"Towards a Cure”: HIV Reservoirs and Strategies to Control Them IAS WORKSHOP, 16 & 17 JULY 2010
INTERNATIONAL ACCOUNTING STANDARDS WORKSHOP · Graham Roberts, Finance Director IAS Workshop. 12...
Transcript of INTERNATIONAL ACCOUNTING STANDARDS WORKSHOP · Graham Roberts, Finance Director IAS Workshop. 12...
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IAS Workshop25 January 2005
WELCOME TO THE IAS WORKSHOP
GRAHAM ROBERTS, FINANCE DIRECTOR
IAS Workshop25 January 2005
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IAS Workshop25 January 2005
OVERVIEW
British Land will commence reporting under IAS in the year ended31 March 2006
Cash Flows unaffected
Dividend policy unaffected
Banking arrangements unaffected
IAS and its interpretation is subject to change
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COMMUNICATION TIMETABLE
MAY 2005 2005 UK GAAP Preliminary Results
JULY 2005 2005 IAS Annual Results
NOV 2005 2006 H1 IAS Interim Results
MAY 2006 2006 IAS Preliminary Results
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AGENDA
THE MOVE TO IASISOBEL SHARP, DELOITTE
BRITISH LAND AND IASLUCINDA BELL, HEAD OF TAX & ACCOUNTING
SIMON CARTER, TREASURY EXECUTIVEMARC FURLONGER, SENIOR ACCOUNTANT
INDICATIVE EFFECTS OF IASLUCINDA BELL, HEAD OF TAX & ACCOUNTING
Q & A
IAS Workshop25 January 2005
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AGENDA
THE MOVE TO IASISOBEL SHARP, DELOITTE
BRITISH LAND AND IASLucinda Bell, Head of Tax & Accounting
Simon Carter, Treasury ExecutiveMarc Furlonger, Senior Accountant
INDICATIVE EFFECTS OF IASLucinda Bell, Head of Tax & Accounting
Q & A
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STANDARD SETTING CIRCA 2000
Asia crisis – blame on accounting
The old International Accounting Standards Committee under review
The creation of a single European market
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EUROPEAN MOVES
ECOFIN meeting – Lisbon 2000
EC Council of Ministers – IAS Regulation 2002
Applies directly to listed groups for periods beginning on or after 1 January 2005
British Land’s 1 April 2005 to 31 March 2006 period
IASB standards as adopted by Europe
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THE REASONS
Part of Financial Services Action Plan
Better functioning of the internal market, efficient and cost-effective capital markets, investor protection, maintenance of confidence
Standards accepted internationally and truly global
Hope – acceptable to SEC by 2008
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THE NEW IMPROVED IASB
Began work in 2001
From 70 unpaid part-timers to 14 full-time
2005 created real pressure on work programme
Big prize is movement in US post Enron, etc
IASB / FASB in step (almost)
Real work now starting, e.g. leasing, reporting performance, financial instruments
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AGENDA
THE MOVE TO IASIsobel Sharp, Deloitte & Touche
BRITISH LAND AND IASLUCINDA BELL, HEAD OF TAX & ACCOUNTING
Simon Carter, Treasury ExecutiveMarc Furlonger, Senior Accountant
INDICATIVE EFFECTS OF IASLucinda Bell, Head of Tax & Accounting
Q & AGraham Roberts, Finance Director
IAS Workshop25 January 2005
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IAS Workshop25 January 2005
BRITISH LAND BEFORE AND AFTER IAS
CURRENT TREATMENT
Efficient Balance Sheet
Strong Cash Flows
Growing Dividend
IAS TREATMENT
Efficient Balance Sheet
Strong Cash Flows
Growing Dividend
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BRITISH LAND AND IAS
Key areas of change
Summarise impact
Reporting measures
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TEMPLATE
CURRENT TREATMENT
Current Balance Sheet and Profit & Loss treatment
IAS TREATMENT
IAS Balance Sheet and Income Statement treatment
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TEMPLATE (CONTINUED)
INDICATIVE IMPACT ON HALF YEAR TO SEPT 2004
All figures are indicative and unaudited
All figures include share of Joint Ventures
Income Statement and Balance Sheet figures are to the nearest £5m
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AREAS OF PARTICULAR FOCUS
