Operational Review - Part 2

Marks & Spencer Group PLC
12 July 2004



Issued: Monday 12 July 2004

Part 2 of 2

         
         Marks and Spencer Group plc ('Marks & Spencer' or the 'Group')
                             Operational Review

Appendix 2

We commissioned DTZ, an external valuer, to produce a valuation on an existing
use value basis for Marks & Spencer's operational stores and other properties
and a market value basis for non-operational properties. The property portfolio
has been valued at approximately £3.6 billion. This compares to a current net
book value for the total property portfolio of £2.2 billion, giving a surplus
over net book value of approximately £1.4 billion.

It is not our intention to dispose of the property portfolio. However, the
estimated amount of tax on chargeable gains that would be payable on the
portfolio if it were sold at a value of £3.6 billion is approximately £230
million. The calculation relates only to the tax on potential gains.

DTZ Valuation Report

                                                         9 July 2004
The Directors
Marks and Spencer Group p.l.c.
35 North Wharf Road
LONDON
W2 1NW


Gentlemen

Valuation of a property portfolio held by Marks and Spencer Group p.l.c.

1    Introduction

In accordance with instructions, dated 9 July 2004, received from Marks and
Spencer Group p.l.c. (the 'Company'), with the exceptions of 11 properties we
have inspected the 92 freehold or heritable, 331 leasehold and 67 part freehold/
part leasehold properties (the 'Properties') that are owned by the Company, in
order to advise you of our opinion of the value of the interests held by the
Company in each of the Properties at 9 July 2004. The bases of valuation we have
adopted are referred to in Section 6 of this report.

The majority of the Properties are occupied by the Company for the purpose of
its business, although parts of certain of the owner-occupied properties have
been let to third parties. Two of the Properties are held as investments, 29 of
the Properties are surplus to the Company's requirements and 459 of the
Properties are occupied by the Company.

2    Inspections

With the exception of 11 of the Properties, which we have not inspected, the
Properties were subject to internal and external inspections during June and
July 2004. Our internal inspections for the purposes of this valuation were
generally in respect of only the trading floors of the owner occupied
properties.

We did not undertake inspections of 11 of the Properties (all of which are
recent acquisitions) for the purposes of this Valuation Report due to the late
identification of these properties to us by the Company. However, we are
familiar with the locations of these properties and have relied on information
provided to us by the Company concerning the characteristics of these
properties.

3    Purpose of the valuations and compliance with the City Code on Takeovers 
     and Mergers and the Appraisal and Valuation Standards

We understand that the valuations are for the addressees use only, including for
use in connection with a potential offer for the Company. We also understand
that, subject to the provisions of item 10 of this valuation report (the
'Valuation Report') our Valuation Report may be included in certain press
announcements to be made by the Company. We have prepared the valuations and the
Valuation Report firstly, in accordance with relevant requirements of the City
Code on Takeovers and Mergers and secondly, in accordance with the appropriate
sections of the current Practice Statements ('PS') and United Kingdom Practice
Statements ('UKPS') contained in the RICS Appraisal and Valuation Standards, 5th
Edition (the 'Red Book').

In accordance with your instructions relating to the commercial sensitivity of
publishing individual property values, descriptions, tenure details and
addresses, we have not included such information within the Valuation Report.

The valuation instruction is for a purpose included in the definition of
Regulated Purpose Valuations as referred to in UKPS 5 of the Red Book and,
therefore, in accordance with UKPS 5.4 we have made certain disclosures in
connection with this valuation instruction and our relationship with the
Company. These are included in item 5 below.

4    Status of valuer and conflicts of interest

We confirm that we have undertaken the valuations acting as external valuers as
defined in the Glossary of the Red Book, qualified for the purpose of the
valuations.

We have existing fee earning relationships with certain of the Company's
landlords in respect of 41 of the Properties. We have made the Company aware of
our existing instructions on the relevant Properties and have made our existing
clients aware of this instruction and have received the necessary confirmations
that we may proceed with the valuation on behalf of the Company.

5    Disclosures required under the provisions of UKPS 5.4

5.1  Name of signatory

We have not provided valuation reports to the Company for the same purpose as
this Valuation Report. However, we have undertaken valuations of the Company's
Properties for other purposes since 2000, and the signatories of these reports
have been Robert Peto (2000), Gillian Rushmore and Mark Williams (2001, 2002,
2003).

