The real strengths of Liberty International are our focus, our proven ability to add value through intensive management involvement, our experience of investing through the property cycles and our financial track record. It would be helpful to set out these strengths in more detail.

First, we are a highly specialised business focussed on quality retail property, with a very strong market position in UK regional shopping centres, which constitute 78 per cent of our overall investment properties, with retail overall comprising 93 per cent:

• We are the UK’s market leader in prime regional shopping centres with 14 major centres including 8 of the UK’s top 21 centres. We have an attractive mix of out-of-town and city centre assets. We have interests in four of the UK’s eight out-of-town super-regional centres with a combined value of £3.1 billion while in-town centres in prime city locations amount to £3.2 billion.
• We have an enviable geographic spread across the UK including major cities such as Manchester, Glasgow, Newcastle, Nottingham and Cardiff as well as a strong presence in the South East of England through four of our major shopping centres, with an aggregate value of £2.4 billion, including our flagship Lakeside, Thurrock.
• The scale of our business and our use of turnover-based rents produces strong retailer relationships. Retailers appreciate that our centres provide first-rate trading locations and have confidence they will continue to be maintained to the highest standards. We encourage retailers to have flagship stores in our centres, displaying their latest formats and continually refreshing their offer to the shopping public.
• Our business has strong inflation-hedging characteristics as in the long run our ability to deliver growth in net rental income is linked to the success of retailers in our centres and the growth in their sales.
• Our pro-active management approach, particularly focussed on constantly upgrading the retail mix, enables our centres to continually improve and attract repeat visits from shoppers. Examples are the Boardwalk restaurant development at Lakeside which opened in June introducing eleven new restaurants overlooking the lake and substantially enhancing the attraction of the centre late into the evening, while at The Glades, Bromley we are well underway with a project to link major high street units into the centre increasing its overall size.
• We have a strong shopping centre development capability. We have opened major projects in 2004 (the Red Mall extension at MetroCentre), 2005 (Chapelfield, Norwich) and 2006 (Manchester Arndale extension), in each year the largest opening event in the UK regional shopping centre industry. Through our current development programme we aim to continue the measured expansion of our business.

Secondly, on a relative basis, valuations of prime regional shopping centres continue to be very defensive:

• Prime regional shopping centres are valued on an equivalent yield basis of around 4.75 per cent which is more conservative than other prime asset classes such as high street shops (4.0 per cent), retail parks (3.85 per cent), West End offices (3.50 per cent) and City offices (4.25 per cent) (Source: CB Richard Ellis).
• Prime regional shopping centres are very stable and resilient assets which have provided consistent growth in net rental income and capital appreciation. Their performance has shown substantially less volatility than other major UK real estate asset classes. While in the property market euphoria of the last few years, offices have outperformed retail and secondary retail has outperformed prime, we are confident that the traditional strengths of our assets will soon reassert themselves and deliver long-term outperformance as rising interest rates make life more difficult for debt-driven buyers of assets and owners of inferior properties. Our centres are well let on long leases to a wide spread of tenants and we have consistently maintained high occupancy levels.

Thirdly, shareholders should fully appreciate the basis on which our net asset value is prepared:

• Our balance sheet aggregates our individual assets at market value and ignores important elements of value, such as the considerable management expertise and experience within the group including a strong development capability and the ability to handle large and complex transactions.
• The market values take no account of the additional portfolio value of our assets which have been accumulated over a generation and could not now be assembled individually on any sensible timescale.
• Furthermore, although shareholders buying our shares only pay stamp duty at 0.5 per cent on share transactions, the assumption contained within the valuations is that our assets would be sold individually to purchasers who would pay the full 4 per cent stamp duty land tax applicable to large property transactions and other notional acquisition costs. Adjusting for this factor would increase our net asset value by £382 million, representing 101p per share over and above our published net asset value per share figure of 1385p, producing a more realistic number for shareholders of 1486p.

Fourthly, through Capital & Counties, we have an excellent business which complements our regional shopping centre activities, with:

• A substantial Central London presence, through the Great Capital Partnership and our Covent Garden investment.
• An investment of scale in Covent Garden where the extent of our holdings is such that we have a degree of management influence over the area akin to ownership of a large shopping centre.
• A new and energetic management team assembled over the last twelve months which is fully capable of taking on new challenges such as the Earls Court and Olympia investment.
• An international capability, at present mostly through Capital & Counties USA where we have £363 million of predominantly retail assets on the West Coast of the USA and have delivered excellent returns to shareholders.