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LAND - Land Securities News Story

961.2p -6.4  -0.7%

Last Trade - 21/02/20

Sector
Financials
Size
Large Cap
Market Cap £7.13bn
Enterprise Value £10.93bn
Revenue £748.0m
Position in Universe 128th / 1838

Land Sec. Group Plc - Preliminary results 14 May 2008

Wed 14th May, 2008 7:03am
"Whilst Land Securities has not been immune to the general market trends in

2008-05-14 07:03:19
Land Sec. Group Plc - Preliminary results 14 May 2008
Preliminary results for the year ended 31 March 2008

"Whilst Land Securities has not been immune to the general market trends in
property values, we have performed well in each of our three divisions and
achieved significant relative out performance against IPD. Our moderate
gearing levels, well timed development programme and active approach to asset
management position the Company well for the current market."


Results Summary

2008 2007 change
Valuation (1,279.6m) 1,396.1m n/a
(deficit) /
surplus
Basic NAV 2067 pence 2304 pence Down 10.3%
Adjusted diluted 1956 pence 2181 pence Down 10.3%
NAV*
Pre-tax (loss) / (888.8m) 1,979.1m n/a
profit**
Revenue profit 379.1m 392.2m Down 3.3%
Basic EPS (188.80 pence) 753.59 pence n/a
Adjusted diluted 81.71 pence 70.20 pence Up 16.4%
EPS
Adjusted Gearing 67.5% 58.8% n/a
***
Dividend 64.0 pence 53.0 pence Up 20.8%


*Our key valuation measure ** Includes revaluation deficit, profits/loss on
disposals and exceptional items *** Including notional share of joint ventures

Highlights

Performance

- All three businesses, London, Retail and Trillium performed well

- 58.5m p.a. of development lettings in year

- 1.56bn of investment property sales - 5.3% above March 2007 valuation
(before disposal costs)

- 0.81bn of capital released from Trillium Investment Partners Fund

- Investment portfolio valuation down 8.8%

- IPD outperformance on investment properties

- IPD All Property +6.5%

- IPD London Office +4.3%

- IPD Shopping Centre +4.6%

- IPD Retail Warehouses +5.5%

London

- 1.6m sq ft of new developments completed and 94% let

- Total sales of 716.2m at 8.2% above March 2007 valuation

- Timing of development pipeline well matched to economic cycle


Retail

- Completed and launched three developments, Exeter 95% let, Cambridge 100%
let and Corby 75% let

- Total sales of 834.8m at 3.1% above March 2007 valuation

- Launched and grew the Harvest Partnership joint venture with J Sainsbury


Trillium

- Successful launch of the 1.1bn Trillium Investment Partners fund

- Positive return on capital of 9.5%

- New business wins in key strategic areas including education and waste


Demerger

- Good progress on plans for the demerger. New Chairmen selected for each
business

- Discussions with rating agencies indicate likely ratings of AA for separate
London and Retail debt programmes, in line with current Group arrangements

- Timing on implementation to be guided by market conditions


Commenting on the results, Francis Salway, Chief Executive said:

"The market is demanding but we have performed well in relative terms this
year and our results show considerable success in terms of value preservation
in the face of a sharply falling market. As a result, we are well placed in
our London and Retail investment businesses, with moderate gearing levels, a
well-timed development programme and strong portfolios matched to occupiers'
needs. Trillium is in excellent health with stable long-term cashflows and a
robust pipeline of new opportunities across a number of growing sectors. I am
confident our businesses have the strength and scale to thrive.

"How occupiers respond to current economic conditions will prove key over the
next 12 months. We are alive to the challenges involved and we will
concentrate on competing hard in this environment while preparing for the next
set of opportunities.

In summary we are well placed in the short term and for the medium to longer
term, we have a plan for sustained value creation through demerger on which we
are steadily progressing our plans."

-Ends-

Notes to editors

Land Securities Group PLC

- Land Securities is the UK's leading Real Estate Investment Trust
with a national portfolio of commercial property worth almost 14bn. Our
investment portfolio has around 60 retail parks and shopping centres
including Birmingham's Bullring centre and Exeter's award-winning
Princesshay site.

- Half our portfolio is in London, where we own many landmark
buildings such as the Piccadilly Lights and Westminster City Hall and are
developing some of the capital's most innovative mixed-use schemes, such
as Cardinal Place, Victoria and New Street Square in Mid-town.

- Land Securities' multi billion pound development programme is
transforming regional city centres including Bristol, Cardiff, Glasgow and
Leeds, key sites in Central London and delivering long-term, large-scale
regeneration projects in the South East.

- Land Securities Trillium is the principal name in property
outsourcing and partnerships. We focus on understanding our customers'
business and property requirements and meeting them through excellent
service and innovation. We manage and provide services to numerous
commercial properties nationwide, for a growing number of companies and
government departments.

Land Securities will be holding a results presentation today at 9.00am (GMT)
and a live web-cast will be available at www.landsecurities.com/prelims2008

An interview with Francis Salway and Martin Greenslade, Group Finance
Director, is available at www.landsecurities.com/prelims2008

For further info, please contact:

Francis Salway / Donal McCabe John Sunnucks / David Allchurch
Land Securities Group PLC Tulchan Communications
T +44 (0)20 7413 9000 T +44 (0)20 7353 4200
Chairman's message

Land Securities is a well-managed company that thrived during an extended run
of good market conditions. This year there was a market correction. Property
values have reflected changes in interest rates and risk premia margins. Our
sector does not operate in isolation from the credit market and the wider
economy.

We anticipated these changing conditions and have been preparing the Company
accordingly. We limited acquisitions, accelerated sales, reduced our exposure
to development risk and planned our funding conservatively. We keep an old
fashioned focus on costs, spending only when necessary and productive. Our
three businesses are in good shape as a result.

Successful companies respond early to change. The actions we took this year
demonstrate strength. We will continue to be decisive and to make the most of
our skills and competitive advantages in the current demanding conditions.

Land Securities has a long and proud history of managing itself well through a
range of market conditions. We always look to move forward, even when progress
demands bold decisions.

Back in the 1950s, under the leadership of Harold Samuel, we entered into the
property sector's first convertible debenture agreement. This was criticised
by some at the time but soon became common practice.

In the early 1970s we went against the prevailing trend in the sector and
limited our borrowing, a decision that enabled us to bounce back from the
property crash of 1974.

Looking at the Company in the early 1990s, we can see parallels with today.
Chairman Peter Hunt wrote at the time: "The fundamental principles on which
Land Securities has been built are helping us through the most difficult
period for the property industry that I can remember."

Those principles still hold true. Once again we are being bold with our plans
for demerger. Our diversified business model has served us well but we believe
specialisation will become increasingly appealing. Investors value
specialisation - they want to be absolutely clear on the specific risks and
opportunities ahead. We believe that by demerging our businesses we can
provide greater clarity and greater value through a step change in focus and
flexibility. To use the jargon of professional investors, we will be more
ambitious in our pursuit of portfolio alpha.

Throughout the demerger process we will work hard to minimise costs and to
communicate what we are doing and why. The Company strives to set high
standards of disclosure. We will report key decisions quickly and clearly.

One principle will remain consistent throughout the process - we will only
move to demerge when the conditions are right. We have no timetable to follow
but our own.

During times of profound change you see the true calibre of a company's
employees. I am impressed by what I have seen here this year. The demerger has
not distracted anyone or anything. We recognise business conditions are
placing great demands on our people at the moment and we thank them for their
terrific response.

Win Bischoff left our Board recently after more than eight years of quite
extraordinary service. He will be missed. We congratulate him on his
appointment as Chairman of Citigroup. Christopher Bland, Rick Haythornthwaite
and Kevin O'Byrne have been appointed to the Board as Non-executive Directors.
They will be offering themselves for election by shareholders at our
forthcoming Annual General Meeting. I encourage you to support their election.

Regardless of the demerger process and demanding market conditions, the
Company continues to make corporate responsibility a priority. Rightly so. We
want to be a provider and partner of choice, and our excellent track record
across governance, sustainability and community affairs plays a vital role in
this. It's quite simple - we want to be the sort of company people prefer to
work with.

The Board thanks our colleagues, customers and suppliers for their tremendous
support this year. With their help the Company remains in excellent shape and
we look ahead with confidence to the next 12 months in Land Securities'
remarkable history.

Paul Myners

Chairman



Chief Executive's Statement

After a long run of good market conditions the property sector experienced a
set back this year, with less liquidity in the capital markets and some
caution on likely demand from occupiers. Although we anticipated this
inflection point some time ago, and started preparations for changed market
dynamics, our portfolio and our performance have not been immune to the
general market trends.

Our key challenge this year was to keep evolving our businesses so they were
fit to compete and win in the current demanding conditions while laying the
foundations for future growth. Our strategy delivered a strong relative
performance, with our portfolio outperforming the IPD Quarterly Universe by
6.5% in relative terms. This outperformance represents some 800m of value
preservation for our shareholders.

Timing and execution

I believe the key to our performance this year can be summed up in two words -
timing and execution. Take our sales programme. We made our last major retail
acquisition in February 2006, while this year we sold 835m of retail assets
and achieved prices on average 3.1% above valuation.

As a result we have a high quality retail portfolio well suited to our
customers' needs and we have the resources required to make acquisitions when
the right opportunities appear. In London we have achieved similar success,
with 716m of sales made at 8.2% above average valuation, providing resources
to address future opportunities.

Our development programme was equally well timed and executed. This year we
secured our highest ever level of development completions at 242,200m2, and at
year-end these were 94% let. In London we had expected employment growth in
the financial services sector to be weaker so we will be completing just
25,500m2 of office developments over the next two financial years, keeping our
supply of high quality space in line with expected levels of demand.

Three market leaders within one company

Our three businesses performed well throughout the year and demonstrated their
market leadership credentials.

In London we achieved the highest levels of office development lettings of any
company or organisation this year. This included the leasing of Bankside 2&3
to Royal Bank of Scotland - the second largest letting of the year in the
sector. In July we won planning consent from the Secretary of State for 20
Fenchurch Street. This followed a high profile media debate and public
inquiry, and once again we showed that taking a project of this scale from
vision to approval requires both imagination and determination - a rare blend.

Our Retail business capped a strong year with the completion and successful
letting of Princesshay in Exeter. I think this is one of the finest
developments in our history and deserved its British Council of Shopping
Centres' Supreme Gold Award - the third year in a row a Land Securities
development has won this accolade. I am also pleased by the launch and early
progress of The Harvest Partnership, our joint venture with Sainsbury's.

Trillium produced another year of strong growth. Having integrated the
Secondary Market Infrastructure Fund business acquired in February 2007, we
launched our PPP fund, Trillium Investment Partners, this year and - despite
less liquidity and increasing anxiety in the market - achieved a successful
close of the fund in March 2008. Trillium Investment Partners has been
established with an initial capital of 1.136bn, of which half is debt
financed and half equity. The quality of the investors in the fund speaks
volumes for Trillium's reputation, while our success in winning the Kent
Building Schools for the Future contract confirms both the strength of our
offer and the scale of the opportunities ahead.

Meeting changing needs and expectations

Our businesses are increasingly adept at understanding and responding to our
customers' changing needs and expectations. This often requires us to make key
decisions early, from adjusting the volume and type of space we are developing
to incorporating innovative forms of public space into our projects.

Sustainability is of growing importance to many people and is one area where
we have sought to anticipate change and act early. For a decade we have
focused on environmental issues and this was recognised during the year when
sustainablebusiness.com named us one of the World's Top 20 Sustainable Stocks,
with Land Securities the only UK Company included. I am also pleased that the
Dow Jones Sustainability Index named us a global leader in both the real
estate and finance sectors.

Acting responsibly means addressing some big challenges, such as working to
reuse or recycle at least 90% of the demolition waste created by a new
development, or enabling customers to improve the energy performance of a
building. But it's about smaller things too, like offering our employees up to
two days paid leave so they can help local community organisations. In our
experience, both big and small acts help to make us a better business.

The value of REIT status

We converted to REIT status on 1 January 2007 and so this year we enjoyed
exemption from corporation tax on qualifying rental income and on gains from
investment property sales.

Although the conversion has coincided with the more challenging market
conditions I outlined earlier, our change in status has been and continues to
be advantageous for shareholders. First, we now pay less tax, which has
increased earnings per share. Second, the representation of international
shareholders on our register has increased from 23% to 37% since March 2005
and this suggests REIT status has attracted more international capital and
potentially wider demand for shares - a clear benefit.

Plans for demerger

Since 2004 we have structured the Company around three large and distinct
business divisions. The Board believes there is now potential to create
greater value for shareholders by separating these businesses. In our Interim
Report in November 2007 we confirmed our intention to demerge the Group into
three separately quoted entities and we set out our rationale for doing so.

This is not a reaction to short-term market trends. A demerger has been under
careful consideration for some time and, as with our conversion to REIT
status, the Board's proposal is made with long-term value creation in mind. In
the past few years we have run our three businesses with a high degree of
autonomy and the demerger process is a natural step in our Company's
evolution.

I am delighted to report that our planning for the demerger did not impact the
activity levels or performance of the Company nor did it affect the support we
provide to customers. Indeed, our satisfaction rating with our largest
customer, the Department for Work and Pensions, was the highest ever at 94%,
up three percentage points on 2006.

Throughout the year the Non-executive Directors have provided invaluable
guidance to the senior management team. I would like to take this opportunity
to thank them for their support.

Outlook

The market is certainly demanding but we have performed well in relative terms
this year. As a result, we are well placed in our London and Retail property
investment businesses, with moderate gearing levels, a well-timed development
programme and strong portfolios well matched to occupiers' needs. Trillium is
in excellent health with stable long-term cashflows and a robust pipeline of
new opportunities across a number of dynamic sectors. I am confident our
businesses have the strength and scale to thrive.

How occupiers respond to current economic conditions will prove key over the
next 12 months. We are alive to the challenges involved and we will
concentrate on competing hard in this environment while preparing for the next
set of opportunities. I have long believed the companies that thrive in our
industry do so because they maintain a clear long-term view of their markets
and have the confidence to evolve their businesses well ahead of changing
conditions - this is the approach Land Securities will continue to take.

Benefits of demerger

In November 2007 we announced our intention to demerge into three separate
companies. Since then we have made progress on the extensive preparatory work
required to make this happen. The Board will make the final decision on the
implementation of our plan when market conditions are favourable and when it
receives the mandate to do so from shareholders. Here we discuss the rationale
for demerger.

Why we are considering demerger now

As a property company we set out to take key investment decisions from a
position of strength. We restructured to create Retail, London and Outsourcing
(now Trillium) in 2004 because it was right for the Company. The three
businesses have grown and now have the size and strength to stand alone.

The demerger plan recognises that these businesses have different financial
characteristics, and that specialisation will help each business to raise
capital. We also believe that greater recognition will be given to major
successes achieved within a specialised business, rather than within a more
broadly based Group.

The history of the demerger process

The potential benefits of demerger were first raised within the Company in
autumn 2005 when Chief Executive Francis Salway identified this as a key issue
for the Group in the second half of the decade. The review process started
long before current market conditions were evident and we believe demerger
will be delivering value for shareholders when the current market conditions
are regarded as history.

The Board has a strong track record on bold decisions. In recent years we
acquired Trillium, exited the industrial sector through the property swap with
SEGRO and boosted our development pipeline ahead of the current cycle. These
decisive actions have proved successful. Demerger is the latest bold decision
in the ongoing evolution of the Company.

Businesses benefit from specialisation

Historic data shows that in the UK and US specialist companies have produced
higher shareholder returns over the last 10 years. We believe a balance sheet
tailored to the respective sector cycles has the potential to improve return
on shareholders' equity by a material amount.

With a bespoke financial structure our London and Retail portfolios could be
valued more easily and could raise capital more easily. We believe they will
also be better positioned to access new flows of capital into the global
listed property sector.

Our progress so far

Initial preparatory work for demerger is well advanced, and this includes the
appointment of the leadership teams for each business.

In terms of Chief Executives, Francis Salway will run the Retail business,
Mike Hussey will continue to run London and Ian Ellis will continue to run
Trillium.

Sir Christopher Bland has been appointed Chairman of Trillium in the run up to
its demerger and subsequently. His recent roles include Chairman of BT and
Chairman of the Board of Governors at the BBC.

Rick Haythornthwaite has been appointed as Chairman of the Retail business
following demerger. He is currently Chairman of Mastercard Inc, Chairman of
the Risk and Regulation Advisory Council and partner at Star Capital Partners
Ltd. His previous roles include Chief Executive of Blue Circle Industries and
Invensys and Non-executive Director of ICI.

Paul Myners will assume the role of Chairman of the London business at
demerger.

The cost of demerger

There will be the additional cost of running three corporate entities,
including three boards, and our estimate is that this will be around 15m per
annum, with the businesses able to manage overall costs down once separated.

In addition, the cost of finance for the three businesses is expected to
increase slightly, but we believe the credit quality of the three individual
portfolios will keep this increase to moderate levels. There will also be the
one-off costs of undertaking the transaction - including legal, accountancy
and adviser fees - and we expect these to be in line with similar
transactions.

While we will keep costs under close scrutiny throughout the process, we
believe the long-term benefits for shareholders will significantly outweigh
the initial costs of demerger.

A clear step forward

Demerger represents a clear step forward for this Company and is in keeping
with our heritage of taking key decisions early. In our view, the independent
London and Retail businesses will - along with Trillium - continue to lead
their markets, with their proven management teams supported by tailored
financial structures.

Business Unit Review - Retail Portfolio

Key highlights:

- Completed and launched the Princesshay development, Exeter

- Sold 834.8m of assets achieving total sales at 3.1% above valuation

- Achieved the successful sale of Whitefriars, Canterbury, for 253m

- Launched and grew The Harvest Partnership, a joint venture with J Sainsbury

We are transforming shopping as a leisure activity for millions of people
across the UK. Using our ability to unlock the potential within properties and
places, we develop new and better ways for retailers to connect with customers
- creating the environments they need to increase footfall, grow sales and
provide a great leisure experience.

Our market

Current market conditions are certainly challenging. Absolute sales growth is
the single most useful market indicator for our business as it includes the
effect of retailers increasing floorspace to win greater market share. This
year absolute retail sales showed positive growth of 5.4%.

This is not the whole story, however. Pressure on margins has reduced
profitability for many retailers and there has been an increase in
insolvencies across the market as a consequence. Our strong leasing
performance in the portfolio and in the development programme has helped to
mitigate the effects of a weaker occupational market.

2008 will see a peak of completions of new shopping centre developments across
the UK. This has sharpened competition between providers, with many retailers
being offered greater incentives to take leases. However, well-conceived
developments are attracting good levels of demand as no retail business can
afford to stand still. Retailers of all sizes know they can work with
companies such as Land Securities to enhance their performance through range
and format changes, new locations and greater efficiency. Our challenge is to
be as dynamic as the most successful retailers and that means evolving our
portfolio to ensure we provide good space at good rates in the right
locations.

Looking long-term, there will always be winners and losers in the retail
sector - and internet retailing is certainly a fierce competitor for some
shops - but in our experience people are drawn by the immediacy and experience
they get by going shopping. More and more, we work to create a great
environment around our shops so people enjoy spending time there, as well as
spending money. We see a growing appetite for shopping-as-leisure and expect
continued demand for high quality shopping centres and retail parks from our
customers and their customers.

Our strategy

Our aim is to be the provider and partner of choice for retailers and local
authorities in the UK. We want to be recognised as a market leader in terms of
customer focus, design and innovation. Our challenge is to spot, unlock and
maximise the potential of places and properties throughout the UK.

We create value by:

- Identifying, acquiring and enhancing shopping centre and retail park assets
that offer growth potential

- Using our asset management expertise to make our locations more attractive
to shoppers and retailers

- Developing major new shopping and leisure assets that can transform
under-valued areas into thriving destinations

- Forming close relationships with retailers and local authorities, ensuring
we understand and can respond to people's changing needs

- Recycling our capital and applying our skills to re-position assets higher
up the value hierarchy.

