Land Securities Regulatory News (LAND)

14 May 2008 07:01

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 changeValuation (‚£1,279.6m) ‚£1,396.1m n/a(deficit) /surplusBasic 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/aprofit**Revenue profit ‚£379.1m ‚£392.2m Down 3.3%Basic EPS (188.80 pence) 753.59 pence n/aAdjusted diluted 81.71 pence 70.20 pence Up 16.4%EPSAdjusted 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

HighlightsPerformance

- 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 thisyear and our results show considerable success in terms of value preservationin the face of a sharply falling market. As a result, we are well placed inour London and Retail investment businesses, with moderate gearing levels, awell-timed development programme and strong portfolios matched to occupiers'needs. Trillium is in excellent health with stable long-term cashflows and arobust pipeline of new opportunities across a number of growing sectors. I amconfident our businesses have the strength and scale to thrive."How occupiers respond to current economic conditions will prove key over thenext 12 months. We are alive to the challenges involved and we willconcentrate on competing hard in this environment while preparing for the nextset of opportunities.In summary we are well placed in the short term and for the medium to longerterm, we have a plan for sustained value creation through demerger on which weare steadily progressing our plans." -Ends-Notes to editorsLand 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 AllchurchLand Securities Group PLC Tulchan CommunicationsT +44 (0)20 7413 9000 T +44 (0)20 7353 4200Chairman's messageLand Securities is a well-managed company that thrived during an extended runof good market conditions. This year there was a market correction. Propertyvalues have reflected changes in interest rates and risk premia margins. Oursector does not operate in isolation from the credit market and the widereconomy.We anticipated these changing conditions and have been preparing the Companyaccordingly. We limited acquisitions, accelerated sales, reduced our exposureto development risk and planned our funding conservatively. We keep an oldfashioned focus on costs, spending only when necessary and productive. Ourthree 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 arange of market conditions. We always look to move forward, even when progressdemands bold decisions.Back in the 1950s, under the leadership of Harold Samuel, we entered into theproperty sector's first convertible debenture agreement. This was criticisedby 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 plansfor demerger. Our diversified business model has served us well but we believespecialisation will become increasingly appealing. Investors valuespecialisation - they want to be absolutely clear on the specific risks andopportunities ahead. We believe that by demerging our businesses we canprovide greater clarity and greater value through a step change in focus andflexibility. To use the jargon of professional investors, we will be moreambitious 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'semployees. I am impressed by what I have seen here this year. The demerger hasnot distracted anyone or anything. We recognise business conditions areplacing great demands on our people at the moment and we thank them for theirterrific response.Win Bischoff left our Board recently after more than eight years of quiteextraordinary service. He will be missed. We congratulate him on hisappointment as Chairman of Citigroup. Christopher Bland, Rick Haythornthwaiteand Kevin O'Byrne have been appointed to the Board as Non-executive Directors.They will be offering themselves for election by shareholders at ourforthcoming Annual General Meeting. I encourage you to support their election.Regardless of the demerger process and demanding market conditions, theCompany continues to make corporate responsibility a priority. Rightly so. Wewant to be a provider and partner of choice, and our excellent track recordacross governance, sustainability and community affairs plays a vital role inthis. It's quite simple - we want to be the sort of company people prefer towork with.The Board thanks our colleagues, customers and suppliers for their tremendoussupport this year. With their help the Company remains in excellent shape andwe look ahead with confidence to the next 12 months in Land Securities'remarkable history.Paul MynersChairmanChief 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 retailacquisition in February 2006, while this year we sold ‚£835m of retail assetsand achieved prices on average 3.1% above valuation.As a result we have a high quality retail portfolio well suited to ourcustomers' needs and we have the resources required to make acquisitions whenthe right opportunities appear. In London we have achieved similar success,with ‚£716m of sales made at 8.2% above average valuation, providing resourcesto address future opportunities.Our development programme was equally well timed and executed. This year wesecured our highest ever level of development completions at 242,200m2, and atyear-end these were 94% let. In London we had expected employment growth inthe financial services sector to be weaker so we will be completing just25,500m2 of office developments over the next two financial years, keeping oursupply 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 anycompany or organisation this year. This included the leasing of Bankside 2&3to Royal Bank of Scotland - the second largest letting of the year in thesector. In July we won planning consent from the Secretary of State for 20Fenchurch Street. This followed a high profile media debate and publicinquiry, and once again we showed that taking a project of this scale fromvision 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 ourcustomers' changing needs and expectations. This often requires us to make keydecisions early, from adjusting the volume and type of space we are developingto incorporating innovative forms of public space into our projects.Sustainability is of growing importance to many people and is one area wherewe have sought to anticipate change and act early. For a decade we havefocused on environmental issues and this was recognised during the year whensustainablebusiness.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 theDow Jones Sustainability Index named us a global leader in both the realestate 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 distinctbusiness divisions. The Board believes there is now potential to creategreater value for shareholders by separating these businesses. In our InterimReport in November 2007 we confirmed our intention to demerge the Group intothree 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 undercareful consideration for some time and, as with our conversion to REITstatus, the Board's proposal is made with long-term value creation in mind. Inthe past few years we have run our three businesses with a high degree ofautonomy and the demerger process is a natural step in our Company'sevolution.I am delighted to report that our planning for the demerger did not impact theactivity levels or performance of the Company nor did it affect the support weprovide to customers. Indeed, our satisfaction rating with our largestcustomer, 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 termsthis year. As a result, we are well placed in our London and Retail propertyinvestment businesses, with moderate gearing levels, a well-timed developmentprogramme and strong portfolios well matched to occupiers' needs. Trillium isin excellent health with stable long-term cashflows and a robust pipeline ofnew opportunities across a number of dynamic sectors. I am confident ourbusinesses have the strength and scale to thrive.How occupiers respond to current economic conditions will prove key over thenext 12 months. We are alive to the challenges involved and we willconcentrate on competing hard in this environment while preparing for the nextset of opportunities. I have long believed the companies that thrive in ourindustry do so because they maintain a clear long-term view of their marketsand have the confidence to evolve their businesses well ahead of changingconditions - this is the approach Land Securities will continue to take.

Benefits of demerger

In November 2007 we announced our intention to demerge into three separatecompanies. Since then we have made progress on the extensive preparatory workrequired to make this happen. The Board will make the final decision on theimplementation of our plan when market conditions are favourable and when itreceives the mandate to do so from shareholders. Here we discuss the rationalefor 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 inautumn 2005 when Chief Executive Francis Salway identified this as a key issuefor the Group in the second half of the decade. The review process startedlong before current market conditions were evident and we believe demergerwill be delivering value for shareholders when the current market conditionsare regarded as history.The Board has a strong track record on bold decisions. In recent years weacquired Trillium, exited the industrial sector through the property swap withSEGRO and boosted our development pipeline ahead of the current cycle. Thesedecisive actions have proved successful. Demerger is the latest bold decisionin the ongoing evolution of the Company.

Businesses benefit from specialisation

Historic data shows that in the UK and US specialist companies have producedhigher shareholder returns over the last 10 years. We believe a balance sheettailored to the respective sector cycles has the potential to improve returnon shareholders' equity by a material amount.With a bespoke financial structure our London and Retail portfolios could bevalued more easily and could raise capital more easily. We believe they willalso be better positioned to access new flows of capital into the globallisted 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 businessfollowing demerger. He is currently Chairman of Mastercard Inc, Chairman ofthe Risk and Regulation Advisory Council and partner at Star Capital PartnersLtd. His previous roles include Chief Executive of Blue Circle Industries andInvensys 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 toincrease slightly, but we believe the credit quality of the three individualportfolios will keep this increase to moderate levels. There will also be theone-off costs of undertaking the transaction - including legal, accountancyand adviser fees - and we expect these to be in line with similartransactions.

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 peopleacross the UK. Using our ability to unlock the potential within properties andplaces, we develop new and better ways for retailers to connect with customers- creating the environments they need to increase footfall, grow sales andprovide 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 acrossthe UK. This has sharpened competition between providers, with many retailersbeing offered greater incentives to take leases. However, well-conceiveddevelopments are attracting good levels of demand as no retail business canafford to stand still. Retailers of all sizes know they can work withcompanies such as Land Securities to enhance their performance through rangeand format changes, new locations and greater efficiency. Our challenge is tobe as dynamic as the most successful retailers and that means evolving ourportfolio to ensure we provide good space at good rates in the rightlocations.Looking long-term, there will always be winners and losers in the retailsector - and internet retailing is certainly a fierce competitor for someshops - but in our experience people are drawn by the immediacy and experiencethey get by going shopping. More and more, we work to create a greatenvironment around our shops so people enjoy spending time there, as well asspending money. We see a growing appetite for shopping-as-leisure and expectcontinued demand for high quality shopping centres and retail parks from ourcustomers 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 hada significant positive impact on our financial performance with our ungearedproperty return being 4.6% and 5.5% better than the IPD benchmarks forshopping centres and retail warehouses respectively.Our leasing and asset management activity has helped us to perform wellagainst key portfolio metrics. Rent review programmes, particularly at theWhite 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% ina generally flat market, and our strong leasing performance on the investmentproperties 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 morechallenging conditions early and decided to make no major acquisitions duringthis financial year. Instead, we focused on disposals and achieved total salesof ‚£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, soldVictoria Place shopping centre, SW1, to Ewart Properties Ltd for ‚£92.5m. Thegood price achieved reflects the value we have added to the asset and thesurrounding 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. Thisinvolves us in making long-term improvements to the environment, to servicesand to the tenant mix. Rental growth is the reward for our investment in theseimprovements.Our approach to our biggest asset - the White Rose Centre in Leeds -demonstrates the value of our expertise. Our successful rent review programmecoincided with the opening of a new store for Marks & Spencer. This followsthe development of new space for Next, Zara and River Island in 2006. Thisenabled us to settle the major round of rent reviews, at an average increasein rent of 40% over the five-year period since the previous reviews. We alsoachieved new lettings at even higher levels, further underpinning the successof 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 unitsto Marks & Spencer, Next and Boots, which significantly changes the retail mixon the park, and we have increased rental values by 12%.At Westwood Cross, Thanet, we have completed a new development that adds acinema, restaurants and leisure facilities to the retail units, and introducedJD Sports to the shopping park. Our Thanet ownerships will be further enhancedwith the integration of the adjacent Sainsbury's store and car park, which wenow jointly own and manage through our Harvest venture with J Sainsbury.At Lakeside Retail Park we have provided small pod units and Costa Coffee isone of the first occupiers. While the key attraction of retail parks forshoppers remains convenience, we have continued to introduce enhancements likethis to improve the overall shopping experience.Our approach to asset management keeps a clear focus on helping our customersthrive. For example, the running costs of shopping centres are borne byretailers through their service charge. This year we carried out an efficiencyprogramme that has enabled us to achieve a zero increase on the averageservice charge across our shopping centre portfolio, helping to lessen costpressures 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 WeekShopping Location of the Year award and International Council of ShoppingCentres award for Best Medium Size Shopping Centre all underline the successof this development, which has been very well received by residents andretailers and was 92% let on full opening in September 2007. The schemedemonstrates our ability to integrate a new development into a historic citycentre, 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 ofeight shops, a restaurant and 15 apartments. The retail element opened inDecember 2007 and is now 100% let. The Christ's Lane project sits in asensitive location within a conservation area between two Cambridge colleges,Christ's and Emmanuel. Our development re-established one of the city'shistoric 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 partnershipswith other organisations. In November 2007 we launched the Harvest LimitedPartnership, a 50-50 joint venture with J Sainsbury. This adds our expertisein development to Sainsbury's desire to grow its property portfolio, with thetwo companies working together to unlock and realise the development potentialof a number of sites. Initially, we contributed a Sainsbury's supermarket inour ownership while Sainsbury's contributed two freehold stores. In Decemberwe increased the portfolio with the purchase of the Maltings shopping centrein Salisbury for ‚£27.5m. This 8,830m2 property includes a Sainsbury's, 27retail units and a car park.

