Final Results

5th Dec 2007 07:00

Shaftesbury PLC05 December 2007 SHAFTESBURY PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2007 Shaftesbury PLC ("Shaftesbury") today announces its results for the year ended30 September 2007. Shaftesbury owns a portfolio of over 400 properties inLondon's West End (Carnaby and Chinatown) and Covent Garden. Results • Adjusted diluted net asset value per share up 56p (9.5%) to £6.46 in the year to 30.9.2007(up 76p (12.9%) excluding REIT conversion charge)Diluted unadjusted net asset value per share up 41% to £6.41 • Portfolio valued at £1,394.0 million reflecting Capital Value return of8.2% over the year (IPD Monthly Index 2.2% over the year)Valuation uplifts from rental growth and estate management - yields largelyunchanged over the year as a whole • Portfolio Total Return for the year 12.0% (IPD Monthly Index 7.2%) • Adjusted profit before tax down 5.7% to £12.7 million Increase in rental income of £3.4 million, offset by higher property andinterest charges arising from high levels of asset management and refurbishmentactivity across the portfolio • Profit (including fair value movements in respect of investmentproperties and financial derivatives) before tax £124.2 million (2006: £187.6million) • Adjusted diluted earnings per share up 19.1% to 8.55p reflectingreduction in tax charge in second half following REIT conversionUnadjusted diluted earnings per share 196.9p up 90.5% reflecting release ofdeferred tax liabilities on REIT conversion less conversion charge • Final dividend in respect of first period under REIT rules 5.50p to bepaid as a PID (47.4% increase on 2006 final dividend - pre REIT conversion) Portfolio activity • £32 million of acquisitions in year; selective disposals in the secondhalf realised net proceeds £8.4 million • Continuing strong tenant demand across all uses in every village;portfolio ERV now £72.4 million (up £6.4 million over the year); vacant space athistorically low level • Longmartin Joint Venture progressing well - four planning consentsobtained in August 2007 John Manser, Chairman commented, "Our clearly defined strategy to invest only in London's West End has continuedto deliver growth in our net asset value. This has been achieved against abackground of considerable uncertainty concerning the future direction andstability of the economy in general and property markets in particular. We believe the exceptionally resilient nature of our unique portfolio, with itsproven capacity to produce sustained growth in both actual and potential futureincome, is well placed to deliver long term outperformance in both income andcapital values". There will be a presentation to analysts at 9.30 am on Wednesday 5 December2007, to be held at the offices of JPMorganCazenove, 25 Moorgate, London EC2. The presentation will have a conference call facility to allow callers to listento the presentation and ask questions via an operator at the end of the formalpresentation. A copy of the presentation in Pdf format will be available on theCompany's web site (www.shaftesbury.co.uk) from 9.00am. Dial in details are as follows: Meeting title Shaftesbury PLC Preliminary Results 2007Date/start Wednesday 5 December 2007 at 9.30amDial-in number +44 (0) 1452 584 160 UK Local: 0845 146 2116Conference ID 26344705 Date: 5 December 2007 For further information: Shaftesbury PLC 020 7333 8118 cityPROFILE 020 7448 3244Jonathan Lane, Chief Executive Simon CourtenayBrian Bickell, Finance Director William Attwellwww.shaftesbury.co.uk Index Page 3 Financial Highlights and Performance Summary 21 Group Balance Sheet 4 Chairman's Statement 22 Group Cash Flow Statement 8 Business Review 22 Statement of changes in shareholders' equity 18 Portfolio Analysis 23 Notes to the Preliminary Announcement 20 Group Income Statement Financial Highlights 2007 2006 ChangeNet property income £'000 49,580 46,983 +5.5%Adjusted profit before tax* £'000 12,713 **13,490 -5.7%Adjusted diluted earnings per share* Pence 8.55 **7.18 +19.1%Profit (including fair value movements in respect £'000 124,176 187,602 -33.8%of investment properties and financialderivatives) before taxDiluted earnings per share Pence 196.92 103.32 +90.5%Interim dividend per share Pence 2.16 1.92 +12.5%Final dividend per share Pence 5.50 3.73 +47.4%Property assets at book value £'000 1,393,662 1,254,776Adjusted net assets *** £'000 872,726 788,704 +10.7%Adjusted diluted net assets per share Pence 646 590 +9.5%Net assets £'000 866,786 606,881 +42.8%Diluted net asset value per share Pence 641 454 +41.2% * Adjusted to exclude property and financial derivatives fair valuationmovements, gain on sale of investment properties and, loss on purchase ofdebenture stock (see page 3)** 2006 - adjusted to reflect re-classification of payments under hedgingcontracts (see Note 5)*** Adjusted to exclude fair valuation of financial derivatives and deferredtax in respect of investment property revaluations and financial instrument fairvalues (see page 3) Performance Summary Shaftesbury Group BenchmarkCapital Value return (the annual valuation uplift and realised surpluses arising on the IPD UK Monthly Group's investment portfolio expressed as a percentage return on the Index -valuation at the beginning of the year adjusted for acquisitions and Capital Valuescapital expenditure) +8.2% +2.2% 2006 +18.1% +14.7% Total return (a combination of the Capital Value return referred to above and the IPD UK Monthlynet property income from the portfolio for the year expressed as a Index -percentage return on the valuation at the beginning of the year Total Return adjusted for acquisitions and capital expenditure) +12.0% +7.2% 2006 +22.4% +20.7% Net asset value return(the growth in diluted net asset value per Ordinary share plusdividends paid per Ordinary share expressed as a percentage of thediluted net asset value per share at the beginning of the year)Based on adjusted net assets - before REIT conversion charge 14.0%- after REIT conversion charge 10.5% 2006 +30.8%Based on reported net assets (2007 - reflecting the REIT conversion charge and release of deferredtaxation arising on conversion) +42.5% 2006 +28.9% Total shareholder return (the growth during the year in the market price of an Ordinary shareplus dividends reinvested expressed as a percentage of the share price FTSE 350 Real at the beginning of the year, based on year end share price £4.95 Estate Index(2006: £6.00)) -16.5% -14.1% 2006 +59.3% +35.3% Chairman's Statement Our clearly defined strategy to invest only in London's West End has continuedto deliver growth in our net asset value. This has been achieved against abackground of considerable uncertainty concerning the future direction andstability of the economy in general and property markets in particular. Ourresults for the year ended 30 September 2007 show further growth in rentalincome and capital values. Our Results The adjusted results referred to below are calculated in accordance with theguidance issued by the European Public Real Estate Association ("EPRA") inJanuary 2006. 2007 2006 Diluted Diluted net net asset asset value value per Total per share Total share £'000 £ £'000 £ Net assets reported in the Group Balance Sheet 866,786 6.41 606,881 4.54Adjusted for:Fair value adjustment in respect of financial derivatives 630 9,318Deferred tax provided in respect of:Investment property revaluation gains 5,310 175,300Financial derivatives - (2,795) Adjusted net assets 872,726 6.46 788,704 5.90REIT conversion charge 27,512 0.20 - -Adjusted net assets before REIT conversion charge 900,238 6.66 788,704 5.90 Net assets at 30 September 2007, adjusted as shown in the table above to excludethe fair value of financial derivatives and deferred tax provided in respect ofthe investment property and financial derivatives revaluations, totalled £872.7million, equivalent to a diluted net asset value per share of £6.46. Thesefigures include the charge we have incurred on conversion to REIT status of£27.5 million, equivalent to a reduction in diluted net asset value per share of£0.20. The increase in diluted net asset value per share over the year,excluding this one-off charge, was £0.76, an uplift of 12.9%, which reduces to£0.56, an uplift of 9.5%, once the charge is deducted. Shareholders' funds reported in the unadjusted Group Balance Sheet at 30September 2007 totalled £866.8 million, equivalent to a diluted net asset valueper share of £6.41, and reflect the release arising on REIT conversion of netdeferred taxation liabilities amounting to £171.4 million, less the conversioncharge referred to above. The increase in unadjusted shareholders' funds sincethe last year end totalled £259.9 million, equivalent to £1.87 per share(diluted), an uplift of 41%. 2007 *2006 £'000 £'000 Profit before tax reported in the Group Income Statement 124,176 187,602Profit on disposal of investment properties (2,215) (748)Surplus arising on revaluation of investment properties (103,034) (190,933)Movement in fair value of financial derivatives (8,688) *(2,440)Loss on purchase of debenture stock 2,474 20,009Adjusted profit before tax 12,713 *13,490 * Comparatives adjusted to reflect re-classification of payments under hedgingcontracts (see Note 5) As shown in the table above, adjusted profit before tax for the year ended 30September 2007 amounted to £12.7 million, compared with £13.5 million in thesame period last year. Although we have seen an increase in rental income of£3.4 million compared with last year, property outgoings have risen by £0.8million, reflecting costs incurred ahead of commencement of a number of majornew schemes. Interest payable has risen by £4.1 million, due to higher interest rates,particularly in the second half of the year, but also as a result of the cost offinancing the strategic acquisitions made over the last two years. The lowinitial income from these purchases has been further reduced in the short termas a result of our deliberate policy of securing vacant possession in advance ofrefurbishment and re-letting. We do not currently capitalise interest incurredin respect of properties or parts of multi-let buildings being refurbished. In September 2007 we sold a number of non-core commercial and residentialproperty interests for total proceeds after costs of £8.4 million, producingsurpluses totalling £2.2 million over their 31 March 2007 book values of £6.2million. Under our new REIT status, no taxation liability arises on thesesurpluses. The results also include a loss of £2.5 million on repurchase of £6.5 million(nominal) of 8.5% Debenture Stock 2024, which was completed in October 2006.This was the final phase of the refinancing of part of our historic fixed ratelong term debt announced in September 2006, which has allowed us to create auseful post-tax economic surplus ahead of REIT conversion and provided greaterflexibility in future financing. This year we have seen a substantial reduction in the fair value deficit of ourfinancial derivatives from £9.3 million to £0.6 million, which has resulted in acredit to the Income Statement of £8.7 million (2006: £2.4 million). Thereduction in the deficit reflects the market expectation of higher interestrates in future years. Profit before tax reported in the Income Statement was £124.2 million (2006:£187.6 million) and included investment property revaluation surpluses of £103.0million (2006: £190.9 million). 