Interim Report 2005 > delivering our vision Delivering our vision

Our vision is to be highly regarded Key statements 27 Independent review report to within the sector which means 01 Financial highlights Slough Estates plc we must strive towards a position 02 Highlights where investors understand us 03 Chairman’s statement Interim accounts 2005 and are keen to invest, customers 04 Chief Executive’s interim statement 28 Group income statement recommend us and expand with 10 Financial review 29 Statement of recognised income us, financiers, commentators and expense Property portfolio 29 Statement of changes in and governments prefer us, 16 UK portfolio analysis as at shareholders’ equity employees are proud to work 30 June 2005 30 Group balance sheet for the company and are actively 18 Overseas portfolio analysis 31 Summarised Group cash flow statement encouraged to develop their skill as at 30 June 2005 32 Notes to the interim financial statements set, competitors respect us and 20 Development programme suppliers want to work with us. as at 30 June 2005 Reference 56 Shareholder information 22 Operating review IBC Group information IBC Directors and Officers

Front Cover: Ferrari Maserati UK headquarters, 275 Leigh Road, Slough Slough Estates plc | Interim Report 2005 01

Financial highlights

Half year to 30 June Change 2005 2004 % Net rental income £136.9m £119.8m 14.3 Operating income £290.2m £199.8m 45.2 Profit before tax £119.0m £173.6m (31.5) Adjusted profit before tax £90.6m £66.2m 36.9 Earnings per share 17.1p 29.3p (41.6) Adjusted earnings per share 14.7p 13.7p 7.3 Dividends per ordinary share 6.5p 6.15p 5.7

30 June 31 December Change 2005 2004 % Net assets per share 501p 486p 3.1 Adjusted net assets per share 623p 595p 4.7 Diluted net assets per share 472p 461p 2.4 Adjusted diluted net assets per share 581p 558p 4.1 Combined portfolio valuation £4,154.2m £3,729.4m 11.4 Equity shareholders’ funds £2,111.8m £2,029.1m 4.1 Adjusted equity shareholders’s funds £2,625.0m £2,486.4m 5.6 Net borrowings £1,787.4m £1,325.3m 34.9 Gearing – net debt to equity 62% 51% (11.0) LTV – net debt to property assets 40% 36% (4.0) 02 Slough Estates plc | Interim Report 2005

Highlights

> Diluted NAV per share up 2.4 per cent to 472 pence (31 December 2004: 461 pence). Adjusted diluted NAV per share up 4.1 per cent to 581 pence (31 December 2004: 558 pence).

> Valuation of the investment portfolio up by 3.6 per cent to £4.2 billion.

> Profit before tax of £119.0 million (H1 2004: £173.6 million), reflecting cost of the bond exchange, revaluation surpluses and other exceptional profits/losses. Adjusted profit before tax of £90.6 million (H1 2004 : £66.2 million) – up 37 per cent.

> Basic earnings per share 17.1 pence per share (H1 2004 : 29.3 pence). Adjusted basic earnings per share up by 7.3 per cent to 14.7 pence per share.

> Interim dividend of 6.5 pence, up 5.7 per cent.

> 67,480 sq.m. of space leased in UK, a group record for a six month period, but overall occupancy rates held back by space returned.

> Sale of non-core assets in US – Quail West (£32 million) and Tipperary (in July – £124 million).

> Significant property purchases in the period in the UK (£28 million) and US (£191 million) and an initial foothold established in the Netherlands.

> In July, the further acquisition of holding entities owning two major UK industrial estates; Woodside in Dunstable and Heywood in Manchester, for £276 million.

> Successful £322 million debt refinancing leading to future interest cost savings of £11 million per annum. Slough Estates plc | Interim Report 2005 03

Chairman’s statement

Paul Orchard-Lisle, Chairman

We are driving the performance > of the portfolio forward.

It has of course been a matter Results which if continued should lead towards of enormous concern to all in the The adjusted diluted net asset value per reduced voids in our portfolio and modest company that for the last few share has increased by 4.1 per cent to 581 levels of rental growth. pence (31 December 2004: 558 pence). weeks Sir Nigel Mobbs has been The valuation of the investment portfolio The economy unable to fulfil his role as Chairman increased by 3.6 per cent to £4.2 billion. The extent to which the world’s economy of the company. As I write, he Adjusted profit before tax of £90.6 million is dominated by the US cannot be continues to be ill and all our (H1 2004: £66.2 million) was up 37 per underestimated. Overall, and in spite of cent and adjusted earnings per share were high oil prices, recent news has been thoughts are with him. However, up by 7.3 per cent to 14.7 pence. The encouraging and the actions by the he would be the first to insist that interim dividend is 6.5 pence (H1 2004: Federal Reserve to initiate a series of the business was taken forward 6.15 pence) up 5.7 per cent. Dividend interest rate increases indicates a serious without him and it is in that sense growth continues to be at a rate level of confidence. considerable in excess of inflation. that I report to you. Even so, within the UK there are causes for Restructuring some concern. Spending levels look too The Group is firmly focused upon its Ian Coull, our Chief Executive, reports high in relation to earnings and levels of debt objective of being the prime providers of separately on the steps taken to sell our amongst consumers are at a worryingly flexible business space in selected non-core assets in the US. In line with the high level. The greatest concern, however, markets. It believes that by so doing it will Board’s expectations, we achieved returns is that the Government takes serious steps deliver superior shareholder returns over a well in excess of book value and this has to encourage private sector employment period of time. The extension of this been a first-class achievement. In parallel, and conversely does not stifle it by undue concept is that we will exit those of our new real estate acquisitions have been bureaucracy or taxation. Providing this current investments that are not seen as made in the UK, the US and on the pitfall can be avoided, there are grounds relevant to our mission. Continent. One of the most encouraging to support the Bank of England’s forecast features is that the volume of space let in of improved growth in 2006 and beyond. In the first six months of 2005 we the UK (approximately 67,000 sq.m.) is an have made important strides in the all-time record for any six-month period in Summary implementation of this intention. The Board the company’s history. The Group is close to completing the believes that group management has reshaping of the business that we signalled responded extremely well to the dual The property market two years ago. In the meantime, for the challenges of expanding its core business For over three years now we have enjoyed rest of this year, energies will be focused whilst withdrawing from other activities in an upsurge in institutional interest in real on driving the performance of the portfolio an orderly and profitable manner. estate as an investment media, and I forward and on the acquisition of suitable believe that current levels of asset new holdings for our core portfolios. In allocation are likely to continue. In the that sense I look forward to reporting at short-term, weight of money is likely to the end of the year not only worthwhile drive prices higher but the other overall returns but also increased activity components of performance clearly are the in the UK, the US and Europe. security of income and rental growth. It has only been in the last few months that we Paul Orchard-Lisle have seen any significant move forward in Chairman the occupational market 25 August 2005 04 Slough Estates plc | Interim Report 2005

Chief Executive’s interim statement

The business is in good shape and there is continuing > evidence that occupier demand is improving in the business space markets we are serving.

In the first half of 2005, the Group The Group has also been busy with core all other exceptional items. The adjusted has made important strides property transactions. In total, Slough profit before tax stated before these items towards its goal of focusing its Estates received £18.1 million from increased by 37 per cent to £90.6 million. investment property disposals and acquired This amount was, to some extent, enhanced business on ‘edge of town’ a further £267.8 million of assets in the first by an unusually large surrender premium of flexible business space. Since the half of the year. Since the end of June, the £36.6 million (2004: £7.5 million), but it was beginning of the year, we made Group has also acquired holding entities negatively impacted by the short-term loss two important disposals of non- owning two industrial estates in the UK of rental income associated with these for £276 million. We have also taken the surrenders and the sale of the Pfizer core assets with an exceptional opportunity to restructure our debt which campus in the second half of last year. gain of £98 million (to be recorded has provided us with less expensive It should also be noted that no income has in the second half of the year) long-term funding. Finally, we have been recognised in respect of the rental from the sale of Tipperary and a undertaken a major reorganisation of our guarantees on vacant properties acquired UK business to create six market-facing, from Land Securities as these have to be price of £32 million for Quail West fully-accountable business regions, to accounted for as a deduction from the which was substantially above bring us closer to our customers and to cost of acquisition under IFRS. the written-down book value. improve underlying performance. The prices were achieved as a Net debt at 30 June 2005 stood at We have now virtually completed the £1,787 million, compared with £1,325 million result of our decision to delay reshaping of our existing assets and we are as at 31 December 2004 and gearing these disposals until maximum now well positioned to take the business increased by 11 per cent to 62 per cent value could be extracted for forward with a focus on flexible business as at 30 June 2005. This was a result of shareholders. space in three geographic regions – the the substantial property acquisitions in the UK, Continental Europe and the US. period. Gearing is likely to rise further by the year end due to the further acquisitions Financial results completed post 30 June 2005, details of Our results for the period are presented which have already been announced. in accordance with International Financial Reporting Standards (‘IFRS’) for the first The adjusted diluted net assets per share time and all comparative figures for 2004 have increased since December 2004, from have also been restated accordingly. 558 pence to 581 pence, a rise of 4.1 per cent, whilst the unadjusted and undiluted The aggregate market value of our net assets per share were 501 pence (31 investment portfolio increased during December 2004: 486 pence). We are paying the period from £3.7 billion to £4.2 billion. an interim dividend of 6.5 pence per share, This increase reflects acquisitions up 5.7 per cent. Dividend growth continues and development expenditure of some to be at a rate considerably in excess of £267.8 million, but also a revaluation inflation and, over five years, has grown at surplus of £145.1 million. a compound growth of 7.3 per cent per annum. The interim ordinary dividend will Profit before tax amounted to £119.0 be payable on 7 October to shareholders million (2004: £173.6 million) including on the register on 9 September 2005. revaluation gains, the book loss arising To create greater dynamism in the business on the bond exchange transaction and we have put in place a new regional Slough Estates plc | Interim Report 2005 05

Ian Coull, Chief Executive

structure for the UK business, which now Major purchases and sales in the first > Purchase of 13 ha Blueprint site in operates in six regional teams reporting six months of 2005: Portsmouth. With potential for up to to John Heawood, our Group Director > Sale of Quail West for a net £32 million. 49,239 sq.m., Voyager Park is one of responsible for UK Property. This new The leisure and residential complex in the largest industrial sites in the South structure is working well and is providing Naples, Florida was sold to Ginn-LA. East and, when fully developed, will the customer focus that we need in today’s The first instalment of £9 million has have a value in excess of £50 million. market, so that our property management been received and this will be followed > Purchase of 2.1 ha income producing and development teams work more closely by four further annual payments. The property at Edmonton, North London, with our customers at a local level and sale price exceeds the written down for £9 million. The site comprises an provide a more seamless service for all of net book value of £9.6 million and existing warehouse complex of 16,836 their needs. It is a structure that has worked reflects the improvement in the sq.m., with land for redevelopment. well for our businesses in Europe and North market for such high-end residential > Sale of Navigator Park, Heston, West America and, in the UK, it will help us to developments over the last two years. London for £9.2 million. The estate increase occupancy, both by attracting > Purchases of land in San Diego for comprises 6,290 sq.m. and was sold new customers and, just as importantly, £20 million. Slough acquired a 16.5 ha to a recovery fund. by retaining existing customers through site at Carlsbad which will > Sale of Avenue Kléber in Paris. greater responsiveness to their needs. accommodate approximately 58,000 This 3,221 sq.m. central district office sq.m. of two-storey office and R&D building has been sold for £21 million to In Continental Europe we created a new product, suitable for marketing to Fonciere des Regions generating profit management structure in October, headed health science companies. of £4.5 million. This building was one by Walter Hens who is based in Paris. We > Purchase in San Francisco for £171 of the Group’s largest seven vacancies have now filled the roles of Country Heads million. In the San Francisco Bay Area, by rental value. in Belgium and France and we have also Slough has acquired the 67,493 sq.m. > Purchase of Mainland BV. Slough acquired, through Mainland BV, an excellent Shoreline Technology Center with net Estates has entered the Dutch market team in the Netherlands. Our Continental rental income of £4.8 million per annum by acquiring a 60 per cent stake in European activities have taken a significant and the 57,860 sq.m. Seaport Center Mainland BV for £1.7 million. Mainland step forward in the last few months and, in with net rental income of £4.2 million BV is a developer in the Schiphol area the coming months we expect to announce per annum from Equity Office outside Amsterdam and has a strong a number of exciting opportunities to grow Properties. These sites are attractive management and track record.The our business. to Slough Estates as they are high company owns 130,000 sq.m of new specification offices which, unusually, development sites in the Schiphol Major property purchases and sales can be converted to health science use Airport area. The high level of property purchases and and there are significant opportunities sales within the portfolio that was seen in to add value to both investments. 2004 continued through the first half of > Purchase of 3.4 ha LSG Sky Chefs site 2005. In the US, the Group completed the at Heathrow. This site provides the sale of its non-core assets, achieving potential to develop a 9,290 sq.m. returns well in excess of book value and warehouse scheme with a completed cash was recycled through purchases of value of some £20 million. new development sites. In the UK, after the property swap with Land Securities in 2004, we have continued to see a high level of activity and have completed the purchase of two major industrial estates. 06 Slough Estates plc | Interim Report 2005

Chief Executive’s interim statement continued

Since 30 June 2005, we have completed Terminal. At Trax Park, Doncaster, a 11,148 Increasing occupancy has been a particular the following major transactions: sq.m. speculative unit was completed at challenge in the UK as a result of the > Sale of stake in Tipperary Corporation the end of May 2005 and a number of property swap with Land Securities in which for £124 million. The gross proceeds viewings have taken place. The joint venture we exchanged nearly fully let shopping of £124 million included £13.1 million also has a number of strategic holdings centres for UK industrial property with lower in debt due to Slough, giving an at Radlett in Hertfordshire, where it has a levels of occupancy. In particular, seven exceptional profit of some £98 million. development agreement on approximately of the estates bought from Land Securities, The sale was in line with the Group’s 121 ha of greenbelt land to promote at Basildon, Croydon, Fareham, Guildford strategy to exit non-core assets and this up to 278,700 sq.m. of rail connected and Oxford, had 45.3 per cent vacancy oil and gas company had no long-term development, and at Rossington and but with the benefit of an 18 month rental place in Slough Estates’ asset portfolio. Stainforth on the M18 in Yorkshire. guarantee. However, some 19 per cent of > Purchase of holding entities owning two the total Land Securities’ December major multi-let estates; Woodside HelioSlough’s capital expenditure to date vacancy, 68,276 sq.m. has now been let Industrial Estate in Dunstable and amounts to £14.2 million. Future planned or sold and another 51.5 per cent is at Heywood Distribution Park in Manchester, development expenditure amounts to various stages of negotiation. We believe for £276 million in cash. Woodside and approximately £140 million. that we are on track to lease the majority Heywood are two of the largest industrial of these properties by the time the rental parks in the UK. Together the two sites The joint venture is expected to break even guarantees come to an end in 2006. It contain 371,000 sq.m. of prime industrial in 2005 and to make a positive contribution should be noted that the rental guarantees property, providing combined income of to earnings in 2006 as further schemes cannot be treated as property income under approximately £16 million per annum, and are completed. the accounting rules and so they have over 11.3 ha of further development land. no positive impact on our earnings line. Leasing In today’s tougher leasing environment, the Joint Venture – HelioSlough A key objective for us in the last two importance of customer retention increases. In April 2004 we established a joint venture years has been to increase occupancy This is a key reason why the reorganisation with Helios Properties called HelioSlough throughout the Group. of the UK business is so important to our Ltd. It is a 50/50 joint venture, which has future as it will enable us to build closer £150 million of funding available, focused In the first six months of 2005 we leased relationships with our customers. on developing a network of strategic 104,559 sq.m. of space much of which distribution parks throughout the UK. This was in our higher value properties. Of the The market conditions in Europe and the is a sector which Slough Estates had not seven largest vacant properties at the end US are also demanding but we have had previously exploited in the UK, although we of 2004, we have let one, totalling 11,189 considerable success in most areas of our had successfully developed a number of sq.m. and sold one, Avenue Kléber, Paris. operations and in particular in Germany, distribution parks around Paris and Brussels. We took back 124,542 sq.m. over the where we have pre-let three buildings The changes in supply-chain management period, of which 25,291 sq.m. or 20 per totalling 27,675 sq.m. and this is in a mean that the UK will be an attractive market cent, was either demolished or redundant market where pre-letting is rare. In the US for distribution facilities in the coming years. space, presenting a substantial opportunity we have received a surrender premium for redevelopment. Of this space taken of £36.6 million from Pfizer following their The joint venture is progressing well and it back from customers, the largest amount take-over of Sugen. All three buildings in now has a number of sites ready to enter was some 31,757 sq.m. in the Heathrow the Pointe Grande Estate campus are now the construction phase, at Nimbus near region, and West London region. The fully leased but will not start to generate Thorne, Doncaster, at Sheffield International space returned to us in the first half revenue until the end of this year. Railfreight Terminal, at Wynard One, Tees represented 54 per cent of lease expiries Valley and at Cardiff Rail Freight and 21 per cent of break options. Slough Estates plc | Interim Report 2005 07

Group occupancy at the half year remained Major lettings have included: > Genentech agreed to lease 72,464 sq.m. broadly unchanged from 31 December 2004 UK (780,000 sq.ft.) of office and laboratory at 87.2 per cent and the overall break > Letting of 11,189 sq.m. of IT back-up space in eight new buildings on Slough’s down is as follows: space at Dundee Road on the Slough Britannia East Grand site in South San Trading Estate to a major financial Francisco in late 2004. This is a four year Occupancy rates institution at £91.49 per sq.m. project, with the first phase of 41,805 > Letting of 2,805 sq.m. office sq.m. currently under construction. 30.06.05 31.12.04 %%development at 252 Bath Road, Slough to LG Electronics at £217 per sq.m. Development Group 89.2 89.6 > Letting of two units totalling 4,013 In the first half of 2005 we have pushed – Treating rental guarantees sq.m. to Manpower at Riverside Estate, ahead with more development throughout as vacant 87.5 87.7 Uxbridge at £110 per sq.m. the portfolio in anticipation of improving > Pre-let of 6,968 sq.m. Phase 300 at occupier demand. The level of enquiries UK 90.0 90.6 Parkbury, Radlett, to Viglen Ltd. increased by around 40 per cent on a – Treating rental guarantees as vacant 87.5 87.9 The lease is for 15 years at an annual year-on-year basis in the first half of 2005, rent of £610,500, making it the largest although the second quarter was somewhat US 87.1 86.3 pre-let deal in South Hertfordshire for slower than the first. The enquiries are over 10 years. converting into more viewings but there Europe 87.8 87.9 > Pre-let of 2,950 sq.m. car showroom is little competitive pressure on occupiers complex at the Portsmouth Motor Park to proceed quickly and as a result The overall change in space is as follows: to Pentagon Ltd. negotiations are taking longer than has Europe historically been the case. The level of Leasing of space vs. space taken back > In Germany in the first half there has increased activity, however, gives us cause been one pre-let of 6,327 sq.m. at for some optimism and accordingly, we Slough Trading Other UK Europe US Estate sq.m. sq.m. sq.m. sq.m. Dormagen, in addition to the 18,327 are continuing to develop prudently so that Lettings 32,849 34,631 10,607 26,472 sq.m. pre-let at Neuss and the 3,021 we have sufficient business space to meet Pre-lets 0 8,727 6,327 0 sq.m. pre-let at Krefeld started in the the growth in demand. In 2005, we are New space second half of 2004. expecting to spend some £200 million on completed US developments and by the end of June and un-let 2,394 20,824 1,800 0 > On the Pointe Grande Estate (South £125 million had been incurred. Also at the Space San Francisco) Slough Estates received end of the half year we had 170,032 sq.m. taken back 23,972 74,880 9,565 16,125 a termination premium of £36.6 million. under construction, of which 48 per cent is The facility forms part of the 20,624 pre-leased. sq.m. campus formerly occupied by Sugen, a subsidiary of Pfizer. The first We have continued to prepare our two buildings in the campus have been development sites, obtaining planning let to Exelixis and we have recently consents and putting in place the key completed the letting of 9,848 sq.m. infrastructure so that we are in a position to to Rinat Neuroscience. agree pre-lets and, where appropriate, to start on limited speculative development. 08 Slough Estates plc | Interim Report 2005

