consolidated income statement

for the year ended 31 march 2016

2016

20152

Note

Underlying1

£m

Capital
and other
£m

Total
£m

Underlying1
£m

Capital
and other
£m

Total
£m

Revenue

3

569

21

590

505

51

556

Costs

3

(128)

(11)

(139)

(115)

(45)

(160)

3

441

10

451

390

6

396

Joint ventures and funds
(see also below)

8

135

262

397

129

597

726

Administrative expenses

(93)

-

(93)

(85)

-

(85)

Valuation movement

4

-

616

616

-

884

884

Profit on disposal of investment properties and investments

-

35

35

-

20

20

Net financing costs

- financing income

5

5

65

70

7

-

7

- financing charges

5

(111)

(34)

(145)

(112)

(47)

(159)

(106)

31

(75)

(105)

(47)

(152)

Profit on ordinary activities before taxation

377

954

1,331

329

1,460

1,789

Taxation

6

33

33

(24)

(24)

Profit for the year after taxation

1,364

1,765

Attributable to non-controlling interests

14

5

19

16

39

55

Attributable to shareholders
of the Company

363

982

1,345

313

1,397

1,710

Earnings per share:

- basic

2

131.2p

168.3p

- diluted

2

124.1p

167.3p

All results derive from continuing operations.

2016

20152

Note

Underlying1£m

Capital

and other
£m

Total
£m

Underlying1
£m

Capital

and other
£m

Total
£m

Results of joint ventures and funds accounted for using the equity method

Underlying Profit

135

-

135

129

-

129

Valuation movement

4

-

245

245

-

589

589

Profit on disposal of investment properties, trading properties and investments

-

18

18

-

6

6

Taxation

-

(1)

(1)

-

2

2

8

135

262

397

129

597

726

1 See definition in glossary.

2 The prior year comparatives have been restated. See note 1.

consolidated statement OF COMPREHENSIVE INCOME

for the year ended 31 march 2016

2016
£m

2015
£m

Profit for the year after taxation

1,364

1,765

Other comprehensive income:

Items that will not be reclassified subsequently to profit or loss:

Net actuarial loss on pension scheme

(1)

(5)

Valuation movements on owner-occupied property

19

10

18

5

Items that may be reclassified subsequently to profit or loss:

(Losses) gains on cash flow hedges

- Group

(24)

(71)

- Joint ventures and funds

(3)

3

- Reclassification of items from the statement of comprehensive income

-

30

(27)

(38)

Transferred to the income statement (cash flow hedges)

- Foreign currency derivatives

2

(11)

- Interest rate derivatives

10

8

12

(3)

Exchange differences on translation of foreign operations

- Hedging and translation

(3)

6

- Other

3

(6)

-

-

Deferred tax on items of other comprehensive income

(15)

10

Other comprehensive loss for the year

(12)

(26)

Total comprehensive income for the year

1,352

1,739

Attributable to non-controlling interests

19

53

Attributable to shareholders of the Company

1,333

1,686

consolidated BALANCE SHEET

AS AT 31 march 2016

Note

2016
£m

2015
£m

ASSETS

Non-current assets

Investment and development properties

7

9,643

9,120

Owner-occupied property

7

95

60

9,738

9,180

Other non-current assets

Investments in joint ventures and funds

8

3,353

2,901

Other investments

9

142

379

Deferred tax assets

13

3

-

Interest rate and currency derivative assets

14

167

139

13,403

12,599

Current assets

Trading properties

7

325

274

Debtors

10

33

20

Cash and short-term deposits

14

114

108

472

402

Total assets

13,875

13,001

LIABILITIES

Current liabilities

Short-term borrowings and overdrafts

14

(74)

(102)

Creditors

11

(218)

(261)

Corporation tax

(18)

(9)

(310)

(372)

Non-current liabilities

Debentures and loans

14

(3,687)

(3,847)

Other non-current liabilities

12

(122)

(79)

Deferred tax liabilities

13

-

(12)

Interest rate and currency derivative liabilities

14

(137)

(126)

(3,946)

(4,064)

Total liabilities

(4,256)

(4,436)

Net assets

9,619

8,565

EQUITY

Share capital

260

258

Share premium

1,295

1,280

Merger reserve

213

213

Other reserves

(93)

(82)

Retained earnings

7,667

6,563

Equity attributable to shareholders of the Company

9,342

8,232

Non-controlling interests

277

333

Total equity

9,619

8,565

EPRA NAV per share*

2

919p

829p

* As defined in glossary.

consolidated statement OF CASH FLOWS

for the year ended 31 march 2016

Note

2016
£m

20151£m

Rental income received from tenants

435

397

Fees and other income received

58

49

Operating expenses paid to suppliers and employees

(152)

(128)

Cash generated from operations

341

318

Interest paid

(124)

(124)

Interest received

11

18

Corporation taxation repayments received

8

-

Distributions and other receivables from joint ventures and funds

8

58

73

Net cash inflow from operating activities

294

285

Cash flows from investing activities

Development and other capital expenditure

(256)

(157)

Purchase of investment properties

(243)

(172)

Sale of investment and trading properties

564

415

Payments received in respect of future trading property sales

40

32

Purchase of investments

-

(7)

Acquisition of Speke Unit Trust

-

(90)

Tesco property swap

-

(93)

Investment in and loans to joint ventures and funds

(241)

(173)

Capital distributions and loan repayments from joint ventures and funds

366

134

Net cash inflow (outflow) from investing activities

230

(111)

Cash flows from financing activities

Issue of ordinary shares

5

12

Dividends paid

15

(235)

(228)

Dividends paid to non-controlling interests

(16)

(19)

Acquisition of units in Hercules Unit Trust

(61)

(93)

Closeout of interest rate derivatives

15

(12)

Cash collateral transactions

(24)

10

Decrease in bank and other borrowings

(919)

(581)

Drawdowns on bank and other borrowings

373

703

Issue of zero coupon 2015 convertible bond

344

-

Net cash outflow from financing activities

(518)

(208)

Net increase (decrease) in cash and cash equivalents

6

(34)

Cash and cash equivalents at 1 April

108

142

Cash and cash equivalents at 31 March

114

108

Cash and cash equivalents consists of:

Cash and short-term deposits

14

114

108

1 The prior year comparatives have been restated. See note 1.

consolidated statement OF CHANGES IN EQUITY

for the year ended 31 march 2016

Share capital
£m

Share premium
£m

Hedging and translation reserve1
£m

Re-
valuation
reserve
£m

Merger reserve
£m

Retained earnings
£m

Total
£m

Non-controlling interests
£m

Total
equity
£m

Balance at 1 April 2015

258

1,280

(76)

(6)

213

6,563

8,232

333

8,565

Profit for the year after taxation

-

-

-

-

-

1,345

1,345

19

1,364

Losses on cash flow hedges

-

-

(24)

-

-

-

(24)

-

(24)

Revaluation of owner-occupied property

-

-

-

19

-

-

19

-

19

Exchange and hedging movements in joint ventures and funds

-

-

-

(3)

-

-

(3)

-

(3)

Reclassification of gains on cash flow hedges

- Foreign currency derivatives

-

-

2

-

-

-

2

-

2

- Interest rate derivatives

-

-

10

-

-

-

10

-

10

Exchange differences on translation
of foreign operations

-

-

(3)

3

-

-

-

-

-

Net actuarial loss on pension schemes

-

-

-

-

-

(1)

(1)

-

(1)

Deferred tax on items of
other comprehensive income

-

-

(16)

1

-

-

(15)

-

(15)

Other comprehensive (loss) income

-

-

(31)

20

-

(1)

(12)

-

(12)

Total comprehensive income for the year

-

-

(31)

20

-

1,344

1,333

19

1,352

Share issues

2

15

-

-

-

(12)

5

-

5

Fair value of share and share option awards

-

-

-

-

-

8

8

-

8

Purchase of units from non-controlling interests

-

-

-

-

-

-

-

(59)

(59)

Loss on purchase of units from non-controlling interests

-

-

-

-

-

(1)

(1)

-

(1)

Dividends payable in year (28.0p per share)

-

-

-

-

-

(287)

(287)

-

(287)

Dividends payable by subsidiaries

-

-

-

-

-

-

-

(16)

(16)

Adjustment for scrip dividend element

-

-

-

-

-

52

52

-

52

Balance at 31 March 2016

260

1,295

(107)

14

213

7,667

9,342

277

9,619

Balance at 1 April 2014

255

1,257

(32)

(38)

213

5,091

6,746

371

7,117

Profit for the year after taxation

-

-

-

-

-

1,710

1,710

55

1,765

Losses on cash flow hedges

-

-

(69)

-

-

-

(69)

(2)

(71)

Revaluation of owner-occupied property

-

-

-

10

-

-

10

-

10

Exchange and hedging movements in joint ventures and funds

-

-

-

3

-

-

3

-

3

Reclassification of items from the statement
of comprehensive income

-

-

-

30

-

-

30

-

30

Reclassification of (losses) gains on cash flow hedges

- Foreign currency derivatives

-

-

(11)

-

-

-

(11)

-

(11)

