Gladstone Land Corporation Annual Report 2013

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FY2013 Annual Report · Gladstone Land Corporation

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WORKING TO
A CLEAR PLAN

Annual Report 2013

fuRThER INfORmATION

KEy REAds WIThIN
ThIs REPORT

In brief
An overview of our business
and performance throughout
the year.

ONLINE ANNuAL REPORT
www. landsecurities.com /annualreport2013

p 14

– Presentation of the year’s

key content

– Video stories from the year
– Executive team review of 2012/13
– ‘Create your own report’ tool and
Annual Report chart generator

CORPORATE WEbsITE
www.landsecurities.com
– Latest news and investor updates
– Profiles of our Board Directors
– Press releases
– Easy access to content on careers

and CR

CORPORATE REsPONsIbILITy
www.landsecurities.com/responsibility

– Why Corporate Responsibility

is important

– What CR means for investors,
employees and communities

– Examples of CR in action
– Priorities and progress in 2012/13

Chairman’s
message
Alison Carnwath reviews the
performance of the Company
during the year, outlines Board
activity and offers her outlook
on the year ahead.

Chief
Executive
Robert Noel reports on our market,
the Company’s strategy, the key
factors underlying our performance,
and our prospects over the next
12 months.

p 22

p 24

Financial
review

Martin Greenslade reports
on our financial performance
in detail.

Business
review

A focus on our Retail and London
portfolios and the key factors
underlying their performance.

p 26

p 36

Smart
thinking

Our smart long-term thinking
is achieving a successful and
sustainable business.

p 48

Good
governance

Information on how we manage
our businesses including Board
committees and Directors’
biographies and remuneration.

p 57

Financial
statements
Financial statements for
the Group and Company
including a report from the
independent auditor.

Investor
resource
Supporting information to provide
investors with a more detailed
analysis of the Company’s
performance.

p 93

p 147

Forward-looking statements

This Annual Report and the Land Securities website may contain certain “forward-looking
statements” with respect to Land Securities Group PLC and the Group’s financial condition,
results of operations and business, and certain of Land Securities Group PLC’s and the Group’s
plans, strategy, objectives, goals and expectations with respect to these items
and the economies and markets in which Land Securities operates.

Forward-looking statements are sometimes, but not always, identified by their use of
a date in the future or such words as “anticipates”, “aims”, “due”, “could”, “may”, “should”, “will”,
“would”, “expects”, “believes”, “intends”, “plans”, “targets”, “goal” or “estimates” or,
in each case, their negative or other variations or comparable terminology. Forward-looking
statements are not guarantees of future performance. By their very nature forward-looking
statements are inherently unpredictable, speculative and involve risk and uncertainty because
they relate to events and depend on circumstances that may or may not occur in the future.
Many of these assumptions, risks and uncertainties relate to factors that are beyond the
Group’s ability to control or estimate precisely. There are a number of such factors that could
cause actual results and developments to differ materially from those expressed or implied by
these forward-looking statements. These factors include, but are not limited to, changes in the
economies and markets in which the Group operates; changes in the legal, regulatory and
competition frameworks in which the Group operates; changes in the markets from which the
Group raises finance; the impact of legal or other proceedings against or which affect the
Group; changes in accounting practices and interpretation of accounting standards under IFRS;
and changes in interest and exchange rates.

Any written or verbal forward-looking statements made in this Annual Report or the Land
Securities website or made subsequently which are attributable to Land Securities Group PLC
or any other member of the Group or persons acting on their behalf are expressly qualified in
their entirety by the factors referred to above. Each forward-looking statement speaks only as
of the date it is made. Except as required by its legal or regulatory obligations, Land Securities
Group PLC does not intend to update any forward-looking statements.

Land Securities Group PLC
Copyright and trade mark notices
All rights reserved.
©Copyright 2013 Land Securities Group PLC.

Land Securities, LandSecurities (stylised),
the Cornerstones logo and Making Property
Work, are trade marks of Land Securities
Group PLC.

All other trade marks and registered
trade marks are the property of their
respective owners.

This report is printed on Naturalis and Olin
Smooth paper and has been idependently
certified on behalf of the Forest Stewardship
Council (FSC(R)). The inks used are vegetable
oil based.

Printed alcohol free by CPI Colour -
an ISO14001, FSC and CarbonNeutral®
certified company.

Design by saslondon.com
Words by Tim Rich
Photography by Luke Hayes
Board portraits by John Wildgoose

Land Securities Group pLC
5 Strand, London WC2N 5AF

T
E

+44 (0)20 7413 9000
investor.relations@
landsecurities.com
W www.landsecurities.com

THROUGH TOUGH MARKET
CONDITIONS WE HAVE
CONTINUED TO SEE
THINGS DIFFERENTLY.

WHILE OTHERS HELD bACK,
WE MADE AN EARLY START
ON DEVELOpMENT AND
HAVE FOUND NEW WAYS
TO MEET OCCUpIERS’
CHANGING NEEDS.

OUR DECISIVE AppROACH
HAS ENAbLED US TO MAKE
GOOD pROGRESS. AS WE
MOVE FORWARD, WE HAVE
A CLEAR pLAN FOR EVERY
ASSET AND A pORTFOLIO
WELL MATCHED TO THE
WORLD WE SEE AHEAD…

ESSENTIAL READ
ifc More information print and online
12 Land Securities in brief
13 Our portfolio in detail
14 Our performance at a glance
15 Strategy and key performance indicators
16 Our year of progress
18 Our top properties

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DIRECTORS’ REpORT
22 Chairman’s message
24 Chief Executive’s statement
26 Financial review
32 Our principal risks and
how we manage them

36 Retail Portfolio review of the year
42 London Portfolio review of the year
48 Corporate Responsibility Report

GOVERNANCE
58 Board of Directors
60 Corporate Governance Report
64 Nominations Committee Report
68 Audit Committee Report
74 Directors’ Remuneration Report
92 Report of the Directors

FINANCIAL STATEMENTS
94 Statement of Directors’ Responsibilities
95 Independent auditors’ Report
96 Income statement
96 Statement of comprehensive income
97 Balance sheets
98 Statement of changes in equity
100 Statements of cash flows
101 Notes to the financial statements

INVESTOR RESOURCE
148 Business analysis
152 Combined portfolio analysis
154 Lease lengths
155 Development pipeline
financial summary
156 Five year summary
158 Retail asset disclosures
160 London asset disclosures
162 Investor information
164 Glossary
ibc Forward-looking statements

Contact details

ESSENTIAL READ

WE ARE CREATING VALUE
bY HELpING OCCUpIERS
THRIVE IN A FAST-
MOVING WORLD...

WELLINGTON HOUSE
Delivered 2012

pORTLAND HOUSE
Operational

CARDINAL pLACE
Delivered 2006

NOVA VICTORIA
Delivery 2016-2018

Land Securities Annual Report 2013

ESSENTIAL READ

For example, at Victoria, SW1,
we are transforming an outdated
part of London into a thriving
centre with contemporary offices
and an exciting, modern mix of
retail and leisure.

KINGS GATE
Delivery 2015

THE zIG zAG bUILDING
Delivery 2015

62 bUCKINGHAM GATE
Delivered 2013

123 VICTORIA STREET
Delivered 2012

Land Securities Annual Report 2013

ESSENTIAL READ

IN LONDON, WE ARE
DELIVERING EFFICIENT,
MODERN SpACE INTO
A SUppLY-CONSTRAINED
MARKET...

Land Securities Annual Report 2013

ESSENTIAL READ

At 20 Fenchurch Street, EC3,
we are enabling businesses to
swap outdated office space for
hard-working, contemporary
space in an iconic building.

Land Securities Annual Report 2013

ESSENTIAL READ

IN RETAIL, WE ARE
WORKING TO bRING
THE bENEFITS OF
CONVENIENCE, LEISURE
AND THE INTERNET
TO THE HIGH STREET...

Land Securities Annual Report 2013

ESSENTIAL READ

Our new Trinity Leeds centre
offers a range of attractions
under one roof, from big brands
to local shops; from premium
restaurants to street food vans;
from multi-channel retailing
and interactive advertising
to public art.

Land Securities Annual Report 2013

ESSENTIAL READ

WE bELIEVE IN TAKING
CONTROL OF OUR
DESTINY, NOT RELYING
ON THE MARKET FOR
GROWTH...

Land Securities Annual Report 2013

ESSENTIAL READ

Since 2010 we have started
development on major schemes
while others have paused.
Our decision to press ahead is
providing us with strong returns
as we move through the cycle.

Despite difficult market
conditions back in 2010, we
chose to develop Park House,
W1 – a major mixed-use scheme
at the meeting point of Mayfair
and Oxford Street. We then
sold the asset later in the year
ahead of completion, and
recycled the capital into further
development activity.

Land Securities Annual Report 2013

ESSENTIAL READ

FROM DEVELOpMENT
TO ASSET MANAGEMENT,
WE ARE WORKING TO
A CLEAR pLAN.

2013

62 buckingham gate
London, SW1

Land Securities Annual Report 2013

Across London and Retail, we are
constantly evolving our portfolio
and adding to our development
pipeline, so we can ensure
our assets are well matched
to occupiers’ changing needs.

2014

20 fenchurch Street
London, ec3

ESSENTIAL READ

2013

craWLey high Street
WeSt SuSSex

2015

kingS gate
London, SW1

2014

biShop centre
tapLoW

Land Securities Annual Report 2013

ESSENTIAL READ

LAND SECURITIES
IN bRIEF

WHAT WE DO
Land Securities is a FTSE 100 company
and the largest Real Estate Investment
Trust (REIT) in the UK by market
capitalisation.

RETAIL
We own, manage and develop
shopping centres and retail parks
across the UK. Our assets are in
locations that have either a
proven record of trading success
or potential for future success.

TOp OCCUpIERS

p 36

LONDON
We own, manage and develop
a portfolio of office, retail and
residential space in the capital.
Our assets are concentrated in
central London, from Victoria
in the west to the City in the east.

TOp OCCUpIERS

p 42

Land Securities Annual Report 2013

OUR AppROACH
Our overall goal is to provide attractive and
sustainable total returns for our shareholders
by being at the forefront of meeting the space
requirements of our customers.

Our focus on the property market’s two largest
sectors gives us a range of opportunities and a
high quality tenant base.

OUR VISION AND VALUES

– Customer service – Integrity
– Excellence – Respect – Innovation

MANAGEMENT
The Board is responsible for providing
leadership for the Group. It ensures that
the right strategy is set, acceptable risks are
taken and appropriate financial and human
resources are in place in order to deliver
value to shareholders and benefits to the
wider community.

The Board also sets standards for ethical
behaviour and for monitoring environmental
and health and safety performance.

Executive Directors from the left: Martin Greenslade
(Chief Financial Officer), Robert Noel (Chief Executive)
and Richard Akers (Executive Director).

ESSENTIAL READ

OUR pORTFOLIO
IN DETAIL

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A breakdown of the
Company’s portfolios
into their major segments.

COMbINED pORTFOLIO
VALUE*

pORTFOLIO SpLIT bY
VALUE

£11.45bn

London
Portfolio 53%
Retail
Portfolio 47%

RETAIL pORTFOLIO

LONDON pORTFOLIO

* On a proportionate basis.

£5.35bn

Shopping centres
and shops

Retail warehouses
and food stores
Leisure and hotels
Other

59%

22%

18%
1%

Shopping centres and shops
This comprises 22 shopping centres
in major retail locations across the UK
including Trinity Leeds, Gunwharf
Quays, Portsmouth and Buchanan
Galleries in Glasgow.

Retail warehouses
Our 16 retail parks are typically located
away from town centres and offer a
range of retail and leisure with parking
providing convenient shopping. Assets
include Westwood Cross, Thanet and
Team Valley Retail Park, Gateshead.

Leisure and hotels
We own three stand-alone leisure assets
and a 59.4% share of the X-Leisure
Fund which comprises 16 schemes of
prime leisure and entertainment space.
We also own 29 Accor Group hotels in
the UK. They are leased back to Accor
Group for 78 years, with 12-yearly
tenant break clauses. Rent is set as a
percentage of each hotel’s turnover.

£6.10bn

West End

mid-town

City

Inner London

Central London shops

Other

34%

15%

18%

13%

18%

West End
Our £2.1bn West End office portfolio is
dominated by our Victoria assets which
include Cardinal Place, SW1 and
developments including The Zig Zag
Building, SW1 and Nova Victoria, SW1.

Mid-town
Positioned between the City and West
End, our cluster of buildings at New
Street Square, EC4, represent our
major assets in Mid-town.

City
Our £1.1bn City office portfolio includes
recently completed developments such as
One New Change, EC4, the development
programme including 20 Fenchurch
Street, EC3 and proposed developments
including 1 & 2 New Ludgate, EC4.

Inner London
Includes our assets at Canary Wharf
and south of the River Thames
including Bankside 2 & 3, SE1.

Central London shops
This segment comprises the retail
space in our London Portfolio assets.
The largest elements are the retail space
at One New Change, EC4, Cardinal
Place, SW1, and Piccadilly Lights, W1.

Land Securities Annual Report 2013

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ESSENTIAL READ

OUR pERFORMANCE
AT A GLANCE

Here we show the key performance
measures for the business.

PROFIT BEFORE TAX
(including valuation surplus)

TOTAL SHAREHOLDER RETURN

TOTAL BUSINESS RETURN

+X.X%
£X.Xm
£533m 19.1% 8.0%

+X.X%

Total shareholder return and total
business return provide shareholders
with the clearest guide to the Company’s
progress in financial terms.

REVENUE PROFIT (£m)

ADJUSTED DILUTED EARNINGS
PER SHARE (pence)

DIVIDENDS PER SHARE (pence)

2013

2012

2011

290.7

299.4

274.7

2013

2012

2011

36.8

38.5

35.51

2013

2012

2011

29.8

29.0

28.2

Revenue proﬁt is our measure of the underlying pre-tax proﬁt
of the Group.

1. Restated to exclude proﬁts on disposal of trading properties

and long-term contracts.

We aim to deliver a progressive dividend.

LOAN TO VALUE RATIO (%)1

VALUATION SURPLUS (£m)1

ADJUSTED DILUTED NAV
PER SHARE (pence)

2013

2012

2011

36.9

38.0

39.0

2013

2012

2011

217.5

190.9

2013

2012

2011

908.8

903

863

826

Includes proportionate share of joint ventures and subsidiaries.

The six charts above show the main components of our most important indicator of progress – total return.

COMBINED PORTFOLIO PERFORMANCE
RELATIVE TO IPD UNGEARED TOTAL
RETURN (%)
12 months ending 31 March 2013

Land Securities
IPD sector-weighted benchmark
IPD quarterly universe

15.1

12.5

10.2 9.6

5.4

7.8

2.4

3.2

1.1 0.5

London
ofﬁces1

Central London
shops

Retail
warehouses2

Shopping
centres

Total
Portfolio3

Land Securities’ total return would be higher by 0.4% for London
ofﬁces and 0.1% for total portfolio if adjusted for capital extracted
from Queen Anne’s Gate, SW1 through the 2009 bond issue.

Includes food stores for Land Securities.

Includes leisure and hotels and other for Land Securities.

Land Securities Annual Report 2013

RETAIL PORTFOLIO (%)
Rental and capital value movements
12 months ended 31 March 2013

Rental value change (like-for-like)

Valuation surplus

LONDON PORTFOLIO (%)
Rental and capital value movements
12 months ended 31 March 2013

Rental value change (like-for-like)

Valuation surplus

-1

-2

-3

-4

-5

0.3

-0.2

-0.4

-2.2

-1.5

-3.9

-5.1
Shopping
centres
and shops

-4.8

Retail
warehouses
and food stores

Leisure
and
hotels

Retail
Portfolio

6.2

5.4

4.8

5.4

7.1

1.1

1.6

1.2

2.2

1.5

West
End

City

Mid-
town

Central
London
shops

London
Portfolio

ESSENTIAL READ

STRATEGY AND KEY pERFORMANCE INDICATORS

Our goal is to provide attractive and sustainable total returns for our shareholders by being at the forefront of meeting the space requirements
of our customers.

Our strategy is to use all our resources, from the skilled people we employ to our financial capabilities, to drive the best possible returns from
our investments in the London and retail segments of the UK commercial property market. To deliver that strategy, we have set ourselves seven
fundamental objectives. We work to turn these objectives into tangible performance through the pursuit of our strategic priorities. As part of
our strategic priorities, we set individual key performance indicators (KPIs) against which we measure our performance each year.

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objective

Strategic priorities

kpi for the year

performance

– Three year Total Shareholder Return (TSR)

performance compared to the TSR performance
(weighted) of a comparator group of property
companies within the FTSE 350 Real Estate Index

– TSR outperformance of
1.26% per annum for the
three year period from
April 2010

1. Deliver
sustainable
long-term
shareholder
returns

2. Maximise
the returns
from the
investment
portfolio

3. Manage our
balance sheet
effectively

– Focus on the UK commercial property
market’s two largest sectors – London
and retail

– Ensure we have a clear plan for every asset

and deliver on that plan

– Make our shareholders’ capital work as hard
as possible, realising value and recycling
capital whenever we see the right opportunity
– Balance activity between development and
property investment in line with changing
market conditions

– Add value by being smart in the way we
manage assets and time acquisitions
and disposals

– Maintain tight financial discipline and an

appropriate level of gearing

– 1 year and 3 year Total Property Return (TPR)
performance compared to the IPD Quarterly
Universe, weighted to the sectors in which the
Group is invested

– Manage balance sheet gearing through an
approximate match between receipts from
disposals and outgoings on development
and acquisitions

– Charge Nova Victoria (Land Securities’ share) as
a further credit asset within the Security Group

– Outperformance versus

weighted IPD benchmark:
1 year 1.70%, 3 years 3.12%

The outturn is adjusted to take account of the
performance of trading properties and the capital
and income extracted from Queen Anne’s Gate,
SW1, through a bond issue in 2009.

– Net investment of £133.3m

in 2013 replaces net
divestment of £116.7m
in 2012
– Achieved

– £31.7m development
lettings in the year

– Trinity Leeds opened on
21 March 2013, ahead of
original schedule

– All developments on time
and to budget, with the
exception of Wellington
House, SW1, which was
delayed by two months

4. Maximise
development
performance

– Create value through development by

– Secure a minimum of £16.5m

delivering the right product at the right
point in the cycle, while keeping a tight
focus on cost

of development lettings

– Trinity Leeds to open on time

– Developments progressed to time

and to budget

5. Ensure
high levels
of customer
satisfaction

– Constantly deepen our understanding of
the market and our relationships with
customers, so we can anticipate and
respond to change quickly

– Deliver outstanding service in our

shopping centres

– Maintain overall customer satisfaction rates

– Retail 4.28

in Retail and London customer surveys
of 4 (out of 5) or over

London 4.05

6. Attract,
develop,
retain and
motivate high
performance
individuals

7. Continually
improve
sustainability
performance

– Continually work to strengthen the

– Employee feedback survey (Towers Watson

– 82% engagement score

reputation of the Company so the best people
want to join and stay at Land Securities

Engagement Survey) to exceed UK
national norm

– Ensure talented people within the Company
are well trained, supported and rewarded

– Make sound, long-term investments in our

buildings to ensure their performance
meets changing expectations and
regulations, and generate sustainable
returns in the years ahead

– Reduce carbon emissions from like-for-like managed
portfolio by 15% by 2020 (against 2010 benchmark)

– Develop positive relationships with local
authorities and local communities, so
people welcome our presence in their area

– Increase to 90% the amount of waste diverted from
landfill and recycle at least 70% by weight (as an
average across all centres) by March 2015

– 10% reduction in water use across the like-for-like
managed London office and Retail Portfolio by
March 2016, measured against a 2010/11 baseline

+2% vs 2012

– +9% outperformance vs

UK national norm

– Achieved 1.4% reduction
in the year to March 2013
against an interim
reduction target of
5% by March 2014
– Achieved 90.9%

landfill diversion with
68.2% reused or recycled
– Achieved 8.9% reduction

in water use in the London
office portfolio and a
10.2% reduction in the
Retail Portfolio

Land Securities Annual Report 2013

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ESSENTIAL READ

OUR YEAR
OF pROGRESS

A NEW CHIEF ExECUTIVE
Robert Noel took over from
Francis Salway as Chief Executive
in April 2012. Previously, Robert
had been Managing Director of
the London Portfolio for two
years, and previously Property
Director at Great Portland
Estates plc. He brings more than

25 years of property experience
to the job and has an outstanding
track record in the London
property market. On assuming
his new role, Robert thanked
Francis for his support and
commented: “Land Securities
has a clear strategy and is a very
well positioned business.”

123 VICTORIA STREET COMpLETED
August saw practical completion
at 123 Victoria Street, SW1 – one
of the Land Securities buildings
redefining Victoria as a place to
work, live and enjoy. Offering
office and retail space, the
building features a triple height
atrium, efficient floorplates,

stunning views over London and
three distinct entrances. Outside,
we have added decked, green and
pebbled terraces. On completion,
the building was 53% let. Office
occupiers include Jimmy Choo,
which has taken 4,450m2.

Practical completion achieved at 123 Victoria Street, SW1

REVIVING OxFORD STREET
In September Primark opened a
new flagship store at our Oriana,
W1, scheme, which we jointly own
with Frogmore. Located at the
east end of London’s Oxford
Street, the store covers 13,650m2
of prime retail space. The joint
venture also submitted a
planning application for an

additional 8,440m2 of retail space
along with 18 apartments. This
section of Oxford Street
is developing into one of the
liveliest parts of central London.
It is being given a further boost
with the £1 billion redevelopment
of Tottenham Court Road
station, with the Crossrail station
due to open in 2018.

Robert Noel – Land Securities Chief Executive

bETTER bY DESIGN
In June we published our Annual
Report 2012, which included
proposed changes to the
structure of Directors’
remuneration. The revised
approach reflected the reduction
in the number of Executive
Directors from four to three
following the departure of
Francis Salway. It was also
designed to better align
remuneration to the
performance of the Group,

rather than individual business
units. The new structure
removed discretionary elements,
aligned rewards more closely
with total shareholder return,
made them longer term in nature
and reduced the overall
quantum. Shareholders were
very supportive of the changes
and a resolution to adopt the
new structure was passed at the
Company’s AGM in July, with
98.3% support.

Land Securities Annual Report 2013

Primark opens its new flagship store at Oriana, W1

ESSENTIAL READ

JOHN LEWIS
With autumn came the opening
of the first John Lewis flexible
format department shop, in
Exeter city centre. The shop
trades over five floors and
occupies 10,080m2. The flexible
format enables John Lewis to offer
its full range through a smaller
footprint by supporting omni-

channel shopping, including
click and collect. Together with
our Princesshay development,
the shop gives people plenty of
reasons to visit Exeter. It also
provides more reasons for us,
Exeter City Council and our
partners, The Crown Estate, to
keep investing in the city’s retail
and leisure offer.

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20 FENCHURCH STREET LETS
In February we announced that
20 Fenchurch Street, EC3 – our
64,120m2 tower development in
the City – was more than half full
in terms of pre-lettings. We are
working with our joint venture
partner, Canary Wharf Group,
to deliver the scheme and with

a year to go until completion, this
iconic building has six tenants
signed up and is attracting very
strong interest from others.
Occupiers are drawn to its
modern, efficient space in a
prime location. See page 20
for more.

20 Fenchurch Street, EC3, taking shape

NEW RETAIL SCHEMES OpEN
Spring saw the completion of
two new Land Securities retail
schemes, with Trinity Leeds
and 185-221 Buchanan Street,
Glasgow, both opening their
doors in March. We received

one million shopper visits to our
75,900m2 Trinity Leeds centre
in the first ten days of trading.
The retail element at 185-221
Buchanan Street was fully let
on opening.

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John Lewis flexible format shop, Exeter

ACqUISITIONS
Building on our acquisition
earlier in the year of The
Cornerhouse, a leisure asset
in Nottingham, we went on to
buy central Manchester’s The
Printworks and a majority
interest in leisure operator
X-Leisure (completed in
January). The former is the
dominant leisure destination

Land Securities Annual Report 2013

in Manchester, attracting around
eight million visitors a year.
X-Leisure owns 16 leisure assets
across the UK, from Brighton
Marina to Xscape in Milton
Keynes. These investments
reflect our view that leisure is
an increasingly attractive sector,
with long lease lengths and
excellent opportunities to
enhance income.

185-221 Buchanan Street, Glasgow, opens for business

ESSENTIAL READ

OUR TOp
pROpERTIES

7. Piccadilly Lights, W1
Offices, retail, leisure and a world famous
advertising landmark. 2009 saw the
introduction of enhanced LED screens
and a flagship branch of Barclays.
Principal occupiers:
Hyundai, Barclays, Boots.

1. Cardinal Place, SW1
Stunning trio of buildings completed in 2006
by Land Securities, encompassing office space
and retail accommodation. This landmark site
is home to blue-chip businesses and retailers
including an M&S anchor store.
Principal occupiers :
Microsoft, Wellington Asset
Management, M&S.

2. New Street Square, EC4
Innovative offices with retail and restaurants.
Recreating traditional ground-level routes,
including a delightful public square, the
property offers office space with attractive
retail and leisure facilities. Developed by
Land Securities, and completed in 2008.
Principal occupiers :
Deloitte, Taylor Wessing, Speechly Bircham.

3. One New Change, EC4
A prime office and leisure destination in an
iconic building in the City of London, with
a roof terrace offering stunning views of
St. Paul’s Cathedral. Developed by Land
Securities, the retail and leisure space opened
in October 2010.
Principal occupiers:
K&L Gates, CME, H&M, Topshop, Next.

4. Queen Anne’s Gate, SW1
Built by Land Securities in 1977,
comprehensively refurbished in 2008,
it is the headquarters of the Ministry
of Justice.
Principal occupier:
Central Government.

5. Trinity Leeds
Located in a prime position in a thriving
city, this 75,900m2 retail destination was
developed by Land Securities and opened
in March 2013.
Principal occupiers:
H&M, Topshop, Next, Primark, River Island.

6. Gunwharf Quays, Portsmouth
Offering a unique blend of outlet shopping,
leisure and entertainment on a stunning
waterfront location, this landmark scheme
is a bustling centre of mixed-use space.
Leading brands:
Paul Smith, Jack Wills, Ted Baker, Polo/Ralph
Lauren, Jamie’s Italian.

Land Securities Annual Report 2013

ESSENTIAL READ

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Land Securities Annual Report 2013

20 FENCHURCH STREET
IN FOCUS

Having identified supply-constrained conditions
ahead, we moved forward with construction in
2010. The innovative design has created larger
floorplates on the more valuable upper floors,
using state-of-the-art modelling and materials
technologies to transform bold plans into reality.
Large open areas within the building mean occupiers
can consolidate their teams in one efficient space.
They also benefit from contemporary facilities,
stunning views and an iconic home.

ESSENTIAL READ

total m2

64,120
38Storey building
51%pre-let at

31 march 2013

Partners:
50:50 joint venture with
Canary Wharf Group.

Density:
One person per 8m2,
compared to City
average of one per 10m2
for new space.

Power:
Unique fuel cell power
plant to significantly
reduce building’s CO2
emissions.

Sustainability:
Minimum Very Good
BREEAM rating, set to be
upgraded to Excellent
following fit out.

Completing:
Spring 2014.

street

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more information:
Learn more about the
unique features that
make 20 Fenchurch
Street, EC3 stand out
www.landsecurities.com/
annualreport2013

Byward Street

3. Location
Within seven minutes
walk of four major
railway stations and
seven Tube stations, and
close to all major City
institutions and offices

4. Sky Garden
Landscaped public Sky
Garden with a café, bar,
restaurant and stunning
360-degree views

2. Floor space
Level 33 provides
2,734m2 of space
Level 7 provides 1,455m2
of space

Land Securities Annual Report 2013

DIRECTORS’ REPORT

Directors’ report

Chairman’s message
Alison Carnwath discusses our results, the
work of the Board and her outlook for the
year ahead.

p 22

Chief Executive’s
statement

Robert Noel reports on our financial
and operating performance over a busy
12 months.

p 24

Financial review
Martin Greenslade reports on our
financial performance in detail.

p 26

How we performed
Commentary on our progress, with
detailed analysis of performance in
the Retail and London portfolios.

p 36

A responsible
approach
A look at how our smart, long-term
way of working is helping to make
us a stronger business.

p 48

essential reaD
ifc More information print and online
12 Land Securities in brief
13 Our portfolio in detail
14 Our performance at a glance
15 Strategy and key performance indicators
16 Our year of progress
18 Our top properties

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Directors’ report
22 Chairman’s message
24 Chief Executive’s statement
26 Financial review
32 Our principal risks and
how we manage them

36 Retail Portfolio review of the year
42 London Portfolio review of the year
48 Corporate Responsibility Report

Governance
58 Board of Directors
60 Corporate Governance Report
64 Nominations Committee Report
68 Audit Committee Report
74 Directors’ Remuneration Report
92 Report of the Directors

Financial statements
94 Statement of Directors’ Responsibilities
95 Independent auditors’ Report
96 Income statement
96 Statement of comprehensive income
97 Balance sheets
98 Statement of changes in equity
100 Statements of cash flows
101 Notes to the financial statements

investor resource
148 Business analysis
152 Combined portfolio analysis
154 Lease lengths
155 Development pipeline
financial summary
156 Five year summary
158 Retail asset disclosures
160 London asset disclosures
162 Investor information
164 Glossary
ibc Forward-looking statements

Contact details

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Land Securities Annual Report 2013

DIRECTORS’ REPORT

cHairman’s
messaGe

Alison Carnwath assesses the
Company’s progress during a very
busy year. She reviews our results,
the work of the Board and the steps
taken to enhance remuneration
policy. She also shares her outlook
for the year ahead.

Land Securities Annual Report 2013

The Company had a good year. Despite
dreary economic conditions, we achieved a
strong set of results, with our Total Property
Return of 7.8% outperforming the IPD
Quarterly Universe by 4.4%. The other key
measures of performance, revenue profit and
adjusted net asset value per share, were ahead
of market expectations and we delivered a
Total Shareholder Return of 19.1%. We aim
to deliver a progressive dividend and we are
recommending a final dividend of 7.6p,
taking the total for the year to 29.8p, up 2.8%.

Our results were driven by our own actions
rather than a rising market. We were the first
property company to restart development
following the downturn and this activity
continues to bear fruit. Our schemes are well
matched to occupier demand, borne out by
our high level of leasing activity. Trinity
Leeds shopping centre opened close to full
occupancy and 20 Fenchurch Street, EC3,
at 56% pre-let or in solicitors’ hands is ahead
of schedule. Our regeneration of Victoria,
SW1, has continued apace: 62 Buckingham
Gate reached practical completion in May;
construction is underway at The Zig Zag
Building and Kings Gate; and we have
committed to start construction of Nova
Victoria (formerly Victoria Circle) in June
following completion of the demolition phase.

At the start of the year Robert Noel took
over as Chief Executive. His thorough
understanding of the business enabled him
to hit the ground running. He has set high
expectations and has created strong forward
momentum from which our business will
benefit in the future. I would like to thank all
of our staff for their individual and collective
contributions over the last 12 months.

During the year we consulted with
shareholders on new proposals for executive
remuneration. Our objective was to simplify
remuneration policy, further aligning
management rewards to shareholder returns.
Our plans included proposals to address
general shareholder concerns over
‘discretionary’ and ‘additional’ bonuses for
management, with a shift towards longer
term incentives and greater emphasis on
Total Shareholder Return. We explained our
plans to around half of our share register,
invited feedback and acted on what we heard.
The subsequent proposals received support
from 98.3% of those who voted at the AGM.

This consultation exercise underlines
the importance the Board places on
understanding your views. Investor road
shows enabled us to talk with more than 40%
of our shareholders by ownership, after each
of the annual and half yearly results. We also
held an annual investor conference at which
major shareholders met management below
Executive Director level. Our AGM is an
opportunity for all shareholders to express

good returns and shareholder value. In both
London and Retail our teams will work to
meet demand from successful businesses that
require new and better space. Development
is likely to remain the best route to superior
returns.

In short, the Company has performed well.
Everyone here is clear on the plan for the
year ahead and we are getting on with it.

Alison Carnwath
Chairman

total sHareHolDer returns*

taBle 1

Land Securities

FTSE 100

FTSE 350 Real Estate Index

Over one
year to
31 March
2013
(£)

119.1

115.4

121.8

* Historical TSR performance for a hypothetical investment of £100.

Source: Aon Hewitt

GeoGrapHical split oF tHe
company’s sHareHolDers (%)

cHart 2

Europe

North America

45%

21%

23%

Rest of the World

11%

DIRECTORS’ REPORT

their opinions. It is noteworthy that the
character of our shareholder register has
changed significantly since the Company’s
conversion to REIT status in 2007. Today
23% of our shareholders are based in North
America – a three-fold increase over five
years – and specialist real estate investors
now represent some 30% of our register.

Our markets continue to evolve at some
speed. Your Board constantly challenges
itself and management on the effects of
changing customer demands. The
experience around the boardroom table
means we are equipped to respond to new
trends. Over the last 12 months we have
invested time developing the skills of the
Directors at our Board strategy day and
Board development sessions. An external
review of Board effectiveness was also
undertaken. I want to thank our Directors for
their commitment and contribution this year.

To read more about the Board go to
pages 58-92.

Along with remuneration policy, key Board
agenda issues included the purchase of a
controlling stake in X-Leisure; the
commitment to our Nova Victoria, SW1
development; and our five-year forecast
and budget for the business. There were
no changes to the Board during the year
although we do expect to make a Non-
executive appointment over the next 12
months as part of succession planning for
the Board. We retain our diversity target of
25% female Board representation by 2015.

It is important that the Company maintains
good relationships with those who affect, and
are affected by, what we do. Our teams go to
great lengths to support the local areas in
which we operate, developing partnerships
with community groups and councils that can
make a lasting difference to people’s lives.
We are particularly involved in creating local
job and apprenticeship opportunities. This
year the Company started to record the full
socio-economic effect of our development
schemes, and we intend to share the results
with local authorities. We also support
Central Government in their efforts to boost
economic activity and employment.

Land Securities takes a lead on addressing
long-term issues relevant to our industry.
For example, changing environmental
regulation will have a substantial impact on
property owners and occupiers over coming
years. We are helping to inform government
decision-making in this area. We are also
giving close attention to environmental
issues in our business planning and the way
we design our buildings. Any other approach
would be short-sighted.

Moving forward, we will continue to rely on
our own actions, not the market, to generate

Land Securities Annual Report 2013

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DIRECTORS’ REPORT

cHieF executive’s
statement

From pushing forward with
development in London to opening
major new retail schemes, 2013 saw
the Company work to a clear plan.
Robert Noel reports on our financial
and operating performance over the
12 months.

Land Securities Annual Report 2013

We went into the year with a clear plan.
In London, we prioritised development
over property investment, as we continued
to believe this would generate substantially
higher returns at this point in the cycle.
In Retail, we focused on delivering our big
schemes, increasing our exposure to the
leisure sector and finding new ways to
respond to retailers’ changing needs.

Pursuit of these objectives meant it was an
extremely busy year across the business.
We completed 142,520m2 of new office, retail
and residential developments, including
2 km of shop frontage. We worked to secure
lettings, fill voids, reduce costs and add new
schemes to our development programme,
proving that modern, efficient buildings can
succeed in a subdued leasing market. Each
day we attracted close to a million visitors
to our shopping centres. We significantly
increased our investment in leisure. And we
maintained a strong balance sheet through
our financial discipline.

This activity led to robust financial and
operational results. Total Business Return
was 8.0%. Revenue profit at £290.7m and
adjusted diluted earnings per share at
36.8p were better than we expected at the
beginning of the year. And we managed our
void levels well, reducing them from 2.8% to
2.0% on a like-for-like basis. (See our results
on the following page for other highlights.)

We achieved this strong performance in spite
of a difficult economic backdrop. The UK
cannot decide whether it is in recession or
not. Employment growth is weak. Caution
reigns. Ongoing issues in the eurozone
haven’t helped. The world is an uncertain
place, so we are relying on our own efforts
to create value.

pressinG aHeaD in lonDon
Although demand in the capital has been
held back by weak business confidence, so
has supply. Our view has not changed since
my statement to you last year: low levels of
development, high numbers of lease expiries
from 2013 and evolving occupier needs mean
the market will not have enough of the right
product. Now is the time to be building and
delivering efficient and technically resilient
space that meets the needs of today’s
occupiers. At 20 Fenchurch Street, EC3, for
example, 56% of the space is now pre-let or
in solicitors’ hands – one year ahead of
completion – and our average rent is over
£60 per sq ft. Occupiers are recognising the
financial and social benefits of the building’s
efficient floorplates, along with its remarkable
views and facilities. We understand how to
design and deliver for our market and we
know how to fill our buildings.

DIRECTORS’ REPORT

Development is about timing. Looking at all
of the schemes we have started and completed
in London since 2010, 91% of the floorspace
had been let or sold by 31 March 2013. We
were right to press ahead with speculative
construction, and we are right to keep
building today. Construction costs have
remained at attractive levels but will increase
rapidly with a sustained upswing in activity.
We remain vigilant.

victoria takes sHape
Given these market dynamics, we are moving
at pace in Victoria, SW1. Cardinal Place is
thriving. The Wellington House apartments
were all sold by completion. 123 Victoria
Street was completed in August 2012 and
is 78% let. There is strong interest at 62
Buckingham Gate, although we would like
to have let it faster. The Zig Zag Building is
on schedule for completion in January 2015.
Our residential scheme at Kings Gate is due
to complete at the same time and 59 of the
100 apartments have already been pre-sold.
And we have committed to 67,500m2 of retail,
residential and office space at our Nova Victoria
(formerly Victoria Circle) joint venture.

In the past, people would only go to Victoria
if they had to. We are transforming the area
into one of the capital’s most desirable places
to live, work and play. By the end of this decade
we plan to have delivered over 210,000m2 of
new office, retail and residential space since
recommencing development in 2010.

winners anD losers in retail
Turning to retail, the market remains tough
with the consumer still under pressure.
People are generally making fewer visits to
shops but spending more time when there.
They demand convenience or a great
shopping experience – preferably both.
Retailers and properties unable to meet
those expectations are suffering. Destination
shopping centres and convenient edge-of-
town retail parks are well placed to compete
and we are prioritising those assets.

Online continues to impact physical retailing,
but we are also seeing and addressing
opportunities to integrate these channels
through click and collect, new formats for
online retailers, and new uses of mobile and
social media.

As we have said for some time, the changes
sweeping through retail are creating winners
and losers. We saw several high profile
retailers fail this year. We have seen others
expand. Our established relationships with
occupiers have enabled us to anticipate
insolvencies and re-let space promptly. Retail
like-for-like voids at the year end were 2.9%,
down from 3.3%.

new openinGs, new acquisitions
We had a busy March. Trinity Leeds opened
on the 21st, 95% let or in solicitors’ hands. We
then opened our shops at 185-221 Buchanan
Street, Glasgow, on the 22nd. The scheme
is fully let. The early success of these
developments demonstrates that – despite
the clouds over the retail sector – there is
demand for well designed, well located space
that matches the expectations of consumers,
retailers and the local community.

We continue to improve the portfolio,
investing in our winning assets and selling
others. Recent disposals have included
secondary assets in Worcester, Welwyn
Garden City and Liverpool.

Leisure is an increasingly important part of
the mix and we took action during the year to
increase our activity in this area. We acquired
The Cornerhouse in Nottingham and The
Printworks in Manchester – the latter a swiftly
executed transaction that shows the value of
a smart team and a strong balance sheet.
We increased our interest in the X-Leisure
Unit Trust to 59.4% and acquired 100% of
the management company. This gives us
exposure to 16 leisure assets across the UK
and we have welcomed a first class
management team into the business.

From sounD FounDations to
sustainaBle returns
While we are pushing ahead with development
we are doing so from strong financial footings.
We are keeping our net debt relatively constant
by funding developments and acquisitions
from sales. Our balance sheet gives us
flexibility, should difficult conditions prevail
and opportunities arise.

Our goal is to create attractive and
sustainable returns for shareholders. First
and foremost, we must ensure we create
and run properties that appeal to today’s
occupiers. But we must also address long-
range issues such as our impact on
communities and the environment, so
we meet future regulations and society’s
changing expectations. Across London, we
are creating jobs and making a substantial
contribution to UK plc. This includes
collaborating with partners to help people
into work. So far 199 people have secured
jobs through our London Employment
Strategy. The majority are individuals who
are furthest from the jobs market: young
people, long-term unemployed and ex-
offenders. At Trinity Leeds, over 200 people
have received training or work experience
through the project, and 80 have progressed
into permanent employment, a good
illustration of what our development activity
can bring to local economies.

cHart 3

Ungeared total property return %

7.8

3.2

Land Securities

IPD Quarterly
universe

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OUR RESULTS

8.0%

Total business return

4.6%

Increase in adjusted
diluted NAV per
share

-2.9%

Revenue profit

HiGHliGHts
– Profit before tax £533.0m, up 3.4%
– Revenue profit £290.7m, down 2.9%
– Adjusted diluted earnings per share 36.8p,

down 4.4%

– Valuation surplus of £217.5m or 2.0%
– Adjusted diluted NAV per share 903p, up 4.6%
– Recommended total dividend for the year 29.8p,

up 2.8%

– Sales of £65.9m
– Acquisitions of £529.4m

An approach that is both responsive and
responsible makes us a more successful
business. From local communities to
planning departments, we want people to
be pleased it’s Land Securities investing in
their neighbourhood.

our outlook
We move into a new financial year with an
optimism tempered by caution. In London,
we expect the occupational market to be
busier, but take-up to remain below the long
run average. We remain confident we will
continue to gain a good share of lettings
through the quality of our buildings. Overall,
the retail market will remain challenging,
but the response to structural change will
continue to separate successful retailers –
and property assets – from the rest.

In these mixed conditions it will be smart
real estate thinking that creates value.
By translating our clear plan into sound
property decisions on every asset, day after
day, we will continue to be successful.

Robert Noel
Chief Executive

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Land Securities Annual Report 2013

DIRECTORS’ REPORT

Financial review

Martin Greenslade reports on our
financial performance in detail,
explaining the movement in our key
financial measures and providing
an update on the balance sheet and
our financial strategy.

Land Securities Annual Report 2013

overview anD HeaDline results
Over the full year, valuation increases of
£217.5m (including our proportionate share
of subsidiaries and joint ventures) helped us
deliver a profit before tax for the year ended
31 March 2013 of £533.0m, compared to
£515.7m for the previous year. Basic earnings
per share were 68.4p compared to 67.5p for
the year ended 31 March 2012. However,
underlying earnings were down slightly;
revenue profit was £290.7m compared to
£299.4m last year and adjusted diluted
earnings per share declined from 38.5p
to 36.8p this year.

Our combined portfolio increased in value
from £10.33bn to £11.45bn as a result of
acquisitions, further investment in our
development programme and our valuation
surplus of £217.5m. Net assets per share
increased by 38p from 921p at 31 March 2012
to 959p at 31 March 2013. Adjusted diluted
net assets per share were up by 4.6% over the
year, increasing from 863p at 31 March 2012
to 903p. The 40p increase in adjusted diluted
net assets per share, together with the 29.4p
dividend paid in the year, represents an 8.0%
total return from the business.

A number of the measures we use internally
to assess the performance of the business
include the results of our joint ventures on
a proportionate basis. Having increased
our interest in the X-Leisure Unit Trust
(‘X-Leisure’) during the year to 59.4%,
X-Leisure is now accounted for as a
subsidiary. Accordingly, we now also adjust
these performance measures to exclude
the non-owned element of our subsidiaries
and refer to these measures as being on
a proportionate basis.

revenue proFit
Revenue profit is our measure of the
underlying pre-tax profit of the Group,
which we use internally to assess our income
performance. It includes the pre-tax results
of our subsidiaries and joint ventures on a
proportionate basis, but excludes capital
and other one-off items. A reconciliation of
revenue profit to our IFRS profit before tax
is given in note 4 to the financial statements.

Table 4 shows the composition of our revenue
profit including the contributions from
London and Retail.

Revenue profit decreased by £8.7m from
£299.4m last year to £290.7m. As anticipated
in the Financial Review last year, the fall in
revenue profit was due to a reduction in
non-recurring income, the impact of selling
investment properties ahead of finding
attractive buying opportunities and the
loss of income at Kingsgate House, SW1,
a property we demolished this year for
redevelopment. These items were also
behind the £25.0m reduction in net rental

DIRECTORS’ REPORT

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income, partly offset by new income from
completed developments and our acquisition
of leisure assets. Further information on
the net rental income performance of the
London and Retail portfolios is given in
the respective business reviews.

The indirect costs of London and Retail
and net unallocated expenses need to be
considered together as, in total, they
represent the net indirect expenses of the
Group including joint ventures. In total, net
indirect expenses were £76.8m compared
to £85.9m last year. The £9.1m reduction
in these costs is primarily due to staff
reductions, some expenditure being
deferred into next year and Brand Empire
closure costs of £2.7m having been incurred
in the prior year.

Our total cost ratio, which is calculated with
reference to our gross rental income and
includes both direct and indirect costs, was
up slightly at 19.7% (2012: 19.2%) due to lower
rental income following disposals. Direct

costs were £8.8m higher than last year due to
increased provisions against tenant incentives
and the prior year benefiting from non-
recurring items, the largest of which was the
release against costs of £5.8m of dilapidation
provisions. Total costs were down slightly on
last year at £119.0m (2012: £119.3m) with the
reduction in net indirect expenses offsetting
the increase in direct costs. Table 5 below
provides a more detailed breakdown of
our costs.

valuation surplus anD Disposal proFits
A key component of our pre-tax profit is the
movement in the values of our investment
properties and any profits or losses on
disposals. Over the course of the year, the
valuation increase on our combined portfolio
was £217.5m, up 2.0%. We made a small net
loss on the disposal of investment properties
of £1.6m (2012: profit of £46.4m) and we
recorded a net gain on disposal of trading
properties of £38.0m, up from £5.2m last
year. The profit on sale of trading properties

includes £20.7m on the sale of all the
residential units at Wellington House, SW1,
following practical completion in October
2012 and £15.4m in contingent sale proceeds
on land at Bankside, SE1, sold for residential
development in 2005.

A breakdown of the valuation surplus by
category is shown in table 6 over the page.

In aggregate, the like-for-like portfolio saw
a 0.1% decline in value over the year to March
2013, driven by a reduction in rental values of
1.5% with little change in yields.

Shopping centres and shops declined in value
by 3.2%, largely due to a 5.1% fall in rental
values as the occupational market weakened.
Values in retail warehouses and food stores
were down by 6.1% due to a combination of
rental value decline and outward movement
in equivalent yields, particularly for larger
lot sizes. London offices reported a 2.4%
valuation surplus, driven by rental value
growth and lower yields at Mid-town and

cost analysis

Gross rental income1

Net service charge expense

Direct property expenditure (net)

Net rental income

Indirect costs

Segment profit before interest

Unallocated expenses (net)

Net interest – Group

Net interest – joint ventures

Revenue profit

589.9

(2.2)

(40.0)

547.7

(40.3)

507.4

(36.5)

(149.2)

(31.0)

290.7

Direct
property
costs

£42.2m

Indirect
expenses
£76.8m

Includes finance lease interest, net of ground rents.

1.
2 . All percentages represent costs divided by gross rental income including finance leases before ground rents.

Total

Total cost ratio

£119.0m
19.7%

Year ended 31 March 2013

Total £m

Cost
ratio %

Total £m

taBle 5

2012

Cost
ratio %

Managed operations

Tenant default

Void related costs

Other direct property costs

9.4

8.3

12.5

9.4

1.6

1.4

2.1

1.6

9.5

2.9

14.7

7.6

1.5

0.5

2.4

1.2

Development expenditure

17.8

2.9

13.4

2.2

Asset management,
administration
and compliance

61.6

Total

119.0

10.2

19.7

71.2

119.3

11.4

19.2

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Land Securities Annual Report 2013

Revenue pRofit table 4Retail Portfolio £mLondon Portfolio£m31 March 2013£mRetail Portfolio£mLondon Portfolio£m31 March 2012£mChange £mGross rental income*313.8276.1589.9312.9293.2606.1(16.2)Net service charge expense(2.5)0.3(2.2)(2.8)(2.5)(5.3)3.1Direct property expenditure (net)(30.6)(9.4)(40.0)(26.4)(1.7)(28.1)(11.9)Net rental income280.7267.0547.7283.7289.0572.7(25.0)Indirect costs(23.4)(16.9)(40.3)(28.1)(17.7)(45.8)5.5Segment profit before interest257.3250.1507.4255.6271.3526.9(19.5)Unallocated expenses (net)(36.5)(40.1)3.6Net interest – Group(149.2)(155.5)6.3Net interest – joint ventures(31.0)(31.9)0.9Revenue profit290.7299.4(8.7)* Includes finance lease interest, net of ground rents payable.

DIRECTORS’ REPORT

valuation analysis

Shopping centres and shops

Retail warehouses and food stores

Leisure and hotels

London offices

Central London shops

Other (Retail and London)

Total like-for-like portfolio

Proposed developments

Completed developments

Acquisitions

Development programme

Total combined portfolio

Market value
31 March 2013
£m

Valuation
surplus
%

Rental value
change*
%

Net initial
yield
%

Equivalent
yield
%

2,384.4

1,093.4

450.8

3,656.0

842.4

100.4

8,527.4

123.6

759.3

593.1

1,443.0

11,446.4

(3.2)

(6.1)

0.7

2.4

8.4

(2.4)

(0.1)

3.7

3.3

(2.2)

16.8

2.0

(5.1)

(2.2)

0.3

1.3

2.2

(6.2)

(1.5)

n/a

1.4

n/a

(1.3)

6.4

5.5

6.7

5.1

4.2

4.1

5.5

–

3.8

5.8

0.7

4.7

6.3

5.9

6.7

5.5

5.3

5.0

5.8

n/a

5.2

6.7

5.3

5.7

taBle 6

Movement in
equivalent
yield
bps

(3.0)

31.0

(12.0)

(7.0)

(24.0)

(47.0)

(5.0)

n/a

(8.0)

n/a

(3.0)

Rental value change excludes units materially altered during the year and Queen Anne’s Gate, SW1.

City properties. Central London shops saw
an 8.4% valuation surplus as equivalent yield
compression of 24 basis points was augmented
by a 2.2% increase in rental values.

Outside the like-for-like portfolio, proposed
developments were up 3.7% due to design
changes and lower than expected
construction costs following receipt of
tenders. Completed developments rose in
value by 3.3%, driven by yield compression
and rental value increases on the back
of lettings.

Purchase costs accounted for the 2.2%
valuation decline of acquisitions while the
development programme was up by 16.8% as
risk reduced on some of our major schemes
through pre-letting and construction progress.

earninGs per sHare
Basic earnings per share were 68.4p,
compared to 67.5p last year, an increase of
1.3% reflecting the small increase in profit
after tax, partly offset by the impact of
additional shares issued under the scrip
dividend scheme.

In a similar 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 decreased by 4.4% from
38.5p last year to 36.8p per share this year.
This was mainly due to the decrease in
revenue profit, together with a small impact
from the additional shares issued under the
scrip dividend scheme.

total DiviDenD
We are recommending a final dividend
payment of 7.6p per share. Taken together
with the three quarterly dividends of 7.4p,
our full year dividend will be 29.8p per share
(2012: 29.0p) or £232.4m (2012: £225.5m).

Land Securities Annual Report 2013

Shareholders continue to have the
opportunity to participate in our scrip
dividend scheme and receive their dividend
in the form of Land Securities shares (a scrip
dividend alternative) as opposed to cash. The
average take-up for the four dividends paid
during the year was 21.8%. This resulted in
the issue of 6.6m new shares at between 726p
and 811p per share and £50.4m of cash being
retained in the business. However, in line
with our approach outlined last year to buy
back shares issued at a material discount
in connection with the scrip dividend, we
bought back 4.6m shares at a cost of £34.4m
at between 713p and 774p.

All of the cash dividends paid and payable
in respect of the financial year ended
31 March 2013 comprise Property Income
Distributions (PID) from REIT qualifying

activities. In contrast to the cash dividends,
none of the scrip dividends paid to date
have been PIDs and therefore they have not
been subject to the 20% withholding tax
requirement which applies to PIDs for
certain classes of shareholders. The latest
date for election for the non-PID scrip
dividend alternative in respect of the final
dividend will be 24 June 2013 and the
calculation price will be announced on
2 July 2013.

Looking ahead, there is a limit to the amount
of non-PID scrip dividends we can pay due to
the REIT requirement to distribute 90% of
our earnings (calculated on a tax basis) as a
PID. As a result, we may need to suspend our
scrip dividend or offer it in the form of a PID
dividend. Any changes will be communicated
to shareholders in advance.

net assets attriButaBle to owners oF tHe parent

Net assets at the beginning of the year

Adjusted earnings

Valuation surplus on investment properties

(Loss)/profit on disposal of investment properties

Profit on disposal of trading properties

Other

Profit after tax attributable to owners of the Parent

Cash dividends

Purchase of own shares and treasury shares

Other reserve movements

Net assets at the end of the year

Fair value of interest-rate swaps

Debt adjusted to nominal value

Adjusted net assets at the end of the year

To the extent tax is payable, all items are shown post-tax.

Year ended
31 March 2013
£m

taBle 7

Year ended
31 March 2012
£m

7,155.4

6,811.5

288.2

217.5

(1.6)

38.0

(9.1)

533.0

(178.4)

(34.9)

11.6

298.3

190.9

46.4

5.2

(17.9)

522.9

(154.8)

(18.5)

(5.7)

7,486.7

7,155.4

24.5

(432.8)

7,078.4

20.8

(450.9)

6,725.3

DIRECTORS’ REPORT

casH Flow anD net DeBt

Net cash inflow from operations

Dividends paid

Non-current assets:

Acquisitions

Disposals

Capital expenditure

Loans repaid by third parties

Joint ventures

Business combination

Fair value movement of interest-rate swaps

Purchase of own shares

Other movements

(Increase)/decrease in net debt

Net debt at the beginning of the year

Net debt at the end of the year

Year ended
31 March 2013
£m

taBle 8

Year ended
31 March 2012
£m

246.7

(178.3)

(243.9)

509.9

(277.0)

(11.0)

0.8

(119.6)

(404.3)

(1.6)

(34.9)

(13.2)

(515.4)

(3,183.2)

(3,698.6)

254.1

(153.1)

(107.3)

513.7

(307.0)

99.4

22.8

(45.5)

–

(4.5)

(18.5)

(24.3)

130.4

(3,313.6)

(3,183.2)

net assets
At 31 March 2013, our net assets per share
were 959p, an increase of 38p or 4.1% from
31 March 2012. The increase in our net assets
was primarily driven by the increase in
value of our investment properties, profits
on disposal of trading properties and our
adjusted earnings, partly offset by the
dividends we paid.

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 include our debt at
its nominal value. At 31 March 2013, adjusted
diluted net assets per share were 903p per

share, an increase of 40p or 4.6% from
31 March 2012.

Table 7 summarises the main differences
between net assets and our adjusted measure
of net assets together with the key movements
over the year.

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casH Flow
A summary of the Group’s cash flow and
movement in net debt for the year is set out
in Table 8.

The main cash flow items are typically
operating cash flows, the dividends we pay
and the capital transactions we undertake.
Operating cash inflow after interest and tax
was £246.7m for the year ended 31 March 2013,
down slightly on the £254.1m received last year
following asset disposals. We spent £243.9m
acquiring new assets, including The Printworks
in Manchester and The Cornerhouse in
Nottingham, and we invested £277.0m in our
portfolio as capital expenditure. This net
investment was broadly funded by proceeds from
disposals including Arundel Great Court, WC2,
50% of Nova Victoria, SW1 (formerly Victoria
Circle) and St John’s Centre, Liverpool. We
invested a further £119.6m in our joint ventures
primarily to fund our developments at Nova
Victoria, SW1 and 20 Fenchurch Street, EC3.

The £404.3m business combination relates
to the cost of acquiring further units in
X-Leisure, all of its £280.6m underlying net
debt, as well as 100% of its management
company.

our approacH to GearinG
When we consider gearing, we need to recognise that we have both financial gearing and operational gearing.
We aim to use both forms of gearing to enhance our returns without taking excessive risk.

taBle 9

Financial

How it arises
– Debt we have on our
balance sheet or in
joint ventures.

The potential benefits and risks
– Magnifies the financial effects of
income and valuation movements.

– Accentuates negative as well as

positive movements.

Operational

– Principally from
development of
properties,
particularly if
speculative.

– Magnifies the potential returns
available from capital invested
in property.

– Higher volatility of valuation

movements and potential income
shortfalls.

How we measure it
– Assess in terms of

How we manage it
– In normal market conditions: 35% to

interest cover
ratios (ICR) and
Loan to Value
(LTV) ratios.

– Assess in terms of
income at risk
from capital
invested.

– The proportion of
capital deployed
in development.

– Level of

committed capital
expenditure.

45% LTV (inner range).

– Certain stages in the cycle: 25% to 55%

LTV (outer range).

– Increased pace at which market factors
influence asset values is encouraging
us towards lower financial leverage.

– We also consider LTV including

unspent but committed development
capital expenditure.

– Using conservative letting

assumptions, the income impact from
the un-let element of our development
programme should not exceed
underlying retained earnings for
the year.

– Total development cost of current

developments should not exceed 20%
of total assets unless significantly
pre-let.

– Committed development expenditure
not to exceed 90% of available cash
and undrawn bank facilities.

Land Securities Annual Report 2013

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DIRECTORS’ REPORT

GearinG

Adjusted gearing* on
a proportionate basis

Group LTV

Group LTV on a
proportionate basis

Security Group LTV

taBle 10

31 March
2012
%

31 March
2013
%

60.6

40.2

36.9

37.7

59.2

40.4

38.0

37.6

* Book value of balance sheet debt increased to recognise nominal value

of debt on refinancing in 2004 divided by adjusted net asset value.

net DeBt anD GearinG
As a result of the cash flows described on
the previous page and, in particular, the
inclusion of 100% of the X-Leisure net
debt, our net debt increased by £515.4m
to £3,698.6m. Adjusted net debt, which
is presented on a proportionate basis and
includes the nominal value of our debt but
excludes the mark-to-market on our swaps,
was up £308.8m at £4,290.2m (31 March
2012: £3,981.4m).

Since our general approach on capital
transactions is for asset disposals to fund
our capital expenditure and acquisitions,
we would expect our adjusted net debt to be
relatively stable over time. This is not a strict
target and the strength of our balance sheet
allows us to take advantage of opportunities
as they arise. This year, we saw an opportunity
to increase our exposure to leisure assets
through acquisitions, which led to the
£308.8m increase in adjusted net debt.
In contrast, last year’s adjusted net debt
declined by £204.5m as we sold some
secondary assets but saw fewer investment
opportunities.

Table 10 above sets out various measures
of our gearing.

FinancinG structure

Bond debt

Bank borrowings

Amounts payable under finance leases

Less: cash and restricted deposits

Adjusted net debt

Despite the increase in debt compared to
last year, our LTV measures are broadly
unchanged as a result of the increase in the
value of our assets. The measure most widely
used in our industry is loan-to-value (LTV).
We focus most on Group LTV presented on
a proportionate basis. This LTV measure
declined from 38.0% at March 2012 to 36.9%
at March 2013, which is in line with our
strategy at this stage in the property cycle
of allowing gearing to decline as property
values rise.

The small rise in our Security Group LTV to
37.7% (2012: 37.6%) is a result of increasing
the funding to our joint ventures using
cheaper Group facilities in place of separate,
standalone finance.

Our interest cover, excluding our share of joint
ventures, has reduced from 2.5 times in 2012 to
2.4 times in 2013. 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 year to 31 March 2013 was
2.1 times. Further information on our
approach to gearing is included in table 9 on
the previous page.

FinancinG structure anD strateGy
The total capital of the Group consists of
shareholders’ equity, non-controlling
interests and adjusted net debt. Since IFRS
requires us to state a large part our net debt
at below its nominal value, we view our capital
structure on a basis which adjusts for this.
Table 11 below outlines our main sources of
capital. Further details are given in notes
31 and 32 to the financial statements.

In general, we follow a secured debt strategy
as we believe that this gives the Group and

joint ventures better access to borrowings
and at lower cost. Other than our finance
leases, all our borrowings at 31 March 2013
were secured.

A key element of the Group’s capital structure
is that the majority of our borrowings are
secured against a large pool of our assets
(the Security Group). This enables us to raise
long-term debt in the bond market as well as
shorter-term flexible bank facilities, both at
competitive rates. In addition, the Group
holds a number of assets outside the Security
Group structure (in the Non-Restricted
Group). These assets are typically our joint
venture interests, our interest in X-Leisure or
other properties on which we have separate,
asset-specific finance. By having both the
Security Group and the Non-Restricted
Group, and considerable freedom to move
assets between the two, we are able to raise
the most appropriate finance for each
specific asset or joint venture.

