Final Results

Workspace Group PLC
12 June 2006

                     WORKSPACE POSITIONED FOR FURTHER GROWTH
                                AS NAV JUMPS 36%

Workspace Group PLC ('Workspace') today announces its preliminary results for
the year ended 31 March 2006. Workspace provides 5.8 million sq. ft of flexible
business accommodation to over 4,000 small and medium size enterprises ('SMEs')
in London and the South East.

•Valuation Surplus                              £131.3m              15.8%
•Adjusted Net Asset Value per share              £3.12               up 36%
•Net Asset Value per share                       £2.37               up 34%
•Profit Before Tax                              £149.0m              up 80%
•Trading Profit Before Tax                       £15.1m               up 4%
•Basic Earnings per share                         65.1p              up 80%
•Investment Portfolio Valuation                 £964.3m              up 34%
•Rent Roll                                       £46.6m              up 10%
•Final dividend of 2.51p - total dividend up 10.3% to 3.76p

Commenting on the results, Harry Platt, Chief Executive, said,

' Another year of strong growth with adjusted NAV per share up 36%. Workspace is
the market leader for SME accommodation in London, a substantial and growing
market place. This has been a very active year. We have made £127m of
acquisitions and £48m of disposals. We sold the majority of our properties
outside the M25, and re-invested the proceeds and more in properties in London,
in locations with better longer-term prospects for growth. We continue to track
a range of acquisition opportunities.'

' Looking to the future, the prospects for the long-term performance of the
business are promising. We have repositioned the portfolio to focus on London
where we see greatest prospect for increasing rental income, which will underpin
our growth. We have improved the range of our offering, through a programme of
refurbishments. Whilst occupancy has dipped slightly in the year partly due to
these works it will improve as the space is let going forward.

' 97% of properties are now located inside the M25, often where there is
pressure for higher density, sustainable development, and where available land
is scarce. The demands of the Olympic games in 2012 will add further impetus to
the demand for space. We are therefore accelerating our plans for releasing the
latent value in our portfolio through increased density and change of use in
line with the London Plan. We have today announced a joint venture which will
help this process. It will also enable us to re-cycle our funds to invest in the
continued expansion of the business.'

                                      -ends-

Date: 12 June 2006

For further information:

Workspace Group PLC                            cityPROFILE
Harry Platt, Chief Executive                   Simon Courtenay
Mark Taylor, Finance Director                  Andrew Harris
020-7247-7614                                  020-7448-3244
e-mail: [e-mail]
---------------------------------
web: www.workspacegroup.co.uk
---------------------------------

Chairman's Statement

Once again, it is a pleasure to report another year of excellent growth in
shareholder value, driven by growth of 36% in adjusted net asset value per
share. Total shareholder return in the year was 46.1% and over 5 years has been
26.1% per annum. These are good results, achieved at a time when short term
rental earnings growth has been muted, primarily due to refurbishment activities
and the preparation of some estates for redevelopment. The refurbishments will
contribute to longer term growth both in rental and capital values.

Furthermore, during the year your Board has sought to increase the momentum in
extracting the latent development potential that exists in a significant number
of the properties in its portfolio. The new joint venture with Glebe, announced
with these results, is a major step forward to realise some of this value. It
allows our shareholders to participate in the substantial upside potential,
whilst reducing the risk profile of the Group and releasing funds to be used in
the continued expansion of the core business.

Strategy

Our strategy is to: -

•Actively manage our portfolio for increased shareholder value
•Acquire properties that service London's small and medium sized
 enterprises
•Drive underlying values and long term rents by intensification of use,
 enhanced environment, intensive management and the strength of the Workspace
 brand
•Deliver a superior and supportive service to our customers, and
•Create value in the medium term from our sites through mixed use
 developments and increased densities in line with the needs of London.

This year has seen some major steps in the successful execution of this
strategy. In particular, the Group has increased its focus on London, with the
sale of the majority of its sites outside the M25, whilst at the same time
investing record sums within the M25. The disposals were made at sharper yields
than the acquisitions. Even so, the acquisitions represent better long term
value given the continued growth of London and the effect of the Olympics on
East London in particular.

Results

Net Asset Value per share grew by 34% to £2.37 per share (Adjusted Net Asset
Value by 36% to £3.12 per share). This growth was driven by a £131.3m valuation
surplus, a 15.8% increase in value. Against the IPD industry benchmark measure,
our 23.0% annual return outperformed the 20.9% reported for the universe
benchmark, placing us once again in the top quartile in terms of performance. On
a geared basis, combining this growth with earnings for the year yielded a total
return on equity of 40.7% (2005: 27.6%). The rent roll increased by 10.2% to
£46.6m mainly as a result of acquisitions during the year. These acquisitions,
the market rents of which are substantially higher than the initial rent roll at
acquisition, offer further scope for growth, particularly at 111 Power Road and
Kennington Park.

REITs

There has been considerable press coverage following the Chancellor's Budget
announcement. The initial prospects are encouraging but there remain many areas
of detailed clarification from Her Majesty's Revenue and Customs before a final
recommendation can be made to shareholders. However, progress has so far been
good and it is likely that a positive decision on this will be made by your
Board during the year.

Reporting

In drafting this report your Board has been conscious of the substantial impact
on corporate financial reporting obliged by the introduction of IFRS. We have
endeavoured to maintain the process of improvement to our reporting whilst
addressing these changes. Having last year addressed much of the proposed
Operating and Financial Review (OFR) requirements, we have decided that we
should stay with this approach notwithstanding the abandonment of the OFR in
favour of the simpler Business Review. We are publishing, in parallel with our
annual report, an updated Sustainability Report which addresses Social, Ethical
and Environmental issues. This sister publication explains in more detail how
our business model accords with the recognised needs for sustainable development
in London and gives further insights to our strategy going forward.

Board and Staff

Dr Chris Pieroni, Senior Non-Executive Director and Chairman of the Remuneration
Committee will retire as a director following the Group's AGM this year. Chris
has given 6 good years service as a non-executive director, a period during
which the Group has grown substantially. On Chris's retirement Bernard Cragg,
Non-Executive and Chairman of the Audit Committee, will succeed Chris as Senior
Non-Executive Director. A replacement for Chris is being sought.

As always, the Company's success and this year's results depends upon the
continuing enthusiasm and commitment of all of our staff. Our staff are key to
all we do and, on behalf of the Board, I wish to thank them all again for their
contribution this year.

Current Trading and Prospects

Trading conditions are stable with a steady level of enquires and modest
increases in rental levels. Our overall occupancy of 84.3% at 31 March provides
scope for increasing income particularly in our refurbished properties at
Enterprise, Clerkenwell and Southbank in 2006, and Power Road, Lombard House and
Kennington Park in future years. In 2006 we expect the rate of tightening of
yields to slow. Rental growth together with the redevelopment, intensification
and change of use of sites must then provide the drivers for continued asset
growth. The property investment market has experienced an exceptionally buoyant
period and market conditions which have been unusually favourable, this may not
continue. Nevertheless, in tighter market conditions, in London Workspace Group
remains well positioned to continue to outperform the sector through its focus
on driving up rents and achieving latent added value.

Dividend

In line with previous practice your board proposes to increase the dividend by
10%. It recommends a final dividend payment of 2.51 pence per share making 3.76
pence for the year.


Chief Executive's Review

2005/2006 was a year of unprecedented growth, with the value of the Group's
portfolio increasing by 34% to £964.3m through record levels of both
acquisitions and valuation surpluses. We have repositioned the portfolio in
London, with 97% of our properties now within the M25. This is a growing market
place which we know well and where our intensive management skills can continue
to drive rental and capital values at our existing estates and source new
opportunities.

Key Results

Strong results have again been achieved with:

Adjusted Net Asset Value per share                          £3.12   up 36%
Net Asset Value per share                                   £2.37   up 34%
Trading Operating Profit                                    £37.1m  up 11%
Trading Profit Before Tax                                   £15.1m  up 4%
Profit Before Tax                                          £149.0m  up 80%
Basic Earnings per share                                     65.1p  up 80%
Investment Portfolio Valuation                             £964.3m  up 34%

(note: adjusted Net Asset Value per share is defined in note 9 to the financial
statements)

In particular, adjusted net assets per share increased by 36% following a
£131.3m valuation surplus which also contributed to an 80% increase in profit
before tax to £149.0m (2005: £82.8m). At a trading level, earnings per share
were up 12.7% to 7.1p (2005: 6.3p) despite a number of significant tenancy voids
during the year.

Strategy

Following a year of exceptional growth, the Group has largely achieved its five
year target which it set itself in September 2003 of doubling shareholder value
and building a £1bn portfolio. The Group achieved this by outperforming the
sector on all key measures over the year: valuation surplus 15.8%; overall
portfolio return 23%; equity return 40.7%; and total shareholder return of
46.1%. Looking forward, the Group seeks to maintain this out performance by:-

- focusing on the SME market in London; which we believe has excellent
long term growth prospects.
- growing rents; our average like for like rent of £9.48 per sq ft has
substantial potential to grow, and yet remain affordable for our customers.
- realising the latent value in our portfolio; targeting where
intensification or change of use is possible. In the longer term, some 45% of
the Group's portfolio has such potential, whilst on a 5 year basis, there are
over 20 estates we are working on, of which 11 are in the recently announced
Glebe joint venture.
- acquiring properties where we see long term value; we continue to
track a large number of potential property acquisitions in London.
- improving margins; on certain estates there is the potential to
further increase rents with added service offerings.

Trading Review

We have recorded good growth in our key financial statistics, net asset value
per share and earnings per share. However, underlying this there has been a
reduction in occupancy which has, on a like-for-like basis excluding
re-developments, reduced from 90.2% to 86.7% and reduced overall from 88.3% to
84.3%. This 4% reduction can be analysed as follows: -

Impact of acquisitions and disposals                     1.0%
Re-development sites vacated for disposal                0.6%
Occupancy loss following fire at Westwood                0.6%
Lombard Surrender (see below)                            1.0%
Other significant sites (Tower Bridge, Seax and N17)     0.8%
                                                        ------
                                                         4.0%

The reductions at Tower Bridge, Seax and N17 arose in part due to the loss of a
number of larger space users, particularly at Tower Bridge where customers using
space for document storage have reduced their requirements. Of the balance of
the reduction in occupancy, most of this creates an opportunity for the Group,
For example, the lease surrender at Lombard had a twin effect of increasing
earnings in the current year, due to the surrender premium received, whilst
depressing current levels of occupancy and rent roll. The surrender premium was
equivalent to the contracted future rentals, notwithstanding the prospect of
re-letting the space. However, the space is now being converted back to a
business centre, upgrading the services at the same time. This will have a short
term impact on earnings whilst space is re-let and refurbishment completed.
Looking forward the Group's other refurbishment projects underway at Enterprise
House and Clerkenwell Workshops will complete in 2006 when there is the prospect
of occupancy and rent roll improvements as these properties are let.