- Interest rate derivatives

-

-

8

-

-

-

8

-

8

Exchange differences on
translation of foreign operations

-

-

6

(6)

-

-

-

-

-

Net actuarial loss on pension schemes

-

-

-

-

-

(5)

(5)

-

(5)

Deferred tax on items of other comprehensive income

-

-

22

(5)

-

(7)

10

-

10

Other comprehensive (loss) income

-

-

(44)

32

-

(12)

(24)

(2)

(26)

Total comprehensive income for the year

-

-

(44)

32

-

1,698

1,686

53

1,739

Share issues

3

23

-

-

-

(10)

16

-

16

Non-controlling interest on acquisition of subsidiary

-

-

-

-

-

-

-

31

31

Fair value of share and share option awards

-

-

-

-

-

10

10

-

10

Purchase of units from non-controlling interests

-

-

-

-

-

2

2

(103)

(101)

Dividends payable in year (27.3p per share)

-

-

-

-

-

(277)

(277)

-

(277)

Dividends payable by subsidiaries

-

-

-

-

-

-

-

(19)

(19)

Adjustment for scrip dividend element

-

-

-

-

-

49

49

-

49

Balance at 31 March 2015

258

1,280

(76)

(6)

213

6,563

8,232

333

8,565

1 The balance at the beginning of the year includes £10m in relation to translation and (£86m) in relation to hedging.

Notes to the accounts

1 Basis of preparation, significant accounting
policies and accounting judgements

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 March 2016 or 2015, but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Registrar of Companies and those for 2016 will be delivered following the Company's Annual General Meeting. The auditor has reported on those accounts; their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498(2) or (3) of Companies Act 2006 or equivalent preceding legislation.

The financial statements for the year ended 31 March 2016 have been prepared on a historical cost basis, except for the revaluation of properties, investments held for trading and derivatives. The financial statements have also been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and therefore comply with Article 4 of the EU IAS Regulation.

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRSs. The Company expects to publish full financial statements that comply with IFRSs in June 2016.

In the current financial year the Group has adopted Annual Improvementsto IFRSs 2010-2012 cycle and 2011-2013 cycle and Defined Benefit Plans: Employee Contributions - Amendments to IAS 19.

The adoption of these standards has not had a material impact on the Group and otherwise the accounting policies used are consistent with those contained in the Group's previous Annual Report and Accounts for the year ended 31 March 2015.

A number of new standards and amendments to standards and interpretations have been issued but are not yet effective for the current accounting period. None of these are expected to have a material impact on the consolidated financial statements of the Group, except the following set out below:

IFRS 9 - Financial Instruments, will impact both the measurement and disclosures of financial instruments and is effective for the Group's year ending 31 March 2019. The Group has not yet completed its evaluation of the effect of the adoption.

IFRS 15 - Revenue from contracts with customers, does not apply
to gross rental income, but does apply to service charge income, management and performance fees and trading property disposals and is effective for the Group's year ending 31 March 2019. The Group does not expect adoption of IFRS 15 to have a material impact on the measurement of revenue recognition, but additional disclosures will be required with regards to the above sources of income.

IFRS 16 - Leases, will impact both the measurement and disclosures of the Group's head leases and is effective for the Group's year ending 31 March 2020. The Group has not yet completed its evaluation of the effect of the adoption.

Restatement

During the year, the accounting for Broadgate Estates, a wholly owned subsidiary of the Group which acts as a property manager, has been reviewed resulting in a reclassification of items presented in the Consolidated Income Statement and the Consolidated Statement
of Cash Flows.

This reclassification had no impact on either IFRS profit before tax or Underlying Profit. It resulted in a £29m increase in other fees and commissions received offset by a £26m increase in other fees and commissions expenses and a £3m increase in administrative expenses.

This reclassification had no impact on the net cash inflow from operating activities presented in the Consolidated Statement of Cash Flows. It resulted in £35m increase in fees and other income received and a £35m increase in operating expenses paid to suppliers and employees. In addition, the format of the Consolidated Income Statement has been changed to aid the clarity and usability of the financial statements and the prior-year comparatives have been re presented to reflect this change.

Accounting judgements and estimates

In applying the Group's accounting policies, the Directors are required to make judgements and estimates that affect the financial statements.

Significant areas of estimation are:

Valuation of properties and investments held for trading: The Group uses external professional valuers to determine the relevant amounts. The primary source of evidence for property valuations should be recent, comparable market transactions on an arms-length basis. However, the valuation of the Group's property portfolio and investments held for trading are inherently subjective, as they are made on the basis of assumptions made by the valuers which may not prove to be accurate.

Other less significant areas of estimation include the valuation of fixed rate debt and interest rate derivatives, the determination of share-based payment expense, and the actuarial assumptions used in calculating the Group's retirement benefit obligations.

The key areas of accounting judgement are:

REIT status: British Land is a Real Estate Investment Trust (REIT) and does not pay tax on its property income or gains on property sales, provided that at least 90% of the Group's property income is distributed as a dividend to shareholders, which becomes taxable in their hands. In addition, the Group has to meet certain conditions such as ensuring the property rental business represents more than 75% of total profits and assets. Any potential or proposed changes to the REIT legislation are monitored and discussed with HMRC. It is Management's intention that the Group will continue as a REIT for the foreseeable future.

Accounting for joint ventures and funds: In accordance with IFRS 10 'Consolidated financial statements', IFRS 11 'Joint arrangements', and IFRS 12 'Disclosures of interests in other entities' an assessment is required to determine the degree of control or influence the Group exercises and the form of any control to ensure that the financial statement treatment is appropriate.

Interest in the Group's joint ventures is commonly driven by the terms of the partnership agreements which ensure that control is shared between the partners. These are accounted for under the equity method, whereby the consolidated balance sheet incorporates the Group's share of the net assets of its joint ventures and associates. The consolidated income statement incorporates the Group's share of joint venture and associate profits after tax.

Accounting for transactions: Property transactions are complex in nature and can be material to the financial statements. Assessment is required to determine the most appropriate accounting treatment of assets acquired and of potential contractual arrangements in the legal documents for both acquisitions and disposals. Management consider each transaction separately and, when considered appropriate, seek independent accounting advice.

2 Performance measures

Earnings per share

The Group measures financial performance with reference to underlying earnings per share, the European Public Real Estate Association (EPRA) earnings per share and IFRS earnings per share. The relevant earnings and weighted average number of shares (including dilution adjustments) for each performance measure are shown below, and a reconciliation between these is shown within the supplementary disclosures (Table B).

EPRA earnings per share is calculated using EPRA earnings, which is the IFRS profit after taxation attributable to shareholders of the Company excluding investment and development property revaluations, gains/losses on investing and trading property disposals, changes in the fair value of financial instruments and associated close-out costs and their related taxation. EPRA earnings (diluted) also takes into account dilution due to the 2012 convertible bond.

Underlying earnings per share is calculated using Underlying Profit adjusted for underlying taxation (see note 6). Underlying Profit is the pre-tax EPRA earnings measure, with additional Company adjustments. No Company adjustments were made in either the current or prior year. For the year ended 31 March 2015 the 2012 convertible bond was not dilutive for underlying earnings, as the contingent conditions associated to the bond had not been met. The convertible conditions period ended on 25 September 2015 and therefore the bond was treated as dilutive in the current year.

2016

2015

Earnings per share

Relevant
earnings
£m

Relevant

number
of shares
million

Earnings
per share
pence

Relevant
earnings
£m

Relevant
number
of shares
million

Earnings
per share
pence

Underlying

Underlying basic

365

1,025

35.6

313

1,016

30.8

Underlying diluted

371

1,089

34.1

313

1,022

30.6

EPRA

EPRA basic

365

1,025

35.6

313

1,016

30.8

EPRA diluted

371

1,089

34.1

319

1,080

29.5

IFRS

Basic

1,345

1,025

131.2

1,710

1,016

168.3

Diluted

1,351

1,089

124.1

1,710

1,022

167.3

Net asset value

The Group measures financial position with reference to EPRA net asset value (NAV) per share and EPRA triple net asset value (NNNAV) per share. The net asset value and number of shares for each performance measure is shown below. A reconciliation between IFRS net assets and EPRA net assets, and the relevant number of shares for each performance measure, is shown within the supplementary disclosures (Table B). EPRA net assets is a proportionally consolidated measure that is based on IFRS net assets excluding the mark-to-market on effective cash flow hedges and related debt adjustments, the mark-to-market on the convertible bonds as well as deferred taxation on property and derivative valuations. They include the valuation surplus on trading properties and are adjusted for the dilutive impact of share options and the £400 million convertible bond maturing in 2017.

2016

2015

Net asset value per share

Relevant
net assets
£m

Relevant
number
of shares
million

Net asset
value per
share
pence

Relevant
net assets
£m

Relevant
number
of shares
million

Net asset
value per
share
pence

EPRA

EPRA NAV

10,074

1,096

919

9,035

1,090

829

EPRA NNNAV

9,640

1,096

880

8,359

1,090

767

IFRS

Basic

9,619

1,029

935

8,565

1,020

840

Diluted

10,019

1,096

914

8,565

1,032

830

Total accounting return

The Group also measures financial performance with reference to total accounting return. This is calculated as the increase in EPRA net asset value per share and dividend paid in the year as a percentage of the EPRA net asset value per share at the start of the year.