Chief Executive’s interim statement continued

Estimated first half of 2004. We expect SH&P to break Spend Committed development Anticipated even for the year as a whole. Current Developments to date spend cost to come completion Major Schemes sq.m. £m £m £m date Farnborough 153,000 118 41 257 2013 Board matters Cambridge 35,000 35 0 66 2014 Following the recent announcement about Voyager Park, Portsmouth 48,000 8 0.3 40 2008 Sir Nigel Mobb’s illness, at the request of Pegasus Park, Brussels 170,000 28 0.9 141 2010 the Board, Paul Orchard-Lisle, has agreed East Grand, San Francisco 73,000 55 123.3 108 2008 to take on responsibility as Chairman. Poway, San Diego 78,000 37 44.7 67 2011 On 23 May we were pleased to welcome Excludes buildings already completed. Thom Wernink onto the Board as a non- executive director. Thom, who is a Dutch Valuation Debt exchange offers citizen, is a well known figure in the The half-year valuation of all the Group’s In June we completed a bond exchange in Continental European property market and investment properties was undertaken as which we exchanged £322 million of high- his experience will be of great benefit to at 30 June by external valuers. coupon debt for long-dated new debt at Slough Estates in growing our European lower interest rates. This has led to a one- business. He was until April 2005, June 2005 % change from off cost in this year’s accounts of £125.6 Chairman of the European Public Real Revaluation movements £m Dec 2004 million but will reduce our debt cost on an Estate Association and was a former annual basis by around £11 million and has Chairman of Corio N.V. UK reduced our average cost of debt from 6.5 Industrial 93.7 4.5 per cent to 5.8 per cent. Slough Estates Outlook Office 25.0 5.4 now has the lowest coupon and longest There is continuing evidence that occupier Retail 12.8 6.8 dated unsecured public debt issues in the demand is improving in the business space Excluding land 131.5 4.8 UK property sector and the Group’s future markets we are serving and in the first half Land (8.4) (3.3) earnings will benefit directly as a result. of the year we have managed to lease a Total UK 123.1 4.2 large volume of space across the portfolio. Overseas Other activities In the UK this amounted to some 67,480 US 17.5 2.4 Since the end of last year we have sq.m. which shows an encouraging Europe 4.5 1.6 completed the sale of our non-core increase in the level of activity and the Total Overseas 22.0 2.2 activities in the US. Quail West was sold success of our leasing teams. However, in May for £32 million, a sum substantially the Group also took back a similar amount Total 145.1 3.6 above book value, and there was an of space and so occupancy levels have Joint ventures/associate 2.4 2.0 exceptional gain of £98 million on the remained broadly unchanged. The Group sale of Tipperary Oil and Gas in July has made further progress in focusing its which illustrates the wisdom in taking time activities on flexible business space and is to exit these investments in order to therefore well-positioned for growth. maximise shareholder value. The overall property market is in a robust Slough Heat & Power (SH&P) has state. There has been a revival in investment continued to improve its operating in property as there is a recognition of the performance over the past six months, attractions of property as a key component recording £0.8 million profit for the first half in investment portfolios. Though offices in compared to a loss of £3.0 million for the the UK, and in particular in the Thames Slough Estates plc | Interim Report 2005 09

Valley, still face some shortage in occupier based in Paris. Yields in Continental demand and industrial growth continues Europe continue to be more attractive to be slower than expected, there is today and we believe there is an opportunity a strong investor demand for well-located to build a pan-European business. and well-let property. The investment case > In North America, we have raised is underpinned by low inflation, affordable substantial funds from the sale of interest rates and a lack of funding to non-core assets and the disposal of support speculative development excesses. completed developments in the health science property portfolio. We will It seems that the yield compression of the continue to exploit the opportunities last two years looks set to continue into in health science in California by the second half of 2005. We have seen a reinvesting the proceeds of these and structural change in yields which reflects future disposals in the most exciting the changing sentiment towards real estate development projects. Slough Estates as an asset class, and the low inflationary has built up a leading position in the environment that we are now experiencing provision of space to the health science makes real estate more attractive. Although community which means that we can we believe that we have seen most of the expect to see a very positive downward pressure on yields, and expect contribution towards Group earnings some stabilisation in the coming months, it is from both our completed laboratory too early to call an end to yield compression. space and from our strong development pipeline. > In the UK, Slough Estates’ focus will increasingly be on flexible business Whilst the consequence of the corporate space. This focus has been increased activity undertaken over the last 12 months by the swap with Land Securities last has been to reduce core earnings this year, year and the addition in July of we are confident that our acquisition and Woodside and Heywood, so that today development programmes will bring growth Slough Estates owns five of the largest from 2006 onwards. The Board believes industrial estates in the UK, including that Slough Estates is well-positioned, with the Slough Trading Estate, Winnersh a tighter focus on flexible business space, and Kings Norton. We will continue to to take advantage of the opportunities in its look for opportunities to strengthen this chosen markets. The strength of the current position, both by acquisition and asset base, the growth opportunities offered through development including our two by the land bank and the understanding major sites at Farnborough and of the dynamics of the market place point Cambridge. towards excellent shareholder value as > A key objective is to grow our established occupier demand improves. position in Continental Europe, where we see good opportunities for Ian Coull expanding our base in the industrial, Chief Executive logistics and suburban office markets. 25 August 2005 We have recently re-organised the business under Walter Hens who is 10 Slough Estates plc | Interim Report 2005

Financial review

The 2005 Interim Report has been prepared in > accordance with IFRS. Adjusted profit before tax increased by 37 per cent to £90.6 million.

International Financial Reporting Under IFRS, revaluation gains on Standards investment properties are included within The Interim Report 2005 has been the Income Statement and the equivalent prepared in accordance with International items in respect of our associate and joint Financial Reporting Standards (‘IFRS’). venture companies are included within the The comparative figures for 2004 have Group’s share of results of such entities. been restated accordingly. The notes to Our presentation of adjusted earnings the interim financial statements contain excludes such valuation gains as they do reconciliations of these restatements. not relate to the operating performance of the business. Income Statement Adjusted profit before tax Similarly, the gain or loss on the sale of Reported profit before tax within the investment properties is excluded from Income Statement includes the revaluation adjusted earnings, as is the gain on surplus on investment properties and a disposal of the Group’s residential leisure number of exceptional gains and losses. development at Quail West, Florida. Whilst The directors consider that adjusted profit the latter property was classified as a before tax provides a more meaningful trading property, it was not part of the core measure of the underlying performance business and, accordingly, the profit upon of the Group’s ongoing activities as it disposal of that asset is excluded from our eliminates the distorting effects of such underlying performance measures. items. Adjusted profit before tax is set out in the following table. Six months ended Year ended 30 June 2005 30 June 2004 31 December 2004 £m £m £m Profit before tax, as reported 119.0 173.6 388.0 Revaluation gains on investment properties (including associate and joint ventures) (140.0) (101.7) (182.1) Loss/(profit) on sale of non-current assets 3.0 (0.1) (64.7) Profit on sale of Quail West (17.0) – – Loss on bond exchange 125.6 – – Notional adjustment in respect of preference shares financing charge – (5.6) (11.2) Adjusted profit before tax1 90.6 66.2 130.0 1 Includes the benefit of Pfizer lease surrender premium of £36.6 million. In both the six months ended 30 June 2004 and the year ended 31 December 2004 a premium of £7.5 million was received in connection with 252 Bath Road, Slough. Slough Estates plc | Interim Report 2005 11

Dick Kingston, Finance Director

On 21 June 2005, the Group completed Six months ended Year ended a bond exchange programme whereby 30 June 2005 30 June 2004 31 December 2004 approximately £322 million of bonds with £m £m £m interest rates ranging from 10 per cent to Net rental income 136.9 119.8 232.5 12.375 per cent and maturity profiles of Net income from trading properties 7.1 3.9 6.8 between 2007 and 2019 were effectively Net profit (loss) from utilities 0.8 (3.0) (4.1) exchanged for £300 million of new bonds Net loss from oil and gas (1.8) (1.9) (3.3) with interest rates between 5.5 per cent Other investment income 3.3 3.2 10.5 and 5.75 per cent and with maturities Administration expenses (7.7) (6.3) (14.7) ranging from 2018 to 2035, and £146 Operating income 138.6 115.7 227.7 million of short-term borrowings. Our Net finance costs (50.6) (52.6) (106.4) intention is to refinance the short-term Share of profit of associate and joint ventures after tax 2.6 3.1 8.7 borrowings in the coming months. The Adjusted profit before tax 90.6 66.2 130.0 bond exchange exercise gave rise to a one-off charge of £125.6 million, but will Adjusted profit before tax increased by agreed as part of last year’s asset swap. reduce ongoing interest costs by 37 per cent to £90.6 million, including the Under the accounting rules, rental approximately £11.0 million per annum. benefit of an unusually large lease surrender guarantees are treated as a reduction in the premium amounting to £36.6 million in cost of the assets rather than as income. In accordance with IAS 32 and IAS 39, respect of a building returned to us by Pfizer with effect from 1 January 2005, the early in the year. A similar event in the UK The estimated rental value of vacant space Group’s convertible preference shares are resulted in a premium of £7.5 million in the at 30 June 2005 was £40 million, of which classified as borrowings and preference first half of 2004. Excluding these items, £25.6 million was in the UK. dividends are replaced by a financing ‘underlying’ profits before tax would charge recorded before ‘profit before tax’. show a half year-on-half-year reduction of Net income from trading properties, In order to aid comparison between 2004 £4.7 million which reflects the loss of some excluding the £17.0 million gain on sale and 2005, the adjusted profit before tax in £8.4 million of rental income associated of the Group’s former residential leisure respect of the six months ended 30 June with the Pfizer space surrendered and the development at Quail West, Florida, 2004 and the year ended 31 December sale of the Pfizer Center in San Diego in increased by £3.2 million to £7.1 million, 2004 have been reduced by £5.6 million the second half of 2004, partly offset by mainly as a result of the sale of a property and £11.2 million, respectively, being the interest of approximately £4 million earned at Avenue Kléber, Paris. dividends payable on the convertible on the net proceeds. redeemable preference shares. The actual The net profit from utilities represents the financing charge in respect of convertible Net rental income for the period was results of Slough Heat & Power (‘SH&P’). preference shares for the six months £136.9 million compared with £119.8 million SH&P showed a significant improvement ended 30 June 2005 is £6.6 million. for the equivalent period last year. Adjusting in its performance compared with last year for the above-mentioned factors, net rental as a result of plant operating improvements Income Statement – restated income was broadly flat on a like for like and increased market prices for electricity The following table is a summary of the basis, with new lettings and rental increases and carbon trading. We are optimistic that income statement after removing the contributing £4.2 million of income against the trend of improving operational and effects of items excluded from adjusted a loss of rental income of £4.5 million financial performance seen in the first half profit before tax. attributable to space returned (excluding will be sustained into the second half of the returned Pfizer space). Net rental the year, enabling the business to make income excludes the cash receivable from a positive contribution to full year earnings Land Securities under rental guarantees for the first time in seven years. 12 Slough Estates plc | Interim Report 2005

Financial review continued

Losses from the Group’s oil and gas The effective rate of tax on adjusted profit investment in Tipperary were broadly before tax was 30 per cent (H1 2004: 15 unchanged compared with the first half per cent). 2004 benefited from the utilisation of 2004. On 1 July the Group announced of tax losses brought forward from earlier that it had agreed to sell its interests in years, principally in the US. Such losses Tipperary for a consideration of £124 have now been fully utilised and, accordingly, million which will give rise to a gain on the effective current tax rate on adjusted disposal of approximately £98 million in the profit before tax has increased. second half of the year. The transaction was completed on 13 July 2005. Earnings and dividend per share Adjusted earnings per share increased Adjusted net financing costs for the period, by 7.3 per cent from 13.7 pence to excluding the loss arising on the bond 14.7 pence. However, basic earnings per exchange, reduced by £2.0 million. Interest share decreased from 29.3 pence to capitalised amounted to £9.4 million against 17.1 pence as a result of the factors £7.6 million for the same period last year and described above. reflects the increased level of development activity in progress through 2005. There The interim dividend per ordinary share has was no significant interest cost reduction increased by 5.7 per cent from 6.15 pence from the bond exchange in the first half of to 6.5 pence, reflecting the Board’s the year, but the second half financing costs intention of maintaining a progressive will benefit by approximately £5 million as dividend policy underpinned a result of the transaction. by adjusted earnings per share.

Taxation Balance sheet The tax charge for the period can be Under IFRS, the Group is required to provide analysed as follows: for deferred tax on investment properties and the capital gains tax on revaluation Six months ended Six months ended surpluses. In arriving at adjusted net assets 30 June 2005 30 June 2004 and adjusted net assets per share, the £m % £m % Board believes it is appropriate to add back Tax charge on: such contingent tax liabilities since the Adjusted profit before tax 26.9 30 9.6 15 nature of the Group’s investment portfolio Adjusting items 18.7 66 37.1 35 means the tax is unlikely to crystallise. Reported profit before tax 45.6 38 46.7 27 Adjusted diluted net assets of the Group increased by £109 million during the period, as set out in the following table. Slough Estates plc | Interim Report 2005 13

£m Per share Funds availability 31 December 2004 2,622.4 558 At the 30 June the Group had £587.8 Property valuation gains million of available funds represented by (including associates) 147.5 31 £178.3 million of cash balances held on Adjusted profit after tax 74.2 16 deposit and £409.5 million of undrawn Loss on bond exchange, net of tax (88.0) (19) bank facilities, of which £334.6 million were Exceptional items, net of tax (2.1) – committed for a duration of over two years. Ordinary dividend paid (41.6) (9) This was mainly provided by the £415 Preference share conversions 7.1 2 million committed revolving credit facility Other items 11.9 2 signed in 2002 and which was extended 30 June 2005 2,731.4 581 (and the margin renegotiated downwards) during the first half of the year. The maturity Cash flow and net debt date of this facility is now 2011. A summary of the cash flow for the period is as follows: Maturity and interest rate profile of debt Six months to Year ended The bond exchange transaction resulted in 30 June 31 Dec the issue of two new long-dated unsecured £ millions 2005 2004 2004 sterling debt issues. These are £200 million Cash flow from operations 154.1 104.5 202.4 5.5 per cent 2018 and £100 million 5.75 Interest and per cent 2035. Following closure of this dividends (net) (141.3) (87.0) (172.4) transaction, the weighted average maturity Tax paid (net) (49.8) (5.9) (15.3) profile of debt in issue is 9.8 years. This Funding pension compares to the weighted unexpired term scheme deficit (15.0) – – of the lease portfolio which is 11.5 years (52.0) 11.6 14.7 excluding break clauses, or 9.8 years Capital expenditure (239.1) (45.4) 135.3 assuming that all break clauses are exercised. Investment in longer term deposits 180.6 – (184.5) Net increase in borrowings 71.2 4.9 88.2 Other (3.6) 6.8 6.6 Net Cash (outflow)/inflow (42.9) (22.1) 60.3 Opening cash and cash equivalents 218.1 158.6 158.6 Exchange rate changes (0.1) (1.4) (0.8) Closing cash and cash equivalents 175.1 135.1 218.1 14 Slough Estates plc | Interim Report 2005

Financial review continued

The Group’s policy on interest rate > 126 million of bank debt has been exposure is that at least 70 per cent of the swapped from EURIBOR into gross debt portfolio should be at a fixed or 5.68 per cent until 2010. capped rate. As at 30 June 2005, 75 per > Canadian $25 million of private cent of the debt portfolio was at fixed rate placement debt at 9.27 per cent has with an average interest rate of 6.42 per been swapped into US$15.9 million at cent, the 25 per cent at variable rate has 9.23 per cent fixed to 2010. an average of 4.08 per cent, and the all in weighted average interest rate for As some transaction types in the above borrowings was 5.80 per cent (excludes portfolio do not qualify for hedge the 8.25 pence convertible preference accounting treatment under IFRS, the shares classified as debt under IFRS). This Group has decided to account for all includes the effect of all derivative contracts derivative instruments at fair value and which are listed below: take the movements in fair value as well as the associated cash flows to > US$150 million of bank debt has been the income statement. swapped from US$ LIBOR to 2.28 per cent until January 2006. Financial ratios > US$121.6 million of bank debt has The Group aims to maintain its key financial been fixed with forward rate ratios at a level that will support a strong agreements at 3.95 per cent from long-term investment grade credit rating December 2005 to July 2006. although it will consider movements to > £150 million of bond debt has been outside this range on a temporary short- swapped from 6.75 per cent to LIBOR term basis to permit acquisitions to proceed plus 1.0 per cent to 2013. The bank pending realisation of assets. Currently the counterparties have the option to Group is rated A- by Fitch. Gearing as cancel this transaction on any 6 month tested by our bank financial convenants rollover date. The LIBOR exposure is stood at 62 per cent as at 30 June. This collared in a range of 4.5 per cent – excludes the convertible redeemable 5.5 per cent until 2006. preference shares from debt, reclassifying > A £125 million swaption was entered them back to equity and adds back all in 2001 giving the counterparty banks deferred tax to the asset base. This gearing the option to make Slough pay level is up from the unusually low level of 5 per cent for fifteen years from 2010. 51 per cent at 31 December 2004 but is Slough receives an annual premium of in the middle range seen over the last ten 0.52 per cent until 2010 for this option, years. A prime key ratio is recurring interest effectively reducing the running cost of cover ignoring all exceptional and one-off the 7.125 per cent 2010 bond. items. We aim to maintain this at above a minimum cover level of 1.8 times. Cover for the first half of 2005 was 2.1 times. Slough Estates plc | Interim Report 2005 15

Portfolio highlights

Revaluation Weighted average Value Movement Change Portfolio lease term, years Valuation by Sector £m £m % % Long Lease Profile to expiry to first break

UK UK 9.3 7.3 Industrial 2,062 89.8 4.6 48.2 Industrial 9.2 7.0 Suburban Offices 483 24.9 5.4 11.3 Suburban Offices 9.1 6.7 R&D 82 4.0 5.1 1.9 R&D 16.1 12.9 Retail 278 13.7 5.2 6.5 Retail 11.3 11.3 Land/WIP 247 (8.4) (3.3) 5.8 Total UK 3,152 124.0 4.1 73.7 Overseas US 21.2 21.2 Overseas Europe 6.1 3.5 US 831 19.1 2.4 19.4 Europe 293 4.4 1.5 6.9 Group 11.5 9.8 Total Overseas 1,124 23.5 2.1 26.3

Revaluation Value Movement Change Portfolio % of income remaining at: Valuation by Location £m £m % % Security of income expiry first break

