UK OFFICES. London & Cambridge Properties Ltd LCP House The Pensnett Estate Kingswinford West Midlands DY6 7NA. Tel: Fax:

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1 UK OFFICES London & Cambridge Properties Ltd LCP House The Pensnett Estate Kingswinford West Midlands DY6 7NA Tel: Fax: Millbank Tower Millbank London SW1P 4QP Tel: Fax: GERMAN OFFICE Josephinen Straße Düsseldorf Germany Tel: Fax: POLISH OFFICE Plac Pilsudskiego Warsaw Poland Tel: Fax:

2 London & Cambridge Properties Annual Report & Accounts 2014 London & Cambridge Properties Limited owns and manages a portfolio of properties of fifteen million square feet. Contents 01 Financial highlights 03 Strategic report 12 Report of the directors 15 Consolidated profit and loss account 16 Other primary statements 17 Consolidated balance sheet 18 Company balance sheet 19 Consolidated cash flow statement 20 Accounting policies Independent auditors report 40 Ten year financial summary Right: Blocks A and B, Progress Point, The Pensnett Estate, Kingswinford, West Midlands London & Cambridge Properties Limited Company number , Registered in England Using its intensive management approach to enhance returns and maximise asset growth it is committed to further expansion by acquisition and development of quality buildings in key locations.

3 01 London & Cambridge Properties Annual Report & Accounts 2014 Financial highlights for the year ended 31 March Financial highlights Vantage Point, The Pensnett Estate, Kingswinford, West Midlands Profit and Loss Account Group turnover 89, ,244 Gross profit 74, ,548 Administrative expenses (15, 518 ) (14,915) Group operating profit 59, ,633 Operating profit in joint ventures 1, 059 1,104 (Loss)/ Profit on disposal of investment properties ( 141 ) 1,018 Interest payable less receivable ( 16, 830 ) ( 20,871 ) Profit before taxation 43,177 38,884 Profit after taxation 32, ,546 Balance sheet Investment property and joint ventures 950, ,858 Equity shareholders funds 530, ,727 Borrowings Interest cover (times) Net borrowings: investment properties 63% 68% Net borrowings: equity shareholders funds 113% 132% Performance overview, m m m m m m m m m m m m Turnover m Equity shareholders funds m Profit before taxation m

4 03 London & Cambridge Properties Annual Report & Accounts 2014 Strategic report for the year ended 31 March Strategic report Building 7, The Hill Top Estate, West Bromwich, West Midlands The directors present their strategic report for the year ended 31 March Activities and Business Review In 2014 the Group enjoyed a successful year marked by significant refinancing, completed after the year end, strategic disposals achieving optimum proceeds and additions delivering value. The principal activities of the Group consist of the development and management of industrial and commercial properties and the provision of associated services. It is not anticipated that there will be any significant change during the current financial year. The strategy of the Group remains to improve returns and achieve asset growth through the intensive management and development of its properties. The Group continues to consider opportunities to acquire or dispose of properties where these activities offer opportunities to use our key strengths to deliver growth. Future Developments The Group envisages no changes to the direction of its strategy. Performance Review The Group turnover and profit before taxation and underlying profit before taxation, which the directors consider to be key performance indicators to monitor the business, for the year were as follows: Performance Turnover UK 76,829 77,124 Continental Europe 12,961 11,120 Group 89,790 88,244 Profit before taxation UK 40,152 38,628 Continental Europe 3, Group 43,177 38,884 Taxation (10,530) (9,338) Profit for the year 32,647 29,546 Underlying profit before taxation UK 35,171 35,602 Continental Europe 2,924 1,167 Group 38,095 36,769 The Group sold the second phase of development land at Pensnett. Turnover includes development income of 7.62 million with the cash being received on completion after the year end (2013: 4.97 million received for the first phase). Value by sector Industrial 54.2% Retail 43.3% Offices 2.5% Underlying profits exclude the impact of exchange differences and certain one-off costs and benefits.

5 05 London & Cambridge Properties Annual Report & Accounts 2014 Strategic report for the year ended 31 March has seen record trading results for the Group, with pre-tax profits of 43.2m Photographs, from top: Wulfrun Shopping Centre, Wolverhampton, West Midlands Blocks B and C, Progress Point, The Pensnett Estate, Kingswinford, West Midlands Buildings 1 and 2, The Hill Top Estate, West Bromwich, West Midlands Performance Review continued Underlying profits in the UK fell by 0.43 million compared to the prior year but improved by 1.76 million in Continental Europe. In the UK, the decline in rental income of 2.08 million was principally attributable to continuing difficult market conditions in the retail sector. The Group took the opportunity to dispose of two Sainsbury s stores both at a yield of 4.8% ( 0.59 million reduction in rental income in 2014). Property direct costs and overheads reduced by 0.22 million partly due to savings achieved following the disposal of industrial land at Reading and through the reduction of irrecoverable costs across the industrial portfolio. UK interest costs reduced by 0.95 million. Interest payments on external debt reduced by 2.79 million as a number of interest rate hedges taken out at historically high rates matured and debt was repaid during the refinancing exercise. Interest receivable on loans from related parties reduced by 1.71 million as million ( 25 million) was repaid during the year and rates on the loan to Paris Properties SARL were renegotiated with a fixed rate of 6.5% replaced by a 3 month euro LIBOR rate plus a 4.5% margin. The Group has maintained a commitment to offer properties that are fully refurbished and available for immediate occupancy. In total, the Group spent 4.57 million on capital and refurbishment expenditure within the UK portfolio in 2014 compared to 4.49 million in Underlying profits in Continental Europe improved by 1.76 million. The acquisition of new property in Poland helped to deliver a growth in rental income of 1.58 million and management fees of 0.37 million. Portfolio Value The revaluation of the Group s investment properties at 31 March 2014 revealed a revaluation deficit of 8.17 million, a 1% reduction. The revaluation deficit of the joint venture holding in the Concourse Centre, Skelmersdale was 0.2 million. During the year, the Group has seen a number of high yielding opportunities to strengthen its portfolio and has made the following acquisitions. The Group purchased the leasehold interest of 5 industrial units on an estate in Leicester for 1.51 million and the freehold interest of a retail unit in Swindon for 0.85 million. The Group continued development works to regenerate Pitsea town centre. During the year, 3.87 million was capitalised. The project is continuing as planned with construction of the Aldi store completed on time. Further capital works include expenditure of 1.88 million to build new units to satisfy the requirement for smaller units at The Pensnett Estate, 0.51 million to upgrade a 43,000 square foot unit at The Hill Top Industrial Estate and 1.85 million relating to extending, upgrading and improving properties throughout the UK. Investment Property UK 778, , 795 Continental Europe 157, , 126 Group 936, , 921 UK Joint venture 14, , 937 Income by location (UK) Midlands 47.3% South East 27% Scotland 2.8% South/South West 8.3% North West 7.9% North East 6.7%