Importantly, we can use borrowings raised
against the Security Group to fund
expenditure on both acquisitions and
developments. At a time when finance to
fund capital expenditure on speculative
developments remains scarce, this gives the
Group a considerable advantage in being
able to develop at this point in the cycle.

During the year, in the Security Group,
we extended a £135m bilateral revolving
credit facility, which was due to expire in
November 2014, to March 2018 and
marginally improved the headline pricing to
Libor +120 basis points. This facility extends
our pool of committed facilities beyond that
of the £1,085m revolving credit facility which
has an expiry date of December 2016. We also
successfully charged our equity interest in
the Nova Victoria partnership in the year.

Adjustment
for
proportionate
share
£m

–

(122.5)

(1.9)

11.4

Group
£m

3,353.8

801.7

28.7

(72.6)

4,111.6

(113.0)

Joint
ventures
£m

–

340.1

4.5

(53.0)

291.6

2013

Combined
£m

3,353.8

1,019.3

31.3

(114.2)

Group
£m

3,363.5

300.0

23.3

(59.2)

4,290.2

3,627.6

taBle 11

2012

Combined
£m

3,363.5

693.4

27.8

(103.3)

3,981.4

Joint
ventures
£m

–

393.4

4.5

(44.1)

353.8

Non-controlling interests

Adjusted equity attributable to owners of the Parent

Total adjusted equity

–

7,070.0

–

8.4

–

7,078.4

0.2

6,711.0

6,711.2

–

14.3

0.2

6,725.3

6,725.5

Total capital

11,181.6

(113.0)

300.0

11,368.6

10,338.8

368.1

10,706.9

Land Securities Annual Report 2013

DIRECTORS’ REPORT

Introducing this asset into the Security
Group is important as its value will grow as
we invest significantly in the redevelopment
of Nova Victoria, SW1.

In the Non-Restricted Group, our Oriana
joint venture with Frogmore entered into
a new £195m four year investment and
development facility. The facility replaced
an existing £144m loan due to mature on
30 May 2013 and, importantly, provides a
£25m development commitment to part
fund our planned phase two development
at the eastern end of Oxford Street.

The weighted average duration of the Group’s
debt (on a proportionate basis) is 9.7 years
with a weighted average cost of debt of 4.9%.

HeDGinG
We use derivative products to manage our
interest-rate exposure, and have a hedging
policy which generally requires at least 80%
of our existing debt plus increases in debt
associated with net committed capital
expenditure to be at fixed interest rates for
the coming five years. Specific interest-rate
hedges are also used within our joint
ventures to fix the interest exposure on
limited-recourse debt. At 31 March 2013,
Group debt (on a proportionate basis) was
90.7% fixed (2012: 94.8%) and the notional
amount of outstanding interest-rate swaps
at 31 March 2013 was £1,230.4m.

taxation
As a consequence of the Group’s conversion
to REIT status, income and capital gains
from our qualifying property rental business
are now exempt from UK corporation tax.
No tax charge arose in respect of the current
year (2012: £8.0m tax credit). At 31 March
2013 the Group held a provision of £21.3m
(2012: £21.3m) for interest on overdue tax
in relation to a dispute with HMRC, which
has now been resolved. The liability will be
settled during 2013/14.

net pension surplus
The Group operates a defined benefit
pension scheme which is closed to new
members. At 31 March 2013, the scheme
was in a net surplus position of £5.9m
compared to a deficit of £2.4m at 31 March
2012. The change is primarily due to a
£30.4m increase in the value of the scheme’s
assets as a result of the return from scheme
investments. Further information regarding
the defined benefit pension scheme,
including the assumptions adopted and the
related sensitivities, can be found in note 34
to the financial statements.

Martin Greenslade
Chief Financial Officer

Land Securities Annual Report 2013

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DIRECTORS’ REPORT

our principal risks anD
How we manaGe tHem

Our Board recognises the importance of
identifying and actively monitoring the full
range of financial and non-financial risks
facing the business. By regularly reviewing
the risk appetite of the business, the Board
ensures that the risk exposure remains
appropriate at any point in the cycle. Whilst
responsibility for risk management clearly
rests with the Board, the management of risk
is embedded as part of our everyday business
activities and culture and all our employees
are responsible for maintaining the control
framework.

Importantly the Board perceives risk not only
as having a potential negative influence on
the business but also as an opportunity that
can be a source of financial outperformance.

For effective risk management it is necessary
that the identification, assessment and
management of known and emerging risks
form part of a dynamic process. (See page 72.)

We manage risk by operating a ‘Three lines
of defence’ risk and control model. The first
line lies with operational management
implementing and maintaining effective

internal controls. They are supported by
a number of oversight functions which form
the second line. Internal Audit serves as the
third line, tasked with reviewing controls and
risk management procedures, identifying
areas for improvement and reporting to
Senior Management and the Audit
Committee. Due to its independence and
objectivity, Internal Audit is able to provide
reliable assurance on the effectiveness of the
overall governance, risk management and
internal control processes.

risk manaGement process

cHart 12

risk anD control – ‘tHree lines oF DeFence’

cHart 13

Identify

Report risks
and mitigation
to the Board

Assess
and quantify

Re-assess risk
post-mitigation

Develop action
plans to mitigate

1st line of defence
– Management
– Internal control

framework

2nd line of defence
– Financial control
– Risk management
– Health and safety
– Environment
– Business standards
– Legal

3rd line of defence
– Internal Audit

The following tables show the principal risks and uncertainties facing the business, the Board’s view on how they have changed over the year,
the processes by which we aim to manage them and which of our strategic objectives they impact.

principal risks key

Strategic goal and objectives
Our overall goal is to provide attractive and sustainable
total returns for our shareholders by being at the
forefront of meeting the space requirements of our
customers. To deliver that strategy, we have set
ourselves seven fundamental objectives:

1. Deliver sustainable long-term

5. Ensure high levels of customer

Change from last year

shareholder returns.

satisfaction.

2. Maximise the returns from the

6. Attract, develop, retain and motivate

investment portfolio.

3. Manage our balance sheet effectively.
4. Maximise development

high performance individuals.
7. Continually improve sustainability

performance.

Increased
No change
Reduced

performance.

people

Risk description

Impact

Mitigation

Change from 2011/12

Strategic objectives

People
p49–50
Inability to attract,
retain and develop
the right people.

– Lack the skills

– Competitive remuneration plans.

necessary to deliver
the business
objectives.

– Appropriate mix of insourcing and outsourcing.

– Clear employee objectives and development plans.

– Annual employee engagement survey.

– Succession planning and talent management.

1, 6

Stable senior
management team
with clear evidence of
employee progress.

Land Securities Annual Report 2013

DIRECTORS’ REPORT

Financial

Risk description

Impact

Mitigation

Change from 2011/12

Strategic objectives

Liability structure
p30–31
Lack of availability
of bank funding.

Liability structure
is unable to adapt
to changing asset
strategy or
property value.

– Increased cost of

borrowing.

– Limits ability to

meet existing debt
maturities and fund
forward cash
requirements.

– £1.1bn revolving credit facility in place, which matures in 2016
and a £135m bilateral facility which matures in March 2015.

– Access to different sources of finance with most of our

funding on a long-term basis and with a spread of maturity
dates. The weighted average life of our debt at 31 March 2013
is 9.7 years.

– Modest gearing (Security Group LTV at 31 March 2013 of 37.7%).

– Reduced financial
and operational
flexibility.

– The Group’s Asset and Liability Committee meets three

times a year to monitor both sides of the balance sheet and
recommend strategy to the Board.

– Missed business

– We manage the business within an inner gearing range

Despite continuing
uncertainty in both
the financial sector
and the eurozone, the
cost and availability
of medium- and
long-term facilities
have improved.

1, 3

opportunities and
higher cost of
financing.

of 35% to 45% LTV in normal market conditions.

– Security Group structure allows assets to be sold and ability

to raise new debt.

– Our principal debt funding structure benefits from financial

default only being triggered at 1 times Security Group
ICR (currently 4.1 times) or 100% Security Group LTV
(currently 37.7%).

– At less than 1.45 times ICR or greater than 65% LTV, a

persuasive covenant regime applies which is designed to
preserve cash for the potential protection of lenders and
encourage the business to reduce debt.

– The existing revolving credit facility provides flexibility

as it allows debt to be drawn in certain circumstances even
when the Security Group LTV exceeds 65%.

reGulatory

Risk description

Impact

Mitigation

Change from 2011/12

Strategic objectives

Health and safety
p48–56
Accidents causing
injury to
employees,
contractors,
tenants and visitors
to our properties.

– Criminal/civil
proceedings
and resultant
reputational
damage.

– Board responsibility for health and safety.

1, 5

– Quarterly Board reporting.

– Dedicated specialist personnel.

– Annual cycle of health and safety audits.

– Established policy and procedures including ISO 18001

certification.

Environment
p48–56
Properties do
not comply with
legislation or
meet customer
expectations.

– Increased cost base.

– Board responsibility for environment.

1, 5, 7

– Inability to attract
or retain tenants.

– Dedicated specialist personnel.

– Established policy and procedures including ISO 14001

certified environmental management system.

– Active involvement in legislative working parties.

– Active environmental programme addressing key areas

of energy and waste.

Continuing
investment and focus
on energy and waste
management across
the portfolio.

Land Securities Annual Report 2013

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principal risks key

1. Deliver sustainable long-term

5. Ensure high levels of customer

Change from last year

shareholder returns.

satisfaction.

2. Maximise the returns from the

6. Attract, develop, retain and motivate

investment portfolio.

3. Manage our balance sheet effectively.
4. Maximise development performance.

high performance individuals.
7. Continually improve sustainability

performance.

Increased
No change
Reduced

property investment

Risk description

Customers
p48–56
Pressure on
consumer
spending.

Market cyclicality
p22–31
Volatility and
speed of change
of asset valuations
and market
conditions.

Impact

Mitigation

Change from 2011/12

Strategic objectives

– Shift in customer
demand with
consequent impact
on new lettings,
renewal of existing
leases and rental
growth.

– Retail tenants
unable to meet
existing rental
commitments.

– Large and diversified tenant base (our largest retail tenant,

Arcadia, represents only 2.3% of rents).

– Of our income, 62.8% is derived from tenants who make

less than a 1% contribution to rent roll.

– High quality property portfolio, of which 58.9% is located

in London.

– Target for maximum percentage of leases subject to expiry

1, 2, 5

Trading conditions
continue to be very
difficult for tenants,
particularly within the
retail sector, resulting
in a number of tenant
failures.

in any one year.

– Experienced leasing team.

– Active development programme to maintain a modern

portfolio well suited to occupier requirements.

– Strong relationships with occupiers.

– Variety of asset types and, for the Retail Portfolio,

geographic spread.

– Reduces liquidity

– Large multi-asset portfolio.

1, 2

and relative
property
performance.

– Monitor asset concentration (our largest asset is only 5.9%

of the total portfolio).

– Average investment property lot size of £67.3m.

– Generally favour full control and ownership of assets

(14.0% of assets currently in joint ventures).

– Average unexpired lease term of 9.1 years with a maximum
of 11.0% of gross rental income expiring or subject to break
clauses in any single year.

– Reduction in

revenue profits.

Acquisitions
p22–31
Inability to acquire
new assets to
replace properties
that have been
sold or are in the
process of being
redeveloped.

– Experienced investment team.

1, 2, 3

– Integrated portfolio and investment management teams.

– Ability to control level of property sales.

– Risk analysis of speculative development pipeline on capital

and income basis.

– Strategy of flexing size of development programme

according to the outlook for the market cycle.

Although the risk is
not considered to have
changed from the
prior year, there
remains a lack of
attractively priced
assets in both the
London and retail
sectors. Despite this,
we have broadly
balanced sales with
development
expenditure and
acquisitions,
increasing the
proportion of leisure
within our business in
line with our strategy.

Land Securities Annual Report 2013

DIRECTORS’ REPORT

Development

Risk description

Impact

Mitigation

Change from 2011/12

Strategic objectives

Development
p22–31
Occupiers
reluctant to enter
into commitments
to take new
space in our
developments.

– Negative
valuation
movements.

– The impact of failing to lease the un-let element of our
development programme must not exceed the Group’s
retained earnings.

– Reduction in

– Proportion of capital employed in development programme

income.

(based on total costs to completion) will not exceed 20% of our
total capital employed, save that where a material part of the
development programme is pre-let, this proportion can rise
to 25%.

– Monitor the level of committed future capital expenditure
on our development programme relative to the level of our
un-drawn debt facilities.

– Monitor market cycle and likely tenant demand before

committing to new developments.

– Risk analysis of speculative development pipeline on capital

and income basis.

– Strategy of flexing size of development programme according

to the outlook for the market cycle.

1, 2, 3, 4

Difficult trading
conditions continue to
affect tenant appetite
to take on new space,
particularly within the
retail sector. Despite
this our development
programme continues
to attract good
quality tenants with
Trinity Leeds 89%
let prior to opening,
20 Fenchurch Street
51% pre-let ahead
of its April 2014
completion and
62 Buckingham Gate
now 10% pre-let.

current assessment oF principal risks
The inherent and residual positioning of our
principal risks are illustrated in the diagram
opposite in terms of impact and likelihood.
The inherent or gross risk is the risk that an
activity would pose if no controls or other
mitigating factors were in place. The residual
risk (net risk) is the risk that remains after
controls have been taken into account.

Risk

1. Liability structure
2. Customers
3. Market cyclicality
4. Acquisitions
5. Development
6. People
7. Health and safety
8. Environment

emerGinG risks
Emerging risks are those for which the full
extent and implications are not yet fully
understood. The diagram opposite indicates
our current assessment of these risks in terms
of the likelihood, timeframe and impact to
our business.

Risk

1. Eurozone crisis
2. Climate change
3. Cyber-terrorism
4. Power shortages
5. Increased energy regulation
6. Increased financial regulation

h
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d
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n
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Inherent risk

Residual Risk

unlikely

Likelihood

Almost certain

High impact

medium impact

Low impact

<6 months

Time

uncertain

Land Securities Annual Report 2013

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DIRECTORS’ REPORT

retail portFolio
review oF tHe year

HiGHliGHts

- 1.5%

Valuation deficit

£11.0m

Development lettings

£501.5m

Acquisitions, including The
Cornerhouse, Nottingham,
The printworks, Manchester
and X-Leisure

86,600m2 of retail space
completed at Trinity Leeds
and Buchanan Street,
Glasgow

Investment lettings of £14.6m,
0.3% above ERV (excludes
pre-development properties)

Like-for-like voids down from
3.3% to 2.9%

proGress aGainst our oBjectives For 2012/13

Objective

progress

Outperform IPD sector benchmark.

The portfolio outperformed its IPD sector
benchmark by 2.7%.

Protect occupancy by dealing effectively with
retailer administrations.

31 March 2013 voids lower at 2.9%. Units
in administration unchanged at 2.3%.

Progress development lettings at Trinity
Leeds; 185-221 Buchanan Street, Glasgow;
Bishop Centre, Taplow; Peterborough; Derby;
and Selly Oak.

Letting levels at these schemes at 31 March
2013: Trinity Leeds 89%; 185-221 Buchanan
Street, Glasgow 99%; Bishop Centre, Taplow
76% pre-let; Peterborough 0%; Derby 0%;
and Selly Oak 39% pre-let.

Schemes completed on time and to budget at
Trinity Leeds and 185-221 Buchanan Street,
Glasgow (excluding residential element of
Buchanan Street, Glasgow, which was not due
to complete during the year).

Commence out-of-town developments at
Crawley, Taplow, Derby and Chadwell Heath.

Enter into a development agreement with
Oxford City Council for Westgate Centre,
Oxford.

Both achieved.

All achieved except Derby, where we changed
our strategy for the asset during the year and
we are refurbishing the existing park.

Not achieved but achieved since the year end.

Submit planning applications at Exeter and
three new sites secured in our out-of-town
pipeline.

We deferred the Exeter application to extend
our pre-application consultations. We secured
four sites in our out-of-town pipeline.

Land Securities Annual Report 2013

DIRECTORS’ REPORT

our market
The retail market continues to reflect an uncertain
national economy and straitened circumstances
for many consumers. This, together with
continuing structural change, has impacted on
retailer demand, caused a number of major
retailers to enter into administration, and resulted
in falling capital and rental values.

Investment volumes in retail property have
been at historically low levels reflecting this
uncertainty, although prime assets both
in- and out-of-town have attracted strong
interest when brought to the market.

relationships with retailers to anticipate
administrations early and secure new
occupiers swiftly. We will continue to identify
properties for sale in order to recycle capital
into new opportunities.

The sector continues to see a rapid change in
consumer behaviour. Shoppers are making
fewer trips but spending more per trip. In
many centres, footfall is down but sales are
up. People are increasingly looking for more
convenient ways to shop. They expect more
from the time they spend shopping and this
is driving a long-term structural shift in
retailing activity away from smaller towns and
high streets towards larger shopping centres
and edge-of-town locations and away from
weaker retailers to the bigger brands who
have invested in omni-channel. Consumers
are increasingly using their mobile devices
to check prices and look for offers when
visiting shops. They demand a connected
environment which makes the information
they want accessible. Leisure is an ever
more important part of the retail mix, with
consumers looking to visit cafés, restaurants,
cinemas and other entertainment venues
along with shopping for products.

In this fast-changing market, there continues
to be demand from strong retailers for the
right space in the right locations. Consumer
weakness is holding back rental values, but
we see opportunities to create value through
asset management and development activity
which is well matched to shoppers’
expectations and requirements. It is clear
that the most successful retail property
owners will be those who enable retailers
to respond to consumer trends in smart,
efficient and innovative ways.

our strateGy
We aim to create value by providing our
customers with new or more efficient space
that helps drive their profits. We look to
improve our assets, raising them up the retail
hierarchy and improving their appeal relative
to the competition. We constantly look for
ways to reduce voids, using our established

We are focused on owning and developing
dominant or destination centres in thriving
locations. We are developing our edge-of-town
and out-of-town assets in response to growing
demand for convenience from shoppers and
new formats from retailers. We are also
increasing the proportion of leisure in our
retail assets reflecting increasing consumer
demand for experiences and investing in
standalone leisure assets based on strong
property fundamentals, our established
relationships with operators and the resilience
of the sector to structural change.

We aim to be at the forefront of digitising
retail environments and helping retailers
to pursue multi-channel strategies. We were
the first to commit to free wifi in our centres,
introduce Google product search and to
trial Amazon lockers. We will continue to
experiment with new ideas that have the
potential to improve customer experience
and help retailers connect profitably with
their shoppers. Through our work on
Trinity Leeds, we will be assessing the wider
potential of our new Customer Relationship
Management system, a navigation app, and
the use of interactive screens.

our perFormance
The portfolio produced an ungeared total
property return of 4.6%, outperforming its
sector benchmark in the IPD Quarterly
Universe by 2.7%. Our shopping centres
outperformed the IPD sector benchmark by
3.0%. Retail warehouses outperformed the
sector benchmark by 0.6%.

The portfolio was valued at £5,348.0m at
31 March 2013, up £596.8m over the year,
following a year of significant net investment,
slightly offset by a 1.5% overall valuation
decrease. Shopping centres and shops were
down 0.4%. Retail warehouses and food stores
were down 4.8%. Leisure and hotels were

retail portFolio
By capital value £5.35bn

cHart 14

Shopping centres 59.1%
and shops

Retail warehouses 22.1%
and food stores
Leisure and hotels 18.1%

Other

0.7%

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retail value trenDs
Rental and capital value trends %
12 months ended 31 march 2013

cHart 15

Shopping centres
and shops

Retail warehouses
and food stores

Retail
Portfolio

-1

-2

-3

-4

-5

-6

-0.4

-2.2

-1.5

-3.9

-5.1

-4.8

Rental value change (like-for-like)

Valuation surplus

voiDs anD units
in aDministration
Like-for-like Retail Portfolio %
12 months ended 31 march 2013

cHart 16

Shopping centres
and shops

Retail warehouses
and food stores

Retail
Portfolio

2.8

2.2

4.1

3.7

3.6

2.3

1.8

3.7

3.3

3.0

2.9

1.4

1.7

1.4

1.1

Mar
12

Sep
12

Mar
13

Mar
12

Sep
12

Mar
13

Mar
12

Sep
12

Mar
13

units in administration

Voids

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Land Securities Annual Report 2013

DIRECTORS’ REPORT

retail portFolio
Floorspace 1.63 million m2

cHart 17

net rental income

Shopping centres 48.1%

Retail warehouses 22.5%

Leisure and hotels 28.3%

Other

1.1%

Like-for-like investment properties

Proposed developments

Development programme

Completed developments

Acquisitions since 1 April 2011

Sales since 1 April 2011

Non-property related income

Net rental income

31 March 2013
£m

31 March 2012
£m

248.8

250.3

–

4.3

9.3

11.5

2.5

4.3

280.7

–

4.6

7.4

1.3

16.1

4.0

283.7

taBle 19

Change
£m

(1.5)

–

(0.3)

1.9

10.2

(13.6)

0.3

(3.0)

top 10 retail clients

Arcadia Group

Sainsbury’s

Primark

Boots
Next

Dixons Retail

M&S
H&M

Debenhams

Home Retail Group

Retail other (excluding Accor)

Total

cHart 18

% of Group
rent
2.3

1.9

1.5

1.5
1.4

1.3

1.1
1.1

1.0

1.0
14.1

34.5

48.6

How we create value
We aim to deliver growing rental income streams,
higher asset values and future development
opportunities by:

a fast-changing retail environment.

undervalued areas into thriving destinations.

1 Owning and creating assets able to thrive in
2 Developing assets that can transform
3 Acting decisively to crystallise value and
4 Using asset management expertise to make

locations more attractive to shoppers
and retailers.

recycle capital.

5 Forming close relationships with retailers

and local authorities, so we can respond
to stakeholders’ changing needs.

Land Securities Annual Report 2013

down 0.2%. Rental values on our like-for-like
portfolio (excluding units materially altered
during the year) were down by 5.1% for our
shopping centres and shops, and down by
2.2% for our retail warehouses and food
stores reflecting difficult market conditions.

Our asset management teams will remain
extremely busy as they look to maximise
occupancy and returns through proactive
initiatives. We will continue to time and
de-risk our developments with care, in line
with market dynamics.

Overall, we see increasing distance between
the best retail assets, with their ability to
meet people’s desire for convenience and
great shopping experiences, and the rest.
We expect that our responsive approach to
multi-channel retailing, leisure, food and
beverage and digitally enhanced retailing
will help set us apart. Our portfolio and
strategy are well matched to the market
we see ahead.

key oBjectives For 2013/14

– Outperform our IPD sector benchmark

– Complete the letting of Trinity Leeds

– Progress pre-lettings at Buchanan

Galleries, Glasgow

– Submit planning application for Westgate

Centre, Oxford

– Achieve pre-lettings on our out-of-town
development programme and progress
planning applications

– Achieve planning permission for the

Selly Oak development in partnership
with Sainsbury’s

– Complete developments at Crawley and

Chadwell Heath

– Sale of specific assets to fund our

investment activity

Despite a number of retailer insolvencies,
we reduced voids across our like-for-like
portfolio from 3.3% at March 2012 to 2.9%
at March 2013. 1.1% of these are subject to
temporary lettings. Units in administration
were 2.3%, unchanged from March 2012.

Footfall in our shopping centre portfolio was
down 2.6% in the year ended 31 March 2013.
The national benchmark was down 3.7%
over the same period. Our measured same
store like-for-like sales were up 0.8%, while
the BRC benchmark was up 0.4%. Our same
centre sales, taking into account new lettings
and tenant changes, were up 3.7%. Our
measured retailers’ rent/sales ratio was 10.2%.
Total occupancy costs (including rent, rates,
service charges and insurance) represented
17.9% of sales.

Net rental income decreased by £3.0m from
£283.7m to £280.7m see table 19. The
reduction is primarily due to the cessation of
income on properties sold last year, notably
St John’s Centre, Liverpool and Corby Town
Centre, which has not been fully offset by
the additional £10.2m of income from
acquisitions. Within the like-for-like
portfolio, higher costs associated with tenant
failures, including Clinton Cards, Comet,
HMV and Dreams were only partly offset by
reduced void related costs, as we increased
occupancy levels compared to last year.

our outlook
We expect the retail market to remain tough,
but with increasing opportunities for us as
we move swiftly to address evolving consumer
and retailer demand. The quality of our
portfolio, the relationships we have with
retailers and our ability to develop new and
better space in the best locations will be
increasingly important. Our strong balance
sheet enables us to progress transactions and
developments when others can’t.

DIRECTORS’ REPORT

4mCustomer visits in

first two months

9,000

Downloads of our
app so far

Facebook fans

85,000
450,000

Visits to
www.trinityleeds.com

trinity leeDs
in Focus

Our new development reflects the growing importance
of digital technology in retailing. The centre is a
multi-channel space where customers can use Google
product search to check stock availability in the stores;
navigate and receive promotions through our app; and
collect orders placed online.
The instant popularity of the centre’s Facebook page
makes it the largest social media group in Leeds. The
page enables us to share news and promotions and ask
for feedback. Such digital initiatives are helping us to
increase footfall, support retailers and offer an even
better shopping experience.

More information:
See more on the great ideas
drawing people to Trinity Leeds
www.landsecurities.com/
annualreport2013.

1. Multimedia
Retailers can send out
news and offers for
shoppers via our app,
emails, website, mobile
website and network of
digital screens.

2. Brand immersion
Over the first four days of
opening, Sony took every
minute of advertising and
event space in the centre,
including the full screen
network.

3. Student Takeover
During our ‘Student
Takeover’ event in April,
retailers sent 47 new
offers via our digital
channels.

4. Mobile app
The Trinity Leeds App is all
about personalising your
experiences with Trinity
Leeds.

Land Securities Annual Report 2013

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DIRECTORS’ REPORT

our key asset activity – at a Glance
How we turned a clear plan for every asset into action during the year.

Acquisitions
and sales
Acquisitions in the year
totalled £501.5m at an
average yield of 6.0%.
In line with our plan to
increase our exposure
to leisure, our most
significant acquisitions
in the year were all
leisure assets.

Asset management
This was a very busy
year for our asset
management teams as
they worked to improve
space and introduce
new formats.

Development
and planning
Building on our early
mover advantage, we
pushed forward with
development based
on strong pre-lettings.

– The Cornerhouse, Nottingham

Acquired for £50.0m, this 20,900m2 asset is anchored by
a 14-screen cinema and includes 11 restaurants, two bars,
a nightclub and a casino.

– The Printworks, Manchester

Acquired for £93.8m, the city’s dominant leisure destination
attracts around eight million visitors each year.

– X-Leisure

During the year we acquired a further 47.4% equity interest
in the X-Leisure Unit Trust and 100% in X-Leisure Limited,
the management company of the fund, for £128.2m. The
transaction provides us with exposure to 16 leisure assets across
the UK, and takes our interest in the fund to 59.4%. Our share
of the underlying assets at 31 March 2013 was £351.1m.

– We also made a further £43.3m of other acquisitions

including the freehold of the O2 Centre, Finchley Road,
and the Boar Lane car park in Leeds.

– Sales during the year were £56.2m including the sale of

Cathedral Plaza, Worcester, our share of the BHS store at
St David’s, Cardiff and the partial sale of Bridgewater Park,
Northern Ireland. Since the year end we have sold Clayton
Square, Liverpool and a small asset at Stonehills, Welwyn
Garden City.

– Debenhams

In September, we opened a 5,800m2 department store for
Debenhams at the Ravenside Retail Park in Chesterfield.
We also entered into an agreement for lease for a 7,600m2
Debenhams department store at Southside, Wandsworth,
which is part of our Metro joint venture with Delancey.

– John Lewis Partnership

We enabled John Lewis to open its first flexible format
department shop in October. Located in Exeter and
occupying 10,080m2 over five floors, the store offers
the full John Lewis range by combining physical and
online retailing.

– Primark

In October we also opened a 6,500m2 store for Primark at
Westwood Cross, Thanet, adding to an exciting fashion offer
at the centre. In November, we opened a 5,550m2 store for
Primark at The Bridges, Sunderland, creating a major new
anchor for the centre.

– Kingsmead, Bath

The opening of Frankie & Benny’s during the year took this
8,400m2 leisure and restaurant complex to 100% let. We
have also forward purchased a 108-bedroom Premier Inn
hotel next to the centre which is due to be completed in
October 2013.

– The O2 Centre, Finchley Road

During the year we reconfigured space with lettings to Oliver
Bonas, Paperchase and Bo Concept. We also increased the
first floor restaurant space, and Vue Cinemas added four
new screens. Having also acquired the freehold interest,
we are now looking at more extensive development options.

– Nene Valley Retail Park, Northampton

We lengthened income through lease restructuring,
taking the average unexpired lease term on the park from
3.5 years to 8.5 years.

– Bexhill Retail Park

We secured planning permission for a 4,920m2 M&S store
at this park. Works are due to complete in August 2013.

– Ravenside Retail Park, Chesterfield

We achieved planning consent for the construction of an
additional 2,460m2 of floorspace in two new stores, which
we pre-let to Asda Living and Hobbycraft. Works are due to
complete in September.

– Accor Hotel Portfolio

We are engaging with Accor to discuss strategy in relation
to the break options they have on these leases in 2019. This
will enable us to plan our exit from this non-core part of
our portfolio over time.

– Trinity Leeds

– Bishop Centre, Taplow

The scheme opened on schedule, to budget and 95% let
or in solicitors’ hands. Occupiers include M&S, Primark,
Apple, Superdry, Hollister, Next, River Island, H&M,
Topshop/Topman, Urban Outfitters and Victoria’s Secret.

In September we secured full planning consent for the
redevelopment of the existing site. We have committed to
the new 12,260m2 development, which is 76% pre-let to
Tesco, TK Maxx, Nike, Frankie & Benny’s and Costa.

– 185-221 Buchanan Street, Glasgow

– Buchanan Galleries, Glasgow

The scheme opened on schedule, to budget and is now fully
let. The retail element of the scheme includes Forever 21,
Paperchase, Gap, Fat Face and Watches of Switzerland.

– Whalebone Lane, Chadwell Heath

In March we started work to refurbish and upgrade a unit
previously let to B&Q. The store is pre-let to Asda. We have
also let an adjacent 1,223m2 store to B&M Stores.

– Crawley

We started development of a 7,000m2 supermarket, which
is pre-let to Morrisons, along with 600m2 of restaurant
space and a 110-bedroom Travelodge hotel.
The scheme is 94% pre-let.

Since the year end we have signed M&S as the anchor
tenant and secured outline planning permission for
a 43,100m2 extension to the scheme with an improved
public realm and a link into Queen Street station.

– Westgate Centre, Oxford

With our joint venture partner, the Crown Estate, we have
exchanged a conditional agreement for lease with anchor
tenant, John Lewis, and entered into a development
agreement with Oxford City Council. This provides
the opportunity to develop a scheme of approximately
72,000m2 in an undersupplied retail location.

Land Securities Annual Report 2013

DIRECTORS’ REPORT

retail portFolio
Development
pipeline

2013

CRAwLEY
wEST SUSSEX

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2014

bISHOp CENTRE
TApLOw

2013

wHALEbONE LANE,
CHADwELL HEATH

retail Development pipeline at 31 marcH 2013

Description
of use

Ownership
interest
%

Size
m2

Letting
status
%

Market
value
£m

Net income/
ERV
£m

Estimated/
actual
completion
date

Total
development
costs to date
£m

taBle 20

Forecast
total
development
cost
£m

Retail

100

75,900

435

29.9

Feb 2013

333

377

property

Developments after
practical completion

Trinity Leeds

Developments approved
or in progress

185-221 Buchanan
Street, Glasgow

Whalebone Lane, Chadwell Heath

Crawley

Bishop Centre, Taplow

Retail

100

Retail

100

Residential

10,700

4,200

5,700

11,000

9,390

100

4.7 Mar 2013

Sept 2013

1.3

2.6

Aug 2013

Nov 2013

2.7 Mar 2014

Floor areas and letting status shown above represent the full scheme whereas all other figures represent our
proportionate share. Letting % is measured by ERV and shows letting status at 31 March 2013. Trading property
development schemes are excluded from the development pipeline. Cost figures given for proposed schemes could
still be subject to material change prior to final approval.

Total development cost
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 capitalised interest being the Group’s borrowing costs associated with direct
expenditure on the property under development. Interest is also capitalised on the purchase cost of land or property
where it is acquired specifically for redevelopment. Of the properties in the development pipeline at 31 March 2013,
interest was capitalised on the land cost at Trinity Leeds, 185-221 Buchanan Street, Glasgow and Crawley. The figures for
total development costs include expenditure on the residential element of 185-221 Buchanan Street, Glasgow of £12.9m.

Net income/ERV
Net income/ERV represents net headline annual rent on let units plus ERV at 31 March 2013 on unlet units.

Land Securities Annual Report 2013

DIRECTORS’ REPORT
DIRECTORS’ REPORT

lonDon portFolio
review oF tHe year

proGress aGainst our oBjectives For 2012/13

Objective

progress

Outperform IPD sector benchmark.

The portfolio outperformed its IPD sector
benchmark by 0.1%.

Progress development lettings at One New
Change, EC4; 123 Victoria Street, SW1;
62 Buckingham Gate, SW1; and 20 Fenchurch
Street, EC3.

Letting levels at these schemes at 31 March
2013: One New Change: 100%; 123 Victoria
Street: 78%; 62 Buckingham Gate: 0%;
20 Fenchurch Street: 51%.

Practical completion on time and to budget
at Wellington House, SW1, and 123 Victoria
Street, SW1.

Both schemes completed to budget.
Completion of Wellington House delayed by
two months.

Progress on time and to budget at 62
Buckingham Gate, SW1, and 20 Fenchurch
Street, EC3.

Demolition of Kingsgate House, SW1, and
commencement of demolition at Victoria
Circle (now Nova Victoria), SW1.

Submission of planning applications at
Portland House, SW1, and Oxford House, W1.

Both schemes are on time and to budget.

Kingsgate House demolished by November with
The Zig Zag Building and Kings Gate now under
construction; demolition commenced at Nova
Victoria, SW1, in October.

Both applications submitted during the year.

HiGHliGHts

5.4%

Valuation surplus

£11.8m

Investment lettings at 6.8%
ahead of ERV (excludes
pre-development properties)

£20.7m

Development lettings

Like-for-like voids down from
2.3% to 1.0%

20 Fenchurch Street, EC3,
now 56% pre-let or in
solicitors’ hands

Over £700m of development
committed at The Zig Zag
Building, Kings Gate and
Nova Victoria, all SW1

42
42

Land Securities Annual Report 2013
Land Securities Annual Report 2013

DIRECTORS’ REPORT

our market
The occupational market was similar to last
year, with relatively subdued take-up for
new and second-hand office space. Take-up
in central London for the 12 months to
31 March 2013 totalled 0.9 million m2 compared
to the 10 year average rate of 1.1 million m2.

Although overall take-up has been sluggish,
there have been pockets of activity where
occupiers are willing to move and pay for
the right space as evidenced in our portfolio
in deals at 20 Fenchurch Street, EC3 and
123 Victoria Street, SW1.

Low business confidence remained a key factor
in subduing demand but, as last year,
it also served to limit the supply of new space
being developed. CB Richard Ellis estimate
that just 1.8 million m2 of office space will be
developed or extensively refurbished in the four
years between 2013 and 2016; this works out at
less than 0.5 million m2 of space per annum.
Furthermore, of the 1.8 million m2 of space
estimated to be developed, 0.9 million m2 is
under construction and of this, 0.3 million m2
is already pre-let. This leaves just 0.6 million m2
that is under construction and available.

Low development activity is keeping vacancy
rates low. Across central London, as at
31 March 2013, the vacancy rate stood at
7.8% compared to an average vacancy rate of
8.1% over the last 10 years. Not enough of the
right space is being built. The development
pipeline, including newly completed space
currently available, provides just over two years
supply, based upon the 10 year average rate of
take-up of new space. This means occupiers
looking to move in 2014/15 need to be looking
for space now. This has extended our window
for development, and we have committed to
further projects with more in the pipeline.

Despite the flat conditions of the office rental
market, London’s enduring qualities as a
leading financial and commercial centre
continue to attract inward investment.
According to CB Richard Ellis, central
London office transactions totalled £13.3bn
over the 12 months to 31 March 2013, the
most since the 12 months to 31 March 2008.
Overseas investors accounted for over 40%
of all transactions. In addition, increased
demand for central London homes means the
residential market has also remained strong.

our strateGy
Our priorities are to develop first class office,
retail and residential space in central London
and to strengthen income streams through
smart, rigorous asset management.

We work to maximise returns through the
cycle. As early-cycle developers, we gain the
benefits of competitive construction costs
and rising rental values. Across the portfolio,
we have a clear plan for every asset. We do
not hesitate to realise and recycle the value
in an asset if a more attractive opportunity
appears. We manage the balance between
development and property investment
carefully, with a current emphasis on
development as it has the potential to deliver
greater returns at this point in the cycle. Our
development programme is well timed, well
managed, and well matched to the market
conditions we see ahead. Where necessary,
we establish partnerships that enable us to
de-risk and enhance the way we deliver
major developments.

It is important that we keep anticipating
and responding to the ever-evolving needs
and expectations of today’s occupiers in the
way we plan, design, build and manage our
buildings. We also work to form close
relationships, which are built on trust, within
the communities in which we operate so that
our commercial endeavours are supported.

our perFormance
The portfolio produced an ungeared
total property return of 10.5%, which
outperformed the sector benchmark
(central and inner London) in the IPD
Quarterly Universe by 0.1%.

The London Portfolio was valued at
£6,098.4m at 31 March 2013. This produced
a valuation surplus for the year of 5.4%.
West End offices were up 6.2%. Mid-town
offices were up 4.8%. City offices were up
5.4%. Central London shops were up 7.1%.
Within these figures, properties within the
development programme produced a surplus
of 18.2%, while proposed developments were
up by 3.7%.

Rental values in our like-for-like portfolio
(excluding units materially altered during the
year) increased by 1.5%. Across the portfolio,
the increases were 1.1% for West End offices,
1.6% for City offices, 1.2% for Mid-town
offices and 2.2% for central London shops.
Like-for-like voids were 1.0%, compared
to 2.3% at March 2012. Void levels on the

lonDon portFolio
By capital value £6.10bn

cHart 21

West End offices

33.9%

City offices

18.3%

Central London
shops

18.2%

mid-town offices

15.0%

Inner London offices 12.6%

Other

2.0%

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lonDon value trenDs
Rental and capital value trends %
12 months ended 31 march 2013

cHart 22

West End

City

mid-town

London
Portfolio

Central
London
shops

7.1

6.2

5.4

4.8

5.4

1.1

1.6

1.2

2.2

1.5

Rental value change1 (like-for-like)

Valuation surplus

Rental value figures exclude units materially altered during the year
and also Queen Anne’s Gate, SW1.

voiDs anD units
in aDministration
Like-for-like portfolio %

cHart 23

2.3

2.1

1.0

Mar
12

Sep
12

Mar
13

Voids

units in administration

0.2 0.1 0.1

Mar
12

Sep
12

Mar
13

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Land Securities Annual Report 2013

31 March 2013
£m

31 March 2012
£m

235.5

226.2

1.6

4.5

20.1

–

0.8

4.5

4.8

15.0

16.1

–

22.4

4.5

267.0

289.0

taBle 26

Change
£m

9.3

(3.2)

(10.5)

4.0

–

(21.6)

–

(22.0)

Value creation will come from well-timed
development and active asset management.
We continue to believe that delivering
developments early in the cycle is preferable,
and that the opportunity to generate strong
returns from office, retail and residential
development remains.

KEY ObJECTIVES FOR 2013/14

– Outperform our IPD sector benchmark

– Complete the letting of 123 Victoria Street, SW1

– Progress development lettings at

62 Buckingham Gate, SW1, 20 Fenchurch
Street, EC3 and 1 & 2 New Ludgate, EC4

– Demolition of 1 New Street Square, EC4

– Obtain planning permission at Portland

House, SW1 and Oxford House, W1

– Progress on time and to budget at The Zig
Zag Building, Kings Gate, Nova Victoria,
all SW1 and 20 Fenchurch Street, EC3

– Sale of specific assets to fund our investment

activity

DIRECTORS’ REPORT

lonDon portFolio
Floorspace 0.75 million m2

cHart 24

net rental income

London offices

84.8%

Central London
shops

Other

3.1%

12.1%

Like-for-like investment properties

Proposed developments

Development programme

Completed developments

Acquisitions since 1 April 2011

Sales since 1 April 2011

Non-property related income

Net rental income

top 10 oFFice tenants

Central Government (including
Queen Anne’s Gate, SW1)
Royal Bank of Scotland

Deloitte

Bank of New York Mellon
Taylor Wessing

K&L Gates

Metropolitan Police
EDF Energy

Redbus Interhouse

Microsoft

Office other
Total

taBle 25
% of Group
rent

5.2
2.7

2.7

1.5
1.4

1.2

1.1
1.0

1.0

0.9
18.7

19.2
37.9

How we create value
We aim to deliver growing rental income streams
and higher asset values over the long term by:

maximise returns.

that meet customers’ changing needs.

1 Owning and creating high quality products
2 Developing assets early in the cycle to
3 Acting decisively to crystallise value and
4 Being inventive and energetic in the way
5 Combining our strong reputation and local

knowledge to unlock opportunity.

we manage our assets.

recycle capital.

like-for-like central London shops were
0.8% (2012: 1.2%) and London offices were
1.1% (2012: 2.5%).

Net rental income decreased by £22.0m
to £267.0m (see table 26). The reduction
is driven almost entirely by the impact of
properties sold in the last two years, most
notably Eland House and properties sold to
our Nova Victoria (formerly Victoria Circle)
joint venture, both SW1. Net rental income
from the development programme and
proposed developments has also reduced,
driven by vacant possession at Kingsgate
House and Nova Victoria, respectively.
Income from like-for-like properties benefits
from the completion of the refurbishment
at 40 Strand, WC2 in the prior year.

our outlook
The fundamental drivers of supply and
demand described earlier are set to remain
in place over the short term. Although we
expect demand to increase, it will remain
below the long-term average. However,
supply of new space is set to remain relatively
restricted. London continues to attract
property investors from overseas.

Looking at longer-term dynamics, the office
market is changing. Modern occupiers are
increasingly looking for their new space to
accommodate more people while providing
excellent facilities and cost-effective services
in a great location. Floor plans must
respond to greater use of open plan working
and more flexible meeting areas. Technical
resilience in the lift capacity, power supplies,
heating, cooling, lighting and environmental
performance are increasingly important
factors. As we move forward, the most
successful schemes and assets will be those
that are well placed to meet the efficiency
demands and quality expectations of
occupiers.

We will not rely on the market for growth.

Land Securities Annual Report 2013

DIRECTORS’ REPORT

£1bnTotal development cost
535Residential apartments

Location:
Situated in the centre of
London and close to three
parks, iconic London
sights and the river.

Community living:
Fantastic community life,
with events and places to
meet. Great shopping
options, restaurants, cafés
and bars.

New heights:
We have submitted plans
to change Portland
House, Victoria’s tallest
building, from offices to
apartments.

Off-plan strategy:
At Wellington House,
our first residential
development in SW1,
all 59 apartments were
sold before completion,
for £90.4m.

Next stage:
Phase 1 of our ambitious
Nova Victoria scheme
will provide a spectacular
67,500m2 mix of
residential, retail, office
and public amenity space.

resiDential Development
in sw1

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Visit Victoria and you will see that enormous
changes are taking place. Our revitalisation of the
area’s offices, shops and homes is turning the dusty
old corridors of traffic and 1960s’ architecture
into a vibrant centre at the heart of the capital.
Our residential development activity in SW1 was
originally a response to local authority requirements
for new homes. But over time we have also seen very
strong growth in demand for high-end residential
space, and we are meeting that demand. Buyers
are attracted by the prime location and high
specification of our SW1 schemes, while our heritage
and reputation as a developer gives them confidence
their property will be delivered as expected.
This area of development promises strong returns
for us over the next few years.

1. Transformation
Our masterplan is
creating 3 million sq ft of
offices, shops and homes.

2. Value
Our SW1 assets are now
generating substantial
shareholder value.

3. Location
Victoria is becoming
one of London’s
most desirable
neighbourhoods.

4. Understanding
We are providing the
modern space today’s
occupiers require.

More information:
See why our residential schemes
in SW1 are generating such
strong demand
www.landsecurities.com/
annualreport2013.

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Land Securities Annual Report 2013

DIRECTORS’ REPORT

our key asset activity – at a Glance
How we turned a clear plan for every asset into action during the year.

Acquisitions
and sales
With strong competition
for assets and the
relative attraction of
our development
programme driving up
values, we opted to take a
disciplined approach,
making small, strategic
acquisitions to support
our schemes.

Asset management
Smart asset management
is providing us with the
strong and reliable
revenues we need to
complement our activity.

Development
and planning
Our commitment to
developing early in the
cycle drove a busy year of
activity across London,
from Victoria to the City.

– 6 Castle Lane, SW1

We purchased this asset for £10.1m. It increases our options
for the delivery of our masterplan for Victoria.

– 19-23 Shaftesbury Avenue, W1

This £25.8m purchase completed our ownership of the
entire freehold island site behind Piccadilly Lights, W1 and
has opened up a number of significant reconfiguration
options.

– Wellington House, SW1

All of the 59 apartments were sold on completion for £90.4m.

City and Mid-town:
– One New Change, EC4

Following new lettings to CBREi, bwin, Panmure Gordon
and Dealogic, the scheme is fully let. New retail lettings –
including to Boots and Bang & Olufsen – have been achieved
ahead of ERV.

– Times Square, EC4

The asset is fully let following 4,800m2 of lettings to Research
Now and NICE.

– 47 Mark Lane, EC3

We restructured leases with AXA Insurance UK, securing
an additional five years of income, and completed a letting
to Jubilee Insurance Services.

– 38-48 Southwark Bridge Road, SE1

We took a surrender of the headlease allowing the
undertenant to simultaneously extend its lease by five years.
We have subsequently sold the asset, crystallising an 18.5%
uplift in value.

– Red Lion Court, SE1

Due to expire in 2015, we restructured Lloyds Banking
Group’s lease securing their occupation until a minimum
of 2020.

West End:
– Nova Victoria, SW1 (formerly Victoria Circle)

Ahead of demolition works, we secured vacant possession
of 170 leasehold interests on time and below cost estimates.

– Oriana, W1

At our joint venture with Frogmore, Primark opened its new
flagship store and we achieved planning consent for a
further 8,440m2 of flagship and residential space.

– Cardinal Place, SW1

We strengthened income, completing lease restructures,
securing additional lettings and settling an outstanding
rent review.

– Oxford House, W1

With the office income due to expire while we explore a
conversion to residential, we have maximised income
through a 4,120m2 short-term letting to Publicis.

– Piccadilly Lights, W1

We have completed lease renewals at two advertising screens
ahead of ERV and introduced Jamie’s Italian to Sherwood
Street. Following our purchase of 19-23 Shaftesbury Avenue,
we have let virtually all of the space on short-term leases and
plans are underway to remodel three flagship stores and
introduce a further advertising screen.

– 7 Soho Square, W1

Due to expire in 2013, we restructured Trip Advisor’s lease,
securing the building’s largest tenant through the Crossrail
works period.

– 123 Victoria Street, SW1

– The Zig Zag Building, SW1

Practical completion was achieved in August 2012 and the
building is 78% let.

– 62 Buckingham Gate, SW1

This 24,160m2 office and 1,450m2 retail development
completed in May 2013 and is 10% pre-let.

– 20 Fenchurch Street, EC3

This world-class 62,940m2 office building is 56% pre-let
or in solicitors’ hands – a full year ahead of completion.
Lettings have been ahead of our expectations in terms of
rental level, lease length and incentives.

– Kings Gate, SW1 (trading property)

This prime residential development will comprise 100
private apartments over 14 storeys, providing 10,120m2 of
contemporary space. 59 of the 100 apartments have already
been pre-sold with completion scheduled for January 2015.

The scheme comprises a 20,910m2 office and retail
building. Construction started in November with practical
completion scheduled for January 2015.

– Nova Victoria, SW1 (formerly Victoria Circle)

Phase 1 will provide a spectacular 67,500m2 mix of retail,
residential, office and public amenity space. Demolition
work started in October and completion of the scheme is
due in April 2016.

– 1 & 2 New Ludgate, EC4

We completed demolition during the year. A construction
contract is fully tendered and completion of this 35,210m2
proposed development of high quality office, restaurant and
retail accommodation will be 23 months from commitment
to build.

– 1 New Street Square, EC4

Demolition started in March 2013 and the earliest completion
date for this extension to our successful New Street Square
campus is July 2016. Our success at New Street Square gives us
confidence in the prospects for this scheme, when delivered.

Land Securities Annual Report 2013

2015

THE zIG zAG bUILDING
LONDON Sw1

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2016

NOVA VICTORIA pHASE 1
LONDON Sw1

DIRECTORS’ REPORT

lonDon portFolio
Development
pipeline

2013

62 bUCKINGHAM GATE
LONDON Sw1

lonDon Development pipeline at 31 marcH 2013

Description
of use

Ownership
interest
%

Size
m2

planning
status

Letting
status
%

Market
value
£m

Net
income/
ERV
£m

Estimated/
actual
completion
date

Total
development
costs
to date
£m

taBle 27

Forecast
total
development
cost
£m

property

Developments after
practical completion

123 Victoria Street, SW1*

Developments approved
or in progress

62 Buckingham Gate,
SW1

20 Fenchurch Street,
EC3

The Zig Zag Building,
SW1**

Office
Retail

Nova Victoria (formerly
Victoria Circle) Phase 1,
SW1

Office
Retail
Residential

Proposed developments

1 & 2 New Ludgate, EC4

1 New Street Square, EC4

Office
Retail

100

18,490
2,620

24,160
1,450

62,940
1,180

17,450
4,150

44,620
7,420
15,460

32,180
3,030

24,490
460

* Office refurbishment only. Figures provided are for the property as a whole including the retail element.
**

Includes retail within Kings Gate, SW1.

Developments let and transferred or sold

One New Change, EC4

Office
Retail

100

31,990
20,160

Where the property is not 100% owned, floor areas and letting status shown above represent the full scheme whereas
all other figures represent our proportionate share. Letting % is measured by ERV and shows letting status at 31 March
2013. Trading property development schemes (e.g. Kings Gate, SW1) are excluded from the development pipeline.

planning status for proposed developments
PR – Planning received.

traDinG property Development scHemes

74
100

–
–

51
–

–
16

–
–
–

–
–

100
99

228

13.8

Aug 2012

155

253

183

112

n/a

17.8 May 2013

21.1

Apr 2014

15.6

Jan 2015

20.0

Apr 2016

n/a

2015

2016

163

147

n/a

177

239

181

384

n/a

504

27.3

Oct 2010

529

development programme, together with capitalised interest, being the Group’s borrowing costs associated with direct
expenditure on the property under development. Interest is also capitalised on the purchase cost of land or property
where it is acquired specifically for redevelopment. Of the properties in the development pipeline at 31 March 2013,
the only property on which interest was capitalised on the land cost was Nova Victoria Phase 1, SW1. The figures for
total development costs include expenditure on the residential elements of Nova Victoria Phase 1, SW1 (£133.4m).

Net income/ERV
Net income/ERV represents net headline annual rent on let units plus ERV at 31 March 2013 on unlet units.

property

Description
of use

Wellington House, SW1 Residential

Kings Gate, SW1

Residential

* Residential TDC excludes any estimated tax on disposal.

Land Securities Annual Report 2013

Ownership
interest
%

Sold

100

Size
m2

6,130

10,120

Number
of units

100

Sales
exchanged
by unit
%

100

Estimated/
actual
completion
date

Oct 2012

Jan 2015

Total
development
costs
to date*
£m

n/a

taBle 28

Forecast total
development
cost*
£m

n/a

161

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CORPORATE RESPONSIBILITY

corporate responsiBility
strateGy

While there is no simple link between sustainability
While there is no simple link between sustainability
and share price, we are convinced that taking a
and share price, we are convinced that taking a
long-term approach to business helps us to create
long-term approach to business helps us to create
and protect value.
and protect value.

stakeHolDers

strateGy

reportinG

operations

By acting responsibly, we are able to deliver

sustainaBle Business

stronGer communities

Better environments

We aim to create and
protect value by being
the company people
prefer to work with
and for.

P51

We want to be a good
neighbour who invests
locally and helps
to create job
opportunities.

P52

We work hard to ensure
our sites are safe,
waste is minimised
and natural resources
are used carefully.

P53

Land Securities Annual Report 2013

CORPORATE RESPONSIBILITY

corporate
responsiBility
report

sustaininG our success
While there is no simple link between
sustainability and share price, we are convinced
that taking a long-term approach to business
helps us to create and protect value. We believe
thinking that looks beyond the short term
provides us with a portfolio of properties that
can respond to changing customer needs,
public expectations and regulation.

Mutual advantage is central to our approach.
We look to create benefits for all of the
stakeholders affected by our activities. To turn
that aspiration into action, we have a set of
standards that apply across the Company.
Certain areas, such as energy, are coordinated
at Group level. Others – such as supporting
community groups, charities and schools – are
handled locally, with our teams on the ground
using their knowledge and relationships to
make a difference. We try to respond to the
particular needs of each area, rather than
impose initiatives from afar. And we aim to
make a significant and lasting contribution
whatever we do, wherever we work.

We report on our approach under the banner
of ‘corporate responsibility’ (CR). As with other
areas of our activity, we are working to a clear
plan on CR. You can read more about our
progress in our Corporate Responsibility
Report 2013 at www.landsecurities.com/
responsibility.

Working with students from Pimlico Academy

our stakeHolDers
Our activities bring us into contact with a
wide range of people. We describe some

of the key groups below. Of course, many
people interact with us in more than one way.
For example, someone might be a regular
visitor to one of our shopping centres, work
for a local authority partner and live near one
of our developments. Some of our employees
are also investors.

Investors
Our investors expect us to use their capital
responsibly so that we can provide them with
sustainable returns. They want to know that
we are a well-governed organisation that
considers both the immediate and the
long-term issues and opportunities facing
the Company, our customers and our
industry. We commission an independent
investor survey every two years, which helps
us to understand our investors’ views and
expectations. We provide a wide range of
communications to shareholders, including a
comprehensive area on our website and a range
of reports, including this Annual Report.

Employees
We aim to attract, retain and develop the
brightest and best people in our industry.
We want them to make the most of their
talents, and aspire to be the best at what they
do. We recognise and reward those who
create and protect value for the Company.

We continue to develop people’s leadership
skills at all levels of the business and aim to
identify future leaders early in their careers.
We compare our employee development and
culture with high performance companies
in general, rather than others in our industry.
We encourage close co-operation between
our teams across the business, and promote
knowledge and resource sharing.

We are committed to equal opportunities
and to providing a diverse and inclusive
workplace in which everyone is treated with
respect. As part of this, we work to ensure all
employees, including those with disabilities,
receive the same opportunities for training,
career development and promotion. We
adhere to the UN Declaration of Human
Rights, and this underpins all our policies,
systems and actions. We encourage people
to speak up and listen to others. Our annual
employee engagement survey enables
management to identify what is working well
from the employees’ perspective, and what
needs to be improved. We also have an
Exchange Forum in which employee
representatives discuss key issues with
members of the Senior Management Board.
The Forum was relaunched this year to ensure
it continues to be relevant. We believe it plays
a vital role in helping us to achieve success.

Many of our employees donate or raise
money for charities, or volunteer their time.
We support the efforts of our volunteers,
award bursaries and run a Give As You Earn

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Creating a better shopping environment at St David’s, Cardiff

scheme to encourage charitable donations
from employees.

Customers
In Retail, we work closely with retailers to
help them respond to a demanding and
fast-changing market. We develop new and
better ways for them to minimise costs and
trade successfully. We look to maximise value
for money for service charge payers, and we
enable occupiers to discuss proposed charges
with us during the budgeting process. We also
provide a breakdown of service charges at all
of our shopping centres and retail parks, so
occupiers can see how their charge compares
to those elsewhere.

In London, our West End team and City
and Mid-town team include individuals
from financial management and property
management. This means occupiers receive
a seamless service rather than having to
work with different Land Securities teams
to address different requirements. Our open
door policy means occupiers can come in at
any time to discuss issues or make suggestions.

To ensure we respond to our occupiers’
needs, all of our tenants have their own
Land Securities contact, we conduct customer
satisfaction surveys and we hold occupier
review meetings. See page 38 for our top ten
retail occupiers and page 44 for our top ten
office occupiers.

Land Securities Annual Report 2013

London First, the UK Green Building
Council and the European Public Real Estate
Association. And we meet with a number of
non-governmental organisations relevant to
our work.

Consumers
We want the shoppers who visit our assets
to enjoy spending time in them and to value
the services they find there. Leisure is an
increasingly important part of the retail mix,
and we are doing more than ever before to
provide great restaurants, cafés, bars and
entertainment venues. We try to speak to
as many members of the public as possible
through the customer service desks in our
shopping centres, by communicating through
regular shopper surveys, and providing
feedback facilities on our websites. We run
bespoke training for our customer service
staff so they can help visitors gain the best
experience from their shopping trip.

Governance

Our Stakeholder Panel meets once a year and
includes customers and individuals from academia
and the investment community. Together, they
provide a range of valuable opinions on our targets,
performance and reporting.

Our Corporate Responsibility Committee meets six
times a year and is made up of people from across the
business. The individuals that sit on the Committee
include experts on property development and
portfolio management, health and safety, and
environment. The Committee’s remit is to define our
corporate responsibility strategy, make sure our
activities remain relevant to our business objectives
and monitor our performance. That performance is
ultimately reviewed by the Executive Directors, as are
the Group’s CR targets. Chaired by the Group Tax
and Treasury Director, Martin Wood, the Committee
reports to our Chief Executive.

We also have a network of corporate responsibility
advisers located throughout the business. This team
provides information and guidance on CR initiatives
to colleagues. It meets six times per year and a
member of the CR Committee attends as an observer.

CORPORATE RESPONSIBILITY

The local community supports the launch of Trinity Leeds

Suppliers and service partners
The most significant activities carried out
by our suppliers and contractors include
construction, construction-related trades and
architectural services, cleaning, security,
mechanical/electrical services, engineering,
waste management and concierge services.

Our aim is to procure the best value goods
and services from suppliers that meet our
standards. To this end, all of our suppliers
are registered on our new central Supplier
Information Management System. This
captures essential information provided by
them. We use this information to carry out
a full and thorough evaluation of their
suitability as a supplier.

We also work in partnership with our supply
chain to ensure their staff are well trained.
We require their employees to act responsibly
at all times and to deliver the services that
our customers demand. We expect all of our
service partners and suppliers to comply
with all appropriate legislation. They must
also conform to high ethical, social and
environmental standards, including the
highest standards for safety and health.
We have a robust tendering and sourcing
process for goods and services to ensure
that we get best value from our relationships.
We also monitor the performance of each
supplier using key contract performance
indicators, and we work together to achieve
mutual advantage.

Communities
Wherever we work, we spend time in
understanding how we can best support
the local community. We work closely with
local authorities, community agencies and

voluntary groups to create employment,
education and enterprise opportunities.
We work with supply chain partners to help
groups such as ex-offenders, young people
with no experience and the long-term
unemployed. And we also link up with
national and local charities, so our buildings
can help to connect people with causes they
care about.

With development schemes or asset
management initiatives, we consult with
all interested parties early in the process.
We want our buildings to be part of local
life, not an island in the community.

Local authorities
A productive relationship with local
authorities is essential if we are to secure
planning for developments and make the
greatest possible contribution to each area.
No two communities are the same, so we
build partnerships with decision makers,
economic development teams and planning
departments to help us understand local
priorities. This enables our teams to focus
investment and activity in the right way on
the right issues.

Central government, regulators, trade
bodies and NGOs
We aim to be a trusted adviser to government,
and to be seen in our industry as a company
that sets high standards and addresses the big
issues. We engage with legislators, including
members of both Houses of Parliament, and
the trade organisations that influence them.
We participate in industry bodies such as the
British Property Federation, British Council
for Offices, British Council for Shopping
Centres, Better Buildings Partnership,

Land Securities Annual Report 2013

By making the public realm around our office
buildings attractive and vibrant, we make our
assets more appealing to our customers and
their staff. And by being alive to the potential
effects of climate change on policy and public
opinion, we ensure our new buildings can
respond to the needs of tomorrow’s occupiers
and tomorrow’s legislation.