2016

2015

Increase in NAV per share

pence

Dividend per share paid

pence

Total
accounting
return

Increase in NAV per share

pence

Dividend per

share paid

pence

Total
accounting
return

Total accounting return

90

28.02

14.2%

141

27.30

24.5%

3 Revenue and costs

2016

2015

Underlying
£m

Capital
and other
£m

Underlying
£m

Capital
and other
£m

Rent receivable

437

-

369

-

Spreading of tenant incentives and guaranteed rent increases

12

-

26

-

Surrender premia

2

-

4

-

Gross rental income

451

-

399

-

Trading property sales proceeds

-

21

-

51

Service charge income

72

-

65

-

Management and performance fees (from joint ventures and funds)

8

-

7

-

Other fees and commissions

38

-

34

-

Revenue

569

21

505

51

Trading property cost of sales

-

(11)

-

(45)

Service charge expenses

(72)

-

(65)

-

Property operating expenses

(26)

-

(24)

-

Other fees and commissions expenses

(30)

-

(26)

-

Costs

(128)

(11)

(115)

(45)

441

10

390

6

The cash element of net rental income recognised during the year ended 31 March 2016 from properties which were not subject to a security
interest was £229m (2014/15: £182m). Property operating expenses relating to investment properties that did not generate any rental income were £1m (2014/15: £2m). Contingent rents of £3m (2014/15: £3m) were recognised in the year.

4 Valuation movements on property

2016
£m

2015
£m

Consolidated income statement

Revaluation of properties

616

884

Revaluation of properties held by joint ventures and funds accounted for using the equity method

245

589

861

1,473

Consolidated statement of comprehensive income

Revaluation of owner-occupied properties

19

10

880

1,483

5 Net financing costs

2016
£m

2015
£m

Underlying

Financing charges

Bank loans, overdrafts and derivatives

(30)

(36)

Other loans

(88)

(88)

Obligations under head leases

(2)

(2)

(120)

(126)

Development interest capitalised

9

14

(111)

(112)

Financing income

Deposits, securities and liquid investments

3

2

Loans to joint ventures

2

5

5

7

Net financing charges - underlying

(106)

(105)

Capital and other

Financing charges

Valuation movements on translation of foreign currency debt

2

(11)

Hedging reserve recycling

(2)

11

Valuation movements on fair value derivatives

54

108

Valuation movements on fair value debt

(53)

(104)

Recycling of fair value movement on close-out of derivatives

(6)

(12)

Capital financing costs1

(29)

(2)

Fair value movement on convertible bonds

-

(35)

Valuation movement on translation of foreign currency net assets

-

(1)

Fair value movement on non-hedge accounted derivatives

-

(1)

(34)

(47)

Financing income

Fair value movement on convertible bonds

64

-

Fair value movement on non-hedge accounted derivatives

1

-

65

-

Net financing income (charges) - capital

31

(47)

Net financing costs

Total financing income

70

7

Total financing charges

(145)

(159)

Net financing costs

(75)

(152)

1 Primarily debenture bonds tender offer and purchase.

Interest payable on unsecured bank loans and related interest rate derivatives was £19m (2014/15: £24m). Interest on development expenditure
is capitalised at the Group's weighted average interest rate of 2.6% (2014/15: 3.3%). The weighted average interest rate on a proportionately consolidated basis at 31 March 2016 was 3.3% (2014/15: 3.8%).

6 Taxation

2016
£m

2015
£m

Taxation income (expense)

Current taxation:

UK corporation taxation: 20% (2014/15: 21%)

(15)

(1)

Adjustments in respect of prior years

17

-

Total current taxation income (expense)

2

(1)

Deferred taxation on revaluations and derivatives

31

(23)

Group total taxation

33

(24)

Attributable to joint ventures and funds

(1)

2

Total taxation income (expense)

32

(22)

Taxation reconciliation

Profit on ordinary activities before taxation

1,331

1,789

Less: profit attributable to joint ventures and funds1

(397)

(726)

Group profit on ordinary activities before taxation

934

1,063

Taxation on profit on ordinary activities at UK corporation taxation rate of 20% (2014/15: 21%)

(187)

(223)

Effects of:

REIT exempt income and gains

161

232

Taxation losses

11

(10)

Deferred taxation on revaluations and derivatives

31

(23)

Adjustments in respect of prior years

17

-

Group total taxation income (expense)

33

(24)

A current taxation expense of £1m (2014/15: £2m expense) and a deferred taxation expense of £nil (2014/15: £4m credit) arose on profits attributable to joint ventures and funds.

Taxation attributable to Underlying Profit for the year ended 31 March 2016 was a credit of £2m (2014/15: £nil). Corporation taxation payable at 31 March 2016 was £18m (2014/15: £9m) as shown on the balance sheet.

7 Property

Property reconciliation for the year ended 31 March 2016

Canada Water was added as a property sector in the year, reflecting the key role the campus has in the strategy of the Group.

Investment

Retail & leisure
Level 3
£m

Offices & residential
Level 3
£m

Canada

Water

Level 3

£m

Developments
Level 3
£m

Investment
and
development properties
Level 3
£m

Trading properties
£m

Owner-
occupied
Level 3
£m

Total
£m

Carrying value at 1 April 2015

5,584

2,902

249

385

9,120

274

60

9,454

Additions

- property purchases

4

234

-

-

238

-

-

238

- development expenditure

4

6

1

43

54

59

-

113

- capitalised interest and staff costs

-

-

1

3

4

5

-

9

-
capital expenditure on asset management initiatives

91

24

1

-

116

-

-

116

99

264

3

46

412

64

-

476

Depreciation

-

-

-

-

-

-

(1)

(1)

Disposals

(372)

(130)

-

(7)

(509)

(11)

-

(520)

Reclassifications

135

22

-

(172)

(15)

(2)

17

-

Revaluations included in income statement

161

369

4

82

616

-

-

616

Revaluation included in OCI

-

-

-

-

-

-

19

19

Movement in tenant incentives and contracted rent uplift balances

10

9

-

-

19

-

-

19

Carrying value at 31 March 2016

5,617

3,436

256

334

9,643

325

95

10,063

Head lease liabilities (note 12)

(37)

Valuation surplus on trading properties

85

Group property portfolio valuation
at 31 March 2016

10,111

Non-controlling interests

(324)

Group property portfolio valuation at 31 March 2016 attributable to shareholders

9,787

Property valuation

The different valuation method levels are defined below:

Level 1:Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2:
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3:Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

These levels are specified in accordance with IFRS 13 'Fair Value Measurement'. Property valuations are inherently subjective as they are made on the basis of assumptions made by the valuer which may not prove to be accurate. For these reasons, and consistent with EPRA's guidance, we have classified the valuations of our property portfolio as Level 3 as defined by IFRS 13. The unobservable inputs to the valuations are analysed in the table on the following page.

The Group's total property portfolio was valued by independent external valuers on the basis of fair value, in accordance with the RICS Valuation - Professional Standards 2014, ninth edition, published by The Royal Institution of Chartered Surveyors.

The information provided to the valuers, and the assumptions and valuations models used by the valuers are reviewed by the property portfolio team, the Head of Offices, the Head of Retail and the Chief Financial Officer. The valuers meet with the external auditors and also present directly to the Audit Committee at the interim and year end review of results.

Investment properties, excluding properties held for development, are valued by adopting the 'investment method' of valuation. This approach involves applying capitalisation yields to current and future rental streams net of income voids arising from vacancies or rent-free periods and associated running costs. These capitalisation yields and future rental values are based on comparable property and leasing transactions in the market using the valuers' professional judgement and market observation. Other factors taken into account in the valuations include the tenure of the property, tenancy details and ground and structural conditions.

In the case of ongoing developments, the approach applied is the 'residual method' of valuation, which is the investment method of valuation as described above, with a deduction for all costs necessary to complete the development, including a notional finance cost, together with a further allowance for remaining risk. Properties held for development are generally valued by adopting the higher of the residual method of valuation, allowing for all associated risks, or the investment method of valuation for the existing asset.

Copies of the valuation certificates of Knight Frank LLP and CBRE can be found at www.britishland.com/reports

Within their valuation report, CBRE have highlighted that they expect considerable uncertainty to arise if there is a decision for the UK to exit the EU following the referendum on 23 June 2016 and that this has the potential to reduce investment volumes and liquidity. This is a forward looking statement which has no impact on the valuations as at 31 March 2016.

