Chairman's Statement to Slough Estates plc Annual General Meeting

May 16, 2006

Speaking at the Annual General Meeting of Slough Estates plc being held in London today, Paul Orchard-Lisle, Chairman, will say:

"Slough Estates is the leading provider of flexible business space for those businesses that are naturally located on the edge-of-town. That implies we will build and invest in a rich mix of offices, research facilities, distribution space and manufacturing space, and that we will do so in what we consider to be the best business locations in the countries in which we operate.

There are good reasons to be pleased with the results that were achieved in 2005. After all, to add 22% to the net value of our assets in a twelve month period and to grow earnings per share by 34% at a time when inflation is running around 3% is no mean achievement. However, our view is that there is still more to be done and that whilst business will be competitive over the next few years, we are well positioned to be one of the top performers in the real estate industry. In that sense it is worth reflecting that the so-called industrial sector of real estate has proved to be historically, and probably will be in the future, the most stable of all the property asset classes. Offices and shops often achieve leaps in value, all too often then followed by steep decline.

During the last 2 years we have played an active role in the consultation process that has taken place with government on the possible introduction of REITs into the UK. The government responded positively to the views of the industry and as a result the legislation that is presently in front of Parliament is likely to create a very good environment for the UK property industry. Even so, I hold the strong view that over a period of time it would clearly be advantageous if the European Union were to seek to ensure compatibility of REIT legislation across all member countries and I hope that this is something we shall see develop in due course.

On the assumption that we elect to convert to a REIT, we would be required to pay an entry charge equal to 2% of the value of our UK investment property assets at the time of entry. Thereafter we would be exempt from corporation tax on UK investment property income and capital gains. Going forward we would be required to pay dividends to shareholders which are at least equal to 90% of the tax-exempt income. Those dividends would be subject to a withholding tax at the basic rate of income tax and shareholders according to their individual tax circumstances would then be liable to pay a further tax or, in some cases, reclaim withholding tax. The tax treatment of the Group's other activities, including overseas, is unaffected by the REIT legislation.

Based on our last valuation, the 2% entry charge would be approximately £70 million although that would have to be recalculated at the actual date of conversion. Thereafter, as I indicated earlier, all future UK rental income and investment property gains and disposals would be exempt from taxation and thus deferred tax provisions in respect of UK investment properties would no longer be required - a sum of no less than £400 million as at 31st December 2005. The surpluses on our UK investment property developments would also be tax-exempt providing we held the assets for at least three years from the date of completion.

The arguments in favour of conversion therefore are strong and, while we cannot make a final decision until the legislation and regulations are settled, on the basis of the evidence that we have at the moment the Board believes that conversion is likely to be in shareholders' best interests. As the full details of conversion become available to us, so we will reach our conclusion some time I suspect later in the summer and of course then provide a review of the effects on the shareholders in the company.

I would like to highlight one or two positive developments since the year-end and give you an indication of how I see our immediate future.

The most notable achievements in the first quarter of 2006 have been:

• Further progress made in Continental Europe resulting in over 1 million square feet being leased in the first three months of the year. In the last week we also signed a lease to let a further 420,000 square feet in Belgium.
• The acquisition of the Treforest Business Park just outside Cardiff. We paid £63 million for 130 acres of land on which there is about 1 million square feet of accommodation but still 9.6 acres of land for early development. The purchase is in keeping with our strategy of owning physically large parks so that we may maximize the returns from the flexibility and their critical mass. With the acquisition of Treforest, we now own 6 of the largest such parks in the UK .
• Continued momentum in our leasing programme in the UK with 425,000 square feet already leased in the first quarter of the year.

Our proven ability to let the space that we create speaks well for the locations in which we have chosen to invest your money. Equally independent surveys of our customers reveal high levels of satisfaction with the accommodation that we have created and the way in which it is managed. Those factors are supremely important if we are to retain the best businesses and support the image of Slough Estates as a world-class landlord. Even so, many of our customers are seeking to restrain their physical expansion and to limit their real estate requirements. However the availability of good accommodation in the right locations is not as great as a casual study of the media might suggest. Therefore, whilst I do not expect capital values to accelerate as quickly in the next nine months as they have done in the last two years, I believe that we will be able to manage the company's affairs to your good advantage.

My thoughts for 2006 and beyond are optimistic. Prime industrial yields have fallen by a further 18 basis points in the first quarter - although we do not believe that yield compression will continue throughout the year. More importantly, and in spite of business sentiment being fragile, our enquiry levels remain high in all our areas of operation and we are hopeful of another good year of lettings following our record year in 2005.


For further information please contact:

Notes to editors

Slough Estates is the leading European provider of flexible business space and owns business parks in Europe and North America, with four million square metres of business space and over 1600 customers (as at 31 December 2005). Slough Estates' properties are in suburban locations in close proximity to the main business centres, where there is long term demand for business accommodation to serve these key economic regions. The company's main activities are currently based around London, Brussels, Paris, Düsseldorf, Amsterdam, San Francisco and San Diego and the company continues to develop new business parks with the long term objective of building shareholder value and enhancing its reputation for quality buildings offering excellent value to customers. www.sloughestates.com

Please click here for the full press release in PDF format.