposed to the specifics
of the French economy through
our shopping centre investments
in France.

We have stress-tested our business
model against a severe downside
economic scenario. We confirmed
that the Group is robust, reflecting
low gearing, long-term secure
income streams from our leases, the
currency hedging of the value of
our French portfolio, a good spread
of debt maturities and the flexibility
to phase or halt our development
programme.

Property valuations
Conditions prevailing in the general
economic environment and the
property investment market affect
the value of Hammerson’s property
portfolio. Accordingly, the Group’s
net asset value may rise or fall
due to external factors beyond
management’s control. Global
financial markets have stabilised
since the peak of the financial crisis,
and investors have become more
active in the real estate investment
market, resulting in a rise in values
for prime property over the last
few years.

However, instability in the eurozone
could generate significant volatility
in financial markets in the short to
medium terms.

The Group’s property portfolio
is of high quality, geographically
diversified and let to a large number
of tenants. These factors should
help mitigate negative impacts
which may arise from changes in the
financial and property markets.
Tenant default
Some tenants continue to face
challenging operating conditions,
increasing the risk that they may
be unable to pay their rents or
may enter into administration. The
Group’s geographical diversity and its
large number of tenants mean the
impact of individual tenant default
for Hammerson is low. Furthermore,
our occupational leases are generally
long-term contracts, making the
income relatively secure.

change
from
2011

further
commentary
Chairman’s statement
(page 4)

Chief Executive’s
report (page 6)

Market background
(page 8)

Business review
(pages 20 to 31)

Financial review
(pages 40 to 49)

Market background
(page 8)

Business review
(pages 20 to 31)

risk/imPact
• Implementation of a
strategy inconsistent
with the market
environment, risking
poor investment
decisions and
inadequate returns.

• Shopping centre,
retail parks or
premium designer
outlet markets in
UK or France
underperform relative
to other sectors or
markets, eroding
shareholder value.

• Investment

decisions result in
inadequate returns
or the adoption of
unforeseen liabilities.

• Opportunities to

divest of properties
are missed, or
limited by market
constraints, reducing
potential returns.

mitigation
• We commission and
evaluate research
into the economy
and investment
and occupational
markets and use
this to prepare an
annual Business Plan
and regular financial
forecasts.

• Hammerson’s

portfolio is diversified
geographically and
by sub-sector and its
allocation, including
exposure to the
eurozone, is reviewed
regularly.

• We focus on prime
shopping centres in
the best locations,
convenient retail
parks and premium
designer outlets, all
with experienced
management.

• We monitor closely

developments
in multi-channel
retailing and
introduce innovative
new concepts to
our portfolio when
appropriate.
• Acquisitions

are thoroughly
evaluated, supported
by detailed review,
financial appraisals,
due diligence
and detailed risk
assessment prior to
Board approval.

• The performance of
individual properties
is benchmarked
against target
returns.

• Properties are held
in a ‘ready for sale’
state.

• Financial loss arises
through tenant
default.

Security and quality of
income (page 46)

Tenant covenant
strength and collection
rates (page 47)

• We regularly monitor
the credit status of
tenants and adopt a
flexible approach to
tenant requests for
changes to payment
terms.

• Arrears are reported
monthly and we
report six monthly on
Group-wide tenant
exposures.

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

risk area
(and executive
resPonsibility)
Property
development
(GEC)

Treasury, tax
and regulatory
(CFO)

Business and financial review

Risk management

change
from
2011

further
commentary
Creating high-quality
properties (page 20)

Financial review
(page 44)

Notes 21 and 22
to the accounts
(pages 111 to 119)

PrinciPal
uncertainties
Development and letting
In the current economic
environment development is
inherently more risky. We have a
substantial pipeline but will progress
developments only when the
relevant markets are sufficiently
robust, when we have the right
level of interest from occupiers and
on the basis that sound financial
analysis demonstrates good returns.

Potential occupiers remain cautious
about committing to lease space.
We currently have only one major
development underway, Les
Terrasses du Port in Marseille, for
which 83% of the income has
been contracted or is in solicitors’
hands. We will progress significant
developments only when substantial
pre-lets are secured.

Property valuations
The property portfolio is the most
significant component of the
value of the Hammerson Group. A
worsening of the economic situation
may put downward pressure on
property values, which would
increase gearing and could ultimately
result in the breach of borrowing
covenants.

The high quality and diversification
of our portfolio should help to
protect values from the negative
impacts which may arise from
changes in the financial and
property markets.

Gearing stood at 53% at
31 December 2012, significantly
lower than the Group’s most
stringent borrowing covenant that
gearing should not exceed 150%.
We estimate that values could fall
by 44% from their December 2012
levels before covenants would be
endangered.
Liquidity risk
Companies with short-term
financing requirements may continue
to find it difficult to secure sufficient
funding, in particular from banks,
at costs comparable with their
existing facilities. Our recent funding
strategy has therefore addressed
near-term maturities early. We will
also consider accessing the sterling,
euro and private placement bond
markets if appropriate. Following the
issue in September of a €500 million
unsecured bond due 2019 and the
signing of a £175 million syndicated
five-year revolving credit facility in
December 2012 to refinance that
maturing in April 2013, the nearest
debt maturity is £389 million
in 2015.

risk/imPact
• Over-exposure to

mitigation
• The Group’s exposure

developments within
a short timeframe
increases exposure to
market risk and puts
pressure on financing
and cashflow.

• Poor control of

the development
programme and
failure to address
investment and
occupational market
risks results in
inadequate returns.

• Poor management
and inadequate
resourcing leads to
failed projects.

• Breach of borrowing
covenants, triggering
default and/or
repayment of
facilities or bonds.

to developments
and the phasing of
projects is considered
as part of our annual
Business Plan and
reviewed throughout
the year.

• We monitor

and report on
development
projects monthly.

• Detailed analysis,
including market
research, is
undertaken prior to
the approval of each
development project.

• Teams are

assembled for each
development under a
project ‘owner’.

• A programme of post
completion reviews
ensures potential
improvements
to processes are
identified.

• We set guidelines for
financial ratios which
are monitored
regularly by the
Board.

• Our annual Business
Plan includes stress
tests considering
the impact of
a significant
deterioration in the
markets in which
we operate.

• Poor planning and/
or external factors,
including failures in
the banking system,
lead to a liquidity
squeeze preventing
the refinancing of
maturing debt or
leading to insufficient
liquidity to progress
the development
programme.

• The Board approves
future investment
requirements and
sufficient facilities
are put in place
with an appropriate
maturity profile.

• We monitor the
maturity profile
of debt and take
an opportunistic
approach to
refinancing.

• Credit ratings are
set for lending
counterparties and
monitored. We use
diverse sources of
funding.

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risk area
(and executive
resPonsibility)
Treasury, tax
and regulatory
(CFO)
(continued)

Business organisation
and human resources
(GEC)

Business and financial review

Risk management

PrinciPal
uncertainties
Interest rate and exchange risk
Although the medium-term outlook
for interest rates is that they will
remain low, the interest charged on
borrowings is a significant cost for
the Group.

To manage the risk of changes in
interest rates, we set guidelines for
our exposure to fixed and floating
interest rates, using interest rate
and currency swaps as appropriate.
At 31 December 2012, 80% of the
Group’s gross debt was at fixed rates
of interest.

The Group is exposed to movements
in the sterling/euro exchange rate
through its investment in France.
Exchange risk is managed principally
by matching foreign currency assets
with foreign currency borrowings
or derivatives. At the end of 2012,
80% of the value of the Group’s
French portfolio was hedged in
this way.

Tax and regulatory
Governments are seeking to reduce
fiscal deficits and regulators are
examining mechanisms which
would make financial markets more
resilient. Increased taxation may
be a risk for the broader business
sector, but an asset-based industry
such as real estate which currently
benefits from tax-efficient regimes
throughout Europe could become a
specific target.

The real estate sector is sometimes
perceived by regulators to be part of
the financial services sector rather
than as an operating business and
the industry could be adversely
affected by misdirected regulation
designed to stabilise financial
markets.
For Hammerson, there are currently
no significant uncertainties related
to this risk.

further
commentary

change
from
2011

risk/imPact
• Adverse currency
or interest rate
movements result in
financial losses.

mitigation
• Fixed rate borrowings

are used where
appropriate and
foreign currency
denominated assets
are financed by
borrowings in the
same currency.

• Loss of tax exempt

• Speculation and

status due to change
in legislation.

• EU/UK regulation
acts as a brake
on growth and
administrative burden
for the real estate
sector.

• Inappropriate
management
structure or
resourcing levels for
achieving business
objectives.

• Failure to recruit and
retain key executives
and staff with
appropriate skills
and calibre.

comment relating
to changes in tax
regimes in the UK
and Europe
is monitored.

• Developments

in regulation are
monitored and
governments
and regulators
lobbied through
representation by UK
and European real
estate trade bodies.

• A Human Resources
plan features as
part of the annual
Business Plan.

• The Nomination

Committee approves
succession plans for
senior roles.

• Significant changes
to the management
structure are
approved by
the Board.

• We periodically

review the
remuneration
structure, including
an annual review by
the Remuneration
Committee and
benchmarking
against industry,
or other relevant
comparatives.

Our people
(page 18)

Governance
(pages 50 to 61)

Remuneration Report
(pages 62 to 77)

HAMMERSON ANNUAL REPORT 2012

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Financial review

Discontinued operations

IFRS requires that we disclose separately in
the consolidated income statement the
income and expenditure directly attributable
to discontinued operations. The related assets
and liabilities are described as ‘held for sale’
in the consolidated balance sheet, and
comparative figures have been reclassified
where appropriate. The components of the
net profit related to discontinued operations
are analysed in note 9B on page 100. With the

exception of Hammerson’s share of the
secured loan on 125 Old Broad Street, assets
held for sale are funded from the Group’s
unsecured debt, and so no finance costs have
been attributed to these assets within the
profit related to discontinued operations.

Profit before tax

Including discontinued operations, the Group’s
profit before tax was £142.2 million in 2012,
compared with £346.3 million in the prior year

and the reduction principally reflected the
pattern of property revaluations and the costs
of the early redemption of bonds. Property
revaluation gains of £186.3 million in 2011
have been partially reversed in 2012 by a
reduction in values of £49.9 million, although
that negative impact was more than offset by
the valuation gains in our associate, Value
Retail, and on the revaluation of derivatives.
The table below reconciles profit before tax
on adjusted and unadjusted bases.

Analysis of profit before tax

Adjusted profit before tax

Adjustments:

Gain on the sale of investment properties

Net revaluation (losses)/gains on property portfolio

Net revaluation gains in associate – Value Retail

Premium and costs on redemption of bond and floating rate reset bonds

Change in fair value of derivatives

Profit before tax – continuing and discontinued operations

Year ended
31 December 2012
£m

Year ended
31 December 2011
£m

152.5

141.6

42.6

(49.9)

43.2

(55.5)

9.3

142.2

23.5

186.3

–

(5.1)

346.3

Notes

2, 9B

7, 9B

Adjusted profit before tax for the year ended 31 December 2012 was £152.5 million, an increase of £10.9 million, or 7.7%, on the prior year
as shown in the table below. The net income lost from disposals more than offset the increase in profit from acquisitions and developments.
However we benefited from growth in rental income for the like-for-like portfolio, additional income from our interests in Value Retail and
through concerted efforts to reduce administration and borrowing costs.

Reconciliation of adjusted profit before tax

Adjusted profit before tax for 2011

Acquisitions

Disposals

Developments

Like-for-like net rental income increase

Administration cost reduction

Additional income from Value Retail

Interest saving initiatives

Exchange and other

Adjusted profit before tax for 2012

Adjusted profit
before tax
£m

EPRA EPS
pence

141.6

7.3

(13.6)

0.5

5.6

3.6

4.4

9.0

(5.9)

152.5

19.3

1.0

(1.9)

0.1

0.8

0.5

0.6

1.3

(0.8)

20.9

For the year ended 31 December 2012, EPRA earnings per share were 20.9 pence, up by 1.6 pence, or 8.3%, on the year. Detailed calculations
for earnings per share are set out in note 11A to the accounts on page 102.

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Net rental income

Total net rental income for 2012, including discontinued operations, was £282.9 million but for continuing operations only was £258.8 million
compared with £263.8 million for the year ended 31 December 2011. The contributions from rental growth of 2.1% in the like-for-like portfolio
and acquisitions were more than offset by income lost from disposals and the impact of exchange. Like-for-like net rental income is analysed in
the tables on page 28.

Administration expenses

Administration costs are analysed in the table below.

Administration expenses

Continuing operations

Cost of property activities

Corporate expenses

Management fees receivable

Discontinued operations

Cost of property activities

Management fees receivable

Notes

Year ended 31
December 2012
£m

Year ended 31
December 2011
£m

31.4

17.4

48.8

(5.9)

42.9

1.1

(0.7)

0.4

33.3

17.9

51.2

(5.2)

46.0

1.5

(0.6)

0.9

Total administration expenses

43.3

46.9

Excluding management fees receivable,
administration expenses in 2012 for
continuing operations, at £48.8 million, were
£2.4 million down on the prior year. There was
a £3.5 million restructuring charge in 2011
but some of the savings generated by the
restructuring programme have been offset by
additional performance-related remuneration
for staff and part of the benefit has arisen in
operational costs within net rental income.
When operational costs and management

fees receivable are taken into account, the
total cost for continuing operations has
reduced by £6.3 million, or 7.3%, from
£86.1 million in 2011 to £79.8 million in 2012
as set out in the cost ratio table overleaf. This
demonstrates the success of the measures
put in place over the last year to reduce the
Group’s cost base, including a review of
supplier contracts, the realignment of our
staffing structure with the refreshed strategy
and a reduction in head office accommodation

expenditure, in both the UK and France. Cost
control continues to be a point of focus for
the Group.

For discontinued operations, administration
expenses relate to the costs of staff made
redundant as a result of the sale of the office
portfolio. Management fees receivable relate
to the joint ventures for 125 Old Broad Street
and 10 Gresham Street.

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Cost ratio

Set out in the table below is the calculation for a cost ratio based on total operating costs and gross rental income. The ratio is not necessarily
comparable between different companies as business models and expense accounting and classification practices vary. The ratio for continuing
operations has reduced from 28.3% in 2011 to 27.0% in 2012. We expect the ratio to decrease further over time reflecting a growing income
stream from refurbishments, extensions and completed developments and rigorous cost control.

Cost ratio

Continuing operations

Net service charge expenses

Other property outgoings

Cost of property activities

Corporate expenses

Management fees receivable

Total costs – continuing operations

Gross rental income (after rents payable)

Cost ratio (%)

Year ended 31
December 2012
£m

Year ended 31
December 2011
£m

Notes

8.2

28.7

31.4

17.4

(5.9)

79.8

295.7

27.0

9.4

30.7

33.3

17.9

(5.2)

86.1

303.9

28.3

Notes
Staff costs amounting to £0.8 million (2011: £nil) have been capitalised as development costs and are excluded from the table above.
Our business model for developments is to use a combination of in-house staff and external advisers. The cost of external advisers is capitalised to the cost of developments. The cost
of staff working on developments is generally expensed, but may be capitalised subject to meeting certain criteria related to the degree of time spent on and the stage of progress of
specific projects.

Share of results and net assets of associate – Value Retail (VR)

With effect from August 2012, following the acquisition of additional interests in and the ability to exercise influence over the management of
VR, we have equity accounted for our investment. Further details of the operating performance of VR are set out in the Business Review on page 25.

Prior to August, our interests were treated as investments and income was recognised as distributions were received. As shown in the table
opposite, on an EPRA basis, we recognised net income of £12.6 million, or 1.8 pence per share during the year ended 31 December 2012.
Excluding our share of VR’s income for the period, our investment contributed £112.5 million, or 16 pence per share, to the increase in the
Group’s equity shareholders’ funds in 2012 as a result of increases in the valuation of the property portfolio and retained profit. On an EPRA
basis, and including the loan to VR, our net interest in VR was valued at £491.6 million, equivalent to 69 pence per share, at 31 December 2012.

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Value Retail

Income statement

Distributions received

Share of results of associate

Interest receivable

Less: EPRA adjustments

Total impact of VR on income statement – EPRA basis

Balance sheet

Other investments

Investment in associate

Add: EPRA adjustments

EPRA adjusted investment in associate

Loan to VR

Total impact of VR on balance sheet – EPRA basis

Finance costs

We have been successful in reducing the cost
of debt in 2012 and will continue to monitor
the capital markets with a view to reducing
it further.

For continuing operations in the year ended
31 December 2012, underlying finance costs,
comprising gross interest costs less finance
income as set out in note 7 to the accounts,
were 10.8% lower at £96.3 million compared
with £107.9 million in 2011. The interest-
saving initiatives detailed below accounted for
£9.0 million of the reduction:

– Bought back €220 million of the €700 million
4.875% unsecured bonds due 2015, saving
£3.6 million in the year.

– Cancelled an interest rate swap on the
£100 million puttable bond, saving
£3.4 million.

– Contracted a new interest rate swap on the
£250 million 6.875% 2020 bond, saving
£2.0 million.

Year ended 31
December 2012
£m

Year ended 31
December 2011
£m

Notes

Within net rental income

14A

Within net finance costs

14A

14B

4.9

47.5

3.4

(43.2)

12.6

–

428.4

16.2

444.6

47.0

491.6

6.1

–

2.1

–

8.2

214.0

–

214.0

23.4

237.4

Taken together, these transactions had the
effect of reducing the Group’s average cost
of borrowing from 5.2% in the year ended
31 December 2011 to 5.0% in 2012. We
have also reduced future financing costs
by exercising a call option to repurchase
£100 million nominal of floating rate reset
bonds that were issued in July 2008. These
bonds had put options at par from February
2013 in favour of the lender and a call option
at fair value in favour of Hammerson. Having
evaluated the potential costs and benefits of
the arrangement in the context of the current
market backdrop, we exercised the call option
to repurchase the bonds in December at their
fair value of £141.7 million. This resulted in an
exceptional finance cost of £41.7 million.

Interest capitalised in 2012 amounted to
£8.8 million and principally related to the
development of Les Terrasses du Port.
The finance costs for discontinued activities
as shown in note 9B are in respect of the
Group’s share of the secured debt and related
derivatives of the 125 Old Broad Street joint
venture. No finance charges have been allocated
to discontinued operations as the other office
properties held for sale have been financed
from the Group’s pooled unsecured borrowings.

Tax

The Group is a UK REIT and French SIIC for tax
purposes. In light of new legislation in France,
which was effective from July 2012, it was
thought that SIIC distributions paid from
our French subsidiaries to Hammerson plc
would be subject to a withholding tax of 3%.
However, SIICs have recently been exempted
from the rule and no such tax is payable. We
expect that the situation will be reviewed by
the French authorities in 2014.

Dividend

The Directors are recommending a final dividend
of 10.0 pence per share which, together with
the interim dividend of 7.7 pence, represents a
total for 2012 of 17.7 pence per share. This is
an increase of 6.6% on the 2011 total dividend
of 16.6 pence. The final dividend is payable on
14 May 2013 to shareholders on the register
at the close of business on 5 April and 4.0 pence
will be paid as a PID, net of withholding tax
where appropriate with the balance paid as
a normal dividend. As has been the case in
recent years, there will be no scrip alternative
although the dividend reinvestment plan
remains available to shareholders.

HAMMERSON ANNUAL REPORT 2012

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Balance sheet

Equity shareholders’ funds increased by £79 million over the course of 2012 and stood at £3.9 billion at the end of the year, whilst EPRA net
asset value per share was up 2.3% at £5.42. The uplift in the value of our investment in Value Retail, profit on disposals and adjusted profit were
the principal contributors to the increase, although these were partly offset by dividends, the net revaluation deficit on the property portfolio
and the costs related to the redemption of the floating rate reset bonds and unsecured euro-bond.

Movement in net asset value

31 December 2011

Revaluation – continuing investment portfolio

Revaluation – continuing developments

Revaluation – investments in Value Retail

Profit on disposals

Premium and costs – on redemption of bond and of floating rate reset bonds

Adjusted profit for the year

Dividends

Exchange and other

31 December 2012

* Excluding deferred tax and the fair value of derivatives, calculated in accordance with EPRA best practice.

Equity shareholders’ funds*
£m

EPRA NAV*
£ per share

3,772

(68)

113

(56)

149

(121)

3,860

5.30

(0.10)

0.03

0.16

0.06

(0.08)

0.21

(0.17)

0.01

5.42

Our exposure to exchange translation
differences on euro denominated assets is
hedged with a mix of euro borrowings and
derivatives. At the end of December 2012,
80% of the value of euro-denominated assets
was hedged, in line with our policy. Interest
on euro debt also acts as a hedge against
exchange differences arising on rental income
from our French portfolio and, in 2012, 94%
of the relevant income was hedged in this way.

The average maturity of the Group’s debt
at 31 December 2012 was approximately
seven years and the chart opposite shows
the pattern of maturities for our facilities
and bonds. As part of the management of
near-term maturities, we completed a tender
offer in May for €220 million of the Company’s
€700 million 4.875% unsecured bonds due in
2015. An exceptional charge of £13.8 million
reflected the premium and costs paid on
the repurchased bonds, but we achieved a
lower running cost of debt as the debt was
refinanced at floating rates of 2.2%. This
should result in a saving of approximately
£5.0 million per annum.

In April part of the bank debt which matured
in 2012 was refinanced by the proceeds from
a new £125 million syndicated five-year
revolving credit facility. The facility will
increase to £150 million in April 2013 and
carries a margin of 150 basis points over
LIBOR. An agreement for an additional
£175 million facility with similar terms was
signed in December and, when available in
April 2013, it will be used to refinance the
£150 million facility maturing at the same
time. We issued a €500 million 2.75%
seven-year bond in September. The low
coupon will reduce our average cost of
borrowing over the longer term as existing
bonds are refinanced at lower rates of interest.
We believe that the sterling, euro and private
placement bond markets will be available to
Hammerson in the medium term to replace
existing bank borrowings as they mature. We
will continue to monitor these markets and
consider accessing them as appropriate.

Liquidity, comprising cash and undrawn
committed facilities, was £696 million
at the end of December 2012.

Financing

Net debt at 31 December 2012, comprising
borrowings of £2.1 billion less cash of
£66 million was £2.0 billion, some £72 million
higher than at the end of the prior year. During
the year cash and deposits reduced by
£34 million reflecting a £140 million cash
inflow from operating activities, £648 million
of capital expenditure and acquisition outflows,
disposal proceeds of £585 million, a £118 million
outflow in respect of financing activities and
other net inflows totalling £7 million.

We have a policy of maintaining a minimum of
50% of debt at fixed rates of interest, although
at higher gearing levels this level may be
increased. Over the course of 2012, the
proportion of fixed rate debt was reduced
from 88% to 80%. The increased exposure to
floating rate debt allows us to benefit from the
continuing low interest rate environment whilst
maintaining the security offered by fixed rates of
interest on the majority of debt. This rebalancing
was achieved through the part buyback of the
fixed rate 2015 bonds and their replacement
with floating rate bank facilities, and by changing
£250 million of borrowings from fixed to
floating rates using interest rate swaps.

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Financial review

DEBT MATURITY PROFILE AT 31 DECEMBER 2012 (£M)

900

800

700

600

500

400

300

200

100

157

2013

1
2014

505

389

299

125

401

248

297

198

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

Bank debt drawn

Secured debt

Euro bonds

Sterling bonds

Undrawn facilities

We monitor the Group’s financial structure
against guidelines approved by the Board,
currently including: gearing of no more than
85% for an extended period; interest cover of
at least 2.0 times; and a net debt to EBITDA
ratio of less than ten times. At 31 December
2012, the ratios were 53%, 2.8 times
and 7.9 times respectively. Hammerson’s
unsecured credit is rated at A- by Fitch
and Baa2 by Moody’s.

The financial covenants of the Group’s
unsecured bank facilities are that the Group’s
gearing, defined as the ratio of net debt to
shareholders’ equity, should not exceed 150%
and that interest cover, defined as net rental
income divided by net interest payable, should
be not less than 1.25 times. The same gearing
covenant applies to three of the Company’s
unsecured bonds, whilst the remaining bonds
contain a covenant that gearing should not

exceed 175%. The bonds have no covenant for
interest cover. As noted above, Hammerson’s
financial ratios are comfortably within these
covenants. Financing risk is discussed further
within Principal Risks and Uncertainties on
page 38.

Key financing metrics are shown in the
table below.

Key financing metrics

Net debt (£m)

Gearing (%)

Loan to value (%)

Liquidity – cash and undrawn facilities (£m)

Weighted average cost of finance (%)

Interest cover (times)

Net debt/EBITDA (times)

Debt fixed/hedged (%)

31 December
2012

31 December
2011

2,036

1,964

696

5.0

2.8

7.9

696

5.2

2.6

7.7

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Property portfolio
information

8y e a r s

The weighted average
unexpired lease term
is eight years

Security and quality of income

With a weighted average unexpired lease term of more than eight years, our retail portfolio provides a secure income stream with the potential
for growth.

The continuing portfolio was 2.0% reversionary at 31 December 2012, compared with 3.5% at the end of the prior year. The UK portfolio was
1.5% reversionary whilst in France the figure was 3.7%. Additional income of £16.4 million per annum could be secured from our portfolio by
2015, assuming leases are renewed or pre-let and rent reviews are agreed at current ERVs.

lease exPiries and breaks

Lease expiries and breaks
as at 31 December 2012

Notes

United Kingdom

Retail: Shopping centres

Retail parks

Other UK

Total United Kingdom

France: Retail

Group

Retail

Other UK

Total Group

Rents passing that
expire/break in

ERV of leases that
expire/break in

Weighted average
unexpired lease term

2014
£m

9.2

1.4

10.6

1.1

11.7

6.9

17.5

1.1

18.6

2015
£m

12.6

4.7

17.3

2.5

19.8

4.4

21.7

2.5

24.2

2013
£m

18.8

8.7

27.5

3.8

31.3

11.2

38.7

3.8

42.5

2014
£m

9.7

1.5

11.2

1.0

12.2

7.4

18.6

1.0

19.6

2015
£m

12.6

4.3

16.9

2.7

19.6

4.7

21.6

2.7

24.3

to break
years

to expiry
years

7.0

9.7

8.1

6.1

8.0

1.2

6.4

6.1

6.4

8.6

10.5

9.4

8.0

9.3

4.6

8.2

8.0

8.2

2013
£m

15.4

6.4

21.8

3.5

25.3

10.4

32.2

3.5

35.7

Notes
1 The amount by which rental income, based on rents passing at 31 December 2012, could fall in the event that occupational leases due to expire are not renewed or replaced by new

leases. For the UK, it includes tenants’ break options. For France, it is based on the date of lease expiry.

2 The ERV at 31 December 2012 for leases that expire or break in each year and ignoring the impact of rental growth and any rent-free periods.

The table above shows that, during the period from 2013 to 2015, leases with current rents passing of £78.5 million will expire or are subject
to tenants’ break clauses. We estimate that additional rental income of £7.9 million per annum could be secured in respect of expiries. We have
assumed renewals take place at current rental levels and have excluded tenant break options from this calculation, as we consider the probability
that they will be exercised to be low. This is not a forecast and takes no account of void periods, lease incentives or potential changes to rental values.

HAMMERSON ANNUAL REPORT 2012

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Business and financial review

Property portfolio information

rent reviews

Rent reviews as at
31 December 2012

Notes

United Kingdom

Retail: Shopping centres

Retail parks

Other UK

Total United Kingdom

Rents passing subject
to review in

Projected rents at current ERV of
leases subject to review in

Outstanding
£m

20.6

23.6

44.2

2.1

46.3

2013
£m

33.0

8.3

41.3

1.2

42.5

2014
£m

16.1

9.5

25.6

1.2

26.8

2015
£m

10.6

24.1

34.7

2.7

37.4

Outstanding
£m

22.7

24.4

47.1

2.2

49.3

2013
£m

34.1

8.7

42.8

1.2

44.0

2014
£m

17.8

10.0

27.8

1.3

29.1

2015
£m

11.4

24.9

36.3

2.8

39.1

Notes
1 Rents passing at 31 December 2012, after deducting head and equity rents, which are subject to review in each year.
2 Projected rents for space that are subject to review in each year, based on the higher of the current rental income and the ERV as at 31 December 2012 and ignoring the impact of

changes in rental values before the review date.

In the UK, on the assumption that outstanding
rent review negotiations are concluded at
rental values prevailing at the time of review,
we would secure £3.0 million of additional
annual rental income. Over the next three
years, leases with rents passing of £106.7 million
are subject to review. If reviewed to current
rental values, rents estimated at £112.2 million
per annum would be secured, resulting in an
annual rental increase of £5.5 million. This is
not a forecast and takes no account of potential
changes in rental values before the relevant
review dates.

The majority of leases in our French portfolio
are not subject to periodic review, but increase
annually by indexation.

Tenant covenant strength

At the end of 2012, our ten most significant
retail occupiers accounted for £63.8 million,
or 20.5%, of rents passing from the
continuing portfolio.

Retail – continuing portfolio

Tenant

B&Q

H&M

Home Retail Group

DSG Retail

Arcadia

Boots

Inditex

New Look

Debenhams

Total

% of total passing rent

4.0

2.2

2.1

2.0

1.7

1.5

1.2

20.5

We use a credit rating agency to monitor the
credit ratings of our key retailers and to assess
the covenant strength of prospective tenants.
The agency’s risk indicator scale runs from one
(low risk) to five (high risk). A score of two
indicates ‘lower than average risk’. All of the
top ten retail tenants were rated at ‘one’ at
31 December 2012. Tenants scoring ‘one’ or
‘two’ comprised 82% of the passing rents of
the UK retail portfolio and the average score
in that portfolio was 1.6.

In our French portfolio the proportion of
tenants with a minimum rating of lower than
average risk was 81% and the average score
was 1.8.

At 27 February 2013, 52 retail units in the UK
were let to tenants in administration, of which
24 continued to trade. In our French portfolio,
all of the 28 units let to tenants in administration
continued to trade. In total, income from tenants
in administration represented 2.3% of the
Group’s passing rents. However, for tenants in
administration and no longer trading, the figure
fell to 0.7%. The equivalent data as at 30 June
2012 was 2.0% and 0.6% respectively.

Collection rates

Despite the challenging economic
environment, our rent collection rates
continue to demonstrate the underlying
strength of the tenant base in the portfolio.
Within 14 days of the December 2012
quarter day, 99% of UK and 93% of French
rents had been collected.

HAMMERSON ANNUAL REPORT 2012

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Property portfolio information

investment ProPerty – valuation data

Valuation data for investment property
for the year ended 31 December 2012

Properties
at valuation
£m

Revaluation
in the year
£m

Capital
return
%

Notes

United Kingdom

Retail: Shopping centres

Retail parks

Other UK

Total United Kingdom

Continental Europe

France: Retail

Group

Retail

Other UK

Total investment portfolio

Developments

Total continuing operations

Discontinued operations

Total Group

2,412.9

1,422.6

3,835.5

158.9

3,994.4

(21.2)

(30.6)

(51.8)

(17.3)

(69.1)

1,188.3

0.8

5,023.8

158.9

5,182.7

275.7

5,458.4

194.5

5,652.9

(51.0)

(17.3)

(68.3)

19.8

(48.5)

(1.4)

(49.9)

(0.8)

(2.5)

(1.4)

(8.3)

(1.7)

0.8

(0.8)

(8.3)

(1.1)

11.5

(0.5)

5.3

0.1

Initial
yield
%

5.4

5.6

5.4

5.1

5.3

5.6

5.3

True
equivalent
yield
%

6.0

6.3

6.1

6.6

6.1

5.6

6.0

6.6

6.0

Total
return
%

4.3

3.0

3.9

(3.4)

3.5

5.9

4.4

(3.4)

4.1

11.3

4.5

10.7

5.0

Notes
1 Annual cash rents receivable, net of head and equity rents and the cost of vacancy, as a percentage of gross property value, as provided by the Group’s external valuers. Rents receivable

following the expiry of rent-free periods are not included. Rent reviews are assumed to have been settled at the contractual review date at ERV.

2 The capitalisation rate applied to future cash flows to calculate the gross property value. The cash flows reflect the timing of future rents resulting from lettings, lease renewals and rent

reviews based on current ERVs and assuming rents are received quarterly in advance. The property true equivalent yields are determined by the Group’s external valuers.

3 Further analysis of development properties by segment is provided in note 3B on page 94.
4 The weighted average remaining rent-free period is 0.6 years.

HAMMERSON ANNUAL REPORT 2012

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investment Portfolio – rental data

Rental data for investment portfolio
for the year ended 31 December 2012

Notes

United Kingdom

Retail: Shopping centres

Retail parks

Other UK

Total United Kingdom

Continental Europe

France: Retail

Group

Retail

Other UK

Total continuing investment portfolio

Income from developments and other sources
not analysed above

Total continuing operations

Discontinued operations

Total Group – as disclosed in note 3A
to the accounts

Selected data for the year ended 31 December 2011

Gross
rental
income
£m

141.2

70.9

212.1

16.2

228.3

Net
rental
income
£m

117.0

66.8

183.8

13.9

197.7

69.1

61.3

281.2

16.2

297.4

0.2

297.6

28.0

245.1

13.9

259.0

(0.2)

258.8

24.1

325.6

282.9

Group

Retail

Other UK

Total continuing investment portfolio

282.8

23.0

305.8

243.3

20.7

264.0

Vacancy
rate
%

1.9

1.8

1.9

9.1

2.3

2.5

2.0

9.1

2.3

n/a

0.3

1.8

7.6

2.1

Average
rents
passing
£/m²

495

185

340

175

325

Rents
passing
£m

146.3

85.3

231.6

11.1

242.7

Estimated
rental
value
£m

150.4

88.7

239.1

12.6

251.7

325

69.0

73.4

340

175

325

n/a

570

300.6

11.1

311.7

n/a

15.6

312.5

12.6

325.1

n/a

12.5

Reversion/
(over-
rented)
%

1.0

2.1

1.4

2.7

1.5

3.7

1.9

2.7

2.0

n/a

(25.4)

350

165

330

281.1

11.8

292.9

295.9

13.6

309.5

3.4

5.5

3.5

Notes
1 The ERV of the area in a property, or portfolio, excluding developments, which is currently available for letting, expressed as a percentage of the ERV of that property or portfolio.
2 Average rent passing at 31 December 2012 before deducting head and equity rents and excluding rents passing from anchor units and car parks.
3 The annual rental income receivable from an investment property at 31 December 2012, after any rent-free periods and after deducting head and equity rents.
4 The estimated market rental value of the total lettable space in a property at 31 December 2012, after deducting head and equity rents, calculated by the Group’s valuers.
5 The percentage by which the ERV exceeds, or falls short of, rents passing together with the estimated rental value of vacant space, all at 31 December 2012.

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Governance

Chairman’s introduction

Dear Shareholder

Your Board is collectively responsible to shareholders for the long-term success of the Group, and sets the strategic direction, governance and
values of the business. Effective governance is important to our organisation and during the year the Board has sought to review and maintain
appropriate governance practices whether or not those are mandatory.

In the section that follows we set out our approach to corporate governance and provide further details about Board membership and our
governance framework and report on the activity of the Board and its Committees during the year.

During 2012 we welcomed Gwyn Burr as a Non-Executive Director to the Board. Gwyn brings significant expertise in understanding and
delivering customer service for major retail brands, experience which is fundamental to our future strategy. At the beginning of 2013 we also
welcomed Jean-Philippe Mouton as an Executive Director. Jean-Philippe is currently Managing Director for Hammerson France, a position he
has held since 2009. He will retain management responsibility for the French business, as well as assuming responsibility for Group marketing.
His wide commercial and marketing background will prove highly valuable to the Board, as we focus on creating winning retail destinations for
the future.

We are a diverse Board and the Directors come from a range of business backgrounds, as you can see from their biographies set out on
pages 52 and 53. I believe that we have the balance of skills and depth of experience to add real value to the Company. When considering any
future appointments we will continue to consider diversity as part of the robust, merit-based approach that we use for the consideration of all
Board appointments. We do, however, keep the make-up of the Board under review and we also appraise the performance of the Board, its
Committees and individual Directors annually.

As announced in January 2013, I will retire as Chairman at the AGM in May and be succeeded by David Tyler who joined the Board in January
2013. He was appointed following a thorough process conducted by the Board under the leadership of Anthony Watson, Senior Independent
Director, with the benefit of external advice. David has considerable experience of both retail and finance, which will prove invaluable as the
Company continues in its aim to be the best owner-manager and developer of retail property in Europe.

