Annual Report 2008

2 0 0 8 a n d b e y o n d … www.thecrownestate.co.uk

London T h

e 2008 and The Crown Estate C

16 New Burlington Place r o

London w n

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T 020 7851 5000 t a t e

Edinburgh A n

The Crown Estate n u

6 Bell’s Brae a l r Edinburgh e p beyond… EH4 3BJ o r t

T 0131 260 6070 2 0 0

Windsor 8 The Crown Estate The Great Park Windsor Berkshire SL4 2HT T 01753 860 222

Published by TSO (The Stationery Office) and available from: Online www.tsoshop.co.uk Mail, telephone, fax and email TSO PO Box 29, Norwich NR3 1GN T General enquiries 0870 600 5522 Order through the Parliamentary Hotline Lo-call 0845 7 023474 F 0870 600 5533 E [email protected] Textphone 0870 240 3701 TSO Shops 16 Arthur Street, Belfast BT1 4GD Annual report T 028 9023 8451 ISBN 978-0-10-295673-3 F 028 9023 5401 2008 71 Lothian Road, Edinburgh EH3 9AZ T 0870 606 5566 F 0870 606 5588 The Parliamentary Bookshop 12 Bridge Street, Parliament Square London SW1A 2JX TSO@Blackwell and other Accredited Agents 9 780102 956733 What we do

Urban Estate Marine Estate The Urban Estate consists of over 600 commercial properties The Marine Estate includes over 55% of the UK ’s foreshore, in London and elsewhere including shops, offices, retail the beds of tidal rivers and estuaries and almost all of the and business parks, shopping centres and industrial sites . seabed out to the 12 nautical mile territorial limit around the There are also over 2,600 residential properties ranging from UK. It also includes the rights to explore and utilise the natural 1,340 units let on monthly regulated or assured tenancies, resource of the UK continental shelf with the exception of oil, to long leasehold properties in Millbank, Regent’s Park coal and gas . It covers a diverse portfolio of interests and Kensington . embracing marine aggregates, potash mining, oil and gas pipelines, telecommunication and power cables, aquaculture, renewable energy, moorings, marinas, wildfowling and ports . £194.4m £5,381m £41.9m £370m Turnover Property value Turnover Property value (73.4% of group) (78.8% of group) (15.8% of group) (5.4% of group)

For more information about the Urban Estate For more information about the Marine Estate m see pages 36 –39. m see pages 40 –42.

Rural Estate Windsor Estate The Rural Estate is one of the largest in the UK with almost The Windsor Estate covers around 6,300 hectares (15,600 119,000 hectares (294,000 acres) of agricultural land, forests, acres) and includes Windsor Great Park and Home Park, the residential and commercial property in England, Scotland and Savill and Valley Gardens, residential properties and some Wales (excluding Windsor). There are also 34 active mineral commercial properties including Berkshire and Swinley Forest lettings producing limestone, sand, gravel, clay, slate, five golf clubs, Ascot Racecourse, Smith ’s Lawn, two let farms and mines, Royal leases (including one gold mine in Northern almost 3,200 hectares (7,700 acres) of forest. Windsor Great Ireland). There are 780 agricultural tenancies and 750 residential Park is the only Royal Park managed by The Crown Estate. properties. The forestry estates cover almost 11,000 hectares The Board of The Crown Estate has a duty to maintain its (27,000 acres) of which almost one-third is managed by The character as a Royal Park and forest . Crown Estate, with the remainder let. Designed and produced by Radley Yeldar This annual report is available at: Photography by Marcus Ginns £22 .5m £903m £5.8m £173m www.thecrownestate.co.uk/annual_report Illustration by Emily Forgot / ZeeganRush.com This document is printed on Era Silk, which is produced from 50% genuine waste Turnover Property value Turnover Property value pulp, the balance being ECF pulp from well-managed/certified forests. The paper (8.5% of group) (13.2% of group) (2.2% of group) (2.5% of group) If you require alternative formats, is also FSC certified and manufactured at an ISO 14001 accredited mill. such as Braille or audio, or require FSC – Forest Stewardship Council. This ensures there is an audited chain of custody For more information about the Rural Estate For more information about the Windsor Estate from the tree in the well -managed forest through to the finished document in the m see pages 43 –44. m see pages 45 –46. further information, please contact printing factory. the communications department ISO 14001 – A pattern of control for an environmental management system against on 020 7851 5070 which an organisation can be credited by a third party. If you have finished reading this report and no longer wish to retain it, please pass it on to other interested readers, return it to The Crown Estate, or dispose of it in Turnover and gross revenue surplus figures for 2007/08 are stated prior to the change in accounting estimates (see note 3). your recycled paper waste. Thank you. i W f c h –

ifc What we do a t There is no organisation in the world 3 2 Highlights of the year w 3 Chairman’s introduction e d quite like The Crown Estate. Our property o portfolio includes ancient forests, farms, parkland, coastline, shops, offices and homes. 4 O v – O e

Our role as guardian, facilitator, manager, 4 Chief Executive’s overview 8 r p v e i e

r and goals a w t i n influencer, employer and revenue creator & g p a r i n o d is unique. r i t f i i e n s a n c i a

We have two main objectives: to benefit l r e v i e the taxpayer by paying our revenue w 9 C

surplus to the Treasury, and to enhance u – s

10 The Farmer 2 t o 4

11 The Biker m

the value of the Estate and the income e

12 The Developer r s

14 The Port Director t o it generates. r i

15 The Business Council Leader e 16 The Teacher s 18 The Energy Project Director 19 The Harbour Master 20 The Chief Executive 22 The Farmer 24 The Golf Club Secretary 2 B 5 u s –

26 West End property swaps i n 3 e

27 Expansion of offshore wind farms 4 s 28 Tabley Estate s s t 29 Reducing CO 2 emissions o r i 30 Acquisition of Deganwy Marina e s 31 Rural ‘Business Deal’ 32 Customer focus programme 33 The Royal Landscape 34 Stamford Street P 3 5 e r – 36 Urban Estate f o 5 r m 40 Marine Estate 7 a

43 Rural Estate n c

45 Windsor Estate e 47 Corporate Responsibility 54 Financial review 5 G 8 o v 58 The Board – e 7 r n 60 Governance report 0 a

69 Remuneration report n c e 7 F i 1 n a 72 The Certificate and Report of the – n 9 c 2

Comptroller and Auditor General to i a l the Houses of Parliament s 74 Revenue account 74 Statement of total recognised gains and losses 75 Balance sheet 76 Cash flow statement To The Queen’s Most Excellent Majesty 77 Notes to the financial statements May it please Your Majesty, The Crown Estate Commissioners 91 Ten year record take leave to submit this their fifty-second Report and Accounts, in obedience to sections 2(1) and 2(5) of the Crown Estate Act, 1961. Highlights of the year

994

995 £211.4 m

996 98 +5.6% 99

.4 £7,328m

.8 .2 +3. 3% .6

90 £264.8 m

93 95 +1.0% 98

08 £10.1 m

00 £6,58 4m +0.2%

.6 £242m

Turnover and gross revenue surplus figures for 2007/08 are stated prior to the change in accounting estimates (see note 3). What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92 Page 3 , , y t , n 8 n e l s a o m i h , m d t t u p e r 0 / e n o d n w n a t s a 7 s i s h t o t e r a e t p u r o r i o d t a h t e v . d a e y g n i r u e r e t d n a r u o j h t n 0 0 p e r g r h t i w r a f o b a u l a d r u F e t e 2 r u d a e u n i t n a h s a e h t e d o o y s m i o t n o m v n i r u h s i w , s s s d e l l a , e t a r a h c m a o B o c d i v n g n s i n o i b e u n i t n o e c 2 d e e p p a t s E o f e w e b m u n a y l o r e h t e g t i l a c l 1 s r u s n e r b o t e t s D a e h v o r t s n y l r t s d n s r e , r e r u O , s a p r u r e d i s e r r e y l e a n a . d i e a r p , n . r e o t o t d n k r v e i h c e n i s u b b P c s o t l u d n o m a r u R a a r d a r a l u c i t r , s e t o n g n i r u g i e l l i w o h w v a D g e a m a e d m e f e m v e w o e h t r g n i w e w n a c o t s e s i r e g n e v , s e i o i t a s i e h p e h t m e e c i v I H y n g n m r , n g e a r n y r I r e l i o l l h c o c . r a h e a h o o r a e s u n e o a l i . o y o d g n i f e i f i l a u q t l e i h t c u m f i t e s g e i l e g n i e e s e h t l v e i l t a h r t c a r a a w w C t e b a r y c i A l a h i g n t s a o m o W i c . e h c d n a ’ s r s e e b b a t s e t i d c u d t l p e k f s y l n i o B o 8 I i g e a n o e h o r n 0 e a h c n d n a r w m r a a t i s s a t l a n d i a v s s w o n t a r a e y l e h p x e o 0 e I r e h r u o n I . t h g i i t a s c e k o a w t n i e l A t n r s e n o t s e l i 2 i i n f s I n a l t s c i e s i D t h y l a a r e u l t r e o d n . y m o s m A l a g r s s e i K U a t u o h s i h v i l t e i d t n l r e p x t h . s s e i e l a v S d r a e n w o e b a e n o r l a t t e s k n d n e y r g s n o i t r r e p x e d y r a u n o s e g n a e r r i r e a . m s i e h t g u o t e d r e o e o c u s a t n t f i s u h o t o n n a r u d e s s a J t t s t t x e r h n i t t a a r p d d n a r e h t l B t g n i p o l t n e e h t i s g p k t I a c y l l 1 i s o r p m e e e l l a h l e r a d n u i n m i t p f t o s l d d t i n a a h t u l n i u c c b g . s o 7 0 n a o n o , e n e v e c f h i r e e v e o i k e e h 0 o a o m n a l a n a x n g n r a g k t m d s a f i i s s e i t n i g s n 2 l o i l , a h e s u s u i t g a s d i l t t r y f s y a r e h t e y g d u o s e o . d n d n a t r g d e s e n o r a n r n l w m o s s d a e l a a o p e v e a d t h e w . t l r a r u f , s s e e m o i t d i g d a d e l w L a e r l a e d g n t s g n i o i t u a u g e r , r w a i h n n w o r g n e f s y c n e n i n w s d o o o B e r o m l l r o n e c n u n l n e v o n a r k r u b a r t y d r a t u b o n a m e y a i e n o i t a n i t s e g u a k j k e o e r e a h o f o a c e b n o G o d h r p d o r t o c a c r u o l p - e h h t h c e r y n i u i a t m t w c a , l a t t h c B n d e v r u h o h d i e r u e n m o s a s u e h o o o e h t n a I h C o d i a l a m n a o t A s o c I t e d t t a f o n o e H w o y w o C h o n w t s A t t a r f h t l A o t r t l r e f n u o w o j . s d r k n cu d n, o t t av - o n n e t . k o i a m e e b d a h t h g n i h g u o h w s l a e the s i h a w r e a h t r u i f f i d l l i a y l r a l - y t i n u t s h t n o d e o e n i o f r a o t n u b g n i l l i w a v e l l l a r u d o r h rm o f m s s e n i s u b n o w t n i r a s e v i t a i t i n i s a h o i s a d n a ate e r r o p r a e y y b t a e r b t u 3 . a c i d e d s M r a w r o f e k i l e v o o 2 1 % he d n a d n a t l p o p a w s t e 7 £ c i t r a p st E . y g r e n e m s e n o e h t u y l n o n e p rn e d tha h d n e h t t a h w t n o s n o i t c i r t s e r s o 6 . 5 , s r e m r a f n i a t r o e l t s a l t d o e s a e l e w t o m r d e t s u r t p a h t o n d l u o w t u b i r t n o c f o l e h e h t , ry r o j a m t h g i r B I a h t i w t n e s e i t i n u t r o t t s e l i m n w o r s n o i t a d n u o f e s a e s i d s a i t c l a r , s e i g e t a r t S i h w p p u s a i d n , n o i s n a y s n o i t u b i r t n o , y r t C se su f o , se o r t n p p c a y r t n a n e t s u o b a w e n c d n r e g t a o w t o n m e h t h t i w e k e i c i f f e s u y e h t u a g n i r i y l g n i s a e r c n ea r e c i p x e . s e s s . s s e n , d e c e hte g i el d l b i d e n e s r o d a s s o R t n e m t r r u o f o d n he T e r T e k d e s s e r i d e n a f o o m t n a t n l e so al w e c e h t . r n e o a T na i f n e c d n e m e g m t c e s ncr i a e t r a f p s a s o c i f p o ar a a m a e m o c c u s p m u d o r he l p e b o i d n h c e h t e n e r c r o f e r t n t e c u s I i y n u t a e m e a i a d e h t r u f , y y e b m a y c e i n g p s e r e u d n i e o v e s m b e h d n a e h i h w t v e i s a n a m , d r ue al t o n l t n nths, o t t s k o o u n l b o h w l s u i t i v e r e us o nd e u n a h t n a a e t a h s u n o f o i k r t f o a m e a l w a s i h c ns. o i us o i y a t a o B t r o t n e s s e l o f s n o i , s t r o f f e i g n a a h t e w r e v a h a P me d e n i t a h t t t a t s l p o s ’ 2 1 c r u p n r u o e t a t i t n o c k r o w s n o i a e v e h t d e a t r o p m i us, l surp , e t p m i o i l l mi t s e p g e tr b r a e n r o m r o n e t r o p s e t ev r p e l b a i nd o l r e d o t n r u o a e r n E t a l b m u y i e ast ta i ap C s i s n r u o f o c d e s s a p l e t i d n o c n n o i t a y a w a t s u o e r a G e . y l g u l l a a t s ed l a t i n i t i c e e i l e b E s i r e d i a e u t a n a nu n o t th E f l a a w h t i I ar s e v i t c s a e w d e s e n i s e h n ev I x e t e k t u r g e th t a a m , r u R n i b m o c u q e d rket d i , d e m r i f o b e k 4 . 1 1 2 £ e y n o e n i a g hi

r n o h t d e z t h e b t t n e e n i a e r c , t a b r s s e a r o – eve r t h g i d e n a s n a g r o h t f r i e r a m m r i a h C n o c l u . . f n o s a m U ve ac ma d h g ed i e s h T s - , r e f o r o s d , t u b c g c n i s r n o h t e r i a et n u o . e d e t e y r s e e t i r h g , e

m e g r a e r a e s e r i r b e n c o r p r a f e h a r e c a u u o y y a vi h t e t % 3 . 3 e h c r g m urn a e y r G n Wi h t l p o s r e e s o p n i k n g l p e s u c r e c n ; m a a e y n a o f g n e e p d n a k i l n i i S e t rn u t e h t a v a h e h t t A s a o T d n a m i t a t s E o t i h t o r h t e p up p s e D o r p e h t n O i h w a l p u o e r p et r I

h C O Operating and financial review Going for gold – our aspirations and targets for 2012… What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92 Page 5 s d . n e e t n l t n o t n i , n o e f n i . v i t s ’ d n a s d l o l e h t h t i w t n e m c o i l l i w a W s n o i t d . n d n l . t e h t e t a t s E r e r o e m p t c % 0 e v e i h c , y t i m y t r e n r e t o L o i l l i a 1 f e v o m , y a l h t r m m m t s e p s h t w d e v i e c 5 f p o l e o h e e r o w o l e a o r t n o e p p o c a s n e h t m r u c a e n i r o r f r e r o o r f o c . 4 e e r t S e h t o N d a o r t e w p g e r i d n i 0 o t e s e h e v n i a r t v e d p v e d t t 1 8 e t t n M r a n i n i d n g n i e w y g n i t t u s f p e l f s n a n i 2 £ a p d n a t n 3 , , – s e i n a p e b o g n i o m e g e s a e r t e u n y l r r g x e r d l e h h t 5 £ r u O c i r 8 0 e l p m s d l o c d n i w a r d a w s e e m g r e n m o d u l e R p a e e s a e l . a l 0 y e r c n i a n i r l l i w e v e e r c s d e h c r o t l t 2 o c o h b a u e r o t g n e c n i o j t n a t r f t r e h t n p m d y t o t o t s i h Q n a a m a e , e v i c e n e e o e r c n r T o r i s d t s t o a r d n a o p g n i m b e s a o r i f r w e n . c a m t a l % 2 . i a h t o h s f y e k i d t p t e v e a t s r e l e g n l o n i 0 , n o r u m i i o n a f o c i f d n a f o l t i n w q s a s a h a o i m d a u 0 5 l i r f y w e b e e r o i h c o t l l g t g n y l s u 5 t y b s l r u o n n t o i Q e i r p s l o r a i a e d m i a a , t f o K U S t n a o o p p i y t i t a t n e e a r t 0 w l l p g n a h c . i m e u v e h d v r e v e h l 8 0 e , g n n 7 d i t r o a t e h / e n y l e u d ) 3 v e o a t m e t n e m s a h 3 , t m e a v n a b a h i t s t y f e t g r u g r r o n l £ e n i n I a n s y 7 0 w s 1 o n p m o e t e o n e i i o s n j s e s a h p i t s e e s a h f 0 r U o n m e g i v . n e e r o t R a h g a n r u s o c i o w e v n 2 s r u i y b r u i t e n e r t l e e s f a c t l c r u o i o v n i r a e t s e e h t S u e h c l s o r t e i h t r , e o e e s ( e t r l m , e a , T p t c g n t a n o e i e t e s o r e t h g s s e t d e y b f d n n i t a n n r o f i i l i h v a h e t c e n s b a n k t e h t a t t n o t o r u o d e t s t t h s r i r e w i l . % s c o e E s s l l u d W n l s d e r o u E d u s a e 4 e s t E d f n , e w e i d e e r p s e t a m i t n o a . r e f r a p w n i n rn i m i t l a n e n r a n w s o u c n t o o r o . r h f o v , s e s n a n t e s n d n i r d t t o p 2 n s h y r f e h e h i r m o s a e t n a , 2 R t s 4 d l a e t s m l g n T c i w a b r t o c n a s t n e 0 . e m e u u a e y f f £ o r a a M s e e v f g e l U c s o d a M n a a e o g r l g n s a e o d t e e r s l a e m p m i i u d a t s s t b 0 2 r e i p a s e t t r i n e m . a e i e m i o e v a n t n u e l t n e c E c r c c i n e e u o r p i d n l h i a r a t S o s e h t l e u o e v i v n - r h e c i i i n m o h e i t n u o c c a s e l a l b r e t l a d n b a o c S n a % 4 n a n a n t i n o g n i n t o e h e h g r a n v n c n e W t c a l t c a – a e y t O . 9 h c u p t a v e d l p i i f n a t u o n a n e w h T i S t i n a O h T i d e g n a h c 7 n w s d n y t h t i w y b n a e h t % d a t n e o r 0 0 f n i nd o es l a t 2 t 6 . e t o C r e p a r t a h t p u o t s a w - h 5 eased l e w el o t o e e o e h f o l l p e r o i r h t y w e n w d r r p p r a e y t n e m g i h n o i l l i m . ad b h T m erty p o r p o t n e s a p e r d t m e w d n a r u O . e t a t s E m t s e v n i e e c n a m r n sustai e vi l l a r e m e r a he . e v i n o ed l ub o r vert g n rn u t e r r e s e t a o c e r 8 . 4 l t p t c n a t r o , n o i l l i m I a d l e h w e i v the t s m . t s e v n I e ar ne e b a n e l l i w m u s e h o f r e p h g e i l er h c i h w 6 2 £ t p m i r a l a t o t t y % 2 . 0 t s s o r c 8 2 3 r e r o f e r n e n w o r C t s u c o f k c a r t e h t f a e h a ns o i o t u o 8 0 x e d e d i v o r p y l t c e r i and t o i s a e r c n i r u e h a r t e ar ha tha , 7 £ d o t u c e s n o c e m r e t - g n o l t t a h m o n s i , / 7 0 % r u o e m r e t - m e h T t s k r a m h c n e b t s n i , x th d n I v o , s r s d r a w n w o d ss o w - ng o l 1 y , 8 ts g n i r u d r e t n s a d r r u e s a 0 2 s i h c h e d r u o a g d a m o e y a e c e i h t a h o r F o f w 0 / e r e, t I e e s f g n o a t t y b a f t i nd co r o f l y l r e t w d n I . r e i h . e o o es ng t e 7 0 s s t i f v o r c n i k s e p x w r e asse s o t K U e h e r p a e e s ’ e succ e h o r g t a d e rn u t e r at g i y e c n t r a u o r v a h e u t t t 0 2 y l ta v e utur f e s o r r u g t g rk e n a a p i f s i v Q r p m i e h e , x e . r o a h p t a a v e l hal e h l b s r e - m u w t o s s e n e l r a a m r nav e k r K U c s u l he a o F t e h p e w m v e l ab f d n I , n o n a h t t i d ng i eng l hal g n t i l e D P I i e y o s i h T f o c t i ual q f o a t o i t c a n i a a m w a s t he p r u s w e m t rm g n l i m a y e v r o f o f r e p e h , k a e e i t v o rn u t t . s r e e ) D P I hav e u ( d n e e f f e i t u w e w r h d e m r o f r e p p t s u s r e s n o i t i d v e r o te - r a e y ce r e v e h T e k t h ug ho e , s u l p r u r n e v . % 1 . 9 r u o s s e r g o r p e l l a h s u o i v e d l a d o o g e r c e x i v e u o s e h t i f e n e b t l w d e k r a m – a f r c t u o e r h t t E i c a u o een b r p n o c i l e d e A d e t r e h e s n a nstr emo d . n o e n a b p o r p o o rt ho 4 8 5 , 6 £ f o r o t i f e i e h t . n o t a e t t . e v i t u c e x E t s h t t o t w o r g s n a n i t c . o t e r e d f ha as n d th , r a e y h t h C s o r g u n e t d n s t e s a s t e k i l l i m

a h d e r o m r to h h t , n a e r o m r o us r e u l r u u d to a t a D t n e f w , n a n o m ed r a e y r a i w e p x t h e c n a s s e t a v e r y l t l y n a e h t e a v l b a s e g i s s a n i a g a o t e r y t o r a p m o c n o w m ne o r f e i e v o sec hi o f t s m a nu g n s d r r a e i s r u r B 4 . 1 1 e

t ti r e n t r E y g e y ti ec j ers r l a t t s g n s l a t e n l a t y t i l t a i c n p h c e v o a r t o n o , % % d e k r rt o ep r si n i l o f t r 2 £ r m o c a w e i p e g e t 7 3 r u o t e p s a e r r n u o f a r t s a i h w s i t a t s E e W . 7 . 3 o r P a c o t o p T i r u D u o p e r o d a u q e h W a n i f t e s s a e b n o T o R h C O co sub a m to at w o p

h T T Operating and financial review

Chief Executive’s overview and goals continued

For the Rural Estate, the year saw another solid performance, with total property value up by 26.5% to £903 million. This has been a broadly positive 12 months for agriculture, reflected by impressive capital growth supported by encouraging growth in revenue, and we worked with a large number of our tenants to help build their businesses. One of the highlights was the purchase of the Tabley Estate in Knutsford, Cheshire. Gross revenue surplus during the year showed a slight increase to £17 million. Our Windsor Estate embraces Windsor Great Park, a national asset of considerable importance, which includes The Royal #1. Achieve a revenue Landscape and The Savill Building which have continued to attract both visitors and plaudits. During the autumn, the Park contribution of £250 million was closed for six weeks as foot and mouth disease marched Our revenue contribution is the profit we give to Treasury almost to the gates. With its significant head of livestock, and the UK taxpayer and this is the most important of all the Park was extremely vulnerable at this time but thanks our targets. Although the current economic climate may to the diligence of our management team we avoided a single impact our progress, I believe that our policy of concentrating outbreak. Windsor Estate reported a gross deficit of £2.1 million, on assembling and managing good quality assets will provide which was maintained at the same level as the previous year. a sound basis for sustaining performance over the medium- Going for Gold to long-term. In addition to ensuring that our portfolio is well positioned for sustained progress, we are also working hard The Crown Estate is a property business with a difference. to reduce our administration costs and refine our forecasting Although we manage, invest and disinvest, as others do, and cash flow model. we carry out those activities within a unique context. For us, while the commercial imperative is hugely important it is not the only consideration. As a long-term landowner responsible for a large number of heritage buildings and landscapes, our commercialism is tempered by core values of stewardship and integrity. From the Highlands to Regent Street, we have a significant impact on important concentrations of our urban and rural fabric and on the lives of our tenants and the public at large. Our success or otherwise is measured by that impact, as well as by more conventional financial measures. To this end, we use a balanced scorecard approach to monitor progress against our priority corporate objectives, and during 2007/08 these have been distilled into nine high level ‘Going for Gold’ targets to be achieved by 2012. These targets will focus our work on making The Crown Estate an even more successful organisation.

#2. Consistently outperform the IPD Total Return Index The Investment Property Databank (IPD) is the world leader in performance analysis of property organisations and the Total Return Index sets the benchmark for ourselves as well as our peers. We aim to exceed the Index on a rolling three-year basis – and will strive to beat it annually whenever possible, as we have done in each of the last three years.

Chief Executive’s overview and goals continued

#9. Ensure that we are regarded by our stakeholders as the best custodians of a diverse and unique portfolio Although we have consistently delivered on our targets #7. Establish partnerships across disparate real estate areas, we are never complacent. We understand the importance of maintaining a sure balance with other property owners between commercialism on the one hand and integrity and stewardship on the other. We believe that The Crown Estate through a flexible approach is the natural home for the assets under our stewardship, to investment and including the Marine Estate, and we will continue to demonstrate that fact to our stakeholders. disinvestment Looking ahead As markets have evolved, we have become increasingly In summary, 2007/08 was a year of considerable achievement innovative in our investment strategy. Compared to our peers, for The Crown Estate, despite challenging conditions. We can we have a major constraint: we cannot borrow. Instead, we be in no doubt that the coming year will be equally, if not more, seek to grow in other ways – and chief among those is by uncertain. The Going for Gold targets I have outlined, with their partnering with other owners. This enables us to co-invest in emphasis on financial and investment performance, innovation, projects and also gives us access to additional management customer focus and corporate responsibility, will play a key role skills. Our recent ‘Property Company of the Year, London’ in the demanding times that lie ahead. award, together with the innovative swap transactions concluded by our Urban Estate during the year, show that Good results and customer satisfaction depend upon the we are recognised as ‘good people to do business with’. commitment and expertise of our people. Throughout the year, I have been enormously impressed by the dedication and expertise of our employees. They have faced change with skill and good humour and I thank them unreservedly. While we face a challenging year ahead, I believe that our strategy, our targets and our people have together created a solid foundation. We face the future with confidence.

Roger Bright Chief Executive

#8. Ensure that Crown Estate employees and representatives actively embrace our core values It is not only our history and portfolio that set us apart; so too do our values. We are not just another property company and our core values are not just another list of principles. We work hard to engage with our employees as well as with our third party contractors who are, in many respects, our most visible public face for tenants and other customers.

What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92 Page 9

s s e

o t n i s u b w e i v e r l a i c n a n i f

d n a g n i t a r e p t a e r G o O d

… h t i w Operating and financial review

The Farmer Mark Pilkington Warwickshire When we purchased the Ashby St Ledgers estate in Warwickshire in 2005, we did so with a keen eye for how a conventional estate could be transformed into a series of contemporary, dynamic businesses. At Chapel Farm, we invested heavily to help make the ambitious plans of dairy farmers Mark and Hilary Pilkington a reality. To date, we have built a new eco-friendly farmhouse as well as helping to fund a new milking parlour and other new infrastructure. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92

Page 11 s h e i t t t l e r i l h l t n i l i a e c l i c a h t r y w a f e L y t i h n b . l u s i h t e w l i e v a g l , i t c s A o t e h w o a o t n o t . r n u t t a f d i t i s d s t s g n e e r r i e l n i v o e a n i i g r o b i m o n a o r p t i T e h t a r o f t s n e e c n a l l t o d i s g l e m i i v r t f i f o u a f o b l l r ; s c S h r r u o a n o l h s i a n f c e e r a n d o r a e o n i e g a k o t p o t o l i a h c e h e k t n t l i i i t t b n I v w k r o s k i d r a o t h d n g n , t e h t i i d p c w c a c a i B e h t e a t e l u o e r o r t v M e L r i p o l t a t n g . p o l u f r w e t n e t m o r o t l n s n l f e v e g n i h s f l n s r e h t e c y e C i r b u o m e d G f n e h t l c l e k e h T e m a J a B t A r o f i w d n o w s a f o w o d i k o o l t u o r i k S i B e s u o t w e i v e r l a i c n a n i f d n a g n i t a r e p O Operating and financial review

The Developer Mike Forster Luton Part of a three-way consortium of landowners, we worked closely with developer Easter Group to bring the environmentally-responsible Butterfield business and technology park to reality. Close to Luton, this 85-acre project features the UK’s first office buildings to incorporate an innovative ventilation system using earth ducts. The buildings will be energy efficient while the landscaping will create a bio-diverse natural environment. The first phase is now complete, with occupiers including Royal Bank of Scotland and The University of Bedfordshire. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92

Page 13 w e i v e r l a i c n a n i f d n a g n i t a r e p O Operating and financial review

The Port Director Stephen Eldred Norfolk Our support was essential to the creation of a new harbour which will encourage trade and bring much- needed jobs to Great Yarmouth. EastPort is a public/private partnership and the granting of a 99-year lease of the seabed was vital to this major deal. By working closely with the various stakeholders, we enabled public funds to be released and helped ensure that when the harbour opens in 2009 it will play a key role in the regeneration of one of the most deprived areas of England. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92

Page 15 s . s y e e t i g n r i e s s s e r h t o d h t i p l h d n i t i n u n e t e n i i n i w a r n u f m f e h M o s o f ) t n e i e w e d s u b d e . a m o M G l e s y n d c b t n a A s n a t s i d e l s a n a C B M a n e a M e v l e i l a g n h e . n o t y l c r e n i v l w o c S W L i r r a ( m S h o r - y l e t s a i c t t 7 0 0 2 l u e r r o s n u o i i s n a r e l i c i y , t C i m o s s t r i m r o n n o p i t s n n a i e b a M i c n u o t s m s i g n a p e h t m r b C i t a u B n i c n i – d o t e v e W s m t s r s ’ g a F e l d n n s i d e e n e n f o a i e a l m - W l i o j e n i w o i r b m s a e u l e u o C e h T o l G n o d n o L e h T s u B c n u o C w o r g a m s r u o a v e m e W l p t s o p w e i v e r l a i c n a n i f d n a g n i t a r e p O Operating and financial review

The Teacher Maria Fay-Russell London With many key workers unable to afford to live in London, we were one of the first organisations to implement a Choice Based Lettings (CBL) system. This gives key workers a real choice in where they wish to live and provides accommodation at reasonable rates. Our CBL system went online in October 200 7, so teachers like Maria Fay-Russell can check out properties from her computer. Maria found a suitable home online and is now living with her family in their new home close to Victoria Park. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92

Page 17 w e i v e r l a i c n a n i f d n a g n i t a r e p O Operating and financial review

The Energy Project Director Martin Wright Northern Ireland As landlords of the seabed around the UK, we are passionate about our potential to encourage and enable renewable energy projects. During 2007 we arranged a five-year non-commercial lease which allowed Bristol-based Marine Current Turbines to progress an ambitious tidal energy scheme based in the narrows of Strangford Lough in Northern Ireland. The 1.2MW SeaGen project, which is due to be commissioned during the summer of 2008, will provide renewable energy for around 1,000 homes. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92

Page 19 w y t s s s s e . s d t o n r a r e o n e r a i s , c k h t a h m i t s r t u a o t i e y o p e e t w b t r r o f e i t n e n e e y t n d o w i C n r r h r r e a r t t a e p e g h r e v o m e t r t e u c n i o h e h s n h t e e W s t e m t r d d s . u , , u r g s f o t e v o o s a A a e s r n a l e c l t c e d n n y a h a l t u t r n l f y a t a e o e s . t t o u o b y i o a e n y a l t h e y r i t r d P l t o s a a e n e b l e r c m r c y l i r o G s n o a e e v r i s i f i t o e e S h r a r o f a w f h t i t a t l a n t f r i n d h t n u b e i f o e s i e a r e l g l r i h n o u A H t e p s e b b e K s i p i n o i t r o t i a u c a i c t r o w e o y v c t s r u t n i s s s n w t t p i h s d a a e a y t a l r e r o P r h a t p d c u r t e n o p p u t e r e k r h e t s o a e r t s t n c i h a t r e s o - s s o i s u l c u e h l m m k n i l r e r c b t w e h T f w e R i F a M e h T p a C R w e i v e r l a i c n a n i f d n a g n i t a r e p O Operating and financial review What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92

Page 21 r d t , s e d i s r e e t s t , e h n . r e t e f a a f e s s c i o s l n o e u e v i a l e o t c o a l e e n i h n o e n w e L t c a v s s s e r e t o e r a f e h W r u t i n o y n a r u o d n d n a u b r e n i t f e t a d d n e c i h w a e h - l s u . s a t e f g f o r e c s u c o f f o c r o g n . f s u n i u B l n d t e k n o e s e r a i i t c a t s o c a p o r f s i t c r c i v o n e n o r a l l l u p n a a n o n n i k o o e r i r e h e l i C A m c i d e a i a g b d D e f e i a c o m y s t r e l y l e v i n a l a a i r o e d h e s f o s A t n w o e h t r a p n o d n o L H f o w e g n . a d a n e d y d h d e x n e t t u c i s t i a r f o v n o t n t r t i m p n o h C c e t l c d n u s g n m r o r a r a o i t t r w f c a c n e i P i a a , i n P a n e h B i o p e p o e e l e i t r s i e s m o c i d t h g e m n o r p H e r a r l a i r h a e h r a t n r o e h t i c n a , t u o d i v i e e p o a d n u o c u d l e l n n o d n o r n - o - t e h e h T e x E r a S L e h T A n a a u q S m e e w o n a g r o w r p t W c i f e r w e i v e r l a i c n a n i f d n a g n i t a r e p O Operating and financial review What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92

Page 23 , t e g h t t a e e e t a r d n h t i n s e i w a h t k o o G o t l t t a l t t n a r r e r e k t s E t p e c k e r e a r w m r a c e h t n a r e h t k w s e A R P o a . o s , t f , s e F d d s t n t e g s l s e m a m o t a E h n i o s s e r l e v i o t g D r a n e s t i c h , u h c e v e i v W i 7 0 0 2 G r o i d s , , s h o e t f s o e u l n t l d o h i h s s n s t f o w r o t n h t o i n n a o s u a n n r e m l a o n d t c i o e f o s k n d n p e r a m n n o g s i t a a l m p u r n e v e c e e f y i t r u h g Wi r a m e m y r r o d u w e t y r f y t a d n t i h a b O a r x u o o l a t a F i . e B r h t a n e r o a b s l t f o t a s d i r s E o c i e h t s r o e B e t l l e t g n e g r o o d h g i i n e s f f l a e i p p u e i r a r a N e v s r g k g n i e n e r h t s d n c n w o i e e e e e e s r n u s n a h h h h C o k i l e s i d t t a c a P t r u d t Wi W e h T e g i N w e i v e r l a i c n a n i f d n a g n i t a r e p O Operating and financial review

The Golf Club Secretary Colonel John Hunt Berkshire When the Berkshire Golf Club decided to move ahead with two major projects, our support as landlord was an essential prerequisite before the club’s bank would agree funding. We made changes to the lease, which gave the bank sufficient confidence to advance the necessary monies. A refurbishment of the clubhouse and renewal of the irrigation systems on both the club’s courses, together with the building of a reservoir, are now close to completion. Operating and financial review W i f c h – a t 3 w e d o O 4

Achieving v – e 8 r v i e w & p r i o r i t i e great things s 9 C u – s 2 t o 4 m e r s t o r i e throughout s P B 2 5 a u g s – i e n 3 e 2 4 s the year… 5 s s t o r i e s 3 P 5 e r – f o 5 r m 7 a n c e 5 G 8 o v – e 7 r n 0 a n c e 7 F i 1 n a – n 9 c 2 i a l s Operating and financial review

West End property swaps Demonstrating its innovative approach to adding value to its Regent Street portfolio, The Crown Estate this year completed two major Regent Street property swaps, first with the Pollen Estate (Pollen) and then with Great Capital Partnership (GCP). The GCP swap completed in February 2008 and was hailed as the largest property swap transaction in the West End ever, involving 580,000 sq ft of prime West End property, valued at over £350 million. The £100 million+ Pollen swap completed in December 2007. The GCP and Pollen deals together unlock over 1 million sq ft of development potential on Regent Street, expanding significantly the scope of The Crown Estate’s investment programme to reinvigorate Regent Street and its buildings.