5.2  DTZ's relationship with the Company

DTZ Debenham Tie Leung provides and has provided valuations of the Company's
occupational and investment properties and valued in the past 60 of the
Company's stores in connection with the securitisation of the relevant interests
therein. In addition, DTZ Debenham Tie Leung has provided ad hoc property advice
in connection with various aspects of the Company's property portfolio

5.3  Fee income from the Company

DTZ Debenham Tie Leung is a wholly owned subsidiary of DTZ Holdings plc (the
'Group'). In the Group's financial year to 30 April 2004, the proportion of
total fees payable by Marks and Spencer p.l.c. to the total fee income of the
Group was less than 5 per cent.

6    Bases of valuation

6.1  Properties occupied by the Company - Existing Use Value

The value of each of the Properties occupied by the Company has been assessed in
accordance with the relevant parts of the current RICS Appraisal and Valuation
Standards. In particular, we have assessed the Existing Use Value of the
properties in owner occupation in accordance with UKPS 1.3. Under these
provisions 'Existing Use Value' means '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 wherein the
parties had acted knowledgeably, prudently and without compulsion, assuming that
the buyer is granted vacant possession of all parts of the property required by
the business and disregarding potential alternative uses and any other
characteristics of the property that would cause its Market Value to differ from
that needed to replace the remaining service potential at least cost'.

In undertaking our valuations on the basis of Existing Use Value, we have
applied the interpretive commentary of Market Value, which has been settled by
the International Valuation Standards Committee and which is included in PS 3.2,
together with the supplementary commentary which is included in items 2 - 5 of
UKPS 1.3.

Where the Company is in occupation of the Properties, or part(s) thereof, the
Existing Use Value of each of the Properties reflects full vacant possession of
all elements that are occupied by the Company. Where part(s) of Properties
otherwise occupied by the Company are subject to leases granted by the Company
to third parties, these leased parts have been taken into account and they have
been valued on the basis of Market Value, as defined below in 6.3.

Where we consider it to be appropriate, we have undertaken our existing use
valuations of certain of the Properties as fully equipped operational entities
having regard to trading potential.

In accordance with the commentary to UKPS 1.3 where we consider certain of the
Properties have a higher value due to their potential to be divided into smaller
units for the existing use, this has been reflected in our valuation of the
relevant Properties. For this purpose we have relied on cost estimates provided
by the Company's quantity surveyors, as described in Section 8.9 of this
Valuation Report.

6.2  Existing Use Value based on a Special Assumption

A special assumption is referred to in the Glossary in the Red Book as an
assumption that either requires a valuation to be based on facts that differ
materially from those that exist at the date of valuation or is one that a
prospective purchaser (excluding a purchaser with a special interest) could not
reasonably be expected to make at the date of valuation, having regard to
prevailing market circumstances ('Special Assumption').

In accordance with your instructions, we have undertaken our existing use
valuation of one store (amounting to approximately 0.2% of the total portfolio
value) on a Special Assumption that the Company has good freehold title to the
entirety of that store at the date of valuation.

6.3  Properties held as investments and properties surplus
     to the Company's requirements - Market Value

The value of each of the Properties that are either held as investments or are
surplus to the Company's requirements has been assessed in accordance with the
relevant parts of the current RICS Appraisal and Valuation Standards. In
particular, we have assessed Market Value in accordance with PS 3.2. Under these
provisions, the term 'Market Value' means '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 wherein the
parties had each acted knowledgeably, prudently and without compulsion'.

In undertaking our valuations on the basis of Market Value we have applied the
interpretive commentary which has been settled by the International Valuation
Standards Committee and which is included in PS 3.2. The RICS considers that the
application of the Market Value definition provides the same result as Open
Market Value, a basis of value supported by previous editions of the Red Book.

The properties held as investments form part of larger centres with the
remainder of the centres being occupied and traded as a Marks & Spencer store.
The Market Values we have attributed to the freehold interest in the properties
reflect the fact that the Marks & Spencer stores are continuing to trade as such
at the date of the valuation and that the stores produce no income, or give rise
to any irrecoverable outgoings, for the purchaser of the freehold interest of
each of the properties. In arriving at our opinion of the Market Values we have
made an Assumption that the properties would be capable of sale independently of
the Marks & Spencer store without any onerous conditions or restrictions.