Contingent Tax
Debt and Derivatives
Property and Leasing
Other issues
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IAS Workshop25 January 2005
AREAS OF PARTICULAR FOCUS
Contingent Tax
Debt and Derivatives
Property and Leasing
Other issues
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IAS Workshop25 January 2005
CONTINGENT TAX
CURRENT TREATMENT
Contingent tax disclosed, but not recognised
IAS TREATMENT
Recognise contingent tax on property and other valuations
The deferred tax recognised in the period is charged or credited to the Income Statement
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CONTINGENT TAX: IMPACT
INDICATIVE IMPACT ON HALF YEAR TO SEPT 2004
Reduce net assets – 2004/5 H1 £810m increased deferred tax provision
Reduce profits – 2004/5 H1 £85m increased deferred tax charge
See Appendix page 57 for reconciliation of IAS to UK GAAP contingent tax at 30 Sept 2004
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EXAMPLE: SALE OF THE SWISS CENTRE
Accounting impact will not be what we pay
Capital gain ¼ of 30 Sept 2004 provision
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AGENDA
THE MOVE TO IASIsobel Sharp, Deloitte & Touche
BRITISH LAND AND IASLucinda Bell, Head of Tax & Accounting
SIMON CARTER, TREASURY EXECUTIVEMarc Furlonger, Senior Accountant
INDICATIVE EFFECTS OF IASLucinda Bell, Head of Tax & Accounting
Q & AGraham Roberts, Finance Director
IAS Workshop25 January 2005
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IAS Workshop25 January 2005
AREAS OF PARTICULAR FOCUS
Contingent Tax
Debt and Derivatives
Property and Leasing
Other issues
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DEBT AND DERIVATIVES
IAS SUMMARY
Minimal impact on profits
All British Land derivatives qualify as “effective” hedges
Majority of debt held at nominal value rather than market value
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INTEREST RATE MANAGEMENT
British Land maintains around 85% of debt at fixed rates
Fixed and floating debt raised from variety of sources
Interest rate swaps used to hedge floating rate debt
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EXAMPLE: £100M 5 YR FACILITY SWAPPED TO FIX
(10)
(8)
(6)
(4)
(2)
02
4
6
8
10
1 2 3 4 5
Year
Swap
Loan
Cash flow£m
(10)
(8)
(6)
(4)
(2)
02
4
6
8
10
1 2 3 4 5 (10)
(8)
(6)
(4)
(2)
02
4
6
8
10
1 2 3 4 5
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ACCOUNTING FOR DERIVATIVES
All derivatives at fair value on Balance Sheet under IAS
All British Land derivatives qualify as “effective” hedges
Movements in fair value through Reserves not Income Statement
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CHANGES IN INTEREST RATES
When
But …
No impact on profits
NET ASSETSDERIVATIVE VALUERATES
NET ASSETSDERIVATIVE VALUERATES
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DEBT AND DERIVATIVES
CURRENT TREATMENT
Effective derivatives not recorded on Balance Sheet
All debt at nominal value rather than market value
NB: Market value of debt and derivatives disclosed
IAS TREATMENT
Mark to market for derivatives on Balance Sheet
Majority of debt at nominal value rather than market value¹
¹ See Appendix page 58
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DEBT AND DERIVATIVES: IMPACT
INDICATIVE IMPACT ON HALF YEAR TO SEPT 2004
Minimal impact on profits
Impacts net assets – 2004/5 H1 £15m decrease
See Appendix page 58 for reconciliation of derivative net asset impact
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AGENDA
THE MOVE TO IASIsobel Sharp, Deloitte & Touche
BRITISH LAND AND IASLucinda Bell, Head of Tax & Accounting
Simon Carter, Treasury ExecutiveMARC FURLONGER, SENIOR ACCOUNTANT
INDICATIVE EFFECTS OF IASLucinda Bell, Head of Tax & Accounting
Q & AGraham Roberts, Finance Director
IAS Workshop25 January 2005
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IAS Workshop25 January 2005
AREAS OF PARTICULAR FOCUS
Contingent Tax
Debt and Derivatives
Property and Leasing
Other issues
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INVESTMENT PROPERTIES
CURRENT TREATMENT
Held at market value
