Final Results - Part 1

RNS Number : 7094D

British Land Co PLC

21 May 2012

THE BRITISH LAND COMPANY PLC FULL YEAR RESULTS

Management Actions Drive Continued Outperformance

Good results in challenging markets

· Underlying PBT¹ up 5.1% to £269 million reflecting £28 million (5.4%) growth in net rental income

· EPRA NAV² up 4.9% to 595 pence

· 1.5% increase in Q4 dividend to 6.6 pence; full year dividend of 26.1 pence

· Quarterly dividend for 2012/13 of 6.6 pence; making a total of 26.4 pence

· Total Accounting Return of 9.5%³

Portfolio structure, development and asset management driving 75% of the valuation uplift

· Portfolio valuation up 2.6%: capital returns at 3% outperforming IPD by 250 bps

· 2.1% growth in portfolio estimated rental value (ERV), outperforming IPD by 160 bps

· Total property return of 8.3% above IPD by 200 bps

· Both Retail and Offices outperformed IPD Total Return benchmarks by 110 bps and 410 bps

Focus on prime, well located properties securing and growing rental income

· 5.0 million sq ft of leasing activity generating £10.0 million pa of new rent (excluding pre-lets)

· 1.0 million sq ft lettings and renewals in retail, 6.9% above ERV

· 1.0 million sq ft of lettings and lease extensions in offices, 3.3% above ERV

· Increase in portfolio occupancy of 20 bps to 98.0%; UK retail 98.3% and offices 98.0%

· Proportion of rent expiring in the next 3 years reduced to 7.6% from 10.4% a year ago

Benefiting from early commitment to London development; increasing retail development pipeline

· 50% of office developments under construction now pre-let to UBS, Aon and Debenhams - securing £34 million of annual income

· £167 million of valuation uplift from office developments to date; further £192 million to come

· 347,000 sq ft of UK retail developments committed in the year; already 72% let/under offer

· Further 960,000 sq ft of retail developments with planning secured or pending

Investing in quality assets with secure and growing income; increased recycling ahead of valuation

· £371m of acquisitions made at 6.9% net initial yield, adding £21 million of annual rent

· £100m of disposals of lower growth assets at 1.6% above March 2011 valuation

Strengthened financial position through significant level of financing activity

· £2.0 billion (British Land share £1.4 billion) of financing agreed since April 2011

· Operational and financial flexibility maintained with diversified funding and spread of maturities

· LTV at 45.3% (proportionally consolidated) with 2.2 times interest cover; Group LTV at 29.1%

Chris Grigg, Chief Executive said: "These are good results, and that's in a tougher environment. Our profits, valuation and NAV are all up. We outperformed the broader UK commercial property market on almost all key measures and our balance sheet is strong. I am particularly pleased by our high level of leasing activity and development progress over the period. Our results also show we are defensively positioned in today's more challenging markets, but also well placed to continue to outperform in the future, as a result of the decisions we have taken."

	FY 2011/12	FY 2010/11	Change
EPRA Net Asset Value² per share	595p	567p	+4.9%
IFRS net assets	£5,104m	£4,930m
Underlying pre-tax profit (UPBT)¹	£269m	£256m	+5.1%
IFRS pre-tax profit	£479m	£830m
Diluted Underlying EPS²	29.7p	28.5p	+4.2%
Diluted EPS	53.8p	95.2p
Dividends per share	26.1p	26.0p

¹Underlying pre-tax profit - see Note 1 to the condensed set of financial statements

²See Note 1 to the condensed set of financial statements

³Growth in EPRA NAV plus dividends paid

Investor Conference Call

A presentation of the results will take place 9.30am today, 21 May 2012, and will be broadcast live via webcast (www.britishland.com) and conference call. The details for the conference call are as follows:

UK Toll Free Number: 0800 279 4977

UK Number: +44 (0) 207 136 2056

Passcode: 3492846

A dial in replay will be available later in the day and the details are:

Replay number: +44 (0) 207 111 1244

Passcode: 3492846

For Information Contact

Investor Relations

Sally Jones, British Land 020 7467 2942

Media

Pip Wood, British Land 020 7467 2838

Gordon Simpson, Finsbury Group/ 020 7251 3801

Guy Lamming, Finsbury Group

Forward-Looking Statements

This document contains certain "forward-looking" statements reflecting, among other things, current views on our markets, activities and prospects. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that may or may not occur and which may be beyond British Land's ability to control or predict (such as changing political, economic or market circumstances). Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements. Any forward-looking statements made by or on behalf of British Land speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. Except to the extent required by law, British Land does not undertake to update or revise forward-looking statements to reflect any changes in British Land's expectations with regard thereto or any changes in information, events, conditions or circumstances on which any such statement is based.

Notes to Editors:

About British Land

British Land is one of Europe's largest Real Estate Investment Trusts (REITs) with total assets, owned or managed, of £15.8 billion (British Land share £10.3 billion), as valued at 31 March 2012. Through our property and finance expertise we attract experienced partners to create properties and environments which are home to over 1,000 different organisations and visited by over 300 million people each year. Our property portfolio is focused on prime retail locations and Central London offices which attract high quality occupiers committed to long leases. Our occupancy rate of 98.0% and average lease length to first break of 11.3 years are among the highest of the major UK REITs.

Retail assets account for 61% of our portfolio, over 80% of which are located at prime out of town sites. Comprising around 27 million sq ft of retail space across 90 retail parks, 99 superstores, 12 shopping centres and 10 department stores, the retail portfolio is modern, flexible and adaptable to a wide range of formats. Our active asset management delivers space which is attractive and meets the needs of both retailers and consumers.

London offices, located in the City and West End, comprise 34% of the portfolio (which will rise to an estimated 40% on completion of current developments). Our 7 million sq ft of high quality office space includes Broadgate, the premier City office campus (50% share) and Regent's Place in the West End. We have committed £1.2 billion to create Central London's largest committed office development programme which will deliver 2.3 million sq ft of high quality space by 2014, including a 700,000 sq ft building at 5 Broadgate, the 610,000 sq ft Leadenhall Building in London's insurance district and a 500,000 sq ft mixed office and residential scheme at Regent's Place in the West End.

Our size and substance demands a responsible approach to business and we focus on five areas which matter most to us and our key stakeholders: managing buildings efficiently; developing sustainable buildings; enhancing biodiversity; exceeding customers' expectations and focusing on local communities. We believe leadership on issues such as sustainability helps drive our performance and is core to our corporate vision of building the best REIT in Europe.

Further details can be found on the British Land website at www.britishland.com

CHIEF EXECUTIVE'S REVIEW

At British Land our vision is to build the best REIT in Europe. Being the best REIT for us means producing consistent outperformance over time as measured by our property returns along with a return which is higher than our cost of capital. Our strategic priorities underpin our approach, the aim of which are to ensure we focus our efforts on the most value enhancing activities. Our five priorities are: generating sustainable rental income growth; protecting and growing the value of our capital; creating incremental value through developing, repositioning assets and exploiting market anomalies; controlling costs; and exploiting our scale and financial strength. We closely monitor our progress against these priorities and report on them below.

After two positive years as property values recovered from the sharp falls during the credit crisis and prime office rents in London rose significantly, the last year has been much more challenging. This reflects the re-emergence of economic and political tensions in the Eurozone last summer and more recently, the faltering of economic growth in the UK with the latest official statistics suggesting the economy has slipped back into recession. The combination of these two factors impacted both the occupational and the investment markets in the UK, particularly in retail, but also to some extent in Central London, where hitherto, demand has remained resilient.

Against this more challenging backdrop, our business had a good year and we are pleased to be able to report good progress on income and capital value and that once again, we significantly outperformed the IPD benchmarks on all key metrics:

· Net rental income and underlying earnings were ahead by 5.4% and 5.1% respectively

· The value of our portfolio rose 2.6% and our NAV was 4.9% ahead

· Our ERVs grew by 2.1% outperforming the IPD benchmark by 160 bps

· Our capital return was 3.0%, outperforming the IPD benchmark by 250 bps

· Our total property returns were 8.3%, outperforming the IPD benchmark by 200 bps

· Our total accounting return was 9.5%

Our continued strong outperformance is a clear reflection of the benefits of the structure of our business both from a portfolio and a financial perspective, along with specific actions we have taken to drive performance in recent years:

· Our portfolio focus on prime retail and Central London offices along with our conviction that polarisation in the occupational and investment markets would be the key determinant of performance

· Our intensified focus on strengthening and growing our rental income flows both through our asset management activities and through acquisitions

· Our early decision to invest in a significant office development programme in Central London

· Our decision to leverage our expertise and financial strength to create incremental value through repositioning assets and exploiting pricing anomalies

· Securing our medium term funding requirements by well-timed and executed financings; and

· More recently, increasing the pace of asset recycling

Our Objective: Delivering superior total shareholder returns

Our total accounting return was 9.5% for the year, including growth in EPRA Net Asset Value of 4.9% to 595 pence. The Board has proposed a 1.5% increase in the fourth quarter dividend to 6.6 pence bringing the dividend for the full year to 26.1 pence. The Board is intending to pay a dividend, at this higher level, of 6.6 pence per quarter for the coming 2012/13 financial year making a total of 26.4 pence. At a portfolio level, our total property returns were 8.3%, outperforming the IPD benchmark by 200 bps. We have now outperformed the market on total property returns over the last one, three and five years.

Our Strategic Priorities

1. Creating sustainable and growing rental income

Our net rental income was 5.4% ahead of the comparable period last year (£546 million on a proportionally consolidated basis). Acquisitions accounted for a significant proportion of the increase with like-for-like net rental income growth up by 1.5% reflecting continued demand for our high quality space and successful asset management initiatives. Underlying pre-tax profits grew broadly in line with rental income at 5.1% to £269 million.

Overall, our total occupancy increased by 20 bps to 98.0% reflecting the strength of our leasing activity along with the beneficial impact of acquisitions. Leasing activity during the year, excluding development pre-lets, generated £10.0 million of new annual rent across the group. Acquisitions made in the year generate an additional £21 million of annual rental income. Estimated rental values for the portfolio rose by 2.1% compared to 0.5% for the market as measured by IPD.

In our Retail business, in what was a more difficult market, demand for space remained robust across our UK portfolio through the year as retailers continued to look for high quality, affordable space, which they believe can meet the needs of their businesses going forward. The attractiveness of our retail offer is reflected in the strength of our operational metrics. Footfall across our UK portfolio was up 0.3%, significantly outperforming the industry average which fell 2.0%; our occupancy remained high at 98.3% and our ERVs rose by 1.4% compared to a fall of 0.4% for the market as a whole. Lettings and renewals were agreed on 1.0 million sq ft at an average of 6.9% above ERV. Tenants in administration at the year-end were 0.6% of our total rent which compares with 0.5% a year ago. Of the 60 retail units that were in administration at 31 March 2012, nearly 60% are currently under offer to be re-let or assigned. Following the administration of Clinton Cards in May, administrations rose to 1.0% of total rent.

In Offices, while leasing activity across the market remained subdued, we continued to see encouraging levels of activity in our portfolio, particularly in developments. This reflects the quality of our buildings and our customer service which continue to attract and retain occupiers. In our investment portfolio, we agreed 1.0 million sq ft of lettings and lease extensions at 3.3% ahead of ERV moving our occupancy ahead further by 20 bps to 98.0%. As a result, the proportion of our office rent subject to lease break or expiry over the next 3 years fell from 12.0% a year ago to 4.9%. In developments, our successful pre-letting of over 1 million sq ft of our development space has secured £34 million of rent for an average term of 20 years.

2. Protecting and growing capital value

There was a marked slowdown in investment market activity across the market in the second half of the year, reflecting the increased uncertainty in the UK and Europe. Overall capital values grew modestly by 0.5% as measured by IPD. However, demand for the highest quality income generating assets remained robust, with most of the outward pressure on yields and values being seen in more secondary assets.

We continued to benefit from the prime nature of our portfolio, the strength of our income flows, our exposure to Central London, and the progress made on our major development programme. The value of our portfolio rose to £10.3 billion, an increase of 2.6% over the year. Our capital returns outperformed the market by 250 bps. Offices was the main contributor to performance, increasing in value by 7.3%, primarily reflecting further gains in the offices development portfolio as we continued to achieve further milestones but also enhancing the strength of income in the investment portfolio. Values in our UK Retail portfolio were ahead 0.4%, outperforming a difficult retail market where capital returns fell by 0.8%.

3. Creating incremental value through developing, repositioning assets and exploiting market anomalies

The value of our total office, retail and residential development programme rose by 13.6% to £701 million, primarily reflecting the significant progress made in offices, where we agreed binding pre-lets on 50% of the space which is under construction.

In Offices, we agreed unconditional pre-lets on 1.1 million sq ft of space under development to three high quality corporate occupiers. Having satisfied all the outstanding conditions, our agreement with UBS to build them a new 700,000 sq ft office at Broadgate, went unconditional during the year. We also signed unconditional pre-lets with Aon, a global insurer which is relocating its global headquarters to London, to pre-let around 30% of our Leadenhall Building; and with Debenhams, a major UK department store operator, which has taken nearly half of our latest office development at Regent's Place in the West End. The terms, each of which were ahead of the investment case, in aggregate secured £34 million of rent for 20 years. We have also pre-sold £96 million of the residential at on average 26% ahead of our original investment case.

In Retail, we increased the pace of our development activity to take advantage of a shortage of high quality space triggered by a lack of development finance. We started on site at Whiteley, a 302,000 sq ft new concept out of town shopping centre in South Hampshire; and we began construction of a 45,000 sq ft leisure extension at Glasgow Fort. Whiteley is 68% pre-let or under offer to a range of well-known high street retailers; and the Glasgow Fort leisure complex is fully pre-let. We invested in building up our future development pipeline, receiving planning permissions for 200,000 sq ft of developments. These included a major refurbishment and extension to Surrey Quays shopping centre in London. In addition, we have recently applied for a new 52,000 sq ft retail-led development on the land adjoining our Meadowhall Shopping Centre. Our development at Puerto Venecia, Zaragoza, is on schedule for completion in autumn 2012 with the scheme now 69% pre-let or under offer.

In addition, we have committed to 70,000 sq ft of residential-led development with an estimated end value of £94 million, representing an 19% profit on cost. As existing residential developments are sold, we will continue to look for further attractive residential opportunities to generate strong incremental returns through a predominantly develop and sell approach.

As announced earlier in the year, recycling is becoming a more important part of our investment strategy with the pace of disposals likely to increase as we seek to more actively redeploy capital into higher returning opportunities. We spent £371 million (gross) on acquisitions the largest of which was a portfolio of 17 premium Virgin Active racquet clubs. Since April 2011, we made £100 million (gross) of disposals which included a number of non-core retail and office properties as well as five of the smaller Virgin Active clubs we acquired earlier in the year, which were sold at an 18% premium to the original purchase price.

4. Controlling our costs

Our cost income ratio for the year was 14.9%, maintaining our position as the most cost competitive of the major UK REITs. Net operating costs (representing property outgoings and administrative expenses, net of fees received for managing joint ventures and funds, and other income) were higher than the previous year which benefited from the non-vesting of incentive schemes. Our administration costs remained stable throughout the year at £19 million (proportionally consolidated) per quarter.

Within the office development programme, we successfully contracted £617 million (British Land Share £429 million) representing over 80% of our total construction costs. By committing to schemes early we have succeeded in securing contracts at attractive levels and better than our original expectations.