Outlook

Our experience is that UK retail sales growth is relatively resilient throughthe economic cycle, but we recognise that the current trading environment isproving challenging for retailers. The quality and mix of our tenants isexcellent, and this will help to reduce and diversify risk if demand fromoccupiers weakens over the next 12 months. Our cashflow will continue to behelped by the UK's system of long leases with upward-only rent reviews andalso by the reversionary nature of our portfolio.In the meantime, strong relationships with retailers are enabling us to makesound progress on leasing our developments and we will continue to providespace that meets retailers' need for efficiency and quality. We have a rangeof upgrade and development opportunities within our own portfolio and we willfocus on bringing a number of these projects forward for delivery over thecoming years.

We outline our development pipeline in Table 1.

Table 1: Retail development pipeline at 31 March 2008

Total developmentProperty

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 SHOPSDevelopments, letand transferredor soldChrist's Lane, Retail 100 5,800 - 100% 2 Nov 2007 33 33Cambridge Residential 1,350 -Princesshay, Retail 100 37,360 - 95% 13 Sept 2007 204 204Exeter Residential 7,200 - DevelopmentscompletedWillow Place, Retail 100 16,260 - 75% 2 Oct 2007 43 43Corby Developmentsapproved andthose in progressCabot Circus, Retail 50 83,610 - 75% 18 Sep 2008 198 243Bristol - TheBristol Alliance- a limitedpartnership withHammerson plc Leisure 9,000 - Offices 28,000 - Residential 18,740 -St David's, Retail/leisure 50 89,900 - 12% 18 Oct 2009 156 306Cardiff - StDavid'sPartnership - alimitedpartnership withCapital ShoppingCentres Residential 16,500 -The Elements, Retail 100 32,000 - 36% 8 Oct 2008 107 151Livingston Leisure 5,670 -Southside Retail 50 1,960 - 1 Sep 2009 6 8Shopping Centre,Phase I, Office 1,740 -Wandsworth -Metro Shopping Residential 4,040 -Fund - a limitedpartnership withDelancey ProposeddevelopmentsTrinity Quarter, Retail 75 94,890 PR 20% n/a 2011 n/a n/aLeeds RETAIL WAREHOUSESDevelopments, letand transferredor soldCommerce Centre, Retail 100 19,100 - 100% 3 Aug 2006 50 50PooleThanet Leisure, Leisure 100 8,970 - 100% 1 Aug 2007 25 25ThanetMaskew Avenue, Retail 100 13,380 - 100% 3 Sep 2007 36 36Peterborough Developmentsapproved andthose in progressAngel Road Retail Retail 100 3,480 - 70% 1 Feb 2009 12 18Park, Edmonton ProposeddevelopmentsAlmondvale South Retail 100 4,180 PR n/a 2009 n/a n/aPhase 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 thecommencement of the project, the estimated capital expenditure required todevelop the scheme from the start of the financial year in which the propertyis added to our development programme, together with finance charges. Floorareas shown above represent the full scheme whereas the cost represents ourshare of costs. Letting % is measured by ERV and shows letting status at 31March 2008. Trading property development schemes are excluded from thedevelopment pipeline. Cost figures for proposed schemes are not given as thesecould 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 severalyears of very strong growth, and we now expect demand for new office space toreduce substantially. The credit crunch has accentuated these market dynamics.We did not anticipate the credit crunch but we did recognise the early signsof a slowdown some time ago and have adjusted our portfolio and developmentpipeline accordingly. The next two years will see our lowest completions for adecade, while our existing portfolio is focused on high quality properties inthriving 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 developmentprogramme taking our overall schemes that completed this financial year from78% 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 outperformance of the IPD sector benchmark for London offices of 4.3%. This is asignificant achievement.Our asset management team has also performed well in the year and put us ingood shape for the year ahead. For London offices we saw our voids drop from5.7% to 1.8% in the year and we continue to benefit from the strength of ourrental value growth, a 18.1% increase in like-for-like rental values and anincrease in the reversionary potential from 6.7% to 20.5%. These factors havedriven our underlying rental performance and our redevelopment of oldersecondary assets over the last three years is leading us into more difficultmarket conditions with a strong cashflow of well-let, newly developed assetsthat 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 achievethe right price at the right time so we can recycle the capital into assetswith greater growth potential. We have completed transactions valued at ‚£1bnor more every year for the last four years and have now turned over more than50% of our portfolio since 2004. This year we sold ‚£716.2m of assets - anincrease 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 showsthat 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. Thelocation is now outside our strategic areas of focus, so we opted to addsubstantial value by seeking planning permission for development and accepteda 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 intendedfor redevelopment in the next cycle. Second, improving the performance of ourCentral London retail assets. We will continue to focus on our relationshipswith customers while driving efficiency in the portfolio, which will help todifferentiate us in a period of reduced asset growth.

Joint ventures

Joint ventures enable us to pursue opportunities and diversify risk in theportfolio. In December we sold 50% of our holding at the corner of OxfordStreet and Tottenham Court Road, W1, to Frogmore Real Estate Partners andentered into a joint venture through which we will define a long-termredevelopment strategy and Frogmore will manage the assets. This approach willcombine the two companies' skills and experience and provide both parties withexposure 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 developmentProperty

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, letand transferredor soldCardinal Place, Offices 100 51,130 - 100% 37 Jan 2006 389 389SW1 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 111EC2 Retail 1,500 - 100% Developmentsapproved andthose in progressNew Street Offices 100 62,340 - 87% 33 Apr 2008 347 383Square,EC4 Retail 2,980 - 87%50 Queen Anne's Offices 100 30,140 - 100% 13 May 2008 137 142Gate, SW110 Eastbourne Offices 100 6,150 - 73% 3 June 2008 37 43Terrace, W2Dashwood House, Offices 100 13,870 - 9 Nov 2008 90 113EC2 Retail 740 -30 Eastbourne Offices 100 4,470 - 2 May 2009 13 35Terrace, W2One New Change, Offices 100 31,660 - 34% 33 Sept 2010 220 537EC4 Retail 19,830 - 12%Park House, W1 Offices 100 15,550 - 11% 25 Feb 2011 218 347 Retail 8,470 - Residential 5,380 - ProposeddevelopmentsArundel Great Offices 100 42,600 - n/a n/a 2012 n/a n/aCourt & HowardHotel, WC2 Retail 3,830 - Residential 25,720 -Selborne House, Offices 100 23,340 - n/a n/a 2012 n/a n/aSW1 Retail 3,970 -20 Fenchurch Offices 100 54,810 PR n/a n/a 2012 n/a n/aStreet, 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 thecommencement of the project, the estimated capital expenditure required todevelop the scheme from the start of the financial year in which the propertyis added to our development programme, together with finance charges. Floorareas shown above represent the full scheme whereas the cost represents ourshare of costs. Letting % is measured by ERV and shows letting status at 31March 2008. Trading property development schemes are excluded from thedevelopment pipeline. Cost figures for proposed schemes are not given as thesecould 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 projectthat will transform 420 hectares of land into a vibrant mix of residential,business, retail, leisure and public space. We are working at two maindevelopment sites - Eastern Quarry and Ebbsfleet - within which are ten`villages' or development areas. This year we achieved excellent progress onplanning permission and made a good start on development and marketing.Highlights included:

- Planning

We gained planning permission for Eastern Quarry, enabling us to focus ondeveloping the 870,000m2 project. We have since gained approval for oursite-wide and area masterplans together with 18 other submissions forinfrastructure and landscaping. We have also completed the masterplan for thecentral core of Ebbsfleet, comprising some 506,000m2, with a team from ArupUrban Design. We have submitted these plans to Dartford and Gravesham BoroughCouncils.

- 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 launchedin March 2008 and more than 50% of the first phase was reserved within twoweeks. First occupations will take place in September 2008. The finaldevelopment will provide more than 600 homes together with a church andcommunity centre, health centre and sports centre. We continue to achieve goodsales at Waterstone Park, a further joint development with CountrysideProperties 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 launchedthe Ebbsfleet Landmark, a ‚£2m project to create a major public artwork to helpput Ebbsfleet Valley on the map. Artists Daniel Buren, Richard Deacon,Christopher Le Brun, Mark Wallinger and Rachel Whiteread have submitted modelsof 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 setout 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 issubject to the site's inclusion in the final East of England Plan.

Outlook

Ebbsfleet Valley is making the vital step from planning to implementationsuccessfully, and we expect to make substantial further progress onconstruction of infrastructure, landscaping and buildings, residential salesand community facilities over the next year. Meanwhile, we are seeking out newopportunities to help the UK meet growing demand for housing and mixed-usespace.