Revaluation gains/(losses) shown as a reserve movement¹
IAS TREATMENT
Held at market value
Revaluation gains/(losses) shown in Income Statement
¹ Also shown in the Statement of Total Recognised Gains and Losses (STRGL)
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INVESTMENT PROPERTIES: IMPACT
INDICATIVE IMPACT ON HALF YEAR TO SEPT 2004
Revaluation gains/(losses) shown in Income Statement –
2004/5 H1 £385m gain reallocated to income from reserves
No impact on net assets
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DEVELOPMENT PROPERTIES
CURRENT TREATMENT
Held at cost (or market value, if lower)
NB: Revaluation gains added back for “adjusted NAV” per share
IAS TREATMENT
Held at market value
Investment properties being redeveloped still treated as investment properties
Other development properties revalued through Reserves¹
¹ Also shown in the Statement of Recognised Income and Expense (SRIE) – the IAS replacement for STRGL
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DEVELOPMENT PROPERTIES: IMPACT
INDICATIVE IMPACT ON HALF YEAR TO SEPT 2004
Increase profits – 2004/5 H1 £10m
Small impact on net assets – 2004/5 H1 £25m increase in book value of development
properties
British Land’s “adjusted NAV” already includes developments at market value
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TENANT INCENTIVES
CURRENT TREATMENT
Tenant incentives amortised to first open market rent review
IAS TREATMENT
Tenant incentives amortised over lease term (or tenant’s first right to break)
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TENANT INCENTIVES: IMPACT
INDICATIVE IMPACT ON HALF YEAR TO SEPT 2004
Net rents – 2004/5 H1 £5m increase
Revaluation surplus – 2004/5 H1 £5m decrease
No net impact on profits or net assets
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OTHER ISSUES
Tenant leases
Head leases
Joint Ventures
Dividends
Negative goodwill
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OTHER ISSUES: LEASES
All leases reviewed for requirements of IAS
All British Land properties will be treated as operating leases
No impact on Balance Sheet or Income Statement
TENANTLEASES
Ground rents on leasehold properties capitalised as financial liability
Increases 2004/5 H1 investment properties by £20m and net debt by £20m
No impact on profits or net assets
HEADLEASES
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OTHER ISSUES: JOINT VENTURES
No change in consolidation method under IAS
Consolidated using equity methodBALANCE
SHEET
JV profit after tax shown in British Land’s pre-tax profit as one line
On conversion to IAS - the amounts currently included separately in the
profit & loss account will be reallocated to this one line
INCOMESTATEMENT
NB: The effect of all other IAS impacts on Joint Ventures will be reflected net in the JVs line in both the Balance Sheet and Income Statement
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OTHER ISSUES: FIRST-TIME ADOPTION
Proposed dividend not recognised until approved
Net assets increase by £25m for half yearDIVIDENDS
Negative Goodwill not recognised under IAS
One-off increase to net assets of £35mNEGATIVEGOODWILL
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AGENDA
THE MOVE TO IASIsobel Sharp, Deloitte & Touche
BRITISH LAND AND IASLucinda Bell, Head of Tax & Accounting
Simon Carter, Treasury ExecutiveMarc Furlonger, Senior Accountant
INDICATIVE EFFECTS OF IASLUCINDA BELL, HEAD OF TAX & ACCOUNTING
Q & AGraham Roberts, Finance Director
IAS Workshop25 January 2005
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PROFIT AFTER TAX: NET INDICATIVE EFFECTS
(85)Contingent tax
(5)Other305
371IAS treatment
66Current treatment
395Revaluations gains
£mHalf year to 30 Sept 2004
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INCOME STATEMENT: DETAILED INDICATIVE EFFECTS
+
-
+
+
-
+
+
+
Indicative effect of IAS on profitIncrease/(Decrease)
£m
305
(60)
365
305
(5)
10
50
5
Income tax expense(14)
Profit before tax80
Profit after tax66
Profit on property trading and fixed assets5
Net valuation gains on investment property-
(172)
