Hammerson PLC — Annual Report 2010

Dec 31, 2010

Annual Report 2010

Our 3-point strategy threads through everything we do

FOCUS ON INCOME GROWTH HIGH QUALITY PROPERTY CAPITAL STRENGTH

Valuations and passing rents are as at 31 December 2010. Figures show Hammerson's share of valuation and passing rents in respect of joint ventures.

Who we are Contents

Hammerson has been creating and managing some of the most exciting retail destinations and office buildings in Europe for over 60 years.

Hammerson's vision is to be the best owner-manager and developer of retail and office property in the UK and France. We focus on prime regional shopping centres and out-of-town retail, while exploiting opportunities in the office sector.

Our strategy is to outperform through two areas of focus: income growth and high quality property, both of which are underpinned by our capital strength.

Overview

Financial highlights	2
Business highlights	3
Chairman's statement	4
Board of Directors	6
Chief Executive's Q&A	7
Our strategy	9

Business and financial review

Business framework	12
Property markets and outlook	13
Risk management	14
Principal uncertainties	15
Key performance indicators	16
Financial and property returns	17
Business review	18
Financial review	27
Human resources	32
Senior management	33
Corporate responsibility	34

Governance

38
42
43
46

Financial statements

Independent auditor's report on the
Group financial statements	52
Consolidated income statement	54
Consolidated statement
of comprehensive income	55
Consolidated balance sheet	56
Consolidated statement
of changes in equity	57
Consolidated cash flow statement	59
Analysis of movement in net debt	59
Notes to the accounts	60
Independent auditor's report on the
parent company financial statements	94
Company balance sheet	95
Notes to the Company accounts	96
Ten-year financial summary	99
Shareholder information	100

Property portfolio

UK shopping centres	103
UK retail parks	106
France retail	111
Offices	115
Glossary of terms	117
Index	119

Financial highlights

net rental income

2010: £285m 2009: £294m

adjusted profit before tax(1)

2010: £145m 2009: £130m

adjusted earnings per share(1)

2010: 19.9p 2009: 19.7p

total dividend per share(2)

2010: 15.95p 2009: 15.45p

InCOMe CaPItal ratIOS

equity shareholders' funds Property assets 2010: £5,331m 2009: £5,142m

2010: £3,480m 2009: £2,950m

adjusted net asset value per share, ePra basis(1)

notes

(1) The calculations for adjusted figures are shown on pages 27 and 30 and in note 10 to the accounts. (2) The average number of shares in issue in 2010 was 706.0 million (2009: 637.2 million). (3) The profit for the year ended 31 December 2010 was £619.5 million (2009: loss of £350.4 million).

OvErviEW

business highlights

In 2010 Hammerson raised £555 million from disposals including: stakes in French shopping centres Espace Saint Quentin and O'Parinor; Exchange Tower, an office in London's Docklands; and its remaining stake in Bishops Square, a City of London office building.
Hammerson invested £219 million in acquisitions offering superior returns in the year, including: Leadenhall Court and a stake in 10 Gresham Street, both offices in the City of London; Wrekin Retail Park in Telford; and the remaining 75% stake of Battery Retail Park in Birmingham.
In 2010 Hammerson began enabling works at Les Terrasses du Port, a major shopping centre development in Marseille, and handed over retail units to tenants at the redevelopment of 54-60 rue du Faubourg Saint-Honoré, Paris.
Hammerson acquired Brookfield's stake in the Brent Cross Cricklewood project, London NW4, assuming full control of the Cricklewood element. The project received planning consent in October 2010.
Hammerson submitted a detailed planning application in November 2010 for a 46,000m2 office development at London Wall Place, London EC2.
In January 2010 Hammerson was appointed as development and asset manager of The Rock, a shopping centre in Bury, by the administrators of Thornfield Ventures Limited.
328 leases in respect of approximately 119,000m2 were signed in 2010.
Hammerson brought major international retailers into its portfolio in the UK and France, as well as signing leases with successful, established customers.
Occupancy at the year-end was 97.3%, compared with 95.4% at December 2009.
Passing rents at 31 December were £315 million, and like-for-like net rental income grew by 3.5% in 2010.
Rent reviews in the UK in the year secured an uplift of £2.3 million per annum.
Hammerson has a diverse base of high quality tenants, and the average unexpired lease term at 31 December 2010 was nearly nine years.
Net debt at 31 December was £1.8 billion, with gearing of 52%.
The Company has a strong, flexible financial position with virtually all debt unsecured and liquidity (cash and undrawn facilities) at the year-end of £1.0 billion.

Chairman's statement

John nelson, Chairman

"Our rigorous focus on the performance of each asset is improving occupancy and income."

StrateGY

Hammerson aims to be the best ownermanager and developer of retail and office property in the UK and France. Our strategy is to outperform through two areas of focus: maximising income growth; and creating a high quality property portfolio through acquisition, development and asset management. Both areas are underpinned by prudent financial management.

We have a portfolio of exceptional quality that continues to provide strong like-for-like income growth in a challenging environment. Nevertheless, we are committed to enhancing our returns by disposing of mature assets and reinvesting in higher return opportunities where we aim to take advantage of our strong financial position, first-class in-house property skills and occupier relationships. Further, we are taking forward development schemes from our significant pipeline.

In 2010 we made good progress in the management of both our portfolio and our assets, as well as making important changes to our operations, all of which should deliver improved returns for shareholders.

reSultS

The Group's adjusted profit before tax increased by £15 million to £145 million, and adjusted earnings per share were 19.9 pence compared with 19.7 pence for 2009. The Board has proposed a final dividend of 8.8 pence per share, giving a total dividend for the year of 15.95 pence per share, which compares to 15.45 pence for 2009. The final dividend will be paid as a PID, but

shareholders will be offered a scrip dividend alternative, details of which will be sent in a separate letter.

Capital values increased over the year, with the value of the UK and French portfolios rising by 12.5% and 1.9% respectively. Adjusted net asset value per share was £4.95 at 31 December 2010, a 17.6% increase over the year.

MaXIMISInG InCOMe and OPeratIOnal CHanGeS

At the beginning of the year we restructured our UK leasing teams and created the new role of UK Sales and Marketing Director, as part of our approach to generate value for both retailers and Hammerson by focusing on key measures including footfall, retail sales, affordability and customer satisfaction. In France, towards the end of the year, we made significant new hires, including the Director of Finance and Director of Operations.

Retailers' preference for strong trading locations was clear throughout 2010, and we have seen an improving trend in retail demand. We continue to attract successful, expanding retailers into the portfolio, such as Forever 21 who opened their first European store at Bullring. We signed 328 leases in respect of approximately 119,000m2 across our portfolio in 2010, and at the year-end the Group's overall occupancy rate was 97.3%, up from 95.4% at December 2009. In the second half of the year, overall, new leases in the UK were signed 1% below ERV, with those in France 2% above. UK rent reviews agreed in the year secured an annual uplift of £2.3 million.

Our regionally dominant shopping centres and accessible, conveniently located retail parks continued to perform well. Footfall was up at our shopping centres in both the UK and France, which resulted in like-for-like sales increases of 3.5% and 0.7% respectively, ahead of national benchmarks. Total like-for-like net rental income for the year increased 3.5% on 2009.

POrtFOlIO

We completed a number of disposals in 2010 to release capital for reinvestment in assets offering superior returns. In France, we sold stakes in both Espace Saint Quentin and O'Parinor, whilst retaining the management of the schemes. In London, we sold Exchange Tower and our remaining stake in Bishops Square. In aggregate, disposals in the year raised £555 million, and £219 million was invested in acquisitions. These transactions resulted in us recycling the equivalent of 15% of our portfolio, which at the year-end was valued at £5.3 billion.

In the City of London, we purchased Leadenhall Court and a stake in 10 Gresham Street. These provide the opportunity to use our asset management skills, whilst giving us increased exposure to high quality property in the heart of the City. Retail parks remain in demand from our tenants and their customers. We took full control of Battery Retail Park in Birmingham by acquiring our partner's 75% stake, and acquired Wrekin Retail Park in Telford. In February 2011 we acquired SQY Ouest, a shopping centre in Saint Quentin-en-Yvelines, Paris, adjacent to our existing Espace Saint Quentin centre. We can create value by improving the tenant mix

"We have sold mature assets and reinvested in properties which offer better growth prospects through active management."

at SQY Ouest and providing common management of both centres.

In 2010 we made good progress with a number of our development schemes in the UK and France. At Brent Cross Cricklewood, where we have full planning consent, we assumed control of the Cricklewood project by acquiring Brookfield's stake. We have begun construction of Les Terrasses du Port, Marseille, which will be one of the largest retail developments in France over the next few years. We are currently discussing with retailers new schemes at Mantes and Beauvais in northern France. In the City of London, we submitted a detailed planning application for a 46,000m2 office development at London Wall Place on the former St Alphage site. We also have a cleared site and are seeking a pre-let at Bishops Place, our proposed mixed-use development with 52,000m2 of office space. We have a significant pipeline of other development opportunities, in both the UK and France, which we will progress in a phased manner.

We seek continually to improve our portfolio through extensions and redevelopments which create new retail space, increasing the attractiveness to retailers and enhancing the quality of the schemes. We received planning consents for an additional 7,700m2 of retail and leisure space at Silverburn, and for a 1,000m2 restaurant quarter at Bullring. We also received consent for extensions at Abbey Retail Park, Belfast, and Battery Retail Park. In January 2011 we received consent for a 930m2 extension to Queensgate, which will allow us to accommodate Primark in a

new 5,500m2 unit as part of a £20 million upgrade of the scheme.

FInanCInG

Net debt at the year-end was £1.8 billion, resulting in gearing of 52%, compared to 67% at 30 June 2010, with liquidity, cash and undrawn facilities, of £1.0 billion. At the end of 2010 the weighted average maturity of the Group's borrowings, virtually all of which are unsecured, was eight years, with 94% of gross debt at fixed rates of interest.

BOard CHanGeS

Earlier this year we announced that Simon Melliss will retire in June 2011 after 20 years with the Company, including 16 years as Chief Financial Officer. Simon has played a central role as a member of both the Board and the senior management team and on behalf of the Board and shareholders I would like to thank him for his great contribution to Hammerson and wish him well for the future. I am delighted to welcome Timon Drakesmith as Simon's successor. Timon has proven capability and sector expertise, as well as wider industry and financial experience.

David Edmonds, who has served as a Non-Executive Director for eight years, will step down from the Board at the AGM in April. David's wisdom and advice have been invaluable, and I thank him for his significant input.

OutlOOK

Our rigorous focus on the performance of each asset is improving occupancy and income. We have sold mature assets and reinvested in properties which offer better growth prospects through active management. Looking forward, our financial flexibility and continued asset recycling will allow us to continue to take advantage of opportunities which we believe will arise in the coming period.

John Nelson Chairman 21 February 2011

"We have a portfolio of exceptional quality that continues to provide strong like-for-like income growth in a challenging environment."

prOpErty pOrtFOliO

board of directors

John nelson, Chairman

John Nelson, a Chartered Accountant, was appointed Chairman in 2005 and is a member of the Remuneration Committee and Chairman of the Nomination Committee. He is deputy chairman and the senior independent director of Kingfisher plc and senior advisor to Charterhouse Capital Partners LLP. He is also a trustee of The National Gallery and chairman of its development board.

david atkins, Chief Executive

David Atkins, a Chartered Surveyor, joined the Company in 1998 and was appointed to the Board of the Company's UK business in 2003. He was appointed an Executive Director of Hammerson in 2007 and Chief Executive in 2009. He is a board member of the European Public Real Estate Association, a member of the policy committee of the British Property Federation and the advisory committee of the British Council of Shopping Centres.

Peter Cole, Chief Investment Officer

Peter Cole, a Chartered Surveyor, joined the Company in 1989 as a senior development surveyor and was appointed to the Board of the Company's UK business in 1992. He was appointed an Executive Director of Hammerson in 1999. He is a general council member and past president of the City Property Association.

terry duddy, Non-Executive Director Terry Duddy was appointed a Non-Executive Director of Hammerson in 2009 and is a member of the Audit, Remuneration and Nomination Committees. He is chief executive of Home Retail Group plc.

david edmonds CBe, Non-Executive Director David Edmonds was appointed a Non-Executive Director of Hammerson in 2003 and is a member of the Remuneration Committee. He will be retiring from the Board at the Annual General Meeting on 28 April 2011. He acts as Chairman to the Hammerson Pension Scheme Trustees. He is chairman of Wincanton plc, the Legal Services Board and NHS Shared Business Services Limited. He is also a non-executive director of William Hill plc and the Olympic Park Legacy Company.

Jacques espinasse, Non-Executive Director Jacques Espinasse was appointed a Non-Executive Director and member of

the Audit Committee in 2007. He is a non-executive director of AXA Belgium, Maroc Telecom, SES and LBPAM.

John Hirst, Non-Executive Director

John Hirst, a Chartered Accountant, joined the Board as a Non-Executive Director in 2004 and is Chairman of the Audit Committee. He is chief executive of the Met Office, a director of Epilepsy Research UK and a trustee of Epilepsy Bereaved. He is chairman of the audit committee of the World Meteorological Organization and a member of Exeter University Business School's advisory board.

Simon Melliss, Chief Financial Officer

Simon Melliss, a Chartered Accountant, joined the Company in 1991 as group financial controller, having worked in various financial positions for other companies, and was appointed Chief Financial Officer in 1995. He will be retiring from the Board on 30 June 2011. He is a non-executive director and chairman of the audit committee of Whitbread PLC and a member of the committee of management of Hermes Property Unit Trust.

anthony Watson CBe, Non-Executive Director

Tony Watson was appointed a Non-Executive Director of Hammerson in 2006. He is the Senior Independent Director, Chairman of the Remuneration Committee and is a member of the Audit and Nomination Committees. He is chairman of Marks & Spencer Pension Trust Limited and the Asian Infrastructure Fund Limited and a member of the Shareholder Executive Board. He is also a non-executive director of Lloyds Banking Group plc, Witan Investment Trust plc and Vodafone Group Plc and is on the advisory board of Norges Bank Investment Management.

Chief Executive's Q&a

strategy, but it is far from over."

david atkins, Chief Executive

"the business never stands still and there are always things we can do better."

2010 HIGHlIGHtS What are the highlights of the results?

Well I'm obviously pleased that values have gone up this year, but there are a number of other important things behind that headline. Like-for-like rental income is up by 3.5% and we have increased the dividend by 3.2%. At the property level, we have reduced vacancy to below 3%. Looking at our financing we have net debt of £1.8 billion which resulted in gearing of 52% at the year-end, which positions us well to take advantage of opportunities in 2011.

What were the operational highlights for the year?

There were many things. We successfully opened The Rock in Bury on behalf of the administrators of Thornfield, and we had some significant signings into our portfolio, for example bringing Forever 21 into Bullring. We also made good progress on our developments, such as starting work on Les Terrasses du Port, getting a crucial planning consent for Brent Cross and submitting a detailed planning application for London Wall Place. In line with our stated strategy, we also sold a number of assets where we felt there was scope to reinvest for better returns.

StrateGY

What have you learnt in your first full year as CeO?

The business never stands still and there are always things we can do better. I'm pleased with what we have achieved in 2010, but there are still many things that I want to do to improve our portfolio, our asset management and our relationships with customers and staff.

What progress have you made implementing the customer strategy?

We've made significant progress, but it is far from over. The first year was really about embedding the processes internally and making sure that we had opened the lines of communication with customers to ensure they understood what we are trying to do. We're measuring that every year with the customer survey, and I'm hopeful that when we get the results of the 2010 survey they will show an improvement, but also highlight areas where we can keep getting better.

What is the strategy for the Company?

Our strategy is very clear: we focus on three things. First, managing the assets and the relationships with our customers to actively grow sales and income generated by the portfolio. Second, ensuring that we actively manage the portfolio so that we hold high quality assets offering superior returns. Third, we operate within a prudent and flexible financial framework which allows us to be entrepreneurial and capitalise on opportunities at the property level.

OvErviEW

OutlOOK

With action being taken to tackle fiscal deficits in both your markets, what is the outlook for your tenants?

It is clearly a difficult environment in which our customers are operating, but the prime nature of our assets means that we attract excellent tenants into our shopping centres, retail parks and offices. I'm by no means complacent, but our retail assets attract some of the most successful fashion, home and catering brands, and I think that our results show that we are well positioned to thrive in these challenging conditions.

What are the biggest challenges facing the business in 2011?

The biggest challenges are macro – action to tackle government deficits domestically, concerns over sovereign debt defaults in Europe and the growing tensions caused by global trade imbalances. All of these factors make us cautious about the outlook, but I believe that our regionally dominant shopping centres will continue to outperform the sector. I believe that the City of London is also in strong shape and that as a business not only are we well positioned to withstand further economic instability, but to benefit relative to our sector.

What are the catalysts for starting uK retail developments?

Many of our retail customers are keen to expand into new, modern space in thriving retail environments in order to grow their own sales. However, the outlook remains mixed for many retailers, and whilst we are developing in France and have had expressions of interest at sensible rental levels from some UK retailers, we cannot start a new retail scheme until we have sufficient confidence in the depth of retail demand in an area – commencing an uneconomic scheme is simply not in the interests of our shareholders, our retail customers or our council partners.

What are your areas of focus this year?

Having been a net seller in 2010 I'm looking for opportunities to add to our portfolio, but only if we can find reasonably priced assets that offer us the opportunity to use our skills to increase returns. The drive to improve the performance of our existing properties is ongoing, as is the progression of our significant development pipeline to ensure that we can capitalise on those opportunities when the demand is there. In terms of relationships, I want to demonstrate the value this year of some of the important hires we made in 2010 and also continue to improve the internal communication with staff.

"We attract excellent tenants into our shopping centres, retail parks and offices."

Our strategy

Our 3-point strategy threads through everything we do.

We have two areas of focus: income growth and high quality property.

both are underpinned by one principle: our capital strength.

so what's it about?

OUR STRATEGY

it's about creating environments for our customers to thrive...

FinanCial statEmEnts

OvErviEW

business framework

leGal and reGulatOrY FraMeWOrK

Hammerson operates in the UK and France where planning regimes impose restrictions on new property developments. These restrictions are particularly onerous in the case of large retail schemes, limiting the supply of new space and thereby benefiting owners of existing retail properties. By contrast, it is generally more straightforward to gain permission to create new office buildings, which can lead to more marked imbalances between supply and demand, resulting in greater fluctuations in rents and values. From a developer's perspective, the planning process can sometimes be uncertain and protracted.

In England and Wales, contracts to lease property are governed principally by the Landlord and Tenant Act 1954. The duration of a typical lease is 10-15 years, with rent payable quarterly in advance and with rent reviews at the end of each five year period. Rent reviews are generally 'upward only' whereby the rent will be increased to the market rent, unless the market rent is lower than the passing rent, in which case it will remain unchanged. Occupiers bear the responsibility for repairing and insuring the property and have a right to renew their leases for a further term at the end of the lease.

Scotland has its own legal system and there is no equivalent of the Landlord and Tenant Act. There is little legislation or case law relating to leases and a Scottish lease will usually contain all relevant terms. However, common law provisions may apply if the lease is silent on a particular issue. Despite the legal differences, the commercial terms of Scottish leases are similar to those elsewhere in the UK discussed above.

The trend in the UK is for a more flexible approach by property owners, which may include shorter leases, rent which is related to an occupier's turnover and rents being paid monthly.

In France, leases are governed by the 'Code du Commerce' and a typical lease is of around ten years' duration, with the occupier often having the right to break the lease every three years. Rent for the majority of leases is revised annually according to one of two official indices which are related to retail prices, retail sales and construction costs. Rents may go up or down depending on the index. Occupiers have the right to renew their leases for a further term at the end of the lease.

Hammerson is subject to various environmental regulations in the UK and France. In particular, our office and retail portfolio investment activities are subject to:

• Climate Change Act
• Carbon Reduction Commitment Energy Efficiency Scheme (CRC EES)
• Energy Performance Certificates (EPC)
• European Energy Performance of Buildings Directive
• Landfill regulations
• Grenelle de l'Environment Acts one and two

StrateGY and rISK ManaGeMent

The Group's strategy, which is summarised on pages 7 to 11, is set by the Board and documented in the Group's annual threeyear business plan. The strategy and associated action plans take into account the current and anticipated conditions in property markets. Set out opposite is a review of the property markets in 2010 and the medium-term outlook.

Operational and financial strategies support the Group's real estate strategy and are implemented within a risk management framework designed to identify and manage risk. More details of these strategies are provided in the Business and Financial Reviews on pages 18 and 31 respectively. A summary of the principal risks and uncertainties faced by Hammerson and how these are managed is set out on pages 14 and 15.

KeY PerFOrManCe IndICatOrS

We use financial and operational measures to monitor the performance of the business. The Key Performance Indicators (KPIs) which we believe are most important to the Group's performance are shown on page 16 and details of our financial and property returns are on page 17.

COrPOrate reSPOnSIBIlItY

The impact of our business on the environment and our stakeholders, including employees and the communities in which we operate, is discussed on pages 32 to 37.

COntraCtual relatIOnSHIPS

Our principal contractual relationships are with occupiers, joint venture partners, managing agents and building contractors. However, due to the number and diversity of the businesses with whom we deal, there are no individual contractual arrangements which are essential to the Group's business. As part of our commentary on the security of Hammerson's income, details of our largest occupiers by rental income are provided in the Business Review on page 23.

We have important relationships with our banks and bondholders who, together with shareholders, finance the Group. We use a number of banks and our bonds are widely held by a diverse range of investors. Accordingly, our financing risk is not concentrated with any particular lender.

property markets and outlook

investment market

Global economic recovery and supportive monetary policy contributed to a marked improvement in the performance of UK and French commercial property during 2010. In both countries, improving investor sentiment increased the demand for commercial property, boosted transaction volumes and led to lower investment yields and higher property valuations. Demand has been mainly focused on high quality property assets with secure income streams.

The value of UK commercial property transactions reached £35 billion during 2010, an annual rise of almost 50%. The quarterly IPD all-property equivalent yield moved in consistently throughout the year, falling 80bp to 7.1% by December 2010. Although the rate of inward yield movement slowed as the year progressed, a stabilisation of rental values helped to push up annual all-property total returns to 15.1%, the highest level since 2006.

The French commercial property market recorded a smaller decline in capital values during the downturn, and accordingly has not seen as sharp a recovery as the UK. The volume of transactions in France in 2010 remained below the historic average, but accelerated through the year to a total of €11 billion, a year-on-year rise of 40%. Rising demand put pressure on yields throughout the year, contributing to a return to capital value growth.

Commercial property continues to look attractive. The spread between property yields and interest rates remains well above the historic average, which should continue to encourage investor demand. However, investors are expected to prefer prime properties, helping to maintain the wide spread between prime and secondary yields.

retail propertY

In the UK, non-food retail sales rose by almost 3% over the year, as households reduced savings and increased spending. The recovery in retail sales was partly the result of lower than expected unemployment.

Although overall sales recovered, trading conditions for retailers in the UK have been mixed. Some retailers have taken advantage of the downturn to improve operations and increase market share. However, factors such as the weakness of sterling and rising commodity costs have affected retailer profitability. Against this background we expect to see a continued polarisation to prime, regionally dominant shopping centres and conveniently located retail parks.

During the recent downturn, many of the UK's planned retail developments were either delayed or cancelled by property companies. Accordingly, the UK development pipeline is now substantially smaller. Fewer new developments and an improved sales environment helped UK retail vacancy rates to stabilise in 2010, reducing the pace of shopping centre rental decline, and returning positive rental growth to the retail warehouse sector during the second half of the year. Vacancy levels at prime well-let shopping centres and retail parks such as Hammerson's are significantly lower than market averages, supporting rental values.

In France, retail sales have also started to grow as economic recovery and a stabilisation of unemployment have overcome weak consumer confidence. French households have a higher level of savings and lower level of personal debt than those in the UK, and the economic downturn in France resulted in fewer retailer administrations, helping to keep shopping centre vacancy rates lower than in the UK, at around 3%. However, retailers are yet to increase appreciably their demand for new stores. Shopping centre rents declined on average by just 1% during the downturn, and are estimated to have returned to growth in 2010. The main French indexation rate for existing retail leases was set at -0.22% with effect from 1 January 2011, and compares with +0.84% a year earlier. Indexation in France is likely to track any further increase in inflation, helping to maintain real rental incomes.

oFFiCe propertY

The performance of the central London office market generally mirrored the movements in global financial markets. Take-up fell back during the Greek sovereign debt crisis, but improved in the final quarter to a three-year high, as equity markets reached levels not seen since mid-2008.

Over the year as a whole, central London take-up was 15 million ft2 , a 67% rise on the previous year, and represented the highest level of leasing activity since 2006. For the first time since 2008, significant pre-letting activity began to return to the market. The central London vacancy rate fell from 7.2% at the start of the year, to 5.5% by the end of 2010, supporting continued rental growth and smaller incentive payments to tenants. Prime City rents were £55/ft2 by the end of the year, whilst rent-free periods had reduced by six months to 24 months for a ten-year lease.

The completion of additional floor space in the City will fall over the next two years, with the likely consequence of lower availability of grade-A offices and further increases in prime rents. Demand has increased but remains unpredictable, which in conjunction with an increase in development activity could temper rental growth in the longer-term.

risk management

risk management is integral to the achievement of our financial and operating objectives. risk management policies are designed to reduce the chances of financial loss, protect our reputation and enhance performance when opportunities arise. Our risk management framework, which is regularly reviewed by our senior team, helps us to identify and control risk. the five principal risk areas in that framework, and the steps we take to mitigate them, are shown in the table below. also noted are references to the pages in this annual report where the risks, or the elements of the business affected by them, are discussed further.

	risk mitigation		Commentary	page
Business strategy	• Implementation of a strategy inconsistent with the market environment. • Over-concentration of activities and investment exposure in particular markets.	• We commission and evaluate research into the economy and investment and occupational markets and use this to prepare an annual Business Plan and regular financial forecasts. • Hammerson's portfolio is geographically diversified and its allocation is regularly reviewed.	• Property markets and outlook • Property portfolio and allocation • Principal uncertainties	13 18 15
property development	• Poor control of the development programme and failure to address investment and occupational market risks. • Overexposure to developments within a short timeframe.	• Detailed analysis, including market research, is undertaken prior to the approval of each development project. • The Group's overall exposure to development is monitored and projects phased. • A programme of post completion reviews ensures potential improvements to processes are identified.	• Current and future developments • Principal uncertainties	25 15
property investment	• Acquisition of properties that fail to meet performance expectations.	• Acquisitions are thoroughly evaluated, including due diligence reviews. • The performance of individual properties is benchmarked against target returns.	• Investment portfolio	20
treasury	• Breach of borrowing covenants, triggering default and/or repayment. • Insufficient liquidity to progress the development programme. • Adverse currency or interest rate movements.	• Guidelines for financial ratios are set and monitored by the Board. • Future investment requirements are approved by the Board and sufficient facilities put in place. Diverse sources of funding used. • Fixed rate borrowings are used where appropriate and foreign currency denominated assets financed by borrowings in the same currency.	• Chairman's statement • Financial Review • Notes 20 and 21 to the accounts • Principal uncertainties	5 31 83 to 90 15
Business organisation and human resources	• Failure to recruit and retain key staff with appropriate skills and calibre.	• Recruitment procedures and the remuneration structure are regularly reviewed and benchmarked. • Succession plans are in place for senior positions.	• Remuneration Report • Human Resources • Corporate Governance	46 to 51 32 38 to 41

principal uncertainties

propertY valuations

The property portfolio is the largest component of the Group's net asset value. The value of the portfolio is affected by the conditions prevailing in the property investment market and the general economic environment. Accordingly, the Group's net asset value can change due to external factors beyond management's control. During 2010, improved economic conditions and the relatively attractive income yield on prime property have encouraged investors to be more active in the real estate investment market and property values have risen. However, there remains some uncertainty in the outlook for the economy whilst the continued high levels of bank finance secured on commercial property and the associated refinancing requirements could cause weakness in the investment market. The Property markets and outlook section of this report provides further discussion of these issues.

Hammerson has a high quality portfolio which is geographically diversified and let to a large number of tenants. These factors should help to mitigate any negative impact arising from changing conditions in the financial and property markets.

Our property portfolio is valued in compliance with international standards by external, professionally qualified valuers. The primary source of evidence for valuations should be recent, comparable market transactions. The current level of activity in the commercial property investment markets in the UK and France has meant that our valuers have had sufficient market evidence on which to base their valuations.

liquiditY

Although conditions in the financial markets have stabilised during 2010, companies with short-term refinancing requirements may continue to find it difficult to secure adequate funding at costs comparable with their existing facilities. Hammerson has just £43 million of debt maturing before April 2012 and a further £175 million in 2013. Accordingly we have time to plan for an optimal debt maturity and cost profile.

Gearing at 31 December 2010 was 52%. The risk that the Group could breach its borrowing covenants, the most stringent of which is that gearing should not exceed 150%, is therefore low. We estimate that, on a proforma basis, the value of our portfolio would have to fall by 43% to endanger our most rigorous gearing covenant.

development and letting

Potential occupiers remain cautious about entering into commitments to lease space, although the level of interest has increased over the last year. Vacancy is discussed further in the Business Review on page 22. We currently have one significant development underway, Les Terrasses du Port in Marseille, which is 49% let or under offer and where we have much interest from prospective tenants. Although we have a significant development pipeline, the programme will be phased and we will not start major capital projects without substantial pre-lets. The construction contract at Les Terrasses is for a fixed price and is therefore protected from the effects of inflation.

tenant deFault

The trading environment has continued to improve during 2010, and the rate at which retail companies in the UK are going into administration has fallen. However the effects of increased taxation and restrictions on government spending may mean that some tenants, principally in the UK retail sector, face difficult operating conditions and there is a risk that they will be unable to pay their rents. The large number of tenants and their geographical spread mean the impact of individual tenant default to Hammerson is low. Furthermore, our occupational leases are long-term contracts, thus making the income relatively secure. The quality of the Group's income is discussed on page 23 of the Business Review.

interest rates

Interest charged on borrowings is a significant cost for Hammerson. We set guidelines for our exposure to fixed and floating interest rates and use interest rate and currency swaps to manage this risk. At 31 December 2010, 94% of the Group's gross debt was at fixed rates of interest. If short-term interest rates increase, our hedging programme should partly mitigate the impact of any rise.

exChange risk

Exchange risk is managed by matching foreign currency assets with foreign currency debt, using derivatives where appropriate. At the end of 2010, 82% of the value of the French portfolio was hedged. We estimate that a 1% strengthening of the euro relative to sterling would have the effect of increasing shareholders' funds by around £2 million and would increase net debt by approximately £11 million.

Overview

gOvernance

key performance indicators

to monitor the performance of our business, we measure three principal indicators against appropriate benchmarks. set against the background of our strategy, these 'key performance indicators', or 'kpis', demonstrate the extent to which earnings and valuation growth drive returns. growth in portfolio and equity returns should, over time, be reflected in improved shareholder returns. the sources of the information used to calculate kpis are management reporting systems and ipd.

	return on shareholders' equity (roe)	portfolio return relative to ipd(2)	occupancy
description	ROE represents the income and capital returns in a year expressed as a percentage of shareholders' equity at the start of the year.(1)	We compare the total return achieved from the portfolio against the relevant IPD index.	The ERV of the space in the portfolio which is currently let, as a percentage of the total portfolio. (1) (3)
Why it is important	It is a measure of how effective Hammerson is in generating a return on the equity invested by shareholders in the business.	It enables us to monitor the return achieved from the portfolio against a recognised benchmark.	We aim to maximise the occupancy of our properties as income lost through vacancy has a direct impact on profitability.
Benchmark	8.2% (estimated cost of equity)	IPD Universe +1.0%	97.0%
2009 actual	-16.9%	-4.1% (IPD Universe 1.3%)	95.4%
2010 actual	21.1%	18.6% (IPD Universe: 15.1%)	97.3%
Commentary	Financial and property returns, page 17	Financial and property returns, page 17	Business Review, page 22

Notes

Please refer to the glossary on page 117 for a full definition.

2010 figures refer to UK data only, based on the IPD quarterly index, as the UK annual index was unavailable at the time of publication. There is no French quarterly index and the French annual IPD index was unavailable at the time of publication. The figures will be updated when the annual indices are available.

3 EPRA has issued revised guidance for the calculation of vacancy. Previously, vacancy was reported as a percentage of rents passing plus the ERV of vacant space. The revised definition expresses vacancy as a percentage of the total ERV of a property or portfolio. We have adopted this new definition and restated our 2009 comparatives for vacancy and occupancy data.

The chart above shows weighted returns and indices for 2006 to 2009 for the UK and French portfolios. The data for 2010 is for the UK only as the IPD index for France is not yet available.

financial and property returns

returns

Our objective is to achieve a return on equity which is greater than our cost of equity. To achieve this, we set hurdle rates for investment. The hurdle rates are based on a minimum five-year internal rate of return and are adjusted according to the risk associated with each project. When appropriate, the returns that would be generated by buying in the Company's own shares are evaluated against the potential returns from property investment and development. The table below provides information on the financial returns achieved in 2010 and compares them with appropriate benchmark indices. The IPD annual return was not available at the time of publication, so the IPD benchmarks shown for the UK portfolio are based on the quarterly index. There is no benchmark for total portfolio returns which is comparable with Hammerson's geographical portfolio allocation. IPD data relating to the returns of the French property sector in 2010 will be available only after this Annual Report has been published.

returns data for 2010

Return	%	Benchmark	%
UK portfolio capital return	12.5	UK IPD Universe – capital	8.5
UK portfolio income return	5.5	UK IPD Universe – income	6.2
UK portfolio total return	18.6	UK IPD Universe – total	15.1
Total portfolio capital return	9.3	n/a
Total portfolio income return	5.3	n/a
Total portfolio total return	15.0	n/a
Return on shareholders' equity	21.1	Estimated cost of equity	8.2
Total shareholder return over one year	2.5	FTSE EPRA/NAREIT UK index over one year	4.9
Total shareholder return over three years p.a.	-11.9	FTSE EPRA/NAREIT UK index over three years p.a.	-13.4
Total shareholder return over five years p.a.	-6.6	FTSE EPRA/NAREIT UK index over five years p.a.	-9.3

An analysis of capital and total returns by business segment is provided in the Business Review on pages 19 and 20.

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

Hammerson's return on shareholders' equity for the year ended 31 December 2010 was 21.1%. The income element of the return on shareholders' equity will tend to be relatively low given the high quality of the property portfolio, as described above. In 2010 the capital element of the return on equity reflected the increase in the value of the portfolio during the year, which resulted from the continuing recovery of the real estate investment market.

Total shareholder return for 2010 underperformed the FTSE EPRA/NAREIT UK index. Over the last five years, Hammerson's average annual total shareholder return has been -6.6% compared with -9.3% for the EPRA/NAREIT UK index.

epra performance measures

EPRA promotes the presentation of certain performance measures in its Best Practices Recommendations. A summary is set out below.

Performance measure
epra earnings Page 75	Definition Recurring earnings from core operational activities. Purpose A key measure of a company's underlying operating results from its property rental business and an indication of the extent to which current dividend payments are supported by earnings.
epra nav Page 75	Definition Net Asset Value adjusted to include properties and other investment interests at fair value and to exclude certain items not expected to crystallise in a long-term investment property business model. Purpose Adjusts IFRS NAV to provide stakeholders with relevant information on the fair value of the assets and liabilities of a real estate investment company with a long-term investment strategy.
epra nnnav Page 75	Definition EPRA NAV adjusted to include the fair values of financial instruments, debt and deferred taxes. Purpose Adjusts EPRA NAV to provide stakeholders with relevant information on the current fair value of the assets and liabilities of a real estate company.
epra net initial Yield (niY) Page 21 epra 'topped-up' niY Page 21	Definition 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. Definition EPRA NIY adjusted for the expiry of rent-free periods. Purpose Comparable measures in Europe for portfolio valuations.
vacancy Page 22	Definition Estimated market rental value (ERV) of vacant space divided by the ERV of the whole portfolio. Purpose A measure of investment property space that is vacant, based on ERV.

financial statements

business review

real estate strategY

Our real estate strategy focuses on high quality properties and income growth, and aims to maximise the total returns from the portfolio by:

• allocating the majority of the portfolio to prime regional shopping centres and retail parks;
• managing our investment properties so that they continue to be attractive to occupiers, enabling us to increase the Group's rental income and other revenues over time; and
• generating attractive income and capital returns through development, in both the retail and office sectors.

Our performance in these areas during 2010 is discussed in this Business Review, which also provides information on the potential future growth in the portfolio's income and value.

propertY portFolio and alloCation

Our portfolio allocation is based on external and internal research which is used to analyse in detail the markets in which we operate. As part of our annual business planning process, we review the current and projected performance of each of our properties and identify assets for disposal. This active portfolio management has resulted in £555 million being raised from disposals in 2010, whilst £305 million has been invested in acquisitions, new developments and improving existing properties over the same period.

At 31 December 2010, our property portfolio was valued at £5.3 billion, with the investment portfolio valued at £5.2 billion and developments making up the balance. Joint ventures accounted for 46% by value of the total portfolio, including eight major shopping centres in the UK and two in France.

Our ten most valuable properties represented 48% of the portfolio value at 31 December 2010, with an average lot size of £253 million.

At the end of 2010, Hammerson's retail portfolio in the UK and France provided 1.6 million m2 of space and included 16 major shopping centres and 17 retail parks. Our office portfolio includes seven prime buildings in central London, providing 157,000m2 of accommodation.