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 localauthority infrastructure, all of which offer a pipeline of majoropportunities. Building Schools for the Future is a 15-year governmentprogramme with ‚£45bn committed for the upgrading of every secondary school inthe country. In waste, the government must address the UK's reliance onlandfill by 2010 or face heavy penalties from the EU - ‚£10bn is one estimateof the investment needed to address this. To date, ‚£2bn has been committed toPFI in the waste sector and this has been matched by an equal amount fromlocal 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 oforganisations across the public and private sectors. We don't just supplybetter buildings - we own, manage, develop and upgrade everything fromindividual properties to entire estates. Government departments, internationalbusinesses, individual schools and many other organisations use our expertiseto maximise the potential of their infrastructure for their business and theirpeople.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 contractswith Accor and Royal Mail and around ‚£43.0m of non-recurring items. On the DWPcontract, which accounted for the majority of the non-recurring items, theanticipated decline in operating profits due to vacations did indeedmaterialise, but this was offset by us resolving a number of outstandingissues 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 kindfocused on PPP contracts. We intend to grow the fund to around ‚£2bn over fiveyears through the acquisition of mature PPP assets, such as schools andhospitals already in operation. The fund will acquire these assets fromTrillium, where our market leading New Business division has already secured‚£240m of new opportunities. The fund is aiming to invest ‚£200m every year forthe 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 Investmentsbusiness, which included interests in seven signed PFI projects and oneproject at preferred bidder stage. We paid ‚£158.5m for the business, whichprovides us with a top quality portfolio of assets and a specialist teamexperienced across the complete PFI/PPP process, from bidding to long-termmanagement of investments. This acquisition is now fully integrated intoTrillium, and reinforced our position as a leader in PFI, transport and healthsectors.New businessProperty partnerships- Defence Training ReviewHaving won preferred bidder status in January 2007, Metrix - our 50-50 jointventure with QintetiQ - continues to work with the Ministry of Defence tocreate a new defence training academy at St Athan, South Wales. This is one ofthe UK's largest PPP projects.

- Workplace 2010

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

PPP

- Education

With Northgate Information Solutions, we were announced as Kent CountyCouncil's preferred bidder for the first phase of its ‚£1.8bn Building Schoolsfor the Future (BSF) programme. Through this, we will enter into a new ‚£600mpublic private partnership with Kent County Council and Partnerships forSchools to refurbish or rebuild secondary schools and help transform educationin the Gravesham, Swale and Thanet districts by 2014. Our success in Kentbuilds on our work across the UK, where we now own or manage 197 schools with174,000 pupils. This year we were also named as one of the two finalshort-listed bidders for the Birmingham BSF programme, with a final decisionexpected 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 CyrilSweett Investments, we became preferred bidder for Norfolk Waste ManagementContract A, a 25 year project to build and operate an Advanced MechanicalBiological Treatment (AMBT) facility to treat and recycle solid waste. AMBTfacilities are considered effective and environment-friendly, and we are nowdemonstrating to other local authorities that our solution in Norfolk can helpthem 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 ¢â€š¬500m 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 headquartersthis year - three weeks ahead of schedule and on budget. Our work has helpedto transform the working environment.

- DVLA

The major refurbishment of the Main Headquarters office and a number of othersites was completed successfully, with the main HQ works handed over eightweeks early and on budget. We also provided a new print facility building.Through scope extensions we have now trebled our initial investment from ‚£25min 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 ‚£mContract 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 2.8Bid costs (11.9) (2.8)Central and other costs (25.9) (14.0) Underlying operating profit 129.1 98.8Net deficit on revaluation of investment properties (24.9)

(13.6)

Profit on disposal of properties 18.1

7.5Segment profit 122.3 92.7 Share of profit / (loss) from Investors in theCommunity (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 resultsThe Group's loss before tax was ‚£888.8m, compared to a profit of ‚£1,979.1m ayear ago. The loss before tax includes the revaluation deficit on ourinvestment 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 pershare 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 sharedecreased by 10.3% to 2067p from 2304p, with adjusted diluted net assets pershare 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 ourinvestment portfolio (including any profits or losses on disposal ofproperties), our net rental income, the performance of our Trillium business,and the amount of interest we paid. The degree to which movement on these andother items led to the reduction in our profit before tax from ‚£1,979.1m lastyear 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 ‚£mYear ended 31 March 2007 1,979.1 392.2Valuation 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 3.8Demerger 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 donot meet the requirements of IAS39 as they are not deemed to be substantiallydifferent from the debt they replaced. As a result, the book value of the newinstruments is reduced to the book value of the debt it replaced and thedifference is amortised over the life of the new instruments. The decrease inamortisation over the comparable period is a reflection of the maturityprofile 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 dueto net sales of investment properties, offset by interest on REIT entry chargeand 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-taxresults of our joint ventures but excludes capital and other one-off itemssuch as the valuation (deficit) / surplus, gains on disposals, trading profitsand profits on long-term development contracts.Revenue profit for the year decreased by 3.3% from ‚£392.2m to ‚£379.1m. Anincrease in revenue profit from London and Retail on the back of higher netrental income was offset by a decline in Trillium for the accounting reasonsdescribed below. Net rental income from our investment portfolio increased by‚£8.2m, despite almost ‚£800m of net investment property sales. This growth inrental income was driven by ‚£17.4m of like-for-like rental income increasesand ‚£31.7m of higher income from our completed developments, which includedPrincesshay in Exeter and, in London, Cardinal Place and Bankside 2&3. Whilenet property sales reduced rental income by ‚£36.6m, this was more than offsetby the associated interest savings.While Trillium's operating profit is higher than last year (see Table 3 onpage 31), at the revenue profit level there has been a decline of ‚£26.3m, dueto the accounting treatment of its PPP assets. Through the acquisition ofSecondary Market Infrastructure Fund in February 2007 and subsequenttransactions, Trillium has purchased a number of PPP assets. These assets werepurchased with the intention from the outset that they would be transferred toa fund, Trillium Investment Partners, in which Trillium would subsequentlyreduce its ownership. As a result, we have accounted for all PPP investmentswhich we are intending to transfer to Trillium Investment Partners or sell tothird parties, as a disposal group. The implications of this are that we donot consolidate the individual assets and liabilities of the PPP investments.Instead, they are held at fair value less costs to sell in the balance sheetand we do not recognise our share of the underlying net income of the PPPprojects, nor do we recognise in revenue profit any profits on disposal ofthese PPP investments. During the course of the year, we made ‚£47.5m from thesale of Meterfit and equity interests in Trillium Investment Partners, theowner of the majority of Trillium's PPP investments. We do, however, includein revenue profit the interest cost associated with acquiring and owning thesePPP investments, which amounted to ‚£42m for the year. This imbalance inaccounting for revenue profit, whereby we recognise interest cost but notrevenues, has resulted in the decline in Trillium's contribution to revenueprofit.The net divestment of almost ‚£800m of investment property sales reducedinterest costs related to London and Retail. This benefit was largely offsetby higher interest costs at Group level of ‚£14.7m following the payment inJuly 2007 of ‚£316.2m as our REIT entry charge and our move to paying quarterlydividends.

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) 1,979.1Valuation 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 - jointventures 7.1 -Mark-to-market adjustment on interest rate swaps 22.4 (17.4)Eliminate effect of bond exchange de-recognition 7.6 17.1Debt restructuring charges 1.9 19.2Joint 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-offitems to give revenue profit, we also report an adjusted earnings per sharefigure, although this includes some additional adjustments to revenue profit.The adjustments to earnings per share are set out in note 7 to the financialstatements. They are based on the guidance given by European Public RealEstate Association (EPRA) with a limited number of further adjustments toreflect better our underlying earnings. Adjusted diluted earnings per shareincreased 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 attributableto a significantly lower tax charge following REIT conversion (last year onlybenefited for three months), partially offset by the interest costs associatedwith 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 nowconsists of two components: a property income distribution (PID) from the REITqualifying activities and a dividend distribution from the non-qualifyingactivities (non-PID). The aggregate of these two components will continue tobe referred to as our total dividend. We are obliged for certain shareholdersto withhold tax, currently at a rate of 20% (22% prior to 6 April 2008), fromthe PID element of the dividend. Our total dividend is therefore a grossdividend. Table 6 sets out our quarterly dividends, the date on which theywere paid, and how much of each dividend was a PID, together with similardetails for out proposed final dividend. A note on the tax consequences forshareholders and forms to enable certain classes of shareholder to claimexemption from withholding tax are available on our website atwww.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 ofwhich 90% will be a PID.Table 6: Dividends Property income Non-property distribution income (PID) distribution Total pence pence penceFirst quarterly dividend (paid on 26 October 2007) 12.8 3.2 16.0Second quarterly dividend (paid on 7 January 2008) 12.8 3.2 16.0Third quarterly dividend (paid on 25 April 2008) 12.8 3.2 16.0Final dividend (payable on 28 July 2008) 16.0

- 16.0Total 54.4 9.6 64.0Balance of business testsREIT legislation specifies conditions in relation to the type ofbusiness a REIT may conduct, which the Group is required to meet in order toretain its REIT status. In summary, at least 75% of the Group's profits mustbe derived from REIT qualifying activities (the 75% profits test) and 75% ofthe Group's assets must be employed in REIT qualifying activities (the 75%assets test). Qualifying activities means a property rental business. Theresult of these tests for the Group for the financial year, and at the balancesheet 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) 42.9 401.2Balance 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 17,807.4Balance of business - 75% 88.3% 11.7% 88.1% 11.9%assets test Net assetsAt the financial year end, net assets per share were 2067p, a decrease of 237por 10.3% over the year. The fall in value of our investment property portfoliowas responsible for the decline in net assets.In common with other property companies, we calculate an adjusted measure ofnet assets which we believe better reflects the underlying net assetsattributable to shareholders. Adjusted net assets are lower than our reportednet assets primarily due to the debt adjustment we make. Under currentaccounting standards, we do not show our debt at its nominal value, althoughwe believe it would be more appropriate to do so and we therefore adjust ournet assets accordingly. At the year end, adjusted diluted net assets per sharewere 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

7,493.9Adjusted earnings 381.0 330.0Demerger costs * (6.9) -Revaluation (deficits) / surpluses on ongoing andcompleted development properties * (126.6)

130.9

Revaluation (deficits) / surpluses on investmentproperties (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 adjustedearnings - 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 portfolioproperty disposals, which included Whitefriars, Canterbury and Greater LondonHouse, NW1. In total, we invested ‚£1,667.2m in our properties including‚£722.6m on investment property acquisitions, ‚£158.5m by Trillium (primarilyAccor hotels) and ‚£530.3m on development. The development expenditure, whichincludes land acquisitions but excludes capitalised interest and our share ofjoint ventures, was spent principally on New Street Square, EC4, Queen Anne'sGate, SW1, and One New Change, EC4, in London and shopping centre developmentsin Livingston and Exeter.As part of our strategy to continue to expand Trillium in the PPP market, wespent ‚£158.5m acquiring PPP assets from AMEC. We also received ‚£814.4m fromour Trillium Investment Partners fund; first through raising debt against theassets (‚£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 "Receiptsfrom discontinued activities"). Further details are given in the LandSecurities Trillium section.We invested a net ‚£0.2m in our joint ventures, including, ‚£56.2m received ondisposals, 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 than2007 (‚£5,087.9m). While this increase can be attributed to the REIT conversioncharge of ‚£316.2m, there were significant capital inflows and outflows whichare summarised in Table 9.