2007 2006 £'000 £'000 Taxation (credit)/charge reported in the Income Statement (140,632) 50,100Current tax in respect of:REIT conversion charge (27,512) -Loss on purchase of debenture stock 742 6,002Deferred tax in respect of:Property disposals - 5,268Revaluation of investment properties (2,766) (56,708)Movements in fair value of financial instruments - (732)Deferred tax released on REIT conversion 171,378 -Adjusted taxation charge on the adjusted profit 1,210 3,930 Provision for current and deferred tax on the adjusted profit for the yearamounted to £1.2 million (2006: £3.9 million). The liability for corporationtax on the wholly owned Group's profits has been eliminated in the period priorto REIT conversion by the utilisation of losses arising from the Debenturerefinancing carried out in September and October 2006 and other tax lossesarising during that period. In the second half, the Group, excluding theLongmartin joint venture, was subject to taxation under the REIT regime andtherefore net rental income and capital gains realised from the sale of letproperties were exempt from tax. As virtually all of the wholly-owned Group'sbusiness fell within the REIT ring fence, no taxation liability arises on theseexempt activities. The tax credit reported in the Income Statement of £140.6 million (2006: charge- £50.1 million) includes both the charge incurred on conversion to REIT statusof £27.5 million and a release of net deferred tax liabilities of £171.4 millionas a result of conversion. Our interest in the Longmartin joint venture has notbeen included within our REIT election. Our share of Longmartin's profitcontinues to be subject to corporation tax and deferred tax continues to beprovided in respect of our share of its property revaluation surpluses. The adjusted profit after tax for the year amounted to £11.5 million (2006:£9.6 million). The profit after tax reported in the Group Income Statementamounted to £264.8 million (2006: £137.5 million). Dividends This year's final dividend reflects the distribution obligations contained inREIT legislation, which broadly require distribution of a minimum of 90% of netrental income (calculated by reference to tax rather than accounting rules).These distribution obligations apply to our business for the second half of theyear during which we have been subject to the REIT regime. All future dividendswill reflect this requirement. As a result, your Directors are pleased to recommend a substantially increasedfinal dividend of 5.5p per share (2006: 3.73p). Together with the interimdividend of 2.16p (2006: 1.92p), this will bring the total distribution for theyear to 7.66p (2006: 5.65p), an increase of 36%. The final dividend will be paidentirely as a Property Income Distribution ("PID"). We intend to maintain a policy of increasing our distributions to reflect growthin our underlying income, although adherence to the REIT rules may result in aless even pattern than we have seen previously. From 2008 interim and finaldividends will be more evenly balanced. Our Portfolio Our property portfolio has been valued at 30 September 2007 at £1,394.0 million,resulting in a revaluation surplus of £103.0 million. Together with thesurpluses realised on disposals of £2.2 million, this represents an uplift of8.2% over the year, which compares with an increase in the IPD UK Monthly Indexof Capital Values for all classes of commercial property of 2.2% over the sameperiod. Our portfolio showed an overall return for the year of 12.0% comparedwith the IPD UK Monthly Index of Total Returns for all classes of commercialproperty of 7.2%. Following two years of valuation increases driven by exceptional yieldreductions, yields have ended the year largely unchanged. Consequently thegrowth in values we have seen this year has been driven by continued rentalgrowth - both actual and prospective - and a reduction in vacant space. As aresult of the current turbulence in financial markets there is a reduction ininvestment demand for property assets, which is leading to an increase invaluation yields. However, we believe that, against a background of continuingstrong tenant demand in our markets, the impact on the values of our welllocated properties, which have the capacity to produce sustained rental growth,will be less marked. Rental growth for all uses has continued throughout the year, reflecting strongoccupier demand across our villages. We believe there is considerable potentialfor further growth through our policy of creating unique shopping and leisuredestinations in the West End as rental values for all uses throughout ourvillages are much lower than those in adjacent high street locations. We continue to take opportunities to establish higher rental levels bypro-actively taking back leases and re-letting. Although in the short term thisleads to a loss of income from individual properties, the longer term benefitsacross our adjacent properties more than compensates and contributes to theout-performance which is evident in these results. We have also seen especiallygood growth in office rents as higher demand has resulted in low levels ofvacant space in the West End. Our valuers have estimated the rental value of our total portfolio at the yearend to be £72.4 million per annum, compared with the portfolio's current passingincome at that date of £57.9 million per annum. Estimated rental values havegrown by 9.6% over the year of which 5.1% occurred in the second half. Thetable below demonstrates the success of our management initiatives which arefocussed not only on delivering income growth but also on the long termimprovement in the rental prospects of our portfolio and is reflected in theacceleration in its reversionary potential. Current strong demand across all ourvillages indicates that this trend will continue into 2008. Valuers' estimates Current gross Estimated rental Reversionary income value potential £million £million £million At 30 September 2005 49.8 60.6 10.8At 30 September 2006 53.9 66.0 12.1At 31 March 2007 56.0 69.0 13.0At 30 September 2007 57.9 72.4 14.5 Once again DTZ, the valuers of our wholly-owned portfolio, have commented intheir report on the concentration of a high proportion of our properties inadjacent or adjoining locations within our principal villages and the dominanceof retail and restaurant uses. They advise that, as a consequence of theseunusual factors, some prospective purchasers may consider that parts of thewholly-owned portfolio when combined may have a greater value than thatcurrently reflected in the valuation we have adopted in our results. In the market in the West End, which continues to attract considerable investorinterest despite recent uncertainties, we have made acquisitions in our villagestotalling £32.1 million during the year, principally in and around our Carnabyvillage. Capital expenditure totalled £9.8 million, representing approximately0.7% of the portfolio's capital value. This low level of capital expenditurereflects our strategy of improving existing buildings rather than redevelopmentand our focus on retail, restaurant and residential uses, which are not prone tothe costs of obsolescence evident in other sectors. Total Shareholder Return Both Shaftesbury and the FTSE 350 Real Estate Index recorded negative returnsover the year as a result of the substantial reductions in share prices acrossthe entire real estate sector from the high point seen in March 2007, when manyreal estate company shares were trading at substantial premiums to actual andprospective net asset values. Current adverse sentiment towards property in the equity markets, which reflectsconcerns over the general economic prospects, the availability of finance forreal estate investment and the outlook for property yields, has now resulted inreal estate equities, including our shares, trading at discounts to net assetvalues. In contrast, our occupier markets have rarely been stronger, withfalling vacancy rates, increasing demand and accelerating rental growth in allof our sectors. Prospects London's position as one of the World's most important financial centres and itsstatus as the World's most popular city tourist destination underpin the valueof our portfolio and its long term growth potential. Comprising over 400 mixeduse freeholds in the West End, our portfolio is unique amongst UK listed realestate companies both in its nature and geographical focus. Although the longerterm direction of yields is difficult to predict, and set-backs in propertymarkets are now evident, our local knowledge, experience in West Endregeneration and financial strength will enable us to take full advantage of newopportunities to extend our core holdings. We believe the exceptionally resilient nature of our unique portfolio, with itsproven capacity to produce sustained growth in both actual and potential futureincome, will deliver long term outperformance in both income and capital values. John ManserChairman5 December 2007 Business Review Overview and Strategy Our strategy is to invest only in the busiest areas of the West End of London -a city that is universally recognised to be the best in Europe for present andfuture business ventures as well as being the World's most popular destinationfor overseas visitors. As a consequence, London's economy is very buoyant. This prosperity isstimulating the development of large new business districts such as Paddingtonand King's Cross, which have easy access to the West End. It is alsoencouraging to see investment in several major new hotels in the West End aswell as projects to improve London's infrastructure, which are essential if thecity's prosperity is to be maintained. Central and Local Government are now committed to improving public transportupon which the success of London depends. Important long-term improvements topublic transport are starting to have an impact with the re-opening of St.Pancras Station, improvements to King's Cross and the consequent release ofWaterloo Station's Eurostar platforms for domestic services. Recently, theGovernment has also given a commitment to the construction of the Crossrail East/West route. A growing cosmopolitan population, together with exciting and variedopportunities for employment is giving Central London a prosperity