0BBC Pension Scheme

ANNUALREPORTFOR THE YEAR ENDED

31 MARCH 2007

BBC Pension Scheme

Annual Report for the year ended 31 March 2007

Page Trustee and Advisers to the Scheme 1

Trustees’ Report 2

Consolidated Statement of Net Assets 22

Consolidated Fund Account 23

Notes to the Financial Statements 24

Independent Auditors’ Report 36

Independent Auditors’ Statement about Contributions 38

Summary of Contributions Payable 39

Actuarial Statement 40

Actuarial Certificate 42

Myners Compliance Statement 43

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Trustee and Advisers to the Scheme as at 31 March 2007

Trustee BBC Pension Trust Ltd, Broadcasting House, London W1A 1AA

Secretary to the Trustee Sandra Phillips Pension & Benefits Centre, Broadcasting House, Cardiff CF5 2YQ

Actuary Alison Blay, Watson Wyatt Ltd

Auditors PricewaterhouseCoopers LLP

Investment Consultants Watson Wyatt Ltd David Gamble Richard L. Greene (USA property)

Investment Managers Barclays Global Investors Ltd Alliance Bernstein Ltd (a unit of Alliance Capital) Artemis Investment Management Ltd Baillie Gifford & Co Capital International Ltd GS & Co Henderson Equity Partners Ltd Henderson Global Investors Ltd Hg Pooled Management Invesco Asset Management Ltd Marvin & Palmer Associates Inc Morley Fund Management Ltd NewSmith Asset Management LLP NewSmith UK Hedge Fund Ltd PGSF111 GP Ltd State Street Global Advisors Ltd Sun Capital Advisors V, LP Trilogy Global Advisors LLC Western Asset Management Company Ltd

Cash Barclays Global Investors Ltd

Engagement Hermes Equity Ownership Services Ltd

Property Managers Grosvenor Americas Ltd (USA) CB Richard Ellis (UK) CB Richard Ellis Investors (UK) PanEuropean Property Unit Trust

Property Valuer Cushman & Wakefield (Chartered Surveyors)

Custodian HSBC Bank plc

Solicitor Sacker & Partners LLP

Property Solicitors Brodies LLP (Scotland) Greene, Radovsky, Maloney & Share (USA) Nabarro (England & Wales)

Bankers The Royal Bank of Scotland plc

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Trustees’ Report This report for the year ended 31 March 2007 is presented in compliance with the Occupational Pension Schemes (Disclosure of Information) Regulations 1996. The financial statements have been prepared and audited in accordance with the regulations made under sections 41 (1) and 41 (6) of the Pensions Act 1995. How the Scheme is run The BBC Pension Scheme (the Scheme) is a defined benefits scheme. It provides benefits for employees of the British Broadcasting Corporation (BBC) and Participating Employers. On 31 March 2007 the Participating Employers were: 2 Entertain Management Ltd

2 Entertain Video Ltd 3SIXTYMEDIA Ltd

BBC Audio Books Ltd

BBC Children in Need

BBC Resources Ltd BBC Video Ltd

BBC World Distribution Ltd

BBC World Ltd

BBC Worldwide Ltd The Scheme is established and governed by a Trust Deed and Rules. Members of the Scheme (other than members of the Career Average Benefits section) are contracted out of the State Second Pension. The Scheme is registered with HMRC under Chapter 2, Part 4 of the Finance Act 2004.

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The Corporate Trustee BBC Pension Trust Ltd exists only for the purpose of acting as corporate trustee of the Scheme. The board of directors corresponds exactly with how the board of trustees would otherwise be composed and is referred to as ‘the Trustees’ throughout this report.

On 31 March 2007 the Trustees comprised:

Attendance at Board meetings (excluding standing committees)

Trust Trustee: Jeremy Peat 6/6 Alternate Trust Trustee: Dermot Gleeson n/a BBC Trustees: Mark Byford 5/6 Stephen Kelly 3/3 Zarin Patel 6/6 Caroline Thomson 4/6 Member Trustees: Grant Cassidy 6/6 Ian Pollock 6/6 Dan Cooke 5/6 Pensioner Trustee: Geoff Jones 6/6

Changes during the year Jenny Kimber resigned on 30 April 2006 and Grant Cassidy was appointed as a Trustee with effect from 1 May 2006. Jeremy Nordberg resigned on 25 October 2006 and the BBC appointed Stephen Kelly as a Trustee on 26 October 2006.

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Appointment and nomination of Trustees The power to appoint and remove the BBC Trust Trustee is vested in the BBC Trust. The BBC Trust Trustee acts as Chairman of the Trustees.

The power to appoint and remove the Alternate BBC Trust Trustee is vested in the BBC Trust Trustee, subject to the approval of the BBC Trust. The Alternate BBC Trust Trustee only attends meetings when the BBC Trust Trustee is unable to attend.

The power to appoint and remove the BBC Trustees is vested in the BBC. All BBC Trustees are Active Members.

Member Trustees are nominated from and by the Active Members. They hold office for six years and retire in rotation. If the number of nominations exceeds the number of vacancies, a ballot of the Active Members is held.

If a Member Trustee ceases to hold office mid-term, the other Member Trustees can appoint an Active Member who is willing to fill the vacancy for the remainder of the term of office, unless the BBC agrees that an election can be held.

The Pensioner Trustee is nominated from and by the Pensioners. He or she holds office for four years. If there is more than one nomination, a ballot of the Pensioners is held.

The Trustees have a duty to act in the best interests of all beneficiaries. As a group and as individuals they represent all members equally, rather than sectional interests.

Trustee meetings During the year, the Trustee Board and the Investment Committee met six times each, the General Purposes Committee met three times, a sub committee of directors three times and the Internal Disputes Resolution Committee met to consider six cases.

Advisers During the year: David Gamble was appointed as an external investment consultant to the Investment

Committee; Hermes Equity Ownership Services Ltd was appointed as an engagement manager; Invesco Asset Management Ltd was appointed to manage a UK equity portfolio; Artemis Investment Management Ltd was appointed to manage a UK equity portfolio; The mandate with Schroder Investment Management Ltd was terminated; Henderson Equity Partners Ltd was appointed to manage an infrastructure fund; Hg Pooled Management was appointed to manage a renewable power portfolio and a private

equity portfolio; PGSF 111 GP Ltd was appointed to manage a private equity portfolio; GS & Co was appointed to manage an infrastructure fund; Sun Capital Advisors V, LP was appointed to manage a corporate recovery portfolio.

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Governance The Trustees have adopted a governance policy intended to reassure members that the Scheme is well run and provide a means of monitoring the effectiveness of the arrangements put in place to manage the Scheme.

