Hammerson plc Annual Report 2014

FY2014 Annual Report · Hammerson plc

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ANNUAL REPORT 2014

Retail
specialists

CONTENTS

STRATEGIC REPORT
Our business model
Chief Executive’s Q&A
Our markets
Our Product Framework

– Best @ retail
– Entertaining & exciting
– Interactive & engaging
– Convenient & easy
– Iconic destinations
– Positive Places

(our sustainability strategy)

02
04
07

10
12
14
16
18

Our people
Key performance indicators
Business review
Financial review
Principal risks and uncertainties

CORPORATE GOVERNANCE REPORT
Chairman’s introduction
Your Board
Your Board’s year
Nomination Committee report
Audit Committee report
Remuneration report

60
62
64
68
71
75

Remuneration at a glance
2014 Remuneration: Implementation report
UK Corporate Governance
Code Compliance
Directors’ biographies
Directors’ report

FINANCIAL STATEMENTS
Directors’ responsibilities
Independent auditor’s report
Primary financial statements

102
103
106

Notes to the accounts
Company balance sheet
Notes to the Company accounts

OTHER INFORMATION
Portfolio analysis
Property details
Ten-year financial summary
Directors’ Remuneration policy

158
164
169
170

Shareholder information
Glossary
Index

REPORT HIGHLIGHTS

32
36
40
51
55

76
77

94
98
100

113
153
154

183
186
188

HOW
WE
CREATE
VALUE
Our business
model designed
to generate value
PAGE 02

CHIEF
EXECUTIVE’S
Q&A
PAGE 04

BUSINESS
REVIEW
PAGE 40

FINANCIAL
STATEMENTS
Detailed information
for the year ended
31 December 2014
PAGE 101

Retail
specialists

Our vision is to be the best owner-manager
and developer of retail property within Europe.
Our properties bring together the best in
physical and digital retail environments
to give the consumer the most enjoyable
shopping experience.
We are retail specialists and our strategy
to deliver exceptional retail destinations is
underpinned by our six unique areas of focus:

Hammerson delivers
the best @ retail

Hammerson centres are
convenient & easy

More on page 29

* On a proportionally consolidated basis but excluding the Group’s premium outlet interests.

38 Hammerson plc Annual Report 2014

EPRA MEASURES

EPRA Best Practice Recommendations
(BPR) on sustainability reporting
Absolute measures for energy and water usage, greenhouse gas
emission and waste, together with intensity measures for the same
areas as defined by EPRA, are set out in the full Global Reporting
Initiative and EPRA Best Practice Recommendation compliance
pack which can be found online at www.hammerson.com.

EPRA Financial Reporting Best Practice
Recommendations
Hammerson is a member of European Public Real Estate Association
(EPRA) and actively participates in a number of EPRA committees and
initiatives. This involves working with peer group companies, real estate
investors and analysts, and the large audit firms, to improve the
transparency, comparability and relevance of the published results of
listed real estate companies in Europe.

We have adopted the recommendations in the December 2014 Best
Practice Recommendation report and the key EPRA metrics are shown
in the table below.

Table Fig 22
EPRA performance measures

Performance measure

2014 Performance

2013 performance

Definition

Earnings

£171.3m

£164.5m Recurring earnings from core operational activities.

Earnings per share

23.4p

23.1p

In 2014, EPRA earnings differ from the Group’s adjusted
earnings of £174.3 million which exclude a net one-off
restructuring cost of £3.0 million

Recurring earnings from core operational activities
divided by the weighted average number of shares in
issue during the period. As for the 2014 EPRA earnings
above, the Group’s adjusted EPS of 23.9p excludes a
net one-off restructuring cost of £3.0 million

Net Asset Value (NAV) to exclude the fair value of
financial instruments, debt and deferred tax balances
divided by the number of issued shares

£6.38

£5.73

£5.96

4.7%

4.9%

2.5%

23.4%

£5.41

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

5.2% 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

5.5% EPRA NIY adjusted for the expiry of rent-free periods

2.3% Estimated market rental value (ERV) of vacant space

divided by the ERV of the whole portfolio (occupancy
is the inverse of vacancy)

24.6% Total operating costs as a percentage of gross rental
income, after rents payable. The 2014 ratio excludes
a net one-off restructuring cost of £3.0 million

Page

128

129

163

Net asset value (NAV)
per share

Triple net asset value
(NNNAV) per share

Net Initial Yield (NIY)

Topped-up NIY

Vacancy

Cost ratio

www.hammerson.com 39

STRATEGIC REPORT
BUSINESS REVIEW

ANOTHER SUCCESSFUL YEAR

The 2014 Business Review provides an overview of the achievements made against our
three strategic priorities during the year.

HIGH-QUALITY
PROPERTY

During 2014, we have introduced a Product
Framework which has been embedded across
the business. This is based on six unique focus
areas as shown on page 3, which have been
designed to ensure our portfolio is able to
perform in the evolving retail environment.

We aim to apply the framework consistently to
ensure our properties are attractive to retailers
and consumers and are vibrant places to visit.

DEVELOPMENTS AND EXTENSIONS
The Group has a proven track record of delivering iconic retail
developments. We have a large number of development opportunities
in both the UK and France, including six on-site schemes and three
major London developments. These will require expenditure of
approximately £1.5 billion and have the potential to significantly
grow the business and create new retail destinations. In addition,
we are working to bring forward a number of potential development
projects, but are conscious of the need to tightly control expenditure
while these opportunities are fully assessed.

During 2014 we completed three projects and have continued to
make good progress in advancing our other development schemes
as shown in the table below.

Completed developments
In May, we opened Les Terrasses du Port, Marseille, the 62,800m²
shopping and leisure destination, which has traded ahead of
expectations. The centre was valued at £480 million at December
2014, £107 million above its development cost, and is now 98% let.
Further details of this successful project are on page 21.

PORTFOLIO SUMMARY
The Group’s property portfolio includes 22 prime shopping centres,
22 convenient retail parks and investment in 15 premium outlets
across Europe providing a total of 2.2 million m2 of retail space. At the
end of 2014, the combined portfolio was valued at £7.7 billion, with
69% of the portfolio by value located in the UK, 25% in France and the
balance representing premium outlets in ten European countries.

The average lot size for the portfolio was £93 million and the ten
most valuable properties represented 50% of the portfolio value.

At Abbotsinch Retail Park, Paisley, which was acquired as part of the
Junction Fund portfolio in October 2012, a 5,000m², £9 million terrace
extension was completed in June. The extension created five new
units which are fully let, and increased the park to 20,900m².

A 7,200m² extension of O’Parinor, Paris creating a 14-screen cinema
and food court was completed towards the end of the year. The
extension is fully let and is part of a wider refurbishment of the centre,
including Primark’s first Paris store. Retailers have witnessed sales
growth and a significant increase in footfall.

PROGRESS MADE IN ADVANCING OUR DEVELOPMENT PROGRAMME IN 2014

Planning

Letting

Construction

• Achieved planning approval for:
– Brent Cross, London NW4
– Elliott’s Field Shopping

Park, Rugby

– WestQuay Watermark,

Southampton

• Council resolution for compulsory

purchase order at:
– Croydon town centre,

South London

• Submitted planning application for:

– The Goodsyard, London E1

• Signed lettings at:

• Completed works at:

– Abbotsinch Retail Park, Paisley
– Cyfarthfa Retail Park,

Merthyr Tydfil

– Elliott’s Field Shopping

Park, Rugby

– Le Jeu de Paume, Beauvais
– Les Terrasses du Port, Marseille
– Silverburn extension, Glasgow
– Victoria Gate, Leeds
– WestQuay Watermark,

Southampton

– Abbotsinch Retail Park, Paisley
– Les Terrasses du Port, Marseille
– O’Parinor, Paris

• Progressed construction at:

– Cyfarthfa Retail Park, Merthyr Tydfil
– Le Jeu de Paume, Beauvais
– Silverburn extension, Glasgow

• Started construction at:

– Elliott’s Field Shopping Park, Rugby
– Victoria Gate, Leeds
– WestQuay Watermark, Southampton

40 Hammerson plc Annual Report 2014

On-site developments
Table Fig 23

Scheme

Silverburn extension, Glasgow
Cyfarthfa Retail Park extension, Merthyr Tydfil
Elliott’s Field Shopping Park, Rugby
Le Jeu de Paume, Beauvais
Victoria Gate, Leeds (Phase 1)
WestQuay Watermark, Southampton
Total

Notes

Ownership1
%

Lettable area
m2

Expected
completion

Current
value2
£m

Estimated
cost to
complete3
£m

Estimated
annual
income4
£m

50
100
100
100
100
100

10,900
14,500
15,700
23,800
34,300
17,000
116,200

Q1 2015
Q2 2015
Q3 2015
Q4 2015
Q3 2016
Q1 2017

n/a
n/a
n/a
34
49
8

3
10
29
34
104
72
252

1
2
3
5
10
5
26

Let5
%

97
65
62
62
40
58

1. Value, costs and income represent Hammerson’s share for properties held in joint ventures.

2. Valuation at 31 December 2014. Values are not included for extension projects as they are incorporated into the valuation of the existing property.

3. Incremental capital cost including capitalised interest.

4. Incremental income net of head rents and after expiry of rent-free periods.

5. Let or in solicitors’ hands by income at 13 February 2015.

The first group of new catering operators have successfully opened
at the 10,900m² leisure-led extension of Silverburn, Glasgow which
will increase the centre to in excess of 100,000m². The project is almost
fully let and features a 14-screen Cineworld and a total of nine new
restaurants, including Five Guys, Chimichanga and Carluccios. The
restaurants are due to open by Easter 2015, with the cinema opening
in the summer.

We have progressed the 14,500m² extension to Cyfarthfa Retail Park,
Merthyr Tydfil where works commenced in 2013. The first phase
of the extension, including B&Q’s first Eco-learning store, opened
in September. The remaining 8,700m² of the scheme, including a
4,600m² full-line M&S store offering clothing, homeware and a foodhall,
will open in summer 2015. The scheme has provided over 250 jobs
during the construction phase and will create the equivalent of up
to 230 full-time jobs when complete.

In March, planning consent for the extension of Elliott’s Field Shopping
Park, Rugby was upheld following a Judicial Review and we started on
site in the autumn. The scheme will be anchored by a 5,600m² full-line
Debenhams and a 4,600m² M&S general merchandise store and also
involves the construction of a new retail terrace. The extension will
accommodate a further 13 new fashion and homeware brands and
provide new catering space, improved car parking facilities and
improvements to the external environment. Completion is expected
in autumn this year and 62% of the estimated annual income has
been secured. The scheme is targetting BREEAM Excellent and the
integration of 130kWp of solar photovoltaic panels will enable the
generation of approximately 1mWh of renewable energy each year.

Our 23,800m² development in Le Jeu de Paume, Beauvais is due for
completion this year, and will be anchored by Carrefour Market. The
scheme will also include 86 retail units, including H&M and Furet du
Nord and 37 residential apartments. Leases representing 62% of the
anticipated income have already been signed or are in solicitors’ hands.

Construction work for the first phase of Victoria Gate, Leeds
commenced in April 2014. The 34,300m² scheme is adjacent to
Victoria Quarter, which was acquired in 2012. The £150 million
development will consist of three main buildings: a flagship John Lewis
store; a two-street arcade with more than 30 aspirational retailers and
restaurants; and an 800-space multi-storey car park. Leasing progress
is encouraging, with 40% of the retail income let or in solicitors’ hands.
Further details of this scheme are on page 22.

Following planning approval in June, we started on-site with the first
phase of WestQuay Watermark. The 17,000m2 leisure and catering
scheme is in the centre of Southampton, next to our jointly owned
WestQuay Shopping Centre. The scheme includes a 10-screen
Showcase Cinema de Lux, up to 20 restaurants and a new public
piazza in front of the city’s historic walls. The scheme is scheduled
to be fully open by spring 2017. Estimated income for the £80 million
development is £5 million per annum, of which 58% has been pre-let
to catering operators including Wahaca, Zizzi and Byron. The scheme
is targetting BREEAM Excellent.

www.hammerson.com 41

STRATEGIC REPORT
BUSINESS REVIEW CONTINUED

Major developments
Table Fig 24

Scheme

Croydon town centre, South London
The Goodsyard, London E12
Brent Cross extension, London, NW4
Total

Notes

Ownership
%

Lettable area
m2

Earliest start

Potential
completion

Estimated
cost to
complete1
£m

50
50
41

200,000
260,000
90,000
550,000

2016
2016
2017

2019/20
Phased
2020/21

625-750
140-160
475-550
1,240-1,460

1. Hammerson’s share of incremental capital cost including capitalised interest. These costs are indicative as full scheme details are yet to be finalised.

2. Cost reflects phase 1 only. Due to residential component of scheme, area is gross external.

We have continued to progress our three major developments in
London. In addition to creating new retail destinations, these complex
schemes offer the potential for significant urban regeneration and to
deliver attractive financial returns over the longer term.

The redevelopment of Croydon town centre involves the regeneration
of the retail heart of this area to attract £1 billion of annual retail
spend. The scheme is being advanced by the Croydon Partnership, a
50:50 joint venture with Westfield which was formed at the beginning
of 2013. The joint venture owns Centrale shopping centre and
a 25% interest in the 155-year headlease of the Whitgift Centre. The
redevelopment of the Whitgift Centre and refurbishment of Centrale
will result in 200,000m2 of retail, leisure and residential space. Planning
permission was granted in April 2014. Since this date, Croydon Council
has resolved to make a compulsory purchase order (CPO) to assemble
the land required for the scheme and the CPO inquiry began in
February 2015. The planning process and design of this significant
regeneration project has taken longer than originally expected and,
assuming a successful CPO outcome, works are due to start in 2016
with completion scheduled for 2019/20. Further details of this major
project are on page 23.

In conjunction with our joint venture partner, Ballymore Properties,
a planning application to develop The Goodsyard, London E1 was
submitted in July 2014. The 4.2ha site in Shoreditch has the potential to
deliver a 260,000m² mixed-use development that will include 19,000m²
of retail space, 60,000m² of offices and up to 1,500 homes and will

cater for the growing Tech City media and technology start ups
attracted to the area. The regeneration will also provide substantial
public realm including a new park. The public consultation has been
completed and we are working with the local authorities. A planning
decision is targeted for late 2015.

Following approval by Barnet Council in January 2014 of a revised
planning application, work continues on the regeneration of Brent
Cross Cricklewood in north-west London. The submission followed
extensive consultation with local stakeholders and amended the
outline planning permission granted for the scheme in 2010.
A reserved matters application for the extensive highways and
infrastructure works was submitted in January 2015. A key element
of the regeneration is a 90,000m2 extension to Brent Cross shopping
centre which will deliver a world-class retail, dining and leisure
environment. The scheme will also provide new parks and community
facilities and much enhanced transport connections. In conjunction
with our joint venture partner, Standard Life Investments, we are in
the process of refining the scheme design and programme prior to
working up and submitting a reserved matters application for the
shopping centre extension. This application is anticipated for late
2015 and, subject to confirmation of CPO powers, we anticipate
a start on-site in 2017 with completion in 2020/21.

42 Hammerson plc Annual Report 2014

Development pipeline opportunities
Table Fig 25

Scheme
Italie Deux, Paris 13ème

Les 3 Fontaines, Cergy Pontoise

Orchard Centre, Didcot

Parc Tawe, Swansea

Lettable area
m2
5,100

22,000

14,000

20,600

Key facts
• Retail extension of existing shopping centre
• Progressing necessary consents to enable start on-site
• Retail and leisure extension
• Working towards obtaining the necessary consents in 2015
• Retail-led extension to existing centre
• Planning application submitted in February 2015
• A refurbishment and modernisation of existing retail park
• Planning permission granted in August 2014 for a potential

start on-site in late 2015

Silverburn (Phase 4), Glasgow

50,000

• Masterplan planning application submitted in July 2014 for

SQY Ouest, Saint Quentin-en-Yvelines

30,200

future extension of existing centre

• Masterplan also includes retail, hotel and leisure uses
• Opportunity to reposition existing shopping centre, creating

a leisure-led destination

Victoria Gate, Leeds (Phase 2)

73,000

• Planning consent for retail-led scheme, including up to 2,700

WestQuay Watermark, Southampton (Phase 2)

58,000

Total

272,900

We have a number of potential pipeline schemes which we continue
to advance. These include new-build and extension projects across
all three of the Group’s sectors: UK and French shopping centres,
and UK retail parks.

The precise nature and design of these schemes are fluid and the
speed of delivery will be dependent on a variety of factors including:
planning permission, retailer demand, anchor tenant negotiations,
land assembly, and scheme design. The Group’s principal opportunities
are shown in Table 25 above.

REFURBISHMENTS
The £100 million refurbishment programme across the majority of
our French centres, which began in 2013, was completed during 2014.
The programme introduced upgraded interiors, new services and
improved leisure provision to our centres.

Following completion of the programme we intend to undertake
increased levels of tenant rotation across the French portfolio to further
enliven the retail offer and work up refurbishment projects for San
Sébastien, Nancy; Villebon, Paris and Les 3 Fontaines, Cergy Pontoise.

ACQUISITIONS AND DISPOSALS
We closely monitor the performance of our existing portfolio to ensure
that it meets our strategic requirements. Proceeds from disposals may
be reinvested in the investment portfolio or used to fund acquisitions
or developments to generate higher returns.

In January 2014, together with our 50% partner Aviva Investors, we
sold Queensgate Shopping Centre in Peterborough. Hammerson’s
share of net rental income from the asset in 2013 was £6 million and
we received net proceeds of £99 million.

car park spaces

• Freehold control of site obtained
• Outline planning consent for mixed use scheme
• Council owned land, with joint review of scheme under way

We acquired Saint Sébastien shopping centre in Nancy, north-east
France for £109 million in February 2014. The city has an affluent
population and is advancing the Nancy Grand Coeur regeneration
project which should benefit the centre’s footfall. The 24,000m2 centre
has passing rents of £6 million and there is scope for a number of
future asset management initiatives to improve the centre and
increase income.

In September, we completed the sale of the Group’s 50% stake
in 10 Grosvenor Street, W1 for £54 million. The building was our
remaining office asset and is currently Hammerson’s head office,
ahead of the relocation to Kings Place, King’s Cross in June.

Also in September, we bought our joint venture partner’s 40% interest
in Highcross, Leicester for £180 million. The 105,600m2 centre is
anchored by John Lewis, generates passing rents of £27 million and
was extended and refurbished by Hammerson in 2008. There are
a number of asset management opportunities which will attract
retailers and consumers and to grow the income stream.

Since the year end, in conjunction with our joint venture partner
Allianz, we completed the acquisition of Nicetoile shopping centre
in Nice. The 17,600m2 centre was recently refurbished and trades on
four levels. It attracts 13 million visitors each year and generates rental
income of £13 million. Allianz has a 90% stake in the centre, with
Hammerson holding 10% and the management contract for the
property. Our share of the acquisition costs was £24 million.

www.hammerson.com 43

STRATEGIC REPORT
BUSINESS REVIEW CONTINUED

PREMIUM OUTLETS
Hammerson is the only European REIT to have a strategic exposure
to the premium outlets market which comprises outlet centres of
institutional investment quality. We believe the outlet centre market is
a critical distribution channel for retailers, in particular for luxury and
fashion brands, as it complements their multichannel strategies and
enables effective inventory management. The European outlet centre
market is highly fragmented, but well managed high-quality centres
can deliver high sales densities and annual total returns above 10%.

The Group has been increasing its exposure to the premium outlet
sector over recent years and has investments through its long-term
holding in Value Retail and also a new joint venture, VIA Outlets. At
31 December 2014, these investments represent 13% of the Group’s
total property value.

Value Retail (VR)
VR operates nine luxury outlet Villages in the UK and Western Europe
with 170,000m2 of floor space and over 1,000 stores. Their Villages,
which include Bicester Village, Oxfordshire and La Vallée Village, Paris,
serve the luxury, fashion and international shopping-tourism customer
and are amongst the best outlet centres in Europe. The Group’s stake
in VR has increased over recent years but remained unchanged during
2014. We hold a 22% interest in the VR holding companies as well
as direct investments in certain Villages. When these holdings are
combined, the Group has an economic interest in the net assets of
VR of approximately 38%. Hammerson also provides loan finance
to VR which totalled £64 million at 31 December 2014.

Our investment in VR is consistent with our high-quality property
strategy. During 2014, La Roca Village, Barcelona opened a 5,800m2
extension, and this, together with the introduction of Sunday trading,
has led to significant footfall growth. Further expansions are on-site
or planned with work having commenced on a 5,800m2 extension
at Kildare Village, Dublin which will add 36 new international brands
when open at the end of 2015. Planning has been granted for a
4,300m2 extension at Bicester Village to add new retail and catering
and improve road access to the Village.

The Villages have continued to perform strongly during 2014 with
brand sales growth of 11% across the portfolio. During the year, around
21% of the like-for-like retail space in the Villages was remerchandised,
with around half of that resulting from the introduction of new brands.
Occupancy currently stands at 95%. Future growth is expected to
be supported by global tourism, new emerging brands, consumers’
more considered approach to shopping and the importance of
perceived value.

At 31 December 2014, the nine Villages were valued at €3.7 billion,
reflecting underlying valuation growth of 12.1%. VR’s EBITDA in 2014,
as prepared under IFRS, grew by 13.4% to €125.4 million. Hammerson’s
share of the property valuations and EBITDA were £885 million and
£33.5 million respectively.

We continue to benefit from our relationship with VR management
and utilise the knowledge gained to enhance the positioning of the
Group’s portfolio, for example at Victoria Gate, Leeds. Hammerson
enjoys a supportive relationship with VR, whose expansion into
China includes Villages at Shanghai and Suzhou.

VIA Outlets (VIA)
In September we announced the Group had invested in a 47% stake
in a new outlet joint venture, VIA Outlets, formed in partnership
with APG, Value Retail and Meyer Bergman. The new venture aims
to acquire existing European outlet centres with strong catchments
and potential for growth.

During 2014, VIA acquired six outlet centres including Batavia Stad,
near Amsterdam and Alcochete, Lisbon. The most recent acquisition is
Landquart, in Switzerland where Hammerson’s share of the acquisition
costs was £28 million. This centre is 21,000m2 and has 90 retail units
including Calvin Klein, Desigual and Hugo Boss and it benefits from its
proximity to the wealthy catchment of Zurich as well as tourists visiting
the region.

In total the VIA outlet centres provide 180,000m2 of floor space and
over 600 stores and were valued at €393 million at 31 December 2014.
Hammerson’s share of the property valuations and post acquisition
operating profit were £143 million and £2.1 million respectively.

The operational performance of VIA is summarised in Table 26 below:

Table Fig 26

Operational performance*
Brand sales (€m)
Brand sales growth (%)
Footfall (millions)
Average spend per visit (€)
Average sales densities (€000/m2)
Occupancy (%)

VIA Outlets

2014
386
13
11.7
33
2.9
92

* The above figures reflect overall portfolio performance, not Hammerson’s

ownership share and the year-on-year figures include pre-acquisition performance.

The VIA partners intend to make further acquisitions in Europe with the
strategy of creating a c. €1 billion portfolio. In addition to building up
the portfolio, the focus in 2015 will be on improving the performance
of the outlet centres by changing the tenant mix; enhancing the
leisure and food offers; right-sizing some of the units; creating flagship
units for key brands; and targeted marketing to increase tourist visits.
Hammerson intends to contribute personnel and expertise to VIA to
support this strategy.

Page 53 of the Financial Review provides further information on how our
investments in Value Retail and VIA Outlets have impacted the Group’s
financial performance during 2014.

44 Hammerson plc Annual Report 2014

INCOME
GENERATION

We actively manage our portfolio to generate
sustainable income growth.

We recognise the importance of strong
retailer relationships and the need to deliver
tenant rotation to enhance the vibrancy
of the consumer experience.

Technology is becoming an integral part
of the shopping experience. Consumers are
shopping across multiple channels and the
ability to engage with consumers is the
key to success in a multichannel age.

Introduction
Retailers are focusing their space requirements on high-quality, prime
shopping centres, conveniently located retail parks and premium
outlets of the types invested in by Hammerson. Retailers are making
these choices because they understand the changing preferences of
consumers.

As retail specialists, we understand that in order to keep generating
income growth, we need to stay ahead of consumer and retail trends
and supporting technologies. Our innovation agenda will ensure that
the Group’s properties are best-in-class and ready to deliver
exceptional performance in this new retail environment.

This specialist approach, alongside improving consumer confidence,
low interest rates and inflation, and the limited delivery of new retail
space, combine to create the conditions for ERV growth.

Adapting to retail in a multichannel age
Consumers are increasingly considered in their approach to shopping.
They have more choices than ever before and are using multiple
channels to research, buy and complete their purchases. Retailers are
adapting their offer to react to these changes. We are working to a
tightly defined strategy to ensure that our product offer of proactively
managed, outstanding retail space meets the demands of both
consumers and retailers.

We actively rotate tenants to ensure the retail offer is optimised and
enlivened at each location. Our strategy also recognises the need
for superb customer service and facilities that make shopping easy,
more convenient and enjoyable throughout the day. Our catering
and leisure offers, accessible parking, customer information and
world-class facilities are constantly refined and improved.

In 2014, we launched a click & collect service at Brent Cross, in
partnership with Collect+, which is already performing very strongly.

A core focus is the seamless integration of digitally enabled services
into our retail space which is increasingly a differentiator in the
selection of retail locations. As well as offering free high speed Wi-Fi
to our shoppers, we are upgrading our web capabilities to assist
customers with researching their shopping trips. Digital tools also
allow us to communicate with shoppers in a timely, relevant and
highly targeted way, driving loyalty and spend.

Following successful trials of our award winning mobile app in
2013 at The Oracle, Reading and Highcross, Leicester, we launched
our updated platform ‘Plus’ at Les Terrasses du Port, Marseille in May.
This mobile app allows us to communicate directly with shoppers in
real-time, with personalised content and offers based on their interests,
browsing and redemption history, and stores visited. The innovative
geo-location technology uses Bluetooth low energy beacons.

We have strengthened our team with digital and loyalty experts
and invested in class-leading analytic platforms to ensure that the
true value of this data is realised. The ‘Plus’ app, upgraded websites
and analytics tools will be rolled out across our shopping centre
portfolio in 2015.

In addition to the new digital platform, we continue to deliver
engaging content across social media channels to more than one
million followers, as well as supporting successful physical events that
enliven our mall space such as Autumn Fashion Fix, Student Nights,
Love Food and The Big Positive Weekend.

www.hammerson.com 45

STRATEGIC REPORT
BUSINESS REVIEW CONTINUED

OPERATIONAL PERFORMANCE
Presentation of information
This overview provides information on a number of key operational
metrics which management monitor to ensure the portfolio
generates sustainable income growth. The information presented
is consistent with our management reporting systems and includes
metrics prepared on a proportionally consolidated basis. However,
it excludes metrics from our investments in the premium outlet
shopping sector which are shown in the previous section of the
Business Review, as the Group has less day-to-day management
involvement and the sector has different operational characteristics
from the Group’s shopping centre and retail parks interests. 2013
figures also exclude the office properties which were sold and
treated as discontinued during that year.

Operational performance summary
The table below shows the strong operational performance achieved
during 2014, demonstrating our ability to adapt to the changing retail
environment. The highlights are an increased level of letting activity
across the portfolio and the recovery in tenant sales in the UK. The
weaker French sales figures reflect the more challenging economic
environment in France, although other metrics remain robust.

Table Fig 27
Operational performance
Net rental income growth – like-for-like (%)
Occupancy (%)
Leasing activity – new rent from units
leased (£m)
Area of new lettings (000m2)
Leasing v ERV (% above
31 December 2013/2012 ERV)
Leasing v previous passing rents (%)
Like-for-like ERV growth (%)

UK
France

Retail sales change (%)*

UK
France

Footfall change (%)*

UK
France

Occupational cost ratio (%)*

UK
France

Collection rates (%)

UK
France

Non-rental income (£m)

UK
France

* Shopping centres only.

2014
2.1
97.5

2013
2.1
97.7

29.5
178.9

23.9
153.9

6
5

1.8
0.2

2.6
(1.0)

(1.3)
1.5

20.8
14.3

98
84

21.6
3.1

2
2

(0.2)
1.3

(0.4)
(2.7)

(1.0)
(4.9)

21.5
13.9

99
87

20.4
1.4

Further information is provided in the Portfolio Analysis tables
on pages 158 to 163.

46 Hammerson plc Annual Report 2014

Like-for-like net rental income
On a like-for-like basis, net rental income generated by the continuing
portfolio grew by 2.1% during 2014. UK shopping centre growth of
2.2% was driven by leasing activity, rent reviews and increased turnover
rent and commercial income, notably at Cabot Circus, Highcross and
Union Square. However, these positive factors were partially offset by
the impact of lease expiries and tenant reconfigurations.

Leasing activity associated with tenant rotation at the newly
refurbished centres was the principal factor behind French shopping
centre income growth of 2.0%. UK retail parks recovered from a flat
year in 2013 to record like-for-like growth of 2.4%, again due to leasing
activity and the permanent letting of space which had previously been
impacted by retailer administrations.

Table Fig 28

Like-for-like net rental
income growth (%)
31 December 2014
30 June 2014
31 December 2013

UK
shopping
centres
2.2
2.0
3.2

France
retail
2.0
1.1
2.6

UK retail

parks Other UK
(1.2)
2.4
(0.2)
1.2
(4.0)
0.2

Total
portfolio
2.1
1.5
2.1

Further analysis of like-for-like net rental income by business segment is
on page 160.

Occupancy
At 31 December 2014, occupancy was 97.5%, ahead of our 97.0%
target. French occupancy fell marginally during the year as a result
of lease expiries, although this will enable future tenant rotation.

Table Fig 29

Occupancy (%)
31 December 2014
30 June 2014
31 December 2013

UK
shopping
centres
98.1
97.7
98.1

France
retail
96.6
96.6
97.4

UK retail

parks Other UK
91.3
98.5
91.6
98.2
91.3
98.4

Total
portfolio
97.5
97.2
97.7

Further analysis of occupancy by business segment is on page 158.

Leasing
Leasing activity increased during 2014, with 413 leases signed
representing annual rental income of £29.5 million and 178,900m2
of space. This compares to 364 leases, £23.9 million of income and
153,900m2 in the prior year. For principal leases in the Group as a
whole, rents secured were 5% greater than previous passing rents
and 6% greater than December 2013 ERVs.

We continue to be encouraged by improving retailer demand and
there is an improving trend of ERV growth. Across the portfolio ERVs
grew by 1.5% during 2014, with growth of 0.9% in the second half
of the year. This annual growth varied across the Group’s three sectors,
with UK shopping centres seeing growth of 2.6% and retail parks
0.5%, whilst the French shopping centres suffered from low
indexation, achieving ERV growth of 0.2%.

Non-rental income
Non-rental income, being net income from car parks and the sale
of advertising and merchandising opportunities, continues to grow
across the portfolio and is included within ‘net rental income’.

In the UK, non-rental income increased by 5.9% to £21.6 million,
principally reflecting additional income at Union Square, Bullring
and Highcross, partly offset by the impact of the sale of Queensgate
at the beginning of 2014. In France, non-rental income increased
by £1.7 million to £3.1 million, reflecting additional income from the
new car park at Les Terrasses du Port.

Collection rates and tenant covenants
Our collection rates remain strong and demonstrate the underlying
strength of the Group’s income stream. 98% of UK billings and 84% of
French billings were collected within 14 days of the December 2014
due date.

Our credit control function assesses the covenant strength of
prospective tenants and monitors the credit standing of key retailers
using a credit rating agency. The agency has a four-point indicator
scale which runs from one (‘low risk’) to four (‘high risk’). As at
31 December 2014, weighted by passing rent, 90% of UK tenants
and 83% of French tenants were rated within the two lowest
risk categories.

Incidents of tenant administrations have reduced during 2014 and, at
31 December 2014, 55 retail units were let to tenants in administration,
of which 42 continued to trade. In total, 1.0% of the Group’s total
passing rents was derived from tenants in administration, and for those
tenants no longer trading the figures was just 0.4%.The equivalent
figures at 31 December 2013 were 1.2% and 0.5% respectively.

Lease expiries and rent reviews
Our prime property portfolio provides a secure income stream, with
a weighted average unexpired lease term of eight years. However,
there are a significant number of leases across the portfolio which
will be subject to rent reviews, break clauses or expiry in the near
term. These provide the opportunity to secure additional income
for the Group, if reviews or new leases are agreed at ERV.

Over the three years to 31 December 2017, leases with current rents
passing of £78.0 million are due to expire, or are subject to tenants’
break clauses. If these were renewed at ERV, additional annual rental
income of £7.4 million would be secured.

Including outstanding reviews and those falling due over the next
three years, leases in the UK with rents passing of £150.2 million are
subject to review and, if reviewed at ERV, would generate additional
annual income of £9.6 million. Rents in our French portfolio are subject
to annual indexation, which is nil in 2015 for the majority of leases.
These figures do not represent a forecast and take no account of void
periods, lease incentives or potential changes to future rental values.

Further information on lease expiries and rent reviews
is included on page 159.

Retailer sales, footfall and occupancy cost
The picture for sales at our UK shopping centres improved during the
year, with tenant sales growth, calculated on a same centre basis, of
2.6%, compared to a 0.4% reduction in sales in 2013. Jewellery, sports
and outdoors and health and beauty sales recorded the highest sales
growth during 2014. Footfall in the UK reduced by 1.3%, however,
consumers are spending more time and money during each visit to
our centres.

In France, the poor economic environment continued to hinder retail
sales, and same centre sales fell by 1.0% during 2014, compared to a
2.7% decline in 2013. Footfall increased by 1.5% in 2014, compared
to a decline of 4.9% in 2013. This is an encouraging trend with
shoppers attracted to our centres following the completion of the
refurbishment programme.

The occupational cost ratio, defined as tenant sales as a proportion
of total occupancy cost (rent, business rates and service charge) fell
in the UK from 21.5% to 20.8% as a result of the growth in tenant sales
during 2014. In France, the ratio was 14.3%, an increase from 13.9% at
the beginning of the year, this change is consistent with the reduction
in retailer sales during the year.

www.hammerson.com 47

STRATEGIC REPORT
BUSINESS REVIEW CONTINUED

CAPITAL
STRENGTH

We maintain a strong balance sheet with
our prime property portfolio supported
by a robust capital base. Our unsecured
financing strategy provides the Group with
financial security and the flexibility and
capacity to deliver our business objectives.
It also enables the Group to act swiftly and
decisively when opportunities arise to further
enhance performance.

PROPERTY PORTFOLIO
Presentation of information
As in the previous ‘Income generation’ section on page 45, the
information presented in this section of the Business Review is
prepared on a proportionally consolidated basis and, unless stated,
excludes our investments in the premium outlet shopping sector.
The 2013 figures also exclude the office properties which were sold
and treated as discontinued in that year.

Portfolio valuation
During 2014, the valuation of the portfolio increased by £776 million,
including an underlying valuation increase of £437 million. The
movement in the portfolio valuation is set out in Table 31 above.

Table Fig 31
Movement in portfolio value in the year to
31 December 2014

Portfolio value at 1 January 2014
Valuation increase
Capital expenditure

Acquisitions
Developments
Expenditure on existing
portfolio
Tenant incentive amortisation

Capitalised interest
Disposals
Foreign exchange
Transfers
Portfolio value at
31 December 2014

Investment
£m
5,434
419

Development
£m
497
18

306
–

90
5
1
(126)
(83)
453

–
165

–
–
8
–
(27)
(453)

Total
£m
5,931
437

306
165

90
5
9
(126)
(110)
–

6,499

208

6,707

Chart 30 below analyses the sources of valuation change for the
Group’s property portfolio. During 2014, investment yields fell and
increased valuations for UK shopping centres, retail parks and French
retail properties. The yield movement for retail parks and the French
properties was weighted towards the second half of the year. The
benefit of leasing and modest rental value growth further boosted
valuations, although this was principally at the UK and French
shopping centres. In total, yield improvements accounted for
83% of the total portfolio valuation increase during 2014.

Further valuation and yield analysis is included on pages 162 and 163.

Chart Fig 30
Components of valuation change in 2014 – Total property portfolio (£m)

450

350

250

150

-50

437

361

237

184

(4)

UK shopping centres

(35)

France retail

112

137

(10)

UK retail parks

Total portfolio1

1. Total portfolio includes the valuation change of £9m for UK Other properties.

Yield

Income

Development and other

Total

48 Hammerson plc Annual Report 2014

Table Fig 32
Returns data for 2014

Return
UK portfolio income return
UK portfolio capital return
UK portfolio total return
Group income return
Group capital return
Group total return
Total shareholder return over one year
Total shareholder return over three years p.a.
Total shareholder return over five years p.a.

%
5.1
8.8
14.3
5.1
8.0
13.6
24.7
23.3
11.5

Benchmark
UK IPD All Retail Universe income return
UK IPD All Retail Universe capital return
UK IPD All Retail Universe total return
Group weighted IPD All Retail Universe income return
Group weighted IPD All Retail Universe capital return
Group weighted IPD All Retail Universe total return
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.

%
5.4
8.4
14.3
5.1
7.0
12.5
21.3
24.9
13.5

Property returns
The table above compares the financial returns generated in 2014
with benchmark IPD indices. The above returns include development
properties and the Group’s returns include those from the properties
held by its premium outlet investments in Value Retail and VIA Outlets.
The Group weighted IPD All Retail Universe total return benchmark of
12.5% is weighted 70:30 between the UK and French indices. The All
Retail Universe indices include returns from all types of retail property.

As the Annual IPD benchmarks for both countries are not available
until after this Annual Report has been published, the IPD benchmarks
have been estimated and are subject to revision. The UK IPD data is
based on the Quarterly All Retail Universe to December 2014. As there
is less data available for France, we have assumed that the French
benchmark is equal to the total return generated by our French
portfolio of 8.3%.

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 which we maintain strong working relationships.
Long-term debt principally comprises the Group’s fixed rate
unsecured bonds.

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.

The Board approves financing guidelines against which it monitors the
Group’s financial structure. These guidelines, together with the relevant
metrics, including the Group’s share of joint ventures but excluding
balances held in our premium outlet investments are summarised in
Table 33 below which illustrates the Group’s robust financial condition.

The Group’s total return was 13.6%, compared with an estimated
weighted IPD benchmark of 12.5%. The total return for the UK portfolio
was 14.3% which was in-line with the IPD index, although income
return was 30bp lower than the index which is indicative of the prime
nature of the Group’s UK portfolio. The Group’s investments in premium
outlets properties produced a total return of 19.9%.

Table Fig 33

Key financing metric
Net debt (£m) – note 25B
Gearing (%)

An analysis of the capital and total returns by business segment
is included on page 162.

SHAREHOLDER RETURNS
For the year ended 31 December 2014, Hammerson’s return on
shareholders’ equity was 16.3%. This compares to the Group’s
estimated cost of equity of 8.0%. The income element of the return
on equity tends to be relatively low given the prime quality of the
property portfolio. The capital element of the return was driven by
the portfolio’s strong valuation performance during the year.

Loan to value (%)
Liquidity (£m)
Weighted average cost
of finance (%)
Interest cover (times)
Net debt/EBITDA (times) Less than 10.0
FX hedging (%)
Fixed debt (%)

At least 2.0

80%-90%

Guideline

Maximum 85% for
an extended period
Up to 40%

31
December
2014
2,265
46

31
December
2013
2,252
56

34
648

4.7
2.8
8.0
88
79

38
716

4.8
2.8
8.2
79
70

Hammerson’s total shareholder return for 2014 was 24.7% which
outperformed the FTSE EPRA/NAREIT UK index by 340bp. Over the last
five years, Hammerson’s average annual total shareholder return has
been 11.5% compared with 13.5% for the FTSE EPRA/NAREIT UK index.

FINANCING
Our financing strategy is to generally borrow on an unsecured basis on
the strength of the Group’s covenant in order to maintain operational
flexibility. This strategy has ensured access to a wide range of debt capital
markets at competitive pricing. Borrowings are arranged to ensure an
appropriate maturity profile and to maintain short-term liquidity.

During the first half of the year, we received the funds from the
$443 million US private placement signed in November 2013. The
fixed rate senior notes mature in seven, ten and twelve years and are
denominated in US Dollar, British Pound Sterling and Euro, with the
US Dollar portion swapped to fixed rate Euro. The weighted average
coupon is fixed at 3.6% and the proceeds have been used to repay
existing floating rate debt and increase the proportion of fixed
rate debt.

In July 2014, we issued a new eight year €500 million bond at a coupon
of 2.0%. The proceeds were partly used in December 2014 to redeem

www.hammerson.com 49

STRATEGIC REPORT
BUSINESS REVIEW CONTINUED

the outstanding €480 million 4.875% coupon bond, originally maturing
in June 2015. This refinancing will result in a saving of 2.875%, or
€14 million, per annum and is in line with the Group’s objectives to
manage down the cost of debt and extend the debt maturity profile.
At 31 December 2014, the average maturity of the Group’s debt was
6.5 years. The maturity profile of the Group’s borrowings is shown
in Chart 34 below.

Funds raised through the bond issue and, the share placing in
September, were used in the short term to repay floating rate debt on
the revolving credit facilities at low floating rates of interest. The timing of
this has led to the weighted average cost of finance rising from 4.6% at
the half year to 4.7% for the full year. However, following the €480 million
bond redemption in December, the running cost of debt fell to below
4.3%. We believe that the sterling and euro bond markets will continue
to be available in the medium term to refinance existing bonds as they
mature and we will access these markets as appropriate. In addition,
bank lending markets have continued to improve during 2014, with
falling margins, and we expect to be able to take advantage of this
situation with upcoming refinancings of unsecured credit facilities.

Our policy for interest rate hedging is to fix the rate of at least 50%
of debt, although we may increase this at higher gearing levels. At
31 December 2014, 79% of debt was fixed, compared with 70% at
the beginning of the year. We expect interest rates to increase in the
medium to long term and our fixed/floating profile will partly
mitigate that risk.

Exposure to exchange translation differences on euro-denominated
assets is managed through a combination of euro borrowings and
derivatives. At 31 December 2014, 88% of euro-denominated assets
were hedged by euro-denominated debt, compared to 79% at the
beginning of the year. The purpose of this increase was to offset the
impact of increased euro-denominated rental income following the
opening of Les Terrasses du Port in May. Interest on euro debt acts as a
hedge against exchange differences arising on rental income from our
French business. On average during 2014, approximately 82% of our
French income was hedged in this way. However, falling euro interest

Chart Fig 34
Debt maturity proﬁle at 31 December 2014 (£m)

rates have led to higher euro-denominated earnings and the hedge of
euro income is forecast to fall to approximately two-thirds during 2015.

The Group’s unsecured bank facilities and the US private placement
senior notes contain financial covenants, requiring 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 not be 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% and have no covenant for interest cover. The
calculation of these ratios includes the Group’s share of joint ventures.
Hammerson’s financial ratios are comfortably within these covenants.
Fitch and Moody’s rate Hammerson’s unsecured credit as A- and Baa2
(positive outlook) respectively. Moody’s upgraded their outlook from
stable to positive in June 2014.

Premium outlets
As explained at the beginning of this section, we do not proportionally
consolidate our two premium outlet interests, Value Retail and VIA
Outlets. These are financed independently from the rest of the Group’s
financing arrangements. Both VR and VIA utilise a combination of
secured borrowings and partner loans to fund their structures. At
31 December 2014, Hammerson’s share of VR’s and VIA’s net debt was
£275 million and £31 million respectively. If the Group’s share of net
debt, properties and other net assets of the two premium outlet
investments were included within the Group’s financing metrics, the
Group’s proforma gearing would increase from 46% to 52%, whilst the
loan to value ratio would reduce from 34% to 33%.

EQUITY ISSUE
Hammerson raised gross proceeds of £399 million in September 2014
through a successful share placing. 71.3 million shares were issued at
£5.60 each, representing a 4% discount to the prevailing share price.
The proceeds were used to finance the £180 million acquisition of a 40%
stake in Highcross, Leicester and our 47% investment in VIA Outlets. The
remaining proceeds will fund the Group’s development expenditure.

1,000

800

600

400

200

339

272

43
166

107

2015

2016

2017

143

2018

385

383

248

297

198

123

131

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

Bank debt drawn

Secured debt

Euro bonds

Sterling bonds

US Private Placement

Undrawn facilities

50 Hammerson plc Annual Report 2014

FINANCIAL REVIEW

The Group’s strategic priorities of high-quality property, income generation and capital strength
provide the basis to enhance the Group’s financial performance and 2014 has been another
successful year for Hammerson.

Presentation of financial information
The Group’s financial statements are prepared under IFRS and for
2014 the Group has adopted IFRS 11 Joint Arrangements. The new
standard requires that the Group’s joint arrangements, which were
previously proportionally consolidated, are classified as joint ventures
and are equity accounted. This presentation is consistent with the
treatment of the Group’s investment in Value Retail, which is classified
as an associate.

The income statement on page 106 and the balance sheet on page
108 include single lines showing the Group’s share of post-tax profit
and the net investment in joint ventures and associates respectively.
The Group’s profit for the year and equity shareholders’ funds are
unaffected by the presentational changes associated with the new
accounting standard. Further details of the impact of adopting this
accounting policy are given in note 1 to the accounts on page 113.

Adjusted profit is a key measure of the Group’s financial performance
as it reflects the underlying earnings of the Group. Details of
adjustments in calculating adjusted earnings are given in note
11A to the accounts on page 128.

As explained in the Business Review on page 46, management
continues to monitor the performance of the business principally
on a proportionally consolidated basis, except for its interests
in premium outlets through its investments in Value Retail and
VIA Outlets where the Group has less day-to-day involvement
in operational activities. The commentary in this Financial Review
is consistent with this approach.

Table 35 below highlights the presentational impact of the adoption
of IFRS 11 on the Group’s proportionally consolidated adjusted profit.

Table Fig 35
Adjusted profit analysis

Gross rental income, after rents payable
Property outgoings
Net rental income
Administration expenses
Net finance costs
Share of results of joint ventures1
Share of results of associate
Profit from discontinued operations
Adjusted profit before tax
Tax charge
Non-controlling interests
Adjusted profit for the year
Adjusted EPS, pence
Total dividend per share, pence

Notes

Year ended 31 December 2014

Year ended 31 December 2013

Reported
Group
£m
205.9
(17.8)
188.1
(42.6)
(97.4)
114.8
16.0
–
178.9
(0.9)
(3.7)
174.3
23.9p
20.4p

Share of
Property joint
ventures
£m
136.3
(18.8)
117.5
(0.9)
(2.7)
(113.9)
–
–
–
–
–
–

Proportionally
consolidated
£m
342.2
(36.6)
305.6
(43.5)
(100.1)
0.9
16.0
–
178.9
(0.9)
(3.7)
174.3
23.9p
20.4p

Reported
Group
£m
175.5
(15.3)
160.2
(41.1)
(88.6)
121.1
13.4
3.9
168.9
(0.8)
(3.6)
164.5
23.1p
19.1p

Share of
Property joint
ventures
£m
143.8
(21.2)
122.6
(1.0)
(1.9)
(121.1)
–
1.4
–
–
–
–

Proportionally
consolidated
£m
319.3
(36.5)
282.8
(42.1)
(90.5)
–
13.4
5.3
168.9
(0.8)
(3.6)
164.5
23.1p
19.1p

Notes to the
Accounts

13B

14A

2,11

1. The £0.9 million shown as “Share of results from joint ventures” for the year ended 31 December 2014 represents the share of adjusted profit from the Group’s investment in VIA

Outlets which is not proportionally consolidated. All other joint venture interests are proportionally consolidated in this analysis.

Further analysis on the proportionally consolidated income statement is in
note 2 to the accounts on pages 117 and 118.

www.hammerson.com 51

STRATEGIC REPORT
FINANCIAL REVIEW CONTINUED

Profit before tax
The Group’s profit before tax for 2014 was £703.1 million compared
with £341.2 million in 2013, the latter figures includes discontinued
operations. As analysed in Table 36 below, the year-on-year increase
reflected portfolio revaluation gains of £436.8 million in 2014,
compared to £90.3 million in 2013. A good operational performance
also contributed to the increase in profit.

Other profit variances related to the net loss of £6.5 million on the sale
of properties and joint venture interests in 2014 compared to a profit
of £11.7 million in 2013 and a £13.7 million increase in the fair value of
derivatives compared to a decrease of £13.9 million in the prior year.

Table Fig 36
Analysis of profit before tax

Proportionally consolidated, excluding
premium outlets and including discontinued
operations in 2013
Adjusted profit before tax
Adjustments:
(Loss)/Gain on the sale of properties
and joint ventures interests

Net revaluation gains on
property portfolio
Net revaluation and other losses
in joint venture not proportionally
consolidated – VIA Outlets
Net revaluation and other gains
in associate – Value Retail
Bond redemption – premium and costs
Net one-off restructuring charge
Change in fair value of derivatives
Profit before tax

Year ended
31 December
2014
£m
178.9

Year ended
31 December
2013
£m
168.9

(6.5)

11.7

436.8

90.3

(2.0)

–

93.9
(8.7)
(3.0)
13.7
703.1

88.1
(3.9)
–
(13.9)
341.2

Notes

2,13B

2,14A

11A

11A,13B

At £178.9 million, adjusted profit before tax was £10.0 million up on
2013, an increase of 5.9%. Table 37 below reconciles the movement
in adjusted profit before tax between the current and prior years.
The principal contributors to the increase were new income from
acquisitions and developments, additional income from the like-for-
like portfolio and Value Retail. These were partly offset by higher
financing costs associated with reduced levels of floating rate debt.

Table Fig 37
Reconciliation of adjusted profit before tax

Proportionally consolidated, excluding premium
outlets and including discontinued operations in 2013
Adjusted profit before tax 2013
Net financing expense
Net administration expense
Net investment and development activity
Like-for-like net rental income increase
VIA EPRA earnings
Value Retail EPRA earnings
Impact of share placing
Exchange and other
Adjusted profit before tax 2014

52 Hammerson plc Annual Report 2014

Adjusted
profit before
tax
£m
168.9
(4.7)
(0.9)
6.8
5.4
0.9
2.6
1.4
(1.5)
178.9

Adjusted EPS
pence
23.1
(0.7)
(0.1)
1.1
0.7
0.1
0.3
(0.5)
(0.1)
23.9

In 2014, adjusted earnings per share increased by 3.5% to 23.9 pence,
reflecting the changes noted in Table 37. Calculations for earnings per
share are set out in note 11A to the accounts on page 128.

Table Fig 38
Net rental income

Proportionally consolidated, excluding
premium outlets and including
discontinued operations in 2013
Like-for-like investment
properties
Acquisitions
Disposals
Developments
Exchange
Net rental income

Year ended
31 December
2014
£m

Year ended
31 December
2013
£m

Change
£m

266.4
16.3
2.0
20.9
–
305.6

261.0
5.5
16.7
3.8
3.2
290.2

5.4
10.8
(14.7)
17.1
(3.2)
15.4

In 2014, the portfolio as a whole generated net rental income of
£305.6 million, compared with £290.2 million in the prior year. Growth
of 2.1% in income from the like-for-like portfolio was principally
driven by leasing activity at Cabot Circus and Italie Deux. Net rental
income also increased with additional income of £17.1 million from
developments, principally Les Terrasses du Port and £10.8 million from
acquisitions. This was partly offset by £14.7 million of income lost
from disposals, principally Queensgate sold in January 2014 and the
remainder of the office portfolio sold in June 2013.

Further analysis of net rental income by business segment is on page 160.

Administration expenses
As announced with the 2013 annual results, we intended to
rebalance the Group’s cost base by increasing resources to grow
the development and digital marketing areas of our business.

During 2014 a number of initiatives were implemented and we have:
consolidated senior positions in London; contracted to relocate our
London head office to King’s Cross in June; reduced employee share
scheme benefits; closed the UK defined benefit pension scheme to
future accrual; and transferred a number of head office roles to a new
operations centre in Reading.

