(LAND.L) Land Securities Group PLC Buy/Sell

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Key Themes:

The Group has adopted a flexible approach to lettings to secure income, but not to the detriment of the quality of key assets. This has been effective with £29.9m of income secured across the portfolio in the first half. Highlights have included the successful letting at Thomas More Square, London E1 to News International, which is the largest letting of second-hand space in London since 2003.

A focus on asset sales and treasury management has preserved an AA credit rating and leaves the Group well placed with the financial capacity to take advantage of new investment and development opportunities as the market cycle turns. With a Group LTV of 50.8%, the business has the flexibility to make investment acquisitions, but also the current market exposure to allow it to be patient and wait for the right opportunities.

With a belief that West End offices will deliver strong rental growth in the recovery phase, construction tender returns have been sought on 60,000 sq m of office, retail and residential development opportunities in the West End. The schemes at Park House, W1, Selborne House, SW1, and Wellington House, SW1, can be started in 2010 for delivery into improving occupier markets in 2012 and 2013.

The Group is confident in its ability to deliver long term outperformance as it shapes itself for the next five years. There will be a focus on exploiting its competitive cost of finance and aligning its strong development capability with a liquid portfolio to allow capital rotation. The strength and appeal of its portfolio and its expertise in both offices and retail will continue to offer organic opportunities for growth as well as new business opportunities.

Commenting, Chief Executive Francis Salway said:

"We are pleased that our portfolio has outperformed the market index, and that we have delivered our plans for balance sheet management through treasury activity and asset disposals.

"We are confident that from the low point in July 2009 property values will rise over the next five years with the profile characterised by ripples rather than pure straight-line growth as residual risks and imbalances in financial markets play out.

"We are prepared to be patient for the best opportunities and we will not rush our investment programme, as we expect a broader range of opportunities to emerge once banks begin to take action on their property loan portfolios.

"In the short term, we will continue to focus on the key qualities and capabilities that have guided our actions since March 2009: a strong balance sheet and good access to finance; a high quality team showing leadership in planning, development and asset management; and a portfolio with exciting development opportunities. We believe these powerful tools for long-term value creation will become the hallmarks of success in our market."

For further media information, please contact:

Francis Salway / Donal McCabe John Sunnucks / David Allchurch
Land Securities Group PLC Tulchan Communications
T +44 (0)20 7413 9000 T +44 (0)20 7353 4200

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/interims2009

Please note that there will be an interactive question & answer facility on the webcast. There will also be an audio conference call line to access the meeting, it is recommended that you dial-in to the call 10-15 minutes before the start of the presentation due to the large volume of callers expected. Dial-in details are as follows:

Dial-in number: +44 (0) 1452 568 405

Call title: Land Securities Half-Yearly Results

Call ID number: 36400596

An interview with Francis Salway, Group Chief Executive, and Martin Greenslade, Group Finance Director, is available at www.landsecurities.com/interims2009

Chief Executive's Statement

"We enter the recovery phase of the cycle with our balance sheet positioned as we planned in terms of gearing ratios. We have the capacity and confidence in our expertise to invest in the right acquisitions and new developments to create outperformance."

Francis Salway

Chief Executive

Overview

A deteriorating UK commercial property market found its floor during the first six months of our financial year. The market's peak to trough fall in values was in line with our expectations at the time of the 2009 Rights Issue, and this reinforces our confidence in the actions we have taken. The timing of the turning point was slightly earlier than generally expected - in July 2009 - and by the end of our Half Year we had seen the first signs of recovery.

We are now entering a key phase for commercial property companies, with the decisions taken today likely to prove instrumental in terms of value creation tomorrow. As the market makes the transition from rapid deterioration to nascent recovery, it will be the combination of decisiveness, patience and flexibility that determines the long-term winners in our sector.

Since March 2009, we have placed particular emphasis on three key areas of activity. First, we have increased our financial flexibility by completing a programme of sales to position our balance sheet appropriately. Second, we have implemented a flexible lettings strategy to secure income, but not to the detriment of the quality of key assets. Third, we have continued planning for the medium term by preparing sites for redevelopment, whether through obtaining and improving planning consents or seeking construction tender returns.

Our combined portfolio showed a small valuation deficit of 1.4% or £117.8m, which contributed to our reported pre-tax loss of £4.6m. Our adjusted diluted net assets per share stood at 565p at 30 September 2009, down 4.7% over the period. The change was largely attributable to the valuation deficit and also to a £74.5m cash payment to terminate interest-rate swaps. As expected, our property sales in the period impacted underlying revenue profit, which was £128.4m, down 15.4% compared with the first six months of the previous financial year. Our adjusted diluted earnings per share decreased to a greater degree, down 42.8%, as a result of the dilutive effect on earnings of our Rights Issue. We have confirmed the second quarter's dividend at the same level as the first quarter's at 7.0p per share.

In terms of the relative performance of our property assets, our combined portfolio delivered an ungeared total property return of 2.1%, outperforming the IPD Quarterly Universe which delivered a 1.0% total return.

Financial flexibility

In accordance with the plans we outlined at the time of our Rights Issue announcement in February 2009, we have continued with our programme of investment property disposals and sold £765.5m across the London and Retail portfolios in the six months. Asset sale values were, on average, 0.3% below their March 2009 valuations, while values in the market as a whole fell by 2.5% over this period. This provides a helpful validation of the pricing of the assets in our portfolio. In managing our sales programme, we have been careful to ensure that the sales have not materially impacted the quality or appeal of our portfolio from the perspective of our major customers.

Our balance sheet gearing is attractively positioned at the turning point in the cycle with a Group Loan to Value (LTV) ratio of 50.8%. This ensures an attractive multiplier on the conversion of future increases in property value into growth in shareholders' net assets.

In September 2009, we paid down drawn debt facilities of £1.8bn to restore our debt structure to a normal operating environment. The result is a strong balance sheet that will serve to protect the company's credit rating, while the proceeds of asset sales and our Rights Issue give us the financial firepower needed to start speculative developments and take advantage of acquisition opportunities. Managing our balance sheet to maintain an AA rating will help lower the cost of finance in the medium term, giving us a competitive advantage as we move into the next cycle.

We have continued to develop and implement effective approaches to funding outside the Security Group, our principal debt structure. For example, in July 2009, we closed a £360.3m bond linked to our commercial lease with the UK Government over Queen Anne's Gate, London SW1. This is the first bond of its type issued by a property company for some time. In September 2009, the St David's Limited Partnership - a 50:50 joint venture with Capital Shopping Centres - agreed a facility of £290.0m against the St David's shopping centre development in Cardiff. The cash raised from these two transactions further increases our financial flexibility.

Leasing activity

The leasing markets remain difficult, but our pragmatic approach to leasing is proving effective. With some assets we are taking a tactical approach, securing short-term lettings that reflect current market dynamics. With others, particularly higher quality assets, our priority is to secure maximum value through long-term agreements with occupiers who enhance the tenant mix, as at our mixed office and retail development at One New Change, London EC4.

We are particularly pleased that News International made the decision to move into 3 Thomas More Square, London E1. This is the largest letting of second-hand office space in London since 2003, and it sees News International take on 17,820 sq m of office accommodation.

Our people and capability

In June 2009, Mike Hussey left the company by mutual agreement, and I would like to thank Mike for his substantial contribution to the company over the past seven years, which included five years as a member of the Board.

In September 2009, we announced the appointment of Robert Noel to the Board and to the executive position of Managing Director of the London Portfolio. This appointment will take effect from 1 January 2010. As Property Director of Great Portland Estates PLC, Robert has created an outstanding track record on transactions and investment performance in the London property market. His experience and expertise will be a great addition to the strength and depth of the current London team.

In August 2009, Chris Bartram joined the Board as a non-executive director. Chris has had a successful and broad-ranging career in the property industry. He is currently Chairman of Orchard Street Investment Management LLP, a leading UK commercial property investment management firm, and he is a non-executive director of The Crown Estate.

These Board-level appointments add significant weight to what is already a very experienced and effective Board and senior management team. It is critical that our capability is in tune with a changing market, and I am delighted that our people continue to devise and implement truly innovative industry initiatives. For example, in April 2009, we helped lead the development of a 'Ten Point Plan' for service charge cost management for retailers. We are also making good progress on our Brand Empire initiative to help bring new international retailers into the UK.

Planning and development opportunities

In keeping with our belief that rental growth will return first in London's West End, we have obtained construction tender prices for three proposed development projects: Park House, London W1 (offices, retail and residential); Selborne House, London SW1 (predominantly offices); and, Wellington House, London SW1 (residential being delivered in conjunction with the offices at Selborne House), with the aim of commencing construction in 2010. Completions are scheduled for late 2012 and early 2013, when we expect to see stronger occupational demand and rising rents.

We are also making good progress towards securing an appropriate level of pre-lettings to enable us to start the 92,900 sq m Trinity Quarter shopping centre scheme in Leeds.

Outlook and priorities

Looking ahead, we are confident that from the low point in July 2009, property values will rise over the next five years with the profile characterised by ripples rather than pure straight-line growth, as residual risks and imbalances in the financial markets play out.

Our priority is to maintain a clear view on the strategies that will define success in this market, and to act decisively on these. We are prepared to be patient for the best opportunities and we will not rush our investment programme, as we expect a broader range of opportunities to emerge once banks begin to take action on their property loan portfolios.

In the short term, we will continue to focus on the key qualities and capabilities that have guided our actions since March 2009: a strong balance sheet and good access to finance; a high quality team showing leadership in planning, development and asset management; and a portfolio with exciting development opportunities. We believe these powerful tools for long-term value creation will become the hallmarks of success in our market.

Francis Salway

Chief Executive

London Portfolio

Performance overview

The demand for commercial property investments in London has gathered momentum over the Half Year, fuelled by strong buying interest from overseas investors. A combination of the substantial fall in values from the peak, currency movements and the transparency of the market have made London one of the preferred locations for global investors. Occupier markets have encountered continued downward pressure on rental values, although we have seen an encouraging improvement in levels of take up of offices in the City market since the middle of the summer.

The revaluation of our London Portfolio resulted in a positive valuation surplus of 0.5% for the six-month period overall, with West End offices up 2.3%, City offices down 2.0% and Central London retail down 1.7%. Over the same period, rental values in our like-for-like portfolio increased by 2.0% for Central London retail, but decreased by 9.5% for City offices and 7.7% for West End offices.

As expected, pre-development sites continued to show greater volatility in valuation movements than investment properties, but overall the valuation change on our pre-development sites at Park House, W1, Selborne House, SW1, Wellington House, SW1, Arundel Great Court, WC2 and 20 Fenchurch Street, EC3, was positive over the six-month period at 6.5%.

On the basis of ungeared total property returns, our London Portfolio outperformed the IPD Quarterly Universe by 3.3%, with London offices ahead by 4.1% over the six months and our London retail underperforming by 2.9%.

Voids across our London Portfolio decreased from 7.2% in March 2009 to 5.1% in September 2009, with the decrease primarily attributable to properties being prepared for development. It continues to be the case that the high quality of our tenant base in London has ensured that units in administration are at an extremely low level at 0.3% (31 March 2009: 1.1%).

Rental income

Gross rental income of the London Portfolio declined by £12.0m as set out in the table below.

Table 1: Gross rental income - London Portfolio
30 September 2009 30 September 2008 Change
£m £m

£m
Like-for-like investment properties 127.4 130.5 (3.1)
Proposed development properties 3.4 5.3 (1.9)
Completed developments 23.7 19.7 4.0
Purchases since 1 April 2008 4.4 1.0 3.4
Sales since 1 April 2008 6.5 20.7 (14.2)
Ongoing developments 0.3 0.5 (0.2)
Gross rental income(1) 165.7 177.7 (12.0)

(1) Includes properties treated as finance leases. The income of these properties for the six months to 30 September 2009 was £1.9m (30 September 2008: £2.9m)

The decline in gross rental income compared to the same period last year is mainly attributable to our sales programme, which resulted in a decline in rental income of £14.2m. In addition, our gross rental income on like-for-like properties reduced by £3.1m mainly due to voids following lease expiries at Eastbourne Terrace, W2, and Portland House, SW1. These reductions were partially offset by acquisitions, and by a £4.0m increase in rental income as a result of completed developments, in particular New Street Square, EC4, and Queen Anne's Gate, SW1.

Sales

During the Half Year, we successfully completed our planned programme of asset sales. Sales totalled £296.3m and, on average, were at 2.1% below the 31 March 2009 valuation (before disposal costs) and showed an average income yield of 8.1%.

All of the properties were acquired by overseas investors, with the largest transaction being Portman House in Oxford Street, W1, which was sold for £155.0m. Portman House provides approximately 4,200 sq m of retail and just under 9,500 sq m of offices, with the offices being let on leases with between three and seven years to expiry and with passing rents in the range of £533 to £861 per sq m (£49 to £80 per sq ft). Other asset disposals were 22 Kingsway, WC2, 98 Theobald's Road, WC1, 40/50 Eastbourne Terrace, W2 and Sardinia House, WC2.