Table 9: Cash flow and net debt

Year ended Year ended 31 March 31 March 2008 2007 ‚£m ‚£mOperating cash inflow after interest and tax (excludingREIT conversion charge) 315.4 361.5REIT 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 Unionand 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

25.0Joint ventures (0.2) 50.0Purchase of share capital (87.6) (36.2)Other movements (26.3) 4.8Increase 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 theinternational debt markets, beginning with defaults on sub prime mortgages inthe US. As a result of international banking business, the contagion quicklyspread around the world impacting the ability of domestic banks to makeadvances as their capital ratios came under pressure. The implications forborrowers like Land Securities continue to unfold. Initially the UK bondmarkets were effectively closed, and whilst this has historically been animportant source of funding for the Group, our demerger plans have meant thatthe Group would not have accessed such long term financing at this time. Inthe UK market, we have seen the following effects - an increase in the cost ofdebt, the imposition of more onerous covenants, increased execution time andincreased execution risk.Despite these conditions, Land Securities has executed eightdifferent financing arrangements, either directly or through joint ventures.We have been able to continue to access the debt markets as a result of ourongoing debt investor relations programme, a responsible creditor track recordand a high quality portfolio and debt structure from which to raise funding.Under this structure, we benefited from a lower cost of finance by utilisingthe credit strength of our investment portfolio without the more onerousrestrictions of individually collateralised obligations. Operationalflexibility is maintained through provisions which allow us to buy and sellassets, without restriction, and to undertake developments. At 31 March 2008,our debt investors had security over ‚£11.0bn of investment properties in thisstructure.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 risein net debt, gearing has increased from 47.1% to 56.2% principally due to theimpact 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 thisreduction can be attributed to the accounting treatment of Land SecuritiesTrillium's PPP assets. While we recognise the interest cost associated withacquiring these assets, we do not include or share of the underlying incomethey 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, weneed to maintain an interest cover ratio in the exempt business of at least1.25 times to avoid paying tax. As calculated under the REIT regulations, ourinterest cover ratio of the exempt business for the year to 31 March 2008 was2.26 times.During the year, the Group entered into three committed bilateralfacilities all of which are secured on the assets of the Security Group. InJune 2007, the Group entered into a ‚£150m facility, which has been extended inDecember 2007, as a ‚£175m facility with an expiry in February 2010. In July2007, the Group entered into a ‚£500m facility which was due to expire in July2008, 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 SMIFacquisition facility was repaid. Another ‚£350m facility was established inDecember 2007 which expires in October 2008. The Group has an option to extendeach of these facilities by a further year. In December 2007, the Groupacquired a share of Leeds Trinity Quarter which included a facility which hasbeen refinanced post year end with a five year ‚£352m committed facilitysecured 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 jointventures) amounted to ‚£6,133.0m of which ‚£865.0m was drawn under our ‚£1.5bnsecured bank facility and ‚£67.3m related to finance leases. Committed butundrawn facilities amounted to ‚£611.0m. The majority of debt due in one yearrelates to drawings under the committed bank facilities which have a one yearextension option.Hedging

We use derivative products to manage our interest rate exposure and have ahedging policy which requires at least 80% of our existing debt plus our netcommitted capital expenditure to be at fixed interest rates for the comingfive years. Specific hedges are also used in geared joint ventures to fix theinterest exposure on limited recourse debt. At the year end we had ‚£2.3bn ofhedges in place, and our debt was 80% fixed. Consequently, based on year enddebt levels, a 1% rise in interest rates would increase full year interestcharges 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 Portfoliobusiness units make up the majority of our Investment Portfolio. TheInvestment 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 InvestmentPortfolio 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 theGroup, 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 theInvestment Portfolio at 31 March 2008 was undertaken by Knight Frank LLP asExternal Valuer. The valuations were in accordance with the Royal Institutionof Chartered Surveyors Appraisal and Valuation Standards and the InternationalValuation Standards. The valuation of each property was on the basis of marketvalue, subject to the assumptions that investment properties would be soldsubject to any existing leases and that properties held for development wouldbe sold with vacant possession in existing condition. The External Valuer'sopinion of market value was primarily derived using recent comparable markettransactions 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 ‚£240.0mCardinal Place, SW1New Street Square, EC450 Queen Anne's Gate, SW1White Rose Centre, LeedsAlmondvale Shopping Centre, LivingstonCabot Circus Shopping Centre, BristolBullring, BirminghamPrincesshay, ExeterPortland House, SW1Bankside 2&3, SE1Gunwharf Quays, PortsmouthTimes 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 ‚£mCombinedportfolio 373.7 284.5 29.3 687.5 388.4 261.8 29.5 679.7Central Londonshops (excludingMetro ShoppingFund LP) (45.4) 45.4 - - (50.9) 50.9 - -Inner Londonofficesin MetroShopping Fund LP 0.8 (0.8) - - 0.8 (0.8) - -Rest of UKoffices 2.3 - (2.3) - 2.7 - (2.7) -Allocation ofother 7.9 9.5 (17.4) - 10.3 7.8 (18.1) - 339.3 338.6 9.6 687.5 351.3 319.7 8.7 679.7Less financelease adjustment (3.4) (8.1) - (11.5) (4.5) (8.1) - (12.6)Per businessunit 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 ‚£mCombinedportfolio 6,851.9 6,124.0 610.8 13,586.7 8,060.7 6,102.9 588.9 14,752.5Central Londonshops (excludingMetro ShoppingFund LP) (1,009.8) 1,009.8 - - (1,182.6) 1,182.6 - -Inner Londonofficesin MetroShopping Fund LP 20.0 (20.0) - - 21.0 (21.0) - -Rest of UKoffices 79.6 - (79.6) - 90.1 - (90.1) -Allocation ofother 244.9 237.3 (482.2) - 237.0 196.8 (433.8) -Per businessunit 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 ‚£mCombinedportfolio 480.1 431.2 26.7 938.0 511.9 394.5 28.4 934.8Central Londonshops (excludingMetro ShoppingFund LP) (70.9) 70.9 - - (70.8) 70.8 - -Inner Londonofficesin MetroShopping Fund LP 1.0 (1.0) - - 1.0 (1.0) - -Rest of UKoffices 2.4 - (2.4) - 4.2 - (4.2) -Allocation ofother 9.4 11.2 (20.6) - 9.6 10.4 (20.0) -Per businessunit 422.0 512.3 3.7 938.0 455.9 474.7 4.2 934.8Table 15: Top 12 occupiers Current gross rent roll %Central Government 9.7Deloitte 4.1Royal Bank of Scotland 3.1Metropolitan Police Authority 2.9Arcadia Group 1.8J Sainsbury 1.6DSG 1.5Boots 1.5Mellon Bank 1.4Marks & Spencer 1.3Argos and Homebase 1.2Eversheds 1.2Total 31.3

Includes share of joint venture properties

Table 16: % Portfolio by value and number of property holdings at 31 March2008 Value Number of‚£m % properties0 - 9.99 1.5 5610 - 24.99 2.7 2425 - 49.99 9.3 3450 - 99.99 17.8 34100 - 149.99 11.8 13150 - 199.99 11.2 9200 + 45.7 20Total 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

59.4South East and Eastern 4.6 2.9 - 0.7 8.2Midlands 3.5 1.4 - - 4.9Wales and South West 6.3 1.4 0.1 - 7.8North, North West, Yorkshire andHumberside 7.8 5.4 0.2 0.3 13.7Scotland and Northern Ireland 3.9 1.5 - 0.6 6.0Total 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 ‚£/m2Retail

Shopping centres and shops n/a n/aRetail warehouses (including supermarkets) 193 212

Offices

London office portfolio 338 405Average rent and estimated rental value have not been provided where it isconsidered that the figures would be potentially misleading (i.e. where thereis a combination of analysis on rents on an overall and Zone A basis in theretail 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. Excludesproperties 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 rentReversionary potential roll rollGross reversions 16.2 11.6Over-rented (1.2) (1.5)Net reversionary potential 15.0 10.1The reversion is calculated with reference to the gross secure rent roll afterthe expiry of rent free periods on those properties which fall under thelike-for-like definition as set out in the notes to the combined portfolioanalysis. Reversionary potential excludes additional income from the lettingof voids. Of the over-rented income, ‚£4.5m is subject to a lease expiry orbreak 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 % paRetail - 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/prelims2008Trillium

Table 23: Trillium contract analysis

Year ended 31 March 2008 Barclays Telereal Accor Royal OtherContract 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 ‚£mUnitary charge 532.5 14.0 8.8 0.6 - 28.2 3.8 9.4 597.3Third party (sublet) income 10.4 0.9 - 1.6 -

- 2.6 2.0 17.5Capital projects 65.7 0.2 6.9 - - - - 1.8 74.6Other revenue 19.5 0.8 1.7 - 44.0 - - 5.6 71.6Finance lease income - 7.5 2.9 - - - - - 10.4Gross property income 628.1 23.4 20.3 2.2 44.0 28.2 6.4 18.8 771.4Rents 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, includingoverheads (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) 129.1Profit on sale ofnon-current assets 16.0 - - - - - 0.1 2.0 18.1Net (deficit) / surplus onrevaluation of investmentproperties - - - (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 expenditureLife cycle maintenance costscapitalised (17.0) (0.8) - - -

- - - (17.8)

Estates costs capitalised (10.3) - - - -

- - (0.2) (10.5)

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

- - 0.5 544.8Notes:

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 breakclause in March 2012 and a further 164 tenancies with a break clause in March2017