The retail weighting of the portfolio at 31 December 2010 was unchanged from the end of the previous year at 88%. However, over the course of 2010 acquisitions, disposals and the effects of exchange rates have combined to change the geographical weighting of the portfolio so that the UK accounted for 74% compared with 66% at the end of 2009.

The value of the portfolio increased by £190 million during 2010, and the movement is analysed in the table below.

Movement in portfolio value in 2010	£m
Portfolio value at 1 January	5,142
Valuation increase	447
Capital expenditure
Acquisitions	219
Developments	26
Expenditure on existing portfolio	47
Capitalised interest	2
Disposals	(491)
Exchange	(61)
Portfolio value at 31 December	5,331

Capital returns

		Shopping centres		Retail parks		Offices		Total
		Capital		Capital		Capital		Capital
	Value	return	Value	return	Value	return	Value	return
	£m	%	£m	%	£m	%	£m	%
UK	2,254	13.2	1,038	12.4	644	10.7	3,936	12.5
France	1,299	1.6	96	7.4	–	–	1,395	1.9
Total	3,553	8.3	1,134	11.9	644	10.7	5,331	9.3
The underlying valuation increase for the UK portfolio was 12.5%. Changes to investment yields accounted for virtually all of the increase in value in the UK retail portfolio, with shopping centres and retail parks showing a similar performance. For the UK office portfolio, nearly
three-quarters of the valuation uplift resulted from lower investment yields with the balance reflecting increased rental income. The valuation uplift from yield movement in the UK was weighted towards the first half of the year, whilst the last six months of 2010 benefited from increased income and rental values.
In France, valuations were broadly static as improved investment yields offset a small reduction in rental values. The improvement in yields was weighted towards the second half of the year and rental values declined fairly evenly in 2010.
The components of the valuation change in 2010 for the UK and French portfolios are shown in the charts below.

Change in valuation yields -50 50 0 100 150 H1 H2 Year 200 250 300 350 400 £ million Income and rental value growth Other movements UK portfolio

2010 components of valuation change French portfolio

business review (continued)

investment portFolio

valuation data for investment property

for the year ended 31 december 2010

						True
	Properties	Revaluation	Capital	Total	Initial	equivalent
	at valuation £m	in the year £m	return %	return %	yield %	yield %
Notes					1	2
United Kingdom
Retail: Shopping centres	2,243	261	13.3	19.3	5.2	6.3
Retail parks	1,025	102	11.8	18.1	5.5	6.1
	3,268	363	12.9	18.9	5.3	6.2
Office: City	518	40	15.2	23.3	5.3	6.1
Other	66	4	7.4	15.1	5.2	6.6
	584	44	12.7	20.7	5.3	6.1
Total United Kingdom	3,852	407	12.8	19.2	5.3	6.2
Continental Europe
France:Retail	1,338	40	2.1	7.3	4.9	5.6
Group
Retail	4,606	403	9.1	14.9	5.2	6.0
Office	584	44	12.7	20.7	5.3	6.1
Total investment portfolio	5,190	447	9.6	15.6	5.2	6.0
Developments	141	–	(1.8)	(3.6)
Total Group	5,331	447	9.3	15.0

Notes

¹ Annual cash rents receivable (net of head and equity rents and the cost of vacancy and in the case of France, net of an allowance for costs of approximately 5.2% primarily for management fees), as a percentage of gross property value, as provided by the Group's external valuers. Rents receivable following the expiry of rent-free periods are not included. Rent reviews are assumed to have been settled at the contractual review date at ERV.

² The capitalisation rate applied to future cash flows to calculate the gross property value. The cash flows reflect the timing of future rents resulting from lettings, lease renewals and rent reviews based on current ERVs and assuming rents are received quarterly in advance. The property true equivalent yields are determined by the Group's external valuers.

³ Further analysis of development properties by segment is provided in note 3B on page 67.

⁴ The weighted average remaining rent-free period is 1.1 years.

The initial yield calculation in the table 'Valuation data for investment property', is based on passing rents at 31 December 2010 excluding rents of £20.8 million per annum which will be received after the expiry of rent-free periods.

We have had an active year in 2010, disposing of several properties and reinvesting the proceeds in acquisitions and developments which provide opportunities for income and valuation growth.

At 54-60 rue du Faubourg Saint-Honoré, Paris 8ème, the redevelopment work is being completed and six of the seven stores have been handed over to tenants for fitting out. The stores, all but one of which are pre-let, will open for trading during the second quarter of 2011. The total development cost is £31 million and the increase in annual rents as a result of the redevelopment is £3.1 million. At 31 December 2010 the valuation of the property was £36 million above cost.

In October we completed the sales of interests in the Espace Saint Quentin and O'Parinor shopping centres near Paris. Hammerson will continue to manage both schemes and receive management fees. A 75% interest in Espace Saint Quentin, Saint Quentin-en-Yvelines, was sold to Allianz Real Estate GmbH for net proceeds of £151 million, and a further £2 million is contingent upon the purchaser's option to acquire one of the shop units in 2012. Using the exchange rate prevailing at the time of the transaction, the value of the property at 31 December 2009 was £209 million and net income for the year then ended was £11.6 million. The property is now held in a 25:75 joint venture, and Hammerson's annual net income from the arrangement, comprising rental income and management fees, is estimated at £4.0 million.

The sale of a 51% interest in O'Parinor, Aulnay-sous-Bois, to The National Pension Service of Korea raised net proceeds of £187 million. We have agreed with the purchaser that it can purchase, and Hammerson can sell, an additional 24% interest in autumn 2011 at a price based on the same valuation for the centre as was used for the initial transaction. This further sale would raise around £91 million. The value of the property, using the exchange rate at the date of the initial sale, was £395 million at 31 December 2009 and it contributed £19.0 million of net income during the year then ended. We estimate that Hammerson's income from the 49:51 joint venture, including management fees, will be £10.0 million per annum.

Elsewhere in our shopping centre portfolio, Glasgow City Council confirmed in October our application to extend Silverburn by 7,700m2 . The extension will provide high quality retail and leisure space and include an upgrade of the promenade leading to the Pollok Civic Realm. Silverburn, currently Scotland's largest purpose-built shopping centre, is held in a 50:50 joint venture with Canada Pension Plan Investment Board (CPPIB).

We have received planning consents for a 1,000m2 restaurant quarter at Bullring, Birmingham and a 930m2 extension to Queensgate, Peterborough. The latter will allow us to accommodate Primark in a new 5,500m2 unit as part of a £20 million upgrade of the scheme.

We have also been active in the retail park sector during the year. In June, we acquired the remaining 75% interest in Battery Retail Park, Birmingham, from our partner TIAA-CREF, the US pensions group. The cost of the acquisition was £49 million and Hammerson now wholly owns the 13,000m2 park which is fully occupied by retailers including B&Q, Currys, Halfords, Homebase, Next and PC World. We have planning consents to extend this scheme and Abbey Retail Park, Belfast.

In November, we acquired Wrekin Retail Park, Telford, for £42 million including costs. The 13,400m2 park was built in 1996, adjoins an owner-occupied Tesco Extra store and has open A1 planning consent. The scheme is fully let to nine retailers including Asda Living, Boots, Homebase and Matalan. Annual gross rental income is £2.6 million, equivalent to around £18 per square foot, and the leases have an unexpired term of more than ten years. Wrekin has excellent transport links, located to the west of Telford town centre, beside junction 6 of the M54 and has a primary catchment population of around 270,000.

We have recently agreed terms to acquire our partner's 75% interest in Central Retail Park, Falkirk for £69 million including costs.

We continued the theme of asset recycling in our office portfolio. In September, we sold Exchange Tower in London's Docklands, for net proceeds of £134 million. Originally acquired in 1999 for £77 million, the building was valued at £131 million at 31 December 2009 and rents passing were £10.7 million at that time.

Bishops Square, London E1, which was developed by Hammerson, completed in 2005, and in which we held a 25% interest through a joint venture with Oman Investment Fund (OIF), was sold in December. The property was let to Allen & Overy LLP and a number of retailers at a total rent of £35 million per annum. The sale reflected a property value of £557 million compared with £481 million at 31 December 2009. The net proceeds due to Hammerson from the sale of our interest, including performance payments from OIF, the repayment of loans and after taking account of the joint venture's debt and interest rate swap, were £80 million.

A long leasehold interest in Leadenhall Court, London EC3, was acquired in July for £65 million including costs. The property was built in 1988 and provides 10,000m2 of office space in a prime City of London location between Bank and Liverpool Street stations. The property is fully let until March 2014 to a subsidiary of RSA Insurance Group plc, with rents passing of £7.2 million per annum net of head rents payable. There is a wide range of opportunities to add value to the property, including the potential for refurbishment or full redevelopment.

In August we entered into a joint venture with CPPIB to acquire a long leasehold interest in 10 Gresham Street, London EC2, for £183 million including costs. Hammerson will manage the property on behalf of the joint venture, in which we have a 30% interest. The 23,600m2 eight-storey building was designed by Foster+Partners, was completed in 2003 and comprises high-quality offices, retail and ancillary accommodation. Lloyds TSB Bank is the principal occupier, with the remainder of the property let to seven other tenants including Milbank Tweed Hadley & McCloy and JC Flowers. The average unexpired lease term is over 10 years and Hammerson's share of the rents passing, net of head rent payable, is £3.2 million per annum, reflecting average headline rents of £44 per square foot.

investment portFolio overvieW

investment portfolio at 31 december 2010

	Income £m	Gross value £m	Net book value £m
Portfolio value (net of cost to complete)		5,474	5,474
Purchasers' costs			(284)
Net portfolio valuation as reported in the financial statements			5,190
Income and yields
Rent for valuers' initial yield (equivalent to EPRA Net Initial Yield)	287.1	5.2%	5.5%
Rent-free periods	20.8	0.4%	0.4%
Rent for 'topped-up' initial yield	307.9	5.6%	5.9%
Non-recoverable costs (net of outstanding rent reviews)	7.0	0.1%	0.2%
Passing rents (note 1)	314.9	5.7%	6.1%
ERV of vacant space	8.8	0.2%	0.2%
Reversions	6.4	0.1%	0.1%
Total ERV/Reversionary yield	330.1	6.0%	6.4%
True equivalent yield		6.0%
Nominal equivalent yield		5.8%
Note

¹ The yield of 5.7% based on passing rents and the gross value is equivalent to EPRA's 'topped-up' net initial yield.

The table above analyses the net and gross valuations, income and yields for the Group's investment portfolio, excluding developments. Purchasers' costs equate to 5.5% of the net portfolio value.

business review (continued)

The net initial yield, based on the net portfolio value, at 31 December 2010 of 5.5% compares with 5.8% at the end of 2009, and the movement reflects the strengthening of the property investment market over the year.

rental inCome

rental data for investment portfolio

for the year ended 31 december 2010

	Gross rental income £m	Net rental income £m	Vacancy rate %	Average rents passing £/m²	Rents passing £m	Estimated rental value £m	Reversion/ (over rented) %
Notes			1	2	3	4	5
United Kingdom
Retail: Shopping centres	136.8	113.6	3.1	430	134.2	144.9	4.8
Retail parks	54.1	50.2	1.8	195	60.2	63.0	2.8
	190.9	163.8	2.7	340	194.4	207.9	4.2
Office: City	36.1	31.6	3.3	490	40.4	35.7	(16.9)
Other	14.0	12.2	11.8	245	4.8	5.7	4.4
	50.1	43.8	4.4	445	45.2	41.4	(14.0)
Total United Kingdom	241.0	207.6	3.0	355	239.6	249.3	1.0
Continental Europe
France:Retail	90.4	79.4	1.9	350	75.3	80.8	5.2
Group
Retail	281.3	243.2	2.5	340	269.7	288.7	4.5
Office	50.1	43.8	4.4	445	45.2	41.4	(14.0)
Total investment portfolio	331.4	287.0	2.7	355	314.9	330.1	2.0
Income from developments and other sources not analysed above	0.6	(2.3)
As disclosed in note 2 to the accounts	332.0	284.7

Selected data for the year ended 31 December 2009

Group
Retail	275.4	234.8	3.9	340	274.7	306.0	7.0
Office	68.2	59.2	9.5	365	43.7	41.8	(15.1)
Total investment portfolio	343.6	294.0	4.6	345	318.4	347.8	4.1

Notes

¹ The ERV of the area in a property, or portfolio, excluding developments, which is currently available for letting, expressed as a percentage of the ERV of that property or portfolio.

² Average rents passing at 31 December 2010 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 2010, 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 2010, after deducting head and equity rents, calculated by the Group's external valuers.

⁵ The percentage by which the ERV exceeds, or falls short of, rents passing together with the estimated rental value of vacant space, all at 31 December 2010.

Net rental income was £284.7 million for the year ended 31 December 2010, whilst passing rents from the investment portfolio totalled £314.9 million at that date. Further details of net rental income, including a like-for-like analysis, are provided in the Financial Review on pages 28 and 29.

In 2010 we agreed 118 rent reviews in the UK, for which the existing rents receivable were £11.7 million, and secured an uplift of £2.3 million per annum. Annual rents could increase by a further £2.7 million, assuming that rent reviews outstanding at the end of the year are settled at ERV.

Shopping centre rents in France change annually according to one of two indices: a composite index, partly based on retail prices (ILC); or a construction cost index (ICC). Around 72% by value of the retail leases in Hammerson's French portfolio will fall by 0.22% from 1 January 2011. The corresponding movement in the index for 2010 was an increase of 0.84%. The balance of the leases in France is indexed according to construction costs, for which the index for 2011 is an increase of 1.27%.

oCCupanCY/vaCanCY

EPRA has issued revised guidance for the calculation of vacancy. Previously, vacancy was reported as a percentage of the rents passing plus the ERV of vacant space. The revised definition expresses vacancy as a percentage of the total ERV of a property or portfolio. We have adopted this new definition and restated our 2009 comparatives for vacancy and occupancy data.

At 31 December 2010, occupancy in the investment portfolio stood at 97.3%, compared with 95.4% at the 2009 year end and our target of 97%. The increased occupancy over the last 12 months principally reflected lettings at the recently completed shopping centre developments in the UK and at 60 Threadneedle Street, London EC2, although this positive impact was partly offset by slightly increased vacancy at some of our French shopping centres.

inCome seCuritY and qualitY

Our investment portfolio has a secure income stream, demonstrated by a weighted average unexpired lease term of nearly nine years at the end of 2010.

At 31 December 2010, 21 UK retail units were let to tenants in administration, and of these, ten were still trading. In France, the equivalent figures were 15 and 13 units respectively. Income from tenants in administration for the Group as a whole represents less than 1% of passing rents at 31 December 2010.

Hammerson's ten largest retail tenants accounted for £54 million, or 17%, of total passing rents at the end of 2010. In the office portfolio, the five largest tenants represented £26 million or 8% of total passing rents. Our largest occupiers by rental income are shown in the table below.

Retail tenant	% of total passing rent	Office tenant	% of total passing rent
B&Q	3.2	Deutsche Bank	3.3
H&M Hennes	2.3	Royal & SunAlliance	2.1
Arcadia	1.8	Latham & Watkins LLP	1.5
Home Retail Group	1.8	Lloyds TSB	0.9
DSG Retail	1.7	DTZ Holdings	0.6
Next Group	1.5
New Look	1.4
Boots	1.3
J Sainsbury	1.2
JDSports	1.1
Total	17.3	Total	8.4

Our credit control team assesses the covenant strength of all prospective tenants and monitors the credit ratings of key existing tenants, using a credit rating agency's risk indicator scale of one to five, with one being low risk and two lower-than-average risk. At 31 December 2010, our top ten retail tenants were all rated as low risk. Tenants with a low or lower-than-average risk indicator comprised 80% by passing rents of the UK retail portfolio and the score in the portfolio averaged 1.6.

We also monitor the risk indicators of our office tenants, although they tend to be of lower risk than retailers. This is evidenced by the fact that there have been no significant rent payment defaults in our office portfolio in 2010. At 31 December 2010, four of the top five office tenants had a low or lower-than-average risk indicator. In the UK office portfolio at 31 December 2010, the average risk score was 1.3 and 83% of passing rents were provided by tenants with a risk rating of one or two.

retailer trends

Overall in 2010 retail sales in the UK increased by 2.6%, despite weak consumer confidence. There was a polarisation in consumer preference between local retailing destinations and the broad merchandise offers at regional shopping centres.

The growth in Multichannel retail continues, with retailers reporting the accelerated growth of 'Click & Collect' and the increased value to retailers of customers that shop using a number of channels. We have continued to develop our understanding of Multichannel retailing, for example using social media and the content on our shopping centre websites to develop better relationships with consumers. In France, we are also trialling a 'flash sales' concept, using our O'Parinor shopping centre website to sell stock on behalf of retailers. Continually developing our plan and technical capabilities to ensure we are well placed to deal with the challenges and opportunities afforded by Multichannel is a high priority.

retailer performance

In the UK, like-for-like turnover at Hammerson's shopping centres rose by 3.5% during 2010. Results were positive throughout the year, except for January when sales were affected by adverse weather conditions. Highcross shopping centre in Leicester saw like-for-like growth of 7.1% demonstrating the success of the extension which opened in September 2008. The Bullring in Birmingham and Brent Cross shopping centre in London also showed a good performance.

In the UK portfolio, like-for-like sales in department stores rose by 3.2% in 2010 with nearly all operators in this sector showing some growth. Unit shops saw selective sales growth with catering specialists performing well. Within fashion, the MSUs remain the strongest format for sales growth as consumers still favour larger stores which provide a one-stop shop for footwear, lingerie, accessories and clothing.

business review (continued)

Footfall across the UK portfolio has increased by 1.8% on a like-for-like basis and by 8.0% including Silverburn, Glasgow and Union Square, Aberdeen. Nearly all centres recorded growth in the number of visitors, with Cabot Circus in Bristol showing the largest increase at 11.2%.

In France, overall spending increased by 1.0% in 2010, marginally ahead of the performance in the previous year. Nationally, sales at regional shopping centres fell by 0.6% on a like-for-like basis, whilst Hammerson shopping centres showed an increase of 0.7%. Strasbourg recorded the best performance with sales up 4.7%, reflecting a recovery following the opening of a competing centre in late 2008. Our other regional shopping centres showed a positive trend with the exception of Bercy 2 (-9.5%) which suffered from competitor activity. In the Hammerson France portfolio, turnover at unit shops was positive at 1.5% whilst larger stores saw sales decline by 0.9%; hypermarket sales decreased by 2.2%.

Footfall performances outperformed the national benchmark with an increase of 0.7% year-on-year. Within the Hammerson portfolio, Espace Saint Quentin and Place des Halles outperformed.

rent to sales ratio

Across the UK portfolio, affordability levels, measured as rent as a percentage of sales, have improved as a result of retail sales growth. Only one centre reported an increase in rent to sales ratio, reflecting recent rent reviews.

In France, the level of rents in relation to turnover is generally lower than in the UK. The modest movements seen in the indexation of rents compared to turnover growth has meant that rent to sales ratios fell during 2010 at nearly all Hammerson's shopping centres.

lease expiries and Breaks

as at 31 december 2010

		Rents passing that expire/break in				Weighted average unexpired lease term
					ERV of leases that expire/break in
	2011	2012	2013	2011	2012	2013	to break	to expiry
	£m	£m	£m	£m	£m	£m	years	years
Notes	1	1	1	2	2	2
United Kingdom
Retail: Shopping centres	13.4	2.8	7.6	17.3	2.9	7.6	8.7	10.0
Retail parks	2.4	2.3	0.9	2.5	2.3	0.9	11.7	12.2
	15.8	5.1	8.5	19.8	5.2	8.5	9.7	10.8
Office: City	9.1	–	0.5	7.4	–	0.4	6.6	7.9
Other	1.0	0.3	0.5	1.0	0.3	0.6	6.2	8.3
	10.1	0.3	1.0	8.4	0.3	1.0	6.6	7.9
Total United Kingdom	25.9	5.4	9.5	28.2	5.5	9.5	9.0	10.2
France: Retail	17.3	9.3	5.5	18.7	9.3	5.6	1.9	4.5
Group
Retail	33.1	14.4	14.0	38.5	14.5	14.1	7.4	8.9
Office	10.1	0.3	1.0	8.4	0.3	1.0	6.6	7.9
Total Group	43.2	14.7	15.0	46.9	14.8	15.1	7.3	8.8

Notes

¹ The amount by which rental income, based on rents passing at 31 December 2010, 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 2010 for leases that expire or break in each year and ignoring the impact of rental growth and any rent-free periods.

As shown in the table above, during the period from 2011 to 2013 leases with current rents passing of £72.9 million will expire, or are subject to tenants' break clauses. We estimate that additional rents of £3.9 million per annum would be secured, assuming renewals take place at current rental values. The potential uplifts in the UK and French retail portfolios are partly offset by over-renting at the UK offices, particularly at 99 Bishopsgate where there are lease expiries in 2011. This is not a forecast and takes no account of void periods, lease incentives or possible changes in rental values.

rent revieWs

as at 31 december 2010

								Projected rent at current ERV
				Rents passing subject to review in				of leases subject to review in
		Outstanding	2011	2012	2013	Outstanding	2011	2012	2013
		£m	£m	£m	£m	£m	£m	£m	£m
Notes		1	1	1	1	2	2	2	2
	United Kingdom
	Retail: Shopping centres	22.3	10.7	12.3	35.1	23.7	11.0	13.5	36.2
	Retail parks	19.3	12.5	9.4	6.0	20.4	12.7	9.6	6.4
		41.6	23.2	21.7	41.1	44.1	23.7	23.1	42.6
Office: City		10.4	9.3	0.4	4.6	10.6	9.4	0.7	4.6
	Other	2.0	0.1	–	–	2.0	0.1	–	–
		12.4	9.4	0.4	4.6	12.6	9.5	0.7	4.6
	Total United Kingdom	54.0	32.6	22.1	45.7	56.7	33.2	23.8	47.2

Notes

¹ Rents passing at 31 December 2010, 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 2010 and ignoring the impact of changes in rental values before the review date.

At 31 December 2010, the investment portfolio was 2.0% reversionary, compared with 4.1% reversionary at the end of 2009. The change during the year resulted from an increase in passing rents and lower ERVs reflecting acquisitions and disposals. Our shopping centre and retail park portfolios were 4.8% and 2.8% reversionary respectively at the end of 2010, whilst the offices were 14.0% over-rented, principally due to Leadenhall Court, 99 Bishopsgate and 125 Old Broad Street in the City of London.

In the UK, leases with passing rents of £100.4 million are subject to review over the next three years. If reviewed at current rental values, we estimate that rents receivable in respect of these leases would increase by £3.8 million per annum by 2013. Furthermore, assuming that outstanding rent review negotiations are concluded at current rental values, an additional £2.7 million per annum would be secured. This is not a forecast and takes no account of potential changes in rental values before the relevant review dates.

In France, the majority of leases are subject to annual indexation.

ContraCted inCome

In 2011, our cash flow will increase by around £9 million due to leases and contracts that have been signed at Union Square in Aberdeen, 125 Old Broad Street and 60 Threadneedle Street in the City of London and 54-60 rue du Faubourg Saint-Honoré in Paris. On an accounting basis, the increase will be approximately £4 million.

Current and Future developments

We have three objectives for our development programme:

• to create assets which generate an attractive initial yield with the potential for future growth in income;
• to create assets valued at a surplus above cost; and
• to create prime assets of a type which are difficult to obtain in the open market.

Hammerson has built a reputation as one of the leading developers in the UK and France, managing complex urban regeneration schemes and forging strong links with local authorities and key occupiers. We currently have one development underway, at Les Terrasses du Port, Marseille.

Les Terrasses du Port, at 56,000m2 , will be one of the largest shopping centre developments in France over the next few years and will comprise 160 shops and 2,600 car parking spaces. We acquired the site in December 2009 and have since established relationships with key local stakeholders and re-engineered the scheme to optimise the retail layout, reduce costs and target a BREEAM 'Excellent' environmental rating. By renegotiating the construction contracts to fixed cost and creating comprehensive tenant mix and leasing strategies, we have reduced risk considerably. Enabling works commenced in August and we expect to start the main construction in spring 2011 with completion forecast in spring 2014. The project's total development cost is estimated at £370 million and the centre is projected to generate income of £28 million, net of head rents payable and leases representing 49% of the retail income are pre-let or under offer.

Overview

business review (continued)

We have a substantial pipeline of potential future development opportunities and continue to maintain close contact with the local authorities involved with these schemes. A number of milestones in the progression of these projects have been met during 2010.

Planning consent comprising 1.4 million m2 of mixed-use development was granted in October for the regeneration of Brent Cross Cricklewood as a new town centre. The judicial review period has expired and the planning consent is free from challenge. We intend to work up a phased masterplan in 2011, including a 78,000m2 retail and leisure extension to Brent Cross shopping centre. On the Cricklewood site, we are planning 33,000m2 of retail accommodation, office and leisure space of 450,000m2 and 26,000m2 respectively, a 61,000m2 hotel, 7,500 residential units and new schools. In June, Hammerson assumed control of the Cricklewood project from its former joint venture partner, Brookfield Europe Limited. The broader regeneration plans are under the control of the Brent Cross Cricklewood Development Partners, comprising Hammerson and Standard Life Investments UK Shopping Centre Trust.

We submitted in November a detailed planning application for our office scheme at London Wall Place, formerly known as the St Alphage House site. The project involves the creation of two landmark buildings at 121 and 123 London Wall, London EC2, to replace the existing podium and 1950's tower. The 28,000m2 headquarter office building to be built at 121 London Wall will encompass extensive multi-level landscaped terraces and offer flexible space ranging from large trading floors to individual office suites. To the west of the site, 123 London Wall will provide 18,000m2 of office space in an elegant multi-tenanted building. More than half the site will comprise publicly accessible open space in the form of a series of gardens. We anticipate that the application will be determined by the summer of 2011 and are currently seeking to pre-let 121 London Wall. Subject to planning approval and occupier demand, completion of that building would be in 2014 and, following a fit-out period, it would be ready for occupation by the middle of 2015.

We have planning permission for the Bishops Place, London EC2, regeneration project. Foster+Partners have designed a 140,000m2 scheme encompassing two high-quality office buildings, a 51-storey mixed-use tower providing residential and hotel accommodation, retail space and 50 affordable housing units. We are proposing to submit a revised application for an office building of 52,000m2 , with individual floors of 3,800m2 , together with a 51-storey residential tower and ancillary retail. Our approach is to pre-let a significant portion of the office space and seek a specialist developer to partner the residential element.

Watermark WestQuay is a development project set on a four hectare brownfield site adjacent to our existing WestQuay shopping centre. The planning consent for the mixed-use scheme includes up to 24,000m2 of retail accommodation, a hotel, a 240-unit apartment building and leisure facilities. We have a development agreement with Southampton City Council and are working with the council and other stakeholders to bring forward the retail and leisure elements of the scheme.

We also have a development agreement with Sheffield City Council for Sevenstone, a retail-led city centre development, and are in discussion with the council to complete the land acquisition phase of the scheme. Sevenstone has outline planning consent, some of the buildings within the scheme have detailed consent and we are working closely with principal stakeholders, such as John Lewis, to progress the project. The current scheme comprises 80,000m2 of retail and leisure accommodation and 2,500 car parking spaces.

Outline planning consent has been renewed for Eastgate Quarters, Leeds, our proposed retail-led regeneration of Leeds city centre. We have agreements for lease with anchors John Lewis and Marks & Spencer and a development agreement with Leeds City Council. A new outline planning application for an improved scheme will be submitted early in 2011.

In February 2011, we acquired SQY Ouest, a 31,000m2 shopping centre in Saint Quentin-en-Yvelines, in a 50:50 joint venture with Codic France. The total consideration for the property was £33 million and Hammerson's initial commitment was £17 million, including transaction costs. SQY Ouest is a modern retail and leisure scheme developed in 2005, and is adjacent to Espace Saint Quentin, in which we have a 25% interest. SQY Ouest has over 45 retailers on four floors, including international brands such as Bershka, GoSport, Virgin Megastore and Zara. The top floor is anchored by one of UGC's most successful multiplex cinemas. SQY Ouest is currently 87% occupied, and there is an opportunity to reconfigure the existing centre by introducing new anchor tenants, improving the catering offer, and creating additional retail space. Hammerson will manage the centre.

We were appointed in January 2010 as development and asset manager of The Rock, Bury, by the administrators of Thornfield Ventures Limited. The shopping centre opened on schedule on 16 July and at that time, leases representing 78% of the projected income had been exchanged or were in solicitors' hands, meeting the target set on our appointment.

financial review

The financial information contained in this review is extracted or calculated from the attached income statement, balance sheet, cash flow statement, other financial statements, notes and the glossary of terms.

result BeFore tax

For the year ended 31 December 2010 there was a profit before tax of £620.2 million, compared with the loss of £453.1 million in 2009. The profit in 2010 reflected increased property values.

The table below reconciles the profit for the year to the adjusted profit before tax of £144.5 million.

	2010	2009
Analysis of profit/(loss) before tax	£m	£m
Adjusted profit before tax	144.5	130.0
Adjustments:
Profit/(Loss) on the sale of investment properties and associate/subsidiary	22.8	(163.4)
Revaluation gains/(losses) on investment properties	447.0	(403.9)
Revaluation gains/(losses) on development properties	0.1	(40.2)
Revaluation changes in associate	(0.5)	(1.7)
Release of provision relating to formerly owned property	–	5.3
Recycled exchange differences	–	9.8
Goodwill impairment	–	2.0
Distribution from other investments	4.6	13.1
Change in fair value of derivatives	1.7	(4.1)
Profit/(Loss) before tax	620.2	(453.1)

In 2010 adjusted profit before tax increased by £14.5 million, or 11.2%, compared with the previous year. Acquisitions, lower interest costs, rent reviews in the UK and indexation in France and increased management fees receivable all contributed to the higher profit. However, their impacts were partly offset by the effects of disposals, the cessation of capitalised interest at Union Square, Aberdeen and exchange rate movements.

For the year ended 31 December 2010, adjusted earnings per share were 19.9 pence, an increase of 0.2 pence compared with 2009. Although adjusted profit was significantly higher in 2010, the number of shares used to calculate earnings per share reflected the full year impact of the rights issue in March 2009. Detailed calculations are shown in note 10A to the accounts on page 75 and these are summarised in the following table:

	2010	2009	Change
Adjusted profit for the year (£m)	140.2	125.3	+11.9%
Average number of shares in issue (million)	706.0	637.2	+10.8%
Adjusted earnings per share (pence)	19.9	19.7	+1.0%

Overview

financial review (continued)

net rental inCome

Net rental income for 2010 at £284.7 million was £8.9 million, or 3.0%, lower than the prior year. The reduction reflected disposals in 2009 and 2010, although the impact was partly mitigated by income from acquisitions, a full year's contribution from recently completed developments, rent reviews and lettings in the UK portfolio and indexation in France. Net rental income for 2010 and 2009 is shown in the tables opposite, analysed by investment properties owned throughout both years and those properties which have been acquired, sold or been under development at any time during the two year period. On a like-for-like basis, net rental income for the Group as a whole increased by 3.5% principally as a result of rent reviews, lettings and a lower bad debt expense in the UK retail portfolio. A lease expiry at Bercy 2, Charenton-le-Pont was the main factor behind the 1.6% reduction in income from the French portfolio.

In 2010, net rental income included net income from car parks of £11.3 million (2009: £8.6 million) and rent related to tenants' turnover amounting to £5.1 million (2009: £3.5 million). Net income from the sale of advertising and merchandising opportunities in our shopping malls was £4.8 million in 2010, compared with £3.9 million in 2009.

We have changed the way we present lease incentives in 2010. Previously, the amortisation of lease incentives and related costs was included within other property outgoings. These items are now within gross rental income as we consider this a more appropriate treatment. There is no impact on net rental income or net profit and prior year comparatives have been restated to reflect the change.

Property outgoings were £42.2 million in 2010, down from £45.3 million in the previous year. The decrease principally reflected disposals in the year and lower vacancy.

Analysis of net rental income	2010 £m	2009 £m
Net rental income as reported in the income statement	284.7	293.6
Items included in net rental income
Amortisation of tenant incentives and other costs	6.4	5.3
Rent allocated to rent-free periods	(12.8)	(10.6)
Net income receivable	278.3	288.3

The table above reconciles net rental income as reported in the income statement to net income receivable, the latter being a proxy for the net cash inflow from tenant leases.

like-For-like net rental inCome For the Year ended 31 deCemBer 2010

	Properties owned throughout 2009/10 £m	Increase/ (Decrease) for properties owned throughout 2009/10 %	Acquisitions £m	Disposals £m	Developments £m	Total net rental income £m
United Kingdom
Retail	143.6	6.6	10.1	(0.2)	10.4	163.9
Office	23.5	2.9	5.5	9.1	3.3	41.4
Total United Kingdom	167.1	6.1	15.6	8.9	13.7	205.3
Continental Europe
France retail	79.5	(1.6)	(1.2)	–	1.1	79.4
Group
Retail	223.1	3.5	8.9	(0.2)	11.5	243.3
Office	23.5	2.9	5.5	9.1	3.3	41.4
Total	246.6	3.5	14.4	8.9	14.8	284.7

like-For-like net rental inCome For the Year ended 31 deCemBer 2009

	Properties owned throughout 2009/10 £m	Exchange £m	Acquisitions £m	Disposals £m	Developments £m	Total net rental income £m
United Kingdom
Retail	134.6	–	0.2	2.9	4.8	142.5
Office	22.9	–	–	25.8	(1.0)	47.7
Total United Kingdom	157.5	–	0.2	28.7	3.8	190.2
Continental Europe
France retail and office	80.7	3.8	3.3	13.0	2.6	103.4
Group
Retail	215.3	3.8	3.5	5.2	7.4	235.2
Office	22.9	–	–	36.5	(1.0)	58.4
Total	238.2	3.8	3.5	41.7	6.4	293.6

administration expenses

In 2010, administration expenses were £35.9 million, compared with £41.0 million in 2009. Higher employment costs, principally reflecting recruitment, increased costs by £2.6 million, but this was more than offset by £6.7 million of additional management fees receivable, including fees from the Thornfield development and management contract. Following the completion of The Rock, Bury, during 2010, fees from the Thornfield contract will be lower in 2011.

net FinanCe Costs

Excluding the change in fair value of derivatives, capitalised interest and investment income, net finance costs were £108.0 million in 2010, some £25.5 million or 19% lower than the 2009 equivalent of £133.5 million. The proceeds from disposals have been used to repay debt and we have benefited from lower interest rates, reduced commitment fees and a full year's impact from the proceeds of the 2009 rights issue.

Reflecting the low level of development activity in 2010, interest capitalised was £1.7 million, compared with £10.0 million in 2009.

The Group's average cost of borrowing in 2010 was 5.0%, marginally less than the average cost for 2009 of 5.1%.

share oF results oF assoCiate

Our 25% investment in the company which owned Bishops Square, London E1, was sold in December 2010. The property and its related debt were accounted for as an associate up to the point of disposal. Hammerson's share of net rental income and interest costs in 2010 amounted to £2.0 million.

tax

Due to its status as a UK REIT and French SIIC, the Group bears minimal current tax. Deferred tax is also low now that foreign dividends are exempt from UK corporation tax.

Overview

financial review (continued)

dividend

The Board is recommending a final dividend of 8.8 pence per share, which together with the interim dividend of 7.15 pence, makes a 2010 total dividend of 15.95 pence per share. This compares with a total dividend for 2009 of 15.45 pence per share.

The final dividend, for which the record date is 11 March 2011, will be paid as a PID, net of withholding tax if appropriate, but shareholders will be offered a scrip dividend alternative. Further details of the scrip scheme are provided in a letter which is being sent to shareholders on 21 March. Where shareholders elect for the scrip alternative, this will not be treated as a PID and will not be subject to withholding tax. Shareholders should note that there is no guarantee that the Board will offer a scrip dividend alternative for future dividends.

Cash FloW

In 2010, cash generated from operations was £237 million compared with £239 million in the prior year and, largely due to lower interest costs, the cash inflow from operating activities was £133 million, up from £105 million in 2009. Capital expenditure, including acquisitions, was £305 million in 2010, whilst £555 million was raised from disposals.

Net debt at 31 December 2010 stood at £1.8 billion, a reduction of £330 million over the year, and comprised borrowings of £1.9 billion and cash and deposits of £126 million. The proceeds from disposals, to the extent that they exceeded the cost of acquisitions and capital expenditure, were used to repay debt.

BalanCe sheet

Equity shareholders' funds at the end of 2010 were £3.5 billion, up by £530 million on the year, reflecting increased property values. Adjusted net asset value per share, excluding deferred tax and other items, increased by £0.74, or 17.6%, to £4.95. Note 10B to the accounts provides detailed calculations for net asset value per share and a reconciliation of the movement in net asset value over the year is shown in the table below.