During the year the Board: considered priority orders on winding up; evaluated its performance and that of the sub committees and agreed that the number of

meetings should be increased and that training sessions should be incorporated into Trustee meetings;

received a training update on the new regulatory framework and on the statutory funding objective in preparation for the 2007 actuarial valuation;

examined the implications of the appointment of the BBC Trust in place of the BBC Governors and recommended that BBC Trust should continue to appoint a pension Trustee;

appointed Hermes Equity Ownership Services Ltd to provide a full voting and engagement service for all the Scheme’s equity investments and signed up to the UN initiative for responsible investment;

revised the policy on bulk transfers in the light of the market value approach to valuations; reviewed actuarial factors in line with the assumptions established under the 2005 valuation; agreed the proposal to allow salary sacrifice and agreed a Rule change to enable this and to

accommodate flexible benefits; executed the 38th Deed of variation to include the Career Average Benefits (CAB) section; executed the 39th Deed of variation which clarified the role of the Actuary in relation to the

statutory funding objective; considered the implications of the Age Discrimination Regulations; agreed to consult with active and deferred members in the summer 2007 on the continuation

of the levelling option. The levelling option enables members who retire before State Pension Age to smooth their overall pension payment. This is achieved by paying an amount roughly equivalent to the State Pension before a member’s State Pension Age and reducing a member’s pension payments by a corresponding amount once their State Pension starts to be paid;

appointed Magenta One Global Ltd to process the recoveries identified following a review of potential claims that the Scheme could make in class actions;

concluded that it did not wish to appoint an independent trustee as an additional member of the Board, but noted that BBC Trust was able to appoint one with the board’s approval and that the BBC was able to appoint one as one of the four BBC appointed Trustees or as a replacement for any ex-officio trustee who was willing to act;

undertook an audit of compliance with the Codes of Practice issued by the Pensions Regulator and noted that the Scheme complied;

reviewed the Scheme’s Conflicts of Interest Policy; reviewed the Scheme’s investment strategy; confirmed the Trustees’ investment beliefs following a detailed examination of the beliefs by a

Trustee working party; agreed new regulations which allowed the Guaranteed Minimum Pension to be commuted on

serious ill health; revised the Statement of Investment Principles; approved changes to the Scheme’s investment strategy recommended by the Investment

Committee; considered the BBC’s proposals in respect of flexible retirement; agreed a timetable for the 2007 actuarial valuation.

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The Investment Committee: undertook a review of private equity investment; reviewed the UK equity management mandate; agreed an infrastructure investment; commissioned Inalytics Ltd to review the Scheme’s investment managers’ trading activity,

analysing purchases and sales undertaken by the managers and identifying whether dealing activity added value over time;

considered currency as an alternative asset class. The Committee decided not to put a passive currency hedge in place but agreed to review whether to appoint an active currency manager at a later date;

expanded the investment management agreement terms with the Scheme’s UK property managers to allow up to 20% of the total value of the property portfolio to be invested in pooled property vehicles;

appointed Able/Noser Corp to review transaction costs; reviewed the appointment of its investment consultant and reappointed Watson Wyatt Ltd.

The General Purposes Committee: considered the results of the customer survey, noting that overall the levels of service had

been maintained in line with the previous survey results and in a number of areas had improved;

agreed that the availability of the “Funding the Future” seminars should be increased; approved an updated version of the Trustee handbook which reflected changes during the

year and incorporated updated key Scheme documents; reviewed the Volunteer Visiting Scheme and concluded that the service it provided was

valuable and should be continued; reviewed the panel of independent financial advisers who speak at retirement conferences; reviewed the Scheme’s with-profits AVC provider and considered the merits of

with-profits accounts; noted the results from the 2005 Pension Administration Large Schemes (PALS) Survey; agreed that Members who still held funds with Equitable Life should be written to and

reminded of the options available to them; considered the communication material produced by the Pension and Benefits Centre and

noted the timetable of expected communication for the following year; reviewed the performance of the Scheme’s advisers; agreed an updated risk register, following a full review of the register, with specialist support

from KPMG LLP; considered a report from Internal Audit; considered a report on catastrophe insurance cover; noted that the Pension and Benefits Centre’s target service is that 95% of all cases should be

completed within minimum standard times. In 2006/7 over 95% of all cases were completed within minimum standard times for three out of four quarters, and for the year 92% of all cases were met within minimum standard times;

noted, in its monitoring of administration services: that a fraud workshop had been undertaken with the Scheme’s management team and the BBC risk management team with the aim of raising awareness of fraud and identifying any fraud hotspots in the Scheme’s processes.

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Movement of the Fund The Consolidated Fund Account on page 23 shows that income from contributions and transfers in was £163.6m and outgoings were £308.3m, giving a net outflow from dealings with members of £144.7m. Income from investments, net of expenses, was £177.6m; providing a total net inflow of £32.9m.

The market value of the Scheme’s assets increased during the year by £249.8m (2006: £1,518.9m).

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Membership 31/03/07 31/3/06

Total membership

Contributing members 19,974 19,864

Deferred pensioners 17,723 16,890

Pensioners 21,116 20,479

58,813 57,233

Contributing members

At 1 April 2006 19,864

New members 3,317

Leavers (2,592)

Retired with pension (normal health) (581)

Retired with pension (ill health) (15)

Died in service (19)

At 31 March 2007 19,974

Deferred pensioners

At 1 April 2006 16,890

Leavers from active status 1,750

Subsequently transferred (427)

Pensions becoming payable (400)

Deaths (16)

Surrendered, commuted or refunded (74)

At 31 March 2007 17,723

Pensioners Former

contributors Spouses and dependants

Total

At 1 April 2006 16,803 3,676 20,479

Contributing members who retired 596 0 596

Deferred pensions becoming payable 400 0 400

Spouses and dependants 0 256 256

Cessations (427) (188) (615)

At 31 March 2007 17,372 3,744 21,116

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Benefit changes during the year A Career Average Benefits section of the Scheme was opened for those joining on or after 1 November 2006. For each year (or part year) of membership a block of pension equal to 1.67% of Pensionable Salary is built up, and is payable at age 65.

The Finance Act 2004 took effect on 6 April 2006. The Scheme retained a maximum Pensionable Salary in line with the previous earnings cap, except for the calculation of the death in service lump sum. It retained a number of specific limits (based on the previous Inland Revenue Limits), including the 15% contribution limit. Members are able to take the maximum lump sum at retirement (approximately four times the pension).

Following the Trustees’ decision not to allow transfers in, existing members with two or more years’ pensionable service were given until 31 October 2006 to request a transfer. Members who had still to complete their two year qualifying period are able to request a transfer on completion of two years’ pensionable service.

The Trustees agreed a Rule change to allow salary sacrifice and to accommodate flexible benefits.

The Trustees agreed regulations to allow the guaranteed minimum pension element of the pension to be commuted in cases of serious ill health.

The Trustees agreed that all Old Benefits Members, who had reached age 60 but who were still in service, could take their pension whilst they were still working.

Increases in pensions and deferred pensions For Old and New Benefits Members, pensions in payment and deferred pensions, including any guaranteed minimum pension, are increased each 1 April by the rise in the Retail Prices Index (RPI) during the twelve months ending 31 December last, up to a maximum of 10% for Old Benefits Members and 5% for New Benefits Members. For Old and New Benefits Members deferred pensions and pensions in payment for less than a year are increased pro rata. The pension increase paid on 1 April 2006 was 2.2% and the increase paid on 1 April 2007 was 4.4%. There are no Career Average Benefits Members with pensions in payment.

Additional voluntary contributions (AVCs) A total of 2,346 members paid AVCs during the year (2006: 2,491). The contributions are invested with Abbey National plc, Equitable Life Assurance Society, Norwich Union Life and Pensions Ltd or Fidelity Pensions Management in accordance with the members’ elections. At 31 March 2007, 3,484 members were buying Added Years (2006: 3,925).

Contributions The BBC increased its contributions (inclusive of AVC Plus contributions) to 7.5% in April 2006 and to 19.1% from 1 April 2007. The BBC will also pay £23m a year, from 1 April 2007 for a period of 8 years, increasing in line with price inflation measured from 1 April 2005. Employee contributions increased by 0.5% to 6.0% in September 2006. Career Average Benefits members pay 4% by salary sacrifice.

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Actuarial position The Actuary issued the following statement on 24 May 2007.

"A full investigation of the Scheme's financial strength was made as at 1 April 2005. This showed that the Scheme continued to be in a satisfactory financial position, although the surplus of assets over accrued liabilities that has existed for many years was almost exhausted.