We have incurred a net £3.0 million one-off restructuring charge
which has been recognised within administration expenses, but
excluded from adjusted earnings. The gross cost is £5.5 million, of
which £3.0 million relates to occupational changes, £1.5 million to staff
restructuring and £1.0 million to the other initiatives. These costs are
partly offset by a curtailment gain of £2.5 million recognised on the
closure to future accrual of the defined benefit pension scheme.

We anticipate constraining total operating costs, whilst increasing
rental income to further improve the cost ratio over the next few years.

Administration expenses are analysed in the following table.

Table Fig 40

Table Fig 39
Administration expenses

Proportionally consolidated, excluding premium
outlets and including discontinued operations in 2013
Employee and corporate costs
Management fees receivable
Administration expenses
Less:

Restructuring cost
Pension curtailment gain
One-off restructuring charge
Underlying net administration expenses

Year ended
31 December
2014
£m
52.1
(5.6)
46.5

Year ended
31 December
2013
£m
49.2
(6.9)
42.3

(5.5)
2.5
(3.0)
43.5

–
–
–
42.3

In 2014, underlying administration expenses, net of management
fees receivable, were £43.5 million, an increase of £1.2 million, or 2.8%,
compared with 2013. The increase was principally due to marginally
higher staff costs and reduced management fees associated with
joint venture disposals and an outperformance fee received in 2013.

Cost ratio
The EPRA cost ratio for the year ended 31 December 2014 is 23.4%,
a reduction of 120bp from 24.6% for 2013. The ratio is calculated as
total operating costs, including the cost of vacancy, as a percentage
of gross rental income and the 2013 ratio is for continuing operations.
The reduction in 2014 reflects a £22.9 million increase in gross rental
income whilst operating costs increased by £1.5 million.

The 2014 ratio has been adjusted to exclude the £3.0 million
one-off net restructuring charge explained on page 52. Including
this item would increase the 2014 cost ratio to 24.3%.

The ratio is not necessarily comparable between different companies
as business models and expense accounting and classification
practices vary.

The Cost ratio calculation is shown on page 161.

Share of results and net assets from investments in
premium outlets – Value Retail and VIA Outlets
The operating performance of our investments in Value Retail and VIA
Outlets is described on page 44 of the Business Review.

As explained above, for the management reporting purposes we
do not proportionally consolidate the results of these interests as
the Group has less day-to-day involvement in these operations.

Value Retail (VR)
As the Group has significant influence over the operations of Value
Retail PLC and its associated entities, our investment in VR is treated
as an associated undertaking and equity accounted. VR’s contribution
to the Group’s income statement and balance sheet is set out in
Tables 40 and 41.

Value Retail – Adjusted earnings analysis
Income statement
Share of results of associate
Less: EPRA adjustments
Adjusted earnings
of associate

Interest receivable
Total impact of VR on income
statement – adjusted basis

Notes

14A

Within net
finance costs

Year ended
31 December
2014
£m

Year ended
31 December
2013
£m

109.9
(93.9)

101.5
(88.1)

16.0

5.8

21.8

13.4

5.6

19.0

Table Fig 41

Value Retail – EPRA NAV analysis
Balance sheet
Investment in associate
Add: EPRA adjustments
EPRA adjusted investment
in associate
Loan to VR
Total impact of VR on
balance sheet – EPRA basis

31 December
2014
£m

31 December
2013
£m

Notes

14B

628.8
31.9

660.7
63.5

545.4
19.7

565.1
68.7

724.2

633.8

In 2014, EPRA net income from our investment was £21.8 million,
or 3.0 pence per share, compared with £19.0 million, or 2.7 pence per
share in 2013. The uplift in income reflects the continued brand sales
growth driving additional rental income.

During 2014, on an EPRA adjusted basis, the value of the Group’s
investment in VR increased by £95.6 million. This was principally due to
the valuation uplift within the VR property portfolio, the Group’s share
of which was £111.1 million.

Including the Group’s loan to VR, our net interest at the end of 2014
was valued at £724.2 million on an EPRA basis, equivalent to 92 pence
per share.

VIA Outlets (VIA)
The Group acquired a 47% stake in VIA Outlets in July, which is a
joint venture formed in partnership with APG, Value Retail and Meyer
Bergman. VIA acquired six assets during 2014 and for management
reporting purposes we do not proportionally consolidate the results
of VIA and instead using equity accounting.

In 2014, VIA contributed £0.9 million to EPRA earnings. At 31 December
2014, the Group’s investment in VIA totalled £104.2 million, or
£108.2 million on an EPRA NAV basis excluding deferred tax, goodwill
on acquisition and the fair value of financial instruments. Further details
of the Group’s interest in VIA are shown in Note 13 to the accounts.

Finance costs
We reduced the average cost of borrowings for the Group to
4.7% in 2014 from 4.8% in the prior year. This was primarily due to the
increased use of floating rate debt during the year. The €500 million
bond issue in July and earlier $443 million US private placement have

www.hammerson.com 53

STRATEGIC REPORT

FINANCIAL REVIEW CONTINUED

been retained at fixed rates of interest. Underlying finance costs,
comprising gross interest less finance income were £109.2 million
compared with £103.6 million in 2013.

Interest capitalised during the year was £8.8 million and related
principally to the developments of Les Terrasses du Port, which
completed in May, and Victoria Gate in Leeds.

Tax
The Group is a UK REIT and French SIIC for tax purposes and hence is
exempt from corporation tax on rental income and gains arising on
property sales. The tax charge at 31 December 2014 remains low at
£1.0 million, of which £0.1 million relates to deferred tax.

Dividend
The Directors have proposed a final dividend of 11.6 pence per share.
Together with the interim dividend of 8.8 pence, the total for 2014 is
20.4 pence, representing an increase of 6.8% compared with the prior
year. The final dividend is payable on 24 April 2015 to shareholders on
the register at the close of business on 13 March 2015 and 2.0 pence
will be paid as a PID, net of withholding tax where appropriate, with
the balance of 9.6 pence paid as a normal dividend. As has been the
case in recent years, there will be no scrip alternative although the
dividend reinvestment plan continues to be available to shareholders.

Balance sheet
During 2014, equity shareholders’ funds increased by £914 million to
£4,974 million at 31 December 2014.

Net assets, calculated on an EPRA basis, were £4,999 million, an
increase of 22.4% during the year. On a per share basis, net assets
increased by 65 pence, or 11.3%, to £6.38 and the movement
during the year is shown in Table 42 below:

Table Fig 42
Movement in EPRA net asset value

Proportionally consolidated
31 December 2013

Revaluation – property portfolio
Revaluation – investment in Value Retail
Revaluation – investment in VIA Outlets
EPRA profit for the year
Dividends
Equity share issue (net of costs)
Exchange and other
31 December 2014

Net assets*
£m
4,083

EPRA NAV*
£ per share
5.73

437
111
(2)
171
(140)
393
(54)
4,999

0.56
0.14
–
0.22
(0.18)
(0.02)
(0.07)
6.38

* Excluding deferred tax and the fair value of derivatives, calculated in accordance

with EPRA best practice as shown in note 11B.

The increase in EPRA net asset value was principally due to the
valuation surplus on the property portfolio due to yield improvements.
Other improvements resulted from the gains from our Value Retail
investment, the equity share issue and retained earnings.

Financing and cash flow
At 31 December 2014, net debt was £2,265 million, including our
share of net debt held in joint ventures which totalled £12 million.

Net debt comprised borrowings and currency swaps of £2,324 million
and cash and deposits of £59 million. During the year, net debt was
almost unchanged with a small increase of £13 million. The movement
in net debt during 2014 are summarised in Table 43 below:

Table Fig 43
Movement in net debt

Proportionally consolidated excluding premium outlets
Net debt at 1 January 2014
Acquisitions
Disposals
Development and other capital expenditure
Proceeds from equity issue (net of costs)
Net cash inflow from operations
Dividends paid
Exchange and other
Net debt at 31 December 2014

£m
2,252
414
(155)
244
(393)
(162)
139
(74)
2,265

At 31 December 2014, liquidity, comprising cash and undrawn
committed facilities, was £648 million, compared with £716 million
at the end of 2013.

Going concern
The Group’s business activities, together with the factors likely to
affect its future development, performance and position are set out
in the Business Review, this Financial Review and the Principal Risks
and Uncertainties sections of the Annual Report on pages 40 to 59.
The financial position of the Group, its liquidity position and borrowing
facilities are also described on pages 49 and 50 and in notes
17, 19 and 20 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
financial statements.

54 Hammerson plc Annual Report 2014

PRINCIPAL RISKS AND UNCERTAINTIES

MANAGING UNCERTAINTY

The management of risk is integrated with 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 framework which is
regularly reviewed by our management team.

This framework is subject to regular management review, and is
approved annually by the Audit Committee, on behalf of the Board. For
2014, we have added two new principal risk areas in relation to Tax and
Regulatory matters and Ownership structures as well as updating a
number of key risks and mitigation actions. The updated framework is
shown in the table overleaf. Macroeconomics and government policies
continue to dominate the risk landscape, particularly with the
uncertainty associated with the forthcoming UK general election and
the slow economic recovery in the eurozone. We have also included

references in the table to the pages in this Annual Report where the
risks, or the elements of the business affected by them, are discussed
further, and where relevant linked the risks with our strategic priorities.

Responsibility for risk management rests ultimately with the Board.
However, the foundations of our approach are instilled in the culture
and values at Hammerson. Improved team integration and a flat
management structure mean that the senior team is involved in
all key decision making, and risk identification and mitigation.

BOARD

– Overall responsibility for corporate strategy, governance, performance,

internal controls and risk management

– Defines the Group’s appetite for risk

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AUDIT
COMMITTEE

– Reviews effectiveness of Group’s risk management framework and internal

controls on behalf of the Board

– Ensures compliance with relevant legislation, rules and regulations

– Oversees effectiveness of the Group’s internal audit function

EXECUTIVE
MANAGEMENT
– Group Executive Committee

– Management of the business and delivery of strategy

– Monitoring of key risk indicators

– Regular reviews of the risk management framework

RISK AND
CONTROLS
COMMITTEE

– Responsible for integration of the risk management framework

throughout the business

– Monitors compliance with the Group’s internal control systems

– Management of the internal audit function

DIVISIONAL MANAGEMENT

– UK Executive
– Hammerson France
Management Board

– Responsible for implementation of risk mitigation actions and compliance

with internal controls and procedures at the operational level of the business

– Formal reviews of risk management framework to identify risk trends

– Oversight of project level risk management activities

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www.hammerson.com 55

STRATEGIC REPORT

PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED

PRINCIPAL RISKS
Risk, impact and related
strategic priority
Business strategy

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

• Shopping centre, retail parks or

premium outlet markets in UK or
France underperform relative to
other sectors or markets, eroding
shareholder value.

• Consumer spending stalls,

particularly in France, adversely
impacting future performance

Related strategic priorities

Mitigation

Further
commentary

Change from 2013

Chief
Executive’s
report
(page 4)

Our markets
(page 7)

Business
review
(page 40)

Financial
review
(page 51)

The UK economy has seen accelerated
growth, although the recovery in the
eurozone has been subdued with further
monetary stimulus expected in 2015.

Stock markets have performed strongly
despite potential uncertainty associated
with forthcoming elections. But downside
risks remain, especially given recent
election results in Greece.

Retailers are becoming more confident
in their outlook but must ensure that
their sales channels remain relevant in the
digital age and provide consumers with
the flexibility and convenience they
require. Real estate remains a cornerstone
of their plans.

• 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.

• The Group’s portfolio is diversified 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
outlets, all with experienced management.

• Stress-testing of our business model against
a severe downside economic scenario has
confirmed that the Group is robust. Low gearing,
long-term secure income streams from our leases,
the currency hedging of the value of and income
from our euro-denominated portfolio, a good
spread of debt maturities and the flexibility to
phase or halt our development programme,
all point to resilience to market shocks.

• We monitor closely developments in multichannel
retailing and introduce innovative new concepts
to our portfolio when appropriate.

Property and corporate investment

• 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.

Related strategic priorities

• 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,

with documentation supporting leases, rights
and obligations readily accessible.

• The Group’s property portfolio is high-quality,
geographically diversified and let to a large
number of tenants.

Our markets
(page 9)

Business
review
(page 43)

2014 has seen an increase in investor
demand for real estate, reinforced by
an appetite from overseas investors for
relatively safe returns from prime assets
in the UK and France. This is further
encouraged by the continuing low
interest rate and inflation environment.
These factors have contributed to a rise
in real estate values during 2014 and this
trend is forecast to continue into 2015.

However, in the event that there is further
instability in the eurozone, significant
volatility could return to financial markets
in the short to medium term, which
could have a negative effect on real
estate values.

Key to the principal risks table
Strategic priority

Change in risk from 2013

1 High-quality property

Increased

2 Income generation

Same

3 Capital strength

Reduced

56 Hammerson plc Annual Report 2014

Risk, impact and related
strategic priority
Property development

Mitigation

Further
commentary

Change from 2013

We successfully completed Les Terrasses
du Port in May and were on-site with six
projects at 31 December 2014.

Our three major London schemes have
been advanced and this coincides with
improving demand from retailers for new
prime trading locations. Local and
national politicial support is still required
to bring these schemes to fruition, and
uncertainty caused by UK elections may
act to adversely impact the delivery of
these projects.

We have also seen cost inflation in the
construction sector, fuelled by growing
demand for skills and raw materials as
economic growth returns. The recent fall
in the oil price should act to cool these
inflationary trends.

• Over-exposure to developments

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

• The Group’s exposure to developments and the
phasing of projects is considered as part of our
annual Business Plan and reviewed throughout
the year. This process also considers future
resourcing requirements.

• Poor control of the development

• We produce regular management reporting

Business
review
(page 40)

programme and failure to
address investment and
occupational market risks or
inflationary pressures results
in inadequate returns.

• Poor management and

inadequate resourcing leads
to failed projects.

• Failure to achieve key project
milestones, such as planning
consents and land acquisitions,
on a timely basis damages project
viability and corporate reputation.

Related strategic priorities

to enable effective monitoring of
development projects.

• Detailed analysis, including market research,

is undertaken prior to the approval of expenditure
on each development project.

• Where possible, guaranteed maximum price

contracts are agreed with building contractors
and fixed prices agreed for other advisers.

• Multi-disciplinary teams are assembled for each
development under a project ‘owner’, and these
are supported by external expertise.

• Constructive relationships are maintained with

local councils/government.

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

• 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.
Developments only represent 3% of the Group
property portfolio at 31 December 2014, and
leasing is progressing as expected on the six
on-site developments.

Treasury

• Breach of borrowing covenants

• We set guidelines for financial ratios which

triggers default and/or repayment
of facilities or bonds.

Related strategic priorities

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.

• Gearing stood at 46% at 31 December 2014,

significantly lower than the Group’s most stringent
borrowing covenant that gearing should not
exceed 150%. We estimate that values could fall
by 52% from their December 2014 levels before
covenants would be endangered.

Business
review
(page 49)

Notes 19
and 20 to the
accounts
(pages 140
to 141)

The improved economic picture has
supported property valuations for prime
assets and hence maintained the safety
margin for borrowing covenants.

The Group’s balance sheet and financial
ratios were further strengthened by the
£399 million share placing in September.

Interest rate and exchange risk

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

Related strategic priorities

Business
review
(page 49)

• We set guidelines for our exposure to fixed and
floating interest rates, using interest rate and
currency swaps as appropriate. At 31 December
2014, 79% of the Group’s gross debt was at fixed
rates of interest.

• Exchange risk is managed principally by matching

foreign currency assets with foreign currency
borrowings or derivatives. At the end of 2014, 88%
of the value of the Group’s euro-denominated
assets was hedged in this way.

Interest rates have remained low over
the last 12 months, and the pressure for
a near-term increase has diminished as
inflationary pressures have reduced.
However, there remains an expectation
that they will rise in the medium term.

Sterling has strengthened against the
euro during 2014 and the risk of volatility
remains at times of heightened
uncertainty in the eurozone.

www.hammerson.com 57

STRATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED

Risk, impact and related
strategic priority
Treasury (continued)

Liquidity risk

• Poor planning 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.

• 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.

Related strategic priorities

Ownership structures

Joint ventures (JV)
• Strategic differences with

joint venture partners impact
operational activities and
reduce financial performance.

• Loss of liquidity through joint

venture structures.

Related strategic priorities

Mitigation

Further
commentary

Change from 2013

Business
review
(page 49)

Lenders have become more willing
to lend during 2014, although continue
to be selective in their choice of
counterparty, and the corporate bond
market is open to borrowers with an
appropriate risk profile.

Alternatives to the traditional bank
lending and bond markets, such as
private placement, remain open to
the Group.

• 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 a proactive approach to refinancing.

• Credit ratings are set for lending counterparties

and monitored. We use diverse sources of funding.

• 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.

• While credit conditions during 2014 have been

favourable for debt issuers, there is a risk that this
could change. The Group’s recent funding strategy
has therefore sought to raise new funds to
refinance near-term maturities. This strategy was
demonstrated in 2014 by the issue of an 8-year
€500 million bond in July where the funds were
partly used in December to redeem the
outstanding €480 million 4.875% bond maturing in
June 2015. At 31 December, the Group had
liquidity of £648 million and an average debt
maturity of 6.5 years.

• The Group has a diverse range of joint venture

partners and an annual liquidity review is
undertaken. At 31 December 2014, 43% of our
properties are classified as being held within
joint ventures or associated undertakings.

• Joint venture documentation drafted to align
strategic direction and to provide liquidity
and flexibilty for partners and to protect the
Group’s ownership.

Note 13 to the
accounts
(page 131)

We have reduced the number of JVs
through the disposal of Queensgate and
10 Grosvenor Street and the acquisition
of partner shares in Highcross and
SQY Ouest.

The property market remains liquid with
a number of JV stakes, such as Cabot
Circus, having been successfully traded
on the open market.

Premium outlets
• Lack of direct control over externally
managed premium outlet interests
results in inconsistent strategies and
governance structures.

Related strategic priorities

• Strong working relationships and regular meetings
with partners to proactively manage any issues.
Formal annual business planning process used
to ensure strategic alignment.

• Influence over strategy and governance gained

Business review
(page 44)

Note 14 to the
accounts
(page 137)

through board representation for both
Value Retail and VIA Outlets.

• Entities subject to external audit and property

independently valued for Hammerson.

We continue to have a productive
working relationship with Value Retail
which is a partner in VIA Outlets.

Our investment in VIA Outlet contains
provisions to enable effective joint
governance and control to protect
the Group’s position.

58 Hammerson plc Annual Report 2014

Risk, impact and related
strategic priority
Tax and Regulatory

Mitigation

Further
commentary

Change from 2013

• Loss of tax exempt status due to

• Speculation and comment relating to changes

change in legislation.

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

• Emerging EU/UK environmental

regulation acts to disrupt
transaction processes and
increase costs.

Related strategic priorities

in tax regimes in the UK and Europe is monitored
with the help of specialist advisers.

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

• Monitoring of exposure to key regulations at
portfolio level combined with strategic plan
to mitigate. Active participation in policy
consultations and industry led dialogue with
policy makers.

Financial
review
(page 54)

Note 8 to the
accounts

(page 125)

No significant changes during 2014,
although governments continue to seek
to reduce fiscal deficits and regulators
examine 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.

Business organisation and human resources

• Management structure or

resourcing levels are inappropriate
for achieving business objectives.

• A Human Resources plan features as part of the
annual Business Plan which considers team
structures and talent management.

• Failure to recruit and retain

• The Nomination Committee approves succession

key executives and staff with
appropriate skills and calibre.

Related strategic priorities

Catastrophic event

• The Group’s operations or financial
security are significantly affected
by disruption to financial markets
following a major event such as a
power shortage, extreme weather,
environmental incident, civil
unrest or terrorist or cyber attack.

Related strategic priorities

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.

• Management competency framework launched
with management skills formally assessed with
annual appraisal process.

• Continuity plans established at both corporate

and individual property levels.

• Properties reviewed for flood risk and to ensure
appropriate defence measures and insurance
cover is in place.

• Crisis management group established with
predetermined processes and escalation.

• Physical security measures in place at properties.

• Senior management, including crisis management

group, receive media training for crisis events.

• Security threat assessed regularly through links

with security agencies.

• Insurance policies include terrorism cover.

Our people
(page 32)

Governance
(pages 60
to 74)

Remuneration
Report
(pages 75
to 93)

The recruitment market has become
more active with rising demand for good
people. This will put upward pressure
on salaries for the best candidates.

We recognise the importance of
motivating and developing our staff
and have plans in action to help to
mitigate the impact of third party
recruitment approaches.

Whilst the overall risk of a major incident
remains low, assessments for terrorist and
cyber risks indicate a heightened risk
status in both the UK and France.

2014 STRATEGIC REPORT
Pages 1 to 59 of this Annual Report constitute the Strategic Report. It has been approved and signed on behalf
of the Board on 13 February 2015.

DAVID ATKINS
Director

TIMON DRAKESMITH
Director

www.hammerson.com 59

STRATEGIC REPORT
CHAIRMAN’S INTRODUCTION

SUPPORTING THE
GROUP’S STRATEGY

David Tyler
Chairman

My objective as Chairman is to help ensure the Board creates
maximum value for shareholders over the long term. We do
our best to balance opportunity against risk and to lead the
organisation in an ethical way.

This Corporate Governance Report is intended to give an
insight into how the Board operated in 2014 to achieve these
aims. Full details of the Company’s governance arrangements in
compliance with the Principles of the UK Corporate Governance
Code are included on pages 94 to 97.

As you will have read in the Chief Executive’s Report on pages
4 to 6, 2014 has been a year in which the business has achieved
strong returns and is well placed to continue to deliver its
strategic goals. The year has seen economic and consumer
recovery gather momentum which has helped stimulate
improved sales in our shopping centres and retail parks. Our
newly created VIA Outlets investment will provide exciting
opportunities for Hammerson. Our investment in this sector
is a key differentiator of our business. Last year I said that I was
particularly struck by the capabilities of the management team
and their energy and vision and one year on I remain impressed.
I want to thank them and indeed all our people for delivering
a strong performance in the year.

CORPORATE
GOVERNANCE REPORT
Your Board

Your Board’s year

Nomination Committee Report

Audit Committee Report

Directors’ Remuneration Report

Compliance with the UK
Corporate Governance Code

Board biographies

Directors’ Report

100

COMPLIANCE STATEMENT

The Company complied
in full with the provisions of
the UK Corporate Governance
Code published in September
2012, which applied
throughout the financial year
ended 31 December 2014.

60 Hammerson plc Annual Report 2014

I am delighted to welcome Pierre Bouchut, who was appointed to the
Board on 13 February 2015 and a report on the recruitment process is
described in the Nomination Committee report on page 70. His strong
financial expertise combined with an in-depth knowledge and
experience of the retail industry in an international environment
complement the skills of the Board.

In light of Anthony Watson’s decision to stand down from the Board
in April 2015, the Nomination Committee considered possible
successors to the role of Senior Independent Director in consultation
with all the Board and the Company Secretary. I am delighted that
Terry Duddy has agreed to accept the role and he will be appointed
with effect from 22 April 2015. He has both the right personal
qualities and deep commercial and shareholder relations experience,
culminating in his years as Chief Executive of Home Retail Group.

It is my responsibility to ensure that Board members have
independence of mind and action and that the Board as a whole
has an appropriate balance and diversity of skills, experience
and background. This has been in my mind as the changes noted
above have taken place. Further changes to the Board will continue
to reflect these points as well as the long-term demands of the
business as it develops in the coming years.

Changes to the UK Corporate Governance Code
The Board and I remain committed to following best practice in
corporate governance. I am pleased to report that the Company
complied fully with the Code in 2014. Following the publication
by the Financial Reporting Council of a revised edition of the UK
Corporate Governance Code in September 2014, we have already
taken steps to comply with the updated requirements. We plan
to comply fully with these requirements in 2015.

David Tyler
Chairman

An effective Board
As Chairman I am responsible for ensuring that your Board works
effectively under my leadership in support of the Group’s strategy.
In last year’s Annual Report I reported on my intention to change the
structure and frequency of Board and Committee meetings during
2014. Board agendas have been revised and some items moved to
the agendas of the Committees in order to enable the Board to spend
more time discussing investment, marketing and development. Senior
executives have met with Non-Executive Directors both formally and
informally to discuss specific projects. The Board has evaluated the new
approach and I can report that the Directors are satisfied with the way
the Board is operating. Further detail on this year’s internal evaluation
of Board effectiveness can be found on page 67 of the Corporate
Governance Report.

One of the recommendations from the 2013 external Board
effectiveness review was to introduce an electronic board paper
portal as a more efficient, secure and sustainable way of disseminating
Board papers. A project to explore suitable software was managed
by the Company Secretary and her team. Following an evaluation
exercise, a provider was chosen and the software implemented.
It is now being used for the Board and all Committees and feedback
from Directors indicates that it has been received very positively.

Board changes and succession planning
Since my last report to you a number of changes have happened
to the Board and its Committees. After the Annual General Meeting
(AGM) in 2014 we said goodbye to John Hirst at which point Jacques
Espinasse took on the role of Chairman of the Audit Committee.
Gwyn Burr assumed the role of Chairman of the Remuneration
Committee after the AGM, having been appointed to that Committee
in February 2014.

Anthony Watson will be stepping down at the conclusion of this
year’s AGM, after nine years on the Board. On behalf of the Board
I would like to thank Anthony for his commitment to the Company
and the valuable and significant contribution he has made as a
Non-Executive Director. Anthony has been a member of the
Remuneration, Audit and Nomination Committees and was Chairman
of the Remuneration Committee from January 2006 to April 2014.
He has held the role of Senior Independent Director since January
2010. I would also like to add my personal thanks to Anthony for the
significant role he has played in ensuring that the Board meets
its responsibilities to shareholders and stakeholders in these roles.

Jacques Espinasse will have served on the Board for nine years
in 2016 and has indicated his intention to step down from the
Board at the AGM in 2016.

In July, we decided that all Non-Executive Directors would become
members of the Nomination Committee and so membership
increased by three. The Nomination Committee report can be
found on pages 68 to 70.

www.hammerson.com 61

CORPORATE GOVERNANCE REPORT
YOUR BOARD

COMMITTED TO THE
HIGHEST STANDARDS

62 Hammerson plc Annual Report 2014

From left to right
1. David Tyler
Chairman
2. David Atkins

Chief Executive
3. Anthony Watson

Non-Executive Director and
Senior Independent Director

4. Peter Cole

Chief Investment Officer

5. Timon Drakesmith

Chief Financial Officer

6. Gwyn Burr

Non-Executive Director

7. Jacques Espinasse

Non-Executive Director

8. Judy Gibbons

Non-Executive Director

9. Terry Duddy

Non-Executive Director
10. Jean-Philippe Mouton
Executive Director

11. Pierre Bouchut

Non-Executive Director

Biographical details for all Directors are on pages 98 and 99. Further details
of the Board’s balance of skills and experience is on page 69.

www.hammerson.com 63

CORPORATE GOVERNANCE REPORT
YOUR BOARD’S YEAR

BRINGING CORPORATE
GOVERNANCE TO LIFE

This section of the Corporate Governance Report highlights
some of the key activities of the Board during 2014. It should
be read in conjunction with the section on compliance with
the UK Corporate Governance Code on pages 94 to 97.

JANUARY
TO
SEPTEMBER

For further
information
on financing
see page 49.

RAISING CAPITAL TO FUND ACQUISITIONS
AND DEVELOPMENTS
During the year, the Board explored various financing and
re-financing options proposed by management to enable the
Company to advance its acquisition and development strategy
whilst retaining a robust capital structure. Financing options
considered by the Board included a bond buy-back, the issue
of shares to be listed on the London Stock Exchange, a bond
issue and hedging strategies. Market conditions were kept
under review during this time and management and the
Board received feedback on likely shareholder responses
to various debt and equity raising options. Proposals came
forward for a share placing as part of funding plans for an
investment in Highcross and the VIA Outlet venture. The Board
reviewed and approved a proposal to fund the acquisitions
through a placing of up to 10% of the Company’s existing
issued share capital. On 25 September 2014 the Company
announced that the placing had been successfully completed
and would fund the acquisition of the remaining interest
in Highcross, provide investment in the European outlet
sector and partly fund the Company’s significant
development pipeline.

Key steps in the Board’s process in reaching its decision
to proceed with the placing are set out below. During
the process the Board worked closely with management,
the Company’s legal team and its advisers.

PLACING OF SHARES – KEY STEPS

Review of the
implications of
a cashbox structure,
how the placing
would be received by
shareholders and the
process, timing and
costs of a placing.

Consideration of the
pre-market process, due
diligence and other comfort
which the banks would require.

Discussions between the Executive
Directors and the Company’s major
shareholders to gauge expressions
of shareholder interest.

Review of market conditions which
were favourable; approval of the legal
documents required for a placing
and approval of the placing as an
appropriate means of raising funds.

The Company announced
its intention to the
Stock Exchange to
place up to 71.3 million
new ordinary shares.

Announcement of
successful completion of
the placing which raised
approximately £399m
(before expenses).

64 Hammerson plc Annual Report 2014

JANUARY
TO
DECEMBER

SHAREHOLDER
ENGAGEMENT
The Board recognises the
importance of communicating
regularly with its shareholders
and during 2014 the Company
undertook a variety of investor
relations activities which were
organised both for institutional
and private shareholders. As well
as the formal programme of
events, ad hoc meetings took
place throughout the year.

The majority of shareholder
contact is between the
Company’s institutional
shareholders and the Chief
Executive and the Chief Financial
Officer. During 2014 a number
of events were either attended
or hosted by the Company.
The programme of events is
set out opposite.

APRIL

January 2014

February 2014
March 2014

April 2014
June 2014

• Analysts’ visit to O’Parinor, France.
• One-to-one investor meetings hosted by David Atkins and Timon

Drakesmith at the JP Morgan Property Conference, London.

• 31 investor road show meetings held in London, Paris and Amsterdam.
• 20 one-to-one meetings arranged at the Citi Global Conference, Miami.
•

Invitations to major shareholders from the Chairman to attend a meeting.
Subsequent meetings were arranged.

• Annual General Meeting.
• 20 one-to-one investor meetings arranged at the Kempen Conference

•

in Amsterdam.
Investor and analyst visit to Les Terrasses du Port, Marseille. David Atkins
and Jean-Philippe Mouton gave a presentation and the French project team
were available to answer questions. The visit included a tour of the Centre.

July 2014

• Half-year investor road shows. 32 meetings held in London,

Amsterdam and Paris.

August –
September 2014

• Meetings held with the Head of Sustainability and shareholders to discuss

sustainability performance.

• 14 one-to-one investor meetings arranged at the Bank of America Merrill

Lynch Conference in New York.

November 2014

• Telephone meetings held with the Company Secretary and shareholders

December 2014

to discuss corporate governance and corporate reporting for 2015.
• Seven one-to-one investor meetings arranged at the UBS Conference

•

in London.
Investor meeting with Value Retail representatives presenting on the
outlet sector.

DEVELOPMENT PROGRAMME FOR NEW CHAIRMAN OF AUDIT COMMITTEE
Jacques Espinasse succeeded John Hirst as Chairman of the Audit Committee following the Annual General
Meeting in 2014. Shortly after his appointment, the Company Secretary organised a full briefing focusing on
the role of Audit Committee Chairman, accompanied by a comprehensive pack of briefing papers. The briefing
covered amongst other matters:

• A detailed update session on financial and tax-related matters from senior managers in the finance team;
• A meeting with the Group’s external valuer, DTZ, to discuss the valuation process and opportunities to refine the reporting process;
• A discussion with the external auditor, Deloitte, covering corporate governance developments and an update on the role and

responsibilities of the Audit Committee and Audit Committee Chairman;

• A session with the Company Secretary and Group Financial Controller to review the Audit Committee’s work plan for the year and

consider any improvements; and

• A private meeting with Deloitte, with whom the Audit Committee Chairman engages separately outside the Committee timetable.

www.hammerson.com 65

CORPORATE GOVERNANCE REPORT
YOUR BOARD’S YEAR CONTINUED

OCTOBER

BOARD VISIT TO MARSEILLE
In October 2014, the Board held its scheduled Board
meeting at Les Terrasses du Port, Marseille. Having
seen the Centre in the final stages of construction last
year this provided an opportunity for the Board to see
the Centre open for shoppers. The Board toured the
Centre and received presentations from the local
project and management teams including progress
on store openings and occupancy rate, feedback
on the opening of the Centre in May 2014 and an
update on Centre performance. The Board also
received a presentation on how the multi-channel
digital programme at Les Terrasses du Port is positively
driving customer engagement and is also providing
new insights into customer behaviour.

BOARD STRATEGY DAY
The Board’s annual Strategy Day was held at Les
Terrasses du Port, Marseille the day after the Board
meeting. As in previous years, the Board prepared
for the day by reviewing background commentary
on the UK and French economies and real estate
markets and current Hammerson data including
the Group’s corporate profile, operational data and
financial forecasts.

Members of senior management joined the Board
for discussions which included branding, strategy,
capital allocation and operational efficiency. The
agenda for the Strategy Day also covered:

• Review of progress against 2014 Business

Plan objectives;

• Overview of the UK and European property

and retail markets and future trends;

• Evaluation of risks in relation to economic
forecasts, their impact on the Company
and mitigation;

• Presentation from external advisers on
linking the Company’s strategy to
its brand proposition;
Improving financial performance through
optimal capital allocation;

•

• Growth opportunities in other territories

and sectors;

• Review sustainability performance

and opportunities to create
sustainability leadership;
Improving the performance of the Group’s
winning retail venues; and
Increasing retail spend through
operational strategies.

•

A number of initiatives identified as a result of the
Strategy Day have been incorporated into the Business
Plan for 2015. The Business Plan influences objectives
set for the Executive Directors and throughout the
business for 2015.

66 Hammerson plc Annual Report 2014

DAVID ATKINS’ PERSPECTIVE

“

Holding this year’s Strategy Day in Les Terrasses du Port, Marseille
had a huge impact. Being in our newest centre brought our
strategy to life and gave the Directors real insight into current
themes and trading through direct contact with our staff and
our shoppers. We experienced and saw first hand, the latest
technology, design innovation and industry-leading sustainability
in the Centre. This really helped to inspire us to challenge our
ideas about the future strategy of the business.

For me, the importance of the Strategy Day lies not in the
discussion of day-to-day issues – that’s the job of the Executive
Directors and management – but rather in the opportunity to be
ambitious in setting our strategic goals as a Board, to propose the
unconventional and evaluate our reactions to new themes and
ideas. We do not confine ourselves to our sector but look at other
sectors too – for example, other consumer-facing businesses –
and we evaluate the best of what they are doing.

The key to a successful Strategy Day is that broad-ranging
discussions are stimulated through posing ourselves challenging
questions and scenarios. This is especially important for the
Non-Executive Directors who are not involved in the running
of the business. The insights and ideas generated through
discussion will not all find their way into our strategy but we
take away the best initiatives to be refined and included in
the Business Plan.

“

DECEMBER

BOARD EFFECTIVENESS REVIEW
The Board recognises that Board evaluation is a continuous process. A thorough and extensive external Board evaluation was carried out in
2013, progress against which was reviewed as part of the 2014 evaluation and is reported on in the table below.

The 2014 Board effectiveness review was facilitated by the Company Secretary and focused on questions grouped around governance themes
taken from the UK Corporate Governance Code. Each Director gave feedback to the Company Secretary who discussed her interviews with the
Chairman and a report with recommendations was tabled to the Board and actions agreed. The evaluation was conducted in this way to allow
the Directors to make more informative responses and to establish any specific areas where the Board could improve its performance.

In general the 2014 evaluation highlighted that satisfactory progress had been made against 2013 actions and in the way the Board continued
to operate. The Board continues to strive for excellence and identified further opportunities for consideration. These included:

• The continued focus on succession planning, particularly for Executive Directors, and talent development;
• Refining the structure of the Strategy Day and how strategic discussions may be facilitated and made more effective;
• Keeping abreast of the opportunities and risks of Value Retail and how they are managed; and
• Further engagement with senior management below Board level.

Where appropriate these actions have been incorporated into the 2015 Board work plan.

A summary of the Board’s progress against actions arising from the 2013 externally facilitated Board effectiveness review is set out below:

Recommendations from 2013 Board Effectiveness Review

Progress on actions

Clearly identify optimum mix of skills that the Board needs.

During the year the Nomination Committee commenced a
phased plan for recruiting two new Non-Executive Directors.
Pierre Bouchut was appointed on 13 February 2015. The
appointment of a second Non-Executive Director is underway
and will be a particular focus for the Nomination Committee
following the 2015 AGM.

Identify the internal talent pool of new executives with
high potential and create development plans for them.

The Nomination Committee reviewed succession plans in
June and continues to focus on this area.

Reduced use of printed Board papers should be considered.

Board agendas should be revised to ensure adequate focus on
development projects and marketing. The layout of Board
papers should also be reviewed.

Effectiveness of reduced number of formal Board
meetings should be reviewed once a full calendar cycle
has been completed.

Additional engagement between Non-Executive Directors
and management should be arranged.

An electronic Board portal has been introduced as described
in the Chairman’s introduction on page 61.

The Board agendas have been revised, as described in the
Chairman’s introduction on page 61. The layout of Board
papers has been reviewed in light of the introduction of
an electronic Board portal.

The Board will continue to keep this under review.

Senior managers are invited to attend Board meetings for
papers with which they have been involved. During the year
various Non-Executive Directors have met senior managers
formally and informally for business specific purposes and
general networking. Two UK centre visits are in the 2015 Board
work plan where further opportunities will be scheduled to
meet employees.

www.hammerson.com 67

CORPORATE GOVERNANCE REPORT
NOMINATION COMMITTEE REPORT

NOMINATION
COMMITTEE
MEMBERS

• David Tyler (Chairman)
• Gwyn Burr
• Terry Duddy
• Jacques Espinasse
• Judy Gibbons
• Anthony Watson
• Pierre Bouchut
(Appointed
13 February 2015)

ENSURING THE
BALANCE IS RIGHT

DEAR SHAREHOLDER
During the year the membership of the Committee was increased to include all of the Non-Executive
Directors. This enables the Committee to assist the Board better in discharging its responsibilities including
reviewing and evaluating the Board’s balance and composition, and making recommendations to the
Board with regard to any proposed recruitment and other changes.

The Board is mindful of the need to ensure that both it and the Committees continue to have the right
balance of skills, experience and knowledge to carry out their duties and responsibilities effectively. In
particular, during the year and in light of the changes to the Board which are described on page 61, the
Committee has focused its attention on selecting potential new Non-Executive Directors to join the
Board. The appointment process was conducted with Spencer Stuart, an executive search consultant,
and culminated in the appointment of Pierre Bouchut as a Non-Executive Director on 13 February 2015.
The appointment process is described in more detail on page 70.

The Committee has also considered a successor for Anthony Watson’s role as Senior Independent Director.
The Senior Independent Director acts as a sounding board for the Chairman, serves as an intermediary for
the Directors when necessary and is available to shareholders if they have concerns which they have been
unable to resolve through the normal channels or for which such contact is inappropriate. Following my
discussions with each of the members of the Committee, we decided that Terry Duddy had the right
personal qualities and appropriate skills and experience for the role of Senior Independent Director. The
Board approved the proposal that Terry Duddy be appointed to the role from the conclusion of the
Annual General Meeting.

One of my key responsibilities in ensuring Board effectiveness is to review, with the assistance of the
Nomination Committee, succession planning for the Board. During the year the Nomination Committee
spent time considering the mix of qualifications, skills, experience and knowledge required for an effective
Board. Further detail on the mix of skills is described on page 69.

In addition, the Committee considered a progress report on the Company’s approach to diversity and
was pleased to note steps taken to promote diversity within the business, and short to medium-term
objectives to focus further progress in this area were agreed. You can read more details on the steps the
Company has taken in the ‘Our People’ section on page 35.

David Tyler
Chairman of the Nomination Committee

68 Hammerson plc Annual Report 2014

Board balance and mix of skills
During the year the Committee considered the composition of the Board. Each Director brings a particular range of skills and expertise to the
deliberations of the Board which facilitates constructive and challenging debate around the boardroom table. Background professions of the
Board include property, banking, auditing, treasury, retail, media, marketing and technology. All Executive Directors have a strong property
background as well as professional qualifications in their technical sphere and chart 44 below provides further details of the range of skills
and expertise on the Board. Following the 2013 external Board effectiveness review and subsequent discussion the Board had determined that
at least one of the next two Non-Executive Directors appointed to the Board should be recruited with continental European experience and a
wider background in areas such as investment, banking, financing and fund management or asset allocation. These skills would complement
the other skills on the Board to ensure an appropriate balance. Pierre Bouchut’s appointment to the Board in February 2015 adds to the
Board’s existing expertise in finance. In addition, he brings considerable senior management experience in the retail sector and a broader
European perspective.

Chart Fig 44
Around the boardroom table – array of skills and expertise

David Tyler
Non-Executive Chairman
Leadership
Strategy and Finance
Retail
Shareholder relations

David Atkins
Chief Executive
Strategic leadership
Property
Investment and
transactions

Anthony Watson
Senior Independent
Director
Finance and Law
Corporate Governance

Gwyn Burr
Marketing
Customer service
for major retail brands
Financial services

Timon Drakesmith
Chief Financial Officer1
Finance and capital raising
Investment and transactions

Judy Gibbons
Digital technology
Marketing
International Business

“
The Board is well
managed and structured.
Appropriate relationships
exist between the Executive
and Non-Executive Directors.
“

Non-Executive Director

Further biographical details
for the Board are provided on
pages 98 and 99

Terry Duddy
Strategic leadership
Customer behaviours
Retail markets

Peter Cole
Chief Investment Officer
Property
Regeneration and
development projects
Investment and
transactions

Jean-Philippe Mouton
Executive Director2
Property and leasing
French market
Marketing

Pierre Bouchut
Finance
French retail
French property

Jacques Espinasse
Finance and treasury
French market
International business

Non-Executive Director

Executive Director

1. Additionally, responsible for outlets.

2. Additionally, responsible for France and marketing.

www.hammerson.com 69

CORPORATE GOVERNANCE REPORT
Chart Fig 45
Board gender diversity

Male
Female

Chart Fig 46
Board composition

Chairman
Executive Directors
Independent Non-Executive Directors

Chart Fig 47
Length of tenure of Non-Executive Directors

0 – 3 years
3 – 6 years
6 – 9 years

As at 31 December 2014.

NOMINATION COMMITTEE REPORT CONTINUED

Appointment of Non-Executive Director
The Committee led the process that resulted in the appointment
of Pierre Bouchut. Key steps in the process are outlined below:

• The Committee considered three executive search consultancy
firms after which Spencer Stuart was appointed to facilitate
and advise on the search. Spencer Stuart has no other
connection with the Group and is a signatory to the
Voluntary Code of Conduct of Executive Search Firms.

• The Committee’s preference was to recruit a senior business

person with deep experience in the French market and ideally
with expertise in both retail and finance. Having considered
the knowledge and experience required a candidate profile
was prepared.
It was agreed that the Chairman and the Company Secretary
review a range of candidates following which a long list
was prepared for the Chairman by Spencer Stuart.

•

• The Chairman met and interviewed seven candidates and
reviewed the respective skills, experience and fit of each
of the candidates with the Board’s candidate profile.
• Members of the Committee interviewed the shortlisted

candidates and the Committee made a recommendation
to the Board.

• The Board approved the appointment of Pierre Bouchut

on 13 February 2015.

Succession planning
The Committee considered succession planning for the Executive
Directors and other key roles in the organisation. Due to the size
of the organisation the Committee acknowledges that there are
not necessarily obvious successors for every senior role. Management’s
plans for the identification, development and readiness of
talented successors to the Group Executive Committee and senior
management roles are kept under review. The Committee noted that
management’s review of individuals’ performance and potential took
account of the diversity profile within the organisation. Succession
planning provides an opportunity to ensure that Hammerson
is developing a capable and diverse talent pool for the future.
For further details refer to the ‘Our People’ section in the Strategic
Report on pages 32 to 35.

Diversity
The Board considers that encouraging diversity, including gender
diversity, within the Group, is an essential driver of long-term success
and recognises that potential needs to be identified and nurtured at
all levels of the organisation. The charts on the right illustrate some of
the factors the Committee takes into account when considering the
composition of the Board. As at the year end female representation
on the Board stands at 20%. The Committee will continue to consider
gender diversity when recommending any future Board appointments.
However, future appointments will always be made on merit.

70 Hammerson plc Annual Report 2014

AUDIT COMMITTEE REPORT

ENSURING
ACCOUNTABILITY

DEAR SHAREHOLDER
On behalf of the Audit Committee, I am pleased to present its report for the year ended 31 December
2014. Although this is my first report as Chairman of the Committee, I have been a member of the
Committee since May 2007. I succeeded John Hirst who stepped down after last year’s Annual General
Meeting (AGM) after nine years of service and I would like to thank John for his considerable contribution
to the work of the Committee. Shortly after my appointment as Chairman of the Committee I undertook
a development briefing focusing on the role of Audit Committee Chairman and more details are
provided on this on page 65.

I fulfil the requirement of the UK Corporate Governance Code (Code) as the member of the Committee
nominated as having recent and relevant financial experience. In addition, my fellow Committee members
are individuals who hold or have held senior office in business and have both the knowledge and
experience to properly discharge their duties and a good understanding of the issues under consideration.
We are supported in turn by members of the senior management of the Company and by the expertise
of the external auditor, Deloitte LLP (Deloitte), whose representatives regularly attend meetings. In addition,
the Committee met with Deloitte and the internal auditor, Ernst & Young LLP (EY) without management
being present to enable full and frank discussion and to satisfy itself that the external and internal auditors
had not been unduly influenced by management.

The Committee met three times during the year and attendance at these meetings is set out in the
Company’s report on compliance with the Code on page 94. During the year, the Committee paid particular
attention to significant judgements in relation to the Group’s financial statements. These are significant by
virtue of their impact on the Group’s results and the remuneration of senior management. The main areas
of focus during the year are set out in table 48 on page 72.

An essential element of the Committee’s work during the year is the scrutiny applied to the valuation of the
Group’s property portfolio. Having carried out a review of the Committee’s schedule of meetings, I decided
that an additional meeting would be held in January to allow the Committee extra time to review, debate
and challenge the valuation prepared by the Company’s external valuer DTZ Debenham Tie Leung (DTZ)
and also Cushman and Wakefield (C&W) who valued the premium outlet centres. This January meeting
will be included in future in the Committee’s schedule.

The Committee satisfied itself that the Annual Report is a document which allows shareholders to assess
the Company’s position and performance, business model and strategy. The Committee considered
a paper from management on how each of the elements highlighted on the left had been addressed.
In addition the Annual Report was reviewed by a number of external parties as part of the process
before the Committee made its recommendation to the Board that the Annual Report is fair, balanced
and understandable.

In December, the Committee carried out an assessment of its performance and, in its opinion, continues to
perform its role efficiently and effectively. I am confident that the Committee continues to satisfy itself that
the internal and external systems of control and safeguards at Hammerson are working well throughout
the business to ensure that risks are mitigated and managed appropriately.

I would like to thank Deloitte, on behalf of the Board, for the continuing high quality of the audit services
they have provided to the Group during the year.

Jacques Espinasse
Chairman of the Audit Committee

AUDIT
COMMITTEE
MEMBERS

• Jacques Espinasse

(Chairman)
• Gwyn Burr
• Judy Gibbons
• Anthony Watson
• Pierre Bouchut
(Appointed
13 February 2015)

Fair
✓ All important elements
have been included.

Balanced
✓ Consistency achieved
between the Strategic
Report and Financial
Statements.

✓ An appropriate balance
between statutory
and adjusted measures.

✓ Adjustments are
clearly explained.

Understandable
✓ Greater use of diagrams

and briefer text.

✓ Clear contents pages
to aid navigation.

✓ Colour coding
to distinguish
different sections.
✓ Code Compliance

in a separate section.

✓ Strategy presented

consistently throughout.

✓ Clear cross references.
✓ Jargon is avoided
where possible.

www.hammerson.com 71

CORPORATE GOVERNANCE REPORT
AUDIT COMMITTEE REPORT CONTINUED

Table Fig 48
Significant financial judgements
During the year, the Committee considered the appropriateness of significant financial judgements made in connection with the financial
statements as set out below:

Why this issue is considered significant

How the Committee addressed the issue

Significant financial
judgement considered
during the year

Valuation of the
Group’s property
portfolio (excluding
Premium Outlets)

Please see page
114 for more details
about Valuations.

The valuation of the Group’s property
portfolio, including those held in
joint ventures, is a key risk due to its
significance in the context of the Group’s
net asset value. Although valuations are
conducted externally by DTZ, the nature
of the valuation process and estimates
are inherently subjective. The outcome
of this judgement is also a key
determinant of the Group’s results
and affects investment decisions.

Accounting for
property transactions

Please see page
114 for more details
about property
transactions.

During the year, the Group made several
acquisitions and disposals including
interests in joint ventures. There are
risks in the accounting process for
these complex transactions.

The Committee has a robust process in place to satisfy itself that
the external valuation of the Group’s property portfolio is appropriate.
The Committee recognises that the Group operates in two liquid and
mature markets, the UK and France, in which there are well established
and respected valuation professionals. The Committee reviewed the
outcomes of DTZ’s valuations, challenged their assumptions and was
satisfied that procedures and methodologies used were appropriate.
The Committee is also familiar with the processes by which management
provides information to DTZ. Current conditions and recent transactions
in the market were reviewed to provide context. DTZ were asked
to highlight any significant judgements and disagreements with
management and the Committee satisfied itself of DTZ’s independence.
The Committee was satisfied that the valuation of the Group’s
property portfolio was prudent and reasonably based.

The Committee, in conjunction with Deloitte, reviewed and challenged
management’s accounting proposal and key judgements, and was
satisfied that the approach adopted was appropriate.

The Group has a significant investment
in Value Retail (VR) and acquired a
47% interest in VIA Outlets (VIA) during
2014. These investments are externally
managed and due to the complexity of
the underlying structures, there is a risk
of inaccurate and inconsistent reporting.

The Committee discussed the proposed accounting treatment for the
Group’s interests in VR and VIA, which is based on the nature of the
Group’s control over those investments. The Committee also reviewed
the accounting associated with the VIA acquisition and the valuations
of each investment ‘s property portfolio which are undertaken by
C&W. The Committee concluded that both investments had been
recognised appropriately.

Maintenance of the Group’s REIT status for
its UK operations and under the SIIC rules
for its French operations is dependent
on compliance with certain conditions
in each jurisdiction. The beneficial tax
regime resulting from REIT status has a
significant impact on the Group’s results.

The Group has adopted IFRS 11 in
2014 which requires the Group to equity
account for its joint ventures (previously
proportionally consolidated). This
change has a significant impact
on the presentation of the Group’s
financial statements.

The Committee reviewed compliance with UK REIT and French
SIIC legislation and concluded that the Group continues to meet
the requirements.

The Committee, in conjunction with Deloitte, has reviewed the
disclosure requirements. Management’s methodology, as presented
in its paper to the Committee, was considered. The Committee was
satisfied that management has appropriately adopted the accounting
standard and explained the presentational impact of the new
standard to shareholders in an appropriate manner.

The Committee evaluated management’s assessment of the
appropriateness of the Group preparing its half-year and annual financial
statements on a going concern basis and approved the Statement which
appears on page 54. The Committee considered the Group’s liquidity by
reviewing reports on the renewal and maturity profile of debt, forecast
cash flows (including the level of committed expenditure), funding
requirements and contingent liabilities. The Committee also considered
these forecasts against the financial covenants in the Group’s borrowing
facilities and concluded that the going concern basis was appropriate.

Going concern

Please see page
54 for more details
about Going concern.

A critical risk is the Company’s solvency
and liquidity and the appropriateness
of preparing the Group’s financial
statements on a going concern basis.