Our performance

With the investment markets weakening our focus has been on asset disposals
and on leasing.

Disposals of 834.8m at an average of 3.1% above March 2007 valuations has had
a significant positive impact on our financial performance with our ungeared
property return being 4.6% and 5.5% better than the IPD benchmarks for
shopping centres and retail warehouses respectively.

Our leasing and asset management activity has helped us to perform well
against key portfolio metrics. Rent review programmes, particularly at the
White Rose centre in Leeds, drove our like-for-like rental income up by 5.5%.
Asset management activity has helped to create rental value growth of 2.0% in
a generally flat market, and our strong leasing performance on the investment
properties with some 19m of rent secured has enabled us to keep voids at 4.0%
across the like-for-like portfolio.

Future growth in rental income will come from our development programme as we
complete schemes and also from the reversionary potential on our existing
portfolio on which the rent passing currently stands 11.6% below today's
rental values.

We remain in a strong financial position, with resources available to take
advantage of opportunities created by changed conditions in the investment
market. Our cashflow will continue to be helped by the UK's system of long
leases and upward-only rent reviews. The quality and mix of our tenants is
excellent, and this will help to diversify risk if demand from occupiers
weakens over the next 12 months.

Sales

The timing of our sales was critical this year. We had anticipated more
challenging conditions early and decided to make no major acquisitions during
this financial year. Instead, we focused on disposals and achieved total sales
of 834.8m at 3.1% above valuation.

Important sales this year included:

- Whitefriars, Canterbury

We sold our award-winning shopping centre to Henderson Global Investors and
Canada Pension Plan Investment Board for 253m, achieving a good return on an
investment we completed in 2005.

- East Kilbride Shopping Centre

The Scottish Retail Property Limited Partnership, our joint venture with
British Land Plc, completed a 385m sale of this asset in June 2007.

- Victoria Place, SW1

In January 2008 the Metro Shopping Fund, our joint venture with Delancey, sold
Victoria Place shopping centre, SW1, to Ewart Properties Ltd for 92.5m. The
good price achieved reflects the value we have added to the asset and the
surrounding environment.

- Coppergate, York

In March 2008 we completed the sale of this shopping centre for 42.5m.

- Retail warehouses

We completed the sale of eight retail warehouse assets for 130m and sold four
supermarket assets for more than 125m.

Asset management

We maximise rental income from our portfolio through asset management. This
involves us in making long-term improvements to the environment, to services
and to the tenant mix. Rental growth is the reward for our investment in these
improvements.

Our approach to our biggest asset - the White Rose Centre in Leeds -
demonstrates the value of our expertise. Our successful rent review programme
coincided with the opening of a new store for Marks & Spencer. This follows
the development of new space for Next, Zara and River Island in 2006. This
enabled us to settle the major round of rent reviews, at an average increase
in rent of 40% over the five-year period since the previous reviews. We also
achieved new lettings at even higher levels, further underpinning the success
of the centre.

At Gunwharf Quays in Portsmouth we continued to achieve rental growth, we
improved the mix of tenants with 11 new fascias introduced to the centre, and
we won a British Council of Shopping Centres 2008 Achieving Customer
Excellence award for customer service.

At Aintree Retail Park in Liverpool we have exchanged agreements to let units
to Marks & Spencer, Next and Boots, which significantly changes the retail mix
on the park, and we have increased rental values by 12%.

At Westwood Cross, Thanet, we have completed a new development that adds a
cinema, restaurants and leisure facilities to the retail units, and introduced
JD Sports to the shopping park. Our Thanet ownerships will be further enhanced
with the integration of the adjacent Sainsbury's store and car park, which we
now jointly own and manage through our Harvest venture with J Sainsbury.

At Lakeside Retail Park we have provided small pod units and Costa Coffee is
one of the first occupiers. While the key attraction of retail parks for
shoppers remains convenience, we have continued to introduce enhancements like
this to improve the overall shopping experience.

Our approach to asset management keeps a clear focus on helping our customers
thrive. For example, the running costs of shopping centres are borne by
retailers through their service charge. This year we carried out an efficiency
programme that has enabled us to achieve a zero increase on the average
service charge across our shopping centre portfolio, helping to lessen cost
pressures on retailers.

Development

We completed three new developments this year and these set new standards in
terms of the positive impact regeneration schemes can have on town and city
centres. Highlights included:

- Princesshay, Exeter

Our British Council of Shopping Centres Supreme Gold Award, the Retail Week
Shopping Location of the Year award and International Council of Shopping
Centres award for Best Medium Size Shopping Centre all underline the success
of this development, which has been very well received by residents and
retailers and was 92% let on full opening in September 2007. The scheme
demonstrates our ability to integrate a new development into a historic city
centre, drawing more shoppers from a wider catchment area into the city.

- Christ's Lane, Cambridge

We achieved very strong pre-lettings for this distinctive retail-led scheme of
eight shops, a restaurant and 15 apartments. The retail element opened in
December 2007 and is now 100% let. The Christ's Lane project sits in a
sensitive location within a conservation area between two Cambridge colleges,
Christ's and Emmanuel. Our development re-established one of the city's
historic streets to create a new, busy retail thoroughfare.

- Corby

This year we completed the development of a new mall to complement our
existing holdings within the town centre. The quality of new tenants -
including Primark, River Island, Jane Norman and Dorothy Perkins - has
exceeded our expectations and significantly improved the attractiveness of the
town as a shopping destination. By floor area, the scheme is now 85% let.

Along with our successful completions we have made good progress with our
ongoing development programme. For example, our Cabot Circus development in
Bristol is on schedule for opening in autumn 2008, is 85% let or in
solicitors' hands and we have secured House of Fraser and Harvey Nichols as
anchor tenants. In Cardiff we are on schedule for the autumn 2009 opening of
the combined St David's 1 and 2 shopping centres, with John Lewis as anchor
tenant. And at Leeds Plaza we have entered into a partnership with Caddick
Developments to link our existing centre to a new development. We opened
discussions with potential anchor tenants this year, started demolition in
April and the phased opening is scheduled between October 2010 and January
2011.

Joint ventures

This year we once again demonstrated our ability to form strong partnerships
with other organisations. In November 2007 we launched the Harvest Limited
Partnership, a 50-50 joint venture with J Sainsbury. This adds our expertise
in development to Sainsbury's desire to grow its property portfolio, with the
two companies working together to unlock and realise the development potential
of a number of sites. Initially, we contributed a Sainsbury's supermarket in
our ownership while Sainsbury's contributed two freehold stores. In December
we increased the portfolio with the purchase of the Maltings shopping centre
in Salisbury for 27.5m. This 8,830m2 property includes a Sainsbury's, 27
retail units and a car park.

Outlook

Our experience is that UK retail sales growth is relatively resilient through
the economic cycle, but we recognise that the current trading environment is
proving challenging for retailers. The quality and mix of our tenants is
excellent, and this will help to reduce and diversify risk if demand from
occupiers weakens over the next 12 months. Our cashflow will continue to be
helped by the UK's system of long leases with upward-only rent reviews and
also by the reversionary nature of our portfolio.

In the meantime, strong relationships with retailers are enabling us to make
sound progress on leasing our developments and we will continue to provide
space that meets retailers' need for efficiency and quality. We have a range
of upgrade and development opportunities within our own portfolio and we will
focus on bringing a number of these projects forward for delivery over the
coming years.

We outline our development pipeline in Table 1.


Table 1: Retail development pipeline at 31 March 2008

Total
development
Property Estimated/ costs to Forecast
Size ERV actual date total
Planning Letting completion development
Description of use Ownership sq m status status m date m cost m
SHOPPING CENTRES interest %
AND SHOPS

Developments, let
and transferred
or sold
Christ's Lane, Retail 100 5,800 - 100% 2 Nov 2007 33 33
Cambridge
Residential 1,350 -

Princesshay, Retail 100 37,360 - 95% 13 Sept 2007 204 204
Exeter
Residential 7,200 -

Developments
completed
Willow Place, Retail 100 16,260 - 75% 2 Oct 2007 43 43
Corby

Developments
approved and
those in progress
Cabot Circus, Retail 50 83,610 - 75% 18 Sep 2008 198 243
Bristol - The
Bristol Alliance
- a limited
partnership with
Hammerson plc
Leisure 9,000 -

Offices 28,000 -

Residential 18,740 -

St David's, Retail/leisure 50 89,900 - 12% 18 Oct 2009 156 306
Cardiff - St
David's
Partnership - a
limited
partnership with
Capital Shopping
Centres
Residential 16,500 -

The Elements, Retail 100 32,000 - 36% 8 Oct 2008 107 151
Livingston
Leisure 5,670 -

Southside Retail 50 1,960 - 1 Sep 2009 6 8
Shopping Centre,
Phase I, Office 1,740 -
Wandsworth -
Metro Shopping Residential 4,040 -
Fund - a limited
partnership with
Delancey

Proposed
developments
Trinity Quarter, Retail 75 94,890 PR 20% n/a 2011 n/a n/a
Leeds

RETAIL WAREHOUSES
Developments, let
and transferred
or sold
Commerce Centre, Retail 100 19,100 - 100% 3 Aug 2006 50 50
Poole
Thanet Leisure, Leisure 100 8,970 - 100% 1 Aug 2007 25 25
Thanet
Maskew Avenue, Retail 100 13,380 - 100% 3 Sep 2007 36 36
Peterborough

Developments
approved and
those in progress
Angel Road Retail Retail 100 3,480 - 70% 1 Feb 2009 12 18
Park, Edmonton

Proposed
developments
Almondvale South Retail 100 4,180 PR n/a 2009 n/a n/a
Phase ll b,
Livingston


Planning status for proposed developments

PR - Planning Received

Total development cost (m)

Total development cost refers to the book value of the land at the
commencement of the project, the estimated capital expenditure required to
develop the scheme from the start of the financial year in which the property
is added to our development programme, together with finance charges. Floor
areas shown above represent the full scheme whereas the cost represents our
share of costs. Letting % is measured by ERV and shows letting status at 31
March 2008. Trading property development schemes are excluded from the
development pipeline. Cost figures for proposed schemes are not given as these
could still be subject to material change prior to final approval.

Business Unit Review - London Portfolio

Key highlights:

- 151,830m2 of new developments completed and 94% let, including Bankside 2&3
to RBS

- No. 1 market share of London office development lettings

- Total sales of 716.2m at 8.2% above valuation

- Planning approval won for 20 Fenchurch Street, EC3

- Timing of development pipeline well matched to demand

We are helping to reshape one of the world's great cities. Using our
knowledge, understanding and scale, we develop and invest to create high
quality office and retail space for world-class businesses and brands. We
believe the spaces we provide enable organisations to enhance performance and
improve day-to-day life for employees, shoppers and local residents.

Our market

London is a world-class city with a growing population and excellent prospects
for long-term business growth and employment. The capital's attraction as a
place to live and work means households are set to increase by 15% (or
500,000) by 2021 and employment is expected to increase by 22% by 2026.
[Source: London Draft Mayor's Housing Strategy September 2007, and GLA
Economics].

In the short-term, our market has entered a period of slowdown after several
years of very strong growth, and we now expect demand for new office space to
reduce substantially. The credit crunch has accentuated these market dynamics.
We did not anticipate the credit crunch but we did recognise the early signs
of a slowdown some time ago and have adjusted our portfolio and development
pipeline accordingly. The next two years will see our lowest completions for a
decade, while our existing portfolio is focused on high quality properties in
thriving central locations.

Looking further ahead, we see a return to strong and sustainable growth in the
London property sector. Our confidence in the London market is based on
London's proven ability to attract people, businesses and international
capital.

Our strategy

We invest substantial amounts of capital to create substantial value, using
our expertise and scale to maximise growth and minimise risk. We believe that,
in the London market, businesses thrive by taking decisive action on the
timing and scope of key portfolio decisions.

We create value by:

- Ensuring we understand our customers' changing needs and expectations

- Investing early in the cycle to maximise value

- Focusing on major development projects located in a number of key central
locations across London

- Using a mixed-use approach to create high quality properties that exceed
people's expectations, thereby generating demand and improved rental
performance.

Our performance

We have carefully managed our strategy over the last few years in order to
time our delivery of developments and our sales and acquisition programme to
the cyclical nature of the London office and commercial property market.

We have demonstrated elsewhere in this Report the success of our development
programme taking our overall schemes that completed this financial year from
78% to 94% let.

In addition, we sold 716.2m of assets at 8.2% average above March 2007
valuation. The majority of these sales reflected our belief that the assets
had reached maturity in terms of their investment profile and could secure
good prices in the strong investment market of 2007.

The combination of these two key areas of activity has resulted in a net out
performance of the IPD sector benchmark for London offices of 4.3%. This is a
significant achievement.

Our asset management team has also performed well in the year and put us in
good shape for the year ahead. For London offices we saw our voids drop from
5.7% to 1.8% in the year and we continue to benefit from the strength of our
rental value growth, a 18.1% increase in like-for-like rental values and an
increase in the reversionary potential from 6.7% to 20.5%. These factors have
driven our underlying rental performance and our redevelopment of older
secondary assets over the last three years is leading us into more difficult
market conditions with a strong cashflow of well-let, newly developed assets
that will come into our like-for-like portfolio next year.

Sales and acquisitions

Our objective is to create a balanced portfolio containing a strong blend of
both investment assets and buildings offering medium- and long-term
development opportunities.

Our rationale for selling a particular asset is simple - we look to achieve
the right price at the right time so we can recycle the capital into assets
with greater growth potential. We have completed transactions valued at 1bn
or more every year for the last four years and have now turned over more than
50% of our portfolio since 2004. This year we sold 716.2m of assets - an
increase on previous years. A high level of turnover is not an end in itself,
but our ability to achieve good liquidity from a very large portfolio shows
that we have agility as well as scale.

Important sales this year included:

- Greater London House, NW1

We acquired this investment more than three years ago, achieved excellent
rental growth, decided to crystallise the return on our investment in spring
2007 and completed its sale in August 2007.

- Blackfriars Road, SE1

Having recognised its development potential we acquired this site in 2003. The
location is now outside our strategic areas of focus, so we opted to add
substantial value by seeking planning permission for development and accepted
a strong offer in June 2007.

- Lime Street Estate, EC3

This series of buildings sits within the City's tall buildings zone and has
medium-term development potential. It has performed well as an investment over
many years and produced a good price on sale for us this year.

Important acquisitions this year included:

- Thomas More Square, E1

Located close to Tower Hill, this estate provides more than 52,000m2 on a 1.7
hectare site, and we see excellent long-term development potential here. In
November 2007 we entered into a 50% co-ownership agreement with Ontario
Teachers' Pension Plan Board.

- Times Square, EC4

Here we completed the purchase of a further 50.5% interest in Times Square,
EC4, taking our holding to 95%.

- Harbour Exchange, E13

We added 3 Harbour Exchange to our five neighbouring holdings.

Asset management

We have focused on two areas. First, maximising income from assets intended
for redevelopment in the next cycle. Second, improving the performance of our
Central London retail assets. We will continue to focus on our relationships
with customers while driving efficiency in the portfolio, which will help to
differentiate us in a period of reduced asset growth.

Joint ventures

Joint ventures enable us to pursue opportunities and diversify risk in the
portfolio. In December we sold 50% of our holding at the corner of Oxford
Street and Tottenham Court Road, W1, to Frogmore Real Estate Partners and
entered into a joint venture through which we will define a long-term
redevelopment strategy and Frogmore will manage the assets. This approach will
combine the two companies' skills and experience and provide both parties with
exposure to the investment and development markets.

Development programme

This year we completed 151,830m2 of development space of which 94% is now
fully let - an excellent performance that has put us in a strong position in a
challenging market. Highlights included:

- Bankside 2&3, SE1

Completed in 2007, these two buildings are now fully let to Royal Bank of
Scotland, providing them with 35,172m2 of high quality space in an
increasingly popular and vibrant location.

- New Street Square, EC4

Completed in April 2008 and now 87% let, our development has set record rents
for the Mid-town market, helping to establish this location as a leading
destination for the legal and professional community.

- One Wood Street, EC2

Completed in September 2007, this development has now been handed over to its
occupier, Eversheds.

In addition the offices at Cardinal Place, SW1, are now fully let to
occupiers, including 3i and Microsoft, and Victoria continues to establish its
position as one of the most attractive commercial centres in London.

For some time we have managed our development pipeline with one eye on the
possibility of lower levels of demand. While the industry as a whole was
increasing supply for completion in 2008/9, we opted to hold back. Over the
next two years we have just 25,230m2 of office developments coming onto the
market.

In the medium-term the picture looks somewhat different. We see a return to
strong growth for high quality buildings and have invested in a major
development pipeline of 235,720m2. We believe these developments have the
potential to deliver significant returns beyond 2010. Key developments
include:

- One New Change, EC4

Our innovative development will bring excellent offices, retail and public
space to a historic site opposite St Paul's Cathedral and is due for
completion in late 2010. In October 2007 we exchanged contracts with K&L Gates
on the pre-letting of 35% of the office space for a minimum term of 15.5
years.

- Park House, W1

Due for completion in 2011, this mixed use scheme will offer some of the
largest office floor plates in the West End and add premium retail and
residential units to an exceptional site

- 20 Fenchurch Street, EC3

We won planning permission this year following an arduous public enquiry and
much debate. This stunning development could be delivered by 2012.

Outlook

Short-term, market conditions will be challenging with deteriorating
employment levels in the financial services sector. However, we are well
positioned to compete in a challenging market and can use our balance sheet
strength to take advantage of opportunities. Over the medium-term, we see a
return to strong demand for high quality space and we are timing our
substantial and imaginative development programme in line with this view.
Long-term, we believe continued strong economic and commercial growth within
London will support our diverse mixed-use portfolio, enabling us to enhance
our standing as a market leader in a world-class capital.

We outline our development pipeline in Table 2.

Table 2: London development pipeline at 31 March 2008


Total
development
Property Estimated/ costs to Forecast
Size ERV actual date total
Planning Letting completion development
Description of use Ownership sq m status status m date m cost m
interest %

Developments, let
and transferred
or sold
Cardinal Place, Offices 100 51,130 - 100% 37 Jan 2006 389 389
SW1
Retail 9,420 - 97%

Bankside 2&3, SE1 Offices 100 35,550 - 100% 17 Aug 2007 163 163

Retail/Leisure 3,170 - 72%

One Wood Street, Offices 100 15,020 - 100% 10 Sept 2007 111 111
EC2
Retail 1,500 - 100%

Developments
approved and
those in progress
New Street Offices 100 62,340 - 87% 33 Apr 2008 347 383
Square,
EC4 Retail 2,980 - 87%

50 Queen Anne's Offices 100 30,140 - 100% 13 May 2008 137 142
Gate, SW1
10 Eastbourne Offices 100 6,150 - 73% 3 June 2008 37 43
Terrace, W2
Dashwood House, Offices 100 13,870 - 9 Nov 2008 90 113
EC2
Retail 740 -

30 Eastbourne Offices 100 4,470 - 2 May 2009 13 35
Terrace, W2
One New Change, Offices 100 31,660 - 34% 33 Sept 2010 220 537
EC4
Retail 19,830 - 12%

Park House, W1 Offices 100 15,550 - 11% 25 Feb 2011 218 347

Retail 8,470 -

Residential 5,380 -

Proposed
developments
Arundel Great Offices 100 42,600 - n/a n/a 2012 n/a n/a
Court & Howard
Hotel, WC2 Retail 3,830 -

Residential 25,720 -

Selborne House, Offices 100 23,340 - n/a n/a 2012 n/a n/a
SW1
Retail 3,970 -

20 Fenchurch Offices 100 54,810 PR n/a n/a 2012 n/a n/a
Street, EC3
Retail 560 -


Planning status for proposed developments

PR - Planning Received

Total development cost (m)

Total development cost refers to the book value of the land at the
commencement of the project, the estimated capital expenditure required to
develop the scheme from the start of the financial year in which the property
is added to our development programme, together with finance charges. Floor
areas shown above represent the full scheme whereas the cost represents our
share of costs. Letting % is measured by ERV and shows letting status at 31
March 2008. Trading property development schemes are excluded from the
development pipeline. Cost figures for proposed schemes are not given as these
could still be subject to material change prior to final approval.