John Hirst has been a Director of Hammerson for nine years and Chairman of the Audit Committee for over seven years. In light of my decision
to retire, the Nomination Committee determined that John Hirst remained independent and decided that, notwithstanding his length of service,
the Board would ask him to continue as a Non-Executive Director and as Chairman of the Audit Committee until the conclusion of the 2014
AGM. I am pleased to say John has confirmed his willingness to do so.

You can read about the work of our Nomination Committee on page 56, and of our Audit Committee on pages 58-60.

John Nelson
Chairman

HAMMERSON ANNUAL REPORT 2012

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Our Board

BOARD EXPERIENCE BY SECTOR*

BOARD COMPOSITION*

BOARD DIVERSITY*

IT/Communications/
Marketing
Property

Retail

Chairman

Executive Directors

Non-Executive Director (9 years)

Finance/Investment

Independent Non-Executive Directors

Male

Female

1
4
1
6

Government, Education,
Charity etc
Industry

* As at 2013 AGM

John Nelson 1
Chairman

David Atkins 2
Chief exeCutive

Timon Drakesmith 3
Chief finanCial
OffiCer

Peter Cole 4
Chief investment
OffiCer

Jean-Philippe Mouton 5
exeCutive DireCtOr

Anthony Watson CBE 6
nOn-exeCutive
DireCtOr anD
seniOr inDepenDent
DireCtOr

Gwyn Burr 7
nOn-exeCutive
DireCtOr

Jacques Espinasse 8
nOn-exeCutive
DireCtOr

Terry Duddy 9
nOn-exeCutive
DireCtOr

John Hirst 10
nOn-exeCutive
DireCtOr

Judy Gibbons 11
nOn-exeCutive
DireCtOr

HAMMERSON ANNUAL REPORT 2012

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Our Board

a balanced and
experienced
Board

John Nelson
Chairman (Age 65)

Appointed to the Board: 1 May 2004.
Committee Membership: Remuneration
Committee and Chairman of the Nomination
Committee.
Skills and experience: John Nelson is a
Chartered Accountant with a strong banking
background. He was appointed as Chairman
of Lloyd’s of London in October 2011. He is
also a senior advisor to Charterhouse Capital
Partners LLP.
Other appointments: Trustee of the
National Gallery and chairman of its
development board.
Past appointments: Deputy chairman and
senior independent director of Kingfisher
plc. Non-executive director of BT Group
plc, Cazenove Group Limited, J.P. Morgan
Cazenove Holdings, Woolwich plc and
English National Opera. Member of the
chairman’s advisory group of KPMG.

David Atkins
Chief Executive (Age 46)

Appointed to the Board: 1 January 2007
and appointed Chief Executive on
1 October 2009.
Skills and experience: David Atkins is
a Chartered Surveyor who joined the
Company in 1998. His career at Hammerson
began as Group Property Executive,
responsible for strategy and investment
performance, where he worked on a number
of overseas transactions, particularly in
France. In 2002 he took responsibility for
the UK retail parks portfolio and in 2006
he became responsible for the wider UK
retail portfolio.
Other appointments: Chairman of the
European Public Real Estate Association.
Director and junior vice president of
the British Council of Shopping Centres.
Member of the policy committee of the
British Property Federation and the advisory
committee of the British Council of Shopping
Centres. Member of the Royal Institution of
Chartered Surveyors – Commercial Property
Market Forum.

Peter Cole
Chief Investment Officer (Age 54)

Appointed to the Board: 1 October 1999.
Skills and experience: Peter Cole is a
Chartered Surveyor who joined the Company
in 1989 as a Senior Development Surveyor
and was appointed to the Board of the
Company’s UK business in 1992. He has had
responsibility for Hammerson’s development,
acquisition and disposal programme since
being appointed to the Board. In addition, he
has led major re-generation and investment
projects.
Past appointments: President and general
council member of the City Property
Association.

HAMMERSON ANNUAL REPORT 2012

Jean-Philippe Mouton
Executive Director (Age 51)

Appointed to the Board: 1 January 2013.
Skills and experience: Jean-Philippe
Mouton joined Hammerson in 2003 with
responsibility for property leasing, development
and asset management in France. In 2006,
he assumed responsibility for managing the
French portfolio as Director of Operations
and in 2009 became the Managing Director
of Hammerson’s French business. Jean-
Philippe’s in-depth experience of the French
business strengthens the Board’s integrated
approach across the UK and France. He also
has Board responsibility for marketing where
he can draw on years of experience working
for Disneyland Paris.
Past appointments: Director of strategic
planning at Disneyland Paris and roles at
The Walt Disney Company and Standard
Chartered Bank.

Timon Drakesmith
Chief Financial Officer (Age 47)

Appointed to the Board: 30 June 2011.
Skills and experience: Timon Drakesmith
is a Chartered Accountant who joined the
Company in 2011 as Chief Financial Officer.
He has experience of working in commercial
property having spent 6 years as finance
director at Great Portland Estates plc.
Other appointments: Non-executive
director of Value Retail PLC and chairman
of the British Property Federation’s finance
committee.
Past appointments: Finance director of the
MK Electric division of Novar plc and group
director of financial operations of Novar plc.
Other financial roles at Credit Suisse, Barclays
and Deloitte Haskins and Sells.

Anthony Watson CBE
Non-Executive Director and Senior
Independent Director (Age 67)

Appointed to the Board: 1 February 2006.
Committee Membership: Audit
Committee, Nomination Committee and
Chairman of Remuneration Committee.
Skills and experience: Anthony Watson
has a strong financial and legal background.
He is a frequent speaker and contributor
to corporate governance debates and is
well placed to understand shareholders’
requirements, essential for his role as
Senior Independent Director.
Other appointments: Non-executive
director of Lloyds Banking Group plc and senior
independent director of both Witan Investment
Trust plc and Vodafone Group plc. Member of
the advisory board of the Association of
Corporate Treasurers and the board of the
Shareholder Executive. Chairman of Lincoln’s
Inn investment committee. Director of the
Queen’s University of Belfast foundation board.
Past appointments: Chairman of Marks
& Spencer Pension Trust Limited, Asian
Infrastructure Fund Limited and Strategic
Investment Board (Northern Ireland).
Member of Norges Bank Investment
Management advisory board.

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Our Board

7
Gwyn Burr
Non-Executive Director (Age 50)

Appointed to the Board: 21 May 2012.
Committee Membership: Audit Committee.
Skills and experience: Gwyn Burr has
expertise in understanding and leading
customer service processes for major retail
brands which supports Hammerson’s focus
on retail.
Other appointments: Customer service
and colleague director at J Sainsbury plc.
Member of board, remuneration committee
and chairman of nominations committee of
Sainsbury’s Bank plc. Non-executive director
of the Financial Ombudsman Service. Non-
executive director of Wembley Stadium.
Chair of Business in the Community (BITC)
community investment board.
Past appointments: Senior roles in
marketing, customer service and financial
services at Asda plc. Non-executive
director at the Principality Building Society.
Director at Incorporated Society of British
Advertisers.

John Hirst
Non-Executive Director (Age 60)

Appointed to the Board: 1 March 2004.
Committee Membership: Chairman of
Audit Committee.
Skills and experience: John Hirst is a
Chartered Accountant. He has extensive
corporate experience having held senior
positions at ICI plc and Premier Farnell plc
where he successfully led a re-positioning
of the business.
Other appointments: Chief executive of
the Met Office and chairman of the audit
committee of the World Meteorological
Organization. Director of Epilepsy Research
UK and a trustee of Epilepsy Bereaved.
Member of Exeter University Business
School’s advisory board.
Past appointments: Group chief executive
of Premier Farnell plc and chairman of
ASBISC Enterprises plc.

Jacques Espinasse
Non-Executive Director (Age 69)

Terry Duddy
Non-Executive Director (Age 56)

Appointed to the Board: 1 May 2007.
Committee Membership: Audit Committee.
Skills and experience: Jacques Espinasse has a
BBA and MBA, which complement his long
business career in many different sectors,
based in Brussels, London and Paris. He has
extensive knowledge of and insight into the
French market.
Other appointments: Non-executive director
and chairman of the audit committee of AXA
(Holdings) Belgium, AXA Bank Europe and
AXA Belgium. Non-executive director and
member of the audit and remuneration
committees of LBPAM and SES. Chairman
and chief executive officer of the Foundation
JED-Belgique.
Past appointments: Chief financial officer
of Vivendi. Non-executive director of Canal+
France, Maroc Telecom, SFR and Universal
Music Group.

Judy Gibbons
Non-Executive Director (Age 56)

Appointed to the Board: 1 May 2011.
Committee Membership: Audit Committee
and Remuneration Committee.
Skills and experience: Judy Gibbons
has a background in software, internet
technologies, digital media, mobile
applications and e-commerce. She also
has extensive experience in marketing and
international business.
Other appointments: Non-executive
director of Guardian Media Group plc,
Michael Kors Holdings Limited and Virgin
Money Giving and chairman of Refresh
Mobile Limited.
Past appointments: Non-executive
director of O2 plc. Corporate vice president
of Microsoft Corporation. Venture partner
of Accel Partners. Senior roles in marketing
and product development at Apple Inc. and
Hewlett-Packard.

Appointed to the Board: 3 December
2009.
Committee Membership: Nomination
Committee and Remuneration Committee.
Skills and experience: Terry Duddy is
chief executive of Home Retail Group plc. In
addition to the capabilities and experience
related to managing a large public company,
he brings specific insight into customer
behaviour and retail markets, which is a major
focus for Hammerson’s strategy.
Other appointments: Trustee of Education
and Employer’s Taskforce.
Past appointments: Director of DSG Retail
Limited.

David Tyler (pictured top left)
Non-Executive Director (Age 60)

Appointed to the Board: 12 January 2013.
Committee Membership: Remuneration
Committee.
Skills and experience: David Tyler is an
experienced chairman having served in
that role previously at Logica plc and 3i
Quoted Private Equity plc and currently
at J Sainsbury plc. He has considerable
experience of both retail and finance
and is a Management Accountant.
Other appointments: Chairman of
J Sainsbury plc and non-executive director
of Burberry plc. Fellow of the Chartered
Institute of Management Accountants
and a member of the Association of
Corporate Treasurers.
Past appointments: Finance director of
GUS plc and has held senior financial and
general management roles with Christie’s
International plc, County NatWest Limited
and Unilever PLC. Chairman of Logica plc
and 3i Quoted Private Equity plc and a
non-executive director of Experian plc and
Reckitt Benckiser Group plc.

HAMMERSON ANNUAL REPORT 2012

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leadership

Leadership

Our Board is collectively
responsible for our
long-term
success

During 2012 the Board continued
to consider the main principles and
provisions of the 2010 UK Corporate
Governance Code (the ‘UK Code’) and
has sought to put in place practices
to enable full compliance with these.
Except where otherwise stated, the
Company has complied with the UK
Code throughout the year ended
31 December 2012.

The role and structure of the Board

The Board is collectively responsible to the
Company’s shareholders for the long-term
success of the Group and the long-term
strategic and operational objectives of the
Group. The Board sets the strategic direction,
governance and values of the Group and has
ultimate responsibility for the management,
direction and performance of the Group.
The Board is a diverse group, the majority of
whom are independent. Whilst the Board has
a formal list of matters specifically reserved
for its decision, it delegates authority to
Committees of the Board to assist in meeting
its business objectives whilst ensuring a
sound system of internal control and risk
management.

unable to attend a meeting, their comments
on papers to be considered at the meeting
may be provided in advance to the Chairman.
The following table shows current Directors’
attendance at Board and Committee meetings
they were eligible to attend in 2012:

Board

Audit Remuneration Nomination

Director

John
Nelson

10/10

David Atkins 10/10
Peter
Cole

10/10

Timon
Drakesmith 10/10

–

Gwyn Burr1

5/6

2/2

6/6

3/3

–

Anthony Watson continued to serve as Senior
Independent Director during 2012 and is
available to address shareholders’ concerns
on governance and, if necessary, other
issues that have not been resolved through
the normal channels of communication with
the Chairman, or Chief Executive, or Chief
Financial Officer, or in cases when such
communications would be inappropriate.
The Senior Independent Director can also
deputise for the Chairman in his absence, act
as a sounding board for the Chairman and
be available to advise and counsel all Board
colleagues. Biographical details and the dates
of appointment of all current Directors are
provided on pages 52 and 53.

Terry
Duddy2

Jacques
Espinasse

Judy
Gibbons

John
Hirst

Anthony
Watson3

9/10

–

6/6

3/3

Board decisions and activity

10/10

4/4

–

10/10

4/4

6/6

10/10

4/4

–

The Board, which has ultimate responsibility
for Hammerson’s business and financial
strategy and for its overall management,
operates within the terms of its written
authorities, and has a formal schedule of
matters reserved for its approval, which are
reviewed annually. These matters include:

9/10

4/4

6/6

3/3

1 Gwyn Burr joined the Board on 21 May 2012 and was

unable to join the June Board meeting due to an unresolved
diary clash.

The Board currently consists of the Chairman,
four Executive Directors and seven Non-
Executive Directors, all of whom are
considered to be independent by the Board.

2 Terry Duddy was unable to attend the November
Board meeting due to his plane being grounded
in the New York storms.

3 Anthony Watson was unable to join the June

Board meeting due to an unresolved diary clash.

The Board met 10 times during 2012.
Non-Executive Directors are encouraged
to communicate directly with Executive
Directors and senior management between
formal Board meetings. In addition to regular
Board meetings, the Board takes part in an
annual strategy day at which it considers the
future direction of the Company at the start
of the business planning process. All Directors
are expected to attend all meetings of the
Board, and of those Committees on which
they serve, and to devote sufficient time to
the Company’s affairs to enable them to fulfil
their duties as Directors. When Directors are

There were further ad hoc telephone Board
meetings called at short notice to deal with
transactional matters.

The Chairman, John Nelson, was independent
on his original appointment to the Board.
The Chairman sets the Board agenda and
ensures that important matters and, in
particular, strategic issues, receive adequate
time and attention at meetings. The roles and
responsibilities of the Chairman and Chief
Executive, are clearly defined and documented
and approved by the Board.

HAMMERSON ANNUAL REPORT 2012

– strategy

– acquisition and divestment policy

– major capital expenditure projects

– treasury and financial risk management

– corporate governance

– major contracts

– risk management

– remuneration policy

– monitoring performance

– internal control

– human resources

– corporate responsibility

– reporting to shareholders.

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Leadership

areaS oF board FocuS during 20121

Feb

Feb march april

may

June

July

Sept

nov

dec

Core items
Chief Executive report

Finance report

Property portfolio

Timetabled items
Strategic planning and review

Risk management and internal controls

Board briefings

Financial reporting

Shareholder interaction

Corporate operational items (IT, pensions, HR)

Corporate social responsibility

Financial risk management

Corporate governance

Asset oversight

1 Two scheduled meetings were held in February. No meeting was held in January, August or October.

A schedule of regular matters to be addressed
by the Board and its Committees is agreed
on an annual basis and information is supplied
to Directors in a manner that enables them
to fulfil their responsibilities. This includes the
circulation of comprehensive briefing papers
one week prior to Board and Committee
meetings. Presentations on business, financial
and operational issues are made regularly
to the Board by senior management and
the annual programme of Board meetings is
tailored to enable some meetings to be held at
the Company’s properties. During 2012, the
Board visited the Company’s shopping centres
in Birmingham and offices in Paris. In addition
to the encouragement of strategic debate at
all Board meetings, the annual strategy day
provides a forum at which all Directors are
invited to challenge strategic direction and
help develop strategic options for the future.

Board Committee structure

Specific responsibilities are delegated to
the Audit, Remuneration and Nomination
Committees of the Board, each of which
has written terms of reference that deal
clearly with the authorities and duties of
the Committee. Copies of all the Committee
terms of reference, which are reviewed
annually, are available on the Company’s
website. Each of these Committees is
comprised of independent Non-Executive
Directors of the Company who are appointed
by the Board on the recommendation of the
Nomination Committee. The Company
Secretary is secretary to each Committee.
The Chairman of each Committee reports
the outcome of meetings to the Board.

our governance Framework

Hammerson plc Board

Audit
Committee

Remuneration
Committee

Nomination
Committee

Ad hoc
committee/s

Group Executive Committee1
chaired by the Chief Executive

Risk and Controls
Committee2

Operating Boards

UK Retail Executive

Hammerson France
Management Board

1 The Group Executive Committee (GEC), formed and chaired by the Chief Executive, consists of the senior management
in the business. The purpose of the GEC is to provide executive management of the Company within the strategy and
budget approved by the Board. The GEC therefore supports the Board and the Chief Executive in the discharge of their
duties towards the Company by implementing at an operational level decisions agreed by the Board. The GEC has its own
terms of reference.

2 For a description of the Risk and Controls Committee, see page 60.

committee memberShip

Audit Committee

Remuneration Committee

Nomination Committee

Director

Tenure*

Director

Tenure*

Director

John Hirst (Ch)

8.5 years

Anthony Watson (Ch) 7 years

John Nelson (Ch)

Gwyn Burr

Jacques Espinasse

Judy Gibbons

1 year

6 years

2 years

John Nelson

Terry Duddy

Judy Gibbons

Anthony Watson

3.5 years

David Tyler

8.5 years

Terry Duddy

Anthony Watson

2 years

1 year

4 months

Tenure*

8 years

3 years

6 years

* As at 2013 AGM

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
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effectiveness

Effectiveness

ensuring an appropriate balance of
SkillS, knowledge
and independence

on our Board

nOminatiOn COmmittee

The Committee had two scheduled meetings
in 2012 to conduct regular business. The
Committee undertakes an annual review of
succession planning and ensures that the
membership and composition of the Board,
including the balance of Executive Directors
and Non-Executive Directors, continues to
be appropriate. As part of these reviews, the
Committee considers the independence of
Non-Executive Directors and the balance
of skills and knowledge required of both
Executive Directors and Non-Executive
Directors. In addition to identifying potential
successors for executive positions, senior
functional positions within the Company
are also considered.

During 2012, the Nomination Committee
worked on two Non-Executive Director
appointments. An executive search firm
was appointed to assist with the search for
an additional Non-Executive Director with
retail and marketing experience. A number of
candidates were considered and interviewed.
The preferred candidate, Gwyn Burr, met
with each member of the Board, prior to her
appointment in May 2012.

When John Nelson indicated to the Board
that he wished to step down as Chairman
following the Annual General Meeting in 2013,
the Nomination Committee agreed a work
plan for appointing his successor. John Hirst
was temporarily co-opted for this purpose
alone, whilst John Nelson was excluded
from Committee discussions concerning his
replacement. Following receipt of proposals
from a number of executive search firms, one
firm was appointed.

A candidate brief, including a job description,
person specification and explanation of
time commitment was created and a long
list proposed by the search consultants. A
number of candidates were interviewed, and
once all the candidates had been interviewed,
David Tyler was identified as the preferred
candidate. David met, or spoke by telephone
with, all Directors and the Board appointed
him in January 2013.

Board balance and appointments
process

The effectiveness of the Board and its
Committees is vital to the success of the
Company. Therefore care is taken, through
the Nomination Committee, to recruit and
appoint Directors who can provide and
maintain an appropriate balance of skills,
experience, independence and knowledge
of the Company. The balance of the Board is
reviewed annually.

The Board is satisfied that the Non-Executive
Directors, each of whom is independent from
management and has no material commercial
or other connection with the Company, are
able to exercise independent judgement. Their
experience, gained from varied commercial
backgrounds, enables them to bring specific
insights and make valuable contributions to
the Company. They challenge assumptions
constructively and effectively and help the
executive management to develop their
thinking. The Nomination Committee has
considered the fact that by the 2013 Annual
General Meeting John Hirst will have served
on the Board for more than nine years. The
Nomination Committee agrees with the NAPF
Corporate Governance Policy and Voting
Guidelines in that it views the UK Code nine-
year ‘rule’ as a milestone rather than a cut
off. The Committee considers that John Hirst
continues to be independent in character and
judgement and of considerable value to the
Board and the Audit Committee.

Diversity

Last year the Company announced its
intention to add to female representation
on the Board as soon as practicable and
in May 2012 Gwyn Burr joined the Board.
The Company believes that diversity, both
at Board level and within management and
staff at the Group, is an important factor for
maximising performance. Within Hammerson
there is significant diversity, including gender
diversity. The male : female ratio in the Group
as a whole is 46:54.

Commitment

Positions held by Non-Executive Directors are
set out on pages 52 and 53 and the Board
is satisfied that each of the Non-Executive
Directors is able to devote sufficient time
to the Company’s business. Non-Executive
Directors are advised on appointment of
the time required to fulfil the role and are
asked to confirm that they can make the
required commitment. Executive Directors are
encouraged to take non-executive positions
in other companies and organisations, to
broaden their experience. The appointment to
such positions is subject to the approval of the
Board which considers, in particular, the time
commitment required.

Conflicts of interest

The Company’s Articles of Association
allow the Directors to authorise conflicts
and potential conflicts of interest, where
appropriate. The Board considers conflicts or
potential conflicts at each Board meeting.

HAMMERSON ANNUAL REPORT 2012

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Governance
Financial statements
Other information

Effectiveness

Development

Information and support

Directors have access to independent
professional advice at the Company’s
expense and to the advice and services of
the Company Secretary who is responsible
to the Board for advice on corporate
governance matters and for ensuring that
Board procedures are followed and that
the Company and the Board operate within
applicable legislation, rules and regulations.
The Company Secretary is also responsible
for facilitating the programme of Directors’
induction, for enabling appropriate training
and development needs to be identified
and addressed, and for Board performance
evaluation. The appointment and removal of
the Company Secretary is a matter requiring
approval of the Board.

Performance evaluation

In accordance with the UK Code, an external
evaluation of the Board’s performance, and
those of its Committees and individual Directors,
was undertaken in December 2010. It is
intended that the next external Board evaluation
will be undertaken in 2013. In the intervening
years, evaluations have been undertaken
internally by the Company Secretary.

The internal evaluation for 2012 commenced
with reviewing the matters for consideration
identified in the December 2011 evaluation
and providing the Board with an update on the
progress made. To perform the November
2012 evaluation, a narrative-based approach
was taken. Questions, grouped around
governance themes taken from the UK Code,
were asked and free text comments were
sought from the Directors. The evaluation was
conducted this way so that it would be more
informative than a questionnaire and scoring
approach and enable the Board to establish
more specifically areas where it could improve
its performance.

There is an induction programme for Non-
Executive Directors in place which is based
on the guidelines issued by the Institute of
Chartered Secretaries and Administrators,
tailored to the specific requirements of
newly appointed external Directors. On
their appointment, Non-Executive Directors
meet with the Chairman and the Chief
Executive and are provided with briefings
on their responsibilities as Directors and
on the Company’s business, finances, risks,
strategy, procedures and the markets in
which the Company operates. Non-Executive
Directors also meet with members of senior
management who provide further information
on the Company’s operations, including
visits to the Company’s properties, and with
representatives from the Company’s auditor
and advisers. Any new Executive Director
receives a tailored programme appropriate to
his or her needs.

All Directors are kept informed of changes
in relevant legislation and regulations and
changing financial and commercial risks, with
the assistance of the Company’s legal advisers
and auditor where appropriate. Executive
Directors are subject to the Company’s
performance development review process
through which their performance against
predetermined objectives is reviewed and
their personal and professional development
needs considered. Non-Executive Directors
are encouraged to maintain and expand their
knowledge of the Company and visit the
Company’s properties. The performance of
Non-Executive Directors is appraised annually
by the Chairman. The training and personal
development requirements of Non-Executive
Directors are reviewed and agreed as part
of this appraisal process and Non-Executive
Directors are encouraged to attend seminars
and undertake external training at the
Company’s expense in areas considered to
be appropriate for their own professional
development including on issues relevant to
the Board Committees to which they belong.
A record of such training is maintained by the
Company Secretary.

The evaluation concluded that the Board was an
effective team that worked constructively,
inclusively and in a trusting environment.
Recommendations from the evaluation such as
reviewing the composition of the Committees
and reviewing and re-establishment of the
division of responsibilities between the Chief
Executive and Chairman will be carried out
later in 2013. Other recommendations
include additional property visits and periodic
presentations from advisers. These are to be
included in the Board calendar for 2013.

The Chairman meets with the Non-Executive
Directors as necessary, but at least twice each
year, without the Executive Directors present.
The Chairman also carries out a formal Non-
Executive Director performance evaluation
individually with each Non-Executive Director
in order to review whether the Non-Executive
Director continues to be effective and
demonstrate commitment to the role. The
Senior Independent Director chairs an annual
meeting of Executive and Non-Executive
Directors without the Chairman in order to
appraise the Chairman’s performance and to
provide an opportunity to address any other
matters which the Directors might wish to
raise. The outcome of these discussions is
conveyed to the Chairman by the Senior
Independent Director.

Re-election of Directors

In accordance with the requirements of the
UK Code, all Directors, with the exception of
John Nelson who will retire from the Board
at the end of the Annual General Meeting,
are submitting themselves for re-election at
the 2013 Annual General Meeting and will be
subject to annual re-election.

HAMMERSON ANNUAL REPORT 2012

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accountability

Accountability

Our systems and procedures
ensure the

integrity
of our information

auDit COmmittee

Meetings

Review of the year

The Committee meets at least four times
each year with agendas organised around the
Company’s reporting cycle. During 2012 it
met on four occasions.

The Chairman of the Company, the Chief
Executive, the Chief Financial Officer
and other members of the senior finance
management team together with senior
representatives of the external auditor are
invited to attend all or part of meetings as
appropriate. In order to fulfil its duties as
defined in its terms of reference, the Audit
Committee receives presentations and
reviews reports from the Group’s senior
management, consulting as necessary with
the external auditor.

The Committee meets with Deloitte LLP,
the Company’s external auditor, and with
BDO LLP, which undertakes the majority of
the Company’s internal audit reviews, in the
absence of management at least once
each year.

The Company’s external valuer, DTZ, present
the conclusions of their full and half-year
valuations to the Committee. The valuation
is an important exercise and a significant
measurement of the Group’s performance
and in Executive Directors’ remuneration.
The external valuer and external auditor have
full access to each other and the Chairman
of the Committee meets the external valuer
and external auditor as part of the full and
half-year valuations to ensure that they are
each satisfied that there has been a full and
open exchange of information and views.

During the year, the Committee reviewed the
draft Annual Report and the full and half-year
results announcements prior to their approval
by the Board. These reviews considered the
application of the Company’s accounting
policies and practices and any changes to
them, major judgemental areas, adjustments
resulting from the audit and going concern
assumptions. The reviews also included
consideration of the Group’s compliance with
statutory tax obligations, compliance with
accounting standards and with regulatory
requirements, the statement on risk
management and internal control, property
valuations and clarity of disclosure.

The Committee is required to assist the Board
to fulfil its responsibilities relating to the
adequacy and effectiveness of the control
environment and the Group’s compliance
with the UK Code. To fulfil these duties, the
Committee reviewed:

– the external auditor’s management letters

– internal audit reports, including

recommendations arising from them and
the review of progress in implementing
previous recommendations

– reports on the systems of internal controls

and the risk management framework

– the Company’s approach to compliance

with legislation and regulations and to the
prevention of fraud, including arrangements
for staff to raise concerns in confidence

– the recommendations of the 2012 Board
and Committee performance evaluations

– the audit planning reports

– gifts and entertainment and expenses

registers.

The Board has established an Audit Committee
(the ‘Committee’) of five independent Non-
Executive Directors, the membership of which
complies with the UK Code recommendations,
including that at least one member of the
Committee has recent and relevant financial
experience. Its responsibilities are set out in
written terms of reference that are available
on the Company’s website.

John Hirst, the Chairman of the Committee,
is a Chartered Accountant and a member of
the Association of Corporate Treasurers. He
has been closely involved in financial issues as
chief executive of the Met Office since 2007
and as chief executive of Premier Farnell plc
between 1998 and 2005; prior to that he was
group treasurer of ICI plc. Notwithstanding
that John Hirst has been a member of the
Audit Committee for over seven years, and
a Non-Executive Director for nine years,
the Board considers that given his relevant
financial experience it is appropriate that he
should continue to chair the Committee for
the time being. The Committee also consists
of a further four independent Non-Executive
Directors one of whom, Jacques Espinasse,
served as chief financial officer of Vivendi and
currently chairs or serves as a member of the
audit committee of a number of European
companies.

The Committee is responsible for ensuring
that management has systems and
procedures in place to ensure the integrity
of financial information. The Committee
maintains an appropriate relationship with
the Group’s external auditor and reviews the
effectiveness, objectivity and independence
of the external auditor and considers both
the scope of their work and the fees paid
to them for audit and non-audit services.
The Committee reviews the Company’s
internal audit arrangements, internal financial
controls and the audit process and has access
to employees and all documentation and
information it may require.

HAMMERSON ANNUAL REPORT 2012

Strategic review
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Accountability

Where non-audit services are provided, the
fees are based on the work undertaken and
are not success related. Consideration is given
to the nature of and remuneration received for
other services provided by Deloitte LLP to the
Company and confirmation is sought that the
fee payable for the annual audit is adequate
to enable the external auditor to perform its
obligations in accordance with the scope of
the audit. The external auditor’s remuneration
in respect of the year ended 31 December
2012, comprised approximately £754,000
for year end audit and half-year review work
(2011: £527,000) and £375,000 for other
work (2011: £59,000). The total cost of non-
audit services provided by Deloitte LLP in 2012
is considered unusually high.

The Committee has regard to the
recommendations of the Auditing Practices
Board on effective communication between
audit committees and external auditors and
has concluded that the relationship with
Deloitte LLP meets these recommendations.

The Committee has recommended to the
Board that the external auditor should be
reappointed at the 2013 AGM.

Auditor

The Committee is responsible for the
development, implementation and monitoring
of the Group’s policy on external audit in
which is set out the categories of non-audit
services that the external auditor is, and is not,
allowed to provide to the Group. Details are
given below.

The Company’s external auditor is Deloitte
LLP. In accordance with the Ethical Standards
issued by the Auditing Practices Board, the
audit partner responsible for the Company’s
audit matters is changed at least every
five years, most recently in April 2012. The
Committee is fully supportive of the new
provision in the UK Code requiring FTSE 350
companies to put the provision of external
audit services out to tender at least every
ten years. The Committee has reviewed the
performance of the external auditor and is
satisfied that currently Deloitte LLP provides
an appropriate level of service delivered by a
team with an in-depth understanding of our
business and the broader real estate sector.
The Committee’s present intention therefore
is that they will review the requirement to
tender the external audit closer to the time
when the audit partner next rotates. In
forming their opinion on the independence
and objectivity of the external auditor, the
Audit Committee takes into account the
safeguards operating within Deloitte LLP.

Under the Company’s policy governing
the provision of non-audit services by the
external auditor, they may not provide a
service which places them in a position where
they may be required to audit their own
work. Specifically, they are precluded from
providing services relating to bookkeeping or
other services relating to accounting records
or financial statements of the Company,

financial information system design and
implementation, appraisal or valuation
services, actuarial services, any management
functions, investment banking services, legal
services unrelated to the audit, internal audit
outsourcing services, remuneration related
services or advocacy services.

Some services may be provided in specific and
exceptional circumstances and can include tax
compliance work, due diligence and property
related consultancy. Each occasion is
specifically assessed and authorised by an
Executive Director up to a limit of £50,000
and above that limit after review by the
Chairman of the Committee. During 2012,
services provided by Deloitte LLP to the
Company in addition to acting as external
auditor, included due diligence for corporate
and property acquisitions, acting as reporting
accountants for intra-group distributions,
assistance with the electronic filing of accounts,
tax returns and bond compliance work.

To fulfil its responsibilities regarding the
external auditor, the Committee reviewed:

– the scope of the audit as set out in the
external auditor’s engagement letter
for the forthcoming year

– the external auditor’s overall work plan

for the forthcoming year

– the external auditor’s fee proposal

– a report from the external auditor

describing its arrangements to ensure
objectivity and to identify, report and
manage any conflicts of interest

– the extent of non-audit services provided
by the external auditor to ensure that
it is not placed in a position to audit its
own work.

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Accountability

The Company conducts internal audit activities
through a programme of reviews. These
reviews, which are principally undertaken by
BDO LLP, but also on occasion by Company
employees, and the implementation of
recommendations arising from them, are
overseen and coordinated by a Risk and Controls
Committee. This Committee comprises
executives from the finance and operational
parts of the business, is chaired by the Chief
Financial Officer, and is intended to ensure that
internal control is integrated into Hammerson’s
daily operations. The Audit Committee
considers these arrangements annually and is
satisfied that they provide an appropriate
overview of the Company’s internal control
procedures.

Other key elements of the Group’s systems of
risk management and internal control include:

– regular meetings of the Board and the Audit
Committee whose overall responsibilities
are set out in this report

– a management structure that is designed
to enable effective decision-making
with clearly defined responsibilities and
limits of authority. Monthly meetings of
the Group Executive Committee and of
the management committees in the UK
and France are an important part of this
structure

– the maintenance of operational control

manuals setting out a control framework
for management to operate within and
containing guidance and procedures for the
Group’s operations

– the measurement of the Group’s financial
performance on a regular basis against
budgets and long-term financial plans.

The systems of risk management and internal
control and their effectiveness have been
reviewed by the Board for the year under
review and during the period up to the date
of this report and the process accords with
the Turnbull guidance. The Board will continue
to develop its awareness and monitoring
of emerging risks and its approach to the
reporting of risk throughout 2013.

Code of Conduct

The Company has a Code of Conduct which
explains how employees are expected to
fulfil their responsibilities by acting in the best
interests of the Company and in line with
its corporate and financial objectives. This
includes compliance with laws and regulations,
acting fairly in dealing with customers,
suppliers and other stakeholders, maintaining
integrity in financial reporting, treating people
with respect and operating within a controlled
framework which includes environmental
and health and safety policies. A summary
of the Code of Conduct is available on the
Company’s website.

Whistleblowing

The Company has whistleblowing procedures
under which staff may report any suspicion
of fraud, financial irregularity or other
malpractice. No reports of any such matters
have been received for the year under review.
The Company subscribes to the independent
charity, Public Concern at Work, so that staff
may have free access to its helpline. The
whistleblowing procedure is reviewed and
if necessary updated annually to ensure it
remains appropriate.

Risk management and internal control

The Board has ultimate responsibility for
determining the nature and extent of the
significant risks it is willing to take in achieving its
strategic objectives, for maintaining sound risk
management and internal control systems and
for reviewing their effectiveness. Appetite
towards risk is discussed at Board meetings
whenever significant strategic, financial or
operational proposals are discussed, and is
also high on the Board’s agenda at its annual
strategy day. The Group’s risk management
and internal control systems are designed to
safeguard assets against unauthorised use or
disposition, ensure the maintenance of proper
accounting records, provide reliable financial
information and ensure compliance with
relevant legislation, rules and regulations.

There is a regular review process throughout
the year of the effectiveness of the Group’s
systems of risk management and internal control,
including financial, operational and compliance
controls and risk management. These systems
are designed to support the achievement of
business objectives. However, it must be
recognised that any such systems can only
provide reasonable and not absolute assurance
against material misstatement or loss.

Management has established a risk management
framework and procedures necessary to
enable the Directors to report on internal
controls in compliance with the UK Code.
The risk management procedures involve the
analysis, evaluation and management of the
key risks to the Group and include plans for the
continuity of the Company’s business in the
event of unforeseen interruption. The Board,
which reviews the framework and procedures
regularly, has allocated responsibility for the
management of each key risk to Executive
Directors and senior executives within the
Group. Reports on these key risks are made
regularly to the Board. A more detailed
explanation of the Company’s approach to risk
management is set out on pages 36 to 39.

HAMMERSON ANNUAL REPORT 2012

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Other information

relations with
shareholders

Relations with shareholders

We actively seek to

engage
with our investors

During 2012 the Company has undertaken
a wide variety of investor relations activities.
These activities were split across institutional
and private shareholders. In addition to these
events, the Company has held ad hoc meetings
with investors and arranged visits to Company
properties. The Company actively seeks
additional channels through which to engage
with investors. For example, the Chief Executive
is chairman of the European Public Real Estate
Association.

Institutional shareholders

Institutional shareholders represent the largest
group of equity investors and much of the
activity is focused on this group. During 2012,
over twenty-five events were either attended
or hosted by the Company. This included
investor roadshows in London, Paris and
Amsterdam, five roundtable events and five
investor conferences. Visits to key properties
in the UK and Paris were also arranged for
investors and analysts. Wherever possible
the Company is represented by the Executive
Directors. The Chief Executive and Chief
Financial Officer host or attend the majority
of the events held. Key senior executives also
participate in meetings and activities with
institutional shareholders.