5. Exploiting our scale and financial strength

We arranged £2 billion (British Land share £1.4 billion) of new financing since April 2011 at an average margin to British Land of 160 bps. Overall, our average interest rate (on a proportionally consolidated basis) fell by 30 bps to 4.6% at 31 March compared to the same time a year ago. The Group's financial position remains strong with a diverse source of funds and a broad spread of maturities giving us significant operational and financing security and flexibility. At the end of the year, our loan to value (LTV) ratio was 45.3% (proportionally consolidated), within the Group's stated target range of 40-50%, and the Group LTV was 29.1%.

Outlook

We believe British Land is well placed. Key market trends favour our business mix: London will continue to outperform the rest of the UK and polarisation will continue, particularly in Retail. Our results show the clear benefit of the long-term sector and asset choices we have made. There is also significant value still to come from our existing London office development programme. Given the ongoing shortage of quality space in both offices and retail, we believe there are further opportunities to create value and we are investing in expanding our future development pipeline. We intend to increase the pace of recycling and to re-invest in higher growth opportunities including development. We do remain cautious about the overall economic environment which remains difficult; we expect it to remain so with the UK economy growing slowly at best and the Eurozone crisis unlikely to resolve quickly. Against this background, we expect property capital values in the UK to be variable in the near term.

Overall, our results show that our business is defensively positioned in today's more difficult markets: we have a high quality portfolio, secure and sustainable rental income and a strong financial position. We are also well placed to benefit as the economic environment improves and our decision to increase the quarterly dividend demonstrates our confidence in the Group's prospects.

Chris Grigg

Chief Executive

BUSINESS REVIEW

PORTFOLIO REVIEW

Highlights

· Leasing activity in our investment portfolio generates £10.0 million of new annual rent

· 1.1 million sq ft of unconditional office development pre-lets to major global occupiers securing £34 million of future annual rent

· £371 million of acquisitions at an average yield of 6.9% on income producing properties; adding £21 million of annual rent

· £100 million of disposals agreed at 1.6% above March 2011 valuation

In line with our objective of providing consistent and superior total property returns, our portfolio continues to have a substantial weighting to high quality investments in sectors with the potential for long-term income and capital value growth, principally UK retail and Central London offices. Our focus remains on high quality properties in the right locations which meet the current and future needs of occupiers and which consistently attract high quality occupiers willing to take long term leases on favourable terms. The rest of our portfolio primarily comprises investments such as residential and leisure where we are able to leverage our property and financial expertise to enhance our returns.

Over the last two years our investment activities have been focused on:

· Actively managing our investment portfolio to maximise our rental performance. Over the last 12 months, our leasing activity across the portfolio has generated £10.0 million of new annual rent;

· Significantly increasing our investment in development, principally in Central London reflecting a shortage of high quality supply along with strong investor demand. Since the beginning of 2010, we have committed to a £1.4 billion total development programme with an estimated rental value of £88 million;

· Increasing our investment in the West End relative to the City, reflecting our belief that returns in the West End will be higher and less cyclical over the medium term than the City. Since March 2009, the West End has grown from 10% of our portfolio to nearly 17% on completion of committed developments; and

· Actively leveraging our substantial expertise in UK property and financing to take advantage of opportunities to add incremental value in areas such as residential and leisure.

During the year the immediate focus of our portfolio activity was on executing our existing development programme and extracting value through pre-letting. In addition to our existing development pipeline, our aim is to redeploy capital both into standing income generating investments and into building our future development pipeline.

Development activity was the primary factor which increased the weighting of Offices within our portfolio to 34.5% at 31 March 2012 from 32.1% a year previously. On a pro-forma basis taking into account the valuers' current estimates of the value of the developments on completion, Offices is 39.9% of the total portfolio.

Portfolio Weighting
At 31 March	2011	2012	2012
%		(current)	(pro forma¹)
Retail:
Retail parks	27.6	26.3	23.9
Superstores	13.9	13.2	12.0
Shopping centres	15.7	14.6	13.3
Department stores	4.8	4.4	4.0
UK Retail	62.0	58.5	53.2
Europe Retail	3.8	2.6	2.9
All Retail	65.8	61.1	56.1
Offices:
City	19.6	20.0	22.2
West End	12.3	13.6	16.9
Provincial	0.2	0.9	0.8
All Offices	32.1	34.5	39.9
Other	2.1	4.4	4.0
Total	100.0	100.0	100.0

¹ pro forma for committed developments at estimated end value (as determined by the Group's external valuers)

Development

Our total capital commitment to development is £1.4 billion, compared with £1.2 billion a year ago. This primarily reflects the addition of 439,000 sq ft of retail, office and residential developments notably: a major refurbishment of offices at 39 Victoria Street; the re-development of our Whiteley Shopping Centre; and further additions to our residential development portfolio. These new developments add £7.8 million of potential rental income, bringing the total ERV of our committed pipeline to £88 million.

As at 31 March 2012	Sq ft	Value	Cost to	ERV	Pre-let	Pre-sold
	'000	£m	Complete £m¹	£m	£m	£m
Retail	1,707	64	75	10.5	5.7	-
Offices²	2,289	593	569	77.5	34.1	96
Residential	70	50	29	-	-	12
Total Committed	4,066	707	673	88.0	39.8	108
Retail	960
Offices	1,714
Residential	-
Total Prospective	2,674
Total Development	6,740

¹ including notional cost of finance of 6%

² including 161,000 sq ft of residential (estimated end value of £144 million)

At 31 March, the balance sheet value of our total committed development pipeline was £701 million with an increase of 13.6% over the year driven by growth of 19.2% in the value of the committed office programme. We expect to spend £588 million to complete our committed pipeline over the next 3 years with £362 million budgeted to be spent in 2012/13, excluding interest.

The increase in value reflected the achievement of a number of important milestones in our office development programme during the year, including: a major planning approval; pre-lets in buildings in the City and West End; and further pre-sales of high-end residential units. Six of our seven committed office developments are well underway, we have agreed pre-lets on 50% of the office space; and pre-sold 168 of our 196 residential units for a total of £96 million.

The office development programme is expected to deliver a further £192 million (21 pence per share) of development profit (based on our valuers' current assumptions), and of the £77.5 million of estimated rental value to come from these developments, £34 million is already contracted through pre-let agreements.

In addition, we have 2.7 million sq ft of prospective developments of which 0.7 million sq ft has detailed planning consent or has planning pending.

Additional detail on committed and prospective developments can be found in the separate Retail and Offices reviews.

Acquisitions and Disposals

FY to 31 March 2012	Price		BL Share	Annual Passing
Acquisitions - Completed/exchanged	(gross) £m		£m	Rent £m
17 Virgin Active Racquet Clubs	179		179	13¹
Grenfell Island, Maidenhead	74		74	5
Wardrobe Court, EC2	57		57	3
18-20 Craven Hill Gardens, W2	16		16	-
Other	45		25	-
Total	371		351	21

Disposals		Price	BL Share	Annual Passing
Completed/exchanged		(gross) £m	£m	Rent £m
5 Virgin Active Racquet Clubs		33	33	2
New Century Park, Coventry²		17	8	-
Meadowhall Surrounding Lands (50% interest)		12	12	-
58-72 Church Street, Liverpool		12	12	1
25 James Street, W1 (5 residential units)		7	7	-
Other		19	15	1
Total		100	87	4

¹ rent subject to fixed uplift at Year 5 (equivalent to 2.5%pa CAGR), and annual RPI-linked increases thereafter (range of 1-4%pa)

² sale conditional on planning

We acquired £371 million of assets at an average net initial yield of 6.9% on the income producing properties, adding to the £511 million of new investments made in the previous year. All of these properties have strong and sustainable rental income profiles where we see the potential to create value through both rental and capital growth. Taken together, the acquisitions in the year have increased our annual rental income by £21 million and have a weighted average lease length of 20 years to first break.

The most significant acquisition was the purchase of a portfolio of 17 premium Virgin Active Racquet Clubs for £179 million. The properties are mainly in the South East of England. They were let on new 25 year leases to Virgin Active at an attractive initial rent of £8 per sq ft, with a fixed uplift at year five, compounded at 2.5% per annum, rising annually thereafter on RPI based uplifts of between 1% and 4% for the remainder of the lease term. On a net initial yield of 7.3%, a net equivalent yield of 8.4% and at significantly below replacement cost, we believed this was an opportunity to acquire institutional grade assets at a highly attractive price. We subsequently sold five of the smaller clubs at an 18% premium to their acquisition price, of which two were sold after the year end.

We also bought Grenfell Island, a 198,000 sq ft office and leisure scheme in Maidenhead for £74 million. Hutchison 3G UK Ltd occupies the 113,000 sq ft of office space and the 85,000 sq ft of leisure space is anchored by a 10-screen Odeon cinema and health club. The overall unexpired lease term is 9.9 years. The building which is in the centre of the town is opposite the mainline railway station which will become the western terminus for CrossRail when it is completed in 2018. Purchased at a net initial yield of 7.5%, we believe, like the Virgin Active clubs, this is another good quality institutional grade asset which we have acquired at an attractive price and which will benefit from its proximity to London and its association with CrossRail.

We made a further £113 million of residential investments to expand our existing portfolio. The most significant investment was Wardrobe Court, a Grade II listed 71,000 sq ft property in the City which we acquired for £57 million. With a net initial yield of 4.7% and a capital value of £800 psf, we see good potential upside given both the modest current rental levels and capital value relative to comparable sites in and around the City. At the end of the year, we entered into a joint venture agreement with Barratt Developments to acquire a two acre site on the edge of the City at 1 and 2 Aldgate. The purchase is conditional on securing a revised planning consent for a 430,000 sq ft residential-led mixed-use development.

In total we made £100 million of disposals at an average price of 1.6% above March 2011 valuation. We disposed of a range of relatively small assets including five of the Virgin Active clubs we bought earlier in the year, taking advantage of strong demand from institutional investors for strong but secure income generating assets. The sales price achieved of £33 million represents an average net initial yield of 6.5% and a significant premium to the original acquisition price. We also continued to sell our residential developments, disposing of five of our residential units at James Street, generating a profit on cost of 35%.

PORTFOLIO PERFORMANCE

Performance Highlights

· Total properties increased in value by 2.6% (£262 million) to £10.3 billion

· Portfolio capital return of 3.0% outperforming IPD by 250 bps

· Portfolio total property return of 8.3%, significantly outperforming IPD by 200 bps

· 5.0 million sq ft of leasing activity (excluding pre-lets) generating £10.0 million pa of new rent

· Continued improvement in estimated rental values (ERV) by 2.1%, ahead of IPD at 0.5%

· 1.1 million sq ft of unconditional office pre-lets securing £34 million of future rent

The value of the portfolio increased 2.6% to £10.3 billion. Around three quarters of the valuation uplift was driven by our own actions - our successful asset management initiatives across our investment portfolio along with our early commitment to a significant London office development programme. Further modest improvement in the valuation yields accounted for the remaining quarter of the uplift, reflecting continued investor demand for prime assets, particularly in Central London.

Following growth of 2.2% in the first six months of the year, the pace of valuation growth slowed in the second half of the year to 0.4%, as investor sentiment and the outlook for rental growth weakened. This reflected both a deterioration in economic growth in the UK and the impact of renewed concern about the Eurozone.

In UK retail, against a challenging environment where capital returns for the market fell by nearly 1%, the value of our properties grew by 0.4% to £6.0 billion. Active asset management was the key driver of performance and this helped offset the impact of some softening of investment yields across the market particularly for smaller secondary properties.

In Europe, the value of our retail portfolio was 5.7% lower at £272 million reflecting both the squeeze on consumer spending and weakening investor sentiment across southern Europe, where the majority of our properties are based.

The value of our office portfolio improved by 7.3% to £3.6 billion in the year. This included growth of 17.8% in our office developments reflecting the value created from securing pre-lets in our committed programme combined with fixing the majority of our construction costs either at or slightly below budget. The value of our office investment portfolio also increased (by 5.3%) largely driven by significant improvements in the portfolio's income profile as a result of lettings and lease extensions agreed, principally at Broadgate and Regent's Place together with run-off of rent free periods. The portfolio net equivalent yield also improved by an average of 6 bps, benefiting from continued investment market demand from both international and domestic buyers.

Portfolio Valuation
At 31 March 2012	Group	JVs & Funds¹	Total	Change %²
	£m	£m	£m	H1	H2	FY
Retail³:
Retail parks	1,879	839	2,718	1.0	(0.7)	0.2
Superstores	142	1,223	1,365	1.2	(0.1)	1.1
Shopping centres	474	1,038	1,512	0.6	(0.6)	0.0
Department stores	451	-	451	0.1	0.8	0.8
UK Retail	2,946	3,100	6,046	0.9	(0.5)	0.4
Europe Retail	-	272	272	(2.0)	(4.4)	(5.7)
All Retail	2,946	3,372	6,318	0.7	(0.6)	0.1
Offices⁴:
City	526	1,538	2,064	5.0	1.4	6.1
West End	1,402	-	1,402	6.4	3.0	9.3
Provincial	89	7	96	(1.9)	6.0	3.8
All Offices	2,017	1,545	3,562	5.3	2.1	7.3
Other	451	6	457	1.4	1.5	2.8
Total	5,414	4,923	10,337	2.2	0.4	2.6
¹ group's share of properties in joint ventures and funds
² valuation movement during the period (after taking account of capital expenditure) of properties held at the balance sheet date, including developments (classified by end use), purchases and sales
³ including committed and prospective developments of £87 million, down 8.0% for the 12 months
⁴ including committed and prospective developments of £614 million, up 17.8% for the 12 months

The portfolio ERV grew by 2.1% which compares with a 0.5% increase in rental values for the market overall as measured by IPD. Rental values across our 24 million sq ft UK retail portfolio grew by an average of 1.4% with all of our subsectors ahead of the previous year. In our 7 million sq ft office portfolio, the average ERV increased by 3.7%.

At 31 March 2012, the portfolio net equivalent yield was virtually unchanged at 5.8% as compared with a year ago which compares with 6.6% for the market as measured by IPD. Our EPRA net initial yield and our EPRA topped-up net initial yield for the portfolio was unchanged at 5.2% and 5.8% respectively. The ERPA topped-up net initial yield includes £57 million of growth in contracted cash flows from the expiry of rent free periods and guaranteed fixed uplifts.

Portfolio Yield & ERV Movements
At 31 March 2012	ERV Growth %¹			Net equivalent yield movement / (compression)²
	H1	H2	FY	H1	H2	FY
Retail:
Retail parks	0.7	0.3	1.0	(3)	7	4
Superstores	0.3	1.9	2.2	(2)	3	1
Shopping centres	0.5	0.3	0.8	(8)	1	(7)
Department stores	-	5.1	5.1	2	5	6
UK Retail	0.5	0.9	1.4	(4)	4	1
Europe Retail	n/a	n/a	n/a	10	(6)	33
All Retail	0.5	0.9	1.4	(3)	4	2
Offices:
City	2.8	0.6	3.4	(8)	(2)	(10)
West End	2.8	0.9	3.7	(3)	2	(1)
Provincial	7.9	(0.5)	7.3	(1)	6	124
All Offices	3.0	0.6	3.7	(6)	(1)	(6)
Other	-	-	-	(3)	(11)	(5)
Total	1.3	0.8	2.1	(4)	2	(1)
¹ like-for-like (as calculated by IPD), excluding Europe
² including notional purchaser's costs

Overall, our portfolio generated a total property return of 8.3% for the year, made up of an income return of 5.1% and a capital return of 3.0%. Our portfolio allocation, our bias towards high quality UK retail and central London offices including development combined with our successful active asset management meant that we significantly outperformed the market with our total property return 200 bps and capital return 250 bps ahead of the IPD benchmark.