6 07 London & Cambridge Properties Annual Report & Accounts 2014 Strategic report for the year ended 31 March Photographs, from top: Wulfrun Shopping Centre, Wolverhampton, West Midlands Piotrkow Trybunalski, Poland Shopping mall, Piotrkow Trybunalski, Poland Bokserska, Poland Entrance, Piotrkow Trybunalski, Poland Income by location (Europe) UK 83.1% Poland 11.5% Germany 5.4% Income by sector Industrial 46.5% Retail 50.2% Offices 3.3% Portfolio Value continued In Poland the Group acquired a shopping centre at Piotrkow for million and Bokserska for 3.41 million. The project to refurbish and upgrade the logistics centre at Bydgoszcz continued with expenditure of 2.32 million incurred during the year. In addition, expenditure of 0.24 million was incurred to improve other properties in Continental Europe. The Group disposed of two Sainsbury s stores achieving a yield of 4.8% and proceeds of million. Industrial land at Woodley, Reading was sold for residential development for 7.83 million. In addition, the Group disposed of a number of industrial buildings and non-core residential units where it sees little opportunity to add value through management or development, receiving proceeds from these disposals amounting to 8.29 million. The Group is continually seeking high yielding investment property acquisitions in the UK, Poland and Germany. The market is constantly monitored and acquisitions will be undertaken on a selective basis where there are real opportunities to enhance returns using our intensive management approach. Occupancy Levels During the year the Group s occupancy levels averaged 89% with industrial occupancy averaging 88% and retail 93%. In the UK, occupancy levels remained at 89% throughout the year. Occupancy in both the industrial and retail sectors held up strongly at 88% and 92% respectively. Occupancy levels UK 89% 89% Continental Europe 92% 85% Group 89% 88% Occupancy Levels continued In Continental Europe occupancy levels improved from 85% to 92% at March The refurbishment at Bydgoszcz and the loss of a tenant in Essen reduced occupancy in the industrial sector to 78%. Subsequent lettings at both locations have improved occupancy to 90% while occupancy in the retail sector improved from 92% to 94%. Financing The net debt at 31 March 2014 of million comprised million at fixed rates, million capped at a strike rate of 6%, 15 million capped at 4% and million capped at 3.25%. All of the Group s debt is hedged with 72% at fixed interest rates. In the UK, the Group has refinanced 130 million of medium term loan facilities for a 5 year term maturing June The Group repaid million of the commercial mortgage backed security. The Group agreed a 30 million extension of facilities with an existing bank lender maturing February 2018 and a new 70 million with an insurance company with a 15 year term maturing February In addition, the Group repaid million of bank loans, and 1 million of shareholder loans. In Poland, the Group has refinanced million of medium term loan facilities for a 4½ year term maturing June The Group agreed a million finance lease with a bank lender secured against the Piotrkow acquisition. The lease has a 10 year term maturing April In Germany, the Group repaid 3.07 million of bank loans. At 31 March 2014, the Group had million of debt falling due within one year or on demand. Within this amount, million is due to Leathbond Limited, the parent undertaking.

7 09 London & Cambridge Properties Annual Report & Accounts 2014 Strategic report for the year ended 31 March All property and financial risks are constantly monitored to ensure their effect is minimalised. Financing continued Since the year end, the Group has repaid the outstanding million of the commercial mortgage backed security in advance of the August 2014 maturity, and 9 million of shareholder loans. Since the year end, Leathbond and the Group have agreed to reschedule the debt due within one year. The Group has agreed to repay 12 million during the year to 31 March The repayment of the commercial mortgage backed security was partly funded by the draw down of 40 million from existing bank facilities and a new 67 million bank loan for a 5 year term maturing May Interest receivable on loans from related parties reduced by 1.71 million due to repayments of million and reduced rates. The loan to Paris Properties SARL was renegotiated with a fixed rate of 6.5% replaced by a 3 month euro LIBOR rate plus a 4.5% margin. Interest on bank loans and overdrafts and other loans reduced by 3.47 million as the Financial risks Risk Impact Mitigation Liquidity /refinancing risk Inability to fund operations, capital expenditure or to raise new or replacement funding The Group regularly monitors banking covenant headroom, leverage and committed, undrawn financing facilities. The Group maintains regular contact with both existing and prospective providers of funding to evaluate options in advance of funding deadlines. Interest rate exposure Increased borrowing costs Interest rates are constantly monitored and hedging policies reviewed by the directors to ensure the Group s risk and exposure to volatile interest rate movements is kept to a minimum. The Group s policy is to manage its exposure to short term interest rate movements through the use of derivative contracts where appropriate. Credit risk : failure of bank and financial institution counterparties Loss of cash deposits Group reduced debt levels. Margin increases on new financing agreements have been offset against the maturity of historically high interest rate swaps. The weighted average cost of borrowings increased from 4.27% at March 2013 to 4.59% at March Financing Loans and borrowings Bank loans and overdrafts 550, , 234 Finance leases 13, 564 Other loans 11, , 000 Loans from shareholders 58, , 650 Total loans and borrowings 633, , 884 Cash ( 34, 750) ( 26, 828) Net debt 598, , 056 The Group has fostered relationships with a range of banks to provide deposit facilities for surplus cash balances. The Group continually reviews the credit ratings of these banks and spreads deposits across institutions with the higher credit ratings. Foreign currency risk Volatility of earnings and cash flows The Group s policy is to reduce exposure to foreign currency exchange differences by hedging overseas net assets with foreign currency borrowings and derivative contracts where appropriate. Property risks Gearing and Financial Covenants The Group property gearing loan to value ratio, which reflects the ratio of net debt to investment properties and investments in joint ventures, reduced from 68% at 31 March 2013 to 63% at 31 March The Group will continue to reduce debt levels in future to further reduce this ratio. The ratio of net debt to equity shareholders funds reduced during the year from 132% at 31 March 2013 to 113% at 31 March In addition to the loan to value ratio, interest cover is a key financial covenant within the Group s banking facilities. The Group was compliant with its covenants for all bank loan agreements at all times during the year. At 31 March 2014 the Group s interest was 3.6 times covered compared to 2.9 times covered at 31 March Risk Impact Mitigation Acquisition risk Tenant credit risk Valuation risk Health and safety Acquisition of property that fails to meet performance targets. Continued worries about employment security, falling real income and restrictions on government expenditure may result in tenants, particularly in the UK retail sector, facing difficult operating conditions which may result in increasing tenant default and vacancy rates. Valuations have fallen in the past three financial years. Uncertainty in the UK economy may result in further retrenchment of values due either to falling yields or rental income. A fall in property valuations may lead to a worsening in loan to value ratios outside the range acceptable to the Group and to a level risking breach of banking covenants. Potential loss or injury to employees, contractors, tenants or members of the public. Risk Management The Group perceives risk management as critical to achieving the strategic goals of the Group. Risk management policies are designed to reduce the chance and impact of financial loss, to protect the reputation of the Group, and to improve the likelihood of successfully taking opportunities as they arise in the market. Regular Board meetings are held at which the adequacy of the existing risk mitigation policies and controls are reviewed and challenged, new risks are identified and prioritised. Target acquisitions are evaluated and due diligence carried out. Investment criteria are established by the Board and no properties are acquired which fail to meet these criteria. The Group operates procedures to reduce exposures by reviewing tenant covenants for new leases. Close contact and strong relationships are maintained with existing tenants to enable the Group to consider actions to mitigate risk at the earliest opportunity. The Group manages a diversified portfolio in the industrial, retail and office sectors which are predominantly multi-let sites and with a spread of lease end dates. The Group manages a diversified portfolio in different geographical regions and sectors. In particular, the Group s businesses in Poland and Germany are seeing positive signs, and in the UK, the Group has seen positive indicators in the industrial sector. Since the downturn in 2007, the Group has prioritised the management of loan to value ratios. Management has at all times continued to communicate fully with lenders, making debt repayments when necessary while acquiring properties which enhance the portfolio as opportunities arise. The Group Health and Safety Committee meet regularly to update risk mitigation policies. Education and training are provided to all employees as required. All properties are visited every year and structured risk assessments undertaken.

