Final Results - Year Ended 31 March 2000, Part 2

Peel Hldgs PLC
1 June 2000

Part 2


Extract from the Chairman's Statement

The Peel Group enjoyed a period of further growth for the year ended 31st March
2000.  The year was marked by a strong first full year's contribution  from  The
Trafford  Centre  and  by the completion of a substantial  refinancing  exercise
which has given the Group additional financial security and flexibility.

Before an  exceptional charge of £60.69m relating to prepayment  penalties  and
breakage costs on existing bank loans to enable the refinancing exercise to take
place,  profit before tax improved by 22.9% to £22.77m. As a consequence of  the
exceptional  charge,  the  absorbed loss for the year  totalled  £50.66m. After
taking into account the absorbed loss and also the purchase by the  Company  of
its  own  shares for cancellation at a cost of £20.58m and a property  valuation
uplift of £52.31m, there was a reduction in shareholders' funds of £18.43m from
£839.81m  to  £821.38m.  Despite  the  reduction  in  shareholders' funds,  the
Company's continuing purchases of its own shares during the period helped fully
diluted  net  assets per ordinary share at 31st March 2000 to increase  to  988p
(1999:  965p). The fully diluted net asset value of each ordinary share  reduces
to  909p when adjusted to reflect the post tax market value of the Group's fixed
rate  debt  at  the  year  end. Basic earnings per ordinary  share  (before the
exceptional  charge) were up 63.2% at 24.29p after an effective  tax  charge  of
10.5%. The  Board  recommends a final dividend of 7.8p per ordinary  share, an
increase  of  14.7% over that for the previous year, making a total distribution
for the year of 11.5p (1999: 10.0p).

In  January 2000, the quotation of the Company's shares moved from the  Official
List to  the  Alternative Investment Market, partly to sustain a  share  buy-in
programme  for  both ordinary shares and convertible preference  shares  in  the
Company.  Following  on from this, the Board has today announced  Tender Offers
with  Credit  Lyonnais Securities under which shareholders  will  be  given the
opportunity to sell ordinary and convertible preference shares. Details are  set
out in a Circular of 1st  June 2000 to shareholders.

Overall,  the conditions in the UK economy remained favourable during  the  year
with  steady growth and the Group's underlying operations performed respectably.
Details  of the performance of each of the divisions is set out in the Operating
and Financial Review.

The  increase  in  profit  before  tax  (before  the  exceptional  charge)  was
attributable  mainly  to  the substantial increase in  rental  income  from  The
Trafford  Centre  to  £49.68m  (1999:  £20.49m) for  the  full  financial  year.
Elsewhere, the Group continued to improve the overall quality of its UK property
investment portfolio  by active management and selective  sales.  However, the
recent increases in stamp duty on property transactions are harmful and are now
having  a  detrimental effect on values and discouraging activity.  The  Group's
 total  annual  net  rental income, including The Trafford  Centre,  was 
£91.74m (1999:  £62.51m).  Conditions for development activity were positive 
with  firm tenant demand in most sectors. Six  developments were completed
during the year producing profit, realised and unrealised, in excess of £5.0m.

The  Group continued to manage its substantial landholdings effectively, winning
some new  permissions  in  an  increasingly hostile  planning  environment and
achieving  a profit of £2.17m from land sales. However, the Group's contribution
to  regional  regeneration  would be much faster with  a  planning  system  more
conducive  to investment and development. The waste and minerals division  found
conditions  tougher with reduced income of £0.73m (1999: £0.88m), largely  as  a
result  of the competitive conditions in the landfill and construction  markets.
The  port's  operating  profits at £2.84m were also well down  on  the  previous
year's £3.92m, although liquid traffics held up well. In the airports' division,
 significant progress in passenger throughput at Liverpool Airport, now over two
million on an annualised basis, was achieved but there is still a long way to go
to  make  this operation profitable, especially following the abolition of duty
free  sales within the European Union which has cost over £1m per annum  on  the
bottom  line. Good progress was also achieved on the planning process to convert
the former RAF base at Finningley near Doncaster, purchased in June 1999, into a
commercial airport.

In February this year, the Company completed a £610m securitised bond issue  at
an interest rate of just under 7% per annum with an average life of  28  years
secured on  the assets and income stream of The Trafford Centre. The  size  and
terms  of the issue reflect the quality of The Trafford Centre and, as mentioned
earlier,  this has provided the Group with considerable financial  security and
certainty going forward. It also led to the repayment of existing bank loans of
£340m  and  the closing down of incidental financial instruments. The exit  cost
from these arrangements produced the exceptional charge for the year of £60.69m,
but the replacement fixed rate securitisation issue is a substantial benefit to
the Group for the long term.

For  the  future,  the  Group's  strategy  will  continue  to  be  centred   on
opportunities around property, land and transport where the Group can add  value
or  where  there  is a special angle to develop assets which  are  of  strategic
importance sectorally or geographically. In addition, the Group will continue to
maximise   returns  from  its  investment  property  portfolio   and   extensive
development  programme  and  also by building up  and  working  effectively  the
Group's  range  of  other  diverse  assets,  including  its  airports  and  port
interests.

The  economic  environment remains benign with investor sentiment  and  business
confidence solid and it would appear that interest rates will peak in this cycle
at levels  not much higher than the present. The main drivers for progress  are
therefore  in  place and I am confident that with an encouraging commercial  and
economic environment the Group has the necessary physical and human resources to
deliver further asset and earnings growth.


John Whittaker
Chairman



Extract from the Operating and Financial Review

Earnings
Operating  profit increased by £22.81m (35.6%) to £86.90m (1999: £64.09m).  This
was largely attributable to an increase of £21.77m in property investment profit
to  £76.91m  (1999:  £55.14m) which included for the first time  a  full year's
contribution  from  The Trafford Centre. Property trading  profit  increased by
£0.72m  to  £3.94m  (1999: £3.22m). In addition, there  was  no  repeat  of  the
impairment loss of £1.82m incurred in 1999.

These increases were offset by a reduction of £1.08m in port and canal operating
profit  to  £2.84m  (1999:   £3.92m) mainly  due  to  an  increase  in  abnormal
maintenance costs. There was also a negative contribution from Liverpool Airport
this  year of £0.43m, compared with last year's profit of £0.63m, a decrease of
£1.06m  which was largely as a result of the abolition of duty free sales within
the  European Union from 1st July 1999. Additionally, there was a small decrease
of £0.15m in income from waste and minerals to £0.73m (1999:  £0.88m).