Analysis of net asset value	£m	2010 £ per share	£m	2009 £ per share
Basic	3,480.0	4.92	2,949.7	4.20
Dilution on exercise of share options	4.2	0.1	4.5	n/a
Diluted	3,484.2	4.93	2,954.2	4.20
Adjustments:
Fair value of derivatives	12.9	0.02	(1.9)	–
Deferred tax	0.5	–	0.4	–
Adjustment for associate	–	–	7.6	0.01
EPRA	3,497.6	4.95	2,960.3	4.21
Basic shares in issue (million)	707.6		702.8
Diluted shares in issue (million)	707.3		702.9

Movement in net asset value £m	EPRA NAV* £ per share
31 December 2009 2,960	4.21
Revaluation changes 447	0.63
Net profit on disposals 23	0.03
Retained profit (excluding revaluation changes and loss on disposal) 144	0.20
Dividends (92)	(0.13)
Exchange and other movements 16	0.01
31 December 2010 3,498	4.95

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

Our real estate strategy is complemented by prudent financial management. Our financing policy is to optimise the Group's weighted average cost of capital by using an appropriate mix of debt and equity. The Board monitors the Group's financial structure with reference to guidelines which currently include gearing of no more than 85% for an extended period, interest cover in excess of 2.0 times and a maximum net debt to EBITDA ratio of ten times. For the year ended 31 December 2010, these ratios were 52%, 2.6 times and 7.2 times respectively.

The Group's exposure to interest rate and currency fluctuations is managed using appropriate hedging policies.

At the end of 2010, the weighted average maturity of the Group's borrowings was eight years and 94% of gross debt was at fixed rates of interest. The maturity profile of our debt portfolio is shown in the chart below.

maturity analysis of gross debt at 31 december 2010 (£m)

When added to cash and deposits, undrawn committed facilities of £913 million, of which £40 million mature in 2011 and £747 million mature in 2012, provided liquidity of around £1 billion at 31 December 2010.

The Group's unsecured bank facilities contain financial covenants that the Group's gearing, broadly equivalent to the ratio of net debt to shareholders' equity, should not exceed 150% and that interest cover, defined as net rental income divided by net interest payable, should be not less than 1.25 times. Three of the Company's unsecured bonds contain a similar gearing covenant and two contain a covenant that gearing should not exceed 175%. The bonds do not contain an interest cover covenant.

Gearing was 52% at the end of 2010 compared with 72% at 31 December 2009. The reduction reflected lower net debt and the increase in shareholders' equity principally arising from the higher portfolio value.

The market value of the Group's debt at 31 December 2010 was £78 million higher than its book value, equivalent to 11 pence per share on an adjusted net asset value per share basis.

financial statements

Human resources

Our people are more than just the face of Hammerson. they deliver our products and services to customers and other key partners. Our people bring our values to life.

Our goal is to create a high performing organisation, made up of people who are inspired and enabled to give their very best. Over the last 12 months we have reviewed almost every aspect of our people management and development practices to ensure they are aligned to this goal.

engagement

We conduct an annual staff survey through 'Great Place To Work' and use the results as a basis for improving working life. We share the results openly with staff, discuss and involve them in developing solutions, and commit to an action plan against which management can be judged. For our 2010 survey 84% of staff from across the Group participated and the results show that three-quarters of respondents rate Hammerson highly for its friendliness, its support for training and development, the office facilities, and the way the organisation manages its impact on the environment and society. Targeted areas for improvement in 2010 were training and development, employee recognition, and internal communications. All three have seen improved responses from employees.

organisation

Toward the end of 2009, we reorganised our UK property teams to provide better performance for our customers. In 2010 our attention turned to embedding this new way of working into day-to-day practices. We recruited new talent, including people from outside the real estate sector, to bring new ideas and, in particular, to strengthen our customer account management and marketing capabilities. Throughout the year we continued to integrate the shopping centre-based property management teams into our business to help us deliver our operational service goals. In April 2010 we appointed Jean-Philippe Mouton to run our French business. Here too, the

organisation has benefited from an increasing performance focus and a strengthening of the calibre of the team in both property and finance. Throughout the Group, the focus has been on active team-working to ensure expertise and knowledge within functional areas are shared to benefit the business as a whole.

development

At the start of the year, we incorporated skills assessment into appraisals for Londonbased staff to add a strong development dimension to employee reviews and help improve performance. To make the most of existing capabilities, support succession planning, and provide people with career development options, we also introduced a talent review to identify those with the motivation and potential to progress to new or more senior roles. Both these approaches will be rolled out throughout the Group in 2011. In 2010 we also added to the resources we provide to support learning and development – in particular we have used coaching to support managers who are new to their role. In December we launched a leadership development programme to aid managers in this important area.

reWard

We aim to ensure that our employee reward policies encourage the highest levels of performance in support of business goals, and that they align with our desire to attract and retain talented people. In the last quarter of 2010 we launched a Group-wide review of reward with the involvement of representative staff from around the organisation. The review identified areas for improvement which we will start to implement from 2011.

Employees of Hammerson are encouraged to become investors in the Company through a range of share ownership schemes. At 31 December 2010, 217 employees owned shares or participated in one of the Group's share plans.

The remuneration of Directors is set out on pages 46 to 51.

diversitY and equalitY

Hammerson now employs around 250 people in the UK and 100 in France.

We have an active equal opportunities policy and monitor employee satisfaction in our annual staff survey by various demographics including gender, age, racial or ethnic minority, full and part-time status and those with caring responsibilities as well as responses to specific questions on fair treatment on the grounds of age, race or ethnicity, gender, sexual orientation and disability.

Hammerson reports on a number of performance indicators relating to employees as part of the Global Reporting Initiative. These are available in the online CR report at www.reports.hammerson.com/cr

senior management

James aitchison Director of Taxation

andrew Berger-north Director, Retail Parks

stephen Court Director of Commercial & Brand Partnerships

nick hardie Director, UK Finance

sheila king Director, Group Retail Leasing

vinod thakrar Director, Project Management

Group Financial Controller

morgan Bone Director of Corporate Communications

kevin Crowley Director, Business Development

stuart haydon Company Secretary

sally learoyd Group Human Resources Director

andrew thomson Director, UK Operations

*Members of the Group Executive Committee.

duncan Beardsley Group Treasurer

sarah Booth General Counsel

robin dobson Director, UK Retail Development

lawrence hutchings* Managing Director, UK Retail

John mulqueen Director, Investment Management, London Group

simon travis Director, Business Development

Director, Sales and Marketing

peter Cooper Portfolio Director, UK Retail

paul edwards Head of Sustainability

martin Jepson* Managing Director,

ryan perryman Systems

Director, Information

laurent santiago Director, Project Management

vincent ravat Director of Operations

Director, Retail Leasing

gérald Ferezou Director, Investment & Asset Management

thomas havas Director, Marketing & Communication

Jean-philippe mouton* Managing Director,

France

Overview

business and financial review

gOvernance

stéphane girard Director, Retail Management

michael krief Director, IT

Christophe proffit Director, Reporting and Control

Christophe rigo Director, Human Resources

financial statements

corporate responsibility

implementing our Cr strategY and monitoring perFormanCe

This year we continued to concentrate on the environmental, social and financial challenges faced by our investment portfolio and on ensuring that our development pipeline is designed to be sustainable. Acquisitions and disposals in 2010 have changed the shape of our portfolio, and brought new CR challenges and opportunities.

Activity within our investment portfolio focused on the big three environmental issues of energy, water and waste. We improved our understanding of usage and potential savings, whilst developing and implementing new initiatives to improve our performance in these areas. We also continued to improve our understanding of the social impacts of our business activities, through increased monitoring of community investment and improved community engagement. We implemented a new community engagement framework at Bishops Quarter, London, coordinating the approach on the existing property at Bishops Square with our new projects at Bishops Place and Bishopsgate Goods Yard.

providing value to our Customers

Our initiatives have helped us to maintain competitive service charges for our customers. Since our baseline year of 2006, we have reduced our carbon emissions (expressed in CO2 e) from landlord shared services by 21% (excluding Highcross) for UK shopping centres, 13% (excluding O'Parinor) for French shopping centres and by 13% for UK offices, on a like-for-like basis.

We have improved both the level and quality of engagement with our occupiers. We have increased the number of occupier-led 'green groups' at our properties in both the UK and France, so providing a forum for information and knowledge sharing between landlords and occupiers. We have now completed over 200 green leases in France and continue to work with occupiers in the UK to sign the Better Building Partnership Memorandum of Understanding. Working with the industry we have signed an agreement with PROCOS (the industry body for French tenants) to produce an industry standard green lease, which will be implemented in 2011.

We are reducing the amount of waste sent to landfill, and are on track to achieve our 2008 target of recycling 75% by 2013. In France we have increased our original target of 50% recycling by 2013 to 75%, to align with the new Government target announced in 2010. We have completed waste audits in both countries to understand the waste recycling potential of our portfolio so that we can create appropriate recycling solutions.

meeting our investors' requirements

Through an established programme of investor meetings and tours we continued to improve our understanding of Environmental Social Governance (ESG) requirements being set by our shareholders, and have expanded our engagement programme to include North America.

Over the past three years, through reporting against annual and in some cases quarterly KPIs, we have tracked our performance, identifying any achievements or challenges whilst improving transparency for our external stakeholders. Our ESG indicators are fully disclosed in our CR report. Although they are not fully independently audited, they are validated by third party sustainability advisers Jones Lang LaSalle.

Furthermore, progress against our annual targets is analysed by our advisers and a full report is available on our CR Report website.

Working With our supplY Chain

Hammerson is committed to maintaining the highest standards for safety, health and welfare for all employees, visitors and partners in line with statutory obligations and audited internal guidelines. This proactive approach to Health and Safety management means we find solutions to potential problems rather than just dealing with issues after they arise.

As a well managed, low-risk business, preventing accidents is a priority for Hammerson which is achieved by a thorough risk assessment process led by a dedicated H&S team working in conjunction with property managers.

During 2010, the employee accident and lost time injuries rate remained under 1% and reportable accidents are reducing. The aim for 2011 is to continue this downward trend.

Building emploYee knoWledge

In 2009, we noted that sustainability should be integrated into employee roles. We provided job specific training for each part of the business. The training included presentations from people with equivalent roles in other organisations who understand Government legislation. We held eight full-day CR training courses for employees in 2010.

In 2010 we nominated a 'sustainability champion' in each part of the business. The champions provide a point of contact and conduit for the CR team through which they channel information relevant to that area. Each champion has been trained to improve their understanding of sustainability as it relates to their role. The champion for the project management team completed a Building Research Establishment training course, becoming a qualified BREEAM assessor, and thereafter provided an internal BREEAM training course to all project and development managers.

Despite the reduced level of development activity in 2010, we continue to improve sustainability initiatives in building design. At London Wall Place we have developed our first truly integrated design platform which includes an overarching vision, six guiding CR themes and 21 principles, ranging from waste to employment. In France we implemented our first Sustainable Implementation Plan at Les Terrasses du Port, Marseille, and improved our BREEAM score from 29 to 73 points. The project, when complete, will provide Hammerson with its first BREEAM Excellent project in France.

mitigating our risks and identiFYing opportunities

A full summary of legislative risks and opportunities and stakeholder engagement in 2010 is available in our CR Report and in the business risk section of this report on pages 14 and 15.

Some examples of how we manage our most significant legislative risks include:

• The work over the last three years which enabled Hammerson to complete the Carbon Reduction Commitment Energy Efficiency Scheme registration and associated Carbon Trust Standard certification on time and at a relatively low cost. We continue to work with industry groups and the Government to try to simplify the scheme and ensure that the 'polluter pays' principle is met.
• The adjustment in France of our original target of 50% of waste recycled by 2013 to 75% to align with the new government requirement announced in 2010.

We identify, mitigate and manage any risks and opportunities on a regular basis through:

• Regular legislation tracking.
• Extensive stakeholder engagement.
• Setting policies with stretching objectives linked to our targets. These include Environmental, Responsible Procurement, Biodiversity, Climate Change and Carbon Management Policies. All policies will be reviewed annually.
• Ensuring our CR strategy is embedded across our operations and that individuals are accountable for sustainability objectives.

aligning With Business strategY and monitoring perFormanCe

At the end of 2010 we started to define a new CR strategy for the following three years, which will integrate with our business strategy. Our approach included a benchmarking study, internal and external

stakeholder interviews, a youth forum and senior management workshops which were organised by two independent advisers, Jones Lang LaSalle and Forum for the Future.

The new CR strategy is set out in our CR report. We have retained the governance structure for CR as shown below and will continue to report against the same Key Performance Indicators.

The monitoring of our strategy, including the review of risks and opportunities and our performance, is carried out at quarterly meetings of our CR Board, chaired by our Chief Executive, as well as at our European management meetings where appropriate. The main plc Board and GEC are also updated on these risks and opportunities every six months.

hoW We manage Cr

set and monitor policies, measures and deliverables				achieve measures and deliverables
-----------------------------------------------------	--	--	--	-----------------------------------

• david atkins, Chief Executive operations

• robin dobson, Director, UK Retail Development development

• Janette Bell, Sales and Marketing Director Corporate

• philippe Bouveret, Sustainability Director, France paul edwards, Head of Sustainability

Cr Board Cr Working groups

paul edwards, Head of Sustainability andrew thomson, Director, UK Operations

Jean-philippe mouton, Managing Director, France marc valente, Deputy Director, Retail Management

andrew thomson, Director, UK Operations robin dobson, Director, UK Retail Development

morgan Bone, Director of Corporate Communications Barthélemy doat, Deputy Director, Asset Management

thomas havas, Director, Marketing and Communication

reporting

This is our third year of reporting using the Global Reporting Initiative (GRI) guidelines. As in previous years, we are aiming to achieve GRI Level B. We also participate in indices such as the DJSI, FTSE4Good and have published our response to the Carbon Disclosure Project and comply with the Green Property Alliance Common Metrics.

financial statements

Overview

gOvernance

Corporate responsibility (continued)

CONNECTED REPORTING FRAMEWORK

	1. Climate change and energy	2. Resource use
Strategic objectives	• Reduce the carbon footprint of each of our properties. • Adapt our buildings to minimise the impact of climate change.	• Maximise the efficiency of our use of natural resources. • Reduce waste and re-use where viable.
Actions in 2010	Reduce energy consumption and greenhouse gas emissions on a like-for-like basis in our investment portfolio in line with our 2010 target. In order to do this we have: • Continued to improve our metering and monitoring capability through the installation of automated half hourly meters. • Completed the Carbon Trust Standard for our managed shopping centres in England and our offices portfolio. • Continued the upgrade of car park lighting from T8 to T5 technology. • Investigated natural ventilation at managed shopping centres. • Completed the registration of all properties into the Carbon Reduction Commitment Energy Efficiency Scheme as required by the UK Government.	• We completed water audits in the UK and France. In France this included an audit of tenant water consumption across the portfolio. • We launched our first biodiversity policy and commenced the implementation of biodiversity action plans at our UK shopping centres. • In France we started our first biodiversity audits at all five shopping centres. • Waste audits commenced in France to establish recycling potential. • Environmental coordinators employed at five UK assets. • We completed a sustainability implementation plan for France for our development projects.
Performance	CO2 e from UK Offices, UK Shopping Centres and France Shopping Centres Year-on-year greenhouse gas emissions intensity by portfolio (like-for-like properties) 250 200 kgCO2 per m2/year 150 100 50 0 2006 2007 2008 2009 2010 Change from 2006 2006 2007 2008 2009 2010 to 2010 UK Offices (2) 245 249 245 204 214 –12.5% UK Shopping Centres (5) 163 157 156 135 129 –20.9% France Shopping Centres (6) 75 68 66 62 65 –13.0%	Shopping Centres (UK & France) Offices (UK) Annual waste Annual waste production (absolute production (absolute by final by final disposal route) disposal route) 25,000 1,000 900 Absolute annual metric tonnes Absolute annual metric tonnes 20,000 800 700 15,000 600 500 10,000 400 300 5,000 200 100 0 0 2008 2009 2010 2008 2009 2010 (twelve (twelve (fourteen (five (seven (four properties) properties) properties) properties) properties) properties) Landfill Landfill Incinerated waste (use as fuel) Incinerated waste (use as fuel) Recycled/reused/composted Recycled/reused/composted MRF – recovery rate not known
	2008 £ 2009 £ 2010 £ Energy UK	2008 2009 2010 Waste UK £ £ £
	Cost of energy 7,500,000 10,858,000 8,202,000	Total waste cost 1,720,000 1,473,000 1,668,000
	Energy efficiency investment 855,000 53,000 697,000	Amount saved in landfill tax 254,000 370,000 558,000
	Estimated energy savings 335,000 980,000 211,000	Income from sale of waste 55,000 44,000 76,000
Commentary on performance in 2010	• Since our baseline year of 2006, we have reduced the carbon emissions (expressed in CO2 e) from landlord shared services by 21% (excluding Highcross) for UK shopping centres, 13% (excluding O'Parinor) for French shopping centres and by 13% for UK offices, when normalised on a like-for-like basis . • Our targets represent 48% of our total carbon emissions; our total carbon footprint for 2010 is 65,312 tCO2 e. • We sold Exchange Tower and purchased 10 Gresham Street and Leadenhall Court in 2010. • 125 Old Broad Street and 60 Threadneedle Street have been excluded due to significant increases in occupancy. • Financial data relating to French energy consumption can be found in the online report. New measure: • Reduce carbon emissions by 20% from 2010 (2015).	• Waste: The proportion of waste recycled, reused or composted (through onsite and offsite segregation) reached 55% for UK shopping centres, 29% for French shopping centres and 54% for UK offices. We have reset our long-term target for France from 50% to 75% recycling by 2013. This change is to align with the new French Government target of 75%. • Water: We completed water audits in the UK and France, which have enabled us to set a long-term measure of a 12% reduction by 2015 based on a 2010 baseline, for all managed shopping centres in the UK and France. We have chosen a different approach to setting a reduction for UK offices due to the cyclical nature of our office portfolio. Therefore our measure is to reduce consumption and ensure all properties meet good practice benchmark by 2013 and best practice by 2015. • Developments: Les Terrasses du Port development in Marseille scored 29 points under BREEAM when purchased last year. The team has reviewed and improved the design and now anticipate a score of 73 to become a BREEAM Excellent project at the time of reporting. New measure: • Reduce water consumption by 12% from 2010 (2015). • Increase waste recycling to 75% (2013). • Implement biodiversity action plans at all retail properties (2015).

for full data, notes and commentary, please visit our online Cr report at www.reports.hammerson.com/cr

3. Community regeneration	4. Supply chain	5. Customers
• Invest in local communities including skills training and job creation.	• Engage with our suppliers to share best practice and to procure sustainable goods and services.	• Anticipate and meet our occupiers' long-term sustainability needs. • Share best practice on sustainability issues.
• The community investment tool which measures local contributions now includes Silverburn and Union Square. • The community investment tool has been translated into French to be implemented in France in 2011. • Community bursary projects set up in Highcross, Leicester and continued at Union Square, Aberdeen. • National skills academy skills shops extended to Oracle, Brent Cross, WestQuay and Union Square. • University partnerships continue with Southampton, DeMontford and Middlesex Universities. • Supported the launch of The Rock, Bury by introducing an employment charter and jobs programme with Bury Council and Jobcentre Plus. • Established a community bursary scheme distributing £20,000 to local charities and not for profit organisations. • Provided 302,553m2 of space within the retail and office portfolio for use by local community and charitable groups.	• We issued a sustainable supply chain questionnaire to main contractors, architects, consultants, lawyers, IT contractors. We also increased our engagement with suppliers through the supply chain questionnaire, individual one-to-one meetings, teleconferences and presentations. • In the UK the questionnaire formed part of the tender process and supplier selection for the Spiceal Street, Bishops Gate Goods Yard and London Wall Place projects. • In France we implemented a detailed supply chain questionnaire during the tender process at Les Terrasses du Port, Marseille and 54-60 rue du Faubourg Saint-Honoré. • A standard monthly data collection form is produced for all new developments.	Our approach to engaging with our customers on sustainability issues builds on the success of previous years and in 2010 included: • Introduction of green leases across the portfolio, targeting the Better Building Partnership Memorandum of understanding for existing leases where possible. • Provide all new customers with a Tenants' Sustainability Guide. • Developing exemplar stores in partnership with customers. • Created Green Groups at nine properties. • Held a retailer event with over 50 retailers in attendance and the first retailer panel seminar during sustainability awareness week.
Number of organisations that benefited from Hammerson direct and indirect contributions Number of organisations that benefited from Hammerson direct and indirect 2010: 202 contributions:	Total number of suppliers Total number of suppliers: (2009: 2,361) 2010: 2,202	Total number of green leases in portfolio Total number of green leases in portfolio: (2009: 698) 2010: 787
2009: 235 (2009: 235)	2,202 2009: 2,361	787 2009: 698
202 Indirect contributions (UK) (£) (e.g. charitable donations raised by customers in Hammerson shopping centres)	Number of suppliers we engaged with Number of suppliers we engaged with on sustainability on sustainability:	Total number of occupiers: Total number of occupiers (2009: 2,568)
Indirect contributions (uK) 2010: £400,776 (e.g. charitable donations raised by customers in	2010: 183 (2009: 155)	2010: 2,531
Hammerson shopping centres): 2009: £821,494	183 2009: 155	2,531 2009: 2,568
(2009: £821,494) Direct contributions (UK) (£) (e.g. cash, value of time and in-kind donations made directly by Hammerson)	Total cost of goods and materials (£m)	Green leases as a proportion of passing rent Green leases as a proportion of passing rent (UK and France)
£400,776	Total cost of goods and materials: (2009: £307.2m)	(uK and France): (2009: 19%)
2010: £631,816 Direct contributions (uK) (e.g. cash, value of time and in-kind donations 2009: £753,611 made directly by Hammerson):	2010: 188.6 £188.6m 2009: 307.2	2010: 24% 24% 2009: 19%
(2009: £753,611)	Value of contracts for suppliers we engaged Value of contracts for suppliers we with on sustainability (£m)	Green leases (£m) Other (£m)
£631,816	engaged with on sustainability: 2010: 230	75 2010: 240
	(2009: £166m)
	£230m 2009: 166	60 2009: 259
• We completed a comprehensive review of the community strategy; this included extensive engagement with internal and external stakeholders in the UK and France. A series of recommendations will now be implemented. • The community strategy review took place as the UK Coalition Government announced the introduction of Local Enterprise Partnerships and the Localism Bill. Changes are also expected to the French planning system. • We have commenced discussions with councils in Leeds, Sheffield, Barnet and Redcar as part of the preparation relating to our development pipeline. • We continue to use the London Benchmarking Group (LBG) model to measure and evaluate our community investment. We will start work with other LBG members	• We continue to engage with our suppliers in order to mitigate any risks associated with non-sustainable practices as these could have reputational and financial impacts. • Through increasingly stringent legislation and our continued engagement, we can see that suppliers are willing to improve their sustainability performance. • The findings of the supply chain questionnaire will be presented by our Chief Executive at a presentation to suppliers in 2011. • Furthermore, in 2011 we intend to trial the implementation of the supply chain questionnaire at one shopping centre in the UK. New measure: 50% of suppliers by value to be engaged in the survey.	• The majority of our actions to date have focused on gradually sharing best practice with our customers, fostering knowledge-sharing and providing practical advice on how to minimise our environmental impact together. An example of this type of practical advice is the opening of the first RetailLab in partnership with DeMontford University. Several customers have used the facility, and a tour is planned for retailers in 2011. • We now have a strong platform for taking advantage of sustainability opportunities together with our tenants and helping them to decrease their operating costs and implement their corporate sustainability policies. New measure: • Engage with 100% of customers on sustainability issues by 2013.

investment in 2011. New measure:

investment (2014).

managed assets (2014).

• Prepare community plans for all developments and

• 75% of community activity to be long-term community

overview

Corporate governance

THE COMBINED CODE

The Board is committed to maintaining high standards of corporate governance and, except where otherwise stated, the Company has complied with section 1 of the 2008 Combined Code on Corporate Governance throughout the year ended 31 December 2010. The Company also now complies with the majority of the provisions of the UK Corporate Governance Code, which replaces the 2008 Combined Code, notwithstanding it will not apply to the Company until the year ending 31 December 2011. The Board also takes account of the corporate governance guidelines of institutional shareholders and their representative bodies.

BOARD OF DIRECTORS

The Board currently consists of the Chairman, three Executive Directors and five Non-Executive Directors. The Board, which meets routinely not less than ten times during the year and additionally as may be required, met on 11 occasions in 2010. Non-Executive Directors are encouraged to communicate directly with Executive Directors between formal Board meetings and, in addition to these regular Board meetings, the Board holds an annual strategy meeting at which it considers the future direction of the Company as part of the business planning process. All Directors are expected to attend all meetings of the Board, and of those Committees on which they serve, and to devote sufficient time to the Company's affairs to enable them to properly fulfil their duties as Directors. The following table shows Directors' attendance at Board and Committee meetings they were eligible to attend:

			Remun	Nomin
	Board	Audit	eration	ation
John Nelson	11/11		8/8	6/6
David Atkins	11/11
Peter Cole	11/11
Terry Duddy	8/11	2/4		5/5
David Edmonds	11/11		7/8
Jacques
Espinasse	9/11	4/4
John Hirst	11/11	4/4
Simon Melliss	11/11
Tony Watson	11/11	4/4	8/8	6/6

When Directors are unable to attend meetings, their comments on briefing papers to be considered at the meeting are provided in advance to the Chairman.

The roles and responsibilities of the Chairman, Chief Executive, Executive Directors and Non-Executive Directors are clearly defined and documented.

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

• strategy;
• acquisition and divestment policy;
• approval of major capital expenditure projects;
• risk management;
• monitoring performance;
• internal control;
• treasury and the raising of finance;
• human resources; and
• corporate governance.

Specific responsibilities are delegated to the Audit, Remuneration and Nomination Committees and documented in their terms of reference. The procedures and accountability for these matters are set out in the Company's operations and control manuals. A schedule of routine matters to be addressed by the Board and its Committees is agreed on an annual basis and information is supplied to them in a manner that enables them to fulfil their responsibilities. This includes the circulation of comprehensive briefing papers one week prior to board and committee meetings. Presentations on business and operational issues are made regularly to the Board by senior management and the annual programme of board meetings is tailored to enable some meetings to be held at the Company's properties. During 2010 the Board visited the Company's shopping centres at Brent Cross, London, Union Square, Aberdeen and Silverburn, Glasgow.

In accordance with the UK Corporate Governance Code, all directors, with the exception of David Edmonds, are submitting themselves for re-election at the 2011 Annual General Meeting.

Biographical details of all directors are provided on page 6.

RESOURCES

All Directors have access to independent professional advice at the Company's expense and to the advice and services of the Company Secretary who is responsible to the Board for advice on corporate governance matters and for ensuring that Board procedures are followed and that the Company and the Board operate within applicable legislation, rules and regulations. The Company Secretary is also responsible

for facilitating the programme of directors' induction and professional development and Board performance evaluation. The appointment and removal of the Company Secretary is a matter requiring approval of the Board.

TRAINING AND DEVELOPMENT

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

BOARD EFFECTIVENESS

The effectiveness of the Board and its Committees is vital to the success of the Company and they therefore monitor and evaluate their own performance and the contribution made by individuals.

An external evaluation of the Board's effectiveness and procedures, and those of its Committees, was undertaken in December 2010 by ICSA Board Evaluation.

This evaluation concluded that the Board and its Committees were operating effectively, but highlighted some potential improvements in procedures. In future, the Nomination Committee will report directly to all Non-Executive Directors on all matters considered by the Committee. There will be a reduction in the number of routine board meetings held each year from 10 to nine and, as a consequence, there will be a review of the matters to be considered at board meetings to maximise the effective use of time. These changes are being implemented under the guidance of the Chairman and the Company Secretary. It is intended that the next external board evaluation will be undertaken in 2013 and that, in the intervening years, evaluations will be undertaken internally by the Company Secretary.

The Chairman meets as necessary, but at least twice each year, with the Non-Executive Directors without Executive Directors present. The Senior Independent Director chairs an annual meeting of Executive and Non-Executive Directors without the Chairman in order to appraise his performance and to provide an opportunity to address any other matters which the Directors might wish to raise. The outcome of these discussions is conveyed to the Chairman by the Senior Independent Director.

NON-EXECUTIVE DIRECTORS

The Board is satisfied that the Non-Executive Directors, each of whom is independent from management and has no material commercial or other connection with the Company, are able to exercise independent judgement. Their experience, gained from varied commercial backgrounds, enables them to make a valuable contribution to the Company as part of which they assist the executive management and challenge assumptions. The Chairman holds other positions which are set out on page 6. The Board is satisfied that these appointments do not adversely affect his commitment as the Company's Chairman. Positions held by Non-Executive Directors are also set out on page 6 and the Board is likewise satisfied that each of the Non-Executive Directors is able to devote sufficient time to the Company's business. Non-Executive Directors are advised on appointment of the time required to fulfil the role and are asked to confirm they can make the required commitment. Tony Watson is the Senior Independent Director. In this role he would deputise for the Chairman in his absence and is available to advise and counsel particularly Non-Executive, but also Executive, colleagues. He is a member of the Audit, Remuneration and Nomination Committees.

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

RELATIONS WITH SHAREHOLDERS

The Company has an active dialogue with its shareholders through a programme of investor meetings which include formal presentations of the full and half-year results. All Non-Executive Directors are available to attend meetings if requested to do so by shareholders and may attend meetings between shareholders and management if desired. The Board receives reports of meetings with institutional shareholders together with regular market reports and brokers' circulars. This enables the Directors to obtain the required understanding of the views of shareholders. Shareholders are invited to ask questions at the Company's Annual General Meeting and meet the Directors informally after the meeting. The number of proxy votes cast on resolutions is announced at the Annual General Meeting and published on the Company's website.

EXTERNAL APPOINTMENTS

Executive Directors are encouraged to take non-executive positions in other companies, to broaden their experience. The appointment to such positions is subject to the approval of the Board which considers, in particular, the time commitment required.

Simon Melliss is a member of the committee of management of Hermes Property Unit Trust, for which he received a fee of £20,000 in 2010 and a non-executive director and chairman of the Audit Committee of Whitbread PLC, for which he received a fee of £65,000 in 2010. The fees paid are retained in recognition of the personal commitment and expertise required for such positions.

STANDING COMMITTEES OF THE BOARD

The Board has Audit, Remuneration and Nomination Committees, each of which has written terms of reference which are modelled closely on those recommended by the Institute of Chartered Secretaries and Administrators. They deal clearly with the authorities and duties of each Committee and are formally reviewed annually. Copies of these terms of reference are available on the Company's website. Each of these Committees is comprised of Independent Non-Executive Directors of the Company who are appointed by the Board on the recommendation of the Nomination Committee.

The Company Secretary is secretary to each Committee.

The Chairman of each Committee reports the outcome of meetings to the Board.

THE AUDIT COMMITTEE

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

The Committee has access to employees and all documentation and information it may require.

Committee membership

Members	Date of appointment
John Hirst (Chairman)	19 August 2004
Terry Duddy	1 January 2010
Jacques Espinasse	1 May 2007
Tony Watson	1 January 2010

John Hirst, the Chairman of the Committee, is a Chartered Accountant and a member of the Association of Corporate Treasurers. He has been closely involved in financial issues as chief executive of the Met Office since 2007 and as chief executive of Premier Farnell plc between 1998 and 2005; prior to that he was group treasurer of ICI plc. The Board is satisfied that he has the required recent and relevant experience. Notwithstanding John Hirst has been a member of the Audit Committee for over six years, the Board considers that, given his experience and the need to provide continuity on the appointment of a new Chief Financial Officer, it is appropriate that he should continue to chair the Committee.

Meetings

The Committee meets at least four times each year with agendas organised around the Company's reporting cycle. During 2010 it met on four occasions.

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

Corporate governance (continued)

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

Review of the year

During the year, the Committee reviewed the draft Annual Report and the full and half-year results announcements prior to their approval by the Board.

These reviews considered the application of the Company's accounting policies and practices and any changes to them, major judgemental areas, adjustments resulting from the audit and going concern assumptions. The reviews also included consideration of the Group's compliance with statutory tax obligations, compliance with accounting standards and with regulatory requirements, the statement on internal control, property valuations and clarity of disclosure.

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

• the external auditors' management letters;
• internal audit reports, including recommendations arising from them and the review of progress in implementing previous recommendations;
• reports on the systems of internal controls and the risk management framework; and
• the Company's approach to compliance with legislation and regulations and to the prevention of fraud, including arrangements for staff to raise concerns in confidence.

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

The Committee has recommended to the Board that the external auditors should be reappointed.

REMUNERATION COMMITTEE

Members	Date of appointment
Tony Watson (Chairman)	1 February 2006
Terry Duddy	18 February 2011
David Edmonds	1 January 2010
John Nelson	21 July 2006

The Remuneration Committee comprises three independent Non-Executive Directors and the Company Chairman.

The Committee met eight times during 2010. Full details of the responsibilities of the Remuneration Committee and a review of its activities during the year are included in the report of the Remuneration Committee on pages 46 to 51. The Chief Executive (other than in respect of his own remuneration) is invited to attend meetings of the Committee.

NOMINATION COMMITTEE

Members	Date of appointment
John Nelson (Chairman)	7 April 2005
Terry Duddy	18 February 2010
Tony Watson	3 May 2007

The Committee met six times in 2010. The Committee undertakes an annual review of succession planning and ensures that the membership and composition of the Board, including the balance of Executive Directors and Non-Executive Directors, continues to be appropriate. As part of the review, the Committee considers the independence of Non-Executive Directors and the balance of skills and knowledge required of both Executive Directors and Non-Executive Directors. In addition to identifying potential successors for executive board level positions, the review considers senior functional positions within the Company.

Christophe Clamageran resigned as a director in November 2009. The Committee, advised by Russell Reynolds Associates, reviewed internal and external candidates for the position and, having concluded that Jean-Philippe Mouton was the most suitable candidate for the position, recommended his appointment as Managing Director of Hammerson France in April 2010.

Simon Melliss will retire as Chief Financial Officer on 30 June 2011. The Committee, advised by Spencer Stuart, considered successors for the position and, having concluded that Timon Drakesmith, with his background in banking and finance, most

recently as the finance director of a major listed property company, has the necessary skills and experience, recommended his appointment as Chief Financial Officer with effect from the end of May 2011.

OTHER COMMITTEES

In addition to the principal committees referred to above, the Board has established committees to deal with share plan administration, compliance with the Companies Act and the Listing, Prospectus, Disclosure and Transparency Rules and other relevant regulatory requirements and the administrative arrangements required for financing.

EXTERNAL AUDITORS

The Company's external auditors are Deloitte LLP. The audit partner responsible for the Company's audit matters is changed every five years in accordance with the Ethical Standards issued by the Auditing Practices Board. In forming their opinion on the independence and objectivity of the external auditors, the Audit Committee takes into account the safeguards operating within Deloitte LLP. Under the Company's policy governing the provision of non-audit services by the external auditors, they may not provide a service which places them in a position where they may be required to audit their own work.

Specifically, they are precluded from providing services relating to bookkeeping or other services relating to accounting records or financial statements of the Company, financial information system design and implementation, appraisal or evaluation services, actuarial services, any management functions, investment banking services, legal services unrelated to the audit, remuneration related services or advocacy services.

During 2010, services provided by Deloitte LLP to the Company, in addition to acting as external auditors, included acting as reporting accountants for the capital restructuring of subsidiaries, including intra-group distributions, and bond compliance work.

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

• the scope of the audit as set out in the external auditors' engagement letter for the forthcoming year;

• the external auditors' overall work plan for the forthcoming year;
• the external auditors' fee proposal;
• a report from the external auditors describing their arrangements to ensure objectivity and to identify, report and manage any conflicts of interest; and
• the extent of non-audit services provided by the external auditors to ensure that they are not placed in a position to audit their own work.

Where non-audit services are provided, the fees are based on the work undertaken and are not success related. Consideration is given to the nature of and remuneration received for other services provided by Deloitte LLP to the Company and confirmation is sought from them that the fee payable for the annual audit is adequate to enable them to perform their obligations in accordance with the scope of the audit. The auditors' remuneration in respect of the year ended 31 December 2010, comprised £608,000 for year-end audit and half-year review work (2009: £626,000) and £49,000 for other work (2009: £64,000). The Audit Committee has reviewed the briefing paper on effective communication between audit committees and external auditors issued by the Auditing Practices Board. Having considered the recommendations of the briefing paper in respect of the external auditors, the Audit Committee has concluded that the relationship with Deloitte LLP meets the recommendations.

TRUSTEES OF THE PENSION SCHEME

The Company's defined benefit pension scheme was closed to new entrants on 31 December 2002 following which a Group Personal Pension Plan was established for new employees.

The defined benefit pension scheme, The Hammerson Group Management Limited Pension & Life Assurance Scheme, is administered by two corporate trustees, one of which is an independent trustee. The other is a subsidiary of the Company which has four directors. The Chairman of this subsidiary is David Edmonds, one of the Company's Non-Executive Directors. David Edmonds will continue as the Chairman of this subsidiary and chair meetings of the Trustees following his retirement in April 2011 as a director of the Company. Two of the remaining directors are employees, but not directors, of the Company and the other is a former employee. The Scheme's funds are invested and managed independently of the Company.

INTERNAL CONTROL

The Board has ultimate responsibility for the Group's system of internal control and for reviewing its effectiveness. This system is designed to safeguard assets against unauthorised use or disposition, ensure the maintenance of proper accounting records, provide reliable financial information and ensure compliance with relevant legislation and regulations.

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

Management has established a risk management framework and procedures necessary to enable the Directors to report on internal controls in compliance with the Code. The risk management procedures involve the analysis, evaluation and management of the key risks to the Group and include plans for the continuity of the Company's business in the event of unforeseen interruption. The Board, which reviews the framework and procedures regularly, has allocated responsibility for the management of each key risk to Executive Directors and senior executives within the Group who report on these risks to the Board.