which ismaterially greater than that seen elsewhere in the UK and which is less relianton the domestic economy than other UK cities. We are seeing the benefits of thisprosperity in our villages. London also has an exceptionally extensive, varied and historic urbanenvironment, which distinguishes it from other cities. This makes CentralLondon and in particular the West End, especially attractive to domestic andoverseas visitors, whose numbers and expenditure are at record levels. Touristsare attracted by those cultural and leisure assets which set the West End apartfrom any other city, namely its unrivalled cluster and choice of World classtheatres, cinemas, museums, galleries, historic buildings and public spaces, aswell as the extensive choice of shops and restaurants. Over the past fifteen years we have assembled a unique estate of over 400buildings in the heart of the West End. Clustered around some of London's mostvibrant areas, we have created distinctive villages such as Carnaby andChinatown. Within Covent Garden we now have a number of districts includingSeven Dials, the Opera Quarter and our Longmartin Joint Venture, as well asholdings around the Coliseum, which is close to Trafalgar Square. In addition,we have identified other adjacent areas within the West End in which we areinvesting. Whilst we choose areas with good access to public transport, generally we avoidstreets which are dominated by national brands and where high rents restrict thepotential for long term growth. Our tightly knit team has very detailed local knowledge and specialist skills inurban regeneration, as well as an enterprising approach to estate management.We are able to identify clusters of streets, where properties are run down,often vacant, and rents are low. Through numerous transactions and projects, wecreate over time distinctive high quality neighbourhoods thereby generating longterm rental growth. We always take care to introduce an appropriate mix of usesin such a way that prosperity is enhanced without destroying local identity. Using extensive local knowledge and specialist skills, we create value in anumber of distinctive ways. For example:- • We cluster our ownerships so that we give areas an identity with anemphasis on shop, restaurant and leisure uses. • We welcome exciting combinations of alternative shops, individualrestaurants and leisure uses to create a vibrant street life. Increasingly asLondon continues to prosper, we focus on higher quality and more varied conceptswhich meet current expectations of demand. • We adapt our properties and change our tenants as we identifyopportunities to reconfigure space to meet the changing needs of occupiers andcustomers. • We provide a range of sizes and rental levels especially for shopswithin each of our villages. For example, we are aware that there is strongdemand and lack of availability of units over 1,000 sq. ft., so we are quick toadapt our refurbishment strategies to satisfy this growing market. • We work closely with Westminster City Council and Camden Council tocoordinate our respective plans and to combine resources so that the bestpossible environments are created. Between us we seek to deliver regenerationof a high quality which includes not just buildings, but also pedestrianfriendly environments. Many of the issues faced are complex ones andincreasingly our involvement now includes environmental health and licensing aswell as the public realm. The mutual benefits of this integrated approach areapparent in the success and vibrancy of our villages. • Each year we identify new opportunities to invest in our chosenlocations, which we know will deliver long term growth once refurbished. Manyacquisitions are of un-modernised or derelict properties, which we can improveto our specifications. For example, by conversion, we introduce new residentialaccommodation into former office floors as we are aware of the strong demandfrom those wishing to live in the liveliest districts in London. We make it a priority to have frequent and direct contact with our principalshareholders and stakeholders as well as prospective investors so that they areaware of our unique strategy and how we implement it. Portfolio activity Acquisitions during the year totalled £32.1 million. During 2007 the supply ofsuitable property in our chosen locations was limited by vendors' reluctance tosell other than at very high prices. Increasing economic uncertainty since theyear end has led to a change in sentiment, and already we are being offered anumber of interesting opportunities. Since the year end, taking advantage of our REIT tax status, we acquired theentire share capital of Carnaby Investments Limited for a consideration of £4.89million, satisfied by the issue of 889,000 Ordinary 25p shares at £5.50. Thesole asset of that company is the one freehold in Carnaby Street which we didnot already own. Capital expenditure on our portfolio totalled £9.8 million, equivalent to 0.7%of its year end valuation. Of the total, fees and preliminary works incurred inour Longmartin project accounted for £1.8 million. The continuing low level ofexpenditure on our wholly owned portfolio reflects our focus on improvingexisting buildings and concentration on uses where the extent of fit-out costsand obsolescence we incur is low. Following our conversion to REIT status in April 2007, and the consequentelimination of any taxation liability on sales of properties, we have identifiedcertain investments which are no longer central to our core holdings andstrategy and their potential for rental and capital growth does not meet ourrequirements. Our initial sales, which included a restaurant, a theatre andthree apartments, realised net proceeds of £8.4 million and reflected priceswhich in aggregate were 36% above their book value at 31 March 2007. Furthersales are being considered. In the year to 30 September 2007 we let commercial space with an aggregaterental value of £3.2 million per annum, comprising £1.6 million of shops, £0.7million of restaurants and £0.9 million of offices. New opportunities to let orre-let vacant space have been limited by the absence of large shops andrestaurants coming vacant and also by delays in obtaining the planning consentsneeded to change use or reconfigure units. However, since the year end we haveobtained a number of useful consents which will allow us to advance theseprojects. Demand from prospective tenants is exceptionally strong and extends to every useacross all our villages. The rental value of wholly-owned vacant commercial space at 30 September 2007was historically low at only £2.1 million, which represents 3% of the estimatedrental value of our wholly-owned portfolio. Almost half the vacant space at theyear end was under offer. Where planning consents are awaited, these rentalvalues do not fully reflect values expected on completion of renovation works. In addition to the commercial space under refurbishment, we have 25 newapartments currently being created from former offices, of which nineteen are inCovent Garden. Analysis of Wholly Owned Vacant Commercial Space at 30 September 2007 Shops Restaurants and Offices Total leisureEstimated Rental Value £'000 £'000 £'000 £'000 Under refurbishment 42 88 335 465Ready to let 257 300 92 649Under offer 558 400 39 997Total 857 788 466 2,111 Number of units 22 5 25Area - sq. ft. 18,000 20,000 24,000 62,000 Our Portfolio Our wholly owned portfolio at 30 September 2007 included 292 shops extending to368,000 sq. ft. and producing 41% of total income with an average unexpiredlease term of seven years. Sixteen of our 22 vacant shops available to let aresmall units of under 1,000 sq. ft. Recently, we have identified a number oflarger shops where we intend to secure vacant possession in 2008. This willenable us to introduce new brands and create new rental evidence. We actively encourage new retail ideas. During the year, we have introducedseveral exciting new retailers especially into Carnaby and Seven Dials. Demandfor new food based concepts both in Chinatown and the Opera Quarter is aparticularly interesting development, which we intend to encourage. Preliminaryenquiries for shops to be created in our Longmartin project are already mostencouraging. We have 153 restaurants, bars and clubs, with a total area of 399,000 sq. ft. inour wholly owned portfolio. They provide 29% of contracted income with anaverage unexpired lease term of fifteen years. Catering projects are long-terminvestments for both landlord and tenant. Installation of plant essential fortoday's high quality restaurants can present particular challenges inconservation areas and often listed structures such as our own. Whilst suchpractical issues, combined with a strict planning and licensing regime, greatlylimit the supply of new restaurants in the West End, there is, at the same time,a growing demand from experienced and enterprising caterers to open new venturesas the popularity of "eating out" increases. Consequently, we have stronginterest whenever a restaurant comes vacant. Offices in our wholly owned portfolio extend to 425,000 sq. ft. With 334tenancies, they comprise the largest single tenant group in our portfolio.However, they only represent 23% of our income. Whilst virtually all ouroffices are let, the unit size is small (1,270 sq. ft. on average) and leasesare short, with an average un-expired term of four years. We are aware that theoffice market tends to be cyclical and in any downturn our office tenants,unlike our retail and restaurant tenants, can readily find alternativelocations. Consequently, we continue our long-term policy of converting smallerand older office space to other less cyclical commercial and residential uses. We have 254 apartments in our wholly owned portfolio, which now represent 7% ofour income. They are currently fully let. Such is the strength of currentdemand that when a unit becomes vacant it is usually re-let andincome-producing within 4 weeks. Whilst we expect to make selective residentialsales, we will also continue with our current conversion programme to create newflats and maisonettes. Carnaby Carnaby Statistics Valuation 30 September 2007 £559.4 millionPercentage of portfolio 40%Acquisitions during year £ 19.0 millionCapital expenditure in year £2.6 millionValuation surplus £45.9 millionValuation uplift 9.0% Number Area - % of Current Gross Sq. ft. Income Shops 138 186,000 47Restaurants and leisure 36 78,000 12Offices (tenancies) 189 255,000 37Residential 58 45,000 4 Carnaby, our largest village, represents 40% of our assets by value and includes47% of our wholly owned shops and 60% of our wholly owned offices. Whilst the shops in Carnaby Street are substantially fully let, our priority is,wherever possible, to promote change by introducing fresh brands which are oftennew to the UK. Since