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213
30 Sept 2004UK GAAP
£m
Profit from operations
Net interest payable
Share of the profit of joint ventures
See Appendix page 55 for detailed breakdown
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REPORTING: EARNINGS MEASURE
Industry discussion on earnings performance measures
Earnings Before Gains on Asset Revaluations and Disposals (EBGARD)
Strip out related tax effects
Similar to current underlying profit measure
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EARNINGS MEASURES: INDICATIVE EFFECTS
+ 59Earnings per share¹12.7
12.1
30 Sept 2004UK GAAP
p
Minimal changeUnderlying/EBGARD earnings per share¹
Indicative effect of IASIncrease/(Decrease)
p
¹ Diluted
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NET ASSETS: NET INDICATIVE EFFECTS
(740)
(15)Mark to market on interest rate swaps
25Revaluation surplus on development properties
35Write back of – Negative goodwill
4,525IAS treatment
5,265Current treatment
(810)Contingent tax
25Write back of – Proposed dividend
£mAs at 30 Sept 2004
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BALANCE SHEET: DETAILED INDICATIVE EFFECTS
-
+
-
-
-
+
(710)Provisions(106)
40Other net assets/(liabilities)(179)
5,265
(4,936)
756
9,730
30 Sept 2004UK GAAP
£m
(30)Net debt
(740)Net assets
45Properties & lease incentives
(85)Investments in joint ventures
Indicative effect of IAS on net assetsIncrease/(Decrease)
£m
See Appendix page 56 for detailed breakdown
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REPORTING: BALANCE SHEET MEASURE
“Adjusted NAV”
Net assets
Including:• Revaluation on trading properties
Excluding:• Contingent taxes and “FRS 19” provision• Fair value adjustments of debt and derivatives
Similar to current adjusted NAV
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INDICATIVE EFFECTS ON NET ASSET VALUE
+
- (149)Net asset value per share¹1027
1049
30 Sept 2004UK GAAP
p
12Adjusted net asset value per share¹
Indicative effect of IASIncrease/(Decrease)
p
¹ Diluted
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REPORTING MEASURES: CONCLUSION
Reporting – Significant changes
Performance Measures – Minimal effect
Business - unchanged
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INTERNATIONAL ACCOUNTING STANDARDS WORKSHOP
Q & A
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INCOME STATEMENT: INDICATIVE EFFECTS
-
-
-
5
(5)
-
(5)
15
(15)
-
JV Reclassification
-(5)5----Underlying/EBGARD profits
305(5)-10385-(85)Profit after tax
59p(1)-2p74p-(16p)EPS1
TotalOne-off items
Tenant Incentives
Development Properties
Investment Properties
Debt & Derivatives
Contingent Tax£m
(60)-----(65)Income tax expense
365(5)-10385-(20)Profit before tax
305-(5)10300--Net valuation gains on investment property
(5)------Profit on property trading and fixed assets
10(5)-----Net interest payable
50---85-(20)Share of the profit of joint ventures
5-5----Profit from operations
¹ Diluted
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BALANCE SHEET: INDICATIVE EFFECTS
5p
5p
25
25
-
-
-
-
Dividends
(149p)7p---(3p)(158p)NAV per share¹
12p7p-----Adjusted NAV per share¹
(740)35-25-(15)(810)Net assets
TotalNegative Goodwill
Head Leases
Development Properties
Investment Properties
Debt & Derivatives
Contingent Tax£m
4015-----Other net assets/ (liabilities)
(710)-----(710)Provisions
(30)-(20)--(10)-Net debt
(85)20---(5)(100)Investments in joint ventures
45-2025---Properties & lease incentives
¹ Diluted
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RECONCILIATION OF CONTINGENT TAX
40
20²Deduction for estimated selling costs and other adjustments
35³Deduction for negative goodwill
810IAS treatment
770Current treatment
(15)¹Tax on revaluation of trading properties
£mAs at 30 Sept 2004
NOTES
¹ Trading properties are carried at cost in the Balance Sheet and thus to be consistent the contingent tax recognised does not reflect any tax arising on the revaluation surplus.
² Under the current treatment selling costs are treated as an allowable deduction in calculating the contingent tax. Under IAS selling costs cannot be anticipated.