Lettings

In line with the long-term planning of our development programme, we have had very little completed space coming onto the market during the period. During the Half Year, development completions totalled just 4,470 sq m and related entirely to our development at 30 Eastbourne Terrace in Paddington, which was completed in May 2009.

Successful leasing activity during the period included:

This 14,820 sq m office refurbishment was completed in October 2008. We have made good progress on leasing and the building is now 52% let or in solicitors hands (31 March 2009: 9%)

This 4,470 sq m office refurbishment was completed in May 2009, and we have agreed terms to let 27% of the space in two separate transactions.

In the Half Year we completed 2,780 sq m of new lettings, which takes the retail element of this scheme near to full occupancy and leaves just 2,170 sq m of offices still to let.

As we have relatively little development floorspace available to let, it is an investment property which generated our largest letting over the period. In August 2009, together with The Cadillac Fairview Corporation Limited, co-owners of Thomas More Square, E1, we completed a letting of 17,820 sq m of office and supporting space to News International for a term of a minimum of five years and at a rent of £4.2m per annum. This is the largest letting of second-hand space secured in the London office market since 2003.

Development and planning

Our next major development completion is One New Change, EC4, which lies adjacent to St Paul's Cathedral in the City. Here we pre-let approximately one third of the offices in September 2007 and have now let or agreed terms on 52% of the retail space. Confirmed tenants include H&M, Hobbs, Links of London, Marks & Spencer, Reiss, Topshop and Wasabi. In July of this year we made a decision to push forward quickly with retail lettings while taking a more measured approach on office lettings. We believe the exceptional quality and unique location of this development will attract strong interest from office occupiers as we near completion and as the momentum of the London offices market rebuilds.

Looking to the future, we expect positive rental growth to emerge first in the West End office market, and we plan to be one of the first to start large-scale development in this market. We have obtained construction tender prices for three West End developments, where we are likely to commence construction in 2010:

This site covers an entire city block of almost half a hectare on a prime Oxford Street location near Marble Arch. It will provide exceptional retail, office and residential space.

The current Selborne House is an outdated 1960s office building. This will be replaced by a high-quality building that will create premium office accommodation, together with street-level shops and restaurants.

The new Wellington House will be a residential development providing 59 flats, and is intended to complement the traditional London red-brick mansion blocks of Victoria.

Our expected completion date for these developments is late 2012 or early 2013.

We have continued to identify opportunities to create value through our planning expertise, and one example of this is City Forum, N1. Here, Islington Council has granted planning consent for a residential-led scheme of 100,000 sq m, which will establish a mixed-use development on a 1.9 hectare site in Islington.

We have also obtained planning consent on appeal for our mixed office, hotel and residential development of 61,890 sq m at Arundel Great Court, Aldwych, WC2. We have secured income from the existing buildings on the site until late 2012 so that this is a potential medium-term development opportunity.

At Ebbsfleet Valley in Kent, we have very little residential development currently under way. All 104 completed units have now been sold and, on the small phase of 58 units currently under construction, we have already exchanged contracts for sale on 67% of the units. Further phases of flats and houses to be delivered in the short term at Springhead Park will likewise be sized to meet levels of demand.

Looking ahead

As a leading global financial centre, London continues to be a magnet for international businesses, and this is reflected in the number of major office lettings concluded in recent months. We do not expect further material increases in vacancy rates in the short term and, with limited new developments being started, vacancy levels will begin to reduce as the economy recovers. Against this backdrop, a high proportion of the new capital we invest in London is likely to be allocated to development projects; these can be commenced now for delivery, in some three years' time, into improved occupier markets with the prospect of rising rents.

We outline our development pipeline in Table 2.

Table 2: London development pipeline at 30 September 2009
Description of use Ownership interest % Size Planning status Letting status % Net income/ ERV Estimated/ actual Total development Forecast total
sq m £m completion date costs to date development cost
£m £m

Property Developments, let and transferred or sold
New Street Square, EC4 Office 100 62,340 96 32 May 2008 378 378
Retail 2,980 86

Developments completed
Dashwood House, EC2 Office 100 14,110 25 7 Oct 2008 113 113
Retail 710 100
30 Eastbourne Terrace, W2 Office 100 4,470 - 2 May 2009 30 33

Developments approved and in progress
One New Change, EC4 Office 100 30,840 41 27 Sept 2010 336 541
Retail 19,900 27

Proposed developments
Park House, W1 Office 100 15,430 PR n/a n/a 2012 n/a n/a
Retail 8,140
Residential 5,380
Wellington House, SW1 Retail 100 250 PR n/a n/a 2013 n/a n/a
Residential 5,650
Selborne House, SW1 Office 100 23,950 PR n/a n/a 2013 n/a n/a
Retail 1,540
20 Fenchurch Street, EC3 Office 100 61,660 PR n/a n/a 2014 n/a n/a
Retail 2,130
Arundel Great Court & Howard Office 100 36,750 PA* n/a n/a 2016 n/a n/a

Hotel, WC2
Retail 2,470
Residential 22,670

Floor areas shown above represent the full scheme whereas the cost represents our share of costs. Letting % is measured by ERV and shows letting status at 30 September 2009. Trading property development schemes are excluded from the development pipeline. Cost figures for proposed schemes are not given as these could still be subject to material change prior to final approval.

Planning status for proposed developments

PR - Planning Received

PA - Planning Appeal

Total development cost (£m)

Total development cost refers to the book value of the land at the commencement of the project, the estimated capital expenditure required to develop the scheme from the start of the financial year in which the property is added to our development programme, together with finance charges less residential costs (£nil across all categories of development).

Net income/ERV

Net income/ERV represents headline annual rent payable on let units plus ERV at 30 September 2009 on unlet units.

Retail Portfolio

Performance overview

During the first few months of our Half Year, retail property values continued to weaken before we then began to see an improvement in investor demand for shopping centres and, particularly, for retail warehouses. Although retail leasing conditions continue to reflect pressures in the wider economic environment, we have benefited from a clear strategy on leasing and from our deep relationships with retailers. As a result, our response to these conditions has proved effective in securing new lettings.

The revaluation of our Retail Portfolio resulted in a valuation deficit for the six-month period of 3.6% overall, with shopping centres and shops down 5.9% and retail warehouses and food stores down 0.1%. Decreases in rental values on our like-for-like portfolio over the six months were 6.0% for our shopping centres and shops and 4.5% for our retail warehouses and food stores.

On the basis of ungeared total property returns, our Retail Portfolio outperformed the IPD Quarterly Universe by 1.7%, with shopping centres ahead by 2.3% over the six months and our retail warehouses underperforming slightly by 0.5%.

Voids across our like-for-like Retail Portfolio remained static at September 2009 at 4.8% compared to March 2009 despite units previously in administration being transferred to void status. Within the 4.8% of void space, 1.3% is subject to temporary lettings, and on a further 1.0% terms have been agreed for re-letting. We have reduced the proportion of units in administration from 5.6% in March 2009 to 3.7% in September 2009, as a result of good leasing progress which we attribute to our excellent relationships with a wide range of retailers. Our response to the MFI insolvency illustrates the benefits of our scale together with the quality of our relationships with retailers. We were left with eight MFI stores but by the end of the Half Year we had let or agreed to let four, one has been sold, and we are planning to develop another. That leaves just two stores outstanding.

Rental income

Gross rental income of the Retail Portfolio declined by £12.6m as set out in the table below.

Table 3: Gross rental income - Retail Portfolio
30 September 2009 30 September 2008 Change
£m £m £m
Like-for-like investment properties 141.7 152.9 (11.2)
Proposed development properties 3.5 3.6 (0.1)
Purchases since 1 April 2008 1.1 0.6 0.5
Sales since 1 April 2008 13.1 25.2 (12.1)
Ongoing developments 11.2 0.9 10.3
Gross rental income(1) 170.6 183.2 (12.6)

(1) Includes properties treated as finance leases. The income of these properties for the six months to 30 September 2009 was £1.4m (30 September 2008: £1.6m)

The decline in gross rental income from like-for-like investment properties, compared to the same period last year, is attributable to the failure of a number of retailers in the second half of our last financial year. In addition, our sales programme resulted in a decline in gross rental income of £12.1m compared to the prior period, although this was substantially offset by increased income from our developments in Bristol and Livingston, which opened in September and October 2008 respectively.

Asset sales

In line with our plans, we continued to make asset disposals. The assets we chose to sell were those that provided us with fewer opportunities to create value through development and active management, whereas the funds generated have increased our flexibility to exploit future opportunities. Asset sales from the Retail Portfolio totalled £469.2m. On average, the sales were at 0.9% above the 31 March 2009 valuation (before disposal costs) and showed an average income yield of 8.0%.

The largest disposal related to our one third ownership in the Bullring, Birmingham, which was sold to the Future Fund of Australia for £209.8m in September 2009. The sale price reflected a net yield of 6.9% after settlement of outstanding rent reviews. The centre has performed well for us but it was an unusual asset within our portfolio because of our lack of management control and the constraints on raising debt against the asset as a result of the partnership structure. Other asset disposals were retail warehouse parks and foodstores in Bury, Melton Mowbray, Plymouth, Liverpool, Edmonton, Swansea and Chester together with a shopping centre in Maidstone.

Development and asset management initiatives

On 22 October 2009, we opened the St David's Shopping Centre in Cardiff with our partners, Capital Shopping Centres PLC. The centre is anchored by a new John Lewis department store, the first in Wales and the largest outside London. The centre also benefits from linking into the existing Debenhams and Marks & Spencer stores, which have been refitted to coincide with the opening of the new scheme. The centre is now 63% let or in solicitors' hands by income, and has brought 25 new retailers to Wales.

In May 2009, John Lewis confirmed that our Commerce Centre in Poole, Dorset, would be the first location for its new 'John Lewis at home' format. In trusting us to deliver this new format, John Lewis has underlined the strength of our relationship. The new unit sells the retailer's home and electrical goods along with additional features, including customer collection, a gift-list service and a customer caf, providing a total floor area of 5,110 sq m.

During the six months we also confirmed a series of new lettings for our Livingston and Dundee retail parks, achieving rental levels of between £215 and £248 per sq m (£20 and £23 per sq ft). At Almondvale retail park in Livingston, Currys will open a 1,860 sq m PCWorld/Currys concept store, double the size of its current unit and the first of its kind in Scotland. Dreams, the leading national bed specialist, has signed two lettings, one for the existing 930sq m Currys unit at Almondvale and another for a 930 sq m store at Kingsway West retail park in Dundee. Meanwhile, at the Bon Accord shopping centre in Aberdeen, Next has opened a new 5,010 sq m store and we have seen new openings from Topshop Topman, River Island, Kurt Geiger, Phase 8, Coast and other fashion retailers.

Early in 2009 we worked with others in our industry to develop a 'Ten Point Plan', an initiative to help landlords and occupiers develop new ways to reduce service charges and other costs. We created a combined task force of both our own and retailers' employees to look at potential savings within our own portfolio, which visited a number of our shopping centres during the Half Year. Retailers have seen material benefits as a result of this initiative.

We continue to have constructive discussions with retailers around other key issues such as monthly rents and the structure of leases. We have developed our new 'Clearlet' leases in conjunction with retailers, and we intend to introduce more of these on new lettings to help speed up and simplify the leasing process. Clearlet leases are straightforward contracts offering monthly rents and deemed approvals for assignment, sub-letting and alterations if responses are not provided within fixed timescales. This is part of a wider set of initiatives to become more aligned with our retailers and includes the sharing of turnover information, which will help us to manage shopping centres to their maximum potential.

During the Half Year, we also developed our innovative Brand Empire initiative, which sets out to attract overseas retailers to our UK shopping centres. This is an example of our teams engaging with brands and retailers at all levels to find new ways to enhance the vibrancy of retail environments despite tough market conditions. We are in active discussions with several potential entrants to the UK market.

Development and planning

In December 2008, we obtained planning consent to provide 54,000 sq m of new retail space at our Trinity Leeds shopping centre development; this will be integrated into our existing shopping centre of 38,900 sq m, which will also undergo refurbishment. We have made good progress in discussions with retailers to take us towards our target for pre-lettings before starting the development.

We have obtained consent for a 8,360 sq m Sainsbury's store at Almondvale South retail park, Livingston. The proposed Sainsbury's store would take over the units currently occupied by Homebase and Argos, with Argos relocating to new premises at Almondvale retail park previously occupied by Land of Leather.

During the year we also achieved planning permission for a food store at the Greyhound retail park, Chester, and a 6,500 sq m application was recently submitted for a food store at our Northampton retail park. We have submitted further applications for food stores in our retail warehouse portfolio and related to our Harvest Limited Partnership joint venture with J Sainsbury. These applications reflect the relative buoyancy of the food sector and underline our ability to identify sites with excellent development potential despite an adverse economic environment.

Looking ahead

We expect to see a continued strengthening of buying interest for retail investment property despite the backdrop of some further downward pressure on rents. It is also realistic to assume that there will be more insolvencies in the sector, but we expect the level of units in administration in our portfolio to remain stable or to reduce slightly as new lettings offset further insolvencies. Over the next 24 months, the outlook for rental recovery will become polarised across UK towns and cities according to the level of vacancies and the attraction of individual assets.