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

Other key elements of the Group's system of internal control include:

• regular meetings of the Board and the Audit Committee whose overall responsibilities are set out above;
• a management structure that is designed to enable effective decision making with clearly defined responsibilities and limits of authority. Monthly meetings of the Group Executive Committee and of the management boards in the UK and France are an important part of this structure;
• the maintenance of operational control manuals setting out a control framework for management to operate within and containing guidance and procedures for the Group's operations; and
• the measurement of the Group's financial performance on a regular basis against budgets and long-term financial plans.

The Company has a code of conduct which explains how the Company expects employees to fulfil their responsibilities by acting in the best interests of the Company and in line with its corporate and financial objectives. This includes compliance with laws and regulations, acting fairly in dealing with customers and suppliers, maintaining integrity in financial reporting, treating employees fairly, providing training and development and operating within a control framework which includes environmental and health and safety policies.

The Company has 'whistleblowing procedures' under which staff may report any suspicion of fraud, financial irregularity or other malpractice. No reports of any such matters have been received. The Company subscribes to the independent charity, Public Concern at Work, so that staff may have free access to its helpline.

The system of internal control and the effectiveness thereof have been reviewed by the Board for the year under review and during the period up to the date of this report and the process accords with the Turnbull guidance.

By Order of the Board

Stuart Haydon

Secretary 21 February 2011 finanCial statements

directors' responsibilities

RESPONSIBILITY STATEMENT

We confirm to the best of our knowledge:

• 1. The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit and loss of the Company and the undertakings included in the consolidation taken as a whole; and
• 1. The Business Review, which is incorporated into the Directors' Report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.

Signed on behalf of the Board on 21 February 2011

David Atkins Simon Melliss Director Director

DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE PREPARATION OF THE FINANCIAL STATEMENTS

The Directors are responsible for preparing the Annual Report, Directors' Remuneration Report and the financial statements in accordance with applicable law and regulations.

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

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

However, Directors are also required to:

• properly select and apply accounting policies;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; and
• provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance.

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

• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

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

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

directors' report

The Directors submit their Report and the audited financial statements for the year ended 31 December 2010. The Corporate Governance Statement set out on pages 38 to 41 forms part of this report.

1: RESULTS FOR THE YEAR

The results for the year are set out in the consolidated income statement on page 54.

2: DIVIDENDS

The Directors recommend a final dividend of 8.8 pence per share which, together with the interim dividend paid on 1 October 2010, will make a total dividend for the year of 15.95 pence (2009: 15.45 pence). It is intended that warrants in respect of the final dividend will be posted on 12 May 2011 for payment on 13 May 2011 to shareholders on the register at the close of business on 11 March 2011.

It is intended that the final dividend will be paid as a Property Income Distribution (PID), net of withholding tax where appropriate.

Where shareholders elect for the scrip dividend alternative this will not be treated as a PID and will not be subject to withholding tax.

Shareholders participating in the scrip dividend alternative will receive new ordinary shares in Hammerson plc instead of cash in respect of the 2010 final dividend. Details of the Company's dividends can be found on the Company's website: www.hammerson. com on the 'Investors' page.

3: PRINCIPAL ACTIVITIES AND FUTURE PROSPECTS

The principal activities of the Group have continued to be property investment and development. The Chairman's Statement, Business Review and Financial Review should be read in conjunction with this Directors' Report.

4: BUSINESS REVIEW

A detailed review of the business of the Group and a description of the principal risks and uncertainties facing it, including an analysis of the development and performance of the Group during the year and the position of the Group at the year end, including analysis using key performance indicators and any other information required to fulfil the requirements of section 417 of the Companies Act 2006, can be found on pages 4 and 5 and 12 to 32 and 34 to 37 which are incorporated into this Directors' Report by reference.

5: FIXED ASSETS

Changes in tangible fixed assets during the year are set out in notes 11 and 12 to the accounts on pages 76 and 77, whilst details of Hammerson's property portfolio are provided on pages 102 to 116.

6: SHARE CAPITAL

Changes to the Company's share capital, principally as a result of shares issued under the scrip dividend scheme during the year, are set out in note 24 to the accounts on pages 91 and 92. On 31 December 2010 there were 707,578,856 ordinary shares of 25 pence each in issue each with one vote, of which 800,000 shares were held in treasury.

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

7: PURCHASE OF OWN SHARES

The Company was granted authority at the Annual General Meeting in 2010 to purchase its own shares up to a total aggregate value of 10% of the issued nominal capital. That authority expires on the date of the 2011 Annual General Meeting at which a resolution will be proposed for its renewal. To enhance net asset value, the Company purchased a total of 800,000 shares between 28 October and 1 November 2010 with a nominal value of £200,000 (representing 0.1% of the Company's issued share capital on 28 October 2010) at a total cost of £3,375,464. These shares are held in treasury.

8: GOING CONCERN

The current economic conditions have created a number of uncertainties as set out on page 15. The Group's business activities, together with the factors likely to affect its future development, performance and position are set out on pages 18 to 26 of the Annual Report. The financial position of the Group, its liquidity position and borrowing facilities are described on pages 27 to 31 and in notes 18, 20 and 21 to the accounts.

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

9: PROVISIONS ON CHANGE OF CONTROL

Four of the five outstanding bonds issued by the Company contain covenants specifying that, if the Company is downgraded to below investment grade following a change of control, and the rating remains below investment grade for a period of six months thereafter, the bondholders may require repayment at par.

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

directors' report (continued)

10: SUBSTANTIAL INTERESTS IN THE SHARE CAPITAL OF THE COMPANY

At 17 February 2011 the following interests in voting rights over the issued share capital of the Company had been notified:

	Percentage
Ordinary	of total
shares	voting
of 25p each	rights
Ontario Teachers' Pension Plan Board/2175972 Ontario Inc. 83,975,146	11.88
BlackRock Inc 49,523,222	7.01
APG Algemene Pensioen Groep N.V. 48,158,672	6.81
Cohen & Steers, Inc 36,739,170	5.20
Standard Life Investments 31,057,619	4.39
Legal & General Investment Management Ltd 25,983,018	3.68

11: DIRECTORS

The Directors of the Company, each of whom served throughout the year, and biographical details are shown on page 6.

Simon Melliss will retire as Chief Financial Officer on 30 June 2011 and Timon Drakesmith has been appointed as Chief Financial Officer with effect from the end of May 2011.

David Edmonds will be retiring as a Non-Executive Director on 28 April 2011.

With the exception of David Edmonds, all the Directors will retire in accordance with the UK Corporate Governance Code and will offer themselves for re-election at the forthcoming Annual General Meeting.

David Atkins, Peter Cole and Simon Melliss have service agreements with the Company. The appointments of the Non-Executive Directors, including the Chairman, are governed by letters of appointment. Details of the service agreements and the letters of appointment are set out in the Remuneration Report on page 49. Details of the Directors' interests in the share capital of the Company are set out in paragraph 12 below.

12: DIRECTORS' INTERESTS

The beneficial interests of the Directors in the ordinary shares of the Company are set out below:

	31 December	1 January
	2010	2010
John Nelson	49,000	24,000
David Atkins	93,085	60,632
Peter Cole	196,620	172,482
Terry Duddy	20,000	–
David Edmonds	19,578	19,368
Jacques Espinasse	12,000	12,000
John Hirst	13,425	13,351
Simon Melliss	211,197	186,144
Tony Watson	12,000	12,000

At 31 December 2010, Tony Watson had an interest in £60,000 nominal 6.875% Sterling bonds due 2020 and Simon Melliss had an interest in £56,000 nominal 7.25% Sterling bonds due 2028.

Between 1 January and 17 February 2011, the Directors' beneficial interests above have remained unchanged.

No contract existed during the year in relation to the Company's business in which any Director was materially interested.

13: DIRECTORS' REMUNERATION

Details of the remuneration of each of the Directors are set out in the Remuneration Report on pages 46 to 51.

14: DIRECTORS' AND OFFICERS' LIABILITY INSURANCE

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

15: DONATIONS

During the year Hammerson made charitable donations in the United Kingdom of £125,075 (2009: £134,929). Under the Company's charitable donations policy, donations are made to a variety of children's, medical, music and arts charities and to charities connected to localities in which the Company is represented. In addition to these charitable donations, the Company provides financial assistance to other projects of benefit to the community. Political donations are not made.

16: CREDITOR PAYMENT POLICY

It is the Group's policy and practice that the terms of payment to suppliers are agreed in advance of the supply of any goods and services and that payments are made in accordance with those terms and conditions provided that the supplier has also complied with them. The Group's creditor payment days as at 31 December 2010 represented 31 days' purchases (2009: 29 days).

17: FINANCIAL INSTRUMENTS

Details of the financial instruments used by the Group and the Company are set out in note 21 to the accounts on pages 85 to 90.

18: AUDITORS

Deloitte LLP are willing to be reappointed as auditors to the Company. Their reappointment has been considered and recommended by the Audit Committee and a resolution concerning their reappointment will be proposed at the Annual General Meeting.

19: DISCLOSURE OF INFORMATION TO AUDITORS

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

• so far as he is aware, there is no relevant audit information of which the Company's auditors are unaware; and
• he has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

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

20: ANNUAL GENERAL MEETING

The Annual General Meeting will be held on Thursday 28 April 2011 at 10 Grosvenor Street, London W1K 4BJ at 11.00am. The Notice of Meeting and the explanatory notes will be included in a separate notice to be sent to all shareholders.

By Order of the Board

Stuart Haydon Secretary 21 February 2011

remuneration report

The Directors submit their report on remuneration for the year ended 31 December 2010. The report reflects the policy for that year, for 2011 and, subject to ongoing review by the Remuneration Committee, subsequent years.

This report has been approved and adopted by the Board and has been prepared in accordance with schedule 8 to the Accounting Regulations under the Companies Act 2006 and the Listing and Disclosure Rules and the principles relating to Directors' remuneration of the Combined Code. The information, the headings of which have been noted with an asterisk (*), is subject to audit in accordance with the Regulations.

THE REMUNERATION COMMITTEE

The Remuneration Committee's responsibilities are set out in its terms of reference which are available on request to shareholders and on the Company's website. These responsibilities include determination of company policy on the remuneration of Executive Directors and approval of the composition and level of remuneration of the Chairman, Executive Directors and certain senior executives. The fee of the Chairman, who is a member of the Committee, is discussed in his absence. This includes an annual review of all incentive plans to ensure that they remain appropriate to the Company's current circumstances and prospects and that, in particular, they are aligned with and based on the creation of value for shareholders and provide appropriate incentives for management to achieve this objective. The Board has accepted, without amendment, the Committee's recommendations relating to remuneration policy.

COMMITTEE MEMBERSHIP

The Committee comprises Tony Watson (Chairman), Terry Duddy (appointed with effect from 18 February 2011), David Edmonds and John Nelson. John Nelson was considered independent on his appointment as Chairman of the Company in 2005 and the Board considers each of the other members of the Committee to be independent.

David Edmonds will be retiring at the Annual General Meeting in April 2011.

REMUNERATION POLICY

In determining an appropriate remuneration policy for recommendation to the Board, the Committee's objective is to ensure that the Company continues to attract, retain and

motivate experienced individuals, capable of making a major contribution to Hammerson's success. It is the Committee's objective, having regard to the views of investors, that the Company's remuneration policy should generally provide for median, or below median, basic salary but with the opportunity to increase total potential remuneration for superior performance through variable remuneration in the form of bonus and long-term incentives. Remuneration for Executive Directors and members of the Group Executive Committee takes account of performance through an annual performance-related bonus scheme and, for long-term performance, by the award of shares under a long-term incentive plan. Other members of the Company's senior management also participate in the performance-related bonus scheme and in the Company's Restricted Share Plan.

Shares to satisfy awards under the various schemes are acquired by market purchases either directly or on transfer from treasury.

In implementing the policy, following its approval by the Board, the Committee takes into account remuneration packages available within other comparable companies (whilst remaining mindful of the need to treat comparisons with caution), the Company's overall performance, internal relativities, achievement of corporate objectives, individual performance and published views of institutional investors and their representative bodies.

ADVISERS

Hewitt New Bridge Street has provided general advice and specific advice on executive remuneration to the Committee during the year. They have provided no other services to the Company during 2010.

The Chief Executive attends all meetings of the Committee by invitation, except when his own remuneration is being discussed, to provide information and advice.

REMUNERATION COMMITTEE – REVIEW OF THE YEAR

During the year, Hewitt New Bridge Street was commissioned to prepare a report on the variable pay arrangements for Executive Directors and other senior management. Following the review and consultation with major shareholders and shareholder representative bodies, the Committee has made a number of changes to 2011 remuneration arrangements in the light of evolving best practice, and to ensure the provision of remuneration packages that are competitive by reference to market rates across competitor companies, which take account of the individual contribution of each executive and which reflect the performance of the Company against financial objectives, including:

• An increase in the length of the performance period for future awards under the Long-Term Incentive Plan from three to four years;
• An increase in the deferred share element of the annual bonus (from 30% to 40% of any bonus earned);
• An increase in the shareholding guideline requirement for the Chief Executive from 100% to 150% of gross basic salary;
• The introduction of a clawback facility in the annual bonus and Long-Term Incentive Plan whereby the Committee can recover incentive awards in the event that they are subsequently found to have been paid as a result of misstated figures.

Full details are set out in the appropriate parts of this report.

Since the year end the Committee, advised by Hewitt New Bridge Street, considered the remuneration package for Timon Drakesmith on his appointment which is expected to be at the end of May 2011 and decided that his base salary should be set at £400,000 per annum. In addition he will participate in the bonus scheme and the Long-Term Incentive Plan on the terms applicable to 2011 awards on the same basis as the other Executive Directors, as set out on pages 47 and 48. He will also be entitled to pension contributions, or a non pensionable salary supplement, equal to 20% of salary (which will not be included as salary for the calculation of bonus payments), a car allowance and other benefits including medical insurance and life assurance cover. In addition, the Committee decided to make two share-based awards to Timon Drakesmith on his appointment, both of which will be made pursuant to chapter 9.4.2 of the UKLA Listing Rules as being necessary to facilitate, in exceptional circumstances, his recruitment. The awards were made to compensate him for the loss of awards at his previous employer and are not envisaged to be worth more than the value forgone even after discounting to reflect any outstanding performance conditions.

The first award is over 250,000 Hammerson shares which will vest on the first anniversary of the award. This award is generally subject to continued employment but is not subject to other performance conditions as the size of the award was discounted to reflect the

absence of such conditions. The award is subject to early release in certain good leaver situations or the occurrence of a change of control. The award benefits from roll-up of the value of dividends over the period. The award contains standard discretions to adjust for variations in share capital or other exceptional events. The award may be amended with the consent of both parties and is not transferable or pensionable.

The second award is over Hammerson shares with a value of £400,000 (on the same date as the 2011 LTIP award is made). This award will be made on materially the same terms as the 2011 LTIP award, including the performance conditions.

REMUNERATION OF EXECUTIVE DIRECTORS AND SENIOR EXECUTIVES

The remuneration packages for senior staff, including Executive Directors, consist of the following elements and are structured to reward corporate and individual performance. Details of all payments to Executive Directors are disclosed in the table on page 50. Over two-thirds of the Executive Directors' total target remuneration (excluding pension and benefits) is performance related which is felt to be appropriate.

Basic salary and benefits

Basic salaries for Executive Directors and other senior executives are reviewed by the Committee, normally annually or otherwise on promotion, having regard to responsibility, competitive market practice, company and individual performance and independently compiled salary survey information. This exercise is undertaken at the same time and on the same basis as the review of salaries of all employees within the Company. Benefits include the use of a company car or the provision of a car allowance, medical insurance and life assurance cover.

Annual performance-related bonus scheme*

Staff throughout the Company, including Executive Directors, participate in a performance-related bonus scheme. Payments under the scheme for 2010, which are not pensionable, are based on the achievement of earnings per share, relative net asset performance and personal objectives. The targets are reviewed and set annually by the Committee and are designed so that payment of the maximum would only be achieved for exceptional performance. Under the terms of the bonus scheme, the maximum amount payable to Executive Directors is up to 200% of their basic salary.

For 2010, for Executive Directors, 40% of the bonus payment is paid in cash (Part A) and the balance of 60% is paid in shares in two equal parts (Parts B and C). Shares under Part B of the scheme are awarded on the date the bonus is paid and the value thereof is included in the table of remuneration on page 50. Shares under Part C of the scheme are receivable in the form of nil cost options, the shares in respect of which vest two years after the date of grant, subject to remaining with Company. The entitlement to Part C shares is shown in a separate table on page 50.

The adjusted earnings per share target was achieved, for Executive Directors, to a level of 38.75% and the net asset value target was achieved to a level of 72.73%. This, together with individual achievement against operational targets and personal objectives, resulted in an average payment to Executive Directors representing 52.34% of the maximum potentially payable. This compares with a payment of 68.6% of the maximum potential in respect of 2009 when the maximum amount payable was reduced from 200% to 133% of salary for that year only in recognition of market conditions at that time.

A number of structural changes are being made to the bonus plan for 2011 in order to provide an improved alignment between performance and reward and to ensure the bonus plan remains valued by participants, consistent with current best practice and aligned with the interests of shareholders:

• The maximum bonus potential for 2011 will remain unchanged at 200% of salary.
• 60% of the bonus will now be paid in cash. The remaining 40% will be paid in shares, but all of these shares will now be deferred for two years.
• When the deferred shares vest, participants will receive the value of dividends that would have been paid during the deferral period.
• There will be an increase in the weighting of financial targets (from 50% to 60% of the bonus) with earnings per share and Total Property Return being the main financial targets to be used in 2011. The balance of the bonus will continue to be based on relevant non-financial and individual performance targets.
• A clawback facility is being introduced into the annual bonus plan whereby the Committee can recover deferred share bonuses in the event that they are subsequently found to have been paid as a result of misstated figures.

Long-Term Incentive Plan*

The Long-Term Incentive Plan, which was introduced in 2007, provides for conditional awards of Performance Shares worth up to 200% of salary (with a 300% limit in exceptional circumstances). Conditional awards of 200% of salary were made in 2010.

The performance measures applicable to the Plan are a combination of Total Shareholder Return ('TSR') performance (thus aligning the interests of Directors with shareholders) and Total Property Return ('TPR') (to focus on the underlying property returns). For Executive Directors, for grants made between 2007 and 2010, one half of the award is based on each of these performance measures over the relevant three-year performance period.

TPR performance is measured over the three financial years commencing with the year of grant and in comparison with a composite index comprising Investment Property Databank's ('IPD') Annual UK Index and Annual France All Property Index, the relative composition of which may vary with each grant to ensure that it reflects the Company's portfolio.

Vesting under the TPR performance condition is as follows:

Less than index	0%
Equal to index	25%
Index + 0.5% (average) p.a.	55%
Index + 1.0% (average) p.a.	85%
Index + 1.5% (average) p.a.	100%

Vesting for intermediate performance between these levels is pro-rata on a linear basis.

Prior to each grant, the Committee considers this range of targets to ensure they remain appropriate in the light of experience and anticipated future performance.

TSR performance is measured over the three-year period from the date of grant, in comparison with a comparator group, including some European real estate companies, as follows in respect of 2010:

The FTSE 100 Index, The British Land Company plc, Capital & Regional plc, Capital Shopping Centres Group PLC, Corio N.V., Derwent London plc, Great Portland Estates plc, IVG Immobilien AG, Klépierre S.A., Land Securities Group PLC, Quintain Estates and Development PLC, Shaftesbury PLC, SEGRO plc, St. Modwen Properties PLC and Unibail-Rodamco SE.

remuneration report (continued)

Vesting under the TSR performance condition is as follows:

Less than TSR of median-ranked entity	0%
Equal to TSR of median-ranked entity	25%
Equal to TSR of upper quartile-ranked entity	100%

Awards between median and upper quartile entities are on a linear scale between 25% and 100%.

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

Having considered the existing structure of the plan, the Committee has made a number of changes that will apply to grants in 2011:

• Performance measures: In addition to the two existing relative performance measures, a portion of awards will be subject to absolute Net Asset Value ('NAV') growth targets. Therefore, one-third of 2011 awards will be subject to each of relative TSR, relative TPR and absolute NAV performance. The Committee believes that this will provide an appropriate balance of relative and absolute performance measures rather than the current exclusive focus on relative measures. The TSR and TPR targets remain as previously set. NAV growth of 7.5% p.a. will result in vesting under the NAV performance condition of 25%, with 100% vesting for NAV growth of 15% p.a. Vesting for intermediate performance will be pro-rata on a linear basis. There will be no vesting for NAV growth of less than 7.5%.
• Performance period: The Committee believes that for a long-term capital intensive and cyclical business, a longer performance period would be better aligned to the delivery of the business plan. The performance period for future awards will therefore be increased from three to four years. An immediate change to this policy would result in there being no vesting of an award in 2014. To avoid this, an enhanced award of 300% of salary will be granted in 2011 only, with half of this award subject to a three-year performance period (which would vest in 2014) and half subject to a four-year performance period (vesting in 2015). This will ensure there is no vesting 'gap' in 2014 and overall will result in only a modest reduction in potential awards vesting to executives in the three-year period from 2014 to 2016.
• Clawback: A clawback facility will be introduced whereby the Committee can recover vested awards in the event that they are subsequently found to have been paid as a result of misstated figures.

At 31 December 2010 the following conditional share awards, including the reinvestment of notional dividends, made to Executive Directors under the Long-Term Incentive Plan remained outstanding:

	Date of grant/Maximum number of shares
Date of grant	1 April 2008	1 April 2009	30 April 2010
David Atkins	67,532	183,045	264,296
Peter Cole	84,413	228,808	211,437
Simon Melliss	84,413	228,808	222,400

The average middle market price, adjusted for the 2009 Rights Issue where appropriate, of the ordinary shares in the Company for the five dealing days before the award dates which were used for calculating the number of shares over which an award was made was 748.4p for the 2008 award, 258.6p for the 2009 award and 385.88p for the 2010 award.

Savings related share option scheme*

The Directors' interests in options over ordinary shares of the Company under the Company's savings related share option scheme are as follows:

	1 January 2010				31 December	Exercise price†	Expiry
		Granted Exercised		Lapsed	2010		year
David Atkins	4,212	–	–	–	4,212	217.20p	2012
Peter Cole	3,481	4,980	–	3,481	4,980	312.24p	2015

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

Share Incentive Plan*

All UK employees are eligible to receive Free Shares up to a value of £3,000 each year, subject to achievement of a performance target under the Share Incentive Plan ('SIP'). In addition, such employees can purchase Partnership Shares, up to a value of £1,500 each fiscal year, which the Company will match through the award of Matching Shares on the basis of two Matching Shares for every Partnership Share purchased. Dividends on shares held under the Share Incentive Plan are used to purchase additional shares.

The Directors' interests in shares of the Company under the Share Incentive Plan at 31 December 2010 are as follows:

							Cost to
	Total SIP	Partnership	Matching		Dividend	Total SIP	Company
	shares	Shares	Shares	Free Shares	Shares	shares held	of shares
	1 January	purchased in	awarded in	awarded in	purchased in	31 December	awarded
	2010	2010	2010	2010	2010	2010	in 2010
David Atkins	4,894	416	832	759	210	7,111	£6,835
Peter Cole	5,379	–	–	759	205	6,343	£3,812
Simon Melliss	4,828	–	–	759	185	5,772	£3,733

The middle market price of the Company's ordinary shares, as derived from the London Stock Exchange Daily Official List, was 417p on 31 December 2010 and the range during the year was 336p to 434p.

SHARE OWNERSHIP GUIDELINES

All Directors are encouraged to own shares in the Company. Certain elements of total remuneration are designed to encourage Executive Directors and senior executives, over a period of time, to acquire a shareholding with a value equivalent to 100% of their annual gross basic salary. The Chief Executive is expected to build up a shareholding equivalent to 150% of salary. Their interests are set out in the table on page 44.

SERVICE AGREEMENTS

David Atkins, Peter Cole and Simon Melliss have service agreements which may be terminated by the Company on 12 months' notice. Timon Drakesmith, who has been appointed an Executive Director of the Company with effect from the end of May 2011 will also have a service agreement which may be terminated by the Company on 12 months' notice. Prior to 1 January 2007, service agreements with Executive Directors provided that if a contract is terminated at short notice, any resulting compensation would not be subject to mitigation. The service agreements of Peter Cole and Simon Melliss were entered into prior to 1 January 2007.

Any compensation payable on termination at short notice to David Atkins or Timon Drakesmith, whose service agreements were entered into after 1 January 2007, would be subject to mitigation and, in the case of Timon Drakesmith, based on fixed remuneration only.

The basic annual salaries payable to Executive Directors are reviewed annually on 1 April. Salaries payable with effect from 1 April 2011 are:

David Atkins	£585,000
Peter Cole	£420,000
Simon Melliss	£433,500

David Atkins' salary was set on his appointment as Chief Executive at a level below the market rate, given both that he was new to the role and the wider economic circumstances. As he is now established in the role, the Committee concluded that it was appropriate for his salary to be increased to the benchmark level.

As previously disclosed, agreements had been made under which an Executive Director could elect to receive a pension compensation payment rather than further contributions being made to the Company's defined benefit pension scheme.

Simon Melliss made such an election on 3 December 2009 and therefore became entitled to a Pension Compensation Payment equal to 30% of basic salary whilst continuing in employment.

The Chairman and the Non-Executive Directors do not have service contracts with the Company. Their appointments are governed by letters of appointment, which are available for inspection on request. The Chairman's appointment, which is subject to 12 months' notice, was initially for a period of three years to 30 September 2008, on completion of which it was extended for a further three years to 30 September 2011. Following review by the Board (excluding the Chairman), this appointment has been renewed for a further period of three years ending 30 September 2014. The appointments of the Non-Executive Directors, the dates of which are set out below, are reviewed by the Chairman and the Executive Directors every three years.

Terry Duddy	3 December 2009
David Edmonds	8 May 2003
Jacques Espinasse	1 May 2007
John Hirst	1 March 2004
Tony Watson	1 February 2006

Notwithstanding the intention that the appointments of Non-Executive Directors are for a term of three years, such appointments are at all times subject to the right of either party to terminate the appointment on not less than three months' notice.

All the directors, who retire in accordance with the UK Corporate Governance Code, with the exception of David Edmonds, offer themselves for re-election at the forthcoming Annual General Meeting.

NON-EXECUTIVE DIRECTORS' REMUNERATION

The Chairman of the Board, John Nelson, is a Non-Executive Director. His fee is determined by the Remuneration Committee and those of the other Non-Executive Directors are determined by the Board, having regard to the contribution required from, and the responsibility taken by, Non-Executive Directors and current market practice, including the level of fees paid to Non-Executive Directors of comparable companies. Non-Executive Directors are not eligible for performance-related bonuses or participation in the Company's share plans and their fees are not pensionable.

The annual fees payable to the Chairman and the other Non-Executive Directors, are as follows:

Chairman	£270,000
Non-Executive Director
– basic fee	£50,000

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

£10,000
£15,000
£5,000
£10,000
£5,000

In addition, David Edmonds receives a fee of £7,500 per annum as a director of Hammerson Pension Scheme Trustees Limited which is a corporate trustee of the Company's defined benefit pension scheme. overview

remuneration report (continued)

REMUNERATION OF DIRECTORS*

The following table shows a breakdown of the remuneration of the Directors for the year ended 31 December 2010:

					Total emoluments excluding pension		LTIP
	Salaries/	Performance	Benefits		contributions		gain on shares
	fees	related bonus	in kind	2010	2009	2010	2009
	£000	£000	£000	£000	£000	£000	£000
Executive Directors
David Atkins	500	477	17	994	622	–	36
Peter Cole	394	426	17	837	627	–	91
Simon Melliss	418	448	20	886	637	–	91
Non-Executive Directors
John Nelson	259	–	–	259	225	–	–
Terry Duddy	52	–	–	52	3	–	–
David Edmonds	60	–	–	60	52	–	–
Jacques Espinasse	52	–	–	52	44	–	–
John Hirst	58	–	–	58	50	–	–
Tony Watson	72	–	–	72	44	–	–
	1,865	1,351	54	3,270	2,304	–	218

The value of benefits in kind includes the use of a company car or provision of a car allowance, medical insurance and life assurance cover.

During the year ended 31 December 2010 no payments were made to Directors for expenses other than those incurred wholly and directly in the course of their employment or appointment.

As explained on page 47, the performance related bonus in respect of 2010 is payable in three parts. One part is payable in cash (Part A) and a further element of the bonus is payable in shares (Parts B and C). The payment in shares is made in two parts, one of which (Part B) is made at the time the cash bonus is paid and the other of which (Part C) is deferred for two years and is subject to the participant remaining with the Company.

Payments under Part A and Part B are included in the remuneration table above and deferred entitlements under Part C are shown in the table below. However, in respect of the bonus for 2008 only, in view of market conditions, the Executive Directors agreed to defer the vesting of Part B shares such that they would be treated in the same way as Part C shares. Accordingly, for 2008 only, the entitlement to Part C shares given in the table below additionally includes the potential entitlement to Part B shares.

					Part C Entitlements		Part C Shares vested
			2009 Bonus		2008 Bonus		2007 Bonus
	2010 Bonus value	Shares vesting in	Market value at date of grant	Shares vesting in	Market value at date of grant	Shares vested on 1 March	Market value at date of grant
	£000	2012	£000	2011	£000	2010	£000
David Atkins	205	28,462	110	52,845	140	5,036	39
Peter Cole	183	26,288	101	49,075	130	7,664	59
Simon Melliss	192	25,899	100	52,471	139	7,664	59

Simon Melliss will retire on 30 June 2011 and, in accordance with the terms of the Scheme, the shares due to vest in 2012 will vest on the date of his retirement. In respect of the bonus for 2010, the Part B entitlement will be paid in cash on the date the bonus payment is made and the Part C entitlement will be paid in cash at retirement.

PENSIONS*

The Executive Directors all participate in the Company's defined benefit pension scheme, more fully described in note 6 to the accounts on pages 69 and 71 which provides pension and other benefits.

Pension entitlements are based on basic salary. In previous years, members who joined the Scheme on or after 1 June 1989 were subject to restrictions imposed by the Income and Corporation Taxes Act 1988. Following the introduction of the Finance Act 2004, these restrictions no longer apply for service accrued on or after 6 April 2006.

Since 6 April 2006 an individual's benefits under the Company's pension scheme would be subject to additional tax should those benefits exceed certain defined limits. The Remuneration Committee has agreed that, in these circumstances, a Director may elect to receive a Pension Compensation Payment rather than further contributions being made to the Scheme. Such compensation payments will be subject to income tax and national insurance contributions and will not qualify for annual bonus purposes or entitlements under long-term incentive plans.

David Atkins and Peter Cole are members of the Hammerson Group Management Pension and Life Assurance Scheme. David Atkins' pension is currently being provided with a 1/60th accrual rate. This is the rate of accrual received by all members of the Scheme who joined after

1 July 1994. Peter Cole's pension is accruing at a rate which will provide a pension of two-thirds of salary at retirement. This is equivalent to an accrual rate of 1/45th offered to provide competitive benefits at retirement. The Scheme has a normal retirement age of 60 and any pensions payable on early retirement would be reduced in accordance with the rules of the Scheme.

The following tables set out information on Directors' defined benefit pension entitlements:

							Increase in
					Total accrued		accrued benefit
		Years'			benefit at	Increase in	during the
	Age at	service at	Normal		31 December	accrued benefit	year excluding
	31 December	31 December	retirement	Accrual	2010	during the year	inflation
	2010	2010	age	rate	£000	£000	£000
David Atkins	44	12	60	1/60th	56	20	13
Peter Cole	51	21	60	1/45th	194	20	19

For each Director, the total accrued benefit at 31 December 2010 represents the annual pension that is expected to be payable on eventual retirement, given the length of service and salary of each Director at 31 December 2010. 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 2009. The increase in accrued pension excluding the effect of inflation over the year is also shown.

Requirements under:		Companies Act 2006		The Listing Rules
				Transfer value
	Transfer value	Transfer value	Value of	at 31 December
	at 31 December	at 31 December	increase in	2010 of increase
	2009 of total	2010 of total	accrued benefit	in accrued
	accrued benefit	accrued benefit	during the year	benefit
	£000	£000	£000	£000
David Atkins	334	550	216	187
Peter Cole	2,141	2,488	347	161

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

For each Director, the increase in transfer value of accrued benefits under the requirements of Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 is the transfer value of the total accrued benefit at 31 December 2010 less the corresponding transfer value at 31 December 2009. The transfer value fo the increase in accrued benefits under the Listing Rules is the transfer value at 31 December 2010 of the increase in accured benefits during the period (excluding inflation).

The transfer values disclosed above do not represent the sum paid or payable to the individual director. Instead, they represent a potential liability fo the pension scheme.

SHAREHOLDER RETURN

The graph below shows the total shareholder return in respect of the Company's ordinary shares of 25 pence each for the five years ended 31 December 2010 relative to the total return of the FTSE EPRA/NAREIT UK Index, which comprises shares of the Company's peers. The total shareholder return is rebased to 100 at 31 December 2005. The other points plotted are the values at intervening financial year-ends.

Total Shareholder Return Index (31 December 2005 = 100)

By Order of the Board

Stuart Haydon Secretary 21 February 2011 governanCe

overview

business and finanCial review

independent auditor's report on the Group financial statements

INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOlDERS OF HAMMERSON PlC

We have audited the Group financial statements (the 'financial statements') of Hammerson plc for the year ended 31 December 2010 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated balance sheet, the consolidated statement of changes in equity, the consolidated cash flow statement, the analysis of movement in net debt and the related notes 1 to 29. The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

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

RESPECTIvE RESPONSIbIlITIES OF DIRECTORS AND AUDITOR

As explained more fully in the Directors' Responsibilities Statement, the Directors are responsible for the preparation of the Group 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 Boards (APB's) Ethical Standards for Auditors.

SCOPE OF THE AUDIT OF THE FINANCIAl STATEMENTS

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements.

OPINION ON THE FINANCIAl STATEMENTS

In our opinion the Group financial statements:

• give a true and fair view of the state of the Group's affairs as at 31 December 2010 and of its profit for the year then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of the IAS Regulation.

OPINION ON OTHER MATTER PRESCRIbED by THE COMPANIES ACT 2006

In our opinion the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the Group financial statements.

MATTERS ON wHICH wE ARE REqUIRED TO REPORT by ExCEPTION

We have nothing to report in respect of the following:

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

• certain disclosures of directors' remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.

Under the Listing Rules we are required to review:

• the directors' statement contained within the Directors' Report in relation to going concern;
• the part of the Corporate Governance Statement relating to the Company's compliance with the nine provisions of the June 2008 Combined Code specified for our review; and
• certain elements of the report to shareholders by the Board on Directors' remuneration.

OTHER MATTER

We have reported separately on the parent company financial statements of Hammerson plc for the year ended 31 December 2010 and on the information in the Directors' Remuneration Report that is described as having been audited.

Ian Krieger (Senior Statutory Auditor)

for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor London, UK 21 February 2011

consolidated income statement

For the year ended 31 december 2010

	Notes	2010 £m	2009 £m
Gross rental income	2	332.0	344.3*
Operating profit before other net gains/(losses) and share of results of associate	2	248.8	252.6
Other net gains/(losses)	2	469.9	(590.4)
Share of results of associate	2	1.5	(0.8)
Operating profit/(loss)	2	720.2	(338.6)
Finance costs		(111.5)	(129.0)
Change in fair value of derivatives		1.7	(4.1)
Finance income		9.8	18.6
Net finance costs	7	(100.0)	(114.5)
Profit/(Loss) before tax		620.2	(453.1)
Current tax charge	8A	(0.6)	(0.9)
Deferred tax (charge)/credit	8A	(0.1)	103.6
Tax (charge)/credit		(0.7)	102.7
Profit/(Loss) for the year		619.5	(350.4)
Attributable to:
Equity shareholders		615.4	(344.5)
Equity minority interests		4.1	(5.9)
Profit/(Loss) for the year		619.5	(350.4)
Basic earnings/(loss) per share	10A	87.2p	(54.1)p
Diluted earnings/(loss) per share	10A	87.2p	(54.1)p

* The comparative figure for gross rental income has been amended to reflect the reclassification of lease incentives (see note 1 on page 63).