Profit  on  disposal  of  fixed assets decreased from  £3.64m  in  the  previous
financial  year  to  £1.65m largely due to a reduced profit  of  £1.67m  on  the
disposal  of  investment properties (1999: £3.54m) from total sale  proceeds  of
£30.88m compared with £12.75m for the previous financial year.

The net interest charge increased by £16.57m (33.7%) to £65.77m (1999: £49.20m),
reflecting  a full year's charge for the borrowings relating to the  development
of  The Trafford Centre. Only £0.02m of interest (1999: £12.94m) was capitalised
during  the year. The rental income from The Trafford Centre helped to  increase
 the cover of net rental income to total net interest to 139.5% (1999: 127.1%).

The Group incurred an exceptional charge of £60.69m following the repayment  on
28th February 2000 of the £340m Trafford Centre loan facility. This exceptional
charge consisted of a prepayment premium of £27.34m and fixed rate loan breakage
costs of £33.35m. The reasons for incurring this charge are described within the
section headed 'Borrowings and Financial Resources'.

The above factors together contributed to an increase of £4.24m (22.9%) in pre-
tax profit (before the exceptional charge) to £22.77m (1999: £18.53m). After the
exceptional  charge of £60.69m, there was a loss on ordinary  activities  before
taxation of £37.92m.

The tax charge of £2.40m (1999: £4.50m) represents an effective rate of 10.5% of
pre-tax  profit before taking the exceptional charge into account (1999: 24.3%).
 The  tax charge consists of £2.14m of corporation tax (1999: £0.81m), £0.24m 
of deferred  tax  (1999: £1.06m) and the write-off of advance  corporation tax 
of £3.76m (1999:  £3.31m) incurred on the purchase by the Company of its own
shares which was offset by prior year adjustments of £3.74m (1999: £0.67m).

Basic earnings  per  share (before the exceptional charge) increased  by  9.41p
(63.2%) to 24.29p (1999: 14.88p) as a result of the increased pre-tax profit and
the lower tax charge. After the exceptional charge, the basic loss per ordinary
share was 54.53p.

After minority  interests and preference dividends, the  loss  attributable  to
ordinary  shareholders for the year amounted to £41.99m (1999: profit  £11.47m).
The  directors  propose an increased final dividend of 7.8p per  ordinary  share
(1999:  6.8p) which, if approved at the Annual General Meeting, will be paid  on
2nd  October  2000  to ordinary shareholders on the register  at  the  close  of
business  on  8th September 2000. This would make a total distribution  for  the
year  of  11.5p  per ordinary share (1999: 10.0p) which is covered  by  earnings
(before the exceptional charge) 2.2 times (1999: 1.5 times).

Balance Sheet
Consolidated shareholders' funds decreased by £18.43m (2.2%) to £821.38m  (1999:
 £839.81m)  producing fully diluted net assets per ordinary share of 988p 
(1999: 965p), an increase of 23p (2.4%).

The reduction in shareholders' funds was mainly due to the overall loss for the
year  of  £50.66m  and the purchase by the Company of its own  shares  totalling
£20.58m.  During  the  financial  year,  the  Company  bought  for  cancellation
2,330,000 of its own ordinary shares for a total cost of £10.74m, at an  average
price  of £4.61 per share. It also bought for cancellation 4,077,000 of its own
5.25%  convertible cumulative non-voting preference shares for a total  cost of
£6.60m  at  an average price of £1.62 per share. On 9th June 1999,  the Company
also cancelled  and repaid all of the class of the 2,700,000 10% non-redeemable
cumulative preference shares at a price of £1.20 per share for a total  cost of
£3.24m.  These  reductions in shareholders' funds were  partially  offset  by  a
£52.31m  uplift  from  the  revaluation at the year end  of  certain  investment
properties, of which £28.60m was attributable to the revaluation of The Trafford
Centre  to  £880.00m. The remainder of the revaluation was due to an  uplift of
£22.81m  on  various UK commercial investment properties and £0.90m  on  certain
land  assets. Other movements in shareholders' funds included a foreign exchange
gain  of  £0.46m and the issue of ordinary shares of £0.03m on the  exercise of
share options.

Although consolidated shareholders' funds decreased, fully diluted  net  assets
per ordinary  share actually increased due to the purchase by the  Company  for
cancellation during the year of its own shares at a substantial discount to  net
asset value.

The investment  property  portfolio of the Group at 31st  March  2000  totalled
£1,566.19m and is analysed over the various property sectors as follows:

                            Undevelop                 Capital Capital
                            ed Land Sq. Ft.     Sq.   Value  Value
                              Acres    '000  Metres   £'000      %
                                               '000
The Trafford Centre               -   1,308     122   880,000   56.2
Out-of-town retail               16   1,729     161   299,260   19.1
Town centre retail                -     469      44    53,435    3.4
Offices                           5   1,030      96    93,967    6.0
Industrial                       72   1,880     175    62,546    4.0
Sports and leisure              474     220      20    21,878    1.4
Land                          9,815      65       6   111,744    7.1
Waste and minerals            1,882       -       -     7,917    0.5
Overseas land and                32     212      20    35,442    2.3
property investment
                             12,296   6,913     644 1,566,189  100.0
                                                        

The Group's  portfolio of stock properties decreased to  £9.88m  compared  with
£14.80m  at 31st March 1999, as a result of the decrease in the amount  of  land
being held for development.

Cash Flow
The Group's net debt increased by £87.91m (13.4%) to £743.18m (1999:  £655.27m)
at the financial year end. This resulted from capital expenditure, interest paid
and  the  purchase of own shares which was partially offset by a  positive cash
flow from operating activities.

The amount generated from operating activities of £72.53m was £50.06m lower than
the previous year (1999: £122.59m). This was due to a VAT repayment of  £29.98m
by Customs and Excise in April 1999 not repeated this financial year in addition
to expenditure  of  £31.21m  on accrued costs to complete  in  respect of  The
Trafford  Centre.  Returns  on  investments  and  servicing  of  finance 
(pre-exceptional  item)  totalled £71.34m and were largely  unchanged  to  last 
year (1999:  £71.64m).  However, prepayment penalties and breakage costs  of 
£43.46m were paid in the year to enable the refinancing of The Trafford Centre.
The net capital  expenditure  and  financial  investment  included  £44.98m  of 
capital expenditure  (1999:  £160.72m) less proceeds from the sale of  fixed 
assets of £24.74m (1999: £10.06m).