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 RoyalFloor space (000m2) DWP Union DVLA Barclays II Accor Mail Other TotalClient occupied 1,885.1 107.0 16.2 11.4 - 230.0 92.7 - 2,342.4Third party (sublet) 119.2 5.2 - 17.8 - - 91.9 - 234.1Vacant 228.0 1.7 - 6.7 - - 56.8 - 293.2Total 2,232.3 113.9 16.2 35.9 - 230.0 241.4 - 2,869.7 Freeholds / valuableleaseholds 805.0 38.9 - 11.3 - - 128.1 - 983.3Leaseholds 1,427.3 75.0 16.2 24.6 - 230.0 113.3 - 1,886.4Total 2,232.3 113.9 16.2 35.9 - 230.0 241.4 - 2,869.7Estate managed but nottransferred 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 2008Client occupied 1,996.0 51.4 (153.4) - (8.9) 1,885.1Third party (sublet) 81.0 - (1.8) 48.7 (8.7) 119.2Vacant 244.2 - 155.2 (48.7) (122.7) 228.0Total 2,321.2 51.4 - - (140.3) 2,232.3 Freeholds / valuableleaseholds 840.0 12.3 - - (47.3) 805.0Leaseholds 1,481.2 39.1 - - (93.0) 1,427.3Total 2,321.2 51.4 - - (140.3) 2,232.3Estate managed but nottransferred 78.7 - (14.2) - - 64.5* Includes corevacations 31 March 31 March 2007 2008Vacation allowance usedto date 392.7 - - - 392.7 491.9Available allowance 130.5 - - - 130.5 64.9Future 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 2008Client occupied 11.4 - - - - 11.4Third party (sublet) 18.1 - (1.4) 1.6 (0.5) 17.8Vacant 7.5 - 1.4 (1.6) (0.6) 6.7Total 37.0 - - - (1.1) 35.9 Freeholds / valuableleaseholds 11.3 - - - - 11.3Leaseholds 25.7 - - - (1.1) 24.6Total 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 2008Client occupied 92.7 - - - - 92.7Third party (sublet) 94.1 - (11.9) 9.7 - 91.9Vacant 68.5 - 11.9 (9.7) (13.9) 56.8Total 255.3 - - - (13.9) 241.4 Freeholds / valuableleaseholds 128.5 - - - (0.4) 128.1Leaseholds 126.8 - - - (13.5) 113.3Total 255.3 - - - (13.9) 241.4

Table 28: Trillium number of people by occupation

As at 31 March 2008 TotalAsset management 105Call centre 68Capital projects 139Quality assurance 30Facilities management 377Human resources / Finance 115

Business development and commercial 95Total 929Financial StatementsConsolidated income statement Before 2008 Before 2007 exceptional Exceptional exceptional Exceptional items items Total items items Total Notes ‚£m ‚£m ‚£m ‚£m ‚£m ‚£mGroup revenue* 2 1,561.2 - 1,561.2 1,641.1 - 1,641.1Costs 2 (958.6) - (958.6) (1,046.2) - (1,046.2) 602.6 - 602.6 594.9 - 594.9Profit on disposal of non-currentproperties 2 75.4 - 75.4 118.2 - 118.2Net (deficit) / surplus on revaluationof investment properties 2 (1,170.3) - (1,170.3) 1,307.6 - 1,307.6Operating (loss) / profit (492.3) - (492.3) 2,020.7 - 2,020.7Interest 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 - 1,799.8Share of the loss of an associateundertaking (post-tax) (0.5) - (0.5) - - -Share of the (loss) / profit of jointventures (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 1,979.1Income tax credit / (expense) 5 10.5 - 10.5 (445.0) 1,994.2 1,549.2(Loss) / profit for the financial yearfrom continuing activities (878.3) - (878.3) 1,436.1 2,092.2 3,528.3Discontinued operations 12 47.5 - 47.5 - - -(Loss) / profit for the financial yearattributable to equity shareholders 16 (830.8) - (830.8) 1,436.1 2,092.2 3,528.3 (Loss) / earningsper shareBasic (loss) /earnings per share # 7 (188.80p) 753.59pDiluted (loss) / earningsper 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 ‚£mActuarial gains / (losses) on defined benefit pensionschemes 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 equityshareholders (822.6) 3,542.6Consolidated balance sheet 2008 2007 Notes ‚£m ‚£mNon-current assetsInvestment properties 9 12,296.7 13,319.3Operating 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 1,338.8Net pension benefit assets 14 11.0 -Total non-current assets 14,887.3 15,679.8Current assetsTrading properties and long-term developmentcontracts 173.0

148.3

Derivative financial instruments 13 4.3

14.6Trade and other receivables 838.0 641.8Cash and cash equivalents 48.4 52.7Total current assets (excluding non-currentassets classified as heldfor sale) 1,063.7

857.4

Non-current assets classified as held for sale 12 664.1

2,420.3Total current assets 1,727.8 3,277.7Total assets 16,615.1 18,957.5Current 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 (excludingliabilities directly associated withnon-current assets classified as held forsale) (1,933.8)

(3,022.4)

Liabilities directly associated withnon-current assets classified as held for sale 12 (427.7)

(1,601.0)Total current liabilities (2,361.5) (4,623.4)Non-current liabilitiesProvisions (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 10,791.3EquityOrdinary shares 16 47.1 47.0Own shares 16 (22.3) (14.5)Share-based payments 16 11.3 7.9Share premium 16 56.6 51.5Capital redemption reserve 16 30.5 30.5Retained earnings 16 9,459.7 10,668.9Total shareholders' equity 9,582.9 10,791.3

Consolidated cash flow statement

2008 2008 2007 2007 Notes ‚£m ‚£m ‚£m ‚£mNet cash generated from operationsCash generated from operations 17 696.5 682.4Interest paid (338.3) (237.5)Interest received 10.7 12.4Employer contributions to pension scheme (2.0) (3.9)Taxation (corporation tax paid) (367.7) (91.9)Net cash (outflow) / inflow from operations (0.8) 361.5Cash flows from investing activitiesInvestment 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 relatednon-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 financeleases 0.8

3.8

Receipts from the disposal of discontinuedactivities 424.9

-

Net loans (to) / from joint ventures and cashcontributed (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 ofcash acquired) 18 (158.5)

(521.4)

Net cash received from / (used in) investingactivities 127.3 (1,505.3) Cash flows from financing activitiesIssue of shares 5.2 8.4Purchase 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 financingactivities (132.2) 1,180.9(Decrease) / increase in cash and cashequivalents for the year (5.7) 37.1

Notes to the Financial Statements

1. Basis of preparationThe financial information is abridged and does not constitute the Group's fullFinancial Statements for the years ended 31 March 2008 and 31 March 2007, andhas 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 ‚£mRental income 271.2 329.1 9.6 - 609.9 279.2 311.6 8.7 - 599.5Service chargeincome 47.3 53.3 0.6 - 101.2 46.8 48.6 0.3 - 95.7Property servicesincome - - - 761.0 761.0 - - - 785.9 785.9Trading propertysale proceeds 1.3 40.0 2.3 - 43.6 - 33.1 29.0 1.7 63.8Long-termdevelopmentcontract income - - 26.3 - 26.3 - 28.9 51.8 - 80.7Finance leaseinterest 2.9 5.9 - 10.4 19.2 3.5 5.9 - 6.1 15.5Revenue 322.7 428.3 38.8 771.4 1,561.2 329.5 428.1 89.8 793.7 1,641.1Rents payable (11.0) (5.3) - (175.1) (191.4) (11.3) (4.9) - (179.9) (196.1)Other directproperty orcontractexpenditure (64.7) (72.6) (1.0) (403.6) (541.9) (67.7) (62.1) (0.8) (469.0) (599.6)Indirect propertyor contractexpenditure (32.6) (29.4) (4.0) (13.7) (79.7) (31.6) (30.9) (5.8) (16.3) (84.6)Long-termdevelopmentcontractexpenditure - - (24.3) - (24.3) - (26.1) (40.3) - (66.4)Bid costs - - - (11.9) (11.9) - - - (2.8) (2.8)Cost of sales oftrading 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)Underlyingoperating profit 211.3 276.9 8.1 129.1 625.4 217.3 270.5 21.9 98.8 608.5Profit on disposalof non-currentproperties 16.4 40.9 - 18.1 75.4 28.5 81.7 0.5 7.5 118.2Net (deficit) /surplus onrevaluation ofinvestmentproperties (671.2) (464.7) (9.5) (24.9) (1,170.3) 293.6 1,022.0 5.6 (13.6) 1,307.6Segment result (443.5) (146.9) (1.4) 122.3 (469.5) 539.4 1,374.2 28.0 92.7 2,034.3Demerger costs (9.8) -Unallocatedexpenses (13.0) (13.6)Operating (loss) / profit (492.3) 2,020.7

Net interest expense (note 3) (295.0) (220.9) (787.3) 1,799.8Share of the (loss) / profit of jointventures (post-tax)- Retail Portfolio (92.6) 182.5- London Portfolio (14.4) -- Other investment portfolio 5.9 -- Trillium 0.1 (3.2) (101.0) 179.3Share of the loss of an associate undertaking(post-tax) (0.5) -(Loss) / profit before tax from continuingactivities (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 ‚£mInvestmentproperties 4,615.9 7,069.6 48.8 562.4 12,296.7 5,497.7 7,329.4 64.6 427.6 13,319.3Operatingproperties - - - 544.8 544.8 - - - 551.5 551.5Other property,plant andequipment 8.0 7.0 4.7 53.9 73.6 9.3 8.3 5.0 55.6 78.2Net investment in

finance leases 53.2 104.8 - 175.7 333.7 63.0 104.0 - 95.4 262.4Investments inPublic PrivatePartnerships - - - 25.4 25.4 - - - - -Goodwill - - - 148.6 148.6 - - - 129.6 129.6Investments inequity accountedjoint ventures 1,370.2 9.0 26.3 5.1 1,410.6 1,315.9 - 17.9 5.0 1,338.8Investment in anequity accountedassociate - - - 42.9 42.9 - - - - -Trading propertiesand long-termdevelopmentcontracts 16.5 24.5 128.0 4.0 173.0 - 41.4 106.2 0.7 148.3Trade and otherreceivables 203.1 390.0 23.3 221.3 837.7 185.9

220.3 27.7 207.5 641.4Non-current assetsclassified as heldfor 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 18,889.8Unallocated assets 53.0 53.1Total 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 Liabilitiesdirectlyassociated withnon-current assetsclassified as heldfor 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 Unallocatedliabilities (5,651.2) (5,720.6)Total liabilities (7,021.2) (8,151.6) Other segmentitemsCapital 220.1 368.3 0.2 51.7 640.3 148.5 357.1 0.3 39.6 545.5expenditureAll the Group's operations are in the UK and are organised into four mainbusiness segments against which the Group reports its primary segmentinformation. These are Retail Portfolio, London Portfolio, Other investmentportfolio and Trillium.3. Net interest expense 2008 2007 ‚£m ‚£mInterest expenseBond 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 underdevelopment 48.5 32.3Total interest expense (324.4) (257.3) Interest incomeShort-term deposits 4.1 1.5Other interest receivable 1.3 2.4Interest receivable from joint ventures 15.0 8.5Expected return on pension scheme assets 9.0 8.6Fair value profits on interest rate swaps

- 15.4Total interest income 29.4 36.4Net 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