Whilst occupancy reduced, average like-for-like rents per square foot increased.
This was partly a mix factor and partly due to real growth in rental values.
Overall, the average like-for-like rent increased by 3.6% to £9.48 per square
foot; an affordable level for a portfolio, 70% of which is within 6 miles of the
centre of London. The fact that the average rent increased at a time when
occupancy reduced indicates that the market overall is robust and demand is
good.

This year the rolling rent review and lease renewal programme extended to 11.6%
of the opening rent roll. The uplift achieved of £0.90m through rent reviews and
lease renewals represents a 18.3% increase on previous passing levels for these
tenancies. This reflects a good performance for a period during which occupancy
performance was mixed. With the continued pressures on space in London and our
affordable rental levels, we consider that the scope for continued growth
remains good.

Portfolio Activity: Acquisitions, Disposals and Added Value

This year the Group's portfolio activity (acquisitions, disposals,
refurbishments) was at the highest level in its history. During the year 10
properties totalling £127.4m (2005: £43.4m) (both figures net of costs) were
acquired. This was a significant achievement in a competitive property market.
Disposals of £47.6m (2005: £34.8m) were also made. Full details of these
acquisitions and disposals may be found on below. In addition to this scale of
portfolio activity four key features stand out.

1. Repositioning the portfolio:

With the Group's focus on acquisitions within the M25, coupled with the disposal
of the majority of its properties outside the M25, the Group has further
increased its concentration in London. 97% (2005: 90%) of its portfolio is now
within the M25. This 'switch' has been achieved at good values. Whereas the
drier investments outside of the M25 were sold at an exit yield of 6.2% (with a
reversionary yield at that stage of 7.1%) the acquisitions attracted an
aggregate initial yield of 6.4%. These acquisitions also offer much better
prospects for growth both immediately, as is reflected in their reversionary
yield of 8.5%, and in the longer term as our skills are applied to the
properties.

2. Kennington Park, our largest acquisition in the year:

The Kennington Park site was acquired for £56.0m and offers exciting prospects
for the Group. It is a classic Workspace investment. It is in many respects
comparable to the Group's Leathermarket centre. This building was acquired in
1993 for £1.7m and following a rolling programme of improvement works, totalling
£5.9m to date now attracts a net rent roll of over £1.6m per annum, has an ERV
of £2.5m and is valued at £36.2m. At the time of its acquisition Bermondsey was
depressed. Since then it has emerged as a buoyant vibrant community attracting
considerable interest for both residential and commercial uses. Kennington Park,
a former taxi cab works, is located at the inter-section of the A23 and the
A202, just yards from the A3 at the Oval tube station. It occupies a prominent
island 6.2 acre site with 11 discrete attractive buildings arranged around a
central courtyard. With the improvements in neighbouring locations, the
Kennington area appears set to enjoy a renaissance similar to that of Bermondsey
which will improve the prospects for the site. Kennington, as with the
Leathermarket at the time of its acquisition, is divided mainly into larger
units of accommodation, which generally attract lower rental values. Over time
the Leathermarket space has been sub-divided to create accommodation more suited
to its SME customers and this is what we will do at Kennington. 63% of the
Kennington floorspace is currently in units of 2000 square feet or more
(Leathermarket now: 14%) with just 19% allocated to units sized up to 1000
square feet (Leathermarket now: 72%).

At the time of the acquisition of Kennington Park, one of the larger occupiers
in the largest building had served notice to terminate its lease. This loss,
which was anticipated, is to the Group's advantage since it allows us to
relocate other users in the building so that we can refurbish and divide all of
the space into smaller units; the first stage of an overall rolling programme of
improvements on the estate. It is believed that as Kennington Park is
transformed through this programme then it will over time attract customers of a
profile similar to those at the Leathermarket where 86% of the space is let to
customers in the creative, cultural and professional services sectors
(Kennington: 25%). These sectors are at the heart of London's knowledge based
SME services sector and have shown greater strength and growth potential. This
repositioning of Kennington will (as shown by our experience at the
Leathermarket) secure the organic growth of rental and capital values.

3.Olympics related investment:

Prior to the announcement of the decision on the 2012 Olympic Games the Group
sought opportunities to invest in potentially affected areas in East London. Two
purchases were completed ahead of the announcement and others are being pursued
now. Uplands Business Park is based in Walthamstow to the north of the Olympic
zone. It has the potential to benefit from providing accommodation to businesses
that will be displaced by the Olympics area development. The estate was purchased 
for a capital value of £83 per square foot. As such, it also offers potential, 
over time, for change of use, as pressures on land increase in this area.

This potential is even more marked in the case of the second acquisition made
only weeks before the bid success was announced. Marshgate Lane was purchased
for £5.6m (£60 per square foot). It is located in an area originally designated
for compulsory purchase for the Olympics. However, following the bid success the
London Development Agency re-appraised its land needs and the property was
released from the compulsory purchase order zone. It is located immediately
adjacent to the Olympic boundary close to the A11 at the Bow flyover, near the
Pudding Mill Lane DLR station. Whilst it is presently designated for industrial
use there is increasing pressure for release of land adjacent to the Olympic
site for other mixed uses. As a result, the site attracted a £12.75m valuation
at 31 March 2006 (an increase of 128% over original cost) with scope for further
improvement.

4. Realising the latent development potential:

We believe that at least 45% of the Group's portfolio has scope to add value by
improvement initiatives. Through the year we have continued to work to realise
this value. In our third quarter report we noted that at four key sites
(Aberdeen Studios, Thurston Road, Wharf Road and Greenheath), where plans were
well advanced, there was scope to triple the site density adding 430,000 sq ft
of space for a variety of uses. We see potential to do the same on a further
eleven estates adding a further 1.47 million sq. ft of extra space. As is
explained in our companion Sustainability Report this sits comfortably with the
principles set out in the Mayor's Plan for London. The city's growing population
can only be accommodated within current built areas by increasing the density of
development of these areas. To be sustainable, this denser occupation of space
needs to meet the mixed demands of the community in living, working and
recreational space.

During the year the original planning consent at Thurston Road to replace the
46,433 sq. ft industrial park with 45,000 sq. ft of retail accommodation and 24
residential units was improved to a scheme incorporating 98,650 sq. ft of retail
and 18,000 sq. ft of live work space with 271 residential units adding value to
our site. Further improvements to this scheme are under consideration.

At Wharf Road an agreement was reached with a residential developer to sell that
part of the site with a residential consent for a consideration comprising
£1.86m cash and the provision of a new 30,000 sq. ft business centre to be
constructed on the retained portion of the site. This deal was completed shortly
after the year end and the developer is now on site. This 'new for old' formula
is one which we seek to repeat elsewhere.

At Greenheath we are progressing proposals to redevelop a 0.34 acre ribbon of
land on the perimeter of the site to provide student accommodation, preserving
the business centre at the heart of the site. If these proposals receive consent
then the business centre will be refurbished alongside the new works.

Despite support from the planning officers, our proposals for Aberdeen Studios,
Islington have been refused planning consent during this year. This was
disappointing, particularly since the officers had recognised by their
recommendation that our proposals were the best for the community. We are now
looking at options for revisions to our plans which might achieve approval,
whilst pursuing a planning appeal on the original application.

Work is in hand to promote proposals on other sites Included in this is our
joint venture with Glebe which is announced with this statement. This is a major
step forward to accelerate our programme, bringing in additional expertise to do
this, and, whilst continuing to benefit in the upside potential from development, 
reducing the Group's risk profile.

Valuation

With the move to IFRS accounting, this year we changed our policy of valuing the
portfolio each half year to quarterly valuations. In an active property market
this showed progressive quarterly surpluses of £18.1m, £22.1m, £33.9m and £57.2m
making a total of £131.3m. The surplus in the last quarter alone was almost as
much as the whole for last year, which was itself a record. This was therefore
an exceptional result, driven principally by falling investment yields in a very
competitive investment market. Whilst this yield shift has continued following
the year end, we expect this to abate during the current year when we anticipate
the fundamentals of rental growth and redevelopment potential will take over to
drive our future growth.

The valuation of the Group's properties (valued by CB Richard Ellis) at 31 March
2006 was £964.3m. The average value of the Group's property was £162 per sq. ft,
with a yield at estimated current market rental values of 6.9%. Given the
location of our portfolio, this represents good underlying value. Our
acquisitions strategy targets similar properties with low capital values and
future potential, as is shown by our recent acquisitions in East London which
have been completed at capital values of only £60 - £80 per sq. ft.

For properties held throughout the year, comparing their value at 31 March 2005
plus additions and improvements at cost with that at 31 March 2006, the uplift
was £121.2m or 17.4%. Acquisitions during the year showed a surplus on valuation
of £10.1m (7.5%).

The total market rental income (ERV) at 31 March 2006 was £66.5m. Allowing for
the 10% void that the Group typically operates at, this shows an achievable
rental stream of £59.8m. This compares with current net income of £47.1m leaving
£12.7m of potential additional income. Over half of this lies in seven
properties including, in particular, the refurbishment projects at Clerkenwell,
Enterprise, Southbank and 111 Power Road. Clearly, as these projects are
completed and the space re-let, rents and hence earnings will increase.

We have again tested the Group's performance against the IPD (Investment
Property Databank) March Universe 2006 benchmark. The table below illustrates
not only our top quartile performance, but also the lower levels of volatility
in our particular sector compared with commercial property more generally.

--------------------------------------------------------------------------------
Total Return (p.a.)                     One    Three      Five        Ten
                                       Year    Years     Years      Years
--------------------------------------------------------------------------------
Workspace Group                       23.0%    18.9%      17.0%     19.3%
IPD March Universe                    20.9%    16.6%      12.9%     13.0%
Workspace Group Percentile Rank          23       22          5       top
IPD Comparator                        20.7%    14.7%      10.8%     12.8%


The IPD comparator index is a benchmark compiled by IPD of comparable properties
in comparable locations to those held by the Group.

Improvements in valuation and total returns arise partly from market movements
but also as a result of value-adding activity through acquisition, management
and refurbishment/redevelopment. Comparison against indices such as these
segregates simple market movement from our value-adding activity.

Through its performance the Group has demonstrated its consistent ability to
generate enhanced returns from its investments. This strategy will continue - a
focused portfolio with low capital values, serving a growing market, with
opportunities to add value and to acquire more stock. With this, and the current
robust underlying values, there is plenty of scope and opportunity for growth.


Financial Review

Introduction

2005/6 was a record year at many levels. Profit before tax of £149.0m, was up
80% on last year, driven by a valuation surplus of £131.3m; both record levels.
At the same time, our investment in the future through both acquisitions and
improvements to existing property of £154.5m was a record too. Going forward,
investment capacity, following the transaction with Glebe, will be at a record
level also with funding availability approximately equivalent to last year's
acquisitions and the capacity to raise further debt thereafter. Indeed (based on
UK GAAP principles) gearing at this stage will be approximately 60% leaving
approximately £200m headroom to a 100% gearing level.