From addressing opportunities to managing
risk, smart thinking is helping to make us a
sustainable business with a bright future.

learninG anD talkinG

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CORPORATE RESPONSIBILITY

sustainaBle
Business

We work to sustain our
success by ensuring that
our business plans take
account of the way the world
is changing. This is about
smart thinking that helps
us to prepare for tomorrow
while competing today.
Our approach often requires us to create benefits
for ourselves by investing for the benefit of others.
For example, by supporting social and economic
development in the local community, we enhance
the long-term success of a shopping centre.

responDinG to a cHanGinG worlD

Volunteering
We introduced a new approach to
volunteering this year. Volunteers
now get two days’ holiday for personal
volunteering time, and an additional
two days out of the office for
professional volunteering that enables
them to develop their skills while
supporting one of our local
communities.

Investor relations
As a leader in our industry, we believe
we should set high standards when
communicating about sustainability.
For example, this year we invited a
group of Socially Responsible Investors
to our Environment Conference, and
we met with mainstream investors
to discuss how we see risks and
opportunities from a sustainability
perspective.

Employee surveys
We used to run an Employee
Engagement Survey each year.
This year we have moved to a new
approach in which we carry out a full
survey every other year and a lighter
touch Pulse survey in the alternate
years. This was a Pulse year, and the
overall findings included the following:

with working for Land Securities”

95%of respondents said “Overall, I am satisfied
94%of respondents said “I am proud to work
90%of respondents would “Recommend

for Land Securities”

Land Securities as a good place to work”

Detailed performance on key
Sustainable Business targets can
be found on page 56.

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Given the importance of sustainability
to our business, our Board of Directors
requested additional input from
management this year to ensure they
have a full understanding of critical
issues. Presentations highlighted the
changing context for our business,
including macro issues such as
economic pressures, climate change,
resource scarcity, localism and
transparency, together with changes
within society, business culture,
technology and mobility. Specific

issues likely to affect our business
were then explored further, including
potential restrictions on development,
increasingly stringent environmental
legislation, environmental threats to
property and transparency. This work
has strengthened the Board’s ability to
identify and address the short, medium
and long-term issues that may affect
our business. The scale of the issues
involved underlines that sustainability
is about much more than simply being
a ‘green’ business.

creatinG a Better victoria

Once a rather outdated part of central
London, we are helping to transform
the Victoria, SW1, area into one of the
capital’s most dynamic quarters.
Along with reshaping Victoria’s built
environment, we are making
substantial investments in the social
and economic success of the area. Our
coordinated programme of investment
and action includes everything from
education projects in local schools to
support for young people’s centres,
employment and apprenticeship

schemes, charities, hostels and
homeless shelters. We are also part
of the Business Improvement District.
The scale of this work is made possible
by the close partnerships we have
formed with Westminster City Council
and organisations such as Jobcentre
Plus, The Prince’s Trust, London’s
Probation Service and a number of our
suppliers. By working together in a
joined-up way we are able to have a
lasting impact on life in SW1.

Land Securities Annual Report 2013

So wherever we have a significant asset, we invest
in and work with the people who live nearby, and
with local organisations. Whether it’s through
charitable giving, creating employment or
providing educational opportunities, our aim is
to earn people’s trust and to help the area thrive.
More and more, we look to develop long-term
partnerships that address the most pressing local
needs. In some locations that might mean we focus
on employment projects. In others it might be
education that receives priority.

CORPORATE RESPONSIBILITY

stronGer
communities

Ultimately, the people who
live where our properties
are located determine
whether we succeed or not.
They affect everything
from our ability to secure
planning permission to
the success of our shops
and the quality of life for
office tenants.

workinG toGetHer in lonDon

The construction industry requires
29,000 new recruits each year to 2017
to cope with planned developments
and an ageing workforce. As the
capital’s largest commercial property
developer, this shortfall represents a
risk – lack of skilled people may delay
construction. But it also represents an
opportunity, providing job openings
for those who live in and around our
schemes, many of whom are furthest
from the employment market.

Devised and led by us, the London
Employment Strategy is a framework
designed to maximise the effectiveness
of property related work, training and
apprenticeship initiatives in the capital.
Land Securities fully funds four weeks
of pre-employment training for each
candidate. We then work with our
partners to ensure those candidates can
access qualifications, work experience
and employment opportunities. This
year, 94 candidates have secured jobs.

supportinG tHrouGH reportinG

centre’s impact a year after opening.
Such comprehensive reporting takes
some time to complete, but we hope to
be sharing our findings with more local
authorities as we move through the
year and into 2014.

From employment and training to
spending with local suppliers, we know
that property development and asset
initiatives can have substantial social
and economic effects. But those
effects have yet to be measured or
analysed accurately, and lack of
data is restricting the ability of local
authorities to assess prospective
schemes. To address this, we are
working on a new reporting
programme that will capture socio-
economic benefits and impacts of what
we do. Our first report has covered
development at Trinity Leeds. This will
be followed up with analysis of the

Land Securities Annual Report 2013

supportinG communities

Charity partner
During 2012 we partnered with the
MS Society in all of our retail centres,
enabling them to raise both
awareness and funds of more than
£100,000. The relationship will
continue through 2013 as we help
the charity to attract new volunteers
during its 60th anniversary year.

Made in Marylebone
In February, 50 of our employees
gave up a day of their time to help
the Marylebone Project, a charity
that supports homeless women on
the path back to independent living.
Our team used their skills to transform
part of the charity’s HQ into a
revenue-generating space. We also
ran workshops for residents, and made
and sold products from a market stall
to raise funds.

London Benchmarking Group
We are part of a group of organisations
that have committed to report the
volume and value of community and
charitable endeavours they make each
year. Every year we will report how
much time and money we have
spent supporting local groups. Our
voluntary, self-assessed entry can
be compared with those from other
companies – including our peers in
the property industry. Participating
in the group will enable us to both
benchmark our efforts and see how
our support is changing over time.

Donations from our Charities
Committee are focused on education,
employability, enterprise and the
environment. Contributions made
more locally respond directly to the
varied needs of the different
communities in which we operate.
We make no political donations.

Key figures from this year include:

£3.5m equivalent value of the space,
time, promotion and cash investment
made in community activity.

9,255 hours spent by our employees
on skills-based, team building and
personal volunteering activities.

Detailed performance on key
Community targets can be found
on page 56.

Part of the challenge is to make investments for
the long term without making our properties more
expensive for occupiers today, or less profitable
for us. Our work in this area covers everything
from new forms of energy for buildings to the
recycling of waste, support for local ecosystems
and initiatives that encourage people to use our
buildings in the most intelligent way. But we think
bigger than that. If we can design and build more
efficient and more flexible buildings – and create
even better places for people to live, work and
enjoy – everyone wins: occupiers get better value,
fewer resources are required, enduring benefits
are created for the community and we have assets
that are more attractive and more valuable.

CORPORATE RESPONSIBILITY

Better
environments

Commercial property
generates around 18% of
carbon emissions in the
UK, so it has a significant
role to play in carbon
reduction and overall
environmental protection.

Evolving legislation and regulation represent
a risk to any property company. Along with
informing debate, policy and industry best
practice, our approach is to develop an ever
better portfolio of buildings well matched to
the standards required in coming years.

eFFiciency By DesiGn

At 20 Fenchurch Street, EC3, we
are creating one of the most efficient
office properties yet seen in the
capital. The building will feature a
range of innovations and best practice
elements to ensure it exceeds energy
and environmental regulations. For
example, solar shading will reduce
heat while solar panels are in place to
generate electricity. A low carbon,
natural gas fuel cell – the first to be used
in the City – will help to cool, heat and
power the building. And the Sky Garden

and a green wall will support
biodiversity. However, the most
important element is the overall design
of the building. Its large floorplates,
efficient air-conditioning and double
decker lifts mean occupiers can
accommodate more employees in less
space. That space can also be adapted
easily to suit changing requirements
over time, so the building should have
a long economic life.

And by applying our new knowledge in
the way we design new schemes, our
next generation of assets will be
meeting regulations and exceeding
expectations for years to come.

takinG control

Given the scale of our property
portfolio, we take energy efficiency
very seriously. Finding new and better
ways to monitor and manage our
energy use has a direct impact on costs
for occupiers and for us. It also helps us
to reduce emissions. We are now
implementing a Company-wide system
that will centralise the way we collect
energy data, bill occupiers, and think
about energy when we design new
schemes. Greater control will enable
us to reduce inefficiency.

enHancinG tHe environment

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Influencing change
This year we set a target to ‘introduce
a behavioural change programme
to raise environmental awareness
and reduce energy use at two of our
managed office buildings’. 95% of the
occupants in the buildings have signed
up to this pilot scheme, which will look
at activities such as water and energy
use, recycling, travel and procurement.

Waste management
We set challenging waste management
targets for centres within our portfolio.
When we acquire new buildings, they
often need to be moved from a low
benchmark to bring them into line
with our existing assets. We are
pleased to see the rapid improvement
we can generate when we apply our
expertise, like in Nottingham at The
Cornerhouse, where landfill diversion
rates have improved dramatically
in ten months.

Biodiversity
A central team helps colleagues in
London and Retail to assess whether
a particular asset or scheme has the
potential to enhance biodiversity.
From green walls to ponds and gardens,
there are often simple ways in which
we can support plant, animal and
insect life. For example, to help
encourage bee numbers, our team
in Exeter has installed new beehives
in the city and plans to sell the honey
produced at our Princesshay shopping
centre. Our Westwood Cross team has
also helped by building a ‘Bee Hotel’ –
a large wooden structure that provides
a great habitat for wild bees.

100%of London waste diverted from landfill
90.9%

of Retail waste diverted from landfill

Detailed performance on key
Environmental targets can be
found on page 56.

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Land Securities Annual Report 2013

CORPORATE RESPONSIBILITY

epra sustainaBility
reportinG

We collect environmental data to help us
improve efficiency and ensure we meet
regulation. We also share information with
our shareholders and other stakeholders so
they can get a clear picture of how we use
energy and other resources.

We report using European Public Real
Estate Association (EPRA) Best Practice
Recommendations for Sustainability
Reporting. This common reporting standard
enables us to compare our impacts and use
of resources with those of our peers.

We first published an EPRA-based reporting
dashboard in last year’s Annual Report. This
year we have made improvements to how we
display and discuss data to make our reporting
as transparent as possible. For example, we
now publish conversion factors. We expect to
enhance our reporting each year, but believe
we are already in good shape to meet
Mandatory Carbon Reporting when it is
introduced in 2014.

carBon: aBsolute
Year-on-year performance tCO2e

cHart 29

2012/13

Renewable energy

112,850

133,550

2011/12

2010/11

130,938

134,252

80,000 90,000 100,000 110,000 120,000 130,000 140,000

t CO2e

notes on perFormance
The figures shown do not reflect construction
activity, nor do they cover every property in our
portfolio. We only report on buildings where we
run the building and control the management
of energy – what we call our managed portfolio.
In the London offices managed portfolio, we
report on the landlord-controlled common
parts but also the space occupied by our tenants.
In the Retail managed portfolio, we usually
do not have access to tenants’ metering
information as they tend to work directly with
energy suppliers.

Overall, our absolute environmental
performance over the 12 months was broadly
consistent with last year’s figures. While a
year-to-year absolute comparison is currently
best practice in our industry, it can only provide
a basic overview. Our normalised like-for-like
figures provide more meaningful insights into
what has changed from year to year.

With both absolute and like-for-like
measures, the dynamic nature of a property
portfolio has to be taken into account before
conclusions are drawn about performance.
For example, if we were to acquire a set of
environmentally inefficient buildings this
may impact our performance during the year,
but it would also provide opportunities to

substantially increase the efficiency of those
poorly performing assets over time. Also, the
performance of an individual asset may have
altered significantly if, for example, the use
of the building had changed or we have
introduced new measures to improve
resource use. Or we may have had a high
number of assets that were unoccupied one
year but occupied the next.

A closer look at this year’s figures
demonstrates the complexity of
environmental reporting. We have seen a
9.5% overall increase in total energy used
when set against our 2010/11 baseline.
However, when we normalise these figures
per m2, we have seen a small decrease in total
energy used. Part of this reduction in energy
used per m2 is due to energy efficiency
measures. Part is also due to a fall in oil
consumption as we replace oil-reliant sites
with gas heating systems. Some of the
reduction is due to occupier behaviour;
buildings being emptied as part of our
development pipeline activity; or the
conversion factor for electricity moving in
our favour due to the decarbonisation of the
grid. In short, it is very difficult to isolate one
factor as the ultimate cause of any movement
in performance.

performance against baseline

Ahead or equal

Behind

aBsolute: 2012/13 FiGures

taBle 30

taBle 31

Total energy usage

Electricity

Total kWh

tCO2e

Electricity kWh

tCO2e

Gas

Gas kWh

2010/11:
Baseline year

287,131,915

134,252

193,319,012

2012/13

285,267,433

133,550

194,399,641

114,768

114,661

87,473,505

87,443,766

tCO2e

17,630

17,869

Oil

Oil kWh

6,339,398

3,424,026

Difference

(1,864,482)

(702)

1,080,629

(107)

(29,739)

239

(2,915,372)

% Change

(0.6)

0.6

0.0

(46.0)

tCO2e

1,854

1,020

(834)

Water

Water m3

949,942

920,663

(29,279)

(3.1)

Land Securities Annual Report 2013

CORPORATE RESPONSIBILITY

epra sustainaBility
reportinG

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conversion

Electricity

Natural gas

Burning oil

carBon Disclosure project
sustainaBility reportinG

Disclosure

Score

2010/11
kg CO2/kWh
0.59367

0.20155

0.29245

2011

taBle 32

2012/13
kg CO2/kWh
0.58982

0.20435

0.29795

taBle 33

2012

carBon: like-For-like
Year-on-year performance per m2

cHart 34

2012/13

2011/12

2010/11

Renewable energy

0.0376

0.0439

0.0436

0.0445

0.025

0.030

0.035

0.040

0.045

per m2

We set a ten-year carbon reduction target from a 2010/11 baseline. Therefore,
unlike conventional financial reporting, we have not restated data to reflect
changes to our like-for-like portfolio.

performance against baseline
like-For-like: 2012/13 FiGures

Ahead or equal

Behind

taBle 35

taBle 36

Total energy usage

Electricity

Total kWh

tCO2e

Electricity kWh

tCO2e

2010/11:
Baseline year

2012/13

214,635,490

235,004,107

101,689

111,427

147,537,959

164,177,302

Difference

20,368,617

9,738

16,639,343

% Change

9.5

11.3

87,598

96,835

9,237

Gas

Gas kWh

60,758,133

69,556,741

8,798,608

14.5

tCO2e

12,237

14,214

1,977

Oil

Oil kWh

6,339,398

1,270,064

tCO2e

1,854

378

(5,069,334)

(1,476)

(80.0)

lonDon (like-For-like)
epra normaliseD perFormance 2012/13

taBle 37

retail (like-For-like)
epra normaliseD perFormance 2012/13

Water

Water m3

830,976

830,829

(147)

0.0

taBle 38

Energy
kWh/m2/year

kWh/person/year

GHG
tCO2e/m2/year
tCO2e/person/year

Water
m3/m2/year

m3/person/year

waste

Retail

London

Baseline
2010/11

190

2,643

0.090

1.257

0.425

5.926

2012/13

Change

% Change

182

2,540

0.090

1.252

0.387

5.395

(8)

(103)

(0.005)

(0.038)

0.53

(4.2)

(3.9)

0.0

(0.4)

(8.9)

(9.0)

Energy
kWh/m2/year

kWh/person/year

GHG
tCO2e/m2/year
tCO2e/person/year

Water
m3/m2/year

m3/person/year

Baseline
2010/11

355

0.021

0.167

0.332

2.606

2012/13

Change

% Change

411

0.022

0.181

0.298

2.488

0.001

0.014

8.9

15.8

4.8

8.4

(0.034)

(0.118)

(10.2)

(4.5)

cHart 39

68.2

22.7

9.1

100

explanation
Waste from our Retail Portfolio remains a challenge. In particular, wet waste –
for example, organic waste from restaurants – plays a bigger role in Retail than
London and is harder to recycle. Geography affects figures too, with energy-
from-waste facilities easier to reach in South East England. More retailers are
choosing to recycle some of their more valuable waste, while leaving us to
handle the rest. This makes it harder for us to reach our targets, but it does give
us plenty of opportunities to improve waste management overall.

Recycled (%)

Waste to energy (%)

Landfill (%)

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Land Securities Annual Report 2013

DIRECTORS’ REPORT

key tarGets

KEY TARGETS

Targets

Overall target

2012/13 target

2012/13 performance

Sustainable business:
Professional
volunteering

Maintain or increase 60% employees
volunteering rate (for half day or more per
year) but increase the proportion of those who
provide skilled or professional advice or
mentoring to 25% (of the 60%) by March 2014.

Establish accurate recording data
across the business and aim for 17%
(of benchmark) of volunteers to be
providing skilled or professional
advice or mentoring.

Customer service

Maintain overall satisfaction rates
in both London and Retail Portfolio
customer surveys of 4 or over.

N/A

Achieved.
New policy established and subsequent
reporting mechanism introduced to
capture breakdown of data. 35% of
volunteering activity captured is
classified as ‘professional’.

Achieved.
Retail: “Overall satisfaction with
shopping centre management team”
4.28 (of 5). London: “Overall
satisfaction with estate management
team” 8.1 (of 10), equivalent 4.05 (of 5).

Investor engagement

Stronger communities:

Reporting to
local authorities

London Employment
Strategy

Education

Better environments:

Energy

Water

Waste

90% of our surveyed investor and analyst
audience and 90% of our surveyed SRI
specialists to believe our CR strategy is clear
and perceived to be embedded in the way
we do business by March 2014.

Target top ten SRI analysts and host at least
one specific event to address SRI issues.
Seek feedback on the Land Securities’
investment case and include in all corporate
reporting as business as usual.

Partially achieved.
Invited top SRI analysts to Land Securities’
2012 Environment Conference. CR
strategy included in some, but not all,
of our corporate reporting.

Report annually against social, economic
and environmental metrics to all regional
local authorities and London Boroughs
where we have significant shopping centre
or development presence by March 2014.

Deliver the London Portfolio employment
and skills programme across three
development sites – 20 Fenchurch Street,
Park House and 123 Victoria Street by
March 2014.

Establish working relationships with an
increasing number of schools and colleges
year on year; four in London, at least one
at each appropriate Retail development
site and at least one educational initiative
adopted in each centre by March 2014.

London: roll out City of London
Reporting Pack, having taken feedback,
to Westminster City Council. Retail: roll
out reporting to 10 local authorities and
all developments. Obtain feedback to
assess what content is most useful and
important to the local authorities.

Deliver the pre-employment routeway
into construction across three sites –
20 Fenchurch Street, 1 & 2 New Ludgate
and Kingsgate House.

Further develop relationships with current
four London schools and seek feedback
from the schools on how to make the
relationship more productive. Actively
promote opportunities to schools or
colleges within retail development
catchment areas. Each shopping centre
to engage with local authority, agree
and trial at least one appropriate
educational initiative.

Partially achieved.
Met with, and reported to, all major
local authorities. Still to roll out
standard reporting template.

Achieved.
Delivered routeway across three sites;
20 Fenchurch Street, Kings Gate & The
Zig Zag Building and Nova Victoria.
Total candidates into employment 94.

Achieved.
Five schools and one college engaged
in London. Every shopping centre
is engaged in a local educational
initiative.

Reduce average CO2 emissions from the
like-for-like managed portfolio by 16% by
2020/21 (compared to 2010/11).

N/A

Reduce average water consumption across
the London managed office estate and the
Retail like-for-like portfolio by 10% from
a 2010/11 benchmark by March 2018.

Achieve a 5% reduction by 2014.

Saw a 1.4% reduction in 2012/13 against
an interim reduction target of 5% by
March 2014.

Achieved.
Saw a reduction in the London office
portfolio of 8.9% and 10.2% in the
Retail Portfolio.

Increase to 90% the amount of waste
diverted from landfill and recycle at least
70% by weight (as an average across all
shopping centres) by March 2015.

Portfolio average to show an improvement
on the March 2012 landfill avoidance
figure, with at least 68% reused or
recycled.

Achieved.
90.9% of shopping centre waste
diverted from landfill, with 68.2%
reused or recycled.

Environmental
incidents

Health and safety

Record zero environmental incidents
(defined as prosecutions for breaches
of legislation or pollution incidents that
require clean-up operations).

Remain below industry benchmarks for
reportable incidents for health and safety
purposes on development sites and within
our managed property portfolio.

N/A

Achieved.
None recorded in this reporting
period.

Achieved.
We have remained well below all
available industry benchmarks for
reportable incidents.

Land Securities Annual Report 2013

GOVERNANCE

governance

Leadership
A profile of the Non-executive
and Executive Directors who lead
the Company.

p 58

Good governance
The steps we take to ensure the
Company has clear leadership
and is well managed.

p 60

Remuneration
How we align what management
is paid with our performance and
the interests of shareholders.

p 74

essential read
ifc More information print and online
12 Land Securities in brief
13 Our portfolio in detail
14 Our performance at a glance
15 Strategy and key performance indicators
16 Our year of progress
18 Our top properties

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directors’ report
22 Chairman’s message
24 Chief Executive’s statement
26 Financial review
32 Our principal risks and
how we manage them

36 Retail Portfolio review of the year
42 London Portfolio review of the year
48 Corporate Responsibility Report

governance
58 Board of Directors
60 Corporate Governance Report
64 Nominations Committee Report
68 Audit Committee Report
74 Directors’ Remuneration Report
92 Report of the Directors

Contact details

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Land Securities Annual Report 2013

BOARD Of DIRECTORS

Board oF directors

alison carnwath (60)
Chairman of the Board
Appointment to the Board:
Alison was appointed to the Board
in September 2004 and became
Chairman in November 2008.

Career:
Alison worked in investment banking
and corporate finance for 20 years,
before pursuing a portfolio career.
During her banking career, Alison
became the first female Director of
J.Henry Schroder Wagg & Co. Alison
also held the positions of a Senior
Partner of Phoenix Securities and
Managing Director, New York at
Donaldson, Lufkin & Jenrette.
Subsequently she served as a Non-
executive Director of Friends Provident
plc, Gallaher Group plc, Glas Cymru
Cyfyngedig (Welsh Water), Barclays plc
and Man Group plc. Alison is currently
a Non-executive Director at Zurich
Insurance Group Ltd, Paccar Inc, a
Fortune 500 company and The British
Library Trust.

Skills, competencies and experience:
Alison has some 30 years’ international
finance and investment banking
experience. Having held Board
positions in an executive and Non-
executive capacity in a variety of
industries and sectors in the UK and
overseas, she brings substantial
financial knowledge, strategic and
leadership experience.

Board Committees:
She is Chairman of the Nominations
Committee and a member of the
Remuneration Committee.

roBert noel (49)
Chief Executive
Appointment to the Board:
Robert was appointed to the Board in
January 2010 as Managing Director,
London Portfolio and became Chief
Executive on 1 April 2012.

Career:
A chartered surveyor and graduate
of the University of Reading, Robert
was previously Property Director at
Great Portland Estates plc between
August 2002 and September 2009.
Prior to that, he was a Director at
property services group Nelson
Bakewell. Robert is a Trustee of the
property industry charity, LandAid.
Former positions include being a
Director of the New West End
Company, the central London
Business Improvement District and
Chairman of the Westminster
Property Association.

Skills, competencies and experience:
Robert has over 25 years’ experience
in a number of sectors within the
property market. He has extensive
knowledge of the London commercial
property market in particular and
of strategic development. He has
significant executive leadership
experience in different property
sectors and has substantial listed
company experience at Board level.

Board Committees:
Robert chairs the Senior Management
Board and the Asset and Liability
and Investment Committee and is a
member of the Finance Committee.
He attends the Audit, Remuneration
and Nominations Committees at the
invitation of the Chairmen of those
Committees.

Land Securities Annual Report 2013

the position of Head of Retail Portfolio
Management. Prior to joining the
Group, Richard worked in retail
development for AMEC Developments
and prior to that, ARC Properties. He
is primarily responsible for the Retail
Portfolio, leading the Retail Executive
Committee and working with the Chief
Executive and Chief Financial Officer
on Group matters. Richard also has
executive responsibility for Health
and Safety across the Group. He is a
Non-executive Director of Barratt
Developments PLC.

Skills, competencies and experience:
Richard brings more than 25 years’
experience of the retail property
industry to his role and is a regular
author and panellist on industry
matters. He has led the Retail business
through many recent major changes
and challenges in the industry. He is
a former President of the British
Council of Shopping Centres (BCSC),
the main industry body for retail
property owners.

Board Committees:
Richard sits on the Investment
Committee and the Asset and Liability
Committee. He is also a member of the
Senior Management Board.

david rough (62)
Non-executive Director
Appointment to the Board:
David joined the Board as a Non-
executive Director in April 2002 and
was Senior Independent Director from
November 2003 to March 2012 and
was Chairman of the Remuneration
Committee until 30 September 2012.

Career:
David was Group Director
(Investments) of Legal and General
Group PLC until December 2001, and
during that time also served as the
Chairman of the Association of British
Insurers’ Investment Committee.
David is a Non-executive Director of
Brown, Shipley & Co. Ltd, the private
bank, and was previously a Non-
executive Director of the London
Metal Exchange and Senior
Independent Director and Deputy
Chairman of Xstrata Group PLC.

Skills, competencies and experience:
David has many years’ experience
both as an executive in the financial
investment industry and subsequently
as a Non-executive Director in the
investment, property, finance and
extractive industries. He has

martin greenslade (48)
Chief financial Officer
Appointment to the Board:
Martin joined the Group as Chief
Financial Officer in September 2005.

Career:
A chartered accountant, having
trained with Coopers & Lybrand,
Martin was previously Group Finance
Director of Alvis plc. He has also
worked in corporate finance, having
served as a member of the executive
committee of Nordea’s investment
banking division and Managing
Director of its UK business. Martin
is a Trustee of International Justice
Mission UK.

Skills, competencies and experience:
Martin brings significant listed
company financial and reporting
expertise from the property,
engineering and financial sectors in
the UK and overseas. He is responsible
for the finance, tax, treasury,
insurance, IS and accounting teams in
Land Securities and provides strategic
and operational financial expertise
to the Group including in relation to
corporate financing and investment
arrangements.

Board Committees:
Martin sits on the Investment
Committee, the Asset and Liability
Committee and the Finance
Committee. He attends the Audit
Committee meetings at the invitation
of the Chairman of the Committee.
He is also a member of the Senior
Management Board.

richard akers (51)
Executive Director
Appointment to the Board:
Richard joined the Board in May
2005, following his appointment as
Managing Director, Retail Portfolio
in July 2004.

Career:
A chartered surveyor, Richard joined
the Group in 1995 and previously held

BOARD Of DIRECTORS

significant experience of strategic
decision making including major
international corporate actions.
Although he has served on the Board
for over nine years, he brings his
independent thought and challenge
to Board and Committee meetings,
particularly in relation to finance
and investor matters.

Board Committees:
David is a member of the Audit
Committee and Finance Committee.

sir stuart rose (64)
Non-executive Director
Appointment to the Board:
Sir Stuart joined the Board as a
Non-executive Director in May 2003.

Career:
His extensive retail experience
includes the positions of Chief
Executive and then Chairman of
Marks and Spencer Group plc from
2004 until 2010, Chief Executive of
Arcadia Group from 2000 until
December 2002 and Chief Executive
of Booker PLC from 1998 until 2000.
He is Chairman of Ocado plc and Blue
Inc. He is a Non-executive Director of
Woolworths Holdings South Africa,
and sits on the advisory board of
Bridgepoint Capital. He was
Chairman of Business in the
Community from 2008 to 2010.

Skills, competencies and experience:
Sir Stuart commenced his career in
the retail industry in 1972 and has a
wealth of international management
experience in the sector, having led
some of the biggest UK retailers.
Although Sir Stuart has been on the
Board of the Company for over nine
years, he remains independent in
thought and action providing insight
and challenge particularly on retail,
consumer, corporate responsibility
and strategic issues. He was knighted
in 2008 for services to the retail
industry and corporate social
responsibility.

He has previously served as Managing
Director of Haslemere NV, Chairman
of Jones Lang Wooton Fund
management, President of the British
Property Federation and Chairman of
the Bank of England Property Forum.

Skills, competencies and experience:
A property investment specialist, Chris
has many years’ experience in the
commercial property industry in the
UK and abroad. He has substantial
knowledge of property finance and
investment in particular and of the
wider property market.

Board Committees:
Member of the Nominations Committee
and Remuneration Committee.

stacey rauch (55)
Non-executive Director
Appointment:
Stacey joined the Board as a Non-
executive Director on 1 January 2012.

Career:
Stacey is a Director Emeritus of
McKinsey & Company where she served
clients in the US and internationally for
24 years. Whilst there she co-founded
the New Jersey office and was the first
woman to be appointed as an industry
practice leader. She was a leader in the
firm’s Retail and Consumer Goods
Practices, served as the head of the
North American Retail and Apparel
Practice and acted as the Global Retail
Practice Convener. She retired from
McKinsey & Company in September
2010 and is currently a Non-executive
Director of Ann Inc, (a listed American
women’s speciality apparel retailer) and
the Tops Holding Corporation, (the
parent company of Tops Markets LLC,
a US grocery retailer). She is also a
Non-executive Director of the Fiesta
Restaurant Group which is listed on
NASDAQ.

Skills, competencies and experience:
A retail specialist with many years’
experience of the sector in the US and
internationally, her career with
McKinsey saw her consult to a wide
range of retailers, apparel wholesalers
and consumer goods manufacturers.
She brings extensive international
retail, and consumer goods industry
experience. She also brings current
leisure and grocery sector strategic
business knowledge to the Board.

Board Committees:
Member of the Audit Committee.

kevin o’Byrne (48)
Senior Independent Director
Appointment to the Board:
Kevin was appointed to the Board
as a Non-executive Director in April
2008 and was appointed Senior
Independent Director on 1 April 2012.

Career:
Kevin is a chartered accountant who
trained with Arthur Andersen. He has
held several senior finance positions
and had been the Group Finance
Director of Kingfisher plc since 2008
until his appointment in a key
international leadership role as CEO
B&Q and Koctas brands, responsible
for group businesses in the UK, China,
Turkey and Germany. His previous
roles included Group Finance Director
of Dixons Retail Plc, and European
Finance Director for The Quaker
Oats Company.

Skills, competencies and experience:
Kevin brings extensive knowledge and
experience of strategic development
and the management of multi-
jurisdictional retailing for a FTSE 100
company. He also brings significant
recent and relevant financial skills and
expertise, financial governance and
executive leadership.

Board Committees:
Kevin is Chair of the Audit Committee
and is a member of the Nominations
Committee.

chris Bartram (64)
Non-executive Director
Appointment:
Chris was appointed to the Board
as a Non-executive Director in
August 2009.

Career:
Chris is Chairman of Orchard Street
Investment Management LLP, a
specialist UK commercial property
investment manager. He is a chartered
surveyor, a Non-executive Director of
The Crown Estate and a Wilkins Fellow
of Downing College, Cambridge.

simon palley (55)
Non-executive Director
Appointed to the Board:
Simon was appointed to the Board
as a Non-executive Director in
August 2010.

Career:
A senior figure within the private
equity industry, Simon is Chairman
of the private equity firm Centerbridge
Partners Europe and a Trustee of the
University of Pennsylvania and The
Tate Foundation.

Simon has had a successful and broad
ranging career in investment banking,
consulting and private equity. He
started his career at Chase Manhattan
before moving to Bain & Company.
He left there in 1988 to join Bankers
Trust as a Vice President, then in 1990
joined BC Partners, a private equity
firm where he stayed for 17 years,
rising to Managing Partner. Simon is
an MBA graduate of The Wharton
School, Pennsylvania.

Skills, competencies and experience:
Simon brings considerable strategic
management and business oversight
experience. He has particular
expertise in international finance and
investment, investor issues and the
shareowner governance of companies.

Board Committees:
Chairman of the Remuneration
Committee (from 1 October 2012).

Land Securities Annual Report 2013

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GOVERNANCE

introductory letter to
the corporate governance
report From the chairman
oF the Board

Dear Shareholder,

uk corporate governance code
I am pleased to report that once again, your
Company has complied in full with the 2010
UK Corporate Governance Code.

At Land Securities, we believe that good
corporate governance is more than just an
awareness and adherence to rules. It is about
the Board setting clear expectations for
conduct throughout the business, embracing
difficult issues and being honest and open in
our business dealings.

We monitor developments in corporate
governance, both in the UK and
internationally. We adopt emerging practice
where it has the potential to enhance
transparency and improve our business
performance over the long term, whether
or not it becomes mandatory. We talk to our
shareholders regularly and welcome their
feedback on our approach to governance
and what they expect from us.

chieF executive and management
This was Robert Noel’s first year as Chief
Executive and he has made a significant
impact. He has enhanced our governance
and operational processes by establishing the
London Executive Committee and the Retail
Executive Committee. These Committees are
responsible for the oversight and governance
of our principal businesses. For more
information on the Committees, please see
page 62.

The Board continues to support and
challenge management on significant
strategic matters, including the shape of the
organisation and changes in our markets.

During the year we paid particularly close
attention to how the retail and office markets
are changing, what effect this may have on
the requirements of our customers and how
we must adapt to meet their needs.

Board eFFectiveness
We measure the performance of our Board
through a series of individual director
assessments and this year also by an
externally facilitated board effectiveness
review. This was conducted by a leading
board evaluation firm, Boardroom Review,
which completed a comprehensive and
rigorous evaluation of the Board’s work,
effectiveness, composition and efficiency.
The outcome was positive. The review
generated a number of insightful suggestions
which we have set aside time to address over
the next 12 months. We will report on
progress against them next year.

We are aware that we must continually
develop our knowledge and skills so we can
respond to changing market conditions and
new business challenges and opportunities.
Our Board development sessions this year
concentrated on corporate responsibility,
changing occupier requirements and
consumer behaviours, technical innovation
and sustainability.

risk
Our Board meeting in September focused on
risk. The purpose of the session was to gauge
the risk appetite of Directors and their
perception of the level of risk currently being
taken in the business. Directors were asked
whether they would like to see the Company
increase or decrease its exposure to risk as a
means of improving returns. The awareness

of risk amongst Directors was very high and
a consensus emerged as to the levels of risk
the Board is happy for the business to take.

Board committees
Our Board Committees have continued to
perform effectively. Following a year of
considerable change with the appointment
of a new Chief Executive, the focus of the
Nominations Committee included the Board
effectiveness review, succession planning at
the Senior Manager level and the search for
a new Non-executive Director. The
Remuneration Committee completed an
extensive consultation on changes to the
remuneration of our Executive Directors,
which received overwhelming support from
shareholders. It also considered guidance
from investors on their expectations for
executive remuneration and the various
consultations and proposals from the
Department for Business, Innovation & Skills’
for Directors’ remuneration. The Audit
Committee considered a number of key risks
within the business and oversaw a tender
of our external audit. You will find more on
the work of the Committees in this report.

Over the following pages we describe our
corporate governance framework in more
detail and include case studies of our
governance in action. I hope you will find this
helpful in understanding our commitment
to good governance.

Alison Carnwath
Chairman

Land Securities Annual Report 2013

GOVERNANCE

leadership

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the role oF the Board and its committees

chart 40

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Board Committees

Executive Committees

the Board
The Board provides leadership to the
Group. It sets the strategy and oversees its
implementation, ensuring that acceptable
risks are taken. It ensures that the right people
and resources are in place in order to deliver
long-term value to shareholders and benefits
to the wider community.

To help retain control of key decisions, the
Board has put in place a formal schedule of
reserved matters that require its approval.
The principal reserved matters are:
– strategy;
– new business areas;
– authorisation of transactions in excess of
£150m and those which are otherwise
significant;

– internal controls and risk management;
– remuneration policy (through the

Remuneration Committee);

– shareholder circulars and listing

particulars;

– matters relating to share capital, such as

share buybacks;

– treasury policy and significant fundraisings;
– dividend policy; and
– appointment/removal of Directors and the

Company Secretary.

The Board also delegates matters to Board
Committees and management. Clearly
defined written limits support these
delegations.

A copy of reserved matters is available to
view on the Corporate Governance section
of the Company’s website: www.landsecurities.
com/about-us/corporate-governance/
role-of-the-board.

audit committee
The Audit Committee’s primary function is to
assist the Board in fulfilling its financial and
risk oversight responsibilities. During the
year the Committee met four times.

The Committee reviews items such as the
half and full year results and then makes
a recommendation to the Board.

Further information on the work of the
Committee during the year can be found
later in this section.

nominations committee
The Nominations Committee is responsible
for considering the Board’s structure, size,
composition and succession needs. It also
has oversight of the succession planning for
Senior Managers. The Committee met twice
during the year.

The Committee will lead such items as a
search for a new Non-executive Director and
will then make a recommendation to the
Board on the suitable candidate.

Further information on the work of the
Committee during the year can be found
later in this section.

remuneration committee
The Remuneration Committee is responsible
for determining the remuneration and
conditions of employment for Executive
Directors and Senior Managers. The
Committee met four times during the year.

Further information on the work of the
Committee during the year can be found in
the Remuneration Report.

corporate responsiBility committee
The Corporate Responsibility (CR)
Committee reports to the Chief Executive.
The Committee meets every two months and
is responsible for:
– defining strategic priorities in CR;
– monitoring CR performance; and
– ensuring that CR activities remain directly

related to our business objectives.

Our Corporate Responsibility Report 2013
is available at www.landsecurities.com/
responsibility.

Finance committee
The Finance Committee comprises the Chief
Executive, the Chief Financial Officer and
David Rough, a Non-executive Director.
It met three times during the year.

The Committee is responsible for considering
the Group’s funding and reviewing certain
funding activities including the approval of
all new debt facilities. Depending on the level
and type of funding, further approval may be
required from the Board.

Land Securities Annual Report 2013

GOVERNANCE

asset and liaBility committee
The Asset and Liability Committee members
include all of the Executive Directors, the
Group’s Research Manager and the Group’s
Director of Tax and Treasury. It met three
times during the year. The Committee is
responsible for reviewing the following
items, many of which come to the Board for
information and discussion:

– the external environment: the economy,
financial markets, the property cycle and
the property markets in general;

– funding in the context of the Group’s
long- and short-term requirements;

– the forecast impact of acquisitions, disposals
and developments on the Group’s balance
sheet;

– balance sheet gearing ratios and balance
sheet resilience in the event of market
shocks; and

– liquidity analysis of the portfolio, development

and pre-development exposure.

investment committee
The Investment Committee meets weekly
when required and comprises the Group’s
Executive Directors. It is responsible for
approving significant transactions including
acquisitions, disposals, developments and
other transactions where they have a value in
excess of £20 million or are otherwise unusual.

senior management Board
The Senior Management Board is made up
of the Group’s Executive Directors and, with
effect from 1 April 2013, the Group’s General
Counsel and Company Secretary and the
Group’s HR Director. It meets weekly and
invites other senior executives to discuss
operational matters.

london and retail executive committees
The London Executive Committee and Retail
Executive Committee members comprise
senior executives across the London and
Retail business units respectively. The
Committees review governance and
operational performance within their
business units and ensure adherence to the
Group’s strategic and financial aims,
assessing and mitigating key risks.

To put the work of many of these Committees
into context, see page 63 where we have
prepared a case study on the X-Leisure
acquisition.

Senior Independent Director
– Kevin O’Byrne as Senior Independent

Director is available to discuss any concerns
with shareholders that could not be
resolved through the normal channels of
communication with the Chairman or
Chief Executive. No such concerns were
raised in the year.

As at 1 April 2013, the composition of the
Board was:

split oF directors

chart 41

Chairman

Executive directors

Non-executive
Directors

length oF tenure oF
non-executive directors

chart 42

0-3 years

4-6 years

7-9 years

Over 9 years

Board composition and roles
The Board comprises the Chairman, three
Executive Directors and six independent
Non-executive Directors. The Chairman and
Chief Executive’s key responsibilities are
summarised as:

Chairman
– As Chairman, Alison Carnwath is

responsible for leading the Board, its
effectiveness and governance. She sets the
tone for the Company, and ensures the links
between the Board and management and
the Board with shareholders are strong.

Chief Executive
– As Chief Executive, Robert Noel is

responsible for the day-to-day management
of the Group’s operations, for
recommending the Group’s strategy to the
Board and for implementing the strategy
agreed by the Board.

Executive Directors
– Martin Greenslade and Richard Akers
support Robert Noel in devising and
implementing strategy and in relation
to the operational performance of
the business.

Independent Non-executive Directors
– David Rough, Sir Stuart Rose, Kevin

O’Byrne, Chris Bartram, Simon Palley and
Stacey Rauch as Non-executive Directors
constructively challenge the Executive
Directors and monitor the delivery of the
agreed strategy within the risk and control
framework set by the Board.

Board and committee meetings and attendance

Board
meetings

Audit
Committee
meetings

Nominations
Committee
meetings

taBle 43

Remuneration
Committee
meetings

Director

Alison Carnwath

Robert Noel

Martin Greenslade

Richard Akers

David Rough

Sir Stuart Rose

Kevin O’Byrne

Chris Bartram

Simon Palley

Stacey Rauch

7/7

6/71

7/7

4/4

2/23

3/35

2/2

4/4

2/2

4/4

1/12

3/34

4/4

Board meeting rescheduled at short notice, which resulted in David Rough being unable to attend the Board meeting as he was travelling.

1.
2. Sir Stuart Rose stepped down from the Remuneration Committee after its 9 May 2012 meeting.
3. Chris Bartram stepped down from the Audit Committee after its 5 July 2012 meeting.
4. Chris Bartram was appointed to the Remuneration Committee on 19 July 2012.
5. Stacey Rauch was appointed to the Audit Committee on 5 July 2012.
6. David Rough stepped down from the Remuneration Committee on 31 May 2013.

Land Securities Annual Report 2013

GOVERNANCE

Board activity
Seven principal Board meetings were held
during the year. At every meeting each
Executive Director gave a report on his
particular area of responsibility within the
business, which were primarily:

– legal and compliance
– corporate responsibility
– operational performance of the

London Portfolio

– trends in the London property market

Robert Noel (Chief Executive)
– overview of the Group’s operational

performance and key activities
– progress with the Group’s key

business targets
– human resources
– investor relations

Martin Greenslade (Chief Financial Officer)
– overview of the Group’s financial

performance

– the Group’s financial statements
– the Group’s five year forecast and budget
– treasury and tax
– information systems

Richard Akers (Executive Director)
– operational performance of the

Retail Portfolio

– trends in retail property markets
– retail property
– Health and Safety
– valuation
– environment

In order to show how our governance works
in practice, we have included the following
case study:

case study: x-leisure acQuisition

Considered the impact
of the transaction.

Day-to-day running
of the project.

Reviewed the financial
and strategic
implications.

Assessed the impact of the
acquisition against the Group's
strategy and maintained oversight
of the transaction.

Considered the Committees'
recommendations in the
context of the Group's strategy
and alternative investments.
Approved the terms of the
acquisition within certain
parameters.

Updated regularly with
progress on the project with
views sought at key points.

Considered re-financing
of each loan facility.

During the year, we
increased our ownership
from 12% to 59.4% of the
X-Leisure Unit Trust, a
Jersey regulated specialist
fund investing in leisure
properties.

This was a significant step towards our goal
of increasing the proportion of leisure
assets within the portfolio. The transaction
was substantial and high profile, involving a
diverse mix of leisure assets, from cinema
complexes to restaurants, health and
fitness centres, bars, nightclubs and indoor
ski slopes. Here we highlight how our
governance and review processes informed
the various stages of the acquisition.

1. Project Team
The opportunity to purchase units in
X-Leisure was evaluated by our retail team
and corporate finance team (the project
team). They were supported by internal
experts from the Tax, Insurance, Treasury,

Company Secretariat, Finance, Internal
Audit, Building Surveying, HR and Legal
teams; and by leading external financial
advisers, property advisers and law firms
in the UK and Jersey. Due diligence helped
us to calculate the price we were willing
to pay and the returns we expected
to generate.

2. Retail Executive Committee
The project team produced a detailed paper
for the Retail Executive Committee. The
Committee considered the returns, the
risks and the impact on the Retail Portfolio.

3. Investment Committee
This Committee considered the proposal in
the context of the Group’s strategy,
alternative opportunities and the likely
impact on balance sheet, cash flows and
earnings.

4. Senior Management Board
Further due diligence was carried out by the
project team and our advisers. The team
kept the Retail Executive Committee and
the Senior Management Board updated on
progress and sought their views at key
points.

5. Asset and Liability Committee
This Committee considered the transaction
in the context of the economic
environment, and its likely impact on the
Group’s balance sheet, cash flows and
funding requirements.

6. Validation
The project team sought and received
approval from the Retail Executive
Committee and the Investment
Committee before non-binding Heads
of Terms were signed. The Committees
assessed detailed due diligence and
integration issues, as well as individual
asset plans for each of the properties
within the fund.

7. Board approval
At the early stages of the project, the Board
considered a discussion paper which
enabled the Directors to raise questions
well in advance of the requirement for
formal Board approval. Once the
acquisition terms were close to approval,
the Investment Committee approved the
outline terms and recommended them to
the Board.

A special Board meeting considered and
approved the transaction delegating
authority to an Executive Director to settle
the detailed items.

8. Shareholder announcement
On signing, an announcement was released
via the London Stock Exchange.

9. Integration
The Retail Executive Committee and
the project team agreed a detailed
integration plan for the management
company, which was set to become a
subsidiary of the Group. The Retail
Executive Committee assumed
responsibility for integration.

10. Finance Committee
Following the purchase, the Finance
Committee considered the re-financing
of loan facilities within the fund, some of
which were nearing expiry. It will also
consider future financing arrangements.

Land Securities Annual Report 2013

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GOVERNANCE

letter From the
nominations committee

Leadership and succession planning were
also key topics for discussion this year. We
established a ‘Talent Panel’ to examine and
enhance the way we recruit and develop the
careers and experience of people at all levels
of the business. The panel is chaired by
Richard Akers.

Over the following pages you can read more
about the actions of the Committee, including
our work on Board effectiveness.

Alison Carnwath
Chairman

Committee members:
– Alison Carnwath (Chairman)
– Kevin O’Byrne

(Independent Non-executive Director)

– Chris Bartram

(Independent Non-executive Director)

The Committee’s written terms of reference are available
on the Company’s website at www.landsecurities.com/about-us/
corporate-governance/board-committees

Dear Shareholder,

Last year we appointed a new Chief Executive
and a new Non-executive Director. This year
we made no changes to the Board, although
we did make a number of changes to the
composition of our Board Committees.
Our focus has been on Board evaluation, the
professional development of members of the
Board, succession planning and the adoption
of a new Board Diversity policy. We have also
commenced a search for a new Non-executive
Director to join the team.

The evaluation of the Board was conducted
independently by leading board evaluation
firm, Boardroom Review. The review
highlighted the positive and open culture
that we have on our Board. It also noted the
Board’s range of skills, experience and
contribution. You can read more about the
review on page 65.

Of course, there is always room for
improvement. In the coming year we will
be concentrating on our longer term vision
and on ensuring the Board continues to have
the optimal range of skills, experience,
diversity and personalities to succeed. We
are on course for the Board to comprise 25%
women by 2015, in accordance with Lord
Davies’ recommendations and our new
diversity policy.

A leading search consultant attended a
meeting of our Nominations Committee
in March to discuss our requirements for a
new Non-executive Director. Our intention
is to make this appointment over the next
12 months.

Land Securities Annual Report 2013

GOVERNANCE

Board eFFectiveness

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nominations committee agenda

Board evaluation cycle

chart 44

The Committee met twice during the year.
Matters considered included:

– monitoring the Board’s structure, size,

composition and diversity to achieve a balanced
and effective Board in terms of skills, knowledge
and experience;

– reviewing the leadership needs and succession
planning of the Group including identifying and
developing talent;

– engaging an executive search consultant to
search for a new Non-executive Director;

– considering potential conflicts of interest

amongst Directors;

– undertaking a rigorous review of the

independence of Sir Stuart Rose and David
Rough, who will shortly complete 10 and 11
years of service on the Board respectively.

Board environment and access
to appropriate inFormation
A positive and transparent culture exists on
the Board with good contributions from
each Board member. The environment
encouraged Directors to raise challenging
questions, debate issues freely and respond
to each other.

The papers presented to the Board were
focused on the Board’s priorities and were
clear and well-articulated. The agenda
structure combined presentation and debate.

In addition to Board meetings, the Board
calendar included presentations from
executives below Board level, non-executive
sessions without the Executives present and
Board dinners with a variety of attendees
including Senior Managers. Effective support
to the Board, including governance matters,
was provided by the Group General Counsel
and Company Secretary.

External evaluation
by independent,
external consultants

Questionnaires on the
issues raised in Year 1 by
the same independent
consultants

Interviews with the Chairman
and Group General Counsel
and Company Secretary

Board evaluation

Review the work of the Board,
Board environment and use
of time

Conclusions of the
Board Review

Progress against
2012 evaluation
targets

Areas for focus
2013/14

The review explored three key aspects:
1. the work of the Board (strategy, risk and control, and performance management)
2. the Board environment (culture and composition)
3. the use of Board time (planning and allocation).

Conclusions of the Review
The Board was effective and operating to a high level. Particular areas
of strength included:
– financial reporting, internal controls, the Audit Committee and risk

management process

– confidence in the Chief Executive and the Executive Team
– the Board’s open and inclusive culture, contribution and the quality

of Chairmanship

– the structure of the Board calendar, agendas, papers and support
– corporate culture, the development of remuneration policies and

executive succession.

Progress against 2012 evaluation targets
– good progress had been made against the previous year’s Board evaluation targets;
Management’s recommendations were updated to improve the assessment of how
proposals fit with Group strategy, forecasts and alternatives

– improvement in the focus and content of finance papers
– operational reviews also included regular updates on progress with the Group’s

key developments.

Areas for focus for 2013/14
– to more closely monitor sector changes
– a commitment from the Company to ensure the Non-executive Directors are able

to familiarise themselves with more of the Group’s properties

– the future Board composition, and the balance of formal and informal time
– inviting more external subject matter experts to facilitate discussions in highly

specialised areas such as technology.

Land Securities Annual Report 2013

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diversity policy
The Board works hard to ensure that it is
able to recruit Directors from different
backgrounds, with diverse experience,
perspectives, personalities, skills and
knowledge. We believe that diversity
amongst Directors contributes towards a
high performing, effective Board. During
the year, we adopted a new diversity policy,
which is summarised below.

We have made good progress in terms of
gender diversity, with more women now
filling senior management positions across
all of the major divisions of the Company.
We continue to focus on this area. Land
Securities participates in the FTSE cross-
mentoring programme for women wishing
to operate at board level in senior positions.
Through this we provide a mentoring service
for women in FTSE companies and other
companies reciprocate.

In support of our policy on diversity, we
intend to report annually on the following
objectives and initiatives that promote gender
and other forms of diversity amongst our
Board and Senior Management:
– our target to have at least 25% of our Board
made up of women by 2015, whilst ensuring
that candidates are always selected on merit
– we will consider candidates for appointment
as Non-executive Directors from a wider
pool, including those with little or no listed
company board experience

– we will only engage executive search firms
who have signed up to the voluntary Code
of Conduct on gender diversity and best
practice

– we will ensure the topic of diversity is raised

during each Board evaluation

– we will assist the development of a pipeline
of high-calibre candidates by encouraging
a broad range of senior individuals within
the business to take on additional roles so
they can gain valuable external board-level
experience.

GOVERNANCE

evaluation oF the perFormance
oF the Board
The three-year review cycle started again
this year with an independent, formal and
rigorous evaluation of the performance of the
Board, its Committees, the Directors and the
Chairman, conducted by Boardroom Review.

The review included meeting the Chairman
to agree the scope of the evaluation,
individual meetings with each Director and
the Company Secretary, and attendance at
the December 2012 Board meeting. The
outcome of the evaluation was fed back to
the Board at the meeting in February 2013.
Boardroom Review does not have any
other connections with the Company or
individual Directors.

Chairman’s evaluation
Kevin O’Byrne, the Senior Independent
Director, led the evaluation of the
Chairman after the Board meeting in
November. He gave feedback to the
Chairman on the outcome.

proFessional development, support,
training and induction For directors
The Chairman organised a development
session on Corporate Responsibility (CR).
This included an overview of Land Securities’
current approach, CR programme and
emerging issues around sustainability and
responsibility. A Board ‘away day’ was also
held, to discuss strategy, develop and refresh
the Board’s knowledge and skills.

The Board has two specific knowledge
development sessions planned in each year.
This year the Board received presentations
on legal and commercial developments in
leases and on Corporate Responsibility
initiatives within the Group.

Board knowledge of the Company’s property
portfolio was enhanced through site visits
by the Directors to the developments at
20 Fenchurch Street, EC3, Nova Victoria,
SW1, Trinity Leeds and Buchanan Galleries,
Glasgow.

To enrich the experience and development
of Executive Directors and Senior Managers,
the Group supports the taking up of non-
executive directorship positions at listed
companies and charities. Richard Akers
therefore continued as a Non-executive
Director of Barratt Developments PLC.

induction

Stacey Rauch was appointed as a Non-executive
Director on 1 January 2012. A comprehensive
induction was arranged for her by the Chairman
and Group General Counsel and Company
Secretary. Her induction has continued this year
with visits to properties and development sites
across the Retail Portfolio – including those at
Gunwharf Quays, Lewisham, the O2 at Finchley
and the W12 centre in Shepherd’s Bush – and a
tour of additional London properties. Stacey also
met with a number of Senior Managers in the
organisation including Portfolio Directors and
Centre Managers, as well as our external auditor
and valuers.

Board away day

The Board’s ‘away day’ was held over two days
in London and included:

– an overview by Robert Noel of his first ten

months in his role as Chief Executive, which led
to a detailed discussion of the business

– a workshop on changing consumer behaviours,
and technical innovation and sustainability in
retail, facilitated by Richard Akers

– presentations from external experts on the

macro-economic environment and property
market outlook.

independence
The Nominations Committee reviewed and
confirmed the independence of Sir Stuart
Rose and David Rough, who will shortly
complete 10 and 11 years of service
respectively. In accordance with the UK
Corporate Governance Code and guidance
published by shareholder bodies, a rigorous
review of their independence was conducted.
This included an analysis of their
contributions to the Board and Board
Committees, and their external interests
and roles.

The Committee concluded that both David
and Sir Stuart were independent in character
and judgement. They noted, in particular,
their objectivity, the constructive challenge
that they provide to management, and the
additional support and guidance they give
to Executive Directors and Senior Managers
outside Board meetings.

The Committee also concluded that the
remaining Non-executive Directors were
fully independent in character and
judgement. In addition, the Committee
confirmed that Alison Carnwath was
independent at the time of her appointment
as Chairman.

Land Securities Annual Report 2013

GOVERNANCE

Board gender split

chart 45

men

Women

80%

20%

women in executive
positions

chart 46

re-election to the Board
The effectiveness and commitment of the
Non-executive Directors has been reviewed.
The review noted that the time commitment
had gradually increased over the last five
years. The Nominations Committee is
satisfied with the time commitment of each
Non-executive Director during the year and
confident that each of them would be in a
position to discharge their duties to the
Company in the coming year. As detailed in
the notice of the Annual General Meeting,
all Directors will stand for re-election.

conFlicts oF interest
The Board operates a policy to identify and,
where appropriate, manage conflicts or
potential conflicts of interest.

The Nominations Committee monitors this
and considered that there was a potential for
a conflict of interest to arise for Chris
Bartram, Kevin O’Byrne and Richard Akers.
The Committee addressed these potential
conflicts as detailed in the table below.

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men

Women

80%

20%

potential conFlicts oF interest
Director

potential conflict

Chris Bartram

Chairman of Orchard Street
Investment Management (OSIM)
and a Non-executive Director
of The Crown Estate, which are,
in some areas of operation,
competitors of the Group

land securities
gender split

chart 47

Kevin O’Byrne

Executive Director of Kingfisher
plc, a large tenant of the Group

men

Women

54%

46%

Richard Akers

Non-executive Director of Barratt
Developments PLC, a leading
housebuilder

Mitigation

Chris Bartram did not take part
in discussions or see relevant
information on potential
acquisitions of property where
there was a realistic prospect of
OSIM or The Crown Estate also
being involved.

Since operational matters, such as
retail leasing, were unlikely to be
considered at Board level, the
Committee concluded that in
practice conflicts of interest were
unlikely to occur.

The risk of a conflict was
considered low given that the
Group operated in different
sectors of the property market to
Barratt Developments, which is
predominantly a residential
developer. Nevertheless, Barratt
Developments agreed not to
circulate any papers to Richard
Akers or involve him in discussions
regarding an acquisition or
disposal of land they believe
might be in competition or place
him in a position of conflict with
the Company.

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letter From the chairman
oF the audit committee

Dear Shareholder,

I would like to give you an overview of the
operation and scope of the Audit Committee
and report on our work over the past year.

The Group has a strong culture of risk
awareness embedded in decision making,
and robust processes that support the
identification and management of risk.
Again, this year we undertook a high level
review of risks, including the assessment of
our ‘Top 10’ risks for the Group and a ‘Watch
List’ of emerging risks. We also examined
some in more detail, with experts from the
business invited to attend meetings to update
us on the identification and mitigation of
risks specifically people risk, cybersecurity
and Scottish devolution.

During the year our Internal Audit team
assessed the financial controls and risk
management in place on a number of our new
developments, including Trinity Leeds and
62 Buckingham Gate, SW1. They also
undertook a number of audits, including
audits of the Treasury and Health and Safety
functions, to provide assurance to the Audit
Committee that the control environment was
continuing to operate effectively.

Our valuers, Knight Frank, and auditors,
PricewaterhouseCoopers LLP, regularly
attended our meetings to update us on the
valuations and results respectively. I met
with both to discuss their work both in the
company of management and in their absence.

In light of emerging best practice, this year we
decided it was appropriate to put our external
audit out to tender. The Committee
appointed a ‘Selection Panel’ comprising
Alison Carnwath, members of the Committee
– including myself – and management. After
a thorough review process, we have appointed
Ernst & Young LLP as our auditors. Their
reappointment will be subject to
shareholders’ approval at the 2013 AGM.

Kevin O’Byrne
Chairman, Audit Committee

Committee members:
– Kevin O’Byrne (Chairman)
– David Rough (Independent Non-executive

Director)

– Stacey Rauch (Independent Non-executive

Director)

Although all of the Committee members are considered to be
appropriately experienced to fulfil their role, Kevin O’Byrne is
considered to have significant, recent and relevant financial
experience in line with the UK Corporate Governance Code.
Further biographical details of each of the members of the
Committee are set out on pages 58 and 59. The Committee’s
written terms of reference are available on the Company’s website
at www.landsecurities.com/about-us/corporate-governance/
board-committees.

Land Securities Annual Report 2013

GOVERNANCE

accountaBility

audit committee meetings
The Committee’s primary function is to assist
the Board in fulfilling its financial oversight
responsibilities. Meetings of the Audit
Committee were also attended by the
Chairman of the Board, Executive Directors
and the Group’s General Counsel and
Company Secretary, who acts as Secretary to
the Committee. In addition, the Director of
Risk Management and Internal Audit and
representatives from the Group’s auditors
during the year, PricewaterhouseCoopers LLP
(PwC), were present at each meeting. The
Group’s external valuers, Knight Frank LLP,
also attended the meetings after the half year
and full year valuations to present their reports.
All of the Board were invited to attend the
meeting which reviewed our full year results.

audit committee agenda

The Committee met four times. Its agenda
included reviewing:

– the final and interim financial statements and

matters raised by management and the external
and internal auditors

– the effectiveness of the Group’s system of
internal controls and risk management

– the ‘Top 10’ risks for the whole Group and

‘Watch List’ of emerging risks

– updates on people risk, cybersecurity and

Scottish devolution

– the results of internal audit reviews,

management action plans to resolve any issues
arising and the tracking of their resolution

– the external auditors, their effectiveness,

objectivity and independence, and the terms
of engagement and the scope of the audit

– audit plans for external and internal audits

– policy on the provision of non-audit services by

the external auditor

– performance of the Company’s auditors and the

external valuers

– the full and half year valuations and the external

valuation process; and

– the Group’s policies for preventing fraud and
bribery, its employee code of conduct and its
business ethics and anti-corruption policy.

In conjunction with the Board evaluation
outlined on page 65, the Committee
evaluation concluded that it remained
an effective Audit Committee.

external audits and valuations
External auditors and non-audit work
The Audit Committee had policies and
procedures in place to monitor and maintain
the objectivity and independence of the
external auditors, PwC. The policy requires
prior approval by the Chairman of the Audit
Committee of non-audit work above a de
minimis threshold level of £25,000.