The Board receives reports of meetings
with institutional shareholders together with
regular market reports and brokers’ reports.
This enables the Directors to understand
the views of shareholders. The Board takes
account of the corporate governance
guidelines of institutional shareholders and
their representative bodies such as the
Association of British Insurers and the National
Association of Pension Funds.

Private investors

Private investors are actively encouraged
to attend the Annual General Meeting where
they have the opportunity to question the
Board directly. At all other times, investors
are able to raise any concerns or issues with
the Board via the Company Secretary. The
Company also participates in private client
fund managers’ events.

All valid proxy appointment forms are properly
recorded and counted. For each resolution,
after the vote has been taken, information on
the number of proxy votes for and against
the resolution, and the number of shares in
respect of which the vote was withheld, are
given at the meeting and are made available
on the Company’s website.

By Order of the Board

Sarah Booth
General COunsel anD
COmpany seCretary
28 February 2013

Annual General Meeting

The Notice of Annual General Meeting is
dispatched to shareholders, together with
explanatory notes at least 20 working days
before the meeting. Separate resolutions are
proposed on each substantially separate issue
including a resolution relating to the Report
and Accounts.

The Chairmen of the Audit, Remuneration
and Nomination Committees normally attend
the Annual General Meeting and are available
to answer questions. All Directors normally
attend the meeting.

The Board welcomes questions from
shareholders who have an opportunity to raise
issues informally before or formally at the
Annual General Meeting.

For each resolution, the proxy appointment
forms provide shareholders with the option
to direct their proxy vote either for or against
the resolution or to withhold their vote.
The Company will ensure that the proxy
appointment form and any announcement of
the results of a vote will make it clear that a
‘vote withheld’ is not a vote in law and will not
be counted in the calculation of the proportion
of the votes for and against the resolution.

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Remuneration report

remuneration report the alignment of

perFormance
& reward
is fundamental to our policy

Dear Shareholder

It is with pleasure that I introduce the Directors’ Remuneration Report for the year ended 31 December 2012. This report has been prepared
by the Remuneration Committee and approved by the Board.

The Remuneration Committee has kept abreast throughout 2012 of the increased focus on executive pay and reward. The Committee
reviewed the proposals and responded to the consultation papers on executive remuneration and narrative reporting issued by the Department
for Business Innovation and Skills. We will continue to monitor developments related to executive remuneration in 2013. Whilst it is currently
anticipated that any changes will only take effect for the Company from next year, this year’s report seeks to further improve the level and
transparency of disclosure and better demonstrate the link between pay and performance.

In February 2012, the Company announced that it would be a specialist retail REIT. To achieve this we would sell our office assets and reinvest
in our chosen sectors. We also made clear our focus on reducing costs, leveraging our operating platform and growing income streams. In line
with the Company’s remuneration policy to ensure it continues to motivate its leaders and create an opportunity to increase remuneration
for demonstrably superior performance, the Committee set stretching bonus targets. These comprised financial targets to grow earnings per
share, outperform the industry benchmark for total property returns, grow net rental income and reduce operating costs. Detailed personal
objectives for the Executive Directors were designed to ensure delivery of the specific steps required to be taken to deliver the targeted
financial performance. Shareholders will have read earlier in this report about the financial results for the Company for 2012 and also the sale
of the offices and reinvestment of those proceeds. The Committee reviewed the Company’s performance against the objectives it had set
and I hope that shareholders will agree with our assessment that in light of the Company’s excellent performance the Executive Directors have
earned the bonuses we have awarded to them.

During 2012, the Committee also reviewed the Long Term Incentive Plan award that had been granted in 2009. Despite a relatively strong
performance against the established performance conditions, those conditions had not been met and the Committee determined that there
should be no vesting.

Mindful of the Company’s continuing desire to focus on cost control and in light of the challenging economic environment, there will be no
increase in base salary for Executive Directors. In December 2012 the Company announced the appointment of Jean-Philippe Mouton to the
Board and prior to his appointment the Committee reviewed his role and responsibilities. In accordance with our policy, benchmark information
was considered by the Committee and Jean-Philippe has joined the Board on a base salary of €400,000. The remainder of his remuneration
is structured on a basis entirely consistent with the rest of the Executive Directors. The Committee also reviewed the Chairman’s fee, which
was last increased in April 2010. The Committee has decided that the appropriate fee for the Chairmanship of the Company is £320,000 and
David Tyler will, assuming he is elected at the Annual General Meeting, receive this fee. In the meantime, and in light of this review, we decided
that the current Chaiman’s fee should also be increased to £300,000 with effect from 1 January 2013. The review of Non-Executive Director
fees has been deferred until the summer of 2013.

I hope that you find this report helpful in understanding the Company’s remuneration practices. I recommend the report to you and hope that
you will support the resolution to approve the Directors’ Remuneration Report at the Annual General Meeting in May.

Anthony Watson
Chairman Of the remuneratiOn COmmittee

HAMMERSON ANNUAL REPORT 2012

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Remuneration report

The Directors submit their report on remuneration for the year ended 31 December 2012. The report reflects the policy for that year, for 2013
and, subject to ongoing review by the Remuneration Committee (the ‘Committee’), subsequent years.

Given the continuing discussion around the ‘single-figure’ calculation, we have adopted a basis that is consistent with last year’s report. This
report has been approved and adopted by the Board and has been prepared in accordance with the Companies Act 2006 and Schedule 8 of the
Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, the Listing and Disclosure and Transparency Rules
of the Financial Services Authority, and the principles relating to directors’ remuneration in the UK Corporate Governance Code (the ‘UK Code’).

Information that has been audited in accordance with the 2008 regulations is marked with an asterisk (*).

2012: Directors’ remuneration*

The following table shows a breakdown of the remuneration of the Executive Directors for the year ended 31 December 2012:

Executive Directors
David Atkins1

Peter Cole

Timon Drakesmith2

Annual Incentive Plan3

Total emoluments

Salary
£000

585

420

400

1,405

Cash
£000

624

463

427

1,514

Deferred
share award
£000

Benefits4
£000

Salary/cash
supplements5
£000

416

309

284

1,009

–

150

2012
£000

1,714

1,210

1,208

4,132

2011
£000

1,252

877

565

2,694

1 David Atkins was appointed as a director of the British Council of Shopping Centres on 5 December 2012. He does not receive a fee for this appointment.
2 Timon Drakesmith joined the Company on 6 June 2011, and was appointed to the Board on 30 June 2011. His 2011 remuneration in the above table represents the period from 30 June

2011 to 31 December 2011. He was appointed as a non-executive director of Value Retail PLC on 21 August 2012. He does not receive a fee for this appointment. He does not
participate in a Company pension scheme and receives a salary supplement of 20% of his base salary – see Pensions on pages 68 to 69.

3 See Annual Incentive Plan on pages 70 to 71.
4 Contractual benefits are described in the table on page 66.
5 See Pensions on pages 68 to 69.

The table below sets out the Non-Executive Directors’ fees for the year ended 31 December 2012:

Non-Executive Directors

John Nelson

Gwyn Burr1

Terry Duddy

Jacques Espinasse

Judy Gibbons2

John Hirst

Anthony Watson

2012
£000

270

614

Total fees

2011
£000

270

–

558

1 Gwyn Burr was appointed to the Board and Audit Committee on 21 May 2012, and her fee represents the period from 21 May 2012 to 31 December 2012.
2 Judy Gibbons was appointed to the Remuneration Committee on 3 February 2012, and received £4,554 in respect of her Committee membership fee for the period from 3 February

2012 to 31 December 2012.

During the year ended 31 December 2012, no payments were made to Directors for expenses other than those incurred wholly and directly in
the course of their employment or appointment.

HAMMERSON ANNUAL REPORT 2012

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The Committee and its composition

The Committee’s responsibilities are set out in its terms of reference which are available on request to shareholders and on the Company’s website.
The terms of reference are reviewed and amended annually by the Board, and were most recently reviewed and updated in December 2012.

From 1 January 2012 to 3 February 2012, the Committee comprised Anthony Watson (Chairman of the Committee), Terry Duddy and John
Nelson, Chairman of the Company. Provision D.2.1 of the UK Code provides that the remuneration committee of a larger FTSE listed company
should comprise at least three independent non-executive directors excluding the chairman of the company. Therefore, during this period, the
Committee’s composition was not fully compliant with the recommendations of the UK Code as it only comprised two independent Non-
Executive Directors, excluding the Chairman of the Company. However, it was considered that the high level of experience offered by Anthony
Watson, Terry Duddy and John Nelson would ensure proper governance pending the appointment to the Committee of Judy Gibbons in February
2012. During 2012, six Committee meetings were held, at which all Committee members were present.

John Nelson was considered independent on his original appointment to the Board and the Board considers the other members of the
Committee to be independent. No Director has any involvement in discussions about his/her own remuneration. David Tyler was appointed to
the Committee on 12 January 2013.

The Chairman of the Committee reports on the Committee’s activities to the Board at the meeting immediately following the Committee meeting.

Advisers

The following advisers provided services to the Committee during the year:

– FIT Remuneration Consultants LLP (‘FIT’) (which is a member of the Remuneration Consultants Group, the professional association for

remuneration consultants, and complies with its code of conduct) were appointed by the Committee as advisers on 17 August 2011. Since
then, they have provided advice on reward structures and levels. FIT’s terms of engagement are available on request to shareholders and on
the Company’s website. These terms specify that, in order to avoid any conflict of interest, FIT will only provide advice expressly authorised
by or on behalf of the Committee. Where instructions are taken on behalf of the Committee from employees of the Company, FIT will ensure
that the Committee is kept informed of the broad scope of such matters. The fees paid to FIT during 2012 were £62,625 (excluding VAT)
(2011: £42,425 (excluding VAT this amount is for the period from 17 August 2011 to 31 December 2011 only. A further £56,609 (excluding
VAT) was paid to Aon Hewitt, who were the advisers for the year up to 16 August 2011)). FIT did not provide any other services to the
Company during 2012.

– Herbert Smith Freehills LLP provided advice to the Committee throughout the year, and also provided other legal services to the Company

throughout the year.

The Chief Executive and Group HR Director attend all meetings of the Committee by invitation, except when their own remuneration is being
discussed, to provide information and advice. The Company Secretary is the Secretary to the Committee.

HAMMERSON ANNUAL REPORT 2012

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Remuneration policy

The Committee’s objective is to determine an appropriate remuneration policy for recommendation to the Board that:

– Ensures that the Company continues to attract, retain and motivate quality leaders, capable of making a major contribution to the Company’s

success.

– Having regard to the views of investors, generally provides for around market median (+/-10%) base salary but with the opportunity to

increase total potential remuneration for demonstrably superior performance through variable remuneration in the form of bonus and long-
term incentives.

Remuneration for Executive Directors takes account of performance through an annual performance-related bonus scheme (the ‘Annual
Incentive Plan’ or ‘AIP’) and, for longer-term performance, through awards under a Long-Term Incentive Plan (the ‘LTIP’).

In implementing the policy, following its approval by the Board, the Committee takes into account remuneration packages available within other
comparable companies (whilst remaining mindful of the need to treat comparisons with caution), the Company’s overall performance, internal
relativities, achievement of corporate objectives, individual performance and published views of institutional investors and their representative
bodies. In line with the current policy, the Executive Directors’ total target remuneration is structured to reward corporate and individual
performance. Over two-thirds of the Executive Directors’ total target remuneration (excluding pension and fixed benefits) is performance
related, which is considered to be appropriate.

Review of the year

During 2012 the Company adopted a cautious approach to executive remuneration in light of continuing challenging market conditions. During
the year, the Committee met to consider the following matters:

– A review of the Company’s remuneration policy in light of regulatory and market developments and guidelines.
– A salary and bonus review for the Executive Directors and senior executives.
– Performance measures and targets for the AIP and the LTIP.
– A review of the level of achievement of the performance conditions attached to the awards made in 2009 under the LTIP.
– The structure of the Company’s share plans and share-based grants and, accordingly, awards under the Company’s share plans.
– Arrangements under the Company’s defined benefit pension scheme.
– Proposed remuneration for Jean-Philippe Mouton, who was appointed a Director of the Company with effect from 1 January 2013.
– The Chairman’s fees.
– The Company’s overall approach to remuneration in 2013.

The tables on the following pages set out each element of total remuneration, the purpose and policy objectives which underpin each element
and the basis of their operation.

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Key features of Executive Directors’ remuneration: fixed

element

purpoSe

policy

operation

base salary

• Recognition of:
– Accountabilities
– Skills
– Experience
– Value

• Benchmarks main markets in

• Reviewed annually.

which Hammerson competes for
talent.

• Typically +/- 10% median

benchmark.

• Reviewed against property peer group and FTSE 71-100.

• Benchmarking considered at total remuneration level.

• Paid monthly in cash.

• Dependent on skills, experience

• Committee applies discretion for new recruits.

and performance.

• Increases normally consistent
with those given to other
employees of the Hammerson
Group.

• Pensionable.

d
e
x

i
F

d
e
t
a
l
e
r
e
c
n
a
m
r
o
F
r
e
p
-
n
o
n

pension

• Provides

• Legacy pension arrangements

• Non-contributory for Executive Directors.

competitive
retirement
benefits

(defined benefit scheme closed
to new joiners since early 2003)
are supported but the costs of
doing so are kept under review.

• New Executive Directors may
receive either a 20% employer
contribution to the Company’s
Group personal pension plan or
a 20% non-pensionable salary
supplement which they may elect
to be paid into a non-Company
SIPP.

• Pension benefits are taken into
account when determining total
remuneration.

• No compensation for public

policy or tax changes.

• Employer contributions paid monthly.

• For the defined benefit scheme, normal retirement age is 60;

members may retire from age 55 subject to actuarial reduction;
members may draw their pension from age 55 whilst remaining
in employment.

• From 6 April 2011 all pension scheme members impacted by the
reduction in the annual tax free limit to £50,000 may choose
to cap their benefit and receive a salary top-up of the balance,
which is paid after the end of the tax year.

• Non-pensionable salary supplement paid monthly, and does not

qualify for bonus or LTIP entitlements.

• Cash (i.e. other than base salary) and other benefits are excluded

from pensionable pay.

Fixed
benefits

• Provide market
competitive
reward

• Benefits in kind, cash allowance

• Contractual benefits are car allowance, private medical insurance,

and the opportunity to
participate in all-employee share
plans.

• Contractual benefits are taken
into account when determining
total remuneration.

life assurance and permanent health insurance.

• Non-pensionable.

HAMMERSON ANNUAL REPORT 2012

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Key features of Executive Directors’ remuneration: variable

element

purpoSe

policy

operation

annual
incentive
plan

• Incentivises
short-term
performance
goals

• Key financial and
non-financial
metrics from
business plan

• Partial award

in shares aligns
interests with
shareholders
and supports
retention

long-term
incentive
plan

• Incentivises long-
term returns for
shareholders

• Aligns interests
of Executive
Directors with
shareholders

• Supports
retention

d
e
t
a
l
e
r
e
c
n
a
m
r
o
F
r
e
p
m
r
e
t
-
t
r
o
h
S

d
e
t
a
l
e
r
e
c
n
a
m
r
o
F
r
e
p
m
r
e
t
-
g
n
o
l

e
l
b
a

i
r
a
v

• Clear connection from individual

• Up to 200% of base salary, subject to performance.

performance to business
outcomes.

• Awards under the plan materially

differentiate on the basis of
performance.

• Performance targets are:
– Stretching
– Clear financial and non-
financial measures

– Take due account of business

risk.

• Objectives generally remain

unchanged for the year except to
reflect any corporate acquisitions
or other major transactions.

• Non-pensionable.

• Paid in a mix of cash (60%) and shares (40%). The vesting of the

shares is deferred for two years.

• Subject to clawback and malus provisions in situations of

personal misconduct and/or where accounts or information
relevant to performance are shown to be materially wrong and
the bonus paid was higher than should have been the case.

• Targets approved annually by the Committee.

• Objectives approved by the Committee relate to Group financial

targets, Group results in key operational areas and individual
objectives.

• Personal performance is assessed through a transparent and

robust performance management process.

• Award result is determined by the Committee after year end,

based on performance against all targets.

• The Committee retains discretion to amend pay-outs where,
in exceptional circumstances, it is considered appropriate, but
subject always to the overriding cap.

• Dividends accrue on share awards, delivered as additional shares

at the end of the vesting period.

• The performance period is set to
reflect the capital intensive and
cyclical nature of Hammerson’s
business.

• A discretionary annual award of shares to a value of 200% of
salary (300% in exceptional circumstances), subject to a four-
year performance measure.

• Vesting depends on the level of satisfaction of the performance

• The choice of performance

conditions.

measures is determined by those
drivers which deliver value to
shareholders in the longer term.

• Dividends accrue on awards and are delivered as additional

shares at the end of the performance period.

• Performance conditions are based on three equally weighted

measures:

1. Total Shareholder Return against a comparator group (to align

interests of Executive Directors with shareholders)

2. Total Property Return against a composite IPD index (to focus

on underlying property returns)

3. (For 2011 and 2012 awards) Absolute Net Asset Value
(to introduce a balance between relative and absolute
performance measures) and

(For 2013 awards) Earnings per share (to align further the

interests of Executive Directors with shareholders.)

• Committee has discretion to reduce the award in specified

situations.

• Non-pensionable.

• Subject to clawback and malus provisions in situations of

personal misconduct and/or where accounts or information
relevant to performance are shown to be materially wrong and
vesting was higher than should have been the case.

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exeCutive DireCtOrs’ remuneratiOn

Fixed, non perFormance-related elementS oF remuneration

Base salary

There were no increases in base salary for Executive Directors in 2012, an approach that was consistent with salary reviews for employees
at senior management level throughout the Group. As announced on 13 December 2012, Jean-Philippe Mouton, Managing Director of
Hammerson France, would be appointed as an Executive Director of the Company with effect from 1 January 2013, with a base salary of
€400,000. In January 2013, the Committee completed its annual review of remuneration for the remaining Executive Directors and, in view
of the prevailing economic climate and market conditions, no salary increases for 2013 have been recommended for them. This approach is
consistent with reviews for employees at senior management level throughout the Group.

Accordingly, base salaries for Executive Directors for 2013 will be as follows:

David Atkins

Peter Cole

Timon Drakesmith

Jean-Philippe Mouton

Pensions*

Salary for 2013

£585,000

£420,000

£400,000

€400,000

Timon Drakesmith has elected not to participate in the Company’s defined contribution pension scheme. In accordance with his service
agreement, he receives instead a salary supplement of 20% of his base salary which is paid, by way of an employer contribution, into an approved
SIPP. The amount paid by the Company for the year ended 31 December 2012 was £80,000. The salary supplement does not qualify for AIP
purposes or entitlements under the LTIP.

David Atkins and Peter Cole participate in the Hammerson Group Management Pension and Life Assurance Scheme (the ‘Scheme’), the Company’s
defined benefit pension scheme, as outlined in the table on page 66 and more fully described in note 6 to the accounts on pages 96 to 97.

Pension entitlements are based on base salary. The Scheme is non-contributory. Therefore neither David Atkins nor Peter Cole have made any
contributions during the year.

For the year ended 31 December 2012, David Atkins will receive a cash supplement of £69,744 (2011: £64,908) for pension benefits that
exceed the annual allowance of £50,000. This supplement in lieu of pension will be subject to Income Tax and National Insurance Contributions
and will not qualify for AIP purposes or entitlements under the LTIP. Peter Cole has not been affected by the annual allowance restriction and will
not be receiving a cash supplement.

David Atkins’ pension under the Scheme is based on a 1/60th accrual rate. This is the rate of accrual received by all members of the Scheme who
joined after 1 July 1994. Peter Cole joined the Scheme before 1 July 1994. His pension has been accruing at a rate which would provide him with
a pension of two-thirds of final salary at retirement should he continue to work for the Company until age 60. This is equivalent to an accrual rate
of 1/45th.

The following two tables set out information on Directors’ defined benefit pension entitlements and transfer values.

In the table below, for each Director, the total accrued benefit at 31 December 2012 represents the annual pension that is expected to be
payable on eventual retirement, given the length of service and salary of each Director at 31 December 2012. The increase in accrued benefit
earned during the year represents the increase in this expected pension, including the effect of inflation, when compared with the position at
31 December 2011. The increase in accrued benefit during the year excluding the effect of inflation over the year is also shown.

Age at
31 December 2012

Years’ service at
31 December 2012

Normal retirement
age

Total accrued
benefit at
31 December 2012
£000

Increase in accrued
benefit during
the year
£000

Increase in accrued
benefit during the
year excluding
inflation
£000

David Atkins

Peter Cole

223

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In the table below, all transfer values have been calculated in accordance with regulation 7 to 7E of the Occupational Pensions Schemes (Transfer
Values) Regulations 1996 and subsequent amendments. The transfer values of the accrued entitlement represent the value of assets that the
Scheme would need to transfer to another pension provider on transferring the Scheme’s liability in respect of the Director’s pension benefits.
They do not represent sums payable to individual Directors and therefore cannot be added meaningfully to annual remuneration.

For each Director, the increase in transfer value of accrued benefits under the requirements of Schedule 8 of the Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008 is the transfer value of the total accrued benefit at 31 December 2012 less
the corresponding transfer value at 31 December 2011. The transfer value of the increase in accrued benefits under the Listing Rules is the
transfer value at 31 December 2012 of the increase in accrued benefits during the period (excluding inflation).

The transfer values disclosed below do not represent the sum paid or payable to the individual Director. Instead, they represent a potential
liability of the Scheme.

Transfer value at 31 December 2011
of total accrued benefit1
£000

Transfer value at 31 December 2012
of total accrued benefit
£000

Value of increase in accrued
benefit during the year
£000

Transfer value at 31 December 2012
of increase in accrued benefit
£000

Companies Act 2006

The Listing Rules

David Atkins

Peter Cole

736

2,908

834

3,150

242

1 The transfer value as at 31 December 2011 has been restated for David Atkins to reflect his actual restricted pension at that date, as confirmed in April 2012.

Fixed benefits: all employee share plans*

The Company operates a Savings-Related Share Option Scheme (‘Sharesave’) and a Share Incentive Plan (‘SIP’), both of which are approved by
HM Revenue and Customs, for all eligible UK employees. Executive Directors are entitled to participate in both of these plans on the same terms
as other eligible UK employees.

Sharesave is more fully described in note 25 to the accounts on pages 120 to 121. The table below demonstrates movements under the
Sharesave during 2012 for Executive Directors, and options outstanding as at 31 December 2012.

Total options held at
1 January 2012

Granted

Exercised

Lapsed

Total options held at
31 December 2012

Exercise price1

Market price on
exercise date

Exercise dates for outstanding options

David Atkins

4,212

–

(4,212)

Peter Cole

–

2,735

4,980

–

Timon Drakesmith

–

4,558

–

217.20p

424.00p

–

2,735

4,980

4,558

329.04p

312.24p

329.04p

– 1 May 2015 to 31 October 2015

– 1 May 2017 to 31 October 2017

1 The exercise price has been adjusted where appropriate to take account of the 2009 Rights Issue.

The middle market price of the ordinary shares of the Company, as derived from the London Stock Exchange Daily Official List, was 488.30
pence per share on 31 December 2012 and the range during the year was 354.50 pence per share to 497.00 pence per share.

Under the SIP, all eligible UK employees may receive free shares up to a value of £3,000 each year. Furthermore, eligible employees can purchase
partnership shares up to a value of £1,500 each tax year, which the Company will match through the award of two matching shares for every
partnership share purchased. Dividends on shares held under the SIP are used to purchase additional shares.

The Executive Directors’ interests in ordinary shares of the Company under the SIP as at 31 December 2012 are as follows:

David Atkins

Peter Cole

Timon Drakesmith

Total SIP shares
1 January 2012

Partnership shares
purchased

Matching shares
awarded

Free shares
awarded1

Dividend shares
purchased

Total SIP shares
31 December 2012

Cost to Company of
shares awarded in
20122

8,011

9,205

–

592

–

1,184

728

–

267

306

9,006

10,239

1,795

£3,943

£4,095

£7,327

1 The free shares were awarded on 20 April 2012 at a price of 412.00 pence per share.
2 The purchases and awards were funded by shares held in the Hammerson Employee Share Ownership Plan.

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variable, perFormance-related elementS oF remuneration

Annual Incentive Plan*

The annual performance-related bonus operates under the Annual Incentive Plan (the ‘AIP’) and is structured so that 60% of the bonus award is
paid in cash and 40% is awarded in shares. The vesting of the shares is deferred for two years. From 2012, the share award has been made in the
form of nil-cost options and, following vesting, there is a five year exercise period.

The Committee has reviewed the AIP structure for 2013 (which will be paid in 2014), and determined that it will remain broadly the same as
for 2012. The Committee believes that this structure continues to align performance and reward, ensures that the AIP remains valued by the
participants, is consistent with current best practice and is aligned with the interests of shareholders. Details of the AIP structure and targets
from 2011 to 2013 are shown below:

year
oF
award

2013 award
(to be paid
in 2014)

maximum
award
potential

Up to 200%
of salary

proportion
oF award
paid in caSh

proportion
oF award
paid in ShareS

weighting oF
perFormance
conditionS

60%

40% subject to a
two-year vesting
period

60% for Group financial targets

2012 award
(to be paid
in 2013)

Up to 200%
of salary

60%

40% subject to a
two-year vesting
period

2011 award
(paid in
2012)

Up to 200%
of salary

60%

40% subject to a
two-year vesting
period

10% for Group operational
targets

30% for personal objectives

60% for Group financial targets

10% for Group operational
targets

30% for personal objectives

60% for Group financial targets

15% for Group operational
targets

25% for personal objectives

compoSition oF
Financial targetS

30% based on adjusted Group
earnings per share

30% based on Total Property
Return relative to IPD1

30% based on adjusted Group
earnings per share

30% based on Total Property
Return relative to IPD1

36% based on adjusted Group
earnings per share

24% based on Total Property
Return relative to IPD1

1 IPD is the Investment Property Databank’s UK Quarterly Property Index, annualised. From 2013, the metric will be adjusted from All Property to Retail Property only, to reflect the

Company’s new retail focus.

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The personal objectives attached to the 2012 award for each of the Executive Directors focused on the following areas:

– David Atkins:

To improve the investment proposition and underlying performance of the business with particular focus on Group
earnings per share and Total Shareholder Return.
To drive the repositioning of the retail-focused business including specific tactical steps around resourcing.

– Peter Cole:

To effect the sale of the London Office portfolio and invest the sale proceeds into retail property.
To progress major developments.

– Timon Drakesmith:

To improve the Company’s rating from an equity capital markets view point.
To maintain a strong focus on cost management, including restructuring many of the Company’s financial instruments
in order to reduce the Company’s interest payments.
To grow the Company’s position within Value Retail.

In February 2013, the Committee determined the level of achievement of the 2012 performance targets. The Executive Directors all scored
very highly on their personal objectives, whilst ensuring that the Group financial targets were achieved. This has resulted in the bonus payments
as shown in the remuneration table on page 63. For the 2012 AIP award the adjusted earnings per share target was achieved, for Executive
Directors, to a level of 100% and the Total Property Return target was achieved to a level of 100%. This, together with individual achievement
against operational targets and personal objectives, resulted in an average payment to Executive Directors representing approximately 90% of
the maximum potentially payable. This compares with an average payment of 53% of the maximum potential in respect of the 2011 award.

The table below demonstrates the movements during 2012 in relation to the share awards made to Executive Directors under the Deferred
Bonus Share Scheme, the deferred bonus element of the AIP, and awards outstanding as at 31 December 2012:

David Atkins

Peter Cole

Timon Drakesmith

Awards held at
1 January 2012

Awards
during the year1

Notional dividend
shares accrued on
2012 award

72,786

65,908

–

59,635

43,849

35,023

1,942

1,428

1,140

Awards vested
during the year2

Awards held at
31 December 2012

(28,462)

(26,288)

–

105,901

84,897

36,163

1 Awards made on 12 March 2012 were in respect of the 2011 bonus. Awards were made in the form of nil-cost options and will be exercisable from 12 March 2014 to 11 March 2019.
2 Awards that vested on 2 March 2012 were originally granted on 2 March 2010 in respect of the 2009 bonus. The market price per share at vesting was 403.80 pence per share.

The market price on award was 384.90 pence per share for the award made in 2010, 461.40 pence per share for the award made in 2011 and
406.30 pence per share for the award made in 2012.

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Long-Term Incentive Plan*

The Committee reviews the structure of the LTIP awards, as well as the performance measures and conditions attached to the awards, on
an annual basis. Since 2011, the awards have incorporated a balance of relative and absolute measures, and the Committee believes that this
balance is still appropriate.

The structure of the 2013 awards will remain the same as the 2012 awards. However, the relative performance measures will be adjusted to
reflect the Company’s change in strategy to focus on the retail property sector: the comparator group for the Total Shareholder Return (‘TSR’)
measure will focus on major European retail property companies and the Total Property Return (‘TPR’) measure will compare performance
against a retail only property index.

With regard to the absolute performance measure, Absolute Net Asset Value (‘Absolute NAV’) (which was introduced in 2011) will be replaced
with Earnings per Share (‘EPS’) to align further the interests of Directors and shareholders. Details of the LTIP structure from 2009 to 2013 are
set out below:

year
oF
grant

level oF
award

perFormance
period

perFormance
meaSureS

weighting oF
perFormance
conditionS

2013

200% of salary

Four years

2012

200% of salary

Four years

TSR

TPR

EPS

TSR

TPR

Absolute NAV

20111

300% of salary

50% of award: three
years

50% of award: four
years

TSR

TPR

Absolute NAV

2010

2009

200% of salary

Three years

TSR

TPR

33.33%

50%

tSr comparator group

Altera, British Land, Capital and Regional, Intu
Properties (previously called Capital Shopping
Centres), Corio, Eurocommercial, IVG, Klepierre,
Land Securities, London Metric, SEGRO,
Shaftesbury, Unibail-Rodamco, Wereldhave and
the FTSE 100 Index

British Land, Capital and Regional, Capital
Shopping Centres, Corio, Derwent London, Great
Portland Estates, IVG, Klepierre, Land Securities,
Quintain Estates, SEGRO, Shaftesbury, St
Modwen Properties, Unibail-Rodamco and the
FTSE 100 Index

As for 2012

British Land, Brixton (2009 grant only) Capital
and Regional, Corio, Derwent London, Great
Portland Estates, IVG, Klepierre, Land Securities,
Liberty International, Quintain Estates, SEGRO,
Shaftesbury, St Modwen Properties, Unibail-
Rodamco and the FTSE 100 Index

1 In order to smooth the transition from a three-year performance period to a four-year performance period, an enhanced award of 300% of salary was made, with half of the award

subject to a three-year performance period (vesting in 2014) and half subject to a four-year performance period (vesting in 2015). This will ensure there is no vesting ‘gap’ in 2014 and,
overall, will result in only a modest reduction in potential awards vesting to Executive Directors in the three-year period from 2014 to 2016 (assuming a consistent level of performance
is achieved).

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the perFormance meaSureS

TSR
Performance is measured over the three/four-
year period from the date of grant, in comparison
with a comparator group, including some
European real estate companies.

TPR
Performance is measured over the three/four
financial years commencing with the year of
grant and in comparison with a composite index
comprising:

– For awards granted from 2009 to 2012:

Investment Property Databank’s UK Annual All
Property Index and France Annual All Property
Index.

– For awards to be granted in 2013: Investment
Property Databank’s UK Annual Retail Property
Index and France Annual Retail Property Index

The relative composition of the indices may vary
with each grant to ensure that it reflects the
Company’s portfolio.

Absolute NAV
(For awards granted in 2011 to 2012)

Performance is measured over the three/four
financial years commencing with the year of
grant, and is calculated with reference to the Best
Practices recommendations of the European
Public Real Estate Association (‘EPRA’), being the
adjusted shareholders’ funds divided by the
adjusted number of shares in issue.

EPS
(For awards to be granted in 2013)

Performance is measured over the four year
period from December 2012, and is calculated
with reference to the EPRA Best Practices
recommendations.

the perFormance conditionS

Vesting under the TSR performance condition is
as follows:

Vesting under the TPR performance condition is
as follows:

Vesting under the Absolute NAV performance
condition for the 2011 award is as follows:

Less than TSR of median-ranked entity
in comparator group
Equal to TSR of median-ranked entity
in comparator group
Equal to TSR of upper quartile-ranked
entity in comparator group

25%

Less than Index
Equal to Index
Index + 0.5% (average) p.a.
Index + 1.0% (average) p.a.

100%

Index + 1.5% (average) p.a.

0%
25%
55%
85%

100%

Vesting for intermediate performance between
median and upper quartile-ranked entities is on a
linear scale between 25% and 100%.

Vesting under the TSR performance condition is
subject to the Committee’s satisfaction that the
Company’s underlying performance has been
satisfactory in comparison with that of the FTSE
Real Estate sector.

Vesting for intermediate performance between
these levels will be pro-rata on a linear basis
between 25% and 100%.

Less than 7.5% p.a. growth

Equal to 7.5% p.a. growth
Equal to or more than
7.5% p.a. growth

25%

100%

Vesting under the Absolute NAV performance
condition for the 2012 award is as follows:

Less than RPI +3.0% p.a. growth

Equal to RPI +3.0% p.a. growth

Equal to or more than RPI
+7.0% p.a. growth

25%

100%

Vesting under the EPS performance condition for
the 2013 award is as follows:

Less than RPI +3% p.a. growth

Equal to RPI +3% p.a. growth
Equal to or more than
+7% p.a. growth

25%

100%

Vesting for intermediate performance for the
2011, 2012 and 2013 awards will be pro-rata on
a linear basis between 25% and 100%.

Prior to each grant date, the Committee considers this range of targets to ensure that they remain appropriate in light of experience and
anticipated future performance. In each case performance is measured over a single fixed period with no opportunity for re-testing.

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The vesting of the LTIP awards granted in 2010 and subsequent years cannot be determined until the end of the performance periods from April
2013 onwards.

The table below demonstrates the movements during 2012 in conditional share awards, including the accrual of notional dividend shares, made
to Executive Directors under the LTIP and awards outstanding as at 31 December 2012:

David Atkins

Peter Cole

Timon Drakesmith

Awards held at
1 January 2012

Awards
during the year1

Awards lapsed
during the year2

Notional dividend
shares accrued
during the year

Awards held at
31 December 2012

854,083

735,878

254,768

281,724

202,263

192,631

(192,149)

(240,188)

–

29,024

23,453

10,898

972,682

721,406

458,297

1 Awards granted on 2 April 2012 were made in the form of nil cost options. If the award, or any part of it vests, the options will be exercisable from the vesting date to 1 April 2019.
2 Awards granted on 1 April 2009 did not vest as they did not meet their performance conditions. The awards lapsed on 23 April 2012. (The figure shown in the table includes the number

of shares conditionally awarded plus notional dividends that accrued on the original award during the vesting period.)

The average middle market price of the ordinary shares in the Company for the five dealing days before the award dates which were used for
calculating the number of shares over which an award was made was 258.60 pence per share for the 2009 award, 385.88 pence per share for
the 2010 award, 453.00 pence per share and 478.00 pence per share for the 1 April 2011 award (made to David Atkins and Peter Cole) and
6 June 2011 award (made to Timon Drakesmith) respectively and 415.30 pence per share for the 2012 award.

Recruitment share award*

As disclosed last year, the Committee made two share-based awards to Timon Drakesmith when he was appointed in 2011 to facilitate his
recruitment as Chief Financial Officer. The awards were made to compensate him for the loss of awards at his previous employer.

First Tranche1

Second Tranche2

Awards held at
1 January 2012

253,707

84,922

Notional dividend
shares accrued
during the year

4,771

2,766

Awards vested
during the year

Vesting date

(258,478)

20 June 2012

Market price
per share
at vesting

431.26p

Awards held at
31 December 2012

–

6 June 2014

–

87,688

1 The First Tranche of the award was not subject to any performance conditions and was subject only to continued employment at date of vesting. The award was scheduled to vest on
1 June 2012. However, due to the sale of the office portfolio which was announced via the Regulatory News Service on 19 June 2012, the award did not vest until 20 June 2012.

2 The Second Tranche of the award was made on materially the same terms as the 2011 LTIP award, with a three year performance period.

Both the first and second tranches of awards were made on 6 June 2011 at a market price of 478.00 pence per share.