FY to 31 March 2012	Retail		Offices		Total
%	British Land	IPD	British Land	IPD	British Land	IPD
Income Return	5.7	5.8	4.0	5.3	5.1	5.8
Capital Return	0.4	(0.8)	7.8	2.6	3.0	0.5
- ERV Growth	1.4	(0.4)	3.7	2.4	2.1	0.5
- Yield Movement¹	+1 bps	(7) bps	(6) bps	(16) bps	2 bp	(11) bps
Total Property Return	6.1	5.0	12.1	8.0	8.3	6.3

As calculated by IPD, excluding Europe

¹ net equivalent yield movement

RETAIL REVIEW

Highlights

· Focus on quality assets delivered a total property return of 6.1%, outperforming IPD All Retail by 110bps

· 0.8% like for like net rental income growth; ERV up 1.4% significantly outperforming IPD at -0.4%

· 1.0 million sq ft of lettings and renewals agreed; overall 6.9% ahead of ERV

· 2.7 million sq ft of rent reviews settled on average 5.2% above previous passing rent

· Footfall increased 0.3% compared with the previous year, while the IPD benchmark fell 2.0%

· UK retail occupancy rate broadly maintained at 98.3%

· 347,000 sq ft of UK development commitments already 72% pre-let or under offer

The retail landscape in the UK is going through a period of fundamental change. Consumers are becoming increasingly sophisticated and demanding. They want more choice, greater convenience and better value along with a much better shopping experience whether it be in the physical or on-line environment. Increasingly, they see physical and on-line retailing as interchangeable and interdependent. For some time, our view has been that too much of the available space in the UK is not well suited to the changing needs of the modern retailer, nor can it be economically adapted to do so. We have predicated our retail property strategy on aligning our properties closely to the changing needs of retailers and their customers and the belief that the retail property market would become heavily polarised between the right space and that which was essentially obsolete.

After a relatively benign period, the retail market had a more difficult year, particularly so in the second half as consumer confidence was hit by the twin impacts of austerity at home and the debt crisis in Europe and which led to a marked increased in the rate of retailer failures. Retailers responded by more aggressively looking to focus their store portfolios on those locations which are able to offer the right combination of accessibility, affordability, flexibility and overall shopping experience. This was true whether they were expanding, consolidating or contracting. As a result, the polarisation we have seen in rental performance in recent years became even more marked. Although rental values across the market fell by 0.4% in the year, prime rental values continued to grow. We also started to see a divergence in performance of primary and secondary properties in the investment markets, which hitherto have been more uniform.

Our strategy is to own and create retail space which gives retailers the greatest penetration to their target spend in what is becoming an increasingly multi-channel environment. This enables us to meet the needs of modern retailers - from food and convenience to destination shopping. This combined with the depth of the relationships we have with occupiers, means we continued to deliver rental and capital growth across our asset base when rental and capital values across the market as a whole were falling. Our robust performance during what has been a challenging year strengthens our conviction that we have the right assets well suited to the needs of modern retailers.

We continued to outperform the market on ERV, capital and total returns. This outperformance was driven by the combination of the strength and diversity of our retail portfolio, the strength of our asset management initiatives and our focus on creating the right environment. Demand for space across our UK portfolio remained robust throughout the year with occupancy broadly maintained and our rental trends remaining positive at 1.4% ahead compared to a 0.4% fall for the IPD benchmark. The value of our UK retail portfolio rose by 0.4%, reflecting weakening sentiment in the investment markets, notably in the second half and we outperformed capital returns for the market as a whole by 120 bps. Total returns from our portfolio were 6.1%, outperforming IPD All Retail returns by 110 bps. All of our subsectors outperformed the All Retail index with superstores once again the best sector delivering strong capital returns and ERV growth. The defensive qualities of this asset class remain an integral element of our performance. Rental values for our largest subsector, retail parks, outperformed the all retail index by 100 bps.

In Europe, the value of our portfolio fell by 5.7% reflecting the difficult conditions in Southern Europe where the majority of our assets are located. Consumer spending continued to fall and investor sentiment was particularly weak post the re-emergence of concerns over the stability of the Eurozone in the late summer.

Retail Asset Management

Our operational performance remained robust throughout the year despite weakening consumer demand in the second half. Our leasing activity across the portfolio was relatively well balanced through the year: we agreed 340 lettings and renewals on 1.0 million sq ft of space across the portfolio on average 6.9% above ERV with weighted average lease length of more than 11 years to first break. Long-term deals accounted for 90% of lettings. Our occupancy rate was maintained at high levels at 97.9% (31 March 2011: 97.9%). We currently have 440,000 sq ft of lettings and pre-lets under offer across our portfolio at terms ahead of ERV.

We continued to build on our existing strong relationships with major fashion retailers agreeing a number of multiple deals. These included eight deals (172,000 sq ft) with Next; five lettings (98,000 sq ft) with M&S; and three deals 54,000 sq ft with H&M. All three retailers have taken units at Whiteley Shopping Centre, our new retail development, with M&S taking a 60,000 sq ft anchor unit. After the year end, we pre-let a new 60,000 sq ft (including 30,000 sq ft of mezzanines) department store to Debenhams at Fort Kinnaird, Edinburgh as part of the reconfiguration and modernisation of the existing shopping and leisure park.

We also saw a further increase in lettings to traditional high street and fashion names to our retail park schemes. We agreed lettings with a number of premium retailers including Swarovski and Jack Jones at Glasgow Fort and the food retailer Whole Foods Market, which opened its first out of town offer at our Cheltenham Retail Park. Simply Be, the online retailer, opened its first out of town store at Teesside Shopping Park. We also introduced new formats with a Boots and Starbucks drive through store at St James' Retail Park in Northampton, and Domino's Pizza opened their first food court unit at our Eastgate Shopping Centre in Basildon.

In addition to fashion retailers, 123,000 sq ft of multiple deals were agreed with: Asda, for three new stores including Asda Living at Woking, Stafford and Leeds; Smyths Toys which continued to expand its franchise, opening three new stores at Edinburgh, Glasgow and Colchester; and Hobbycraft which opened stores at The Beehive Centre, Cambridge and Gallagher Retail Park, Cheltenham. At Meadowhall we agreed nearly 50 new long term transactions on average significantly ahead of ERV, including tenants such as Urban Outfitters, Carluccio's, TK Maxx and Beaverbrooks, the Jewellers. This continues our programme of increasing the proportion of premium retailers to attract more affluent shoppers.

Improving the retail environment by increasing leisure and food on our schemes was a key aim during the year. We successfully obtained 62 planning consents and completed 5 superstore extensions totalling 95,000 sq ft. We continue to place a strong emphasis on upgrading our leisure offer, agreeing 39 long-term food and leisure lettings on 103,000 sq ft of space across our schemes to a range of food and beverage operators including Café Rouge, Pizza Express and Nando's. We also completed the £7 million major redevelopment of the Oasis food court at Meadowhall adding 7 new restaurants with tenants including Giraffe, Carluccio's and Chao Baby; and Yo Sushi let new purpose built units at Drake Circus in Plymouth and Bon Accord in Aberdeen.

Occupiers in administration were 0.6% of our total rent at 31 March 2012 compared with 0.5% in March 2011 reflecting an increase in the number of retail failures, particularly in the second of half of the year. Of the 60 retail units that were in administration at the year end; nearly 60% are currently under offer to be re-let or assigned. Following the administration of Clinton Cards in May 2012, occupiers in administration rose to 1.0% of our total rent. Our ability to manage our low exposure to administrations reflects the quality of our portfolio as well as our diverse range of major UK and international retailers and gives us confidence in our ability to re-let current and future vacancies arising from retail failures.

Investment Activity

Our investment activity was principally focused on developments but we also successfully sold a number of smaller retail assets which were either non-core or where we believed we could reinvest the capital more productively. We sold properties for a total of £32 million and no retail assets were acquired during the year. We started on site at two schemes in the UK having successfully obtained various planning approvals and pre-let all or a significant part of the space. In total, including existing schemes under development, committed development will add 1.7 million sq ft of space and £10.5 million of rental income of which nearly 70% is already pre-let or in advanced legals.

In January 2012, we started construction of Whiteley Shopping Centre, a 302,000 sq ft retail scheme located between Portsmouth and Southampton. The £64 million development, which we own in joint venture with USS, is due to open in Q2 2013 and is already 68% pre-let or under offer to a number of major high street retailers including Marks & Spencer, Next, Boots, H&M and Bank Fashion. At Glasgow Fort, we fully pre-let and started enabling works for the 45,000 sq ft cinema and restaurant extension which will improve the scheme's leisure offer with an 8 screen Vue cinema and five restaurant dining offer which will include TGI Fridays, Pizza Express and Harvester.

At Puerto Venecia in Zaragoza, our 1.4 million sq ft shopping centre development in Spain is on schedule to open in autumn this year with 69% currently pre-let or under offer and a further 19% is in negotiation, including pre-let agreements secured with all of the Inditex Group's brands, Desigual, H&M and Mango along with key anchors El Corte Inglés and Primark. On completion, Puerto Venecia will be the region's largest retail destination serving a catchment of 2.2 million people within a 2 hour radius.

Over the last year, we have been more active in looking to progress with existing prospective projects as well as add further potential projects to our pipeline. Of our 1 million sq ft of prospective development projects, we have achieved over 200,000 sq ft of planning consents. At Surrey Quays Shopping Centre, planning consent has been granted for a major refurbishment and 100,000 sq ft extension to the scheme. At Glasgow Fort, we have an agreement in principle with an anchor tenant on a further 142,000 sq ft extension.

OFFICES REVIEW

Highlights

· Focus on Central London generated a total property return of 12.1%, well ahead of IPD All Offices at 8.0%

· Like for like net rental income growth of 2.5%; ERV up 3.7% (IPD: 2.4%)

· Over 950,000 sq ft of lease renewals and extensions securing £23.5 million of future income

· New lettings within the investment portfolio at 7.4% above ERV

· 1.1 million sq ft of pre-lets unconditionally agreed with UBS, Aon and Debenhams ahead of expectations, securing £34 million of annual rent for an average term of 20 years

· Occupancy high at 98%

Our Offices portfolio is focused on modern, high quality, well located offices in Central London both in the City and in the West End, reflecting our view that London will significantly outperform all other areas of the UK property market. As one of a small number of truly global cities, London benefits from demand from occupiers and investors unmatched by many other markets around the world. Significantly limited access to development finance has impacted the level of construction in Central London with development starts at a relatively low level. At the same time, we expect the level of occupier demand to increase over the next few years both structurally, as a significant number of lease expiries allow organisations to upgrade to more modern and efficient space, and from growth as London's economy expands.

After two very good years with capital values ahead by 27% the London office market had a slower year both from a capital value and a rental perspective. Although occupational demand for office space in Central London was running at reasonable levels through the first half, it was more subdued in the second as occupiers became more wary of taking decisions. Similarly, while investment demand was relatively buoyant throughout the year with continued strong levels of demand from international investors for prime property, in the second half, there were clear signs of weaker demand for more secondary buildings in the City with shorter lease lengths.

Notwithstanding any current market uncertainties, we remain positive about the outlook for London given the lack of new high quality space combined with demand from occupiers with upcoming lease expiries which will support further rental and value growth. Our development programme is well timed: we have already been beneficiaries of this demand notably from Aon and Debenhams. We have also seen some increase in viewings and requests for proposals, notably in our development space in the City. Due to the quality of our existing portfolio, and development programme, we believe we will continue to successfully attract and retain customers to our buildings.

Our Offices portfolio had another good year reflecting both the quality of our investment portfolio and our decision to invest early in a major development programme. The value of our portfolio increased over the year by 7.3% to £3.6 billion with our capital returns outperforming the IPD All Office benchmark by 520 bps. All the major parts of the portfolio contributed to the result, but the outstanding performer was committed developments with a valuation uplift of 19.2% reflecting the progress made on key construction milestones and our success in attracting pre-lets. Total property returns from the portfolio were 12.1% outperforming the IPD All Office benchmark by 410 bps.

Offices Asset Management

Our offices investment portfolio has a high occupancy rate and our asset management activity over the year concentrated on lettings and lease extensions within the standing portfolio to further enhance income security. Excluding development pre-lets, we agreed 1 million sq ft of new lettings and lease extensions within the office investment portfolio, principally at Broadgate and Regent's Place. New lettings were agreed at 7.4% ahead of ERV. As a result, the proportion of office rent expiring over the next 3 years has been more than halved from 12.0% in March 2011 to 4.9%; while the office occupancy rate has increased from 97.8% to 98.0%.

The majority of our activity has been focused on the Broadgate Estate which continues to maintain its position as the premier City of London Office Estate. Following the completion of 201 Bishopsgate and the Broadgate Tower in 2008, our focus has moved to the revitalisation of Broadgate South. The most significant achievement during the year was our work with UBS, our largest anchor tenant. We completed our agreement with them to build a new office, 5 Broadgate, on the site of two existing offices and also agreed the deferral of breaks on a total of 830,000 sq ft of space they currently occupy at Broadgate. This has reduced the income expiry on the Estate over the next three years to 4.6% and secured a minimum of £26 million additional rent over the extended lease term. After the year end, we submitted a planning application for around £20 million upgrade to the retail and catering facilities and public space around the Broadgate Circle, which will significantly uplift the amenity of the Estate. We are also now turning our attention to 100 Liverpool Street, a 383,000 sq ft building at the front of the Estate, which sits adjacent to the new entrance to CrossRail. After extending the UBS lease, we now expect to get the building back in 2016 and we believe it will offer a significant and exciting refurbishment opportunity.

In the West End, the transformation of Regent's Place is progressing to plan with the development of the final 500,000 sq ft phase of the Estate at NEQ on schedule for completion next year. We agreed 62,000 sq ft of lease extensions with The General Medical Council, Regus, Capital One and Touchstone Group securing £3 million of annual rent for an average additional term certain of 5 years. We have also completed retail lettings at the Estate with the introduction of Giovanni Rana and Union Bar, creating a destination that draws customers from both on and off the Estate enhancing its position as a vibrant place to live and work. We were pleased in June to win the Built Environment Award in recognition of our work with the local community and our commitment to sustainability and regeneration at Regent's Place, creating an environment which achieves both commercial and community needs.

Offices Investment Activity

Our investment activity has been focused on our committed 2.3 million sq ft development programme with a total commitment of £1.2 billion. Over the year, we invested £164 million in the programme of which £109 million was in the West End. We made selective acquisitions and disposals over the first half with the acquisition of Grenfell Island, Maidenhead and completion of the conditional contract to purchase Marble Arch House, W1.