During the year the auditors undertook the
following non-audit work, none of which
exceeded the non-audit work threshold level:
– providing a comfort letter on the annual
update of the Group’s debt prospectus
– reviewing agreed procedures in relation
to non-statutory financial statements of
Thomas More Square Estate

– reviewing agreed procedures in relation
to the ground rent schedules provided to
The Crown Estate for the Exeter properties
– reviewing the net rent schedule provided to
Cardiff City Council for the properties at
St David’s

– non-statutory reporting on the consolidated

financial statements of LS Intermediate
Limited

– extraction procedures on the ground rent

and service charge certificates.

The ratio of fees for non-audit work to audit
services was 1:6. The ratio reflects the
relatively straightforward nature of the Group
statutory audit.

Due to familiarity with the subject matter and
alignment with work carried out under the
audit, these services were provided by PwC.
In order to maintain PwC’s independence
and objectivity, PwC undertook its standard
independence procedures in relation to those
engagements. Further details on the amounts
of non-audit work paid to PwC are set out in
note 7 to the financial statements. These were
reported to and considered by the Audit
Committee.

The Committee also appraised the effectiveness
of PwC, and also assessed their independence.
The Committee concluded that PwC remained
independent. Furthermore, PwC confirmed to
the Committee that it maintained appropriate
internal safeguards to ensure its independence
and objectivity.

During the year, the Audit Committee
held a private meeting with PwC, without
management being present, in order to
receive feedback from them on matters
such as the quality of interaction with
management. The Chairman of the
Committee also met with PwC separately
on several occasions.

audit tender

This year, Land Securities put its audit out to
tender. In addition to this being good practice
and satisfying new governance requirements,
the tender enabled us to determine whether
other firms offered a different approach to the
audit. A Selection Panel was set up comprising
Kevin O’Byrne, David Rough, Martin Greenslade,
Alison Carnwath, and Despina Don-Wauchope,
the Group Financial Controller.

A number of firms were approached to tender
for the audit. The list was based upon their
experience, industry skills and knowledge, their
ability to perform the audit to a high standard and
any pre-existing business relationships that might
affect their independence. Three firms submitted
tenders and were shortlisted. Each was given
access to Directors and Management, including
meetings with Robert Noel, Martin Greenslade
and Kevin O’Byrne, before presenting to the
Selection Panel and Senior Management.
The Selection Panel recommended to the Audit
Committee and Board that Ernst & Young LLP
be selected as the new auditors.

Valuers
The Audit Committee has policies and
procedures in place to monitor the objectivity
of the Group’s independent external valuers,
Knight Frank LLP. The work of Knight Frank
is particularly important since the valuations
of the Group’s portfolio help determine a very
significant part of the Group’s reported
performance and Senior Management
remuneration.

The significance of the valuation work is
reflected in the sophistication of our controls
and evaluation procedures.

The external valuers and external auditors have
full access to one another. They communicate
freely with each other, and exchange
information independently of the Group.

During the year, the Audit Committee
Chairman, Kevin O’Byrne, attended key
valuation meetings to be assured of the
independence and rigour of the process.
In addition, Knight Frank presented its
valuation findings to the Audit Committee
at the interim and full year review of results.

We have a fixed fee arrangement with our
principal valuers Knight Frank. Given the
importance of the work undertaken by
Knight Frank, we have disclosed the fees
we pay them in note 8 to the financial
statements.

The total fees paid by the Company to Knight
Frank in the year represented less than 5%
of its total fee income for the year.

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Significant judgements, key assumptions and estimates
The Audit Committee pays particular attention to matters it considers to be important by virtue of their impact on the Group’s results and
remuneration of Senior Management, or the level of complexity, judgement or estimation involved in their application on the consolidated
financial statements. The main areas of focus during the year are set out below:

Matter considered

Action

taBle 48

Valuation of the investment property portfolio
Although conducted externally by independent valuers, the valuation of the
investment property portfolio is inherently subjective, requiring significant
judgement. The outcome is significant for the Group in terms of its investment
decisions, results and remuneration.

The Audit Committee reviewed the methodology and outcomes of the
valuation. The valuers presented their valuation at the half and full year
results meetings. The valuers proposed significant increases in the values
of our completed developments, which were discussed by the Committee in
detail and accepted on a case-by-case basis. The valuers were also asked to
highlight any significant judgements and any significant disagreements with
management. The objectivity of the independent external valuers, Knight
Frank LLP, was also monitored by the Committee and more information on
this can be found on page 69.

Bankside
In December 2005, the Group sold land on London’s South Bank to a residential
property developer in return for an upfront payment and a share of any
development profit. As the development has now been completed and the vast
majority of flats sold, the Group is required to consider how much of the profit it
should recognise.

The Committee reviewed a recommendation from management on the amount
of profit to be recognised, taking into account the likelihood of the flats selling,
their likely selling prices and the timing of sales. Scenarios produced by
management were considered by the external auditors and debated with the
Committee. The Audit Committee supported management’s judgement to
recognise profit of £15.4m, which it was felt was prudent at this stage of the sales
process.

X-Leisure
The Group acquired a further 41.8% holding in the X-Leisure Unit Trust
(X-Leisure) in January 2013 and an additional 5.6% investment in
March 2013, taking the Group’s total holding in X-Leisure to 59.4%. As a
result of the transactions, the Group acquired control of X-Leisure and the
Committee considered how it would be accounted for, going forward. The
matter was made more complex as X-Leisure is a fund, with a number of
obligations to other investors.

The Audit Committee reviewed a paper presented by management, on which
the external auditors had commented. The paper described the transaction,
the accounting standards and any options in terms of how the acquisition
might be treated. The subsequent discussion, which involved our external
auditors, explored the proposed accounting treatment, how it would differ
from our joint ventures and whether the disclosures within our financial
statements would enable our investors to properly consider the performance
of the asset. The Audit Committee was satisfied by the accounting treatment
proposed by management. For more information, please see note 29.

Further details on significant judgements, key assumptions and estimates can be found
in note 3 to the financial statements on pages 104 to 105.

Land Securities Annual Report 2013

GOVERNANCE

case study: development in victoria

The scale of regeneration we are
undertaking in SW1 means the
proportion of development in our
portfolio is increasing rapidly. We
believe that development activity
will provide better returns for our
shareholders, albeit at a higher risk.
So what risk control measures are
in place to mitigate the risks facing
our development at Nova Victoria?

Financial risk control measures
We have clear risk control measures limiting the
amount of development we can undertake at any
time. We use a number of measures to assess the
appropriate level of development. These include:

– ensuring that the total proportion of capital

employed in our development programme will
generally not exceed 20% of our capital employed

– avoiding having an uncovered dividend, by ensuring
that the income impact from the un-let element of
our development programme does not exceed the
Group’s retained earnings

– monitoring the relationship between contractual

commitments and undrawn cash facilities to
ensure we have sufficient cash available to fund
the work.

Risk management
Development risks relating to our London properties,
such as those in Nova Victoria, are discussed at the
London Executive Committee meetings. The risk
management process captures development risks,
which are recorded on a Group risk register. The
register is monitored by our London Executive
Committee, our Senior Management Board, the
Audit Committee and the Board. Experts in the
business are invited to attend Audit Committee
meetings to provide an update on how the risks are
being managed. As an additional measure, on
Nova Victoria we have entered into a 50/50 joint
venture with the Canada Pension Plan Investment
Board to share the financial exposure for what is
a very significant development.

1. Lettings
There is a risk that we will not be able to let space in the
development or sell the apartments we are creating.
The risk is mitigated by monitoring the market cycle
and likely tenant/purchaser demand before committing
to new developments and delivering the development
in stages to spread supply. In addition, during the
development, the leasing and sales teams constantly
monitor tenant/purchaser demand and supply in the
immediate and wider London areas. Responsibility
for these measures has been allocated to specific
Senior Managers.

2. Main contractor
The project will take many years to complete and there
is a risk that the main contractor will not be able to
complete it on budget or at all. This may occur for a
number of reasons including: financial difficulty, a lack
of expertise or ability to deal with the scale of the works.
To mitigate this risk, we evaluated leading contractors
from across London and invited the most appropriate
to tender for the work. They were asked to provide
details of their experience with projects of this scale,
their proposed team and construction methodology,
detailed company financial information, relevant
guarantees and a fixed lump sum price for the works.
Only once we were satisfied with their ability to
complete the project on budget and programme was
the successful bidder appointed. The main contractor’s
financial position and work will be monitored carefully
throughout the project.

3. Construction
The development involves significant demolition
and complex mixed-use construction over London
Underground tube lines and an overflow sewer on a
large site in the centre of one of the busiest areas of
London. In order to manage the risk, our project team
worked with some of the world’s leading consultants to
assess the different construction issues and create work
streams to efficiently mitigate them.

A fixed price Design and Build construction contract
was placed which transferred responsibility for a
number of the key risks to the main contractor. The
contractors are experts in their field and their work
will be monitored carefully during the works, with
contingency plans in place to deal with issues that
might arise.

4. Utilities
The construction and subsequent occupation of
Nova Victoria by tenants and residents will create
a significant increase in demand for utility services
in the area, particularly electricity, with the risk of
providers not being able to meet that demand. We
have worked closely with UK Power Networks and
other utility suppliers to ensure that likely demand
is satisfied. A new sub-station is under construction
in Victoria Street which will supply consistent high
voltage connections to Nova Victoria and future
developments in the area.

5. Programme
The risk is that project costs and timings overrun.
Thorough planning including design development,
cost analysis and an evaluation of proposed
construction methods are undertaken with the
contractor to ensure both parties are aligned when
the fixed price construction contract is placed. The
costs and programme are regularly monitored
throughout the project to ensure the development
is delivered on time and budget.

6. Health and Safety
The risk here is that an accident occurs during
demolition or construction. To mitigate this risk we
set industry leading health and safety standards for
our contractors to comply with. In addition, we have
an on-going health and safety programme with
a dedicated in-house health and safety team that
undertake regular audits at all stages of the
development and advise on health and safety matters.

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internal controls and risk
management
The Board is responsible for the Group’s
system of internal control. This has been
designed to manage, rather than eliminate,
the risk of any failure to meet business
objectives. It can only provide reasonable
assurance – not absolute assurance – against
material misstatement or loss. The Board’s
approach to risk management is supported
by an oversight structure which includes the
Audit Committee.

The Board has an on-going process to
identify, evaluate and manage the significant
risks faced by the Group. This was in place
throughout the year and up to the date of the
approval of the Annual Report and Accounts.
This process is regularly reviewed by the
Board, and accords with the 2005 Turnbull
guidance. In addition, the Board reviews
annually the effectiveness of the risk
management and internal control systems.

System of risk management
and internal control
This system includes:
1. Strategic and business planning
– a five year forecast prepared and reviewed

by the Board annually.

2. Investment appraisal
– significant capital projects, major contracts

and business and property acquisitions
reviewed in detail by several Committees
– approvals made in accordance with a formal

schedule of reserved matters

– post investment appraisals.

3. Financial monitoring
– profitability, cash flow and capital
expenditure closely monitored

– key historic and forecast financial information

reported to the Board on a monthly basis.

4. Systems of control, procedures
and delegated authorities
– clearly defined guidelines and approval
limits exist for capital and operating
expenditure and other key business
transactions

– financial reporting controls identifying and

addressing key financial reporting risks
including risks arising from changes in
accounting standards, as well as any areas
of accounting judgement.

risk management process

chart 49

Identify

Reports risks and
mitigation to
the Board

Assess
and quantify

Re-assess risk
post mitigation

Develop action plans
to mitigate

Risk management
The Group’s risk management process is
embedded throughout the organisation.
It can be summarised as follows:
1. Identify
Risks are identified for each area of the
business and the Group as a whole.

2. Assess and quantify
Each risk is rated in terms of probability of
occurrence and potential impact on financial
performance and the reputation of the Group.

3. Develop action plans to mitigate
The Risk Management and Internal Audit
team assists the business in developing action
plans to mitigate risk and review and test key
business processes and controls, including
following up with the implementation of
management actions to the Audit Committee.

4. Re-assess risk post mitigation
Risks are continually re-assessed to ensure
that mitigation strategies have been effective.

5. Report risks and mitigation to the Board
Risks are reviewed with the Executive
Directors and the Audit Committee and then
reported to the Board.

Assurance
The Audit Committee and the Board reviewed
the effectiveness of the Group’s system of risk
management and internal control including
financial, operational and compliance
controls. This was primarily achieved by:
– reviewing key controls on a quarterly basis

to ensure they were embedded and
operating effectively within the business

– reviewing the reports from the Risk

Management and Internal Audit team on
any issues identified in the course of their
work. The Director of Risk Management
and Internal Audit met regularly with
Senior Management and attended all
meetings of the Audit Committee

– reviewing annually the Group’s system of

internal control. This includes a summary
of key controls, a report from the internal
audit team on their work and the results
of compliance questionnaires. These
questionnaires provided assurances from
Senior Management that business activities
had been conducted appropriately

– reviewing the effectiveness of the internal

audit function

– monitoring the risks and associated controls

over the financial reporting processes,
including the process by which the Group’s
financial statements are prepared for
publication

– reviewing reports from the external

auditors on any issues identified in the
course of their work, including an internal
control report on control weaknesses.

From the review of the risk management and
internal control system, the Board confirms
that no significant failings or weaknesses have
been identified.

Whistleblowing
The Audit Committee also oversees a
third-party run whistleblowing facility
to enable employees to raise issues on
a confidential basis. The Audit Committee
ensures that independent investigation of
any whistleblowing incidents is undertaken.

Land Securities Annual Report 2013

annual general meeting (agm)
The AGM provided all shareholders with an
opportunity to question the Board and the
Chairmen of the Board Committees on
matters put to the meeting, including the
Annual Report. Shareholders who attended
the AGM were given a detailed presentation
by the Chief Executive on the activities and
performance of the Group over the
preceding year.

The results of voting at general meetings
are published on the Company’s website,
www.landsecurities.com/investors/
shareholder-investor-information/AGM-
Annual-General-Meeting

independent FeedBack
on investor relations
The Board received independent feedback
on Investor Relations through a biennial
presentation by Makinson Cowell, an
independent adviser. Makinson Cowell
undertook its comprehensive Investor
Relations audit last year, so this year their
recommendations continued to be
implemented.

The Investor Relations department also
received feedback from analysts and investors
during the year through the Group’s
corporate advisers. The information was
shared with the Board to help members
develop their understanding of shareholders’
needs and expectations.

Other disclosures
Other disclosures required by paragraph
7.2.6 of the Disclosure and Transparency
Rules and the Companies Act 2006 are set
out in the Report of the Directors on
page 92.

GOVERNANCE

relations with
investors

Approach to Investor Relations
The Company has a comprehensive
Investor Relations programme which
aims to assist existing and potential
investors understand the Group.

The Investor Relations programme is
arranged between institutional investors,
private shareholders and debt investors.
Shareholder feedback is provided to the
Board to ensure that they understand the
views of major investors. During the year,
the programme of investor events included:

institutional shareholders programme
Meetings with principal shareholders
– meetings with Directors and the Chairman

were offered throughout the year

– the Chairman, particularly with regard to
the new remuneration policy, maintained
contact with principal shareholders and
kept the Board informed of their views
– as well as Non-executive Directors, the

Senior Independent Director was available
to meet with shareholders

– the Investor Relations programme

continued in Europe, North America and
the Far East.

Roadshows
– institutional shareholders were invited to
annual and half yearly results meetings.

Investor conference
– the Investor conference is held annually and
focuses on the Retail and London Portfolios
in alternate years. This year, the Conference
was held in London and focused on the
London Portfolio. As well as updates on
market conditions and our business, there
were property tours of 20 Fenchurch Street,
EC3, and Nova Victoria, SW1. It also
provided an opportunity for attendees to
meet management below Executive
Director level

– the presentations and an audiocast or
webcast of the conference were made
available on the corporate website to enable
those investors who could not attend to
access the information provided at the
conference.

Industry conferences
– industry conferences provide Executive
Directors with a chance to meet a large
number of investors on a formal and
informal basis. Conferences that were
attended by Executive Directors included
the UBS Global Property conference in
London, Citi CEO conference in Florida,
Merrill Lynch conference in New York, and
the Kempen conference in Amsterdam,
amongst others.

Other initiatives
– the Chairman and Chief Executive held a
dinner for the senior heads of equity from
UK institutions

– digital communication with investors was
developed further this year with investors
offered live streaming of the results
presentations.

private shareholders’ programme
Private shareholders are encouraged to give
feedback to and communicate with the
Directors through the Company Secretary.
During the year they were also able to meet
Directors at the United Kingdom
Shareholders’ Association (UKSA) meeting,
held annually at our head office, and at the
Annual General Meeting.

deBt investors programme
Credit side institutional investors
and analysts
– meetings were held with our Chief Financial

Officer and our Treasury team after the
annual and half year results.

Banks
– there was regular dialogue with our key
relationship banks including quarterly
meetings with our Treasury team and
in-house dinners with Executive and
Non-executive Directors

– our Treasury team also actively engaged

with potential lenders. Typically, the team
will look up to three years ahead when
developing new relationships.

Credit rating agencies
– during the year meetings were held by our
Treasury team and Senior Management
with both Standard & Poor’s and Fitch
Ratings. As a result of a ratings event,
conference calls were also held with
principal institutional investors.

Further information on our debt investors
can be found at www.landsecurities.com/
investors/debt-investors.

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letter From the chairman
oF the remuneration committee

Dear Shareholder,

This is my first report to shareholders as
Chairman of the Committee, having taken
over from David Rough on 1 October.
David has been a first class Chairman of
the Committee and overseen a number of
improvements to the structure of executive
remuneration within the Group. I would like
to thank him for his contribution and for his
support since stepping down.

The last year has been another difficult
one for the commercial property market,
characterised by uncertainty and caution.
Notwithstanding the outlook, for the year,
the Board again set ambitious ungeared Total
Property Return (TPR) and revenue profit
targets for the business. The targets for our
long-term incentives, Total Shareholder Return
(TSR) and TPR have remained challenging.

The vast majority of our performance
targets are relative, aiming to achieve higher
TSR and TPR returns than both our listed
company peers and investors operating in
similar commercial property sectors as
ourselves. This means that even in a year
where profits are very high, the outturns
from our variable pay will be low where we
have not outperformed our benchmarks.
Of course, this also means that in a year where
profits are low or losses are recorded, the
outturns for variable pay could be high where
outperformance has been significant.

At the beginning of the year, we faced a
relatively benign market. Management
knew that it would need to rely on its own
efforts to create value and meet the targets
set for the business. A combination of good
judgement and hard work has led to a
strong performance against our targets.

In particular, the decision to prioritise
development over property investment and
our relentless focus on asset management
has led to substantially higher returns than
would otherwise have been the case.

At year end, we have seen a strong performance
on both TSR and TPR measures. Our TSR for
the year has been 19.1%. Over three years, it
has been 39%, outperforming our peer group
by 1.26% per annum. Our ungeared TPR
produced 7.8% over the year. Over three years,
our TPR was 37%, outperforming other
investors in our core sectors by 1.03% per
annum. We were especially pleased with our
TPR outperformance of 1.70% over the year,
which followed a year of underperformance.
This has driven our Annual Bonuses higher
than for the same period last year, although the
proportion of our long-term incentives vesting
this year has fallen.

Management was also tasked with beating
challenging targets for revenue profit. As we
highlighted last year, our revenue profit
would be under pressure this year following
the sales of a number of properties and the
cessation of income from other properties
moving into our development programme.
The changes caused our net rental income
to fall by £25 million from last year, although
management’s actions have reduced the
revenue profit decline to £8.7m. A good
result in a difficult environment.

Last year, David Rough took you through the
extensive consultation that we undertook with
investors on our proposals for a remuneration
policy and structure for Executive Directors.
We listened carefully to feedback and made a
number of changes before putting them to
shareholders at our AGM. The proposals
received the support of 98.3% of shareholders

voting. We believe the new structure is simple,
transparent and demonstrably aligned with
shareholder interests. We continue to monitor
its impact carefully.

In common with many remuneration
committees, we have been particularly conscious
of the environment for pay in listed companies.
We have monitored closely the policy statements
received from our shareholders and have
responded to the Government’s consultations
on executive pay. We are supportive of the
changes, which are in the process of being
finalised by the Government and likely to come
into force for our 2014 Annual Report. To
demonstrate our commitment, we have adopted
as many of the new regulations as possible in a
new style of report this year. We have also made
the report clearer and easier to read by using
more tables and reducing the amount of text.
The report is now split into a Policy section,
which deals with our remuneration policy going
forward, and an Implementation section which
deals with payments made to Directors in the
year. In another change to previous years, you
will have a separate vote on each section.

More details of the work of the Committee
follows and I hope you find it helpful in
understanding our executive remuneration
policy and practice.

Simon Palley
Chairman, Remuneration Committee

Committee Members:
– Simon Palley (Chairman and Independent

Non-executive Director)

– Alison Carnwath (Chairman of the Board)
– Chris Bartram (Independent

Non-executive Director)

Land Securities Annual Report 2013

GOVERNANCE

directors’ remuneration – policy report

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1. introduction
In this section, we explain:
– Our remuneration strategy and policy
– How this strategy is underpinned by key
elements of our remuneration packages
– Why we have selected the performance
conditions for variable pay and why we
believe they are stretching and aligned
with the interests of our shareholders
– Other relevant information about our
service agreements with Directors and
remuneration around the Group.

Following a significant review of
remuneration policy for 2012/13, and
subsequent approval of changes to the policy
by shareholders at the 2012 AGM, no further
changes to policy will be made for 2013/14.

2. remuneration strategy
Put simply, our aim is to generate returns for
our shareholders that are higher than those
received by others who invest in our peer
group or in property assets themselves. The
key to achieving this is our people.
Our remuneration strategy is underpinned
by remuneration packages that are designed
to motivate high performing people to deliver
our strategy. They:
– Are simple, transparent and demonstrably
aligned with the interest of shareholders

– Reflect the views of our investors,

shareholder bodies and other stakeholders
– Are weighted to incentivise outperformance

of our peer group, over the short and
long term

– Are structured to ensure that superior
rewards are only paid for exceptional
performance against challenging targets
– Encourage management to adopt a level of
risk which is in line with the risk profile of
the business and as approved by the Board
– Are applied consistently across the Group
to promote alignment and support a high
performance culture

– Ensure a long-term focus through the

deferral of a significant part of the annual
bonus and the requirement for Executive
Directors to maintain significant personal
investments in the Company’s shares.

We have summarised the individual elements of the remuneration packages offered to our Executive Directors in the following table:

remuneration policy

purpose and link to strategy
Base salary

Operation

Opportunity

performance metrics

Changes in
the year

(unaudited) taBle 50

– No changes to policy, although
Directors’ salaries increased by
2.0% for 2013/141, slightly lower
than the increase for the wider
workforce of 2.2%.

– To aid the

– Reviewed annually, with effect from

– N/A

recruitment,
retention and
motivation of high
performing people.

– To reflect their
experience and
importance to
the business.

1 June. Review reflects:

– Increases throughout the rest of the

business.

– Market benchmarking exercise

undertaken periodically to ensure salaries
are set at around the median of the market
competitive level for people in comparable
roles with similar levels of experience,
performance and contribution.

– Where a new Director is appointed at a
salary which is at a discount to reflect
their experience at that point, the
Committee may increase it over time
subject to satisfactory performance and
market conditions.

– In years where no benchmarking exercise

is undertaken, increases likely to be
aligned with the general increase for the
wider workforce or to reflect changes
in responsibility.

– Changes in the scope of a Director’s role
may also require a further adjustment
to salary.

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remuneration policy (continued)

purpose and link to strategy
Benefits
– To provide

protection and
market competitive
benefits to aid
recruitment and
retention of high
quality executives.

Pension
– To help recruit
and retain high
performing
executives.

– Reward continued
contribution to the
business by enabling
Executive Directors
to build long term
savings.

Annual bonus
– To incentivise
the delivery of
stretching, near-
term business
targets and personal
performance
objectives.

– To reward near-term

outperformance
relative to industry
benchmarks.
– The ability to
recognise
performance
through variable
remuneration
enables the Group
to flexibly control its
cost base and react
to events and market
circumstances.
– Deferred bonuses

encourage a longer
term focus aligned
to shareholders and
discourage excessive
risk taking.

Savings Related
Share Option
Scheme
– To encourage

all employees to
make a long-term
investment in the
Company’s shares,
in a tax efficient way.

Operation

Opportunity

performance metrics

– Directors are entitled to

– N/A

a combination of:
– A company car allowance
– Private medical insurance
– Life assurance
– Ill health income protection
– Holiday and sick pay
– Professional advice in connection with

their directorship.

(unaudited) taBle 50

Changes in
the year

– None

– Participation into a money purchase
pension scheme or cash equivalent.

– Directors receive a

– None

pension contribution or
allowance of 25% of salary.

– None

– Maximum bonus
potential of 150%
of salary.

– Of this, 130% based on performance
against the following key targets, all
of which are approved by the Board:

– None

– The Group’s ungeared Total

Property Return (TPR) relative
to its sector weighted IPD index.

– Revenue profit.
– Other key business targets.
– 20% based on objectively measurable

personal performance objectives.

– All measures and targets are reviewed and
set by the Committee at the beginning of
the year and payments are determined by
the Committee after the year end, based
on performance against the targets set.

– Bonuses up to 50% of salary are paid

as cash.

– Any amounts in excess of 50% are
deferred into shares for one year.
– Any amounts in excess of 100% are
deferred into shares for two years.

– Deferred shares are potentially forfeitable
if the executive leaves prior to the share
release date2.
– Not pensionable.
– Clawback provisions apply3.

– There are no performance

– None

conditions.

– All employees, including Executive

Directors, are entitled to contribute up to
£250 per month, for between three and
seven years.

– At the end of the period, participants may
use the monies to purchase shares at a
discount of 20% to the market price at the
time they joined the scheme. Alternatively,
they may ask for their contributions to be
returned, with accrued interest.

– The scheme offers tax advantages in that

the gain is free of income tax.

Land Securities Annual Report 2013

GOVERNANCE

remuneration policy (continued)

Operation

Opportunity

performance metrics

(unaudited) taBle 50

Changes in
the year

purpose and link to strategy
Long-term share
incentive plans
– Incentivises value
creation over the
long-term in excess
of that created by
general increases in
the value of property
or shares in
property companies.
– Rewards execution
of our strategy and
the long-term
outperformance of
our competitors.

– Encourages
long-term
investment by
Directors in the
Company’s shares.
– Aligns the long-term
interests of Directors
and shareholders.
– Promotes retention.

Share ownership
guidelines
– To provide close

alignment between
the longer term
interests of Directors
and shareholders
in terms of the
Company’s growth
and performance.

– Measured and vest over a three year

– None

period, with no re-testing.

– 50% determined by the Group’s total
shareholder return (TSR) relative
to an index (weighted by market
capitalisation) based on a comparator
group comprising all of the property
companies within the FTSE 350 Real
Estate Index (except Land Securities)4.
– 15% of the overall award vests for
matching the Index, with 50%
vesting where we outperform the
Index by 4% or more per annum.
No awards vest for below index
performance.

– Vesting is on a straight-line basis

between matching the Index and
outperforming it by 4% per annum.

– 50% determined by the Group’s
ungeared total property return
(TPR) relative to the IPD weighted
indices that reflect the sector mix of
the Group’s investment portfolio.
– 12.5% of the overall award vests for

matching the Index with 50%
vesting where we outperform the
index + 1% per annum. No awards
vest for below index performance.

– Vesting is on a straight-line basis
between matching the Index and
outperforming it by 1% per annum.

– None

– The Committee makes an annual award

of shares under the Long Term
Incentive Plan.

Long Term Incentive Plan:
– Normal and current award
policy limit – 150% of salary.

– Additional awards are available on the

basis of investment by Executive Directors
in the Company’s shares under the
Matching Performance Share Plan.

– Limit in exceptional
circumstances (e.g.
recruitment) – 200%
of salary.

– Vesting under both Plans is on the same
basis and determined by the Group’s
achievements against stretching
performance targets over a fixed three
year period and continued employment.

– The Committee reviews the measures,

their relative weightings and targets prior
to each award.

– Awards will be satisfied by either newly

issued shares or shares purchased in the
market and any use of newly issued shares
will be subject to the dilution limits
contained in the scheme rules.

– Clawback provisions apply3.

Matching Performance
Share Plan:
– Up to 150% of salary, subject

to pledging sufficient of
their own shares.

– The pledged shares would
then be matched on a two
for one basis.

– To obtain a maximum

award, a Director would be
required to pledge shares
with a value of 75% of salary
(calculated on a pre-tax
basis).

– The pledge may include

shares within their
minimum shareholding
requirement, but only for
the first five years of their
appointment.

– Once the five year period

has elapsed, shares pledged
must be over and above the
shareholding requirement.

Executive Directors:
– Are required to own shares with a value set

Executive Directors:
– Chief Executive – 200%

at a percentage of base salary.

of salary.

– Must be satisfied within five years of

– Other Executive Directors

appointment in order to qualify for future
long-term incentive awards.

– 150% of salary.

– Both within five years

– Deferred or other unvested share awards

of appointment.

not subject to performance conditions may
count towards the guideline.

Non-executive Directors:
– Are required to own shares with a value set

at a percentage of annual fees.

– Must be satisfied within three years of

appointment.

– The Committee monitors the Directors’
progress against the guidelines as at
31 March of every year, using the share
price at the close of business that day.

– Once five year

shareholding guideline has
elapsed, additional shares
are required to be held in
order to qualify for awards
under the Matching
Performance Share Plan.

Non-executive Directors:
– 100% of annual fees, within
three years of appointment.

The base salaries effective from 1 June 2013 (with the prior year in brackets) are Robert Noel £694,000 (£680,000), Martin Greenslade £469,000 (£460,000) and Richard Akers £418,000 (£410,000). Robert Noel became the Group’s Chief Executive
on 1 April 2012, with the Committee awarding him an initial salary of £680,000. This reflected his experience at that point and was set at a discount to market competitive benchmarks with the intention that it could be increased towards the market
level over time (subject to satisfactory performance in post).
Where part of a bonus is deferred into the Company’s shares, those shares are held within the Company’s employee benefit trust and automatically vest on the first or second anniversary of the award date, in accordance with the rules of the scheme.
The proceeds of any dividends accruing on the deferred bonus shares are used to purchase additional shares, with those additional shares transferred to the Executive Director on vesting.
The Committee has discretion to recover some or all of the value of awards of annual bonus and/or LTIP/Matching Performance Share Awards where the overpayment was made as a result of the misstatement of the Company’s results or a
performance condition which caused the overpayment. The recovery will be made against future bonuses and unvested share awards and, to the extent permitted, from Deferred Bonus Shares. This ‘clawback’ applies to awards made to Executive
Directors and to Senior Managers.
The TSR comparator group forming the index for 2013 awards will remain the property companies within the FTSE 350 Real Estate Index. The comparator groups for awards made since 2010 are shown on page 80. TSR will be measured over a single
three-year performance period from the beginning of the first financial year to which the award relates and ending on the last day of the performance period. The outturn is calculated by comparing average closing price over the 30 days prior to the
start and the end of the performance period. TSR calculations are performed independently for the Committee by its benefit advisers, New Bridge Street.

Land Securities Annual Report 2013

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3. Fixed and variaBle pay
Our aim is to ensure that superior rewards are only paid for exceptional performance, with a substantial proportion of Executive Directors’
remuneration payable in the form of performance related pay. The charts that follow illustrate the remuneration opportunity provided to each
Executive Director at different levels of performance for the coming year.

ROBERT NOEL,
CHIEF EXECUTIVE

CHART 51

MARTIN GREENSLADE,
CHIEF FINANCIAL OFFICER

CHART 52

RICHARD AKERS,
EXECUTIVE DIRECTOR

£4,000,000

£3,500,000

£3,000,000

£2,500,000

£2,000,000

£1,500,000

£1,000,000

£890,000

£500,000

£0

£2,555,000

£4,013,000

£3,000,000

£2,500,000

£2,000,000

£1,500,000

£1,000,000

£500,000

£606,000

£0

£2,717,000

£1,732,000

£2,500,000

£2,000,000

£1,500,000

£1,000,000

£500,000

£546,000

£0

CHART 53

£2,427,000

£1,549,000

Fixed pay

On target

Maximum1

Fixed pay

On target

Maximum1

Fixed pay

On target

Maximum1

Basic salary (17%)
Pension (4%)
Beneﬁts (1%)

Annual bonus (26%)
Share awards (52%)

Basic salary (17%)
Pension (4%)
Beneﬁts (1%)

Annual bonus (26%)
Share awards (52%)

Basic salary (17%)
Pension (4%)
Beneﬁts (1%)

Annual bonus (26%)
Share awards (52%)

1. Percentages are of the Maximum.

In developing the above scenarios, the following assumptions have been made:

Fixed and variaBle pay – assumptions

(unaudited) taBle 54

Fixed

– Consists of the latest base salary, benefits and pension allowances.
– Benefits calculated using the figure for the 2012/13 year from the Directors’ emoluments table on page 84.
– Pension allowance calculated at 25% of new base salary.

Robert Noel, Chief Executive

Martin Greenslade, Chief Financial Officer

Richard Akers, Executive Director

On-target This is based on what a director would receive if performance was in line with targets:

– Annual bonuses pay out at 60% of the maximum for on-target performance.
– Long-term incentive plan performance at median would see approximately 50%

of the award vesting1.

Maximum – 100% of the Annual bonus.

– 100% vesting of Long-Term Incentive Awards1.

Long-term incentives consists of share awards only, which are measured at face value, i.e. no assumption for increase in share price or dividends.

Base
(£’000)

Benefits
(£’000)

pension
(£’000)

Total fixed
(£’000)

694

469

418

174

117

105

890

606

546

The following table illustrates in which financial years the various payments in the charts are actually made/released to Executive Directors.
The table assumes that the maximum amount of the annual bonus is payable, so that the first third is paid in cash and the balance deferred into
shares that vest after one and two years.

payment schedule

Financial year

Element of remuneration received

2013-2014

2014-2015

2015-2016

2016-2017

(unaudited) taBle 55

– Base salary.
– Pension.
– Benefits.

– The annual bonus targets
are measured and the
first third of the annual
bonus is paid in cash.

– The second third of the

annual bonus is deferred into
shares that are released after
one year.

– The final third of the annual
bonus is also deferred into
shares, that are released after
two years.

– LTIP and Matching Share

Awards vest.

Land Securities Annual Report 2013

GOVERNANCE

4. our choice oF perFormance targets For the coming year
Our choice of performance metrics aligns individual reward with the Group’s long-term and short-term performance and relative shareholder
returns. The following table examines how we intend to achieve this in terms of the targets we have set for the coming year:

perFormance targets For the coming year
Key metrics for variable pay

Link to strategy and value for shareholders

(unaudited) taBle 56

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Long-term incentive and share
matching plans

Total Shareholder Return
(50% of award)

– Rewards our outperformance of the returns generated by our listed company peers.
– Encourages efficient use of capital through good sector allocation and appropriate gearing.
– Based on a market capitalisation of £6.5 billion, our target of 4% per annum outperformance over

three years would generate approximately £810 million of value for shareholders over and above that
they would have received had we performed in line with our comparator group of property companies
within the FTSE 350 Real Estate Index.

Ungeared Total Property Return
(50% of award)

– Rewards sustained outperformance by our portfolio compared with the industry’s commercial property

benchmark weighted towards the sector mix of our portfolio.

– Focuses on increasing capital values and rental income.
– Capital value growth is reflected in an increased net asset value, which is the measure with the strongest

correlation to share price.

– On the basis of a portfolio with a value of £11.5 billion, our target 1% per annum outperformance over

3 years generates approximately £350 million of value beyond that which would have been received had
the portfolio simply performed in line with the index.

– The benchmark sectors we have chosen are amongst the toughest to compete in as they are also amongst

the most profitable, attracting some of the best investors in the sector.

– Rewards annual outperformance by our portfolio compared with the industry’s commercial

property benchmark.

– Focuses on increasing capital values and rental income.
– Capital value growth is reflected in an increased net asset value, which is the measure with the strongest

correlation to share price.

– On the basis of a portfolio with a value of £11.5 billion, the 2% outperformance targeted for one year
would generate approximately £230 million of return beyond the returns of commercial property
within our sectors.

– The benchmark sectors we have chosen are amongst the toughest to compete in as they are also amongst

the most competitive and profitable.

– Encourages above inflation growth in income profits, year on year, from a base set in 2010.
– Targets set so as not to encourage excessive risk taking.
– Encourages sustainable dividend growth and cover over the medium term.
– Funds additional investment.
– Encourages asset management activity and the income performance of assets, which is a very significant

driver of capital values.

– A key driver of income and revenue profit in the future.
– Proves the value of the development and drives capital growth.

– Rewards outperformance of a stretching income profit target set in the context of the Company’s

business plan for the current year.

– Encourages asset management activity and the income performance of assets, which is a very significant

driver of capital values.

– Increases the value of our investment property.
– Provides the ability to generate additional revenue profit and capital growth in the longer term.

– To reallocate capital within our portfolio to areas that will generate higher returns in the future.
– To generate selling prices that exceed our view of their values.
– Encourages the repositioning of certain parts of our portfolio.

Annual bonus – key targets

Ungeared Total Property Return
(39.0% of salary)

Absolute growth in revenue profit
(39.0% of salary)

Annual Bonus – specific business targets

Development lettings
(20.8% of salary)

Revenue profit against budget
(10.4% of salary)

Achieving planning permission to develop
a number of sites
(10.4% of salary)

Disposal of certain properties at identified
price thresholds
(10.4% of salary)

Individual targets for Executive Directors
(20.0% of salary)

– A mix of short-term and long-term individual goals set at the beginning of the year. These are

commercially sensitive but will be reported on in our next Annual Report.

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5.short-term and long-term incentives and targets
Our remuneration policy seeks to balance returns over the short-term and long-term by incentivising outperformance of our peers in the following way:

the short-term and long-term Balance oF our incentives
Our incentives and targets
Duration

(unaudited) taBle 57

Short-Term

Long-Term

– Base salary and benefits to attract and retain high performing people.
– Revenue profit performance targets within the annual bonus.
– Total Property Return over one year is reflected in the annual bonus.
– Successful planning applications will provide future opportunity for the business and will increase the

value of our property in the short term.

– Asset management initiatives have an immediate impact on revenue profit and capital values with a view

to ensuring short-term outperformance of our peers.

– A significant proportion of the annual bonus is deferred into shares.
– There are significant shareholding requirements for Executive Directors, of between one and a half and

twice times gross annual base salary.

– Relative TSR and TPR metrics are measured over three year periods.
– Certain business unit KPIs set for the annual bonus, such as development lettings targets and successful
planning applications, are likely to have a significant impact on long-term capital growth and revenue
profit performance.

– Development lettings targets provide dividend cover, scope for dividend growth and support capital

values for the longer term.

– Successful planning applications will lead to potential for capital and income growth in the future.

6. perFormance targets For our long-term incentive plans
The performance targets we have set for our Long Term Incentive and Matching Performance Share Plans are the same. They are designed to
reward significant outperformance of our peers in the most competitive sectors of the commercial property market. The performance conditions
are described in the Policy section of this report.

The Committee has chosen the property companies within the FTSE 350 Real Estate Index as the comparator group for measuring our TSR
performance against. The TSR comparator groups for awards made since 2010 are set out in the table below.

total shareholder return – comparator groups

1 April 2010

1 April 2011

1 April 2012

1 April 2013

(unaudited) taBle 58

The British Land Company PLC

Big Yellow Group PLC

Capital & Counties Properties PLC

Daejan Holdings PLC

Derwent London PLC

F&C Commercial Property Trust Limited

Grainger PLC

Great Portland Estates PLC

Hammerson PLC

Hansteen Holdings PLC

Helical Bar PLC

Intu Properties (formerly Capital Shopping Centres Group)

Londonmetric Property (which includes London and Stamford Group PLC before its merger)

Segro PLC

Shaftesbury PLC

St Modwen Properties PLC

UK Commercial Property Trust Limited

UNITE Group PLC

Workspace Group

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7. employee share option schemes
The Company has historically operated share
option arrangements for Executive Directors,
with vesting subject to performance testing.
New awards ceased to be made to Executive
Directors following the adoption of the LTIP
in 2005. The awards made under that scheme
are exercisable for ten years from grant and
a few remain outstanding. These are shown
on page 90.

8.1 Senior Managers
The Group currently employs 13 Senior
Managers in positions below Board level.
None of these Senior Managers receives a
salary or total remuneration package which
is higher than those paid to the Executive
Directors. The structure of their
remuneration packages, including bonuses,
is broadly consistent with that of Executive
Directors.

Awards under this scheme continue to be
made to employees below the level of
Senior Manager.

8. pay within the group
The average base salary increase awarded
across the workforce provides a key reference
point when determining levels of increase for
the Executive Directors.

In setting the pay budget for the wider
workforce, the Committee reviewed data on
pay settlements within the economy, the rate
of inflation and pay settlements for equivalent
roles in similar companies.

In previous years, the personal element of
an employee’s bonus was scored against
objectives set at the beginning of the year.
This year, we introduced a change whereby
the personal element of bonuses was scored
on the basis of an employee’s performance in
their wider role. Inevitably, the scoring will
involve an element of discretion. Investor
guidelines discourage the use of discretion
for bonuses paid to Executive Directors and
so it has not been possible to apply the change
to them. Executive Directors’ annual bonuses
will continue to be calculated on the basis of
objectives set at the beginning of the year.

Senior Managers typically have a bonus
potential of up to 80% of base salary, with
some eligible to receive up to 100%, based on
targets set at the beginning of the financial
year. In addition, they are eligible to
participate in the discretionary bonus pool
described below, although awards from this
pool to Senior Managers are by exception.

Senior Managers may also receive LTIP
and Matching Performance Share Awards,
albeit at lower proportions of salary than
Executive Directors.

8.2 Other employees
Other employees are also entitled to
participate in the Company’s bonus scheme.
The maximum awards range between 20%
and 60% of salary, depending on seniority.

All employees, other than Executive
Directors, are also eligible to be considered
for an award from the discretionary bonus
pool of £1 million, with awards typically
normally made to no more than 10% of the
Group’s employees. The awards are usually
not more than 30% of base salary and are
made on the basis of an exceptional single
achievement or outstanding all-round
performance.

In addition, all employees are entitled to
receive private health insurance, life
assurance, our savings related share option
scheme and a season ticket loan, all
on the same basis as the Executive Directors.

9. non-executive director
remuneration policy
The annual fees of the Chairman of the
Board and Non-executive Directors are
determined by the Board, having regard to
independent advice and published surveys.

The Board also takes into account the time
commitments of the Non-executive Directors,
which are reviewed annually as part of the
Board appraisal process.

No additional fees are payable for
membership of Board Committees,
though additional fees are paid for
specific additional responsibilities:

additional non-executive
directors’ Fees (unaudited)

taBle 59

Name

Chair of Audit Committee

Chair of Remuneration
Committee

Senior Independent Director

£17,500

£12,500

£10,000

Neither the Chairman nor the other Non-
executive Directors receive any pension
benefits from the Company, nor do they
participate in any bonus or incentive schemes.

Land Securities Annual Report 2013

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11. shareholder engagement
At last year’s AGM, we proposed significant
changes to the remuneration structure for
our Executive Directors and Senior
Managers. The proposals were finalised
following a detailed consultation with
shareholders who, together, held more
than 50% of the Company’s shares and also
the two largest institutional shareholder
representative bodies. During the
consultation, which took place over four
months, we received a number of suggestions
for amendment and requests for additional
supporting data. We adopted a number of
these suggestions and published much of
the additional supporting data in last year’s
Annual Report. Our proposals received
the support of 98.3% of the votes cast at our
2012 AGM.

Since then, we have continued to meet
shareholders and shareholder bodies and
have encouraged them to share their
thoughts with us. As a result, the Committee
has resolved to dedicate the major part of
one of its meetings each year to consider
new trends, shareholder feedback
and requirements.

We are very grateful for the time and
assistance shareholders have given us.

GOVERNANCE

10. directors’ service agreements and letters oF appointment
dates oF appointment For directors
Name

Date of appointment

(unaudited) taBle 60

Date of contract

Executive Directors

Robert Noel

Martin Greenslade

Richard Akers

Non-executive Directors

Alison Carnwath

David Rough

Sir Stuart Rose

Kevin O’Byrne

Chris Bartram

Simon Palley

Stacey Rauch

Executive Director notice periods
All of the Executive Directors have service
agreements that are terminable by either
the Company or the Executive Director on
12 months’ notice. None have fixed terms
of service.

Each of these agreements includes a
mitigation clause providing for monthly
phased payments through the notice period
of salary, benefits and pension until
alternative employment is found. At that
point, payments will cease or be reduced. The
Company does not make any arrangements
that guarantee pensions with limited or no
abatement on severance or early retirement.

Executive Director service agreements –
termination provisions
During the course of the year, new service
agreements for Martin Greenslade and
Richard Akers were executed in order to
bring them into line with investor guidelines
and best practice.

Their previous service agreements contained
provisions contractually entitling them to be
treated as ‘good leavers’ for the purposes of
the Company’s share schemes in the event
they are dismissed. In those circumstances,
they would be entitled to automatically
receive a time pro-rated vesting of all
outstanding share awards, subject to testing
of the performance conditions. In addition
they would be entitled to receive a bonus
payment pro-rated to reflect the proportion
of the bonus year they had worked, subject to
a minimum payment of 10% of base salary.

1 January 2010

23 January 2012

1 September 2005

17 May 2005

9 May 2013

1 September 2004

13 November 2008

2 April 2002

21 May 2003

1 April 2008

1 August 2009

1 August 2010

29 April 2004

9 April 2008

21 July 2009

29 July 2010

1 January 2012

26 November 2011

Mr Akers’ and Mr Greenslade’s new service
agreements provide for the phased
withdrawal of these termination provisions
between 1 April 2012 and 31 March 2015.
Mr Noel’s service agreement does not include
these provisions and is already in line with
investor guidelines.

Otherwise, any proposals for the early
termination of the service agreements of
Executive Directors or Senior Managers are
considered by the Committee.

Chairman and Non-executive Director
letters of appointment
The Chairman and the Non-executive
Directors do not have service agreements
with the Company.

Each of them has a letter of appointment
which sets out the terms of their appointment.
The appointment of a Non-executive
Director can be terminated, by either party,
upon one month’s notice and the
appointment of the Chairman on three
months’ notice. Non-executive Directors are
appointed under letters of appointment
which provide for an initial term of service of
three years. The dates of the current letters of
appointment of the Non-executive Directors
are shown above.

The terms and conditions of appointment of
the Non-executive Directors are available for
inspection at the Company’s registered office.

Land Securities Annual Report 2013

GOVERNANCE

directors’ remuneration – implementation report

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– Monitoring, reviewing and responding
to the Government’s consultation over
executive remuneration

– Determining salary increases for Executive
Directors and Senior Managers, together
with overall levels of salary increases across
the Group

– Reviewing the outcomes for business unit
and personal targets under the annual
bonus scheme for Executive Directors and
Senior Managers

– Reviewing the outcomes for achievement
against the performance conditions for
the Long Term Incentive and Matching
Performance Share Plans

– Determining proposed share incentive

and bonus awards to Executive Directors
and Senior Managers

– Determining Directors’ compliance with

the Company’s Share Ownership
Guidelines.

In this section, we describe all of the
payments made or accruing to Directors
in connection with the year under review.

1. the role oF the committee
and governance
1.1 Responsibilities and Terms of Reference
The Committee is responsible for:
– Engaging with shareholders with regard to
pay and ensuring their views are taken into
account when setting policy

– Determining the overall strategy and policy
for the remuneration of Executive Directors
and Senior Managers

– Ensuring the policy is aligned with and
assists in the delivery of the Company’s
strategy

– Ensuring the outturn of performance
conditions reflects the performance of
the business

– Determining the individual remuneration

packages for Executive Directors and
Senior Managers

– Overseeing any significant changes to

employee remuneration across the Group

– Approving the design of and targets for
performance-related incentive schemes
– Overseeing the operation of all incentive
schemes and awards and determining
whether performance criteria have
been met.

The Committee’s Terms of Reference are
available at www.landsecurities.com.

1.2 Advisers
The Committee appointed and received
advice on remuneration and ancillary legal
matters from New Bridge Street, a trading
name of AON plc. It has also made use of
various published surveys to help determine
appropriate remuneration levels and relied
on information and advice provided by the
Group General Counsel and Company
Secretary. New Bridge Street has voluntarily
signed up to the Remuneration Consultants
Group Code of Conduct.

The Committee intends to conduct a tender
of its remuneration and benefit advisory work
during the course of the coming year.

New Bridge Street also provide
benchmarking data to the Group for roles
below the Board and software to facilitate
pay reviews, but otherwise have no other
connection with the Group.

For the financial year under review, New
Bridge Street received fees of £54,100 in
connection with its work for the Committee.

1.3 Membership and meetings
David Rough chaired the Committee
until 1 October 2012, when Simon Palley
became Chairman. Mr Rough stood down
from the Committee in May 2013.

The other members of the Committee
during the year were Alison Carnwath and
Chris Bartram. Alison Carnwath is not
classified as an independent Non-executive
Director for the purposes of the UK
Corporate Governance Code, solely by
virtue of her being the Chairman of the
Board. She was, however, an independent
Non-executive Director at the time of her
appointment as Chairman. All of the other
members were and remain independent
Non-executive Directors.

The Committee met four times during the
year. All of the members attended all of the
meetings. The Group General Counsel and
Company Secretary acted as the Committee’s
Secretary and attended all meetings.

The Chief Executive and Human Resources
Director were invited to attend meetings of
the Committee. No Director was involved
in any decision relating to his or her own
remuneration. As set out in the Corporate
Governance section of this report, a review
of the Committee’s performance was
undertaken by Boardroom Review.

1.4 Activities and highlights
During the course of the year, the
Remuneration Committee was engaged
with a number of matters, including:
– Extensive shareholder consultation

connection with our review of all aspects
of remuneration for Executive Directors
and Senior Managers

– Reviewing trends and likely shareholder

requirements for inclusion in remuneration
policy going forward

Land Securities Annual Report 2013

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GOVERNANCE

2. director salary increases
In accordance with investor guidelines, the Committee has not undertaken a peer group benchmarking exercise this year for Executive
Directors. Instead, the Committee has awarded Executive Directors increases of 2.0%. This is slightly less than the average increase received
by employees as a whole at 2.2% excluding promotions and exceptional increases. Including those items increases the average to 2.9%. Salary
increases take effect from 1 June 2013.

No increases were awarded to our Chairman or Non-executive Directors, whose fees have not increased since October 2009. Our Chairman
has not received an increase since her appointment in November 2008.

executive director salary increases (£’000)

Name
Robert Noel1

Martin Greenslade

Richard Akers

This is the first salary review for Robert Noel since he became Chief Executive on 1 April 2012.

Current

680

460

410

From
1 June 2013

694

469

418

(unaudited) taBle 61

% increase

Average %
increase over five years
(including 2013/14)

–

2.65%

2.41%

3. remuneration outcomes For
directors during the year
In this section, we explain the variable pay
outcomes for Executive Directors during
the year.

We start with a table that shows the payments
we expect to make to Directors in connection
with the 2012/13 financial year. We then move
on to explain the performance outcomes for
our variable pay schemes in the context of
value created for shareholders before
showing the payments to individual Executive
Directors and examining the element of their
annual bonus determined by their personal
performance.

3.1. Directors’ Emoluments
The following table shows our Directors’
emoluments for the financial year ended
31 March 2013.

It is presented in a different format to those
in previous years as we are seeking to comply
with both the existing regulations and those
expected to come into force for next year’s
Annual Report. The first ‘total’ is that
required to be shown under the existing
rules. The second ‘total’ includes the
additional items of remuneration that we
expect will be required to be shown next year.
This is commonly known as the ‘one number’
total and is designed to make it easier to
compare remuneration between different
companies. It also seeks to ensure that the

amounts shown are those earned in relation
to the Company’s performance in the year.

The basis of disclosure is on an ‘accruals’ basis.
This means that the annual bonus column
includes the amount that will be paid in
connection with performance achieved in the
financial year under review. The values shown
for Long Term Incentive Plan awards in
2012/13 are calculated using the closing share
price on 31 March 2013, which was the final
day of the performance period. The actual
price is not known at the time of writing as
the awards do not formally vest until June and
July 2013. In previous years, we have shown
the amounts which actually vest in the year
and so have adjusted the 2011/12 year in order
to present a like for like comparison.

directors’ emoluments (£’000) (audited)

taBle 62

Basic salary
and fees2

Benefits3

pension
allowance

Annual bonus
paid in cash

Annual bonus
deferred
into shares

2012/
13

2011/
12

2012/
13

2011/
12

2012/
13

2011/
12

2012/
13

2011/
12

2012/
13

2011/
12

2012/
13

Contribution
to pension
scheme

Long -term
incentives
vested

Options
exercised

2012/
13

2011/
12

2012/
13

2011/
12

2012/
13

2011/
12

2012/
13

Total

2011/
12

Total

2011/
12

Executives

Robert Noel1

Martin
Greenslade

Richard Akers4

Non-executives

Alison
Carnwath
(Chairman)

David Rough

Sir Stuart Rose

Kevin O’Bryne

Chris Bartram

Simon Palley

Stacey Rauch

680

421

170

105

340

308

535

81 1,747

930

460

410

435

395

113

102

230

205

331

335

353

306

77 1,176

179 1,046

925

993

–

845

595

889 1,083

797

974

–

– 2,592 1,525

– 2,065 2,053

6 1,851 2,012

300

–

300

Robert Noel was appointed Chief Executive on 1 April 2012. His basic salary for 2011/12 reflects his previous position as Managing Director of the Group’s London Portfolio. He was awarded 160,000 conditional shares on appointment to the Board
in 2010 to replace lost awards made by his previous employer. The final tranche of 80,000 shares vested in June 2012, but was intended to reflect his 2011/12 awards and so is shown in that year for consistency with awards made to other Directors.

2. Basic salary is stated as a per annum figure. In the year Richard Akers received £408,000 and Martin Greenslade £454,000.
3. Benefits consists of the provision of a car allowance, private medical insurance, life assurance and holiday pay.
4.

Richard Akers was entitled to an additional bonus of £200,000 for 2011/12, to reflect the Retail Portfolio’s Total Property Return perfomance for that year, under a scheme which has now been withdrawn. Although half of the amount is payable in cash
in 2012/13 and the balance half deferred into shares for two years, the whole payment is recorded in 2011/12 as the payment relates to performance in that year.

5. Pensions of £63,374 (2011/12: £68,072) were paid to former Directors or their dependents, these relate to unfunded historic benefit obligations.
6.

Following the retirement of the Group’s Chief Executive, Francis Salway, on 31 March 2012 all of his outstanding share awards lapsed.

Land Securities Annual Report 2013

GOVERNANCE

3.2 Variable pay – overall performance outcomes
(i) Annual bonus

In the year under review, each Executive Director has had the potential to receive an annual bonus of up to 150% of his base salary. Of this, 130%
was dependent on meeting Group targets and 20% dependent on meeting personal targets. All targets were set at the beginning of the year.

The annual bonus payout relating to the performance of the Group in this year has been reduced by 2.9%. The reduction was used to fund an
additional payment to each member of our staff who was not entitled to participate in the Group level bonus arrangements. The payment is being
made to reflect their contribution towards the Company achieving so many of its targets in the year.

This following table illustrates the Group targets, their significance in terms of the value to the Company and its shareholders and the
respective outcomes.

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annual Bonus outturn

Target

Ungeared total
property return

Share in long-term
real growth in group
revenue profit

(unaudited) taBle 63

Outturn

percentage of
base salary
awarded

percentage of
maximum

percentage of
base salary
(maximum)

Link to strategy and performance

Assessment

39.0%

– Rewards annual outperformance by our portfolio

– The Land Securities Total

33.0%

85.0%

Property Return for the year
outperformed the IPD
Quarterly Universe figure by
1.7% (adjusted for the capital
employed in our core sectors).

compared with the industry’s commercial property
benchmark, weighted towards the capital employed
in our core sectors.

– Focuses on increasing capital values and rental income.
– Capital value growth is reflected in an increased net
asset value, which is the measure with the strongest
correlation to share price.

– On the basis of a portfolio with a value of £11.5bn, the

2% outperformance targeted for one year would
generate approximately £230m of value beyond general
movements in the value of commercial property within
our sectors and cost c.£2.4m in terms of bonuses paid to
Directors and other employees.

– The benchmark sectors we have chosen are amongst
the toughest to compete in as they are amongst the
most profitable and attract some of the most successful
investors in the industry.

39.0%

– Encourages above inflation growth in income profits,

– Revenue profit for the year

31.4%

81.0%

Key business targets:
Development lettings

20.8%

year on year, from a base set in 2010.

– Target set so as not to encourage excessive risk taking.
– Encourages sustainable dividend growth and cover

over the medium term.

– Funds additional investment.
– Encourages asset management activity and focus on
the income performance of assets, which is a very
significant driver of capital values.

– A key driver of income and revenue profit in the future.
– Proves the value of the development and drives

capital growth.

exceeded the target.

– Although the performance
was good, it was below that
of the previous year and this
is reflected in a lower outturn.

– The Group secured

19.0%

91.5%

development lettings for the
year of £31.7m, against a
maximum target of £33m.
– The outturn is calculated on
the basis that nothing is paid
out until a threshold of half
of the target is achieved
(£16.5m). Achievement is
calculated on a straight-line
basis from threshold to the
maximum.

Revenue profit
against budget

10.4%

– Rewards outperformance of a stretching income profit
target set in the context of the Company’s business plan
for the current year.

– Revenue profit achieved in
the year exceeds the upper
threshold of the target.

10.4%

100%

Charging the Group’s
interest in its Nova
Victoria development
into its secured
lending pool

– Encourages asset management activity and the income
performance of assets, which is a very significant driver
of capital values.

10.4%

– The aim is to increase the value of the pool of assets

which can be mortgaged.

– As we invest in Nova Victoria, the value of the asset will

increase significantly.

– Ultimately, this will reduce the Group’s overall cost

of borrowing.

– This was achieved, with
the outcome exceeding
expectations.

10.4%

100%

Land Securities Annual Report 2013

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annual Bonus outturn (continued)

percentage of
base salary
(maximum)

10.4%

Target

Opening the Group’s
Trinity Leeds
development on time.

Link to strategy and performance

Assessment

– Creates momentum for the opening of the scheme
– Brings forward the receipt of income.
– Builds customer confidence in our ability to deliver

schemes on time.

– This was achieved to an

10.4%

100%

exacting timeline.

(unaudited) taBle 63

Outturn

percentage of
base salary
awarded

percentage of
maximum

20.0%

These targets comprise a number of measures that
are designed to improve the short- and long-term
performance of the Group.

Individual Executive
Directors were scored by the
Remuneration Committee
on the basis of objectively
measurable targets set at the
beginning of the year. The
outturn was as follows:
– Robert Noel
– Martin Greenslade
– Richard Akers

17.0%
15.0%
13.0%

85.0%
75.0%
65.0%

Executive Director
individual targets
Each Director received
a number of personal
targets, which included:
– Ensuring the success

of the new three
Executive Director
structure (in 2011/12,
there were four
Executive Directors).

– Developing clear
communication
channels with
domestic and
international
investors.

– Management of

Group overheads.
– Implementation of a
new budgeting and
forecasting system.

– Building a Group wide
career development
programme for high
performing
employees.

Total

150%

Robert Noel1
Martin Greenslade1
Richard Akers1

129%
127%
125%

The outturn is adjusted to take account of the performance of the trading properties and income extracted from a property in Queen Anne’s Gate, London, SW1, through a bond issue in 2009.

1.
2. The bonus outturns are reduced by 2.90% to fund an additional payment to staff to reward their efforts during the year.

For awards granted in 2011, the Group’s
performance over the two years to 31 March
2013 would, if sustained over the three
year period, result in 81.9% of the share
awards vesting. For awards granted in 2012,
performance over the one year period to
31 March 2013 would, if sustained over the
second and third years of the period, result
in 70.1% of the awards vesting.

(ii) Long Term Incentive Plan

Summary of the performance conditions
Awards under the Group’s Long Term
Incentive Plans are subject to performance
conditions measured over three financial
years. The performance conditions compare
the Group’s relative performance against its
peers in terms of Total Property Return
(TPR) and Total Shareholder Return (TSR),
with each measure contributing 50% to the
total. The performance conditions are
explained in detail in the Policy section of
this report.

For the TPR portion of the measure, a
performance in line with the IPD weighted
indices that reflect the sector mix of Land
Securities investment portfolio will cause
12.5% of the award to vest, with straight-line
vesting to the maximum 50% for where our
TPR outperforms by 1% per annum or more.

For the TSR proportion of the measure, a
performance in line with that of the property
companies comprised within the FTSE 350
Real Estate Index will cause 15% of the
award to vest, with straight-line vesting to
the maximum 50% vesting for where our
TSR outperforms that of the Index by 4%
per annum.

The Policy Section of this report sets out the
performance conditions and their calculation
in full.