A breakdown of valuations split between the Group and its share of joint ventures and funds is shown below:

2016

2015

Group
£m

Joint
ventures and funds
£m

Total
£m

Group
£m

Joint
ventures and funds
£m

Total
£m

Knight Frank LLP

7,529

3,576

11,105

6,795

3,313

10,108

CBRE

2,582

1,361

3,943

2,714

1,401

4,115

Total property portfolio valuation

10,111

4,937

15,048

9,509

4,714

14,223

Non-controlling interests

(324)

(76)

(400)

(441)

(105)

(546)

Total property portfolio valuation
attributable to shareholders

9,787

4,861

14,648

9,068

4,609

13,677

Information about fair value measurements using unobservable inputs (Level 3)

Investment

ERV per sq ft

Equivalent Yield

Costs to complete per sq ft

Fair value at
31 March 2016
£m

Valuation
technique

Min
£

Max
£

Average
£

Min
%

Max
%

Average
%

Min
£

Max
£

Average
£

Retail & leisure

5,608

Investment methodology

2

75

22

3

11

5

-

45

8

Offices & residential1,2

3,492

Investment methodology

4

136

53

1

8

4

-

150

15

Canada Water

250

Investment methodology

15

25

22

1

5

3

-

5

4

Developments2

343

Residual methodology

65

107

73

4

5

4

-

664

447

Total

9,693

Trading properties
at fair value

418

Group property portfolio valuation

10,111

Includes owner-occupied.

Includes Residential with an average capital value per sq ft of £1,028 including developments at end value and mixed use.

All other factors being equal:

· a higher equivalent yield or discount rate would lead to a decrease in the valuation of an asset;

· an increase in the current or estimated future rental stream would have the effect of increasing the capital value; and

· an increase in the costs to complete would lead to a decrease in the valuation of an asset.

However, there are interrelationships between the unobservable inputs which are partially determined by market conditions, which would impact
on these changes. There were no transfers between valuation levels in the period.

8 Joint ventures and funds

Summary movement for the year of the investments in joint ventures and funds

Joint ventures
£m

Funds
£m

Total
£m

Equity
£m

Loans
£m

Total
£m

At 1 April 2015

2,586

315

2,901

2,598

303

2,901

Additions

246

-

246

14

232

246

Disposals

(2)

(13)

(15)

-

(15)

(15)

Share of profit on ordinary activities after taxation

365

32

397

397

-

397

Distributions and dividends:

- Capital

-

(76)

(76)

(76)

-

(76)

- Revenue

(90)

(13)

(103)

(103)

-

(103)

Hedging and exchange movements

4

(1)

3

3

-

3

At 31 March 2016

3,109

244

3,353

2,833

520

3,353

Additional investments in joint ventures and funds covenant information

At 31 March 2016 the investments in joint ventures included within the total investments in joint ventures and funds was £3,348m (2014/15: £2,869m), being the £3,353m total investment shown above, less the net investment of £5m (2014/15: £32m) in PREF, a property fund in Continental Europe.

The summarised income statements and balance sheets below show 100% of the results, assets and liabilities of joint ventures and funds. Where necessary these have been restated to the Group's accounting policies.

Joint ventures' and funds' summary financial statements for the year ended 31 March 2016

Broadgate
REIT

Ltd

MSC Property

Intermediate

Holdings Ltd

BL Sainsbury

Superstores

Ltd

Tesco Joint

Ventures1

Partners

Euro Bluebell LLP

(GIC)

Norges Bank Investment

Management

J Sainsbury plc

Tesco PLC

Property sector

City Offices

Broadgate

Shopping Centres

Meadowhall

Superstores

Superstores

Group share

50%

50%

50%

50%

Summarised income statements

£m

£m

£m

£m

Revenue5

244

102

56

19

Costs

(48)

(23)

(1)

-

196

79

55

19

Administrative expenses

-

-

-

-

Net interest payable

(86)

(36)

(24)

(9)

Underlying Profit

110

43

31

10

Net valuation movement

334

50

(36)

(9)

Profit on disposal of investment properties and investments

-

-

2

-

Profit on ordinary activities before taxation

444

93

(3)

1

Taxation

-

-

-

1

Profit on ordinary activities after taxation

444

93

(3)

2

Other comprehensive income (expenditure)

5

-

-

3

Total comprehensive income

449

93

(3)

5

British Land share of total comprehensive income

225

46

(2)

3

British Land share of distributions payable

44

17

11

4

Summarised balance sheets

£m

£m

£m

£m

Investment and trading properties

4,622

1,786

946

354

Current assets

4

5

2

-

Cash and deposits

293

32

80

6

Gross assets

4,919

1,823

1,028

360

Current liabilities

(77)

(31)

(30)

(3)

Bank and securitised debt

(1,842)

(694)

(462)

(184)

Other non-current liabilities

(65)

(24)

-

(15)

Gross liabilities

(1,984)

(749)

(492)

(202)

Net external assets

2,935

1,074

536

158

British Land share of net assets

1,467

537

269

79

The SouthGate Limited Partnership

USS

Joint

Ventures2

Leadenhall

Holding Co

(Jersey) Ltd

Hercules Unit Trust

joint ventures

and sub-funds3

Other

joint ventures

and funds4

TOTAL

2016

TOTAL

Group share

2016

Aviva
Investors

Universities Superannuation Scheme Group
PLC

Oxford
Properties

Shopping
Centres

Shopping
Centres

City Offices

Leadenhall

Retail

Parks

50%

50%

50%

Various

£m

£m

£m

£m

£m

£m

£m

19

12

35

38

6

531

266

(6)

(3)

(10)

(7)

(1)

(99)

(44)

13

9

25

31

5

432

222

(1)

-

(1)

(6)

(2)

(10)

(5)

(1)

-

-

(8)

-

(164)

(82)

11

9

24

17

3

258

135

4

12

124

4

7

490

245

-

-

-

-

30

32

18

15

21

148

21

40

780

398

-

-

-

-

(3)

(2)

(1)

15

21

148

21

37

778

397

-

-

-

(2)

-

6

3

15

21

148

19

37

784

400

8

11

74

10

25

400

4

6

3

59

31

179

£m

£m

£m

£m

£m

£m

£m

267

252

942

612

108

9,889

4,944

2

1

-

4

14

32

18

5

7

5

9

33

470

239

274

260

947

625

155

10,391

5,201

(4)

(6)

(6)

(7)

(51)

(215)

(111)

-

-

-

(139)

-

(3,321)

(1,660)

(28)

-

-

(4)

(18)

(154)

(77)

(32)

(6)

(6)

(150)

(69)

(3,690)

(1,848)

242

254

941

475

86

6,701

3,353

121

128

471

237

44

3,353

Tesco joint ventures include BLT Holdings (2010) Limited as at 31 March 2016.

USS joint ventures include the Eden Walk Shopping Centre Unit Trust and the Fareham Property Partnership.

Hercules Unit Trust joint ventures and sub-funds includes 50% of the results of Deepdale Co-Ownership Trust, Gibraltar Limited Partnership and Valentine Co-Ownership Trust and 41.25% of Birstall Co-Ownership Trust. The balance sheet shows 50% of the assets of these joint ventures and sub-funds.
4Included in the column headed 'Other joint ventures and funds' are contributions from the following: BL Goodman Limited Partnership, The Aldgate Place Limited Partnership, Bluebutton Property

Management UK Limited, City of London Office Unit Trust and Pillar Retail Europark Fund (PREF). The Group's ownership share of PREF is 65%, however as the group is not able to exercise control over significant decisions of the fund, the Group equity accounts for its interest in PREF.

5Revenue includes gross rental income at 100% share of £495m (2014/15: £451m).

The borrowings of joint ventures and funds and their subsidiaries are non-recourse to the Group. All joint ventures are incorporated in the United Kingdom, with
the exception of Broadgate REIT Limited, the Eden Walk Shopping Centre Unit Trust and Leadenhall Holding Co (Jersey) Limited which are incorporated in Jersey.
Of the funds, the Hercules Unit Trust (HUT) joint ventures and sub-funds are incorporated in Jersey and PREF in Luxembourg.

These financial statements include the results and financial position of the Group's interest in the Fareham Property Partnership, the Aldgate Place Limited Partnership, the BL Goodman Limited Partnership, the Auchinlea Partnership and the Gibraltar Limited Partnership. Accordingly, advantage has been taken of the exemptions provided by Regulation 7 of the Partnership (Accounts) Regulations 2008, not to attach the partnership accounts to these financial statements.

Operating cash flows of joint ventures and funds (Group share)

2016
£m

2015
£m

Rental income received from tenants

208

234

Fees and other income received

1

1

Operating expenses paid to suppliers and employees

(18)

(26)

Cash generated from operations

191

209

Interest paid

(86)

(114)

Interest received

1

2

UK corporation tax paid

(3)

(7)

Foreign tax paid

(1)

(2)

Cash inflow from operating activities

102

88

Cash inflow from operating activities deployed as:

Surplus cash retained within joint ventures and funds

44

15

Revenue distributions per consolidated statement of cash flows

58

73

Revenue distributions split between controlling and non-controlling interests

Attributable to non-controlling interests

4

7

Attributable to shareholders of the Company

54

66

9 Other investments

2016

2015

Investment
held for
trading
£m

Loans, receivables
and other
£m

Total
£m

Investment
held for
trading
£m

Loans,
receivables
and other
£m

Total
£m

At 1 April

99

280

379

92

170

262

Additions

-

35

35

-

113

113

Disposals

-

(272)

(272)

-

(2)

(2)

Revaluation

2

-

2

7

-

7

Depreciation

-

(2)

(2)

-

(1)

(1)

At 31 March

101

41

142

99

280

379

The investment held for trading comprises interests as a trust beneficiary. The trust's assets comprise freehold reversions in a pool of commercial properties, comprising Sainsbury's superstores. The interest was categorised as Level 3 in the fair value hierarchy, is subject to the same inputs as those disclosed in note 7, and its fair value was determined by independent external valuers.