6.4  Taxation and costs

We have not made any adjustments to reflect any liability to taxation that may
arise on disposals, nor for any costs associated with disposals incurred by the
owner. No allowance has been made to reflect any liability to repay any
government or other grants, taxation allowance or lottery funding that may arise
on disposals.

The Existing Use Value or Market Value, which we have attributed to each of the
Properties, reflects the price we consider a purchaser would pay the vendor for
each of the Properties, in accordance with the bases of value defined above (ie
our opinion of the consideration that would appear in the hypothetical sale and
purchase contract).

In calculating the Market Values of the investment properties and the properties
that are surplus to the Company's requirements, we have made deductions to
reflect purchasers' normal acquisition costs. In calculating the Existing Use
Values of the owner-occupied properties we have made deductions to reflect
purchasers' normal acquisition costs where appropriate.

We have checked the postcode of each of the Properties against the Inland
Revenue 'Stamp Taxes - Disadvantaged Areas Postcode Search' web page and
www.easyconvey.co.uk which confirm that certain of the Properties fall within an
area designated as a disadvantaged area under The Stamp Duty (Disadvantaged
Areas) (Application of Exemptions) Regulations 2003. As such these properties
are not subject to stamp duty on sale and our valuations reflect stamp duty at a
zero rate. Your solicitors have confirmed that our analysis is correct in the
majority of cases. However, in respect of a number of the Properties, which
account for approximately 9% of the total portfolio value, your solicitors have
not been able to confirm that in their opinion, our analysis is correct. We
recommend that your solicitors should be asked to investigate further in due
course so that they can confirm whether or not the exemptions are applicable at
the valuation date. Should our Assumptions in this respect be incorrect then we
reserve the right to amend our valuations accordingly. It should be noted that
the stamp duty exemption on some properties could be liable for withdrawal at
any time.

The valuations included in this Valuation Report are net of value added tax at
the prevailing rate.

6.5  Amethyst Properties

In assessing the Existing Use Value of those of the Properties owned by Amethyst
Leasing (Properties) Limited, a subsidiary of the Company, the inter-company
lease between Amethyst and the Company has been disregarded.

6.6  Diamond Properties

The Company occupy certain of the Properties under leases expiring on 31 March
2027. The rents are subject to fixed annual increases from 29 September 2002.
There are two clusters of break option dates. Firstly, on 31 March 2006, 31
March 2007 and 31 March 2008 and secondly, on 31 March 2011, 31 March 2012 and
31 March 2013. By serving a surrender notice not less than six months prior to
the relevant option date, the Company may surrender certain leases. In relation
to the first and fourth option dates, the number of properties is limited so
that the combined rental obligations of such properties do not exceed 5% of the
aggregate of the initial passing rents, as adjusted for the fixed rental
up-lifts. If, on these dates, the full percentage figure is not claimed, a
maximum of 1% can be carried forward and added to allowable percentages at
subsequent option dates within each cluster.

The condition relating to the percentage of the aggregate of the initial passing
rents, as adjusted for fixed rental up-lifts, means that the break options
relate to the Diamond properties as whole and therefore the break options have
been disregarded for the purpose of assessing the Existing Use Value of
individual properties.

6.7  Freehold and leasehold apportionments

Certain of the Properties are mixed tenure and therefore held on a part freehold
/part leasehold basis.

In respect of these mixed tenure properties, where it is our opinion that the
various interests in the adjoining parts of each property would be most likely
to be lotted together in the event of a sale, we have also attributed a single
capital value to the combined interests. However, in respect of each mixed
tenure property, we have also undertaken a notional apportionment of the
Existing Use Value and the Market Value between the various freehold and
leasehold property interests identified and the aggregate of these amounts are
included within the totals referred to in item 9 of this Valuation Report.

6.8  Individual properties

Our capital valuations under both bases of valuation relate to each of the
Properties on an individual basis and you should note that there could be
addition to, or reduction in, the aggregate of those individual values if all
the Properties were to be included in a single sale or if certain of the
Properties were to be sold in groups.