As part  of The Trafford Centre refinancing the £340m Trafford Centre loan  was
paid  on 28th February 2000 following the issue of the £610m securitised  bonds.
Other associated costs of £18.11m were also incurred on raising the new finance.

Borrowings and Financial Resources
The Group's net borrowings at 31st March 2000 of £743.18m produced an increased
gearing ratio  of  net  debt to shareholders' funds  of  90.5%  (1999:  78.0%),
resulting  from  both  the  increase  in  borrowings  and  the   reduction   in
shareholders' funds.

The amount of fixed long term debt in the Group at the financial year  end  was
£867.36m (1999:  £616.46m) representing 85.1% of total gross borrowings  (1999:
85.5%) and was held at a fixed annual borrowing cost of 7.9% (1999: 9.6%).

During the year, the Group continued to comply with all its borrowing covenants.
The principal covenants relate to net worth, gearing, asset cover and  interest
cover, all of which were satisfied by a substantial margin at the financial year
end.  At 31st March 2000, the Group had spare bank facilities of £207.03m
(1999:£77.64m).

On 28th February 2000, the Group took advantage of market conditions to issue  a
610m  multi-  tranche securitised bond at an inclusive interest  rate  of  just
under  7%  per annum. The bonds are secured against the future rental income of
The Trafford Centre together with a legal charge over that asset. Part  of  the
net proceeds from the bond issue was used to repay the existing £340m  Trafford
Centre  loan facility which had a fixed interest rate plus an applicable  margin
totalling 9.33%. The bond issue, with an average life of 28 years, has  provided
the  Group with long term financial stability and has also significantly reduced
the  overall  average  interest rate of the Group. For  these  reasons,  it  was
considered  to  be  in the best interests of the Group to incur  the  prepayment
premium  of £27.34m and fixed rate loan breakage costs of £33.35m which resulted
in the exceptional charge of £60.69m.

The Group's objective continues to be to maintain sufficient facilities to meet
its financial requirements at the lowest achievable cost and at minimum risk.

The Treasury  function within the Group is controlled centrally  in  accordance
with prudent procedures approved by the Board. During the year, the  Group  did
not enter into any interest rate swaps, currency swaps, forward contracts or any
other derivative financial instruments other than a £100m interest rate swap on
28th  February 2000 at a strike rate of 6.66% in order to fix the interest  rate
to  the Group  over  the length of the bonds on the two tranches issued  at a
variable rate, namely the £50m Class A1 and £50m Class D1 Secured Notes.

The present market  value  of the Group's fixed rate  debt  shows  a  post-tax
'marking to market value' of £65.79m in excess of book value (1999:  £104.75m)
(or  £93.99m pre-tax (1999: £151.81m)). If these adjustments were  incorporated
into the  balance  sheet  at  the  year end,  it  would  deduct  79p  and  113p
respectively  from  the  fully diluted net asset value of  each  ordinary  share
(1999: 121p and 175p).

                       Loan                  Market               
                     Amount                   Value    31st   31st
                       31st Interest            31st   March  March
                      March                  March    2000   1999
Funding Source         2000    Rate Maturity    2000  Excess Excess
                      £'000       %           £'000   £'000  £'000
£200m First         200,000   9.875    2011 229,000  29,000 56,847
Mortgage Debenture
£20m First Mortgage  20,000  10.000    2026  27,475   7,475  8,977
Debenture
£12m First Mortgage  12,000  11.625    2018  17,235   5,235  6,439
Debenture
£10m First Mortgage  10,000  12.500 2015/20  15,000   5,000  5,494
Debenture
Perpetual               698   3.500 Perpetu   1,597     899    910
Debentures                               al
£50m Class A1        50,000   6.660    2013  50,599     599      -
Secured Notes
£340m Class A2      340,000   6.500    2033 358,445  18,445      -
Secured Notes
£120m Class B       120,000   7.030    2029 125,215   5,215      -
Secured Notes
£50m Class D1        50,000   6.660    2017  50,401     401      -
Secured Notes
£50m Class D2        50,000   8.280    2022  52,255   2,255      -
Secured Notes
Amortising Bonds     30,608   8.590    2014  34,120   3,512  3,751
£340m Bank Loan           -       -       -       -       - 69,394
FRS4 Adjustment    (15,950)       -       -       -  15,950      -
                          
                    867,356                 961,342  93,986 151,812
Tax relief                                          (28,196)(47,062)
                                                     
Net excess over                                      65,790 104,750
book value

The gross adjustment has reduced by £57.82m to £93.99m (1999: £151.81m) due  to
the increase  in interest rates during the year and the decision to  repay  the
£340m Trafford  Centre loan facility and replace it with the £610m  bond  issue
which is fixed at close to current market rates.

Accounting Standards and Policies
Two new financial reporting standards were adopted for the first time during the
financial year, namely FRS 15 'Tangible Fixed Assets' and FRS 16 'Current  Tax'.
Neither  of the new accounting standards had a significant impact on the  year's
financial statements.

The financial statements therefore comply with all accounting standards  issued
by the  Accounting Standards Board applicable to financial statements  at  31st
March 2000. The Group's accounting policies are consistent with previous years.

Year 2000
The Group completed its Year 2000 programme and has experienced no significant
problems in  this area to date. The costs associated with achieving  Year  2000
Compliance were not material and were charged to the profit and loss account  as
they were incurred.

The Trafford Centre
The Centre has enjoyed steady growth throughout the year as people change their
shopping habits  and the Centre establishes itself as the  premier  retail  and
leisure destination in the North West.

Visitor numbers at 23.5m for the financial year were in line with  expectations
and in the first three months of this calendar year, visitor numbers were  11%
higher than for the equivalent period in 1999. The Centre enjoyed a  successful
Christmas period. Like-for-like comparisons with the previous Christmas  showed
an  average 20%  increase in trade, again indicating the all  important  steady
growth.