72 Hammerson plc Annual Report 2014

Premium Outlet
investments
(Value Retail
and VIA Outlets)

Please see page
44 for more details
about outlets.

REIT status

Please see page
125 for more
details about Tax.

Adoption of IFRS 11
joint arrangements

Please see page
131 for more
details about joint
arrangements.

Effectiveness of the external audit process
The Committee assessed the effectiveness of the external audit
process during the year by monitoring Deloitte’s fulfilment of the
agreed audit plan and its reports on the significant matters and
judgements that arose from the audit plan. The Committee received
regular feedback from management on the level of support provided
by Deloitte. The Committee determined that Deloitte provides an
appropriate level of service delivered by a team which consistently
looks for ways to maintain and improve the high standards it sets itself.
During the year the Committee also considered the re-appointment
of Deloitte and assessed their independence.

In forming its opinion of the independence and objectivity of
Deloitte the Committee reviewed:

• The independence safeguards operating within Deloitte;
• Deloitte’s Audit Transparency Report for the year ended

31 May 2014; and

• The extent of non-audit services provided by Deloitte.

Deloitte or its predecessor firms have been the Company’s external
auditors since the Company was founded in 1942. Deloitte is required
to rotate the audit partner responsible for the Group audit at least
every five years to protect auditor independence and objectivity.
Ian Waller, the current audit lead partner has been in place since April
2012 and is expected to continue until the conclusion of the financial
statements for 2016. Under the Company’s current interpretation
of the transitional arrangements for mandatory audit rotation,
the Company will be required to rotate the audit for the financial
statements for 2021. In advance of that date the Committee will
reflect on retendering the Auditor’s appointment.

The Committee has concluded that the external audit was carried
out effectively and efficiently with the necessary objectivity and
independence. It has recommended to the Board that Deloitte be
re-appointed at the 2015 AGM.

Non-audit services
The Committee is responsible for the development, implementation
and monitoring of the Group’s policy on the engagement of the
external auditor to supply non-audit services to the Group, the
principal requirements of which are that:

• The external auditor may not provide a service which places
it in a position where it may be required to audit its own
work, such as book keeping or valuation services; and

• Some services may be provided in specific and exceptional
circumstances and may 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 by the Chairman
of the Audit Committee.

The full policy on non-audit services is available at
www.hammerson.com.

As shown in note 4 to the accounts on page 122, Deloitte’s
remuneration for the year ended 31 December 2014 was £0.7m.
Consideration is given to the nature of and remuneration received

for other services provided by Deloitte to the Company and
confirmation is sought that the fee payable for the annual audit
is sufficient to enable Deloitte to perform its obligations in
accordance with the scope of the audit.

During 2014 non-audit services provided by Deloitte to the Company
included acting as reporting accountants for tax related work and the
Group’s sustainability reporting. Fees for non-audit services provided
to the Company by Deloitte for the year ended 31 December 2014
were £0.1m.

Risk management and internal control
The Committee assists the Board to fulfil its responsibilities in relation
to the adequacy and effectiveness of the control environment and the
Group’s compliance with the Code.

Throughout the year, the Committee monitored the effectiveness of
the Group’s systems of risk management and internal control, including
financial, operational and compliance controls. In particular the
Committee reviewed:

• Deloitte’s management letters;
•

Internal audit reports, including monitoring the implementation
of recommendations arising from them;

• Reports on the system of internal control and the risk

management framework;

• The Company’s approach to compliance with legislation and the

prevention of fraud;

• Business continuity and cyber risk; and
• Gifts and entertainment and expenses registers.

Internal audit
EY has provided an internal audit service to the Group since August
2013. During the year the Committee has monitored the internal audit
process through management updates and reviewing EY reports, and
EY has been challenged on its findings at Committee meetings. The
Committee continues to be satisfied with the service provided by
EY since their appointment and has approved the continuation of
EY’s appointment as internal auditor for 2015. Now that a full annual
internal audit cycle has been completed the Committee will review
more formally the effectiveness of EY during 2015.

An annual programme of reviews of the controls established to
mitigate the risk areas identified in the risk management framework
is undertaken to ensure that they are operating correctly. During
the year, internal audits were carried out on a number of business
processes, including:

• Shopping centre property management and operational controls;
• Car park controls;
• Management of tenant credit risk;
• Joint venture management processes; and
• Leasing processes.

These reviews and the implementation of recommendations arising
from them are overseen and coordinated by a Risk and Controls
Committee whose primary role is to ensure that internal control is
integrated into the Group’s daily operations.

www.hammerson.com 73

CORPORATE GOVERNANCE REPORT
AUDIT COMMITTEE REPORT CONTINUED

Risk and Controls Committee
This committee is not a committee of the Board but of executives
from across the business, including UK shopping centres, retail parks,
French shopping centres and finance and project management teams
and is chaired by the Chief Financial Officer. The committee reports
its activities to the Group Executive Committee.

The role of the Risk and Controls Committee is to:

• Promote the application of the risk management framework

throughout the business;

• Encourage pro-active discussion of risk around the business;
• Manage the annual internal audit programme;
• Consider the results and recommendations of reviews; and
• Monitor the implementation of recommendations.

Anti bribery and corruption
The Committee oversees and monitors the policies and procedures
which form the core components of the Group’s adequate
procedures under the Bribery Act, including the Code of Conduct
and Whistleblowing Policy. During the year the Code of Conduct
and the Whistleblowing Policy were reviewed, updated and
approved by the Committee.

The Code of Conduct explains how employees are expected to
fulfil their responsibilities by acting in the best interests of the Group
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 control framework which includes environmental and health and
safety policies. A summary of the Code of Conduct is available on
the Company’s website.

The Whistleblowing Policy sets out a procedure by which employees
may report suspicion of fraud, financial irregularity or other malpractice.
No reports of any such matters have been received during the year.
The Company subscribes to the independent charity, Public Concern
at Work, so that employees may have free access to its helpline.

74 Hammerson plc Annual Report 2014

RISK MANAGEMENT IN ACTION –
ELEVATING RISKS
At the beginning of 2014 each Group Executive Committee
member was asked to consider and submit their top five
risks to the business. The responses were reviewed and
collated into a schedule for further discussion by the Group
Executive Committee and as a basis for reviewing the status
of risks or capturing new risks in the risk management
framework (which is described in further detail on pages
55 to 59 of the Annual Report). This exercise was repeated
during the year and the summary review of risks was
compared against the key risks KPIs set out in the risk
management framework to ensure that they were being
adequately monitored and addressed. As a result some
risk KPIs were updated. The Risk and Controls Committee
discussed the risks identified which were incorporated into
the risk management framework with appropriate risk
mitigation steps identified.

The intention of these regular reviews was to make the risk
management framework a dynamic document, promoting
discussions about how risks are evolving and whether they
are being addressed effectively across the business.

BOARD

AUDIT
COMMITTEE

EXECUTIVE
MANAGEMENT

RISK
MANAGEMENT
PROCESS

RISK AND
CONTROLS
COMMITTEE

DIVISIONAL
MANAGEMENT

DIRECTORS’ REMUNERATION REPORT

REMUNERATION
COMMITTEE
MEMBERS

• Gwyn Burr (Chairman)

• Terry Duddy

• Judy Gibbons

• David Tyler

• Anthony Watson

See pages 91 and 92
for 2015 implementation
and updated scenarios.

See page 94, table 81
for Remuneration Committee
attendance in 2014.

See page 170
for the remuneration policy.

C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E
R
E
P
O
R
T

MATCHING REWARD
TO PERFORMANCE

DEAR SHAREHOLDER
I am pleased to present the Directors’ Remuneration Report for the year ended 31
December 2014. This is my first year as Chairman of the Remuneration Committee
(Committee), having succeeded Anthony Watson. I would like to thank Anthony for
chairing the Committee for a number of years, and for the assistance and support he
has given me in 2014.

At our AGM in 2014, our remuneration policy (Policy) was approved. No changes are
being made to that Policy.

As you will have read earlier in this Annual Report, this was another successful year for the
Company. Adjusted earnings per share grew to 23.9 pence; like-for-like NRI increased by
2.1% and the cost: income ratio reduced to 23.4%. Using estimated numbers for total
property return (TPR), the outcome of financial and personal objective performance
measures resulted in an average of 65% of maximum bonus opportunity for 2014. Our TPR
relative to an appropriate peer group is a component of both annual bonus (AIP) and long
term incentives (LTIP). For 2014, we changed the indices for AIP. These indices are published
by IPD each April and so, for 2014 and in future, the TPR component of AIP reported in the
Annual Report will be estimated. No bonus payments for TPR are made until the actual
index data becomes available. We will report the actual outturn on this measure, and the
bonus payment, in our 2015 Annual Report.

In April, the Committee was disappointed when, despite good performance relative to
our peer group, the 2011 LTIP awards did not vest to any material extent, contributing to
an overall reduction in Executive Director total remuneration of 16%. This was largely a
result of the continued comparison with office portfolios, which is now inappropriate
given the change of focus of the Company in late 2012 to retail only. The Committee will
decide at its April 2015 meeting whether the TPR element of the 2012 LTIP awards
should be compared solely against our retail property peer group. The policy of granting
LTIP awards to each Executive Director remains unchanged. However, Executive Directors
continue to set an example given on-going cost control measures, and have requested
that 2015 LTIP awards should again be at less than the agreed norm of 200% of salary,
and grants will be made at a reduced level of 150% of salary. There are also no planned
increases in base salaries for Executive Directors in 2015.

Following member consultation, the Company’s defined benefit pension scheme
(Scheme) was closed to future accruals for all participating employees during the year.
David Atkins and Peter Cole ceased to accrue further benefits within the Scheme and
became eligible for salary supplements instead.

In December, the Company received a ‘PWC Building Public Trust Award’ for the best
executive remuneration report within the FTSE 100. A substantial amount of effort goes
into presenting shareholders with a clear and comprehensive remuneration report,
and I am pleased that this work has received public recognition.

Gwyn Burr
Chairman of the Remuneration Committee

www.hammerson.com 75

REMUNERATION AT A GLANCE

2014 EXECUTIVE
DIRECTORS’ REMUNERATION
AT A GLANCE

Table Fig 49
Total remuneration

David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton

Salary
£000

Benefits
£000

Annual
bonus1
£000

Long Term
Incentive1
£000

Pension
£000

Total
£000

594
431
406
329

22
22
19
25

776
526
579
427

–
–
177
–

177
203
81
74

1,569
1,182
1,262
855

1. These figures contain estimates. See notes 5 and 6 on page 77.

IMPLEMENTATION
REPORT
Executive Directors:
single figure remuneration table

Base salary

Annual Incentive Plan

Long term Incentive Plan

Pension

Relative importance
of spend on pay

Total Shareholder Return

Chief Executive
remuneration history

Service Agreements and
Appointments

Non-Executive Directors:
single figure remuneration table

Directors’ shareholdings

Executive Directors’ share
plan interests

Advisors

2014 AGM: statement of voting

Implementation of
remuneration policy in 2015

Scenarios: 2015 remuneration

Table Fig 51
AIP (bonus) outcome: financial targets

Entry
threshold
measure to
earn any bonus
22.8p
IPD+0.5%
1.5%
24.4%

2014 target
% of vesting for
to achieve
that measure
full vesting
2014
achieved at
for that
closing
measurement1
entry threshold
measure
20%
23.9p
24.4p
25% IPD+2.5% IPD+1.1%
2.1%
3.5%
0%
23.4%
23.8%
0%

2014
payout level2
75%
40%
30%
100%

Performance measure
Adjusted EPS
TPR
NRI
Cost ratio

1. The 2014 closing measurement for TPR is estimated.

2. Actual bonus paid is based on an interpolation between the entry threshold and the target to achieve

a bonus of 100% of payout for each performance measure. See page 79 for more details on AIP.

76 Hammerson plc Annual Report 2014

Personal objectivesGroup ﬁnancialobjectivesTPRAdjusted EPSNRIBonus targets are outlined on page 78. Key measures are as follows:Adjusted EPS: Adjusted earnings per share compared to target levels. See page 128.TPR: % total property returns. See page 36.NRI: % growth in like-for-like Group net rental income. See page 36.Cost ratio: Group total operating costs as a percentage of gross rental income. See page 37.Cost ratio30%70%30%5%5%30%Bonus weightingComposition: Group ﬁnancial objectivesChart Fig 50AIP (bonus) structure2014 REMUNERATION: IMPLEMENTATION REPORT

2014 REMUNERATION: IMPLEMENTATION REPORT

(*) denotes audited information

Table 52 shows the remuneration of the Executive Directors for the year ended 31 December 2014, and the comparative figures for the year
ended 31 December 2013.

Table Fig 52
EXECUTIVE DIRECTORS: SINGLE FIGURE REMUNERATION TABLE*

Note

1, 4 – 8

David Atkins
Peter Cole
Timon Drakesmith
2, 4 – 8
Jean-Philippe Mouton 3, 4 – 8
Total

4 – 8

Salary

Benefits

Annual bonus AIP

Long Term Incentive
Plan LTIP

Pension

Total

2014
£000
594
431
406
329
1,760

2013
£000
585
420
400
340
1,745

2014
£000
22
22
19
25
88

2013
£000
16
16
19
28
79

2014
£000
776
526
579
427
2,308

2013
£000
657
472
449
351
1,929

2014
£000
–
–
177
–
177

2013
£000
798
627
170
42
1,637

2014
£000
177
203
81
74
535

2013
2014
£000
£000
160
1,569
90 1,182
80 1,262
855
78
408 4,868

2013
£000
2,216
1,625
1,118
839
5,798

Notes

1. David Atkins has external non-executive appointments, disclosed in the Directors’ Biographies on page 98. He does not receive a fee for any of these appointments.

2. Timon Drakesmith acts as the Company’s representative as a non-executive director of Value Retail PLC. He does not receive a fee for this appointment.

3. For consistency and comparison against other Executive Directors, Jean-Philippe Mouton’s remuneration has been converted from euros into sterling in table 52.

The exchange rate that has been used is £1: €1.241 (2013: £1:€1.178). His base salary was €400,000 in 2013 and €408,000 in 2014.

4. Benefits: taxable benefits (company car or car allowance and private medical health and, for Jean-Philippe Mouton, a seniority allowance and welfare contribution)

and all-employee arrangements (for the UK Executive Directors, SIP and Sharesave; for the France Executive Director, profit sharing scheme and employer’s contribution
to an employee savings scheme).

5. AIP: Achievement against Company financial targets and personal objectives (using estimated TPR outcomes) resulted in an average entitlement for Executive Directors

of approximately 65% (2013: 54%) of the maximum bonus opportunity. Details of annual bonus outcomes are on page 79.

6. LTIP: 2013 figures were estimated in the 2013 Annual Report as final data for the TPR performance measure was not available at the date of publication. The 2013 figures
above have been updated to reflect the actual outcome using final TPR data. Details of the calculation for the 2013 and 2014 LTIP are at table 53 below. Final figures for
2014 will be presented in the 2015 Annual Report. Estimates are for reporting purposes only.

7. Pension: Full pension details and the method for calculating the pension figures above are given on pages 82 and 83.

8. During the year, no payments were made to Executive Directors for expenses other than those incurred wholly and directly in the course of their employment.

Basis for calculating the values attributable to each performance measure for the LTIP
Table 53 provides a breakdown of the values attributable to each performance measure that when aggregated produce the single figure for
the LTIP in table 52. The basis for any assumptions used is also detailed. Details of the LTIP award that vested in 2014 can be found at table 59.

Table Fig 53

David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton

TSR measure

TPR measure

Absolute NAV measure

Total

2014
£000
–
–
177
–

2013
£000
651
521
n/a
–

2014
£000
–
–
–
–

2013
£000
147
106
170
42

2014
£000
–
–
–
–

2013
£000
–
–
–
–

2014
£000
–
–
177
–

2013
£000
798
627
170
42

Performance measure data and notes on estimation

TSR

TPR

The 2014 figure for TSR is for the 2011 LTIP award that vested in 2014. The performance period ended on 1 April 2014 for awards to David Atkins, Peter Cole and
Jean-Philippe Mouton. For Timon Drakesmith, the performance period ended on 6 June 2014 (2011 LTIP award and second tranche of the Recruitment Share Award).
Values are calculated using actual performance and the share price on the date of vesting (615.50p for Timon Drakesmith).

The 2014 figures are estimated values for awards scheduled to vest in 2015 (where the performance period ended on 31 December 2014) as final IPD index data is
not available at the date of publication. The estimate compares the Company’s actual TPR figures with the best available information. Final IPD data will be available
in April 2015 and the award will vest in May 2015. The estimated value is nil. The actual 2014 figure for TPR will be reported in the 2015 Annual Report.

The 2013 figures for TPR where the performance period ended on 31 December 2013 was estimated ‘nil’ in the 2013 Annual Report as some IPD index data was not
available at the date of publication. The 2013 figures for TPR are the actual values that vested (see table 59). The values are calculated using the share price on the
date of vesting (615.50p for Timon Drakesmith, 576.00p for other Directors).

Absolute
NAV

The 2014 figures for Absolute NAV are the values for awards that are scheduled to vest in 2015 (where the performance period ended on 31 December 2014).
The value for 2014 is nil.

www.hammerson.com 77

CORPORATE GOVERNANCE REPORT
2014 REMUNERATION: IMPLEMENTATION REPORT CONTINUED

BASE SALARY
As reported last year, base salary levels for the Executive Directors increased in 2014 by between 2% and 3.6%. For 2015, the Committee
determined that there would be no increase in base salaries. A number of factors were considered in making this decision including the impact
of historically low inflationary pressure and the Company’s cost reduction objectives. Executive remuneration benchmarking data was reviewed
to ensure that base salaries remain competitive.

Jean-Philippe Mouton’s salary (and the other elements of his remuneration) is denominated in euros. When converted, the sterling equivalent
will vary with currency movements.

Table Fig 54
Executive Directors’ base salary 2015 and 2014

David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton1

1. The exchange rate that has been used above is £1:€1.241. Jean-Philippe Mouton’s base salary for 2014 and 2015 is €408,000.

ANNUAL INCENTIVE PLAN (AIP)
Table 55 details the performance conditions and composition of financial targets for the AIP.

Table Fig 55

Year of award
2015 award
(to be paid
in 2016)

Maximum
award potential
Up to 200% of salary

Proportion of
award paid in cash
60%

Proportion of award
paid in shares1
40% subject
to a two-year
vesting period

Weighting of
performance measures
70% for Group
financial targets2

Base Salary

2015
£000
597
435
408
329

2014
£000
597
435
408
329

Composition of financial targets
25% based on adjusted
Group earnings per share

25% based on Total Property
Return relative to IPD3

20% for Group
operational targets

Up to 200% of salary

60%

2014 award
(to be paid
in 2015)

40% subject
to a two-year
vesting period

2013 award
(paid in 2014)

Up to 200% of salary

60%

40% subject
to a two-year
vesting period

30% for personal objectives2
70% for Group
financial targets4

30% based on adjusted
Group earnings per share

30% based on Total Property
Return relative to IPD3

10% for Group operational
targets
30% for personal objectives4
70% for Group
financial targets

30% based on adjusted
Group earnings per share

30% based on Total Property
Return relative to IPD5

10% for Group
operational targets

30% for personal objectives

Notes

1. The proportion paid in shares is granted as an award under the Deferred Bonus Share Scheme (DBSS). Awards are not subject to further performance conditions.

2. In the opinion of the Board AIP performance conditions and personal objectives for 2015 are commercially sensitive and accordingly are not disclosed. These will be

reported on in the 2015 Annual Report.

3. IPD is the Investment Property Databank’s aggregate full-year UK Retail Property (70%) and France Retail Property (30%) indices.

4. Details of the estimated AIP outcome for 2014 are on page 79.

5. IPD is the Investment Property Databank’s UK Quarterly Property Index, annualised. In 2013, the metric was adjusted from All Property to Retail Property, to reflect

the Company’s retail focus.

78 Hammerson plc Annual Report 2014

AIP (BONUS) OUTCOME: FINANCIAL TARGETS
Table Fig 56

Performance measure
Adjusted EPS
TPR
NRI
Cost ratio

Entry threshold
measure to earn
any bonus
22.8p
IPD+0.5%
1.5%
24.4%

% of vesting for
that measure
achieved at entry
threshold
20%
25%
0%
0%

2014 target to
achieve full
vesting for that
measure
24.4p
IPD+2.5%
3.5%
23.8%

2014
closing
measurement
23.9p
IPD+1.1%
2.1%
23.4%

2014
payout
level
75%
40%
30%
100%

The TPR performance measure is based on IPD UK Retail Property (70%) and France Retail Property (30%) indices. However, data for the IPD
France Retail Property index is published each year in April, and is not available at 13 February 2015. Accordingly, the level of payout for 2014 is
estimated, based on management’s best estimate using available data (see page 49, table 32 for property returns data). The TPR element of any
bonus payment to Executive Directors (including the deferred shares element awarded under the DBSS) is made only when all the IPD index
data is available for the calculation of the TPR performance measure.

The element of bonus determined for each performance measure is calculated by interpolating the actual performance achieved for each
measure against the scale between entry threshold for vesting and the target to achieve full vesting.

The cost control target was changed in 2014 from an absolute measure to a ratio to align it with the Company’s stated intention of reducing
the Group total operating costs as a percentage of the income to 21% by 2016.

EXECUTIVE DIRECTORS’ PERSONAL OBJECTIVES
Executive Directors are able to earn up to 30% of the maximum award for achieving personal objectives. All Executive Directors’ personal
objectives were designed to focus not only on the delivery of the Business Plan for 2014, but also on the strategic objectives set out
on page 3.

Table 57 below provides detail of some of the significant achievements against personal objectives for the Executive Directors. The personal
objectives for each Executive Director in 2014 were not disclosed in the 2013 Annual Report as the Board considered them to be commercially
sensitive. Payout levels were 100% for Timon Drakesmith, 80% for David Atkins and Jean-Philippe Mouton and 65% for Peter Cole.

Table Fig 57

David Atkins

Peter Cole

Timon
Drakesmith

Jean-Philippe
Mouton

2014 personal objectives

•

Provide strategic leadership for vision, values, performance and key retailer relationships

Lead review of sustainability strategy and create ambition for future

Ensure company performance exceeds Business Plan

Imbed product framework to define future for Hammerson retail property

Progress key developments including start on-site at Leeds and WestQuay

Provide strategic leadership to French developments

Extend strategic exposure to European outlet sector

Lead implementation of operating cost savings whilst delivering Business Plan

Optimise timing and strategy for capital raising

Open Les Terrasses du Port on budget, with BREEAM excellent rating

Complete major refurbishments and retenanting

Roll out digital marketing solutions and lead brand review

www.hammerson.com 79

CORPORATE GOVERNANCE REPORT
2014 REMUNERATION: IMPLEMENTATION REPORT CONTINUED

LONG TERM INCENTIVE PLAN (LTIP)
The structure of the LTIP awards, as well as the performance measures and conditions attached to the awards align closely with the Company’s
strategic focus. Since 2011, the awards have incorporated a balance of relative and absolute measures, and the Remuneration Committee believes
that this balance remains appropriate.

The structure of the 2015 awards remains the same as the 2014 awards. The comparator group for the Total Shareholder Return (TSR) measure
focuses on major European retail real estate companies and the Total Property Return (TPR) measure compares performance against a retail
only property index. With regard to the absolute performance measure, earnings per share (EPS) continues to align the interests of Executive
Directors with those of shareholders. Details of the LTIP structure are set out in table 58.

Table Fig 58
LTIP structure showing awards

Year of
grant
2015

Level of award
150% of salary

Performance
period
Four years

Performance
measures
TSR

Weighting of
performance measures
33.33%

2014

100% of salary

Four years

2013

200% of salary

Four years

2012

200% of salary

Four years

TPR

EPS
TSR

TPR

EPS

TSR

TPR

EPS
TSR

TPR

20113

150% of salary

Four years

Absolute NAV
TSR

TPR

33.33%

33.33%
33.33%

33.33%

33.33%
33.33%

33.33%

33.33%
33.33%

33.33%

Absolute NAV

33.33%

TSR comparator group
Altarea, British Land, Capital and Regional, Intu Properties,
Eurocommercial, Klepierre, Land Securities, London Metric,
SEGRO, Shaftesbury, Unibail-Rodamco, New River Retail and
the FTSE 100 Index.1

Altarea, British Land, Capital and Regional, Intu Properties
(previously called Capital Shopping Centres), Corio,
Eurocommercial, Klepierre, Land Securities, London Metric,
SEGRO, Shaftesbury, Unibail-Rodamco, Wereldhave and the
FTSE 100 Index2.
Altarea, 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.

As for 2011.

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.

1. Corio will be excluded from the comparator group on the assumption that the takeover offer by Klepierre announced in July 2014, will proceed.

2. Subsequent to publishing the 2013 Annual Report but prior to granting awards, IVG entered into insolvency. It was excluded from the comparator group when the awards

were made.

3. 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 in 2011, with half of
the award subject to a three-year performance period (which vested in 2014) and half subject to a four-year performance period (vesting in 2015). This avoided a vesting ‘gap’ in
2014 and, overall, results 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). The second half of the award (i.e. 150% of salary) is shown above, as it remains outstanding and will, subject to performance, vest in 2015.

Awards vested in 2014
Table 59 provides a breakdown of the value of LTIP awards that vested in 2014. The number of shares vested includes notional dividend shares
accruing to the date of vesting.

Table Fig 59

TSR1

TPR2

Absolute NAV2

Vesting date
02/05/2014
David Atkins
Peter Cole
02/05/2014
Timon Drakesmith3 06/06/2014
Jean-Philippe Mouton 02/05/2014

Vesting
level
–
–

Number of
shares
Share price
vested
on vesting
–
576.00
576.00
–
615.50 37.5% 28,814
–
576.00

–

Value of
award that
vested
£000

Vesting
level

Number of
shares
vested
– 35.9% 25,543
– 35.9% 18,337
177 35.9% 27,582
7,357

– 35.9%

Value of
award that
vested
£000
147
106
170
42

Vesting
level
–
–
–
–

Number of
shares
vested
–
–
–
–

Value of
award that
vested
£000
–
–
–
–

Total value
of award
vested
£000
147
106
347
42

1. The performance period for TSR for David Atkins, Peter Cole and Jean-Philippe Mouton ended on 1 April 2014 and for Timon Drakesmith on 6 June 2014. The value of

the TSR element in respect of 2014 is included in the Single Figure Remuneration Table for 2014 (table 52).

2. The performance period for TPR and Absolute NAV ended on 31 December 2013. The value of these elements is included in the Single Figure Remuneration Table for

2013 (table 52).

3. The vesting data for Timon Drakesmith aggregates the 2011 LTIP award and the second tranche of his Recruitment Share Award, both of which vested on 6 June 2014.

80 Hammerson plc Annual Report 2014

Table Fig 60
LTIP PERFORMANCE MEASURES
TSR
Performance is measured over the 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 four
financial years commencing with the year
of grant and in comparison with a composite
index comprising:

EPS/Absolute NAV
Performance is measured over the four-year
period from 1 January in the year of grant,
and is calculated with reference to the EPRA
Best Practices recommendations.

• For awards granted from 2013:

EPS (for awards granted from 2013).

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

• For awards granted from 2009 to 2012:
Investment Property Databank’s UK
Annual All Property Index and France
Annual All Property Index.

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

The composition of the EPS measure may
vary with each grant to ensure it reflects the
Company’s portfolio. From 2015, a blend of
UK and French CPI will be used, whereas in
2012 to 2014 RPI was used.

Absolute NAV (for awards granted in 2011
and 2012).

Calculated as adjusted shareholders’ funds
divided by the adjusted number of shares
in issue.

Table Fig 61
LTIP PERFORMANCE CONDITIONS
TSR
Vesting under the TSR performance
measure is as follows:

TPR
Vesting under the TPR performance
measure 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%

100%

Less than Index
Equal to Index
Index +0.5% (average) p.a.
Index +1.0% (average) p.a.
Index +1.5% (average) p.a.

0%
25%
55%
85%
100%

Vesting for intermediate performance
between these levels will be pro-rated
on a straight-line basis between 25%
and 100%.

Vesting for intermediate performance
between median and upper quartile-ranked
entities is on a linear scale between 25%
and 100%. For awards made from 2014
onwards interpolation is between the TSR
of the median and upper quartile-ranked
companies on a straight-line basis on
performance of those positions between
25% and 100%.

Vesting under the TSR performance measure
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.

EPS/Absolute NAV
Vesting under the EPS performance measure
for the 2015 awards is as follows:

Less than CPI +3.0% p.a. growth
Equal to CPI +3.0% p.a. growth
Equal to or more than CPI
+7.0% p.a. growth

0%
25%

100%

Vesting under the EPS performance measure
for the 2013 and 2014 awards 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

0%
25%

100%

Vesting under the Absolute NAV performance
measure 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

0%
25%

100%

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

Less than 7.5% p.a. growth
Equal to 7.5% p.a. growth
Equal to or more than
15.0% p.a. growth

0%
25%

100%

Vesting for intermediate performance for
all awards will be pro-rated on a straight-line
basis between 25% and 100%.

www.hammerson.com 81

CORPORATE GOVERNANCE REPORT
2014 REMUNERATION: IMPLEMENTATION REPORT CONTINUED

PENSION*
Pension arrangements for the year ended 31 December 2014 are detailed below. All salary supplements paid to Executive Directors as part
of their pension arrangements are subject to deductions as required for income tax and social security contributions in the UK and France.
Salary supplements and the pension benefit received by Jean-Philippe Mouton do not qualify for AIP purposes or entitlements under the LTIP.
All benefits accruing under the Group’s defined benefit pension scheme (Scheme) and all salary supplements are reflected in the Single Figure
Remuneration Table (table 52).

Timon Drakesmith
Timon Drakesmith receives a salary supplement of 20% of base salary by way of pension provision. The actual amount paid by the Company
for the year ended 31 December 2014 was £81,200 (2013: £80,000).

Jean-Philippe Mouton
Jean-Philippe Mouton receives a salary supplement of €80,000 in lieu of any supplementary pension benefit. In addition, he participates in a
legacy collective supplementary defined contribution pension scheme operated by his French employing company where the contributions
are subject to statutory limits. For 2014, the benefit he received under this scheme was €12,105 (2013: €11,939).

David Atkins
David Atkins receives a salary supplement of 30% of base salary by way of pension provision. This was effective from 2 April 2014, when he
ceased to accrue further benefits in the Scheme.

For the period 1 January 2014 to 1 April 2014, David Atkins received a salary supplement in lieu of pension benefits as he elected to restrict the
value of the pension benefits accrued in the Scheme over the 2013/2014 tax year to the annual allowance defined under pension legislation
(currently £40,000). The salary supplement was calculated to be equal in value to the pension benefits that David Atkins would otherwise have
accrued in the Scheme over the period, at a rate of 1/60th of final salary for each year of service.

On ceasing to accrue further benefits in the Scheme, David Atkins became eligible for a deferred pension based on his pensionable salary and
service at that point. Further details of this are provided below.

The actual salary supplement paid by the Company for the year ended 31 December 2014 was £177,214 (2013: £97,829).

Peter Cole
Peter Cole receives a salary supplement of 30% of base salary by way of pension provision. This was effective from 1 July 2014, when he ceased
to accrue further benefits in the Scheme.

For the period 1 January 2014 to 30 June 2014, Peter Cole accrued benefits in the Scheme at a rate of approximately 1/45th of final salary for
each year of service.

On ceasing to accrue further benefits in the Scheme, Peter Cole became eligible for a deferred pension based on his pensionable salary and
service at that point. Further details of this are provided below.

The pension figure disclosed for Peter Cole represents the increase in accrued pension in the Scheme over the year (net of inflation) multiplied
by a factor of 20, plus a salary supplement of £65,250 in respect of the period 1 July 2014 to 31 December 2014.

Defined Benefit Pension Scheme
In 2014, David Atkins and Peter Cole ceased to accrue benefits in the Scheme. Pension entitlements are calculated by reference to base salary.
The Scheme is non-contributory for members. The normal retirement age under the Scheme is 60; members may draw their pension from age
55, subject to actuarial reduction and the Trustees’ consent. Further information concerning the Scheme can be found in note 6 to the accounts
on pages 122 to 124 and the Policy reproduced from page 170. A detailed breakdown of deferred benefits under the Scheme for David Atkins
and Peter Cole is provided in tables 62, 63 and 64.

82 Hammerson plc Annual Report 2014

Executive Directors’ deferred benefits under the Scheme
In the table below, the total accrued benefit at 31 December 2014 represents the annual pension that is expected to be payable on retirement,
given the length of pensionable service and salary of each Executive Director at the date each ceased accruing benefits under the Scheme.
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 2013. The increase in accrued benefit during the year excluding the effect of inflation is also shown.

Table Fig 62
Executive Directors’ accrued pension benefits

David Atkins
Peter Cole

Age at
31 December
2014
48
55

Years’ service at
31 December
2014
16
25

Normal
retirement
age
60
60

Total accrued
benefit at
31 December
2014
(£000)
82
245

Increase in
accrued benefit
during the year
(£000)
0
13

Increase in accrued
benefit during the
year excluding
inflation
(£000)
0
7

Table 63 shows the transfer values calculated in accordance with regulations 7 to 7E of the Occupational Pensions Schemes (Transfer Values)
Regulations 1996 and subsequent amendments.

The Listing Rules figures in table 63 represent the transfer value of the increase in accrued benefits during the period to 31 December 2014
(excluding inflation) for each Director.

Transfer values of 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 Executive Director’s pension benefits. They do not represent sums paid or payable to
individual Executive Directors and therefore cannot be added meaningfully to annual remuneration. Instead, they represent a potential
liability of the Scheme. The statutory disclosures are based on required assumptions.

Table Fig 63
Executive Directors’ accrued pension benefits: Listing Rules transfer values

David Atkins
Peter Cole

The Listing Rules

Transfer value at 31 December 2014 of
increase in accrued benefit over 2014
(excluding inflation)
£000
0
105

Whilst the calculation of transfer values under the Companies Act 2006 is not required to be disclosed, it is believed that these are still meaningful
and so details of these calculations are included in table 64.

Table Fig 64
Executive Directors’ accrued pension benefits: Companies Act 2006 transfer values

David Atkins
Peter Cole

Companies Act 2006

Transfer value at
31 December 2013
of total accrued
benefit
£000
920
3,411

Transfer value at
31 December
2014 of total
accrued benefit
£000
984
3,744

Increase in transfer
value in 2014
£000
64
333

www.hammerson.com 83

CORPORATE GOVERNANCE REPORT
2014 REMUNERATION: IMPLEMENTATION REPORT CONTINUED

PAYMENTS TO PAST DIRECTORS*
There were no payments to past Directors in 2014.

PAYMENTS FOR LOSS OF OFFICE*
There were no payments for loss of office to any past Directors in 2014. John Hirst received a discretionary gift on retiring as a Director as detailed
in the Single Figure Remuneration Table for Non-Executive Directors (table 70).

RELATIVE IMPORTANCE OF SPEND ON PAY
Table 65 below shows the Company’s total employee costs compared with dividends paid. The Company did not buy back any of its own
shares during 2014.

Table Fig 65
Total employee costs compared with dividends paid

2014
2013
Difference

Notes

1. These figures have been extracted from Note 4 (Administration expenses) to the accounts on page 121.

2. These figures have been extracted from Note 10 (Dividends) to the accounts on page 127.

Chart Fig 66
TOTAL SHAREHOLDER RETURN
31 December 2008 = 100

Employee
Remuneration1
£44.7m
£44.0m
1.6%

Shareholder
Distributions2
£139.5m
£130.1m
7.2%

250

200

150

100

31 Dec 2008

31 Dec 2009

31 Dec 2010

31 Dec 2011

31 Dec 2012

31 Dec 2013

31 Dec 2014

Hammerson plc

FTSE EPRA/NAREIT UK

Source: Thomson Reuters

Chart 66 above shows the total shareholder return in respect of the Company’s ordinary shares of 25 pence each for the six years ended
31 December 2014 relative to the 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 2008. The other points plotted are the values at intervening financial year ends.

84 Hammerson plc Annual Report 2014

REMUNERATION OF THE CHIEF EXECUTIVE OVER THE LAST SIX YEARS
Table 67 shows the remuneration of the holder of the office of Chief Executive for the period from 1 January 2009 to 31 December 2014.

Table Fig 67
CEO remuneration history over the last six years

Year
2014
2013
2012
2011
2010
2009 (David Atkins)
2009 (John Richards)

Total
remuneration
£000
1,569
2,216
2,451
1,515
1,594
242
895

Notes

Annual bonus5
65.3%
56.2%
88.9%
51.7%
68.2%
55.0%
48.8%

LTIP vesting5
–
51.6%
52.6%
–
–
–
49.4%

Notes
1. The total remuneration and annual bonus figures for 2014 include certain estimated values for the LTIP and AIP vesting. See pages 77 and 79 for details.
2. The total remuneration reported in the 2013 Annual Report contained estimates and these numbers are the actual values (see table 52).
3. David Atkins became Chief Executive on 1 October 2009, having been an Executive Director since 2007. The figure for 2009 has been pro-rated accordingly.
4. John Richards retired as Chief Executive on 30 September 2009.
5. All numbers are expressed as a percentage of the maximum opportunity.

REMUNERATION FOR THE CHIEF EXECUTIVE COMPARED WITH ALL OTHER
EMPLOYEES OF THE HAMMERSON GROUP.
Table 68 shows the percentage change from 31 December 2013 to 31 December 2014 in base salary, taxable benefits and bonus for
the Chief Executive compared to all employees of the Hammerson group.

Table Fig 68
Percentage change in CEO base salary, taxable benefits and bonus

David Atkins
Total Group

Notes

1,2

1,3,4

Salary
1.5%
0.4%

Movement %

Benefits
-0.3%
-6.8%

Annual bonus
18.2%
14.6%

Total1
10.2%
3.4%

Notes
1. The percentage movement in annual bonus is based on calculations that incorporate an estimated value for the TPR performance measure within the AIP.
2. The percentage change in total remuneration is calculated without including the LTIP. Using the total remuneration set out in table 52, David Atkins’ total remuneration

declined by 29.2%.

3. The exchange rates used to convert data for French employees are £1:€1.241 for 31 December 2014 and £1:€1.178 for 31 December 2013.
4. David Atkins has been excluded from the Group calculation. Retention bonuses for employees who left the Company in February 2015 have been included.

DIRECTORS’ SERVICE AGREEMENTS AND LETTERS OF APPOINTMENT
Executive Directors’ service agreements are terminable on 12 months’ notice by either party. Dates of service agreements for the UK Directors
are as follows: David Atkins (11 January 2008), Peter Cole (28 February 2002), Timon Drakesmith (18 January 2011). Jean-Phillipe Mouton was
appointed as an Executive Director on 1 January 2013 and his service agreement is dated 25 March 2013. Further details on the terms of the
Executive Directors’ service agreements are set out in the Policy (see pages 178 and 179).

Table Fig 69
Non-Executive Directors’ letters of appointment

Non-Executive Director
Pierre Bouchut 2
Gwyn Burr 3
Terry Duddy 4
Jacques Espinasse
Judy Gibbons
David Tyler
Anthony Watson

Date of original appointment
to the Board
13 February 2015
21 May 2012
3 December 2009
1 May 2007
1 May 2011
12 January 2013
1 February 2006

Commencement date
of current term
13 February 2015
21 May 2012
3 December 2012
1 May 2013
1 May 2014
12 January 2013
1 February 2012

Unexpired term as at April 20151
2 years, 10 months
1 month
8 months
1 year, 1 month
2 years 1 month
10 months
Retiring at the end of 2015 AGM

Notes
1. Appointments are terminable on 3 months’ notice by either party.
2. Subject to election at the 2015 AGM.
3. Subject to re-election at the Annual General Meeting, Gwyn Burr’s appointment has been renewed for a further three year period from 21 May 2015.
4. Subject to re-election at the Annual General Meeting, Terry Duddy’s appointment has been renewed for a further three year period from 3 December 2015.

www.hammerson.com 85

CORPORATE GOVERNANCE REPORT
2014 REMUNERATION: IMPLEMENTATION REPORT CONTINUED

NON-EXECUTIVE DIRECTORS: SINGLE FIGURE REMUNERATION TABLE*
Table 70 shows the remuneration of Non-Executive Directors for the year ended 31 December 2014, and the comparative figures for
the year ended 31 December 2013. During the year, no payments were made to Non-Executive Directors for expenses other than those
incurred wholly and directly in the course of their appointments.

Table Fig 70
Non-Executive Directors’ remuneration for year ended 31 December 2014

David Tyler

1,7 Chairman

Note

Additional responsibilities

Fees

2014
£000

Benefits

2013
£000

2014
£000

2013
£000

Total

2014
£000

2013
£000

Remuneration Committee member
Nomination Committee Chairman

320

226

Gwyn Burr

2,5,7 Audit Committee member

Nomination Committee member
Remuneration Committee Chairman∆

Terry Duddy

7 Nomination Committee member

Jacques Espinasse

Remuneration Committee member

2,6,7 Nomination Committee member
Audit Committee Chairman∆

Judy Gibbons

7 Audit Committee member

Nomination Committee member
Remuneration Committee member

John Hirst

3,6,7 Audit Committee Chairman∆∆

4,7 Chairman

5,7

Remuneration Committee member
Senior Independent Director
Audit Committee member
Nomination Committee member
Remuneration Committee Chairman∆∆

John Nelson
(retired 9 May 2013)
Anthony Watson

Total

∆

From 23 April 2014.

∆ ∆ To 23 April 2014.

Notes

65
22

–

77
679

63
68

108

78
717

–

1
4

–

1
16

–

–
–

–
14

320

226

66
26

–

77
694

63
68

122

78
731

1. David Tyler was appointed as a Non-Executive Director on 12 January 2013. On the same date, he was appointed as a member of the Remuneration Committee. For

the period from 12 January 2013 to 8 May 2013 inclusive, he received fees of £50,000 (pro-rated) as a Non-Executive Director and £5,000 (pro-rated) as a member of the
Remuneration Committee. When he became Chairman of the Company on 9 May 2013, he received the Chairman’s fee of £320,000 (pro-rated). He does not receive any
additional fees for his membership of the Remuneration or Nomination Committees.

2. The fees payable to Gwyn Burr and Jacques Espinasse in 2014 reflect their membership of and subsequent appointments to chairman of the Remuneration Committee

and Audit Committee, respectively.

3. John Hirst was Audit Committee Chairman to 23 April 2014. He retired at the end of the 2014 AGM and in line with the Policy, received a departing gift to the value of

£1,820 (post tax). The gross value has been disclosed above.

4. John Nelson retired from the Board on 9 May 2013.

5. Gwyn Burr became Remuneration Committee Chairman on 23 April 2014 when Anthony Watson stepped down as chairman to become a member of that committee.

6. Jacques Espinasse became Audit Committee Chairman on 23 April 2014 when John Hirst stepped down from that role, prior to retiring from the Board on the same date.

7. The benefits to Non-Executive Directors disclosed in the table above relate to the reimbursement of travel and accommodation expenses in attending Board meetings

at the Company’s London office. The gross value has been disclosed and, in accordance with the Policy, the tax arising will be settled by the Company.

The figures shown in tables 52 and 70, the Single Figure Remuneration Tables for Executive Directors and for Non-Executive Directors respectively,
have been rounded to the nearest thousand. The actual aggregate total remuneration (being salary/fees, benefits and bonus) for all Executive
Directors and Non-Executive Directors for 2014 was £4,849,721 (2013: £4,480,460).

86 Hammerson plc Annual Report 2014

FEES PAYABLE TO NON-EXECUTIVE DIRECTORS
In 2014, annual fees payable to the Chairman and Non-Executive Directors were as detailed below. No fee increases are planned for 2015.

Table Fig 71
Non-Executive Director fees during 2014

Base fees £000

Additional fees £0003

Chairman1
320

Non-Executive
Director: base fee2
55

Senior
Independent
Director
10

Chair of Audit
Committee
15

Audit
Committee
member
5

Chair of
Remuneration
Committee
10

Remuneration
Committee
member
5

Notes

1. The Company Chairman does not receive any additional fee in respect of membership of any of the Committees.

2. The Non-Executive Directors’ base fee was last increased in July 2013.

3. No additional fees are payable for becoming either a member or Chairman of the Nomination Committee.

DIRECTORS’ SHAREHOLDINGS*
Tables 72 and 73 show the beneficial interests in the ordinary shares of the Company held by Directors who were in office during the year
ended 31 December 2014. For Executive Directors, the table also shows actual share ownership compared with the share ownership guidelines
(full details of which can be found in the Policy on page 174). Non-Executive Directors are encouraged to acquire a shareholding in the Company.

Table Fig 72
Executive Directors’ shareholdings

David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton

Notes

1 January
2014
296,414
247,105
177,147
215,623

31 December
2014
363,968
272,072
219,313
249,767

13 February
2015
363,968
272,072
219,4052
249,767

Guideline on
share ownership
as % of salary
150%
100%
100%
100%

Actual beneficial
share ownership
as % of salary1
371%
382%
327%
459%

Guideline met
Yes
Yes
Yes
Yes

1. As at and based on the share price of 605p on 31 December 2014. The exchange rate that has been used to convert Jean-Philippe Mouton’s global base salary from euros

to sterling is £1: €1.241.

2. The change in share interests for Timon Drakesmith from 31 December 2014 to 13 February 2015 is due to share purchases/awards made under the SIP on 5 January 2015

(50 shares) and 5 February 2015 (42 shares).

Table Fig 73
Non-Executive Directors’ shareholdings

David Tyler
Gwyn Burr
Terry Duddy
Jacques Espinasse
Judy Gibbons
John Hirst1
Anthony Watson

1 January
2014
20,000
5,000
40,000
12,235
4,000
13,495
12,000

31 December
2014
25,000
5,000
40,000
17,235
4,000
13,495
12,000

1. Shareholding shown as at 23 April 2014, the date of John Hirst’s retirement from the Board.

Between 1 January 2014 and 13 February 2015, the Non-Executive Directors’ beneficial interests above remain unchanged.

At 31 December 2014, 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.

www.hammerson.com 87

CORPORATE GOVERNANCE REPORT
2014 REMUNERATION: IMPLEMENTATION REPORT CONTINUED

EXECUTIVE DIRECTORS’ SHARE PLAN INTERESTS (INCLUDING SHARE OPTIONS)*
Tables 74 and 75 set out the Executive Directors’ interests under the Deferred Bonus Share Scheme (DBSS), the LTIP and the Sharesave schemes.
Awards under the DBSS and Sharesave are not subject to any performance conditions (other than continued employment as at the vesting date).
The LTIP awards are subject to performance conditions, details of which can be found on page 81. Also shown are details of the second tranche
of Timon Drakesmith’s Recruitment Share Award (RSA) which vested in June 2014. The award was made on materially the same terms as the
2011 LTIP award.

Awards
held at
1 January
2014

Granted in
2014

Notional
dividend
shares
accrued in
2014

Award date

Exercised/
vested in
2014

Lapsed/
forfeited in
2014

Awards
held at
31 December
2014

Face value
of awards
granted in 2014
(£000)

Exercise
price
(in pence)

If share
options,
date from
which
exercisable

Mar-14
Mar-15
Mar-16

n/a
n/a
Apr-16
Apr-17
Apr-18

Expiry date

Mar-19
Mar-20
Mar-21

n/a
n/a
Apr-19
Apr-20
Apr-21

0.00
0.00
0.00

n/a
n/a
0.00
0.00
0.00

329.04 May-15

Oct-15

0.00
0.00
0.00

n/a
n/a
0.00
0.00
0.00

Mar-14
Mar-15
Mar-16

n/a
n/a
Apr-16
Apr-17
Apr-18

Mar-19
Mar-20
Mar-21

n/a
n/a
Apr-19
Apr-20
Apr-21

312.24 May-15

Oct-15

–
85,537
46,926
132,463
–
215,976
303,806
255,363
108,748
883,893
2,735

47,618
63,483
33,690
144,791
–
155,059
218,117
183,336
79,237
635,749
4,980

263

597

189

435

Table Fig 74

David Atkins
DBSS∆
DBSS∆
DBSS∆

LTIP
LTIP
LTIP∆
LTIP∆
LTIP∆

12/03/2012
11/03/2013
03/03/2014

63,594
83,024
–

–
–
45,548

01/04/2011 209,632
01/04/2011 209,632
02/04/2012 294,883
02/04/2013 247,862
01/04/2014

–
–
–
–
– 107,490

1,166
2,513
1,378

3,845
6,344
8,923
7,501
1,258

64,760
–
–

25,543
–
–
–
–

–
–
–

187,934
–
–
–
–

Sharesave∆

05/04/2012

2,735

–

Peter Cole
DBSS∆
DBSS∆
DBSS∆

LTIP
LTIP
LTIP∆
LTIP∆
LTIP∆

12/03/2012
11/03/2013
03/03/2014

46,760
61,619
–

01/04/2011 150,504
01/04/2011 150,504
02/04/2012 211,710
02/04/2013 177,951
–
01/04/2014

–
–
32,701

–
–
–
–
78,321

858
1,864
989

2,761
4,555
6,407
5,385
916

–

–
–
–

–

–
–
–

18,337
–
–
–
–

134,928
–
–
–
–

Sharesave∆

01/04/2010

4,980

–

∆ Indicates awards granted in the form of share options.

88 Hammerson plc Annual Report 2014

Awards
held at
1 January
2014

Granted in
2014

Notional
dividend
shares
accrued in
2014

Exercised/
vested in
2014

Lapsed/
forfeited in
2014

Awards
held at
31 December
2014

Face value
of awards
granted in
2014
(£000)

If share
options,
date from
which
exercisable

Exercise
price
(in pence)

Table Fig 75

Award date

Timon Drakesmith
DBSS∆
DBSS∆
DBSS∆

12/03/2012
11/03/2013
03/03/2014

LTIP
LTIP
LTIP∆
LTIP∆
LTIP∆

06/06/2011
06/06/2011
02/04/2012
02/04/2013
01/04/2014

37,348
56,768
–

135,841
135,841
201,628
169,477
–

RSA

06/06/2011

90,561

Sharesave∆ 05/04/2012

4,558

Jean-Philippe Mouton
DBSS∆
12/03/2012
DBSS∆
11/03/2013
DBSS∆
03/03/2014

LTIP
LTIP
LTIP
LTIP
LTIP

01/04/2011
01/04/2011
02/04/2012
02/04/2013
01/04/2014

14,625
18,086
–

61,483
61,483
84,426
138,717
–

–
–
31,144

–
–
–
–
73,460

–

–
–
23,617

–
–
–
–
60,711

685
1,717
942

2,492
4,111
6,102
5,129
859

–
–
–

33,838
–
–
–
–

104,495
–
–
–
–

1,661

22,558

69,664

38,033
58,485
32,086
128,604
–
139,952
207,730
174,606
74,319
596,607
–

0.00
0.00
0.00

n/a
n/a
0.00
0.00
0.00

Mar-14
Mar-15
Mar-16

n/a
n/a
Apr-16
Apr-17
Apr-18

180

408

Expiry date

Mar-19
Mar-20
Mar-21

n/a
n/a
Apr-19
Apr-20
Apr-21

–

268
547
715

14,893
–
–

–

–
–
–

–
–
–
–
–

7,357
–
–
–
–

54,126
–
–
–
–

4,558

329.04 May-17

Oct-17

–
18,633
24,332
42,965
–
61,483
84,426
138,717
60,711
346,047

0.00
0.00
0.00

n/a
n/a
0.00
0.00
0.00

Mar-14
Mar-15
Mar-16

n/a
n/a
Apr-16
Apr-17
Apr-18

136

337

Mar-19
Mar-20
Mar-21

n/a
n/a
Apr-19
Apr-20
Apr-21

∆ Indicates awards granted in the form of share options.