UK End 2010 89 76 Slough 1,227 65.8 5.7 28.7 End 2015 54 44 S London & S of England 368 12.3 3.5 8.6 Initial Reversionary N London & yield yield E of England 406 4.9 1.2 9.5 Current Yields % % Midlands 227 5.8 2.6 5.3 UK Heathrow & W London 504 22.5 4.7 11.8 Business space Thames Valley & Industrial 5.7 6.7 W of Engand 420 12.7 3.1 9.8 Suburban Offices 6.0 7.1 Total UK 3,152 124.0 4.1 73.7 R&D 6.3 6.8 Retail 5.3 5.6 Europe Total UK 5.7 6.7 Belgium 186 0.1 0.1 4.4 France 107 4.3 4.2 2.5 Overseas Total Europe 293 4.4 1.5 6.9 US 8.4 8.6 Europe* 7.6 7.8 Worldwide Initial yield: current rent passing dividend by current capital UK 3,152 124.0 4.1 73.7 value (including vacant properties). Europe 293 4.4 1.5 6.9 Reversionary yield: current estimated rental value on a fully US 831 19.1 2.4 19.4 let basis, divided by current capital value. Total Worldwide 4,276 147.5 3.6 100.0 * Excludes trading properties. Excludes trading properties in Europe. Includes land, buildings under construction and share of joint ventures and associate. 16 Slough Estates plc | Interim Report 2005

UK portfolio analysis as at 30 June 2005

Land for Industrial/ Business/ Under Land area development warehousing office Retail Total construction Number of Rent roll Location hectares hectares sq.m. sq.m. sq.m. sq.m. sq.m. tenants £000

UK Slough 197 1 567,046 82,612 33,737 683,395 7,143 394 71,125 Heathrow and West London 78 7 322,123 12,323 4,370 338,816 11,350 214 28,380 Thames Valley and West of England 98 12 257,739 32,203 – 289,942 1,759 170 25,486 South London and South of England 126 43 237,365 11,558 – 248,923 16,447 118 13,853 North London and East of England 126 15 289,652 29,780 – 319,432 6,968 150 17,704 Midlands 54 1 157,559 10,814 16,734 185,107 – 157 11,870 HelioSlough 27 24 11,148 – – 11,148 – – – Retail 18 – – 393 44,967 45,360 – 66 9,364 Total 724 103 1,842,632 179,683 99,808 2,122,123 43,667 1,269 177,782 Percentage by use 87 8 5

Heathrow and West London NW10 6 – 31,223 – – 31,223 – 37 2,522 W3 4 – 19,512 – – 19,512 – 15 1,829 WC1 0 – – 2,185 – 2,185 – 1 500 Greenford 5 – 24,955 – – 24,955 – 14 1,922 West Drayton 7 – 28,650 – – 28,650 6,032 11 2,374 Hayes 5 – 22,161 – – 22,161 – 35 1,696 Uxbridge 7 7 23,693 757 – 24,450 – 9 1,082 South Ruislip 3 – 6,357 – 4,370 10,727 – 3 1,650 Feltham 23 – 82,938 8,668 – 91,606 – 37 9,347 Heston 6 – 29,213 – – 29,213 – 9 2,076 Hounslow 3 – 13,375 – – 13,375 5,318 9 665 Colnbrook 3 – 15,892 – – 15,892 – 11 1,064 Isleworth 6 – 24,154 713 – 24,867 – 23 1,653 Total 78 7 322,123 12,323 4,370 338,816 11,350 214 28,380

Thames Valley and West of England High Wycombe 9 – 31,564 2,169 – 33,733 – 27 2,779 Winnersh 33 – 111,200 20,684 – 131,884 – 36 14,180 Wokingham 2 – 7,465 – – 7,465 – 7 547 Yate 9 – 31,568 – – 31,568 – 26 1,507 Weston-super-Mare 8 1 25,572 – – 25,572 1,759 40 1,177 Bristol 7 – 21,892 – – 21,892 – 17 1,545 Swindon 3 – 11,180 – – 11,180 – 4 607 Ascot 11 – – 9,350 – 9,350 – 1 2,624 Oxford 3 – 12,431 – – 12,431 – 3 175 Gloucester 11 11 – – – – – – – Bracknell 2 – 4,867 – – 4,867 – 9 345 Total 98 12 257,739 32,203 – 289,942 1,759 170 25,486 Slough Estates plc | Interim Report 2005 17

Land for Industrial/ Business/ Under Land area development warehousing office Retail Total construction Number of Rent roll Location hectares hectares sq.m. sq.m. sq.m. sq.m. sq.m. tenants £000

South London and South of England Epsom 1 – 6,843 – – 6,843 – 3 323 SW19 2 – 9,973 – – 9,973 – 1 801 Camberley 2 – 13,789 – – 13,789 – 4 365 Leatherhead 2 – 4,176 – – 4,176 – 1 118 Crawley 9 2 33,809 – – 33,809 – 1 1,100 Coulsdon 2 – 9,448 – – 9,448 – 4 349 Croydon 5 – 19,990 – – 19,990 – 5 810 Frimley 3 – 21,863 – – 21,863 – 20 1,684 Guildford 2 – 11,925 – – 11,925 – 6 641 Basingstoke 4 – 15,944 – – 15,944 – 15 1,396 Southampton 5 2 13,035 – – 13,035 – 5 675 Portsmouth 33 14 57,088 – – 57,088 4,874 47 3,818 Fareham 3 – 12,169 – – 12,169 – – – Swanley 1 – 6,448 – – 6,448 – 1 340 Farnborough 52 25 865 11,558 – 12,423 11,573 5 1,433 Total 126 43 237,365 11,558 – 248,923 16,447 118 13,853

North London and East of England Huntingdon 2 – 8,179 – – 8,179 – 13 501 Chelmsford 3 – 15,691 – – 15,691 – 10 912 Barking 3 – 13,338 – – 13,338 – 5 748 West Thurrock 6 – 30,050 – – 30,050 – 19 1,647 Basildon 10 – 55,553 4,313 – 59,866 – 16 3,055 Cambridge 45 10 – 19,197 – 19,197 – 6 1,959 Luton 9 – 38,286 – – 38,286 – 27 1,631 Elstree 27 5 32,995 6,270 – 39,265 – 20 2,886 Edmonton 2 – 16,836 – – 16,836 – 1 435 Hatfield 6 – 31,580 – – 31,580 – 1 2,500 Welwyn Garden City 2 – 9,541 – – 9,541 – 24 822 Radlett 11 – 37,603 – – 37,603 6,968 8 608 Total 126 15 289,652 29,780 – 319,432 6,968 150 17,704

Midlands Birmingham 23 1 69,365 5,205 – 74,570 – 86 4,490 Huddersfield 8 – 15,315 – 9,023 24,338 – 18 1,372 Oldbury 2 – 4,315 1,575 – 5,890 – 6 489 Chester 3 – – – 7,711 7,711 – 5 1,896 Runcorn 4 – 13,697 – – 13,697 – 4 635 Warrington 5 – 20,671 – – 20,671 – 26 778 Northampton 5 – 20,565 – – 20,565 – 2 1,089 Derby 4 – 13,631 4,034 – 17,665 – 10 1,121 Total 54 1 157,559 10,814 16,734 185,107 – 157 11,870

HelioSlough Trax Park, Doncaster (50 per cent) 3 – 11,148 – – 11,148 – – – Thorne, Doncaster (50 per cent) 24 24 – – – – – – – Total 27 24 11,148 – – 11,148 – – –

Retail Surrey Quays, Rotherhithe (50 per cent) 9 – – 393 25,655 26,048 – 56 5,220 Clifton Moor, York (50 per cent) 9 – – – 19,312 19,312 – 10 4,144 Total 18 – – 393 44,967 45,360 – 66 9,364 18 Slough Estates plc | Interim Report 2005

Overseas portfolio analysis as at 30 June 2005

Land for Industrial/ Business/ Under Rent roll Land area development warehousing office Retail Total construction Number of local currency Location hectares hectares sq.m. sq.m. sq.m. sq.m. sq.m. tenants 000

Belgium 69 41 102,772 75,233 2,797 180,802 6,360 85 120,097 France 56 – 234,249 8,035 17,812 260,096 4,638 21 115,473 Germany 28 6 43,909 16,315 – 60,224 53,031 62 13,885 US 191 65 439,330 41,066 18,526 498,922 62,336 87 $111,739 Total 344 112 820,260 140,649 39,135 1,000,044 126,365 255 N/A Percentage by use – – 82 14 4 – – – –

BELGIUM Brussels Woluwe St Stevens 4 – 18,228 2,304 – 20,532 – 19 1,393 Zaventem E40 1 – 5,106 – 2,337 7,443 – 7 362 Horizon 2 1 6,536 – – 6,536 – 7 723 Sirius 1 1 – – – – – – – Kortenberg 5 4 – – 460 460 – 1 41 Relegem 4 – 19,334 – – 19,334 – 23 2,185 Pegasus – Diegem 1 15 8 8,750 72,929 – 81,679 6,360 23 13,144 Pegasus – Diegem 2 1 1 – – – – – 1 214 Nivelles 6 4 8,424 – – 8,424 – 2 411 Diegem 2 3 3 – – – – – – – Diegem (UPS) (50 per cent) 3 1 10,131 – – 10,131 – 1 751 Zellik (50 per cent) 2 2 – – – – – – – Zaventem 3 (50 per cent) 6 6 – – – – – – – Bornem (50 per cent) 11 7 16,517 – – 16,517 – 1 873 Rumst (50 per cent) 5 3 9,746 – – 9,746 – – – 69 41 102,772 75,233 2,797 180,802 6,360 85 320,097

FRANCE Paris Colombes 3 – – – 17,812 17,812 – 1 1,640 Bures Orsay 4 – 19,264 – – 19,264 – 3 1,080 Aulnay sous Bois 2 – 11,155 – – 11,155 – 1 692 Nanterre (66 per cent) 0 – – 5,803 – 5,803 – – – Evry 5 – 26,087 – – 26,087 – 2 1,566 Marly La Ville 25 – 108,382 – – 108,382 – 6 6,436 Cergy Pontoise 10 – 51,645 – – 51,645 – 2 2,872 Blanc Mesnil 7 – 17,716 2,232 – 19,948 4,638 6 1,187 56 – 234,249 8,035 17,812 260,096 4,638 21 315,473

GERMANY Neuss 9 2 5,576 3,126 – 8,702 26,922 14 766 Mönchengladbach 2 – 7,637 3,365 – 11,002 – 14 870 Frankfurt 4 2 9,117 1,746 – 10,863 – 3 234 Kapellen 5 2 – – – – 12,186 – – Ratingen 3 – 11,168 6,069 – 17,237 – 17 1,201 Dormagen 1 – – – – – 6,327 – – Hamburg 2 – 10,411 2,009 – 12,420 – 14 814 Krefeld 2 – – – – – 7,596 – – 28 6 43,909 16,315 – 60,224 53,031 62 33,885 Slough Estates plc | Interim Report 2005 19

Land for Industrial/ Business/ Under Rent roll Land area development warehousing office Retail Total construction Number of local currency Location hectares hectares sq.m. sq.m. sq.m. sq.m. sq.m. tenants 000

US Peoria: Illinois Washington/Cherrytree (25 per cent) 7 – – – 18,526 18,526 – 15 839 California San Diego Torrey Pines 1 (37.5 per cent) 2 – 7,837 – – 7,837 – 1 3,104 Torrey Pines 2 (50 per cent) 1 – 4,297 – – 4,297 – 1 1,616 Torrey Pines Science Center 3 – 15,462 – – 15,462 – 2 6,637 Torreyana 3 – 7,898 – – 7,898 – 1 1,510 Torrey Pines Science Park 7 – 27,110 – – 27,110 – 6 5,006 Carlsbad 16 16 – – – – – – – Poway 36 32 11,612 – – 11,612 14,492 – – San Francisco Hacienda, Pleasanton (55 per cent) 6 – 23,166 – – 23,166 – 11 3,364 Hacienda, Pleasanton (90 per cent) 10 – 8,426 26,262 – 34,688 – 5 7,247 Nellcor, Pleasanton (64 per cent) 3 – 13,099 – – 13,099 – 1 1,996 Point Eden, Hayward (64 per cent) 16 – 49,346 – – 49,346 – 8 6,522 South San Francisco Oyster Point 13 4 63,280 – – 63,280 – 3 28,903 East Grand 11 – – – – – 41,805 – – Gateway (45 per cent) 3 – 13,690 – – 13,690 – 1 4,260 Gateway (90 per cent) 2 – 9,854 – – 9,854 – 1 4,186 Seaport 12 – 43,056 14,804 – 57,860 – 12 7,400 Shoreline 21 – 67,493 – – 67,493 – 12 12,000 Forbes 3 – 15,128 – – 15,128 – – – Pointe Grand South 15 2 58,576 – – 58,576 6,039 7 17,149 190 54 439,330 41,066 18,526 498,922 62,336 87 $111,739

UK 724 103 1,842,632 179,683 99,808 2,122,123 43,667 1,269 OVERSEAS 344 102 820,260 140,649 39,135 1,000,044 126,365 255 TOTAL 1,068 205 2,662,892 320,332 138,943 3,122,167 170,032 1,524 20 Slough Estates plc | Interim Report 2005

Development programme as at 30 June 2005

Practical Work in Potential completion progress Anticipated starts H1 2005 June 05 completion H2 2005 Location Type sq.m. sq.m. Date sq.m.

UK Slough 381 Sykes Road Industrial 2,394 24-29 Buckingham Avenue Industrial/Retail 2,437 Q4 115-118 Buckingham Avenue Industrial 4,706 Q4 61 Whitby Road Industrial 2,584 638 Ajax Avenue R&D 5,914 303/310 Farnham Road Retail 6,064 2 Buckingham Avenue Industrial 5,500 91-93 Farnham Road Leisure 2,323 Oxford Avenue Industrial 3,404 Slough total 2,394 7,143 25,789 Portsmouth Motorpark Industrial 2,950 Q3 Pre-let to Pentagon Ltd Railway Triangle Industrial 1,924 Q3 Voyager Park Industrial 15,008 Radlett Phase 200 Industrial 9,676 Phase 300 Industrial 6,968 Q4 Pre-let to Viglen West Drayton Stone Close Phase 1 Car Showroom 2,926 Pre-let to HR Owen Stockley Close Phase 1 Industrial 6,032 Q3 Camberley Stanhope Road Industrial 2,484 Pre-sold to The Dolphin Head Hounslow Pulborough Way Industrial 5,318 Q3 Farnborough 200/250 The Square Offices 7,029 2006 Q134 Offices 4,544 2006 Luton Phase 200 Industrial 6,039 Uxbridge Phase 300/400 Industrial/Office 7,316 Weston Super Mare Phase 100 Industrial 1,759 Q4 Let to Bradford & Sons West Thurrock Phase 4,295 HelioSlough Trax Park, Doncaster Industrial 11,148 UK TOTAL 28,628 43,667 58,447 Slough Estates plc | Interim Report 2005 21

Practical Work in Potential completion progress Anticipated starts H1 2005 June 05 completion H2 2005 Location Type sq.m. sq.m. Date sq.m.

BELGIUM Rumst Industrial 13,000 Pegasus Park Office 6,360 Q3 14,000 Kortenberg Industrial 2,300 Total – 6,360 29,300

FRANCE Le Blanc Mesnil Industrial 5,509 4,638 Q3 5,000 3,709 sq.m. let to Finemetal Total 5,509 4,638 5,000

GERMANY Neuss V Industrial 5,802 Q3 Neuss IV Asics Industrial 21,120 Q4 18,327 sq.m. pre-let to ASICS Krefeld Industrial 7,596 Q4 3,021 sq.m. pre-let to Nachi Kapellen, Phase III Logistics 12,186 Q3 Dormagen Industrial 6,327 Q4 6327 sq.m. pre-let to FEAG Mönchengladbach Industrial 21,812 Total – 53,031 21,812

US Poway Industrial 14,492 Q3 17,837 East Grand R&D 41,805 2006 Pre-let to Genentech Pointe Grand R&D 6,039 Q3 BOP II R&D 10,498 BOP E R&D 9,144 Pre-let to Amgen Torrey Pines Science Park 5 R&D 4,181 285 E Grand R&D 6,968 Total – 62,336 48,628

OVERSEAS TOTAL 5,509 126,365 104,740 GROUP TOTAL 34,137 170,032 163,187 Let or Sold 26.7% 47.7% 5.6% 22 Slough Estates plc | Interim Report 2005

Operating review

Slough Trading Estate Value £1.2 billion Heathrow and West London The Slough Trading Estate is the largest 649,658 sq.m. (6.9 million sq.ft.) business This region includes Slough Estates’ business park in Europe and has been space and 33,737 sq.m. (363,142 sq.ft.) holdings in West London and those Slough Estates’ core property asset since retail space immediately adjacent to London’s Heathrow the Group was founded over 80 years ago. Airport (not including the Slough Trading Today the Estate is a modern business 196.61 ha (485.83 acre) site Estate). The properties have been managed park close to London’s Heathrow Airport, 394 customers as one estate since 2003 and this has the world’s busiest airport. It has excellent Approximately 20,000 employees based brought great operating efficiencies in West access to the M4 and M40 motorways. on the Trading Estate London. The excellent communications to Website: www.sloughte.com the West of London make this a premier > Lettings completed in the first half of location for business in the UK. 2005 totalled 32,849 sq.m., a 57 per Customers include: cent increase over the first half of 2004. Allied Carpets, B&Q, Black & Decker, > A total of 12,875 sq.m. of space let in > We are confident that this increased Celltech R&D, Comet Group, Credit Suisse the first half of 2005. activity points to an improving business First Boston, Equant, Fujitsu Europe, > Letting of two units, totalling 4,013 environment but at present the market Fullers Logistics, Furniture Village, sq.m. to Manpower at Riverside Estate, for offices in Slough continues to be Ferrari Maserati UK, Fiat Auto (UK), Uxbridge at £110 per sq.m. weak, which is reflected by some Honda Motor Europe, Ipsen, John Menzies, > Purchase of 3.4 ha LSG Skychefs site downward pressure on rental levels L G Electronics UK, Lonza Biologics, at Heathrow, providing the potential to for offices. Our occupancy is 91.4 per Mars, O2, Polycom (UK), Safeway Properties, develop a 9,290 sq.m. warehouse cent, compared with 87.9 per cent at Sun Chemical, Unatrac, WH Smith scheme with a completed value of June 2004. Trading, Xenova some £20 million. > In early 2005, a letting of 11,189 sq.m. Rent passing £71.1 million pa of existing business space to a major Average passing rent financial institution for an IT back-up centre, at a rent of £91.49 per sq.m. Business space: showing return of demand for large deals. – industrial £100.26 per sq.m > Letting of 2,805 sq.m. office development – office £207.46 per sq.m at 252 Bath Road, to LG Electronics at – retail £218.82 per sq.m £217 per sq.m. The office scheme, designed by the in-house architectural 7,143 sq.m. under construction team at Slough Estates has been 91 per cent occupancy by area recognised with an award by the British Council for Offices. Slough Estates plc | Interim Report 2005 23