Included within the loans, receivables and other balance is £nil (2014/2015: £243m) in relation to a loan to the Broadgate joint venture, which is carried at amortised cost, and was fully repaid in the year.

10 Debtors

2016
£m

2015
£m

Trade and other debtors

24

16

Prepayments and accrued income

9

4

33

20

Trade and other debtors are shown after deducting a provision for bad and doubtful debts of £16m (2014/15: £16m). The charge to the income statement in relation to bad and doubtful debts was £1m (2014/15: £1m).

The Directors consider that the carrying amount of trade and other debtors is approximate to their fair value. There is no concentration of credit risk with respect to trade debtors as the Group has a large number of customers who are paying their rent in advance.

As at 31 March, trade and other debtors outside their payment terms yet not provided for are as follows:

Outside credit terms but not impaired

Total

£m

Within credit terms
£m

0-1 month
£m

1-2 months
£m

More than
2 months
£m

2016

24

12

11

1

-

2015

16

9

7

-

-

11 Creditors

2016
£m

2015
£m

Trade creditors

39

61

Other taxation and social security

34

31

Accruals

72

98

Deferred income

73

71

218

261

Trade creditors are interest-free and have settlement dates within one year. The Directors consider that the carrying amount of trade and other creditors is approximate to their fair value.

12 Other non-current liabilities

2016
£m

2015
£m

Other creditors

70

32

Head leases1

46

41

Net pension liabilities

6

6

122

79

Includes £9m in relation to head lease liabilities on trading properties held at cost.

13 Deferred tax

The movement on deferred tax is as shown below:

Deferred tax assets year ended 31 March 2016

1 April
2015
£m

Credited to income

£m

Credited (debited) to equity

£m

Transferred to joint ventures

£m

31 March
2016

£m

Interest rate and currency derivative revaluations

-

-

5

-

5

Other timing differences

-

6

-

-

6

-

6

5

-

11

Deferred tax liabilities year ended 31 March 2016

£m

£m

£m

£m

£m

Property and investment revaluations

(5)

-

(2)

-

(7)

Interest rate and currency derivative revaluations

(4)

25

(21)

-

-

Other timing differences

(3)

-

-

2

(1)

(12)

25

(23)

2

(8)

Net deferred tax (liability) asset

(12)

31

(18)

2

3

Deferred tax assets year ended 31 March 2015

1 April
2014
£m

Expensed

to income

£m

Credited to
equity

£m

Transferred to joint ventures

£m

31 March
2015

£m

-

-

-

-

-

Deferred tax liabilities year ended 31 March 2015

£m

£m

£m

£m

£m

Property and investment revaluations

-

(5)

-

-

(5)

Interest rate and currency derivative revaluations

-

(19)

15

-

(4)

Other timing differences

(4)

1

-

-

(3)

(4)

(23)

15

-

(12)

Net deferred tax (liability) asset

(4)

(23)

15

-

(12)

The following corporation tax rates have been substantively enacted; 20% effective from 1 April 2015 reducing to 19% effective from 1 April 2017
and 18% effective from 1 April 2020. The deferred tax assets and liabilities have been calculated at the tax rate effective in the period that the tax is expected to crystallise.

The Group has recognised a deferred tax asset calculated at 18% (2014/2015: 20%) of £6m (2014/2015: £nil) in respect of capital losses from previous years available for offset against future capital profit. Further unrecognised deferred tax assets in respect of capital losses of £60m (2014/2015: £87m) exist at 31 March 2016.

The Group has recognised deferred tax assets on derivative revaluations to the extent that future matching taxable profits are expected to arise.

At 31 March 2016 the Group had an unrecognised deferred tax asset calculated at 18% (2014/2015: 20%) of £51m (2014/2015: £38m) in respect of UK revenue tax losses from previous years.

Under the REIT regime, development properties which are sold within three years of completion do not benefit from tax exemption. At 31 March 2016 the value of such properties is £967m (2014/2015: £1,008m) and if these properties were to be sold and no tax exemption was available, the tax arising would be £56m (2014/15: £66m).

14 Net debt

Footnote

2016
£m

2015
£m

Secured on the assets of the Group

9.125% First Mortgage Debenture Stock 2020

1.1

34

35

5.264% First Mortgage Debenture Bonds 2035

371

355

5.0055% First Mortgage Amortising Debentures 2035

100

99

5.357% First Mortgage Debenture Bonds 2028

349

344

6.75% First Mortgage Debenture Stock 2020

62

176

Bank loans

1.2, 1.3

733

963

Loan notes

2

2

1,651

1,974

Unsecured

5.50% Senior Notes 2027

101

98

6.30% Senior US Dollar Notes 2015

-

104

3.895% Senior US Dollar Notes 2018

2

28

28

4.635% Senior US Dollar Notes 2021

2

165

158

4.766% Senior US Dollar Notes 2023

2

105

99

5.003% Senior US Dollar Notes 2026

2

69

64

3.81% Senior Notes 2026

113

111

3.97% Senior Notes 2026

116

114

1.5% Convertible Bond 2017

445

493

0% Convertible Bond 2020

334

-

Bank loans and overdrafts

634

706

2,110

1,975

Gross debt

3

3,761

3,949

Interest rate and currency derivative liabilities

137

126

Interest rate and currency derivative assets

(167)

(139)

Cash and short-term deposits

4,5

(114)

(108)

Total net debt

3,617

3,828

Net debt attributable to non-controlling interests

(104)

(190)

Net debt attributable to shareholders of the Company

3,513

3,638

These are non-recourse borrowings with no recourse for repayment to other companies or assets in the Group:

2016
£m

2015
£m

1.1 BLD Property Holdings Ltd

34

35

1.2 Hercules Unit Trust

443

645

1.3 TBL Properties Limited and subsidiaries

290

318

767

998

Principal and interest on this borrowing was fully hedged into Sterling at a floating rate at the time of issue.

The principal amount of gross debt at 31 March 2016 was £3,552m (2014/15: £3,717m). Included in this is the principal amount of secured borrowings and other borrowings of non-recourse companies of £1,563m of which the borrowings of the partly-owned subsidiary, Hercules Unit Trust, not beneficially owned by the Group
is £109m.

Included within cash and short-term deposits is the cash and short-term deposits of Hercules Unit Trust, of which £8m is the proportion not beneficially owned
by the Group.

Cash and deposits not subject to a security interest amount to £93m (2014/15: £84m).

Maturity analysis of net debt

2016
£m

2015
£m

Repayable: within one year and on demand

74

102

Between: one and two years

504

71

two and five years

1,491

1,707

five and ten years

807

943

ten and fifteen years

500

747

fifteen and twenty years

385

6

twenty and twenty five years

-

373

3,687

3,847

Gross debt

3,761

3,949

Interest rate and currency derivatives

(30)

(13)

Cash and short-term deposits

(114)

(108)

Net debt

3,617

3,828

1.5% Convertible bond 2012 (maturity 2017)

On 10 September 2012 British Land (Jersey) Limited (the 2012 Issuer), a wholly-owned subsidiary of the Group, issued £400 million 1.5% guaranteed convertible bonds due 2017 (the 2012 bonds) at par. The 2012 Issuer is fully guaranteed by the Company in respect of the 2012 bonds.

Subject to their terms, the 2012 bonds are convertible into preference shares of the 2012 Issuer which are automatically transferred to the Company in exchange for ordinary shares in the Company or, at the Company's election, any combination of ordinary shares and cash. Bondholders may exercise their conversion right at any time up to (but excluding) the 20th dealing day before 10 September 2017 (the maturity date).

The initial exchange price was 693.07 pence per ordinary share. The exchange price is adjusted based on certain events.

From 25 September 2015, the Company has the option to redeem the 2012 bonds at par if the Company's share price has traded above 130% of the exchange price for a specified period, or at any time once 85% by nominal value of the 2012 bonds have been converted, redeemed, or purchased and cancelled. The 2012 bonds will be redeemed at par on 10 September 2017 (the maturity date) if they have not already been converted, redeemed or purchased and cancelled. No redemption of the bonds occurred in the year.

0% Convertible bond 2015 (maturity 2020)

On 9 June 2015 British Land (White) 2015 Limited (the 2015 Issuer), a wholly owned subsidiary of the Group, issued £350 million zero coupon guaranteed convertible bonds due 2020 (the 2015 bonds) at par. The 2015 Issuer is fully guaranteed by the Company in respect of the 2015 bonds.

Subject to their terms, the 2015 bonds are convertible into preference shares of the Issuer which are automatically transferred to the Company in exchange for ordinary shares in the Company or, at the Company's election, any combination of ordinary shares and cash. From 20 July 2015 up to and including 29 June 2018, a bondholder may exercise its conversion right if the share price has traded at a level exceeding 130% of the exchange price for a specified period. Thereafter, and up to but excluding the 7th dealing day before 9 June 2020 (the maturity date), a bondholder may convert at any time.