General notes

1. Face values for the DBSS and LTIP awards made in 2014 have been calculated using the grant price in accordance with the respective plan rules:
– For the DBSS, the grant price was 576.83 pence, which was the average share price over the three business days immediately preceding the award date; and
– For the LTIP, the grant price was 555.40 pence, which was the average share price over the five business days immediately preceding the award date.
– Notional dividend shares accruing are not included in the calculation.

2. Details of the performance measures and conditions for the LTIP can be found on page 81.

3. The aggregate gain from share awards that vested during 2014 was £1,081,131 (2013: £3,025,252).

4. For LTIP awards made to Jean-Philippe Mouton prior to 2014, there is no accrual of notional dividend shares. For French tax reasons, LTIP awards granted to Jean-Philippe

Mouton are in the form of conditional awards of free shares, not share options.

The Executive Directors’ interests in ordinary shares of the Company under the Share Incentive Plan (SIP) as at 31 December 2014 are shown
in table 76. The shares are held under a SIP trust. Jean-Philippe Mouton is not eligible to participate in the SIP.

Table Fig 76
Executive Directors’ SIP interests as at 31 December 2014

David Atkins
Peter Cole
Timon Drakesmith

Note

1. The free shares were awarded on 17 April 2014 at 560.00 pence per share.

Total SIP shares
1 January 2014
9,874
11,144
3,348

Partnership
shares
purchased
578
578
293

Matching
shares
awarded
843
843
385

Free shares1
awarded
535
535
535

Dividend
shares
purchased
324
362
117

Total SIP shares
31 December
2014
12,154
13,462
4,678

www.hammerson.com 89

CORPORATE GOVERNANCE REPORT
2014 REMUNERATION: IMPLEMENTATION REPORT CONTINUED

ADVISORS
The following advisors provided services to the Committee during the year:

• FIT Remuneration Consultants LLP (FIT) was appointed by the Committee as advisors on 17 August 2011. FIT provided advice on reward
structures and levels and aspects of the Company’s future remuneration policy. FIT is a member of the Remuneration Consultants Group
and complies with their code of conduct. However, to avoid any conflict of interest, the terms of engagement (available on request to
shareholders) specify that FIT will only provide advice expressly authorised by or on behalf of the Committee. Additionally, where
instructions are taken on behalf of the Committee from employees of the Company, FIT ensures that the Committee is kept informed of
the broad scope of such matters. The fees paid to FIT during 2014, which were charged on their standard terms, were £84,277 (excluding
VAT) (2013: £98,852, excluding VAT). FIT did not provide any other services to the Company during 2014, and the Committee remains
satisfied that all advice was objective and independent.

• Herbert Smith Freehills LLP (HSF) provide legal advice to the Company, and Lane Clark & Peacock LLP (LCP) provide actuarial advice

to the Company. Advice from HSF and LCP, concerning the closure of the defined benefit pension scheme and the consequences for
Executive Directors who would no longer participate as a result, was made available to the Committee during 2014.

• The Chief Executive, Chief Financial Officer and senior Human Resources staff attend meetings by invitation, but are not present during
discussions concerning their own remuneration. The Company Secretary is the Secretary to the Committee. The Chief Executive, senior
Human Resources staff and the Company Secretary provided advice to the Committee on matters relating to the Policy and also
Company practices.

2014 AGM: STATEMENT OF VOTING
At the Company’s Annual General Meeting held on 23 April 2014, votes cast by proxy at the meeting in respect of the Directors’ Remuneration
Report were as follows. No issues concerning remuneration were raised by shareholders during the Annual General Meeting.

Table Fig 77

Resolution
To receive and approve the Directors’ Remuneration Policy
To receive and approve the 2013 Directors’ Annual
Remuneration Report (excluding the Remuneration Policy)

Notes

Votes For

Votes Against

Total votes cast Votes withheld

No. of shares
534,234,020

% of shares
voted

No. of shares
97.11% 15,898,048

% of shares
voted
2.89%

% of issued
share capital1 No. of shares
175,5832

77.17%

537,765,609

97.75% 12,366,033

2.25%

77.17%

176,0092

1. Issued share capital as at the record date for voting at the Annual General Meeting (17 April 2014) was 712,902,066 ordinary shares.

2. Represents 0.02% of the issued share capital as at the record date.

90 Hammerson plc Annual Report 2014

IMPLEMENTATION OF REMUNERATION
POLICY IN 2015

Shareholder approval for the remuneration policy (Policy) was received at the 2014 Annual General Meeting and the Company is not
making changes to the Policy that require shareholder approval at the 2015 Annual General Meeting. The Policy is reproduced for reference
from page 170.

A statement on the implementation of the Policy during 2015 is presented in table 78. The remuneration scenarios as shown in the Policy
have been updated overleaf to reflect 2015 planned implementation.

Table Fig 78
Summary – 2015 planned implementation of the Policy

Policy element

Base Salary
Details on page 78

Pension
Details on page 82

Benefits

Implementation of Policy during 2015

No increases to current salaries are proposed for 2015.

All Directors will receive a salary supplement by way of pension provision.

No changes to current arrangements are proposed for 2015.

Annual Incentive Plan (AIP) and
deferral under the Deferred Bonus
Share Scheme (DBSS)
Details on page 78

AIP maximum for Executive Directors in 2015 will remain at 200% of base salary.

Performance measures for the AIP in 2015 remain weighted 70% towards Group financial
targets and 30% personal objectives.

Group financial targets comprise: 25% adjusted Group earnings per share; 25% Total Property
Return relative to IPD; 20% Group operational targets.

40% of AIP vesting for 2015 will be deferred by making an award of shares under the DBSS
(deferral period of 2 years).

Long Term Incentive Plan
Details on page 81

As explained in the Chairman’s letter, award levels for Executive Directors for 2015 will be
150% of base salary, below the normal level stated within the Policy of 200%.

Performance measures for LTIP awards granted in 2015 are unchanged, except that the earnings
per share performance measure is calculated by reference to outperformance relative to a blend
of CPI in the UK and France.

All-employee arrangements

Continued opportunity to participate in all-employee arrangements on the same basis as all
staff in the UK or France as appropriate.

Share Ownership Guidelines

Remain at 150% of base salary for the Chief Executive and 100% of base salary for all other
Executive Directors.

Chairman and Non-Executive
Directors’ fees

Chairman’s fee – £320,000 p.a.

Non-Executive Director’s fee – £55,000 p.a. There are also additional fees paid to the Senior
Independent Director, Chairmen of the Audit and Remuneration Committees and for
membership of these committees.

www.hammerson.com 91

CORPORATE GOVERNANCE REPORT
2014 REMUNERATION: IMPLEMENTATION REPORT CONTINUED

Chart Fig 79
Scenarios: 2015 Implementation

David Atkins

Peter Cole

Timon Drakesmith

Jean-Philippe Mouton

£2,887

31%

41%

£1,619

14%

37%

(£000)

3000

2500

2000

1500

500

£2,110

31%

41%

£1,185

14%

37%

£1,937

32%

£1,070

42%

14%

38%

£509

100%

48%

26%

£1,579

31%

43%

£873
14%
39%

£413

100%

47%

100%

1000

£798

100%

49%

28%

£587

100%

49%

28%

Fixed

On-target

Maximum

Fixed

On-target

Maximum

Fixed

On-target

Maximum

Fixed

On-target

Maximum

Fixed Remuneration

Annual variable Remuneration

Long-term incentives

Table Fig 80
Assumptions – 2015 Executive Director remuneration scenario

Assumptions
Fixed

• Compares base salary, benefits, pension and participation in the UK all-employee share plans. Jean-Philippe

Mouton’s data has been converted at a rate of £1: €1.241.

• Base salary is that to be paid in 2015.

• Benefits are as shown in the Single Figure Remuneration Table for 2014 (table 52) on page 77 (except for
Jean-Philippe Mouton where the amount he received under the profit sharing plan has been excluded
from his 2014 benefits figure for these purposes (see On-Target and Maximum below).

• Pensions reflect salary supplements in lieu of pensions (see page 82). The pension figure for Jean-Philippe

Mouton is as shown on the Single Figure Remuneration Table on page 77.

David Atkins
Peter Cole
Timon Drakesmtih
Jean-Philippe Mouton

Base Salary
£000
597
435
408
329

Benefits
£000
22
22
19
10

Pension
£000
179
130
82
74

Total Fixed
£000
798
587
509
413

On-Target

Based on the reward that the Executive Director would receive if performance was in line with expectation
(excluding share price appreciation and dividends):

• AIP: consists of on-target levels (equal to 50% of bonus maximum).

• LTIP: consists of the threshold level of vesting, being 25% of the face value of the award.

• France profit sharing (Jean-Philippe Mouton only): consists of on-target levels (equal to 50% of the current

capped vesting level of €18,774).

Maximum

Based on the maximum remuneration receivable (excluding share price appreciation and dividends):

• AIP: consists of the maximum bonus (200% of base salary).

• LTIP: assumes maximum vesting of awards (150% of base salary for 2015).

• France profit sharing (Jean-Philippe Mouton only): assumes maximum vesting at the current capped

vesting level of €18,774.

92 Hammerson plc Annual Report 2014

The objective of the Committee in implementing the Policy during 2015, in line with the Main Principle D.1 of the UK Corporate Governance
Code, is to ensure that the design of Executive Directors’ remuneration promotes the long-term success of the Company and that performance-
related elements should be transparent, stretching and rigorously applied. The variable pay arrangements reflect the Company’s strategic
priorities, taking suitable account of risk and corporate social responsibility factors. Variable pay structures include provision for malus and
claw-back as set out in the Policy, which is reproduced from page 170.

Implementation of the Policy requires the Committee to continue to take into account remuneration packages available within other comparable
companies, the Company’s overall performance, internal relativities, achievement of corporate objectives, individual performance and experience,
published views of institutional investors and general market trends and performance.

Generally, two-thirds of the Executive Directors’ total target remuneration (excluding pension and benefits) is performance related, through the
annual performance-related bonus plan (AIP) and a long term incentive plan (LTIP). Performance measures associated with remuneration are
linked to key performance indicators incorporating group financial targets, as set out on page 3 and stretching personal performance objectives.

By order of the Board

Sarah Booth
General Counsel and Company Secretary
13 February 2015

www.hammerson.com 93

CORPORATE GOVERNANCE REPORT
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE

This section of the Corporate Governance Report details the
Company’s compliance with the Principles set out in the UK Corporate
Governance Code (Code) which is available at www.frc.org.uk. This
section should be read in conjunction with the Corporate Governance
Report as a whole as set out on pages 60 to 99.

On 17 September 2014, a revised UK Corporate Governance Code
was published. The new Code applies to companies with reporting
periods beginning on or after 1 October 2014. Hammerson will report
in accordance with the requirements of the new Code in 2015.

A. Leadership
A.1 The Role of the Board
The Board is collectively responsible to the Company’s shareholders
for the long-term success of the Group and the delivery of 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 operates through a sound risk management
and internal control system, details of which can be found
on pages 55 to 59 and 73 to 74.

The Board has a formal schedule of matters specifically reserved for
its decision which can be accessed at www.hammerson.com.

The Board has regular scheduled meetings throughout the year and
held six scheduled meetings in 2014. Additional Board conference calls
are held as required between the formal Board meetings. The table
below includes attendance at formal Board meetings and scheduled
Board conference calls. Non-Executive Directors are encouraged to
communicate directly with Executive Directors and senior management
between formal Board meetings. All Directors are expected to attend all
meetings of the Board, and of those Committees on which they serve
and the Annual General Meeting (AGM), and to devote sufficient time
to the Company’s affairs to enable them to fulfil their duties as Directors.
Details of Directors’ attendance at each of the Board and Committee
meetings during 2014 are set out in the table below.

Table Fig 81
Board and Committee meetings attendance

A.2 Division of responsibilities
The roles and responsibilities of the Chairman and Chief Executive are
separate. They are clearly defined and documented and approved by the
Board. The Chairman, David Tyler, is responsible for the operation of the
Board. The Chief Executive, David Atkins, is responsible for leading and
managing the business within the authorities delegated by the Board.

A.3 The Chairman
The Chairman sets the Board’s agenda and ensures that important
matters and in particular strategic issues, receive adequate time and
attention at meetings. The annual Board Strategy Day is dedicated to
considering the future direction of the Company at the start of the
business planning process.

Further details of the 2014 Board Strategy
Day can be found on page 66.

At the time of becoming Chairman in 2013, David Tyler was considered
independent. In accordance with the Code, the continuing test of
independence for the Chairman is not appropriate.

A.4 Non-Executive Directors
Anthony Watson is the Senior Independent Director. He 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, 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.

The Senior Independent Director chairs an annual meeting of Executive
and Non-Executive Directors without the Chairman present to appraise
the Chairman’s performance and to address any other matters which
the Directors might wish to raise. The outcome of these discussions
is conveyed by the Senior Independent Director to the Chairman.

David Tyler
David Atkins
Peter Cole
Timon Drakesmith
Jean-Philippe Mouton
Gwyn Burr1,3,5
Terry Duddy
Jacques Espinasse1,3
Judy Gibbons3
John Hirst2
Anthony Watson1,4

Board
10/10
10/10
10/10
10/10
10/10
9/10
10/10
9/10
10/10
2/2
9/10

Audit
–
–
–
–
–
3/3
–
3/3
3/3
1/1
3/3

Remuneration
4/4
–
–
–
–
4/4
4/4
–
4/4
–
4/4

Nomination
2/2
–
–
–
–
2/2
2/2
2/2
2/2
–
2/2

1. The Director concerned was unable to attend one Board meeting due to a diary clash with another Board.

2. John Hirst retired following the AGM on 23 April 2014.

3. Appointed to the Nomination Committee on 23 July 2014.

4. Chairman of Remuneration Committee to 23 April 2014.

5. Chairman of Remuneration Committee from 23 April 2014. Present at January Remuneration Committee meeting by invitation.

94 Hammerson plc Annual Report 2014

Anthony Watson will retire from the Board following the 2015 AGM
and will be succeeded by Terry Duddy as Senior Independent Director.

The Chairman meets with the Non-Executive Directors as necessary,
but at least twice each year without the Executive Directors present.

If any Director has concerns about the running of the Company or
a proposed action which cannot be resolved, such concerns will be
recorded in the Board minutes. No such concerns arose in 2014.

B. Effectiveness
B.1 The Composition of the Board
During the year the Board reviewed the overall balance of skills,
experience, independence and knowledge of the Board and
Committee members.

The Board is satisfied that the Non-Executive Directors, each of
whom is independent from management and has no material
or other connection with the Company, are able to exercise
independent judgement.

The Board undertakes an annual review of the independence of
its Non-Executive Directors in accordance with the criteria set out
within the Code.

Anthony Watson will retire following the 2015 AGM and it is planned
that Jacques Espinasse will retire from the Board in April 2016.

There are currently seven Non-Executive Directors (including the
Chairman) and four Executive Directors on the Board.

B.2 Appointments to the Board
The Nomination Committee, chaired by the Chairman and
consisting of all Non-Executive Directors, leads the process
for Board appointments and makes recommendations to
the Board. The Committee’s terms of reference can be found
at www.hammerson.com.

Further details of the work of the Nomination
Committee can be found on pages 68 to 70.

Disclosures on diversity can be found
on pages 35 and 70.

During the year the Nomination Committee appointed Spencer
Stuart, an independent executive search firm, which does not have
any other connection with the Company, to identify non-executive
director candidates. Following a thorough search carried out by
Spencer Stuart, Pierre Bouchut was identified as a potential candidate
and subsequently recommended to the Board by the Committee.
Pierre Bouchut was appointed as a Non-Executive Director
and member of the Audit and Nomination Committees on
13 February 2015.

Further details of the recruitment process are described on page 70.

B.3 Commitment
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 asked to confirm that they can make the required
commitment. Their commitment to their role is reviewed annually
as part of their annual appraisal. Letters of appointment for the
Non-Executive Directors are available for inspection at the AGM.

Positions held by Non-Executive Directors
are set out on pages 98 and 99.

Each Executive Director is encouraged to take a non-executive
position in another company or organisation. The appointment
to such a position is subject to the approval of the Board which
considers, in particular, the time commitment required.

B.4 Development
All Directors appointed to the Board receive an induction programme
which takes into account their qualifications and experience. 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 advisors and external auditor, where
appropriate. Executive Directors are subject to the Company’s annual
performance development review process through which their
performance against pre-determined objectives is reviewed and
their personal and professional development needs are considered.

Non-Executive Directors’ training and personal development
requirements are reviewed and agreed as part of the annual
appraisal of their performance, conducted by the Chairman.
Non-Executive Directors are encouraged to attend seminars and
undertake external training at the Company’s expense in areas
considered appropriate for their professional development
including on issues relevant to the Board and Committees to
which they belong.

Details of the development programme for Jacques Espinasse
can be found on page 65.

B.5 Information and support
The Directors have access to independent professional advice
at the Company’s expense and to the advice and services of
the Company Secretary who advises the Board on corporate
governance matters. The Board and its Committees receive
high-quality, up-to-date information for review in good time
before each meeting. The Company Secretary ensures that Board
procedures are followed and that the Company and the Board
operate within applicable legislation. The Company Secretary is
also responsible for facilitating Directors’ induction and assisting
with identifying and enabling appropriate training and for
Board performance evaluation.

The appointment and removal of the Company Secretary is a matter
requiring approval of the Board.

B.6 Evaluation
In 2013 an external performance evaluation of the Board and its
Committees was facilitated by IDDAS, which had no other connection
with the Company. The evaluation considered the balance of skills of the
Board, diversity, independence, knowledge of the Company and the
Board’s effectiveness. Details of that evaluation were provided in last year’s
Annual Report. The next externally facilitated performance evaluation
of the Board and its Committees is likely to be conducted in 2016.

www.hammerson.com 95

CORPORATE GOVERNANCE REPORT
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE CONTINUED

The Chairman carries out a formal annual performance evaluation
individually with each Non-Executive Director to review whether the
Non-Executive Director continues to contribute effectively and
demonstrates commitment to the role.

•

Identify and, as far as possible, mitigate potential impediments
to the Group achieving its objectives; and

• Ensure compliance with relevant legislation, rules and regulations.

The Non-Executive Directors, led by the Senior Independent
Director are responsible for the annual performance evaluation
of the Chairman. The Chairman’s evaluation was carried out in early
2015 and the Board was updated subsequently.

The Directors concluded that following the internal Board effectiveness
evaluation in 2014 the Board and its Committees operate effectively
and that each Director continues to contribute effectively and
demonstrates commitment to the role.

More details of the internal Board effectiveness
evaluation are provided on page 67.

B.7 Election and re-election
All Directors are subject to election at the first AGM following their
appointment. Pierre Bouchut will stand for election at the AGM in
April 2015 and the Board recommends his election. It is planned that
Anthony Watson will retire from the Board at the conclusion of the
AGM in April 2015. With that exception, all the other Directors are
submitting themselves for re-election at the 2015 AGM and are
subject to annual re-election.

Biographical details for all Directors are on pages
98 and 99. Further discussion on the balance of skills
and experience on the Board is provided on page 69.

C. Accountability
C.1 Financial and business reporting
The Board considers that the Annual Report, taken as a whole, is fair,
balanced and understandable and provides the information necessary
for shareholders to assess the Company’s position and performance,
business model and strategy.

A statement of the Directors’ responsibilities regarding the financial
statements is set out on page 102.

A statement on the status of the Company as a going
concern is set out on page 54.

An explanation of the Group’s strategy and business model is
available on pages 1 to 31. An assessment of the principal
risks facing the Company are set out on pages 55 to 59 and
performance metrics are set out on pages 36 to 39.

C.2 Risk Management and internal control
The Board has established processes for monitoring sound
risk management and internal control which allow it to review
the effectiveness of the systems in place within the Group.

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 information;

It must be recognised that the Group’s internal controls provide
reasonable and not absolute assurance against material misstatement
or loss.

Management has established a risk management framework and
sufficient procedures necessary to enable the Directors to report on
internal controls in compliance with the Code. These 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. Reports on key risks to the Group are made
regularly to the Board via the Audit Committee. The Board allocates
responsibility for the management of each key risk to the Executive
Directors and senior executives within the Group.

Further explanation of the Company’s approach
to risk management is on pages 55 to 59 and 73 to 74.

C.3 Audit Committee and Auditors
The Audit Committee comprises five independent Non-Executive
Directors. It has three scheduled meetings per year, organised around
the Company’s reporting schedule. During 2014 the Audit Committee
met three times. In 2015, and in future years, it is planned that there will
be an additional scheduled meeting to review the year-end valuation
of the Group’s property portfolio by the valuers, DTZ Debenham Tie
Leung (DTZ).

Details of the composition of the Audit Committee
are set out on pages 71.

The experience and background of members of the
Audit Committee are on pages 69 and 98 to 99.

The Audit Committee assists the Board to fulfil its responsibility in
relation to: ensuring that management has systems and procedures in
place to ensure the integrity of financial information; maintaining an
appropriate relationship with the Group’s external auditor Deloitte LLP
(Deloitte); reviewing the effectiveness, objectivity and independence
of Deloitte including the scope of work and the fees paid to Deloitte;
and reviewing the Company’s internal audit arrangements. Further
details are provided in the terms of reference for the Audit Committee
which are available at www.hammerson.com.

The Audit Committee Chairman regularly reports to the Board details
of the work carried out by the Audit Committee in accordance with its
terms of reference.

Jacques Espinasse, the Chairman of the Audit Committee, has been
determined by the Board to have recent and relevant financial
experience as required by the Code. It is planned that Jacques Espinasse
will retire as Chairman of the Audit Committee and as a Non-Executive
Director of the Board at the conclusion of the 2016 AGM.

The Chairman of the Board, the Chief Executive, the Chief Financial
Officer and other members of the senior finance management team
together with senior representatives of Deloitte are invited to attend all

96 Hammerson plc Annual Report 2014

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 Deloitte.

E. Relations with Shareholders
E.1 Dialogue with Shareholders
The Company actively engages with shareholders.

The Audit Committee meets with Deloitte and with Ernst & Young LLP,
the internal auditor (which undertakes the majority of the Company’s
internal audit reviews), in the absence of management at least once
each year.

DTZ and Deloitte have full access to each other and the Chairman
of the Committee meets with DTZ and Deloitte as part of the half-year
and year end valuations to ensure that they are each satisfied that
there has been a full and open exchange of information and views.

The Audit 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 meets these recommendations.

Details of how the Audit Committee has discharged its
responsibilities during the year are provided in the Audit
Committee Report on pages 71 to 74.

D. Remuneration
D.1 The level and components of remuneration
The principal responsibilities of the Remuneration Committee are
determining and agreeing with the Board the overall remuneration
principles and framework for the remuneration of the Executive
Directors, the Company Secretary and the other members of the Group
Executive Committee. The terms of reference for the Committee are
available at www.hammerson.com. The terms of reference are reviewed
annually by the Board. The Chairman of the Committee reports on
the Committee’s activities at the subsequent Board meeting.

Gwyn Burr joined the Remuneration Committee in February 2014
and succeeded Anthony Watson as Chairman of the Committee
after the 2014 AGM.

The Directors’ Remuneration Report can be found
on pages 75 to 93.

D.2 Procedure
In determining policy on executive remuneration the Remuneration
Committee takes into account all factors which it deems necessary
including relevant legal and regulatory requirements, the provisions
of the Code and associated guidance. Further details are provided in
the terms of reference for the Remuneration Committee which are
available at www.hammerson.com.

Details of the composition of the Remuneration Committee
are on page 75.

Details of advisors who provided services to the
Remuneration Committee during the year are on page 90.

During 2014 no individual was present when his or her own
remuneration was being determined.

Throughout the year the Company has undertaken a wide variety
of meetings, presentations and road shows.

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

Hammerson’s website contains information of interest to both
institutional and private shareholders.

Further details about relations with shareholders can be found in
the Corporate Governance Report on page 65 and in the Directors’
Remuneration Policy on page 182.

E.2 Constructive use of General Meetings
At general meetings, the proxy appointment form provides
shareholders with the option to direct their proxy vote for each
resolution 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. 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, is given at the general meeting
and is made available on the Company’s website. Notice of general
meetings is despatched to shareholders at least 14 days in advance.

Separate resolutions are proposed on each substantially separate issue.

In the event that, in the opinion of the Board, a significant proportion
of the votes is cast against a resolution at any general meeting, the
Company would explain the actions it intends to take to understand the
reasons behind the vote result, when announcing the results of voting.

The AGM will be held on 22 April 2015 and is an opportunity for
shareholders to attend and vote on the resolutions proposed.

The Notice of AGM is available at www.hammerson.com and is
despatched to shareholders who have requested a hard copy of the
documentation from the Company, together with explanatory notes,
at least 20 working days before the AGM. Separate resolutions are
proposed on each substantially separate issue, including a resolution
to approve the Annual Report.

All Directors normally attend the AGM as well as the Company
Secretary. The Chairmen of the Audit, Remuneration and Nomination
Committees are available to answer questions.

The Board welcomes questions from shareholders. They have
an opportunity to raise issues formally at the AGM or informally
with Directors before or after the meeting.

www.hammerson.com 97

CORPORATE GOVERNANCE REPORT
DIRECTORS’ BIOGRAPHIES

David Tyler
Non-Executive Director and Chairman (Age 62)
Appointed to the Board: 12 January 2013 and appointed
Chairman on 9 May 2013.

Committee membership: Remuneration Committee and
Chairman of the Nomination Committee.

Other appointments: Chairman of J Sainsbury plc and
non-executive director of Burberry plc.

Past appointments: Chairman of Logica plc and 3i Quoted Private
Equity plc. 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. Non-executive director
of Experian plc and Reckitt Benckiser Group plc.

David Atkins
Chief Executive (Age 48)
Appointed to the Board: 1 January 2007 and appointed
Chief Executive on 1 October 2009.
Other appointments: Member of the executive board of the
European Public Real Estate Association. President, director and
member of the advisory committee of the British Council of Shopping
Centres. Member of the policy committee of the British Property
Federation. Director and trustee of the Reading Real Estate Foundation.

Peter Cole
Chief Investment Officer (Age 56)
Appointed to the Board: 1 October 1999.
Past appointments: President and general council member of
the City Property Association.

Timon Drakesmith
Chief Financial Officer (Age 49)
Appointed to the Board: 30 June 2011.
Other appointments: Non-executive director of Value Retail PLC.
Chairman of VIA Outlets advisory committee and of the British Property
Federation’s finance committee.
Past appointments: Finance director of Great Portland Estates plc
and the MK Electric division of Novar plc. Group director of financial
operations of Novar plc. Other financial roles at Credit Suisse, Barclays
and Deloitte Haskins and Sells.

Jean-Philippe Mouton
Executive Director (Age 53)
Appointed to the Board: 1 January 2013.
Past appointments: Director of strategic planning at Disneyland Paris
and roles at The Walt Disney Company and Standard Chartered Bank.

Anthony Watson CBE
Non-Executive Director and
Senior Independent Director (Age 69)
Appointed to the Board: 1 February 2006.
Committee membership: Audit Committee, Nomination
Committee and Remuneration Committee.
Other appointments: Senior independent director of both Witan
Investment Trust plc and Lloyds Banking Group plc. Member of the
Norges Bank Investment Management corporate governance advisory
board. Chairman of Lincoln’s Inn investment committee. Director
of the Queen’s University of Belfast foundation board. Member of
the advisory board of the Association of Corporate Treasurers.
Past appointments: Chairman of Marks and Spencer Pension
Trust Limited, Asian Infrastructure Fund Limited and Strategic
Investment Board (Northern Ireland). Non-executive director
of Vodafone Group plc.

98 Hammerson plc Annual Report 2014

Gwyn Burr
Non-Executive Director (Age 52)
Appointed to the Board: 21 May 2012.
Committee membership: Audit Committee, Nomination
Committee and Chairman of the Remuneration Committee.
Other appointments: Member of board, remuneration committee
and chairman of nominations committee of Sainsbury’s Bank plc.
Non-executive director of the Financial Ombudsman Service,
Wembley Stadium, Just Eat plc, Metro SG and DFS Trading Limited.
Past appointments: Senior roles in marketing, customer service and
financial services at Asda plc. Customer service and colleague director
at J Sainsbury plc. Non-executive director of the Principality Building
Society. Director of the Incorporated Society of British Advertisers.
Chair of Business in the Community, community investment board.

Terry Duddy
Non-Executive Director (Age 58)
Appointed to the Board: 3 December 2009.
Committee membership: Nomination Committee and
Remuneration Committee.
Other appointments: Chairman of Retail Trust.
Past appointments: Chief executive of Home Retail Group plc.
Director of DSG Retail Limited and trustee of Education and
Employers Taskforce.

Jacques Espinasse
Non-Executive Director (Age 71)
Appointed to the Board: 1 May 2007.
Committee membership: Nomination Committee and
Chairman of the Audit Committee.
Other appointments: Non-executive director and member
of the audit and remuneration committees of La Banque Postale
Asset Management and SES. Non-executive director and chairman
of the audit committee of AXA Belgium. Chairman of the
Fondation JED-Belgique.
Past appointments: Chief financial officer of Vivendi. Non-executive
director of Canal+ France, Maroc Telecom, SFR and Universal Music
Group. Non-executive director and chairman of the audit committee
of AXA Bank Europe and AXA (Holdings) Belgium.

Judy Gibbons
Non-Executive Director (Age 58)
Appointed to the Board: 1 May 2011.
Committee membership: Audit Committee,
Nomination Committee and Remuneration Committee.
Other appointments: Non-executive director of Guardian
Media Group plc, Michael Kors Holdings Limited and Virgin
Money Giving Limited. 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.

Pierre Bouchut
Non-Executive Director (Age 59)
Appointed to the Board: 13 February 2015.
Committee membership: Audit Committee and Nomination
Committee.
Other appointments: Executive vice president and chief financial
officer of Delhaize Group SA. Non-executive director of La Rinascente
SpA. Non-executive member of the advisory boards of both
Qualium Investissement and Lombard Odier Asset Management
(Switzerland) SA.
Past appointments: Executive director growth markets zone
and chief financial officer of Carrefour SA. Chief financial officer
and member of the management board of Schneider Electric SA.
Chief executive officer and member of the board of Casino
Guichard-Perrachon SA.

Sarah Booth
General Counsel and Company Secretary (Age 48)
Sarah joined Hammerson as General Counsel in March 2010 and was
appointed Company Secretary in September 2011. Prior to joining
Hammerson, Sarah had been General Counsel at Christian Salvesen plc
and Sodexo amongst others. Sarah qualified as a solicitor in Scotland.

See the Nomination Committee Report for further details on
Directors’ skills and expertise on page 69.

www.hammerson.com 99

CORPORATE GOVERNANCE REPORT

DIRECTORS’ REPORT

This report (Report) forms part of the management report as required
under Disclosure and Transparency Rule (DTR) 4. The Strategic Report
on pages 1 to 59, includes an indication of future likely developments
in the Company, details of important events since the year ended
31 December 2014, the Company’s business model and strategy.
The Corporate Governance Report on pages 60 to 99 is incorporated
in this Report by reference.

Articles of Association (Articles)
The Company’s Articles may be amended by special resolution in
accordance with the Companies Act 2006 (Act) and are available
at www.hammerson.com.

Branches
Details of the Company’s operations in France are provided on
pages 167 to 168.

Directors
Details of the Directors who served during the year are set out on
pages 98 to 99. John Hirst served as a Non-Executive Director until
23 April 2014 when he retired. Directors are appointed and replaced
in accordance with the Articles, the Act and the UK Corporate
Governance Code. The powers of the Directors are set out in the
Articles and the Act.

Indemnification of and insurance for Directors
and officers
The Company maintains directors’ and officers’ liability insurance,
which is reviewed annually. The Company’s Directors and officers
are adequately insured in line with best practice. Directors are
indemnified under the Company’s Articles.

Dividends
Details of the recommended final dividend can be found on page 54.

Employees
Details of the Company’s policies regarding the employment of
disabled persons and its engagement with employees are provided
on pages 34 and 35.

Financial Instruments
Details of the Group’s financial risk management in relation to its
financial instruments are available on pages 141 to 147.

Going Concern
The Company’s going concern statement can be found on page 54.

Greenhouse Gas Emissions Reporting
Information regarding the Company’s greenhouse gas emissions
can be found on page 29.

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 and private
placement notes, the lending banks or holders may require repayment
of outstanding amounts within 30 and 52 days respectively, of any
change of control.

Purchase of own shares
At the 2014 Annual General Meeting (AGM), the Company was
granted authority by shareholders to purchase up to 71,289,894
ordinary shares (10% of the Company’s issued ordinary share capital
as at 21 February 2014). This authority will expire at the conclusion of
the 2015 AGM at which a resolution will be proposed for its renewal.

Re-appointment of External Auditor and Disclosure
of Information
The re-appointment of Deloitte LLP (Deloitte) has been considered
and recommended by the Audit Committee to the Board. Deloitte is
willing to be re-appointed as the external auditor to the Company and
a resolution concerning Deloitte’s re-appointment will be proposed
at the AGM.

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

• So far as she or he is aware, there is no relevant information
of which the Company’s external auditor is unaware; and

• She or he has taken all the steps that she or he ought to

have taken as a Director in order to make herself or himself
aware of any relevant audit information and to establish that
the Company’s external auditor is aware of that information.

Responsibility Statement
The Directors’ responsibility statement is set out on page 102.

Share Capital and Substantial Shareholders
Details of the Company’s capital structure are set out on pages 147 to
149. The rights and obligations attached to the Company’s shares are
set out in the Articles. There are no restrictions on the transfer of shares
except the UK REIT restrictions.

At 31 December 2014 the following interests in voting rights over the
issued share capital of the Company had been notified in accordance
with DTR 5:

Table Fig 82

APG Algemene Pensioen Groep N.V.
BlackRock Inc.
Legal & General Investment
Management Ltd

Ordinary shares
of 25p each
68,227,094
50,223,602

At 31 December
2014 percentage of
total voting rights
9.57%
7.05%

25,717,804

3.61%

No changes to the above have been disclosed to the Company
between 31 December 2014 and 13 February 2015.

Sarah Booth
General Counsel and Company Secretary
13 February 2015

100 Hammerson plc Annual Report 2014

FINANCIAL
STATEMENTS

Directors’ responsibilities
Independent auditor’s report
Primary financial statements
Notes to the accounts
Company balance sheet
Notes to the Company accounts

OTHER INFORMATION
Portfolio analysis
Property details
Ten-year financial summary
Directors’ Remuneration policy
Shareholder information
Glossary
Index

102
103
106
113
153
154

158
164
169
170
183
186
188

F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S

www.hammerson.com 101

DIRECTORS’ RESPONSIBILITIES STATEMENT

Directors’ responsibilities in respect of the preparation
of the financial statements
The Directors are responsible for preparing the Annual 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. Under that law the Directors are required
to prepare the Group financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union and Article 4 of the IAS Regulation and 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).
Under company law the Directors must not approve the accounts
unless they are satisfied that they give a true and fair view of the state
of affairs of the Company and of the profit or loss of the Company
for that period.

In preparing the parent company financial statements, the Directors
are required to:

• Select suitable accounting policies and then apply them

consistently;

• Make judgments and accounting 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.

In preparing the Group financial statements, International
Accounting Standard 1 requires that Directors:

• Properly select and apply accounting policies;
• Present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;

• 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; and

• Make an assessment of the Company's ability to continue as a

going concern.

The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company and enable them to ensure
that the 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 financial statements may
differ from legislation in other jurisdictions.

Responsibility statement
We confirm that to the best of our knowledge:

• The financial statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company and
the undertakings included in the consolidation taken as a whole;
• The Strategic 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
that they face; and

• The Annual Report and financial statements, taken as a whole, are
fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company’s performance,
business model and strategy.

By order of the Board

David Atkins
Chief Executive Officer
13 February 2015

Timon Drakesmith
Chief Financial Officer
13 February 2015

102 Hammerson plc Annual Report 2014
102 Hammerson plc Annual Report 2014

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HAMMERSON PLC

Opinion on the financial statements of
Hammerson plc
In our opinion:

• The financial statements give a true and fair view of the state of

the Group’s and of the parent company’s affairs as at 31 December
2014 and of the Group’s profit for the year then ended;

• the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union;

• the parent company financial statements have been properly
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and

• the financial statements have been prepared in accordance

with the requirements of the Companies Act 2006 and, as regards
the Group financial statements, Article 4 of the IAS Regulation.

The financial statements comprise the Consolidated Income
Statement, the Consolidated Statement of Comprehensive Income,
the Consolidated and Company Balance Sheets, 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 29 for the consolidated financial statements and the
related notes A to L for the parent company financial statements.

The financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable law and
IFRSs as adopted by the European Union. The financial reporting
framework that has been applied in the preparation of the parent
company financial statements is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted
Accounting Practice).

Going concern
As required by the Listing Rules we have reviewed the Directors’
Responsibilities Statement contained on page 102 that the Group
is a going concern. We confirm that:

• we have concluded that the Directors’ use of the going concern

basis of accounting in the preparation of the financial statements
is appropriate; and

• we have not identified material uncertainties related to events or
conditions that may cast significant doubt on the Group’s ability
to continue as a going concern.

However, because not all future events or conditions can be
predicted, this statement is not a guarantee as to the Group’s
ability to continue as a going concern.

Our assessment of risks of material misstatement
There has been no significant change in the Group’s operations and our assessed risks of material misstatement described below, which are
those that had the greatest effect on the audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team,
are the same risks as in the prior year:

Risk

How the scope of our audit responded to the risk

Valuation of the property portfolio
• Hammerson plc (“Hammerson”) owns a portfolio of retail

property assets valued at £6,706.5 million at 31 December
2014 of which £4,427.3 million are held by subsidiaries and
£2,279.2 million by joint ventures (Hammerson’s share excluding
VIA Outlets). The valuation of the portfolio (including a number
of development properties) is a significant judgement area and
is underpinned by a number of assumptions.

• The Group uses professionally qualified external valuers to fair

value the Group’s portfolio at six-monthly intervals. The portfolio
(excluding development properties) is valued by the investment
method of valuation with development properties valued by
the same methodology with a deduction for all costs necessary
to complete the development together with an allowance for
remaining risk (‘the residual method’).

• Please see note 12 to the financial statements

• We assessed management’s process for reviewing and challenging

the work of the external valuer and development appraisals;

• We met with the external valuers of the portfolio to discuss and challenge

the valuation process, performance of the portfolio and significant
assumptions and critical judgement areas, including future lease income
and yields. We benchmarked these assumptions to relevant market
evidence including specific property sales and other external data;
• For development properties we assessed future costs to complete

based on development appraisals. We also tested controls around the
development cycle;

• We assessed the competence, independence and integrity of the external

valuer; and

• We performed audit procedures to assess the integrity of information

provided to the independent valuer including agreement on a sample
basis back to actual leases.

Investment property transactions
• Hammerson undertook acquisitions and disposals

during the year including acquiring a full controlling interest in
Highcross, Leicester for £180 million, acquiring Saint Sébastien,
Nancy for £109 million and disposing of its interests in
Queensgate Shopping Centre, Peterborough for £99 million.

• There is a risk that transactions may have complexity which

includes deferred consideration arrangements, rental top-up
payments or other contractual obligations which are not
appropriately recorded within the financial statements.

• We challenged management’s judgements by reviewing sale and

purchase agreements and other related documents;

• We assessed each transaction against the recognition, measurement and
classification criteria of the Group’s accounting policies set out in note 1
and applicable IFRSs; and

• We tested the accuracy and completeness of the disclosures in the

financial statements.

www.hammerson.com 103
www.hammerson.com 103

FINANCIAL STATEMENTS

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF HAMMERSON PLC CONTINUED

Risk

How the scope of our audit responded to the risk

Accounting for the investment in Value Retail

• Hammerson’s interest in Value Retail (carrying value
of £629 million) is equity accounted as an associate.
• The valuation of the Group’s investment in Value Retail

is primarily driven by the valuation of the Value Retail property
portfolio of £2,703 million of which Hammerson’s share is
£885 million. This is subject to similar judgements to those of
the Group’s own property portfolio above, including future
rental income and yields.

• Please see note 14 of the financial statements.

• We planned the scope of the audit and instructed the auditor of Value

Retail accordingly;

• We met with the auditor, Value Retail management and the external

valuer of the Value Retail property portfolio to discuss and challenge the
valuation assumptions including future rental income and yields; and

• We assessed the competence, independence and integrity of the

external valuer.

The description of risks above should be read in conjunction with the significant issues considered by the Audit Committee discussed on
page 72 and the significant accounting policies disclosed in note 1.

Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole, and not to
express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with respect to any of the
risks described above, and we do not express an opinion on these individual matters.

Our application of materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed
or influenced. We use materiality both in planning the scope of
our audit work and in evaluating the results of our work.

The UK and French components were subject to a full scope audit,
whilst Value Retail (accounted for as an associate) and VIA (accounted
for as a joint venture) were subject to an audit of specified
account balances, where the extent of our testing was based on
our assessment of the risks of material misstatement and of the
materiality of the Group’s operations at those components.

Our audit work at the four locations was executed at levels of
materiality applicable to each individual entity which were lower
than group materiality and ranged from £12.6 million to £16.5 million
(2013: £12.6 million to £16.5 million). For those balances impacting
EPRA Adjusted Profit Before Tax the materiality range was £3.2 million
to £4.35 million (2013: £3.2 million to £4.35 million).

The group audit team continued to follow a programme of planned
visits that has been designed so that the Senior Statutory Auditor or
a senior member of the group audit team visits each of the locations
where the group audit scope was focused at least once every two
years. In years when we do not visit a significant component we will
include the component audit team in our team briefing, discuss their
risk assessment, and review documentation of the findings from
their work.

At the parent entity level we also tested the consolidation process
and carried out analytical procedures to confirm our conclusion
that there were no significant risks of material misstatement of the
aggregated financial information of the remaining components
not subject to audit or audit of specified account balances. We
have obtained an understanding of the Group’s system of internal
controls and undertaken a combination of procedures, all of which
are designed to target the Group’s identified risks of material
misstatement in the most effective manner possible.

We determined materiality for the Group to be £30 million
(2013: £30 million), which is below 1% (2013: 1%) of shareholders’
equity. We determined materiality based on shareholders’ equity
as net asset value is a key performance indicator as it takes into
consideration the valuation of Hammerson’s property portfolio
and the investment in Value Retail.

In addition to net assets, we consider EPRA Adjusted Profit Before
Tax as a critical performance measure for the Group and a measure
used within the Real Estate industry. We applied a lower threshold of
£7.8 million (2013: £6.5 million) which equates to 4.5% (2013: 4%) of
that measure for testing all balances impacting that measure.

We agreed with the Audit Committee that we would report to
the Committee all audit differences in excess of £0.6 million
(2013: £0.6 million), as well as differences below that threshold that,
in our view, warranted reporting on qualitative grounds. We also
report to the Audit Committee on disclosure matters that we identified
when assessing the overall presentation of the financial statements.

An overview of the scope of our audit
Our group audit was scoped by obtaining an understanding of the
Group and its environment, including group-wide controls, and
assessing the risks of material misstatement at the group level.

Based on that assessment, we focused our group audit scope primarily
on the audit work at four significant components being the UK, France,
Value Retail and VIA Outlets (VIA). VIA was included within scope for
the first time in 2014 following the investment made in the year. These
four (2013: three) components together comprise 99% (2013: 99%)
of the Group’s net assets and 100% (2013: 100%) of profit before tax.

104 Hammerson plc Annual Report 2014
104 Hammerson plc Annual Report 2013

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 Strategic Report and the Directors’
Report for the financial year for which the financial statements
are prepared is consistent with the financial statements.

Matters on which we are required to report
by exception
Adequacy of explanations received and
accounting records
Under the Companies Act 2006 we are required to report to you if,
in our opinion:

• we have not received all the information and explanations we

require for our audit; or

• 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 are not in agreement

with the accounting records and returns.

We have nothing to report in respect of these matters.

Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our
opinion certain disclosures of Directors’ remuneration have not been
made or the part of the Directors’ Remuneration Report to be audited
is not in agreement with the accounting records and returns. We have
nothing to report arising from these matters.

Corporate Governance Statement
Under the Listing Rules we are also required to review the part of
the Corporate Governance Statement relating to the Company’s
compliance with ten provisions of the UK Corporate Governance
Code. We have nothing to report arising from our review.

Our duty to read other information in the Annual Report
Under International Standards on Auditing (UK and Ireland), we
are required to report to you if, in our opinion, information in the
Annual Report is:

• materially inconsistent with the information in the audited financial

statements; or

Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement,
the Directors are responsible for the preparation of the 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 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 Ethical Standards
for Auditors. We also comply with International Standard on Quality
Control 1 (UK and Ireland). Our audit methodology and tools aim to
ensure that our quality control procedures are effective, understood
and applied. Our quality controls and systems include our dedicated
professional standards review team and independent partner reviews.

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.

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 and 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 audited financial statements
and to identify any information that is apparently materially incorrect
based on, or materially inconsistent with, the knowledge acquired by
us in the course of performing the audit. If we become aware of any
apparent material misstatements or inconsistencies we consider the
implications for our report.

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

• apparently materially incorrect based on, or materially inconsistent

with, our knowledge of the Group acquired in the course of
performing our audit; or

13 February 2015

• otherwise misleading.

In particular, we are required to consider whether we have identified
any inconsistencies between our knowledge acquired during the audit
and the Directors’ statement that they consider the Annual Report is
fair, balanced and understandable and whether the Annual Report
appropriately discloses those matters that we communicated to the
Audit Committee which we consider should have been disclosed.
We confirm that we have not identified any such inconsistencies
or misleading statements.

www.hammerson.com 105
www.hammerson.com 105

FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2014

Continuing operations

Gross rental income

Operating profit before other net gains and share of results of joint ventures and associate

Other net gains

Share of results of joint ventures

Share of results of associate

Operating profit

Finance costs

Bond 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

Group

Share of results of joint ventures

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

Adjusted earnings per share

Notes

13A

14A

29C

11A

2014
£m

206.5

142.5

264.7

279.0

109.9

796.1

(106.7)

(8.7)

13.4

9.0

(93.0)

703.1

(1.0)

702.1

–

702.1

699.1

3.0

702.1

95.7p

–

95.7p

Restated*
2013
£m

176.0

119.1

86.3

128.7

101.5

435.6

(95.0)

(3.9)

(16.8)

6.4

(109.3)

326.3

(0.7)

325.6

5.4

9.5

14.9

340.5

337.4

3.1

340.5

45.3p

2.1p

47.4p

23.9p

23.1p

* Comparative figures have been restated following the change in accounting policy resulting from the adoption of IFRS 11 Joint Arrangements (see note 1 on page 113).

** Non-controlling interests relate to continuing operations.

106 Hammerson plc Annual Report 2014
106 Hammerson plc Annual Report 2014

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2014

Continuing and discontinued operations

Foreign exchange translation differences*
Net gain/(loss) on hedging activities*
Revaluation gains on owner-occupied property held in joint venture

Revaluation gains on participative loans within investment in associate

Net actuarial losses on pension schemes

Net (loss)/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

2014
£m

(136.4)

103.8

–

0.6

(11.5)

(43.5)

702.1

–

702.1

658.6

660.9

(2.3)

658.6

2013
£m

32.2

(31.9)

3.2

2.9

(2.4)

4.0

325.6

14.9

340.5

344.5

339.6

4.9

344.5

* Foreign exchange translation differences and net losses or gains on hedging activities would be recycled through the income statement in the event that foreign operations were disposed.

www.hammerson.com 107
www.hammerson.com 107

FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEET

As at 31 December 2014

Non-current assets
Investment and development properties
Interests in leasehold properties
Plant and equipment
Investment in joint ventures
Investment in associate
Other investments
Receivables

Current assets
Receivables
Cash and deposits

Total assets

Current liabilities
Payables
Tax
Borrowings

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

Total liabilities
Net assets

Equity
Share capital
Share premium
Translation reserve
Hedging reserve
Merger reserve
Other reserves
Retained earnings
Investment in own shares

Equity shareholders’ funds
Non-controlling interests**
Total equity
Diluted net asset value per share
EPRA net asset value per share

Notes

13A

14B

19A

29C

11B

2014
£m

4,427.3
33.2
5.0
2,341.5
628.8
1.4
79.3
7,516.5

97.8
28.6
126.4
7,642.9

204.4
0.3
–
204.7

2,287.1
0.5
33.0
72.5
2,393.1
2,597.8
5,045.1

196.1
1,222.9
239.0
(207.5)
374.2
19.6
3,136.2
(6.8)
4,973.7
71.4
5,045.1
£6.35
£6.38

Restated*
2013
£m

3,447.8
35.1
6.3
2,470.8
545.4
1.4
71.8
6,578.6

78.1
15.7
93.8
6,672.4

169.5
1.0
246.2
416.7

2,017.8
0.4
34.9
66.0
2,119.1
2,535.8
4,136.6

178.2
1,222.4
370.1
(311.3)
–
17.2
2,588.2
(4.9)
4,059.9
76.7
4,136.6
£5.70
£5.73

* Comparative figures have been restated following the change in accounting policy resulting from the adoption of IFRS11 Joint Arrangements (see note 1 on page 113).

** Non-controlling interests relate to continuing operations.

These financial statements were approved by the Board of Directors on 13 February 2015.
Signed on behalf of the Board

David Atkins
Director
Registered in England No. 360632

108 Hammerson plc Annual Report 2014
108 Hammerson plc Annual Report 2014

Timon Drakesmith
Director

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2014

Share
capital
£m

Share
premium
£m

Translation
reserve
£m

Hedging
reserve
£m

Merger
reserve
£m

Other
reserves
£m

Retained
earnings
£m

Investment
in own
shares**
£m

Equity
shareholders’
funds
£m

Non-
controlling
interests
£m

Total
equity
£m

178.2 1,222.4

370.1 (311.3)

–

17.2 2,588.2

Balance at 1 January
2014 – restated*
Issue of shares

Share issue costs

Share-based employee
remuneration

Cost of shares awarded
to employees

Transfer on award of own
shares to employees

Proceeds on award of own
shares to employees

Purchase of own shares

Dividends

Foreign exchange
translation differences

Net gain on hedging activities

Revaluation gains on
participative loans within
investment in associate

Net actuarial losses on
pension schemes

Profit for the year attributable
to equity shareholders

Total comprehensive
income/(loss) for the year

17.9

–

0.5

–

(131.1)

–

– 103.8

–

(131.1) 103.8

–

381.4

(7.2)

–

5.1

(3.6)

(4.9) 4,059.9
399.8

–
–

(7.2)

–

5.1

3.6

–

0.9

(0.9)

–

0.2

–

– (139.5)

–
(5.5)
–

76.7 4,136.6

–

399.8

(7.2)

5.1

–

0.2

(5.5)

–

0.2

(5.5)

(139.5)

(3.0)

(142.5)

–

0.6

(11.5)

699.1

688.2

–
–

–

(131.1)

(5.3)

(136.4)

103.8

0.6

(11.5)

–

103.8

0.6

(11.5)

699.1

3.0

702.1

–

660.9
(6.8) 4,973.7

(2.3)

658.6

71.4 5,045.1

Balance at 31 December 2014 196.1 1,222.9

239.0 (207.5)

374.2

19.6 3,136.2

Notes

* Comparative figures have been restated following the change in accounting policy resulting from the adoption of IFRS11 Joint Arrangements (see note 1 on page 113). In addition,

the balance of £7.2 million on the capital redemption reserve has been aggregated within other reserves.