Value £504 million South London and Southern England Value £368 million 334,446 sq.m. (3.6 million sq.ft.) business The South London and Southern 248,921 sq.m. (2.7 million sq.ft.) business space and 4,370 sq.m. (47,038 sq.ft.) retail England region covers South London, space in: Basingstoke, Portsmouth, in: Feltham, Hayes, Hounslow, Isleworth, primarily between the M23 and the M3 Camberley, Southampton, Epsom, Poyle, West Drayton, Park Royal, motorways down to the south coast. It Leatherhead, Farnborough, Coulsdon, Uxbridge, Greenford, Ruislip, Heston covers the counties of Surrey, Sussex, Croydon, Fareham, Frimley, Guildford, Kent and Hampshire which are affluent SW19, Swanley, Crawley 80.65 ha (196.29 acres) in total commuting areas. 214 customers 126.94 ha (313.68 acres) in total Website: www.thelhr.com / www.A40.net > Slough Estates’ holdings in this region 118 customers Customers include: were substantially strengthened in 2004 Customers include: AAH Pharmaceuticals, British Midland by the acquisition of an industrial Agustawestland International, Autodesk, Airways, DFS Furniture Company, Federal portfolio from Land Securities with Carlsberg UK, Honeywell Avionics Express Europe, Fujitsu, LSG Sky assets in Basingstoke, Coulsdon, Systems, Thales Properties, Oddbins, Chefs/GCC, Natwest Commercial Services, Croydon, Fareham, Frimley, Guildford, Pinnacle Entertainment, Snows Motor Group London SW19 and Swanley. Scottish & Newcastle, Thorn, UPS (UK), > Rent passing £13.9 million pa Unigate Properties A total of 188 sq.m. let in the first half of 2005. Average passing rent: £55.65 per sq.m Rent passing £28.4 million pa > Pre-let of 2,950 sq.m. car showroom 16,447 sq.m. under construction Average passing rent: £83.76 per sq.m. complex at the Portsmouth Motor Park 81 per cent occupancy by area, excluding 11,350 sq.m. under construction to Pentagon Ltd. > Purchase of 13 ha Blueprint site in rental guarantee. 89 per cent occupancy by area Portsmouth (known as Voyager Park) 95 per cent occupancy including one of the largest industrial sites in the rental guarantee South East. 24 Slough Estates plc | Interim Report 2005

Operating review continued

North London and East of England Value £366 million Thames Valley and West of England The North London and East of England 319,432 sq.m. (3.4 million sq.ft.) business This region (which excludes Slough and region covers an area north of London to space in: Elstree, Welwyn Garden City, LHR) covers the area adjacent to the M4 the east of the M1 motorway and reaches Chelmsford, Radlett, Luton, Basildon, motorway between London and Bristol out as far as Cambridge and along the Hatfield, Thurrock, Barking, Huntingdon, in the West. The M4 Corridor has been M11 motorway. The Cambridge area has Cambridge, Dunstable the most successful business area in the been identified by the Government as a south east of England in recent years major growth area for development and is 127.48 ha (315.01 acres) in total and Slough has leading Business Parks the main home to the UK’s biotech industry. 150 customers across the region. Customers include: > A total of 8,505 sq.m. let in the first half Diomed, Ford Motor Company, NTL > A total of 6,146 sq.m. let in the first of 2005. Cambridge, Sheffield Insulations, half of 2005. > Acquisition of £9 million warehouse Starbucks Coffee Company, Tesco > A pre-let of 1,579 sq.m. to Bradford & complex of approx 16,836 sq.m. on a Distribution, Tibbett & Britten, Vitec Group Sons in Weston Super Mare, due for site of 2.15 ha fronting the North Communications completion in Q4 2005. Circular Road in Edmonton. Rent passing £17.7 million pa > Pre-let of 6,968 sq.m. at Radlett to Value £420 million Average passing rent: £55.42 per sq.m. Viglen Ltd – the largest pre-let deal in 289,942 sq.m. (3.1 million sq.ft.) business South Herts for over 10 years. 6,968 sq.m. under construction at Radlett space in: High Wycombe, Yate, > Pre-let of 2,908 sq.m. building at 79 per cent occupancy by area, excluding Weston Super Mare, Swindon, Bristol, Cambridge Research Park to the rental guarantee Wokingham, Winnersh, Ascot, Bracknell, ODPM to serve as a new regional Oxford, Haresfield control centre for the Fire and 82 per cent occupancy including Rescue Service, in August 2005. rental guarantee 98.34 ha (243 acres) in total > Addition of the 135,326 sq.m. 170 customers Woodside Industrial Estate in Dunstable Customers include: in July, with 3 ha of development land. Agere Systems, Agilent Technologies UK, Biffa Waste Services, Fujitsu, Intel Corporation, Kerry Foods, Mars, MDS Pharma Services GB, NTL, The Post Office Rent passing £25.5 million pa Average passing rent: £87.90 per sq.m. 88 per cent occupancy by area, excluding rental guarantee 92 per cent occupancy, including rental guarantee Slough Estates plc | Interim Report 2005 25

Midlands Joint Venture – HelioSlough Belgium The Midlands region is centred around This 50/50 JV with Helios Properties, which Slough Estates has been operating in Birmingham, the UK’s second largest city, has £150 million of funding available, aims Belgium since 1963. Its Pegasus Park and its main industrial centre. The largest to develop a network of large-scale strategic development is the largest office park in asset is the Kings Norton Business Park to distribution parks throughout the UK. Brussels and is adjacent to Brussels the south of Birmingham. There are also a International Airport. Slough Estates is also few properties in the North. > Six schemes at different stages of a leading provider of distribution space development which will produce within (‘the golden triangle’) between > A total of 6,372 sq.m. let in the first approximately 418,064 sq.m. Brussels, Ghent and Antwerp. half of 2005. > Substantial strategic landbank of some > Addition of the 234,269 sq.m. 271 ha in three sites. > A total of 2,016 sq.m. let in first half Heywood Distribution Park in > 11,148 sq.m. speculative unit completed of 2005. Manchester in July 2005 with 8.5 ha at Trax Park, Doncaster in May 2005. > Post half year end, completion of of development land. 6,360 sq.m. speculative office building Trading book value (100 per cent basis) at Pegasus Park. Value £191 million £14.2 million 168,371 sq.m. (1.8 million sq.ft.) business 11,148 sq.m. (0.12 million sq.ft) Investment property value £183 million space and 16,733 sq.m. (180,113 sq. ft.) of business space Trading book value £11 million retail space in: Birmingham, Huddersfield, 50/50 JV with Helios Properties 178,005 sq.m. (1.9 million sq.ft.) Chester, Derby, Northampton, Runcorn, business/office space and 2,797 sq.m. Warrington, Oldbury, Manchester (30,107 sq.ft.) of retail in: Brussels Pegasus 54.04 ha (133.54 acres) in total Park (81,679 sq.m.), Woluwe, Relegem, Bornem, Nivelles, Zaventem, Horizon, 157 customers Diegem, Rumst, Zellik, Sirius, Kortenberg Customers include: 70.25 ha (173.59 acres) in total Aggregate Industries Management, British Midland, DSG, Furniture Village, 85 customers Lloyds TSB Bank, MFI Properties, Reid Customers include: Furniture, Saint-Gobain Building Cisco, Johnson Controls, Regus, DHL, Distribution, Tesco Distribution Bornem, UPS, Telenet, Sungard, Emerson, Rent passing £11.87 million pa Agilent, Ecolab (Henkel), Synstar Average passing rent: £64.13 per sq.m. Rent passing £13.6 million pa 91 per cent occupancy by area Average passing rent: £75.10 per sq.m. 83 per cent occupancy by area 26 Slough Estates plc | Interim Report 2005

Operating review continued

France Germany California Slough Estates has been operating in Slough Estates has been operating in Slough Estates has been operating in France since 1972. The business is Germany since 1974. The business is North America since 1951 but today its centred on Paris. The main developments centred on the Ruhr which is the industrial operations are centred in the Bay Area of have been around Paris’ orbital motorway, heartland of western Germany. The San Francisco and San Diego in California. La Francilienne, where a number of business is focused on developing small In terms of product the business is distribution facilities have been developed. industrial parks and then selling these focused on providing buildings to the More recently there has been greater developments to German institutions. health science industry. emphasis on business space at such sites as Le Blanc Mesnil. > A total of 4,882 sq.m. let in the first half > Letting of 9,848 sq.m. building on the of 2005. Pointe Grande Estate, South San > A total of 3,709 sq.m. let in the first > Pre-let of 6,327 sq.m. at Dormagen, Francisco to Rinat Neuroscience. The half of 2005. in addition to the 18,327 sq.m. pre-let facility forms part of the 20,624 sq.m. > Sale of 3,221 sq.m. office scheme at Neuss and the 3,021 sq.m. pre-let campus formerly occupied by Sugen, a in Avenue Kléber, Paris for £21 million. at Krefeld, started in the second half subsidiary of Pfizer. The two other of 2004. buildings in the campus have been let Investment property value £107 million to Exelixis. Trading book value £12.5 million Trading book value £74 million > Acquisition of the 67,493 sq.m. 242,284 sq.m. (2.6 million sq.ft.) business 60,224 sq.m. (648,246 sq.ft.) business Shoreline Technology Center and the space and 17,812 sq.m. (191,727 sq.ft.) of space in: Neuss, Hamburg, Ratingen, 57,860 sq.m. Seaport Center in the retail in: Marly la Ville, Cergy Pontoise, Evry, Mönchengladbach, Frankfurt, Kapellen, San Francisco Bay Area. > Bures Orsay, Colombes, Le Blanc Mesnil, Krefeld Acquisition of 16.5 ha development site Aulnay sous Bois, Nanterre and Paris at Bressi Ranch, Carlsbad, San Diego. 28.50 ha (70.43 acres) in total > 26,472 sq.m. let in first half. 56.19 ha (138.85 acres) in total 62 customers 21 customers Customers include: Investment property £787 million Customers include: CC Bank, Qits, SATO, Listan, Phonet, 480,397 sq.m. (5.1 million sq.ft.) business Geodis, Daher, Deluxe, Staci, Conforama, Flashpoint, Spacelabs, ADCO, Bernd space in: San Francisco, San Diego Stockalliance, Gefco, Mory Team, Guilbert, John, Junkers, Tholstrup, Robin (Europe) 183.21 ha (452.72 acres) in total UPS Patisfrance Rent passing £2.6 million pa 72 customers Rent passing £10.45 million pa Average passing rent: £43.59 per sq.m. Customers include: Average passing rent: £40.20 per sq.m. 68 per cent occupancy area Actel, Amgen, Boston Scientific, Exelixis, 4,638 sq.m. under construction Pfizer, Rigel, Robert Half International, 96 per cent occupancy by area FibroGen, Raven, SkyePharma, Aradigm, Millennium Pharmaceuticals, Syrrx, Perlegen Sciences, ProBusiness Services Rent passing £61.9 million pa Average passing rent: £128.97 per sq.m. 62,336 sq.m. under construction 87 per cent occupancy by area Slough Estates plc | Interim Report 2005 27

Independent review report to Slough Estates plc

Introduction preparing the full annual financial statements Review conclusion We have been instructed by the company for the first time in accordance with On the basis of our review we are not to review the financial information for the accounting standards adopted for use in aware of any material modifications that six months ended 30 June 2005 which the European Union. The IFRS standards should be made to the financial information comprises the consolidated interim balance and IFRIC interpretations that will be as presented for the six months ended sheet as at 30 June 2005 and the related applicable and adopted for use in the 30 June 2005. consolidated interim statements of income, European Union at 31 December 2005, cash flows, recognised income and are not known with certainty at the time of PricewaterhouseCoopers LLP, expense, changes in equity and the related preparing this interim financial information. Chartered Accountants notes for the six months then ended. We London have read the other information contained Review work performed 25 August 2005 in the interim report and considered We conducted our review in accordance whether it contains any apparent with guidance contained in Bulletin 1999/4 Notes: misstatements or material inconsistencies issued by the Auditing Practices Board for (a) The maintenance and integrity of the Sough Estates plc website is the responsibility of the directors; the work with the financial information. use in the United Kingdom. A review carried out by the auditors does not involve consideration consists principally of making enquiries of of these matters and, accordingly, the auditors accept Directors’ responsibilities group management and applying analytical no responsibility for any changes that may have occurred to the interim report since it was initially presented on The interim report, including the financial procedures to the financial information the website. information contained therein, is the and underlying financial data and, based (b)Legislation in the United Kingdom governing the responsibility of, and has been approved thereon, assessing whether the disclosed preparation and dissemination of financial information by the directors. The directors are accounting policies have been applied. may differ from legislation in other jurisdictions. responsible for preparing the interim report A review excludes audit procedures such in accordance with the Listing Rules of the as tests of controls and verification of Financial Services Authority. assets, liabilities and transactions. It is substantially less in scope than an audit As disclosed in note 2, the next annual and therefore provides a lower level of financial statements of the Group will be assurance. Accordingly we do not prepared in accordance with accounting express an audit opinion on the financial standards adopted for use in the European information. This report, including the Union. This interim report has been conclusion, has been prepared for and prepared in accordance with the basis set only for the company for the purpose of out in notes 2 and 24. the Listing Rules of the Financial Services Authority and for no other purpose. We The accounting policies are consistent do not, in producing this report, accept with those that the directors intend to use or assume responsibility for any other in the next annual financial statements. purpose or to any other person to whom As explained in note 2, there is, however, a this report is shown or into whose hands possibility that the directors may determine it may come save where expressly agreed that some changes are necessary when by our prior consent in writing. 28 Slough Estates plc | Interim Report 2005

Group income statement For the half year to 30 June 2005

Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Note £m £m £m Revenue 5 232.5 161.6 342.7

Gross rental income from rental properties 153.0 132.6 257.4 Interest received on finance lease assets 0.4 0.4 0.9 Other property related income 5.9 6.5 13.4 Property outgoings (22.4) (19.7) (39.2) Net rental income 136.9 119.8 232.5

Proceeds on sale of trading properties 49.0 4.3 31.4 Carrying value of trading properties sold (26.1) (2.1) (27.7) Trading property rental income 1.6 2.0 4.2 Property outgoings relating to trading properties (0.4) (0.3) (1.1) Net income from trading properties 24.1 3.9 6.8

Income from sale of utilities and gas 22.6 15.8 35.4 Cost of sales (23.6) (20.7) (42.8) Net income from utilities and gas (1.0) (4.9) (7.4)

Other investment income 3.3 3.2 10.5 Administration expenses (7.7) (6.3) (14.7) (Loss)/gain on disposal of property assets (3.0) 0.1 64.7 Net valuation gains 6 137.6 84.0 166.7 Operating income 290.2 199.8 459.1

Finance costs 7 (58.3) (49.6) (101.9) Exceptional loss on repayment of bonds 7 (125.6) –– (183.9) (49.6) (101.9)

Finance income 8 7.7 2.6 6.7 Share of profit from joint ventures and associate after tax 9 5.0 20.8 24.1 Profit before tax 119.0 173.6 388.0 Taxation – current 10 (13.5) (11.0) (49.4) – deferred 10 (32.1) (35.7) (42.8) (45.6) (46.7) (92.2)

Profit after tax 73.4 126.9 295.8 Preference dividends 11 – (5.6) (11.2) Profit for the period 73.4 121.3 284.6

Attributable to minority interests 1.8 (0.7) (1.2) Attributable to equity shareholders 19 71.6 122.0 285.8 73.4 121.3 284.6

Basic earnings per ordinary share 12 17.1p 29.3p 68.5p Diluted earnings per ordinary share 12 16.7p 27.2p 63.4p Slough Estates plc | Interim Report 2005 29

Statement of recognised income and expense For the half year to 30 June 2005

Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Note £m £m £m Revaluation gains and losses on properties in course of development 6 7.5 3.2 24.1 Exchange differences arising on translation of overseas operations 14.7 (6.3) (12.5) Actuarial losses on defined benefit pension schemes (3.0) (3.2) (10.6) Deferred tax liability arising on items taken directly to equity (5.7) (1.3) (3.3) Net gain/(loss) recognised directly in equity 13.5 (7.6) (2.3) Profit for the period 73.4 121.3 284.6 Total recognised income and expense for the period 86.9 113.7 282.3

Attributable to – equity shareholders 85.1 114.4 283.6 Attributable to – minority interests 1.8 (0.7) (1.3) 86.9 113.7 282.3

Statement of changes in shareholders’ equity For the half year to 30 June 2005

Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Note £m £m £m Shareholders’ funds at 1 January 2,165.1 1,942.4 1,942.4 Effect of adopting IAS 32 and 39 (103.6) –– As restated 2,061.5 1,942.4 1,942.4 Preference share conversions 7.1 –– Issue of ordinary shares 1.4 0.8 3.0 Fair value of share based payments – 0.2 0.2 Purchase of shares in ESOP (2.6) – (0.8) Issue of shares in ESOP 0.9 0.8 0.8 2,068.3 1,944.2 1,945.6 Total recognised income and expense for the period 85.1 114.4 283.6 Ordinary dividend paid 11 (41.6) (38.4) (64.1) Shareholders’ funds at end of period 19 2,111.8 2,020.2 2,165.1 30 Slough Estates plc | Interim Report 2005

Group balance sheet As at 30 June 2005

30 June 30 June 31 December 2005 2004 2004 Note £m £m £m Non-current assets Goodwill 13 0.6 –– Investment properties 14 3,816.8 3,370.5 3,452.7 Property, plant and equipment 15 381.6 353.8 394.8 Finance lease receivables 10.8 11.0 10.9 Available-for-sale investments 44.5 34.5 38.4 Investments in joint ventures and associate 16 94.1 220.8 84.1 Deferred tax asset 0.3 – 0.2 Total non-current assets 4,348.7 3,990.6 3,981.1

Current assets Inventories 1.8 1.7 1.9 Trading properties 104.7 124.5 125.3 Finance lease receivables 0.1 0.1 0.1 Trade and other receivables 121.9 90.9 115.0 Non-current assets classified as held-for-sale 87.3 –– Cash and cash equivalents 178.3 136.7 397.4 Total current assets 494.1 353.9 639.7

Total assets 4,842.8 4,344.5 4,620.8

Non-current liabilities Borrowings 17 1,634.6 1,644.7 1,683.5 Obligations under finance leases 0.5 0.5 0.5 Pension scheme deficit 18 30.2 27.3 41.5 Deferred tax provision 18 488.6 441.1 448.4 Provisions for liabilities and charges 18 0.3 20.4 18.3 Other payables 14.8 9.1 15.8 Total non-current liabilities 2,169.0 2,143.1 2,208.0

Current liabilities Borrowings 17 331.1 8.0 39.2 Liabilities relating to non-current assets held-for-sale 55.0 –– Tax liabilities 9.4 20.2 47.4 Trade and other payables 148.0 134.5 141.7 Total current liabilities 543.5 162.7 228.3

Total liabilities 2,712.5 2,305.8 2,436.3

Net assets 2,130.3 2,038.7 2,184.5

Equity Called up ordinary share capital 105.7 138.7 138.8 Share premium account 250.3 337.0 339.1 Own shares held (6.9) (4.4) (5.2) Other reserves 1,283.2 1,172.1 1,127.2 Retained earnings 479.5 376.8 565.2 19 2,111.8 2,020.2 2,165.1 Minority interests 18.5 18.5 19.4 Total equity 2,130.3 2,038.7 2,184.5

Net assets per ordinary share: Basic 12 501p 451p 486p Diluted 12 472p 430p 461p Slough Estates plc | Interim Report 2005 31

Summarised Group cash flow statement For the half year to 30 June 2005

Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Note £m £m £m Cash inflow generated from operations 22 154.1 104.5 202.4 Interest received on deposits 6.2 2.5 7.4 Dividends received from joint ventures and associate 2.8 4.3 8.4 Dividends received from available-for-sale investments 0.7 2.7 3.1 Interest paid (including penalty on bond repayment) (99.9) (51.9) (115.0) Dividend paid to preference shareholders (5.6) (5.7) (11.3) Minority dividends paid (3.9) (0.5) (0.9) Tax paid (49.8) (5.9) (15.3) Funding pension scheme deficit (15.0) –– Net cash (outflow)/inflow from operating activities (10.4) 50.0 78.8

