The area of Formal Development of Programs and Systems contains the widest range of activity, covering theoretical, tool and applications work. Formal program development is focused through the Extended ML system. The basic theory of modular specification and development of programs continues to be investigated and is being supported through tool development and case-studies. Safety critical research has focused on exploitation of several LFCS concepts (including CCS and the Concurrency Workbench) on a number of industrial case studies, with notable success in several application domains. Future work will be expanded to encompass the problems of formal approaches within "whole" systems development. The formal system design group focuses on system development using a variety of methods. For example, the Lambda/Dialog system (a product of Abstract Hardware Ltd. - an LFCS affiliate) is used in case studies to investigate high-level design tactics; a delay-insensitive synthesis system based on concurrency theory is being developed; feedback from case-studies is used to direct investigations into appropriate formalisms for this area of specification and verification.