- 98.0Exceptional items before tax

- 98.0 Deferred taxation released on conversion to a Real Estate Investment Trust

- 2,309.2Real 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 ‚£mCurrent taxCorporation tax expense for the year 10.3 68.8Adjustment in respect of prior years (17.9) (0.6)Corporation tax in respect of property disposals 0.5 32.0Real Estate Investment Trust conversion charge - 315.0Total current tax (credit) / expense (7.1) 415.2Deferred taxOrigination and reversal of timing differences (3.4) 32.9Released in respect of property disposals - (18.8)On valuation surplus - 330.7Released 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) 593.7Effects of:Deferred tax released in respect of property disposals - (18.8)Corporation tax on disposal of non-current assets 6.3 6.0Joint venture accounting adjustments 0.9 (44.2)Prior year corporation tax adjustments (17.9) (0.6)Prior year deferred tax adjustments (2.9) 1.1Non-allowable expenses and non-taxable items 19.8 7.9Real 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 March2007 - (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) statuswith effect from 1 January 2007. As a result the Group no longer pays UK corporationtax on the profits and gains from qualifying rental business in the UK provided itmeets certain conditions. Non-qualifying profits and gains of the Group continue to besubject to corporation tax as normal. On entering the REIT regime an entry charge equalto 2% of the aggregate market value of the properties associated with the qualifyingrental business was payable. Deferred tax accrued at the date of conversion in respectof the assets and liabilities of the qualifying rental business was released to theincome statement, as the relevant temporary differences are no longer taxable onreversal. An equivalent release of deferred taxation was also made by the jointventures, of which the Group's share was ‚£98.0m. The calculation of the Group's tax expense and liability necessarily involves a degreeof estimation and judgement in respect of certain items whose tax treatment cannot befinally determined until a formal resolution has been reached with the relevant taxauthorities. If all such issues are resolved in the Group's favour, provisionsestablished in previous periods of up to ‚£216.0m could be released in the

future.6. Dividends 2008 2007 ‚£m ‚£mOrdinary dividends paidFinal dividend for the year ended 31 March 2007 (34.00pper 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 dividendfor the year ended 31 March 2007: 34.00p) which will result in a furtherdistribution of ‚£74.4m (2007: ‚£159.5m). It will be paid on 28 July 2008 toshareholders who are on the Register of Members on 20 June 2008. The finaldividend is in addition to the third quarterly dividend of 16.00p paid on 25April 2008. The total dividend paid and proposed in respect of the year ended31 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 anddeferred 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

- 5.8Real 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 371.5 303.3Eliminate effect of debt restructuring charges (net of taxation) 1.9 13.4Eliminate effect of bond exchange de-recognition (net of deferredtax) 7.6 13.3Adjusted earnings 381.0 330.0 Number Number million millionWeighted average number of ordinary shares 470.6 469.8Effect of own shares and treasury shares

(5.4) (1.6) Weighted average number of ordinary shares after adjusting for own shares

465.2 468.2Effect of dilutive share options 1.1 1.9Weighted average number of ordinary shares adjusted for dilutiveinstruments 466.3 470.1 Pence PenceBasic (loss) / earnings per share (188.80) 753.59Diluted (loss) / earnings per share (188.80) 750.54Adjusted earnings per share 81.90 70.48Adjusted 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 toprovide an indication of the Group's underlying business performance.Accordingly, it excludes the effect of all exceptional items, debt and otherrestructuring charges, and other items of a capital nature (other than tradingproperties and long-term contract profits) as indicated above. In addition,the corporation tax charge arising from the conversion to a REIT, and thedeferred tax released following the conversion to a REIT, have also beenexcluded due to their size and incidence. Further, prior to the conversion toa REIT, the deferred tax arising on capital allowances in respect ofinvestment properties was eliminated as experience had shown that theseallowances are not in practice repayable, and deferred tax on capitalisedinterest was also added back as this was effectively a permanent difference.An EPRA measure has been included to assist comparison between Europeanproperty companies. We believe our measure of adjusted diluted earnings pershare is more appropriate than the EPRA measure in the context of ourbusiness.8. Net assets per share 2008 2007 ‚£m ‚£mNet 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 10,767.7Reverse bond exchange de-recognition adjustment (511.5) (519.1)Adjusted net assets attributable to equity shareholders 9,084.1 10,248.6Reinstate 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 millionNumber of ordinary shares 470.9 470.4Effect of own shares and treasury shares (7.2) (2.1)Number of ordinary shares after adjusting for own shares 463.7 468.3Effect of dilutive share options 0.7 1.6Number of ordinary shares adjusted for dilutive instruments 464.4 469.9 Pence PenceNet assets per share 2067 2304Diluted net assets per share 2064 2297Adjusted net assets per share 1959 2188Adjusted diluted net assets per share

1956 2181

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

2019 2188

Adjusted net assets per share excludes the deferred tax arising on revaluationsurpluses, mark-to-market adjustments on financial instruments used for hedgingpurposes and the bond exchange de-recognition adjustment as management consider thatthis better represents the expected future cash flows of the Group. EPRA measures havebeen included to assist comparison between European property companies. We believe ourmeasure of adjusted net assets attributable to equity shareholders is more

indicativeof 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 12,077.3Properties transferred from portfoliomanagement into the development programmeduring the year (at 1 April 2006valuation) (219.0) 219.0 - - - - -Developments completed, let andtransferred from the development programmeinto portfolio management during the year 60.8 (60.8) -

- - - -Property acquisitions 510.0 13.7 414.1 937.8 26.6 - 964.4Capital expenditure 77.2 422.1 - 499.3 27.2 19.0 545.5Capitalised interest - 29.8 - 29.8 - - 29.8Disposals (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 - - 1,307.6Net book value at 31 March 2007 10,607.4 2,284.3 427.6 13,319.3 551.5 78.2 13,949.0Properties transferred from portfoliomanagement into the development programmeduring the year (at 1 April 2007valuation) (218.7) 218.7 - - - - -Developments completed, let andtransferred from the development programmeinto portfolio management during the year 1,491.5 (1,491.5) -

- - - -Property acquisitions 714.2 0.2 149.4 863.8 8.9 - 872.7Capital expenditure 117.5 467.3 6.8 591.6 32.4 16.1 640.1Capitalised interest 1.4 43.7 - 45.1 - - 45.1Disposals (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 beenexcluded from this reconciliation as the net book value and the market valueare not materially different. The components of the reconciliation areincluded 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 12,891.7Plus: amount included in prepayments inrespect of lease incentives 93.6 37.4 131.0Less: head leases capitalised (61.6) (9.4) (71.0)Plus: properties treated as finance leases 163.1 - 163.1Market value at 31 March 2007 - Group 10,802.5 2,312.3 13,114.8Market value at 31 March 2006 - plus: share ofjoint ventures (note 11)

1,637.7

Market value at 31 March 2007 - Group andshare 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 11,734.3Plus: amount included in prepayments inrespect of lease incentives 156.3 24.3 180.6Less: head leases capitalised (65.3) (2.0) (67.3)Plus: properties treated as finance leases 149.2 - 149.2Market value at 31 March 2008 - Group 10,578.5 1,418.3 11,996.8Market value at 31 March 2008 - plus: share ofjoint ventures (note 11)

1,589.9

Market value at 31 March 2008 - Group andshare 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 ReportingStandards' and IAS 17 `Leases', the Group has reviewed the classification ofall leases at the opening balance sheet date of 1 April 2004. In reviewingleases of land and buildings in accordance with IAS 17 the land and buildingselements of the lease need to be considered separately. On this basis, leaseson 43 properties entered into between 1923 and 2003 were reclassified asfinance leases in these accounts. This resulted in an increase in fixed assetsof ‚£77.2m and a finance lease creditor of the same amount at first timeadoption 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. Thecorresponding 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 beenarrived at on the basis of a valuation carried out at that date by KnightFrank LLP, external valuers. The valuation by Knight Frank LLP, which conformsto Appraisal and Valuation Standards of the Royal Institution of CharteredSurveyors and with IVA 1 of the International Valuation Standards, was arrivedat by reference to market evidence of transaction prices for similarproperties. Fixed asset properties include capitalised interest of ‚£211.7m(2007: ‚£145.6m). The average rate of capitalisation is 5.5% (2007: 5.5%). Thehistorical cost of investment properties is ‚£7,813.2m (2007: ‚£7,210.6m).The current value of investment properties in respect of proposed developmentsis ‚£639.6m (2007: ‚£329.3m). Developments are transferred out of thedevelopment programme when physically complete and 95% let. The schemescompleted during the year were Christ's Lane, Cambridge, 1 Wood Street, EC2,Princesshay, Exeter, Maskew Avenue, Peterborough, Poole Road, Poole, Bankside2&3, SE1, Thanet Leisure, Westwood Cross and Cardinal Place, SW1. The propertyrental 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 ‚£mNon-current

Finance leases - gross receivables 692.8 603.9Unearned finance income (385.6) (368.0)Unguaranteed residual value 26.5 26.5 333.7 262.4

Current

Finance leases - gross receivables 27.4 14.6Unearned finance income (20.3) (10.9) 7.1 3.7Total net investment in finance leases 340.8 266.1

11. Investments in joint ventures

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

MetroSummary Scottishfinancial Retail Shopping Buchanan The Bullinformation Property Fund St. David's Ring The Harvest Orianaof Group's Limited Limited Galleries Limited Limited Bristol Limited Limited Othershare of Partnership Partnership Partnership Partnership Partnership Alliance Partnership Partnership (1) Totaljointventures ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£mIncomestatementRental income 12.5 14.0 9.9 5.4 14.7 3.4 1.4 1.4 3.4 66.1Servicecharge income 2.5 3.0 0.7 0.7 2.7 - - - 0.7 10.3Propertyservicesincome - - - - - - - - 0.1 0.1Tradingproperty saleproceeds - - - - - - - - 35.1 35.1Revenue 15.0 17.0 10.6 6.1 17.4 3.4 1.4 1.4 39.3 111.6Rents payable (0.2) - - - - - - - (0.1) (0.3)Other directpropertyexpenditure (4.6) (3.8) (1.9) (1.2) (4.1) (0.2) - - (1.4) (17.2)Indirectpropertyexpenditure (0.6) (1.1) (0.1) (0.3) (0.2) (0.2) (0.1) (0.2) (0.1) (2.9)Cost of salesof tradingproperties - - - - - - - - (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 ondisposal ofnon-currentproperties (7.6) 0.6 - - - - - - (0.1) (7.1)Net (deficit)/ surplus onrevaluationof investmentproperties (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 beforetax (32.0) (11.9) (6.4) (16.8) (18.3) 9.7 (8.4) (14.4) 0.6 (97.9)Income taxexpense- 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 sheetInvestmentproperties(2) 126.7 246.4 176.0 244.1 288.4 291.5 62.7 87.3 55.9 1,579.0Currentassets 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 1,852.3Currentliabilities (2.9) (4.9) (2.5) (15.7) (8.2) (17.2) (0.5) (79.7) (10.7) (142.3)Non-currentliabilities (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 1,410.6Capitalcommitments 2.9 0.6 2.9 127.4 - 27.7 - - 8.3 169.8Market valueof investmentproperties(2) 125.9 246.6 180.0 244.0 293.3 294.5 62.8 87.3 55.5 1,589.9NetinvestmentAt 1 April2007 145.8 95.3 188.6 308.1 321.1 198.6 - - 81.3 1,338.8Propertiescontributed - - - - - - 39.7 205.8 - 245.5Cashcontributed - 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 valuemovement oncash flowhedges takento equity 1.8 (5.3) - - - - - - - (3.5)Loan advances - - - 55.4 - 79.5 - - - 134.9Loanrepayments - - - - (13.5) (3.4) - (181.6) - (198.5)At 31 March2008 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