Cash flows from investing activities Purchase and development of investment properties (189.8) (21.5) (68.1) Sales of investment properties 14.2 2.7 237.1 Amount received from property swap – – 3.4 Legal costs paid in relation to property swap (0.6) – (2.2) Purchase of property plant and equipment (66.6) (27.5) (35.8) Sale of property plant and equipment 3.7 0.9 0.9 Purchase of available-for-sale investments (2.7) (4.6) (16.2) Proceeds from disposal of available-for-sale investment 4.7 11.6 20.5 Proceeds from reduction in holding of a subsidiary – –3.3 Investment and loans to associate and joint ventures (5.3) (1.2) (3.8) Investment in longer term deposits 180.6 – (184.5) Acquisition of minority interests – – (4.0) Contribution from minorities – 0.2 4.6 Net cash used in investing activities (61.8) (39.4) (44.8)

Cash flows from financing activities Dividend paid to ordinary shareholders (41.6) (38.4) (64.1) Net increase in borrowings 71.2 4.9 88.2 Proceeds from the issue of ordinary shares 0.7 0.8 3.0 Purchase of own shares (1.0) – (0.8) Net cash used in financing activities 29.3 (32.7) 26.3

Net (decrease)/increase in cash and cash equivalents (42.9) (22.1) 60.3 Cash and cash equivalents at the beginning of the period 218.1 158.6 158.6 Effect of foreign exchange rate changes (0.1) (1.4) (0.8) Cash and cash equivalents at the end of the period 175.1 135.1 218.1

Cash and cash equivalents per balance sheet 178.3 136.7 397.4 Less restricted deposits – – (176.0) 178.3 136.7 221.4 Bank overdrafts (3.2) (1.6) (3.3) Cash and cash equivalents per cash flow statement 175.1 135.1 218.1 32 Slough Estates plc | Interim Report 2005

Notes to the interim financial statements

1. General

Slough Estates plc (“the Group”) is a limited company incorporated in England. These financial statements are presented in millions and in sterling since that is the currency in which the majority of the Group’s transactions are denominated. The results for the year ended 31 December 2004 have been audited whilst the results for the six months ended 30 June 2004 and 30 June 2005 are unaudited. The Interim Report is unaudited and does not constitute statutory accounts within the meaning of s240 of the Companies Act 1985. The statutory accounts for 2004, which were prepared under UK Generally Accepted Accounting Principles (“GAAP”), have been delivered to the Registrar of Companies. The auditors’ opinion on these accounts was unqualified and did not contain a statement made under s237(2) or s237(3) of the Companies Act 1985. The income statement and balance sheet have been prepared, in accordance with applicable International Accounting Standards (“IAS”) and International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and on the basis that all such standards will be endorsed by the European Union (“the EU”). These standards are also collectively referred to as “IFRS”.

2. Transition to International Financial Reporting Standards (IFRS)

All listed companies in the EU are required to present their consolidated financial statements for accounting periods beginning on or after 1 January 2005 in accordance with IFRS as adopted by the EU. Therefore, the Group’s consolidated financial statements for the year ending 31 December 2005 will be presented on this basis with IFRS comparatives. These interim financial statements have been prepared on the basis of the IFRS accounting policies expected to be adopted in the year end consolidated financial statements. Reconciliations have been provided of certain key figures to UK GAAP, and these, together with an explanation of the resulting changes in accounting policies, are set out in note 24. The Group’s transition date for the adoption of IFRS is 1 January 2004 and its transition date for the implementation of IAS 32 and IAS 39 dealing with financial instruments is 1 January 2005. These transition dates have been selected in accordance with IFRS 1, “First-time adoption of International Financial Reporting Standards”. Although there is now a fairly stable platform, standards continue to evolve and those currently in issue and endorsed by the EU are subject to interpretation by the International Financial Reporting Interpretations Committee (“IFRIC”) and further standards may be issued and endorsed by the EU before 31 December 2005. These uncertainties could result in the need to change the basis of accounting or presentation of certain financial information from that applied in the preparation of this document. The Group is required to apply its IFRS accounting policies retrospectively to determine its opening IFRS balance sheet at the transition date of 1 January 2004 and the comparative information for the year ending 31 December 2005. Business combinations prior to 1 January 2004 have not been restated to comply with IFRS 3, “Business Combinations”. The Group has applied IFRS 2, “Share-based payment”, retrospectively only to awards made after 7 November 2002 that had not vested at 1 January 2005. The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements 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 may ultimately differ from those estimates.

3. Accounting policy changes

An explanation of the changes in accounting policies as a result of adopting IFRS, together with a full list of the revised accounting policies are shown in note 24. Slough Estates plc | Interim Report 2005 33

4. Segmental analysis Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Primary segments Investment property Turnover 159.3 139.5 271.7 Operating costs (22.4) (19.7) (39.2) Operating profit 136.9 119.8 232.5 (Loss)/gain on disposal of property assets (3.0) 0.1 64.7 Net valuation gains 137.6 84.0 166.7 Share of profit from joint ventures and associate after tax 5.3 20.9 24.9 Operating result 276.8 224.8 488.8

Trading property Turnover 50.6 6.3 35.6 Operating costs/cost of sales (26.5) (2.4) (28.8) Operating profit 24.1 3.9 6.8 Share of loss from joint ventures after tax (0.3) (0.1) (0.8) Operating result 23.8 3.8 6.0

Utilities and gas Turnover 22.6 15.8 35.4 Cost of sales (23.6) (20.7) (42.8) Operating result (1.0) (4.9) (7.4)

Operating result of segments 299.6 223.7 487.4 Other investment income 3.3 3.2 10.5 Administration expenses (7.7) (6.3) (14.7) Net finance costs (176.2) (47.0) (95.2) Taxation (45.6) (46.7) (92.2) Profit after tax 73.4 126.9 295.8

Geographical segments Turnover United Kingdom 106.2 106.3 211.7 Australia – Gas 3.5 1.5 4.7 Canada – 1.2 2.3 USA 89.1 39.2 73.1 Europe 33.7 13.4 50.9 232.5 161.6 342.7

Operating result of segments United Kingdom 193.4 150.6 301.4 Australia – Gas (1.8) (1.9) (3.3) Canada – 4.2 5.0 USA 87.1 54.1 150.4 Europe 20.9 16.7 33.9 299.6 223.7 487.4 34 Slough Estates plc | Interim Report 2005

Notes to the interim financial statements continued

4. Segmental analysis (continued)

Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Property investment turnover comprises Rents United Kingdom 83.9 89.7 174.1 Canada – 0.9 1.7 USA 58.9 32.0 61.5 Europe 10.6 10.4 21.0 153.4 133.0 258.3

Tenant recharges and other United Kingdom 2.2 2.3 4.4 Canada – 0.3 0.7 USA 3.4 3.7 7.8 Europe 0.3 0.2 0.5 5.9 6.5 13.4

Total property investment revenue United Kingdom 86.1 92.0 178.5 Canada – 1.2 2.4 USA 62.3 35.7 69.3 Europe 10.9 10.6 21.5 159.3 139.5 271.7

Rents include a significant surrender premium of £36.6 million (half year 2004 £7.5 million: year 2004 £7.5 million).

5. Revenue

Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Rental income from investment properties 153.0 132.6 257.4 Interest received on finance lease assets 0.4 0.4 0.9 Service charge income 5.6 6.1 12.6 Miscellaneous property income 0.3 0.4 0.8 Total property investment revenue 159.3 139.5 271.7 Proceeds on sale of trading properties 49.0 4.3 31.4 Trading property rental income 1.6 2.0 4.2 Sale of electricity, water and steam 19.1 14.3 30.7 Sale of oil and gas 3.5 1.5 4.7 Total revenue 232.5 161.6 342.7

6. Net valuation gains

The total valuation gains and losses for the period are shown in the financial statements as follows:

Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Income statement 137.6 84.0 166.7 Statement of recognised income and expense 7.5 3.2 24.1 Total valuation gains of Group companies 145.1 87.2 190.8

The valuation gains and losses of joint ventures and associate are included within their results shown on the face of the income statement and are excluded from the above figures. Slough Estates plc | Interim Report 2005 35

7. Finance costs

Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Interest on bank loans and overdrafts 11.6 9.7 20.5 Interest on other loans 46.6 46.9 95.9 Interest on convertible redeemable preference shares 6.6 –– Unwinding of discount on the pensions liability less return on assets 0.7 0.4 0.9 Unwinding of discount on provisions 0.2 0.2 0.5 Total borrowing costs 65.7 57.2 117.8 Less amount charged to: the development of trading properties (0.4) (0.7) (0.8) Less amount charged to: the development of investment properties (8.5) (6.1) (14.0) Less amount charged to: the development of other assets (0.5) (0.8) (1.2) Net borrowing cost 56.3 49.6 101.8 Fair value losses on interest rate swaps and other derivatives 2.0 –– Exchange differences – –0.1 Total finance costs 58.3 49.6 101.9

Exceptional loss on exchange of bonds (see explanation below) 125.6 ––

On 10 May 2005 the Group announced a debt exchange programme whereby holders of the following bonds were offered the chance to exchange the bonds at market value plus an incentive into new longer dated current coupon bonds: £50 million 10 per cent Euro Bond 2007 £31.8 million 12.375 per cent Unsecured Loan Stock 2009 £100 million 11.625 per cent Euro Bond 2012 £100 million 10 per cent Euro Bond 2017 £40 million 11.25 per cent 1st Mortgage Debenture 2019

The three shorter dated bonds were exchanged into a new unsecured issue bearing a coupon of 5.5 per cent with a maturity date of 2018. The two longer dated bonds were exchanged into a new unsecured issue bearing a coupon of 5.75 per cent with a maturity date of 2035. Those investors unable to hold the new bonds because of duration mismatches or because of the unsecured nature of the new bonds were offered a cash-out alternative whereby the company bought back the new bonds for redemption.

The proposals were voted on at bondholders’ EGMs on 8 June 2005 and as over 75 per cent of all holders of each issue voted in favour of the proposals, they were adopted in full and the old bonds were effectively redeemed on 21 June 2005 and were replaced with the following new debt: £200 million 5.5 per cent Euro Bond 2018 £100 million 5.75 per cent Euro Bond 2035 £146 million of new bank line drawings at circa 5 per cent

The cost of the exchange reflecting the mark-to-market fair value of the old bonds plus the £4.9 million incentive fee results in a once-off tax deductible finance charge of £125.6 million to the half year income statement. However, future cash interest charges should be reduced by circa £11.0 million per annum.

8. Finance Income

Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Interest received on bank deposits 6.4 2.5 6.7 Fair value gains on interest rate swaps and other derivatives 0.7 –– Exchange differences 0.6 0.1 – 7.7 2.6 6.7 36 Slough Estates plc | Interim Report 2005

Notes to the interim financial statements continued

9. Share of profit from joint ventures and associate after tax

Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Group share of: Operating profit before finance and valuation gains 4.3 7.6 15.4 Finance cost (1.3) (1.3) (2.7) Valuation gains 2.4 17.7 15.4 Profit before tax 5.4 24.0 28.1 Current taxation (0.5) (0.4) (1.1) Deferred taxation 0.1 (2.8) (2.9) Profit after tax 5.0 20.8 24.1

10. Taxation

Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Current tax Corporation tax charge at 30 per cent (2004 30 per cent) 13.5 11.0 15.0 Tax in respect of property disposals – – 34.4 13.5 11.0 49.4

Deferred tax Origination and reversal of timing differences 10.9 10.7 30.1 Released in respect of property disposals in the period (0.9) – (51.6) On valuation surplus 38.8 21.8 58.2 Total deferred tax in respect of investment properties 48.8 32.5 36.7 Released in respect of Quail West 12.7 –– Other deferred tax (29.4) 3.2 6.1 Total deferred tax 32.1 35.7 42.8

Total tax on profit on ordinary activities 45.6 46.7 92.2

A contingent tax asset of £93.9 million relating to unused indexation allowances has not been recognised in the financial statements due to the restrictions in IFRS (see note 24(a)).

11. Dividends

Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Ordinary dividends paid Final dividend for the year ended 31 December 2004 @ 9.85 pence per share 41.6 –– Final dividend for the year ended 31 December 2003 @ 9.2 pence per share – 38.4 38.4 Interim dividend for the year ended 31 December 2004 @ 6.15 pence per share – – 25.7 41.6 38.4 64.1

The board have proposed an interim dividend of 6.5 pence per share (2004: 6.15 pence). As required by IFRS this dividend is not recognised in the financial statements until paid.

The preference dividend paid during the period of £5.6 million is included in 2005 within finance costs. Slough Estates plc | Interim Report 2005 37

12. Earnings and net assets per ordinary share

Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 Earnings per ordinary share The weighted average number of shares used for the calculation of the earnings per share is as follows: Weighted average number of shares in issue Shares m 420.7 418.2 418.6 Less weighted average number of shares held by ESOP Shares m (1.7) (1.4) (1.4) Basic weighted average number of shares a Shares m 419.0 416.8 417.2 Dilution adjustments: Preference shares Shares m 47.1 50.4 50.4 Share options and save-as-you-earn schemes Shares m 1.5 1.3 1.3 Diluted weighted average number of shares b Shares m 467.6 468.5 468.9

Earnings used for the calculation of earnings per share is as follows: Attributable profit c £m 71.6 122.0 285.8 Dividends on preference shares £m 6.6 5.6 11.2 d£m78.2 127.6 297.0 Deferred tax relating to investment properties £m 10.9 12.2 30.1 Revaluation surpluses including joint ventures and associate net of deferred tax and minority £m (101.7) (76.8) (146.3) Add back exceptional losses on repayment of bonds net of tax £m 88.0 –– Profits and losses on sale of investment properties net of tax and minorities £m 2.1 (0.1) (54.6) Add back profit on the sale of Quail West net of tax £m (9.5) –– Adjusted diluted earnings e £m 68.0 62.9 126.2

Adjusted basic earnings f £m 61.4 57.3 115.0

Earnings per ordinary share Basic c/a pence 17.1 29.3 68.5 Basic adjusted f/a pence 14.7 13.7 27.6 Diluted d/b pence 16.7 27.2 63.4 Diluted adjusted e/b pence 14.5 13.4 26.9

Net assets per ordinary share The number of ordinary shares used for the calculation of net assets per share is as follows: Number of shares in issue Shares m 422.9 418.7 419.3 Less number of shares held by ESOP Shares m (1.7) (1.2) (1.4) Basic number of shares h Shares m 421.2 417.5 417.9 Dilution adjustments: Preference shares Shares m 47.1 50.4 50.4 Share options and save-as-you-earn schemes Shares m 1.5 1.4 1.3

Diluted number of shares l Shares m 469.8 469.3 469.6

Equity used for the calculation of net assets per ordinary share is as follows: Total equity attributable to ordinary shareholders £m 2,118.7 1,888.6 2,034.3 Less shares held by ESOP £m (6.9) (4.4) (5.2) Restated equity j£m2,111.8 1,884.2 2,029.1 Adjustment to exclude deferred tax on investment properties and latent CGT on revaluation surpluses £m 513.2 460.2 457.3 Adjusted equity attributable to ordinary shareholders k £m 2,625.0 2,344.4 2,486.4 Dilution adjustment for preference shares £m 106.4 136.0 136.0 Adjusted diluted equity attributable to ordinary shareholders m £m 2,731.4 2,480.4 2,622.4

Diluted equity attributable to ordinary shareholders n £m 2,218.2 2,020.2 2,165.1

Net assets per ordinary share Basic j/h pence 501 451 486 Basic adjusted for deferred tax on investment property k/h pence 623 562 595 Diluted n/l pence 472 430 461 Diluted adjusted for deferred tax on investment property m/l pence 581 529 558 38 Slough Estates plc | Interim Report 2005

Notes to the interim financial statements continued

12. Earnings and net assets per ordinary share (continued)

The Group has also presented an adjusted basic earnings per share figure to exclude the impact of profits and losses on the sale of investment properties (net of taxation and minority interests), profit from the sale of Quail West, loss on the refinancing of bonds, revaluation surpluses on investment properties and deferred tax that would arise on the sale of investment properties. Adjusted profit before tax for the six months to 30 June 2004 and the year to 31 December 2004 have also been reduced for comparative purposes, by a notional finance charge in respect of the preference shares. This is the approximate charge that would have applied for the periods had the group elected to apply IAS 32 and 39 with effect from 1 January 2004. The directors consider that this adjusted figure gives a more meaningful comparison for the periods shown in the consolidated financial statements. Deferred tax has been excluded from the adjusted calculation as the Group has no plans to sell a significant proportion of its investment properties, and in any case, it is generally very unusual for UK capital allowances to be recaptured on the disposal of a property. Profits and losses on the sale of investment properties and the loss on the bond repayment are excluded from adjusted earnings as these are non-recurring items. Net assets per share are calculated on the equity shareholders’ funds of £2,111.8 million (2004 half year £1,884.2 million: year 2004 £2,029.1 million). Adjusted net assets per share have been calculated on the same number of shares but shareholders’ funds exclude the deferred tax liability of £513.2 million (2004 half year £460.2 million: year 2004 £457.3 million) as it is the opinion of the directors that deferred tax on capital allowances and valuation surpluses in relation to investment properties is unlikely to crystallise materially in practice.

13. Goodwill

The goodwill arising in the period relates to the acquisition of Mainland BV, a company incorporated in the Netherlands. The main activity of this company is the development and sale of trading properties.

14. Investment properties

Investment properties consist of completed land and buildings and properties in the course of redevelopment. They exclude properties occupied by Group companies and land held for development and developments in the course of construction. These are classified as property, plant and equipment in accordance with IAS 16 and are shown in note 15.

UK North America Europe Total £m £m £m £m At 1 January 2005 2,776.8 411.1 264.8 3,452.7 Exchange movement – 37.8 (12.5) 25.3 Additions 27.6 171.7 (1.7) 197.6 Disposals (13.5) (3.7) – (17.2) Transfer from property, plant and equipment 11.5 3.0 – 14.5 Surplus on valuation 127.3 11.0 5.6 143.9 At 30 June 2005 2,929.7 630.9 256.2 3,816.8

At 30 June 2004 2,525.5 595.0 250.0 3,370.5

The Group’s properties were externally valued as at 30 June 2005 by CB Richard Ellis, DTZ Debenham Tie Leung or Colliers Conrad Ritblat Erdman in the United Kingdom, in the USA by Walden-Marling, Inc., in Belgium by De Crombrugghe & Partners s.a. and in France by CB Richard Ellis Bourdais. The valuation basis is fair value, conforms to international valuation standards and was arrived at by reference to market evidence of the transaction prices for similar properties. All the valuers listed above are qualified valuers who hold a recognised and relevant professional qualification and have recent experience in the relevant location and category of the properties being valued.

CB Richard Ellis and DTZ Debenham Tie Leung also undertake some professional and letting work on behalf of the Group, although this activity is limited in relation to the activities of the Group as a whole. Both companies advise us that the total fees paid by the Group represent less than 5 per cent of their total revenue in any year and have adopted policies for the regular rotation of the responsible valuer.