Income from base rents on an annualised basis currently stands at £49.1m.  This
will increase by £1.3m upon the expiry of some rent free incentives and lettings
currently  with solicitors. There is only one shop unit currently  available to
let.  This  is in an important location next to Selfridges for which  the  right
occupier is awaited. Turnover rent produced an additional £1.8m in the financial
year.

Whilst many of the Centre's tenants are performing well, in recent months  some
retail groups  experienced difficulties. Knickerbox for example has  gone  into
administration  and  Arcadia  have  decided  to  close  their  Richards'  stores
throughout   the  country.  In  some  respects,  these  changes  are   seen  as
opportunities to introduce fresh retailers into the Centre, but they need to be
handled in a controlled and steady manner.

The Centre's reputation was heightened by the BBC television programme 'Shopping
City'  which  featured the Centre every weekday for several months,  reinforcing
the Centre's popularity particularly as a destination for coach trips.

The cinema  within the Centre is reported to be the busiest in  the  UK  and  a
succession of entertaining events in the Orient have helped establish  it  as  a
popular evening destination.

Improvements are continually sought at The Trafford Centre and  one  particular
area  of focus is the Festival Village. Additional car parking has been provided
at that  end of the site and a planning application has recently been submitted 
to convert one corner of the Festival Village into a second food court.

Within the  current retail sales environment, there has been  much  speculation
about the possible impact that might be created by the Internet. There may  well
be consumer  benefits  from on-line, home deliveries of  groceries,  where the
supermarkets  have  the infrastructure in place to service and  distribute, and
there  may  be other areas, particularly service orientated, where the  Internet
brings other advantages. However, such purchases are merely transactions, whilst
shopping at The Trafford Centre is an experience and a day out. The majority  of
the  retailers in the Centre are fashion orientated and consumers will  continue
to  want  to  touch,  feel  and  test  the merchandise.  The  Group is however
investigating  ways  in  which The Trafford Centre can work  with  and  use  the
Internet  to  the  advantage of all concerned, but the Group believes  that any
adverse  impact  will  be  confined to secondary  locations  which  should  only
reinforce the pre-eminence of schemes such as The Trafford Centre.

To further reinforce the Centre, the Group has submitted a planning application
for a  major  residential  and office scheme on  adjoining  land  next  to  the
Manchester Ship Canal. The scheme, which is known as Trafford Quays,  will  also
include a marina and a new 4/5 star hotel. In line with Government policy, the
objective is to create an area where people can live, work, shop and enjoy their
leisure time. The Trafford Quays application lies with the Government Office for
the  North  West, as does the application for a retail warehouse development on
the Giants Field site. Contrary to the recommendation of his own inspector, the
Secretary of State for the Environment, Transport and Regions refused permission
for  the  Giants Field development last year. That decision has now been quashed
and  it is expected that the Public Inquiry into the proposal will be re-opened.
At the  previous Inquiry, the Group put forward a funding proposal  that  would
have  enabled a Metrolink line to be built through Trafford Park to the Centre.
Funding  for other extensions of the Metrolink system has now been announced by
the  Government  and  an  agreement  is in place  with  the  Greater  Manchester
Passenger Transport Executive that it will also tender the Trafford Park line. A
line  to The Trafford Centre would enhance the commercial viability of the rest
of the network and it is hoped that a new funding package can be unveiled at the
re-opened  Giants  Field Inquiry which would at last lead to  the  long  awaited
construction of this new line.

The Centre  is committed to investing in all its employees and has demonstrated
this by  achieving the Investor in People Award in its opening year, the  North
West Tourist Board 'Training for Tourism' Award in June 1999, and as  an  equal
opportunities  employer  the Centre was awarded the EASE  Award  in  1999  which
underpins the commitment to staff and customers.

UK Commercial Property Investment Portfolio
The economy  improved  as  the year progressed, eventually  fuelling  fears  of
inflationary pressures and leading to precautionary increases in interest rates.
 Overall,   property  yields  tended  to  harden  and  there  was   evidence  of
strengthening rental growth in all sectors with the London area being  the  main
 focus  for  this growth. In previous years, the Group benefited from the strong
 performance  of  retail warehouses but this year it was the turn  of 
industrial property  to outperform other sectors, particularly in terms of
capital  growth, followed  by offices and then retail warehouses. Whilst showing
positive  growth virtually  across  the  board,  the Group's UK  commercial 
property  investment portfolio,  being  heavily weighted towards out-of-town
retail,  performed  less well than in recent years.

Despite a  favourable  economy, aggressive competition  amongst  retailers  cut
margins and  made life difficult for some operators, whilst others  flourished.
This, coupled with the perceived future impact of e- commerce in siphoning  off
demand  from  the  high  street  and boosting  demand  for  distribution  space,
contributed to the relative underperformance of the retail sector.
The Group  remains  confident  in its out-of-town  retail  portfolio  and  will
continue  to  adapt  and  develop to meet changing  requirements  of  retailers.
However,  the  Group has reduced its exposure to traditional high street  retail
investments (which are generally considered to be under the greatest threat from
the  e-commerce revolution) and which now represents only 3.4% of the portfolio.
The  Group's gradual but carefully considered disinvestment in this sector will
continue  with poorer performing properties being targeted. As in recent  years,
investment  in  new properties will come from the Group's development  programme
together with added value acquisitions and refurbishments on and around existing
 investments.  It  is also expected that the Group will continue  to  expand 
its investment within the sports and leisure sector.

Opportunities to increase the rent roll were hampered by a number  of  factors.
Few  high  value rent reviews and lease renewals fell within the financial  year
and  although  additional  income of £0.71m per annum was  generated  from this
source, this compared unfavourably with the previous year's figure of £1.28m per
annum.  A  similar amount of property was let as the previous year with  initial
rents  totalling  £2.91m per annum, but the receipt of much of this  income was
deferred  to the following financial year due to the grant of rent free periods.
 Combined annualised rents of £1.38m per annum were deferred in this way
compared with  £0.08m per annum the previous year. Rent lost from new vacancies
stood  at £1.95m per annum, well down on the £3.00m per annum in the previous
year.  There was  also  a net disinvestment in the portfolio as a result of a
combination  of the  ongoing  sales  programme  and relatively few  purchases 
which  caused  an annualised rental loss of £1.51m.

