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The British Land Company PLCThe Annual Report & 2006 Accounts British Land Annual Report & Accounts 2006 Contents Foreword 01 Remuneration Report 57 Distinctive features 02 Highlights 03 Corporate Governance 68 Corporate Strategy 04 Valuation Certificate 72 Chairman’s Statement 06 Report of the Directors 74 Report of the Auditors 76 Chief Executive’s Statement 08 Financial Statements Operating and Financial Review Consolidated Income Statement 78 Highlights and introduction 11 Consolidated Balance Sheet 79 Objectives 11 Consolidated Statement of Activity during the year 12 Changes in Equity 80 Customer focus 16 Consolidated Cash Flow Statement 81 Accelerating development programme 16 Notes to the accounts 82 Portfolio valuation 19 Performance measures 85 Property market outlook 20 Staff costs and pensions 88 Retail sector 21 Taxation 91 Office sector 23 Funds and Joint Ventures 94 Financial performance 25 Net debt 99 Share capital and reserves 103 Corporate responsibility 30 Dividend 105 Funds and Joint Ventures 32 Company Balance Sheet and notes 112 Portfolio highlights 34 Financial Calendar 119 Portfolio description Shareholder Information 120 Out-of-town retail 37 Ten Year Record 121 In-town retail 41 Sponsorship 122 London offices 43 Glossary of Terms 123 Development Programme 46 Financing Policy 50 Principal Debt Instruments 51 Directors and Officers 54 Front and back cover Ramsgate Sands: ‘Life at the Seaside’, 1852-4 by William Powell Frith William Powell Frith’s Ramsgate Sands was first shown in 1854. At the Private View of that year’s Royal Academy Exhibition, Queen Victoria bought the newly completed painting for 1,000 guineas. At this time family holidays were still the preserve of the middle classes but only women and children (plus assorted maids and elderly relatives) normally stayed the full fortnight. The menfolk seen in the picture have probably come down to join them for the weekend on the ‘Daddy Boat’ from London. Foreword British Land was formed in 1856. We are the oldest property investment company in the UK, and one of no more than a dozen limited liability companies in existence in 1856 that continue in business today. Another great institution that was born 150 years ago is the National Portrait Gallery. British Land has long been an enthusiastic supporter of the visual arts and we are delighted to be sharing our celebrations with such a dynamic and internationally revered organisation. Our first acquisition was a parcel of land in Marylebone; the National Portrait Gallery’s was nothing less than the ‘Chandos’ portrait of William Shakespeare, the bequest of the Earl of Ellesmere. In time, many people who were themselves born in 1856 achieved fame and were commemorated in the Gallery’s permanent collection. Among them are Sigmund Freud (1856-1939), the father of psychoanalysis; George Bernard Shaw (1856-1950), the Nobel Prize-winning playwright; Keir Hardie (1856-1915), the first socialist MP, who campaigned to enfranchise the working classes; and Sir Joseph John Thomson (1856-1940), whose discoveries in subatomic physics led to the development of television and computers. Their work was often a reaction against the prevailing ethos and their lives are in many ways a bridge between the lost world of mid-Victorian Britain and our own everyday realities in the age of New Labour and digital technology. In our Annual Report & Accounts we mark the special significance of the year 1856 by paying tribute to their extraordinary achievements. The British Land Company PLC 1 Our most distinctive features Largest UK Quality assets, property portfolio– best property in continuous asset prime locations selection Focused business– Long leases, 97% of portfolio in sustainable, assured Retail and London cash ﬂows Ofﬁces Earnings growth Actively adding value – built in and with intense pursuit of further potential asset management and development gains Secure risk profile, Financial acumen, consistent, accomplished integrated deal-making and business model capital structuring Superior Able management, total returns, a key to all we do outperforming competitors 2 The British Land Company PLC Highlights Underlying profit before tax2, 4 Net asset value per share*, 4 Dividends for the year year ended 31 March as at 31 March year ended 31 March £m pence pence 250 1500 18 16 200 1200 14 12 150 900 10 8 100 600 6 50 300 4 2 0 0 0 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 *adjusted, diluted March 2006 March 2005 % Increase Gross Rental Income1 £751m £630m 19 Underlying Profit before Tax2 £228m £181m 26 Profit before Tax1 £1,696m £780m 117 Underlying Earnings per Share2 36p 27p 33 Dividend per Share 17.0p 15.7p 8 NAV per Share3 1486p 1128p 32 Total Return5 34.6% 18.8% 1 With proportioned consolidation of Funds and Joint Ventures, Table A 2 See