For more information about the Urban Estate m see pages 36 –39. Operating and financial review i W f c h – a t Expansion of offshore 3 w e d

wind farms o In 2007/08 activity in offshore wind farms increased significantly. The generating capacity of offshore wind farms increased to about 500MW, with ongoing expansion reaching 1,000MW within the next year and over 2,000MW by 2010. Two new wind farm sites were granted consent – Gunfleet Sands, off the Essex coast and a project at Teeside. Following 4 the announcement in December 2007 by John Hutton, the O v – e 8 Secretary of State for Business, Enterprise and Regulatory r v i e

Reform, of the Government’s intention to begin a strategic w

environmental assessment into further delivery of up to 25GW & p r i of offshore wind energy by 2020, The Crown Estate is working o r i t i with industry on ways of facilitating this. e s

For more information about the Marine Estate m see pages 40-42. 9 C u – s 2 t o 4 m e r s t o r i e s P 2 B 5 a u g s – i e n 3 e 2 4 s 7 s s t o r i e s P 3 5 e r – f o 5 r m 7 a n c e 5 G 8 o v – e 7 r n 0 a n c e 7 F i 1 n a – n 9 c 2 i a l s Operating and financial review

Tabley Estate During the year we successfully completed the purchase of the Tabley Estate in Cheshire from The University of Manchester. Comprising 1,460 hectares (3,608 acres) in north east Cheshire, the Tabley Estate includes 18 equipped farms, a further 18 lettings of farmland, three land parcels let as grazing, 52 residential properties, 13 commercial leases, the Cheshire Showground and a number of sporting agreements. This acquisition represents a unique opportunity to add to our Rural Estate holdings and underlines The Crown Estate’s commitment to remain a major rural land owner.

For more information about the Rural Estate m see pages 43 –44. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92 Page 29 a o i g n i s s d l d n a r e g o a o f t f m o e n i s u s m r f s y e r a p r o b s p g r m r e t n a m e w n e h o h t t s o i o c s n i e h t s e n e , l f , s i s s s o r o o c t p l a u t c a n a b r U i m a b a % 3 n o r t n e % 2 0 . s n o i s s i m e y b s n o o c r u o r t n o 3 i s e k i l - m e x E c s r s O C t c l l a n n o o i s s r o f o t o n e r i f - i i m e t s e d 2 i d b r a y v e L k e s i O i c % d e t c c e l i m C f 9 a o r u o 1 r u c m e e u r t s f g n i n 2 j b u s n o r o r e o n i e g n a h o p 2 – i t c u d n C O C e d n o r o n e i i l u e n e k e v a h o f a e t u o e b c u d e T t r b r t a O C t c u d t a m i a e c u d e W n o p e r e r l C e h s a h t s E . s e r l t o i t g o u s l a t d e i n i g a m h i f r t t e n a b g a r o r e v . s g n i d r o s e s a h c s ’ l i e o . 2 5 f n i r U n a t c n i c t a e r u b s a e e g a f r a e m u p d n a o a h y u w t p e o m o d t t r o 5 4 s r T e e t e d f o j a o . s a o F e s f o g l v e s l c i m s t e t h r a l a r s t a t i t o t r a p w h c a o c – R A m u o s t n e g a w e i v e r l a i c n a n i f d n a g n i t a r e p O Operating and financial review

Acquisition of Deganwy Marina We completed our first direct acquisition of a marina which has expanded our portfolio of marinas to include wholly owned facilities branded with The Crown Estate and operated through contracted partnerships. Bought from Interguide Investment Holdings, the 165-berth marina is set in the village of Deganwy amongst the beautiful surroundings of the north Wales coastline, and has superb sailing waters. The marina will be leased to Quay Marinas and will operate as Deganwy Quay Marina, with the office and retail space leased to Majestic Yachts. This is our first direct investment in Wales and the first acquisition made as part of our new marine investment programme. This purchase increases our exposure to the marina sector in north Wales and complements our interest in the nearby Conwy Marina, also run by Quay Marinas.

For more information about the Marine Estate m see pages 40 –42. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92 Page 31 e . e s i r s e k a a n d l e h , s g m r i u o i e h t e t d n i h t y e h t o t q e r s i r n a . s t n a n s s e n i s u r e w s n a m r e b g n i t a i t i n i a o e t e d s r e f d n a d e h t o s a d e n o a m n , s , n o i t a g e h t g n a h a t g n i t e d o m o s n c m e b o h t l l e w a c e j r o s t n e m s a d s s o c n a h n i w e s a m a s l u e r o f f n i ’ l a g r p e n a t n e d e , s e u o c o t e e t s m t s t n e d s s d u t n a n g n i s u b i l m p i a r e t e D o e n i l n o e t y l a t s E a e t s t n e l t e r c n l s m t s a t I g a n e v o r e t s o c . m e p t d n a r u R e s o e d e h w s p o n a m e d i v o e v o p e d r r p o a h h t r p , e g n o m e v n i - o c y i h s n r p i n t a r p m n s s e n i o r t u o e l i s e n l l i w t c e a t s e j l d n a b a v t t a w l o t s E r a w r e t b a i t a h t n i s u b i s l e o v n p n o r i - y o h i t n e p r l r r ’ l a w s a f o u i e n o o c . 4 4 e r o f a t s E m h o s – a e l e D e m w t T e r o r o r C f e 3 4 f . d n B ‘ o t v n w n i d e s s e i r e e b s s a a t i p k s s o e e s i g h r i e g u u d t r o T o i a c a r C o t a p c - n m e t , w c o f u e n i s u e s 7 n e d r p i h s n r o e h t e l b t r a p e e e e s F o T m B ‘ 0 0 i c l a r u a i n a t l d s e w t a t 2 a l i a r f f o p p h n e o i t a l e n a a h t n a a r v a t o o l T e b R n I m w e i v e r l a i c n a n i f d n a g n i t a r e p O Operating and financial review

Customer focus programme In 2007/08 we initiated a customer focus programme to improve our performance in the area of customer service. We identified two particular strands to pursue: business efficiency and business development. Working with Managing Agents from each Estate, we are testing and developing specific ideas in pilot areas in the south west of England (Rural), west of Scotland (Marine) and St James’s (Urban). We also involved colleagues from across the business in the design process by asking them to contribute their ideas about excellent customer service from their own experience as customers in their everyday lives.

For more information about the Customer focus programme across the m business see page 51. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92 Page 33 o s l a e K U w h t i w t n i 8 l l i o j o t o n 0 / v a h e v a h e w m o w t , s v a S 7 0 e u s r g n i r o r 7 f 0 d r e t a W 0 r e y l n 2 f e b f 0 o o t i s e h T s k n o i t i n g o 2 n i d e t a i n i i V o f o a g h . 8 e c m u n 0 p e e w r e r r i V 0 a r e n e p c r a e e n o , e l t s a t 2 t a M x i s e g o t i s C l a n r . g n i d l i u r i v g n h c s a t s E n I c s d n r r e s e B o f r i e . a i t o i l l l b k a a w a L k s r a a c s t x e r M l i v d e h . o s d n a n i i c a y n t i i n o e r b t c f a y p i a S l e z W l s Wi i w o i i t u a r r t h R h o P m t k r a t e h t e h t i t a w e n e h T p h f r e h d n a 0 w e h 5 . r o o g n t u o t u t t e i T m l e L b 0 0 r e o i 1 £ a c o a d t d n a g o r u f , 0 r f l r u m t n S o 1 t s e u , e l i d n a d o i t t w e 4 o n t n e A s l . 6 i f e n g t r v s d 4 c s a n a r a m n n – a a t e e v C w r o n o s e c B I R i d 5 4 l o e b o e i c w a y o f o h t f n i e e s n x e u a o f o h e h g e t r t o t t e g B t s a a 1 y o n i n R a i e h l l 1 l i p p r m n i r o b r f d e i v b r e g e d e g v a e s t n s n e p n a e o F e s s a i s e d a S o s h c i o n n i d n l n n e r e d r t e k l a n i i u n c i e h e h u a c n i f l t B w e e b t n a i h T m h T u T t w e i v e r l a i c n a n i f d n a g n i t a r e p O Operating and financial review

Stamford Street We made our first major acquisition under our new residential investment strategy of a 58 unit apartment block at Stamford Street on London’s South Bank for £23 million , which is being built for us by Crest Nicholson. This is the first major investment by The Crown Estate to supplement our traditional residential portfolio and is part of a strategy to replace assets that are sold to leaseholders through enfranchisement and lease extensions. It also reflects our objective to invest in areas with good rental and capital growth prospects.

For more information about the Urban Estate m see pages 36 –39. Operating and financial review i W f c h – a t 3 w e d A well o 4 O v – e 8 r v i e w & p r i o r i t i managed e s 9 C u – s 2 t o 4 m

and e r s t o r i e responsible s 2 B 5 u s – i n 3 e 4 s s s t o r i e business… s P P 3 5 a e g r – f e o 5 r 3 m 7 5 a n c e 5 G 8 o v – e 7 r n 0 a n c e 7 F i 1 n a – n 9 c 2 i a l s Operating and financial review

Urban Estate

he Urban Estate includes shops, offices, retail and Property value including indirect investment 2004–2008 (£million) business parks, industrial sites and residential Tproperties. The year to 31 March 2008 saw the 5,394 5,381 Estate perform comfortably ahead of industry 4,556 benchmarks and meet its target for income returns. 3,740 3,440 The Urban portfolio represents more than 78% of The Crown Estate’s total property value and over 75% of its gross revenue surplus. During the year under review, turnover including indirect investment was £204.5 million up 4% on 2006/07. Property value including indirect investment fell by 0.2% to £5,381 million. -0.2% 2004 2005 2006 2007 2008 During the year, significant investment activity was undertaken across the office, regional, residential and retail portfolios. There was a successful programme of office sales in line with the investment strategy and Regent Street continued to attract Turnover 2004–2008 (£million) major new retailers such as Banana Republic and AIX Armani as well as moving on with its development timetable. 188.6 195.7 194.4 177.9 183.3 It is clear that in the early part of the financial year, we enjoyed the final months of a long bull market for all aspects of commercial and residential property. The impact of the credit crunch became clearly apparent by December 2007 with the annual IPD industry benchmark in the calendar year displaying a fall of 7.7% in capital values. In effect, market liquidity almost completely dried up. However, despite that, we were able to continue concluding key asset management transactions. -0.7% 2004 2005 2006 2007 2008 Consolidating our strengths In the West End, take-up of office space was in line with the long-term average and supply remained restricted with a vacancy rate of just 2.5%. Prime rents rose 17% to £120 per Income from indirect investments 2004–2008 (£million) sq ft but this is expected to move sideways over the next few 10.1 years. The vast majority of West End deals are in the £60 to £80 per sq ft range, which is seen as more sustainable and it is in this bracket that rents are likely to be more resilient over the next year. Throughout 200 7, retail was the worst performing sector with a total return on the IPD Quarterly Index of –11.8%. This was due to poor rental growth of just 1.6% and a fall in property values of 15.8%. Central London retail, however, held up 0.9 particularly well with a total return of –1.4%. Our own 0.0 0.0 0.0 2004 2005 2006 2007 2008 experience on Regent Street has been of significant demand from retailers wishing to gain representation as the result of strong asset management plus good levels of tourism. This relatively healthy performance is reflected by sales which Turnover by activity 2007/2008 (£million) grew in London by 2.7% in the year to April 2008 in contrast to the rest of the UK which fell 1.5%. D E A Retail 69.7 C In broad terms our strategy has been to invest in our core A central London holdings where tactical opportunities arise B Office 95.0 to assemble blocks of property and to exercise greater C Residential 19.4 management control. D Industrials 7.7 E Other Urban 2.6 B

Page 37 . e l p r u p n i ” . d e 7 t y t i C t h g i l t n h 8 g 0 0 i h 2 t n 0 / e m t n r e t s 7 s o m e g e p d o o g o l , t e v R e e s 0 0 d t 2 t n a r u o r e b m n n i m t r d a u , t n o c Q s e e k a m e r r n e c e g n i r e h T W h o t D u c t i w n e m p o l e t u d e g n i n e n r t y b i S t n d e l a r d a u t n s s n a v e d e g e i c Q u n R l p d e t f o i t w t e e h t e i v l i n u o a i n o r e h T a t r o p m n a r g C w e r g o r p i c r t S “ e A f d l s n i l l r o g n t e t s t i f o s l a e l t o f t f r g n . s d l o t a h t a e r a r y e e w f t n e t s e a p a y t i C , p a p t k i d o m t s e W t s r o i n e h g n i e r t S n o o h e e h e p q s t y o R i f o e b r i v a S t e t r e v o i t a s a t s n a f g e t n l i u g o w t e c w s y w o n w s d e s l l c t i r e t t n d g e R s e i t r l i u b e s u h r e t n e r P C G o j a m y w o s r a b t n i l n i l p e i h s g e h t i e s u t a , t s e r e t n l l , o e i t n e g s a e l t n e é f a b e k i w t f n o f f o s n o a t e e r t S e s u t S e h T f o t n e n e h . d e u l a l f d p o l i C W n o m o r f e m e g e a t r t e d u n i r u d . a n i f e b d n E e r t s e R e g e R d e x l e r h t t n e i m , w t , e rn r u o f t n q s e a v R a s n a r e v t s l l d e x i i u d l o h s 0 0 0 , 4 4 a d n s u o i e u l e p o r p e h t g n n e m p o n e k e r t n a p . n o t s d d t s i e t i l o f t r o l c n d t a s s e f o i m e a i l o h e r e h t o i v - d e x i r e h m i t e r a m t i m e g w e a s l e d e d p r e h t i t n v l e t o y b e s n i a w n o i e c c a t r v n n i e n s d n e n i a m e r f e s d n o i i . s n o i t l l e r f m p o l w a s W e t o m o r p 1 0 1 o e H e W t s E e v e d e R e r p l a n o h e d u t t c i h T e d o m e n i e e f f o C m r t o y t r s i t r u f d c i n d d n a l i t i h t o c d e a r e n m o c n r u o i m a g e r g o r . t x e n o s n o i a e t e ) p l l 9– e h a y b l a n o t t n , e c i l e h t , s a i p a g t d e s e l n e v e s o n e e r , o 1 t 9 e d n u P r a y l o r t n o c r u r o j e r v e y g r e n t x e i h w l o e t a n v r e s o e u f l i m a l a e W i d d a l c n o c t S t d e e a s n a r n i v e d e r t n e n rn e h t u o s i l o f P o f t e w t n a r d e g - i r t m o r f t e e r e p o r p P c i l i l a e r 1 / t e e r l l i e t i n u a m e r r u c C G ( e r o t s o d a h d l e h t o n e m s E h c i h w d e r i u t l i u b e r a u q i t c a s n w e n d n a b . e n a d o o g e t r o w t S e v a h a u e h e w r o t S p . n o , t s r i f y t r S t e h t c a s n a r t ) t s e i p a b p a r , h f s m r s i h T e h T Q s e i t n a r g b u p t , s e m e h c s , rn u 0 0 1 £ t r o p e w d n E t s e g r a l t n e g e . s k c o l t n e g q c a e h e l l i w t r a p t a e t s t s e r e q e g n i s u e w o s t t r e j a m e h t l a r t n e c b n e l l o t p o l e v d n a t i w R c a p s s t e r l l i w e h T p o t n a t r o h c u . s u r a e y d d n o L e r e v o a p e R e h P t n i e a e k a m p i h s g a h T t e e r t e h T s A t 0 p i h s r e n t n e g e ’ n o d a e r l a S d n o e W l f e s u - p o r n I s i h t . e m . h c r i S d o f o n o i t a e r c e h . r R t s e W . v a . p e 7 t a h t p m i t e h 0 0 e r e h w e h t t n e s n o t C f o h t , d n E d e p a w s r a g l a f a r T e h l l i d n u o r a . s n o , l e s e i t r e h T i h s r e n w o w e d n e p i h s r e n w o e c i f f o l a y o R c t r a P t n e c e r f o t o b , s k c o l b l l i m t f d l a w , s t i n u f o d n o L t e e r f o h c s i t c y l l i d u 0 0 2 t a t f 3 0 2 t e e r t y t s r a e y é f o i l o f t r o p e d e x i m l o h e s f o . 2 0 0 2 n m a h t i w , 0 0 4 l a t g n r o a e h , 1 W l a y t r e ( t S S r u o r t q s y g e t a r t w o n t s o m d l o h e q a s i a f y a M d i l a t i w c i g e e w e i v e r r e t f A e r e h i n t s e W d e u n i t s e d e t n e g e R a h s a C r a e l e e h t d a c 0 3 t a h t e , n o d n o L i t n t e v a g l c n o s u i p a e l a d m s d a c s a u o w n a 0 0 5 £ e m e n a e u q h t c n s t h g i l t a r c d e d n a h t e n o i n o i t n , t e e C , n i d u o e W i t n e t o p r t g e l % 0 7 t s p o r p g n i s i r p m o c . a e c s r e , ) r A n a i s c i P l a i c n h t l a r n o c , y t i l i b a n i a t s u s e d i t s n a l p r u o u l a v q s a w , h t d t a d i n i ) e a l n a t f t t ; t d n o B n o h g i h g h c s r a m o n a r u o r t S a n r e t n n o l l i m h t e w l e s i r 0 e e t n s e h f o h ; t i d d f n i d i t a e e h t a f f o s t i - e g i h r h t i w s t n , t n h t i l o s w n a r f i f r o f s e i a e m t s 1 s e i n i e b m e c e D p a w d v o e e r e e r e e r t r h e c s u o t r m l h t , y r e l l i t p d w r G d e t o s t i w r r a l 0 0 0 , 0 8 5 a r d e h e n n o i l l r d e n a , n H e v n u u o H d n t i n i t t n t r e t S e N t S t S n o i t i i , r e b m 0 2 , 7 t n r d a n o i t a H a e a e e v o r p l o h e e r f s u j v k n o c a u e h t d n a a g r y t s e i t t t t n i . s t n e m p y 3 d e h u t g i m r r r e e v o n i , t , t o t d l i 8 0 / r e h o e s e c a c i , g n r b t e m p o l e m p o l e p o l h T s i c a r e r e e m m a r e v o p o r l a d l a t n e m n o u Q d n a u Q e c l i c n e e i n o t s r o c i l s o p r e c e g o r r o t i t i e a r n p S e r r e n e u e n o k e v l o a l f s n u b e v e v e v r u o r i u q e e F e l c e D e h t e r h t e r n e g e w o n e g e n e g e p 3 p p 0 5 3 r u 1 s i h f e h 7 0 0 s n n o m A O i p o r p 1 R a r t o t R t S e h t r u f e m o s l e v e d c x e s e r o t s n I p o r p o £ v n i i w o 2 t e g o t i V ( e K ( c a s a R T o p e r v a h R e d a p s T e d 2 o C d n a g e r t S i m g o r p n i b u p f i n g i s d n E i v n e d y h e d a P t i Operating and financial review

Urban Estate continued

Security of income (net rent) Urban commercial portfolio (£million) We also made a number of key disposals, including the Oxford Street Quadrangle. This sale, among others in High G A Holborn and elsewhere, is part of our strategy to dispose of A Lease expired 0.8 0.4% B F non-core assets in order to concentrate on our core London B <5 years 43.2 23.9% E holdings – including Regent Street – and diversification C 5–10 years 45.6 25.2% outside central London. D 10–20 years 50.2 27.8% We formed an important partnership during the year, the Gibraltar Limited Partnership. This is a £600 million, 50/50 E 20–50 years 9.1 5.0% D C F 50–75 years 9.2 5.1% arrangement with British Land through their Hercules investment vehicle to own and manage large retail parks G >75 years 22.8 12.6% together. We have contributed parks in Cheltenham and Leamington Spa, with British Land adding a park in Edinburgh. The partnership will enable both parties to share expertise and generate mutually attractive rewards from a portfolio of Property value by sector (including indirect investment and owner occupied) Urban Commercial (£million) successful retail parks. F DE Enhancing our residential position A Office 2,231 47.6% C Talk of a crash is probably extreme but there are challenging B Retail 1,753 37.4% times ahead. The RICS UK March 2008 housing market C Retail Warehouse 287 6.1% survey reported its lowest reading since the survey began in A D Industrial 118 2.5% 1978 and the stock of unsold properties has increased 50% B E Residential 71 1.5% over the past year. We however expect ultra prime capital values to be the most resilient. F Other 231 4.9% On the lettings side, the story is different. The Q1 RICS residential lettings survey reported increasing occupier demand for rental properties and increasing gross yields. Property value by region (including indirect investment and owner occupied) Urban Commercial (£million) In March, we completed our exciting new residential apartment development in Stamford Street, SE1, just off London’s South F Bank. The block of 58 one and two bedroom flats is in a prime A West End 3,399 72.5% E location on the South Bank, close to the National Theatre, B City 227 4.8% D the OXO Tower and Waterloo Station. Setting a precedent C Midtown 93 2.0% C B for further investment in residential property, this £23 million D Rest of London 27 0.6% purchase is our first major acquisition designed to diversify E Rest of South East 142 3.0% A our residential exposure by building a more extensive portfolio of market let developments. We have now added to the F Rest of UK 803 17.1% Stamford Street purchase with an acquisition of a residential development of 60 units in Paddington Basin which offers good rental and attractive growth prospects. Maintaining our position in the industrial sector The current dynamics for investment in the industrial sector are not particularly attractive. Rental growth continues to be modest and there is a high level of supply. Returns will also be damaged by the introduction of ‘empty rates’ in April 2008. The outwards movement in yields is however returning the sector back to its traditional attraction of high income return. We are comfortable with our existing holdings, particularly recent purchases which have indexed rents, long leases and strong covenants. Our strategy is to seize opportunities as they occur, particularly where asset management initiatives can generate greater future value. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92

Page 39 , r e h t e h . r l h t t n y i w l a e h t i a f y t l r a f o i y y i w , r o o t . s t n e r n m i r p i c f d n a w e s s o a M f e s e y - l t e l d e d o t c e s e k c l n i a t r ’ s g n o d n a r c k e b n l a e h t d n a y u b r a e w f 5 1 . e u r e c n o c A s r u O m o n o e c g r e n o d n a b r e h t a e k r a s e m . e u n r e m m d e l e o o t d n a a t e m r e m g e s t e w t e k h c u m s e c i r a m . n m k c l a v c e d e t i g n i s a e o L e h o y t n e m t s e v n i o c m e e l r e y u b o o y e b y r e v y d n a r e v t a d e t n r f e g n o l n a c o t l i d n e p s l g n m i h m l a . d n u i c s l a l b o e b i t n o c e h s i l e r a m m o s i r c n i t v r e s n o d s e r e v k o w o i t a u i m e d d e u n g n i s u o h e r a w o c e o s i d o n y a m o t e w t u o o o t r o t s e i t i n u t e l r e t - e b l l a i s ’ s e m a r e v e r n r o s r e h p e n i e t n i q e g g u r t s i t r e s e J t c e w e n l l a i ’ s e b e c a l f e , n t o t o t s l l t g u o r h t e v a h r a o L f r e t s e i r e t u b p r e h w o c d n a r e g n o n i l i a t e r l e p r e d n u S l e l p p o r p g o i w l e p x e i n u e g f s d e t o n i p v a h r e t a m p i n t d e h t r o p p o i t n e , t e d n a o e h r n r e m u s n o c t l l e s d l l s s e n i s u b b a t s a l e w d o m d e m e h t e o e t a t s E e t s e s r o l % n a o d n o L r f % 5 1 i . s a n i i w d e t c e p x e s i d e t c e p x e t n a v e k r a t h g a t n e m t s e v n i w e s rn u t c n e r a l u o l b a v e d n a m e d o o o c m d l e p p t y , m d n a l e 0 4 m s t n e m e r a m d n a t e i l a r w r l a h i y o y b t u t n e m o r o t c e p x e a e r a o p p f w o t i e w e R t u b t a h o r c o n e r a e y b z i e s e r e o d e f l a t y l o s i h c a s m o h c . d n a e i s e h e p x e p o w t s a e e l a r C d e t t e w h t l o h e s a e r f d l e w e h y r a l i h t n e c r a y l p p u s l s e c i t c e p s h t e l d e t n h r a t e f f e r u e f o r o c w g n i y u n d n a a d e v w o n . n v w i e y s u r e h w o i t n e f o l u c w t u s r u o f g n g n i i i c n a n b p p o v e d o d n a r p e h T a e r c n e b n e h s t o o i i l e v e d s i f o o h s s e u l a v t u f k . s h e h o l k c u b e r d o s m i v w t c e p s o , t e d , o p p u s . s l r a s s a s rn u r g t r o t t x e n e h e v i f o l a e i l e b t f o n d i s e c e p x e f g u m t p e h n c a l r p r t s a e t s i t c u r k c o t n o l a t e t o o e v o e l a e h s e u s s t y b e k r a t e e e m e r p r t n e s e e q o n i r t t s e v n i s i h c t t e e h e r g h d e e v a h l b s e v e l t c a d e r u c e i r , m n s y l , s t o c t u i w e b r c o h t n e r m t r a a h u a m h g s e l e p t l e v e r a t s u o e , r l c s t t n i d l l g r a l a l n n l n e r d s , r e v e n r n o c n a c e e l e u o e i r e n l a s e c i t i . g o i e u o e r a . r u f i A n n o c n i i h o t s e n 0 1 0 u s s r e v l t b t c e p i w i r h b i i c i r u f o l n w h g b a o . t n o h t t u c i a t t u i p r s i a l 2 e r e i , d a o , K t g i o g i p g o d n e w o t i t y d n l i t d n y n i n r p e h x e t c e W h l a n l a d U i m e r s t a t d e v o H d i e t r e d s a n i a h e d w u O e . n e d m r e r a V n i v o n o m o c t s a i g e m , n n a a c e c h t s i i e v i n i a e g e n a s n m t m o n p t L n a s e r t r a m s i s e . s h r r a h u n a n 4 6 u . e y y r f r o i t i t l u l t m w o d , - g e r g r e u o t a r 9 0 n a s d l a t n r p m o m e r t a r s g , r e v t i s s l p u t . y r e t u n d n e i e v 0 e d r e l e t - , t e , t e i a o t a l a l l a i c s r a f r e r e o t v t i C g r n s s b a f o e n i t n o i t p - l 2 c k l i l u t r w e i a t r e p h l i s d o n e m a d h t r e w e b e o e d l s i r p t e p m t t i p t o o n l i a n a l e k r a k r a e r o e t r n u k a e r e v i s t u h g m y t t e l e u n e p e s e r o r s o w o h r e v % 7 n e p h u o o i n o i h h s e o c e o h n i u u n W L m T o s o H m v a d f d O h r i y o c R p w h 3 O c o m n I a c i a i T p u O t p r F d f t f n a o s l a e d p i h s r e n t t n e r a p d e t m i m i l e e g h t s o t f o t y l r a l u c i t r r a e i P ” . e u l a . a n a a p v e t a r e n e g e u n i m h g r u b n i t i n u d E t r n a c e d i s t u o w e i v e r t n o c o p s k e r u t u f , r u c c o l r a p t e s s a l a i c n l i l . a n i a p o i t f e v i d n e e r d w a L d r n a i g h s i y e h t e a n t i n i e z i t t a i t n i r e t a e r B K a r r t e h t p i e s r e h w W “ g i n i r o F O w s a Operating and financial review

Marine Estate

he Marine Estate includes 55% of the foreshore of the UK and almost all of the seabed out to Tthe 12 mile nautical limit. The Marine Estate covers a diverse portfolio of interests and, over the last 12 months, has recorded a good performance in a challenging environment. During the year, the Marine Estate turnover was £41.9 million. This performance represents an increase of 9.4% over the previous year. The total property value of the Marine Estate rose by 10% to £370.2 million. The marine aggregates business performed particularly well, with revenue up by 12% to £17.7 million. The coastal estate, which includes marinas, ports, harbours and other coastal activity, contributed £11.3 million in revenue. The renewable energy sector of the Marine Estate experienced a significant increase in interest from both Government and the general public during 2007/08. At £1.1 million, the contribution from Tobermory Harbour where we have invested £320,000 in two pontoons that will the renewables sector was relatively small – however, we be leased back to the Tobermory Harbour Association. expect this to increase in the coming years. The performance drivers behind the Marine Estate are diverse and often resilient to movements in the wider economy. The Government’s support for renewable energy and, specifically, offshore wind farms, is a particularly powerful long-term influence. We have begun to implement a strategy of developing a portfolio of investments and also actively supporting areas which indirectly benefit the commercial dealings of the Marine Estate. The year was characterised by important progress in three distinct areas: in our established business sectors; in developing our portfolio of interests, through direct investment; “Our strategy to expand and in continuing to identify and evaluate the latent value in the Estate, such as the potential for renewables. our marina interests was Promoting our existing business areas endorsed during the year We have successfully continued to promote and support our established areas of operation, including aggregates, cables by a comprehensive study and pipelines, and aquaculture. The focus remains on managing diverse interests and maximising the value of the which revealed the vital role Marine Estate; in short, doing even better those things that played by marinas in the we have always done well. For example, the Marine Estate owns and manages the economic development mineral rights to the seabed extending to the edge of the of the UK.” UK continental shelf. We issue consents for non-exclusive sampling and licences for commercial aggregate extraction and also issue leases for major pipeline and cable projects. Aquaculture plays an important role in both the Marine Estate and also in the lives of many of the communities in which we operate, most notably in Scotland. Following the success of our annual awards for salmon farmers, in 2007/08 we have widened the scheme to include the whole of Scotland’s marine aquaculture industry. The awards recognise operators who employ the highest standards of husbandry, offer innovative training programmes, support local communities and manage their businesses with a high level of environmental awareness.

Page 41 A E +9.4% D B +10.0% C 11.3 1.9 4 370.2 (£million) 38.3 336.5 (£million)

2007/2008 (£million)

36.9 297.2 2004–2008 00.0 2004–2008 36.1 3 Dredging 17.7 Dredging Coastal Cables/Pipelines 10.0 1.1 Cables/Pipelines Fish Farms Renewables 1.8 roperty value 4.6 004 2005 2006 2007 2008 01.5 A B C D E Turnover by activity 3 2004 2005 2006 2007 2008 2 3 Turnover P 7 l a n i o t , d s n n t r n o s y o e g n g n o l i i l e r e o y . y m 0 0 2 d e t . y t o i t a f r t s u h e t u . t o t w , t r e b . a n r d e u s r u e o a n i i r e h t o e v i r a g n i n i a s i t a s i n l p m w b i a a e h r e d e i t a g e i t a d p . , l i i n u o o t n o i c o d n e j a m s o o b e e d n i e h t e r t o g n i t a g l a d n a s y r a T e h t e p s e p o l e v e d e i a t n d e s r o i t s t a v o n o c e t t a a s e c a m e d n r o m r a m r a m l P m e e a d e l p m o i t s y l t K w n a g e i o l a b o v e m i s s s A r o f j i r a s n o o p a l t A t s e n o t h t r u f l t e r e h t n c c , u h w o n k n o c p l e h U D i f l g v a h t a e r e p o l i c e n a l h s a h o w t v n i n a o n n i t n a m o n n o i e r a t s E m m o c l i e r u s i h i i e v n c i l t r e i t o c l e t R c l d i s g n o l h c . s n e v a c o . 8 0 t n e s i e h d , s e h e w t s e n l t s r i f l l i w h c t n o p f o b s a l c e g n i h S t r o t e w t i f e n n a l a e s n k e e s a W h t r e b r u o b r a e r d n i m r , e d h t i w m o r f w d n a n , a r o l l i h w n i t n a a c o . y a n i r f o y l s e h f o t e b l a e h i r i h w w o r t p m w e h t a p t t i i c i t s r c t r e b a H e h T e r l a i a p e r - 5 7 1 s e i t i l i c a f ’ y r f d n C l e r a s t s o s l a / 7 0 0 2 y t e h w h g u o r h t t e m n a M t n , n o h c i h w r m y d e s e c i f e h t r o f e h t e k r n d n a a i g n b - 5 6 1 g n i m o n e 0 0 5 £ e n o d e c u d i , e d u e h i l l i a h t s u o i y o l t e h w e w u o e h t s i i r o h s a n i r a a n o i r u o c e t s r o e h T e h o c , r u o b r a H m 0 0 0 , 0 2 3 £ b . s e n i l r o f r o t c m , m e e h s a t d t i p o l h t u u o c e e r e t n i p i v i d d n a t t i b g n i r u e d y l C f o m o n o c t u M e n i b r d o r t n i l y r o m r e d p m y a u Q e d i s e r o d e r e v o e S d e s s n t A r o f r e 4 £ d e n o m m o c e s e i f o a e r a l a t c e s o e h e h a h e v e d n a l m a a c e d n d a t t i u o m r r o n i n o i t f o t a h t d n t s d h b o T n I t r o l a i l a i c r e o l , s g n s r u o a n e h t g n e r l i e h a n i r a i t r e b r a d e r u s i e n a v a h t t i s a Y f o p l t i n u e h T a p x t s t . s t n e t s a o t a a n i r t i n e h t m g n i q c a e v n t r i F i u i s e h d e u n i t o c S i e o i t i s i u q t e r u s i e l t a e v a h e h t v i s n e h e r C s a , d n a t e r r u o b r a e s a e t i f e n e b e n e w b r a h e u l a v r o f p u s t r o p a m l o f o t r o e e n o H c a o i l e l e h l a n a t e w t s w o h s d e s i n g o c e r f o r u o d n a g n i s a e r c n i t s m m o c q c a e w i r a p a e r , s e r G . g n i l i a s e w s a n i r a m t n o c t s e h , p o s s i a h e v a h , s m h s i b t y r e k c a n i r d n u o r r u s t r o e h t t a p m o c n o t i f t r o e v i m t s e v n i g n i k o o l a l t o c S . d i v o r p d d a b t s a o , a n i r d n p p u s e r a t n e m r o t c e s d n a l l i . n o s e h T t r o p p d n a g n i p o l e v t p a o c s a c d n a b l u w e i v e r a t n e l l . y t i g n i d u l c u t r o w e n g n i e W a i c n a n i d r u o b s e t a t s f o o f t r o p e w c n a h n e t c e u f o t r a m u h R , e e s a e e l a W f i t n i e d . d c e p e R f o a M s r u o b e d a t s r t t o c S e c h t i w t r a y l e v s . y m o n o p x e y b e i t i l r d e y n a d e e B n i r d h t v i t c h s s e r t s e r e u r u e r g r a a n y l p p l a i c n u a r t j b o r i d H n e f o f o e v n t s a g d l r o g o a i t r o p x e i t c e m i r o c e n i u o h l a e d e w n t d n a s a u o w o r g i c a i g a l p a n a s u i t e h t w r o f i s i u s a m s h R e b f n i l d e o c v i l e - r a l p o e p h e l n u o h a e l e r t n e d n a s u a e y o t e r N y t i l i y t i l i d n n d s t d d s i a M h t i a t n e m e g n a i r e g g n d n b f o a s a , a e y e l p o e s i t n i d i n i k r o e h h t n i d e l s I m s i s e e h . s t s e r e t n h T a y r o m i t y a i c e r l o r n a t g y g e t n i e b e k a m l r p n e m e g a , n o b i s b i s a f f o . r r a w l s i t t o l c i m o n o r u h t e h w t s a e g l l i w t r i r B o t e h m a y e r c n i s a n i r t a r t e r t a l e e n n i y w n e t f g n o m e t n r e b n e m t e g a t o t 0 0 7 , 1 t e m p o l i t i d e r r v o r p e 0 0 r e m l i w n i c i g e e r a c E e t s c S r e m a n d e y o i p o l e s e i t n o i t a w n o a e e s e g n i i o p s o p a t i v s o p g n t r a r o t l e v h c a r n a m 0 i r t e h t s a v l i a a g o T s e t h t l p e v r i t e C d a u t n h t r c o s p e h w o r e h , 2 e v e W e D O v n i c a t r o h s c e s d n a r u O i h w e h t l a m o c e W h c r u p c a f t s u j i w s o o b T e S g e r a n I a M e D e h t r u O i r u d T n a h C n I o t 2 o u o n o s a e l l a c o l o f e d m u s e w e h t t A a h t r u O a r t s e d e h t r u f e v o l Operating and financial review