7    Currency

Our valuations of the Properties in the Republic of Ireland have been included
in this Valuation Report in £ sterling, based on an exchange rate of £1 =
€1.49582 as at 9 July 2004.

8    Assumptions and sources of information

An Assumption is stated in the Glossary to the Red Book to be a 'supposition
taken to be true' ('Assumption'). Assumptions are facts, conditions or
situations affecting the subject of, or approach to, a valuation that, by
agreement, need not be verified by a valuer as part of the valuation process. In
undertaking our valuations, we have made a number of Assumptions and have relied
on certain sources of information. Where appropriate, the Company has undertaken
its own enquiries and with the exception of the Special Assumption referred to
in Section 6.2 has confirmed that our Assumptions are correct so far as they are
aware. In the event that any of these Assumptions prove to be incorrect then the
value of the Properties could vary from the valuations in this Valuation Report.
The Assumptions we have made for the purposes of our valuations are referred to
below:-

8.1  Title

We have not had access to the title deeds of any of the Properties. However, in
respect of the Properties owned by Amethyst and also the properties known as the
Amethyst reserve properties, we have reviewed Certificates of Title dated 29
November 2001 prepared by the Company's legal advisors. Save as disclosed in the
Certificates of Title and unless specifically advised to the contrary by the
Company or its legal advisors, we have made an Assumption that the Company is
possessed of good and marketable freehold, heritable and/or leasehold title in
each case and that the Properties are free from rights of way or easements,
restrictive covenants, disputes or onerous or unusual outgoings. No account has
been taken of any mortgages, standard securities, debentures or other security
which may exist over any of the Properties.

8.2  Condition of structure and services, deleterious
     materials, plant and machinery and goodwill

Due regard has been paid to the apparent state of repair and condition of each
of the Properties, but condition surveys have not been undertaken for the
purposes of these valuations, nor have woodwork or other parts of the structures
which are covered, unexposed or inaccessible, been inspected. Therefore, we are
unable to report that the Properties are structurally sound or free from any
defects. We have made an Assumption that the Properties are free from any rot,
infestation, adverse toxic chemical treatments, and structural or design
defects.

We have not arranged for investigations to be made to determine whether high
alumina cement concrete, calcium chloride additive or any other deleterious
materials have been used in the construction of any of the Properties or in any
alterations, and therefore we cannot confirm that the Properties are free from
risk in this regard.

We have been advised however that the Company commissioned an assessment of
whether high alumina cement ('HAC') was used in the construction of any of their
properties, or any extensions thereto, in 1993. This was undertaken by a number
of structural consultants, co-ordinated by the Company's consulting engineers. A
desk top appraisal of structural record drawings was undertaken to determine the
construction at each store. Any stores that contained HAC or had sections of
floors where the records were not clear, were physically inspected, with the
removal of ceiling and other finishes as appropriate, in order to determine
their condition.

In 1993, only nine stores were found to contain HAC. This was found in pre-cast
concrete floor planks. No significant problems or defects were noted and they
concluded in 1993 that these elements were adequate for their purpose. A further
inspection of two of the stores was undertaken by the Company's consulting
engineers in October 2001 and update reports were provided to the Company in
November 2001. In both cases, the Company's consulting engineers advised that
there was no evidence of any deterioration in the HAC in either store and they
expressed the opinion that 'providing any water leakage is attended to as soon
as possible and the general environment and loading is not significantly
altered, then the existing HAC construction should remain adequate for the
remaining life of the building'.

The Company's consulting engineers also recommended that periodic inspections of
the relevant areas of the construction should be undertaken at not more than 10
year intervals.

With regard to the presence of chlorides or other deleterious materials, the
Company's consulting engineers have advised us that from their knowledge of
working on the Company's projects over the last 30 years, additives were
generally not used in construction. The only concern would be with those stores
which have wholly in-situ concrete frames and floors, of which there are
relatively few, and these are all generally of an age prior to the use of such
additives. Their view is that they would expect the presence of such materials
to be readily visible by the cracking, crazing and spalling of the concrete.
This type of problem would be apparent when the buildings are generally
surveyed. They can confirm that, from their considerable experience in dealing
with the stores, they have no records of any such defects.