8 11 London & Cambridge Properties Annual Report & Accounts 2014 Report of the directors for the year ended 31 March The improvement in Group occupancy levels during 2014 has continued since the year end Report of the directors Post Balance Sheet Events The Group completed the refinancing of the commercial mortgage backed security, repaying the remaining million. This was partly funded by the draw down of 40 million from existing bank facilities and a new 67 million bank loan. The Group has repaid 5 million of bank loans and 9 million to Leathbond Limited. The Group has sold an office building in Stevenage for 2.4 million. Dividends Dividends of 1,250,000 were paid during the year. Dividends of 7,500,000 have been paid since the year end. Dividends recognised in the year are disclosed in note 9. Fixed Assets The changes in fixed assets during the year can be found in notes 10 to 12 on pages 24 and 25. On behalf of the board S J Massey Director 1 1 August 2014 Income by lease length 0 5 years 77.7% 5 10 years 14.5% years 5.4% 15+ years 2.4% The directors present their report together with the audited financial statements for the year ended 31 March Directors The directors who served during the year were: S J Massey C MacDonald-Hall J D Chandris M D Chandris E A Tomazos A Tomazos Statement of Directors Responsibilities The directors are responsible for preparing the Report of the Directors and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (UK Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and the group and of the profit or loss of the group for that period. In preparing these financial statements, the directors are required to: select suitable accounting policies and then apply them consistently; make judgements and accounting estimates that are reasonable and prudent; state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company s and the group s transactions and disclose with reasonable accuracy at any time the financial position of the company and the group and enable them to ensure that the financial statements comply with the Companies Act They are also responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Strategic Report The directors have taken advantage of the option to disclose information in relation to future developments, post balance sheet events and risk exposure within the Strategic Report. Statement as to Disclosure of Information to Auditors So far as the directors are aware, there is no relevant audit information ( as defined by Section 418 of the Companies Act 2006 ) of which the group s auditors are unaware, and each director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit information and to establish that the group s auditors are aware of that information. Left: Building 44, The Pensnett Estate, Kingswinford, West Midlands Auditors The auditors, Rothmans Audit LLP, will be proposed for re-appointment at the forthcoming annual general meeting. On behalf of the board S J Massey Director 1 1 August 2014

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10 15 London & Cambridge Properties Annual Report & Accounts 2014 Consolidated profit and loss account Other primary statements Consolidated profit and loss account/other primary statements for the year ended 31 March Notes Turnover : Group and share of joint ventures 91, , 588 Less : share of joint ventures (1, 336 ) (1, 344 ) Group turnover 1 89, , 244 Cost of sales (15, 183 ) (15, 696 ) Gross profit 74, , 548 Administrative expenses (15, 518 ) (14, 915 ) Group operating profit 59, , 633 Share of operating profit in joint ventures 1, 059 1, , , 737 (Loss)/ Profit on disposal of investment properties (141) 1, 018 Profit on ordinary activities before interest 60, , 755 Interest receivable 3 16, , 732 Interest payable 4 ( 33, 123 ) ( 36, 603 ) Profit on ordinary activities before taxation 5 43, , 884 Taxation on profit on ordinary activities 7 ( 10, 530 ) ( 9, 338 ) Profit on ordinary activities after taxation 32, , 546 Equity minority interests (11) 30 Profit for the financial year 22 32, , 576 The profit and loss account relates solely to continuing operations as defined in FRS 3 Statement of Group Total Recognised Gains and Losses Notes Profit for the financial year 32, , 576 Unrealised deficit on revaluation of investment properties 22 ( 8, 174 ) (29, 846) Share of revaluation deficit relating to joint ventures 22 (200) (1, 200) Taxation on prior year property revaluations 22 ( 3, 315) (4) Actuarial gain /(loss) on pension scheme 28 1, 960 (566) Foreign currency differences 22 (212) 137 Total recognised gains /( losses) for the year 22, 695 (1, 903) Note of Group Historical Cost Profits and Losses Retained profit on ordinary activities before taxation 43, , 884 Realisation of property revaluation gains of previous years before taxation 37, , , 270 Historical cost profit for the year retained after taxation and minority interests 69, , 962 Reconciliation of Movement in Shareholders Funds Profit for the financial year 32, , 576 Dividends 9 ( 1, 250) (5, 000) 31, , 576 Other recognised losses 22 (10, 083) (31, 333) 21, 303 (6, 757) Opening shareholders funds 509, , 840 Closing shareholders funds 530, , 083 The notes on pages 20 to 38 form part of these Financial Statements The notes on pages 20 to 38 form part of these Financial Statements