In the absence of any material surplus, it would normally be the case that the full funding rate would be paid to the Scheme at the earliest opportunity. For the BBC Pension Scheme, the full funding rate is 24.8% of Pensionable Salaries (plus certain small additions). Following lengthy discussions between the Trustees and the BBC, and careful consideration by the Trustees of the relevant issues, it was agreed that the BBC will pay the following amounts to the Scheme:

with effect from 1 April 2006: 7.5% of Pensionable Salaries; with effect from 1 April 2007: 24.8% of Pensionable Salaries (plus certain small additions) less

the members’ normal rate of contributions; additional contributions equal to £23m per annum for a period of 8 years, increasing in line

with price inflation measured from 1 April 2005. All contribution rates are subject to review at the next valuation.

As a statutory requirement, I assessed the Scheme's funding level against the Minimum Funding Requirement under the Pensions Act 1995 and I can confirm that the statutory minimum was comfortably exceeded at 1 April 2005.

My formal statements complying with the statutory requirements are set out on pages 40 to 42.

I reviewed the Scheme's financial position as at 1 April 2006, and was able to confirm that it remained satisfactory. Shortly after that date, equity markets fell significantly but have since regained the lost ground. It is important to monitor the progress of the Scheme regularly, although it should be noted that pension schemes are investing for the long term and the contribution requirements should not be unduly influenced by short term fluctuations in investment markets.

The Trustees decided to bring forward the date of the next formal valuation to 1 April 2007. This valuation is the first to take place under the new Scheme Specific Funding Requirement of the Pensions Act 2004 and is now in progress. Until the results of this valuation are known, it is reasonable, in my opinion, for the BBC and the members to pay contributions to the Scheme at the planned rates.

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Transfer values Payments made in respect of employees or deferred pensioners to other pension arrangements have been calculated in accordance with the provisions of Section 97 of the Pension Schemes Act 1993, using tables supplied by the Actuary. Payments made during the year fully reflected the value of the Members’ accrued benefit rights. Similarly, benefits granted to those joining the Scheme and bringing with them transfers from previous pension schemes have been determined using tables supplied by the Actuary. Allowance is made for all discretionary benefits calculated on actuarial advice.

Administration BBC Pension Trust Ltd is the Scheme Administrator. The management and staff involved in running the Scheme (including the Secretary to the Trustees) are employed by the BBC. The Scheme bears all costs of investment, direct staff and computer costs, stationery and postage, together with accommodation and other administrative costs.

Investment policy The Trustees are responsible for setting and reviewing investment policy. In accordance with s.35 of the Pensions Act 1995, they have adopted a Statement of Investment Principles (SIP), which sets out the principles governing decisions about the Scheme’s investments. A copy of the SIP, which was last revised in December 2006, is available on request.

The Trustees’ overall investment policy is to invest in a wide range of long term assets such as equities, property and bonds and a range of alternative assets (private equity, hedge funds, infrastructure, commodities etc) whilst ensuring that there are sufficient holdings of readily marketable securities that can meet the short term liabilities of the fund.

An Asset Liability Modelling study was undertaken in 2005 from which the Trustees concluded that they should maintain the strategic asset allocation agreed three years earlier, which was 30% UK equities, 30% overseas equities, 30% bonds and 10% property.

This strategy was reviewed towards the end of 2006 and it was concluded that a formal allocation should be made to alternative asset classes. As from 1 January 2007 the strategic asset allocation changed to 25% UK equities, 25% overseas equities, 30% bonds, 10% property and 10% alternative assets.

At 31 March 2007 the Scheme was invested 28% in UK equities, 35% overseas equities, 19% bonds, 12% property, 3% alternative assets and 3% cash.

This overweighting of equities and underweighting of bonds against the benchmark over the last few years has been an extremely successful strategy. The Investment Committee has monitored the position closely and in early 2007 decided that a significant start should be made to unwind this tactical position. Hence, in March 2007, over 6% of the Scheme’s assets were moved from equities into bonds. Further moves are likely to be made in the current year but will be driven by the specific terms available in the market place.

Investment strategy is reviewed annually with full reviews undertaken every three years, which will normally include an Asset Liability Modelling study. As there is an Actuarial Valuation of the Scheme being undertaken during 2007 a full Asset Liability Modelling study will be undertaken later in the year on the basis of the data being used in the Actuarial Valuation.

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Current management arrangements The Trustees have delegated the management of all investments to external managers who are given a range of different mandates. There are ten quoted equity managers, three private equity managers, two infrastructure managers, one manager investing in renewable energy, one manager investing in corporate recovery and four bond managers. Their performance targets are based on relevant equity and bond indices, managers of unquoted assets are given absolute return targets. One of the UK property portfolios is benchmarked to the performance of a number of similarly sized UK property portfolios, with the other having an objective to produce a real return of 5%-6% a year. For overseas property, local index benchmarks are used.

The following changes to the management of the Scheme’s assets were made during the year: In November 2006 the mandate with Schroder Investment Management Limited was terminated and £704m was withdrawn. At the same time £93m was withdrawn from the UK equity fund managed by State Street Global Advisors Ltd. These funds were allocated to two new investment managers with UK equity mandates, Artemis Investment Management Ltd: £459m, and Invesco Asset Management Ltd: £235m; £94m was also allocated to the UK equity mandate managed by NewSmith Asset Management LLP. In March 2007 the Scheme appointed State Street Global Advisors Ltd to manage two passive bond mandates and increased its bond exposure by £512m. This was funded by withdrawing £201m from Alliance Bernstein Ltd, £75m from Marvin and Palmer Associates Inc and £75m from Capital International, all global equity mandates; a further £165m was also withdrawn from the UK equity mandate of State Street Global Advisors Ltd. During the year the Scheme also committed to investing in a number of alternative asset mandates. As at 31 March 2007 these investments had been funded as follows: Henderson PFI Secondary Fund (infrastructure) £70m, Hg Capital 5, LP (private equity) £32m, GS Infrastructure Advisors 2006, LLC (infrastructure) £12m, Pantheon Ventures Ltd (private equity) £8m, and Hg Renewable Power Partners LP (renewable power) £3m. The Scheme is committed to further funding of these investments as detailed in note 21 to the financial statements. The Investment Committee, a sub-committee of the Trustee Board, monitors the performance of the investment managers on a quarterly basis. The in-house executive team meet with the managers quarterly and Members of the Investment Committee join those meetings from time to time. Given the increasing number of managers each manager is expected to make a formal presentation to the Investment Committee on a two yearly cycle although the Investment Committee will arrange to meet with managers between these meetings in the event of poor performance or other concerns. Investment managers are remunerated on scales linked to the value of assets under management. In some cases these fees have been reduced and an additional fee agreed related to the performance of the underlying portfolio. Fees payable to UK property managers are related to the value of assets under management, but fees are also paid to the managers for purchases, sales and day-to-day management of the portfolio.

During the year Hermes Equity Ownership Services Ltd was appointed to co-ordinate all voting at company meetings and engagement with the companies in which the Scheme is invested on a global basis.

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Corporate governance and socially responsible investment The Trustees believe that voting rights are an important part of overall shareholder value. They therefore believe that institutional shareholders should make considered use of their voting rights on all resolutions at annual and extraordinary general meetings held by UK companies.

The Trustees have delegated responsibility for voting to Hermes Equity Ownership Services Ltd (Hermes), and wish them normally to exercise these votes in accordance with Myners requirements and Institutional Shareholders’ Committee (ISC) principles and such higher standards as Hermes agrees with the Trustees, unless they believe that doing so would not be in the best financial interests of the Scheme.

The Trustees have advised all their active Investment Managers of their desire to discourage socially irresponsible behaviour through the Scheme’s investments. Both Hermes and the active managers have been asked to be vigilant against the effects on companies’ long-term performance prospects that could arise from any practices which alienate civilised society, including socially irresponsible behaviour.

UK property managers have been asked to comply with the foregoing in relation to the Scheme’s UK property investments.