Marine Estate continued

Planning for the future Far beyond our own interests, the combined pressures of climate change and energy security are presenting challenges which are of a truly global scale. As an energy intensive economy with declining traditional energy resources, the UK has particular issues to resolve over a relatively short time frame. The Government’s commitment to substantially increase its renewable energy generating capacity over the next decade sets out a path that, if successful, will generate 25% of the UK electricity from the wind, wave and tidal natural resources of the Marine Estate. We want to ensure that we can meet this need while ensuring that we achieve our statutory obligations of enhancing the value of our Estates through good management. To this end, we have commenced a methodical investigation of the energy potential of the Marine Estate. The Pentland Firth where we are starting a programme to deliver over 1,000MW Having already established renewable generating facilities of wave and tidal energy by 2020. on the Marine Estate, we are now actively working to understand how to develop the full potential of our energy generating capacity. There are already a considerable number of renewable energy projects either in operation or near to operation and our natural resources will supply at least 1% of the UK’s electricity within the next year. However, the Government’s target of 20% renewable energy by 2020 requires us to achieve some important milestones. Over the next year we plan to: encourage industry competition that will lead to the delivery of 25GW of offshore wind energy generation by 2020; start programmes to deliver over 1,000MW of wave and tidal energy into the Pentland Firth by 2020 and to build a wave “We continued to promote energy facility in the Western Isles to bring the technology to a pre-commercial stage; and co-develop the design of electricity good stewardship of our transmission infrastructure to support offshore renewables so Marine Estate and during that it may be constructed over the next five years. Towards the end of the financial year, we took the important 2007/08 invested £829,000 step of signing an agreement to purchase the prototype of the world’s largest offshore wind turbine, known as the Britannia in many important initiatives project. This investment will help us gain the vital first-hand across the UK.” knowledge of the challenges facing the development of turbines for deep water deployment. This is an important step in the future of offshore wind and a great opportunity to help establish a new industrial base of activity to advance the UK’s leadership in renewable energy. Marine Stewardship Programme We continued to promote good stewardship of our Marine Estate and during 2007/08 invested £829,000 in many important initiatives across the UK. Among many such examples of our support, we funded a new moorings system at Chanonry Sailing Club at Fortrose Bay and new learning facilities for GCSE and A-Level students visiting the National Maritime Museum. We also contributed to a major marine community project in Strangford Lough, Northern Ireland, as well as to Dover Sea Sports Development Centre, RSPB Cymru and St Abbs and Eyemouth Voluntary Marine Reserve in Scotland. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92

Page 43 l a A t t e o t n e t s D s e l a s r s s a , +0.9% e w e C i d +26.5% g , h g B n a c a n a l t i n u s e v i t v e r u t n o r t 5.1 2.1 u o r 15.0 s u f f o 2.5 2 903 h t t i l a i t i n i e v i t c . y l e (£million) ) 3

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1.6 73 a t i p a c g a 2 6 t a l e r i s e n g n s e t a m i t 2004–2008 e s e h t s e h t i d g n e m e g a 0.7 2004–2008 2 618 s a t c e u e h t i Forestry 0.3 Agricultural Residential Minerals Forestry i t n u o c c a p x i k o o L n 0.3 i l c n C D A B Turnover by activity 2 2004 2005 2006 2007 2008 522 2004 2005 2006 2007 2008 Turnover Property value “ i e w s s o p n a m l e r w o r g . s n e g n a h c , n e d o s h t i l u i t . s g n i n s a e h t i e h t w e h t e f p o , e d n a . g n i e w g n r e i r a o r a w i t e d n s o t r e . ts v i t a v e m w o e r b i s alue y t r e a r o i s n a e v r e h t k a t r o e n i d o t u a h t y r t n y t l s d n a l v t a s g p y n t o i e c e u n i r e e h t s t c e e r a e r e h . s t s o r u o , n o h t a h e t a m i i r . l f u a e t i o p e v A a e r n u i d n o l r p o n n n i y c k i s e x e l l w f o r i h s e h in e v p . g n o r a s t n c c y es or r o f t s E k c o t s p o r p a m f s s e c c u s e r p u c c o e ar c t n e d n d n n . y f y b ve l f o s n o c c n C d e a D y e r m o r f i l p t s i r i c o e r t i m a . operty pr a l n a n a t e g o e l e h t e m l a l p i e h r y g r tl i o p p t i o t t y w o r g e m t n s u o i f o a l i h w o i l ect a t s d e l a r u t e k r nd l i t d n a m r a f l a f n a y t s e al i d o m m o i c r t a h t c e e r e n s h d e , s t i f o r h g u o h t l d o i r l r a w a t n e a t i w R c e r o , s t a p u s s n o i a o t n i a e n , s s e k – a n i ci l b t p l e a a m can e n w o pos s v i L a m e v d n a s s o r g 3 0 9 £ m e r v e r p e r o m e p d n a s t i t c n i l u c fi . t a e r e t d c a e i f o r , m o r y nd v e e t t a u n o d e h t a n i i h t l d n f o , g n i f y r t a a h g n m h s s e t r i t r e i p s ni a l l e h e n o ; a , y m la g n l e e h t a g i b a t r l a v , d r o f s t u n K f o y t r o t s a w a f e m m o c a m e l g n a p l u o v c n a r t s n o v o e n i s u b e a t s E i d e d o m m o r d t n e m sig a e p e 8 0 / 7 0 0 2 t e m c i t c u t a r t s n o m e d n o r u f s E p r a e k a e r a 119,000 c e n o om r e t f a a t s u s , s t e h s d c e s t n e u , s n i g r a m d e e f t a i t c a e r a e r t c w s p o r c y r o f g n i t r a p , e r u s o i v l o v e p m ar tur e n s i 8 0 / 7 0 0 2 i p n e e s d o r b - g n i s a e . 7 0 m m i a h t o n u l f f a i r u c e s e s a e r c n i n i w o r g n i n i r e d n a t i l i s a p s e r l a r u e r y e k p t n e r s e e s s r o h g ul t t s E p i u q e nd s , s m i ises l s g R p x e e v i s i d n r e d a r t l a r u r % 2 . 1 i h e l i h W k e t a a b a y l r a e l c a n i ic ct w o n a s g i q e s n o s r e g d e L e g r a l h r u g i f e t e b pr l a d n a e o e v a h , s r a e u l t e s s k c o t s p d n a e h t a r u t e r a gr 0 0 0 , 0 1 £ / 6 0 0 2 C d n d n a e h y l y g r e n e p u t c e j a t t s E d e t h ia t t i f o r t s e v n i s u l S a . y g r R r t a l u c e – m r o f e y p s e c i r p sp e r a a V l a r e n e g p x n o i y t p om t n a n e t p e l f e w f o , n s n o i t d e k r a m b o , w e e y e l c i m i l o t a p s o d n a e u d of s e u l a v d s e i t i Esta r u s e r o f e r e h t r o t v o e n e d n g n i s a e r c n i e h t t r o w p u s t c u r o pr d e c n e r e a m e d e h T o t . s a e r a n i a . K U n o i ident s r . l s m r o f e v o b a i c r a c n e e b a T r u O m e f o s n o i t a s i t e , r o t c o i l l i m y r i a d l i c a e i v e r i r e e v a e r u s y b h s A e a e r e c e r o t d n i h e b d n t c c e s d n a s i d n o c f s r w e i v e r d o r , y l d e s a h c r u s p i . r a the tat n d n a es) r t s e v h r . s r e s a h c l l l e d n a a h t d h c e h g i p e p es r a e y e s h t r t s s s l a n a b s e r e e u e e h t w l e y h n i e b m u , r s a e u n e v e r k a n a g term h g u o p x e E . w e i , k c o t e ac h t w e e r s e r e h 08 % 5 . 6 2 n a s l a t e m r n i n t r u p l a i c n e d o m r u h r k c o h t e w u d o r v e e d n l n o i g n i i h w n as a i t l a v p r o o f o e w e r e p r h t l n i g r d o o o t e s a f p e 7 . 6 1 £ s u a t a t s E t a w a n c i r f o s t u o e f e i f o a b o l g l b y a l e v e f i r s e v s e t a e ll s

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th e g f o n e t u b he (294,000 as v i s l g e r n i t s r o o p s u l p o r p u f s a p e d h t r u o r a m g n g n n u o d , r o t c n a r a r u h t rin n e r r c e l b e l b s t y r e i e h d a g n rn u rn u a m c a o r p s e c s i u q v o n e t n e , 5 0 0 2 r e g n o r u o h t l p e h e h e h

r u T T R O o f a h c an r o F p r u s T n a T t A m a s Du l r o w e s u i s i r a r a T i r p e d w o n d n a c n e e h t r u c e h t a r a r o F l A i r u d t e r h c r u p t n i t n e n e r a m d i s n o c n I c e s n o C e s o h t e h W a t e r n i c a i r u d p a p o r c w e n Operating and financial review

Rural Estate continued

The purchase of Tabley from the University of Manchester, which was concluded in July 2007, has brought a further 1,460 hectares (3,608 acres) into the Rural Estate. At £35 million, this was our largest rural estate acquisition for many years. Tabley is an extensive agricultural, residential and sporting estate comprising 18 equipped farms, a further 18 lettings of farmland, three land parcels let as grazing, 52 residential properties, 13 commercial leases, the Cheshire Showground and a number of sporting agreements providing rights for shooting, fishing and boating. The acquisition underlines The Crown Estate’s commitment to remain a major rural land owner. We are committed to working closely with existing tenants and the local community to secure a strong and vibrant future for the estate. Working together with customers We continue to develop and implement new and more effective ways in which our expertise and experience can be aligned The price of arable land rose well above £10,000 per hectare in many areas more closely with those of our customers, to mutual benefit. during 2007/08. The Crown Estate has an extremely diverse portfolio – from international fashion retailers to local food producers – and we are keen to work alongside individual businesses to help them take advantage of market opportunities in new and innovative ways. This integrated approach is delivering benefits for us and for our tenants. For example, towards the end of our financial year we confirmed Several high profile community events were held during the an agreement to work with our tenants and premium retailer, year, raising awareness of our activities at local level and Waitrose, to pilot the development of a new red meat supply reinforcing our commitment to our core values. These events chain. If this project is successful for all parties, we anticipate have included the opening of new themed ‘Smugglers’ walking expansion to other product areas, offering new opportunities trails’ at Glenlivet; the planting of a new native woodland to to many of our tenants across the Rural Estate. commemorate the centenary of the Scout movement on the Derwent Estate; school events during National Tree Week Under the umbrella of our ongoing Customer Focus and barn owl conservation projects on several estates programme, we launched a pilot study in the south west throughout the country. of England. During a series of workshops, involving our own team, managing agents and tenants, we have taken a detailed Our activities and efforts have been recognised in many ways, look at the landlord/tenant relationship and how improvements including two honours for the Glenlivet Estate, which won a can be made to maximise business opportunities. Each party European Award of Excellence from the European Landowners’ outlined their own needs and these have now been formalised Organisation and was also a finalist in the Scottish Thistle in the style of a business/customer contract entitled ‘The Awards under the sustainable tourism category. Business Deal’. Although not legally binding, it does provide The estate visit programme continued to provide Board a framework to enhance the way tenants and the Rural Estate members with the opportunity to take a strategic view of can work together. The pilot will continue through 2008 and individual rural estates, while preserving direct contact with tenants will be kept up to date with progress through our tenants. Follow-up visits by members of the senior management ‘Rural Bulletin’ publication, which has continued to improve team ensure further direct liaison with our customers. communication between The Crown Estate and our tenants. Looking to the future, we expect limited opportunities to make Playing our part significant purchases. We do however expect relatively strong The Rural Estate has an important part to play, not only in the rental growth and opportunities to release capital through businesses of our tenants, but also in the lives of communities asset management initiatives, including selective land sales and the general public throughout the UK. with the benefit of vacant possession. Our involvement and sponsorship of the CALM Project For our tenants, prospects for the current crop year have (Carbon Accounting for Land Managers) was advanced improved due to higher plantings and more positive weather through evaluation of the ‘CALM Calculator’ which assesses reports. The effects of low carry-over stocks, variable weather the carbon footprint of an estate. The Ashby St Ledgers Estate conditions and energy crop substitution, however, will ensure near Daventry was used in the pilot and our intention is to use continuing volatility. this tool to assess activities on other rural estates. We have also worked with the Edinburgh Centre for Carbon Management to understand more thoroughly how our forestry assets can contribute to climate change mitigation. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92

Page 45 A E +5.5% B +1.8% D C 2.5 0.3 1.0 .8 5 173 . (£million) ) 3

5.5 170 e t o n (£million)

e e s ( 2007/2008 (£million)

4.9 159 Building 1.3 Building & s e t a m i t property 2004–2008 s e g n 2004–2008 4.9 154 Garden Forestry 0.7 Residential Savill Commercial Forestry Agricultural i t n u o c c a n i roperty value B C A D E Turnover by activity 4.7 2004 2005 2006 2007 2008 Turnover 146 2004 2005 2006 2007 2008 P e g n a h c e r r i ) I S h t . n o e h t h s g d n a h c i , s g n i t n i S S s r n ( as s e u c i o t o t y l n o n y t e i l a e s a e r s a r a e y t o a , e s a h c g n i h s r e r u t , o p r e f o l c l , e t a t s E n l b e h t e h t i f s h k a o l a v i p e e l t o i w d o f k r e B l a in e h T u n o s d n Wi e m l a l a l l f o i i a g u o h t r a v e i n t s e r l e e w r p c ens t a w a s way u p t f o a i t a l u p o g n i a c i a t n i e a a w p a s , i t n n e i e h t f o a s c . n o i t n i k , g n i c r e m p e r t n e d n t r o n e ir k r a w s e a i r g Park d e t n e e h t i d e t – d i e t s s e n t es t k a a e t n I i k e h t c e c u d e p a P a p y t t s t n t n o . g n i k t n e r abl r e , t n p s e th w i c n a a m d c er rn u y e t w o r C l a t n u h e h t i w c e d i s e h t ea r d gar a t s a e r a d i s d n s a e h t d a e i s i tar a e r , n o m o c a n i i f i ot e d w w o t t n a n e d i l o e r e g n a t s E y l f o e r a t s E a m l o t e r w m o e m e m n o r i e r n t f o n I n by i a e r a nt v e e y r c e h c c s d n e r f utb i l l l s e h T y G t n i c n y o i t n e G i m d e i y o l a r e d a l Berksh e r r u S a t hec d n . e e h e h k r a o omm e s a b t u o ot , k r a r v t t v n e w o d j n p a i c r u o e m o r f a j n e b d a o r f o i h w P c e d , g n i d t a i l o e y , % 5 . 5 n r o P S e se a h c h t u o m b o n d n a e h i r c i n i s s f o a m r o N t y s l a r o s i h T r o f e s r u o c l t s a C and s i e w 8 0 / 7 0 0 2 e r c n i t s E b i s e r ea nd 3 7 1 £ i v r u s t i n u t r o r h g i h y r r o s d n Wi outh m m u s n o t s e t a t s E f o mporta e m o r a e y 6,300 a y i d n a e o h w t s a pl wa c s d n a l d n a a t u l a i c e r o f s a e r a t a e r G b r a e n l s r a e . n o e t s a v m t a e r G p u d n Wi e h p a l u e g u h b p l a i c r e m e h t e h r . s l e v r y c n i t e h Windso y e s r o h t h g i r p p o rs e h t i l l i m h g u o h t s e ia r o s a s a w t i c i f e o t , e t r S t o a nd e l s r o t a r e e e h s e s u s t a e r g m o n o c e d h e h t t nd a s a t n y b a t l A n w o r C e h f o o f c i t r a ) s e r c a ve f o e h T Surr s t i s e t ye , n o i l e h t a t r u g i f d n a ’ m o c t o a d n u o b ent . r o s d n Wi ov d e i r a v p d i o i v l l e i t u a c e r 8 . 4 £ g n i n i a c s e h t se d n Wi v f o d o m ude t r a e r g n i r u e h T s l i m e t i e u l a v s u l f o h t p , 8 0 0 2 ot w n i he e r u s n e e h y e h T t i p t e s f f e p d t t a r , s r e b S r o s d n Wi the f o e s o l c y e l g n i s d n a r a e y t r e n o h c u s s a w a te c i l b u 0 0 0 , s . e f i l d i w b o h fo h m o r f i l l . r t r ncl t s n o t we y d n a s u o h t s i esid r p 5 a r u s w o l s i t i ( y b . n o i o t d of d e g a n a m cour t n i a m e t i l i w e h t u o h g u o r h i h s a e m rn e v o 8 . 5 £ a d s a v o c i m e s a t e h t t a h e g n e ) n e e t r e m u n k r It d d t Wi r o f e i t i e h a e y a t s E , G s l l rby s e e p o w f o n i Esta h c r a M t w e i v e r . we 2 l l i m e t c k g . g n i g a e b r o t t i w g n i h ough r e , g n o r t s t a h t e s i s and p s e e b m u n s a v i t r o a P r a s r r P n i e d i e f p o r es r h t e p l e y l b a k o d e ea , s r e m e v y b r o s, r e – h t l e u n e v e r h c or th t w a Race e v i 1 3 f e p e g a t i 1 £ h ide t i s r a P c t e d e f a a h c c a e g a n n s n ts l a i c n . s d n , 7 0 0 2 r r a e n o m m o c t c e s a u f n a m ac t s o c h t f a h r t i v v o u o i v r d r u d Al r e e s u c e d r o ds h T o t u o s e f o e h a n s a e s l a s s d o o w i f i h w t h r . l a i t f ed. e y l d a m k r a a e w rys e r n I r h r a m e o t h t

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d e t p i t i d s t (15,600 he cou hi r e r e a e r r o f c y c n u n e e r t s a e r g l a h t t o e l e r G r a P r o r o n i d e w e v a h r o a r ll s 9 j u t d n r o f w r e a m . % 8 . 1 r c e r r u o v o n e a e S n i s t o c r u o d n u s a e s y o t i s t i s p f . 7 e h f f inan

r u T T i W O we farms operti pr f in wa r o F o rn u t i v o f o d n a d n a £ T s a e h t R e w d n a t e s o r t n u o c c s A i v e h t e d a m d n a a t s a t s n I n o p s e r p o r p e w p o r p e d i R i h W d n a d n a h t u o m i d t a t s E h t e n o n n i o f d n a t I o Operating and financial review

Windsor Estate continued

The Park was closed for six weeks and no public access was allowed and all main entrances and exits had full disinfectant baths. We also established an Emergency Committee to co- ordinate the efforts of our own team, local vets and tenants. All cattle on the Windsor Estate were blood-tested three times, thankfully with negative results in each case. Sadly one of the Estate tenants had young stock slaughtered as a precaution but these were grazing on neighbouring land. The closure necessitated the cancellation of a number of minor and two major events: the National Carriage Driving competition and the Windsor half marathon, which attracts 6,000 runners and raises considerable funds for local charities. As the threat posed by foot and mouth receded, the park fully re-opened in early November, with The Savill Garden and Savill Building admitting visitors two weeks earlier. People quickly returned in numbers, encouraged by the mild winter weather. We were especially busy over the Christmas period, selling Leptis Magna ruins, an important Roman folly due for repair work in 2008. out of Christmas trees very early in the season, and visitor numbers were up again in February 2008. Consolidating our progress Foot and mouth apart, 2007/08 was a year of consolidation and steady progress. The Savill Building was once again recognised for its innovative design. The gateway to The Royal Landscape, encompassing The Savill Garden, The Valley Gardens and Virginia Water, the Savill Building was one of only two UK finalists in the RIBA Stirling Prize 2007. Since its opening in June 2006, the building has attracted over 800,000 visitors and been recognised by 11 award schemes. “Demand remains strong In June 2007, the New Zealand Garden was officially opened by the Duke of York. Located within The Savill Garden, for our residential property, this new initiative showcases plants from the region and was developed in close co-operation with the New Zealand where we have seen a High Commission. moderate increase in rental During the year, we also completed the restoration of the car park at Virginia Water. This important facility has now been values and enjoy remarkably modernised, with new ticketing arrangements, making it more convenient for visitors to enjoy this part of the Park. low void levels.” Looking ahead, we anticipate an increase in visitor numbers together with progress on several important projects. We will be continuing work on The Royal Landscape, including the stabilisation and a degree of repair work to the Leptis Magna ruins, an important Roman folly on the edge of the Virginia Water lake. Environmental concerns are close to the heart of the Windsor Estate and we will continue to look at ways in which we can become more energy efficient. For example, we will evaluate the benefits of building a heat and power plant, possibly with biofuels as a primary energy source. We will also focus attention on how we can best upgrade our housing stock in keeping with modern best practice. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92

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Corporate Responsibility

e have been reporting on Corporate Similarly across our rural portfolio, the movement in global Responsibility (CR) publicly since 2004, when food prices and changing market conditions continue to Wwe set out our overall vision, approach and require sensitive management and innovation. We consider commitment, and identified the key issues facing our our role to include both advice and practical assistance to business. Over the past four years we have continued our tenant farmers to diversify their activities, and pursue to develop our CR strategy and our management sustainable business models. systems. We set ourselves ever-more challenging These are just a few examples of our activity in a rapidly targets year-on-year to achieve our goal changing world. of continuous improvement in economic, social and environmental performance. The following is a Materiality review summary of our achievements over the past year – Over the past year we acknowledged that we needed to refine further details can be found in the full CR report on our CR strategy in recognition of global challenges and climate our website. change. We have therefore focused our attention on a number Of the 20 targets we set ourselves over the past year 75% of CR issues which are material to both our business and were fully achieved. This represents our best performance society as a whole. In liaison with our external CR advisers we since 2004 and is testament to the commitment and hard identified those issues which currently have the most impact work of our employees and advisers. Our progress against on our business. The process involved an in-depth internal the targets is verified by our CR advisers whose statement consultation, a brainstorming workshop, extensive research of verification can be found in the full CR report. into government strategy and best practice in sustainability across a range of industry sectors and stakeholders. Achievement against CR targets 2007/08 Number of targets From this exercise, we developed an overarching philosophy from which stems a set of six high level commitments. 15 These are each accompanied by our business rationale in the form of a statement of belief. The commitments fit underneath our current five key themes and largely pick up on the critical issues within the previously adopted nine long-term objectives, which they now replace. They will form the backbone of our CR strategy from now on. 2 2 1 Overarching philosophy

0–25% achieved 26–50% achieved 51–75% achieved 100% achieved We believe that our business activities have direct social, environmental and economic impacts and we The pressure on our business to become more sustainable therefore aim to act responsibly in everything we do is increasing. In the urban context attention has been firmly to help secure a sustainable future. focused on reducing carbon emissions from the built The six high level commitments and associated beliefs are environment. Evidence suggests that occupiers themselves set out under the following five key theme headings together are increasingly paying attention to sustainability. We therefore with an outline of key achievements which can be seen to continue to work with them and our business partners to have supported them. improve the environmental management of properties in our direct control and by influencing occupiers of all our properties. Separately, our Marine Estate offers a unique set of challenges, where our ownership of foreshore, seabed, estuary beds and tidal rivers renders us acutely aware of the potential impacts of climate change through coastal flooding and the deterioration of natural habitats. We have a major opportunity to play a key role in mitigating the UK’s contribution to climate change by enabling investment in offshore wind and tidal energy projects, and facilitating carbon storage below the seabed. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92

Page 49 e l r b a n s e d i e h t e i u g e s ’ d n a w o h i a t s u S l b a n i l t l p a t e h t . e t a t s E o c S o e p t n w o h s t i s u s d i s e v i n o t n i 7 0 i V a n l n e l i 0 2 e c G . s n t n e a l r o e c o i d e k s a f m p e h t i n t e a l p d r o r n a d n o r e w b m a k w A i v n e r o s e l o c e s d n a d n a l w d n o c e s t s h s t t s i h e t i ’ d n a k o T k w l t r o c S a o o t o t f s h s i e r g t e o c S , s o t a s t y r o t a o t r c s t d r a a t s n o E g e t o c S i E s w a s e y d u t a c n w s u t a r e n e m t e t t o i v m s s e g m s i l i p o s o r C t e n i n i r i r r s e i m m u i e e l u s e r h u o o h T B o c t s a C G t T p d ) r o f . t n n i a ’ s t n e e h , s r e f n e v a h y t i t i t p o d a i o % 0 1 g a s e v e s r o f . e o , s s r e u l a l i b t e W e m e r u e e i t a l a t n n o v y t e c n a v d a g n r u o i t n i t l p o d o o g m c i t e n a h t l p p u s t r i s n i n t . s r i a h c r u c t u o h g u o r h t h t a . d n e p c o r p a t n a h g u o r h t p a r i g a n p a a e r a e f o r e t e h t l a i c ” . s s e n i s u b i w e y i c i r t c e h t o p r u o i e m n o r i e t t l u s o e s s l e a m e e b s w c i t c t a o p s e r e m e e r f o g n e g n a e r g o y r u o k r o e n v n e i d a r e t a t s n o m e h s . ) I s t l r i a r s t n e g a l b i s n o p e r h t w l p m t p m m i o t d n a e d t c a f a t o n s a g a r u o n i P E i s u b l s t n e g a ( s i k r o w s e l o s e m r e t s a a s i n i e h e x e p s e r a p l l i w t n e m t c n s e n p ) I s s e n e k s t i x e t n e t n i d e v o r p t r d n a d n a e o n i e ) L k t r e m i i r t n e a g e l i s u y l m u i 99% a v i t a l l m i g n i g a n a a p e h t d n I e e s level) r t P K ( b d n d o W “ e h t a i C C ( m t n e o y l e v i a : d g n i g a n a m e i t i n i e h t u o m e l t r r o t m m o c t a n m n o m s u b t p a n o i l u m n r p m e v o r p h l a r e v o t t c s n e k a : c o s b i s t t s e n o h a c y v e L m i n o h l e r u o n a t n t c e f f e t i w l e h t s e b s e h t a b r U l i v n e (foundation g n o d 2006/07 End of 2007/08 e c n a m r o . d o p v e l l i e p x e i d n e ) d n a t e g r a n o s f r e h I e m t b r U y d a e v a h t i m m o c of t r . w ” . s n o i d r e e w a t u p e r r u o e g n a : f e i t n e m n o w e i v e r s k s i r e r e t e r u r o l d m u r o s t e g a r u o c n e P l a t h i l a e d n o i t e c t u e s s n a F e n i a r i v f o e w e v i l r u o 83% End t a r e r u o C e w s s h w ( e w l a l e b a n a l y l p p l l e m e r u c o r p l a i c n t s l R I P h c n e n e g n e o t h t e d l o s a a d r e h t r e c a d n e n o i n s o p a C a n n e m E r a e f o i y f t i m m o c i s e w y u f r o t o t o t i h w e l b i a e d e e v e l b u o n a h t r d t n e m l o f t f r e t a m i d e t e e s t n o o s u s y l p p 2005 e n u b t s : d h t i u o i s t f n a l b a u n e i l l e v y a w l C t a l a s n o n o r i v c u n o r s r e g o u s r o p n a m r o , e c f o a p f o t e m r e f t e l y s r t n i h e b e d r o s n a m r o f r e P t n i a r p s e g a e i a e t s o i t n o n e i l p e v a h e v a h s l h e m e t i t c a r e n o m e g n e s n e h n o p s y H d r o r u o I r u o l n o n i e r C i v n E r e p e t a a r e v p e d r e h 42% Baseline November Average score of Urban managing agents against Environmental Average score of Urban managing agents against Performance Index (EPI p u s m h T r u O o f O t a t S W “ g i H e R r p t s u s o n I c i h w e W • • • e W e K e r o c s w o n n a r e l Operating and financial review

Corporate Responsibility continued

Our people Case study We are proud of the expertise and enthusiasm of the people David Shaw named as Mayfair Times Property we employ and we want them to feel fulfilled in their work. Personality of the Year Statement of belief: David Shaw, Head of Regent Street Strategy and “We believe that our people are our single most Development at The Crown Estate was awarded the Mayfair important asset, and that they have a right to feel Times Property Personality Award at the inaugural Mayfair valued.” Times Personality of the Year Awards. The award was given in recognition of his role leading the team responsible for the High level commitment: transformation of Regent Street since 2002. Employee health, well-being and satisfaction: “We will ensure the health, well-being and ongoing development of our employees, and help and encourage them to make sustainable business decisions.” Over the past year we have: • Delivered five CR awareness-raising events for employees to ensure that our commitment to responsible business is understood throughout the organisation. • Delivered diversity training to 89% of permanent employees who were in employment for the full year. • Implemented a new Occupational Health and Safety strategy which has involved the introduction of a comprehensive health surveillance programme. KPI

Average number of training days per Crown Estate employee

3.6 3.7

1.4

2004/05 2005/062006/07 2007/08 2005/06 – Figures were particularly high due to a number of compulsory in-house training sessions for all employees. 2006/07 – The time spent on the preparation and subsequent move to new office headquarters for central London-based employees resulted in fewer training sessions. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92

Page 51 . y e m e h c s d n a r t s u s d e c r a d n i t i w a g n i c a r p n a m r a t s e f n u b r , n s n o m o i s a h e t l a s t a v d r a h s i t w a a t s E o n n i e n t o c d r a S r u t l w o r e C w e r u c h t e d n i a u n h T a y q t i t 6 A l i h y d h g u 0 0 i b a t l 2 s i s t t h g n i a e i t e c h s o c n i u o s a C S S t s e o t s s e s u s u d . s e i t n n Band A Band B Band C Band D k c o t s i l s e d a s e m o H o i v c c a r u o , s r e o i v e y l n o s g n i c a r u t n e v i t i n i e h f t n i a h c r p t u s e r p d n s d e t n i o p p a c y n o u a n e c t o n e m o o t n a n a t n i o e l b a n i a t s u s j e h t y f n o p u h e h t e D e t . s e d n e v u n i t n o c i s a b t r i t n n i t s u a e m l n o p u i u n e e b l p p u s n i l t r o p p o c a h s o l a d n a d n s r i e h t i c a s ’ t n , s h t . s e c a e e o s l a i s r e v i d a f o t h t i t i s a h i w w d n a l n o i p o r u o c o e t o l t u t n e m i w t e m n i t c a r r b e d n e p b s s n o p r e m o i c a f f o i s a d r a d n a t a h t m o r b r e v s r e m o r u e d 33% 13% t u b s t s e v e d p s s ” . m e h o t a c i f i s r t s e v n i s t n e m e t rn e s i e o o G t s u c d e t s n a d . y a w e n i s u b t s u c rn e t r n o h T g n i k r a s e s s e n n a c e v i d s s e n o t o l i u c s r a e y e n i s u e h t e m d o m e v i c a l d g n i l b b f b l i s u d r u o v o r p m e n d o m i o b o l l 0 2 ” . s e u l y e h g n i e l : e t l u f e r t t i s o : t n a r G f o s t n a n e g n i t a y a n e d e s o s i h T t n i p d n a i w h d e 2006/07 v 2% 1% 33% 14% l l u f h p i h s r e n t r a t n e v i s u b v a h s r a s d t a i l p o r i e h t s a t u d t t i w e e m b a n i a . v l o v e e n i e W p o r p . s t e k d e s e l p o e e m . e s o l a r u r a e d c i h w h p “ e w t s e e n p r u o r i n : f e i w e i v e r d e s s e n d e 0 1 : d n a e c n e h m n o y l l u f s i s u s m e i s d e s i rn e t r a m u o t a d e m i a e c i 0 2 s i n r a e a h e h t l e b r t i a W l i e c h t i w h t l a i c n e w o y o t h e c h t h g u o o t u b rn e e g s t g o d o o g n e a n y b . e 2005/06 2007/08 t f o 16% i o t r e d o m t s a t e u c o f s f t i m m o c a r d e t i w r h t r v r e s i v d a s r e v w r d t e e m n i d o t g i v d a s t g n e l b n a n t n a p w e i v n U d o m n U d o M . s t r e d o M l a . n a d f o e i l u o c l e v i s e t s u c s s e r e a o t e v i t a e y n i d n a t d e k d e r g i e b m o y g : A : B : C : D d r a d n s e l h h t n i l a n e e v i g e b e p l n o i t e f t t a c u d o c e j o i r a e a i t i , s t i l o r t 0 2 h e m e t a r y e u h w r e a y t i l i r o W n i r p e h o t P w S f O r u r a n r p o t – e n o p s d n a d n a d n a d n a p b 0 0 r e d n 2004/05 55% 55% 51% 53% 17% 25% 27% 3% 2% Condition of housing on the Rural Estate r u O o T O • e r v O u q u o t n o p s e r a e m o t s u C g i H a t S W “ • • B I P K B 1 1 B B Operating and financial review

Corporate Responsibility continued

The environment around us KPI As stewards of our portfolio we strive to act in a responsible Building efficiency: close managed Urban portfolio CO2 emissions (kg CO2/m2) manner so as to leave a legacy for future generations by preserving and enhancing those parts of the Estate rich in bio-diversity and architectural and historical value. Climate change 14 Statement of belief: “We believe that climate change presents both physical and regulatory risks to our business, and to society as a whole, in the medium and longer -term.” CO2 emitted CO2 averted High level commitment: 56 49 Climate change: “We strive to achieve a zero carbon 2006/07 2007/08 footprint. We will reduce our own carbon emissions, As can be seen from the graph above, energy consumption encourage our customers to do similarly and promote per metre squared (m 2) rose across our Urban close managed sequestration through forestry and carbon capture.” portfolio during 2007/08, although the associated carbon emissions actually fell as we have now started to purchase Resource efficiency CCL exempt electricity. Statement of belief: Building efficiency is a measure of how much energy a “We believe that the prudent use of resources building uses, relative to its floor area. This allows a maximises business efficiency, as well as sustaining comparison to be made between the efficiency of different environmental capital for future generations.” buildings or portfolios. For full qualifying notes please go High level commitment: to www.thecrownestate.co.uk/cr Resource efficiency: “We will use resources efficiently. We will reduce our energy and water use, limit waste production, increase the reuse and recycling of our own waste and encourage our customers to do likewise.” Over the past year we have: Case study • Achieved our target of facilitating the displacement of over Energy efficient Christmas lights for Regent Street one million tonnes of CO 2 per annum through the wind energy produced on the Marine Estate. The Regent Street 2007 Christmas lights, sponsored by Nokia, combined an exciting new interactive approach to • Encouraged all Urban managing agents to conduct energy, festive lighting with minimal impact on the environment. water and waste audits at the properties that they manage, The materials used to make them were recyclable and thus ensuring that our buildings are managed in an efficient the LEDs used a fifth of the energy required by traditional and sustainable manner. light bulbs. • Become a member of the National Home Energy Rating (NHER) scheme. • Supported Natural England in achieving their target of 95% of Sites of Special Scientific Interest (SSSIs) being in favourable or recovering condition by 2010. We are currently on schedule to achieve this target for our own SSSIs. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92