** Investment in own shares is stated at cost.

www.hammerson.com 109
www.hammerson.com 109

FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2013

Restated*

Share
capital
£m

Share
premium
£m

Translation
reserve
£m

Hedging
reserve
£m

Other
reserves
£m

Retained
earnings
£m

Investment in
own shares**
£m

Equity
shareholders’
funds
£m

Non-
controlling
interests
£m

Total
equity
£m

Balance at 1 January 2013

178.2 1,222.3

339.7

(279.4)

18.1

2,378.3

(6.0)

3,851.2

74.5 3,925.7

Issue of shares

Share-based employee remuneration

Cost of shares awarded to employees

Transfer on award of own shares
to employees

Proceeds on award of own shares
to employees

Purchase of own shares

Dividends

Foreign exchange translation differences

Net loss on hedging activities

Revaluation gains on owner-occupied
property held in joint venture

Revaluation gains on participative loans
within investment in associate

Net actuarial losses on pension schemes

Profit for the year attributable to
equity shareholders

Total comprehensive income/(loss)
for the year

–

0.1

–

30.4

–

(31.9)

–

30.4

(31.9)

–

3.9

(6.0)

–

1.2

(1.2)

–

0.1

–

(130.1)

–

3.2

2.9

(2.4)

337.4

341.1

–

6.0

–

(4.9)

–

0.1

3.9

–

0.1

(4.9)

–

0.1

3.9

–

0.1

(4.9)

(130.1)

(2.7)

(132.8)

30.4

(31.9)

3.2

2.9

(2.4)

1.8

–

32.2

(31.9)

3.2

2.9

(2.4)

337.4

3.1

340.5

339.6

4.9

344.5

Balance at 31 December 2013

178.2 1,222.4

370.1

(311.3)

17.2

2,588.2

(4.9)

4,059.9

76.7 4,136.6

Notes

* Comparative figures have been restated following the change in accounting policy resulting from the adoption of IFRS11 Joint Arrangements (see note 1 on page 113). In addition,

the balance of £7.2 million on the capital redemption reserve has been aggregated within other reserves as at 1 January 2013.

** Investment in own shares is stated at cost.

110 Hammerson plc Annual Report 2014
110 Hammerson plc Annual Report 2014

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2014

Operating activities

Operating profit before other net gains and share of results of joint ventures and associate

– continuing operations

– discontinued operations

Increase in receivables

Increase/(Decrease)in payables

Adjustment for non-cash items

Cash generated from operations

Interest paid

Interest received

Tax paid

Distributions and other receivables from property joint ventures

Cash flows from operating activities

Investing activities

Property acquisitions

Development and major refurbishments

Other capital expenditure

Sale of properties

Acquisition of interest in associate

Distribution received from associate

Investment in joint ventures

Sale of interests in joint ventures

Increase in loans to joint ventures

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

Bond redemption premium and costs paid

Increase in non-current borrowings

(Decrease)/Increase in current borrowings

Dividends paid to non-controlling interests

Equity dividends paid

Cash flows from financing activities

Net increase/(decrease) in cash and deposits

Opening cash and deposits

Exchange translation movement

Closing cash and deposits

Notes

2014
£m

Restated*
2013
£m

142.5

–

142.5

(21.1)

23.5

12.2

157.1

(122.2)

9.1

(1.5)

85.6

128.1

(302.7)

(164.0)

(39.8)

5.8

–

11.5

(110.8)

149.6

(8.1)

0.9

(457.6)

392.6

0.2

(5.5)

(8.7)

340.7

(234.3)

(3.0)

(139.1)

342.9

13.4

15.7

(0.5)

28.6

119.1

4.6

123.7

(6.0)

(23.3)

6.1

100.5

(106.6)

6.4

(1.0)

98.7

98.0

–

(165.8)

(9.1)

174.5

(54.7)

45.0

(245.1)

76.3

(2.1)

(20.7)

(201.7)

0.2

0.1

(4.9)

(3.9)

146.0

86.9

(2.7)

(129.4)

92.3

(11.4)

26.8

0.3

15.7

* Comparative figures have been restated following the change in accounting policy resulting from the adoption of IFRS 11 Joint Arrangements (see note 1 on page 113). The cash flows for

2013 above relate to continuing and discontinued operations.

www.hammerson.com 111
www.hammerson.com 111

FINANCIAL STATEMENTS

ANALYSIS OF MOVEMENT IN NET DEBT

For the year ended 31 December 2014

At 1 January 2014 – restated*

Cash flow

Exchange

Balance at 31 December 2014

Restated*

At 1 January 2013

Cash flow

Exchange

Balance at 31 December 2013

Short-term
deposits
£m

Cash at bank
£m

–

0.1

–

0.1

15.7

13.3

(0.5)

28.5

Short-term
deposits
£m

Cash at bank
£m

14.4

(14.4)

–

12.4

3.0

0.3

15.7

Current
borrowings
including
currency swaps
£m

(246.2)

234.3

17.0

5.1

Current
borrowings
including
currency swaps
£m

(158.0)

(86.9)

(1.3)

(246.2)

Non-current
borrowings
£m

Net debt
£m

(2,017.8)

(2,248.3)

(340.7)

71.4

(93.0)

87.9

(2,287.1)

(2,253.4)

Non-current
borrowings
£m

(1,836.4)

(146.0)

(35.4)

(2,017.8)

Net debt
£m

(1,967.6)

(244.3)

(36.4)

(2,248.3)

* Comparative figures have been restated following the change in accounting policy resulting from the adoption of IFRS 11 Joint Arrangements (see note 1 on page 113).

112 Hammerson plc Annual Report 2014
112 Hammerson plc Annual Report 2014

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 2014, the following new and revised Standards and
Interpretations have been adopted and have affected the amounts
reported in these financial statements:

•

IFRS 10 Consolidated Financial Statements

IFRS 11 Joint Arrangements

IFRS 12 Disclosure of Interests in Other Entities

•
• Amendments to IAS 27 Separate Financial Statements
• Amendments to IAS 28 Investments in Associates and

Joint Ventures

• Amendments to IAS 32 Financial Instruments: Presentation
• Amendments to IAS 36 Impairment of Assets arising from
Recoverable Amount Disclosures for non-financial assets
• Amendments to IAS 39 Financial Instruments: Recognition

and Measurement.

At the date of approval of these financial statements the following
Standards and Interpretations relevant to the Group were in issue
but not yet effective and in some cases had not been adopted for
use in the European Union:

Issued, not yet effective and not yet endorsed for use in the
European Union
• Amendments to IAS 1 Disclosure Initiatives; effective for
accounting periods beginning on or after 1 January 2017

•

IFRS 9 Financial Instruments; effective for accounting periods
beginning on or after 1 July 2015
IFRS 15 Revenue from Contracts with Customers; effective for
accounting periods beginning on or after 1 January 2017.

Issued and endorsed for use in the European Union but not
yet effective
• Defined benefit plans: Employee Contributions (Amendments
to IAS 19 Employee Benefits); effective for accounting periods
beginning on or after 1 July 2014.

These pronouncements, when applied, will either result in changes
in presentation and disclosure, or are not expected to have a
material impact on the financial statements.

In the 2014 financial statements, the Group has adopted IFRS 11 Joint
Arrangements which is effective for accounting periods beginning
on or after 1 January 2014. Under IFRS 11, joint arrangements are
classified as either joint operations or joint ventures, depending on
the Company’s rights to the assets and obligations for the liabilities
of the arrangements. The new standard requires joint ventures to be
accounted for under the equity method and joint operations to be
reported on a proportionally consolidated basis recognising the
Company’s share of assets, liabilities, revenues and expenses.

The classification of the Group’s joint arrangements has been
evaluated and it has been concluded that the joint arrangements
fall within the definition of joint ventures. As a result the Group’s
interests, which were previously proportionally consolidated have
been presented on an equity accounted basis. The consolidated
income statement reflects the Group’s share of its joint ventures’
post-tax profit as ‘Share of results of joint ventures’ and the
consolidated balance sheet reflects the Group’s share of its joint
ventures’ net assets as ‘Investment in joint ventures’. The Group’s
profit for the year and equity shareholders’ funds are unaffected by
the change, but other income statement and balance sheet items in
the consolidated financial statements, such as net rental income and
investment and development properties have decreased reflecting
the reclassification from those line items of the amounts relating to
joint ventures.

The comparative figures have been restated to reflect the change
in accounting policy. The impact of these changes on the income
statement has been reflected in notes 2 and 3. The impact on the
balance sheet and net debt are shown in note 25. The share of results
from joint ventures is separately disclosed in note 13. Previously
reported cash flows have been reclassified within the cash flow
statement, and the cumulative gains on owner-occupied property
of £21.2 million, which was held in a joint venture, have been
reclassified from the ‘Revaluation reserve’ to ‘Retained earnings’
within the statement of changes in equity.

IFRS 9 will impact the measurement and classification of the
Group’s financial assets and financial liabilities. The Group has not
yet completed its evaluation of the effect of adoption.

Basis of preparation
The financial statements are prepared on a going concern basis,
as explained in the Financial Review on page 54.

The financial statements are presented in sterling. They are prepared
on the historical cost basis, except that investment and development
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.

As part of the Group’s strategy to focus on the retail sector, the Group
completed the disposal of the majority of its office portfolio between
July 2012 and June 2013. Consequently, the relevant assets and
liabilities were classified as held for sale. The income and expenditure
of these properties are classified as discontinued operations in the
comparative period to reflect the discontinuation of the Group’s
office property activities, which was considered to be a major line
of business. Details of discontinued operations in 2013 are set out
in note 9.

www.hammerson.com 113
www.hammerson.com 113

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

1: Significant accounting policies (continued)
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.

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.

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.

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.

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. Where the acquired
corporate vehicle 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.

Business combinations are accounted for using the acquisition
method. Any excess of the purchase consideration over the fair value
of the net assets acquired is recognised as goodwill, and reviewed
annually for impairment. Any discount received or acquisition related
costs are recognised in the income statement.

Accounting for joint ventures and associates
The accounting treatment for joint ventures and associates 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.

Associates are those entities over which the Group is in a position
to exercise significant influence, but not control or joint control.

114 Hammerson plc Annual Report 2014
114 Hammerson plc Annual Report 2014

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.

Joint ventures and associates
The results, assets and liabilities of joint ventures and associates are
accounted for using the equity method. Investments in joint ventures
and 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 joint venture or associate, less any impairment. Losses of a joint
venture or associate in excess of the Group’s interest in that entity are
recognised only to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the entity.
The Group eliminates upstream and downstream transactions with
its joint ventures, including interest, management fees and partner
loan balances.

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 = €1.289 (2013: £1 = €1.202). The principal
exchange rate used for the income statement is the average rate,
£1 = €1.241 (2013: £1 = €1.178).

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 and of debt raised in non-functional currencies.
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 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, at 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. Further details
are given in note 12.

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. 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.

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.

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.

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 or losses 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.

www.hammerson.com 115
www.hammerson.com 115

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

1: Significant accounting policies (continued)
Plant and equipment
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.

Management fees
Management fees are recognised in the period to which they relate.
Performance fee related elements are recognised at the end of the
performance period when the fee can be reliably estimated and is
due for payment. Management fees between the Group and its joint
ventures are eliminated on consolidation.

Employee benefits
Defined contribution pension plans
Obligations for contributions to defined contribution pension plans
are charged to the income statement as incurred.

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.

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 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.

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.

116 Hammerson plc Annual Report 2014
116 Hammerson plc Annual Report 2014

2: Profit for the year
As a result of the change in accounting policy resulting from the adoption of IFRS 11 referred to in note 1 on page 113, the Reported Group results,
as presented in column A in the following tables, have been amended to show the share of results from joint ventures on a separate line. To show the
impact of this change on the current and previously reported figures, the total share of results from Property joint ventures has been shown separately
in column B, and reallocated to the relevant financial statement lines. The Group’s share of results arising from its interest in premium outlets have not
been reallocated as management does not review these interests on a proportionally consolidated basis (see note 3). The Group’s share of results in
column C, aggregates these elements on a proportionally consolidated basis, which is then allocated between ‘Adjusted’ and ‘Capital and other’ for the
purposes of calculating figures in accordance with EPRA best practice.

Notes

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/(payable)

Employee and corporate costs

Net one-off restructuring costs

Administration expenses

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

Profit on the sale of properties

Loss on the sale of joint ventures

Joint venture formation costs written off

Revaluation gains on properties

Other net gains

Share of results of joint ventures

Share of results of associate

Operating profit

Net finance (costs)/income

Profit before tax

Current tax charge

Deferred tax charge

Profit for the year

Non-controlling interests

Notes

13A

14A

Profit for the year attributable to equity shareholders

11A

Notes

A Reported Group results as shown in the consolidated income statement on page 106.

B Share of results of Property joint ventures as shown in note 13A.

Reported
Group
£m

Share of
Property
joint ventures
£m

206.5

(0.6)

205.9

34.6

(40.0)

(5.4)

(12.4)

(17.8)

188.1

6.3

(48.9)

(3.0)

(45.6)

137.6

(1.3)

136.3

25.1

(30.1)

(5.0)

(13.8)

(18.8)

117.5

(0.7)

(0.2)

–

(0.9)

Total
£m

344.1

(1.9)

342.2

59.7

(70.1)

(10.4)

(26.2)

(36.6)

Adjusted
£m

344.1

(1.9)

342.2

59.7

(70.1)

(10.4)

(26.2)

(36.6)

305.6

5.6

(49.1)

(3.0)

(46.5)

5.6

(49.1)

–

(43.5)

142.5

116.6

259.1

262.1

0.6

(4.0)

(3.1)

271.2

264.7

279.0

109.9

796.1

(93.0)

703.1

(0.9)

(0.1)

702.1

(3.0)

699.1

–

165.6

(280.1)

–

2.1

(2.1)

–

0.6

(4.0)

(3.1)

436.8

430.3

(1.1)

109.9

798.2

(95.1)

703.1

(0.9)

(0.1)

702.1

(3.0)

699.1

–

0.9

16.0

279.0

(100.1)

178.9

(0.9)

–

178.0

(3.7)

174.3

2014

Total

Capital
and other
£m

–

(3.0)

0.6

(4.0)

(3.1)

436.8

430.3

(2.0)

93.9

519.2

5.0

524.2

–

(0.1)

524.1

0.7

524.8

C Aggregated results on a proportionally consolidated basis showing Reported Group together with share of Property joint ventures.

D Aggregated results on a proportionally consolidated basis allocated between ‘Adjusted’ and ‘Capital and other’ for the purposes of calculating EPRA earnings per share as shown

in note 11A.

www.hammerson.com 117
www.hammerson.com 117

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

2: Profit for the year (continued)

Notes (see page 117)

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

Notes

Restated
Reported
Group
£m

Share of
Property
joint ventures
£m

176.0

(0.5)

175.5

28.7

(33.4)

(4.7)

(10.6)

(15.3)

145.2

(1.4)

143.8

29.4

(34.6)

(5.2)

(16.0)

(21.2)

Total
£m

321.2

(1.9)

319.3

58.1

(68.0)

(9.9)

(26.6)

(36.5)

Adjusted
£m

321.2

(1.9)

319.3

58.1

(68.0)

(9.9)

(26.6)

(36.5)

Net rental income

160.2

122.6

282.8

Management fees receivable/(payable)

Employee and corporate costs

Administration expenses

Operating profit before other net gains and share
of results of joint ventures and associate

Gain on the sale of properties

Revaluation gains on properties

Other net gains

Share of results of joint ventures

Share of results of associate

Operating profit/(loss)

Net finance (costs)/income

Profit before tax

Current tax charge

Deferred tax credit

Profit from continuing operations

Profit from discontinued operations

Share of results of joint ventures

Profit for the year

13A

14A

13A

Non-controlling interests – continuing operations

Profit for the year attributable to equity shareholders

11A

Profit for the year attributable to equity shareholders

Continuing operations

Discontinued operations

11A

7.5

(48.6)

(41.1)

119.1

2.6

83.7

86.3

128.7

101.5

435.6

(109.3)

326.3

(0.8)

0.1

325.6

5.4

9.5

340.5

(3.1)

337.4

322.5

14.9

337.4

(0.8)

(0.2)

(1.0)

6.7

(48.8)

(42.1)

6.7

(48.8)

(42.1)

121.6

240.7

1.6

5.1

6.7

(128.7)

–

(0.4)

0.4

–

9.5

(9.5)

–

4.2

88.8

93.0

–

101.5

435.2

(108.9)

326.3

(0.8)

0.1

325.6

14.9

–

340.5

(3.1)

337.4

322.5

14.9

337.4

–

13.4

254.1

(90.5)

163.6

(0.8)

–

162.8

5.3

–

168.1

(3.6)

164.5

159.2

5.3

164.5

2013

Total

Capital
and other
£m

–

4.2

88.8

93.0

–

88.1

181.1

(18.4)

162.7

–

0.1

162.8

9.6

–

172.4

0.5

172.9

163.3

9.6

172.9

Included in gross rental income on a proportionally consolidated basis is £6.9 million (2013: £8.0 million) of contingent rents calculated by
reference to tenants’ turnover.

118 Hammerson plc Annual Report 2014
118 Hammerson plc Annual Report 2014

3: Segmental analysis
The factors used to determine the Group’s reportable segments are the geographic locations, UK and France, 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.

As stated in the Financial Review on page 51, management reviews the business principally on a proportionally consolidated basis, except for its
interests in premium outlets held through its investments in Value Retail and VIA Outlets, where the Group has less day-to-day involvement in the
financial performance and which have different operational characteristics compared with the Group’s property portfolio. The segmental analysis
has been prepared on the basis that management uses to review the business, rather than on a statutory basis. For reconciliation purposes the
Reported Group figures are shown in the following tables.

A: Revenue and profit by segment

United Kingdom

Shopping centres

Retail parks

Other

Total

France

Total investment portfolio

Developments

Total property portfolio – continuing operations

Discontinued operations

Offices

Total portfolio

Less share of Property joint ventures

Reported Group – total

Reported Group:

Continuing operations

Discontinued operations

Reported Group – total

Gross rental
income
£m

Net rental
income
£m

2014

Non-cash
items
within net
rental income
£m

Gross rental
income
£m

Net rental
income
£m

2013

Non-cash
items
within net
rental income
£m

149.4

86.2

14.5

250.1

91.8

341.9

2.2

344.1

127.9

83.0

11.3

222.2

82.4

304.6

1.0

305.6

–

344.1

(137.6)

206.5

–

305.6

(117.5)

188.1

206.5

188.1

–

206.5

188.1

(4.2)

1.1

(0.1)

(3.2)

2.5

(0.7)

–

(0.7)

–

(0.7)

2.3

1.6

–

1.6

145.1

86.6

14.9

246.6

71.6

318.2

3.0

321.2

7.4

328.6

(148.0)

180.6

176.0

4.6

180.6

124.3

82.1

12.1

218.5

63.2

281.7

1.1

282.8

7.4

290.2

(125.4)

164.8

160.2

4.6

164.8

(7.5)

0.2

(0.1)

(7.4)

(0.1)

(7.5)

–

(7.5)

(0.8)

(8.3)

5.6

(2.7)

–

(2.7)

The non-cash items included within net rental income relate to the amortisation of lease incentives and other costs and movements in accrued
rents receivable.

www.hammerson.com 119
www.hammerson.com 119

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

3: Segmental analysis (continued)
B:

Investment and development property assets by segment

United Kingdom

Shopping centres

Retail parks

Other

Total

France

Total non-current assets

Assets held for sale

Total property assets

Less share of Property joint ventures

Reported Group – total

C: Analysis of non-current assets employed

United Kingdom

Continental Europe

2014

2013

Property
valuation
£m

Capital
expenditure
£m

Revaluation
gains
£m

Property
valuation
£m

Capital
expenditure
£m

Revaluation
gains/(losses)
£m

2,930.8

1,653.5

288.0

4,872.3

1,834.2

6,706.5

–

6,706.5

(2,279.2)

4,427.3

249.3

43.7

26.7

319.7

246.6

566.3

–

566.3

(40.1)

526.2

236.4

136.8

9.4

382.6

54.2

436.8

–

436.8

(165.6)

271.2

2,534.4

1,478.5

280.8

4,293.7

1,637.5

5,931.2

–

5,931.2

(2,483.4)

3,447.8

169.7

24.3

56.0

250.0

138.6

388.6

(0.6)

388.0

(212.8)

175.2

54.4

26.1

(25.7)

54.8

34.0

88.8

1.5

90.3

(5.1)

85.2

Non-current assets employed

2014
£m

4,895.0

2,621.5

7,516.5

2013
£m

4,336.4

2,242.2

6,578.6

Included in the above table are investments in joint ventures of £2,341.5 million (2013: £2,470.8 million), which are further analysed in note 13 on
pages 131 to 136. Hammerson’s share of the property valuations held within Property joint ventures of £2,279.2 million (2013: £2,483.4 million)
has been included in note 3B above, of which £2,134.9 million (2013: £2,317.7 million) relates to the United Kingdom and £144.3 million
(2013: £165.7 million) relates to Continental Europe.

120 Hammerson plc Annual Report 2014
120 Hammerson plc Annual Report 2014

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 contribution scheme

– defined benefit schemes

Continuing operations

Discontinued operations*

Total

Note

2014
£m

25.6

6.7

1.2

7.9

3.9

6.3

3.0

(2.0)

1.0

44.7

–

44.7

2013
£m

24.4

5.7

0.8

6.5

3.0

6.5

2.0

1.2

3.2

43.6

0.4

44.0

Includes £0.1 million in respect of share-based employee remuneration in 2013.

Of the above amount, £11.6 million (2013: £10.6 million) was recharged to tenants through service charges and £1.5 million (2013: £1.5 million)
capitalised in respect of development projects.

In addition to the figures above, redundancy related costs of £1.7 million (2013: £0.6 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. Further details of share-based payment arrangements, some of which have performance conditions, are provided in the Directors’
Remuneration Report on pages 75 to 93. 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 174 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

2014
Number

419

181

2013
Number

410

174

www.hammerson.com 121
www.hammerson.com 121

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

4: Administration expenses (continued)
Other information

Auditor’s remuneration:

Audit of the Company’s annual accounts

Audit of subsidiaries, pursuant to legislation

Audit-related assurance services

Audit and audit-related assurance services
Other fees1

Total auditor’s remuneration

Depreciation of plant and equipment

Note

2014
£m

0.2

0.3

0.1

0.6

0.1

0.7

1.4

2013
£m

0.2

0.1

0.5

0.1

0.6

1.5

1. Other fees payable to the Company’s auditor are principally for tax related work and a review of the Group’s sustainability reporting.

5: Directors’ emoluments
The Executive Directors are considered to be ‘Key Management’ for the purposes of IAS 24 ‘Related party transactions’. The total remuneration
of the Directors is set out in aggregate in note 29B. Full details of the Directors’ emoluments, as required by the Companies Act 2006, are disclosed
in the audited sections of the Directors’ Remuneration Report on pages 75 to 93.

The Company did not grant any credits, advances or guarantees of any kind to its Directors during the year.

6: Pensions
Defined contribution pension scheme
The Company operates the UK funded approved Group Personal Pension Plan which is a defined contribution pension scheme. The Group’s cost
for the year was £3.0 million (2013: £2.0 million).

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, was closed to
new entrants on 31 December 2002, and was closed to future accrual for all participating employees on 30 June 2014, which led to a curtailment
gain of £2.5 million.

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.

Principal actuarial assumptions used for defined benefit pension schemes

Discount rate for scheme liabilities

Increase in pensionable salaries

Increase in retail price index

Increase in pensions in payment

Mortality table

122 Hammerson plc Annual Report 2014
122 Hammerson plc Annual Report 2014

2014
%

3.6

n/a

3.1

2013
%

4.6

3.9

3.4

SAPS Light

CMI 1.0%

Amounts recognised in the income statement in respect of defined benefit pension schemes

Current service cost
Curtailment gain*

Included in income statement line

Administration expenses

Net interest cost

Other interest payable

Total pension (income)/expense

* The curtailment gain is shown after the deduction of past service costs of £0.3 million (2013: nil).

The Group expects to make contributions totalling £2.5 million to the Scheme in the next financial year.

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

2014
£m

0.5

(2.5)

(2.0)

1.3

(0.7)

2014
£m

61.9

(89.4)

(27.5)

(5.4)

(6.9)

(39.8)

(0.8)

(39.0)

(39.8)

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 method.

All defined benefit pension scheme assets are investments with target returns linked to LIBOR.

Experience gains and losses

Experience gains/(losses) on plan liabilities

Experience gains on plan assets

2014
£m

0.9

–

2013
£m

1.2

–

1.2

1.1

2.3

2013
£m

58.4

(79.6)

(21.2)

(5.1)

(6.6)

(32.9)

(0.7)

(32.2)

(32.9)

2013
£m

(0.5)

1.1

www.hammerson.com 123
www.hammerson.com 123

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

6: Pensions (continued)
Changes in the present value of defined benefit pension scheme obligations

At 1 January

Service cost – current
Curtailment gain*

Interest cost

Net actuarial losses – experience on plan liabilities

– changes in financial assumptions

– changes in demographic assumptions

Benefits

Exchange gains

At 31 December

* Curtailment gain includes past service costs of £0.3 million (2013: nil).

Changes in the fair value of defined benefit pension scheme assets

At 1 January

Interest on assets

Actuarial gains

Contributions by employer

Benefits

At 31 December

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

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

124 Hammerson plc Annual Report 2014
124 Hammerson plc Annual Report 2014

2014
£m

91.3

0.5

(2.5)

(2.0)

4.0

(0.9)

12.4

–

11.5

(3.2)

0.1

101.7

2014
£m

58.4

2.7

–

3.2

(2.4)

61.9

2014

£m

9.5

103.3

1.1

1.6

115.5

(8.8)

106.7

8.7

(13.1)

(0.3)

(13.4)

(9.0)

93.0

115.5

(9.0)

106.5

2013
£m

85.5

1.2

–

1.2

3.6

0.5

1.4

1.6

3.5

(2.5)

–

91.3

2013
£m

55.0

2.5

1.1

1.5

(1.7)

58.4

2013
£m

11.8

94.8

–

1.5

108.1

(13.1)

95.0

3.9

16.8

–

16.8

(6.4)

109.3

108.1

(6.4)

101.7

8: Tax
A: Tax charge

UK current tax

Foreign current tax

Current tax charge

Deferred tax charge/(credit)

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

Less: Profit after tax of joint ventures

Less: Profit after tax of associate

Profit on ordinary activities before tax

Profit multiplied by the UK corporation tax rate of 21.5% (2013: 23.25%)

UK REIT tax exemption

French SIIC tax exemption

Non-deductible and other items

Tax charge

C: Current and deferred tax movements

Current tax

Deferred tax

Analysed as:

Current assets: Corporation tax

Current liabilities: Tax

Non-current liabilities: Deferred tax

2014
£m

0.1

0.8

0.9

0.1

1.0

2014
£m

703.1

–

703.1

(279.0)

(109.9)

314.2

67.6

(42.8)

(24.0)

0.2

1.0

2013
£m

0.3

0.5

0.8

(0.1)

0.7

2013
£m

326.3

14.9

341.2

(138.2)

(101.5)

101.5

23.6

(1.2)

(23.8)

2.1

0.7

Notes

13A

1 January
2014
£m

Recognised in
income
£m

Tax paid
£m

31 December
2014
£m

0.8

0.4

1.2

(0.2)

1.0

0.4

1.2

0.9

0.1

1.0

(1.5)

–

(1.5)

0.2

0.5

0.7

(0.1)

0.3

0.5

0.7

D: Unrecognised deferred tax
At 31 December 2014, the Group had unrecognised deferred tax assets calculated at a tax rate of 20% (2013: 20%) of £64 million
(2013: £68 million) for surplus UK revenue tax losses carried forward and £90 million (2013: £90 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 2014 the total of such gains was £250 million
(2013: £235 million) and the potential tax effect before the offset of losses was £50 million (2013: £47 million). If a UK REIT sells a property within
three years of completion of development, the REIT exemption will not apply. There were no such properties at 31 December 2013 or 2014.

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.

www.hammerson.com 125
www.hammerson.com 125

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

8: Tax (continued)
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 then designates 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 2014 amount to £26 million (2013: £30 million)
and are expected to be settled within dividends paid by Hammerson plc over the following four years. A further £400 million (2013: £300 million)
of dividends would be payable if the properties were realised at their 31 December 2014 values. Since 1 July 2009, qualifying foreign dividends
have been exempt from UK tax and therefore no deferred tax provision is recognised. To remain a SIIC, 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.

9: Discontinued operations
As part of the Group’s strategy to focus on the retail sector, a number of office properties, and related entities, were disposed of between July
2012 and June 2013. The income and expenditure was classified as discontinued operations in 2012 and 2013, and the summarised income
statement for 2013 allocated between ‘Adjusted’ and ‘Capital and other’ for the purposes of calculating figures in accordance with EPRA best
practice is shown below.

Profit for 2013

Gross rental income

Net rental income

Administration expenses

Operating profit before other net gains

Gain on the sale of properties

Revaluation gains on properties

Other net gains

Net finance costs

Profit for the year

Reported
Group
£m

Share of joint
ventures
£m

Note

4.6

–

4.6

–

1.5

(0.7)

5.4

2.8

(0.2)

2.6

7.5

–

7.5

(0.6)

9.5

2013

Total

Adjusted
£m

Capital and
other
£m

7.4

(0.2)

7.2

–

(1.9)

5.3

–

7.5

1.5

9.0

0.6

9.6

Total
£m

7.4

(0.2)

7.2

7.5

1.5

9.0

(1.3)

14.9

126 Hammerson plc Annual Report 2014
126 Hammerson plc Annual Report 2014

10: Dividends
The proposed final dividend of 11.6 pence per share was recommended by the Board on 13 February 2015 and, subject to approval by
shareholders, is payable on 24 April 2015 to shareholders on the register at the close of business on 13 March 2015. 2.0 pence per share will
be paid as a PID, net of withholding tax at the basic rate (currently 20%) if applicable, and the remainder of 9.6 pence per share will be paid as
a normal dividend. There will be no scrip alternative. The aggregate amount of the 2014 final dividend is £91.0 million. This has been calculated
using the total number of eligible shares outstanding at 31 December 2014.

The interim dividend of 8.8 pence per share was paid on 2 October 2014, as a PID, net of withholding tax where appropriate.

The total dividend for the year ended 31 December 2014 would be 20.4 pence per share (2013: 19.1 pence per share).

Current year

2014 final dividend

2014 interim dividend

Prior years

2013 final dividend

2013 interim dividend

2012 final dividend

Dividends as reported in the consolidated statement of changes in equity

2012 interim dividend withholding tax (paid January 2013)

2013 interim dividend withholding tax (paid January 2014)

2014 interim dividend withholding tax (paid January 2015)

PID
pence
per share

Non-PID
pence
per share

Total
pence
per share

Equity
dividends
2014
£m

Equity
dividends
2013
£m

2.0

8.8

10.8

3.6

8.3

11.9

4.0

9.6

–

9.6

7.2

–

7.2

6.0

11.6

8.8

20.4

10.8

8.3

19.1

10.0

–

62.6

–

76.9

–

139.5

–

9.4

(9.8)

–

59.0

71.1

130.1

8.7

(9.4)

–

Dividends paid as reported in the consolidated cash flow statement

139.1

129.4

www.hammerson.com 127
www.hammerson.com 127

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

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 and B.

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 24), which are treated as cancelled.

Notes

Earnings
£m

Shares
million

Pence
per share

Earnings
£m

Shares
million

Pence
per share

2014

2013

Basic – continuing operations

Basic – discontinued operations

Basic – total

Dilutive share options

Diluted
Adjustments*:

Revaluation gains
on properties:

Reported Group

Joint ventures

Associate

Change in fair
value of derivatives:

Reported Group

Joint ventures

Joint ventures – discontinued operations

Associate

Deferred tax:

Reported Group

Joint ventures

Associate

Other adjustments:
Reported Group:

Gain on sale of properties

Gain on sale of properties – discontinued
operations

Loss on sale of joint ventures

Joint venture formation costs written off

Non-controlling interests

Bond redemption – premium and costs

Joint ventures:

Gain on sale of properties

Gain on sale of properties – discontinued
operations

Associate:

Changes in fair value of participative loans

Capitalised loan finance fees written off

Total adjustments

EPRA

Net one-off restructuring charge

Adjusted earnings

13B

14A

13B

14A

13B

14A

13B

14A

699.1

730.6

–

699.1

730.6

–

0.2

699.1

730.8

(271.2)

(164.3)

(111.1)

(546.6)

(13.1)

(0.3)

–

9.9

(3.5)

0.1

0.4

11.9

12.4

(0.6)

–

4.0

3.1

(0.7)

8.7

–

(4.6)

–

9.9

(527.8)

171.3

730.8

3.0

174.3

730.8

95.7

–

95.7

–

95.7

(37.1)

(22.5)

(15.2)

(74.8)

(1.8)

–

1.3

(0.5)

–

0.1

1.6

1.7

711.8

322.5

14.9

337.4

–

0.2

337.4

712.0

(83.7)

(5.1)

(85.5)

(174.3)

16.8

(2.3)

(0.6)

(5.0)

8.9

(0.1)

–

9.0

8.9

(0.1)

(2.6)

–

0.5

0.4

(0.1)

1.2

–

(0.6)

–

1.3

(72.3)

23.4

0.5

23.9

(1.5)

–

(0.5)

3.9

(1.6)

(7.5)

(7.1)

0.5

(16.4)

(172.9)

164.5

712.0

–

164.5

712.0

45.3

2.1

47.4

–

47.4

(11.8)

(0.7)

(12.0)

(24.5)

2.3

(0.3)

(0.1)

(0.7)

1.2

–

1.3

(0.4)

(0.2)

–

(0.1)

0.5

(0.2)

(1.0)

0.1

(2.3)

(24.3)

23.1

–

23.1

* Adjustments relate to continuing operations unless otherwise stated.

See page 52 for further details of the restructuring charge of £3.0 million incurred in 2014.

128 Hammerson plc Annual Report 2014
128 Hammerson plc Annual Report 2014

B: Net asset value per share

Basic

Company’s own shares held in Employee Share
Ownership Plan

Unexercised share options

Diluted
Fair value adjustment to borrowings1

EPRA triple net

Fair value of derivatives
Fair value adjustment to borrowings1
Adjustment for associate

Adjustment for joint venture

Deferred tax

EPRA

Note

Shares
million

784.3

(1.2)

0.4

783.5

Equity
shareholders’
funds
£m

4,973.7

Notes

–

1.9

4,975.6

(306.3)

4,669.3

(13.1)

306.3

31.9

4.0

0.5

20I

14B

13C

4,998.9

783.5

2014

Net asset
value
per share
£

Equity
shareholders’
funds
£m

6.34

4,059.9

n/a

6.35

(0.39)

5.96

(0.02)

0.39

0.04

0.01

–

6.38

–

2.3

4,062.2

(210.9)

3,851.3

0.8

210.9

19.7

–

0.4

Shares
million

712.9

(1.0)

0.5

712.4

2013

Net asset
value
per share
£

5.70

n/a

5.70

(0.29)

5.41

–

0.29

0.03

–

5.73

4,083.1

712.4

1. Adjustments include amounts relating to the Group’s share of joint ventures.

Commentary on earnings and net asset value per share is provided in the Financial Review on pages 51 to 54.

12: Investment and development properties

Balance at 1 January 2014

Exchange adjustment

Additions

– capital expenditure

– asset acquisitions

Transfer from investment in joint venture

Disposals

Transfers

Capitalised interest

Revaluation

Investment
properties
Valuation
£m

Development
properties
Valuation
£m

2,988.7

(72.1)

459.1

(27.1)

Total
Valuation
£m

3,447.8

(99.2)

70.0

302.7

372.7

279.1

(6.6)

453.4

0.5

257.5

153.5

–

153.5

–

(453.4)

8.3

13.7

223.5

302.7

526.2

279.1

(6.6)

–

8.8

271.2

Balance at 31 December 2014

4,273.2

154.1

4,427.3

Restated

Balance at 1 January 2013

Exchange adjustment

Additions – capital expenditure

Disposals

Transfers

Capitalised interest

Revaluation

Transfer from assets held for sale

Balance at 31 December 2013

Investment
properties
Valuation
£m

Development
properties
Valuation
£m

2,896.2

26.2

51.9

(3.4)

(48.5)

1.1

57.8

7.4

244.2

5.7

123.3

(0.6)

48.5

12.0

26.0

–

Total
Valuation
£m

3,140.4

31.9

175.2

(4.0)

–

13.1

83.8

7.4

2,988.7

459.1

3,447.8

www.hammerson.com 129
www.hammerson.com 129

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

12: Investment and development properties (continued)
Properties are stated at fair value as at 31 December 2014, 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 2014 based on certain assumptions
as set out in note 1.

In the case of leasehold properties, 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 21) and
‘Interests in leasehold properties’ respectively. Further information is provided in ‘Significant accounting policies’ on page 115.

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.

As noted in ‘Significant judgements and key estimates’ on page 114, real estate valuations are complex, derived from data which is not widely
publicly available and involve a degree of judgement. For these reasons, and consistent with EPRA’s guidance, we have classified the valuations
of our property portfolio as Level 3 as defined by IFRS 13. Inputs to the valuations, some of which are ‘unobservable’ as defined by IFRS 13, include
nominal equivalent yield and rental income. These inputs to the valuations are analysed by segment in the valuation and rental data tables on
pages 158 and 162. All other factors remaining constant, an increase in rental income would increase valuations, whilst increases in nominal
equivalent yield and discount rate would result in a fall in values and vice versa. However, there are interrelationships between unobservable
inputs as they are determined by market conditions. The existence of an increase of more than one unobservable input would augment the
impact on valuation. The impact on the valuation would be mitigated by the interrelationship between unobservable inputs moving in opposite
directions. For example, an increase in rents may be offset by an increase in yield, resulting in no net impact on the valuation.

The total amount of interest included in development properties at 31 December 2014 was £2.4 million (2013: £24.6 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 2014 was
4.7% (2013: 4.8%). At 31 December 2014 the historic cost of investment and development properties was £3,930.1 million (2013: £3,124.7 million).

Analysis of properties by tenure

Balance at 31 December 2014

Balance at 31 December 2013

Capital commitments

Freehold
£m

3,365.0

2,557.8

Long leasehold
£m

1,062.3

890.0

2014
£m

237.1

Total
£m

4,427.3

3,447.8

2013
£m

142.1

130 Hammerson plc Annual Report 2014
130 Hammerson plc Annual Report 2014

13: Investment in joint ventures
As at 31 December 2014 certain property and corporate interests, being jointly controlled entities, have been equity accounted, and the significant
interests are set out in the following table:

Partner

Property interest1

Group share
%

United Kingdom

Bishopsgate Goodsyard Regeneration Limited

Ballymore Properties

The Goodsyard

Brent Cross Shopping Centre

Brent South Shopping Park

Bristol Alliance Limited Partnership

Standard Life

AXA Real Estate

Brent Cross

Cabot Circus

Croydon Limited Partnership/Whitgift Limited Partnership

Westfield

Centrale/Whitgift

Retail Property Holdings Limited

The Bull Ring Limited Partnership

CPPIB

TH Real Estate, CPPIB

Silverburn

Bullring

41.2

40.6

The Martineau Galleries Limited Partnership

Land Securities, Phoenix Group

Martineau Galleries

33.33

The Oracle Limited Partnership

The West Quay Limited Partnership

ADIA

GIC

VIA Limited Partnership

APG, Meyer Bergman, Value Retail

The Oracle

WestQuay

Various European
Outlet centres

France

SCI ESQ

SCI RC Aulnay 1 and SCI RC Aulnay 2

In July 2014 the Group acquired a 47% interest in VIA Outlets.

Allianz

Espace Saint Quentin

Client of Rockspring Property
Investment Managers

O’Parinor

In September 2014, the Group acquired an additional 40% stake in The Highcross Limited Partnership, and an additional 50% stake in SCI Espace
Plus, a Company which owned SQY Ouest, increasing Hammerson’s interest in both partnerships to 100%. The revaluation gains during the year
up to the date the Group acquired the additional stakes in these entities totalled £5.0 million, which has been treated as a property revaluation
gain within other net gains/(losses) shown in the summarised income statement on page 132.

The Group sold its 50% interests in Queensgate Limited Partnership and The Grosvenor Street Limited Partnership in January 2014 and September
2014 respectively.

1. The names of the principal property operated by each partnership have been used in the summary income statements and balance sheets on pages 132 to 135. The results for Highcross

and Queensgate for the period until disposal have been classified as ‘Other’ in 2014.

www.hammerson.com 131
www.hammerson.com 131

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

13: Investment in joint ventures (continued)
Hammerson’s total proportional share of joint ventures is split between Property joint ventures and VIA Outlets as the Property joint ventures are
included in the Group’s management reporting on a proportional consolidated basis. As explained in note 3, management reviews the business
principally on a proportionally consolidated basis, except for its premium outlet investments in Value Retail and VIA Outlets.

A. Summary financial statements of joint ventures
The summarised income statements and balance sheets below and on the adjacent page show 100% of the results, assets and liabilities of joint
ventures, and where necessary has been restated to the Group’s accounting policies and exclude all balances which are eliminated on consolidation.

Share of results of joint ventures for the year ended 31 December 2014
See page 134 for notes.

Ownership (%)

Gross rental income

Net rental income

Administration expenses

Operating profit before other net gains/(losses)
Other net gains/(losses)3

Net finance costs

Tax charge

Profit for the year

Hammerson share of profit for the year

Hammerson share of distributions payable

Brent Cross1
£m

Cabot Circus
£m

Bullring
£m

The Oracle
£m

WestQuay
£m

41.2

47.5

43.9
–
43.9
43.6
–
–
87.5

36.1

–

37.7

32.0

(0.7)

31.3

39.5

(0.8)

–

70.0

35.0

15.8

56.5

50.3

(0.2)

50.1

125.7

–

175.8

87.9

23.0

31.4

26.2

–

26.2

55.3

–

81.5

40.7

5.9

31.3

25.2

–

25.2

(0.4)

–

50.0

25.0

0.6

Share of assets and liabilities of joint ventures as at 31 December 2014

Non-current assets

Investment and development properties

Goodwill

Interests in leasehold properties

Receivables

Current assets

Receivables

Cash and deposits

Current liabilities

Payables

Non-current liabilities

Borrowings – secured

Obligations under finance leases

Payables

Deferred tax

Net assets

Hammerson share of net assets3

132 Hammerson plc Annual Report 2014
132 Hammerson plc Annual Report 2014

Brent Cross1
£m

Cabot Circus
£m

Bullring
£m

The Oracle
£m

WestQuay
£m

967.2
–
–
–
967.2

33.2
4.0
37.2

575.6

1,085.0

612.6

532.7

–

14.6

–

4.2

–

590.2

1,085.0

612.6

536.9

5.7

9.6

15.3

4.2

18.9

23.1

7.2

5.7

12.9

4.2

5.0

9.2

(47.6)

(13.3)

(14.9)

(13.5)

(10.4)

–
–
(2.4)
–
(2.4)
954.4

393.2

–

(14.6)

(0.5)

–

(15.1)

577.1

288.6

–

(1.1)

–

(1.1)

1,092.1

546.0

–

(0.4)

–

(0.4)

611.6

305.8

–

(4.2)

(0.8)

–

(5.0)

530.7

265.4

Silverburn
£m

Centrale/Whitgift
£m

O’Parinor
£m

20.8

18.5

(0.1)

18.4

8.4

–

26.8

13.4

–

12.4

8.3

(0.6)

7.7

1.8

–

9.5

4.8

–

19.0

17.9

(0.1)

17.8

3.6

(5.5)

–

15.9

4.0

–

Other
£m

n/a

56.0

39.7

(3.0)

36.7

17.4

(7.2)

(1.1)

45.8

32.1

13.9

Hammerson share

Total
2014
£m

Property joint
ventures
£m

VIA Outlets
£m

137.6

117.5

(0.9)

116.6

165.6

(2.1)

–

4.4

2.7

(0.6)

2.1

(1.3)

(1.4)

(0.5)

Total
£m

142.0

120.2

(1.5)

118.7

164.3

(3.5)

(0.5)

280.1

(1.1)

279.0

312.6

262.0

(4.7)

257.3

320.5

(13.9)

(1.1)

562.8

279.0

59.2

Silverburn
£m

Centrale/Whitgift
£m

O’Parinor
£m

Other
£m

Total
2014
£m

Property joint
ventures
£m

VIA Outlets
£m

Total
£m

Hammerson share

379.3

183.0

356.9

726.9

5,419.2

2,279.2

142.9

2,422.1

–

1.2

0.1

–

20.0

0.1

–

9.8

–

3.1

–

0.1

3.1

9.8

0.1

379.3

183.0

356.9

728.2

5,439.3

2,289.0

146.1

2,435.1

6.0

6.1

12.1

21.9

9.0

30.9

11.0

2.9

13.9

7.3

23.8

31.1

100.7

85.0

185.7

42.1

30.8

72.9

1.4

7.0

8.4

43.5

37.8

81.3

(9.5)

(25.8)

(7.7)

(18.1)

(160.8)

(66.5)

(5.1)

(71.6)

–

381.9

190.9

188.1

94.1

(168.7)

–

(11.9)

–

(180.6)

182.5

45.6

(102.3)

(1.2)

(13.6)

(11.1)

(128.2)

613.0

(271.0)

(20.0)

(30.7)

(11.1)

(332.8)

5,131.4

(42.2)

(37.2)

(9.8)

(6.1)

–

(4.0)

(79.4)

(9.8)

(10.1)

(4.0)

(58.1)

(45.2)

(103.3)

211.9

2,341.5

2,237.3

104.2

2,341.5

www.hammerson.com 133
www.hammerson.com 133

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

13: Investment in joint ventures(continued)
Share of results of joint ventures for the year ended 31 December 2013

Ownership (%)

Gross rental income

Net rental income

Administration expenses

Operating profit before other net gains/(losses)
Other net gains/(losses)3

Net finance costs

Profit before and after tax – continuing operations

Profit before and after tax – discontinued operations

Profit before and after tax

Hammerson share of profit

Hammerson share of distributions payable

Brent Cross1
£m

Cabot Circus
£m

Bullring2
£m

The Oracle
£m

Queensgate
£m

41.2

49.2

45.6
–
45.6
(2.2)
–
43.4
–
43.4

17.9

–

34.4

29.1

(0.8)

28.3

3.8

(0.8)

31.3

–

31.3

15.6

16.8

53.7

48.1
–
48.1
32.6
–
80.7
–
80.7

38.3

20.4

31.8

26.6

–

26.6

19.4

–

46.0

–

46.0

23.0

7.1

16.3

12.5

(0.2)

12.3

(18.4)

–

(6.1)

–

(6.1)

(3.1)

7.3

Share of assets and liabilities of joint ventures as at 31 December 2013

Non-current assets

Investment and development properties

Interests in leasehold properties

Owner-occupied property

Receivables

Current assets

Receivables

Cash and deposits

Current liabilities

Payables

Non-current liabilities

Borrowings – secured

Obligations under finance leases

Payables

Net assets

Hammerson share of net assets3

1. Includes the results of Brent South Shopping Park in which Hammerson has a 40.6% interest.

Brent Cross1
£m

Cabot Circus
£m

Bullring
£m

The Oracle
£m

Queensgate
£m

889.6
–
–
–
889.6

26.9
1.6
28.5

538.4

14.6

–

553.0

3.4

11.3

14.7

955.1
–
–
–
955.1

6.2
15.6
21.8

552.1

202.1

–

0.1

552.2

3.0

7.8

10.8

–

202.1

3.5

5.0

8.5

(52.0)

(15.0)

(17.6)

(9.2)

(5.8)

–
–
(0.5)
(0.5)
865.6

356.1

–

(14.6)

(0.3)

(14.9)

537.8

269.0

–
–
(0.8)
(0.8)
958.5

479.3

–

(0.3)

553.5

276.8

–

(0.2)

204.6

102.3

2. Reflects the Group’s acquisition in May 2013 of an additional 16.7% stake in The Bull Ring Limited Partnership, increasing Hammerson’s interest to 50%.

3. The joint ventures are generally funded by loans from the Company and the relevant partners and this funding has been excluded as it is proportionally eliminated upon consolidation.

‘Other net gains/(losses)’ principally represent valuation changes on investment properties.

134 Hammerson plc Annual Report 2014
134 Hammerson plc Annual Report 2014

Highcross
£m

WestQuay
£m

Silverburn
£m

Centrale/Whitgift
£m

O’Parinor
£m

Other
£m

28.4

22.2

–

22.2

(5.6)

–

16.6

–

16.6

10.0

6.0

29.1

24.6

–

24.6

17.4

(0.4)

41.6

–

41.6

20.8

0.6

19.8

18.0

(0.1)

17.9

9.1

–

27.0

–

27.0

13.5

–

11.8

8.0

(0.8)

7.2

(24.0)

–

(16.8)

–

(16.8)

(8.4)

–

20.4

18.2

(0.1)

18.1

(21.3)

3.7

0.5

–

0.5

0.2

–

Highcross
£m

WestQuay
£m

Silverburn
£m

Centrale/Whitgift
£m

O’Parinor
£m

352.7

168.0

368.2

–

168.0

368.2

11.9

7.4

19.3

432.4

–

0.9

433.3

4.7

9.0

13.7

(9.9)

–

(0.2)

436.9

262.2

506.5

4.2

–

510.7

3.8

9.8

13.6

(9.9)

–

(4.2)

(0.6)

(4.8)

509.6

254.8

–

0.1

352.8

4.5

6.5

11.0

(7.9)

–

355.9

178.0

2.1

6.3

8.4

(8.1)

–

168.3

84.1

Hammerson share

2013
£m

145.2

122.6

(1.0)

121.6

6.7

0.4

128.7

9.5

138.2

Total
2013
£m

316.8

268.8

(2.2)

266.6

1.3

2.7

270.6

19.0

289.6

138.2

60.9

Total
2013
£m

Hammerson share

2013
£m

5,347.9

2,483.4

20.0

66.4

1.1

9.8

33.2

0.5

5,435.4

2,526.9

81.9

85.8

167.7

35.0

41.0

76.0

n/a

21.9

15.9

(0.2)

15.7

(9.5)

0.2

6.4

19.0

25.4

10.4

2.7

Other
£m

382.8

1.2

66.4

–

450.4

11.9

5.5

17.4

(6.6)

(12.6)

(154.6)

(71.0)

(180.2)

–

(15.6)

(195.8)

185.1

46.3

–

(1.2)

(3.4)

(4.6)

450.6

161.9

(180.2)

(20.0)

(21.9)

(222.1)

5,226.4

(45.0)

(9.8)

(6.3)

(61.1)

2,470.8

www.hammerson.com 135
www.hammerson.com 135

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

13: Investment in joint ventures (continued)
B. Reconciliation to EPRA adjusted earnings

Profit for the year

Other net (gains)/losses

Continuing operations

Discontinued operations

Change in fair value of derivatives

Continuing operations

Discontinued operations

Deferred tax

Total adjustments

EPRA adjusted earnings of joint ventures

C. Reconciliation to EPRA adjusted investment in joint ventures

Investment in joint ventures

Fair value of derivatives

Deferred tax

Goodwill as a result of deferred tax

EPRA adjustments

EPRA adjusted investment in joint ventures

D. Reconciliation of movements in investment in joint ventures

Balance at 1 January

Acquisitions

Joint venture formation costs written off

Transfer of investment property on acquisition by Reported Group

Disposals

Share of results of joint ventures

Distributions and other receivables

Revaluation gains on owner-occupied property

Other movements

Foreign exchange translation differences

Balance at 31 December

136 Hammerson plc Annual Report 2014
136 Hammerson plc Annual Report 2014

Property joint
ventures
£m

VIA Outlets
£m

Total
2014
£m

280.1

(1.1)

279.0

(165.6)

–

(165.6)

(0.6)

–

(0.6)

–

(166.2)

113.9

1.3

–

1.3

0.3

–

0.3

0.4

2.0

0.9

(164.3)

–

(164.3)

(0.3)

–

(0.3)

0.4

(164.2)

114.8

Total
2013
£m

138.2

(6.7)

(7.5)

(14.2)

(2.3)

(0.6)

(2.9)

–

(17.1)

121.1

2014
£m

2013
£m

2,341.5

2,470.8

3.1

4.0

(3.1)

4.0

–

2,345.5

2,470.8

2014
£m

2,470.8

110.8

(3.2)

(279.1)

(151.8)

279.0

(100.4)

–

26.0

(10.6)

2013
£m

2,250.9

245.1

–

(76.3)

138.2

(103.4)

3.2

9.9

3.2

2,341.5

2,470.8

14: Investment in associate
The Group has significant influence over Value Retail PLC and associated entities (“VR”) and equity accounts for its investment.