We continued to achieve significant milestones on our developments and are now well underway at 6 of our London office developments with 5 projects expected to complete over the next 18 months. We have placed 80% of construction costs at prices either in line or slightly better than our original expectations of cost and timing. We also secured binding pre-let agreements on 1.1 million sq ft (representing 50% of the office space) ahead of our investment case and valuation. This continues our strong run of letting success which means that over the last 2 years we have let 2.0 million sq ft which accounts for one fifth of all Central London Grade A take up. At 31 March 2012, the expected total profit on cost (based on our valuers' assumptions) from the committed office development programme was £359 million (40 pence per share), compared with £241 million a year ago. Of this amount, £167 million (or 19 pence per share) has been recognised to date.

In the City, we successfully obtained all the necessary planning permissions and satisfied the remaining conditions on the agreement with UBS to pre-let 5 Broadgate which constitutes the largest ever pre-let in the City. Construction of the building is now underway with practical completion on track for Q4 2014. UBS will occupy the entire 700,000 sq ft building for a term of over 18 years at an average initial rent of £54.50 per sq ft with annual RPI linked increases. Also at Broadgate, we received planning for the substantial refurbishment of 199 Bishopsgate, placed a contract for the works and started on site in August 2011. Practical completion is scheduled for late 2012.

At the Leadenhall Building, we agreed a 191,000 sq ft pre-let with Aon, the global insurance giant which is relocating its global headquarters to London. The leases, on the bottom 10 floors (levels 4-13) of the 610,000 sq ft tower, are for a term of 19 years at an overall initial rent of £56 per sq ft. Aon also has options to take up to a further 85,000 sq ft on floors 14 to 18. With the exception of UBS, this was the largest letting in the City in 2011. We are continuing to see encouraging occupier interest in the remainder of the building - during the last few months, we have responded to four RFP's (requests for proposals) which total over 300,000 sq ft.

In the West End, our NEQ development at Regent's Place is on schedule for completion in 2013. We have successfully placed 95% of the construction costs and have a further 3% out to tender. In September 2011, Debenhams agreed to pre-let 145,000 sq ft at 10 Brock Street, the 340,000 sq ft office building which forms part of our NEQ development at Regent's Place at an average initial rent of £50 per sq ft (rising to a minimum of £53.50 per sq ft at the first rent review). Post the year end, Debenhams agreed to pre-let a further 29,500 sq ft on level 5 at a rent of £56 per sq ft. In aggregate, the major UK retailer will occupy 174,500 sq ft (representing over 50% of the building) as its new headquarters for a term of 25 years without break. This is the largest letting in the West End in six years and puts us in a good position to let the higher floors at premium rents. Sales at The Triton Building, the 25 storey residential tower which forms the remaining part of the NEQ development, remained strong. 70% (by end value) of the residential units have now been pre-sold with prices in excess of our investment case.

We also completed the acquisition of Marble Arch House in September 2011 for £18 million. Vacant possession was secured and the demolition programme started to allow development of the 86,000 sq ft mixed use scheme, scheduled for delivery in Q4 2013. At 10 Portman Square (previously 2-14 Baker Street), we completed demolition works with construction underway and on schedule for delivery of the 159,000 sq ft mixed use scheme in Q2 2013. We completed the development and pre-contracted sale of the associated residential units and retail at 95-99 Baker Street (totalling 25,000 sq ft), W1 for £17 million representing a profit on cost of 22%.

We have added the £69 million (including site and interest) major refurbishment and extension of 39 Victoria Street, SW1 to our committed development programme. We have achieved planning consent and agreed vacant possession, with an anticipated start on site this summer. On completion in Q2 2013, the building will provide 92,000 sq ft of high quality West End office accommodation.

JOINT VENTURES AND FUNDS

Our net investment in Joint Ventures and Funds at 31 March 2012 was £2,191 million (2011: £2,066 million) principally in 12 joint ventures (where we partner with one other investor) and 3 funds (where there are several investors). These entities own £10.1 billion (2011: £9.8 billion) of properties in office and retail investment and development projects. Our share of the assets accounted for 48% of our total portfolio valuation at 31 March 2012, and our share of the total debt of Joint Ventures and Funds was £2.6 billion. Summary details of our joint ventures and funds are shown below.

Since April 2011 HUT agreed a total of £850 million of new finance on behalf of itself and joint venture partners. As a result the Fund's average interest rate has reduced from 6.0% to 3.8%.

At 31 March 2012	JV partner	Portfolio Value £m	Rent¹ £m	Finance £m²
Bluebutton Properties Limited Broadgate, City offices	Blackstone Group L.P. funds	2,900	173	1,859
Leadenhall Holding Co (Jersey) Limited The Leadenhall Building, City offices³	Oxford Properties	176	-	-
MSC Property Intermediate Holdings Limited Meadowhall, regional shopping centre, Sheffield	LSP Green Park Property Trust	1,497	83	790
BL Sainsbury Superstores Limited 38 Sainsbury superstores, 1 Waitrose store	J Sainsbury plc	1,276	67	634
Tesco BL Holdings Limited 2 retail parks, 2 shopping centres each anchored by Tesco, 5 Tesco superstores	Tesco plc	586	34	315
Tesco Aqua Limited Partnership 21 Tesco superstores	Tesco plc	615	33	487
BLT Properties Limited 1 retail park, 8 Tesco superstores	Tesco plc	354	19	185
Shopping Centres Limited 1 shopping centre, 1 retail park	Tesco plc	196	12	-
Tesco British Land Property Partnership district shopping centre anchored by Tesco	Tesco plc	114	7	60
The Scottish Retail Property Limited Partnership shopping centre, Aberdeen	Land Securities Group PLC	203	14	119
Eurofund Investments Zaragoza SL Puerto Venecia, shopping scheme³ Spain	Orion Capital Managers LLP	168	3	62
Whiteley Co-Ownership Fareham, out of town shopping centre	Universities Superannuation Scheme	35	-	-

¹ annualised contracted rent (including expiry of rent free periods and fixed uplifts)

² principal amount of debt

³ development project

Fund	Value¹ £m	Rent² £m	Finance £m	BL share %
Hercules Unit Trust	1,568	115	655	41.2
Pillar Retail Europark Fund	288	25	143	65.3
Hercules Income Fund	80	5	15	26.1

¹ HUT share where assets are in joint arrangements

² annualised rent

FINANCIAL REVIEW

Highlights

· Underlying profit up 5.1% to £269 million driven by acquisitions and letting growth

· EPRA Net Asset Value per share at 595 pence, 4.9% ahead of 31 March 2011 (567 pence)

· Total accounting return of 9.5% for the 12 months

· 1.5% increase in Q4 dividend from 6.5 pence to 6.6 pence; full year dividend of 26.1 pence

· Quarterly dividend for 2012/13 of 6.6 pence; making a total of 26.4 pence

· £2.0 billion of refinancing agreed strengthening balance sheet and extending funding

This year British Land has delivered a total accounting return of 9.5% reflecting the quality of our portfolio and the actions we have taken during the year. We have:

· Strengthened the longevity of our rental cash flows through acquisitions, asset management and development lettings reflecting the prime nature and diversity of our properties

· Leveraged our scale to raise £2 billion (British Land share £1.4 billion) of new finance. At a time of debt constrained markets this provides a real competitive advantage

These two actions, combined with the quality of our assets, our confidence in the portfolio and in the contracted cash flows in the medium term provide the basis for a resumption in dividend growth.

Underlying profit has increased 5.1% principally due to the impact of acquisitions. In addition half of the space in our office development program is already let. These developments will complete in FY 2013 to 2015.

The Net Asset Value has increased 4.9% to 595 pence reflecting a valuation increase of 2.6% including our total development programme which showed a 13.6% uplift in value.

The board has proposed an increase in the quarterly dividend of 1.5% to 6.6 pence per share for the final dividend for the current financial year bringing the total for the year to 26.1 pence per share.

The board is intending to pay a dividend, at this higher level, of 6.6 pence per quarter for the coming 2012/13 financial year making a total of 26.4 pence per share.

INCOME STATEMENT

The group financial statements are prepared under IFRS where the after tax results of joint ventures and funds are shown as a single line item on the income statement, and the net investment in joint ventures and funds is shown as a single line on the balance sheet.

Management reviews the performance of the business principally on a proportionally consolidated basis (i.e. on a line-by-line basis) and comments on movements in the income statement provided in the financial review below are made on this basis. Income statements and balance sheets which show British Land's interests on this basis are also included in Table A within the supplementary disclosures.

Year ended 31 March	2012			2011
	Group	JVs & Funds	Prop Consol	Group	JVs & Funds	Prop Consol
	£m	£m	£m	£m	£m	£m
Gross rental income	300	272	572	262	279	541
Property outgoings	(14)	(12)	(26)	(7)	(16)	(23)
Net financing costs	(77)	(141)	(218)	(70)	(142)	(212)
Net rental income less finance	209	119	328	185	121	306
Fees & other income	16	1	17	15	3	18
JVs & Funds underlying profit	113			117
Administrative expenses	(69)	(7)	(76)	(61)	(7)	(68)
JVs & Funds underlying profit		113			117
Underlying profit before tax	269		269	256		256
Underlying EPS	29.7p		29.7p	28.5p		28.5p
Dividend per share	26.1p		26.1p	26.0p		26.0p

Gross rental income, including our share of joint ventures and funds, increased 5.7% to £572 million for the year ended 31 March 2012. The impact of acquisitions, including the Virgin Active portfolio, Drakes Circus, Mayflower, Basildon, Barnstaple Green Lanes and Maidenhead Grenfell Island, more than offset the impact of disposals and assets which were transferred to the development program.

On a like-for-like basis, net rental income was 1.5% higher than a year ago, driven by leasing activity and rent reviews in our office portfolio which grew by 2.5% like-for-like. New lettings at Ropemaker and Broadgate Tower were significant contributors to the office increase. In retail, like-for-like net rental income increased 0.8%, with improvements generated in Superstores, Department stores and Retail Parks due to rent reviews and new lettings offset by a reduction in Shopping Centres primarily due to non-recurring surrender premiums received in the prior year.

Creating sustainable and growing rental income is one of our strategic priorities. We focus on those sectors and assets where we expect demand from occupiers will be the strongest and seek to grow our income over time through asset management, development and acquisitions. Occupancy remains strong at 98% with an average lease length of 11.3 years. A quarter of rents are subject to annual RPI or fixed uplifts and leases in administration account for 0.6% of our rent profile as at 31 March 2012.

Underlying profit before tax increased by £13 million, or 5.1%, to £269 million for the year ended 31 March 2012. The increase in underlying profit before tax is summarised below:

Movement in underlying profit before tax		£m
Year ended 31 March 2011		256
Impact of acquisitions and disposals		24
Like-for-like rental movement		7
Assets transferred to development		(8)
Administrative costs		(8)
Other movements		(2)
Year ended 31 March 2012		269

The Group measures its operating efficiency as the proportion of gross rental income represented by its net operating costs (being property outgoings and administrative expenses, net of fees and other income). The ratio for the year was 14.9% (2011: 13.5%). A significant portion of the movement was due to an increase in administrative expenses of £8m to £76 million on a proportionally consolidated basis, the prior year being flattered due to variable pay and share incentives which did not vest, in addition current year staff costs have increased due to the Group's investment in its development team and analytical functions.

Net financing costs on a proportionally consolidated basis were £218 million, an increase of £6 million compared to the prior year. This increase was largely due to the cost of financing acquisitions which have principally been financed by variable rate debt. Net financing costs included £8 million of interest capitalised on developments (2011: £5 million).

Underlying profits from joint ventures and funds for the year were £113 million. The decrease of £4 million compared to the prior year mainly relates to assets in joint ventures which were previously income generating but are now developments.

Underlying diluted earnings per share for the year ended 31 March 2012 was 29.7 pence (2011: 28.5 pence) based on underlying profit after tax of £265 million (2011: £251 million) and weighted average diluted number of shares of 892 million (2011: 882 million).

IFRS profit after tax for the full year was £480 million (2011: £840 million), including £182 million from investments in joint ventures and funds (2011: £381 million). In addition to underlying profits, the most significant item impacting IFRS profit was the net valuation movement of £143 million for the Group and £72 million for our share of joint ventures and funds, driven by an increase of 2.6% (2011: 6.9%) in the value of the proportionally consolidated property portfolio reflecting the slowing pace of revaluation gain compared to the prior year.

Taxation recognised in the income statement amounted to a £1 million credit. This compared to a credit of £4 million in the prior year which resulted mainly from deferred tax movements. The proportionally consolidated underlying tax rate for the year is 1.5% (2011: 2.0%).

Year ended 31 March	2012			2011
	Group	JVs & Funds	Prop Consol	Group	JVs & Funds	Prop Consol
	£m	£m	£m	£m	£m	£m
Underlying profit before tax	156	113	269	139	117	256
Net valuation movement ¹	143	72	215	321	270	591
Amortisation of intangible assets				(10)		(10)
Capital financing costs	(2)		(2)	(1)		(1)
Non-recurring items		(3)	(3)
Taxation - current tax	(2)	(1)	(3)	(2)	(3)	(5)
- deferred tax	3	1	4	12	(3)	9
IFRS profit after tax	298	182	480	459	381	840
Diluted EPS			53.8p			95.2p

¹ includes profit on disposals

CASH FLOW

The Group cash inflow from operating activities for the year ended 31 March 2012 was £206 million (2011: £210 million). The table below provides a summary of the net increase in net debt for the year:

Year ended 31 March 2012	Group £m	JVs & Funds £m	Total £m
Net cash from operations	206	33	239
Cash flows from investing activities:
Investment acquisitions	(382)		(382)
Other purchases	(22)	11	(11)
Disposals	71	11	82
Development and other capital expenditure	(106)	(101)	(207)
Investment in and loans to JVs & Funds	(110)	110
Cash flows from financing activities:
Dividend paid	(212)		(212)
Other /non cash movements	(34)	57	23
Net (increase)/decrease in net debt	(589)	121	(468)

In addition to the net cash inflow from operations, investment activity absorbed net cash of £518 million. Key acquisitions in the year included Maidenhead, Grenfell Island, the Virgin Active portfolio, Craven Hill Gardens and Wardrobe Court. The level of capital expenditure in both Group and joint ventures & funds reflects spend on our committed development programme.

The Group has significant rental growth potential in its property portfolio. The table below shows how current rents will grow following expiry of rent free periods, contracted rental uplifts and development pre-lets - with total contracted rents being £642 million. In addition, on a headline basis, there is further growth potential from reversions and leasing of the remaining space in the investments and developments:

As at 31 March 2012		Annualised Rent (valuation basis) £m¹
Current annualised rents		534
Expiry of rent free periods²		51
Fixed and minimum uplifts²		17
Developments - pre-let		40
Total contracted		642
Letting of developments		49
RPI uplifts^2,3		7
Uplift from rent reviews, expiries and vacancies²		30
Total		728

¹ gross rents on a cash basis plus, where rent reviews are outstanding, any increases to ERV (as determined by the Group's external valuers), less any ground rents payable under head leases

² over the next 5 years

³ illustrative impact based on growth in RPI of 2.5%pa

DIVIDENDS

The board is intending to pay a dividend, at this higher level, of 6.6 pence per quarter for the coming 2012/13 financial year making a total of 26.4 pence per share.

The increase in quarterly dividend reflects the Board's confidence in the quality of our assets and in particular the strength of contracted cash flows in the medium term, reflecting the unconditional pre-lets we have achieved. Future growth in the dividend will be driven by further lettings in the development program and rental growth.