11 17 London & Cambridge Properties Annual Report & Accounts 2014 Consolidated balance sheet/company balance sheet for the year ended 31 March Consolidated balance sheet Company balance sheet Notes Intangible fixed assets Goodwill , 381 Negative goodwill 10 (353) Tangible fixed assets Investment properties , , 921 Other fixed assets 12 2, ,437 3, , 042 Investments 13 5,956 5, 956 Investments in joint ventures 13 Share of gross assets 15, , 538 Share of gross liabilities ( 554) 14,685 ( 601 ) 14, 937 Current assets Stock and work in progress 15 1, 543 3, 160 Debtors Amounts falling due within one year 16 34, , 650 Amounts falling due after more than one year , , 435 Pension asset 28 1, 179 Cash at bank and in hand 34, , , , 073 Creditors Amounts falling due within one year 17 (232, 762 ) (190, 307) Net current assets 22, , 766 Total assets less current liabilities 982, 934 1, 069, 729 Notes Fixed assets Investments in group undertakings 14 44, , 773 Current assets Debtors Amounts falling due within one year 16 3, 069 1, 786 Amounts falling due after more than one year 16 19, , 153 Cash at bank and in hand , , 943 Creditors Amounts falling due within one year 17 (11, 112 ) (11, 304) Net current assets 11, 112 9, 639 Net assets 55, , 412 Capital and reserves Called up share capital Share premium account 22 32, , 888 Profit and loss account 22 22, , 522 These financial statements were approved by the board of directors on 11 August , , 412 Creditors Amounts falling due after more than one year 18 ( 447, 135 ) ( 554, 380) Provisions for liabilities Deferred taxation 20 ( 5, 309) ( 5, 608) Other provisions 20 (300) ( 380) Pension liability 28 ( 634) Net assets 530, , 727 S J Massey Director C MacDonald-Hal l Director Capital and reserves Called up share capital Share premium account 22 32, , 888 Revaluation reserve , , 684 Profit and loss account , , 509 Shareholders funds 530, , 083 Equity minority interest (196) (356) Equity shareholders funds 530, , 727 These financial statements were approved by the board of directors on 11 August 2014 S J Massey Director C MacDonald-Hal l Director The notes on pages 20 to 38 form part of these Financial Statements The notes on pages 20 to 38 form part of these Financial Statements

12 19 London & Cambridge Properties Annual Report & Accounts 2014 Consolidated cash flow statement/accounting policies for the year ended 31 March Consolidated cash flow statement Accounting policies Notes Net cash inflow from operating activities 23 71, , 362 Return on investments and servicing of finance Interest received 11, , 429 Interest paid ( 27, 441) ( 31, 644 ) Cash received on account of profit share from joint venture 1, 112 1, 000 (14, 698) (18, 215 ) Taxation Corporation tax paid ( 11, 099 ) (10, 664) Capital expenditure and financial investments Purchase of investment property (19, 235 ) (13, 290 ) Sale of investment property 58, 454 3, 198 Purchase of other fixed assets (162) (4, 538 ) Sale of other fixed assets , 761 (14, 611 ) Equity dividends paid ( 1, 250 ) (5, 000) Cash inflow before management of liquid resources and financing 83, , 872 Financing Loans advanced 102, , 453 Loans repaid ( 178, 662) ( 180, 999 ) Finance leases ( 208) Net cash outflow from financing (76, 835 ) ( 29, 546 ) Increase / ( decrease ) in cash 24 6, 892 ( 10, 674 ) The following accounting policies are used consistently in dealing with items which are considered material in relation to the group and company accounts. a Basis of accounting The accounts have been prepared in accordance with applicable Accounting Standards under the historical cost convention, modified by the revaluation of investment properties. The value of investments in subsidiary and joint venture undertakings is adjusted to reflect the underlying net asset values. b Consolidation The consolidated accounts comprise the accounts of the company and all subsidiaries made up to 31 March The company has not presented its own profit and loss account as permitted by Section 408 of the Companies Act c Joint venture undertakings A joint venture undertaking is one in which the company holds a long term interest and shares control under a contractual relationship. The joint ventures have been accounted for under the gross equity method and the company s share of their gross assets and liabilities and profits less losses have been accounted for within the consolidated accounts in accordance with FRS 9. d Turnover Turnover represents amounts due for the year in respect of gross rental income, estate related services, the income from managed operations such as warehousing, car parks, shopping centre malls and serviced offices, sales of development properties and income from the helicopter charter operation, excluding value added tax. Where a rent-free period is included in a lease, the rental income foregone is allocated evenly over the period from the date of lease commencement to the date of the first review. Rental income under stepped rent agreements is recognised on a straight-line basis over the shorter of the entire lease term or the period to the first break option. Where a lease incentive payment, including surrender premiums paid, does not enhance the value of the property, it is amortised on a straight line basis over the period from the date of lease commencement to the date of the first rent review. Upon receipt of a surrender premium for the early determination of a lease, the profit, net of dilapidations and non-recoverable outgoings relating to the lease concerned, is immediately reflected in income. e Depreciation Depreciation is calculated to write off the cost of tangible fixed assets by equal annual instalments over their estimated useful lives as follows: Plant and machinery 3-20 years Furniture, fittings, tools and equipment 4-10 years Leasehold property is amortised over the period of the lease. f Stocks and work in progress These are valued at the lower of cost and net realisable value. In respect of work in progress, cost includes materials, labour and the attributable proportion of overhead expenses. Property developments in the course of development are valued at the lower of cost and net realisable value. Cost for this purpose comprises the cost to the company of acquiring the land and development expenditure. g Deferred taxation The company has implemented the provisions of FRS 19 and has provided in full for deferred taxation in respect of accelerated capital allowances for plant and machinery and for the taxation effect of other timing differences. Provision will continue to be made until the relevant interest is disposed of or until the expiry of the prescribed industrial buildings life. At this point in time any reversing allowances will be released to the profit and loss account. The company does not make provision for the taxation that would arise if it disposed of its investment properties as the Directors have no intention of making such disposals. This unprovided deferred tax is detailed in the notes. h Investment property Investment properties are carried at market valuation. Any movement on future revaluation will be transferred to a revaluation reserve except where it is considered to permanently reduce the value below historical cost, in which case the deficit is taken to the profit and loss account. No depreciation is provided in respect of investment properties. The Companies Act 2006 requires all properties to be depreciated. However, this requirement conflicts with the generally accepted accounting principle set out in SSAP 19. The directors consider that, as these properties are held for their investment potential, to depreciate them would not give a true and fair view, and that it is necessary to adopt SSAP 19 in order to give a true and fair view. If this departure from the Act had not been made, the profit for the financial period would have been reduced by depreciation. However, the amount of depreciation cannot reasonably be quantified because depreciation is only one of many factors reflected in the annual valuation and the amount which might otherwise have been shown cannot be separately identified or quantified. Development property comprises property acquired to be developed for future use as investment property and is initially measured at cost. Where, prior to the completion of the development, the value falls below the cost of the development and the directors consider this to be a permanent impairment, the fall is charged to the profit and loss account. i Finance leases Leases are classified as finance leases whenever they transfer substantially all the risks and rewards of ownership to the Group. The assets are included in investment properties and the capital elements of the leasing commitments are shown as obligations under finance leases. The assets are revalued on the same basis as owned investment properties. The interest element of the lease rental is included in the profit and loss account in interest payable and similar charges. j Pensions The company operates a contributory defined benefit pension scheme for employees whose employment began before 1 September The scheme funds are administered by trustees and are independent of the company s finances. Contributions are paid to the scheme in accordance with the recommendations of independent actuaries. The contributions to the scheme are charged to the profit and loss account in order to spread the cost of providing pensions over the working lives of employees. The company also operates a defined contribution stakeholder pension scheme. The amount charged to the profit and loss account in respect of pension costs is the contributions payable in the year. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the balance sheet. k Operating leases The rentals arising under operating lease agreements are charged to the profit and loss account over the term of the lease. l Foreign currencies The results of overseas subsidiary undertakings are translated into sterling using the average rates of exchange ruling during the period. Their balance sheets are translated at the exchange rate ruling at the year end. Any resulting translation differences are taken directly to reserves. All other exchange differences are reflected in the profit and loss account. m Goodwill Goodwill arising on the acquisition of subsidiary undertakings is written off to the profit and loss account over the estimated economic life in accordance with FRS 10. The goodwill arising on acquisition is considered to have an economic life of 10 years. n Derivative financial instruments Fair value accounting has not been adopted in respect of financial instruments. Gains and losses on financial instruments are included in the profit and loss account when they are realised. The fair value of derivatives at the balance sheet date is disclosed in the notes to the accounts. The notes on pages 20 to 38 form part of these Financial Statements