³ Negative goodwill, which relates to deductions for contingent tax on acquisition, will reverse on sale of the asset. This reversal is anticipated under the current treatment. Under IAS there is no negative goodwill on the Balance Sheet so this adjustment is no longer required.
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RECONCILIATION OF DERIVATIVE NET ASSET IMPACT
10- Fixed rate debt swapped to floating²
Value adjustments to hedged liabilities
(5)Share of Joint Venture derivative market value
(45)
20- US Private Placements at spot exchange rate¹
(15)IAS impact on net assets
(40)Group derivative market value
£mAs at 30 Sept 2004
NOTES
¹ British Land uses cross currency swaps to eliminate foreign exchange risk on US denominated debt. Under IAS, these effective swaps have minimal impact on net assets since their fair value is offset by the spot retranslation of the debt.
² British Land has a small number of interest rate derivatives which swap fixed rate debt into floating. Under IAS hedge accounting these have no impact on net assets because there is an equal and offsetting adjustment to the carrying value of the swapped debt.
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BALANCE SHEET: VALUATION BASIS
MVMVPension asset
PVPVPension liability
HCHCFloating rate debt
Debtors
Net Debt
HCHCOther creditors
HCHCProvisions for liabilities and charges
MVHCDerivatives (effective)
SEHEUS Private Placements swapped to Sterling
MVHCFixed rate debt swapped to floating
HCHCFixed rate debt
HCHCCash and deposits
HCHCPrepayments and accrued income
HCHCAmounts owed by joint ventures
HCHCTrade debtors
HC1HC1Trading properties
NRHCNegative goodwill
MVMVOther investments
BVBVInvestments in joint ventures
MVHC1Development properties
MVMVInvestment properties
IASUK GAAP
MV – Market Value
HC – Lower of Historic Cost or Net Realisable Value (for Net Debt = Nominal Value)
HE – Historical Exchange Rate
SE – Spot Exchange Rate
BV – Book Value. Equity accountedwhere individual assets/liabilitiesare valued as per this schedule
PV – Present Value of defined benefit obligations determined by our actuaries
NR – Not Recognised
¹ Included at Market Value in “Adjusted NAV”
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IAS Workshop25 January 2005
OTHER AREAS OF IAS NOT COVERED
Areas of IAS impact that are not covered in this Workshop due their immateriality to British Land:
Accounting for share-based payments and share schemesAccounting for employees benefits and defined benefit pensions schemesAccounting for properties subject to a finance leaseInventories and trading propertiesSpreading of letting fees and other direct costs incurred on the inception of a tenant leaseRevenue recognition – disclosure of gross service charge income and expenseUse of the foreign currency translation reserveHedging of the net investment of a foreign operationFair value hedge accountingCash flow hedge accounting for foreign exchange riskAccounting for Convertible BondsImpairment of assetsSegmental reporting requirementsRelated party disclosures
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IAS Workshop25 January 2005
BROADGATE REFINANCING
(125)5,265Net assets
53(179)Other net assets/(liabilities)
(178)(4,936)Net debt
-756Investments in JVs
-(106)Provisions
-9,730Properties
Effect of transaction
30 Sept 2004 £m
Accounting treatment similar under IAS for this transaction
Annual interest saving of £12m pa (£8m post tax)
Exceptional accounting charge against March 2005 pre-tax profits estimated of £178m (£125m post tax)
Virtually no effect on NNNAV
The above financial effects are illustrative and stated on a pro forma basis as though the refinancing had completed on 30 Sept 2004 and based on pricing at the close of business on 19 Jan 2005 (see press release).
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The workshop and accompanying presentation have been written in general terms and therefore cannot be relied on to cover specific situations.
Furthermore this presentation may contain certain “forward-looking” statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, that could cause actual outcomes and results to differ materially from that 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. British Land does not undertake to update forward-looking statements to reflect any changes in British Land’s expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.
This presentation is published solely for information purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. No representation or warranty, either express or implied, is provided in relation to the accuracy, completeness of reliability of the information contained herein. All opinions expressed in this presentation are subject to change without notice and may differ to opinions expressed elsewhere.
All numbers given in the presentation are estimates, included only for illustrative purposes. They are subject to change and should not be relied on or considered definitive.