April, lettings of larger shops have included HilfigerDenim, G-Star and USA Pro. We have identified new opportunities to obtainvacant possession of a number of shops in 2008 for which there is a readydemand. The opening of a new 6,000 sq. ft. restaurant, Cha Cha Moon, which fronts bothGanton Street and Kingly Court, is imminent. Whilst long awaited, this excitingnew concept is likely further to invigorate activity in Kingly Court, which nowhas a canopy for most of the winter months. Ganton Street, with its cluster ofbars, cafes and clubs at the centre of Carnaby village, is now well establishedas an exciting leisure destination. Recently, we have made a number of key acquisitions which will allow us toprogress further development opportunities over the next three years. Westminster City Council's Action Plan for Soho was adopted in June 2007. Thisincludes, as a priority, the improvement and partial pedestrianisation of KinglyStreet on the western boundary of our Carnaby holdings, adjacent to RegentStreet. We expect work to take place on this under-utilised street during 2008. Covent Garden Covent Garden Statistics Longmartin* - Shaftesbury Group's Wholly Owned 50% share Valuation 30 September 2007 £381.1 million £81.7 millionPercentage of portfolio 27% 6%Acquisitions during the year £8.4 million -Capital expenditure in year £4.0 million £1.8 millionBook value of disposals (excluding transfers to £6.2 million -Joint Venture)Valuation surplus £29.6 million £9.2 millionValuation uplift 8.1% 12.7% Wholly Owned Longmartin Total Number Area - % of current Number Area - % of current Sq. ft. gross income Sq. ft gross income Shops 98 123,000 47 7 16,000 23Restaurants and leisure 53 124,000 23 7 44,000 26Offices (tenancies) 72 106,000 18 40 **157,000 38Residential 108 78,000 12 44 37,000 13 * Longmartin statistics refer to existing accommodation at 30 September 2007** Includes 35,000 sq. ft. of garaging Our holdings in Covent Garden, including our 50% share in the Longmartin JointVenture, represent 33% of our property assets. Seven Dials offers a diverse choice of shops and restaurants in a distinctiveurban village environment. Our successful regeneration of Monmouth Street is now having a beneficial impacton neighbouring streets, especially Earlham Street, and we are experiencingstrong retail demand in these locations. As with Carnaby, we have very fewvacant shops, but, with our proactive management style, we already have projectsin hand, which offer opportunities to introduce exciting new retailers in 2008. In October, we secured the purchase of a small but strategically significantbuilding in Neal's Yard, completing our ownership of the south side of the yard.We have also identified a number of potential acquisitions in the area. Following two key purchases during the second half of the year, holdings in ourOpera Quarter now include eighteen restaurants and cafes and nine shops. Centredon four streets, this area is in the heart of Covent Garden, next to seven ofLondon's world famous theatres, and adjacent to the Piazza. We are well advanced with our schemes for a high quality food and leisurequarter as well as improving office accommodation and introducing residentialuses. Strong interest from occupiers of both commercial and residentialaccommodation is leading to early lettings. Recently, we have received twoimportant planning consents and further schemes are now being prepared. We welcome Westminster Council's proposals to improve the neighbouring streetsas part of its Covent Garden Action Plan. Longmartin, our 50% joint venture with The Mercers' Company currently includes254,000 sq. ft. of predominantly un-modernised offices and garages on an IslandSite of almost two acres with frontages to four streets including Long Acre andclose to Leicester Square Station. It is also immediately south of our holdingsin Seven Dials. Plans for regeneration envisage an entirely new destinationwith retail, restaurant, leisure, office and residential uses around a centralcourtyard with pedestrian access leading from Long Acre and St. Martin's Laneand Mercer Street. In August, planning consent was obtained for the first four elements. Thesereplace 105,000 sq. ft. of principally offices and garaging with 112,000 sq. ft.of mixed use with a balance of shops, offices, residential and restaurantaccommodation. We are now submitting further applications to replace 58,000 sq.ft. predominantly of offices with 84,000 sq. ft. of shops, offices andresidential uses. In total, these projects will comprise 25 shops, sixrestaurants, bars and cafes, 69,000 sq. ft. of offices and 33 apartments. With all of the existing space currently either vacant or let on short termleases, we have started preliminary works and expect the main contracts to becommenced in Spring 2008. Securing vacant possession ahead of commencement ofthese works is resulting in a considerable loss of income and empty propertycosts. We currently estimate our share of the costs of the scheme will be in theregion of £27 million, to be incurred in the period to mid-2010. In close co-operation with our Joint Venture partner, The Mercers' Company,which also own adjacent properties along Long Acre, we are assisting WestminsterCouncil in its plans to carry out significant environmental and streetImprovements to Long Acre and to its busy junction at St. Martin's Cross. Thiswork is expected to commence early in 2008. During 2008, we expect to advance plans for the improvement of the remainingbuildings on the site, which currently extend to 90,000 sq. ft. and include32,000 sq. ft. of offices, 42 apartments, two shops, two clubs and a bar. Chinatown Chinatown Statistics Valuation 30 September 2007 £341.6 millionPercentage of portfolio 25%Acquisitions during the year £4.7 millionCapital expenditure in year £1.3 millionValuation surplus £15.9 millionValuation uplift 4.9% Number Area - % of Current Gross Sq. ft. Income Shops 53 55,000 26Restaurants and leisure 57 177,000 61Offices (tenancies) 64 48,000 7Residential 70 45,000 6 Our holdings, which now extend to much of London's Chinatown, include 57restaurants and 53 shops. These uses produce 87% of its income, and representthe highest concentration of restaurant and retail uses in our portfolio. Chinatown comprises 25% of our assets. Substantially all space is let, withmost of the restaurants let on long leases with an average unexpired term ofsixteen years. Vacant restaurant and retail units are rare. Raising the overall quality of Chinatown remains a priority and we have madefurther investment in street improvements in conjunction with Westminster CityCouncil. The resurfacing of Lisle Street is well advanced and our next projectwith Westminster City Council involves proposals for pavement widening inWardour Street and a raised carriageway at the important junction of WardourStreet and Gerrard Street, to facilitate pedestrian flows. Thames Water's extensive works to replace the Victorian water mains in WardourStreet, Shaftesbury Avenue and Lisle Street have been hugely disruptive for ourtenants for much of 2007. However, these works are now substantially complete.Whilst further street improvements and neighbouring developments will inevitablycause further disruption in the short term, we are confident that, based on ourexperiences in other locations, these initiatives will materially enhance theattractiveness of the area. Risks and uncertainties facing the business Operational and financial risks facing the business are monitored through aprocess of regular assessment by the executive team and reporting and discussionat meetings of the Audit Committee and the Board. The valuation of all property assets involves assumptions regarding incomeexpectations and yields that investors would expect to achieve on those assetsover time. Many external economic and market factors, such as interest rateexpectations, bond yields, the availability of finance and the relativeattraction of property against other asset classes, could lead to a reappraisalof the assumptions used to arrive at current valuations. In adverse conditions,this reappraisal could lead to a reduction in property values and a loss in netasset value, amplified by the effect of gearing. The key risks identified by the Group's assessment processes specific to itsbusiness arise from the concentration of the Group's assets in the centre of theWest End of London. The prosperity of the West End economy, and therefore of theGroup's retail and restaurant occupiers, is heavily dependent on large numbersof domestic and overseas visitors to this high profile area. With such a diversevisitor base, our experience is that visitor numbers and spending are lessinfluenced by economic considerations than other domestic retail locations.However, any external events in our high profile locations, such as security andpublic safety or health concerns or transport disruption, which might result ina sustained and significant reduction in visitor numbers could, over time, leadto a reduction in occupier demand and the rental potential of the Group'sproperty assets. All of the Group's properties are located within the jurisdictions ofWestminster City Council and the London Borough of Camden. Although the Groupworks closely in many aspects of day-to-day business with these localauthorities, changes to their policies, particularly those relating to planningand licensing, could have a significant impact on the Group's ability tomaximise the long term potential of its assets. Results Our profit before taxation for the year, adjusted as shown on page 4 toeliminate the surplus realised on property disposals, the loss on purchase ofdebenture stock and the fair valuation movements in respect of investmentproperties and financial derivatives, amounted to £12.7 million, a smalldecrease on the 2006 equivalent figure of £13.5 million. Profit on ordinaryactivities before taxation reported in the Income Statement amounted to £124.2million (2006: £187.6 million). Our rental income has continued to rise, with rents invoiced (adjusted for leaseincentives) increasing from £52.2 million to £55.6 million. Eliminating theimpact of property acquisitions and disposals, on a like-for-like basis rentsreceivable have increased by 6.2% this year compared with the previous year. Thepattern of rent reviews and lease renewals means that the growth in rentalincome has been less than the growth in the estimated rental value of ourportfolio. Property outgoings have increased this year by £0.8 million to £6.0 million(2006: £5.2 million). Of this increase, £0.3 million relates to increasedexpenditure on the marketing and promotion of our villages both in the UK andoverseas. Interest payable rose by £4.1 million during the year to £30.3 million and wascovered 1.41 times (2006: 1.51 times) by operating profits