13 21 London & Cambridge Properties Annual Report & Accounts 2014 for the year ended 31 March Group segmental reporting Turnover Profit before tax Net assets / ( liabilities ) 4 Interest payable and similar charges Geographical analysis UK 76, , , , , ,851 Continental Europe 12, , 120 3, (16, 079 ) (22, 124 ) 89, , , , , , 727 Analysis of turnover by activity Rental income 77, , 638 Estate services 2, 713 2, 605 Development income 7, 615 4, 967 Warehousing Shopping mall and car park income 1, 410 1, 339 Helicopter chartering income Employees 89, , 244 The average number of people employed by the Group ( including directors ) during the year was as follows : Management and administration The aggregate payroll costs were as follows : Wages and salaries 7, 403 6, 437 Social security costs Other pension costs , 972 7, 674 On bank loans and overdrafts and other loans repayable within five years 22, , 521 On loans repayable after five years 2, 924 1, 953 On loans from parent undertaking 1, 201 1, 472 Foreign exchange losses 5, 543 3, 923 Swap 2, 283 Other interest and similar charges 1, The swap cost above relates to the close-out of a swap contract, settled as a result of refinancing part of the Group s property portfolio during the year. 5 Profit before taxation 33, , 603 The profit before taxation is stated after charging /( crediting ): Operating lease rentals : plant and machinery land and buildings 1, 879 2, 473 Depreciation of tangible fixed assets Amortisation of goodwill Amortisation of negative goodwill ( 353) ( 467) Loss /(profit) on disposal of investment properties 141 (1, 018 ) Foreign exchange losses Auditors remuneration - Group for audit services for audit services for the pension scheme 5 5 taxation Auditors remuneration - Company for audit services taxation Directors emoluments The emoluments of the directors for the year ended 31 March 2014 were as follows : Emoluments for services as directors and executives 3, 013 1, 829 Contributions to money purchase pension schemes Interest receivable and similar income 3, 165 1, 878 The number of directors who are accruing benefits under pension schemes is as follows : Bank interest receivable Foreign exchange gains 5, 538 3, 427 Interest on other loans 10, , 830 Other interest , , 732 Money purchase schemes 2 2 Defined benefit schemes 1 1 The emoluments of the highest paid director were as follows : Aggregate emoluments 1, Contributions to a money purchase pension scheme ,

14 23 London & Cambridge Properties Annual Report & Accounts 2014 for the year ended 31 March Taxation Taxation based on the profits for the year UK corporation tax at 23% ( 2013: 24%) 9, 594 9, 272 Adjustment in respect of earlier years : Corporation tax 160 ( 23 ) 9, 754 9, 249 Foreign taxes : Corporation taxes Total current tax 9, 765 9, 309 Deferred tax UK 144 ( 299 ) Deferred tax Continental Europe The tax for the period is lower ( 2013 : lower) than the standard rate of corporation tax in the UK of 23% ( 2013 : 24%). The differences are explained below : 10, 530 9, 338 Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 23% ( 24%) 9, 931 9, 332 Expenses disallowed Increased /( reduced) tax on property sales 1, 477 ( 214 ) Deferred tax released principally capital allowances (124) ( 99) Other items ( 1, 103 ) ( 192) Effect of foreign subsidiaries (685) 71 Prior year items 160 ( 23) Total taxation on profits for the year 9, 765 9, Profit dealt with in the accounts of the Company As permitted by section 408 of the Companies Act 2006, the profit and loss account of the parent company is not presented as part of these financial statements. The parent company s profit for the financial year was 2, 723, 000 ( 2013 : 5, 657, 000). 10 Intangible fixed assets Goodwill 000 Cost At 1 April , 249 Exchange adjustments (83) At 31 March , 166 Accumulated amortisation At 1 April , 868 Charge for the year 419 Exchange adjustments (58) At 31 March , 229 Net book amount at 31 March Net book amount at 31 March , 381 The goodwill arising on the acquisition of EMKA S.A. is being amortised on a straight line basis over the period of 10 years, the period over which the directors estimate that the value of the underlying business acquired is expected to exceed the value of the underlying assets at acquisition. Negative goodwill 000 Cost At 1 April 2013 and 31 March , 710 Accumulated amortisation At 1 April , 357 Charge for the year 353 At 31 March , 710 Net book amount at 31 March 2014 Net book amount at 31 March The Group is amortising the negative goodwill over a period of 10 years, the expected useful life. 9 Dividends Interims paid in respect of current period ( 2013 : ) per ordinary share 1, 250 5, 000