Adjusted earnings per share are shown in note 10A. All results derive from continuing operations.

consolidated statement of comprehensive income

For the year ended 31 december 2010

	Note	2010 £m	2009 £m
Foreign exchange translation differences		(65.1)	(209.0)
Net gain on hedge of net investment in foreign subsidiaries		50.8	176.3
Exchange gain previously recognised in the translation reserve, recycled on disposal of foreign operation		–	(28.2)
Exchange loss previously recognised in the hedging reserve, recycled on disposal of foreign operation		–	18.4
Revaluation gains/(losses) on owner-occupied property		4.5	(6.4)
Revaluation gains on other investments		18.4	3.9
Actuarial losses on pension schemes		(4.8)	(14.3)
Deferred tax on items taken directly to equity	8A	–	4.4
Net gain/(loss) recognised directly in equity		3.8	(54.9)
Profit/(Loss) for the year		619.5	(350.4)
Total comprehensive income/(loss) for the year		623.3	(405.3)
Attributable to:
Equity shareholders		621.8	(392.1)

Equity minority interests	1.5	(13.2)
Total comprehensive income/(loss) for the year	623.3	(405.3)

Overview

consolidated balance sheet

as at 31 december 2010

	Notes	2010 £m	2009 £m
Non-current assets
Investment and development properties	11	5,331.1	5,141.5
Interests in leasehold properties		30.5	23.0
Plant, equipment and owner-occupied property	12	33.4	30.4
Investment in associate	13B	–	10.4
Other investments	15	133.2	114.0
Receivables	16	45.2	61.5
		5,573.4	5,380.8
Current assets
Receivables	17	80.7	102.7
Cash and deposits	18	126.2	182.9
		206.9	285.6
Total assets		5,780.3	5,666.4
Current liabilities
Payables	19	220.1	228.4
Tax	8C	1.0	1.6
Borrowings	20A	4.4	62.9
		225.5	292.9
Non-current liabilities
Borrowings	20A	1,916.2	2,256.1
Deferred tax	8C	0.5	0.4
Tax	8C	0.5	1.3
Obligations under finance leases	22	30.3	22.8
Payables	23	55.6	69.8
		2,003.1	2,350.4
Total liabilities		2,228.6	2,643.3
Net assets		3,551.7	3,023.1
Equity
Share capital	24	176.9	175.7
Share premium		1,222.5	1,223.6
Translation reserve		415.2	477.7
Hedging reserve		(334.6)	(385.4)
Capital redemption reserve		7.2	7.2
Other reserves		8.6	10.3
Revaluation reserve		101.5	78.6
Retained earnings		1,890.1	1,372.4
Investment in own shares	25	(4.0)	(4.6)
Treasury shares	26	(3.4)	(5.8)
Equity shareholders' funds		3,480.0	2,949.7
Equity minority interests		71.7	73.4
Total equity		3,551.7	3,023.1
Diluted net asset value per share	10B	£4.93	£4.20
EPRA net asset value per share	10B	£4.95	£4.21

These financial statements were approved by the Board of Directors on 21 February 2011.

Signed on behalf of the Board

David Atkins Simon Melliss

Director Director

Registered in England No. 360632

consolidated statement of changes in equity

For the year ended 31 december 2010

					Capital				Investment		Equity	Equity
	Share capital £m	Share premium£m	reserve £m Translation	Hedging reserve £m	redemption reserve £m	Other reserves £m	reserve £m Revaluation	Retained earnings £m	in own shares £m	Treasury shares £m	shareholders' funds £m	minority interests £m	equity £m Total
Balance at 1 January 2010	175.7	1,223.6	477.7	(385.4)	7.2	10.3	78.6	1,372.4	(4.6)	(5.8)	2,949.7	73.4	3,023.1
Issue of shares	–	0.1	–	–	–	–	–	–	–	–	0.1	–	0.1
Share-based employee
remuneration	–	–	–	–	–	3.2	–	–	–	–	3.2	–	3.2
Cost of shares awarded to
employees	–	–	–	–	–	(6.4)	–	–	6.4	–	–	–	–
Transfer on award of own shares
to employees	–	–	–	–	–	1.5	–	(1.5)	–	–	–	–	–
Proceeds on award of own
shares to employees	–	–	–	–	–	–	–	0.1	–	–	0.1	–	0.1
Transfer from treasury shares	–	–	–	–	–	–	–	–	(5.8)	5.8	–	–	–
Purchase of treasury shares	–	–	–	–	–	–	–	–	–	(3.4)	(3.4)	–	(3.4)
Dividends	–	–	–	–	–	–	–	(91.5)	–	–	(91.5)	(3.2)	(94.7)
Scrip dividends	1.2	(1.2)	–	–	–	–	–	–	–	–	–	–	–
Foreign exchange
translation differences	–	–	(62.5)	–	–	–	–	–	–	–	(62.5)	(2.6)	(65.1)
Net gain on hedging activities	–	–	–	50.8	–	–	–	–	–	–	50.8	–	50.8
Revaluation gains on owner
occupied property	–	–	–	–	–	–	4.5	–	–	–	4.5	–	4.5
Revaluation gains on
other investments	–	–	–	–	–	–	18.4	–	–	–	18.4	–	18.4
Actuarial losses on pension
schemes	–	–	–	–	–	–	–	(4.8)	–	–	(4.8)	–	(4.8)
Profit for the year attributable to equity shareholders	–	–	–	–	–	–	–	615.4	–	–	615.4	4.1	619.5
Total comprehensive income/ (loss) for the year	–	–	(62.5)	50.8	–	–	22.9	610.6	–	–	621.8	1.5	623.3
Balance at 31 December 2010	176.9	1,222.5	415.2	(334.6)	7.2	8.6	101.5	1,890.1	(4.0)	(3.4)	3,480.0	71.7	3,551.7
Notes	24								25	26
Investment in own shares and treasury shares are stated at cost.

GOvernance

consolidated statement of changes in equity

For the year ended 31 december 2009

					Capital				Investment		Equity	Equity
	Share capital £m	Share premium£m	Translation reserve £m	Hedging reserve £m	reserve £m redemption	Other reserves £m	Revaluation reserve £m	earnings £m Retained	in own shares £m	Treasury shares £m	funds £m shareholders'	minority interests £m	equity £m Total
Balance at 1 January 2009	72.7	742.2	707.6	(580.1)	7.2	11.5	100.0	1,775.6	(4.5)	(11.6)	2,820.6	89.3	2,909.9
Rights issue	101.5	507.2	–	–	–	–	–	–	–	–	608.7	–	608.7
Expenses of rights issue	–	(24.4)	–	–	–	–	–	–	–	–	(24.4)	–	(24.4)
Issue of other shares		0.1	–								0.1		0.1
	–			–	–	–	–	–	–	–		–
Share-based employee
Cost of shares awarded to remuneration	–	–	–	–	–	5.1	–	–	–	–	5.1	–	5.1
employees	–	–	–	–		(5.7)	–		5.7		–	–
Transfer on award of own shares					–			–		–			–
to employees	–	–	–	–	–	(0.6)	–	0.6	–	–	–	–	–
Transfer on sale of investments	–	–	–	–	–	–	(0.4)	0.4	–	–	–	–	–
Transfer on change in accounting policy relating to development
properties	–	–	–	–	–	–	(18.5)	18.5	–	–	–	–	–
Proceeds on award of own shares
to employees	–	–	–	–	–	–	–	0.1	–	–	0.1	–	0.1
Transfer from treasury shares	–	–	–	–	–	–	–	–	(5.8)	5.8	–	–	–
Dividends	–	–	–	–	–	–	–	(68.4)	–	–	(68.4)	(2.7)	(71.1)
Scrip dividends	1.5	(1.5)	–	–	–	–	–	–	–	–	–	–	–
Foreign exchange translation differences	–		(201.7)	–							(201.7)	(7.3)	(209.0)
		–			–	–	–	–	–	–
reserve recycled on disposal of Net gain on hedging activities recognised in the translation Exchange gain previously	–	–	–	176.3	–	–	–	–	–	–	176.3	–	176.3
foreign operation	–	–	(28.2)	–	–	–	–	–	–	–	(28.2)	–	(28.2)
reserve recycled on disposal of recognised in the hedging Exchange loss previously
foreign operation	–	–	–	18.4	–	–	–	–	–	–	18.4	–	18.4
Revaluation losses on owner
occupied property	–	–	–	–	–	–	(6.4)	–	–	–	(6.4)	–	(6.4)
Revaluation gains on other
Actuarial losses on pension investments	–	–	–	–	–	–	3.9	–	–	–	3.9	–	3.9
schemes	–	–	–	–	–	–	–	(14.3)	–	–	(14.3)	–	(14.3)
Deferred tax on items taken
directly to equity	–	–	–	–	–	–	–	4.4	–	–	4.4	–	4.4
Loss for the year attributable to
equity shareholders	–	–	–	–	–	–	–	(344.5)	–	–	(344.5)	(5.9)	(350.4)
Total comprehensive
(loss)/income for the year	–	–	(229.9)	194.7	–	–	(2.5)	(354.4)	–	–	(392.1)	(13.2)	(405.3)
Balance at 31 December 2009	175.7	1,223.6	477.7	(385.4)	7.2	10.3	78.6	1,372.4	(4.6)	(5.8)	2,949.7	73.4	3,023.1
Notes	24								25	26
Investment in own shares and treasury shares are stated at cost.

consolidated cash flow statement

For the year ended 31 december 2010

	Notes	2010 £m	2009 £m
Operating activities
Operating profit before other net gains/(losses) and share of results of associate	2	248.8	252.6
(Increase)/Decrease in receivables		(3.6)	31.7
Increase/(Decrease) in payables		0.2	(48.1)
Adjustment for non-cash items	27	(8.4)	2.3
Cash generated from operations		237.0	238.5
Interest paid		(111.1)	(149.0)
Interest received		3.4	3.9
Distribution received from other investments		4.6	13.1
Tax paid	8C	(1.2)	(1.2)
Cash flows from operating activities		132.7	105.3
Investing activities
Property and corporate acquisitions		(218.6)	(39.5)
Development and major refurbishments		(60.8)	(164.1)
Other capital expenditure		(25.5)	(23.7)
Sale of properties		474.6	394.9
Sale of subsidiary		–	3.0
Disposal of/(Investment in) associate		80.0	(5.0)
(Purchase)/Sale of other investments		(1.1)	1.3
Decrease in non-current receivables		0.3	–
Cash flows from investing activities		248.9	166.9
Financing activities
Rights issue		–	584.3
Issue of other shares		0.1	0.1
Proceeds from award of own shares		0.1	0.1
Purchase of treasury shares		(3.4)	–
Decrease in non-current borrowings		(306.6)	(647.2)
Decrease in current borrowings		(29.2)	(74.3)
Dividends paid to minorities		(3.2)	(2.7)
Equity dividends paid	9	(95.4)	(64.5)
Cash flows used in financing activities		(437.6)	(204.2)
Net (decrease)/increase in cash and deposits		(56.0)	68.0
Opening cash and deposits		182.9	119.9
Exchange translation movement		(0.7)	(5.0)
Closing cash and deposits	18	126.2	182.9

analysis of movement in net debt

For the year ended 31 december 2010

	Short-term deposits £m	Cash at bank £m	Current borrowings including currency swaps £m	Non-current borrowings £m	Net debt £m
Balance at 1 January 2010	111.9	71.0	(50.8)	(2,256.1)	(2,124.0)
Cash flow	(57.3)	1.3	29.2	306.6	279.8
Exchange	(0.2)	(0.5)	17.2	33.3	49.8
Balance at 31 December 2010	54.4	71.8	(4.4)	(1,916.2)	(1,794.4)

business and Financial review

Overview

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 2010, the following pronouncements either had no impact on the financial statements or resulted in changes to presentation and disclosure only:

• Amendments to IFRIC 9 and IAS 39 Embedded Derivatives; effective for accounting periods beginning on or after 30 June 2009
• IFRS 3 (revised) Business Combinations; effective for accounting periods beginning on or after 1 July 2009
• Amendments to IAS 27 Consolidated and Separate Financial Statements; effective for accounting periods beginning on or after 1 July 2009
• IFRIC 17 Distribution of non-cash assets to Owners; effective for periods beginning on or after 1 July 2009
• IFRIC 18 Transfer of Assets from Customers; effective for periods beginning on or after 1 July 2009, relating to transfers after that date
• Amendments to IFRS 2 Group Cash-settled Share-based Payment Transactions; effective for accounting periods beginning on or after 1 January 2010

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

• Amendments to IFRS 7 Disclosures Transfers of Financial Assets; effective for accounting periods beginning on or after 1 July 2011
• Amendments to IAS 32 Classification of Rights Issues; effective for accounting periods beginning on or after 1 February 2010
• IFRS 9 Financial Instruments; effective for accounting periods beginning on or after 1 January 2013
• IAS 24 Related Party Disclosures; effective for periods commencing on or after 1 January 2011
• IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments; effective for accounting periods beginning on or after 1 July 2010

These pronouncements, when applied, will either result in changes to presentation and disclosure, or are not expected to have a material impact on the financial statements.

bASIS OF PREPARATION

The financial statements are prepared on a going concern basis as explained in the Directors' Report on page 43.

The financial statements are presented in sterling. They are prepared on the historical cost basis except that investment and development properties, owner-occupied properties, 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.

SIGNIFICANT jUDGEMENTS AND kEy ESTIMATES

The preparation of the financial statements requires management to make judgements, estimates and assumptions that may affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses.

Property valuations

The property portfolio, which is carried in the balance sheet at fair value, is valued six-monthly by professionally qualified external valuers and the Directors must ensure that they are satisfied that the valuation of the Group's properties is appropriate for the accounts. The independent valuations are based on a number of assumptions such as appropriate discount rates and estimates of future rental income and capital expenditure. Property valuations are one of the principal uncertainties of the Group, as noted on page 15.

Other investments

The Company holds other investments which are classified as available for sale and held at fair value on the balance sheet. The fair value of these investments is based on the Directors' valuation, having regard to external valuations of the underlying properties and the Group's interest in these properties.

1 SIGNIFICANT ACCOUNTING POlICIES (Continued)

Accounting for acquisitions

Management must assess whether the acquisition of property through the purchase of a corporate vehicle should be accounted for as an asset purchase or a business combination. As noted in the accounting policy below, where the acquired company contains significant assets or liabilities in addition to property, the transaction is accounted for as a business combination. Where there are no such items, the transaction is treated as an asset purchase.

Accounting for joint ventures

The accounting treatment for our joint ventures requires an assessment to determine the degree of control or influence which the Group may exercise over them and the form of any control. Hammerson's interest in its joint ventures is commonly driven by the terms of partnership agreements which ensure that control is shared between the partners. As a result, these are accounted for as jointly controlled entities and are included in the financial statements on a proportionate consolidation basis in accordance with IAS 31.

REIT and SIIC status

The Company has elected for UK REIT and French SIIC status. To continue to benefit from these tax regimes, the Group is required to comply with certain conditions as outlined in notes 8E and 8F to the accounts. Management intends that the Group should continue as a UK REIT and French SIIC for the foreseeable future.

bASIS OF CONSOlIDATION

Subsidiaries

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

Where properties are acquired through corporate acquisitions and there are no significant assets or liabilities other than property, the acquisition is treated as an asset acquisition. In other cases, particularly where there is an integrated set of activities and assets, capable of being conducted and managed for the purpose of providing a return, the acquisition method is used.

joint ventures

Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement. The consolidated financial statements include the Group's proportionate share of assets, liabilities, results and cash flows of joint ventures.

Associates

Associates are those entities over which the Group is in a position to exercise significant influence, but not control or joint control. The results, assets and liabilities of associates are accounted for using the equity method. Investments in associates are carried in the balance sheet at cost as adjusted for post acquisition changes in the Group's share of the net assets of the associate, less any impairment. Losses of an associate in excess of the Group's interest in that associate are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate.

Goodwill

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the acquired entity over the Group's interest in the fair value of the assets, liabilities and contingent liabilities acquired. Goodwill which is recognised as an asset is reviewed for impairment at least annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed.

Where the fair value of the assets, liabilities and contingent liabilities acquired is greater than the cost, the excess, known as negative goodwill, is recognised immediately in the income statement.

FOREIGN CURRENCy

Foreign currency transactions

Transactions in foreign currencies are translated into sterling at exchange rates approximating to the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to sterling at the exchange rate ruling at that date and, unless they relate to the hedging of the net investment in foreign operations, differences arising on translation are recognised in the income statement.

notes to the accounts (continued)

1 SIGNIFICANT ACCOUNTING POlICIES (Continued)

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 period. 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 = €1.167 (2009: £1 = €1.126). The principal exchange rate used for the income statement is the average rate, £1 = €1.166 (2009: £1 = €1.123).

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 hedge its exposure to foreign currency movements and interest rate risks.

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 for the net investment in a foreign operation is recognised in the hedging reserve.

Trade receivables and payables

Trade receivables and payables are initially measured at fair value, subsequently measured at amortised cost and, where the effect is material, discounted to reflect the time value of money.

Net finance costs

Net finance costs include interest payable on borrowings, net of interest capitalised, interest receivable on funds invested, and changes in the fair value of derivative financial instruments.

Capitalisation of interest

Interest is capitalised if it is directly attributable to the acquisition, construction or production of development properties or the redevelopment of investment properties. Capitalisation commences when the activities to develop the property start and continues until the property is substantially ready for its intended use. Capitalised interest is calculated with reference to the actual rate payable on borrowings for development purposes or, for that part of the development cost financed out of general funds, to the average rate.

PROPERTy PORTFOlIO

Investment properties

Investment properties are stated at fair value, being market value determined by professionally qualified external valuers, and changes in fair value are included in the income statement.

Development properties

Properties acquired with the intention of redevelopment are classified as development properties and stated at fair value, being market value determined by professionally qualified external valuers. Changes in fair value are included in the income statement.

All costs directly associated with the purchase and construction of a development property are capitalised. When development properties are completed, they are reclassified as investment properties.

leasehold properties

Leasehold properties that are leased out to tenants under operating leases are classified as investment properties or development properties, as appropriate, and included in the balance sheet at fair value.

The obligation to the freeholder or superior leaseholder for the buildings element of the leasehold is included in the balance sheet at the present value of the minimum lease payments at inception. Payments to the freeholder or superior leaseholder are apportioned between a finance charge and a reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent rents payable, such as rent reviews or those related to rental income, are charged as an expense in the periods in which they are incurred.

1 SIGNIFICANT ACCOUNTING POlICIES (Continued)

Depreciation

In accordance with IAS 40 Investment Property, no depreciation is provided in respect of investment and development properties, which are carried at fair value. Leasehold property occupied by the Group ('owner-occupied property') is depreciated where material over its expected useful life, giving due consideration to its estimated residual value.

Net rental income

Rental income from investment property leased out under an operating lease is recognised in the income statement on a straight-line basis over the lease term.

Contingent rents, such as turnover rents, rent reviews and indexation, are recorded as income in the periods in which they are earned. Rent reviews are recognised when such reviews have been agreed with tenants.

Lease incentives and costs associated with entering into tenant leases are amortised over the period to the first break option or, if the probability that the break option will be exercised is considered low, over the lease term.

Property operating expenses are expensed as incurred and any property operating expenditure not recovered from tenants through service charges is charged to the income statement.

Previously, the amortisation of lease incentives and other related costs had been included within other property outgoings. These items are now included within gross rental income, which is considered to be a more appropriate classification. As a result of this reclassification, for the year ended 31 December 2010, gross rental income and other property outgoings have been reduced by £9.5 million. Comparative figures for the year ended 31 December 2009 have been reduced by £7.2 million. There is no impact on net rental income or profit.

Profits on sale of properties

Profits 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.

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.

Plant, equipment and owner-occupied property

Owner-occupied property held under a finance lease is stated at fair value with changes in fair value recognised directly in equity.

Plant and equipment are stated at cost less accumulated depreciation. Depreciation is charged to the income statement on a straight-line basis over the estimated useful life, which is generally between three and five years, or in the case of leasehold improvements, the lease term.

INvESTMENTS

Investments are classified as 'available for sale' and carried at fair value with changes in fair value recognised directly in equity.

Where a significant or prolonged decline in fair value is identified, the investment is considered impaired and any cumulative revaluation gain or deficit is recycled through the income statement.

EMPlOyEE bENEFITS

Defined contribution pension plans

Obligations for contributions to defined contribution pension plans are charged to the income statement as incurred.

Defined benefit pension plans

The Group's net obligation in respect of defined benefit pension plans comprises the amount of future benefit that employees have earned, discounted to determine a present value, less the fair value of the pension plan assets. The discount rate used is the yield on AA credit-rated bonds that have maturity dates approximating to the terms of the Group's obligations. The calculation is performed by a qualified external actuary using the projected unit credit method.

Actuarial gains and losses are recognised in equity. Where the assets of a plan are greater than its obligation, the asset included in the balance sheet is limited to the present value of any future refunds from the plan or reduction in future contributions to the plan.

Share-based employee remuneration

Share-based employee remuneration is determined with reference to the fair value of the equity instruments at the date at which they are granted and charged to the income statement over the vesting period on a straight-line basis. The fair value of share options is calculated using the binomial option pricing model and is dependent on factors including the exercise price, expected volatility, option life and risk-free interest rate. The fair value of the market-based element of the Long-Term Incentive Plans is calculated using the Monte Carlo Model and is dependent on factors including the expected volatility, vesting period and risk-free interest rate. IFRS 2 Share-based Payment has been applied to share options granted.

notes to the accounts (continued)

1 SIGNIFICANT ACCOUNTING POlICIES (Continued)

TAx

Tax is included in the income statement except to the extent that it relates to items recognised directly in equity, in which case the related tax is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates applicable at the balance sheet date, together with any adjustment in respect of previous years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates that are expected to apply in the period when the liability is settled or the asset is realised.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

2 RESUlT FOR THE yEAR

	Notes	Adjusted £m	Capital and other £m	Total 2010 £m	Adjusted £m	Capital and other £m	Total 2009 £m
Gross rental income	3A	332.0	–	332.0	344.3	–	344.3
Ground and equity rents payable		(5.1)	–	(5.1)	(5.4)	–	(5.4)
Gross rental income, after rents payable		326.9	–	326.9	338.9	–	338.9
Service charge income		59.9	–	59.9	57.6	–	57.6
Service charge expenses		(67.7)	–	(67.7)	(69.3)	–	(69.3)
Net service charge expenses		(7.8)	–	(7.8)	(11.7)	–	(11.7)
Other property outgoings		(34.4)	–	(34.4)	(33.6)	–	(33.6)
Property outgoings		(42.2)	–	(42.2)	(45.3)	–	(45.3)
Net rental income	3A	284.7	–	284.7	293.6	–	293.6
Management fees receivable		9.6	–	9.6	2.9	–	2.9
Cost of property activities		(30.1)	–	(30.1)	(28.2)	–	(28.2)
Corporate expenses		(15.4)	–	(15.4)	(15.7)	–	(15.7)
Administration expenses		(35.9)	–	(35.9)	(41.0)	–	(41.0)
Operating profit before other net gains/(losses) and share
of results of associate		248.8	–	248.8	252.6	–	252.6
Loss on the sale of investment properties		–	(15.7)	(15.7)	–	(138.0)	(138.0)
Loss on the sale of subsidiary		–	–	–	–	(25.4)	(25.4)
Gain on sale of associate		–	38.5	38.5	–	–	–
Revaluation gains/(losses) on investment properties		–	447.0	447.0	–	(403.9)	(403.9)
Revaluation gains/(losses) on development properties		–	0.1	0.1	–	(40.2)	(40.2)
Goodwill impairment		–	–	–	–	(1.4)	(1.4)
Negative goodwill		–	–	–	–	3.4	3.4
Net exchange gain previously recognised in equity, recycled on disposal of foreign operation		–	–	–	–	9.8	9.8
		–	469.9	469.9	–	(595.7)	(595.7)
Release of provision relating to formerly owned property Other net gains/(losses)		– –	– 469.9	– 469.9	– –	5.3 (590.4)	5.3 (590.4)
Share of results of associate	13A	2.0	(0.5)	1.5	0.9	(1.7)	(0.8)
Operating profit/(loss)		250.8	469.4	720.2	253.5	(592.1)	(338.6)
Net finance (costs)/income	7	(106.3)	6.3	(100.0)	(123.5)	9.0	(114.5)
Profit/(Loss) before tax		144.5	475.7	620.2	130.0	(583.1)	(453.1)
Current tax charge	8A	(0.6)	–	(0.6)	(0.9)	–	(0.9)
Deferred tax (charge)/credit	8A	–	(0.1)	(0.1)	–	103.6	103.6
Profit/(Loss) for the year		143.9	475.6	619.5	129.1	(479.5)	(350.4)
Equity minority interests		(3.7)	(0.4)	(4.1)	(3.8)	9.7	5.9
Profit/(Loss) for the year attributable to equity shareholders	10A	140.2	475.2	615.4	125.3	(469.8)	(344.5)

Included in gross rental income is £5.1 million (2009: £3.5 million) calculated by reference to tenants' turnover.

The management fees receivable of £9.6 million (2009: £2.9 million) include fees paid to Hammerson in respect of joint ventures and an associate for investment and development management services. All other related party transactions, with the exception of Directors' remuneration, are eliminated on consolidation.

notes to the accounts (continued)

3 SEGMENTAl ANAlySIS

The factors used to determine the Group's reportable segments are the geographic locations (UK and Continental Europe) and sectors in which it operates, which are generally managed by separate teams and are the basis on which performance is assessed and resources allocated. Gross rental income represents the Group's revenue from external 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.

A: REvENUE AND PROFIT by SEGMENT

					2010 Non-cash items				2009 Non-cash items
					Revaluation				Revaluation
		Gross rental income £m	Net rental income £m	Within net rental income £m	gains on properties £m	Gross rental income £m	Net rental income £m	Within net rental income £m	gains/ (losses) on properties £m
	United Kingdom
Retail:	Shopping centres	136.8	113.6	(2.2)	260.8	117.4	92.4	2.8	(152.2)
	Retail parks	54.1	50.2	(0.6)	101.6	54.7	50.1	0.5	18.7
		190.9	163.8	(2.8)	362.4	172.1	142.5	3.3	(133.5)
Office:	City	36.1	31.6	7.8	39.7	39.9	33.4	2.7	(27.5)
	Other	14.0	12.2	1.0	4.5	15.9	14.7	–	(34.7)
		50.1	43.8	8.8	44.2	55.8	48.1	2.7	(62.2)
	Total United Kingdom	241.0	207.6	6.0	406.6	227.9	190.6	6.0	(195.7)
	Continental Europe
France
Retail		90.4	79.4	0.4	40.4	101.1	91.2	1.0	(208.2)
Office		–	–	–	–	12.4	11.1	(1.2)	–
Total France		90.4	79.4	0.4	40.4	113.5	102.3	(0.2)	(208.2)
Germany
Retail		–	–	–	–	2.2	1.1	(0.5)	–
	Total Continental Europe	90.4	79.4	0.4	40.4	115.7	103.4	(0.7)	(208.2)
Group
Retail		281.3	243.2	(2.4)	402.8	275.4	234.8	3.8	(341.7)
Office		50.1	43.8	8.8	44.2	68.2	59.2	1.5	(62.2)
	Total investment portfolio	331.4	287.0	6.4	447.0	343.6	294.0	5.3	(403.9)
	Developments and other sources not analysed above	0.6	(2.3)	–	0.1	0.7	(0.4)	–	(40.2)
Total portfolio		332.0	284.7	6.4	447.1	344.3	293.6	5.3	(444.1)
	As disclosed in note	2	2	27	11	2	2	27	11

The non-cash items included within net rental income reflect the amortisation of lease incentives and other costs and movements in accrued rents receivable.

3 SEGMENTAl ANAlySIS (Continued)

b: PROPERTy ASSETS by SEGMENT

					2010				2009
		Investment	Development		Capital	Investment	Development		Capital
		properties	properties	Total	expenditure	properties	properties	Total	expenditure
		£m	£m	£m	£m	£m	£m	£m	£m
	United Kingdom
Retail:	Shopping centres	2,243	11	2,254	26	1,966	12	1,978	290
	Retail parks	1,025	13	1,038	98	826	7	833	23
		3,268	24	3,292	124	2,792	19	2,811	313
Office:	City	518	59	577	136	345	57	402	15
	Other	66	1	67	2	189	5	194	–
		584	60	644	138	534	62	596	15
	Total United Kingdom	3,852	84	3,936	262	3,326	81	3,407	328
	Continental Europe
France
Retail		1,338	57	1,395	30	1,696	39	1,735	57
Office		–	–	–	–	–	–	–	(1)
	Total Continental Europe	1,338	57	1,395	30	1,696	39	1,735	56
Group
Retail		4,606	81	4,687	154	4,488	58	4,546	370
Office		584	60	644	138	534	62	596	14
Total		5,190	141	5,331	292	5,022	120	5,142	384

C: ANAlySIS OF EqUITy SHAREHOlDERS' FUNDS

						Equity shareholders'
	Assets employed		Net debt		funds
	2010 £m	2009 £m	2010 £m	2009 £m	2010 £m	2009 £m
United Kingdom	3,938.2	3,415.8	(694.1)	(797.9)	3,244.1	2,617.9
Continental Europe	1,336.2	1,657.9	(1,100.3)	(1,326.1)	235.9	331.8
	5,274.4	5,073.7	(1,794.4)	(2,124.0)	3,480.0	2,949.7

As part of the Group's foreign currency hedging programme, at 31 December 2010 the Group had currency swaps outstanding which are included in the analysis above. Further details are set out in note 21C.

Overview

notes to the accounts (continued)

4 ADMINISTRATION ExPENSES

Administration expenses include the following items:

STAFF COSTS, INClUDING DIRECTORS

		Note	2010 £m	2009 £m
Salaries and wages			21.6	18.9
Performance-related bonuses – payable in cash			5.1	3.3
	– payable in shares		0.8	0.8
			5.9	4.1
Other share-based employee remuneration			2.4	4.3
Social security			4.7	4.5
Net pension expense	– defined benefit plans	6	1.3	1.2
	– defined contribution plans	6	1.5	1.3
			2.8	2.5
			37.4	34.3

Of the above amount, £7.6 million (2009: £7.0 million) was recharged to tenants. Further details of share-based payment arrangements, some of which have performance conditions, are provided in the Remuneration Report on pages 46 to 51. In addition to the figures above, redundancy costs of £0.6 million (2009: £0.3 million) were incurred during the year.

Staff throughout the Company, including Executive Directors, participate in a performance-related bonus scheme, part payable in cash and part payable in shares. The Company also operates a number of share plans under which employees, including Executive Directors, are eligible to participate. Details of these schemes are set out in the Remuneration Report on pages 47 and 48. 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 48 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 which 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

		2010	2009
		Number	Number
Average number of staff		344	313
Staff recharged to tenants, included above		112	99
OTHER INFORMATION
		2010 £m	2009 £m
Auditors' remuneration:	Audit of the Company's annual accounts	0.2	0.2
	Audit of subsidiaries, pursuant to legislation	0.3	0.3
	Other services, pursuant to legislation	0.1	0.1
	Other services	0.1	0.4
	Other auditors' remuneration: Audit of subsidiaries, pursuant to legislation, and other services	0.1	0.1
	Depreciation of plant, equipment and owner-occupied property	1.4	1.5

Included in 'other services' in 2009 were fees of £0.4 million paid to the Group's auditors in respect of the rights issue which were deducted from the share premium account.

5 DIRECTORS' EMOlUMENTS

Full details of the Directors' emoluments, as required by the Companies Act 2006, are disclosed in the audited sections of the Remuneration Report on pages 46 to 51. The Executive Directors are considered to be 'Key Management' for the purposes of IAS 24 'Related party transactions'.

The Company has granted no credits, advances or guarantees of any kind to its Directors during the year.

6 PENSIONS

DEFINED bENEFIT PENSION SCHEMES

Hammerson Group Management limited Pension & life Assurance Scheme (the 'Scheme')

The Scheme is funded and the funds, which are administered by trustees, are independent of the Group's finances. The Scheme, which was closed to new entrants on 31 December 2002, provides a pension linked to final salary at retirement.

Unfunded Unapproved Retirement Scheme

The unfunded scheme provides pension benefits to two former Executive Directors; one in the UK and one in France. The amount of pension is linked to final salary at retirement. The accrued benefits in respect of the former Executive Directors remain within the scheme and are now paid directly by the Group.

US Unfunded Unapproved Retirement Scheme

The US unfunded pension commitment relates to obligations to four former employees and their spouses.

DEFINED CONTRIbUTION PENSION SCHEMES

The Company operates the UK funded approved Group Personal Pension Plan and the UK funded unapproved retirement benefit scheme, both of which are defined contribution pension schemes. The Group's total cost for the year relating to defined contribution pension schemes was £1.5 million (2009: £1.3 million).

PRINCIPAl ACTUARIAl ASSUMPTIONS USED FOR DEFINED bENEFIT PENSION SCHEMES

	31 December 2010 %	31 December 2009 %	31 December 2008 %	31 December 2007 %	31 December 2006 %
Discount rate for scheme liabilities	5.40	5.75	6.50	5.90	5.20
Expected return on plan assets	7.60	7.80	6.80	8.20	6.10
Increase in pensionable salaries	4.00	4.10	3.30	3.70	3.50
Increase in retail price index	3.50	3.60	2.80	3.20	3.00
Increase in pensions in payment	3.50	3.60	2.80	3.20	3.00
Mortality table	SAPS Light	SAPS	PA92	PA92	PA90 less
	CM1 0.5%	MC	C2020	C2020	6 years

The expected return on scheme assets has been calculated as the weighted rate of return on each asset class. The return on each asset class is taken as the market rate of return.

AMOUNTS RECOGNISED IN THE INCOME STATEMENT IN RESPECT OF DEFINED bENEFIT PENSION SCHEMES

	Included in income statement within	2010 £m	2009 £m
Current service cost	Administration expenses	1.3	1.2
Expected return on assets	Other interest payable	(3.7)	(2.8)
Interest cost	Other interest payable	3.8	3.1
Total pension expense		1.4	1.5

The Group expects to make regular contributions totalling £1.7 million to the Scheme in the next financial year.

notes to the accounts (continued)

6 PENSIONS (Continued)

AMOUNTS RECOGNISED IN THE bAlANCE SHEET IN RESPECT OF DEFINED bENEFIT PENSION SCHEMES

	2010 £m	2009 £m	2008 £m	2007 £m	2006 £m
Fair value of Scheme assets	51.0	47.4	42.4	47.0	43.0
Present value of Scheme obligations	(66.0)	(58.4)	(40.9)	(46.3)	(47.7)
	(15.0)	(11.0)	1.5	0.7	(4.7)
Present value of unfunded defined benefit obligations	(4.6)	(4.5)	(4.0)	(3.0)	(2.8)
Present value of US unfunded defined benefit obligations	(6.3)	(5.6)	(5.6)	(4.1)	(4.5)
Net pension liability	(25.9)	(21.1)	(8.1)	(6.4)	(12.0)
Analysed as:
Current liabilities	(0.7)	(0.2)
Non-current liabilities – Other payables	(25.2)	(20.9)

The actual return on the Scheme assets for the year ended 31 December 2010 was 0.1% (2009: 0.1%).

The present value of defined benefit obligations has been calculated by an external actuary. This was taken as the present value of accrued benefits and pensions in payment calculated using the projected unit credit method and allowing for projected compensation.

(25.9) (21.1)

ExPERIENCE GAINS AND lOSSES FOR CURRENT AND PRIOR yEARS

	2010 £m	2009 £m	2008 £m	2007 £m	2006 £m
Experience gains/(losses) on plan liabilities	0.3	(0.1)	(0.3)	(0.1)	(1.8)
Experience (losses)/gains on plan assets	(0.8)	3.9	(8.5)	1.1	1.5

ANAlySIS OF ClASSES OF DEFINED bENEFIT PENSION SCHEME ASSETS AS A PROPORTION OF THE TOTAl FAIR vAlUE OF ASSETS

	2010	2009
	%	%
Investments with target return linked to retail price index	100	100

CHANGES IN THE PRESENT vAlUE OF DEFINED bENEFIT PENSION SCHEME OblIGATIONS

	2010 £m	2009 £m
At 1 January	68.5	50.5
Service cost	1.3	1.2
Interest cost	3.8	3.1
Actuarial losses	5.7	18.2
Benefits	(2.3)	(3.5)
Exchange gains	–	(1.0)
At 31 December	77.0	68.5

6 PENSIONS (Continued)

CHANGES IN THE FAIR vAlUE OF DEFINED bENEFIT PENSION SCHEME ASSETS

	2010 £m	2009 £m
At 1 January	47.4	42.4
Expected return	3.6	2.8
Actuarial gains	0.9	3.9
Contributions by employer	0.8	1.1
Benefits	(1.6)	(2.8)
At 31 December	51.1	47.4

The cumulative net actuarial losses recognised in the consolidated statement of comprehensive income at 31 December 2010 were £24.2 million (2009: £19.4 million).

7 NET FINANCE COSTS

	2010	2009
	£m	£m
Interest on bank loans and overdrafts	9.9	31.7
Interest on other borrowings	98.5	102.9
Interest on obligations under finance leases	2.4	2.3
Other interest payable	2.4	2.1
Gross interest costs	113.2	139.0
Less: Interest capitalised	(1.7)	(10.0)
Finance costs	111.5	129.0
Change in fair value of interest rate swaps	(1.1)	(3.1)
Change in fair value of currency swaps outside hedge accounting designation	(0.6)	7.2
Change in fair value of derivatives	(1.7)	4.1
Distribution from other investments (note 15)	(4.6)	(13.1)
Other finance income	(5.2)	(5.5)
Finance income	(9.8)	(18.6)
Net finance costs	100.0	114.5

notes to the accounts (continued)

8 TAx

A: TAx CHARGE/(CREDIT)

	2010 £m	2009 £m
UK current tax	0.4	0.1
Foreign current tax	0.2	0.8
Total current tax charge	0.6	0.9
Deferred tax charge/(credit)	0.1	(103.6)
Tax charge/(credit)	0.7	(102.7)
	2010 £m	2009 £m
Deferred tax on items taken directly to equity	–	(4.4)

Current tax is reduced by the UK REIT and French SIIC tax exemptions.

b: TAx CHARGE/(CREDIT) RECONCIlIATION

	2010 £m	2009 £m
Profit/(Loss) before tax	620.2	(453.1)
Profit/(Loss) multiplied by the UK corporation tax rate of 28% (2009: 28%)	173.7	(126.9)
UK REIT tax exemption on net income before revaluations and disposals	(29.1)	(25.7)
UK REIT tax exemption on revaluations and disposals	(125.2)	72.6
SIIC tax exemption	(24.3)	66.1
Non-deductible and other items	5.6	16.6
Deferred tax released on introduction of foreign profits tax exemption	–	(105.4)
Tax charge/(credit)	0.7	(102.7)

C: CURRENT AND DEFERRED TAx MOvEMENTS

	1 January	Recognised in		Corporate	31 December
	2010	income	Tax paid	transactions	2010
	£m	£m	£m	£m	£m
Current tax	2.6	0.6	(1.2)	(0.8)	1.2
Deferred tax	0.4	0.1	–	–	0.5
	3.0	0.7	(1.2)	(0.8)	1.7
Analysed as:
Current assets: Corporation tax	(0.3)				(0.3)
Current liabilities: Tax	1.6				1.0
Non-current liabilities: Deferred tax	0.4				0.5
Non-current liabilities: Tax	1.3				0.5
	3.0				1.7

8 TAx (Continued)

D: UNRECOGNISED DEFERRED TAx

At 31 December 2010, the Group had unrecognised deferred tax assets as calculated at a tax rate of 27% (2009: 28%) of £83 million (2009: £78 million) for surplus UK revenue tax losses carried forward and £87 million (2009: £43 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 2010 the total of such gains was £168 million (2009: £153 million) and the potential tax effect before the offset of losses was £45 million (2009: £43 million).