before investmentproperty disposals and valuation movements. The increase in interest costs arosefrom the higher rates of interest payable on the capped and un-hedged elementsof the Group's borrowings and the cost of financing recent property additions toour portfolio. Virtually all of the proceeds of this year's property disposalswere received after the year end. Over the last two years we have acquired a number of properties which wereeither vacant or producing a low initial income. Our estate management plansusually reduce income still further in the short term as we secure vacantpossession, obtain planning permissions and carry out improvement works prior tore-letting. In the long term these initiatives are expected to lead to muchincreased income, which will reverse the initial funding deficit, and deliverhigher capital values. We do not currently capitalise any interest. This year's administration expenses include a charge of £0.1 million (2006: £1.6million) in respect of the National Insurance liability on share awards andshare options expected to vest in the future. During the year, a substantialnumber of share options were exercised at market prices materially in excess ofthe share price of £6.00 prevailing at the last year end. However, theadditional national insurance costs which resulted from these exercises havebeen offset by the effect of the reduction in share price in the second half,which has materially reduced the provision in respect of options not yetexercised at the year end. The tax charge on the adjusted profit for the year was £1.2 million, comparedwith £3.9 million last year. Tax losses within the wholly-owned Groupeffectively eliminated the liability to Corporation tax in the first half. Notax liability arose in the second half as, from 1 April 2007 when the Groupconverted to REIT status, virtually the entire taxable profits within thewholly-owned Group arose from its tax-exempt activities. Longmartin remainsoutside of the Group's REIT election, so that our share of Longmartin's profitcontinues to be subject to corporation tax and deferred tax continues to beprovided in respect of our share of its property revaluation surpluses. The taxation credit reported in the Income Statement of £140.6 million (2006:charge - £50.1 million) includes both the charge incurred in converting to REITstatus of £27.5 million and the release of net deferred tax liabilities of£171.4 million as a result of conversion. The major refinancing of half of our long term Debenture debt was completed inOctober 2006, with the purchase of £6.5 million of Debenture Stock at a cost of£9.3 million, realising a loss of £2.5 million. The Board continues to be alertto opportunities to refinance further stock if the terms for both purchase andthe cost of alternative finance offer a clear long term benefit to the Group. Adjusted diluted post-tax earnings per share for the current year amounted to8.55p compared with 7.18p last year. Unadjusted diluted post-tax earnings pershare shown in the Group Income Statement for the current year amounted to196.92p compared with 103.32p last year. Unadjusted Shareholders' funds at the year end shown in the Group Balance Sheettotalled £866.8 million, equivalent to a diluted net asset value of £6.41 pershare, an increase over the year of £259.9 million, or 187p per share. Adjustingthese amounts to exclude the deferred tax liability arising on the valuation ofinvestment properties and the fair value of financial derivatives and associateddeferred tax, our adjusted net asset value becomes £872.7 million equivalent toa diluted net asset value per share of £6.46 per share (2006: £788.7 million -£5.90 per share), an increase of £84.0 million or £0.56 per share. Dividends Following our conversion to REIT status, the level of our dividends must nowreflect the requirement of REIT legislation, which requires us to distribute aminimum of 90% of income arising from our rental business (calculated byreference to tax rather than accounting rules). For this year, theserequirements apply to the second half only. Our interest in Longmartin is not currently within our REIT election, so thatour share of its rental income and the cost of financing our investment in thejoint venture are excluded from the calculation of taxable rental profits forREIT purposes. During the initial stages of this major scheme, Longmartin's netrental income is reduced and is less than the cost of financing our investment.Excluding this deficit from the calculation of taxable profits across the Groupmeans the amount we are currently required to distribute to meet our REITobligations exceeds our distributable accounting profits in the second half.Looking forward, this situation will persist until such time as the eligibilityrules permit us to include Longmartin in our REIT election or as Longmartin'sscheme progresses and the financing deficit reverses. Apart from our interest in Longmartin, virtually all of the Group's activitiesare within the REIT ring fence. Our proposed final dividend, together with asubstantial element of dividends in the foreseeable future, will therefore beProperty Income Distributions ("PIDs"), which we expect will increase in linewith the growth of our underlying income. Clearly, the introduction of REITdistribution obligations is an additional factor which will need to be takeninto account in setting the level of dividends, so that the pattern of increasemay be less smooth than in the past. We expect that from next year interim and final dividends will be more evenlybalanced. Finance The nominal value of bank borrowings at the year end totalled £487.7 million, anincrease of £27.1 million over the previous year end. Cash outflows during theyear on acquisitions less disposals of investment properties amounted to £31.6million and expenditure on refurbishments totalled £9.9 million. Revenueoperations after interest and taxation produced a net cash surplus of £13.5million, compared with £12.2 million in the previous year. The refinancing ofDebenture Stock in October 2006 cost £9.3 million, largely met out of cashbalances held at the last year end. Gearing at the year end, calculated by reference to our adjusted net assetsreferred to above and the nominal rather than book value of our Debenture andnet bank debt, was 56% (2006: 57%). The ratio of the nominal value of debentureand net bank debt to the market value of our property assets was 35% (2006:36%). Our strategy is to secure flexible long and medium term finance together withnon-speculative hedging of the interest rate exposure on a substantial portionof our floating rate debt. This finance strategy is intended to match ourfunding with our assets which are held for long term investment, and providereasonable certainty of finance costs whilst limiting the Group's exposure toadverse movements in interest rates. The Board keeps under review the level of current and forecast debt and theGroup's strategies regarding the appropriate levels of debt and equity finance,the maturity profile of loan facilities and interest rate exposure and hedging. During the year, we secured additional bank facilities of £25 million, bringingour total committed facilities to £525 million. The maturity of our largestfacility was extended during the year, which accounted for the increase inweighted average maturity of our facilities to 9.9 years (2006: 8.8 years).Committed unutilised facilities at the year end totalled £98 million (2006: £107million). At the year end, the weighted average cost of our borrowings including marginwas 6.54%, compared with 6.01% at the previous year end. Base rate increasedover the year from 4.75% to 5.75%. The turbulence in financial markets sinceJuly has resulted in LIBOR rates at up to 1% higher than base rate, although wehave mitigated some of this additional cost by taking short term LIBOR fixtures,where the rates have been much closer to base rates. At the year end, £226 million of borrowings, equivalent to 46% of our bank anddebenture debt was either at fixed rate or hedged at fixed rates. In addition,£125 million of borrowings, equivalent to 26% of our bank and debenture debt,was subject to interest rate hedges under which we pay floating rate LIBOR butour exposure to three month LIBOR rates is capped at a maximum of 6.5%. InNovember 2007 we entered into forward start interest rate hedges for an averageterm of seven years on a further £45 million notional principal at an averagefixed rate of 5.3%. Together with existing arrangements, these new hedges, whichcommence in April 2008, bring our total of fixed rate and hedged debt to £396million, equivalent to 81% of year end borrowings. At 30 September 2007, the fair value of the Group's interest rate derivativescontracted at that date represented a liability of £0.6 million (2006: £9.3million). The reduction in the liability reflects the market expectation offuture interest rates at higher levels than were previously expected. The deficit arising on the fair value of the Group's long term debenture debt,which IFRS does not allow to be reflected in the results, amounted to £14.5million, based on £61.0 million of Stock in issue (2006: £24.9 million, basedon £67.5 million of Stock in issue). The reduction in the deficit has arisen asa result of Stock repurchases, market expectations of higher future interestrates and a widening of bond yields. The Group has no legal obligation to crystallise these fair value deficits byfurther early refinancing of its fixed rate debt or the early termination of itsinterest rate hedges but may consider doing so where there is a clear economicbenefit to the business. The Board monitors both actual and forecast performance against the covenantscontained in the Group's bank facilities. Our banking covenants are structuredon a Group-wide basis and are broadly similar for each of our facilities. Theyrequire us to maintain minimum levels of property security value compared withactual borrowings, minimum levels of interest cover compared with net propertyincome and set a maximum level of gearing on shareholders' funds. Performance and Benchmarking The table on page 3 summarises our performance this year against our chosenbenchmarks. As explained in previous years, we have been unable to identify a publishedproperty performance index which relates specifically to a portfolio of mixeduse buildings such as ours, or recognises restaurant uses as a component, animportant element of our investment strategy. We have therefore used forcomparison purposes the IPD UK Monthly Index which tracks movements across allmain commercial property categories on a monthly basis. Shaftesbury is aconstituent of the FTSE 350 Real Estate Index. As shown in the Performance Summary on page 3, this year our capital value andtotal returns have again out-performed