15 25 London & Cambridge Properties Annual Report & Accounts 2014 for the year ended 31 March Tangible fixed assets: Investment property Group Short Long Freehold Leasehold Leasehold Developments Total 000 At 1 April , 837 7, , 299 5, , 921 Additions 4, , 435 6, , 123 Reclassifications (650) 650 Disposals ( 58, 595 ) ( 58, 595 ) Revaluation deficit ( 544 ) (236) (7, 393) ( 8, 173) Exchange adjustment (126) (2, 789) (93) (3, 008) At 31 March , 542 6, , , , 268 Freehold and leasehold investment properties are shown at valuation. Development assets consist of assets in the course of construction where the completed project will be transferred into investment property. Development assets are shown at cost. A long leasehold property at Piotrkow was acquired during the year under a finance lease. The property was valued at 17, 229, 000 at 31 March The Group s UK portfolio of investment properties was valued at market value by Jones Lang LaSalle Ltd at 31 March 2014, the Polish portfolio by DTZ Polska Sp. Zo.o. at 31 March 2014 and the German portfolio by Wüst & Partners at 31 January The cost of the assets included at valuation determined according to historical cost accounting rules is as follows : Freehold property 459, , 633 Leasehold property 244, , , , Other tangible fixed assets Furniture Fittings Plant and Tools and Group Machinery Equipment Total 000 Cost At 1 April , , 305 Exchange adjustments (8) (2) (10) Additions Disposals ( 1, 253 ) (20) ( 1, 273 ) At 31 March , , 183 Depreciation At 1 April , , 184 Exchange adjustments (7) (1) (8) Charge in year Disposals ( 546) (20) ( 566 ) 13 Investments Group Unlisted investments share of net assets in joint ventures 14, , 937 Listed investments 5, 956 5, 956 The Group owns a 50% share in The Skelmersdale Limited Partnership, a limited partnership incorporated in the UK and registered in England which manages The Concourse Shopping Centre. The market value of the listed investments at the year end was 8, 508, 000 ( 2013: 6, 338, 000). 14 Investments in group undertakings 20, , 893 Company Shares at cost As at 31 March 2014 and , , 773 The company owns the following operating subsidiary undertakings that are involved in the management of industrial and commercial properties and the provision of associated services, except as noted below : Incorporated within the United Kingdom and registered in England : Holdings Holdings Direct Holdings LCP Management Limited Provision of management services 100% 100% Braycape Limited 100% 100% Mapleplan Limited 100% 100% Indirect Holdings LCP Properties Limited 100% 100% LCP Investments Limited 100% 100% LCP Securities Limited 100% 100% LCP Estates Limited 100% 100% Rookman Properties Limited 100% 100% LCP Securities ( North West ) Limited 100% 100% LCP Retail Limited 100% 100% LCP Commercial Limited 100% 100% Lockstead Limited 100% 100% SCC Properties Limited 100% 100% LCP Developments Limited Development of industrial and commercial properties 100% 100% L & C Estates Limited 100% 100% L & C Investments Limited 100% 100% L & C Commercial Limited 100% 100% L & C Securities Limited 100% 100% Wellington Real Estate Limited 100% 100% Charterstyle Limited Helicopter Chartering 100% 100% LCP Real Estate Limited 100% 100% L & C Europe Limited Intermediate holding company 100% 100% At 31 March , , 014 Net book amount at 31 March , , 169 Net book amount at 31 March , , 121

16 27 London & Cambridge Properties Annual Report & Accounts 2014 for the year ended 31 March Investments in group undertakings ( continued ) Holdings Holdings Polish registered companies LCP Properties Sp. Zo.o. Provision of management services 100% 100% Taima Investments Sp. Zo.o. 100% 100% Avery Investments Sp. Zo.o. 100% 100% Corentin Investments Sp. Zo.o. 100% 100% Estelle Investments Sp. Zo.o. 100% 100% Solver Investments Sp. Zo.o. 100% 100% Tredia Investments Sp. Zo.o. 100% 100% Macalla lnvestments Sp. Zo.o 100% 100% Xantira Investments Sp. Zo.o. 100% 100% Xantira Investments Sp. Zo.o. Sp. K 100% 100% LCP Properties Management Sp. Zo.o. 100% German registered companies GIPAM GmbH Provision of management services 100% 100% LCP Verwaltungs GmbH Eins IG Intermediate holding company 95.83% 95.83% LCP Verwaltungs GmbH IG Intermediate holding company 95.83% 95.83% LCP Verwaltungs GmbH Zwei IG Intermediate holding company 95.83% 95.83% LCE Deutschland 1 GmbH & Co KG 95.83% 95.83% LCE Deutschland 2 GmbH & Co KG 95.83% 95.83% LCE Deutschland 3 GmbH & Co KG 95.83% 95.83% LCE Deutschland 4 GmbH & Co KG 95.83% 95.83% LCE Deutschland 5 GmbH & Co KG 95.83% 95.83% LCE Deutschland 6 GmbH & Co KG 95.83% 95.83% LCE Deutschland 7 GmbH & Co KG 95.83% 95.83% Luxembourg registered companies L & C Lux Hold Co S.A.R.L. Intermediate holding company 95.83% 95.83% LCE Allemagne 1 S.A.R.L. Intermediate holding company 95.83% 95.83% LCE Allemagne 2 S.A.R.L. Intermediate holding company 95.83% 95.83% LCE Allemagne 3 S.A.R.L. Intermediate holding company 95.83% 95.83% LCE Allemagne 4 S.A.R.L. Intermediate holding company 95.83% 95.83% LCE Allemagne 5 S.A.R.L. Intermediate holding company 95.83% 95.83% LCE Allemagne 6 S.A.R.L. Intermediate holding company 95.83% 95.83% LCE Allemagne 7 S.A.R.L. Intermediate holding company 95.83% 95.83% LCE 7 Luxembourg GP S.A.R.L. Intermediate holding company 95.83% 95.83% All of the above holdings comprise ordinary shares. In addition, the holding in LCP Securities Limited comprises 100% of the deferred ordinary shares, and in Mapleplan Limited, comprises 100% of the A Ordinary shares. All subsidiaries are included within the consolidated accounts. 16 Debtors Group Company Group Company Amounts falling due within one year : Trade debtors 6, 721 6, 644 Amounts owed by subsidiary undertakings 3, 069 1, 786 Corporation tax 127 Deferred tax 2, 019 2, 622 Other debtors 17, 606 7, 089 Prepayments and accrued income 7, 701 7, , 174 3, , 650 1, 786 Amounts falling due after one year : Amounts owed by subsidiary undertakings 19, , 153 Other 184, , 435 Other debtors include 183, 181, 000 ( 2013: 208, 177, 000) due from related parties. Details of these amounts are given in note 29. Included in debtors is an amount of 15, 000, 000 due from Ringmerit Limited, which is a subordinated loan. 17 Creditors : amounts falling due within one year 218, , , , 939 Group Company Group Company Amounts falling due within one year : Bank loans and overdrafts 117, , 854 Other loans 11, , , , 000 Trade creditors 6, 415 5, 756 Amount owed to parent undertaking 57, , 650 Finance leases 333 Corporation tax 5, 758 3, 655 Social security and other taxation Other creditors 10, , 527 Accruals and deferred income 22, , The maturity profile of the bank loans is explained further in note , , , , Stock and work in progress Group Stock of land Short term work in progress 1, 303 2, 466 Raw materials and consumables The directors are of the opinion that the market value of stock of land is 625, 000 ( 2013 : 7, 660, 000). If stock and work in progress was disposed of at its market value it is estimated that tax of 80, 000 ( 2013: 1, 532, 000) would become due. 1, 543 3, Creditors : amounts falling due after more than one year Group Company Group Company Amounts falling due after more than one year : Bank loans 432, , 380 Finance leases 13, 231 Loan from parent undertaking 1, 000 Other creditors , , 380