Hermes and, where appropriate, the active investment managers are expected to develop policies on socially and environmentally responsible investments (SRI) and to engage with companies in which they invest for the Scheme so as to encourage socially responsible business practices when these will enhance or protect those companies’ long-term prospects. Managers are expected to review their policies on SRI periodically and report any changes to the Trustees.

The Trustees view their Corporate Governance policy as an important component of their overall SRI policy. The Trustees expect Hermes, to whom they have delegated their responsibility for exercising voting rights in respect of the Scheme’s investments and engagement with the companies themselves, to exercise such rights (so far as is practicable) to promote SRI policies where these will enhance or protect companies’ long-term prospects.

In addition to this, active Old and New Benefits members of the Scheme have the option to contribute to an ethical AVC fund.

In addition to their policies on Corporate Governance and SRI, the Trustees expect their investment managers to intervene in an investee company in accordance with the policies on activism set out in the Statement of Principles drawn up by the Institutional Shareholders’ Committee, unless the managers believe that doing so would not be in the best financial interests of the Scheme or their own house policy differs from those policies in a manner approved by the Trustees.

The Trustees expect Hermes and active investment managers to:

(i) monitor various aspects of corporate performance (including Corporate Governance);

(ii) maintain details of their monitoring process;

(iii) intervene in a company if they believe that such action will enhance value for the Scheme after taking account of the costs involved. Intervention should be seriously considered when Hermes has concerns about any aspect of corporate performance and where it believes that shareholder value may be at risk;

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(iv) maintain a regular dialogue with the management of the companies in which they hold a significant percentage of the issued capital on behalf of their clients;

(v) intervention may take several forms, according to the circumstances and may include the following:

exercising votes, discussion with management, communicating concerns in writing for the attention of the board as a whole, communicating concerns to the company’s brokers or advisers, declining to accept the terms of a takeover, exchanging information with other shareholders, working with other shareholders to requisition a shareholder meeting and attendance at general meetings, which may involve calling a poll;

(vi) manage conflicts of interest effectively;

(vii) monitor the response of a company during and after the period of intervention, looking for evidence that the company has addressed the concerns and responded accordingly;

(viii) report back to the Trustees on a quarterly basis where Hermes has taken meaningful steps to intervene in a company.

During the year the Scheme signed up to the UN Principles for Responsible Investment (UNPRI) and is also a member of the Institutional Investors Group on Climate Change (IIGCC) where Peter Dunscombe, the Scheme’s Head of Pensions, Investments, is chair of the Steering Committee.

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The following table gives the distribution of investment assets, including cash, by mandate and manager as at the period end. £m £m % %

Investments

Global equities (including UK equities)

Alliance Bernstein Ltd (a unit of Alliance Capital) 983.7 12.1 Baillie Gifford & Co 348.7 4.3 Capital International Ltd 710.6 8.7 Marvin & Palmer Associates Inc 656.1 8.1 Trilogy Global Advisors LLC 368.4 4.5 UK equities State Street Global Advisors Ltd 891.8 10.9 NewSmith Asset Management LLP 459.9 5.7 Artemis Investment Management Ltd 460.4 5.6 Invesco Asset Management Ltd 259.3 3.2 NewSmith UK Hedge Fund Ltd 60.1 0.7 Bonds State Street Global Advisors Ltd 522.2 6.4 Western Asset Management Company Ltd 234.5 2.9 Morley Fund Management Ltd 435.2 5.3 Henderson Global Investors 422.5 5.2

Alternative assets

GS & Co 11.5 0.1 Hg Pooled Management (HG SPLP LP) 112.1 1.4 Hg Pooled Management (HG Capital SLP) 30.6 0.4 Hg Pooled Management (HG Renewable Power Partners LP)

2.6 0.0

Henderson Equity Partners Ltd 70.3 0.9 PGSF 111 GP Ltd 8.1 0.1

Total stocks, shares, futures contracts and unit trusts 7,048.4 86.5

Property Investments UK – CB Richard Ellis 372.4 4.6 UK – CB Richard Ellis Investors 449.6 5.5 USA – Grosvenor Americas Ltd 207.2 2.5 Europe – Pan European Property Unit Trust 35.6 0.4 Total Property Investments 1,064.8 13.0

Miscellaneous cash balances 38.0 38.0 0.5 0.5 Total investments 8,151.2 100.0

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Custody Custody of securities is with HSBC Bank plc. Securities are normally registered in the name of the nominee of the custodian or its sub custodians, but this is subject to local market practice, regulations and law. However, through HSBC, UK securities (CREST) are specifically registered in a segregated style allowing clear identification of the Scheme’s specific assets. Such designation is a practice recommended in the Myners report for the Shareholder Voting Working Group, looking at various aspects of Corporate Governance.

The Trustees monitor the administration and processing of investment transactions by the custodian. The controls in place to secure safe custody are subject to both internal and external audit testing, the findings of the latter being published in HSBC’s FRAG 21 statement for the year ended 31 December 2006.

The deeds for all UK properties are held by the Scheme’s property solicitors, Nabarro Nathanson in England and Wales and Brodies LLP in Scotland.

Distribution of investments Summaries of the investments showing market values at 31 March 2007, analysed by category, are shown below:

(a) Asset class

£m Actual %

Equities UK 2,281.9 28.0 Europe (other than UK) 1,016.8 12.5 USA 996.2 12.2 Japan 359.7 4.4 Pacific Basin (ex Japan) 307.7 3.8 Other markets 139.9 1.7

Property 981.4 12.0

Index-linked government bonds 528.7 6.5

Fixed interest bonds 1,034.8 12.7

Cash 257.4 3.2

Futures 11.4 0.1

Alternatives 235.3 2.9

8,151.2 100.0

The direct and indirect investments in quoted securities are considered to be readily marketable, but the investments in property, private equity and other unquoted investments are generally illiquid investments. It may not be possible to liquidate some of these assets fully and some may require sufficient time to find buyers willing to pay full market value.

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(b) Classification by geographical sector

Market value £m %

UK 4,973.0 61.1

USA 1,101.1 13.5

Europe (other than UK) 1,258.1 15.4

Japan 367.2 4.5

Pacific Basin (ex Japan) 310.4 3.8

Other markets 141.4 1.7

8,151.2 100.0

(c) Largest Holdings

The twenty largest individual equity investments of the Scheme are as follows: Market value £m

1 Vodafone Group plc 57.3 2 BP plc 53.7 3 Royal Dutch Shell plc 53.4 4 British American Tobacco plc 43.2 5 GlaxoSmithKline plc 36.8 6 Barclays plc 35.8 7 Aviva plc 34.3 8 Microsoft Corporation 32.0 9 Sanofi-Aventis 29.4

10 BT Group plc 28.2 11 Lloyds TSB Group plc 27.0 12 Rio Tinto plc 26.9 13 National Grid plc 26.5 14 The Royal Bank of Scotland Group plc 26.5 15 Standard Chartered plc 26.4 16 Canon Inc 25.8 17 Xstrata plc 24.9 18 Scottish & Southern Energy plc 24.4 19 Sap AG 24.2 20 Ebay Inc 24.1

The total value of the investments shown above is £660.8m, which represents 8.1% of the Scheme's total investment assets.

