Balance of business tests
REIT legislation specifies conditions in relation to the type of business a REIT may conduct, which the Group is required to meet in order to retain its REIT status. In summary, at least 75% of the Group’s profits must be derived from REIT qualifying activities (the 75% profits test) and 75% of the Group’s assets must be employed in REIT qualifying activities (the 75% assets test). Qualifying activities means our property rental business. The result of these tests for the Group for the six months ended 30 September 2007 and at the balance sheet date is as follows:
Table 4: REIT balance of business tests
| For the six months ended / at 30 September 2007 | |||
| Tax-exempt business | Residual business | Adjusted results | |
| Adjusted profit before tax (£m) | 186.5 | (12.0) | 174.5 |
| Balance of business – 75% profits test | 106.9% | (6.9%) | |
| Adjusted total assets (£m) | 16,189.5 | 2,308.1 | 18,497.6 |
| Balance of business – 75% assets test | 87.5% | 12.5% | |
If the £27.1m interest cost of the SMIF acquisition loan is eliminated from the above figures, the profits of the tax-exempt business comprise 92.5% of total adjusted profits.
© 2007 Land Securities Group