Calculation of the 2013 outturn and interim
measurements for subsequent awards
Awards made in 2010 were measured over
the three year period to 31 March 2013, with
76.1% vesting.

Land Securities Annual Report 2013

GOVERNANCE

The performance calculation and relative value created for awards vesting in 2013 are illustrated below.

total shareholder return – 1 april 2010 to 31 march 2013

taBle 64

proportion of the
total award

50%

performance target for maximum vesting

Outperformance of our comparator
group by 4% per annum

Based on a market capitalisation of £5,144 million at 1 April 2010.

Land Securities’ TSR
over the period

Comparator Group
TSR over the period

Land Securities’
outperformance
(per annum)

Approximate value of
the outperformance1

proportion of award
vesting (max 50%)

39.1%

35.2%

1.26%

£198m

26.1%

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taBle 65

proportion of the
total award

50%

performance target for maximum vesting

Ungeared outperformance of our sector
weighted IPD index by 1% per annum

Land Securities’ TpR
over the period

IpD sector weighted
TpR over the period

Land Securities’
outperformance
(per annum)2

Approximate value of
the outperformance1

proportion of award
vesting (max 50%)

36.8%

32.7%

1.03%

£296m

50.00%

1.
2.

Based on a portfolio value of £9,540 million at 1 April 2010.
The outturn is adjusted to take account of the performance of the trading properties and the capital and income extracted from a property in Queen Anne’s Gate, London SW1, though a bond issue in 2009.

Individual outcomes
In this section, we set out the components of each Executive Director’s remuneration for the year, compared with the maximum that could have
been paid. This is illustrated in the form of a chart and a table that shows the amounts. The footnotes for the table apply to the charts as well.

We also explain any additional payments made to Directors that are not described in the previous section of this report.

ROBERT NOEL, CHIEF EXECUTIVE

£3,003,000

£2,592,000

£2,151,000

£3,000,000

£2,500,000

£2,000,000

£1,500,000

£1,000,000

£872,000

£500,000

£0

Element of pay

Base salary

Pension

Benefits

Annual bonus1
– Group element
– Individual element

Long Term Incentive Plan2

Total

(unaudited) taBle 66

Outcome

Maximum
potential
(£’000)

percentage of
maximum
achieved

680

170

884
136

1,111

3,003

n/a

86%
85%

76%

81%3

(£’000)

680

170

759
116

845

2,592

Fixed pay

On target

Maximum

Actual

Basic salary
Pension
Beneﬁts

Annual bonus1
Share awards2

1.
2.

£340,000 of Robert Noel’s annual bonus will be deferred into shares for one year and £195,000 for two years.
In 2010, Robert Noel received LTIP and Matching Share Awards over 134,057 shares, with a value of £794,000, in connection with his position as Managing
Director of the London Portfolio. He became CEO on 1 April 2012. The award was based on an average share price of approximately £5.92. Since then, the share
price has increased, closing at £8.29 on 31 March 2013. For consistency and in order to better illustrate the percentage of the maximum that will vest, we have
substituted the grant price with the closing price at 31 March 2013 in both the table and the chart.

3. Percentage is of variable pay maximum.

As part of the package to recruit Mr Noel to
the Board as Managing Director of the
London Portfolio on 1 January 2010, Mr Noel
was granted an award of shares which broadly
matched the long-term incentive awards he
left behind at his previous employer. This
award was described in the last year’s report
and was structured to reflect the timing and

likelihood of vesting of those share awards.
In relation to quantum it was agreed that
these awards would not be subject to
performance conditions but the value would
be scaled back to reflect assumptions in
relation to the likelihood of vesting. An
award of 160,000 shares was made, to be
released over three years. The final award

of 80,000 shares vested in June 2012, but
replaced awards vesting for performance
ending in the financial year 2011/12.
Accordingly, these have been recorded in
the 2011/12 year, in line with other awards
made to Executive Directors the Company
for the same year. The final tranche of the
award had a value of £595,000.

Land Securities Annual Report 2013

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MARTIN GREENSLADE, CHIEF FINANCIAL OFFICER

£2,452,000

£2,065,000

£1,708,000

£2,500,000

£2,000,000

£1,500,000

£1,000,000

£500,000

£595,000

£0

Fixed pay

On target

Maximum

Actual

Basic salary
Pension
Beneﬁts

Annual bonus1
Share awards2

RICHARD AKERS, EXECUTIVE DIRECTOR

Element of pay

Base salary

Pension

Benefits

Annual bonus1
– Group element
– Individual element

Long-Term Incentive Plan2

Total

(unaudited) taBle 67

Outcome

Maximum
potential
(£’000)

percentage of
maximum
achieved

460

113

598
92

1,169

2,452

n/a

86%
75%

76%

79%3

(£’000)

460

113

514
69

889

2,065

1.
2.

£230,000 of Martin Greenslade’s annual bonus will be deferred into shares for one year and £123,000 for two years.
In 2010, Martin Greenslade received LTIP and Matching Share Awards over 140,936 shares with a value of £835,000, based on an average share price of
approximately £5.92. Since then, the share price has increased, closing at £8.29 on 31 March 2013. For consistency and in order to better illustrate the percentage
of the maximum that will vest, we have substituted the grant price with the closing price at 31 March 2013 in both the table and the chart.

3. Percentage is of variable pay maximum.

£2,207,000

£1,851,000

£1,542,000

Element of pay

Base salary

Pension

Benefits

£2,500,000

£2,000,000

£1,500,000

£1,000,000

£500,000

£534,000

£0

Fixed pay

On target

Maximum

Actual

Basic salary
Pension
Beneﬁts

Annual bonus1
Share awards2

Annual bonus1
– Group element
– Individual element

Long-Term Incentive Plan2

Share Options exercised

Total

(unaudited) taBle 68

Outcome

Maximum
potential
(£’000)

percentage of
maximum
achieved

410

103

533
82

1,048

2,207

n/a

86%
65%

76%

n/a

79%3

(£’000)

410

103

458
53

797

1,852

1.
2.

£205,000 of Richard Akers’ annual bonus will be deferred into shares for one year and £101,000 for two years.
In 2010, Richard Akers’ received LTIP and Matching Share Awards over 126,421 shares with a value of £749,000
based on an average share price of approximately £5.92. Since then, the share price has increased, closing at
£8.29 on 31 March 2013. For consistency and in order to better illustrate the percentage of the maximum that
will vest, we have substituted the grant price with the closing price at 31 March 2013 in both the table and the chart.

3. Percentage is of variable pay maximum.

Mr Akers became a Non-executive Director
of Barratt Developments PLC on 2 April
2012. In keeping with the Company’s policy,
the Nominations Committee has permitted
him to retain his Director’s fees of £58,000
per annum.

Mr Akers ceased to be an active member of
the Group’s defined benefit pension scheme
on 31 March 2012 and so did not receive any
additional accrual of benefit in respect of his
service in the year under review.

deFined BeneFit pension scheme (audited)

taBle 69

Accrued
benefit at
31 March 2013
£

Increase in
accrued
benefits
excluding
inflation
£

Increase in
accrued
benefits
including
inflation
£

Transfer
value of
increase in
accrued
benefits
excluding
inflation
£

Transfer
value of
accrued
benefits at
1 April 2012
£

Transfer
value of
accrued
benefits at
31 March
2013
£

Increase in
transfer
value net of
Directors’
contributions**
£

R J Akers

37,752

1,003

765,626

856,286

90,660

RJ Akers opted out of the Scheme on 31 March 2012 and has a deferred benefit which is linked to inflation. He does not earn future pension accrual.

*
** There were no contributions from the Director.
The ‘Increase in transfer value net of Directors’ contributions’ differs from the ‘Transfer value of increase in accrued benefit’ in that it reflects the change in market
conditions over the year less the Directors’ own contributions to the pension scheme.
The transfer values, have been calculated on the basis of the actuarial advice in accordance with the 2008 transfer value regulations.
The transfer values of the accrued entitlement in respect of qualifying service represents the value of assets that the pension scheme would need to transfer to another
pension provider on transferring the liability in respect of the Directors’ pension benefits that they earned in respect of qualifying service. They do not represent sums
payable to individual Directors and, therefore, cannot be added meaningfully to annual remuneration.

Land Securities Annual Report 2013

GOVERNANCE

5. directors’ shares
The interests of the Directors in the shares of the Company as at 31 March 2013 are shown below.

directors’ interests in shares at 31 march 2013 (audited)

taBle 70

Ordinary shares

Deferred shares

LTIp performance shares*

LTIp matching shares*

Conditional share award

A J Carnwath

R M Noel

R J Akers

M F Greenslade

D Rough

S Rose

S Palley

C Bartram

K O'Byrne

S Rauch

2013

2012

136,476

109,140

202,604

229,293

18,524

16,250

16,408

9,253

11,516

8,000

131,328

70,740

141,388

156,486

18,524

16,250

16,408

9,253

11,516

6,000

2013

–

2012

–

2013

–

2012

–

2013

–

21,370

10,127

249,072

117,798

246,382

129,146

94,009

188,872

189,168

188,619

37,487

26,626

211,052

210,522

209,974

2012

–

115,782

178,416

197,786

–

2013

–

2012

–

80,000

–

Subject to performance conditions (see page 79).

There have been no changes in the shareholdings of the Directors between the end of the financial year and 31 May 2013, save that
Alison Carnwath and Martin Greenslade acquired 1,238, and 1,778 shares respectively under the Company’s Scrip Dividend Plan.

No Director had any other interests in contracts or securities of the Company or any of its subsidiary undertakings during the year.

Land Securities Annual Report 2013

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outstanding share awards made to executive directors
The tables below illustrate those share awards made to Executive Directors that have not yet vested or, in the case of awards made under historic
share option schemes, have not yet been exercised.

ltip and matching shares awarded and those that vested this year* (audited)

R M Noel

– LTIP shares

– Matching shares

M F Greenslade

– LTIP shares

– Matching shares

R J Akers

– LTIP shares

– Matching shares

Cycle
ending

Award
date

2013

2014

2015

2013

2014

2015

2012

2013

2014

2015

2012

2013

2014

2015

2012

2013

2014

2015

2012

2013

2014

2015

29/06/2010

29/06/2011

27/07/2012

30/07/2010

29/07/2011

27/07/2012

29/06/2009

29/06/2010

29/06/2011

27/07/2012

31/07/2009

30/07/2010

29/07/2011

27/07/2012

29/06/2009

29/06/2010

29/06/2011

27/07/2012

31/07/2009

30/07/2010

29/07/2011

27/07/2012

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price at
award
date (p)

572

827.5

777

613

861

781

468

572

827.5

777

532

613

861

781

468

572

827.5

777

532

613

861

781

* Subject to performance tests (see page 79).

directors’ options over ordinary shares (audited)

Shares
awarded

Shares
vested

Market
price at
date of
vesting (p)

taBle 71

Vesting
date

68,493

49,305

131,274

65,564

50,218

130,600

88,273

70,890

51,359

88,803

76,160

70,046

51,580

88,348

79,446

63,801

45,921

79,150

68,542

62,620

47,254

78,745

29/06/2013

29/06/2014

27/07/2015

30/07/2013

29/07/2014

27/07/2015

75,826

742.02

29/06/2012

29/06/2013

29/06/2014

27/07/2015

65,421

794.77

31/07/2012

30/07/2013

29/07/2014

27/07/2015

68,244

742.02

29/06/2012

29/06/2013

29/06/2014

27/07/2015

58,877

794.77

31/07/2012

30/07/2013

29/07/2014

27/07/2015

taBle 72

Granted during year

Exercised/(lapsed) during year

Number of
options
at 31/03/12

8,600

12,762

4,033

1,193

Number

Grant price
(pence)

–

1,599

577

Note

(1), (3)

(2)

Number

8,600

–

(1,193)

–

Exercise price
(pence)

Market price
on exercise
(pence)

Number of
options
at 31/3/2013
(4)

Exercise price
(pence)

Exercisable dates

710

799

–

710

07/2006-07/2013

–

12,762

4,033

–

1,599

1044

07/2007-07/2014

388

08/2014-02/2015

1372

12/2011-06/2012

577

08/2015-02/2016

R J Akers

M F Greenslade

2002 Executive Share Option Scheme. Vesting of Awards is dependent on the Company’s growth in normalised adjusted EPS exceeding the growth in RPI by at least 2.5% per year.
2003 Savings Related Share Option Scheme. Not subject to performance conditions as it is available to all staff and HM Revenue & Customs’ rules do not permit performance conditions for this type of scheme.

1.
2.
3. As adjusted for the Rights Issue in March 2009.
4. Total number of options held by Directors at 31 March 2013 was 18,394 (2012: 26,588).
5. The range of the closing middle market prices for Land Securities Group PLC ordinary shares during the year was 849 pence to 704 pence. The closing share price on 28 March 2013 was 829.0 pence.

Land Securities Annual Report 2013

GOVERNANCE

All outstanding share option awards capable of
exercise at 31 March 2013 have an exercise price
that is above the market price on that date.

The Long-Term Incentive Plan awards made
to Senior Managers vested on the same basis
as the awards made to Executive Directors.

Compliance with shareholding guidelines
In May 2010 the Committee agreed that
Martin Greenslade and Richard Akers had
met the shareholding guidelines, which are
set out in the Policy section of this report.
Following his appointment as the Group’s
Chief Executive on 1 April 2012, Mr Noel
will have five years to meet the ownership
guidelines.

6.2 All Other Employees
The average pay increase for employees
other than Executive Directors was 2.2%,
or 2.90% including salary adjustments and
promotions, as against 2.0% for the Executive
Directors. The ratio of the salary of the Chief
Executive to the average salary across the
Group (excluding Directors) was 13:1
(£680,000: £52,100).

In May 2012, the Committee determined that
all Non-executive Directors in place at the
time had complied with this requirement,
with the exception of Stacey Rauch whom the
Committee determined met the guidelines
in May 2013.

6. pay around the group
6.1 Senior Managers
During the year under review, bonuses for
this group of employees ranged from 60%
to 103% of salary (2012: 49% to 84%). The
average bonus is 86% of salary (2012: 61%).
Two of these employees received additional
bonuses in the year that related to the
performance of their business units in the
prior year. This scheme has now been
withdrawn. Including these payments would
increase the upper end of the range from
103% to 124% and the average to 92%.

7. dilution
Awards granted under the 2005 and 2012
Long-term Incentive Plans, which cover LTIP
and Matching Performance Share Awards,
Deferred Bonus Share Awards and the 2005
Executive Share Option Plan are satisfied
through the funding of an Employee Benefit
Trust administered by an external trustee
which acquires shares in the market. The
Employee Benefit Trust held 1,037,633 shares
at 31 March 2013.

The exercise of share options under the
Group’s Savings-Related Share Option
Scheme, which is open to all employees who
have completed three months’ service with
the Group, is satisfied by the allotment of
newly issued shares. At 31 March 2013, the
total number of shares which could be
allotted under this scheme was 460,875
shares, which represent significantly less
than 1% of the issued share capital of the
Company.

8. land securities 2012 agm , directors’
remuneration report voting results
The votes cast on the resolution seeking
approval for the Directors’ Remuneration
Report at our 2012 AGM were as follows:

Votes for

% for

Votes
against

Votes
withheld

530,687,023

98.44

8,384,136

7,485,118

9. perFormance graphs
As required by legislation covering the
Directors’ Remuneration Report, the
following illustrates the performance of the
Company measured by total shareholder
return (share price growth plus dividends
paid) against a ‘broad equity market index’
over a period of five years. As the Company
is a constituent of the FTSE 350 Real Estate
Index, this is considered to be the most
appropriate benchmark for the purposes of
the graph. An additional line to illustrate the
Company’s performance compared with the
FTSE 100 index over the previous five years,
is also included.

total shareholder return (£)

(unaudited) taBle 73

160

140

120

100

71.8

39.2

34.9

108.0

61.4

56.6

116.1

69.2

64.0

117.5

66.8

65.6

135.7

81.4

78.1

March 08

March 09

March 10

March 11

March 12

March 13

Land Securities Group PLC

FTSE 350 Real Estate Index

FTSE 100 Index

This graph shows the value, by 31 March 2013, of £100 invested in Land Securities Group PLC on 31 March 2008 compared with the value of £100 invested in the FTSE 350 Real Estate Index or the FTSE 100 Index over the same period.
The other points plotted are the values at intervening financial year ends.

Source: Thomson Reuters

Adrian de Souza
Group General Counsel and Company Secretary

Land Securities Annual Report 2013

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report oF the directors –
additional disclosures

Share capital
At the Company’s last Annual General Meeting
(AGM), held on 19 July 2012, shareholders
authorised the Company to make market
purchases of ordinary shares representing up
to 10% of its issued share capital at that time and
to allot shares within certain limits approved by
shareholders. These authorities expire at the
2013 AGM and a renewal will be sought.

During the year the Company purchased
4,599,131 of its ordinary shares. The number
of shares purchased is equivalent to the number
of shares that were issued in connection with the
scrip dividend scheme at a time when the share
price was at a material discount to adjusted net
asset value. The purpose of the purchase was to
minimise dilution associated with the issue of
shares under the scrip dividend scheme.
Following this and other purchases in earlier
periods, the Company currently holds
10,495,131 ordinary shares in treasury.

As at 31 March 2013 there were 1,031,237 shares
held in the Employee Benefit Trust (EBT) for
the purposes of satisfying awards made under
the Company’s employee share plans. The EBT
has waived its entitlement to a dividend.

New shares were allotted during the year only
in relation to certain employee share awards
and the Company’s scrip dividend facility.
Resolutions to renew these authorities will be
proposed at the 2013 AGM. The Company has
no restrictions on the transfer of its shares.

Substantial shareholders
At 7 May 2013 the interests in issued share
capital which had been notified to the
Company under the Disclosure and
Transparency Rules (DTR 5) of the UK
Listing Authority are shown below.

Shareholders owning over 3% of the
Company’s shares:

Shareholder

Number of
shares

BlackRock, Inc.

57,371,354

Norges Bank

42,042,530

APG Algemene
Pensioen Groep

30,953,837

Peel Holdings Plc

28,135,823

%
holding

7.33

5.37

3.95

3.59

Legal & General
Investment
Management

24,128,855

3.08

Directors’ indemnities and insurance
On 5 May 2006, the Company agreed to
indemnify each Director against any liability
incurred in relation to acts or omissions
arising in the course of their office. The
indemnity applies only to the extent
permitted by law. A copy of the deed of
indemnity is available for inspection at the
Company’s registered office and at the AGM.
The Company has ensured that appropriate
insurance cover is available in respect of
potential legal action against its Directors.

Auditors and disclosure of information
to auditors
So far as the Directors are aware, there is no
relevant audit information that has not been
brought to the attention of the Company’s
auditors. Each Director has taken all reasonable
steps to make himself or herself aware of any
relevant audit information and to establish that
such information was provided to the auditors.
Following the tender of the audit during the
year, a resolution to appoint Ernst & Young LLP
as auditors to the Company will be proposed at
the 2013 AGM. For more details on the audit
tender please see page 68 and 69.

Provisions on change of control
There are a number of agreements which take
effect, alter or terminate upon a change of
control of the Company. None of these are
considered significant. The Company’s share
schemes contain provisions which take effect in
the event of a change of control, but do not entitle
participants to a greater interest in the shares of
the Company than created by the initial grant or
award under the relevant scheme.

Payment policy
The Group’s policy is to pay invoices in
accordance with their terms. The Company
has no trade creditors as at 31 March 2013.
The Group’s creditor payment days at
31 March 2013 represented 28 days’ of
purchases (2012: 27 days).

Charitable donations
During the year £0.5m was donated to
charitable causes. For more information,
please see the Corporate Responsibility
section on page 48.

Financial reporting and the ‘going concern’
basis for accounting
The Board seeks to present a balanced and
understandable assessment of the Group’s

Land Securities Annual Report 2013

position and prospects. In order to satisfy
themselves that the Company has adequate
resources to continue in operational existence
for the foreseeable future, the Directors have
reviewed assumptions about future trading
performance, valuation projections and debt
requirements contained within the Group’s
current five year plan and reported against
them, internally, on a monthly basis. This,
together with available market information
and the Directors’ knowledge and experience
of the Group’s property portfolio and markets,
has given them sufficient confidence to
continue to adopt the going concern basis in
preparing the accounts. After making
enquiries, the Directors have a reasonable
expectation that the Company has adequate
resources to continue in operational existence
for the foreseeable future. For this reason, they
continue to adopt the going concern basis in
preparing the accounts.

Voting rights
Each ordinary share of the Company carries
one vote. Further information on the voting
and other rights of shareholders are set out in
the Company’s Articles of Association and in
the explanatory notes that accompany the
Notice of the AGM which are available on the
Company’s website at www.landsecurities.com.

Directors’ powers
As set out in the Company’s Articles of
Association, the business of the Company is
managed by the Board who may exercise all
the powers of the Company.

Appointment and removal of Directors
The Board may appoint a Director, either to
fill a vacancy or as an addition to the existing
Board. This Director must retire at the next
AGM of the Company and put themselves
forward for re-appointment by the shareholders.

In addition to any power of removal conferred
by the Companies Act, the Company may by
special resolution remove any Director before
the expiration of his period of office and may,
subject to the Articles, by ordinary resolution
appoint another person who is willing to act
as a Director in his place.

Annual General Meeting
Accompanying this report is the Notice of
the AGM which sets out the resolutions for
the meeting, together with an explanation
of them.

By order of the Board

Adrian de Souza
Group General Counsel and Company Secretary

fInancIaL STaTemenTS

financial statements

Income
Earnings per share, Group revenue,
costs and other important financial
information.

p 96

Balance sheets
The Group’s balance sheet at
31 March 2013.

p 97

Notes
Accounting policies, segmental
information and other helpful
guidance.

p 101

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directors’ report
22 Chairman’s message
24 Chief Executive’s statement
26 Financial review
32 Our principal risks and
how we manage them

36 Retail Portfolio review of the year
42 London Portfolio review of the year
48 Corporate Responsibility Report

Governance
58 Board of Directors
60 Corporate Governance Report
64 Nominations Committee Report
68 Audit Committee Report
74 Directors’ Remuneration Report
92 Report of the Directors

financial statements
94 Statement of Directors’ Responsibilities
95 Independent auditors’ Report
96 Income statement
96 Statement of comprehensive income
97 Balance sheets
98 Statement of changes in equity
100 Statements of cash flows
101 Notes to the financial statements

Contact details

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Land Securities Annual Report 2013

fInancIaL STaTemenTS

statement of directors’ responsibilities

in respect of the annual report and the financial statements

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

Company law requires the Directors to
prepare financial statements for each
financial year. Under that law the Directors
have prepared the Group and Parent
Company financial statements in accordance
with International Financial Reporting
Standards (IFRSs) as adopted by the
European Union. Directors must not approve
the financial statements unless they are
satisfied that they give a true and fair view
of the state of affairs of the Group and the
Company and of the profit and loss of the
Group and Company for that period.

In preparing these financial statements the
Directors are required to:

– select suitable accounting policies and then

apply them consistently;

– make judgements and accounting estimates

that are reasonable and prudent;

– state whether applicable IFRSs as adopted

by the European Union have been followed,
subject to any material departures
disclosed and explained in the financial
statements; and

– prepare the financial statements on a going
concern basis, unless it is inappropriate to
presume that the Group will continue
in business.

The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Company’s
transactions and disclose with reasonable
accuracy at any time the financial position of
the Company and the Group and to enable
them to ensure that the financial statements
and the Directors’ Remuneration Report
comply with the Companies Act 2006 and,
as regards the Group financial statements,
Article 4 of the IAS Regulation. They are also
responsible for safeguarding the assets of the
Company and the Group and hence for taking
reasonable steps for the prevention and
detection of fraud and other irregularities.

Directors’ responsibility statement
Each of the Directors, whose names and
functions are listed below, confirm that:
– to the best of their knowledge, the Group
financial statements, which have been
prepared in accordance with IFRSs as
adopted by the EU, give a true and fair view
of the assets, liabilities, financial position
and profit of the Group; and

– to the best of their knowledge, the
management reports (which are
incorporated into the Report of the
Directors) contained in the Annual Report
include a fair review of the development
and performance of the business and the
position of the Group, together with a
description of the principal risks and
uncertainties that it faces.

A copy of the financial statements of the
Group is placed on the Company’s website.
The Directors are responsible for the
maintenance and integrity of statutory and
audited information on the Company’s website
at www.landsecurities.com. Information
published on the internet is accessible in many
countries with different legal requirements.
Legislation in the United Kingdom governing
the preparation and dissemination of financial
statements may differ from legislation in
other jurisdictions.

The Directors of Land Securities Group PLC
as at the date of this Annual Report are as set
out below:
Alison Carnwath, Chairman
Robert Noel, Chief Executive
Kevin O’Byrne, Senior Independent
Director*
Martin Greenslade, Chief Financial Officer
David Rough*
Richard Akers, Executive Director
Sir Stuart Rose*
Chris Bartram*
Simon Palley*
Stacey Rauch*

*Non-executive Directors

By order of the Board
Adrian de Souza
Group General Counsel and
Company Secretary
14 May 2013

Land Securities Annual Report 2013

fInancIaL STaTemenTS

independent auditors’ report

to the members of Land Securities group PLc

We have audited the financial statements
of Land Securities Group PLC for the year
ended 31 March 2013 which comprise the
Group Income Statement, the Group
Statement of Comprehensive Income, the
Group and Company Balance Sheets, the
Group and Company Statements of Cash
Flows, the Group and Company Statements
of Changes in Equity and the related notes.
The financial reporting framework that has
been applied in their preparation is
applicable law and International Financial
Reporting Standards (IFRSs) as adopted
by the European Union and, as regards the
Parent Company financial statements, as
applied in accordance with the provisions
of the Companies Act 2006.

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

This report, including the opinions, has been
prepared for and only for the Company’s
members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act
2006 and for no other purpose. We do not,
in giving these opinions, 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 the audit of the financial statements
An audit involves obtaining evidence about
the amounts and disclosures in the financial
statements sufficient to give reasonable
assurance that the financial statements are
free from material misstatement, whether
caused by fraud or error. This includes an
assessment of: whether the accounting
policies are appropriate to the Group’s
and the Parent Company’s circumstances
and have been consistently applied and
adequately disclosed; the reasonableness of
significant accounting estimates made by the
Directors; and the overall presentation of the
financial statements. In addition, we read all
the financial and non-financial information
in the Annual Report 2013 to identify
material inconsistencies with the audited
financial statements. If we become aware
of any apparent material misstatements or
inconsistencies we consider the implications
for our report.

Opinion on financial statements
In our opinion:
– the financial statements give a true and fair
view of the state of the Group’s and of the
Parent Company’s affairs as at 31 March
2013 and of the Group’s profit and Group’s
and Parent Company’s cash flows for the
year then ended;

Matters on which we are required to report
by exception
We have nothing to report in respect of
the following:

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

– adequate accounting records have not been
kept by the Parent Company, or returns
adequate for our audit have not been
received from branches not visited by us; or

– the Parent Company financial statements

and the part of the Directors’ remuneration
report to be audited are not in agreement
with the accounting records and returns; or

– certain disclosures of Directors’

remuneration specified by law are not
made; or

– we have not received all the information

and explanations we require for our audit.

Under the Listing Rules we are required
to review:
– the Directors’ statement, set out on page 92,

in relation to going concern;

– the parts of the Corporate Governance
Statement relating to the Company’s
compliance with the nine provisions of the
UK Corporate Governance Code specified
for our review; and

– the Group financial statements have been
properly prepared in accordance with
IFRSs as adopted by the European Union;

– certain elements of the report to

shareholders by the Board on Directors’
remuneration.

Parwinder Purewal
(Senior Statutory Auditor)
for and on behalf of:
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
14 May 2013

– the Parent Company financial statements

have been properly prepared in accordance
with IFRSs as adopted by the European
Union and as applied in accordance with the
provisions of the Companies Act 2006; and

– the financial statements have been
prepared in accordance with the
requirements of the Companies Act 2006
and, as regards the Group financial
statements, Article 4 of the lAS Regulation.

Opinion on other matters prescribed
by the Companies Act 2006
In our opinion:
– the part of the Directors’ remuneration
report to be audited has been properly
prepared in accordance with the
Companies Act 2006; and

– the information given in the Directors’
Report for the financial year for which
the financial statements are prepared is
consistent with the financial statements.

Land Securities Annual Report 2013

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fInancIaL STaTemenTS

income statement

for the year ended 31 march 2013

statement of comprehensive income

for the year ended 31 march 2013

Land Securities Annual Report 2013

NotesGroup2013 £mGroup2012£mGroup revenue1 5736.6671.5Costs(290.7)(239.6)445.9431.9(Loss)/profit on disposal of investment properties(3.1)45.4Profit on disposal of other investments1.6–Net surplus on revaluation of investment properties14196.7169.8Release of impairment/(impairment charge) on trading properties227.1(2.0)Operating profit 648.2645.1Interest expense9(201.6)(201.1)Interest income932.526.2Fair value movement on interest-rate swaps9(1.6)(4.5)Movement on redemption liability28(4.5)–Net gain on business combination291.4–474.4465.7Share of post-tax profit from joint ventures1958.652.2Impairment of investment in joint ventures19–(2.2)Profit before tax533.0515.7Income tax11–8.0Profit for the financial year 533.0523.7Attributable to:Owners of the Parent533.0522.9Non-controlling interests–0.8Profit for the financial year533.0523.7Earnings per share attributable to the owners of the Parent (pence) Basic earnings per share1268.467.5Diluted earnings per share1268.167.41. Group revenue excludes the share of joint ventures’ revenue of £108.6m (2012: £121.4m).NotesGroup2013£mGroup2012£mProfit for the financial year533.0523.7Other comprehensive income consisting of:Actuarial gains/(losses) on defined benefit pension scheme343.9(16.1)Share of joint ventures’ fair value movement on interest-rate swaps treated as cash flow hedges19(0.9)4.9Revaluation of other investments292.3–Recycling of revaluation of other investments to the income statement29(2.3)–Other comprehensive income/(expense) for the financial year3.0(11.2)Total comprehensive income for the financial year536.0512.5Attributable to:Owners of the Parent536.0511.7Non-controlling interests–0.8Total comprehensive income for the financial year536.0512.5fInancIaL STaTemenTS

balance sheets

at 31 march 2013

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Land Securities Annual Report 2013

GroupCompanyNotes2013£m2012£m2013£m2012£mNon-current assetsInvestment properties149,651.98,453.2––Other property, plant and equipment168.38.8––Net investment in finance leases17188.0185.0––Loan investments 1850.050.8––Investments in joint ventures191,301.01,137.6––Investments in subsidiary undertakings20––6,180.76,177.8Other investments21–32.3––Trade and other receivables2310.6–––Pension surplus345.9–––Total non-current assets11,215.79,867.76,180.76,177.8Current assetsTrading properties and long-term development contracts22152.8133.1––Trade and other receivables23344.8759.621.815.8Monies held in restricted accounts and deposits2430.929.5––Cash and cash equivalents2541.729.70.10.2Total current assets570.2951.921.916.0Total assets11,785.910,819.66,202.66,193.8Current liabilitiesBorrowings 31(436.2)(10.8)––Trade and other payables26(364.3)(361.3)(609.3)(691.5)Provisions27(7.0)(8.6)––Derivative financial instruments30(9.1)–––Current tax liabilities(21.2)(21.6)––Total current liabilities(837.8)(402.3)(609.3)(691.5)Non-current liabilitiesBorrowings 31(3,315.2)(3,225.1)––Derivative financial instruments30(10.7)(6.5)––Pension deficit34–(2.4)––Trade and other payables26(17.4)(27.7)––Redemption liability28(118.1)–––Total non-current liabilities(3,461.4)(3,261.7)––Total liabilities(4,299.2)(3,664.0)(609.3)(691.5)Net assets7,486.77,155.65,593.35,502.3EquityCapital and reserves attributable to the owners of the ParentOrdinary shares3679.278.579.278.5Share premium787.6786.2787.6786.2Capital redemption reserve30.530.530.530.5Merger reserve––373.6373.6Share-based payments6.86.86.86.8Retained earnings6,590.36,271.24,315.64,226.7Own shares37(7.7)(17.8)––Equity attributable to the owners of the Parent7,486.77,155.45,593.35,502.3Non-controlling interests–0.2––Total equity7,486.77,155.65,593.35,502.3The financial statements on pages 96 to 146 were approved by the Board of Directors on 14 May 2013 and were signed on its behalf by:R M NoelM F GreensladeDirectors

fInancIaL STaTemenTS

statement of chanGes in equity

Land Securities Annual Report 2013

Attributable to owners of the ParentGroupOrdinary shares£mShare premium £mCapital redemption reserve£mShare-based payments£mRetained earnings1£mOwn shares£mTotal£mNon-controlling interest£mTotal equity£mAt 1 April 201177.6785.530.57.25,914.3(3.6)6,811.50.86,812.3Profit for the year ended 31 March 2012––––522.9–522.90.8523.7Other comprehensive income:Actuarial loss on pension scheme––––(16.1)–(16.1)–(16.1)Share of joint ventures’ fair value movement on interest-rate swaps treated as cash flow hedges––––4.9–4.9–4.9Total comprehensive income for the year ended 31 March 2012––––511.7–511.70.8512.5Transactions with owners:Exercise of options–0.7––––0.7–0.7New share capital subscribed0.965.7––––66.6–66.6Transfer to retained earnings in respect of shares issued in lieu of cash dividends–(65.7)––65.7––––Fair value of share-based payments–––4.8––4.8–4.8Release on exercise/forfeiture of share options–––(5.2)5.2––––Settlement and transfer of shares to employees on exercise of share options––––(4.3)4.3–––Dividends to owners of the Parent––––(221.4)–(221.4)–(221.4)Distribution paid to non-controlling interests–––––––(1.4)(1.4)Acquisition of own shares–––––(18.5)(18.5)–(18.5)Total transactions with owners of the Parent0.90.7–(0.4)(154.8)(14.2)(167.8)(1.4)(169.2)At 31 March 201278.5786.230.56.86,271.2(17.8)7,155.40.27,155.6Profit for the year ended 31 March 2013––––533.0–533.0–533.0Other comprehensive income:Actuarial gain on pension scheme––––3.9–3.9–3.9Share of joint ventures’ fair value movement on interest-rate swaps treated as cash flow hedges––––(0.9)–(0.9)–(0.9)Revaluation of other investments––––2.3–2.3–2.3Recycling of revaluation of other investments to the income statement––––(2.3)–(2.3)–(2.3)Total comprehensive income for the year ended 31 March 2013––––536.0–536.0–536.0Transactions with owners:Exercise of options0.11.4––––1.5–1.5New share capital subscribed0.649.8––––50.4–50.4Transfer to retained earnings in respect of shares issued in lieu of cash dividend–(49.8)––49.8––––Purchase of treasury shares––––(34.4)–(34.4)–(34.4)Fair value of share-based payments–––2.9––2.9–2.9Release on exercise/forfeiture of share options–––(2.9)2.9––––Settlement and transfer of shares to employees on exercise of share options––––(7.3)10.63.3–3.3Dividends to owners of the Parent––––(228.8)–(228.8)–(228.8)Unpaid dividends refunded––––0.9–0.9–0.9Transfer to redemption liability–––––––(0.2)(0.2)Acquisition of own shares–––––(0.5)(0.5)–(0.5)Total transactions with owners of the Parent0.71.4––(216.9)10.1(204.7)(0.2)(204.9)At 31 March 201379.2787.630.56.86,590.3(7.7)7,486.7–7,486.71. Included within retained earnings are cumulative losses in respect of cash flow hedges (interest rate swaps) of £3.9m (2012: £3.0m).fInancIaL STaTemenTS

statement of chanGes in equity

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Land Securities Annual Report 2013

CompanyOrdinary shares£mShare premium£mCapital redemption reserve£mMerger reserve1£mShare-based payments£mRetained earnings£mTotal£mAt 1 April 201177.6785.530.5373.67.24,505.75,780.1Loss for the year ended 31 March 2012–––––(29.1)(29.1)Exercise of options–0.7––––0.7New share capital subscribed0.965.7––––66.6Transfer to retained earnings in respect of shares issued in lieu of cash dividend–(65.7)–––65.7–Fair value of share-based payments ––––4.8–4.8Transfer of treasury shares from Group undertakings–––––(99.4)(99.4)Release on exercise/forfeiture of share options––––(5.2)5.2–Dividends –––––(221.4)(221.4)At 31 March 201278.5786.230.5373.66.84,226.75,502.3Profit for the year ended 31 March 2013–––––298.5298.5Exercise of options0.11.4––––1.5New share capital subscribed0.649.8––––50.4Transfer to retained earnings in respect of shares issued in lieu of cash dividend–(49.8)–––49.8–Fair value of share-based payments ––––2.9–2.9Purchase of treasury shares–––––(34.4)(34.4)Release on exercise/forfeiture of share options––––(2.9)2.9–Dividends–––––(228.8)(228.8)Unclaimed dividends refunded–––––0.90.9At 31 March 201379.2787.630.5373.66.84,315.65,593.31. The merger reserve arose on 6 September 2002 when the Company acquired 100% of the issued share capital of Land Securities PLC. The merger reserve represents the excess of the cost of acquisition over the nominal value of the shares issued by the Company to acquire Land Securities PLC. The merger reserve does not represent a realised or distributable profit.

fInancIaL STaTemenTS

statements of cash flows

for the year ended 31 march 2013

100

Land Securities Annual Report 2013

GroupCompanyNotes2013£m2012 £m2013£m2012£mNet cash generated from operationsCash generated from operations39345.0399.1––Interest paid(175.6)(164.4)––Interest received10.327.1––Employer contributions to defined benefit pension scheme34(4.7)(4.9)––Acquisition of trading properties(7.2)–––Capital expenditure on trading properties(25.4)(16.7)––Disposal of trading properties104.419.4––Corporation tax paid(0.1)(5.5)––Net cash inflow from operations246.7254.1––Cash flows from investing activitiesInvestment property development expenditure(208.8)(158.8)––Acquisition of investment properties and other investments(243.9)(107.3)––Acquisition of subsidiary undertaking (net of cash acquired)29(86.8)–––Other investment property related expenditure(66.2)(145.9)––Disposal of investment properties509.9513.7––Expenditure on non-property related non-current assets(2.0)(2.3)––Receipts in respect of finance lease receivables–1.1––Disposal of other investments3.0–––Loans repaid by third parties0.822.8––Cash contributed to joint ventures (3.9)(21.1)––Loan advances to joint ventures 19(159.1)(66.5)––Loan repayments by joint ventures 1912.818.0––Distributions from joint ventures1930.624.1––Net cash (outflow)/inflow from investing activities(213.6)77.8––Cash flows from financing activitiesCash received on issue of shares arising from exercise of share options4.70.7––Purchase of own shares and treasury shares(34.9)(18.5)––Proceeds from new loans (net of finance fees)200.6288.1––Repayment of loans31(10.9)(461.0)(0.1)–(Increase)/ decrease in monies held in restricted accounts and deposits24(1.4)5.6––Decrease in finance leases payable(0.1)(0.2)––Dividends paid to owners of the Parent10(178.3)(153.1)––Distributions paid by subsidiary undertakings28(0.8)(1.4)––Net cash outflow from financing activities(21.1)(339.8)(0.1)–Increase/(decrease) in cash and cash equivalents for the year12.0(7.9)(0.1)–Cash and cash equivalents at the beginning of the year29.737.60.20.2Cash and cash equivalents at the end of the year2541.729.70.10.2The Company cash flow statement excludes transactions, including the payment of dividends, that are settled on the Company’s behalf by other Group undertakings.fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013

1. basis of preparation
These financial statements have been
prepared on a going concern basis and in
accordance with International Financial
Reporting Standards as adopted by the
European Union (IFRSs as adopted by
the EU), IFRIC Interpretations and the
Companies Act 2006 applicable to companies
reporting under IFRS. The financial
statements have been prepared in Pounds
Sterling (rounded to the nearest hundred
thousand), which is the presentation currency
of the Group (Land Securities Group PLC
and all of its subsidiary undertakings), and
under the historical cost convention as
modified by the revaluation of land and
buildings, available-for-sale investments,
derivative financial instruments and financial
assets and liabilities held for trading.
A summary of the more important Group
accounting policies, which have been applied
consistently across the Group, is set out in
note 2 below.

The preparation of financial statements
in conformity with generally accepted
accounting principles requires the use of
estimates and assumptions that affect the
reported amounts of assets and liabilities at
the date of the financial statements and the
reported amounts of revenues and expenses
during the reporting period. Although these
estimates, disclosed in note 3, are based on
management’s best knowledge of the amount,
event or actions, actual results ultimately may
differ from those estimates.

Land Securities Group PLC has not
presented its own statement of comprehensive
income (and separate income statement), as
permitted by Section 408 of Companies Act
2006. The profit for the year of the Company,
dealt with in its financial statements, was
£298.5m (2012: a loss of £29.1m).

2. siGnificant accountinG policies
The accounting policies are consistent with
those applied in the year ended 31 March
2012, as amended to reflect the adoption of
the new Standards, Amendments to
Standards and Interpretations which are
mandatory for the year ended 31 March 2013.

The following accounting standards or
interpretations were effective for the financial
year beginning 1 April 2012 but have not had
a material impact on the Group:
– IFRS 7 (amendment) ‘Financial

instruments: Disclosures’ (disclosures on
transfers of financial assets)

The following IFRS accounting standards
and interpretations relevant to the Group
have been issued but are not yet effective, or

have not yet been adopted by the EU. None of
these standards or interpretations have been
early adopted by the Group. The Group is in
the process of assessing the impact of these
new standards and interpretations on its
financial reporting. None of these standards
are expected to have a significant impact on
the Group’s reporting, although some may
require additional disclosures to be included
in the notes to the financial statements.
– IFRS 7 (amendment) ‘Financial

instruments: Disclosures’ (offsetting
requirement and converged disclosure)

– IFRS 10 ‘Consolidated Financial

Statements’

– IFRS 11 ‘Joint Arrangements’
– IFRS 12 ‘Disclosure of Interests in

Other Entities’

– IFRS 13 ‘Fair Value Measurement’
– IAS 19 (revised) ‘Employee Benefits’
– IAS 27 (revised) ‘Separate Financial

Statements’

– IAS 28 (revised) ‘Associates and Joint

Ventures’

– IAS 1 (amendment) ‘Presentation of

Financial Statements’

– IAS 12 (amendment) ‘Income Tax’
– IAS 32 (amendment) ‘Financial

instruments: Presentation’ (assets
and liability offsetting)

(a) Basis of consolidation
The consolidated financial statements for the
year ended 31 March 2013 incorporate the
financial statements of Land Securities
Group PLC (the Company) and all its
subsidiary undertakings (the Group).
Subsidiary undertakings are those entities
controlled by the Company. Control exists
when the Company has the power, directly
or indirectly, to govern the financial and
operating policies of an entity so as to obtain
benefits from its activities.

The results of subsidiaries and joint ventures
acquired or disposed of during the year are
included from the effective date of acquisition
or to the effective date of disposal.
Accounting practices of subsidiaries and joint
ventures which differ from Group accounting
policies are adjusted on consolidation.

Business combinations are accounted for
under the acquisition method. Any excess of
the purchase price of business combinations
over the fair value of the assets, liabilities and
contingent liabilities acquired and resulting
deferred tax thereon is recognised as
goodwill. Any discount received is credited
to the income statement in the period of
acquisition as a ‘gain on business

combination’. The Group recognises any
non-controlling interest in the acquiree on
an acquisition-by-acquisition basis, either at
fair value or at the non-controlling interest’s
proportionate share of the recognised
amounts of the acquiree’s identifiable net
assets. Acquisition-related costs are expensed
as incurred.

If the business combination is achieved in
stages, the acquisition date carrying value of
the acquirer’s previously held equity interest
in the acquiree is re-measured to fair value
at the acquisition date and any gains or
losses arising from such re-measurement
are recognised in the income statement.

Joint ventures are those entities over whose
activities the Group has joint control,
established by contractual agreement.
Interests in joint ventures are accounted for
using the equity method of accounting as
permitted by IAS 31 ‘Interests in joint
ventures’. The equity method requires the
Group’s share of the joint venture’s post-tax
profit or loss for the period to be presented
separately in the income statement and the
Group’s share of the joint venture’s net assets
to be presented separately in the balance
sheet. 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.

The Group’s share of jointly controlled assets,
related liabilities, income and expenses are
combined with the equivalent items in the
consolidated financial statements on a
line-by-line basis.

Intra-group balances and any unrealised
gains and losses arising from intra-group
transactions are eliminated in preparing the
consolidated financial statements. Unrealised
gains arising from transactions with joint
ventures are eliminated to the extent of the
Group’s interest in the joint venture
concerned. Unrealised losses are eliminated
in the same way, but only to the extent that
there is no evidence of impairment.

(b) Segment reporting
Operating segments are reported in a manner
consistent with the internal reporting
provided to the chief operating decision-
maker. The chief operating decision-maker,
who is responsible for allocating resources
and assessing performance of the operating
segments, has been identified as the Senior
Management Board, which during the year
consisted of the three Executive Directors.

Land Securities Annual Report 2013

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notes to the financial statements

for the year ended 31 march 2013 continued

2. siGnificant accountinG policies
continued
Unallocated income and expenses are items
incurred centrally which are neither directly
attributable nor reasonably allocatable to
individual segments. Unallocated assets are
cash and cash equivalents, monies held in
restricted accounts, loan investments and
the pension surplus. Unallocated liabilities
include borrowings, derivative financial
instruments, current tax liabilities and trade
and other payables.

(c) Investment properties
Investment properties are those properties,
either owned by the Group or where the
Group is a lessee under a finance lease, that
are held either to earn rental income or for
capital appreciation, or both. In addition,
properties held under operating leases are
accounted for as investment properties when
the rest of the definition of an investment
property is met. In such cases, the operating
leases concerned are accounted for as if they
were finance leases.

Investment properties are measured initially
at cost, including related transaction costs.
After initial recognition at cost, investment
properties are carried at their fair values
based on market value determined by
professional independent valuers at each
reporting date. Properties are treated as
acquired at the point when the Group
assumes the significant risks and returns of
ownership and as disposed when these are
transferred to the buyer. This generally
occurs on unconditional exchange, except
where completion is expected to occur
significantly after exchange. Additions to
investment properties consist of costs of a
capital nature and, in the case of investment
properties under development, capitalised
interest. Certain internal staff and associated
costs directly attributable to the management
of major schemes during the construction
phase are also capitalised.

The difference between the fair value of
an investment property at the reporting
date and its carrying amount prior to
re-measurement is included in the income
statement as a valuation surplus or deficit.

When the Group begins to redevelop an
existing investment property for continued
future use as an investment property, the
property remains an investment property
and is accounted for as such. When the
Group begins to redevelop an existing
investment property with a view to sell, the
property is transferred to trading properties
and held as a current asset. The property is
re-measured to fair value as at the date of

the transfer with any gain or loss being taken
to the income statement. The re-measured
amount becomes the deemed cost at
which the property is then carried in
trading properties.

Borrowing costs associated with direct
expenditure on properties under
development or undergoing major
refurbishment are capitalised. The interest
capitalised is calculated using the Group’s
weighted average cost of borrowings after
adjusting for borrowings associated with
specific developments. Where borrowings
are associated with specific developments,
the amount capitalised is the gross interest
incurred on those borrowings less any
investment income arising on their
temporary investment. Interest is capitalised
as from the commencement of the
development work until the date of practical
completion. The capitalisation of finance
costs is suspended if there are prolonged
periods when development activity is
interrupted. Interest is also capitalised on
the purchase cost of land or property
acquired specifically for redevelopment in the
short-term but only where activities necessary
to prepare the asset for redevelopment are
in progress.

(d) Property, plant and equipment
This category comprises computers, motor
vehicles, furniture, fixtures and fittings and
improvements to Group offices. These assets
are stated at cost less accumulated
depreciation and are depreciated to their
residual value on a straight-line basis over
their estimated useful lives of between two
and five years.

The residual values and useful lives of all
property, plant and equipment are reviewed,
and adjusted if appropriate, at least at each
financial year end.

(e) Investments in subsidiary undertakings
Investments in subsidiary undertakings are
stated at cost in the Company’s balance sheet,
less any provision for impairment in value.

completion method. An appropriate estimate
of the profit attributable to work completed is
recognised once the outcome of the contract
can be estimated reliably. The gross amount
due from customers for contract work is
shown as a receivable. The gross amount due
comprises costs incurred plus recognised
profits less the sum of recognised losses
and progress billings. Where the sum of
recognised losses and progress billings
exceeds costs incurred plus recognised
profits, the amount is shown as a liability.

(g) Other investments
Other investments are available-for-sale
financial assets and are held at fair value.
Changes to fair value are recorded within
other comprehensive income.

(h) Trade and other receivables
Trade and other receivables are recognised
initially at fair value, subsequently at
amortised cost and, where relevant, adjusted
for the time value of money. A provision for
impairment is established where there is
objective evidence that the Group will not
be able to collect all amounts due according
to the original terms of the receivables
concerned. If collection is expected in more
than one year, they are classified as non-
current assets.

(i) Cash and cash equivalents
Cash and cash equivalents comprises cash
balances, deposits held at call with banks and
other short-term highly liquid investments
with original maturities of three months or
fewer. Bank overdrafts that are repayable on
demand and form an integral part of the
Group’s cash management are deducted from
cash and cash equivalents for the purpose of
the statement of cash flows.

(j) Loan investments
Loan investments are non-derivative
financial assets which are initially recognised
at fair value plus acquisition costs. They are
subsequently carried at amortised cost using
the effective interest method.

(f) Trading properties and long-term
development contracts
Trading properties are those properties held
for sale or those being developed with a view
to sell and are shown at the lower of cost and
net realisable value. Proceeds received on the
sale of trading properties are recognised
within revenue.

Revenue on long-term development contracts
is recognised according to the stage reached
in the contract by reference to the value of
work completed using the percentage of

(k) Provisions
A provision is recognised in the balance sheet
when the Group has a constructive or legal
obligation as a result of a past event and it is
probable that an outflow of economic benefits
will be required to settle the obligation.
Where relevant, provisions are determined
by discounting the expected future cash flows
at a pre-tax rate that reflects current market
assessments of the time value of money and,
where appropriate, the risks specific to
the liability.

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fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

(l) Borrowings
Borrowings, other than bank overdrafts,
are recognised initially at fair value less
attributable transaction costs. Subsequent to
initial recognition, borrowings are stated at
amortised cost with any difference between
the amount initially recognised and
redemption value being recognised in the
income statement over the period of the
borrowings, using the effective interest
method.

Where existing borrowings are exchanged
for new borrowings and the terms of the
existing and new borrowings are not
substantially different (as defined by IAS 39),
the new borrowings are recognised initially
at the carrying amount of the existing
borrowings. The difference between the
amount initially recognised and the
redemption value of the new borrowings is
recognised in the income statement over the
period of the new borrowings, using the
effective interest method.

(m) Redemption liability
Where instruments held in a subsidiary by
third parties are redeemable at the option
of the holder, these interests are classified
as a financial liability. The liability is carried
at the redemption amount; the value is
reassessed at the balance sheet date and
movements are recognised in the income
statement.

(n) Pension benefits
In respect of defined benefit pension
schemes, pension obligations are measured
at discounted present value, while pension
scheme assets are measured at their fair
value, except annuities, which are valued
to match the liability or benefit value.
The operating and financing costs of such
schemes are recognised separately in the
income statement. Service costs are spread
using the projected unit credit method.
Financing costs are recognised in the periods
in which they arise and are included in
interest expense. Actuarial gains and losses
arising from either experience differing from
previous actuarial assumptions, or changes
to those assumptions, are recognised
immediately in other comprehensive income.

Contributions to defined contribution
schemes are charged to the income statement
as incurred.

(o) Share capital
Ordinary shares are classified as equity.
External costs directly attributable to the
issue of new shares are shown in equity as
a deduction from the proceeds.

The consideration paid by any Group entity
to acquire the Company’s equity share
capital including any directly attributable
incremental costs, is deducted from equity
until the shares are cancelled, reissued or
disposed. Where own shares are sold or
reissued, the net consideration received is
included in equity. Shares acquired by the
Employee Share Ownership Trust (ESOT)
are presented on the Group balance sheet as
‘own shares’. Purchases of treasury shares are
deducted from retained earnings.

(p) Share-based payments
The cost of granting share options and other
share-based remuneration to employees and
directors is recognised through the income
statement. These are equity settled and
therefore the fair value is measured at the
grant date. Where the share awards have
non-market related performance criteria the
Group has used the Black-Scholes option
valuation model to establish the relevant fair
values. Where the share awards have a TSR
market related performance criteria the
Group has used the Monte-Carlo simulation
valuation model to establish the relevant fair
values. The resulting values are amortised
through the income statement over the
vesting period of the options and other
grants. For awards with non-market related
criteria, the charge is reversed if it appears
probable that the performance criteria will
not be met.

(q) Revenue
The Group recognises revenue on an accruals
basis, when the amount of revenue can be
reliably measured and it is probable that
future economic benefits will flow to the
Group. Revenue comprises rental income,
service charges and other recoveries from
tenants of the Group’s investment and trading
properties, proceeds of sales of its trading
properties and income arising on long-term
contracts. Rental income includes the income
from managed operations such as car parks,
food courts, serviced offices and flats. Service
charges and other recoveries include income
in relation to service charges and directly
recoverable expenditure together with any
chargeable management fees.

Rental income from investment property
leased out under an operating lease is
recognised in the income statement on a
straight-line basis over the term of the lease.
Lease incentives granted are an integral part
of the net consideration for the use of the
property and are therefore recognised on the
same straight-line basis. Service charges and
other recoveries are recorded as income in
the periods in which they are earned.

When property is let under a finance lease,
the Group recognises a receivable at an
amount equal to the net investment in the
lease at inception of the lease. Rentals
received are accounted for as repayments of
principal and finance income as appropriate.
Finance income is allocated to each period
during the lease term so as to produce a
constant periodic rate of interest on the
remaining net investment in the finance
lease. Contingent rents, being lease payments
that are not fixed at the inception of a lease,
for example turnover rents, are recorded
as income in the periods in which they
are earned.

(r) Expenses
Property and contract expenditure is
expensed as incurred with the exception of
expenditure on long-term development
contracts (see (f)).

Rental payments made under an operating
lease are recognised in the income statement
on a straight-line basis over the term of the
lease. Lease incentives received are an
integral part of the net consideration for the
use of the property and are also recognised
on a straight-line basis.

Minimum lease payments payable on finance
leases and operating leases accounted for as
finance leases under IAS 40 are apportioned
between finance expense and reduction of
the outstanding liability. Finance expense is
allocated to each period during the lease
term so as to produce a constant periodic
rate of interest on the remaining liability.
Contingent rents (as defined in (q))
are charged as an expense in the periods in
which they are incurred.

(s) Impairment
The carrying amounts of the Group’s
non-financial assets, other than investment
properties (see (c)), are reviewed at
each reporting date to determine whether
there is any indication of impairment. If any
such indication exists, the asset’s recoverable
amount is estimated (see below). An
impairment loss is recognised in the income
statement whenever the carrying amount of
an asset exceeds its recoverable amount.

The recoverable amount of an asset is the
greater of its fair value less costs to sell and its
value in use. The value in use is determined
as the net present value of the future cash
flows expected to be derived from the asset,
discounted using a pre-tax discount rate that
reflects current market assessments of the
time value of money and the risks specific to
the asset.

Land Securities Annual Report 2013

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fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

2. siGnificant accountinG policies
continued
An impairment loss is reversed if there has
been a change in the estimates used to
determine the recoverable amount. An
impairment loss is reversed only to the
extent that the asset’s carrying amount after
the reversal does not exceed the amount
that would have been determined, net of
applicable depreciation, if no impairment
loss had been recognised.

(t) Derivative financial instruments
(derivatives) and hedge accounting
The Group uses interest-rate swaps to help
manage its interest-rate risk. In accordance
with its treasury policy, the Group does not
hold or issue derivatives for trading purposes.

Where hedge accounting is applied the
Group documents, at the inception of the
transaction, the relationship between the
hedging instruments and the hedged items,
as well as its risk management objectives and
strategy for undertaking various hedging
transactions. The Group also documents its
assessment, both at hedge inception and on
an ongoing basis, of whether the derivatives
that are used in hedging transactions are
highly effective in offsetting changes in cash
flows of hedged items.

All derivatives are initially recognised at fair
value at the date the derivative is entered into
and are subsequently re-measured at fair
value. The fair value of interest-rate swaps
is based on broker or counterparty quotes.
Those quotes are tested for reasonableness
by discounting estimated future cash flows
based on the terms and maturity of each
contract and using market interest rates for
similar instruments at the measurement date.
The method of recognising the resulting gain
or loss depends on whether the derivative is
designated as a hedging instrument.

Cash flow hedges: where a derivative is
designated as a hedge of the variability of a
highly probable forecast transaction (i.e. an
interest payment) the element of the gain
or loss on the derivative that is an effective
hedge is recognised directly in other
comprehensive income. The associated
gains or losses that were recognised in the
statement of other comprehensive income
are reclassified into the income statement
on termination or expiry of the hedge.

Derivatives that do not qualify for hedge
accounting: the gain or loss on derivatives
that do not qualify for hedge accounting,

and the non-qualifying element of derivatives
that do qualify for hedge accounting, are
recognised immediately in the income
statement.

remaining balance of the liability for each
period. The investment properties acquired
under finance leases are subsequently carried
at their fair value.

(u) Income tax
Income tax on the profit for the year
comprises current and deferred tax. Current
tax is the tax payable on the taxable income
for the year and any adjustment in respect of
previous years. Deferred tax is provided in
full using the balance sheet liability method
on temporary differences between the
carrying amounts of assets and liabilities
for financial reporting purposes and the
amounts used for taxation purposes.
Deferred tax is determined using tax rates
that have been enacted or substantively
enacted by the reporting date and are
expected to apply when the asset is realised
or the liability is settled.

No provision is made for temporary
differences (i) arising on the initial
recognition of assets or liabilities, other than
on a business combination, that affect neither
accounting nor taxable profit and (ii) relating
to investments in subsidiaries to the extent
that they will not reverse in the foreseeable
future.

(v) Leases
A Group company is the lessee:

i) Operating lease – leases in which
substantially all risks and rewards of
ownership are retained by another party,
the lessor, are classified as operating leases.
Payments, including prepayments, made
under operating leases (net of any incentives
received from the lessor) are charged to the
income statement on a straight-line basis over
the period of the lease.

ii) Finance lease – leases of assets where the
Group has substantially all the risks and
rewards of ownership are classified as finance
leases. Finance leases are capitalised within
investment properties at the commencement
of the lease at the lower of the fair value of
the property and the present value of the
minimum lease payments. Each lease
payment is allocated between the liability and
finance charges so as to achieve a constant
rate on the finance balance outstanding.
The corresponding rental obligations, net
of finance charges, are included in current
and non-current borrowings. The finance
charges are charged to the income statement
over the lease period so as to produce a
constant periodic rate of interest on the

A Group company is the lessor:

i) Operating lease – properties leased out to
tenants under operating leases are included
in investment properties in the balance sheet.

ii) Finance lease – when assets are leased out
under a finance lease, the present value of
the minimum lease payments is recognised
as a receivable. The difference between the
gross receivable and the present value of
the receivable is recognised as unearned
finance income.

Lease income is recognised over the term of
the lease using the net investment method
before tax, which reflects a constant periodic
rate of return. Where only the buildings
element of a property lease is classified as
a finance lease, the land element is shown
within operating leases.

(w) Dividends
Final dividend distributions to the Company’s
shareholders are recognised as a liability in
the Group’s financial statements in the period
in which the dividends are approved by the
Company’s shareholders. Interim dividends
are recognised when paid.

3. siGnificant judGements, key
assumptions and estimates
The Group’s significant accounting policies
are stated in note 2 above. Not all of these
significant accounting policies require
management to make difficult, subjective
or complex judgements or estimates.
The following is intended to provide an
understanding of the policies that
management consider critical because of the
level of complexity, judgement or estimation
involved in their application and their impact
on the consolidated financial statements.
These judgements involve assumptions or
estimates in respect of future events. Actual
results may differ from these estimates.

(a) Investment property valuation
The Group uses the valuation performed by
its external valuers, Knight Frank LLP and
Jones Lang LaSalle, as the fair value of its
investment properties.

104

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fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

3. siGnificant judGements, key
assumptions and estimates continued
The valuation of the Group’s property
portfolio is inherently subjective due to,
among other factors, the individual nature of
each property, its location and the expected
future rental revenues from that particular
property. As a result, the valuations the
Group places on its property portfolio are
subject to a degree of uncertainty and are
made on the basis of assumptions which may
not prove to be accurate, particularly in
periods of volatility or low transaction flow
in the commercial property market.