A: Share of results of associate

Gross rental income

Net rental income

Administration and other expenses

Operating profit before other net gains

Revaluation gains on properties

Operating profit

Net finance costs

Change in fair value of financial instruments

Change in fair value of participative loans – revaluation movement

Change in fair value of participative loans – other movement

Profit before tax

Current tax charge

Deferred tax charge

Profit for the year

Foreign exchange translation differences

Total comprehensive income

Reconciliation to EPRA adjusted earnings

Profit for the year

Revaluation gains on properties

Change in fair value of financial instruments

Change in fair value of participate loans – revaluation movement

Capitalised loan finance fees written off

Deferred tax charge

EPRA adjustments

EPRA adjusted earnings of associate

2014

Hammerson
share
£m

75.1

49.6

(20.0)

29.6

111.1

140.7

(14.0)

(9.9)

4.6

2.1

123.5

(1.7)

(11.9)

109.9

(15.7)

94.2

109.9

(111.1)

9.9

(4.6)

–

11.9

(93.9)

16.0

100%
£m

243.1

157.3

(73.1)

84.2

314.2

398.4

(39.2)

(34.8)

–

324.4

(7.4)

(47.4)

269.6

(49.7)

219.9

269.6

(314.2)

34.8

–

47.4

(232.0)

37.6

2013

Hammerson
share
£m

65.4

43.5

(17.8)

25.7

85.5

111.2

(12.0)

5.0

7.1

0.8

112.1

(1.6)

(9.0)

101.5

(0.4)

101.1

101.5

(85.5)

(5.0)

(7.1)

0.5

9.0

(88.1)

13.4

100%
£m

227.6

147.1

(71.1)

76.0

273.6

349.6

(44.2)

8.3

–

313.7

(7.3)

(43.8)

262.6

8.6

271.2

262.6

(273.6)

(8.3)

–

1.2

43.8

(236.9)

25.7

When aggregated, the Group’s share of VR’s operating profit before other net gains amounted to 35.2% for the year ended 31 December 2014
(33.8% for the year ended 31 December 2013).

www.hammerson.com 137
www.hammerson.com 137

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

14: Investment in associate (continued)
B: Share of assets and liabilities of associate

Goodwill on acquisition of associate

Investment properties

Other non-current assets

Non-current assets

Other current assets

Cash and deposits

Current assets

Total assets

Current liabilities

Borrowings

Other liabilities

Deferred tax

Non-current liabilities

Total liabilities

Net assets

Participative loans*

Investment in associate

2014

Hammerson
share
£m

65.7

884.7

18.6

969.0

30.2

28.4

58.6

100%
£m

–

2,702.6

81.1

2,783.7

164.8

103.9

268.7

100%
£m

–

2,462.8

84.0

2,546.8

169.6

110.3

279.9

3,052.4

1,027.6

2,826.7

(214.1)

(789.5)

(226.9)

(346.6)

(1,363.0)

(1,577.1)

1,475.3

(132.5)

(912.6)

(190.8)

(322.6)

(1,426.0)

(1,558.5)

1,268.2

(52.0)

(253.6)

(83.6)

(80.8)

(418.0)

(470.0)

557.6

71.2

628.8

2013

Hammerson
share
£m

65.7

787.9

19.6

873.2

33.4

30.0

63.4

936.6

(32.7)

(281.4)

(73.1)

(75.0)

(429.5)

(462.2)

474.4

71.0

545.4

The analysis in the table above excludes liabilities in respect of distributions received in advance from VR amounting to £12.6 million
(2013: £13.4 million) which are included within non-current liabilities in note 22.

Hammerson’s investment in associate excluding goodwill as a proportion of VR’s net assets is 38.2% at 31 December 2014 (2013: 37.8%).

* 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 EPRA adjusted investment in associate

Investment in associate

Fair value of derivatives

Deferred tax

Goodwill as a result of deferred tax

EPRA adjustments

EPRA adjusted investment in associate

C: Reconciliation of movements in investment in associate

Balance at 1 January

Acquisitions

Share of results of associate

Distributions

Revaluation movement on participative loans

Foreign exchange translation differences

Balance at 31 December

138 Hammerson plc Annual Report 2014
138 Hammerson plc Annual Report 2014

2014
Hammerson
share
£m

2013
Hammerson
share
£m

628.8

(1.9)

80.8

(47.0)

31.9

660.7

2014
£m

545.4

–

109.9

(11.5)

0.6

(15.6)

628.8

545.4

(8.3)

75.0

(47.0)

19.7

565.1

2013
£m

428.4

59.4

101.5

(46.4)

2.9

(0.4)

545.4

Note

14B

15: Receivables: non-current assets

Loans receivable

Other receivables

Fair value of interest rate swaps

2014
£m

63.5

0.8

15.0

79.3

Loans receivable includes a loan of €58.0 million (£45.0 million) (2013: €58.0 million, £48.2 million) to Value Retail European Holdings BV
bearing interest at 10% and maturing on 11 September 2016, except a residual €2 million tranche which matures on 30 November 2043.

Loans receivable also includes a loan to VR Milan S.R.L. of €25.0 million granted on 30 July 2013 bearing interest at Euribor plus a 5% margin
and maturing on 13 December 2017. This loan is repayable in quarterly instalments and the balance outstanding at 31 December 2014 is
€23.9 million (£18.5 million) (2013: €24.6 million, £20.5 million). Both loans are classified as available for sale and held at fair value.

16: Receivables: current assets

Trade receivables

Other receivables

Corporation tax

Prepayments

Fair value of currency swaps

2014
£m

47.7

41.1

0.1

3.8

5.1

97.8

2013
£m

68.7

1.1

2.0

71.8

2013
£m

24.9

50.9

0.2

2.1

–

78.1

Trade receivables are shown after deducting a provision for bad and doubtful debts of £11.6 million (2013: £8.5 million), as set out in the table
below. The movement in the provision during the year was recognised entirely in income. Credit risk is discussed in note 20F.

Gross
receivable
£m

Provision
£m

2014
Net receivable
£m

Gross
receivable
£m

Provision
£m

2013
Net receivable
£m

31.1

10.0

0.2

0.9

3.1

14.0

59.3

–

0.3

–

0.2

0.5

10.6

11.6

31.1

9.7

0.2

0.7

2.6

3.4

47.7

13.7

5.7

1.3

0.5

2.1

10.1

33.4

Not yet due

1-30 days overdue

31-60 days overdue

61-90 days overdue

91-120 days overdue

More than 120 days overdue

17: Cash and deposits

Cash at bank

Short-term deposits

Currency profile

Sterling

Euro

–

0.2

0.5

0.1

0.6

7.1

8.5

2014
£m

28.5

0.1

28.6

10.1

18.5

28.6

13.7

5.5

0.8

0.4

1.5

3.0

24.9

2013
£m

15.7

–

15.7

8.8

6.9

15.7

www.hammerson.com 139
www.hammerson.com 139

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

18: Payables: current liabilities

Trade payables

Other payables

Accruals

Deferred income

19: 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

2014
£m

18.3

133.4

27.5

25.2

204.4

Bank loans and
overdrafts
£m

Other
borrowings
£m

Total
2014
£m

Bank loans and
overdrafts
£m

Other
borrowings
£m

2013
£m

11.0

118.4

19.4

20.7

169.5

Total
2013
£m

1,160.1

458.6

399.1

2,017.8

246.2

2,264.0

–

1,399.0

72.9

164.6

237.5

–

384.8

265.8

457.7

430.4

2,049.6

2,287.1

–

237.5

2,049.6

2,287.1

–

165.8

–

165.8

249.9

415.7

–

415.7

1,160.1

292.8

399.1

1,852.0

(3.7)

1,848.3

–

1,848.3

2,264.0

Current assets: Fair value of currency swaps

–

(5.1)

237.5

2,044.5

2,282.0

At 31 December 2013 and 2014 no borrowings due after five years were repayable by instalments.

At 31 December 2014, the fair value of currency swaps was an asset of £16.1 million of which £5.1 million is due within one year and is included
in current receivables (see note 16). At 31 December 2013, the fair value of currency swaps was a liability of £22.6 million.

B: Analysis

Unsecured

£200 million 7.25% sterling bonds due 2028

£300 million 6% sterling bonds due 2026

€500 million 2% euro bonds due 2022

£250 million 6.875% sterling bonds due 2020

€500 million 2.75% euro bonds due 2019

£272 million 5.25% sterling bonds due 2016

€480 million 4.875% euro bonds due 2015

Bank loans and overdrafts

Senior notes due 2026

Senior notes due 2024

Senior notes due 2021

Fair value of currency swaps

2014
£m

198.0

297.4

383.4

248.4

384.8

271.5

–

237.5

23.2

131.1

122.8

2013
£m

197.9

297.2

–

248.2

412.2

271.1

399.1

415.7

–

2,298.1

(16.1)

2,282.0

2,241.4

22.6

2,264.0

Financing activities during the year are detailed in the Business Review on pages 49 and 50. Senior notes comprise £185.6 million denominated
in US dollars, £46.5 million in euro and £45.0 million in sterling.

140 Hammerson plc Annual Report 2014
140 Hammerson plc Annual Report 2014

C: Undrawn committed facilities

Expiry

Within two to five years

Within one to two years

D: Interest rate and currency profile

Sterling

Euro

US Dollar

Sterling

Euro

2014
£m

250.0

339.0

589.0

Fixed rate borrowings

Other variable
rate borrowings

6.2

3.3

–

4.0

6.5

4.1

4.9

Years

–

Fixed rate borrowings

Years

£m

425.4

1,375.3

–

1,800.7

£m

475.0

1,127.0

1,602.0

£m

74.8

413.3

(6.8)

481.3

Other variable
rate borrowings

£m

410.6

251.4

662.0

2013
£m

659.0

–

659.0

2014
Total

£m

500.2

1,788.6

(6.8)

2,282.0

2013
Total

£m

885.6

1,378.4

2,264.0

The analysis above reflects the effect of currency and interest rate swaps in place at 31 December 2013 and 2014, further details of which are
set out in note 20. The interest rates shown are the weighted average for fixed rate borrowings. Variable rate borrowings bear interest based
on LIBOR, with the exception of certain euro borrowings whose interest costs are linked to EURIBOR.

20: 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 Principal Risks and Uncertainties on page 55. 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.

Interest rate management

B:
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 2014, the Group had interest rate swaps of £250.0 million (2013: £250.0 million), maturing in 2020 under which the Group
pays interest at a rate linked to LIBOR and receives interest at 6.875%. At 31 December 2014, the fair value of interest rate swaps was an asset of
£15.0 million (2013: £2.0 million asset). 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. The Group also hedges
the impact of foreign exchange movements in debt raised in foreign currencies through the use of derivatives to swap the cash flows back to
either sterling or euros.

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 net investment hedges. The carrying amount of the bonds at
31 December 2014 was £775.8 million (2013: £811.3 million) and their fair value was £829.8 million (2013: £845.7 million). Included in the
senior notes (USPP) due in June 2021, 2024 and 2026 is a euro-denominated borrowings element of €60.0 million which had a carrying
amount of £46.5 million.

www.hammerson.com 141
www.hammerson.com 141

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

20: Financial instruments and risk management (continued)
At 31 December 2014, the Group had currency swaps of £987.3 million, being €121.0 million sold forward against sterling for value in January
2015 at a rate of £1 = €1.273, €412.0 million sold forward against sterling for value in March 2015 at a rate of £1 = €1.272, €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%,
and cross currency swaps to swap US$291 million of Senior notes (USPP) maturing in June 2021 and 2024, into euro at a rate of €1 = US$1.3415.
At 31 December 2013, the Group had currency swaps of £735.9 million, being €302.5 million sold forward against sterling for value in February
2014, at a rate of £1 = €1.184 and the €379.6 million and US$291 million of cross currency swaps as described above. The fair value of currency
swaps is shown in note 20I.

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 51 to 54.

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 20A.

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 payable quarterly in advance and the average unexpired lease term at 31 December 2014 was 8.1 years (2013: 8.0 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 Portfolio
Analysis on page 161.

Loans receivable and other receivables include available for sale investments and VAT receivables. These items do not give rise to significant credit
risk. The receivables in notes 15 and 16 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 16.

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 2014, the Group’s maximum
exposure to credit risk was £205.7 million (2013: £165.6 million).

G: Financial maturity analysis
The following table is a maturity analysis for income-earning financial assets and interest-bearing financial liabilities.

Total
£m

(28.6)

1,015.3

768.2

277.1

250.0

(250.0)

237.5

(16.1)

2,253.4

(63.5)

2,189.9

Less than
one year
£m

(28.6)

–

(5.1)

(33.7)

–

(33.7)

One to two
years
£m

–

271.5

–

164.6

(5.7)

430.4

(45.0)

385.4

Two to five
years
£m

2014 Maturity

More than five
years
£m

–

384.8

–

72.9

–

457.7

(18.5)

439.2

–

743.8

383.4

277.1

250.0

(250.0)

–

(5.3)

1,399.0

–

1,399.0

Cash and deposits

Unsecured bonds

– Sterling fixed rate bonds

– Euro fixed rate bonds

Senior notes

Interest rate swaps (variable)

Interest rate swaps (fixed)

Unsecured bank loans and overdrafts

Fair value of currency swaps

Net debt

Loans receivable

142 Hammerson plc Annual Report 2014
142 Hammerson plc Annual Report 2014

Cash and deposits

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

(15.7)

1,014.4

811.3

209.0

(209.0)

415.7

22.6

2,248.3

(68.7)

2,179.6

Less than
one year
£m

(15.7)

–

249.9

(3.7)

230.5

–

230.5

One to two
years
£m

–

399.1

–

399.1

–

399.1

Two to five
years
£m

–

2013 Maturity

More than five
years
£m

–

271.1

–

(41.0)

41.0

165.8

21.7

458.6

(68.7)

389.9

743.3

412.2

250.0

(250.0)

–

4.6

1,160.1

–

1,160.1

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.

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. The tables
below provide indicative sensitivity data.

Effect on profit before tax:

(Decrease)/Increase (£m)

2014

Increase in
interest rates
by 1%

Decrease in
interest rates
by 1%

Increase in
interest rates
by 1%

2013

Decrease in
interest rates
by 1%

(17.2)

17.9

(18.4)

19.1

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.

Effect on financial instruments:

2014

2013

Strengthening of
sterling against
euro by 10%

Weakening of
sterling against
euro by 10%

Strengthening of
sterling against
euro by 10%

Weakening of
sterling against
euro by 10%

Increase/(Decrease) in net gain taken to equity (£m)

166.9

(204.0)

129.4

(158.1)

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.

www.hammerson.com 143
www.hammerson.com 143

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

20: Financial instruments and risk management (continued)
I: Fair values of financial instruments
The fair values of borrowings, currency and interest rate swaps, together with their book value included in the balance sheet, are as follows:

Reported Group

Borrowings, excluding currency swaps

Currency swaps

Total

Interest rate swaps

Reported Group including share of Property joint ventures

Borrowings, excluding currency swaps

Currency swaps

Total

Interest rate swaps

Book value
£m

2,298.1

(16.1)

2,282.0

(15.0)

Book value
£m

2,340.3

(16.1)

2,324.2

(13.1)

2014

Fair value
£m

2,604.1

(16.1)

2,588.0

(15.0)

2014

Fair value
£m

2,646.6

(16.1)

2,630.5

(13.1)

Book value
£m

2,241.4

22.6

2,264.0

(2.0)

Book value
£m

2,286.4

22.6

2,309.0

0.8

2013

Fair value
£m

2,451.7

22.6

2,474.3

(2.0)

2013

Fair value
£m

2,497.3

22.6

2,519.9

0.8

At 31 December 2014, the fair value of financial instruments, including the Group’s share of Property joint ventures, exceeded their book value
by £306.3 million (2013: £210.9 million), equivalent to 39 pence per share (2013: 29 pence per share) on an EPRA net asset value per share basis.

The fair values of the Group’s borrowings have been estimated on the basis of quoted market prices, representing Level 1 and Level 2 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 17. 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 15 and 16. The amounts are presented net of allowances for doubtful
receivables and allowances for impairment are made where appropriate. 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/(losses)

– in profit and loss

– in other comprehensive income

Other movements

– settlement of interest

– loan (repayment)/issue

Net movements in participative loans to associate recognised as available for sale

Balance at 31 December

2014
£m

141.1

7.9

(4.4)

(5.8)

(0.6)

(2.1)

136.1

2013
£m

91.2

13.8

3.4

(5.6)

21.4

16.9

141.1

144 Hammerson plc Annual Report 2014
144 Hammerson plc Annual Report 2014

J: Carrying amounts, gains and losses of financial instruments

Trade receivables

Cash and deposits

Loans and receivables

Other investments

Loans receivable

Participative loans to associate

Available for sale loans and investments

Interest rate swaps

Assets at fair value (held for trading)

Currency swaps

Derivatives in effective hedging
relationships

Notes

14B

19B

Carrying
amount
£m

47.7

28.6

76.3

1.4

63.5

71.2

136.1

15.0

16.1

Payables

18, 22

(276.9)

Gain/
(Loss) to
income
£m

(3.2)

0.5

(2.7)

–

1.2

6.7

7.9

16.4

3.5

–

2014

Gain/
(Loss) to
equity
£m

–

(4.4)

–

Carrying
amount
£m

24.9

15.7

40.6

1.4

68.7

71.0

141.1

2.0

55.4

(22.6)

55.4

(22.6)

–

(235.5)

Borrowings, excluding currency swaps

Obligations under finance leases

Liabilities at amortised cost

Total for financial instruments

19B

(2,298.1)

(122.3)

46.9

(2,241.4)

(33.0)

(1.1)

(2,608.0)

(123.4)

(2,364.5)

(98.3)

–

46.9

97.9

(34.9)

(2,511.8)

(2,350.7)

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

Interest capitalised

Deduct:

Change in participative loans to associate shown in share of results of associate

Net finance costs

Notes

Gain/
(Loss) to
income
£m

2013

Gain/
(Loss) to
equity
£m

(0.6)

0.1

(0.5)

–

5.9

7.9

13.8

(14.2)

0.7

–

(114.6)

(0.2)

(114.8)

(115.0)

2014
£m

(98.3)

3.2

8.8

(6.7)

(93.0)

–

3.4

–

(11.8)

–

(20.1)

–

(20.1)

(28.5)

2013
£m

(115.0)

0.5

13.1

(7.9)

(109.3)

No financial instruments were designated as at fair value through profit and loss on initial recognition, nor 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 £55.4 million (2013: £11.8 million loss) and borrowings of £46.9 million
(2013: £20.1 million loss) is £102.3 million (2013: £31.9 million loss) and is shown in the movement in the hedging reserve in the consolidated
statement of changes in equity.

www.hammerson.com 145
www.hammerson.com 145

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

20: Financial instruments and risk management (continued)
K: Maturity analysis of financial liabilities
The remaining contractual maturities are as follows:

2014

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

2013

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

181.4

1,753.9

Payables
£m

Currency
swaps
£m

–

25.2

3.3

5.1

33.6

179.2

212.8

–

394.3

575.7

420.7

996.4

Payables
£m

Currency
swaps
£m

–

24.6

3.3

5.9

33.8

132.5

166.3

–

315.8

–

315.8

251.6

567.4

Financial
liability
cash flows
£m

20L

–

703.6

529.1

Finance
leases
£m

Total
2014
£m

69.7

37.3

5.6

1.9

69.7

1,997.8

712.5

930.4

2,986.6

114.5

3,710.4

89.0

1.9

690.8

3,075.6

116.4

4,401.2

Financial
liability
cash flows
£m

20L

–

1,519.9

662.8

497.7

2,680.4

347.0

3,027.4

Finance
leases
£m

Total
2013
£m

76.8

40.0

6.0

2.0

124.8

1.4

126.2

76.8

1,584.5

987.9

505.6

3,154.8

732.5

3,887.3

At 31 December 2014, the currency swap liability is offset by an asset of £1,012.5 million (2013: £544.8 million), so that the fair value of the currency
swaps is an asset of £16.1 million (2013: £22.6 million liability), as reported in note 19B.

L: Reconciliation of maturity analyses in notes 19A and 20K
The maturity analysis in note 20K 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 total borrowings column in
note 19A with the financial maturity analysis in note 20K.

Borrowings
including
currency swaps
£m

Unamortised
borrowing
costs
£m

Interest
£m

Financial
liability
cash flows
£m

20K

19A

1,399.0

457.7

430.4

2,287.1

(5.1)

2,282.0

343.0

240.7

97.0

680.7

94.1

774.8

11.9

1,753.9

5.2

1.7

703.6

529.1

18.8

2,986.6

–

89.0

18.8

3,075.6

2014

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

146 Hammerson plc Annual Report 2014
146 Hammerson plc Annual Report 2014

2013

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
including
currency swaps
£m

Interest
£m

Unamortised
borrowing costs
£m

19A

1,160.1

458.6

399.1

2,017.8

246.2

2,264.0

349.3

198.2

98.3

645.8

100.7

746.5

10.5

6.0

0.3

16.8

0.1

16.9

Financial
liability
cash flows
£m

20K

1,519.9

662.8

497.7

2,680.4

347.0

3,027.4

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 Business Review on pages 49 and 50 and information on share capital and
changes therein is set out in note 23 below and in the Consolidated Statement of Changes in Equity on page 109.

21: Obligations under finance leases
Finance lease obligations in respect of rents payable on leasehold properties are payable as follows:

2014

2013

Minimum
lease
payments
£m

69.7

37.3

5.6

1.9

Present value
of minimum
lease
payments
£m

Minimum
lease
payments
£m

29.6

3.0

0.2

0.1

76.8

40.0

6.0

2.0

1.4

Interest
£m

(40.1)

(34.3)

(5.4)

(1.8)

116.4

(83.4)

33.0

126.2

After 25 years

From five to 25 years

From two to five years

From one to two years

Within one year

22: Payables: non-current liabilities

Net pension liability (note 6)

Other payables

23: Share capital

Ordinary shares of 25p each

The Authorised share capital was removed from the Company’s Articles of Association in 2010.

Movements in number of shares in issue

Number of shares in issue at 1 January 2014

Issue of shares

Share options exercised – Executive Share Option Scheme

Share options exercised – Savings-related Share Option Scheme

Number of shares in issue at 31 December 2014

Present value
of minimum
lease
payments
£m

32.1

3.0

0.2

0.1

(0.5)

34.9

2013
£m

32.2

33.8

66.0

Interest
£m

(44.7)

(37.0)

(5.8)

(1.9)

(91.3)

2014
£m

39.0

33.5

72.5

Called up, allotted and fully paid

2014
£m

196.1

2013
£m

178.2

Number

712,876,870

71,297,452

40,708

80,218

784,295,248

www.hammerson.com 147
www.hammerson.com 147

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

23: Share capital (continued)
On 25 September 2014, the Company completed a placing of shares which resulted in the issue of 71,297,452 new ordinary shares of 25 pence
each at a price of 560 pence per placing share, raising proceeds of approximately £399.3 million (before expenses). The placing of shares was
effected by way of a cashbox placing. The proceeds of the placing were used to acquire the remaining 40% interest in Highcross Shopping
Centre in Leicester, make further investments in the fast-growing premium outlet sector and provide additional capital for our development
pipeline. For further details of the share issue and the associated merger reserve, see note H to the Company balance sheet.

Share options
At 31 December 2014, the following options granted to staff remained outstanding under the Company’s Executive Share Option Scheme:

Expiry year

2015

2016

Exercise price
(pence)

Number of
ordinary shares
of 25p each

583

839

14,449

88,486

102,935

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 or five-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-year contract). For contracts entered into prior to 2013, a seven-year term, was also available. 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 the invitation is launched.

At 31 December 2014, the following options granted to Executive Directors and staff remained outstanding under the Company’s Savings-related
Share Option scheme:

Expiry year

2015

2016

2017

2018

2019

Exercise price
(pence)

Number of
ordinary shares
of 25p each

312.24 – 329.04

111,206

217.2 – 420.0

312.24 – 462.4

368 – 420

329.04 – 462.4

72,500

67,695

12,438

17,481

281,320

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

Exercised during the year

Outstanding and exercisable at 31 December

2014
Weighted average
exercise price
£

7.26

7.59

5.10

8.03

Number
of options

167,732

(24,089)

(40,708)

102,935

2013
Weighted average
exercise price
£

7.06

8.19

4.16

7.26

Number
of options

205,211

(18,779)

(18,700)

167,732

The weighted average share price at the date of exercise for share options exercised during the year was £5.83 (2013: £5.26). The options
outstanding at 31 December 2014 had a weighted average remaining contractual life of 1 year (2013: 2 years). 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

148 Hammerson plc Annual Report 2014
148 Hammerson plc Annual Report 2014

2014
Weighted average
exercise price
£

3.39

4.62

3.64

3.56

3.00

3.78

Number
of options

316,708

65,808

(4,006)

(16,972)

(80,218)

281,320

2013
Weighted average
exercise price
£

3.23

4.20

3.72

3.19

3.00

3.39

Number
of options

316,173

54,102

(16,575)

(9,781)

(27,211)

316,708

The weighted average share price at the date of exercise for share options exercised during the year was £5.80 (2013: £5.15). No options
outstanding under the Company’s Savings-related Share Option Scheme were exercisable at 31 December 2014 or 31 December 2013.
The weighted average fair value of options granted during the year was £1.56 (2013: £1.30).

At 31 December 2014, the following shares remained outstanding under the Company’s Restricted Share Plan and Long-Term Incentive Plan.

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

2011

2012

2013

2014

24: Investment in own shares

At cost

Balance at 1 January

Purchase of own shares

Cost of shares awarded to employees

Balance at 31 December

2014

901,194

258,244

25,651

(314,224)

(147,708)

–

Restricted Share Plan

Long-Term Incentive Plan

Number of ordinary shares of 25p each

2013

2014

2013

1,002,236

2,832,739

2,778,141

303,790

36,927

356,892

72,363

(351,325)

(89,565)

(90,434)

–

(514,571)

766,408

79,578

(648,466)

–

(142,922)

2,832,739

723,157

901,194

2,657,858

Restricted Share Plan

Long-Term Incentive Plan

Number of ordinary shares of 25p each

2014

–

261,618

232,940

228,599

723,157

2013

311,251

301,553

288,390

–

2014

600,988

889,928

806,586

360,356

2013

1,179,503

866,268

786,968

–

901,194

2,657,858

2,832,739

2014
£m

4.9

5.5

(3.6)

6.8

2013
£m

6.0

4.9

(6.0)

4.9

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 2014 was 1,163,523 (2013: 984,463) following awards to participants during the year of 720,940
shares (2013: 1,353,344), and the purchase of 900,000 shares (2013: 1,000,000).

www.hammerson.com 149
www.hammerson.com 149

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

25: Impact of change in accounting policy
Following the adoption of IFRS 11 Joint Arrangements with effect from 1 January 2014, the Group’s interests in joint ventures are presented on an
equity accounting rather than a proportionally consolidated basis. Comparative figures have been restated to reflect the change in accounting
policy. The impact of these changes on the balance sheet and net debt are shown in the tables below. Further details of the impact of adopting
IFRS 11 are set out in note 1 on page 113.

A. Balance sheet

Notes

Non-current assets

Reported
Group
£m

Adjustment
£m

2014

Proportionally
consolidated
basis
£m

Reported
Group
£m

Adjustment
£m

2013

Proportionally
consolidated
basis
£m

Investment and development properties

4,427.3

2,279.2

6,706.5

3,447.8

2,483.4

5,931.2

Interests in leasehold properties

Plant, equipment and owner-occupied property

33.2

5.0

9.8

–

43.0

5.0

35.1

6.3

9.8

33.2

Investment in joint ventures

Property joint ventures

VIA Outlets

Investment in associate

Other non-current assets

Current assets

Receivables

Cash and deposits

Total assets

Current liabilities

Payables

Tax

Borrowings

Non-current liabilities

Borrowings

Deferred tax

Obligations under finance leases

Payables

Total liabilities

Net assets

Notes

44.9

39.5

–

545.4

73.7

6,634.7

113.1

56.7

169.8

–

0.5

56.1

35.0

41.0

76.0

2,237.3

(2,237.3)

–

2,470.8

(2,470.8)

104.2

–

2,341.5

(2,237.3)

104.2

628.8

80.7

–

2,470.8

(2,470.8)

545.4

73.2

51.7

7,568.2

6,578.6

42.1

30.8

72.9

139.9

59.4

199.3

78.1

15.7

93.8

628.8

80.7

7,516.5

97.8

28.6

126.4

7,642.9

124.6

7,767.5

6,672.4

132.1

6,804.5

204.4

66.5

270.9

0.3

–

0.3

–

204.7

66.5

271.2

169.5

1.0

246.2

416.7

71.0

–

71.0

240.5

1.0

246.2

487.7

2,287.1

42.2

2,329.3

2,017.8

45.0

2,062.8

0.5

33.0

72.5

2,393.1

2,597.8

–

9.8

6.1

58.1

124.6

0.5

42.8

78.6

2,451.2

2,722.4

0.4

34.9

66.0

2,119.1

2,535.8

–

9.8

6.3

61.1

132.1

0.4

44.7

72.3

2,180.2

2,667.9

5,045.1

–

5,045.1

4,136.6

–

4,136.6

A Reported Group results as shown in the consolidated balance sheet on page 108.

B Adjustment required to present the results on a proportionally consolidated basis.

C 2014 results presented on a proportionally consolidated basis, with the exception of the presentation of the investment in VIA Outlets.

D 2013 results previously reported on a proportionally consolidated basis.

150 Hammerson plc Annual Report 2014
150 Hammerson plc Annual Report 2014

B. Net debt

Notes

Cash at bank

Short-term deposits

Cash and deposits

Current borrowings including currency swaps

Non-current borrowings

Net debt

Reported
Group
£m

Adjustment
£m

28.5

0.1

28.6

5.1

(2,287.1)

(2,253.4)

27.7

3.1

30.8

–

(42.2)

(11.4)

2014

Total
£m

56.2

3.2

59.4

5.1

(2,329.3)

(2,264.8)

26: 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

Reported
Group
£m

Adjustment
£m

15.7

–

15.7

(246.2)

(2,017.8)

(2,248.3)

29.8

11.2

41.0

–

(45.0)

(4.0)

2014
£m

4.7

(6.3)

(1.6)

1.4

5.1

7.3

12.2

2013

Total
£m

45.5

11.2

56.7

(246.2)

(2,062.8)

(2,252.3)

2013
£m

5.4

(2.7)

2.7

1.5

3.9

(2.0)

6.1

27: 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 Property Analysis section on
page 159 and credit risk related to the trade receivables is discussed in note 20F.

Within one year

From one to two years

From two to five years

After five years

2014
£m

131.5

129.6

315.2

861.4

2013
£m

93.9

115.7

271.8

522.2

1,437.7

1,003.6

28: Contingent liabilities
There are contingent liabilities of £31.6 million (2013: £31.1 million) relating to guarantees given by the Group and a further £12.3 million (2013:
£10.5 million) relating to claims against the Group arising in the normal course of business, which are considered to be unlikely to crystallise.

In addition, Hammerson’s share of contingent liabilities arising within Property joint ventures, which is not included in the figures shown above,
is £16.2 million (2013: £17.0 million). Principal risks and uncertainties facing the Group are detailed on pages 55 to 59.

www.hammerson.com 151
www.hammerson.com 151

FINANCIAL STATEMENTS

NOTES TO THE ACCOUNTS CONTINUED

29: Related party transactions and non-controlling interests
A. Joint ventures and associates
Related party transactions with the Group’s joint ventures and associates primarily comprise management fees, interest receivable and
loan balances. The amounts shown below represent the Group’s transactions and balances with its related parties and are shown before any
consolidation adjustments.

Management fees from joint ventures

Interest receivable from joint ventures

Interest receivable from associate

Loans owed by associate

Amounts owed by joint ventures

Amounts owed to joint ventures

2014
£m

9.3

32.7

5.8

2013
£m

11.5

31.6

5.6

63.5

1,156.8

(3.2)

68.7

1,439.3

(3.9)

B. Key management
The remuneration of the Directors, who are the key management of the Group, is set out below in aggregate. Further information about the
Directors’ remuneration, as required by the Companies Act 2006, is disclosed in the audited sections of the Directors’ Remuneration Report on
pages 75 to 93.

Salaries and short-term benefits

Post-employment benefits

Share-based payments

Total remuneration

2014
£m

3.9

0.1

2.8

6.8

2013
£m

3.7

0.4

1.5

5.6

C. Non-controlling interests
The Group’s non-controlling interest represents a 35.5% interest in Place des Halles, Strasbourg held by Assurbail. During 2014, the property
generated gross rental income of £12.4 million (2013: £12.0 million) and the property valuation at 31 December 2014 was £206.4 million
(2013: £222.4 million). The non-controlling interests’ share of the gross rental income was £4.4 million (2013: £4.3 million) and of the property
valuation was £73.3 million (2013: £79.0 million). The balances and movements during the year associated with the non-controlling interest
are shown on the Consolidated Statement of Changes in Equity on pages 109 and 110.

152 Hammerson plc Annual Report 2014
152 Hammerson plc Annual Report 2014

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

Total liabilities

Net assets

Equity

Called up share capital

Share premium

Merger reserve

Other reserves

Revaluation reserve

Retained earnings

Investment in own shares

Equity shareholders’ funds

These financial statements were approved by the Board of Directors on 13 February 2015.

Signed on behalf of the Board

David Atkins
Director

Timon Drakesmith
Director

Registered in England No. 360632

Notes

2014
£m

3,576.7

5,180.2

8,756.9

8.6

1.5

10.1

2013
£m

2,948.6

4,545.0

7,493.6

5.6

0.8

6.4

8,767.0

7,500.0

1,434.8

–

1,434.8

2,287.1

3,721.9

5,045.1

196.1

1,222.9

374.2

7.3

1,981.1

1,270.3

(6.8)

5,045.1

1,176.1

246.2

1,422.3

2,017.8

3,440.1

4,059.9

178.2

1,222.4

–

7.3

1,353.0

1,303.9

(4.9)

4,059.9

www.hammerson.com 153
www.hammerson.com 153

FINANCIAL STATEMENTS

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 £105.9 million
(2013: £57.1 million).

Dividend information is provided in note 10 to the consolidated accounts.

C: Investments in subsidiary companies

Balance at 1 January 2014

Revaluation adjustment

Balance at 31 December 2014

Cost less provision
for permanent
diminution in value
£m

1,561.7

–

1,561.7

Investments are stated at Directors’ valuation. A list of the principal subsidiary companies at 31 December 2014 is included in note L.

D: Receivables: non-current assets

Amounts owed by subsidiaries

Loans receivable (see note 15)

Fair value of interest rate swaps

2014
£m

5,101.7

63.5

15.0

Valuation
£m

2,948.6

628.1

3,576.7

2013
£m

4,474.3

68.7

2.0

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 2015.

5,180.2

4,545.0

154 Hammerson plc Annual Report 2014
154 Hammerson plc Annual Report 2013

Receivables: current assets

Other receivables

Fair value of currency swaps

F: Payables

Amounts owed to subsidiaries

Other payables and accruals

2014
£m

3.5

5.1

8.6

2014
£m

1,377.9

56.9

1,434.8

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

Current assets: Fair value of currency swaps

Bank loans and
overdrafts
£m

Other
borrowings
£m

2014
Total
£m

–

1,399.0

72.9

164.6

237.5

–

384.8

265.8

457.7

430.4

2,049.6

2,287.1

–

237.5

2,049.6

2,287.1

–

(5.1)

2013
£m

5.6

–

5.6

2013
£m

1,112.9

63.2

1,176.1

2013
Total
£m

1,160.1

458.6

399.1

2,017.8

246.2

2,264.0

–

Details of the Group’s borrowings and financial instruments are given in notes 19 and 20 to the consolidated accounts. The Company’s
borrowings are unsecured and comprise sterling and euro denominated bonds, bank loans and overdrafts.

237.5

2,044.5

2,282.0

2,264.0

H: Equity

Balance at 1 January 2014

Issue of shares

Share issue costs

Dividends

Revaluation gains on investments in subsidiary
companies

Profit for the year

Note

Share
premium
£m

1,222.4

0.5

–

Merger
reserve
£m

–

381.4

(7.2)

–

Other
reserves
£m

Revaluation
reserve
£m

7.3

1,353.0

–

628.1

–

Retained
earnings
£m

1,303.9

–

(139.5)

–

105.9

Balance at 31 December 2014

1,222.9

374.2

7.3

1,981.1

1,270.3

The merger reserve comprises the premium on the share placing in September 2014. With regard to this transaction, no share premium is
recorded in the Company’s financial statements, through the operation of the merger relief provisions of the Companies Act 2006.

The balance of £7.2 million on the capital redemption reserve has been aggregated within other reserves as at 1 January 2014.

www.hammerson.com 155
www.hammerson.com 155

FINANCIAL STATEMENTS

NOTES TO THE COMPANY ACCOUNTS CONTINUED

Investment in own shares

At cost

Balance at 1 January

Purchase of own shares

Transfer to employing subsidiaries – cost of shares awarded to employees

Balance at 31 December

2014
£m

4.9

5.5

(3.6)

6.8

2013
£m

6.0

4.9

(6.0)

4.9

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 23 and 24 to the consolidated accounts.

J: 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

Profit for the year

Balance at 31 December

K: Fair value of financial instruments

Borrowings, excluding currency swaps

Currency swaps

Total

Interest rate swaps

2014
£m

2013
£m

4,059.9

3,851.2

392.6

(139.5)

628.1

3.6

(5.5)

105.9

5,045.1

Book value
£m

2,241.4

22.6

2,264.0

2.0

0.1

(130.1)

280.5

6.0

(4.9)

57.1

4,059.9

2013

Fair value
£m

2,451.7

22.6

2,474.3

2.0

Book value
£m

2,298.1

(16.1)

2,282.0

15.0

2014

Fair value
£m

2,604.1

(16.1)

2,588.0

15.0

156 Hammerson plc Annual Report 2014
156 Hammerson plc Annual Report 2013

L: Principal Group entities
In the opinion of the Directors the disclosure of all of the Group’s undertakings would be excessive so, as permitted by section 410 of
the Companies Act 2006, a complete listing of all the Group’s undertakings has not been provided below. A complete list of the Group’s
undertakings will be filed with the Annual Return at Companies House.

The Directors consider the entities listed below to be the principal undertakings affecting the Group’s financial results, which 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 and are incorporated/registered and operate in the countries listed below. No Group
entities have been excluded from the consolidated financial results.

France

Hammerson International Holdings Ltd

Hammerson SAS

Hammerson UK Properties plc

Hammerson Holding France SAS

Grantchester Holdings Ltd

Hammerson Centre Commercial Italie SAS

Hammerson (Brent Cross) Ltd

Société Civile Immobilière ESQ (25%)

Bristol Alliance Limited Partnership (50%)

Société Civile Immobilières RC Aulnay1 and RC Aulnay 2 (25%)

The Netherlands

Hammerson Europe BV

Société Civile de Développement du Centre Commercial de la
Place des Halles SDPH (64.5%)

The Bull Ring Limited Partnership (50%)

Hammerson (Cramlington 1) Ltd
Croydon Limited Partnership (50%)
Hammerson Group Management Ltd

The Highcross Limited Partnership

Hammerson Operations Ltd

The Oracle Limited Partnership (50%)
Retail Property Holdings Limited (50%)1
Hammerson (Value Retail Investments) Ltd

Hammerson (Victoria Quarter) Limited
Whitgift Limited Partnership (50%)
Union Square Developments Ltd

The West Quay Limited Partnership (50%)
VIA Limited Partnership (47%)2

1. Incorporated/registered and resident in the Isle of Man.

2. Incorporated/registered and resident in Jersey.

www.hammerson.com 157
www.hammerson.com 157

FINANCIAL STATEMENTS

PORTFOLIO ANALYSIS

Unaudited

Our portfolio provides a secure income stream, with a weighted average unexpired lease term of
eight years, and opportunities for growth. The portfolio was 3.6% reversionary at 31 December 2014,
with reversion at the UK and French portfolios of 1.2% and 10.0% respectively. Assuming that leases
are renewed or re-let and rent reviews are agreed at current ERVs an estimated £17.0 million of
additional annual income could be secured from the portfolio by the end of 2017.

As explained in the Financial Review on page 51, management reviews the performance of the business including the Group’s share of joint
ventures on a proportionally consolidated basis, but excludes the Group’s interest in premium outlets through investments in Value Retail and
VIA Outlets. This is because the Group has less day-to-day involvement and the outlets centre sector has different operational characteristics
compared with the Group’s property portfolio. The information in the following tables has been prepared on this basis.

Table Fig 83
Rental information
Rental data for the year ended 31 December 2014

Proportionally consolidated excluding premium outlets

Notes
United Kingdom
Shopping centres
Retail parks
Other
Total

France
Total investment portfolio
Developments
Total property portfolio

Selected data for the year ended 31 December 2013
(continuing portfolio only)
Group
UK
France
Total investment portfolio

Notes

Gross rental
income
£m

Net rental
income
£m

Vacancy rate
%

Average rents
passing
£/m²

Rents
passing
£m

Estimated
rental value
£m

Reversion/
(over-rented)
%

149.4
86.2
14.5
250.1

91.8
341.9
2.2
344.1

127.9
83.0
11.3
222.2

82.4
304.6
1.0
305.6

1.9
1.5
8.7
2.1

3.4
2.5

535
190
180
335

360
340

154.2
86.8
12.4
253.4

93.5
346.9

160.8
87.4
13.4
261.6

107.0
368.6

2.6
(0.9)
(0.4)
1.2

10.0
3.6

246.6
71.6
318.2

218.5
63.2
281.7

2.2
2.6
2.3

330
335
330

250.3
69.7
320.0

258.2
75.1
333.3

1.0
4.9
1.8

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 rents passing at 31 December 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, 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, after deducting head and equity rents, calculated by the Group’s valuers. ERVs in

the above table are included within the unobservable inputs to the portfolio valuations as defined by IFRS 13.

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.

158 Hammerson plc Annual Report 2014

Table Fig 84
Lease expiries and breaks as at 31 December 2014

Proportionally consolidated excluding premium outlets

Notes
United Kingdom
Shopping centres
Retail parks
Other
Total

France
Total investment portfolio

Notes

Rents passing that expire/break in

ERV of leases that expire/break in

2015
£m

21.8
7.7
3.4
32.9

13.8
46.7

2016
£m

7.9
1.0
0.7
9.6

4.4
14.0

2017
£m

8.9
2.0
0.9
11.8

5.5
17.3

2015
£m

26.9
8.1
4.2
39.2

14.9
54.1

2016
£m

7.5
1.1
0.6
9.2

4.4
13.6

Weighted average
unexpired lease term

to break
years

to expiry
years

6.5
8.8
7.0
7.4

3.8
6.3

8.2
9.8
8.3
8.8

6.4
8.1

2017
£m

9.1
1.9
0.9
11.9

5.8
17.7

1. The amount by which rental income, based on rents passing at 31 December 2014, 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 2014 for leases that expire or break in each year and ignoring the impact of rental growth and any rent-free periods.

Table Fig 85
Rent reviews as at 31 December 2014

Proportionally consolidated excluding premium outlets

Notes
United Kingdom
Shopping centres
Retail parks
Other
Total

Notes

Rents passing subject to review in

Projected rents at current ERV of leases subject to review in

Outstanding
£m

37.9
23.6
3.0
64.5

2015
£m

9.4
23.0
2.1
34.5

2016
£m

9.2
15.4
0.8
25.4

2017
£m

Outstanding
£m

13.2
11.8
0.8
25.8

41.8
24.5
3.2
69.5

2015
£m

10.3
23.7
2.2
36.2

2016
£m

10.4
15.9
0.8
27.1

2017
£m

14.1
12.1
0.8
27.0

1. Rents passing at 31 December 2014, 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 2014 and ignoring

the impact of changes in rental values before the review date.

www.hammerson.com 159

OTHER INFORMATION
PORTFOLIO ANALYSIS CONTINUED

Table Fig 86
Net rental income
Net rental income for the year ended 31 December 2014

Proportionally consolidated excluding premium outlets

United Kingdom
Shopping centres
Retail parks
Other
Total

France
Total property portfolio

Table Fig 87
Net rental income for the year ended 31 December 2013

Proportionally consolidated excluding premium outlets
United Kingdom
Shopping centres
Retail parks
Other
Total

France
Total property portfolio – continuing operations
Discontinued operations
Total property portfolio

Increase/
(Decrease)
for properties
owned
throughout
2013/14
%

Properties
owned
throughout
2013/14
£m

Acquisitions
£m

Disposals
£m

Developments
£m

Total net
rental income
£m

115.0
80.1
9.3
204.4

62.0
266.4

Properties
owned
throughout
2013/14
£m

112.6
78.2
9.5
200.3

60.7
261.0
–
261.0

2.2
2.4
(1.2)
2.1

2.0
2.1

10.5
–
0.9
11.4

4.9
16.3

0.3
1.0
0.7
2.0

–
2.0

2.1
1.9
1.3
5.3

15.6
20.9

127.9
83.0
12.2
223.1

82.5
305.6

Exchange
£m

Acquisitions
£m

Disposals
£m

Developments
£m

Total net
rental income
£m

–
–
–
–

3.2
3.2
–
3.2

5.5
–
1.1
6.6

(1.1)
5.5
–
5.5

6.2
1.5
2.2
9.9

0.1
10.0
6.7
16.7

0.4
2.4
1.2
4.0

(0.2)
3.8
–
3.8

124.7
82.1
14.0
220.8

62.7
283.5
6.7
290.2

160 Hammerson plc Annual Report 2014

Table Fig 88
Cost ratio

Proportionally consolidated excluding premium outlets
Net service charge expenses – non-vacancy
Net service charge expenses – vacancy
Net service charge expenses – total
Other property outgoings
Employee and corporate costs
Management fees receivable
Net one-off restructuring charge
Total operating costs

Gross rental income, after rents payable

Cost ratio including net service charge expenses – vacancy (%)
Cost ratio excluding net service charge expenses – vacancy (%)

2013 figures are for continuing operations only

Notes

Year ended
31 December
2014
£m
3.0
7.4
10.4
26.2
52.1
(5.6)
(3.0)
80.1

Year ended
31 December
2013
£m
2.0
7.9
9.9
26.6
48.8
(6.7)
–
78.6

342.2

319.3

23.4
21.2

24.6
22.1

Staff costs amounting to £1.5 million (2013: £1.5 million) 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.

Including the net one-off restructuring charge of £3.0 million shown above as operating costs increases the cost ratio to 24.3%. Further details
on the restructuring charge are in the Financial Review on page 52.

Table Fig 89
Top Ten Tenants
Tenants ranked by passing rent at 31 December 2014

Proportionally consolidated excluding premium outlets
B&Q
Next
Dixons Carphone
H&M
Inditex
Arcadia
Home Retail Group
Boots
New Look
Debenhams
Total

Passing rent
£m
12.1
7.1
6.7
6.7
6.6
6.0
6.0
5.2
5.0
4.5
65.9

% of total passing rent
3.5
2.0
1.9
1.9
1.9
1.8
1.8
1.5
1.4
1.3
19.0

www.hammerson.com 161

OTHER INFORMATION

PORTFOLIO ANALYSIS CONTINUED

Table Fig 90
Valuation analysis
Valuation data for property portfolio for the year ended 31 December 2014

Proportionally consolidated

Notes
United Kingdom
Shopping centres
Retail parks
Other
Total

France
Total investment portfolio
Developments
Total property portfolio
Premium outlets4
Total Group

Notes

Properties
at valuation
£m

Revaluation
in the year
£m

Capital
return
%

2,863.9
1,644.1
192.7
4,700.7

1,797.7
6,498.4
208.1
6,706.5
1,027.6
7,734.1

237.4
134.9
5.1
377.4

41.1
418.5
18.3
436.8
109.8
546.6

9.6
9.0
3.4
9.0

2.4
7.4
9.1
7.4
12.8
8.0

Total
return
%

15.0
15.0
8.9
14.7

7.7
13.1
9.8
12.7
19.9
13.6

Initial
yield
%

True equivalent
yield
%

Nominal
equivalent
yield
%

4.7
4.8
6.1
4.8

4.6
4.7

5.4
5.6
7.2
5.6

5.3
5.5

5.2
5.4
7.1
5.4

5.1
5.3

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. Nominal equivalent yields, which are similar to the true equivalent yields but assume rents are received annually in arrears, are included within the unobservable inputs to

the portfolio valuations as defined by IFRS 13.

4. Represents the returns for the Group’s share of premium outlets through its interests in Value Retail and VIA Outlets.

5. The weighted average remaining rent-free period is 0.5 years.

162 Hammerson plc Annual Report 2014

Table Fig 91
Yield analysis
Investment portfolio at 31 December 2014

Proportionally consolidated excluding premium outlets
Portfolio value (net of cost to complete)
Purchasers’ costs1
Net investment 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 5.4% of the net portfolio value.

2. The yield of 4.9% based on passing rents and the gross portfolio value is equivalent to EPRA’s ‘topped-up’ Net Initial Yield.

Income
£m

Gross value
£m
6,849

Net book value
£m
6,849
(350)
6,499

323.4
13.3
336.7
10.2
346.9
8.8
12.9
368.6

4.7%
0.2%
4.9%
0.2%
5.1%
0.1%
0.2%
5.4%
5.5%
5.3%

5.0%
0.2%
5.2%
0.2%
5.4%
0.1%
0.2%
5.7%

www.hammerson.com 163

OTHER INFORMATION
PROPERTY DETAILS

Unaudited

UK SHOPPING CENTRES
Our 11 major UK shopping centres attract nearly 160 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
JV PARTNER:

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

Standard Life (59%)

1976 developed,
1995 refurbished

Leasehold

Fenwick, John Lewis,
Marks & Spencer,
Waitrose

NO. OF TENANTS:

111

UNEXPIRED LEASE TERM TO EXPIRY:

7 years

OCCUPANCY RATE:

RENTS PASSING:

AVERAGE RENTS PASSING:

ENVIRONMENTAL
MANAGEMENT SYSTEM:

ENERGY INTENSITY*:

OWNERSHIP:

99%

£17.5 million p.a.

£1,065per m2

ISO 14001

127

41%

PROPERTY NET INTERNAL AREA:

84,900m2

BRISTOL INVESTMENT
PROPERTIES
JV PARTNER:

AXA Real Estate (50%)

BULLRING,
BIRMINGHAM
JV PARTNER:

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

2000-2006 acquired

Leasehold

BHS, Sports Direct,
Sainsbury’s,
HMV, Superdrug

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

CPPIB (16.7%), Henderson
Shopping Centre
Fund (33.3%)

2003 developed

Leasehold

Apple, Debenhams,
Forever 21, Selfridges

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

10 years

OCCUPANCY RATE:

RENTS PASSING:

AVERAGE RENTS PASSING:

OWNERSHIP:

94.9%

£3.7 million p.a.

£265 per m2

50%

PROPERTY NET INTERNAL AREA:

33,800m2

NO. OF TENANTS:

162

UNEXPIRED LEASE TERM TO EXPIRY:

6 years

OCCUPANCY RATE:

RENTS PASSING:

AVERAGE RENTS PASSING:

ENVIRONMENTAL MANAGEMENT
SYSTEM:

98.8%

£26.8 million p.a.

£535 per m2

ISO 14001

ENERGY INTENSITY*:

OWNERSHIP:

127

50%

PROPERTY NET INTERNAL AREA:

127,600m2

HIGHCROSS,
LEICESTER
JV PARTNER:

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

2008 developed

Freehold

Cinema de Lux,
Debenhams, House of
Fraser, John Lewis

NO. OF TENANTS:

135

UNEXPIRED LEASE TERM TO EXPIRY:

13 years

OCCUPANCY RATE:

RENTS PASSING:

AVERAGE RENTS PASSING:

ENVIRONMENTAL MANAGEMENT
SYSTEM:

96.4%

£27.4 million p.a.