The initial exchange price was 1103.32 pence per ordinary share. The exchange price is adjusted based on certain events (such as the Company paying dividends in any year above 14.18 pence per ordinary share).

From 30 June 2018, the Company has the option to redeem the 2015 bonds at par if the Company's share price has traded above 130% of the exchange price for a specified period, or at any time once 85% by nominal value of the 2015 bonds have been converted, redeemed, or purchased and cancelled. The 2015 bonds will be redeemed at par on 9 June 2020 (the maturity date) if they have not already been converted, redeemed or purchased and cancelled.

Fair value and book value of net debt

2016

2015

Fair value
£m

Book value
£m

Difference
£m

Fair value
£m

Book value
£m

Difference
£m

Debentures and unsecured bonds

1,637

1,613

24

1,925

1,785

140

Convertible bonds

779

779

-

493

493

-

Bank debt and other floating rate debt

1,384

1,369

15

1,691

1,671

20

Gross debt

3,800

3,761

39

4,109

3,949

160

Interest rate and currency derivative liabilities

137

137

-

126

126

-

Interest rate and currency derivative assets

(167)

(167)

-

(139)

(139)

-

Cash and short-term deposits

(114)

(114)

-

(108)

(108)

-

Net debt

3,656

3,617

39

3,988

3,828

160

Net debt attributable to non-controlling interests

(106)

(104)

(2)

(192)

(190)

(2)

Net debt attributable to shareholders of the Company

3,550

3,513

37

3,796

3,638

158

The fair values of debt, debentures and the convertible bonds have been established by obtaining quoted market prices from brokers. The bank debt and loan notes have been valued assuming they could be renegotiated at contracted margins. The derivatives have been valued by calculating the present value of expected future cash flows, using appropriate market discount rates, by an independent treasury advisor.

Short-term debtors and creditors and other investments have been excluded from the disclosures on the basis that the fair value is equivalent
to the book value.

Group loan to value (LTV)

2016
£m

2015
£m

Group loan to value (LTV)

25%

28%

Principal amount of gross debt

3,552

3,717

Less debt attributable to non-controlling interests

(109)

(200)

Less cash and short-term deposits (balance sheet)

(114)

(108)

Plus cash attributable to non-controlling interests

8

10

Total net debt for LTV calculation

3,337

3,419

Group property portfolio valuation (note 7)

10,111

9,509

Investments in joint ventures and funds (note 8)

3,353

2,901

Other investments (note 9)

142

379

Less property and investments attributable to non-controlling interests

(384)

(528)

Total assets for LTV calculation

13,222

12,261

Proportionally consolidated loan to value (LTV)

2016
£m

2015
£m

Proportionally consolidated loan to value (LTV)

32%

35%

Principal amount of gross debt

5,217

5,404

Less debt attributable to non-controlling interests

(128)

(200)

Less cash and short-term deposits

(353)

(300)

Plus cash attributable to non-controlling interests

9

10

Total net debt for proportional LTV calculation

4,745

4,914

Group property portfolio valuation (note 7)

10,111

9,509

Share of property of joint ventures and funds (note 7)

4,937

4,714

Other investments (note 9)

142

379

Less other investments attributable to joint ventures and funds

(4)

(123)

Less property attributable to non-controlling interests

(400)

(546)

Total assets for proportional LTV calculation

14,786

13,933

British Land Unsecured Financial Covenants

The two financial covenants applicable to the Group unsecured debt including convertible bonds are shown below:

2016
£m

2015
£m

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

34%

38%

Principal amount of gross debt

3,552

3,717

Less the relevant proportion of borrowings of the partly-owned subsidiary / non-controlling interests

(109)

(200)

Less cash and deposits (balance sheet)

(114)

(108)

Plus the relevant proportion of cash and deposits of the partly-owned subsidiary / non-controlling interests

8

10

Net Borrowings

3,337

3,419

Share capital and reserves (balance sheet)

9,619

8,565

EPRA deferred tax adjustment (EPRA Table A)

5

13

Trading property surpluses (EPRA Table A)

93

96

Exceptional refinancing charges (see below)

287

300

Fair value adjustments of financial instruments (EPRA Table A)

198

257

Less reserves attributable to non-controlling interests (balance sheet)

(277)

(333)

Adjusted Capital and Reserves

9,925

8,898

In calculating Adjusted Capital and Reserves for the purpose of the unsecured debt financial covenants, there is an adjustment of £287m (2014/15: £300m) to reflect the cumulative net amortised exceptional items relating to the refinancings in the years ended 31 March 2005, 2006 and 2007.

2016
£m

2015
£m

Net Unsecured Borrowings not to exceed 70% of Unencumbered Assets

29%

28%

Principal amount of gross debt

3,552

3,717

Less cash and deposits not subject to a security interest (being £93m less the relevant proportion of cash and deposits of the partly owned subsidiary / non-controlling interests of £5m)

(88)

(77)

Less principal amount of secured and non-recourse borrowings

(1,563)

(1,906)

Net Unsecured Borrowings

1,901

1,734

Group property portfolio valuation (note 7)

10,111

9,509

Investments in joint ventures and funds (note 8)

3,353

2,901

Other investments (note 9)

142

379

Less investments in joint ventures (note 8)

(3,348)

(2,869)

Less encumbered assets (note 7)

(3,803)

(3,844)

Unencumbered Assets

6,455

6,076

Reconciliation of movement in Group net debt for the year ended 31 March 2016

2015

Cash flows

Business combinations

Transfers3

Foreign exchange

Fair value

Arrangement
costs
amortisation

2016

Short term borrowings

102

(104)

-

74

2

-

-

74

Long term borrowings

3,847

(98)

-

(74)

14

(9)

7

3,687

Derivatives1

(13)

22

-

-

(13)

(26)

-

(30)

Total liabilities from financing activities

3,936

(180)

-

-

3

(35)

7

3,731

Cash and cash equivalents

(108)

(6)

-

-

-

-

-

(114)

Net debt

3,828

(186)

-

-

3

(35)

7

3,617

Reconciliation of movement in Group net debt for the year ended 31 March 2015

2014

Cash flows

Business combinations

Transfers3

Foreign
exchange

Fair value

Arrangement
costs
amortisation

2015

Short term borrowings

495

(495)

-

102

-

-

-

102

Long term borrowings

2,803

616

379

(102)

40

104

7

3,847

Derivatives2

25

(4)

-

-

(47)

13

-

(13)

Total liabilities from financing activities

3,323

117

379

-

(7)

117

7

3,936

Cash and cash equivalents

(142)

34

-

-

-

-

-

(108)

Net debt

3,181

151

379

-

(7)

117

7

3,828

Cash flows on derivatives include £7m of net receipts on derivative interest.

Cash flows on derivatives include £8m of net receipts on derivative interest.

Transfers comprises debt maturing from long term to short term borrowings.

Fair value hierarchy

The table below provides an analysis of financial instruments carried at fair value, by the valuation method. The fair value hierarchy levels are defined in note 7.

2016

2015

Level 1
£m

Level 2
£m

Level 3
£m

Total
£m

Level 1
£m

Level 2
£m

Level 3
£m

Total
£m

Interest rate and currency derivative assets

-

(167)

-

(167)

-

(139)

-

(139)

Other investments - held for trading

-

-

(101)

(101)

-

-

(99)

(99)

Assets

-

(167)

(101)

(268)

-

(139)

(99)

(238)

Interest rate and currency derivative liabilities

-

137

-

137

-

126

-

126

Convertible bonds

779

-

-

779

493

-

-

493

Liabilities

779

137

-

916

493

126

-

619

Total

779

(30)

(101)

648

493

(13)

(99)

381

Categories of financial instruments

2016
£m

2015
£m

Financial assets

Fair value through income statement

Other investments - held for trading

101

99

Derivatives in designated hedge accounting relationships

164

139

Derivatives not in designated hedge accounting relationships

3

-

Amortised cost

Trade and other debtors

24

16

Cash and short term deposits

114

108

Other investments - loans and receivables

41

280

447

642

Financial liabilities

Fair value through income statement

Convertible bonds

(779)

(493)

Derivatives in designated hedge accounting relationships

(137)

(126)

Amortised cost

Gross debt

(2,982)

(3,456)

Head leases payable

(46)

(41)

Creditors

(133)

(178)

(4,077)

(4,294)

Total

(3,630)

(3,652)

Gains and losses on financial instruments, as classed above, are disclosed in note 5 (net financing costs), note 10 (debtors), note 4 (valuation movements on property), the consolidated income statement and the consolidated statement of comprehensive income. The Directors consider that the carrying amounts of other investments and head leases payable are approximate to their fair value, and that the carrying amounts are recoverable.

Maturity of committed undrawn borrowing facilities

2016
£m

2015
£m

Maturity date: over five years

-

-

between four and five years

1,113

930

between three and four years

95

-

Total facilities available for more than three years

1,208

930

Between two and three years

85

61

Between one and two years

-

235

Within one year

60

10

Total

1,353

1,236

The above facilities are comprised of British Land undrawn facilities of £1,150m, plus undrawn facilities of Hercules Unit Trust totalling £203m.