The investment property valuation contains
a number of assumptions upon which Knight
Frank LLP and Jones Lang LaSalle have
based their valuation of the Group’s
properties as at 31 March 2013. The
assumptions on which the Property Valuation
Reports have been based include, but are not
limited to, matters such as the tenure and
tenancy details for the properties, ground
conditions at the properties, the structural
condition of the properties, prevailing
market yields and comparable market
transactions. These assumptions are market
standard and accord with the RICS Valuation
Standards. However, if any assumptions
made by the property valuer prove to be false,
this may mean that the value of the Group’s
properties differs from their valuation, which
could have a material effect on the Group’s
financial condition.

(b) Finance lease calculations
In apportioning rentals on finance lease
properties, the Group is required to estimate
the split of the fair values of the properties
concerned between land and buildings. The
inception of many of the Group’s leases took
place many years ago and therefore reliable
estimates are very difficult to obtain.
Accordingly, the Group has had to apply its
judgement in estimating the split at inception
of certain finance lease properties.

(c) Trading properties
Trading properties are carried at the lower
of cost and net realisable value. The latter is
assessed by the Group having regard to
suitable valuations performed by its external
valuer, Knight Frank LLP.

The estimation of the net realisable value of
the Group’s trading properties, especially
the development land and infrastructure
programmes, is inherently subjective due
to a number of factors, including their
complexity, unusually large size, the
substantial expenditure required and long
timescales to completion. In addition, as a
result of these timescales to completion, the
plans associated with these programmes
could be subject to significant variation.
As a result, and similar to the valuation of
investment properties, the net realisable
values of the Group’s trading properties are
subject to a degree of uncertainty and are
made on the basis of assumptions which may
not prove to be accurate.

If the assumptions upon which the external
valuer has based their valuation prove to be
false, this may have an impact on the net
realisable value of the Group’s trading
properties, which would in turn have an
effect on the Group’s financial condition.

(d) Trade receivables
The Group is required to judge when there
is sufficient objective evidence to require the
impairment of individual trade receivables.
It does this on the basis of the age of the
relevant receivables, external evidence of
the credit status of the counterparty and the
status of any disputed amounts.

(e) Compliance with the Real Estate
Investment Trust (REIT) taxation regime
On 1 January 2007 the Group converted to
a group REIT. In order to achieve and retain
group REIT status, several entrance tests
had to be met and certain ongoing criteria
must be maintained. The main criteria are
as follows:
– at the start of each accounting period, the
assets of the tax exempt business must be
at least 75% of the total value of the
Group’s assets;

– at least 75% of the Group’s total profits must
arise from the tax exempt business; and
– at least 90% of the notional taxable profit

of the property rental business must
be distributed.

The Directors intend that the Group should
continue as a group REIT for the foreseeable
future, with the result that deferred tax is no
longer recognised on temporary differences
relating to the property rental business.

4. seGmental information
Management has determined the Group’s
operating segments based on the information
reviewed by the Senior Management Board
(SMB) to make strategic decisions. During
the year, the SMB consisted of the three
Executive Directors.

All the Group’s operations are in the UK and
are organised into two operating segments
against which the Group reports its
segmental information, being Retail Portfolio
and London Portfolio. The London Portfolio
includes all our London offices and central
London shops and the Retail Portfolio
includes all our shopping centres, hotels
and leisure assets, shops, retail warehouse
properties and assets held in retail joint
ventures, excluding central London shops.

The information and reports reviewed by the
SMB are prepared on a combined portfolio
basis, which includes the Group’s share of
joint ventures and non-wholly owned
subsidiaries on a proportionately
consolidated basis. The following segmental
information is therefore presented on a
proportionately consolidated basis.

The Group’s primary measure of underlying
profit before tax is revenue profit. This
measure seeks to show the profit arising from
ongoing operations and as such removes all
items of a capital nature (e.g. valuation
movements and profit/(loss) on disposal of
investment properties) and one-off or
exceptional items. It includes the pre-tax
results of subsidiaries and joint ventures on a
proportionately consolidated basis. Segment
profit is the lowest level to which the profit
arising from the ongoing operations of the
Group is analysed between the two segments.
The Group manages its financing structure,
with the exception of joint ventures, on a
pooled basis and, as such, debt facilities and
interest charges are not specific to a
particular segment.

Land Securities Annual Report 2013

105

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fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

4. seGmental information continued
The segmental information provided to Senior Management for the reportable segments for the year ended 31 March 2013 is as follows:

Group

Retail portfolio

London portfolio

Year ended 31 March 2013
Total

Group
£m
256.0
1.9
257.9
(9.4)
248.5
34.9
(36.4)
(1.5)
11.4
(31.1)
227.3
(20.5)
(0.1)
206.7
–
206.7

Joint
ventures
£m
66.9
0.5
67.4
(2.1)
65.3
10.1
(11.1)
(1.0)
1.2
(12.1)
53.4
(2.8)
–
50.6
(16.4)
34.2

Total
£m
322.9
2.4
325.3
(11.5)
313.8
45.0
(47.5)
(2.5)
12.6
(43.2)
280.7
(23.3)
(0.1)
257.3
(16.4)
240.9

Group
£m
253.6
9.1
262.7
(3.1)
259.6
37.1
(36.7)
0.4
17.7
(26.2)
251.5
(15.3)
(0.9)
235.3
–
235.3

Joint
ventures
£m
16.5
–
16.5
–
16.5
0.6
(0.7)
(0.1)
0.1
(1.0)
15.5
(0.7)
–
14.8
(14.6)
0.2

Total
£m
270.1
9.1
279.2
(3.1)
276.1
37.7
(37.4)
0.3
17.8
(27.2)
267.0
(16.0)
(0.9)
250.1
(14.6)
235.5

Revenue profit
Rental income
Finance lease interest
Gross rental income (before rents payable)
Rents payable1
Gross rental income (after rents payable)
Service charge income
Service charge expense
Net service charge expense
Other property related income
Direct property expenditure
Net rental income
Indirect property expenditure
Depreciation
Segment profit before interest
Joint venture net interest expense
Segment profit
Group services – income
– expense

Interest expense
Interest income
Eliminate effect of bond exchange de-recognition
Revenue profit

Included within rents payable is finance lease interest payable of £1.7m (2012: £1.5m) and £0.4m (2012: £0.6m) for the Retail and London portfolios, respectively.

Group

Retail portfolio

London portfolio

Group
£m
206.7
–
–
–
–
–
–
206.7
40.9

(46.4)
(5.5)

(48.8)
–
152.4

Joint
ventures
£m
50.6
4.6
(4.0)
0.6
3.1
(3.1)
–
51.2
15.6

(14.1)
1.5

(30.9)
(0.2)
21.6

Total
£m
257.3
4.6
(4.0)
0.6
3.1
(3.1)
–
257.9
56.5

(60.5)
(4.0)

(79.7)
(0.2)
174.0

Group
£m
235.3
106.7
(69.3)
37.4
–
0.1
0.1
272.8
4.9

(2.5)
2.4

245.8
7.1
528.1

Joint
ventures
£m
14.8
4.7
(4.7)
–
–
–
–
14.8
4.5

(4.5)
–

51.4
(3.8)
62.4

Total
£m
250.1
111.4
(74.0)
37.4
–
0.1
0.1
287.6
9.4

(7.0)
2.4

297.2
3.3
590.5

Reconciliation to profit before tax
Segment profit before interest
Trading property sales proceeds
Carrying value of trading property disposals
Profit on disposal of trading properties
Long-term development contract income
Long-term development contract expenditure
Profit on long-term development contracts

Investment property disposal proceeds
Carrying value of investment property disposals

(including lease incentives)

(Loss)/profit on disposal of investment properties
Net surplus/(deficit) on revaluation of investment

properties

Impairment release/(charge) on trading properties

Group services – income
– expense
Profit on disposal of other investments
Adjustment to include subsidiaries at 100%2
Operating profit
Interest expense
Interest income
Fair value movement on interest-rate swaps
Movement on redemption liability
Net gain on business combination
Joint ventures net liabilities adjustment
Profit before tax

Group
£m
509.6
11.0
520.6
(12.5)
508.1
72.0
(73.1)
(1.1)
29.1
(57.3)
478.8
(35.8)
(1.0)
442.0
–
442.0
3.8
(40.3)
(199.8)
32.5
18.1
256.3

Group
£m
442.0
106.7
(69.3)
37.4
–
0.1
0.1
479.5
45.8

(48.9)
(3.1)

197.0
7.1
680.5
3.8
(40.3)
1.6
2.6
648.2
(201.6)
32.5
(1.6)
(4.5)
1.4
–
474.4

Joint
ventures
£m
83.4
0.5
83.9
(2.1)
81.8
10.7
(11.8)
(1.1)
1.3
(13.1)
68.9
(3.5)
–
65.4
(31.0)
34.4
–
–
–
–
–
34.4

Total
£m
593.0
11.5
604.5
(14.6)
589.9
82.7
(84.9)
(2.2)
30.4
(70.4)
547.7
(39.3)
(1.0)
507.4
(31.0)
476.4
3.8
(40.3)
(199.8)
32.5
18.1
290.7

Year ended 31 March 2013
Total

Joint
ventures
£m
65.4
9.3
(8.7)
0.6
3.1
(3.1)
–
66.0
20.1

(18.6)
1.5

20.5
(4.0)
84.0
–
–
–
0.5
84.5
(31.0)
–
4.8
–
–
0.3
58.6

Total
£m
507.4
116.0
(78.0)
38.0
3.1
(3.0)
0.1
545.5
65.9

(67.5)
(1.6)

217.5
3.1
764.5
3.8
(40.3)
1.6
3.1
732.7
(232.6)
32.5
3.2
(4.5)
1.4
0.3
533.0

2. This represents the interest in X-Leisure which we do not own, but is consolidated in the Group numbers.

106

Land Securities Annual Report 2013

fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

4. seGmental information continued

Group

Retail Portfolio

London Portfolio

Year ended 31 March 2012
Total

e
S
S
e
n
T
I
a
L
r
e
a
D

Group
£m
535.4
8.3
543.7
(13.7)
530.0
76.7
(79.8)
(3.1)
31.8
(49.6)
509.1
(40.3)
(2.6)
466.2
–
466.2
3.9
(44.0)
–
(201.1)
26.2
16.6
2.8
270.6

Group
£m
466.2
8.0
(5.8)
2.2
7.4
(3.8)
3.6
472.0
961.4

Group
£m
255.9
2.1
258.0
(9.5)
248.5
33.9
(34.5)
(0.6)
12.8
(29.8)
230.9
(23.6)
(2.2)
205.1
–
205.1

Joint
ventures
£m
66.1
0.4
66.5
(2.1)
64.4
8.4
(10.6)
(2.2)
1.2
(10.6)
52.8
(2.3)
–
50.5
(21.2)
29.3

Total
£m
322.0
2.5
324.5
(11.6)
312.9
42.3
(45.1)
(2.8)
14.0
(40.4)
283.7
(25.9)
(2.2)
255.6
(21.2)
234.4

Group
£m
279.5
6.2
285.7
(4.2)
281.5
42.8
(45.3)
(2.5)
19.0
(19.8)
278.2
(16.7)
(0.4)
261.1
–
261.1

Joint
ventures
£m
11.7
–
11.7
–
11.7
0.3
(0.3)
–
–
(0.9)
10.8
(0.6)
–
10.2
(10.7)
(0.5)

Total
£m
291.2
6.2
297.4
(4.2)
293.2
43.1
(45.6)
(2.5)
19.0
(20.7)
289.0
(17.3)
(0.4)
271.3
(10.7)
260.6

Interest expense
Interest income
Eliminate effect of bond exchange de-recognition
Eliminate debt restructuring charges
Revenue profit

Included within rents payable is finance lease interest payable of £1.5m and £0.6m for the Retail and London portfolios, respectively.

Group

Retail Portfolio

London Portfolio

Group
£m
205.1
0.9
(0.6)
0.3
–
–
–
205.4
255.1

(235.1)
20.0

6.1
–
231.5

Joint
ventures
£m
50.5
26.2
(23.4)
2.8
1.9
(1.9)
–
53.3
26.8

(25.8)
1.0

(11.6)
(0.9)
41.8

Investment property disposal proceeds
Carrying value of investment property disposals

(including lease incentives)

Profit on disposal of investment properties
Net surplus/(deficit) on revaluation of investment

properties

Impairment (charge)/release on trading properties

Group services – income
– expense

Operating profit
Interest expense
Interest income
Fair value movement on interest-rate swaps
Impairment of investment in joint ventures
Joint venture tax adjustment
Joint venture net liabilities adjustment
Profit before tax

Total
£m
255.6
27.1
(24.0)
3.1
1.9
(1.9)
–
258.7
281.9

Group
£m
261.1
7.1
(5.2)
1.9
7.4
(3.8)
3.6
266.6
706.3

Joint
ventures
£m
10.2
5.2
(5.0)
0.2
–
–
–
10.4
–

Total
£m
271.3
12.3
(10.2)
2.1
7.4
(3.8)
3.6
277.0
706.3

(260.9)
21.0

(680.9)
25.4

–
–

(680.9)
25.4

(916.0)
45.4

(5.5)
(0.9)
273.3

163.7
(2.0)
453.7

32.7
0.8
43.9

196.4
(1.2)
497.6

169.8
(2.0)
685.2
3.9
(44.0)
645.1
(201.1)
26.2
(4.5)
(2.2)
–
–
463.5

Joint
ventures
£m
77.8
0.4
78.2
(2.1)
76.1
8.7
(10.9)
(2.2)
1.2
(11.5)
63.6
(2.9)
–
60.7
(31.9)
28.8
–
–
–
–
–
–
–
28.8

Total
£m
613.2
8.7
621.9
(15.8)
606.1
85.4
(90.7)
(5.3)
33.0
(61.1)
572.7
(43.2)
(2.6)
526.9
(31.9)
495.0
3.9
(44.0)
–
(201.1)
26.2
16.6
2.8
299.4

Year ended 31 March 2012
Total

Joint
ventures
£m
60.7
31.4
(28.4)
3.0
1.9
(1.9)
–
63.7
26.8

(25.8)
1.0

21.1
(0.1)
85.7
–
–
85.7
(31.9)
–
(0.9)
–
(0.3)
(0.4)
52.2

Total
£m
526.9
39.4
(34.2)
5.2
9.3
(5.7)
3.6
535.7
988.2

(941.8)
46.4

190.9
(2.1)
770.9
3.9
(44.0)
730.8
(233.0)
26.2
(5.4)
(2.2)
(0.3)
(0.4)
515.7

D
r
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o
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r
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P
o
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T

g
o
v
e
r
n
a
n
c
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f
I
n
a
n
c
a
L
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a
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Land Securities Annual Report 2013

107

fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

4. seGmental information continued

Group

Retail portfolio

London portfolio

Year ended 31 March 2013
Total

Joint
ventures
£m

Total
£m

Group
£m

Joint
ventures
£m

Total
£m

Group
£m

Joint
ventures
£m

Total
£m

Group
£m

4,290.9

978.1

5,269.0

5,139.6

587.6

5,727.2

9,430.5

1,565.7

10,996.2

2.0

29.4

–

106.2

–

4.8

8.8

50.9

37.5

–

2.0

34.2

8.8

157.1

37.5

–

6.3

151.6

152.8

249.7

–

12.0

5.7

15.5

0.3

6.3

151.6

164.8

255.4

15.5

0.3

8.3

181.0

152.8

355.9

–

4.8

20.8

56.6

53.0

0.3

8.3

185.8

173.6

412.5

53.0

0.3

4,428.5

1,080.1

5,508.6

5,700.0

621.1

6,321.1

10,128.5

1,701.2

11,829.7

30.6

30.9

50.0

5.9

–

30.6

30.9

50.0

5.9

239.0

12.0

251.0

–

(412.2)

10,484.9

1,301.0

11,785.9

(127.9)

(29.8)

(157.7)

(145.4)

(29.0)

(174.4)

(273.3)

(58.8)

(332.1)

(1.1)

(115.4)

–
(244.4)

(0.4)

(1.5)

–

(115.4)

(5.9)

(2.7)

–

(5.9)

(2.7)

(200.9)
(231.1)

(200.9)
(475.5)

–
(154.0)

(152.1)
(181.1)

(152.1)
(335.1)

(7.0)

(118.1)

–

(398.4)

(0.4)

–

(353.0)

(412.2)

(7.4)

(118.1)

(353.0)

(810.6)

(3,627.0)

(16.1)

(21.2)

(98.9)

(137.6)

–

412.2

(3,627.0)

(16.1)

(21.2)

(98.9)

(137.6)

412.2

(4,299.2)

–

(4,299.2)

162.2

(1.8)

160.4

115.4

80.7

196.1

277.6

78.9

356.5

Balance sheet

Investment properties

Other property, plant and equipment

Net investment in finance leases

Trading properties and long-term development

contracts

Trade and other receivables

Share of joint venture cash

Joint venture net liabilities adjustment

Segment assets

Unallocated:

Cash and cash equivalents

Monies held in restricted accounts

Loan investments

Pension surplus

Adjustment for proportionate share
of subsidiary assets

Joint venture liabilities

Total assets

Trade and other payables

Provisions

Redemption liability

Share of joint venture borrowings

Segment liabilities

Unallocated:

Borrowings

Derivative financial instruments

Current tax liabilities

Trade and other payables

Adjustment for proportionate share
of subsidiary liabilities

Joint venture liabilities to assets

Total liabilities

Other segment items

Capital expenditure

108

Land Securities Annual Report 2013

e
S
S
e
n
T
I
a
L
r
e
a
D

Year ended 31 March 2012
Total

Joint
ventures
£m

Total
£m

fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

4. seGmental information continued

Group

Retail Portfolio

London Portfolio

Balance sheet

Investment properties

Other property, plant and equipment

Net investment in finance leases

Trading properties and long-term development

contracts

Trade and other receivables

Share of joint venture cash

Segment assets

Unallocated:

Cash and cash equivalents

Monies held in restricted accounts

Loan investments

Other investments

Joint venture liabilities

Total assets

Trade and other payables

Provisions

Share of joint venture borrowings

Segment liabilities

Unallocated:

Borrowings

Derivative financial instruments

Pension deficit

Current tax liabilities

Trade and other payables

Joint venture liabilities to assets

Total liabilities

Other segment items

Capital expenditure

Group
£m

Joint
ventures
£m

Total
£m

Group
£m

3,672.4

1,004.1

4,676.5

4,780.8

2.5

33.0

–

222.0

–

8.3

7.7

96.8

21.3

2.5

41.3

7.7

318.8

21.3

6.3

152.0

133.1

537.6

–

Joint
ventures
£m

449.3

–

15.3

3.6

22.8

Total
£m

Group
£m

5,230.1

8,453.2

1,453.4

9,906.6

6.3

152.0

148.4

541.2

22.8

8.8

185.0

133.1

759.6

–

8.3

23.0

100.4

44.1

8.8

193.3

156.1

860.0

44.1

3,929.9

1,138.2

5,068.1

5,609.8

491.0

6,100.8

9,539.7

1,629.2

11,168.9

29.7

29.5

50.8

32.3

–

29.7

29.5

50.8

32.3

–

(491.6)

9,682.0

1,137.6

10,819.6

(96.5)

(0.6)

–
(97.1)

(66.2)

(0.6)

(263.4)

(330.2)

(162.7)

(138.1)

(12.6)

(150.7)

(234.6)

(1.2)

(263.4)

(427.3)

(8.0)

–

(146.1)

–

(148.8)

(161.4)

(8.0)

(148.8)

(307.5)

(8.6)

–

(243.2)

(78.8)

(0.6)

(412.2)

(491.6)

(313.4)

(9.2)

(412.2)

(734.8)

(3,235.9)

(6.5)

(2.4)

(21.6)

(154.4)

–

491.6

(3,235.9)

(6.5)

(2.4)

(21.6)

(154.4)

491.6

(3,664.0)

–

(3,664.0)

133.0

14.0

147.0

151.3

31.3

182.6

284.3

45.3

329.6

D
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Land Securities Annual Report 2013

109

fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

5. Group revenue

Group

Rental income (excluding adjustment for lease incentives)

Adjustment for lease incentives

Rental income

Service charge income

Other property related income

Trading property sales proceeds

Long-term development contract income

Finance lease interest

Other income

2013
£m

494.2

19.2

513.4

72.9

28.8

106.7

–

11.0

3.8

2012
£m

520.7

14.7

535.4

76.7

31.8

8.0

7.4

8.3

3.9

736.6

671.5

Revenue includes proceeds on the sale of trading properties, which in the year ended 31 March 2013 includes proceeds on the sale of
Wellington House of £90.4m and an estimate of the probable amounts due on the profit share in respect of land sold in 2005 (Bankside 4)
of £15.4m.

6. employee costs

Group

The average monthly number of employees during the year was:

Indirect property or contract and administration

Direct property or contract services:

Full-time

Part-time

2013
Number

2012
Number

433

436

144

591

178

656

The average number of employees for the year ended 31 March 2013 includes 20 employees in respect of our X-Leisure operations, acquired
in January 2013. The average number of employees for the year ended 31 March 2012 includes 45 employees in respect of our Brand Empire
operations, which ceased trading in that year.

Group

Employee costs

Salaries and wages

Social security

Other pension (note 34)

Share-based payments (note 35)

2013
£m

2012
£m

49.5

50.8

6.2

2.7

2.9

7.2

3.0

4.8

61.3

65.8

With the exception of the Directors and the Group General Counsel & Company Secretary, who are employed by Land Securities Group PLC,
all employees are employed by subsidiaries of the Group.

During the year, no Directors had retirement benefits accruing under either the defined contribution pension scheme (2012: one) or the
defined benefit scheme (2012: one). Information on Directors’ emoluments, share options and interests in the Company’s shares is given in the
Directors’ remuneration report on pages 74 to 91.

Details of the employee costs associated with the Group’s Executive Directors are included in note 40.

110

Land Securities Annual Report 2013

fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

7. auditor remuneration

Group

Services provided by the Group’s auditor

Audit fees:

Parent company and consolidated financial statements

Audit of subsidiary undertakings

Other fees:

Audit related assurance services

2013
£m

2012
£m

0.3

0.1

0.7

0.2

0.3

0.2

0.7

It is the Group’s policy to employ the Group’s auditors, PricewaterhouseCoopers LLP, on assignments additional to their statutory duties where
their expertise and experience with the Group are important. Where appropriate, the Group seeks tenders for services and if fees are expected
to be greater than £25,000 they are pre-approved by the Audit Committee. In addition, PricewaterhouseCoopers LLP also receives fees for
statutory duties performed for some of our joint venture arrangements, of which our proportionate share of the fees was £0.1m (2012: £0.1m).

8. external valuer remuneration

Group

Services provided by the Group’s external valuers

Valuation fees:

Year and half year valuations

Security Group valuation

Other consultancy and agency services

2013
£m

2012
£m

0.8

0.1
0.9

1.5

2.4

0.9

–
0.9

1.1

2.0

The fee payable to Knight Frank LLP (Knight Frank), the Group’s external valuers, for the year end and half year valuation is a fixed fee that
is adjusted on an annual basis for acquisitions and disposals of investment properties in the reporting period to which the fee relates. Knight
Frank also undertakes some other consultancy and agency work on behalf of the Group. In addition, Knight Frank receives fees for their duties
performed for some of our joint venture arrangements, of which our proportionate share of the fees was £0.1m (2012: £0.1m).

Jones Lang LaSalle (JLL) was employed to perform the valuation for investment properties in respect of the X-Leisure properties acquired in
the year. The valuation fee has a fixed element and a variable element based on the value of the portfolio. Both Knight Frank and JLL have
confirmed to us that the total fees paid by the Group represented less than 5 per cent of their total revenues in each year.

Land Securities Annual Report 2013

111

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a
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c
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f
I
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a
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c
a
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S
T
a
T
e
m
e
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T
S

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S
o
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fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

9. net interest expense

Group
Interest expense

Bond and debenture debt

Bank borrowings

Other interest payable

Amortisation of bond exchange de-recognition

Interest on pension scheme liabilities

Interest capitalised in relation to properties under development

Total interest expense

Interest income

Short-term deposits

Interest received on loan investments

Other interest receivable

Interest receivable from joint ventures

Expected return on pension scheme assets

Total interest income

Fair value movement on interest-rate swaps

Net interest expense

Included within rents payable (note 4) is finance lease interest payable of £2.1m (2012: £2.1m).

2013
£m

2012
£m

(177.3)

(177.8)

(18.3)

(0.8)

(18.1)

(7.8)

(13.0)

(0.6)

(16.6)

(8.0)

(222.3)

(216.0)

20.7

14.9

(201.6)

(201.1)

0.6

2.3

5.4

15.6

8.6

32.5

0.4

3.8

7.4

5.5

9.1

26.2

(1.6)

(4.5)

(170.7)

(179.4)

112

Land Securities Annual Report 2013

fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

10. dividends

Ordinary dividends paid

For the year ended 31 March 2011:

Third interim

Final

For the year ended 31 March 2012:

First interim

Second interim

Third interim

Final

For the year ended 31 March 2013:

First interim

Second interim

Gross dividend

e
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a
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Group and Company

Payment date

Actual
per share
pence

2013
£m

26 April 2011

28 July 2011

24 October 2011

9 January 2012

26 April 2012

26 July 2012

12 October 2012

10 January 2013

7.0

7.2

7.4

–

56.1

57.5

57.6

2012
£m

53.9

55.6

55.8

56.1

–

228.8

221.4

The Board has proposed a final quarterly dividend for the year ended 31 March 2013 of 7.6p per share (2012: 7.4p), which will be 100% PID,
to the extent it is paid in cash, and result in a further estimated distribution of £59.4m (2012: £57.5m). It will be paid on 19 July 2013 to
shareholders who are on the Register of Members on 21 June 2013. The final dividend is in addition to the third quarterly interim dividend of
7.4p or £57.8m paid on 17 April 2013 (2012: 7.2p or £56.1m). The total dividend paid and proposed in respect of the year ended 31 March 2013
is 29.8p (2012: 29.0p).

The Company operates a scrip dividend scheme which provides shareholders with the opportunity to receive their dividend in shares as
opposed to cash. Shares issued in lieu of dividends during the year, all of which were non-PID distributions, totalled £50.4m (2012: £66.6m).
The difference between the gross dividend of £228.8m and the amount reported in the consolidated cash flow for the year of £178.3m is the
shares issued in lieu of dividends (£50.4m), the timing of the payment of the related withholding tax (£0.8m) and unpaid dividends refunded
during the year (£0.9m).

A cash dividend may be paid as a PID, a non-PID, or a mixture of the two. Following the enactment of the Finance (No.3) Act 2010, the issue of
ordinary shares under the scrip in lieu of a cash dividend can also qualify as a PID, a non-PID, or a mixture of the two. Confirmation of whether
PID or non-PID treatment to a particular dividend will apply will be announced prior to the relevant ex-dividend date. The scrip dividend
alternative for the proposed final quarterly dividend will be a non-PID.

Land Securities Annual Report 2013

113

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fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

11. income tax

Group

Current tax

Adjustment in respect of prior years

Total income tax credit in the income statement

The tax for the year is lower than the standard rate of corporation tax in the UK of 24% (2012: 26%). The differences are explained below:

Profit before tax

Profit before tax multiplied by the rate of corporation tax in the UK of 24% (2012: 26%)

Effects of:

Interest rate fair value movements and other timing differences

Adjustment in respect of prior years

Non-allowable expenses and non-taxable items

Losses carried forward

Utilised losses brought forward

Exempt property rental profits and revaluations in the year

Exempt property losses in the year

Total income tax credit in the income statement (as above)

2013
£m

–

2012
£m

8.0

533.0

515.7

(127.9)

(134.1)

(0.1)

–

(0.2)

(2.0)

11.2

119.0

–

(0.9)

8.0

(1.6)

(4.9)

7.2

134.0

0.3

8.0

The Group has unutilised trading and other tax losses carried forward as at 31 March 2013 of approximately £63.0m (2012: £86.0m).

During the year the Group released provisions of £nil (2012: £8.0m) to the income statement. At 31 March 2013, the Group held a provision
of £21.3m (2012: £21.3m) for interest on overdue tax in relation to a dispute with HM Revenue & Customs. This dispute has now been resolved
and the liability will be settled during 2013/14.

Land Securities Group PLC elected for group Real Estate Investment Trust (REIT) status with effect from 1 January 2007. As a result,
the Group no longer pays UK corporation tax on the profits and gains from qualifying rental business in the UK provided it meets certain
conditions. Non-qualifying profits and gains of the Group continue to be subject to corporation tax as normal.

114

Land Securities Annual Report 2013

fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

12. earninGs per share

Group

Profit for the financial year attributable to the owners of the Parent

Fair value movement on redemption liability

Net surplus on revaluation of investment properties – Group

– Joint ventures

Loss/(profit) on disposal of investment properties – Group

Impairment (release)/charge on trading properties – Group

– Joint ventures

Profit on disposal of trading properties – Group

Fair value movement on interest-rate swaps – Group

– Joint ventures

Impairment of investment in joint ventures

Joint venture net liabilities adjustment1

Profit on disposal of other investments

Net gain on business combination

Adjustment for proportionate share of earnings

EPRA adjusted earnings attributable to the owners of the Parent

Tax adjustments related to prior periods – Group

Eliminate profit on long-term development contracts – Group2

Eliminate debt restructuring charges and other interest items – Group

Eliminate amortisation of bond exchange de-recognition – Group

Adjusted earnings attributable to the owners of the Parent

Joint ventures with net liabilities are carried at zero value in the balance sheet where there is no commitment to fund the deficit.

1.
2. The profit on long-term development contracts has been removed from our adjusted earnings due to the long-term, capital nature of these programmes.

Weighted average number of ordinary shares

Weighted average number of treasury shares

Weighted average number of own shares

Weighted average number of ordinary shares – basic earnings per share

Dilutive effect of share options

Weighted average number of ordinary shares – diluted earnings per share

Basic earnings per share

Diluted earnings per share

Adjusted earnings per share

Adjusted diluted earnings per share

2013
£m

533.0

4.5

2012
£m

522.9

–

(197.0)

(169.8)

(20.5)

3.1

(1.5)

(7.1)

4.0

(37.4)

(0.6)

1.6

(4.8)

–

(0.3)

(1.6)

(1.4)

(3.8)

(21.1)

(45.4)

(1.0)

2.0

0.1

(2.2)

(3.0)

4.5

0.9

2.2

0.4

–

270.2

290.5

–

(0.1)

–

18.1

288.2

2013
million

789.1

(8.7)

(1.5)

778.9

3.4

782.3

2013
pence

68.4

68.1

37.0

36.8

(8.0)

(3.6)

2.8

16.6

298.3

2012
million

781.5

(5.9)

(1.4)

774.2

1.7

775.9

2012
pence

67.5

67.4

38.5

EPRA adjusted diluted earnings per share

34.5

37.4

Management has chosen to disclose adjusted earnings per share in order to provide an indication of the Group’s underlying business
performance. Accordingly, it excludes the effect of debt and other restructuring charges, non-recurring items and other items of a capital nature.
We believe our measure of adjusted diluted earnings per share is more appropriate than the EPRA measure in the context of our business.

Land Securities Annual Report 2013

115

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fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

13. net assets per share

Group

Net assets attributable to the owners of the Parent

Fair value of interest-rate swaps – Group

– Joint ventures

EPRA adjusted net assets

Reverse bond exchange de-recognition adjustment

Adjusted net assets attributable to the owners of the Parent

Reinstate bond exchange de-recognition adjustment

Fair value of interest-rate swaps – Group

Fair value of interest-rate swaps – Joint ventures

Excess of fair value of debt over book value (note 31)

EPRA triple net assets

Number of ordinary shares in issue

Number of treasury shares

Number of own shares

Number of ordinary shares – basic net assets per share

Dilutive effect of share options

Number of ordinary shares – diluted net assets per share

Net assets per share

Diluted net assets per share

Adjusted net assets per share

Adjusted diluted net assets per share

EPRA measure – adjusted diluted net assets per share

– diluted triple net assets per share

2013
£m

2012
£m

7,486.7

7,155.4

16.1

8.4

6.5

14.3

7,511.2

7,176.2

(432.8)

(450.9)

7,078.4

6,725.3

432.8

(16.1)

(8.4)

450.9

(6.5)

(14.3)

(1,111.8)

(860.9)

6,374.9

6,294.5

2013
million

792.1

(10.5)

(1.1)

780.5

3.2

783.7

2013
pence

959

955

907

903

958

813

2012
million

785.1

(5.9)

(2.3)

776.9

2.6

779.5

2012
pence

921

918

866

863

921

808

Adjusted net assets per share excludes fair value 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 the owners of the Parent is more indicative of underlying performance.

14. investment properties
The net book value of leasehold properties where head leases have been capitalised is £947.3m (2012: £885.7m).

The fair value of the Group’s investment properties at 31 March 2013 has been arrived at on the basis of a valuation carried out at that date by
Knight Frank LLP and Jones Lang LaSalle, external valuers. The valuation by Knight Frank LLP and Jones Lang LaSalle, which conform to
Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors and with IVA 1 of the International Valuation Standards,
were arrived at by reference to market evidence of transaction prices for similar properties. Investment properties include capitalised interest
of £208.8m (2012: £189.9m). The average rate of interest capitalisation for the year is 5.0% (2012: 5.0%). The historical cost of investment
properties is £7,003.5m (2012: £6,006.5m).

The current value of investment properties, including joint ventures, in respect of proposed developments is £123.6m (2012: £212.6m).
Developments are transferred out of the development programme when physically complete and 95% let, or two years after practical
completion, whichever is earlier. The only scheme transferred out of the development programme during the year was One New Change, EC4.

116

Land Securities Annual Report 2013

fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

14. investment properties continued

Group

Net book value at 1 April 2011

Property acquisitions

Issue of finance lease

Capital expenditure

Capitalised interest

Disposals

Depreciation

Transfer from trading properties

Valuation surplus

Net book value at 31 March 2012

Property acquisitions

Acquisition of finance lease

Capital expenditure

Capitalised interest

Disposals

Disposal of finance lease (leasehold)

Net movement in finance leases

Depreciation

Acquired in business combination – property acquisition (note 29)

– acquisition of finance lease (note 29)

Transfer to trading properties

Transfers from the development programme into portfolio management

Transfers from portfolio management into the development programme

Valuation surplus

Net book value at 31 March 2013

portfolio
management
£m

Development
programme
£m

Total
£m

8,028.0

861.0

8,889.0

69.7

(89.7)

140.2

1.8

(863.5)

(0.1)

14.8

95.6

–

141.8

11.7

(32.3)

–

74.2

69.7

(89.7)

282.0

13.5

(895.8)

(0.1)

14.8

169.8

7,396.8

1,056.4

8,453.2

237.7

1.1

32.9

0.6

(48.5)

2.0

10.7

(0.3)

540.3

4.7

(50.0)

462.7

(87.9)

22.7

7.6

–

244.9

18.3

–

(462.7)

87.9

174.0

245.3

1.1

277.8

18.9

(48.5)

2.0

10.7

(0.3)

540.3

4.7

(50.0)

–

196.7

8,525.5

1,126.4

9,651.9

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.

Net book value at 31 March 2012

Plus: tenant lease incentives (note 23)

Less: head leases capitalised (note 33)

Plus: properties treated as finance leases

Market value at 31 March 2012 – Group

– Joint ventures (note 19)

– Group on a proportionate basis

Net book value at 31 March 2013

Plus: tenant lease incentives (note 23)

Less: head leases capitalised (note 33)

Plus: properties treated as finance leases

Market value at 31 March 2013 – Group

– Adjustment for non-wholly owned subsidiaries1

– Joint ventures (note 19)

– Group on a proportionate basis

This represents the interest in X-Leisure which we do not own, but is consolidated in the Group numbers.

portfolio
management
£m

Development
programme
£m

Total
£m

7,396.8

1,056.4

8,453.2

181.1

(22.0)

197.4

7,753.3

1,389.2

9,142.5

23.6

(1.3)

7.8

1,086.5

101.6

204.7

(23.3)

205.2

8,839.8

1,490.8

1,188.1

10,330.6

8,525.5

1,126.4

9,651.9

228.8

(28.7)

200.1

9.2

–

11.9

238.0

(28.7)

212.0

8,925.7

1,147.5

10,073.2

(240.0)

1,317.7

–

(240.0)

295.5

1,613.2

10,003.4

1,443.0

11,446.4

Land Securities Annual Report 2013

117

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fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

15. capital commitments

Group

Contracted capital commitments at the end of the period in respect of:

Investment properties

Trading properties

Joint ventures and jointly controlled assets (our share)

Total capital commitments

16. other property, plant and equipment

Group

Net book value at 1 April 2011

Capital expenditure

Disposals

Depreciation

Net book value at 31 March 2012

Capital expenditure

Disposals

Depreciation

Net book value at 31 March 2013

2013
£m

2012
£m

170.5

66.5

302.2

539.2

87.4

9.1

17.9

114.4

£m

11.3

2.3

(0.2)

(4.6)

8.8

2.2

(0.1)

(2.6)

8.3

118

Land Securities Annual Report 2013

fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

17. net investment in finance leases

Group

Non-current

Finance leases – gross receivables

Unearned finance income

Unguaranteed residual value

Current

Finance leases – gross receivables

Unearned finance income

Total net investment in finance leases

Gross receivables from finance leases:

Not later than one year

Later than one year but not more than five years

More than five years

Unearned future finance income

Unguaranteed residual value

Net investment in finance leases

2013
£m

2012
£m

379.6

414.9

(225.2)

(263.5)

33.6

188.0

12.0

(10.3)

1.7

189.7

12.0

49.3

330.3

391.6

33.6

185.0

11.5

(11.0)

0.5

185.5

11.5

46.5

368.4

426.4

(235.5)

(274.5)

33.6

189.7

33.6

185.5

The Group has leased out a number of investment properties under finance leases, which range from 25 to 100 years in duration
from the inception of the lease. These are accounted for as finance lease receivables rather than investment properties.

The fair value of the Group’s finance lease receivables, using a discount rate of 4.9% (2012: 5.0%), is £188.4m (2012: £190.5m).

Land Securities Annual Report 2013

119

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fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

18. loan investments

Group

At the beginning of the year

Amortisation of loan note discount at acquisition

Redemptions

At the end of the year

Real estate
secured
loan notes
£m

0.8

–

(0.8)

–

Loans to
third
parties
£m

50.0

–

50.0

2013

Total
£m

50.8

–

(0.8)

50.0

Real estate
secured
loan notes
£m

22.2

1.2

(22.6)

0.8

Loans to
third
parties
£m

50.0

–

50.0

The credit quality of loan investments is assessed by reference to external credit ratings (if available) or to historical information about
counterparty default rates. None of the loan investments are past due and are therefore not impaired.

Group

Counterparties with external credit ratings

AAA

AA-

Counterparties without external credit ratings

Group 11

Group 22

Group 33

1. New counterparty (less than six months).
2.
3.

Existing counterparty (more than six months) with no defaults in the past.
Existing counterparty (more than six months) with some defaults in the past.

Real estate
secured
loan notes
£m

Loans to
third
parties
£m

–

50.0

–

50.0

2013

Total
£m

–

50.0

–

50.0

Real estate
secured
loan notes
£m

Loans to
third
parties
£m

–

0.8

–

0.8

–

50.0

–

50.0

2012

Total
£m

72.2

1.2

(22.6)

50.8

2012

Total
£m

–

0.8

–

50.0

–

50.0

50.8

120

Land Securities Annual Report 2013

fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

19. investments in joint ventures
The Group’s joint ventures are described below:

Name of joint venture

percentage owned

Business segment

20 Fenchurch Street Limited Partnership

Metro Shopping Fund Limited Partnership

Buchanan Partnership

St. David’s Limited Partnership

Bristol Alliance Limited Partnership

The Harvest Limited Partnership

The Oriana Limited Partnership

The Scottish Retail Property Limited Partnership1

Westgate Oxford Alliance Limited Partnership1

The Martineau Galleries Limited Partnership1

The Martineau Limited Partnership1,3

The Ebbsfleet Limited Partnership1

Millshaw Property Co. Limited1

Hungate (York) Regeneration Limited1

Countryside Land Securities (Springhead)
Limited1

Victoria Circle Limited Partnership1

The Empress State Limited Partnership1

HNJV Limited1,3

Fen Farm Developments Limited1,2

West India Quay Unit Trust1

Included within Other in subsequent tables.

1.
2. Disposed of in the year to 31 March 2012.
3. Dissolved in the year to 31 March 2013.

50.0%

33.3%

50.0%

33.3%

50.0%

London Portfolio

Retail Portfolio

Year end date

31 March

Joint venture partners

Canary Wharf Group plc

Delancey Real Estate Partners Limited

Retail Portfolio

31 December

The Henderson UK Shopping Centre Fund

Retail Portfolio

31 December

Retail Portfolio

31 December

Retail Portfolio

London Portfolio

31 March

Retail Portfolio

London Portfolio

Retail Portfolio

31 March

31 December

31 March

30 June

Intu Properties plc

Hammerson plc

J Sainsbury plc

Frogmore Real Estate Partners
Limited Partnership

The British Land Company PLC

The Crown Estate Commissioners

Hammerson plc/Pearl Group Limited

Lafarge Cement UK PLC

Evans Property Group Limited

Crosby Lend Lease PLC/
Evans Property Group Limited

London Portfolio

30 September

Countryside Properties PLC

London Portfolio

31 March

Canada Pension Plan Investment Board

London Portfolio

31 December

Capital & Counties Properties PLC

London Portfolio

Retail Portfolio

31 March

Places for People Group Limited

Economic Zones World

Retail Portfolio

31 December

Schroder Exempt Property Unit Trust

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Land Securities Annual Report 2013

121

fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

19. investments in joint ventures continued

20
Fenchurch
Street
Limited
partnership
£m

Metro
Shopping
Fund
Limited
partnership
£m

Buchanan
partnership
£m

St. David’s
Limited
partnership
£m

Bristol
Alliance
Limited
partnership
£m

The
Harvest
Limited
partnership
£m

The Oriana
Limited
partnership
£m

Income statement

Rental income

Finance lease interest

Gross rental income (before rents payable)

Rents payable

Gross rental income (after rents payable)

Service charge income

Service charge expense

Net service charge expense

Other property related income

Direct property expenditure

Net rental income

Indirect property expenditure

Segment profit/(loss) before interest

Net interest expense1

Capitalised interest

Segment profit/(loss)

0.1

–

0.1

–

0.1

–

–
–

–

(0.1)

–

(0.1)

(4.5)

2.4

(2.2)

6.8

–

6.8

–

6.8

1.6

(1.8)
(0.2)

0.2

(0.8)

6.0

(0.4)

5.6

(3.2)

–

2.4

8.9

0.1

9.0

–

9.0

1.3

(1.4)
(0.1)

–

(0.9)

8.0

–

8.0

(4.1)

–

3.9

Segment profit/(loss) before interest

(0.1)

5.6

8.0

Trading properties sale proceeds

Carrying value of trading properties disposals

Profit on disposal of trading properties

Long-term development contract income

Long-term development contract expenditure

Profit on long-term development contracts

Investment property disposal proceeds

Carrying value of investment property disposals

Profit on disposal of investment properties

Net surplus/(deficit) on revaluation of

investment properties

Impairment charge on trading properties

Operating profit/(loss)

Net interest expense

Profit/(loss) before tax

Income tax

Net liabilities adjustment2

Share of post-tax profit/(loss)

–

–
–

–

–
–

–

–
–

23.1

–

23.0

(2.1)

20.9

–

20.9

–

20.9

–

–
–

–

–
–

–

–
–

(6.3)

–

(0.7)

(3.2)

(3.9)

–

(3.9)

–

(3.9)

–

–
–

–

–
–

–

–
–

–

8.0

(4.1)

3.9

–

3.9

–

3.9

17.2

–

17.2

(1.2)

16.0

2.4

(2.9)
(0.5)

0.3

(3.9)

11.9

(0.6)

11.3

(5.3)

–

6.0

11.3

3.7

(3.1)
0.6

–

–
–

15.4

(14.1)
1.3

8.1

(0.1)

21.2

(4.4)

16.8

–

16.8

–

16.8

18.4

0.3

18.7

(0.6)

18.1

2.4

(2.5)
(0.1)

0.3

(3.9)

14.4

(0.5)

13.9

–

13.9

4.1

–

4.1

–

4.1

0.1

(0.1)
–

0.1

(0.3)

3.9

(0.5)

3.4

(1.4)

–

2.0

7.1

–

7.1

–

7.1

0.3

(0.2)
0.1

–

(0.1)

7.1

(0.4)

6.7

(4.5)

–

2.2

13.9

3.4

6.7

–

–
–

–

–
–

–

–
–

(17.9)

–

(4.0)

–

(4.0)

–

(4.0)

–

(4.0)

–

–
–

3.1

(3.1)
–

–

–
–

(1.4)

–

2.0

(1.4)

0.6

–

0.6

–

0.6

–

–
–

–

–
–

4.5

(4.5)
–

7.3

–

14.0

(3.4)

10.6

–

10.6

–

10.6

1.
2.

Excludes fair value movements on interest rate swaps.
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.

122

Land Securities Annual Report 2013

Year ended 31 March 2013

Other
£m

21.1

0.1

21.2

(0.3)

20.9

2.6

(2.9)
(0.3)

0.4

(3.1)

17.9

(1.0)

16.9

Total
£m

83.7

0.5

84.2

(2.1)

82.1

10.7

(11.8)
(1.1)

1.3

(13.1)

69.2

(3.5)

65.7

(13.0)

(36.0)

2.6

6.5

16.9

5.6

(5.6)
–

–

–
–

0.2

–
0.2

7.8

(3.9)

21.0

(7.6)

13.4

–

13.4

0.3

13.7

5.0

34.7

65.7

9.3

(8.7)
0.6

3.1

(3.1)
–

20.1

(18.6)
1.5

20.7

(4.0)

84.5

(26.2)

58.3

–

58.3

0.3

58.6

fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

19. investments in joint ventures continued

e
S
S
e
n
T
I
a
L
r
e
a
D

Year ended 31 March 2012

20
Fenchurch
Street
Limited
Partnership
£m

Metro
Shopping
Fund
Limited
Partnership
£m

Buchanan
Partnership
£m

St. David’s
Limited
Partnership
£m

Bristol
Alliance
Limited
Partnership
£m

The Harvest
Limited
Partnership
£m

The Oriana
Limited
Partnership
£m

Income statement

Rental income

Finance lease interest

Gross rental income (before rents payable)

Rents payable

Gross rental income (after rents payable)

Service charge income

Service charge expense

Net service charge expense

Other property related income

Direct property expenditure

Net rental income

Indirect property expenditure

Segment profit/(loss) before interest

Net interest expense1

Capitalised interest

Segment profit/(loss)

0.1

–

0.1

–

0.1

–

–
–

–

(0.4)

(0.3)

(0.1)

(0.4)

(1.4)

0.7

(1.1)

7.2

–

7.2

–

7.2

1.2

(2.0)
(0.8)

0.2

(0.7)

5.9

(0.3)

5.6

(4.7)

–

0.9

9.2

0.1

9.3

–

9.3

1.1

(1.1)
–

–

(1.1)

8.2

(0.1)

8.1

(4.1)

–

4.0

Segment profit/(loss) before interest

(0.4)

5.6

8.1

Trading property sales proceeds

Carrying value of trading property disposals

Profit on disposal of trading properties

Long-term development contract income

Long-term development contract expenditure

Profit on long-term development contracts

Investment property disposal proceeds

Carrying value of investment property disposals

Profit/(loss) on disposal of investment properties

Net surplus/(deficit) on revaluation of investment

properties

Impairment (charge)/release on trading properties

Operating profit

Net interest expense

Profit before tax

Income tax

Net liabilities adjustment2

Share of post-tax profit/(loss)

–

–
–

–

–
–

–

–
–

13.4

–

13.0

(0.7)

12.3

–

12.3

–

12.3

–

–
–

–

–
–

–

(0.2)
(0.2)

(0.6)

–

4.8

(4.7)

0.1

(0.3)

(0.2)

–

(0.2)

–

–
–

–

–
–

–

–
–

1.3

–

9.4

(4.1)

5.3

–

5.3

–

5.3

16.1

–

16.1

(1.3)

14.8

2.2

(2.9)
(0.7)

0.3

(4.1)

10.3

(0.5)

9.8

(7.3)

–

2.5

9.8

7.1

(6.2)
0.9

–

–
–

0.6

(0.4)
0.2

2.5

(1.6)

11.8

(9.6)

2.2

–

2.2

–

2.2

18.7

0.2

18.9

(0.6)

18.3

2.1

(2.5)
(0.4)

0.3

(2.6)

15.6

(0.4)

15.2

–

15.2

4.2

–

4.2

–

4.2

0.2

(0.1)
0.1

–

(0.4)

3.9

(0.2)

3.7

(1.8)

–

1.9

3.7

–

3.7

–

3.7

0.1

(0.2)
(0.1)

–

(0.5)

3.1

(0.3)

2.8

(4.9)

–

(2.1)

15.2

3.7

2.8

–

–
–

–

–
–

–

–
–

(8.6)

–

6.6

–

6.6

–

6.6

–

6.6

–

–
–

1.9

(1.9)
–

26.2

(25.4)
0.8

0.1

–

4.6

(3.8)

0.8

–

0.8

–

0.8

–

–
–

–

–
–

–

–
–

14.4

–

17.2

(3.0)

14.2

–

14.2

–

14.2

Other
£m

18.6

0.1

18.7

(0.2)

18.5

1.8

(2.1)
(0.3)

0.4

(1.7)

16.9

(1.0)

15.9

(8.5)

0.1

7.5

15.9

24.3

(22.2)
2.1

–

–
–

–

0.2
0.2

(1.4)

1.5

18.3

(6.9)

11.4

–

11.4

(0.4)

11.0

Total
£m

77.8

0.4

78.2

(2.1)

76.1

8.7

(10.9)
(2.2)

1.2

(11.5)

63.6

(2.9)

60.7

(32.7)

0.8

28.8

60.7

31.4

(28.4)
3.0

1.9

(1.9)
–

26.8

(25.8)
1.0

21.1

(0.1)

85.7

(32.8)

52.9

(0.3)

52.6

(0.4)

52.2

D
r
e
c
T
o
r
S

’

r
e
P
o
r
T

g
o
v
e
r
n
a
n
c
e

f
I
n
a
n
c
a
L
S
T
a
T
e
m
e
n
T
S

n
v
e
S
T
o
r
r
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S
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c
e

Land Securities Annual Report 2013

123

fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

19. investments in joint ventures continued

Net investment
At 1 April 2011
Cash contributed
Property and other contributions
Distributions
Fair value movement on cash flow hedges taken to

comprehensive income

Disposals
Loan advances
Loan repayments
Share of post-tax profit/(loss)
Impairment of investment
At 31 March 2012
Cash contributed
Property and other contributions
Distributions
Acquired in business combination
Fair value movement on cash flow hedges taken to

comprehensive income

Loan advances
Loan repayments
Loan settled through equity

Share of post-tax profit/(loss)
At 31 March 2013

Balance sheet at 31 March 2013
Investment properties1

Current assets

Current liabilities

Non-current liabilities

Net liabilities adjustment2
Net assets

Market value of investment properties1
Net (debt)/cash

Balance sheet at 31 March 2012
Investment properties1

Current assets

Current liabilities

Non-current liabilities

Net assets

Market value of investment properties1
Net (debt)/cash

20
Fenchurch
Street
Limited
partnership
£m
70.5
0.1
–
–

Metro
Shopping
Fund
Limited
partnership
£m
25.6
16.8
–
(0.6)

Buchanan
partnership
£m
135.9
0.8
–
(3.3)

St. David’s
Limited
partnership
£m
144.2
–
0.1
–

Bristol
Alliance
Limited
partnership
£m
296.8
–
–
(17.0)

The
Harvest
Limited
partnership
£m
95.1
0.3
–
–

The Oriana
Limited
partnership
£m
47.6
–
14.2
–

–
–
18.7
–
12.4
–
101.7
–
0.1
–
–

–
52.9
–
–

20.9
175.6

183.1

2.9
186.0

(10.4)

–
(10.4)
–
175.6

183.1
2.9

101.6

1.3
102.9

(1.2)

–
(1.2)
101.7

98.2

1.3

1.0
–
–
–
(0.2)
–
42.6
1.5
–
(0.7)
–

(2.5)
–
–
–

(3.9)
37.0

106.6

5.3
111.9

(3.1)

(71.8)
(74.9)
–
37.0

107.5
(68.6)

109.1

5.9
115.0

(3.4)

(69.0)
(72.4)
42.6

110.0

(65.2)

–
–
–
–
5.3
–
138.7
0.3
–
(4.7)
–

–
–
–
–

3.9
138.2

136.0

4.4
140.4

(2.2)

–
(2.2)
–
138.2

137.5
2.3

132.8

8.2
141.0

(2.3)

–
(2.3)
138.7

138.0

1.9

–
–
19.0
(18.0)
2.2
–
147.5
–
–
–
–

–
26.7
(4.9)
–

16.8
186.1

253.2

36.2
289.4

(7.8)

(95.5)
(103.3)
–
186.1

264.7
(74.5)

266.0

22.4
288.4

(45.0)

(95.9)
(140.9)
147.5

–
–
1.0
–
6.6
–
287.4
–
–
(14.7)
–

–
–
–
–

(4.0)
268.7

257.2

21.3
278.5

(7.2)

(2.6)
(9.8)
–
268.7

271.7
(0.1)

275.4

23.3
298.7

(8.7)

(2.6)
(11.3)
287.4

2.1
–
3.0
–
0.8
–
101.3
–
–
–
–

0.8
2.0
–
(43.0)

0.6
61.7

72.0

13.4
85.4

(3.1)

(20.6)
(23.7)
–
61.7

72.9
(15.6)

73.5

52.4
125.9

(3.5)

(21.1)
(24.6)
101.3

278.1

(92.3)

290.0

0.7

74.3

(19.4)

–
–
–
–
14.2
–
76.0
–
–
–
–

–
1.1
(5.6)
–

10.6
82.1

160.4

9.3
169.7

(3.1)

(84.5)
(87.6)
–
82.1

163.5
(78.5)

150.7

3.7
154.4

(2.7)

(75.7)
(78.4)
76.0

151.1

(72.6)

Other
£m
123.9
3.1
85.2
(3.2)

1.8
(1.9)
24.8
–
10.9
(2.2)
242.4
2.1
–
(10.5)
29.0

0.8
76.4
(2.3)
–

Total
£m
939.6
21.1
99.5
(24.1)

4.9
(1.9)
66.5
(18.0)
52.2
(2.2)
1,137.6
3.9
0.1
(30.6)
29.0

(0.9)
159.1
(12.8)
(43.0)

13.7
351.6

58.6
1,301.0

409.0

42.9
451.9

1,577.5

135.7
1,713.2

(88.3)

(125.2)

(12.3)
(100.6)
0.3
351.6

(287.3)
(412.5)
0.3
1,301.0

412.3
(67.9)

1,613.2
(300.0)

344.3

58.6
402.9

(15.5)

(145.0)
(160.5)
242.4

1,453.4

175.8
1,629.2

(82.3)

(409.3)
(491.6)
1,137.6

351.1

1,490.8

(122.5)

(368.1)

1.
2.

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

124

Land Securities Annual Report 2013

fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

20. investments in subsidiary undertakinGs

Company

At the beginning of the year

Capital contributions relating to share-based payments (note 35)

At the end of the year

e
S
S
e
n
T
I
a
L
r
e
a
D

2013
£m

2012
£m

6,177.8

6,173.0

2.9

4.8

6,180.7

6,177.8

In accordance with IFRIC 11 ‘IFRS 2 – Group and Treasury Transactions’ the equity settled share-based payment charge for the employees
of the Company’s subsidiaries is treated as an increase in the cost of investment in the subsidiaries, with a corresponding increase in the
Company’s equity.

The Directors consider that to give full particulars of all subsidiary undertakings would lead to a statement of excessive length. The principal
Group undertakings which are consolidated are listed below:

Group operations

Land Securities Properties Limited

Investment property business

Land Securities Intermediate Limited

Land Securities Property Holdings Limited

Ravenseft Properties Limited

LS Cardinal Limited

The City of London Real Property Company Limited

Ravenside Investments Limited

LS Victoria Properties Limited

LS London Holdings One Limited

2013
Holding

2012
Holding

100%

100%
100%

100%

100%
100%

100%

All principal subsidiary undertakings operate in Great Britain and are registered in England and Wales. A full list of subsidiary undertakings
at 31 March 2013 will be appended to the Company’s next annual return.

21. other investments

Group

At the beginning of the year

Acquisitions

Disposals

Revaluation

Transfer arising on business combination

At the end of the year

2013
£m

32.3

–

(1.7)

2.3

(32.9)

2012
£m

1.8

30.5

–

32.3

Land Securities Annual Report 2013

125

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a
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c
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f
I
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a
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c
a
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T
a
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S

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S
o
u
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c
e

fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

22. tradinG properties and lonG-term development contracts

Group

At 1 April 2011

Transfer between categories

Capital expenditure

Capitalised interest

Transfer to investment properties

Disposals

Impairment provision

Contract costs deferred

At 31 March 2012

Acquisitions

Capital expenditure

Capitalised interest

Transfer from investment properties

Disposals

Impairment release

Contract costs deferred

At 31 March 2013

Development
land and
infrastructure
£m

107.6

(39.7)

2.2

0.8

–

(0.9)

(2.0)

–

68.0

7.1

3.1

0.9

–

7.1

–

86.2

Long-term
development
contracts
£m

6.2

–

2.2

8.4

–

1.0

9.4

Other
£m

15.5

39.7

20.6

0.6

(14.8)

(4.9)

–

56.7

–

17.1

0.9

50.0

(67.5)

–

57.2

Total
£m

129.3

–

22.8

1.4

(14.8)

(5.8)

(2.0)

2.2

133.1

7.1

20.2

1.8

50.0

(67.5)

7.1

1.0

152.8

The realisable value of the Group’s trading properties at 31 March 2013 has been based on a valuation carried out at that date by Knight Frank
LLP, external valuers. The cumulative impairment provision at 31 March 2013 in respect of Development land and infrastructure was £103.4m
(31 March 2012: £110.5m); and in respect of Other was £0.3m (31 March 2012: £0.3m).

Group

Long-term development contracts

Income statement:

Contract revenue recognised as revenue in the year

Contract expenditure recognised as costs in the year

Balance sheet:

Contract costs incurred and recognised profits (less recognised losses) to date

Balance at the end of the year

2013
£m

–

0.1

9.4

2012
£m

7.4

(3.8)

3.6

8.4

126

Land Securities Annual Report 2013

fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

23. trade and other receivables

Trade receivables

Less: allowance for doubtful accounts

Net trade receivables

Property sales receivables

Other receivables

Tenant lease incentives

Prepayments and accrued income

Current tax assets

Net investment in finance leases due within one year (note 17)

Amounts due from joint ventures

Loans to Group undertakings

Total current trade and other receivables

Plus: non-current trade and other receivables

Total trade and other receivables

Group

Accounts receivable past due

As at 31 March 2013

Past due but not impaired

Past due and impaired

As at 31 March 2012

Past due but not impaired

Past due and impaired

2013
£m

52.0

Group

2012
£m

34.6

(12.3)

(10.1)

39.7

3.1

10.8

238.0

33.3

–

1.7

18.2

–

344.8

10.6

355.4

24.5

482.1

4.1

204.7

35.9

–

0.5

7.8

–

759.6

–

759.6

Company

2012
£m

2013
£m

–

0.1

–

16.3

10.2

–

5.5

21.8

–

21.8

1- 30 days
past due
£m

Up to 6
months
past due
£m

Up to 12
months
past due
£m

More than
12 months
past due
£m

32.8

0.4

33.2

23.0

–

23.0

5.1

1.8

6.9

1.3

1.7

3.0

1.8

3.4

5.2

0.2

3.0

3.2

–

6.7

–

5.4

–

5.5

15.8

–

15.8

Total
£m

39.7

12.3

52.0

24.5

10.1

34.6

In accordance with IFRS 7, the amounts shown as past due represent the total credit exposure, not the amount actually past due.
Trade receivables are all considered past due as they relate to rents receivable from tenants all of which are payable in advance.

Group

Movement in allowances for doubtful accounts

At 1 April

Net charge to the income statement

Acquired in business combination

Utilised in the year

At 31 March

Group

Movement in tenant lease incentives

At 1 April

Revenue recognised

Capital incentives granted

Provision for doubtful receivables

Disposal of properties

At 31 March

2013
£m

2012
£m

10.1

4.3

1.4

(3.5)

12.3

2013
£m

13.9

0.9

–

(4.7)

10.1

2012
£m

204.7

194.2

19.2

15.8

(1.5)

(0.2)

14.7

2.6

(2.2)

(4.6)

238.0

204.7

Land Securities Annual Report 2013

127

e
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a
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D
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’

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P
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T

g
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n
a
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c
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f
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a
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c
a
L
S
T
a
T
e
m
e
n
T
S

n
v
e
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T
o
r
r
e
S
o
u
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c
e

fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

24. monies held in restricted accounts and deposits

Group
Cash at bank and in hand
Short-term deposits

2013
£m
7.4
23.5
30.9

2012
£m
7.2
22.3
29.5

Monies held in restricted accounts and deposits represent cash held by the Group in accounts with conditions that restrict 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.