£455 per m2

ISO 14001

ENERGY INTENSITY*:

OWNERSHIP:

100%

PROPERTY NET INTERNAL AREA:

105,600m2

CABOT CIRCUS,
BRISTOL
JV PARTNER:

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

CENTRALE,
CROYDON
JV PARTNER:

AXA Real Estate(50%)

September 2008 opened

KEY DATES:

Leasehold

Harvey Nichols,
House of Fraser,
Cinema de Lux

TENURE:

PRINCIPAL OCCUPIERS:

Westfield (50%)

1988 developed,
2011 acquired

Freehold

Debenhams,
House of Fraser,
H&M, Next, Zara

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

7 years

OCCUPANCY RATE:

RENTS PASSING:

AVERAGE RENTS PASSING:

ENVIRONMENTAL MANAGEMENT
SYSTEM:

ENERGY INTENSITY*:

OWNERSHIP:

96.3%

£4.9 million p.a.

£260 per m2

–

204

50%

PROPERTY NET INTERNAL AREA:

64,700m2

NO. OF TENANTS:

129

UNEXPIRED LEASE TERM TO EXPIRY:

8 years

OCCUPANCY RATE:

RENTS PASSING:

AVERAGE RENTS PASSING:

ENVIRONMENTAL MANAGEMENT
SYSTEM:

97.6%

£15.1 million p.a.

£370 per m2

ISO 14001

ENVIRONMENTAL RATING:

OWNERSHIP:

Excellent

50%

PROPERTY NET INTERNAL AREA:

109,600m2

MONUMENT MALL,
NEWCASTLE
JV PARTNER:

–

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

2011 acquired,
2013 redeveloped

Freehold

Jamie’s Italian, Living
Ventures, Michael Kors,
TK Maxx, Sports Direct

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

OCCUPANCY RATE:

RENTS PASSING:

AVERAGE RENTS PASSING:

ENERGY INTENSITY*:

OWNERSHIP:

99.6

£3.3 million p.a.

£375 per m2

238

100%

PROPERTY NET INTERNAL AREA:

9,500m2

* Measured by kg/CO2e/m2 Common Parts.

164 Hammerson plc Annual Report 2014

SILVERBURN,
GLASGOW
JV PARTNER:

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

CPPIB (50%)

2007 opened,
2009 acquired

Freehold

Debenhams, Marks &
Spencer, Tesco Extra

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

8 years

OCCUPANCY RATE:

RENTS PASSING:

AVERAGE RENTS PASSING:

ENVIRONMENTAL MANAGEMENT
SYSTEM:

99.8%

£10.3 million p.a.

£355 per m2

ISO 14001

ENERGY INTENSITY*:

OWNERSHIP:

50%

PROPERTY NET INTERNAL AREA:

92,100m2

THE ORACLE,
READING
JV PARTNER:

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

ADIA (50%)

1999 developed

Leasehold

Debenhams,
House of Fraser, Hugo
Boss, Vue Cinema

NO. OF TENANTS:

110

UNEXPIRED LEASE TERM TO EXPIRY:

8 years

OCCUPANCY RATE:

RENTS PASSING:

AVERAGE RENTS PASSING:

ENVIRONMENTAL MANAGEMENT
SYSTEM:

98.5%

£14.3 million p.a.

£565 per m2

ISO 14001

ENERGY INTENSITY*:

OWNERSHIP:

50%

PROPERTY NET INTERNAL AREA:

70,400m2

UK SHOPPING CENTRES

UNION SQUARE,
ABERDEEN
JV PARTNER:

–

VICTORIA QUARTER,
LEEDS
JV PARTNER:

–

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

2009 developed

Freehold

Apple, Cineworld,
Marks & Spencer,
Next, Zara

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

2012 acquired

Freehold

Harvey Nichols,
Paul Smith,
Vivienne Westwood

WESTQUAY,
SOUTHAMPTON
JV PARTNER:

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

GIC (50%)

2000 developed

Leasehold

John Lewis,
Marks & Spencer,
Superdry, Zara

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

12 years

UNEXPIRED LEASE TERM TO EXPIRY:

6 years

UNEXPIRED LEASE TERM TO EXPIRY:

4 years

OCCUPANCY RATE:

RENTS PASSING:

96.9%

OCCUPANCY RATE:

£17.5 million p.a.

RENTS PASSING:

AVERAGE RENTS PASSING:

£480 per m2

AVERAGE RENTS PASSING:

ENVIRONMENTAL RATING:

BREEAM Very Good

ENERGY INTENSITY*:

OWNERSHIP:

PROPERTY NET INTERNAL AREA:

19,100m2

96.5%

£7.3 million p.a.

£540 per m2

100%

OCCUPANCY RATE:

RENTS PASSING:

AVERAGE RENTS PASSING:

ENVIRONMENTAL MANAGEMENT
SYSTEM:

99.9%

£14.6 million p.a.

£660 per m2

ISO 14001

ENERGY INTENSITY*:

OWNERSHIP:

50%

PROPERTY NET INTERNAL AREA:

76,400m2

ENERGY INTENSITY*:

OWNERSHIP:

171

100%

PROPERTY NET INTERNAL AREA:

51,600m2

* Measured by kg/CO2e/m2 Common Parts.

UK RETAIL PARKS
Hammerson owns 21 retail parks in the UK, which together provide over 500,000m2 of floorspace. The 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:

2006 acquired

Freehold

B&Q, Tesco

UNEXPIRED LEASE TERM TO EXPIRY:

15 years

OCCUPANCY RATE:

100%

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

Part open A1,
part bulky goods

£3.3 million p.a.

£145 per m2

100%

ABBOTSINCH RETAIL PARK,
PAISLEY
JV PARTNER:

–

BATTERY RETAIL PARK,
BIRMINGHAM
JV PARTNER:

–

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

2012 acquired

KEY DATES:

Freehold

B&Q, Pets at Home,
Harveys, DFS

TENURE:

PRINCIPAL OCCUPIERS:

Built 1990, 2002 acquired,
2010 bought out partner

Leasehold

Currys, Halfords,
Homebase, Next, PC
World

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

11 years

OCCUPANCY RATE:

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

100%

Bulky goods

£4.1 million p.a.

£195 per m2

100%

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

10 years

OCCUPANCY RATE:

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

PROPERTY NET INTERNAL AREA:

100%

A1 and restaurants

£2.3 million p.a.

£330 per m2

100%

6,900m2

PROPERTY NET INTERNAL AREA:

20,200m2

PROPERTY NET INTERNAL AREA:

20,900m2

BRENT SOUTH SHOPPING PARK,
LONDON NW2
JV PARTNER:

Standard Life (59%)

CENTRAL RETAIL PARK,
FALKIRK
JV PARTNER:

–

CLEVELAND RETAIL PARK,
MIDDLESBROUGH
JV PARTNER:

–

2004 developed

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

NO. OF TENANTS:

Freehold

DFS, Next,
TK Maxx

UNEXPIRED LEASE TERM TO EXPIRY:

8 years

OCCUPANCY RATE:

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

100%

Mainly open A1

£1.7 million p.a.

£495 per m2

41%

PROPERTY NET INTERNAL AREA:

8,700m2

Δ Measured by kg/CO2e/car parking space.

TENURE:

PRINCIPAL OCCUPIERS:

NO. OF TENANTS:

WEIGHTED AVERAGE UNEXPIRED
LEASE TERM EXPIRY

OCCUPANCY RATE:

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

9 years

96.2%

Mixed

£5.8 million p.a.

£200 per m2

100%

PROPERTY NET INTERNAL AREA:

36,900m2

2002 acquired,
2003 extended

Leasehold

KEY DATES:

Boots, Homebase,
Mothercare, Next, Tesco

TENURE:

PRINCIPAL OCCUPIERS:

2002 acquired,
2006 extended,
2009 reconfiguration

Freehold

Argos, Boots, B&Q, Currys,
Matalan, M&S Simply
Food, Next, Outfit

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

10 years

OCCUPANCY RATE:

100%

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

Part open A1,
part bulky goods

£4.6 million p.a.

£160 per m2

100%

PROPERTY NET INTERNAL AREA:

27,800m2

www.hammerson.com 165

OTHER INFORMATION
PROPERTY DETAILS CONTINUED

UK RETAIL PARKS CONTINUED

CYFARTHFA RETAIL PARK,
MERTHYR TYDFIL
JV PARTNER:

–

DALLOW ROAD,
LUTON
JV PARTNER:

–

DRAKEHOUSE RETAIL PARK,
SHEFFIELD
JV PARTNER:

–

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

2005 developed

KEY DATES:

Freehold

Argos, B&Q, Boots, Currys,
Debenhams, DW Sports,
New Look, Next, TK Maxx

TENURE:

PRINCIPAL OCCUPIERS:

NO. OF TENANTS:

2002 acquired,
2006 redeveloped

KEY DATES:

TENURE:

Freehold

Aldi, B&Q

PRINCIPAL OCCUPIERS:

2003 acquired

Freehold

B&M Home Store,
Carpetright, Currys,
Homebase, JD Sports,
Oak Furnitureland,
Smyths Toys, Wickes

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

9 years

OCCUPANCY RATE:

92.1%

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

Mixed (open A1, bulky
goods, restaurant)

£5.0 million p.a.

£225 per m2

100%

PROPERTY NET INTERNAL AREA:

23,500m2

UNEXPIRED LEASE TERM TO EXPIRY:

15 years

OCCUPANCY RATE:

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

£2.0 million p.a.

£195 per m2

100%

PROPERTY NET INTERNAL AREA:

10,100m2

100%

NO. OF TENANTS:

Food and bulky goods

UNEXPIRED LEASE TERM TO EXPIRY:

9 years

OCCUPANCY RATE:

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

100%

Restricted open A1

£4.2 million p.a.

£200 per m2

100%

PROPERTY NET INTERNAL AREA:

21,000m2

ELLIOTT’S FIELD,
RUGBY*
JV PARTNER:

–

FIFE CENTRAL RETAIL PARK,
KIRKCALDY
JV PARTNER:

–

IMPERIAL RETAIL PARK,
BRISTOL
JV PARTNER:

–

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

2011 acquired

KEY DATES:

Freehold

Halfords, Pizza Hut,
TK Maxx

TENURE:

PRINCIPAL OCCUPIERS:

2005 acquired, 2009
extension

Freehold

Argos, B&Q, Boots,
Homebase, Mothercare,
Next, Sainsbury’s

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

1 years

OCCUPANCY RATE:

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

ENVIRONMENTAL RATING:

OWNERSHIP:

PROPERTY NET INTERNAL AREA:

100%

Open A1

£0.5 million p.a.

£190 per m2

n/k

BREEAM Excellent
targeted

100%

2,400m2

* Excludes area currently under development.

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

9 years

OCCUPANCY RATE:

100%

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

Part open A1, part bulky
goods

£6.0 million p.a.

£210 per m2

100%

PROPERTY NET INTERNAL AREA:

28,200m2

MANOR WALKS,
CRAMLINGTON
JV PARTNER:

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

–

2006 acquired

Freehold

Argos, Boots,
Next, Sainsbury’s, Vue

PARC TAWE,
SWANSEA
JV PARTNER:

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

–

2006 acquired

Leasehold

Mothercare, Odeon,
Toys ‘R’ Us

NO. OF TENANTS:

122

UNEXPIRED LEASE TERM TO EXPIRY:

7 years

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

3 years

OCCUPANCY RATE:

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

100%

Open A1

£1.4 million p.a.

£75 per m2

130

100%

PROPERTY NET INTERNAL AREA:

20,600m2

OCCUPANCY RATE:

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

97.9%

Open A1

£8.1 million p.a.

£145 per m2

220

100%

PROPERTY NET INTERNAL AREA:

57,600m2

Δ Measured by kg/CO2e/car parking space.

166 Hammerson plc Annual Report 2014

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

2012 acquired

Freehold

B&Q, Boots, M&S Simply
Food, Tesco Home Plus

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY

11 years

OCCUPANCY RATE:

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

100%

Restricted open A1

£5.3 million p.a.

£165 per m2

100%

PROPERTY NET INTERNAL AREA:

32,200m2

RAVENHEAD RETAIL PARK,
ST HELENS
KEY DATES:

2007 acquired

TENURE:

Freehold

PRINCIPAL OCCUPIERS:

Argos, B&Q, Boots,
Currys, Next, PC World,
Smyths Toys

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

9 years

OCCUPANCY RATE:

100%

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

Part open A1, part bulky
goods

£4.8 million p.a.

£175 per m2

102

100%

PROPERTY NET INTERNAL AREA:

27,600m2

ST OSWALD’S RETAIL PARK,
GLOUCESTER
JV PARTNER:

–

TELFORD FORGE SHOPPING
PARK, TELFORD
JV PARTNER

–

THE ORCHARD CENTRE,
DIDCOT
JV PARTNER:

–

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

2005 developed

Leasehold

B&Q, DW Sports,
Homesense, Mothercare

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

2012 acquired

Freehold

Sainsbury’s, Outfit,
TK Maxx, Boots, Next

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

13 years

UNEXPIRED LEASE TERM TO EXPIRY:

10 years

OCCUPANCY RATE:

100%

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

Mixed (open A1, bulky
goods, restaurant)

£4.5 million p.a.

£215 per m2

100%

PROPERTY NET INTERNAL AREA:

20,800m2

OCCUPANCY RATE:

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

95.1%

Open A1

£4.7 million p.a.

£215 per m2

100%

PROPERTY NET INTERNAL AREA:

29,100m2

KEY DATES:

TENURE:

2006 acquired

Leasehold

PRINCIPAL OCCUPIERS:

Argos, Next, Sainsbury’s

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

13 years

OCCUPANCY RATE:

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

100%

Open A1

£3.8 million p.a.

£145 per m2

147

100%

PROPERTY NET INTERNAL AREA:

25,800m2

THURROCK SHOPPING PARK,
THURROCK
JV PARTNER:

–

WESTWOOD & WESTWOOD
GATEWAY RETAIL PARKS, THANET
JV PARTNER:

–

WREKIN RETAIL PARK,
TELFORD
JV PARTNER:

–

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

2012 acquired

Freehold

Decathlon, Dunelm,
Marks & Spencer, TK Maxx,
Gap, Asda Living, Boots,
Smyths Toys, Nike

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

9 years

OCCUPANCY RATE:

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

100%

Open A1

£5.9 million p.a.

£190 per m2

100%

PROPERTY NET INTERNAL AREA:

30,300m2

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

2002 acquired,
2009 extended

Freehold

KEY DATES:

TENURE:

Homebase, Matalan,
Sports Direct, Wren Living

PRINCIPAL OCCUPIERS:

1996 development;
2010 acquired

Freehold

Asda Living, Boots,
Homebase Matalan

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

10 years

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

7 years

OCCUPANCY RATE:

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

96.1%

Part open A1

£4.9 million p.a.

£200 per m2

100%

OCCUPANCY RATE:

PLANNING

RENTS PASSING:

AVERAGE RENTS PASSING:
ENERGY INTENSITY Δ:

OWNERSHIP:

100%

Open A1

£2.6 million p.a.

£195 per m2

100%

PROPERTY NET INTERNAL AREA:

24,700m2

PROPERTY NET INTERNAL AREA:

13,400m2

FRANCE RETAIL
In France, we own and manage some of the top shopping centres in the Ile-de-France region, including Italie Deux and O’Parinor, together
with high-quality centres in Marseille, Strasbourg and Angers. Our French shopping centres attract over 80 million visitors each year.

BERCY 2,
CHARENTON-LE-PONT
CO-OWNERSHIP:

Carrefour, Darty

ESPACE SAINT QUENTIN,
SAINT QUENTIN-EN-YVELINES
PARTNER:

Allianz (75%)

GRAND MAINE,
ANGERS
CO-OWNERSHIP:

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

2000 acquired

Freehold

Go Sport, H&M,
La Grande Récré

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

6 years

OCCUPANCY RATE:

RENTS PASSING:

AVERAGE RENTS PASSING:

ENERGY INTENSITY*:

OWNERSHIP:

PROPERTY NET INTERNAL AREA:

94.9%

£3.9 million p.a.

£285 per m2

20,200m2

35,200m2

Δ Measured by kg/CO2e/car parking space.

* Measured by kg/CO2e/m2 Common Parts.

CO-OWNERSHIP:

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

Buffalo Grill, C&A,
Carrefour, Darty,
McDonalds

1994 acquired
2007 reconfigured

Freehold

C&A, Carrefour, Go Sport,
H&M, Sephora

NO. OF TENANTS:

122

UNEXPIRED LEASE TERM TO EXPIRY:

5 years

OCCUPANCY RATE:

RENTS PASSING:

AVERAGE RENTS PASSING:

ENERGY INTENSITY*:

OWNERSHIP:

PROPERTY NET INTERNAL AREA:
(of which JV ownership is 29,500m2)

95.9%

£2.9 million p.a.

£465 per m2

25%

60,300m2

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

Carrefour

1983 opened
2007 acquired

Freehold

Carrefour, Celio, Etam,
Naf Naf, Paul, Yves Rocher

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

5 years

OCCUPANCY RATE:

RENTS PASSING:

AVERAGE RENTS PASSING:

ENERGY INTENSITY*:

OWNERSHIP:

PROPERTY NET INTERNAL AREA:

94.8%

£2.5 million p.a.

£315 per m2

8,600m2

21,500m2

www.hammerson.com 167

OTHER INFORMATION

PROPERTY DETAILS CONTINUED

FRANCE RETAIL CONTINUED

ITALIE DEUX,
PARIS 13ÈME
JV PARTNER:

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

–

1976 opened,
1998 acquired
2013 refurbished

Freehold

Carrefour Market,
Darty, Fnac, Go Sport,
La Grande Récré,
Printemps, Sephora

NO. OF TENANTS:

127

UNEXPIRED LEASE TERM TO EXPIRY:

6 years

OCCUPANCY RATE:

RENTS PASSING:

98.5%

£18.9 million p.a.

AVERAGE RENTS PASSING:

£500 per m2

ENERGY INTENSITY*:

OWNERSHIP:

PROPERTY NET INTERNAL AREA:

57,300m2

LES 3 FONTAINES,
CERGY PONTOISE
CO-OWNERSHIP:

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

Auchan

1972 opened
1995 acquired
1996 refurbished

Freehold

Auchan, C&A, Darty,
H&M, Mango, New Look

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

5 years

OCCUPANCY RATE:

RENTS PASSING:

97.9%

£12.0 million p.a.

AVERAGE RENTS PASSING:

£560 per m2

ENERGY INTENSITY*:

OWNERSHIP:

PROPERTY NET INTERNAL AREA:

25,500m2

61,500m2

LES TERRASSES DU PORT,
MARSEILLE
KEY DATES:

Developed 2014

TENURE:

PRINCIPAL OCCUPIERS:

Leasehold

Printemps, Monoprix,
Zara, H&M, Mango

NO. OF TENANTS:

177

UNEXPIRED LEASE TERM TO EXPIRY:

10 years

OCCUPANCY RATE:

RENTS PASSING:

98.3%

£21.8 million p.a.

AVERAGE RENTS PASSING:

£390 per m2

ENVIRONMENTAL RATING

BREEAM Excellent

OWNERSHIP:

100%

PROPERTY NET INTERNAL AREA:

62,800m2

NICETOILE,
NICE
JV PARTNER:

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

Allianz

Acquired Jan 2015

Leasehold

Habitat, Sephora, Hollister,
Maison du Monde, Lancel

NO. OF TENANTS:

107

UNEXPIRED LEASE TERM TO EXPIRY:

5 years

OCCUPANCY RATE:

RENTS PASSING:

AVERAGE RENTS PASSING:

OWNERSHIP:

PROPERTY NET INTERNAL AREA

PROPERTY NET INTERNAL AREA:

96.0%

£1.3 million p.a.

£600 per m2

10%

17,600 m2

O’PARINOR,
AULNAY-SOUS-BOIS
JV PARTNER:

Client of Rockspring
Property Investment
Managers LLP (75%)

CO-OWNERSHIP:

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

Carrefour and Redevco

1974 opened
2002 acquired
2008 redeveloped 2014
extension completed

Freehold

C&A, Carrefour, Darty,
Fnac, H&M, Saturn,
Primark, UGC, Zara

NO. OF TENANTS:

184

UNEXPIRED LEASE TERM TO EXPIRY:

5 years

OCCUPANCY RATE:

RENTS PASSING:

AVERAGE RENTS PASSING:

ENERGY INTENSITY*:

OWNERSHIP:

94.6%

£5.4 million p.a.

£360 per m2

25%

PROPERTY NET INTERNAL AREA:
(of which JV ownership is 67,300m2)

100,700m2

PLACE DES HALLES,
STRASBOURG
MINORITY INTEREST:

Assurbail (35.5%)

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

1979 opened
1998 acquired
2007 refurbished

Freehold

C&A, Darty, Go Sport,
H&M, Mango, New Look,
Sephora, Toys ‘R’ Us, Zara

NO. OF TENANTS:

115

UNEXPIRED LEASE TERM TO EXPIRY:

4 years

OCCUPANCY RATE:

RENTS PASSING:

92.8%

£10.9 million p.a.

AVERAGE RENTS PASSING:

£355 per m2

ENERGY INTENSITY*:

OWNERSHIP:

PROPERTY NET INTERNAL AREA:

40,000m2

41,300m2

SAINT SÉBASTIEN,
NANCY
CO-OWNERSHIP:

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

AXA, Redevco Natixis

Acquired 2014

Freehold

Monoprix, Intersport, C&A
and Sephora

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

OCCUPANCY RATE:

RENTS PASSING:

AVERAGE RENTS PASSING:

ENERGY INTENSITY*:

OWNERSHIP:

PROPERTY NET INTERNAL AREA:

97.1%

£6.2 million p.a.

£385 per m2

18,300m2

24,000m2

* Measured in kg/CO2e/m2

Common Parts.

SQY OUEST,
SAINT QUENTIN-EN-YVELINES
JV PARTNER:

KEY DATES:

TENURE:

PRINCIPAL OCCUPIERS:

NO. OF TENANTS:

2005 opened
2011 acquired

Freehold

UGC

UNEXPIRED LEASE TERM TO EXPIRY:

2 years

OCCUPANCY RATE:

RENTS PASSING:

AVERAGE RENTS PASSING:

ENERGY INTENSITY*:

OWNERSHIP:

PROPERTY NET INTERNAL AREA:

74.9%

£2.3 million p.a.

£145 per m2

18,300m2

VILLEBON 2,
VILLEBON-SUR-YVETTE
KEY DATES:

2005 acquired
2007 extension

TENURE:

PRINCIPAL OCCUPIERS:

Freehold

C&A, Darty, Fnac,
Toys ‘R’ Us

NO. OF TENANTS:

UNEXPIRED LEASE TERM TO EXPIRY:

6 years

OCCUPANCY RATE:

RENTS PASSING:

AVERAGE RENTS PASSING:

ENERGY INTENSITY*:

OWNERSHIP:

PROPERTY NET INTERNAL AREA:

100%

£6.7 million p.a.

£145 per m2

47,400m2

168 Hammerson plc Annual Report 2014

TEN-YEAR FINANCIAL SUMMARY

Unaudited

Income statement

Net rental income

Operating profit before other net
gains/(losses)

Other net gains/(losses)

Share of results of joint venture

Share of results of associate

Current tax

Deferred tax

Non-controlling interests

Profit/(Loss) for the year
attributable to equity shareholders

Balance sheet

2014
£m

2013*
£m

2012*
£m

2011
£m

2010
£m

2009
£m

2008
£m

2007
£m

2006
£m

2005
£m

305.6

290.2

282.9

296.0

284.7

293.6

299.8

275.7

237.4

210.3

259.1

430.3

247.9

102.0

(1.1)

–

109.9

101.5

239.6

(7.3)

–

47.5

249.1

209.8

–

248.8

469.9

–

1.5

252.6

257.5

(590.4)

(1,698.3)

234.5

25.2

201.3

748.0

–

(0.8)

–

(0.9)

(0.1)

(3.0)

(0.8)

0.1

(3.1)

(0.4)

–

(3.4)

(0.7)

–

(9.9)

(0.6)

(0.1)

(4.1)

(0.9)

103.6

5.9

(0.6)

38.3

1.2

(16.4)

17.6

(10.6)

699.1

337.4

138.4

335.7

615.4

(344.5)

(1,572.6)

101.0

1,016.9

554.4

178.9

607.6

–

(87.9)

698.6

1.0

(133.9)

(11.3)

792.4

(99.4)

333.8

(9.9)

Cost of finance (net)

(95.1)

(110.2)

(137.6)

(112.6)

(100.0)

(114.5)

(170.7)

(149.3)

(156.9)

Profit/(Loss) before tax

703.1

341.2

142.2

346.3

620.2

(453.1)

(1,611.5)

110.4

Investment and development properties 6,706.5 5,931.2 5,458.4

5,719.6

5,331.1

5,141.5

6,456.8

7,275.0

6,716.0

5,731.7

Investment in joint ventures

Investment in associate

Cash and short-term deposits

104.2

628.8

59.4

–

545.4

428.4

–

56.7

57.1

100.7

126.2

–

10.4

182.9

–

119.9

28.6

39.4

45.5

Borrowings

Other assets

Other liabilities

(2,329.3) (2,309.0) (2,038.1)

(2,079.9)

(1,920.6)

(2,319.0)

(3,452.6)

(2,524.2)

(2,282.6)

(2,094.8)

268.6

271.2

462.3

435.6

323.1

331.6

319.5

318.7

(392.6)

(358.5)

(441.9)

(327.1)

(307.6)

(323.9)

(425.3)

(573.5)

Net deferred tax provision

Non-controlling interests

(0.5)

(0.4)

(71.4)

(76.7)

(0.5)

(74.5)

(0.5)

(76.5)

(0.5)

(71.7)

(0.4)

(73.4)

(108.4)

(89.3)

(99.6)

(70.4)

301.1

(448.9)

(103.3)

(56.6)

278.1

(378.4)

(406.4)

(49.9)

Equity shareholders’ funds

4,973.7 4,059.9 3,851.2

3,771.9

3,480.0

2,949.7

2,820.6

4,354.6

4,165.1

3,125.8

Cash flow

Operating cash flow after tax

149.6

129.4

139.9

Dividends

(139.1)

(129.4)

(118.4)

147.8

(86.1)

132.7

(95.4)

Property and corporate acquisitions

(413.5)

(191.1)

(397.3)

(374.1)

(218.6)

105.3

(64.5)

(39.5)

29.8

(86.7)

(29.2)

(73.1)

5.5

(57.7)

44.9

(51.0)

(123.5)

(163.3)

(219.5)

(308.1)

Developments and major
refurbishments

Other capital expenditure

Disposals

Other cash flows

Net cash flow before financing
Per share data**
Basic earnings/(loss) per share

Adjusted earnings per share

Dividend per share

Diluted net asset value per share

EPRA/Adjusted net asset value per share

Financial ratios

(193.1)

(184.4)

(122.9)

(50.4)

(17.5)

(48.0)

155.4

256.3

585.0

12.7

(30.8)

(478.4)

(167.5)

(72.4)

(34.1)

(91.2)

(23.6)

271.8

(34.9)

(60.8)

(25.5)

554.6

(0.8)

(190.3)

286.2

207.7

(325.7)

(119.4)

(164.1)

(376.7)

(335.5)

(250.5)

(186.3)

(23.7)

394.2

–

(13.9)

(44.6)

245.3

537.2

–

(10.9)

(29.6)

628.0

(10.2)

66.0

(36.9)

224.4

17.7

(295.3)

242.6p

134.4p

(54.1)p

(368.9)p

47.3p

19.3p

16.6p

£5.30

87.2p

19.9p

19.7p

15.95p

15.45p

£4.93

£4.95

£4.20

£4.21

23.7p

27.3p

18.5p

£10.22

22.3p

14.7p

£9.91

£10.49

£10.18

25.8p

18.9p

£6.61

£7.03

21.2p

13.4p

£7.44

£8.39

Return on shareholders’ equity

16.3%

Gearing

Interest cover

Dividend cover

46%

2.8x

1.2x

11.2%

21.1%

-16.9%

-32.5%

52%

2.6x

1.2x

52%

2.6x

1.2x

72%

2.2x

1.3x

118%

1.7x

1.4x

4.5%

57%

1.9x

1.5x

25.3%

34.0%

54%

1.8x

1.5x

66%

1.9x

1.6x

* Comprises continuing and discontinued operations.

** Comparative per share data was restated following the rights issue in March 2009.

The 2014 results have been presented on a proportionally consolidated basis, excluding the Group’s investment in VIA Outlets.

www.hammerson.com 169

95.7p

23.9p

20.4p

£6.35

£6.38

47.4p

23.1p

19.1p

£5.70

£5.73

8.8%

56%

2.8x

1.2x

19.4p

20.9p

17.7p

£5.41

£5.42

5.3%

53%

2.8x

1.2x

OTHER INFORMATION

DIRECTORS REMUNERATION POLICY
DIRECTORS’ REMUNERATION REPORT: POLICY

POLICY

This is an extract from the 2013 Annual Report and sets out the Directors’ Remuneration Policy
(Policy) approved at the 2014 annual general meeting held on the 23 April 2014 and is effective
from that date for all payments made to Directors.

The Policy is reproduced here for ease of reference only and the table below must be read
alongside its footnotes, which together set out and explain the Policy.

Page number references relating to the 2013 Annual Report have been removed.

FIXED REMUNERATION

Element

Purpose, policy and role in supporting
the Company’s strategic objectives

Operation and opportunity

Base salary

• Ensure the Company continues to attract

• Paid monthly in cash.

and retain quality leaders.

• Recognise:

• Accountabilities
• Skills
• Experience
• Value

• Benchmarked against the main markets in
which Hammerson competes for talent.

Pension

• Ensure the Company continues to attract

and retain quality leaders.

• Provide market-competitive retirement

benefits.

• Pensionable.

• Reviewed annually by the Committee.

• Executive Directors may receive an allowance (Pension Choice) to
be paid either (i) as an employer contribution to the Company’s
defined contribution pension plan or (ii) as a payment to a SIPP
personal pension plan or (iii) as a salary supplement or (iv) a
combination of all three. The Pension Choice is up to an aggregate
limit of 30% of base salary.

• The salary supplement is non-pensionable and does not qualify for

AIP or LTIP entitlements.

• No compensation for public policy or tax changes.

• Non-contributory for Executive Directors.

• The Company keeps the pension arrangements for Executive
Directors under review to ensure they remain appropriate.

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170 Hammerson plc Annual Report 2014
Hammerson plc Annual Report 2013

• In undertaking reviews, the Committee will take into account

• Benchmarking considered at both base salary and total remuneration

factors including market conditions and the level of salary

level, and the Committee generally considers that pay will be within

increases awarded to other employees of the Group, and a

a range of +/- 10% of median benchmark but also takes into account

comparison against both a relevant property peer group and

such other factors as it considers appropriate and is not constrained

a market cap group as selected by the Committee (currently

by this default.

the largest REITs and an appropriate pan-sector group of

companies with a comparable market capitalisation).

• The base salary for any Executive Director shall not exceed £850,000

per annum (or the equivalent if denominated in a different currency).

Arrangements for Executive Directors who participate in the

Other

Hammerson Group Management Pension and Life Assurance

• In addition to receiving a salary supplement, Jean-Philippe Mouton

Scheme (Scheme)

The Scheme closed to new joiners at the start of 2003.

participates in the collective supplementary defined contributions

retirement plan operated by his French employing company, and

Peter Cole and David Atkins participate in the Scheme instead

employer contributions are made at the annual statutory limit.

of the arrangements described on page 74.

• Scheme members affected by the UK annual allowance may

choose to limit their benefit and receive a salary supplement

on pages 82 and 83.

• The contractual pension entitlements of existing Executive Directors

are set out in the summary of Executive Directors’ service agreements

of the actuarially assessed balance, which is paid shortly after

• The Company will comply with any local legal obligations in respect

the end of the relevant tax year.

of pensions.

• The maximum benefit (including in respect of any salary

supplement in lieu of accrual) will remain 2/3 of final

pensionable salary although the costs of such provision will

change depending on, for example, actuarial assumptions.

• Entitlement to receive Pension Choice of 30% of base salary

if the Executive Director chooses to cease accruing service in

the Scheme, payable only whilst employment continues.

DIRECTORS’ REMUNERATION REPORT: POLICY

POLICY

FIXED REMUNERATION

Element

Purpose, policy and role in supporting

the Company’s strategic objectives

Operation and opportunity

Base salary

• Ensure the Company continues to attract

• Paid monthly in cash.

• Pensionable.

• Reviewed annually by the Committee.

and retain quality leaders.

• Recognise:

• Accountabilities

• Skills

• Experience

• Value

• Benchmarked against the main markets in

which Hammerson competes for talent.

Pension

• Ensure the Company continues to attract

• Executive Directors may receive an allowance (Pension Choice) to

and retain quality leaders.

• Provide market-competitive retirement

benefits.

be paid either (i) as an employer contribution to the Company’s

defined contribution pension plan or (ii) as a payment to a SIPP

personal pension plan or (iii) as a salary supplement or (iv) a

combination of all three. The Pension Choice is up to an aggregate

For 2013 and 2014

see pages 87 and 88.

For 2013

see pages 87 and

92 to 93.

limit of 30% of base salary.

AIP or LTIP entitlements.

• The salary supplement is non-pensionable and does not qualify for

• No compensation for public policy or tax changes.

• Non-contributory for Executive Directors.

• The Company keeps the pension arrangements for Executive

Directors under review to ensure they remain appropriate.

APPROACH TO REMUNERATION POLICY
The overall objective of the Remuneration Committee (Committee)
is to determine an appropriate remuneration policy for
recommendation to the Board that ensures that the Company can
continue to attract, retain and motivate quality leaders who are
capable of making a major contribution to the Company’s success
whilst avoiding paying more than the Committee considers necessary.
In implementing the Policy, the Committee takes into account various
factors, including remuneration packages available within other
comparable companies, the Company’s overall performance, internal
relativities, achievement of corporate objectives, individual
performance and experience, published views of institutional investors
and general market trends/performance.

Generally, two-thirds of the Executive Directors’ total target
remuneration (excluding pension and benefits) is performance
related, through an annual performance-related bonus plan
(Annual Incentive Plan or AIP) and a long term incentive plan
(Long Term Incentive Plan or LTIP), and this is considered
to be appropriate.

The Committee has received clear advice that formal limits are
required in the Policy and has retained sufficient flexibility to
enable it to continue to act in the interests of the Company and its
shareholders. The limits will not lead to pressure on reward levels
and the Committee is satisfied that it has adopted a suitably
conservative approach to date and will continue to do so.

• In undertaking reviews, the Committee will take into account
• In undertaking reviews, the Committee will take into account
factors including market conditions and the level of salary
factors including market conditions and the level of salary
increases awarded to other employees of the Group, and a
increases awarded to other employees of the Group, and a
comparison against both a relevant property peer group and
comparison against both a relevant property peer group and
a market cap group as selected by the Committee (currently
a market cap group as selected by the Committee (currently
the largest REITs and an appropriate pan-sector group of
the largest REITs and an appropriate pan-sector group of
companies with a comparable market capitalisation).
companies with a comparable market capitalisation).

• Benchmarking considered at both base salary and total remuneration
• Benchmarking considered at both base salary and total remuneration
level, and the Committee generally considers that pay will be within
level, and the Committee generally considers that pay will be within
a range of +/- 10% of median benchmark but also takes into account
a range of +/- 10% of median benchmark but also takes into account
such other factors as it considers appropriate and is not constrained
such other factors as it considers appropriate and is not constrained
by this default.
by this default.

• The base salary for any Executive Director shall not exceed £850,000
• The base salary for any Executive Director shall not exceed £850,000
per annum (or the equivalent if denominated in a different currency).
per annum (or the equivalent if denominated in a different currency).

Other
Other
• In addition to receiving a salary supplement, Jean-Philippe Mouton
• In addition to receiving a salary supplement, Jean-Philippe Mouton
participates in the collective supplementary defined contributions
participates in the collective supplementary defined contributions
retirement plan operated by his French employing company, and
retirement plan operated by his French employing company, and
employer contributions are made at the annual statutory limit.
employer contributions are made at the annual statutory limit.

• The contractual pension entitlements of existing Executive Directors
• The contractual pension entitlements of existing Executive Directors
are set out in the summary of Executive Directors’ service agreements
are set out in the summary of Executive Directors’ service agreements
on pages 82 and 83.
produced later in this policy.

• The Company will comply with any local legal obligations in respect
• The Company will comply with any local legal obligations in respect

of pensions.
of pensions.

Arrangements for Executive Directors who participate in the
Arrangements for Executive Directors who participate in the
Hammerson Group Management Pension and Life Assurance
Hammerson Group Management Pension and Life Assurance
Scheme (Scheme)
Scheme (Scheme)
The Scheme closed to new joiners at the start of 2003.
The Scheme closed to new joiners at the start of 2003.
Peter Cole and David Atkins participate in the Scheme instead
Peter Cole and David Atkins participate in the Scheme instead
of the arrangements described opposite.
of the arrangements described on page 74.
• Scheme members affected by the UK annual allowance may
• Scheme members affected by the UK annual allowance may
choose to limit their benefit and receive a salary supplement
choose to limit their benefit and receive a salary supplement
of the actuarially assessed balance, which is paid shortly after
of the actuarially assessed balance, which is paid shortly after
the end of the relevant tax year.
the end of the relevant tax year.

• The maximum benefit (including in respect of any salary
• The maximum benefit (including in respect of any salary
supplement in lieu of accrual) will remain 2/3 of final
supplement in lieu of accrual) will remain 2/3 of final
pensionable salary although the costs of such provision will
pensionable salary although the costs of such provision will
change depending on, for example, actuarial assumptions.
change depending on, for example, actuarial assumptions.

• Entitlement to receive Pension Choice of 30% of base salary
• Entitlement to receive Pension Choice of 30% of base salary
if the Executive Director chooses to cease accruing service in
if the Executive Director chooses to cease accruing service in
the Scheme, payable only whilst employment continues.
the Scheme, payable only whilst employment continues.

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75

DIRECTORS REMUNERATION POLICY CONTINUED
DIRECTORS’ REMUNERATION REPORT: POLICY CONTINUED

FIXED REMUNERATION CONTINUED

Element

Benefits

Purpose, policy and role in supporting
the Company’s strategic objectives

Operation and opportunity

• Provide a range of benefits in line with

• Executive Directors may receive such contractual and non-

• Benefits are non-pensionable.

In addition to the benefits outlined:

general practice.

• Ensure the Company continues to attract

and retain quality leaders.

contractual benefits as the Committee considers to be appropriate
and consistent with market practice in the relevant market in
which the Executive Director is based.

• These benefits currently include a car allowance or a company car,
private medical insurance (for the Executive Director and their
spouse/life partner), and permanent health insurance and
life assurance.

• Where benefits are provided by a third-party provider, the

• Where Executive Directors are relocated to work in a different country

Company covers the cost at market rates.

• The aggregate value of contractual and non-contractual

benefits received by each Executive Director (based on the

the Company may (i) pay global relocation support (up to a maximum of

£400,000); and/or (ii) provide tax equalisation arrangements in relation to

all elements of remuneration.

value included in the individual’s annual P11D tax calculation

• While the Committee does not consider it to form part of benefits in the

or a broadly equivalent basis for a non-UK based Executive

normal sense, Executive Directors can participate in corporate hospitality

Director) shall not exceed £100,000 per annum (with this

(including travel and where appropriate, with a family member), whether

• Benefits additionally available to employees of Hammerson France

maximum increasing annually at the rate of RPI).

paid for by the Company or another, within its agreed policies.

VARIABLE, PERFORMANCE RELATED REMUNERATION

currently include seniority allowance and an employer’s
contribution of up to €2,000 per annum to an employee
savings scheme.

Element

Annual Incentive
Plan (AIP), with
deferral under the
Deferred Bonus
Share Scheme
(DBSS)

Long Term
Incentive Plan
(LTIP)

Purpose, policy and role in supporting
the Company’s strategic objectives

Operation and opportunity

Performance

• Align Executive Director remuneration
with annual financial and Company
strategic targets as determined by the
Company’s Business Plan for the relevant
financial year.

• In the view of the Committee, to

differentiate appropriately on the basis
of performance.

• Partial award in shares aligns interests

with shareholders and supports retention.

• The current maximum bonus opportunity is 200% of base salary.

Deferred shares element

• The performance measures and conditions will be set by the Committee

• The Committee reserves the power to increase the maximum

bonus opportunity to up to 300% of base salary, although there is
no current intention to do so. The Committee would only increase
the maximum bonus level above the current 200% of base salary
after appropriate consultation with shareholders.

• Awards are subject to continued employment, save in the leaver
circumstances described in the Payment for Loss of Office section
of this Policy.

• Awards are paid in a mix of cash and deferred shares, with the
deferred shares element being at least 40% of the total award.

• 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.

• Non-pensionable.

• Incentivise the creation of long-term

• A discretionary annual award up to a value of 200% of base salary.

• Participants are entitled to a dividend equivalent for the

• The performance measures may consist of a combination of financial

returns for shareholders.

• Align interests of Executive Directors with

shareholders.

• Support retention.

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

• The choice of performance measures is

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

The Committee reserves the power to increase the maximum award
to 300% of base salary in exceptional circumstances, although there
is no current intention to do so. The extent of vesting is determined
by the performance conditions.

• Awards are subject to continued employment, save in the leaver
circumstances described in the Payment for Loss of Office section
of this Policy.

• Awards are normally structured as nil-cost share options but can
take other forms – for example, awards made to France-based
employees may be made in the form of a conditional award
of shares.

• The deferred shares element is currently awarded under the

on an annual basis.

DBSS (but may be delivered under a different plan with

equivalent terms).

be shorter.

• The deferral period is currently two years, and may not

• The deferred shares are subject to the leaver conditions as

set out in the Payment for Loss of Office section of this Policy.

• No further performance targets apply to the deferred shares

as these represent previously earned bonuses.

• The awards are structured as nil-cost share options.

• Participants are entitled to a dividend equivalent for the

period from grant until the vesting date, delivered as

additional shares when the shares are transferred

to the participant.

• The performance conditions will be assessed over a period of one year,

and may consist of a combination of:

• Financial measures (at the group or divisional level);

• Operational measures; and

• Individual performance objectives.

• The Committee reserves the right to include such other measures as it

considers to be an appropriate means of assessing the performance of

the Executive Directors.

• The Committee retains discretion to amend the vesting level (up or down)

where it considers it to be appropriate, but not so as to exceed the

maximum bonus potential.

• Once set, performance measures and conditions will generally remain

unchanged for the year, except in exceptional circumstances.

period from grant until the vesting date, delivered as

and non-financial measures.

additional shares when the shares are transferred

to the participant.

• The Committee has discretion to settle awards as a cash

payment in place of the transfer of shares.

• Vesting under each condition is on a straight line basis with no more

than 25% vesting at threshold performance.

• The LTIP rules impose a minimum performance period of three years.

However, the Committee has determined that the performance period

• Non-pensionable.

should be four years.

• Subject to clawback and malus provisions in situations of

• The Committee retains the discretion to amend the performance measures

personal misconduct and/or where accounts or information

and/or conditions used, and/or the weighting of each for future awards and/

relevant to performance are shown to be materially wrong

or the performance measurement periods. It is the current intention of the

and vesting was higher than should have been the case.

Committee that future awards be granted with the same performance

measures and conditions as for the 2014 awards detailed on page 90 to 91.

• Once set, the Committee may only amend the performance conditions in

respect of outstanding awards in the event that exceptional circumstances

occur which make it appropriate to do so, provided that the amended

condition is not, in the view of the Committee, materially less difficult to satisfy.

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172 Hammerson plc Annual Report 2014
Hammerson plc Annual Report 2013

DIRECTORS’ REMUNERATION REPORT: POLICY CONTINUED

Element

Benefits

For 2013

see page 87.

Element

Annual Incentive

Plan (AIP), with

deferral under the

Deferred Bonus

Share Scheme

(DBSS)

For 2013

see pages 87 and

88 to 89.

FIXED REMUNERATION CONTINUED

Purpose, policy and role in supporting

the Company’s strategic objectives

Operation and opportunity

general practice.

• Ensure the Company continues to attract

and retain quality leaders.

contractual benefits as the Committee considers to be appropriate

and consistent with market practice in the relevant market in

which the Executive Director is based.

• These benefits currently include a car allowance or a company car,

private medical insurance (for the Executive Director and their

spouse/life partner), and permanent health insurance and

life assurance.

• Benefits additionally available to employees of Hammerson France

currently include seniority allowance and an employer’s

contribution of up to €2,000 per annum to an employee

savings scheme.

VARIABLE, PERFORMANCE RELATED REMUNERATION

Purpose, policy and role in supporting

the Company’s strategic objectives

Operation and opportunity

• Align Executive Director remuneration

• The current maximum bonus opportunity is 200% of base salary.

with annual financial and Company

strategic targets as determined by the

Company’s Business Plan for the relevant

financial year.

• The Committee reserves the power to increase the maximum

bonus opportunity to up to 300% of base salary, although there is

no current intention to do so. The Committee would only increase

the maximum bonus level above the current 200% of base salary

• In the view of the Committee, to

after appropriate consultation with shareholders.

differentiate appropriately on the basis

of performance.

• Awards are subject to continued employment, save in the leaver

circumstances described in the Payment for Loss of Office section

• Partial award in shares aligns interests

of this Policy.

with shareholders and supports retention.

• Awards are paid in a mix of cash and deferred shares, with the

deferred shares element being at least 40% of the total award.

• 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.

• Non-pensionable.

Long Term

Incentive Plan

(LTIP)

For outstanding

awards and 2014

awards see pages

90 to 91.

• Incentivise the creation of long-term

• A discretionary annual award up to a value of 200% of base salary.

returns for shareholders.

• Align interests of Executive Directors with

shareholders.

• Support retention.

• The performance period is set to reflect

the capital intensive and cyclical nature

of Hammerson’s business.

• The choice of performance measures is

determined by those drivers which deliver

value to shareholders in the longer term.

The Committee reserves the power to increase the maximum award

to 300% of base salary in exceptional circumstances, although there

is no current intention to do so. The extent of vesting is determined

by the performance conditions.

• Awards are subject to continued employment, save in the leaver

circumstances described in the Payment for Loss of Office section

of this Policy.

of shares.

• Awards are normally structured as nil-cost share options but can

take other forms – for example, awards made to France-based

employees may be made in the form of a conditional award

• Provide a range of benefits in line with

• Executive Directors may receive such contractual and non-

• Benefits are non-pensionable.
• Benefits are non-pensionable.

In addition to the benefits outlined:
In addition to the benefits outlined:

• Where benefits are provided by a third-party provider, the
• Where benefits are provided by a third-party provider, the

• Where Executive Directors are relocated to work in a different country
• Where Executive Directors are relocated to work in a different country

Company covers the cost at market rates.
Company covers the cost at market rates.

• The aggregate value of contractual and non-contractual
• The aggregate value of contractual and non-contractual

benefits received by each Executive Director (based on the
benefits received by each Executive Director (based on the
value included in the individual’s annual P11D tax calculation
value included in the individual’s annual P11D tax calculation
or a broadly equivalent basis for a non-UK based Executive
or a broadly equivalent basis for a non-UK based Executive
Director) shall not exceed £100,000 per annum (with this
Director) shall not exceed £100,000 per annum (with this
maximum increasing annually at the rate of RPI).
maximum increasing annually at the rate of RPI).

the Company may (i) pay global relocation support (up to a maximum of
the Company may (i) pay global relocation support (up to a maximum of
£400,000); and/or (ii) provide tax equalisation arrangements in relation to
£400,000); and/or (ii) provide tax equalisation arrangements in relation to
all elements of remuneration.
all elements of remuneration.

• While the Committee does not consider it to form part of benefits in the
• While the Committee does not consider it to form part of benefits in the
normal sense, Executive Directors can participate in corporate hospitality
normal sense, Executive Directors can participate in corporate hospitality
(including travel and where appropriate, with a family member), whether
(including travel and where appropriate, with a family member), whether
paid for by the Company or another, within its agreed policies.
paid for by the Company or another, within its agreed policies.

Deferred shares element
Deferred shares element
• The deferred shares element is currently awarded under the
• The deferred shares element is currently awarded under the
DBSS (but may be delivered under a different plan with
DBSS (but may be delivered under a different plan with
equivalent terms).
equivalent terms).

• The deferral period is currently two years, and may not
• The deferral period is currently two years, and may not

be shorter.
be shorter.

• The deferred shares are subject to the leaver conditions as
• The deferred shares are subject to the leaver conditions as

set out in the Payment for Loss of Office section of this Policy.
set out in the Payment for Loss of Office section of this Policy.

• No further performance targets apply to the deferred shares
• No further performance targets apply to the deferred shares

as these represent previously earned bonuses.
as these represent previously earned bonuses.

• The awards are structured as nil-cost share options.
• The awards are structured as nil-cost share options.

• Participants are entitled to a dividend equivalent for the
• Participants are entitled to a dividend equivalent for the
period from grant until the vesting date, delivered as
period from grant until the vesting date, delivered as
additional shares when the shares are transferred
additional shares when the shares are transferred
to the participant.
to the participant.

Performance
Performance

• The performance measures and conditions will be set by the Committee
• The performance measures and conditions will be set by the Committee

on an annual basis.
on an annual basis.

• The performance conditions will be assessed over a period of one year,
• The performance conditions will be assessed over a period of one year,

and may consist of a combination of:
and may consist of a combination of:

• Financial measures (at the group or divisional level);
• Financial measures (at the group or divisional level);

• Operational measures; and
• Operational measures; and

• Individual performance objectives.
• Individual performance objectives.

• The Committee reserves the right to include such other measures as it
• The Committee reserves the right to include such other measures as it
considers to be an appropriate means of assessing the performance of
considers to be an appropriate means of assessing the performance of
the Executive Directors.
the Executive Directors.

• The Committee retains discretion to amend the vesting level (up or down)
• The Committee retains discretion to amend the vesting level (up or down)

where it considers it to be appropriate, but not so as to exceed the
where it considers it to be appropriate, but not so as to exceed the
maximum bonus potential.
maximum bonus potential.

• Once set, performance measures and conditions will generally remain
• Once set, performance measures and conditions will generally remain

unchanged for the year, except in exceptional circumstances.
unchanged for the year, except in exceptional circumstances.

• The Committee has discretion to settle awards as a cash
• The Committee has discretion to settle awards as a cash

payment in place of the transfer of shares.
payment in place of the transfer of shares.

• Non-pensionable.
• Non-pensionable.

• Subject to clawback and malus provisions in situations of
• Subject to clawback and malus provisions in situations of

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

• The performance measures may consist of a combination of financial
• The performance measures may consist of a combination of financial

and non-financial measures.
and non-financial measures.

•
• Vesting under each condition is on a straight line basis with no more
Vesting under each condition is on a straight line basis with no more
than 25% vesting at threshold performance.
than 25% vesting at threshold performance.

•
The LTIP rules impose a minimum performance period of three years.
• The LTIP rules impose a minimum performance period of three years.
However, the Committee has determined that the performance period
However, the Committee has determined that the performance period
should be four years.
should be four years.

•
The Committee retains the discretion to amend the performance measures
• The Committee retains the discretion to amend the performance measures
and/or conditions used, and/or the weighting of each for future awards and/
and/or conditions used, and/or the weighting of each for future awards and/
or the performance measurement periods. It is the current intention of the
or the performance measurement periods. It is the current intention of the
Committee that future awards be granted with the same performance
Committee that future awards be granted with the same performance
measures and conditions as for the 2014 awards detailed on page 90 to 91.
measures and conditions as for the 2014 awards.