Service Agreements

Details of the Service Agreements of the Executive Directors who were in office as at 31 December 2012 are shown in the table below:

David Atkins

Peter Cole

Timon Drakesmith

Date of agreement

11 January 2008

28 February 2002

18 January 2011

From Company

12 months

Notice period

From individual

6 months

12 months

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The agreements may be terminated by the Company without notice and without payment of compensation in certain circumstances, such
as gross misconduct, and may be terminated on short notice in the event of incapacity. The Company also has the option to terminate each
agreement without notice for any reason but with payment of compensation in lieu of notice. Such a payment in lieu of notice under each
agreement would include salary and the value of fixed benefits during the notice period.

In addition, the payment in lieu of notice for Peter Cole and David Atkins would include a payment equivalent to the average bonus paid over the
preceding three years (save in exceptional circumstances), such bonus to be pro-rated where they have worked for only part of the bonus year
and so does not include compensation for loss of unearned bonus. In addition, they would continue to be entitled to their LTIP awards (subject to
the LTIP rules). The calculation of their pension benefits would be as at the end of what would have been the notice period.

The agreements for David Atkins and Timon Drakesmith each give the option to the Company to make the payment in lieu of notice in
instalments during what would have been the notice period. David Atkins and Timon Drakesmith would be obliged to make reasonable efforts
to find alternative employment and their remaining instalments would be reduced by any earnings from such new employment.

The agreements for each Executive Director provide that if their employment is terminated by the Company in breach of contract (including a
constructive dismissal), or is terminated within 12 months of a change of control, they would be entitled to receive as liquidated damages a sum
equivalent to their payment in lieu of notice, calculated on the basis set out above. For David Atkins and Timon Drakesmith, any amount payable
would be reduced by any gross earnings from alternative employment.

Chairman and Non-Executive Directors’ remuneration

The Chairman and the Non-Executive Directors do not have service agreements with the Company. Their appointments are governed by letters
of appointment, which are available for inspection on request.

The Chairman of the Board is John Nelson, who will retire from the Board following the Company’s Annual General Meeting (the ‘AGM’) in May
2013. He will be succeeded by David Tyler, who was appointed as a Non-Executive Director of the Company in January 2013. His appointment is
for a term of three years subject to a three month notice period.

The dates of the appointments of the Non-Executive Directors who were in office as at 31 December 2012 are set out below. The letters of
appointment of Non-Executive Directors are reviewed by the Chairman and the Executive Directors every three years. Appointments of
Non-Executive Directors are for a term of three years, subject to the right of either party to terminate the appointment on not less than three
months’ notice.

Gwyn Burr

Terry Duddy

Jacques Espinasse1

Judy Gibbons

John Hirst2

Anthony Watson

Date of original Appointment to Board

Commencement date of current term

Unexpired term as at May 2013

21 May 2012

3 December 2009

1 May 2007

1 May 2011

1 March 2004

1 February 2006

21 May 2012

3 December 2012

1 May 2010

1 May 2011

1 March 2010

1 February 2012

2 years

2 years, 7 months

3 years

1 year

2 years, 9 months

1 Jacques Espinasse’s appointment has been renewed for a further three year period from 1 May 2013 to the conclusion of the Company’s AGM in 2016.
2 John Hirst’s appointment has been renewed for a further period from 1 March 2013 to the conclusion of the Company’s AGM in 2014.

The Chairman’s fee is determined by the Committee and those of the other Non-Executive Directors are determined by the Board on the
recommendation of the Executive Directors. Non-Executive Directors are not eligible for performance-related bonuses or participation in
the Company’s share plans and their fees are not pensionable. It was agreed that the fees for the Chairman would increase with effect from
1 January 2013 and that fees for the Non-Executive Directors would be reviewed in the summer of 2013.

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The annual fees payable to the Chairman and the other Non-Executive Directors with effect from 1 January 2013 are as follows:

Chairman

Non-Executive Director: base fee

£300,000

£50,000

The level of fees is set to reflect the responsibilities of the role and, in order to recognise the additional responsibility of the Senior Independent
Director and of membership and chairmanship of the Audit and Remuneration Committees, further fees are payable in respect of these positions
as listed below:

Senior Independent Director

Audit Committee chairmanship

Audit Committee membership

Remuneration Committee chairmanship

Remuneration Committee membership

£10,000

£15,000

£5,000

£10,000

£5,000

John Nelson does not receive any additional fee in respect of his membership of the Remuneration Committee.

Following the Company’s AGM in May 2013, David Tyler will receive a fee of £320,000 as Chairman of the Company. He will continue to be a
member of the Remuneration Committee and will assume chairmanship of the Nomination Committee but will not receive any additional fee for
membership of either of these committees.

Share ownership guidelines

All Directors are encouraged to own shares in the Company.

With regard to the Executive Directors, the deferred bonus element of the AIP, the LTIP and other Company share plans are designed to enable
them, over a period of time, to build up and retain a shareholding, with a value equivalent to 150% of the annual gross base salary for the Chief
Executive and 100% of the annual gross base salary for other Executive Directors.

There is currently no minimum shareholding requirement for Non-Executive Directors.

Executive Directors’ shares interests

The beneficial interests of the Executive Directors who were in office as at 31 December 2012 in the ordinary shares of the Company are set
out below, showing actual share ownership against guidelines:

David Atkins

Peter Cole

Timon Drakesmith

1 January 2012 31 December 2012 28 February 2013

Guideline on
share ownership as
% of salary

Actual beneficial
share ownership as
% of salary1

Guideline met

159,100

218,878

50,000

177,938

246,200

175,594

177,938

246,200

175,7502

150%

100%

151%

291%

218%

Yes

1 Based on the share price of 497.00p as at 27 December 2012.
2 The change in share interests for Timon Drakesmith between 31 December 2012 to 28 February 2013 is due to share purchases/awards made under the SIP on 4 January 2013

(75 shares) and 4 February 2013 (81 shares).

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Non-Executive Directors’ shares interests

The beneficial interests of the Non-Executive Directors who were in office as at 31 December 2012 in the ordinary shares of the Company are
set out below:

John Nelson

Gwyn Burr

Terry Duddy

Jacques Espinasse

Judy Gibbons

John Hirst

Anthony Watson

1 January 2012 31 December 2012

49,000

–

40,000

12,235

–

13,495

12,000

–

40,000

12,235

4,000

13,495

12,000

Between 1 January 2013 and 28 February 2013, the Non-Executive Directors’ beneficial interests above have remained unchanged.

At 31 December 2012, in addition to the interests in shares disclosed in the table above, Anthony Watson also had an interest in £60,000
nominal 6.875% Sterling bonds due 2020.

Total Shareholder Return

The graph below shows the total shareholder return in respect of the Company’s ordinary shares of 25 pence each for the five years ended
31 December 2012 relative to the total return of the FTSE EPRA/NAREIT UK Index, which comprises shares of the Company’s peers. The total
shareholder return is rebased to 100 at 31 December 2007. The other points plotted are the values at intervening financial year ends.

TOTAL SHAREHOLDER RETURN INDEX (31 DECEMBER 2007 = 100)

Hammerson plc
FTSE EPRA/NAREIT UK

110

100

31 Dec 2007

31 Dec 2008

31 Dec 2009

31 Dec 2010

31 Dec 2011

31 Dec 2012

Source: Thomson Reuters

Shareholder view

At the Company’s AGM held on 19 April 2012, over 97% of shares voted supported the 2011 Remuneration Report. It was considered that this
represented broad support for the Company’s remuneration arrangements and no material changes have been made since then.

By Order of the Board

Sarah Booth
General COunsel anD COmpany seCretary
28 February 2013

HAMMERSON ANNUAL REPORT 2012

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Additional disclosures

additional disclosures

1. Financial and business reporting

This Annual Report aims to tell a cohesive
story, with the narrative section giving a
consistent presentation and a balanced and
understandable assessment of the Company’s
financial position, results and prospects.
A description of our business model and
strategy are set out in the Chief Executive’s
Report on pages 6 and 7. The Going Concern
Statement is represented under point 7 below,
and the Directors’ and Auditor’s responsibility
statements are on pages 80 to 81.

2. Principal activities

The principal activities of the Group have
continued to be property investment and
development.

3. Dividends

The Directors recommend a final dividend of
10.0 pence per share which, together with
the interim dividend paid on 5 October 2012,
will make a total dividend for the year of 17.7
pence (2011: 16.6 pence). It is intended that
the final dividend will be paid on 14 May 2013
to shareholders on the register at the close of
business on 5 April 2013.

It is intended that 4.0 pence per share will be
paid as a Property Income Distribution, net of
withholding tax where appropriate, and the
remainder of 6.0 pence per share paid as a
normal dividend.

Details of the Company’s dividends can
be found on the Company’s website:
www.hammerson.com on the ‘Investors’ page.

4. Fixed assets and capitalised interest

Changes in tangible fixed assets and capitalised
interest during the year are set out in notes 12
and 13 to the accounts on pages 103 and
104, whilst details of Hammerson’s property
portfolio are provided on pages 132 to 137.

5. Share capital

Changes to the Company’s share capital during
the year, are set out in note 25 to the accounts
on pages 120 and 121.

HAMMERSON ANNUAL REPORT 2012

On 31 December 2012 there were
712,830,959 ordinary shares of 25 pence in
issue each with one vote. There are no shares
held in treasury. The total number of voting
rights in Hammerson plc at 31 December
2012 was therefore 712,830,959.

There are no specific restrictions on the size of
a holding nor on the transfer of shares except
UK REIT restrictions. No person has any special
rights of control over the Company’s share
capital and all issued shares are fully paid.

6. Purchase of own shares

The Company was granted authority at the
Annual General Meeting (‘AGM’) in 2012
to purchase its own shares up to a total
aggregate value of 10% of the issued nominal
capital. That authority expires on the date of
the 2013 AGM at which a resolution will be
proposed for its renewal.

7. Going concern

The current economic conditions have created
a number of uncertainties as set out on pages
36 to 39. The Group’s business activities,
together with the factors likely to affect its
future development, performance and position
are set out on pages 20 to 31. The financial
position of the Group, its liquidity position and
borrowing facilities are described on pages 44
to 45 and in notes 19 and 21 to the accounts.

The Directors have reviewed the current
and projected financial position of the Group,
making reasonable assumptions about future
trading performance. As part of the review,
the Directors considered the Group’s cash
balances, its debt maturity profile, including
undrawn facilities, and the long-term nature
of tenant leases. After making enquiries, the
Directors have a reasonable expectation that
the Company and the Group have adequate
resources to continue in operational existence
for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in
preparing the Annual Report.

8. Provisions on change of control

Five of the six outstanding bonds issued by
the Company contain covenants specifying
that, if the Company’s credit rating is

downgraded to below investment grade due
to a change of control, and the rating remains
below investment grade for a period of six
months thereafter, the bondholders may
require repayment at par.

In addition, under the Company’s credit facilities,
the lending banks may require repayment of
outstanding amounts within 30 days of any
change of control.

9. Employees

It is the Group’s policy to give full consideration
to suitable applications for employment of
disabled persons. Disabled employees are
eligible to participate in all career development
opportunities available to employees.
Opportunities also exist for employees of the
Group who become disabled to continue in
their employment or to be retrained for other
positions in the Group.

The Company places considerable importance
on good internal communications with its staff
and invests time in consulting on a wide range
of matters which affect them as employees
including: reward practices, work/life balance
initiatives, corporate responsibility activities
and approaches to internal communications.
Consultation predominantly takes the form of
facilitated discussion groups and employee
involvement on relevant committees. The
Company also provides very regular internal
updates on business news and performance
through formal and informal meetings,
intranet announcements and special employee
briefings/question and answer sessions on the
annual and interim results.

10. Pension scheme

The Company’s defined benefit pension scheme
was closed to new entrants on 31 December
2002 following which a Group personal pension
plan was established for new employees.

The defined benefit pension scheme, The
Hammerson Group Management Limited
Pension and Life Assurance Scheme (the
‘Scheme’), is administered by two corporate
trustees, one of which is an independent trustee.
The other is a subsidiary of the Company
which has five directors. The Chairman of
this subsidiary is David Edmonds, one of the
Company’s former Non-Executive Directors.

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Additional disclosures

David Edmonds continues as the Chairman
of this subsidiary and chairs meetings of the
Trustees. Two of the remaining directors are
employees, but not Directors of the Company
and the other two directors are former
employees. The Scheme’s funds are invested
and managed independently of the Company.

11. Substantial shareholders

At 31 December 2012 the following interests
in voting rights over the issued share capital of
the Company had been notified:

David Atkins, Peter Cole and Timon Drakesmith
have service agreements with the Company.
The appointments of the Non-Executive
Directors, including the Chairman, are
governed by letters of appointment. Details
of the service agreements and the letters of
appointment are set out in the Remuneration
Report on pages 74 and 75. Details of the
Directors’ interests in the share capital of the
Company are set out in the Remuneration
Report on pages 76 and 77.

13. Directors’ remuneration

At 31 December 2012

Ordinary
Shares of 25p
each

Percentage
of total voting
rights

Details of the remuneration of each of the
Directors are set out in the Remuneration
Report on pages 62 to 77.

APG Algemene Pensioen
Groep N.V.

BlackRock Inc.

68,227,094

50,223,602

9.57%

7.05%

14. Directors’ and officers’ liability
insurance

Norges Bank Investment
Management

Legal & General Investment
Management Ltd

34,141,595

4.79%

25,717,804

3.61%

Legal & General
Group plc

22,499,364

3.16%

The Company maintains Directors’ and
Officers’ liability insurance, which is reviewed
annually. The Company’s Directors and
Officers are adequately insured in line with
the guidelines produced by the Institute of
Chartered Secretaries and Administrators.

No changes to the above have been disclosed
to the Company in accordance with Rule 5 of
the Disclosure and Transparency Rules between
31 December 2012 and 28 February 2013.

12. Directors

The biographical details of the current Directors
are shown on pages 52 and 53. Jean-Philippe
Mouton was appointed as an Executive
Director on 1 January 2013. Gwyn Burr and
David Tyler were appointed as Non-Executive
Directors with effect from 21 May 2012 and
12 January 2013 respectively. John Nelson
will be retiring as Chairman of the Company
at the 2013 AGM. He will be succeeded by
David Tyler who will take the role of Chairman
immediately after the 2013 AGM. During the
financial year 31 December 2012 there were
no resignations from the Board.

In accordance with the UK Corporate
Governance Code, all the Directors will retire
and offer themselves for election and re-election
at the forthcoming AGM. This excludes John
Nelson who will be retiring and not offering
himself for re-election.

15. Donations

During the year the Company made charitable
donations in the United Kingdom of £151,343
(2011: £144,845). Under the Company’s
charitable donations policy for 2012, donations
were made to a variety of children’s, youth and
medical charities and to charities connected to
localities in which the Company is represented.

For 2013, the Company will make charitable
donations focused on children and young people,
health and local regeneration of community
infrastructures and facilities. Donations to
political or religious organisations are not made.

16. Creditor payment policy

It is the Group’s policy and practice that the
terms of payment to suppliers are agreed in
advance of the supply of any goods and services
and that payments are made in accordance
with those terms and conditions provided that
the supplier has also complied with them.

The Group’s creditor payment days as at
31 December 2012 represented 21 days’
purchases (2011: 23 days).

17. Financial instruments

Details of the financial instruments used by
the Group and the Company are set out in note
22 to the accounts on pages 113 to 119.

18. Auditor

Deloitte LLP are willing to be re-appointed as the
auditor to the Company. Their re-appointment
has been considered and recommended by the
Audit Committee and a resolution concerning
their re-appointment will be proposed at
the AGM.

19. Disclosure of information to the
auditor

Each of the persons who are a Director at the
date of approval of the Directors’ Report has
confirmed that:

– so far as s/he is aware, there is no relevant
audit information of which the Company’s
auditor is unaware; and

– s/he has taken all the steps that s/he ought
to have taken as a Director in order to make
her/himself aware of any relevant audit
information and to establish that the Company’s
auditor is aware of that information.

This confirmation has been given and should
be interpreted in accordance with the provisions
of section 418(2) of the Companies Act 2006.

20. Annual General Meeting

The Annual General Meeting will be held on
Thursday 9 May 2013 at 10 Grosvenor Street,
London, W1K 4BJ at 11.00 am. The Notice of
Meeting and the explanatory notes will be
included in a separate notice to be sent to
all shareholders.

By Order of the Board

Sarah Booth
General Counsel
and Company seCretary
28 February 2013

HAMMERSON ANNUAL REPORT 2012

Directors’ responsibilities

The Directors have elected to prepare the
parent company financial statements in
accordance with United Kingdom Generally
Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable
law). The parent company financial statements
are required by law to give a true and fair
view of the state of affairs of the Company.
In preparing these financial statements, the
Directors are required to:

– select suitable accounting policies and then

apply them consistently;

– make judgements and estimates that are

reasonable and prudent;

– state whether applicable UK Accounting

Standards have been followed, subject to any
material departures disclosed and explained
in the financial statements; and

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

The Directors are responsible for keeping
proper accounting records that disclose with
reasonable accuracy at any time the financial
position of the Company and enable them
to ensure that the parent company financial
statements comply with the Companies
Act 2006. They are also responsible for
safeguarding the assets of the Company and
hence for taking reasonable steps for the
prevention and detection of fraud and other
irregularities.

The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website. Legislation in the United
Kingdom governing the preparation and
dissemination of the financial statements may
differ from legislation in other jurisdictions.

Directors’ responsibilities in
respect of the preparation of the
financial statements
The Directors are responsible for preparing
the Annual Report, Directors’ Remuneration
Report and the financial statements
in accordance with applicable law
and regulations.

Company law requires the Directors to
prepare financial statements for each financial
year. The Directors are required by the IAS
regulation to prepare the Group financial
statements under International Financial
Reporting Standards (IFRSs) as adopted by
the European Union. The Group financial
statements are also required by law to be
properly prepared in accordance with the
Companies Act 2006 and Article 4 of the
IAS regulation.

International Accounting Standard 1 requires
that financial statements present fairly for
each financial year the Group’s financial
position, financial performance and cash
flows. This requires the faithful representation
of the effects of transactions, other events
and conditions in accordance with the
definition and recognition criteria for assets,
liabilities, income and expenses set out in
the International Accounting Standards
Board’s ‘Framework for the preparation
and presentation of financial statements’. In
virtually all circumstances, a fair presentation
will be achieved by compliance with all
applicable IFRSs.

However, Directors are also required to:

– properly select and apply accounting policies;

– present information, including accounting

policies, in a manner that provides relevant,
reliable, comparable and understandable
information; and

– provide additional disclosures when

compliance with the specific requirements
in IFRSs are insufficient to enable users
to understand the impact of particular
transactions, other events and conditions
on the entity’s financial position and
financial performance.

HAMMERSON ANNUAL REPORT 2012

Responsibility Statement
We confirm to the best of our knowledge:

1. The financial statements, prepared in
accordance with the applicable set of
accounting standards, give a true and fair
view of the assets, liabilities, financial position
and profit and loss of the Company and the
undertakings included in the consolidation
taken as a whole; and

2. The Business and financial review, which is
incorporated into the Directors’ Report,
includes a fair review of the development
and performance of the business and
the position of the Company and the
undertakings included in the consolidation
taken as a whole, together with a description
of the principal risks and uncertainties
they face.

Signed on behalf of the Board on

28 February 2013

David Atkins
Director

Timon Drakesmith
Director

Strategic reviewGovernanceFinancial statementsOther information Independent auditor’s report

Independent auditor’s report on
the Group financial statements

Scope of the audit of the
financial statements
An audit involves obtaining evidence about
the amounts and disclosures in the financial
statements sufficient to give reasonable
assurance that the financial statements are free
from material misstatement, whether caused
by fraud or error. This includes an assessment
of: whether the accounting policies are
appropriate to the Group’s circumstances and
have been consistently applied and adequately
disclosed; the reasonableness of significant
accounting estimates made by the Directors;
and the overall presentation of the financial
statements. In addition, we read all the financial
and non-financial information in the Annual
Report to identify material inconsistencies with
the audited financial statements. If we become
aware of any apparent material misstatements
or inconsistencies we consider the implications
for our report.

Opinion on the financial
statements
In our opinion the Group financial statements:

– give a true and fair view of the state of the
Group’s affairs as at 31 December 2012
and of its profit for the year then ended;

– have been properly prepared in accordance

with IFRSs as adopted by the European Union;
and

– have been prepared in accordance with the
requirements of the Companies Act 2006
and Article 4 of the IAS Regulation.

We have audited the Group financial statements
(the ‘financial statements’) of Hammerson plc
for the year ended 31 December 2012, which
comprise the consolidated income statement,
the consolidated statement of comprehensive
income, the consolidated balance sheet, the
consolidated statement of changes in equity,
the consolidated cash flow statement, the
analysis of movement in net debt and the
related notes 1 to 30. The financial reporting
framework that has been applied in the
preparation of the Group financial statements
is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by
the European Union.

This report is made solely to the Company’s
members, as a body, in accordance with Chapter
3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we
might state to the Company’s members those
matters we are required to state to them in
an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone
other than the Company and the Company’s
members as a body, for our audit work, for this
report, or for the opinions we have formed.

Our responsibility is to audit and express
an opinion on the financial statements
in accordance with applicable law and
International Standards on Auditing (UK and
Ireland). Those standards require us to comply
with the Auditing Practices Board’s (APB’s)
Ethical Standards for Auditors.

Opinion on other matter
prescribed by the Companies
Act 2006
In our opinion the information given in the
Directors’ Report for the financial year for
which the financial statements are prepared is
consistent with the Group financial statements.

Matters on which we are required
to report by exception
We have nothing to report in respect of
the following:

Under the Companies Act 2006 we are
required to report to you if, in our opinion:

– certain disclosures of Directors’ remuneration

specified by law are not made; or

– we have not received all the information
and explanations we require for our audit.

Under the Listing Rules we are required
to review:

– the Directors’ statement contained within the
Directors’ Report in relation to going concern;

– the part of the Corporate Governance
Statement relating to the Company’s
compliance with the nine provisions of the
UK Corporate Governance Code specified
for our review; and

– certain elements of the report to

shareholders by the Board on Directors’
remuneration.

Other matter
We have reported separately on the parent
company financial statements of Hammerson
plc for the year ended 31 December 2012
and on the information in the Directors’
Remuneration Report that is described
as having been audited.

Ian Waller (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, UK

28 February 2013

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther information
Consolidated income statement

Consolidated income statement
For the year ended 31 December 2012

Continuing operations

Gross rental income

Operating profit before other net (losses)/gains and share of results of associate

Other net (losses)/gains

Share of results of associate

Operating profit

Finance costs

Bond redemption – premium and costs

Floating rate reset bonds redemption – premium and costs

Change in fair value of derivatives

Finance income

Net finance costs

Profit before tax

Tax charge

Profit from continuing operations

Profit from discontinued operations

Profit for the year

Attributable to:

Equity shareholders

Non-controlling interests**

Profit for the year

Basic and diluted earnings per share

Continuing operations

Discontinued operations

Total

EPRA earnings per share

* The results previously reported for the year ended 31 December 2011 have been reclassified to reflect discontinued operations.

** Non-controlling interests relate to continuing operations.

Notes

14A

11A

2012
£m

297.6

215.9

(36.3)

47.5

227.1

(94.0)

(13.8)

(41.7)

9.4

6.5

(133.6)

93.5

(0.4)

93.1

48.7

141.8

138.4

3.4

141.8

2011*
£m

305.9

217.8

190.4

–

408.2

(108.2)

–

(2.8)

5.2

(105.8)

302.4

(0.7)

301.7

43.9

345.6

335.7

9.9

345.6

12.6p

6.8p

19.4p

41.1p

6.2p

47.3p

20.9p

19.3p

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther information Consolidated statement of comprehensive income

Consolidated statement of comprehensive income
For the year ended 31 December 2012

Continuing and discontinued operations

Foreign exchange translation differences

Net gain on hedging activities

Revaluation gains on owner-occupied property

Revaluation gains on other investments

Actuarial losses on pension schemes

Net gain recognised directly in equity

Profit for the year from continuing operations

Profit for the year from discontinued operations

Profit for the year

Total comprehensive income for the year

Attributable to:

Equity shareholders

Non-controlling interests

Total comprehensive income for the year

2012
£m

(43.6)

27.3

0.1

74.4

(0.7)

57.5

93.1

48.7

141.8

199.3

198.1

1.2

199.3

2011
£m

(35.9)

27.9

2.8

57.4

(5.7)

46.5

301.7

43.9

345.6

392.1

384.0

8.1

392.1

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther information Consolidated balance sheet

Consolidated balance sheet
As at 31 December 2012

Non-current assets
Investment and development properties*
Interests in leasehold properties*
Plant, equipment and owner-occupied property
Investment in associate
Other investments
Receivables

Current assets
Assets held for sale
Receivables*
Cash and deposits*

Total assets

Current liabilities
Liabilities associated with assets held for sale
Payables*
Tax
Borrowings*

Non-current liabilities
Borrowings*
Deferred tax
Tax
Obligations under finance leases*
Payables*

Total liabilities
Net assets

Equity
Share capital
Share premium
Translation reserve
Hedging reserve
Capital redemption reserve
Other reserves
Revaluation reserve
Retained earnings
Investment in own shares
Treasury shares
Equity shareholders’ funds
Non-controlling interests**
Total equity

Diluted net asset value per share
EPRA net asset value per share

Notes

2012
£m

2011
£m

14B

21A

11B

5,458.4
42.3
36.7
428.4
1.4
66.6
6,033.8

212.6
102.7
57.1
372.4
6,406.2

90.4
243.7
1.4
158.0
493.5

1,880.1
0.5
–
42.3
64.1
1,987.0
2,480.5
3,925.7

178.2
1,222.3
339.7
(279.4)
7.2
10.9
18.0
2,360.3
(6.0)
–
3,851.2
74.5
3,925.7

£5.41
£5.42

5,719.6
17.7
35.4
–
215.1
55.7
6,043.5

–
111.7
100.7
212.4
6,255.9

–
244.4
1.1
100.7
346.2

1,979.2
0.5
0.3
17.6
63.7
2,061.3
2,407.5
3,848.4

178.2
1,221.9
381.1
(306.7)
7.2
9.3
161.7
2,125.7
(1.8)
(4.7)
3,771.9
76.5
3,848.4

£5.30
£5.30

* Assets and liabilities relating to discontinued operations have been reclassified as held for sale. See note 9.

** Non-controlling interests relate to continuing operations.

These financial statements were approved by the Board of Directors on 28 February 2013.

Signed on behalf of the Board

David Atkins
Director

HAMMERSON ANNUAL REPORT 2012

Timon Drakesmith
Director

Registered in England No. 360632

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HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther information

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HAMMERSON ANNUAL REPORT 2012

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Strategic reviewGovernanceFinancial statementsOther information

Consolidated cash flow statement

Consolidated cash flow statement
For the year ended 31 December 2012

Operating activities
Operating profit before other net (losses)/gains and share of results of associate
– continuing operations
– discontinued operations

Increase in receivables
Increase in payables
Adjustment for non-cash items
Cash generated from operations

Interest paid
Interest received
Tax paid
Cash flows from operating activities

Investing activities
Property acquisitions
Development and major refurbishments
Other capital expenditure
Sale of properties
Sale of interest in joint venture
Purchase of other investments
Distribution received from associate
Decrease/(Increase) in non-current receivables
Cash flows from investing activities

Financing activities
Issue of shares
Proceeds from award of own shares
Purchase of own shares
Purchase of treasury shares
Interest rate swap cancellation costs paid
Bond redemption premium and costs paid
Floating rate reset bonds redemption premium and costs paid
(Decrease)/Increase in non-current borrowings
Increase in current borrowings
Dividends paid to non-controlling interests
Equity dividends paid
Cash flows used in financing activities
Net decrease in cash and deposits

Opening cash and deposits
Exchange translation movement
Closing cash and deposits
Cash and deposits classified as assets held for sale
Cash and deposits as stated on balance sheet

Notes

2012
£m

2011
£m

215.9
23.7
239.6
(14.5)
13.5
14.0
252.6

(117.6)
5.7
(0.8)
139.9

(397.3)
(122.9)
(48.0)
585.0
–
(80.0)
2.4
5.2
(55.6)

0.5
0.2
(3.4)
–
(5.2)
(13.8)
(41.7)
(20.0)
87.1
(3.2)
(118.4)
(117.9)
(33.6)

100.7
(0.7)
66.4
(9.3)
57.1

217.8
31.3
249.1
(10.5)
19.5
2.7
260.8

(115.4)
3.1
(0.7)
147.8

(374.1)
(91.2)
(23.6)
178.9
92.9
(24.7)
–
(10.2)
(252.0)

0.7
0.2
–
(4.7)
–
–
–
78.3
94.0
(3.3)
(86.1)
79.1
(25.1)

126.2
(0.4)
100.7
–
100.7

The cash flows above relate to continuing and discontinued operations. See note 9 for information on discontinued operations.

Analysis of movement in net debt
For the year ended 31 December 2012

Balance at 1 January 2012
Cash flow
Exchange
Balance at 31 December 2012
Cash and deposits and borrowings classified as assets held for sale (note 9D)
As stated on balance sheet at 31 December 2012

Short-term
deposits
£m

39.5
(27.5)
–
12.0
–
12.0

Current
borrowings
including
currency swaps
£m

(85.7)
(87.1)
13.5
(159.3)
1.3
(158.0)

Cash
at bank
£m

61.2
(6.1)
(0.7)
54.4
(9.3)
45.1

Non-current
borrowings
£m

(1,979.2)
20.0
15.8
(1,943.4)
63.3
(1,880.1)

Net debt
£m

(1,964.2)
(100.7)
28.6
(2,036.3)
55.3
(1,981.0)

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther information Notes to the accounts

1: Significant accounting policies
Statement of compliance
The consolidated financial statements have
been prepared in accordance with IFRS
and interpretations adopted by the
European Union.

During 2012, the following pronouncements
either had no impact on the financial
statements or resulted in changes to
presentation and disclosure only:

• IAS 27 Separate Financial Statements;

effective for accounting periods beginning
on or after 1 January 2013

• Amendments to IFRS 10, IFRS 12 and

IAS 27 Investment entities; effective for
accounting periods beginning on or after
1 January 2014

• Amendments to IFRS 1 Government Loans;
effective for accounting periods beginning
on or after 1 January 2013

• Amendments to IAS 12 Deferred Tax:

• Revised IAS 19 Employee Benefits;

Recovery of Underlying Assets; effective
for accounting periods beginning on or after
1 January 2012

• Amendments to IFRS 7 Disclosures

– Transfers of Financial Assets; effective
for accounting periods beginning on or
after 1 July 2011

At the date of approval of these financial
statements the following standards and
guidance relevant to the Group were in issue
but not yet effective:

• Amendments to IFRS 7 Disclosures

– Offsetting Financial Assets and Financial
Liabilities; effective for accounting periods
beginning on or after 1 January 2013

• Amendments to IAS 32 Offsetting Financial
Assets and Financial Liabilities; effective for
accounting periods beginning on or after
1 January 2014

• IFRS 9 Financial Instruments; effective for
accounting periods beginning on or after
1 January 2015

• IAS 28 Investments in Associates and
Joint Ventures; effective for periods
commencing on or after 1 January 2013

effective for accounting periods beginning
on or after 1 January 2013

With the exception of IFRS 11, these
pronouncements, when applied, will either
result in changes to presentation and
disclosure, or are not expected to have a
material impact on the financial statements.

IFRS 11 ‘Joint Arrangements’ has been
endorsed by the EU and is effective for
periods beginning on or after 1 January 2014.
The Directors are assessing the impact that
the adoption of IFRS 11 may have on the
financial statements of the Group in future
periods. The Directors do not expect that
the adoption of IFRS 11 will impact profit after
tax and net assets presented in the financial
statements. The Directors do note however,
that the presentation of the financial
statements may differ, should it be concluded
that the equity method of accounting
should be applied to any of the Group’s joint
arrangements. It is not considered practicable
to provide a reasonable estimate of the effect
of this standard on the presentation of the
financial statements until a detailed review
has been completed.

• Amendments to IAS 1 Presentation of items
of other comprehensive income; effective
for accounting periods beginning on or after
1 July 2012

Basis of preparation
The financial statements are prepared on
a going concern basis, as explained in the
Directors’ Report on page 78.

• IFRS 10 Consolidated Financial Statements;
effective for accounting periods beginning
on or after 1 January 2013

• IFRS 11 Joint Arrangements; effective for
accounting periods beginning on or after
1 January 2013

• IFRS 12 Disclosure of interests in other

entities; effective for accounting periods
beginning on or after 1 January 2013

• IFRS 13 Fair value measurement; effective

for accounting periods beginning on or after
1 January 2013

HAMMERSON ANNUAL REPORT 2012

The financial statements are presented in
sterling. They are prepared on the historical
cost basis, except that investment and
development properties, owner-occupied
properties, other investments and derivative
financial instruments are stated at fair value.

The accounting policies have been applied
consistently to the results, other gains and
losses, assets, liabilities and cash flows
of entities included in the consolidated
financial statements.

Revisions to accounting estimates are
recognised in the period in which the estimate
is revised if the revision affects only that
period. If the revision affects both current and
future periods, the change is recognised over
those periods.

On 19 June 2012, the Group exchanged
contracts with Brookfield Office Properties to
dispose of the majority of its office portfolio
by June 2013. Consequently, the assets and
liabilities of the relevant subsidiaries have been
classified as held for sale. This transaction is
part of Hammerson’s decision to focus on retail
property and the Group has sold the majority of
the remainder of the office portfolio, which is
also classified as held for sale as the relevant
criteria have been met. The income and
expenditure of these offices have been
classified as discontinued operations in both
the current and comparative periods as these
disposals result in the discontinuation of the
Group’s office property activities, which was
considered to be a major line of business. Details
of discontinued operations and assets and
liabilities classified as held for sale are set out in
note 9.

Significant judgements
and key estimates
The preparation of the financial statements
requires management to make judgements,
estimates and assumptions that may affect
the application of accounting policies and the
reported amounts of assets, liabilities, income
and expenses.

Property valuations
The property portfolio, which is carried in
the balance sheet at fair value, is valued
six-monthly by professionally qualified external
valuers and the Directors must ensure that
they are satisfied that the valuation of the
Group’s properties is appropriate for the
accounts. Investment properties, excluding
properties held for development, are valued
by adopting the ‘investment method’ of
valuation. This approach involves applying
market-derived capitalisation yields to current
and market-derived future income streams
with appropriate adjustments for income voids
arising from vacancies or rent-free periods.
These capitalisation yields and future income
streams are derived from comparable property
and leasing transactions and are considered to
be the key inputs in the valuation. Other factors
that are taken into account in the valuations
include the tenure of the property, tenancy
details and ground and structural conditions.

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts 1: Significant accounting policies
(continued)
In the case of ongoing developments, the
approach applied is the ‘residual method’ of
valuation, which is the investment method of
valuation as described above with a deduction
for all costs necessary to complete the
development, together with a further
allowance for remaining risk. Properties held
for future development are generally valued
by adopting the higher of the residual method
of valuation allowing for all associated risks,
or the investment method of valuation for the
existing asset. Property valuations are one
of the principal uncertainties of the Group,
as noted on page 37.

Tenant leases
Management has exercised judgement in
considering the potential transfer of the risks
and rewards of ownership in accordance with
IAS 17 Leases for properties leased to tenants
and has determined that such leases are
operating leases.

Other investments
The Company holds other investments that
are classified as available for sale and held
at fair value on the balance sheet. The fair
value of these investments is based on the
Directors’ valuation, with regard to external
valuations where appropriate.

Accounting for acquisitions
Management must assess whether the
acquisition of property through the purchase
of a corporate vehicle should be accounted
for as an asset purchase or a business
combination. As noted in the accounting policy
below, where the acquired company contains
significant assets or liabilities in addition to
property, the transaction is accounted for
as a business combination. Where there are
no such items, the transaction is treated as
an asset purchase.

Accounting for joint ventures
The accounting treatment for our joint
ventures requires an assessment to determine
the degree of control or influence that the
Group may exercise over them and the form
of any control. Hammerson’s interest in its
joint ventures is commonly driven by the
terms of partnership agreements, which
ensure that control is shared between the
partners. As a result, these are accounted for
as jointly controlled entities and are included
in the financial statements on a proportionate
consolidation basis in accordance with IAS 31.

Accounting for associates
Associates are those entities over which the
Group is in a position to exercise significant
influence, but not control or joint control.
The Directors must exercise judgement in
determining whether the Group is in a position
to exercise significant influence.