This is the first annual report that the Group has prepared by reference to the
new International Financial Reporting Standards (IFRS). As may be seen from the
accounts and notes this transition has resulted in many significant changes, not
only to the style and content of the reporting but also to the reported figures
themselves. We have decided to preserve the columnar analysis of performance
between 'Trading Operations' and 'Other Items' used hitherto in our former
reporting under UK GAAP since this assists differentiation between our 'cash'
trading activities and the valuation adjustments introduced under IFRS to bring
book values of assets and liabilities in line with 'market values'. As such, the
performance reported in the Trading Operations column is only marginally
different under IFRS and so correlates well with figures reported previously.

Profits

As noted above, profits before tax at £149.0m are 80% up on last year (2005:
£82.8m), this increase being largely driven by the substantial 93% increase in
the valuation surplus for the year to £131.3m (2005: £67.9m). Elevation of
valuation surpluses from the former Statement of Total Recognised Gains and
Losses to the Income Statement under IFRS is helpful since it provides
shareholders with an immediate appreciation of the total gains recognised in the
financial period, with the result that financial ratios (e.g. EPS) calculated by
reference to these statements give a fuller picture also.

Trading profit before tax increased also by 4.1% to £15.1m (2005: £14.5m), in a
year when occupancy reduced (some of which was attributable to management
decisions that will benefit earnings in the future). Although, as recorded in
note 1 to the accounts trading earnings were assisted in the year by an
exceptional level of income received from surrender premia. However, as the
re-development projects complete and lettings commence, occupancy and rental
income will improve.

Profit before tax included a £3.4m contribution from profits on disposals (2005:
£0.1m loss). Details of disposals are given below. This profit arose mainly from
the disposal of the Magenta portfolio, eleven properties all located outside the
M25 being all of the Group's smaller property holdings outside the M25. Not only
was this sale achieved at a surplus to the 31 March 2005 valuation but also it
showed an exit yield which was lower than that for the investments made during
the year on properties inside the M25, mainly in London itself. This switch
therefore was both profitable and performance enhancing both in the short term,
from better initial yields, and in the longer term as assets are improved.

Earnings per share growth mirrored profit before tax (PBT) up 80% to 65.1p
(2005: 36.1p), whilst trading earnings per share were up 12.7% at 7.1p (2005:6.3p) 
the latter relative improvement (compared with trading PBT growth) was due to the 
lower tax rate for the year.

Administrative expenses were up 19.7% over the year and, as is shown later, have
increased slightly as a percentage of revenue. This increase was attributable to
higher head office staff costs due to the increasing scale of the business,
increases in the fair value of cash settled share based payments due to the
substantial increase in the Company's share price over the year and IFRS
transition fees.

Interest charges were up 20% at £23.6m. This increase was due principally to the
increased debt levels, with borrowings at 31 March 2006 up 33% and totalling
£429.7m (2005: £323.2m), offset by a saving due to lower interest rates. At
4.68% the market daily average rate of LIBOR through 2005/06 was 0.15% lower
than that for 2004/05.

Taxation

The effective rate of corporation tax in 2005/06 was 28.4% (2004/05: 29.3%).
However, much of this relates to the deferred tax provision relating to
valuation surpluses. At a trading level the taxation rate reduced to 22.5%
(2005: 29.7%). Of the total charge of £3.4m just £1.2m relates to current
liabilities with £2.2m being deferred. This low current charge was due mainly to
prior period tax adjustments totalling £0.9m made for capital allowance claims.
Whilst this reduces the amount of the current taxation liability it also gives
rise to a deferred tax provision. Since a number of the buildings will soon
reach the end of their IBA life, or as plant is replaced, these liabilities will
crystallise. It is again anticipated that, leaving aside disposals, the current
year tax rate for 2006/07 will be of the order of 30%. However, this level may
be reduced by further prior year adjustments arising from capital allowance
claims.

Net Assets and Balance Sheet

Overall net worth (net assets employed) on an IFRS basis increased over the year
by £101.8m (35.3%) to £390.3m with the valuation surplus for the year of £131.3m
before tax (77 pence per share) largely providing this increase. This increase
is reflected in the £237.6m increase in non-current assets financed by £103.7m
of increased longer term borrowings with the balance arising from the £4.4m
reduction in net current liabilities and £36.5m increase in deferred tax
provisions.

The Group's net current liabilities at 31 March 2006 were £18.8m (2005: £23.2m).
Current liabilities include tenants' deposits in the form of advance rent
payments and quarterly and monthly rents and service charge payments in advance
amounting in aggregate to £12.3m (2005: £11.0m). The directors consider that in
the normal course of business the majority of these liabilities are unlikely to
require payment and therefore form part of the working capital of the Group. Net
cash inflow from operating activities at £39.0m (2005: £33.9m) improved,
principally due to the contribution from newly acquired properties together with
increased profitability from existing properties.

Progress Record

Progress in key performance indicators over the year and over a five year period
was:

       
                                  2005/2006      2004/2005      Compound annual
                                                                         growth
                                     growth         growth          2001 - 2006
--------------------------------------------------------------------------------       
Improvement in Trading PBT             4.1%           2.6%                  9.9%
Improvement in Trading EPS            12.7%           3.3%                 10.2%
Improvement in dividends per
share                                 10.3%          10.0%                 10.2%
Improvement in Adjusted NAV
(per share)                           35.7%          21.7%                 20.9%

Dividend

A final dividend of 2.51p per share is proposed. The interim dividend was 1.25p
per share, and so the total dividend proposed for the year is 3.76p (an increase
of 10.3%). The dividends are covered 17.30 times (2005: 10.47 times) by earnings, 
1.90 times (2005: 1.83 times) based on earnings from trading operations only. The 
dividend increase is in line with previous periods.


Internal performance measures
Internal benchmark comparison shows:

Performance measures                  2006     2005     2004     2003     2002
--------------------------------------------------------------------------------
Revenue per member of staff (£000)     410      380      332      314      294
Year-end investment in property per
member of staff (£000)               6,262    5,006    4,092    3,261    2,984
Administrative expenses as a
percentage of revenue                 14.4%    13.9%    13.9%    14.6%    15.3%
Total return on equity (pre-tax)      40.7%    27.6%    26.2%    15.0%    20.6%

Return on equity is computed by reference to pre-tax profits plus valuation
surpluses/deficits divided by opening shareholders' funds Our target is to
achieve a strong double digit return on equity year on year, and in due course
to reduce administrative expenses as a percentage of revenue to below 12%.
However, the continued growth and expansion of the business, together with the
'added value' initiatives undertaken to improve future rental income and capital
values of properties slows attainment of this latter target.

Financing

The Group opened this year with £50.9m of available borrowing resources. This
was supplemented by the £47.6m (before costs and taxation) realised on the
disposals of Payne Road, Alpine Park and the Magenta Portfolio. As flagged last
year, the Group's facility with Bradford & Bingley has been increased from £200m
to £270m during the year and renewed to a fresh five year term. This enlarged
facility together with funds from disposals and other un-utilised facilities
provided the resources for the £127.4m (before costs) acquisition programme.
This together with other capital expenditure on properties totalled £154.5m in
the year. At the year end the Group had available borrowing facilities of £15.7m
which was increased immediately following the year end by a further £25m
facility with NatWest increasing funding availability to £40.7m. The disposal of
a portfolio of properties to a separately financed joint venture with Glebe,
referred to elsewhere in this report, will give rise to a net inflow of
approximately £120m to the Group. This will be applied to pay down existing loan
facilities, which will remain available for redrawing in due course as further
acquisitions are identified.

The Board considers that the funding strategy of extending and renewing five
year term loans continues to be appropriate. Through this approach, the Board
considers the Group can access competitively priced funding on a flexible basis
to match its cash demands for expansion. With regular reviews and renewals the
maturity of these loans can be maintained in the 3 - 5 year range leaving
flexibility should markets and circumstances change. The weighted average life
of the Group's debt at 31 March 2006 was 3.9 years.


At the year end the Group's facilities and drawings thereon were:

                                      2006       2006          2006        2005
                           Facility Amount      Drawn     % of Debt       Drawn
                                       £m          £m                        £m
Debenture Stock                      19.5        19.5             5%       19.5
Convertible Loan Stock                2.2         2.2             1%        2.5
Bradford & Bingley loan             270.0       270.0            62%      200.0
NatWest property loan               150.0       134.7            31%      100.8
NatWest overdraft                     4.0         3.6             1%        0.8
--------------------------------------------------------------------------------
                                    445.7       430.0           100%      323.6
--------------------------------------------------------------------------------

The available resources of approximately £40m (following the increase referred
to above) are equivalent to 8 months spend at the planned capital investment
rate for 2006/07.

Borrowings over recent years              2006    2005    2004    2003    2002
% Fixed/hedged                              54%     62%     59%     75%     77%
Average interest rate (year end)           5.9%    6.3%    5.8%    5.8%    5.8%
Interest cover (excl valuation            1.84    1.77    1.97    2.04    2.15
surpluses)
Trading Interest Cover                    1.69    1.77    1.91    1.72    2.09
Year-end gearing % (on Adjusted NAV)        85%     88%    104%     98%     81%
Debt: Portfolio Value                       45%     45%     49%     48%     43%

Despite the substantial borrowings to finance acquisitions during the year and
following the substantial valuation surplus at the year end, gearing measured by
reference to adjusted net assets employed, was maintained at 85% (2005: 88%).
Both gearing and interest cover levels are comfortably within the levels
historically set by the Board of less than 120% and greater than 1.5 times.

The debenture and convertible loan stock, which attract an average 11.3%
interest charge, represent just 6% of total borrowings. The debenture stock
matures in June 2007 with the Convertible maturing in 2011. The maturity of net
debt at 31 March 2006 is shown below: -

                         2006          2005        2004       2003        2002
--------------------------------------------------------------------------------   
Maturity of net debt        %             %           %          %           %
--------------------------------------------------------------------------------
Under 12 months             -             -           -          -           1%
1 - 5 years                99%           99%         99%        99%         34%
5 - 10 years                1%            1%          1%         1%         65%
10 years +                  -             -           -          -           -
--------------------------------------------------------------------------------
             Total        100%          100%        100%       100%        100%
================================================================================

At 31 March 2006 the average cost of floating rate funds was a margin of 0.94%
over LIBOR or base rate (2005: 0.94%). At 31 March 2006 secured borrowings were
covered 1.99 times by the value of charged property (with a further £157.6m of
uncharged property giving an overall cover of 2.38 times). Further details of
debt facilities and borrowing policies are given in note 17 to the accounts.