Business Unit Review - Urban Community Development

Urban Community Development creates value through the transformation of
under-used land into thriving places and communities. Our work is both
supporting and benefiting from London's long-term economic and population
growth.

Kent Thameside

Our regeneration programme at Ebbsfleet Valley in Kent is a 20-25 year project
that will transform 420 hectares of land into a vibrant mix of residential,
business, retail, leisure and public space. We are working at two main
development sites - Eastern Quarry and Ebbsfleet - within which are ten
`villages' or development areas. This year we achieved excellent progress on
planning permission and made a good start on development and marketing.
Highlights included:

- Planning

We gained planning permission for Eastern Quarry, enabling us to focus on
developing the 870,000m2 project. We have since gained approval for our
site-wide and area masterplans together with 18 other submissions for
infrastructure and landscaping. We have also completed the masterplan for the
central core of Ebbsfleet, comprising some 506,000m2, with a team from Arup
Urban Design. We have submitted these plans to Dartford and Gravesham Borough
Councils.

- Construction, marketing and sales

We started construction of phase one at Springhead Park with our partner,
Countryside Properties. The marketing suite and first show homes were launched
in March 2008 and more than 50% of the first phase was reserved within two
weeks. First occupations will take place in September 2008. The final
development will provide more than 600 homes together with a church and
community centre, health centre and sports centre. We continue to achieve good
sales at Waterstone Park, a further joint development with Countryside
Properties next to Bluewater.

- Transport connections

In November 2007 Eurostar launched its services from Ebbsfleet International
station to Paris, Brussels and Lille, with Paris just over 2 hours away.
High-speed domestic services to London will be launched in late 2009 with a
journey time of just 17 minutes to St Pancras International. Fastrack, the
award winning Bus Rapid Transit network serving Kent Thameside, has
flourished, carrying significantly more passengers than expected.

- Culture

In conjunction with London and Continental Railways and Eurostar, we launched
the Ebbsfleet Landmark, a 2m project to create a major public artwork to help
put Ebbsfleet Valley on the map. Artists Daniel Buren, Richard Deacon,
Christopher Le Brun, Mark Wallinger and Rachel Whiteread have submitted models
of their ideas and the final selection will be made in late summer.

Harrow and Wealdstone

In January 2008 we formed a partnership with Kodak Ltd to find new uses for 24
hectares of redundant land around its production plant in Harrow and
Wealdstone. Our approach will enable Kodak to continue production while
devising ways to maximise the land's future potential.

Milton Keynes

Working with joint venture partner Gazeley Limited, we completed the
development of a 60,400m2 distribution centre. This was pre-let to John Lewis
and we have now sold the asset, generating a profit of 8.1m.

Harlow

In April 2008 we formed a 50:50 joint venture with Places for People and set
out our plan to acquire more than 970 hectares of land to the north of Harlow,
to help meet much-needed housing and employment in the area. The purchase is
subject to the site's inclusion in the final East of England Plan.

Outlook

Ebbsfleet Valley is making the vital step from planning to implementation
successfully, and we expect to make substantial further progress on
construction of infrastructure, landscaping and buildings, residential sales
and community facilities over the next year. Meanwhile, we are seeking out new
opportunities to help the UK meet growing demand for housing and mixed-use
space.

Business Unit Review - Land Securities Trillium

Key messages:

- Successful launch and close of the 1.136bn Trillium Investment Partners
fund

- Strong financial performance on existing contracts

- New business success in key strategic areas, including education and waste

- Acquisition and integration of AMEC Private Finance Initiative (PFI)
business

We are the clear market leader in property partnerships and Public Private
Partnerships (PPP). We help transform the performance of businesses and public
services through long-term partnerships that invest in, manage and service
property and community infrastructure. Our work enables organisations to
transform workspace, enhance employees' performance and create value for
stakeholders.

Our market

Despite uncertainty in the economy, our markets are in good shape. As UK
market leader in property partnerships we are in a very strong position to
compete for major opportunities as they arise. Central and local government
are committed to achieving more efficient use of assets and we believe this is
likely to create further market opportunities for us.

The PPP market is also strong. Our focus here is on education, waste and local
authority infrastructure, all of which offer a pipeline of major
opportunities. Building Schools for the Future is a 15-year government
programme with 45bn committed for the upgrading of every secondary school in
the country. In waste, the government must address the UK's reliance on
landfill by 2010 or face heavy penalties from the EU - 10bn is one estimate
of the investment needed to address this. To date, 2bn has been committed to
PFI in the waste sector and this has been matched by an equal amount from
local authorities.

Meanwhile, the Government Efficiency Review is requiring some 30bn to be
realised from the sale of assets by central government departments and local
authorities, and many are looking to partner with the private sector to
achieve this and to upgrade their estates.

We also see good potential revenue opportunities on the Continent. With EU
money moving towards eastern Europe, more governments in the west are adopting
PPP to procure and deliver social infrastructure investment. In Continental
Europe our initial focus is on acquiring investments in secondary market
assets already in operation.

Our strategy

We invest in and manage properties and facilities for a wide range of
organisations across the public and private sectors. We don't just supply
better buildings - we own, manage, develop and upgrade everything from
individual properties to entire estates. Government departments, international
businesses, individual schools and many other organisations use our expertise
to maximise the potential of their infrastructure for their business and their
people.

We create value by:

- Using our asset management skills and development expertise to improve
performance and reduce risk for customers while growing our own business

- Increasing the scope, scale and value of our contracts with customers by
forming excellent long-term relationships, earning trust and delivering major
improvements

- Developing new and better ways to get the most from properties, workspaces
and facilities

- Gaining access to new market areas and strengthening our leadership position
by acquiring specialist businesses

- Supporting the growth of our pipeline of opportunities through Trillium
Investment Partners acquiring mature assets.

Our performance

We delivered an underlying operating profit of 129.1m (2007:
98.8m), significantly higher than last year largely due to our new contracts
with Accor and Royal Mail and around 43.0m of non-recurring items. On the DWP
contract, which accounted for the majority of the non-recurring items, the
anticipated decline in operating profits due to vacations did indeed
materialise, but this was offset by us resolving a number of outstanding
issues which allowed us to recognise additional profits of 31.3m.

Higher operating profit contributions from DVLA and Norwich Union
reflect the completion of major refurbishment works, while the DVLA contract
has also benefited from scope extensions.

Increased costs reflect the overhead associated with the former
SMIF, IIC and AMEC teams. Bid costs increased due to the high level of new
business activity associated with our appointment as preferred bidder on both
DTR and Kent BSF, and our involvement in Workplace 2010.

The successful launch and close of Trillium Investment Partners and
the sale of the Meterfit asset has given rise to a profit on disposal of
47.5m.

Trillium Investment Partners

This year we achieved a major success with the launch and close of Trillium
Investment Partners, a 1.136bn fund that enables third party investors to
gain exposure to our PPP contracts.

The launch of the fund attracted very strong interest, despite one of the
weakest debt and equity markets for some time, and the calibre of the equity
partners is a testament to the strength and quality of the assets and our
business model. We have retained a 10% stake in the venture.

Trillium Investment Partners is now the largest investment vehicle of its kind
focused on PPP contracts. We intend to grow the fund to around 2bn over five
years through the acquisition of mature PPP assets, such as schools and
hospitals already in operation. The fund will acquire these assets from
Trillium, where our market leading New Business division has already secured
240m of new opportunities. The fund is aiming to invest 200m every year for
the next four years.

A new division of Trillium, authorised by the FSA, will manage the fund and
receive an annual management fee.

AMEC PFI acquisition

In November 2007 we completed the acquisitions of AMEC's Project Investments
business, which included interests in seven signed PFI projects and one
project at preferred bidder stage. We paid 158.5m for the business, which
provides us with a top quality portfolio of assets and a specialist team
experienced across the complete PFI/PPP process, from bidding to long-term
management of investments. This acquisition is now fully integrated into
Trillium, and reinforced our position as a leader in PFI, transport and health
sectors.

New business

Property partnerships

- Defence Training Review

Having won preferred bidder status in January 2007, Metrix - our 50-50 joint
venture with QintetiQ - continues to work with the Ministry of Defence to
create a new defence training academy at St Athan, South Wales. This is one of
the UK's largest PPP projects.

- Workplace 2010

This is a twenty year contract to provide a full range of property outsourcing
services for the Northern Ireland Civil Service. Workplace 2010 includes a
major five-to-seven year programme to transform the Northern Ireland Civil
Service's office estate, improve working environments for staff and facilitate
new ways of working, with the aim of delivering greater value for the
taxpayer. We are one of two final short-listed bidders.

PPP

- Education

With Northgate Information Solutions, we were announced as Kent County
Council's preferred bidder for the first phase of its 1.8bn Building Schools
for the Future (BSF) programme. Through this, we will enter into a new 600m
public private partnership with Kent County Council and Partnerships for
Schools to refurbish or rebuild secondary schools and help transform education
in the Gravesham, Swale and Thanet districts by 2014. Our success in Kent
builds on our work across the UK, where we now own or manage 197 schools with
174,000 pupils. This year we were also named as one of the two final
short-listed bidders for the Birmingham BSF programme, with a final decision
expected in September 2008; and in April 2008 e4i (Education for Inverclyde) -
a consortium comprising Trillium, Miller Construction, Cyril Sweett and FES -
was named preferred bidder for the 80m Inverclyde Schools PPP project.

- Waste

This year we secured our first major success in the fast-growing waste sector.
Working in partnership with Norfolk Environmental Waste Services and Cyril
Sweett Investments, we became preferred bidder for Norfolk Waste Management
Contract A, a 25 year project to build and operate an Advanced Mechanical
Biological Treatment (AMBT) facility to treat and recycle solid waste. AMBT
facilities are considered effective and environment-friendly, and we are now
demonstrating to other local authorities that our solution in Norfolk can help
them meet pressing EU environment and waste targets.

- Thornton Hall Prison

Working in partnership with Global Solutions Limited, in the Leargas
consortium with McNamara and Barclays Private Equity, we have been named
preferred bidder for Thornton Hall, a Euro500m PFI prison near Dublin.

Property partnerships

This was a very successful year for a number of our property partnership
contracts with major long-term customers. Key highlights included:

- Department of Work and Pensions

We achieved a customer satisfaction rating of 94% this year - three percentage
points better than last year's level. This is particularly impressive given
the enormous scale of the portfolio, with some 1,300 properties under
management. Notable successes also included the sale for development of the
Hinchley Wood site.

- Norwich Union

We completed a major three-year refurbishment of Norwich Union's headquarters
this year - three weeks ahead of schedule and on budget. Our work has helped
to transform the working environment.

- DVLA

The major refurbishment of the Main Headquarters office and a number of other
sites was completed successfully, with the main HQ works handed over eight
weeks early and on budget. We also provided a new print facility building.
Through scope extensions we have now trebled our initial investment from 25m
in 2005 to 75m today.

- Royal Mail

Our contract with Royal Mail went live in March 2007, when we took over the
risk and management of 296 vacant and sublet leaseholds. We have made good
progress on the disposal of surplus space and have continued to evolve our
relationship with Royal Mail.

- Accor

In May we completed the purchase of a further 7 Ibis and Novotel hotels,
bringing the portfolio owned to 29 hotels in London and across the UK. The
hotels are leased back to Accor on a turnover rent basis and we maintain the
structural fabric of each hotel.

Outlook

We are market leader in two sectors - property partnerships and PPP - both of
which offer stable long-term cashflows and good growth prospects. We have a
well-rounded business with a strong supply of investment capital and a
comprehensive range of services. We have robust contracts, a strong new
business pipeline and operate in market sectors driven by government
investment and blue chip corporate activity. We see excellent prospects for
continued growth in the short, medium and long-term.

Trillium Financial Results

The results for the year are set out in the table below:

Table 3: Trillium financial results

Year ended Year ended
31 March 31 March
2008 2007

m m
Contract level operating profit

DWP 94.3 81.0
Norwich Union 11.1 9.2
Barclays 1.9 3.3
DVLA 3.7 1.7
Telereal II 15.5 16.1
Accor 27.1 1.5
Royal Mail 4.1 -
BBC 9.2 2.8

Bid costs (11.9) (2.8)
Central and other costs (25.9) (14.0)

Underlying operating profit 129.1 98.8

Net deficit on revaluation of investment properties (24.9) (13.6)
Profit on disposal of properties 18.1 7.5

Segment profit 122.3 92.7

Share of profit / (loss) from Investors in the
Community (IIC) (joint venture) 0.1 (3.0)

Share of loss of Trillium Investment Partners
(associate) (0.5) -

Profit on sale of interests in Trillium Investment
Partners (discontinued operation) 37.5 -

Profit on sale of Meterfit (discontinued operation) 10.0 -



Headline results

The Group's loss before tax was 888.8m, compared to a profit of 1,979.1m a
year ago. The loss before tax includes the revaluation deficit on our
investment properties of 1,304.5m (2007: 1,382.7m surplus). Revenue profit,
our measure of underlying profit before tax, decreased from 392.2m to
379.1m. Earnings per share decreased from 753.59p last year to a loss per
share of (188.80p), with adjusted diluted earnings per share showing a 16.4%
increase on last year to 81.71p (2007: 70.20p).

The combined investment portfolio decreased in value from 14.8bn to 13.6bn.
This included a valuation deficit of 1,279.6m or 8.8%. Net assets per share
decreased by 10.3% to 2067p from 2304p, with adjusted diluted net assets per
share decreasing by 10.3% to 1956p (2007: 2181p).

(Loss) / profit before tax

The main drivers of our loss before tax are the change in value of our
investment portfolio (including any profits or losses on disposal of
properties), our net rental income, the performance of our Trillium business,
and the amount of interest we paid. The degree to which movement on these and
other items led to the reduction in our profit before tax from 1,979.1m last
year to a loss of 888.8m this year, is explained in Table 4 below:

Table 4: Principal changes in profit before tax and revenue profit

Profit /
(loss) Revenue
before tax profit

m m

Year ended 31 March 2007 1,979.1 392.2
Valuation deficit (2,687.2) -
Profit on disposal of non-current properties (50.1) -
Profit on sale of trading properties (2.5) -
Long-term development contract profits (1) (12.3) -
Amortisation of bond de-recognition (2) 9.5 -
Net rental and service charge income (3) 7.9 7.9
Indirect costs 1.5 1.5
Trillium operating profit (including joint ventures) (4) 34.6 34.6
Interest associated with PPP investments (5) (42.0) (42.0)
Other Trillium interest (6) (18.9) (18.9)
Other interest (7) 3.8 3.8
Demerger costs (8) (9.8) -
Debt restructuring charges 17.3 -
Joint venture tax adjustment (79.9) -
Interest rate swaps (39.8) -
Year ended 31 March 2008 (888.8) 379.1


1. 2007 benefited from the first time recognition of profits on the BBC
Broadcasting House contract.

2. The debt instruments issued as part of the refinancing in November 2004 do
not meet the requirements of IAS39 as they are not deemed to be substantially
different from the debt they replaced. As a result, the book value of the new
instruments is reduced to the book value of the debt it replaced and the
difference is amortised over the life of the new instruments. The decrease in
amortisation over the comparable period is a reflection of the maturity
profile of debt replaced.

3. Increased as a result of completed developments and like-for-like rental
income growth, partially offset by properties sold.

4. Increase is mainly due to DWP contract and Accor hotels. See Table 3 on
page 31 for details.

5. Interest cost associated with acquiring PPP investments on which no revenue
is recognised.

6. Increased costs due to higher average capital employed, principally
associated with Royal Mail and Accor.

7. Relates to property investment business and Group. Lower interest costs due
to net sales of investment properties, offset by interest on REIT entry charge
and movement to quarterly dividends.

8. All costs related to the proposed demerger were expensed during the year
but do not form part of the calculation of revenue profit.

Revenue profit

Revenue profit is our measure of the underlying pre-tax profit of the Group,
which we use internally to assess our performance. It includes the pre-tax
results of our joint ventures but excludes capital and other one-off items
such as the valuation (deficit) / surplus, gains on disposals, trading profits
and profits on long-term development contracts.

Revenue profit for the year decreased by 3.3% from 392.2m to 379.1m. An
increase in revenue profit from London and Retail on the back of higher net
rental income was offset by a decline in Trillium for the accounting reasons
described below. Net rental income from our investment portfolio increased by
8.2m, despite almost 800m of net investment property sales. This growth in
rental income was driven by 17.4m of like-for-like rental income increases
and 31.7m of higher income from our completed developments, which included
Princesshay in Exeter and, in London, Cardinal Place and Bankside 2&3. While
net property sales reduced rental income by 36.6m, this was more than offset
by the associated interest savings.

While Trillium's operating profit is higher than last year (see Table 3 on
page 31), at the revenue profit level there has been a decline of 26.3m, due
to the accounting treatment of its PPP assets. Through the acquisition of
Secondary Market Infrastructure Fund in February 2007 and subsequent
transactions, Trillium has purchased a number of PPP assets. These assets were
purchased with the intention from the outset that they would be transferred to
a fund, Trillium Investment Partners, in which Trillium would subsequently
reduce its ownership. As a result, we have accounted for all PPP investments
which we are intending to transfer to Trillium Investment Partners or sell to
third parties, as a disposal group. The implications of this are that we do
not consolidate the individual assets and liabilities of the PPP investments.
Instead, they are held at fair value less costs to sell in the balance sheet
and we do not recognise our share of the underlying net income of the PPP
projects, nor do we recognise in revenue profit any profits on disposal of
these PPP investments. During the course of the year, we made 47.5m from the
sale of Meterfit and equity interests in Trillium Investment Partners, the
owner of the majority of Trillium's PPP investments. We do, however, include
in revenue profit the interest cost associated with acquiring and owning these
PPP investments, which amounted to 42m for the year. This imbalance in
accounting for revenue profit, whereby we recognise interest cost but not
revenues, has resulted in the decline in Trillium's contribution to revenue
profit.

The net divestment of almost 800m of investment property sales reduced
interest costs related to London and Retail. This benefit was largely offset
by higher interest costs at Group level of 14.7m following the payment in
July 2007 of 316.2m as our REIT entry charge and our move to paying quarterly
dividends.

An explanation of the year on year changes in revenue profit is given in Table
4 and a reconciliation between the (loss) / profit before tax and revenue
profit is shown in Table 5.

Table 5: Reconciliation of (loss) / profit before tax to revenue profit

Year ended Year ended

31 March 31 March
2008 2007

m m

(Loss) / profit before tax (888.8) 1,979.1
Valuation deficit / (surplus) - Group 1,170.3 (1,307.6)
Valuation deficit / (surplus) - joint ventures 134.2 (75.1)
(Profits) / losses on non-current property disposals - Group (75.4) (118.4)
(Profits) / losses on non-current property disposals - joint
ventures 7.1 -
Mark-to-market adjustment on interest rate swaps 22.4 (17.4)
Eliminate effect of bond exchange de-recognition 7.6 17.1
Debt restructuring charges 1.9 19.2
Joint venture tax adjustment 3.1 (76.8)
Demerger costs 9.8 -
Profit on sale of trading properties - Group (2.8) (13.6)
Profit on sale of trading properties - joint ventures (8.3) -
Long-term development contract profits (2.0) (14.3)
Revenue profit 379.1 392.2


(Loss) / earnings per share

The basic loss per share was (188.80p), compared to earnings per share of
753.59p in the prior year, the change being predominantly due to the
revaluation deficit on the investment property portfolio (576.28p per share).