The external valuation is included on the balance sheet under the following headings: 30 June 30 June 31 December 2005 2004 2004 £m £m £m Investment property 3,816.8 3,370.5 3,452.7 Property included in property, plant and equipment 337.4 244.2 276.7 Total assets externally valued 4,154.2 3,614.7 3,729.4 Slough Estates plc | Interim Report 2005 39

15. Property, plant and equipment

Properties Property Gas & Other plant in the course held for utilities fixtures of development own use plant and fittings Total £m £m £m £m £m Cost or valuation At 1 January 2005 259.2 17.7 121.1 10.8 408.8 Exchange 8.0 – 2.0 – 10.0 Additions 70.2 – 7.6 0.9 78.7 Disposals (3.9) – – (0.2) (4.1) Transfer to investment property (14.5) – – – (14.5) Revaluation surplus during period 0.7 0.5 – – 1.2 Transfer to assets-for-sale – – (83.6) – (83.6) At 30 June 2005 319.7 18.2 47.1 11.5 396.5

Depreciation and impairment At 1 January 2005 – 0.2 6.3 7.5 14.0 Exchange – – 0.1 – 0.1 Additions – 0.3 2.1 0.5 2.9 Disposals – – – (0.1) (0.1) Transfer to assets-for-sale – – (2.0) – (2.0) At 30 June 2005 – 0.5 6.5 7.9 14.9

Net book value at 30 June 2005 319.7 17.7 40.6 3.6 381.6

Net book value at 31 December 2004 259.2 17.5 114.8 3.3 394.8 Net book value at 30 June 2004 226.7 17.5 106.3 3.3 353.8

16. Investments in joint ventures and associate

30 June 30 June 31 December 2005 2004 2004 £m £m £m Joint ventures At 1 January 80.2 199.4 199.4 Exchange movement 1.4 (0.7) (1.5) Additions 6.1 1.7 7.3 Disposal – – (140.4) Dividends received (2.5) (4.2) (8.2) Share of profits after tax 4.6 20.6 23.6 At 30 June 89.8 216.8 80.2

Associate At 1 January 3.9 3.9 3.9 Exchange movement 0.3 – (0.3) Dividends received (0.3) (0.1) (0.2) Share of profits after tax 0.4 0.2 0.5 At 30 June 4.3 4.0 3.9

Total investments in joint ventures and associate 94.1 220.8 84.1 40 Slough Estates plc | Interim Report 2005

Notes to the interim financial statements continued

17. Borrowings

30 June 30 June 31 December 2005 2004 2004 £m £m £m Maturity profile of group debt In one year or less 331.1 8.0 39.2 In more than one year but less than two 35.7 28.2 7.3 In more than two years but less than five 271.9 381.0 473.7 In more than five years but less than ten 438.1 488.9 466.6 In more than ten years 888.9 746.6 735.9 Total Group debt 1,965.7 1,652.7 1,722.7

Split between secured and unsecured borrowings Secured (on land and buildings) 92.0 183.0 175.5 Unsecured 1,873.7 1,469.7 1,547.2 1,965.7 1,652.7 1,722.7

Maturity profile of undrawn borrowing facilities In one year or less 54.5 41.2 47.3 In more than one year but less than two 20.4 11.5 – In more than two years 334.6 348.4 275.9 Total available undrawn facilities 409.5 401.1 323.2

Fair value of borrowings Book value 1,965.7 1,652.7 1,722.7 Net fair value 2,111.7 1,810.0 1,949.2 Pre-tax mark-to-market adjustment 146.0 157.3 226.5 Tax relief due on early redemption/termination (43.8) (47.2) (68.0) After tax mark-to-market adjustment 102.2 110.1 158.5

The borrowings as at 30 June 2005 include preference shares reclassified out of equity amounting to £106.4 million.

18. Provisions for liabilities and charges, pension deficit and deferred tax

Pension Deferred deficit tax Quail West Other liabilities Total £m £m £m £m £m

Balance at 1 January 2005 41.5 448.4 18.0 0.3 508.2 Exchange movement – 2.4 0.5 – 2.9 Charge/(credit) to income statement 1.7 32.1 (18.7) – 15.1 Charge to SORIE 3.0 5.7 – – 8.7 Unwinding of the discounted balance brought forward 0.7 – 0.2 – 0.9 Paid (16.7) – – – (16.7) Balance at 30 June 2005 30.2 488.6 – 0.3 519.1

Balance at 30 June 2004 27.3 441.1 19.8 0.6 488.8

The other liabilities relate principally to provisions for onerous leases on rented properties and represent the estimated liability of future costs for lease rentals and dilapidation costs less the expected receipts from sub-letting these properties which are surplus to business requirements.

30 June 30 June 31 December 2005 2004 2004 Deferred taxation in respect of: £m £m £m Investment properties 513.2 460.2 457.3 Quail West provision – (13.9) (13.1) Pension scheme deficit (10.0) (8.2) (11.9) Other reserves (14.6) 3.0 16.1 488.6 441.1 448.4 Slough Estates plc | Interim Report 2005 41

19. Statement of movement in equity

Balance Retained Preference Balance 1 January Restate for profit for Shares Dividend Reserve share 30 June 2005 IAS 39 Exchange period SORIE issued Other paid transfers conversions 2005 £m £m £m £m £m £m £m £m £m £m £m Revaluation reserve net of deferred tax 1,090.8 – 1.7 – 4.2–––100.6 – 1,197.3 Equity reserve – 41.2–––––––(1.8) 39.4 Share based payments reserve 0.3–––––0.1–––0.4 Fair value reserve – 4.1 0.3–––––(1.3) – 3.1 Unrealised surplus reserve 47.4–––––––––47.4 Translation reserve net of deferred tax (11.3) 2.0 0.2 – 3.9–––0.8–(4.4) Total other reserves 1,127.2 47.3 2.2 – 8.1 – 0.1 – 100.1 (1.8) 1,283.2

Revenue reserve 565.2 (18.7) 8.5 71.6 (5.4) – – (41.6) (100.1) – 479.5 Ordinary share capital 104.8––––0.1–––0.8105.7 Preference shares 34.0 (34.0) ––––––––– Share premium 339.1 (98.2) – – – 1.3–––8.1250.3 Own shares held (5.2) –––––(1.7) – – – (6.9) Total equity attributable to equity shareholders 2,165.1 (103.6) 10.7 71.6 2.7 1.4 (1.6) (41.6) – 7.1 2,111.8 Minority interests 19.4 – 0.8 1.8 – – 0.6 (4.1) – – 18.5 Total equity 2,184.5 (103.6) 11.5 73.4 2.7 1.4 (1.0) (45.7) – 7.1 2,130.3

SORIE is the term used for the Statement of Recognised Income and Expense.

20. Post balance sheet events

Subsequent to 30 June 2005, the Group disposed of its 54 per cent shareholding in Tipperary Corporation and its 10 per cent holding in Tipperary Oil and Gas Pty Ltd. The Group received gross consideration of approximately £124 million which will give rise to an exceptional profit of circa £98 million in the second half of the year.

The Group entered into an option agreement with WB Woodside II, L.P. and WB Heywood L.P., two limited partnerships managed by a subsidiary of Moorfield Group Limited, to acquire a controlling interest in a Unit Trust owning two industrial estates for a consideration of £276 million in cash. These estates are situated in Dunstable and Manchester. The option was exercised on 18 July 2005 and the purchase was completed on 26 July 2005.

21. Capital commitments 30 June 31 December 2005 2004 £m £m Property – United Kingdom 55.1 36.6 – Overseas 153.3 147.5 Utilities 0.5 0.6 Other 0.2 17.3 Total capital commitments 209.1 202.0 42 Slough Estates plc | Interim Report 2005

Notes to the interim financial statements continued

22. Reconciliation of cash generated from operations Half year to Half year to Year to 30 June 30 June 31 December 2005 2004 2004 £m £m £m Net operating income 290.2 199.8 459.1

Adjustments for: Depreciation of property, plant and equipment 2.9 1.8 4.5 Loss/(profit) on sale of properties 3.0 (0.1) (64.7) Revaluation surplus on investment properties (137.6) (84.0) (166.7) Other provisions (18.7) (0.9) (1.7) Other income re-allocated (3.3) (3.9) (11.0)

Changes in working capital: Decrease/(increase) in trading properties 26.4 (7.2) 6.9 Decrease/(increase) in inventories 0.1 (0.1) (0.3) Increase in debtors (10.5) (1.8) (33.6) Increase in creditors 1.6 0.9 9.9 Net cash generated from operations 154.1 104.5 202.4

23. Acquisitions

On 28 June 2005 Anglo French Industrial Developments Limited, a Group company, incorporated a subsidiary, Slough BV, with issued share capital of 30,000 ordinary shares of 1100.00 each. This company acquired 60 per cent of the voting equity in Mainland BV, a Kuiper Group company, on 28 June 2005 for £1.7 million cash. Mainland BV specialises in the development of offices and industrial accommodation in the Randstad region of the Netherlands. Based in Hoofdorp, close to Schiphol airport, Mainland BV has an established and experienced management team as well as a development pipeline comprising six sites located around Schiphol and elsewhere in the Randstad which will enable the development of 130,000 sq.m. of office and industrial accommodation. The acquisition has been accounted for using the purchase method of accounting. Details of the book value and the fair value of the assets and liabilities at the date of acquisition, after making the necessary adjustments, are summarised as follows: Fair value Book value adjustment* Fair value £m £m £m Non-current assets – Plant and office equipment 0.1 – 0.1 Non-current assets – Investment property 6.5 3.3 9.8 Receivables 1.2 – 1.2 Non-current liabilities falling due after more than one year – borrowings (4.0) – (4.0) Non-current liabilities falling due after more than one year – other (0.8) – (0.8) Current liabilities falling due within one year – borrowings (0.8) – (0.8) Current liabilities falling due within one year – other (0.5) (3.3) (3.8) Net assets of Mainland BV at date of acquisition 1.7 – 1.7 Minority interests (0.6) – (0.6) Group share of net assets 1.1 – 1.1 Goodwill 0.6

Total consideration 1.7

* Fair value of contractual liability to purchase investment property

The Group believes the premium paid over its share of the net assets of Mainland BV represents the additional value of a strong local management team; a fully established office in the Netherlands; a good network of contacts in the Netherlands including local and regional authorities, agents, possible tenants, and suppliers; and a well-known brand in the Dutch real estate market with a proven history of successfully completing new developments. Neither the Group nor Mainland BV decided to dispose of any operations as a result of the business combination. The summary results of Mainland BV from the beginning of its financial year to the date of acquisition are as follows: 1 January 2005 Year to to 28 June 2005 31 December 2004 £m £m Turnover – 2.2 Operating loss (0.3) (0.3) Taxation 0.1 0.1 Loss after tax attributable to shareholders (0.2) (0.2)

There were no recognised gains or losses in the period other than the loss attributable to shareholders. Mainland BV had no turnover and incurred no costs during the period between the date of acquisition and 30 June 2005. Slough Estates plc | Interim Report 2005 43

24. Transition to International Financial Reporting Standards

24(a). Significant differences between UK GAAP and IFRS as at 31 December 2004 are summarised as follows:-

IAS 40 – Investment property Under IAS 40, an investment property is recognised in the accounts at fair value, with revaluation gains being taken directly to the Group income statement rather than the revaluation reserve. Accumulated revaluation surpluses relating to investment properties as at the transition date have been reallocated to retained earnings. This treatment does not, however, have any impact on the distributable profits. As at 31 December 2004 valuation gains relating to development properties amounting to £36.3 million are held within revaluation reserves under IAS 16 until the developments are completed, at which point the surplus will be transferred to retained earnings.

IAS 12 – Income taxes Under IAS 12, deferred tax is recognised on ‘temporary differences’ rather than timing differences, which has been the basis in the UK under SSAP 15. Timing differences, which focus on profit and loss movements, are the difference between the taxable amount and the pre-tax accounting profit that originate in one reporting period and reverse in one or more subsequent periods. Temporary differences, which focus on balance sheet movements, are the differences between the carrying amount of an asset or liability in the balance sheet and its tax base.

In many cases, the deferred tax provision is the same under IAS 12 as under FRS 19. However, under FRS 19, deferred tax is not provided on the revaluation surplus when a fixed asset is revalued without there being any commitment or intention to sell the asset. IAS 12 requires deferred tax to be provided in these circumstances. Where the revaluation has been reflected directly in reserves, the deferred tax is also charged directly to reserves, with no impact on earnings.

The tax provision has been mitigated by recognising indexation allowances on the land element of the investment properties. As the Group has no intention to sell its investment properties, it cannot recognise the indexation relating to the building element. The amount remains as a contingent asset and is disclosed in note 10 of these financial statements.

IAS 19 – Employee benefits This standard continues the measurement requirements of FRS 17 for defined benefit pension schemes. In the Group’s 2004 financial statements these measurement bases were disclosures whilst the accounts were drawn up under SSAP 24. The net effect for the year ended 31 December 2004 is to reduce profit before tax by £0.7 million. In addition, the prepayment recognised under UK GAAP in respect of additional contributions (£0.5 million at 31 December 2004) is not recognised under IAS 19, while the net actuarial deficit of £41.5 million is recognised in full. Service costs, the expected return on pension scheme assets and interest on pension scheme liabilities are charged in arriving at profit before tax, while experience gains and losses flow through the Statement of Recognised Income and Expense, broadly equivalent to UK GAAP’s Statement of Recognised Gains and Losses.

The Group has decided to take advantage of the exemption in IAS 19 in relation to defined benefit schemes not to adopt the corridor approach and has recognised in full the pension scheme deficit on the balance sheet. The Group is expecting that the revised IAS 19 which permits this policy will receive EU endorsement.

IAS 31 – Interests in joint ventures and associates Under UK GAAP, the Group was required to recognise its share of the joint ventures’ and associate’s profit before interest and its share of interest and tax with the Group figures on the face of the profit and loss account. The Group’s aggregate share of the gross assets and gross liabilities of the joint ventures and associate were shown separately on the balance sheet.

IAS 31 allows companies to make a one-time choice as to whether joint ventures will be accounted under the equity method or proportionally consolidated. The Group has opted to use the equity method and report its joint ventures’ and associate’s profit after tax as a single line in the income statement and its share of the net assets as a single line in the balance sheet. Additional disclosures will be made of the underlying income, expenditure, assets and liabilities for the joint ventures, together with supplemental notes.

IAS 17 – Leases IAS 17 requires a lease to be classified as either a finance lease or an operating lease. A finance lease exists if substantially all the risks and rewards are transferred to the tenant. The classification test is done separately for the land and buildings elements of a lease whereas under UK GAAP the test is done on the lease itself. The group has tested all of its leases and has established that the majority are operating leases. Some twelve finance leases have been identified and these are accounted for as such.

The accounting treatment of a finance lease under IFRS is to assume that the building has been effectively sold to the tenant. A receivable is recognised in the balance sheet at the inception of the lease at an amount equal to the net present value of the minimum lease payments. The impact on the balance sheet at 31 December 2004 is to reduce investment properties by £21.7 million, increase receivables by £11.0 million and reduce retained earnings by £10.7 million.

Under IFRS the rental income for the whole property is split into three elements: Rental income on the land; Interest income on the debtor balance due from the tenant; and Repayment of the debtor.

The impact on the previously reported 2004 UK GAAP net rental income is minimal. 44 Slough Estates plc | Interim Report 2005

Notes to the interim financial statements continued

24(a). Transition to International Financial Reporting Standards (continued)

Since the carrying value of the finance lease is not reassessed at each reporting date, the open market value of the building may differ significantly from the value of the finance lease receivable at that date.

Where an investment property is itself subject to a head or groundlease, that headlease is treated as if it were a finance lease. In total four properties are affected, leading to the recognition of a finance lease liability of £0.5 million at 31 December 2004 and an increase in the carrying value of the Group’s properties by £0.5 million.

IAS 10 – Events after the balance sheet date IAS 10 requires that a liability should not be recognised in respect of a dividend until the paying company has an obligation to make the payment. This would normally be when it was declared or approved at the annual general meeting in the case of the final dividend for the year. As a result the 2004 proposed final dividend of £41.3 million is excluded from the IFRS balance sheet and written back to retained earnings.

IFRS also requires that dividends and distributions are presented in a different way to current UK GAAP. Under IFRS, dividends are not considered to be an expense of the paying company so they are not included in the income statement. Instead, dividends are treated as a reserve item and are, therefore, presented in the Statement of changes in equity alongside other transactions with shareholders.

IAS 32 and 39 – Financial instruments The Group has chosen to take the exemption permitted under IFRS from applying IAS 32 and 39 in the year ended 31 December 2004. However, there are a number of effects on the Group’s financial statements which will apply from 1 January 2005. a) Preference shares Under UK GAAP the Group’s cumulative redeemable convertible preference shares were shown within share capital on the Group’s balance sheet. Under IFRS the shares are considered to be a form of debt with an embedded derivative (known as an equity instrument) in respect of the option for shareholders to convert.

The Group has therefore split the value of the shares between a financial liability (which is shown within liabilities) and an equity instrument (which is shown within equity). Interest costs increase as a charge will arise in relation to the financial liability shown within liabilities. The effect of this accounting is to reduce the Group’s net assets, reduce profits and increase liabilities.

There is no effect on the 2004 amounts as we have decided to apply IAS 32 and 39 with effect from 1 January 2005 as allowed by the standards. However, the finance charges increase by £13.8 million in 2005, as a result of this change in accounting policy. b) Interest rate hedges and other derivatives Under IFRS and as from 1 January 2005 the Group is required to recognise the fair value of its derivatives including interest rate hedges and currency swaps on the balance sheet and movements in those values within the income statement. Previously these were disclosed but not recognised in the Group’s accounts. The group’s interest rate hedges and currency swaps do not meet the strict criteria set out in the standard for hedge accounting. Although the Group is satisfied that, economically, all of its interest rate hedges do indeed offset interest rate exposures, the practical difficulty in forecasting accurately the amount and timing of cash receipts and payments associated with investment portfolio transactions means that the IAS 39 tests on hedge effectiveness may not be met. In addition, in many cases, the length of the hedge could exceed the remaining term of the Group’s committed bank facilities. As a result, shareholders’ funds have been reduced by £2.9 million at 1 January 2005. c) Available-for-sale investments Under UK GAAP, the Group accounted for its available-for-sale investments at the lower of cost and market value and these were shown in current assets on the balance sheet. Profits and losses arising from their disposal were taken to income.

Under IAS 39, these investments are carried at fair value and classified in the balance sheet as available-for-sale investments under non-current assets. Movements in fair value are taken directly to equity and recycled through the income statement when the investments are realised.

SIC-15 – Operating leases – incentives The cost of rent free periods and other incentives given to tenants under operating leases are spread over the term of the lease rather than, as under UK GAAP, to the first review to market rents. Further, there are no transitional provisions so that incentives granted before IFRS came into effect have now been brought back into account. This will change the timing but not the aggregate amount recognised in relation to lease incentives.

IFRS 3 – Business combinations Goodwill arising on acquisitions is not amortised under IFRS, but is subject to impairment review at each reporting date. The group’s property acquisition arising from the exchange of properties with Land Securities Group plc has been treated as an acquisition of assets rather than a business combination. Adjustments have therefore been made in 2004 to remove the negative goodwill of £4.7 million and deferred tax of £4.1 million created under UK GAAP. Slough Estates plc | Interim Report 2005 45

24(a). Transition to International Financial Reporting Standards (continued)

IFRS 2 – Share-based payment IFRS 2 requires the cost of granting share options and other share-based remuneration to employees and directors to be recognised through the income statement. The group has used the Black-Scholes option valuation model and the resulting fair value is being charged through the income statement over the vesting period of the options. Fair value takes account of the likelihood of the options becoming ‘in the money’ in the future. This results in a credit to the income statement in the year of £0.4 million, which is net of provisions previously made by the Group in respect of the cost of certain of the share-based compensation arrangements. Only share based transactions after 7 November 2002 that had not vested by 1 January 2005 have been restated, as permitted by the Standard.