Acquisitions and Disposals 2005/2006

Acquisitions 2005/2006
--------------------------------------------------------------------------------
Name of property   Description           Purchase        Initial          Market 
                                            price         Actual         rent at                  
                                                          income        31/03/06           
                                                            £000            £000
================================================================================
111 Power Road,    Factory complex         £7.50m          151.8         1,150.0
Chiswick,          (98,110 sq.ft) for
London W4          refurbishment as a      
                   business centre
--------------------------------------------------------------------------------                   
Marshgate          93,400 sq. ft, 25        £5.59m         347.3          478.8
Business           unit industrial 
Centre,            estate.
Stratford,
London E15                                  
--------------------------------------------------------------------------------            
Evelyn Court,      16,800 sq. ft, 14        £2.64m         210.0          198.1
Deptford,          unit office
London SE8         building             
--------------------------------------------------------------------------------                   
Uplands            287,500 sq. ft           £24.00m       1,711.0        1,857.4
Business Park,     industrial estate  
Walthamstow,       with 57 units
London E17                    
--------------------------------------------------------------------------------                            
Kennington         332,100 sq. ft           £56.00m       3,705.4        4,669.2
Park,              business park in  
Kennington,        11 buildings with
London SW9         70 units      
--------------------------------------------------------------------------------              
Horton Road        41,500 sq. ft            £4.04m          304.3          314.4
Industrial         industrial estate 
Estate, West       with 10 units
Drayton, UB7                    
--------------------------------------------------------------------------------
Sundial Court,     26,200 sq. ft            £5.15m          397.0          416.2
Kingston-upon-     courtyard offices
Thames, KT5        over 25 units              
--------------------------------------------------------------------------------                 
Park Royal         30,900 sq ft             £5.55m          332.1
Business           business centre 
Centre, Park       with 86 units
Royal, London
NW10                                
                   
Park Royal         11,300 sq. ft            £2.52m          124.8
House,             business centre
London NW10        with 38 units
                  
28/30 Park         28,200 sq. ft            £3.65m          227.1
Royal Road,        industrial
London NW10        building with 8
                   units

2 Cullen Way       15,200 sq. ft            £2.28m          143.6        1,115.5
and 10 Cullen      industrial 
Way, London        buildings with 7
NW10               units              
--------------------------------------------------------------------------------                   
10 Bowling         12,700 sq. ft            £4.50m          253.2          309.7
Green Lane,        business centre 
Clerkenwell,       with 6 units
London EC1         (£176,500 rent 
                   free currently)
--------------------------------------------------------------------------------                   
Langdale           10,800 sq ft             £4.00m          277.9          310.3
House,             business centre  
Borough,           with 44 serviced
London SE1         offices         
================================================================================                   
Total                                      £127.42m       8,185.5       10,819.6
================================================================================

Disposals 2005/2006
--------------------------------------------------------------------------------
Name of            Description           Sale price   Exit income
property                                                     £000
================================================================================
Payne Road         Site sold for             £2.10m          97.4
Studios &          mixed use development
5 Payne
Road,                            
Bow,London E3
--------------------------------------------------------------------------------
Alpine Park,      Single 35,000 sq. ft       £3.80m         350.0
Beckton,          warehouse sold under
London E6         option to occupier
--------------------------------------------------------------------------------
Magenta           11 small unit industrial  £41.70m       2,590.0
Portfolio         estates located 
                  outside M25 totalling 
                  321,000 sq. ft in 234
                  units (the sales price 
                  includes Stevenage
                  Business Centre which 
                  completed on 14 April
                  2006)
--------------------------------------------------------------------------------
Total                                       £47.60m       3,037.4

Acquisitions

During the year the Group made ten acquisitions for a total consideration
(excluding acquisition costs) of £127.4m. These acquisitions were made at an
aggregate initial yield of 6.42%. Allowing for a 10% void level their aggregate
reversionary yield would be 7.64%.

111 Power Road, Chiswick, is a former factory complex where the production
activities had ceased and part of the complex had been converted to business
centre use. It is close to the Chiswick Studios Business Centre acquired last
year by the Group and was identified as a possible acquisition following a
review of the market around Chiswick Studios. Construction works are in progress
to complete the conversion of the remainder of the property to a business
centre. Due to the substantial void area it was acquired at a low initial yield
of 2.0%. Following the refurbishment works it is anticipated that the yield will
improve to 7.4% on total costs (including capital expenditure since acquisition)
and the property will offer accommodation complementing the Group's other
ownerships in the area, namely Chiswick Studios and the Barley Mow Centre.

Marshgate Business Centre is an industrial estate in Stratford, East London. It
was acquired as part of the Group's plan to acquire strategically located assets
in and around the Olympics zone. In this case the property was located within
the designated zone and, as a result, was destined to be subject to a compulsory
purchase order if the Olympics was awarded to London. In the circumstances, it
had been increasingly difficult to manage and the former owners sold at a price
that recognised this blight. As described above, following the award of the
Olympics the circumstances changed and the property is no longer subject to a
compulsory purchase order, enhancing its value significantly. Given its
considerable attraction for residential development the Group is now reviewing
its options for this property.

Evelyn Court is a small, 14 lettable unit office scheme in Deptford located
between the Group's major Tower Bridge and Faircharm Studios properties. It
occupies a prominent site on the A200 in Deptford and services the local
business community.

Uplands Business Park was the second acquisition in the Group's plan to target
'Olympics affected' areas. It is located approximately 3 miles to the north of
the Olympics zone (between it and the North Circular Road). Its acquisition
price of £83 per sq. ft, as a site cost, would not deter redevelopment should a
more valuable alternative use be identified in due course.

Kennington Park was the most significant acquisition of the year. Through it and
the subsequent disposal of the majority of the Group's holdings outside the M25
the Group effected a switch to refocus further its activities into London whilst
exchanging assets showing lower initial and reversionary yields for ones which
not only exceeded these but offered significantly greater potential for further
enhancement. The Group's strategy with regard to this major holding is described
in more detail above.

Horton Road Industrial Estate is a small single storey terraced estate
constructed in the 1950s. It is located to the North West side of the Stockley
Park business area with good transportation links through this to Heathrow. It
offers simple affordable space to occupiers in this prime business area. As the
Stockley Park area continues its spread outwards it is possible in time that
this site will present opportunities for redevelopment.

Sundial Court is prominently located at the intersection of the A3 and A240 in
the Tolworth area of Kingston-upon-Thames. It is a modern courtyard office
scheme, constructed in 1990 providing 26,200 sq. ft over 25 office units
servicing its local office market. This acquisition will assist growth of the
Group's representation in this area in which it holds little property at
present.

The Park Royal portfolio is a package of properties that the Group has been
tracking for a number of years. It is located on Park Royal Road and complements
the Group's existing ownerships (Acton Business Centre, Westwood Business Centre
and Europa House) located adjacent to the other major road traversing Park
Royal, Victoria Road. Park Royal has enjoyed a renaissance over recent years
following an earlier period of industrial decline. With this acquisition the
Group is now established as the principal supplier of accommodation to small
businesses in this area.

10 Bowling Green Lane is a former school building that has been converted into a
business centre. It adjoins the Group's Clerkenwell Workshops details of which
are given above.

Langdale House is a small serviced office business centre located in Southwark
between the Group's existing Leathermarket property and the Great Guildford
Street cluster (Great Guildford Street, Surrey House and Linton House). The
Group has monitored this property for a number of years and it will complement
the Group's other accommodation in this improving location. It gives a further
presence in the serviced office market, focusing on space let to small
businesses.

Consolidated Income Statement
For the year ended 31 March

                                 2006          2006     2006        2005          2005     2005
                  Notes       Trading         Other    Total     Trading         Other    Total
                           operations         items*          operations         items*
                                   £m            £m       £m          £m            £m       £m
                                                                    

Revenue               1          63.2             -     63.2        55.0             -     55.0
Direct costs          1         (16.9)          0.1    (16.8)      (14.1)          0.1    (14.0)
------------------------------------------------------------------------------------------------

Net rental
income                1          46.3           0.1     46.4        40.9           0.1     41.0
Administrative
expenses                         (9.2)          0.1     (9.1)       (7.6)            -     (7.6)
Gain from
change in fair
value of
investment
property                            -         131.3    131.3           -          67.9     67.9
Profit/(loss)
on disposal of
investment
properties            2             -           3.4      3.4           -          (0.1)    (0.1)
------------------------------------------------------------------------------------------------
Operating
profit                3          37.1         134.9    172.0        33.3          67.9    101.2

Finance income
- interest
receivable                        0.2             -      0.2         0.1             -      0.1
Finance costs
- interest
payable               4         (22.2)         (1.4)   (23.6)      (18.9)         (0.7)   (19.6)
Change in fair
value of
derivative
financial
instruments                         -           0.4      0.4           -           1.1      1.1
------------------------------------------------------------------------------------------------

Profit before
tax                              15.1         133.9    149.0        14.5          68.3     82.8
Taxation              6          (3.4)        (39.0)   (42.4)       (4.3)        (20.0)   (24.3)
------------------------------------------------------------------------------------------------

Profit for the
period after
tax and
attributable
to equity
shareholders                     11.7          94.9    106.6        10.2          48.3     58.5
================================================================================================

Basic earnings
per share             8           7.1p         58.0p    65.1p        6.3p         29.8p    36.1p
Diluted
earnings per
share                 8           7.0p         55.7p    62.7p        6.2p         28.6p    34.8p


* Other items above include profits and losses (together with their related
taxation) on sales of investment properties and items of a non trading nature
such as: valuation adjustments arising from the fair valuing of investment
properties and derivative financial instruments; adjustments arising from the
treatment of head lease payments as interest; and certain adjustments arising
from the estimation of the cost of employee share based payments.


Consolidated Statement of Recognised Income and Expense (SORIE)
For the year ended 31 March

                                                             2006        2005
                                                               £m          £m

Profit for the financial year                               106.6        58.5
--------------------------------------------------------------------------------
Total recognised income and expense for the year            106.6        58.5
--------------------------------------------------------------------------------

There is no difference between the profit for the financial year and the total
recognised income and expense for the year.

The notes below form part of these financial statements.

Consolidated Balance Sheet
As at 31 March
                                                    Notes     2006        2005
                                                                £m          £m

Non-current assets
Investment properties                                10      954.0       716.5
Intangible assets                                    11        0.2         0.2
Property, plant and equipment                        12        3.6         3.5
--------------------------------------------------------------------------------
                                                             957.8       720.2
--------------------------------------------------------------------------------              

Current assets
Trade and other receivables                          13        6.7         5.2
Financial assets - derivative financial              17e       0.1         0.2
instruments
Investment properties held for sale                  10        8.2           -
Cash and cash equivalents                            14        1.7         1.2
--------------------------------------------------------------------------------
                                                              16.7         6.6
--------------------------------------------------------------------------------                

Current liabilities
Financial liabilities - borrowings                   17a      (3.6)       (0.8)
Financial liabilities - derivative financial         17e      (1.2)       (1.7)
instruments
Trade and other payables                             15      (29.0)      (24.8)
Current tax liabilities                              16       (1.7)       (2.5)
--------------------------------------------------------------------------------
                                                             (35.5)      (29.8)
--------------------------------------------------------------------------------                  
Net current liabilities                                      (18.8)      (23.2)
Non-current liabilities
Financial liabilities - borrowings                   17a    (426.1)     (322.4)
Deferred tax liabilities                             21     (122.6)      (86.1)
--------------------------------------------------------------------------------
                                                            (548.7)     (408.5)
--------------------------------------------------------------------------------                  
Net assets                                                   390.3       288.5
--------------------------------------------------------------------------------

Shareholders' equity
Ordinary shares                                               16.9        16.9
Share premium                                                 28.7        28.4
Investment in own shares                             22       (5.1)       (5.5)
Other reserves                                                 0.8         0.5
Retained earnings                                            349.0       248.2
--------------------------------------------------------------------------------                  
Total shareholders' equity                                   390.3       288.5
--------------------------------------------------------------------------------
Net asset value per share (basic)                     9      £2.37       £1.77
Diluted net asset value per share                     9      £2.29       £1.71
Adjusted net asset value per share (basic)            9      £3.12       £2.30
Diluted adjusted net asset value per share            9      £3.01       £2.23

The notes below form part of these financial statements.