Nevertheless, the overall annualised net rent roll only fell by £0.70m per annum
to £33.96m. Of the growth generated within the portfolio, roughly half came from
the  development  activity  as  newly completed units  were  absorbed into  the
portfolio.  The  remaining growth was produced by the combined effects  of  rent
reviews, lease renewals, lettings and vacancies.

As mentioned, rents from new lettings exceeded that lost from units which  were
vacated. However, the total figure for voids increased. This was partly  due  to
lettings being achieved at rents significantly higher than the previous  passing
rent or previous forecast, and partly due to the purchase during the year of a
variety of properties for the purpose of future re-development which were either
wholly or partially empty. There also remained an overhang of vacant properties 
from  the  previous year's refurbishment programme which had not  been  let  as
quickly  as  originally anticipated. At the year end, vacant property  accounted
for  3.0%  of the total portfolio in terms of rental value and 6.2% in terms  of
floor area.

The Group maintained its commitment to improving the quality of its portfolio by
disposing  of  certain  poorly performing properties whilst  at  the  same  time
raising  £27.58m  in  capital  receipts for more profitable  reinvestment  which
included the purchase of eight properties for £7.33m, largely forre-development.

At  31st  March  2000,  78.5% of the Group's UK commercial  property portfolio,
excluding The Trafford Centre, was externally revalued by King Sturge. The total
valuation figure of £416.91m represents an initial yield, net of costs, of 6.4%,
compared  with  7.1%  in  1998 and 8.2% in 1997. The  overall  increase on the
valuation  of the UK commercial properties in the financial statements  is 5.8%
which is analysed by sector as follows:

Out-of-town retail                                           +5.5%
Town centre retail                                           +3.0%
Offices                                                      +8.4%
Industrial                                                  +21.8%
Sports and leisure                                           -8.2%

Out-of-town retail parks and food superstores
Now representing 19.1% of the Group's property investment portfolio, this is the
Group's most important investment sector after The Trafford Centre. However,  by
recent  standards  this  was  a  poor year for retail  warehouses  in  terms  of
investment  return  reflecting a degree of caution amongst retailers  who found
themselves  operating in an increasingly price sensitive market. Tenant  failure
 featured for the first time in a number of years, with already one unit and 
the likelihood  of  another, being vacated for this reason. At the year  end,
there were  only  two units vacant, representing 1.8% of this sector of the 
portfolio and  the  only  impediment  to re-occupation remains  the  seemingly 
inevitable planning delays.

Increasingly, rents continue to widen between the best and the poorest sites and
it is at these better sites, particularly at Edinburgh and Stockport, that the
Group  has sought to target further investment. There is also little doubt  that
size  matters in terms of ability to control tenant mix and create opportunities
for rental  growth  which  was the justification  for  the  purchase  of three
additional  retail warehouse units adjoining the Peel Centre at  Corby. Schemes
involving  further retail warehouse development are being pursued at  Edinburgh,
Barnsley,  Blackburn, Hyndburn and Wolverhampton. Opportunities also  exist for
the expansion of food superstores at Bradford, Trafford and Rawtenstall.

Town centre retail
Despite reasonable consumer demand, high street retailers have experienced  more
mixed  fortunes than their out-of-town colleagues, with some types of  retailers
doing  better  than  others. This has limited rental  growth  outside the  best
locations  and  investors  have become suspicious of the  e-commerce  influences
putting a  break  on capital growth. For these reasons, it continues to  be  a
shrinking  sector  within  the Group's portfolio. Voids  were  relatively  high,
representing  13.6% of this sector of the portfolio largely as a  result  of  an
extensive  programme of refurbishment and re-development at  locations  such  as
Amersham, Banstead and Walsall.

Offices
The office  sector  produced good results over the year as the  service  sector
outperformed the rest of the economy. Rental growth was good apart from the most
secondary  accommodation and capital growth was also encouraging. It is  now an
important  area  of  investment  within the UK  commercial  property  investment
portfolio  at 6.0% of the Group's property investment portfolio. The sector  was
the  subject  of  capital  expenditure  of  £1.81m  to  complete  a variety  of
refurbishment  schemes  and  to  acquire  a  part-built  office  development at
Castlefield,  Manchester. The departure of BNFL from over 73,000 sq. ft. of
office  space  at  The  Victoria, Salford Quays was a major disappointment,  but
three  of  the  five floors they occupied were quickly re-let at  higher  rents,
demonstrating the strength of the local market. Void property within this sector
of  the  portfolio stood at 18.1% although significant improvements are expected
over the coming year.

Industrial and warehouse properties
The manufacturing industry saw some improvement during the course of  the  year
which in  turn  fuelled the industrial property market.  With  the  anticipated
additional  demand  for  warehousing from operators of e-commerce,  this  sector
became very attractive to investors with capital growth boosting overall returns
above  those  of  other  sectors.  This trend  was  evident  in  the  industrial
properties  which were re-valued, although the Group's holding in this  area is
now  fairly  small at 4.0% of its property investment portfolio. Whilst  140,000
sq.   ft.  is  currently vacant, representing 7.5% of the industrial  portfolio,
127,000   sq.  ft. is either the subject of re-development proposals or  was  on
the market for sale at the year end.

Sports and leisure
The proportion of the Group's investment in this sector is becoming increasingly
important and now represents 1.4% of its property investment portfolio. Added to
the portfolio  from the development programme were two substantial  health and
fitness centres, themed respectively on soccer and tennis.

Property Development
The general strategy for property development is to concentrate on land already
owned by  the  Group.  Development opportunities will be  undertaken  in  other
locations,  but only where substantial pre-lets from occupiers or  forward-sales
can be secured.

Completed  property developments during the year included the  construction  and
sale  of  a 92,000  sq.  ft. industrial factory in Altrincham. The occupier was
Rexam  Printing  Limited and the purchasers were the Crown Estate Commissioners.
Through its  joint  venture company with Manchester  City  Council,  the  Group
constructed and sold to the occupiers a 3,000  sq.  ft. fast food restaurant, an
83  bedroom hotel and a 14,000  sq.  ft. public house located at Junction  4 of
the  M67,  near to Stockport. In Dumfries, the Group obtained planning  approval
for a 45,000  sq.  ft. food supermarket on an eight acre site, which was sold to
Tesco and at Irlam, near Salford, the Group sold a three acre site with planning
approval  for industrial use to MAN Trucks. The Group also constructed and  sold
to  the  occupier  a  120,000   sq.   ft.  cold  storage  facility  at  Heywood,
Lancashire.