Page 53 p t f o e m u i e n y F y h i f e n e b e i h s d r a k m m a r r e v : d c o L r a u q a e g n o e h t e s i a s l a c t i a o r s w e t s o l y f o t g n r o r p i d e i l f b e i o t k t s b w i s e e n d s r n u u o o g n r r a h s n o o e n i r a i r e s p s n o m l r e v a K U e r s ’ e t a t s E o m a o f g i s e d o n e d d n u f e t a r a e h i o t e f r o B l d w o l p s e m e h c s i m e b s a w r o w r C r e d u l c n n c i t I a t c / d n u o c r e t s y s . d n a m a r u o e n i r a k u O g e h T s ) w b a t c e ) s I P . o j l l a o r m c . K ( r a m t c e o l e n o j o r p s e t o r b o P s e f e n y F i t a i r o s ’ a t t r p g h s e m r l a c o t i n d e . p i l n a c i h r a t a c o o f n r u e i d i t s d n i L h n d e y t c e n w o t e r e t u m m s E f u f e l i i p c d r a h ( o . e t a t n c n a s a i o c t d h t s r l m w e p e d y d n w a s s 0 e u o t t s n a a t e r o f i t r o r l t h e n s t s a C . w w w e p r o M s y a s i v e n e 0 0 , 0 i r e r a l p e o c d o c S r e v h s i f 0 8 n s a C T o O £ a m i w a d n a ! g n s e d n o s a t n e l a d n a n l l e w w t l i v i o Fund i e b - r u o a t l s e i t i l c r u o s e e y o n , s s a . k r a P . k r a M l l a m a n e e e r u q e t n e d n e o t i n u ” . S b e w e s m i a . g c o s e h y l p m t a h t r e t u b t l o o h y k r e l a e h t e l a n o p e d Communities Fund Research ” . m e h t v a h c s t a h a P n o e t a i c o s s t r o f y t i l a u Q e t s n s i r t n o i t a t a s i l a l s u o i m m o C n i m r a f g e c i d e g a r u o c n e r u s n t o c o l a e r v e r e m s e e Marine Marine t i m t s , c i m o n o p g n i v i s e i t i v i t i n u m m o c u d e G d n a e v e i h c a n i m r d n a t n e m n o t a h t d n a i c o t t G g n i d n a t s r e d n u o d e W ) c e g n i d n u o s a F e m o c e t r w t c a e h c s s a h e b m t n a w g n i r e r i v n o o f C B e d n u F e h t o i a v i n a e d i d n a n o i i n u m m o c t r u r r u s d n a y t i ) E Y s p i h e w e f f o e w o n e s f o l l o r y a P r o s d n Wi d n d n u F f t a p i t i s o d n m u h a p i h s A G ( r e g n i v n o i n W “ o n u e h t a p i M S W ( a l e h , s t n d n a t s n o i t t d o o F f o s e i a r h a i a l e t n e g a i p o t c i t r a : e e w t e b m : r e e u l f o e : s e i p n o e r rn a E a n e t c i l i c n u t c a t n t d n d r a w e t b m e m a v c o s t a t s v a h k n i l g n i s u a h g d n u m e S , u o v a h o C s y e v r u s e g n i g a r a e Y m o Y p m i e m l b u p r a d e h g n i t n f e w t e n h t : f e i w e i v e r s c s s u o n s e r a r u o . d n u s e i t r o t a r Marine Communities and Marine Research Funds t i n u m m o C i A d n e c a p m i p o l e v e d F 52 c i m o 33 2007/08 , e g e h T n a m i t i t a i s i r a e e n i l e b by w a b i v n o v h t i w l a i c n y i r a M n o t t i n u m m o c h t n i u o f a s l a c i g o e n i v i t l a t e l b e a n d e v u . f o i p i t a e z a t s e v i G e f t i m m o c s u B e t a r t s n a b r t u o c a n o c e e v s r e h t l o r d h t n i a r a M e i h l o c e y t n a p t r a p U t s d e a w e n u m m o . y t i l n e m n a a t e i l r l e v e support r e d i w s a e c a c n o r B e i l b a n g p u h s r e n o m e w o y l l a c i f i c h t t i r o s e n e e l n a t e h t h t n i t d t r u o a e b h T e a t i v t n i e b m e n e R e r r a e m o c e i a t a n o r i n k d n s r e c s h e m e t a r o e r i e h t n i s r e B p M a k a T p s f o f o m e S C t a a n w o e r o p . B n o p p m 48 2006/07 i h T e W O e h t a t S W “ u f o g i H s u S u b v n e • v O • • • . N n k d n a I P K (Number) Projects Operating and financial review

Financial review

John Lelliott, Finance Director

ur strong results this year have been discussed Accounting and regulatory issues in the Chief Executive’s review. The purpose of The 2007/08 financial statements contain two changes in this review is to develop some of the elements O accounting estimate. These have arisen as a result of our that contributed to the year’s success and highlight preparations for implementation of International Financial areas receiving special consideration going forward. Reporting Standards (IFRS) and the change of accounting The results are underpinned by both investment system in 2008/09. activity and asset management initiatives across the entire Estate. The first change relates to our policy on income recognition in respect of rent, royalties and similar payments. For 2007/08 As a long-term landowner we have obligations to achieve all such income is recognised in the year in which it accrues year-on-year long-term growth. Over the past ten years we rather than in the accounting period in which it was demanded. have seen revenue growth of 68.1% delivering to the Treasury This brings us into line with best practice in the property sector. £1.7 billion, capital growth of 121.7% and a total return that has outperformed IPD over the past one, three, five and ten years. The impact of this has been the recognition of £34.9 million as a reduction in turnover for the year 2007/08. This amount The Crown Estate Act 1961 represents the income invoiced to tenants prior to 31 March It is important to understand the provisions of the Act and 2008, which is in respect of income for the following financial especially how we report our financial results. The Crown year. The adjustment has been shown as a separate item Estate Act 1961 places certain obligations and restrictions on the face of the revenue account in order that a fair on the way we do business. In particular we are unable to comparison can be made with the previous year’s income. borrow to finance investment and we have special accounting The second change relates to the recovery of capital arrangements that are specifically aimed at maintaining expenditure for new works and improvements under our a balance between revenue and capital, which is similar Treasury Agreement. The introduction of our new accounting to a trust. system has enabled us to recover capital expenditure on Given these arrangements, our results are all the more a property by property basis, rather than by geographical impressive. In particular, if our revenue results were not location. This now allows us to improve the tracking of base affected by the requirements of The Crown Estate Act, costs relating to each property. The change in accounting they would increase by £43.4 million from £211.4 million to estimate has resulted in a £30.6 million decrease in the £254.8 million. The majority of this relates to profit on sales of recovery of new works and improvement costs through freeholds of £47 million which is retained within the capital the revenue account in 2007/08. This adjustment has been account for reinvestment in the Estate. Full details of this shown separately on the face of the revenue account to are given in note 4 to the financial statements. enable easier comparison with previous years. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92

Page 55 7 . t 0 n o i r u 2 4 / t i n r u o f o o o t e m 7 . 8 3 3 . 3 1 6 0 l l i m l a t o t e a £ 2 . 2 6 2 8 . 7 5 2 1 . 0 0 2 1 9 0 , 7 2 7 5 , 6 f o o e c 0 2 a i x e e m e y b k r a t o c n s a e h t i m b u s w t e c l m a c d w r e v o n c a d n I d n a s d e d e t h t n d e r e s e s a e y l w o a o r p g a n a w i r u t v i n e d r o l n d n a o b o n l a r e v l . % o m s i h T l t e l r e t . s e c o d i l e d e t a . t m h c n e b t s e o r e y u b f t r e v a r e n e f d r o e c n a m e W b 8 0 n o r p 1 . 9 y o g k r a i l o s l n a – i d e h c o p r o l i 8 2 3 4 8 5 2 4 2 % l l a r p f o c e r % 5 . m 2 . 0 4 5 . 5 1 r a u Q y t f e l l e s s a e p e d n i t 4 . 8 5 2 4 . 1 1 2 8 . 4 6 2 , 7 , 6 6 . o a h t i a i d . y g e m £ s a e s r / 7 0 0 2 m i i h w h 6 2 e 6 o h e r u t u f f r e p w y e h t m r o d e p o l e v e d f n e e b r u t D P I t a r f w h t b h o t m r e t n i o t o d e e v o i t s ) s n o a g u o t d y l t w t s e l u c d n E i i u s r u p e h n w c h t d e n t r r h o m m o i t c t n r e v a t d e s s a o n g n y e v a h c g n i o t k e e s d n a e h g a e t i l e w o g n i h s e t e r i d o r n i b m i r e e m i y s e u d i u t s e W r g s e i e w t a c n t s r u a s n a t s s e h . r , t r a r m o c o C o s e i t c a r e p o e t l a v ) 3 d n a g n i r e m e h t r f t w t s E e h l l a u n t r p d e p m r h c i h t , o o e t v n i e o D P I i l o r o r a f w t x e h i t n a p m n i d e r e v r a h c o f o o n d n a l d a i f r g h . % 5 . f n w r u r p t y m 1 o t r , o t w o o c o c . l a e p o r p b r u s o f o e p t e i l i s k l e d r d e t Wi e v i s u e e s ( o r c o r C f t a h t h e k l a o p o f g n o . i o t r u o r g l c r o n e e b i h c i l c s i l o c e W t r e s o d e l p o i w t n e t i - t n h e e g a n i d l o l b t s . h n l a ( n f o b n s e t s l a i c o s t i w T o p f o o f o i g r o p o e d 8 f o t r o t u s e t a m i t n i l a , e e h l n r o n t 0 i s h m o c t a t i l u o e w l a r o s e p f a m e s g n 0 n u t p a c y c i y e r e u p s a o % 7 . % 4 . d 2 f f a y b g n l a v i k r r e m m h r d R 7 3 s a t o e n l a v n e n e m i o h y r b m e f f r i r e h y r e w d e c e s s o c o r a a b t o r o o o u d e s a m n a b i i l i l s s r o g a h e b m o a e y a M a h s m r p s o f p i r rn rn r U i b r s a e n e u r e p t c a r a M i t n u o c c a t r f t r m u u e e c n u d e t n a b a n v i o r t n a r c o p a w r n i f e t e t e e h r h T r p A s r a m n a f r n I r d n i T s i 1 3 r t r h T e b t a o p r U o p c r u p e g n a h c s a o i h c s a h e l y l e h t l o t % x e d n I i g n i o t g n , s h s e 3 . r a M t e k i h w y b c , n l l a i t f t r o e h i 5 i s i f d n a r e t r a t . g n r r o i r p r e s 1 3 p t ’ e i d e u l r a m a m r a M v u Q c d m o n a e u i t e o t l a v r f % 0 1 s s o r l o h s g n i e r i a t a % 4 . 5 e h b r p o r p % 3 4 . 5 g n e h t d t n d v y r a . % 5 . 2 i t s D P I a rn , e r u s o p x c a U y t c d e o b e e e y t n I t n e y i d n t h t l o h l l a e m b e r i r a . e l n o l r u o i r e h t t s g n e i w a ‘ g n i s r a d i c r y p v o m 8 0 e h t d n i a , t a e m b n o i t n n o % 9 . 3 1 / 7 0 c n a y n i e y e m e x e r u o , f o % 4 9 . 4 e t c a e h g i h l p r 0 2 f o a e r c n i e k r a y b d n I i s a e r c n i d l e i y e h t % 7 d e e e u l a v r o f m m o c d i s e r p u s r u O y e v i s n e f e m o r f e n i l t n o c t n m r o f r e n i s e . b r o f d n I o i l o f d y l r e e h p f o o i l o f t e h t n e v i r r u g e v i s u l c n i l l e f c e d t u o e m i r t r o d i f t u o h , e o i l o f p p l i t a r u o y l e v i k c a . d n e t r o p , e t l s u l t a t r a u Q t i w e l a v i u q d e h r o n o i l l i m d e v s e c i f f o e a s a w n o p r u o e n a t e R t s E p r u s t a l e r t i w a t s E e n i l l a r u R r a e y D P I h t o m v o m n e h t e u s e s n o t n i o s e n a b s i r a M n w o t , n o i l , l w e i v e r e h w o g n i r a n o d e v t n n o e h t e h t r u o e r e h w n e v y l w o r e 6 2 8 , 6 £ r U e i l o f l a t r g l a r e p x l i m e r e b a h f o C a d i M h t i t a r e , d h t i l a i c n l a s u s t s n o L o t i e b e m e e t n e m t t s d u l w i t a n d a o r t r o p i s c r e v O n E e u l p r s d l f d n e a e y r a p m o c l l a r b t h g a s o r g h T e v i t t i p a c t s o c u l a a n a a v s t d i t 3 0 9 £ e g r s e v h . e u s v d t n l a v s i s i e i y e m o c / e a i c , n a s e f o % 2 . 3 a l a r t o n i u l a v e m a g n t n a d n u n i e u d e y t e c g y t r t y t h T h T s i e u s r e W d e m E n i . . n e m t n i i t a l a t y b t l o h w r e l a r e . % 4 % r e m l a t o t e m m o c , x r e v e h t l a t i e p p e v o a r t s 5 r e % 5 . 8 1 n e v i p a n e v n i m % 9 6 s e . 6 r o f r e h t e e h t c e r i d e d n e v e t n e o r p e h 8 0 0 . 6 8 0 0 r e v o rn u r n u T o r P n I a C p a C R p O d A e R T R P T O e s o r 2 v n i 2 y b r u O t A s a h e p p o r p n i w o h a m e r n I e W o t m o c 2 s a t a e R Operating and financial review

Financial review continued

the whole of our Urban commercial portfolio for analysis Work has been carried out on assessing the impact of IFRS on a six-monthly basis. As at March 2008 this amounted and ensuring that the new finance system will enable full to 423 properties with a total value of £4,690 million, or compliance with IFRS. 69% of the entire estate. We will still need to produce accounts in accordance with the In April last year we appointed DTZ and Jones Lang requirements of The Crown Estate Act 1961. LaSalle as external valuers. At 31 March 2008 they valued Cash flow £3,946 million of property representing 89% of the portfolio benchmarked by IPD and 60% of our direct property Retaining a strong liquidity position remains a very important ownership. Over the course of next year we intend to increase part of our investment strategy. With the investment market this level to 100% and 68% respectively. Our intention is also subdued, combined with our inability to borrow, it is vital that to move to quarterly valuations from September 2009. we have sufficient funds to enable us to take advantage of opportunities the current market may present, as well as being As in previous years, we commissioned independent check able to fund our development projects. valuations of a sample of our rural properties (4.9% by value of the agricultural estate). The results of this exercise reassuringly This year there has been significant investment activity, mainly supported the tone of the main valuation. In addition, all on the commercial estate and the West End in particular where purchases and developments completed during the year were we have taken the opportunity to consolidate and strengthen valued independently of the acting investment advisers (over our holdings. The overall total investment across the estate, 10% of the estate). including our investment in the Gibraltar Limited Partnership, was £713 million and our total disinvestment was Investment in partnerships £934 million. A substantial element of this activity was cash In April 2007 we completed our investment in a 50:50 joint neutral as we continued our successful strategy of transacting venture partnership with Hercules Unit Trust. The new vehicle, property swaps and investing property rather than cash into The Gibraltar Limited Partnership, contributed £8.4 million to our joint venture. The actual capital cash investment in the the Revenue Account this year. This was the second such estate was £308 million with cash receipts of £329 million investment in land through the structure of limited partnerships leading to a net inflow of £21 million compared with a net following our acquisition of 4.7% of the Lend Lease Retail inflow of £193 million in 2006/07. Partnership in September 2006. Our investment in indirect Risk factors and risk management property has increased to £242 million which represents 3.5% of our total investment in property. Risk management is well established within The Crown Estate and we continue to further develop and embed the risk During the year we continued to analyse alternative management process within all departments, key processes approaches to investment. With proper due diligence, and projects. The vision for risk management is to move from specifically bearing in mind the constraints of The Crown ‘established’ to ‘fully embedded’ and to raise the awareness of Estate Act 1961, we established that we can make corporate risk at all levels of the organisation in such a way that all acquisitions where the underlying rationale is to purchase significant business decisions are risk informed. Risk land or property. As a result, in April 2008 we completed management is an effective corporate governance and the acquisition of Rhu Marina in Scotland through a business planning tool as well as a means of ensuring effective corporate acquisition. strategic and operational decisions take into consideration key International Financial Reporting Standards (IFRS) risks that may impact on the business. We intend to present our financial statements for 2008/09 in accordance with the principles of IFRS. This will bring The Crown Estate into line with listed property companies and will therefore allow for direct comparison with our peers. This implementation will be a year ahead of other public sector organisations. We do not intend to issue interim financial statements for the six months to September 2008. IFRS compliance will not change the underlying performance and cash flows of the business. However, it will have a significant impact on the way in which the results are presented. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92

Page 57 s s t h d s a t e m r a n a t c a s n e m l c s e w e n w o f i r 9 e e r e l a e i t h t f g n e v i t e k u s i p y k e h t l e e c n a p m i r e n i d e v o e m m w k r a m l r e p s e t a e v a h p t s i t a o r C r 0 / 8 o r r e h s r e h t w r p l i l a n w o i t o t o t r u l l a r 0 b f r a m l l l a n k c e h C w . o e e s e w n m p o l e o g 0 i o e r r u s n h c n u i n i o p t s l e h o m e m m a i i w p m v p u s o f i r o r p t c e s e v 2 r e p u s t n o i t T o r o f i t r c e r g t n e m , n o d n r u o i t n e g n y y b d e r o t c e s i s e d r u g n p y h t l a e t a t s E t i s i h t d n E o t e a . r o t c e s w i h W , o r o s t n e m e c n a h n e g n i b d n a p x e o c n o a h o L d n a i s o m o p P t o n d e . r e c n e i t a i t i n r a g e H c l a i d e e r r u c i t c a s n a i ’ e v d i s e f i s h g u o r e n w s t n a n e v m o r r l t n a c f o e w f r r u c r t r o s e w r c i f t a h t y t n o i t r h f o i l i s e w r a p e l e h t d i d t s e W t o c r i t a n e r u s o f f e c o f o s n o r e v o c o r C a r t s e r e h t h s a c d i s n e h t l r p b t n a c o t c e s i n g p i t d n a m o h i . m r e c o t a d e v e h t i c n a n i t a h t f o l e x d e n i a t e e v e f i h i i s e c n a r u s n i e w r u s s a e r g n i . d e r e h t i e h e h t o c t u t n e l h r p e i n a s m t t a h e d i f o n e p o w i d n i t n l e t y r e t l a ‘ T d n a s n g s u r u O o d n a e d i s t u o i d a i s n e f e h t a h t e r e i e c e b d n a e d e c n a r u s n I o s t r t t r t r i s ’ e y t e m s o o i o c e s l e m t e h y t e s y i l o b a . y t t s u d e n o , e r r u o e t n l a i t d n a t j i b n t s s e e D t a s i i i v o l e c x e n i . s r u d e g n r h e t s e h t e k e e c g e l k r a g a t n a v d a t r e y l r a V t l a e o c t k r a s n o t n e m e o f e h i h o c n p e u n i r i t r e p e k r i o t r a r a e y t i s o t a t s E l u m o h e u n i t i e g s m n i s u m r f i w y l r e t a n d r a o p o o r e h p t i o n o c e n i v a s . s t r a e w n r t t u n o b w r a m e r u s o t n i v d a r a e y l t s i a l k a d e c a f o n , p a m w w p t c e s b e i d r c n t w r i a e v i r e h T e t n o c m r u n w e h e W l e e h t d C f c e j s t t h o o c s 8 n e e 7 0 l a t o f e h o t n a t a l a - s r r o w p x e o c i s s i n t t % a m t n e c e a g n t n e n b r e h t e o e r i l a n o r a e y c i t c a p n k s i . e v t 3 . e v o r C i c r i i h i t s u s e h l e r e W 0 2 o r p e i m r l i t r u r r e t m o C . d r o c e t i o t c n g n i 0 0 2 s e s a e l i v o k s i g o r g n i m i v i d e r a o e n r u o t i s , n o t l r e v t c i r t a s , n i w f i n g e h l b a h t s u r e e s t c e ; i d a n w e h i s e t s e o i h g u j l o g d n r t r e b o T s t y e k i s s e l a i c n m o c t p v o p r p . s s e d e s s e f e v o rn o a t o o r p m w r u o t c t d e i n e W l a r g n o ’ e f t n l s e e A u o e m m o u l c w n i i s e n i o s a r e v e . , 7 r i f o u r a r p r t f . u x e l e w s i m t c o i a m e r d h c a n e s n t a rn e r r n e e a p u c c o s o d w h i r O e h c t u a o r t r o e n i l s e s O b u d d e w x e s e n o s n i a u q n l e t s d o l c t l a d h c r t a d h h t i w i n c n a e u b s u o l a n o e w t d u n 0 0 2 t r e b s t e i n E e h s a e W e u d e n i . e r u q e t c e n o n i a t o u m o c l l e t e o t n a e e r s a v e l n a h . l u p n a s i n a u r c s e v o c d d n o p i t a n w f o n h a p t a i l s i l o c m e r h l a v o t h s w s i t i t a n v e r e n i l d i n a t t u . e D d o t e c h r t i f e b r t i a i n e w e g n t i a m e n i g l e s n a f e h c o x e n 9 8 2 t a i m e r e v i o v l l a u o c n A r d e c , e r y l l i g d e u w o i g t n i e r a h t o c l i o i n o f b L t i n o o r a e i d l p i c n E i e y p s s n a i n y i n e e c d e v 0 / 0 / 1 / y l g t i e t o y s n r t r i h c w i a t d r r C a m n o c u d s l a k e v i n t a w n e i o t a u s d e r c n d e i n i d r u t n e d h c w e r u u l r n e t v i o i r i r a m n a h h u o 8 0 7 0 1 1 e g e w t t a t d d d e l p p r t c e p t a p n a t s n s t r a g e i u s o o s a i v a e n i u l e s e o c e e h e h a h r h n a r e v o R A n i n I B h c a s a w e v o c t a h T e n s i E e e b L n o a e r a L n a x e t t u O s e W e W h s a s u q e r r 0 2 f e d n o h T h w r t t 0 2 t c a s i F o J n i n o c n i 0 2 , r i e a % l o r e l r e t s y b o t 8 e h t o f o d 1 6 , h t i g e v a h , s e , e c i 0 i e l m o f e i t s e v y l t n e e r . n o e g a t n r a r f 0 o 1 6 ’ s r d n . ) s s e s r e i t t n e m y a 0 2 d i a d o r t n o i r o s m e a e l a . d r t r p i , s n o c o v n i p b k s i R k s 9 1 t n e m . ’ b a r e e c r f i t n e t s a i t l l b r s r e e h t i r d e t r o p i t m e g e r u s n c n p d i e t f o l a u n n r e s b o c o r p y s e p n e d e e r e e n w o a o B e g n a 5 9 , 5 £ ( p p u s s e n u J l v o c a r e l p p u s c A e d o e t . e g o e t a c n u f a e g a n a m r o f n d n a l l a n i f ( i t e r C a h 2 t n k s g n i s k s v o s s a a t s E e g n l a m r o f l p p u s c a n a M a r n e t n e t r o h s s i r i s i h T e t a e t i r ‘ i c n d n a s k s i r a m y s s n a r d e i s e c . n o a e n a e r h a f o ; t n e m u t e g s m a t s E c e r t d i t t a r o p r o n a a n a m d n e e h t e n a p t s E i a a r o t e s o h t a b c i f d o e m e g e r s i v o r e t s m e v m o r f a y e k y w o r i a s s e n o s s e i s l e 8 0 / 7 0 0 2 c a r t c o d i s u b d u b f o e e s o h t o t h o t y a w C s t n u o m t e h P u b t i r e p a a n a n i . s y l e f p m i p r o c y e s i h w h c i h s e c w e n , s r e t s y s i s u b n w o r y t i l n w o r C l t c e r i a M ) s t n e m e e b ( w f o d n a n i s u b s n o i C d a n g i s e t n e w e h T m e e s i h y c e t a l l a s ’ e t a t a t y s k s i r d d n a t a l e r e g n i o g n o i o v n t s r u o t c a r e h s w e i v e r i t a r a t e h T t i l i t S e v i s n e h e l u f s s rn e t s i g e r , e e t s e t a r o i l o p i c n t a n o t c e r r o c a c s . y s y e h i b i s n o c n a t n e m y a e t s h T d n a f o n i h o t i t e y n a r e r a e y e k t d p e r e h w , E P t i l i c a f a 7 5 1 , 0 1 £ l o r t a h t y , e c i t n o c w a n y l r e t r a u g n i n n a l m r b i s i v t i w e b k s i r t p i e d o m t u p s i n o i e h i f n o e h r e f o q d e s e r p t a h t t t e g e n o t t t n a , e g a r e t e c c u s d n w l l i w t n e m p m o d n a t t – a t a g n i l p r o c n i d i v o f r e o c e r c t n o C s r e a s k s i r d e t t c a r p t p i d u a m m o C r e l e h e h t f o g n i ; ) s e t b n o i r C e B ‘ e p c i v r e s y a p : s e v i f o f o s m i t i s n o e c i f i n g l a t o t t a r o g n i t g n i r u a n s i s r e d i r o f s e s s k s d n i l p p v o r p , y l r e t e r e t a e r g c e j o r p w e i v e r t s e t n e m e c e t i m r n O d n a s ’ o t s , s s r e g a n a m f o r i s t u u d r o D t n t a s n o t c e b . d i R u r a i t a d e h t d s r e t . g e t s s y a s k r h T v i t c s e e p p r o i n d e c o f o d a s a n I c r o p e n a l a i c n n o i s e i t e t a t e t a t s e i n o c u q n a s j b o n a f o c c a r d n v i t y s f o n o i t i r n i n s s n e m r p e l p m i s n a a t t t a m o a n e h T d e e e h T t i s n o d s i t E E f l a l a e c i o t r a i a s k , d e 6 3 e h d n r f . r o d a g r o e a m l l a t s e k s i p r t d a s i u c e e m y a p r . d n a s y a d y c a h c h e r r g a h t s s n i e m v n i e l p i n o i t n a , y t r t s s e n a e l b f o e g a n s t n i t . ) 2 ( 4 n i s e g y l d r x E h t e n s i r e s t e s e v i n w o n w o g t n e m t n e m n e t 0 3 n e m e r a n o e l p m o c c n i h t s r e t n i i h t t r t r u b p h t i w r e t a m t . d n o n i d s e d a t i r s a n e m e g a n e m e g a n e m e g a c i g e r C r C i l p n a l r k r r p t c e t n o i t r a p y a r n n n h t o o e m e t p s u l u l a m r o n o a p l i a p d o i r n e d i c i o v n i v e i h s s o r e d r ) 7 0 / 6 0 0 2 n i h t s k s i a o s i g e p e h e h r f a r t R O B s j o r p a M c a e d a d R a ( a u Q e d a t s s i s n o c T a m d n a a h C T p u S c e s i w o i h t n i c n i e p e b m s o c n i a p r o W a w m o r f a m e h t s a c a n e t x E f n I The Board

Ian D Grant CBE, FRAgS Dinah Nichols CB Chairman, First Commissioner and Scottish Commissioner Non-executive Board Member Ian Grant first joined The Crown Estate Board on 1 September Appointed to Board in January 2003. Dinah Nichols is a 1996 and was subsequently appointed Chairman of non-executive Director of Pennon Group plc (a water and The Crown Estate in October 2002. He farmed in Perthshire waste company) and of Shires Smaller Companies Investment from 1962 –93. He is Chairman of Scottish Exhibition Centre Trust. In 2005 she became Chair of the National Forest Limited and is Deputy Chairman of NFU Mutual. In 1988 he Company. Until 2002 she was Director-General Environment was awarded the CBE for services to agriculture. His other in DEFRA, where her responsibilities covered policy for previous appointments have included President of the Scottish sustainable development, climate change, air and water NFU; Chairman of the EC Cereals Working Party; Chairman of quality, waste, chemicals and the environmental aspects of the International Federation of Agricultural Producers Grains farming. In her previous posts in the civil service she dealt with Committee and Chairman of the Scottish Tourist Board. housing, construction, property, regeneration and transport. He was Deputy Chairman of Scottish & Southern Energy plc, Dinah is also Chair of the regeneration charity Groundwork, a non-executive Director of Clydesdale Bank plc and East North London, and a Trustee of ENCAMS and the Travel of Scotland Farmers Limited. Aged 64. Foundation. Aged 64. Roger Bright MA (Cantab) Jenefer Greenwood BSc, FRICS Chief Executive and Second Commissioner Non-executive Board Member Roger Bright graduated from Cambridge in 1973 and joined Appointed to the Board on 19 February 2004. Jenefer the Department of the Environment, where he went on to Greenwood is currently Grosvenor Estate’s Retail Strategist, hold a series of senior positions, including Principal Private a position she took up in May 2003. Previously she worked for Secretary and Press Secretary to the Secretary of State. CB Hillier Parker for 25 years, where she was Head of Retail. He left the civil service and became Deputy Chief Executive Within Grosvenor she has particular responsibility for the retail Officer of the Housing Corporation in 1991 and then held positioning, leasing direction and marketing within the £3 billion senior posts at the Personal Investment Authority, including development programme. She is a Board member of New Chief Executive, and subsequently Head of the Investment West End Company and a member of the Advisory Board Business (Personal Investment Authority firms) Department of the National Skills Academy for Retail. Past President of at the Financial Services Authority. Roger joined The Crown the British Council of Shopping Centres (BCSC) and a member Estate in June 1999 as Director of Finance and Administration of the ICSC European Advisory Board, she is also a Governor and was appointed to the Board in April 2000. In June 2001 of Westonbirt School. Aged 50. he was appointed Chief Executive of The Crown Estate, Chris Bartram MA, FRICS taking up the post on 1 September 2001. Aged 56. Non-executive Board Member Hugh Duberly CBE Appointed to the Board on 1 January 2007. Chris Bartram is Non-executive Board Member currently Chairman of Orchard Street Investment Management Appointed to the Board on 19 November 2001. Hugh Duberly and was Managing Director of Haslemere NV which was farms in Cambridgeshire and was a member of the Huntingdonshire floated on the Amsterdam Stock Exchange in 1999. Current District Council from 1979 until 2004. He was previously non-executive appointments include: Chairman of Estate President of the Country Landowners Association and a Management Development Fund at Cambridge University Director of the Agricultural Mortgage Corporation plc. and Associate Fellow, Downing College, Cambridge. Chairman of both the Papworth Trust and the Shuttleworth Past (non-executive) appointments include: President Trust, Hugh is also a Governor of Writtle College. He is of the British Property Federation, Chairman of the Bank HM Lord-Lieutenant of Cambridgeshire. Aged 65. of England Property and a non-executive Director of George Wimpey plc. Aged 58. Martin Moore MRICS Non-executive Board Member David Fursdon FRICS, FAAV Non-executive Board Member Appointed to the Board in April 2002. Martin Moore is Managing Director of PRUPIM (Prudential Property Investment Appointed to the Board in January 2008. David Fursdon is Managers) and director of M&G Ltd, the UK and European a qualified rural chartered surveyor and agricultural valuer. investment management arm of Prudential plc. He is a Board He owns and manages an 800-acre family estate in Devon. member and past President of the British Property Federation He was formerly President of the Country Land & Business and chairs their Sustainability Committee. He also chairs the Association (CLA) which has 37,000 members across England sustainability group of the Property Industry Alliance. Martin and Wales. David is currently the Chairman of Governors for is a past Chairman of the Investment Property Forum and Blundell’s School, Parish Chairman, Deputy Lieutenant for Westminster Property Owners Association, was a member Devon and a former member of the Government’s Affordable of the CABE Design Review Committee and has worked Housing Commission and Heritage Protection Review. Before on various property related panels for both the Association taking the chairmanship of the CLA Board in 2003, he worked of British Insurers and the Royal Institution of Chartered full time as an equity partner of Stags, the West Country Surveyors. Aged 51. Chartered Surveying firm. Aged 55.