REIT and SIIC status
The Company has elected for UK REIT and
French SIIC status. To continue to benefit from
these tax regimes, the Group is required to
comply with certain conditions as outlined in
notes 8E and 8F to the accounts. Management
intends that the Group should continue
as a UK REIT and French SIIC for the
foreseeable future.

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

Where properties are acquired through
corporate acquisitions but there are no
significant assets or liabilities other than
property, the acquisition is treated as an asset
acquisition. In other cases, particularly where
there is an integrated set of activities and
assets, capable of being conducted and
managed for the purpose of providing a
return, the business combination approach
method is used.

Joint ventures
Joint ventures are those entities over
whose activities the Group has joint control,
established by contractual agreement. The
consolidated financial statements include
the Group’s proportionate share of assets,
liabilities, results and cash flows of
joint ventures.

Associates
The results, assets and liabilities of associates
are accounted for using the equity method.
Investments in associates are carried in the
balance sheet at cost as adjusted for post-
acquisition changes in the Group’s share of the
net assets of the associate, less any impairment.
Losses of an associate in excess of the Group’s

interest in that associate are recognised only
to the extent that the Group has incurred legal
or constructive obligations or made payments
on behalf of the associate.

Goodwill
Goodwill arising on acquisition is recognised as
an asset and initially measured at cost, being
the excess of the cost of the acquired entity
over the Group’s interest in the fair value of
the assets, liabilities and contingent liabilities
acquired. Goodwill that is recognised as an
asset is reviewed for impairment at least
annually. Any impairment is recognised
immediately in the income statement
and is not subsequently reversed.

Where the fair value of the assets, liabilities
and contingent liabilities acquired is greater
than the cost, the excess, known as negative
goodwill, is recognised immediately in the
income statement.

Foreign currency
Foreign currency transactions
Transactions in foreign currencies are
translated into sterling at exchange rates
approximating to the exchange rate ruling
at the date of the transaction. Monetary
assets and liabilities denominated in foreign
currencies at the balance sheet date are
translated to sterling at the exchange rate
ruling at that date and, unless they relate to
the hedging of the net investment in foreign
operations, differences arising on translation
are recognised in the income statement.

Financial statements of foreign
operations
The assets and liabilities of foreign operations,
including goodwill and fair value adjustments
arising on consolidation, are translated into
sterling at the exchange rates ruling at the
balance sheet date. The operating income and
expenses of foreign operations are translated
into sterling at the average exchange rates
for the year. Significant transactions, such
as property sales, are translated at the
foreign exchange rate ruling at the date
of each transaction.

The principal exchange rate used to translate
foreign currency-denominated amounts in
the balance sheet is the rate at the end of the
year, £1 = €1.233 (2011: £1 = €1.197). The
principal exchange rate used for the income
statement is the average rate, £1 = €1.233
(2011: £1 = €1.153).

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts An asset equivalent to the leasehold obligation
is recorded in the balance sheet within
‘interests in leasehold properties’, and is
amortised over the lease term.

Depreciation
In accordance with IAS 40 Investment
Property, no depreciation is provided in
respect of investment and development
properties, which are carried at fair value.
Leasehold property occupied by the Group
(‘owner-occupied property’) is depreciated
where material over its expected useful life,
giving due consideration to its estimated
residual value.

Net rental income
Rental income from investment property
leased out under an operating lease is
recognised in the income statement on
a straight-line basis over the lease term.

Contingent rents, such as turnover rents,
rent reviews and indexation, are recorded
as income in the periods in which they are
earned. Rent reviews are recognised when
such reviews have been agreed with tenants.

Lease incentives and costs associated with
entering into tenant leases are amortised
over the period to the first break option or,
if the probability that the break option will
be exercised is considered low, over the
lease term.

Property operating expenses are expensed
as incurred and any property operating
expenditure not recovered from tenants
through service charges is charged to the
income statement.

Gains on sale of properties
Gains on sale of properties are taken into
account on the completion of contract, and
are calculated by reference to the carrying
value at the end of the previous year, adjusted
for subsequent capital expenditure.

Notes to the accounts (continued)

1: Significant accounting policies
(continued)
Net investment in foreign operations
Exchange differences arising from the
translation of the net investment in foreign
operations are taken to the translation
reserve. They are released to the income
statement upon disposal of the
foreign operation.

Borrowings, interest and derivatives
Borrowings
Borrowings are recognised initially at fair
value, after taking account of any discount
on issue and attributable transaction costs.
Subsequently, borrowings are held at
amortised cost, such that discounts and costs
are charged to the income statement over the
term of the borrowing at a constant return on
the carrying amount of the liability.

Derivative financial instruments
The Group uses derivative financial instruments
to economically hedge its exposure to foreign
currency movements and interest rate risks.
Hedge accounting is applied in respect of net
investments in foreign operations.

Derivative financial instruments are
recognised initially at fair value, which equates
to cost and subsequently remeasured at fair
value, with changes in fair value being included
in the income statement, except that a gain or
loss on the portion of an instrument that is
an effective hedge of the net investment
in a foreign operation is recognised in the
hedging reserve.

Trade receivables and payables
Trade receivables and payables are initially
measured at fair value, subsequently
measured at amortised cost and, where
the effect is material, discounted to reflect
the time value of money.

Net finance costs
Net finance costs include interest payable on
borrowings, net of interest capitalised, interest
receivable on funds invested, and changes in
the fair value of derivative financial instruments.

Capitalisation of interest
Interest is capitalised if it is directly
attributable to the acquisition, construction or
production of development properties or the
redevelopment of investment properties.
Capitalisation commences when the activities
to develop the property start and continues
until the property is substantially ready for its
intended use. Capitalised interest is calculated
with reference to the actual rate payable on
borrowings for development purposes or, for
that part of the development cost financed
out of general funds, to the average rate.

Property portfolio
Investment properties
Investment properties are stated at fair
value, being market value determined by
professionally qualified external valuers,
and changes in fair value are included in the
income statement.

Development properties
Properties acquired with the intention of
redevelopment are classified as development
properties and stated at fair value, being
market value determined by professionally
qualified external valuers. Changes in fair
value are included in the income statement.

All costs directly associated with the purchase
and construction of a development property
are capitalised. When development properties
are completed, they are reclassified as
investment properties.

Leasehold properties
Leasehold properties that are leased out to
tenants under operating leases are classified
as investment properties or development
properties, as appropriate, and included in
the balance sheet at fair value.

The obligation to the freeholder or superior
leaseholder for the buildings element of the
leasehold is included in the balance sheet
at the present value of the minimum lease
payments at inception. Payments to the
freeholder or superior leaseholder are
apportioned between a finance charge and
a reduction of the outstanding liability. The
finance charge is allocated to each period
during the lease term so as to produce a
constant periodic rate of interest on the
remaining balance of the liability. Contingent
rents payable, such as rent reviews or those
related to rental income, are charged as
an expense in the periods in which they
are incurred.

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts 1: Significant accounting policies
(continued)
Plant, equipment and
owner-occupied property
Owner-occupied property held under a finance
lease is stated at fair value with changes in fair
value recognised directly in equity.

Plant and equipment are stated at cost less
accumulated depreciation. Depreciation
is charged to the income statement on a
straight-line basis over the estimated useful
life, which is generally between three
and five years, or in the case of leasehold
improvements, the lease term.

Other investments
Other investments are classified as ‘available
for sale’ and carried at fair value with changes
in fair value recognised directly in equity.

Where a significant or prolonged decline
in fair value is identified, the investment is
considered impaired and any cumulative
revaluation gain or deficit is recycled through
the income statement.

Employee benefits
Defined contribution pension plans
Obligations for contributions to defined
contribution pension plans are charged to
the income statement as incurred.

Defined benefit pension plans
The Group’s net obligation in respect of
defined benefit pension plans comprises the
amount of future benefit that employees have
earned, discounted to determine a present
value, less the fair value of the pension plan
assets. The discount rate used is the yield
on AA credit-rated bonds that have maturity
dates approximating to the terms of the
Group’s obligations. The calculation is
performed by a qualified external actuary
using the projected unit credit method.

Actuarial gains and losses are recognised in
equity. Where the assets of a plan are greater
than its obligation, the asset included in the
balance sheet is limited to the present value of
any future refunds from the plan or reduction
in future contributions to the plan.

Share-based employee remuneration
Share-based employee remuneration is
determined with reference to the fair value of
the equity instruments at the date at which
they are granted and charged to the income
statement over the vesting period on a
straight-line basis. The fair value of share
options is calculated using the binomial option
pricing model and is dependent on factors
including the exercise price, expected volatility,
option life and risk-free interest rate. The fair
value of the market-based element of the
Long-Term Incentive Plans is calculated using
the Monte Carlo Model and is dependent
on factors including the expected volatility,
vesting period and risk-free interest rate.
IFRS 2 Share-based Payment has been
applied to share options granted.

Tax
Tax is included in the income statement
except to the extent that it relates to items
recognised directly in equity, in which case
the related tax is recognised in equity.

Current tax is the expected tax payable on
the taxable income for the year, using tax
rates applicable at the balance sheet date,
together with any adjustment in respect
of previous years.

Deferred tax is provided using the balance
sheet liability method, providing for temporary
differences between the carrying amounts
of assets and liabilities for financial reporting
purposes and the amounts used for tax
purposes. The following temporary differences
are not provided for: goodwill not deductible
for tax purposes, the initial recognition
of assets or liabilities that affect neither
accounting nor taxable profit, and differences
relating to investments in subsidiaries to
the extent that they will probably not reverse
in the foreseeable future. The amount
of deferred tax provided is based on the
expected manner of realisation or settlement
of the carrying amount of assets and liabilities,
using tax rates that are expected to apply in
the period when the liability is settled or the
asset is realised.

A deferred tax asset is recognised only to the
extent that it is probable that future taxable
profits will be available against which the asset
can be utilised.

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts Notes to the accounts (continued)

2: Result for the year

Gross rental income

Ground and equity rents payable

Gross rental income, after rents payable

Service charge income

Service charge expenses

Net service charge expenses

Other property outgoings

Property outgoings

Net rental income

Management fees receivable

Cost of property activities

Corporate expenses

Administration expenses

Operating profit before other net (losses)/gains and
share of results of associate

Gain on the sale of investment properties

Gain on sale of interest in joint venture

Revaluation (losses)/gains on investment properties

Revaluation gains on development properties

Other net (losses)/gains

Share of results of associate

Operating profit

Net finance costs

Profit before tax

Current tax charge

Profit from continuing operations

Profit from discontinued operations

Profit for the year

Non-controlling interests – continuing operations

Profit for the year attributable to equity shareholders

Continuing operations

Discontinued operations

Notes

Adjusted
£m

297.6

(1.9)

295.7

54.5

(62.7)

(8.2)

(28.7)

(36.9)

258.8

5.9

(31.4)

(17.4)

(42.9)

215.9

Capital
and
other
£m

–

Total
2012
£m

297.6

(1.9)

295.7

54.5

(62.7)

(8.2)

(28.7)

(36.9)

Adjusted
£m

305.9

(2.0)

303.9

52.7

(62.1)

(9.4)

(30.7)

(40.1)

258.8

263.8

5.9

(31.4)

(17.4)

5.2

(33.3)

(17.9)

(42.9)

(46.0)

215.9

217.8

–

12.2

–

12.2

–

(68.3)

19.8

(36.3)

14A

4.3

220.2

43.2

6.9

47.5

227.1

–

Capital
and
other
£m

–

19.5

4.0

142.0

24.9

Total
2011
£m

305.9

(2.0)

303.9

52.7

(62.1)

(9.4)

(30.7)

(40.1)

263.8

5.2

(33.3)

(17.9)

(46.0)

217.8

19.5

4.0

142.0

24.9

190.4

–

217.8

190.4

408.2

(87.5)

(46.1)

(133.6)

(103.0)

(2.8)

(105.8)

132.7

(39.2)

93.5

114.8

187.6

302.4

11A

(0.4)

–

(39.2)

28.9

(0.4)

93.1

48.7

(10.3)

141.8

(0.7)

114.1

26.8

140.9

–

187.6

17.1

204.7

(0.7)

301.7

43.9

345.6

132.3

19.8

152.1

(3.3)

(0.1)

(3.4)

(3.9)

(6.0)

(9.9)

148.8

(10.4)

138.4

137.0

198.7

335.7

129.0

19.8

148.8

(39.3)

28.9

89.7

48.7

(10.4)

138.4

110.2

26.8

137.0

181.6

17.1

198.7

291.8

43.9

335.7

Included in gross rental income is £6.3 million (2011: £6.3 million) of contingent rents calculated by reference to tenants’ turnover.

Jacques Espinasse, a Non-Executive Director, leased an apartment from the Group from 2 January 2012 until the date of sale of the relevant
property on 22 May 2012. The total payments made to the Group during the year in respect of this ten-year lease, which was at market rate,
comprised rent of €7,000 and a contribution to refurbishment costs of €43,000. The management fees receivable in notes 2 and 9B include fees
paid to Hammerson in respect of joint ventures for investment and development management services. Except as noted above, and in relation to
Directors’ remuneration, all other related party transactions are eliminated on consolidation.

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts Continuing operations

United Kingdom

Retail:

Shopping centres

Retail parks

Other UK

Total United Kingdom

Continental Europe

France:

Retail

Group

Retail

Other UK

Total investment portfolio

2: Result for the year (continued)
The Group’s revenue includes gross rental income, service charge income, management fees receivable and finance income. See table above and
note 7 on page 98.

3: Segmental analysis
The factors used to determine the Group’s reportable segments are the geographic locations (UK and Continental Europe) and sectors in which it
operates, which are generally managed by separate teams and are the basis on which performance is assessed and resources allocated. Gross rental
income represents the Group’s revenue from its ‘customers’ or tenants. Net rental income is the principal profit measure used to determine the
performance of each sector. Total assets are not monitored by segment and resource allocation is based on the distribution of property assets
between segments. Following the decision to dispose of the majority of the Group’s offices, as referred to in note 9, the reporting segments have
been reanalysed, in line with our management reporting, and previously reported figures reclassified accordingly.

A: Revenue and profit by segment

Gross rental
income
£m

Net rental
income
£m

2012
Non-cash items

Within net
rental
income
£m

Revaluation
gains/(losses)
on properties
£m

Gross
rental
income
£m

Net rental
income
£m

2011
Non-cash items

Within net
rental
income
£m

Revaluation
gains/(losses)
on properties
£m

141.2

70.9

212.1

16.2

228.3

117.0

66.8

183.8

13.9

197.7

(7.2)

(0.9)

(8.1)

(0.2)

(8.3)

(21.2)

(30.6)

(51.8)

(17.3)

(69.1)

136.2

65.9

202.1

23.0

225.1

112.6

61.8

174.4

20.7

195.1

(6.4)

(1.0)

(7.4)

5.8

(1.6)

66.0

23.9

89.9

(24.8)

65.1

69.1

61.3

–

0.8

80.7

68.9

0.3

76.9

Developments and other sources not analysed above

0.2

(0.2)

–

19.8

0.1

(0.2)

Total continuing operations

297.6

258.8

(8.3)

(48.5)

305.9

263.8

281.2

16.2

297.4

245.1

13.9

259.0

(8.1)

(0.2)

(8.3)

(51.0)

(17.3)

(68.3)

282.8

23.0

305.8

243.3

20.7

264.0

(7.1)

5.8

(1.3)

–

(1.3)

166.8

(24.8)

142.0

24.9

166.9

As disclosed in note

Discontinued operations

Other UK

As disclosed in note

Total portfolio

2, 12

28.0

24.1

1.5

(1.4)

38.2

32.2

0.2

19.4

9B, 12

325.6

282.9

(6.8)

(49.9)

344.1

296.0

(1.1)

186.3

The non-cash items included within net rental income reflect the amortisation of lease incentives and other costs and movements in accrued
rents receivable.

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts
Notes to the accounts (continued)

3: Segmental analysis (continued)
B: Investment and development property assets by segment

United Kingdom

Retail:

Shopping centres

Retail parks

Other UK

Total United Kingdom

Continental Europe

France:

Retail

Group

Retail

Other UK

Total non-current assets

Assets held for sale

Total property assets

Investment
properties
£m

Development
properties
£m

2012
Capital
expenditure
£m

Total
£m

Investment
properties
£m

Development
properties
£m

2011
Capital
expenditure
£m

Total
£m

2,412.9

1,422.6

3,835.5

158.9

3,994.4

11.5

5.2

16.7

27.5

44.2

2,424.4

1,427.8

3,852.2

186.4

4,038.6

159.2

273.0

432.2

3.7

435.9

2,273.7

1,180.4

3,454.1

704.3

4,158.4

11.4

18.2

29.6

75.5

2,285.1

1,198.6

3,483.7

779.8

105.1

4,263.5

148.0

123.7

271.7

123.3

395.0

1,188.3

231.5

1,419.8

104.5

1,320.0

136.1

1,456.1

81.9

5,023.8

248.2

5,272.0

158.9

5,182.7

194.5

5,377.2

27.5

186.4

275.7

5,458.4

–

194.5

275.7

5,652.9

536.7

3.7

540.4

18.7

559.1

4,774.1

704.3

5,478.4

–

165.7

75.5

241.2

–

4,939.8

779.8

5,719.6

–

5,478.4

241.2

5,719.6

353.6

123.3

476.9

–

476.9

C: Analysis of equity shareholders’ funds

United Kingdom

Continental Europe

2012
£m

4,514.4

1,373.1

5,887.5

Assets employed

2011
£m

4,376.7

1,359.4

5,736.1

2012
£m

Net debt

2011
£m

2012
£m

(861.1)

(898.3)

3,653.3

(1,175.2)

(2,036.3)

(1,065.9)

(1,964.2)

197.9

3,851.2

Equity shareholders’
funds

2011
£m

3,478.4

293.5

3,771.9

As part of the Group’s foreign currency hedging programme, at 31 December 2012 the Group had currency swaps outstanding, which are included
in the analysis above. Further details are set out in note 22C.

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts
4: Administration expenses
Administration expenses include the following items:

Staff costs, including Directors

Salaries and wages

Performance-related bonuses – payable in cash

– payable in shares

Other share-based employee remuneration

Social security

Net pension expense

– defined benefit schemes

– defined contribution schemes

Continuing operations

Discontinued operations

Total

Note

2012
£m

22.7

7.2

1.1

8.3

3.7

5.8

1.3

2.0

3.3

43.8

1.1

44.9

2011
£m

23.1

5.2

0.5

5.7

3.3

5.3

1.4

1.8

3.2

40.6

1.5

42.1

Of the above amount, £10.8 million (2011: £8.7 million) was recharged to tenants through service charges and £0.8 million (2011: £ nil) capitalised
in respect of development projects. Further details of share-based payment arrangements, some of which have performance conditions,
are provided in the Remuneration Report on pages 62 to 77. In addition to the figures above, redundancy related costs of £0.1 million
(2011: £1.6 million) were incurred during the year.

Staff throughout the Company, including Executive Directors, participate in a performance-related bonus scheme, part payable in cash and part
payable in shares. The Company also operates a number of share plans under which employees, including Executive Directors, are eligible to
participate. Details of these schemes are set out in the Remuneration Report on pages 69 to 73. In addition, the Company operates the following
share plans in which Directors do not participate:

Restricted Share Plan
Certain UK employees receive awards under a Restricted Share Plan, which provides an opportunity for these employees to build up a shareholding
in the Company. Under the Restricted Share Plan, share awards vest, subject to continued employment, on the third anniversary of grant.

French Share Plan
For French employees, who are not able to participate in the Share Incentive Plan referred to on page 69 or the Restricted Share Plan referred to
above, there is a share plan under which conditional awards of shares are made. The number of shares that will vest after a two-year period is
dependent on a combination of the performance of the Company’s investment portfolio in France and the Group’s performance.

Staff numbers

Average number of staff

Staff recharged to tenants, included above

Other information

Auditor’s remuneration:

Audit of the Company’s annual accounts

Audit of subsidiaries, pursuant to legislation

Other services

Other auditor’s remuneration:

Audit of subsidiaries, pursuant to legislation, and other services

Depreciation of plant, equipment and owner-occupied property

2012
Number

405

161

2012
£m

0.3

0.4

0.2

1.5

2011
Number

380

130

2011
£m

0.2

0.3

0.1

0.2

1.7

Auditor’s remuneration: Other services includes £0.2 million for due diligence services prior to acquisition of additional interests in Value Retail, and
£0.2 million payable to Drivas Jonas Deloitte in respect of advice relating to the acquisition of The Junction Fund.

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts

5: Directors’ emoluments
Full details of the Directors’ emoluments, as required by the Companies Act 2006, are disclosed in the audited sections of the Remuneration Report
on pages 62 to 77. The Executive Directors are considered to be ‘Key Management’ for the purposes of IAS 24 ‘Related party transactions’.

The Company did not grant any credits, advances or guarantees of any kind to its Directors during the year.

6: Pensions
Defined benefit pension schemes
Hammerson Group Management Limited Pension & Life Assurance Scheme (the ‘Scheme’)
The Scheme is funded and the funds, which are administered by trustees, are independent of the Group’s finances. The Scheme, which was closed
to new entrants on 31 December 2002, provides a pension linked to final salary at retirement.

Unfunded Unapproved Retirement Scheme
The unfunded scheme provides pension benefits to two former Executive Directors; one in the UK and one in France. The amount of pension is linked
to final salary at retirement. The accrued benefits in respect of the former Executive Directors remain within the scheme and are now paid directly
by the Group.

US Unfunded Unapproved Retirement Scheme
The US unfunded pension commitment relates to obligations to four former employees and their spouses.

Defined contribution pension schemes
The Company operates the UK funded approved Group Personal Pension Plan and the UK funded unapproved retirement benefit scheme, both
of which are defined contribution pension schemes. The Group’s total cost for the year relating to defined contribution pension schemes was
£2.1 million (2011: £1.9 million), being £2.0 million (2011: £1.8 million) relating to continuing operations and £0.1 million (2011: £0.1 million) in
respect of discontinued operations.

Principal actuarial assumptions used for defined benefit pension schemes

Discount rate for scheme liabilities

Expected return on scheme assets

Increase in pensionable salaries

Increase in retail price index

Increase in pensions in payment

Mortality table

31 December
2012
%

31 December
2011
%

31 December
2010
%

31 December
2009
%

31 December
2008
%

4.5

6.4

3.5

3.0

4.7

6.4

3.7

3.2

5.4

7.6

4.0

3.5

5.75

7.8

4.1

3.6

6.5

6.8

3.3

2.8

SAPS Light

CMI 0.5%

SAPS

PA92

C2020

PA92

C2020

The expected return on scheme assets has been calculated as the weighted rate of return on each asset class. The return on each asset class is taken
as the market rate of return.

Amounts recognised in the income statement in respect of defined benefit pension schemes

Included in income statement line

Current service cost

Administration expenses

Expected return on assets

Other interest payable

Interest cost

Total pension expense

Other interest payable

The Group expects to make regular contributions totalling £1.6 million to the Scheme in the next financial year.

2012
£m

1.3

(3.3)

3.7

1.7

2011
£m

1.4

(3.9)

4.0

1.5

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts Notes to the accounts (continued)6: Pensions (continued)
Amounts recognised in the balance sheet in respect of defined benefit pension schemes

Fair value of Scheme assets

Present value of Scheme obligations

Present value of unfunded defined benefit obligations

Present value of US unfunded defined benefit obligations

Net pension liability

Analysed as:
Current liabilities: Other payables
Non-current liabilities

2010
£m

51.0

(66.0)

(15.0)

(4.6)

(6.3)

(25.9)

2009
£m

47.4

(58.4)

(11.0)

(4.5)

(5.6)

(21.1)

2008
£m

42.4

(40.9)

1.5

(4.0)

(5.6)

(8.1)

2012
£m

55.0

(72.9)

(17.9)

(5.1)

(7.5)

(30.5)

(0.8)
(29.7)
(30.5)

2011
£m

51.5

(70.7)

(19.2)

(4.4)

(7.1)

(30.7)

(0.7)
(30.0)
(30.7)

The actual return on the Scheme assets for the year ended 31 December 2012 was 7.1% (2011: 0.5%).

The present value of defined benefit obligations has been calculated by an external actuary. This was taken as the present value of accrued benefits
and pensions in payment calculated using the projected unit credit method and allowing for projected compensation.

Experience gains and losses for current and prior years

Experience (losses)/gains on plan liabilities

Experience (losses)/gains on plan assets

2012
£m

(0.6)

(0.4)

2011
£m

(0.2)

(3.6)

2010
£m

0.3

(0.8)

2009
£m

(0.1)

3.9

Analysis of classes of defined benefit pension scheme assets as a proportion of the total fair value of assets

Investments with target return linked to retail price index

Changes in the present value of defined benefit pension scheme obligations

At 1 January

Service cost

Interest cost

Actuarial losses

Benefits

Exchange gains

At 31 December

Changes in the fair value of defined benefit pension scheme assets

At 1 January

Expected return

Actuarial gains/(losses)

Contributions by employer

Benefits

At 31 December

2012
%

100

2012
£m

82.2

1.3

3.7

1.1

(2.4)

(0.4)

85.5

2012
£m

51.5

3.3

0.4

1.5

(1.7)

55.0

2008
£m

(0.3)

(8.5)

2011
%

100

2011
£m

77.0

1.5

4.0

2.1

(2.4)

–

82.2

2011
£m

51.1

3.9

(3.6)

1.7

(1.6)

51.5

The cumulative net actuarial losses recognised in the consolidated statement of comprehensive income at 31 December 2012 were £30.6 million
(2011: £29.9 million).

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts 7: Net finance costs

Interest on bank loans and overdrafts

Interest on other borrowings

Interest on obligations under finance leases

Other interest payable

Gross interest costs

Less: Interest capitalised

Finance costs

Bond redemption – premium and costs*

Floating rate reset bonds redemption – premium and costs*

Change in fair value of interest rate swaps

Change in fair value of currency swaps outside hedge accounting designation

Change in fair value of derivatives*

Finance income

Net finance costs

Underlying finance costs

Gross interest costs

Finance income

Net underlying finance costs

* Total of £46.1 million (2011: £2.8 million) included in ‘Capital and other’ in note 2.

8: Tax
A: Tax charge

UK current tax

Foreign current tax

Tax charge

Current tax is reduced by the UK REIT and French SIIC tax exemptions.

B: Tax charge reconciliation

Profit before tax – continuing operations

Profit before tax – discontinued operations

Profit before tax

Profit multiplied by the UK corporation tax rate of 24.5% (2011: 26.5%)

UK REIT tax exemption on net income before revaluations and disposals

UK REIT tax exemption on revaluations and disposals

SIIC tax exemption

Non-deductible and other items

Tax charge

HAMMERSON ANNUAL REPORT 2012

2012
£m

11.6

89.2

0.6

1.4

102.8

(8.8)

94.0

13.8

41.7

(8.3)

(1.1)

(9.4)

(6.5)

133.6

102.8

(6.5)

96.3

2012
£m

0.3

0.1

0.4

2012
£m

93.5

48.7

142.2

34.8

(21.1)

7.9

(19.9)

(1.3)

0.4

2011
£m

9.9

100.9

0.6

1.7

113.1

(4.9)

108.2

–

1.7

1.1

2.8

(5.2)

105.8

113.1

(5.2)

107.9

2011
£m

0.1

0.6

0.7

2011
£m

302.4

43.9

346.3

91.8

(27.1)

(29.1)

(40.3)

5.4

0.7

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts Notes to the accounts (continued)8: Tax (continued)
C: Current and deferred tax movements

Current tax

Deferred tax

Analysed as:

Current assets: Corporation tax

Current liabilities: Tax

Non-current liabilities: Deferred tax

Non-current liabilities: Tax

1 January
2012
£m

Recognised in
income
£m

Tax paid
£m

Acquisitions
£m

31 December
2012
£m

1.2

0.5

1.7

(0.2)

1.1

0.5

0.3

1.7

0.4

–

0.4

(0.8)

–

(0.8)

0.4

–

0.4

1.2

0.5

1.7

(0.2)

1.4

0.5

–

1.7

D: Unrecognised deferred tax
At 31 December 2012, the Group had unrecognised deferred tax assets as calculated at a tax rate of 23% (2011: 25%) of £69 million
(2011: £80 million) for surplus UK revenue tax losses carried forward and £63 million (2011: £66 million) for UK capital losses.

Deferred tax is not provided on potential gains on investments in subsidiaries and joint ventures when the Group can control whether gains
crystallise and it is probable that gains will not arise in the foreseeable future. At 31 December 2012 the total of such gains was £175 million
(2011: £206 million) and the potential tax effect before the offset of losses was £40 million (2011: £52 million).

If a UK REIT sells a property within three years of completion of development, the REIT exemption will not apply. At 31 December 2012, the value
of such completed development properties was £nil (2011: £217 million) and the potential tax charge that would arise if these properties were to
be sold was £nil (2011: £nil).

E: UK REIT status
The Group elected to be treated as a UK REIT with effect from 1 January 2007. The UK REIT rules exempt the profits of the Group’s UK property
rental business from corporation tax. Gains on UK properties are also exempt from tax, provided they are not held for trading or sold in the three
years after completion of development. The Group is otherwise subject to UK corporation tax.

As a REIT, Hammerson plc is required to pay Property Income Distributions equal to at least 90% of the Group’s exempted net income. To remain
a UK REIT there are a number of conditions to be met in respect of the principal company of the Group, the Group’s qualifying activity and its
balance of business. The Group continues to meet these conditions.

F: French SIIC status
Hammerson plc has been a French SIIC since 1 January 2004 and all the major French properties are covered by the SIIC tax-exempt regime.
Income and gains are exempted from French tax but the French subsidiaries are required to distribute a proportion of their profits to Hammerson plc,
which will then designate UK dividends paid to its shareholders as SIIC distributions. Dividend obligations will arise principally after property disposals
but for the Hammerson Group there will be a period of around four years after a disposal for dividends to be paid to shareholders.

Outstanding SIIC dividend obligations arising on disposals and earnings prior to 31 December 2012 amount to £80 million (2011: £127 million) and
are expected to be settled within dividends paid by Hammerson plc over the following four years. A further £265 million (2011: £281 million)
of dividends would be payable if the properties were realised at their 31 December 2012 values. Since 1 July 2009, qualifying foreign dividends
have been exempt from UK tax and therefore no deferred tax provision is recognised.

If Hammerson plc ceased to qualify as a French SIIC before 1 January 2014, tax penalties of £132 million (2011: £163 million) would be payable.
To continue to qualify, at least 80% of assets must be employed in property investment and, with limited temporary exceptions, no shareholder
may hold 60% or more of the shares. The Group continues to meet these conditions.

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts 9: Discontinued operations and assets and liabilities classified as held for sale
A: Disposals
As part of the Group’s strategy to focus on the retail sector, the Group disposed of the following entities and office properties during the year. The
profits and losses arising from these disposals are classified as discontinued operations:

Entity
Hammerson (99 Bishopsgate) Limited
Hammerson Bishopsgate LLP
99 Bishopsgate Management Limited
10 Gresham Street LLP
Hammerson Gresham Street Unit Trust
Hammerson (Victoria) Limited

Property
Principal Place, London EC2
London Wall Place, London EC2
Harbour Quay, London E14
Puddledock, London EC4

In addition, on 19 June 2012 the Group exchanged contracts to dispose of the entities listed below before 30 June 2013. Consequently the assets
and liabilities of these entities have been reclassified as held for sale. On completion, control of these entities and properties will pass to the acquirier.

Entity
125 OBS Limited Partnership
Hammerson 125 OBS Unit Trust
125 OBS (General Partner) Limited
Hammerson (125 OBS LP) Limited
Hammerson (Leadenhall Court) Limited

The income and expenditure of the entities and properties shown above have been classified as discontinued operations in both the current
and prior year.

B: Result for the year

Gross rental income

Ground and equity rents payable

Gross rental income, after rents payable

Service charge income

Service charge expenses

Net service charge expenses

Other property outgoings

Property outgoings

Net rental income

Management fees receivable

Cost of property activities

Administration expenses

Operating profit before other net gains

Gain on the sale of investment properties

Revaluation (losses)/gains on investment properties

Revaluation gains on development properties

Other net gains

Operating profit

Net finance costs

Profit before and after tax and profit for the year attributable
to equity shareholders

100

HAMMERSON ANNUAL REPORT 2012

Adjusted
£m

Capital and
other
£m

Notes

28.0

(0.3)

27.7

4.0

(6.7)

(2.7)

(0.9)

(3.6)

24.1

0.7

(1.1)

(0.4)

23.7

–

30.4

(1.4)

–

29.0

2012

Total
£m

28.0

(0.3)

27.7

4.0

(6.7)

(2.7)

(0.9)

(3.6)

24.1

0.7

(1.1)

(0.4)

23.7

30.4

(1.4)

–

29.0

52.7

Adjusted
£m

Capital and
other
£m

38.2

(1.8)

36.4

7.1

(8.0)

(0.9)

(3.3)

(4.2)

32.2

0.6

(1.5)

(0.9)

31.3

–

31.3

–

14.5

4.9

19.4

2011

Total
£m

38.2

(1.8)

36.4

7.1

(8.0)

(0.9)

(3.3)

(4.2)

32.2

0.6

(1.5)

(0.9)

31.3

–

14.5

4.9

19.4

50.7

23.7

29.0

(3.9)

(0.1)

(4.0)

(4.5)

(2.3)

(6.8)

2, 11A

19.8

28.9

48.7

26.8

17.1

43.9

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts Notes to the accounts (continued)9: Discontinued operations and assets and liabilities classified as held for sale (continued)
C: Cashflows from discontinued operations

Cash flows from operating activities

Cash flows from investing activities

Cash flows used in financing activities

Net cash inflow/(outflow) from discontinued operations

D: Summary of assets and liabilities associated with assets held for sale

Investment properties

Interests in leasehold properties

Current receivables

Cash and deposits

Assets held for sale

Non-current borrowings

Obligations under finance leases

Payables

Current payables

Current borrowings

Liabilities associated with assets held for sale

Net assets associated with assets held for sale

2012
£m

26.5

352.5

(0.7)

378.3

2011
£m

32.3

(106.4)

(3.3)

(77.4)

2012
£m

194.5

7.0

1.8

9.3

212.6

63.3

6.9

3.7

15.2

1.3

90.4

122.2

10: Dividends
The proposed final dividend of 10.0 pence per share was recommended by the Board on 28 February 2013 and, subject to approval by
shareholders, is payable on 14 May 2013 to shareholders on the register at the close of business on 5 April 2013. 4.0 pence per share will be paid as
a PID, net of withholding tax if applicable, and the remainder of 6.0 pence per share will be paid as a normal dividend. There will be no scrip alternative.
The aggregate amount of the 2012 final dividend is £71.3 million. This has been calculated using the total number of eligible shares outstanding at
31 December 2012.

The interim dividend of 7.7 pence per share was paid on 5 October 2012, as a PID, net of withholding tax where appropriate.

The total dividend for the year ended 31 December 2012 would be 17.7 pence per share (2011: 16.6 pence per share).

Current year

2012 final dividend

2012 interim dividend

Prior years

2011 final dividend

2011 interim dividend

2010 final dividend*

Dividends as reported in the consolidated statement of changes in equity

2011 interim dividend withholding tax (paid January 2012)

2012 interim dividend withholding tax (paid January 2013)

Dividends paid as reported in the consolidated cash flow statement

PID
pence
per share

Non-PID
pence
per share

Total
pence
per share

Equity
dividends
2012
£m

Equity
dividends
2011
£m

4.0

7.7

11.7

7.0

5.5

12.5

6.0

–

6.0

2.3

1.8

4.1

10.0

7.7

17.7

9.3

7.3

16.6

–

54.8

–

66.1

–

120.9

6.2

(8.7)

118.4

–

52.0

40.3

92.3

(6.2)

–

86.1

* The Company offered shareholders a scrip dividend alternative for this dividend. Where a shareholder elected to receive the scrip, the dividend ceased to qualify as a PID.

HAMMERSON ANNUAL REPORT 2012

101

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts 11: Earnings per share and net asset value per share
The European Public Real Estate Association (EPRA) has issued recommended bases for the calculation of certain per share information and these
are included in the following tables.

A: Earnings per share
The calculations for earnings per share use the weighted average number of shares, which excludes those shares held in the Hammerson Employee
Share Ownership Plan (note 26) and treasury shares (note 27), which are treated as cancelled.