the IPD All Property Monthly indices bysignificant margins. The degree of out-performance in total return was less thanthat for the portfolio return due to the lower yield profile of our assets. After two years of substantial out-performance, we recorded a negative totalshareholder return for the year ended 30 September 2007 of 16.5%, against theFTSE 350 Real Estate Index which recorded a negative return of 14.1% over theyear. Adverse sentiment towards the real estate sector in the second half of theyear, after two years of exceptional returns, has resulted in significantreductions in share prices across the sector, which in most cases are now atsubstantial discounts to net asset values. Over the three years to 30 September2007, Shaftesbury produced a total shareholder return of 85.7% compared with theFTSE Real Estate Index return of 56.5%. Key Performance Indicators The key financial objective of the Group is to deliver to shareholders sustainedout-performance in the long term growth in its net asset value. Fundamental tothis objective is the growth in value of the Group's property assets. The Groupmeasures its overall portfolio performance against the IPD UK Monthly Indexwhich, as explained above, tracks movements across all main commercial propertycategories on a monthly basis. The Group's performance against this Index is setout on page 2. The rental growth prospects of the Group's portfolio are the key driver of itslong term performance. The key non-financial performance indicators used withinthe business measure: - the extent to which rental levels are achieved in excess of the marketrental values assessed by the Group's external valuers at their last valuationand; - the ability of management to minimise the time that properties arevacant and not producing income. In the case of properties being refurbished,the void period being monitored includes time spent in designing schemes,obtaining planning consents, carrying out physical works and marketing up to thepoint of completing lettings. For vacant properties ready to let, marketingperiods are monitored and assessed. The Board is satisfied that the key performance indicator of rental growth ismeeting its expectations. Void periods are generally at an acceptable levelalthough where delays occur these are often due to problems beyond the Group'scontrol, such as delays in the planning process or the failure of utilitycompanies to meet their service obligations. At present there are no indicationsthat capacity constraints within the construction industry are delaying thecompletion of the Group's schemes. Prospects The West End economy is extremely buoyant, with increasing numbers of visitorsand spending being reported. Consequently there is strong occupier demand forall uses across each of our villages. This is reflected in sustained growth inrental values throughout our portfolio. In contrast, current financial concerns in the wider economy are leading to anincrease in property yields and downward pressure on property values. Ourfinancial resources will enable us to take advantage of opportunities which aremore likely to arise in this weakened investment market. We believe the rentalgrowth prospects of our resilient, well-located portfolio, together with ourvalue-creating management initiatives, will continue to deliver out-performancein income and capital values. Jonathan S. Lane - Chief ExecutiveBrian Bickell - Finance Director5 December 2007 Portfolio Analysis at 30 September 2007 Note Carnaby Covent Chinatown Charlotte Wholly Longmartin* Total Garden Street Owned Portfolio Portfolio Market Value 1 £559.4 m £381.1m £341.6m £30.2m £1,312.3m **£81.7m £1,394.0m% of total Market 40% 27% 25% 2% 94% **6% 100%ValueCurrent gross income 2 £23.2m £15.5m £15.3m £1.3m £55.3m **£2.6m £57.9mEstimated rental 3 £29.7m £20.1m £17.1m £1.5m £68.4m **£4.0m £72.4mvalue (ERV)ShopsNumber 138 98 53 3 292 7Area - sq. ft. 186,000 123,000 55,000 4,000 368,000 16,000% of current gross 4 47% 47% 26% 9% 41% 23%income% of ERV 4 47% 49% 27% 9% 42% 21%Vacancy rate by % of 5 2% 4% 3% - 5% -ERVAverage unexpired 6 5 10 8 14 7 2lease length - yearsRestaurants andleisureNumber 36 53 57 7 153 7Area - sq. ft. 78,000 124,000 177,000 20,000 399,000 44,000% of current gross 4 12% 23% 61% 46% 29% 26%income% of ERV 4 13% 22% 59% 41% 28% 18%Vacancy rate by % of 5 2% 8% 3% - 3% -ERVAverage unexpired 6 13 14 16 15 15 5lease length - yearsOfficesNumber of tenancies 189 72 64 9 334 40Area - sq. ft. 255,000 106,000 48,000 16,000 425,000 ***157,000% of current gross 4 37% 18% 7% 27% 23% 38%income% of ERV 4 36% 17% 8% 34% 23% 52%Vacancy rate by % of 5 3% 1% 12% 17% 5% 32%ERVAverage unexpired 6 4 5 4 2 4 2lease length - yearsResidentialNumber 58 108 70 18 254 44Area - sq. ft. 45,000 78,000 45,000 10,000 178,000 37,000% of current passing 4% 12% 6% 18% 7% 13%rent% of ERV 4 4% 12% 6% 16% 7% 9%Vacancy rate by % of 5 20% 23% 13% 4% 22% 6%ERV * Longmartin statistics refer to existing accommodation at 30 September 2007 ** Shaftesbury Group's share *** Includes 35,000 sq. ft of garaging Basis of Valuation at 30 September 2007 Note Carnaby Covent Chinatown Charlotte Wholly Longmartin* Garden Street Owned Portfolio Overall initial yield 8 3.78% 3.67% 4.23% 3.86% 3.87% 2.50%Overall equivalent yield 9 4.68% 4.59% 4.73% 4.45% 4.66% 4.13%Tone of retail equivalent 4.35 - 4.00 - 4.75 - 4.25 - 4.15 - 4.50%yields 5.85% 5.60% 5.50% 5.25%Tone of retail estimated £75 - £320 £65 - £350 £150 - £260 £72-£80 £317 - £390rental values - ITZA £ per sq.ft.Tone of restaurant equivalent 5.00% 4.00 - 4.75 - 4.25 - 4.00 - 6.00%yields 5.50% 5.12% 4.75%Tone of restaurant estimated £60 - £90 £35 - £105 £130 - £315 £70 £40 - £81rental values -£ per sq.ft. ITZATone of office equivalent 4.80 - 5.00 - 5.25 - 5.00 - 4.75 - 6.00%yields 5.75% 6.00% 5.60% 5.75%Tone of office estimated £38 - £57 £29 - £55 £30 - £42 £35 - £39 £30 - £40rental values -£ per sq.ftTone of residential estimated £9,100 - £10,100 - £7,800 - £9,300 - £13,000 -rental values-£ per annum £52,000 £52,000 £26,700 £17,200 £29,000 Notes 1. The Market Values shown above in respect of the four Villages are, in eachcase, the aggregate of the market values of several different property interestslocated within close proximity which, for the purpose of this analysis arecombined to create each Village. The different interests in each Village werenot valued as a single lot. 2. Current gross income includes total actual and 'estimated income' reservedby leases. Current gross income does not reflect any ground rents, head rents orrent charges and estimated irrecoverable outgoings as at 30 September 2007 (the'date of valuation'). 'Estimated income' refers to gross estimated rentalvalues in respect of rent reviews outstanding at the date of valuation and,where appropriate estimated rental values in respect of lease renewalsoutstanding at the date of valuation where the Market Value reflects terms for arenewed lease. 3. Estimated rental value ("ERV") is the respective valuers' opinion of therental value of the properties, or parts thereof, reflecting the terms of therelevant leases or, if appropriate, reflecting the fact that certain of theproperties, or parts thereof, have been valued on the basis of vacant possessionand the assumed grant of a new lease. Estimated rental value does not reflectany ground rents, head rents or rent charges and estimated irrecoverableoutgoings. 4. The percentage of current gross income and the percentage of ERV in eachof the use sectors are expressed as a percentage of total gross income and totalERV for each village. 5. The vacancy rate by percentage of ERV is the ERV of the vacantaccommodation within each use sector, on a village-by-village basis, expressedas a percentage of total ERV of each use sector in each village. 6. Average unexpired lease length has been calculated by weighting the leasesin terms of current rent reserved under the relevant leases and, where relevant,by reference to tenants' options to determine leases in advance of expirythrough effluxion of time. 7. Where mixed uses occur within single leases, for the purpose of thisanalysis the majority use by rental value has been adopted. 8. The initial yield is the net initial income at the date of valuationexpressed as a percentage of the gross valuation. Yields reflect net incomeafter deduction of any ground rents, head rents and rent charges and estimatedirrecoverable outgoings at 30 September 2007. 9. Equivalent yield is the internal rate of return, being the discount ratewhich needs to be applied to the flow of income expected during the life of theinvestment so that the total amount of income so discounted at this rate equalsthe capital outlay at values current at the date of valuation. The EquivalentYield shown for each Village has been calculated by merging together the cashflows and Market Values of each of the different interests within each Villageand represents the average Equivalent Yield attributable to each Village fromthis approach. 10. The tone of rental values and yields is the range of rental values oryields attributed to the majority of the properties. Group Income StatementFor the year ended 30 September 2007 Note 2007 2006 £'000 £'000Continuing operations Revenue from properties 1 62,423 58,792 Property charges 2 (12,843) (11,809) Net property income 49,580 46,983 Administration expenses (5,628) (5,320) Charge in respect of equity settled 3 (1,140) (2,101)remuneration Total administration expenses (6,768) (7,421) Operating profit before investment property 42,812 39,562disposals and valuation movements Profit on disposal of investment properties 4 2,215 748 Investment property valuation movements 103,034 190,933 Operating profit 148,061 231,243 Interest receivable 214 130 Interest payable 5 (30,313) *(26,202) Change in fair value of financial 8,688 *2,440derivatives Loss on purchase of debenture stock 6 (2,474) (20,009) Total finance costs (23,885) (43,641) Profit before tax 124,176 187,602 Current tax 7 (27,980) (391) Deferred tax 7 168,612 (49,709) Tax credit/(charge) for the year 140,632 (50,100) Profit for the year 264,808 137,502 Earnings per share: 8 Basic 197.90p 103.75p Diluted 196.92p 103.32p * Adjusted to reflect re-classification of payments under hedging contracts (seeNote 5) Balance Sheet As at 30 September 2007 Note 2007 2006 £'000 £'000Non-current assetsInvestment properties 10 1,393,662 1,254,776Office assets and vehicles 387 409Investment in subsidiary undertakings - -Investment in joint venture - -Deferred tax assets - 7,610 1,394,049 1,262,795Current assetsTrade and other receivables 11 24,622 15,058Cash 336 9,090 Total assets 1,419,007 1,286,943 Current liabilitiesTrade and other payables 12 33,666 22,633 Non-current liabilitiesTaxation payable 13 17,901 -Borrowings 14 494,714 468,341Financial derivatives 14 630 