Consolidated Cash Flow Statement
For the year ended 31 March

                                                     Notes     2006       2005
                                                                 £m         £m

Cash flows from operating activities
Cash generated from operations                        18       39.0       33.9
Interest received                                               0.2        0.1
Interest paid                                                 (22.9)     (19.7)
Tax paid                                              19       (1.9)      (3.2)
--------------------------------------------------------------------------------
Net cash from operating activities                             14.4       11.1

Cash flows from investing activities
Purchase of investment properties                            (132.8)     (44.9)
Capital expenditure on investment properties                  (20.9)      (9.5)
Net proceeds from disposal of investment                       44.2       35.4
properties
Tax paid on disposal of investment properties         19       (4.8)      (2.8)
Purchase of intangible assets                                  (0.1)      (0.1)
Purchase of property, plant and equipment                      (0.7)      (0.8)
--------------------------------------------------------------------------------
Net cash used in investing activities                        (115.1)     (22.7)

Cash flows from financing activities
Net proceeds from issue of ordinary share                         -        0.3
capital
Net proceeds from issue of bank borrowings                    103.9       16.3
Net distribution of own shares                                  0.4        0.7
Finance lease principal payments                               (0.1)      (0.1)
Dividends paid to shareholders                         7       (5.8)      (5.2)
--------------------------------------------------------------------------------
Net cash from financing activities                             98.4       12.0
--------------------------------------------------------------------------------
Net (decrease)/ increase in cash and cash                      (2.3)       0.4
equivalents.
================================================================================                                      
Cash and cash equivalents at start of year            18        0.4          -
Cash and cash equivalents at end of year              18       (1.9)       0.4
================================================================================ 

The notes below form part of these financial statements.

Significant Accounting Policies

The principal accounting policies adopted in the preparation of these financial
statements are set out below. These policies have been consistently applied to
all years presented, as explained below, with the exception of IFRS5 'Non
current assets held for sale and discontinued operations', which has been
applied prospectively from 1 April 2005.

Basis of Preparation

These financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS) and IFRIC interpretations as adopted by the
European Union and with those parts of the Companies Act 1985 applicable to
companies reporting under IFRS.

The financial statements have been prepared under the historical cost convention
as modified by the revaluation of investment properties, fair value of
derivative financial instruments and convertible loan stock.

The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities at the balance sheet date and the
reported amounts of revenues and expenses during the reporting period. Although
these estimates are based on management's best knowledge of the amount, event or
actions, actual results ultimately may differ from those estimates.

Key judgements include the estimation of fair values of investment properties
and derivative financial instruments, the assessment of useful economic lives
and residual values of property, plant and equipment and estimates of trade
receivables impairment provisions.

Adoption of IFRS

The Group is required to establish its IFRS accounting policies for the year
ended 31 March 2006 and to apply these retrospectively to determine its balance
sheet at the date of transition to IFRS, 1 April 2004, and comparative financial
information for the year ended 31 March 2005. The comparative financial figures
have therefore been amended as required in accordance with the relevant
requirements and disclosures relating to the transition to IFRS. Advantage has
been taken of certain exemptions allowed by IFRS 1 'First Time Adoption of IFRS'
as follows:


   • Share based payment transactions - to not apply IFRS2 'Share Based
    Payment' to equity instruments granted before 7 November 2002 and Cash
    Settled Share Base Payment liabilities settled prior to 1 January 2005.
   • Fair value at deemed cost - to take fair value as the deemed cost of
    owner occupied property at the date of transition.

Basis of consolidation

The consolidated financial statements include the financial statements of the
Company and all its subsidiary undertakings up to 31 March 2006. Subsidiaries
are entities over which the Group has the power to govern the financial and
operating policies. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences to the
date control ceases.

Inter company transactions, balances and unrealised gains from intra group
transactions are eliminated. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred.

Investment properties

Investment properties are those properties owned or leased under a finance lease
by the Group that are held to earn rental income or for capital appreciation or
both and are not occupied by the Company or subsidiaries of the Group.

Land or buildings held under operating leases are classified and accounted for
as investment properties where the rest of the definition of investment property
is met. The operating lease is accounted for as if it were a finance lease.

Investment property is measured initially at cost, including related transaction
costs. After initial recognition investment property is held at fair value based
on a valuation by a professional external valuer at each reporting date. Changes
in fair value of investment property at the reporting date are recorded in the
income statement.

Properties are treated as acquired at the point the Group assumes the
significant risks and returns of ownership and are treated as disposed when
these are transferred outside the Group.

Existing investment property which undergoes redevelopment for continued future
use as investment property remains in investment property. Property that is
being constructed or developed for future use as investment property, but has
not previously been classified as such, is classified as property, plant and
equipment and initially recognised at cost until construction or development is
complete, at which time it is reclassified as investment property at fair value.

Subsequent expenditure is charged to the asset's carrying amount only when it is
probable that future economic benefits associated with the expenditure will flow
to the Group, and the cost of each item can be reliably measured. All other
repairs and maintenance costs are charged to the income statement during the
period in which they are incurred.

In the case of existing investment properties undergoing redevelopment,
capitalised interest on the redevelopment expenditure is added to the asset's
carrying amount. Borrowing costs capitalised are calculated by reference to the
actual interest rate payable on borrowings, or if financed out of general
borrowings by reference to the average rate payable on funding the assets
employed by the Group and applied to the direct expenditure on the property
undergoing redevelopment. Interest capitalised is from the date of commencement
of the re-development activity until the date when substantially all the
activities necessary to prepare the asset for its intended use are complete.

Assets held for sale

Properties and land held for sale are included in the balance sheet at fair
value and presented on the balance sheet as investment properties held for sale.

Property plant and equipment

All property, plant and equipment is stated at historical cost less
depreciation. Historical cost includes expenditure that is directly attributable
to the acquisition of the items.

Subsequent expenditure is charged to the asset's carrying amount or recognised
as a separate asset only when it is probable that future economic benefits
associated with the expenditure will flow to the Group and the cost of each item
can be reliably measured. All other repairs and maintenance costs are charged to
the income statement during the period in which they are incurred. In the case
of properties undergoing construction or development, capitalised interest on
the development expenditure is added to the asset's carrying amount.

Depreciation is provided using the straight line method to allocate the cost
less estimated residual value over the asset's estimated useful lives as
follows:

Freehold Land             not depreciated

Buildings                 50 years

Motor vehicles            4 years

Equipment and fixtures    4 years

The assets' residual values and useful lives are reviewed and adjusted, if
appropriate, at least at each financial year end. An asset's carrying amount is
written down immediately to its recoverable amount if its carrying amount is
greater than its estimated recoverable amount.

Intangibles

Acquired computer software licenses and external costs of implementing or
developing computer software programmes are capitalised. These costs are
amortised over their estimated useful lives of 4 years on a straight line basis.
Intangibles are stated at historical cost.

Costs associated with maintaining computer software programmes are recognised as
an expense as incurred.

Leases

A group company as lessee

i) Operating leases - leases in which substantially all the risks and rewards of
ownership are retained by another party, the lessor, are classified as operating
leases. Payments, including prepayments, made under operating leases are charged
to the income statement on a straight line basis over the period of the lease.

ii) Finance leases - leases of assets where the Group has substantially all the
risks and rewards of ownership are classified as finance leases. Assets acquired
under finance leases are capitalised at the lease's commencement at the lower of
the fair value of the leased property and the net present value of the minimum
lease payments. The corresponding rental obligations, net of finance charges,
are included in current and non current borrowings. Each lease payment is
allocated between liability and finance charges so as to achieve a constant rate
on the finance balance outstanding. The interest element of the finance cost is
charged to the income statement. The investment properties acquired under
finance leases are subsequently carried at fair value.

A group company as lessor

i) Operating leases - properties leased out under operating leases are included
in investment property in the balance sheet. Rental income from operating leases
is recognised in the income statement on a straight line basis over the lease
term. When the Group provides incentives to its customers the cost of the
incentives are recognised over the lease term on a straight line basis as a
reduction of rental income.

ii) Finance leases - when assets are leased out under a finance lease, the
present value of the minimum lease payments is recognised as a receivable. The 
difference between the gross receivable and the present value of the receivable 
represents unearned finance income. Lease income is recognised over the term of 
the lease using the net investment method before tax, which reflects a constant 
periodic rate of return. Where the buildings element of a property lease is 
classified as a finance lease, the land element is treated as an operating lease.

Trade and other receivables

Trade and other receivables are recognised initially at fair value and
subsequently measured at cost less provision for impairment where it is
established there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of the receivable. The
amount of the provision is the difference between the asset's carrying amount
and the present value of estimated future cash flows. The provision is recorded
in the income statement.

Trade and other payables

Trade and other payables are stated at cost.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks
and other short term highly liquid investments with original maturities of three
months or less. Bank overdrafts are included within cash and cash equivalents
for the purpose of the cash flow statement.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs
incurred. Borrowings are subsequently stated at amortised cost, any difference
between the initial amount (net of transaction costs) and the redemption value
is recognised in the income statement over the period of the borrowings, using
the effective interest method, except for interest capitalised on
redevelopments.

Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months
after the balance sheet date.

Compound financial instruments

At the date of issue of compound financial instruments, the fair value of the
liability component is estimated using the prevailing market interest rate for
similar non-compound debt. The difference between the proceeds of issue and the
fair value of the liability is included in equity. The interest payable and
amortisation of the carrying value of the liability component are recognised as
interest expense so as to maintain a constant rate of interest on the carrying
value.

Derivative financial instruments

The Group enters into derivative transactions such as interest rate collars in
order to manage its interest risk. Derivatives are recorded at fair value
calculated on valuation techniques based on market prices and estimated cash
flows. As the Group does not apply hedge accounting to the interest rate
collars, any changes in value are recognised in the income statement.

Share capital

Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares are shown in equity as a deduction, net
of tax, from the proceeds.

Investment in own shares

The Group operates an Employee Share Ownership Trust (ESOT). When the Group
purchases Company shares, the consideration paid is deducted from shareholders' 
equity as Investment in Own Shares until the shares are re-issued, cancelled or 
disposed of. Where shares are re-issued or disposed of any consideration due is 
included in shareholders' equity as Investment in own shares.

Provisions

Provisions are recognised when the Group has a current obligation arising from a
past event and it is probable that the Group will be required to settle that
obligation. Provisions are measured at the directors' best estimate of the
present value of the expenditure required to settle that obligation at the
balance sheet date.