Basic – continuing operations

Basic – discontinued operations

Basic – total

Dilutive share options

Diluted

Adjustments:

Other net losses/(gains)

– continuing operations

– discontinued operations

Adjustment for associate

Change in fair value of derivatives

– continuing operations

– discontinued operations

Bond redemption-premium and costs

Floating rate reset bonds redemption-premium and costs

Non-controlling interests in respect of the above1

EPRA

1 Non-controlling interests relate to continuing operations.

Shares
million

711.7

0.2

711.9

Notes

14A

Earnings
£m

89.7

48.7

138.4

–

138.4

36.3

(29.0)

7.3

(43.2)

(9.4)

0.1

(9.3)

13.8

41.7

0.1

148.8

2012

Pence
per share

12.6

6.8

19.4

–

19.4

5.1

(4.1)

1.0

(6.1)

(1.3)

–

(1.3)

2.0

5.9

–

20.9

Earnings
£m

291.8

43.9

335.7

–

335.7

(190.4)

(19.4)

(209.8)

–

2.8

2.3

5.1

–

6.0

137.0

Further commentary on earnings and net asset value per share is provided in the Financial Review on pages 40 to 45.

B: Net asset value per share

Basic

Company’s own shares held in Employee

Share Ownership Plan

Treasury shares

Unexercised share options

Diluted

Fair value adjustment to borrowings

EPRA triple net

Fair value of derivatives

Fair value adjustment to borrowings

Adjustment for associate

Deferred tax

EPRA

Shares
million

712.8

(1.3)

–

0.7

712.2

Notes

22I

14B

Equity
shareholders’
funds
£m

3,851.2

–

3.7

3,854.9

(289.5)

3,565.4

(11.6)

289.5

16.2

0.5

3,860.0

2012

Net asset
value
per share
£

5.40

n/a

5.41

(0.41)

5.00

(0.02)

0.41

0.03

–

5.42

Equity
shareholders’
funds
£m

3,771.9

–

3.8

3,775.7

(149.7)

3,626.0

(4.4)

149.7

–

0.5

3,771.8

Shares
million

709.8

0.3

710.1

Shares
million

712.6

(0.4)

(1.2)

0.8

711.8

2011

Pence
per share

41.1

6.2

47.3

–

47.3

(26.8)

(2.7)

(29.5)

–

0.4

0.3

0.7

–

0.8

19.3

2011

Net asset
value
per share
£

5.29

n/a

5.30

(0.21)

5.09

–

0.21

–

5.30

Previously EPRA NAV was calculated by excluding foreign exchange and cross currency swaps as well as interest rate swaps. Following clarification of
EPRA best practice recommendations, foreign exchange and cross currency swaps are no longer excluded as they act as economic hedges of euro
denominated assets that are included in EPRA NAV. The adjustment would be immaterial to the comparatives which have therefore not been restated.

102

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts Notes to the accounts (continued)12: Investment and development properties

Balance at 1 January 2012

Exchange adjustment

Additions – continuing operations

– capital expenditure

– asset acquisitions

Additions – discontinued operations

Total additions

Disposals

– continuing operations

– discontinued operations

Capitalised interest

Revaluation

– continuing operations

– discontinued operations

Transfer to assets held for sale

Balance at 31 December 2012

Balance at 1 January 2011

Exchange adjustment

Additions – continuing operations

– capital expenditure

– asset acquisitions

Additions – discontinued operations

Total additions

Disposals

– continuing operations

– discontinued operations

Capitalised interest

Revaluation

– continuing operations

– discontinued operations

Investment
properties
Valuation
£m

Cost
£m

4,665.0

5,478.4

(21.6)

(38.6)

70.8

397.3

468.1

14.4

482.5

(76.0)

(328.3)

(404.3)

1.3

–

70.8

397.3

468.1

14.4

482.5

(126.5)

(350.2)

(476.7)

1.3

(68.3)

(1.4)

(69.7)

(176.6)

(194.5)

Development
properties
Valuation
£m

Cost
£m

Total
Valuation
£m

241.2

4,915.9

5,719.6

(4.0)

(25.2)

(42.6)

71.7

0.6

72.3

4.3

76.6

(13.0)

(52.4)

(65.4)

7.5

19.8

–

19.8

–

142.5

397.9

540.4

18.7

559.1

(80.0)

(389.2)

(469.2)

8.8

–

142.5

397.9

540.4

18.7

559.1

(139.5)

(402.6)

(542.1)

8.8

(48.5)

(1.4)

(49.9)

(176.6)

(194.5)

Cost
£m

250.9

(3.6)

71.7

0.6

72.3

4.3

76.6

(4.0)

(60.9)

(64.9)

7.5

–

4,546.3

5,182.7

266.5

275.7

4,812.8

5,458.4

Cost
£m

4,469.6

(19.8)

27.9

275.0

302.9

106.3

409.2

(67.9)

(126.6)

(194.5)

0.5

–

Investment
properties
Valuation
£m

5,190.2

(33.5)

Development
properties
Valuation
£m

140.9

(1.4)

Cost
£m

180.6

(1.6)

27.9

275.0

302.9

106.3

409.2

(91.5)

(153.0)

(244.5)

0.5

142.1

14.4

156.5

59.2

–

59.2

8.5

67.7

–

4.2

–

59.2

–

59.2

8.5

67.7

–

4.2

24.8

5.0

29.8

241.2

Cost
£m

4,650.2

(21.4)

87.1

275.0

362.1

114.8

476.9

(67.9)

(126.6)

(194.5)

4.7

–

Total
Valuation
£m

5,331.1

(34.9)

87.1

275.0

362.1

114.8

476.9

(91.5)

(153.0)

(244.5)

4.7

166.9

19.4

186.3

4,915.9

5,719.6

Balance at 31 December 2011

4,665.0

5,478.4

250.9

Properties are stated at fair value as at 31 December 2012, valued by professionally qualified external valuers, DTZ Debenham Tie Leung, Chartered
Surveyors. The valuations have been prepared in accordance with the RICS Valuation – Professional Standards (Incorporating
the International Valuation Standards) March 2012 based on certain assumptions as set out in note 1.

HAMMERSON ANNUAL REPORT 2012

103

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts 12: Investment and development properties (continued)
In the case of leasehold properties included in the tables above, valuations are net of any obligation to freeholders or superior leaseholders. To
comply with IAS 40 and IAS 17 these obligations and the related leasehold assets are included in the balance sheet within ‘Obligations under finance
leases’ (note 23) and ‘Interests in leasehold properties’ respectively. Further information is provided in ‘Significant accounting policies’ on page 90.

Valuation fees are based on a fixed amount agreed between the Group and the valuers and are independent of the portfolio value. Summaries of
the valuers’ reports are available on the Company’s website: www.hammerson.com

At 31 December 2012 the total amount of interest included in development properties was £12.5 million (2011: £5.2 million). Capitalised interest
is calculated using the cost of secured debt or the Group’s average cost of borrowings, as appropriate, and the effective rate applied in 2012 was
5.2% (2011: 5.2%).

At 31 December 2012 investment and development properties did not include any property held for sale (2011: £709.8 million, including
£579.8 million in respect of discontinued operations).

Balance at 31 December 2012

Balance at 31 December 2011

Capital commitments

Freehold
£m

3,282.3

3,447.5

Long
leasehold
£m

2,176.1

2,272.1

2012
£m

158.1

Total
£m

5,458.4

5,719.6

2011
£m

237.6

At 31 December 2012 Hammerson’s share of the capital commitments in respect of joint ventures, which is included in the table above, was
£4.2 million (2011: £18.8 million).

13: Plant, equipment and owner-occupied property

Cost or valuation

Balance at 1 January 2011

Exchange adjustment

Additions

Revaluation

Balance at 31 December 2011/1 January 2012

Exchange adjustment

Additions

Disposals

Revaluation

Balance at 31 December 2012

Depreciation

Balance at 1 January 2011

Disposals

Depreciation charge for the year

Balance at 31 December 2011/1 January 2012

Exchange adjustment

Disposals

Depreciation charge for the year

Balance at 31 December 2012

Book value at 31 December 2012

Book value at 31 December 2011

Owner-occupied
property
£m

Plant and
equipment
£m

27.1

–

2.8

29.9

–

0.1

30.0

–

30.0

29.9

13.7

(0.1)

1.6

–

15.2

(0.2)

2.8

(3.1)

–

14.7

(7.4)

(0.6)

(1.7)

(9.7)

0.2

3.0

(1.5)

(8.0)

6.7

5.5

Total
£m

40.8

(0.1)

1.6

2.8

45.1

(0.2)

2.8

(3.1)

0.1

44.7

(7.4)

(0.6)

(1.7)

(9.7)

0.2

3.0

(1.5)

(8.0)

36.7

35.4

The Group occupies part of 10 Grosvenor Street, London W1, in which it holds a 50% joint venture interest. This property was valued as part of the
portfolio valuation referred to in note 12. The fair value of owner-occupied property represents a nominal apportionment of the fair value of the
property as a whole. The cost of owner-occupied property at 31 December 2012 was £12.0 million (2011: £12.0 million).

104

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts Notes to the accounts (continued)14: Investment in associate
On 21 August 2012 the Group gained significant influence over Value Retail PLC and associated entities and equity accounted for its investment
from that date. See also note 16.

A: Share of results of associate – 21 August to 31 December 2012

Revenue

Depreciation and amortisation

Operating profit before other net gains

Revaluation gains on investment properties

Other net operating costs

Operating profit

Interest income

Interest expense

Change in fair value of financial instruments

Change in fair value of participative loans

Change in fair value of derivatives

Profit before tax

Current tax charge

Deferred tax charge

Profit for the period

Foreign exchange translation differences

Total comprehensive income

Reconciliation to note 11A

Profit for the period

Revaluation gains on investment properties

Change in fair value of derivatives

Deferred tax charge

Adjustment for associate

EPRA adjusted earnings of associate

2012

Hammerson
share
£m

18.1

(0.6)

17.5

38.1

(9.1)

46.5

0.4

(4.2)

(3.4)

12.0

8.6

51.3

(0.3)

(3.5)

47.5

1.6

49.1

47.5

(38.1)

(8.6)

3.5

(43.2)

4.3

100%
£m

61.9

(1.7)

60.2

124.3

(35.9)

148.6

1.3

(15.7)

(17.6)

–

(17.6)

116.6

(1.7)

(23.3)

91.6

12.7

104.3

91.6

(124.3)

17.6

23.3

(83.4)

8.2

HAMMERSON ANNUAL REPORT 2012

105

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts
B: Share of assets and liabilities of associate

Goodwill on acquisition of associate

Other non-current assets

Non-current assets

Other current assets

Cash and deposits

Current assets

Total assets

Current liabilities

Other liabilities

Fair value of financial instruments

Deferred tax

Non-current liabilities

Total liabilities

Net assets

Participative loans*

Total investment in associate

2012

Hammerson
share
£m

58.5

579.1

637.6

43.5

21.7

65.2

100%
£m

–

2,224.6

140.3

87.3

227.6

2,452.2

702.8

(40.8)

(944.3)

(132.8)

(273.6)

(1,350.7)

(1,391.5)

1,060.7

(9.8)

(235.2)

(33.0)

(39.2)

(307.4)

(317.2)

385.6

42.8

428.4

* The Group’s total investment in associate includes long-term debt which in substance forms part of the Group’s investment. These participative loans are not repayable in the

foreseeable future.

Reconciliation to note 11B

Total investment in associate

Fair value of derivatives

Deferred tax

Goodwill as a result of deferred tax

Adjustment for associate

EPRA adjusted total investment in associate

C: Reconciliation of movements in investment in associate

Transfer from other investments on 21 August 2012

Share of results of associate

Dividends

Foreign exchange translation differences

Balance at 31 December 2012

106

HAMMERSON ANNUAL REPORT 2012

2012

Hammerson
share
£m

428.4

5.7

39.2

(28.7)

16.2

444.6

£m

381.7

47.5

(2.4)

1.6

Notes

14B

428.4

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts Notes to the accounts (continued)

15: Joint ventures
As at 31 December 2012 certain property and corporate interests, being jointly controlled entities, have been proportionately consolidated,
and the significant interests are set out in the following table:

Investments

Brent Cross Shopping Centre

Brent South Shopping Park

Bristol Alliance Limited Partnership

Queensgate Limited Partnership

Retail Property Holdings Limited (Silverburn)

SCI Espace Plus

SCI ESQ (Espace Saint Quentin)

SCI RC Aulnay 1 and SCI RC Aulnay 2 (O’Parinor)

The Bull Ring Limited Partnership

The Grosvenor Street Limited Partnership

The Martineau Galleries Limited Partnership

The Oracle Limited Partnership

The Highcross Limited Partnership

The West Quay Limited Partnership

125 OBS Limited Partnership

Developments

Bishopsgate Goodsyard Regeneration Limited

Group
share
%

41.2

40.6

33.33

The Group’s interest in The Highcross Limited Partnership does not confer the majority of voting rights nor the right to exercise dominant influence
over the partnership. Instead the partnership is under the joint control of Hammerson and its respective partner. Consequently, the Group’s interest
is not treated as a subsidiary, but is accounted for by proportional consolidation.

The summarised income statements and balance sheets on pages 108 and 109, show the proportion of the Group’s results, assets and liabilities that
are derived from its joint ventures.

HAMMERSON ANNUAL REPORT 2012

107

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts 15: Joint ventures (continued)

m
£

a
t
o
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2
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4
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6
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9
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–

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–

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£

Q
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£

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108

HAMMERSON ANNUAL REPORT 2012

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15: Joint ventures (continued)

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3

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0
0
3

7
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N

HAMMERSON ANNUAL REPORT 2012

e
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109

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts

16: Other investments

Available for sale investments

Balance at 1 January 2012

Exchange adjustment

Acquisitions

Other additions*

Total additions

Revaluation

Transfer to associate

Balance at 31 December 2012

Value Retail PLC
and associated
entities (‘VR’)
£m

Note

Other
investments
£m

214.0

(1.6)

79.7

15.2

94.9

74.4

14C

(381.7)

–

1.1

–

0.3

–

0.3

–

1.4

Total
£m

215.1

(1.6)

80.0

15.2

95.2

74.4

(381.7)

1.4

* Following the transition to equity accounting for the Group’s interest in VR, certain balances have been reclassified. Other additions comprise £4.7 million preferred returns previously

recognised in receivables and £10.5 million of advanced distributions for which the liability was previously included within investments but which is now recognised within other
non-current payables.

Prior to 21 August 2012, the Group had concluded that it did not have significant influence over any of the investments in Value Retail PLC and
associated entities as, despite holding certain limited voting rights, the Group had no means to influence financial and operating policies through
its voting rights or otherwise. The interests were therefore classified as available for sale investments.

On 21 August 2012, the Group acquired additional stakes in the sponsor entities of Bicester Investors Limited Partnership, Bicester Investors II LP,
VR European Holdings BV and Value Retail PLC, increasing its interest in these Value Retail holding companies to 22%. These investments have been
equity accounted from the date of acquisition of the additional stakes, and disclosed as Investment in Associate (see note 14), as the Group has
significant influence through its ownership interest from this date. In addition to the interests in the holding companies, the Group has non-equity
interests of differing proportions in the entities which own VR’s outlet Villages. When aggregated the Group’s share of VR’s operating profit before
other net gains amounts to 29.1% for the period ended 31 December 2012.

17: Receivables: non-current assets

Loans receivable

Other receivables

Fair value of interest rate swaps

2012
£m

47.0

1.1

18.5

66.6

2011
£m

52.6

3.1

–

55.7

Loans receivable comprises a loan of €58.0 million (£47.0 million) to Value Retail European Holdings BV bearing interest at 11% and maturing on
22 August 2016. This loan is classified as available for sale.

At 31 December 2011, loans receivable comprised a loan to Value Retail PLC €28.0 million (£23.4 million), and £29.2 million representing a loan of
€30 million plus accumulated interest, to SCI Quantum, the purchaser in 2009 of a property in France. This loan was repaid in July 2012.

18: Receivables: current assets

Trade receivables

Other receivables

Corporation tax

Prepayments

Fair value of currency swaps

2012
£m

53.2

38.6

0.2

10.7

–

102.7

2011
£m

42.6

47.4

0.2

6.5

15.0

111.7

Trade receivables are shown after deducting a provision for bad and doubtful debts of £13.2 million (2011: £12.4 million), as set out in the table
on page 111. The movement in the provision during the year was recognised entirely in income. Credit risk is discussed in note 22F.

110

HAMMERSON ANNUAL REPORT 2012

Notes to the accounts (continued)Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts 18: Receivables: current assets (continued)

Not yet due

1-30 days overdue

31-60 days overdue

61-90 days overdue

91-120 days overdue

More than 120 days overdue

19: Cash and deposits

Cash at bank

Short-term deposits

Currency profile

Sterling

Euro

Gross
receivable
£m

36.4

11.5

1.4

0.4

2.3

14.4

66.4

Provision
£m

–

0.7

0.1

0.6

11.1

13.2

2012
Net
receivable
£m

36.4

10.8

0.7

0.3

1.7

3.3

53.2

Gross
receivable
£m

25.2

9.6

2.0

0.3

2.2

15.7

55.0

Provision
£m

–

0.6

0.1

1.0

10.6

12.4

Associated with
assets held for sale
£m

Total
£m

2012
As stated on
balance sheet
£m

54.4

12.0

66.4

52.6

13.8

66.4

(9.3)

–

(9.3)

–

(9.3)

45.1

12.0

57.1

43.3

13.8

57.1

2011
Net
receivable
£m

25.2

9.0

1.9

0.2

1.2

5.1

42.6

2011
£m

61.2

39.5

100.7

76.7

24.0

100.7

Short-term deposits principally comprise deposits placed on money markets with rates linked to LIBOR for maturities of not more than one month,
at an average rate of £0.3% (2011: 0.4%). Such deposits are considered to be cash equivalents. Included in the cash balance is £1.9 million
(2011: £1.6 million) that may be used only in relation to certain development projects or in respect of secured borrowings.

20: Payables: current liabilities

Trade payables

Other payables

Accruals

Deferred income

21: Borrowings
A: Maturity

After five years

From two to five years

From one to two years

Due after more than one year

Due within one year

2012
£m

36.3

132.3

25.3

49.8

243.7

2012
As stated on
balance sheet
£m

1,142.4

737.7

–

1,880.1

158.0

2,038.1

2011
£m

23.1

147.0

23.2

51.1

244.4

2011
Total
£m

742.5

985.4

251.3

1,979.2

100.7

2,079.9

Bank loans
and overdrafts
£m

(1.7)

100.8

1.3

100.4

159.5

259.9

Other
borrowings
£m

1,144.1

698.9

–

1,843.0

(0.2)

1,842.8

2012
Total
£m

Associated with
assets held for sale
£m

1,142.4

799.7

1.3

1,943.4

159.3

2,102.7

–

(62.0)

(1.3)

(63.3)

(1.3)

(64.6)

At 31 December 2011 and 2012 no borrowings due after five years were repayable by instalments.

At 31 December 2012 the fair value of currency swaps was a liability of £11.1 million and is included in the table above. At 31 December 2011 the fair
value was an asset of £15.0 million included within current receivables (see note 18).

HAMMERSON ANNUAL REPORT 2012

111

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts 21: Borrowings (continued)
B: Analysis

Unsecured

£200 million 7.25% sterling bonds due 2028

£300 million 6% sterling bonds due 2026

£250 million 6.875% sterling bonds due 2020

€500 million 2.75% euro bonds due 2019

£300 million 5.25% sterling bonds due 2016

€480 million (2011: €700 million) 4.875% euro bonds due 2015

Bank loans and overdrafts

Fair value of currency swaps

Secured

Euro variable rate mortgage due 2016

Sterling variable rate mortgage due 2015*

* Associated with assets held for sale.

2012
£m

2011
£m

197.9

297.1

247.9

401.2

298.7

388.9

151.6

1,983.3

11.1

1,994.4

43.7

64.6

197.8

297.0

247.7

–

298.3

583.8

345.5

1,970.1

(15.0)

1,955.1

44.9

64.9

2,102.7

2,064.9

Security for secured euro and sterling borrowings as at 31 December 2012 is provided by a first legal charge on two properties, for which the Group’s
share of the carrying value was £99.3 million and £131.6 million respectively.

C: Undrawn committed facilities

Expiring within one year

Expiring after more than two years

D: Interest rate and currency profile

Sterling

Euro

Sterling

Euro

2012
£m

–

630.0

2011
£m

90.0

505.0

595.0

Fixed rate borrowings

Other
variable rate
borrowings

Years

£m

555.8

1,137.8

1,693.6

Fixed rate borrowings

357.9

51.2

409.1

Other
variable rate
borrowings

Years

£m

1,201.5

625.0

1,826.5

(226.5)

464.9

238.4

2012
Total

£m

913.7

1,189.0

2,102.7

2011
Total

£m

975.0

1,089.9

2,064.9

6.4

4.1

4.8

6.2

4.9

5.5

The analysis above reflects the effect of currency and interest rate swaps in place at 31 December 2011 and 2012, further details of which are set
out in note 22.

Variable rate borrowings bear interest based on LIBOR, with the exception of certain euro borrowings whose interest costs are linked to EURIBOR.

112

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts Notes to the accounts (continued)22: Financial instruments and risk management
Exposure to credit, interest rate and currency risks arises in the normal course of the Group’s business. Derivative financial instruments are used
to manage exposure to fluctuations in foreign currency exchange rates and interest rates, but are not employed for speculative purposes. Further
discussion of these issues is set out in Risk Management on page 38.

The Group’s risk management policies and practices with regard to financial instruments are as follows:

A: Debt management
The Group generally borrows on an unsecured basis on the strength of its covenant in order to maintain operational flexibility. Borrowings are
arranged to ensure an appropriate maturity profile and to maintain short-term liquidity. Acquisitions may be financed initially using short-term funds
before being refinanced for the longer term when market conditions are appropriate. Short-term funding is raised principally through syndicated
revolving credit facilities from a range of banks and financial institutions with whom Hammerson maintains strong working relationships. Long-term
debt mainly comprises the Group’s fixed rate unsecured bonds.

B: Interest rate management
Interest rate swaps are used to alter the interest rate basis of the Group’s debt, allowing changes from fixed to variable rates or vice versa. Clear
guidelines exist for the Group’s ratio of fixed to variable rate debt and management regularly reviews the interest rate profile against these guidelines.

At 31 December 2012, the Group had interest rate swaps of £60.7 million (2011: £60.7 million) and £40.0 million (2011: £41.2 million), maturing
in 2015 and 2016 respectively. Under these swaps the Group pays interest at fixed rates of 2.455% and 3.075% respectively and receives interest
linked to LIBOR and EURIBOR. The Group also had interest rate swaps of £250.0 million (2011: £nil) maturing in 2020 under which the Group pays
interest linked to LIBOR and receives interest at 6.875%. At 31 December 2011 the Group also had interest rate swaps of £100 million which were
cancelled during 2012.

At 31 December 2012, the fair value of interest rate swaps was an asset of £11.6 million (2011: £10.6 million liability).

The Group does not hedge account for its interest rate swaps and states them at fair value with changes in fair value included in the income statement.

C: Foreign currency management
The impact of foreign exchange movements is managed by financing the cost of acquiring euro denominated assets with euro borrowings.
The Group borrows in euros and uses currency swaps to match foreign currency assets with foreign currency liabilities.

To manage the foreign currency exposure on its net investments in subsidiaries in Continental Europe, the Group has designated all euro borrowings,
including euro denominated bonds and currency swaps, as hedges. The carrying amount of the bonds at 31 December 2012 was £790.1 million
(2011: £583.8 million) and their fair value was £841.4 million (2011: £604.1 million).

At 31 December 2012, the Group had currency swaps of £347.7 million, being €58.5 million sold forward against sterling for value in January 2013
at a rate of £1 = €1.227 and €379.6 million of cross currency swaps to swap the £300.0 million, 5.25% sterling bond maturing in 2016 into euro at a
rate of £1 = €1.265 and a coupon of 4.76%. At 31 December 2011, the Group had currency swaps of £476.2 million, being €552.0 million sold
forward against sterling: €372.0 million for value in March 2012, at a rate of £1 = €1.162 and €180.0 million for value in June 2012, at a rate of
£1 = €1.146. The fair value of currency swaps is shown in note 22I.

The exchange differences on hedging instruments and on net investments in foreign subsidiaries are recognised in equity.

D: Profit and loss account and balance sheet management
The Group maintains internal guidelines for interest cover, gearing and other ratios. Management monitors the Group’s current and projected
financial position against these guidelines. Further details of these ratios are provided in the Financial Review on pages 44 to 45.

E: Cash management and liquidity
Cash levels are monitored to ensure sufficient resources are available to meet the Group’s operational requirements. Short-term money market
deposits are used to manage liquidity while maximising the rate of return on cash resources, giving due consideration to risk.

Longer-term liquidity requirements are met with an appropriate mix of short and longer-term debt as explained in note 22A above.

F: Credit risk
The Group’s principal financial assets are bank and cash balances, short-term deposits, trade and other receivables and investments.

The Group’s credit risk is attributable to its trade and other receivables, cash and short-term deposits and derivative financial instruments.

Trade receivables consist principally of rents due from tenants. The balance is low relative to the scale of the balance sheet and the Group’s tenant base
is diversified geographically, with tenants generally of good financial standing. The majority of tenant leases are long-term contracts with rents

HAMMERSON ANNUAL REPORT 2012

113

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts 22: Financial instruments and risk management (continued)
payable quarterly in advance and the average unexpired lease term at 31 December 2012 was 8.2 years (2011: 8.4 years). Rent deposits and
personal or corporate guarantees are held in respect of some leases. Taking these factors into account, the risk to the Group of individual tenant
default and the credit risk of trade receivables are considered low. The Group’s most significant tenants are set out in the Financial review on
page 47.

Loans receivable and other receivables include balances due from joint venture partners, available for sale investments and VAT receivables.
These items do not give rise to significant credit risk.

The receivables in notes 17 and 18 are presented net of allowances for doubtful receivables and allowances for impairment are made where
appropriate. An analysis of trade receivables and the related provisions is shown in note 18.

The credit risk on short-term deposits and derivative financial instruments is limited because the counterparties are banks, who are committed
lenders to the Group, with high credit ratings assigned by international credit-rating agencies.

At 31 December 2012, the Group’s maximum exposure to credit risk was £237.5 million (2011: £268.1 million).

G: Financial maturity analysis
The following table is a maturity analysis for income-earning financial assets and interest-bearing financial liabilities.

Cash and deposits

Sterling variable rate secured bank loan

Euro variable rate secured bank loan

Unsecured bonds

Sterling fixed rate bonds

Euro fixed rate bonds

Interest rate swaps (variable)

Interest rate swaps (fixed)

Unsecured bank loans and overdrafts

Fair value of currency swaps

Net debt

Loans receivable

Total
£m

Less than
one year
£m

(66.4)

64.6

43.7

1,041.6

790.1

149.3

(149.3)

151.6

11.1

2,036.3

(47.0)

1,989.3

1.3

–

158.2

(0.2)

92.9

–

92.9

One to
two years
£m

–

1.3

–

1.3

–

1.3

Two to
five years
£m

–

62.0

43.7

2012 Maturity

More than
five years
£m

–

298.7

388.9

(100.7)

742.9

401.2

250.0

100.7

(250.0)

(4.9)

11.3

(1.7)

–

799.7

1,142.4

(47.0)

–

752.7

1,142.4

Borrowings are stated net of unamortised fees. Where facilities are undrawn, unamortised fees appear in the analysis above as negative amounts in
the period in which the facility matures.

Cash and deposits

Sterling variable rate secured bank loan

Euro variable rate secured bank loan

Unsecured bonds

Sterling fixed rate bonds

Euro fixed rate bonds

Interest rate swaps (variable)

Interest rate swaps (fixed)

Unsecured bank loans and overdrafts

Fair value of currency swaps

Net debt

Loans receivable

114

HAMMERSON ANNUAL REPORT 2012

Total
£m

Less than
one year
£m

One to
two years
£m

(100.7)

64.9

44.9

1,040.8

583.8

(201.9)

201.9

345.5

(15.0)

1,964.2

(52.6)

1,911.6

0.7

–

100.0

(15.0)

–

(15.0)

–

1.3

–

(100.0)

100.0

250.0

–

251.3

(29.2)

222.1

Two to
five years
£m

–

62.9

44.9

298.3

583.8

(101.9)

101.9

(4.5)

–

985.4

(23.4)

962.0

2011 Maturity

More than
five years
£m

–

742.5

–

742.5

–

742.5

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts Notes to the accounts (continued)22: Financial instruments and risk management (continued)
H: Sensitivity analysis
In managing interest rate and currency risks the Group aims to reduce the impact of short-term fluctuations on the Group’s earnings. Over the
longer term, however, permanent changes in foreign exchange and interest rates may have an impact on consolidated earnings.

At 31 December 2012, it is estimated that an increase of one percentage point in interest rates would have decreased the Group’s annual profit
before tax by £15.3 million (2011: increase of £2.8 million) and a decrease of one percentage point in interest rates would have increased the
Group’s annual profit before tax by £16.3 million (2011: decrease of £4.4 million). There would have been no effect on amounts recognised directly
in equity. The sensitivity has been calculated by applying the interest rate change to the variable rate borrowings, net of interest rate swaps, at the
year end. The decrease in the Group’s annual profit before tax in 2011 following a reduction in interest rates is due to the charge arising on the
change in fair value of interest rate swaps being greater than the saving arising from floating rate borrowings.

It is estimated that, in relation to financial instruments alone, a 10% strengthening of sterling against the euro would have increased the net gain
taken directly to equity for the year ended 31 December 2012 by £109.4 million. A 10% weakening of sterling against the euro would have
decreased the net gain taken directly to equity for the year ended 31 December 2012 by £133.8 million. For the year ended 31 December 2011,
a 10% strengthening of sterling against the euro would have increased the net gain taken directly to equity by £95.0 million. A 10% weakening of
sterling against the euro would have decreased the net gain taken directly to equity by £116.1 million. However, these effects would be more than
offset by the effect of exchange rate changes on the euro denominated net assets included in the Group’s financial statements.

In relation to financial instruments alone, there would have been no impact on the Group’s profit before tax. This has been calculated by retranslating
the year end euro denominated financial instruments at the year end foreign exchange rate changed by 10%. Forward foreign exchange contracts
have been included in this estimate.

I: Fair values of financial instruments
The fair values of borrowings, currency and interest rate swaps, together with their carrying amounts included in the balance sheet, are as follows:

Borrowings, excluding currency swaps

Currency swaps

Total

Interest rate swaps

Financial instruments associated with assets held for sale included in above table

Book value
£m

2012

Fair value
£m

2,091.6

2,381.1

Book value
£m

2,079.9

2011

Fair value
£m

2,229.6

11.1

(15.0)

2,102.7

2,392.2

(11.6)

2,064.9

10.6

2,214.6

10.6

Borrowings, excluding currency swaps

Interest rate swaps

64.6

3.0

64.6

3.0

–

At 31 December 2012, the fair value of financial instruments exceeded their book value by £289.5 million (2011: £149.7 million), equivalent to
41 pence per share (2011: 21 pence per share) on an EPRA net asset value per share basis. The increase, compared with 31 December 2011
principally reflected the increase in the market values of the Company’s bonds caused by a reduction in yields and underlying interest rates.

During the year floating rate reset bonds of £100 million nominal value were redeemed at fair value of £141.7 million, resulting in an exceptional
finance cost of £41.7 million which is included in net finance costs (note 7).

HAMMERSON ANNUAL REPORT 2012

115

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts 22: Financial instruments and risk management (continued)
The fair values of the Group’s borrowings have been estimated on the basis of quoted market prices, representing Level 1 fair value measurements
as defined by IFRS 7 Financial Instruments: Disclosures. The fair values of the Group’s outstanding interest rate swaps have been estimated by
calculating the present value of future cash flows, using appropriate market discount rates, representing Level 2 fair value measurements as defined
by IFRS 7. The fair value of the Group’s currency swaps has been estimated on the basis of the prevailing forward rates at the year end, representing
Level 2 fair value measurements as defined by IFRS 7.

Details of the Group’s cash and short-term deposits are set out in note 19. Their fair values and those of other financial assets and liabilities equate
to their book values. Details of the Group’s receivables are set out in notes 17 and 18. The amounts are presented net of allowances for doubtful
receivables and allowances for impairment are made where appropriate. Details of the Group’s investments, stated at fair value, are set out in notes
14 and 16. The table below reconciles the opening and closing balances for Level 3 fair value measurements of available for sale investments
and loans.

Available for sale loans and investments

Balance at 1 January

Total gains

– in profit and loss

– in other comprehensive income

Other movements

– acquisitions

– settlement of interest

– loan issue/(repayment)

Participative loan to associate recognised as available for sale

Transfer to investment in associate

Balance at 31 December

2012
£m

267.7

16.0

72.8

95.2

(4.3)

(5.3)

30.8

(381.7)

91.2

2011
£m

175.1

3.6

55.7

24.7

(2.1)

10.7

–

267.7

116

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts Notes to the accounts (continued)J: Carrying amounts, gains and losses of financial instruments

Trade receivables

Cash and deposits

Discontinued operations

Loans and receivables

Other investments

Loans receivable

Participative loan to associate

Available for sale loans and investments

Interest rate swaps

Discontinued operations

Assets/(Liabilities) at fair value (held for trading)

Currency swaps

Derivatives in effective hedging relationships

Payables

Borrowings, excluding currency swaps

Obligations under finance leases

Discontinued operations

Liabilities at amortised cost

Total for financial instruments

Carrying
amount
£m

53.2

57.1

10.7

Gain/
(Loss) to
income
£m

(0.8)

0.6

–

121.0

(0.2)

1.4

47.0

42.8

91.2

14.6

(3.0)

11.6

(11.1)

–

4.0

12.0

16.0

9.2

(1.0)

8.2

1.4

2012

Gain/
(Loss) to
equity
£m

–

72.8

–

72.8

–

15.7

Notes

14B

17, 24

22I

18, 21

Carrying
amount
£m

42.6

100.7

–

143.3

215.1

52.6

–

267.7

(10.6)

–

(10.6)

15.0

Gain/
(Loss) to
income
£m

(0.6)

0.5

–

(0.1)

(0.2)

3.8

–

3.6

(6.3)

(3.3)

(9.6)

(0.9)

20, 24

(224.1)

–

(215.2)

–

(2,027.0)

(158.2)

11.6

(2,079.9)

(106.8)

(42.3)

(83.6)

(0.7)

(3.0)

–

(17.6)

–

(2,377.0)

(161.9)

11.6

(2,312.7)

(2,164.3)

(136.5)

100.1

(1,897.3)

(0.6)

(3.5)

(110.9)

(117.9)

2011

Gain/
(Loss) to
equity
£m

–

57.4

(1.7)

–

55.7

–

8.9

–

19.0

–

19.0

83.6

The total gain to income for the year ended 31 December 2012 in respect of interest rate swaps shown above includes the gain arising from the
change in fair value of £8.3 million (2011: £4.0 million loss), included within net finance costs in note 7, and a loss of £0.1 million in respect of
discontinued operations included in note 9B.

The table below reconciles the net gain or loss taken through income to net finance costs:

Total loss on financial instruments to income

Add back:

Trade receivables loss

Other interest income
(Gain)/Loss to income on currency swaps outside hedge accounting designation

Interest capitalised

Discontinued operations

Deduct:

Change in fair value of participative loan to associate shown in share of results of associate

Net finance costs

Notes

2012
£m

(136.5)

0.8

0.2
1.1

8.8

4.0

(12.0)

(133.6)

2011
£m

(117.9)

0.6

0.9
(1.1)

4.9

6.8

–

(105.8)

No financial instruments were designated as at fair value through profit and loss on initial recognition. No financial instruments are classified as held
to maturity. Financial instruments classified as held for trading are hedging instruments that are not designated for hedge accounting.

The total of the equity gains in relation to currency swaps of £15.7 million (2011: £8.9 million) and borrowings of £11.6 million (2011: £19.0 million)
is £27.3 million (2011: £27.9 million) is shown in the movement in the hedging reserve in the consolidated statement of changes in equity.

HAMMERSON ANNUAL REPORT 2012

117

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts

22: Financial instruments and risk management (continued)
K: Maturity analysis of financial liabilities
The remaining contractual maturities are as follows:

2012

Notes

After 25 years

From five to 25 years

From two to five years

From one to two years

Due after more than one year

Due within one year

Payables*
£m

–

21.2

4.7

5.0

30.9

205.3

236.2

Interest
rate
swaps
£m

–

6.9

–

6.9

–

6.9

Currency
swaps
£m

–

307.8

–

307.8

47.4

355.2

Financial
liability
cash flows
£m

22L

–

1,565.4

1,045.9

101.8

2,713.1

260.2

2,973.3

* Payables comprise £224.1 million relating to continuing operations and £12.1 million relating to discontinued operations.