If a UK REIT sells a property within three years of completion of development, the REIT exemption will not apply. At 31 December 2010, the value of such completed development properties was £854 million (2009: £746 million) and the potential tax charge that would arise if these properties were to be sold was £nil (2009: £nil).

E: Uk REIT STATUS

The Group elected to be treated as a UK REIT with effect from 1 January 2007. The UK REIT rules exempt the profits of the Group's UK property rental business from corporation tax. Gains on UK properties are also exempt from tax, provided they are not held for trading or sold in the three years after completion of development. The Group is otherwise subject to UK corporation tax.

As a REIT, Hammerson plc is required to pay Property Income Distributions equal to at least 90% of the Group's exempted net income. To remain a UK REIT there are a number of conditions to be met in respect of the principal company of the Group, the Group's qualifying activity and its balance of business.

F: FRENCH SIIC STATUS

Hammerson plc has been a French SIIC since 1 January 2004 and all the major French properties are covered by the SIIC tax-exempt regime. Income and gains are exempted from French tax but the French subsidiaries are required to distribute a proportion of their profits to Hammerson plc, which will then designate UK dividends paid to its shareholders as SIIC distributions. Dividend obligations will arise principally after property disposals but for the Hammerson group there will be a period of around four years after a disposal for dividends to be paid to shareholders.

Outstanding SIIC dividend obligations arising on disposals and earnings prior to 31 December 2010 amount to £203 million (2009: £53 million) and are expected to be settled within dividends paid by Hammerson plc over the following four years. A further £239 million (2009: £372 million) of dividends would be payable if the properties were realised at their 31 December 2010 values. Since 1 July 2009, qualifying foreign dividends have been exempt from UK tax and therefore no deferred tax provision is recognised.

If Hammerson plc ceased to qualify as a French SIIC before 1 January 2014, tax penalties of £199 million (2009: £190 million) would be payable. To continue to qualify, at least 80% of assets must be employed in property investment and, with limited temporary exceptions, no shareholder may hold 60% or more of the shares.

notes to the accounts (continued)

9 DIvIDENDS

The proposed final dividend of 8.8 pence per share was recommended by the Board on 21 February 2011 and, subject to approval by shareholders, is payable on 13 May 2011 to shareholders on the register at the close of business on 11 March 2011. This will be paid entirely as a PID, net of withholding tax if applicable, except to the extent that shareholders elect to receive the scrip dividend alternative. The aggregate amount of the 2010 final dividend is £62.3 million. This assumes no shareholders elect to receive the scrip dividend alternative and has been calculated using the total number of eligible shares outstanding at 31 December 2010. In 2009, the Company paid a second interim dividend of 8.5 pence per share in lieu of a final dividend.

The interim dividend of 7.15 pence per share, paid on 1 October 2010, was paid entirely as a normal dividend.

The total dividend for the year ended 31 December 2010 will be 15.95 pence per share (2009: 15.45 pence per share).

	PID pence per share	Non-PID pence per share	Total pence per share	Equity dividends 2010 £m	Equity dividends 2009 £m
Current year
2010 final dividend	8.8	–	8.8	–	–
2010 interim dividend	–	7.15	7.15	50.5	–
	8.8	7.15	15.95
Prior years
2009 second interim dividend*	8.5	–	8.5	41.0	–
2009 first interim dividend*	6.95	–	6.95	–	24.1
	15.45	–	15.45
2008 final dividend				–	44.3
Dividends as reported in the consolidated statement of changes in equity				91.5	68.4
2009 withholding tax (paid January 2010)				3.9	(3.9)
Dividends paid as reported in the consolidated cash flow statement				95.4	64.5

* The Company offered shareholders a scrip dividend alternative for these dividends. Where a shareholder elected to receive the scrip, the dividend ceased to qualify as a PID.

10 EARNINGS PER SHARE AND NET ASSET vAlUE PER SHARE

The European Public Real Estate Association (EPRA) has issued recommended bases for the calculation of certain per share information and these are included in the following tables.

A: EARNINGS PER SHARE

The calculations for earnings per share use the weighted average number of shares, which excludes those shares held in the Hammerson Employee Share Ownership Plan (note 25) and treasury shares (note 26), which are treated as cancelled.

			2010			2009
	Earnings £m	Shares million	Pence per share	Earnings £m	Shares million	Pence per share
Basic	615.4	705.8	87.2	(344.5)	637.2	(54.1)
Dilutive share options	–	0.2	–	–	–	–
Diluted	615.4	706.0	87.2	(344.5)	637.2	(54.1)
Adjustments:
Other net (gains)/losses (note 2)	(469.9)		(66.6)	595.7		93.5
Adjustment for associate (note 13A)	0.5		0.1	1.7		0.3
Change in fair value of derivatives (note 7)	(1.7)		(0.2)	4.1		0.6
Distribution from other investments (note 7)	(4.6)		(0.6)	(13.1)		(2.0)
Deferred tax charge/(credit) (note 8)	0.1		–	(103.6)		(16.3)
Equity minority interests in respect of the above	0.4		–	(9.7)		(1.5)
EPRA	140.2		19.9	130.6		20.5
Release of provision relating to formerly owned property (note 2)	–		–	(5.3)		(0.8)
Adjusted	140.2		19.9	125.3		19.7

Further commentary on earnings and net asset value per share is provided in the Financial Review on pages 27 to 30.

b: NET ASSET vAlUE PER SHARE

			2010			2009
	Equity shareholders' funds £m	Shares million	Net asset value per share £	Equity shareholders' funds £m	Shares million	Net asset value per share £
Basic	3,480.0	707.6	4.92	2,949.7	702.8	4.20
Company's own shares held in Employee
Share Ownership Plan	–	(0.4)	n/a	–	(0.4)	n/a
Treasury shares	–	(0.8)	n/a	–	(0.5)	n/a
Unexercised share options	4.2	0.9	n/a	4.5	1.0	n/a
Diluted	3,484.2	707.3	4.93	2,954.2	702.9	4.20
Fair value adjustment to borrowings	(77.5)		(0.11)	3.5		0.01
EPRA triple net	3,406.7		4.82	2,957.7		4.21
Fair value of derivatives	12.9		0.02	(1.9)		–
Fair value adjustment to borrowings	77.5		0.11	(3.5)		(0.01)
Deferred tax	0.5		–	0.4		–
Adjustment for associate (note 13B)	–		–	7.6		0.01
EPRA	3,497.6		4.95	2,960.3		4.21

notes to the accounts (continued)

11 INvESTMENT AND DEvElOPMENT PROPERTIES

		Investment properties	Development properties			Total
	Cost £m	Valuation £m	Cost £m	Valuation £m	Cost £m	Valuation £m
Balance at 1 January 2010	4,515.5	5,022.4	160.2	119.1	4,675.7	5,141.5
Exchange adjustment	(35.1)	(59.6)	(1.5)	(1.4)	(36.6)	(61.0)
Additions – Capital expenditure	47.0	47.0	26.3	26.3	73.3	73.3
– Asset acquisitions	219.1	219.1	–	–	219.1	219.1
	266.1	266.1	26.3	26.3	292.4	292.4
Disposals	(277.6)	(486.4)	(5.4)	(4.2)	(283.0)	(490.6)
Capitalised interest	0.7	0.7	1.0	1.0	1.7	1.7
Revaluation adjustment	–	447.0	–	0.1	–	447.1
Balance at 31 December 2010	4,469.6	5,190.2	180.6	140.9	4,650.2	5,331.1

		Investment properties		Development properties		Total
	Cost £m	Valuation £m	Cost £m	Valuation £m	Cost £m	Valuation £m
Balance at 1 January 2009	4,835.6	6,028.6	626.8	428.2	5,462.4	6,456.8
Exchange adjustment	(125.9)	(206.3)	(4.5)	(3.9)	(130.4)	(210.2)
Additions – Capital expenditure	110.0	110.0	87.1	87.1	197.1	197.1
– Asset acquisitions	150.5	150.5	36.2	36.2	186.7	186.7
	260.5	260.5	123.3	123.3	383.8	383.8
Disposals	(1,049.3)	(1,054.2)	(0.8)	(0.6)	(1,050.1)	(1,054.8)
Transfers	594.1	397.2	(594.1)	(397.2)	–	–
Capitalised interest	0.5	0.5	9.5	9.5	10.0	10.0
Revaluation adjustment	–	(403.9)	–	(40.2)	–	(444.1)
Balance at 31 December 2009	4,515.5	5,022.4	160.2	119.1	4,675.7	5,141.5

Properties are stated at market value as at 31 December 2010, valued by professionally qualified external valuers. In the United Kingdom, the Group's properties were valued by DTZ Debenham Tie Leung, Chartered Surveyors. In France, the Group's properties were valued by Cushman & Wakefield, Chartered Surveyors. The valuations have been prepared in accordance with the Royal Institution of Chartered Surveyors Valuation Standards and with IVA 1 of the International Valuation Standards.

Valuation fees are based on a fixed amount agreed between the Group and the valuers and are independent of the portfolio value. Summaries of the valuers' reports are available on the Company's website: www.hammerson.com

At 31 December 2010 the total amount of interest included in development properties was £1.0 million (2009: £nil million). Capitalised interest is calculated using the Group's average cost of borrowings, as appropriate to the currency profile of the development programme, which for 2010 was 4.2% (2009: 6.1%).

	Long Freehold leasehold £m £m	Total £m
Balance at 31 December 2010	3,176.2 2,154.9	5,331.1
Balance at 31 December 2009	3,438.8 1,702.7	5,141.5
	2010 £m	2009 £m
Capital commitments	54.8	60.2

At 31 December 2010, Hammerson's share of the capital commitments in respect of joint ventures, which is included in the table above, was £27.9 million (2009: £25.5 million).

	12 PlANT, EqUIPMENT AND OwNER-OCCUPIED PROPERTy

	Owner occupied property £m	Plant and equipment £m	Total £m
Cost or valuation
Balance at 1 January 2009	29.0	15.4	44.4
Exchange adjustment	–	(0.6)	(0.6)
Additions	–	0.3	0.3
Disposals	–	(0.2)	(0.2)
Revaluation adjustment	(6.4)	–	(6.4)
Balance at 31 December 2009/1 January 2010	22.6	14.9	37.5
Exchange adjustment	–	(0.2)	(0.2)
Additions	–	0.3	0.3
Disposals	–	(1.3)	(1.3)
Revaluation adjustment	4.5	–	4.5
Balance at 31 December 2010	27.1	13.7	40.8
Depreciation
Balance at 1 January 2009	–	(5.9)	(5.9)
Exchange adjustment	–	0.2	0.2
Disposals	–	0.1	0.1
Depreciation charge for the year	–	(1.5)	(1.5)
Balance at 31 December 2009/1 January 2010	–	(7.1)	(7.1)
Exchange adjustment	–	0.1	0.1
Disposals	–	1.0	1.0
Depreciation charge for the year	–	(1.4)	(1.4)
Balance at 31 December 2010	–	(7.4)	(7.4)
Book value at 31 December 2010	27.1	6.3	33.4
Book value at 31 December 2009	22.6	7.8	30.4

The Group occupies part of 10 Grosvenor Street, London W1, in which it holds a 50% joint venture interest. This property was valued as part of the portfolio valuation referred to in note 11. The fair value of owner-occupied property represents a nominal apportionment of the fair value of the property as a whole. The cost of owner-occupied property at 31 December 2010 was £12.0 million (2009: £12.0 million).

GOvernance

Overview

business and Financial review

notes to the accounts (continued)

13 INvESTMENT IN ASSOCIATE

On 14 December 2010, the Group sold its interest in Bishops Square Holdings Limited, a company in which the Group held a 25% interest.

A: SHARE OF RESUlTS OF ASSOCIATE

	2010 £m	2009 £m
Gross rental income	8.7	5.2
Other operating profits and finance costs	2.0	0.9
Revaluation losses on investment properties	–	(1.2)
Change in fair value of derivatives	0.1	(0.5)
Deferred tax charge	(0.6)	–
	(0.5)	(1.7)
Profit/(Loss) after tax for the year	1.5	(0.8)

b: SHARE OF ASSETS AND lIAbIlITIES OF ASSOCIATE

	31 December	31 December
	2010	2009
	£m	£m
Investment properties	–	120.2
Other assets	–	4.4
Total assets	–	124.6
Borrowings	–	(88.6)
Fair value of derivatives	–	(7.6)
Other liabilities	–	(18.0)
Total liabilities	–	(114.2)
Net assets	–	10.4

14 jOINT vENTURES

As at 31 December 2010 certain property and corporate interests, being jointly controlled entities, have been proportionately consolidated, and the significant interests are set out in the following table:

	Group share
	%
Investments
Brent Cross Shopping Centre	41.2
Brent South Shopping Park	40.6
Bristol Alliance Limited Partnership	50
Queensgate Limited Partnership	50
Retail Property Holdings Limited	50
SCI ESQ (Espace Saint Quentin)	25
SCI RC Aulnay 1 and SCI RC Aulnay 2 (O'Parinor)	49
The Bull Ring Limited Partnership	33.33
The Grosvenor Street Limited Partnership	50
The Martineau Galleries Limited Partnership	33.33
The Oracle Limited Partnership	50
The Highcross Limited Partnership	60
The West Quay Limited Partnership	50
125 OBS Limited Partnership	50
10 Gresham Street LLP	30
Developments
Bishopsgate Goodsyard Regeneration Limited	50
Wensum Developments Limited	50

The Group's interest in The Highcross Limited Partnership does not confer the majority of voting rights nor the right to exercise dominant influence over the partnership. Instead the partnership is under the joint control of Hammerson and its respective partner. Consequently, the Group's interest is not treated as a subsidiary, but is accounted for by proportional consolidation.

The summarised income statements and balance sheets on pages 80 and 81, show the proportion of the Group's results, assets and liabilities which are derived from its joint ventures.

Overview

GOvernance

		Bristol						Retail
	Brent	Alliance Limited	Bull Ring Limited	Oracle Limited	Queensgate Limited	Highcross Limited	West Quay Limited	Property Holdings	SCI RC			Total
	Cross1 £m	Partnership £m	Partnership £m	Partnership £m	Partnership £m	Partnership £m	Partnership £m	Limited £m	Aulnay2 £m	SCI ESQ3 £m	Other £m	2010 £m
Net rental income	17.8	16.3	15.2	12.1	6.2	12.4	12.4	8.2	1.7	0.6	8.8	111.7
Administration expenses	–	(0.5)	–	–	(0.1)	–	–	(0.1)	–	–	(0.2)	(0.9)
Operating profit before
other net gains/(losses)	17.8	15.8	15.2	12.1	6.1	12.4	12.4	8.1	1.7	0.6	8.6	110.8
Other net gains/(losses)	52.6	25.1	53.9	35.6	5.6	24.6	34.5	15.2	(9.1)	0.9	9.1	248.0
Net finance costs	–	(0.3)	–	0.1	–	0.1	(0.2)	–	–	–	(2.9)	(3.2)
Profit/(Loss) before tax	70.4	40.6	69.1	47.8	11.7	37.1	46.7	23.3	(7.4)	1.5	14.8	355.6

AS bAlANCE SHEETS	AT 31 DECE	MbER 2010
	Cross1 Brent £m	Alliance Partnership Bristol Limited £m	Bull Ring Limited Partnership £m	Oracle Limited Partnership £m	Queensgate Partnership Limited £m	Highcross Limited Partnership £m	West Quay Limited Partnership £m	Property Holdings Retail Limited £m	Aulnay2 SCI RC £m	SCI ESQ3 £m	Other £m	2010 Total £m
Non-current assets
Investment and development
properties at valuation	348.2	294.6	287.2	243.3	105.6	277.3	232.3	166.8	181.8	51.5	242.2	2,430.8
Interests in leasehold
properties	–	7.3	–	–	–	–	2.1	–	–	–	1.0	10.4
Receivables	–	–	–	–	–	–	–	–	–	–	1.8	1.8
	348.2	301.9	287.2	243.3	105.6	277.3	234.4	166.8	181.8	51.5	245.0	2,443.0
Current assets
Other current assets	5.4	2.0	1.0	2.2	0.8	2.6	1.9	0.9	1.2	0.3	3.5	21.8
Cash and deposits	1.9	7.3	4.2	4.5	3.5	3.9	3.8	3.1	1.0	0.6	4.1	37.9
	7.3	9.3	5.2	6.7	4.3	6.5	5.7	4.0	2.2	0.9	7.6	59.7
Current liabilities
Other liabilities	(15.3)	(8.4)	(4.3)	(4.5)	(1.0)	(7.3)	(5.0)	(3.4)	(1.9)	(1.2)	(6.4)	(58.7)
	(15.3)	(8.4)	(4.3)	(4.5)	(1.0)	(7.3)	(5.0)	(3.4)	(1.9)	(1.2)	(6.4)	(58.7)
Non-current liabilities
Borrowings	–	–	–	–	–	–	–	–	–	–	(65.3)	(65.3)
Other liabilities	–	(7.3)	–	–	–	–	(2.1)	–	(1.6)	–	(2.8)	(13.8)
	–	(7.3)	–	–	–	–	(2.1)	–	(1.6)	–	(68.1)	(79.1)
Net assets	340.2	295.5	288.1	245.5	108.9	276.5	233.0	167.4	180.5	51.2	178.1	2,364.9

1Includes Brent Cross Shopping Centre and Brent South Shopping Park.

Reflects the Group's disposal in October 2010 of a 51% interest in O'Parinor shopping centre.

3 Reflects the Group's disposal in October 2010 of a 75% interest in Espace Saint Quentin shopping centre.

Other than as shown above, the joint ventures are funded by the Company and the relevant partners. 'Other net gains/(losses)' principally represent valuation changes on investment properties.

notes to the accounts (continued)

vENTURES (Continued)

14

jOINT

		Queensgate
		Oracle
		Bull Ring
MbER 2009 MENTS FOR THE yEAR ENDED 31 DECE ME STATE INCO	Bristol	Alliance

jOINT

vENTURES (Continued)

14

		Bristol						Retail2
		Alliance	Bull Ring	Oracle	Queensgate	Highcross	West Quay	Property
	Brent	Limited	Limited	Limited	Limited	Limited	Limited	Holdings		Total
	Cross1	Partnership	Partnership	Partnership	Partnership	Partnership	Partnership	Limited	Other	2009
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Net rental income	16.7	13.6	13.9	11.2	7.1	11.3	12.1	0.2	6.0	92.1
Administration expenses	–	(0.2)	(0.1)	–	(0.1)	–	–	–	(0.2)	(0.6)
Operating profit before other net (losses)/gains	16.7	13.4	13.8	11.2	7.0	11.3	12.1	0.2	5.8	91.5
Other net (losses)/gains	(28.6)	(24.4)	4.1	(10.9)	(24.5)	(29.7)	(14.9)	–	(28.4)	(157.3)
Net finance costs	–	(0.4)	–	0.1	–	–	(0.2)	–	(2.4)	(2.9)
(Loss)/Profit before tax	(11.9)	(11.4)	17.9	0.4	(17.5)	(18.4)	(3.0)	0.2	(25.0)	(68.7)

bAlANCE SHEETS AS AT 31 DECEMbER 2009

	Cross1 Brent £m	Bristol Alliance Limited Partnership £m	Partnership Bull Ring Limited £m	Oracle Limited Partnership £m	Queensgate Limited Partnership £m	Highcross Partnership Limited £m	West Quay Limited Partnership £m	Retail2 Property Holdings Limited £m	Other £m	Total 2009 £m
Non-current assets
Investment and development properties at valuation	293.5	269.3	233.5	208.3	100.0	253.5	198.2	151.5	172.9	1,880.7
Interests in leasehold properties	–	7.3	–	–	–	–	2.1	–	0.5	9.9
	293.5	276.6	233.5	208.3	100.0	253.5	200.3	151.5	173.4	1,890.6
Current assets
Other current assets	6.4	3.2	1.6	0.5	1.1	1.7	0.3	0.3	4.3	19.4
Cash and deposits	2.6	4.4	5.1	3.6	4.7	2.8	4.7	3.5	5.5	36.9
	9.0	7.6	6.7	4.1	5.8	4.5	5.0	3.8	9.8	56.3
Current liabilities
Borrowings	–	–	–	–	–	–	–	–	(62.9)	(62.9)
Other liabilities	(11.4)	(10.3)	(4.9)	(3.2)	(1.1)	(6.2)	(4.2)	(4.3)	(6.3)	(51.9)
	(11.4)	(10.3)	(4.9)	(3.2)	(1.1)	(6.2)	(4.2)	(4.3)	(69.2)	(114.8)
Non-current liabilities
Other liabilities	–	(7.3)	–	–	–	–	(2.1)	–	(0.5)	(9.9)
	–	(7.3)	–	–	–	–	(2.1)	–	(0.5)	(9.9)
Net assets	291.1	266.6	235.3	209.2	104.7	251.8	199.0	151.0	113.5	1,822.2

Includes Brent Cross Shopping Centre and Brent South Shopping Park.

Reflects the Group's acquisition in December 2009 of a 50% interest in Retail Property Holdings Limited, which owns Silverburn Shopping Centre, Glasgow.

Other than as shown above, the joint ventures are funded by the Company and the relevant partners. 'Other net (losses)/gains' principally represent valuation changes on investment properties. notes to the accounts (continued)

15 OTHER INvESTMENTS

Available for sale investments	2010 £m	2009 £m
Value Retail Investors Limited Partnerships	74.8	56.4
Investments in Value Retail plc and related companies	57.3	57.5
	132.1	113.9
Other investments	1.1	0.1
	133.2	114.0

The Group has an effective 35.6% interest in Value Retail Investors Limited Partnership I and an effective 26.6% interest in Value Retail Investors Limited Partnership II, both of which have interests in a designer outlet centre in Bicester, in the United Kingdom. The total cost of the investments was £7.8 million (2009: £7.8 million). These investments are included at fair value, based on the market value of the underlying property, at 31 December 2010 of £74.8 million (2009: £56.4 million), the property elements of which have been reviewed by DTZ Debenham Tie Leung, Chartered Surveyors. These investments have neither been consolidated, nor equity accounted, within the Group accounts as the Group does not have significant influence over the management of the partnerships. Investments in Value Retail plc and related companies are included at fair value. The cost of these investments was £37.4 million (2009: £37.6 million).

During the year, the Company received a special distribution of £4.6 million (2009: £13.1 million) from the Value Retail Investors Limited Partnerships, which is included in finance income (see note 7).

16 RECEIvAblES: NON-CURRENT ASSETS

	2010	2009
	£m	£m
Loans receivable	41.9	27.6
Loans to associate	–	30.1
Other receivables	3.3	3.8
	45.2	61.5

Loans receivable includes £28.2 million (2009: £27.6 million) representing a loan of €30 million plus cumulative accrued interest to SCI Quantum, the purchaser in 2009 of a property in France. The loan is secured by way of a second charge on the property, bears interest at 6.1% and is for a term of two years from June 2009, extendable at the option of the purchaser for a further two years.

Loans receivable also includes a loan of €16 million (£13.7 million) to Value Retail plc bearing interest at 10% and maturing on 22 August 2012. At 31 December 2009, this loan, translated at £14.2 million, was included within current receivables (see note 17).

17 RECEIvAblES: CURRENT ASSETS

	2010 £m	2009 £m
Trade receivables	38.9	35.1
Loans receivable	–	14.2
Other receivables	37.6	37.3
Corporation tax	0.3	0.3
Prepayments	3.9	3.7
Fair value of currency swaps	–	12.1
	80.7	102.7

Trade receivables are shown after deducting a provision for bad and doubtful debts of £11.9 million (2009: £11.1 million) as set out in the table opposite. The movement in the provision during the year was recognised entirely in income. Credit risk is discussed in note 21F.

17 RECEIvAblES: CURRENT ASSETS (Continued)

	Gross receivable £m	Provision £m	2010 Net receivable £m	Gross receivable £m	Provision £m	2009 Net receivable £m
Not yet due	22.8	–	22.8	19.1	–	19.1
1-30 days overdue	7.5	0.6	6.9	10.2	1.0	9.2
31-60 days overdue	2.3	0.1	2.2	0.3	0.1	0.2
61-90 days overdue	0.7	0.2	0.5	0.9	0.3	0.6
91-120 days overdue	2.9	1.6	1.3	2.5	1.8	0.7
More than 120 days overdue	14.6	9.4	5.2	13.2	7.9	5.3
	50.8	11.9	38.9	46.2	11.1	35.1

18 CASH AND DEPOSITS

	2010 £m	2009 £m
Cash at bank	71.8	71.0
Short-term deposits	54.4	111.9
	126.2	182.9
Currency profile
Sterling	109.5	87.9
Euro	16.7	95.0
	126.2	182.9

Short-term deposits principally comprise deposits placed on money markets with rates linked to LIBOR for maturities of not more than one month, at an average rate of 0.5% (2009: 0.2%). Such deposits are considered to be cash equivalents. Included in the cash balance is £1.6 million (2009: £3.6 million) which may be used only in relation to certain development projects or in respect of secured borrowings.

19 PAyAblES: CURRENT lIAbIlITIES

	2010 £m	2009 £m
Trade payables	64.8	59.4
Other payables	128.9	138.0
Accruals	26.4	29.1
Fair value of interest rate swaps	–	1.9
	220.1	228.4

20 bORROwINGS

A: MATURITy

	Bank loans	Other	2010	2009
	and overdrafts	borrowings	Total	Total
	£m	£m	£m	£m
After five years	–	1,040.0	1,040.0	1,659.3
From two to five years	239.3	598.5	837.8	596.8
From one to two years	38.4	–	38.4	–
Due after more than one year	277.7	1,638.5	1,916.2	2,256.1
Due within one year	–	4.4	4.4	62.9
	277.7	1,642.9	1,920.6	2,319.0

At 31 December 2009 and 2010 no borrowings due after five years were repayable by instalments.

At 31 December 2010, the fair value of currency swaps was a liability of £4.4 million which is included in the table above. At 31 December 2009, the fair value of currency swaps was an asset of £12.1 million which was included in current receivables (see note 17).

notes to the accounts (continued)

20 bORROwINGS (Continued)

b: ANAlySIS

2010 £m	2009 £m
Unsecured
£200 million 7.25% Sterling bonds due 2028 197.7	197.7
£300 million 6% Sterling bonds due 2026 296.8	296.7
£250 million 6.875% Sterling bonds due 2020 247.5	247.3
£300 million 5.25% Sterling bonds due 2016 298.0	297.6
€700 million 4.875% Euro bonds due 2015 598.5	620.0
Bank loans and overdrafts 212.4	596.8
1,850.9	2,256.1
Fair value of currency swaps 4.4	(12.1)
1,855.3	2,244.0
Secured
Sterling variable rate mortgage due 2015 65.3	–
Sterling variable rate mortgage due 2010 –	62.9
65.3	62.9
1,920.6	2,306.9

Security for secured borrowings as at 31 December 2010 is provided by a first legal charge on a property, for which the Group's share of the carrying value is £115.0 million.

C: UNDRAwN COMMITTED FACIlITIES

	2010	2009
	£m	£m
Expiring within one year	40.0	27.0
Expiring between one and two years	746.5	70.0
Expiring after more than two years	126.9	487.3
	913.4	584.3

D: INTEREST RATE AND CURRENCy PROFIlE

		Fixed rate borrowings		Fair value Other of currency variable rate swaps borrowings		2010 Total
	%	Years	£m	£m	£m	£m
Sterling	6.0	10	1,200.7	(501.3)	104.1	803.5
Euro	4.9	4	598.5	505.7	12.9	1,117.1
	5.6	8	1,799.2	4.4	117.0	1,920.6

			Fixed rate borrowings	Fair value of currency swaps	Other variable rate borrowings	2009 Total
	%	Years	£m	£m	£m	£m
Sterling	6.2	11	1,187.3	(485.6)	184.1	885.8
Euro	4.9	5	620.0	473.5	327.6	1,421.1
	5.7	9	1,807.3	(12.1)	511.7	2,306.9

The analysis above reflects the effect of currency and interest rate swaps in place at 31 December 2009 and 2010, further details of which are set out in note 21.

Variable rate borrowings bear interest based on LIBOR, with the exception of certain euro borrowings whose interest costs are linked to EURIBOR.

21 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 uncertainties' on page 15.

The Group's risk management policies and practices with regard to financial instruments are as follows:

A: DEbT MANAGEMENT

The Group generally borrows on an unsecured basis on the strength of its covenant in order to maintain operational flexibility. Borrowings are arranged to ensure an appropriate maturity profile and to maintain short-term liquidity. Acquisitions may be financed initially using short-term funds before being refinanced for the longer-term when market conditions are appropriate. Short-term funding is raised principally through syndicated revolving credit facilities from a range of banks and financial institutions with whom Hammerson maintains strong working relationships. Long-term debt mainly comprises the Group's fixed rate unsecured bonds.

b: INTEREST RATE MANAGEMENT

Interest rate swaps are used to alter the interest rate basis of the Group's debt, allowing changes from fixed to variable rates or vice versa. Clear guidelines exist for the Group's ratio of fixed to variable rate debt and management regularly reviews the interest rate profile against these guidelines.

At 31 December 2010, the Group had interest rate swaps of £100.0 million (2009: £100.0 million) and £60.7 million (2009: £nil) maturing in 2013 and 2015 respectively. Under these swaps the Group pays interest at fixed rates of 4.725% and 2.455% respectively and receives interest linked to LIBOR. At 31 December 2009, the Group had interest rate swaps of £47.9 million maturing in 2010. Under these swaps, the Group paid interest at a fixed rate of 6.275% and received interest at variable rates linked to LIBOR.

At 31 December 2010, the fair value of interest rate swaps was a liability of £8.5 million (2009: £10.2 million).

At 31 December 2009, the Group also had £300 million of interest rate swap options whereby the counterparties could require the Group to pay LIBOR and receive a fixed rate of 5.25% over the period 15 December 2010 to 15 December 2016. These options were unexercised and matured on 15 December 2010.

The Group does not hedge account for its interest rate swaps and states them at fair value with changes in fair value included in the income statement.

C: FOREIGN CURRENCy MANAGEMENT

The impact of foreign exchange movements is managed by financing the cost of acquiring euro denominated assets with euro borrowings. The Group borrows in euros and uses currency swaps to match foreign currency assets with foreign currency liabilities.

To manage the foreign currency exposure on its net investments in subsidiaries in Continental Europe, the Group has designated all euro borrowings, including euro denominated bonds and currency swaps, as hedges. The carrying amount of the bonds at 31 December 2010 was £598.5 million (2009: £620.0 million) and their fair value was £622.7 million (2009: £608.8 million).

At 31 December 2010, the Group had currency swaps of £501.3 million, being €590.1 million sold forward against sterling: €187.5 million for value in January 2011 at a rate of £1 = €1.182 and €402.6 million for value in February 2011, at a rate of £1 = €1.175. At 31 December 2009, the Group had swaps of £485.6 million, being €532.9 million sold forward against sterling: €266.7 million for value in March 2010, at a rate of £1 = €1.090 and €266.2 million for value in June 2010, at a rate of £1 = €1.105. The fair value of currency swaps is shown in note 21I.

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 page 31.

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 whilst 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 21A above.

notes to the accounts (continued)

21 FINANCIAl INSTRUMENTS AND RISk MANAGEMENT (Continued)

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 2010 was 8.8 years (2009: 8.6 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 Business Review on page 23.

Loans receivable and other receivables include balances due from joint venture partners, available for sale investments and VAT receivables. These items do not give rise to significant credit risk.

The receivables in notes 16 and 17 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 17.

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 2010, the Group's maximum exposure to credit risk was £252.1 million (2009: £347.1 million).

G: FINANCIAl MATURITy ANAlySIS

The following table provides a maturity analysis for income-earning financial assets and interest-bearing financial liabilities.

				2010 Maturity
Total £m	Less than one year £m	One to two years £m	Two to five years £m	More than five years £m
(126.2)	(126.2)	–	–	–
65.3	–	0.7	64.6	–
1,040.0	–	–	–	1,040.0
598.5	–	–	598.5	–
(160.7)	–	–	(160.7)	–
160.7	–	–	160.7	–
212.4	–	37.7	174.7	–
4.4	4.4	–	–	–
1,794.4	(121.8)	38.4	837.8	1,040.0
(41.9)	–	(13.7)	(28.2)	–
1,752.5	(121.8)	24.7	809.6	1,040.0

21 FINANCIAl INSTRUMENTS AND RISk MANAGEMENT (Continued)

					2009 Maturity
	Total £m	Less than one year £m	One to two years £m	Two to five years £m	More than five years £m
Cash and deposits	(182.9)	(182.9)	–	–	–
Sterling variable rate secured bank loan	62.9	62.9	–	–	–
Unsecured bonds
Sterling fixed rate bonds	1,039.3	–	–	–	1,039.3
Euro fixed rate bonds	620.0	–	–	–	620.0
Interest rate swaps (variable)	(147.9)	(47.9)	–	(100.0)	–
Interest rate swaps (fixed)	147.9	47.9	–	100.0	–
Unsecured bank loans and overdrafts	596.8	–	–	596.8	–
Fair value of currency swaps	(12.1)	(12.1)	–	–	–
Net debt	2,124.0	(132.1)	–	596.8	1,659.3
Loans receivable	(41.8)	(14.2)	(27.6)	–	–
Loans to associate – interest bearing	(21.0)	–	–	(21.0)	–
	2,061.2	(146.3)	(27.6)	575.8	1,659.3

H: SENSITIvITy ANAlySIS

In managing interest rate and currency risks the Group aims to reduce the impact of short-term fluctuations on the Group's earnings. Over the longer-term, however, permanent changes in foreign exchange and interest rates may have an impact on consolidated earnings.

At 31 December 2010, it is estimated that an increase of one percentage point in interest rates would have increased the Group's annual profit before tax by £3.3 million (2009: increase of £0.1 million) and a decrease of one percentage point in interest rates would have decreased the Group's annual profit before tax by £3.5 million (2009: decrease of £0.6 million). There would have been no effect on amounts recognised directly in equity. The sensitivity has been calculated by applying the interest rate change to the variable rate borrowings and loans receivable, net of interest rate swaps, at the year end. The decrease in the Group's annual profit before tax with a reduction in interest rates is due to the change in fair value of interest rate swaps having a greater charge than the saving on floating rate borrowings.

It is estimated that, in relation to financial instruments alone, a 10% strengthening of sterling against the euro, would have increased the net gain taken directly to equity for the year ended 31 December 2010 by £101.5 million. A 10% weakening of sterling against the euro would have decreased the net gain taken directly to equity for the year ended 31 December 2010 by £124.1 million. For the year ended 31 December 2009, a 10% strengthening of sterling against the euro would have increased the net gain taken directly to equity by £122.3 million. A 10% weakening of sterling against the euro would have decreased the net gain taken directly to equity by £149.5 million. However, these effects would be more than offset by the effect of exchange rate changes on the euro denominated net assets included in the Group's financial statements.

In relation to financial instruments alone, there would have been no impact on the Group's profit before tax. This has been calculated by retranslating the year end euro denominated financial instruments at the year end foreign exchange rate changed by 10%. Forward foreign exchange contracts have been included in this estimate.

I: FAIR vAlUES OF FINANCIAl INSTRUMENTS

The fair values of borrowings, currency and interest rate swaps, together with their carrying amounts included in the balance sheet, are as follows:

		2010		2009
	Book value £m	Fair value £m	Book value £m	Fair value £m
Borrowings, excluding currency swaps	1,916.2	1,993.7	2,319.0	2,314.2
Currency swaps	4.4	4.4	(12.1)	(12.1)
Total	1,920.6	1,998.1	2,306.9	2,302.1
Interest rate swaps	8.5	8.5	10.2	10.2

At 31 December 2010, the fair value of financial instruments exceeded their book value by £77.5 million equivalent to 11 pence per share on an adjusted net asset value per share basis. At 31 December 2009, the book value of financial instruments exceeded their fair value by £4.8 million, equivalent to 1 pence per share on an adjusted net asset value per share basis.