24(b). Summary of significant accounting policies under IFRS

Basis of consolidation Prior to the introduction of IFRS, the Group had prepared its financial statements under United Kingdom accounting standards. As a result of adopting IFRS it has been necessary to change many of the Group’s accounting policies and these are shown below.

The consolidated financial statements of the Group include the financial statements of Slough Estates plc (“the Company”) and its subsidiaries (collectively referred to as “the Group”) and the Group’s share of profits and losses and net assets of joint ventures and associate made up to 30 June 2005.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the Group.

Intra-group balances and any unrealised gains and losses arising from intra-group transactions are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with joint ventures are eliminated to the extent of the Group’s interest in the joint venture concerned. Unrealised losses are eliminated in the same way, but only to the extent that there is no evidence of impairment.

Investments in associates An associate is an entity over which the Group is in a position to exercise significant influence, but not control, through participation in the financial and operating policy decisions of the investee.

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. Investments in associates are carried in the balance sheet at cost, adjusted by post-acquisition changes in the Group’s share of the net assets of the associates, less any impairment in the value of individual investments of the associates.

Where a group entity transacts with an associate of the Group, unrealised profits and losses are eliminated to the extent of the Group’s interest in the relevant associate, except to the extent that unrealised losses provide evidence of an impairment of the asset transferred.

Interests in joint ventures A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control.

Where a group company undertakes its activities under joint venture arrangements directly, the Group’s share of jointly controlled assets and any liabilities incurred jointly with other venturers are recognised in the financial statements of the Group and classified according to their nature. Liabilities and expenses incurred directly in respect of interests in jointly controlled assets are accounted for on an accrual basis.

Joint venture arrangements which involve the establishment of a separate entity in which each venturer has an interest are referred to as jointly controlled entities. The group reports its interests in jointly controlled entities using the equity method of accounting. Investments in joint ventures are carried in the balance sheet at cost as adjusted by post-acquisition changes in the Group’s share of the net assets of the joint ventures, less any impairment in the value of individual investments of the joint ventures.

Where the Group transacts with its jointly controlled entities, unrealised profits and losses are eliminated to the extent of the Group’s interest in the relevant joint venture, except to the extent that unrealised losses provide evidence of an impairment of the asset transferred.

On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

Goodwill On acquisition, the assets and liabilities of a subsidiary, joint venture or associate that are accounted for as business combinations are measured at their fair value at the date of acquisition. Any excess (deficiency) of the joint venture’s or associate’s cost of acquisition over (below) the fair value of the identifiable net assets acquired is recognised as goodwill (negative goodwill). Goodwill is carried in the balance sheet at cost less any accumulated impairment. Negative goodwill is immediately recognised in the income statement. 46 Slough Estates plc | Interim Report 2005

Notes to the interim financial statements continued

24(b). Summary of significant accounting policies under IFRS (continued)

Derivative financial instruments (derivatives) The group uses derivatives, particularly interest rate swaps, to help manage its interest rate risk. The group does not hold or issue derivatives for trading purposes.

Derivatives are recognised initially at cost. Subsequent to initial recognition, derivatives are stated at fair value. The gain or loss on re-measurement to fair value is recognised immediately in the income statement unless the derivatives qualify for hedge accounting, in which case recognition depends on the nature of the item being hedged. Currently none of the Group’s derivatives qualify for hedge accounting.

Foreign currencies Transactions in currencies other than sterling are initially recorded at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities denominated in such currencies are retranslated at the rates prevailing on the balance sheet date. Profits and losses arising on retranslation are included in the income statement, except where foreign currency denominated loans are designated as a hedge of the Group’s investment in its overseas subsidiaries. In this case the exchange difference is taken to equity until the realisation of the overseas investment and then it is transferred to the income statement as part of the profit or loss on realisation.

On consolidation, the assets and liabilities of the Group’s overseas operations are translated into sterling at exchange rates prevailing on the balance sheet date. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised as income or expenses in the period in which the operation is disposed of. Income and expense items are translated at the average exchange rates for the period.

Investment property Investment properties are those properties that are held either to earn rental income or for capital appreciation or both. Investment properties may be freehold properties or leasehold properties. For leasehold properties that are classified as investment properties the associated leasehold obligations are accounted for as finance lease obligations.

Valuation surpluses and deficits arising in the period are included in the income statement.

Existing investment properties undergoing redevelopment for the purpose of earning future rental income continue to be accounted for as investment properties.

Investment properties are measured initially at cost, including related transaction costs. After initial recognition at cost, investment properties are carried at their fair values based on a professional valuation made as of each reporting date. Properties are treated as acquired at the point when the Group assumes the significant risks and returns of ownership and as disposed when these are transferred to the buyer. Additions to investment properties consist of costs of a capital nature and, in the case of investment properties under development, capitalised interest. Certain internal staff and associated costs directly attributable to the management of developments under construction are also capitalised.

When the Group begins to redevelop an existing investment property with a view to sale, the property is transferred to trading properties and held as a current asset. The property is re-stated to fair value as at the date of the transfer, with any gain or loss being taken to the Group income statement. The re-stated amount becomes the deemed cost at which the property is then carried in trading properties.

Property that is being constructed or developed for future use as an investment property, but which has not previously been classified as such, is classified as investment property under development within property, plant and equipment. This is recognised initially at cost but is subsequently re-stated to fair value at each reporting date. Any gain or loss on re-statement is taken direct to equity unless a loss in the period exceeds the net cumulative gain previously recognised in equity. In the latter case, the amount by which the loss in the period exceeds the net cumulative gain previously recognised is taken to the income statement. On completion, the property is transferred to investment property with any final difference on re-measurement accounted for in accordance with the foregoing policy.

The gain or loss arising on the disposal of a property is determined as the difference between the sales proceeds and the carrying amount of the asset at the beginning of the period and is recognised in the Group income statement.

Property, plant and equipment Properties under this heading comprise those properties acquired for development and completed properties occupied by group companies. They are fair valued on the same basis as investment properties.

Surpluses and deficits arising on the revaluation of such land and buildings are credited to the revaluation reserve, except to the extent that it reverses a revaluation deficit for the same asset previously recognised in income, in which case the increase is credited to the income statement to the extent of the deficit previously charged. A decrease in carrying amount arising on the revaluation of such land and buildings is charged as an expense to the extent that it exceeds the balance, if any, held in the revaluation reserve relating to a previous revaluation of that asset.

On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the revaluation reserve is transferred directly to accumulated profits.

The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset at the beginning of the period and is recognised in the income statement. Slough Estates plc | Interim Report 2005 47

24(b). Summary of significant accounting policies under IFRS (continued)

Owner-occupied properties are depreciated over their estimated useful lives, normally 30 years.

Plant and equipment comprise the power station assets, oil and gas plant and equipment of Tipperary Corporation, computers, motor vehicles, furniture, fixtures and fittings, and improvements to group offices. These assets are stated at cost less accumulated depreciation and are depreciated on a straight-line basis over their estimated useful lives.

Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

Group company as lessee a) Operating leases – leases in which the Group does not have substantially all risks and rewards of ownership are classified as operating leases. Payments, including prepayments, made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. b) Finance leases – leases of assets where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease commencement at the lower of the fair value of the asset and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in current and non-current borrowings. The finance charges are charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Investment properties acquired under finance leases are carried at their fair value.

Group company as lessor a) Operating leases – properties leased out to tenants under operating leases are included in investment properties in the balance sheet. b) 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 is recognised as 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 only the buildings element of a property lease is classified as a finance lease, the land element is shown within investment properties.

Trading properties Properties developed and held for sale are classified as trading properties and are shown at the lower of cost and net realisable value. Cost includes direct expenditure and interest capitalised during the development period. The development period ends on practical completion.

Profit from pre-sold trading developments is recognised according to the stage reached in the contract by reference to the value of work completed using the percentage of completion method. An appropriate estimate of the profit attributable to work completed is recognised once the outcome of the contract can be estimated reliably. The amount due from customers for contract work is shown as a receivable. The amount due comprises costs incurred plus recognised profits less the sum of recognised losses and progress billings. Where the sum of recognised losses and progress billings exceeds costs incurred plus recognised profits, the amount is shown as a liability.

Inventories Inventories (utilities and oil and gas) are stated at the lower of cost and net realisable value. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated on a first in, first out basis. Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

Trade and other receivables Trade and other receivables are recognised initially at fair value. A provision for impairment of trade receivables is established where there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables concerned.

Available-for-sale investments Available-for-sale investments are non-derivative financial assets that are designated as available-for-sale. These represent mainly the investments in Charterhouse USA, Candover and certain warrants in US companies who are tenants of the Group.

The investments are held at fair value with gains and losses taken to equity. The gains and losses taken to equity are recycled through the income statement on realisation. If there is objective evidence that the asset is impaired the cumulative loss that had been recognised directly in equity is removed from equity and recognised in the income statement. The amount removed from equity and recognised in the income statement, is the difference between the acquisition cost (net of any principal repayment and amortisation) and current fair value, less any impairment loss on that financial asset previously recognised in income.

Impairment losses recognised in the income statement are not reversed through income. 48 Slough Estates plc | Interim Report 2005

Notes to the interim financial statements continued

24(b). Summary of significant accounting policies under IFRS (continued)

Cash and cash equivalents Cash and cash equivalents comprise cash balances, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. Bank overdrafts that are repayable on demand and which form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Impairment The group’s assets are, other than investment properties, reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated (see below). An impairment loss is recognised in income whenever the carrying amount of an asset exceeds its recoverable amount. For the purposes of assessing impairment, assets are grouped together at the lowest levels for which there are separately identifiable cash flows.

The recoverable amount of an asset is the greater of its net selling price and its value-in-use. The value-in-use is determined as the net present value of the future cash flows expected to be derived from the asset, discounted using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Any impairment of financial assets is based on the original effective interest rate attributable to the financial asset on acquisition.

An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount after the reversal does not exceed the amount that would have been determined, net of applicable depreciation, if no impairment loss had been recognised.

Share capital Ordinary shares are classed as equity. External costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

Where any group company purchases the company’s equity share capital, the consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from equity attributable to the company’s equity holder until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects is included in equity attributable to the company’s equity holders.

Borrowings Borrowings other than bank overdrafts are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, borrowings are stated at amortised cost with any difference between the amount initially recognised and redemption value being recognised in the income statement over the period of the borrowings, using the effective interest method.

Convertible redeemable preference shares The convertible redeemable preference shares are regarded as compound instruments, consisting of a liability component and an equity component. At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate at the time of issue for similar non-convertible debt. The difference between the net proceeds of issue of the convertible redeemable preference shares and the fair value assigned to the liability component, representing the embedded option to convert the liability into equity of the Group , is included in equity (capital reserves).

Issue costs are apportioned between the liability and equity components of the convertible redeemable preference shares based on their relative carrying amounts at the date of issue. The portion relating to the equity component is charged directly against equity.

The interest expense on the liability component is calculated by applying the prevailing market interest rate at the time of issue for similar non-convertible debt to the liability component of the instrument. The difference between this amount and the interest paid is added to the carrying amount of the convertible loan note.

Pensions The obligations of defined benefit pension schemes are measured at discounted present value while scheme assets are measured at their fair value. The operating and financing costs of such plans are recognised separately in the income statement; service costs are spread systematically over the working lives of the employees concerned and financing costs are recognised in the periods in which they arise. Actuarial gains and losses arising from either experience differing from previous actuarial assumptions or changes to those assumptions are recognised immediately in the statement of recognised income and expense. Contributions to defined contribution schemes are expensed as incurred. The retirement benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation.

Provisions A provision is recognised in the balance sheet when the Group has a constructive or legal obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. Slough Estates plc | Interim Report 2005 49

24(b). Summary of significant accounting policies under IFRS (continued)

Provision is made for dilapidations that will crystallise in the future where, on the basis of the present condition of the property, an obligation exists at the reporting date and can be reliably measured. The estimate is revised over the remaining period of the lease to reflect changes in the condition of the building or other changes in circumstances. The estimate of the obligation takes account of relevant external advice.

Trade and other payables Trade and other payables are stated at cost.

Revenue Revenue comprises rental income, service charges and other recoveries from tenants of the Group’s investment and trading properties and proceeds of sales of its trading properties. Rental income includes the net income from managed operations such as car parks, food courts and serviced offices. Service charges and other recoveries include income in relation to service charges and directly recoverable expenditure together with any chargeable management fees. Where revenue is obtained from the rendering of services, it is recognised by reference to the stage of completion of the relevant transactions at the reporting date.

Rental income from investment property leased out under an operating lease is recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the net consideration for the use of the property and are therefore also recognised on the same, straight-line basis.

When property is let out under a finance lease, the Group recognises a receivable at an amount equal to the net investment in the lease at inception of the lease. Rentals received are accounted for as repayments of principal and finance income as appropriate.

Minimum lease payments receivable on finance leases are apportioned between finance income and reduction of the outstanding receivable. Finance income is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining net investment in the finance lease. Contingent rents, being those lease payments that are not fixed at the inception of a lease, for example increases arising on rent reviews, are recorded as income in the periods in which they are earned. Rent reviews are recognised as income when it is reasonable to assume that they will be received. Rent reviews are recognised as income based on estimates to be received or amounts received.

Surrender premiums received in the period from tenants vacating the property before the end of the lease are included in rental income.

A property is regarded as sold when the significant risks and returns have been transferred to the buyer. For conditional exchanges, sales are recognised as the conditions are satisfied.

Share-based payments The cost of granting share options and other share-based remuneration to employees and directors is recognised through the income statement. The group has used the Black-Scholes option valuation model and the resulting value is amortised through the income statement over the vesting period of the options. The charge is reversed if it appears likely that the performance criteria will not be met.

Own shares held in connection with employee share plans or other share based payment arrangements are treated as treasury shares and deducted from equity, and no profit or loss is recognised on their sale, issue or cancellation.

Borrowing costs Gross borrowing costs relating to direct expenditure on properties under development or undergoing major refurbishment are capitalised. The interest capitalised is calculated using the Group’s weighted average cost of borrowings. Interest is capitalised as from the commencement of the development work until the date of practical completion. The capitalisation of finance costs is suspended if there are prolonged periods when development activity is interrupted.

All other borrowing costs are recognised in the Group income statement in the period in which they are incurred.

Income tax Income tax expense represents the sum of the tax currently payable and deferred tax.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets are not recognised if the temporary differences arise from goodwill (or negative goodwill) or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

No provision is made for temporary differences arising on the initial recognition of assets or liabilities that affect neither accounting nor taxable profit.

Indexation relief on land is recognised as a reduction of the deferred tax liability but not on the buildings unless the properties are in the process of being sold. 50 Slough Estates plc | Interim Report 2005

Notes to the interim financial statements continued

24(b). Summary of significant accounting policies under IFRS (continued)

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group is entitled to settle its current tax assets and liabilities on a net basis.

Segment reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments.

The group’s primary reporting segments are investment properties and trading properties.

Dividend distribution Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved.

Interim measurement note Current income tax Current income tax expense is recognised in these interim consolidated financial statements based on management’s best estimates of the weighted average annual income tax rate expected for the full financial year.

Costs Costs that incur unevenly during the financial year are anticipated or deferred in the interim report only if it would also be appropriate to anticipate or defer such costs at the end of the financial year.

24(c). Restatement for International Financial Reporting Standards

Reconciliation of opening shareholders’ equity as previously reported under UK GAAP to International Financial Reporting Standards

Year to Half year to Year to 31 December 30 June 31 December Note 2004 2004 2003 £m £m £m Shareholders’ equity previously reported under UK GAAP 2,446.2 2,293.1 2,176.1 Effects of adopting IFRS Proposed dividends 1 41.3 25.7 38.4 Business combinations 27.4–– Operating lease incentives 3 (9.4) (6.4) (4.7) Joint ventures and associate 4 (8.2) (8.9) (6.1) Finance leases as lessor 5 (10.7) (8.8) (8.5) Deferred tax 6 (260.3) (247.0) (225.0) Pension scheme deficit 7 (41.0) (26.7) (29.5) Fair value of share based payments 8 1.3 0.9 0.8 Other (1.5) (1.7) 0.9 Shareholders’ equity restated under IFRS 2,165.1 2,020.2 1,942.4

Notes 1. IAS 10 – Ordinary dividend excluded from the income statement. Recognised on the balance sheet when approved. 2. IFRS 3 – The acquisition of Ravenseft has been treated as a property acquisition. Goodwill and deferred tax on acquisition have been eliminated. Opted to apply this standard with effect from 1 January 2004. 3. SIC 15 – Lease incentives amortised over period of lease or to the first break whichever is the shorter. 4. IAS 28 & 31 – Equity account for the results of joint ventures and associate’s profits, including its share of valuation surpluses and deficits, interest and taxation as a one line entry in profit before tax. The reduction in shareholders’ funds arises principally from deferred taxation provided on revaluation surpluses. 5. IAS 17 – Finance leases included on the balance sheet as a debtor. No revaluation. Previously accounted for as investment property. 6. IAS 12 – Mainly deferred tax on investment property valuation surpluses, with movements in the income statement. Previously disclosed in the notes. 7. IAS 19 – Recognise in full the cumulative deficits at the transition date 1 January 2004 – corridor approach not adopted. 8. IFRS 2 – Share option plans fair valued at the date of grant and costs taken to the income statement over the vesting period. Transitional exemption used. Slough Estates plc | Interim Report 2005 51

Group income statement – Reconciliation of reported profits between UK GAAP and IFRS for the twelve months ended 31 December 2004

Effects of Events Investments changes in Year after the in associate Share- Business Operating foreign Year 31 Dec balance Income Employee & joint Investment based combin- lease exchange 31 Dec 2004 sheet date taxes Leases benefits ventures property payments nations incentives rates and 2004 UK GAAP IAS 10 IAS 12 IAS 17 IAS 19 IAS 28 & 31 IAS 40 IFRS 2 IFRS 3 SIC-15 other IFRS £m £m £m £m £m £m £m £m £m £m £m £m Gross rental income from investment properties 252.1 (0.9) 4.7 1.5 257.4 Interest received on finance lease assets – 0.9 – 0.9 Other property related income 13.1 0.3 13.4 Property outgoings (34.3) (4.9) (39.2) Net rental income 230.9––––––––4.7(3.1) 232.5

Proceeds on sale of trading properties 32.3 (0.9) 31.4 Carrying value of trading properties sold (28.4) 0.7 (27.7) Trading property rental income 4.4 (0.2) 4.2 Property outgoings relating to trading properties (1.2) 0.1 (1.1) Net income from trading properties 7.1–––––––––(0.3) 6.8 Income from sale of utilities and gas 35.1 0.3 35.4 Cost of sales (42.3) (0.5) (42.8) Net income from utilities and gas (7.2) –––––––––(0.2) (7.4) Other investment income 10.0 0.5 10.5 Administration expenses (15.2) 0.2 0.4 (0.1) (14.7) Gain on disposal of property assets 62.3 2.4 64.7 Valuation gains and losses – (2.1) 164.0 7.4 (8.6) 6.0 166.7 Operating income 287.9 – – (2.1) 0.2 – 164.0 0.4 7.4 (3.9) 5.2 459.1