2011

Notes

After 25 years

From five to 25 years

From two to five years

From one to two years

Due after more than one year

Due within one year

Payables
£m

–

10.5

3.0

9.2

22.7

192.5

215.2

Interest
rate
swaps
£m

–

1.2

3.5

2.8

7.5

4.0

11.5

Currency
swaps
£m

–

461.2

Financial
liability
cash flows
£m

22L

–

1,172.7

1,256.3

351.2

2,780.2

203.7

2,983.9

Finance leases

Continuing
£m

Discontinued
£m

332.2

51.7

7.8

2.0

393.7

3.1

396.8

38.0

7.5

1.1

0.4

47.0

0.3

47.3

Finance leases

Continuing
£m

Discontinued
£m

300.8

21.2

4.2

1.1

327.3

1.1

328.4

–

2012
Total
£m

370.2

1,645.8

1,374.2

109.2

3,499.4

516.3

4,015.7

2011
Total
£m

300.8

1,205.6

1,267.0

364.3

3,137.7

862.5

4,000.2

At 31 December 2012, the currency swap liability is offset by an asset of £344.1 million (2011: £476.2 million), so that the fair value of the currency
swaps is a liability of £11.1 million (2011: asset of £15.0 million), as reported in note 21B.

L: Reconciliation of maturity analyses in notes 21 and 22K
The maturity analysis in note 22K shows contractual non-discounted cash flows for all financial liabilities, including interest payments, but excluding
the fair value of the currency swaps, which is not a cash flow item. The following table reconciles the borrowings column in note 21 with the financial
maturity analysis in note 22K.

Borrowings
£m

21A

1,142.4

799.7

1.3

1,943.4

159.3

2,102.7

Unamortised
borrowing
costs
£m

13.1

8.2

–

21.3

–

21.3

Financial
liability
cash flows
£m

22K

1,565.4

1,045.9

101.8

2,713.1

260.2

2,973.3

Interest
£m

409.9

238.0

100.5

748.4

100.9

849.3

2012

Notes

From five to 25 years

From two to five years

From one to two years

Due after more than one year

Due within one year

118

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts Notes to the accounts (continued)
22: Financial instruments and risk management (continued)

2011

Notes

From five to 25 years

From two to five years

From one to two years

Due after more than one year

Due within one year

Borrowings
£m

21A

742.5

985.4

251.3

1,979.2

100.7

2,079.9

Unamortised
borrowing
costs
£m

7.6

9.2

–

16.8

–

16.8

Interest
£m

422.6

261.7

99.9

784.2

103.0

887.2

Financial
liability
cash flows
£m

22K

1,172.7

1,256.3

351.2

2,780.2

203.7

2,983.9

M: Capital structure
The Group’s financing policy is to optimise the weighted average cost of capital by using an appropriate mix of debt and equity, the latter in the form
of share capital. Further information on debt is provided in the Financial Review on page 44 and information on share capital and changes therein is
set out on page 78, in note 25 on page 120 and in the Statement of Changes in Equity on page 85.

23: Obligations under finance leases
Finance lease obligations in respect of rents payable on leasehold properties are payable as follows:

After 25 years

From five to 25 years

From two to five years

From one to two years

Within one year

Minimum
lease
payments
£m

332.2

51.7

7.8

2.0

3.1

Interest
£m

(291.0)

(48.8)

(7.5)

(2.5)

(4.7)

396.8

(354.5)

2012

Present value
of minimum
lease
payments
£m

41.2

2.9

0.3

(0.5)

(1.6)

42.3

2011

Present value
of minimum
lease
payments
£m

17.5

0.1

–

Interest
£m

(283.3)

(21.1)

(4.2)

(1.1)

Minimum
lease
payments
£m

300.8

21.2

4.2

1.1

328.4

(310.8)

17.6

During the year the obligation relating to a leasehold interest in Les Terrasses du Port, Marseille became effective and was recognised at
£32.3 million being the present value of the minimum lease payments. An equivalent asset was recognised in the balance sheet within ‘Interests
in leasehold properties’. This is a non-cash transaction.

24: Payables: non-current liabilities

Net pension liability

Other payables

Fair value of interest rate swaps

2012
£m

29.7

30.5

3.9

64.1

2011
£m

30.0

23.1

10.6

63.7

HAMMERSON ANNUAL REPORT 2012

119

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts 25: Share capital

Ordinary shares of 25p each

Movements in issued share capital

Number of shares in issue at 1 January 2012

Share options exercised – Executive Share Option Scheme

Share options exercised – Savings-related Share Option Scheme

Number of shares in issue at 31 December 2012

Called up, allotted and fully paid

2012
£m

178.2

2011
£m

178.2

Number

712,615,209

13,648

202,102

712,830,959

No shares in issue at the balance sheet date were held in treasury (2011: 1,200,000), see note 27.

Share options
At 31 December 2012, the following options granted to staff remained outstanding under the Company’s Executive Share Option Scheme:

Expiry year

2013

2014

2015

2016

Exercise price (pence)

Number of ordinary shares of 25p each

286

440

583

839

2,889

41,330

35,981

125,011

205,211

UK eligible employees may participate in the Company’s Savings-related Share Option Scheme by choosing to enter into one or more contracts for
a three, five or seven year term and save a fixed amount from £5 to £250 each month for three years (for a three year contract) or five years (for a
five or seven year contract). At the end of the contract, employees may exercise an option to purchase shares in the Company at the option price,
which is set at the beginning of the contract at a discount of up to 20% of the prevailing share price at the time that invitation is launched.

At 31 December 2012, the following options granted to Executive Directors and staff remained outstanding under the Company’s Savings-related
Share Option scheme:

Exercise price (pence)

Number of ordinary shares of 25p each

Expiry year

2013

2014

2015

2016

2017

2018

2019

312.24

217.2-368.0

312.24-329.04

217.2-368.0

312.24-329.04

368.0

329.04

The number and weighted average exercise prices of share options under the Company’s Executive Share Option Scheme are as follows:

Outstanding at 1 January

Forfeited during the year

Expired during the year

Exercised during the year

Outstanding and exercisable at 31 December

2012
Weighted
average
exercise
price
£

6.37

7.00

5.83

2.94

7.06

Number
of options

587,864

(14,205)

–

(148,012)

425,647

Number
of options

425,647

(13,466)

(193,322)

(13,648)

205,211

The weighted average share price at the date of exercise for share options exercised during the year was £4.86 (2011: £4.63).
The options outstanding at 31 December 2012 had a weighted average remaining contractual life of 2 years (31 December 2011: 2 years).

120

HAMMERSON ANNUAL REPORT 2012

19,174

71,411

146,098

45,513

18,001

1,936

14,040

316,173

2011
Weighted
average
exercise
price
£

5.88

6.71

–

4.40

6.37

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts Notes to the accounts (continued)
25: Share capital (continued)
The number and weighted average exercise price of share options under the Company’s Savings-related Share Option Scheme are as follows:

Outstanding at 1 January

Granted during the year

Forfeited during the year

Expired during the year

Exercised during the year

Outstanding at 31 December

2012
Weighted average
exercise price
£

2.67

3.29

3.24

2.35

2.18

3.23

Number
of options

398,402

176,669

(55,729)

(1,067)

(202,102)

316,173

2011
Weighted average
exercise price
£

2.38

3.68

2.52

5.98

2.68

2.67

Number
of options

323,969

111,734

(27,127)

(2,948)

(7,226)

398,402

The weighted average share price at the date of exercise for share options exercised during the year was £4.30 (2011: £4.31).
No options outstanding under the Company’s Savings-related Share Option Scheme were exercisable at 31 December 2012 or 31 December 2011.

The weighted average fair value of options granted during the year was £1.01 (2011: £1.16).

At 31 December 2012, the following shares remained outstanding under the Company’s Restricted Share Plan and Long-Term Incentive Plan.

Number of ordinary shares of 25p each

Restricted Share Plan

Long-Term Incentive Plan

2012

2011

2012

2011

Outstanding at 1 January

Awarded during the year

Notional dividend shares accrued during the year

Vested during the year

Forfeited during the year

Lapsed during the year

Outstanding at 31 December

Year of grant

2009

2010

2011

2012

26: Investment in own shares

At cost

Balance at 1 January

Transfer from treasury shares

Purchase of own shares

Cost of shares awarded to employees

Balance at 31 December

985,502

352,258

32,377

(285,893)

777,191

3,160,051

2,656,495

390,846

904,012

1,256,872

27,413

(90,405)

99,170

–

(82,008)

(119,543)

(156,337)

–

(1,228,755)

85,617

–

(377,831)

(461,102)

1,002,236

985,502

2,778,141

3,160,051

Restricted Share Plan

Long-Term Incentive Plan

Number of ordinary shares of 25p each

2012

–

347,562

325,703

328,971

2011

280,616

356,904

347,982

2012

–

783,657

2011

1,206,054

773,442

1,151,874

1,180,555

–

842,610

–

1,002,236

985,502

2,778,141

3,160,051

2012
£m

1.8

4.7

3.4

(3.9)

6.0

2011
£m

4.0

3.4

–

(5.6)

1.8

The Trustees of the Hammerson Employee Share Ownership Plan acquire the Company’s own shares to award to participants in accordance with the
terms of the Plan. The expense related to share-based employee remuneration is calculated in accordance with IFRS 2 and the terms of the Plan and
is recognised in the income statement within administration expenses. The corresponding credit is included in other reserves. When the Company’s
shares are awarded to employees as part of their remuneration, the cost of the shares is transferred to other reserves. Should this not equal the
credit previously recorded against other reserves, the balance is adjusted against retained earnings.

The number of shares held as at 31 December 2012 was 1,337,807 (2011: 412,844) following awards to participants during the year of 975,037 shares
(2011: 732,637), a transfer of 1,200,000 treasury shares (2011: 800,000) and a purchase of 700,000 shares (2011: nil).

HAMMERSON ANNUAL REPORT 2012

121

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts 27: Treasury shares

At cost

Balance at 1 January

Transfer to investment in own shares

Purchase of treasury shares

Balance at 31 December

2012
£m

4.7

(4.7)

–

The number of treasury shares held at 31 December 2012 was nil (2011: 1,200,000), following the transfer at cost of 1,200,000 shares
(2011: 800,000 shares) to the Hammerson Employee Share Ownership Plan during the year.

28: Adjustment for non-cash items in the cash flow statement

Amortisation of lease incentives and other costs

Increase in accrued rents receivable

Non-cash items included within net rental income*
Depreciation
Share-based employee remuneration
Exchange and other items

Note

2012
£m

7.3

(0.5)

6.8
1.5
4.9
0.8

14.0

2011
£m

3.4

(3.4)

4.7

2011
£m

6.6

(5.5)

1.1
1.7
4.0
(4.1)

2.7

* Consists of £8.3 million (2011: £1.3 million) relating to continuing operations, offset by £1.5 million (2011: £0.2 million) relating to discontinued operations (see note 3A).

29: The Group as lessor – operating lease receipts
At the balance sheet date, the Group had contracted with tenants for the future minimum lease receipts as shown in the table below. The data is for
the period to the first tenant break option. An overview of the Group’s leasing arrangements is included in the Business Review on pages 46 and 47
and credit risk related to the trade receivables is discussed in note 22F.

Within one year

From one to two years

From two to five years

After five years

2012
£m

225.0

193.1

456.4

971.9

1,846.4

2011
£m

234.9

212.2

476.7

1,170.5

2,094.3

30: Contingent liabilities
There are contingent liabilities of £32.1 million (2011: £42.9 million) relating to guarantees given by the Group and a further £29.2 million
(2011: £33.5 million) relating to claims against the Group arising in the normal course of business, which are considered to be unlikely to crystallise.
Hammerson’s share of contingent liabilities arising within joint ventures, which is included in the figures shown above, is £14.0 million
(2011: £11.4 million).

122

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther informationNotes to the accounts Notes to the accounts (continued)Independent auditor’s report

Independent auditor’s report on the
parent company financial statements

Independent auditor’s report to the members of Hammerson plc
We have audited the parent company financial statements of Hammerson plc for the year ended 31 December 2012, which comprise the Parent
Company Balance Sheet and the related notes A to M. The financial reporting framework that has been applied in their preparation is applicable law
and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and
the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the parent company financial
statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the parent company
financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.

Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the
financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting
policies are appropriate to the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of
significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial
and non-financial information in the Annual Report to identify material inconsistencies with the financial statements. If we become aware of any
apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on the financial statements
In our opinion the parent company financial statements:

• give a true and fair view of the state of the parent company’s affairs as at 31 December 2012;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act 2006
In our opinion:

• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and

• the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the parent

company financial statements.

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches

not visited by us; or

• the parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the

accounting records and returns; or

• certain disclosures of Directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Other matter
We have reported separately on the Group financial statements of Hammerson plc for the year ended 31 December 2012.

Ian Waller (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, UK

28 February 2013

HAMMERSON ANNUAL REPORT 2012

123

Strategic reviewGovernanceFinancial statementsOther information
Notes

2012
£m

2011
£m

2,668.1

4,195.0

6,863.1

6.2

1.4

7.6

2,624.7

4,076.7

6,701.4

20.7

34.7

55.4

6,870.7

6,756.8

1,025.1

158.0

1,183.1

1,836.4

–

1,836.4

3,019.5

3,851.2

178.2

1,222.3

7.2

0.1

1,072.5

1,376.9

(6.0)

–

1,009.7

100.0

1,109.7

1,870.1

5.1

1,875.2

2,984.9

3,771.9

178.2

1,221.9

7.2

0.1

1,029.1

1,341.9

(1.8)

(4.7)

3,851.2

3,771.9

Company balance sheet

Non-current assets

Investments in subsidiary companies

Receivables

Current assets

Receivables

Cash and short-term deposits

Total assets

Current liabilities

Payables

Borrowings

Non-current liabilities

Borrowings

Payables

Total liabilities

Net assets

Equity

Called up share capital

Share premium

Capital redemption reserve

Other reserves

Revaluation reserve

Retained earnings

Investment in own shares

Treasury shares

Equity shareholders’ funds

These financial statements were approved by the Board of Directors on 28 February 2013.

Signed on behalf of the Board

David Atkins
Director

Registered in England No. 360632

Timon Drakesmith
Director

124

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther information Notes to the Company accounts

Notes to the Company accounts

A: Accounting policies
Although the consolidated Group accounts are prepared under IFRS, the Hammerson plc company accounts presented in this section are prepared
under UK GAAP. The accounting policies relevant to the Company are the same as those set out in the accounting policies for the Group in note 1,
except as set out below.

Investments in subsidiary companies are included at valuation. The Directors determine the valuations with reference to the underlying net assets of
the subsidiaries. In accordance with UK GAAP, in calculating the underlying net asset values of the subsidiaries, no deduction is made for deferred tax
relating to revaluation surpluses on investment properties.

The Company has taken advantage of the exemption in FRS 29 Financial Instruments – Disclosure Section 2D not to present the disclosures
required in respect of the Hammerson plc company accounts as the Company is included in the consolidated Group accounts. The consolidated
accounts of Hammerson plc comply with IFRS 7 Financial Instruments – Disclosure which is materially consistent with FRS 29.

The Company does not utilise net investment hedging under FRS 26 Financial Instruments – Recognition and Measurement.

B: Profit for the year and dividend
As permitted by section 408 of the Companies Act 2006, the income statement of the Company is not presented as part of these financial
statements. The profit for the year attributable to equity shareholders dealt with in the financial statements of the Company was £155.9 million
(2011: £159.3 million).

Dividend information is provided in note 10 to the consolidated accounts.

C: Investments in subsidiary companies

Balance at 1 January 2012

Revaluation adjustment

Balance at 31 December 2012

Cost less
provision
for permanent
diminution
in value
£m

Valuation
£m

1,561.7

2,624.7

–

43.4

1,561.7

2,668.1

Investments are stated at Directors’ valuation. A list of the principal subsidiary companies at 31 December 2012 is included in note M.

D: Receivables: non-current assets

Amounts owed by subsidiaries

Loans receivable (see note 17)

Fair value of interest rate swaps

2012
£m

2011
£m

4,129.5

4,053.3

47.0

18.5

23.4

–

4,195.0

4,076.7

Amounts owed by subsidiaries are unsecured and interest-bearing at variable rates based on LIBOR. These amounts are repayable on demand;
however, it is the Company’s current intention not to seek repayment before 31 December 2013.

E: Receivables: current assets

Other receivables

Fair value of currency swaps

2012
£m

6.2

–

6.2

2011
£m

5.7

15.0

20.7

HAMMERSON ANNUAL REPORT 2012

125

Strategic reviewGovernanceFinancial statementsOther information Notes to the Company accounts

Notes to the Company accounts (continued)

F: Payables

Amounts owed to subsidiaries

Other payables and accruals

2012
£m

963.4

61.7

2011
£m

947.7

62.0

1,025.1

1,009.7

The amounts owed to subsidiaries are unsecured, repayable on demand and interest bearing at variable rates based on LIBOR.

G: Borrowings

After five years

From two to five years

From one to two years

Due after more than one year

Due within one year

Bank loans
and overdrafts
£m

(1.7)

(4.9)

–

Other
borrowings
£m

1,144.1

698.9

–

2012
Total
£m

1,142.4

694.0

–

(6.6)

1,843.0

1,836.4

158.2

151.6

(0.2)

158.0

1,842.8

1,994.4

2011
Total
£m

742.5

877.6

250.0

1,870.1

100.0

1,970.1

Details of the Group’s borrowings and financial instruments are given in notes 21 and 22 to the consolidated accounts. The Company’s borrowings
are unsecured and comprise sterling and euro denominated bonds, bank loans and overdrafts.

H: Payables: non-current liabilities

Fair value of interest rate swaps

I: Equity

Balance at 1 January 2012

Issue of shares

Dividends

Revaluation gains on investments in subsidiary companies

Profit for the year

Balance at 31 December 2012

J: Investment in own shares

Balance at 1 January

Transfer from treasury shares

Purchase of own shares

Transfer to employing subsidiaries – cost of shares awarded to employees

Balance at 31 December

2012
£m

–

2011
£m

5.1

Share
premium
£m

1,221.9

0.4

–

1,222.3

Capital
redemption
reserve
£m

7.2

–

7.2

Other
reserves
£m

0.1

–

Revaluation
reserve
£m

1,029.1

–

43.4

–

Retained
earnings
£m

1,341.9

–

(120.9)

–

155.9

0.1

1,072.5

1,376.9

2012
£m

1.8

4.7

3.4

(3.9)

6.0

2011
£m

4.0

3.4

–

(5.6)

1.8

The Trustees of the Hammerson Employee Share Ownership Plan acquire the Company’s own shares to award to participants in accordance with the
terms of the Plan.

The Company has no employees. When the Company’s own shares are awarded to Group employees as part of their remuneration, the cost of the
shares is transferred by the Company through intercompany accounts to the employing subsidiaries, where the related credit is recognised in equity.

Further details of share options and the number of own shares held by the Company are set out in notes 25, 26 and 27 to the consolidated accounts.

126

HAMMERSON ANNUAL REPORT 2012

Strategic reviewGovernanceFinancial statementsOther information Notes to the Company accounts

K: Reconciliation of movements in equity shareholders’ funds

Balance at 1 January

Issues of shares

Dividends

Revaluation gains on investments in subsidiary companies

Cost of shares awarded to employees

Purchase of own shares

Purchase of treasury shares

Profit for the year

Balance at 31 December

L: Fair value of financial instruments

Borrowings, excluding currency swaps

Currency swaps

Total

Interest rate swaps

2012
£m

2011
£m

3,771.9

3,480.0

0.4

(120.9)

43.4

3.9

(3.4)

–

155.9

3,851.2

Book value
£m

2012

Fair value
£m

1,983.3

2,272.8

11.1

Book value
£m

1,970.1

(15.0)

0.7

(92.3)

223.3

5.6

–

(4.7)

159.3

3,771.9

2011

Fair value
£m

2,119.8

(15.0)

1,994.4

2,283.9

1,955.1

2,104.8

18.5

5.1

M: Principal subsidiary companies
All principal subsidiary companies are engaged in property investment and development, investment holding or management. Unless otherwise
stated, the companies are 100% owned subsidiaries through investment in ordinary share capital. As permitted by section 409 of the Companies
Act 2006, a complete listing of all the Group’s undertakings has not been provided. A complete list of the Group’s undertakings will be filed with the
Annual Return.

Subsidiaries are incorporated/registered and operate in the following countries:

France
Hammerson SAS
Hammerson Holding France SAS
Hammerson Centre Commercial Italie SAS
Société Civile de Développement du Centre Commercial de la Place des Halles SDPH (64.5%)

UK
Hammerson International Holdings Ltd
Hammerson UK Properties plc
Grantchester Holdings Ltd
Hammerson (Brent Cross) Ltd
Hammerson (Bristol Investments) Ltd
Hammerson Bull Ring Ltd
Hammerson (Cramlington 1) Ltd
Hammerson (Croydon) Ltd
Hammerson Group Management Ltd
Hammerson (Leicester) Ltd
Hammerson Operations Ltd
Hammerson Oracle Investments Ltd
Hammerson Peterborough (No.1) Ltd
Hammerson (Silverburn) Ltd1
Hammerson (Value Retail Investments) Ltd
Union Square Developments Ltd
West Quay Shopping Centre Ltd

The Netherlands
Hammerson Europe BV

1 Incorporated/registered and resident in the Isle of Man.

HAMMERSON ANNUAL REPORT 2012

127

Strategic reviewGovernanceFinancial statementsOther information Strategic review
Governance
Financial statements
Other information

Ten-year financial summary

Income statement*

Net rental income

Operating profit before other net gains/(losses)

Other net (losses)/gains

Share of results of associate

Cost of finance (net)

Profit/(Loss) before tax

Current tax

Deferred tax

Non-controlling interests

Profit/(Loss) for the year attributable
to equity shareholders

Balance sheet

Investment and development properties

Investment in associate

Cash and short-term deposits

Borrowings

Other assets

Other liabilities

Net deferred tax provision

Non-controlling interests

Equity shareholders’ funds

Cash flow

Operating cash flow after tax

Dividends

Property and corporate acquisitions

Developments and major refurbishments

Other capital expenditure

Disposals

Other cash flows

Net cash flow before financing

Per share data**

Basic earnings/(loss) per share

EPRA/Adjusted earnings per share

Dividend per share

Diluted net asset value per share

EPRA/Adjusted net asset value per share

Financial ratios

Return on shareholders’ equity

Gearing

Interest cover

Dividend cover

2012
£m

2011
£m

2010
£m

2009
£m

2008
£m

2007
£m

2006
£m

2005
£m

IFRS

2004
£m

UK GAAP

2003
£m

282.9

239.6

(7.3)

47.5

(137.6)

142.2

(0.4)

–

(3.4)

296.0

249.1

209.8

–

284.7

248.8

469.9

1.5

293.6

252.6

299.8

257.5

(590.4) (1,698.3)

(0.8)

–

275.7

234.5

25.2

–

237.4

201.3

748.0

–

210.3

178.9

607.6

–

189.5

162.9

330.2

–

189.5

164.6

(18.8)

–

(112.6)

(100.0)

(114.5)

(170.7)

(149.3)

(156.9)

(87.9)

(79.7)

(78.7)

346.3

620.2

(453.1) (1,611.5)

110.4

792.4

698.6

413.4

(0.7)

–

(9.9)

(0.6)

(0.1)

(4.1)

(0.9)

(0.6)

(16.4)

(99.4)

1.0

(80.9)

103.6

5.9

38.3

1.2

17.6

333.8

(133.9)

104.2

(10.6)

(9.9)

(11.3)

(5.3)

67.1

(1.7)

(13.1)

(2.0)

138.4

335.7

615.4

(344.5) (1,572.6)

101.0 1,016.9

554.4

431.4

50.3

5,458.4 5,719.6
–

428.4

5,331.1

5,141.5 6,456.8 7,275.0 6,716.0 5,731.7 4,603.0

3,997.5

57.1

100.7

126.2

182.9

119.9

–

10.4

–

28.6

–

39.4

–

45.5

–

53.7

(2,038.1) (2,079.9) (1,920.6) (2,319.0) (3,452.6) (2,524.2) (2,282.6) (2,094.8) (1,799.5)
194.0

435.6

319.5

331.6

318.7

278.1

323.1

301.1

462.3

–

187.0

(1,772.2)

138.6

(441.9)

(0.5)

(74.5)

(327.1)

(307.6)

(323.9)

(425.3)

(573.5)

(448.9)

(378.4)

(385.9)

(289.8)

(0.5)

(0.4)

(108.4)

(99.6)

(103.3)

(406.4)

(213.4)

(76.5)

(71.7)

(73.4)

(89.3)

(70.4)

(56.6)

(49.9)

(41.7)

(54.8)

(38.1)

3,851.2 3,771.9 3,480.0 2,949.7 2,820.6 4,354.6

4,165.1

3,125.8 2,410.2

2,168.2

139.9

(118.4)

(397.3)

(122.9)

(48.0)

585.0

(72.4)

(34.1)

19.4p

20.9p

17.7p

£5.41

£5.42

5.3%

53%

2.8x

1.2x

147.8

132.7

105.3

29.8

(86.1)

(95.4)

(64.5)

(86.7)

(29.2)

(73.1)

5.5

44.9

(57.7)

(51.0)

60.5

(47.4)

(374.1)

(218.6)

(39.5)

(123.5)

(163.3)

(219.5)

(308.1)

(320.8)

(91.2)

(23.6)

(60.8)

(164.1)

(376.7)

(335.5)

(250.5)

(186.3)

(203.3)

(25.5)

(23.7)

(13.9)

(44.6)

(29.6)

(36.9)

(20.2)

271.8

554.6

394.2

245.3

537.2

628.0

224.4

398.7

(34.9)

(0.8)

–

(10.9)

(10.2)

17.7

5.6

68.4

(44.4)

(183.7)

(188.8)

(68.5)

556.2

–

(190.3)

286.2

207.7

(325.7)

(119.4)

66.0

(295.3)

(126.9)

139.2

47.3p

19.3p

16.6p

£5.30

87.2p

(54.1)p (368.9)p

19.9p

19.7p

15.95p

15.45p

25.8p

18.9p

23.7p

27.3p

18.5p

£4.93

£4.95

£4.20

£4.21

£6.61

£10.22

£7.03

£10.49

£10.18

242.6p

134.4p

106.0p

22.3p

14.7p

£9.91

21.2p

13.4p

£7.44

£8.39

19.5p

12.2p

£5.90

£6.41

11.2%

21.1% -16.9% -32.5%

4.5%

25.3%

34.0%

21.7%

52%

2.6x

1.2x

52%

2.6x

1.2x

72%

2.2x

1.3x

118%

1.7x

1.4x

57%

1.9x

1.5x

54%

1.8x

1.5x

66%

1.9x

1.6x

72%

1.9x

1.6x

12.4p

20.2p

11.4p

£5.32

£5.45

9.3%

73%

1.8x

The financial information shown above for the years 2004 to 2012 was prepared under IFRS. The information for 2003 was prepared under UK
GAAP. Consequently, certain data may not be directly comparable from one year to another.

* Comprises continuing and discontinued operations. ** Comparative per share data was restated following the rights issue in March 2009.

128

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Connected reporting framework

EnErgy
Significant investment has been made into energy efficient lighting and research into natural ventilation.

Cost of energy (£000)

Estimated energy savings1 (£000)

Energy efficiency investment (£000)

1 The majority of savings reflect the roll out of T5 relamping in car parks. This will be completed in 2013.

2010

10,674

697

211

2011

9,707

1,231

1,157

2012

9,404

1,032

3,616

WastE
We continue to receive income from the sale of waste. At The Oracle we now include the cardboard waste from other town centre retailers in the programme
which generates additional income. Centralised waste management in the UK has dramatically improved recycling to 74%, which in turn has made significant
savings for Hammerson and our customers.

Total waste cost (£000)

Amount saved in landfill (£000)

Income from sale of waste (£000)

2010 and 2011 data restated to include France. 2012 includes Centrale.

WatEr

Cost of water (£000)

Investment in water management improvements1 (£000)

Estimated water savings2 (£000)

2010

2,383

558

118

2011

2,031

527

190

2010

1,742

2011

1,896

218

1 Several toilet refurbishments have taken place in the UK and France but the full impact of this investment will not be realised until 2013.
2 2010 and 2011 data restated to reflect a revised basis for calculation.

suppliErs
In 2012 we launched a new sustainability supply chain questionnaire for suppliers with whom we contract for more than £100k.

Suppliers engaged where spend is more than £100k (%)

Number of suppliers engaged where spend is more than £100k2

Value of contracts with suppliers we engaged on sustainability (£m)

1 Target was 50%.
2 2011 figures restated to included France.

CommunitiEs
We have created a community plan in 2012 which aligns with our community investment strategy.

75% long term investment (%)

Direct contributions1 (£000)

Indirect contributions (£000)

Number of organisations that benefited from Hammerson direct and indirect contributions

1 2010 and 2011 figures restated for exchange.

2010

n/a

371

482

2011

n/a

107

2010

2011

n/a

736

401

202

n/a

932

366

389

2012

1,859

1,129

176

2012

1,751

312

275

2012

1001

302

193

2012

599

446

347

HAMMERSON ANNUAL REPORT 2012

129

Strategic review
Governance
Financial statements
Other information

Connected reporting framework

Connected reporting framework
(continued)

CustomErs

Engage with the top 75 customers

Passing rent covered by green leases (£m)

Number of green leases in portfolio

Green leases as proportion of passing rent (%)

invEstors

Engage top 20 investors
Number of investors with whom we had collective or individual meetings

Total number of shares held by the top 20 investors (‘000)

Total number of shares held by those top 20 investors with whom Hammerson engaged on sustainability (‘000)

EmployEEs

Total expenditure on training (£000)

Total hours spent on training (hrs)

ENvIroNmENT

Carbon

Year-on-year greenhouse gas emissions building intensity by portfolio
UK Offices1 (kgCO2 per m²/year)
UK Shopping centres² (kgCO2 per m²/year)
UK Retail Parks (kgCO2 per m²/year)
French Shopping centres (kgCO2 per m²/year)
Percentage change 2011 to 2012 (Like-for-like)

UK Offices3 (%)

UK Shopping centres (%)

UK Retail Parks (%)

French Shopping centres (%)

1 This is not like-for-like but the portfolio including several efficient buildings has been sold as part of the strategy to focus on retail.
2 Bullring, Silverburn and Centrale figures restated due to metering problems.
3 Like-for-like the two remaining properties 125 Old Broad Street and 10 Grosvenor Street have continued to reduce carbon emissions.

2010

n/a

787

2011

n/a

896

2012

127

1,250

2010

2011

2012

n/a

417,375

147,690

395,220

169,862

2010

303

2011

482

2012

357

4,039

7,386

5,081

2010

2011

2012

166

132

144

n/a

166

130

177

n/a

198

121

134

5.2

8.3

7.3

19.7

130

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Connected reporting framework

WastE

Annual waste production (absolute by final disposal route)

Shopping centres

Landfilled waste (tonnes)

Incinerated waste (use as fuel) (tonnes)

Recycled/reused/composted (tonnes)

MRF – recovery rate not known (tonnes)

Retail parks

Landfilled waste (tonnes)

Incinerated waste (use as fuel) (tonnes)

Recycled/reused/composted (tonnes)

MRF – recovery rate not known (tonnes)

Offices

Landfilled waste (tonnes)

Incinerated waste (use as fuel) (tonnes)

Recycled/reused/composted (tonnes)

MRF – recovery rate not known (tonnes)

WatEr

Building water intensity

UK Shopping centres1 (litres per visit)

French Shopping centres (landlord only) (litres per visit)

French Shopping centres (tenant only) (litres per visit)

1 2011 figure restated. Metering problem at Silverburn has now been corrected.

2010

2011

2012

5,754

3,489

5,958

6,258

5,699

4,482

7,812

6,639

2,816

1,341

6,405

10,424

n/a

281

309

187

n/a

171

503

200

185

212

454

105

298

118

2010

2011

2012

2.5

6.1

n/a

2.6

4.7

n/a

2.5

4.6

1.2

HAMMERSON ANNUAL REPORT 2012

131

Strategic review
Governance
Financial statements
Other information

UK shopping centres

Our 12 major UK shopping centres attract over 180 million visitors each year. The portfolio includes internationally recognised city centre
schemes such as Bullring, Birmingham, Brent Cross in North London and The Oracle, Reading.

brEnt Cross, london nW4

CEntralE, Croydon

QuEEnsgatE, pEtErborough

JV PARTNER:
KEY DATES:

TENURE:
PRINCIPAL OCCUPIERS:

Standard Life (59%)
1976 developed,
1995 refurbished
Leasehold
Fenwick, John Lewis,
Marks & Spencer, Waitrose
117

JV PARTNER:
KEY DATES:

TENURE:
PRINCIPAL OCCUPIERS:

Westfield (50%)*
1988 developed,
2011 acquired
Freehold
Debenhams, House of Fraser,
H&M, Next
51

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

Aviva Investors (50%)
2005 acquired
Freehold
John Lewis,
Marks & Spencer,
Next, Waitrose
114

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 6 years
OCCUPANCY RATE:
99.5%
RENTS PASSING:
£18.1 million p.a.
AVERAGE RENTS PASSING:
£1,115 per m²
ENVIRONMENTAL RATING:
ISO 14001
ENERGY PERFORMANCE
D
CERTIFICATE:

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 8 years
OCCUPANCY RATE:
96.1%
RENTS PASSING:
£9.5 million p.a.
AVERAGE RENTS PASSING:
£255 per m²
ENVIRONMENTAL RATING:
–
ENERGY PERFORMANCE
C
CERTIFICATE:

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 16 years
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
ENERGY PERFORMANCE
CERTIFICATE:

98.1%
£7.8 million p.a.
£300 per m²
ISO 14001
E

OWNERSHIP:

41%

OWNERSHIP:

50%

OWNERSHIP:

50%

PROPERTY NET INTERNAL AREA: 83,800m2

PROPERTY NET INTERNAL AREA: 64,700m2

PROPERTY NET INTERNAL AREA: 83,300m2

* JV from January 2013

bullring, birmingham

highCross, lEiCEstEr

silvErburn, glasgoW

JV PARTNER:

KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 7 years
OCCUPANCY RATE:
99.6%
RENTS PASSING:
£17.8 million p.a.
AVERAGE RENTS PASSING:
£510 per m²
ENVIRONMENTAL RATING:
ISO 14001
ENERGY PERFORMANCE
D
CERTIFICATE:

Future Fund (33%) , Henderson
Global Investors (33%)
2003 developed
Leasehold
Debenhams, Selfridges
167

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

Royal Mail Pension Plan (40%)
2008 developed
Freehold
Cinema de Lux, Debenhams,
House of Fraser, John Lewis
139

JV PARTNER:

KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

Canada Pension Plan Investment
Board (50%)
2007 opened, 2009 acquired
Freehold
Debenhams, Marks & Spencer,
New Look, Next, Tesco Extra
100

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 13 years
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
ENERGY PERFORMANCE
CERTIFICATE:

96.9%
£16.6 million p.a.
£435 per m²
ISO 14001 BREEAM Very Good
D

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 9 years
OCCUPANCY RATE:
97.4%
RENTS PASSING:
£9.7 million p.a.
AVERAGE RENTS PASSING:
£345 per m²
ENVIRONMENTAL RATING:
–
ENERGY PERFORMANCE
C
CERTIFICATE:

OWNERSHIP:

50%

OWNERSHIP:

33%

OWNERSHIP:

60%

PROPERTY NET INTERNAL AREA: 127,100m2

PROPERTY NET INTERNAL AREA: 104,900m2

PROPERTY NET INTERNAL AREA: 91,800m2

Cabot CirCus, bristol

thE oraClE, rEading

union sQuarE, abErdEEn

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

Land Securities (50%)
September 2008 opened
Leasehold
Harvey Nichols,
House of Fraser
130

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

ADIA (50%)
1999 developed
Leasehold
Debenhams,
House of Fraser
113

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 9 years
OCCUPANCY RATE:
95.9%
RENTS PASSING:
£14.7 million p.a.
AVERAGE RENTS PASSING:
£385 per m²
ENVIRONMENTAL RATING:
ISO 14001 BREEAM Excellent
OWNERSHIP:

50%

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 6 years
OCCUPANCY RATE:
99.9%
RENTS PASSING:
£14.8 million p.a.
AVERAGE RENTS PASSING:
£535 per m²
ENVIRONMENTAL RATING:
ISO 14001
ENERGY PERFORMANCE
D
CERTIFICATE:

OWNERSHIP:

50%

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

–
2009 developed
Freehold
Apple, Cine UK, H&M,
Marks & Spencer,
Next, Zara
79

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 12 years
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
ENERGY PERFORMANCE
CERTIFICATE:

97.2%
£15.9 million p.a.
£400 per m²
BREEAM Very Good
B

OWNERSHIP:

100%

PROPERTY NET INTERNAL AREA: 96,100m2

PROPERTY NET INTERNAL AREA: 70,300m2

PROPERTY NET INTERNAL AREA: 51,600m2

132

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

UK shopping centres

viCtoria QuartEr, lEEds

WEstQuay, southampton

bristol invEstmEnt propErtiEs

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

–
2012 acquired
Freehold
Louis Vuitton, Paul Smith,
Vivienne Westwood
72

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

GIC (50%)
2000 developed
Leasehold
John Lewis,
Marks & Spencer
96

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 6
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
ENERGY PERFORMANCE
CERTIFICATE:

99.3%
£7.3 million p.a.
£515 per m²
None
E

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 5 years
OCCUPANCY RATE:
98.1%
RENTS PASSING:
£14.1 million p.a.
AVERAGE RENTS PASSING:
£630 per m²
ENVIRONMENTAL RATING:
ISO 14001
ENERGY PERFORMANCE
D
CERTIFICATE:

OWNERSHIP:

100%

OWNERSHIP:

50%

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

Land Securities (50%)
2000-2006 acquired
Leasehold
BHS, Currys,
Sportsworld,
Superdrug
62

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 10 years
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
ENERGY PERFORMANCE
CERTIFICATE:

94.9%
£3.9 million p.a.
£265 per m²
–
–

OWNERSHIP:

50%

PROPERTY NET INTERNAL AREA: 19,100m2

PROPERTY NET INTERNAL AREA: 76,800m2

PROPERTY NET INTERNAL AREA: 33,700m2

monumEnt mall, nEWCastlE*

JV PARTNER:
–
2011 acquired
KEY DATES:
TENURE:
Freehold
PRINCIPAL OCCUPIERS:
N/A
NO. OF TENANTS:
N/A
UNExPIRED LEASE TERM TO ExPIRY: N/A
OCCUPANCY RATE:
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
ENERGY PERFORMANCE
CERTIFICATE:

–
–
–
–
–

OWNERSHIP:

100%

PROPERTY NET INTERNAL AREA:

–

* This property is currently being redeveloped.