MetroSummary Scottishfinancial Retail Shopping Buchanan The Bullinformation Property Fund St. David's Ring The Harvest Orianaof Group's Limited Limited Galleries Limited Limited Bristol Limited Limited Othershare of Partnership Partnership Partnership Partnership Partnership Alliance Partnership Partnership (1) Totaljointventures ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£m ‚£mIncomestatementRental income 20.6 13.3 10.2 2.0 15.1 3.3 - - 3.1 67.6Servicecharge income 4.5 3.2 1.4 0.2 2.6 - - - 0.5 12.4Propertyservicesincome - - - - - - - - 1.6 1.6 Revenue 25.1 16.5 11.6 2.2 17.7 3.3 - - 5.2 81.6Rents payable (0.2) - - - - - - - (0.1) (0.3)Other directpropertyexpenditure (8.4) (4.3) (2.4) (0.4) (4.5) (0.2) - - (4.6) (24.8)Indirectpropertyexpenditure (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) 52.7Profit ondisposal ofnon-currentproperties - - - - - - - - 0.2 0.2Net surplusonrevaluationof investmentproperties 6.3 23.0 10.2 2.6 23.8 6.9 - - 2.3 75.1Operatingprofit 21.4 34.2 19.3 4.4 36.8 9.9 - - 2.0 128.0Net interest(expense) /income (11.7) (10.9) (3.4) 0.2 0.1 0.4 - - (0.2) (25.5)Profit beforetax 9.7 23.3 15.9 4.6 36.9 10.3 - - 1.8 102.5Income 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 98.0Share ofprofits ofjointventuresafter tax 24.7 34.0 19.3 4.6 76.2 17.3 - - 3.2 179.3Balance sheetInvestmentproperties(2) 357.2 301.0 185.1 213.2 319.6 197.3 - - 57.9 1,631.3Currentassets 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 1,836.4Currentliabilities (4.5) (5.2) (4.0) (21.2) (9.2) (11.8) - - (5.9) (61.8)Non-currentliabilities (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 1,338.8Capitalcommitments 0.6 1.1 1.3 1.9 - 129.3 - - - 134.2Market valueof investmentproperties(2) 351.4 299.3 189.3 213.3 325.0 200.5 - - 58.9 1,637.7NetinvestmentAt 1 April2006 105.2 81.0 173.0 0.8 259.3 118.5 - - 91.7 829.5Propertiescontributed - - - 267.6 - - - - - 267.6Cashcontributed 9.5 6.8 1.4 35.1 0.3 - - - 2.5 55.6Cost ofacquisition - - - - - - - - 0.5 0.5Share ofpost-taxresults 24.7 34.0 19.3 4.6 76.2 17.3 - - 3.2 179.3Distributions - (29.6) (5.1) - - - - - (4.5) (39.2)Fair valuemovement oncash flowhedges takento equity 6.4 3.1 - - - - - - - 9.5Transferredto goodwill - - - - - - - - (12.1) (12.1)Loan advances - - - - - 67.0 - - - 67.0Loanrepayments - - - - (14.7) (4.2) - - - (18.9)At 31 March2007 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 ‚£mNon-current assets classified as held for sale 664.1 2,420.3Liabilities directly associated with non-current assetsclassified as held for sale (427.7) (1,601.0) 236.4 819.3Non-current assets and liabilities held for sale at 31 March 2007 representsPPP investments acquired as part of the SMIF acquisition. SMIF was acquired on5 February 2007 for ‚£517.0m. SMIF included a number of PPP investments whichthe Group acquired exclusively with a view to being resold to third partyinvestors, while maintaining a minority share. The Group transferred themajority of the PPPs acquired with SMIF, together with a number of projectssubsequently acquired, into a specifically created vehicle, the TrilliumInvestment Partners LP, for the purpose of introducing third party investors.During the year the Trillium Investment Partners LP was refinanced resultingin a repayment of ‚£414.8m of debt. On 14 March 2008, 90% of the equity ofTrillium Investment Partners LP was sold to third party investors and theremaining 10%, which is to be retained, was transferred to an investment in anassociate undertaking. On disposal ‚£23.9m was recognised as the income of theTrillium Investment Partners LP as a discontinued operation, being theoperational profits of the business from acquisition to 14 March.The remaining balance represents a number of PPP investments which will besold to Trillium Investment Partners LP or to third parties. The net carryingvalue of the disposal group is based on its fair value less costs to sell atthe date of acquisition, as adjusted to reflect cash advanced and cashreturned from the disposal group. The disposal group represents a discontinuedoperation, and the Group has not recognised any profits or losses in respectof this discontinued operation (other than disclosed above) for the periodfrom acquisition to 31 March 2008. The disposal group is held in the Trilliumsegment.Set out below is an analysis of the movements within the disposal group forthe year ended 31 March 2008: Trillium Investment Partners LP Other Total ‚£m ‚£m ‚£mBook value at 1 April 2007 761.2 58.1 819.3Projects acquired from AMEC (note 18) - 134.4 134.4Other 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 anassociate undertaking (43.4) - (43.4)Cash received on disposal of Trillium Investment PartnersLP (399.6)

- (399.6) Profit within the Trillium Investment Partners LP from acquisition to 14 March 2008

23.9 - 23.9Profit on disposal of the Trillium Investment Partners LP 13.6 - 13.6Profit on disposal of Meterfit - 10.0 10.0Profit from discontinued operations 37.5 10.0 47.5 - 236.4 236.413. 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)Sterling4.625 per cent Notes due2013 (1) 300.0 299.7 - 299.7 Fixed 4.7 2.8 292.9 (6.8)5.292 per cent Notes due2015 (1) 391.5 390.9 - 390.9 Fixed 5.3 5.7 384.0 (6.9)4.875 per cent Notes due2019 (1) 400.0 396.1 - 396.1 Fixed 5.0 9.6 369.9 (26.2)5.425 per cent Notes due2022 (1) 255.3 254.5 - 254.5 Fixed 5.5 12.0 240.0 (14.5)4.875 per cent Notes due2025 (1) 300.0 297.0 - 297.0 Fixed 4.9 15.5 257.2 (39.8)5.391 per cent Notes due2026 (1) 210.7 209.8 - 209.8 Fixed 5.4 15.9 190.5 (19.3)5.391 per cent Notes due2027 (1) 611.2 608.5 - 608.5 Fixed 5.4 17.0 547.6 (60.9)5.376 per cent Notes due2029 (1) 317.9 316.3 - 316.3 Fixed 5.4 19.5 283.4 (32.9)5.396 per cent Notes due2032 (1) 322.9 321.0 - 321.0 Fixed 5.4 22.3 285.2 (35.8)5.125 per cent Notes due2036 (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)EuroEuro Commercial Paper(2) 35.5 - 35.5 35.5 Floating 4.7 0.1 35.5 - Amounts payable underfinance 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 derivativeinstrumentsInterest 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 exchangede-recognitionadjustment(8) (511.5) - (511.5) - 511.5Total borrowings 5,218.4 214.5 5,432.9 5,641.6 208.7Less: bank overdraft (1.4)Less: borrowings falling due within oneyear (802.1)Less: derivative financial instruments- liabilities (10.7)Plus: derivative financial instruments- assets 4.3Plus: bond exchange de-recognitionfalling due within one year 11.7Less: amounts payable underfinance leases falling duewithin 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)Sterling5.016 per cent Notes due2007 (1) 181.7 181.7 - 181.7 Fixed 5.0 0.1 181.6 (0.1)4.625 per cent Notes due2013 (1) 300.0 299.6 - 299.6 Fixed 4.7 3.8 288.5 (11.1)5.292 per cent Notes due2015 (1) 391.5 390.7 - 390.7 Fixed 5.3 6.7 384.3 (6.4)4.875 per cent Notes due2019 (1) 400.0 395.7 - 395.7 Fixed 5.0 10.6 379.1 (16.6)5.425 per cent Notes due2022 (1) 255.3 254.4 - 254.4 Fixed 5.5 13.0 255.4 1.04.875 per cent Notes due2025 (1) 300.0 296.9 - 296.9 Fixed 4.9 16.5 286.2 (10.7)5.391 per cent Notes due2026 (1) 210.7 209.8 - 209.8 Fixed 5.4 16.9 213.2 3.45.391 per cent Notes due2027 (1) 611.3 608.3 - 608.3 Fixed 5.4 18.0 614.8 6.55.376 per cent Notes due2029 (1) 317.9 316.2 - 316.2 Fixed 5.4 20.5 324.5 8.35.396 per cent Notes due2032 (1) 322.9 321.0 - 321.0 Fixed 5.4 23.3 331.3 10.35.125 per cent Notes due2036 (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)EuroBi-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 FrancsEuro Commercial Paper(2) 21.0 - 21.0 21.0 Floating 5.5 - 21.0 - YenEuro Commercial Paper(2) 38.8 - 38.8 38.8 Floating 5.4 - 38.8 - Amounts payable underfinance 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 derivativeinstrumentsInterest 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 exchangede-recognitionadjustment(8) (519.1) - (519.1) - 519.1Total 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

6.3Plus: derivative financial instruments -assets 14.6Less: amounts payable under finance leasesfalling 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 andfloating pool of assets (The Security Group). The debt investors benefit fromsecurity over a pool of investment properties valued at ‚£11.0bn at 31 March2008 (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 regimewhich gives the Group substantial operational flexibility when the loan tovalue and interest rate cover in The Security Group are less than 65% and morethan 1.45 times respectively. If these limits are exceeded, operationalrestrictions increase significantly and could act as an incentive to reducegearing.(2) Euro Commercial Paper is unsecured. However, the amount drawn is requiredto be supported by an unutilised committed bank facility, which is a securedfacility.