BALANCE SHEET

At 31 March 2012, EPRA Net Asset Value per share was 595 pence per share, an increase of 4.9% compared with the prior year. The valuation uplift of 2.6% was the main contributor to this performance and this was generated by our own asset management and development actions and by compression in yields applied to our rental streams. The uplift was partially offset by an increase in net debt resulting from the Group's ongoing investment and development activities.

	As at 31 March 2012			As at 31 March 2011
	Group	JVs & Funds	Prop Consol	Group	JVs & Funds	Prop Consol
	£m	£m	£m	£m	£m	£m
Properties at valuation	5,414	4,923	10,337	4,783	4,789	9,572
Investment in JVs & Funds	2,191			2,066
Other non-current assets	28	(11)	17	51		51
	7,633	4,912	10,354	6,900	4,789	9,623
Other net current liabilities	(189)	(110)	(299)	(205)	(4)	(209)
Net debt	(2,303)	(2,576)	(4,879)	(1,714)	(2,697)	(4,411)
Other non-current liabilities	(37)	(35)	(72)	(51)	(22)	(73)
JVs & Funds' net assets		2,191			2,066
IFRS net assets	5,104		5,104	4,930		4,930
EPRA adjustments¹	277		277	171		171
EPRA net assets¹	5,381		5,381	5,101		5,101
EPRA NAV per share	595p		595p	567p		567p

¹ EPRA net assets exclude the mark to market on effective cash flow hedges and related debt adjustments, as well as deferred taxation on revaluations

At 31 March 2012, 48% of the property portfolio and 53% of net debt was held within joint ventures and funds. The IFRS balance sheet shows our investment in joint ventures and funds grouped together and shown net. On this basis, our net investment at 31 March 2012 was £2,191 million, up from £2,066 million at the previous year end, attributable to the continued recovery of property values throughout the financial year.

The principal movements in EPRA net asset value are summarised below:

Movement in EPRA net asset value per share¹		pence
At 31 March 2011		567
Property and investment revaluation (including disposals)
- Offices		23
- Retail & Other		1
Underlying profit after tax		29
Dividends (including scrip)		(26)
Other		1
At 31 March 2012		595

¹ EPRA net assets exclude the mark to market on effective cash flow hedges and related debt adjustments, as well as deferred taxation on revaluations

Our total accounting return for the year ended 31 March 2012 of 9.5% comprises income return of 29 pence per share (or 5.1%) of which 26.0 pence per share has been distributed to investors, and a capital return of 25 pence per share (4.4%).

NET DEBT AND FINANCING

Net debt (EPRA) basis at 31 March 2012 was £2.2 billion for the Group and £4.7 billion including our share of joint ventures and funds.

The strength of the Group's balance sheet has been reflected in British Land's senior unsecured credit rating which remains rated by Fitch at A-.

Financing statistics	Group	Prop Consol
IFRS Net debt	£2,303m	£4,879m
Weighted average debt maturity	9.1 years	9.3 years
Weighted average interest rate of drawn debt	4.2%	4.6%
% of debt at fixed/capped rates	86%	91%
Interest cover¹	3.0 times	2.2 times
Loan to value²	29%	45%

¹Underlying profit before interest and tax / net interest

² debt to property and investments

At a time of heightened global financial instability, we have arranged in total £2.0 billion (British Land share £1.4 billion) of finance since April 2011 with the additional benefits of further diversifying the debt investor base and extending maturities on competitive terms.

At 31 March 2012 the Group had £2.3 billion of available committed banking facilities of which £1.7 billion has a maturity of more than 2 years. In addition the Group had £337 million of cash, short-term deposits and liquid investments. With scale, quality assets and income longevity from strong occupier covenants, we have been able to achieve attractive financings.

Due to our successful refinancing, liquidity has improved and the Group is in a strong position to manage near-term financings and exploit future investment opportunities.

In May 2011, we signed a new 5 year £560 million unsecured revolving bank facility for British Land Group. The margin is 125 basis points over LIBOR. This facility launched at £350 million and was oversubscribed. It is provided by a syndicate of 11 banks, with a broad geographical spread, including four banks which are new lenders to the Group.

In addition, we accessed the unsecured US Private Placement market on attractive terms. We launched at $200 million and due to strong demand upsized to $480 million. Maturities range from 7 to 15 years, with an average life of 11 years. The financing, which was drawn on 1 September, was swapped from US Dollars at a fixed rate to £300 million at a floating rate of 146 basis points over LIBOR.

In March 2012 we signed £200 million of new unsecured revolving bank facilities with a five year term on a bi-lateral basis.

In September, Hercules Unit Trust (HUT), the specialist retail warehouse fund advised by British Land and in which we have a 41% investment, signed a new £350 million 5 year loan facility. The facility is split into a £250 million term loan, and a £100 million revolving loan to provide flexibility for the Fund in respect of acquisitions, disposals and general business purposes.

In March 2012 a further £150 million five year loan facility was signed by The Gibraltar Limited Partnership, a joint venture 50% owned by HUT. The loan has been used, together with existing cash held by the Partnership, to repay in full its existing debt finance which would have matured in July 2012. The all-in rate on the loan, including margin and arrangement fee, is significantly less than the interest rate under the existing finance.

Post the year end HUT has signed a new £350 million five year loan facility. A £250 million term loan which will be used to fully repay the existing credit facility, has been swapped to a fixed rate resulting in an all-in rate including margin and arrangement fees below the fixed interest rate under the existing financing. A further £100 million revolving loan will provide flexibility for HUT in respect of acquisitions, capital projects, disposals and general business purposes.

PREF, a fund owning a portfolio of retail property in Europe (in which British Land has a net investment of £96 million), had a €173 million syndicated bank loan of which €61 million was refinanced in December 2011 with a new term loan in respect of assets in Spain. The remaining balance was repaid in full from a €100 million loan provided by unit holders and the utilisation of existing cash resources.

The profile of our Group debt maturity is as follows:

Debt maturity	2013	2014	2015	2016	2017
Group	£m	£m	£m	£m	£m
Drawn	51	405	665	99	11
Undrawn	25	101	280	-	825
Total	76	506	945	99	836

The weighted average interest rate reduced from 4.9% to 4.6% on a proportionally consolidated basis incorporating the benefits of drawing facilities at lower margins with current market variable rates. Average debt maturity of 9.3 years compares with average lease lengths of 11.3 years.

FUTURE REPORTING

Since the third quarter of 2005/06, the Group has provided full quarterly financial reports along with property valuations. We have concluded that the additional detail in these quarterly reports relative to the information available from an interim management statement does not justify the considerable investment in their preparation and analysis. With effect from the first quarter 2012/13, the Group will publish interim management statements for the first and third quarters of the year, bringing our reporting in line with our competitors. We have exited the IPD quarterly index but will still use the index as a benchmark. Dividends will continue to be paid quarterly.

ACCOUNTING JUDGEMENTS

In preparing these financial statements, the key accounting judgement relates to the carrying value of the properties and investments, which are stated at fair value. The Group uses external professional valuers to determine the relevant amounts.

The primary source of evidence for property valuations should be recent, comparable market transactions on an arms-length basis. However, the valuation of the Group's property portfolio is inherently subjective, as it is made on the basis of assumptions made by the valuers which may not prove to be accurate.

REIT status: the Company has elected for REIT status. To continue to benefit from this regime, the Group is required to comply with certain conditions as defined in the REIT legislation. Management intends that the Group should continue as a REIT for the foreseeable future.

Accounting for joint ventures and funds: an assessment is required to determine the degree of control or influence the Group exercises and the form of any control to ensure that financial statement treatment is appropriate. Interest in the Group's joint ventures is commonly driven by the terms of the partnership agreements which ensure that control is shared between the partners. These are accounted for under the equity method, whereby the consolidated balance sheet incorporates the Group's share of the net assets of its joint ventures and associates. The consolidated income statement incorporates the Group's share of joint venture and associate profits after tax upon elimination of upstream transactions.

FINANCIAL POLICIES AND PRINCIPLES

This section of the Financial Review covers our approach to gearing, managing our debt portfolio, managing our interest rate exposure, foreign currency exposure, and our tax policy.

APPROACH TO GEARING

The gearing level adopted by the Board is a significant judgement as it impacts on the net asset value of the Company, the scale of British Land and the amount of debt that can be comfortably sustained. We use debt finance to enhance our total returns to shareholders.

The Loan to Value (net debt as a percentage of the gross value of our assets) or LTV ratio is the primary measure of gearing monitored by the Board. Our preferred range of gearing is an LTV ratio between 40% and 50% on a proportionally consolidated basis (i.e. including our share of joint ventures and funds), with a maximum of 55%. At 31 March 2012, this ratio was 45.3%.

We aim to manage the level of gearing over the cycle such that, as property values rise, gearing will be at the lower end of our preferred range; whilst at the bottom of the cycle, gearing will be at the higher end of the range. It is in the nature of real estate that transactions are often large in size which can cause large movements in LTV within our preferred range. While our currently committed development programme and acquisitions are likely to increase gearing towards the higher end of our range in the short term, this will be mitigated by increases over time in property values.

In determining our preferred range of gearing for the business, the Board considers a wide range of factors to assess the aggregate level of risk and opportunity within the business. In addition to anticipated transactions, the impact of developments including our speculative letting exposure, and the likely direction of property values, the principal matters we consider are the low level of risk across our business as exemplified by our operational metrics, the strength of our debt portfolio and low refinancing risk, and covenant compliance.

· The strength of our operational metrics is emphasised by the longevity and quality of our cash flows, with long average outstanding lease lengths (11.3 years); high occupancy (98%); the in-built growth of our portfolio (24% with fixed or RPI linked uplifts); low levels of vacancies and lease expiries over the next three years (9.6% of income, of which 7.6% is due to lease expiries); and reduced levels of development risk (with £39 million already contracted future income from pre-lets).

· The strength of our debt portfolio and low refinancing risk is illustrated by the average length (9.3 years) and range (within 12 months to 24 years) of our debt maturities; our diversified pool of finance confirming our lack of reliance on single debt sources; our efficiency with an average cost of debt of 4.6%; our use of non-recourse debt; and operational flexibility, supported by our continued success at raising debt at competitive prices.

· Our covenant compliance is well managed and assisted by our careful blend of unsecured and secured, and non-recourse and recourse debt.

British Land has a competitive advantage as, by leveraging our scale through joint ventures and funds financed with non-recourse debt, the operational LTV at 45.3% proportionally consolidated is higher than the Group measure which is less than 30%. This means that we can differentiate between covenant compliance and operational gearing and so we can operate with a higher level of proportionally consolidated LTV without taking on unnecessarily increased risk in terms of our covenant compliance.

All the debt in our funds and joint ventures is arranged without recourse to British Land and secured on quality long term cash flows, where gearing can safely be arranged at a higher level than Group debt. 63% of debt in our funds and joint ventures is provided by long dated securitisations without LTV covenants, and with refinancing risk mitigated by amortisation.

We monitor our current and projected financial position using several key internally generated reports focused principally on cash flow; borrowing levels; debt maturity; covenant headroom; and interest rate exposure. We also undertake sensitivity analysis to assess the impact of proposed transactions, movements in interest rates and changes in property values on the key balance sheet, liquidity and profitability ratios. In assessing our ongoing debt requirements, including those of our development programme, we consider potential downside scenarios such as an unexpected fall in valuations and the effect that might have on our covenants; and we consider the impact on the differing categories of debt within our business.

MANAGING OUR DEBT PORTFOLIO

At the heart of our approach to financing is the need to ensure that we have sufficient competitively priced financing available to support our property strategy within our stated gearing range. To achieve this we have five key principles that guide the way we finance the Group and manage its debt book:

1. Diversified debt maturity profile

The maturity profile of our debt is managed by spreading the repayment dates and extending facilities, and by monitoring the various debt markets so that we have the ability to act quickly to arrange new finance at advantageous rates as opportunities arise. At 31 March 2012, Group gross borrowings were £2,621 million; including our share of debt in joint ventures and funds, gross borrowings were £5,222 million. Debt maturities are well spread over a long period, with no debt refinancing due in the next two years. We arrange facilities in excess of our expected requirements ensuring we have adequate cover.

2. Diversified sources of finance

The scale and quality of the Group's business enables us to access a broad range of secured and unsecured, recourse and non-recourse debt markets. We arrange our finances so as to be able to choose between different types of debt to suit our own and, where appropriate, our partners' needs within the constraints of our borrowing covenants. We aim to maintain a balance between longer-term and shorter-term financings.

Group

Shorter-term financing by the Group is principally unsecured debt of British Land, raised through bilateral and syndicated unsecured revolving bank facilities. These credit facilities are based on relationships with a wide range of banks, reducing reliance on any particular lender. At 31 March 2012, 19 different financial institutions from 8 countries provided finance to the Group via bilateral or syndicated facilities totalling £2.3 billion at floating interest rates based on LIBOR plus an average margin of 73 bps or 0.73% per annum; of this, £1.1 billion was drawn at an average margin of 45 bps or 0.45% per annum. Total facilities include the new £560 million syndicated loan facility provided by 11 banks and a further £200 million arranged on a bi-lateral basis, signed during the financial year with five year maturities.

Medium to longer-term financing comprises public and private bond issues, including private placements and securitisations. Other unsecured funding with recourse to British Land includes US private placements, issued in full at fixed rates, requiring no amortisation and with terms up to 15 years. We currently have three US private placement issues: £98 million 5.5% Senior Notes 2027 and $154 million 6.3% Senior US Dollar Notes 2015 (which is swapped back into Sterling at 6.0%), together with the new $480 million issue in September 2011. This new issue, which was swapped to £300 million at an average floating rate of 146 bps (1.46%) over LIBOR, comprises $40 million 3.895% Senior Notes 2018; $220 million 4.635% Senior Notes 2021; $135 million 4.766% Senior Notes 2023; and $85 million 5.003% Senior Notes 2026. Issuing in this market widens the debt investor base.

Secured debt with recourse to British Land is provided by debentures at fixed interest rates with long maturities and no amortisation. The £0.9 billion of debentures issued by British Land are secured against a single combined pool of assets with common covenants: the value of those assets is required to cover the amount of these debentures by a minimum of 1.5 times and net rental income must cover the interest at least once. We use our rights under the debentures to withdraw, substitute or add properties (or cash collateral) in the security pool, in order to manage these cover ratios effectively, deal with any asset sales and remedy any stress on covenants if necessary.

Debentures without recourse to British Land comprise two fixed rate debentures of £73 million in total.

Joint ventures and funds

Our joint ventures and funds are each financed in 'ring-fenced' structures without recourse to British Land. External debt in total of £5.4 billion (2011: £5.9 billion) has been arranged through securitisation or bank debt according to the requirements of the business of each venture.

The securitisations of the Broadgate estate (£1,859 million), Meadowhall (£790 million) and the Sainsbury's Superstores portfolio (£634 million), have weighted average maturities of 14.6 years, 12.9 years, and 9.3 years respectively. The only financial covenant applicable to these securitisations is that income must cover interest and scheduled amortisation (1 times); there are no LTV covenants. These securitisations provide for quarterly principal repayments with the balance outstanding reducing to approximately 20-30% of the original amount raised by expected final maturity, thus mitigating financing risk.

Those debt arrangements which include LTV ratio covenants have maximum levels ranging from 60% to 90% (except for one fund in which we have a small interest where the LTV is 40%); several of the debt arrangements have rental income to interest or debt service cover requirements. There is no obligation on British Land to remedy any breach of these covenants and any remedy needed would be considered by the parties on a case-by-case basis.