In response, we intend to deploy our capital to acquire retail assets requiring intensive management. We will also invest, selectively, in the development of shopping centres in the strongest regional cities. And, we will look to deploy capital in smaller out-of-town developments where we can capitalise on our strong relationship with retailers to secure key pre-lettings.

We outline our development pipeline in Table 4.

Table 4: Retail development pipeline at 30 September 2009
Description of use Ownership interest % Size Planning status Letting status % Net income/ ERV Estimated/ actual Total development Forecast total
sq m £m completion date costs to date development cost
£m £m

Property

Developments completed
Willow Place, Corby Retail 100 16,260 83 2 Oct 2007 42 42
Cabot Circus, Bristol - The Retail 50 83,610 90 17 Sept 2008 257 257

Bristol Alliance - a limited partnership with Hammerson PLC
Leisure 9,000
Residential 18,740
The Elements, Livingston Retail 100 32,000 78 8 Oct 2008 166 166
Leisure 5,670

Developments approved and those in progress
St David's, Cardiff - St Retail/leisure 50 89,900 50 15 Oct 2009 292 337

David's Partnership - a limited partnership with Capital Shopping Centres PLC
Residential 16,500

Proposed developments
Trinity Quarter, Leeds Retail 75 92,900 PR n/a n/a 2012 n/a n/a

Floor areas shown above represent the full scheme whereas the cost represents our share of costs. Letting % is measured by ERV and shows letting status at 30 September 2009. Trading property development schemes are excluded from the development pipeline. Cost figures for proposed schemes are not given as these could still be subject to material change prior to final approval.

Planning status for proposed developments

PR - Planning Received

Total development cost (£m)

Total development cost refers to the book value of the land at the commencement of the project, the estimated capital expenditure required to develop the scheme from the start of the financial year in which the property is added to our development programme, together with finance charges, less residential costs (totalling £32m across all categories of development).

Net income/ERV

Net income/ERV represents headline annual rent payable on let units plus ERV at 30 September 2009 on unlet units.

Financial review

Headline results

The Group's loss before tax was £4.6m, compared to a loss of £1,621.2m for the six months ended 30 September 2008. Revenue profit, our measure of underlying profit before tax, reduced by 15.4% from £151.8m to £128.4m, mainly as a result of lower rental income due to the sale of properties.

Basic earnings per share was 1.58p compared to a loss per share of 314.39p last year, restated for the Rights Issue and the reclassification of Trillium to discontinued operations. Adjusted diluted earnings per share was 16.89p (2008: 29.51p), down 42.8% on the comparable period.

The combined investment portfolio (including joint ventures) decreased in value from £9,407.0m to £8,700.8m on the back of sales of £765.5m and a valuation deficit of £117.8m or 1.4%. Net assets per share decreased by 17p from 639p at the end of March 2009 to 622p in September 2009, with adjusted diluted net assets per share decreasing by 4.7% over the same period from 593p to 565p.

Valuation deficit

The main reason behind the reduction in the Group's loss before tax to £4.6m (six months ended 30 September 2008: loss of £1,621.2m) was a significantly lower valuation deficit on the investment portfolio. The valuation deficit of £117.8m represented a 1.4% reduction in market values over the six months, compared with a 12.5% reduction for the comparable period last year.

Revenue profit

Revenue profit is our measure of the underlying pre-tax profit of the Group, which we use internally to assess our performance. It includes the pre-tax results of our joint ventures but excludes capital and other one-off items.

Table 5 shows the composition of our revenue profit including the contributions from London and Retail.

Table 5: Revenue profit
Retail Portfolio London Portfolio 30 September 2009 Retail London Portfolio 30 September 2008
£m £m £m Portfolio £m £m
£m
Gross rental income (1) 170.6 165.7 336.3 183.2 177.7 360.9
Direct property related income 4.6 10.9 15.5 4.5 12.0 16.5
Rents payable (7.0) (3.7) (10.7) (6.1) (2.3) (8.4)
Rental income 168.2 172.9 341.1 181.6 187.4 369.0
Net service charge expense (2.7) (3.0) (5.7) (3.2) (0.5) (3.7)
Direct property expenditure (16.5) (24.3) (40.8) (16.8) (20.5) (37.3)
Indirect costs (18.7) (17.7) (36.4) (20.4) (20.2) (40.6)
Underlying segment operating profit 130.3 127.9 258.2 141.2 146.2 287.4
Unallocated expenses (6.1) (8.0)
Net interest - Group (107.7) (116.2)

(1) Includes finance lease interest.

Revenue profit declined to £128.4m for the six months to 30 September 2009 compared to £151.8m for the prior period, mainly due to a £24.6m reduction in gross rental income. Sales of investment properties accounted for £26.3m of this decline in income, partly offset by increased income of £14.1m from developments. Gross rental income was also affected by the failure of a number of retailers in late 2008 and early 2009, which led to a decline in income on our like-for-like investment portfolio of £14.3m.

Net service charge expense and direct property expenditure increased by £2.0m and £3.5m respectively, driven by increased levels of voids compared with the same period last year. These increases were partly offset by lower indirect costs because of reduced headcount and lower professional fees.

Net interest was £3.9m lower than last year, reflecting lower interest rates, partly offset by a reduction in capitalised interest, following the completion of our schemes in Bristol and Livingston.

Earnings per share

Basic earnings per share was 1.58p compared to a loss per share from continuing operations of 314.39p in the prior period. The improvement was predominantly due to the significantly lower valuation deficit on the investment property portfolio together with an income tax credit of £17.8m this period, compared to a £2.7m credit in the first six months last year.

In the same way that we adjust profit before tax to remove capital and one-off items to give revenue profit, we also report an adjusted earnings per share figure. Adjusted diluted earnings per share from continuing operations reduced from 29.51p per share for the six months ended 30 September 2008 to 16.89p per share for the current period. This reduction was attributable to lower revenue profit for the reasons described above as well as an increase in the average number of issued shares following our Rights Issue in March 2009.

During the period under review, the Rights Issue proceeds of £756m were held as cash while we waited for property markets to stabilise. As a result of very low prevailing interest rates, on average 0.8%, the interest received on the Rights Issue proceeds was low, leading to a dilution in earnings per share.

Total dividend

We will be paying a second quarterly dividend of 7.0p per share on 15 January 2010 to shareholders on the Register at 11 December 2009. Taken together with the first quarterly dividend of 7.0p, paid on 23 October 2009, this makes a first half dividend of 14.0p per share (2008: 29.8p). This is in line with guidance given at the time of our Rights Issue and in our 2009 Annual Report. For our second interim dividend of 7.0p, it is our intention to offer shareholders the opportunity to receive this in the form of Land Securities shares as opposed to cash (a scrip dividend alternative). Further information relating to the scrip dividend will be sent to shareholders shortly. If the scrip dividend alternative is approved by shareholders, we will suspend the current Dividend Re-investment Plan (DRIP).

Net assets

At 30 September 2009, net assets per share were 622p, a decrease of 17p or 2.7% compared with the year ended 31 March 2009. This reduction was primarily due to the valuation deficit.

In common with other property companies, we calculate an adjusted measure of net assets, which we believe better reflects the underlying net assets attributable to shareholders. Our adjusted net assets are lower than our reported net assets primarily due to an adjustment to our debt. Under IFRS we do not show our debt at its nominal value, although we believe it would be more appropriate to do so, and we therefore adjust our net assets accordingly. At 30 September 2009, adjusted diluted net assets per share were 565p per share, a decrease of 28p or 4.7% from 31 March 2009.

This decline was greater than the reduction in our net assets over the period due to the termination of interest-rate swaps. Adjusted net assets ignores the fair value movement on interest-rate swaps, only recognising the impact of realised gains or losses on these instruments. As explained in more detail below, during the period we terminated a number of interest-rate swaps, resulting in a cash payment of £74.5m. This realised loss is reflected in the reduction in adjusted net assets during the period.

Table 6 summarises the main differences between net assets and our adjusted measure together with the key movements over the period.

Table 6: Net assets attributable to owners of the Parent
Six months ended 30 Year ended 31 March 2009
September 2009 £m
£m
Net assets at the beginning of 4,823.5 9,582.9

the period
Adjusted earnings 127.6 325.0
Valuation deficits on (117.8) (4,743.7)

investment properties
Impairment of development land (12.2) (104.3)

and infrastructure
Losses on disposals of (10.3) (127.9)

investment properties
Other 24.6 (119.5)
Profit/(loss) after tax 11.9 (4,770.4)

attributable to owners of the Parent
Loss on discontinued - (420.9)

operations
Dividends paid (129.8) (302.4)
Rights Issue - 755.7
Other reserve movements (3.2) (21.4)
Net assets at the end of the 4,702.4 4,823.5

period
Mark-to-market on 60.9 150.2

interest-rate swaps
Debt adjusted to nominal value (493.4) (499.8)
Adjusted net assets at the end 4,269.9 4,473.9

of the period

Net pension deficit

The Group operates a defined benefit pension scheme which is closed to new members. At 30 September 2009 the scheme was in a net deficit position of £7.5m compared to a net surplus of £3.0m at 31 March 2009. Although the scheme's assets performed strongly over the period, a significant reduction in corporate bond yields reduced the discount rate from 7.0% to 5.5%, which in turn increased the scheme's liabilities and resulted in the £10.5m change in the position since the beginning of the financial year.

Cash flow, net debt and gearing

Our net debt at 30 September 2009 was £3,428.6m, £495.0m lower than the position at 31 March 2009. This reduction was primarily due to proceeds received from the disposal of investment properties (£511.6m) and the sale of our joint venture interest in the Bullring, Birmingham (£209.8m). Capital expenditure during the period totalled £112.1m, of which £45.3m was spent on our development at One New Change, London EC4. We also invested a net £38.1m in our joint ventures, consisting mainly of capital expenditure of £66.6m on our major developments in Cardiff and Bristol, offset by drawings of £30.5m on a new stand-alone facility within our Cardiff joint venture.

Our interest cover, excluding our share of joint ventures, is virtually unchanged from 1.89 times for the year ended 31 March 2009 to 1.88 times for the six months ended 30 September 2009. Under the rules of the REIT regime, we need to maintain an interest cover in the exempt business of at least 1.25 times to avoid paying tax. As calculated under the REIT regulations, our interest cover of the exempt business for the six months ended 30 September 2009 was 1.82 times.

Table 7: Cash flow and net debt
Six months ended 30 Year ended 31 March
September 2009 2009
£m £m
Operating cash inflow after 83.4 367.2

interest and tax
Dividends paid (129.8) (302.4)

Non-current assets:
Acquisitions (34.2) (86.1)
Disposals 511.6 823.0
Divestment of joint ventures 209.8 -
Capital expenditure (112.1) (429.8)
575.1 307.1

Trillium disposal:
Gross proceeds - 444.0
Net debt divested - 48.6
- 492.6
Loans advanced to third - (50.0)

parties
Receipts from the disposal - 113.5

group (part of Trillium's PPP activities)
Joint ventures and associates (38.1) (117.0)
Proceeds from the Rights Issue - 755.7
Fair value movement on 10.9 (105.6)

interest-rate swaps
Other movements (6.5) (0.2)
Decrease in net debt 495.0 1,460.9
Net debt at the beginning of (3,923.6) (5,384.5)

the period
Net debt at the end of the (3,428.6) (3,923.6)

period

The reduction in net debt has contributed to the fall in gearing from 81.4% at 31 March 2009 to 72.9% at 30 September 2009. Details of the Group's gearing are set out in Table 8, which also shows the impact of joint venture debt, although the lenders to our joint ventures have no recourse to the Group for repayment.

Adjusted gearing, which recognises the nominal value of our debt, reduced from 96.4% at 31 March 2009 to 91.3% at 30 September 2009. Adjusted gearing including our share of joint ventures also reduced, declining from 105.9% to 102.0% over the same period. In common with other property companies, we also show our Group LTV ratio.

Table 8: Gearing
30 September 2009 31 March
% 2009
%
Gearing 72.9 81.4
Adjusted gearing* 91.3 96.4
Adjusted gearing* - as above plus notional share 102.0 105.9

of joint venture debt
Security Group LTV 54.9 76.7
Group LTV - including notional share of joint 50.8 52.0

venture debt

Financing and capital

Our financing strategy and the structure of our main funding vehicle, the Security Group, are described in detail on page 22 of our 2009 Annual Report. As a result of our decision in January 2009 to draw down £1.1bn of available credit facilities, the Security Group entered a more restrictive operating environment (Tier 3) following formal submission of our valuation report as at 31 March 2009. The priority for the period under review was to focus on cash flows, extending existing facilities and raising new finance. In this regard, we have had considerable success.

We raised £360.3m of long-term debt against a government lease on Queen Anne's Gate, London SW1 and secured £290.0m of five year joint venture finance for the St David's Centre, Cardiff. Since the end of September 2009, we have extended £650.0m of bank bilateral facilities were anticipated to be repaid in 2010 to the financial year ending March 2015. We are also well advanced in discussions with other banks about entering into new agreements.