In the same way that we adjust profit before tax to remove capital and one-off
items to give revenue profit, we also report an adjusted earnings per share
figure, although this includes some additional adjustments to revenue profit.
The adjustments to earnings per share are set out in note 7 to the financial
statements. They are based on the guidance given by European Public Real
Estate Association (EPRA) with a limited number of further adjustments to
reflect better our underlying earnings. Adjusted diluted earnings per share
increased from 70.20p per share in 2007 to 81.71p per share in 2008, a 16.4%
increase. The increase in adjusted earnings per share is largely attributable
to a significantly lower tax charge following REIT conversion (last year only
benefited for three months), partially offset by the interest costs associated
with the PPP investments in Trillium.

Total dividend

We are recommending a final dividend payment of 16.0p per share. Taken
together with the three quarterly dividends of 16.0p our full year dividend
will be 64.0p per share (2007: 53.0p), a 20.8% increase over last year. A
large part of this substantial increase is attributable to the tax we have
saved by being a REIT for the full financial year.

REIT conversion also impacts on the make-up of the Group's dividend, which now
consists of two components: a property income distribution (PID) from the REIT
qualifying activities and a dividend distribution from the non-qualifying
activities (non-PID). The aggregate of these two components will continue to
be referred to as our total dividend. We are obliged for certain shareholders
to withhold tax, currently at a rate of 20% (22% prior to 6 April 2008), from
the PID element of the dividend. Our total dividend is therefore a gross
dividend. Table 6 sets out our quarterly dividends, the date on which they
were paid, and how much of each dividend was a PID, together with similar
details for out proposed final dividend. A note on the tax consequences for
shareholders and forms to enable certain classes of shareholder to claim
exemption from withholding tax are available on our website at
www.landsecurities.com.

The total dividend for the year is covered 1.3 times by adjusted earnings
(2007: 1.3 times). Subject to approval by shareholders at the Annual General
Meeting to be held on 17 July 2008, our final dividend, which is 100% PID,
will be paid on 28 July 2008 to shareholders on the Register at 20 June 2008.

For the next financial year, our first quarterly dividend will be 16.5p of
which 90% will be a PID.

Table 6: Dividends

Property
income Non-property
distribution income
(PID) distribution Total

pence pence pence

First quarterly dividend (paid on 26 October 2007) 12.8 3.2 16.0
Second quarterly dividend (paid on 7 January 2008) 12.8 3.2 16.0
Third quarterly dividend (paid on 25 April 2008) 12.8 3.2 16.0
Final dividend (payable on 28 July 2008) 16.0 - 16.0
Total 54.4 9.6 64.0



Balance of business tests

REIT legislation specifies conditions in relation to the type of
business a REIT may conduct, which the Group is required to meet in order to
retain its REIT status. In summary, at least 75% of the Group's profits must
be derived from REIT qualifying activities (the 75% profits test) and 75% of
the Group's assets must be employed in REIT qualifying activities (the 75%
assets test). Qualifying activities means a property rental business. The
result of these tests for the Group for the financial year, and at the balance
sheet date is as follows:

Table 7: REIT balance of business tests

For the year ended / as at For the year ended / as at 31
31 March 2008 March 2007

Tax-Exempt Residual Adjusted Tax-Exempt Residual Adjusted
Business Business Results Business Business Results

Adjusted profit before tax 351.1 9.7 360.8 358.3
(m) 42.9 401.2
Balance of business - 75% 97.3% 2.7% 89.3% 10.7%
profits test

Adjusted total assets (m) 14,766.8 1,962.9 16,729.7 15,695.8 2,111.6 17,807.4

Balance of business - 75% 88.3% 11.7% 88.1% 11.9%
assets test


Net assets

At the financial year end, net assets per share were 2067p, a decrease of 237p
or 10.3% over the year. The fall in value of our investment property portfolio
was responsible for the decline in net assets.

In common with other property companies, we calculate an adjusted measure of
net assets which we believe better reflects the underlying net assets
attributable to shareholders. Adjusted net assets are lower than our reported
net assets primarily due to the debt adjustment we make. Under current
accounting standards, we do not show our debt at its nominal value, although
we believe it would be more appropriate to do so and we therefore adjust our
net assets accordingly. At the year end, adjusted diluted net assets per share
were 1956p per share, a decrease of 10.3% from last year end.

Table 8: Net assets

Year ended Year ended
31 March 31 March
2008 2007

m m

Net assets at the beginning of the year 10,791.3 7,493.9

Adjusted earnings 381.0 330.0
Demerger costs * (6.9) -
Revaluation (deficits) / surpluses on ongoing and
completed development properties * (126.6) 130.9
Revaluation (deficits) / surpluses on investment
properties (excluding Trillium) * (1,153.0) 910.6
Revaluation deficits on Trillium investment properties * (24.9) (10.1)
Profits on non-current asset disposal * 67.8 105.2
Interest charges not included in adjusted earnings * (31.9) (13.0)
Prior year non-revenue tax adjustments 16.2 -
Tax (charges) / credits not included in adjusted
earnings - 2,074.7

(Loss) / profit after tax (878.3) 3,528.3
Profit on discontinued operations 47.5 -
Dividends paid (308.4) (223.0)
Other reserve movements (69.2) (7.9)
Net assets at the end of the year 9,582.9 10,791.3
Mark-to-market on interest rate hedges 12.7 (23.6)
Debt adjusted to nominal value (511.5) (519.1)
Adjusted net assets at the end of the year 9,084.1 10,248.6


* These amounts are post-tax

Cash flow and net debt

Cash receipts during the year totalled 1,080.7m from investment portfolio
property disposals, which included Whitefriars, Canterbury and Greater London
House, NW1. In total, we invested 1,667.2m in our properties including
722.6m on investment property acquisitions, 158.5m by Trillium (primarily
Accor hotels) and 530.3m on development. The development expenditure, which
includes land acquisitions but excludes capitalised interest and our share of
joint ventures, was spent principally on New Street Square, EC4, Queen Anne's
Gate, SW1, and One New Change, EC4, in London and shopping centre developments
in Livingston and Exeter.

As part of our strategy to continue to expand Trillium in the PPP market, we
spent 158.5m acquiring PPP assets from AMEC. We also received 814.4m from
our Trillium Investment Partners fund; first through raising debt against the
assets (414.8m in "Receipts from the disposal group" in Table 9) followed by
399.6m from the sale of equity interests in the fund (included in "Receipts
from discontinued activities"). Further details are given in the Land
Securities Trillium section.

We invested a net 0.2m in our joint ventures, including, 56.2m received on
disposals, the largest of which was East Kilbride Shopping Centre, offset by
131.5m spent on shopping centre developments in Bristol and Cardiff.

At 31 March 2008, the Group's net debt was 5,384.5m, some 296.6m higher than
2007 (5,087.9m). While this increase can be attributed to the REIT conversion
charge of 316.2m, there were significant capital inflows and outflows which
are summarised in Table 9.

Table 9: Cash flow and net debt

Year ended Year ended
31 March 31 March
2008 2007

m m
Operating cash inflow after interest and tax (excluding
REIT conversion charge) 315.4 361.5
REIT conversion charge (316.2) -
Dividends paid (308.4) (223.0)

Investment property acquisitions (722.6) (523.7)
Trillium property acquisitions (158.3) (416.5)
Development and refurbishment capital expenditure (530.3) (532.6)
Investment in finance lease receivables (Norwich Union
and DVLA) (82.1) (43.3)
Investment in properties (1,493.3) (1,516.1)
Acquisition of AMEC (2007: SMIF and IIC) (158.5) (919.0)
Acquisition of PPP contracts (152.7) -
Other capital expenditure (15.4) (18.8)

Total capital expenditure (1,819.9) (2,428.9)
Disposals 1,080.7 869.8
Receipts from discontinued activities 424.9 -
Receipts from the disposal group 441.0 25.0
Joint ventures (0.2) 50.0
Purchase of share capital (87.6) (36.2)
Other movements (26.3) 4.8
Increase in net debt (296.6) (1,402.0)
Opening net debt (5,087.9) (3,685.9)
Closing net debt (5,384.5) (5,087.9)


Details of the Group's gearing are set out in Table 8, which includes the
effects of our share of joint venture debt, although the lenders to our joint
ventures have no recourse to the wider Group for repayment.


Table 10: Gearing


31 March 31 March
2008 2007

m % %

Gearing - on book value of balance sheet debt 56.2 47.1
Adjusted gearing * 64.9 54.7
Adjusted gearing * - as above plus notional share of joint
venture debt 67.6 58.8


* Book value of balance sheet debt increased to recognise nominal value of
debt on refinancing in 2004 divided by adjusted net asset value.


Financing strategy and financial structure

Our financing strategy is to maintain an appropriate net debt to
equity ratio (gearing) to ensure that asset level performance is translated
into enhanced returns for shareholders while maintaining an appropriate risk
reward balance to accommodate changing financial and operating market cycles.

The last twelve months has seen a major upheaval in the
international debt markets, beginning with defaults on sub prime mortgages in
the US. As a result of international banking business, the contagion quickly
spread around the world impacting the ability of domestic banks to make
advances as their capital ratios came under pressure. The implications for
borrowers like Land Securities continue to unfold. Initially the UK bond
markets were effectively closed, and whilst this has historically been an
important source of funding for the Group, our demerger plans have meant that
the Group would not have accessed such long term financing at this time. In
the UK market, we have seen the following effects - an increase in the cost of
debt, the imposition of more onerous covenants, increased execution time and
increased execution risk.

Despite these conditions, Land Securities has executed eight
different financing arrangements, either directly or through joint ventures.
We have been able to continue to access the debt markets as a result of our
ongoing debt investor relations programme, a responsible creditor track record
and a high quality portfolio and debt structure from which to raise funding.
Under this structure, we benefited from a lower cost of finance by utilising
the credit strength of our investment portfolio without the more onerous
restrictions of individually collateralised obligations. Operational
flexibility is maintained through provisions which allow us to buy and sell
assets, without restriction, and to undertake developments. At 31 March 2008,
our debt investors had security over 11.0bn of investment properties in this
structure.

As previously stated, net debt increased by 5.8% from 5.1bn to
5.4bn as a result of our REIT conversion charge. Despite only a moderate rise
in net debt, gearing has increased from 47.1% to 56.2% principally due to the
impact of the revaluation deficit of our equity.

Our interest cover ratio, excluding our share of joint ventures,
has fallen from 2.43 times in 2007 to 1.93 times in 2008. A large part of this
reduction can be attributed to the accounting treatment of Land Securities
Trillium's PPP assets. While we recognise the interest cost associated with
acquiring these assets, we do not include or share of the underlying income
they generate. If we adjust the interest cost related to these assets,
interest cover would be 2.23 times. Under the rules of the REIT regime, we
need to maintain an interest cover ratio in the exempt business of at least
1.25 times to avoid paying tax. As calculated under the REIT regulations, our
interest cover ratio of the exempt business for the year to 31 March 2008 was
2.26 times.

During the year, the Group entered into three committed bilateral
facilities all of which are secured on the assets of the Security Group. In
June 2007, the Group entered into a 150m facility, which has been extended in
December 2007, as a 175m facility with an expiry in February 2010. In July
2007, the Group entered into a 500m facility which was due to expire in July
2008, but a commitment has been obtained to replace it in July 2008 with a
350m facility with an expiry in July 2009. In December 2007, the 1.0bn SMIF
acquisition facility was repaid. Another 350m facility was established in
December 2007 which expires in October 2008. The Group has an option to extend
each of these facilities by a further year. In December 2007, the Group
acquired a share of Leeds Trinity Quarter which included a facility which has
been refinanced post year end with a five year 352m committed facility
secured on these assets.

Also during the year, we bought back in the market 4.7m of our own
shares for a total cost of 77.8m, equating to an average price of 1666p.

At 31 March 2008, Land Securities' net borrowings (including joint
ventures) amounted to 6,133.0m of which 865.0m was drawn under our 1.5bn
secured bank facility and 67.3m related to finance leases. Committed but
undrawn facilities amounted to 611.0m. The majority of debt due in one year
relates to drawings under the committed bank facilities which have a one year
extension option.

Hedging

We use derivative products to manage our interest rate exposure and have a
hedging policy which requires at least 80% of our existing debt plus our net
committed capital expenditure to be at fixed interest rates for the coming
five years. Specific hedges are also used in geared joint ventures to fix the
interest exposure on limited recourse debt. At the year end we had 2.3bn of
hedges in place, and our debt was 80% fixed. Consequently, based on year end
debt levels, a 1% rise in interest rates would increase full year interest
charges by only 12.4m.

Taxation

As a consequence of the Group's conversion to REIT status, income and capital
gains from our qualifying property rental business are now exempt from UK
corporation tax. The tax credit for the year of 10.5m (2007: 1,549.2m)
includes a current year tax charge of 10.3m on non-qualifying activities
offset by a 20.8m release in respect of prior years.

Pension schemes

The Group operates a number of defined benefit pension schemes which are
closed to new members. At 31 March 2008 the schemes had a combined surplus,
net of deferred tax, of 10.2m (2007: deficit 5.2m). The surplus has arisen
due to an increase in the prescribed discount rate used to value scheme
liabilities from 5.4% to 6.9%.

Business Analysis

Investment Portfolio

The investment properties in our Retail Portfolio and London Portfolio
business units make up the majority of our Investment Portfolio. The
Investment Portfolio includes a pro-rata share of our property joint ventures,
but excludes investment properties within our property outsourcing business,
Trillium.

The market value of the investment property interests in the Investment
Portfolio totalled 13,586.7m at 31 March 2008 (31 March 2007: 14,752.5m).
The aggregate of the market values of those investment properties held by the
Group, excluding joint ventures and Trillium, as at 31 March 2008 was
11,996.8m (31 March 2007: 13,114.8m).

The valuation of the freehold and leasehold investment properties in the
Investment Portfolio at 31 March 2008 was undertaken by Knight Frank LLP as
External Valuer. The valuations were in accordance with the Royal Institution
of Chartered Surveyors Appraisal and Valuation Standards and the International
Valuation Standards. The valuation of each property was on the basis of market
value, subject to the assumptions that investment properties would be sold
subject to any existing leases and that properties held for development would
be sold with vacant possession in existing condition. The External Valuer's
opinion of market value was primarily derived using recent comparable market
transactions on arm's length terms.

There follows a number of tables which give further detail of the underlying
performance of the combined portfolio:


Table 11: Top 12 property holdings

Total value 4.4bn
(32.7% of combined portfolio)

Values in excess of 240.0m

Cardinal Place, SW1
New Street Square, EC4
50 Queen Anne's Gate, SW1
White Rose Centre, Leeds
Almondvale Shopping Centre, Livingston
Cabot Circus Shopping Centre, Bristol
Bullring, Birmingham
Princesshay, Exeter
Portland House, SW1
Bankside 2&3, SE1
Gunwharf Quays, Portsmouth
Times Square, EC4



Table 12: Income statement - gross rental income reconciliation

Year Year
ended ended
Other 31 Other 31
Retail London Investment March London Investment March
Portfolio Portfolio Portfolio 2008 Retail Portfolio Portfolio 2007
m m m m m m m m
Combined
portfolio 373.7 284.5 29.3 687.5 388.4 261.8 29.5 679.7
Central London
shops (excluding
Metro Shopping
Fund LP) (45.4) 45.4 - - (50.9) 50.9 - -
Inner London
offices
in Metro
Shopping Fund LP 0.8 (0.8) - - 0.8 (0.8) - -
Rest of UK
offices 2.3 - (2.3) - 2.7 - (2.7) -
Allocation of
other 7.9 9.5 (17.4) - 10.3 7.8 (18.1) -
339.3 338.6 9.6 687.5 351.3 319.7 8.7 679.7
Less finance
lease adjustment (3.4) (8.1) - (11.5) (4.5) (8.1) - (12.6)
Per business
unit 335.9 330.5 9.6 676.0 346.8 311.6 8.7 667.1



Table 13: Open market value reconciliation


Other Other
Retail London Investment 31 March London Investment 31 March
Portfolio Portfolio Portfolio 2008 Retail Portfolio Portfolio 2007
m m m m m m m m
Combined
portfolio 6,851.9 6,124.0 610.8 13,586.7 8,060.7 6,102.9 588.9 14,752.5
Central London
shops (excluding
Metro Shopping
Fund LP) (1,009.8) 1,009.8 - - (1,182.6) 1,182.6 - -
Inner London
offices
in Metro
Shopping Fund LP 20.0 (20.0) - - 21.0 (21.0) - -
Rest of UK
offices 79.6 - (79.6) - 90.1 - (90.1) -
Allocation of
other 244.9 237.3 (482.2) - 237.0 196.8 (433.8) -
Per business
unit 6,186.6 7,351.1 49.0 13,586.7 7,226.2 7,461.3 65.0 14,752.5


Table 14: Gross estimated rental value reconciliation


Year Year
ended ended
Other 31 Other 31
Retail London Investment March London Investment March
Portfolio Portfolio Portfolio 2008 Retail Portfolio Portfolio 2007
m m m m m m m m
Combined
portfolio 480.1 431.2 26.7 938.0 511.9 394.5 28.4 934.8
Central London
shops (excluding
Metro Shopping
Fund LP) (70.9) 70.9 - - (70.8) 70.8 - -
Inner London
offices
in Metro
Shopping Fund LP 1.0 (1.0) - - 1.0 (1.0) - -
Rest of UK
offices 2.4 - (2.4) - 4.2 - (4.2) -
Allocation of
other 9.4 11.2 (20.6) - 9.6 10.4 (20.0) -
Per business
unit 422.0 512.3 3.7 938.0 455.9 474.7 4.2 934.8



Table 15: Top 12 occupiers

Current
gross rent
roll

%

Central Government 9.7
Deloitte 4.1
Royal Bank of Scotland 3.1
Metropolitan Police Authority 2.9
Arcadia Group 1.8
J Sainsbury 1.6
DSG 1.5
Boots 1.5
Mellon Bank 1.4
Marks & Spencer 1.3
Argos and Homebase 1.2
Eversheds 1.2
Total 31.3

Includes share of joint venture properties


Table 16: % Portfolio by value and number of property holdings at 31 March
2008

Value
Number of
m % properties

0 - 9.99 1.5 56
10 - 24.99 2.7 24
25 - 49.99 9.3 34
50 - 99.99 17.8 34
100 - 149.99 11.8 13
150 - 199.99 11.2 9
200 + 45.7 20
Total 100.0 190

Includes share of joint venture properties


Table 17: Combined portfolio value by location

Shopping
centres and Retail
shops warehouses Offices Other Total

% % % % %
Central inner and outer London 9.0 0.8 48.0 1.6 59.4
South East and Eastern 4.6 2.9 - 0.7 8.2
Midlands 3.5 1.4 - - 4.9
Wales and South West 6.3 1.4 0.1 - 7.8
North, North West, Yorkshire and
Humberside 7.8 5.4 0.2 0.3 13.7
Scotland and Northern Ireland 3.9 1.5 - 0.6 6.0
Total 35.1 13.4 48.3 3.2 100.0

% figures calculated by reference to the combined portfolio value of 13.6bn.



Table 18: Average rents as at 31 March 2008

Average
rent Average ERV

/m2 /m2

Retail
Shopping centres and shops n/a n/a
Retail warehouses (including supermarkets) 193 212
Offices
London office portfolio 338 405

Average rent and estimated rental value have not been provided where it is
considered that the figures would be potentially misleading (i.e. where there
is a combination of analysis on rents on an overall and Zone A basis in the
retail sector or where there is a combination of uses, or small sample sizes).
This is not a like-for-like analysis with the previous year. Excludes
properties in the development programme and voids.


Table 19: Like-for-like reversionary potential as at 31 March 2008

31 March 31 March
2008 2007

% of rent % of rent
Reversionary potential roll roll

Gross reversions 16.2 11.6
Over-rented (1.2) (1.5)
Net reversionary potential 15.0 10.1

The reversion is calculated with reference to the gross secure rent roll after
the expiry of rent free periods on those properties which fall under the
like-for-like definition as set out in the notes to the combined portfolio
analysis. Reversionary potential excludes additional income from the letting
of voids. Of the over-rented income, 4.5m is subject to a lease expiry or
break clause in the next five years.