The credit quality of monies held in restricted accounts and deposits can be assessed by reference to external credit ratings of the counterparty
where the account or deposit is placed.

Group
Counterparties with external credit ratings
AAA
AA
A+
A
BBB+

25. cash and cash equivalents

Cash at bank and in hand

Short-term deposits

Liquidity funds

2013
£m

–
–
7.4
23.5
–
30.9

2013
£m

0.1

–

0.1

2012
£m

–
–
23.5
4.0
2.0
29.5

Company

2012
£m

0.2

–

0.2

2013
£m

17. 4

24.3

–

41.7

Group

2012
£m

11.5

1.0

17.2

29.7

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 yielded an average return of 0.5% in the year ended 31 March 2013 (2012: an average return of 0.6%).

Short-term deposits
The effective interest rate on short-term deposits was 0.3% at 31 March 2013 (2012: 0.4%) and had an average maturity of 2 days (2012: 2 days).

The credit quality of cash and cash equivalents can be assessed by reference to external credit ratings of the counterparty where the account
or deposit is placed.

Group

Counterparties with external credit ratings

AAA

AA-

A+

A-

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2013
£m

–

19.5

6.1

16.1

–

41.7

2012
£m

17.2

–

1.6

8.7

2.2

29.7

fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

26. trade and other payables

Trade payables

Capital payables

Other payables

Accruals and deferred income

Amounts owed to joint ventures

Loans from Group undertakings

Total current trade and other payables

Non-current trade and other payables

Total trade and other payables

2013
£m

6.6

32.5

29.5

293.4

2.3

–

364.3

17.4

381.7

Group

2012
£m

7.4

48.1

46.9

214.1

44.8

–

361.3

27.7

389.0

2013
£m

–

6.4

13.0

–

589.9

609.3

–

Company

2012
£m

–

7.2

3.0

–

681.3

691.5

–

609.3

691.5

Capital payables represent amounts due under contracts to purchase properties, which were unconditionally exchanged at the year end, and for
work completed on investment properties but not paid for at the year end. Deferred income principally relates to rents received in advance.

27. provisions

Group

At 31 March 2012

Charge to income statement for the year

Utilised in the year

Released to the income statement in the year

Reclassified to accruals

At 31 March 2013

Included in the balance above, the following amounts are anticipated to be utilised within one year:

At 31 March 2012

At 31 March 2013

Provisions relate to costs arising in the ordinary course of business in respect of a number of properties held by the Group.

28. redemption liability

Group

At 1 April 2012

Transfer from non-controlling interests

Transfer from other creditors

Arising on business combination

Acquisition of additional interest

Distributions paid by subsidiary undertakings

Movement in redemption liability

At 31 March 2013

£m

8.6

5.2

(4.0)

(1.3)

(1.5)

7.0

8.3

6.7

£m

–

0.2

0.8

129.7

(16.0)

(0.8)

4.2

118.1

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fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

29. business combination
On 16 January 2013 the Group acquired 322m units in the X-Leisure Unit Trust (X-Leisure) from Capital & Regional Units Limited and
AREA (X-L) Limited, representing a 42% holding. Prior to the acquisition, the Group held 92.5m units in X-Leisure (a 12% holding), which
was recorded within other investments. As a result of this transaction, the Group’s holding in X-Leisure increased to 54%. The acquisition
increases the proportion of leisure assets in the Group’s business in line with the Group’s strategic objectives for the Retail Portfolio.

X-Leisure owns 99.9% of the X-Leisure Limited Partnership, with the remaining 0.1% ownership being with X-Leisure (GP) Limited. On the
same day, the Group acquired 100% of both X-Leisure (GP) Limited and X-Leisure Limited (previously owned 50% by Capital & Regional
Property Management Limited and 50% by AREA (X-L) Management Limited).

The acquisition of additional units in X-Leisure, together with the acquisition of X-Leisure (GP) Limited and X-Leisure Limited resulted in the
Group obtaining control of X-Leisure from 16 January 2013. The transaction has therefore been accounted for as a business combination,
achieved in stages.

The fair value of the consideration paid to acquire the 42% holding was £112.0m, being the cash consideration. The previously held interest has
been measured at fair value at the acquisition date. As a result of this, a gain of £2.3m has been recognised in other comprehensive income and
recycled to the income statement.

The fair value of the assets and liabilities acquired is set out in the table below:

Fair value
£m

545.0

29.0

18.4

25.2

6.0

623.6

(305.8)

(7.1)

(22.0)

(11.7)

(346.6)

277.0

32.9

129.7

112.0

2.4

Assets

Investment property

Investment in joint venture

Finance lease receivable

Cash

Trade and other receivables

Total assets

Liabilities

Borrowings

Trade and other payables

Accruals and deferred income

Derivative financial instruments

Total liabilities

Net assets

Fair value of previously held interest

Redemption liability

Fair value of consideration paid

Gain on acquisition of subsidiary

130

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fInancIaL STaTemenTS

notes to the financial statements

for the year ended 31 march 2013 continued

29. business combination continued
The fair value of the consideration, the redemption liability and the previously held interest are less than the value of the identifiable assets and,
as a result, a gain of £2.4m has been recognised in the income statement on acquisition within net gain on business combination. Also included
within this line are transaction related costs of £3.3m and the gain on the revaluation of the previously held investment of £2.3m. The gain on
bargain purchase of £2.4m reflects the discount achieved on the purchase of the units, together with the impact of the net fair value adjustments
recorded on acquisition.

The fair value of trade and other receivables is £6.0m and includes trade receivables with a fair value of £2.7m. The gross contractual amount
for trade receivables due is £3.9m, of which £1.2m is expected to be uncollectible.

In March 2013, the Group acquired a further 5% holding in X-Leisure for £16.3m, increasing the Group’s total holding to 59%.

Pro forma information
During the year the acquired companies contributed £10.7m to the revenue of the Group and £4.9m to the profit for the year. The pro forma
consolidated results of the Group, as if the acquisitions had been made on 1 April 2012, would show an increase to revenue of £39.2m and an
increase to profit after taxation of £14.7m.

In calculating the pro forma information, the results of the acquired companies for the period before acquisition have been adjusted to reflect
the Group’s accounting policies and the fair value adjustments made on acquisition. The information is provided for illustrative purposes only
and is not necessarily indicative of the results of the combined Group that would have occurred had the purchases actually been made at the
beginning of the year, or indicative of future results of the combined Group.

30. derivative financial instruments

Group

Current liabilities

Non-current liabilities

Total

2013
£m

9.1

10.7

19.8

2012
£m

–

6.5

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 in the statement of other comprehensive income.

There was no ineffectiveness to be recognised from the designated cash flow hedges in either the current or prior year. The deferred asset or
liability assumed is released to the income statement on termination or expiry of the hedge. At the balance sheet date, the notional amount of
outstanding derivative financial instruments was as follows:

Interest-rate swaps

2013
£m

1,016.8

2012
£m

220.0

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131

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FINANCIAL STATEMENTS

Notes to the FiNaNcial statemeNts

for the year ended 31 March 2013 continued

31. BorrowiNgs

Group

Current borrowings

Sterling

5.292 per cent MTN due 2015

5.253 per cent QAG Bond

Syndicated bank debt

Bilateral facilities

Total current borrowings

Non-current borrowings

Sterling

4.875 per cent MTN due 2019

5.425 per cent MTN due 2022

4.875 per cent MTN due 2025

5.391 per cent MTN due 2026

5.391 per cent MTN due 2027

5.376 per cent MTN due 2029

5.396 per cent MTN due 2032

5.125 per cent MTN due 2036

Bond exchange de-recognition adjustment

5.253 per cent QAG Bond

Syndicated bank debt

Bilateral facilities

Secured/
unsecured

Fixed /
floating

Effective
interest
rate
%

Nominal/
notional
value
£m

Fair value
£m

Book value
£m

2013

Secured

Fixed

5.3

122.7

11.8

125.1

14.3

122.7

11.8

Secured

Floating

Secured

Floating

LIBOR+
margin

264.8

35.7

435.0

37.0

441.2

36.9

436.2

Secured

Fixed

5.0

5.5

4.9

5.4

5.1

400.0

255.3

300.0

210.7

608.6

317.6

322.7

500.0

–

458.9

307.1

357.7

254.0

744.0

384.8

392.9

596.5

397.8

254.7

297.7

210.0

606.3

316.1

320.9

498.6

–

(432.8)

2,914.9

3,495.9

2,469.3

Secured

Fixed

5.3

Secured

Floating

Secured

Floating

LIBOR+
margin

317.2

330.0

384.1

330.0

317.2

330.0

170.0

Amounts payable under finance leases (note 33)

Unsecured

Fixed

7.3

28.7

42.0

28.7

Total non-current borrowings

Total borrowings

3,760.8

4,422.0

3,315.2

4,195.8

4,863.2

3,751.4

Medium term notes (MTNs)
The MTNs 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, development properties and the Group’s investment in the Bristol Alliance Limited Partnership, the Westgate Oxford
Alliance Limited Partnership and the Victoria Circle Limited Partnership, valued at £9.3bn at 31 March 2013 (2012: £8.8bn). The Group’s
investment in the Victoria Circle Limited Partnership was charged to the Security Group in the year ended 31 March 2013. 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 (see note 32). 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 MTNs are listed on the Irish Stock Exchange and their fair values are based
on their respective market prices.

Syndicated bank debt
At 31 March 2013 the Group had a £1.085bn authorised credit facility with a maturity of December 2016, which was £330.0m drawn.

This facility is committed and is secured on the assets of the Security Group.

Also included are bank facilities of £293.4m, arising on the acquisition of X-Leisure. Undrawn facilities at 31 March 2013 were £28.6m and the
facilities mature in December 2013 and March 2014.

132

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FINANCIAL STATEMENTS

Notes to the FiNaNcial statemeNts

for the year ended 31 March 2013 continued

31. BorrowiNgs coNtiNued
Bilateral facilities
At 31 March 2012 the Group had a £135.0m facility with a maturity of November 2014, which was undrawn. In March 2013, the borrowing
under this facility was repaid and the facility cancelled in full. At the same time a new facility for the same amount was entered into, which
matures in March 2018. The new facility was £95.0m drawn at 31 March 2013. A further committed bilateral facility of £165.0m, maturing in
May 2014, is available to the Group and was £75.0m drawn at 31 March 2013 (2012: £nil). The bilateral facilities are secured on the assets of the
Security Group.

Also included in bilateral facilities is a £36.9m facility arising on the acquisition of X-Leisure. The facility was fully drawn at 31 March 2013 and
matures in June 2013.

Queen Anne’s Gate 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, (QAG). The QAG Bond is a fully amortising bond with a final maturity in February 2027 and a fixed interest rate of 5.253%
per annum. At 31 March 2013 the bond had an amortised book value of £329.0m (2012: £339.4m).

Fair values
The fair values of any floating rate financial liabilities are assumed to be equal to their nominal value, but adjusted for the effect of exit fees
payable on redemption.

Group

Current borrowings

Sterling

5.253 per cent QAG Bond

Amounts payable under finance leases (note 33)

Total current borrowings

Non-current borrowings

Sterling

5.292 per cent MTN due 2015

4.875 per cent MTN due 2019

5.425 per cent MTN due 2022

4.875 per cent MTN due 2025

5.391 per cent MTN due 2026

5.391 per cent MTN due 2027

5.376 per cent MTN due 2029

5.396 per cent MTN due 2032

5.125 per cent MTN due 2036

Bond exchange de-recognition adjustment

5.253 per cent QAG Bond

Syndicated bank debt

Bilateral facilities

Secured/
unsecured

Fixed/
floating

Effective
interest rate
%

Nominal/
notional
value
£m

Fair value
£m

Book value
£m

2012

Secured

Unsecured

Fixed

Secured

Fixed

5.3

7.8

5.3

5.0

5.5

4.9

5.4

5.1

10.5

0.3

10.8

12.2

0.3

12.5

10.5

0.3

10.8

122.7

400.0

255.3

300.0

210.7

608.8

317.6

322.7

500.0

–

127.8

442.4

290.9

328.4

236.4

689.2

356.9

359.4

537.0

122.7

397.4

254.7

297.5

209.9

606.4

316.1

320.9

498.5

–

(450.9)

3,037.8

3,368.4

2,573.2

Secured

Fixed

5.3

Secured

Floating

Secured

Floating

LIBOR+
margin

329.0

300.0

380.5

300.0

328.9

300.0

–

Amounts payable under finance leases (note 33)

Unsecured

Fixed

7.8

23.0

35.4

23.0

Total non-current borrowings

Total borrowings

3,689.8

4,084.3

3,225.1

3,700.6

4,096.8

3,235.9

Land Securities Annual Report 2013

133

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FINANCIAL STATEMENTS

Notes to the FiNaNcial statemeNts

for the year ended 31 March 2013 continued

31. BorrowiNgs coNtiNued
Reconciliation of the movement in borrowings

Group

At the beginning of the year

Repayment of loans

Acquired in business combination (note 29)

Proceeds from new loans

Amortisation of finance fees

Amortisation of bond exchange de-recognition adjustment

Net movement in finance lease obligations

At the end of the year

2013
£m

2012
£m

3,235.9

3,384.3

(10.9)

(461.0)

305.8

200.8

1.0

18.1

0.7

–

300.0

1.1

16.6

(5.1)

3,751.4

3,235.9

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 MTNs with higher nominal values. The new MTNs did not meet the IAS 39 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 MTNs. The amortisation is charged to net interest
expenses in the income statement.

32. FiNaNcial risk maNagemeNt
Introduction
A review of the Group’s objectives, policies and processes for managing and monitoring risk is set out in the ‘Financial review’ (pages 26 to 31)
and ‘Our principal risks and how we manage them’ (pages 32 to 35). This note provides further detail on financial risk management and
includes quantitative information on specific financial risks.

The Group is exposed to a variety of financial risks: market risks (principally interest-rate risk), credit risk and liquidity risk. The Group’s
overall risk management strategy seeks to minimise the potential adverse effects of these on the Group’s financial performance and includes
the use of derivative financial instruments to hedge certain risk exposures.

Financial risk management is carried out by Group Treasury under policies approved by the Board of Directors.

Capital structure
The capital structure of the Group consists of shareholders’ equity and net borrowings, including cash held on deposit. The type and
maturity of the Group’s borrowings are analysed further in note 31 and the Group’s equity is analysed into its various components in the
Statement of changes in equity. Capital is managed so as to promote the long-term success of the business and to maintain sustainable
returns for shareholders.

The Group’s strategy is to maintain an appropriate net debt to total equity ratio (gearing) and loan-to-value ratio (LTV) to ensure that asset
level performance is translated into enhanced returns for shareholders whilst maintaining an appropriate risk reward balance to accommodate
changing financial and operating market cycles. As the Group came out of the last property downturn, its objective was to see rising asset values
reduce gearing and LTV ratios. The following table details a number of the Group’s key metrics in relation to managing its capital structure:

134

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FINANCIAL STATEMENTS

Notes to the FiNaNcial statemeNts

for the year ended 31 March 2013 continued

32. FiNaNcial risk maNagemeNt coNtiNued

Group
Property portfolio

Market value of investment properties

Trading properties and long-term contracts

Net debt

Borrowings

Cash and cash equivalents

Monies held in restricted accounts and deposits

Fair value of interest-rate swaps

Net debt

Less: Fair value of interest-rate swaps

Reverse bond exchange de-recognition (note 31)

Adjusted net debt

Adjusted total equity

Total equity

Fair value of interest-rate swaps

Reverse bond exchange de-recognition (note 31)

Adjusted total equity

Gearing

Adjusted gearing

Loan to value – Group

Loan to value – Security Group

Weighted average cost of debt

2013

2012

Adjustment
for
non-wholly
owned
subsidiaries1
£m

Group
£m

Joint
ventures
£m

Combined
£m

Group
£m

Joint
ventures
£m

Combined
£m

10,073.2

(240.0)

1,613.2

11,446.4

8,839.8

1,490.8

10,330.6

152.8

–

20.8

173.6

133.1

23.0

156.1

10,226.0

(240.0)

1,634.0

11,620.0

8,972.9

1,513.8

10,486.7

3,751.4

(124.4)

344.6

3,971.6

3,235.9

397.9

3,633.8

(41.7)

(30.9)

19.8

11.4

–

(3.7)

(53.0)

–

8.4

(83.3)

(30.9)

24.5

(29.7)

(29.5)

6.5

(41.4)

(2.7)

14.3

(71.1)

(32.2)

20.8

3,698.6

(116.7)

300.0

3,881.9

3,183.2

368.1

3,551.3

(19.8)

432.8

3.7

–

(8.4)

–

(24.5)

432.8

(6.5)

(14.3)

450.9

–

(20.8)

450.9

4,111.6

(113.0)

291.6

4,290.2

3,627.6

353.8

3,981.4

7,486.7

19.8

(432.8)

7,073.7

49.4%

58.1%

40.2%

37.7%

4.9%

7,486.7

7,155.6

(3.7)

8.4

24.5

6.5

14.3

(432.8)

(450.9)

7,155.6

20.8

(450.9)

(3.7)

8.4

7,078.4

6,711.2

14.3

6,725.5

51.8%

60.6%

36.9%

4.9%

44.5%

54.1%

40.4%

37.6%

5.0%

49.6%

59.2%

38.0%

5.0%

This represents the 40.6% interest in X-Leisure which we do not own but is consolidated in the Group numbers.

The following table summarises the Group’s financial assets and liabilities into the categories required by IFRS 7, ‘Financial Instruments,
Disclosure’:

Group

Available-for-sale financial assets

Loans and receivables

Financial liabilities at amortised cost

Net financial liabilities at fair value through profit and loss

Other

2013
£m

–

2012
£m

32.3

405.4

810.4

(4,133.1)

(3,624.9)

(19.8)

(118.1)

(6.5)

–

(3,865.6)

(2,788.7)

Financial risk factors
(i) Credit risk
The Group’s principal financial assets are cash and cash equivalents, trade and other receivables, finance lease receivables, amounts due from
joint ventures, loans to third parties and commercial property backed loan notes. Further details concerning the credit risk of counterparties
is provided in the note that specifically relates to each type of asset.

Bank and financial institutions
One of the principal credit risks of the Group arises from financial derivative instruments and deposits with banks and financial institutions.
In line with the policy approved by the Board of Directors, where the Group manages the deposit only independently-rated banks and financial
institutions with a minimum rating of A- are accepted. Group Treasury currently performs a weekly review of the credit ratings of all its
financial institution counterparties. Furthermore, Group Treasury ensures that funds deposited with a single financial institution remain
within the Group’s policy limits.

Land Securities Annual Report 2013

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FINANCIAL STATEMENTS

Notes to the FiNaNcial statemeNts

for the year ended 31 March 2013 continued

32. FiNaNcial risk maNagemeNt coNtiNued
Trade receivables
Trade receivables are presented in the balance sheet net of allowances for doubtful receivables. Impairment is made where there is objective
evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables concerned. The balance is
low relative to the scale of the balance sheet and, owing to the long-term nature and diversity of the Group’s tenancy arrangements, the credit
risk of trade receivables is considered to be low. Furthermore, a credit report is obtained from an independent rating agency prior to the
inception of a lease with a new counterparty. This report is used to determine the size of the deposit that is required from the tenant at
inception. In general these deposits represent between three and six months’ rent.

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

Loans to third parties
A loan maturing in 2035 was made to Semperian PPP (formerly Trillium Investment Partners LP) as part of the disposal of the Trillium
business. This loan is not considered a significant credit risk as it is repayable from dividends from investments in government
infrastructure projects.

(ii) Liquidity risk
The Group actively maintains a mixture of notes with final maturities between 2015 and 2036, and medium-term committed bank facilities that
are designed to ensure that the Group has sufficient available funds for its operations and its committed capital expenditure programme.

Management monitors the Group’s available funds as follows:

Group

Cash and cash equivalents

Undrawn committed credit lines

Available funds

As a proportion of drawn debt

March
2013
£m

41.7

913.6

955.3

December
2012
£m

43.1

September
2012
£m

19.3

June
2012
£m

31.5

March
2012
£m

29.7

1,010.0

1,130.0

1,025.0

1,085.0

1,053.1

1,149.3

1,056.5

1,114.7

23.0%

28.1%

31.7%

28.3%

30.3%

The Group’s core financing structure is in the Security Group, although the remaining Non-Restricted Group may also secure independent
funding.

Security Group
The Group’s principal financing arrangements utilise the credit support of a ring-fenced group of assets (the Security Group) that comprises
the majority of the Group’s investment property portfolio. These arrangements operate in ‘tiers’ determined by LTV and Interest cover ratio
(ICR). This structure is most flexible at lower tiers (with a lower LTV and a higher ICR) and allows property acquisitions, disposals and
developments to occur with relative freedom. In higher tiers, the requirements become more prescriptive. No financial covenant default is
triggered until the applicable LTV exceeds 100% or the ICR is less than 1.0x.

As at 31 March 2013, the reported LTV for the Security Group was 37.7% (2012: 37.6%), meaning that the Group was operating in Tier 1
and benefited from maximum operational flexibility.

Management monitors the key covenants attached to the Security Group on a monthly basis, including LTV, ICR, sector and regional
concentration and disposals.

Non-Restricted Group
The Non-Restricted Group obtains funding when required from a combination of inter-company loans from the Security Group, equity
and external bank debt. Bespoke credit facilities are established with banks when required for the Non-Restricted Group projects and joint
ventures, usually on a limited-recourse basis.

136

Land Securities Annual Report 2013

FINANCIAL STATEMENTS

Notes to the FiNaNcial statemeNts

for the year ended 31 March 2013 continued

32. FiNaNcial risk maNagemeNt coNtiNued
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet
date to the expected maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

E
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Borrowings (excluding finance lease liabilities)

Finance lease liabilities

Derivative financial instruments

Trade payables

Capital payables

Redemption liability

Group

Borrowings (excluding finance lease liabilities)

Finance lease liabilities

Derivative financial instruments

Trade payables

Capital payables

Between
1 and 2
years
£m

264.8

2.2

7.9

–

118.1

393.0

Between
2 and 5
years
£m

2013

Over
5 years
£m

981.8

4,429.2

6.7

2.8

–

259.1

–

991.3

4,688.3

Between
1 and 2 years
£m

Between
2 and 5 years
£m

2012

Over
5 years
£m

313.5

3.6

–

862.3

4,623.8

3.5

6.5

–

203.5

–

317.1

872.3

4,827.3

Less than
1 year
£m

625.4

2.2

9.1

6.6

32.5

–

675.8

Less than
1 year
£m

193.2

2.1

–

7.4

48.1

250.8

(iii) Market risk
The Group is exposed to market risk through interest rates and availability of credit.

Interest rates
The Group uses derivative products to manage its interest-rate exposure, and has a hedging policy that generally requires at least 80% of its
existing debt plus increases in debt associated with net committed capital expenditure to be at fixed interest rates for the coming five years.
Due to a combination of factors, principally the high level of certainty required under IAS 39 ‘Financial Instruments: Recognition and
Measurement’, hedging instruments used in this context do not qualify for hedge accounting. Specific interest-rate hedges are also used within
our joint ventures to fix the interest rate exposure on limited-recourse debt. Where specific hedges are used in geared joint ventures to fix the
interest exposure on limited-recourse debt, these may qualify for hedge accounting.

At 31 March 2013, the Group (including joint ventures) had £1.2bn (2012: £0.6bn) of interest rate swaps in place, and its net debt was 90.7%
fixed (2012: 94.8%). Based on the Group’s debt balances at 31 March 2013, a 1% increase in interest rates would increase the net interest payable
in the income statement by £5.0m (2012: £3.0m). The sensitivity has been calculated by applying the interest rate change to the variable rate
borrowings, net of interest-rate swaps and cash and cash equivalents.

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

The Group does not normally enter into any foreign currency transactions as it is UK based. However, where significant committed
expenditure in foreign currencies is identified, it is the Group’s policy to hedge 100% of that exposure by entering into forward purchases
of foreign currency to fix the Sterling value. Therefore the Group’s foreign-exchange risk is low.

The Group had no foreign currency exposure at 31 March 2013 or at 31 March 2012.

Land Securities Annual Report 2013

137

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FINANCIAL STATEMENTS

Notes to the FiNaNcial statemeNts

for the year ended 31 March 2013 continued

32. FiNaNcial risk maNagemeNt coNtiNued
Financial maturity analysis
The interest rate profile of the Group’s undiscounted borrowings, after taking into account the effect of the interest-rate swaps, are
set out below:

Group

Sterling

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

Group

One year or less, or on demand

More than one year but not more than two years

More than two years but not more than five years

More than five years

Fixed
rate
£m

3,395.3

Floating
rate
£m

800.5

2013

Total
£m

Fixed
rate
£m

4,195.8

3,400.6

Floating
rate
£m

300.0

2012

Total
£m

3,700.6

Fixed
rate
£m

134.5

13.2

48.7

Floating
rate
£m

300.5

75.0

425.0

2013

Total
£m

435.0

88.2

473.7

Fixed
rate
£m

10.8

8.7

Floating
rate
£m

–

2012

Total
£m

10.8

8.7

165.7

300.0

465.7

3,198.9

3,395.3

–

3,198.9

800.5

4,195.8

3,215.4

3,400.6

–

3,215.4

300.0

3,700.6

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

Group

One year or less, or on demand

More than one year but not more than two years

More than two years but not more than five years

2013
£m

296.8

220.0

500.0

1,016.8

2012
£m

–

220.0

Valuation hierarchy
Interest-rate swaps, the redemption liability and other investments are the only financial instruments which are carried at fair value. The table
below shows the aggregate assets and liabilities carried at fair value by valuation method:

Group

Assets

Liabilities

Note:
Level 1: valued using unadjusted quoted prices in active markets for identical financial instruments.
Level 2: valued using techniques based on information that can be obtained from observable market data.
Level 3: valued using techniques incorporating information other than observable market data.

Level 1
£m

–

Level 2
£m

–

(137 .9)

Level 3
£m

–

2013

Total
£m

–

(137.9)

Level 1
£m

–

Level 2
£m

32.3

(6.5)

Level 3
£m

–

2012

Total
£m

32.3

(6.5)

138

Land Securities Annual Report 2013

FINANCIAL STATEMENTS

Notes to the FiNaNcial statemeNts

for the year ended 31 March 2013 continued

33. oBligatioNs uNder FiNaNce leases

Group

The minimum lease payments under finance leases fall due as follows:

Not later than one year

Later than one year but not more than five years

More than five years

Future finance charges on finance leases

Present value of finance lease liabilities

The present value of finance lease liabilities fall due as follows:

Not later than one year

Later than one year but not more than five years

More than five years

2013
£m

2.1

8.4

234.2

244.7

2012
£m

2.1

7.1

203.5

212.7

(216.0)

(189.4)

28.7

23.3

–

28.7

0.3

–

23.0

23.3

The fair value of the Group’s lease obligations, using a discount rate of 4.9% (2012: 5.0%), is £42.0m (2012: £35.7m).

34. Net peNsioN surplus/(deFicit)
Defined contribution scheme
A defined contribution scheme was introduced on 1 January 1999 for all new administrative and senior property based employees,
subject to eligibility, together with a separate similar scheme, effective 1 April 1998, for other property based employees.

Pension costs for defined contribution schemes are as follows:

Group

Defined contribution schemes

2013
£m

2.1

2012
£m

2.0

Defined benefit scheme
The Pension & Assurance Scheme of the Land Securities Group of Companies (the Scheme) is a wholly-funded scheme, and the assets of the
Scheme are held in a self-administered trust fund which is separate from the Group’s assets.

Contributions to the Scheme are determined by a qualified independent actuary on the basis of triennial valuations using the projected unit
credit method. As the Scheme is closed to new members, the current service cost is expected to increase as a percentage of salary of the Scheme
members, under the projected unit credit method, as members approach retirement. A full actuarial valuation of the Land Securities Scheme
was undertaken on 30 June 2012 by the independent actuaries, Hymans Robertson Consultants & Actuaries. As a result of this valuation, the
Trustees and the Group have agreed that, in order to address the deficit at that time, a combined employee and employer contribution rate
of 44% of pensionable salary will be paid, together with additional employer contributions of £4m per annum, for a period of six years
commencing on 1 July 2013. Employees currently contribute 5% of this combined contribution rate. This valuation was updated to 31 March
2013 using, where required, assumptions prescribed by IAS 19, ‘Employee Benefits’. The next full actuarial valuation will be performed as at
30 June 2015.

All death-in-service and incapacity benefits arising during employment are wholly insured. No post-retirement benefits other than pensions
are made available to employees of the Group.

The major assumptions used in the valuation, were (in nominal terms):

Group

Rate of increase in pensionable salaries

Rate of increase in pensions in payment

Discount rate

Inflation – Retail Price Index

– Consumer Price Index

Expected return on scheme assets

2013
%

3.50

4.30

3.50

2.70

4.83

2012
%

3.50

4.80

3.50

2.70

5.25

Land Securities Annual Report 2013

139

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FINANCIAL STATEMENTS

Notes to the FiNaNcial statemeNts

for the year ended 31 March 2013 continued

34. Net peNsioN surplus/(deFicit) coNtiNued
The expected return on scheme assets is based on expectations for bonds and equities. At the year end, the expected return on bonds is based
on market yields of long-dated bonds at that date. The expected return on equities includes an additional equity-risk premium.

On 1 April 2013 an amendment to IAS 19 ‘Employee Benefits’ will be adopted by the Group (note 2), at which point the finance income on assets
will be calculated with reference to the discount rate and not the expected rate of return on scheme assets.

The mortality assumptions used in this valuation were:

Group

Life expectancy at age 60 for current pensioners – Men

– Women

Life expectancy at age 60 for future pensioners (current age 40) – Men

– Women

2013
years

30.9

32.2

33.7

34.0

2012
years

30.0

31.7

33.1

34.9

The fair value of the assets in the scheme (including annuities purchased to provide certain pensions in payment) and the expected rate
of return (net of investment management expenses) were:

Group

Equities

Bonds and insurance contracts

Other

Fair value of scheme assets

Present value of scheme liabilities

Net pension surplus/(deficit)

The major categories of scheme assets as a percentage of total scheme assets are as follows:

Group

Equities

Bonds and insurance contracts

2013
%

7.00

4.30

0.50

2012
%

7.50

3.98

0.50

2013
£m

66.4

125.6

0.8

2012
£m

59.6

101.8

1.0

192.8

162.4

(186.9)

(164.8)

5.9

(2.4)

2013
%

2012
%

The scheme assets do not include any directly owned financial instruments issued by the Company. Indirectly owned financial instruments had
a fair value of less than £0.1m (2012: £0.1m).

Group

Analysis of the amounts charged to the income statement

Analysis of the amount charged to operating profit

Current service cost

Charge to operating profit

Analysis of amount credited to interest expense

Expected return on scheme assets

Interest on scheme liabilities

Net credit to interest expense

2013
£m

2012
£m

1.1

(8.6)

7.8

(0.8)

1.0

(9.1)

8.0

(1.1)

The sensitivities regarding the principal assumptions used to measure the scheme liabilities are set out below:

Assumption

Discount rate

Rate of mortality

Change in assumption

Increase/decrease by 0.1%

Increase by 1 year

Impact on scheme liabilities

Decrease/increase by 1.6% or £3m

Increase by 2.7% or £5m

As the above table demonstrates, changes in assumptions can have a significant impact on the scheme liabilities. The assumptions agreed
with the Trustees of the Scheme for the triennial valuation and subsequent interim updates differ from those described by IAS 19, ‘Employee
Benefits’. Using the assumptions agreed with the Trustees would result in a balance sheet deficit for the Scheme of £22.8m at 31 March 2013
as opposed to a surplus of £5.9m.

140

Land Securities Annual Report 2013

FINANCIAL STATEMENTS

Notes to the FiNaNcial statemeNts

for the year ended 31 March 2013 continued

34. Net peNsioN surplus/(deFicit) coNtiNued

Group
Change in the present value of the defined benefit obligation

At the beginning of the year

Current service cost

Interest cost

Actuarial losses

Benefits paid

Contributions by scheme participants

At the end of the year

Group
Changes in the fair value of scheme assets

At the beginning of the year

Expected return on scheme assets

Employer contributions

Actual return less expected return on scheme assets

Benefits paid

Contributions by scheme participants

At the end of the year

Actual return on scheme assets

Group
Analysis of the amounts recognised in other comprehensive income

Analysis of gains and losses

Actual return less expected return on scheme assets

Experience losses arising on scheme liabilities

Actuarial gains/(losses)

Cumulative actuarial losses recognised in other comprehensive income

Actuarial gains and losses are recognised immediately through the Statement of comprehensive income.

2013
£m

164.8

1.1

7.8

18.2

(5.1)

0.1

2012
£m

141.9

1.0

8.0

18.4

(4.7)

0.2

186.9

164.8

2013
£m

162.4

8.6

4.7

22.1

(5.1)

0.1

192.8

30.7

2012
£m

150.6

9.1

4.9

2.3

(4.7)

0.2

162.4

11.4

2013
£m

2012
£m

22.1

(18.2)

3.9

(40.6)

2.3

(18.4)

(16.1)

(44.5)

Group
History of experience gains and losses

Experience adjustments

Scheme assets

Scheme liabilities

Present value of scheme liabilities

Fair value of scheme assets

Surplus/(deficit)

2013
£m

2012
£m

2011
£m

2010
£m

2009
£m

11.5%

9.7%

1.4%

11.2%

0.2%

7.9%

17.8%

27.3%

24.5%

10.6%

(186.9)

(164.8)

(141.9)

(148.1)

(104.1)

192.8

5.9

162.4

(2.4)

150.6

8.7

141.6

(6.5)

107.1

3.0

The employer contributions expected to be paid in respect of the defined benefit schemes during the financial year ending
31 March 2014 amount to £5m.

The Company did not operate any defined contribution schemes or defined benefit schemes during the financial year ended
31 March 2013 or in the previous financial year.

Land Securities Annual Report 2013

141

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FINANCIAL STATEMENTS

Notes to the FiNaNcial statemeNts

for the year ended 31 March 2013 continued

35. share-Based paymeNts
The Group operates a number of share-based payment schemes, all of which are equity settled. The total cost recognised in the income
statement was £2.9m in the year ended 31 March 2013 (2012: £4.8m). The following table analyses the total cost between each of the relevant
schemes, together with number of options outstanding.

Group

Long-term incentive plan

Deferred bonus share scheme

Conditional shares granted 1 January 2010

Executive share option schemes

Savings related share option schemes

2013
Charge
£m

2013
Number
(millions)

Outstanding at 31 March

2012
Charge
£m

2012
Number
(millions)

2.2

0.1

0.4

0.1

2.9

2.4

0.2

–

3.2

0.5

6.3

2.7

1.1

0.2

0.5

0.3

4.8

2.2

0.1

3.5

0.6

6.5

A summary of the main features of each type of scheme is given below. The schemes have been split into two categories: Executive schemes
and other schemes. For further details on Executive schemes, see the Directors’ remuneration report on pages 74 to 91.

Executive schemes:
Long-term incentive plan
The Long-Term Incentive Plan (LTIP) is open to Executive Directors and senior executives, and awards are made at the discretion of the
Remuneration Committee. In addition, an award of Matching Shares can be made where the individual acquires Land Securities Group PLC
shares and pledges to hold them for a period of three years. Awards of LTIP Performance Shares and Matching Shares are subject to the same
performance criteria and vest over three years. Awards may be satisfied by the issue of new shares, the transfer of treasury shares or the transfer
of shares other than treasury shares. The shares will be issued at nil consideration, subject to vesting conditions being met. The weighted
average share price at the date of vesting during the year was 761p (2012: 722p). The estimated fair value of awards granted during the year
under the scheme was £3.7m (2012: £3.2m).

Deferred bonus shares scheme
The Executive Directors’ annual bonus is structured in two distinct parts made up of an initial payment and deferred shares. The shares are
deferred for two or three years and are not subject to additional performance criteria. Awards made under the plan are satisfied by the transfer
of existing shares held by the Employee Share Ownership Trust (ESOT), which are issued at nil consideration. No deferred shares vested
during the year. In the prior year the weighted average share price at the date of vesting was 676p. The estimated fair value of awards granted
during the year under the scheme was £0.4m (2012: £0.4m).

Conditional shares granted 1 January 2010
160,000 shares were granted to R Noel on his appointment on 1 January 2010. The final shares vested on 30 June 2012 leaving no conditional
shares outstanding at 31 March 2013. The share price at the date of vesting during the year was 744p (2012: 837p). The estimated fair value of
the awards on the date of grant was £1.0m.

Other schemes:
Executive share option scheme (ESOS)
The 2005 ESOS is open to executives and management staff not eligible to participate in the LTIP. Awards are discretionary and are granted
in the ordinary shares of the Company at the middle market price on the three dealing days immediately preceding the date of grant. Options
vest over three years and are not subject to performance conditions. Options are satisfied by the transfer of shares from the ESOT. Options
lapse ten years after the date of grant. The weighted average share price at the date of exercise for shares exercised during the year was 698p
(2012: 749p). The estimated fair value of options granted during the year under the scheme was £0.5m (2012: £0.5m).

Savings related share option schemes
Under the Savings Related Share Option Schemes Executive Directors and eligible employees are invited to make regular monthly
contributions into a Sharesave scheme operated by Lloyds Banking Group. On completion of the three, five or seven year contract period,
ordinary shares in the Company may be purchased at a price based upon the current market price at date of invitation less 20% discount.
The weighted average share price at the date of exercise for shares exercised during the year was 800p (2012: 677p). The estimated fair value
of options granted during the year under the scheme was £0.2m (2012: £0.1m).

142

Land Securities Annual Report 2013

FINANCIAL STATEMENTS

Notes to the FiNaNcial statemeNts

for the year ended 31 March 2013 continued

35. share-Based paymeNts coNtiNued
The aggregate number of share awards outstanding for the Group for each type of schemes and their weighted average exercise
price is shown below:

E
S
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A
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Group

Executive schemes*

At the beginning of the year

Granted

Exercised

Forfeited

Lapsed

At the end of the year

Exercisable at the end of the year

Weighted average remaining contractual life

Executive schemes are granted at nil consideration.

Number of awards

Number of options

2013
Number
(millions)

2012
Number
(millions)

2013
Number
(millions)

2012
Number
(millions)

2.4

1.1

(0.7)

(0.2)

–

2.6

–

Years

1.4

2.7

0.8

(0.5)

(0.6)

–

2.4

–

Years

1.2

4.1

0.9

(1.0)

(0.2)

(0.1)

3.7

1.2

4.7

0.7

(0.1)

(0.9)

(0.3)

4.1

1.0

The number of share awards outstanding for the Group by range of exercise prices is shown below:

Other schemes

Weighted average
exercise price

2013
Pence

702

732

467

805

827

764

934

Years

6.1

2012
Pence

780

800

633

1,133

885

702

1,117

Years

6.1

Group

Exercise price – range
Pence

Nil*

200 – 399

400 – 599

600 – 799

800 – 999

1,000 – 1,199

1,200 – 1,399

1,400 – 1,599

Outstanding at 31 March 2013

Outstanding at 31 March 2012

Weighted
average
exercise
price
Pence

Number of
awards
Number
(millions)

Weighted
average
remaining
contractual
life
Years

–

388

527

736

828

1,071

1,282

1,563

2.6

0.2

1.4

0.7

0.6

0.5

0.1

0.2

1.4

1.9

6.2

7.8

8.3

3.4

2.3

3.9

Weighted
average
exercise
price
Pence

–

388

520

684

828

1,071

1,287

1,565

Weighted
average
remaining
contractual
life
Years

Number of
awards
Number
(millions)

2.4

0.5

1.8

0.3

0.6

0.1

0.2

1.2

1.6

7.5

1.7

9.2

4.4

3.1

4.9

Executive schemes are granted at nil consideration.

Fair-value inputs for awards with non-market performance conditions
Fair values are calculated using the Black-Scholes option pricing model for awards with non-market performance conditions.
Inputs into this model for each scheme are as follows:

Group

Long-Term Incentive
Plan (awards issued
before 31 March 2009)

Deferred Bonus Shares

Conditional shares
granted 1 January 2010

2002 Executive Share
Option Scheme

2005 Executive Share
Option Scheme

Savings Related Share
Option Scheme

Range of share prices at grant date

485p to 861p

584p to 828p

661p

788p to 1,159p

469p to 1,737p

485p to 1,903p

Range of exercise prices

Expected volatility

Expected life

Risk-free rate

nil p

20% to 22%

nil p

22%

788p to 1,159p

469p to 1,737p

388p to 1,523p

19%

19% to 22%

3 years

2 to 3 years

2.5 years

3 to 5 years

2.3 to 5 years

3 to 7 years

0.35% to 2.25% 0.28% to 1.82%

1.32% 3.60% to 5.10% 0.35% to 5.67% 0.35% to 5.53%

Expected dividend yield

3.35% to 5.98%

nil to 4.79%

4.38% 4.23% to 4.34% 2.97% to 6.53% 3.02% to 5.98%

Expected volatility was determined by calculating the historic volatility of the Group’s share price over the previous ten years. The expected
life used in the model has been determined based upon management’s best estimate for the effects of non-transferability, vesting/exercise
restrictions and behavioural considerations. Risk-free rate is the yield at the date of the grant of an award on a gilt-edged stock with a
redemption date equal to the anticipated vesting of that award.

Land Securities Annual Report 2013

143

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C
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FINANCIAL STATEMENTS

Notes to the FiNaNcial statemeNts

for the year ended 31 March 2013 continued

35. share-Based paymeNts coNtiNued
Fair-value inputs for awards with market performance conditions
Fair values are calculated using the Monte-Carlo simulation option pricing model for awards with market performance conditions. Awards
made under the 2005 Long-Term Incentive Plan which were granted after 31 March 2009 include a Total Shareholder Return (TSR) condition,
which is a market based condition. The inputs into this model for the scheme are as follows:

Group

2005 Long-Term Incentive Plan (awards issued after 31 March 2009)

Range of share prices
at date of grant

485p – 861p

Range of
exercise
prices

nil p

Expected volatility
– Group

Expected volatility
– index of
comparator
companies

Correlation
– Group vs.
index

20% – 22%

20% – 25%

85%

36. ordiNary share capital

Group and Company

Ordinary shares of 10p each

Allotted and fully paid

2013
£m

79.2

2012
£m

78.5

Following a change to the Company’s Articles of Association, the issued share capital of the Company now consists of ordinary shares of 10p
nominal value each. References to the Non-equity B shares and the Redeemable preference shares, previously issued by the Company but no
longer in issue, have been removed.

At the beginning of the year

Issued on the exercise of options

Issued in lieu of cash dividends

At the end of the year

Number of shares

2013

2012

785,141,158

775,872,954

330,649

114,026

6,599,128

9,154,178

792,070,935

785,141,158

The number of options over ordinary shares that were outstanding at 31 March 2013 was 3,742,923 (2012: 4,150,147). If all the options were
exercised at that date then 801,761 new ordinary shares (2012: 1,068,275 new ordinary shares) would be issued and 2,941,162 shares would
be required (2012: 3,081,872 shares transferred) from the ESOT.

Shareholders at the Annual General Meeting have previously authorised the acquisition of shares by the Company representing up to 10%
of its share capital, to be held as treasury shares. During the year ended 31 March 2013, 4,599,131 ordinary shares (2012: nil ordinary shares)
were acquired to be held as treasury shares. This was done when new shares were issued to satisfy the scrip dividend, and the share price was
materially below our adjusted net asset value per share. This was done in order to minimise the dilutive impact of the scrip dividend on net
assets per share. At 31 March 2013 the Group held 10,495,131 ordinary shares (2012: 5,896,000 ordinary shares) with a market value of £87.0m
(2012: £42.6m) in treasury.

37. owN shares

Group

Cost at the beginning of the year

Acquisition of ordinary shares

Transfer of shares to employees on exercise of share options

Cost at the end of the year

2013
£m

17.8

0.5

(10.6)

7.7

2012
£m

3.6

18.5

(4.3)

17.8

Own shares consist of shares in Land Securities Group PLC held by the Employee Share Ownership Trust (ESOT) in respect of the Group’s
commitment to a number of its employee share option schemes (note 35).

The number of shares held by the ESOT at 31 March 2013 was 1,031,237 (2012: 2,355,235). The market value of these shares at 31 March 2013
was £8.5m (2012: £17.0m).

38. coNtiNgeNcies
The Group has contingent liabilities in respect of legal claims, guarantees, and warranties arising in the ordinary course of business.
It is not anticipated that any material liabilities will arise from the contingent liabilities.

144

Land Securities Annual Report 2013

FINANCIAL STATEMENTS

Notes to the FiNaNcial statemeNts

for the year ended 31 March 2013 continued

39. cash Flow From operatiNg activities

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

Cash generated from operations

Operating profit/(loss)

Adjustments for:

Depreciation

Loss/(profit) on disposal of investment properties

Profit on disposal of trading properties

Profit on disposal of other investments

Net valuation surplus on investment properties

Impairment (release)/charge on trading properties

Share-based payment charge

Defined benefit pension scheme charge

Changes in working capital:

Increase in long-term development contracts

(Increase)/decrease in receivables

(Decrease)/increase in payables and provisions

Net cash generated from operations

2013
£m

Group

2012
£m

Company

2012
£m

2013
£m

648.2

645.1

328.0

(11.9)

2.6

3.1

(37.4)

(1.6)

4.6

(45.4)

(2.2)

–

(196.7)

(169.8)

(7.1)

2.9

1.1

2.0

4.8

1.0

–

415.1

440.1

328.0

(11.9)

(1.0)

(48.0)

(21.1)

(2.2)

5.5

–

(44.3)

(328.0)

345.0

399.1

–

11.9

–

40. related party traNsactioNs
Subsidiaries
During the year, the Company entered into transactions, in the normal course of business, with other related parties as follows:

Company

Transactions with subsidiary undertakings:

Recharge of costs

Dividends received

Interest paid

2013
£m

2012
£m

(212.9)

(161.3)

350.0

(45.7)

–

(27.4)

At 31 March 2013, the Company had a net outstanding balance of £584.4m (2012: £675.8m) due to subsidiary undertakings.

Land Securities Annual Report 2013

145

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FINANCIAL STATEMENTS

Notes to the FiNaNcial statemeNts

for the year ended 31 March 2013 continued

40. related party traNsactioNs coNtiNued
Joint ventures
As disclosed in note 19, 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:

Group

20 Fenchurch Street Limited Partnership

Metro Shopping Fund Limited Partnership

Buchanan Partnership

St. David’s Limited Partnership

Bristol Alliance Limited Partnership

The Harvest Limited Partnership

The Oriana Limited Partnership

The Scottish Retail Property Limited Partnership

Westgate Oxford Alliance Limited Partnership

The Martineau Galleries Limited Partnership

The Ebbsfleet Limited Partnership

Millshaw Property Co. Limited

Countryside Land Securities (Springhead) Limited

Victoria Circle Limited Partnership

The Empress State Limited Partnership

The Martineau Limited Partnership

Fen Farm Developments Limited

West India Quay Unit Trust

Year ended and as at 31 March 2013

Year ended and as at 31 March 2012

Net
investments
into joint
ventures
£m

Amounts
owed by
joint
ventures
£m

Revenues
£m

5.7

0.1

4.4

1.4

1.1

1.2

0.1

2.3

0.9

0.2

–

(0.8)

0.1

8.1

–

24.8

52.9

0.8

(4.4)

21.8

(14.7)

(41.0)

(4.5)

57.5

(0.2)

(0.7)

–

(1.7)

11.5

–

(0.2)

–

(0.5)

76.6

6.0

0.7

0.8

0.3

0.2

0.6

0.1

0.5

0.6

0.1

–

1.2

7.1

–

18.2

Amounts
owed to
joint
ventures
£m

(0.1)

–

(0.5)

(0.1)

–

(11.2)

–

(1.6)

(13.5)

Net
investments
into joint
ventures
£m

Amounts
owed by
joint
ventures
£m

Amounts
owed to
joint
ventures
£m

Revenues
£m

2.7

2.4

4.3

1.6

1.0

1.5

0.1

0.4

0.7

0.2

–

0.1

0.7

–

0.1

–

15.8

18.7

16.2

(2.5)

1.1

(16.0)

3.3

14.2

1.9

(1.2)

(0.6)

–

0.3

102.0

5.4

–

1.5

0.6

0.5

0.4

0.2

0.8

0.4

0.2

–

1.1

0.7

–

(42.9)

(0.1)

–

(10.4)

–

(1.8)

–

142.8

7.8

(55.2)

Further detail of the above transactions and balances can be seen in note 19.

Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of the
applicable categories specified in IAS 24 ‘Related Party Disclosures’. Further information about the remuneration of individual Directors
is provided in the audited part of the Directors’ remuneration report on pages 74 to 91.

Group

Short-term employee benefits

Post-employment benefits

Share-based payments

2013
£m

4.3

–

1.6

5.9

2012
£m

6.9

0.1

1.9

8.9

41. operatiNg lease arraNgemeNts
The Group earns rental income by leasing its investment and operating properties to tenants under non-cancellable operating leases.

At the balance sheet date, the Group had contracted with tenants to receive the following future minimum lease payments:

Group

Not later than one year

Later than one year but not more than five years

More than five years

The total of contingent rents recognised as income during the year was £39.5m (2012: £40.5m).

146

Land Securities Annual Report 2013

2013
£m

486.5

2012
£m

494.6

1,918.9

1,328.4

3,371.1

3,140.7

5,776.5

4,963.7

InveSTor reSoUrce

investor resource

Business analysis
A closer look at some of our key
performance areas.

p 148

Five year summary
The Group’s financial performance
since 2009.

p 156

For investors
Useful dates and contact details
for shareholders.

p 162

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directors’ report
22 Chairman’s message
24 Chief Executive’s statement
26 Financial review
32 Our principal risks and
how we manage them

36 Retail Portfolio review of the year
42 London Portfolio review of the year
48 Corporate Responsibility Report

Governance
58 Board of Directors
60 Corporate Governance Report
64 Nominations Committee Report
68 Audit Committee Report
74 Directors’ Remuneration Report
92 Report of the Directors

Contact details

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Land Securities Annual Report 2013

147

InveSTor reSoUrce

business analysis

% portFolio by value and number oF
property holdinGs at 31 march 2013

table 74

development – estimated Future spend (£m)

chart 75

£m

0 – 9.99

10 – 24.99

25 – 49.99

50 – 99.99

100 – 149.99

150 – 199.99

200 +

Total

Value
%

Number of
properties

7
8
2

2.0

4.5

6.9

17.0

13.2

10.2

46.2

100.0

170

1
5
2

6
9
1

1
3
1

8
1
1

4
0
1

3
1

2013

3
4

2014

Development programme
Proposed developments

2015

2016

0
1

2017

Estimated future spend includes the cost
of residential space but excludes interest

Floor space (million m2)

chart 78

contracted rental income breakdown
by tenant business sector

chart 79

London Portfolio

retail Portfolio

0.75

1.63

financial services

Services

retail trade

Public administration

manufacturing

Transport/comms

Wholesale trade

other

10.7%

29.1%

36.2%

6.1%

2.6%

4.6%

3.3%

7.4%

148

Land Securities Annual Report 2013

yield – like-for-like portfoliotable 7631 March 201331 March 2012Net initial yield %Topped-up net initial yield%Equivalent yield%Net initial yield %Equivalent yield%Shopping centres and shops6.46.56.36.06.4Retail warehouses and food stores5.55.75.95.05.6Leisure and hotels6.76.76.76.86.8Central London shops4.24.35.34.15.5London offices5.15.65.55.15.6Total portfolio5.55.85.85.35.9Combined portfolio value by loCation at 31 marCh 2013table 77Shopping centres and shops%Retail warehouses%Offices%Hotel, leisure, residential and other %Total%Central, inner and outer London12.30.342.63.959.1South East and Eastern4.44.5–2.211.1Midlands–1.3–0.92.2Wales and South West7.10.6–0.27.9North, North West, Yorkshire and Humberside8.22.40.12.012.7Scotland and Northern Ireland5.41.2–0.47.0Total37.410.342.79.6100.0% figures calculated by reference to the combined portfolio value of £11.45bn.
InveSTor reSoUrce

business analysis

top 12 occupiers

table 80

property income distribution (pid)

chart 81

Central Government (including Queen Anne’s Gate,SW1)2
Accor
Royal Bank of Scotland
Deloitte
Arcadia Group
Sainsbury’s
Bank of New York Mellon
Primark
Boots
Next
Taylor Wessing
Dixons Retail

1. On a proportionate basis.
2. Rent from Central Government excluding Queen Anne’s Gate, SW1 is 0.1%.

% of Group rent1
5.2
5.1
2.7
2.7
2.3
1.9
1.5
1.5
1.5
1.4
1.4
1.3
28.5

Who can claim exemption from deduction of withholding tax on
Property Income Distributions?1
– UK companies
– Charities
– Local authorities
– UK pension schemes
– Managers of PEPs, ISAs and Child Trust Funds

Who is unlikely to be able to claim exemption from deduction of
withholding tax on Property Income Distributions?
– Overseas shareholders2
– Individual private shareholders

1.
See investor information on pages 162-163 for how eligible shareholders can claim exemption.
2. May be able to reclaim some or all of the withholding tax under relevant double taxation treaty.

calculation oF required property
income distribution (pid)

voids and units in administration
like-For-like portFolio (%)

chart 82

voids

administration

Profit before tax per accounts

4.1

3.6

3.7

Adjustment to exclude

table 83

Year ended
31 March
2013
£m
533.0

Year ended
31 March
2012
£m
515.7

(217.5)
1.6
(38.0)
(0.1)
(3.1)
(32.5)
(3.2)
(1.4)
(3.8)
4.5
(1.6)
(0.3)
237.6

(48.0)
(25.7)
28.0
191.9

172.7
178.4

(190.9)
(46.4)
(5.2)
(3.6)
2.1
(26.2)
5.4
–
–
–
–
2.9
253.8

(42.3)
(14.9)
19.2
215.8

194.2
154.8

Net surplus on revaluation of investment properties
Loss/(Profit) on disposal of investment properties
Profit on disposal of trading properties
Profit on long-term development contracts
Trading property impairment (release)/charge
Interest income
Fair value movement on interest rate swaps
Net gain on business combination
Adjustment for proportionate share of results
Fair value movement on redemption liability
Profit on disposal of other investments
Joint venture accounting adjustments

1.3

l
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p
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Tax adjustments

Capital allowances
Capitalised interest
Other

Estimated tax exempt income for year

PID thereon (90%)
PID dividends paid in the year

The table provides a reconciliation of the Company’s profit before tax to its estimated tax exempt income, 90% of which
the Company is required to distribute as a PID to comply with REIT regulations. The Company has 12 months after the
year end to make the minimum distribution. Accordingly PID dividends paid in the year may relate to the distribution
requirement of the previous period.

2.5

1.1

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2.8

2.2

2.3

2.0

1.7

1.2

1.1

0.8

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0.1

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0.0

s
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s
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31 march 2013
Properties held for development

31 march 2012
Properties held for development

analysis oF perFormance relative to ipd (%)

chart 84

4.4

3.1

2.3

2.0

-0.6

0.8

0.1

0.0

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m
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attribution analysis, ungeared total return, 12 months to 31 march 2013, relative to IPD Quarterly
Universe (Source: IPD).

Land Securities Annual Report 2013

149

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InveSTor reSoUrce

business analysis

epra perFormance measures

Definition for EpRA measure

Notes

Adjusted earnings

Recurring earnings from core operational activity

Adjusted earnings per share

Adjusted diluted earnings per weighted number of
ordinary shares

Adjusted net assets

Net asset value adjusted to exclude fair value movements on
interest-rate swaps

Adjusted net assets per share Adjusted diluted net assets per share

Triple net assets

Adjusted net assets amended to include the fair value of
financial instruments and debt

Triple net assets per share

Diluted triple net assets per share

Net Initial Yield (NIY)

Annualised rental income less non-recoverable costs as a %
of market value plus assumed purchasers’ costs3

Topped-up NIY

Voids/vacancy rate

NIY adjusted for rent-free periods3

ERV of vacant space as a % of ERV of combined portfolio
excluding the development programme4

Refer to notes 12 and 13 and table 90 for further analysis.

Land Securities
measure

£288.2m

31 March 2013

EpRA
measure
£270.2m1

Land Securities
measure

£298.3m

table 85

31 March 2012

EPRA
measure
£290.5m1

36.8p

34.5p1

38.5p

37.4p1

£7,078.4m

£7,511.22

£6,725.3m

£7,176.2m2

903p

958p2

863p

921p2

£6,374.9m

£6,294.5m

813p

808p

4.7%

5.3%

5.5%

5.8%

2.0%

2.3%

4.8%

5.2%

2.8%

5.4%

5.7%

3.6%

EPRA adjusted earnings and EPRA adjusted earnings per share include the effect of bond exchange de-recognition charges of £18.1m (2012: £16.6m), profit on long-term development contracts of £0.1m (2012: £3.6m) and in 2012
non-revenue profit debt restructuring charges of £2.8m and non-revenue tax adjustments of £8.0m.
EPRA adjusted net assets and adjusted diluted net assets per share include the bond exchange de-recognition adjustment of £432.8m (2012: £450.9m).

2.
3. Our NIY and Topped-up NIY relate to the combined portfolio and are calculated by our external valuers. EPRA NIY and EPRA Topped-up NIY calculations are consistent with ours, but exclude the development programme.
4. Our measure reflects voids in our like-for-like portfolio only. The EPRA measure reflects voids in the combined portfolio excluding only the development programme.

reconciliation oF net book value oF the investment properties to the market value

As at 31 March 2013

table 86

As at 31 March 2012

Net book value

Plus: tenant lease incentives

Less: head leases capitalised

Plus: properties treated as finance leases

Market value

This represents the interest in X-Leisure which we do not own, but is consolidated in the Group numbers.

like-For-like reversionary potential

Reversionary potential

Gross reversions

Over-rented

Net reversionary potential

Group
(excl. joint
ventures)
£m

9,651.9

238.0

(28.7)

212.0

10,073.2

Adjustment
for pro-
portionate
share1
£m

Joint
ventures
£m

Total
£m

Group
(excl. joint
ventures)
£m

Joint
ventures
£m

Total
£m

(233.2)

1,577.5

10,996.2

8,453.2

1,453.4

9,906.6

(0.2)

1.9

(8.5)
(240.0)

35.5

(4.6)

4.8

273.3

(31.4)

208.3

204.7

(23.3)

205.2

33.8

(4.5)

8.1

238.5

(27.8)

213.3

1,613.2

11,446.4

8,839.8

1,490.8

10,330.6

table 87

31 March
2013
% of rent

31 March
2012
% of rent

8.4

(7.0)

1.4

8.4

(5.5)

2.9

The reversion is calculated with reference to the gross secure rent roll after the expiry of rent-free periods on those properties which fall under the
like-for-like definition as set out in the notes to the combined portfolio analysis. Reversionary potential excludes additional income from the letting
of voids and the expiry of rent-free periods.

one year perFormance relative to ipd unGeared total returns – year to 31 march 2013

table 88

Retail – Shopping centres

– Retail warehouses

Central London shops

Central London offices

Total portfolio4

IPD Quarterly Universe.

Including supermarkets.

Including inner London offices.

Including leisure and hotel portfolio and other.