HAMMERSON ANNUAL REPORT 2012

133

Strategic review
Governance
Financial statements
Other information

UK retail parks

Hammerson owns 21 retail parks in the UK, which together provide over 480,000m² of floorspace. These easily accessible parks, located on
the edge of town centres, are let to both bulky goods and fashion retailers. They offer large-format modern stores with ample parking.

abbEy rEtail park, bElfast

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 17 years
OCCUPANCY RATE:
PLANNING

–
2006 acquired
Freehold
B&Q, Tesco
4

RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
OWNERSHIP:

100%
Part open A1,
part bulky goods
£3.3 million p.a.
£145 per m²
EPC completed1

100%

brEnt south shopping park,
london, nW2

Cyfarthfa rEtail park,
mErthyr tydfil

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

Standard Life (59%)
2004 developed
Freehold
Arcadia, Next,
TK Maxx
10

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 9 years
OCCUPANCY RATE:
100%
Mainly open A1
PLANNING
RENTS PASSING:
£1.8 million p.a.
AVERAGE RENTS PASSING:
£505 per m²
EPC completed1
ENVIRONMENTAL RATING:
OWNERSHIP:

41%

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

–
2005 developed
Freehold
Argos, B&Q, Boots, Currys,
Debenhams, DW Sports, New
Look, Next, TK Maxx
17

100%
Mixed (open A1, bulky goods,
restaurant)
£5.2 million p.a.
£215 per m²
EPC completed1

100%

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 11 years
OCCUPANCY RATE:
PLANNING

RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
OWNERSHIP:

PROPERTY NET INTERNAL AREA: 20,200m2

PROPERTY NET INTERNAL AREA: 8,700m2

PROPERTY NET INTERNAL AREA: 23,800m2

abbotsinCh rEtail park, paislEy

CEntral rEtail park, falkirk

dalloW road, luton

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

–
2012 acquired
Freehold
B&Q, Pets at Home,
Harveys, DFS
6

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 14
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
OWNERSHIP:

100%
Bulky goods
£3.1 million p.a.
£190 per m²
–

100%

PROPERTY NET INTERNAL AREA: 15,900m2

battEry rEtail park, birmingham

JV PARTNER:
KEY DATES:

TENURE:
PRINCIPAL OCCUPIERS:

–
Built 1990, 2002 acquired,
2010 bought out partner
Leasehold
B&Q, Currys, Halfords,
Homebase, Next, PC World
8

JV PARTNER:
KEY DATES:

TENURE:
PRINCIPAL OCCUPIERS:

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 4 years
OCCUPANCY RATE:
100%
A1 and restaurants
PLANNING
RENTS PASSING:
£3.1 million p.a.
AVERAGE RENTS PASSING:
£240 per m²
ENVIRONMENTAL RATING:
BREEAM Pass
OWNERSHIP:

100%

JV PARTNER:
KEY DATES:

TENURE:
PRINCIPAL OCCUPIERS:

NO. OF TENANTS:
WEIGHTED AVERAGE UNExPIRED
LEASE TERM ExPIRY:
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
OWNERSHIP:

–
2002 acquired,
2003 extended
Leasehold
Boots, Homebase,
Mothercare, Next, Tesco
27

10 years
95.7%
Mixed
£5.4 million p.a.
£185 per m²
EPC completed1

100%

PROPERTY NET INTERNAL AREA: 37,400m2

ClEvEland rEtail park,
middlEsbrough

–
2002 acquired, 2006 extended,
2009 reconfiguration
Freehold
Argos, B&Q, Boots, Currys,
Matalan, M&S Simply Food,
Next, Outfit
18

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 12 years
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
OWNERSHIP:

99.9%
Part open A1, part bulky goods
£4.4 million p.a.
£160 per m²
BREEAM Good

100%

JV PARTNER:
KEY DATES:

–
2002 acquired,
2006 redeveloped
Freehold
Aldi, B&Q
2

TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 17 years
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
OWNERSHIP:

100%
Food and bulky goods
£2.0 million p.a.
£195 per m²
EPC completed1

100%

PROPERTY NET INTERNAL AREA: 10,100m2

drakEhousE rEtail park, shEffiEld

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

–
2003 acquired
Freehold
Carpetright, Currys, Dreams,
Homebase, JD Sports,
Oak Furnitureland, Smyths Toys
19

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 11 years
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
OWNERSHIP:

100%
Restricted open A1
£3.7 million p.a.
£175 per m²
EPC completed1

100%

PROPERTY NET INTERNAL AREA: 13,000m2

PROPERTY NET INTERNAL AREA: 21,000m2

PROPERTY NET INTERNAL AREA: 27,100m2

1 Energy performance certificates completed for individual units.

134

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

UK retail parks

Elliott’s fiEld, rugby

manor Walks, Cramlington

ravEnhEad rEtail park, st hElEns

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

–
2011 acquired
Freehold
Halfords, Homebase, TK Maxx,
Wickes
9

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

–
2006 acquired
Freehold
Argos, Asda, Boots,
Next, Sainsbury’s, Vue
101

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 1 years
OCCUPANCY RATE:
94.7%
Open A1
PLANNING
RENTS PASSING:
£2.0 million p.a.
AVERAGE RENTS PASSING:
£165 per m²
ENVIRONMENTAL RATING:
BREEAM Good
OWNERSHIP:

100%

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 5 years
OCCUPANCY RATE:
94.5%
Open A1
PLANNING
RENTS PASSING:
£6.2 million p.a.
AVERAGE RENTS PASSING:
£145 per m²
EPC completed1
ENVIRONMENTAL RATING:
OWNERSHIP:

100%

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

–
2007 acquired
Freehold
Argos, B&Q, Boots, Currys,
Next, Outfit, Smyths Toys
19

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 11 years
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
OWNERSHIP:

100%
Part open A1, part bulky goods
£4.9 million p.a.
£175 per m²
BREEAM Pass

100%

PROPERTY NET INTERNAL AREA: 12,700m2

PROPERTY NET INTERNAL AREA: 48,300m2

PROPERTY NET INTERNAL AREA: 27,600m2

fifE CEntral rEtail park, kirkCaldy

thE orChard CEntrE, didCot

st osWald’s rEtail park, glouCEstEr

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

–
2005 acquired, 2009 extension
Freehold
Argos, B&Q, Boots, Homebase,
Mothercare, Next, Sainsbury’s
18

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 10 years
OCCUPANCY RATE:
PLANNING

RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
OWNERSHIP:

100%
Part open A1,
part bulky goods
£5.3 million p.a.
£185 per m²
BREEAM Pass

100%

–
2006 acquired
Leasehold
Argos, Next, Sainsbury’s
47

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 15 years
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
OWNERSHIP:

98.3%
Open A1
£3.8 million p.a.
£200 per m²
EPC completed1

100%

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 15 years
OCCUPANCY RATE:
PLANNING

RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
OWNERSHIP:

–
2005 developed
Leasehold
B&Q, DW Sports,
Homebase, Mothercare
13

100%
Mixed (open A1,
bulky goods, restaurant)
£4.1 million p.a.
£200 per m²
EPC completed1

100%

PROPERTY NET INTERNAL AREA: 28,200m2

PROPERTY NET INTERNAL AREA: 20,800m2

impErial rEtail park, bristol

parC taWE rEtail park, sWansEa

JV PARTNER:
KEY DATES:

–
2012 acquired

TENURE:
Freehold
PRINCIPAL OCCUPIERS:
B&Q, Boots, Tesco Home Plus
NO. OF TENANTS:
17
UNExPIRED LEASE TERM TO ExPIRY: 13
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
OWNERSHIP:

95.6%
Restricted open A1
£5.2 million p.a.
£170 per m²
–

100%

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 0
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
OWNERSHIP:

92.5%
Open A1
£1.9 million p.a.
£95 per m²
EPC completed1

100%

PROPERTY NET INTERNAL AREA: 20,500m2

tElford forgE shopping park,
tElford

–
2006 acquired
Leasehold
Mothercare, Odeon, Toys ‘R’ Us
14

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

–
2012 acquired
Freehold
Sainsbury’s, Outfit, TK Maxx,
Boots, Next
20

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 10 years
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
OWNERSHIP:

100%
Open A1
£5.1 million p.a.
£220 per m²
–

100%

PROPERTY NET INTERNAL AREA: 32,300m2

PROPERTY NET INTERNAL AREA: 22,600m2

PROPERTY NET INTERNAL AREA: 29,100m2

1 Energy performance certificates completed for individual units.

HAMMERSON ANNUAL REPORT 2012

135

Strategic review
Governance
Financial statements
Other information

UK retail parks

UK retail parks (continued)

thurroCk shopping park, thurroCk

WrEkin rEtail park, tElford

WEstWood & WEstWood gatEWay
rEtail parks, thanEt

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

–
2012 acquired
Freehold
Marks & Spencer, Matalan,
TK Maxx, Gap, Asda Living,
Boots, Smyths Toys, Nike
20

JV PARTNER:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

–
2002 acquired, 2009 extended
Freehold
Argos, Bhs, Homebase, Matalan,
Sportsworld
18

JV PARTNER:
KEY DATES:

TENURE:
PRINCIPAL OCCUPIERS:

–
1996 development;
2010 acquired
Freehold
Asda Living, Boots, Homebase,
Matalan
12

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 10 years
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
OWNERSHIP:

95.5%
Open A1
£5.8 million p.a.
£200 per m²
–

100%

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 11 years
OCCUPANCY RATE:
PLANNING
RENTS PASSING:
AVERAGE RENTS PASSING:
ENVIRONMENTAL RATING:
OWNERSHIP:

100%
Part open A1
£4.8 million p.a.
£185 per m²
EPC completed1

100%

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 8 years
OCCUPANCY RATE:
100%
Open A1
PLANNING
RENTS PASSING:
£2.6 million p.a.
AVERAGE RENTS PASSING:
£195 per m²
EPC completed1
ENVIRONMENTAL RATING:
OWNERSHIP:

100%

PROPERTY NET INTERNAL AREA: 29,900m2

PROPERTY NET INTERNAL AREA: 24,700m2

PROPERTY NET INTERNAL AREA: 13,400m2

1 Energy performance certificates completed for individual units.

136

HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

France retail

In France, we own and manage some of the top shopping centres in the Ile-de-France region, including Italie 2 and O’Parinor, together with high
quality centres in Strasbourg and Angers. Our French shopping centres attract over 70 million visitors each year.

bErCy 2, CharEnton-lE-pont

grand mainE, angErs

EspaCE saint QuEntin,
saint QuEntin-En-yvElinEs

CO-OWNERSHIP:
KEY DATES:
TENURE:
PRINCIPAL OCCUPIERS:

Carrefour and Darty
2000 acquired
Freehold
Go Sport, H&M, La Grande
Recré, Carrefour, Tati, Virgin
60

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 6 years
OCCUPANCY RATE:
94.5%
RENTS PASSING:
£4.8 million p.a.
AVERAGE RENTS PASSING:
£285 per m²
ENVIRONMENTAL RATING:
–
OWNERSHIP:

20,200m2
PROPERTY NET INTERNAL AREA: 35,200m2

JV PARTNER:
CO-OWNERSHIP:

KEY DATES:

TENURE:
PRINCIPAL OCCUPIERS:

Allianz (75%)
Buffalo Grill, C&A, Carrefour,
Darty, McDonalds
1994 acquired
2007 reconfigured
Freehold
C&A, Carrefour, Go Sport,
H&M, Sephora
121

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 5 years
OCCUPANCY RATE:
98.1%
RENTS PASSING:
£3.3 million p.a.
AVERAGE RENTS PASSING:
£490 per m²
ENVIRONMENTAL RATING:
–
OWNERSHIP:

25%

PROPERTY NET INTERNAL AREA: 58,700m2

CO-OWNERSHIP:
KEY DATES:

TENURE:
PRINCIPAL OCCUPIERS:

Carrefour
1983 opened
2007 acquired
Freehold
Camaieu, Carrefour, Celio,
Etam, Naf Naf, Paul, Yves Rocher
55

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 4 years
OCCUPANCY RATE:
93.7%
RENTS PASSING:
£2.6 million p.a.
AVERAGE RENTS PASSING:
£365 per m²
ENVIRONMENTAL RATING:
–
OWNERSHIP:

9,100m2

PROPERTY NET INTERNAL AREA: 22,000m2

italiE 2, avEnuE d’italiE, paris 13èmE

lEs 3 fontainEs, CErgy pontoisE

o’parinor, aulnay-sous-bois

(of which JV ownership is 27,900m2)

JV PARTNER:
KEY DATES:

TENURE:
PRINCIPAL OCCUPIERS:

–
1976 opened,
1998 acquired
2001 refurbished
Freehold
CarrefourMarket, Darty, Fnac,
Go Sport, La Grande Récré,
Printemps, Sephora
127

CO-OWNERSHIP:
KEY DATES:

TENURE:
PRINCIPAL OCCUPIERS:

Auchan
1972 opened
1995 acquired
1996 refurbished
Freehold
Auchan, C&A, Darty, H&M,
Mango, New Look
80

JV PARTNER:

CO-OWNERSHIP:
KEY DATES:

TENURE:
PRINCIPAL OCCUPIERS:

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 3 years
OCCUPANCY RATE:
99.2%
RENTS PASSING:
£19.6 million p.a.
AVERAGE RENTS PASSING:
£410 per m²
ENVIRONMENTAL RATING:
HQE for proposed extension
OWNERSHIP:

56,900m2
PROPERTY NET INTERNAL AREA: 56,900m2

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 5 years
OCCUPANCY RATE:
99.6%
RENTS PASSING:
£11.9 million p.a.
AVERAGE RENTS PASSING:
£485 per m²
ENVIRONMENTAL RATING:
–
OWNERSHIP:

24,700m2
PROPERTY NET INTERNAL AREA: 60,700m2

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 5 years
OCCUPANCY RATE:
96.6%
RENTS PASSING:
£5.7 million p.a.
AVERAGE RENTS PASSING:
£355 per m²
ENVIRONMENTAL RATING:
–

OWNERSHIP:

25%

PROPERTY NET INTERNAL AREA: 94,100m2

Client of Rockspring Property
Investment Managers LLP (75%)
Carrefour and Redevco
1974 opened
2002 aquired
2008 redeveloped
Freehold
C&A, Carrefour, Darty, Fnac,
H&M, New Look, Saturn, Zara
187

plaCE dEs hallEs, strasbourg

sQy ouEst, saint QuEntin-En-yvElinEs

villEbon 2, villEbon-sur-yvEttE

(of which JV ownership is 60,700m2)

MINORITY INTEREST:
KEY DATES:

TENURE:
PRINCIPAL OCCUPIERS:

Assurbail (35.5%)
1979 opened
1998 acquired
2007 refurbished
Freehold
C&A, Darty, Go Sport, H&M,
Mango, New Look, Sephora,
Toys ‘R’ Us
120

NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 5 years
OCCUPANCY RATE:
99.3%
RENTS PASSING:
£12.3 million p.a.
AVERAGE RENTS PASSING:
£310 per m²
ENVIRONMENTAL RATING:
–
OWNERSHIP:

39,900m2
PROPERTY NET INTERNAL AREA: 41,200m2

JV PARTNER:
KEY DATES:

Codic France (50%)
2005 opened
2011 acquired
Freehold
UGC, GoSport, Zara
28

TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 4 years
OCCUPANCY RATE:
68.6%
RENTS PASSING:
£1.7 million p.a.
AVERAGE RENTS PASSING:
£155 per m²
ENVIRONMENTAL RATING:
–
OWNERSHIP:

50%

PROPERTY NET INTERNAL AREA: 31,300m2

KEY DATES:

2005 acquired
2007 extension
Freehold
C&A, Darty, Fnac, Toys ‘R’ Us
46

TENURE:
PRINCIPAL OCCUPIERS:
NO. OF TENANTS:
UNExPIRED LEASE TERM TO ExPIRY: 6 years
OCCUPANCY RATE:
100%
RENTS PASSING:
£7.1 million p.a.
AVERAGE RENTS PASSING:
£150 per m²
ENVIRONMENTAL RATING:
–
OWNERSHIP:

47,500m2
PROPERTY NET INTERNAL AREA: 47,500m2

HAMMERSON ANNUAL REPORT 2012

137

Strategic review
Governance
Financial statements
Other information

Glossary of terms

Adjusted figures (per share)

Reported amounts adjusted to exclude certain items as set out in note 11 to the accounts.

Anchor store

A major store, usually a department, variety or DIY store or supermarket, occupying a large unit within a
shopping centre or retail park, which serves as a draw to other retailers and consumers.

Average cost of borrowing

The cost of finance expressed as a percentage of the weighted average of borrowings during the period.

Capital return

DTR

Dividend cover

Earnings per share (EPS)

EBITDA

EPRA

Equivalent yield (true and nominal)

ERV

Gearing

Gross property value

Gross rental income

IAS

IASB

IFRS

Initial yield

The change in property value during the period after taking account of capital expenditure and exchange
translation movements, calculated on a monthly time-weighted basis.

Disclosure and Transparency Rules, issued by the United Kingdom Listing Authority.

Adjusted earnings per share divided by dividend per share.

Profit for the period attributable to equity shareholders divided by the average number of shares in issue
during the period.

Earnings before interest, tax, depreciation and amortisation.

European Public Real Estate Association. This organisation has issued recommended bases for the
calculation of earnings per share and net asset value per share.

The capitalisation rate applied to future cash flows to calculate the gross property value. The cash flows
reflect the timing of future rents resulting from lettings, lease renewals and rent reviews based on current
ERVs. The true equivalent yield assumes rents are received quarterly in advance. The nominal equivalent
yield assumes rents are received annually in arrears. The property true and nominal equivalent yields are
determined by the Group’s external valuers.

The estimated market rental value of the total lettable space in a property, after deducting head and equity
rents, calculated by the Group’s external valuers.

Net debt expressed as a percentage of equity shareholders’ funds.

Property value before deduction of purchaser’s costs, as provided by the Group’s external valuers.

Income from rents, car parks and commercial income, after accounting for the net effect of the
amortisation of lease incentives.

International Accounting Standard.

International Accounting Standards Board.

International Financial Reporting Standard.

Annual cash rents receivable (net of head and equity rents and the cost of vacancy, and in the case of France,
net of an allowance for costs of approximately 5.2% primarily for management fees), as a percentage of
gross property value, as provided by the Group’s external valuers. Rents receivable following the expiry of
rent-free periods are not included. Rent reviews are assumed to have been settled at the contractual review
date at ERV.

Interest cover

Net rental income divided by net cost of finance before capitalised interest and change in fair value
of derivatives.

Interest rate or currency swap (or derivatives)

An agreement with another party to exchange an interest or currency rate obligation for a pre-determined
period of time.

IPD

Investment Property Databank. An organisation supplying independent market indices and portfolio
benchmarks to the property industry.

Like-for-like/underlying net rental income

The percentage change in net rental income for completed investment properties owned throughout both
current and prior periods, after taking account of exchange translation movements.

Loan to value ratio

Borrowings and foreign currency swaps expressed as a percentage of the total value of investment and
development properties.

Net asset value per share (NAV)

Equity shareholders’ funds divided by the number of shares in issue at the balance sheet date.

Net rental income

Occupancy rate

Income from rents, car parks and commercial income, after deducting head and equity rents payable, and
other property related costs.

The ERV of the area in a property or portfolio, excluding developments, which is let, expressed as a
percentage of the total ERV of that property or portfolio.

138

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Strategic review
Governance
Financial statements
Other information

Glossary of terms

Glossary of terms (continued)

Over-rented

Pre-let

The amount by which ERV falls short of rents passing, together with the estimated rental value of
vacant space.

A lease signed with a tenant prior to completion of a development.

Property Income Distribution (PID)

A dividend, generally subject to withholding tax, that a UK REIT is required to pay from its tax-exempt
property rental business and which is taxable for UK-resident shareholders at their marginal tax rate.

REIT

Rents passing or passing rents

Real Estate Investment Trust. A tax regime that in the UK exempts participants from corporation tax both
on UK rental income and gains arising on UK investment property sales, subject to certain requirements.

The annual rental income receivable from an investment property, after any rent-free periods and after
deducting head and equity rents. This may be more or less than the ERV (see over-rented and reversionary
or under-rented).

Return on shareholders’ equity (ROE)

Capital growth and profit for the year expressed as a percentage of equity shareholders’ funds at the
beginning of the year, all excluding deferred tax and certain non-recurring items.

Reversionary or under-rented

The amount by which the ERV exceeds the rents passing, together with the estimated rental value of
vacant space.

Scrip dividend

SIIC

A dividend received in the form of shares.

Sociétés d’Investissements Immobiliers Côtées. A French tax-exempt regime available to property
companies listed in France.

Total development cost

All capital expenditure on a development project, including capitalised interest.

Total return

Net rental income and capital return expressed as a percentage of the opening book value of property
adjusted for capital expenditure and exchange translation movements, calculated on a monthly
time-weighted basis.

Total shareholder return

Dividends and capital growth in the share price, expressed as a percentage of the share price at the
beginning of the year.

Turnover rent

UK GAAP

Vacancy rate

Yield on cost

Rental income that is related to an occupier’s turnover.

United Kingdom Generally Accepted Accounting Practice.

The ERV of the area in a property, or portfolio, excluding developments, which is currently available
for letting, expressed as a percentage of the ERV of that property or portfolio.

Rents passing expressed as a percentage of the total development cost of a property.

Disclaimer
This document contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking in nature and are subject to
risks and uncertainties. Actual future results may differ materially from those expressed in or implied by these statements.

Many of these risks and uncertainties relate to factors that are beyond Hammerson’s ability to control or estimate precisely, such as future market conditions, currency fluctuations, the
behaviour of other market participants, the actions of governmental regulators and other risk factors such as the Company’s ability to continue to obtain financing to meet its liquidity
needs, changes in the political, social and regulatory framework in which the Company operates or in economic or technological trends or conditions, including inflation and consumer
confidence, on a global, regional or national basis.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. Hammerson does not undertake any obligation
to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this document. Information contained in this document relating to
the Company should not be relied upon as a guide to future performance.

HAMMERSON ANNUAL REPORT 2012

139

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Governance
Financial statements
Other information

Index

Accounting policies

88, 125

Investment in own shares

Adjustment for non-cash items in the cash flow statement

122

Investments in subsidiary companies

Administration expenses

Analysis of movement in net debt

Auditor’s report

Group financial statements

Parent company financial statements

Board of Directors

Borrowings

Business model

Business review

Cash and deposits

Chairman’s Introduction to Governance

Chairman’s statement

Chief Executive’s report

Company balance sheet

Connected reporting framework

Consolidated balance sheet

Consolidated cash flow statement

Consolidated income statement

Consolidated statement of changes in equity

Consolidated statement of comprehensive income

Contingent liabilities

Corporate governance

Developments

Directors’ remuneration

Directors’ responsibilities

Dividends

Equity

Financial instruments

Financial review

Glossary of terms

Human resources

41, 95

Joint ventures

44, 87

Key performance indicators (KPIs)

Market background

Net finance costs

Notes to the accounts

Obligations under finance leases

123

44, 111, 126

Operating lease receipts

Other investments

Payables

44, 111

Pensions

Per share data

124

129

Plant, equipment and owner-occupied property

Principal Group addresses

Principal uncertainties

Principal subsidiary companies

Profit before tax

Property portfolio

Property portfolio information

Property returns

Receivables

122

Real Estate Investment Trusts (REITs)

Remuneration report

Result for the year

68, 75

Risk management

Segmental analysis

43, 78, 101

Share capital

85, 126

Shareholder information

113, 127

Shareholder return

138

Sociétés d’Investissements Immobiliers Côtées (SIIC)

Strategy

Tax

Investment and development properties

20, 48, 103

Ten-year financial summary

Investment in associate

105

Treasury shares

121

125

107

43, 98

88, 125

119

122

110

119, 126

68, 78, 96

IFC, 40, 44, 102

104

141

127

40, 82, 92

132

32, 34

110, 125

43, 98, 99

48, 49, 93

78, 120

141

34, 77

43, 98, 99

6, 11, 32

43, 98

128

122

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HAMMERSON ANNUAL REPORT 2012

Strategic review
Governance
Financial statements
Other information

Shareholder information

1. Key Contact Details:
Registered office
10 Grosvenor Street
London
W1K 4BJ
Registered in England No. 360632

Principal Group addresses
United Kingdom
Hammerson plc
10 Grosvenor Street
London
W1K 4BJ

Tel +44 (0)20 7887 1000
Fax +44 (0)20 7887 1010

France
Hammerson France SAS
48 rue Cambon
Paris 75001
France

Tel: +33 (0) 1 56 69 30 00
Fax: +33 (0) 1 56 69 30 01

2. Shareholder Administration:
Payment of dividends to
mandated accounts
Shareholders who do not currently have their
dividends paid direct to a bank or building
society account and who wish to do so should
complete a mandate instruction available
from the Registrar or request one at
www.hammerson-shares.com. Under this
arrangement, tax vouchers are sent to the
shareholder’s registered address.

Multiple accounts
Shareholders who receive more than one copy
of communications from the Company may
have more than one account in their name on
the Company’s register of members. Any
shareholder wishing to amalgamate such
holdings should contact the Registrar.

Registrar
If you have any queries about the administration
of shareholdings, such as lost share certificates,
change of address, change of ownership or
dividend payments please contact
the Registrar:

Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU

Tel: 0871 664 0300 (from the UK)
(Calls cost 10p per minute plus network
extras, lines are open 8.30 am to 5.30 pm
Monday to Friday)
or
+44 (0)20 8639 3399 (from overseas)

email ssd@capitaregistrars.com
website www.capitalshareportal.com

Dividend Reinvestment Plan (‘DRIP’)
Shareholders can reinvest dividend payments
in additional shares in the Company under the
DRIP operated by the Company’s Registrar
by completing an application form online at
www.capitalshareportal.com or by calling
Capita IRG Trustees: Tel: 0871 664 0381
(from the UK calls cost 10p per minute plus
network extras) or +44 (0) 20 8639 3402
(from overseas)
email: shares@capitaregistrars.com.

Elections to participate in the DRIP (or cancellation
of previous instructions) in respect of the final
dividend must be received by the Company’s
Registrar no later than 5.00 pm on 19 April 2013.
Further details can be found on the website at
www.hammerson.com on the Investors page.

The DRIP will continue to be available to those
shareholders who have already completed an
application form. Such shareholders should
take no action unless they wish to receive
their dividend in cash, in which case they
should contact Capita Registrars to cancel
their instruction.

Registering on the Hammerson Share Portal
website enables you to view your shareholding
in the Company, including an indicative share
price and valuation, a transaction audit trail and
dividend payment history. You can also amend
certain standing data relating to your account.

Advisers
Valuers DTZ Debenham Tie Leung
Auditor Deloitte LLP
Solicitors Herbert Smith Freehills LLP
Joint Brokers and Financial Advisors J.P. Morgan
Cazenove and Deutsche Bank AG
Financial Adviser Lazard Ltd

International payment service
In conjunction with Western Union, Capita
Registrars provides a service to convert
sterling dividends into certain local currencies.
For further information, please contact
Capita Registrars (address listed above).
Tel: 0871 664 0385 (calls cost 10p per
minute plus network extras, lines are open
9.00 am to 5.30 pm Monday to Friday)
or +44 (0)20 8639 3405 (from overseas);
email: ips@capitaregistrars.com.
Further details can be found at:
http://international.capitaregistrars.com/

Capita share dealing services
An online and telephone dealing facility is
available, providing shareholders with an easy to
access and simple to use service. There is no
need to pre-register and there are no
complicated forms to fill in. The online and
telephone dealing service allows you to trade
‘real time’ at a known price that will be given to
you at the time you give your instruction. This is
subject to a credit check for shareholders
dealing in shares valued at more than the
sterling equivalent of €15,000.

For further information on this service,
or to buy and sell shares, please call Capita Tel:
0871 664 0364 (calls cost 10p per minute plus
network extras, lines are open 8.00 am to 4.30
pm Monday to Friday), +44 (0)20 3367 2686
(from overseas) or 1 890 946 375
(from Ireland)
email: info@capitadeal.com
website: www.capitadeal.com

HAMMERSON ANNUAL REPORT 2012

141

If you use an unauthorised firm to buy or sell
shares or other investments, you will not have
access to the Financial Ombudsman Service
or Financial Services Compensation Scheme
if things go wrong.

If you are approached about a share scam
you should tell the FSA using the share fraud
reporting form at www.fsa.gov.uk/scams,
where you can find out about the latest
investment scams. You can also call the
Consumer Helpline on 0845 606 1234.

If you have already paid money to share
fraudsters you should contact Action Fraud
on 0300 123 2040.

More detailed information on this or similar
activity can be found on the Financial Services
Authority website at: http://www.fsa.gov.uk/
consumerinformation/scamsandswindles/
investment_scams/boiler_room

Strategic review
Governance
Financial statements
Other information

Shareholder information

ShareGift
Shareholders with a small number of shares, the
value of which makes it uneconomic to sell
them, may wish to consider donating them to
charity through ShareGift, a registered charity
administered by The Orr Mackintosh
Foundation Limited (registered charity number:
1052686, registered company number:
3150478). Further information about ShareGift
is available at www.sharegift.org.uk or by
writing to ShareGift, The Orr Mackintosh
Foundation, 17 Carlton House Terrace, London,
SW1Y 5AH or by telephone on 020 7930 3737.

Website
The 2012 Annual Report and other information
that shareholders may find useful are available
on the Company’s website: www.hammerson.
com on the Investors page. The Company
operates a service whereby all registered users
can choose to receive via email, notice of all
Company announcements, which can also
be viewed on the website.

UK Real Estate Investment Trust
(‘REIT’) taxation
As a UK REIT, Hammerson plc is exempt from
corporation tax on rental income and gains on
UK investment properties but is required to pay
Property Income Distributions (‘PIDs’). UK
shareholders will be taxed on PIDs received at
their full marginal tax rates. A REIT may in
addition pay normal dividends.

For most shareholders, PIDs will be paid after
deducting withholding tax at the basic rate.
However, certain categories of shareholder are
entitled to receive PIDs without withholding tax,
principally UK resident companies, UK public
bodies, UK pension funds and managers of ISAs,
PEPs and Child Trust Funds. Further information
on UK REITs is available on the Company’s
website, including a form to be used by
shareholders to certify if they qualify to receive
PIDs without withholding tax.

Unsolicited mail
Hammerson is obliged by law to make its share
register available on request to other
organisations. This may result in you receiving
unsolicited mail. If you wish to limit the receipt of
unsolicited mail you may do so by writing to the
Mailing Preference Service, an independent
organisation whose services are free to you.
Once your name and address have been added
to its records, it will advise the companies and
other bodies that support the service that you
no longer wish to receive unsolicited mail. If you
would like more details you should register on
their website: www.mpsonline.org.uk or
telephone their helpline on 0845 703 4599.

Shareholder security
Share fraud includes scams where investors are
called out of the blue and offered shares that
often turn out to be worthless or non-existent,
or offered an inflated price for shares they own.
These calls come from fraudsters operating
in so called ‘boiler rooms’ that are mostly
based abroad.

While high profits are promised, those who
buy or sell shares in this way usually lose
their money.

The Financial Services Authority (‘FSA’) has
found most share fraud victims are experienced
investors who lose an average of £20,000, with
around £200 million lost in the UK each year.

If you are offered unsolicited investment advice,
discounted shares, a premium price for shares
you own, or free company or research reports,
you should take these steps before handing
over any money:

– Ask for the name of the person and

organisation contacting you.

– Check the FSA Register at www.fsa.gov.uk/
fsaregister to ensure they are authorised.

– Use the details on the FSA Register to

contact the firm.

– Call the FSA Consumer Helpline on 0845
606 1234 if there are no contact details
on the FSA Register or you are told they
are out of date.

– Search the FSA’s list of unauthorised
firms and individuals with whom it is
recommended to avoid doing business.

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Governance
Financial statements
Other information

Shareholder information

Shareholder information (continued)

3. Financial Calendar and Share Analysis:
Annual General Meeting
The Annual General Meeting for 2013 will be held at 11.00 am on 9 May 2013 at 10 Grosvenor Street, London, W1K 4BJ.
Details of the Meeting and the resolutions to be voted upon can be found in the Notice of Meeting that has been sent to all shareholders.

Full-year results announced

Recommended final dividend

Ex-dividend date

Record date

1 March 2013

3 April 2013

5 April 2013

Election (or cancellation) date for Dividend Reinvestment Plan

5:00 pm on 19 April 2013

Annual General Meeting

Anticipated 2013 interim dividend

Payable on

Analysis of Shares Held as at 31 December 2012

14 May 2013

9 May 2013

October 2013

Number of Shareholders

Percentage of
Total Shareholders

Holding

% of Total Capital

895

385

378

398

167

285

182

30.45

13.10

12.86

13.54

5.68

9.70

3.33

6.19

1.81

3.34

172,869

301,282

555,925

1,257,358

1,154,011

7,031,020

7,025,158

43,241,365

38,540,602

613,551,369

2,939

100.00

712,830,959

0.02

0.04

0.08

0.18

0.16

0.99

0.98

6.07

5.41

86.07

100.00

Number of Shares held

0-500

501-1,000

1,001-2,000

2,001-5,000

5,001-10,000

10,001-50,000

50,001-100,000

100,001-500,000

500,001-1,000,000

1,000,001 and above

Total

Four Year Dividend History

Dividend price (pence)

2009*

2010

2011

2012**

Interim dividend (non PID)

Interim dividend (PID)

Final dividend (non PID)

Final dividend (PID)

In 2009, a second interim dividend was paid in place of a ﬁnal dividend

*
** The 2012 ﬁnal dividend is subject to the approval by shareholders at the 2013 Annual General Meeting

HAMMERSON ANNUAL REPORT 2012

143

Strategic review
Governance
Financial statements
Other information

Notes

144

HAMMERSON ANNUAL REPORT 2012

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Hammerson plc
10 Grosvenor Street,
London, W1K 4BJ