As a result of these achievements and the cash raised from investment property sales, we have repaid £1.8bn of bank facilities and the Security Group has returned to a normal operating environment. In addition, our debt structure has had its AA credit rating reaffirmed allowing us to raise finance at a competitive rate.

The Group still had £637.9m of cash investments (including restricted cash of £119.0m) at the end of September, £360.0m of which has subsequently been used to repay outstanding short-term bank debt.

The weighted average life of the Group's debt is 11.9 years (31 March 2009: 9.7 years) with a weighted average cost of debt of 5.0% at 30 September 2009, although this has subsequently risen to around 5.3% following the further repayment of £360.0m of short-term borrowings in November 2009.

Hedging

We use derivative products to manage our interest-rate exposure, and have a hedging policy which requires at least 80% of our existing debt plus our net committed capital expenditure to be at fixed interest rates for the coming five years. Specific hedges are also used in geared developments or joint ventures to fix the interest exposure on limited-recourse debt.

At 31 March 2009 the Group was slightly over-hedged at 107% principally due to the Rights Issue proceeds which were received in late March 2009. During the period, this over-hedging increased as a result of our investment property sales and funding initiatives. Corrective action to eliminate the over-hedged position was taken during September 2009 when £2.2bn of interest-rate swaps were closed out resulting in a £74.5m cash payment. As a result, Group debt is now 97.8% fixed.

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 period of £17.8m (2008: £2.7m credit) comprises a prior year corporation tax credit of £20.0m following resolution of a number of prior year issues, and a net deferred tax charge of £2.2m, including the write off of deferred tax assets no longer considered recoverable. The tax credit for the period has not been recognised as part of our adjusted earnings as it is non-recurring and relates to the period before we became a REIT.

Principal risks and uncertainties

The principal risks facing the Group for the remaining months of the financial year are broadly consistent with those outlined on pages 30 to 32 of the 2009 Annual Report. The risks include property investment risks (falling property values, illiquidity of assets and tenant failure) and financial risks (including liquidity risk due to unavailability of credit facilities).

While these risks remain relevant for the rest of this financial year and beyond, our new and extended bank facilities, as well as our return to a normal operating environment under our Security Group debt structure, have helped to mitigate liquidity risk. The financial and property risks, which are closely tied to property values and property market liquidity, have also reduced since 31 March 2009 as the overall trend in property values since 31 March 2009 has stabilised.

Statement of Directors' responsibilities

The Directors confirm that this condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the Half-yearly Report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

The Directors of Land Securities Group PLC as at the date of this announcement are as set out below:

The Board of Directors

Alison Carnwath*, Chairman

Francis Salway, Chief Executive

David Rough*

Martin Greenslade

Bo Lerenius*

Sir Stuart Rose*

Richard Akers

Sir Christopher Bland*

Kevin O'Byrne*

Chris Bartram*

By order of the Board

Peter Dudgeon

Secretary

17 November 2009

Independent review report to Land Securities Group PLC

Introduction

We have been engaged by the Company to review the condensed set of consolidated interim financial information in the Half-yearly Report for the six months ended 30 September 2009, which comprises the unaudited consolidated income statement, unaudited consolidated statement of comprehensive income, unaudited consolidated balance sheet, unaudited consolidated statement of changes in equity, unaudited consolidated statement of cash flows and related notes. We have read the other information contained in the Half-yearly Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of consolidated interim financial information.

Directors' responsibilities

The Half-yearly Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half-yearly Report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of consolidated interim financial information included in the Half-yearly Report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of consolidated interim financial information in the Half-yearly Report based on our review. This report, including the conclusion, has been prepared for and only for the Company's members as a Body for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of consolidated interim financial information in the Half-yearly Report for the six months ended 30 September 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP

Chartered Accountants London

17 November 2009

Notes:

1. The maintenance and integrity of the Land Securities Group PLC website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the Half-yearly Report since it was initially presented on the website.

2. Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.

Financial statements

Unaudited consolidated income statement for the six months ended 30 September 2009
Six months ended Year to
30 September 31 March

Restated(1)
Notes £m £m £m

Continuing operations
Group revenue (2) 4 418.7 405.4 821.2
Costs (200.3) (164.6) (326.4)
218.4 240.8 494.8
Loss on disposal of investment properties (18.6) (0.7) (130.8)
Net deficit on revaluation of investment properties (89.8) (1,551.3) (4,113.4)
Impairment of trading properties (9.3) - (92.3)
Operating profit/(loss) 3 100.7 (1,311.2) (3,841.7)
Interest expense 5 (134.2) (139.0) (262.9)
Interest income 5 19.8 16.3 32.5
Fair value movement on interest-rate swaps 5 10.9 4.7 (102.1)
(2.8) (1,429.2) (4,174.2)
Share of the loss of joint ventures (post-tax) 10 (1.8) (192.0) (599.0)
Loss before tax (4.6) (1,621.2) (4,773.2)
Income tax 17.8 2.7 (0.5)
Profit/(loss) for the period from continuing operations 13.2 (1,618.5) (4,773.7)
Discontinued operations - (106.9) (420.9)
Profit/(loss) for the period 13.2 (1,725.4) (5,194.6)

Attributable to:
Owners of the Parent 11.9 (1,725.4) (5,191.3)
Minority interests 1.3 - (3.3)
Profit/(loss) for the period 13.2 (1,725.4) (5,194.6)

Earnings/(loss) per share attributable to the owners of the Parent (pence)(3)(4)
Basic earnings/(loss) per 7 1.58 (335.16) (999.04)

share
of which from: continuing operations 7 1.58 (314.39) (918.04)
of which from: discontinued operations 7 - (20.77) (81.00)
Diluted earnings/(loss) per share 7 1.58 (335.16) (999.04)
of which from: continuing operations 7 1.58 (314.39) (918.04)
of which from: discontinued operations 7 - (20.77) (81.00)

(1) Restated to reclassify the results of Trillium from continuing operations to discontinued operations.

(2) Group revenue excludes the share of joint ventures' income of £56.0m (30 September 2008: £39.5m, 31 March 2009: £104.8m).

(3) Adjusted earnings per share from continuing operations is given in note 7.
(4) The earnings per share figures for the six months ended 30 September 2008 have been restated to reflect the bonus element inherent in the Rights Issue that was approved on 9 March 2009.

Unaudited consolidated statement of comprehensive income for the six months ended 30 September 2009
Six months ended 30 September Year to 31 March

£m £m £m
Profit/(loss) for the period 13.2 (1,725.4) (5,194.6)

Other comprehensive income
Actuarial losses on defined (11.7) (10.2) (11.1)

benefit pension schemes
Deferred tax credit on 1.9 - 0.6

actuarial losses on defined benefit pension schemes
Fair value movement on cash - (1.9) (0.2)

flow hedges taken to equity - Group

the period
Total comprehensive income for 6.1 (1,736.1) (5,226.6)

the period Attributable to:
Owners of the Parent 4.8 (1,736.1) (5,223.3)
Minority interests 1.3 - (3.3)
Total comprehensive income for 6.1 (1,736.1) (5,226.6)

the period

Unaudited consolidated balance sheet at 30 September 2009
30 September 31 March

Notes £m £m

Non-current assets
Investment properties 9 7,380.2 7,929.4
Other property, plant and equipment 12.8 14.3
Net investment in finance leases 115.8 116.3
Loans to third parties 50.0 50.0
Investments in joint ventures 10 763.4 930.8
Pension surplus - 3.0
Deferred tax assets - 1.9
Total non-current assets 8,322.2 9,045.7

Current assets
Trading properties and long-term development 11 88.8 94.9

contracts
Derivative financial instruments 14 1.2 -
Trade and other receivables 473.2 392.1
Monies held in restricted accounts and 12 119.0 29.9

deposits
Cash and cash equivalents 13 518.9 1,609.1
Total current assets 1,201.1 2,126.0
Total assets 9,523.3 11,171.7

Current liabilities
Short-term borrowings and overdrafts 15 (7.8) (1.1)
Derivative financial instruments 14 (27.8) (112.0)
Trade and other payables (629.6) (625.8)
Current tax liabilities (118.5) (161.5)
Total current liabilities (783.7) (900.4)

Non-current liabilities
Borrowings 15 (4,032.1) (5,449.5)
Pension deficit (7.5) -
Deferred tax liabilities - (1.6)
Total non-current liabilities (4,039.6) (5,451.1)
Total liabilities (4,823.3) (6,351.5)
Net assets 4,700.0 4,820.2

Equity Capital and reserves attributable to the owners of the Parent
Ordinary shares 76.2 76.2
Share premium 785.2 785.2
Capital redemption reserve 30.5 30.5
Share-based payments 4.2 8.1
Retained earnings 3,814.5 3,935.9
Own shares (8.2) (12.4)
Equity attributable to the owners of the 4,702.4 4,823.5

Parent
Minority interest (2.4) (3.3)
Total equity 4,700.0 4,820.2

Unaudited consolidated statement of changes in equity at 30 September 2009
Attributable to the owners of the Parent
Ordinary shares Share premium Capital redemption Share-based payments Retained earnings Own shares Total Minority interest Total
reserve equity
£m £m £m £m £m £m £m £m £m
At 1 April 2008 47.1 56.6 30.5 11.3 9,459.7 (22.3) 9,582.9 - 9,582.9
Loss for the financial period - - - - (1,725.4) - (1,725.4) - (1,725.4)

Other comprehensive income:
Actuarial loss on pension - - - - (10.2) - (10.2) - (10.2)

scheme
Fair value movement on cash - - - - (0.5) - (0.5) - (0.5)

flow hedges taken to equity
Total comprehensive income for - - - - (1,736.1) - (1,736.1) - (1,736.1)

the period ended 30 September

Transactions with owners:
Exercise of options - 1.7 - - - - 1.7 - 1.7
Fair value of share-based - - - 4.4 - - 4.4 - 4.4

payments
Release on exercise/forfeiture - - - (4.3) 4.3 - - - -

of share options
Dividends paid to owners of - - - - (148.8) - (148.8) - (148.8)

the company
Transfer of shares to - - - - (4.3) 4.3 - - -

employees on exercise of share schemes
Total transactions with owners - 1.7 - 0.1 (148.8) 4.3 (142.7) - (142.7)
At 30 September 2008 47.1 58.3 30.5 11.4 7,574.8 (18.0) 7,704.1 - 7,704.1
Loss for the financial period - - - - (3,465.9) - (3,465.9) (3.3) (3,469.2)

Other comprehensive income:
Actuarial loss on pension - - - - (0.3) - (0.3) - (0.3)

scheme
Fair value movement on cash - - - - (21.0) - (21.0) - (21.0)

flow hedges taken to equity
Total comprehensive income for - - - - (3,487.2) - (3,487.2) (3.3) (3,490.5)

the period ended 31 March 2009 Transactions with owners:
Rights Issue 29.1 726.6 - - - - 755.7 - 755.7
Exercise of options - 0.3 - - - - 0.3 - 0.3
Fair value of share-based - - - 4.2 - - 4.2 - 4.2

payments
Release on exercise/forfeiture - - - (7.5) 7.5 - - - -

of share options
Dividends paid to owners of - - - - (153.6) - (153.6) - (153.6)

the company
Transfer of shares to - - - - (5.6) 5.6 - - -

employees on exercise of share schemes
Total transactions with owners 29.1 726.9 - (3.3) (151.7) 5.6 606.6 - 606.6
At 31 March 2009 76.2 785.2 30.5 8.1 3,935.9 (12.4) 4,823.5 (3.3) 4,820.2
Profit for the financial - - - - 11.9 - 11.9 1.3 13.2

period Other comprehensive income:
Actuarial loss on pension - - - - (9.8) - (9.8) - (9.8)

scheme
Fair value movement on cash - - - - 2.7 - 2.7 - 2.7

flow hedges taken to equity
Total comprehensive income for - - - - 4.8 - 4.8 1.3 6.1

the period ended 30 September

Transactions with owners:
Fair value of share-based - - - 3.9 - - 3.9 - 3.9

payments
Release on exercise/forfeiture - - - (7.8) 7.8 - - - -

of share options
Dividends paid to owners of - - - - (129.8) - (129.8) - (129.8)

the company
Distributions paid to minority - - - - - - - (0.4) (0.4)

interests
Transfer of shares to - - - - (4.2) 4.2 - - -

employees on exercise of share schemes
Total transactions with owners - - - (3.9) (126.2) 4.2 (125.9) (0.4) (126.3)
At 30 September 2009 76.2 785.2 30.5 4.2 3,814.5 (8.2) 4,702.4 (2.4) 4,700.0

Unaudited consolidated statement of cash flows for the six months ended 30 September 2009
Statement of cash flows Six months ended 30 September Year to 31 March