Developments under construction at the year end included a 58,000  sq.  ft.
non-food  retail  warehouse park at Yeovil, which has been pre-let  to  JJB 
Sports, Matalan, Shoe City and Richleys.

Further  projects  with  planning  approval  include  two  mixed  town   centre
developments at Blackburn and Altrincham where the Group is seeking to  assemble
owner  occupiers or to pre-let to end users before proceeding. Outline planning
approval  was  received for a 1.1m  sq.  ft. business park development on land
adjacent to Junction 39 of the M1, near Wakefield. In addition, outline planning
approval  was  also  received for 1.06m  sq.  ft. of  offices,  600  residential
units,  40,000   sq.  ft. of leisure, 26,000  sq.  ft. of retail and  300  hotel
beds at Salford Quays. Because of the relatively small take-up of space in these
locations  and  the Group's aversion to speculative development, these planning
approvals will take a substantial number of years to build out.

The restrictive  nature of present legislation relating  to  environmental  and
planning issues means that the development team is finding it more difficult  to
obtain planning approvals, which inevitably prolongs the development cycle.

The Group's  commitment to the North West region combined  with  its  extensive
landholdings  has  given  it  the opportunity to contribute  positively  to  the
regeneration  of  Manchester's waterfront. The Group's vision, shared  with the
local  authorities  of  Manchester, Salford and Trafford, has  seen  Castlefield
become  a  new  residential and entertainment quarter for the  city centre  and
established  Salford Quays as the region's most significant edge of town  centre
office  location  served by the Metrolink tram system and now  enhanced  by  The
Lowry arts complex. The Trafford Centre has brought a world class retailing  and
leisure  experience to the North West. Further opportunities near Manchester  at
St Georges, Pomona and Carrington are now being promoted which will continue the
transformation  providing new homes and employment, placing the Manchester Ship
Canal corridor and the Group at the economic heart of the region.

Overseas
The 138,000 sq.  ft. Washington shopping mall and offices at Hamilton, Bermuda,
remain fully let and generate income of £2.40m per annum.

In Nassau, Bahamas, Frederick House, a 24,000  sq.  ft. office building, remains
fully  let  and generates income of £0.28m per annum. Beaumont House,  a  49,000
sq.  ft. office building, is 66% let and generates income of £0.40m per annum.

Advertising
A  department was created in December 1998 to generate income from advertising,
mainly in response to opportunities at The Trafford Centre.  Its  role  is  to
develop and  maximise  profit from sales of advertising space,  promotions  and
sponsorship throughout the Group's property portfolio. During the financial year
total advertising income amounted to £1.10m.

Land and Planning
The Land and Planning Department manages the Group's landholdings amounting  to
12,296 acres. Land with potential is promoted through the planning  system  for
development by the Group or disposal to the market. The Department also  handles
major planning applications for other parts of the Group including the expansion
of Liverpool Airport and the re-development of the former RAF base at Finningley
near Doncaster.

The housing  market  has displayed growing strength in  the  last  year  and  a
particular  focus has been placed upon bringing residential schemes forward.  In
many cases,  this has involved complex negotiations to assemble  sites,  obtain
planning approval and market in a manner which maximises values. With greenfield
development becoming increasingly difficult, the Group's portfolio of urban and
brownfield sites continues to present good opportunities.

Planning permission was granted for the development of 350 houses at  Fairhills
Road, Irlam  in  Salford. Sale particulars have been issued in respect  of  the
Group's last  remaining site in East Anglia at Bowthorpe,  Norwich  and  a  new
bridge over  the River Yare has increased the attractiveness of  this  38  plot
site.  Planning permission was also obtained for 100 houses at Rush Green, Lymm,
Cheshire following a successful appeal against a refusal of planning permission.
A sale has been agreed and is due to contract shortly.

At a  site in  Stretford,  an application has been submitted  for  houses  and
apartments adjoining the Bridgewater Canal. The scheme includes a public  house
and a marina for 32 boats which will greatly improve facilities on this part of
the  Cheshire  Canal Ring. The Group has been working with British Waterways to
promote  the Cheshire Canal Ring in partnership with Local Authorities. However,
there have been some setbacks, including the loss of an appeal in respect of an
application  for  apartments  at  Granville  Road,  Sevenoaks  on grounds  of
incompatibility with the Conservation Area.

The sale of land with little development potential is ongoing with a further 130
acres  sold  at  the  Cadishead Estate. Since 1994, 395 acres  have  been  sold,
leaving only 114 acres remaining for sale.

Significant progress was made during the year in the assembly and  organisation
of  the  landholdings around Liverpool Airport. A total of 740 acres  previously
held on option was purchased to allow for the long term future expansion of the
Airport in a phased manner. In addition, a Development Agreement was  concluded
with  Speke  Garston  Development  Company in respect  of  the  former  Northern
Airfield.  The  Group will develop 240 acres as an extension to  the  successful
Estuary Business Park. A £5m contract to provide access, services and sewers is
currently underway.

The Group  is  progressing its proposals for the Salford Forest Park.  Detailed
plans of the scheme, which will include a new racecourse for Manchester  and  a
high quality  equestrian centre, are under preparation. A planning  application
will be submitted later this year.

Active management  of  landholdings also delivers continuing  opportunities  to
extract additional value and a number of contracts in respect of  radio  masts,
fibre optic  cables, other easements and the variation of covenants  have  been
concluded.

The Group contributes to the ongoing debate on planning policy at both national
and local  level.  Detailed comments have been made on  the  Regional  Economic
Strategies prepared by the Regional Development Agencies in both the North  West
and Yorkshire  and  Humber  and  similarly on the  emerging  Regional  Planning
Guidance.  This  is  important, as it will set the  framework  for  the  Unitary
Development  Plans  and Local Plans which will determine the future  development
prospects for the Group's landholdings and businesses. Additional resources will
be directed to this process in the next few years and the Group will continue in
particular to promote the Manchester Ship Canal corridor in the North West. As a
contribution to the national debate, the Group is to fund a Research  Fellowship
for  the next three years in the newly established centre for Sustainable Urban
and Regional Futures (SURF) at Salford University.