Table 20: One year performance relative to IPD

Ungeared total returns - period to 31 March 2008

Land
Securities
% pa IPD % pa

Retail - Shopping centres (3.7) (8.0)
Retail warehouses (10.6) (15.3)
Central London offices* (1.4) (5.4)
Total portfolio (3.2) (9.1)
IPD Quarterly Universe to March 2008


* Central London defined as West End, City, Mid-town and Inner London regions.

Table 21: Combined portfolio analysis

This table can be found in full on our website - www.landsecurities.com/prelims2008

Table 22: Development pipeline financial summary

This table can be found in full on our website - www.landsecurities.com/prelims2008




Trillium

Table 23: Trillium contract analysis

Year ended 31 March 2008
Barclays Telereal Accor Royal Other
Contract DWP NorwichUnion DVLA (1) II (2) Mail (3) (4) Total

Contract length term (years) 20.0 25.0 20.0 20.0 4.5 84.0 15.0
Mar Jun Mar Dec Mar Mar Mar

Expiry date 2018 2029 2025 2024 2010 2091 2022

Income statement m m m m m m m m m
Unitary charge 532.5 14.0 8.8 0.6 - 28.2 3.8 9.4 597.3
Third party (sublet) income 10.4 0.9 - 1.6 - - 2.6 2.0 17.5
Capital projects 65.7 0.2 6.9 - - - - 1.8 74.6
Other revenue 19.5 0.8 1.7 - 44.0 - - 5.6 71.6
Finance lease income - 7.5 2.9 - - - - - 10.4

Gross property income 628.1 23.4 20.3 2.2 44.0 28.2 6.4 18.8 771.4
Rents payable (169.1) (4.0) (2.0) - - - - - (175.1)
Service partners
(maintenance, facilities,
etc) (164.7) (3.8) (4.7) - - - (0.1) 1.7 (171.6)
Life cycle maintenance costs (22.3) (1.7) (0.3) - - (0.4) - - (24.7)
Capital projects (63.2) (0.2) (6.2) - - - - (0.8) (70.4)
Other costs, including
overheads (79.2) (1.8) (3.4) (0.3) (28.5) (0.7) (2.2) (34.5) (150.6)
Bid costs - - - - - - - (11.9) (11.9)
Depreciation (35.3) (0.8) - - - - - (1.9) (38.0)

Underlying operating profit
/ (loss) 94.3 11.1 3.7 1.9 15.5 27.1 4.1 (28.6) 129.1
Profit on sale of
non-current assets 16.0 - - - - - 0.1 2.0 18.1
Net (deficit) / surplus on
revaluation of investment
properties - - - (5.9) - (13.0) (7.8) 1.8 (24.9)

Segment profit / (loss) 110.3 11.1 3.7 (4.0) 15.5 14.1 (3.6) (24.8) 122.3

Capital expenditure
Life cycle maintenance costs
capitalised (17.0) (0.8) - - - - - - (17.8)

Estates costs capitalised (10.3) - - - - - - (0.2) (10.5)

Book value of assets at 31
March 2008
Investment in associate - - - - - - - 73.5 73.5
Investment properties - - - 22.0 - 435.9 89.8 14.7 562.4
Net investment in finance
leases - 100.0 54.1 - - - - 21.6 175.7
Operating properties 500.6 43.7 - - - - - 0.5 544.8


Notes:

1. Barclays sale and leaseback terms include a tenant break clause in December
2014, with annual breaks until expiry

2. Accor sale and leaseback terms include a tenant break clause every 12 years
with the first in 2019

3. Royal Mail sale and leaseback terms include 12 tenancies which have a break
clause in March 2012 and a further 164 tenancies with a break clause in March
2017

4. Other includes new business and corporate overheads, bid costs, SPVs,
management income, and release of provisions on the BBC contract.



Table 24: Trillium contract analysis at 31 March 2008

Norwich Telereal Royal
Floor space (000m2) DWP Union DVLA Barclays II Accor Mail Other Total

Client occupied 1,885.1 107.0 16.2 11.4 - 230.0 92.7 - 2,342.4
Third party (sublet) 119.2 5.2 - 17.8 - - 91.9 - 234.1
Vacant 228.0 1.7 - 6.7 - - 56.8 - 293.2
Total 2,232.3 113.9 16.2 35.9 - 230.0 241.4 - 2,869.7

Freeholds / valuable
leaseholds 805.0 38.9 - 11.3 - - 128.1 - 983.3
Leaseholds 1,427.3 75.0 16.2 24.6 - 230.0 113.3 - 1,886.4
Total 2,232.3 113.9 16.2 35.9 - 230.0 241.4 - 2,869.7
Estate managed but not
transferred 64.5 8.7 85.9 - 150.0 - - - 309.1




Table 25: Trillium vacation allowance and portfolio activity - DWP

Floor space (000m2) 31 March 31 March

2007 Acquisitions Vacations* Lettings Disposals 2008

Client occupied 1,996.0 51.4 (153.4) - (8.9) 1,885.1
Third party (sublet) 81.0 - (1.8) 48.7 (8.7) 119.2
Vacant 244.2 - 155.2 (48.7) (122.7) 228.0
Total 2,321.2 51.4 - - (140.3) 2,232.3

Freeholds / valuable
leaseholds 840.0 12.3 - - (47.3) 805.0
Leaseholds 1,481.2 39.1 - - (93.0) 1,427.3
Total 2,321.2 51.4 - - (140.3) 2,232.3
Estate managed but not
transferred 78.7 - (14.2) - - 64.5
* Includes core
vacations
31 March 31 March

2007 2008
Vacation allowance used
to date 392.7 - - - 392.7 491.9
Available allowance 130.5 - - - 130.5 64.9
Future allowance * 164.4 - - - 164.4 131.6


* The future allowance relates to the period commencing from 1 April following
the year end.



Table 26: Trillium portfolio activity - Barclays

Floor space (000m2) 31 March 31 March

2007 Acquisitions Vacations* Lettings Disposals 2008

Client occupied 11.4 - - - - 11.4
Third party (sublet) 18.1 - (1.4) 1.6 (0.5) 17.8
Vacant 7.5 - 1.4 (1.6) (0.6) 6.7
Total 37.0 - - - (1.1) 35.9

Freeholds / valuable
leaseholds 11.3 - - - - 11.3
Leaseholds 25.7 - - - (1.1) 24.6
Total 37.0 - - - (1.1) 35.9

* Includes lease surrenders, lease expiries and disposals



Table 27: Trillium portfolio activity - Royal Mail

Floor space (000m2) 31 March 31 March

2007 Acquisitions Vacations Lettings Disposals 2008

Client occupied 92.7 - - - - 92.7
Third party (sublet) 94.1 - (11.9) 9.7 - 91.9
Vacant 68.5 - 11.9 (9.7) (13.9) 56.8
Total 255.3 - - - (13.9) 241.4

Freeholds / valuable
leaseholds 128.5 - - - (0.4) 128.1
Leaseholds 126.8 - - - (13.5) 113.3
Total 255.3 - - - (13.9) 241.4



Table 28: Trillium number of people by occupation

As at 31 March 2008 Total

Asset management 105
Call centre 68
Capital projects 139
Quality assurance 30
Facilities management 377
Human resources / Finance 115
Business development and commercial 95
Total 929




Financial Statements

Consolidated income statement

Before 2008 Before 2007
exceptional Exceptional exceptional Exceptional
items items Total items items Total

Notes m m m m m m

Group revenue* 2 1,561.2 - 1,561.2 1,641.1 - 1,641.1
Costs 2 (958.6) - (958.6) (1,046.2) - (1,046.2)
602.6 - 602.6 594.9 - 594.9
Profit on disposal of non-current
properties 2 75.4 - 75.4 118.2 - 118.2
Net (deficit) / surplus on revaluation
of investment properties 2 (1,170.3) - (1,170.3) 1,307.6 - 1,307.6
Operating (loss) / profit (492.3) - (492.3) 2,020.7 - 2,020.7
Interest expense 3 (324.4) - (324.4) (257.3) - (257.3)
Interest income 3 29.4 - 29.4 36.4 - 36.4
(787.3) - (787.3) 1,799.8 - 1,799.8
Share of the loss of an associate
undertaking (post-tax) (0.5) - (0.5) - - -
Share of the (loss) / profit of joint
ventures (post-tax) 11 (101.0) - (101.0) 81.3 98.0 179.3
(Loss) / profit before tax 2 (888.8) - (888.8) 1,881.1 98.0 1,979.1
Income tax credit / (expense) 5 10.5 - 10.5 (445.0) 1,994.2 1,549.2
(Loss) / profit for the financial year
from continuing activities (878.3) - (878.3) 1,436.1 2,092.2 3,528.3
Discontinued operations 12 47.5 - 47.5 - - -
(Loss) / profit for the financial year
attributable to equity shareholders 16 (830.8) - (830.8) 1,436.1 2,092.2 3,528.3

(Loss) / earnings
per share
Basic (loss) /
earnings per share 7 (188.80p) 753.59p
Diluted (loss) / earnings
per share 7 (188.80p) 750.54p


* Group revenue excludes the share of joint ventures' income of
111.6m (2007: 81.6m) (see note 11)

adjusted (loss) / earnings per share is given in note 7



Consolidated statement of recognised income and expense

2008 2007

m m
Actuarial gains / (losses) on defined benefit pension
schemes 15.8 (1.3)
Deferred tax (charge) / credit on actuarial (gains) /
losses on defined benefit pension schemes (0.9) 1.0
Fair value movement on cash flow hedges taken to equity -
Group (3.2) 6.7
Fair value movement on cash flow hedges taken to equity -
joint ventures (3.5) 11.8
Deferred tax on fair value movement on cash flow hedges
taken to equity - Group - (1.6)
Deferred tax on fair value movement on cash flow hedges
taken to equity - joint ventures - (2.3)
Net income recognised directly in equity 8.2 14.3
(Loss) / profit for the financial year (830.8) 3,528.3
Total recognised income and expense attributable to equity
shareholders (822.6) 3,542.6



Consolidated balance sheet

2008 2007

Notes m m
Non-current assets
Investment properties 9 12,296.7 13,319.3
Operating properties 9 544.8 551.5
Other property, plant and equipment 9 73.6 78.2
9 12,915.1 13,949.0
Net investment in finance leases 10 333.7 262.4
Investments in Public Private Partnerships 25.4 -
Goodwill 148.6 129.6
Investment in an associate undertaking 42.9 -
Investments in joint ventures 11 1,410.6 1,338.8
Net pension benefit assets 14 11.0 -
Total non-current assets 14,887.3 15,679.8
Current assets
Trading properties and long-term development
contracts 173.0 148.3
Derivative financial instruments 13 4.3 14.6
Trade and other receivables 838.0 641.8
Cash and cash equivalents 48.4 52.7
Total current assets (excluding non-current
assets classified as held
for sale) 1,063.7 857.4
Non-current assets classified as held for sale 12 664.1 2,420.3
Total current assets 1,727.8 3,277.7
Total assets 16,615.1 18,957.5
Current liabilities
Short-term borrowings and overdrafts (794.0) (1,683.2)
Derivative financial instruments 13 (10.7) -
Trade and other payables (927.2) (783.9)
Provisions (40.9) (19.5)
Current tax liabilities (161.0) (535.8)
Total current liabilities (excluding
liabilities directly associated with
non-current assets classified as held for
sale) (1,933.8) (3,022.4)
Liabilities directly associated with
non-current assets classified as held for sale 12 (427.7) (1,601.0)
Total current liabilities (2,361.5) (4,623.4)
Non-current liabilities
Provisions (36.7) (61.2)
Borrowings 13 (4,632.5) (3,472.0)
Net pension benefit obligations 14 - (5.6)
Deferred tax liabilities 15 (1.5) (4.0)
Total non-current liabilities (4,670.7) (3,542.8)
Total liabilities (7,032.2) (8,166.2)
Net assets 9,582.9 10,791.3
Equity
Ordinary shares 16 47.1 47.0
Own shares 16 (22.3) (14.5)
Share-based payments 16 11.3 7.9
Share premium 16 56.6 51.5
Capital redemption reserve 16 30.5 30.5
Retained earnings 16 9,459.7 10,668.9
Total shareholders' equity 9,582.9 10,791.3




Consolidated cash flow statement

2008 2008 2007 2007

Notes m m m m
Net cash generated from operations
Cash generated from operations 17 696.5 682.4
Interest paid (338.3) (237.5)
Interest received 10.7 12.4
Employer contributions to pension scheme (2.0) (3.9)
Taxation (corporation tax paid) (367.7) (91.9)
Net cash (outflow) / inflow from operations (0.8) 361.5
Cash flows from investing activities
Investment property development expenditure (415.3) (429.4)
Acquisition of investment properties (722.6) (523.7)
Other investment property related expenditure (80.0) (77.2)
Acquisition of properties by Trillium (158.3) (416.5)
Capital expenditure by Trillium (35.0) (26.0)
Capital expenditure on properties (1,411.2) (1,472.8)
Disposal of non-current investment properties 1,047.0 841.0
Disposal of non-current operating properties 33.7 28.8
Net expenditure on properties (330.5) (603.0)
Net expenditure on non-property related
non-current assets (15.4) (18.8)
Net cash outflow from capital expenditure (345.9) (621.8)
Receivable finance leases acquired (82.1) (43.3)
Receipts in respect of receivable finance
leases 0.8 3.8
Receipts from the disposal of discontinued
activities 424.9 -
Net loans (to) / from joint ventures and cash
contributed (75.3) 10.8
Distributions from joint ventures 75.1 39.2
Investment in PPPs (8.2) -
Net cash received from / (advanced to)
disposal group 296.5 (372.6)
Acquisitions of Group undertakings (net of
cash acquired) 18 (158.5) (521.4)
Net cash received from / (used in) investing
activities 127.3 (1,505.3)

Cash flows from financing activities
Issue of shares 5.2 8.4
Purchase of own share capital (87.6) (36.2)
Increase in debt 260.6 1,433.9
Decrease in finance leases payable (2.0) (2.2)
Dividends paid to ordinary shareholders 6 (308.4) (223.0)
Net cash (outflow) / inflow from financing
activities (132.2) 1,180.9
(Decrease) / increase in cash and cash
equivalents for the year (5.7) 37.1


Notes to the Financial Statements

1. Basis of preparation
The financial information is abridged and does not constitute the Group's full
Financial Statements for the years ended 31 March 2008 and 31 March 2007, and
has been prepared under with International Financial Reporting Standards
(IFRS).

Full Financial Statements for the year ended 31 March 2007, which were
prepared under IFRS, received an unqualified auditors' report and did not
contain a statement under Section 237 (2) or (3) of the Companies Act 1985,
have been filed with the Registrar of Companies.

Financial Statements for the year ended 31 March 2008 will be presented to the
Members at the forthcoming Annual General Meeting; the auditors' report on
these Financial Statements is unqualified.

2. Segmental information
Other 2008 Other 2007
Retail London investment Retail London investment
Portfolio Portfolio portfolio Trillium Total Portfolio Portfolio portfolio Trillium Total

Income statements m m m m m m m m m m
Rental income 271.2 329.1 9.6 - 609.9 279.2 311.6 8.7 - 599.5
Service charge
income 47.3 53.3 0.6 - 101.2 46.8 48.6 0.3 - 95.7
Property services
income - - - 761.0 761.0 - - - 785.9 785.9
Trading property
sale proceeds 1.3 40.0 2.3 - 43.6 - 33.1 29.0 1.7 63.8
Long-term
development
contract income - - 26.3 - 26.3 - 28.9 51.8 - 80.7
Finance lease
interest 2.9 5.9 - 10.4 19.2 3.5 5.9 - 6.1 15.5
Revenue 322.7 428.3 38.8 771.4 1,561.2 329.5 428.1 89.8 793.7 1,641.1
Rents payable (11.0) (5.3) - (175.1) (191.4) (11.3) (4.9) - (179.9) (196.1)
Other direct
property or
contract
expenditure (64.7) (72.6) (1.0) (403.6) (541.9) (67.7) (62.1) (0.8) (469.0) (599.6)
Indirect property
or contract
expenditure (32.6) (29.4) (4.0) (13.7) (79.7) (31.6) (30.9) (5.8) (16.3) (84.6)
Long-term
development
contract
expenditure - - (24.3) - (24.3) - (26.1) (40.3) - (66.4)
Bid costs - - - (11.9) (11.9) - - - (2.8) (2.8)
Cost of sales of
trading properties (0.9) (38.9) (1.0) - (40.8) (0.1) (28.7) (20.9) (0.5) (50.2)
Depreciation (2.2) (5.2) (0.4) (38.0) (45.8) (1.5) (4.9) (0.1) (26.4) (32.9)
Underlying
operating profit 211.3 276.9 8.1 129.1 625.4 217.3 270.5 21.9 98.8 608.5
Profit on disposal
of non-current
properties 16.4 40.9 - 18.1 75.4 28.5 81.7 0.5 7.5 118.2
Net (deficit) /
surplus on
revaluation of
investment
properties (671.2) (464.7) (9.5) (24.9) (1,170.3) 293.6 1,022.0 5.6 (13.6) 1,307.6
Segment result (443.5) (146.9) (1.4) 122.3 (469.5) 539.4 1,374.2 28.0 92.7 2,034.3
Demerger costs (9.8) -
Unallocated
expenses (13.0) (13.6)
Operating (loss) / profit (492.3) 2,020.7
Net interest expense (note 3) (295.0) (220.9)
(787.3) 1,799.8
Share of the (loss) / profit of joint
ventures (post-tax)
- Retail Portfolio (92.6) 182.5
- London Portfolio (14.4) -
- Other investment portfolio 5.9 -
- Trillium 0.1 (3.2)
(101.0) 179.3
Share of the loss of an associate undertaking
(post-tax) (0.5) -
(Loss) / profit before tax from continuing
activities (888.8) 1,979.1


Included within rents payable is finance lease interest payable of 2.0m
(2007: 1.9m) and 2.8m (2007: 3.1m) respectively for Retail Portfolio and
London Portfolio.

All of the share of the loss of an associate undertaking is attributable to Trillium.


2. Segmental information continued

Other 2008 Other 2007
Retail London investment Retail London investment
Portfolio Portfolio portfolio Trillium Total Portfolio Portfolio portfolio Trillium Total

Balance sheets m m m m m m m m m m
Investment
properties 4,615.9 7,069.6 48.8 562.4 12,296.7 5,497.7 7,329.4 64.6 427.6 13,319.3
Operating
properties - - - 544.8 544.8 - - - 551.5 551.5
Other property,
plant and
equipment 8.0 7.0 4.7 53.9 73.6 9.3 8.3 5.0 55.6 78.2
Net investment in
finance leases 53.2 104.8 - 175.7 333.7 63.0 104.0 - 95.4 262.4
Investments in
Public Private
Partnerships - - - 25.4 25.4 - - - - -
Goodwill - - - 148.6 148.6 - - - 129.6 129.6
Investments in
equity accounted
joint ventures 1,370.2 9.0 26.3 5.1 1,410.6 1,315.9 - 17.9 5.0 1,338.8
Investment in an
equity accounted
associate - - - 42.9 42.9 - - - - -
Trading properties
and long-term
development
contracts 16.5 24.5 128.0 4.0 173.0 - 41.4 106.2 0.7 148.3
Trade and other
receivables 203.1 390.0 23.3 221.3 837.7 185.9 220.3 27.7 207.5 641.4
Non-current assets
classified as held
for sale - - - 664.1 664.1 - - - 2,420.3 2,420.3
Segment assets 6,266.9 7,604.9 231.1 2,448.2 16,551.1 7,071.8 7,703.4 221.4 3,893.2 18,889.8
Unallocated assets 53.0 53.1
Total assets 16,604.1 18,942.9

Trade and other (249.2) (253.2) (24.1) (338.2) (864.7) (286.7) (160.8) (20.0) (281.8) (749.3)
payables
Non-current - - - (77.6) (77.6) - - - (80.7) (80.7)
payables
Liabilities
directly
associated with
non-current assets
classified as held
for sale - - - (427.7) (427.7) - - - (1,601.0) (1,601.0)
Segment (249.2) (253.2) (24.1) (843.5) (1,370.0) (286.7) (160.8) (20.0) (1,963.5) (2,431.0)
liabilities
Unallocated
liabilities (5,651.2) (5,720.6)
Total liabilities (7,021.2) (8,151.6)

Other segment
items
Capital 220.1 368.3 0.2 51.7 640.3 148.5 357.1 0.3 39.6 545.5
expenditure


All the Group's operations are in the UK and are organised into four main
business segments against which the Group reports its primary segment
information. These are Retail Portfolio, London Portfolio, Other investment
portfolio and Trillium.