3. Maintain liquidity

The Group maintains undrawn Bank revolving credit facilities which provide financial liquidity with full flexibility and drawing and repayment at short notice without additional costs. This reduces the need to hold liquid resources in cash and deposits, and minimises costs arising from the difference between borrowing and deposit rates while reducing credit exposure. At 31 March 2012 we had cash, liquid investments and undrawn facilities of £1.6 billion.

4. Optimise flexibility

Our bank revolving credit facilities of over £2 billion provide full flexibility of drawing and repayment at short notice without additional cost and provide valuable operational support, and are committed for terms of generally five years. We arrange these revolving credit facilities in excess of our expected requirements to ensure we always have adequate financing availability and to support future business requirements. In addition, these also provide the Group with a range of lenders. Operational flexibility is maintained with our combination of unsecured debt and secured debt with good substitution rights, where we have the ability to move assets in and out of our debentures.

5. Good access to the debt markets

We aim to ensure that potential debt providers understand our business and we adopt a transparent approach so that lenders can understand the level of their exposure within the overall context of the Group. We ensure that we operate within the relevant covenants of our facilities; and we enjoy a senior unsecured debt rating of A- from Fitch. These factors increase our attractiveness to lenders, and since April 2011 we arranged £2.0 billion (British Land share £1.4 billion) of new facilities from banks and private placements.

We have the same banking covenants applying across each of the Group's unsecured facilities, which also helps us when raising debt. These covenants, which have been consistently agreed with all unsecured lenders since 2003, are:

a) Net Borrowings not to exceed 175% of Adjusted Capital and Reserves; and

b) Net Unsecured Borrowings not to exceed 70% of Unencumbered Assets.

No income/interest cover ratios apply to these facilities, and there are no other unsecured debt financial covenants in the Group.

The assets of the Group not subject to any security stood at £4.3 billion as at 31 March 2012.

Covenant ratios

As at 31 March	2008	2009	2010	2011	2012
Net Unsecured Borrowings to Unencumbered Assets¹	22%	6%	14%	25%	34%
Net Borrowings to Adjusted Capital and Reserves²	74%	83%	37%	36%	44%

Highest during the year to 31 March 2012: 37%(1); 45%(2)

Although secured assets are excluded from Unencumbered Assets for the covenant calculations, unsecured lenders benefit from the surplus value of these assets above the related debt and the free cash flow from them. During the year ended 31 March 2012, these assets generated £54 million of surplus cash after payment of interest. In addition, while investments in joint ventures do not form part of Unencumbered Assets, our share of profits generated by these ventures are regularly passed up to the Group.

MANAGING OUR INTEREST RATE EXPOSURE

We manage our interest rate exposure and risk independently from our debt exposure. The Board sets an appropriate maximum level of sensitivity of underlying earnings and cash flows to movements in market rates of interest over a rolling five-year period. The proportion of fixed rate debt required to remain within the target sensitivity varies with the levels of gearing and interest cover.

Our debt finance is raised at both fixed and variable rates. Derivatives (primarily interest rate swaps) are used to achieve the desired interest rate profile across proportionally consolidated net debt. Currently 73% of projected net debt (including our share of joint ventures and funds) is at fixed rate over the five year policy time period.

The interest rate management of joint ventures and funds is addressed on an entity by entity basis. The use of derivatives is managed by a derivatives committee.

The Group's exposure to derivative counterparties is monitored on a regular basis, as are their external credit ratings.

FOREIGN CURRENCY EXPOSURE

Our policy is to have no material unhedged net assets or liabilities denominated in foreign currencies. The currency risk on overseas investments is hedged via foreign currency denominated borrowings and derivatives. When attractive terms are available to do so, the Group borrows in freely available currencies other than Sterling. The Group fully hedges its foreign currency risk on such borrowings.

Our overseas assets are held in Spain, Portugal, Italy and France and total £310 million (our share); they are hedged by borrowings of equal amounts in Euros from a range of German, British and other European banks.

TAX STRATEGY

Our tax strategy is an important aspect of our business. Being a Real Estate Investment Trust (REIT) significantly reduces the taxation costs of the Group, but brings with it a responsibility to our shareholders and to the UK tax authorities (HMRC) to operate within the rules of the REIT regime. We do not pay tax on our property income or gains on property sales, provided that we distribute at least 90% of our property income to shareholders, which becomes taxable in their hands. In addition, we have to meet certain conditions such as ensuring our property rental business represents more than 75% of our total profits and assets.

We do pay tax on overseas earnings, which are subject to overseas taxation, and any UK income that does not qualify as property income within the REIT rules (such as fees and interest) is subject to tax in the normal way. We also collect VAT and withholding tax on dividends as well as employment taxes. So we have a major responsibility for deducting, collecting, accounting for and paying significant amounts to the Government - in the year to 31 March 2012 we paid a total of £201 million to HMRC.

We maintain a regular dialogue with HMRC to let them know what we are doing and to maintain transparency, and we have been awarded and have maintained a low risk rating with HMRC. Where there is a range of ways in which a transaction could be undertaken we consider the relative merits and seek pre-clearance from HMRC in complex areas. We engage in discussions on potential or proposed changes in the taxation system that might affect us, particularly those relating to REIT legislation, seeking to ensure a successful and fair outcome for the Group. We ensure that our tax returns are correct and are filed within agreed timelines. British Land's tax policy and approach to taxation is regularly reviewed by the Board.

PRINCIPAL RISKS

Our approach to risk management

Our approach to risk underpins the constituent parts of our business model. When deciding future strategy, the Board considers the level of risk to be taken in alternative scenarios considered, and ensures that the strategic direction of the Group includes an appropriate and not undue level of risk in line with future expectations for the economic environment and the property cycle.

We also ensure that the risks involved are considered before approving every proposed transaction - and, if we proceed, that the level of risk accepted aligns with the agreed strategy and is appropriate both in relation to that transaction and its impact on the Group as a whole.

We have no control over some of the overriding external risks, such as the economy, but spend time considering the potential impact of such risks on our business. We recognise that we must tailor our strategy to respond to the external environment, addressing the threats and exploiting the opportunities that arise. At the same time we must monitor and control those internal risks to which we are exposed in pursuing our chosen strategy.

The risks we face do not change significantly from year to year. However, the magnitude and importance of the risks can and do change significantly, usually in line with events as they occur. For example, the successful conclusion of lettings to Aon and Debenhams, for their new head offices at the Leadenhall Building and Regent's Place respectively, and the agreement for lease to UBS of 5 Broadgate becoming unconditional significantly reduced the risk relating to our development exposure.

Risk management process

The process of identifying and monitoring risks, and their potential impact, occurs at a number of levels throughout the Group. In addition to considering risk in relation to strategy and transactions by the Investment Committee or the Board, a risk register is maintained by each of our business units as well as the Group as a whole. These registers are the result of thought and input from senior executives throughout the Group as well as the Executive Directors. A register of Principal Risks and Uncertainties is also maintained bringing together those factors which are considered to have the potential to significantly impact British Land's performance. This register is considered and refined at meetings of the Executive Committee, and the Audit Committee at least twice yearly, and is reviewed by the Board which has a particular focus on the strategic and economic risks. The adequacy of risk mitigating strategies and controls are considered at each review. This helps define the risk profile of the group and the implications of decisions taken.

Consideration of our current risk environment as well as our strategic priorities has resulted in a number of additional risks now being classified as Principal Risks and Uncertainties. These include: Economic uncertainty (notably Eurozone), Income Sustainability, Capital Structure - Gearing, Financing Strategy Execution and Communication. Further details of these risks are given in the schedule of Principal Risks and Uncertainties which follows.

Our small Head Office team provides clarity for each employee as to which member of the Executive Committee they directly or indirectly report. This relatively flat management structure allows the Executive Directors to have close involvement in day-to-day operational matters and respond quickly to changing events so as to reduce the effect of any adverse impacts on the risk profile.

Risk measurement and appetite

The risk register for the Group is underpinned by a series of key risk indicators. Each indicator has criteria capable of measurement, the result of which is matched against a range to calibrate the indicator either green, amber or red so as to inform Directors when deciding how to categorise each risk in order of importance, and to help highlight whether risks are increasing or decreasing. Risks are scored and ranked in accordance with a matrix based on the likelihood of occurrence and the potential impact on the Group.

It is inherent in the nature of risk that risk brings reward, and there are risks that we will choose, with our expertise, to accept. Taking risk is key to enhancing profits - the key is to take those risks that we are able to manage and are best placed to take, such as those relating to property performance, and to seek to minimise the impact of any risks that are not under our day-to-day control. There are many risks that we consider and monitor, but we naturally concentrate on those that we have identified as most important through the process described above.

British Land's risk framework

During the year, we have introduced a risk framework under which risks are classified as external or internal based on the extent of our control over them.

This framework reflects the different approaches required to manage different types of risk as well as recognising the extent to which external factors affect our performance.

External environment

Factors which British Land cannot control and must set its strategy to exploit or respond to

External and economic risk areas

· Global and UK-wide factors affecting all industries and consumers

Principal risks and uncertainties

· Economic uncertainty (notably Eurozone)

· Investor demand

· Occupier demand and tenant default

· Availability and cost of finance

· Catastrophic business event

UK commercial real estate risk areas

· External factors specifically affecting UK commercial real estate

· The impact of the external and economic risk areas on UK commercial real estate

Internal risk areas

Factors which British Land

can control

Strategic factors

· Factors which can be controlled to determine our risk profile; to be set in the context of evaluation of the external environment

Principal risks and uncertainties

· Investment strategy

· Development

· Income sustainability

· Capital structure - gearing

· Financing strategy execution

Corporate and compliance

· Factors which must be controlled to maintain sound operation of the company

· and fulfil legal and regulatory obligations

· Corporate responsibility risks

Principal risks and uncertainties

· Communication

· People

External risks

Risks and impacts	Change (from last year)	Key mitigants
Economic uncertainty (notably Eurozone)
Continued global economic uncertainty presents risks to financing and property markets as well as the businesses of our occupiers. Notably, failure of one or more members of the Eurozone could cause serious dislocation to the property and finance markets and could directly impact valuations and performance of British Land's limited property holdings in mainland Europe as well as treasury liquidity	NEW	· Consideration of external economic and property factors, including leading indicators in determining strategy · Limited exposure to Eurozone property holdings at less than 3% of gross assets
Investor demand
Reduction in investor demand for UK real estate may result in falls in asset valuations and could arise from variations in: · Health of the UK economy · Attractiveness of investment in the UK · Availability of finance · Relative attractiveness of other asset classes	↑	· Consideration of external economic and property factors, including leading indicators, in determining strategy · Focus on prime portfolio in sectors deemed to have resilient attributes · Focus on long upward only lease profiles with strong occupier financial covenants
Occupier demand and tenant default
· Underlying income, rental growth and capital performance could be adversely affected by weakening occupier demand resulting from variations in health of the UK economy and corresponding weakening of consumer confidence, business activity and investment · Occupier failures may adversely impact underlying income and capital performance · Changing consumer and business practices (e.g. Internet shopping, flexible working practices and demand for energy efficient buildings), new technologies and alternative locations may result in earlier than anticipated obsolescence of our buildings if evolving occupier requirements are not met	↑	· Consideration of external economic and property factors, including leading indicators, in determining strategy · Focus on prime portfolio in sectors deemed to have resilient attributes · Focus on long upward only lease profiles with strong occupier financial covenants · Monitoring of sector supply and demand for space · Monitoring of footfall and turnover at retail schemes · Ongoing occupier covenant monitoring · Proactive asset management approach to maintain strong occupier line-up · Key occupier account programme to maintain strong occupier relationships · Development of 'future proofing' initiatives to maintain our retail assets' ranking in the retail hierarchy · Sustainability Briefs for Developments, Acquisition and Management
Availability and cost of finance
· Reduced availability of Real Estate financing may adversely impact British Land's ability · To refinance facilities and result in weaker investor demand for Real Estate · Increasing finance costs would reduce British Land's underlying income	↑	· Consideration of external economic and property factors, including leading indicators, in determining strategy · Monitoring and pro-active management of refinancing requirement · Diverse range of sources of financing · Spread of facility expiries maintained · Continuing focus on capital market and bank relationship management · Interest rate hedging policy determined to minimise exposure to short term rate fluctuations while maintaining long term flexibility
Catastrophic business event
An external event such as a civil emergency, including a large scale terrorist attack, or environmental disaster could severely disrupt global markets (including property and finance) and cause significant damage and disruption to British Land's portfolio and operations	←→	· Asset risk assessments (e.g. security, flood, environmental, health and safety) · Regular security threat information service · Physical security measures at properties and development sites · Asset emergency procedures reviewed and scenario tested · Head office business continuity plan in place and regularly tested · Comprehensive insurance

Internal strategic risks

Risks and impacts	Change (from last year)	Key mitigants
Investment strategy
Significant underperformance could result from inappropriate determination of property investment strategy, including consideration of the following factors: · Sector selection and weighting · Timing of investment and divestment decisions · Exposure to developments · Sector, asset, tenant, region concentration · Engagement with co-investment partners	←→	· Annual determination of investment strategy based on consideration of position of current portfolio and outlook for macro-economic and property fundamentals · Ongoing review of validity of chosen strategy and performance against strategic priorities and actions · Benchmarking of portfolio composition · Use of asset and portfolio model · Standardised investment appraisal methodology and formalised Investment Committee review of proposed investment decisions
Development
Development risks could adversely impact underlying income and capital performance including: · Development letting exposure · Construction timing and costs · Adverse planning judgements	↓	· Detailed analysis and appraisal of all developments including risks, sensitivity and scenarios · Investment Committee approval prior to each development commitment · Ongoing monitoring of development progress against budget and schedule · Strategic use of pre-lets to de-risk the development letting profile · Fixing of development cost commitments early in the project timeline · Assessment of key contractors prior to appointment, including a financial covenant review · Building Confidence sustainability accreditation for supply chain · Maintenance of strong relationships with key suppliers
Income sustainability
Sustainability of income streams required to be considered in: · Execution of investment strategy and capital recycling, notably timing of reinvestment of · Sale proceeds · Nature and structure of leasing activity · Nature and timing of asset management and development activity Inappropriate decision-making and execution in respect of the above may result in disruptions to underlying profit growth outside the scope of strategic plans	NEW	· Comprehensive profit and cash flow forecasting undertaken incorporating scenario analysis reflecting prospective transactions · Reinvestment opportunities considered alongside asset sales as required by investment strategy · Focus on long lease structures with upward only rent reviews · Managed exposure to fixed, minimum and index-linked rental uplifts · Development funding requirements balanced with sustainable income streams from investment portfolio · Focus on income as well as capital impact in considering asset management initiatives · Pro-active asset management to mitigate occurrence and impact of occupier failures and lease breaks and expiries
Capital structure - gearing
· An inappropriate gearing level may result in net asset value underperformance · An increase in the gearing level increases the risk of a breach of covenants on borrowing facilities and may increase finance costs	NEW	· Determination of capital structure and gearing level considered over short and long term in annual determination of strategy and reviewed on an ongoing basis · All financial forecasting, including scenario analysis of prospective transactions, · incorporates consideration of impact on gearing and covenant headroom · Monitoring of covenant headroom and gearing with reference to cyclical · valuation movements and committed expenditure
Financing strategy execution
Failure to manage the refinancing requirement may result in a shortage of funds to sustain the operations of the business or repay facilities as they fall due	NEW	· Monitoring and pro-active management of refinancing requirement · Diverse range of sources of financing · Spread of facility expiries maintained · Continuing focus on capital market and bank relationship management

Corporate and compliance risks

Risks and impacts	Change (from last year)	Key mitigants
Communication
Failure to adequately communicate the Company's strategy and explain performance in respect of this may result in an increased disconnect between investor perceptions of value and actual performance	NEW	· Clear articulation and re-iteration of strategic priorities in corporate communications including the Annual Report · Defined communication and investor relations programme · Regular press releases and engagement with investors and analysis · Investor feedback survey undertaken by independent advisors
Failure to recruit, develop and retain staff and directors with the right skills and experience may result in significant underperformance	←→	· Succession planning regularly evaluated · Director and employee remuneration and incentives aligned with appropriate peer group and regularly benchmarked · Regular performance appraisal process with a focus on continuous personal development · Bi-annual employee survey and program of employee events to build a culture aligned with British Land's values

Corporate responsibility risks

The Group has a particular concern for corporate responsibility and is proud of its environmental credentials. Accordingly we also particularly monitor related risks, and have summarised them in a separate table that follows. These are not included as Principal Risks and Uncertainties because they are considered to be well managed, and so are unlikely to result in a significant impact on the Group's performance. In addition, we are proactive in monitoring emerging requirements to ensure that we have time to react to changes such as those arising from the Energy Act 2011.