We have relied upon and reflected the advice of the Company's consulting
engineers referred to above in undertaking our valuations of each of the
Properties.

For the purposes of these valuations, we have made an Assumption that any
further investigations would not reveal the presence of any deleterious
materials in any adverse condition, save as referred to above.

The Company has advised us that in 2003 Crossways Environmental Services Limited
inspected those of the Properties which are under the Company's control in
connection with the Control of Asbestos at Work Regulations 2002, in order to
identify where asbestos was present and also to advise whether the asbestos
should be removed from any of the Properties in order to comply with the 2002
Regulations. The Company has advised that in each case where Crossways
Environmental Services Limited identified the presence of asbestos and advised
that it should be removed, the category A works involving the removal of
asbestos will be undertaken within the two year time period as set out in the
legislation. The Company's quantity surveyors have advised us of the costs
involved in undertaking the works to remove asbestos and we have reflected them
in our valuations. Asbestos is still present in a number of the Properties,
where Crossways Environmental Services Limited advised removal was not required
in order to comply with the 2002 Regulations. In respect of these properties, if
our Existing Use Valuations reflect the potential for the store to be divided
into smaller units for retail use, the cost of asbestos removal has been
included in the conversion cost estimates provided by the Company's quantity
surveyors, as referred to in Section 8.9 of this Valuation Report.

No mining, geological or other investigations have been undertaken to certify
that the sites are free from any defect as to foundations. We have made an
Assumption that the load bearing qualities of the sites of the Properties are
sufficient to support the buildings constructed, (or to be constructed) thereon.
We have also made an Assumption that there are no abnormal ground conditions,
nor archaeological remains present, which might adversely affect the present or
future occupation, development or value of any of the Properties.

No tests have been carried out as to electrical, electronic, heating, plant and
machinery, equipment or any other services nor have the drains been tested.
However, we have made an Assumption that all services are functioning
satisfactorily.

We do not have the architectural and engineering advice required to undertake a
detailed analysis of the different ways in which the Properties could be
developed or their structural suitability for different developments.
Accordingly, our valuations of certain of the Properties are based on
Assumptions as to their suitability for the development reflected in our
valuations.

In general, our valuations include the Company's fitting out work such as shop
fronts, suspended ceilings, floor and wall finishes and electrical wiring and
items of plant and machinery normally regarded as forming part of the building
service installations such as lifts, escalators, central heating and
air-conditioning installations.

With the exceptions of those of the Properties we have valued as fully equipped
operational entities having regard to trading potential, our valuations do not
include process plant or installations associated with telephones, computers or
trade shop fitting.

No account has been taken in any of our valuations of any goodwill that may
arise from the current occupation of the Properties.

It is a condition of DTZ Debenham Tie Leung Limited or any related company or
any of our qualified employees, providing advice and opinions as to value, that
the client and/or third parties (whether notified to them or not) accept that
the Valuation Report in no way relates to, or gives warranties as to the
condition of the structure, foundations, soil and services of any of the
properties.

8.3  Environmental matters

We have made enquiries of the Company in the past, in order, so far as
reasonably possible, to establish the potential existence of contamination
arising out of previous or present uses of any of the sites and any adjoining
sites. We have also reviewed copies of environmental reports prepared by WSP
Environmental Ltd in 2001 in respect of those Properties owned by Amethyst and
the Amethyst reserve properties and prepared by White Young Green Environmental
in 2003 in respect of nine of the warehouse properties. We have made an
Assumption that the information and opinions we have been given are complete and
correct. As agreed, we have not made any enquiries of the environmental
authorities.

Our enquiries and inspections and the environmental reports referred to above
have provided no evidence that there is a significant risk of contamination in
respect of any of the Properties that is sufficient to affect value.
Accordingly, you have instructed us to make an Assumption that no contamination
or other adverse environmental matters exist in relation to the Properties
sufficient to affect value. Other than as referred to above, we have not made
any investigations to establish whether there is any contamination or potential
for contamination to the Properties.

Commensurate with our Assumptions set out above we have made no allowance in
these valuations for any effect in respect of actual or potential contamination
of land or buildings. A purchaser in the market might, in practice, undertake
further investigations than those undertaken by us. If it is subsequently
established that contamination exists at any of the Properties or on any
neighbouring land, or that the premises have been or are being put to any
contaminative use then this might reduce the values now reported.