150

Land Securities Annual Report 2013

Land
Securities
%

5.4

1.12

12.5

10.23

7.8

IpD1
%

2.4

0.5

15.1

9.6

3.2

InveSTor reSoUrce

business analysis

top 10 property holdinGs

Total value £4.32bn
(38% of combined portfolio)

Name

Cardinal Place, SW1

New Street Square, EC4

One New Change, EC4

Queen Anne’s Gate, SW1

Trinity Leeds

Gunwharf Quays, Portsmouth

Piccadilly Lights, W1

White Rose Centre, Leeds

table 89

Weighted
average
unexpired
lease term
yrs

5.8

Annualised
net rent1
£m

34.7

Let by
income
%

32.3

100

10.5

17.9

100

9.8

Ownership
interest
%

100 Retail

Office

Other

100 Retail

Office

100 Retail

Office

Other

Floor
area
m2

9,300

51,500

500

2,100

62,300

20,200

32,000

2,300

Principal occupiers

Microsoft

Wellington

M&S

Deloitte

Taylor Wessing

K&L Gates

CME

H&M

Topshop

Central Government

100 Office

32,900

28.7

100

13.6

H&M

Topshop

Primark

River Island

Vue Cinema

M&S

Nike

Gap

Ted Baker

Hyundai

Barclays

Boots

Sainsbury’s

Debenhams

M&S

Primark

H&M

100 Retail

Other

63,000

12,900

9.9

12.5

100 Retail

Office

Other

100 Retail

Office

Other

31,300

2,800

24,300

6,400

2,400

1,300

22.5

100

7.6

12.9

3.3

100 Retail

65,000

20.7

7.9

Bankside 2&3, SE1

Royal Bank of Scotland

100 Retail

Office

Other

16.3

100

14.2

3,200

35,200

270

Cabot Circus, Bristol

1. Group share.

House of Fraser

Harvey Nichols

H&M

Topshop

50 Retail

114,200

18.7

8.5

Other

8,800

Land Securities Annual Report 2013

151

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InveSTor reSoUrce

combined portFolio analysis

152

Land Securities Annual Report 2013

Like-for-Like segmentaL anaLysisMarket value1Valuation movement2Rental income3Annualised rental income4Annualised net rent5Net estimated rental value631 March 2013 £m31 March 2012 £mSurplus/ (deficit) £mSurplus/ (deficit) %31 March 2013 £m31 March 2012 £m31 March 2013 £m31 March 2013 £m31 March 2012 £m31 March 2013 £m31 March 2012 £mRetail PortfolioShopping centres and shops2,384.42,450.6(78.5)(3.2%)182.4185.4183.6174.9172.0169.0178.5Retail warehouses and food stores1,093.41,152.3(70.6)(6.1%)67.564.968.467.565.070.070.4Leisure and hotels450.8447.63.20.7%32.030.831.831.830.931.831.7Other31.638.6(5.5)(14.9%)4.44.13.73.64.24.24.8Total Retail Portfolio3,960.24,089.1(151.4)(3.7%)286.3285.2287.5277.8272.1275.0285.4London PortfolioWest End1,492.01,469.518.91.3%88.284.687.684.384.377.877.1City507.6483.518.73.9%26.625.724.523.623.831.630.9Mid-town885.8848.937.75.3%41.537.943.441.240.148.748.2Inner London770.6769.01.30.2%49.052.547.545.745.747.346.7Total London offices3,656.03,570.976.62.4%205.3200.7203.0194.8193.9205.4202.9Central London shops842.4771.464.78.4%38.734.339.238.935.050.050.1Other68.861.53.14.9%2.02.12.02.02.02.12.1Total London Portfolio4,567.24,403.8144.43.5%246.0237.1244.2235.7230.9257.5255.1Like-for-like portfolio108,527.48,492.9(7.0)(0.1%)532.3522.3531.7513.5503.0532.5540.5Proposed developments3123.6106.84.43.7%2.33.5––3.2–3.7Completed developments3759.3726.422.93.3%36.632.434.432.028.842.342.2Acquisitions11593.130.2(12.9)(2.2%)13.61.439.036.91.941.61.8Sales and restructured interests12–54.0––4.039.2––3.1–3.2Development programme131,443.0920.3204.116.8%15.723.132.813.714.2129.2101.1Combined portfolio11,446.410,330.6211.52.0%604.5621.9637.9596.1554.2745.6692.5Surplus on investment property reclassified as trading6.013.3%Properties treated as finance leases (11.5)(8.7)Combined portfolio 217.52.0%593.0613.2 totaL portfoLio anaLysis Retail PortfolioShopping centres and shops3,161.33,014.7(11.8)(0.4%)207.3218.6222.4199.7193.7220.6229.8Retail warehouses and food stores1,183.01,230.1(59.4)(4.8%)69.269.869.968.867.978.174.2Leisure and hotels 968.8467.8(2.1)(0.2%)44.231.769.867.832.269.232.9Other34.938.6(6.4)(15.5%)4.64.43.73.64.14.34.7Total Retail Portfolio5,348.04,751.2(79.7)(1.5%)325.3324.5365.8339.9297.9372.2341.6London PortfolioWest End2,065.01,819.9117.96.2%92.4104.892.584.586.6137.0111.9City1,115.5981.954.75.4%41.141.937.933.431.470.770.1Mid-town917.1875.336.14.8%44.843.443.441.243.348.751.6Inner London770.6769.01.30.2%49.152.547.545.745.747.346.7Total London offices4,868.24,446.1210.04.9%227.4242.6221.3204.8207.0303.7280.3Central London shops1,110.81,007.273.27.1%48.648.148.849.446.467.266.5Other119.4126.18.07.4%3.26.72.02.02.92.54.1Total London Portfolio6,098.45,579.4291.25.4%279.2297.4272.1256.2256.3373.4350.9Combined portfolio11,446.410,330.6211.52.0%604.5621.9637.9596.1554.2745.6692.5Surplus on investment property reclassified as trading6.013.3% Properties treated as finance leases (11.5)(8.7)Combined portfolio217.52.0%593.0613.2Represented by:Investment portfolio9,845.08,839.8197.02.1%520.6543.7557.6515.1472.5622.8582.8Share of joint ventures1,601.41,490.820.51.3%83.978.280.381.081.7122.8109.7Combined portfolio11,446.410,330.6217.52.0%604.5621.9637.9596.1554.2745.6692.5InveSTor reSoUrce

combined portFolio analysis

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Notes:
1.

The market value figures, on a proportionate basis, are determined by the
Group’s external valuers.

2. The valuation movement is stated after adjusting for the effect of SIC 15

under IFRS.

3. Refer to glossary for definition.
4. Annualised rental income is annual ‘rental income’ (as defined in the glossary)
at the balance sheet date, except that car park and commercialisation income
are included on a net basis (after deduction for operational outgoings).
Annualised rental income includes temporary lettings.

5. Annualised net rent is annual cash rent, after the deduction of ground rents,
as at the balance sheet date. It is calculated with the same methodology as
annualised rental income but is stated net of ground rent and before
SIC 15 adjustments.

6. Net estimated rental value is gross estimated rental value, as defined in the

glossary, after deducting expected ground rents.

7. Gross estimated rental value (ERV) – refer to glossary for definition. The figure
for proposed developments relates to the existing buildings and not the
schemes proposed.

8. Net initial yield – refer to glossary for definition. This calculation includes all

properties including those sites with no income.

Equivalent yield – refer to glossary for definition. Proposed developments are
excluded from the calculation of equivalent yield on the combined portfolio.

10. The like-for-like portfolio – refer to glossary for definition. Capital expenditure
on refurbishments, acquisitions of head leases and similar capital expenditure
has been allocated to the like-for-like portfolio in preparing this table.
Includes all properties acquired since 1 April 2011.
Includes all properties sold since 1 April 2011.

11.
12.
13. The development programme – refer to glossary for definition. Net initial yield
figures are only calculated for properties in the development programme that
have reached practical completion.

Land Securities Annual Report 2013

153

Like-for-Like segmentaL anaLysistabLe 90Gross estimated rental value7Net initial yield8Equivalent yield9Voids (by ERV)331 March 2013 £m31 March 2012 £m31 March 2013 %31 March 2012 %31 March 2013 %31 March 2012 %31 March 2013 %31 March 2012 %Retail PortfolioShopping centres and shops179.5189.06.4%6.0%6.3%6.4%3.6%4.1%Retail warehouses and food stores70.670.95.5%5.0%5.9%5.6%1.1%1.7%Leisure and hotels31.831.76.7%6.8%6.7%6.8%––Other4.34.97.5%9.1%10.1%10.0%25.6%16.3%Total Retail Portfolio286.2296.56.2%5.8%6.3%6.2%2.9%3.3%London PortfolioWest End77.877.15.2%5.4%5.5%5.5%1.7%2.3%City31.831.34.7%4.3%5.5%5.6%0.3%3.2%Mid-town49.849.24.4%4.5%5.1%5.3%0.8%4.3%Inner London48.247.55.7%5.6%5.9%5.8%0.8%0.6%Total London offices207.6205.15.1%5.1%5.5%5.6%1.1%2.5%Central London shops50.350.44.2%4.1%5.3%5.5%0.8%1.2%Other 2.12.12.5%2.7%2.6%2.9%–4.8%Total London Portfolio260.0257.64.9%4.9%5.4%5.5%1.0%2.3%Like-for-like portfolio10546.2554.15.5%5.3%5.8%5.9%2.0%2.8%Proposed developments3–3.80.0%2.9%n/an/an/an/aCompleted developments343.743.33.8%3.2%5.2%5.3%n/an/aAcquisitions1141.92.05.8%5.8%6.7%n/an/an/aSales and restructured interests12–3.94.7%4.8%n/an/an/an/aDevelopment programme13129.3101.20.7%0.9%5.3%5.3%n/an/aCombined portfolio761.1708.34.7%4.8%5.7%n/an/an/atotaL portfoLio anaLysisRetail PortfolioShopping centres and shops232.4241.45.4%5.4%Retail warehouses and food stores78.774.55.2%4.9%Leisure and hotels69.332.96.4%6.8%Other4.54.76.8%9.1%Total Retail Portfolio384.9353.55.6%5.4%London PortfolioWest End137.0112.23.8%4.4%City71.070.83.0%2.9%Mid-town49.853.34.3%4.8%Inner London48.247.55.7%5.6%Total London offices306.0283.84.0%4.3%Central London shops67.766.94.0%4.0%Other 2.54.11.4%1.3%Total London Portfolio376.2354.83.9%4.2%Combined portfolio761.1708.34.7%4.8%Represented by:Investment portfolio636.2597.04.7%4.8%Share of joint ventures124.9111.34.8%4.5%Combined portfolio761.1708.34.7%4.8%

InveSTor reSoUrce

lease lenGths

154

Land Securities Annual Report 2013

Table 91Unexpired lease term at 31 March 2013Like-for-like portfolioLike-for-like portfolio, completed developments and acquisitions Mean1yearsMean1 yearsShopping centres and shops8.07.9Retail warehouses and food stores8.78.8Leisure and hotels6.59.7Total Retail Portfolio7.98.4West End8.78.7City6.88.2Mid-town11.411.4Inner London10.810.8Total London offices9.59.6Central London shops9.29.1Total London Portfolio9.89.8Combined portfolio8.89.11. Mean is the rent-weighted average remaining term on leases subject to lease expiry/break clauses.InveSTor reSoUrce

development pipeline Financial summary

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Table 92Cumulative movements on the development programme to 31 March 2013Total scheme details1Market value at start of scheme £mCapital expenditure incurred to date £mCapitalised interest to date £mValuation surplus/ (deficit) to date2£mDisposals, SIC 15 rent and other adjustments £mMarket value at 31 March 2013 £mEstimated total capital expenditure3£mEstimated total capitalised interest £mEstimated total develop-ment cost4£mNet income/ERV5£mValuation surplus/ (deficit) for year ended 31 March 20132£mDevelopments let and transferred or soldShopping centres and shops–––––––––––Retail warehouses and food stores–––––––––––London Portfolio135.0341.152.6(60.1)35.1503.7341.152.6528.727.314.0135.0341.152.6(60.1)35.1503.7341.152.6528.727.314.0Developments after practical completion, approved or in progressShopping centres and shops97.5260.423.5125.810.8518.0316.123.5437.134.660.9Retail warehouses and food stores33.516.40.110.50.260.759.31.994.76.610.5London Portfolio373.5294.516.3218.9(38.9)864.3701.960.01,135.488.3138.7504.5571.339.9355.2(27.9)1,443.01,077.385.41,667.2129.5210.1Movement on proposed developments for the year to 31 March 2013Proposed developmentsShopping centres and shops–––––––––––Retail warehouses and food stores–––––––––––London Portfolio106.812.60.14.4(0.3)123.6287.516.9428.036.14.4106.812.60.14.4(0.3)123.6287.516.9428.036.14.4Notes:1. Total scheme details exclude properties sold in the year.2. Includes profits realised on the disposal of investment properties and any surplus or deficit on investment properties transferred to trading.3. For proposed development properties the estimated total capital expenditure represents the outstanding costs required to complete the scheme as at 31 March 2013.4. Includes the property at its market value at the start of the financial year in which the property was added to the development programme together with estimated capitalised interest. For proposed development properties, the market value of the property at 31 March 2013 is included in the estimated total cost. Estimated total development cost includes the cost of residential properties in the development programme (£12.9m for shopping centres and shops and £133.4m for the London Portfolio). Estimated costs for proposed schemes could still be subject to material change prior to final approval.5. Net headline annual rent on let units plus net ERV at 31 March 2013 on unlet units.

InveSTor reSoUrce

Five year summary

156

Land Securities Annual Report 2013

2013£m2012£m2011£m2010£m2009£mIncome statementGroup revenue736.6671.5701.9833.4821.2Costs(290.7)(239.6)(270.8)(392.5)(326.4)445.9431.9431.1440.9494.8(Loss)/profit on disposal of investment properties(3.1)45.475.7(32.5)(130.8)Net surplus/(deficit) on revaluation of investment properties196.7169.8794.1746.0(4,113.4)Profit on disposal of other investments1.6––––Release of impairment/(impairment) of trading properties7.1(2.0)(1.4)(10.6)(92.3)Operating profit/(loss)648.2645.11,299.51,143.8(3,841.7)Net interest expense(170.7)(179.4)(216.1)(212.1)(332.5)Movement on redemption liability(4.5)––––Net gain on business combination1.4––––474.4465.71,083.4931.7(4,174.2)Share of post-tax profit/(loss) from joint ventures 58.652.2143.9137.6(599.0)Impairment of investment in joint ventures–(2.2)–––Profit/(loss) before tax533.0515.71,227.31,069.3(4,773.2)Income tax–8.016.823.1(0.5)Profit/(loss) for the financial year from continuing activities533.0523.71,244.11,092.4(4,773.7)Discontinued operations––––(420.9)Profit/(loss) for the financial year533.0523.71,244.11,092.4(5,194.6)Revaluation surplus/(deficit) for the year:Group197.01169.8794.1746.0(4,113.4)Joint ventures20.521.1114.7117.8(630.3)Total217.5190.9908.8863.8(4,743.7)Revenue profit290.7299.4274.7251.8314.91. Includes our subsidiaries on a proportionate basis.InveSTor reSoUrce

Five year summary

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2013£m2012£m2011£m2010£m2009£mBalance sheetInvestment properties9,651.98,453.28,889.08,044.37,929.4Other property, plant and equipment8.38.811.312.814.3Net investment in finance leases188.0185.0116.8115.4116.3Loan investments50.050.872.284.350.0Investment in joint ventures1,301.01,137.6939.6787.8930.8Other investments–32.31.8––Pension surplus5.9–8.7–3.0Deferred tax assets––––1.9Trade and other receivables10.6–77.0––Total non-current assets11,215.79,867.710,116.49,044.69,045.7Trading properties and long-term development contracts152.8133.1129.387.994.9Derivative financial instruments–––1.0–Trade and other receivables344.8759.6352.5334.4392.1Monies held in restricted accounts and deposits30.929.535.195.629.9Cash and cash equivalents41.729.737.6159.41,609.1Total current assets 570.2951.9554.5678.32,126.0Borrowings(436.2)(10.8)(33.0)(308.6)(1.1)Derivative financial instruments(9.1)––(1.1)(112.0)Trade and other payables(364.3)(361.3)(423.2)(395.5)(625.8)Provisions(7.0)(8.6)(7.4)(1.5)–Current tax liabilities(21.2)(21.6)(35.5)(111.0)(161.5)Total current liabilities(837.8)(402.3)(499.1)(817.7)(900.4)Borrowings(3,315.2)(3,225.1)(3,351.3)(3,209.7)(5,449.5)Derivative financial instruments(10.7)(6.5)(2.0)––Pension deficit–(2.4)–(6.5)–Deferred tax liabilities––––(1.6)Trade and other payables(17.4)(27.7)(6.2)––Redemption liability(118.1)––––Total non-current liabilities(3,461.4)(3,261.7)(3,359.5)(3,216.2)(5,451.1)Net assets7,486.77,155.66,812.35,689.04,820.2Net debt(3,698.6)(3,183.2)(3,313.6)(3,263.4)(3,923.6)Results per share from continuing activitiesTotal dividend payable in respect of the financial year (actual)29.8p29.0p28.2p28.0p56.5pTotal dividend payable in respect of the financial year (restated)1n/an/an/an/a51.7pBasic earnings/(loss) per share68.4p67.5p162.3p144.0p(918.0)pDiluted earnings/(loss) per share 68.1p67.4p162.2p144.0p(918.0)pAdjusted earnings per share2 37.0p38.5p35.5p33.1p60.3pAdjusted diluted earnings per share2 36.8p38.5p35.5p33.1p60.3pNet assets per share959p921p885p750p639pDiluted net assets per share955p918p884p750p639pAdjusted net assets per share907p866p827p691p593pAdjusted diluted net assets per share 903p863p826p691p593p1. The restated total dividend payable represents the theoretical dividend per share that would have been paid had the bonus shares inherent in the Rights Issue been in existence at the relevant dividend dates.2. In 2012 adjusted earnings and adjusted earnings per share were restated to exclude profits on disposals of trading properties and long-term development contracts. The prior years have been adjusted accordingly.

InveSTor reSoUrce

retail asset disclosures

assets > £200m

Accor Hotels

Cabot Circus, Bristol

Gunwharf Quays, Portsmouth

St David’s, Cardiff

Type/location

Leisure and hotels

Shopping centres

Ownership

100%

50%

100%

50%

Freehold/
leasehold

Freehold/
Leasehold

Leasehold

Freehold

2,800

The Centre, Livingston

Shopping centres

100%

Freehold

Trinity Leeds

White Rose, Leeds

assets From £100m to £200m

Shopping centres

100%

Freehold

Leasehold

Bon Accord & St Nicholas Centre, Aberdeen

Shopping centres

50%

Leasehold

Buchanan Galleries, Glasgow

Overgate, Dundee

Princesshay, Exeter

Shopping centres

50%

100%

50%

Leasehold

The Bridges, Sunderland

Shopping centres

100%

Leasehold

The O2 Centre, Finchley, London

Shopping centres

100%

Leasehold

assets From £50m to £100m

185-221 Buchanan Street, Glasgow

Lewisham Shopping Centre, London

Southside Centre, Wandsworth, London

The Cornerhouse, Nottingham

The Galleria, Hatfield

The Printworks, Manchester

Shopping centres

Leisure and hotels

Shopping centres

Leisure and hotels

West 12 Shopping Centre, Shepherds Bush, London

Shopping centres

Xscape, Milton Keynes

assets From £100m to £200m

Leisure and hotels

100%

50%

100%

59%

Freehold

Lakeside Retail Park, West Thurrock

Retail World Team Valley, Gateshead

Westwood Cross, Thanet

assets From £50m to £100m

Type/location

Open A1
planning
Consent?

Retail warehouses

Yes

Ownership

100%

Freehold/
leasehold

Freehold

Leasehold

Retail warehouses

Yes

100%

Freehold

Bexhill Retail Park, Bexhill-on-Sea

Retail warehouses

Partial

Greyhound Retail Park, Chester

Kingsway West Retail Park, Dundee

Retail warehouses

Yes

Poole Retail Park, Poole

The Peel Centre, Bracknell

Retail warehouses

Partial

Retail warehouses

Yes

100%

Freehold

Leasehold

Office floorspace (m2)

Retail floorspace (m2)

Other floorspace (m2)

principal occupiers

Annualised

net rent (£m)

Year of construction

Year of last refurbishment

–

100

–

1,900

–

114,200

31,300

120,200

93,400

63,000

65,000

40,900

55,800

39,000

44,500

56,600

23,500

10,700

21,800

45,400

–

25,400

–

17,700

3,600

229,600

Accor

8,800

24,300

House of Fraser, Harvey Nichols, H&M, Next, Topshop

Vue Cinema, M&S, Nike, Gap, Ted Baker

John Lewis, New Look, H&M, Debenhams

BHS, Debenhams, M&S, H&M, Next, Boots, Primark

12,900

H&M, Topshop, Next, Primark, River Island

Sainsbury’s, Debenhams, M&S, Primark, H&M

Next, Boots, New Look, River Island, H&M, Topshop

John Lewis, Hollister, H&M, Boots, Next

Debenhams, Next, Arcadia, Gap, Primark

John Lewis, Debenhams, Arcadia, New Look, Next,

River Island, Hollister

Debenhams, Tesco, Next, H&M, Boots, Primark

4,200

Sainsbury’s, Vue Cinema, Homebase, Virgin Active

4,200

–

5,700

20,900

3,800

34,500

4,400

33,500

Forever21, Gap, Paperchase

M&S, Boots, BHS, H&M

Waitrose, Virgin Active, Primark, Cineworld

Cineworld, TGI Friday

M&S, TK Maxx, Gap, SportsDirect

Virgin Active, United Cinema, Tiger Tiger

Morrisons, Poundland, Boots, Argos

Snozone, Cineworld, Virgin Active

Currys, Next, Toys R Us, Argos, Mothercare

TK Maxx, Next, Boots, Mothercare, Arcadia, Asda Living,

Currys/PC World

M&S, Debenhams, H&M, Next, Primark

Tesco, Next, B&Q, Boots

DFS, Dunelm, Pets at Home, John Lewis at Home

Next Home, Currys, Dunelm, Homebase, Toys R Us, Boots

John Lewis at Home, Boots, Next Home, Mothercare

Morrisons,Tesco, Next, JD Sports, New Look

–

29.8

18.7

22.5

14.6

16.2

9.9

20.7

7.6

8.9

10.8

9.2

13.5

8.0

1.1

7.1

5.6

3.5

7.2

6.4

5.1

3.6

8.8

10.8

7.6

5.0

3.7

5.1

4.0

5.0

2013

1997

1999

2000

2007

1998

2013

1975

1971

2001

1990

–

1970

2000

1987

1986

2005

1989

1990

1987

1988

Various

2008

2001

SD1 – 1982

SD2 – 2009

Phase 1 – 1976

Phase 2 – 1996

Phase 3 – 2008

SD1 – 1991 & 2009

Phase 1 – 1996 & 2008,

2011 (e)

Phase 2 – 2008

St Nicholas Centre – 1985

St Nicholas Centre – 2009

Bon Accord – 1990

Bon Accord – 2012

Phase 1 – 1969

Phase 2 – 2000

Market Square – 2001

Phase 1 2000

2013 (e)

1991 & 2007

2013 (e)

2000

2001, 2012 (e)

2012 (e)

2003

2013 (e)

2004, 2013 (e)

Phase 1 – 1987

Phase 2 – 2004

2006, 2010 (e)

Rolling – latest 2012

Office floorspace (m2)

Retail floorspace (m2)

Other floorspace (m2)

principal occupiers

Annualised

net rent (£m)

Year of construction

Year of last refurbishment

–

35,300

41,300

24,100

18,900

27,300

19,300

15,700

Notes:
All data as at 31 March 2013. Floor areas represent the full property areas whereas the annualised net rent and asset value represent Land Securities’ share. Floor areas are rounded to the nearest 100m2 for areas over 500m2 and rounded
to the nearest 10m2 for areas under 500m2. Annualised net rent is annual cash rent, after deduction of ground rents, as at the balance sheet date. (e) Extended.

158

Land Securities Annual Report 2013

InveSTor reSoUrce

Office floorspace (m2)

Retail floorspace (m2)

Other floorspace (m2)

principal occupiers

229,600

Accor

8,800

24,300

–

House of Fraser, Harvey Nichols, H&M, Next, Topshop

Vue Cinema, M&S, Nike, Gap, Ted Baker

John Lewis, New Look, H&M, Debenhams

BHS, Debenhams, M&S, H&M, Next, Boots, Primark

12,900

H&M, Topshop, Next, Primark, River Island

–

Sainsbury’s, Debenhams, M&S, Primark, H&M

Next, Boots, New Look, River Island, H&M, Topshop

John Lewis, Hollister, H&M, Boots, Next

Debenhams, Next, Arcadia, Gap, Primark

John Lewis, Debenhams, Arcadia, New Look, Next,
River Island, Hollister

Debenhams, Tesco, Next, H&M, Boots, Primark

The O2 Centre, Finchley, London

Shopping centres

100%

Leasehold

4,200

Sainsbury’s, Vue Cinema, Homebase, Virgin Active

4,200

–

5,700

20,900

3,800

34,500

4,400

33,500

Forever21, Gap, Paperchase

M&S, Boots, BHS, H&M

Waitrose, Virgin Active, Primark, Cineworld

Cineworld, TGI Friday

M&S, TK Maxx, Gap, SportsDirect

Virgin Active, United Cinema, Tiger Tiger

Morrisons, Poundland, Boots, Argos

Snozone, Cineworld, Virgin Active

assets > £200m

Accor Hotels

Cabot Circus, Bristol

Gunwharf Quays, Portsmouth

St David’s, Cardiff

Type/location

Leisure and hotels

Shopping centres

Ownership

100%

50%

100%

50%

Freehold/

leasehold

Freehold/

Leasehold

Freehold

2,800

The Centre, Livingston

Shopping centres

100%

Freehold

Trinity Leeds

White Rose, Leeds

assets From £100m to £200m

Shopping centres

100%

Freehold

Leasehold

Bon Accord & St Nicholas Centre, Aberdeen

Shopping centres

50%

Leasehold

Buchanan Galleries, Glasgow

Overgate, Dundee

Princesshay, Exeter

Shopping centres

50%

100%

50%

Leasehold

The Bridges, Sunderland

Shopping centres

100%

Leasehold

assets From £50m to £100m

185-221 Buchanan Street, Glasgow

Lewisham Shopping Centre, London

Southside Centre, Wandsworth, London

The Cornerhouse, Nottingham

The Galleria, Hatfield

The Printworks, Manchester

Shopping centres

Leisure and hotels

Shopping centres

Leisure and hotels

West 12 Shopping Centre, Shepherds Bush, London

Shopping centres

Xscape, Milton Keynes

Leisure and hotels

assets From £100m to £200m

Freehold

100

1,900

Lakeside Retail Park, West Thurrock

Retail World Team Valley, Gateshead

Westwood Cross, Thanet

assets From £50m to £100m

Open A1

planning

Consent?

Type/location

Retail warehouses

Yes

Ownership

100%

Freehold/

leasehold

Freehold

Leasehold

Retail warehouses

Yes

100%

Freehold

Bexhill Retail Park, Bexhill-on-Sea

Retail warehouses

Partial

Greyhound Retail Park, Chester

Kingsway West Retail Park, Dundee

Retail warehouses

Yes

Poole Retail Park, Poole

The Peel Centre, Bracknell

Notes:

Retail warehouses

Partial

Retail warehouses

Yes

Freehold

Leasehold

All data as at 31 March 2013. Floor areas represent the full property areas whereas the annualised net rent and asset value represent Land Securities’ share. Floor areas are rounded to the nearest 100m2 for areas over 500m2 and rounded

to the nearest 10m2 for areas under 500m2. Annualised net rent is annual cash rent, after deduction of ground rents, as at the balance sheet date. (e) Extended.

100%

50%

100%

59%

100%

–

114,200

31,300

120,200

93,400

63,000

65,000

40,900

55,800

39,000

44,500

56,600

23,500

10,700

21,800

45,400

–

25,400

17,700

3,600

35,300

41,300

24,100

18,900

27,300

19,300

15,700

Annualised
net rent (£m)

Year of construction

Year of last refurbishment

e
S
S
e
n
T
I
a
L
r
e
a
D

29.8

18.7

22.5

14.6

16.2

9.9

20.7

7.6

8.9

10.8

9.2

13.5

8.0

1.1

7.1

5.6

3.5

7.2

6.4

5.1

3.6

Various

2008

2001

SD1 – 1982
SD2 – 2009

Phase 1 – 1976
Phase 2 – 1996
Phase 3 – 2008

2013

1997

SD1 – 1991 & 2009

Phase 1 – 1996 & 2008,
2011 (e)
Phase 2 – 2008

St Nicholas Centre – 1985
Bon Accord – 1990

St Nicholas Centre – 2009
Bon Accord – 2012

1999

2000

2007

Phase 1 – 1969
Phase 2 – 2000
Market Square – 2001

1998

2013

1975

1971

2001

1990

–

1970

2000

Phase 1 2000
2013 (e)

2013 (e)

1991 & 2007

2013 (e)

2000

2001, 2012 (e)

D
r
e
c
T
o
r
S

’

r
e
P
o
r
T

g
o
v
e
r
n
a
n
c
e

f
I
n
a
n
c
a
L
S
T
a
T
e
m
e
n
T
S

n
v
e
S
T
o
r
r
e
S
o
U
r
c
e

Office floorspace (m2)

Retail floorspace (m2)

Other floorspace (m2)

principal occupiers

Annualised
net rent (£m)

Year of construction

Year of last refurbishment

–

Currys, Next, Toys R Us, Argos, Mothercare

TK Maxx, Next, Boots, Mothercare, Arcadia, Asda Living,
Currys/PC World

M&S, Debenhams, H&M, Next, Primark

Tesco, Next, B&Q, Boots

DFS, Dunelm, Pets at Home, John Lewis at Home

Next Home, Currys, Dunelm, Homebase, Toys R Us, Boots

John Lewis at Home, Boots, Next Home, Mothercare

Morrisons,Tesco, Next, JD Sports, New Look

8.8

10.8

7.6

5.0

3.7

5.1

4.0

5.0

1987

1986

2005

1989

1990

Phase 1 – 1987
Phase 2 – 2004

1987

1988

2012 (e)

2003

2013 (e)

2004, 2013 (e)

2006, 2010 (e)

Rolling – latest 2012

Land Securities Annual Report 2013

159

Ownership

Freehold/leasehold

Office floorspace (m2)

Retail floorspace
(m2)

Other floorspace (m2)

principal occupiers

InveSTor reSoUrce

london asset disclosures

assets > £200m

62 Buckingham Gate, SW1

123 Victoria Street, SW1

Location

West End

Bankside 2 & 3, Southwark Street, SE1

Inner London

Cardinal Place, Victoria Street, SW1

New Street Square, New Fetter Lane, EC4

One New Change, Cheapside, EC4

Piccadilly Lights, W1

Queen Anne’s Gate, Petty France, SW1

Times Square, Queen Victoria Street, EC4

assets From £100m to £200m

20 Fenchurch Street, EC3

32-50 Strand, WC2

West End

Mid-town

City

West End

City

Mid-town

Dashwood House, Old Broad Street, EC2

City

Empress State Building, Lillie Road, SW6

Harbour Exchange, E14

Haymarket House, Haymarket, SW1

Hill House, Little New Street, EC4

Portland House, Bressenden Place, SW1

Oriana, Oxford Street, W1

Nova Victoria, SW1

assets From £50m to £100m

1 & 2 New Ludgate, EC4

10, 20 & 30 Eastbourne Terrace, W2

47 Mark Lane, EC3

Holborn Gate, High Holborn, WC1

Oxford House, Oxford Street, W1

Moorgate Hall, Moorgate, EC2

Red Lion Court, Park Street, SE1

The Zig Zag Building, SW1*

Inner London

West End

Mid-town

West End

City

West End

City

Mid-town

West End

City

Inner London

West End

Thomas More Square, Thomas More Street, E1

Inner London

Westminster City Hall, Victoria Street, SW1

West End

100%

95%

50%

100%

50%

100%

50%

100%

50%

100%

1,400

2,600

3,200

9,300

2,100

20,200

6,400

–

340

1,200

3,400

700

300

–

3,400

–

1,100

23,600

Freehold

Leasehold

Freehold

Leasehold

Freehold

24,200

18,500

35,200

51,500

62,300

32,000

2,400

32,900

34,500

62,940

8,700

Leasehold

13,900

Freehold

Leasehold

Freehold

Freehold/
Leasehold

Freehold

Leasehold

Freehold

39,900

43,400

7,500

15,500

26,900

2,300

56,100

7,900

32,200

18,100

7,900

12,700

5,700

6,500

11,900

17,400

49,800

16,600

3,000

–

1,600

1,000

1,700

1,600

–

4,200

900

600

Annualised

net rent (£m)

Year of construction

Year of last refurbishment

Current development

Jimmy Choo, CDC, Boots, John Lewis, Intuit, CPA Global

The Royal Bank of Scotland

Microsoft, Experian, EDF, Wellington Management, M&S

Deloitte, Taylor Wessing, Speechly Bircham

K&L Gates, Friends Life, CME, Panmure, bwin, H&M, M&S,

Topshop, Next

Hyundai, Coca-Cola, Samsung, Barclays, Boots, Gap

Central Government

Bank of New York Mellon, Dechert, Nice Systems, Research Now

Markel, Kiln, Liberty Mutual, Liberty Syndicates, RSA

Current development

600

Bain & Company, Superdrug, Natwest Bank, Lloyds, McDonald's,

Sainsbury’s

Edwards, Angell Palmer & Dodge, Cadwalader Wickersham &

Taft, Mitsubishi Pharma

1,800

Metropolitan Police Authority

Telecity, HSBC, British American Tobacco

1988/1989

Incisive Media, Curtis Brown Group, Whitbread Group, A3D2

Rolling – latest 2012

Deloitte

Investments

Bill & Melinda Gates Foundation, Regus, Pioneer Global

12.5

Rolling – latest 2010

Primark, Boots, Sainsbury's

Various

Rolling – latest 2012

Marks and Spencer PLC, Chapman Taylor, Davy Process

Technology

Kenexa, AXA Insurance, Acenden

Good Relations, FTI, Regus

Publicis, Woods Bagot

Mace

Lloyds Banking Group

Westminster City Council

Current development

Demolished

1955/57

Current development

Rolling – latest 2009

Rolling – latest 2010

2006

Rolling – latest 2012

2,800

News International, Virgin Media, Easynet

2008/2009

–

2.7

16.3

34.7

32.3

17.9

12.9

28.7

12.8

0.1

1.8

6.5

6.9

9.0

5.3

7.1

–

5.5

2.3

5.2

3.6

1.2

4.3

–

7.3

2.5

1977

2007

2006

2008

2010

Various

1977

2003

1957

1976

1961

1955

1973

1962

1964

1974

1964

1990

1963

–

270

500

2,300

1,300

–

140

–

700

1,300

15,500

–

430

2012

-–

–

2011

2007

2012

2008

2003

–

2002

–

Includes retail within Kings Gate, SW1.

160

Land Securities Annual Report 2013

Bankside 2 & 3, Southwark Street, SE1

Inner London

Dashwood House, Old Broad Street, EC2

City

Leasehold

13,900

assets > £200m

62 Buckingham Gate, SW1

123 Victoria Street, SW1

Cardinal Place, Victoria Street, SW1

New Street Square, New Fetter Lane, EC4

One New Change, Cheapside, EC4

Piccadilly Lights, W1

Queen Anne’s Gate, Petty France, SW1

Times Square, Queen Victoria Street, EC4

assets From £100m to £200m

20 Fenchurch Street, EC3

32-50 Strand, WC2

Empress State Building, Lillie Road, SW6

Harbour Exchange, E14

Haymarket House, Haymarket, SW1

Hill House, Little New Street, EC4

Portland House, Bressenden Place, SW1

Oriana, Oxford Street, W1

Nova Victoria, SW1

assets From £50m to £100m

1 & 2 New Ludgate, EC4

10, 20 & 30 Eastbourne Terrace, W2

47 Mark Lane, EC3

Holborn Gate, High Holborn, WC1

Oxford House, Oxford Street, W1

Moorgate Hall, Moorgate, EC2

Red Lion Court, Park Street, SE1

The Zig Zag Building, SW1*

Notes:

Includes retail within Kings Gate, SW1.

Location

West End

Mid-town

City

West End

City

Mid-town

West End

Mid-town

West End

City

West End

City

Mid-town

West End

City

Inner London

West End

100%

95%

50%

100%

50%

100%

50%

100%

50%

100%

Freehold

Leasehold

Freehold

Leasehold

Freehold

Leasehold

Freehold

Freehold/

Leasehold

Freehold

Leasehold

Freehold

24,200

18,500

35,200

51,500

62,300

32,000

2,400

32,900

34,500

62,940

8,700

39,900

43,400

7,500

15,500

26,900

2,300

32,200

18,100

7,900

12,700

5,700

6,500

11,900

17,400

49,800

16,600

1,400

2,600

3,200

9,300

2,100

20,200

6,400

–

340

1,200

3,400

700

300

–

3,400

1,100

23,600

3,000

–

1,600

1,000

1,700

1,600

–

4,200

900

600

Thomas More Square, Thomas More Street, E1

Inner London

Westminster City Hall, Victoria Street, SW1

West End

to the nearest 10m2 for areas under 500m2. Annualised net rent is annual cash rent, after deduction of ground rents, as at the balance sheet date.

InveSTor reSoUrce

Ownership

Freehold/leasehold

Office floorspace (m2)

(m2)

Other floorspace (m2)

principal occupiers

Retail floorspace

Annualised
net rent (£m)

Year of construction

Year of last refurbishment

e
S
S
e
n
T
I
a
L
r
e
a
D

–

270

500

2,300

1,300

–

140

–

600

–

1,800

–

700

–

1,300

56,100

7,900

15,500

–

430

–

2,800

–

Jimmy Choo, CDC, Boots, John Lewis, Intuit, CPA Global

The Royal Bank of Scotland

Microsoft, Experian, EDF, Wellington Management, M&S

Deloitte, Taylor Wessing, Speechly Bircham

K&L Gates, Friends Life, CME, Panmure, bwin, H&M, M&S,
Topshop, Next

Hyundai, Coca-Cola, Samsung, Barclays, Boots, Gap

Central Government

Bank of New York Mellon, Dechert, Nice Systems, Research Now

Markel, Kiln, Liberty Mutual, Liberty Syndicates, RSA

Bain & Company, Superdrug, Natwest Bank, Lloyds, McDonald's,
Sainsbury’s

Edwards, Angell Palmer & Dodge, Cadwalader Wickersham &
Taft, Mitsubishi Pharma

Metropolitan Police Authority

Telecity, HSBC, British American Tobacco

Incisive Media, Curtis Brown Group, Whitbread Group, A3D2

Deloitte

Bill & Melinda Gates Foundation, Regus, Pioneer Global
Investments

Primark, Boots, Sainsbury's

–

Marks and Spencer PLC, Chapman Taylor, Davy Process
Technology

Kenexa, AXA Insurance, Acenden

Good Relations, FTI, Regus

Publicis, Woods Bagot

Mace

Lloyds Banking Group

News International, Virgin Media, Easynet

Westminster City Council

–

2.7

16.3

34.7

32.3

17.9

12.9

28.7

12.8

0.1

1.8

6.5

6.9

9.0

5.3

12.5

7.1

–

5.5

2.3

5.2

3.6

1.2

4.3

–

7.3

2.5

Current development

1977

2007

2006

2008

2010

Various

1977

2003

Current development

1957

1976

1961

1988/1989

1955

1973

1962

2012

-–

–

2011

2007

–

2012

2008

2003

–

Rolling – latest 2012

2002

Rolling – latest 2010

Various

Rolling – latest 2012

Current development

Demolished

1955/57

1964

1974

1964

1990

Current development

1990

1963

–

Rolling – latest 2009

Rolling – latest 2010

2006

Rolling – latest 2012

–

2008/2009

–

Land Securities Annual Report 2013

161

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InveSTor reSoUrce

investor inFormation

scrip dividends
Following the approval by shareholders of the
Scrip Dividend scheme at the Annual General
Meeting on 19 July 2012, the Company offers
shareholders the option to receive a Scrip
dividend – an issue of shares available to
shareholders at no dealing or stamp duty
reserve tax costs. Shareholders have the option
to forgo their cash dividend for the share
alternative. Details of the scheme, including
the rules, and the required mandate forms
for participation are available at
www.landsecurities.com/investors/
shareholder-investor-information/scrip-
dividend or, alternatively, please contact:
The Share Dividend Team,
Equiniti,
Aspect House, Spencer Road,
Lancing, West Sussex BN99 6DA
Telephone: 0871 384 2268*
International dialling: +44 (0)121 415 7173

reit dividend payments
As a UK REIT, the Company is exempted
from corporation tax on rental income
and gains on its property rental business
but is required to pay Property Income
Distributions (PIDs). UK shareholders will
generally be taxed on PIDs received at their
full marginal tax rates. However, should a
shareholder opt to receive their dividend as
shares (under the Scrip Dividend scheme)
instead of cash then this form of dividend
would be treated as a non-PID (unless notified
by the Company that it was paid as a PID) and
would be subject to tax on the cash equivalent
of the Scrip as though it were an ordinary UK
dividend.

For most shareholders, PIDs will be paid after
deducting withholding tax at the basic rate.
However, certain categories of shareholder
are entitled to receive PIDs without
withholding tax, principally UK resident
companies, UK public bodies, UK pension

funds and managers of ISAs, PEPs and Child
Trust Funds. A detailed note on the tax
consequences for shareholders and forms to
enable certain classes of shareholder to claim
exemption from withholding tax are available
at www.landsecurities.com/investors/
shareholder-investor-information/uk-reit-
taxation.

balance oF business tests
REIT legislation specifies conditions in
relation to the type of business a REIT may
conduct, which the Group is required to
meet in order to retain its REIT status.
In summary, at least 75% of the Group’s
profits must be derived from REIT qualifying
activities (the 75% profits test) and 75% of the
Group’s assets must be employed in REIT
qualifying activities (the 75% assets test).
Qualifying activities means a property rental
business. For the result of these tests for the
Group for the financial year, and at the
balance sheet date, see Table 94 below.

162

Land Securities Annual Report 2013

financial calendar table 93Ex-dividend date – 2012/13 final dividend19 June 2013Record date – 2012/13 final dividend21 June 2013First quarter interim management statement announcement 17 July 2013AGM – London18 July 2013Payment date – 2012/13 final dividend19 July 2013Ex-dividend date – 1st interim dividend* 11 September 2013Payment date – 1st interim dividend*11 October 20132013/14 Half yearly results announcement12 November 2013Ex-dividend date – 2nd interim dividend* 4 December 2013Payment date – 2nd interim dividend*9 January 2014Third quarter interim management statement announcement January 2014Ex-dividend date – 3rd interim dividend* 12 March 2014Payment date – 3rd interim dividend*11 April 20142013/14 Annual results announcementMay 2014* Provisional dates.reit balance of business table 94For the year ended 31 March 2013For the year ended 31 March 2012Tax-exemptbusinessResidualbusinessAdjustedresultsTax-exemptbusinessResidualbusinessAdjustedresultsProfit before tax (£m)261.749.6311.3261.918.3280.2Balance of business – 75% profits test84.1%15.9%93.5%6.5%Adjusted total assets (£m)11,247.3703.411,950.710,302.21,008.911,311.1Balance of business – 75% assets test94.1%5.9%91.1%8.9% InveSTor reSoUrce

investor inFormation

dividends For shareholders resident
outside the uk
Instead of waiting for a Sterling cheque to
arrive by mail, you can ask us to send your
dividends direct to your bank account. This is
a service our registrar can arrange in over 30
different countries worldwide and it normally
costs less than paying in a Sterling cheque.
For more information contact the Company’s
registrar, Equiniti, on +44 (0)121 415 7047
or download an application form online at
www.shareview.co.uk/myportfolio or by
writing to our registrars at the address given.

share dealinG Facilities
Equiniti provides both existing and
prospective UK shareholders with simple
ways of buying and selling Land Securities
Group PLC ordinary shares by telephone,
internet or post.

For telephone dealing, call 0845 603 7037
between 8.00am and 4.30pm Monday to
Friday. For internet dealing, log on to
www.shareview.co.uk/dealing. For postal
dealing, call 0871 384 2248* for full details
and a form.

Existing shareholders will need to provide
the account/shareholder reference number,
shown on the share certificate.

Other brokers and banks or building societies
also offer share dealing facilities.

shareGiFt
Shareholders with a small number of shares,
the value of which makes it uneconomic to sell
them, may wish to consider donating them
to the charity ShareGift (registered charity
1052686), which specialises in using such
holdings for charitable benefit. A ShareGift
Donation form can be obtained from the
registrar and further information about
ShareGift is available at www.sharegift.org
or by writing to:
ShareGift,
17 Carlton House Terrace,
London SW1Y 5AH
Telephone: 020 7930 3737

corporate individual savinGs
accounts (isas)
The Company has arranged for a Corporate
ISA to be managed by Equiniti Financial
Services Limited, who can be contacted at:
Aspect House,
Spencer Road,
Lancing, West Sussex BN99 6UY
Telephone: 0871 384 2244*

our website
Our corporate website gives you access to
share price and dividend information as
well as sections on managing your shares
electronically and corporate governance; and
other debt and equity investor information on
the Group. To access the website please go to
www.landsecurities.com/investors.

reGistrar
All general enquiries concerning holdings
of ordinary shares in Land Securities
Group PLC, should be addressed to:
Equiniti,
Aspect House, Spencer Road,
Lancing, West Sussex BN99 6DA
Telephone: 0871 384 2128*
Textphone: 0871 384 2255*
International dialling: +44 (0)121 415 7049
Website: www.shareview.co.uk

An online share management service is
available, enabling shareholders to access
details of their Land Securities shareholdings
electronically. Shareholders wishing to view
this information, together with additional
information such as indicative share prices
and information on recent dividends, should
visit www.landsecurities.com/investors/
shareholder-investor-information/dividend
information or www.shareview.co.uk/
myportfolio.

e-communication
We encourage shareholders to consider
receiving their communications
electronically. Choosing to receive
shareholder communications electronically
means you receive information quickly and
securely and allows Land Securities to
communicate in a more environmentally
friendly and cost-effective way. To register
for this service, shareholders should visit
www.landsecurities.com/investors/
shareholder-investor-information/manage-
your-shares or www.shareview.co.uk/
myportfolio.

payment oF dividends
Shareholders whose dividends are not
currently paid to mandated accounts may
wish to consider having their dividends paid
directly into their bank or building society
account. This has a number of advantages,
including the crediting of cleared funds into
the nominated account on the dividend
payment date. If shareholders would like
their future dividends to be paid in this
way, they should contact the registrars or
complete a mandate instruction available
from www.landsecurities.com/investors/
shareholder-investor-information/dividend
information and return it to the registrars.
Under this arrangement tax vouchers are
sent to the shareholder’s registered address.

capital Gains tax
For the purpose of capital gains tax, the
price of the Company’s ordinary shares at
31 March 1982, adjusted for the capitalisation
issue in November 1983 and the Scheme of
Arrangement in September 2002, was 203p.
On the assumption that the 5 for 8 Rights
Issue in March 2009 was taken up in full,
the adjusted price would be 229p.

unclaimed assets reGister
The Company participates in the Unclaimed
Assets Register, which provides a search
facility for financial assets which may have
been forgotten. For further information,
contact:
The Unclaimed Assets Register,
PO Box 9501, Nottingham NG80 1WD
Telephone: 0870 241 1713
Fax: 0115 976 8785
Website: www.uar.co.uk

share price inFormation
The latest information on Land Securities
Group PLC share price is available on our
website www.landsecurities.com.

unsolicited mail and shareholder
Fraud
Shareholders are advised to be wary of
unsolicited mail or telephone calls offering
free advice, to buy shares at a discount or
offering free company reports. To find more
detailed information on how shareholders
can be protected from investment scams visit
www.fca.org.uk/consumers/scams/investment-
scams/share-fraud-and-boiler-room-scams.

reGistered oFFice
5 Strand, London WC2N 5AF
Registered in England and Wales
No. 4369054

oFFices
5 Strand, London WC2N 5AF
and at:
City Exchange, 11 Albion Street,
Leeds LS1 5ES
120 Bath Street, Glasgow G2 2EN

* Calls to 0871 telephone numbers are charged at 8p per minute from a BT
landline. Other telephone providers’ costs may vary. Lines open 8.30am to
5.30pm, Monday to Friday, excluding bank holidays.

Land Securities Annual Report 2013

163

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Glossary

164

Land Securities Annual Report 2013

Adjusted earnings per share (EPS)Earnings per share based on revenue profit after related tax.Adjusted net asset value (NAV) per shareNAV per share adjusted to remove the effect of the de-recognition of the 2004 bond exchange and cumulative fair value movements on interest-rate swaps and similar instruments.Adjusted net debtNet debt excluding cumulative fair value movements on interest-rate swaps, the adjustment arising from the de-recognition of the bond exchange and amounts payable under finance leases. It generally includes the net debt of subsidiaries and joint ventures on a proportionate basis. Average unexpired lease termThe weighted average of the unexpired term of all leases other than short-term lettings such as car parks and advertising hoardings, temporary lettings of less than one year, residential leases and long ground leases.Book valueThe amount at which assets and liabilities are reported in the financial statements.BREEAMBuilding Research Establishment’s Environmental Assessment Method.Combined portfolioThe combined portfolio comprises the investment properties of the Group’s subsidiaries, on a proportionately consolidated basis when not wholly owned, together with our share of investment properties held in our joint ventures. Unless stated otherwise, references are to the combined portfolio when the investment property business is discussed.Completed developmentsCompleted developments consist of those properties previously included in the development programme, which have been transferred from the development programme since 1 April 2011.Development pipelineThe development programme together with proposed developments.Development programmeThe development programme consists of committed developments (Board approved projects with the building contract let), authorised developments (Board approved), projects under construction and developments which have reached practical completion within the last two years but are not yet 95% let.Diluted figuresReported results adjusted to include the effects of potentially dilutive shares issuable under employee share schemes.Earnings per share (EPS)Profit after taxation attributable to owners of the Parent divided by the weighted average number of ordinary shares in issue during the period.EPRAEuropean Public Real Estate Association.EPRA net initial yieldEPRA net initial yield is defined within EPRA’s Best Practice Recommendations as the annualised rental income based on the cash rents passing at the balance sheet date, less non-recoverable property operating expenses, divided by the gross market value of the property. It is consistent with the net initial yield calculated by the Group’s external valuers.Equivalent yieldCalculated by the Group’s external valuers, equivalent yield is the internal rate of return from an investment property, based on the gross outlays for the purchase of a property (including purchase costs), reflecting reversions to current market rent and such items as voids and non-recoverable expenditure but ignoring future changes in capital value. The calculation assumes rent is received annually in arrears. ERV – Gross estimated rental value The estimated market rental value of lettable space as determined biannually by the Group’s external valuers. Fair value movementAn accounting adjustment to change the book value of an asset or liability to its market value.Finance leaseA lease that transfers substantially all the risks and rewards of ownership from the lessor to the lessee.GearingTotal borrowings, including bank overdrafts, less short-term deposits, corporate bonds and cash, at book value, plus cumulative fair value movements on financial derivatives as a percentage of total equity. For adjusted gearing, see note 32 in the financial statements.Gross market valueMarket value plus assumed usual purchaser’s costs at the reporting date.Head leaseA lease under which the Group holds an investment property.Interest Cover Ratio (ICR)A calculation of a company’s ability to meet its interest payments on outstanding debt. It is calculated using revenue profit before interest, divided by net interest (excluding the mark-to-market movement on interest-rate swaps, bond exchange de-recognition, capitalised interest and interest on the pension scheme assets and liabilities). The calculation excludes joint ventures. Interest-rate swapA financial instrument where two parties agree to exchange an interest rate obligation for a predetermined amount of time. These are generally used by the Group to convert floating-rate debt or investments to fixed rates.Investment portfolioThe investment portfolio comprises the investment properties of the Group’s subsidiaries, on a proportionately consolidated basis where not wholly owned.Joint ventureAn entity in which the Group holds an interest and is jointly controlled by the Group and one or more partners under a contractual arrangement. Decisions on financial and operating policies essential to the operation, performance and financial position of the venture require each partner’s consent.Lease incentivesAny incentive offered to occupiers to enter into a lease. Typically the incentive will be an initial rent-free period, or a cash contribution to fit-out or similar costs. For accounting purposes the value of the incentive is spread over the non-cancellable life of the lease.LIBORThe London Interbank Offered Rate, the interest rate charged by one bank to another for lending money, often used as a reference rate in bank facilities.Like-for-like portfolioThe like-for-like portfolio includes all properties which have been in the portfolio since 1 April 2011, but excluding those which are acquired, sold or included in the development pipeline at any time since that date.Like-for-like managed propertiesProperties in the like-for-like portfolio other than those in our joint ventures which we do not manage operationally.Loan-to-value (LTV) Group LTV is the ratio of adjusted net debt, including subsidiaries and joint ventures, to the sum of the market value of investment properties and the book value of trading properties of the Group, its subsidiaries and joint ventures, all on a proportionate basis, expressed as a percentage. For the Security Group, LTV is the ratio of net debt lent to the Security Group divided by the value of secured assets.Market valueMarket value is determined by the Group’s external valuers, in accordance with the RICS Valuation Standards, as an opinion of the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing.Mark-to-market adjustmentAn accounting adjustment to change the book value of an asset or liability to its market value.Net asset value (NAV) per shareEquity attributable to owners of the Parent divided by the number of ordinary shares in issue at the period end.Net initial yieldNet initial yield is a calculation by the Group’s external valuers of the yield that would be received by a purchaser, based on the Estimated Net Rental Income expressed as a percentage of the acquisition cost, being the market value plus assumed usual purchasers’ costs at the reporting date. The calculation is in line with EPRA guidance. Estimated Net Rental Income is the passing cash rent less ground rent at the balance sheet date, estimated non-recoverable outgoings and void costs including service charges, insurance costs and void rates.Outline planning consentThis gives consent in principle for a development, and covers matters such as use and building mass. Full details of the development scheme must be provided in an application for ‘reserved matters approval’, including detailed layout, scale, appearance, access and landscaping, before a project can proceed. An outline planning permission will lapse if the submission of ‘reserved matters’ have not been made within three years, or if it has not been implemented within three years or within two years of the final approval of ‘reserved matters’, unless otherwise expressly stated within conditions attached to the permission itself or, for any permissions granted on or before 1 October 2009, a successful application has been made to extend the time within which ‘reserved matters’ application can be submitted, or the overall limit for commencement of development. Over-rentedSpace where the passing rent is above the ERV.Passing cash rentThe estimated annual rent receivable as at the reporting date which includes estimates of turnover rent and estimates of rent to be agreed in respect of outstanding rent review or lease renewal negotiations. Passing cash rent may be more or less than the ERV (see over-rented, reversionary and ERV). Passing cash rent excludes annual rent receivable from units in administration save to the extent that rents are expected to be received. Void units and units that are in a rent-free period at the reporting date are deemed to have no passing cash rent. Although temporary lets of less than 12 months are treated as void, income from temporary lets is included in passing cash rents.Pre-letA lease signed with an occupier prior to completion of a development.Pre-development propertiesPre-development properties are those properties within the like-for-like portfolio which are being managed to align vacant possession within a three year horizon with a view to redevelopment.Property income distribution (PID)A PID is a distribution by a REIT to its shareholders paid out of qualifying profits. A REIT is required to distribute at least 90% of its qualifying profits as a PID to its shareholders.Proposed developmentsProposed developments are properties which have not yet received final Board approval or are still subject to main planning conditions being satisfied, but which are more likely to proceed than not.Qualifying activities/Qualifying assetsThe ownership (activity) of property (assets) which is held to earn rental income and qualifies for tax-exempt treatment (income and capital gains) under UK REIT legislation.Real Estate Investment Trust (REIT)A REIT must be a publicly quoted company with at least three-quarters of its profits and assets derived from a qualifying property rental business. Income and capital gains from the property rental business are exempt from tax but the REIT is required to distribute at least 90% of those profits to shareholders. Corporation tax is payable on non-qualifying activities in the normal way.Rental value changeIncrease or decrease in the current rental value, as determined by the Group’s external valuers, over the reporting period on a like-for-like basis.Rental incomeRental income is as reported in the income statement, on an accruals basis, and adjusted for the spreading of lease incentives over the term certain of the lease in accordance with SIC 15. It is stated gross, prior to the deduction of ground rents and without deduction for operational outgoings on car park and commercialisation activities.Retail warehouse parkA scheme of three or more retail warehouse units aggregating over 5,000m2 with shared parking.Return on average capital employedGroup profit before interest, plus joint venture profit before interest, divided by the average capital employed (defined as shareholders’ funds plus adjusted net debt).Return on average equityGroup profit before tax plus joint venture tax divided by the average equity shareholders’ funds.Revenue profitProfit before tax, excluding profits on the sale of non-current assets and trading properties, profits on long-term development contracts, valuation movements, fair value movements on interest-rate swaps and similar instruments used for hedging purposes, the adjustment to interest payable resulting from the amortisation of the bond exchange de-recognition, debt restructuring charges and any items of an unusual nature.Reversionary or under-rentedSpace where the passing rent is below the ERV.Reversionary yieldThe anticipated yield to which the initial yield will rise (or fall) once the rent reaches the ERV.Scrip dividendLand Securities offers its shareholders the opportunity to receive dividends in the form of shares instead of cash. This is known as a scrip dividend.Security GroupSecurity Group is the principal funding vehicle for Land Securities and properties held in the Security Group are mortgaged for the benefit of lenders. It has the flexibility to raise a variety of different forms of finance.Temporary lettingsLettings for a period of one year or less. These are included within voids.Topped-up net initial yieldTopped-up net initial yield is a calculation by the Group’s external valuers. It is calculated by making an adjustment to net initial yield in respect of the annualised cash rent foregone through unexpired rent-free periods and other lease incentives. The calculation is consistent with EPRA guidance.Total business returnDividend paid per share, plus the change in adjusted diluted net asset value per share, divided by the adjusted diluted net asset value per share at the beginning of the year.Total cost ratioTotal cost ratio represents all costs included within revenue profit, other than rents payable and financing costs, expressed as a percentage of gross rental income before rents payable. Total development cost (TDC)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 capitalised interest.Total property returnValuation movement, profit/(loss) on property sales and net rental income in respect of investment properties expressed as a percentage of opening book value, together with the time weighted value for capital expenditure incurred during the current year, on the combined property portfolio.Total Shareholder Return (TSR)The growth in value of a shareholding over a specified period, assuming that dividends are reinvested to purchase additional units of the stock.Trading propertiesProperties held for trading purposes and shown as current assets in the balance sheet.Turnover rentRental income which is related to an occupier’s turnover.VoidsVoids are expressed as a percentage of ERV and represent all unlet space, including voids where refurbishment work is being carried out and voids in respect of pre-development properties. Temporary lettings for a period of one year or less are also treated as voids.Weighted average cost of capital (WACC)Weighted average cost of debt and notional cost of equity, used as a benchmark to assess investment returns.Yield shiftA movement (negative or positive) in the equivalent yield of a property asset.Zone AA means of analysing and comparing the rental value of retail space by dividing it into zones parallel with the main frontage. The most valuable zone, Zone A, is at the front of the unit. Each successive zone is valued at half the rate of the zone in front of it.fuRThER INfORmATION

KEy REAds WIThIN
ThIs REPORT

In brief
An overview of our business
and performance throughout
the year.

ONLINE ANNuAL REPORT
www. landsecurities.com /annualreport2013

p 14

– Presentation of the year’s

key content

– Video stories from the year
– Executive team review of 2012/13
– ‘Create your own report’ tool and
Annual Report chart generator

CORPORATE WEbsITE
www.landsecurities.com
– Latest news and investor updates
– Profiles of our Board Directors
– Press releases
– Easy access to content on careers

and CR

CORPORATE REsPONsIbILITy
www.landsecurities.com/responsibility

– Why Corporate Responsibility

is important

– What CR means for investors,
employees and communities

– Examples of CR in action
– Priorities and progress in 2012/13

Chairman’s
message
Alison Carnwath reviews the
performance of the Company
during the year, outlines Board
activity and offers her outlook
on the year ahead.

Chief
Executive
Robert Noel reports on our market,
the Company’s strategy, the key
factors underlying our performance,
and our prospects over the next
12 months.

p 22

p 24

Financial
review

Martin Greenslade reports
on our financial performance
in detail.

Business
review

A focus on our Retail and London
portfolios and the key factors
underlying their performance.

p 26

p 36

Smart
thinking

Our smart long-term thinking
is achieving a successful and
sustainable business.

p 48

Good
governance

Information on how we manage
our businesses including Board
committees and Directors’
biographies and remuneration.

p 57

Financial
statements
Financial statements for
the Group and Company
including a report from the
independent auditor.

Investor
resource
Supporting information to provide
investors with a more detailed
analysis of the Company’s
performance.

p 93

p 147

Forward-looking statements

Land Securities, LandSecurities (stylised),
the Cornerstones logo and Making Property
Work, are trade marks of Land Securities
Group PLC.

All other trade marks and registered
trade marks are the property of their
respective owners.

This report is printed on Naturalis and Olin
Smooth paper and has been idependently
certified on behalf of the Forest Stewardship
Council (FSC(R)). The inks used are vegetable
oil based.

Printed alcohol free by CPI Colour -
an ISO14001, FSC and CarbonNeutral®
certified company.

Design by saslondon.com
Words by Tim Rich
Photography by Luke Hayes
Board portraits by John Wildgoose

Land Securities Group pLC
5 Strand, London WC2N 5AF

T
E

+44 (0)20 7413 9000
investor.relations@
landsecurities.com
W www.landsecurities.com

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Annual Report 2013