note 2 on page 85 3 EPRA basis, see note 2 on page 85 4 2002, 2003 and 2004 are as reported under UK GAAP and have not been restated under IFRS 5 Increase in EPRA NAV plus dividends paid, excluding refinancing charges The British Land Company PLC 3 Corporate Strategy British Land seeks to achieve superior long-term growth in shareholder value by: focusing on prime assets in the office and retail sectors; creating exceptional long-term investments with strong covenants, long lease profiles and good growth potential; enhancing property returns through active sales, purchases, management and development; maximising risk-adjusted returns through optimal financing and partnership with others; and taking advantage of opportunities in the property market through flexibility, entrepreneurial organisation, deal-doing and financing. Sir Henry Rider Haggard 1856–1925 Sepia-toned platinotype print, 1902, by George Charles Beresford H Rider Haggard – as his title pages proclaimed him–was the doyen of adventure writers. He penned a total of 34 ripping yarns set in such exotic places as Mexico, Iceland and Ancient Egypt. Right through to the last page, his novels were chock full of action, derring-do and breathless heroism. Born at Bradenham Hall in Norfolk, he went to South Africa as a young man and later served on official commissions that took him to all parts of the British Empire. The landscapes and people that he encountered–especially in the Dark Continent – were his inspiration; a knighthood and a KBE were his reward. 4 The British Land Company PLC “It is a curious thing that at my age –I shall never see sixty again–I should find myself taking up a pen to try to write a history.” Sir Henry Rider Haggard Statement by the Chairman Sir John Ritblat “My general view of property as an investment class is that it remains at least as good as anything else, if not better.” This is my 35th Annual Report to shareholders and I am international renown. Over the years we extended the site, pleased to tell you that the Company is in a position of redeveloped the building, and recently sold only a part of great strength. Today British Land owns or manages some the new Plantation Place offices for £527 million. £18 billion of prime property, making it Europe’s largest Our underlying strategy has been consistently applied quoted property company by this measure. In the year for many years. Achieving ownership of the 30 acre ended 31 March 2006, total return (before refinancing Broadgate Estate in stages over a 20 year span was charges) is 35% and for the fifth successive year the another long-term venture. It began with a participation in dividend increase exceeds 8%, with a final dividend of the One Finsbury Avenue office development in 1983, and 11.8p per share, making a total of 17p for the year. now extends to over 4 million sq ft, with another 820,000 Shareholders will welcome these outcomes, not least sq ft currently under development. It was a similar story at because the value they represent has taken our stock the Regent’s Place Estate, half purchased in 1984, the market capitalisation well beyond £6 billion. Net assets, other half in 1986, which is still in course of redevelopment now £7.8 billion, have risen by 32% to 1486p per share on and revitalisation to provide an additional 1 million sq ft, an EPRA basis. making just over 2 million sq ft of space in all. We have joint-ventured with others throughout – 150th Anniversary Commercial Union, GUS, House of Fraser, Scottish & In 2006 we celebrate the 150th anniversary of The British Newcastle, the Quantum Fund run by George Soros, and Land Company’s original incorporation. The Company Tesco, to name a few of our many partners. started as part of the great electoral Reform movement of the mid-19th century, when few people had the vote, but Core values ownership of an interest in land worth only £2 in rent per So while there have been important changes in markets year conferred that right. British Land bought tracts of generally over the last 35 years, the core values that built land, mostly in and around London, which could be sub- British Land successfully remain more valid than ever, and divided into plots on which houses could be built and so much of our current prosperity derives from earlier votes obtained. decisions, judgements and actions. Property is a long-term This early political significance did not last long. The game and it is vital to have the strength of conviction and Company soon concentrated on conventional business, strength of finances to build enduring value. Our focus on and for the first three-quarters of its existence it survived prime property and on certainty of income remain at a very modest level of activity, but it invested prudently distinctive benefits, as they have been in past years.

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