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(d) Unquoted securities

The Scheme has several portfolios of unquoted securities. By their very nature, the companies in which the investments are held tend to be small and the Scheme’s proportionate holdings in these companies are greater than would be the case for quoted companies. Property At 31 March 2007 the Scheme owned 66 properties in the UK, with a total market value of £711.4m (excluding cash awaiting investment of £83.4m), 89.8% by value being freehold and the remainder held on leases exceeding 104 years. Tenants’ leases were let on leases subject to rent reviews not later than 2017. Investment performance In the last year equity markets generally rose continuing their strong recovery since March 2003 whilst bond markets declined modestly over the year. The performance of the Scheme’s investments is measured by HSBC Securities Services (UK) Limited. Comparison is made against the Scheme’s specific benchmark. This is a weighted average of the individual portfolios’ benchmarks. Although the results for individual years are important, the longer term results are more significant as these enable consistency of performance to be judged. Performance in the year to 31 March 2007 was 5.9% which was 1.5% below the benchmark of 7.4%. All of this underperformance occurred in the first quarter of 2007 when equity markets in particular were very volatile. Over three years, the annualised performance was 14.6% which was 0.1% below the benchmark of 14.7% and over five years the annualised performance was 7.8% which was 0.3% below the benchmark of 8.1%. These figures reflect the combined performance of our investment managers against their benchmarks. In addition HSBC Securities Services (UK) Limited has calculated that if the Scheme’s assets had been invested in line with the strategic benchmark and that in each category index returns had been achieved, then the annualised return over the three years to the end of March 2007 would have been 13.6%. Hence the tactical overweighting of equities and underweighting of bonds has added 1.1% pa. Consequently, over the last three years, combining the performance from our investment managers and our tactical positions taken, some 1% pa outperformance has been achieved against the strategic benchmark. The Investment Committee, at the request of the Trustees, continue to monitor very closely the performance of the investment managers against their benchmarks. These figures continue to be volatile and it is very disappointing that much of the 2.0% outperformance achieved by our investment managers in 2005/6 was given up in the first quarter of 2007 when markets were particularly volatile. However the Investment Committee remain confident that active management will add value to the Scheme over the longer term.

19

Investment performance

3 yrs to 2007

2007

2006

2005

2004

2003 2002

5 yrs to 2007

-30

-20

-10

0

10

20

30

40

% return

Year to 31March

BBC Scheme

BBC benchmark

20

Statement of Trustees’ responsibilities The financial statements are the responsibility of the Trustees. Pension scheme regulations require the Trustees to make available to Scheme Members, beneficiaries and certain other parties, audited financial statements for each Scheme year which:

show a true and fair view of the financial transactions of the Scheme during the Scheme year and of the amount and disposition at the end of the Scheme year of its assets and liabilities, other than liabilities to pay pensions and benefits after the end of the Scheme year, and

contain the information specified in the Schedule to the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, including a statement whether the financial statements have been prepared in accordance with the Statement of Recommended Practice “Financial Reports of Pension Schemes”.

The Trustees have supervised the preparation of the financial statements and have agreed suitable accounting policies, to be applied consistently, making any estimates and judgements on a prudent and reasonable basis.

The Trustees are also responsible under pensions legislation for ensuring that there is prepared, maintained and from time to time revised a Schedule of Contributions showing the rates of contributions (other than voluntary contributions) payable to the Scheme by or on behalf of the employer and the Active Members of the Scheme and the dates on or before which such contributions are to be paid.

The Trustees are also responsible for keeping records of contributions received in respect of any Active Member of the Scheme, and for ensuring that contributions are made to the Scheme in accordance with the Schedule of Contributions.

The Trustees also have a general responsibility for ensuring that adequate accounting records are kept and for taking such steps as are reasonably open to them to safeguard the assets of the Scheme and to prevent and detect fraud and other irregularities.

21

Data protection There is a formal agreement in place between the Trustees and the BBC for the transfer of data. This is necessary to ensure that the Scheme complies with the data protection principles detailed in Part 1 of Schedule 1 of the Data Protection Act 1998. Further information Further information about the Scheme is available from the Secretary at the address shown on page 1. For and on behalf of BBC Pension Trust Limited

Sandra Phillips Secretary 19 June 2007

22

Consolidated Statement of Net Assets as at 31 March 2007

2007 2006

Notes £m £m £m £m

Investment assets 3 8,151.1 7,848.0

AVC investments 13 76.9 76.4

Current assets and liabilities 10 (22.8) (1.9)

Total Net Assets 8,205.2 7,922.5

The Financial Statements on pages 22 to 35 were approved by the Board of the Trustees on 19 June 2007 and signed on its behalf by:

Director Director

23

Consolidated Fund Account for the year ended 31 March 2007 2007 2006

Notes £m £m £m £m

Contributions and benefits

Contributions receivable 11 149.6 103.1

Individual transfers in 14.0 9.3

163.6 112.4

Benefits payable 14 277.5 240.0

Payments to and on account of leavers

15 26.1 35.4

Administrative expenses 16 4.7 3.7

(308.3) (279.1)

Net withdrawals from dealings with members

(144.7) (166.7)

Returns on investments

Investment income 17 206.4 189.1

Change in market value of investments

18 249.8 1,518.9

Investment expenses 19 (28.8) (25.4)

Net return on investments 427.4 1,682.6

Net increase in fund during the year 282.7 1,515.9

Opening balance of fund 7,922.5 6,406.6

Closing balance of fund 8,205.2 7,922.5

24

Notes to the Financial Statements for the year ended 31 March 2007 1. Basis of preparation

(a) Compliance with SORP The Financial Statements have been prepared in accordance with the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, and in accordance with the Statement of Recommended Practice "Financial Reports of Pension Schemes" (SORP) issued in November 2002.

(b) Scope of financial statements The Financial Statements summarise the transactions and net assets of the Scheme. They do not take account of the liabilities to pay pensions and other benefits in the future. The actuarial position of the fund, which does take account of such liabilities, is dealt with by the Actuary in her Statement on pages 40 to 42.

2. Accounting policies

The principal accounting policies adopted and applied consistently by the Trustees are as follows: (a) Consolidation The BBC Pension Scheme consolidated financial statements include its subsidiary undertaking (which is incorporated in North America) and joint ventures, derived from the latest audited financial statements of the entities as at 31 December each year unless significant transactions have taken place since that date when adjustments are made to reflect such transactions.

The Scheme has taken advantage of the exemption included in FRS9 (Associates and Joint Ventures)which allows the Scheme to account for its subsidiary company and joint ventures using the net equity method of accounting. This results in the Scheme's financial statements including the Scheme’s share of the valuation of the North American properties.

The Scheme’s investment in its subsidiary undertaking is re-valued annually on a net assets basis, such that there is no difference between the Scheme’s total net assets and those of the Group.

Further information about the subsidiary undertaking and joint ventures is given in note 20 to the financial statements.

(b) Contributions (i) Normal contributions, both from the members and from the employers, are accounted for as they fall due under the Schedule of Contributions. (ii) Additional and special contributions from the employer are accounted for in accordance with the agreement under which they are paid, or in the absence of such an agreement, when received. Additional voluntary contributions from the members are accounted for in the month that they are deducted from the payroll.

25

(c) Pensions and benefits Members can choose whether to take their benefits as a pension or reduced pension and lump sum. Pensions and lump sums are accounted for on an accruals basis from the later of the date of retirement or the date the option is exercised.

(d) Investment and cash deposits (i) Listed investments are included at the mid-point of the quoted prices at 31 March. The exception is UK securities within the FTSE 100 index which are quoted on the order matching system called the Stock Exchange Trading Service (SETS). SETS uses the single last trade (i.e. last automatically executed trade before the market close) rather than the mid-point of the bid and offer prices. Market values listed in overseas currencies are translated into sterling at the rate of exchange ruling at 31 March.

(ii) Investments held in quoted pooled investment vehicles are valued at the average of the closing bid and offer prices at 31 March. The geographical analysis of pooled investment vehicles is shown by reference to the location of the underlying assets. In the opinion of the Trustees this better reflects the underlying risks attached to the securities.

(iii) Unquoted securities and pooled investment vehicles are valued by the Trustees, based on recommendations by the investment managers. Valuations are generally as at 31 March each year except where data is not available, in which case the valuations are as at 31 December, updated for any net subsequent investment and after allowing for estimated investment management fees.