15 Dividend

The fourth quarter interim dividend of 7.09 pence per share, totalling £73m (2014/15: 6.92 pence per share, totalling £71m) was approved by the Board
on 16 May 2016 and is payable on 5 August 2016 to shareholders on the register at the close of business on 1 July 2016.

The Board will announce the availability of the Scrip Dividend Alternative, if available, via the Regulatory News Service and on its website (www.britishland.com/dividends), no later than four business days before the ex-dividend date of 30 June 2016. The Board expects to announce the split between Property Income Distributions (PID) and non-PID income at that time. Any Scrip Dividend Alternative will not be enhanced. PID dividends are paid, as required by REIT legislation, after deduction of withholding tax at the basic rate (currently 20%), where appropriate. Certain classes of shareholders may be able to elect to receive dividends gross. Please refer to our website www.britishland.com/dividends for details.

Payment date

Dividend

Pence per share

2016
£m

2015
£m

Current year dividends

05.08.2016

2016 4th interim

7.09

06.05.2016

2016 3rd interim

7.09

12.02.2016

2016 2nd interim

7.09

73

06.11.2015

2016 1st interim

7.09

72

28.36

Prior year dividends

07.08.2015

2015 4th interim

6.921

71

06.05.2015

2015 3rd interim

6.92

71

13.02.2015

2015 2nd interim

6.92

71

07.11.2014

2015 1st interim

6.92

70

27.68

08.08.2014

2014 4th interim

6.751

68

Dividends in consolidated statement
of changes in equity

287

277

Dividends settled in shares

(52)

(49)

Dividends settled in cash

235

228

Timing difference relating to payment
of withholding tax

-

-

Dividends in cash flow statement

235

228

Scrip alternative treated as non-PID for this dividend.

16 Share capital and reserves

2016

2015

Number of ordinary shares in issue at 1 April

1,031,788,286

1,019,766,481

Share issues

8,774,037

12,021,805

At 31 March

1,040,562,323

1,031,788,286

Of the issued 25p ordinary shares, 627 shares were held in the ESOP trust (2014/15: 98,453), 11,266,245 shares were held as treasury shares (2014/15: 11,266,245) and 1,029,295,451 shares were in free issue (2014/15: 1,020,423,588). No treasury shares were acquired by the ESOP trust during the year. All issued shares are fully paid.

Hedging and translation reserve

The hedging and translation reserve comprises the effective portion of the cumulative net change in the fair value of cash flow and foreign currency hedging instruments, as well as all foreign exchange differences arising from the translation of the financial statements of foreign operations.
The foreign exchange differences also include the translation of the liabilities that hedge the Company's net investment in a foreign subsidiary.

Revaluation reserve

The revaluation reserve relates to owner-occupied properties and investments in joint ventures and funds.

Merger reserve

This comprises the premium on the share placing in March 2013. No share premium is recorded in the Company's financial statements, through
the operation of the merger relief provisions of the Companies Act 2006.

17 Segment information

The Group allocates resources to investment and asset management according to the sectors it expects to perform over the medium term. Its three principal sectors are Offices, Retail and Canada Water. The Office sector includes residential, as this is often incorporated into Office schemes, and Retail includes leisure, for a similar rationale. Canada Water was added as a principal sector in the year, reflecting the key role the campus has in the strategy of the Group. Consequently the prior year comparatives in this note have been restated to reflect this additional principal sector.

The relevant gross rental income, net rental income, operating result and property assets, being the measures of segment revenue, segment result and segment assets used by the management of the business, are set out below. Management reviews the performance of the business principally on a proportionally consolidated basis, which includes the Group's share of joint ventures and funds on a line-by-line basis and excludes non-controlling interests in the Group's subsidiaries. The chief operating decision maker for the purpose of segment information is the Executive Committee.

Gross rental income is derived from the rental of buildings. Operating result is the net of net rental income, fee income and administrative expenses. No customer exceeded 10% of the Group's revenues in either year.

Segment result

Offices and residential

Retail and leisure

Canada Water

Other/unallocated

Total

2016

£m

2015

£m

2016

£m

2015

£m

2016

£m

2015

£m

2016

£m

2015

£m

2016

£m

2015

£m

Gross rental income

British Land Group

133

121

291

248

8

6

-

-

432

375

Share of joint ventures and funds

114

89

104

146

-

-

4

8

222

243

Total

247

210

395

394

8

6

4

8

654

618

Net rental income

British Land Group

124

112

277

233

7

6

-

-

408

351

Share of joint ventures and funds

110

85

99

141

-

-

3

8

212

234

Total

234

197

376

374

7

6

3

8

620

585

Operating result

British Land Group

112

101

260

218

7

6

(46)

(41)

333

284

Share of joint ventures and funds

109

82

102

138

-

-

(1)

10

210

230

Total

221

183

362

356

7

6

(47)

(31)

543

514

Reconciliation to Underlying Profit

2016

£m

2015

£m

Operating result

543

514

Net financing costs

(180)

(201)

Underlying Profit

363

313

Reconciliation to profit on ordinary activities before taxation

Underlying Profit

363

313

Capital and other

954

1,460

Underlying Profit attributable
to non-controlling interests

14

16

Total profit on ordinary activities before taxation

1,331

1,789

Of the total revenues above, £4m (2014/15: £8m) was derived from outside the UK.

Segment assets

Offices and residential

Retail and leisure

Canada Water

Other/unallocated

Total

2016

£m

2015

£m

2016

£m

2015

£m

2016

£m

2015

£m

2016

£m

2015

£m

2016

£m

2015

£m

Property assets

British Land Group

4,181

3,520

5,323

5,275

283

273

-

-

9,787

9,068

Share of joint ventures and funds

2,843

2,530

2,018

2,039

-

-

-

40

4,861

4,609

Total

7,024

6,050

7,341

7,314

283

273

-

40

14,648

13,677

Reconciliation to net assets

British Land Group

2016

£m

2015

£m

Property assets

14,648

13,677

Other non-current assets

138

256

Non-current assets

14,786

13,933

Other net current liabilities

(257)

(307)

Adjusted net debt

(4,765)

(4,918)

Other non-current liabilities

(90)

(73)

EPRA net assets (undiluted)

9,674

8,635

Convertible dilution

400

400

EPRA net assets (diluted)

10,074

9,035

Non-controlling interests

277

333

EPRA adjustments

(732)

(803)

Net assets

9,619

8,565

SUPPLEMENTARY DISCLOSURES

Table A: Summary income statement and balance sheet

Summary income statement based on proportional consolidation for the year ended 31 March 2016

The following pro forma information is unaudited and does not form part of the consolidated primary statements or the notes thereto. It presents the results of the Group, with its share of the results of joint ventures and funds included on a line-by-line basis and excluding non-controlling interests.

Year ended 31 March 2016

Year ended 31 March 2015

Group

£m

Joint ventures and funds

£m

Less non-controlling interests

£m

Proportionally consolidated

£m

Group

£m

Joint ventures and funds

£m

Less non-controlling interests

£m

Proportionally consolidated

£m

Gross rental income

451

231

(28)

654

399

250

(31)

618

Property operating expenses

(26)

(9)

1

(34)

(24)

(10)

1

(33)

Net rental income

425

222

(27)

620

375

240

(30)

585

Administrative expenses

(93)

(5)

4

(94)

(85)

(4)

1

(88)

Net fees and other income

16

-

1

17

15

-

2

17

Ungeared Income Return

348

217

(22)

543

305

236

(27)

514

Net financing costs

(106)

(82)

8

(180)

(105)

(107)

11

(201)

Underlying Profit

242

135

(14)

363

200

129

(16)

313

Underlying taxation

2

-

-

2

-

-

-

-

Underlying Profit after taxation

244

135

(14)

365

200

129

(16)

313

Valuation movement

861

1,473

Other capital and taxation (net)1

48

50

Capital and other

909

1,523

Total return

1,274

1,836

Includes other comprehensive income, movement in dilution of share options and the movement in items excluded for EPRA NAV.

Table A (continued)

Summary balance sheet based on proportional consolidation as at 31 March 2016

The following pro forma information is unaudited and does not form part of the consolidated primary statements or the notes thereto. It presents
the composition of the EPRA net assets of the Group, with its share of the net assets of the joint venture and fund assets and liabilities included
on a line-by-line basis, and excluding non-controlling interests, and assuming full dilution.