From left Chris Bartram, Dinah Nichols CB, Martin Moore, Roger Bright, Ian Grant CBE, Hugh Duberly CBE, Jenefer Greenwood and David Fursdon. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92

Page 59 Governance report

Introduction Act, as may be given to them by the Chancellor of the Exchequer and the Secretary of State for Scotland. The Board In managing the affairs of The Crown Estate, the Board submit annually to the Treasury a forecast of their activities in a of Commissioners (the Board) is committed to business corporate plan covering the following and two ensuing years. integrity, high ethical values and professionalism across all its activities – all in accordance with the organisation’s core The Crown Estate is not the property of the Government, values of commercialism, integrity and stewardship. As an nor is it the Sovereign’s private estate. It is part of the hereditary essential part of this commitment, the Board recognises the possessions of the Sovereign in right of the Crown. importance of high standards of governance and has in place The Crown Estate is a statutory corporation; it is not a company a corporate framework document setting out the basis on for the purposes of the Companies Act. which The Crown Estate operates and the formal structure for decision-making. The Crown Estate may not hold assets other than in land, gilts or cash. Investment in equities or outside the United The Combined Code on Corporate Governance (the Kingdom is not permitted. Combined Code) issued by the Financial Reporting Council is widely acknowledged as representing best practice in The Crown Estate has no general powers to borrow, either governance. Although The Crown Estate is not obliged to for capital purposes or for working balances, and there is thus comply with the requirements of the Combined Code, its no external indebtedness in the balance sheet. Board nevertheless supports the principles and provisions Under The Crown Estate Act 1961 (First Schedule, para. 5) set out in the code and, inasmuch as they are applicable to monies are provided by Parliament (Resource Finance) the circumstances of The Crown Estate, seeks to comply with towards the cost of the Board’s salaries and the expense the code where this is appropriate. of their office. This report provides information on The Crown Estate, Composition of the Board including the statutory position of the Board. It also describes the Board’s approach towards governance of The Crown At 31 March 2008 the Board comprised eight members: Estate and, to the extent possible, how The Crown Estate a Chairman (who is non-executive), Chief Executive and six has applied the principles set out in the Combined Code. non-executive members. The composition of the Board is Adherence to best practice in corporate governance is kept defined by The Crown Estate Act 1961. under regular review. The Board is satisfied that no individual, or group of individuals, Statutory Position of The Crown Estate and the Board is, or has been, in a position to dominate the Board’s decision- making. It is of the view that collectively Board members The Crown Estate Act 1961 was enacted by Parliament in provide an appropriate balance of skills, experience and pursuance of the recommendations of the Report of the qualities and that, as currently constituted, the Board has Committee on Crown Lands which visualised the role of strong independent and diverse characteristics. the Board as analogous to that of trustees of a trust fund. The Act charged the Board with the management of Brief biographies of each of the current members are set out The Crown Estate. on page 58. The Crown Estate may be traced back to the reign of King The role of the Board Edward the Confessor and, until the accession of King The role of the Board is to maintain and enhance the value of George III, the Sovereign received its rents, profits and The Crown Estate and the return obtained from it, having due expenses. However since 1760, the annual surplus, after regard to the requirements of good management. To achieve deducting management costs, has been surrendered by this, the Board’s responsibilities include: the Sovereign to Parliament to help meet the costs of civil government. In return, the Sovereign receives the civil list and • setting objectives, policies and strategies; the Government meets other official expenditure incurred in • monitoring long-term development of the organisation in support of the Sovereign. the light of the political, economic and social environments The duties of the Board are to maintain The Crown Estate as in which it operates; an estate in land (with such cash or investments as may be • controlling and monitoring the financial state and required for the discharge of their functions) and to maintain performance of The Crown Estate; and enhance its value and the return obtained from it, but with due regard to the requirements of good management. By the • approving major expenditure and transactions including Civil List Act 1952 the net income from The Crown Estate, after acquisitions, disposals and joint ventures; defraying costs of collection and management, is required to • ensuring a system of controls (financial and otherwise) be paid into the Exchequer and made part of the Consolidated is in place; and Fund (general government revenues). • ensuring adequate succession and remuneration The Board have authority to do on behalf of the Crown in arrangements are in place. relation to The Crown Estate all such acts as belong to the Crown’s right of ownership, subject only to the detailed restrictions set out in the Act. The Board must comply with such directions, as to the discharge of their functions under the What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92 Page 61 l e . l a h r f o d r e y e r a . d r t r f o e h t a w o . r r a r e h y n a , t i w t n s ’ e h t k R a r b m g n i t t e l a o l a a e H t e y e n o ) e o n a e r s t n a o p e e n e B a . y r f o i l p o t l a r r o r a N c a l n o t c e r f . ) a g n i s i d r y r u s s g n i r e n i r l . t n e g d o i t e c n e t e p e h t i a e v y f o g e L 8 a n e t w e n s i h a . s e i t i v i t T h c m r n a e c e D d m o d v d e h t . e r a e s ’ e e h t t i l i c a d e w o l l o r a h s t n e m t n i c s i h t e v i t u c e x e - n a f e h p t s e h c f e m t n i 0 0 o f f m o e l w . i t n 1 c a f o l l a a o B , s e i t i T a e g n f e n e t n m t n i l r a t e i s e l p i c o t 2 o p 3 s i e t t i e a , s J n i e t y o o n e s . s r e l o n o p u g n i r b d n u o s . s e i l p p t u g i h f o d n , g n i K M e u t r i v e t c e l d a u o p p p m u s e r a m k a t n e c n i e h t b d d n a a , y l n o p d e q a l a n H r y l e v i t c p p e d i s r e t a t s E r c e s r o t s i r h p A s e s r p m b m e e d n e r e h t e a s a h e c i t a p y b p m i w e v i t u e h t m l i t u s l l s s e c C l o y r a u n a a y e h t r e h s a s d n s e d i w a c i l o m u m i x a m d a d o c a o f o e c n e l n w , s t n o C a o i s s e m o r B e h t a t n o g n i t r o c r i p x e r d f l u f s i r e J r i e r u d d n a a c e x C l a i t i n i r o p h e f , l l a m s e b u D r p o r b u r o t e e h b r u s t n e m t i m t a h g n i e s o l c s i d , , s e i t u d p e d n i f s i n a 1 e m p u o p c e n n e i v i V t s t d e h e r l P C y , s l o h e c d n e h d n a e d e h d r a t r e n e e s t c a e t a e h t d e m t n e c n e e - n t a i h y r p t n a f d g t n e e c o r p e l e c i f o i v c a e r o g i t s i m e v s r a e n i c n e r a i e e v l b u t n o N m e h o o e h i t h t s e b o h t B p u s N t o r p o c e h T o n t t i o r v e t n e m t s ’ e p m t r i s T H i t u d e s i o ( t n e e b d i r e i t a i t c a p t n i e h t o d n l d n w e i t n i n e s t n o p p r u s n d o t b m d n a w s e t d r i t n e a h t , s rn u f e h . s e b m e a e h t o h y n e h g n r o a e t n e r p o t c r e t t r e m l e h f y o t h a n s e r s r o s e d u r a t o p B a . s r a i r a w p x e p p a o n a o v i t s a h t i e h n i o C r o p p d e o d m e t s e o c e x e y l s m i v r d e t n I a o r a t r a e r u e l D i e m r n i s i d u . b o p p y B a i e y n p a s r l f g n l c n B . ( y , s n e n i r d e s n o c r a l l ( , r e d e i o d a y t n l l s t n i a e c o s . r t f s l l f i r e s e y i f e h e e r t a n e o r e i f e n e f w t y t l c n t c e i s a h u l a r u y r e r e h e b t a i l o t n i r e y r a o n o r p e v d r a i d u t i ( r e b B o n o e c e b m e i s e s s t t a m b o i L i i k s l e h i l c g n i i m n f f O v o h a u n n f i u q l e r i o l a V o a s i t o d l f e s o o r f o p p T r u o o c m a i l e f e b m r e h o m w d n a m e i a G c i f t B l c n d r b r e b m t s f e s o o a i r r u C o n p p a i e r c o a h t c M t u t i h s f i r e d n a g n i f f u s t a m . s e w l a u n n a ’ , l b i m e , e c n s t u c e d s r u i d s t , s e e e e n r i t e s o i m e m t o d d d t e m g b i s d e c l b u p w n v e n u s l b e h x t c e s r e i F s n e e c e m s i r s r s r w e e h t n o c e i l t n n i t c r n r a r a e c o r p n o t l a e o f e v t o u o i i t f d P i r d o b n l o e v t n t e d a i r d i u d e ’ e r s e n e i t d r e v o f n n k a h p u , s s i d o i t a i r a i s s r a e b e b s i i m l u o t e v x n - n u w e r e t e l t r r s e a o s i i v o p i t i n e m i d a r a r t r o p n o u c l p n t i f f o o p i t t a s r e p o e p d r p d s a e M a o s e c u c o D e r e l w r e u y l i c n n b s e o f n e n t s t s e f e b e b t c i o a E i s B D r e p m o e d v i x d d a r r d o B o c v e r h . d r e h n w e n e t a i u c e c c A n n t e n o n o R , d l a r s d r n o t r e e x e i e t c n m e i f n i r c e n , m e m m e m u t r x a a t i v d n a p i S o g o s ’ o e - f e h n I u e m o o a o p f d r d r l b e o o r t n - u c c n t n m i y t c i w e d a i t u f p p a d i n e t b u s r o n d e e m e m s d x e c n a g . r t t e d r d r a f e B o s t t t n e n m e m m e m o s a - e a e v t n l f - n o e n o i , m r a o w D n a o a o s t n r p i o , o n o a d n n n u d m n h s n a n a m ) t c r a e s o p o a n i r n i c t x e r a o a o i m B o r B n r C o p n o i r a d t e h n r n o d r d r a r ) i o i o o r i o 7 - n i l f s e s e r o u n a v t i t r a h t t S e b m e d t c e e p e n B B g i a n h e t c e t c e j t l b 0 e e e e e e p a u H n i a s d p s e l l l r e e r t i r i i o p p i n r a a o a o h c a n o r c e l e a t e e h e h d n s t n h T n o E e m u d a W h T o c t l A h T f o b o u H s D i i 0 2 h C f o p p a r h T B n e h T G s t l A o f a m n o c c a B g a s B A c c a p p a p p a w u p h T p p a n a h T e r U n o i e h t r o t g n i k ; n f f o n s l a i e h T o f d r a o s t i d o a t s u n r o d c f e f r e f r , n o i t a r o i t e l t n o g n i t c t a r e n w e i v e a o B o o o i t o i r e e h t a t n e t i d u A r b f i l l i m r e d u y l l a e h , s e v i t h t e h T s s a v o B e e t t i m a n i f r e a g e e r i d r o i n n u f r o f m e r e p o t e s t n e o f e h t m e s c e l e s d t r . s r e b f o l e i s n o o t i c e l e s 0 2 £ o d r a o e s R m e h d d n a u n n a o f t f o e v i n u e s s e n i s u b B g n i d u l c n i p s 8 0 m o c g n i e b e n i s u y t i r o h t u a s m e t s y S t e s s t c e j b o y r d n a e o t d g ; n a l p e l b f o e r e h t e u A n m e m e r a 0 2 d e v r e s e r e h T e h g n r e v o k c o t s f o t n e m i l a m r o f t c n a h n e e v i l ; s o s i & i t a l a i ) a n a e c n e r e t e t c e f f e A , e e t t i m a d , s r e b d r a e e r g a M s s e n i s u b d r a o B e c n e r e h c r b i s n o f e r , d r a o B s e t a t s E f n e v e r p o l e t s E s r e t t s e e t t i s t i d n a p e e k , s e v i t c e y g e c i f f o t n a r e n o i t a , ) s r e t j s e c i g e t a r s l a s o m o s ’ . s s s e u s s g n i r i a h . t n e m o B t e r h i t n u o c s e t a g e l e t s a . p y t i l i b i s n o p s e r h 7 0 0 2 t n a r d a u Q t f o v e n e h t r o f G c a M e h t C r c t s d e t a m u t a r t e r d n w s p s e r t o p s b o e c m e m m m o i i a s f o a a , n o f 1 e h t d n a m r o f n I t e a m v i b , c y s d n d t S l a r u R i t r e h d n r o f o r o l e i 3 i l t n e m e b a t s E n a I v i g n i g a n a m e d u d r b e o r g o c y a s m r p e a r f & a m r d r a p o r C e d u t d n d n a t s E e e l g n e l e o d t O t n y t i l i b i o t v e t u c r o d n a t c e r o f t a l o e t b u s m r e a r e a a t d r a o g e ; y t b c . l c n r i e n s n t h g e e d e t i e j o B p l c n e e h t e x e t i f o p o B s t s l u d i r d u y t p m O d b o i e g l p o o t a o i t s E e h T g e a r r e r u a t r o t r o i s n e t - g n t B e o e v e s r c a s e v o r B 9 l e h t i s n o p e m t s e t f o i e t a . p t s c n a n e n i r a M e h h c s d t o t r c n e g r o l p l b i n v 2 t a r p g n i n n a c e r e i r o h g n i e v g n i t u n w o r C d r T t u e r d u b p e r i F a e h c s a g t n a t d n o t s l p f o n e - n o n d i D i t c d i p a d n s e R a i h w e v n I a e h s e i o p s e r t u a f o l a r e n e g a : e s e d n a t i m m o C i a M s i h , s r e t s . n o s i r o c e r i D e m f o n w o r C e g o R e h T a o B y t i l i t f o e l e d c e x E s i e f f e s s e s i H e v i t u c e t i f o r p e t a d n e p x e t n d n a s i r u s n e i t n e s e t t n d u t u d g n i t s r o t s e e l a u n n l a u n n h s l e e h t n i l a m r o f o d n a . e l a s f e b i s e h t r o f , r e i h c l a g s s e a a i o i t i r o s t d t a m c i n u m m o t c e r e b i r c s x E i s i n i s i y r e v i t , g e h T . e t r a d t n e m t s l c n e m c r u t e g r a i h r p e i a h t n o i t c e r t n s e i g e t a t i a r i D r H h t f o e u q n i e L g m a e d e t n i o p p a e d t c e a v e s C ( t u b n e m f e i f o r t , . n a g r e t a n o p t i d i D s r o t e h t e h t p p a a t i p a r g o r a t s l n i a g t s e , u c e s d n s a n i i t t o c S t r u o B s r e e v n r a o B n n r o p r o C u a e e m h c i i c e r p E s x r i D r o t n t n g g a e t t i m m o , s g h e g p p a e v i t r u h C e h t , g n s a e s e r E c e r h t v n i c : f o g g , e e t a t e t a t n d e n e p h t d n a l p d t h g i e h w i K n i t l a l a r s s e l e d s n n a m r i e , t t o i l r e h h t i d r e d a n a t i l o t g n e m e m g a t t a m f e e s f o l s i r u e E E n i v o n i v o x e h t n i e n i e t , k r a e e g a n t e t t i e e t t e e t t , e e t t i r B r o , f w o r i h a h e v i t s t s i t n e g e g l e L n i r d e n e d e t a g n n l C s a H n e m p o l g n i a M s e i t a r o n n i m i m n i t o m o r p a u q e h t c i g e C C C r a o B a m t r a l o h e l a t n o i s i s c e j d r a r e r g r p p r p p e r g n i d u a g a m t r i n w n w u c a i c n c a n a n e l k p m m m m e i e n l u a a a a i l n a g e v e l e n e e i c e p r m m n h i p n a v e l c e a o b o e g o a r t s e d o p o c h T a t s a p h T e h t d n a o r C e h t o r C B R a P a M v i V o J o c R p o t s i r h C h T a c a h c a n i f h T s a d n a l e r a m a t r e C d n a o c o C e h t b u S o c n i ( • • e x e e d • • • o C m u s h T D Governance report continued

The selection panel (comprising a representative from the Board papers encompass regular reports from the Chief Treasury, an independent member agreed with Treasury and Executive, Director of Finance and Information Systems and up to three existing Board members including the Chairman others on a planned basis. Formal minutes of all Board and the Chief Executive) supervises the process, interviews meetings are circulated to Board members. Between Board candidates against the detailed written requirements of meetings other information is circulated as necessary to keep the post and agrees its recommendation. The Cabinet Board members informed on relevant issues, and outside of Office appoints an independent scrutineer. The Chairman formal meetings the Board may be asked to make decisions makes recommendations for re-appointments with a ‘out of committee’. Board members have access to up-to-date presumption against second extensions. Appointments corporate and market information as required. are made by Her Majesty The Queen on the advice of the Board processes Prime Minister. Special arrangements apply for appointments to the roles of Chairman and Chief Executive, within the All key procedures and policies affecting the Board are Government’s principles. maintained and operated by the Board secretary. Succession planning Liability Board members’ appointments and re-appointments are Board members are indemnified against any personal civil staggered to allow the managed transition of the Board’s liability which is incurred in proper execution of their Board business as non-executive Board members become eligible functions provided that the Board member has acted honestly, for re-appointment. reasonably, in good faith and without negligence. Board meetings Board effectiveness The Board held seven scheduled meetings of the Main Board Board performance evaluation during the year ending 31 March 2008. As well as meetings in During the last financial year, the Chairman carried out an London the Board also met in Windsor. In addition there were annual appraisal with each of the non-executive Board three meetings of the Audit Committee, five meetings of the members. These evaluations were conducted against the Corporate Responsibility Committee, two meetings of the background of a comprehensive check list which ensured that Remuneration Committee, three of the Scottish Committee there was opportunity to gain assurances or comments in and one meeting of the Quadrant Committee. respect of areas which required action. The evaluation included In addition to scheduled Board meetings, each year the Board the perspective of the non-executive Board member (covering attends a special meeting which takes place over two days at the view from his/her position and from the Board), and the which broad strategy, external factors and the direction of the Chairman’s assessment points. business is discussed in depth. This year’s meeting was held Also during the year the Board reviewed the performance of in Southampton. the relationship between themselves, the Chairman and the Information flow Chief Executive. In this matter the Board considered the relationship and communication to be positive and that there Board members receive a regular and controlled flow were no issues to be addressed. of information relevant to the fulfilment of their duties. For example, details of portfolio valuations and performance against external benchmarks, financial information particularly directed at revenue performance, and various market and research information and presentations.

Current terms of office Length of service Board member Date of most recent appointment Date of expiry as at 31 March 2008 Ian Grant (Chairman)* 1 October 2006 31 December 2009 5 years Roger Bright (Chief Executive) 1 September 2005 31 September 2009 7 years Christopher Bartram 1 January 2007 31 December 2010 1 year Sir Donald Curry** 1 January 2004 31 December 2007 8 years Hugh Duberly 1 January 2006 31 December 2009 6 years Jenefer Greenwood 1 January 2008 31 December 2011 4 years Martin Moore 22 April 2006 31 December 2010 6 years Dinah Nichols 16 January 2007 31 December 2010 5 years David Fursdon*** 1 January 2008 31 December 2011 3 months

** *Formerly a non-executive Board member. ***Sir Donald Curry’s appointment expired on 31 December 2007. ***David Fursdon’s appointment commenced on 1 January 2008. One re-appointment was made during the year to 31 March 2008. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92 Page 63 f s t h s o e t s t r s i s t l r e s a r o ) r g i s r u o . n e e y b r s e i f e v i t u e t a t s E h t i w o p e , t n e s i n o t c s h l a i t n s rn o h y n r ; s s n o i t t e v e t i v g e d n g n i t e e t e e a r o d a e H o r n e h w y n a i m b u s o c a g i t s e v n i a d e s i r o h t u g u e c o t c e r t u o h t i w e d i , y t i b e c n a n i F m m m c a ; e r i D e c n c e x e o m t i i t c n i o f n o i s s e n w o r u i t c a t i d u a a l u a s i n i D o r e h t n a t l u s s f n o s t i o r o a e k e e r d n t s e f o n I a o s l s i n e e t f o s p n T c p r C r h t o t a l a i c n s t g y n a g e a . r i g o o c e h t e s k s i t i d r t i m m r . r o s e o r p e h t r o c r , e w t e c n a i l p m o o d r a e t a i d s u f o s n o i t c a n i s a r e t n I o t o t ; f e t t i m n o d n e t t a c u A c a o e r a f o e h T r ; t i d u a e i n n h t i w g n i g n i w o l l r p e t d u a o c t t n e d n l d n m , e e c e o ; s n i l l i f l u f , t n e O e e t t i m h t a y a o f o B a t i m m o c g n r i t n e v i t u o a c e c n , s e s , y t i l a u q r e c n e h t r e s t l a A a h e r i D r e l l d n d ; t n d n a d e t a o r p . s rn o r p d n t e l n i D f C m v i e c t y t i o t i d u g n i r ; s s e m o a l e d f a c o N ( r a y o l p e h e o a rn e o c t n i h c i l b u P m t n d i e h t e d . e c i t c i e h t i e r a t o a p a h o T C e h T v a h e m e y e h t t o r t n l e p e c e x E t e c n c o t g y p u w r d r a w r t n . e e m e t r o h , i w i . r t r o t x e m e s d i t r o p e r f g n i e h e b e m s r e s b c n e r e n a r p o r s t t d n r p s a o f t t a e i n o i d u A l o c o p p e L C t a u q t n d n i y r l o c e i v e k a a g a n B i r e d a p e s o h , d t a t a h t u a r o e e c y n l o s v i h r e h t s a rn e t s t m s g n i e y t d n a t l a d u A e t w a e e d p r e h o t i a l r a P e h d a o e h C r t n e f t i l e m s e n i t a m a d n a t t e h l a a e b s A a d n a f e R s i t p t m e e r a t n e t x e a rn e o o g n h f o f , e p i c d e , r c i e h k l s a m n r a e r a o B e g l t s o c h e b i r c t n o s e h n . y r m e m o i t f o d u a n t e e m T t o d n t d n t i r i d u a i l c i i o i s s d i s o i c n a n e h f t n l i a o e p s s t s e . a i e d a w e a n t s s u s o p t t s e m A o c s e s i r o h t u i i w e v e i i s a n : s i F w e r f t u a i b l p i l g e i v i v t d r a d e a l f l a n m u c o l s s t a s e m e c l o y c n . n s e i s s o w a o t s e h m n i a M r r o g a n a t M o c s o r d e r o r c e p x o g n a e n s m r u e k s i i c n a n g r e i o r e h s e h t l e y n i m i l : e B e n m o o r i t d n a p e t t n i i f o e T y m f d o H p e i h n u o c i r e e h t a y r o d e e n r i u q i a l o f d n a l e l l a n r e t e e r h t s e n f t n o . 8 e l a u n e t s d l t c n i d e t e s o p t x e a m o s l d u e e r t p . t c l r a e l l o u s ’ h a c n s l s t i i e r l l t 9 a s n t t b k s t : r e ’ c i v t y r a o o t r i i ’ i e e t t i i s u b h x e c e l t o t m u n a r a u y S 9 n a e n u d e h c s o t c p m t s c n g A x e d l t i e t w r l a e r i d i g n a e h c g e e v s a c i m g v o i n e m 1 s t a e a t r n e f o t n t o u e e d n t d o t d r u e r r n n i h o t t h rn s t rn s g e r o p e h u d i d u A t s e m e p g d d n e o i i w h t t n a r e h T r a l a e n a e n e l . y n e t e t d n c e f m o d n e i s e e e E d n n e t n a a h t a n i h t i w i r b t o e c e r s i s i t i t t c A d r e c a n a e c a a g n g f e g g g i s a o g a w o r a u A . r a e y w d e n a n i t l C a t r o p e r o C n . e w r i r u r r a n e n t . n n a m n f f e l b r o t a l n y o t t a e n i s n i n i n i r y t i r p t s t i e l b f d n i b e r a o t i s a y c m r o f i w s g e l e d s f o i e h y e c l p rn e c n e i o t o r p s d e h o i t o i t i a t e u o w w w w u o o c i d o a g d t n l i t s r B o t o t i n o g l a u c e h W l n a s e i a s g l o s c e e e e i o , e m t i f f i t i i i i e l y t i v i t c s . t n I s n t n d c a n i e e a d r a e t r e v d e r n t a s l t s p m m v i m e l f n I h C r C u A o n o o l d u A t c e i m a s e c i c m e u n n w i g n i n e e r t a m m t e t c h t d e t n n a s n s i h w e r n e n o e s v e r v e r f o n a o c v e r c a s n n e e i e e n I i m r t n d r o o o c ‘ i d u q p s t r a s e v o h e s i h e h r o e s y e h a h s g e T s a b e f t w n k y b n s a c t h T D o b a w v d a p o o c a r t h W ‘ A e r s a i o c e M r o n I e p S n a f o t a • f n i • • l • T y n a e r n a • • h T i v n i s h T i r u d T . d s n t n d s e e o r a y t s n i i t f m , n e v d n a g a o o B o i s r e h t a g t n k a t r R r e t e t e v i t u c a c i f i n s i a e t t i m d e o n o i s i v o a c i n P r r a r , s g i t n e e v i u s f s d r r p o r p p a r t s e x E f o e h a e h T m e d n u e y e m o c e n u r e . t s e u q e r . o l i a t t o t n e e h i t c e l e f e k n e e s r e m m e h t , s e y g e t a r t s t g s e l h t e d i s n o c o B c i f i c e . s r o t c e r i o t v f o S o y h c n i s i h . s i k r u P m e s n o i s n o t o d w o l i m t n i o p f o b C i h C e v i t u c e x e - n o n t s a c e r o f p s e n i g n i d n a e R m e v t n e u s s i p a e e e t t n e v s i l a u n n a e l g , y t i r o h t u a b e e r h t a b m e m t i a r p i c n i r h t l a e h t r e b k c o t e h n i t s e u t s e s i t a t o m p l o v s s r n a S y t i l i q d n a w e i v g n e h w h f e d i v a D e h o b : e r a t s i n i m e g e c n e r h t d r a m e f o b i s g n i g e r e l b a n e t i s e h b a l i a v m r o f i s e , s g n i h t i r b c i f i c e e , s e e t m m o e f e h n t n e v i g n s i f o i . s t n e m n m t c i g e t a r a n a m r i a h C m t s e v n i e c o r w e s e o , 7 0 c s a t T i r , l p m o o B r e t t t o s e r , s l y i i p p s s n o t s t e l c h T e e t n i d n e f e r d r e t s l u f r e h 0 2 . e a n a M d d n t a s h e a o d n a g n i e n i ) e v i r i m m e h t l a r t i g e h o p a a s o t o t t a o d n e p s e e s , e m o a n a w e r o e r u s n e ) n a m r e T i m m p i m m n e h l a w t t i i l B e c e . s t R , n o i t a m i t u c i s n o a t s o s m m y g e e e b m u n e v i , r e p o r i o f c t o c t n e m e l p m i c o e t e d d n t e . d r e e t e v i e t c i p v i r o f d e a g n l l c t b m e v e r a e b m e t i a h C v d r a t i m m o C d i s n o t r o n i ) 8 e c r u o s e r e v a i e h i t a o i t u e r i s a r e c t i m m o C t s r i F t c e r p b u a r o t u c c u d u d n a t e k r a m a r t s d n c n a m r o f r e d B e m o B e e i m m o C . s e c r u o s e R p c a c e D o m a e e a d n a p p o f o a 0 0 2 e x e - n o n t i m m o c l c n i y t r e h t d n a t n l e n i d u A e x E t n e i c s n o i s n u o r o f e h t e v i f 1 3 t u c e x c n a n i f d e h s i l b , s r e s p r o C f R P i f d n o c g e e e l o r d r a o B f o l i s e e y r a , e s . d e r g s e s e i c a r d . d r a o B t n f u t n e m t s e v i i m a w c e x e - n o n o s t t a n n a m u s i f o h t e d i a t s e , m a r e i h g n i t n t n e m t s s d e h t n t i d r i p i t u e s e d r i y e H u e p o r p e h t C h t , s e e t t e e t t s r e b m e m t t i i m m o C t t i m m o c s r i l o p h d e m o t f ( r r n i w e i r e p e h t h t s g n i n i h t i t p o i m o x e a u Q u n a J k c a b e n i o j o e v n d n d . e t a i r p f o s a u A ( i t r a B l a rn f o s r e b m e m t i m y y r s n o c N e t i w a 1 d t t i m m o h e v i h t u C o t v e r o t t n o d e e t t s b d n a g c e s o t h g i e e m m a n o n e h t i w e c d y h T d . e r o o n e m e g a s r n a n e b m e c a t e r e h o n y r a d e i m d e t u c y b r a o B t n e n e r n o i t a m o c n i w e w h w e t t i t n e m e M e e t t e v o G d a e H o i m o r p p a i m m o C m d n a n a s i u F n e r s e i r a s e v i t s i r u m t n r c e n o i t h s i m t t m o i m o n o i t i d l a n o d e y s e t a n i i m t n i o r g o r p e x e e f . y g e c s M r a o B d r l l a d e i v t u e r d e t a g d r i c t e h e h y r a s s e c e p u s e r i d u c c t c u s r e b m D t r t t c u e m m w e n d s e t t o i l r e e e i o p e r e e e l e e r m n n o e r a r e d i v o r p m u s n a g d g a n a r l p p a o f n e M y b i d u A h T a M p o t s i r h C v a D h T a ( i S e h t p a h T B d n a o p o r G a r t s o C v n i v o c e n c e n I p o h T r o a h c e x e e d n I c S f o o c s i A s t i y b d n i o m h w h T a o B d n a l A I Governance report continued

If any employee believes that they are required to act Meetings are held at least quarterly. The following executives in a way which: ordinarily attend meetings: members of the Management Board, and Head of Corporate Support. The committee • is illegal, improper or unethical; reports to the Main Board particularly in relation to relevant • means a criminal offence has been committed or is likely policy statements or decisions and the achievements against to be committed; objectives and targets. • may involve possible maladministration, fraud or misuse Terms of reference of public funds; The committee’s main purpose is to ensure that there is in • is a failure to comply with legal obligations; place an established framework in place for improving the management of the historic, environmental and social aspects • may be a danger to health and safety; of the business of The Crown Estate and that the • is likely to cause damage to the environment; organisation’s reputation as a responsible landowner continues to be enhanced. The duties of the committee include: • is a breach of a code of conduct; • formulating policy and strategy in relation to corporate • is an attempt to cover up any of these; responsibility for approval by the Board; they should either raise the matter through their management • ensuring implementation of corporate responsibility and line or else approach in confidence the Head of Internal Audit. environmental policies; Employees should also draw attention to instances where they believe there is evidence of any of the above elsewhere • overseeing production of the annual corporate responsibility in the organisation, although they have not themselves report; and been involved. • providing representation for The Crown Estate at external The Comptroller and Auditor General events relating to corporate responsibility. The National Audit Office (NAO) acts as The Crown Estate’s Report of the committee’s activities external auditors. The appropriate NAO Director attends During the year, the committee met five times and considered meetings of the Audit Committee and has complete access all matters within the committee’s terms of reference, in to all financial and other information. particular: Report of the committee’s activities • setting objectives and targets; During the year, the committee met three times (on each • monitoring performance; occasion with the NAO Audit Director in attendance) for routine business and considered all matters within the committee’s • good management practice; terms of reference, as set out above. Additionally, the • benchmarking; and committee also considered health and safety, insurance, pension scheme and litigation in 2007/08. • external consultancy and audit advice. During 2007/08, Internal Audit completed a performance The work of the committee is reflected in the Corporate review of the Audit Committee. The review concluded that the Responsibility section of the Annual Report and Accounts. Audit Committee at The Crown Estate functions effectively in Scottish Committee performing a range of activities in line with good practice, HM Treasury and NAO guidance. There were some minor Members improvements that could be made for better performance The current members are: and appropriate remedial action has been recommended. Ian Grant (Committee Chairman) Remuneration Committee Roger Bright, Chief Executive The committee’s membership, terms of reference and activity is described in the Remuneration Committee report on The secretary to the Scottish Committee is Alex Adrian as a pages 69 and 70. member of the Edinburgh office. Corporate Responsibility Committee Meetings are held at least three times a year. The following executives ordinarily attend meetings: Director of Marine Members Estates, Director of Rural Estates, Director of Investment and The current members are: Asset Management, Head of Customer Management (Rural) and Head of Marine Business Development (Scotland). Roger Bright (Committee Chairman) Dinah Nichols, non-executive Board member The secretary to the committee is Jane Baptist, Corporate Responsibility Manager. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92 Page 65 1 1 1 , r o t a / n a / n a / n a / n a / n e h t d n a d s i h e e t t i m t n a r d a e f T f o t n i e n i o . s s e u Q , h g n r r o s 8 e h t m o C o t c e r i D r a d d n u o w r e i l r s g n i t e l a o i t n u o p e a M 0 0 a r ; n o i l l i m e o p x e s i s y l a n a e 2 g r o e m t n a H e : s e u s s i a r u n r e l i t n u s s 9 1 e e L d d n a r a d n a h c , t £ k s i r , v i e r 3 . d e s b m h s r a g o t e e t d n a g c i f i c d i t t n e t r a / n a / n a / n a / n a / n a / n a / n f o e h t e g n i t e e M r d a u Q g n b g n i l l i B r a o B y l c e j o r r e m e e s i s n e b o r p m d o s m s s e p s r i u q e t o c S n i i t e r p f o s u d e r l l u m e n i m m o r f , h s e t o b m n o d n o L g c x e a C a o t s . e . t n e e t t n g n i v e m , l e v i o e t n a d n e s i t i d n m e m e e n e v a n e t n e h i y l n o m e m l B y S t t i m t e e r a M h s i n o i a e h t t o n i p r p w t a i t c e h t d r n i m o M t a e e w t t c e l e v ) n a s f f o y o i v r d a u i g f e m m o d r a i o c - e f l i r e l e o t a o y e n m m e i t d n a a a a a 2 2 2 o t r Q e v e C e b a h s t a . s g n t t o c S m r r p a n o i c B i i s e o d e t a B t u c t s r : t / n / n / n / n / n n o c t r i r a n r a i s e l l d m f i D e e r , n r e a h t e s s A r a p s a e x e h t e v i d t s e i m o R a s ’ o d n a w t n a r v i , d d t y n a s t f e h C t g n i s i i : t u n o h s o t e e e t t i m m o r o i m n u o o t a o e r a o i t a f n I e e C t y l h r a B t a r e n u m r a d a f o s e e o M t t u c o d n a e e t d a u a r u t i d n t t t t e t n y e h . t n n i e R t B e - n o n e v d r a e e y r o Q l e h e s h i o g a f t e d a t t l l i d r ; o d n a c a e x e g e t c e x e - i r t t n e i m t e e . i r e e p x , d u - a o m t s m B f n s o r e n u m i m m h m m n t a e o o , l l i h e t i h W m e t t ; h c r a a a a a a a t c a m m 5 c e m o e c e h g i r u t i d n e t t e t u c e o i x j n e d l f o r p n o o t B m o n n a v e x s e o R e c h y t i l i i n i e t a n / n / n / n / n / n / n / n o C i t S u t n o w t o c b m e , l l C l e t t i t e i i m n h n p a ( h w a t r o l i n s e v o r p a n u a p x r e w y i a M m i n , e d m f i a p t e h c u s t a g m e e , y t i f o b i s n s t e w t S m o C n I F n l i t t h e h t o n a n g a l r a e e h , n o t s n i r o n M e r d e m a r d n r a r n t a t e i t o p g t b f t a o c p r o C i s a e t e e v v f o f o m o C o i r n e e e s t i s i t a s G o i a y t S s e n e r t r d a r a c w w w o r r m v c e e d i h i o M r r d n e s g B g l r i s n t o r o r t i R i t l u e e f o o B t r w e p s a i i e r B r c e r e b p d n i n u q e e f v o y i o g e n u c s o f Q . s t n e t r e n e s e i m o m b a r d a t r t e l a o p i r o p s i t c e t c e c e d s e r p a l e d r p v e r u Q v e r p p a n a e e e e e t a m m s b e n : s w v e u r i r i g o g e h p r t u t i e a a a a a r e b o l l e R o c u s h T s • e R e M a M Q T R h C h T e M h T D D h P R t u D h T • • e J • d u / n / n / n / n / n e t t i o f A d n a e t m m u n s a r s a s e t a t s e m o a s C ; o p o t n r e t n o s n a w ; d n a l t , s e e t i a i e t a o i t i y r a s s e C s o i s i e s t i s i r a n i m e s , d a o i t a v h t o c S r p o r r y f o c e n d d a a n e d r h s i t a d n a y g c e d t t i m m a f n i f o . d / n e t o n I d y ; s t e g r a t o t t a s a g n i c r u . 8 a p p a c a n t n e m e g a n a M a o B g e l e d i r p o r p p a s r e t e r t s g n n a t n e o w t i d u s o i . r e t o c S l a m r o f t o s c o h - d a s n i 7 0 0 2 A d n a 0 0 2 s m r e t t s i g n i A r i t e e h t t a y e h t s e e l n i e e h t f o , f o r t u o y c i l b i m a u ; d n i t n e b m o t s t s e r e t n i ; s m a r a p r e e m t l a i c e n l a t i p a c , e e a t s n u D l a i c n a n i f e s ’ e e t l o p s t r a p c y l t r o p e r t i t t g i l e a J e e ; p u p s m t s e v n i s t o n i h t i w t s ’ e c i m e l e e d r a o B 1 e D t r r e h k r o r d a l a p i c n w e d e r i d t s 713 61 2 71 411 713 5211 613 713 5231 71 71 l o t t e e r h d n a a u n s e i i r g c S t m m b m u n n e k a i v r a n o p 1 3 o r e h n e p p m i ; e t g i h r o n i a M o w i t i e w a d s a t b a o B o c a t s E t o e n o i r o f t f i m m o C e c n a m r o f r e y t i m m o t n g d d n s r e e e u s s i t n v i t s n o e h a n t e m o i c d n p a t ; d n t i o m m o d e e h c n e d n a i r e r g n i s e t r i t r o a d n a t n e h t c a p a l c a e m a r f c i e m R C v a h o : o t n o e h i e t n l l y p x t e c n t t u t o t s s ’ a c ; t n e p a r a p e r h c g e m m o w o r C i h s r t a c d r P t s e b m e m d n e h i w t l r e i h c e n o d r a t f o i m l t i h c n a m r o f r e S a y i c r e x e v n i w p i w e m m a r g o g t n e m n a u d n a e o B d n a e e t a o B t a r t s i e h T , y r u a d n e t m o i f i n g i s w e n i h t n e m i t a l e r r p l a i t n i c t r a u q d t a s r e e m t s e v r a l u c t e r p r e t , s g t n i c i n u m m o c t . e b m e m b m . d n a l t o e h t n i n o t i w e e t t i m m s t c e h t i v r e n i t c e n i e t a i i t r d i v i d e s i a s g n m a r f d r a o B c n a : r a l u c i t s a n i s r o j a m e h t s n o p p a e f n o * y n i e a h e h s n o i n i c S t i m m o t o c v o f a y b * * n i t a p t t a m s y o p p a . e l d o o w r r f f a r p o a h t ’ y C n a l t o c n ; p i s s s n o i s n o i s n o i r a p h t i i n t r a B r p p a y l y b i r r e t t i m m o c i t a c g n a l l a n i t e e m S n a l l e w i a g a t a c i i d / t n e r o G d e y l l i t e e m h d n u C d r a o B r a e y w s l o e h t n o d b a c i l ’ n o n i n e e i n e n i g e c a s e u C g p r o h s d , r e r e n u d t h g i r p p a s t c r e b s i c e s i c e s i c e e r o o s r f o , s a d s h s i t a c i r e h e m , h t h c i r G f o d e r p a d d d n i a t n i t e t a e h t e n i d r o t i u m r u m e t t i M t s e , e c r B c n a a r t d i s d i s N u F F u D s i t t o c n i m r e t r r a w n o i t a g e t o d r a d r a t s e r n a r h t m n f i c e , s e d l a n o l b a t n o i t i d r e b l a n o r e f d n i a n n a d n n i h S c e f s e d r e t u l c i h o o r i g e l d n g n r e p i m o D e t d G v D t r v n i t = m m o p p r i c n o m s e k a t o c n o c o c n i m p s t e d B f a e k a t l e d n o c o t e k a t n i B s e o e a e d i s n n e r e e t i a e n e t r n u e g o D S * a M e J v a D g u H i S t A t A o C f e r • • • • o c R p o t s i r h C • • e R i r u D • * * a / n • • • • p A t a t s E n I * a n i D m u N a I • D h T Governance report continued