Risks and impacts	Change (from last year)	Key mitigants
Managing buildings efficiently and developing sustainable buildings
Failure to futureproof our buildings against extreme weather occurrences or legislation may result in: · reduced investor and occupier interest in our buildings · disruption for our occupiers · additional costs for British Land and its occupiers to adapt buildings or meet new legislative requirements	NEW	· Flood assessment and defence where required · Sustainability Briefs for Development Acquisition and Management · Energy reduction strategy · Energy Performance Certificate (EPC) portfolio review · Government engagement and review on future legislation · ISO14001 for developments
Supporting Communities
Poor long term engagement with communities where we own or plan to develop assets may: · impede our ability to obtain planning permission for new developments · impact the financial performance of our assets	↑	· Community Charter · Charity funding · Ongoing local engagement by British Land and its site management teams

CORPORATE RESPONSIBILITY

At British Land, corporate responsibility is a critical part of how we manage risks and enhance value across our portfolio and we have a partnership approach to developing, managing and financing property responsibly. We're committed to doing business 'the right way' and this year we carried out a thorough review of our corporate responsibility strategy and activities, commissioning independent research to get the views of key stakeholders. We also consulted experts on a range of issues, reviewed best practice and benchmarked our performance. We have identified five focus areas as being the most important for us and our key stakeholders: managing buildings efficiently; developing sustainable buildings; enhancing biodiversity; exceeding customers' expectations; and focusing on local communities.

Our corporate responsibility key performance indicators provide a rigorous method of assessment of progress against annual targets and are independently audited each year.

Full details of our Corporate Responsibility performance will be published on 15 June 2012. The report for 2011/12 can be viewed at www.britishland.com from this date. It is designed to be accessible and easy to navigate. On-line reporting, rather than circulation of full printed copies, is part of our efforts to improve environmental performance.

DIRECTORS' RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

(a) the financial statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole;

(b) the adoption of a going concern basis for the preparation of the financial statements continues to be appropriate based on the foregoing and having reviewed the forecast financial position of the Group; and

(c) the management report, or 'Business Review', includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

GOING CONCERN

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Directors' Report and Business Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities, together with the Group's financing policy, are described in the Financial Review and Financial Policies and Principles.

The Group has considerable undrawn debt facilities and cash deposits in excess of current drawn banking facilities. There is substantial headroom against the covenants for its unsecured banking facilities, details of which are included in the Financial Policies and Principles section. It also benefits from a diverse and secure income stream from leases with long average lease terms. As a consequence, the directors believe that the Group is well placed to manage its business risks satisfactorily despite the current uncertain economic outlook.

The directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis in preparing the Annual Report and Accounts.

By order of the Board, Lucinda Bell, Finance Director

GLOSSARY

Annualised rent is the gross rent receivable on a cash basis as at the reporting date. Additionally where rent reviews are outstanding, any increases to applicable estimated rental value (as determined by the Group's external valuers), less any ground rents payable under head leases.

BREEAM (Building Research Establishment Environmental Assessment Method) assesses the sustainability of buildings against a range of criteria.

CACI Ltd is a wholly owned subsidiary of Consolidated Analysis Center Incorporated (CACI) providing marketing solutions and informational systems to local and central Government and to business from most industry sectors (including retail).

Capital return is calculated as the change in capital value of the UK portfolio, less any capital expenditure incurred, expressed as a percentage of capital employed over the period, as calculated by IPD. Capital returns are calculated monthly and indexed to provide a return over the relevant period.

Capped rents are subject to a maximum level of uplift at the specified rent reviews as agreed at the time of letting.

Collar rents are subject to a minimum level of uplift at the specified rent reviews as agreed at the time of letting.

CRC Energy Efficiency Scheme (previously known as the Carbon Reduction Commitment) is the UK Government's new mandatory scheme for carbon emissions reporting and pricing.

Credit rating A rating from an independent institution that assess creditworthiness or the credit risk, and provides publicly available credit ratings used by investors as well as analysts as a guide for investment decisions in regard to relative credit standing or strength. British Land are assessed by the credit rating agency Fitch. Other examples of credit rating agencies are Standard & Poor's and Moody's Investor Service.

Developer's profit is the profit on cost estimated by the valuers. The developers profit is typically calculated by the valuers to be a percentage of the estimated total development costs, including land and notional finance costs.

Development uplift is the total increase in the value (after taking account of capital expenditure and capitalised interest) of properties held for development during the period. It also includes any developer's profit recognised by valuers in the period.

Development construction cost is the total cost of construction of a project to completion, excluding site values and finance costs (finance costs are assumed by the valuers at a notional rate of 6% per annum).

EPRA is the European Public Real Estate Association, the industry body for European REITs.

EPRA Net Initial Yield is the annualised rents generated by the portfolio, after the deduction of an estimate of annual recurring irrecoverable property outgoings, expressed as a percentage of the portfolio valuation (adding notional purchaser's costs), excluding development properties.

EPRA earnings is the profit after taxation excluding investment property revaluations and gains/losses on disposals, intangible asset movements and their related taxation.

EPRA NAV per share is EPRA NAV divided by the diluted number of shares at the period end.

EPRA net assets (EPRA NAV) are the balance sheet net assets excluding the mark to market on effective cash flow hedges and related debt adjustments, deferred taxation on revaluations and diluting for the effect of those shares potentially issuable under employee share schemes.

EPRA NNNAV is the EPRA NAV adjusted to reflect the fair value of debt and derivatives and to include deferred taxation on revaluations.

EPRA 'topped-up' Net Initial Yield is the annualised rents generated by the portfolio, after the deduction of an estimate of annual recurring irrecoverable property outgoings, plus rent contracted from expiry of rent-free periods and uplifts agreed at the balance sheet date which are not intended to compensate for future inflation, expressed as a percentage of the portfolio valuation (adding notional purchaser's costs), excluding development properties.

EPRA vacancy rate is the estimated market rental value (ERV) of vacant space divided by ERV of the whole portfolio, excluding developments. This is the inverse of the occupancy rate.

Estimated rental value (ERV) is the external valuers' opinion as to the open market rent which, on the date of valuation, could reasonably be expected to be obtained on a new letting or rent review of a property.

Estimated (Net) Development Value is the estimated end value of a development project as determined by the external valuers for when the building is completed and fully let (taking into account tenant incentives and notional purchasers costs). It is based on the valuers view on ERVs, yields, letting voids and rent-frees.

Fair value is the estimated amount for which a property should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction after proper marketing and where parties had each acted knowledgeably, prudently and without compulsion.

Fair value movement An accounting adjustment to change the book value of an asset or liability to its market value.

Gearing see Loan to Value (LTV).

Gross rental income is the gross accounting rent receivable (quoted either for the period or on an annualised basis) prepared under IFRS which requires that rental income from fixed/minimum guaranteed rent reviews and tenant incentives is spread on a straight-line basis over the entire lease to first break. This can result in income being recognised ahead of cash flow.

Gross Value Added (GVA) provides a snapshot of a company's overall contribution to the UK economy, both directly through activities and indirectly through spending.

Group is The British Land Company PLC and its subsidiaries and excludes its share of joint ventures and funds on a line-by-line basis (i.e. not proportionally consolidated).

Headline rent is the contracted gross rent receivable which becomes payable after all the tenant incentives in the letting have expired.

IFRS are the International Financial Reporting Standards as adopted by the European Union.

Income return is calculated as net income expressed as a percentage of capital employed over the period, as calculated by IPD.

Interest cover is the number of times net interest payable is covered by underlying profit before net interest payable and taxation.

IPD is Investment Property Databank Ltd which produces an independent benchmark of property returns.

Key performance indicators (KPIs) Activities and behaviours, aligned to both business objectives and individual goals, against which the performance of Land Securities employees is annually assessed. Performance measured against them is referenced in the Annual Report.

Lettings and Lease Renewals are divided between short term (less than two years lease length) and long-term (over two years lease length). Lettings and renewals are compared both to the previous passing rent as at the start of the financial year; and the ERV immediately prior to letting. Both comparisons are made on a net effective basis.

Like-for-like ERV growth is the change in ERV over a period on the standing investment properties expressed as a percentage of the ERV at the start of the period. Like-for-like ERV growth is calculated monthly and compounded for the period subject to measurement.

Like-for-like rental income growth is the growth in gross rental income on properties owned throughout the current and previous periods under review. This growth rate includes revenue recognition and lease accounting adjustments but excludes properties held for development in either period, properties with guaranteed rent reviews, asset management determinations and surrender premiums.

Loan to Value (LTV) is the ratio of principal value of gross debt less cash, short-term deposits and liquid investments to the aggregate value of properties and investments.

Mark-to-market is the difference between the book value of an asset or liability and its market value.

Net effective rent is the contracted gross rent receivable taking into account any rent-free period or other tenant incentive. The incentives are treated as a cost to rent and spread over the lease to the earliest termination date.

Net Equivalent Yield is the weighted average income return (after allowing for notional purchaser's costs) a property will produce based upon the timing of the income received. In accordance with usual practice, the equivalent yields (as determined by the external valuers) assume rent is received annually in arrears.

Net operating costs are property operating expenses and administrative expenses net of fees and other income.

Net rental income is the rental income receivable in the period after payment of direct property outgoings which typically comprise ground rents payable under head leases, void costs, net service charge expenses, and other direct irrecoverable property expenses. Net rental income is quoted on an accounting basis. Net rental income will differ from annualised net cash rents and passing rent due to the effects of income from rent reviews, net property outgoings and accounting adjustments for fixed and minimum contracted rent reviews and lease incentives.

Net reversionary yield is the anticipated yield, which the initial yield will rise to once the rent reaches the estimated rental value.

Occupancy rate is the estimated rental value of let units as a percentage of the total estimated rental value of the portfolio, excluding development properties. It includes accommodation under offer or subject to asset management (where they have been taken back for refurbishment and are not available to let as at the balance sheet date).

Over rented is the term used to describe when the contracted rent is above the estimated rental value (ERV).

Overall 'topped-up' Net Initial Yield is the EPRA Net 'topped-up' Initial Yield, adding all contracted uplifts to the annualised rents.

Passing rent is the gross rent, less any ground rent payable under head leases.

Planning

The 1947 Town and Country Planning Act requires all proposals, with a few exclusions, to secure planning permission from the local authority. It extends not only to new construction, but also to substantive changes of use of a property. There are various 'use classes'. Change of use to a different use class generally requires planning consent.

Planning consent gives consent for a development, and covers matters such as use and design. Full details of the development scheme must be provided in an application for full planning consent, including detailed design, external appearance and landscaping before a project can proceed. Outline planning consent establishes the broad outline of the scheme and is subject to the later approval of the details of the design.

Portfolio valuation movement is the increase in value of the portfolio (after taking account of capital expenditure and capitalised interest) of properties held at the balance sheet date and sales during the period, expressed as a percentage of the capital value at the start of the period plus net capital expenditure.

Property Income Distributions (PIDs) Profits distributed as PIDs are subject to tax in the hands of the shareholders as property income. PIDs are normally paid net of withholding tax currently at 20% which the REIT pays to the tax authorities on behalf of the shareholder. Certain types of shareholder (i.e. pension funds) are tax exempt and receive PIDs without withholding tax. Property companies also pay out normal dividends, called non- PIDs, which are treated as normal dividends and not subject to withholding tax.

Property valuation In accordance with usual practice, the Group's external valuers report valuations net, after the deduction of the prospective purchaser's costs, including stamp duty land tax, agent and legal fees.

Rack rented is the term used to describe when the contracted rent is in line with the estimated rental value (ERV), implying a nil reversion.

REIT (Real Estate Investment Trust)

The Government established REIT status in the UK in 2007 to remove taxinequalities between different real estate investors and aimed to improve overall investor access to real estate. REITs are companies which are exempt from corporate taxation on profits from property rental income and capital gains on the sale of investment properties.

REITs must distribute 90% of UK rental income in the form of property income dividends (PIDs). This makes the tax implications of investing in REITs equivalent to investing directly in property. REITs are also required to meet certain conditions including the proportion of total profits and assets accounted for by their property rental businesses. They remain liable to corporation tax on non-property investment businesses e.g. management fees and interest receivable.

The UK has had a tax exempt real estate regime since 1 January 2007. A number of other countries, notably the US, Australia and France also have tax exempt REIT regimes. British Land has been a REIT since 1 January 2007. The Government is looking to encourage the growth of the REIT sector. The 2011 budget proposals are looking to relax qualifying conditions to encourage new entrants.

Rent free period see Tenant (or lease) incentives.

Rent reviews take place at intervals agreed in the lease (typically every five years) and their purpose is usually to adjust the rent to the current market level at the review date. For upwards only rent reviews, the rent will either remain at the same level or increase (if market rents have increased) at the review date.

Rent roll see Annualised Rents.

Rents with fixed and minimum uplifts are either where rents are subject to contracted uplifts at a level agreed at the time of letting; or where the rent is subject to an agreed minimum level of uplift at the specified rent review.

Retail planning consents are separated between A1, A2 and A3 - as set out in The Town and Country Planning (Use Classes) Order 2005. Within the A1 consent category, Open A1 consent grants planning for any type of retail, while Restricted A1 consent places limits on the types of retail that can operate (this is typically a restriction that only bulky goods operators are allowed to trade at that site).

Class	Description	Use for all/any of the following purposes
A1	Shops	Retail sale of goods other than hot food; post office; sale of tickets or as a travel agency; sale of sandwiches or other cold food off the premises; hairdressing; direction of funerals; display of goods for sale; hiring out of domestic or personal goods/articles; the reception of goods to be washed, cleaned or repaired; a retail warehouse club being a retail club where goods are sold, or displayed for sale, only to persons who are members of that club; or as a night club.
A2	Financial and professional services	Financial services; professional services (other than professional health or medical); or other services (including betting) services appropriate for a shopping area.
A3	Restaurants	Sale of food/drink and cafés (i.e. restaurants).
A4	Drinking establishments	Pub, wine bar or other drinking establishment.
A5	Hot food take-aways	Sale of hot food for consumption off premises.