3. Net interest expense 2008 2007

m m
Interest expense
Bond and debenture debt (195.1) (173.1)
Bank borrowings (136.4) (89.6)
Other interest payable (2.2) (1.2)
Fair value losses on interest rate swaps (21.9) -
Provision discounting (1.6) (1.0)
Amortisation of bond exchange de-recognition (note 13) (7.6) (17.1)
Interest on pension scheme liabilities (8.1) (7.6)
(372.9) (289.6)
Interest capitalised in relation to properties under
development 48.5 32.3
Total interest expense (324.4) (257.3)

Interest income
Short-term deposits 4.1 1.5
Other interest receivable 1.3 2.4
Interest receivable from joint ventures 15.0 8.5
Expected return on pension scheme assets 9.0 8.6
Fair value profits on interest rate swaps - 15.4
Total interest income 29.4 36.4
Net interest expense (295.0) (220.9)


Included within rents payable (note 2) is finance lease interest payable of
4.8m (2007: 5.0m).


4. Exceptional items 2008 2007

m m
Deferred taxation released within joint ventures on
conversion to a Real Estate Investment Trust - 98.0
Exceptional items before tax - 98.0
Deferred taxation released on conversion to a Real Estate
Investment Trust - 2,309.2
Real Estate Investment Trust conversion charge - (315.0)
- 2,092.2


The exceptional items arising from the Group's conversion to a Real Estate Investment
Trust are explained in note 5 below.


5. Income tax credit 2008 2007

m m
Current tax
Corporation tax expense for the year 10.3 68.8
Adjustment in respect of prior years (17.9) (0.6)
Corporation tax in respect of property disposals 0.5 32.0
Real Estate Investment Trust conversion charge - 315.0
Total current tax (credit) / expense (7.1) 415.2
Deferred tax
Origination and reversal of timing differences (3.4) 32.9
Released in respect of property disposals - (18.8)
On valuation surplus - 330.7
Released on conversion to a Real Estate Investment Trust - (2,309.2)
Total deferred tax credit (3.4) (1,964.4)
Total income tax credit in the income statement (10.5) (1,549.2)


The tax for the year is lower than the standard rate of corporation tax in the UK
(30%). The differences are explained below:

(Loss) / profit on activities before taxation (888.8) 1,979.1
(Loss) / profit on activities multiplied by the rate of
corporation tax in the UK of 30% (266.7) 593.7
Effects of:
Deferred tax released in respect of property disposals - (18.8)
Corporation tax on disposal of non-current assets 6.3 6.0
Joint venture accounting adjustments 0.9 (44.2)
Prior year corporation tax adjustments (17.9) (0.6)
Prior year deferred tax adjustments (2.9) 1.1
Non-allowable expenses and non-taxable items 19.8 7.9
Real Estate Investment Trust conversion charge - 315.0
Deferred tax released on conversion to a Real Estate
Investment Trust - (2,309.2)
Exempt property rental profits in the year ended 31 March
2008 278.9 -
Exempt property gains in the year ended 31 March 2008 (28.9) -
Exempt property rental profits in the three months ended
31 March 2007 - (89.8)
Exempt property gains in the three months ended 31 March
2007 - (10.3)
Total income tax credit in the income statement (as above) (10.5) (1,549.2)


Land Securities Group PLC elected for group Real Estate Investment Trust (REIT) status
with effect from 1 January 2007. As a result the Group no longer pays UK corporation
tax on the profits and gains from qualifying rental business in the UK provided it
meets certain conditions. Non-qualifying profits and gains of the Group continue to be
subject to corporation tax as normal. On entering the REIT regime an entry charge equal
to 2% of the aggregate market value of the properties associated with the qualifying
rental business was payable. Deferred tax accrued at the date of conversion in respect
of the assets and liabilities of the qualifying rental business was released to the
income statement, as the relevant temporary differences are no longer taxable on
reversal. An equivalent release of deferred taxation was also made by the joint
ventures, of which the Group's share was 98.0m.

The calculation of the Group's tax expense and liability necessarily involves a degree
of estimation and judgement in respect of certain items whose tax treatment cannot be
finally determined until a formal resolution has been reached with the relevant tax
authorities. If all such issues are resolved in the Group's favour, provisions
established in previous periods of up to 216.0m could be released in the future.


6. Dividends 2008 2007

m m
Ordinary dividends paid
Final dividend for the year ended 31 March 2007 (34.00p
per share) 159.5 -
Final dividend for the year ended 31 March 2006 (28.55p
per share) - 133.8
First quarterly dividend for the year ended 31 March 2008
(16.00p per share) 74.5 -
Second quarterly dividend for the year ended 31 March 2008
(16.00p per share) 74.4 -
Interim dividend for the year ended 31 March 2007 (19.00p
per share) - 89.2
308.4 223.0


The Board has proposed a final dividend of 16.00p per share (final dividend
for the year ended 31 March 2007: 34.00p) which will result in a further
distribution of 74.4m (2007: 159.5m). It will be paid on 28 July 2008 to
shareholders who are on the Register of Members on 20 June 2008. The final
dividend is in addition to the third quarterly dividend of 16.00p paid on 25
April 2008. The total dividend paid and proposed in respect of the year ended
31 March 2008 is 64.00p (2007: 53.00p).



7. (Loss) / earnings per share 2008 2007

m m

(Loss) / profit for the financial year (878.3) 3,528.3
Revaluation deficits / (surpluses) net of deferred taxation -
Group 1,170.3 (976.9)
Revaluation surpluses net of deferred taxation n - joint ventures 134.2 (54.5)
Profit on non-current property disposals after current and
deferred tax (67.8) (105.2)
Mark-to-market adjustment on interest rate swaps (net of deferred
tax) 22.4 (13.7)
Demerger costs (net of taxation) 6.9 -
Prior year non-revenue tax adjustments (16.2) -
Deferred tax arising from capital allowances on investment
properties - 11.7
Deferred tax arising from capitalised interest on investment
properties - 5.8
Real Estate Investment Trust conversion charge - 315.0
Deferred tax released on conversion to a Real Estate Investment
Trust - Group - (2,309.2)
Deferred tax released on conversion to a Real Estate Investment
Trust - joint ventures - (98.0)
EPRA adjusted earnings 371.5 303.3
Eliminate effect of debt restructuring charges (net of taxation) 1.9 13.4
Eliminate effect of bond exchange de-recognition (net of deferred
tax) 7.6 13.3

Adjusted earnings 381.0 330.0


Number Number
million million

Weighted average number of ordinary shares 470.6 469.8
Effect of own shares and treasury shares (5.4) (1.6)
Weighted average number of ordinary shares after adjusting for
own shares 465.2 468.2
Effect of dilutive share options 1.1 1.9
Weighted average number of ordinary shares adjusted for dilutive
instruments 466.3 470.1

Pence Pence

Basic (loss) / earnings per share (188.80) 753.59
Diluted (loss) / earnings per share (188.80) 750.54
Adjusted earnings per share 81.90 70.48
Adjusted diluted earnings per share 81.71 70.20

EPRA adjusted earnings 79.67 64.52


Management have chosen to disclose adjusted earnings per share in order to
provide an indication of the Group's underlying business performance.
Accordingly, it excludes the effect of all exceptional items, debt and other
restructuring charges, and other items of a capital nature (other than trading
properties and long-term contract profits) as indicated above. In addition,
the corporation tax charge arising from the conversion to a REIT, and the
deferred tax released following the conversion to a REIT, have also been
excluded due to their size and incidence. Further, prior to the conversion to
a REIT, the deferred tax arising on capital allowances in respect of
investment properties was eliminated as experience had shown that these
allowances are not in practice repayable, and deferred tax on capitalised
interest was also added back as this was effectively a permanent difference.
An EPRA measure has been included to assist comparison between European
property companies. We believe our measure of adjusted diluted earnings per
share is more appropriate than the EPRA measure in the context of our
business.


8. Net assets per share 2008 2007

m m

Net assets attributable to equity shareholders 9,582.9 10,791.3
Cumulative mark-to-market adjustment on interest rate swaps (net of
deferred tax) - Group 10.7 (14.4)
Cumulative mark-to-market adjustment on interest rate swaps (net of
deferred tax) - joint ventures 1.5 (9.2)
Cumulative mark-to-market adjustment on interest rate swaps (net of
deferred tax) - an associate undertaking 0.5 -
EPRA adjusted net assets 9,595.6 10,767.7
Reverse bond exchange de-recognition adjustment (511.5) (519.1)
Adjusted net assets attributable to equity shareholders 9,084.1 10,248.6
Reinstate bond exchange de-recognition adjustment 511.5 519.1
Cumulative mark-to-market adjustment on interest rate swaps (net of
deferred tax) - Group (10.7) 14.4
Cumulative mark-to-market adjustment on interest rate swaps (net of
deferred tax) - joint ventures (1.5) 9.2
Cumulative mark-to-market adjustment on interest rate swaps (net of
deferred tax) - an associate undertaking (0.5) -
Excess of fair value of debt over book value (note 13) (208.7) (511.5)
EPRA triple net assets value 9,374.2 10,279.8

Number Number
million million

Number of ordinary shares 470.9 470.4
Effect of own shares and treasury shares (7.2) (2.1)
Number of ordinary shares after adjusting for own shares 463.7 468.3
Effect of dilutive share options 0.7 1.6
Number of ordinary shares adjusted for dilutive instruments 464.4 469.9

Pence Pence

Net assets per share 2067 2304
Diluted net assets per share 2064 2297
Adjusted net assets per share 1959 2188
Adjusted diluted net assets per share 1956 2181

EPRA measure - adjusted diluted net assets per share 2066 2291
EPRA measure - triple net assets per share 2019 2188


Adjusted net assets per share excludes the deferred tax arising on revaluation
surpluses, mark-to-market adjustments on financial instruments used for hedging
purposes and the bond exchange de-recognition adjustment as management consider that
this better represents the expected future cash flows of the Group. EPRA measures have
been included to assist comparison between European property companies. We believe our
measure of adjusted net assets attributable to equity shareholders is more indicative
of underlying performance.


9. Non-current assets
Other
Total property,
Development investment Operating plant and
Portfolio management programme Trillium properties properties equipment Total

m m m m m m m

Net book value at 31 March 2006 10,211.2 1,229.3 27.1 11,467.6 536.1 73.6 12,077.3
Properties transferred from portfolio
management into the development programme
during the year (at 1 April 2006
valuation) (219.0) 219.0 - - - - -
Developments completed, let and
transferred from the development programme
into portfolio management during the year 60.8 (60.8) - - - - -
Property acquisitions 510.0 13.7 414.1 937.8 26.6 - 964.4
Capital expenditure 77.2 422.1 - 499.3 27.2 19.0 545.5
Capitalised interest - 29.8 - 29.8 - - 29.8
Disposals (643.5) (5.6) - (649.1) (23.0) (0.2) (672.3)
Transfer to joint ventures (266.5) - - (266.5) - - (266.5)
Surrender premiums received (3.9) - - (3.9) - - (3.9)
Depreciation (3.3) - - (3.3) (15.4) (14.2) (32.9)
Surplus / (deficit) on revaluation 884.4 436.8 (13.6) 1,307.6 - - 1,307.6
Net book value at 31 March 2007 10,607.4 2,284.3 427.6 13,319.3 551.5 78.2 13,949.0
Properties transferred from portfolio
management into the development programme
during the year (at 1 April 2007
valuation) (218.7) 218.7 - - - - -
Developments completed, let and
transferred from the development programme
into portfolio management during the year 1,491.5 (1,491.5) - - - - -
Property acquisitions 714.2 0.2 149.4 863.8 8.9 - 872.7
Capital expenditure 117.5 467.3 6.8 591.6 32.4 16.1 640.1
Capitalised interest 1.4 43.7 - 45.1 - - 45.1
Disposals (1,099.4) (2.2) (0.6) (1,102.2) (16.9) (0.7) (1,119.8)
Transfers to joint ventures (228.2) - - (228.2) - - (228.2)
Transfers to trading properties - (17.4) - (17.4) (4.1) - (21.5)
Reclassifications - - 4.1 4.1 (4.1) - -
Surrender premiums received (6.2) - - (6.2) - - (6.2)
Depreciation (2.9) - - (2.9) (22.9) (20.0) (45.8)
Deficit on revaluation (1,038.3) (107.1) (24.9) (1,170.3) - - (1,170.3)
Net book value at 31 March 2008 10,338.3 1,396.0 562.4 12,296.7 544.8 73.6 12,915.1


9. Non-current assets continued


The following table reconciles the net book value of the investment properties
(excluding those within Trillium) to the market value. Trillium has been
excluded from this reconciliation as the net book value and the market value
are not materially different. The components of the reconciliation are
included within their relevant balance sheet headings.

Total
Portfolio Development investment
management programme properties

m m m

Net book value at 31 March 2007 10,607.4 2,284.3 12,891.7
Plus: amount included in prepayments in
respect of lease incentives 93.6 37.4 131.0
Less: head leases capitalised (61.6) (9.4) (71.0)
Plus: properties treated as finance leases 163.1 - 163.1
Market value at 31 March 2007 - Group 10,802.5 2,312.3 13,114.8
Market value at 31 March 2006 - plus: share of
joint ventures (note 11) 1,637.7
Market value at 31 March 2007 - Group and
share of joint ventures 14,752.5


Total
Portfolio Development investment
management programme properties

m m m

Net book value at 31 March 2008 10,338.3 1,396.0 11,734.3
Plus: amount included in prepayments in
respect of lease incentives 156.3 24.3 180.6
Less: head leases capitalised (65.3) (2.0) (67.3)
Plus: properties treated as finance leases 149.2 - 149.2
Market value at 31 March 2008 - Group 10,578.5 1,418.3 11,996.8
Market value at 31 March 2008 - plus: share of
joint ventures (note 11) 1,589.9
Market value at 31 March 2008 - Group and
share of joint ventures 13,586.7

Included in investment properties are leasehold properties with a net book
value of 1,368.1m (2007: 1,485.5m).

In accordance with IFRS 1 `First time adoption of International Reporting
Standards' and IAS 17 `Leases', the Group has reviewed the classification of
all leases at the opening balance sheet date of 1 April 2004. In reviewing
leases of land and buildings in accordance with IAS 17 the land and buildings
elements of the lease need to be considered separately. On this basis, leases
on 43 properties entered into between 1923 and 2003 were reclassified as
finance leases in these accounts. This resulted in an increase in fixed assets
of 77.2m and a finance lease creditor of the same amount at first time
adoption on 1 April 2004. At 31 March 2008 leases on 25 properties (2007: 28)
entered into between 1960 and 2007 were classified as finance leases. The
corresponding increase in fixed assets and finance lease creditor was 67.3m
(2007: 71.0m). Operating lease expense has reduced by 6.7m (2007: 7.2m).

The fair value of the Group's investment properties at 31 March 2008 has been
arrived at on the basis of a valuation carried out at that date by Knight
Frank LLP, external valuers. The valuation by Knight Frank LLP, which conforms
to Appraisal and Valuation Standards of the Royal Institution of Chartered
Surveyors and with IVA 1 of the International Valuation Standards, was arrived
at by reference to market evidence of transaction prices for similar
properties. Fixed asset properties include capitalised interest of 211.7m
(2007: 145.6m). The average rate of capitalisation is 5.5% (2007: 5.5%). The
historical cost of investment properties is 7,813.2m (2007: 7,210.6m).

The current value of investment properties in respect of proposed developments
is 639.6m (2007: 329.3m). Developments are transferred out of the
development programme when physically complete and 95% let. The schemes
completed during the year were Christ's Lane, Cambridge, 1 Wood Street, EC2,
Princesshay, Exeter, Maskew Avenue, Peterborough, Poole Road, Poole, Bankside
2&3, SE1, Thanet Leisure, Westwood Cross and Cardinal Place, SW1. The property
rental income earned by the Group from its investment properties amounted to
603.8m (2007: 594.6m).


10. Net investment in finance leases

2008 2007

m m
Non-current
Finance leases - gross receivables 692.8 603.9
Unearned finance income (385.6) (368.0)
Unguaranteed residual value 26.5 26.5
333.7 262.4
Current
Finance leases - gross receivables 27.4 14.6
Unearned finance income (20.3) (10.9)
7.1 3.7
Total net investment in finance leases 340.8 266.1



11. Investments in joint ventures

Year ended 31/03/08 and at 31/03/08

Metro
Summary Scottish
financial Retail Shopping Buchanan The Bull
information Property Fund St. David's Ring The Harvest Oriana
of Group's Limited Limited Galleries Limited Limited Bristol Limited Limited Other
share of Partnership Partnership Partnership Partnership Partnership Alliance Partnership Partnership (1) Total
joint
ventures m m m m m m m m m m
Income
statement
Rental income 12.5 14.0 9.9 5.4 14.7 3.4 1.4 1.4 3.4 66.1
Service
charge income 2.5 3.0 0.7 0.7 2.7 - - - 0.7 10.3
Property
services
income - - - - - - - - 0.1 0.1
Trading
property sale
proceeds - - - - - - - - 35.1 35.1
Revenue 15.0 17.0 10.6 6.1 17.4 3.4 1.4 1.4 39.3 111.6
Rents payable (0.2) - - - - - - - (0.1) (0.3)
Other direct
property
expenditure (4.6) (3.8) (1.9) (1.2) (4.1) (0.2) - - (1.4) (17.2)
Indirect
property
expenditure (0.6) (1.1) (0.1) (0.3) (0.2) (0.2) (0.1) (0.2) (0.1) (2.9)
Cost of sales
of trading
properties - - - - - - - - (26.8) (26.8)

9.6 12.1 8.6 4.6 13.1 3.0 1.3 1.2 10.9 64.4
(Loss) /
profit on
disposal of
non-current
properties (7.6) 0.6 - - - - - - (0.1) (7.1)
Net (deficit)
/ surplus on
revaluation
of investment
properties (28.4) (12.1) (11.5) (21.8) (31.5) 6.3 (9.7) (15.6) (9.9) (134.2)
Operating
(loss) /
profit (26.4) 0.6 (2.9) (17.2) (18.4) 9.3 (8.4) (14.4) 0.9 (76.9)
Net interest
(expense) /
income (5.6) (12.5) (3.5) 0.4 0.1 0.4 - - (0.3) (21.0)
(Loss) /
profit before
tax (32.0) (11.9) (6.4) (16.8) (18.3) 9.7 (8.4) (14.4) 0.6 (97.9)
Income tax
expense
- ordinary (0.1) (0.6) - - - - - - (2.4) (3.1)
Share of
(losses) /
profits of
joint
ventures
after tax (32.1) (12.5) (6.4) (16.8) (18.3) 9.7 (8.4) (14.4) (1.8) (101.0)
Balance sheet
Investment
properties
(2) 126.7 246.4 176.0 244.1 288.4 291.5 62.7 87.3 55.9 1,579.0
Current
assets 11.2 38.3 6.1 118.7 9.1 12.4 2.3 1.5 73.7 273.3
137.9 284.7 182.1 362.8 297.5 303.9 65.0 88.8 129.6 1,852.3
Current
liabilities (2.9) (4.9) (2.5) (15.7) (8.2) (17.2) (0.5) (79.7) (10.7) (142.3)
Non-current
liabilities (62.0) (209.9) - (0.4) - (2.3) - (0.1) (24.7) (299.4)
(64.9) (214.8) (2.5) (16.1) (8.2) (19.5) (0.5) (79.8) (35.4) (441.7)
Net assets 73.0 69.9 179.6 346.7 289.3 284.4 64.5 9.0 94.2 1,410.6
Capital
commitments 2.9 0.6 2.9 127.4 - 27.7 - - 8.3 169.8
Market value
of investment
properties
(2) 125.9 246.6 180.0 244.0 293.3 294.5 62.8 87.3 55.5 1,589.9
Net
investment
At 1 April
2007 145.8 95.3 188.6 308.1 321.1 198.6 - - 81.3 1,338.8
Properties
contributed - - - - - - 39.7 205.8 - 245.5
Cash
contributed - 6.6 3.4 - - - 33.2 - 26.3 69.5
Share of
post-tax
results (32.1) (12.5) (6.4) (16.8) (18.3) 9.7 (8.4) (14.4) (1.8) (101.0)
Distributions (42.5) (14.2) (6.0) - - - - (0.8) (11.6) (75.1)
Fair value
movement on
cash flow
hedges taken
to equity 1.8 (5.3) - - - - - - - (3.5)
Loan advances - - - 55.4 - 79.5 - - - 134.9
Loan
repayments - - - - (13.5) (3.4) - (181.6) - (198.5)
At 31 March
2008 73.0 69.9 179.6 346.7 289.3 284.4 64.5 9.0 94.2 1,410.6


(1) Other principally includes the Martineau Galleries Limited Partnership,
Fen Farm Developments Limited, the Ebbsfleet Limited Partnership, the A2
Limited Partnership and Investors in the Community (IIC).