Auditors Statement of the Board’s and Accounting Officer’s responsibilities The financial statements of The Crown Estate are audited by the Comptroller and Auditor General in accordance with The Board are responsible for ensuring that The Crown Estate section 2(6) of The Crown Estate Act 1961. The audit has in place a system of controls, financial and otherwise, and certificate appears on pages 72 and 73. No fees have been under section 2(5) of The Crown Estate Act 1961 are required incurred in respect of non-audit services. The audit fee for work to prepare a statement of accounts in the form and on the performed in the year of account was £95,000. basis determined by the Treasury. The financial statements are prepared on an accruals basis and must give a true and Statement on disclosure of relevant audit information fair view of The Crown Estate’s surplus, state of affairs at the to the entity’s auditors year-end and of its income and expenditure and cash flows So far as the Accounting Officer is aware there is no relevant for the financial year. audit information of which the entity’s auditor is unaware: In preparing the accounts the Board are required to: and the Accounting Officer has taken all the steps that he ought to have taken to make himself aware of any relevant • observe the accounts direction issued by the Treasury, audit information and to establish that the entity’s auditors including the relevant accounting and disclosure are aware of this information. requirements, and apply suitable accounting policies on a consistent basis; Health and safety • make judgements and estimates on a reasonable basis; Following the internal review of health and safety management systems an in-house Health and Safety Manager was • state whether applicable accounting standards have been appointed to further improve the policies, procedures and followed, and disclose and explain any material departures control measures implemented across the organisation. in the financial statements; and The services of health and safety consultants Sypol have • prepare the financial statements on the going concern basis. been retained for the short term to provide site-based support as identified by the Health and Safety Manager. The Treasury has appointed the Chief Executive as the Accounting Officer for The Crown Estate. His responsibilities As part of the regular review of health and safety management as Accounting Officer, including his responsibility for the systems and the associated control measures, both the health propriety and regularity of the public finances and for the and safety policy statement and procedures manual were keeping of proper records, are set out in ‘Managing updated. Particular attention was paid to ensuring that the Public Money’. procedures reflected the organisation’s activities and those responsibilities were made clear to all concerned. Statement on internal control The use of electronic workstation assessments has continued, Scope of responsibility with completion monitored to ensure that assessments and The Board has overall responsibility for the system of internal the identified actions are completed. The organisation’s intranet controls, including risk management and corporate site and associated IT systems continues to be utilised as a governance and direction over appropriate strategic, financial, repository for relevant health and safety documentation, operational and compliance issues. The Board has delegated information and guidance. Following a competitive tender to executive management the implementation of the system of exercise National Britannia was appointed to provide internal controls. It has also delegated to the Audit Committee occupational health services to the organisation. To date, the review of the effectiveness of the system of internal a programme of baseline medical assessments has been controls, on behalf of the Board. rolled out to all estate operational employees; this has been based on hazards that they could be exposed to during the As Accounting Officer, the Chief Executive is responsible for completion of their normal work activities. National Britannia maintaining a sound system of internal control that supports has also assisted in the completion of return to work the achievement of The Crown Estate’s aims and objectives programmes for employees returning from long-term sickness. as set out in The Crown Estate Act 1961, and for reviewing its effectiveness. The monitoring of accident and incident reporting has continued, with regular statistical reviews of the collated data The Crown Estate’s system of internal control is designed undertaken as part of the assessment of safety performance to manage risk to an acceptable level rather than to eliminate across all operations. The 2007/08 figures shows a reduction the risk of failure to achieve business objectives and can only in events from the previous year. provide reasonable and not absolute assurance against material misstatement or loss. It is intended over the coming year to improve the consistency of health and safety systems and associated control across the An ongoing process has been established for identifying, organisation; to draw on the knowledge and experience within evaluating and managing the significant risks faced by the organisation; and identify how related industry best The Crown Estate. The Board regularly reviews this process. practice can be introduced and implemented. This process has been in place and operating effectively throughout the year ended 31 March 2008 and up to the date of approval of the annual report and financial statements, and accords with HM Treasury guidance. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92 Page 67 l a e t r f t n a g n e n e e t a h t i o e t a o f n d e b e c a l p , s d n a g n i k e h t r o y r s l t s E ’ s k s i r t a h t , s e i t i l i b v a h w e i v e ; s i s a e m n m n i r a t e v o s t r o t i n p r k s i b g n i , s n o i t l t t e v l o l a u n n a y l l u f o i s i v s k s i r , r a l u c i t r r s t l u o r ‘ g a n a y l n s e , s i s a f ; a n w s a h e l s o c s s e n i s u b r e t e t o t s i h , r e t s i g a t n u e r a b e t a h t o M r t n t n p r i e h t m a rn e h s e n e r o t g a n o r d o o h i l e k i l a c e j o e h t f a c n u f e h t r e n w o s ’ i l m l l a y l r e t o r i v n e e r T f a e h t s l l o o c n i C f n i t c o c e s e n i l e r p a c i t , l o ; d f o t n a e t t i m t s a g n i l g a n o e e t n i m g k s i r a r e t r a u d j e y b e r h t p d n a c a o c i a , d s k s i , f i n a v o q e h s t n e m r t r r e g i u o r t n k s i r ‘ d n a r a u q ; s n r t n o d n a d n m o g n i w e T r a m e l y e d n g ; l l o y c n t c k s i e s o h t r P a m r e t a t s E . s t c e j e h c g i s a d e i k r g t n e m a n e t a a p e i , s t n e t c o i t g n o o f , e d n a e f o a c t y l t m o r n e t a rn e t n f i n g i s s r t r a e l c a r g n i s s d n i e t s a t s s k s ; s n e v e , s o e g i l a n f i t n c a l e h p o i h a v e r e e n w r a m l n a f r g n r t a l a u d i t a h t e n i t e s i s g i c e d n a a n , t e k s l l a e s t o e v r o m t r a t i e i s n n i h t i w i i ’ d e h s i l b a t s e n y t e n o r e c n o p r e d s i g i r s t a ‘ m a i i f l e e , s o c i s e y e d a b r g n i d e s s e s s a i e t n i d r a g n n o C a t l e i , d n d r g y s n i l r t n l e e d n a ; s i k c t s e s ’ d n a t e v i r o c r o t c e t a i a n a m t a h m t o m e o d p e d e c n i r e m m t ; s t e n v a h s s e n e s ; s e g e e r r t i t n e m e h i e t i s e d B o c o p r j b k s i m e h d n r i s a o t d n i o r , a e d i m y e h e h s e h o t i l d n t f d e e d r a i r e h o t T t t a p x t c e , s k s a s i s b t v o C a h y a i f f a s e g s a o f a m i f t t n o e ( t s y s t i r l b e k s g n i t o t r j b a n m o y a n s e t n e t n e t t n e ; l w c o t c n u f i r w a a t s E a b r o s s r o i e g o g n i s n o k s f C i g n s e d n a e s s e c a h v o i t n r e t c a y i i a r u s s a k a o p t n d e . , s s e d n a a t s c b c n n t n e r y i r e e t t s , t n d n a t i s s s e n g f m e ; y m e i R m e t n e d l i d n e i o r e h m s e s s e n t n t a i g n h i e a n a m a c t a c e w r t a r k s o g n t c t j g n i ; s a i h l e c o l a d e t n t n p i l l t s i i f i b g n t n e m d e s u f t d e t n y t i o e r o t e a r o l e p u s l v l l o o r l e e h n t s s e n i R r c u r e y o t n i i n r p o i d t t e s s e n i s u b e n o k a e e s m e r a u q r o f g e s m r i o ; i c e t g i s e e C p r g a t g n o r p w i s n f e e d i l e m e m g g a n a r g a n a g a n a l a e e i v i v s i i h i l a r s g s ) s e i a p k a w a e d a t o g n o i i d t y a h h e r s e t t n i m d s e s s e c p e s d , k i c e f d o h n s i M p s m t a , t m t n a o r o c u b i o r p e g e g t o f n : e r h n n s n i s y b n o t r h u b w s t r p n a f e i g n e m o n d n a n n t n e p f e v o b n n a t e n e e i t k d t r T m o a n a , y r a n a d i t r n m n a o d k s e f o n , o y i a n a n e s r p n , i e d h t l m o r f e c f i r t t s c a i m g o r p m c i c e g l s a d e m t i e d e d r b t n t a s i n e s n a l g a u i o r o o p k t n p e i f m n a m r m e r d k a t a f n a f t e i g e m e i n h e t a s o t i o y n p t l n t f n a m a m e l c d s s i t s i t g e y n m s n n n a e g n a o r p i e i t g e t a i s e m e g n r t b e t t a p a f h t i i r d e o o n e e a p n r a t h e l l e l t r g a a ’ i i n g r e e n e m n e m n n t t a i c d t s u g e m o h g a s t e i f r a c t o a r a n v v n d n a i e m i r e s s c a p s g a g a i i s n e n a m s e v t m t a e r s e d e t n n i e d d t t i d e i a r e v e v p e r s s e p n e i e g e g s o l s r i i c r a n a n s o r e e n s e e p p t a l o a g r f i m c i k p e r t i i o r e d a a g e n s t c n a f s t , l v e g r a p r a m a m t r a i y n n t c e n i i i o s u o u c u c r e s e u m e e c j n e d r o s t s o i o m b a a p i m m e j t a e a s t a i r o p r t n d d r t c e t c e e e s s t m a m k k k s k l k e r s e h e r l e n e a e a g i s l s s s s i n l a s i h d e b k c o c h c a e e b f f e s a x e h t b o n a m r c a i r i r o r p n a n a o t n a m n i e c d i t s x e s a c c a y b f f e s a i l p e r o m o r c o r p a e l s e d u b p e d i r o C f o o c i r s e r t c o r s i R o f f o m e c e d f o y e K r p • • • • • • • • • • • • e , n r a ; s e e d n a t r e g f f ; l o e s l ; y t i l i d n g n i r u d l a n r u a r a a p k a t n t s s t g n i o h t . o s r a n r o f d n a s k s i r d n a r t n o c e t n i s a o e s l l A e h t f o e g n i n k s i r t a h t e o r t n o c t c u d n , d e c o r p s a e n o d e l w o n k d r a e h t d d u d n a i a r t o c l a rn e t n i , s n o i l l e t i n o m d n a m e r i u d n d n a b a t n u o c c a o B t a r e p r f o a g n i d u l c n w l o r t n o c l c n i . s e v i t c i o d n a e h t s a h d n a o f s e v i t c e q e r e j n o i j l a rn e t n i e h t g n i r o t i s a b o j - e d n a s o t n o i t a s i n a t a , s e , ; s s e n i s u h s l o r o , h s i b o t a l u g e r f o b o s n o i t a r e p o l s i h T t t i n t s e i c i l t a e b l a rn e e s m r l o r t n o c y r a s s e c e n r h t a r e ; g n i t r g r o ; g n i n n a l p l s t e s e h s t r u m c e b a i m e t s y s t n o . s l d n s e n i o e o p t n i s e t t e h l o m t - n o i o e t i e h l b c a e ; s e t e h a n f n t p h d r i , e h ; s t t ; s t s r t a n t s e t p o v i n s t f o e h t i s ’ e i c o r r o f t ; n g n f o g a r e e r o r t n p s e r i t ; s n t i o : e a o ; s p y s g n w u t a i m i d i o i t t e v s t r l f o t n y t d r o h c e w a t o i i i r B e i l o c s t l o k r o e l a t n u o t t e c n l i y a t o p r s a t s E f l a v e h c j b e d a h i c i l o p t o r h t s E a c , g n i n n a i v e h t e l a i i w o a r l t a v o c e r l p y i h n l a rn e e h c u d n i t i c t o c b e e r y l t p e d u d e c a c s . c e l i m a rn c r t n o o r i h w l l c i ; s t i r o h a f a e e n w ; o a o c s c . s s e v p m a c a t x e l a b i s n o a f i m e p o t w e m a i l n i d n a o l c n i e s e ; l t d n a p s a g n i r o e t n i ; s e r u , e r u t u a r f w o r C p p a b m e o c r o f p s l o r t n i c i l o o r C l a n d n a t s y s s ; p f o e r d n a e c n a e n e v i l a p p a ; e l t c u y t i i n u m m o c s r e d i a s i a l t n e i c d n a s t e k g e t a r t s e c n a i c n a n i e m c n a r u s s e c o t n f e m o c t I r e t r t s i f d n a e h T i t c e l l o c s e v i t d n a ; t c d e c o t n o c e v d d e n g t i n o m p o s s e c o e h T r e h t o s . l o r t n r u l a n a n i t c e e t s ’ e t r p f o : f e s a y n i l i b a i c n a r p p m e t e b r p n o l a f f f o t a m i t i g e e m h t i w r p d r a m t l f a h n a a e p f o i s e . t n c d o c e n i r e t r e t t n d n s e t n d n a e g a n f i l p m o c : e d a t s a t s o s l o r s s a n o t d o t a e g n a u d n o s y s e h T n i n i d n g c e j b o d s s s t E E t n n o g n a y g n i t n d n g ; c e m n o i a n e d e c n g u l c e m n i e r n o i t a e a m n o i t a m d n a s s a n a n n i . s r o d e t n e i t c n a s r m e a i t a c i t a e n i n i a n a t n o c n i e m f o e c i g h t e m r o e v i s s e n u n n i d i d n a f l s e e y o l u o c c a s e h t i w y l r n e t e p a i l p t a l . d e g a a g s e i m n i t e g y t i l r e h s e v e i v i t w o r w o r n i t s y e g a n t s n e p e e g r e p o k s i t s e r t o u d n e t a u b t c e m r o i n e r s v o r u m s l o r m e l e C C p m o c p m i t n o i c i l o e l e d u a u e d r f m o e d o f f h c r t n r u o s e c , s a i c n k s i u g e h t e r o t i n p r i e h a n r i d n f n v n s u i l b a r a e c c c i i r p d i b r s a m o e a q m o c s l a o u o i v a h e e t a t n m l l i g l r n e a f e h a n i • • • • • • • • • d n i • y e K t i o c • k s o m r e d n u e b • • • o t • w a • l A f o c n e e h t f h T s t i o c t I u c e x E e h T o f t s e • T h T a m f o Governance report continued

• risk management framework, policy and processes During the year, Ernst & Young LLP was appointed as which are consistent with best practice including co-sourced Internal Audit partner for The Crown Estate, Government Guidelines; to complement the existing in-house Internal Audit team, which comprises three staff led by the newly appointed Head • ongoing consideration of the procurement of of Internal Audit. insurance cover; and Internal Audit, under the oversight of the Audit Committee, • Internal Audit facilitating the implementation of a robust risk has reviewed the system of internal controls, including risk management framework whereby management identifies, management and corporate governance, and concluded that evaluates, manages, monitors and reports key risks. adequate controls are in place and operating effectively, with Review of effectiveness of internal controls the exception of the item highlighted below. The Audit Committee reviews the effectiveness of the system Internal control concerns of internal controls and reports its findings to the Board. In the last quarter of the financial year 2006/07, financial This includes the requirement for the Head of Internal Audit irregularities were identified at a subsidiary office. Internal to report to the Audit Committee on the implementation Audit’s investigation, which commenced in January 2007 and of actions identified as a result of Internal Audit’s annual concluded during the financial year 2007/08, determined how programme of work. these failings arose and re-assessed the effectiveness of The Accounting Officer is responsible for putting in place management’s ongoing processes for designing, operating arrangements for gaining assurance with respect to the and monitoring the system of internal control. Remedial action effectiveness of the system of internal controls. The Accounting was undertaken and internal controls at the subsidiary office Officer forms his own view on effectiveness after due and continue to be improved. A provision has been made (within careful consideration of the information and assurances current liabilities) to cover the confirmed loss in the 2007/08 provided to him, and is advised by the following: accounts which is included within creditors and accrued charges (note 24 to the Accounts). • Audit Committee (communicates the results of its oversight and monitoring role to the Board, which enables it to build up a cumulative assessment of the state of internal controls and the effectiveness with which risk is being managed); • executive management (responsible for establishing, Roger Bright maintaining and monitoring the system of internal controls, Chief Executive and for considering changes since the last annual assessment in the nature and extent of significant risks, 19 June 2008 and the ability to respond to changes in its organisation’s business and in the external environment); • cross-departmental Risk Committee; • National Audit Office (by way of comments contained in their management letter); • Internal Audit (provides the Audit Committee with independent and objective assurance on the effectiveness of the system of internal controls, including risk management and corporate governance); and • external consultants and other providers of assurance. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92 Page 69 t e £ – – – – – – – – ; s r u l a h s a c o t v e s a e r n e l a v e h t d n c n i i u 1 6 3 , 8 r e a y r n i t n e e c n a t c e r o f s ; d e e r o e g a n q e f d n a f r 9 1 s t f o n a p s m r n t n e i c i f f u s r a s s n m e h t t l a e R d o i g a a m e g o e r o f r s i o i t e l b i s n o i w r i t e t c e n i r a t r e p n n p r a p s e c e n r e p g a n a ; e v i t u c o i n o i c i a s n £ t – – – – – – – – f e r s o i m o i n e s e e u h c a e s s e a r e n u t n e s l a s r r e k a t r p e x E r e c n ; d 8 0 0 2 h s a C l a v e t a i r f ; g a e c i t o n r a M p m e i o p o f y b e k r e e m e r c e p s o e n u r a p o e h t s : o r d n a 1 3 c e t a t s E e o i n e s e c a c a l a v i u q e l p l e i o t r e h e i h C e g a m e l t a p a n t a p 5 9 5 , 5 3 7 , 1 r p p r t r e f s n a r d f o w e p x e t i r g e a h t i w t h t i w w o n e d u l t s a b a e h i t e t n d e r t n t d n t o d n a p o o a r a a l e i o i u d n r t c n i d n a r C s r a t t s e a h s q £ y b e m a – – – – – – – – s s e c a e g u t a r d e s e r p p n e l e y d s l d o r e r - e n o a e h t n . ) 7 0 e g e e r i s i t a 5 8 3 l a v 7 0 0 2 s a C m e t p r a e T h c r a M a i e c a r t n o c l u i k s t a l a v i u ; d r e r a r e t n e a n c 1 f r u o i f l e s w r 3 m w e e h q e r g n t i m m t s y s r r t r e h t e h a w c n a m e n u m e s n , 4 3 5 , e n a a m o f r a e a t / 6 0 0 2 r o r r f o i d r n f d w o i f f u s ; e h c i h w t 1 g t r s f o o n f o f s t a i s n n i u s r a r i t a i d e s l o h a t i a m o c s e s p t h t o i n r w e s t n e r . n o i n i h y - r u o a r r g d t e p s r e s f w e u i o p i v E ; e e r s e r a l f e s c e d m r e t a 0 £ 8 h 5 6 0 – – – – – – – – . d a p p o n a v i t t s t n a i 6 s u n o b o r t t n e g d e l a l e t s t h c r s s r e i l s , a a p s d n e c e c u r 0 0 2 t a r o f g l a g a n t i f a f o c n o g u c o n a w o f h t h t a M v o n u b n i n e e n i n e m n e m , 4 7 £ ( r t g r i 1 c a u d r p t i d u a 2 2 4 , 4 7 n o i g g g o - g r C e s s i a m n i 3 s e a u n n 0 i l d n n i v t c a n i i g x E y e g e g l a i i i n r e d s n r y a i t 5 h t i r r d e t n i f n t a n d a a s e t n i d i e h t t r u o i u n a s ’ l a f e a e p t o T u s i n i d e t n i o a e i a T i s n s s r n t p r u d o p r e k 5 , 4 n g e l b i : s w o l l o 7 f e s t e r n a m o f i a f h C c s t a n e o t a t e s a s x e n a m o c f o n e u d p a £ p p a h e n – – – – – – – f T • • • • • • • • • r e n e G 0 6 s a 4 6 o s a t r a o i s n o s l a e r e r c a n o i s n e o t i e p n i y l l a i t i n i s u n s s i n i l a s e w e s p - n o t r o b d u A s r d r r a s t e R e h t i : e . e d a o n e h t s t r s e i t i g n i . d m r a e t t a d n f o a w a d o e t t a e i d r a o d r a r u o C a m e r e c n a n i F B r m e s s t h D s ££ 7 e v i t u c e x e –– l a l l b u s h t i w p e r e e t v i t c a f o B d n a g n n o 0 f i i r e l a a t i 5 8 7 2 / t o u n i t , e v i t u c e x E o . 9 0 T V a e l l o s d e n i d u t a h t s t i 8 9 7 , 8 9 7 , 8 9 7 , 8 9 7 , 8 9 7 , 4 4 5 , l e h t o b e e t e n i l e v i e c e r r e r t s 6 0 0 e h t i e v i e c e r 7 , 4 0 2 d n a u c s i d t i n d e r c n 2 p i 8 1 8 1 8 1 8 1 8 1 8 4 s l l i k s b m n i f o e n o y g i s r e v o f o r e b m e e h o t 6 , 1 6 2 f e i h C u m e e b m m o C . d r a w r o f e r a r e b r o t c e r i m e r o C g n i w o l l o f t t i s r e h t n D m o C d i s n e d e l e d n a e h t m m m o c . e m e o i t i r a e y h r e b m e h g n i r u s n e s s e d e r a p d r a c e v l e s m e h t o c d e t n i d n T T n t p s t n e m y n g n i t r o p o e h t , t h i e h t a r e r o a £ e t n e g n i n i s e g a k e b m e n e m , s r t r o p B T e h t i . y s u p e r 8 0 l a t n e r g n l d n m o C a ) n S e i s u 2 3 2 3 2 3 2 3 8 5 4 7 5 9 2 3 5 4 l l t s g i r e n t u r n o i t t i i m p p y b a c a v / 7 t n e s n 4 b o T e g . s n u B 7 , , a d r e v i d u a r n i t e r p g n i a u n o b d r a d c s t n o o , e e f e r 0 , 9 0 , 9 0 , 9 0 , 9 4 2 , 4 0 , 9 4 1 , 9 i e r i t u l c u m e e s b a a n e c t e v i o 0 0 2 i a m r i e e n f r e t t u 1 1 1 1 1 1 6 4 v i a o i r u n i b n n e h t e B c o 2 s e r a r e r e i w B d r a a D e R d n a s t s g o a m e e t u c e e n o t u c u m e w e x n t e k c e x E a h C e c r u o s s r t t R o h w i p x e v i a h ) 8 a e c s m e h f v o c r o e r g n n o e t r e t e r u s n e t t e x e i s n i t e R e m e - n e x E i w i a M s i h e t t o t i n e f f o o t 0 0 2 e p s o n : e i h C e n u m e R . m r e t d l . y r u s a e r e h t n e m e n s i , s m e t e e t t r - n o n t u c e x e d r T i u r c e i m m o C t r o p e r e l a u d i v e r o c i h w r d e e c e y r a f e h e i h C s ’ e e t n o i t a y r a s n a m u h t o t a m ) 7 0 h t e t t i m m o o m a r d n a i m m o C i u q s y S s e e h e h t - n o t H i d n s o m n o i n o i y t i d n a e h n r i a e r : d C ( 0 2 r a o t d o o w , d o o w e r u n a . d s e c t r r r i p x e p r t r o f , – f o u n a J n o n t a r t a r , d t i m m o c r i e t r a B y b y l y l s r e b m e m v i t y r e t a i h C a n o i t n o i t e n r o f n i 1 s g u p u C s l o t . r a e y n o d e n e e n e e e n e n h t p e r s h t n e r e f e r t i m m o c d a n a – a m n e t t a e a r a r y l r a o B d e d t h g i t h g i r e b r e b r o e g a k c a e r o o e r o o s r n i t h t a t e t e c r e h f r p o u c e d e h c i r G r G o t n o n e r p f o r a e H u m u m v o n i y l i e h t M M a u i t a m r o v o r B r B e n e n e h t N e e u F l a u D u D t n e m t n , g m x E i n e i r u d r c e r r n a r r p p s e l p i r a e l a n o r e f r e f r p n i n i h b a r i a h C f n I t n i o s m e R c e R n n d m i r h h x i y a M a g n r e r a G s m i t a r e n u m e D r e b m e c e D t r t r w e a o p u m u m p e e e e e e e i s r c n e n e n d r a n i t a p a n i h t r a n i d r p p p n e s rn u e g o e g o s e h p x e e h t e r a i w w e r t I i r u d e T h T B n a l e r d n a g u H r o e J a M a n i D v a D h T a M g u H e J i S a ( 1 3 e R h T t p o t s i r h C h T f e i h C R i r p a ( o B a I s i h T h T R R h T f o R n e r Remuneration report continued

The salary and pension entitlements of the members of the Management Board were: Cash Cash Total accrued equivalent equivalent Real increase 2007/08 2006/07 Real increase pension at 60 transfer value transfer value in cash Total Total in pension at 31 March as at 31 March as at 31 March equivalent remuneration remuneration at 60 2008 2007 2008 transfer value Management Board £’000 £’000 £ £ £ £ £ Christopher Bourchier 135 –140 120 –125 4,258 39,399 602,245 714,143 110,248 Giles Clarke (departed July 2007) 45 –50 150 –155 864 11,579 113,527 110,987 3,796 Paul Clark (appointed October 2007) 80 –85 – 597 597 – 8,676 7,971 Martin Gravestock (retired September 2007) 60 –65 115 –120 566 47,397 926,628 965,476 38,086 Robert Hastings 135 –140 115 –120 2,000 3,968 23,542 55,568 28,176 Vivienne King 130 –135 105 –110 2,920 15,131 194,638 250,463 54,175 John Lelliott 130 –135 115 –120 5,336 53,666 1,027,361 1,254,839 225,828

The above information is covered by the Comptroller and Both schemes provide benefits on a ‘final salary’ basis at a Auditor General’s audit opinion. normal retirement age of 60. Benefits accrue at the rate of 1/80th of pensionable salary for each year of service except Members of the Management Board are appointed on for the Principal Civil Service Pension Premium Scheme which permanent contracts which provide for a notice period of is 1/60th. In addition a lump sum equivalent to three years’ three months. Their remuneration is determined by reference pension is payable on retirement. Members pay contributions to individual job responsibilities and market data and is of 1.5% of pensionable earnings with the exception of the reviewed periodically. members of the Principal Civil Service Pension Premium Total remuneration includes salary, performance bonuses, Scheme which is 3.5%. Pensions payment increase is in line flexible benefit and leave converted into salary. In addition to with the retail price index. On death, pensions are payable to salary, non-pensionable bonuses are payable to members of the surviving spouse at a rate of half the member’s pension. the Management Board. Members of the Management Board, On death in service, a lump sum benefit of four times excluding the Chief Executive, are entitled to individual levels of pensionable pay is payable to Crown Estate Pension non-pensionable discretionary bonus up to 20% of their salary Scheme members. This benefit has also been extended to which is performance related and is approved by the Roger Bright and Rob Hastings. Both schemes provide a Remuneration Committee. Members of the Management service enhancement in computing the spouse’s pension. Board, excluding the Chief Executive, also receive a The enhancement depends on length of service and cannot non-pensionable flexible benefit of 6% of base pay which exceed ten years. Medical retirement is possible in the event is available to all office-based employees. of serious ill-health. In this case pensions are brought into payment immediately without actuarial reduction and with Pensions service enhanced as for widow(er) pensions. Two defined benefit pension schemes operate within The Crown Estate providing retirement and related benefits to all eligible employees based on individual final emoluments. The Crown Estate Board members with the exception of Roger Bright, Chief Executive, are non-executive appointments and are not members of either The Crown Estate Pension Scheme or the Principal Civil Service Pension Scheme. Roger Bright Chief Executive Pension benefits are provided to Roger Bright, Chief Executive, and members of the Management Board through the Principal 19 June 2008 Civil Service Pension Scheme or The Crown Estate Pension Scheme. Roger Bright and Martin Gravestock are members of the Principal Civil Service Pension Classic Scheme, Giles Clarke and Rob Hastings are members of the Principal Civil Service Pension Premium Scheme. The remaining members of the Management Board are ordinary members of The Crown Estate Pension Scheme. Roger Bright’s bonus is non-pensionable.

What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92 Page 71

e h t o t l s e t h a r n t e e f d n o m e e s e t r t G a i n g t o p r o s t i t o c t d e R n l a e i n r d e l u A c n e m n a t n s m a a a d e e i l t o d t n i t t n r s e u o f t e a f a r o c e o c P s o c a t s l e a c i a r e l h t r l e h s t n f o f i t r o d n r w o e o t s a r e a l f c e m e u n t p s C s e y e e t h s n a l v n e t o a t e h e T a C a B e R n i a g N S e s u o H m o C T s 1 9 6 7 5 7 7 7 4 7 4 7 2 7

l a i c n a n i F The Certificate and Report of the Comptroller and Auditor General to the Houses of Parliament

I certify that I have audited the financial statements of The Crown Estate for the year ended 31 March 2008 under The Crown Estate Act 1961. These comprise the Revenue account, the Balance sheet, the Cash flow statement and Statement of total recognised gains and losses and the related notes. These financial statements have been prepared under the accounting policies set out within them. I have also audited the information in the Remuneration report that is described in that report as having been audited. Respective responsibilities of The Crown Estate Commissioners, the Accounting Officer and Auditor The Board and Chief Executive as Accounting Officer are responsible for preparing the Annual Report, the Remuneration report and the financial statements in accordance with The Crown Estate Act 1961 and HM Treasury directions made thereunder and for ensuring the regularity of financial transactions. These responsibilities are set out in the statement of The Crown Estate Board’s and Accounting Officer’s Responsibilities. My responsibility is to audit the financial statements and the part of the Remuneration report to be audited in accordance with relevant legal and regulatory requirements, and with International Standards on Auditing (UK and Ireland). I report to you my opinion as to whether the financial statements give a true and fair view and whether the financial statements and the part of the Remuneration report to be audited have been properly prepared in accordance with The Crown Estate Act 1961 and HM Treasury directions made thereunder. I report to you whether, in my opinion, the information, which comprises What we do, Operating and financial review, The Board and Governance report, included in the Annual Report, is consistent with the financial statements. I also report whether in all material respects the expenditure and income have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them. In addition, I report to you if The Crown Estate has not kept proper accounting records, if I have not received all the information and explanations I require for my audit, or if information specified by HM Treasury regarding remuneration and other transactions is not disclosed. I review whether the statement on internal control reflects The Crown Estate’s compliance with HM Treasury’s guidance, and I report if it does not. I am not required to consider whether this statement covers all risks and controls, or form an opinion on the effectiveness of The Crown Estate’s corporate governance procedures or its risk and control procedures. I read the other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. This other information comprises the unaudited part of the Remuneration report and the Ten year record. I consider the implications for my report if I become aware of any apparent misstatements or material inconsistencies with the financial statements. My responsibilities do not extend to any other information. Basis of audit opinions I conducted my audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. My audit includes examination, on a test basis, of evidence relevant to the amounts, disclosures and regularity of financial transactions included in the financial statements and the part of the Remuneration report to be audited. It also includes an assessment of the significant estimates and judgements made by the Board and Accounting Officer in the preparation of the financial statements, and of whether the accounting policies are most appropriate to The Crown Estate’s circumstances, consistently applied and adequately disclosed. I planned and performed my audit so as to obtain all the information and explanations which I considered necessary in order to provide me with sufficient evidence to give reasonable assurance that the financial statements and the part of the Remuneration report to be audited are free from material misstatement, whether caused by fraud or error, and that in all material respects the expenditure and income have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them. In forming my opinion I also evaluated the overall adequacy of the presentation of information in the financial statements and the part of the Remuneration report to be audited. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92 Page 73 e h t t n n i e c n a e m r a e d e a y i l e d a d u l e h t d r o c c r a P m a c n i r o s n y b f , t n i s u l o i t c d e r o p e r r a d e d n e r i d e p r u s p e r e t n i c n p s t i d n a y l r f o a rn e 1 6 s e s o p d n 9 1 e p o r a v o G p r u p 8 t c e A d n a n e e h t 0 0 2 b o t e h c r d e t a t s E d r a o B e i l v a h a M d n d 1 a n w o p p a 3 e h T e t i ; . n r C r e t a d u e a s , w e i e h a e b v e T m e h t b e r d n u e r e v l rn s r i a o t a i e a h h t i w e h t t v f f a e e r o o g e d a p e s ’ e t m o c n a n i f c n a r . s m d n r t n c n i o o a t s E d n a . s t n i t h c i h w a d n a c c a e m e r e n n i e r u s n o i t c e r i e m e t a t s u n w o r C d g n i t a r e s e i t i r o h t a t s l a p O m e R , w e i v t u a e h T f , o o r i a f e h t d e h t l a i c n a n i f t i d n e p x e e y r u s a e r T i c n a n i f f o o t t a e w e h d n a t t r t t s e h e s e h t s d n a t t a p h e h c e u r 1 t t t i e a h W l n o f e h a p w 6 9 t m r o f n o o s a r s c 1 d e e k v e r d n t n e t c e s i r a o a i g e n e l a a m A s n o , y r u s R i G i r e o t a e r e t a t p m o c T e c a s t s i s n o c t a m h E M s i e c l a P y t i r a c i t c a s n a r l l a i f t H r o t i d u A s n o i t a s t n e m e t a s t n e m e t a h n d t s t s w i f O , t r o y b n w o l l v r e , , : l u g e l a i c r ; d n a t i d m a h g r C r a i c a i c n a n o i n o i r e d p e R s b o e n o u A 8 0 0 2 s e d n n o i t a n a n a n i f l S S 9 e l l o l a n i k c e n n n h T i i m o n n u e n i p o n i p o f f a i e n n o i o i h e u B r o t r o e h t y y t i r r u B u n n W 1 v a n o i n i u J n i p r o t r t p m n e h e h r e h e h f n 1 n o d n m m w t t A i t t J p a h • p O n I • I e R W S o L 4 2 O n I • d n a T o C t a N 5 1 c i V Revenue account for the year ended 31 March 2008

2007/08 2006/07 Notes £’000 £’000 Turnover 2 264,802 262,160 Impact of change in accounting estimate on turnover recognised in the year 2 & 3a (34,933) – Total turnover 229,869 262,160 Direct operating costs 2 (40,199) (38,718) Gross surplus 2 189,670 223,442 Administrative expenses 5 (15,493) (13,271) Indirect operating expenses 6 (730) (766) Recovery of capital expenditure 10 (23,502) (28,008) Impact of change in accounting estimate on recovery of capital expenditure 3b & 10 30,606 – Operating surplus 180,551 181,397 Share of profit from joint venture 17 8,380 – Indirect investment in property 18 1,719 869 Profit/(loss) on sale of fixed assets 193 (142) Income from gilt-edged investments – 794 (Loss) on sale of gilt-edged investments – (145) Bank interest receivable 28,142 24,631 FRS 17 Retirement benefits – Net financing income/(cost) 9c 10 (42) Surplus on ordinary activities 218,995 207,362 Parliamentary Resource finance 12 2,357 2,249 Statutory transfers 13 (9,909) (9,539) Net revenue surplus 211,443 200,072 Consolidated Fund payment 14 (211,000) (200,000) Residue carried to revenue reserve 443 72 Revenue reserve brought forward 4,675 7,457 Pension reserve adjustment 33 (711) (2,854) Revenue reserve carried forward 4,407 4,675