Overview

notes to the accounts (continued)

21 FINANCIAl INSTRUMENTS AND RISk MANAGEMENT (Continued)

The fair values of the Group's borrowings have been estimated on the basis of quoted market prices, representing Level 1 fair value measurements as defined by IFRS 7 Financial Instruments: Disclosures. The fair values of the Group's outstanding interest rate swaps have been estimated by calculating the present value of future cash flows, using appropriate market discount rates, representing Level 2 fair value measurements as defined by IFRS 7. The fair value of the Group's currency swaps have 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 18. 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 16 and 17. The amounts are presented net of allowances for doubtful receivables and allowances for impairment are made where appropriate. Details of the Group's investments, stated at fair value, are set out in notes 13 and 15. The table below reconciles the opening and closing balances for Level 3 fair value measurements of available for sale investments:

	Available
	for sale
	investments
	£m
Balance at 1 January 2010	113.9
Total gains/(losses)
– in profit and loss	(0.2)
– in other comprehensive income	18.4
Balance at 31 December 2010	132.1

j: CARRyING AMOUNTS, GAINS AND lOSSES OF FINANCIAl INSTRUMENTS

The carrying amounts, and net gains or net losses, of financial instruments are as follows:

				2010			2009
	Notes	Carrying amount £m	Gain/ (Loss) to income £m	Gain/ (Loss) to equity £m	Carrying amount £m	Gain/ (Loss) to income £m	Gain/ (Loss) to equity £m
Trade receivables	17	38.9	(0.8)	–	35.1	(5.2)	–
Cash and deposits	18	126.2	0.5	–	182.9	2.4	–
Loans and receivables		165.1	(0.3)	–	218.0	(2.8)	–
Other investments	15	133.2	(0.2)	18.4	114.0	(0.8)	3.9
Loans receivable	16,17	41.9	2.3	–	41.8	2.2	–
Loans to associate – interest bearing	16	–	1.4	–	21.0	0.8	–
Available for sale		175.1	3.5	18.4	176.8	2.2	3.9
Interest rate swaps	19,23	(8.5)	(4.5)	–	(10.2)	(7.8)	–
Liabilities at fair value (held for trading)		(8.5)	(4.5)	–	(10.2)	(7.8)	–
Currency swaps	20	(4.4)	0.3	13.2	12.1	(1.8)	54.7
Derivatives in effective hedging relationships		(4.4)	0.3	13.2	12.1	(1.8)	54.7
Trade payables	19	(187.0)	–	–	(214.0)	–	–
Borrowings, excluding currency swaps	20	(1,916.2)	(102.3)	37.6	(2,319.0)	(112.0)	121.6
Finance leases	22	(30.3)	(2.4)	–	(22.8)	(2.3)	–
Liabilities at amortised cost		(2,133.5)	(104.7)	37.6	(2,555.8)	(114.3)	121.6
Total for financial instruments		(1,806.2)	(105.7)	69.2	(2,159.1)	(124.5)	180.2

The total loss to income for the year ended 31 December 2010 in respect of interest rate swaps shown above includes the gain arising from the change in fair value of £1.1 million (2009: £3.1 million), included within net finance costs in note 7.

21 FINANCIAl INSTRUMENTS AND RISk MANAGEMENT (Continued)

The table below reconciles the net gain or loss taken through income to net finance costs:

	Notes	2010 £m	2009 £m
Total loss on financial instruments to income		(105.7)	(124.5)
Add back: Trade receivables loss		0.8	5.2
Other interest income		2.6	2.0
Loss/(Gain) to income on currency swaps outside hedge accounting designation	7	0.6	(7.2)
Interest capitalised	7	1.7	10.0
Net finance costs	7	(100.0)	(114.5)

No financial instruments were designated as at fair value through profit and loss on initial recognition. No financial instruments are classified as held to maturity. Financial instruments classified as held for trading are hedging instruments that are not designated for hedge accounting.

The total of the net equity gains in relation to currency swaps of £13.2 million (2009: £54.7 million) and borrowings of £37.6 million (2009: £121.6 million) is £50.8 million, as shown in the movement in the hedging reserve in the consolidated statement of changes in equity.

k: MATURITy ANAlySIS OF FINANCIAl lIAbIlITIES

The remaining contractual maturities are as follows:

2010	Payables £m	Interest rate swaps £m	Currency swaps £m	Financial liability cash flows £m	Finance leases £m	2010 Total £m
Notes			20D	21L	22
After 25 years	–	–	–	–	359.7	359.7
From five to 25 years	8.4	–	–	1,499.3	51.9	1,559.6
From two to five years	3.3	0.3	–	1,119.2	10.4	1,133.2
From one to two years	6.1	3.5	–	139.7	2.6	151.9
Due after more than one year	17.8	3.8	–	2,758.2	424.6	3,204.4
Due within one year	169.2	4.5	505.7	100.1	2.6	782.1
	187.0	8.3	505.7	2,858.3	427.2	3,986.5

2009	Payables £m	Interest rate swaps £m	Currency swaps £m	Financial liability cash flows £m	Finance leases £m	2009 Total £m
Notes			20D	21L	22
After 25 years	–	–	–	–	318.2	318.2
From five to 25 years	8.3	–	–	2,200.5	43.6	2,252.4
From two to five years	10.6	5.5	–	894.3	8.7	919.1
From one to two years	18.7	4.7	–	104.6	2.2	130.2
Due after more than one year	37.6	10.2	–	3,199.4	372.7	3,619.9
Due within one year	176.4	6.1	473.5	164.5	2.2	822.7
	214.0	16.3	473.5	3,363.9	374.9	4,442.6

At 31 December 2010, the currency swap liability is offset by an asset of £501.3 million (2009: £485.6 million), so that the fair value of the currency swaps is a liability of £4.4 million (2009: asset of £12.1 million) as reported in note 21I.

Based on market conditions existing at 31 December 2009, the potential cash flows arising from the counterparties exercising their options to reinstate the £300 million interest rate swaps from December 2010 to December 2016, as referred to in note 21B, has been excluded from the maturity analysis above for 2009. These options matured on 15 December 2010.

notes to the accounts (continued)

21 FINANCIAl INSTRUMENTS AND RISk MANAGEMENT (Continued)

l: RECONCIlIATION OF MATURITy ANAlySES IN NOTES 20 AND 21k

The maturity analysis in note 21K shows contractual non-discounted cash flows for all financial liabilities, including interest payments, but excluding the fair value of the currency swaps, which is not a cash flow item. The following table reconciles the borrowings column in note 20 with the financial maturity analysis in note 21K.

2010	Borrowings £m	Fair value of currency swaps £m	Interest £m	Unamortised borrowing costs £m	Financial liability cash flows £m
Notes	20A	20B			21K
From five to 25 years	1,040.0	–	449.3	10.0	1,499.3
From two to five years	837.8	–	278.9	2.5	1,119.2
From one to two years	38.4	–	101.1	0.2	139.7
Due after more than one year	1,916.2	–	829.3	12.7	2,758.2
Due within one year	4.4	(4.4)	100.1	–	100.1
	1,920.6	(4.4)	929.4	12.7	2,858.3

2009	Borrowings £m	Interest £m	Unamortised borrowing costs £m	Financial liability cash flows £m
Notes	20A			21K
From five to 25 years	1,659.3	528.8	12.4	2,200.5
From two to five years	596.8	296.6	0.9	894.3
From one to two years	–	104.6	–	104.6
Due after more than one year	2,256.1	930.0	13.3	3,199.4
Due within one year	62.9	101.5	0.1	164.5
	2,319.0	1,031.5	13.4	3,363.9

M: CAPITAl STRUCTURE

Information on the Group's capital structure is provided in the Financial Review on page 31.

22 OblIGATIONS UNDER FINANCE lEASES

Finance lease obligations in respect of rents payable on leasehold properties are payable as follows:

			2010			2009
	Minimum lease payments £m	Interest £m	Present value of minimum lease payments £m	Minimum lease payments £m	Interest £m	Present value of minimum lease payments £m
After 25 years	359.7	(329.6)	30.1	318.2	(295.6)	22.6
From five to 25 years	51.9	(51.7)	0.2	43.6	(43.4)	0.2
From two to five years	10.4	(10.4)	–	8.7	(8.7)	–
From one to two years	2.6	(2.6)	–	2.2	(2.2)	–
Within one year	2.6	(2.6)	–	2.2	(2.2)	–
	427.2	(396.9)	30.3	374.9	(352.1)	22.8

23 PAyAblES: NON-CURRENT lIAbIlITIES

	2010 £m	2009 £m
Net pension liability	25.2	20.9
Other payables	21.9	40.6
Fair value of interest rate swaps	8.5	8.3
	55.6	69.8

24 SHARE CAPITAl

		Called up, allotted and fully paid
	2010	2009
	£m	£m
Ordinary shares of 25p each	176.9	175.7
		Number
Movements in issued share capital
Number of shares in issue at 1 January 2010		702,809,926
Issued in respect of scrip dividend		4,709,275
Share options exercised – Share option scheme		58,389
Share options exercised – Save As You Earn		1,266
Number of shares in issue at 31 December 2010		707,578,856

The number of shares in issue at the balance sheet date included 800,000 (2009: 500,000) shares held in treasury, see note 26.

Share options

At 31 December 2010 the following options granted to staff remained outstanding under the Company's executive share option scheme:

Expiry year	Exercise price (pence)	Number of ordinary shares of 25p each
2011	440	148,012
2012	381-583	203,749
2013	286	15,454
2014	440	41,330
2015	583	43,310
2016	839	136,009
		587,864

At 31 December 2010 the following options granted to Executive Directors and staff remained outstanding under the Company's savingsrelated share option scheme:

Expiry year	Exercise price (pence)	Number of ordinary shares of 25p each
2011	372.1-598.1	5,312
2012	217.2	218,855
2013	312.24	27,600
2014	217.2	55,622
2015	312.24	11,055
2016	217.2	3,020
2017	312.24	2,505
		323,969

The number and weighted average exercise prices of share options under the Company's executive share option scheme are as follows:

	Number of options	2010 Weighted average exercise price £	Number of options	2009 Weighted average exercise price £
Outstanding at 1 January	673,226	5.61	535,023	8.05
Adjustment for rights issue	–	–	252,268	(2.60)
Forfeited during the year	(26,973)	5.73	(63,450)	5.62
Exercised during the year	(58,389)	2.89	(50,615)	2.87
Outstanding at 31 December	587,864	5.88	673,226	5.61
Exercisable at 31 December	587,864	5.88	673,226	5.61

The weighted average share price at the date of exercise for share options exercised during the year was £3.87 (2009: £3.44). The options outstanding at 31 December 2010 had a weighted average remaining contractual life of 2 years (31 December 2009: 3 years).

notes to the accounts (continued)

24 SHARE CAPITAl (Continued)

The number and weighted average exercise price of share options under the Company's savings-related share option scheme are as follows:

	Number of options	2010 Weighted average exercise price £	Number of options	2009 Weighted average exercise price £
Outstanding at 1 January	308,659	2.38	60,873	8.88
Adjustment for rights issue	–	–	15,041	(2.84)
Granted during the year	42,322	3.12	304,044	2.17
Forfeited during the year	(25,746)	2.89	(70,724)	5.77
Exercised during the year	(1,266)	2.17	(575)	2.17
Outstanding at 31 December	323,969	2.38	308,659	2.38

The weighted average share price at the date of exercise for share options exercised during the year was £3.95 (2009: £4.02). No options outstanding under the Company's savings-related share option scheme were exercisable at 31 December 2010 or 31 December 2009.

At 31 December 2010, the following shares remained outstanding under the Company's Restricted Share Plan and Long-Term Incentive Plan.

	Number of ordinary shares of 25p each
		Restricted Share Plan		Long-Term Incentive Plan
	2010	2009	2010	2009
Outstanding at 1 January	445,995	96,665	1,988,253	512,057
Adjustment for rights issue	–	47,888	–	254,884
Awarded during the year	388,679	305,911	913,114	1,360,938
Dividends awarded during the year	22,083	10,499	83,647	52,438
Vested during the year	(48,714)	–	–	–
Forfeited during the year	(30,852)	(14,968)	(328,519)	(192,064)
Outstanding at 31 December	777,191	445,995	2,656,495	1,988,253

Number of ordinary shares of 25p each
		Restricted Share Plan		Long-Term Incentive Plan
Year of grant	2010	2009	2010	2009
2007	–	48,714	–	322,983
2008	90,485	92,157	454,153	437,898
2009	297,536	305,124	1,272,936	1,227,372
2010	389,170	–	929,406	–
	777,191	445,995	2,656,495	1,988,253

25 INvESTMENT IN OwN SHARES

At cost	2010 £m	2009 £m
Balance at 1 January	4.6	4.5
Transfer from treasury shares	5.8	5.8
Cost of shares awarded to employees	(6.4)	(5.7)
Balance at 31 December	4.0	4.6

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 2010 was 345,481 (2009: 392,359) following awards to participants during the year of 546,878 shares (2009: 697,061) and a transfer of 500,000 treasury shares (2009: 500,000).

26 TREASURy SHARES

At cost	2010 £m	2009 £m
Balance at 1 January	5.8	11.6
Transfer to investment in own shares	(5.8)	(5.8)
Purchase of treasury shares	3.4	–
Balance at 31 December	3.4	5.8

The number of treasury shares held at 31 December 2010 was 800,000 (2009: 500,000) following the transfer at cost of 500,000 shares (2009: 500,000 shares) to the Hammerson Employee Share Ownership Plan during the year. On 29 October 2010, 1 November and 2 November, the Company purchased 400,000, 325,000 and 75,000 respectively of its own shares for a total of £3.4 million.

27 ADjUSTMENT FOR NON-CASH ITEMS IN THE CASH FlOw STATEMENT

	Note	2010 £m	2009 £m
Amortisation of lease incentives and other costs		6.4	5.3
Increase in accrued rents receivable		(12.8)	(10.6)
Non-cash items included within net rental income	3A	(6.4)	(5.3)
Depreciation		1.4	1.5
Share-based employee remuneration		3.2	5.1
Exchange and other items		(6.6)	1.0
		(8.4)	2.3

28 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 Business Framework on page 12 and in the Business Review on pages 22 to 25.

	2010 £m	2009 £m
Within one year	253.2	258.6
From one to two years	226.5	233.4
From two to five years	516.7	550.1
After five years	1,193.7	1,125.0
	2,190.1	2,167.1

29 CONTINGENT lIAbIlITIES

There are contingent liabilities of £17.1 million (2009: £19.0 million) relating to guarantees given by the Group and a further £27.7 million (2009: £40.3 million) relating to claims against the Group arising in the normal course of business. Hammerson's share of contingent liabilities arising within joint ventures, which is included in the figures shown above, is £9.9 million (2009: £10.9 million).

independent auditor's report on the parent company financial statements

INDEPENDENT AUDITOR'S REPORT TO THE SHAREHOlDERS OF HAMMERSON PlC

We have audited the parent company financial statements of Hammerson plc for the year ended 31 December 2010 which comprise the Parent Company Balance Sheet and the related notes A to L. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

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

RESPECTIvE RESPONSIbIlITIES OF DIRECTORS AND AUDITORS

As explained more fully in the Directors' Responsibilities Statement, the Directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

SCOPE OF THE AUDIT OF THE FINANCIAl STATEMENTS

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the parent company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements.

OPINION ON THE FINANCIAl STATEMENTS

In our opinion the parent company financial statements:

• give a true and fair view of the state of the parent company's affairs as at 31 December 2010;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.

OPINION ON OTHER MATTERS PRESCRIbED by THE COMPANIES ACT 2006

In our opinion:

• the part of the Directors' Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and
• the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the parent company financial statements.

MATTERS ON wHICH wE ARE REqUIRED TO REPORT by ExCEPTION

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
• the parent company financial statements and the part of the Directors' Remuneration Report to be audited are not in agreement with the accounting records and returns; or
• certain disclosures of Directors' remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.

OTHER MATTER

We have reported separately on the Group financial statements of Hammerson plc for the year ended 31 December 2010.

Ian Krieger (Senior Statutory Auditor) for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor London, UK 21 February 2011

company balance sheet

as at 31 december 2010

		2010	2009
	Notes	£m	£m
Non-current assets
Investments in subsidiary companies	C	2,448.9	2,104.8
Receivables	D	3,703.9	4,531.7
		6,152.8	6,636.5
Current assets
Receivables	E	2.8	29.9
Cash and short-term deposits		66.8	122.1
		69.6	152.0
Total assets		6,222.4	6,788.5
Current liabilities
Payables	F	879.2	1,574.4
Borrowings	G	4.4	–
		883.6	1,574.4
Non-current liabilities
Borrowings	G	1,850.9	2,256.1
Payables	H	7.9	8.3
		1,858.8	2,264.4
Total liabilities		2,742.4	3,838.8
Net assets		3,480.0	2,949.7
Equity
Called up share capital	24	176.9	175.7
Share premium	I	1,222.5	1,223.6
Capital redemption reserve	I	7.2	7.2
Other reserves	I	0.1	126.9
Revaluation reserve	I	805.8	461.7
Retained earnings	I	1,274.9	965.0
Investment in own shares	J	(4.0)	(4.6)
Treasury shares	26	(3.4)	(5.8)
Equity shareholders' funds		3,480.0	2,949.7

These financial statements were approved by the Board of Directors on 21 February 2011.

Signed on behalf of the Board

David Atkins Simon Melliss Director Director

Registered in England No. 360632

Overview

business and Financial review

GOvernance

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 £274.6 million (2009: profit £401.9 million).

Dividend information is provided in note 9 to the consolidated accounts.

C: INvESTMENTS IN SUbSIDIARy COMPANIES

Cost less provision for permanent diminution
in value £m	Valuation £m
Balance at 1 January 2010 1,643.1	2,104.8
Revaluation adjustment –	344.1
Balance at 31 December 2010 1,643.1	2,448.9

Investments are stated at Directors' valuation. A list of the principal subsidiary companies at 31 December 2010 is included in note L.

D: RECEIvAblES: NON-CURRENT ASSETS

	2010	2009
	£m	£m
Amounts owed by subsidiaries	3,690.2	4,531.7
Loans receivable (see note 16)	13.7	–
	3,703.9	4,531.7

Amounts owed by subsidiaries are unsecured and interest-bearing at variable rates based on LIBOR. These amounts are repayable on demand, however it is the Company's current intention not to seek repayment before 31 December 2011.

E: RECEIvAblES: CURRENT ASSETS

	2010	2009
	£m	£m
Loans receivable (see note 16)	–	14.2
Other receivables	2.8	3.6
Fair value of currency swaps	–	12.1
	2.8	29.9

F: PAyAblES

	2010	2009
	£m	£m
Amounts owed to subsidiaries	822.8	1,512.7
Other payables and accruals	56.4	61.7
	879.2	1,574.4

The amounts owed to subsidiaries are unsecured, repayable on demand and interest bearing at variable rates based on LIBOR.

G: bORROwINGS

	Bank loans and overdrafts £m	Other borrowings £m	2010 Total £m	2009 Total £m
After five years	–	1,040.0	1,040.0	1,659.3
From two to five years	174.7	598.5	773.2	596.8
From one to two years	37.7	–	37.7	–
Due after more than one year	212.4	1,638.5	1,850.9	2,256.1
Due within one year	–	4.4	4.4	–
	212.4	1,642.9	1,855.3	2,256.1

Details of the Group's borrowings and financial instruments are given in notes 20 and 21 to the consolidated accounts. The Company's borrowings are unsecured and comprise sterling and euro denominated bonds, bank loans and overdrafts.

H: PAyAblES: NON-CURRENT lIAbIlITIES

	2010	2009
	£m	£m
Fair value of interest rate swaps	7.9	8.3

I: EqUITy

	Share premium £m	Capital redemption reserve £m	Other reserves £m	Revaluation reserve £m	Retained earnings £m
Balance at 1 January 2010	1,223.6	7.2	126.9	461.7	965.0
Issue of shares	0.1	–	–	–	–
Scrip dividends	(1.2)	–	–	–	–
Dividends	–	–	–	–	(91.5)
Group dividends received in 2009, realised in 2010	–	–	(126.8)	–	126.8
Revaluation gains on investments in subsidiary companies	–	–	–	344.1	–
Profit for the year	–	–	–	–	274.6
Balance at 31 December 2010	1,222.5	7.2	0.1	805.8	1,274.9

j: INvESTMENT IN OwN SHARES

	2010 £m	2009 £m
Balance at 1 January	4.6	4.5
Transfer from treasury shares	5.8	5.8
Transfer to employing subsidiaries – cost of shares awarded to employees	(6.4)	(5.7)
Balance at 31 December	4.0	4.6

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 24, 25 and 26 respectively to the consolidated accounts.

k: FAIR vAlUE OF FINANCIAl INSTRUMENTS

		2010		2009
	Book value £m	Fair value £m	Book value £m	Fair value £m
Borrowings, excluding currency swaps	1,850.9	1,928.4	2,256.1	2,251.2
Currency swaps	4.4	4.4	(12.1)	(12.1)
Total	1,855.3	1,932.8	2,244.0	2,239.1
Interest rate swaps	7.9	7.9	8.3	8.3

l: PRINCIPAl SUbSIDIARy COMPANIES

All principal subsidiary companies are engaged in property investment and development, investment holding or management. Unless otherwise stated, the companies are 100% owned subsidiaries through investment in ordinary share capital. As permitted by section 409 of the Companies Act 2006, a complete listing of all the Group's undertakings has not been provided. A complete list of the Group's undertakings will be filed with the Annual Return.

Subsidiaries are incorporated/registered and operate in the following countries:

UK France

Hammerson International Holdings Ltd Hammerson SAS Hammerson UK Properties plc Hammerson Holding France SAS Grantchester Holdings Ltd Hammerson Centre Commercial Italie SAS Hammerson (125 OBS LP) Ltd1 Hammerson Faubourg Saint-Honoré SAS Hammerson (60 Threadneedle Street) Ltd Société Civile de Développement du Centre Commercial de la Place des Halles SDPH (64.5%) Hammerson (99 Bishopsgate) Ltd Hammerson (Brent Cross) Ltd Hammerson (Bristol Investments) Ltd Hammerson Bull Ring Ltd Hammerson (Cramlington 1) Ltd Hammerson Group Management Ltd Hammerson Operations Ltd Hammerson (Leicester) Ltd Hammerson Oracle Investments Ltd Hammerson (Silverburn) Ltd2 Union Square Developments Ltd West Quay Shopping Centre Ltd

The Netherlands Germany

Hammerson Europe BV Hammerson GmbH

1 Incorporated/registered in Jersey.

2 Incorporated/registered and resident in the Isle of Man.

ten-year financial summary

							IFRS			UK GAAP
	2010	2009	2008	2007	2006	2005	2004	2003	2002	2001
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Income statement
Net rental income	284.7	293.6	299.8	275.7	237.4	210.3	189.5	189.5	175.9	159.9
Operating profit before other net gains/
(losses)	248.8	252.6	257.5	234.5	201.3	178.9	162.9	164.6	151.6	141.6
Other net gains/(losses)	469.9		(590.4) (1,698.3)	25.2	748.0	607.6	330.2	(18.8)	5.3	(8.2)
Cost of finance (net)	(100.0)	(114.5)	(170.7)	(149.3)	(156.9)	(87.9)	(79.7)	(78.7)	(66.0)	(64.3)
Profit/(Loss) before tax	620.2		(453.1) (1,611.5)	110.4	792.4	698.6	413.4	67.1	90.9	69.1
Current tax	(0.6)	(0.9)	(0.6)	(16.4)	(99.4)	1.0	(80.9)	(1.7)	(2.5)	(7.9)
Deferred tax	(0.1)	103.6	38.3	17.6	333.8	(133.9)	104.2	(13.1)	(11.1)	15.9
Equity minority interests	(4.1)	5.9	1.2	(10.6)	(9.9)	(11.3)	(5.3)	(2.0)	(1.7)	(0.9)
Profit/(Loss) for the year attributable to
equity shareholders	615.4		(344.5) (1,572.6)	101.0	1,016.9	554.4	431.4	50.3	75.6	76.2
Balance sheet
Investment and development properties	5,331.1	5,141.5	6,456.8	7,275.0	6,716.0	5,731.7	4,603.0	3,997.5	3,948.2	3,517.4
Cash and short-term deposits	126.2	182.9	119.9	28.6	39.4	45.5	53.7	187.0	242.2	218.4
Borrowings			(1,920.6) (2,319.0) (3,452.6) (2,524.2) (2,282.6) (2,094.8) (1,799.5)						(1,772.2) (1,883.6) (1,552.9)
Other assets	323.1	342.0	319.5	318.7	301.1	278.1	194.0	138.6	162.5	95.8
Other liabilities	(307.6)	(323.9)	(425.3)	(573.5)	(448.9)	(378.4)	(385.9)	(289.8)	(356.2)	(195.3)
Net deferred tax provision	(0.5)	(0.4)	(108.4)	(99.6)	(103.3)	(406.4)	(213.4)	(54.8)	(34.8)	(7.6)
Equity minority interests	(71.7)	(73.4)	(89.3)	(70.4)	(56.6)	(49.9)	(41.7)	(38.1)	(40.1)	(37.1)
Equity shareholders' funds	3,480.0	2,949.7	2,820.6	4,354.6	4,165.1	3,125.8	2,410.2	2,168.2	2,038.2	2,038.7
Cash flow
Operating cash flow after tax	132.7	105.3	29.8	(29.2)	5.5	44.9	60.5	68.4	57.6	54.1
Dividends	(95.4)	(64.5)	(86.7)	(73.1)	(57.7)	(51.0)	(47.4)	(44.4)	(42.0)	(39.7)
Property and corporate acquisitions	(218.6)	(39.5)	(123.5)	(163.3)	(219.5)	(308.1)	(320.8)	(183.7)	(461.8)	(196.8)
Developments and major refurbishments	(60.8)	(164.1)	(376.7)	(335.5)	(250.5)	(186.3)	(203.3)	(188.8)	(161.8)	(138.2)
Other capital expenditure	(25.5)	(23.7)	(13.9)	(44.6)	(29.6)	(36.9)	(20.2)	(68.5)	(43.9)	(50.9)
Disposals	554.6	394.2	245.3	537.2	628.0	224.4	398.7	556.2	519.6	313.0
Other cash flows	(0.8)	–	–	(10.9)	(10.2)	17.7	5.6	–	–	–
Net cash flow before financing	286.2	207.7	(325.7)	(119.4)	66.0	(295.3)	(126.9)	139.2	(132.3)	(58.5)
Per share data*
Basic earnings/(loss) per share	87.2p		(54.1)p (368.9)p	23.7p	242.6p	134.4p	106.0p	12.4p	18.4p	18.4p
Adjusted earnings per share	19.9p	19.7p	25.8p	27.3p	22.3p	21.2p	19.5p	20.2p	19.8p	16.5p
Dividend per share	15.95p	15.45p	18.9p	18.5p	14.7p	13.4p	12.2p	11.4p	10.7p	10.1p
Diluted net asset value per share	£4.93	£4.20	£6.61	£10.22	£9.91	£7.44	£5.90	£5.32	£5.01	£4.93
Adjusted net asset value per share, EPRA
basis	£4.95	£4.21	£7.03	£10.49	£10.18	£8.39	£6.41	£5.45	£5.10	£4.95
Financial ratios Return on shareholders' equity	21.1%	-16.9%	-32.5%	4.5%	25.3%	34.0%	21.7%	9.3%	4.3%	8.3%
Gearing	52%	72%	118%	57%	54%	66%	72%	73%	81%	65%
Interest cover	2.6x	2.2x	1.7x	1.9x	1.8x	1.9x	1.9x	1.8x	1.9x	1.9x
Dividend cover	1.2x	1.3x	1.4x	1.5x	1.5x	1.6x	1.6x	1.8x	1.9x	1.6x

The financial information shown above for the years 2004 to 2010 was prepared under IFRS. The information for prior years was prepared under UK GAAP. Consequently, certain data may not be directly comparable from one year to another.

*Comparative per share data was restated following the rights issue in March 2009.

Overview

shareholder information

Financial calendar
Full-year results announced	21 February 2011
Recommended final dividend– Ex-dividend date	9 March 2011
– Record date	11 March 2011
– Scrip reference share price announced	16 March 2011
– Election date for scrip (or revocation)	18 April 2011
– Payable on	13 May 2011
Annual General Meeting	28 April 2011
Anticipated 2011 interim dividend	October 2011

annual General MeetinG

The Annual General Meeting for 2011 will be held at 11.00am on 28 April 2011 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 sent to all shareholders.

uk 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. Hammerson's website includes a form to be used by shareholders to certify if they qualify to receive PIDs without withholding tax. Further information on UK REITs is available on the Company's website.

reGistrar

If you have any queries about the administration of shareholdings, such as lost share certificates, change of address, change of ownership or dividend payments please contact the Registrar:

Capita Registrars The Registry 34 Beckenham Road Beckenham Kent BR3 4TU

Tel: 0871 664 0300 (calls cost 10p per minute plus network extras, lines are open 8.30am to 5.30pm Monday to Friday), or +44 (0)20 8639 3399 (from overseas); email: ssd@capitaregistrars.com Website: www.capitashareportal.com

Registering on the Registrar's website enables you to view your shareholding in Hammerson plc including an indicative share price and valuation, a transaction audit trail and dividend payment history. You can also amend certain standing data relating to your account.

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 on request or at www.capitaregistrars.com/shareholders/information. Under this arrangement, tax vouchers are sent to the shareholder's registered address unless the shareholder requests otherwise.

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 write to the Registrar giving details of the accounts concerned and instructions on how they should be amalgamated.

scriP dividend alternative

The Company is offering shareholders a scrip dividend alternative for the 2010 final dividend. Further details can be found in the Chairman's letter to shareholders dated 21 March 2011, and on the website: www.hammerson.com on the 'Investors' page.

dividend reinvestMent Plan (driP)

Following the re-introduction of the Hammerson Scrip Dividend Scheme, the Directors have decided to suspend the Company's Dividend Reinvestment Plan (DRIP), for any dividend in respect of which a scrip dividend alternative is offered. Accordingly the DRIP has been suspended for the 2010 final dividend. The DRIP will, however, be automatically reinstated for any dividend, whether interim or final, in respect of which the Directors decide not to offer a scrip dividend alternative.

international PayMent service

In conjunction with Travelex, Capita Registrars provides a service to convert sterling dividends into certain local currencies. For further information, please contact Capita Registrars (address above). Tel: 0871 664 0385 (calls cost 10p per minute plus network extras, lines are open 9.00am to 5.30pm Monday to Friday) or +44 (0)20 8639 3405 (from overseas); email: ips@capitaregistrars.com Website: http://international.capitaregistrars.com/

caPita share dealinG services

An online and telephone dealing facility is available providing Hammerson shareholders with an easy to access and simple to use service. There is no need to pre-register and there are no complicated forms to fill in. The online and telephone dealing service allows you to trade 'real time' at a known price which will be given to you at the time you give your instruction. This is subject to a credit check for shareholders dealing in shares valued at more than the sterling equivalent of €15,000.

For further information on this service, or to buy and sell shares Tel: 0871 664 0364 (calls cost 10p per minute plus network extras, lines are open 8.00am to 4.30pm Monday to Friday), +44 (0)20 3367 2686 (from overseas) or 1 890 946 375 (from Ireland); email: info@capitadeal.com Website: www.capitadeal.com

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. Further information about ShareGift is available at www.sharegift.org or by writing to ShareGift, The Orr Mackintosh Foundation, 17 Carlton House Terrace, London SW1Y 5AH.

unsolicited Mail

Hammerson is obliged by law to make its share register available on request to other organisations that may then use it as a mailing list. This may result in you receiving unsolicited mail. If you wish to limit the receipt of unsolicited mail you may do so by writing to the Mailing Preference Service, an independent organisation whose services are free to you. Once your name and address have been added to its records, it will advise the companies and other bodies that support the service that you no longer wish to receive unsolicited mail. If you would like more details you should write to:

The Mailing Preference Service FREEPOST 29 LON 20771 London W1E 0ZT

Or telephone their helpline on 0845 703 4599 (calls charged at local rate) or register on their website www.mpsonline.org.uk

Website

The 2010 Annual Report and other information is available on the Company's website: www.hammerson.com on the 'Investors' page. The Company operates a service whereby all registered users can choose to receive, via email, notice of all Company announcements which can be viewed on the website.

reGistered oFFice

10 Grosvenor Street, London W1K 4BJ Registered in England No. 360632

advisers

Valuers	Cushman & Wakefield, DTZ Debenham Tie Leung
Auditors	Deloitte LLP
Solicitors	Herbert Smith LLP
Stockbrokers	Citi, Deutsche Bank AG

PrinciPal GrouP addresses

united kingdom France

Hammerson plc Hammerson SAS London 44 rue Washington

Tel +44 (0)20 7887 1000 Fax +44 (0)20 7887 1010 Tel +33 (1) 56 69 30 00

10 Grosvenor Street Washington Plaza Immeuble Artois W1K 4BJ 75408 Paris CEDEX 08 France

Fax +33 (1) 56 69 30 01

Hammerson owns a portfolio of prime property assets in the UK and france. the portfolio, which is valued at £5.3 billion, includes 17 major shopping centres, 17 retail parks and seven office properties.

UK shopping centres

our nine UK shopping centres attract over 160 million visitors each year and rank amongst the top 30 retail destinations in the UK. the portfolio includes internationally recognised city-centre schemes such as bullring, birmingham; brent cross in north london and the oracle, reading. the most recent additions to our portfolio are Union square in aberdeen, which we completed in october 2009, and silverburn, glasgow, acquired in december 2009.

Ownership 41%

Property net internal area 83,200m2

Ownership 60%

Property net internal area 104,700m2

Ownership 33%

Property net internal area 124,300m2

Brent Cross, London NW4

Brent Cross, situated in affluent North West London, enjoys a loyal customer base with 15 million visits per year. The centre is regularly the location of choice for international fashion retailers launching in the UK, such as Abercrombie & Fitch's brand Hollister, which opened its first UK store at Brent Cross in Summer 2008 and Banana Republic, which opened its first UK mall store in December 2009. The centre benefits from strong transport links: it is served by three main arterial routes – the M1, A406 and A41 – three train stations, and a major bus station. Hammerson and Standard Life have secured planning consent for a major extension to the centre which includes the Cricklewood development area adjacent to the centre.

Highcross, Leicester

Highcross opened to the public in September 2008 following a three-year development and refurbishment programme. This major project comprised an extensive refurbishment of the former Shires shopping centre, together with a 61,000m2 mixed-use extension. The project, which created two new iconic anchor buildings and two public squares, more than doubled the size of the existing centre with 40 additional retail units, and revitalised Leicester's shopping, dining and city centre living. The scheme is anchored by John Lewis, House of Fraser, Debehams and Next. Recent openings included Jones the Bootmaker and Foot Asylum.

Bullring, Birmingham

Developed in 2003 and now owned in a three-way joint venture between Hammerson, Henderson Global Investors and Future Fund, Bullring has transformed Birmingham's city centre. With footfall of almost 40 million a year, it is one of the UK's most successful retail destinations and regeneration projects. Anchored by Selfridges and Debenhams, Bullring continues to attract high quality aspirational UK and international brands, demonstrated by recent lettings to Forever 21, Hugo Boss and Hollister. The catering offer continues to flourish with 14 restaurants including Pizza Express, Wagamama and Jamie's Italian and we have received planning permission for an additional 1,000m2 restaurant quarter.

JV partner: Standard Life (59%) Key dates: 1976 developed, 1995 refurbished tenure: Leasehold principal occupiers: Fenwick, John Lewis, Marks & Spencer, Waitrose number of tenants: 117

unexpired lease term to expiry: 8 years occupancy rate: 99.6% rents passing: £18 million p.a. average rents passing: £1,135 per m2 environmental rating: None

JV partner: Royal Mail Pension Plan (40%) Key dates: 2002 acquired, opened September 2008 (redevelopment and

principal occupiers: Cinema de Lux, Debenhams, House of Fraser, John Lewis, Next, River Island, Zara number of tenants: 132

unexpired lease term to expiry: 13 years

refurbishment) tenure: Freehold

Good

occupancy rate: 95.3% rents passing: £17.3 million p.a. average rents passing: £445 per m2 environmental rating: BREEAM Very governance

bUsiness and financial review

overview

ProPerty Portfolio

JV partners: Future Fund (33%), Henderson Global Investors (33%) Key dates: 2003 developed tenure: Leasehold principal occupiers: Debenhams, Selfridges number of tenants: 163 unexpired lease term to expiry: 8 years occupancy rate: 99.3% rents passing: £16.4 million p.a. average rents passing: £495 per m2 environmental rating: None

Ownership 50%

Property net internal area 95,600m2

Cabot Circus, Bristol

Cabot Circus opened to the public in September 2008 following a three-year construction programme. The retail element is anchored by House of Fraser and Harvey Nichols department stores and provides 150 retail units, including 15 flagship stores, cafés, bars and restaurants. The scheme also includes 250 residential units, a 13-screen Cinema de Lux, two new public squares, three pedestrianised shopping streets and 2,600 parking spaces. Since opening, the centre has continued to attract a range of aspirational retailers, including Hollister. Recent openings include PC World, GarmentQuarter, Bergshaw and Krispy Kreme.

JV partner: Land Securities (50%)
Key dates: Opened September 2008
tenure: Leasehold
principal occupiers: Harvey Nichols,
House of Fraser
number of tenants: 134
unexpired lease term to expiry: 11 years
occupancy rate: 98.5%
rents passing: £15.1 million p.a.
average rents passing: £385 per m2
environmental rating: BREEAM Excellent

Ownership 50%

Property net internal area 70,700m2

the oracle, Reading

Since opening in 1999, The Oracle has become the foremost shopping and leisure destination in the Thames Valley region. Developed in a joint venture between Hammerson and the Abu Dhabi Investment Authority (ADIA), The Oracle continues to attract UK and international retailers including Reiss, L'Occitane, Crew Clothing, Pandora and Lakeland. The Riverside, The Oracle's restaurant and leisure venue designed to regenerate Reading's riverside area, is home to 18 cafés and restaurants including Jamie's Kitchen and Tampopo, and a 10-screen Vue cinema.