(iv) UK freehold and leasehold properties are valued by Cushman & Wakefield, Chartered Surveyors, at 31 December each year, and are included at open market value. No depreciation is provided on freehold or long leasehold property. Properties in development are valued at cost until their completion.

(v) Investments and Cash deposits in overseas currencies are translated into sterling at the relevant rates of exchange ruling at 31 March. (vi) Futures contracts are entered into for the purpose of obtaining economic exposure and are reflected in the accounts on the basis of associated economic exposure. The associated economic exposure of a futures contract is the value of an amount of securities which, if held as an alternative to the futures contract, would provide a similar return in the market to that obtained on the futures contract. Open contracts are valued at market price at the year end. Gains and losses on open contracts are treated as unrealised.

(vii) Accrued interest is excluded from the market value of fixed interest securities but is included in accrued investment income (note 9). (viii) Investment management fees are accounted for on an accruals basis. Acquisition costs are included in the purchase cost of investments. (ix) AVC investments are included at valuations provided by the AVC providers as at 31 March or 31 December. Where valuations are as at 31 December, these are updated for subsequent receipts/payments as indicated by the Scheme’s records.

26

(x) Where stock lending has been carried out the securities ‘loaned’ have been included in the net assets statement to reflect the Scheme’s continuing economic interest of a proprietorial nature in those securities. The total amount of stock lent at the year end has been disclosed in note 4 (c) to the financial statements together with a description of the related collateral.

(e) Income from investments

The different sources of investment income are recognised as follows: (i) Dividends on an ex-div. basis. (ii) Interest (including that on fixed interest securities) on an accruals basis. (iii) Property rents on an accruals basis for the four quarters 25 March 2006 to 24 March 2007. (iv) Sub-underwriting commission on a receipts basis. (v) Interest earned on deposits backing futures contracts is recognised on the accruals basis and is attributed to the classes of investments to which the futures contracts relate.

(f) Transfers

Transfer values represent the capital sums either receivable in respect of members from other pension arrangements or payable to the pension arrangements for members who have left the scheme. They take account of transfers where the trustees of the receiving scheme have agreed to accept the liabilities in respect of the transferring members before the year end, and where the amount of the transfer can be determined with reasonable certainty.

27

3. Investment Assets

2007 2006

Notes £m £m Stock, shares, bonds and unit trusts 4 6,912.4 6,803.3 UK freehold & long leasehold property 5 738.5 635.2 Other property investments 6 242.9 254.7 Loans & cash deposits 8 257.4 128.7 Sub-total 8,151.2 7,821.9 Other investment balances 9 (0.1) 26.1

8,151.1 7,848.0

4. Stocks, shares, bonds and unit trusts

2007 2006

UK Overseas Total UK Overseas Total £m £m £m £m £m £m Quoted investments Fixed interest securities Government 297.4 66.3 363.7 713.7 67.8 781.5 Other 298.5 22.4 320.9 150.9 112.8 263.7 Index futures contract 33.2 (21.8) 11.4 16.2 1.2 17.4 Index linked securities 352.1 - 352.1 51.2 5.0 56.2 Equities (inc convertibles) 1,390.1 2,746.7 4,136.8 1,298.4 2,973.4 4,271.8 Pooled investment vehicles 1,418.6 73.6 1,492.2 1,191.5 80.1 1,271.6 Total 3,789.9 2,887.2 6,677.1 3,421.9 3,240.3 6,662.2 Unquoted investments Fixed interest securities Other - - - 6.6 8.4 15.0 Equities - - 86.5 39.6 126.1

Pooled Investment Vehicles 213.0 22.3 235.3 - - -

Total 213.0 22.3 235.3 93.1 48.0 141.1 Total stocks, shares & unit trusts 6,912.4 6,803.3

28

(a) Pooled vehicles Pooled investment vehicles comprise: unit trusts £nil, (2006: £23.1m) unitised

insurance policies £1,413.2m (2006: £1,161.6m) and other managed funds £314.3m. (2006: £86.9m) At 31 March 2007 the Scheme had £197.2m (2006: £80.1m) invested in pooled investment vehicles not registered in the United Kingdom and £1,530.3m (2006: £1,191.5m) invested in pooled investment vehicles registered in the United Kingdom

(b) Futures contracts The Scheme's Statement of Investment Principles permits its investment managers to utilise traded index and bond futures contracts for the purposes of asset allocation. At the year end, investments included open futures contracts amounting to £11.4m (2006: £17.4m) which represents 0.1% (2006: 0.2%) of the Scheme's assets. Unrealised gains and losses at the year end are immaterial and are not, therefore, disclosed separately.

(c) Stock lending The Scheme lends certain fixed interest and equity securities under a Trustee approved stock lending programme operated by the custodian. At the year end the Scheme had lent £432.7m (2006: £271.4m) of UK fixed interest securities, £90.3m (2006: £215.3m) of UK quoted equities and £194.8m (2006: £170.5m) of overseas quoted equities. The Scheme held collateral in the form of equities and fixed interest securities with a value of 105% (2006: 106%) of stock lent.

5. UK property investments

2007 2006

£m £m

Freehold and long leasehold properties

Offices 147.5 105.8

Industrial 199.3 192.9

Shops 156.0 142.0

Retail warehouses 208.6 169.9

711.4 610.6

Interests in pooled investments 27.1 24.6

738.5 635.2

6. Other property investments

North America joint ventures 207.3 222.0

European property units 35.6 32.7

242.9 254.7

29

7. Changes in investment assets

Market value at 1 April 2006

Purchases at cost

Sale Proceeds

Change in

market value

Transfers In

Transfers out

Market value at

31 March 2007

£m £m £m £m £m £m £m

Manager

Alliance Bernstein Ltd 1,106.3 395.5 (382.7) 42.6 - (200.7) 961.0

Artemis Investment Management Ltd - 130.5 (67.8) 22.2 372.5 - 457.4

Baillie Gifford & Co 364.7 62.4 (66.0) (21.6) - - 339.5

Barclays Global Investors Ltd - 415.8 (488.7) (13.8) 778.1 (691.4) -

Capital International Ltd 758.2 380.5 (390.2) 21.8 - (67.2) 703.1

G S & Co. - 12.3 - (0.8) - - 11.5

Henderson Global Investors Ltd 448.6 855.0 (881.1) (15.8) - - 406.7

Henderson Equity Partners Ltd - 70.3 - - - - 70.3

Hg Pooled Management (SPLP) 152.4 3.4 (72.8) 29.1 - - 112.1

Hg Pooled Management (Renewables) - 5.8 (2.6) (0.6) - - 2.6

Hg Pooled Management (Hg5) - 32.0 - (1.4) - - 30.6

Invesco Asset Management Ltd - 35.2 (18.6) 13.1 229.4 - 259.1

Marvin & Palmer Associates Inc 747.3 1,116.3 (1,131.9) (32.2) - (70.3) 629.2

Morley Fund Management Ltd 439.0 2,680.5 (2,669.7) (15.8) - - 434.0

NewSmith Asset Management LLP 331.5 272.2 (270.8) 20.1 89.5 - 442.5

NewSmith UK Hedge Fund Ltd 56.0 - - 4.1 - - 60.1

PGSF III GP Ltd - 8.3 - (0.2) - - 8.1

Schroder Investment Management Ltd 657.3 209.3 (201.0) 20.2 - (685.8) -

State Street (sterling) 1,161.6 11.0 (158.3) 111.3 - (233.8) 891.8

State Street (Fixed Income) - 12.0 - (2.3) 511.8 - 521.5

State Street Bank Europe Ltd - 520.0 (469.9) (18.0) 479.7 (511.8) -

Trilogy Global Advisors LLC 361.6 355.7 (355.6) (3.1) - - 358.6

Western Asset Management Company Ltd

218.7 136.2 (134.8) (7.4) - - 212.7

Sub Total 6,803.2 7,720.2 (7,762.5) 151.5 2,461.0 (2,461.0) 6,912.4

Property

CB Richard Ellis (UK) 263.5 34.5 (15.6) 41.3 - - 323.7

CB Richard Ellis Investors (UK) 371.7 22.5 (33.5) 54.1 - - 414.8

Property – overseas 254.7 - - (11.8) - - 242.9

Loans and Cash Deposits 128.7 114.8 - 13.9 - - 257.4

AVC Investments 76.4 6.9 (7.2) 0.8 - - 76.9

Total Assets 7,898.2 7,898.9 (7,818.8) 249.8 2,461.0 (2,461.0) 8,228.1

30

Other debtors and prepayments includes £2.2m (2006: £0.9m) of employer special contributions which were paid in full to the Scheme after the year end in accordance with the Schedule of Contributions