17 29 London & Cambridge Properties Annual Report & Accounts 2014 for the year ended 31 March Loans and borrowings Group Company Group Company Analysis of loans Bank loans and overdrafts 550, , 234 Finance leases 13, 564 Other loans 11, , , , 000 Loan from parent undertaking 58, , , , , , 000 Maturity of debt In less than one year or on demand 186, , , , 000 In more than one year but not more than two years 20, , 123 In more than two years but not more than five years 316, , 357 In more than five years 109, , 900 Included in loans and borrowings is 58, 650, 000 (2013: 59, 650, 000) which is unsecured. The remaining loans and borrowings are secured on investment properties owned by the group and fixed and floating charges over the assets of certain subsidiary undertakings. London & Cambridge Properties Limited has provided a secured guarantee for payments of principal and interest in respect of the 11, 000, 000 non-bank loan. Interest is being incurred on bank loans repayable after more than five years at rates of 2025 Gilts plus 215 basis points and 2028 Gilts plus 205 and 215 basis points. A non-bank loan of 11,000,000 bears interest at 2017 Gilt plus 125 basis points. Included in bank loans is 113, 458, 000 from 274, 045, 000 originally borrowed under a securitised commercial mortgage arrangement. Interest is charged at between 0.26% and 0.85% above 3-month LIBOR after taking into account the original hedging arrangements put in place by the Issuer and detailed below : 633, , , , 000 S G Corporate & Hedging providers HSBC Bank Plc. Investment Banking 000 Rate ( % ) 000 Rate ( % ) CAP 95, ,916 6 SWAP 41, , Provision for liabilities Deferred taxation The movements in deferred taxation during the current and previous years are as follows : Group At 1 April , 986 2, 962 Movement in the year attributable to the reduction in tax rate ( 473 ) ( 477 ) other Exchange adjustment 42 ( 13 ) At 31 March 2014 (see below) 3, 290 2, 986 Disclosed as : UK deferred tax provision 5, 043 5, 402 European deferred tax provision Deferred tax provision 5, 309 5, 608 European deferred tax asset (note 16) ( 2, 019) ( 2, 622 ) Deferred taxation provided and unprovided for in the financial statements is set out below. The deferred tax credit for the year ended 31 March 2014 includes 470, 000 ( 2013 : 477, 000) to reflect reduced deferred tax liabilities arising from the reduction in the UK corporation tax rate to 21% ( 2013 : 23%). The provision has been calculated using a tax rate of 21% ( 2013: 23%) in the UK and 19% in Continental Europe. Group Corporation tax deferred in respect of : Accelerated capital allowances 5, 106 5, 489 Other timing differences (63) ( 87 ) UK deferred tax provision 5, 043 5, 402 European timing differences Deferred tax provision 5, 309 5, 608 Tax losses (188) ( 527 ) Other timing differences (1, 831 ) (2, 095 ) European deferred tax asset ( 2, 019) ( 2, 622 ) At 31 March , 290 2, 986 Net fair values of derivative financial instruments Interest rate swaps /caps ( 16, 309 ) ( 20, 802 ) No provision has been made in relation to the revaluation of freehold and leasehold land and buildings included in the revaluation reserve. If the Group s interest in freehold and leasehold land and buildings was disposed of at its balance sheet amount it is estimated that the tax liability would amount to approximately 13, 954, 000 ( 2013: 18, 183, 000).

18 31 London & Cambridge Properties Annual Report & Accounts 2014 for the year ended 31 March Provision for liabilities (continued) Other provisions The movements in other provisions during the current and previous years are as follows: Group At 1 April Released during the year ( 80 ) (416) At 31 March Reserves ( continued ) Profit Share & Loss Premium Company Account Account At 1 April , , 888 Retained profit for the year 2, 723 Dividends paid ( 1, 250 ) At 31 March , , 888 The other provisions relate to onerous lease obligations. Pension Liability The group operates a defined benefit pension scheme. At the balance sheet date the assets of the scheme exceeded the liabilities by 1, 493, 000 ( 2013 : liabilities exceeded assets by 824, 000) see note Share capital Allotted, called up and fully paid 9,000 Ordinary Shares of 10p each B Ordinary Share of ,999 Ordinary Non-Voting Shares of each 22 Reserves 2 2 Investment Property Profit Share Revaluation & Loss Premium Group Reserve Account Account 000 At 1 April , , , 888 Retained profit for the year 32, 636 Revaluation deficit ( 8, 174 ) Share of revaluation deficit relating to joint ventures (200) Transfer to minority interest (142) Taxation on property disposals ( 3, 315) Transfer of surplus arising on sale of investment properties ( 33, 891) 33,891 Dividends paid ( 1, 250 ) Foreign exchange on consolidation 98 ( 310 ) Actuarial gain on pension scheme 1, 960 Reconciliation of exchange differences Note Exchange adjustments on goodwill 10 (25) 2 Exchange adjustments on investment property 11 (3, 008) 2, 038 Exchange adjustments on other tangible fixed assets 12 (2) 1 Exchange adjustments on overseas subsidiaries 2, 823 (1, 904 ) Exchange differences taken to the Statement of Total Recognised Gains and Losses (212) 137 Opening balance of cumulative exchange differences 3, 575 3, 438 Closing balance of cumulative exchange differences 3, 363 3, Reconciliation of operating profit to net cash inflow from operating activities Operating profit 60, , 737 Share of profit from joint venture (1, 059) (1, 104 ) Amortisation of goodwill Amortisation of negative goodwill ( 353) ( 467) Depreciation Net movement in other provisions ( 80) (416) Loss /(profit) on disposal of other fixed assets 3 ( 19 ) Decrease /(increase) in stocks 1, 601 ( 148 ) Decrease in debtors 8, , 755 Increase /(decrease) in creditors 2, 078 (355) Pension contribution less charge ( 317 ) (459) Net cash inflow from operating activities 71, , 362 At 31 March , , , 888 The profit and loss reserve is stated net of the pension asset of 1, 179, 000 ( 2013: deficit 634, 000). The balance excluding the pension reserve would be 312, 257, 000 ( 2013: 247, 143, 000).