9,318Deferred tax liabilities 5,310 179,770 Total liabilities 552,221 680,062 Net assets 866,786 606,881 EquityCalled up share capital 33,579 33,192Other reserves 16 126,468 123,888Retained earnings 16 706,739 449,801 Total equity 866,786 606,881 Net assets per share: 17Basic £6.45 £4.57Diluted £6.41 £4.54 Cash Flow StatementFor the year ended 30 September 2007 Note 2007 2006 £'000 £'000Operating activitiesCash generated from operations 18 43,032 41,564Interest received 214 130Interest paid (30,257) (27,356)Tax receipts/(payments) in respect of operating 470 (2,182)activities 13,459 12,156Investing activitiesProperty acquisitions (32,133) (107,389)Capital expenditure on properties (10,038) (8,212)Net proceeds from sales of properties 674 60,262Net purchase of office assets and vehicles (116) (185)Purchase of shares in joint venture - -Cash flows from investing activities (41,613) (55,524)Financing activitiesIssue of shares 3,693 1,184Purchase of debenture stock (9,312) (74,874)Increase in borrowings 33,562 134,032Bank loan arrangement costs (413) (773)Payment of finance lease liabilities (260) (208)Equity dividends paid 9 (7,870) (6,903)Cash flows from financing activities 19,400 52,458Net change in cash (8,754) 9,090 Statement of changes in shareholders' equityAt 1 October 2006 606,881 473,161Profit for the year 264,808 137,502Dividends paid (7,870) (6,903)Proceeds of shares issued for cash 3,693 1,184Fair value of share based remuneration 1,036 539Deferred tax in respect of share based remuneration (1,762) 1,398(released from)/charged to equityAt 30 September 2007 866,786 606,881 Notes to the Preliminary Announcement 1. Revenue from properties 2007 2006 £'000 £'000 Rents due from tenants 55,348 51,535Recognition of lease incentives 278 696Rents receivable 55,626 52,231 Recoverable property expenses 6,797 6,561 62,423 58,792 2. Property chargesProperty outgoings 6,046 5,248Recoverable property expenses 6,797 6,561 12,843 11,809 3. Charge in respect of equity settled remunerationCharge for share based remuneration 1,036 539Employers National Insurance in respect of share awards and share options 104 1,562vested or expected to vest 1,140 2,101 4. Profit on disposal of investment propertiesNet sale proceeds 8,394 48,338Book value at date of sale (6,179) (47,590) 2,215 748 5. Interest payableDebenture stock interest and amortisation 5,100 9,868Bank and other interest 24,954 *16,126Amount payable under finance leases 259 208 30,313 26,202 * Comparative amount restated to include payments under hedging contractstotalling £389,000 previously reported as part of the movement in the fair valueof financial derivatives 6. Loss on purchase of debenture stockCost of debenture stock purchased:Nominal amount - £6.494 million 9,312 -Nominal amount - £52.101 million - 74.874Nominal amount of stock purchased (6,494) (52,101) 2,818 22,773Unamortised net premium written off (344) (2,764) 2,474 20,009 7. Taxation 2007 2006 £'000 £'000Current taxUK Corporation tax at 30% 875 754REIT conversion charge 27,512 -Adjustments in respect of prior years (407) (363) 27,980 391Deferred taxRevaluation of investment properties 2,766 56,708Revaluation of financial derivatives - 732Properties sold in year - (5,268)Other temporary differences - (2,326)Released on REIT conversion (171,378) -Adjustments in respect of prior years - (137) (168,612) 49,709Tax (credit)/charge for the year (140,632) 50,100Tax charged directly to reserves:Deferred taxation in respect of share based remuneration released on REIT (1,762) -conversionDeferred taxation in respect of share based remuneration - 1,398 (1,762) 1,398 Factors affecting the tax charge:Profit before tax 124,176 187,602UK Corporation tax at 30% 37,253 56,280Taxable profit for the six months to 30.9.2007 no longer liable to UK (1,929) -Corporation tax following conversion to REIT statusDeferred tax not provided in respect of property and financial derivative (31,088) -movements and capital allowances as a result of REIT conversionDifference between expenses and deductions for taxation purposes and (595) (188)amounts charged in the financial statementsDifference due to tax treatment of property disposals - (5,492)Adjustments in respect of prior years (407) (500)Effect of REIT conversion:REIT conversion charge 27,512 -Deferred tax provided in prior years now released (171,378) -Tax (credit)/charge for the year (140,632) 50,100 8. Earnings per share 2007 *2006 £'000 £'000 Profit after tax used for calculation of basic earnings per share 264,808 137,502Adjusted for:Gain on sale of investment properties (2,215) (748)Investment property valuation movements (103,034) (190,933)Movement in fair value of financial derivatives (8,688) *(2,440)Loss on purchase of Debenture Stock 2,474 20,009 Current tax in respect of:REIT conversion charge 27,512 -Loss on purchase of debenture stock (742) (6,002)Deferred tax in respect of:Investment property revaluation gains 2,766 56,708Deferred tax released on REIT conversion (171,378) -Adjustment is respect of property disposals - (5,268)Movement in the fair value of financial derivatives - 732Profit after tax used for adjusted earnings per share 11,503 *9,560* Adjusted to reflect re-classification of payments under hedgingcontracts (see Note 5) '000 '000Weighted average number of shares in issue 133,808 132,532Weighted average number of shares in issue for calculation of diluted 134,475 133,084earnings per shareEarnings per share: Pence PenceBasic 197.90 103.75Diluted 196.92 103.32 Adjusted basic 8.60 *7.21Adjusted diluted 8.55 *7.18 The difference between the weighted average and diluted average number ofOrdinary Shares arises from the potentially dilutive effect of outstandingvested options granted over Ordinary Shares. The adjusted earnings per share is considered to give a better indication of theGroup's underlying revenue performance before non-recurring costs, propertydisposals, movements in the valuation of investment properties and financialderivatives, and losses on Debenture Stock purchases. 9. Dividends paidFinal dividend paid in respect of:Year ended 30 September 2006 at 3.73p per share 4,974 -Year ended 30 September 2005 at 3.30p per share - 4,360 Interim dividend paid in respect of:Six months ended 31 March 2007 at 2.16p per share 2,896 -Six months ended 31 March 2006 at 1.92p per share - 2,543 7,870 6,903 A final dividend in respect of the year ended 30 September 2007 of 5.50p perOrdinary share amounting to £7.4 million will be proposed by the Board at the2008 Annual General Meeting. If approved, this dividend will be paid on 22February 2008 to shareholders on the register at 1 February 2008. The dividendwill be accounted for as an appropriation of revenue reserves in the year ending30 September 2008. 10. Investment properties 2007 2006 £'000 £'000 At 1 October 2006 - book value 1,249,215 987,516Acquisitions 32,101 107,667Refurbishment and other capital expenditure 9,846 8,856Disposals (6,062) (45,757)Intra group disposals - -Net surplus on revaluation 103,034 190,933 1,388,134 1,249,215Add: Head lease liabilities 5,528 5,561Book value at 30 September 2007 1,393,662 1,254,776 Market value at 30 September 2007:Properties valued by DTZ Debenham Tie Leung 1,312,295 1,184,255Properties valued by Knight Frank LLP 81,750 70,685 1,394,045 1,254,940Add: Head lease liabilities 5,528 5,561Less: Lease incentives recognised to date (5,911) (5,725)Book value at 30 September 2007 1,393,662 1,254,776Historic cost of properties at valuation 709,310 670,386 Investment properties were subject to external valuation as at 30 September 2007by qualified professional valuers, being members of the Royal Institution ofChartered Surveyors, either working for DTZ Debenham Tie Leung Limited,Chartered Surveyors (in respect of the Group's wholly owned portfolio) or KnightFrank LLP, Chartered Surveyors (in respect of properties owned by LongmartinProperties Limited), both firms acting in the capacity of External Valuers. Allsuch properties were valued on the basis of Market Value in accordance with theRICS Appraisal and Valuation Standards. Investment properties include freehold properties valued at £1,227.4 million(2006: £1,111.6 million), leasehold properties with an unexpired term of over 50years valued at £88.9 million (2006: £77.3 million) and a notional apportionmentof value in respect of part freehold/part leasehold properties, where theapportionment in respect of the leasehold element with over 50 years unexpiredis £77.7 million (2006: £66.0 million). Capital Commitments 2007 2006 £'000 £'000 Authorised and contracted 4,752 3,220Authorised but not contracted 7,190 9,555 11. Trade and other receivablesAmounts due from tenants 9,346 7,616Lease incentives recognised in the Income Statement 5,911 5,725Due in respect of property disposals 7,835 -Corporation tax recoverable 264 1,000Dividend receivable from joint venture - -Amounts due from subsidiary undertakings - -Other receivables and prepayments 1,266 717 24,622 15,058 12. Trade and other payables 2007 2006 £'000 £'000 Rents invoiced in advance 11,884 11,061Corporation tax and REIT conversion charge payable (note 13) 10,178 365Amount due to joint venture undertaking - -Trade payables in respect of capital expenditure 1,502 1,438Other trade payables and accruals* 10,102 9,769 33,666 22,633* Includes amounts secured by way of fixed charges on certain investment 1,580 1,879properties and floating charges over the Group's wholly owned assets 13. Taxation payableREIT conversion charge 27,512 -Less: Payable within one year included in trade and other payables (note 12) (9,611) - 17,901 -The Group has elected to pay the REIT conversion charge in instalments asfollows:Year to 30 September 2008 9,611 -Year to 30 September 2009 6,847 -Year to 30 September 2010 7,286 -Year to 30 September 2011 3,768 - 27,512 - 14. Borrowings 2007 2006 Nominal Unamortised Book Nominal Unamortised Book value premium and issue value premium and costs Value issue costs Value £'000 £'000 £'000 £'000 £'000 £'0008.5% First Mortgage 61,048 3,148 64,196 67,542 3,583 71,125Debenture Stock 2024Secured bank loans 426,665 (1,675) 424,990 393,103 (1,448) 391,655Debenture and bank 487,713 1,473 489,186 460,645 2,135 462,780borrowingsFinance lease obligations 5,528 - 5,528 5,561 - 5,561 493,241 1,473 494,714 466,206 2,135 468,341 The Group's finance lease obligations represent its share of the net presentvalue of amounts payable under leases with unexpired terms of 173 years held byLongmartin Properties Limited. 