8. Loans and cash deposits

2007 2006

£m £m

Sterling 243.9 139.0

Foreign currency 24.9 9.5

Cash backing open index stock futures (11.4) (19.8)

257.4 128.7

Sterling cash deposits and some US dollar and Euro balances were managed by Barclays Global Investors Ltd, the Scheme's cash manager. Other foreign currencies are managed by the relevant investment and property managers.

9. Other investment balances

2007 2006

£m £m

Receivable on sales of stocks, shares, bonds and unit trusts 45.7 38.9

Accrued investment income 28.5 28.7

Tax recoverable 0.4 0.0

Other debtors 0.2 0.0

Property debtors 5.7 3.2

Payable on purchases of stocks, shares, bonds and unit trusts (58.7) (34.6)

Property creditors (16.2) (9.9)

Other creditors (5.7) (0.2)

(0.1) 26.1

10. Current assets and liabilities

2007 2006

£m £m

Other debtors and prepayments 14.7 10.5

Tax due (3.4) (4.6)

Other creditors (34.1) (7.8)

(22.8) (1.9)

31

11. Contributions Receivable

In accordance with the Actuary's recommendation, the BBC's contribution for the year was 7.5% of Pensionable Salaries inclusive of contributions under the matching provisions of the AVC Plus arrangement.

2007 2006

£m £m

Members - normal 49.0 46.6

- additional 4.9 4.5

Employers - normal 66.4 40.0

- special 27.3 9.8

- additional voluntary 2.0 2.2

149.6 103.1

The Employer special contributions were additional payments made by the BBC to augment the pensions of those employees made redundant.

12. Members' contributions

The total members' contributions include an amount in respect of the reinstatement of past service for members who had opted out of the Scheme or elected not to join, in favour of taking out a personal pension plan.

The Trustees have agreed that past service can be reinstated for members who have been wrongly sold a personal pension, provided that the cost, as advised by the Actuary, is met by the pension provider. The amount received in the financial year was £0.2m (2006: £0.1m).

13. Additional voluntary contributions

Additional voluntary contributions are paid over immediately to Abbey National plc, Equitable Life Assurance Society (ELAS), Norwich Union Life and Pensions Ltd or Fidelity Pensions Management, in accordance with the members' elections. Members participating in this arrangement each receive an annual statement made up to 31 March (1 April for ELAS) confirming the amounts held in their account and the movements in the year.

The aggregate amounts of AVC investments are as follows:

2007 2006

£m £m

Abbey National plc 21.2 21.1

Equitable Life Assurance Society 8.4 9.8

Fidelity Pensions Management 29.9 28.5

Norwich Union Life and Pensions Ltd 17.4 17.0

76.9 76.4

32

The movements in the year are as follows:

£m

Value at 1 April 2006 76.4

Purchases at cost 6.9

Sale proceeds (7.2)

Interest and bonuses 0.8

Value at 31 March 2007 76.9

14. Benefits payable

2007 2006

£m £m

Pensions 236.1 224.3

Lump sum retirement benefits 30.1 8.6

Lump sum death benefits 4.1 3.1

Lump sum AVC benefits 7.2 4.0

277.5 240.0

15. Payments to and on account of leavers

2007 2006

£m £m

Refunds of contributions 2.3 2.0

State scheme premiums 0.3 0.8

Tax payable on repayments 0.1 0.5

Bulk transfer 16.8 29.8

Individual transfers out to other schemes 6.6 2.3

26.1 35.4

During the year £16.8m (2006: £29.8m) was paid to another retirement benefit scheme in respect of 391 Members (2006: 444 Members) who had previously transferred from the Scheme.

33

16. Administrative Expenses

2007 2006

£m £m

Administration staff costs 1.5 1.4

Administration other costs 2.2 1.1

Actuarial 0.8 0.6

Audit 0.1 0.1

Other professional fees 0.1 0.5

4.7 3.7

17. Investment income

2007 2006

£m £m

Fixed interest 44.0 57.8

Index linked 4.9 1.5

Equities 109.6 83.1

Property 44.6 34.1

Interest on cash deposits 9.3 10.6

Other interest receivable 3.8 10.7

Sub-total 216.2 197.8

Irrecoverable taxation (9.8) (8.7)

206.4 189.1

18. Change in market value of investments

2007 2006

£m £m

Change in market value of investments 235.1 1,519.8

Gain/(loss) on foreign currency translation 13.9 (9.7)

Interest & bonuses on AVCs invested (Note 13) 0.8 8.8

249.8 1,518.9

34

19. Investment expenses

The following amounts were payable in respect of investment services:

2007 2006

£m £m

Investment management – stocks and shares 19.7 17.9

Investment management – property 1.9 1.4

Custody 0.6 0.5

Other investment expenses 6.6 5.6

28.8 25.4

20. Subsidiary company and joint ventures

The name of the subsidiary undertaking of the BBC Pension Scheme is shown below together with the percentage of equity capital held by the BBC Pension Scheme, the year-end date of the company and its activities:

Name of company and country of registration

Percentage of equity capital held

Year-end date Activity

BBCAF Inc (USA) 100% 31 December Investment

Holding

At 31 December 2006, BBCAF Inc was a general partner with a 50% interest in two general partnerships, a 50% limited and general partner in three limited partnerships, a 75% limited and general partner in three limited partnerships, a Member with a 50% interest in eight limited liability companies. BBCAF Inc also has a 75% and 50% interest in two Tenancies in Common.

21. Capital and contractual commitments

Unquoted Securities As at 31 March 2007 the Scheme was committed to providing additional funding to certain managers investing in unquoted securities. These commitments amounted to £291m (2006: £nil).

35

22. Contingent liabilities

Other than the liability to pay future benefits, there are no material contingent liabilities of the Scheme at 31 March 2007 (2006: £nil)

23. Related party transactions

Related parties are referred to in the Trustees' Report as follows:

Page 2 - participating employers; Page 3 - BBC management on the Trustee Board and Scheme membership of the Trustees; and Page 11 - administration of the Scheme, and costs thereof.

Of the Trustees noted on page 3, seven were active members of the Scheme for all or part of the year. The Pensioner Trustee was a pensioner of the Scheme in receipt of a pension. The remaining Trustees were not members of the Scheme during the past year. All transactions with these parties were in accordance with the Scheme rules.

Except as disclosed above, there are no transactions, balances or relationships that require disclosure under Financial Reporting Standard 8.

24. Self investment

There were no employer related investments during the year.

36

Independent Auditors’ report To the Trustee of the BBC Pension Scheme

We have audited the financial statements of the BBC Pension Scheme for the year ended 31 March 2007, which comprise the Consolidated Fund Account, the Consolidated Statement of Net Assets and the related notes. These financial statements have been prepared under the accounting policies set out therein.