Notes £m £m £m

Net cash generated from operations
Cash generated from operations 16 217.2 247.8 651.3
Interest paid (131.7) (150.3) (283.6)
Interest received 11.2 4.8 10.4
Employer contributions to (2.0) (3.0) (4.2)

pension scheme
Corporation tax paid (11.3) (3.3) (6.7)
Net cash inflow from 83.4 96.0 367.2

operations Cash flows from investing activities
Investment property (111.3) (126.9) (208.6)

development expenditure
Acquisition of investment (34.2) (32.4) (85.3)

properties
Other investment property - (67.4) (174.1)

related expenditure
Acquisition of properties by - (0.8) (0.8)

Trillium
Capital expenditure by - (17.9) (46.5)

Trillium
Capital expenditure on (145.5) (245.4) (515.3)

properties
Disposal of investment 511.6 212.5 792.7

properties
Disposal of operating - 30.5 30.3

properties
Net proceeds/(expenditure) on 366.1 (2.4) 307.7

properties
Net expenditure on other fixed (0.8) (4.7) (0.6)

assets
Net cash inflow/(outflow) from 365.3 (7.1) 307.1

capital expenditure
Receivable finance leases - (20.7) -

acquired
Receipts in respect of 3.5 1.2 11.7

receivable finance leases
Receipts from the disposal of - 103.0 -

discontinued operations
Loans advanced to third - - (50.0)

parties
Investment in joint ventures (1.9) - (21.1)
Divestment of joint ventures 209.8 - -
Net loans (to)/from joint (39.1) 149.5 (117.5)

ventures and cash contributed
Distributions from joint 2.9 13.7 21.6

ventures
Net cash received from - 1.4 113.5

disposal group
Cash proceeds from disposal of - - 392.7

Trillium (net of cash divested)
Net cash received from 540.5 241.0 658.0

investing activities Cash flows from financing activities
Proceeds from Rights Issue - - 755.7
Issue of shares arising from - 1.7 2.0

exercise of share options
Proceeds from new loans (net 363.0 403.4 1,732.6

of finance fees)
Repayment of loans (1,780.1) (603.8) (1,612.0)
Termination of interest-rate (74.5) - -

swaps
Increase in monies held in (89.1) - (29.9)

restricted accounts and deposits
Decrease in finance leases (2.9) (1.1) (9.4)

payable
Dividends paid to owners of (129.8) (148.8) (302.4)

the company
Distributions paid to minority (0.4) - -

interests
Net cash (outflow)/inflow from (1,713.8) (348.6) 536.6

financing activities
(Decrease)/increase in cash (1,089.9) (11.6) 1,561.8

and cash equivalents for the period(1)
Cash and cash equivalents at 1,608.8 47.0 47.0

the beginning of the period(1)
Cash and cash equivalents at 518.9 35.4 1,608.8

the end of the period(1)

(1) Cash and cash equivalents for the purposes of the cash flow statement includes overdrafts.
(2) The Group cash flow statements for the six months ended 30 September 2008 and the year ended 31 March 2009 include the cash flows relating to the Trillium discontinued operations.
Six months ended 30 September Year to
31 March

Notes £m £m £m
Cash and cash equivalents 518.9 35.4 1,608.8

(cash flow statement)
Overdrafts 15 - - 0.3
Cash and cash equivalents 518.9 35.4 1,609.1
(balance sheet)

Notes to the financial statements

1. Basis of preparation

This condensed consolidated interim financial information for the six months ended 30 September 2009 has been prepared on a going concern basis and in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 'Interim financial reporting' as adopted by the European Union.

The condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2009 were approved by the Board of Directors on 12 May 2009 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. The condensed consolidated interim financial information has been reviewed, not audited.

The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 March 2009, which have been prepared in accordance with IFRSs as adopted by the European Union.

As a result of the disposal of Trillium on 12 January 2009, and in compliance with IFRS 5 'Non-current assets held for sale and discontinued operations', the 2008 comparatives, where relevant, have been restated to classify the disposed Trillium operations as 'Discontinued Operations'. In addition, the Accor hotel portfolio, which was previously reported as part of the Trillium business segment and has been retained by the Group, has been classified as 'Retail Portfolio' and the 2008 segmental comparatives have been restated to reflect this classification.

This condensed consolidated interim financial information was approved for issue on 17 November 2009.

2. Accounting policies

Except as described below, the condensed consolidated interim financial information has been prepared on the basis of the accounting policies, significant judgements, key assumptions and estimates as set out in notes 2 and 3 of the Group's Annual Report for the year ended 31 March 2009.

The following Accounting Standards or interpretations are effective for the financial year beginning 1 April 2009 but do not have a material impact on the Group:

The following Accounting Standards or Interpretations are not yet effective and have not been early adopted by the Group:

restated(1)
Income statements Retail Portfolio London Portfolio Total Retail Portfolio London Portfolio Total Retail Portfolio London Portfolio Total
£m £m £m £m £m £m £m £m £m
Rental income 132.6 158.6 291.2 151.3 171.8 323.1 302.8 338.9 641.7
Finance lease interest 1.2 1.9 3.1 1.4 2.9 4.3 2.7 5.3 8.0
Rents payable (6.7) (3.7) (10.4) (5.9) (2.3) (8.2) (11.6) (4.6) (16.2)
127.1 156.8 283.9 146.8 172.4 319.2 293.9 339.6 633.5
Service charge income 16.2 15.9 32.1 16.9 17.6 34.5 37.3 35.6 72.9
Service charge expense (17.8) (18.9) (36.7) (19.1) (18.1) (37.2) (43.2) (39.5) (82.7)
Net service charge expense (1.6) (3.0) (4.6) (2.2) (0.5) (2.7) (5.9) (3.9) (9.8)
Other property related income 4.6 10.9 15.5 4.5 12.0 16.5 11.4 29.1 40.5
Direct property expenditure (11.8) (23.9) (35.7) (12.9) (20.4) (33.3) (36.8) (43.6) (80.4)
Net rental income 118.3 140.8 259.1 136.2 163.5 299.7 262.6 321.2 583.8
Trading properties sale proceeds 6.2 1.2 7.4 6.9 - 6.9 8.8 0.4 9.2
Costs of sales of trading properties (5.0) (5.2) (10.2) (6.1) (0.3) (6.4) (6.6) (0.1) (6.7)
Profit/(loss) on disposal of trading properties 1.2 (4.0) (2.8) 0.8 (0.3) 0.5 2.2 0.3 2.5
Long-term development contract income - 69.4 69.4 - 20.1 20.1 - 48.9 48.9
Long-term development contract expenditure - (66.5) (66.5) - (18.4) (18.4) - (45.1) (45.1)
Profit on long-term development contracts - 2.9 2.9 - 1.7 1.7 - 3.8 3.8
Indirect property expenditure (16.3) (15.8) (32.1) (18.0) (16.7) (34.7) (33.8) (30.4) (64.2)
Depreciation (0.8) (1.8) (2.6) (1.1) (3.0) (4.1) (1.9) (4.8) (6.7)
Underlying segment operating profit 102.4 122.1 224.5 117.9 145.2 263.1 229.1 290.1 519.2
Investment property disposal proceeds 255.3 292.4 547.7 20.9 256.9 277.8 164.5 434.7 599.2
Carrying value of investment property disposals (263.5) (302.8) (566.3) (19.7) (258.8) (278.5) (219.3) (510.7) (730.0)

(including lease incentives)
(Loss)/profit on disposal of investment properties (8.2) (10.4) (18.6) 1.2 (1.9) (0.7) (54.8) (76.0) (130.8)
Net (deficit)/surplus on revaluation of investment (104.6) 14.8 (89.8) (762.3) (789.0) (1,551.3) (1,923.1) (2,190.3) (4,113.4)

properties
Impairment of trading properties - (9.3) (9.3) - - - - (92.3) (92.3)
Segment result (10.4) 117.2 106.8 (643.2) (645.7) (1,288.9) (1,748.8) (2,068.5) (3,817.3)
Demerger costs - (14.3) (10.2)
Unallocated expenses (6.1) (8.0) (14.2)
Operating profit/(loss) 100.7 (1,311.2) (3,841.7)
Net interest expense (103.5) (118.0) (332.5)
(2.8) (1,429.2) (4,174.2)

Share of the post-tax (loss)/profit of joint ventures

(1) In compliance with IFRS 5, the 2008 comparatives have been restated as the Trillium discontinued operations have been removed from continuing operations and the operations of the Accor hotels contract has been included within Retail Portfolio.

Included within rents payable is finance lease interest payable of £1.1m (30 September 2008: £1.3m, 31 March 2009: £2.5m) and £0.8m (30 September 2008: £1.2m, 31 March 2009: £1.8m) respectively for Retail Portfolio and London Portfolio.

At 30 September 2009 At 31 March 2009
Balance sheets Retail Portfolio London Portfolio Total Retail Portfolio London Portfolio Total
£m £m £m £m £m £m
Investment properties 2,870.3 4,509.9 7,380.2 3,205.4 4,724.0 7,929.4
Other property, plant and equipment 4.1 8.7 12.8 4.7 9.6 14.3
Net investment in finance leases 48.3 67.5 115.8 48.5 67.8 116.3
Investments in joint ventures 729.4 34.0 763.4 906.9 23.9 930.8
Trading properties and long-term development contracts 5.0 83.8 88.8 10.0 84.9 94.9
Trade and other receivables 201.8 271.4 473.2 201.4 190.7 392.1
Segment assets 3,858.9 4,975.3 8,834.2 4,376.9 5,100.9 9,477.8
Unallocated assets 689.1 1,693.9
Total assets 9,523.3 11,171.7
Trade and other payables (384.9) (244.7) (629.6) (335.9) (241.3) (577.2)
Segment liabilities (384.9) (244.7) (629.6) (335.9) (241.3) (577.2)
Unallocated liabilities (4,193.7) (5,774.3)
Total liabilities (4,823.3) (6,351.5)

All the Group's operations are in the UK and are organised into two main business segments against which the Group reports its primary segment information, being Retail Portfolio and London Portfolio.

The Group's financial performance does not suffer from seasonal fluctuations.

4. Group revenue Six months ended 30 September Year to 31 March

£m £m £m
Rental income 291.2 323.1 641.7
Service charge income 32.1 34.5 72.9
Other property related income 15.5 16.5 40.5
Trading property sales 7.4 6.9 9.2

proceeds
Long-term development contract 69.4 20.1 48.9

income
Finance lease interest 3.1 4.3 8.0
418.7 405.4 821.2
(1) In compliance with IFRS 5, the 2008 comparatives have been restated to remove the revenue in relation to the Trillium discontinued operations.
5. Net interest expense Six months ended 30 September Year to 31 March

£m £m £m

Interest expense
Bond and debenture debt (97.4) (97.7) (191.1)
Bank borrowings (34.7) (51.4) (95.4)
Other interest payable (0.7) (1.0) (0.9)
Amortisation of bond exchange (6.4) (5.9) (11.7)

de-recognition
Interest on pension scheme (3.6) (4.2) (7.5)

liabilities
(142.8) (160.2) (306.6)
Interest capitalised in 8.6 21.2 43.7

relation to properties under development
Total interest expense (134.2) (139.0) (262.9)

Interest income
Short-term deposits 7.7 0.8 2.7
Long-term investment loans 1.5 - 0.7
Gain on disposal of - - 2.7

foreign-exchange contract
Other interest receivable 0.2 0.6 1.5
Interest receivable from joint 7.1 10.4 16.8

ventures
Expected return on pension 3.3 4.5 8.1

scheme assets
Total interest income 19.8 16.3 32.5
Fair value movement on 10.9 4.7 (102.1)

interest-rate swaps

Net interest expense (103.5) (118.0) (332.5)
(1) In compliance with IFRS 5, the 2008 comparatives have been restated to remove the net interest expense in relation to the Trillium discontinued operations.
6. Dividends Restated(1) Actual Six months ended 30 September Year to 31 March
Per share Per share 2009 2008 2009
Ordinary dividends paid Payment date pence pence £m £m £m

For the year ended 31 March 2008:

Third quarter 25 April 2008 14.4 16.0 - 74.4 74.4
Final quarter 28 July 2008 14.4 16.0 - 74.4 74.4

For the year ended 31 March 2009:

First quarter 24 October 2008 14.9 16.5 - - 76.8
Second quarter 12 January 2009 14.9 16.5 - - 76.8
Third quarter 24 April 2009 14.9 16.5 76.8 - -
Final quarter 24 July 2009 7.0 7.0 53.0 - -
129.8 148.8 302.4
(1) The restated dividend per share represents the theoretical dividend per share that would have been paid had the bonus shares inherent in the Rights Issue, which was completed in March 2009, been in existence at the relevant dividend dates.

The Board has proposed a second quarterly dividend of 7.0p per share or £52.9m (2008: 16.5p per share or £76.8m) in addition to the first quarterly dividend of 7.0p per share or £52.9m paid on 23 October 2009 (2008: 16.5p per share or £76.8m paid on 24 October 2008). It will be paid on 15 January 2010 to shareholders who are on the Register of Members on 11 December 2009. All numbers relate to actual dividends as opposed to restated dividends.