19 33 London & Cambridge Properties Annual Report & Accounts Reconciliation of movements in net debt 27 Capital commitments for the year ended 31 March Increase /(decrease) in cash 6, 892 ( 10, 674) Cash inflow from new loans advanced ( 102, 035 ) ( 151, 453 ) Non cash movement ( 13, 849 ) ( 108, 992 ) ( 162, 127 ) Repayment of loans 178, , 999 Finance lease , , 872 Effect of foreign exchange gains 5, 252 ( 3, 404 ) Net debt at 31 March 2013 ( 674, 056 ) ( 689, 524 ) Net debt at 31 March 2014 ( 598, 926 ) ( 674, 056 ) Non cash movements represents debt advanced under a finance lease agreement. 25 Analysis of changes in net debt At At 1 April Non-cash Exchange 31 March 2013 Cashflows Movements Movements Cash at bank and in hand 26, 828 7, , 750 Overdraft ( 49) ( 786 ) 6 ( 829) 26, 779 6, , 921 Debt due within one year ( 146, 455 ) ( 39, 667 ) (186, 122 ) Debt due after one year ( 554, 380 ) 76, ,818 5, 002 ( 446, 725 ) Net debt ( 674, 056 ) 83, 727 ( 13, 849 ) 5, 252 ( 598, 926 ) 26 Operating leases The group is committed to pay the following operating lease rentals in the year ending 31 March 2015 : Leasehold Other Leasehold Other Property Assets Property Assets Group Amounts contracted for but not provided in the accounts 8, Amounts authorised by the directors but not contracted for 29, Pension commitments Composition of the Scheme The Group operates a defined benefit scheme in the UK. A full actuarial valuation was carried out as at 31 March 2013 and updated to 31 March 2014 by a qualified independent actuary. The service cost has been calculated using the projected unit method with a 1 year control period. Reconciliation of opening and closing balances of the present value of the scheme liabilities Benefit obligation at beginning of year 18, , 865 Current service cost Interest cost Plan participants contributions Actuarial (gain)/ loss (1, 744) 2, 084 Benefits paid (200) (384) 17, , 661 Analysis of defined benefit obligation Plans that are wholly or partly funded 17, , 661 Reconciliation of opening and closing balances of the fair value of scheme assets Fair value of plan assets at beginning of year 17, , 139 Expected return on plan assets Actuarial gain 216 1, 518 Employer contribution Member contributions Benefits paid (200) (384) Fair value of plan assets at end of year 19, , 837 Funded status 1, 493 (824 ) Net amount recognised 1, 493 (824) Related tax (liability)/ asset (314) 190 Net asset / (liability) per balance sheet 1, 179 (634 ) Leases expiring within one year Leases expiring between one and two years Leases expiring after two years but within five years Leases expiring after five years , ,

20 35 London & Cambridge Properties Annual Report & Accounts 2014 for the year ended 31 March Pension commitments ( continued ) Components of pension cost Current service cost Interest cost Expected return on plan assets ( 811 ) ( 738 ) Total pension cost recognised in the profit and loss account Actuarial (gains) / losses immediately recognised ( 1, 960 ) 566 Total pension cost recognised in the statement of total realised gains and losses ( 1, 960 ) 566 Cumulative amount of actuarial losses immediately recognised 2, 395 4, Pension commitments ( continued ) Weighted average assumptions used to determine net pension cost for year ended Discount rate 4.4% 4.1% Expected long-term return on plan assets 4.9% 4.5% Rate of compensation increase 2.5% 2.5% Rate of RPI inflation 3.3% 3.2% Rate of CPI inflation 2.5% 2.4% Rate of LPI 5% maximum pension increase ( ) 3.2% 3.1% Rate of LPI 2.5% maximum pension increase ( post 2011) 2.2% 2.2% Weighted average life expectancy for mortality tables used to determine benefit obligations at Male Female Male Female Member age 65 ( current life expectancy ) Member age 45 ( life expectancy at age 65 ) Plan assets The weighted average asset allocation at the year end was as follows : Five year history Financial year ending in : Plan Expected Plan Expected Assets Return on Assets Return on 2014 Assets 2013 Assets Asset category Equities 42% 5.5% 44% 5.0% Bonds 19% 4.4% 19% 4.1% Gilts 19% 3.5% 18% 3.0% Diversified Growth 20% 5.5% 19% 5.0% The expected rate of return on plan assets is the average rate of return expected over the remaining life of the actual assets held by the scheme. It includes both income and changes in fair value but is net of scheme expenses. It is based on market expectations at the beginning of the reporting period. 100% 4.9% 100% 4.5% Actual return on plan assets 1, 027 2, 256 Weighted average assumptions used to determine benefit obligations at Discount rate 4.4% 4.1% Rate of compensation increase 2.5% 2.5% Rate of RPI inflation 3.3% 3.2% Rate of CPI inflation 2.5% 2.4% Rate of LPI 5% maximum pension increase ( ) 3.2% 3.1% Rate of LPI 2.5% maximum pension increase ( post 2011) 2.2% 2.2% Benefit obligation at end of year 17, , , , , 198 Fair value of plan assets at end of year 19, , , , , 388 Surplus / ( deficit ) 1, 493 ( 824 ) ( 726) 684 ( 1, 810 ) Difference between actual and expected return on assets Amount ( 000 ) 216 1, 518 ( 368 ) 261 2, 538 Percentage of scheme assets 1% 9% - 2% 2% 20% Experience gains and losses on scheme liabilities Amount ( 000 ) 537 1, 164 Percentage of scheme assets 3% 0% 0% 9% 0% Total amount recognised in statement of total recognised gains and losses Amount ( 000 ) 1, 960 ( 566 ) (2, 020 ) 2, 693 (1, 987 ) Percentage of scheme assets 10% - 3% - 13% 19% - 14% Contributions The Group expects to contribute 706,000 to its pension plan from 1 April 2014 to 31 March The Group also operates a Defined Contribution Stakeholder Pension Scheme. The Group makes fixed contributions to the Scheme based on 8% of members actual salaries. The cost of contributions to the defined contribution scheme amounted to 232, 000 ( 2013 : 170, 000). All death-in-service benefits for incapacity arising during employment provided by the group are wholly insured. The Group also contributes to non group money purchase schemes for two directors.