(2) The difference between the book value and the market value is the amount
included in prepayments in respect of lease incentives, head leases
capitalised and properties treated as finance leases.


11. Investments in joint ventures continued

Year ended 31/03/07 and at 31/03/07

Metro
Summary Scottish
financial Retail Shopping Buchanan The Bull
information Property Fund St. David's Ring The Harvest Oriana
of Group's Limited Limited Galleries Limited Limited Bristol Limited Limited Other
share of Partnership Partnership Partnership Partnership Partnership Alliance Partnership Partnership (1) Total
joint
ventures m m m m m m m m m m
Income
statement
Rental income 20.6 13.3 10.2 2.0 15.1 3.3 - - 3.1 67.6
Service
charge income 4.5 3.2 1.4 0.2 2.6 - - - 0.5 12.4
Property
services
income - - - - - - - - 1.6 1.6
Revenue 25.1 16.5 11.6 2.2 17.7 3.3 - - 5.2 81.6
Rents payable (0.2) - - - - - - - (0.1) (0.3)
Other direct
property
expenditure (8.4) (4.3) (2.4) (0.4) (4.5) (0.2) - - (4.6) (24.8)
Indirect
property
expenditure (1.4) (1.0) (0.1) - (0.2) (0.1) - - (0.9) (3.7)
Depreciation - - - - - - - - (0.1) (0.1)
15.1 11.2 9.1 1.8 13.0 3.0 - - (0.5) 52.7
Profit on
disposal of
non-current
properties - - - - - - - - 0.2 0.2
Net surplus
on
revaluation
of investment
properties 6.3 23.0 10.2 2.6 23.8 6.9 - - 2.3 75.1
Operating
profit 21.4 34.2 19.3 4.4 36.8 9.9 - - 2.0 128.0
Net interest
(expense) /
income (11.7) (10.9) (3.4) 0.2 0.1 0.4 - - (0.2) (25.5)
Profit before
tax 9.7 23.3 15.9 4.6 36.9 10.3 - - 1.8 102.5
Income tax
(expense) /
credit
- ordinary (2.7) (6.2) (3.5) (1.2) (5.6) (1.1) - - (0.9) (21.2)
- exceptional 17.7 16.9 6.9 1.2 44.9 8.1 - - 2.3 98.0
Share of
profits of
joint
ventures
after tax 24.7 34.0 19.3 4.6 76.2 17.3 - - 3.2 179.3
Balance sheet
Investment
properties
(2) 357.2 301.0 185.1 213.2 319.6 197.3 - - 57.9 1,631.3
Current
assets 15.2 9.8 7.5 116.3 10.7 15.5 - - 30.1 205.1
372.4 310.8 192.6 329.5 330.3 212.8 - - 88.0 1,836.4
Current
liabilities (4.5) (5.2) (4.0) (21.2) (9.2) (11.8) - - (5.9) (61.8)
Non-current
liabilities (222.1) (210.3) - (0.2) - (2.4) - - (0.8) (435.8)
(226.6) (215.5) (4.0) (21.4) (9.2) (14.2) - - (6.7) (497.6)
Net assets 145.8 95.3 188.6 308.1 321.1 198.6 - - 81.3 1,338.8
Capital
commitments 0.6 1.1 1.3 1.9 - 129.3 - - - 134.2
Market value
of investment
properties
(2) 351.4 299.3 189.3 213.3 325.0 200.5 - - 58.9 1,637.7
Net
investment
At 1 April
2006 105.2 81.0 173.0 0.8 259.3 118.5 - - 91.7 829.5
Properties
contributed - - - 267.6 - - - - - 267.6
Cash
contributed 9.5 6.8 1.4 35.1 0.3 - - - 2.5 55.6
Cost of
acquisition - - - - - - - - 0.5 0.5
Share of
post-tax
results 24.7 34.0 19.3 4.6 76.2 17.3 - - 3.2 179.3

Distributions - (29.6) (5.1) - - - - - (4.5) (39.2)
Fair value
movement on
cash flow
hedges taken
to equity 6.4 3.1 - - - - - - - 9.5
Transferred
to goodwill - - - - - - - - (12.1) (12.1)
Loan advances - - - - - 67.0 - - - 67.0
Loan
repayments - - - - (14.7) (4.2) - - - (18.9)
At 31 March
2007 145.8 95.3 188.6 308.1 321.1 198.6 - - 81.3 1,338.8


(1) Other principally includes the Martineau Galleries Limited Partnership,
the Ebbsfleet Limited Partnership, the A2 Limited Partnership and Investors in
the Community (IIC).

(2) The difference between the book value and the market value is the amount
included in prepayments in respect of lease incentives, head leases
capitalised and properties treated as finance leases.



12. Non-current assets classified as held for sale 2008 2007

m m

Non-current assets classified as held for sale 664.1 2,420.3
Liabilities directly associated with non-current assets
classified as held for sale (427.7) (1,601.0)

236.4 819.3


Non-current assets and liabilities held for sale at 31 March 2007 represents
PPP investments acquired as part of the SMIF acquisition. SMIF was acquired on
5 February 2007 for 517.0m. SMIF included a number of PPP investments which
the Group acquired exclusively with a view to being resold to third party
investors, while maintaining a minority share. The Group transferred the
majority of the PPPs acquired with SMIF, together with a number of projects
subsequently acquired, into a specifically created vehicle, the Trillium
Investment Partners LP, for the purpose of introducing third party investors.
During the year the Trillium Investment Partners LP was refinanced resulting
in a repayment of 414.8m of debt. On 14 March 2008, 90% of the equity of
Trillium Investment Partners LP was sold to third party investors and the
remaining 10%, which is to be retained, was transferred to an investment in an
associate undertaking. On disposal 23.9m was recognised as the income of the
Trillium Investment Partners LP as a discontinued operation, being the
operational profits of the business from acquisition to 14 March.

The remaining balance represents a number of PPP investments which will be
sold to Trillium Investment Partners LP or to third parties. The net carrying
value of the disposal group is based on its fair value less costs to sell at
the date of acquisition, as adjusted to reflect cash advanced and cash
returned from the disposal group. The disposal group represents a discontinued
operation, and the Group has not recognised any profits or losses in respect
of this discontinued operation (other than disclosed above) for the period
from acquisition to 31 March 2008. The disposal group is held in the Trillium
segment.

Set out below is an analysis of the movements within the disposal group for
the year ended 31 March 2008:

Trillium
Investment
Partners
LP Other Total

m m m

Book value at 1 April 2007 761.2 58.1 819.3
Projects acquired from AMEC (note 18) - 134.4 134.4
Other projects acquired 67.0 77.5 144.5
Cash received on refinancing of Trillium Investment
Partners LP (414.8) - (414.8)
Cash received from the disposal group (7.9) (18.3) (26.2)
Cash received on disposal of Meterfit - (25.3) (25.3)
Trillium Investment Partners LP transferred to an
associate undertaking (43.4) - (43.4)
Cash received on disposal of Trillium Investment Partners
LP (399.6) - (399.6)
Profit within the Trillium Investment Partners LP from
acquisition to 14 March 2008 23.9 - 23.9
Profit on disposal of the Trillium Investment Partners LP 13.6 - 13.6
Profit on disposal of Meterfit - 10.0 10.0
Profit from discontinued operations 37.5 10.0 47.5
- 236.4 236.4



13. Borrowings
2008

Weighted Excess
average of
time for fair
which value
Effective interest over
interest rate is Fair book
rate fixed value(10) value

Book value % Years m m
Nominal/
notional
value
(7) Secured Unsecured Total Fixed /
floating
m m m m (9)
Sterling
4.625 per cent Notes due
2013 (1) 300.0 299.7 - 299.7 Fixed 4.7 2.8 292.9 (6.8)
5.292 per cent Notes due
2015 (1) 391.5 390.9 - 390.9 Fixed 5.3 5.7 384.0 (6.9)
4.875 per cent Notes due
2019 (1) 400.0 396.1 - 396.1 Fixed 5.0 9.6 369.9 (26.2)
5.425 per cent Notes due
2022 (1) 255.3 254.5 - 254.5 Fixed 5.5 12.0 240.0 (14.5)
4.875 per cent Notes due
2025 (1) 300.0 297.0 - 297.0 Fixed 4.9 15.5 257.2 (39.8)
5.391 per cent Notes due
2026 (1) 210.7 209.8 - 209.8 Fixed 5.4 15.9 190.5 (19.3)
5.391 per cent Notes due
2027 (1) 611.2 608.5 - 608.5 Fixed 5.4 17.0 547.6 (60.9)
5.376 per cent Notes due
2029 (1) 317.9 316.3 - 316.3 Fixed 5.4 19.5 283.4 (32.9)
5.396 per cent Notes due
2032 (1) 322.9 321.0 - 321.0 Fixed 5.4 22.3 285.2 (35.8)
5.125 per cent Notes due
2036 (1) 500.0 498.5 - 498.5 Fixed 5.1 25.9 426.6 (71.9)
Bank facility due 2010 15.5 15.5 - 15.5 Floating 6.4 0.1 15.5 -
Euro Commercial Paper
(2) 19.8 - 19.8 19.8 Floating 5.8 0.1 19.8 -
DWP term loan (3) 124.4 124.4 - 124.4 Floating 6.4 0.3 124.4 -
Syndicated bank debt (4) 865.0 865.0 - 865.0 Floating 5.8 - 865.0 -
Bi-lateral facilities
(5) 1,065.4 1,065.4 - 1,065.4 Floating 5.9 - 1,065.4 -
Acquisition loan notes
(6) 106.4 - 106.4 106.4 Floating 5.4 0.5 106.4 -
Bank overdraft 1.4 - 1.4 1.4 Floating - - 1.4 -
Money market borrowings 45.0 - 45.0 45.0 Floating 5.7 0.1 45.0 -

5,852.4 5,662.6 172.6 5,835.2 5,520.2 (315.0)
Euro
Euro Commercial Paper
(2) 35.5 - 35.5 35.5 Floating 4.7 0.1 35.5 -

Amounts payable under
finance leases 67.3 67.3 - 67.3 Fixed 5.5 88.5 79.5 12.2

5,955.2 5,729.9 208.1 5,938.0 5,635.2 (302.8)
Fair value of derivative
instruments
Interest rate swaps -
qualifying hedges 145.7 - 0.8 0.8 5.1 6.3 0.8 -
Interest rate swaps -
non-qualifying hedges 1,880.0 - 9.9 9.9 5.2 1.7 9.9 -
Foreign currency swaps -
qualifying hedges 35.5 - (4.3) (4.3) 4.7 0.1 (4.3) -
2,061.2 - 6.4 6.4 6.4 -
Bond exchange
de-recognition
adjustment(8) (511.5) - (511.5) - 511.5

Total borrowings 5,218.4 214.5 5,432.9 5,641.6 208.7

Less: bank overdraft (1.4)
Less: borrowings falling due within one
year (802.1)
Less: derivative financial instruments
- liabilities (10.7)
Plus: derivative financial instruments
- assets 4.3
Plus: bond exchange de-recognition
falling due within one year 11.7
Less: amounts payable under
finance leases falling due
within one year (2.2)

4,632.5



13. Borrowings continued

2007

Weighted Excess
average of
time for fair
which value
Effective interest over
interest rate is Fair book
rate fixed value(10) value

Book value % Years m m
Nominal/
notional
value
(7) Secured Unsecured Total Fixed /
floating
m m m m (9)


Sterling
5.016 per cent Notes due
2007 (1) 181.7 181.7 - 181.7 Fixed 5.0 0.1 181.6 (0.1)
4.625 per cent Notes due
2013 (1) 300.0 299.6 - 299.6 Fixed 4.7 3.8 288.5 (11.1)
5.292 per cent Notes due
2015 (1) 391.5 390.7 - 390.7 Fixed 5.3 6.7 384.3 (6.4)
4.875 per cent Notes due
2019 (1) 400.0 395.7 - 395.7 Fixed 5.0 10.6 379.1 (16.6)
5.425 per cent Notes due
2022 (1) 255.3 254.4 - 254.4 Fixed 5.5 13.0 255.4 1.0
4.875 per cent Notes due
2025 (1) 300.0 296.9 - 296.9 Fixed 4.9 16.5 286.2 (10.7)
5.391 per cent Notes due
2026 (1) 210.7 209.8 - 209.8 Fixed 5.4 16.9 213.2 3.4
5.391 per cent Notes due
2027 (1) 611.3 608.3 - 608.3 Fixed 5.4 18.0 614.8 6.5
5.376 per cent Notes due
2029 (1) 317.9 316.2 - 316.2 Fixed 5.4 20.5 324.5 8.3
5.396 per cent Notes due
2032 (1) 322.9 321.0 - 321.0 Fixed 5.4 23.3 331.3 10.3
5.125 per cent Notes due
2036 (1) 500.0 498.4 - 498.4 Fixed 5.1 26.9 498.0 (0.4)
Bank facility due 2010 15.5 15.5 - 15.5 Floating 5.7 0.1 15.5 -
Euro Commercial Paper
(2) 139.2 - 139.2 139.2 Floating 5.4 - 139.2 -
DWP term loan (3) 173.1 173.1 - 173.1 Floating 5.7 0.5 173.1 -
Syndicated bank debt (4) 183.0 183.0 - 183.0 Floating 5.5 - 183.0 -
Bi-lateral facility (5) 885.6 885.6 - 885.6 Floating 5.9 0.4 885.6 -
Acquisition loan notes
(6) 114.4 - 114.4 114.4 Floating 4.4 0.5 114.4 -
Money market borrowings 192.0 - 192.0 192.0 Floating 5.5 0.1 192.0 -

5,494.1 5,029.9 445.6 5,475.5 5,459.7 (15.8)
Euro
Bi-lateral facility 26.9 26.9 - 26.9 Floating 4.0 0.2 26.9 -
Euro Commercial Paper
(2) 41.1 - 41.1 41.1 Floating 5.6 0.3 41.1 -

68.0 26.9 41.1 68.0 68.0 -
Swiss Francs
Euro Commercial Paper
(2) 21.0 - 21.0 21.0 Floating 5.5 - 21.0 -

Yen
Euro Commercial Paper
(2) 38.8 - 38.8 38.8 Floating 5.4 - 38.8 -

Amounts payable under
finance leases 71.0 71.0 - 71.0 Fixed 5.5 86.9 79.2 8.2

5,692.9 5,127.8 546.5 5,674.3 5,666.7 (7.6)
Fair value of derivative
instruments
Interest rate swaps -
qualifying hedges 195.6 - (2.4) (2.4) 5.1 5.7 (2.4) -
Interest rate swaps -
non-qualifying hedges 1,205.0 - (12.0) (12.0) 4.9 2.0 (12.0) -
Foreign currency swaps -
qualifying hedges 100.9 - (0.2) (0.2) 5.5 0.1 (0.2) -

1,501.5 - (14.6) (14.6) (14.6) -
Bond exchange
de-recognition
adjustment(8) (519.1) - (519.1) - 519.1

Total borrowings 4,608.7 531.9 5,140.6 5,652.1 511.5


Less: borrowings falling due within one year (1,687.4)
Plus: bond exchange de-recognition falling
due within one year 6.3
Plus: derivative financial instruments -
assets 14.6
Less: amounts payable under finance leases
falling due within one year (2.1)

3,472.0


13. Borrowings continued


(1) The Notes and the committed bank facilities are secured on a fixed and
floating pool of assets (The Security Group). The debt investors benefit from
security over a pool of investment properties valued at 11.0bn at 31 March
2008 (2007: 11.6bn). The amount borrowed against these assets was 5,595.2m
(2007: 5,126.9m). The secured debt structure has a tiered covenant regime
which gives the Group substantial operational flexibility when the loan to
value and interest rate cover in The Security Group are less than 65% and more
than 1.45 times respectively. If these limits are exceeded, operational
restrictions increase significantly and could act as an incentive to reduce
gearing.

(2) Euro Commercial Paper is unsecured. However, the amount drawn is required
to be supported by an unutilised committed bank facility, which is a secured
facility.

(3) The DWP term loan was refinanced in December 2006 and expires in December
2017. It is secured on the freehold and long leasehold properties acquired
from the Department for Work and Pensions. The carrying amount of the
properties concerned was 364.0m at 31 March 2008 (2007: 380.4m).

(4) At 31 March 2008, the Group had a 1.5bn syndicated bank facility with a
maturity of August 2013. The facility is committed and secured on the assets
of the Security Group. The maturity profile is calculated on the basis that it
is the Group's intention to retain the existing loans or that the existing
loans will be refinanced or rescheduled with the same financial institutions
under the terms of the facility.

(5) During the year, the Group entered into three committed bilateral
facilities all of which are secured on the assets of the Security Group. In
June 2007 the Group entered into a 150.0m facility, which has been extended
in December 2007, as a 175.0m facility with an expiry in February 2010. In
July 2007 the Group entered into a 500.0m facility which was due to expire in
July 2008, but a commitment has been obtained to replace it in July 2008 with
a 350.0m facility with an expiry in July 2009. In December 2007, the 1.0bn
SMIF acquisition facility was repaid. Another 350m facility was established
in December 2007 which expires in October 2008. The Group has an option to
extend each of these bilateral facilities by a further year. In December 2007,
the Group acquired a share of Leeds Trinity Quarter which included a facility
which has been refinanced post year-end with a five year 352m committed
facility secured on these assets.

The maturity profile is calculated on the basis that it is the Group's
intention to retain the existing loans or that the loans will be refinanced or
rescheduled with the same financial institutions under the terms of the
facility.

(6) The acquisition loan notes were issued by Retail Property Holdings Trust
Limited, a subsidiary of the Group, as partial consideration for the purchase
of Tops Estates PLC and the LxB portfolio. The notes are unsecured, however,
they have the benefit of a commercial bank guarantee. Interest is calculated
with reference to six month LIBOR. The notes are due to be redeemed in 2015,
however the holders of the notes can request redemption in full at the next
interest payment date with at least 30 days notice.

(7) For foreign currency amounts, the nominal/notional value is the Sterling
equivalent of the principal amount at 31 March.

(8) On 3 November 2004, a debt refinancing was completed resulting in the
Group exchanging all of its outstanding bond and debenture debt for new Notes.
The new Notes did not meet the IAS 39 requirement to be substantially
different from the debt that it replaced. Consequently the book value of the
new Notes is reduced to the book value of the original debt (the bond exchange
de-recognition adjustment). The adjustment is amortised to zero over the life
of the new Notes.