7. Earnings/(loss) per share Six months ended 30 September Year to 31 March

restated

£m £m £m
Profit/(loss) for the 11.9 (1,725.4) (5,191.3)

financial period attributable to the owners of the Parent
of which from: continuing 11.9 (1,618.5) (4,770.4)

operations attributable to the owners of the Parent
of which from: discontinued - (106.9) (420.9)

operations attributable to the owners of the Parent

(1) In compliance with IFRS 5, the 2008 comparatives have been restated to reclassify the profit arising from the Trillium discontinued operations from continuing operations to discontinued operations.

Management has chosen to disclose adjusted earnings per share from continuing operations in order to provide an indication of the Group's underlying business performance. Accordingly, it excludes the effect of all exceptional items, debt and other restructuring charges, and other items of a capital nature (other than trading properties and long-term contract profits) as indicated above. An EPRA measure has been included to assist comparison between European property companies. We believe our measure of adjusted diluted earnings per share is more appropriate than the EPRA measure in the context of our business.

Six months ended 30 September Year to
31 March

restated(2)
£m £m £m
Profit/(loss) for the financial 11.9 (1,618.5) (4,770.4)

period from continuing operations attributable to the owners of the Parent
Valuation deficits - Group 89.8 1,551.3 4,113.4

property disposals after current and deferred tax - Group

on joint ventures(4)
Non-revenue tax adjustment (17.8) - -
Demerger costs (net of taxation) - 11.4 7.2
EPRA adjusted earnings from 121.2 146.5 312.5

continuing operations attributable to the owners of the Parent
Eliminate effect of debt - (0.3) 0.8

restructuring charges (net of taxation)
Eliminate effect of bond exchange 6.4 5.9 11.7

de-recognition
Adjusted earnings from continuing 127.6 152.1 325.0

operations attributable to the owners of the Parent

(2) In compliance with IFRS 5, the 2008 comparatives have been restated to remove the elements arising from the Trillium discontinued operations from continuing operations.

(3) The impairment in relation to the development land and infrastructure programmes within trading properties has been removed from both our and the EPRA's adjusted earnings due to the long-term nature of these programmes.

(4) The adjustment to net liabilities on joint ventures is the result of valuation deficits and as such restricts the recognition of the full valuation deficit. Hence, this adjustment is required to reflect that the valuation deficit has not been recognised in full in the Group's income statement.
Six months ended Year to
30 September 31 March

restated(5)
Number Number Number
million million million
Weighted average number of ordinary shares 761.9 522.1 526.7
Effect of weighted average number of treasury (5.9) (5.9) (5.9)

shares
Effect of weighted average number of own (0.7) (1.4) (1.2)

shares
Weighted average number of ordinary shares for 755.3 514.8 519.6

calculating basic earnings per share
Dilutive effect of share options for diluted 0.2 - -

earnings per share
Weighted average number of ordinary shares for 755.5 514.8 519.6

calculating diluted earnings per share
Dilutive effect of share options for adjusted - 0.6 0.3

diluted earnings per share
Weighted average number of ordinary shares for 755.5 515.4 519.9

calculating adjusted diluted earnings per share

(5) The weighted average number of ordinary shares for the six months ended 30 September 2008 has been adjusted for the bonus element inherent in the Rights Issue that was approved on 9 March 2009 in compliance with IAS 33 'Earnings per Share'.
7. Earnings/(loss) per share continued Six months ended Year to 31 March
30 September

restated(6)
Pence Pence Pence
Basic earnings/(loss) per share 1.58 (335.16) (999.04)
of which from: continuing operations 1.58 (314.39) (918.04)
of which from: discontinued operations - (20.77) (81.00)
Diluted earnings/(loss) per share 1.58 (335.16) (999.04)
of which from: continuing operations 1.58 (314.39) (918.04)
of which from: discontinued operations - (20.77) (81.00)
Adjusted earnings per share from 16.89 29.55 62.60

continuing operations
Adjusted diluted earnings per share from 16.89 29.51 62.57

continuing operations

EPRA adjusted earnings per share from 16.05 28.46 60.20

continuing operations

(6) The earnings per share for the six months ended 30 September 2008 has been adjusted for the bonus element inherent in the Rights Issue that was approved on 9 March 2009 and for the reclassification of the Trillium discontinued operations from continuing operations to discontinued operations.
8. Net assets per share 30 September 31 March

£m £m
Net assets attributable to the owners of the Parent 4,702.4 4,823.5
Cumulative mark-to-market adjustment on interest-rate 26.6 112.0

swaps - Group

Parent
Reinstate bond exchange de-recognition adjustment 493.4 499.8
Cumulative mark-to-market adjustment on interest-rate (26.6) (112.0)

swaps - Group

Number Number
million million
Number of ordinary shares in issue 761.9 761.9
Number of treasury shares (5.9) (5.9)
Number of own shares (0.5) (0.9)
Number of ordinary shares used for calculating basic 755.5 755.1

net assets per share
Dilutive effect of share options 0.5 -
Number of ordinary shares used for calculating diluted 756.0 755.1

net assets per share

.
30 September 31 March

Pence Pence
Net assets per share 622 639
Diluted net assets per share 622 639
Adjusted net assets per share 565 593
Adjusted diluted net assets per share 565 593
EPRA measure - adjusted diluted net assets per share 630 659
EPRA measure - diluted triple net assets per share 579 637

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

9. Investment properties
Portfolio management Development Trillium Total
£m programme £m £m
£m
Net book value at 1 April 2008 10,338.3 1,396.0 562.4 12,296.7
Developments transferred from 256.2 (256.2) - -

the development programme into portfolio management
Accor hotel properties 435.9 - (435.9) -

transferred from Trillium to portfolio management
Property acquisitions 93.4 - - 93.4
Capital expenditure 63.0 147.2 8.8 219.0
Capitalised interest 6.1 13.5 - 19.6
Disposals (232.6) - (10.6) (243.2)
Transfer from operating - - 13.9 13.9

properties
Surrender premiums received (0.4) - - (0.4)
Depreciation (1.6) - - (1.6)
Deficit on revaluation - (1,415.7) (135.6) - (1,551.3)

continuing operations

Developments transferred from 154.1 (154.1) - -

the development programme into portfolio management
Property acquisitions 8.5 1.3 - 9.8
Capital expenditure 111.1 98.3 (2.8) 206.6
Capitalised interest 7.9 9.6 - 17.5
Disposals (449.3) (1.3) (30.8) (481.4)
Transfer to operating - - (2.0) (2.0)

properties
Surrender premiums received (1.6) - - (1.6)
Depreciation (0.5) - - (0.5)
Deficit on revaluation - (2,157.4) (404.7) - (2,562.1)

continuing operations

the disposal of Trillium
Net book value at 31 March 7,215.4 714.0 - 7,929.4

Developments transferred from 411.4 (411.4) - -

the development programme into portfolio management
Property acquisitions 0.3 - - 0.3
Capital expenditure 52.2 42.0 - 94.2
Capitalised interest 1.1 6.2 - 7.3
Disposals (554.9) - - (554.9)
Surrender premiums received (8.7) - - (8.7)
Depreciation (0.9) - - (0.9)
Transfers from trading 3.3 - - 3.3

properties
Deficit on revaluation - (67.3) (22.5) - (89.8)

continuing operations
Net book value at 30 September 7,051.9 328.3 - 7,380.2

The following table reconciles the net book value of the investment properties to the market value. The components of the reconciliation are included within their relevant balance sheet headings.
Portfolio Development Total investment
management programme properties
£m £m £m
Net book value at 31 March 7,215.4 714.0 7,929.4

Plus: amount included in 148.8 40.5 189.3

prepayments in respect of lease incentives
Less: head leases capitalised (56.5) (1.4) (57.9)
Plus: properties treated as 104.7 - 104.7

finance leases
Market value at 31 March 2009 7,412.4 753.1 8,165.5

Plus: amount included in 186.4 4.4 190.8

prepayments in respect of lease incentives
Less: head leases capitalised (55.5) (1.4) (56.9)
Plus: properties treated as 111.7 - 111.7

finance leases
Market value at 30 September 7,294.5 331.3 7,625.8

2009 - Group

2009 - Group and share of joint ventures

9. Investment properties (continued)

Included in investment properties are leasehold properties with a net book value of £949.4m at 30 September 2009 (31 March 2009: £994.0m).

The fair value of the Group's investment properties at 30 September 2009 has been arrived at on the basis of a valuation carried out at that date by Knight Frank LLP, external valuers. The valuation by Knight Frank LLP, which conforms to Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors and with IVA 1 of the International Valuation Standards, was arrived at by reference to market evidence of transaction prices for similar properties. Fixed asset properties include capitalised interest of £183.7m at 30 September 2009 (31 March 2009: £181.1m). The average rate of capitalisation is 4.1% (2008: 5.5%). The historical cost of investment properties is £7,135.1m at 30 September 2009 (31 March 2009: £7,721.8m).

The current value of investment properties in respect of proposed developments is £563.3m (31 March 2009: £524.8m). Developments are transferred out of the development programme when physically complete and 95% let. The only scheme completed during the period was New Street Square, London EC4.

The Group has outstanding capital commitments of £118.4m at 30 September 2009 (31 March 2009: £280.5m).

10. Investments in joint ventures

The Group's significant joint ventures are described below:

Name of joint venture Percentage owned Business segment Year end date Joint venture
partners
The Scottish Retail Property 50.0% Retail Portfolio 31 March The British Land
Limited Partnership Company PLC
Metro Shopping Fund Limited 50.0% Retail Portfolio 31 March Delancey Real Estate
Partnership Partners Limited
Buchanan Partnership 50.0% Retail Portfolio 31 December The Henderson UK
Shopping Centre Fund
St. David's Limited 50.0% Retail Portfolio 31 December Capital Shopping
Partnership Centres PLC
Bristol Alliance Limited 50.0% Retail Portfolio 31 December Hammerson plc

Partnership

The Harvest Limited 50.0% Retail Portfolio 31 March J Sainsbury plc

Partnership

The Oriana Limited Partnership 50.0% London Portfolio 31 March Frogmore Real Estate
Partners Limited
Partnership
The Martineau Galleries 33.3% Retail Portfolio 31 December Hammerson plc
Limited Partnership (1) Pearl Group Limited
The Ebbsfleet Limited 50.0% London Portfolio 31 March Lafarge Cement UK
Partnership (1) PLC
Millshaw Property Co. Limited 50.0% Retail Portfolio 31 March Evans Property Group
(1) Limited
The Martineau Limited 33.3% Retail Portfolio 31 December Hammerson plc
Partnership(1) Pearl Group Limited
Hungate (York) Regeneration 33.3% Retail Portfolio 30 June Crosby Land Lease
Limited(1) PLC
Evans Property Group
Limited
Countryside Land Securities 50.0% London Portfolio 30 September Countryside
(Springhead) Limited(1) Properties PLC
Fen Farm Developments 50.0% Retail Portfolio 31 March Economic Zones World

Limited(1)

The Empress State Limited 50.0% London Portfolio 31 December Liberty
Partnership(1) International PLC
HNJV Limited(1) 50.0% London Portfolio 31 March Places for People
Group Limited

(1) Included within Other

The Group disposed of its interest in the Bull Ring Limited Partnership on 18 September 2009.