8.4  Areas

With the exceptions referred to below, the valuations in this Valuation Report
are based on floor areas that have been measured and calculated by either one of
the Company's property advisers or by Plowman Craven & Associates. We have made
an Assumption that the floor areas were measured and calculated in accordance
with the RICS Code of Measuring Practice (the 'Code') for each of the
Properties. The exceptions are in respect of those of the Properties acquired
since 31 March 2001. We have measured certain of these properties on site or by
scaling from floor plans provided by the Company or its advisers and have
calculated the floor areas in accordance with the Code. The Company has provided
us with the floor areas of the remaining properties. We have made an Assumption
that these areas have been calculated in accordance with the Code.

8.5  Statutory requirements and planning

For the purposes of this valuation we have not made enquiries of the relevant
planning authorities in whose areas the Properties lie as to the possibility of
highway proposals, comprehensive development schemes and other ancillary
planning matters that could affect property values. Neither have we made
enquiries of the relevant authorities as to the likelihood of obtaining such
planning consents and Building Regulations approvals as would be required for
any development of, or other alterations to, certain of the Properties that are
reflected in our valuations.

Save as disclosed in the Certificates of Title in respect of the Amethyst
properties and unless otherwise advised by the Company, we have made an
Assumption that the buildings have been constructed in full compliance with
valid town planning and building regulations approvals, that where necessary
they have the benefit of current Fire Certificates, and that the Properties are
not subject to any outstanding statutory notices as to their construction, use
or occupation. Unless our enquiries have revealed the contrary, we have made a
further Assumption that the existing uses of the Properties are duly authorised
or established and that no adverse planning conditions or restrictions apply.

No allowances have been made for rights, obligations or liabilities arising
under the Defective Premises Act 1972, and we have made an Assumption that the
Properties comply with all relevant statutory requirements.

We would draw your attention to the fact that employees of town planning
departments now always give information on the basis that it should not be
relied upon and that formal searches should be made if more certain information
is required. We assume that, if you should need to rely upon the information
given about town planning matters, your solicitors would be instructed to
institute such formal searches.

8.6  Leasing

We have read copy headleases in respect of certain of the Properties. Where we
have not read copy headleases, we have relied on outline tenure details supplied
by the Company or its legal advisers.

We have relied on information provided by the Company in respect of the terms of
occupational leases granted by the Company.

We have not undertaken investigations into the financial strength of the
tenants. Unless we have become aware by general knowledge, or we have been
specifically advised to the contrary we have made an Assumption that the tenants
are financially in a position to meet their obligations. Unless otherwise
advised we have also made an Assumption that there are no material arrears of
rent or service charges, breaches of covenants, current or anticipated tenant
disputes.

However, our valuations reflect the type of tenants actually in occupation or
responsible for meeting lease commitments, or likely to be in occupation, and
the market's general perception of their creditworthiness.

We have also made an Assumption that wherever rent reviews or lease renewals are
pending or impending, with anticipated reversionary increases, all notices have
been served validly within the appropriate time limits.

8.7  Information

We have made an Assumption that the information the Company and its professional
advisers have supplied to us in respect of the Properties is both full and
correct.

It follows that we have made an Assumption that details of all matters likely to
affect value within your and their collective knowledge such as prospective
lettings, rent reviews, outstanding requirements under legislation and planning
decisions have been made available to us and that the information is up to date.

8.8  Properties valued as fully equipped operational
     entities having regard to trading potential

We have undertaken our valuations of certain of the Properties as fully equipped
operational entities having regard to trading potential. In this connection, the
Company has provided to us financial information including EBITDA and turnover
information on a property by property basis. We have reviewed the trading
accounts for current and previous years. We have relied on the financial
information provided by the Company and have made an Assumption that it is full,
up to date and correct. In addition, our valuations are based on an Assumption
that existing licences, consents, registrations, permits and certificates can be
renewed. Consumable stocks have been excluded from our valuations of these
properties. Further, our valuations of these properties have been based on the
Assumption that:

   • The businesses will at all times be effectively and competently managed,
    operated and promoted.
   • The businesses will be properly staffed, stocked and capitalised.