At 31st March 2000, various licensed lands, ground rents, easements and  other
minor interests of the Group were externally valued at £5.61m which resulted  in
a valuation surplus of £0.90m, an increase of 19.1%.

Waste and Minerals
The economic  and  political climate for both waste  management  and  quarrying
remained  difficult during the financial year. Over the past three  years,  gate
prices at landfill sites in North West England have reduced from a high of
£10-£12 per tonne to levels as low as £7 per tonne at some sites.

In the same period, the landfill tax has dramatically reduced the  volumes  of
inert waste going to landfill sites. That trend is likely to continue  for  all
waste as a combination of political pressure and legislation from both  the  UK
Government and the European Union will continue to reduce the volumes  of  waste
being landfilled. There is now widespread acknowledgement that waste management
in  North  West England has become extremely competitive. In the light of  these
circumstances,  the decision in 1998 to convert the commercial  arrangements  at
the Arpley landfill site to a flat rate royalty per tonne now looks well judged.
The  effect  has  been to preserve, to a large extent, the Group's  income  from
Arpley.

The planning application by Biffa Waste Services Limited for 4.4m cubic  metres
of landfill capacity at Fletcher Bank Quarry, Ramsbottom near Bury has remained
undetermined. Biffa is still working hard to secure its planning permission.

Litigation was a feature of the year. A payment dispute with the Viridor  Group,
the  operator  of  the  Whitehead Landfill Site, remains  unresolved.  A longer
running case involving overtipping at two older sites was finally settled after
the financial year end with a settlement in the Group's favour.

Quarrying also remained depressed. The Chancellor's announcement in  his  March
2000  budget  of an aggregates tax of £1.60 per tonne, although long  signalled,
has  cast  a shadow over the industry. Existing mineral operations have  largely
met  their targets, but increasingly complex planning legislation requires  both
effort and guile simply to retain some existing planning permissions. Scout Moor
Quarry in Rossendale, which is set to become a major production unit, is now the
subject of five separate planning appeals.

Rationalisation in both waste management and quarrying continues  with  some  of
the Group's business partners either having been taken over or likely to be sold
in  the near future. The trend in both industries is strongly towards fewer and
bigger operating companies.

Opportunities to expand waste management and mineral extraction activities  are
still available.  However,  the  days  of  successfully  promoting  stand-alone
landfill  sites  are  largely  at an end. A more  sophisticated  and  integrated
approach  is now needed to reflect the need to reduce, re-use and recycle  waste
and to reduce what are widely seen as unacceptable impacts from waste management
sites and quarries.

Income during the year reduced to £0.73m from £0.88m last year. However, income
projections for  the  current financial year are more  promising  and  planning
decisions are also expected on a number of projects.

Port
The traffic handled  through the port on the Manchester  Ship  Canal  for  the
financial year  was 7.80m tonnes, a decrease of 0.15m tonnes  on  the  previous
year.  This generated income of £18.37m (1999: £18.21m) and an operating  profit
of £2.84m (1999: £3.92m). There were no severance costs during the year.

Despite encouraging signs in the previous year, the anticipated growth in inward
bulk  oil  movements  destined  for  the  retail  transport  market  failed  to
materialise  and  tonnage in this sector of the business fell by  0.10m  tonnes.
Further supply logistics rationalisation in this area accounted for the drop in
the  movements  and tonnage is not expected to recover in the current  financial
year.

During the  year, Shell UK closed the majority of the processing units  at  its
refinery at Shellhaven on the River Thames, leaving the refinery adjacent to the
Canal at Stanlow as its only major production unit in the UK. The closure of the
Shellhaven  plant  resulted in a drop in outward inter-refinery  movements from
Stanlow  and  overall tonnage for Shell fell by 0.18m tonnes in the  year.  This
drop in tonnage handled for Shell follows a number of years of growth in traffic
for  them  but they still remain the port's largest single customer. During  the
year, the  upgrading by Shell of the oil docks at Stanlow was completed  and  a
long term lease on the dock area was granted to Shell.

The steady  increase  in  other bulk liquids, mainly  chemicals,  imported  and
exported via  the port continued, albeit at a slower rate than in the  previous
year.  Export  tonnage  from a berth at Runcorn, for ICI and  another  exporter,
increased in the year. Further growth is expected in the current financial year
in this area of the business.

The total amount of dry cargo handled through the port increased by 0.14m tonnes
in the  year.  The  dry cargo dock operation at Ellesmere  Port  saw  increased
throughput as the bulk storage facility completed in 1999 was fully utilised and
tonnage  was over 50% up on the previous year. Unfortunately, the dock operation
at Runcorn continued to operate below capacity and tonnage fell by 0.04m tonnes.
No customers were lost from Runcorn, but tonnage for a number of the major users
was  down  as  difficulties  in  the glass manufacturing  sector  in  particular
continued.

The section of the Canal between Runcorn and Manchester, the Upper Canal, had  a
mixed year. Following the changes in the oil sector mentioned earlier, the  bulk
liquid storage facility operated by British Tar Products and located adjacent to
the Canal at Partington closed mid way through the year. Although some  traffic
transferred to another storage facility on the Canal, tonnage to the British Tar
Products' facility fell by 0.06m tonnes against the previous year. This decrease
in  tonnage  was  offset  by the revival of movements of  grain by barge  from
Liverpool  to a production unit in Manchester and overall tonnage in  the  Upper
Canal  ended  marginally  down on the previous year. Transhipment  business via
Liverpool  to  the Canal is an area that the Group is keen to develop.  Work  is
progressing  well  on a rail-fed bulk cement storage facility  adjacent to  the
Canal at Weaste near Manchester and exports by ship are expected to start in the
second quarter of this current financial year.

With major work continuing on upgrading a swing bridge in the Warrington  area,
increased dredging costs of £0.15m in the Upper Canal and the payment of a 
one-off  liability relating to a main line rail bridge over the Canal, the
operating deficit  in  the Upper Canal increased significantly in the year to 
£1.59m, an increase of over 120%.

Maintenance and upgrading of the infrastructure of the Canal continued  during
the  year and the major refurbishment work and automation of a set  of  sluice
gates between  the Canal and the River Mersey was finished. The  completion  of
this project  was  the  final phase of the work that  has  been  undertaken  to
transfer the  water  drainage function of the Canal from  a  manually  operated
system to a computer controlled one.