Statement of total recognised gains and losses for the year ended 31 March 2008 2007/08 2006/07 Notes £’000 £’000 Net revenue surplus 211,443 200,072 Add back: Statutory transfers recovered from General Capital Reserve 13 9,909 9,539 Add back: (Charge to)/recovery of capital expenditure from General Capital Reserve 10 (10,126) 25,802 Net revenue surplus before recoveries from General Capital Reserve 211,226 235,413 Actuarial gain FRS 17 Retirement benefits 9d 3,641 (6) Unrealised surplus in investment property valuation 15 294,085 1,102,338 Unrealised (deficit)/surplus in owner occupied property valuation 16 (11,458) 16,856 Unrealised (deficit) in share of joint venture investment 17 (46,540) – Unrealised (deficit)/surplus in indirect investment in property 18 (3,376) 2,661 Unrealised (deficit) on revaluation of other investments 21 (22) – Other profits/(losses) – (2,370) Total recognised gains and losses in the year 447,556 1,354,892

The notes (including accounting policies) on pages 77 to 90 form part of these financial statements. All results relate to continuing operations. There is no difference between the net revenue surplus and its historical cost equivalent. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 71 – 92 Page 75 7 – – – – – 0 0 0 / 7 9 0 9 5 0 0 ’ 2 5 7 £ 6 0 0 , 4 , 0 , 5 6 0 , 2 6 6 3 , 1 5 7 6 , 4 0 1 2 1 8 , 3 3 2 2 , 5 1 4 3 , 7 8 8 3 , 5 6 4 8 5 , 5 1 4 9 , 4 4 6 0 , 1 0 2 ) 4 0 5 , 3 ( ) 4 0 5 , 3 ( 4 0 9 4 , 1 9 7 9 1 8 , 1 4 ) 9 4 4 , 8 3 ) 3 5 9 , 1 4 0 9 4 , 1 9 2 0 1 , 6 2 6 3 6 , 8 4 ( ( 3 4 0 5 6 4 2 1 9 0 , 2 6 , 0 , 7 1 , 2 0 0 5 , 8 4 9 , 4 7 6 0 , 7 6 , 6 4 , 6 ) – 6 7 8 0 / 9 0 5 4 4 9 5 5 6 6 4 8 0 0 0 0 7 0 4 3 ) 0 5 7 ) 8 6 7 ) 8 6 7 1 6 8 8 8 4 8 2 5 7 8 4 8 ’ £ 2 , 8 4 9 , , , , 0 , 2 , 3 9 6 , 8 , 4 , 2 1 9 7 1 , 6 , 5 , 4 , 4 2 6 3 , 8 1 9 8 , 6 3 2 1 , 2 2 2 9 , 2 8 1 7 0 0 2 ( 3 3 0 6 2 , 8 0 2 3 4 9 ( 4 9 ( 2 3 1 5 8 5 9 4 1 1 4 0 1 ( 3 , 8 , 4 5 9 , 7 7 7 , 4 8 9 1 , 7 2 3 , 7 7 3 8 , 4 4 5 , 2 6 4 0 , 8 2 3 , 7 5 2 8 , 6 3 8 , 6 7 6 8 3 4 , 1 7 4 , 6 8 7 3 3 2 4 4 6 9 0 1 5 s e e 9 e 9 1 3 3 3 3 7 1 1 3 2 2 2 3 3 2 1 1 2 2 1 t o N . s t n e m e t a t s l a i c n a n i f e s e h t f o t r a p m r o f 0 9 o t 7 7 s e g a r a e y p e n o r a n o r e c i f f O t e s s a e y ) s e g n n a i i c e t e y i l h t n o t n u n o s s i s t r e o p a p o c n i s o r g n t n e p e r o m n o c A p h t i i g n s s n w i : s i s n n d n s y a s e i i t n u o c e g r a h c e p e e u d e u d d c a g t e s e r g o r p t r e p o t n e m t g t i l i b a e r u t n e v e u e e h s v r e r e n o y t n o i s i i l s a s t n e m y a n i i d u l c x e t r p i s s t e s e v r s t s t : s e v r e s e s s s t n u s t n u s n a o l t n e l a v i u q e s e v n i d : s t e s s a r s t e s t e s e v o o p e r e v r c c a n i s a s e i t i l i b a i l d e s n i o j v o r p s e d e i r e p o t : p r 8 e s e u l c r e t s a n i d u l c n r e r l a t i k r o w i d s o r g s o r g s s a n i r p s a h s a n a m a m a s t t e s d n i ( y b n s e d e x i c t t n e m t s s i m m o d 0 0 2 d n p u c s t e s s a r d n a c e r f s e r t n e r t n e r f o f o h g i r 8 0 0 2 : s : s : s t e s s a s a u f n o i a C h p a c d e d e n a s t e s t n e r n e n e n a B c o c r s x i i d n e v n s t e s s a r o r o x i n e m d e u i f i l a r d n a e c n a l t e n r u c r u c f e l b s e t o e n n o n o n o t a u e r a e r a s r o t l a t r o d e c n t s a M n s s a r u c i g t i d t i d r e n s k c l a l a l a l a a s e g a g t r u J d e e g t n e r r i p t t 1 r e n n o c i s n i s n i s n h S h S e e e n r e h r e h r e h o e v 3 m t s e v m t s e v l a v e n e v e t t O R R h T o R e S 9 1 t o T n i F a C e G t b e D t S u C n I o M e P e N n I r C e P t o T e N r C e P h s a C t o T t o T i d e r C t O t O x i F a T a B a w O n I Cash flow statement for the year ended 31 March 2008

2007/08 2006/07 Notes £’000 £’000 Net cash inflow from operating activities 25 232,810 172,204 Returns on investments less Consolidated Fund payment Interest from gilt-edged securities – 996 Interest received 28,189 23,745 Income from investment in joint venture 6,886 – Income from indirect investment in property 1,719 869 Consolidated Fund payment – revenue surplus (207,000) (198,000) Net cash decrease from returns on investments less Consolidated Fund payment (170,206) (172,390) Capital income/(expenditure) Purchase of property (188,198) (117,738) New works and improvements and other capital outlay on properties (69,918) (67,950) Sale of properties 327,929 416,774 Other capital receipts 902 1,055 Limited Partnerships and joint ventures (49,945) (39,404) Purchase of fixed assets and antiques (2,310) (3,289) Sale of fixed assets and antiques 53 87 Loan repayment received/(advanced) 312 (1,000) Other cash flows and investing activities (647) (4,684) Net cash increase from capital income and expenditure 18,178 183,851 Management of liquid resources Sale of gilt-edged securities – 33,177 Net increase from management of liquid resources – 33,177 Financing Parliamentary Resource Finance 2,357 2,249 Increase in cash 26 83,139 219,091

The notes (including accounting policies) on pages 77 to 90 form part of these financial statements. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 73 – 92 Page 77 r o f f f l o l . e u l a v , d e h t f o a h e u n e s i e l a i t r n o i t p o n o i t d l e h m r d e i f i n d n a s s t s e k c n v e r l d e i a y o R e t e h t s i ) 5 ( 2 a e n o a u l e v o d o ; s s e l e r f i l e h t a p a , d n e a n i r o f i n i a t r m f r r a m a l e h t a u e h t a v e m o r o e t n i l a t i p r f . d n a f q e c l f o e u n e t n e h t i w s a w , n o e h t s e i t i r u c e t r e h w a c s i a i c n a n i f t n a g n i r a t d e n o i t c e s i e h t e s a e l h t i w n e p o e s v e r s d a d r e e s i t n e t n e e r y f i c e c A e h t d e h t d n a o t . t n u o c c r a m p o l f o a e b , e t t e p a c s e t i s v o e h t a l h t i w p s e t a e l d n i a i e t d n v n o m o r y l l a n o i s s e h t f e h w a r m e e e o t 1 m f o e v e e r c a i c e r d n a e h s e s i s a d f l e h t r o a t S r a f b n i m t s r p o r a d - n r g a e f o r e r e u n e e l b f i , 6 9 1 e r o f o a h a p r p o r M c n a d e c n c r e t n i o n r e u q v e r r e f s n a e h t a r e e b p p a a l n o i t r o d e r e t l i u b - . d d d y b r t t c A h d n Wi e n o p p a n o o t v o y l l e r a b a u l n o . s i e n i d c c a s d n h c i h w d e h s i u g n i t s i e r t n u o c c a i t c i r o t s d c e r c x E e i a V e t s e d a r u c c o n i f l a h i h e h t a L 8 0 0 2 f e d e h w e t a t s r r s i e t e d u l c n i e u l r a p E h w h e r u t u f b a e r i p x e n u e h t a c s e i t r e h d e d n a d n a r e t n I n a v e h t s a ( s e i t r e s a h c r e n o n e l e l s i e u n e r o t e h t , d n a p o e e ; s n w o r r a p p o e h t y e r a e b v e a M a s i w o r r a d n C c i h w r p m f o r b a e s r p d e u l a a r a e e u n e v e o C r o y r t n e e r p v y e d n u , y r 1 3 o t a r p e r n o r a i c i f t n t n e c n y r u s a s r e u n e v i e r e r t n e v a h e u l a n e y e h T t a . l a s o p s i d 0 3 a p A s i s e h T v e r u o k c o t s m t a e e s e r o f e r T e n i h m o s s d e i r y m t n d c s y r e b . n e e t t i r d f f o a b s e e h w t e e n e b o c e s s e o r e 0 e h t e e k h a m o i t e u l g a c r g n i d d n a e h t e h t g 4 T c a m c o s n v n i . a e d . v n i e m . e u l a v a v f f o e s l a u a u l v a h e r u t i m o r e r p s e b m y b t s e s s o e - o i s h t i w o v n l a t i p i m o C t e i a v , s t s i x e n o l % e t t l i o d n t d n a n e r c c e k l a t i p a c x e o c n i s t e r g e a c n i h t i w v o : h t i : t a h t a e l c i h e o i c r t a e p o e e b 5 1 t t n c n r e d n l l a h s e h t v . e t a w d p r e p s o p x o t m r f a l s a t s E r a m e u n r e d n u e d o e h t e t n a s e d g n i K e r u t a a u e i t o t d e c n e r f o l a d o f l t p i e f e p r e t n e h h a p a h t o e s a o t s n i a f i c e c i l m r o e h t r a d e g v T a v e a h c e . g e r d r r e l r d e t a t s r d n a r a e r e h t n l a t i p r i u q e f o , t n e d e r o n e m a o r a h p s f c c a e n n m c i h w e h t l a t i d e t i n U a c c d e t i m i l r u t a n o o s s i s a b s n e r a o p e R f o i o s d n Wi n i e n o l a n i e h t i e g n i r f s t e s s a e . e t u t a m d n e s i s i t c A g n i t s a w s u n i m d n i w n o p a c e h t e d a m t s h t e l t a a e h e h t t t e l l a e h t o r f t n t t u o e s a d e i r r e i p u c c o - y e h m p i u q e t n a r a t i r o p x e r d r e c n o c u n i t a g n i r e v g b f o r e l e h t , t s u r t o e f o n o a c s t n e m p g n i rn a e g n i o f b a r e s n o i s f o a e t a t s t , p a c v o e e h d e t n u o c c a s n o i s i s u l p t e h t y t r e p o r p o c c a b o c e r d r a e u l a v c i f f o 2 e n w o g n i s i r a n o i t c e s t n e s t s o c o t g n i o g f i a e r a d e i r r a c w o l f v o ) 4 ( 2 e r e h w n o c e r c e r i d a t c e l f e r r o f o l e v e d d n d e u l a v g n i d n e p e d d n a e r a l a i r p r e h t s e l b m n e . g . e h s a n d n u t s e r e l l a h s m e v e e e h T o n o i t s o c t e u n e v t a l u g e r s i t S a e h o s r s r y r u s a e r T t n u o t n s t n e m e u n e v e r a r o f y l n o s t o r e s o r t e b n i c t c t n a a u n e r e u n e v e e t e r h d h d e e r c c y r o t m u i m . s i s e d e t a n g e g n p o w o g n t h . y r o e r , s e d a m l e m e y e y v d n a s r s r a d e r t d n e S t s a p m e s s e i l e p l a c i h t e h t e l e h a r o i w a b e h e u l u n e r s a i s e e v g e h e r p d b t e m t s a e a e a a p v a h t o l d t a g b i k r o . s r 0 1 0 1 a t i w d r t 1 o f y y p r a v e v n t i t i t n u o e d c n a n e r u t a t S w m o r f g n i o d n i p w s d n e v a c a c o y t a h o t 4– 4 4 4– s n e h e n i f s E e r e r p a a d e v n t o c a i f e r i t s – d l c c d l e h t e s o h y r u s i f t c l g g o i e t n s u e d a l a r y a t o n a t y l 1 A . s r o s s e e d n e r a n o e : s w d s k r f o a t o d o h p n o n i s w w i u b a 1 6 8 0 d n u o r t e s s f o e n o i s a e r o l , t a u m n i p e v r u S a T s t r o s e i r r a c r e h c c u 0 2 d o b 6 9 1 w e r a d n a 9 1 d n a y b i m s e l o f o r C S l a v h a c d i v o r a s i t i e d n a e s a e e h n a d e r a l d d n a l t e s s a c r s u l g n i s a h t p i c i e e r g e h t e h t n s d e g d e s a ’ s g l r e t c A s i n a s n i h t i w s e i t a m o e m y a p e t n e m e t c A w e n c r d e r e t p e p r f o r d n a M n i f o s e i t r e e d i H e h T r d e s r u o c r r o e h T r f s e i t r e p o : t e r f ; s 5 8 9 1 e t e t e v i e o i t a u l a v l o p h t 1 e s e l t a l . p s i s a b a r e h e c n e u s y b d e e u p l l a n e m e e r a 3 h t i w v o : t n e m p i r p e e w t r a h e r e t a t : t n e m p i o t g rn a e h f i l d n r e p o p o r n i f o t t f o a t s a t s e t a t r a e s r o d n e r c u c e r C r p a f o f o n a h t s r e g a e d e p t c A s a h o s s g n i y t n a n i m s e b E ‘ a a E E r p e s t t a l a b s e v n i u q e d e s E h t m l a i t d n c r f o l A n e m p i i l y t u q e s rn o t r g d n n i t n u l a r a m t n s t s t f o e o i l o e t a g e s e i t c e 5 2 m v d g n i t n u . e u n d u s n e f t t n e m e u l a v u p a e s o c s o c g r e t n a . ) y r a e d l a r a e y n e m t s n e n e s e i t c n a n w s e i t r e p f f e u q e n o i e d e t y s e j a t c e p w o r w o r n o i t : s e r o e e e n a r g g y r u n o i t c r e v 0 r e t - t o n i l a n . e v r e e n i d y r u s a e n e v e a p f t C C t a e m t s e n u l c e e b M u o c c u t h t t e n o h t x e n a h t 3 e t c e t r n i p c e r g a i r t e k r u e h r e m e t m e t u p m n a p m e v n i u l o r P o r C e r n i h t A o c c A r T e e e e e e t l c i h l e v t n a m t s e v i t s y . ) s a e r r o r e s e r s a h c n i l A h T p x e a M o r P a m n I n I n I t x e l a V . d o h s T o t h T . a o t l P o C 1 h T s e t o N f i f f O r e H a t s h T o t h T a t s i i i c e p x E e V ) i t s i d ) i i h T o C . b ) i ) i i . c B Notes to the financial statements

1. Accounting policies (continued) Owner occupied properties Properties occupied by The Crown Estate are stated at valuation. They are valued on the basis of existing use value. This includes dwellings occupied by The Crown Estate employees and pensioners at Windsor. The aggregate surplus or deficit below cost arising from the valuation of owner occupied properties is transferred to the revaluation reserve. Disposal of freehold properties and grants of leases for premiums Disposals are recognised at the date of legal completion. In accordance with The Crown Estate Act 1961, capital and revenue is required to be distinguished in the financial statements. Profits and losses on disposal are recognised in a general capital reserve. Properties are transferred between categories at the estimated market value on the date of transfer. Depreciation and amortisation In accordance with Statement of Standard Accounting Practice No.19, investment properties are revalued annually and the aggregate surplus or deficit is transferred to a revaluation reserve, and no depreciation or amortisation is provided in respect of freehold investment properties and leasehold investment properties. The Crown Estate considers that this accounting policy is necessary to provide a true and fair view. Depreciation or amortisation is only one of many factors reflected in the annual valuation and the amount which might otherwise have been shown cannot be separately identified or quantified. e. Joint ventures Joint ventures are those entities in which The Crown Estate has significant influence, but not control, over the financial and operating policies. Joint ventures are accounted for under the equity method. The balance sheet incorporates The Crown Estate’s share of the net assets of joint ventures. The share of revaluation of investment in joint ventures is reflected in the revaluation reserve. f. Other indirect investments in property Other indirect investments in property are shown at The Crown Estate’s share of net assets. The share of revaluation of investment in such partnerships is reflected in the revaluation reserve. The Crown Estate’s share of net profits is reflected in the revenue account. g. Stocks Stocks comprise estate produce on hand for resale at the year-end and stores of supplies held at various estate yards. Produce is valued at the lower of cost and net realisable value. Stores are carried at The Crown Estate’s valuation. h. Gilt-edged securities Gilts are individually valued each year at the lower of cost and middle market price at the balance sheet date. i. Grants The Crown Estate is entitled to apply for Government grants available to landowners generally e.g. for agricultural improvements, forestry planting etc. In the year a grant is received, it is credited to revenue or capital depending on the classification of the related expenditure. j. Turnover Turnover is recorded net of VAT and represents the total value of: i) rent, royalty and similar payments falling due within the year excluding service charges collected from tenants and held to meet specific expenses. Rental and similar income is recognised on an accruals basis. A rent adjustment based on open market estimated rental value is recognised from the rent review date in relation to unsettled rent reviews. ii) premiums on leases granted for a term of 30 years or less; iii) sales of produce; and iv) miscellaneous fees and sundry income. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 73 – 92 Page 79 l 7 – s a t 0 / o T e h t 8 8 4 e i t t s o 0 0 0 ’ £ e h t 6 0 e t a t s E c 1 5 3 , 7 0 9 7 , 7 0 8 8 , 1 1 6 9 , 6 0 6 1 , 2 0 6 1 , 2 6 0 4 , 4 2 0 0 , 2 d n a f o 0 2 1 1 8 1 7 , 8 3 l a n i g i r o ‘ y r u s a 5 2 6 2 6 2 2 4 4 , 3 2 2 2 4 4 , 3 2 2 e t n w o d n a r e p o r e h T r C p t i l a d e r T e h t s t n e m f o s p s . t s o a e h t e h t c y e d n 8 0 0 0 l a t o t a 0 8 0 5 t a 0 e v o r p ’ 8 1 4 6 0 7 6 ) 3 3 9 0 o T 7 £ , m o r f t s E t e e h s e u n e m i , 6 1 3 3 , 7 1 4 4 , 8 2 0 8 , 4 9 6 8 , 9 8 8 9 , 5 , 5 / 7 0 0 2 1 1 9 9 1 , 0 4 r a d n o c 4 3 ( 8 9 1 5 2 6 2 2 2 3 0 6 , 4 2 2 0 7 6 , 9 8 1 y l l a u n v e r d o i e s d n a a r e n a n w o r C p h c r r o e c n a l a s a y b d i a a M e h t r a p – 1 1 0 0 3 9 Q s k r o w r 0 0 n w ) 5 2 H s i m i 1 3 ) 9 6 ( ) 9 6 ( d e t a o 0 ’ r 0 2 0 2 9 3 9 1 9 6 2 1 ( £ r p C e v o t a . s n o i s i v i d e r t s u l w e n e e t a t s E p r o n s d e h s i l b u p . e t a a r a y l n e g n i t s i u s d t s a r e v e l a t r i i d e n w o f t n e e u d n s e e p o 0 –– m e p a c r e h T e h t n e v e i t e t a e r 5 5 3 e v i e s a o t n i 0 0 ’ £ f t s E e l e r g a . e u d 0 5 8 , 4 9 1 7 , 1 5 5 8 , 3 8 2 8 , 5 8 2 8 , 5 8 5 3 , 1 7 2 9 , 7 7 1 6 , 1 d ) 9 9 0 , 2 ( ) 9 9 0 , 2 ( . s n o r e p o d e t a c o l l a r o e i t e n w e h T g r p s a o t n i s i o e h t r t n e s d n r e r f o h s a e l r a h Wi e n o . x a t c l a t p o o a s i g e u l e d e s i n o t ) 0 s t i – 61– 8 6 4 4 5 2 4 2 8 e r r a e u a v w e i v l a g e t a o t n i 6 2 9 4 1 3 9 3 3 4 4 1 3 o s r s n i a g f r e h t r e r l . t n e o a v 0 0 ’ £ 7 , 8 , 6 , 9 , 3 , 9 , t s E e s t s e h t 6 , 3 2 , 8 6 , 9 1 1 1 3 1 m a t i 8 ( o t n m 3 2 4 4 3 e n i c t s n i n i r e t n e e r o o t i n o s i h t y l t n e g e s p a c a g m a M o t c n s e i a d n l s r o a e t t x e n r r u c r e h t o a t e 0 c i h p a r e h t e r a g n a h c a t s E n e r t a t e s f f o 4 9 0 2 2 7 3 3 d n a 7 8 9 1 e e s s e l t s e m o c 5 1 3 9 8 4 7 5 1 f o ) 4 7 9 ( 0 0 ’ £ 2 6 6 , 8 8 6 , 4 6 9 , 6 5 4 , 2 8 4 , s i E e h n i l 7 , 5 9 , 1 3 , 3 t s t s d n a g o e g , ) s r o f 6 1 5 1 1 2 2 2 1 2 o s t c e l f . r a r u c R n w o r C e t a d n o i e r K U e y h c r a M d n a s e v i t a d o i r e , e s a e l e h a p e h t p e h t n . e t a d 1 3 T t a e t t ) t u o - t i f . s r a e h x a t f o n n i a s s e n – i y e t s r ) d 0 0 a h c n i e e v r e s e r 1 1 4 1 8 8 3 1 6 2 0 1 4 7 7 4 7 2 4 3 t r o p r o c d 3 6 8 6 3 5 6 7 3 0 i s u ’ t n 8 h t n d e 0 ’ £ 2 , 4 , , , 3 , , 0 , e t r 5 2 e r a a t s E c i h w e e r f - t n b o t 2 e u 5 , 2 , 1 , 6 3 7 0 8 , 1 4 9 3 r o i n a n e u n i f o e r 2 9 1 5 2 9 6 e l a d u l ( e s s n v v o h s y b n o t 7 1 4 1 1 1 1 e c n i s t a u F T I o o i s s a s s a b r U e v t n o c n i d l a U e h s i s c v h t t a r s s d r ( i e u i s a a w t c e j b u s f o e r n t i f e n e b b t s o c s t n o t s s o i i t n e c s e t e e p o c u s ( a w o y l a n a t o n t e h n i i s y h t s e e m e t e v e r i c i e h T l o f t e d n a e t a r s i e n i . d o i r e p l a t a t e s a h c r u p t a t n i e t e s e s e s e v r e s e r o f e c n a n e t e t a m i t e v i t d e s i n n e m e l o p t n e m e r o p e r a m o e g n a s e i n a e r i e e l a i n e s E t s e e s e i t s a e r f r r u t n i t a m i t e d a m s e s t s a e l l f g l e g n ) t i c i f e d ( / s ) t i c i f e d ( / s f h c t r e m i t s e n e c n d e s e - t n e e b s e e t a t s E n i a m t n o c u q e i d n d e s n o i u n i g n l p m o c n o s r c n a n i l a y o g n o t a t n p o f g o c e r a h c ) 3 r i t n n w o n e d n c u d o g n g n e r s a s n o i t s i v i t n g n a h c n e m t s e m g n i r p u l p i t i t n w e e e b i t a e v a e h o i f o o i t a u l a r p e p x e h g n i r C r e r e s t a n a u l p r u s u l p r u s l r e v o t t i i d r o i r r a e y l h r u o e t n ) 3 c n e m m o c r o e g t u b i f o g n a h c a e s d n a m u i p s a e l t t c v e f o e v n v o v o u o c t o n e r i i w o r C ’ r e p x r e r u o c c l r s s s s s n u o n u o t a m s c e r l h c m R e h l a t a r e a n r t n a h T e e s e e l c c e m g e S A e v o e s e e t O a rn rn t s i t a p d u o c r e h r e h l a t c a o i . e t s o e t o l T i a p e t n e . t o b a h T i h w . 2 o c m h T n a . l e h T e r a o C e r P a S R u T a e l m I c a p O a M e h W o T n ( c a t O t o T e s ( n i o r G r p n i t O r G u T R d n U . k o r G f a c a l A 1 s e N f o Notes to the financial statements

2. Segmental analysis (continued) Other expenditure includes the movement on the provision for bad and doubtful debts as follows: 2007/08 2006/07 £’000 £’000 Provision at the beginning of the year 3,867 3,022 Income written off during the year (370) (706) Increase in provision for the year 2,640 1,551 Provision at the end of the year 6,137 3,867

3. Adjustments resulting from change in accounting estimates 2007/08 2006/07 £’000 £’000 a) Reduction in turnover resulting from change in recognition of rent (34,933) – b) Reduction in revenue expenditure resulting from change in estimation of recovery in new works and improvements 30,606 – a) An adjustment to turnover of £34.9 million has been made in the financial statements for 2007/08. This represents a change in accounting estimate. Previously rent was accounted for in the period that it was demanded, on the grounds that, for the financial statements, this was not materially different to a full accruals basis. As a result of The Crown Estate’s move to a new accounting system it is now possible, with better information, to improve accrual estimates (see note 2). b) An adjustment to expenditure of £30.6 million arises from a cleansing exercise on new works and improvement data. Allocating new works and improvements on a property by property basis rather than estate basis has led to a change in estimates of the historical recovery of new works and improvement expenditure (see note 10). 4. Analysis of adjustment between income and capital The Crown Estate has a statutory obligation under section 2(4) of The Crown Estate Act 1961 to make a distinction in its assets between income and capital and (with qualifications) make proper adjustments, including provision where appropriate for recouping capital expenditure out of revenue. As a result of this requirement the total adjustments between revenue and capital during the year was £43.3 million (£89.4 million, in 2006/07) and comprise: 2007/08 2006/07 £’000 £’000 Net revenue surplus 211,443 200,072 Adjustments: Statutory transfers (note 13) 9,909 9,539 Capital recovery (note 10) i) Purchase of leaseholds 4,738 6,331 ii) New works and improvements 15,742 19,471 iii) Change in accounting estimate for new works and improvements (see note 3) (30,606) – Profit on disposal of freehold properties 47,005 56,614 Capitalised staff costs (note 7) (3,442) (2,497) 254,789 289,530 What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 73 – 92 Page 81 e 0 0 0 7 7 7 7 t c / 0 0 0 0 0 0 a 5 9 1 7 8 5 0 / / / / 0 ’ 0 ’ 0 ’ 6 7 3 1 2 9 4 6 6 7 3 1 2 5 5 9 0 0 1 0 5 3 e £ £ £ 2 , 9 , 0 6 0 6 0 6 0 a t s E e s u 0 7 7 6 , 5 7 0 0 , 7 9 7 8 , 1 1 2 5 , 2 u n ) 7 9 4 , 2 ( 2 0 2 0 2 0 2 e 2 1 3 1 1 v n w o a c e . s n o i t g n i t a e R b r C a r e p r e p o o y – 8– 7 3 r t c c / 8 0 8 0 8 0 0 0 0 0 0 0 a s t i a 4 7 0 2 2 3 5 9 8 9 3 1 0 4 0 4 t 0 0 0 ’ f n ) 2 4 4 3 5 4 0 5 1 0 3 7 2 5 5 5 e ’ £ £ ’ £ , 5 , 4 , e c o d e s o l c s i d / 7 0 0 3 , 7 , 7 1 2 1 , 2 , 1 , 3 m ( / 7 0 0 2 / 7 0 0 2 2 e r i d n i 1 3 1 5 1 y l r u o a i s l r e R a P e t a r , s t s o c a p e s e 1 3 g n 8 0 i t t a n c / a t 4 1 4 5 3 1 2 e n o i t a s i n a g r o e r u s E a r e e e b / 7 0 0 2 n e e h t n w p o v e e v t R o r C a h m o r c e r i f d : s w o l l o f e t d n a – n 8– y r i s a 9 3 1 3 c / a t a e d e a t s E n e c r m p u s t s o c d u l u o n w o c n i s e R e d a a i l r a P r C ) s m d e t a i c e h : s w o l l r e b T s a w o f y o s s a m e s b d a m r a e d y n a e d r r a r u s a w e h t s t n e o B c n i s r a e y m y a p g n i r u d ) e h t t s o c n o i g n i d u l c n i ( l a n o i t i g n i r u d d s e e y d s e e y o l p m s e s o t u b i r t n o a e l y c n a d n u d e r c n e , s s e s n e ’ r e s i r p m e t n e n p x e s e y : e s e p x e n i r t n e m . t o l t a e p m o o i a m r e r t s s t s v i c e c a t i t p m a r p t s E s o c p m o e r e ( c p m i f o n o i s t n e s n e p x e n o y y l r a e s n e . I . N t s i n i m s e n o a r t s i n i m d n a e m e t i l i b s e s n g n e s n e p x e n w o r C n o i t s t d a s r e b m p x e s e s n e p t a t i t a i s n e p a i l n o d a s f o e c t s o c t a m r o f s e i s o a r t e d u g e v e i r e p x x e u n d s t n d d n i t a c l a i e s i s r e n d e n i a t i v i f f a l c n a l a n a t s o i n a r e n a c i n i t a u r e m y t i s r e n c i t a r e p o t s i t a r t f i t n e g a e e . I . e v i t c n a n i t c a s t r u n o i t a f u m e s i s e d r N n g t c c c a y a p u m s s i n o i s n i m d a r e v e m a r t r e p o n i e h d n a i s e g n s ’ t a e s i s i l a t o t r s o c , s c e s e r t s i l a o e g l n o n o t i t a e s e e i r l a t i m d r o t i n a g r d r s r i e h a n r e r e n m m n i m e a i c a l i s n i s n e h T i d n I A y o l p m E e s e t n e p x e h T l a t c e r i d o e a o . t o h T f o e G o T o C p O . 6 . b p a C g a W n I R d u A a S a M 5 d A N B o S . 7 . a e P e P Notes to the financial statements

8. Staff pensions Two defined benefit pension schemes operate within The Crown Estate providing retirement and related benefits to all eligible employees based on individual final emoluments. The schemes are as follows: a. The Principal Civil Service Pension Scheme (PCSPS) The PCSPS is an unfunded multi-employer defined benefit scheme. The Crown Estate is unable to identify its share of the underlying assets and liabilities. A full actuarial valuation was carried out as at 31 March 2007. Details can be found in the resource accounts of the Cabinet Office: Civil Superannuation (www.civilservice-pensions.gov.uk). For 2007/08, employers’ contributions of £2,478,279 were payable to the PCSPS (£1,518,246 in 2006/07) at one of four rates in the range 17.1% to 25.5% of pensionable pay, based on salary bands. Rates will remain the same next year, subject to revalorisation of the salary bands. Employer contributions are to be reviewed every four years following a full scheme valuation by the Government Actuary. The contribution rates reflect benefits as they are accrued, not when the costs are actually incurred, and reflect past experience of the scheme. b. The Crown Estate Pension Scheme The Crown Estate pension scheme is a defined benefit scheme. The assets of the scheme are held separately from those of The Crown Estate, in an independently administered fund. In accordance with FRS 17 the current service cost of the scheme is charged to the revenue account. The current service cost and contributions are determined by the scheme actuary on the basis of triennial valuations using the projected unit method. At 30 September 2005, the value of the scheme’s assets was £14.78 million and the actuarial value of the technical provisions exceeded these assets by 45%. The actuarial assumptions used for the statutory funding valuation are that the pre-retirement investment yield would in the long term exceed earnings increases by 2% per annum and the post-retirement investment yield would exceed pension increases by 1.5% per annum. The Trustees and The Crown Estate have agreed a seven year recovery plan to eliminate the deficit. Consequently, an additional amount of £85,000 per month is being paid to the scheme by The Crown Estate. Furthermore, the regular employer contribution rate has increased to 28.7% of pensionable earnings per annum. 9. FRS 17 retirement benefits a. Balance sheet and notes The valuation of The Crown Estate pension scheme used for FRS 17 disclosures has been based on a fair value of the assets of the scheme measured at 31 March 2008. The principal actuarial assumptions are: 31 March 31 March 31 March 2008 2007 2006 Rate of increase in salaries 4.50% 4.25% 4.0% Rate of increase to pensions in payment before 6 April 1997 3.50% 3.25% 3.0% Rate of increase to pensions in payment after 5 April 1997 3.50% 3.25% 3.0% Rate of increase of deferred pensions 3.50% 3.25% 3.0% Discount rate 6.50% 5.25% 5.0% Inflation assumption 3.50% 3.25% 3.0%

For 2007/08 employer contributions were £1,785,000 (£3,016,000 in 2006/07), this includes £1,020,000 (£2,326,000 in 2006/07) to reduce the scheme deficit and an adjustment of £nil (£528,000 in 2006/07). The agreed contribution rate for the coming year is 28.7% (28.7% in 2006/07) of pensionable pay. In accordance with FRS 17, the valuation of the scheme’s liabilities has been determined using the projected unit method. In these circumstances the use of this method can lead to the contribution rate underlying the current service cost increasing in future years. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 73 – 92 Page 83 ) ) h h h h 6 7 7 7 7 0 0 0 0 0 t a ) 6 ( ) 6 ( h c 0 0 0 0 0 0 0 0 0 0 c r c r c r c r 5 6 9 1 0 2 4 ( ) 2 4 ( a a a a r a 0 ’ 0 ’ 0 ’ 0 ’ ’ 6 3 1 8 4 5 0 0 1 8 4 6 0 2 0 2 0 2 0 2 0 2 7 0 2 ( ) 8 4 5 ( ) 0 0 1 ( £ £ £ £ £ M M M M M 7 6 9 , 5 4 6 4 , 7 4 8 4 , 8 4 4 0 , 1 6 1 0 , 3 e u l a V ) 4 2 8 , 5 ( ) 6 8 0 , 1 ( ) 4 2 8 , 5 ( ) 4 2 8 , 5 ( ) 4 0 5 , 3 ( 1 1 1 1 1 ) 1 9 7 , 1 2 3 3 3 3 1 3 ( t a h c 0 0 0 0 0 0 0 0 0 0 h c h c h c h c ) 5 7 7 3 8 0 0 9 7 9 4 8 0 1 0 1 e 0 0 0 0 0 ) 4 6 ( r a ’ ’ r a r a r a r a u 1 4 6 0 8 9 2 ) 6 4 6 8 ) 4 0 5 2 1 ) 0 8 1 ) 4 0 5 5 5 5 0 9 2 5 5 8 7 ) 9 2 5 ) 5 5 5 1 4 6 ) 4 0 5 8 4 8 7 0 0 2 8 0 0 2 8 0 0 2 8 0 0 2 8 0 0 2 l £ £ ’ £ ’ £ ’ £ ( , , , , ( ( M M M M M , 3 , 3 2 4 1 , 9 , 9 , 9 , 1 , 1 1 , 1 , 3 , 3 a V 3 ( 3 ( ( ( 1 1 1 1 1 1 3 2 2 ( 3 3 3 3 t 8 5 8 a 0 0 h c 4 7 1 6 8 0 8 0 0 e 0 ’ r a 4 8 ) 6 2 3 4 8 2 £ u l M 6 , 8 a V 1 , 1 2 5 , 2 1 , 0 2 ( 1 3 : e r t s e s s o l e w 6 a m 0 % % % h c r n d d r e r n u t 0 2 n e t e r a M c a f e 1 o 0 5 . 4 0 5 . 7 0 5 . 4 r u t e r t - g n o p s e s s 3 L f e t o l s n i x e o a r s a g e i t i l i d n a s e t a d e r s t h n 7 a b a i l n i c 0 m r % % % d d r u t e r a 5 0 5 e e t 0 2 a g e r M e t - g 7 . 5 . 7 . t c s i n g o e c e f o 4 7 4 1 3 p e m e h n o L p x t s t x e c e r a r e d e s i n c s l e s s g o a e h e h t t a t o t e d c e r s h m t a c s u l p f o rn u r a n a r e l a t 8 0 0 2 d e e i t i l i t e t - r % 0 5 % 0 5 % 0 5 e r a M e y r u s o t g n i y l r e g n m e h c s 1 t c e . 4 . 7 . 4 m f o b a i l o 3 f o L e h r a e y e t e ) d t t n e m e d n u p x e a g n i t r e h c s t n e e h t s n r a t a t s a r e f ) d e e u n i g n i r o i s t e s s ) e r n o o n o i s n e p u n a e y m e t i m e h c s p o u d a s i s n n i t n o e t s e h u t i d ) t t n o c o t d n e d e t i t ( e h t e p s i l f i c i n i s i e s e m e h o e rn u t e h t n o c ( i t d t p m u s s a n o i t b a i i f d e g l i c s l s t e r n g n i i f e d ( n e p x e t a s r a / b a e n n g o c d t ( / a t s E s ) y i l n o g n i s e i n n e s i n g t i h c e r i r e t o n e b s t n e t c a s u l p s s a t n t n l i b a i g e b f o c e r i s n e p e m e h c s e m e i l ( e m e h c e m e h c e p x o d n a r u s u o u o s s n w o r C / e g n a h c e e m e h c e m o c n i t a t a t ) s ) s s n o s e g r a h s t t e n i a g / ) s n o i n i n i : r a n i t s o c t s o c e m o c c e u l t e s m a m a ) ) l a i m o f o t n e m e r i n i rn e m h T f f e y g s e l s t a v r f s o c s o c s a s s o e c e c s n e o o e s o l ( / n s o l ( / n t i c i t i c i t e e h s l ( n i n i p n i t t e r e c g u t e rn n e c n a n i i v r i v r e h c r f e c n a n i e c e c u l a n i i a g i a g f t e k s n e c s n o i t n a f e d ( f e d ( v e s e s n o i s n o a r e s t e 7 1 e h / / u t e t n e i v r i v r s i s y s i s y r a t n s i r r n i t t r u i t l a i l a i d e t f m e v n e i a t n o u b i s s m p o s u s u t e s e s r e h s e i a m e t e r n e p t i t i c s t i f l p l p e s v r t n e l a n A l a n A t s r a u t l a u t r a u t t s o M S R F e c n a l a B t O e r e h r e h l a t l a t s e r e t s d n o . t o . e r e p x E o T . b o C a P t O o M r u S n e r r u C c A i f e D o r P c A c A B t e N . d c e p x E n I n e r r u C a P o T r u S t e N t O e r P u q E . a 9 N h T . c Notes to the financial statements