8.9  Building costs

In undertaking our existing use valuations in respect of certain of the
Properties, we have considered the potential to convert the retail stores to a
number of smaller units of retail accommodation. As part of this exercise, we
have relied on general cost estimates for the conversion works provided by the
Company's quantity surveyors, Gleeds, and have reflected these estimates in our
valuations. We have assumed that these estimates reflect the approximate costs
likely to be incurred in undertaking the works.

In carrying out this exercise, the Company's quantity surveyors have not
received advice in respect of architectural, structural or engineering services
requirements.

9    Valuation

9.1  Properties occupied by the Company - Existing Use Value

We are of the opinion that subject to the Assumptions and Special Assumption
referred to in this Valuation Report, the aggregate of the Existing Use Values,
as at 9 July 2004, of the freehold, heritable, leasehold and part freehold/part
leasehold interests in the properties, is as follows:-

Freehold/                  One billion, eight hundred and forty-four million,
Heritable £1,844,940,000   nine hundred and forty thousand pounds                           

Long                       One billion, five hundred and fifty-six million, six
leasehold £1,556,635,000   hundred and thirty-five thousand pounds

Short                      Thirty-six million, three hundred and ninety thousand
leasehold    £36,390,000   pounds
                           
Sub total                  Three billion, four hundred and thirty-seven million,
value     £3,437,965,000   nine hundred and sixty-five thousand pounds
                           
Sub total                  Negative Thirty million, four hundred and ninety-five
Negative    (£30,495,000)  thousand pounds
value                      

The Existing Use Values assume vacant possession of those parts of the
Properties that are occupied by the Company. It should be noted that certain of
the above Existing Use Values include the Market Values of relatively small
parts of certain of the Properties for which the greater part is valued on the
basis of Existing Use Value.

A long leasehold interest is defined as one having more than a 50 years
unexpired term.

9.2  Properties held as investments and properties surplus
to the Company's requirements - Market Value

We are of the opinion that subject to the Assumptions in this Valuation Report,
the aggregate of the Market Values, as at 9 July 2004, of the freehold,
heritable, leasehold and part freehold/part leasehold interests in the
properties, is as follows:-

Freehold/                  Sixty-eight million, seven hundred and five thousand
Heritable    £68,705,000   pounds

Long                       
leasehold    £90,250,000   Ninety million, two hundred and fifty thousand pounds

Sub total                  One hundred and fifty-eight million, nine hundred and
Value       £158,955,000   fifty-five thousand pounds
                           
Sub total
Negative     (£2,010,000)  Negative Two million and ten thousand pounds
Value


9.3  Apportionments of value for part freehold/part leasehold properties

As referred to in Section 6.7, the figures in Sections 9.1 and 9.2 include
notional apportionments of value between the freehold and long leasehold
elements of the mixed tenure properties. The figures attributed to these various
elements within the mixed tenure properties as a result of the notional
apportionments do not themselves represent the Existing Use Value or the Market
Value of the individual elements of such properties.

10   Confidentiality and disclosure

The contents of this Valuation Report are for the sole benefit and use of the
addressees including for use in connection with a potential offer for the
Company. Consequently, and in accordance with current practice, no
responsibility is accepted to any other party in respect of the whole or any
part of the contents of this Valuation Report. Before this Valuation Report, or
any part thereof, is reproduced or referred to, in any document, Circular or
statement, and before its contents, or any part thereof, are disclosed orally or
otherwise to a third party, DTZ's written approval as to the content, form and
context of such publication or disclosure must first be obtained. Such
publication or disclosure will not be permitted unless, where relevant, it
incorporates the Special Assumption referred to herein. For the avoidance of
doubt such approval is required whether or not DTZ Debenham Tie Leung Limited
and/or DTZ Pieda Consulting Limited are referred to by name and whether or not
the contents of our Valuation Report are combined with others.

Yours faithfully


G C RUSHMORE BSc FRICS                  M WILLIAMS BSc MBA MRICS
DIRECTOR                                DIRECTOR
For and on behalf of                    For and on behalf of
DTZ Debenham Tie Leung Limited          DTZ Debenham Tie Leung Limited

C H SMITH MRICS
DIRECTOR
For and on behalf of
DTZ Debenham Tie Leung Limited



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