Dredging of the buoyed approach channel to the Canal was again required  in  the
year  but to a lesser extent than in recent years. During the year, some of the
fine sand dredged during this exercise was put ashore with a view to selling the
product in an attempt to defray in part the overall cost of this dredging.

Airports
Liverpool
The emergence  in recent years of low cost carriers offering very competitively
priced fares  is  changing  the aviation industry  and  enabling  smaller  well
positioned  regional  airports to achieve 'critical mass' and  to  compete  with
other  well  established  airports. Liverpool Airport has  benefited  from this
development  and  in  the financial year achieved a record  level  of  passenger
throughput of 1,515,000, an increase of 62.6% over the previous year.

This was mainly due to the commitment by easyJet to develop an increasing range
of scheduled domestic and European destinations from Liverpool with appropriate
frequencies.  The  key  advantage of scheduled  services  is  their  year  round
activity  and broad spread of aircraft movements throughout the day. During the
financial  year,  easyJet continued to attract thousands of  new  passengers to
Liverpool Airport by adding scheduled daily services to Belfast, Luton,  Malaga,
Madrid  and Majorca. Demand on the established Southern Ireland and Isle of  Man
routes operated by Ryanair and Manx Airlines was also significantly ahead of the
previous  year. As a consequence, the Airport produced income of £10.06m 
(1999:£9.11m)  and a net operating loss of £0.43m (1999: £0.63m profit). The 
downturn of  the  previous year's net operating profit into an operating loss
was largely as  a  result of the loss of over £1.0m of income from the bottom
line following the  abolition of duty free sales within the European Union with
effect from 1st July 1999.

As a 24 hour operation, Liverpool Airport also handles considerable quantities
of freight, much of which is handled during the night, including Royal Mail for
UK destinations, newspapers to the Isle of Man and Ireland and parcels for
world-wide  destinations through TNT's hub at Liege. Tonnage in the financial
year at 45,000 tonnes was 9.8% ahead of the previous year (1999: 41,000 tonnes).

The UK aviation  industry is expected to continue growing for the  foreseeable
future at around  4.5%  annually,  driven by increasingly  strong  competition
between the  airlines  and  the  popularity of  low  cost  carriers  which  has
stimulated passenger demand. To enable the airport to handle increased  aircraft
movements  and passenger numbers, a £12m capital programme, partly funded  by a
grant  from  the European Regional Development Fund, was undertaken to  provide
additional hardstanding, terminal capacity and car parking.

The Airport's immediate strategy is to provide the essential infrastructure  to
attract both the airlines and passengers and widen the range of destinations  on
offer for both  scheduled  and  charter  carriers.  As  passenger  throughput
increases,  the benefits of critical mass are clear with the potential to earn
increasing returns from retailing. However, the abolition of duty free sales  by
the  European  Commission  at  the end of June has  resulted  in  a  significant
financial  loss to the company, which cannot easily be recovered. The other key
objective for the Airport is to achieve increased aviation activity and  revenue
contributions without adding to the overall cost base.

Charter flights  to  the Mediterranean operated by Airtours,  Direct  Holidays,
First Choice  and  Thomson were well supported and carried  215,000  passengers
during the  year.  Despite over-capacity in the industry,  rationalisation  and
other difficulties, Liverpool Airport is well placed in the coming  seasons  to
attract additional charter flights provided competitive terms are offered,  the
right  passenger  facilities  are  in  place  and  the  airlines  are   handled
efficiently.

Although future prospects remain encouraging, the Airport now faces a difficult
year in an increasingly competitive airline market place. Efforts continue to be
made  to  add  to  the  existing airline base. This is partly  affected  by  the
 dominance of easyJet and the limitation of the existing terminal building. On 
a positive note, the Government's awareness of the importance of regional
airports as  economic generators is helpful, particularly in view of Liverpool 
Airport's geographic  position  and significant catchment area.  The  key 
challenges for Liverpool  Airport are to maintain high levels of growth, improve
profitability, maintain  improving levels of customer service and achieve
additional commercial developments.

Finningley
The Group submitted  a planning application to Doncaster Metropolitan  Borough
Council in November  1999 for the re-development of the  former  RAF  base  at
Finningley  into  a  commercial  airport.  This  is  currently   undergoing   a
consultation process by the Council. The application is subject to an Article 14
Direction  and  so  it  will  be referred to the  Secretary  of  State  for  the
Environment,  Transport and Regions for him to decide whether to call  a  public
inquiry or allow the Council to determine the application.

National air  traffic  forecasts  predict a steady  growth  in  the  number  of
passengers using air services and Doncaster Finningley Airport is expected to be
handling 2.3m passengers and 62,000 tonnes of freight each year by 2014. With a
runway almost 3,000 metres long, it can serve popular destinations in the United
States,  the  Caribbean, and the Far East as well as Europe.  There  is  already
significant interest from passenger and freight operators.

Making  efficient use of existing infrastructure and buildings  on  a  840  acre
brownfield  site,  the  development will also provide a catalyst  for  real and
sustainable  economic regeneration. The creation of 7,300 jobs  associated with
the  development  will  provide a significant boost for  South  Yorkshire  which
recently  qualified for European Objective One funding to help revive  economic
performance.

Convenient to the national motorway network and East Coast Main Line and with  a
catchment  of  over 4m people within one hour's drive time the location  of  the
Airport  is  strategically excellent. A new station on the Doncaster to  Lincoln
rail  line adjoining the site is proposed and this will help ensure the Airport
meets  the latest policies for integrated transport. An Environmental Management
Strategy  has been prepared to ensure the Airport operates to high environmental
standards in all respects including noise and air quality.

With three out of four passengers in Yorkshire and Humberside currently  flying
from airports outside the region each year (almost 5m passengers per annum (CAA
1998))  and  an  underdeveloped  freight  sector,  the  market  potential   is
substantial, as operators have been quick to recognise. It is also  encouraging
that  the  scheme  has  received  widespread  support  from  local  communities,
businesses and many individuals who recognise the critical role the Airport  can
play in the renaissance of their area.


For further information on this document please contact 
Mr P A Scott on 0161 629 8200.