•
Once set, the Committee may only amend the performance conditions in
• Once set, the Committee may only amend the performance conditions in
respect of outstanding awards in the event that exceptional circumstances
respect of outstanding awards in the event that exceptional circumstances
occur which make it appropriate to do so, provided that the amended
occur which make it appropriate to do so, provided that the amended
condition is not, in the view of the Committee, materially less difficult to satisfy.
condition is not, in the view of the Committee, materially less difficult to satisfy.

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77

DIRECTORS’ REMUNERATION REPORT: POLICY CONTINUED
DIRECTORS REMUNERATION POLICY CONTINUED

OTHER

Element

Purpose, policy and role in supporting
the Company’s strategic objectives

Operation and opportunity

Share ownership
guidelines

• To encourage share ownership by the
Executive Directors, in order to ensure
alignment with shareholders.

• The Chief Executive is expected to accumulate and maintain a

holding in ordinary shares in the Company equivalent to no less
than 150% of base salary.

• Other Executive Directors are expected to accumulate and

maintain a holding in ordinary shares in the Company equivalent
in value to no less than 100% of base salary.

• Shares to be included in the calculation are:

• Shares held beneficially by the Executive Director and the

Executive Director’s spouse/life partner.

• Shares held by the Executive Director under the Share

Incentive Plan.

• Executive Directors are normally required to achieve the

minimum shareholding requirement within five years of the date
of appointment.

• The share price to be used for annual calculation of shareholdings
as a percentage of salary is the closing middle market quotation
on the last business day in December.

• No formal sanctions exist for non-compliance.

UK based Executive Directors

• Eligible UK employees may participate in the Sharesave and Share

Incentive Plan, and the Executive Directors will be entitled to
participate on those same terms. Maximum participation levels
for all staff, including Executive Directors are set by relevant
UK legislation.

France based Executive Director

• All employees of Hammerson France are eligible to participate in
a profit share plan, which rewards performance against such
measures as the Committee considers to be appropriate.

• Awards are subject to an annual limit determined by

French legislation.

All-employee
arrangements

• In order to be able to offer participation
in these plans to employees generally,
the Company is either required by the
relevant UK and French legislation to
allow Executive Directors to participate
on the same terms, or chooses so to do.

Notes

1. The Committee considers the performance measures currently applied to the AIP and LTIP to be appropriate measures of performance. It recognises the need to balance
the enhancement of the portfolio (including increasing net rental income) and the efficient management of capital and, over the longer term, should be aligned to the
interests of shareholders.

2. For details regarding remuneration of other Company employees, please refer to the section on Employee Pay and Conditions elsewhere in the Group.

3. All awards granted prior to this Policy coming into force, together with any awards outstanding on the

will continue on their existing terms, including as to the exercise of discretion to amend such awards. Those
into

participants

equivalent

dividend

exercise

period

entitle

grant

force

from

until

the

for

appointment of an existing employee as a new Executive Director,
coming
option, rather than only until vesting as is the Company’s future policy.

granted

options

Awards

Policy

prior

cost

this

nil

Please refer to the section on Payment for Loss of Office for details regarding impact on the AIP, the DBSS and the LTIP following a change of control.

The Committee will determine components of remuneration for new Executive Directors, as outlined in the section on Recruitment.

For the AIP, DBSS and LTIP, clawback and malus provisions were introduced for awards made from 2012 onwards.

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174 Hammerson plc Annual Report 2014
Hammerson plc Annual Report 2013

DIRECTORS’ REMUNERATION REPORT: POLICY CONTINUED

OTHER

Element

Purpose, policy and role in supporting

the Company’s strategic objectives

Operation and opportunity

Share ownership

• To encourage share ownership by the

• The Chief Executive is expected to accumulate and maintain a

guidelines

Executive Directors, in order to ensure

holding in ordinary shares in the Company equivalent to no less

alignment with shareholders.

than 150% of base salary.

• Other Executive Directors are expected to accumulate and

maintain a holding in ordinary shares in the Company equivalent

in value to no less than 100% of base salary.

• Shares to be included in the calculation are:

• Shares held beneficially by the Executive Director and the

Executive Director’s spouse/life partner.

• Shares held by the Executive Director under the Share

Incentive Plan.

• Executive Directors are normally required to achieve the

minimum shareholding requirement within five years of the date

of appointment.

• The share price to be used for annual calculation of shareholdings

as a percentage of salary is the closing middle market quotation

on the last business day in December.

• No formal sanctions exist for non-compliance.

• Eligible UK employees may participate in the Sharesave and Share

Incentive Plan, and the Executive Directors will be entitled to

participate on those same terms. Maximum participation levels

for all staff, including Executive Directors are set by relevant

UK legislation.

France based Executive Director

• All employees of Hammerson France are eligible to participate in

a profit share plan, which rewards performance against such

measures as the Committee considers to be appropriate.

• Awards are subject to an annual limit determined by

French legislation.

All-employee

arrangements

• In order to be able to offer participation

UK based Executive Directors

in these plans to employees generally,

the Company is either required by the

relevant UK and French legislation to

allow Executive Directors to participate

on the same terms, or chooses so to do.

Notes

1. The Committee considers the performance measures currently applied to the AIP and LTIP to be appropriate measures of performance. It recognises the need to balance

the enhancement of the portfolio (including increasing net rental income) and the efficient management of capital and, over the longer term, should be aligned to the

interests of shareholders.

2. For details regarding remuneration of other Company employees, please refer to the section on Employee Pay and Conditions elsewhere in the Group.

3. All awards granted prior to this Policy coming into force, together with any awards outstanding on the

appointment of an existing employee as a new Executive Director,

will continue on their existing terms, including as to the exercise of discretion to amend such awards. Those

Awards

granted

nil

cost

options

prior

this

Policy

coming

into

force

entitle

participants

dividend

equivalent

for

the

period

from

grant

until

exercise

the

option, rather than only until vesting as is the Company’s future policy.

Please refer to the section on Payment for Loss of Office for details regarding impact on the AIP, the DBSS and the LTIP following a change of control.

The Committee will determine components of remuneration for new Executive Directors, as outlined in the section on Recruitment.

For the AIP, DBSS and LTIP, clawback and malus provisions were introduced for awards made from 2012 onwards.

SCENARIOS

David Atkins

Peter Cole

Timon Drakesmith

Jean-Philippe Mouton

£3,000

£2,500

£2,000

£1,500

£1,000

£500

£0

£2,563
23%

47%

£1,519
10%
39%

£773
100% 51%

30%

£1,846
24%

47%

£1,085
10%
40%

£541
100% 50%

29%

£1,731

24%

47%

£1,017
10%
40%

£507

100%

50% 29%

£1,491

23%

48%

£877
10%
40%

£436

100% 50%

29%

Fixed

On-Target Maximum

Fixed

On-Target Maximum

Fixed

On-Target Maximum

Fixed On-Target Maximum

Fixed remuneration

Annual variable remuneration

Long-term incentives

ASSUMPTIONS

Fixed

•

Consists of base salary, benefits, pension and participation in the UK all-employee share plans.

Base salary is that to be paid in 2014.

Benefits are as shown in the Single Figure Remuneration Table for 2013 (except for Jean-Philippe Mouton where the amount
he received under the profit sharing plan has been excluded from his 2013 benefits figure for these purposes. See On-Target
and Maximum below).

Pensions are as shown in the Single Figure Remuneration Table for 2013 in the 2013 Annual Report.

Jean-Philippe Mouton’s data has been converted at a rate of £1: €1.178.

David Atkins

Peter Cole

Timon Drakesmtih

Jean-Philippe Mouton

Base Salary
£000

Benefits
£000

597

435

408

346

Pension
£000

160

Total Fixed
£000

773

541

507

436

On-Target

Based on what the Executive Director would receive if performance was in line with expectation (excluding share price
appreciation and dividends):

• AIP: consists of on-target levels (equal to 50% of bonus maximum).

• LTIP: consists of the threshold level of vesting, being 25% of the face value of the award.

• France profit sharing (Jean-Philippe Mouton only): consists of on-target levels (equal to 50% of the current capped

vesting level of €18,186).

Maximum Based on the maximum remuneration receivable (excluding share price appreciation and dividends):

• AIP: consists of the maximum bonus (200% of base salary).

• LTIP: assumes maximum vesting of awards (100% of base salary for 2014 only).

• France profit sharing (Jean-Philippe Mouton only): assumes maximum vesting at the current capped vesting level of €18,186.

7878

Hammerson plc Annual Report 2013

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DIRECTORS REMUNERATION POLICY CONTINUED
DIRECTORS’ REMUNERATION REPORT: POLICY CONTINUED

RECRUITMENT

Approach to recruitment for Executive Directors

Statement of Principles
The Company will pay total remuneration for new Executive Directors that enables the Company to attract appropriately skilled and experienced
individuals, but is not, in the opinion of the Committee, excessive.

The Company will not pay new Executive Directors any inducements to join the Company over and above buy-outs of existing forfeited awards,
as outlined below.

The Company may provide a new Executive Director with global relocation support and/or tax equalisation arrangements as set out in the Policy
although, to date, the Company has not had occasion to do so. Additionally, the Company may make a contribution towards legal fees in
connection with agreeing employment terms.

Approach and limits
Annual salary, pension, benefits, annual bonus and long-term incentive arrangements (including performance measures and/or conditions and
maximum award levels) as described in the Policy will be the starting point for the structure of any package. The level of variable remuneration
that may be awarded to a new Executive Director will not exceed the maximum AIP and LTIP limits that can be awarded in line with the principles
set out in the Policy, with the exception of any compensation for variable remuneration forfeited. The limits contained within the Policy for base
salary do not apply to a new Executive Director either on joining or for any subsequent salary review within the period of this Policy, although the
Committee would seek to avoid exceeding those limits in practice.

For a new Executive Director who is an internal appointment, the Company may also continue to honour contractual commitments made prior
to the internal appointment even if those commitments are otherwise inconsistent with the Policy in force when the commitments are satisfied.
Any relevant incentive plan participation may either continue on its original terms or the performance conditions and/or measures may be
amended to reflect the individual’s new role, as the Committee considers appropriate.

Compensation for variable remuneration forfeited by a new Executive Director
The Company may, where appropriate, compensate a new Executive Director for variable remuneration that has been forfeited as a result of
accepting the appointment with the Company. Where the Company compensates a new Executive Director in this way, it will seek to do so
under the terms of the Company’s existing variable remuneration arrangements, but may compensate on terms that are more bespoke than the
existing arrangements where the Committee considers that to be appropriate. In such instances, the Company will disclose a full explanation of
the detail and rationale for such recruitment related compensation. In making such awards the Committee will seek to take into account the
nature (including whether awards are cash or share-based), vesting period and performance measures and/or conditions for any remuneration
forfeited by the individual when leaving a previous employer. Where such awards had outstanding performance or service conditions (which are
not significantly completed) the Company will generally impose equivalent conditions. In exceptional cases, the Committee may relax those
requirements where it considers this to be in the interests of shareholders, for example through a significant discount to the face value of the
replacement awards.

80
80

176 Hammerson plc Annual Report 2014
Hammerson plc Annual Report 2013

DIRECTORS’ REMUNERATION REPORT: POLICY CONTINUED

RECRUITMENT

Statement of Principles

Approach to recruitment for Executive Directors

The Company will pay total remuneration for new Executive Directors that enables the Company to attract appropriately skilled and experienced

individuals, but is not, in the opinion of the Committee, excessive.

The Company will not pay new Executive Directors any inducements to join the Company over and above buy-outs of existing forfeited awards,

as outlined below.

The Company may provide a new Executive Director with global relocation support and/or tax equalisation arrangements as set out in the Policy

although, to date, the Company has not had occasion to do so. Additionally, the Company may make a contribution towards legal fees in

connection with agreeing employment terms.

Approach and limits

Annual salary, pension, benefits, annual bonus and long-term incentive arrangements (including performance measures and/or conditions and

maximum award levels) as described in the Policy will be the starting point for the structure of any package. The level of variable remuneration

that may be awarded to a new Executive Director will not exceed the maximum AIP and LTIP limits that can be awarded in line with the principles

set out in the Policy, with the exception of any compensation for variable remuneration forfeited. The limits contained within the Policy for base

salary do not apply to a new Executive Director either on joining or for any subsequent salary review within the period of this Policy, although the

Committee would seek to avoid exceeding those limits in practice.

For a new Executive Director who is an internal appointment, the Company may also continue to honour contractual commitments made prior

to the internal appointment even if those commitments are otherwise inconsistent with the Policy in force when the commitments are satisfied.

Any relevant incentive plan participation may either continue on its original terms or the performance conditions and/or measures may be

amended to reflect the individual’s new role, as the Committee considers appropriate.

Compensation for variable remuneration forfeited by a new Executive Director

The Company may, where appropriate, compensate a new Executive Director for variable remuneration that has been forfeited as a result of

accepting the appointment with the Company. Where the Company compensates a new Executive Director in this way, it will seek to do so

under the terms of the Company’s existing variable remuneration arrangements, but may compensate on terms that are more bespoke than the

existing arrangements where the Committee considers that to be appropriate. In such instances, the Company will disclose a full explanation of

the detail and rationale for such recruitment related compensation. In making such awards the Committee will seek to take into account the

nature (including whether awards are cash or share-based), vesting period and performance measures and/or conditions for any remuneration

forfeited by the individual when leaving a previous employer. Where such awards had outstanding performance or service conditions (which are

not significantly completed) the Company will generally impose equivalent conditions. In exceptional cases, the Committee may relax those

requirements where it considers this to be in the interests of shareholders, for example through a significant discount to the face value of the

replacement awards.

SERVICE AGREEMENTS
Service agreements: New Executive Director appointments from 23 April 2014

The Committee’s approach is for new Executive Directors to have service agreements that have regard to market practice at the
date of appointment.

The key elements for service agreements for newly appointed Executive Directors will be:

Notice period

12 months’ notice (both notice to and from the Executive Director).

A longer period of notice from the Company may apply to new appointments for a limited time if the
Committee considers this is appropriate, but would then reduce to no more than 12 months.

Retirement date

There is no default retirement age. Requests for retirement are considered on a case-by-case basis.
At Executive Director level, it is anticipated that 12 months’ notice will be provided.

Post-termination restrictions

To protect the Group’s confidential information for an appropriate period for that information, and to
prevent poaching of its senior workforce and its customer and supplier connections for 12 months
after termination.

Payment in lieu of notice
(PILON)

Employment can be terminated with immediate effect by paying a PILON comprising base pay, pension,
medical insurance and car allowance. A PILON will not apply on termination for gross misconduct, in
which situation no compensation will be due. The Company will have discretion to pay on a phased basis,
subject to mitigation.

Expiry date

There will be no fixed expiry date. The appointment of new Executive Directors will be terminable in
accordance with the notice period.

Change of control and
liquidated damages

The Executive Director will not have a right to liquidated damages.

The terms summarised above will be subject to any local statutory (or collective bargaining) requirements where applicable.

OTHER APPOINTMENTS
Executive Directors are able to accept, with the consent of the Company’s Board of Directors, non-executive appointments outside the Company
(provided that such appointments do not lead to a conflict of interests) on the basis that such external appointments can enhance their
experience and skills and add value to the Company. Any fees received by an Executive Director for such external appointments can be retained
by the individual (except where the Executive Director is appointed as the Company’s representative).

Hammerson plc Annual Report 2013

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81

DIRECTORS REMUNERATION POLICY CONTINUED
DIRECTORS’ REMUNERATION REPORT: POLICY CONTINUED

SERVICE AGREEMENTS CONTINUED
Service agreements: Executive Directors in office as at 31 December 2013

The following table sets out a description of any obligations contained in the UK Executive Directors’ service agreements which could give rise to,
or impact upon, remuneration payments or payments for loss of office.

Date of service contract

28 February 2002

11 January 2008

Peter Cole

David Atkins

Timon Drakesmith

18 January 2011

Expiry date

Notice period

Rolling service contracts with no fixed expiry date.

12 months’ notice to the
Executive Director and six
months’ notice from the
Executive Director.

12 months’ notice (both notice to and from the Executive Director).

Base salary/fee

Base salary, subject to annual review (save where the Executive Director is under notice of termination).
There is no obligation to increase base salary following a review.

Incentive plans

Participation in the annual bonus arrangements and the LTIP.

The rules of the annual bonus arrangements and the LTIP that apply on cessation of employment are
set out in the Payment for Loss of Office section of this Policy. In addition, Timon
Drakesmith’s service
agreement provides that he will be treated as a good leaver in respect of the bonus arrangements in
the event of a successful claim for constructive dismissal.

Pension contributions

Entitled to participate in the Scheme, subject to its rules.1

Entitled to have benefits of the Scheme maintained or, on three
months’ notice, to be provided with alternative arrangements
which are actuarially no worse.

Entitled to a Pension Choice2 of
20% of base salary.

Contractual
benefits

Insurance

• Permanent disability insurance.

• Personal accident and life insurance.

Termination
payments

Car

Sick pay

Notice

Payment in lieu
of notice
(PILON)

• Private medical insurance (for the Executive Director and his spouse/life partner).

Each Executive Director receives a car allowance.

Base salary plus contractual benefits for up to 26 weeks in any 12 month period.

Entitled to 12 months’ base pay and contractual benefits.

Employment can be terminated with immediate effect by paying a
lump sum PILON comprising base salary, contractual benefits and a
bonus based on the Executive Director’s average bonus over the
previous three years (but pro-rated to reflect the part of the bonus
year actually worked).

PILON will not apply on termination for gross misconduct.

The Company has discretion to
pay on a phased basis, subject
to mitigation.

Employment can be terminated
with immediate effect by
paying a PILON comprising
base salary, pension, medical
insurance and car allowance.
PILON will not apply on
termination for
gross misconduct.

The Company has discretion to
pay on a phased basis, subject
to mitigation.

Liquidated
damages/
Change of
Control

Entitlement to liquidated damages calculated by reference to PILON if the Company terminates the
employment in breach of the service agreement or if, within 12 months after a change of control, the
Company terminates the employment or the Executive Director terminates the employment because of
a fundamental breach by the Company.

Liquidated damages are subject to deductions for new earnings.

Notes

1. For details of Scheme participation please see the Pension section in the 2014 Directors Remuneration Report on page 82.

’

Pension Choice is explained in the Fixed Remuneration section of this Policy.

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DIRECTORS’ REMUNERATION REPORT: POLICY CONTINUED

SERVICE AGREEMENTS CONTINUED

Service agreements: Executive Directors in office as at 31 December 2013

The following table sets out a description of any obligations contained in the UK Executive Directors’ service agreements which could give rise to,

or impact upon, remuneration payments or payments for loss of office.

Date of service contract

28 February 2002

11 January 2008

Peter Cole

David Atkins

Timon Drakesmith

18 January 2011

Expiry date

Notice period

Rolling service contracts with no fixed expiry date.

12 months’ notice to the

Executive Director and six

months’ notice from the

Executive Director.

12 months’ notice (both notice to and from the Executive Director).

Incentive plans

Participation in the annual bonus arrangements and the LTIP.

There is no obligation to increase base salary following a review.

The rules of the annual bonus arrangements and the LTIP that apply on cessation of employment are

set out in the Payment for Loss of Office section of this Policy. In addition, Timon

Drakesmith’s service

agreement provides that he will be treated as a good leaver in respect of the bonus arrangements in

the event of a successful claim for constructive dismissal.

Pension contributions

Entitled to participate in the Scheme, subject to its rules.1

Entitled to a Pension Choice2 of

Entitled to have benefits of the Scheme maintained or, on three

months’ notice, to be provided with alternative arrangements

which are actuarially no worse.

20% of base salary.

Contractual

benefits

Insurance

• Permanent disability insurance.

• Personal accident and life insurance.

Car

Sick pay

Notice

Termination

payments

• Private medical insurance (for the Executive Director and his spouse/life partner).

Each Executive Director receives a car allowance.

Base salary plus contractual benefits for up to 26 weeks in any 12 month period.

Entitled to 12 months’ base pay and contractual benefits.

Payment in lieu

Employment can be terminated with immediate effect by paying a

Employment can be terminated

of notice

(PILON)

lump sum PILON comprising base salary, contractual benefits and a

with immediate effect by

bonus based on the Executive Director’s average bonus over the

paying a PILON comprising

previous three years (but pro-rated to reflect the part of the bonus

base salary, pension, medical

year actually worked).

PILON will not apply on termination for gross misconduct.

The Company has discretion to

pay on a phased basis, subject

to mitigation.

insurance and car allowance.

PILON will not apply on

termination for

gross misconduct.

The Company has discretion to

pay on a phased basis, subject

to mitigation.

Liquidated

damages/

Change of

Control

Entitlement to liquidated damages calculated by reference to PILON if the Company terminates the

employment in breach of the service agreement or if, within 12 months after a change of control, the

Company terminates the employment or the Executive Director terminates the employment because of

a fundamental breach by the Company.

Notes

1. For details of Scheme participation please see the Pension section in the 2014 Directors Remuneration Report on page 82.

’

Pension Choice is explained in the Fixed Remuneration section of this Policy.

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Hammerson plc Annual Report 2013

Base salary/fee

Base salary, subject to annual review (save where the Executive Director is under notice of termination).

Jean-Philippe Mouton

Jean-Philippe Mouton has been employed by Hammerson Asset Management SAS (HAM) since 14 April 2003 as Divisional Director (France).
He is based and works in France and, as a result, it was considered appropriate for him to continue to be employed under a French law governed
employment contract with HAM upon his appointment as Executive Director. His employment contract with HAM means that French law applies
to his terms and conditions of employment as Divisional Director (France). Jean-Philippe Mouton entered into a separate English law letter of
appointment, which governs his directorship of the Company. Jean-Philippe Mouton also holds French corporate offices, including Chairman and
Unique General Director of Hammerson France SAS and General Manager of Hammerson SAS, to which he was appointed by written resolution
of the board of Hammerson France SAS.

As at 1 January 2013, his aggregate “global” gross base salary in respect of his directorship of the Company, his role as Divisional Director (France)
and his French corporate offices is €400,000 per annum. In addition, he is paid a supplementary pension benefit. While, of necessity, to comply
with French law, his termination provisions are more complex than the UK based Executive Directors and split between three distinct parts as
summarised below, the overall financial implications, before the impact of any collective bargaining agreements, are very similar and in
aggregate the outcome would broadly equate to one times his global base salary.

Date of service agreement and
appointments

• French employment: 25 March 2013.

• UK directorship: 25 March 2013.

• French corporate offices: 9 February 2014

Expiry date

Notice period

Base salary/fee

Rolling service contract (French employment) with no fixed expiry date.

Three months’ notice (both notice to and from the Executive).

• French employment: base salary.

• UK directorship: basic annual fee, subject to annual review.

• French corporate offices: basic annual fee.

Incentive plans

Participation in the annual bonus arrangements and the LTIP.

Pension contributions

Eligibility to benefit from the statutory retirement regimes in force from time to time in France, and the
collective supplementary defined contributions retirement plan, which was put in place at HAM level
(subject to the annual statutory limits on contributions).

Entitlement to receive an annual salary supplement of €80,000 per annum in lieu of any other
supplementary pension benefit.

Contractual
benefits

Termination
payments

Insurance

Insurance benefits are provided under a French collective scheme applicable to all employees of HAM.

Car

Sick pay

Receives a company car.

Entitlement to receive the minimum benefits set out in the collective bargaining agreement – currently
90% of his global base salary, contractual remuneration and benefits (less statutory sick pay) for a
duration determined by the length of his continuity of service. Thereafter any global base salary,
contractural remuneration and benefits are payable under the health insurance (prévoyance) scheme.1

Notice

• French employment: entitlement to three months’ fixed and variable remuneration.

• UK directorship: entitlement to three months’ fees.

• French corporate offices: no notice.

Severance
payment

Entitlement to a severance payment equal to 25% of average global base salary and contractual
remuneration over the 12 months preceding termination multiplied by years of service (capped at
six months if terminated on grounds of redundancy and if in excess of the legal minimum
termination payment).

Restrictive
covenants

Entitlement to 30% of global base salary for the duration of the 12 month non-competition covenant
(to the extent such covenant is enforced).

Liquidated damages are subject to deductions for new earnings.

Notes

1. As a senior executive, Jean-Philippe Mouton may also be entitled to receive enhanced benefits under the prévoyance, which applies on a mandatory basis to executive level

employees pursuant to the terms of the collective bargaining agreement.

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DIRECTORS REMUNERATION POLICY CONTINUED
DIRECTORS’ REMUNERATION REPORT: POLICY CONTINUED

PAYMENT FOR LOSS OF OFFICE
Notice periods and contractual rights

The notice periods and contractual rights on termination of each of the Executive Directors, and the key terms that will apply under service
agreements for new recruits, are set out in the section on Service Agreements.

Annual bonus and long-term incentives

The following table describes the provisions which apply to leavers and the discretions available under the annual bonus arrangements and the
LTIP. Further detail as to the potential exercise of discretion by the Committee is set out below the table.

Arrangements

Leaver provisions

AIP

Under the rules of the AIP, where prior to the end of the performance period an Executive Director gives or
receives notice, or ceases to be employed by the Group, due to death, ill-health, injury or disability, then the
Executive Director remains entitled to a bonus, subject to the performance conditions. Any bonus payable will,
unless the Committee determines otherwise, be time pro-rated.

Where the date of cessation or notice is after the end of the performance period but prior to payment, the
Executive Director will remain entitled to payment if the cessation is for any of the reasons above, or in addition
if the cessation is due to retirement, redundancy or the sale of the company or business for which he works.

Where the cessation or notice does not fall within the above provisions, the bonus shall not be payable, unless
the Committee determines otherwise which it may do at its discretion. Payment will be on the normal payment
date, unless the Committee decides to accelerate payment.

DBSS (deferred share
element of AIP)

Share awards, which represent deferrals of previously earned bonus, lapse on the Executive Director resigning
or giving notice of resignation, provided that the Committee may exercise its discretion to treat the Executive
Director as a good leaver. Share awards will also lapse on the Executive Director being dismissed for cause.

LTIP

In any other case the share award will continue and will vest in full on the normal vesting date, unless the
Committee decides to accelerate vesting.

An Executive Director who ceases to be a Director or employee of the Group by reason of death, retirement,
ill-health, injury or disability, redundancy, or the sale of the company or business for which he works will be a
good leaver.

Where the cessation is on any other grounds, awards will lapse, provided that the Committee has a discretion
to treat the Executive Director as a good leaver.

Awards held by good leavers will continue and will vest on the normal vesting date, unless the Committee
decides to accelerate vesting.

Awards will remain subject to the performance conditions and, unless the Committee determines otherwise,
be time pro-rated.

In exercising discretion in respect of the annual bonus arrangements or under the LTIP, the Committee will take into account all factors it
determines to be appropriate at the relevant time including, but not limited to the duration of the Executive Directors’ service and its assessment
of the contribution towards to the success of the Company during that period; whether the Executive Director has worked any notice period or
whether a PILON payment is being made; the need to ensure an orderly handover of duties and continuity in the business operations of the
Company and the need to compromise any claims which the Executive Director may have. In exercising any discretion the members of the
Committee will take account of their duties as Directors.

No discretion will be exercisable to treat an Executive Director as a good leaver where he is dismissed summarily for cause or following a formal
disciplinary process.

In respect of the Company’s HMRC-approved, all-employee share plans, the Sharesave and the SIP, and the profit share plan for employees of
Hammerson France, the Executive Directors are subject to the same leaver provisions as all other participants.

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180 Hammerson plc Annual Report 2014
Hammerson plc Annual Report 2013

DIRECTORS’ REMUNERATION REPORT: POLICY CONTINUED

PAYMENT FOR LOSS OF OFFICE

Notice periods and contractual rights

Annual bonus and long-term incentives

Arrangements

Leaver provisions

The notice periods and contractual rights on termination of each of the Executive Directors, and the key terms that will apply under service

agreements for new recruits, are set out in the section on Service Agreements.

The following table describes the provisions which apply to leavers and the discretions available under the annual bonus arrangements and the

LTIP. Further detail as to the potential exercise of discretion by the Committee is set out below the table.

AIP

Under the rules of the AIP, where prior to the end of the performance period an Executive Director gives or

receives notice, or ceases to be employed by the Group, due to death, ill-health, injury or disability, then the

Executive Director remains entitled to a bonus, subject to the performance conditions. Any bonus payable will,

unless the Committee determines otherwise, be time pro-rated.

Where the date of cessation or notice is after the end of the performance period but prior to payment, the

Executive Director will remain entitled to payment if the cessation is for any of the reasons above, or in addition

if the cessation is due to retirement, redundancy or the sale of the company or business for which he works.

Where the cessation or notice does not fall within the above provisions, the bonus shall not be payable, unless

the Committee determines otherwise which it may do at its discretion. Payment will be on the normal payment

date, unless the Committee decides to accelerate payment.

DBSS (deferred share

Share awards, which represent deferrals of previously earned bonus, lapse on the Executive Director resigning

element of AIP)

or giving notice of resignation, provided that the Committee may exercise its discretion to treat the Executive

Director as a good leaver. Share awards will also lapse on the Executive Director being dismissed for cause.

In any other case the share award will continue and will vest in full on the normal vesting date, unless the

Committee decides to accelerate vesting.

LTIP

An Executive Director who ceases to be a Director or employee of the Group by reason of death, retirement,

ill-health, injury or disability, redundancy, or the sale of the company or business for which he works will be a

Where the cessation is on any other grounds, awards will lapse, provided that the Committee has a discretion

to treat the Executive Director as a good leaver.

Awards held by good leavers will continue and will vest on the normal vesting date, unless the Committee

good leaver.

decides to accelerate vesting.

be time pro-rated.

In exercising discretion in respect of the annual bonus arrangements or under the LTIP, the Committee will take into account all factors it

determines to be appropriate at the relevant time including, but not limited to the duration of the Executive Directors’ service and its assessment

of the contribution towards to the success of the Company during that period; whether the Executive Director has worked any notice period or

whether a PILON payment is being made; the need to ensure an orderly handover of duties and continuity in the business operations of the

Company and the need to compromise any claims which the Executive Director may have. In exercising any discretion the members of the

Committee will take account of their duties as Directors.

No discretion will be exercisable to treat an Executive Director as a good leaver where he is dismissed summarily for cause or following a formal

disciplinary process.

In respect of the Company’s HMRC-approved, all-employee share plans, the Sharesave and the SIP, and the profit share plan for employees of

Hammerson France, the Executive Directors are subject to the same leaver provisions as all other participants.

Other

If the Company terminates an Executive Director’s employment by reason of redundancy, the Company will make a redundancy payment to the
Executive Director in line with his service agreement, any applicable collective bargaining agreement and under statute, and reserves the right to
adjust for unfair dismissal.

In addition, and consistent with market practice, the Company may pay a contribution towards the Executive Director’s legal fees for entering
into a statutory settlement agreement and may pay a contribution of up to £50,000, plus VAT, towards fees for outplacement services as part of
a negotiated settlement.

Payment to a departing Executive Director may be made in respect of accrued benefit and untaken holiday.

In connection with an Executive Director ceasing employment, the Company may, if the Committee believes it necessary and in the best interests
of the Company, enter into appropriate new contractual arrangements with the departing Executive Director including (but not limited to)
settlement, confidentiality, restrictive covenants and/or consultancy arrangements on such terms as it considers appropriate. In such case, the
Company will make appropriate disclosures of such terms.

A departing gift may be provided up to a value of £5,000 (plus related taxes) per Executive Director on termination of office.

Change of control

On a corporate action affecting the Company, the rules of the AIP, DBSS and the LTIP will apply. In summary, on a change of control of the
Company awards under the LTIP will vest, subject to the performance conditions and, unless the Committee determines otherwise, be time
pro-rated. Bonuses may be awarded under the AIP, based on performance to the date of the change of control and, unless the Committee
determines otherwise, be time pro-rated. Awards under the DBSS, which represented deferrals of previously earned bonus, will vest in full. Under
the LTIP, the Committee may also determine that a demerger or similar event shall constitute a corporate action. On a variation of share capital
or similar event, the Committee may make such adjustment to awards under the LTIP and DBSS as the Committee considers appropriate.

EMPLOYEE PAY AND CONDITIONS ELSEWHERE IN THE GROUP
Employee remuneration packages

Remuneration packages for all Company employees may comprise both fixed and variable elements. The more senior the individual, the greater
their general opportunity to impact directly upon Company performance, and therefore the remuneration packages of senior managers and
Executive Directors have a greater emphasis on variable pay than those of more junior employees.

Executive Directors are eligible to participate in the full range of Company benefits offered to employees. In addition, they are eligible for certain
remuneration to which other employees are not eligible. Executive Directors may opt to receive a salary supplement in lieu of pension, which is
not available to other employees. Executive Directors are eligible to participate in an LTIP, whereas senior managers across the Group participate
in other share and incentive plans. Eligible employees, including Executive Directors, may participate in the relevant all-employee share plans
(namely UK plans for employees in the UK and French plans for employees in France).

Awards will remain subject to the performance conditions and, unless the Committee determines otherwise,

Considerations in setting Executive Director remuneration

When setting Executive Director remuneration, the Committee takes into account Group-wide pay and employment conditions, along
with market and commercial factors.

The Company strives to pay competitively and to ensure its reward structures recognise superior performance. The Company therefore
undertakes external benchmarking and internal moderation to ensure that, in its view, at all levels the Company’s remuneration approach
reflects the appropriate market rate position. When determining base salary increases for Executive Directors, the Committee reviews the
average Group-wide increase, paying particular attention to the senior manager population.

The Committee reviews performance against the AIP’s performance measures. Personal performance rating impacts bonus calculations for all
employees and these ratings are calibrated internally to ensure consistency. Executive Director performance ratings are calibrated annually by the
Committee. Having reviewed both Company and personal performance, and considering payments being made to shareholders, the Committee
makes a judgement as to what level of bonus payment, if any, is reasonable. The Committee retains discretion to review bonus payments
upwards as well as downwards (subject to the over-riding limits).

In accordance with prevailing commercial practice, the Committee did not consult with employees in preparing the Policy or the
implementation thereof.

8484

Hammerson plc Annual Report 2013

www.hammerson.com 181

www.hammerson.com 85
85

DIRECTORS REMUNERATION POLICY CONTINUED
DIRECTORS’ REMUNERATION REPORT: POLICY CONTINUED

CHAIRMAN AND NON-EXECUTIVE DIRECTORS’ REMUNERATION
Policy as relates to Non-Executive Directors

Element

Fees

Approach to determining element of fees and operation

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.

Fee levels are reviewed periodically taking into account independent advice and the time commitment required of
Non-Executive Directors. Aggregate total fees payable annually to all Non-Executive Directors is subject to the limit as
stated in the Company’s Articles of Association from time to time. The Committee reserves the right to provide additional
fees within the stated limit including for membership of any additional committee the Board may establish.

The fees paid to the Chairman and the fees of the other Non-Executive Directors aim to be competitive with other fully
listed companies which the Committee (in the case of the Chairman) and the Board (in respect of the Non-Executive
Directors) consider to be of equivalent size and complexity but are not set by reference to a prescribed benchmark.

Fees are paid monthly in cash in arrears and are not pensionable.

Additional fees

The Chairman does not receive any additional fee in respect of membership of any of the Committees.

Other benefits

Other Non-Executive Directors may receive additional fees for membership and/or chairmanship of the Remuneration
and Audit Committees. There is also an additional fee for the Senior Independent Director. The level of additional fees is
set to reflect the responsibilities of the role.

There are no other benefits currently available to any of the Non-Executive Directors. Whilst the Company does not
consider that reimbursing travel and accommodation expense (including to the Company’s London office) is a benefit in
the normal sense, should any assessment to tax be made on such reimbursement, the Company reserves the ability to
settle such liability on behalf of the Non-Executive Director.

Non-Executive Directors are not eligible for performance-related bonuses or participation in the Company’s share plans.

While the Committee does not consider it to form part of benefits in the normal sense, Non-Executive Directors can
participate in corporate hospitality (including travel and, where appropriate, with a family member), whether paid for by
the Company or another, within its agreed policies.

A departing gift may be provided up to a value of £5,000 (plus related taxes) per Non-Executive Director on termination
of office.

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 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 or immediately should a conflict of interest arise. If any Non-Executive Director is not re-elected at the Company’s
Annual General Meeting, the appointment will cease automatically.

On termination of an appointment, a Non-Executive Director is only entitled to such fees as may have accrued to the date of termination,
together with the reimbursement in the normal way of any expenses properly incurred prior to that date.

The dates of the appointments of the Non-Executive Directors in office as at 31 December 2013 are set out below.

Date of original appointment to Board

Commencement date of current term

Unexpired term as at April 2014

Gwyn Burr

Terry Duddy

Jacques Espinasse
Judy Gibbons1
John Hirst2
David Tyler

21 May 2012

3 December 2009

1 May 2007

1 May 2011

1 March 2004

12 January 2013

Anthony Watson

1 February 2006

Notes

21 May 2012

3 December 2012

1 May 2013

1 May 2011

1 May 2013

12 January 2013

1 February 2012

1 year, 1 month

1 year, 8 months

2 years, 1 month

1 month

Retiring at the end of 2014 AGM

1 year, 10 months

10 months

Judy Gibbons’ appointment has been extended for three years with effect from 1 May 2014.

John Hirst’s appointment was renewed for a further period to expire at the end of the 2014 AGM.

SHAREHOLDER VIEWS
The Company welcomes dialogue with its significant shareholders and seeks their views when major changes are being made to remuneration
policy. Recently, following feedback from representatives of shareholders, the accumulation period for dividends on shares held in the LTIP and
DBSS schemes was shortened to cover only the period from the date of grant of the award to vesting for awards from 2014 onwards.

86
86

182 Hammerson plc Annual Report 2014
Hammerson plc Annual Report 2013

DIRECTORS’ REMUNERATION REPORT: POLICY CONTINUED

SHAREHOLDER INFORMATION

CHAIRMAN AND NON-EXECUTIVE DIRECTORS’ REMUNERATION

Policy as relates to Non-Executive Directors

Approach to determining element of fees and operation

Element

Fees

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.

Fee levels are reviewed periodically taking into account independent advice and the time commitment required of

Non-Executive Directors. Aggregate total fees payable annually to all Non-Executive Directors is subject to the limit as

stated in the Company’s Articles of Association from time to time. The Committee reserves the right to provide additional

fees within the stated limit including for membership of any additional committee the Board may establish.

The fees paid to the Chairman and the fees of the other Non-Executive Directors aim to be competitive with other fully

listed companies which the Committee (in the case of the Chairman) and the Board (in respect of the Non-Executive

Directors) consider to be of equivalent size and complexity but are not set by reference to a prescribed benchmark.

Fees are paid monthly in cash in arrears and are not pensionable.

Additional fees

The Chairman does not receive any additional fee in respect of membership of any of the Committees.

Other Non-Executive Directors may receive additional fees for membership and/or chairmanship of the Remuneration

and Audit Committees. There is also an additional fee for the Senior Independent Director. The level of additional fees is

set to reflect the responsibilities of the role.

Other benefits

There are no other benefits currently available to any of the Non-Executive Directors. Whilst the Company does not

consider that reimbursing travel and accommodation expense (including to the Company’s London office) is a benefit in

the normal sense, should any assessment to tax be made on such reimbursement, the Company reserves the ability to

settle such liability on behalf of the Non-Executive Director.

Non-Executive Directors are not eligible for performance-related bonuses or participation in the Company’s share plans.

While the Committee does not consider it to form part of benefits in the normal sense, Non-Executive Directors can

participate in corporate hospitality (including travel and, where appropriate, with a family member), whether paid for by

the Company or another, within its agreed policies.

A departing gift may be provided up to a value of £5,000 (plus related taxes) per Non-Executive Director on termination

of office.

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 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 or immediately should a conflict of interest arise. If any Non-Executive Director is not re-elected at the Company’s

Annual General Meeting, the appointment will cease automatically.

On termination of an appointment, a Non-Executive Director is only entitled to such fees as may have accrued to the date of termination,

together with the reimbursement in the normal way of any expenses properly incurred prior to that date.

The dates of the appointments of the Non-Executive Directors in office as at 31 December 2013 are set out below.

Date of original appointment to Board

Commencement date of current term

Unexpired term as at April 2014

Gwyn Burr

Terry Duddy

21 May 2012

3 December 2009

Jacques Espinasse

Judy Gibbons1

1 May 2007

1 May 2011

John Hirst2

David Tyler

1 March 2004

12 January 2013

Anthony Watson

1 February 2006

21 May 2012

3 December 2012

1 May 2013

1 May 2011

1 May 2013

12 January 2013

1 February 2012

Notes

Judy Gibbons’ appointment has been extended for three years with effect from 1 May 2014.

John Hirst’s appointment was renewed for a further period to expire at the end of the 2014 AGM.

SHAREHOLDER VIEWS

1 year, 1 month

1 year, 8 months

2 years, 1 month

1 month

1 year, 10 months

10 months

Retiring at the end of 2014 AGM

The Company welcomes dialogue with its significant shareholders and seeks their views when major changes are being made to remuneration

policy. Recently, following feedback from representatives of shareholders, the accumulation period for dividends on shares held in the LTIP and

DBSS schemes was shortened to cover only the period from the date of grant of the award to vesting for awards from 2014 onwards.

Hammerson plc Annual Report 2013

Key contact details
Registered office and principal UK address
Hammerson plc
10 Grosvenor Street
London W1K 4BJ
Registered in England No. 360632

Tel: +44 (0)20 7887 1000
Fax: +44 (0)20 7887 1010

In June 2015 the registered office and principal UK address will
move to:

Hammerson plc
Kings Place
90 York Way
London
N1 9GE

Principal address in 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

Registrar
For assistance with 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 Asset Services
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 9.00 am to 5.30 pm Monday to Friday) or +44
(0)20 8639 3399 (from overseas)

email: shareholderenquiries@capita.co.uk
website: www.capitashareportal.com

Registering on the Hammerson Share Portal website enables
shareholders to view their shareholding in the Company, including an
indicative share price and valuation, a transaction audit trail and
dividend payment history. Shareholders can also amend certain
standing data relating to their accounts.

Advisors
Valuer: DTZ Debenham Tie Leung
Auditor: Deloitte LLP
Solicitor: Herbert Smith Freehills LLP
Joint Brokers and Financial Advisors: J. P. Morgan Cazenove
and Deutsche Bank AG
Financial Advisor: Lazard Ltd

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 can
register at: www.capitashareportal.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.

Dividend Reinvestment Plan (DRIP)
Shareholders can reinvest dividend payments in additional shares in
the Company under the DRIP operated by the Registrar by completing
an application form online at: www.capitashareportal.com or by calling
Capita Asset Services on 0871 664 0381 (from the UK calls cost 10p per
minute plus network extras) or +44 (0) 20 8639 3402 (from overseas)
email: shares@capita.co.uk

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 25 days before the dividend
payment date.

Further details can be found on the website at: www.hammerson.com

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 the Registrar to cancel their instruction.

International payment service
The Registrar facilitates a service to convert sterling dividends into
certain local currencies. For further information, please contact
the Registrar (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@capita.co.uk
Further details can be found at:
http://international.capitaregistrars.com

www.hammerson.com 183

OTHER INFORMATION
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 shareholders
receiving unsolicited mail. To limit the receipt of unsolicited mail
shareholders may register with the Mailing Preference Service,
an independent organisation whose services are free, by visiting
www.mpsonline.org.uk. Once a shareholder’s name and address
details have been registered, it will advise the companies and other
bodies that subscribe to the service not to send unsolicited mail to
the address registered.

Shareholder security
Share fraud includes scams where fraudsters cold-call investors offering
them overpriced, worthless or non-existent shares, or offer to buy
shares owned by investors at an inflated price. We advise shareholders
to be vigilant of unsolicited mail or telephone calls regarding buying or
selling shares. For more information visit: www.fca.org.uk/scams or call
the FCA Consumer Helpline on 0800 111 6768.

SHAREHOLDER INFORMATION CONTINUED

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 shareholders
to trade ‘real time’ at a known price that will be given to them at the
time they give their 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 on 0871 664 0364 (calls cost 10p per minute plus
network extras, lines are open 8.00 am to 4.30 pm Monday to Friday),
or +44 (0)20 3367 2686 (from overseas).

email: info@capitadeal.com
website: www.capitadeal.com

Discontinuation of Interim Management Statements
Following recent changes to EU regulation on financial disclosure,
the Financial Conduct Authority (FCA) has removed its requirement for
UK companies to publish Interim Management Statements (IMSs). As a
result, and reflecting the long term nature of Hammerson’s business,
the Board has taken the decision to cease publication of formal IMSs
in April and November. The Group remains committed to full and
transparent disclosure and will continue with full-year and half-year
announcements as well as a comprehensive capital markets events in
the autumn.

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 Limited, 17 Carlton House Terrace,
London, SW1Y 5AH or by telephone on +44 (0)20 7930 3737.

Website
The Annual Report and other information that shareholders may find
useful are available on the Company’s website: www.hammerson.com.
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.

184 Hammerson plc Annual Report 2014

Financial Calendar and Share Analysis
Annual General Meeting
The Annual General Meeting will be held at 11.00 am on 22 April 2015 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 which is available at www.hammerson.com/investors.

Full-year results announced
Recommended final dividend

Ex-dividend date
Record date
Election (or cancellation) date for Dividend Reinvestment Plan
Payable on

Annual General Meeting
Anticipated 2015 interim dividend

Analysis of Shares Held as at 31 December 2014

16 February 2015
12 March 2015
13 March 2015
5:00 pm on 30 March 2015
24 April 2015
22 April 2015
October 2015

Number of
shareholders
845
372
418
399
153
285
98
192
59
108
2,929

8.3

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

Chart Fig 93
Five year dividend history (pence per share)

8.8
8.8

7.15

9.3
2.3

7.0

7.3

1.8

5.5

7.7
7.7

10.0
6.0

4.0

% of total
shareholders
28.85
12.70
14.27
13.62
5.22
9.73
3.35
6.56
2.01
3.69

158,317
290,974
620,015
1,279,142
1,064,613
6,762,375
7,084,617
44,483,158
42,009,567
680,542,470
100.00 784,295,248

Holding % of total capital
0.02
0.04
0.08
0.16
0.14
0.86
0.90
5.67
5.36
86.77
100.00

10.8
7.2

3.6

8.8
8.8

11.6

9.6

2.0

2010

2011

2012

2013

2014†

Interim dividend (non PID) Interim dividend (PID) Final dividend (non PID) Final dividend (PID)

† The 2014 final dividend is subject to approval by shareholders at the 2015 Annual General Meeting.

Where a shareholder elected to receive the scrip alternative, the dividend was treated as a non-PID.

The PID element of the dividend is paid net of a 20% withholding tax unless a shareholder is eligible to receive the payment gross.

www.hammerson.com 185

OTHER INFORMATION
GLOSSARY

Adjusted figures (per share)
Anchor store

Average cost of borrowing

BREEAM
Capital return

DTR
Dividend cover
Earnings per share (EPS)

EBITDA
EPRA

Equivalent yield (true and nominal)

ERV

Gearing
Gross property value or Gross asset
value (GAV)
Gross rental income

IAS
IASB
IFRS
Initial yield
(or net initial yield (NIY))

Interest cover

Interest rate or currency swap
(or derivatives)
IPD

Joint venture

Like-for-like/underlying net
rental income
Loan to value ratio (LTV)
Net asset value (NAV) per share
Net rental income (NRI)

Occupancy rate

Reported amounts adjusted to exclude certain items as set out in note 11 to the accounts.
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.
The cost of finance expressed as a percentage of the weighted average of borrowings during
the period.
Building Research Establishment’s Environmental Assessment Method.
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.
The European Public Real Estate Association, a real estate industry body. This organisation
has issued Best Practice Recommendations with the intention of improving the transparency,
comparability and relevance of the published results of listed real estate companies in Europe.
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% 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.
Net rental income divided by net cost of finance before capitalised interest and change in fair
value of derivatives.
An agreement with another party to exchange an interest or currency rate obligation for a
pre-determined period of time.
Investment Property Databank. An organisation supplying independent market indices and
portfolio benchmarks to the property industry.
An entity in which the Group holds an interest and which is jointly controlled by the Group and
one or more partners under a contractual arrangement whereby decisions on the key financial
and operating policies of that entity require each partner’s consent.
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.
Net debt expressed as a percentage of the total value of investment and development properties.
Equity shareholders’ funds divided by the number of shares in issue at the balance sheet date.
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.

186 Hammerson plc Annual Report 2014

Over-rented

Passing rents or rents passing

Pre-let
Property Income Distribution (PID)

Property joint ventures

REIT

The amount by which ERV falls short of rents passing, together with the estimated rental value of
vacant space.
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).
A lease signed with a tenant prior to completion of a development.
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.
The Group’s shopping centre and retail park joint ventures which management proportionally
consolidate when reviewing the performance of the business. These exclude the Group’s interest
in the VIA Outlets joint venture.
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.

Return on shareholders’ equity (ROE) Capital growth and profit for the year expressed as a percentage of equity shareholders’ funds at

Reversionary or under-rented

Scrip dividend
SIIC

Total development cost (TDC)
Total property return (TPR)
(or total return)

Total shareholder return (TSR)

Turnover rent
UK GAAP
Vacancy rate

Value Retail (VR)
VIA Outlets (VIA)

Yield on cost

the beginning of the year, all excluding deferred tax and certain non-recurring items.
The amount by which the ERV exceeds the rents passing, together with the estimated rental value
of vacant space.
A dividend received in the form of shares.
Sociétés d’Investissements Immobiliers Côtées. A tax regime in France which exempts
participants from the French tax on property income and gains subject to certain requirements.
All capital expenditure on a development project, including capitalised interest.
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.
Dividends and capital growth in the share price, expressed as a percentage of the share price at
the beginning of the year.
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.
Owner and operator of luxury outlet Villages in Europe in which Hammerson has an investment.
A premium outlets joint venture, in which the Group has an investment. VIA owns and operates
premium outlet centres in Europe.
Passing rents 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.

www.hammerson.com 187

OTHER INFORMATION
INDEX

Accounting policies
Adjustment for non-cash items in the cash
flow statement
Administration expenses
Analysis of movement in net debt
Audit Committee report
Auditor’s report
Board of Directors
Borrowings
Business model
Business review
Cash and deposits
Chairman’s introduction to Governance

Chief Executive’s Q&A

Company balance sheet
Compliance with the UK Corporate Governance
Code
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’ biographies
Directors’ remuneration report
Directors’ report
Directors’ responsibilities
Diversity
Dividends
Equity
Fair, balanced and understandable
Financial instruments
Financial review
Glossary of terms
Investment and development properties

113, 154

151
53, 122
54, 112
71
103
62
49, 140, 155
2
40
54, 139
60

153

94
30
108
111
106
109
107
151
60
40
98
75
100
102
35, 70
54, 100, 127
108, 153,155
71
141, 156
51
186
20, 40 115, 120

Investment in associate
Investment in own shares
Investments in subsidiary companies
Joint ventures
Key performance indicators (KPIs)
Market background
Net finance costs
Nomination Committee report
Notes to the accounts
Obligations under finance leases
Our People
Operating lease receipts
Payables
Pensions
Per share data
Principal Group addresses
Principal risks and uncertainties
Principal subsidiary companies
Profit before tax
Property portfolio
Property portfolio information
Property returns
Receivables
Real Estate Investment Trusts (REITs)
Remuneration policy
Result for the year
Risk management
Segmental analysis
Share capital
Shareholder information
Shareholder return
Significant financial judgements
Sociétés d’Investissements Immobiliers Côtées (SIIC)
Sustainability
Tax
Ten-year financial summary
Treasury shares
Value Retail
VIA Outlets

53, 137
156
154
131
3, 36
7
49, 124
68
113
147
32
151
147, 155
82, 122
51, 127, 128
183
55
157
51 106, 117
164
158
49
139, 154
54, 125, 184
170
117
55, 73
119, 158
147
183
4, 49
72
54, 125
24
54, 125
169
149
44, 53, 137
44, 53, 131

188 Hammerson plc Annual Report 2014

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Hammerson plc
10 Grosvenor Street,
London, W1K 4BJ