Group

£m

Share of joint ventures
& funds

£m

Less non-controlling interests

£m

Share
options

£m

Deferred
tax

£m

Mark-to-market on effective cash flow hedges and related debt adjustments

£m

Head
leases

£m

Convertible bond adjustment

£m

Valuation surplus on trading properties

£m

EPRA Net assets

31 March 2016

£m

EPRA Net assets

31 March 2015

£m

Retail properties

5,662

2,109

(400)

-

-

-

(30)

-

-

7,341

7,314

Office properties

4,118

2,835

-

-

-

-

(16)

-

87

7,024

6,050

Canada Water properties

283

-

-

-

-

-

(6)

-

6

283

273

Other properties

-

-

-

-

-

-

-

-

-

-

40

Total properties

10,063

4,944

(400)

-

-

-

(52)

-

93

14,648

13,677

Investments in joint ventures and funds

3,353

(3,353)

-

-

-

-

-

-

-

-

-

Other investments

142

(4)

-

-

-

-

-

-

-

138

256

Other net (liabilities) assets

(322)

(121)

3

36

5

-

52

-

-

(347)

(380)

Net debt

(3.617)

(1,466)

120

-

-

198

-

-

-

(4,765)

(4,918)

Dilution due to convertible bond

-

-

-

-

-

-

-

400

-

400

400

Net assets

9,619

-

(277)

36

5

198

-

400

93

10,074

9,035

EPRA NAV per share (note 2)

919p

829p

EPRA Net Assets Movement

Year ended
31 March 2016

Year ended
31 March 2015

£m

Pence per share

£m

Pence per share

Opening EPRA NAV

9,035

829

7,027

688

Income return

365

34

313

31

Capital return

909

77

1,523

145

Dividend paid

(235)

(21)

(228)

(27)

Dilution due to 2012 convertible bond

-

-

400

(8)

Closing EPRA NAV

10,074

919

9,035

829

Table B: EPRA Performance measures

EPRA Performance measures summary table

2016

2015

£m

Pence per share

£m

Pence per share

EPRA Earnings

- basic

365

35.6

313

30.8

- diluted

371

34.1

319

29.5

EPRA Net Initial Yield

4.1%

4.3%

EPRA 'topped-up' Net Initial Yield

4.5%

4.8%

EPRA Vacancy Rate

2.0%

2.9%

2016

2015

Net assets

Net asset
value per share pence

Net assets

Net asset
value per share pence

EPRA NAV

10,074

919

9,035

829

EPRA NNNAV

9,640

880

8,359

767

Calculation and reconciliation of EPRA/IFRS earnings and EPRA/IFRS earnings per share

2016

£m

2015

£m

Profit attributable to the shareholders of the Company

1,345

1,710

Exclude:

Group - current taxation

(2)

1

Group - deferred taxation

(31)

23

Joint ventures and funds - current taxation

1

2

Joint ventures and funds - deferred taxation

-

(4)

Group - valuation movement

(616)

(884)

Group - profit on disposal of investment properties and investments

(35)

(20)

Group - profit on disposal of trading properties

(10)

(6)

Joint ventures and funds - net valuation movement (including result on disposals)

(263)

(595)

Changes in fair value of financial instruments and associated close-out costs

(31)

47

Non-controlling interests in respect of the above

5

39

Underlying Profit

363

313

Group - underlying current taxation

2

-

EPRA earnings - basic

365

313

Dilutive effect of 2012 convertible bond

6

6

EPRA earnings - diluted

371

319

Profit attributable to the shareholders of the Company

1,345

1,710

Dilutive effect of 2012 convertible bond

6

-

IFRS earnings - diluted

1,351

1,710

2016

Number

million

2015

Number

million

Weighted average number of shares

1,036

1,027

Adjustment for Treasury shares

(11)

(11)

IFRS/EPRA Weighted average number of shares (basic)

1,025

1,016

Dilutive effect of share options

2

2

Dilutive effect of ESOP shares

4

4

Dilutive effect of 2012 convertible bond

58

-

IFRS Weighted average number of shares (diluted)

1,089

1,022

Dilutive effect of 2012 convertible bond

-

58

EPRA Weighted average number of shares (diluted)

1,089

1,080

Net assets per share

2016

2015

£m

Pence
per share

£m

Pence
per share

Balance sheet net assets

9,619

8,565

Deferred tax arising on revaluation movements

5

13

Mark-to-market on effective cash flow hedges and related debt adjustments

198

257

Dilution effect of share options

36

37

Surplus on trading properties

93

96

Convertible bond adjustment

400

400

Less non-controlling interests

(277)

(333)

EPRA NAV

10,074

919

9,035

829

Deferred tax arising on revaluation movements

(24)

(13)

Mark-to-market on effective cash flow hedges and related debt adjustments

(153)

(257)

Mark-to-market on debt

(257)

(406)

EPRA NNNAV

9,640

880

8,359

767

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

2016

Number

million

2015

Number

million

Number of shares at year end

1,040

1,031

Adjustment for treasury shares

(11)

(11)

IFRS / EPRA number of shares (basic)

1,029

1,020

Dilutive effect of share options

2

4

Dilutive effect of ESOP shares

7

8

Dilutive effect of 2012 convertible bond

58

-

IFRS number of shares (diluted)

1,096

1,032

Dilutive effect of 2012 convertible bond

-

58

EPRA number of shares (diluted)

1,096

1,090

EPRA Net Initial Yield and 'topped-up' Net Initial Yield

2016
£m

2015
£m

Investment property - wholly-owned

9,787

9,068

Investment property - share of joint ventures and funds

4,861

4,569

Less developments, residential and land

(894)

(1,148)

Completed property portfolio

13,754

12,489

Allowance for estimated purchasers' costs

985

784

Gross up completed property portfolio valuation

14,739

13,273

Annualised cash passing rental income

607

575

Property outgoings

(8)

(8)

Annualised net rents

599

567

Rent expiration of rent-free periods and fixed uplifts1

63

64

'Topped-up' net annualised rent

662

631

EPRA Net Initial Yield

4.1%

4.3%

EPRA 'topped-up' Net Initial Yield

4.5%

4.8%

Including fixed/minimum uplifts received in lieu of rental growth

24

26

Total 'topped-up' net rents

686

657

Overall 'topped-up' Net Initial Yield

4.7%

4.9%

'Topped-up' net annualised rent

662

631

ERV vacant space

14

20

Reversions

42

18

Total ERV

718

669

Net Reversionary Yield

4.9%

5.0%

The weighted average period over which rent-free periods expire is 1 year (2014/15: 1 year).

The above is stated for the UK portfolio only.

EPRA Net Initial Yield (NIY) basis of calculation

EPRA NIY is calculated as the annualised net rent (on a cash flow basis), divided by the gross value of the completed property portfolio. The valuation of our completed property portfolio is determined by our external valuers as at 31 March 2016, plus an allowance for estimated purchaser's costs. Estimated purchaser's costs are determined by the relevant stamp duty liability, plus an estimate by our valuers of agent and legal fees on notional acquisition. The net rent deduction allowed for property outgoings is based on our valuers' assumptions on future recurring non-recoverable revenue expenditure.

In calculating the EPRA 'topped-up' NIY, the annualised net rent is increased by the total contracted rent from expiry of rent-free periods and future contracted rental uplifts where defined as not in lieu of growth. Overall 'topped-up' NIY is calculated by adding any other contracted future uplift to the 'topped-up' net annualised rent.

The net reversionary yield is calculated by dividing the total estimated rental value (ERV) for the completed property portfolio, as determined by our external valuers, by the gross completed property portfolio valuation.

The EPRA vacancy rate is calculated as the ERV of the unrented, lettable space as a proportion of the total rental value of the completed property portfolio.

EPRA Vacancy Rate

2016

£m

2015

£m

Annualised potential rental value of vacant premises

14

20

Annualised potential rental value for the completed property portfolio

728

692

EPRA Vacancy Rate

2.0%

2.9%

The above is stated for the UK portfolio only.

EPRA Cost Ratios

2016

£m

2015

£m

Property operating expenses

25

23

Administrative expenses

90

84

Share of joint ventures and funds expenses

13

14

Less:

Performance & management fees (from joint ventures & funds)

(9)

(9)

Net other fees and commissions

(8)

(8)

Ground rent costs

(3)

(3)

EPRA Costs (including direct vacancy costs) (A)

108

101

Direct vacancy costs

(11)

(11)

EPRA Costs (excluding direct vacancy costs) (B)

97

90

Gross Rental Income less ground rent costs

429

374

Share of joint ventures and funds (GRI less ground rent costs)

222

241

Total Gross Rental Income less ground rent costs (C)

651

615

EPRA Cost Ratio (including direct vacancy costs) (A/C)

16.6%

16.4%

EPRA Cost Ratio (excluding direct vacancy costs) (B/C)

14.9%

14.6%

Overhead and operating expenses capitalised (including share of joint ventures and funds)

4

-

In the current year, employee costs in relation to staff time on development projects have been capitalised into the base cost of relevant development assets.

Table C: Gross rental income

2016

£m

2015

£m

Rent receivable

615

581

Spreading of tenant incentives and guaranteed rent increases

36

33

Surrender premia

3

4

Gross rental income

654

618

The current and prior period information is presented on a proportionally consolidated basis, excluding non-controlling interests.

Table D: Property related capital expenditure

2016

2015

Group

Joint
ventures
and funds

Total

Group

Joint
ventures
and funds

Total

Acquisitions

238

-

238

147

-

147

Development

104

58

162

64

83

147

Like-for-like portfolio

99

6

105

67

23

90

Other

25

15

40

25

8

33

Total property related capex

466

79

545

303

114

417

The above is presented on a proportionally consolidated basis, excluding non-controlling interests and business combinations. The 'Other' category contains amounts owing to tenant incentives of £27m (2014/15: £18m), capitalised staff costs of £4m (2014/15: £nil) and capitalised interest of £9m (2014/15: £15m).

British Land Company plc published this content on 16 May 2016 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 16 May 2016 06:12:05 UTC.

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