JV partner: ADIA (50%) Key dates: 1999 developed tenure: Leasehold principal occupiers: Debenhams, House of Fraser number of tenants: 114 unexpired lease term to expiry: 8 years occupancy rate: 99.3% rents passing: £14.0 million p.a. average rents passing: £530 per m2 environmental rating: None

Ownership 50% Property net internal area 75,600m2

WestQuay, Southampton

Developed by Hammerson and opened in 2000, WestQuay has established Southampton as the region's premier shopping destination. Many of WestQuay's retailers are unique to the region, including flagship fashion and lifestyle stores. Recent openings include Jones the Bootmaker, Pandora, Yo! Sushi, and TM Lewin. Hammerson is working on proposals for the next phase of Southampton's regeneration, Watermark WestQuay, on a 2.4 hectare site adjacent to the shopping centre.

JV partner: GIC (50%) Key dates: 2000 developed tenure: Leasehold principal occupiers: John Lewis, Marks & Spencer number of tenants: 93 unexpired lease term to expiry: 6 years occupancy rate: 99.2% rents passing: £13.8 million p.a. average rents passing: £620 per m2 environmental rating: ISO 14001

Ownership 100%

Property net internal area 53,300m2

Ownership 50%

Property net internal area 91,100m2

union Square, Aberdeen

Union Square, Aberdeen, opened to the public in October 2009 and provides a combination of traditional mall shopping and a retail terrace. Adjacent to Aberdeen's central railway station, the scheme is the largest development of its type in Scotland, providing 18,000m2 of retail units, a 15,000m2 shopping park, 10-screen cinema, 5,700m2 of restaurants and catering space, a 200-bed hotel 1,700 parking spaces and a new civic square. The centre has brought new retailers to the city including Apple, Hollister and Gio Goi, as well as restaurants such as Wagamama and Giraffe.

Silverburn, Glasgow

Hammerson and Canada Pension Plan Investment Board (CPPIB) entered into a 50:50 joint venture to purchase Silverburn in December 2009. Opened in 2007, Silverburn is a single-level covered centre with 100 tenants and 4,500 parking spaces. The site includes a 20,000 m2 Tesco Extra. The centre attracts approximately 14 million customers per year and is anchored by Debenhams, Marks & Spencer, Next and TKMaxx. 2010 lettings included Fat Face, Handmade Burger Co and Modelzone. In October 2010, Hammerson received planning application approval to extend the existing centre by an additional 7,728m2 , creating high-quality retail and leisure space.

Key dates: Opened October 2009 tenure: Freehold principal occupiers: Apple, Cine UK, H&M, Marks & Spencer, Next, Zara number of tenants: 69 unexpired lease term to expiry: 15 years occupancy rate: 87.8% rents passing: £12.3 million p.a. average rents passing: £355 per m2 environmental rating: BREEAM Very Good

JV partner: Canada Pension Plan Investment Board (50%) Key dates: 2007 opened, 2009 acquired tenure: Freehold principal occupiers: Debenhams, Marks & Spencer, New Look, Next, Tesco Extra number of tenants: 100 unexpired lease term to expiry: 11 years occupancy rate: 98.6% rents passing: £9.4 million p.a. average rents passing: £340 per m2 environmental rating: None

overview

Ownership 50%

Property net internal area 81,000m2

Queensgate, Peterborough

The centre is a fully enclosed two-level shopping centre with 117 tenants and 2,300 car parking spaces. Hammerson acquired its 50% interest in the centre in 2005. Adjacent to the city centre railway station, it represents the principal retail offer in Peterborough with an annual footfall of 15 million. The scheme is anchored by John Lewis, Marks & Spencer and Waitrose. The centre is being repositioned to bring new retailers into the city including a new 5,500m2 Primark unit. Recent openings include Cult, Republic and Schuh.

JV partner: Aviva Investors (50%) Key dates: Acquired 2005 tenure: Freehold principal occupiers: Bhs, Boots, John Lewis, Marks & Spencer, Next, Waitrose number of tenants: 117 Weighted average unexpired lease term: 16 years occupancy rate: 95.7% rents passing: £7.9 million p.a. average rents passing: £325 per m2 environmental rating: None

Ownership 50%

Property net internal area 33,700m2

Bristol Investment properties

These properties are adjacent to the Cabot Circus scheme and have recently been refurbished.

JV partner: Land Securities (50%) Key dates: Acquired 2000-2006 tenure: Leasehold principal occupiers: Bhs, Currys, Sports World, Superdrug number of tenants: 67 Weighted average unexpired lease term: 11 years occupancy rate: 99.7% rents passing: £4.1 million p.a. average rents passing: £265 per m2 environmental rating: None

UK retail Parks

Hammerson owns 16 retail parks in the UK which together provide over 370,000m2 of floorspace. these easily accessible parks, located on the edge of town centres, are let to both bulky goods and fashion retailers. they offer large-format modern stores with ample parking.

Ownership 100% Property net internal area 52,400m2

Manor Walks, Cramlington

Manor Walks Shopping Centre and the adjoining Westmorland Retail Park form the core retail area of Cramlington which is situated nine miles north of Newcastle. Planning exists for 2,500m2 of retail floorspace proposed as part of a larger retail and leisure development.

Key dates: 2006 acquired tenure: Freehold principal occupiers: Argos, Asda, Boots, Next, Sainsbury's number of tenants: 100 unexpired lease term to expiry: 5 years occupancy rate: 88.1% planning: Open A1 rents passing: £6.2 million p.a. average rents passing: £145 per m2 environmental rating: None

Ownership 100% Property net internal area 28,200m2

Fife Central retail park, Kirkcaldy

Hammerson acquired Fife Central Retail Park in Kirkcaldy in April 2005. The park was developed in 1997 and following completion of an 11,000m2 extension, the park now comprises 16 retail and three restaurant units. The extension is anchored by B&Q and Sainsbury's, with other tenants including Argos, PC World, Toys ' R' Us and Mothercare.

Key dates: 2005 acquired, 2009 extension tenure: Freehold principal occupiers: Argos, B&Q, Boots, Homebase, Mothercare, Next, Sainsbury's number of tenants: 19 unexpired lease term to expiry: 12 years occupancy rate: 100% planning: Part open A1, part bulky goods rents passing: £5.6 million p.a. average rents passing: £200 per m2 environmental rating: BREEAM Pass

Ownership 100%

Property net internal area 24,700m2

Westwood & Westwood Gateway retail parks, Thanet

Hammerson owns two adjacent schemes, Westwood Retail Park (formerly East Kent and Westwood Retail Parks) and Westwood Gateway Retail Park. The former Westwood Retail Park was redeveloped by Hammerson in 2009 to create a new 5,300m2 terrace let to Bhs, Brantano and Dunelm Mill. Other occupiers include Argos, Matalan and Sports Direct.

Key dates: 2002 acquired, 2009 extended tenure: Freehold principal occupiers: Argos, Bhs, Comet, Homebase, Matalan, Sportsworld number of tenants: 17 unexpired lease term to expiry: 14 years occupancy rate: 100% planning: Part open A1 rents passing: £5.0 million p.a. average rents passing: £205 per m2 environmental rating: None

Ownership 100%

Property net internal area 27,500m2

ravenhead retail park, St Helens

Ravenhead Retail Park is an out-of-town high-specification modern retail park which was developed in several phases from 2000 to 2006. Smyths Toys opened in 2010. Planning consent exists for a further 5,800m2 of new retail floorspace.

Key dates: 2007 acquired tenure: Freehold principal occupiers: Argos, B&Q, Boots, Currys, Next, Outfit, Smyths Toys number of tenants: 18 unexpired lease term to expiry: 13 years occupancy rate: 100% planning: Part open A1, part bulky goods rents passing: £4.8 million p.a. average rents passing: £175 per m2 environmental rating: BREEAM Pass

Ownership 100%

Ownership 100%

Property net internal area 23,600m2

Cyfarthfa retail park, Merthyr Tydfil

Hammerson completed construction of Cyfarthfa Retail Park in January 2005. The scheme is fully let and comprises 13 retail units and three fast food outlets. The retail park, which is one of the most successful in South Wales, also includes a DW Sports health club, and parking for over 1,000 cars.

Key dates: 2005 developed tenure: Freehold principal occupiers: Argos, B&Q, Boots, Currys, Debenhams, DW Sports, New Look, Next, TK Maxx

number of tenants: 16 unexpired lease term to expiry: 13 years occupancy rate: 100% planning: Mixed (open A1, bulky goods, restaurant) rents passing: £4.6 million p.a. average rents passing: £195 per m2 environmental rating: None

Property net internal area 20,500m2

St oswald's retail park, Gloucester Phase one of this 35,000m2 mixed-use

development, located north of Gloucester city centre, includes 19,400m2 of bulky goods retail and leisure space in two terraces, 1,100m2 of restaurants, and 990 parking spaces.

Key dates: 2005 developed tenure: Leasehold principal occupiers: B&Q, Comet, JJB Sports, Mothercare, ScS number of tenants: 13 unexpired lease term to expiry: 17 years occupancy rate: 100% planning: Mixed (open A1, bulky goods, restaurant) rents passing: £4.5 million p.a. average rents passing: £220 per m2 environmental rating: None

Ownership 100%

Cleveland retail park, Middlesbrough

The scheme was initially extended in 2006 and again in 2009. B&Q is the main anchor occupying a 9,500m2 unit and following the recent extension the scheme now includes Outfit, Boots, Next and Argos.

Key dates: 2002 acquired, 2006 extended, 2009 reconfiguration tenure: Freehold principal occupiers: Argos, B&Q, Boots, Currys, Matalan, Next, Outfit number of tenants: 19 unexpired lease term to expiry: 14 years occupancy rate: 97.7% planning: Part open A1, part bulky goods rents passing: £4.0 million p.a. average rents passing: £155 per m2 environmental rating: BREEAM Good

bUsiness and financial review

overview

financial statements

Ownership 100%

Property net internal area 20,500m2

Drakehouse retail park, Sheffield

Hammerson acquired Drakehouse Retail Park in 2003. The scheme is located seven miles from Sheffield city centre and adjoins Crystal Peaks Shopping Centre. Tenants include Homebase, Currys, Comet, Smyths Toys and Dreams. In addition there is an 830 space car park.

Key dates: 2003 acquired tenure: Freehold principal occupiers: Carpetright, Comet, Currys, Dreams, Focus, Homebase, JD Sports, JJB Sports, Smyths Toys number of tenants: 17 unexpired lease term to expiry: 12 years occupancy rate: 100% planning: Restricted open A1 rents passing: £4.0 million p.a. average rents passing: £195 per m2 environmental rating: None

Ownership 100%

Property net internal area 13,000m2

Battery retail park, Birmingham

Built in 1990, Battery Retail Park is located four miles to the southwest of Birmingham city centre. The park consists of eight units including a 900m2 unit which was developed and let to Next in 2009. The asset offers further redevelopment potential. In 2010, Hammerson bought out its partner to become sole owner. Planning permission has been secured for the redevelopment of the B&Q unit and discussions with occupiers are ongoing.

Key dates: Built 1990, 2010 bought out partner tenure: Leasehold principal occupiers: B&Q, Currys, Halfords, Homebase, Next, PC World number of tenants: 8 unexpired lease term to expiry: 5 years occupancy rate: 100% planning: Open A1 and restaurants rents passing: £4.0 million p.a. average rents passing: £305 per m2 environmental rating: BREEAM Pass

Ownership 100%

the orchard Centre, Didcot

The Orchard Centre provides the main retail offer for Didcot, 14 miles south of Oxford. Part open mall, part retail park, it is anchored by a Sainsbury's food store. The development agreement for the adjacent site is now in an agreed form. Pre-letting discussions are under way with anchor retailers.

Key dates: 2006 acquired tenure: Leasehold principal occupiers: Argos, Next, Sainsbury's number of tenants: 49 unexpired lease term to expiry: 16 years occupancy rate: 97.8% planning: Open A1 rents passing: £3.8 million p.a. average rents passing: £190 per m2 environmental rating: None

Property net internal area

22,100m2

Ownership 100%

Property net internal area 22,800m2

abbey retail park, Belfast

The scheme is located approximately three miles north of Belfast city centre in an established retail destination adjacent to the Abbey centre and Marks & Spencer. Planning consent has been secured for 6,225m2 of retail and leisure floorspace, comprising part of a larger future development of the park.

Key dates: 2006 acquired tenure: Freehold principal occupiers: B&Q, Tesco number of tenants: 5 unexpired lease term to expiry: 19 years occupancy rate: 100% planning: Part open A1, part bulky goods rents passing: £3.3 million p.a. average rents passing: £145 per m2 environmental rating: None

Ownership 100% Property net internal area 13,400m2

Wrekin retail park, Telford

In November 2010, Hammerson acquired Wrekin Retail Park, west of Telford town centre. The park was developed in 1996 and is currently fully let. The scheme comprises nine retail units and adjoins an owneroccupied Tesco Extra store.

Key dates: 1996 development; 2010 acquired
tenure: Freehold
principal occupiers: Asda Living, Boots,
Homebase, Matalan
number of tenants: 12
unexpired lease term to expiry: 10 years
occupancy rate: 100%
planning: Open A1
rents passing: £2.6 million p.a.
average rents passing: £195 per m2
environmental rating: None

Ownership 100%

Property net internal area 22,600m2

parc tawe retail park, Swansea

Parc Tawe Retail Park is an edge-of-citycentre scheme in Swansea. The scheme incorporates 5,500m2 of leisure uses, including a cinema. The park benefits from an open A1 planning consent and represents an attractive redevelopment opportunity.

Key dates: 2006 acquired
tenure: Leasehold
principal occupiers: Mothercare, Odeon,
Toys ' R' Us
number of tenants: 14
unexpired lease term to expiry: 2 years
occupancy rate: 96.1%
planning: Open A1
rents passing: £2.1 million p.a.
average rents passing: £105 per m2
environmental rating: None

Ownership 100%

Property net internal area 10,100m2

Dallow road, Luton

Hammerson completed the construction of a 9,000m2 B&Q Warehouse in February 2006. The scheme also consists of a 1,100m2 Aldi store and 670 car parking spaces.

Key dates: 2002 acquired, 2006 redeveloped tenure: Freehold principal occupiers: Aldi, B&Q number of tenants: 2 unexpired lease term to expiry: 19 years occupancy rate: 100% planning: Food and bulky goods rents passing: £2.0 million p.a. average rents passing: £195 per m2 environmental rating: None

overview

Ownership

41% Property net internal area 8,500m2

Brent South Shopping park, London NW2

Owned by Hammerson and Standard Life Investments, Brent South Shopping Park was completed in November 2004. Located directly opposite Brent Cross Shopping Centre, the shopping park also provides 350 parking spaces.

JV partner: Standard Life Investments (59%) Key dates: 2004 developed tenure: Freehold principal occupiers: Arcadia, Next, TK Maxx number of tenants: 9 unexpired lease term to expiry: 12 years occupancy rate: 100% planning: Mainly open A1 rents passing: £1.7 million p.a. average rents passing: £560 per m2 environmental rating: None

Ownership 25%

Property net internal area 37,100m2

Central retail park, Falkirk

Anchored by a Tesco Superstore, retail tenants include Boots, Next, Argos and Mothercare. The scheme also includes a 3,900m2 Cineworld cinema and a 2,300m2 Ballantyne's Health Club, as well as food outlets Pizza Hut, McDonald's and Frankie & Benny's. Acquired by Hammerson in 2002, and extended in 2003, Central Retail Park also includes 1,350 parking spaces.

JV partner: TIAA-CREF (75%) Key dates: 2002 acquired, 2003 extended tenure: Leasehold principal occupiers: Boots, Comet, Homebase, Mothercare, Next, Tesco number of tenants: 28 Weighted average unexpired lease term: 15 years occupancy rate: 97.9% planning: Mixed rents passing: £1.4 million p.a. average rents passing: £210 per m2 environmental rating: None

france retail

in france, we own and manage some of the top shopping centres in the ile-de-france region, including italie 2, and o'Parinor, together with high quality centres in strasbourg and angers. our french shopping centres attract over 70 million visitors each year.

Ownership 56,900m2 Property net internal area 56,900m2

Ownership 40,000m2 Property net internal area 41,300m2

Italie 2, avenue d'Italie, Paris 13ème

Hammerson's 1998 acquisition of this three-level shopping complex was followed by a major refurbishment, completed in 2001. The scheme is the second largest shopping centre in central Paris and is a key location for fashion and leisure brands. Italie 2 forms part of a large mixed-use scheme incorporating residential towers, offices and a hotel. Studies are ongoing for a mall refurbishment to be launched in 2011 and extension plans are under review.

place des Halles, Strasbourg

Part of a mixed-use development including four office buildings, two residential buildings and two hotels, Place des Halles is the main shopping destination in Strasbourg, located in the city centre. Hammerson extensively refurbished the two-level shopping centre in 2002. The centre provides parking for 2,600 cars. A major refurbishment project is planned for the centre.

Key dates: 1998 acquired, 2001 refurbished tenure: Freehold principal occupiers: Bricorama , Carrefour Market, Darty, Fnac, Go Sport, La Grande Récré, Printemps, Zara number of tenants: 133 unexpired lease term to expiry: 3 years occupancy rate: 99.3% rents passing: £19.0 million p.a. average rents passing: £400 per m2 environmental rating: HQE for proposed extension

Minority interest: Assurbail (35.5%) Key dates: 1998 acquired, 2002 refurbished tenure: Freehold principal occupiers: C&A, Darty, Galeries, Go Sport, Gourmandes, H&M, Mango, New Look, Sephora, Surcouf number of tenants: 121 unexpired lease term to expiry: 4 years occupancy rate: 97.0% rents passing: £12.4 million p.a. average rents passing: £315 per m2 environmental rating: None

Ownership 22,900m2

Property net internal area 58,900m2

les 3 Fontaines, Cergy Pontoise

Opened in 1972, and refurbished in 1996, following Hammerson's acquisition in 1995, Les 3 Fontaines is a three-level enclosed shopping centre. Anchored by Auchan, principal tenants include H&M and Mango. The centre also benefits from 3,300 car parking spaces.

Co-ownership: Auchan

Key dates: 1995 acquired, 1996 refurbished tenure: Freehold principal occupiers: Auchan, C&A, Darty, H&M, Mango, New Look number of tenants: 83 unexpired lease term to expiry: 4 years occupancy rate: 98.8% rents passing: £11.6 million p.a. average rents passing: £505 per m2 environmental rating: None

overview

financial statements

Ownership 57,200m2 Property net internal area 90,600m2

o'parinor, Aulnay-sous-Bois

In September 2008, Hammerson completed a 24,000m2 redevelopment and extension of the existing Parinor shopping centre. The centre is the largest to the north of Paris totalling over 90,000m2 and providing an enhanced retail offer and improved customer facilities. It comprises 210 stores and is anchored by one of the top 15 Carrefour hypermarkets in France. Other principal occupiers include C&A, Saturn, Toys ' R' Us, Darty, Fnac, Sephora, Zara and H&M. The scheme includes 5,200 parking spaces. In October 2010, Hammerson sold a 51% interest in the scheme to the National Pension Service of Korea.

JV partner: The National Pension Service of Korea (51%) Co-ownership: Carrefour and Redevco Key dates: 2002 acquired, September 2008 completion of major extension and redevelopment tenure: Freehold principal occupiers: C&A, Carrefour, Darty, Fnac, Go Sport, H&M, New Look, Saturn, Toys ' R' Us, Zara number of tenants: 194 unexpired lease term to expiry: 6 years occupancy rate: 97.8% rents passing: £10.2 million p.a.

average rents passing: £365 per m2 environmental rating: None

Ownership 48,100m2 Property net internal area 48,100m2

Villebon 2, Villebon-sur-Yvette

Acquired in July 2005, Villebon 2 is one of the largest retail parks in the Paris region and accommodates 47 retailers, including Darty and Fnac verte. It has 1,200 car parking spaces and forms part of a larger retail destination including an Auchan hypermarket. A 5,600m² extension has recently been completed and let to fashion retailers including C&A and Kiabi.

Key dates: 2005 acquired, 2007 extension tenure: Freehold principal occupiers: Animalis, Autobacs, C&A, Darty, Fnac, Gemo, Kiabi, Sport 2000, Toys ' R' Us number of tenants: 47 unexpired lease term to expiry: 7 years occupancy rate: 100% rents passing: £7.3 million p.a. average rents passing: £150 per m2 environmental rating: None

Ownership 20,200m2 Property net internal area 35,200m2

Bercy 2, Charenton-le-Pont

In 2000, Hammerson acquired 20,200m2 of the mall units in Bercy 2, representing a 57% interest in the co-ownership. Built in 1990 and refurbished in 1997, the three-level scheme designed by Renzo Piano is anchored by Carrefour. The landmark scheme occupies a high profile site on one of the key exits from Paris on the boulevard Périphérique, has 2,300 parking spaces, and is one of the most important shopping destinations in the eastern suburbs of the capital.

Co-ownership: Carrefour and Darty Key dates: 2000 acquired tenure: Freehold principal occupiers: Carrefour, Etam, Go Sport, H&M, La Grande Recré, Virgin number of tenants: 64 unexpired lease term to expiry: 4 years occupancy rate: 91.0% rents passing: £5.4 million p.a.

average rents passing: £345 per m2 environmental rating: None

Ownership 8,200m2 Property net internal area 8,200m2

54-60 rue du Faubourg Saint-Honoré, Paris 8ème

Hammerson acquired the buildings at 54-60 rue du Faubourg Saint-Honoré, in Paris' prestigious luxury goods quarter, in 2005. Located between rue d'Aguesseau and rue d'Anjou, the buildings comprise six blocks of multi-let properties. We started work in 2010 on a refurbishment programme to the retail element of the scheme which is being completed. When complete, the 8,200m2 mixed-use property will include 4,900m2 of retail space, 600m2 of office space and 2,700m2 of residential accommodation. New brands include Burberry, Moschino, Bally, Blumarine, Jenny Packham and Brunello Cucinelli.

Key dates: 2005 acquired, refurbishment 2010 tenure: Freehold principal occupier: Comme des Garçons number of tenants: 42 unexpired lease term to expiry: 8 years occupancy rate: 100% rents passing: £4.8 million p.a. average rents passing: £810 per m2 environmental rating: None

Financial information relates to the property post the refurbishment programme.

Ownership 27,800m2 Property net internal area 58,600m2

Ownership 9,100m2

Property net internal area 22,000m2

espace Saint Quentin, Saint Quentin-en-Yvelines

Acquired by Hammerson in 1994, Espace Saint Quentin is part of a larger mixed-use development including residential, office and hotel accommodation and a food court. Anchored by Carrefour, the centre was extended in 1999 and 2002. The single-level retail element has direct access to car parking providing 2,600 spaces. A 5,800m2 restructuring programme was completed in 2007. Hammerson sold a 75% interest in the scheme to Allianz in 2010.

JV partner: Allianz (75%) Co-ownership: Carrefour, McDonalds, Darty, Go Sport Key dates: 1994 acquired, 2007 reconfiguration tenure: Freehold principal occupiers: C&A, Carrefour, Go Sport, H&M, Sephora number of tenants: 122 unexpired lease term to expiry: 4 years occupancy rate: 98.1% rents passing: £3.2 million p.a. average rents passing: £490 per m2 environmental rating: None

Grand Maine, Angers

Located in the Lac du Maine area at the edge of Angers city centre, Grand Maine is a 22,000m2 shopping centre. Carrefour anchors the scheme and is also the largest co-owner. The centre provides free parking for 1,350 cars.

Co-ownership: Carrefour Key dates: 2007 acquired tenure: Freehold principal occupiers: Camaieu, Carrefour, Celio, Courir, Etam, Etam Lingerie, Go Sport, H&M, Intersport, Le Grand Recré, Naf Naf, Nocibé, Virgin, Yves Rocher number of tenants: 58 unexpired lease term to expiry: 4 years occupancy rate: 99.1% rents passing: £2.7 million p.a. average rents passing: £300 per m2 environmental rating: None

bUsiness and financial review

overview

Ownership 31,000m2 Property net internal area 31,000m2

SQY ouest, Saint Quentin-en-Yvelines

In February 2011 Hammerson acquired SQY Ouest in Saint Quentin-en-Yvelines in a 50:50 joint venture with Codic France. Developed in 2005, SQY Ouest is a modern retail and leisure scheme located 20km to the south west of Paris and is adjacent to the Espace Saint Quentin shopping centre, also co-owned by Hammerson. The four-level shopping centre comprises 45 retailers including the international brands Bershka, GoSport and Zara and is anchored by one of UGC's most successful multiplex cinemas.

Key dates: Public opening date March 2005, 2011 acquired tenure: Freehold principal occupiers: UGC, GoSport, Virgin Megastore, Zara, Bershka number of tenants: 45 unexpired lease term to expiry: 5.1 years occupancy rate: 87% rents passing: £2.3 million p.a. average rents passing: £150 per m2 environmental rating: None

offices

Hammerson is an active developer and manager of london offices, providing high quality accommodation to a range of occupiers in the city and west end. our 157,000m2 portfolio includes landmark buildings such as 99 bishopsgate, 125 old broad street and 60 threadneedle street.

Ownership 100%

Property net internal area 31,500m2

Ownership 100%

Property net internal area 19,900m2

99 Bishopsgate, London EC2

Acquired by Hammerson in 1993, and extensively redeveloped in 1995, 99 Bishopsgate provides 26 floors of high specification office accommodation totalling 31,500m². Principal tenants include Deutsche Bank and Latham & Watkins. Hammerson carried out a refurbishment of the top five floors, totalling 5,000m², in 2006, and re-let the space to Charles River Associates and existing tenant Latham & Watkins.

Key dates: 1995 developed tenure: Leasehold principal occupiers: Charles River Associates, Deutsche Bank, Latham & Watkins number of tenants: 5 unexpired lease term to expiry: 3 years occupancy rate: 97.1% rents passing: £13.6 million p.a. average rents passing: £585 per m2 environmental rating: ISO 14001

60 threadneedle Street, London EC2

Construction of 60 Threadneedle Street was completed in January 2009. The building provides nine storeys of office accommodation totalling 19,900m2 with flexible floor plates organised around two atria. Principal tenants include Talbot Underwriting, Universities Superannuation Scheme, Berenberg Bank, Close Brothers Corporate Finance, The Toronto Dominion Bank and RWE Supply and Trading. The building forms part of the site previously occupied by the London Stock Exchange.

Key dates: 2002 site acquisition; 2009 completion tenure: Freehold principal occupiers: Talbot Underwriting, Universities Superannuation Scheme, The Toronto Dominion Bank number of tenants: 9 unexpired lease term to expiry: 14 years occupancy rate: 97.5% rents passing: £8.6 million p.a. average rents passing: £455 per m2 environmental rating: BREEAM Excellent

100%

Property net internal area 10,000m2

1 leadenhall Court, London EC3

Acquired in 2010, the building was constructed in 1988 in a prime City of London location at the corner of Gracechurch Street and Leadenhall Street, between Bank and Liverpool Street stations. The building is fully let until March 2014 to RSA Insurance Group.

Key dates: 2010 acquired tenure: Leasehold principal occupiers: RSA Insurance Group number of tenants: 1 unexpired lease term to expiry: 3 years occupancy rate: 100% rents passing: £7.2 million p.a. average rents passing: £760 per m2 Ownership environmental rating: None

overview

financial statements

Ownership 50%

Property net internal area 30,800m2

125 old Broad Street, London EC2

Hammerson and its joint venture partners completed the redevelopment of the 26-storey tower building at 125 Old Broad Street, the former London Stock Exchange, in July 2008. The development provides 29,800m2 of Grade-A office accommodation and 1,000m2 of retail and storage space. Principal tenants include international real estate advisor DTZ, international law firms Gide Loyrette Nouel, King and Spalding, Renaissance RE and service office providers Landmark Business Centres. Retailers include tailor Turnbull & Asser and French bistro Brasserie Le Relais de Venise l'Entrecôte.

JV partners: GE Real Estate (25%), Bank of Ireland (25%) Key dates: 2002 site acquisition; July 2008 completion tenure: Freehold principal occupiers: DTZ, Gide Loyrette Nouel, King and Spalding, Renaissance RE and Landmark Business Centres number of tenants: 22 unexpired lease term to expiry: 12 years occupancy rate: 92.3% rents passing: £7.1 million p.a. average rents passing: £510 per m2 environmental rating: BREEAM Very Good

Ownership 30%

Ownership 100%

Property net internal area 23,600m2

10 Gresham Street, London EC2

Hammerson and its joint venture partner Canada Pension Plan Investment Board acquired this property in 2010. The eight floor building designed by Foster+Partners was completed in 2003.The principal occupier is Lloyds TSB, with the remainder of the building let to seven other tenants including Milbank Tweed Hadley & McCloy and JC Flowers.

JV partner: Canada Pension Plan Investment Board (70%) Key dates: 2010 acquired tenure: Leasehold principal occupiers: Lloyds TSB, Milbank Tweed Hadley & McCloy and JC Flowers number of tenants: 8 unexpired lease term to expiry: 10 years occupancy rate: 99.9% rents passing: £3.2 million p.a. average rents passing: £475 per m2 environmental rating: BREEAM Excellent

Property net internal area

6,500m2

Stockley House, Victoria, London SW1

Acquired by Hammerson in 2007, this building offers an opportunity for redevelopment either as a standalone scheme or as part of the wider Victoria Station regeneration. Principal occupiers include Balfour Beatty and Hays Specialist Recruitment.

Key dates: 2007 acquired tenure: Freehold principal occupiers: Balfour Beatty, Hays Specialist Recruitment number of twenants: 5 unexpired lease term to expiry: 4 years occupancy rate: 99.8% rents passing: £2.1 million p.a. average rents passing: £325 per m2 environmental rating: None

Ownership 50%

Property net internal area 6,000m2

10 Grosvenor Street, London W1

Developed in joint venture between Hammerson and Grosvenor, this six-storey Mayfair office building was completed in December 2003. It houses Hammerson's headquarters with Associated British Foods occupying the top two floors of the building and hedge fund manager LDFM, the third floor. The scheme includes 570m2 of retail space on the ground floor.

JV partner: Grosvenor (50%) Key dates: 2003 developed tenure: Leasehold principal occupiers: Associated British Foods, Hammerson, LDFM number of tenants: 6 unexpired lease term to expiry: 11 years occupancy rate: 100% rents passing: £2.0 million p.a. average rents passing: £690 per m2 environmental rating: BREEAM Excellent in use

glossary of terms

Adjusted figures (per share)
	Reported amounts adjusted to exclude certain items as set out in note 10 to the accounts.
Anchor store	A major store, usually a department, variety or DIY store or supermarket, occupying a large unit within a shopping centre or retail park, which serves as a draw to other retailers and consumers.
Average cost of borrowing	The cost of finance expressed as a percentage of the weighted average of borrowings during the period.
Capital return	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.
DTR	Disclosure and Transparency Rules, issued by the United Kingdom Listing Authority.
Dividend cover	Adjusted earnings per share divided by dividend per share.
Earnings per share (EPS)	Profit for the period attributable to equity shareholders divided by the average number of shares in issue during the period.
EBITDA	Earnings before interest, tax, depreciation and amortisation.
EPRA	European Public Real Estate Association. This organisation has issued recommended bases for the calculation of earnings per share and net asset value per share.
Equivalent yield (true and nominal)	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.
ERV	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.
Gearing	Net debt expressed as a percentage of equity shareholders' funds.
Gross property value	Property value before deduction of purchaser's costs, as provided by the Group's external valuers.
Gross rental income	Income from rents, car parks and commercial income, after accounting for the net effect of the amortisation of lease incentives.
IAS	International Accounting Standard.
IASB	International Accounting Standards Board.
IFRS	International Financial Reporting Standard.
Initial yield	Annual cash rents receivable (net of head and equity rents and the cost of vacancy, and in the case of France, net of an allowance for costs of approximately 5.2% primarily for management fees), as a percentage of gross property value, as provided by the Group's external valuers. Rents receivable following the expiry of rent-free periods are not included. Rent reviews are assumed to have been settled at the contractual review date at ERV.
Interest cover	Net rental income divided by net cost of finance before capitalised interest and change in fair value of derivatives.
Interest rate or currency swap (or derivatives)	An agreement with another party to exchange an interest or currency rate obligation for a pre-determined period of time.
IPD	Investment Property Databank. An organisation supplying independent market indices and portfolio benchmarks to the property industry.
Like-for-like/underlying net rental income	The percentage change in net rental income for completed investment properties owned throughout both current and prior periods, after taking account of exchange translation movements.
Loan to value ratio	Borrowings and foreign currency swaps expressed as a percentage of the total value of investment and development properties.
Net asset value per share (NAV)	Equity shareholders' funds divided by the number of shares in issue at the balance sheet date.
Net rental income	Income from rents, car parks and commercial income, after deducting head and equity rents payable, and other property related costs.

overview

glossary of terms (continued)

Over-rented	The amount by which ERV falls short of rents passing, together with the estimated rental value of vacant space.
Pre-let	A lease signed with a tenant prior to completion of a development.
Property Income Distribution (PID)	A dividend, generally subject to withholding tax, that a UK REIT is required to pay from its tax-exempt property rental business and which is taxable for UK-resident shareholders at their marginal tax rate.
REIT	Real Estate Investment Trust. A tax regime which 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.
Rents passing or passing rents	The annual rental income receivable from an investment property, after any rent-free periods and after deducting head and equity rents. This may be more or less than the ERV (see over-rented and reversionary or under-rented).
Return on shareholders' equity (ROE)	Capital growth and profit for the year expressed as a percentage of equity shareholders' funds at the beginning of the year, all excluding deferred tax and certain non-recurring items.
Reversionary or under rented	The amount by which the ERV exceeds the rents passing, together with the estimated rental value of vacant space.
Scrip dividend	A dividend received in the form of shares.
SIIC	Sociétés d'Investissements Immobiliers Côtées. A French tax-exempt regime available to property companies listed in France.
Total development cost	All capital expenditure on a development project, including capitalised interest.
Total return	Net rental income and capital return expressed as a percentage of the opening book value of property adjusted for capital expenditure and exchange translation movements, calculated on a monthly time-weighted basis.
Total shareholder return	Dividends and capital growth in the share price, expressed as a percentage of the share price at the beginning of the year.
Turnover rent	Rental income which is related to an occupier's turnover.
UK GAAP	United Kingdom Generally Accepted Accounting Practice.
Vacancy rate	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.
Yield on cost	Rents passing expressed as a percentage of the total development cost of a property.

Disclaimer

This document contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking in nature and are subject to risks and uncertainties. Actual future results may differ materially from those expressed in or implied by these statements.

Many of these risks and uncertainties relate to factors that are beyond Hammerson's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of governmental regulators and other risk factors such as the Company's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Company operates or in economic or technological trends or conditions, including inflation and consumer confidence, on a global, regional or national basis.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. Hammerson does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this document. Information contained in this document relating to the Company should not be relied upon as a guide to future performance.

index

Accounting policies	60	Investment in own shares	92
Adjustment for non-cash items in the cash flow statement	93	Investments in subsidiary companies	96
Administration expenses	29, 65, 68	Joint ventures	79
Analysis of movement in net debt	30, 59	Key performance indicators (KPIs)	16
Auditor's report		Net finance costs	29, 71
Group financial statements	52	Notes to the accounts	60, 96
Parent company financial statements	94	Obligations under finance leases	90
Board of Directors	6	Operating lease receipts	93
Borrowings	31, 83	Other investments	82
Business framework	12	Our 10 major investments	IFC
Business highlights	3	Payables	83, 90, 97
Business review	18	Pensions	41, 50, 69
Cash and deposits	31, 83	Per share data	27, 30, 75
Chairman's statement	4	Plant, equipment and owner-occupied property	77
Chief Executive's Q&A	7	Principal group addresses	101
Company balance sheet	95	Principal uncertainties	15
Consolidated balance sheet	56	Principal subsidiary companies	98
Consolidated cash flow statement	59	Profit/loss before tax	27, 54, 65
Consolidated income statement	54	Property markets and outlook	13
Consolidated statement of changes in equity	57	Property portfolio	102
Consolidated statement of comprehensive income	55	Property returns	16, 17, 19, 20
Contingent liabilities	93	Receivables	82, 96
Corporate governance	38	Real Estate Investment Trusts (REITs)	29, 72, 73
Corporate responsibility	34	Remuneration report	46
Developments	25	Result for the year	65
Directors' remuneration	50	Risk management	14
Directors' report	43	Segmental analysis	20, 22, 66
Directors' responsibilities	42	Senior management	33
Dividends	4, 30, 43, 74	Share capital	43, 91
Equity	97	Shareholder information	100
Financial highlights	2	Shareholder return	17, 51
Financial instruments	85, 98	Sociétés d'Investissements Immobiliers Côtées (SIIC)	29, 72, 73
Financial review	27	Strategy	9
Glossary of terms	117	Tax	29, 72
Human Resources	32	Ten-year financial summary	99
Investment and development properties	18, 25, 76	Treasury shares	93
Investment in associate	29, 78

overview

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Hammerson plc

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