Revenue recognition

Revenue comprises rental income, service charges and other sums receivable from
tenants of the Group's investment properties. Other sums comprise insurance
charges, supplies of utilities, premia associated with surrender of tenancies,
commissions, fees and other sundry income.

Rental income from operating leases is recognised in the income statement on a
straight line basis over the lease term. When the Group provides lease
incentives to its tenants the cost of incentives are recognised over the lease
term, on a straight line basis, as a reduction to income.

Service charge and other sums receivable from tenants are recognised by
reference to the stage of completion of the relevant service or transactions at
the reporting date.

Rental income from property let out under a finance lease is accounted for by
allocating each lease payment between receivable and finance income so as to
achieve a constant rate on the finance balance outstanding. The interest element
of the finance income is credited to the income statement over the lease period
so as to produce a constant periodic rate of interest on the remaining balance
of the receivable for each period. Contingent rents, being those lease payments
that are not fixed at the inception of the lease, for example increases arising
on rent reviews, are recorded as income in the periods in which they are earned.

Income for the sale of assets is recognised when the significant risks and
returns have been transferred to the buyer. In the case of sales of properties
this is generally taken on completion. Where any aspect of consideration is
conditional then the revenue associated with that conditional item is deferred.

Direct costs

Minimum lease payments payable under head leases categorised as finance leases
are allocated between liability and finance charges so as to achieve a constant
rate on the finance balance outstanding. The interest element of the finance
cost is charged to the income statement. Contingent rents, being those lease
payments that are not fixed at the inception of the lease, for example increases
arising on rent reviews, are recorded as an expense in the income statement in
the period in which they are incurred.

Share based payment

Incentives in the form of shares are provided to employees under share option
schemes. The fair value of the options granted is recognised over the vesting
period.

Fair value is measured by the use of Black-Scholes and Monte-Carlo option
pricing models. The expected life used in the models has been adjusted, based on
management's best estimate, for the effects of non-transferability, exercise
restrictions and behavioural considerations.

The Company has established an ESOT to satisfy part of its obligation to provide
shares when employees exercise their options. The Company provides funding to
the ESOT to purchase these shares.

Pensions

The Group operates a defined contribution pension scheme. Contributions are
charged to the income statement as they fall due.

Income tax

Income tax on the profit for the year comprises current and deferred tax.

Current income tax is tax payable on the taxable income for the year and any
prior year adjustment and is calculated using tax rates that have been
substantively enacted by the balance sheet data.

Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. Deferred
income tax is determined using tax rates that have been substantively enacted by
the balance sheet date and are expected to apply when the related deferred
income tax is realised or the deferred tax liability settled. Deferred tax is
provided in full on the difference between the original cost of investment
properties and their carrying amounts at the reporting date without taking into
account deductions and allowances, which would apply if the assets concerned
were disposed of.

No provision is made for temporary differences arising on the initial
recognition of assets or liabilities that affect neither accounting nor taxable
profit or relating to investments in subsidiaries where it is probable that the
temporary differences will not reverse in the foreseeable future.

Dividend distributions

Final dividend distributions to the Company's shareholders are recognised as a
liability in the Group's financial statements in the period in which the
dividends are approved, while interim dividends are recognised when paid.

New Standards

IFRS 6 and 7 and IFRIC 4, 5, 6 and 7 have been adopted by the European Union,
but are not effective for the year ended 31 March 2006. It is believed that they
will not have a material impact on the financial statements on initial
application.

Notes to the Financial Statements
For the year ended 31 March


1.Analysis of net rental income

                                               2006                        2005
                       Revenue   Costs   Net rental  Revenue   Costs Net rental
                                             income                      income
                            £m      £m           £m       £m      £m         £m

Rental income*            49.2    (0.2)        49.0     43.3    (0.2)      43.1
Service
charges and
other
recoveries                12.3   (15.9)        (3.6)     9.8   (13.5)      (3.7)

Services,
fees,
commissions
and                        
sundry income              1.7    (0.7)         1.0      1.9    (0.3)       1.6
--------------------------------------------------------------------------------
                          63.2   (16.8)        46.4     55.0   (14.0)      41.0
--------------------------------------------------------------------------------  
*Rental income includes surrender premia of £2.2m (2005: £0.3m).


The Group operates a single business segment providing business accommodation
for rent in London and the South East of England, which is continuing.

2. Profit on disposal of investment properties

                                                              2006       2005
                                                                £m         £m

Gross proceeds from sale of investment properties             44.5       34.7
Book value at time of sale plus sale costs                   (41.1)     (34.8)
--------------------------------------------------------------------------------
Pre tax profit/(loss) on sale                                  3.4       (0.1)

Current taxation                                              (4.7)      (4.0)
Deferred tax released on sale                                  4.9        4.5
--------------------------------------------------------------------------------
Net tax                                                        0.2        0.5
--------------------------------------------------------------------------------
Net profit on disposal after tax                               3.6        0.4
--------------------------------------------------------------------------------

3. Operating profit

The following items have been charged in arriving at operating
profit:                                                          2006     2005
                                                                   £m       £m

Direct costs:
Depreciation of property, plant and equipment - owned assets      0.3      0.3
Staff costs (note 5)                                              2.5      2.3
Repairs and maintenance expenditure on investment property        3.3      2.3
Trade receivables impairment                                      0.1      0.2

Administrative expenses:
Amortisation of intangibles                                       0.1      0.1
Depreciation of property, plant and equipment - owned assets      0.3      0.4
Staff costs (note 5)                                              4.9      4.5
Other operating lease rentals payable:
                     - motor vehicles - minimum lease payments    0.1      0.1
Auditors' remuneration including expenses                         0.1      0.1

Depreciation in direct costs relates to fixtures and fittings installed within
investment properties.

Amounts payable to auditors for non audit fees totalled £103,000 and relate
primarily to the costs of IFRS conversion (2005 - £12,000).

4. Finance costs
                                                                 2006      2005
                                                                   £m        £m

Interest payable on bank loans and overdrafts                    21.0      16.8
Amortisation of issue costs of bank loans                         0.5       0.4
Interest payable on finance leases                                0.1       0.1
Interest payable on 11.125% First Mortgage Debenture Stock        1.4       1.4
2007
Interest payable on 11.625% First Mortgage Debenture Stock        0.8       0.8
2007
Interest payable on 11% Convertible Loan Stock 2011               0.3       0.3
Interest capitalised on property re-developments                 (0.5)     (0.2)
--------------------------------------------------------------------------------
                                                                 23.6      19.6
--------------------------------------------------------------------------------

5. Employees and directors

Staff costs for the Group during the year                        2006      2005
                                                                   £m        £m
Wages and salaries                                                6.3       5.7
Social security costs                                             0.7       0.7
Defined contribution pension plan costs                           0.4       0.4
--------------------------------------------------------------------------------
                                                                  7.4       6.8
--------------------------------------------------------------------------------                       

Number of people (including executive directors) employed at
the year end:                                                    2006      2005
                                                               Number    Number
Executive directors                                                 4         4
Head office staff                                                  63        54
Estates staff                                                      87        85
--------------------------------------------------------------------------------
                                                                  154       143
--------------------------------------------------------------------------------

The average number of persons employed during the year was 153 (2005 - 145).

Key management for the purposes of related party disclosure under IAS 24 are
taken to be all executive and non executive directors. Included within staff
costs above is remuneration payable to key management personnel as follows:

Key management compensation                                      2006      2005
                                                                   £m        £m
Salaries and short-term employee benefits                         1.9       1.6
Pensions and other post-employment benefits                       0.1       0.1
Share-based payments (not included in above)                      0.7       0.4
--------------------------------------------------------------------------------
                                                                  2.7       2.1
--------------------------------------------------------------------------------

The remuneration of the executive directors is determined by the Remuneration
Committee of the Board.

6. Taxation

Analysis of charge in period                                  2006        2005
                                                                £m          £m
Current tax                                                    5.9         6.2
Deferred tax                                                  36.5        18.1
--------------------------------------------------------------------------------
Total taxation                                                42.4        24.3
--------------------------------------------------------------------------------

The charge in the period is analysed as follows:              2006        2005
                                                                £m          £m
Current tax:
UK corporation tax                                             6.8         7.3
Adjustments in respect of previous periods                    (0.9)       (1.1)
--------------------------------------------------------------------------------
                                                               5.9         6.2
--------------------------------------------------------------------------------                      
Deferred tax:
On fair value gains of investment properties                  34.5        15.9
On accelerated tax depreciation                                1.2         0.9
On derivative financial instruments                            0.1         0.3
Adjustments to tax in respect of previous periods              0.5         0.9
Others                                                         0.2         0.1
--------------------------------------------------------------------------------
                                                              36.5        18.1
--------------------------------------------------------------------------------                      
Total taxation                                                42.4        24.3
--------------------------------------------------------------------------------

The tax on the Group's profit for the period differs from the standard
applicable corporation tax rate in the UK (30%). The differences are explained
below:
                                                                2006      2005
                                                                  £m        £m
                                                        
Profit on ordinary activities before taxation                  149.0      82.8
--------------------------------------------------------------------------------
Tax at standard rate of corporation tax in the UK of 30%
(2005: 30%)                                                     44.7      24.8


Effects of:
Income taxed as capital gains                                   (0.4)        -
Contaminated land relief                                        (0.3)        -
Capital gains adjustments on property disposals                 (1.2)     (0.4)
Other items                                                        -       0.1
Adjustments to tax in respect of previous periods               (0.4)     (0.2)
--------------------------------------------------------------------------------
Total taxation                                                  42.4      24.3
--------------------------------------------------------------------------------

There are no timing differences associated with investments in subsidiaries, for
which deferred tax liabilities have not been recognised.

The total tax charge represents 28.5% (2005: 29.3%) of profit before tax. This
reduction was caused by contaminated land relief claims and proportionately
higher indexation allowances on capital gains.

7. Dividends paid
                                                                 2006     2005
                                                                   £m       £m

Final dividend 2004/5 - 2.28p (2003/04 - 2.07p*) per ordinary
share                                                             3.7      3.4

Interim dividend 2005/6 1.25p (2004/05 - 1.13p*) per ordinary
share                                                             2.1      1.8
--------------------------------------------------------------------------------
                                                                  5.8      5.2
--------------------------------------------------------------------------------                          

*Figures adjusted to reflect bonus share issue made in March 2005.

In addition the directors are proposing a final dividend in respect of the
financial year ended 31 March 2006 of 2.51p per Ordinary Share which will absorb
an estimated £4.1m of shareholders' funds. If approved by the shareholders at
the AGM, it will be paid on 4 August 2006 to shareholders who are on the
register of members on 7 July 2006.

8. Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the weighted average number of ordinary shares
outstanding during the year, excluding those held in the employee share
ownership trust (ESOT).

For diluted earnings per share the weighted average number of ordinary shares in
issue is adjusted to assume conversion of all dilutive potential ordinary
shares. The group has two classes of dilutive potential ordinary shares: those
share options granted to employees and those issuable to convertible bond
holders.

Reconciliations of the earnings and weighted average number of shares used in
the calculations are set out below.