15. Financing An explanation of the Group's objectives and policies for the financing of itsoperations is set out in the Business Review. The Group's main financial instruments are its 8.5% First Mortgage DebentureStock, bank loans and cash at bank, and short term debtors and creditors. Thedisclosures below exclude short term debtors and creditors. The Group does not trade financial instruments. Availability and maturity of financial facilities 2007 2006 Book value Facilities* Book value Facilities* Committed Undrawn Committed Undrawn £'000 £'000 £'000 £'000 £'000 £'000Repayable after morethan 15 years:8.5% First Mortgage 64,196 61,048 - 71,125 67,542 -Debenture Stock 2024Repayable between 10 99,520 100,000 - 99,484 100,000 -and 15 yearsRepayable between 5 and 325,470 425,000 98,335 203,409 300,000 95,75810 yearsRepayable between 2 and - - - 88,762 100,000 11,1395 years 489,186 586,048 98,335 462,780 567,542 106,897Finance lease 5,528 5,528 - 5,561 5,561 -obligations 494,714 591,576 98,335 468,341 573,103 106,897 * Nominal value The availability of the Group's bank facilities is subject to granting securityover properties of sufficient value to meet the loan to value ratios requiredunder the facility agreements. Interest rate hedging At the year end, in addition to its fixed rate debenture debt, the Group had inplace the following interest rate hedging on a total of £290.25 million of debt: 1. Interest rate collars on £90 million notional principal maturing betweenOctober 2011 and January 2016 (weighted average maturity 7.3 years). The Group pays floating rate if benchmark LIBOR sets between 3.65% and 6.50% anda maximum of 6.50% if at any calculation date LIBOR sets above the upper limit.If LIBOR sets below 3.65% the Group pays on average 5.28% for that period. Each of these arrangements are extendable at the counterparty's option on expiryfor up to a further 10 years at an average fixed rate of 5.28%. 2. A hedge on £35.25 million notional principal maturing in November 2012. The Group pays 6.05% for a three month period if the benchmark LIBOR rate setsoutside the ranges on the relevant calculation date falling: In the period to July 2008 3.00% - 6.00%In the period from August 2008 to August 2012 4.00% - 6.00% If LIBOR sets within these ranges the Group pays 4.80%. The hedge is extendableat the counterparty's option in November 2012 for a further 10 years at 5.15%. 3. An interest rate hedge on £30 million notional principal at a fixed rate of5.74% until March 2010. 4. Interest rate hedges on £60 million notional principal at an average fixedrate of 4.92% expiring between January 2017 and March 2017. 5. Interest rate hedges on £75 million notional principal at fixed rates of5.00% expiring between November 2016 and January 2017. In November 2007, the Group entered into further interest rate hedges on £45million notional principal at average fixed rates of 5.29% commencing in April2008 for seven year terms. Interest rate profile of financial liabilities 2007 2006 Debt Weighted Debt Weighted (book Average £'000 Average value) Interest Interest £'000 Rate % Rate % Floating rate borrowings LIBOR-linked loans - interest rates fixeduntil October 2007 at latest (including margin) 134,745 6.66 236,405 5.61Hedged borrowings Interest rate hedges in operationat year end (including margin) 290,250 6.17 155,250 5.45Fixed rate borrowing 8.5% First Mortgage Debenture Stock-interest rate fixed for 17.5 years until 31 March 2024 (2006 - now stated at effective interest rate) 64,196 7.93 71,125 7.93 Weighted average cost of borrowings* 6.54 *6.01 *As at the year end, ignoring interest rate hedges which commenced after thatdate. Fair values of financial derivatives 2007 2006 £'000 £'000Interest rate hedgesAt 1 October 2006 - Deficit (9,318) (11,758)Reduction in fair value deficit in year credited in the Income Statement 8,688 *2,440At 30 September 2007 - Deficit (630) (9,318) * Comparative amount restated to exclude payments under hedging contractspreviously reported as part of the movement in the fair value of financialderivatives Changes in the fair value of the Group's financial derivatives, which are notheld for speculative purposes, are reflected in the Income Statement as none ofthe Group's hedging arrangements qualify for hedge accounting under theprovisions of IAS 39 (Financial Instruments: Recognition and Measurement"). Theyhave been valued by J. C. Rathbone Associates Limited by reference to the midpoint of the yield curve at the balance sheet date. Amounts payable or receivable under the Group's hedging arrangements are dealtwith in the Income Statement on an accruals basis. 8.5% Mortgage Debenture Stock 2024Fair value deficit not recognised in the reported results for the year:At 30 September 2007 (nominal value of Stock in issue £61.048 million) (14,464) -At 30 September 2006 (nominal value of Stock in issue £67.542 million) - (24,921) The fair value of the outstanding Debenture Stock has been calculated by J.C.Rathbone Associates Limited at 93 basis points (2006: 55 basis points) above theyield to redemption of the 5% Treasury Stock 2025 at the balance sheet date. 16. Reserves Share premium Share based Retained Total payments earnings £'000 £'000 £'000 £'000At 1 October 2005 119,696 1,217 319,202 440,115Shares issued on exercise of options 1,038 - - 1,038Fair value of share based payments - 539 - 539Deferred tax adjusted in equity - 1,398 - 1,398Profit for the year - - 137,502 137,502Dividends paid during the year - - (6,903) (6,903)At 30 September 2006 120,734 3,154 449,801 573,689Shares issued on exercise of options 3,306 - - 3,306Fair value of share based payments - 1,036 - 1,036Deferred tax in respect of share based - (1,762) - (1,762)remuneration released on REIT conversionProfit for the year - - 264,808 264,808Dividends paid during the year - - (7,870) (7,870)At 30 September 2007 124,040 2,428 706,739 833,207 17. Net assets per share 2007 2006 £'000 £'000 Net assets used for calculation of basic net assets per share 866,786 606,881Adjusted for:Cumulative fair value adjustment in respect of financial derivatives 630 9,318Cumulative deferred tax provided in respect of:Investment property revaluation gains 5,310 175,300Financial derivatives - (2,795)Adjusted net assets 872,726 788,704Additional equity if all vested share options exercised 3,159 3,968Net assets used for adjusted diluted net asset calculations 875,885 792,672 Ordinary shares in issue 134,316 132,768Diluted Ordinary shares 135,619 134,425Net assets per share:Basic £6.45 £4.57Diluted £6.41 £4.54 Adjusted basic £6.50 £5.94Adjusted diluted £6.46 £5.90 The calculations of diluted net asset value per share show the potentiallydilutive effect of vested options granted over Ordinary Shares outstanding atthe balance sheet date and include the increase in shareholders' equity whichwould arise on the exercise of those options. 18. Cash generated from operationsOperating activities 2007 2006 £'000 £'000Operating profit 148,061 231,243Adjustment for non-cash items:Amortisation of lease incentives (278) (696)Share option expense 1,036 539Depreciation and losses on disposals 138 140Profit on sale of investment properties (2,215) (748)Investment property valuation movements (103,034) (190,933)Cash flows from operations before changes in working capital 43,708 39,545 Change in trade and other receivables (2,279) (249)Change in trade and other payables 1,603 2,268Cash generated from operations 43,032 41,564 19. Analysis of changes in net debtGroup 1.10.2006 Cash Non-cash 30.9.2007 £'000 Flows Items £'000 £'000 £'000 8.5% First Mortgage Debenture Stock 2024 (71,125) 9,312 (2,383) (64,196)Secured bank loans (391,655) (33,149) (186) (424,990)Cash at bank 9,090 (8,754) - 336Finance lease obligations (5,561) - 33 (5,528) (459,251) (32,591) (2,536) (494,378) 20. Investment in Joint Venture The Group's share of the results of Longmartin Properties Limited for the yearended 30 September 2007, and its assets and liabilities at that date, which havebeen consolidated in the Group's Income Statement and Balance Sheet, are asfollows: Year ended 5.12.2005 to 30.9.2007 30.9.2006 £'000 £'000Income StatementRents receivable 2,841 2,485Recoverable property expenses 176 272 3,017 2,757Property expenses (619) (275)Recoverable property expenses (176) (272) (795) (547)Net property income 2,222 2,210Administration expenses (2006 - restated to include administration fees (382) (349)payable to Shaftesbury PLC)Operating profit before investment property disposals and revaluation 1,840 1,861Profit on disposal of investment property - 40Investment property revaluation movements 9,217 8,479Operating profit 11,057 10,380Interest receivable 1,078 794Interest payable - (208)Profit before tax 12,135 10,966Current tax (875) (746)Deferred tax (2,766) (2,544)Tax charge (3,641) (3,290)Profit for the year 8,494 7,676Dividends paid (2,050) (1,150)Profit retained for the year 6,444 6,526 Balance Sheet 2007 2006 £'000 £'000Non-current assetsInvestment properties at market value 81,750 70,685Head lease liability grossed up 5,529 5,561 87,279 76,246Current assetsTrade and other receivables 715 544Amounts due from shareholders 18,800 19,875Cash 335 193Total assets 107,129 96,858 Current liabilitiesTrade and other payables 2,389 1,296Non-current liabilitiesDeferred tax 5,310 2,544Head lease liability 5,529 5,561Total liabilities 13,228 9,401Net assets attributable to the Shaftesbury Group 93,901 87,457 21. Post Balance Sheet event In November 2007 Shaftesbury Carnaby Limited acquired the entire issued sharecapital of Carnaby Investments Limited for a total consideration of £4.89million, settled by the issue of 889,422 Ordinary 25p shares. The sole propertyasset of that company was a freehold property in Carnaby Street, London W1. 22. Basis of preparation The preliminary announcement does not constitute full financial statements. The results for the year ended 30 September 2007 included in this preliminaryannouncement are extracted from the audited financial statements for the yearended 30 September 2007 which were approved by the Directors on 5 December 2007.The auditors' report on those financial statements was unqualified and did notinclude a statement under Section 237(2) or 237(3) of the 1985 Companies Act. The 2007 Annual Report is expected to be posted to shareholders on 21 December2007 and will be considered at the Annual General Meeting to be held on 14February 2008. The financial statements for the year ended 30 September 2007have not yet been delivered to the Registrar of Companies. The auditors' report on the financial statements for the year ended 30 September2006 was unqualified and did not include a statement under Section 237(2) or 237(3) of the 1985 Companies Act. The financial statements for the year ended 30September 2006 have been delivered to the Registrar of Companies. 23. Annual General Meeting The 2008 Annual General Meeting will be held at Pegasus House, 37/43 SackvilleStreet, London W1S 3DL on 14 February 2008 at 12 noon. This information is provided by RNS The company news service from the London Stock Exchange

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