9. FRS 17 retirement benefits (continued) f. History of experience gains and losses 31 March 31 March 31 March 31 March 31 March 2008 2007 2006 2005 2004 Difference between expected and actual return on scheme assets: Amount (£’000) (64) (207) 1,710 605 1,483 Percentage of scheme assets 0% (1%) 11% 5% 13% Experience (loss)/gain on scheme liabilities: Amount (£’000) (275) 65 263 – 78 Percentage of the present value of the scheme liabilities (1%) – 1% –– Total amount recognised in statement of total recognised gains and losses: Amount (£’000) 3,641 (6) (2,717) 605 703 Percentage of the present value of the scheme liabilities 18% 0% (12%) 4% 4%

10. Recovery of capital expenditure 2007/08 2006/07 £’000 £’000 By Treasury agreement the Income account is charged/(credited) with: Purchase of leaseholds 4,738 6,331 New works and improvements 15,742 19,471 New works and improvements change in accounting estimate (see note 3) (30,606) – (10,126) 25,802 Depreciation of fixed assets 3,022 2,206 (7,104) 28,008

11. Financial instruments The Crown Estate may not be held other than in land, gilts or cash. Investment in equities or outside the United Kingdom is not permitted. The cash holdings not needed for operational purposes are maintained in overnight ‘on call’ accounts with major United Kingdom clearing banks, thereby avoiding liquidity risks. These deposits are held on a variable interest basis. There is no currency risk as it is only permitted to hold funds in sterling and there are no significant transactions in currencies other than sterling. The Crown Estate monitors the rates offered by the banks and transfers deposits as appropriate to maximise returns. As The Crown Estate is not permitted to place money for periods longer than overnight there is no maturity profile in respect of cash deposits. Any investment of The Crown Estate’s non-cash financial assets would comprise solely of gilts managed on its behalf by the Board for the Reduction of National Debt. This disclosure excludes short-term debtors and creditors. 12. Parliamentary Resource finance The Crown Estate Act 1961 provides that monies are provided by Parliament in respect of Board members’ salaries and the expense of their office. The total of such expenses chargeable to the resource account for the current year is shown on the face of the revenue account and the detail is reported separately to Parliament as a resource account. What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 73 – 92 Page 85 ) l n 0 0 7 7 7 0 6 a t 0 0 0 0 0 0 w / / / o t c 0 ’ 0 ’ 0 ’ T 9 2 8 5 2 3 £ £ £ , 6 0 6 0 6 0 e t a t s E o r C d k c 8 1 , 5 3 2 3 , 3 5 1 4 , 4 2 6 3 , 6 0 8 1 , 0 9 3 5 , 9 6 8 0 , 1 4 1 2 , 9 ) 5 5 0 , 1 ( 0 2 0 2 0 2 e t a t s E ) 6 6 8 , 6 3 ) 8 0 9 , 9 7 1 6 7 , 8 3 6 5 1 4 9 , 8 7 4 8 3 3 , 2 0 6 8 0 2 , 1 9 a b 8 1 0 1 6 , 0 6 1 e p s e r 1 ( 2 ( 7 1 4 ( 5 , 5 5 , 5 1 , 1 8 2 4 , 7 5 3 , 6 6 3 6 , 8 4 4 , 6 e e r g a n i e h t s i n w o r C o t r ) t h g u o b e – 8 a e 8 0 8 0 8 0 0 0 0 0 0 0 l a t s ) 7 0 0 2 n w 0 1 9 0 1 8 9 ) 2 0 9 0 t a y 0 0 e h T d e i r ’ 0 ’ o 4 9 9 9 o T ’ £ £ £ 8 , 5 , ( s t s E r C h c / 7 0 0 4 0 7 , 4 , 9 , 9 2 4 4 5 , 8 5 8 0 , 4 8 0 2 , 1 , 9 0 4 9 , 9 e h t r a c A / 7 0 0 2 / 7 0 0 2 2 3 3 6 9 5 0 8 2 , 9 3 r a . d l o h e 9 1 6 9 3 9 2 0 5 3 , 1 5 1 e r ) 1 5 3 , 5 9 3 ( ) 8 2 6 , 7 3 5 ( 9 ( M r o f e r a f 8 2 4 , 7 5 3 , 6 6 3 6 , 8 4 4 , 6 8 5 1 , 2 3 4 , 6 8 3 4 , 1 7 4 , 6 1 3 d n u F s u l s t n t p a ) – – u o 1 7 1 d e t e t r o 0 0 e t a t s E r u s 9 9 9 9 6 3 0 0 a t 0 ’ s d ) 6 7 3 ) 1 1 8 3 1 8 1 s m a £ 3 2 , , n o i l l i n i E 5 , 6 3 1 , 3 t e n , 3 ( , 5 ( 9 ( m W n w o 7 , 5 0 1 7 , 5 0 1 9 7 3 , 6 0 1 9 7 3 , 6 0 1 r C e h t a d i l o s n o C f o n o e g n i w o l l o t f 6 . 0 6 1 £ ( h t ) 0 e –– 0 6 e t 0 s t s e e h t o t 8 3 a 0 c e p s n i r ) 7 5 ( t ) 3 6 6 2 1 6 ) 6 1 1 a s . s t n e m e r i u q ( ( ’ £ 1 , 8 ( n o i l l i e r E e M 6 0 3 , 8 2 6 2 , 2 r r e t n i m , t n e e u d 9 3 5 , 6 3 7 9 2 , 3 2 0 8 1 , 0 7 9 3 5 , 6 3 0 8 1 , 0 7 1 1 n i 3 3 3 3 m s i 4 . e e d l o h 1 5 . ) 7 g n i c n d n u F 1 r g e s s u l p 0 / a £ ) ) 6 a n i f l y e 0 – ––– ––– a e l 5 5 ) 1 6 6 3 9 1 7 6 1 1 d e t r u s 3 3 3 8 5 7 7 1 8 5 1 t a 0 0 m 0 0 a r u 8 4 ( r f o 3 1 2 t s R ’ £ 6 , 5 , 0 , 6 , 0 , 4 , 5 , 8 , 1 , t s e d u l E 4 , 2 4 , 2 6 3 9 6 8 3 1 7 e u n n i r u s a e e t - t e r 0 0 1 3 6 2 6 1 4 2 ( ( c n i T n 9 9 7 1 7 v e a d i l o s n o c e p s r 8 o i l l i y b r o h s C e r 0 0 s m e h t 2 n i ’ e e h t ) s d n a 0 t a e t 3 . 3 o e i n a . t ) 8 1 ) 3 2 8 0 5 4 6 6 6 7 9 7 t t s b a t h c r a 1 6 t s E ) 8 3 7 ( 0 0 ’ £ 4 6 1 , 0 8 2 , 4 4 4 , 4 0 5 , 7 5 1 , 8 0 2 , 5 3 8 , 2 1 7 , 1 , 3 £ ( , 2 5 9 1 r e r U E t n u M n o i l l i m 1 , 5 0 , 1 t n 9 1 p 9 , 1 9 9 3 5 , 4 0 0 5 1 9 5 9 7 9 8 0 n e m 4 , 8 9 3 3 , 7 4 1 0 6 o r t c c A 1 3 3 ( 5 ( 8 ( w o y r t p A 3 5 0 , 5 2 9 0 , 5 1 0 2 , 5 2 9 2 , 5 o c c a 0 2 7 . 9 4 t a C s i a p e L 3 £ : s w o t n e s e l i s e h t n u r e h T e u n e t r e l o f t a t s E e l i v i C o h c r a M t m t s s v e r d u n l t n ) 3 a 1 3 3 e h t s r a c n p o r p e h i e v n t d t e m i f o e t , w o r r o b e e e y d e s y t n n w o r C t n u o c c a t – 1 y l e r u 8 0 o n o t e r d n ( s g n s a p e h l s t i l m o r f e a n g i f 0 2 o t n i e m p e m p T a a t s E a s t n o m r a f o a e d 7 0 0 2 h c s e s e r o e y e s s a e m e s n o i n o i t c e s d n u F i t e t u t a t s i t e v r e s e n w o s e i t s e i t s e r t a t g n i k a t n o i o l e v e d o l e v e d 0 5 s i t i s n o i s o p s i d r a M d e r C e h t y b e v r e s e R l a s r e f s n a r r e p l i r p A d e t h l t l a i h t i w t i d d a t a u r e p o r f o m r e p o r e p o x i f f o r u c r e d r e d 1 3 1 p s g n t i w s i v o r o r p r p r p e c o r l a v a t i p e s t i p a c f n u n u e s y r o p c n a n i t a t a f r e l b a d i l o d l d e t t i m i l a e d s s s a C y r u s a e r T t u n o i t a d l o h e n o l a r n a d d e t d e t d e h d l o h e h u o : s t n o n o t s e i t s e i t e g n o l a c s d l o h s d l o h r e p o s d l o s d l o n o u l a m u i s k r o w s u t s d e e i g n a i t e i t l a r r e r e s a e r o c e h t i t a i t a : g : g v l e n e r e e s a o h e s T C t a t S s e s e s c p p l p m e i g e l p m e l p m r e n e e h a u l u l . . . e e l r e h r e h e n a e h t d e - t l t t o n o n i e c o r i d d n i e 3 t o f o n i 5 1 i w e r P s i h e e r F a e L o C B P w e N h e e r F A 4 1 n I h T o C B e L a e L a V o r P r u S t O h T t O a V o r P i G o T e G M 1 i M d n U N Notes to the financial statements

16. Tangible fixed assets – owner occupied properties 2007/08 2006/07 Total Total Urban Rural Marine Windsor Crown Crown Estate Estate Estate Estate Estate Estate £’000 £’000 £’000 £’000 £’000 £’000 Valuation at 1 April 2007 59,100 261 – 64,451 123,812 106,454 Additions – Improvements 568 –––568 502 (Deficit)/surplus on valuation (13,543) 10 – 2,075 (11,458) 16,856 Valuation at 31 March 2008 46,125 271 – 66,526 112,922 123,812

17. Investment in joint venture In April 2007, The Crown Estate formed a joint venture partnership with Hercules Unit Trust. The partnership, known as The Gibraltar Limited Partnership, operates in the United Kingdom. The Crown Estate has a 50% interest in the partnership. The partnership’s principal activity is property investment through its investment in Fort Kinnaird Shopping Park in Edinburgh, Gallagher Retail Park in Cheltenham and the Shires Retail Park in Leamington Spa. 2007/08 £’000 Summary of movement in the year in investment in joint venture: Net equity additions 249,941 (Deficit) on revaluation of investment properties (46,540) Distributions receivable in the year (8,485) Share of profit for the year 8,380 Closing balance at carrying value 203,296

Summarised financial statements for The Gibraltar Limited Partnership: 2007/08 2006/07 £’000 £’000 Share of income after expenditure and interest 8,380 – Share of: Investment properties 301,710 – Current assets 6,534 – Gross assets 308,244 – Current liabilities (4,948) – Long-term bank debt (100,000) – Share of net assets at 31 March 2008 203,296 – What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 73 – 92 Page 87 l 0 0 0 7 7 7 0 a 0 0 0 0 0 0 0 4 6 4 6 / / / , p s d r 0 ’ 0 ’ 0 ’ 0 ’ 9 6 8 t o T £ £ £ £ 0 , 6 0 6 0 6 0 5 6 0 , 2 2 6 8 , 2 0 4 7 , 2 1 8 8 , 7 0 0 0 , 1 8 7 2 , 7 0 1 3 , 2 9 5 8 , 4 4 8 5 , 5 1 2 2 0 , 3 ) 9 1 4 , 2 ( ) 2 3 4 , 2 ( 0 2 0 2 0 2 1 1 4 i h s r e a w o t . m u n n d n a a r n t r a P 0 0 0 e p t n e K d e s 2 e 8 0 8 0 8 0 0 0 0 0 0 0 0 0 n i 1 4 7 3 9 1 1 8 9 1 4 6 5 % 7 0 0 0 l c ’ 0 ’ t i m i 7 6 7 1 2 8 8 6 8 4 1 6 5 4 2 2 5 7 9 6 1 ) 7 0 2 ( ) 2 5 2 ( £ ’ £ ’ £ £ e r t i L , 0 0 0 , 1 £ t a , 1 , 1 , 1 , 1 , 1 3 9 6 , 8 h e / 7 0 0 2 / 7 0 0 2 / 7 0 0 2 v 3 n e f o y l r h s i r o C e t t o M n a o l l g n E a r a u q t n a g n i p p o 0 0 r o 0 5 3 2 2 4 5 9 7 6 1 8 3 8 5 9 f h 0 ’ ) 0 2 1 ) 2 2 1 S e l b a £ n e m p i 9 , 9 8 , 9 8 , 5 9 , 1 2 , 5 9 , 3 6 , 4 6 , 2 , p i h s , 2 ( , 2 ( d t L y a p r e t a u q e s i e s g n i c i f w e u r e n t r a P f t s e O l B l i a d l o H 0 y r e r e t n I 0 0 ) 2 9 ( ) 8 5 ( ’ t e R 8 5 8 7 6 1 2 9 7 2 2 4 9 7 3 8 5 1 n i h t o b £ . s 1 7 1 , 1 0 8 2 , 1 r e g e n i t a J r a e h c a m y e s a e L d n e a h t i w t s e r e t n i e r h t n a d n e L y r t i l P t n e m e h e v t o u q e e e f o e l . y l r r g n a a e t r b a y n a a u e r a h s s e d q a p e r % o t n i 7 . i v o r p s i 4 s a t e l b a y a n a o l p . l l y n o i t a s i s i d e r e t n e t e s s a e h T r e . u h i l o p e t a t d e r i u q c a s n a o n a g r o S o l d e x 8 s E t e e r e i f 0 n i t s e r e t n I r p r n . d n t S e h T 0 2 e t a t s n i a . ) e h E t n t 8 e h c t n o s w o r C e g d e r u c r t n e C s e g r a e i s e e f – g a t n e m n w o 0 0 2 t i 7 e m r e R e s l i e h M 7 0 0 f o t s a g s t g t r T C 2 s i 1 s t n 0 0 2 n a o l b a i l 3 l i r o m e v n i – e h T t r o M t a e s s a t s e v n i – e m e p A h c r a M 6 0 0 2 e c n a g n i p p o h S – d n a n d t a t l i r p A 1 m o t c d t L 6 0 2 / 0 0 2 s d e v i d e s r f e v i s u l c n i ( 1 3 s n a o l 1 t a t e r v d a l a i s t e f o d , 6 0 0 2 : e r o f d x i f 8 0 0 2 t a t a e c e t n e i f o s s s g n i r t r u o C n o n a i d n u l a a i r p c n a n i a r B f r e b v e l b 7 0 0 2 r e b m e t p i t a n o i l l i m t n e m m t s f o e g a g t l i s , l l s l s l f o r e e h n o i t a s t e d l o H t e m o e u l a v 4 . e S e i h r o e h c r a M e v h s i o i t a i c e r p e d o u l a v t i g n a i c e e g r p A a s o a s o m k o o b c n i s s a n o i t i s s T h t O n I s e l s 0 3 d o o w h c l a s e g a g t r 9 3 £ r a h 1 3 / t s d e 1 . . . e b r u r a g e m e t p e S r a h S r S t 8 t o f e r n O h T c c E a J 9 1 d A r p e D t e N A t A p s i D t o T o r G o C p s i D t e N t e N ) i i 1 n I N r a h C 0 2 o M o f u o T ) i Notes to the financial statements

21. Other investments Other investments comprise: 2007/08 2006/07 £’000 £’000 Antiques and paintings 4,865 4,941

Antiques and paintings are valued by recognised experts every three years on a rolling basis, the last valuation took place in 2007/08. A valuation deficit of £22,000 was recognised in 2007/08. 22. Stocks and work in progress Stocks and work in progress comprise: 2007/08 2006/07 £’000 £’000 Stocks for resale 120 144 Stores 102 100 Work in progress 2,128 508 2,350 752

Work in progress comprises of costs associated with the implementation of a new financial system. Accumulated costs will be transferred to tangible fixed assets on completion. 23. Debtors Debtors comprise: 2007/08 2006/07 Amounts receivable within one year: £’000 £’000 Rent receivable 9,702 9,317 Sale of land at Bingham 12,750 12,750 Other debtors 33,970 28,928 Prepayments 432 442 Accrued income 6,825 7,179 63,679 58,616 Amounts receivable in more than one year: Sale of land at Bingham – 12,750 Lease premium instalment receivable 2,500 – 2,500 12,750 Total debtors 66,179 71,366

On 11 September 2006 The Crown Estate sold the freehold land at Nottingham Road and Mill Hill, Bingham, Nottinghamshire for £35.5 million, payable over three years. £12.75 million is receivable in September 2008. 24. Creditors: Creditors and accrued charges comprise: 2007/08 2006/07 Amounts due within one year: £’000 £’000 Trade creditors 4,599 6,562 Rents received in advance 49,244 10,884 Taxes and social security 12,440 3,324 Other creditors 11,233 5,980 Consolidated Fund 7,000 3,000 Accruals and deferred income 10,252 8,699 94,768 38,449 Amounts due in more than one year: Rents received in advance 1,750 – 1,750 – What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 73 – 92 Page 89 ) n 0 0 7 7 : ) 0 0 0 0 / / 0 ’ 0 ’ w o 7 7 5 ( £ £ 6 0 6 0 y b 2 3 1 , 6 7 9 3 , 1 4 0 2 , 2 3 2 2 , 5 8 0 0 , 8 1 9 0 , 9 ) 7 0 0 2 r C ) 2 1 5 , 3 ( 0 2 0 2 ) 2 1 1 , 3 3 2 8 0 0 2 ( d e t a t s 1 2 8 1 7 1 3 4 1 2 h h c r e h T l a i c n a n i f c r a a M s ’ M n o i t a c i f i t r s s e l n u e t h t i w 1 3 8 0 8 0 0 0 0 0 e e c 1 3 9 3 r 0 0 ’ t a 7 ) 4 0 1 ) 8 9 5 a t s E ’ £ £ , , o t d e / 7 0 0 , 6 2 2 2 , 4 7 1 3 2 2 , 5 1 5 5 , 0 0 1 8 , 2 2 6 3 , 8 9 3 1 , 3 ( ( e t a t s E 2 / 7 0 0 2 5 8 u t n e v 3 4 8 1 3 2 1 5 r o i r d n e p n w o r n o i l l i m t n n w o C d i o j r a e r C y 6 5 1 n i e h T r a o B £ ( r o e h t e h T f o f o e h t r o f y b l o f o n o i l l i m s f l s t n t x e t n o c r t n o c 2 5 1 % 0 0 1 e £ a h e b e m e t h t . ) 7 0 0 2 e i t i v i t c e h t f o a n o n i a t s d l e h ( e l r e h c r r u a i e u l s w e e t t g n i t i a M d n u a v o l l t i d n 1 y o f 3 m m c n a n i f b s e p x t a a r e p o a e o C l a i r l s e i n a p e h t n e . d e a t i r a r a m o t i d u p , m o r f . s e i t i l i b a i l c a e t a m A e t a d o i l l i m p e r c t d n p a l t n e t n e 8 3 o n e h t e k g s i h t d t L n e £ ( m e w o l f n i n E y b a m e r a e b n O g n i t n t n i o . d t L t h s n o i l l i s t n e o c o n m y n a p m y n a c d e 8 0 0 g a n a m l a v o n d t L 2 d e v o r p s g n i k a t t i o C y y b 1 2 1 t e n e v a h p a t r e £ d a h i u q e d e r e t s i g e r o t a p m o C e n u J . ) t s e r e t n i f o e r a d n u m m o c e h s s t n e t n e m e t n s % s e i 4 2 d r a e r s u l e t a t s a c n a p m o C a m e E h e r u t i 0 5 h g a n ( n o s s e r d e g a n a m u t n t i v i t e m e t a t n n e r u t l e t n e m i d c i h t p r u s t s d e v d n a a M e r d n e c a a e t w e t e m . e u s s i n a e g o r p t s g e t t n r a r e n d e g n f o h s w o r C a t s t e g E n p p x e s e i o l i t n i o f l i a j g a n a M s r l i m i L x i t n s r e G d l a c a n t r a d e a i r a e h a r o t i l k r o a t s E r w , i e s t t L T s g n i n l a o i a n o d e s s t o t d n a a M k e i t t n i r o w b e o s n e i r C e p o s t n r e p o d t n e y t d e r c p o r p c n a n i f a t r s e m a j z o h s n e d 8 0 0 2 t i l e n t r a P t a d o c i p a c i d u A f o n i n i i d d a e m t e m e d n a i b t i F m e y r a i d i l a ) e h T d t u a e t a f o h c e h t 7 0 0 2 d m o r r a G ) e e t a t e d n t e e a i d s t n u o r e p o r f e r o l r e n o l s s b s y t s e e g n a h c u n a d e rn e c n o c P g a n f e s a e s i b E h s n a l a i h g i r p r a M s a e s u s i t a e t n f o u l p s k c o t w o o c c a A i l 8 0 0 2 n e G e s t e r c s 8 0 0 2 a M i m m o c w o r c r e h y r a r o h e c e g r u t e i n r e l l o l f s i 1 1 3 l h l f n c n a n i e s f o n w o i u o r o n i s e f i d a e l r e v o c e e g n r o n i d e e n r a t l r e d ( n a l t u a a p s y t a t a r t p e i t n i ( / e i c n o c r a t i S r C h b s e h h T g n / e t d n a e u u J l a i s b ) e s a b n a b M a r b s o e c e c m o n o a t i p a / ) e g t m e e . e i t a l a r d a h c h s a c s t l s a c s a e r s I C C n A u S c e R i G s e B M R r U g z t i F m o C s d 6 1 r e t e e h t 1 3 e v ...... e s a e r c n a l a n a l a 5 t o a e r c n e r a e h t n O 0 3 9 2 t A d n a 8 2 t A h T u s e r t a t s E n I r a h C ( 6 2 7 2 e S t e N B B I ( e N p O 2 N c e D Notes to the financial statements

31. Related party transactions During the year, none of the Board members, members of the key management staff or other related parties have undertaken any material transactions with The Crown Estate with the exception of Philip Everett, the Deputy Ranger at Windsor Great Park who is employed in a personal capacity through Smiths Gore Chartered Surveyors where he is a salaried partner. Smiths Gore are amongst The Crown Estate’s managing agents and as such receive fees for their services. Philip Everett had no involvement in determining either the appointment or remuneration of Smiths Gore in this capacity. During the year Smiths Gore were paid a total in fees of £1,898,862 (£969,282 in 2006/07), for services they provided across the whole of The Crown Estate. 32. Third party deposits At 31 March 2008 The Crown Estate held £15,286,826 (£15,520,322 at 31 March 2007) (on deposit on behalf of third parties). 33. Reconciliation of movements in reserves 2007/08 General Total Pension capital Revaluation Revenue Crown provision reserve reserve reserve Estate £’000 £’000 £’000 £’000 £’000 Movements in reserves comprise: Balance 1 April 2007 (3,504) 2,141,819 4,948,500 4,675 7,091,490 Statutory transfers (note 13) – 9,909 ––9,909 Capital recovery: i) Leaseholds – 4,738 ––4,738 ii) New works – (14,864) ––(14.864) Other adjustments – 27,214 (27,236) – (22) Revaluation reserve released on disposal of freehold properties – 376,021 (376,021) –– Surplus/(deficit) in valuation of property portfolio i) Investment properties ––294,085 – 294,085 ii) Owner occupied properties ––(11,458) – (11,458) iii) Share of joint venture ––(46,540) – (46,540) iv) Investment in Limited Liability Partnership ––(3,376) – (3,376) Actuarial gain 3,641 –––3,641 Pension reserve adjustments 711 ––(711) – Net revenue surplus –––211,443 211,443 Consolidated Fund payment –––(211,000) (211,000) Balance at 31 March 2008 848 2,544,837 4,777,954 4,407 7,328,046

2006/07 General Total Pension capital Revaluation Revenue Crown provision reserve reserve reserve Estate £’000 £’000 £’000 £’000 £’000 Movements in reserves comprise: Balance 1 April 2006 (6,352) 1,911,350 4,024,143 7,457 5,936,598 Statutory transfers (note 13) – 9,539 ––9,539 Capital recovery: i) Leaseholds – 6,331 ––6,331 ii) New works – 19,471 ––19,471 Other adjustments – (2,370) ––(2,370) Revaluation reserve released on disposal of freehold properties – 197,498 (197,498) –– Surplus in valuation of property portfolio i) Investment properties ––1,102,338 – 1,102,338 ii) Owner occupied properties ––16,856 – 16,856 iv) Investment in Limited Liability Partnership ––2,661 – 2,661 Actuarial (loss) (6) –––(6) Pension reserve adjustments 2,854 ––(2,854) – Net revenue surplus –––200,072 200,072 Consolidated Fund payment –––(200,000) (200,000) Balance at 31 March 2007 (3,504) 2,141,819 4,948,500 4,675 7,091,490 What we do Overview & priorities Customer stories Business stories Performance Governance Financials ifc – 3 4 – 8 9 – 24 25 – 34 35 – 57 58 – 70 73 – 92 Page 91 * 0 8 0 3 0 0 0 / 0 / 0 ’ 0 ’ 2 8 4 8 2 5 7 £ £ ) 0 3 7 ( 0 7 0 0 0 1 9 3 , 4 1 7 3 , 5 0 0 5 , 2 9 5 8 , 4 5 6 8 , 4 6 9 2 , 3 3 9 6 , 8 2 3 1 , 2 6 7 9 , 3 0 0 8 , 0 0 0 0 , 1 3 5 0 , 1 3 4 4 , 1 9 1 7 , 2 * * 3 0 6 , 4 9 3 0 , 0 * * 2 0 8 , 4 ) 0 5 7 , 1 ( 2 2 ) 7 1 8 , 9 3 3 8 3 4 , 7 6 0 6 3 , 4 8 ) 7 4 3 , 1 1 ) 0 2 3 , 7 2 0 0 1 , 9 1 ( ( ( ) 8 6 7 , 4 9 ( ) 3 9 4 , 5 1 ( ) 9 9 1 , 0 4 ( 8 5 8 1 0 2 7 1 1 2 7 1 1 2 0 2 2 2 6 2 3 2 0 , 4 5 , 6 2 , 4 6 4 0 , 8 2 3 , 7 7 2 0 0 0 0 0 0 1 4 4 6 4 8 3 3 4 9 0 ’ 0 ’ / 6 / 1 ) 3 5 9 ) 6 5 9 9 0 5 1 9 ) 3 4 7 ) 1 7 2 ) 6 7 1 ) 8 1 7 ) 6 6 7 ( £ £ , , , , , 1 9 5 , 4 , 4 , 1 , 5 7 1 0 , 7 , 2 , 3 0 5 7 , 2 5 6 0 , 2 0 0 5 , 3 0 0 0 , 0 9 3 3 , 3 2 7 0 , 0 1 6 3 , 3 2 4 4 , 3 0 6 1 , 2 7 3 5 , 3 0 0 2 0 0 2 1 4 , 1 4 ( 5 2 ( 0 1 ( 3 1 ( 0 3 ( 8 3 ( 9 4 6 1 6 1 0 2 6 1 0 2 9 1 2 2 6 2 2 2 0 4 6 , 2 3 0 , 4 8 4 4 , 2 7 5 , 6 8 2 8 , 9 7 1 , 4 0 9 4 , 1 9 0 , 7 . 7 1 S R F 4 0 0 0 0 6 0 1 0 8 9 1 8 5 9 6 7 7 5 9 0 6 0 0 0 0 0 4 7 1 4 2 8 2 1 4 5 8 f o 0 ’ 0 ’ / 5 / 0 ) 1 3 6 ) 0 9 1 8 3 9 5 9 3 ) 0 3 0 ) 1 0 7 ) 1 2 3 ) 1 6 6 ) 3 1 6 8 9 5 4 8 6 £ £ 0 0 9 , 4 5 , 4 3 , 2 9 , 3 , 1 ( 0 2 0 2 , 5 4 ( , 0 2 ( , 0 1 ( , 2 1 ( , 6 2 ( , 1 3 ( 1 , 7 8 2 5 , 6 4 1 8 , 7 4 1 0 , 8 8 1 7 , 7 4 1 8 , 0 9 1 2 , 8 7 1 7 , 0 2 2 3 , 2 5 2 8 , 4 0 2 , 0 7 8 , , 5 8 6 , , 3 0 0 , 3 5 4 , 6 3 9 , 5 n o i t p o d a e h t 0 0 5 0 0 0 4 6 0 0 0 0 f o ’ £ ’ £ / 4 0 / 9 9 ) 7 3 1 , 9 2 4 0 , 5 9 0 2 , 3 1 4 7 , 2 6 5 8 , 3 2 1 6 , 3 4 2 0 , 2 ) 7 0 0 , 2 ) 6 2 2 , 0 ) 6 4 7 , 1 ) 0 3 1 , 5 ) 3 5 9 , 1 2 2 5 , 6 ( 0 2 9 1 1 3 7 , 6 0 0 5 4 , 5 0 3 1 0 0 9 , 2 3 0 0 7 , 5 8 5 8 8 , 2 3 1 1 8 , 4 8 2 7 0 , 2 6 1 9 4 , 3 1 5 2 4 , 0 9 2 4 4 4 , 5 4 2 0 2 , 7 8 ) 5 4 6 , 6 3 ( 1 ( 1 ( 1 ( 2 ( 3 ( 3 2 1 1 1 1 1 2 2 1 t n u o 4 , 8 , 0 , 6 , 3 4 5 3 c c a ) ) e k 0 0 –––– –––– ––––– ––––– ––– ––––– –––– ––––– ––– ––––– ––––– ––––– ) 0 ) 9 4 7 9 6 5 8 7 2 0 0 4 0 7 ) 1 1 8 3 ) 4 ) 1 8 9 5 a t 2 2 4 3 3 1 5 3 6 4 7 7 0 0 7 3 7 8 3 3 8 7 2 6 0 6 7 4 4 0 / 9 9 / 0 0 0 0 8 ( ’ £ ’ £ 1 , 2 , 1 , 1 , 0 , 2 , 5 , 8 , 1 , 8 , 0 , 0 , 7 , 9 , 2 , 0 , 5 , 5 , 2 , 0 , 2 , 4 , 7 , 6 , o t : h 8 9 9 1 4 8 4 2 2 3 1 8 6 3 5 6 1 0 7 3 0 4 7 3 9 ( 3 0 0 2 1 1 8 3 0 2 7 2 7 5 0 3 9 0 3 7 6 3 ( 2 ( 1 ( 2 ( 3 ( c r a 2 1 1 1 1 1 1 2 2 1 1 , 4 , 5 , 3 , . ) 3 M 3 4 4 3 1 3 d e t a t s - e r e t o n ( d e d n e e b n e e t a m i t s e s a h s r a e y s e s e i i g n i t e h t t r e t r e s t n e m r n u o e o f p o r p o r t a p i h s r e n p i h s r e n c c p p a t s t r a t r a s t n n i l a d e d e P P i i i c n p u p u s s t n t n d e d e e m e t t e g n a n t a c c c c i f o o t s a h c e s n e e s n e i m i L i m i L l e m y a e m y a r r e h t p p s e s n s e s n f o d r o c e r s s e r u t n e v e r u t n e v p x e p x e a i c n t t o t a e y a e y s e v s e v h s i l g h s i l g s t s o c s t s o c d n d n s t s t g g r e n w o r e n w o s n a o l s n a o l u l p u l p e p x e p x t c a r e r e a n i e e f d d d d e s e s n i o j n i o j n E n E u F u F r u r u 1 > 1 > s s s e i s e i e t o r a e y r a e y g n i g n i s s s e s e n i t a n i t a p m e r r n i d d n i n i n i n i n a n a s a s a s u s u n a n a t e s t e s e e e u e u e v i t e v i t t e s t e s t a r t a r h t s t t t t t s t t t t i l i b t i l i b 1 > 1 > d d s e l p r l p r r a e y s a s a d e d e a i l a i l s a s a : : a r t a r t r e p o r e p o n e n e n e n e n e n e n e n e u u d n a d n a e t a d e t a d u n e u n e n o s s x i x i e u e u t t t t t t s s s i s i e p o e p o f f d u l n o n o s r o t s r o t e v o b a d r o r o l a t i l a t i v e r v e r t c t c s s s s s e g a g t r s e g a g t r i l o s n i l o s n n e v n e v n i m n i m i s n i s n r e h r e h c x E e h m t s e v m t s e v m t s e v m t s e v m t s e v m t s e v m t s e v m t s e v c e r i d c e r i d e s a r e v o rn u r e v o rn u i d e r C n e r r u C e P i d e r C e P n e r r u C n e r r u C t b e D n I o M n I n I n I n I t O t O n I o M t b e D n e r r u C n I n I o C o C n I t e N t e N n I d A d A o r G o r G e r i D e r i D * * T * p a C T e R p a C e R T B n e T Your notes

Printed in the UK for The Stationery Office Limited on behalf of the Controller of Her Majesty’s Stationery Office. ID585854442 07/08 What we do