                                                Profit       Earnings per share

Earnings used for calculation of earnings
per share                                    2006     2005      2006      2005
                                               £m       £m     pence     pence

Earnings used for basic earnings per share  106.6     58.5      65.1      36.1

Interest saving net of taxation on 11%
Convertible Loan Stock dilution               0.2      0.2      (1.5)     (1.0)                                       
Share option scheme dilution                    -        -      (0.9)     (0.3)
--------------------------------------------------------------------------------
Total diluted earnings                      106.8     58.7      62.7      34.8
Less non trading items                      (94.9)   (48.3)    (55.7)    (28.6)
--------------------------------------------------------------------------------
Trading diluted earnings                     11.9     10.4       7.0       6.2
--------------------------------------------------------------------------------
Weighted average number of shares used for
calculating earnings per share                             2006            2005
                                                         Number          Number

Weighted average number of shares (excluding
shares held in the ESOT)                            163,629,157     161,931,920
Dilution due to Share Option Schemes                  2,538,531       1,682,780
Dilution due to Convertible Loan Stock                4,400,000       5,000,000
--------------------------------------------------------------------------------
Used for calculating diluted earnings per share     170,567,688     168,614,700
--------------------------------------------------------------------------------


9. Net assets per share

Net assets used for calculation of net assets per share        2006       2005
                                                                 £m         £m
Net assets at end of year (basic)                             390.3      288.5
Dilution due to Convertible Loan Stock                          2.2        2.5
--------------------------------------------------------------------------------
Diluted net assets                                            392.5      291.0
Derivative financial instruments at fair value                  1.1        1.5
Deferred tax on accelerated tax depreciation                    8.3        6.6
Deferred tax on fair value change of investment properties    114.2       79.7
Deferred tax on derivative financial instruments               (0.4)      (0.5)
--------------------------------------------------------------------------------
Diluted adjusted net assets                                   515.7      378.3
--------------------------------------------------------------------------------
Adjusted net assets (before dilution)                         513.5      375.8
--------------------------------------------------------------------------------

Net assets have been adjusted to derive a diluted net assets measure as defined
by the European Public Real Estate Association (EPRA).

Number of shares used for calculating net assets
per share                                                     2006         2005
                                                            Number         Number

Shares in issue at year-end                            169,509,640    168,839,660
Less ESOT shares                                        (4,940,960)    (5,620,370)
----------------------------------------------------------------------------------
Number of shares for calculating basic net assets
per share                                              164,568,680    163,219,290
Dilution due to Share Option Schemes                     2,538,531      1,682,780
Dilution due to Convertible Loan Stock                   4,400,000      5,000,000
----------------------------------------------------------------------------------
Number of shares for calculating diluted net
assets per share                                       171,507,211    169,902,070
----------------------------------------------------------------------------------

10(a). Investment properties

                                                               2006       2005
                                                                 £m         £m

Balance at 1 April                                            716.5      626.8
Additions during the year                                     154.5       56.0
Capitalised interest on re-developments                         0.5        0.2
Disposals during the year                                     (40.6)     (34.4)
Net gain from fair value adjustments on investment            131.3       67.9
property
Investment property held for sale (note below)                 (8.2)         -
--------------------------------------------------------------------------------
Balance at 31 March                                           954.0      716.5
--------------------------------------------------------------------------------

Property held for sale at the balance sheet date is shown separately under
current assets as required by IFRS5.

Within additions for the year are property purchases, including costs, of
£133.1m (2005: £45.1m).

Capitalised interest is included at a rate of capitalisation of 5.73% (2005:
5.79%). The total amount of capitalised interest included in investment
properties was £1.5m (2005: £1.2m).

Investment property includes buildings under finance leases of which the
carrying amount is £0.7m (2005: £0.7m). Investment property finance lease
commitment details are show in note 17(h).

The Group has determined that all tenant leases are operating leases within the
meaning of IAS17. The majority of the Group's tenant leases are granted with a
rolling three month tenant break clause. The future minimum rental receipts
under non-cancellable operating leases granted to tenants are as follows:
                                                         2006             2005
                                                           £m               £m
Within one year                                          23.0             19.0
Between two and five years                               24.5             18.5
Beyond five years                                        23.5             24.2
--------------------------------------------------------------------------------
                                                         71.0             61.7
--------------------------------------------------------------------------------         

10(b). Valuation

The Group's investment properties were revalued at 31 March 2006 by CB Richard
Ellis, Chartered Surveyors, a firm of independent qualified valuers. The
valuations were undertaken in accordance with the Royal Institution of Chartered
Surveyors Appraisal and Valuation Standards on the basis of market value. Market
value is defined as the estimated amount for which a property should exchange on
the date of valuation between a willing buyer and willing seller in an arm's
length transaction.

The reconciliation of the valuation report total shown in the Consolidated
Balance Sheet as non-current assets, investment properties, is as follows:





                                                            2006          2005
                                                              £m            £m

Total per CB Richard Ellis valuation report                964.3         718.4

Owner occupied property                                     (2.4)         (2.3)
Property held for sale (shown as current assets)            (8.2)            -
Head leases treated as finance leases under IAS 17           0.7           0.7
Other                                                       (0.4)         (0.3)
--------------------------------------------------------------------------------
Total per balance sheet                                    954.0         716.5
--------------------------------------------------------------------------------

11. Intangible assets
Computer software                                          2006           2005
                                                             £m             £m
Cost
Balance at 1 April                                          0.6            0.5
Additions during the year                                   0.1            0.1
--------------------------------------------------------------------------------
Balance at 31 March                                         0.7            0.6
--------------------------------------------------------------------------------

Accumulated amortisation and impairment
Balance at 1 April                                          0.4            0.3
Charged for the year                                        0.1            0.1
--------------------------------------------------------------------------------
Balance at 31 March                                         0.5            0.4
--------------------------------------------------------------------------------
Net book value at end of year                               0.2            0.2
--------------------------------------------------------------------------------

12. Property, plant and equipment

                           Owner occupied Owner occupied     Equipment   Total
                                     land      buildings  and fixtures 
                                       £m            £m             £m      £m
                                                                
Cost
Balance at 1
April 2004                            0.5           1.5            4.2     6.2
Additions
during the
year                                    -             -            0.8     0.8
Disposals
during the
year                                    -             -           (0.9)   (0.9)
--------------------------------------------------------------------------------
Balance at 31
March 2005                            0.5           1.5            4.1     6.1
Additions
during the
year                                    -           0.1            0.6     0.7
--------------------------------------------------------------------------------
Balance at 31
March 2006                            0.5           1.6            4.7     6.8
--------------------------------------------------------------------------------

Accumulated depreciation
Balance at 1
April 2004                              -             -            2.7     2.7
Charged for
the year                                -             -            0.7     0.7
Disposals
during the
year                                    -             -           (0.8)   (0.8)
--------------------------------------------------------------------------------
Balance at 31
March 2005                              -             -            2.6     2.6
Charged for
the year                                -           0.1            0.5     0.6
--------------------------------------------------------------------------------
Balance at 31
March 2006                              -           0.1            3.1     3.2
--------------------------------------------------------------------------------

Net book
amount at 31
March 2005                            0.5           1.5            1.5     3.5
--------------------------------------------------------------------------------
Net book
amount at 31
March 2006                            0.5            1.5            1.6     3.6
================================================================================

At 1 April 2004, the transition date to IFRS, the fair value of freehold owner
occupied land and buildings was adopted as the deemed cost of those assets. The
fair value of owner occupied land and buildings was £2.0m and the carrying value
at 1 April 2004, under UK GAAP, was £2.0m.

13. Trade and other receivables
                                                              2006        2005
                                                                £m          £m

Trade debtors                                                  3.8         3.5
Less provision for impairment of receivables                  (0.3)       (0.4)
--------------------------------------------------------------------------------
Trade debtors - net                                            3.5         3.1
Taxation and social security                                   0.3           -
Prepayments and accrued income                                 2.9         2.1
--------------------------------------------------------------------------------
                                                               6.7         5.2
--------------------------------------------------------------------------------

There is no concentration of credit risk with regard to trade receivables as the
Group has a large number of unrelated customers. No single debtor represents
more than 4.9% of trade debtors. There is no material difference between the
above amounts and their fair values due to the short term nature of the
receivables.


14. Cash and cash equivalents

                                                             2006         2005
                                                               £m           £m
Cash at bank and in hand                                        -            -
Restricted cash - tenants' deposit deeds                      1.7          1.2
--------------------------------------------------------------------------------
                                                              1.7          1.2
--------------------------------------------------------------------------------                   

Tenants deposit deeds represent returnable cash security deposits received from
tenants and are ring-fenced under the terms of the individual lease contracts.

Bank overdrafts are included within cash and cash equivalents for the purpose of
the cash flow statement.

15. Trade and other payables

                                                             2006         2005
                                                               £m           £m
Trade payables                                                2.4          2.2
Taxation and social security payable                          0.4          1.1
Tenants' deposit deeds (see note 14)                          1.7          1.2
Tenants' deposits                                             5.3          5.0
Accrued expenses                                             13.9         10.5
Deferred income-rent and service charges                      5.3          4.8
--------------------------------------------------------------------------------
                                                             29.0         24.8
--------------------------------------------------------------------------------


There is no material difference between the above amounts and their fair values
due to the short term nature of the payables.


16. Current tax liabilities

                                                             2006         2005
                                                               £m           £m
Current tax liabilities                                       1.7          2.5
--------------------------------------------------------------------------------

17. Financial liabilities - borrowings

a) Balances                                                   2006        2005
                                                                £m          £m
Current
Bank loan and overdrafts due within one year or on demand
(secured)                                                      3.6         0.8

Non -current
11% Convertible Loan Stock 2011 (unsecured)                    2.2         2.5
11.125% First Mortgage Debenture Stock 2007 (secured)         12.5        12.5
11.625% First Mortgage Debenture Stock 2007 (secured)          7.0         7.0
Other loans (secured)                                        403.7       299.7
Finance lease obligations (secured)                            0.7         0.7
--------------------------------------------------------------------------------
                                                             426.1       322.4
--------------------------------------------------------------------------------
                                                             429.7       323.2
--------------------------------------------------------------------------------                        

The secured loans and overdraft facility are secured on properties with balance
sheet values totalling £806.7m (2005: £655.5m).

b) Maturity                                                 2006          2005
                                                              £m            £m
Secured (excluding finance leases)
Repayable in less than one year                              3.6           0.8
Repayable between one year and two years                    19.5             -
Repayable between two years and three years                    -         219.5
Repayable between three years and four years               134.7             -
Repayable between four years and five years                270.0         100.8
--------------------------------------------------------------------------------
                                                           427.8         321.1
Less cost of raising finance                                (1.0)         (1.1)
--------------------------------------------------------------------------------
                                                           426.8         320.0
Unsecured
                                                                         
Repayable in five years or more                              2.2           2.5
Finance leases (secured)
Repayable in five years or more                              0.7           0.7
--------------------------------------------------------------------------------
                                                           429.7         323.2
--------------------------------------------------------------------------------

c) Interest rate profile    Principal       Interest    Interest      Repayable
                                                rate     payable
                                 £m            
Current
Bank loan and overdrafts
due within one year or
on demand                       3.6         Variable    Variable      On demand

Non-current
11% Convertible Loan
Stock 2011                      2.2        11% fixed    June and      Sept 2011
                                                        December
11.125% First Mortgage
Debenture Stock 2007           12.5    11.125% fixed   September      June 2007
                                                       and March
11.625% First Mortgage
Debenture Stock 2007            7.0    11.625% fixed   September      June 2007
                                                       and March
Other loans                   270.0     LIBOR +0.94%    Variable    August 2010
Other loans                   134.7     LIBOR +0.95%    Variable      July 2009

The 11% convertible loan stock 2011 is convertible each year, within 31 days of
the date of dispatch of the audited consolidated financial statements, at one
ordinary share to £0.50 stock held.