Reversion is the increase in rent estimated by the external valuers, where the passing rent is below the estimated rental value. The increases to rent arise on rent reviews and lettings.

Tenant (or lease) incentives are incentives offered to occupiers to enter into a lease. Typically this will be an initial rent free period, or a cash contribution to fit-out. Under accounting rules the value of lease incentives is amortised through the income statement on a straight-line basis to the earliest lease termination date.

The residual site value of a development is calculated as the estimated (net) development value, less development profit, all development construction costs, finance costs (assumed at a notional rate) of a project to completion and notional site acquisition costs. The residual is determined to be the current site value.

Total occupancy rate is the occupancy rate excluding accommodation under offer or subject to asset management.

Total Property Return is calculated as the change in capital value, less any capital expenditure incurred, plus net income, expressed as a percentage of capital employed over the period, as calculated by IPD.

Total return (total accounting return) is the growth in EPRA NAV plus dividends paid, and this can be expressed as a percentage of EPRA NAV per share at the beginning of the period.

Total shareholder return is the growth in value of a shareholding over a specified period, assuming dividends are reinvested to purchase additional units of stock.

Total Tax Contribution is a more comprehensive view of tax contributions that the accountancy-defined tax figure quoted in most financial statements. It comprises taxes and levies paid directly, as well as taxes collected from others which we administered.

Turnover rents is where all or a portion of the rent is linked to the sales or turnover of the occupier.

Under rented is the term used to describe when the contracted rent is below the estimated rental value (ERV), implying a positive reversion.

Underlying earnings per share (EPS) consists of underlying profit after tax divided by the diluted weighted average number of shares in issue during the period.

Underlying profit before tax is the pre-tax EPRA earnings measure with additional company adjustments, including realisation of cash flow hedges and nonrecurring items.

Virtual freehold represents a long leasehold tenure for a period up to 999 years. A 'peppercorn', or nominal, rental is paid annually.

Weighted average debt maturity each tranche of Group debt is multiplied by the remaining period to its maturity and the result is divided by total Group debt in issue at the period end.

Weighted average interest rate is the Group loan interest and derivative costs per annum at the period end, divided by total Group debt in issue at the period end.

Weighted average lease term is the average lease term remaining to first break, or expiry, across the portfolio weighted by contracted rental income (including rent-frees). The calculation excludes short-term lettings, residential leases and properties allocated as developments.

Yield shift is a movement (usually expressed in bps) in the yield of a property asset, or like-for-like portfolio, over a given period. Yield compression is a commonly used term for a reduction in yields.

SUPPLEMENTARY TABLES (Data includes Group's share of Joint Ventures and Funds)

Fourth Quarter Performance
At 31 March 2012	Value	Change	ERV Growth	Net equivalent yield movement/
	£m	%¹	%²	(compression) bps³
Retail:
Retail parks	2,718	(0.1)	0.3	2
Superstores	1,365	(0.3)	1.1	3
Shopping centres	1,512	(0.3)	-	-
Department stores	451	0.7	5.1	4
UK Retail	6,046	(0.2)	0.7	2
Europe Retail	272	(2.7)	n/a	4
All Retail	6,318	(0.3)	0.7	2
Offices:
City	2,064	0.4	0.5	(2)
West End	1,402	1.5	0.8	2
Provincial	96	7.4	(0.2)	6
All Offices	3,562	1.0	0.6	(1)
Other	457	2.1	-	(14)
Total	10,337	0.3	0.6	1
¹ valuation movement during the period (after taking account of capital expenditure) of properties held at the balance sheet date, including developments classified by end use), purchases and sales ² like for like (as calculated by IPD), excluding Europe ³ including notional purchaser's costs

Portfolio Net Yields¹
At 31 March 2012 (excluding developments)	EPRA initial yield %	EPRA topped up initial yield %²	Overall topped up initial yield %³	Reversionary yield %	Equivalent yield %
Retail:
Retail parks	5.4	5.6	5.7	5.7	5.8
Superstores	5.1	5.1	5.1	5.0	5.1
Shopping centres	5.5	5.7	5.8	6.0	5.8
Department stores	5.9	5.9	8.8	4.8	6.5
UK Retail	5.4	5.5	5.8	5.6	5.7
Europe Retail	7.1	7.1	7.1	7.5	8.0
All Retail	5.5	5.6	5.8	5.6	5.8
Offices:
City	4.6	6.2	6.2	6.0	5.7
West End	4.0	5.5	5.9	5.8	5.6
Provincial	7.1	7.1	7.1	5.8	6.5
All Offices	4.4	6.0	6.1	5.9	5.7
Other	7.6	7.6	9.6	6.3	8.4
Total	5.2	5.8	6.1	5.7	5.8
^¹ including notional purchaser's costs ²including rent contracted from expiry of rent free periods and fixed uplifts not in lieu of growth
³ including fixed/minimum uplifts (excluded from EPRA definition)

Annualised Rent & Estimated Rental Value (ERV)
At 31 March 2012 (excluding developments)	Annualised rent (valuation basis) £m¹			ERV £m	Average rent £psf
At 31 March 2012 (excluding developments)	Group	JVs & Funds	Total	Total	Contracted	ERV
Retail:
Retail parks	108	46	154	162	22.5	23.0
Superstores	8	65	73	73	21.5	21.4
Shopping centres	35	58	93	99	27.5	28.7
Department stores	28	-	28	23	12.3	10.0
UK Retail	179	169	348	357	21.9	22.3
Europe Retail	-	18	18	19	9.0	9.4
All Retail	179	187	366	376	20.5	20.6
Offices:
City	5	83	88	114	46.2²	44.4²
West End	45	-	45	65	43.7²	43.8²
Provincial	6	-	6	5	20.7	16.8
All Offices	56	83	139	184	43.6	42.2
Other	29	-	29	22	12.1	10.0
Total	264	270	534	582	23.5	23.3
¹ gross rents on a cash basis plus, where rent reviews are outstanding, any increases to ERV (as determined by the Group's external valuers), less any ground rents payable under head leases, excludes contracted rent subject to rent free and future uplift
²based on office space only

Gross Rental Income¹
(Accounting Basis) £m	12mths to 31 March 2012			Annualised as at 31 March 2012
	Group	JVs & Funds	Total	Group	JVs & Funds	Total
Retail:
Retail parks	104	43	147	107	44	151
Superstores	8	64	72	8	65	73
Shopping centres	36	60	96	34	60	94
Department stores	33	-	33	33	-	33
UK Retail	181	167	348	182	169	351
Europe Retail	-	23	23	-	17	17
All Retail	181	190	371	182	186	368
Offices:
City	26	82	108	25	82	107
West End	56	-	56	53	-	53
Provincial	5	-	5	6	-	6
All Offices	87	82	169	84	82	166
Other	32	-	32	33	-	33
Total	300	272	572	299	268	567
¹gross rental income will differ from annualised rents due to accounting adjustments for fixed & minimum contracted rental uplifts and lease incentives

Lease Length & Occupancy
At 31 March 2012	Average lease length yrs		Occupancy rate %
(excluding developments)	To expiry	To break	Occupancy	Occupancy (overall)¹
Retail:
Retail parks	10.6	9.7	98.2	98.8
Superstores	15.9	15.9	100.0	100.0
Shopping centres	9.9	9.1	94.7	95.9
Department stores	28.6	25.2	100.0	100.0
UK Retail	13.0	12.1	97.7	98.3
Europe Retail	11.3	5.0	89.7	89.7
All Retail	12.9	11.7	97.3	97.9
Offices:
City	10.9	9.0	97.4	97.5
West End	10.6	8.4	98.6	98.6
Provincial	10.7	10.5	100.0	100.0
All Offices	10.8	8.8	97.9	98.0
Other	22.1	22.0	99.0	99.0
Total	12.6	11.3	97.6	98.0
¹including accommodation under offer or subject to asset management

Rent Subject to Lease Break or Expiry
At 31 March 2012	2013	2014	2015	2016	2017	2013-15	2013-17
	£m	£m	£m	£m	£m	£m	£m
Retail:
Retail parks	4	5	4	8	8	13	29
Superstores	-	-	-	-	-	-	-
Shopping centres	5	6	3	6	8	14	28
Department stores	-	-	-	-	-	-	-
UK Retail	9	11	7	14	16	27	57
Europe Retail	3	3	2	2	2	8	12
All Retail	12	14	9	16	18	35	69
Offices:
City	1	2	1	2	22	4	28
West End	3	1	2	3	6	6	15
Provincial	-	-	-	-	-	-	-
All Offices	4	3	3	5	28	10	43
Other	-	1	1	-	-	2	2
Total	16	18	13	21	46	47	114
% of contracted rent	2.5%	3.0%	2.1%	3.4%	7.6%	7.6%	18.6%
Potential uplift at current ERV	1	1	1	1	(1)	3	3

Rent Subject to Open Market Rent Review
12 months to 31 March	2013	2014	2015	2016	2017	2013-15	2013-17
	£m	£m	£m	£m	£m	£m	£m
Retail:
Retail parks	27	23	21	22	18	71	111
Superstores	2	9	17	19	5	28	52
Shopping centres	16	9	5	15	13	30	58
Department stores	-	-	-	5	-	-	5
UK Retail	45	41	43	61	36	129	226
Europe Retail	-	-	-	-	-	-	-
All Retail	45	41	43	61	36	129	226
Offices:
City	19	31	30	17	2	80	99
West End	7	3	1	16	5	11	32
Provincial	-	-	-	6	-	-	6
All Offices	26	34	31	39	7	91	137
Other	-	-	-	1	-	-	1
Total	71	75	74	101	43	220	364
Potential uplift at current ERV	3	3	4	3	1	10	14

Major Assets
At 31 March 2012	BL Share	Sq ft	Rent	Occupancy	Lease
(excluding developments)	%	'000	£m pa¹	rate %²	length yrs³
Broadgate, EC2	50	4,009	173	97.3	7.5
Regents Place, NW1	100	1,210	51	98.4	8.8
Meadowhall Shopping Centre	50	1,374	82	97.4	9.3
Ropemaker Place, EC2	100	594	27	100.0	14.3
Teesside Shopping Park	100	457	14	100.0	8.6
Drake Circus Shopping Centre	100	570	15	94.7	7.6
Debenhams, Oxford Street	100	367	16	100.0	27.0
York House, W1	100	132	5	100.0	5.7
Glasgow Fort Shopping Park	41	393	17	97.5	7.3
St Stephens Shopping Centre	100	410	8	99.2	8.4
Tesco Superstores	50	2,741	62	100.0	15.6
Sainsbury's Superstores	50	2,908	68	100.0	16.7
¹annualised contracted rent including 100% of Joint Ventures & Funds
² includes accommodation under offer or subject to asset management
³ to first break

Occupiers Representing over 0.5% of Rent
At 31 March 2012	% of total rent		% of total rent
Tesco	7.2	JP Morgan	0.9
Sainsbury's	6.2	New Look	0.9
Debenhams	4.3	Aegis Group	0.9
UBS AG	3.6	Reed Smith	0.8
Home Retail Group	3.0	Gazprom	0.8
HM Government	2.3	Deutsche Bank	0.8
Kingfisher (B&Q)	2.2	Mayer Brown	0.8
Virgin Active	2.1	Cable & Wireless	0.7
Next	2.0	Mothercare	0.7
Arcadia Group	1.9	Comet Group	0.7
Spirit Group	1.7	Sports Direct	0.7
Bank of Tokyo-Mitsubishi UFJ	1.6	ICAP	0.7
Macquarie Group	1.5	Lend Lease	0.7
DSG International	1.4	Pets at Home	0.6
Herbert Smith	1.4	Markit Group	0.6
Asda Group (inc. Asda Living)	1.3	Credit Lyonnais	0.6
Boots	1.3	H&M	0.6
RBS	1.2	JD Sports (inc. Bank Fashion)	0.6
Hutchison 3G	1.1	Henderson Global Investors	0.6
Marks and Spencer	1.1	TGI Fridays	0.5
House of Fraser	1.0	Carpetright	0.5
TK Maxx	0.9

Committed Developments

At 31 March 2012	BL Share	Sq ft	PC Calendar	Current Value	Cost to Complete	Notional interest	ERV	Pre- let	Resi End Value
	%	'000	Year	£m	£m¹	£m^1,2	£m³	£m	£m⁴
Offices:
5 Broadgate	50	700	Q4 14	117	141	26	19.1	19.1	-
The Leadenhall Building⁵	50	610	Q2 14	88	136	19	18.6	5.6	-
NEQ, Regents Place⁶	100	500	Q2 13	211	123	13	19.1	9.4	113
199 Bishopsgate	50	142	Q4 12	37	8	1	3.5	-	-
10 Portman Square⁷	100	159	Q2 13	70	37	4	8.4	-	17
Marble Arch House⁸	100	86	Q4 13	29	29	4	3.9	-	14
39 Victoria Street	100	92	Q2 13	41	24	4	4.9	-	-
Total Offices		2,289		593	498	71	77.5	34.1	144
Retail:
Puerto Venecia, Zaragoza	50	1,360	Q4 12	52	42	7	7.6	4.0	-
Whiteley Village, Fareham	50	302	Q2 13	10	21	1	2.4	1.2	-
Glasgow Fort (Cinema)	41	45	Q1 13	2	4	-	0.5	0.5	-
Total Retail		1,707		64	67	8	10.5	5.7	-

Total Residential		70		50	23	6	-	-	94

Total Committed		4,066		707	588	85	88.0	39.8	238

Data includes Group's share of properties in Joint Ventures & Funds (except area which is shown at 100%)

¹from 1 April 2012 to practical completion (PC)

²based on a notional cost of finance of 6%

³estimated headline rental value net of rent payable under head leases (excluding tenant incentives)

⁴parts of residential development expected to be sold, no rent allocated - of which £108 million completed or exchanged

⁵191,000 sq ft pre-let to Aon signed with an option to take a further 85,000 sq ft

⁶includes 126,000 sq ft of residential

⁷includes 25,000 sq ft of off-site residential and retail (95-99 Baker Street) - sale completed

⁸includes 10,000 sq ft of residential

Prospective Developments
At 31 March 2012	BL Share %	Sq ft '000
Offices:
6-9 Eldon Street	100	47	Pre-submission
Colmore Row	100	284	Detailed planning consent
100 Liverpool Street	50	383	Planning pending
New Century Park	50	1,000	Outline
Total Offices		1,714
Retail:
Fort Kinnaird, Edinburgh	21	84	Planning pending
Glasgow Fort, Glasgow	41	185	Detailed planning consent
Kingston Centre, Milton Keynes	50	21	Detailed planning consent
Broughton Park, Chester	41	54	Planning pending
Surrey Quays, London	50	99	Detailed planning consent
Power Court, Luton	100	200	Planning pending
Superstore Extensions	50	99	Board Commitment to Fund
Deepdale Retail Park, Preston	21	76	Detailed planning consent
Meadowhall Surrounding Land	50	142	Planning submitted
Total Retail		960
Total Prospective		2,674

This information is provided by RNS

The company news service from the London Stock Exchange

END

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