10. Investments in joint ventures continued Financial information of Group*s share of joint ventures
Six months ended and as at 30 September 2009
The MetroShopping Fund Buchanan St. David*s Limited The Bull Ring BristolAllianceLimit The Harvest Limited Partnership£m The Oriana Limited Other£m Total£m
ScottishRetailProper Limited Partnership£m Partnership£m Limited ed Partnership£m Partnership£m
tyLimited Partnership£m Partnership£m
Partnership £m

Income statement
Rental income 3.7 6.3 4.3 2.8 7.1 9.1 2.5 1.8 4.2 41.8
Finance lease interest - 0.1 - - - 0.1 - - - 0.2
Rents payable - - - - - (0.3) - - - (0.3)
3.7 6.4 4.3 2.8 7.1 8.9 2.5 1.8 4.2 41.7
Service charge income 0.7 1.2 0.3 0.3 1.4 1.6 0.1 0.2 - 5.8
Service charge expense (1.0) (1.5) (0.3) (0.5) (1.5) (1.7) (0.1) (0.2) (0.2) (7.0)
Net service charge expense (0.3) (0.3) - (0.2) (0.1) (0.1) - - (0.2) (1.2)
Direct property expenditure (0.3) (0.3) (0.8) (0.3) (1.1) (1.5) - (0.4) (0.3) (5.0)
Net rental income 3.1 5.8 3.5 2.3 5.9 7.3 2.5 1.4 3.7 35.5
Trading properties sale - - - - - - - - 8.2 8.2

proceeds
Cost of sales of trading - - - - - - - - (7.2) (7.2)

properties
Profit on disposal of trading - - - - - - - - 1.0 1.0

properties
Indirect property expenditure (0.2) (0.5) - (0.1) (0.1) (0.2) (0.3) (0.1) (0.2) (1.7)
Underlying operating profit 2.9 5.3 3.5 2.2 5.8 7.1 2.2 1.3 4.5 34.8
Investment property disposal 0.1 - - - 212.9 0.8 - - - 213.8

proceeds
Carrying value of investment - - - - (205.0) (0.5) - - - (205.5)

property disposals
Profit on disposal of 0.1 - - - 7.9 0.3 - - - 8.3

investment properties
Net (deficit)/surplus on (3.7) - (7.8) (21.6) - (4.1) 2.5 6.0 0.7 (28.0)

revaluation of investment properties
Impairment of trading - - - - - - - - (2.9) (2.9)

properties
Operating (loss)/profit (0.7) 5.3 (4.3) (19.4) 13.7 3.3 4.7 7.3 2.3 12.2
Net interest expense (1.7) (5.3) (2.0) (0.3) - - (1.6) (1.5) (2.2) (14.6)
(Loss)/profit before tax (2.4) - (6.3) (19.7) 13.7 3.3 3.1 5.8 0.1 (2.4)
Income tax - (0.2) - - - - - - (0.1) (0.3)
(2.4) (0.2) (6.3) (19.7) 13.7 3.3 3.1 5.8 - (2.7)
Net liabilities adjustment(2) - (1.1) - - - - - - 2.0 0.9
Share of (loss)/profit after (2.4) (1.3) (6.3) (19.7) 13.7 3.3 3.1 5.8 2.0 (1.8)

tax Net investment
At 1 April 2009 17.5 - 114.4 240.6 202.8 244.2 65.9 7.1 38.3 930.8
Properties contributed - - - - - - - - - -
Cash contributed 1.0 - 0.5 - - - - - 0.4 1.9
Distributions - - (1.5) - - - - - (1.4) (2.9)
Fair value movement on cash 0.5 1.3 - - - - 0.8 - 0.1 2.7

flow hedges taken to equity
Disposals - - - - (208.8) - - - - (208.8)
Loan advances - - - 43.9 - 8.6 - - - 52.5
Loan repayments - - - - (7.7) (3.3) - - - (11.0)
Share of (loss)/profit after (2.4) (1.3) (6.3) (19.7) 13.7 3.3 3.1 5.8 2.0 (1.8)

tax
At 30 September 2009 16.6 - 107.1 264.8 - 252.8 69.8 12.9 39.4 763.4

Balance sheet
Investment properties (1) 82.6 171.8 105.0 182.5 - 236.2 74.3 90.3 110.7 1,053.4
Current assets 6.1 7.6 5.5 148.4 - 27.9 44.8 2.8 53.1 296.2
88.7 179.4 110.5 330.9 - 264.1 119.1 93.1 163.8 1,349.6
Current liabilities (4.7) (6.1) (3.4) (29.9) - (8.4) (3.1) (5.2) (29.5) (90.3)
Non-current liabilities (67.4) (188.7) - (36.2) - (2.9) (46.2) (75.0) (98.1) (514.5)
(72.1) (194.8) (3.4) (66.1) - (11.3) (49.3) (80.2) (127.6) (604.8)
Net liabilities adjustment(2) - 15.4 - - - - - - 3.2 18.6
Net assets 16.6 - 107.1 264.8 - 252.8 69.8 12.9 39.4 763.4

Capital commitments 0.2 0.4 0.3 17.8 - 7.5 0.2 - 1.1 27.5

Market value of investment 84.0 173.0 107.5 182.5 - 251.5 75.0 90.5 111.0 1,075.0

properties(1)
Net (debt)/cash (64.7) (184.1) 0.5 (33.9) - 3.4 (45.3) (74.0) (93.6) (491.7)
(1) 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.
(2) Joint ventures with net liabilities are carried at zero value in the balance sheet where there is no commitment to fund the deficit and any distributions are included in the consolidated income statement for the year.

10. Investments in joint ventures continued Financial information of Group*s share of joint ventures
Six months ended and as at 30 September 2008
The MetroShopping Fund Buchanan St. David*s Limited The Bull Ring BristolAllianceLimit The Harvest Limited Partnership£m The Oriana Limited Other£m Total£m
ScottishRetailProper Limited Partnership£m Partnership£m Limited ed Partnership£m Partnership£m
tyLimited Partnership£m Partnership£m
Partnership £m

Income statement
Rental income 4.7 6.0 4.2 2.5 8.0 1.9 1.9 2.2 1.9 33.3
Finance lease interest - - 0.1 - - 0.1 - - - 0.2
Rents payable (0.2) - - - - - - - - (0.2)
4.5 6.0 4.3 2.5 8.0 2.0 1.9 2.2 1.9 33.3
Service charge income 0.8 1.3 0.9 0.4 1.2 - - 0.1 0.1 4.8
Service charge expense (1.3) (1.5) (0.9) (0.5) (1.2) - - (0.1) (0.3) (5.8)
Net service charge expense (0.5) (0.2) - (0.1) - - - - (0.2) (1.0)
Direct property expenditure (0.4) (0.4) (0.7) (0.3) (1.4) (0.6) - (0.1) (0.1) (4.0)
Net rental income 3.6 5.4 3.6 2.1 6.6 1.4 1.9 2.1 1.6 28.3
Trading properties sale - - - - - - - - 1.2 1.2

proceeds
Cost of sales of trading - - - - - - - - (1.1) (1.1)

properties
Profit on disposal of trading - - - - - - - - 0.1 0.1

properties
Indirect property expenditure (0.2) (0.5) (0.1) (0.1) (0.2) - (0.1) (0.5) (0.4) (2.1)
Underlying operating profit 3.4 4.9 3.5 2.0 6.4 1.4 1.8 1.6 1.3 26.3
Investment property disposal - 0.1 - - - 5.1 - - 3.8 9.0

proceeds
Carrying value of investment - - - - - (4.0) - - (3.1) (7.1)

property disposals
Profit on disposal of - 0.1 - - - 1.1 - - 0.7 1.9

investment properties
Net deficit on revaluation of (20.2) (25.1) (27.2) (54.1) (43.5) (22.4) (1.6) (0.4) (11.9) (206.4)

investment properties
Impairment of trading - - - - - - - - - -

properties
Operating (loss)/profit (16.8) (20.1) (23.7) (52.1) (37.1) (19.9) 0.2 1.2 (9.9) (178.2)
Net interest (expense)/income (1.5) (5.3) (1.9) 0.1 - (0.1) - (2.9) (1.6) (13.2)
(Loss)/profit before tax (18.3) (25.4) (25.6) (52.0) (37.1) (20.0) 0.2 (1.7) (11.5) (191.4)
Income tax (0.2) (0.7) - - - - - - - (0.9)

Share of (loss)/profit after tax

flow hedges taken to equity
Disposals - - - - - - - - (17.9) (17.9)
Loan advances - - - 35.5 - 50.7 - - 0.2 86.4
Loan repayments - - - - (6.4) (0.3) - - - (6.7)

Share of losses after tax

Balance sheet
Investment properties 110.2 223.4 150.5 229.4 244.7 317.4 78.7 87.9 133.4 1,575.6
Current assets 8.8 6.6 3.9 119.8 10.6 19.7 4.5 2.0 75.9 251.8
119.0 230.0 154.4 349.2 255.3 337.1 83.2 89.9 209.3 1,827.4
Current liabilities (2.1) (6.6) (1.7) (18.5) (9.5) (19.9) (1.0) (13.5) (17.2) (90.0)
Non-current liabilities (61.9) (176.9) - (0.5) - (2.4) - (69.2) (105.9) (416.8)
(64.0) (183.5) (1.7) (19.0) (9.5) (22.3) (1.0) (82.7) (123.1) (506.8)
Net liabilities adjustment - - - - - - - - - -
Net assets 55.0 46.5 152.7 330.2 245.8 314.8 82.2 7.2 86.2 1,320.6

Capital commitments 1.6 1.3 1.3 90.9 - 8.7 0.2 - 2.3 106.3

Market value of investment 109.4 224.4 154.0 229.3 250.0 319.9 78.9 88.0 133.0 1,586.9

properties
Net (debt)/cash (55.0) (173.1) 0.4 4.2 0.5 8.9 2.4 (67.7) (90.5) (369.9)
10. Investments in joint ventures continued Financial information of Group's share of joint ventures
Year ended and as at 31 March 2009
The Scottish Metro Buchanan Partnership St. David's Limited The Bull Ring Bristol Alliance The Harvest Limited The Oriana Limited Other Total
Retail Shopping Fund £m Partnership Limited Partnership Limited Partnership Partnership Partnership £m £m
Property Limited Partnership £m £m £m £m £m
Limited Partnership £m
£m

Income statement
Rental income 9.1 12.9 9.2 5.0 15.5 10.8 4.4 4.3 6.5 77.7
Finance lease interest - - 0.1 - - 0.3 - - - 0.4
Rents payable (0.2) - - - - (0.2) - - (0.1) (0.5)
8.9 12.9 9.3 5.0 15.5 10.9 4.4 4.3 6.4 77.6
Service charge income 1.5 2.5 1.8 0.7 2.5 1.1 0.2 0.3 0.1 10.7
Service charge expense (2.3) (3.2) (1.8) (1.0) (2.5) (1.3) (0.2) (0.3) (0.6) (13.2)
Net service charge expense (0.8) (0.7) - (0.3) - (0.2) - - (0.5) (2.5)
Direct property expenditure (1.3) (0.8) (1.1) (0.2) (2.6) (3.6) (0.1) (0.2) (0.5) (10.4)
Net rental income 6.8 11.4 8.2 4.5 12.9 7.1 4.3 4.1 5.4 64.7
Trading properties sale - - - - - - - - 16.0 16.0

proceeds
Cost of sales of trading - - - - - - - - (10.5) (10.5)

properties
Profit on disposal of trading - - - - - - - - 5.5 5.5

properties
Indirect property expenditure (0.4) (1.2) (0.1) (0.3) (0.3) (0.1) (0.4) (0.6) (0.4) (3.8)
Underlying operating profit 6.4 10.2 8.1 4.2 12.6 7.0 3.9 3.5 10.5 66.4
Investment property disposal (0.1) 0.2 - - 0.4 6.9 - - 3.7 11.1

proceeds
Carrying value of investment - - - - - (5.2) - - (3.0) (8.2)

property disposals
Profit on disposal of (0.1) 0.2 - - 0.4 1.7 - - 0.7 2.9

investment properties
Net deficit on revaluation of (54.0) (78.1) (66.5) (184.6) (87.8) (106.3) (11.5) (4.8) (36.7) (630.3)

investment properties
Impairment of trading - - - - - - - - (12.3) (12.3)

properties
Operating loss (47.7) (67.7) (58.4) (180.4) (74.8) (97.6) (7.6) (1.3) (37.8) (573.3)
Net interest (expense)/income (3.2) (10.6) (3.9) 0.3 - - (1.4) (11.7) (11.6) (42.1)
Loss before tax (50.9) (78.3) (62.3) (180.1) (74.8) (97.6) (9.0) (13.0) (49.4) (615.4)
Income tax (0.2) (0.8) - - - - - - (0.3) (1.3)
(51.1) (79.1) (62.3) (180.1) (74.8) (97.6) (9.0) (13.0) (49.7) (616.7)
Net liabilities adjustment - 16.5 - - - - - - 1.2 17.7
Share of loss after tax (51.1) (62.6) (62.3) (180.1) (74.8) (97.6) (9.0) (13.0) (48.5) (599.0)

Net investment
At 1 April 2008 73.0 69.9 179.6 346.7 289.3 284.4 64.5 9.0 94.2 1,410.6
Properties contributed - - - - - - - - 27.3 27.3
Cash contributed 0.4 5.8 1.4 - - - 17.6 11.2 4.1 40.5
Distributions - (1.1) (4.3) - - - (3.0) (0.1) (13.1) (21.6)
Fair value movement on cash (4.8) (12.0) - - - - (4.2) - (0.3) (21.3)

flow hedges taken to equity
Disposals - - - - - - - - (17.9) (17.9)
Loan advances - - - 74.0 0.3 61.1 - - 0.2 135.6
Loan repayments - - - - (12.0) (3.7) - - (2.4) (18.1)
Disposal of Trillium - - - - - - - - (5.3) (5.3)
Share of losses of joint (51.1) (62.6) (62.3) (180.1) (74.8) (97.6) (9.0) (13.0) (48.5) (599.0)

ventures after tax
At 31 March 2009 17.5 - 114.4 240.6 202.8 244.2 65.9 7.1 38.3 930.8

Balance sheet
Investment properties 82.3 171.5 112.3 147.6 200.0 230.8 69.5 83.9 110.1 1,208.0
Current assets 6.4 7.5 6.0 119.0 12.2 33.6 44.3 3.1 55.7 287.8
88.7 179.0 118.3 266.6 212.2 264.4 113.8 87.0 165.8 1,495.8
Current liabilities (3.1) (5.6) (3.9) (25.6) (9.4) (17.3) (1.0) (4.3) (29.0) (99.2)
Non-current liabilities (68.1) (189.9) - (0.4) - (2.9) (46.9) (75.6) (99.7) (483.5)
(71.2) (195.5) (3.9) (26.0) (9.4) (20.2) (47.9) (79.9) (128.7) (582.7)
Net liabilities adjustment - 16.5 - - - - - - 1.2 17.7
Net assets 17.5 - 114.4 240.6 202.8 244.2 65.9 7.1 38.3 930.8
Capital commitments 1.6 0.7 0.4 53.1 - 12.9 - - 1.9 70.6
Market value of investment 83.8 172.6 115.0 147.5 205.0 253.4 70.0 84.0 110.2 1,241.5

properties

Net (debt)/cash (63.3) (185.1) 1.9 2.7 2.8 1.9 (46.1) (74.8) (99.4) (459.4)

11. Trading properties and long-term development contracts
30 September 2009 31 March 2009
Cost Impairment provision Realisable value Cost Impairment provision Realisable value
£m £m £m £m £m £m

Trading properties:

Development land and 169.4 (101.3) 68.1 159.1 (92.0) 67.1

infrastructure

Other trading properties 17.7 (0.3) 17.4 26.0 (0.3) 25.7
Long-term development 3.3 - 3.3 2.1 - 2.1

contracts
190.4 (101.6) 88.8 187.2 (92.3) 94.9

The realisable value of the Group's trading properties at 30 September 2009 has been arrived at on the basis of a valuation carried out at that date by Knight Frank LLP, external valuers.