(9) Before the effect of derivative instruments.

(10) The Group's Notes are listed on the Irish Stock Exchange and their fair
values are based on their respective market prices. The fair value of interest
rate swaps is based on the market price of comparable instruments at the
balance sheet date. The fair values of short-term deposits, loans and
overdrafts are assumed to approximate to their book values, as are the values
of longer-term, floating rate bank loans.

Financial risk management

Financial risk factors

The Group's overall risk management programme focuses on the unpredictability
of financial markets and seeks to minimise potential adverse effects on the
Group's financial performance. The Group uses derivative financial instruments
to hedge certain risk exposures.

The Group's operations and debt financing expose it to a variety of financial
risks. The main risks arising include credit risk, liquidity risk and market
risk, the latter in respect of both interest rates and foreign exchange.

The exposure to each risk, how it arises and policies for managing each risk
for the year is summarised below:

Credit risk

The Group's principal financial assets are bank balances and cash, trade and
other receivables, finance lease receivables and short-term investments. The
Group's credit risk is primarily attributable to its trade and finance lease
receivables. The amounts presented in the balance sheet are net of allowances
for doubtful receivables. An allowance for impairment is made where there is
objective evidence that the Group will not be able to collect all amounts due
according to the original terms of the receivables concerned. The balance is
low relative to the scale of the balance sheet and therefore the credit risk
of trade receivables is considered to be low.

Property sales receivables primarily relate to the sale of six properties, for
which all payments to date have been received when due, and as the purchasers
are of reputable financial standing the credit risk is considered low.

Finance lease receivables relate to amounts receivable from tenants in respect
of tenant finance leases. This is not considered a significant credit risk as
the tenants are generally of good financial standing.

The credit risk on liquid funds and derivative financial instruments is
limited due to the Group's policy of monitoring counterparty exposures. The
Group has no significant concentration of credit risk, with exposure spread
over a large number of counterparties.


13. Borrowings continued

Liquidity risk

The Group actively maintains a mixture of long-term and short-term committed
facilities that are designed to ensure that the Group has sufficient available
funds for operations and committed investments. The Group's undrawn committed
borrowing facilities are monitored against projected cash flows. The expiry
periods of the G'oup's undrawn committed borrowing facilities are:

2008 2007

m m

More than one year but not more than two years 25.0 -
More than two years but not more than five
years 2.0 2.0
More than five years 584.0 1,077.1

611.0 1,079.1

The undrawn committed borrowing facilities are net of amounts drawn under both
the syndicated bank facility and the Euro Commercial Paper.

Market risk

The Group is exposed to market risk through interest rates and currency
fluctuations.

Interest rates

The Group uses interest rate swaps and similar instruments (forward rate
agreements, forward starting swaps, and gilt locks) to manage its interest
rate exposure. With property and interest rate cycles typically of four to
seven years duration, the Group's target is to have a minimum of 80% of
anticipated debt at fixed rates of interest and a maximum of 20% floating over
this timeframe. Due to a combination of factors, principally the high level of
certainty required under IAS 39 `Financial Instruments: Recognition and
Measurement', hedging instruments used in this context do not qualify for
hedge accounting. Specific hedges are also used in geared joint ventures to
fix the interest exposure on limited recourse debt.

At 31 March 2008 the Group (including joint ventures) had 2.3bn of hedges in
place, and its debt was 80% fixed. Consequently, based on year end debt
levels, a 1% change in interest rates would decrease or increase the Group's
annual profit before tax by 12.4m. The sensitivity has been calculated by
applying the interest rate change to the variable rate borrowings, net of
interest rate swaps, at the year end.

Foreign exchange

Foreign exchange risk arises when future commercial transactions or recognised
assets or liabilities are denominated in a currency that is not the Group's
functional currency.

The Group does not normally enter into any foreign currency transactions as it
is UK based. However, the Group is able to raise debt in currencies other than
Sterling, and where this occurs it is the Group's policy to hedge 100% of the
exposure by entering into currency swaps to fix the sterling value of debt.
Therefore the Group's foreign exchange risk is low.

Financial maturity analysis

The interest rate and currency profiles of the Group's undiscounted
borrowings, after taking into account the effect of the foreign currency swaps
and interest rate swaps, are set out below:

2008 2007

Fixed Floating Fixed Floating
rate rate Total rate rate Total

m m m m m m

Sterling 4,402.5 1,552.7 5,955.2 5,458.4 207.6 5,666.0
Euro - - - - 26.9 26.9

4,402.5 1,552.7 5,955.2 5,458.4 234.5 5,692.9

The maturity profiles of the Group's borrowings are as follows:

2008 2007

Fixed Floating Fixed Floating
rate rate Total rate rate Total

m m m m m m

One year or less, or on demand 172.2 633.5 805.7 1,457.2 234.5 1,691.7
More than one year but not more than two years 464.4 38.0 502.4 2.3 - 2.3
More than two years but not more than five
years 321.9 - 321.9 22.0 - 22.0
More than five years 3,444.0 881.2 4,325.2 3,976.9 - 3,976.9

4,402.5 1,552.7 5,955.2 5,458.4 234.5 5,692.9


The maturity profiles of the Group's derivative instruments are as follows:

2008 2007

Interest Foreign Interest Foreign
rate currency rate currency
swaps swaps Total swaps swaps Total

m m m m m m

One year or less, or on demand 178.9 35.5 214.4 274.9 100.9 375.8
More than one year but not more than two years 46.7 - 46.7 178.9 - 178.9
More than two years but not more than five
years 1,721.9 - 1,721.9 867.3 - 867.3
More than five years 78.2 - 78.2 79.5 - 79.5

2,025.7 35.5 2,061.2 1,400.6 100.9 1,501.5



14. Net pension benefit obligations 2008 2007

m m

At the beginning of the year 5.6 6.5
Charge to operating profit 2.1 2.7
Expected return on plan assets (9.0) (8.6)
Interest on schemes' liabilities 8.1 7.6
Employer contributions (2.0) (3.9)
Actuarial (gains) / losses (15.8) 1.3
At the end of the year (11.0) 5.6



15. Deferred taxation 2008 2007

m m
Deferred tax is provided as follows:
Excess of capital allowances over depreciation - operating
properties 0.7 4.4
Capitalised interest - operating properties 0.9 0.9
Other temporary differences (0.1) (1.3)
Total deferred tax 1.5 4.0



16. Total shareholders' equity Capital Retained
Ordinary Own Share-based Share redemption earnings
shares shares payments premium reserve * Total

m m m m m m m

At 1 April 2006 46.9 (3.4) 6.3 43.2 30.5 7,370.4 7,493.9
Exercise of options 0.1 - - 8.3 - - 8.4
Fair value movement on cash flow
hedges - Group - - - - - 5.1 5.1
Fair value movement on cash flow
hedges - joint ventures - - - - - 9.5 9.5
Fair value of share-based payments - - 5.6 - - - 5.6
Own shares acquired - (15.1) - - - (21.1) (36.2)
Cost of shares awarded to employees - 4.0 (4.0) - - - -
Actuarial losses on defined benefit
pension schemes - - - - - (0.3) (0.3)
Dividends paid (note 6) - - - - - (223.0) (223.0)
Profit for the financial year - - - - - 3,528.3 3,528.3
At 31 March 2007 47.0 (14.5) 7.9 51.5 30.5 10,668.9 10,791.3
Exercise of options 0.1 - - 5.1 - - 5.2
Fair value movement on cash flow
hedges - Group - - - - - (3.2) (3.2)
Fair value movement on cash flow
hedges - joint ventures - - - - - (3.5) (3.5)
Fair value of share-based payments - - 5.0 - - - 5.0
Own shares acquired - (9.4) - - - (78.2) (87.6)
Cost of shares awarded to employees - 1.6 (1.6) - - - -
Actuarial gains on defined benefit
pension schemes - - - - - 14.9 14.9
Dividends paid (note 6) - - - - - (308.4) (308.4)
Loss for the financial year - - - - - (830.8) (830.8)

At 31 March 2008 47.1 (22.3) 11.3 56.6 30.5 9,459.7 9,582.9


* Included within retained earnings are cumulative gains in respect of cash
flow hedges of 4.4m (2007: 11.1m).

Own shares represent the cost of shares purchased in Land Securities Group PLC
by the Employee Share Ownership Plan (ESOP) which is operated by the Group in
respect of its commitment to the Deferred Bonus Shares Scheme. The number of
shares held by the ESOP at 31 March 2008 was 1,336,275 (2007: 895,771).

In July 2006 and 2007 the shareholders at the Annual General Meeting
authorised the acquisition of shares issued by the Company representing up to
10% of its share capital to be held as treasury shares. At 31 March 2008 the
Group owned 5,896,000 (2007: 1,225,000) shares with a market value of 87.6m
(2007: 25.9m).

17. Cash flow from operating activities

Reconciliation of operating profit to net cash inflow from operating
activities:

2008 2007

m m
Cash generated from operations
(Loss) / profit for the financial year (878.3) 3,528.3
Income tax (credit) / expense (10.5) (1,549.2)
(Loss) / profit before tax (888.8) 1,979.1
Share of losses / (profits) of joint ventures
(post-tax) 101.0 (179.3)
Share of losses of an associate undertaking
(post-tax) 0.5 -
(787.3) 1,799.8
Interest income (29.4) (12.4)
Interest expense 324.4 233.3
Operating (loss) / profit (492.3) 2,020.7

Adjustments for:
Depreciation 45.8 32.9
Profit on disposal of non-current properties (75.4) (118.2)
Net deficit / (surplus) on revaluation of
investment properties 1,170.3 (1,307.6)
Share-based payment charge 5.0 5.6
Pension scheme charge 2.1 2.7

Changes in working capital:
Decrease in trading properties and long-term
development contracts 0.2 110.1
(Increase) / decrease in receivables (26.3) (127.2)
Increase in payables and provisions 67.1 63.4
Net cash generated from operations 696.5 682.4



18. Business combinations
AMEC's Project Investment business

The Group acquired 100% of the voting rights of AMEC's Project Investment
business (AMEC) on 12 November 2007 for a consideration of 203.8m, including
costs. This has been accounted for as a business combination.

m
Provisional fair value of net assets acquired
Assets of the disposal group 138.2
Liabilities directly associated with the assets of the disposal
group (3.8)
Disposal group (note 12) 134.4
PPP investments 17.2
Cash and cash equivalents 45.3
Current liabilities (6.6)
Net assets acquired 190.3
Fair value of consideration
Cash 202.1
Costs 1.7
203.8
Goodwill (13.5)
190.3


18. Business combinations continued


The disposal group comprises a number of PPP investments which were acquired
exclusively with a view to being resold to Trillium Investment Partners LP.
The net amount attributed to the disposal group at the date of acquisition
represents fair value less costs to sell. The separate PPP investments
represent investments in associates which are currently constructing PPP
assets. These assets are not treated as assets held for sale. The remaining
assets and liabilities relate to the management companies within AMEC that are
being retained. The fair values reported above in respect of these assets and
liabilities equate to their book values. The goodwill acquired is attributable
to the knowledge and market expertise of the management team of the retained
portion of the business.

Set out below are the results of AMEC Project Investment business excluding
the disposal group, from the date of acquisition 12 November 2007 to 31 March
2008 and for the period from 1 April 2007 to the date of acquisition:

Results
Results Results for AMEC
for AMEC Results for the from Results
from for the Group for the
Group for the 1 April Group as
12 excluding year 2007 to if AMEC
November AMEC for ended had been
2007 to the year 12 acquired
ended 31 31 November on 1
31 March March March April
2008 2008 2008 2007 2007

m m m m m

Revenue - 1,561.2 1,561.2 13.4 1,574.6

(Loss) / profit before tax (5.5) (883.3) (888.8) 9.1 (879.7)
Taxation credit / (charge) 1.5 9.0 10.5 (2.5) 8.0
(Loss) / profit after tax (4.0) (874.3) (878.3) 6.6 (871.7)


There were no recognised gains or losses in the year other than the profit attributable
to shareholders.



Glossary

Adjusted earnings per share (EPS)

Earnings per share based on revenue profit plus profits on trading properties
and long-term development contracts all after tax.

Adjusted net asset value (NAV) per share

NAV per share adjusted to add back deferred tax associated with investment
properties and capitalised interest, the adjustment arising from the
de-recognition of the bond exchange, together with cumulative mark-to-market
adjustment arising on interest swaps and similar instruments used for hedging
purposes. After REIT conversion, the adding back of deferred tax is no longer
relevant.

Book value

The amount at which assets and liabilities are reported in the financial
statements.

Combined portfolio

The combined portfolio is our wholly-owned investment property portfolio
combined with our share of the value of properties held in joint ventures, but
excludes any investment properties owned by Trillium. Unless stated these are
the pro-forma numbers we use when discussing the investment property business.

Development pipeline

The Group's development programme together with any proposed schemes that are
not yet included in the development programme but which are more likely to
proceed than not.

Development programme

The Group's development programme comprises projects which are completed but
less than 95% let; developments on site; committed developments (being
projects which are approved and the building contract let); and authorised
developments (those projects approved by the Board for which the building
contract has not yet been let). For reporting purposes we retain properties in
the programme until they are 95% let.

Development surplus

Excess of latest valuation over the total development cost (TDC).

Diluted figures

Reported amount adjusted to include the effects of potential shares issuable
under employee share schemes.

Earnings per share (EPS)

Profit after taxation attributable to ordinary shareholders divided by the
weighted average number of ordinary shares in issue during the year.

EPRA

European Public Real Estate Association.

Equivalent yield

The internal rate of return from an investment property, based on the gross
outlays for the purchase of a property (including purchase costs), reflecting
reversions to current market rent, and such items as voids and expenditures
but disregarding potential changes in market rents and reflecting the actual
cash flow rents.

Estimated rental value (ERV)

The estimated market rental value of lettable space as determined biannually
by the Group's valuers. This will normally be different to the rent being
paid.

Exceptional item

An item of income or expense that is deemed to be sufficiently material,
either by its size or nature, to require separate disclosure.

Finance lease

A lease that transfers substantially all the risks and rewards of ownership
from the lessor to the lessee.

Gearing (net)

Total borrowings, including bank overdrafts, less short-term deposits,
corporate bonds and cash, at book value, plus non-equity shareholders' funds
as a percentage of equity shareholders' funds.

Gross income yield

The annual net rent on investment properties expressed as a percentage of the
valuation ignoring costs of purchase or sale.

Head lease

A lease under which the Group holds an investment property.

Initial yield

Annualised net rents on investment properties expressed as a percentage of the
acquisition cost.

Interest rate swap

A financial instrument where two parties agree to exchange an interest rate
obligation for a predetermined amount of time. These are used by the Group to
convert floating rate debt to fixed rates.

Investment portfolio

The investment portfolio comprises the Group's wholly-owned investment
properties together with the properties held for development but excludes
Trillium properties.

Joint venture

An entity in which the Group holds an interest on a long-term basis and is
jointly controlled by the Group and one or more venturers under a contractual
arrangement whereby decisions on financial and operating policies essential to
the operation, performance and financial position of the venture require each
venturer's consent.

Lease incentives

Any incentive offered to occupiers to enter into a lease. Typically the
incentive will be an initial rent-free period, or a cash contribution to
fit-out or similar costs. For accounting purposes, under IFRS, the value of
the rent-free period is spread over the non-cancellable life of the lease.

LIBOR

The London Interbank Offered Rate, the interest rate charged by one bank to
another for lending money.

Like-for-like portfolio

Properties that have been in the investment or combined portfolio for the
whole of the current and previous financial year.

London Portfolio

This business includes all London offices and Central London retail, but
excludes those assets held in the Metro Shopping Fund LP.

Mark-to-market adjustment

An accounting adjustment to change the book value of an asset or liability to
its market value.

Net asset value (NAV) per share

Total equity divided by the number of ordinary shares in issue at the period
end.

Open market value

Open market value is an opinion of the best price at which the sale of an
interest in the property would complete unconditionally for cash consideration
on the date of valuation (as determined by the Group's external valuers). In
accordance with usual practice, the Group's external valuers report valuations
net, after the deduction of the prospective purchaser's costs, including stamp
duty, agent and legal fees.

Operating properties

Properties acquired and managed by Trillium as part of its property
outsourcing contracts with third parties and which do not meet the accounting
definition of investment property.

Other investment portfolio

This comprises all other investment properties not included in Retail or
London Portfolio.

Outline planning consent

This gives consent in principle for a development, and covers matters such as
use and building mass. Full details of the development scheme must be provided
in an application for full planning consent, including detailed design,
external appearance and landscaping before a project can proceed. An outline
planning permission will lapse if full planning permission is not granted
within three years.

Private Finance Initiative (PFI)

A particular form of PPP, that is a government or public authority initiative
to acquire private financing for public sector infrastructure.

Property income distribution (PID)

A PID is a distribution by a REIT to its shareholders paid out of qualifying
profits. A REIT is required to distribute at least 90% of its qualifying
profits as a PID to its shareholders.

Public Private Partnership (PPP)

A partnership that brings together, for mutual benefit, a public body and a
private company in a long-term joint venture for the purpose of delivering
public projects or services.

Qualifying activities/Qualifying assets

The ownership (activity) of property (assets) which is held to earn rental
income and qualifies for tax-exempt treatment (income and capital gains) under
UK REIT legislation.

Real Estate Investment Trust (REIT)

A REIT must be a publicly quoted company with at least three quarters of its
profits and assets derived from a qualifying property rental business. Income
and capital gains from the property rental business are exempt from tax but
the REIT is required to distribute at least 90% of those profits to
shareholders. Corporation tax is payable on non-qualifying activities in the
normal way.

Retail Portfolio

This business includes our shopping centres, shops, retail warehouse
properties and assets held in retail joint ventures but not Central London
retail.

Return on average capital employed

Group profit before interest, plus joint venture profit before tax, divided by
the average capital employed (defined as shareholders' funds plus net debt).

Return on average equity

Group profit before tax plus joint venture tax divided by the average equity
shareholders' funds.

Revenue profit

Profit before tax, excluding profits on the sale of non-current asset and
trading properties, profits on long-term development contracts, revaluation
surpluses, mark-to-market adjustments on interest rate swaps and similar
instruments used for hedging purposes, the adjustment to interest payable
resulting from the amortisation of the bond exchange de-recognition, debt
restructuring charges and any exceptional items.

Reversionary or under-rented

Space where the passing rent is below the ERV.

Reversionary yield

The anticipated yield to which the initial yield will rise once the rent
reaches the ERV.

Total business return

Dividend per share, plus the increase in adjusted diluted net asset value per
share, divided by the adjusted diluted net asset value per share at the
beginning of the period.

Total development cost (TDC)

All capital expenditure on a project including the opening book value of the
property on commencement of development, together with all finance costs less
residential proceeds.

Total property return

Valuation surplus, profit / (loss) on property sales and net rental income in
respect of investment properties expressed as a percentage of opening book
value, together with the time weighted value for capital expenditure incurred
during the current period, on the investment property portfolio.

Total shareholder return

The growth in value of a shareholding over a specified period, assuming that
dividends are reinvested to purchase additional units of the stock.

Trading properties

Properties held for trading purposes and shown as current assets in the
balance sheet.

Turnover rent

Rental income which is related to an occupier's turnover.

Underlying operating profit

Operating profit before profit on disposal of non-current properties,
revaluation of investment properties, and exceptional items stated within
operating profit.

Unitary charge

The basic payment received by Trillium under a property outsourcing contract.

Voids

The area in a property or portfolio, excluding developments, which are
currently available for letting.

Weighted average cost of capital (WACC)

Weighted average cost of debt and notional cost of equity, used as a benchmark
to assess investment returns.

Yield shift

A movement (negative or positive) in the equivalent yield of a property asset.

Zone A

A means of analysing and comparing the rental value of retail space by
dividing it into zones parallel with the main frontage. The most valuable
zone, Zone A, is at the front of the unit. Each successive zone is valued at
half the rate of the zone in front of it.



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