(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 amaturity of August 2013. The facility is committed and secured on the assetsof the Security Group. The maturity profile is calculated on the basis that itis the Group's intention to retain the existing loans or that the existingloans will be refinanced or rescheduled with the same financial institutionsunder the terms of the facility.(5) During the year, the Group entered into three committed bilateralfacilities all of which are secured on the assets of the Security Group. InJune 2007 the Group entered into a ‚£150.0m facility, which has been extendedin December 2007, as a ‚£175.0m facility with an expiry in February 2010. InJuly 2007 the Group entered into a ‚£500.0m facility which was due to expire inJuly 2008, but a commitment has been obtained to replace it in July 2008 witha ‚£350.0m facility with an expiry in July 2009. In December 2007, the ‚£1.0bnSMIF acquisition facility was repaid. Another ‚£350m facility was establishedin December 2007 which expires in October 2008. The Group has an option toextend each of these bilateral facilities by a further year. In December 2007,the Group acquired a share of Leeds Trinity Quarter which included a facilitywhich has been refinanced post year-end with a five year ‚£352m committedfacility 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 TrustLimited, a subsidiary of the Group, as partial consideration for the purchaseof Tops Estates PLC and the LxB portfolio. The notes are unsecured, however,they have the benefit of a commercial bank guarantee. Interest is calculatedwith 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 nextinterest 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 theGroup exchanging all of its outstanding bond and debenture debt for new Notes.The new Notes did not meet the IAS 39 requirement to be substantiallydifferent from the debt that it replaced. Consequently the book value of thenew Notes is reduced to the book value of the original debt (the bond exchangede-recognition adjustment). The adjustment is amortised to zero over the lifeof the new Notes.

(9) Before the effect of derivative instruments.

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

Financial risk management

Financial risk factors

The Group's overall risk management programme focuses on the unpredictabilityof financial markets and seeks to minimise potential adverse effects on theGroup's financial performance. The Group uses derivative financial instrumentsto hedge certain risk exposures.The Group's operations and debt financing expose it to a variety of financialrisks. The main risks arising include credit risk, liquidity risk and marketrisk, 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 andother receivables, finance lease receivables and short-term investments. TheGroup's credit risk is primarily attributable to its trade and finance leasereceivables. The amounts presented in the balance sheet are net of allowancesfor doubtful receivables. An allowance for impairment is made where there isobjective evidence that the Group will not be able to collect all amounts dueaccording to the original terms of the receivables concerned. The balance islow relative to the scale of the balance sheet and therefore the credit riskof trade receivables is considered to be low.Property sales receivables primarily relate to the sale of six properties, forwhich all payments to date have been received when due, and as the purchasersare of reputable financial standing the credit risk is considered low.Finance lease receivables relate to amounts receivable from tenants in respectof tenant finance leases. This is not considered a significant credit risk asthe 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 continuedLiquidity riskThe Group actively maintains a mixture of long-term and short-term committedfacilities that are designed to ensure that the Group has sufficient availablefunds for operations and committed investments. The Group's undrawn committedborrowing facilities are monitored against projected cash flows. The expiryperiods 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 fiveyears 2.0 2.0More 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 rateagreements, forward starting swaps, and gilt locks) to manage its interestrate exposure. With property and interest rate cycles typically of four toseven years duration, the Group's target is to have a minimum of 80% ofanticipated debt at fixed rates of interest and a maximum of 20% floating overthis timeframe. Due to a combination of factors, principally the high level ofcertainty required under IAS 39 `Financial Instruments: Recognition andMeasurement', hedging instruments used in this context do not qualify forhedge accounting. Specific hedges are also used in geared joint ventures tofix the interest exposure on limited recourse debt.At 31 March 2008 the Group (including joint ventures) had ‚£2.3bn of hedges inplace, and its debt was 80% fixed. Consequently, based on year end debtlevels, a 1% change in interest rates would decrease or increase the Group'sannual profit before tax by ‚£12.4m. The sensitivity has been calculated byapplying the interest rate change to the variable rate borrowings, net ofinterest 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 itis UK based. However, the Group is able to raise debt in currencies other thanSterling, and where this occurs it is the Group's policy to hedge 100% of theexposure 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 ‚£mSterling 4,402.5 1,552.7 5,955.2 5,458.4 207.6 5,666.0Euro - -

- - 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 ‚£mOne year or less, or on demand 172.2 633.5 805.7 1,457.2 234.5 1,691.7More than one year but not more than two years 464.4 38.0 502.4 2.3 - 2.3More than two years but not more than fiveyears 321.9 - 321.9 22.0 - 22.0More 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 ‚£mOne year or less, or on demand 178.9 35.5 214.4 274.9 100.9 375.8More than one year but not more than two years 46.7 - 46.7 178.9 - 178.9More than two years but not more than fiveyears 1,721.9 - 1,721.9 867.3 - 867.3More 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 6.5Charge to operating profit 2.1 2.7Expected return on plan assets (9.0) (8.6)Interest on schemes' liabilities

8.1 7.6Employer contributions (2.0) (3.9)Actuarial (gains) / losses (15.8) 1.3At the end of the year (11.0) 5.615. Deferred taxation 2008 2007 ‚£m ‚£m

Deferred tax is provided as follows: Excess of capital allowances over depreciation - operating properties

0.7 4.4Capitalised interest - operating properties

0.9 0.9Other 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 ‚£mAt 1 April 2006 46.9 (3.4) 6.3 43.2 30.5 7,370.4 7,493.9Exercise of options 0.1 - - 8.3 - - 8.4Fair value movement on cash flowhedges - Group - - - - - 5.1 5.1Fair value movement on cash flowhedges - joint ventures - - - - - 9.5 9.5Fair value of share-based payments - - 5.6 - - - 5.6Own shares acquired - (15.1) - - - (21.1) (36.2)Cost of shares awarded to employees - 4.0 (4.0) - - - -Actuarial losses on defined benefitpension schemes - - - - - (0.3) (0.3)Dividends paid (note 6) - - - - - (223.0) (223.0)Profit for the financial year - - - - - 3,528.3 3,528.3At 31 March 2007 47.0 (14.5) 7.9 51.5 30.5 10,668.9 10,791.3Exercise of options 0.1 - - 5.1 - - 5.2Fair value movement on cash flowhedges - Group - - - - - (3.2) (3.2)Fair value movement on cash flowhedges - joint ventures - - - - - (3.5) (3.5)Fair value of share-based payments - - 5.0 - - - 5.0Own shares acquired - (9.4) - - - (78.2) (87.6)Cost of shares awarded to employees - 1.6 (1.6) - - - -Actuarial gains on defined benefitpension schemes - - - - - 14.9 14.9Dividends 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 PLCby the Employee Share Ownership Plan (ESOP) which is operated by the Group inrespect of its commitment to the Deferred Bonus Shares Scheme. The number ofshares 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 Meetingauthorised the acquisition of shares issued by the Company representing up to10% of its share capital to be held as treasury shares. At 31 March 2008 theGroup 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 operatingactivities: 2008 2007 ‚£m ‚£mCash 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) 1,799.8Interest income (29.4) (12.4)Interest expense 324.4 233.3Operating (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 ofinvestment properties 1,170.3 (1,307.6)Share-based payment charge 5.0 5.6Pension scheme charge 2.1 2.7 Changes in working capital:Decrease in trading properties and long-termdevelopment 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

682.418. Business combinationsAMEC'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 acquiredAssets of the disposal group

138.2

Liabilities directly associated with the assets of the disposalgroup (3.8)Disposal group (note 12) 134.4PPP investments 17.2Cash and cash equivalents 45.3Current liabilities (6.6)Net assets acquired 190.3Fair value of considerationCash 202.1Costs 1.7 203.8Goodwill (13.5) 190.3

18. Business combinations continued

The disposal group comprises a number of PPP investments which were acquiredexclusively with a view to being resold to Trillium Investment Partners LP.The net amount attributed to the disposal group at the date of acquisitionrepresents fair value less costs to sell. The separate PPP investmentsrepresent investments in associates which are currently constructing PPPassets. These assets are not treated as assets held for sale. The remainingassets and liabilities relate to the management companies within AMEC that arebeing retained. The fair values reported above in respect of these assets andliabilities equate to their book values. The goodwill acquired is attributableto the knowledge and market expertise of the management team of the retainedportion 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 ‚£mRevenue - 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 investmentproperties and capitalised interest, the adjustment arising from thede-recognition of the bond exchange, together with cumulative mark-to-marketadjustment arising on interest swaps and similar instruments used for hedgingpurposes. After REIT conversion, the adding back of deferred tax is no longerrelevant.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 portfoliocombined with our share of the value of properties held in joint ventures, butexcludes any investment properties owned by Trillium. Unless stated these arethe 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 butless than 95% let; developments on site; committed developments (beingprojects which are approved and the building contract let); and authoriseddevelopments (those projects approved by the Board for which the buildingcontract has not yet been let). For reporting purposes we retain properties inthe 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 grossoutlays for the purchase of a property (including purchase costs), reflectingreversions to current market rent, and such items as voids and expendituresbut disregarding potential changes in market rents and reflecting the actualcash 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 isjointly controlled by the Group and one or more venturers under a contractualarrangement whereby decisions on financial and operating policies essential tothe operation, performance and financial position of the venture require eachventurer'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 valueOpen market value is an opinion of the best price at which the sale of aninterest in the property would complete unconditionally for cash considerationon the date of valuation (as determined by the Group's external valuers). Inaccordance with usual practice, the Group's external valuers report valuationsnet, after the deduction of the prospective purchaser's costs, including stampduty, 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 asuse and building mass. Full details of the development scheme must be providedin an application for full planning consent, including detailed design,external appearance and landscaping before a project can proceed. An outlineplanning permission will lapse if full planning permission is not grantedwithin 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 itsprofits and assets derived from a qualifying property rental business. Incomeand capital gains from the property rental business are exempt from tax butthe REIT is required to distribute at least 90% of those profits toshareholders. Corporation tax is payable on non-qualifying activities in thenormal 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 theproperty on commencement of development, together with all finance costs lessresidential proceeds.Total property return

Valuation surplus, profit / (loss) on property sales and net rental income inrespect of investment properties expressed as a percentage of opening bookvalue, together with the time weighted value for capital expenditure incurredduring 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.

vendor