12. Monies held in restricted accounts and deposits 30 September 31 March

£m £m
Cash at bank and in hand 19.3 0.1
Short-term deposits 99.7 29.8
119.0 29.9

Monies held in restricted accounts and deposits represents cash held by the Group in accounts with conditions attached that restricts the use of these monies by the Group and, as such, does not meet the definition of cash and cash equivalents as defined in IAS 7 'Statement of Cash Flows'. Holding cash in restricted accounts does not prevent the Group from optimising returns by putting these monies on short-term deposit.

13. Cash and cash equivalents 30 September 31 March

£m £m
Cash at bank and in hand 18.1 108.1
Short-term deposits 335.0 750.0
Liquidity funds 165.8 751.0
518.9 1,609.1

Liquidity funds

The liquidity funds are AAA rated cash-investment funds with constant net asset values, offering the Group same day access to the funds deposited. These investments yield a return of between 0.3% and 0.6% at 30 September 2009 (31 March 2009: between 0.5% and 1.3%).

Short-term deposits

The effective interest rate on short-term deposits was 0.3% at 30 September 2009 (31 March 2009: 1.2%) and had an average maturity of 28 days (31 March 2009: 91 days).

14. Derivative financial instruments
30 September 2009 31 March 2009
Assets Liabilities Assets Liabilities
£m £m £m £m
Interest-rate swaps (non-designated) 1.2 (27.8) - (112.0)
Total 1.2 (27.8) - (112.0)

Non-designated derivatives are classified as a current asset or liability. The full fair value of a hedging derivative is classified as a non-current asset or liability if the remaining maturity of the hedged item is more than 12 months and as a current asset or liability if the maturity of the hedged item is less than 12 months.

Interest-rate swaps

The Group uses interest-rate swaps to manage its exposure to interest-rate movements on its interest-bearing loans and investments. The fair value of these contracts is recorded in the balance sheet and is determined by discounting future cash flows at the prevailing market rates at the balance sheet date.

The change in fair value of the contracts that are not designated as hedging instruments is taken to the income statement. For contracts that are designated as cash flow hedges the change in the fair value of the contracts is recognised directly in equity. There was no ineffectiveness to be recognised from the designated cash flow hedges. The deferred asset or liability assumed is released to the income statement during the term of each relevant swap.

At the balance sheet date, the notional amount of outstanding derivative financial instruments was as follows:
30 September 31 March

£m £m
Interest-rate swaps 662.0 2,225.0
662.0 2,225.0

The Group terminated interest-rate swaps with a notional value of £2.2bn in September 2009.

15. Borrowings
30 September 2009
Secured/ Fixed/floating Effective interest Nominal/ notional Fair value Book value
unsecured rate value £m £m
% £m

Short-term borrowings and overdrafts Sterling
Bank overdrafts Unsecured Floating - - - -
Amounts payable under finance leases Fixed 6.9 0.7 0.7 0.7
5.253 per cent QAG Bond Secured Fixed 5.3 7.1 7.6 7.1
Total short-term borrowings 7.8 8.3 7.8

and overdrafts

Non-current borrowings Sterling
4.625 per cent MTN due 2013 Secured Fixed 4.7 300.0 301.4 299.9
5.292 per cent MTN due 2015 Secured Fixed 5.3 391.5 396.2 391.1
4.875 per cent MTN due 2019 Secured Fixed 5.0 400.0 390.1 396.7
5.425 per cent MTN due 2022 Secured Fixed 5.5 255.3 248.4 254.6
4.875 per cent MTN due 2025 Secured Fixed 4.9 300.0 264.9 297.3
5.391 per cent MTN due 2026 Secured Fixed 5.4 210.7 195.3 209.9
5.391 per cent MTN due 2027 Secured Fixed 5.4 611.1 560.5 608.6
5.376 per cent MTN due 2029 Secured Fixed 5.4 317.9 293.9 316.4
5.396 per cent MTN due 2032 Secured Fixed 5.4 322.8 300.4 321.1
5.125 per cent MTN due 2036 Secured Fixed 5.1 500.0 433.3 498.6
Bond exchange de-recognition Secured Fixed - - (493.4)

adjustment
3,609.3 3,384.4 3,100.8
5.253 per cent QAG Bond Secured Fixed 5.3 353.2 376.4 352.9
Syndicated bank debt Secured Floating LIBOR + margin 165.8 165.8 162.2
Bilateral facilities Secured Floating LIBOR + margin 360.0 360.0 360.0
Amounts payable under finance leases Fixed 6.9 56.2 68.2 56.2
Total non-current borrowings 4,544.5 4,354.8 4,032.1
Total borrowings 4,552.3 4,363.1 4,039.9

Medium term notes (MTN)

The MTN are secured on the fixed and floating pool of assets of the Security Group. Debt investors benefit from security over a pool of investment properties valued at £7.0bn at 30 September 2009 (31 March 2009: £7.5bn). The secured debt structure has a tiered operating covenant regime which gives the Group substantial flexibility when the loan to value and interest cover in the Security Group are less than 65% and more than 1.45 times respectively. If these limits are exceeded the operating environment becomes more restrictive with provisions to encourage the reduction in gearing. The interest rate is fixed until the expected maturity, being two years before the legal maturity date for each MTN, whereupon the interest rate for the last two years is LIBOR plus a step-up margin. The effective interest rate includes the amortisation of issue costs. The MTN are listed on the Irish Stock Exchange and their fair values are based on their respective market prices.

Syndicated bank debt

At 30 September 2009 the Group had two syndicated bank facilities:

(1) £1.5bn authorised credit facility with a maturity of August 2013. This facility is committed and is secured on the assets of the Security Group. The interest rates are floating at LIBOR plus a margin of between 0.15% and 0.25%. In September 2009, all of the £1.5bn authorised credit facility was repaid; and

(2) £352.0m committed development facility with a maturity of May 2013. This facility was taken out to fund the development of Leeds Trinity Quarter and is secured on this property; this facility is currently £165.8m drawn. The interest rates are floating at LIBOR plus a margin of 2.35%. There are £5.0m of issue costs which are being written off over the life of this facility.

Bilateral facilities

Committed Group Bilateral facilities totalling £540.0m were undrawn and are secured on the assets of the Security Group. These facilities mature between July and December 2010. The Group has the option to extend any drawings for a further year past maturity. In the period to 30 September 2009 committed bilateral facilities of £280.0m have been repaid. The interest rates are floating at LIBOR plus a margin of between 0.25% and 0.75%.

Bond exchange de-recognition

On 3 November 2004, a debt refinancing was completed resulting in the Group exchanging all of its outstanding bond and debenture debt for new MTN with higher nominal values. The new MTN did not meet the IAS39 requirement to be substantially different from the debt that it replaced. Consequently the book value of the new debt is reduced to the book value of the original debt by the 'bond exchange de-recognition' adjustment which is then amortised to zero over the life of the new MTN. The amortisation is charged to net interest expenses in the income statement.

15. Borrowings continued
31 March 2009
Secured/ Fixed/floating Effective interest Nominal/ notional Fair value Book value
unsecured rate value £m £m
% £m

Short-term borrowings and overdrafts Sterling
Bank overdrafts Unsecured Floating - 0.3 0.3 0.3
Amounts payable under finance leases Fixed 5.5 0.8 0.8 0.8
Total short-term borrowings 1.1 1.1 1.1

and overdrafts

Non-current borrowings
Sterling
4.625 per cent MTN due 2013 Secured Fixed 4.7 300.0 294.3 299.8
5.292 per cent MTN due 2015 Secured Fixed 5.3 391.5 383.4 391.0
4.875 per cent MTN due 2019 Secured Fixed 5.0 400.0 370.0 396.5
5.425 per cent MTN due 2022 Secured Fixed 5.5 255.3 230.9 254.6
4.875 per cent MTN due 2025 Secured Fixed 4.9 300.0 237.2 297.2
5.391 per cent MTN due 2026 Secured Fixed 5.4 210.7 175.9 209.9
5.391 per cent MTN due 2027 Secured Fixed 5.4 611.1 509.6 608.5
5.376 per cent MTN due 2029 Secured Fixed 5.4 317.9 256.1 316.4
5.396 per cent MTN due 2032 Secured Fixed 5.4 322.9 258.6 321.1
5.125 per cent MTN due 2036 Secured Fixed 5.1 500.0 376.1 498.6
Bond exchange de-recognition Secured Fixed - - (499.8)

adjustment
3,609.4 3,092.1 3,093.8
Syndicated bank debt Secured Floating LIBOR + margin 1,662.8 1,662.8 1,658.6
Bilateral facilities Secured Floating LIBOR + margin 640.0 640.0 640.0
Amounts payable under finance leases Fixed 5.5 57.1 68.0 57.1
Total non-current borrowings 5,969.3 5,462.9 5,449.5
Total borrowings 5,970.4 5,464.0 5,450.6
Reconciliation of the movement in Six months ended 30 September Year to
borrowings 31 March

£m £m
At the beginning of the period 5,450.6 5,426.5
Decrease in overdrafts (0.3) (1.1)
Repayment of loans (1,780.1) (1,612.0)
Proceeds from new loans 363.2 1,737.6
Capitalisation of finance fees (0.2) (5.0)
Amortisation of finance fees 1.3 2.2
Amortisation of bond exchange 6.4 11.7

de-recognition adjustment
Net movement in finance lease (1.0) (9.4)

obligations
Borrowings included within the - (99.9)

disposal of Trillium
At the end of the period 4,039.9 5,450.6

QAG Bond

On 29 July 2009, the Group issued a £360.3m bond secured on the rental cash flows from the commercial lease with the UK Government over Queen Anne's Gate, London, SW1. The QAG Bond is an amortising bond with a final maturity in February 2027 and a fixed interest rate of 5.253%.

Fair values

The fair values of any floating rate financial liabilities are assumed to be equal to their nominal value.

16. Cash flow from operating activities Six months ended Year to 31 March
30 September

Reconciliation of operating profit to net cash inflow from operating £m £m £m

activities: Cash generated from operations
Loss for the financial period from continuing 13.2 (1,618.5) (4,773.7)

operations
Income tax (17.8) (2.7) 0.5
Loss before tax (4.6) (1,621.2) (4,773.2)
Share of losses of joint ventures (post-tax) 1.8 192.0 599.0
(2.8) (1,429.2) (4,174.2)
Fair value movement on interest-rate swaps (10.9) (4.7) 102.1
Interest income (19.8) (16.3) (32.5)
Interest expense 134.2 139.0 262.9
Operating profit/(loss) from continuing operations 100.7 (1,311.2) (3,841.7)
Operating loss from discontinued operations - (112.3) (79.0)
100.7 (1,423.5) (3,920.7)

Adjustments on continuing and discontinued operations for:
Depreciation 3.1 20.7 24.3
Loss/(profit) on disposal of investment properties 18.6 (1.5) 129.1
Net deficit on revaluation of investment 89.8 1,562.7 4,123.4

properties
Goodwill impairment (included within discontinued - 147.6 148.6

operations)
Impairment of trading properties 9.3 - 92.3
Share-based payment charge 3.9 4.4 8.6
Pension scheme charge 0.5 0.7 1.3
225.9 311.1 606.9

Changes in working capital:
Increase in trading properties and long-term development contracts (2.5) (19.1) (34.0)
(Increase)/decrease in (56.0) (19.8) 69.5

receivables
Increase/(decrease) in 49.8 (24.4) 8.9

payables and provisions
Net cash generated from 217.2 247.8 651.3

operations

17. Related party transactions

Joint ventures

As disclosed in note 10, the Group has investments in a number of joint ventures. Details of transactions and balances between the Group and its joint ventures are disclosed as follows:
Six months ended 30 September 2009 Year ended 31 March 2009
and at 30 September 2009 and at 31 March 2009
Revenues Net investments in Loans to joi

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