Respective responsibilities of the Trustee and Auditors

The Trustee’s responsibilities for obtaining an Annual Report, and audited financial statements prepared in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), are set out in the statement of the Trustee’s responsibilities.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). This report, including the opinion has been prepared for and only for the Trustee as a body in accordance with Section 41 of the Pensions Act 1995 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

We report to you our opinion as to whether the financial statements give a true and fair view and contain the information required by the relevant legislation. We also report to you if, in our opinion, we have not received all the information and explanations we require for our audit.

We read the other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. This other information comprises only the Trustee’s Report, the Summary of Contributions and the Actuarial Statement and Certificate. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.

37

Independent Auditors’ report (continued) Basis of audit opinion and statement about contributions

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by or on behalf of the Trustee in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Scheme’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

Opinion

In our opinion:

the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the financial transactions of the Scheme during the year ended 31 March 2007, and of the amount and disposition at that date of its assets and liabilities, other than the liabilities to pay pensions and benefits after the end of the year, and

the financial statements contain the information specified in Regulation 3 of, and the Schedule to, the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996.

PricewaterhouseCoopers LLP Chartered Accountants and Registered Auditors Bristol 19 June 2007

38

Independent Auditors’ statement about contributions To the Trustee of the BBC Pension Scheme

We have examined the Summary of Contributions to the BBC Pension Scheme for the year ended 31 March 2007 which is set out on the following page.

Respective responsibilities of the Trustee and Auditors

The Trustee’s responsibilities for ensuring that there is prepared, maintained and from time to time revised a schedule of contributions are set out in the statement of Trustee’s responsibilities.

Our responsibility is to provide a statement about contributions to the Scheme in accordance with relevant legislation and to report our opinion to you. This report, including the statement about contributions, has been prepared for and only for the Scheme’s Trustee as a body in accordance with Section 41 of the Pensions Act 1995 and for no other purpose. We do not, in giving this statement, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Basis of statement about contributions

We planned and performed our work so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that contributions reported in the attached summary have been paid in accordance with the relevant requirements. For this purpose the work that we carried out included examination, on a test basis, of evidence relevant to the amounts of contributions payable to the Scheme and the timing of those payments under the schedules of contributions. Our statement about contributions is required to refer to those breaches of the schedules of contributions which we consider to be material for this statement and which come to our attention in the course of our work.

Statement about contributions to the Scheme

In our opinion, the contributions payable to the Scheme required by the schedules of contributions during the year ended 31 March 2007 as reported in the Summary of Contributions on the following page have in all material respects been paid in accordance with the schedules of contributions certified by the Actuary on 11 March 2003 and 31 May 2006.

PricewaterhouseCoopers LLP Chartered Accountants and Registered Auditors Bristol 19 June 2007

39

Summary of Contributions payable in the year ended 31 March 2007

During the year the contributions payable to the Scheme were as follows:

Employee Employer

£m £m

Required by the Schedules of Contributions

Normal contributions 41.8 51.3

Additional Voluntary 0.0 2.0

Total required by the Schedules of

Contributions 41.8 53.3

Other contributions payable

Additional Voluntary 4.9 0.0

Waiver payments 0.0 15.1

Added years 7.2 0.0

Augmentation of benefits 0.0 27.3

Total 53.9 95.7

Total as per Fund Account 149.6

Signed on behalf of the Board of Trustees on 19 June 2007:

Director Director

40

Actuarial Statement made for the purposes of Regulation 30 of The Occupational Pension Schemes (Minimum Funding Requirement and Actuarial Valuations) Regulations 1996. BBC Pension Scheme Effective date of valuation: 1 April 2005

1. Security of prospective rights

In my opinion, the resources of the Scheme are likely in the normal course of events to meet in full the liabilities of the Scheme as they fall due. In giving this opinion, I have assumed that joint contributions will be payable to the Scheme at not less than the following rates:

*(plus AVC Plus contributions and PPF levy contributions)

I have assumed that contributions are deducted from members’ salaries each month and remitted to the Trustees, together with the BBC’s contribution. Any members’ Added Years and AVC contributions are payable in addition to the above amounts.

The BBC’s contribution rates are subject to review at subsequent valuations.

2. Summary of methods and assumptions used

For the purposes of Section 1, I have assumed that the Scheme will continue. I have adopted the “Projected Unit” funding method, and valued assets at their stated market value.

1.4.05 - 31.3.06 11.5% of Pensionable Salaries 1.4.06 - 31.3.07 13.0% of Pensionable Salaries 1.4.07 onwards* 24.8% of Pensionable Salaries plus eight annual inflation linked payments of £23m

41

2005 Assumptions Nominal

% pa Real + % pa

Main financial assumptions: Price inflation 2.7 - Discount rate for accrued liabilities and ongoing contribution rate*

pre retirement 6.7 3.9 post retirement 5.45 2.7

Earnings growth 4.7 1.95

Pension increases

Old Benefits 2.7 -

New Benefits 2.5 (0.2) + Allowing for compounding * The headline discount rates above have then been reduced by 0.2% pa to

allow for future improvements in longevity.

Further details of the methods and assumptions used are set out in my actuarial valuation addressed to the Trustees dated 31 March 2006.

A J Blay Fellow of the Institute of Actuaries Watson Wyatt Limited Watson House London Road Reigate Surrey RH2 9PQ 31 March 2006

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ACTUARIAL CERTIFICATE GIVEN FOR THE PURPOSES OF SECTION 58 OF THE PENSIONS ACT 1995 (CERTIFICATE OF SCHEDULE OF CONTRIBUTIONS) Name of scheme: BBC Pension Scheme

Adequacy of rates of contributions

I hereby certify that, in my opinion, the rates of the contributions payable in accordance with the schedule of contributions dated 4 May 2006 are adequate for the purpose of securing that throughout the period it covers the Scheme will meet the minimum funding requirement imposed by section 56(1) of the Pensions Act 1995.

In forming this opinion I have complied with the requirements imposed by sections 56(3) and 58 of the Pensions Act 1995, the Occupational Pension Schemes (Minimum Funding Requirement and Actuarial Valuations) Regulations 1996 and the mandatory guidelines on minimum funding requirement (GN 27), prepared and published by the Institute of Actuaries and the Faculty of Actuaries, and have made the assumptions prescribed by them.

A J Blay Fellow of the Institute of Actuaries Watson Wyatt Limited

Watson House London Road Reigate Surrey RH2 9PQ

31 May 2006

Note: The certification of the adequacy of rates of contributions for the purpose of securing the meeting of the minimum funding requirement is not a certification of their adequacy for the purpose of securing the Scheme’s liabilities by the purchase of annuities, if the Scheme were wound up.

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Myners Compliance statement In March 2001 Paul Myners produced a report for the Government on Institutional Investment.

The Myners Report is important for the Trustees and Members of the Scheme because it contains a set of ten “Principles” on which all trustees of defined benefit schemes, such as the BBC Scheme, are expected to act.

In December 2004 the Government announced proposals for strengthening the Myners Principles, in particular those areas where progress had in its view been inadequate. The main proposed changes were that:

the chair of the trustee board should be responsible for ensuring that trustees taking investment decisions are familiar with the investment issues and that the board has sufficient trustees for that purpose;

for funds the size of the BBC Scheme the chair of the trustee board and at least one-third of trustees should be familiar with investment issues (even where investment decisions have been delegated to an investment sub-committee); and

trustees should provide the results of monitoring of their own performance to members.

The Trustees assessed their practices against the original Principles. The Scheme complies in all but one of the Principles. The one area of non-compliance is payment of Trustees. The Trustees had agreed unanimously that they should not be paid. This matter is currently under review.

0Issued by: BBC Pension Trust LimitedRegistered office: Broadcasting House, London W1A 1AATelephone: (029) 2032 2811Registered in England: No: 2218202

Produced by: BBC Pension & Benefits Centre 2007© British Broadcasting Corporation