Finance costs (101.4) (0.9) 2.7 (2.3) (101.9) Finance income 6.7 – 6.7 Share of profit from associate and joint ventures after tax 15.9 8.0 0.2 24.1 Profit before tax 209.1 – – (2.1) (0.7) 10.7 164.0 0.4 7.4 (3.9) 3.1 388.0

Taxation – current and deferred (41.7) (35.8) 1.1 (14.7) (1.1) (92.2) 167.4 – (35.8) (2.1) (0.7) 11.8 149.3 0.4 7.4 (3.9) 2.0 295.8 Preference dividends (11.2) (11.2) 156.2 – (35.8) (2.1) (0.7) 11.8 149.3 0.4 7.4 (3.9) 2.0 284.6 Ordinary dividends (67.0) 67.0 – Profit for the year 89.2 67.0 (35.8) (2.1) (0.7) 11.8 149.3 0.4 7.4 (3.9) 2.0 284.6

Attributable to minority interests (1.6) 0.4 – (1.2) Attributable to equity shareholders 90.8 67.0 (35.8) (2.1) (0.7) 11.8 148.9 0.4 7.4 (3.9) 2.0 285.8 89.2 67.0 (35.8) (2.1) (0.7) 11.8 149.3 0.4 7.4 (3.9) 2.0 284.6

Notes 1. IAS 10 – Ordinary dividend excluded from the income statement. Recognised on the balance sheet when approved. 2. IAS 12 – Mainly deferred tax on investment property valuation surpluses, with movements in the income statement. Previously disclosed in the notes. 3. IAS 40 – Investment property valuation surpluses taken to the income statement. 4. IAS 17 – Finance leases included on the balance sheet as a debtor. No revaluation. Previously accounted for as investment property. 5. IAS 19 – Recognise in full the cumulative deficits at the transition date 1January 2004 – corridor approach not adopted. 6. IAS 28 & 31 – Equity account for the results of joint ventures’ and associate’s profits, including its share of valuation surpluses and deficits, interest and taxation as a one line entry in PBT. 7. IFRS 2 – Share option plans fair valued at the date of grant and costs taken to the income statement over the vesting period. Transitional exemption used. 8. IFRS 3 – The acquisition of Ravenseft has been treated as a property acquisition. Goodwill and deferred tax on acquisition is eliminated. Opted to apply this standard with effect from 1 January 2004. 9. SIC 15 – Lease incentives amortised over period of lease or to the first break whichever is the shorter. 52 Slough Estates plc | Interim Report 2005

Notes to the interim financial statements continued

24(c). Restatement for International Financial Reporting Standards (continued)

Group balance sheet – Reconciliation of assets, liabilities and equity between UK GAAP and IFRS as at 31 December 2004 Investments As at Events after Property, Letting in associate 31 December the balance Income plant &, fees Employee & joint 2004 sheet date taxes equipment Leases & other benefits ventures UK GAAP IAS 10 IAS 12 IAS16 IAS 17 IAS 17 IAS 19 IAS 28 & 31 £m £m £m £m £m £m £m £m Non-current assets Investment properties 3,795.6 (276.8) (21.2) (9.9) Property, plant and equipment 118.0 276.8 Negative goodwill (4.7) Finance lease receivables – 10.9 Available-for-sale investments 38.4 Investments in joint ventures and associate 92.3 (8.2) Deferred taxation asset 0.3 Total non-current assets 4,039.9–––(10.3) (9.9) – (8.2)

Current assets Inventories 1.9 Trading properties 125.3 Finance lease receivables – 0.1 Trade and other receivables 84.0 9.8 (0.5) Derivative assets – Cash and cash equivalents 397.4 Total current assets 608.6–––0.19.8(0.5) –

Total assets 4,648.5–––(10.2) (0.1) (0.5) (8.2)

Non-current liabilities Borrowings 1,683.5 Obligations under finance leases – 0.5 Pension scheme deficit 1.2 40.3 Deferred tax provision 192.1 260.3 Provisions for liabilities and charges 18.3 Other creditors 15.2 1.9 Total non-current liabilities 1,910.3 – 260.3 – 0.5 1.9 40.3 –

Current liabilities Borrowings 39.2 Tax liabilities 46.2 1.2 Trade and other payables 185.3 (41.3) 0.2 0.2 Derivative liabilities – Total current liabilities 270.7 (41.3) 1.2 – – 0.2 0.2 –

Total liabilities 2,181.0 (41.3) 261.5 – 0.5 2.1 40.5 –

Net assets 2,467.5 41.3 (261.5) – (10.7) (2.2) (41.0) (8.2)

Equity Called up ordinary share capital 138.8 Share premium account 339.1 Own shares held (5.2) Other reserves 1,664.6 (14.0) Retained earnings 308.9 41.3 (245.6) – (10.7) (2.2) (41.0) (8.2) 2,446.2 41.3 (259.6) – (10.7) (2.2) (41.0) (8.2)

Minority interests 21.3 (1.9) Total equity 2,467.5 41.3 (261.5) – (10.7) (2.2) (41.0) (8.2) Slough Estates plc | Interim Report 2005 53

Operating As at As at Share-based Business lease 31 December Financial 1 January payments combinations incentives Reserve 2004 instruments 2005 IFRS 2 IFRS 3 SIC-15 transfers IFRS IAS 39 IFRS £m £m £m £m £m £m £m Non-current assets Investment properties (35.0) 3,452.7 – 3,452.7 Property, plant and equipment 394.8 – 394.8 Negative goodwill 4.7 – – – Finance lease receivables 10.9 – 10.9 Available-for-sale investments 38.4 4.1 42.5 Investments in joint ventures and associate 84.1 – 84.1 Deferred taxation asset (0.1) 0.2 – 0.2 Total non-current assets – 4.7 (35.1) – 3,981.1 4.1 3,985.2

Current assets Inventories 1.9 – 1.9 Trading properties 125.3 – 125.3 Finance lease receivables 0.1 – 0.1 Trade and other receivables (1.4) 23.1 115.0 (0.3) 114.7 Derivative assets – 3.8 3.8 Cash and cash equivalents 397.4 – 397.4 Total current assets – (1.4) 23.1 – 639.7 3.5 643.2

Total assets – 3.3 (12.0) – 4,620.8 7.6 4,628.4

Non-current liabilities Borrowings 1,683.5 110.1 1,793.6 Obligations under finance leases 0.5 – 0.5 Pension scheme deficit 41.5 – 41.5 Deferred tax provision (4.1) 0.1 448.4 – 448.4 Provisions for liabilities and charges 18.3 – 18.3 Other creditors (1.3) 15.8 – 15.8 Total non-current liabilities (1.3) (4.1) 0.1 – 2,208.0 110.1 2,318.1

Current liabilities Borrowings 39.2 (0.1) 39.1 Tax liabilities 47.4 (1.0) 46.4 Trade and other payables (2.7) 141.7 (4.2) 137.5 Derivative liabilities – 6.7 6.7 Total current liabilities – – (2.7) – 228.3 1.4 229.7

Total liabilities (1.3) (4.1) (2.6) – 2,436.3 111.5 2,547.8

Net assets 1.3 7.4 (9.4) – 2,184.5 (103.9) 2,080.6

Equity Called up ordinary share capital 138.8 (34.0) 104.8 Share premium account 339.1 (98.2) 240.9 Own shares held (5.2) – (5.2) Other reserves 0.2 (523.6) 1,127.2 43.1 1,170.3 Retained earnings 1.1 7.4 (9.4) 523.6 565.2 (14.5) 550.7 1.3 7.4 (9.4) – 2,165.1 (103.6) 2,061.5

Minority interests 19.4 (0.3) 19.1 Total equity 1.3 7.4 (9.4) – 2,184.5 (103.9) 2,080.6

Note 1. IAS39 – Convertible preference shares are treated as debt with accrued interest and an equity element. Derivatives, and available-for-sale investments are stated at fair value. Previously preference shares were treated as share capital, derivatives were hedge accounted and available-for-sale investments were held at the lower of cost and realisable value. 54 Slough Estates plc | Interim Report 2005

Notes to the interim financial statements continued

24(c). Restatement for International Financial Reporting Standards (continued)

Group income statement – Reconciliation of reported profits between UK GAAP and IFRS for the six months ended 30 June 2004

Effects of Investments changes in Events after in associate Share- Operating foreign 30 June the balance Income Employee & joint Investment based lease exchange 30 June 2004 sheet date taxes Leases benefits ventures property payments incentives rates and 2004 UK GAAP IAS 10 IAS 12 IAS 17 IAS 19 IAS 28 & 31 IAS 40 IFRS 2 SIC-15 other IFRS £m £m £m £m £m £m £m £m £m £m £m Gross rental income from investment properties 131.0 (0.5) 2.1 132.6 Interest received on finance lease assets – 0.4 0.4 Other property related income 6.5 6.5 Property outgoings (17.8) (1.9) (19.7) Net rental income 119.7 – – (0.1) ––––2.1(1.9)119.8

Proceeds on sale of trading properties 4.3 4.3 Carrying value of trading properties sold (2.1) (2.1) Trading property rental income 2.0 2.0 Property outgoings relating to trading properties (0.3) (0.3) Net income from trading properties 3.9–––––––––3.9

Income from sale of utilities and gas 15.8 15.8 Cost of sales (20.6) (0.1) (20.7) Net income from utilities and gas (4.8) ––––––––(0.1)(4.9)

Other investment income 3.2 3.2 Administration expenses (6.5) 0.1 0.1 (6.3) Gain on disposal of property assets 0.1 0.1 Valuation gains and losses (0.3) 85.4 (3.8) 2.7 84.0 Operating income 115.6 – – (0.4) 0.1 – 85.4 0.1 (1.7) 0.7 199.8

Finance costs (49.8) (0.4) 1.3 (0.6) (49.5) Finance income 2.5 2.5 Share of profit from associate and joint ventures after tax 7.9 13.0 (0.1) 20.8 Profit before tax 76.2 – – (0.4) (0.3) 14.3 85.4 0.1 (1.7) – 173.6

Taxation – current and deferred (24.7) (22.5) 0.4 – 0.1 (46.7) 51.5 – (22.5) (0.4) (0.3) 14.7 85.4 0.1 (1.7) 0.1 126.9 Preference dividends (5.6) (5.6) 45.9 – (22.5) (0.4) (0.3) 14.7 85.4 0.1 (1.7) 0.1 121.3 Ordinary dividends (25.8) 25.8 – Profit for the year 20.1 25.8 (22.5) (0.4) (0.3) 14.7 85.4 0.1 (1.7) 0.1 121.3

Attributable to minority interests (0.9) 0.2 (0.7) Attributable to equity shareholders 21.0 25.8 (22.5) (0.4) (0.3) 14.7 85.2 0.1 (1.7) 0.1 122.0 20.1 25.8 (22.5) (0.4) (0.3) 14.7 85.4 0.1 (1.7) 0.1 121.3

Notes 1. IAS 10 – Ordinary dividend excluded from the income statement. Recognised on the balance sheet when approved. 2. IAS 12 – Mainly deferred tax on investment property valuation surpluses, with movements in the income statement. Previously disclosed in the notes. 3. IAS 40 – Investment property valuation surpluses taken to the income statement. 4. IAS 17 – Finance leases included on the balance sheet as a debtor. No revaluation. Previously accounted for as investment property. 5. IAS 19 – Recognise in full the cumulative deficits at the transition date 1January 2004 – corridor approach not adopted. 6. IAS 28 & 31 – Equity account for the results of joint ventures’ and associate’s profits, including its share of valuation surpluses and deficits, interest and taxation as a one line entry in PBT. 7. IFRS 2 – Share option plans fair valued at the date of grant and costs taken to the income statement over the vesting period. Transitional exemption used. 8. SIC 15 – Lease incentives amortised over period of lease or to the first break whichever is the shorter. Slough Estates plc | Interim Report 2005 55

Group balance sheet – Reconciliation of assets, liabilities and equity between UK GAAP and IFRS as at 30 June 2004

Investments As at Events after Property, Letting in associate Share- Operating As at 30 June the balance Income plant & fees Employee & joint based lease 30 June 2004 sheet date taxes equipment Leases & other benefits ventures payments incentives Reserve 2004 UK GAAP IAS 10 IAS 12 IAS 16 IAS 17 IAS 17 IAS 19 IAS 28 & 31 IFRS 2 SIC-15 transfers IFRS £m £m £m £m £m £m £m £m £m £m £m £m Non-current assets Investment properties 3,680.9 (244.1) (19.4) (11.1) (35.8) 3,370.5 Property, plant and equipment 43.4 310.4 353.8 Finance lease receivables – 11.0 11.0 Available-for-sale investments 100.8 (66.3) 34.5 Investments in joint ventures and associate 229.7 (8.9) 220.8 Total non-current assets 4,054.8–––(8.4) (11.1) – (8.9) – (35.8) – 3,990.6

Current assets Inventories 1.7 1.7 Trading properties 124.5 124.5 Finance lease receivables – 0.1 0.1 Trade and other receivables 51.1 11.1 (0.6) 29.3 90.9 Cash and cash equivalents 136.7 136.7 Total current assets 314.0–––0.111.1 (0.6) – – 29.3 – 353.9 Total assets 4,368.8–––(8.3) – (0.6) (8.9) – (6.5) – 4,344.5

Non-current liabilities Borrowings 1,644.7 1,644.7 Obligations under finance leases – 0.5 0.5 Pension scheme deficit 1.2 26.1 27.3 Deferred tax provision 194.2 246.9 441.1 Provisions for liabilities and charges 20.3 0.1 20.4 Other creditors 7.9 2.3 (1.1) 9.1 Total non-current liabilities 1,868.3 – 246.9 – 0.5 2.4 26.1 – (1.1) – – 2,143.1

Current liabilities Borrowings 8.0 8.0 Tax liabilities 19.0 1.2 20.2 Trade and other payables 159.8 (25.7) 0.3 0.2 (0.1) 134.5 Total current liabilities 186.8 (25.7) 1.2 – – 0.3 – – 0.2 (0.1) 162.7 Total liabilities 2,055.1 (25.7) 248.1 – 0.5 2.7 26.1 – (0.9) (0.1) – 2,305.8

Net assets 2,313.7 25.7 (248.1) – (8.8) (2.7) (26.7) (8.9) 0.9 (6.4) – 2,038.7

Equity Called up ordinary share capital 138.7 138.7 Share premium account 337.0 337.0 Own shares held (4.4) (4.4) Other reserves 1,539.0 (5.0) 0.5 (362.4) 1,172.1 Retained earnings 282.8 25.7 (241.0) – (8.8) (3.2) (26.7) (8.9) 0.9 (6.4) 362.4 376.8 2,293.1 25.7 (246.0) – (8.8) (2.7) (26.7) (8.9) 0.9 (6.4) – 2,020.2

Minority interests 20.6 (2.1) 18.5 Total equity 2,313.7 25.7 (248.1) – (8.8) (2.7) (26.7) (8.9) 0.9 (6.4) – 2,038.7 56 Slough Estates plc | Interim Report 2005

Shareholder information

August 2005 Shareholder enquiries 1 Payment: 7 /8 per cent bonds 2010 interest 17 August If you have any questions about your 3 6 /4 per cent bonds 2024 interest 23 August shareholding or if you require further Announcement of half-year results 25 August guidance (e.g. to notify a change of address or to give dividend instructions September 2005 to a bank account) please contact Payment: Dividend on 8.25 pence (net) convertible Computershare Investor Services, redeemable preference shares 1 September PO Box 82, The Pavillions, Bridgwater Road, Ex-dividend date for interim dividend Bristol BS99 7NH. (Ordinary Shares) 7 September Telephone 0870 702 0000. On-record date Alternatively you can email your query to (Ordinary Shares) 9 September [email protected]. Payment: 7 per cent bonds 2022 interest 14 September You can also check your shareholding 1 6 /4 per cent bonds by registering at 2015 interest 30 September www-uk.computershare.com/investor.

October 2005 Electronic Communications Payment: Interim dividend 7 October Shareholders also have the opportunity to elect to receive shareholder February 2006

1 communications electronically. Payment: 7 /8 per cent bonds 2010 interest 17 February 3 6 /4 per cent bonds 2024 interest 23 February Shareholders who opt to receive electronic communications can also submit their March 2006 proxy votes electronically. To register for Payment: Dividend on 8.25 pence (net) convertible this service shareholders can register at redeemable preference shares 1 March www-uk.computershare.com/investor. 7 per cent bonds 2022 interest 14 March

May 2006 Individual savings accounts and low Annual General Meeting 16 May cost share dealing service Dividend 19 May The company has selected the Halifax as its preferred ISA provider. Details of June 2006 this service can be obtained from Halifax Payment: Share Dealing Limited on telephone 1 5 /2 per cent bonds 2018 interest 20 June 0845 722 5525. 3 5 /4 per cent bonds 2035 interest 20 June Shareholders can also take advantage of a telephone share dealing service offered by our Registrars, Computershare, which provides shareholders with a low-cost way of selling shares. For further details telephone 0870 703 0084. Group information

UK Belgium Head office and registered office Slough Properties NV Slough Estates plc De Kleetlaan 4, bus 8 234 Bath Road 1831 Diegem Slough SL1 4EE Belgium England Telephone: (32) (2) 714 0600 Telephone: (01753) 537171 Fax: (32) (2) 714 0619 Fax: (01753) 820585 e-mail: [email protected] www.sloughestates.com e-mail: [email protected] France Slough Developments (France) SA US 20 rue Brunel Slough Estates USA Inc 75017 Paris 444 North Michigan Avenue France Suite 3230 Telephone: (33) (1) 56 89 31 31 Chicago, Illinois 60611 Fax: (33) (1) 56 89 31 35 USA e-mail: [email protected] Telephone: (1) (312) 755 0700 Fax: (1) (312) 755 0717 Germany e-mail: [email protected] Slough Commercial Properties GmbH Elisabethstrasse 40 40217 Düsseldorf Germany Telephone: (49) (211) 38 20 52 Fax: (49) (211) 37 46 89 e-mail: [email protected]

Directors and Officers

Chairman Secretary Sir Nigel Mobbs* J R Probert FCIS

Executive committee Executive directors I D Coull – Chief Executive I D Coull – Chief Executive A S Gulliford – Director, Corporate Acquisitions J A N Heawood – UK Property J A N Heawood – UK Property R D Kingston – Finance R D Kingston – Finance Director M D Lees – North America M D Lees – North America J R Probert – Group Secretary D J R Sleath – Deputy Finance Director Non-executive directors J I Titford – Director of Human Resources P D Orchard-Lisle CBE, TD, DL* Lord Blackwell Senior management S L Howard D A Arthur – Head of UK Business Support The Rt. Hon. Lord MacGregor of Pulham Market OBE S M Bailey – Regional Director, Slough Trading Estate A W Palmer R G Bell – Head of Strategy C A Peacock N Coessens – General Manager, Belgium T Wernink J S Danks – Regional Director, North London and East of England W E Hens – Managing Director, Europe * Since 19 August 2005 due to Sir Nigel Mobbs illness, S A Hollins – Head of European Development Paul Orchard-Lisle has assumed full responsibility L Horbette – General Manager, France as Chairman. T C Mant – Group Treasurer G J Osborn – Regional Director, Thames Valley and West of England J Pebworth – Managing Director, Slough Heat and Power P A Redding – Regional Director, Heathrow and West London H E Rogers – Head of Design and Construction R Rohner – Chief Financial Officer, US U Titz – General Manager, Germany M Wilson – Regional Director, South London and South of England >

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