The net proceeds received from initial issue of the Convertible Loan Stock 2011
have been split between the liability element and an equity element as follows:

                                                           2006           2005
                                                             £m             £m
Net proceeds of Convertible Loan Stock 2011                 4.0            4.0
Less equity component                                      (0.3)          (0.3)
--------------------------------------------------------------------------------
Liability component at date of issue                        3.7            3.7
Cumulative amortisation since issue                         0.3            0.3
Liability component of conversion                          (1.8)          (1.5)
--------------------------------------------------------------------------------
Liability component as at 31 March                          2.2            2.5
--------------------------------------------------------------------------------

The effective interest rate on the liability element at 31 March 2006 was 11.95%
(2005: 11.95%).

d) Financial instruments held at fair value through the profit and loss

The following interest rate collars are held:

                         Amount hedged  Interest cap   Interest floor     Expiry
                                   £ m             %                %

Interest rate collar
(amortising amount)              104.2         8.00%            4.50%  July 2009
Interest rate collar              75.0         6.95%            4.05%  July 2009
Interest rate collar
(increasing amount)               35.1         7.00%            2.99%   Oct 2010


The above instruments are treated as financial instruments at fair value with
changes in value dealt with in the income statement during each reporting
period.

At the year end 5% (2005: 7%) of the Group's borrowings were fixed with a
further 50% (2005: 52%) subject to a collar.

e) Fair values of financial instruments

                                        2006        2006        2005        2005
                                  Book Value  Fair Value  Book Value  Fair Value
                                          £m          £m          £m          £m

Financial liabilities not at
fair value through profit or
loss
Bank overdraft                           3.6         3.6         0.8         0.8
11% Convertible Loan Stock
2011                                     2.2         2.5         2.5         2.9
11.125% First Mortgage
Debenture Stock 2007                    12.5        13.1        12.5        13.5
11.625% First Mortgage
Debenture Stock 2007                     7.0         7.4         7.0         7.6
Other loans                            403.7       403.7       299.7       299.7
Finance lease obligations                0.7         0.7         0.7         0.7
--------------------------------------------------------------------------------
                                       429.7       431.0       323.2       325.2
Financial liabilities at fair
value through profit or loss
Derivative financial
instruments:
Liabilities                              1.2         1.2         1.7         1.7
Assets                                  (0.1)       (0.1)       (0.2)       (0.2)
--------------------------------------------------------------------------------
                                         1.1         1.1         1.5         1.5
--------------------------------------------------------------------------------
                                       430.8       432.1       324.7       326.7
--------------------------------------------------------------------------------

The total gain recorded in the income statement was £0.4m (2005: £1.1m) for
changes of fair value of derivative financial instruments.

The fair value of the interest rate collars has been determined by reference to
market prices and discounted expected cash flows at prevailing interest rates.
All other fair values have been calculated by discounting expected cash flows at
prevailing interest rates. The total fair value adjustment equates to 0.8p per
share (31 March 2005: 1.2p).

f) Borrowing facilities

At 31 March 2006 the Group had undrawn borrowing facilities of £19.3m (2005:
£50.9m) for which conditions precedent had been met. Of the total undrawn
facilities, £0.2m (2005: £1.7m) had a maturity of less than 12 months with the
remainder having a maturity of in excess of two years.

g) Financial instrument risk management objectives and policy

Interest risk

The Group finances its operations through a mixture of retained profits and
borrowings. The Group borrows at both fixed and floating rates of interest and
then uses interest rate collars to generate the desired interest and risk
profile.

The Group's policy is to fix or cap interest rates on at least 50% of its
borrowings.

Credit risk

The credit risk in liquid funds and derivative financial instruments is limited
because the counter parties are banks with investment grade credit ratings.

The Group has no significant concentration of credit risk from its customers as
exposure is spread over a large number of entities.

Liquidity risk

The Group minimises liquidity risk by continually refreshing the maturity
profile of its debt.

h) Finance leases

Finance lease liabilities are in respect of leased investment property.

Minimum lease payments under finance leases fall due as
follows:                                                        2006      2005
                                                                  £m        £m

Within one year                                                  0.1       0.1
Between two and five years                                       0.2       0.2
Beyond five years                                                3.7       3.7
--------------------------------------------------------------------------------
                                                                 4.0       4.0
Future finance charges on finance leases                        (3.3)     (3.3)
--------------------------------------------------------------------------------
Present value of finance lease liabilities                       0.7       0.7
--------------------------------------------------------------------------------

18. Notes to cash flow statement

Reconciliation of profit for the period to cash generated from operations:
                                                                2006      2005
                                                                  £m        £m

Profit for the period                                          106.6      58.5
Tax                                                             42.4      24.3
Depreciation                                                     0.6       0.7
Amortisation of intangibles                                      0.1       0.1
(Profit)/loss on disposal of investment properties              (3.4)      0.1
Net gain from fair value adjustments on investment property   (131.3)    (67.9)
Fair value gains on financial instruments                       (0.4)     (1.1)
Interest income                                                 (0.2)     (0.1)
Interest expense                                                23.6      19.6
Changes in working capital:
(Increase)/decrease in trade and other receivables              (1.7)        -
Increase/(decrease) in trade and other payables                  2.7      (0.3)
--------------------------------------------------------------------------------
Cash generated from operations                                  39.0      33.9
--------------------------------------------------------------------------------

For the purposes of the cash flow statement, the cash and cash equivalents
comprise the following:
                                                              2006        2005
                                                                £m          £m
Cash at bank and in hand                                         -           -
Restricted cash - tenants deposit deeds                        1.7         1.2
Bank overdrafts                                               (3.6)       (0.8)
--------------------------------------------------------------------------------
                                                              (1.9)        0.4
--------------------------------------------------------------------------------

19. Tax paid
                                                             2006         2005
                                                               £m           £m

Tax paid in operating activities                              1.9          3.2
Tax paid in investing activities                              4.8          2.8
--------------------------------------------------------------------------------
Total tax paid                                                6.7          6.0
--------------------------------------------------------------------------------

20. Analysis of net debt
                            At 1 April  Cash Flow   Non-cash Items   At 31 March
                                  2005         £m               £m          2006
                                    £m                                        £m

Cash at bank and in hand             -          -                -             -
Restricted cash -
tenants' deposit deeds             1.2        0.5                -           1.7
Bank overdrafts                   (0.8)      (2.8)               -          (3.6)
--------------------------------------------------------------------------------
                                   0.4       (2.3)               -          (1.9)
--------------------------------------------------------------------------------

11% Convertible Loan
Stock                             (2.5)         -              0.3          (2.2)
11.125% First Mortgage
Debenture                        (12.5)         -                -         (12.5)
11.625% First Mortgage
Debenture                         (7.0)         -                -          (7.0)
Bank loans                      (300.8)    (103.9)               -        (404.7)
Less cost of raising
finance                            1.1        0.3             (0.4)          1.0
Finance lease
obligations                       (0.7)      (0.1)             0.1          (0.7)
--------------------------------------------------------------------------------
                                (322.4)    (103.7)               -        (426.1)
--------------------------------------------------------------------------------
Total                           (322.0)    (106.0)               -        (428.0)
--------------------------------------------------------------------------------

21. Deferred tax liabilities

                                                           2006           2005
                                                             £m             £m
Balance at 1 April                                         86.1           68.0
Deferred tax charge                                        36.5           18.1
--------------------------------------------------------------------------------
Balance at 31 March                                       122.6           86.1
--------------------------------------------------------------------------------


Deferred tax recognised in the balance sheet by each category of temporary
timing difference is as follows:
                                                               Deferred tax
                                                                 liability
                                                               2006       2005
                                                                 £m         £m

Fair value gains on investment                                114.2       79.7
properties
Capitalised interest                                            0.4        0.3
Accelerated tax depreciation                                    8.3        6.6
Derivative financial instruments                               (0.4)      (0.5)
Other                                                           0.1          -
--------------------------------------------------------------------------------
Balance at 31 March                                           122.6       86.1
--------------------------------------------------------------------------------

If the investment properties were sold for their revalued amount there would be
a potential liability to corporation tax of £95.6m (31 March 2005: £64.5 m).
Under IFRS no account is taken of indexation relief on capital gains resulting
in the difference between expected corporation tax to be paid and the provision
made for deferred tax.

22. Investment in own shares

The Company has established an Employee Share Ownership Trust (ESOT) to purchase
shares in the market for distribution at a later date in accordance with the
terms of the 1993 and 2000 Executive Share Option Schemes. The shares are held
by an independent trustee and the rights to dividend on the shares have been
waived. During the year the Trust transferred 679,410 shares to employees on
exercise of options. At 31 March 2006, the number of shares held by the Trust
totalled 4,940,960 (2005: 5,620,370). The shares have been included at cost in
shareholders' equity. 4,920,600 shares held by the Trust are subject to option
awards.

23. Explanation of the transition to IFRS

This is the Group's first full year's financial statements prepared in
accordance with IFRS. The accounting policies set out above have been applied in
preparing the financial statements for the periods ended 31 March 2006, 31 March
2005 and in preparing the opening IFRS balance sheet at 1 April 2004, the
Group's date of transition to IFRS.

A guide explaining the principal differences between UK GAAP and IFRS as they
affect the reported results and their presentation was issued in August 2005,
entitled Workspace Group PLC, Adoption of International Financial Reporting
Standards. This is available from the Group's website at 
http://www.workspacegroup.co.uk/investors/?pageID=4.22.68

24. Annual Report and Accounts

The financial information in this preliminary announcement does not constitute
statutory accounts within the meaning of section 240 of the Companies Act (as
amended).

The figures contained herein have been extracted from the Group's full IFRS
financial statements for the year ended 31 March 2006, which will be delivered
to the Registrar of Companies. The Group's full UK GAAP financial statements for
the year ended 31 March 2005 have been delivered to the Registrar of Companies.
The auditors' reports on both of these sets of financial statements were
unqualified and did not contain a statement under section 237(2) or section 237
(3) of the Companies Act.

A printed copy of the Annual Report and Accounts for the Group will be posted to
shareholders on 27 June 2006, and will be available on the Group's website
www.workspacegroup.co.uk




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